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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q/A

(Amendment No. 1)



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



For the quarterly period ended July 1, 2005



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



For the transition period from  to



Commission file number: 333-19495



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RADNOR HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 23-2674715                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)



|                                                                                 |  |           
|-------------------------------------------------------------------------------- |  | ----------
|Radnor Financial Center, Suite 300 150 Radnor Chester Road, Radnor, Pennsylvania |  | 19087     
|(address of principal executive offices)                                         |  | (Zip Code)



Registrants
telephone number, including area code: 610-341-9600



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



Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934) .    Yes ̈No  x



Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ̈No  x



The number of shares outstanding of the Registrants common stock as of

August 22, 2005:



|                                               |  |                 
|---------------------------------------------- |  | ----------------
|Class                                          |  | Number of Shares
|Voting Common Stock; $.10 par value            |  | 600             
|Nonvoting Common Stock; $.10 par value         |  | 245             
|Class B Nonvoting Common Stock; $.01 par value |  | 5,400           



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EXPLANATORY NOTE:



This Amendment No. 1 on Form 10-Q/A amends and or restates Part I, Items 1, 2, 3 and 4 and Part II, Items 1 and 6 of the Quarterly
Report on Form 10-Q for the quarter ended July 1, 2005, as filed with the Securities and Exchange Commission on August 22, 2005 (the Original Filing) by Radnor Holdings Corporation (the Company) and adds a new Part
II, Item 5. The Company is filing this Amendment No. 1 to reflect the restatement of its consolidated financial statements as of and for the three and six months ended July 1, 2005.



On June 30, 2005, Radnor Investment Advisors, L.P., a partnership under
common control with the Company, sold one of its two material investments and approved a distribution totaling $971,213 to certain of its special limited partners, who are also officers and employees of the Company. In addition, two of the
Companys stockholders and senior officers allocated a portion of their interests in Radnor Investment Advisors, L.P. to one of the special limited partners, totaling $150,000, as compensation for her services rendered on behalf of Radnor
Investments Advisors, L.P. During the second quarter ended July 1, 2005, the $150,000 additional allocation was recorded by the Company as non-cash compensation expense and paid-in-capital under the requirements of Securities and Exchange
Commission Staff Accounting Bulletin Topic 5T. These recorded amounts were reflected in the financial statements in the Original Filing.



After the filing of the Original Filing, the Company performed an additional subsequent review of the accounting for the transaction. Based on further
review of the facts and circumstances, the Company concluded that, in analyzing the special limited partnership interests, the Company should have used a different measurement date when applying Securities and Exchange Commission Staff Accounting
Bulletin Topic 5T. As a result, the adjustments included in this Form 10-Q/A are non-cash related in nature, and resulted in an increase in compensation expense for the three and six months ended July 1, 2005 of $971,213 and an increase in
paid-in-capital as of July 1, 2005 of $971,213 from amounts previously reported.



Except as set forth above, this Form 10-Q/A continues to speak as of August 22, 2005, the date of the filing of the Original Filing, and the Company has not updated the disclosures contained herein to reflect any
events that have occurred thereafter. For a discussion of events and developments thereafter, reference is made to the periodic reports the Company has filed with the Securities and Exchange Commission since August 22, 2005.



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PART I - FINANCIAL INFORMATION



Item 1. FINANCIAL STATEMENTS



RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)



|                                                      |  |                           |          |   |                   |   |          |  
|----------------------------------------------------- |  | ------------------------- | -------- | - | ----------------- | - | -------- | -
|                                                      |  | July 1, 2005(As restated) |          |   | December 31, 2004 |  
|Assets                                                |  |                           |          |   |                   |   |          |  
|                                                      |  |                          
|Current assets:                                       |  |                           |          |   |                   |   |          |  
|Cash                                                  |  | $                         | 3,521    |   |                   | $ | 3,393    |  
|Accounts receivable, net                              |  |                           | 57,342   |   |                   |   | 50,048   |  
|Inventories, net                                      |  |                           | 66,728   |   |                   |   | 67,526   |  
|Prepaid expenses and other                            |  |                           | 6,588    |   |                   |   | 8,849    |  
|Deferred tax asset                                    |  |                           | 2,309    |   |                   |   | 2,075    |  
|                                                      |  |                           |          |   |                   |   |          |  
|                                                      |  |                           | 136,488  |   |                   |   | 131,891  |  
|                                                      |  |                           |          |   |                   |   |          |  
|Property, plant and equipment, at cost                |  |                           | 333,269  |   |                   |   | 329,826  |  
|Less accumulated depreciation                         |  |                           | (120,020 | ) |                   |   | (112,255 | )
|                                                      |  |                           |          |   |                   |   |          |  
|                                                      |  |                           | 213,249  |   |                   |   | 217,571  |  
|                                                      |  |                           |          |   |                   |   |          |  
|Investments                                           |  |                           | 1,910    |   |                   |   | 41,676   |  
|Intangible assets                                     |  |                           | 7,709    |   |                   |   | 8,364    |  
|Deferred tax asset                                    |  |                           | 4,829    |   |                   |   | 3,949    |  
|Other assets                                          |  |                           | 16,817   |   |                   |   | 16,075   |  
|                                                      |  |                           |          |   |                   |   |          |  
|                                                      |  | $                         | 381,002  |   |                   | $ | 419,526  |  
|                                                      |  |                           |          |   |                   |   |          |  
|Liabilities and Stockholders Deficit                 |  |                           |          |   |                   |   |          |  
|                                                      |  |                          
|Current liabilities:                                  |  |                           |          |   |                   |   |          |  
|Accounts payable                                      |  | $                         | 47,244   |   |                   | $ | 56,940   |  
|Accrued liabilities                                   |  |                           | 24,388   |   |                   |   | 28,308   |  
|Current portion of long-term debt                     |  |                           | 13,490   |   |                   |   | 12,635   |  
|Current portion of capitalized lease obligations      |  |                           | 2,467    |   |                   |   | 2,315    |  
|                                                      |  |                           |          |   |                   |   |          |  
|                                                      |  |                           | 87,589   |   |                   |   | 100,198  |  
|                                                      |  |                           |          |   |                   |   |          |  
|Long-term debt, net of current portion                |  |                           | 306,534  |   |                   |   | 290,928  |  
|Capitalized lease obligations, net of current portion |  |                           | 2,636    |   |                   |   | 3,726    |  
|Other non-current liabilities                         |  |                           | 3,183    |   |                   |   | 4,191    |  
|Minority interest in consolidated subsidiary          |  |                           |         |   |                   |   | 21,253   |  
|                                                      |  |                          
|Commitments and contingencies                         |  |                           |         |   |                   |   |         |  
|                                                      |  |                          
|Stockholders deficit:                                |  |                           |          |   |                   |   |          |  
|Common stock                                          |  |                           | 1        |   |                   |   | 1        |  
|Additional paid-in capital                            |  |                           | 20,508   |   |                   |   | 19,387   |  
|Accumulated deficit                                   |  |                           | (42,507  | ) |                   |   | (27,628  | )
|Cumulative translation adjustment                     |  |                           | 3,058    |   |                   |   | 7,470    |  
|                                                      |  |                           |          |   |                   |   |          |  
|Total stockholders deficit                           |  |                           | (18,940  | ) |                   |   | (770     | )
|                                                      |  |                           |          |   |                   |   |          |  
|                                                      |  | $                         | 381,002  |   |                   | $ | 419,526  |  
|                                                      |  |                           |          |   |                   |   |          |  



The accompanying notes
are an integral part of these condensed consolidated financial statements.



2



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RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands)

(Unaudited)



|                                                                                                   |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | -------------------------- |  | - | ------------ | - |  | - | ------- | -
|                                                                                                   |  | For the three months ended |         |   | For the six months ended |  
|                                                                                                   |  | July 1, 2005 (As restated) |         |   | June 25,2004             |   |         | July 1, 2005 (As restated) |  |   | June 25,2004 |  
|Net sales                                                                                          |  | $                          | 121,453 |   |                          | $ | 108,105 |                            |  | $ | 236,336      |   |  | $ | 204,405 |  
|                                                                                                   |  |                            |         |  
|Cost of goods sold                                                                                 |  |                            | 105,299 |   |                          |   | 87,158  |                            |  |   | 201,680      |   |  |   | 164,785 |  
|Cost of goods sold - other (Note 6)                                                                |  |                            |        |   |                          |   |        |                            |  |   | 538          |   |  |   |        |  
|                                                                                                   |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Gross profit                                                                                       |  |                            | 16,154  |   |                          |   | 20,947  |                            |  |   | 34,118       |   |  |   | 39,620  |  
|                                                                                                   |  |                            |         |  
|Operating expenses:                                                                                |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Distribution                                                                                       |  |                            | 7,667   |   |                          |   | 7,435   |                            |  |   | 14,500       |   |  |   | 13,683  |  
|Selling, general and administrative, inclusive of $1,121 of non-cash compensation (Notes 2 and 11) |  |                            | 9,734   |   |                          |   | 8,893   |                            |  |   | 19,257       |   |  |   | 16,767  |  
|                                                                                                   |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Income (loss) from operations                                                                      |  |                            | (1,247  | ) |                          |   | 4,619   |                            |  |   | 361          |   |  |   | 9,170   |  
|                                                                                                   |  |                            |         |  
|Interest, net                                                                                      |  |                            | 7,806   |   |                          |   | 6,424   |                            |  |   | 15,200       |   |  |   | 12,031  |  
|Income from unconsolidated affiliates                                                              |  |                            | (125    | ) |                          |   | (151    | )                          |  |   | (275         | ) |  |   | (310    | )
|Other, net                                                                                         |  |                            | 308     |   |                          |   | 167     |                            |  |   | 409          |   |  |   | 357     |  
|Minority interest in operations of consolidated subsidiary                                         |  |                            |        |   |                          |   | (806    | )                          |  |   | (315         | ) |  |   | (1,612  | )
|                                                                                                   |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Loss before income taxes                                                                           |  |                            | (9,236  | ) |                          |   | (1,015  | )                          |  |   | (14,658      | ) |  |   | (1,296  | )
|                                                                                                   |  |                            |         |  
|Provision (benefit) for income taxes:                                                              |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Current                                                                                            |  |                            | 533     |   |                          |   | 660     |                            |  |   | 1,334        |   |  |   | 1,119   |  
|Deferred                                                                                           |  |                            | 1,700   |   |                          |   | (643    | )                          |  |   | (1,113       | ) |  |   | (1,212  | )
|                                                                                                   |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|                                                                                                   |  |                            | 2,233   |   |                          |   | 17      |                            |  |   | 221          |   |  |   | (93     | )
|                                                                                                   |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Net loss                                                                                           |  | $                          | (11,469 | ) |                          | $ | (1,032  | )                          |  | $ | (14,879      | ) |  | $ | (1,203  | )
|                                                                                                   |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  



The accompanying notes
are an integral part of these condensed consolidated financial statements.



3



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RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                                     |  |                           |         |   |               |   |         |  
|------------------------------------------------------------------------------------ |  | ------------------------- | ------- | - | ------------- | - | ------- | -
|                                                                                     |  | For the six months ended  |        
|                                                                                     |  | July 1, 2005(As restated) |         |   | June 25, 2004 |  
|Cash flows from operating activities:                                                |  |                           |         |   |               |   |         |  
|Net loss                                                                             |  | $                         | (14,879 | ) |               | $ | (1,203  | )
|Adjustments to reconcile net loss to net cash used in operating activities:          |  |                           |         |   |               |   |         |  
|Depreciation and amortization                                                        |  |                           | 12,345  |   |               |   | 9,754   |  
|Deferred income taxes                                                                |  |                           | (1,113  | ) |               |   | (1,212  | )
|Income from unconsolidated affiliates                                                |  |                           | (275    | ) |               |   | (310    | )
|Minority interest in operations of consolidated subsidiary                           |  |                           | (315    | ) |               |   | (1,612  | )
|Non-cash compensation (Notes 2 and 11)                                               |  |                           | 1,121   |   |               |   |        |  
|Changes in operating assets and liabilities, net of effects of business acquisition: |  |                           |         |   |               |   |         |  
|Accounts receivable, net                                                             |  |                           | (9,670  | ) |               |   | (11,716 | )
|Inventories                                                                          |  |                           | (276    | ) |               |   | (8,706  | )
|Prepaid expenses and other                                                           |  |                           | 1,855   |   |               |   | (2,589  | )
|Accounts payable                                                                     |  |                           | (7,643  | ) |               |   | 6,740   |  
|Accrued liabilities and other                                                        |  |                           | (4,636  | ) |               |   | (5,334  | )
|                                                                                     |  |                           |         |   |               |   |         |  
|Net cash used in operating activities                                                |  |                           | (23,486 | ) |               |   | (16,188 | )
|                                                                                     |  |                           |         |   |               |   |         |  
|Cash flows from investing activities:                                                |  |                           |         |   |               |   |         |  
|Capital expenditures                                                                 |  |                           | (9,574  | ) |               |   | (5,354  | )
|Proceeds from note receivable                                                        |  |                           | 18,919  |   |               |   |        |  
|Distributions from unconsolidated affiliates                                         |  |                           | 155     |   |               |   | 3,056   |  
|Investments in unconsolidated affiliates                                             |  |                           |        |   |               |   | (2,073  | )
|(Increase) decrease in other assets                                                  |  |                           | 611     |   |               |   | (4,505  | )
|                                                                                     |  |                           |         |   |               |   |         |  
|Net cash provided by (used in) investing activities                                  |  |                           | 10,111  |   |               |   | (8,876  | )
|                                                                                     |  |                           |         |   |               |   |         |  
|Cash flows from financing activities:                                                |  |                           |         |   |               |   |         |  
|Proceeds from borrowings                                                             |  |                           | 41,605  |   |               |   | 76,457  |  
|Repayment of debt                                                                    |  |                           | (24,046 | ) |               |   | (51,562 | )
|Payments on capitalized lease obligations                                            |  |                           | (938    | ) |               |   | (1,401  | )
|Payment of financing fees                                                            |  |                           | (2,372  | ) |               |   | (2,670  | )
|                                                                                     |  |                           |         |   |               |   |         |  
|Net cash provided by financing activities                                            |  |                           | 14,249  |   |               |   | 20,824  |  
|                                                                                     |  |                           |         |   |               |   |         |  
|Effect of exchange rate changes on cash                                              |  |                           | (746    | ) |               |   | 69      |  
|                                                                                     |  |                           |         |   |               |   |         |  
|Net increase (decrease) in cash                                                      |  |                           | 128     |   |               |   | (4,171  | )
|                                                                                     |  |                          
|Cash, beginning of period                                                            |  |                           | 3,393   |   |               |   | 6,896   |  
|                                                                                     |  |                           |         |   |               |   |         |  
|Cash, end of period                                                                  |  | $                         | 3,521   |   |               | $ | 2,725   |  
|                                                                                     |  |                           |         |   |               |   |         |  
|Supplemental disclosure of cash flows information:                                   |  |                           |         |   |               |   |         |  
|Cash paid during the period for interest                                             |  | $                         | 14,569  |   |               | $ | 10,345  |  
|                                                                                     |  |                           |         |   |               |   |         |  
|Cash paid during the period for income taxes                                         |  | $                         | 1,038   |   |               | $ | 111     |  
|                                                                                     |  |                           |         |   |               |   |         |  



The accompanying notes
are an integral part of these condensed consolidated financial statements.



