SECURITIES AND EXCHANGE COMMISSION
                                Washington, DC  20549

                                    FORM 10-K


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 1998      Commission File Number 33-68958

                      SPECIALTY FOODS ACQUISITION CORPORATION
               (Exact name of registrant as specified in its charter)

           Delaware                              75-2488183
 (State or other jurisdiction of        (I.R.S. Employer Identification No.)
incorporation or organization)
      520 Lake Cook Road                        
           Suite 550                                60015
         Deerfield, IL                           (Zip Code)
     (Address of principal
      executive offices)
                 
                                 (847) 405-5300
              (Registrant's telephone number, including area code)


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

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

     Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   Yes      X      No
                                           -------     --------
     Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in  definitive proxy or information statements incorporated by
Reference in Part III of this Form 10-K or any amendment to this
Form 10-K.    X
           -------
     State the aggregate market value of voting stock held by non-
affiliates of the Registrant.  No market presently exists for the
Registrant's Common Stock.

     Number of shares of common stock outstanding as of March 17,
1999:  62,768,000 shares.

     Documents incorporated by reference:  None.
     

                       TABLE OF CONTENTS

                                                           Page
                                                        --------
                             PART I

Item 1.     Business                                         3
Item 2.     Properties                                       8
Item 3.     Legal Proceedings                                8
Item 4.     Submission of Matters to a Vote of Security      
               Holders                                       9

                            PART II

Item 5.     Market for the Registrant's Common Equity and   
               Related Stockholder Matters                  10
Item 6.     Selected Financial Data                         11
Item 7.     Management's Discussion and Analysis of Financial
               Condition and Results of Operations          12  
Item 7A.    Quantitative and Qualitative Disclosure
               about Market Risk                            16
Item 8.     Financial Statements and Supplementary Data     16
Item 9.     Changes In and Disagreements with Accountants
               on Accounting and Financial Disclosure       16

                            PART III

Item 10.    Directors and Executive Officers of the         
               Registrant                                   17   
Item 11.    Executive Compensation                          20
Item 12.    Security Ownership of Certain Beneficial
               Owners and Management                        25
Item 13.    Certain Relationships and Related Transactions  28

                            PART IV

Item 14.    Exhibits, Financial Statement Schedules and     
               Reports on Form 8-K                          30


                   FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking
statements within the meaning of the federal securities laws,
including, without limitation, Item 3 - Legal Proceedings and
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.  These forward-looking
statements reflect the Company's expectations and are based on
currently available information.  When used in this Report, the
words "anticipates," "believes," "expects," "intends" and similar
expressions as they relate to the Company or its management are
intended to identify such forward looking statements. Actual
results, performance, achievements or other information may vary
materially from those expressed in, or implied by such forward-
looking statements and are subject to numerous risks and
uncertainties. Factors that could cause actual results to differ
materially from those in forward-looking statements include:
general economic conditions; industry conditions, including
competition, consolidation and cost and availability of raw
materials; weather; interest rates; access to capital markets and
the timing of and value received in connection with asset
divestitures.  No assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or
occur, or if any of them do so, what impact they will have on the
results of operations and financial condition of the Company.

<PAGE>   2
                               PART I

Item 1.   Business

Specialty Foods Acquisition Corporation ("SFAC"), a Delaware
corporation, is a leading producer, marketer and distributor of
bakery products, including bread, cookies and other baked goods
throughout the United States.  The Company's bakery operations
include Metz Baking Company ("Metz"), Mother's Cake & Cookie Co.
("Mother's"), Archway Cookies, Inc. ("Archway") and Andre-Boudin
Bakeries, Inc. ("Boudin").  SFAC owns all of the capital stock of
Specialty Foods Corporation ("SFC").  SFAC, SFC and their
subsidiaries, including Metz, Mother's, Archway and Boudin are
referred to herein as the "Company".


Operations

The Company operates principally in one segment of business -
bakery products (bread, cookies, baked goods and bakery cafes).
The Company believes its cookie operations are the third largest
in the nation and that the Company has a leading regional
position in multiple product lines within the bread and baked
goods markets of the baking industry.  The Company operates one
of the largest food distribution systems in the U.S. with a
network of more than 2,385 direct-store-delivery ("DSD") routes
across 45 states.

Metz, established in 1922 and headquartered in Deerfield,
Illinois, is a leading retail bread company serving a sixteen
state area of the Midwestern United States.  Metz's product line
includes breads, buns, rolls and sweet goods. These products are
marketed by Metz under the Taystee, Holsum, Old Home, Master,
Country Hearth, Egekvist, D'Italiano, Pillsbury and Healthy
Choice brand names and numerous private labels.  Metz distributes
its products through a company-owned direct-store-delivery
("DSD") system to retail grocers, club stores, mass merchants,
convenience stores and other outlets.

Mother's, founded in 1914 and based in Oakland, California, is
the second largest retail cookie producer and distributor in the
Western United States.  Mother's products are marketed under the
Mother's, Mrs. Wheatley's, Bakery Wagon and Marie Lu brand names.
Mother's sells its cookie products primarily to retail grocers in
14 states through a DSD system that is primarily company-owned.
Mother's also sells nationally through club stores, mass
merchandisers and other outlets.

Archway, headquartered in Battle Creek, Michigan and established
in 1936, is one of the nation's leading cookie makers and is the
leading producer of homestyle soft cookie varieties.  Archway
bakes more than one billion cookies annually, producing more than
60 varieties of cookies, including homestyle, holiday and sugar
free products under the Archway brand name.  Archway distributes
its cookies through an independent DSD network and franchisees
that resell to retail food outlets and chain stores throughout
the U.S. and Canada.

Boudin, which is based in San Francisco and was founded in the
Gold Rush of 1849, is a leading marketer of premium branded
specialty breads and bread-related products.  Boudin sells most
of its products through 46 company owned and operated bakery
cafes in California (37), Chicago (7) and Dallas (2).  Boudin
also distributes some of its products through its own direct-mail
catalog and a limited number of retail grocers.

<PAGE>   3

Acquisition Strategy

In 1998, the Company completed five acquisitions of bakery
companies that complement the Company's existing business, expand
its geographic scope and strengthen its competitive position.
The Company's acquisition strategy is consistent with many of the
other larger companies in the baking industry.  In recent years,
the bread industry has undergone substantial consolidation as
several larger regional competitors (most notably, Interstate
Brands, Earthgrains Company and Flowers Industries) have expanded
their businesses through the acquisition of smaller regional
companies.  Similarly, leading cookie manufacturers such as
Keebler have continued to pursue strategic acquisitions of
smaller cookie makers. These consolidations and acquisitions are
being driven by the opportunity to increase sales and market
share, and reduce costs through the combining of manufacturing,
distribution and administrative capabilities.

In October 1998, the Company acquired Archway which, together
with Mother's, creates the nation's third largest cookie
business. The Archway acquisition provides the Company with a
strong, established brand name, more diversified product lines
and a nation-wide presence.  The Archway acquisition also
provides opportunities to realize significant operational and
distribution synergies.  The Company acquired the capital stock
of Archway for approximately $90 million.  In addition, the
Company used approximately $26 million to repay certain
indebtedness of Archway.  The Company also completed four
smaller, strategic bread acquisitions in 1998.  Boudin acquired
Pane Corporation, doing business as San Diego Bread Company,
which sells a variety of specialty breads, including a private
label sourdough that complements Boudin's premium sourdough bread
brand in California.  The acquisition of the San Diego Bread
Company provides Boudin with the opportunity to strengthen its
position in Southern California.  Metz also acquired three bakery
companies in 1998: (i) Clear Lake Bakery, Inc., which bakes and
distributes a variety of bread, buns, rolls, doughnuts and sweet
rolls throughout Iowa; (ii) Grandma Sycamore's, which distributes
its brand name bread throughout Utah and neighboring states; and
(iii) Eagle (Rock Island) Bakery which produces private label
bread and buns distributed in Iowa and Illinois.  These bread
acquisitions provide significant opportunity for reducing costs
and strengthening Metz's competitive position in its core
Midwestern geography.

The Company intends to continue to selectively acquire bakery
businesses to build enterprise value through the realization of
significant cost synergies.  The Company has identified other
potential acquisition candidates with a range of synergy
opportunities that arise from a combination with its existing
bakery business.


Divestitures

SFC has entered into a definitive agreement to sell all of the
capital stock of its subsidiary HMFS Holdings, Inc. ("HMFS" and,
together with its operating subsidiary, H&M Food Systems Company,
Inc., "H&M"), a leading producer of specialty meats and meat-
based prepared foods for restaurants and food manufacturers, for
approximately $132 million (the "H&M Sale").  Subject to required
regulatory approval, the Company expects to close the H&M Sale in
the second quarter of 1999.  The Company expects to realize net
cash proceeds of approximately $110 million from the H&M Sale
after repurchasing H&M's accounts receivable, establishing a $5
million one-year escrow and paying transaction costs.  The
Company currently expects to utilize a portion of the net
proceeds to make investments in its bakery businesses, including
acquisitions, and to pay down indebtedness.  H&M's results have
been reported as a discontinued operation in the Company's
financial statements.  The total sales and earnings before
interest, taxes, depreciation and amortization ("EBITDA") of H&M
in 1998 were $181.0 million and $16.0 million, respectively.

<PAGE>   4

Financing Structure

The Company's financing structure at the date of this Report
consists of the following:  $122.8 million Revolving Credit
Facility at the operating subsidiary level ("Revolving Credit
Facility"); $169.1 million Term Loan Facility at the SFC level
("Term Loan Facility"); $225 million of 10 1/4% Senior Notes due
2001 issued by SFC ("10 1/4% Senior Notes"); $150 million of 11
1/8% Senior Notes due 2002 issued by SFC ("11 1/8% Senior
Notes"); $200 million of 11 1/4% Senior Subordinated Notes due
2003 issued by SFC ("Senior Subordinated Notes"); 13% Senior
Secured Discount Debentures due 2005 issued by SFAC with an
accreted value at December 31, 1998 of $295.2 million ("Senior
Debentures"); and 11% Senior Subordinated Discount Debentures due
2006 issued by SFAC with an accreted value at December 31, 1998
of $134.7 million ("Subordinated Debentures").  In addition, the
Company is a party to an accounts receivable securitization
facility pursuant to which the accounts receivable of the
Company's operating subsidiaries are transferred to a master
trust ("Accounts Receivable Facility").  The maximum amount of
accounts receivable that can be sold to the Accounts Receivable
Facility is $75 million.  The Revolving Credit Facility, Term
Loan Facility and Accounts Receivable Facility were refinanced in
March, 1998.  The Term Loan and Revolving Credit Facilities have
a final maturity date of January 31, 2000.  The Accounts
Receivable Facility also has a final maturity date of January 31,
2000 and begins to amortize on December 15, 1999.

In October 1998, the Company commenced private exchange offers
(the "Exchange Offers") for certain series of publicly-held debt
of both SFAC and SFC.  The offers are to exchange such series of
SFAC and SFC existing debt for new debt securities of two new
intermediate holding companies.  Both Exchange Offers remain
outstanding as of the date of this Report.  SFAC is offering
certain holders of its Senior Debentures the opportunity to
exchange their existing debt for new 13% Senior Secured Discount
Debentures (the "New Senior Debentures") of a new intermediate
holding company.  The New Senior Debentures include provisions
which (i) extend the cash pay interest and maturity dates, (ii)
give SFAC a call option at prescribed discounts of accreted value
and (iii) provide holders of its Senior Debentures who consent to
the exchange up to an aggregate of ten percent of the equity
interest of a new intermediate holding company. Holders of more
than 50% of the Senior Debentures have indicated their agreement
to exchange the Senior Debentures for New Senior Debentures.  SFC
is offering certain holders of its existing notes the opportunity
to exchange their existing debt for new notes (the "New Notes")
of another new intermediate holding company.  The New Notes have
substantially the same terms and covenants as the existing notes
and will remain structurally senior to the New Senior Debentures.
The holders of SFC's public debt are being offered $5 per $1,000
note to consent to the transaction.  In addition, SFC is seeking
the consent of its Revolving Credit Facility and Term Loan
Facility lenders to amend their agreements to conform to the new
holding company structure.

SFAC, SFC and each subsidiary of SFC is a separate corporate
entity. Because the Company conducts substantially all of its
business through its subsidiaries, the ability of SFAC, SFC or
any new intermediate holding company to meet its obligations
under its indebtedness and to its creditors will be dependent on
the earnings and cash flow of its subsidiaries and the ability of
its subsidiaries to pay dividends and to advance funds to it.  In
addition, rights of SFAC, SFC and any new intermediate holding
company and the rights of such companies' creditors and
securities holders, including the holders of debt securities, to
participate in the assets of any subsidiary upon such
subsidiary's liquidation or recapitalization will be subject to
prior claims of such subsidiary's creditors, except to the extent
that such company may itself be a creditor with recognized claims
against any such subsidiary.

<PAGE>     5

SFAC and SFC were formed in June 1993 to acquire (the
"Acquisition") the North American food businesses (the "Acquired
Companies" or the "Predecessor Company") of Beledia N.V., a
subsidiary of Artal Group S.A.


Competition

The Company's bakery businesses compete in the highly competitive
bakery products industry.  Competition is likely to increase due
to continued industry consolidation and overcapacity in certain
areas of the country. Competitors include multi-product large
food companies (such as Bestfoods), national bakers (such as
Interstate Brands and Earthgrains), cookie
companies with national distribution (such as Keebler and
Nabisco) and numerous smaller regional and local companies.  Many
of the Company's larger competitors have significantly greater
financial, marketing and other resources than the Company, while
smaller competitors may have lower fixed costs and greater operating
flexibility.  The Company is also more highly leveraged than most
of its competitors, which may place it at a competitive
disadvantage or restrict the Company's ability to implement its
acquisition strategy in a consolidating industry.  The Company
does not encounter material foreign competition.  Competition is
based on a number of factors including price, quality, brand
loyalty, service, freshness, marketing effectiveness and
obtaining access to retail outlets and adequate shelf space.


Raw Materials

The Company is a major purchaser of flour, sugar, vegetable oils,
and other agricultural products, as well as plastic, paper and
corrugated products for packaging materials.  Although the
Company has some long-term contracts, the bulk of such raw
materials are purchased on the open market or pursuant to short-
term agreements.  The prices paid for food product raw materials
generally reflect external forces, among which weather conditions
and commodity market activities are the most significant.
Although the prices of the principal raw materials used by the
Company can be expected to fluctuate as a result of government
actions and/or market forces (which would directly affect the
cost of products and value of inventories), such materials are
generally in adequate supply and available from numerous sources.
Occasionally, and where possible, the Company makes advance
purchases of commodities significant to its business in order to
lock in what is perceived to be favorable pricing and to protect
itself from basic market price fluctuations.  The Company seeks
to pass through increases in the costs of commodity ingredients
to its customers where possible.  The Company's ability to do so
is dependent primarily upon competitive conditions and pricing
methodologies employed in the various geographies in which the
Company conducts its business.


Trademarks, Patents and Licenses

The Company owns or licenses a number of trademarks and
tradenames which management believes provide significant value to
several of the Company's product lines because of their
recognition by customers and consumers.  The Company owns or
licenses a number of patents, but such patents and licenses are
not considered material to the conduct of the Company's
businesses, and the Company does not believe that any of its
businesses are substantially dependent on patent protection.

<PAGE>   6

Seasonality, Working Capital

The Company's business is moderately seasonal with higher sales,
operating profit and cash flows generally occurring in the
second, third and fourth quarters of the year.  This seasonality
is due primarily to higher bread and cookie sales in the summer
and fall months, as well as the holiday season.


Customers, Sales and Backlog

No one customer accounts for more than 10% of the Company's net
sales.  In general, the backlog of orders is not deemed to be
significant or material for an understanding of the Company's
businesses.


Environmental Matters

The past and present business operations of the Company and the
past and present ownership and operation of real property by the
Company are subject to extensive and changing federal, state and
local environmental laws and regulations pertaining to the
discharge of materials into the environment, the handling and
disposition of wastes (including solid and hazardous wastes) or
otherwise relating to protection of the environment.  Compliance
with federal, state and local environmental laws and regulations
is not expected to have a material impact on the Company's
capital expenditures, earnings or competitive position.  No
assurance can be given, however, that additional environmental
issues relating to presently known matters or identified sites or
to other matters or sites will not require additional, currently
unanticipated investigation, assessment or expenditures.


Regulation

     Public Health

The Company is subject to the Federal Food, Drug and Cosmetic Act
and regulations administered by the Food and Drug Administration
("FDA").  These comprehensive regulatory schemes govern, among
other things, the manufacture, composition, ingredient labeling,
packaging and safety of food.  For example, the FDA regulates
manufacturing practices for food through its current "good
manufacturing practices" regulations, specifies the called
standards of identity ("recipes") for certain foods, including
many of the kinds of products marketed by the Company's
subsidiaries, and prescribes the format and content of certain
information required to appear on the labels of food products.

The Company has revised the labeling of its products to comply
with regulations promulgated by the FDA pursuant to the Nutrition
Labeling and Education Act of 1990.  These regulations require
nutritional labeling on all foods that are a meaningful source of
nutrition, including many of the Company's products, and place
limitations on the use of certain terms while requiring the use
of other terms.

The operations and the products of the Company's business also
are subject to state and local regulation through such measures
as licensing of plants, enforcement by state health agencies of
various state standards and inspection of the facilities.

<PAGE>   7

     Federal Trade Commission

The Company is subject to certain regulations by the Federal
Trade Commission ("FTC").  Advertising of the Company's
businesses is subject to regulation by the FTC pursuant to the
Federal Trade Commission Act and the regulations promulgated
thereunder.

     Employee Safety Regulations

The Company is subject to certain health and safety regulations
including regulations issued pursuant to the Occupational Safety
and Health Act.  These regulations require the Company to comply
with certain manufacturing, health and safety standards to
protect its employees from accidents.

     Employees

As of December 31, 1998, the Company employed approximately 8,300
persons.  Approximately 62% of the Company's labor force are or
will be covered by collective bargaining agreements upon
completion of current negotiations.


Item 2.   Properties

The Company uses various owned and leased plants, warehouses, and
other facilities in its operations.  These facilities are located
primarily in the Midwest and California.  Management believes
that the facilities are properly equipped with machinery suitable
for this use.  Such facilities and related equipment are well
maintained generally and are adequate for the conduct of current
operations.  Management also believes that the Company's
facilities have sufficient capability and capacity to meet the
Company's long-term needs.  The following is a summary of
significant facilities that were operated by the Company as of
December 31, 1998.

       
                          Number of Facilities
                  -----------------------------------------
        
                    Owned          Leased         Total
                    -----          ------         -----
                     25              61             86

Substantially all of the Company's owned facilities are subject
to mortgages for the benefit of the lenders under the Revolving
Credit Facility.

In addition, the Company operates a number of retail outlets and
retail bakery stores.


Item 3.   Legal Proceedings

On May 20, 1993, prior to the SFC acquisition from Artal, Cacique,
Inc. ("Cacique") commenced proceedings against certain former subsidiaries
of the Company ("Stella") in the California Superior Court, Alameda County 
relating to "Hispanic" - style cheese ("Product") produced by Stella 
between 1993 and September 1994.  In November 1997, Stella was
sold to a third party, but the Company has retained liability with
respect to this proceeding, has indemnified the purchaser in connection
therewith and continues to control the defense of this action.

<PAGE>   8

Cacique's complaint asserts causes of action for misappropriation of
trade secrets, trademark interference, inducing breach of contract,
interference with business relations, unfair competition and conspiracy
to commit certain of the causes previously stated.  Cacique claims damages
for lost profits of approximately $14 million in addition to
punitive damages and attorneys' fees.  Stella filed a cross-complaint
seeking approximately $14 million in damages based upon allegations
that Cacique had engaged in predatory pricing practices. 

