================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 for the
Thirteen Weeks Ended
December 26, 1999
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
for the transition period from _________
to_________
Commission file number 33-91600
SWEETHEART HOLDINGS INC.*
(Exact name of registrant as specified in its charter)
Delaware 06-1281287
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10100 Reisterstown Road, Owings Mills, Maryland 21117
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 410/363-1111
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 [ ]
The number of shares outstanding of the Registrant's common stock as
of January 24, 2000:
Sweetheart Holdings Inc. Class A Common Stock, $0.01 par value -
1,046,000 shares Sweetheart Holdings Inc. Class B Common Stock,
$0.01 par value - 4,393,200 shares
* The Registrant is the guarantor of the 9 5/8 % Senior Secured Notes due
2000 and the 10 1/2% Senior Subordinated Notes due 2003 (collectively,
the "Notes") of Sweetheart Cup Company Inc., a wholly owned subsidiary
of the Registrant.
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
(Unaudited)
December 26, September 26,
1999 1999
------------------ ----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,533 $ 2,965
Receivables, less allowances of $1,885 and $1,905,
respectively
77,090 88,325
Inventories 140,038 129,473
Deferred income taxes 12,962 12,962
Spare parts - current 16,660 16,278
--------- ---------
Total current assets 249,283 250,003
--------- ---------
Property, plant and equipment, net 316,338 322,967
Deferred income taxes 40,898 41,055
Spare Parts 11,106 10,852
Other assets 8,304 9,763
--------- -----------
Total assets $ 625,929 $ 634,640
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 68,995 $ 66,654
Accrued payroll and related costs 37,942 45,089
Other current liabilities 38,948 39,045
Current portion of long-term debt 274,538 275,446
--------- ---------
Total current liabilities 420,423 426,234
--------- ---------
Long-term debt 117,631 118,446
Other liabilities 69,481 71,686
---------- ----------
Total liabilities 607,535 616,366
---------- ----------
Shareholders' equity:
Class A Common stock -- Par value $.01 per share; 1,100,000
shares authorized; 1,046,000 shares issued and outstanding 10 10
Class B Common stock - Par value $.01 per share; 4,600,000
shares authorized; 4,393,200 shares issued and outstanding 44 44
Additional paid-in capital 101,090 101,090
Accumulated deficit (80,687) (80,083)
Accumulated other comprehensive income (loss) (2,063) (2,787)
--------- ---------
Total shareholders' equity 18,394 18,274
--------- ---------
Total liabilities and shareholders' equity $ 625,929 $ 634,640
========== ==========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the For the
Thirteen Thirteen
weeks ended weeks ended
December 26, December 27,
1999 1998
------------- -------------
<S> <C> <C>
Net sales $ 214,216 $ 203,909
Cost of sales 187,341 189,451
---------- ------------
Gross profit 26,875 14,458
Selling, general and administrative expenses 16,496 16,003
Other (income) expense, net 1,221 (213)
----------- -----------
Operating income (loss) 9,158 (1,332)
Interest expense, net of interest income of $3 10,163 10,813
and $36, respectively ----------- -----------
Income (loss) before income tax expense (benefit) (1,005) (12,145)
Income tax expense (benefit) (401) (4,858)
----------- -----------
Net income (loss) (604) (7,287)
----------- -----------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment 11 (263)
Minimum pension liability adjustment (net
of income taxes of $475 and $1,029, respectively) 713 1,544
----------- -------------
Other comprehensive income (loss) 724 1,281
----------- -------------
Comprehensive income (loss) $ 120 $ (6,006)
=========== =============
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the Thirteen For the Thirteen
weeks ended weeks ended
December 26, December 27,
1999 1998
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (604) $ (7,287)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 11,414 11,273
Deferred income tax credit (401) (4,858)
Gain on sale of assets 14 (337)
Changes in operating assets and liabilities:
Receivables 11,236 3,224
Inventories (10,566) 13,598
Accounts payable 2,340 (9,167)
Other, net (8,049) 6,002
---------- ---------
Net cash provided by (used in) operating activities 5,384 12,448
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (4,150) (9,777)
Proceeds from sale of property, plant and equipment 64 5,508
--------- ---------
Net cash provided by (used in) investing activities (4,086) (4,269)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) under revolving credit
facilities (1,486) (5,168)
Repayment of debt (244) (231)
(Increase) decrease in cash escrow - (1,885)
---------- ----------
Net cash provided by (used in) financing activities (1,730) (7,284)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (432) 895
CASH AND CASH EQUIVALENTS, beginning of period 2,965 1,367
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 2,533 $ 2,262
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 2,386 $ 2,893
========= =========
Income taxes paid $ 3 $ -
========= =========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The information included in the foregoing interim financial statements
of Sweetheart Holdings Inc. and subsidiaries (the "Company") are unaudited but,
in the opinion of management, include all adjustments (consisting only of normal
recurring adjustments and accruals) which the Company considers necessary for a
fair presentation of the operating results for these periods. Results for the
interim periods are not necessarily indicative of results for the entire year.