4



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RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

Summary of Operating Segments

(In thousands)

(Unaudited)



|                                        |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|--------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | -------------------------- |  | - | ------------ | - |  | - | ------- | -
|                                        |  | For the three months ended |         |   | For the six months ended |  
|                                        |  | July 1, 2005 (As restated) |         |   | June 25,2004             |   |         | July 1, 2005 (As restated) |  |   | June 25,2004 |  
|Net Sales to Unaffiliated Customers:    |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Packaging                               |  | $                          | 73,381  |   |                          | $ | 60,373  |                            |  | $ | 137,620      |   |  | $ | 116,271 |  
|Specialty Chemicals                     |  |                            | 51,263  |   |                          |   | 51,104  |                            |  |   | 105,866      |   |  |   | 94,425  |  
|Transfers Between Operating Segments(1) |  |                            | (3,191  | ) |                          |   | (3,372  | )                          |  |   | (7,150       | ) |  |   | (6,291  | )
|                                        |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Consolidated                            |  | $                          | 121,453 |   |                          | $ | 108,105 |                            |  | $ | 236,336      |   |  | $ | 204,405 |  
|                                        |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Income (Loss) From Operations:          |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Packaging                               |  | $                          | 861     |   |                          | $ | 4,914   |                            |  | $ | 1,820        |   |  | $ | 10,236  |  
|Specialty Chemicals                     |  |                            | 976     |   |                          |   | 2,708   |                            |  |   | 4,168        |   |  |   | 4,434   |  
|Corporate and Other                     |  |                            | (3,084  | ) |                          |   | (3,003  | )                          |  |   | (5,627       | ) |  |   | (5,500  | )
|                                        |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Consolidated                            |  | $                          | (1,247  | ) |                          | $ | 4,619   |                            |  | $ | 361          |   |  | $ | 9,170   |  
|                                        |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Income (Loss) Before Income Taxes:      |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Packaging                               |  | $                          | (3,779  | ) |                          | $ | 1,285   |                            |  | $ | (7,302       | ) |  | $ | 3,070   |  
|Specialty Chemicals                     |  |                            | (641    | ) |                          |   | 919     |                            |  |   | 961          |   |  |   | 1,214   |  
|Corporate and Other                     |  |                            | (4,816  | ) |                          |   | (3,219  | )                          |  |   | (8,317       | ) |  |   | (5,580  | )
|                                        |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  
|Consolidated                            |  | $                          | (9,236  | ) |                          | $ | (1,015  | )                          |  | $ | (14,658      | ) |  | $ | (1,296  | )
|                                        |  |                            |         |   |                          |   |         |                            |  |   |              |   |  |   |         |  

---

|(1) | Transfers between operating segments reflect the sale of expandable polystyrene (EPS) from the specialty chemicals operating segment to the packaging
operating segment.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



5



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RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

Summary by Geographic Region

(In thousands)

(Unaudited)



|                                        |  |                            |         |   |                          |   |         |                           |  |   |              |   |  |   |         |  
|--------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | ------------------------- |  | - | ------------ | - |  | - | ------- | -
|                                        |  | For the three months ended |         |   | For the six months ended |  
|                                        |  | July 1, 2005 (As restated) |         |   | June 25,2004             |   |         | July 1, 2005(As restated) |  |   | June 25,2004 |  
|Net Sales to Unaffiliated Customers:    |  |                            |         |   |                          |   |         |                           |  |   |              |   |  |   |         |  
|United States                           |  | $                          | 82,651  |   |                          | $ | 69,607  |                           |  | $ | 157,909      |   |  | $ | 133,334 |  
|Canada                                  |  |                            | 10,819  |   |                          |   | 10,624  |                           |  |   | 23,737       |   |  |   | 19,924  |  
|Europe                                  |  |                            | 31,174  |   |                          |   | 31,246  |                           |  |   | 61,840       |   |  |   | 57,438  |  
|Transfers Between Geographic Regions(1) |  |                            | (3,191  | ) |                          |   | (3,372  | )                         |  |   | (7,150       | ) |  |   | (6,291  | )
|                                        |  |                            |         |   |                          |   |         |                           |  |   |              |   |  |   |         |  
|Consolidated                            |  | $                          | 121,453 |   |                          | $ | 108,105 |                           |  | $ | 236,336      |   |  | $ | 204,405 |  
|                                        |  |                            |         |   |                          |   |         |                           |  |   |              |   |  |   |         |  
|Income (Loss) From Operations:          |  |                            |         |   |                          |   |         |                           |  |   |              |   |  |   |         |  
|United States                           |  | $                          | (1,649  | ) |                          | $ | 1,213   |                           |  | $ | (2,687       | ) |  | $ | 3,161   |  
|Canada                                  |  |                            | 1,641   |   |                          |   | 1,434   |                           |  |   | 4,143        |   |  |   | 3,261   |  
|Europe                                  |  |                            | (1,239  | ) |                          |   | 1,972   |                           |  |   | (1,095       | ) |  |   | 2,748   |  
|                                        |  |                            |         |   |                          |   |         |                           |  |   |              |   |  |   |         |  
|Consolidated                            |  | $                          | (1,247  | ) |                          | $ | 4,619   |                           |  | $ | 361          |   |  | $ | 9,170   |  
|                                        |  |                            |         |   |                          |   |         |                           |  |   |              |   |  |   |         |  
|Income (Loss) Before Income Taxes:      |  |                            |         |   |                          |   |         |                           |  |   |              |   |  |   |         |  
|United States                           |  | $                          | (8,700  | ) |                          | $ | (3,246  | )                         |  | $ | (15,758      | ) |  | $ | (5,175  | )
|Canada                                  |  |                            | 1,172   |   |                          |   | 831     |                           |  |   | 3,123        |   |  |   | 2,263   |  
|Europe                                  |  |                            | (1,708  | ) |                          |   | 1,400   |                           |  |   | (2,023       | ) |  |   | 1,616   |  
|                                        |  |                            |         |   |                          |   |         |                           |  |   |              |   |  |   |         |  
|Consolidated                            |  | $                          | (9,236  | ) |                          | $ | (1,015  | )                         |  | $ | (14,658      | ) |  | $ | (1,296  | )
|                                        |  |                            |         |   |                          |   |         |                           |  |   |              |   |  |   |         |  

---

|(1) | Transfers between geographic regions reflect the sale of EPS from the Companys Canadian specialty chemicals operations to its domestic packaging operations.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



6



---

RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



1. BASIS OF PRESENTATION



General



The condensed consolidated financial statements included herein have been
prepared by Radnor Holdings Corporation and subsidiaries (collectively, Radnor, we, us, our or the Company) pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in consolidated financial statements, prepared in accordance with U.S. generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. In
the opinion of the Company, the statements include all adjustments (which include only normal recurring adjustments) required for a fair statement of financial position, results of operations and cash flows for such periods. The preparation of the
statements requires the use of management estimates. The results of operations for the interim periods are not necessarily indicative of the results for a full year, due to the seasonality inherent in some of the Companys operations and the
possibility for general economic changes.



From January 1, 2005
to January 30, 2005, the Company consolidated Radnor Investments, L.P. As described in Note 10 of these condensed consolidated financial statements, as of January 31, 2005, the Company no longer consolidates Radnor Investments, L.P. and the
investments and minority interest of Radnor Investments, L.P. are no longer reflected in the consolidated financial statements of the Company.



Stock-based Compensation



At July 1, 2005, the Company had a stock-based compensation plan as described in Note 10 to the consolidated financial statements in the Companys
Form 10-K for fiscal 2004. In the third quarter of fiscal 2003, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, and accounts for all
prospective option grants under the fair value method. No stock options have been issued by the Company subsequent to its adoption of SFAS No. 148.



Reclassifications



Certain reclassifications have been made to the prior years presentation to conform to the current year presentation.



2. RESTATEMENT



On June 30, 2005, Radnor Investment Advisors, L.P., a partnership under common control with the Company, sold one of
its two material investments and approved a distribution totaling $971,213 to certain of its special limited partners, who are also officers and employees of the Company. In addition, two of the Companys stockholders and senior officers
allocated a portion of their interests in Radnor Investment Advisors, L.P. to one of the special limited partners, totaling $150,000, as compensation for her services rendered on behalf of Radnor Investments Advisors, L.P. During the second quarter
ended July 1, 2005, the $150,000 additional allocation was recorded by the Company as non-cash compensation expense and paid-in-capital under the requirements of Securities and Exchange Commission Staff Accounting Bulletin Topic 5T. These
recorded amounts were reflected in the financial statements in the Original Filing.



Subsequent to the filing of the Original Filing, the Company performed an additional subsequent review of the accounting for the transaction. Based on further review of the facts and circumstances, the Company
concluded that, in analyzing the special limited partnership interests, the Company should have used a different measurement date when applying Securities and Exchange Commission Staff Accounting Bulletin Topic 5T.



As a result, the Company restated its consolidated financial statements for
the three and six months ended July 1, 2005. The restatement adjustments are non-cash in nature, as they related to distributions made by Radnor Investment Advisors, L.P., which resulted in an increase in operating expenses of $971,213 and an
increase in the net loss of $971,213 for the three and six months ended July 1, 2005. The restatement adjustment had the additional effect of increasing the accumulated deficit by $971,213 and increasing additional paid-in capital by $971,213
as of July 1, 2005.



A summary of the effects of the
restatement on the Companys Consolidated Balance Sheet as of July 1, 2005 is as follows:



|                           |  |                      |         |   |             |  |  |   |         |  
|-------------------------- |  | -------------------- | ------- | - | ----------- |  |  | - | ------- | -
|                           |  | July 1, 2005         |        
|                           |  | Aspreviouslyreported |         |   | As restated | 
|Additional paid-in capital |  | $                    | 19,537  |   |             |  |  | $ | 20,508  |  
|Accumulated deficit        |  |                      | (41,536 | ) |             |  |  |   | (42,507 | )



A summary of the
effects of the restatement on the Companys Consolidated Statements of Operations for the three and six months ended of July 1, 2005 is as follows:



|                                    |  |                                 |         |   |                               |   |         |                      |  |   |            |   |  |   |         |  
|----------------------------------- |  | ------------------------------- | ------- | - | ----------------------------- | - | ------- | -------------------- |  | - | ---------- | - |  | - | ------- | -
|                                    |  | Three Months Ended July 1, 2005 |         |   | Six Months Ended July 1, 2005 |  
|                                    |  | Aspreviouslyreported            |         |   | Asrestated                    |   |         | Aspreviouslyreported |  |   | Asrestated |  
|Selling, general and administrative |  | $                               | 8,763   |   |                               | $ | 9,734   |                      |  | $ | 18,286     |   |  | $ | 19,257  |  
|Income (loss) from operations       |  |                                 | (276    | ) |                               |   | (1,247  | )                    |  |   | 1,332      |   |  |   | 361     |  
|Loss before income taxes            |  |                                 | (8,265  | ) |                               |   | (9,236  | )                    |  |   | (13,687    | ) |  |   | (14,658 | )
|Net loss                            |  |                                 | (10,498 | ) |                               |   | (11,469 | )                    |  |   | (13,908    | ) |  |   | (14,879 | )



Separate from the
restatement described above, certain changes have been made to Note 13 to conform with the equity accounting provisions of Rule 3-10 of Regulation S-X.



3. INVENTORIES



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



|                |  |             |        |                  |   |       
|--------------- |  | ----------- | ------ | ---------------- | - | ------
|                |  | July 1,2005 |        | December 31,2004
|Raw Materials   |  | $           | 12,993 |                  | $ | 15,904
|Work in Process |  |             | 3,605  |                  |   | 2,444 
|Finished Goods  |  |             | 50,130 |                  |   | 49,178
|                |  |             |        |                  |   |       
|                |  | $           | 66,728 |                  | $ | 67,526
|                |  |             |        |                  |   |       



7



---

4. INTANGIBLE ASSETS



Intangible assets consisted of (in thousands):



|                      |  |              |       |                   |   |        |            |  |             |       |              |   |       |            |   |        |   |  |   |      
|--------------------- |  | ------------ | ----- | ----------------- | - | ------ | ---------- |  | ----------- | ----- | ------------ | - | ----- | ---------- | - | ------ | - |  | - | -----
|                      |  | July 1, 2005 |       | December 31, 2004
|                      |  | GrossAmount  |       | Accum.Amort.      |   |        | Net Amount |  | GrossAmount |       | Accum.Amort. |   |       | Net Amount
|Customer List         |  | $            | 7,052 |                   | $ | (1,394 | )          |  | $           | 5,658 |              | $ | 7,052 |            | $ | (930   | ) |  | $ | 6,122
|Non-Compete Agreement |  |              | 2,671 |                   |   | (620   | )          |  |             | 2,051 |              |   | 2,671 |            |   | (429   | ) |  |   | 2,242
|                      |  |              |       |                   |   |        |            |  |             |       |              |   |       |            |   |        |   |  |   |      
|                      |  | $            | 9,723 |                   | $ | (2,014 | )          |  | $           | 7,709 |              | $ | 9,723 |            | $ | (1,359 | ) |  | $ | 8,364
|                      |  |              |       |                   |   |        |            |  |             |       |              |   |       |            |   |        |   |  |   |      



Intangible assets are
being amortized on a straight-line basis over the expected period of benefit. The aggregate amortization expense related to intangible assets for the three months ended July 1, 2005 and June 25, 2004 was $0.3 million and $0.2 million, respectively.
The aggregate amortization expense related to intangible assets for the six months ended July 1, 2005 and June 25, 2004 was $0.7 million and $0.4 million, respectively.



5. LONG-TERM DEBT



On April 27, 2004, the Company issued $70.0 million of Senior Secured Floating Rate Notes due 2009. The notes bear interest at a floating rate of LIBOR
plus 6.75% per year. Interest on the notes is reset quarterly and is payable quarterly, with the first payment having been made on July 15, 2004. The notes will mature on April 15, 2009. The net proceeds were used to repay a then outstanding $40.5
million term loan and outstanding borrowings under the existing revolving credit facilities.



On July 1, 2005, the Companys Finnish subsidiary entered into a $20 million term loan facility. The term loan facility bears interest at the Companys option at either (i) the Eurodollar Rate plus 6.50%; or
(ii) 3.75% plus the greater of (a) the Prime Rate and (b) the Federal Funds Effective Rate plus 0.5%, subject to downward adjustment using a pricing grid based on a debt to EBITDA ratio. The term loan matures on July 1, 2008 and, subject to
specified optional and mandatory repayment events, beginning September 30, 2005, is payable in quarterly principal installments of $500,000 in the first twelve months, $575,000 in the second twelve months and $650,000 in the third twelve months,
with the remaining principal balance due at maturity. The loan is secured by a second lien on all of the now owned or hereafter acquired property and assets of the Companys Finnish subsidiary and its subsidiaries, other than its leased real
property, and a pledge of all of the shares of stock of the Finnish subsidiary. In addition, the Company guaranteed the Finnish subsidiarys obligations under the term loan facility up to a maximum of 7.5 million Euros or $9.1 million. The net
proceeds from the term loan were used to repay the Companys European credit facilities and, through the repayment of intercompany loans, outstanding borrowings under the domestic revolving credit facilities.