This proceeding is currently scheduled for trial in the second
quarter of 1999.  The Company intends to continue to vigorously
defend against Cacique's allegations and pursue its claims
against Cacique.  Although any litigation has an element of
uncertainty and no assurances therefore can be given, management
believes that the ultimate resolution of this matter will not
have a material adverse effect on the Company's financial
condition or results of operations.

In addition, the Company is involved in contractual disputes,
administrative and legal proceedings and investigations of
various types, arising out of the ordinary course of business.
Although any litigation, proceeding or investigation has an
element of uncertainty, the Company does not believe that any
single matter, if adversely determined, would have a material
adverse effect on the Company's financial condition or results of
operations. The Company does not believe at this time that there
is a reasonable possibility that all or a majority of such
matters will be decided against the Company.


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

No matters have been submitted to a vote of security holders of
SFAC, through the solicitation of proxies or otherwise, since the
filing by the Company of its Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998.

<PAGE>   9

                            PART II

Item 5.   Market for Registrant's Common Equity and Related
Stockholder Matters

There is no public market for the common stock, par value $.01
per share ("Common Stock"), of SFAC.  On March 17, 1999, the
Common Stock was held of record by 62 persons or entities.  This
number of holders does not include beneficial owners for whom
Cede & Co. or others may act as nominee.

SFAC has never paid any cash dividends on shares of the Common
Stock.  The ability of SFAC to pay dividends is restricted by
provisions of the indentures governing the Senior Debentures and
the Subordinated Debentures of SFAC, the Revolving Credit
Facility and the Term Loan Facility.  Refer to "Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations" and footnote 13 to the accompanying
financial statements for additional discussion of such
restrictions.

In 1996, SFC and Stella Foods, Inc., a former subsidiary of SFC
all of the capital stock of which was sold by SFC in 1997
("Stella"), sold an insurance receivable (the "Purchased
Receivable") generated in connection with a fire at Stella's
Lena, Wisconsin facility to Acadia Partners, L.P. ("Acadia"),
Keystone, Inc. ("Keystone") and Haas Wheat Advisory Partners
Incorporated ("HW Advisory Partners"), each of which are
stockholders of SFAC.  The aggregate face amount of the Purchased
Receivable and the aggregate purchase price paid therefore was:
Acadia, face amount $8,775,000 and purchase price of $8,643,375;
Keystone, face amount of $8,775,000 and purchase price of
$8,643,375; and HW Advisory Partners, face amount of $1,950,000
and purchase price of $1,920,750.

In June 1997, Acadia, Keystone and HW Advisory Partners each
agreed to convert its interests in the Purchased Receivable (the
"Equity Conversion Transaction") into units consisting of one
share of Series A Preferred Stock, par value $1,000 per share, of
SFAC (the "Series A Preferred Stock") and warrants to purchase
395.1 shares of Common Stock (the "Warrants").  In consideration
of the Equity Conversion Transaction, on June 27, 1997 Acadia
received 8,775 shares of Series A Preferred Stock and 8,775
Warrants to purchase an aggregate of 3,467,002 shares of Common
Stock, Keystone received 8,775 shares of Series A Preferred Stock
and 8,775 Warrants to purchase an aggregate of 3,467,002 shares
of Common Stock, and HW Advisory Partners received 1,950 shares
of Series A Preferred Stock and 1,950 Warrants to purchase an
aggregate of 770,445 shares of Common Stock.  The Series A
Preferred Stock has a liquidation value of $1,000 per share and a
cumulative dividend rate of 16% per annum.   As of December 31,
1998, the preferred stock had dividends in arrears of $4,706,000.
Presently, the outstanding debt instruments of the Company
prevent the declaration or payment of dividends on the preferred
stock. The preferred stock is cumulative, non-convertible, non-
participating, and non-redeemable by the holder or the Company
prior to August 16, 2006.  Thereafter, any holder or the Company
may redeem all or a portion of the preferred stock provided that
such redemption would not cause or result in a default in any
outstanding debt instrument of the Company or its subsidiaries at
such time.  The Warrants have a term of ten years and an exercise
price of $0.021332 per share of Common Stock.  The Equity
Conversion Transaction was made in reliance upon the exemption
provided by Section 4(2) of the Securities Act of 1933, as
amended, for transactions not involving a public offering.

<PAGE>   10

Item 6.   Selected Financial Data

                             (In millions, except per share data)
                   
                        1998     1997      1996     1995     1994
                        ----     ----      ----     ----     ----

Net Sales               $742     $718       $706     $704     $667
                        ====     ====       ====     ====     ====

(Loss) from            $(106)   $(112)     $(326)   $(245)    $(97)
continuing             ======   ======     ======   ======    =====
operations (1)(2)

Income (loss) from       $10     $165      $(161)    $(61)     $45
discontinued           ======   ======     ======   ======    =====
operations (1)(2)(3)

Loss per share        $(1.69)  $(1.78)    $(5.12)  $(3.84)  $(1.50)
from continuing        ======   ======     ======   ======   ======
operations (1)(2)

Earnings (loss)        $0.16    $2.61     $(2.53)  $(0.95)   $0.69
per share from         ======   ======     ======   ======   ======
discontinued
operations (1)(2)

Total Assets            $534     $518       $515     $979   $1,237
                       ======   ======     ======   ======  ======
                            
Long-Term Debt        $1,250   $1,134     $1,173   $1,134   $1,071
                       =====   =======     ======   ======  ======  
                                      

(1)  In 1996, the loss and loss per share from continuing
     operations included a goodwill write-down of $203 million
     and $3.19 per share, respectively, while discontinued
     operations included a goodwill write-down of $152 million
     and $2.39 per share, respectively.

(2)  In 1995, the loss and loss per share from continuing
     operations included a goodwill write-down of $157 million
     and $2.45 per share, respectively, while discontinued
     operations included a goodwill write-down of $97 million and
     $1.51 per share.

(3)  Interest expense is not allocated to discontinued
     operations.

<PAGE>   11

Item 7.   Management's Discussion and Analysis of Financial
Condition and Results of Operations

This Annual Report or Form 10-K contains forward-looking
statements within the meaning of the federal securities laws
which reflect the Company's expectations and are based on
currently available information. Actual results, performance,
achievements or other information may vary materially from such
statements and are subject to future known and unknown risks and
uncertainties and events including those discussed herein.

The following table sets forth, for the periods indicated, the
percentage of net sales represented by certain items in the
Company's statements of operations.

                                                1998     1997    1996
                                               -----    -----    -----      
Net sales                                      100.0%   100.0%  100.0%
Cost of sales                                   44.4     44.8    46.5
                                               -----    -----    -----
     Gross profit                               55.6     55.2    53.5

Operating expenses:                                     
     Selling, distribution, general and     
       administrative                           51.3     51.2    49.6
     Amortization of intangible assets           0.2      0.1     1.0
     Goodwill write-down                           -        -    28.9
                                               -----    -----   -----
Total operating expenses                        51.5     51.3    79.5
                                               -----    -----   -----
     Operating profit (loss)                     4.1      3.9   (26.0)
Interest expense, net                           18.0     18.8    18.7
Other expenses, net                              0.4      0.7     1.4
                                               -----    -----   -----
       Loss from continuing operations         (14.3)%  (15.6)% (46.1)%
                                               =====    =====   =====
                                                        

Results of Operations

     1998 Compared to 1997

Consolidated net sales from continuing operations increased 3.4%
to $742.3 million in 1998 compared to $718.1 million in 1997.
The increase in net sales was attributed to volume gains at Metz
and the inclusion of ten weeks of Archway sales in 1998 partially
offset by one less week of sales due to 1997's fifty-three week
year, changes in customer mix and lower pricing at Mother's.  The
volume gains at Metz resulted from the expansion into central
Illinois and new private label business.

The Company's gross profit margin increased to 55.6% in 1998 from
55.2% in 1997.  The gross profit margin percentage was favorably
impacted by product mix at Mother's and lower commodity costs at
Metz. Offsetting these favorable trends were inflationary
increases in manufacturing costs and higher depreciation expense.

Selling, distribution, general and administrative ("SDG&A")
expenses increased $12.8 million or 3.5% in 1998 to $380.8
million.  However, as a percentage of sales, SDG&A expenses were
held constant in 1998. SDG&A increases were attributed to the
inclusion of Archway for ten weeks in 1998, contractual wage
increases, Mother's advertising campaign and Metz's new business
initiatives.  Headcount reductions at both Mother's and Metz
reduced the level of SDG&A expenditures in 1998.

<PAGE>   12

Interest expense, net in 1998 decreased $0.5 million or 0.4% to
$134.0 million from $134.5 million in 1997. The decrease is
primarily due to reduced borrowings under the Revolving Credit
Facility throughout the year and interest earned on cash
equivalents, offset by the additional indebtedness due to the
accretion of interest on SFAC's Senior and Subordinated
Debentures.

Other expense, net was $3.1 million in 1998 compared to $4.7
million in 1997.  The reduction is primarily due to a decrease in
the loss on disposals of property, plant, and equipment in 1998.

As a result of the above factors, net loss from continuing
operations decreased to $106.0 million in 1998 compared to $112.3
million in 1997.

The Company reports minimal state income tax and no federal
income tax due to its net operating loss position for tax
purposes.

Because of the Company's highly leveraged capital structure,
EBITDA is an important performance measure used by the Company
and its stakeholders.  The Company believes that EBITDA provides
additional information for determining its ability to meet future
obligations and debt service requirements.  However, EBITDA is
not indicative of operating income or cash flow from operations
as determined under generally accepted accounting principles.
The Company's EBITDA from continuing operations in 1998 and 1997
is calculated as follows:

                                           (In thousands)
                                           --------------
                               
                                     1998                    1997
                                     ----                    ---- 
Continuing Operations:                          
   Operating profit                 $30,511                  $27,358
   Amortization                       1,471                      900
   Depreciation                      25,733                   20,187
                                    -------                  -------
                                     57,715                   48,445
Discontinued Operations (H&M only)   15,977                   13,078
                                    -------                  -------
                                    $73,692                  $61,523
                                    =======                  =======         


     1997 Compared to 1996

Consolidated net sales from continuing operations increased 1.7%
to $718.1 million in 1997 compared to $706.0 million in 1996.
Net sales increased $12.1 million principally due to increased
cafe sales at Boudin and an additional week of sales due to the
operating units' fifty-three week year in 1997.

The Company's gross profit margin increased to 55.2% in 1997 from
53.5% in 1996 primarily driven by margin gains due to lower
commodity costs.

SDG&A expenses increased $17.6 million or 5.0% in 1997 to $368.0
million.  Selling expenses increased primarily due to increased
store personnel for Boudin's new cafes and increased promotional
spending at Mother's.  Distribution expenses increased due to the
inflationary cost increases in the DSD systems at Metz and
Mother's.  General and administrative expenses decreased
primarily due to a reduction in SFC corporate overhead expenses
and non-recurring 1996 severance expense related to former senior
executives of the Company.

<PAGE>   13

Interest expense, net in 1997 increased $2.1 million or 1.6% to
$134.5 million from $132.4 million in 1996. This increase was
principally due to the additional indebtedness associated with
the accretion of interest on SFAC's Senior and Subordinated
Debentures.

Other expense, net was $4.7 million in 1997 compared to $9.1
million in 1996.  The decrease is primarily due to a decrease in
the loss on disposals of property, plant, and equipment in 1997.

As a result of the above factors and the goodwill write-off of
$203.3 million in 1996, net loss from continuing operations
decreased to $112.3 million in 1997 compared to $325.8 million in
1996.

The Company reports minimal state income tax and no federal
income tax due to its net operating loss position for tax
purposes.

The extraordinary loss of $5.7 million in 1997 resulted from the
write-off of deferred financing costs associated with the
Revolving Credit Facility, Term Loan Facility and Accounts
Receivable Facility, each of which were refinanced in the first
quarter of 1998.


Liquidity and Capital Resources

In 1998, net cash used in operating activities totaled $44.8
million, including cash requirements of $19.6 million related to
continuing operations, $13.5 million related to working capital
and $11.7 million for discontinued businesses.  Net of the
effects of acquisitions, the use of cash related to working
capital is primarily due to the reduction in accounts payable of
$8.5 million as the Company took advantage of certain discount
opportunities, a decrease in accrued expenses of $12.4 million
for expenditures associated with acquisition liabilities and
restructuring payments, offset by cash provided of $8.9 million
from increased funding under the accounts receivable facility.
Net cash used in operating activities in 1997 was $97.6 million.
The increase in net cash used in operating activities in 1997 as
compared to 1996 was primarily attributable to the increased cash
requirements of discontinued operations, payment of accrued
acquisition liabilities, restructuring payments, and reductions
in accounts payable and accrued expenses.  In 1996, cash used by
operating activities of $8.3 million was principally due to the
increased loss from continuing operations offset by net cash
provided by discontinued operations and increased funding under
the accounts receivable facility.

Net cash used by investing activities totaled $239.6 million in
1998.  The activity in 1998 was primarily attributable to the use of
$135.0 million to acquire businesses, the purchase of $35.4
million of transportation and production equipment previously
leased and planned capital expenditures.  In 1997, cash provided
by investing activities of $344.7 million was primarily
attributable to the net proceeds from the divestiture of business
units, offset by capital expenditures.  In 1996, cash provided by
investing activities of $56.8 million resulted from the net
proceeds from the sale of B&G Foods, Inc. and Burns & Ricker, Inc
and sale-leaseback transactions, offset by capital expenditures.

Net cash provided by financing activities amounted to $56.0
million in 1998, primarily due to additional borrowings under the
Company's Revolving Credit Facility, offset by refinancing costs
and scheduled payments on long-term debt.  Net cash used in
financing activities amounted to $61.0 million in 1997 as a
paydown of revolving credit borrowings and normal payments on
long-term debt were partially offset by an issuance of redeemable
preferred stock.  In 1996, cash used by financing activities of
$1.9 million was primarily due to payments of long-term debt and
refinancing costs slightly offset by increased revolver
borrowings.

<PAGE>   14

Based upon the above, the net increase (decrease) in cash in
1998, 1997 and 1996 was $(228.4) million, $186.1 million and
$46.5 million, respectively.

In March 1998, the Company refinanced its Revolving Credit
Facility, Term Loan Facility and Accounts Receivable Facility
with a new syndicate of financial institutions.  The provisions
of the Revolving Credit Facility and Term Loan Facility contain
certain restrictive covenants that require the Company to
maintain specified leverage and interest coverage ratios and
other limitations regarding capital expenditures, sales of
assets, loans and investments and encumbrances of assets.  In
addition, the Company's ability to incur additional indebtedness
is significantly limited under such facilities.

As of December 31, 1998, the Company has a cash balance of $5.9
million and has $75.0 million of borrowings under its $122.8
million Revolving Credit Facility.  Outstanding letters of credit
of $10.2 million as of December 31, 1998 reduce available funds
under the facility.

In 1999, working capital requirements are projected to be lower
than 1998 and capital expenditures are planned to be
substantially reduced from 1998 levels.  The Company will
continue to pursue selective bakery acquisitions.  Management
believes that available funds and proceeds from the H&M sale
should be adequate to fund the Company's 1999 operations, capital
expenditures and acquisitions.  However, there can be no
assurance that available funds will be adequate to meet such
needs.

The Revolving Credit Facility and Term Loan Facility mature in
January 2000.  The Accounts Receivable Facility begins to
amortize December 15, 1999 and matures in January 2000.
Additionally, SFAC's 13% Senior Secured Discount Debentures are
currently scheduled to become cash pay interest obligations in
February 2000 and SFAC's ability to meet its cash debt service
obligations is dependent upon cash dividends from SFC.
Currently, due to covenant restrictions, SFC is unable to make
such dividends.  By the year 2000, the Company's ability to meet
its cash debt service requirements will be dependent upon
refinancing a significant portion of its indebtedness.
Currently, the Company is pursuing an exchange offer more fully
described under Item 1- Business- Financing Structure and in Note
13 to the accompanying financial statements.  The proposed
exchange offer would extend by four years the cash pay interest
date of SFAC's 13% Senior Secured Discount Debentures.  If the exchange
offer is completed, the Company also plans to pursue
an extension of the term of SFC's Revolving Credit Facility, Term
Loan Facility and Accounts Receivable Facility.  Management
believes that completion of an exchange offer and the extension
of its senior secured indebtedness are essential elements in
continuing to operate the Company's business as currently conducted.
There can be no assurance, however, that the Company will be successful
in completing the proposed exchange offer or extending the term
of its senior secured indebtedness.


Year 2000 Issues

The Year 2000 ("Y2K") issue is the result of computer programs
using a two-digit format, as opposed to four digits, to define
the applicable year.  Such computer systems will be unable to
interpret dates beyond the year 1999, which could cause system
failures and other computer errors, resulting in business and
operational disruptions.  In 1998, the Company developed a three-
phase program to address the Y2K issue as it relates to its
information systems and other computer-based operations.  Phase I
was the identification of those Company systems which could be
impacted by the Y2K issue.  Phase I was completed in 1998.  Phase
II, which was substantially completed during 1998, included the
development and implementation of the corrective steps necessary
to ensure Y2K compliance.  The Company anticipates the completion
of Phase III, the final testing of all systems potentially at
risk to ensure remediation of any Y2K issues, by mid-1999.  The
Company has identified three major areas it believes are
essential for the successful resolution of any Y2K issues:  (1)

<PAGE>  15

financial and informational system applications, (2)
manufacturing applications and (3) third-party relationships.

The Company has completed its review of its systems and has
contacted software suppliers to assess major areas of potential
exposure due to the Y2K issue.  While a number of the Company's
systems have been determined to be Y2K compliant, certain
applications required remediation.  The Company has substantially
completed its remediation and is currently replacing certain non-
Y2K compliant hardware and software as well as testing Y2K
software changes.  Such efforts are expected to be completed by
the second quarter of 1999.  In addition, the Company has
contacted key third parties, most of which expect to be Y2K
compliant by mid-1999.

The Company has already spent approximately $0.5 million to
identify, modify and replace those systems with likely exposure
to Y2K issues and expects to spend approximately an additional
$0.8 million to complete this compliance program.

The Company is not able to determine the potential impact of a
failure of some or all of its systems in the event its compliance
efforts are not completely successful, nor has the Company been
able to assess the potential effect on its operations and
financial condition caused by systems failures or disruptions to
any of its suppliers, customers, service providers or other major
third parties.


Item 7A.   Quantitative and Qualitative Disclosure about Market Risk.

During 1998, the Company entered into interest rate swap
agreements to reduce its exposure to changes in the cost of its
variable rate borrowings as required by its Term Loan Facility.
Under the interest rate swap agreements, which expire in January
2000, the Company receives floating rate payments from the
counterparties based upon the three-month LIBOR and makes fixed
rate payments at 5.753% and 5.765% to the respective
counterparties.  The payments are calculated based upon a
notional principal amount of $100 million.  The net differential
of interest to be paid or received under the remaining agreements
is recognized as incurred.  In 1998, net payments totaling $30
thousand were made to the counterparties.  Off-balance-sheet risk
from the interest rate swap agreements at December 31, 1998
includes the risk associated with changes in market values and
interest rates. The counterparties to the agreements are major
financial institutions.


Item 8.   Financial Statements and Supplementary Data

See Index to Financial Information on page F-1.


Item 9.   Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure

None.

<PAGE>   16

                                PART III

Item 10.   Directors and Executive Officers of the Registrant

Directors
----------

The number of persons presently serving on the Board of Directors
of SFAC is ten.  Set forth below are the names, ages, other
positions and offices held and a brief account of the business
experience for each director. All members of the Board of
Directors serve until a successor is elected.


Name                Age     Other Positions
---                 ---     ---------------
                             
Robert B. Haas      51      Chairman of the Board of SFAC and
                            SFC since June 1993 and Chairman of
                            the Board of Haas Wheat & Partners
                            Incorporated, a private investment
                            firm ("Haas Wheat"), since 1992;
                            Chairman of the Board of Haas &
                            Partners Incorporated, a private
                            investment firm, since 1989.  Mr.
                            Haas is Chairman of the Board of
                            Playtex Products, Inc., NBC
                            Acquisition Corp. and Nebraska Book
                            Company, Inc. and a Director of
                            Sybron International Corporation.
                            