These condensed financial statements should be read in conjunction with the
Company's financial statements and notes thereto included in the Company's
annual report on Form 10-K for the fiscal year ended September 26, 1999. Certain
prior period amounts have been reclassified to conform to current period
presentation.
(2) INVENTORIES
The components of inventories are as follows (in thousands):
(Unaudited)
December 26, September 26,
1999 1999
-------------- -------------
Raw materials and supplies $ 33,221 $ 30,092
Finished products 99,371 92,193
Work in progress 7,446 7,188
--------- ----------
Total inventories $ 140,038 $ 129,473
========= ==========
(3) RELATED PARTY TRANSACTIONS
During the period ended December 26, 1999, the Company sold $3.5
million of cups to Fonda Group, Inc. ("Fonda"), and $0.05 million of cups to
Creative Expressions Group, Inc. ("CEG"). Accounts receivable as of December 26,
1999 due from Fonda is $1.2 million. Sales to Fibre Marketing Group, LLC ("Fibre
Marketing") and accounts receivable balances from both CEG and Fibre Marketing
were not material for the period ended December 26, 1999.
During the period ended December 26, 1999, the Company purchased (i)
$1.9 million of corrugated containers and $0.1 million of shared services from
Four M Corporation, (ii) $2.6 million of paper plates and $0.2 million of
equipment rental and shared services from Fonda and (iii) $0.1 million of travel
services from Emerald Lady, Inc. Accounts payable, as of December 26, 1999, from
these purchases, are $0.5 million due to Four M and $0.9 million due to Fonda.
In December 1998, the Company sold certain of its paper plate
manufacturing assets to Fonda for $2.4 million. An independent appraisal was
obtained to determine the fairness of the purchase price. Other purchases from
and sales to affiliates, if any, in the thirteen weeks ended December 27, 1998
were not material.
All of the above referenced affiliates are under the common control of
the Company's Chief Executive Officer.
<PAGE>
(4) OTHER (INCOME) EXPENSE
During the period ended December 26, 1999, the Company experienced a
one-time write-off of a $1.0 million unsecured note receivable issued in
connection with the Fiscal 1998 sale of the bakery business due to the
bankruptcy of the borrower.