In February 2005, March 2005 and August 2005, the Company amended certain
financial covenants in its domestic credit facility to permit flexibility in operating the Companys business and address compliance issues and instances of non-compliance. In addition, in April 2005 and June 2005, the Company amended its
domestic credit facility to provide flexibility in the Companys operations. The most recent amendment caused changes to the following financial covenants: (i) the minimum fixed charge coverage ratio, (ii) the maximum ratio of funded
indebtedness to earnings before interest, taxes, depreciation and amortization and (iii) the limitation of capital expenditures. As amended, the domestic credit facility contains the following financial covenants:



| |  |  | A minimum fixed charge coverage ratio, which is .63 to 1.00 for the quarter ended June 30, 2005 and increasing over time thereafter to 1.15 to 1.00 for the quarter ending September
30, 2006 and for each quarter thereafter;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A maximum ratio of funded indebtedness to earnings before interest, taxes, depreciation and amortization which is not applicable for the quarter ended June 30, 2005, is 8.80 to 1.00
for the quarter ending September 30, 2005 and declines over time thereafter until reaching 3.75 to 1.00 for the quarter ending March 31, 2007 and for each quarter thereafter;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Limitation of capital expenditures of $20.0 million for the year ending December 31, 2005 (or $30.0 million if the Company applies specified proceeds of certain capital raising
transactions to reduce outstanding obligations under the facility), increasing to $25.0 million for the year ending December 31, 2006, and declining to $20.0 million for each fiscal year thereafter;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A minimum ratio of borrowers consolidated tangible assets to consolidated tangible assets of the Companys domestic subsidiaries of 85%;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A minimum ratio of borrowers consolidated earnings before interest, taxes, depreciation and amortization to consolidated earnings before interest, taxes, depreciation and
amortization of the Companys domestic subsidiaries of 85%; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Limitation of operating lease arrangements to $11.0 million per year.
| | - |  | ---------------------------------------------------------------------



As a result of the amendments discussed above, the Company is in compliance with all covenants, including financial covenants, under all of the
Companys credit arrangements.



As of July 1, 2005, the
Company had $60.6 million outstanding under its revolving credit facilities. After taking into account cash on hand of $3.5 million, we would have had the ability to draw up to an additional $16.2 million under these facilities as of July 1, 2005.
The principal uses of cash for the next several years will be debt service, capital expenditures and working capital requirements. The Company is currently pursuing the divestiture of certain non-core assets and a private placement of approximately
$50 million of debt and equity securities to enhance its liquidity. The Company also anticipates entering into additional credit facilities, including capital equipment financings. From time to time, the Company evaluates and may pursue various
capital raising transactions including other sales of debt or equity securities and the divestiture of other non-core assets, in order to further enhance the Companys overall liquidity and improve its capital structure. In recent quarters, the
Company has incurred losses and negative cash flows from operations. As a holding company, the Company is dependent upon dividends and other payments from its subsidiaries to generate the funds necessary to meet its obligations. Subject to certain
limitations, the Company is, and will continue to be, able to control its receipt of dividends and other payments from its subsidiaries. Under the Companys current business plan, the Company expects that in 2005 and in the long-term, cash
generated from operations, sales of debt and equity securities and borrowings from current and new credit facilities will be sufficient to meet the Companys expected operating needs. However, as a result of uncertainties including pricing of
the Companys products, general market and economic conditions and fluctuations in raw material prices, the Company is not able to accurately predict the amount of cash that will be generated from operating activities and cash generated from
operating activities, if any, may not be sufficient to meet the Companys operating needs. To the extent that the Company uses cash in operating activities, we expect that such amounts will be financed from borrowings under existing and new
credit facilities as well as sales of debt and equity securities. However, there can be no assurances that the Company will be able to obtain additional debt or equity financing on terms acceptable to the Company, when and if needed.



6. COMMITMENTS AND CONTINGENCIES



In March 2005, the Company amended its primary North American styrene
monomer requirements contract. Based on this amendment, the Company accrued a $0.5 million termination fee in March 2005 and wrote-off $2.1 million in prepaid costs related to the contract effective December 31, 2004. As part of the amendment, the
contract terminated on August 1, 2005 upon the full payment of the termination fee.



In May 2005, the Company amended its primary European styrene monomer requirements contract. Under the amended contract, the Company is required to purchase 60,000 metric tons annually of its European styrene monomer
requirements through December 2009 from one supplier, and has certain rights to purchase additional styrene monomer.



8



---

7. INCOME TAXES



The effective rate for the three month period ended July 1, 2005 yielded an expense of 24.2%, as compared to a 1.7% expense in the same period in the
prior year. This change was primarily due to the creation of a reserve during the prior period for certain expenses at the Companys Canadian operations and the Company evaluated its deferred tax assets and recorded a charge of $7.1 million
which primarily consists of an establishment of valuation allowance against its U.S. net operating loss carryforwards during the second quarter. The Company determined that the valuation allowance was required based on its losses, which are given
substantially more weight than forecasts of future profitability in the evaluation. Management also considered the reversal of deferred tax liabilities and the impact from tax planning strategies in making the assessment of the realizability of
deferred tax assets. As of July 1, 2005, the Company had $97.4 million of net operating loss carryforwards for federal income tax purposes, which expire through 2024.



8. SPECIALTY CHEMICALS FACILITY OUTAGE



During the second quarter, one of the Companys North American specialty chemicals facilities suffered a fire. That fire resulted in a loss of
production totaling 1.4 million pounds of expandable polystyrene, which represented approximately 3.4% of the North American specialty chemicals operations sales for the second quarter. As a result of this fire, there was no resulting impairment of
assets and no impairment losses were recorded.



9. INTEREST EXPENSE



Included in interest expense was $328,000 and $256,000 of
amortization of deferred financing costs for the three months ended July 1, 2005 and June 25, 2004, respectively, and $651,000 and $428,000 of amortization of deferred financing cost for the six months ended July 1, 2005 and June 25, 2004,
respectively.



10. COMPREHENSIVE INCOME



Comprehensive income is the total of net income (loss) and non-owner changes
in equity. The Company had comprehensive losses as follows (in thousands):



|                                        |  |                            |         |   |                  |   |        |                           |  |   |              |   |  |   |        |  
|--------------------------------------- |  | -------------------------- | ------- | - | ---------------- | - | ------ | ------------------------- |  | - | ------------ | - |  | - | ------ | -
|                                        |  | Three Months Ended         |         |   | Six Months Ended |  
|                                        |  | July 1, 2005 (As restated) |         |   | June 25,2004     |   |        | July 1, 2005(As restated) |  |   | June 25,2004 |  
|Net Loss                                |  | $                          | (11,469 | ) |                  | $ | (1,032 | )                         |  | $ | (14,879      | ) |  | $ | (1,203 | )
|Foreign Currency Translation Adjustment |  |                            | (2,200  | ) |                  |   | 31     |                           |  |   | (4,412       | ) |  |   | (1,087 | )
|                                        |  |                            |         |   |                  |   |        |                           |  |   |              |   |  |   |        |  
|Comprehensive Loss                      |  | $                          | (13,669 | ) |                  | $ | (1,001 | )                         |  | $ | (19,291      | ) |  | $ | (2,290 | )
|                                        |  |                            |         |   |                  |   |        |                           |  |   |              |   |  |   |        |  



11. INVESTMENTS IN AFFILIATED
COMPANIES



Beginning in the fourth quarter of the fiscal
year ended December 26, 2003, the Company adopted Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities, and began to consolidate Radnor Investments, L.P., an affiliated investment
partnership in which the Company was the sole limited partner. On January 31, 2005, the Companys $18.9 million limited partnership interest in Radnor Investments, L.P., which was the maximum amount that the Company could have received on that
date with respect to the limited partnership interest under the partnership agreement, was converted into a note receivable due from Radnor Investment Advisors, L.P., bearing interest at an annual rate equal to the Prime Index reported by Bloomberg
plus one percent (1%) with interest compounded daily. In exchange for the note, the Company assigned its remaining interests as a limited partner in Radnor Investments, L.P. to Radnor Investment Advisors, L.P. Radnor Investment Advisors, L.P. was
the general partner of Radnor Investments, L.P. and is owned by certain executives, stockholders and employees of the Company. The general partner of Radnor Investment Advisors, L.P. is Radnor Investment Advisors, Inc., an entity controlled by the
Chief Executive Officer of the Company and whose other owners consist of certain stockholders and executives of the Company.



As described in Notes 2 and 4 of the consolidated financial statements included in the Companys Annual Report on 10-K for the year ended December
31, 2004, the accounts of Radnor Investments, L.P. were consolidated using accounting guidance that required investments to be recorded at fair value and the fair value of investments was determined in good faith by Radnor Investment Advisors, L.P.
The difference between the fair value of investments of $39.8 million and the Companys $18.9 million limited partnership interest represented the minority interest in Radnor Investments, L.P. of $20.9 million included in the Companys
consolidated financial statements at January 31, 2005. The sole minority interest holder in Radnor Investments, L.P. was Radnor Investment Advisors, L.P. As a result of the transaction described above, the Company no longer consolidates Radnor
Investments, L.P. and the investments and minority interest of Radnor Investments, L.P. are no longer reflected in the consolidated financial statements of the Company. On March 11, 2005, $1.5 million of the note receivable was collected. On April
8, 2005 the remainder of the note receivable, including accrued interest in the amount of $0.2 million, was collected in full.



On June 30, 2005, Radnor Investment Advisors, L.P. sold one of its two material investments and approved a distribution
totaling $971,213 to certain of its special limited partners, who are also officers and employees of the Company. In addition, two of the Companys stockholders and senior officers allocated a portion of their interests in Radnor Investment
Advisors, L.P. to one of the special limited partners, totaling $150,000, as compensation for her services rendered on behalf of Radnor Investments Advisors, L.P. The total distributions to the special limited partners of $1.1 million were recorded
by the Company as non-cash compensation expense and paid-in-capital.



9



---

12. NEW ACCOUNTING STANDARDS



In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 151, Inventory Costs - An Amendment of ARB No. 43, Chapter 4, which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). Under this Statement, such items will
be recognized as current-period charges. In addition, the Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS No. 151 will
be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We continue to assess the potential impact that the adoption of SFAS No. 151 could have on our financial position or results of operations.



In December 2004, the FASB issued SFAS No. 123(R), Share-Based
Payment, which establishes standards for transactions in which an entity exchanges its equity instruments for goods or services. This standard requires a public entity to measure the cost of employee services received in exchange for an award
of equity instruments based on the grant-date fair value of the award. This eliminates the exception to account for such awards using the intrinsic method previously allowable under APB Opinion No. 25. SFAS 123(R) will be effective for fiscal years
beginning after December 15, 2005. We previously adopted the fair value recognition provisions of SFAS No. 123 Accounting for Stock-Based Compensation, in the third quarter of 2003. Accordingly, we continue to assess the potential impact that the
adoption of SFAS No. 123(R) will have on our financial statements.



On March 30, 2005, FASB interpretation No. 47 Accounting for Conditional Asset Retirement Obligations was issued. This interpretation clarifies SFAS No. 143 Asset Retirement Obligations in that an entity is required
to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liabilitys fair value can be reasonably estimated. The interpretation states that when an existing law, regulation or contract
requires an entity to perform an asset retirement activity, an unambiguous requirement to perform the retirement activity exists, even if that activity can be deferred indefinitely. The interpretation is effective no later than the end of fiscal
years ending after December 15, 2005. We are evaluating the effect that FIN 47 will have on our consolidated financial statements.



In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections  A Replacement of APB 20 and FAS 3. SFAS 154
requires retrospective application for voluntary changes in accounting principle unless it is impracticable to do so. Retrospective application refers to the application of a different accounting principle to previously issued financial statements
as if that principle had always been used. SFAS 154s retrospective application requirement replaces APB 20s requirement to recognize most voluntary changes in accounting principle by including in net income of the period in which the
change is made the cumulative effect of changing to the new accounting principle. The Statement carries forward without changing the guidance in APB 20 for reporting the correction of an error in previously issued financial statements and a change
in accounting estimate. Accordingly, a change in accounting estimate shall be accounted for in (a) the period in which the change is made if the change affects that period only or (b) the period in which the change is made and future periods if the
change affects both. A change in accounting estimate shall not be accounted for by restating or retrospectively adjusting amounts reported in financial statements of prior periods or by reporting pro forma amounts for prior periods. Any error in the
financial statements of a prior period discovered prior to those presented shall be reported as a prior-period adjustment by restating the prior-period financial statements. The requirements of the Statement will be effective for accounting changes
made in the fiscal years beginning after December 15, 2005.



On
October 22, 2004, the American Jobs Creation Act (the AJCA) was signed into law. The AJCA provides for the deduction for U.S. federal income tax purposes of 85% of certain foreign earnings that are repatriated, as defined in the AJCA. As
the Company has historically permanently reinvested the undistributed earnings of its foreign subsidiaries and currently plans to continue doing so, the AJCA has not had, and the Company does not expect that the AJCA will have, a material impact on
its financial position or results of operations. The AJCA also provides for a domestic manufacturing deduction for U.S. federal income tax purposes. We will not benefit from this deduction until the date in the future that our U.S. federal tax loss
carryforwards have been fully utilized.



13. SUPPLEMENTAL FINANCIAL
INFORMATION



Radnor Holdings Corporation is a holding
company that has no operations separate from its investment in subsidiaries. The Companys $135.0 million of 11.0% Senior Notes due 2010 and $70.0 million of Senior Secured Floating Rate Notes due 2009 are fully and unconditionally jointly and
severally guaranteed by substantially all of the Companys domestic subsidiaries, all of which are 100% owned by the Company.



As a holding company, the Company is dependent upon dividends and other payments from its subsidiaries to generate the funds necessary to meet its
obligations. Subject to certain limitations, the Company is, and will continue to be, able to control its receipt of dividends and other payments from its subsidiaries.



There are no direct prohibitions on the ability of the Company or any guarantor to obtain funds from its respective domestic
subsidiaries by dividend or by loan. Certain of the Companys foreign subsidiaries credit agreements either prohibit or restrict dividends and loans through covenants, such as minimum debt to equity and current assets to current
liabilities ratios, that indirectly limit the ability of these subsidiaries to transfer funds to the Company. As of July 1, 2005 and December 31, 2004, the net assets of these foreign subsidiaries totaled $30.1 million and $33.7 million,
respectively.