Thomas J. Baldwin   40      Director of SFAC and SFC since May
                            1996; Chief Executive Officer of
                            Christmas Corner, Inc. since January
                            1995 and President of PB Ventures
                            since July 1994.  Mr. Baldwin was
                            also Managing Director of Invus
                            Group, Ltd. from 1990 through
                            February 1995.
                            
Lawrence S.         43      Director of SFAC and SFC since
Benjamin                    February 1997; President and Chief
                            Executive Officer of SFAC and SFC
                            since January 1997; and President
                            and Chief Executive Officer of
                            Stella Foods, Inc. ("Stella") (a
                            former subsidiary of the Company)
                            from August, 1994 until December
                            1997.  Mr. Benjamin held various
                            positions from 1986 through August
                            1994 with operating units of Kraft
                            General Foods, Inc., including
                            President of All American Gourmet
                            Company, Vice President of Kraft
                            Frozen Products Group and Vice
                            President and General Manager of the
                            Specialty Ingredients Unit of Kraft.
                            
J. Taylor Crandall  45      Director of SFAC and SFC since
                            August 1993; Vice President and
                            Chief Financial Officer of Keystone,
                            Inc.,  an affiliate of the Company
                            ("Keystone"), since October 1986 and
                            President, Director and sole
                            stockholder of Acadia MGP, Inc.
                            (managing general partner of Acadia
                            FW Partners, L.P., the sole general
                            partner of Acadia Partners, L.P., an
                            affiliate of the Company ("Acadia"))
                            since March 1992.  Mr. Crandall also
                            is a Director of Bell & Howell
                            Company, Physicians Reliance
                            Network, Sunterra Corp., Integrated
                            Orthopedics and Washington Mutual.
                            
<PAGE>   17
                            
Jerry M. Meyer      58      Director of SFAC and SFC since June
                            1996.  Mr. Meyer also is a Director
                            of Century Capital Financial, Inc.
                            and City National Bank in Kilgore
                            and Longview, Texas.
                            
Andrew J. Nathanson 41      Director of SFAC and SFC since
                            August 1993 and Managing Director of
                            Donaldson, Lufkin & Jenrette
                            Securities Corporation since January
                            1991.  Mr. Nathanson also is a
                            Director of Duane Reade, Inc.
                            
David G. Offensend  45      Director of SFAC and SFC since
                            August 1993 and Founder of Evercore
                            Partners, LLC since October 1995.
                            Mr. Offensend was also Managing
                            Director of Oak Hill Partners, Inc.
                            and its predecessor from April 1990
                            to September 1995; Vice President
                            and Director of Acadia MGP, Inc.
                            from March 1992 to September 1995;
                            and Vice President of Keystone from
                            March 1992 to September 1995.
                            
Marc C. Particelli  44      Director of SFAC and SFC since
                            November 1997 and Managing Director
                            of Oak Hill Partners, Inc. since
                            August 1997.  Mr. Particelli was
                            Principal of Odyssey Partners L.P.
                            from October 1995 to August 1997 and
                            Senior Vice President of Booz Allen
                            & Hamilton Inc. prior to October
                            1995.
                            
Anthony P. Scotto   52      Director of SFAC and SFC since
                            August 1993 and Managing Director of
                            Oak Hill Partners, Inc. and its
                            predecessor since March 1988 and
                            Consultant to Oak Hill Capital
                            Management, Inc. since November
                            1998.  Mr. Scotto also is a Director
                            of Ivex Packaging Corporation,
                            Holophane Corporation and Grove
                            Worldwide LLC
                            
Douglas D. Wheat    48      Director of SFAC and SFC since June
                            1993 and President of Haas Wheat
                            since November 1992; Mr. Wheat was
                            Co-Chairman of Grauer & Wheat, Inc.,
                            a private investment firm, from
                            April 1989 to October 1992.  Mr.
                            Wheat also is a Director of Playtex
                            Products, Inc.

<PAGE>   18

Executive Officers
------------------

Set forth below are the names, ages, positions held and a brief
account of the business experience for each executive officer of
SFAC and certain executive officers of the Company's subsidiaries
who may be deemed executive officers of SFAC.  No family
relationship exists among the identified executive officers.
Executive officers of SFAC are elected by and serve at the
discretion of the Board of Directors of SFAC.

Name                Age     Other Positions
----                ---     ---------------
       
Lawrence S.         43      See Directors.
Benjamin                    

William D. Day      44      President and Chief Executive
                            Officer of H&M since August 1997.
                            Mr. Day held various positions with
                            Stella, including Vice President of
                            Operations from January 1995 through
                            August 1997.  Prior to 1995, Mr. Day
                            held various positions with Kraft
                            General Foods, Inc.
                            
Robert L. Fishbune  43      Vice President and Chief Financial
                            Officer of SFAC and SFC since May
                            1996.  Mr. Fishbune was a Partner at
                            Coopers & Lybrand L.L.P. from 1988
                            until May 1996.
                            
Henry J. Metz       48      Chairman of Metz since January 1999.
                            Mr. Metz was Chief Executive Officer
                            of Metz from August 1993 through
                            December 1998 and President of Metz
                            from February 1983 to April 1998.
                            Mr. Metz was Chief Operating Officer
                            of Metz from 1988 until August 1993.


Patrick J. O'Dea    37      President and Chief Executive Officer of
                            Mother's since April 1997.  Mr. O'Dea
                            was Vice President, Retail of Stella
                            from 1995 to March 1997.  Prior to
                            joining Stella, Mr. O'Dea spent 12 years
                            with Procter & Gamble, most recently as
                            Director of Marketing for its Snack Food
                            Business.
                            

David E. Schreibman 31      Vice President and General Counsel -
                            Business Units of SFAC and SFC since
                            October 1998.  Mr. Schreibman was Chief
                            Counsel - Mergers and Acquisitions for
                            the Sara Lee Corporation from October
                            1995 to October 1998.  Prior to October
                            1995, Mr. Schreibman was in private law
                            practice with Sidley & Austin.
                            
Lawrence J. Strain  46      President of Andre-Boudin Bakeries, Inc.
                            since January 1999.  Vice President of
                            Bakery Operations from August 1990 to
                            December 1998.  Prior to 1990, Mr.
                            Strain was Vice President and operating
                            partner of Boudin International, Inc.
                            
<PAGE>   19

Item 11.   Executive Compensation

Summary Compensation Table

The following table shows compensation for the years ended
December 31, 1998, December 31, 1997 and December 31, 1996 of Mr.
Benjamin, the President and Chief Executive Officer of SFAC and
SFC ("CEO"), and each of the four most highly compensated
executive officers (excluding the CEO) of the Company (including
its operating subsidiaries).  The Company has an annual bonus
plan and a long-term incentive plan pursuant to which executive
officers of the Company may participate.

The compensation set forth in this table is repeated in Summary
Compensation Table listed in SFC's Annual Report on Form 10-K for
the year-ended December 31, 1998.  The CEO and four most highly
compensated executive officers of the Company hold their
respective positions for both SFAC and SFC, however, these
officers are not compensated separately by each entity.


<TABLE>
<CAPTION>
         
                                Annual Compensation              Long Term Compensation
                                -------------------              ----------------------
                                                                        Awards
                                                                        ------
                                                                      Securities
Name and                                                              Underlying
Principal                                            Other Annual       Options/       All Other
Position          Year     Salary($)      Bonus($)  Compensation $ (1)   SARs(#)(2)  Compensation ($)
--------          ----     --------      ----------  ---------------    -----------  ------------
<S>               <C>       <C>          <C>            <C>             <C>          <C>

Lawrence S.       1998      625,000     1,071,000 (3)  89,000               -       101,000(4)
Benjamin          1997      560,000     1,015,000      84,000           1,600,000    89,000
President and     1996      320,000        72,000        -                 50,000      -  
Chief Executive              
Officer of SFAC       
and SFC                

William D. Day    1998      300,000       528,000        -                  -         8,500(5)
President and     1997      209,000       215,000      31,000               -           600 
Chief             1996      145,000          -           -                 15,000       400 
Executive              
Officer of H&M        
                      
Robert L.         1998      376,000       174,000 (3)  62,000               -        64,000(6)    
Fishbune          1997      350,000       298,000      62,000             100,000    80,000
Vice President    1996      191,000       150,000      51,000             100,000    29,000 
and Chief Financial 
Officer of SFAC        
and SFC                       
                                   
Henry J. Metz     1998      338,000       262,500        -                  -           500(7) 
Chief Executive   1997      334,000       251,000        -                  -         1,000  
Officer of        1996      320,000       240,000      93,000              50,000    72,000         
Metz                                                                       

Patrick J. O'Dea  1998      295,000       225,000        -                  -        30,300(8) 
President and     1997      260,000       260,000        -                  -       207,000  
Chief             1996      184,000          -           -                 20,000       400
Executive             
Officer of Mother's             
                       
</TABLE>

(1)  The amounts set forth for Mr. Benjamin include $71,000 and
     $76,000 for tax reimbursement payments made in 1997 and
     1998, respectively. The amounts for Mr. Fishbune in 1996,
     1997 and 1998 include $43,000, $50,000 and $49,000,
     respectively, for tax reimbursement payments.  In 1997, Mr.
     Day received $31,000 in tax reimbursement.  In 1996, Mr.
     Metz received $54,000 of tax reimbursement payments and
     $39,000 for personal use of the Metz airplane.

(2)  Options were generally granted to employees of the Company, including
     the named executive officers, pursuant to the 1994 Stock
     Option Plan, which was amended in February, 1995 (the "Stock
     Option Plan").  Options granted are either non-qualified
     stock options ("NQSOs") or incentive stock options ("ISOs").
     Options granted generally have a ten year term.

<PAGE> 20

(3)  The amounts set forth for Messrs. Benjamin and Fishbune do not
     include certain bonus amounts which will be finalized following
     the completion of the sale of H&M.

(4)  In 1998, SFC made a $90,000 contribution to a retirement
     account maintained by Mr. Benjamin.  Mr. Benjamin (and Mr.
     Fishbune) have established such accounts into which they
     contribute up to 15% of base pay (on an after-tax basis) to
     annuity or money-market funds.  The Company provides
     contributions to the employee's retirement account and a
     reimbursement for taxes incurred as a result of such
     contributions.  The amounts set forth for 1998 for Mr.
     Benjamin also include life insurance premiums ($3,000) and
     personal financial planning services ($8,000).

(5)  The amounts set forth for Mr. Day in 1998 include life
     insurance premiums ($1,500) and reimbursement of moving and
     relocation expenses ($7,000).

(6)  In 1998, SFC made a $56,000 contribution to a retirement
     account maintained by Mr. Fishbune (see note 3 for a
     description of the account).  The amounts set forth for 1998
     for Mr. Fishbune also include life insurance premiums
     ($1,500) and personal financial planning services ($6,500).

(7)  In 1998, Mr. Metz received a $500 reimbursement for
     relocation expenses.

(8)  The amounts set forth for Mr. O'Dea in 1998 include a
     $30,000 relocation allowance and payment of $300 in life
     insurance premiums.


Aggregated Options/SARs Exercised In Last Fiscal Year And Year-
End Option/SAR Values

The following table sets forth for the named executive officers
aggregated information concerning the number of shares of Common
Stock underlying unexercised stock options at December 31, 1998
and the value of unexercised, in-the-money options at that date.

                          Number of          
                         Securities                Value of
                         Underlying               Unexercised
                        Unexercised              In-the-Money
                       Options/SARs at         Options/SARs at
                     Fiscal Year-End (#)      Fiscal Year-End ($)
                       Exercisable/              Exercisable/
          Name         Unexercisable             Unexercisable
          ----       ------------------      ------------------

Lawrence S. Benjamin    900,000/900,000             (1)
President and Chief
Executive Officer of
SFAC and SFC
          
      
William D. Day           18,750/6,250               (1)
President and Chief
Executive Officer of H&M
 
         
Robert L. Fishbune      100,000/100,000             (1)
Vice President
and Chief Financial
Officer of SFAC and
SFC
         

Henry J. Metz           153,750/31,250              (1)
Chief Executive Officer
of Metz
          

Patrick J. O'Dea         26,250/8,750               (1)
President and Chief
Executive Officer of
Mother's

<PAGE>   21

(1)  All of the options listed in this table have an
     exercise price of $0.021322 per share of Common
     Stock. Due to the fact that the Common Stock is
     not publicly traded, it is not currently possible
     to calculate a precise value for the Common Stock.
     In October 1997, the Board of Directors of SFAC
     realized that certain previously granted stock
     options had exercise prices which exceeded the
     fair market value of the Common Stock.  In view of
     the diminished value, the Board of Directors of
     SFAC determined that adjusting the exercise price
     of stock options previously awarded to existing
     employees (including the named executive officers)
     was in the best interests of the Company.  On
     October 30, 1997, the Board of Directors of SFAC
     repriced the exercise price of existing options
     from $0.726703211 to $0.021322 per share of Common
     Stock, which the Board of Directors of SFAC
     determined was not below the fair market value of
     the Common Stock.


Metz-Mother's Cake & Cookie Company Consolidated
Pension Plan for Non-Union Employees

The following table indicates the estimated annual
benefits payable upon retirement for the specified
compensation and years of service classifications under
the Metz-Mother's Cake & Cookie Company Consolidated
Pension Plan for Non-Union Employees (the "Pension
Plan").  Messrs. Metz and O'Dea are the only named
executive officers participating in the Pension Plan.


Pension Plan Table For The Pension Plan

             
   Annual Final     
     Average                       
   Compensation                  Years of Service
  -------------        ------------------------------------------ 
                                                       
                       15        20         25        30         35
                      ---       ---        ---       ---        ---          
                                                       
   125,000          $23,988   $32,547    $41,105   $49,564    $49,664
                                                         
   150,000          $29,369   $39,834    $50,299   $60,764    $60,764
                                                     
   175,000          $33,833   $46,466    $59,100   $71,734    $71,734
                                                          
   200,000          $37,495   $52,035    $66,575   $81,115    $81,115
                                                          
   225,000          $41,158   $57,604    $74,050   $90,497    $90,497
                                               
   250,000          $42,746   $60,038    $77,291   $94,564    $94,564
                                              
   300,000          $42,746   $60,018    $77,291   $94,564    $94,564
                                                         
   350,000          $42,746   $60,018    $77,291   $94,564    $94,564
                                             
   400,000          $42,746   $60,018    $77,291   $94,564    $94,564
                                                     
   450,000          $42,746   $60,018    $77,291   $94,564    $94,564
                                                                            
   500,000          $42,746   $60,018    $77,291   $94,564    $94,564
                                                       
<PAGE>  22

Compensation under the Pension Plan generally refers to total
annual cash compensation (up to $160,000 for 1998, as limited by
the Code section 401(a)(17)), including pre-tax salary deferrals,
but excluding certain specified items such as compensation
received under the Metz Long-Term Incentive Compensation Plan,
the Mother's Long-Term Incentive Compensation Plan, the Metz
Annual Bonus Incentive Plan and the Mother's Annual Bonus
Incentive Plan.

The amount of compensation covered under the Plan in 1998 for
Messrs. Metz and O'Dea was $160,000 (as limited by Code section
401(a)(171).  As of December 31, 1998, Mr. Metz had approximately
27 years of credited service under the Pension Plan and Mr. O'Dea
has approximately one and one-half years of credited service
under the Pension Plan.  Benefits are computed on a straight life
annuity basis and are not subject to deduction for Social
Security or other offset amounts.


Certain Employment Arrangements

The following summaries of certain employment agreements and arrangements
are not necessarily complete and are subject to, and are qualified in
their entirety by reference to, the text of the agreements and 
arrangements, copies of which are listed as exhibits hereto and have
either been filed as exhibits herewith or incorporated by 
reference herein.

Employment Agreement with Mr. Benjamin
-------------------------------------

SFAC, SFC and certain subsidiaries of SFAC and SFC (collectively, the 
"Employers") entered into an Amended and Restated Executive
Employment Agreement dated as of March 15, 1999 with Mr. Benjamin
effective January 1, 1999.  The Employment Agreement for Mr. Benjamin
provides for the initial term of employment to end June 30, 2001,
which term will automatically be renewed for additional one-year extension
periods unless the renewal is canceled by the Employers or Mr. Benjamin upon
six months prior notice.  In addition, upon termination in certain
circumstances, the Employers will make post-termination salary and bonus
payments to such executive (or his estate).  The Employment Agreement
provides for an initial base salary of $655,000 and an annual target
bonus of 75% of base salary upon attainment by the Company of specified
EBITDA targets.

Mr. Benjamin's Employment Agreement also provides that Mr.
Benjamin may be entitled to receive, under certain circumstances,
payments to offset (at least in part) certain tax consequences to
him as a result of his exercise of stock options, the receipt of
certain payments and/or his termination in connection with a
change of control of SFAC or SFC.  These payments are limited in some
circumstances to the tax savings actually realized by the Employers
and in other circumstances by various dollar amounts.

Mr. Benjamin has agreed to be bound by certain confidentiality,
non-competition and non-solicitation restrictions set forth in
his Employment Agreement.

Employment Agreement with Mr. Fishbune
---------------------------------------

SFAC, SFC and certain subsidiaries of SFAC and SFC
(collectively, the "Employers") entered into an Amended and Restated
Executive Employment Agreement dated as of March 15, 1999 with
Mr. Fishbune effective January 1, 1999.  The Employment Agreement
for Mr. Fishbune provides for the initial term of employment to end December
31, 2000, which term will automatically be renewed for additional one-
year extension periods unless the renewal is canceled by the Employers
or Mr. Fishbune upon six months' prior notice.  In addition, upon
termination in certain circumstances, the Employers will make post-
termination salary and bonus payments to such executive (or his estate).
The Employment Agreement provides for an

<PAGE> 23

initial base salary of $400,000 and an annual target bonus of
75% of base salary upon attainment by the Company of specified
EBITDA targets.

Mr. Fishbune's Employment Agreement also provides that Mr.
Fishbune may be entitled to receive, under certain circumstances,
payments to offset (at least in part) certain tax consequences to
him as a result of his exercise of stock options, the receipt of
certain payments and/or his termination in connection with a
change of control of SFAC or SFC. These payments are limited in
some circumstances to the tax savings actually realized by
the Employers and in other circumstances by various dollar amounts.

Mr. Fishbune has agreed to be bound by certain confidentiality,
non-competition and non-solicitation restrictions set forth in
his Employment Agreement.

Employment Agreement with Mr. O'Dea
----------------------------------
SFC, Mother's and MCC-DSD  Holdings, Inc. (parent company of
Mother's and a wholly owned subsidiary of SFC) entered into an
Amended and Restated Executive Employment Agreement with Mr.
O'Dea effective July 15, 1997.  The Employment Agreement for Mr.
O'Dea provides for the initial term of employment to end December
31, 2000, subject to earlier termination under certain enumerated
circumstances.  The Employment Agreement provides for an initial
base salary of $280,000 and an annual target bonus of 75% of base
salary upon attainment by the Company of specified performance
targets.  In addition, upon termination in certain circumstances,
the Employers will make post-termination salary and bonus payments
to such executive (or his estate).

Mr. O'Dea has agreed to be bound by certain confidentiality, non-
competition and non-solicitation restrictions set forth in his
Employment Agreement.

Severance Agreement with Mr. Day
--------------------------------

Mr. Day entered into a Severance Agreement with SFC and H&M as of
August 29, 1997.  The Severance Agreement provides that upon a
sale or change in control of H&M, that results in a termination
of Mr. Day's employment with H&M, H&M will pay Mr. Day his unpaid
base salary and payments of his base salary for the 12 month
period following such termination.

Divestiture Award Agreements
----------------------------

Certain of the executive officers and other key employees of the
Company and its subsidiaries, including Messrs. Benjamin, Day,
Fishbune and Metz have entered into Divestiture Award Agreements
with the Company.  Pursuant to these agreements, a recipient will
receive or has received a percentage of the net cash proceeds
received by the Company (after deducting fees and expenses) in
the event of a sale of various subsidiaries of the Company.

Change in Control Arrangements
------------------------------

Under the Mother's Amended and Restated Supplemental Long-Term
Incentive Compensation Plan, adopted in 1999 (the "Mother's LTIP"),
certain management employees, which include certain named executive
officers, are eligible to receive awards based upon the total value of
Mother's.  Determination of award payments under the Mother's
LTIP will be made on June 1, 2001 or earlier in the event of a
change in control.  The amounts of the awards under the
Mother's LTIP are offset, in certain cases, by amounts payable
under certain of the Deferred Bonus Agreements described below.

<PAGE> 24

Certain of the executive officers and other key employees of the
Company, including Messrs. Benjamin, Fishbune, Day, Metz and
O'Dea, entered into Deferred Bonus Agreements with the Company,
pursuant to which these employees are entitled to receive
deferred bonus payments in amounts equal to their bonus payments
under the Company's annual bonus plans.  Payments of amounts
vested that relate to bonuses earned through 1998 will be made on
March 31, 1999 and January 15, 2000. The payment of amounts vested
that relate to bonuses earned through 1998 that are scheduled to be
paid on March 31, 1999 will be waived by Messrs. Benjamin and 
Fishbune upon receipt of payments under the Divestiture Award 
Agreements with such executive officers relating to H&M described
above.  In addition, with respect to Messrs. Benjamin, Fishbune
and O'Dea, payments of amounts vested that relate to bonuses
that may be earned for 1999 and 2000 will be made on March 31, 2001.
However, in the event of a change in control, the awards that
relate to bonuses earned prior to the change in control vest
immediately and will be paid within 90 days.

Compensation of Directors
-------------------------

Employees of SFAC, SFC or their subsidiaries do not receive any
additional compensation for services as a director or on
committees of the board of directors of SFAC, SFC or any of their
subsidiaries.  Directors of SFAC, SFC or their subsidiaries are
reimbursed for reasonable out-of-pocket expenses incurred in
connection with attendance at Board of Directors and committee
meetings and are covered by director's liability insurance.  Each
of Messrs. Baldwin and Meyer also receive directors fees of
$20,000 annually.

Compensation Committee Interlocks and Insider Participation In
--------------------------------------------------------------
Compensation Decisions
----------------------

J. Taylor Crandall, Robert B. Haas, Anthony P. Scotto and Douglas
D. Wheat are all of the members of the compensation committee of
the Board of Directors of each of SFAC and SFC ("Compensation
Committee"). Each of Messrs. Crandall, Haas, Scotto and Wheat
owns a beneficial interest in or is an executive officer of one
or more of the entities that have entered into financial advisory
arrangements with SFC as described below.

Messrs. Haas and Wheat are controlling shareholders and are
Chairman of the Board and President, respectively, of Haas Wheat.
Haas Wheat was a party to a financial advisory agreement with SFC
pursuant to which Haas Wheat agreed to provide certain financial
advisory and other consulting services to SFC for a five-year
period in consideration for an annual fee of $700,000.  The Board
of Directors approved a one-year extension of the agreement in
August 1998.

J. Taylor Crandall is Vice President and Chief Financial Officer
of Keystone and is President, Director and sole stockholder of
Acadia MGP, Inc., the managing general partner of Acadia FW
Partners, L.P., the sole general partner of Acadia.  Mr. Scotto
is a Managing Director of Oak Hill Partners, Inc. and its
predecessor. Each of Penobscot-MB Partners ("Penobscot"), an
affiliate of Acadia, and Keystone entered into a five-year
financial advisory agreement with SFC, pursuant to which they
were paid an annual fee, $200,000 per year in the case of
Penobscot and $100,000 per year in the case of Keystone. The
Board of Directors approved a one-year extension of the agreement
in August 1998.


Item 12.   Security Ownership of Certain Beneficial Owners and
Management

The following table sets forth, as of March 17, 1999, certain
information regarding the beneficial ownership of voting
securities of SFAC by (i) each person known by SFAC to be the
beneficial owner of more than 5% of any class of SFAC's voting
securities, (ii) each of the directors and named executive
officers of SFAC, and (iii) all executive officers and directors
of SFAC.

<PAGE> 25

                                                 Percentage of
Name and Address of        Number of Shares    Outstanding Shares
Beneficial Owner           of Common Stock     of Common Stock (a)
-------------------        -----------------   -------------------- 
Acadia Partners, L.P. (b)     27,063,347            40.86%
201 Main Street
Fort Worth, Texas 76102

Keystone, Inc. (c)             9,358,502            14.13%
201 Main Street                              
Fort Worth, Texas 76102

Artal Luxembourg S.A. (d)      5,959,327             9.49%
Aandorenstraat 2
3300 Tienen, Belgium

Robert B. Haas (e)             5,881,496             9.26%
300 Crescent Court,
Suite 1700
Dallas, Texas  75201

UBS Capital LLC (f)            5,366,913             8.55%
299 Park Avenue
New York, New York 10171

DLJ Merchant Banking           3,812,562             6.07%
Partners, L.P. (g)
277 Park Avenue
New York, New York 10172

Thomas J. Baldwin                 --                   --

J. Taylor Crandall (b)            --                   --

Jerry M. Meyer                    --                   --

Andrew J. Nathanson (g)           --                   --

David G. Offensend                --                   --

Marc C. Particelli                --                   --

Anthony P. Scotto (b)             --                   --

Douglas D. Wheat (h)           2,396,776            3.82%

Henry J. Metz (i)              1,217,750            1.93%

Lawrence S. Benjamin (j)       1,001,771            1.57%

William D. Day (k)                25,000               *

Robert L. Fishbune (l)           125,000               *

Patrick J. O'Dea (m)              35,000               *

<PAGE>  26

All directors and             10,732,793           16.54%
executive officers
as a group (b)(g)

_________________
*  Less than 1%

(a)  The holdings of all of the stockholders listed in this table
     may be diluted by the exercise of warrants set forth in footnotes
     (b), (c) and (e) below or options which, under employment
     arrangements and stock option plans approved by SFAC and SFC,
     may be granted to certain employees.  The Stock Option Plan
     makes available to certain operating company employees and
     headquarter employees options to purchase 5,852,917 shares of
     Common Stock.

(b)  Acadia's shares of Common Stock include shares owned by FWHY-
     Coinvestments VII Partners, L.P. ("FWHY"), SFC Partners,
     L.P. ("SFCP") and SFC Partners II, L.P. ("SFCII"), parties
     related to Acadia.  Acadia's shares of Common Stock also
     include 3,467,002 shares of Common Stock issuable upon the
     exercise of 8,775 Warrants issued by SFAC in favor of Acadia
     pursuant to a Warrant Agreement dated June 27, 1997.  See
     "Item 13 - Certain Relationships and Related Transactions."
     The general partner of Acadia is Acadia FW Partners, L.P.
     ("Acadia FW"), the managing general partner of which is
     Acadia MGP, Inc. ("Acadia MGP"), a corporation controlled by
     J. Taylor Crandall.  In addition, Mr. Crandall controls
     Group 31, Inc., the general partner of each of FWHY, SFCP
     and SFCII.  Therefore, Acadia FW and Acadia MGP may be
     deemed to beneficially own the shares of Common Stock held
     by Acadia, SFCP, SFCII and FWHY.  Mr. Scotto is a limited
     partner of SFCII and disclaims beneficial ownership of the
     shares of Common Stock held by SFCII.  The address of Acadia
     FW. Acadia MGP, FWHY, SFCP, SFCII and Mr. Crandall is 201
     Main Street, Fort Worth, Texas  76102.

(c)  Keystone's shares of Common Stock include 3,467,002 shares
     of Common Stock issuable upon the exercise of 8,775 Warrants
     issued by SFAC in favor of Keystone pursuant to a Warrant
     Agreement dated June 27, 1997.  See "Item 13-Certain
     Relationships and Related Transactions."  Keystone is
     controlled by Robert M. Bass.  As such, Mr. Bass may be
     deemed to beneficially own the shares of Common Stock held
     by Keystone.  The address of Mr. Bass and Keystone is 201
     Main Street, Fort Worth, Texas  76102.

(d)  The parent entity of Artal Luxembourg S.A. is Artal Group
     S.A., a Luxembourg company.

(e)  Mr. Haas' shares of Common Stock include 101,011 shares
     owned by HWP.  Specialty Subsidiary Partners, 25,253 shares
     owned by HWP Specialty Subsidiary Partners II, and 1,000,000
     shares owned by the Haas Family Long-Term Trust.  Mr. Haas'
     shares of Common Stock also include 770,445 shares of Common
     Stock issuable upon the exercise of 1,950 Warrants issued by SFAC
     in favor of Mr. Haas pursuant to a Warrant Agreement dated 
     September 19, 1997.  See "Item 13 - Certain Relationships and
     Related Transactions."  The shares owned by HWP Specialty 
     Subsidiary Partners and HWP Specialty Subsidiary Partners II
     also are beneficially owned by Mr. Douglas Wheat.

(f)  Union Bank of Switzerland owns indirectly 100% of the
     capital stock of UBS Capital LLC.

(g)  The following entities hold shares of Common Stock:  DLJ
     Merchant Banking Partners, L.P. ("DLJMBP"); DLJ
     International Partners, C.V. ("DLJIP"); DLJ Offshore
     Partners, C.V. ("DLJOP"); DLJ Merchant Banking Funds, Inc.
     ("DLJMBF"); DLJ First ESC L.L.C. ("DLJESC"), an "employee
     securities corporation" (as defined in the Investment
     Company Act of 1940) formed to hold securities of employees

<PAGE>   27

     of DLJMBP, DLJIP, DLJOP and DLJESC); and Donaldson, Lufkin &
     Jenrette Securities Corporation (collectively, the "DLJ
     Entities"). Except for his allocable portion of the shares
     held by DLJESC, Mr. Nathanson disclaims beneficial ownership
     of the shares of Common Stock held by the DLJ Entities.

(h)  Mr. Wheat's shares of Common Stock include 101,011 shares
     owned by HWP Specialty Subsidiary Partners and 25,253 shares
     owned by HWP Specialty Subsidiary Partners II, which also
     are beneficially owned by Mr. Robert B. Haas and 150,000
     shares owned by the Carrol Wheat Jr. Children's Trust, for
     which Mr. Wheat serves as a trustee.

(i)  Mr. Metz's shares of Common Stock include 185,000 shares
     that Mr. Metz has the right to acquire upon the exercise of
     options.

(j)  Mr. Benjamin's shares of Common Stock include 925,000 shares
     that Mr. Benjamin has the right to acquire upon the exercise
     of options.

(k)  Mr. Day's shares of Common Stock include 25,000 shares that Mr. Day
     has the right to acquire upon the exercise of options.

(l)  Mr. Fishbune's shares of Common Stock include 125,000 shares
     that Mr. Fishbune has the right to acquire upon the exercise of
     of options.

(m)  Mr. O'Dea's shares of Common Stock include 35,000 shares that
     Mr. O'Dea has the right to acquire upon the exercise of options.


Item 13.   Certain Relationships and Related Transactions

Stockholders' Agreement

Simultaneously with the closing of the Acquisition, Haas Wheat,
Acadia, Keystone, UBS Capital, Artal Luxembourg S.A. and DLJMBP
(in some cases acting through affiliates) (collectively, with
certain of their affiliates, the "Principal Stockholders")
acquired Common Stock of SFAC at a price of $0.726703211 per
share.  On August 16, 1993, the Principal Stockholders entered
into a stockholders' agreement governing the relationships among
such stockholders (the "Stockholders' Agreement"). Subsequent
transferees of the Common Stock that are affiliates of the
Principal Stockholders or members of management have also agreed
to be bound by the Stockholders' Agreement.  The Stockholders'
Agreement imposes on the parties thereto certain restrictions and
conditions on the transfer of Common Stock, subject to certain
exceptions.  The Stockholders' Agreement provides the parties
with the right to participate in certain sales of Common Stock by
other parties.  The parties to the Stockholders' Agreement were
granted certain preemptive rights with respect to issuance of
Common Stock by SFAC and the right, in certain circumstances, to
have their Common Stock registered for public sale under the
Securities Act of 1933.  The Stockholders' Agreement also sets
forth provisions relating to corporate governance of SFAC.
Pursuant to the Stockholders' Agreement, Acadia has the right to nominate
three Directors, Keystone has the right to nominate two Directors, Haas Wheat
has the right to nominate two Directors, and UBS Capital, Artal Belgium S.A.
and DLJMBP each have the right to nominate one Director.  Under certain
conditions Acadia and Keystone can increase the number of
Directors they can nominate.

<PAGE>  28

Certain Transactions with Stockholders of SFAC

Certain of the Principal Stockholders and their affiliates were
paid financial advisory fees by the Company in 1998 pursuant to
financial advisory agreements with the Company.  In 1998, the
Board of Directors of SFC extended the terms of the financial
advisory agreements between SFC and each of Haas Wheat, Penobscot
and Keystone for one year.  In 1998, SFC paid Haas Wheat an
annual fee of $700,000, Penobscot an annual
fee of $200,000 and Keystone an annual fee of $100,000.  See
"Item 11 -Executive Compensation -Compensation Committee Interlocks
and Insider Participation in Compensation Decisions."

In November, 1996, SF Leasing L.L.C. (of which Acadia and
Keystone each owns a 45% interest and Haas Wheat owns a 10%
interest) purchased from Metz all of the equipment at a
manufacturing facility for $3,222,000 (which price was based on
the appraised value of such equipment), and leased such equipment
back to Metz in a transaction that was deemed by the parties to
be equivalent to an arms length transaction.  In September 1998,
SF Leasing, L.L.C. resold to Metz all of the equipment at that
manufacturing facility for $3,013,381. During 1998, SF Leasing
L.L.C. received $614,439 in rental payments from Metz.  The Board
of Directors of the Company determined that the foregoing
transactions were on terms no less favorable to the Company and
Metz than could otherwise have been obtained by the Company and
Metz in a transaction with an unaffiliated third party.

In December 1998, the Company retained Donaldson, Lufkin and
Jenrette Securities Corporation ("DLJ", an affiliate of DLJMBP)
to serve as the Company's financial advisor in connection with
its proposed sale of H&M. Upon completion of the sale of H&M, the
Company will pay DLJ approximately $1,600,000 as compensation for
such financial advisory services.

In March 1998, the Company paid DLJ $5,092,000 in connection with
the Company's refinancing of its Revolving Credit Facility and
Term Loan Facility.  DLJ acts as the Syndication Agent and
Collateral Agent under both Loan Agreements.  In 1998, the
Company paid DLJ a $100,000 retainer in connection with the
Company's currently outstanding Exchange Offers.


Tax Sharing Agreement

SFAC and SFC have entered into a tax sharing agreement pursuant
to which SFC agreed to pay to SFAC its pro rata share of SFAC's
consolidated income tax liability.  SFC and each of its
subsidiaries are also parties to a tax sharing agreement pursuant
to which each such subsidiary has agreed to pay to SFC its pro
rata share of SFC's consolidated income tax liability.

<PAGE>  29

                              PART IV

Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1)    Financial Statements

     Reference is made to the information set forth in Part II,
     Item 8 of this Report, which information is incorporated
     herein by reference.

(a)(2)    Financial Statement Schedules

     All schedules for which provision is made in the applicable
     accounting regulations of the Securities and Exchange
     Commission have been omitted because they are not required
     under the related instructions, are not applicable, or the
     information has been provided in the consolidated financial
     statements, the notes thereto or the related financial statement
     schedule.


(b)       Reports on Form 8-K

     The following Reports on Form 8-K were filed by
     the Company during the fourth quarter of 1998 and
     the first quarter of 1999:

     (1)  A Current Report on Form 8-K dated October
          14, 1998 was filed under Item 5 - Other
          Events and Item 7 - Exhibits:  Announcement
          of execution of definitive agreements to
          acquire Archway and of commencement of the
          Exchange Offers.

     (2)  A Current Report on Form 8-K dated October
          26, 1998 was filed under Item 5 - Other
          Events: Announcement of the completion of the
          acquisition of Archway.

     (3)  A Current Report on Form 8-K dated March 10, 1999 was
          filed under Item 5 - Other Events and Item 7 - Exhibits:
          Announcement of execution of definitive agreement to sell H&M.


(c)        Exhibits

     Exhibit
     Number    Description of Document
    -------    ------------------------

     3.1       Amended and Restated Certificate of
               Incorporation of SFAC.  (Incorporated by
               reference to Exhibit 3.1 to SFAC's
               Report on Form 10-Q for the Quarter
               ended June 30, 1997)

     3.2       Amended and Restated By-Laws of SFAC.
               (Incorporated by reference to Exhibit
               3.2 to SFAC's Report on Form 10-K for
               the year ended December 31, 1994)

     4.1       Indenture, dated as of August 16, 1993,
               between SFAC and United States Trust
               Company of New York, as Trustee
               ("Trustee"), governing the 13% Senior
               Secured Discount Debentures due 2005.
               (Incorporated by reference to Exhibit
               4.1 to SFAC's Registration Statement on
               Form S-4 (Registration No. 33-68958))

<PAGE>  30

     4.2       Amendment No. 1 to the Indenture
               governing the 13% Senior Secured
               Discount Debentures, dated as of October
               28, 1994, between SFAC and the Trustee.
               (Incorporated by reference to Exhibit
               10.49 to SFAC's Report on Form 10-Q for
               the Quarter ended September 30, 1994)

     4.3       Registration Rights Agreement, dated as
               of August 16, 1993, among SFAC, SFC and
               the purchasers named therein.
               (Incorporated by reference to Exhibit
               4.3 to SFAC's Registration Statement on
               Form S-4 (Registration No. 33-68958))

     4.4       Form of 11% Senior Subordinated Discount Debentures
               issued by SFAC.  (Incorporated by reference to Exhibit 10.27
               to SFAC's Registration Statement on Form S-4 (Registration
               No. 33-68958))
     
     4.5       Form of Amendment No. 1, dated as of
               October 28, 1994, to the 11% Senior
               Subordinated Discount Debentures issued
               by SFAC.  (Incorporated by reference to
               Exhibit 10.50 to SFAC's Report on Form
               10-Q for the Quarter ended September 30,
               1994)

     4.6       Indenture, dated as of August 16, 1993,
               between SFC and the Trustee governing
               the 10 1/4% Senior Notes due 2001.
               (Incorporated by reference to Exhibit
               10.28 to SFC's Registration Statement on
               Form S-4 (Registration No. 33-68956))

     4.7       Amendment No. 1 to the Indenture
               governing the 10 1/4% Senior Notes due
               2001, dated as of October 28, 1994,
               between SFC and the Trustee.
               (Incorporated by reference to Exhibit
               10.47 to SFAC's Report on Form 10-Q for
               the Quarter ended September 30, 1994)

     4.8       Indenture, dated as of August 16, 1993,
               between SFC and the Trustee governing
               the 11 1/4% Senior Subordinated Notes
               due 2003.  (Incorporated by reference to
               Exhibit 10.29 to SFAC's Registration
               Statement on Form S-4 (Registration No.
               33-68958))

     4.9       Amendment No. 1 to the Indenture
               governing the 11 1/4% Senior
               Subordinated Notes due 2003, dated as of
               October 28, 1994, between SFC and the
               Trustee.  (Incorporated by reference to
               Exhibit 10.48 to SFAC's Report on Form
               10-Q for the Quarter ended September 30,
               1994)

     4.10      Indenture, dated as of July 17, 1995,
               between SFC and the Trustee governing
               the 11 1/8% Senior Notes due 2002.
               (Incorporated by reference to Exhibit to
               4.6 SFAC's Report on Form 10-Q for the
               Quarter ended June 30, 1995)