The following condensed consolidating financial
statements of Radnor Holdings Corporation and subsidiaries have been prepared pursuant to Rule 3-10 of Regulation S-X:



10



---

RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidating Balance Sheet

July 1, 2005

(As restated)

(In thousands)



|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|------------------------------------------------------------------- |  | -------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | -------- | -
|                                                                    |  | HoldingCompany |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Assets                                                              |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  |                |         |   |                      
|Current assets:                                                     |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Cash                                                                |  | $              |        |   |                       | $ | (173    | )                         |  | $ | 3,694        |   |  | $            |         |   |  | $ | 3,521    |  
|Accounts receivable, net                                            |  |                |        |   |                       |   | 35,052  |                           |  |   | 28,399       |   |  |              | (6,109   | ) |  |   | 57,342   |  
|Inventories, net                                                    |  |                |        |   |                       |   | 57,720  |                           |  |   | 9,008        |   |  |              |         |   |  |   | 66,728   |  
|Intercompany receivable                                             |  |                |        |   |                       |   |        |                           |  |   | 34,528       |   |  |              | (34,528  | ) |  |   |         |  
|Prepaid expenses and other                                          |  |                | 52      |   |                       |   | 5,388   |                           |  |   | 1,206        |   |  |              | (58      | ) |  |   | 6,588    |  
|Deferred tax asset                                                  |  |                | (25     | ) |                       |   | 2,483   |                           |  |   | (149         | ) |  |              |         |   |  |   | 2,309    |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  |                | 27      |   |                       |   | 100,470 |                           |  |   | 76,686       |   |  |              | (40,695  | ) |  |   | 136,488  |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Property, plant and equipment, at cost                              |  |                |        |   |                       |   | 271,590 |                           |  |   | 61,679       |   |  |              |         |   |  |   | 333,269  |  
|Less accumulated depreciation                                       |  |                |        |   |                       |   | (94,103 | )                         |  |   | (25,917      | ) |  |              |         |   |  |   | (120,020 | )
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  |                |        |   |                       |   | 177,487 |                           |  |   | 35,762       |   |  |              |         |   |  |   | 213,249  |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Intercompany receivable                                             |  |                | 67,285  |   |                       |   |        |                           |  |   | 8,946        |   |  |              | (76,231  | ) |  |   |         |  
|Investments in subsidiaries                                         |  |                | 141,436 |   |                       |   | 51,561  |                           |  |   |             |   |  |              | (192,997 | ) |  |   |         |  
|Investments                                                         |  |                |        |   |                       |   |        |                           |  |   | 1,910        |   |  |              |         |   |  |   | 1,910    |  
|Other assets                                                        |  |                | 15,550  |   |                       |   | 9,246   |                           |  |   | 4,559        |   |  |              |         |   |  |   | 29,355   |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  | $              | 224,298 |   |                       | $ | 338,764 |                           |  | $ | 127,863      |   |  | $            | (309,923 | ) |  | $ | 381,002  |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Liabilities and Stockholders Equity (Deficit)                      |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  |                |         |   |                      
|Current liabilities:                                                |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Accounts payable                                                    |  | $              |        |   |                       | $ | 30,320  |                           |  | $ | 17,297       |   |  | $            | (373     | ) |  | $ | 47,244   |  
|Accrued liabilities                                                 |  |                | 5,807   |   |                       |   | 13,363  |                           |  |   | 5,394        |   |  |              | (176     | ) |  |   | 24,388   |  
|Intercompany payable                                                |  |                | 31,941  |   |                       |   | 25,564  |                           |  |   |             |   |  |              | (57,505  | ) |  |   |         |  
|Current portion of long-term debt and capitalized lease obligations |  |                |        |   |                       |   | 9,347   |                           |  |   | 6,610        |   |  |              |         |   |  |   | 15,957   |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  |                | 37,748  |   |                       |   | 78,594  |                           |  |   | 29,301       |   |  |              | (58,054  | ) |  |   | 87,589   |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Long-term debt, net of current portion                              |  |                | 205,000 |   |                       |   | 99,301  |                           |  |   | 18,793       |   |  |              | (16,560  | ) |  |   | 306,534  |  
|Capital lease obligations, net of current portion                   |  |                |        |   |                       |   | 2,636   |                           |  |   |             |   |  |              |         |   |  |   | 2,636    |  
|Intercompany payable                                                |  |                | 3,548   |   |                       |   | 55,443  |                           |  |   |             |   |  |              | (58,991  | ) |  |   |         |  
|Deferred tax liability                                              |  |                |        |   |                       |   | (119    | )                         |  |   |             |   |  |              | 119      |   |  |   |         |  
|Other non-current liabilities                                       |  |                |        |   |                       |   | 3,179   |                           |  |   | 4            |   |  |              |         |   |  |   | 3,183    |  
|                                                                    |  |                |         |   |                      
|Commitments and contingencies                                       |  |                |        |   |                       |   |        |                           |  |   |             |   |  |              |         |   |  |   |         |  
|                                                                    |  |                |         |   |                      
|Stockholders equity (deficit):                                     |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Common stock                                                        |  |                | 1       |   |                       |   | 4       |                           |  |   | 22           |   |  |              | (26      | ) |  |   | 1        |  
|Additional paid-in capital                                          |  |                | 20,508  |   |                       |   | 99,251  |                           |  |   | 22,620       |   |  |              | (121,871 | ) |  |   | 20,508   |  
|Retained earnings (deficit)                                         |  |                | (42,507 | ) |                       |   | 3,370   |                           |  |   | 51,170       |   |  |              | (54,540  | ) |  |   | (42,507  | )
|Cumulative translation adjustment                                   |  |                |        |   |                       |   | (2,895  | )                         |  |   | 5,953        |   |  |              |         |   |  |   | 3,058    |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Total stockholders equity (deficit)                                |  |                | (21,998 | ) |                       |   | 99,730  |                           |  |   | 79,765       |   |  |              | (176,437 | ) |  |   | (18,940  | )
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  | $              | 224,298 |   |                       | $ | 338,764 |                           |  | $ | 127,863      |   |  | $            | (309,923 | ) |  | $ | 381,002  |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  



11



---

RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the three months ended July 1, 2005

(As restated)

(In thousands)



|                                                           |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|---------------------------------------------------------- |  | -------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|                                                           |  | HoldingCompany |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net sales                                                  |  | $              |        |   |                       | $ | 82,651  |                           |  | $ | 41,993       |   |  | $            | (3,191 | ) |  | $ | 121,453 |  
|                                                           |  |                |         |   |                      
|Cost of goods sold                                         |  |                |        |   |                       |   | 70,434  |                           |  |   | 38,056       |   |  |              | (3,191 | ) |  |   | 105,299 |  
|                                                           |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Gross profit                                               |  |                |        |   |                       |   | 12,217  |                           |  |   | 3,937        |   |  |              |       |   |  |   | 16,154  |  
|                                                           |  |                |         |   |                      
|Operating expenses:                                        |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Distribution                                               |  |                |        |   |                       |   | 5,862   |                           |  |   | 1,805        |   |  |              |       |   |  |   | 7,667   |  
|Selling, general and administrative                        |  |                | 1,133   |   |                       |   | 6,829   |                           |  |   | 1,772        |   |  |              |       |   |  |   | 9,734   |  
|                                                           |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) from operations                              |  |                | (1,133  | ) |                       |   | (474    | )                         |  |   | 360          |   |  |              |       |   |  |   | (1,247  | )
|                                                           |  |                |         |   |                      
|Interest, net                                              |  |                | 2,004   |   |                       |   | 5,312   |                           |  |   | 490          |   |  |              |       |   |  |   | 7,806   |  
|Income from unconsolidated affiliates                      |  |                |        |   |                       |   |        |                           |  |   | (125         | ) |  |              |       |   |  |   | (125    | )
|Other, net                                                 |  |                |        |   |                       |   | (114    | )                         |  |   | 422          |   |  |              |       |   |  |   | 308     |  
|Minority interest in operations of consolidated subsidiary |  |                |        |   |                       |   |        |                           |  |   |             |   |  |              |       |   |  |   |        |  
|                                                           |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Loss before income taxes                                   |  |                | (3,137  | ) |                       |   | (5,672  | )                         |  |   | (427         | ) |  |              |       |   |  |   | (9,236  | )
|                                                           |  |                |         |   |                      
|Provision (benefit) for income taxes:                      |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Current                                                    |  |                |        |   |                       |   | 180     |                           |  |   | 353          |   |  |              |       |   |  |   | 533     |  
|Deferred                                                   |  |                | 859     |   |                       |   | 5,341   |                           |  |   | (4,500       | ) |  |              |       |   |  |   | 1,700   |  
|                                                           |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|                                                           |  |                | 859     |   |                       |   | 5,521   |                           |  |   | (4,147       | ) |  |              |       |   |  |   | 2,233   |  
|                                                           |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Equity in earnings of subsidiaries                         |  |                | (7,473  | ) |                       |   | (1,412  | )                         |  |   |             |   |  |              | 8,885  |   |  |   |        |  
|                                                           |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net Income (loss)                                          |  | $              | (11,469 | ) |                       | $ | (12,605 | )                         |  | $ | 3,720        |   |  | $            | 8,885  |   |  | $ | (11,469 | )
|                                                           |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  



12



---

RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the six months ended July 1, 2005

(As restated)

(In thousands)



|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|                                                                                                                                                  |  | HoldingCompany |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net sales                                                                                                                                         |  | $              |        |   |                       | $ | 157,909 |                           |  | $ | 85,577       |   |  | $            | (7,150 | ) |  | $ | 236,336 |  
|                                                                                                                                                  |  |                |         |   |                      
|Cost of goods sold                                                                                                                                |  |                |        |   |                       |   | 134,591 |                           |  |   | 74,777       |   |  |              | (7,150 | ) |  |   | 202,218 |  
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Gross profit                                                                                                                                      |  |                |        |   |                       |   | 23,318  |                           |  |   | 10,800       |   |  |              |       |   |  |   | 34,118  |  
|                                                                                                                                                  |  |                |         |   |                      
|Operating expenses:                                                                                                                               |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Distribution                                                                                                                                      |  |                |        |   |                       |   | 10,698  |                           |  |   | 3,802        |   |  |              |       |   |  |   | 14,500  |  
|Selling, general and administrative                                                                                                               |  |                | 1,133   |   |                       |   | 14,038  |                           |  |   | 4,086        |   |  |              |       |   |  |   | 19,257  |  
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) from operations                                                                                                                     |  |                | (1,133  | ) |                       |   | (1,418  | )                         |  |   | 2,912        |   |  |              |       |   |  |   | 361     |  
|                                                                                                                                                  |  |                |         |   |                      
|Interest, net                                                                                                                                     |  |                | 3,966   |   |                       |   | 10,429  |                           |  |   | 805          |   |  |              |       |   |  |   | 15,200  |  
|Income from unconsolidated affiliates                                                                                                             |  |                |        |   |                       |   |        |                           |  |   | (275         | ) |  |              |       |   |  |   | (275    | )
|Other, net                                                                                                                                        |  |                |        |   |                       |   | (510    | )                         |  |   | 919          |   |  |              |       |   |  |   | 409     |  
|Minority interest in operations of consolidated subsidiary                                                                                        |  |                |        |   |                       |   |        |                           |  |   | (315         | ) |  |              |       |   |  |   | (315    | )
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) before income taxes                                                                                                                 |  |                | (5,099  | ) |                       |   | (11,337 | )                         |  |   | 1,778        |   |  |              |       |   |  |   | (14,658 | )
|                                                                                                                                                  |  |                |         |   |                      
|Provision (benefit) for income taxes:                                                                                                             |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Current                                                                                                                                           |  |                |        |   |                       |   | 343     |                           |  |   | 991          |   |  |              |       |   |  |   | 1,334   |  
|Deferred                                                                                                                                          |  |                | 2,373   |   |                       |   | 6,059   |                           |  |   | (9,545       | ) |  |              |       |   |  |   | (1,113  | )
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|                                                                                                                                                  |  |                | 2,373   |   |                       |   | 6,402   |                           |  |   | (8,554       | ) |  |              |       |   |  |   | 221     |  
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Equity in earnings of subsidiaries                                                                                                                |  |                | (7,407  | ) |                       |   | 335     |                           |  |   |             |   |  |              | 7,072  |   |  |   |        |  
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net income (loss)                                                                                                                                 |  | $              | (14,879 | ) |                       | $ | (17,404 | )                         |  | $ | 10,332       |   |  | $            | 7,072  |   |  | $ | (14,879 | )
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|                                                                                                                                                 
|RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES Condensed Consolidating Statement of Cash Flows For the six months ended July
1, 2005 (In thousands) | 
|                                                                                                                                                  |  | HoldingCompany |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net cash provided by (used in) operating activities                                                                                               |  | $              | (3,172  | ) |                       | $ | (19,055 | )                         |  | $ | (2,559       | ) |  | $            | 1,300  |   |  | $ | (23,486 | )
|                                                                                                                                                  |  |                |         |   |                      
|Cash flows from investing activities:                                                                                                             |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Capital expenditures                                                                                                                              |  |                |        |   |                       |   | (8,822  | )                         |  |   | (752         | ) |  |              |       |   |  |   | (9,574  | )
|Change in other assets                                                                                                                            |  |                | (53     | ) |                       |   | 381     |                           |  |   | 19,357       |   |  |              |       |   |  |   | 19,685  |  
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net cash provided by (used in) investing activities                                                                                               |  |                | (53     | ) |                       |   | (8,441  | )                         |  |   | 18,605       |   |  |              |       |   |  |   | 10,111  |  
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Cash flows from financing activities:                                                                                                             |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net borrowings on bank financed debt and notes payable                                                                                            |  |                |        |   |                       |   | 1,358   |                           |  |   | 16,201       |   |  |              |       |   |  |   | 17,559  |  
|Net payments on capitalized lease obligations                                                                                                     |  |                |        |   |                       |   | (938    | )                         |  |   |             |   |  |              |       |   |  |   | (938    | )
|Payment of financing costs                                                                                                                        |  |                | (77     | ) |                       |   | (1,066  | )                         |  |   | (1,229       | ) |  |              |       |   |  |   | (2,372  | )
|Change in intercompany, net                                                                                                                       |  |                | 3,302   |   |                       |   | 27,611  |                           |  |   | (29,613      | ) |  |              | (1,300 | ) |  |   |        |  
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net cash provided by (used in) financing activities                                                                                               |  |                | 3,225   |   |                       |   | 26,965  |                           |  |   | (14,641      | ) |  |              | (1,300 | ) |  |   | 14,249  |  
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Effect of exchange rate changes on cash                                                                                                           |  |                |        |   |                       |   | 6       |                           |  |   | (752         | ) |  |              |       |   |  |   | (746    | )
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net increase (decrease) in cash                                                                                                                   |  |                |        |   |                       |   | (525    | )                         |  |   | 653          |   |  |              |       |   |  |   | 128     |  
|                                                                                                                                                  |  |                |         |   |                      
|Cash, beginning of period                                                                                                                         |  |                |        |   |                       |   | 352     |                           |  |   | 3,041        |   |  |              |       |   |  |   | 3,393   |  
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Cash, end of period                                                                                                                               |  | $              |        |   |                       | $ | (173    | )                         |  | $ | 3,694        |   |  | $            |       |   |  | $ | 3,521   |  
|                                                                                                                                                  |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  