     4.11      Registration Rights Agreement, dated as
               of July 17, 1995, among SFC and the
               initial purchasers of the 11 1/8% Senior
               Notes due 2002 issued by SFC.
               (Incorporated by reference to Exhibit
               4.7 to SFC's Report on Form 10-Q for the
               Quarter ended June 30, 1995)

     10.1      Stock Purchase Agreement, dated as of
               August 9, 1993, among the sellers party
               thereto and SFC.  (Incorporated by
               reference to Exhibit 10.1 to SFAC's
               Registration Statement on Form S-4
               (Registration No. 33-68958))

<PAGE>  31

     10.2      Amendment No. 1, dated as of August 16,
               1993, to the Stock Purchase Agreement
               among the sellers party thereto and SFC.
               (Incorporated by reference to Exhibit
               10.2 to SFAC's Registration Statement on
               Form S-4 (Registration No. 33-68958))

     10.3      Security Escrow Agreement, dated as of
               August 16, 1993, by and among the
               sellers party thereto and SFC.
               (Incorporated by reference to Exhibit
               10.3 to SFAC's Registration Statement on
               Form S-4 (Registration No. 33-68958))

     10.4      Purchase Agreement, dated as of August
               16, 1993, among SFAC, SFC and the
               purchasers named therein.  (Incorporated
               by reference to Exhibit 10.4 to SFAC's
               Registration Statement on Form S-4
               (Registration No. 33-68958))

     10.5      Securities Purchase Agreement, dated as
               of August 16, 1993, among SFAC and the
               purchasers named therein.  (Incorporated
               by reference to Exhibit 10.5 to SFAC's
               Registration Statement on Form S-4
               (Registration No. 33-68958))

     10.6      Amendment No. 1 to Securities Purchase
               Agreement, dated as of December 20,
               1993, among SFAC and the purchasers
               named therein.  (Incorporated by
               reference to Exhibit 10.6 to SFAC's
               Report on Form 10-K for the year ended
               December 31, 1993)

     10.7      Lock-Up Letter, dated as of August 16,
               1993, among SFAC and the holders of the
               Subordinated Debentures named therein.
               (Incorporated by reference to Exhibit
               10.6 to SFAC's Registration Statement on
               Form S-4 (Registration No. 33-68958))

     10.8      Stockholders Agreement, dated as of
               August 16, 1993, among SFAC and certain
               of its stockholders.  (Incorporated by
               reference to Exhibit 10.7 to SFAC's
               Registration Statement on Form S-4
               (Registration No. 33-68958))

     10.9      Amendment No. 1, dated as of December
               20, 1993, to Stockholders Agreement
               among SFAC and certain of its
               stockholders.  (Incorporated by
               reference to Exhibit 10.9 to SFAC's
               Report on Form 10-K for the year ended
               December 31, 1993)

     10.10     Stockholders Agreement, dated as of
               August 16, 1993, among SFAC and its
               stockholders.  (Incorporated by
               reference to Exhibit 10.8 to SFAC's
               Registration Statement on Form S-4
               (Registration No. 33-68958))

     10.11     Amendment No. 1 to the Stockholders
               Agreement, dated as of August 19, 1994,
               among SFAC and its stockholders.
               (Incorporated by reference to Exhibit
               10.51 to SFAC's Report on Form 10-Q for
               the Quarter ended September 30, 1994)

     10.12     Registration Rights Agreement, dated as
               of August 16, 1993, among SFAC and the
               holders of the Subordinated Debentures
               named therein.  (Incorporated by
               reference to Exhibit 10.9 to SFAC's
               Registration Statement on Form S-4
               (Registration No. 33-68958))

     10.13     Financial Advisory Agreement, dated as
               of August 16, 1993, among SFAC, SFC and
               Penobscot.  (Incorporated by reference
               to Exhibit 10.10 to SFAC's Registration
               Statement on Form S-4 (Registration No.
               33-68758))

<PAGE>   32

     10.14     Financial Advisory Agreement, dated as
               of August 16, 1993, among SFAC, SFC and
               Keystone.  (Incorporated by reference to
               Exhibit 10.11 to the SFAC's Registration
               Statement on Form S-4 (Registration No.
               33-68958))

     10.15     Financial Advisory Agreement, dated as
               of August 16, 1993, among SFAC, SFC and
               Haas Wheat.  (Incorporated by reference
               to Exhibit 10.12 to SFAC's Registration
               Statement on Form S-4 (Registration No.
               33-68958))

     10.16     Financial Advisory Agreement, dated as
               of August 16, 1993, among SFAC, SFC and
               UBS Capital.  (Incorporated by reference
               to Exhibit 10.13 to SFAC's Registration
               Statement on Form S-4 (Registration No.
               33-68958))

     10.17     Financing Commitment Fee Agreement,
               dated as of August 16, 1993, among SFAC,
               SFC and Acadia.  (Incorporated by
               reference to Exhibit 10.14 to SFAC's
               Registration Statement on Form S-4
               (Registration No. 33-68958))

     10.18     Financing Commitment Fee Agreement,
               dated as of August 16, 1993, among SFAC,
               SFC and Keystone.  (Incorporated by
               reference to Exhibit 10.15 to SFAC's
               Registration Statement on Form S-4
               (Registration No. 33-68958))

     10.19     Financing Commitment Fee Agreement,
               dated as of August 16, 1993, among SFAC,
               SFC and UBS Capital.  (Incorporated by
               reference to Exhibit 10.16 to SFAC's
               Registration Statement on Form S-4
               (Registration No. 33-68958))

     10.20     Tax Sharing Agreement, dated as of
               August 16, 1993, among SFAC, SFC and
               certain subsidiaries of SFC.
               (Incorporated by reference to Exhibit
               10.17 to SFAC's Registration Statement
               on Form S-4 (Registration No. 33-68958))

     10.21     Tax Sharing Agreement, dated as of
               August 16, 1993, between SFAC and SFC.
               (Incorporated by reference to Exhibit
               10.18 to SFAC's Registration Statement
               on Form S-4 (Registration No. 33-68958))

     10.22     Corporate Services Agreement, dated as
               of June 30, 1994, between SFAC and SFC.
               (Incorporated by reference to Exhibit
               10.14 to SFC's Report on Form 10-K for
               the year ended December 31, 1994)

     10.23     Equity Investment Agreement, dated as of
               May 13, 1997, by and among SFAC, Acadia,
               Keystone and Haas Wheat.  (Incorporated
               by reference to Exhibit 10.93 to SFAC's
               Report on Form 10-Q for the Quarter
               ended June 30, 1997)

     10.24     Term Loan Agreement, dated as of March
               16, 1998, among SFC, various financial
               institutions, DLJ Capital Funding, Inc.,
               as syndication agent, and ABN Amro Bank
               N.V., as administrative agent.
               (Incorporated by reference to Exhibit
               10.24 to SFAC's Report on Form 10-K for
               the year ended December 31, 1997)


     10.25     Revolving Credit Agreement, dated as of
               March 16, 1998, among certain
               subsidiaries of SFC, various financial
               institutions, DLJ Capital Funding, Inc.,
               as syndication agent, and ABN Amro Bank
               N.V., as administrative agent.
               (Incorporated by reference to Exhibit
               10.25 to SFAC's Report on Form 10-K for
               the year ended December 31, 1997)

<PAGE>  33

     10.26     Pooling Agreement, dated as of November
               16, 1994, by and among Specialty Foods
               Finance Corporation ("SFFC"), SFC, as
               Master Servicer, and Chase Manhattan
               Bank ("Chase"), as Trustee (the "Pooling
               Agreement").  (Incorporated by reference
               to Exhibit 10.29 to SFAC's Report on
               Form 10-K for the year ended December
               31, 1994)

     10.27     Series 1994-1 Supplement to the Pooling
               Agreement, dated as of November 16,
               1994, by and among SFFC, SFC, as Master
               Servicer, and Chase, as Trustee.
               (Incorporated by reference to Exhibit
               10.30 to SFAC's Report on Form 10-K for
               the year ended December 31, 1994)

     10.28     Series 1996-1 Supplement to the Pooling
               Agreement, dated as of August 1, 1996,
               by and among SFFC, SFC, as Master
               Servicer, and Chase, as Trustee.
               (Incorporated by reference to Exhibit
               10.67 to SFAC's Report on Form 10-Q for
               the Quarter ended September 28, 1996)

     10.29     Amendment No. 1 Series to 1996-1
               Supplement, dated as of November 29,
               1996, by and among SFFC, SFC, as Master
               Servicer, and Chase, as initial VFC
               Certificate holder, and Chase, as
               Trustee.  (Incorporated by reference to
               Exhibit 10.34 to SFAC's Report on Form
               10-K for the year ended December 31,
               1996)

     10.30     Amendment No. 2 to Series 1996-1
               Supplement, dated as of December 13,
               1996, by and among SFFC, SFC, as Master
               Servicer, and Chase, as initial VFC
               Certificate holder, and Chase, as
               Trustee.  (Incorporated by reference to
               Exhibit 10.26 to SFC's Report on Form 10-
               K for the year ended December 31, 1996)

     10.31     Series 1997-1 Supplement to the Pooling
               Agreement, dated as of January 31, 1997,
               by and among SFFC, SFC, as Master
               Servicer, and Chase, as Trustee.
               (Incorporated by reference to Exhibit
               10.36 to SFAC's Report on Form 10-K for
               the year ended December 31, 1996)

     10.32     Series 1998-1 Certificate Purchase
               Agreement, dated as of March 31, 1998,
               by and among SFFC, SFC, as Master
               Servicer and Bankers Trust Company, as
               Agent.  (Incorporated by reference to
               Exhibit 10.78 to SFAC's Report on Form
               10-Q for the Quarter ended March 31,
               1998)

     10.33     Series 1998-1 Supplement, dated as of
               March 31, 1998, to the Pooling
               Agreement, dated as of November 16,
               1994, by and among SFFC, SFC, as Master
               Servicer, and Chase, as Trustee.
               (Incorporated by reference to Exhibit
               10.79 to SFAC's Report on Form 10-Q for
               the Quarter ended March 31, 1998)

     10.34     SFC Master Trust Amendment No. 5 to each
               of the Pooling Agreement and Receivables
               Sale Agreement and Amendment No. 1 to
               the Servicing Agreement.  (Incorporated
               by reference to Exhibit 10.80 to SFAC's
               Report on Form 10-Q for the Quarter
               ended March 31, 1998)

<PAGE>  34

     10.35     Amendment to Series 1998-1 Supplement,
               dated as of March 31, 1998, by and among
               SFFC, SFC, as Master Servicer, Chase, as
               Trustee, and Bankers Trust, as the sole
               VFC Certificate holder under that
               certain Certificate Purchase Agreement.
               (Incorporated by reference to Exhibit
               10.81 to SFAC's Report on Form 10-Q for
               the Quarter ended March 31, 1998)

     10.36     Performance Guaranty, dated as of March
               31, 1998, by and among SFC, as Master
               Servicer, in favor of SFFC.
               (Incorporated by reference to Exhibit
               10.82 to SFAC's Report on Form 10-Q for
               the Quarter ended March 31, 1998)

     10.37     Amended and Restated Receivables Sales
               Agreement, dated as of November 16,
               1994, by and among SFFC, SFC, as Master
               Servicer, and certain subsidiaries to
               SFC.  (Incorporated by reference to
               Exhibit 10.31 to SFAC's Report on Form
               10-K for the year ended December 31,
               1994)

     10.38     Servicing Agreement, dated as of
               November 16, 1994, by and among SFFC,
               SFC, as Master Servicer, and certain
               subsidiaries of SFC.  (Incorporated by
               reference to Exhibit 10.32 to SFAC's
               Report on Form 10-K for the year ended
               December 31, 1994)

     10.39     Amendment No. 1 to SFC Master Trust
               Pooling and Servicing Agreements, dated
               as of December 16, 1996, by and among
               SFFC, SFC, a Master Servicer, and Chase,
               as Trustee.  (Incorporated by reference
               to Exhibit 10.38 to SFAC's Report on
               Form 10-K for the year ended December
               31, 1996)

     10.40     Amendment No. 2 to SFC Master Trust
               Pooling Agreement, dated as of December
               27, 1996, by and among SFFC, SFC, as
               Master Servicer, and Chase, as Trustee.
               (Incorporated by reference to Exhibit
               10.40 to SFAC's Report on Form 10-K for
               the year ended December 31, 1996)

     10.41     Amendment No. 3 to SFC Master Trust
               Pooling Agreement, dated as of February
               24, 1997, by and among SFFC, SFC, as
               Master Servicer, and Chase, as Trustee.
               (Incorporated by reference to Exhibit
               10.41 to SFAC's Report on Form 10-K for
               the year ended December 31, 1996)

     10.42     Amendment No. 1 to Amended and Restated
               Receivables Sale Agreement, dated as of
               December 16, 1996, by and among SFFC,
               SFC, as Master Servicer, and certain
               subsidiaries of SFC.  (Incorporated by
               reference to Exhibit 10.42 to SFAC's
               Report on Form 10-K for the year ended
               December 31, 1996)

     10.43     Amendment No. 2 to Amended and Restated
               Receivables Sale Agreement, dated as of
               December 27, 1996, by and among SFFC,
               SFC, as Master Servicer, and certain
               subsidiaries of SFC.  (Incorporated by
               reference to Exhibit 10.43 to SFAC's
               Report on Form 10-K for the year ended
               December 31, 1996)

     10.44     Amendment No. 3 to Amended and Restated
               Receivables Sale Agreement, dated as of
               February 24, 1997, by and among SFFC,
               SFC, as Master Servicer, and certain
               subsidiaries of SFC.  (Incorporated by
               reference to Exhibit 10.44 to SFAC's
               Report on Form 10-K for the year ended
               December 31, 1996)

<PAGE>  35

     10.45*    Amended and Restated Executive
               Employment Agreement, dated as of March
               15, 1999, among SFAC, SFC and Lawrence
               S. Benjamin.

     10.46     Executive Securities Purchase Agreement,
               dated as of December 15, 1994, among
               Lawrence S. Benjamin, SFAC and SFC.
               (Incorporated by reference to Exhibit
               10.58 to SFAC's Report on Form 10-K for
               the year ended December 30, 1995)

     10.47     Stock Purchase Agreement, dated as of
               June 15, 1995, between Lawrence S.
               Benjamin and SFAC.  (Incorporated by
               reference to Exhibit 10.59 to SFAC's
               Report on Form 10-K for the year ended
               December 30, 1995)

     10.48     Securities Purchase Agreement, dated as
               of August 1, 1995, between Lawrence S.
               Benjamin and SFAC.  (Incorporated by
               reference to Exhibit 10.60 to SFAC's
               Report on Form 10-K for the year ended
               December 30, 1995)

     10.49     Amendment to Securities Purchase
               Agreement, dated as of January 2, 1996,
               between Lawrence S. Benjamin and SFAC.
               (Incorporated by reference to Exhibit
               10.61 to SFAC's Report on Form 10-K for
               the year ended December 30, 1995)

     10.50*    Amended and Restated Executive
               Employment Agreement, dated as of March
               15, 1999, among SFAC, SFC and Robert L. Fishbune.

     10.51*    Executive Employment Agreement, dated as
               of July 15, 1997, among SFC, Mother's,
               MCC-DSD Holdings, Inc. and Patrick J. O'Dea.

     10.52*    Severance Agreement, dated as of August
               27, 1997, among SFC, H&M and William D. Day.

     10.53     Stock Purchase Agreement dated as of
               June 15, 1995, between Henry J. Metz and
               SFAC.  (Incorporated by reference to
               Exhibit 10.46 to SFC's Registration
               Statement on Form S-4 (Registration No.
               33-94836))

     10.54     Form of Executive Securities Purchase
               Agreement among certain named executive
               officers, respectively, and the
               Principal Stockholders, SFAC and SFC
               (with schedule showing differing
               material terms for each such officer's
               agreement).  (Incorporated by reference
               to Exhibit 10.40 SFAC's Report on Form
               10-K for the year ended December 31, 1993)

     10.55*    Mother's Cake & Cookie Co. Amended and
               Restated Supplemental Long Term
               Incentive Compensation Plan

     10.56     Stock Option Agreement, dated as of
               October 27, 1997, between SFAC and
               Lawrence S. Benjamin.  (Incorporated by
               reference to Exhibit 10.52 to SFAC's
               Report on Form 10-K for the year ended
               December 31, 1997)

     10.57     Deferred Bonus Agreement, dated as of
               October 27, 1997, between SFC and
               Lawrence S. Benjamin.  (Incorporated by
               reference to Exhibit 10.53 to SFAC's
               Report on Form 10-K for the year ended
               December 31, 1997)
<PAGE>  36

     10.58     Special Bonus Agreement, dated December
               21, 1997, between SFC and Lawrence S.
               Benjamin.  (Incorporated by reference to
               Exhibit 10.54 to SFAC's Report on Form
               10-K for the year ended December 31, 1997)

     10.59*    Retention Bonus Agreement, dated March
               15, 1999, between SFC and Lawrence S.
               Benjamin.

     10.60*    Participation Award Agreement, dated as of March
               15, 1999 between Mother's and Lawrence S.
               Benjamin. 

     10.61     Deferred Bonus Agreement, dated July 15,
               1997, between SFC and Robert L.
               Fishbune.  (Incorporated by reference to
               Exhibit 10.55 to SFAC's Report on Form
               10-K for the year ended December 31, 1997)

     10.62*    Retention Bonus Agreement, dated March
               15, 1999, between SFC and Robert L. Fishbune.

     10.63*    Deferred Bonus Agreement, dated June 16,
               1998, between Boudin and Larry Strain.

     10.64*    Deferred Bonus Agreement, dated July 15, 1997
               between H&M and William D. Day.

     10.65*    Deferred Bonus Agreement, dated July 15,
               1997, between Mother's and Patrick J. O'Dea.

     10.66*    Retention Bonus Agreement, dated March
               15, 1999, between Mother's and Patrick J. O'Dea.

     10.67*    Retention Bonus Agreement, dated March
               15, 1999, between SFC and David E. Schreibman.
     
     10.68     Deferred Bonus Agreement, dated July 15,
               1997, between Metz and Henry J. Metz.
               (Incorporated by reference to Exhibit
               10.57 SFAC's Report on Form 10-Q for the
               Quarter ended March 31, 1998)

     10.69*    Form of Letter regarding Deferred Bonus
               Agreements listed as Exhibits 10.57, 10.61,
               10.65 and 10.68.

     10.70*    Divestiture Award Agreement, dated April
               8, 1998 by and between H&M and William D. Day.

     10.71     Divestiture Award Agreement, dated
               October 27, 1997, between Stella Foods,
               Inc. ("Stella") and Lawrence S.
               Benjamin. (Incorporated by reference to
               Exhibit 10.59 to SFAC's Report on Form
               10-K for the year ended December 31, 1997)

     10.72     Divestiture Award Agreement, dated July
               15, 1997, between Stella and Robert L.
               Fishbune. (Incorporated by reference to
               Exhibit 10.60 to SFAC's Report on Form
               10-K for the year ended December 31, 1997)

     10.73*    Divestiture Award Agreement, dated March
               15, 1999, between Metz and Robert L.
               Fishbune.

<PAGE>  37

     10.74     Divestiture Award Agreement, dated July
               15, 1997, between Metz and Henry J.
               Metz.   (Incorporated by reference to
               Exhibit 10.65 to SFAC's Report on Form
               10-K for the year ended December 31,
               1997)

     10.75*    Divestiture Award Agreement, dated March
               15, 1999, between H&M and Lawrence S. Benjamin.

     10.76*    Divestiture Award Agreement, dated March
               15, 1999, between Metz and Lawrence S. Benjamin.

     10.77*    Divestiture Award Agreement, dated March
               15, 1999, between H&M and Robert L. Fishbune.

     10.78*    Divestiture Award Agreement, dated March 15,
               1999, between Mother's and Robert L. Fishbune.

     10.79*    Divestiture Award Agreement, dated March
               15, 1999, between Boudin and Robert L. Fishbune.

     10.80*    Divestiture Award Agreement, dated
               October 19, 1998, between H&M and David E.
               Schreibman

     10.81*    Divestiture Award Agreement, dated March
               15, 1999, between Metz and David E. Schreibman

     10.82*    Divestiture Award Agreement, dated March
               15, 1999, between Mother's and David E.
               Schreibman

     10.83*    Divestiture Award Agreement, dated March
               15, 1999, between Boudin and David E.
               Schreibman

     10.84     Amended and Restated SFAC 1994 Stock
               Option Plan.  (Incorporated by reference
               to Exhibit 10.39 to SFAC's Report on
               Form 10-K for the year ended December 31, 1994)

     10.85     Amended and Restated Metz Baking Company 
               Pension Plan for Non-Union Employees.
               (Incorporated by reference to Exhibit 10.52 to SFAC's
               Report on Form 10-K for the year ended December 31, 1994)

     10.86     Amended and Restated Mother's Cake & Cookie Co.
               Retirement Plan. (Incorporated by reference to Exhibit
               10.51 to SFAC's Report on Form 10-K for the year
               ended December 31, 1994.)

     10.87*    Coordination Document for the Metz-Mother's Cake %
               Cookie Co. Consolidated Pension Plan

     10.88     Stock Purchase Agreement, dated as of
               November 26, 1996, between SFC and B
               Companies Acquisition Corporation.
               (Incorporated by reference to Exhibit
               10.80 to SFAC's Report on Form 10-K for
               the year ended December 31, 1996)

<PAGE>  38

     10.89     Stock Purchase Agreement, dated as of
               November 7, 1997, by and among SFC,
               Saputo Group Inc. and Saputo
               Acquisition, Inc.  (Incorporated by
               reference to Exhibit 10.94 to SFAC's
               Report on Form 8-K dated as of December 22, 1997)

     10.90     Stock Purchase Agreement, dated as of October 13,
               1998, by and among SFC, Archway and the Archway
               Shareholders.  (Incorporated by reference to Exhibit 10.83
               SFAC's Report on Form 8-K dated as of October 26, 1998)

     10.91*    Form of 1998 Annual Bonus Plan

     10.92*    Form of 1999 Annual Bonus Plan

     21.1*     Subsidiaries of SFAC

     27*       Financial Data Schedule


* Filed herewith.

<PAGE>  39
                               SIGNATURES


     Pursuant to the requirements of Section 13 or 15
(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.

                                     SPECIALTY FOODS ACQUISITION
                                     CORPORATION



                                     By:  /s/ LAWRENCE S. BENJAMIN     
                                             ------------------------
                                             Lawrence S. Benjamin
                                             President and Chief Executive
                                             Officer

                                     March 31, 1999


     Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the
registrant and in the capacities and on the dates
indicated.

Signature and Title               Capacity              Date
-------------------          -------------------   ---------------         
                                            
/s/ LAWRENCE S. BENJAMIN     Principal Executive   March 31, 1999
------------------------     Officer and Director
Lawrence S. Benjamin
President and Chief
Executive Officer


/s/ ROBERT L. FISHBUNE       Principal Financial   March 31, 1999
----------------------      and Accounting Officer
Robert L. Fishbune    
Vice President and
Chief Financial Officer

<PAGE>  41

Signature and Title             Capacity              Date
-------------------          ------------------    ---------------
                                            
/s/ ROBERT B. HAAS           Chairman of the        March 31, 1999
------------------          Board of Directors
Robert B. Haas        


/s/ THOMAS J.BALDWIN          Director              March 31, 1999
--------------------
Thomas J. Baldwin


/s/ J. TAYLOR CRANDALL        Director              March 31, 1999
----------------------
J. Taylor Crandall


/s/ JERRY M. MEYER            Director              March 31, 1999
------------------
Jerry M. Meyer


/s/ ANDREW J. NATHANSON       Director              March 31, 1999
-----------------------
Andrew J. Nathanson


/s/ DAVID G. OFFENSEND        Director              March 31, 1999
----------------------
David G. Offensend


/s/ MARC C. PARTICELLI        Director              March 31, 1999
----------------------
Marc C. Particelli


/s/ ANTHONY P. SCOTTO         Director              March 31, 1999
---------------------
Anthony P. Scotto


/s/ DOUGLAS D. WHEAT          Director              March 31, 1999
---------------------
Douglas D. Wheat

<PAGE>  42
                   INDEX TO FINANCIAL INFORMATION


                                                            Page
                                                            ----
  Independent Auditors' Report                               F-2
  Consolidated Balance Sheets -
     December 31, 1998 and 1997                              F-3
  Consolidated Statements of Operations -
     Years ended December 31, 1998, 1997, and 1996           F-4
  Consolidated Statements of Changes in Stockholders'
     Equity-Years ended December 31, 1998, 1997, and 1996    F-5
  Consolidated Statements of Cash Flows -
     Years ended December 31, 1998, 1997, and 1996           F-6
  Notes to Financial Statements                          F-7 to F-24

                                                Schedule
                                               ---------

  Financial Statement Schedule:

   Condensed Financial Information of Registrant    I   F-25 to F-27


All other financial statement schedules are omitted as not
applicable or because the required information is presented
in the consolidated financial statements or related notes.





<PAGE>  F-1

                        INDEPENDENT AUDITORS' REPORT



The Board of Directors
Specialty Foods Acquisition Corporation:

We have audited the accompanying consolidated balance sheets
of Specialty Foods Acquisition Corporation and Subsidiaries
as of December 31, 1998 and 1997 and the related
consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the years
in the three-year period ended December 31, 1998.  In
connection with our audits of the financial statements, we
also have audited the related financial statement schedule.
These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these
consolidated financial statements and financial statement
schedule based on our audits.

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

In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Specialty Foods Acquisition
Corporation and Subsidiaries as of December 31, 1998 and
1997 and the results of their operations and their cash
flows for each of the years in the three-year period ended
December 31, 1998 in conformity with generally accepted
accounting principles.  Also in our opinion, the related
financial statement schedule when considered in relation to the
basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information
set forth therein.


                                        KPMG LLP


Chicago, Illinois
March 19, 1999
                              
<PAGE>   F-2
                              
      SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
                              
                   Consolidated Balance Sheets
                              
                         (In thousands)

                                                December 31,
                                            --------------------
                                             1998          1997
                                            ------        -------
           Assets                                              
Current assets:                                     
  Cash and cash equivalents              $    5,881    $   234,267
  Accounts receivable, net                   19,327         15,504
  Inventories                                23,366         20,188
  Net assets of discontinued operations      86,632         65,192
  Other current assets                        7,234          7,157
                                         ----------     ----------
          Total current assets              142,440        342,308
                                                    
Property, plant, and equipment, net         234,944        146,023
Intangible assets, net                      113,438            842
Other noncurrent assets                      43,573         28,334
                                         ----------     ----------
          Total assets                   $  534,395    $   517,507
                                         ==========    ===========

    
    Liabilities and Stockholders' Equity                
                                                    
Current liabilities:                                
  Current maturities of long-term debt   $    3,450    $     2,561
  Accounts Payable                           37,779         41,925
  Accrued expenses                           80,741         80,906
                                         ----------     ----------
          Total current liabilities         121,970        125,392
                                                    
Long-term debt                            1,250,198      1,134,355
Other noncurrent liabilities                 31,355         30,645
                                         ----------     ----------
          Total liabilities               1,403,523      1,290,392
                                         ----------     ----------           
Redeemable preferred stock                   19,500         19,500
                                                    
Stockholders' equity:                               
  Common stock: par value $0.01;                    
    authorized 100,000 shares;               
    issued 64,648 shares                        646            646
  Additional paid-in capital                 42,750         42,750
  Accumulated deficit                      (930,659)      (834,416)
  Cost of common shares in treasury          (1,365)        (1,365)
                                         ----------     ----------
          Total stockholders' equity       (888,628)      (792,385)
                                         ----------     ----------
                                                    
          Total liabilities and
           stockholders' equity          $  534,395    $   517,507
                                         ==========    ===========

See accompanying notes to consolidated financial statements.

<PAGE>   F-3

                              
           SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
                              
                  Consolidated Statements of Operations
                              
                   (In thousands, except per share data)


                                          Years ended December  31,
                               --------------------------------------------
                                           1998          1997         1996
                                          -----         -----        -----
                                                
Net sales                             $ 742,315     $ 718,105    $ 705,996
Cost of sales                           329,567       321,851      328,422
                                      ---------     ---------    ---------
   Gross profit                         412,748       396,254      377,574
                                      ---------     ---------    ---------   
Operating expenses:                              
   Selling, distribution,general and
      administrative expenses           380,766       367,996      350,431
   Amortization of intangibles            1,471           900        7,032
   Goodwill write-down                        -             -      203,304
                                      ---------     ---------    ---------
                                        382,237       368,896      560,767
                                      ---------     ---------    ---------
     Operating profit (loss)             30,511        27,358     (183,193)
                                                 
Other:                                           
  Interest expense, net                 133,961       134,546      132,373
  Other expense, net                      3,129         4,729        9,132
                                      ---------     ---------    ---------
   Loss before income taxes            (106,579)     (111,917)    (324,698)
                                                 
Provision (benefit) for income taxes       (613)          380        1,093
                                      ---------     ---------    ---------
                                                 
   Loss from continuing operations     (105,966)     (112,297)    (325,791)
                                                
Discontinued operations:                         
  Earnings (loss)                        10,324        31,404     (146,273)
  Gain (loss) on disposal                  (601)      133,130      (14,514)
                                      ---------     ---------     ---------
                                          9,723       164,534     (160,787)
                                      ---------     ---------     ---------
   Income (loss) before    
      extraordinary items               (96,243)       52,237     (486,578)
                                                 
Extraordinary items                           -        (5,714)           -
                                      ---------     ---------     ---------
                                                 
          Net income (loss)           $ (96,243)     $ 46,523   $ (486,578)
                                      =========     =========     =========
                                                 
Earnings (loss) per basic                        
and diluted share:
   From continuing operations         $   (1.69)     $  (1.78)  $    (5.12)
   From discontinued operations            0.16          2.61        (2.53)
   Extraordinary items                        -         (0.09)           -
                                      ---------      ---------    ---------
   Net income (loss)                  $   (1.53)     $   0.74   $    (7.65)
                                      =========      =========    =========
   Weighted average shares
    outstanding-basic and diluted        62,768        63,097       63,638
                                      =========      =========    =========


See accompanying notes to consolidated financial statements.
                              

<PAGE>    F-4

<TABLE>
<CAPTION>

         SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
                              
         Consolidated Statements of Changes in Stockholders' Equity
                              
                            (In thousands)
                                                              
                                    Common Stock    Additional                  Cumulative    Treasury Stock
                                  ----------------   paid-in      Accumulated   translation   --------------  
                                  Shares    Amount   Capital        deficit     adjustment   Shares   Amount
                                  ------    ------   --------      ---------     ----------  ------   ------
<S>                               <C>       <C>      <C>           <C>           <C>         <C>      <C> 
                                                                               
Balance at December 31, 1995      64,648    $  646   $ 42,750    $  (394,361)    $  (837)      174    $    (126)  
                                                             
Shares issued                          -         -          -              -           -      (159)         116
Purchase of treasury stock, net        -         -          -              -           -     1,144         (836)
Cumulative translation adjustment      -         -          -              -         837         -            -
Net loss                               -         -          -       (486,578)          -         -            -
                                  ------     ------   -------     ----------     -------     ------     ------- 
                                
Balance at December 31, 1996      64,648    $  646   $ 42,750     $ (880,939)    $     -      1,159    $   (846)
                                                               
Purchase of treasury stock, net        -         -          -              -           -        721        (519)
Net income                             -         -          -         46,523           -         -            -
                                  -------    ------   -------      ---------     -------     ------    --------
                                
Balance at December 31, 1997      64,648    $  646   $ 42,750     $ (834,416)    $     -      1,880    $ (1,365)
                                   
Net loss                               -         -          -        (96,243)          -          -          -
                                  -------    ------   -------     ----------     -------     ------    --------
                                                                                       
Balance at December 31, 1998      64,648    $  646   $ 42,750     $ (930,659)    $     -      1,880    $ (1,365)
                                  =======    ======   =======     ==========     =======     ======    ========       
                                                     
</TABLE>
                              
                              
See accompanying notes to consolidated financial statements.
                              
<PAGE>   F-5

                              
           SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES
                              
                 Consolidated Statements of Cash Flows
                              
                            (In thousands)

                                                  Years ended December 31,
                                                  ------------------------
                                               1998          1997       1996
                                               ----          ----       ----
Cash flows from operating activities:         
 Loss from continuing operations          $ (105,966)   $ (112,297) $ (325,791)
 Adjustments to reconcile to net cash
 from continuing operating activities:
  Depreciation and amortization               27,204        21,087      27,868
  Debt issuance cost amortization             10,109         6,120       6,081
  Accretion of interest                       48,601        43,148      38,285
  Write-down of goodwill                           -             -     203,304
  Loss on disposal of property, plant,
   and equipment, net                            436         1,521       5,747
  Changes in assets and liabilities, net of
    effects from acquisitions of businesses:
     Accounts receivable                       8,916         6,241      14,612
     Inventories                               1,338           398         214
     Prepaid expenses and other assets           274         1,576      (5,987)
     Accounts payable                         (8,478)       (9,093)      2,064
     Accrued expenses and other              (15,551)      (14,785)     (1,756)
                                           ---------     ---------    ---------
  Net cash used by continuing                
    operating activities                     (33,117)      (56,084)    (35,359)
  Net cash provided (used)                         
    by discontinued operations               (11,717)      (41,564)     27,055
                                           ---------     ---------    ---------
Net cash used by operating activities        (44,834)      (97,648)     (8,304)
                                          
Cash flows from investing activities:
 Acquisitions of businesses, net of 
   cash acquired                            (135,035)            -           -
 Net proceeds from divestitures 
   of businesses                                   -       384,096      69,333
 Capital expenditures                        (91,445)      (36,071)    (25,218)
 Cash restricted for the purchase of
   property, plant and equipment              (8,017)            -           -
 Proceeds from sale leaseback, net                 -             -      13,370
 Other                                        (5,061)       (3,281)       (727)
                                           ---------      ---------    --------
Net cash provided (used) by 
     investing activities                   (239,558)      344,744      56,758
                                                   
Cash flows from financing activities:
 Increase (decrease) in revolving credit      75,000       (78,300)      5,700
 Payments on long-term debt                   (6,115)       (3,529)     (2,303)
 Payments of debt issuance costs             (12,879)            -      (3,738)
 Issuance of redeemable preferred stock            -        19,500           -
 Other                                             -         1,319      (1,574)
                                           ---------     ---------     --------
Net cash provided (used) by 
      financing activities                    56,006       (61,010)     (1,915)
                                                   
Increase (decrease) in cash
      and cash equivalents                  (228,386)      186,086      46,539
Balance - beginning of year                  234,267        48,181       1,642
                                          ----------     ---------     --------
Balance - end of year                     $    5,881    $  234,267    $ 48,181
                                          ==========     =========     ========
                                                   


See accompanying notes to consolidated financial statements.

<PAGE>  F-6

(1)  Company Background

   Specialty Foods Acquisition Corporation ("SFAC") through its
   direct, wholly-owned subsidiary, Specialty Foods Corporation
   ("SFC"), is a leading producer, marketer and distributor of
   bakery products, including retail bread, cookies and other
   baked goods.  The continuing operations of SFC consist of the
   following operating companies:

            Metz Baking Company ("Metz") - Metz is a leading retail
            bread company serving a sixteen state area of the Midwestern
            United States.  Metz's product line includes breads, buns,
            rolls and sweet goods.
          
            Mother's Cake & Cookie Co. ("Mother's") - Mother's is
            the second largest retail cookie producer and distributor in
            the Western United States.  Mother's sells its branded
            cookie products primarily to retail grocers.

            Archway Cookies, Inc.  ("Archway") - Acquired in 1998,
            Archway is one of the nation's leading cookie makers,
            producing more than one billion cookies annually.  Archway
            sells its branded cookie products through a network of
            independent distributors who resell to retail food outlets
            and chain stores throughout the U.S. and Canada.
          
            Andre-Boudin Bakeries, Inc. ("Boudin") - Boudin is a
            leading marketer of premium branded specialty breads and
            bread-related products.  Boudin sells most of its products
            through a chain of 46 bakery cafes and kiosks located in
            California and the greater Chicago area.

          
   The Company's discontinued operations are described in
   Note 3.

(2)  Summary of Significant Accounting Policies

        Basis of Presentation
   
   The Company's financial statements are presented on a
   consolidated basis.  All significant intercompany accounts
   and transactions have been eliminated.  Acquisitions recorded
   as purchases are included in the Consolidated Statement of
   Operations from the date of acquisition.  Divestitures
   reported as discontinued operations have been removed from
   continuing operations and reclassified to discontinued
   operations in accordance with Accounting Principles Board
   Opinion No. 30.

<PAGE>  F-7

       Use of Estimates in the Preparation of Financial Statements

   The preparation of financial statements in conformity with
   generally accepted accounting principles requires management
   to make estimates and assumptions that affect the reported
   amounts of assets and liabilities and related disclosures 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.

        Reclassifications
   
   Certain amounts included in the 1997 and 1996 financial
   statements have been reclassified to conform to the manner in
   which the 1998 financial statements have been presented.

        Cash Equivalents

   Cash equivalents represent investments in overnight bank
   deposits and commercial paper with a maturity of less than
   three months.
   
        Inventories
   
   Inventories are stated at the lower of cost or market.  Cost
   is determined principally by the first-in, first-out (FIFO)
   method.
   
        Property, Plant, and Equipment
   
   Property, plant, and equipment are stated at cost.
   Depreciation is provided by the straight-line method over the
   assets' estimated useful lives or, in the case of leasehold
   improvements, over the terms of the leases, if shorter, as
   follows:

                                                  Years
                                                 -------            
        Buildings and improvements                 7-40
        Machinery and equipment                    3-20
        Office furniture and vehicles              3-10
   
   Expenditures for maintenance, repairs, and minor replacements
   are charged to current operations.  Expenditures for major
   replacements and betterment are capitalized.

   The cost and related accumulated depreciation of property and
   equipment retired or sold is eliminated from the property and
   equipment accounts at the time of retirement or sale, and the
   resulting gain or loss is reported in the Consolidated
   Statement of Operations.

<PAGE>  F-8

        Intangible Assets
   
   Intangible assets, which consist primarily of the excess of
   cost over fair value of net assets acquired, are amortized on
   a straight-line basis over the periods of expected benefit,
   which range from five to forty years.  The Company annually
   evaluates whether events and circumstances have occurred that
   indicate that the remaining estimated useful life of
   intangible assets may warrant revision or that the remaining
   balance of intangible assets may not be recoverable.  When
   factors indicate that intangible assets should be evaluated
   for possible impairment, the Company assesses recoverability
   of intangible assets based on its expectations concerning
   operating cash flows after interest and capital expenditures.
   An impairment is recorded if the discounted value of such
   cash flows is less than the recorded value of the intangible
   assets.  The Company utilizes a discount rate which reflects
   its weighted average cost of capital.  Based on application
   of this methodology, an impairment was recorded in 1996 (see Note 5).
   
        Deferred Debt Issuance Costs
   
   Deferred debt issuance costs are being amortized by the
   straight-line method over the terms of the related debt
   agreements and are classified as other noncurrent assets.
   
        Advertising Costs
   
   Advertising costs are expensed as incurred.
   