13



---

RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidating Balance Sheet

December 31, 2004

(In thousands)



|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|------------------------------------------------------------------- |  | -------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | -------- | -
|                                                                    |  | HoldingCompany |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|Assets                                                              |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  |                |         |   |                      
|Current assets:                                                     |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Cash                                                                |  | $              |        |   |                       | $ | 352     |                           |  | $ | 3,041        |   |  | $            |         |   |  | $ | 3,393    |  
|Accounts receivable, net                                            |  |                |        |   |                       |   | 29,511  |                           |  |   | 25,294       |   |  |              | (4,757   | ) |  |   | 50,048   |  
|Inventories, net                                                    |  |                |        |   |                       |   | 54,827  |                           |  |   | 12,699       |   |  |              |         |   |  |   | 67,526   |  
|Intercompany receivable                                             |  |                |        |   |                       |   |        |                           |  |   | 19,724       |   |  |              | (19,724  | ) |  |   |         |  
|Prepaid expenses and other                                          |  |                | 52      |   |                       |   | 7,255   |                           |  |   | 1,600        |   |  |              | (58      | ) |  |   | 8,849    |  
|Deferred tax asset                                                  |  |                | (25     | ) |                       |   | 2,484   |                           |  |   | (384         | ) |  |              |         |   |  |   | 2,075    |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  |                | 27      |   |                       |   | 94,429  |                           |  |   | 61,974       |   |  |              | (24,539  | ) |  |   | 131,891  |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Property, plant and equipment, at cost                              |  |                |        |   |                       |   | 262,768 |                           |  |   | 67,058       |   |  |              |         |   |  |   | 329,826  |  
|Less accumulated depreciation                                       |  |                |        |   |                       |   | (85,680 | )                         |  |   | (26,575      | ) |  |              |         |   |  |   | (112,255 | )
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  |                |        |   |                       |   | 177,088 |                           |  |   | 40,483       |   |  |              |         |   |  |   | 217,571  |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Intercompany receivable                                             |  |                | 58,535  |   |                       |   |        |                           |  |   |             |   |  |              | (58,535  | ) |  |   |         |  
|Investments in subsidiaries                                         |  |                | 148,843 |   |                       |   | 51,226  |                           |  |   |             |   |  |              | (200,069 | ) |  |   |         |  
|Investments in unconsolidated affiliates                            |  |                |        |   |                       |   |        |                           |  |   | 41,676       |   |  |              |         |   |  |   | 41,676   |  
|Other assets                                                        |  |                | 9,607   |   |                       |   | 18,233  |                           |  |   | 548          |   |  |              |         |   |  |   | 28,388   |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  | $              | 217,012 |   |                       | $ | 340,976 |                           |  | $ | 144,681      |   |  | $            | (283,143 | ) |  | $ | 419,526  |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Liabilities and Stockholders Equity (Deficit)                      |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  |                |         |   |                      
|Current liabilities:                                                |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Accounts payable                                                    |  | $              |        |   |                       | $ | 36,724  |                           |  | $ | 20,537       |   |  | $            | (321     | ) |  | $ | 56,940   |  
|Accrued liabilities                                                 |  |                | 5,652   |   |                       |   | 16,453  |                           |  |   | 6,379        |   |  |              | (176     | ) |  |   | 28,308   |  
|Intercompany payable                                                |  |                | 23,437  |   |                       |   | 25,577  |                           |  |   |             |   |  |              | (49,014  | ) |  |   |         |  
|Current portion of long-term debt and capitalized lease obligations |  |                |        |   |                       |   | 9,820   |                           |  |   | 5,130        |   |  |              |         |   |  |   | 14,950   |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  |                | 29,089  |   |                       |   | 88,574  |                           |  |   | 32,046       |   |  |              | (49,511  | ) |  |   | 100,198  |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Long-term debt, net of current portion                              |  |                | 205,000 |   |                       |   | 97,318  |                           |  |   | 5,170        |   |  |              | (16,560  | ) |  |   | 290,928  |  
|Capital lease obligations, net of current portion                   |  |                |        |   |                       |   | 3,726   |                           |  |   |             |   |  |              |         |   |  |   | 3,726    |  
|Intercompany payable                                                |  |                |        |   |                       |   | 26,549  |                           |  |   | 7,133        |   |  |              | (33,682  | ) |  |   |         |  
|Deferred tax liability                                              |  |                | (8,837  | ) |                       |   | 2,247   |                           |  |   | 6,471        |   |  |              | 119      |   |  |   |         |  
|Other non-current liabilities                                       |  |                |        |   |                       |   | 4,184   |                           |  |   | 7            |   |  |              |         |   |  |   | 4,191    |  
|Minority interest in consolidated subsidiary                        |  |                |        |   |                       |   |        |                           |  |   | 21,253       |   |  |              |         |   |  |   | 21,253   |  
|                                                                    |  |                |         |   |                      
|Commitments and contingencies                                       |  |                |        |   |                       |   |        |                           |  |   |             |   |  |              |         |   |  |   |         |  
|                                                                    |  |                |         |   |                      
|Stockholders equity (deficit):                                     |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Common stock                                                        |  |                | 1       |   |                       |   | 4       |                           |  |   | 22           |   |  |              | (26      | ) |  |   | 1        |  
|Additional paid-in capital                                          |  |                | 19,387  |   |                       |   | 99,251  |                           |  |   | 22,620       |   |  |              | (121,871 | ) |  |   | 19,387   |  
|Retained earnings (deficit)                                         |  |                | (27,628 | ) |                       |   | 20,774  |                           |  |   | 40,838       |   |  |              | (61,612  | ) |  |   | (27,628  | )
|Cumulative translation adjustment                                   |  |                |        |   |                       |   | (1,651  | )                         |  |   | 9,121        |   |  |              |         |   |  |   | 7,470    |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|Total stockholders equity (deficit)                                |  |                | (8,240  | ) |                       |   | 118,378 |                           |  |   | 72,601       |   |  |              | (183,509 | ) |  |   | (770     | )
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  
|                                                                    |  | $              | 217,012 |   |                       | $ | 340,976 |                           |  | $ | 144,681      |   |  | $            | (283,143 | ) |  | $ | 419,526  |  
|                                                                    |  |                |         |   |                       |   |         |                           |  |   |              |   |  |              |          |   |  |   |          |  



14



---

RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the three months ended June 25, 2004

(In thousands)



|                                                           |  |                |        |   |                       |   |        |                           |  |   |              |   |  |              |        |   |  |   |         |  
|---------------------------------------------------------- |  | -------------- | ------ | - | --------------------- | - | ------ | ------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|                                                           |  | HoldingCompany |        |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net sales                                                  |  | $              |       |   |                       | $ | 69,607 |                           |  | $ | 41,870       |   |  | $            | (3,372 | ) |  | $ | 108,105 |  
|                                                           |  |                |        |   |                      
|Cost of goods sold                                         |  |                |       |   |                       |   | 55,835 |                           |  |   | 34,695       |   |  |              | (3,372 | ) |  |   | 87,158  |  
|                                                           |  |                |        |   |                       |   |        |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Gross profit                                               |  |                |       |   |                       |   | 13,772 |                           |  |   | 7,175        |   |  |              |       |   |  |   | 20,947  |  
|                                                           |  |                |        |   |                      
|Operating expenses:                                        |  |                |        |   |                       |   |        |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Distribution                                               |  |                |       |   |                       |   | 5,433  |                           |  |   | 2,002        |   |  |              |       |   |  |   | 7,435   |  
|Selling, general and administrative                        |  |                | 4      |   |                       |   | 7,126  |                           |  |   | 1,763        |   |  |              |       |   |  |   | 8,893   |  
|                                                           |  |                |        |   |                       |   |        |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) from operations                              |  |                | (4     | ) |                       |   | 1,213  |                           |  |   | 3,410        |   |  |              |       |   |  |   | 4,619   |  
|                                                           |  |                |        |   |                      
|Interest, net                                              |  |                | 1,630  |   |                       |   | 4,029  |                           |  |   | 765          |   |  |              |       |   |  |   | 6,424   |  
|Income from unconsolidated affiliates                      |  |                |       |   |                       |   |       |                           |  |   | (151         | ) |  |              |       |   |  |   | (151    | )
|Other, net                                                 |  |                |       |   |                       |   | (236   | )                         |  |   | 403          |   |  |              |       |   |  |   | 167     |  
|Minority interest in operations of consolidated subsidiary |  |                |       |   |                       |   |       |                           |  |   | (806         | ) |  |              |       |   |  |   | (806    | )
|                                                           |  |                |        |   |                       |   |        |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) before income taxes                          |  |                | (1,634 | ) |                       |   | (2,580 | )                         |  |   | 3,199        |   |  |              |       |   |  |   | (1,015  | )
|                                                           |  |                |        |   |                      
|Provision (benefit) for income taxes:                      |  |                |        |   |                       |   |        |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Current                                                    |  |                |       |   |                       |   | 4      |                           |  |   | 656          |   |  |              |       |   |  |   | 660     |  
|Deferred                                                   |  |                | (510   | ) |                       |   | (561   | )                         |  |   | 428          |   |  |              |       |   |  |   | (643    | )
|                                                           |  |                |        |   |                       |   |        |                           |  |   |              |   |  |              |        |   |  |   |         |  
|                                                           |  |                | (510   | ) |                       |   | (557   | )                         |  |   | 1,084        |   |  |              |       |   |  |   | 17      |  
|                                                           |  |                |        |   |                       |   |        |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Equity in earnings of subsidiaries                         |  |                | 92     |   |                       |   | 1,963  |                           |  |   |             |   |  |              | (2,055 | ) |  |   |        |  
|                                                           |  |                |        |   |                       |   |        |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net income (loss)                                          |  | $              | (1,032 | ) |                       | $ | (60    | )                         |  | $ | 2,115        |   |  | $            | (2,055 | ) |  | $ | (1,032  | )
|                                                           |  |                |        |   |                       |   |        |                           |  |   |              |   |  |              |        |   |  |   |         |  





15



---

RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the six months ended June 25, 2004

(In thousands)



|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | - | ---------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|                                                                                                                                                   |  | Holding Company |         |   | Guarantor Subsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net sales                                                                                                                                          |  | $               |        |   |                        | $ | 133,334 |                           |  | $ | 77,362       |   |  | $            | (6,291 | ) |  | $ | 204,405 |  
|                                                                                                                                                   |  |                 |         |   |                       
|Cost of goods sold                                                                                                                                 |  |                 |        |   |                        |   | 107,312 |                           |  |   | 63,764       |   |  |              | (6,291 | ) |  |   | 164,785 |  
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Gross profit                                                                                                                                       |  |                 |        |   |                        |   | 26,022  |                           |  |   | 13,598       |   |  |              |       |   |  |   | 39,620  |  
|                                                                                                                                                   |  |                 |         |   |                       
|Operating expenses:                                                                                                                                |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Distribution                                                                                                                                       |  |                 |        |   |                        |   | 9,731   |                           |  |   | 3,952        |   |  |              |       |   |  |   | 13,683  |  
|Selling, general and administrative                                                                                                                |  |                 | 6       |   |                        |   | 13,068  |                           |  |   | 3,693        |   |  |              |       |   |  |   | 16,767  |  
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) from operations                                                                                                                      |  |                 | (6      | ) |                        |   | 3,223   |                           |  |   | 5,953        |   |  |              |       |   |  |   | 9,170   |  
|                                                                                                                                                   |  |                 |         |   |                       
|Interest, net                                                                                                                                      |  |                 | 2,955   |   |                        |   | 7,720   |                           |  |   | 1,356        |   |  |              |       |   |  |   | 12,031  |  
|Income from unconsolidated affiliates                                                                                                              |  |                 |        |   |                        |   |        |                           |  |   | (310         | ) |  |              |       |   |  |   | (310    | )
|Other, net                                                                                                                                         |  |                 |        |   |                        |   | (392    | )                         |  |   | 749          |   |  |              |       |   |  |   | 357     |  
|Minority interest in operations of consolidated subsidiary                                                                                         |  |                 |        |   |                        |   |        |                           |  |   | (1,612       | ) |  |              |       |   |  |   | (1,612  | )
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) before income taxes                                                                                                                  |  |                 | (2,961  | ) |                        |   | (4,105  | )                         |  |   | 5,770        |   |  |              |       |   |  |   | (1,296  | )
|                                                                                                                                                   |  |                 |         |   |                       
|Provision (benefit) for income taxes:                                                                                                              |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Current                                                                                                                                            |  |                 |        |   |                        |   | 10      |                           |  |   | 1,109        |   |  |              |       |   |  |   | 1,119   |  
|Deferred                                                                                                                                           |  |                 | (792    | ) |                        |   | (665    | )                         |  |   | 245          |   |  |              |       |   |  |   | (1,212  | )
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|                                                                                                                                                   |  |                 | (792    | ) |                        |   | (655    | )                         |  |   | 1,354        |   |  |              |       |   |  |   | (93     | )
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Equity in earnings of subsidiaries                                                                                                                 |  |                 | 966     |   |                        |   | 3,138   |                           |  |   |             |   |  |              | (4,104 | ) |  |   |        |  
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net income (loss)                                                                                                                                  |  | $               | (1,203  | ) |                        | $ | (312    | )                         |  | $ | 4,416        |   |  | $            | (4,104 | ) |  | $ | (1,203  | )
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|                                                                                                                                                  
|RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES Condensed Consolidating Statement of Cash Flows For the six months ended June
25, 2004 (In thousands) | 
|                                                                                                                                                   |  | HoldingCompany  |         |   | GuarantorSubsidiaries  |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net cash provided by (used in) operating activities                                                                                                |  | $               | (1,746  | ) |                        | $ | (16,460 | )                         |  | $ | 1,759        |   |  | $            | 259    |   |  | $ | (16,188 | )
|                                                                                                                                                   |  |                 |         |   |                       
|Cash flows from investing activities:                                                                                                              |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Capital expenditures                                                                                                                               |  |                 |        |   |                        |   | (4,560  | )                         |  |   | (794         | ) |  |              |       |   |  |   | (5,354  | )
|Change in other assets                                                                                                                             |  |                 | 215     |   |                        |   | (5,438  | )                         |  |   | 1,813        |   |  |              | (112   | ) |  |   | (3,522  | )
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net cash provided by (used in) investing activities                                                                                                |  |                 | 215     |   |                        |   | (9,998  | )                         |  |   | 1,019        |   |  |              | (112   | ) |  |   | (8,876  | )
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Cash flows from financing activities:                                                                                                              |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net borrowings on bank financed debt and notes payable                                                                                             |  |                 | 70,000  |   |                        |   | (47,946 | )                         |  |   | 2,993        |   |  |              | (152   | ) |  |   | 24,895  |  
|Net payments on capitalized lease obligations                                                                                                      |  |                 |        |   |                        |   | (1,400  | )                         |  |   | (265         | ) |  |              | 264    |   |  |   | (1,401  | )
|Payment of financing costs                                                                                                                         |  |                 | (2,670  | ) |                        |   |        |                           |  |   |             |   |  |              |       |   |  |   | (2,670  | )
|Dividends paid                                                                                                                                     |  |                 | 350     |   |                        |   | (350    | )                         |  |   |             |   |  |              |       |   |  |   |        |  
|Change in intercompany, net                                                                                                                        |  |                 | (66,149 | ) |                        |   | 73,430  |                           |  |   | (7,022       | ) |  |              | (259   | ) |  |   |        |  
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net cash provided by (used in) financing activities                                                                                                |  |                 | 1,531   |   |                        |   | 23,734  |                           |  |   | (4,294       | ) |  |              | (147   | ) |  |   | 20,824  |  
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Effect of exchange rate changes on cash                                                                                                            |  |                 |        |   |                        |   | 71      |                           |  |   | (2           | ) |  |              |       |   |  |   | 69      |  
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Net decrease in cash                                                                                                                               |  |                 |        |   |                        |   | (2,653  | )                         |  |   | (1,518       | ) |  |              |       |   |  |   | (4,171  | )
|                                                                                                                                                   |  |                 |         |   |                       
|Cash, beginning of period                                                                                                                          |  |                 |        |   |                        |   | 2,863   |                           |  |   | 4,033        |   |  |              |       |   |  |   | 6,896   |  
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  
|Cash, end of period                                                                                                                                |  | $               |        |   |                        | $ | 210     |                           |  | $ | 2,515        |   |  | $            |       |   |  | $ | 2,725   |  
|                                                                                                                                                   |  |                 |         |   |                        |   |         |                           |  |   |              |   |  |              |        |   |  |   |         |  



16



---

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



General



Radnor Holdings Corporation is a leading manufacturer and distributor of a broad line of disposable foodservice products in
the United States and specialty chemical products worldwide. We operate 15 plants in North America and 3 in Europe and distribute our foodservice products from 10 distribution centers throughout the United States.



We have been manufacturing expandable polystyrene, or EPS, and related
products sold to the foodservice, insulation and protective packaging industries for more than 26 years. In the foodservice industry, we are the second largest U.S. manufacturer of foam cups and containers and we also manufacture polystyrene and
polypropylene cold drinking cups, barware, stemware, plates, bowls, dessertware, food containers, portion cups and cutlery. By capacity, we are the fifth largest worldwide producer of EPS. In fiscal 2004, we produced 14.7 billion foam and plastic
cups for hot and cold drinks, foam bowls and containers and thermoformed lids, 1.5 billion pieces of plastic cutlery and 165,000 metric tons of EPS. We supply 100% of our own EPS needs in addition to supplying EPS to other manufacturers of
foodservice, insulation and protective packaging products.



Net Sales



Net sales represent the sales of the Companys
products less (i) cash discounts and allowances, which historically have averaged approximately 2% of gross sales, and (ii) sales and marketing rebates.



Cost of Goods Sold



Raw material and energy-related costs represent a large portion of the Companys cost of goods sold and are susceptible to price fluctuations based
upon supply and demand as well as general market conditions. While the Company has been able to pass on the majority of past raw material price increases to customers, we may not be able to further increase prices if the raw material costs rise in
the future. The Company currently purchases only a portion of raw materials pursuant to long-term supply agreements, which the Company believes allows for flexibility in its raw material purchases.



Beginning in January 2003 through July 2005, contract market prices of
styrene monomer, the primary raw material in the Companys foam products, increased by 54% to $0.60 per pound. Although future raw material prices cannot be predicted with accuracy, contract market prices for styrene monomer are forecasted by
independent industry surveys and producer reports to increase to $0.61 per pound by the end of 2005.



Our plastic cups and cutlery are thermoformed and injection molded from polypropylene and polystyrene resins. The prices of polystyrene resins have
generally fluctuated in a fashion similar to the fluctuations affecting styrene monomer. Polystyrene is largely a derivative of styrene monomer and prices typically react in a similar manner over time. Prices also can change based on the operating
rates of the polystyrene manufacturing facilities. Published contract pricing for high-impact polystyrene, or HIPS, was $0.57 per pound in January 2003 and has increased 46% to $0.83 per pound as of July 2005 and is forecasted by independent
industry surveys and producer reports to remain unchanged through the end of 2005.



The primary raw materials used to manufacture our thermoformed plastic products are polypropylene resins, which are made from propylene. Polypropylene resin pricing will generally follow the raw material price of
propylene and be influenced by the operating rates of the respective polypropylene manufacturing locations, as well as general supply and demand conditions. Polypropylene has also had the tendency to fluctuate significantly over time. For example,
the contract price per pound for polypropylene ranged from $0.36 to $0.69 from the beginning of 2003 through July 2005. The published polypropylene contract price is projected by independent industry surveys and producer reports to decrease to $0.63
per pound by the end of 2005.



17



---

Distribution Expense



The Company ships its products from manufacturing locations using a combination of common carriers and its own fleet of leased vehicles. Distribution
expense consists of the costs to ship products, including costs of labor and leased vehicles.



Key Business Indicators



The
Companys financial results are directly impacted by several key items, which management has identified as key indicators in its evaluation of the business. These indicators include:



| |  |  | Sales Volumes  The comparison of unit volumes sold versus the comparable period in prior years provides key operating information.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pricing Spread Over Raw Material Costs  The selling prices of the Companys products as compared to various raw material costs, including styrene monomer,
polystyrene and polypropylene, are key financial performance metrics.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Energy-Related Costs Energy-related costs provide key information with respect to the Companys operating results.
| | - |  | -------------------------------------------------------------------------------------------------------------------



Results of Operations



Executive Summary



While net sales increased $13.4 million, or 12.4%, during the three months ended July 1, 2005 compared to the three months ended June 25, 2004, gross
profit decreased by $4.7 million. In North America, increases in raw material and energy-related costs were partially offset by higher across-the-board selling prices and increased sales volumes at our food packaging operations primarily due to the
expansion of our cold drink product lines. At our European operations, increased raw material costs and reduced sales volumes were only partially offset by higher selling prices, accounting for a $3.5 million decrease in gross profit.



While net sales increased $31.9 million, or 15.6%, during the six months
ended July 1, 2005 compared to the six months ended June 25, 2004, gross profit decreased by $5.5 million. In North America, increases in raw material and energy-related costs were almost entirely offset by higher across-the-board selling prices and
increased sales volumes at our food packaging operations. At our European operations, increased raw material costs and reduced sales volumes were only partially offset by higher selling prices and led to a $4.0 million decrease in gross profit.
Operating expenses increased as a result of higher distribution costs related to increased sales volumes in North America, as well as higher depreciation and amortization expenses related to higher fixed asset levels.



18



---

Three months ended July 1, 2005 compared with the three months ended June 25, 2004



Consolidated Results



The following table summarizes the consolidated results of operations for
the three months ended July 1, 2005 and June 25, 2004.



|                              |  |                            |       |                     |               |   |          |  |   |      |   |  |        |   
|----------------------------- |  | -------------------------- | ----- | ------------------- | ------------- | - | -------- |  | - | ---- | - |  | ------ | --
|                              |  | Three Months Ended         |       | Increase (Decrease) |               |   | % Change | 
|(dollars in millions)         |  | July 1, 2005 (As restated) |       |                     | June 25, 2004 |   |         
|Net sales                     |  | $                          | 121.5 |                     |               | $ | 108.1    |  | $ | 13.4 |   |  | 12.4   | % 
|Gross profit                  |  |                            | 16.2  |                     |               |   | 20.9     |  |   | (4.7 | ) |  | (22.5  | )%
|Operating expenses            |  |                            | 17.4  |                     |               |   | 16.3     |  |   | 1.1  |   |  | 6.7    | % 
|Income (loss) from operations |  |                            | (1.2  | )                   |               |   | 4.6      |  |   | (5.8 | ) |  | (126.1 | )%



Net sales for the
three months ended July 1, 2005 were $121.5 million, a 12.4% increase from $108.1 million for the three months ended June 25, 2004. This increase was primarily a result of higher average selling prices at both the packaging and specialty chemicals
operations of 9.9% and 16.2%, respectively, and higher sales volumes at the packaging segment ($6.8 million), partially offset by lower sales volumes at the specialty chemicals operations ($10.3 million).



Gross profit decreased $4.7 million to $16.2 million for the three months
ended July 1, 2005 from $20.9 million for the similar three-month period in 2004. This decrease was primarily due to lower gross profit at our European specialty chemicals operations ($3.5 million), resulting from higher raw material costs and
reduced sales volumes. In the North American operations, higher raw materials and energy-related costs, as well as the impact of a fire at one of Companys production facilities, describes below, were only partially offset by the benefits of
increased selling prices and higher sales volumes in the foodservice packaging operations.



During the three months ended July 1, 2005, operating expenses of $17.4 million increased $1.1 million from $16.3 million for the three months ended June 25, 2004 as lower selling, general and administrative costs
($1.1 million) related to our cost reduction program were offset by non-cash compensation expense ($1.1 million) primarily related to a distribution made by a partnership under common control with the Company, to certain of its special limited
partners, who are also officers and employees of the Company, higher depreciation and amortization expenses ($0.8 million) and higher distribution costs ($0.3 million). As a percentage of net sales, operating costs decreased to 14.3% for the three
months ended July 1, 2005 as compared to 15.1% for the three months ended June 25, 2004.



Income (loss) from operations decreased by $5.8 million for the three months ended July 1, 2005 to an operating loss of $1.2 million from operating income of $4.6 million for the comparable period in 2004 due to a
$3.1 million decrease at our European specialty chemicals operations, as described above, a $1.4 million increase in depreciation and amortization expense and $1.1 million of non-cash compensation. Income from operations at our North American
operations, excluding depreciation and amortization, decreased by $1.7 million for the three months ended July 1, 2005.



Interest expense increased $1.4 million to $7.8 million during the three months ended July 1, 2005 from $6.4 million in the prior year period primarily
due to higher average debt levels and higher interest rates.



The effective tax rate for the three months ended July 1, 2005 yielded an expense of 24.2%, as compared to a 1.7% expense in the same period in the prior year. This change was primarily due to the creation of a reserve during the prior
period for certain expenses at the Companys Canadian operations and the Company evaluated its deferred tax assets and recorded a charge of $7.1 million which primarily consists of an establishment of valuation allowance against its U.S. net
operating loss carryforwards during the second quarter. As of July 1, 2005, the Company had $97.4 million of net operating loss carryforwards for federal income tax purposes, which expire through 2024.



19



---

Segment Analysis



Packaging Segment Results



The following table summarizes the packaging segment results of operations for the three months ended July 1, 2005 and June 25, 2004.



|                       |  |                    |      |                     |   |      |          |   |      |   |  |       |   
|---------------------- |  | ------------------ | ---- | ------------------- | - | ---- | -------- | - | ---- | - |  | ----- | --
|                       |  | Three Months Ended |      | Increase (Decrease) |   |      | % Change |  
|(dollars in millions)  |  | July 1, 2005       |      | June 25, 2004       |   |     
|Net sales              |  | $                  | 73.4 |                     | $ | 60.4 |          | $ | 13.0 |   |  | 21.5  | % 
|Gross profit           |  |                    | 11.2 |                     |   | 13.6 |          |   | (2.4 | ) |  | (17.7 | )%
|Operating expenses     |  |                    | 10.3 |                     |   | 8.7  |          |   | 1.6  |   |  | 18.4  | % 
|Income from operations |  |                    | 0.9  |                     |   | 4.9  |          |   | (4.0 | ) |  | (81.6 | )%



Net sales in the
packaging segment for the three months ended July 1, 2005 increased $13.0 million to $73.4 million from $60.4 million during the second quarter of 2004. This increase was primarily due to a 12.2% increase in sales unit volumes ($6.8 million) and a
9.9% increase in average selling prices ($5.9 million).



Gross
profit decreased $2.4 million to $11.2 million for the three months ended July 1, 2005 compared to $13.6 million for the three-month period ended June 25, 2004. This decrease was primarily caused by increased raw material costs ($7.1 million) and
higher energy-related expenses ($1.1 million), as well as higher other manufacturing costs ($2.5 million), resulting from inefficiencies surrounding the initial installation and start-up of new production equipment. These costs were only partially
offset by higher selling prices ($5.9 million) and the impact of increased sales volumes ($2.2 million).



Operating expenses increased $1.6 million to $10.3 million during the three months ended July 1, 2005 from $8.7 million during the same period in the
prior year. This increase was primarily due to higher selling and distribution costs ($0.9 million), resulting from higher sales unit volumes, as described above, combined with higher depreciation and amortization expense ($0.3 million). As a
percentage of net sales, operating costs decreased to 14.0% for the three months ended July 1, 2005 as compared to 14.4% for the three months ended June 25, 2004.



For the reasons described above, income from operations decreased $4.0 million to $0.9 million for the three months ended
July 1, 2005 from $4.9 million in the prior year period.



Specialty Chemicals Segment Results



The
following table summarizes the specialty chemicals segment results of operations for the three months ended July 1, 2005 and June 25, 2004.



|                       |  |                    |      |                     |   |      |          |   |      |   |  |       |   
|---------------------- |  | ------------------ | ---- | ------------------- | - | ---- | -------- | - | ---- | - |  | ----- | --
|                       |  | Three Months Ended |      | Increase (Decrease) |   |      | % Change |  
|(dollars in millions)  |  | July 1, 2005       |      | June 25, 2004       |   |     
|Net sales              |  | $                  | 51.3 |                     | $ | 51.1 |          | $ | 0.2  |   |  | 0.4   | % 
|Gross profit           |  |                    | 5.0  |                     |   | 7.3  |          |   | (2.3 | ) |  | (31.5 | )%
|Operating expenses     |  |                    | 4.0  |                     |   | 4.6  |          |   | (0.6 | ) |  | (13.0 | )%
|Income from operations |  |                    | 1.0  |                     |   | 2.7  |          |   | (1.7 | ) |  | (63.0 | )%



20



---

For the three months ended July 1, 2005, net sales in the specialty chemicals segment increased $0.2
million to $51.3 million from $51.1 million during the three months ended June 25, 2004. This increase was primarily due to higher average selling prices, offset almost entirely by lower sales volumes. Net sales included $3.2 million and $3.4
million of sales to the packaging segment for the three months ended July 1, 2005 and June 25, 2004, respectively, which were eliminated in consolidation.



Gross profit decreased $2.3 million, or 31.5%, to $5.0 million for the three months ended July 1, 2005 from $7.3 million for the similar three-month
period in the prior year. In the North American operations, higher selling prices more than offset the impact of lower sales volumes, increased raw material costs and the impact of a fire at one of the Companys North American production
facilities, described below, resulting in a $1.2 million increase in gross profit. In the European operations, the impact of lower sales volumes and increased raw material costs ($6.5 million) were only partially offset by higher selling prices
($3.1 million), resulting in a $3.5 million reduction in gross profit.



For the three months ended July 1, 2005, operating expenses decreased by $0.6 million to $4.0 million from $4.6 million in the prior year period primarily due to lower distribution costs ($0.6 million) resulting from reduced sales volumes
as discussed above. As a percentage of net sales, operating expenses decreased to 7.8% for the three months ended July 1, 2005 compared to 9.0% for the three months ended June 25, 2004.