   
(3)  Discontinued Operations
   
   In March 1999, SFC signed a definitive agreement to sell its
   subsidiary, H&M Food Systems Company, Inc. ("H&M"), for $132
   million.  H&M is a producer of custom formulated, pre-cooked
   meat products that are sold primarily to national restaurant
   chains and prepared-food producers.  SFC will realize net
   cash proceeds of approximately $110 million after it has
   repurchased H&M's financed accounts receivable, established a
   $5 million one-year escrow and paid transaction costs.  Upon
   the closing of this transaction, expected in the second
   quarter of 1999, SFC will report a gain on the sale of H&M.
   
   In addition, during 1997 and 1996 the Company divested of:
   
           Stella Foods, Inc. ("Stella") - One of the largest
           specialty cheese producers in the United States with
           distribution to retail grocers, foodservice accounts, and
           commercial food processors.  The sale of Stella was
           completed on December 5, 1997 for $405 million.

           Gai's Seattle French Baking Company ("Gai's") - A
           restaurant and institutional bakery operation serving the
           northwestern United States.  The sale of Gai's was completed
           on February 24, 1997.
       
           San Francisco French Bread ("SFFB") - A sourdough
           hearth bread operation located in California.  The sale of
           SFFB was completed on March 31, 1997.
      
<PAGE>   F-9
       
           A restaurant and institutional bakery operated by Metz
           located in Illinois.  The sale of this bakery was completed
           on August 23, 1997.
       
           Bloch and Guggenheimer, Inc. ("B&G")/Burns & Ricker,
           Inc. ("B&R") - Pickle, pepper, and specialty snack food
           businesses operated under common management.  The sale of
           the combined business of B&G/B&R was completed on December
           27, 1996.
          
   These divestitures have been reported as discontinued
   operations in the accompanying financial statements in
   accordance with Accounting Principles Board Opinion No. 30.
   Operating results for these businesses, including revenues of
   $181,038, $935,424, and $1,333,194 for 1998, 1997, and 1996,
   respectively, as well as the applicable goodwill write-down
   of $152,360 in 1996, have been reclassified to discontinued
   operations.  No interest expense has been allocated to
   discontinued operations.
   
   In 1998, the earnings from discontinued operations relate
   solely to H&M.  The net loss on disposal of discontinued
   operations for 1998 consists of adjustments to the estimated
   losses on the sale of Gai's, SFFB, and the Illinois
   restaurant and institutional bakery.  The net gain on
   disposal of discontinued operations for 1997 consisted of the
   gain realized on the sale of Stella and Gai's, an adjustment
   to the estimated loss on the disposal of SFFB, and the loss
   realized on disposal of the Illinois restaurant and
   institutional bakery.  The net loss on disposal of
   discontinued operations for 1996 consisted of the realized
   loss on the sale of B&G/B&R, estimated loss on the sale of
   SFFB, and the 1996 operating losses from the measurement date
   through the disposal date of B&G/B&R, SFFB and of Gai's.
   
   Net assets of the discontinued operations as of December 31,
   1998 and 1997 related to H&M and consisted of the following:

                                               1998       1997
                                               ----       ----
   Accounts receivable, net of allowance    $  3,587   $  3,658
   Inventories                                16,824     15,388
   Plant and equipment, net                   53,205     41,852
   Other assets                                4,852      1,011
   Goodwill, net                              18,069     18,592
   Accounts payable                           (6,727)   (10,058)
   Accrued expenses and other liabilities     (3,178)    (5,251)
                                              ------    -------
                                            $ 86,632   $ 65,192
                                              ======    =======
<PAGE>  F-10

(4)   Acquisitions
   
   On October 26, 1998, SFC acquired all of the outstanding
   capital stock of Archway, a privately held Michigan
   corporation, from the previous stockholders. The purchase
   price totaled approximately $90,000 plus $26,000 to repay
   certain indebtedness of Archway.
   
   Additionally, in 1998, SFC also acquired four retail bakeries
   in separate transactions for a total aggregate consideration
   of $19,600.

   All of the acquisitions have been accounted for as purchases
   and, accordingly, the respective purchase prices have been
   allocated to the applicable assets and liabilities based upon
   their estimated fair values as of the acquisition date.  On a
   combined basis, the excess of the purchase price over the
   fair values of the net assets acquired was approximately
   $110,000 and has been recorded as goodwill, which is being
   amortized on a straight-line basis over 40 years.  The
   acquisitions were funded by a combination of cash and
   borrowings under SFC's existing revolving credit facility.
   Operating results of acquired businesses have been included
   in the Consolidated Statements of Operations since their
   respective acquisition dates.
   
   The following unaudited pro forma consolidated results of
   operations are presented as if the above acquisitions had
   been made at the beginning of the periods presented.
   
                                                         1998         1997
                                                         ----         ----
    Net sales                                       $   831,533   $  828,243
    Net earnings (loss) from continuing operations  $  (110,590)  $ (115,026)
    Net earnings (loss) per share from
        continuing operations                       $     (1.76)  $    (1.82)
                                                    
                                                    
   The consolidated pro forma information is not necessarily
   indicative of the combined results that would have occurred
   had the acquisitions been made at the beginning of the
   periods presented or the future results of the combined
   operations and do not include projected cost reductions and
   revenue increases of the combined operations.  Additionally,
   pro forma net sales exclude sales of Archway's franchisees
   and third party distributor mark-up.


(5)  Goodwill Write-Down
   
   As described under "Intangible Assets" in Note 2, "Summary of
   Significant Accounting Policies", the Company annually
   evaluates its intangible assets.  Based on the Company's
   goodwill assessment, a write-down of goodwill was recorded in
   the fourth quarter of 1996, which is presented in the
   accompanying Consolidated Statements of Operations as
   follows:
   
                                         
   Continuing operations                 $   203,304
   Discontinued operations                   152,360
                                            --------
                                         $   355,664
                                            ========
<PAGE>  F-11
   
   In determining the amounts of the goodwill write-down, the
   Company developed its best estimate of future operating cash
   flows, after interest and capital expenditures, over the
   remaining useful life of the goodwill.  The Company's
   estimates were based on recent historic financial trends and
   then current market conditions.  The goodwill of each
   business was evaluated separately for impairment.  Individual
   business unit sales growth projections ranged from two to
   five percent.  Interest costs were allocated based on the
   relative level of investment in each business.  Each of the
   Company's fixed-rate debt obligations were assumed to be
   refinanced at existing interest rates.  The Company
   calculated the present value of estimated future cash flows
   using a discount rate which represented its weighted average
   cost of capital of 11.8% in 1996.
   
   As of December 31, 1998, there was $109,745 of goodwill on
   the Company's balance sheet resulting from acquisitions made
   during 1998.  Management believes the Company's remaining
   goodwill will be recovered over its useful life.


(6)   Acquisition Liabilities

   In connection with the formation of the Company and
   subsequent acquisitions, estimated liabilities were recorded
   for the expected cash expenditures to consolidate facilities,
   streamline operations, and settle environmental, legal and
   tax matters.  In 1998, $4,450 of additional estimated
   acquisition liabilities were recorded as a result of current
   year acquisitions. Cash expenditures associated with
   acquisition liabilities were $4,440,  $14,043, and $10,593
   for 1998, 1997, and 1996, respectively.  As of December 31,
   1998, there are $15,797 of remaining acquisition liabilities,
   of which $4,899 is classified as current.


(7)     Extraordinary Items

   In the first quarter of 1998, the Company refinanced its
   accounts receivable, revolver, and term loan financing
   facilities.  Due to this early extinguishment of debt, the
   Company wrote-off deferred debt issuance costs related to
   these facilities of $5,714 and has recorded them as
   extraordinary items in 1997.


 (8)    Accounts Receivable

   Specialty Foods Finance Corporation ("SFFC"), a wholly-owned
   subsidiary of SFC, was established for the purpose of
   acquiring substantially all of the trade accounts receivable
   generated by the operating subsidiaries of SFC.  Under the
   terms of the Accounts Receivable Facility ("Facility"), SFFC
   sells for cash an undivided interest in eligible accounts
   receivable.

   Under the terms of the Facility, the maximum amount of
   eligible receivables that can be sold to the Facility is
   $75,000.  The amount outstanding under the Facility varies
   based upon the level of eligible receivables and advance rate
   factors.  As of December 31, 1998, the amount outstanding
   under the Facility was $50,000.  The discount on receivables
   sold is included in other expense and totaled $2,445, $1,933,
   and $1,846 in 1998, 1997, and 1996, respectively.

<PAGE>  F-12

   Trade accounts receivable are reported net of the allowance
   for doubtful accounts of $1,149 and $1,099 in 1998 and 1997,
   respectively.


(9)  Inventories

   The components of inventories are as follows:

                                               1998         1997
                                               ----         ----

         Raw materials and packaging        $  12,244     $  9,477
         Work in progress                         264          452
         Finished goods                         8,593        7,662
         Other                                  3,209        2,681
                                               ------       ------
                                               24,310       20,272 
         Less obsolescence and other
             allowances                          (944)         (84)
                                               ------       ------
                                            $  23,366     $ 20,188
                                               ======       ======


 (10)  Property, Plant, and Equipment

   The components of property, plant and equipment are as
   follows:

                                                1998         1997
                                                ----         ----
                                                      
         Land                               $  11,586    $  10,898
         Buildings and improvements            90,963       72,130
         Machinery and equipment              136,732      104,676
         Office furniture and vehicles         63,320       29,248
         Construction in progress              36,734        8,639
                                              -------      -------
                                              339,335      225,591
         Less accumulated depreciation       (104,391)     (79,568)
                                              -------      -------
                                            $ 234,944    $ 146,023
                                              =======      =======
   Depreciation expense was $25,733, $20,187, and $20,836 in
   1998, 1997, and 1996, respectively.


(11)    Restricted Cash
   
   In 1998, the Company entered into various agreements to
   purchase certain machinery, equipment and building
   improvements.  Funds were designated for these purchases and
   deposited in an escrow account which amounted to $7,915 as of
   December 31, 1998.  The escrow account is classified as a
   noncurrent asset.

<PAGE>  F-13

(12)    Accrued Expenses

   The components of accrued expenses are as follows:

                                            1998        1997
                                            ----        ----
                                                  
        Accrued payroll                 $   8,782   $   6,229
        Other taxes payable                 4,087       3,085
        Workers' compensation              11,896       9,768
        Compensated absences                7,491       6,236
        Accrued interest                   21,869      21,518
        Acquisition liabilities             4,899       7,582
        Other                              21,717      26,488
                                          -------     -------
                                        $  80,741   $  80,906
                                          =======     =======

(13)    Long-Term Debt

   Long-term debt consists of the following:

                                            
                                              1998         1997
                                             -----        -----
      
    Revolving Credit Facility          $     75,000  $         -
    Term Loan Facility                      169,080      173,750
    10 1/4% Senior Notes due 2001           225,000      225,000
    11 1/8% Senior Notes due 2002           150,000      150,000
    11 1/4% Senior Subordinated Notes 
        due 2003                            200,000      200,000
    13% Senior Secured Discount Debentures 
        due 2005                            295,191      260,258
    11% Senior Subordinated Discount                  
        Debentures due 2006, payable                    
        to related parties                  134,698      121,043
    Other                                     4,679        6,865
                                          ----------   ----------
                                          1,253,648    1,136,916
    Less current portion                     (3,450)      (2,561)
                                          ---------    ---------
                                        $ 1,250,198  $ 1,134,355
                                          =========    =========

   During March 1998, the Company refinanced its Revolving
   Credit Facility ("Revolver") and Term Loan Facility ("Term
   Loan") with a new syndicate of financial institutions.  Both
   facilities mature on January 31, 2000. Proceeds from these
   facilities can be used to finance working capital
   requirements and are available for other corporate purposes,
   including acquisitions.
   
   As required under the terms of the Revolver and Term Loan
   Agreements, the Company reduced the commitment amount
   available under the Revolver from $125,000 to $122,801 and
   the Term Loan was reduced to $169,080 with excess asset sale
   proceeds during 1998. The Company is required to make
   quarterly payments on the Term Loan in the amount of $434.
   
   The Revolver bears an interest rate of LIBOR plus 250 basis
   points.  The Revolver is secured by the assets of the
   operating companies.  Amounts outstanding under the Revolver
   totaled $75,000 as of December 31, 1998.  In addition to
   amounts outstanding under the Revolver, letters of credit
   
<PAGE>  F-14

   commitments totaling $10,200 as of December 31, 1998 reduce
   available funds under the Revolver.
   
   The Term Loan bears an interest rate of LIBOR plus 375 basis
   points.  The Term Loan is secured by the assets of SFC and a
   pledge of the stock of each of the direct subsidiaries of
   SFC.
   
   Semi-annual interest payments are required through maturity
   on the 10 1/4% Senior Notes and the 11 1/4% Senior
   Subordinated Notes on February 15 and August 15 each year.
   Semi-annual interest payments are required through maturity
   on the 11 1/8% Senior Notes on April 1 and October 1 each
   year.
   
   The Senior Secured Discount Debentures accrete at an interest
   rate of 13% up to the maturity amount of $319,250 on August
   15, 1999.  Beginning February 15, 2000, semi-annual interest
   payments are required through the maturity date on August 15,
   2005.  The Senior Subordinated Discount Debentures are held
   by stockholders of the Company and accrete at an interest
   rate of 11% up to the maturity amount of $185,067 on August
   15, 2001.  Beginning February 15, 2002, semi-annual interest
   payments are required through the maturity date on August 15,
   2006.
   
   The 10 1/4% and 11 1/8% Senior Notes, the 11 1/4% Senior
   Subordinated Notes and the 11% Senior Subordinated Discount
   Debentures are unsecured.  The 13% Senior Secured Discount
   Debentures are secured by a first priority lien on and a
   security interest in all of the outstanding capital stock of
   SFC and all intercompany notes, if any, owing to the Company.
   
   During the fourth quarter of 1998, the Company commenced
   private exchange offers for its publicly held debt.  Under
   the offers, existing debt of SFC and SFAC held by certain
   holders would be exchanged for the debt of two new
   intermediate holding companies.  SFAC is offering certain
   holders of its Senior Debentures the opportunity to exchange
   their existing debt for new 13% Senior Secured Discount
   Debentures (the "New Senior Debentures") of a new
   intermediate holding company.  The New Senior Debentures
   include provisions which extend the cash pay interest and
   maturity dates, give SFAC a call option at prescribed
   discounts of accreted value and provide consenting holders of
   its Senior Debentures up to an aggregate of ten percent of
   the equity interest of the new intermediate holding company.
   SFC is offering certain holders of its existing notes the
   opportunity to exchange their existing debt for new notes
   (the "New Notes") of another intermediate holding company.
   The New Notes have substantially the same terms and covenants
   as the existing notes and will remain structurally senior to
   the New Senior Debentures.  In addition, SFC is seeking the
   consent of its Term Loan and Revolver lenders to amend
   existing agreements to conform to the new holding company
   structure.  The proposed exchange offer has not been
   consummated.  Remaining on the Company's balance sheet are
   unamortized deferred financing fees of approximately $18,000
   related to the existing debt that is subject to the exchange
   offer.  Upon the completion of the exchange offer, this
   amount would be written off as an extraordinary item.
   
   Other long-term debt consists primarily of miscellaneous
   notes payable with interest rates ranging from 7.9% to 10.5%
   at December 31, 1998.

<PAGE>  F-15
   
   The provisions of the Term Loan and the Revolver contain
   covenants which require the Company to maintain specified
   leverage and interest coverage ratios. The Company also has
   other limitations regarding capital expenditures, sales of
   assets, loans and investments, encumbrances of assets and
   assumption of additional indebtedness.  In addition, the
   agreements governing the Term Loan and the Revolver and the
   indentures governing the Senior Notes and the Senior
   Subordinated Notes contain certain restrictive covenants,
   including, to the detriment of the holders of the Senior
   Debentures and the Senior Subordinated Debentures, certain
   covenants that restrict or prohibit (with de minimis
   exceptions) SFC's ability to pay dividends or make other
   distributions to SFAC.  Specifically, as a result of the
   Company's net losses and accumulated deficit, SFC's ability
   to make distributions to SFAC under the indentures of the
   Senior Notes and the Senior Subordinated Notes has been
   impaired and these indentures will require modification
   before any such distribution to SFAC can be made.
   
   Aggregate maturities of debt are as follows:

          1999                           $     3,450
          2000                               243,308
          2001                               225,234
          2002                               150,259
          2003                               200,277
          Thereafter                         431,120
                                          ----------
            Total aggregate maturities   $ 1,253,648
                                          ==========

   Cash paid for interest was $82,508, $85,603, and $90,533 for
   the years ended December 31, 1998, 1997, and 1996,
   respectively.


(14)    Financial Instruments

        Concentration of Credit Risk
   
   The Company's exposure to credit loss in the event of
   nonpayment of accounts receivable by customers is represented
   in the amount of those receivables.  The Company performs
   ongoing credit evaluations of its customers' financial
   condition and generally requires no collateral from those
   customers.  As of December 31, 1998, the Company does not
   believe it has any significant concentration of credit risk
   with respect to its trade accounts receivable.

        Financial Instruments With Off-Balance-Sheet Risk

   During 1998, the Company entered into interest rate swap
   agreements to reduce its exposure to changes in the cost of
   its variable rate borrowings as required by its Term Loan
   Agreement.  Under the interest rate swap agreements, which
   expire in January 2000, the Company receives floating rate
   payments from the counterparties based upon the three-month
   LIBOR and makes fixed rate payments at 5.753% and 5.765% to
   the respective counterparties.  The payments are calculated
   based upon a notional principal amount of $100,000.  The net
   differential of interest to be paid or received under the
   remaining agreements is recognized as incurred.  In 1998, net

<PAGE>  F-16

   payments totaling $30 were made to the counterparties.  Off-
   balance-sheet risk from the interest rate swap agreements at
   December 31, 1998 includes the risk associated with changes
   in market values and interest rates.  The counterparties to
   the agreements are major financial institutions.


        Fair Value of Financial Instruments
   
   The Company's financial instruments include long-term debt
   and the interest rate swap agreements.  The estimated fair
   value and carrying amount of long term debt including current
   maturities but excluding related party Senior Subordinated
   Discount Debentures at December 31, 1998 are as follows:

                                                          Estimated
                                            Carrying         Fair
                                             Amounts        Values
                                          -----------    -----------

     Financial liabilities:
         Long-term debt, including
                current maturities       $ 1,118,950   $    728,184
         Interest rate swap agreements   $         -   $       (906)    


   The fair value of long-term debt and the interest rate swap
   agreements have been determined based on quoted market prices
   and market interest rates at December 31, 1998.


(15)    Lease Commitments

   The Company leases equipment and facilities under various
   noncancelable operating leases.  Future minimum lease
   payments under all noncancelable operating leases are as
   follows:

         1999                            $     11,668
         2000                                  10,879
         2001                                   9,530
         2002                                   8,337
         2003                                   6,406
         Thereafter                            24,443
                                            ---------
           Total minimum lease payments   $    71,263
                                            =========
         

   Total rental expense for 1998, 1997, and 1996 was $17,318,
   $19,557, and $17,018 respectively.

   In 1998, the Company purchased certain transportation and
   production equipment which had been subject to operating
   lease arrangements. The cost of purchasing these leased
   assets was approximately $35,400.

<PAGE>  F-17

 (16)   Income Taxes

   The provision (benefit) for income taxes for 1998, 1997, and
   1996 relates to state and Canadian income taxes payable
   (refundable).   An effective tax rate reconciliation is not
   presented because the Company has no federal tax currently payable or
   deferred income tax expense due to its net operating loss position.
   