For the reasons described above, income from operations decreased $1.7 million to $1.0 million during the three months ended
July 1, 2005 compared to $2.7 million in the prior year period.



During the second quarter, one of the Companys North American Specialty Chemicals facilities suffered a fire. That fire resulted in a loss of production totaling 1.4 million pounds of expandable polystyrene, which represented
approximately 3.4% of the North American specialty chemicals operations sales for the second quarter. The Company estimates that the loss from the event totaled approximately $0.5 million, which the Company anticipates recovering through insurance
during the third quarter.



Corporate and Other



For the three months ended July 1, 2005, corporate
operating expenses increased $0.1 million to $3.1 million from $3.0 million during the same period in the prior year. This increase was mainly due to non-cash compensation expense ($1.1 million) primarily related to a distribution made by a
partnership under common control with the Company, to certain of its special limited partners, who are also officers and employees of the Company, and higher depreciation and amortization ($0.5 million), partially offset by lower general and
administrative expenses ($1.5 million) resulting from implemented cost savings initiatives.



Six months ended July 1, 2005 compared with the six months ended June 25, 2004



Consolidated Results



The following table summarizes the consolidated results of operations for the six months ended July 1, 2005 and June 25, 2004.



|                       |  |                            |       |                     |   |       |          |   |      |   |  |       |   
|---------------------- |  | -------------------------- | ----- | ------------------- | - | ----- | -------- | - | ---- | - |  | ----- | --
|                       |  | Six Months Ended           |       | Increase (Decrease) |   |       | % Change |  
|(dollars in millions)  |  | July 1, 2005 (As restated) |       | June 25, 2004       |   |      
|Net sales              |  | $                          | 236.3 |                     | $ | 204.4 |          | $ | 31.9 |   |  | 15.6  | % 
|Gross profit           |  |                            | 34.1  |                     |   | 39.6  |          |   | (5.5 | ) |  | (13.9 | )%
|Operating expenses     |  |                            | 33.7  |                     |   | 30.4  |          |   | 3.3  |   |  | 10.9  | % 
|Income from operations |  |                            | 0.4   |                     |   | 9.2   |          |   | (8.8 | ) |  | (95.7 | )%



Net sales for the six
months ended July 1, 2005 increased $31.9 million, or 15.6%, to $236.3 million from $204.4 million for the six months ended June 25, 2004. This increase was primarily caused by higher average selling prices at both the packaging and specialty
chemicals operations of 8.9% and 19.7%, respectively, higher sales volumes at the packaging operations ($10.5 million) and favorable foreign currency effects ($3.9 million). These increases were partially offset by lower sales volumes, primarily at
the European specialty chemicals operations.



21



---

Gross profit decreased $5.5 million to $34.1 million for the six months ended July 1, 2005 from $39.6
million for the similar six-month period in 2004. This decrease was primarily due to lower gross profit at our European specialty chemicals operation ($4.0 million), resulting from higher raw material costs and reduced sales volumes. In the North
American operations, higher energy-related expenses, raw material costs and manufacturing inefficiencies caused by the start-up of our new foodservice production equipment, as well as the impact of the previously described fire, were almost entirely
offset by the benefits of increased selling prices and higher sales volumes in the foodservice packaging operations. In addition, a $0.5 million charge was recorded related to the amendment of the Companys primary North American styrene
monomer requirements contract.



During the six months ended
July 1, 2005, operating expenses increased $3.3 million to $33.7 million from $30.4 million for the six months ended June 25, 2004. The increase was mainly due to non-cash compensation expense ($1.1 million) primarily related to a distribution made
by a partnership under common control with the Company, to certain of its special limited partners, who are also officers and employees of the Company, higher depreciation and amortization expense ($1.1 million) and higher distribution costs ($0.8
million) resulting from higher sales volumes at the packaging operations. As a percentage of net sales, operating costs decreased to 14.3% for the six months ended July 1, 2005 as compared to 14.9% for the same period in the prior year.



For the reasons described above, income from operations decreased by $8.8
million for the six months ended July 1, 2005 to $0.4 million from $9.2 million for the comparable period in 2004.



Interest expense increased $3.2 million to $15.2 million during the six months ended July 1, 2005 from $12.0 million in the prior year period due to
higher average debt levels and higher interest rates.



The
effective tax rate for the six months ended July 1, 2005 yielded an expense of 1.5%, as compared to a benefit of 7.2% in the same period in the prior year. This change was primarily due to the creation of a reserve during the prior period for
certain expenses at the Companys Canadian operations and the Company evaluated its deferred tax assets and recorded a charge of $7.1 million which primarily consists of an establishment of valuation allowance against its U.S. net operating
loss carryforwards during the second quarter. As of July 1, 2005, the Company had $97.4 million of net operating loss carryforwards for federal income tax purposes, which expire through 2024.



Segment Analysis



Packaging Segment Results



The following table summarizes the packaging segment results of operations
for the six months ended July 1, 2005 and June 25, 2004.



|                       |  |                  |       |                     |   |       |          |   |      |   |  |       |   
|---------------------- |  | ---------------- | ----- | ------------------- | - | ----- | -------- | - | ---- | - |  | ----- | --
|                       |  | Six Months Ended |       | Increase (Decrease) |   |       | % Change |  
|(dollars in millions)  |  | July 1, 2005     |       | June 25, 2004       |   |      
|Net sales              |  | $                | 137.6 |                     | $ | 116.3 |          | $ | 21.3 |   |  | 18.3  | % 
|Gross profit           |  |                  | 21.0  |                     |   | 26.0  |          |   | (5.0 | ) |  | (19.2 | )%
|Operating expenses     |  |                  | 19.2  |                     |   | 15.8  |          |   | 3.4  |   |  | 21.5  | % 
|Income from operations |  |                  | 1.8   |                     |   | 10.2  |          |   | (8.4 | ) |  | (82.4 | )%



Net sales in the
packaging segment for the six months ended July 1, 2005 increased $21.3 million, or 18.3%, to $137.6 million from $116.3 million during the six months ended June 25, 2004. This increase was primarily due to a 9.7% increase in sales unit volumes and
an 8.9% increase in average selling prices.



Gross profit
decreased $5.0 million to $21.0 million for the six months ended July 1, 2005 compared to $26.0 million for the six months ended June 25, 2004. This decrease was primarily caused by increased raw material costs and higher energy-related expenses
($14.5 million), as well as higher other manufacturing costs ($4.1 million), resulting from inefficiencies experienced during the initial installation and start-up of our new production equipment. These costs were only partially offset by higher
selling prices ($10.3 million) and the impact of higher sales volumes ($3.2 million).



22



---

During the six months ended July 1, 2005, operating expenses increased $3.4 million to $19.2 million from
$15.8 million during the same period in the prior year. This increase was primarily due to higher selling and distribution costs ($1.6 million), resulting from higher sales volumes as described above, combined with higher depreciation and
amortization expense ($0.6 million). As a percentage of net sales, operating expenses increased to 14.0% for the six months ended July 1, 2005 compared to 13.6% for the six months ended June 25, 2004.



For the reasons described above, income from operations decreased $8.4
million to $1.8 million for the six months ended July 1, 2005 from $10.2 million in the prior year period.



Specialty Chemicals Segment Results



The following table summarizes the specialty chemicals segment results of operations for the six months ended July 1, 2005 and June 25, 2004.



|                       |  |                  |       |                     |   |      |          |   |      |   |  |      |   
|---------------------- |  | ---------------- | ----- | ------------------- | - | ---- | -------- | - | ---- | - |  | ---- | --
|                       |  | Six Months Ended |       | Increase (Decrease) |   |      | % Change |  
|(dollars in millions)  |  | July 1, 2005     |       | June 25, 2004       |   |     
|Net sales              |  | $                | 105.9 |                     | $ | 94.4 |          | $ | 11.5 |   |  | 12.2 | % 
|Gross profit           |  |                  | 13.1  |                     |   | 13.6 |          |   | (0.5 | ) |  | (3.7 | )%
|Operating expenses     |  |                  | 8.9   |                     |   | 9.2  |          |   | (0.3 | ) |  | (3.3 | )%
|Income from operations |  |                  | 4.2   |                     |   | 4.4  |          |   | (0.2 | ) |  | (4.5 | )%



Net sales in the
specialty chemicals segment for the six months ended July 1, 2005 increased $11.5 million, or 12.2%, to $105.9 million from $94.4 million during the same period in 2004. This increase was primarily due to higher average selling prices ($18.6
million) and favorable foreign currency effects ($4.5 million), partially offset by lower sales volumes ($11.7 million). Net sales included $7.2 million and $6.3 million of sales to the packaging segment for the six months ended July 1, 2005 and
June 25, 2004, respectively, which were eliminated in consolidation.



Gross profit decreased $0.5 million, or 3.7%, to $13.1 million for the six months ended July 1, 2005 from $13.6 million for the similar six-month period in the prior year. In the European operations, the impact of lower sales volumes and
increased raw material costs ($11.0 million) were only partially offset by higher selling prices ($7.3 million), resulting in a $4.0 million decrease in gross profit. In the North American operations, the increase in average selling prices ($11.3
million) more than offset the impact of lower sales volumes, increased raw material costs, and the previously described fire, resulting in a $3.5 million increase in gross profit.



Operating expenses decreased by $0.3 million for the six months ended July 1, 2005 to $8.9 million from $9.2 million in the
prior year period primarily due to lower distribution costs ($0.5 million) resulting from lower sales volumes, partially offset by the impact of changes in foreign currency exchange rates ($0.4 million). As a percentage of net sales, operating
expenses decreased to 8.4% for the six months ended July 1, 2005 compared to 9.7% for the six months ended June 25, 2004.



For the reasons described above, income from operations decreased $0.2 million to $4.2 million during the six months ended July 1, 2005 compared to $4.4
million in the prior year period.



Corporate and Other



For the six months ended July 1, 2005, corporate
operating expenses increased $0.1 million to $5.6 million from $5.5 million for the six months ended June 25, 2004. The increase was mainly due to non-cash compensation expense ($1.1 million) primarily related to a distribution made by a partnership
under common control with the Company, to certain of its special limited partners, who are also officers and employees of the Company, and higher depreciation and amortization ($0.5 million), partially offset by lower general and administrative
costs ($1.5 million), primarily resulting from implemented cost savings initiatives.



23



---

Liquidity and Capital Resources



During the six months ended July 1, 2005, cash used in operating activities totaled $23.5 million mainly due to an increase
in working capital of $20.4 million. The increase in working capital was due to higher accounts receivable ($9.7 million), lower accounts payable ($7.6 million) and lower accrued expenses ($4.6 million). Accounts receivable increased primarily due
to higher sales volumes and selling prices, while accounts payable decreased as a result of paying down creditors with the proceeds from investing activities as described below.



During the six months ended July 1, 2005, the inventory turnover rate decreased to approximately 5.5 times per year compared
to 5.8 times per year during the same period last year primarily due to the build in the plastics inventory related to the expansion of our cold drink product lines. As of July 1, 2005, the average collection period for our accounts receivable was
44 days as compared to 43 days in the prior year period.



The
Companys investing activities during the six months ended July 1, 2005 provided $10.1 million mainly due to the proceeds from the collection of a note receivable from a formerly consolidated affiliate of the Company totaling $18.9 million,
partially offset by capital expenditures of $9.6 million.



In
February 2005, March 2005 and August 2005, the Company amended certain financial covenants in its domestic credit facility to permit flexibility in operating the Companys business and address compliance issues and instances of non-compliance.
In addition, in April 2005 and June 2005, the Company amended its domestic credit facility to provide flexibility in the Companys operations. The most recent amendment caused changes to the following financial covenants: (i) the minimum fixed
charge coverage ratio, (ii) the maximum ratio of funded indebtedness to earnings before interest, taxes, depreciation and amortization and (iii) the limitation of capital expenditures. As amended, the domestic credit facility contains the following
financial covenants:



| |  |  | A minimum fixed charge coverage ratio, which is .63 to 1.00 for the quarter ended June 30, 2005 and increasing over time thereafter to 1.15 to 1.00 for the quarter ending September
30, 2006 and for each quarter thereafter;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A maximum ratio of funded indebtedness to earnings before interest, taxes, depreciation and amortization which is not applicable for the quarter ended June 30, 2005, is 8.80 to 1.00
for the quarter ending September 30, 2005 and declines over time thereafter until reaching 3.75 to 1.00 for the quarter ending March 31, 2007 and for each quarter thereafter;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Limitation of capital expenditures of $20.0 million for the year ending December 31, 2005 (or $30.0 million if the Company applies specified proceeds of certain capital raising
transactions to reduce outstanding obligations under the facility), increasing to $25.0 million for the year ending December 31, 2006, and declining to $20.0 million for each fiscal year thereafter;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A minimum ratio of borrowers consolidated tangible assets to consolidated tangible assets of the Companys domestic subsidiaries of 85%;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A minimum ratio of borrowers consolidated earnings before interest, taxes, depreciation and amortization to consolidated earnings before interest, taxes, depreciation and
amortization of the Companys domestic subsidiaries of 85%; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Limitation of operating lease arrangements to $11.0 million per year.
| | - |  | ---------------------------------------------------------------------



As a result of the amendments discussed above, the Company is in compliance with all covenants, including financial covenants, under all of the
Companys credit arrangements.



On January 31, 2005, the
Companys $18.9 million limited partnership interest in Radnor Investments, L.P., an affiliated investment partnership in which the Company was the sole limited partner, was converted into a note receivable due from Radnor Investment Advisors,
L.P., bearing interest at an annual rate equal to the Prime Index reported by Bloomberg plus one percent (1%) with interest compounded daily. In exchange for the note, the Company assigned its remaining interests as a limited partner in Radnor
Investments, L.P. to Radnor Investment Advisors, L.P. Radnor Investment Advisors, L.P. was the general partner of Radnor Investments, L.P. and is owned by certain executives, stockholders and employees of the Company. The general partner of Radnor
Investment Advisors, L.P. is Radnor Investment Advisors, Inc., an entity controlled by the Chief Executive Officer of the Company and whose other owners consist of certain stockholders and executives of the Company. On March 11, 2005, $1.5 million
of the note receivable was collected. On April 8, 2005 the remainder of the note receivable, including accrued interest in the amount of $0.2 million, was collected in full.



On June 30, 2005, Radnor Investment Advisors, L.P. sold one of its two material investments and approved a distribution
totaling $971,213 to certain of its special limited partners, who are also officers and employees of the Company. In addition, two of the Companys stockholders and senior officers allocated a portion of their interests in Radnor Investment
Advisors, L.P. to one of the special limited partners, totaling $150,000, as compensation for her services rendered on behalf of Radnor Investments Advisors, L.P. The total distributions to the special limited partners of $1.1 million were recorded
by the Company as non-cash compensation expense and paid-in-capital.