   The components of net deferred taxes are as follows:

                                                     1998           1997
                                                     ----           ----  
                                               
    Deferred tax assets related to:
      Accrued expenses and other liabilities    $  72,570      $  57,518
      Net operating losses and credits             90,799         65,197
      Other                                         3,351          6,538
                                                 --------       --------
         Total deferred tax assets                166,720        129,253
                                                  
    Valuation allowance                           149,552        113,357
                                                 --------       --------
         Total net deferred tax assets             17,168         15,896
                                                
    Deferred tax liabilities related to: 
      Depreciation                                 17,168         15,541
      Inventories                                       -            355
                                                 --------       --------
         Total deferred tax liabilities            17,168         15,896
                                                 --------       --------
         Net deferred tax asset (liability)    $        -       $      -
                                                 ========       ========


   At December 31, 1998, the Company has federal net operating
   loss carryforwards of $235,000 including $9,000 of loss
   carryforwards from predecessor companies, which are subject
   to limitations that may substantially limit future
   utilization.  Also at December 31, 1998, the Company has
   $127,000 of state net operating loss carryforwards and $3,000
   of state tax credit carryforwards.  The net operating loss
   carryforwards and state tax credits exclude H&M's allocable
   portions.  Net operating loss and credit carryforwards expire
   in varying amounts through the year 2018.

   Cash paid (received) for income taxes was $(613), $123 and
   $432 for 1998, 1997, and 1996, respectively.

<PAGE>  F-18

(17)    Litigation and Other Contingencies

        Litigation

   The Company has retained liability with respect to a
   proceeding against Stella.  In 1993, Stella was alleged to
   have misappropriated confidential and proprietary trade
   secrets of a competitor and infringed upon the competitor's
   purported trademark.  Stella has filed a cross complaint
   against the competitor for predatory pricing practices.  The
   proceeding is scheduled for trial during the second quarter
   of 1999.  The Company continues to vigorously defend against
   the allegations and pursue its claim.  Although any
   litigation has an element of uncertainty, management believes
   the ultimate resolution of this matter will not have a
   material adverse effect on the Company's financial condition
   or results of operations.

   In the normal course of business activities, the Company is a
   party to certain legal proceedings and claims.  Although the
   outcome of such matters cannot be determined with certainty,
   it is management's opinion that the final outcome will not
   have a material adverse effect on the Company's financial
   position or results of operations.
 
     Other

   Various operating subsidiaries are self-insured or retain a
   portion of losses with the respect to workers' compensation
   claims.  Accordingly, the Company provides irrevocable
   letters of credit or surety bonds which total $10,200 at
   December 31, 1998 to state regulatory agencies or insurance
   companies.


(18)    Employee Benefits

        Pension and Other Post-retirement Benefits

   Certain of the operating subsidiaries sponsor single-
   employer, non-contributory, defined benefit pension plans.
   The operating subsidiaries also participate in numerous multi-
   employer, non-contributory, defined benefit pension plans.
   Substantially all of the Company's employees are covered by
   the defined benefit or multi-employer plans.  Certain of the
   subsidiaries also sponsor post-retirement health care benefit
   plans.

<PAGE>  F-19

   Benefits for employees are based on various factors including
   length of service and average compensation.  Contributions
   are funded to the extent deductible for federal income tax
   purposes.
   The following table provides a reconciliation of the changes
   in the plans' benefit obligations and fair value of assets
   during the years ended December 31, 1998 and December 31,
   1997 and a summary of the funded status as of December 31,
   1998 and December 31, 1997:


                                      Pension Plans     Post-retirement Medical
                             ---------------------------------------------------
                                   1998        1997          1998         1997
                                   ----        ----          ----         ----
 Change in Benefit Obligation
   Benefit obligation
    at beginning of year      $  61,072   $  54,218     $   8,226    $   9,886
     Service cost                 2,248       1,914           393          345
     Interest cost                4,111       3,956           542          602
     Participant contributions        -           -            29            -
     Plan amendments                 35       1,220             -            -
     Settlement (gain) or loss        -           -             -       (1,295)
     Benefits paid               (3,609)     (2,527)         (591)        (339)
     Actuarial (gain) or loss     1,371       2,291           111         (973)
                                -------     -------       -------      -------
   Benefit obligation 
    at end of year            $  65,228   $  61,072     $   8,710    $   8,226
                                =======     =======       =======      =======
                                                         
 Change in Plan Assets                                
   Fair value of plan assets
    at beginning of year      $  62,167   $  57,854     $       -    $       -
     Actual return on plan assets 7,368       6,840             -            -
     Benefits paid               (3,609)     (2,527)            -            -
     Other                        1,028           -             -            -
                                -------     -------       -------       -------
   Fair value of plan
    assets at end of year     $  66,954   $  62,167     $       -     $      -
                                =======     =======       =======       =======

 Summary of Funded Status
   Funded status              $   1,726   $   1,095      $ (8,710)    $ (8,226)
   Unrecognized transition
     amount                        (274)       (381)            -            -
   Unrecognized prior service
     cost                         1,447       1,561             -            -
   Unrecognized net (gain)
     or loss                    (11,593)    (11,241)       (3,243)      (4,816)
                                -------     -------        -------      -------
                                                          
   Accrued benefit cost       $  (8,694)   $ (8,966)     $(11,953)   $ (13,042)
                                 =======     =======      ========      =======
                                                          
 Amounts Recognized in                                 
  Consolidated Balance Sheets
   Accrued expenses           $   2,842    $  2,464     $       -    $     251
   Other non-current liabilities  5,852       6,502        11,953       12,791
                                --------     -------      -------       -------
                              $   8,694    $  8,966      $ 11,953   $   13,042
                               ========     =======       =======       =======
  
<PAGE>  F-20

   One of the Company's qualified pension plans had a projected
   benefit obligation in excess of plan assets as of December
   31, 1998 and 1997.  The projected benefit obligation,
   accumulated benefit obligation and fair value of plan assets
   for this plan was $13,815, $13,815, and $12,675,
   respectively, as of December 31, 1998 and $12,669, $12,669,
   and $11,616, respectively, as of December 31, 1997.
   
   The following table provides the components of net periodic
   benefit cost for the plans for the fiscal years ended
   December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
   
                                           Pension Plans          Post-retirement Medical              
                                   -------------------------------------------------------
                                    1998       1997      1996        1998      1997      1996
                                    ----       ----      ----        ----      ----      ----
<S>                                  <C>       <C>       <C>         <C>       <C>       <C>                     

Service cost - benefits earned 
 the period                     $  2,248   $  1,914  $  2,116     $   393   $   345    $  446
                                                            
Interest cost on the benefit
 obligation                        4,111      3,956     3,658         542       602       661
                                                            
Expected return on plan assets    (6,175)    (5,087)   (6,290)          -         -         -
                                                            
Net amortization and deferral          -          -     1,583           -         -      (832)
   Transition amount                (107)      (107)        -           -         -         -
   Prior service costs               149        146         -           -         -         -
   (Gain)/loss                      (498)      (607)        -        (805)     (292)        -
                                  -------    -------    -------    -------   -------   -------
Net periodic benefit cost       $   (272)   $   215   $ 1,067     $   130   $   655    $  275
                                  =======    =======    =======    =======   =======   =======
</TABLE>

   Gains and losses in excess of 10% of the greater of the
   benefit obligation or the market-related value of assets are
   amortized over the average remaining service period of active
   participants for pension plans.  Gains and losses in excess
   of 10% of the benefit obligation are amortized over five
   years for the post-retirement plan.
   
   The Company sponsors defined benefit health care plans that
   provide post-retirement medical and life benefits to certain
   full-time employees who meet minimum age and service
   requirements.  The plans are contributory, with retiree
   contributions adjusted annually, and contain other cost-
   sharing features such as deductibles and co-insurance.  The
   accounting for these plans anticipates future cost-sharing
   changes to the written plans that are consistent with the
   Company's expressed intent to increase the retiree
   contribution rate annually for the expected general inflation
   rate for the year.

<PAGE>  F-21
   
   The assumptions used in the measurement of the Company's
   benefit obligations are shown in the following table:
   
          
                                                               Post-retirement
                                          Pension Plans             Medical
                                       ---------------------------------------
                                       1998       1997        1998         1997
                                       ----       ----        ----         ----
                                                          
 Discount Rate (Y/E Disclosures)       6.75%     7.00%    6.50% to 6.75%   7.00%
 Salary Scale                          4.00%     4.00%         N/A          N/A
 Long Term Rate of Return on Assets   10.00%     9.00%         N/A          N/A
  
   For measurement purposes, a 9.5% annual rate of increase in
   the per capita cost of covered health care benefit was
   assumed for 1998.  The rate is assumed to decrease gradually
   to 5.5% for 2002 and remain at that level thereafter.
   
   The health care trend rate used to determine the pre-age 65
   accumulated post-retirement benefit obligation was 14% for
   1998, decreasing to 6% by the year 2002 and beyond.  A flat
   16 % rate per year is used for the post-age 65 obligation.
   Increasing the assumed health care trend rate by 1% each year
   would increase the accumulated post-retirement benefit
   obligation as of December 31, 1998 and 1997 approximately
   $664 and $658, respectively, and the aggregate of the service
   and interest cost components of 1998, 1997, and 1996 net
   retiree healthcare expense approximately $97, $98, and $134
   respectively.   Decreasing the assumed health care trend rate
   by 1% each year would decrease the accumulated post-
   retirement benefit obligation as of December 31, 1998
   approximately $547, and the aggregate of the service and
   interest cost components for 1998 net retiree healthcare
   expense approximately $79.
   
   Certain of the operating subsidiaries also participate in
   various multi-employer defined benefit pension plans on
   behalf of employees pursuant to various collective bargaining
   agreements.  Contributions to these plans included in
   continuing operations amounted to approximately $15,441,
   $14,822, and $14,535 for the years ended December 31, 1998,
   1997, and 1996, respectively.
   
   The Company has various defined contribution plans which
   cover non-bargaining unit employees meeting eligibility
   requirements.  Contributions to these plans were
   approximately $1,915, $1,444, and $1,296 for the years ended
   December 31, 1998, 1997, and 1996, respectively.
          
          Long Term Incentive Compensation Plans

   The Company has adopted long-term incentive compensation
   plans for several of its businesses which provide for cash
   awards upon the achievement of specified earnings or
   enterprise values.  Amounts related to long-term incentive
   plans will be accrued when amounts due participants vest.  As
   of December 31, 1998, no amounts have been accrued.

<PAGE>  F-22

(19)    Stock-Based Compensation Plans

   The Company's stock option plans provide for the granting of
   non-qualified stock options and incentive stock options to
   certain key employees, directors and consultants of the
   Company.  Generally, options outstanding under the Company's
   stock option plans (i) are granted at prices which equate to
   the fair value of the stock at the date of grant, (ii) vest
   ratably over a four year service vesting period, and (iii)
   expire ten years subsequent to award.

   The exercise price per share is $.02 for current employees
   and $.73 for former employees.  A summary of the status of
   the Company's stock options as of December 31, 1998, 1997,
   and 1996 and changes during the years ended on those dates is
   presented below:
   
                                                 Number of Shares
                                           ----------------------------
                                              1998      1997      1996
                                              ----      ----      ----
                                             
    Outstanding at beginning of year         3,632     3,436     4,589
    Granted                                    500     1,400       933
    Exercised                                    -         -         -
    Terminated                                (236)   (1,204)   (2,086)
                                             -----    ------    ------
    Outstanding at year-end                  3,896     3,632     3,436
                                             =====    ======    ======
                                             
    Options exercisable at year-end          2,013     1,376     1,819
                                             =====    ======    ======

    Options available for future grant       1,957     2,221     2,417
                                             =====    ======    ======     

   The Company applies Accounting Principles Board Opinion No.
   25 and related Interpretations in accounting for its stock
   compensation plans.  Accordingly, no compensation cost has
   been recognized for its stock compensation plans.  The
   Company has evaluated the requirements of FASB Statement No.
   123 and has determined that it does not have a material
   impact on the Company's financial position or results of
   operations.

 (20)     Related Party Transactions

     Certain Transactions with Stockholders of and Affiliates
        of Stockholders of SFAC

   Certain of SFAC's stockholders and their affiliates
   previously entered into financial advisory arrangements (the
   "Financial Advisory Agreements") with SFAC's subsidiary, SFC.
   Haas Wheat & Partners ("Haas Wheat"), Penobscot
   ("Penobscot"), an affiliate of Acadia Partners, L.P.
   ("Acadia"), and Keystone, Inc. ("Keystone") each entered into
   such Financial Advisory Agreements.  In August 1998, the
   Board of Directors approved a one-year extension of the
   financial advisory arrangements.  Under the terms of the
   Financial Advisory Agreements, SFC pays Haas Wheat an annual
   fee of $700 (a portion of which Haas Wheat is obligated by
   agreement to remit to Acadia), Penobscot an annual fee of
   $200, and Keystone an annual fee of $100.

   In June 1997, pursuant to an agreement among the Company,
   Acadia, Keystone, and Haas Wheat ("the signing
   stockholders"), the signing stockholders purchased a total of
   19,500 units of equity for an aggregate purchase price of
   $19,500.  Each unit was comprised of one share of cumulative

<PAGE>  F-23

   preferred stock of the Company and one warrant to purchase
   395.1 shares of common stock of the Company, at an exercise
   price of $0.02 per share.

   The shares of preferred stock are in the aggregate face
   amount of $19,500 and have a par value of $1 per share.  The
   shares of preferred stock have a liquidation value of $1 per
   share and are entitled to a dividend rate of 16% per annum.
   As of December 31, 1998, the preferred stock had dividends in
   arrears of $4,706.  Presently, no dividends can be declared
   or paid since such declaration or payment would cause or
   result in default of outstanding debt instruments of the
   Company.  The preferred stock is cumulative, non-convertible,
   non-participating, and non-redeemable by the holder or the
   Company prior to August 16, 2006.  Thereafter, any holder or
   the Company may redeem all or a portion of the preferred
   stock provided that such redemption would not cause or result
   in a default in any outstanding debt instrument of the
   Company or its subsidiaries at such time.

   In 1996, SF Leasing L.L.C. (of which Acadia and Keystone each
   owns a 45% interest and Haas Wheat owns a 10% interest)
   purchased from Metz all of the equipment at a manufacturing
   facility for $3,222 (which was based on the appraised value
   of such equipment) and leased such equipment back to Metz.
   During 1998, the Company made rental payments totaling $614
   to SF Leasing L.L.C. for equipment that was leased by the
   Company.   In September 1998, the Company repurchased from SF
   Leasing L.L.C. this equipment for an aggregate amount of
   $3,013.

   In June 1997, the Company retained Donaldson, Lufkin &
   Jenrette Securities Corporation ("DLJ", an affiliate of
   DLJMBP, which is a stockholder of the Company), to serve as
   the Company's financial advisor in connection with its sale
   of Stella.  The Company paid DLJ approximately $5,400 as
   compensation for such financial advisory services.  In
   December 1998, DLJ was retained as the financial advisor for
   the sale of H&M.  Upon the completion of the H&M sale, the
   Company will pay DLJ approximately $1,600.

   In March 1998, the Company paid DLJ $5,092 in connection with
   the Company's refinancing of its Revolving Credit Facility
   and Term Loan Facility.  DLJ served as the Syndication Agent
   and Collateral Agent under both Loan Agreements.


(21)    Other Expense (Income)

   Other expense (income) is comprised of the following:

                                                      1998      1997       1996
                                                      ----      ----       ---- 
    Loss on disposal of property, plant 
        and equipment                             $    436  $  1,521   $  5,747
    Discount on receivables sold                     2,445     1,933      1,846
    Other                                              248     1,275      1,539
                                                   -------   -------    -------
                                                  $  3,129  $  4,729   $  9,132
                                                   =======   =======    =======
                                                        
<PAGE>  F-24
                                                                 Schedule I
                                                                 ----------
                                                                 Page 1

                            SPECIALTY FOODS ACQUISITION CORPORATION
                              
                                 Condensed Balance Sheets
                              
                                     (In thousands)



                                                           December 31,         
                                                     ------------------------
                                                       1998            1997
                                                       ----            ----
                                       
                      Assets
                                                       
Cash                                             $         1    $         1
Investment in SFC                                   (450,974)      (403,804)
Deferred debt issuance costs                           4,235          4,843
Due from SFC                                           7,499          7,376
Other assets                                               -              -
                                                    --------       --------
          Total assets                           $  (439,239)   $  (391,584)
                                                    ========       ========

        Liabilities and Stockholders' Equity

Senior secured discount debentures               $   295,191    $   260,258
Senior subordinated discount debentures              134,698        121,043
                                                    --------       --------
          Total liabilities                          429,889        381,301
                                                       
Redeemable preferred stock                            19,500         19,500
                                                       
Stockholders' equity:                                  
  Common stock                                           646            646
  Additional paid-in capital                          42,750         42,750
  Accumulated deficit                               (930,659)      (834,416)
  Cost of common shares in treasury                   (1,365)        (1,365)
                                                    --------       --------
          Total stockholders' equity                (888,628)      (792,385)
                                                    --------       --------
  Total liabilities and stockholders' equity     $  (439,239)    $ (391,584)
                                                    ========       ========


The accompanying condensed financial statements should be read in
conjunction with the consolidated financial statements of the
Company.

<PAGE>  F-25

                                                        Schedule I Cont.
                                                        --------------
                                                        Page 2


                         SPECIALTY FOODS ACQUISITION CORPORATION
                              
                           Condensed Statements of Operations
                              
                                     (In thousands)
                              

                                                         
                                                     Years Ended December 31,
                                          -------------------------------------
                                                1998         1997         1996
                                                ----         ----         ---- 
                                                           
Equity in earnings (loss) of SFC           $  (46,166)  $   91,361   $ (446,550)
                                                           
Operating expenses                                972          945          968
                                               ------      -------      -------
                                                           
Income (loss) from operations                 (47,138)      90,416     (447,518)
                                              -------      -------      -------
                                                           
Nonoperating expense:                                      
  Interest expense                            (48,601)     (43,148)     (38,285)
  Amortization of deferred debt issuance costs   (609)        (609)        (609)
                                              -------       -------     -------
          Total nonoperating expenses         (49,210)     (43,757)     (38,894)
                                             --------       -------     -------
 
Income (loss) before income taxes             (96,348)      46,659     (486,412)
  Income taxes                                   (105)         136          166
                                             --------       -------     -------
          Net income (loss)                $  (96,243)    $ 46,523   $ (486,578)
                                             ========       =======    ========


The accompanying condensed financial statements should be read in
conjunction with the consolidated financial statements of the
Company.

<PAGE> F-27

                                                           Schedule I Cont.
                                                           ---------------
                                                           Page 3

                        SPECIALTY FOODS ACQUISITION CORPORATION
                              
                           Condensed Statements of Cash Flows
                            
                                      (In thousands)



                                                          
                                                    Years Ended December 31,
                                              ----------------------------------
                                                 1998         1997       1996
                                                 ----         ----       ----
                                                          
Cash flows from operating activities:
  Net income (loss)                       $   (96,243)   $  46,523  $ (486,578)
  Debt issuance cost amortization                 609          609         609
  Accretion of interest                        48,601       43,148      38,285
  Equity in earnings of SFC                    46,166      (91,361)    446,550
  Changes in operating assets and liabilities:
    Other assets                                    -            -         (91)
                                            ---------    ---------   ---------
       Net cash (used) by operating activities   (867)      (1,081)     (1,225)

                                                          
Cash flows from financing activities:
  Purchase of treasury stock                        -            -        (837)
  Proceeds from issuance of treasury stock          -            -         117
  Dividend from subsidiary                      1,004        1,122       3,671
  Issuance of preferred stock                       -       19,500           -
  Purchase of Senior Secured 
    Discount Debentures                             -            -      (1,712)
  Advances from SFC                               122      (18,375)        (37)
  Other                                          (259)      (1,166)         23
                                             ---------    ---------    --------
Net cash provided by financing activities         867        1,081       1,225

                                                         
Net increase in cash and cash equivalents           -            -           -
Cash at beginning of period                         1            1           1
                                             ---------    ---------    --------
Cash at end of period                      $        1    $       1    $      1
                                             =========    =========    ========

The accompanying condensed financial statements should be read in
conjunction with the consolidated financial statements of the
Company.

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