On July 1, 2005, the Companys Finnish subsidiary entered into a $20 million term loan facility. The term loan facility bears interest at the Companys option at either (i) the
Eurodollar Rate plus 6.50%; or (ii) 3.75% plus the greater of (a) the Prime Rate and (b) the Federal Funds Effective Rate plus 0.5%, subject to downward adjustment using a pricing grid based on a debt to EBITDA ratio. The term loan matures on July
1, 2008 and, subject to specified optional and mandatory repayment events, beginning September 30, 2005, is payable in quarterly principal installments of $500,000 in the first twelve months, $575,000 in the second twelve months and $650,000 in the
third twelve months, with the remaining principal balance due at maturity. The loan is secured by a second lien on all of the now owned or hereafter acquired property and assets of the Companys Finnish subsidiary and its subsidiaries, other
than its leased real property, and a pledge of all of the shares of stock of the Finnish subsidiary. In addition, the Company guaranteed the Finnish subsidiarys obligations under the term loan facility up to a maximum of 7.5 million Euros. The
net proceeds from the term loan facility were used to repay the Companys European credit facilities and, through the repayment of intercompany loans, outstanding borrowings under the domestic revolving credit facilities.



24



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As of July 1, 2005, the Company had $60.6 million outstanding under its revolving credit facilities.
After taking into account cash on hand of $3.5 million, we would have had the ability to draw up to an additional $16.2 million under these facilities as of July 1, 2005. The principal uses of cash for the next several years will be debt service,
capital expenditures and working capital requirements. The Company is currently pursuing the divestiture of certain non-core assets and a private placement of approximately $50 million of debt and equity securities to enhance its liquidity. The
Company also anticipates entering into additional credit facilities, including capital equipment financings. From time to time, the Company evaluates and may pursue various capital raising transactions including other sales of debt or equity
securities and the divestiture of other non-core assets, in order to further enhance the Companys overall liquidity and improve its capital structure. In recent quarters, the Company has incurred losses and negative cash flows from operations.
As a holding company, the Company is dependent upon dividends and other payments from its subsidiaries to generate the funds necessary to meet its obligations. Subject to certain limitations, the Company is, and will continue to be, able to control
its receipt of dividends and other payments from its subsidiaries. Under the Companys current business plan, the Company expects that in 2005 and in the long-term, cash generated from operations, sales of debt and equity securities and
borrowings from current and new credit facilities will be sufficient to meet the Companys expected operating needs. However, as a result of uncertainties including pricing of the Companys products, general market and economic conditions
and fluctuations in raw material prices, the Company is not able to accurately predict the amount of cash that will be generated from operating activities and cash generated from operating activities, if any, may not be sufficient to meet the
Companys operating needs. To the extent that the Company uses cash in operating activities, we expect that such amounts will be financed from borrowings under existing and new credit facilities as well as sales of debt and equity securities.
However, there can be no assurances that the Company will be able to obtain additional debt or equity financing on terms acceptable to the Company, when and if needed.



New Accounting Standards



See note Note 11 to our condensed consolidated financial statements included in this Form 10-Q.



Contractual Obligations and Commercial Commitments



The Company has future obligations for debt repayments, capital leases,
future minimum rental and similar commitments under non-cancelable operating leases, non-competition agreement and purchase obligations as well as contingent obligations related to outstanding letters of credit. These obligations as of December 31,
2004 are summarized in the table below.



|                                         |  |       |         |                        |   |           |  |           |        |               |   |         |  |   |        
|---------------------------------------- |  | ----- | ------- | ---------------------- | - | --------- |  | --------- | ------ | ------------- | - | ------- |  | - | -------
|(thousands of dollars)                   |  |       |         | Payments Due by Period
|Contractual Obligations (2)              |  | Total |         | Less than1 year        |   | 1-3 years |  | 4-5 years |        | After 5 years
|Long-term borrowings, including interest |  | $     | 432,141 |                        | $ | 35,197    |  | $         | 63,829 |               | $ | 178,588 |  | $ | 154,527
|Capital lease obligations                |  |       | 6,552   |                        |   | 2,618     |  |           | 3,934  |               |   |        |  |   |       
|Operating lease obligations              |  |       | 61,187  |                        |   | 8,300     |  |           | 14,047 |               |   | 11,715  |  |   | 27,125 
|Non-compete obligations                  |  |       | 3,000   |                        |   | 1,200     |  |           | 1,200  |               |   | 600     |  |   |       
|Purchase obligations(1)                  |  |       | 48,125  |                        |   | 48,125    |  |           |       |               |   |        |  |   |       
|                                         |  |       |         |                        |   |           |  |           |        |               |   |         |  |   |        
|                                         |  | $     | 551,005 |                        | $ | 95,440    |  | $         | 83,010 |               | $ | 190,903 |  | $ | 181,652
|                                         |  |       |         |                        |   |           |  |           |        |               |   |         |  |   |        

---

|(1) | As adjusted to give effect to commitments under long-term styrene monomer requirements contracts signed in 2005, as described in Note 6 to the condensed consolidated financial
statements included in this Form 10-Q/A, these amounts as of December 31, 2004 would have been: $265,283 total; $53,137, less than 1 year; $106,073, 1-3 years; and $106,073, 4-5 years.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Company has an employment agreement with its President and Chief Executive Officer that is contingent upon closing of a public offering by the Company of its common stock. See
Item 11 included elsewhere herein for a description of the employment agreement. The obligations under this contingent agreement are not included in the Contractual Obligations table above.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



There have been no material changes to the Commercial Commitments as
reflected in the Companys annual report on Form 10-K for fiscal 2004. Reference is made to Notes 5 and 6 to the consolidated financial statements in the Companys annual report on Form 10-K for fiscal 2004 for additional information on
long-term debt, leases and other commitments and contingencies.



Critical
Accounting Policies and Estimates



Managements
Discussion and Analysis of Financial Condition and Results of Operations is based on the consolidated financial statements and accompanying notes that have been prepared in conformity with U.S. generally accepted accounting principles. The
preparation of such consolidated financial statements 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 period. Actual results could differ from those estimates.



Included in the Companys Annual Report on Form 10-K for fiscal 2004 are the significant accounting policies of the
Company, which are described in Note 2 to the consolidated financial statements, and the critical accounting policies and estimates, which are described in the Managements Discussion and Analysis of Financial Condition and Results of
Operations. Information concerning the Companys implementation and impact of new accounting standards issued by the Financial Accounting Standards Board (FASB) is included in the notes to the condensed consolidated financial statements
included herein. Otherwise, there were no changes in the Companys critical accounting policies and estimates in the current period that had a material impact on the Companys financial condition, change in financial condition, liquidity
or results of operations.



Market Risk



We are exposed to the impact of interest rate changes, foreign currency
fluctuations and changes in the market values of our debt securities. Radnors long-term debt consist of both fixed-rate and floating-rate obligations and are primarily denominated in U.S. dollars. For fixed rate debt, interest rate changes
affect the fair market value of such debt but do not impact earnings. The potential increase in fair value of our long-term debt obligations resulting from a hypothetical one-percent decrease in interest rates amounts to approximately $5.2 million
over the term of the debt.



In the normal course of business,
we employ policies and procedures to manage the Companys exposure to changes in interest rates, foreign currencies and the fair market value of our debt instruments. We manage our interest rate risk by monitoring trends in interest rates as a
basis for entering into fixed rate or floating rate debt and maintain our fixed-rate debt as a percentage of our total debt between minimum and maximum percentages. As of July 1, 2005, a one percentage point change in interest rates would be
expected to have an impact on pre-tax earnings and cash flows of approximately $1.5 million, before giving effect to the interest rate swap described below.



Our objective in managing exposure to foreign currency fluctuations is to reduce volatility of earnings and cash flow. For our foreign subsidiaries, we
match the currency of the costs incurred with the currency in which income is generated whenever possible. In addition, we evaluate forward contracts and cross-currency swaps to manage currency exposure that does exist.



In August 2005 we entered into a cross-currency swap effectively fixing the
floating interest rate and the Euro/U.S. Dollar exchange rate on $12.7 million of our Finnish Term Loan for a three-year period.



It is our policy to enter into foreign currency and interest rate derivative transactions and other financial instruments only to the extent considered
necessary to meet our objectives as stated above. We do not enter into these transactions or any other hedging transactions for speculative purposes.



25



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Forward Looking Statements



All statements contained herein that are not historical facts are based on current expectations. These statements are
forward looking in nature and involve a number of risks and uncertainties. Such risks and uncertainties are described in detail in the Companys annual report on Form 10-K for the year ended December 31, 2004, Commission File No. 333-19495, to
which reference is hereby made.



Item 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK



See Item 2.
Managements Discussion and Analysis of Financial Condition and Results of OperationsMarket Risk.



Item 4. CONTROLS AND PROCEDURES



|(a) | Evaluation of Disclosure Controls and Procedures
|--- | ------------------------------------------------



In connection with the preparation of the Companys Quarterly Report on Form 10-Q for the quarter ended July 1, 2005, as filed with the Securities
and Exchange Commission on August 22, 2005, an evaluation was performed under the supervision and with the participation of the Companys management, including its Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the
effectiveness of the design and operation of the Companys disclosure control and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of
July 1, 2005. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange
Act, is accumulated and communicated to the Companys management and is recorded, processed, summarized, and reported as specified in Securities and Exchange Commission rules and forms.



On September 30, 2005, as discussed in more detail in the introduction to
this Quarterly Report on Form 10-Q/A and in Note 2 to the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q/A, we concluded that our financial statements as of and for the three and six months ended July 1,
2005 should be restated. The restatement resulted from a subsequent review of the Companys application of Securities and Exchange Commission Staff Accounting Bulletin Topic 5T to certain distributions made by Radnor Investment Advisors, L.P.,
a partnership under common control with the Company, to certain of its special limited partners, who are also officers and employees of the Company.



In connection with the restatement, we completed another evaluation, under the supervision and with the participation of our management, including the CEO
and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of July 1, 2005. As a result of the material weakness described below the Companys management, including the CEO and CFO, concluded that the
Companys disclosure controls and procedures as of July 1, 2005 were not effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is accumulated and communicated to
the Companys management and is recorded, processed, summarized, and reported as specified in Securities and Exchange Commission rules and forms.



In connection with the evaluation discussed above, the Companys management concluded that a control deficiency existed in its internal control over
financial reporting with respect to the review of complex non-routine transactions. Specifically, the company failed to account for certain distributions made by Radnor Investment Advisors, L.P., a partnership under common control with the Company,
to certain of its special limited partners, who are also officers and employees of the Company, in accordance with U.S. generally accepted accounting principles. This control deficiency resulted in the restatement of the Companys interim
condensed consolidated financial statements for the three and six months ended July 1, 2005 to correct compensation expense and additional paid-in capital. Additionally, this control deficiency could result in a misstatement of compensation expense
and additional paid-in capital that would result in a material misstatement to the Companys interim or annual consolidated financial statements that would not be prevented or detected.



The Company assessed this deficiency and concluded that it constituted a
material weakness, as defined under the Public Company Accounting Oversight Boards (PCAOB) Auditing Standard No. 2. In coming to this conclusion, the Company assessed its internal controls for financial reporting and reviewed the
Securities and Exchange Commissions Staff Accounting Bulletin No. 99, Materiality and the PCAOBs Auditing Standard No. 2 and determined that there was more than a remote likelihood that a material misstatement of the annual
or interim financial statements would not be prevented or detected.



In light of the material weakness that existed as of July 1, 2005, the Company performed additional analysis and other post-closing procedures to ensure the interim condensed consolidated financial statements contained in this Quarterly
Report on Form 10-Q/A are prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q/A fairly
present in all material respects our financial condition, results of operations and cash flows for all periods presented.



At the direction and under the supervision of the Companys Audit Committee, the Company has undertaken several actions to address the material
weakness that resulted in the restatement of our financial statements as of and for the three and six months ended July 1, 2005. The Company has adopted a new policy requiring an additional level of review and approval by the CEO with respect to the
accounting and reporting for all non-routine transactions. The Companys recent appointment of a new CFO and Corporate Controller has also improved internal controls over financial reporting with respect to non-routine transactions. In
addition, as a result of the complex and evolving nature of many technical accounting issues, the Company is in the process of hiring an additional employee whose material responsibilities would include researching technical financial accounting and
reporting issues for both non-routine and routine transactions.



|(b) | Change in Internal Control Over Financial Reporting
|--- | ---------------------------------------------------



There were no changes in the Companys internal control over financial reporting identified in connection with the evaluation of such controls that
occurred during the Companys fiscal quarter ended July 1, 2005 that have materially affected, or that are reasonably likely to materially affect, the Companys internal control over financial reporting.



26



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PART II  OTHER INFORMATION



Item 1. LEGAL PROCEEDINGS



The Company is involved in various legal actions arising in the normal course of business. After taking into consideration legal counsels evaluation
of such actions, management believes that these actions will not have a material effect on the Companys financial position, results of operations or liquidity.



Item 5. OTHER INFORMATION



On April 22, 2005, the Company terminated its Senior Executive Retirement Plan. All amounts deferred under the plan will be distributed to plan
participants through lump-sum payments prior to December 31, 2005.



Item 6.
EXHIBITS



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*10.1  |  | Amended and Restated Agreement of Sale dated as of January 1, 2005 between Lyondell Chemie Nederland B.V. and StyroChem Finland Oy                                                                                                                                                                                                                                                                                                                                                                        
|       | 
|**10.2 |  | Thirteenth Amendment to Fourth Amended and Restated Revolving Credit and Security Agreement dated June 13, 2005 by and among WinCup Holdings, Inc., Radnor Chemical Corporation, StyroChem
U.S., Ltd., Radnor Holdings Corporation, Radnor Delaware II, Inc., StyroChem Delaware, Inc., WinCup Texas, Ltd., StyroChem GP, L.L.C., StyroChem LP, L.L.C., WinCup GP, L.L.C., WinCup LP, L.L.C., PNC Bank, National Association, Fleet Capital
Corporation, LaSalle Business Credit, LLC and Fifth Third Bank
|       | 
|**10.3 |  | Term Loan Agreement dated as of June 30, 2005 among StyroChem Finland Oy, StyroChem Europe (The Netherlands) B.V., Guggenheim Corporate Funding, LLC, Midland National Life Insurance Company
and North American Company for Life and Health Insurance                                                                                                                                                                                                                                                    
|       | 
|31.1   |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                        
|       | 
|31.2   |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                        
|       | 
|32.1   |  | Certification of Chief Executive Officer pursuant to Section 1350 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                             
|       | 
|32.2   |  | Certification of Chief Financial Officer pursuant to Section 1350 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                             

---

|* | Portions of this Exhibit have been deleted pursuant to the Companys Application Objecting to Disclosure and Requesting Confidential Treatment under Rule 24b-2 of the
Securities Exchange Act of 1934. The Amended and Restated Agreements of Sale was previously filed.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Previously filed.
|-- | -----------------



27



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SIGNATURES



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



|                        |  |                             |  |                        
|----------------------- |  | --------------------------- |  | -----------------------
|                        |  | RADNOR HOLDINGS CORPORATION
|                        |  |                            
|Date: November 22, 2005 |  | By:                         |  | /s/ Paul D. Ridder     
|                        |  |                             |  | Paul D. Ridder         
|                        |  |                             |  | Vice President and     
|                        |  |                             |  | Chief Financial Officer



28