(5) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of accumulated other comprehensive income (loss) are as
follows (in thousands):
(Unaudited)
December 26, September 26,
1999 1999
------------ ---------
Foreign currency translation adjustment $(1,286) $(1,297)
Minimum pension liability adjustment (777) (1,490)
-------- --------
Accumulated other comprehensive income (loss) $(2,063) $(2,787)
======== ========
(6) CONTINGENCIES
A lawsuit entitled Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan
Benefits Committee and Fort Howard Cup Corporation, Civil Action No. CV 187-084,
was initially filed in state court in Georgia in April 1987 and is currently
pending in federal court. The remaining plaintiffs claimed, among other things,
that the Company wrongfully terminated the Lily-Tulip, Inc. Salary Retirement
Plan (the "Plan") in violation of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). The relief sought by plaintiffs was to have the plan
termination declared ineffective. In December 1994, the United States Court of
Appeals for the Eleventh Circuit (the "Circuit Court") ruled that the Plan was
lawfully terminated on December 31, 1986. Following that decision, the
plaintiffs sought a rehearing which was denied, and subsequently filed a
petition for a writ of certiorari with the United States Supreme Court, which
was also denied. Following remand, in March 1996, the United States District
Court for the Southern District of Georgia (the "District Court") entered a
judgment in favor of the Company. Following denial of a motion for
reconsideration, the plaintiffs, in April 1997, filed an appeal with the Circuit
Court. On May 21, 1998, the Circuit Court affirmed the judgment entered in favor
of the Company. On June 10, 1998, the plaintiffs petitioned the Circuit Court
for a rehearing of their appeal which petition was denied on July 29, 1998. In
October 1998, plaintiffs filed a Petition for Writ of Certiorari to the United
States Supreme Court, which was denied in January 1999. The Company has begun
the process of paying out the termination liability and as of December 26, 1999,
the Company had disbursed $8.6 million in termination payments. The initial
estimate of the total termination liability, less these payments, exceeds assets
set aside in the Plan by approximately $11.6 million, which amount has been
fully reserved by the Company. As of January 24, 2000, the Company has disbursed
$8.8 million in termination payments.
On April 27, 1999, the plaintiffs filed a motion in the District Court
for reconsideration of the court's dismissal without appropriate relief and a
motion for attorneys' fees with a request for delay in determination of
entitlement to such fees. On June 17, 1999, the District Court deferred these
motions and ordered discovery in connection therewith. The discovery period has
been extended to February 4, 2000. Due to the complexity involved in connection
with the claims asserted in this case, the Company cannot determine at present
with any certainty the amount of damages it would be required to pay should the
plaintiffs prevail; accordingly, there can be no assurance that such amounts
would not have a material adverse effect on the Company's financial position or
results of operations.
<PAGE>
A patent infringement action seeking injunctive relief and damages
relating to the Company's production and sale of certain paper plates entitled
Fort James Corporation v. Sweetheart Cup Company Inc., Civil Action No.
97-C-1221, was filed in the United States District Court for the Eastern
District of Wisconsin on November 21, 1997. During the fourth quarter of Fiscal
1999, mediation resulted in a settlement of this action whereby the Company
agreed to pay damages of $2.6 million. This amount has been fully reserved by
the Company, with the first of two payments, $1.6 million, made on September 30,
1999. The second payment of $1.0 million is due July 1, 2000.
On July 13, 1999, the Company received a letter from the Environmental
Protection Agency ("EPA") identifying the Company, among numerous others, as a
"potential responsible party" under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), at a site in
Baltimore, Maryland. The EPA letter states that it does not constitute a final
determination by EPA concerning the liability of the Company or any other
entity. On December 20, 1999, the Company received an information request letter
from the EPA, pursuant to CERCLA, regarding a Container Recycling Superfund Site
in Kansas City, Kansas. The Company denies liability and has no reason to
believe the final outcomes will have a material effect on the Company's
financial condition or results of operations. However, no assurance can be given
about the ultimate effect on the Company, if any, given the early stage of the
investigations.
The Company is also involved in a number of legal proceedings arising
in the ordinary course of business, none of which is expected to have a material
adverse effect on the Company's financial position or results of operations.
(7) SUMMARIZED FINANCIAL INFORMATION FOR SWEETHEART CUP COMPANY INC.
The following tables provide summary financial information for
Sweetheart Cup Company Inc. ("Sweetheart Cup") and subsidiaries (in thousands):
(Unaudited)
December 26, 1999 September 26, 1999
------------------ ------------------
Current assets $250,791 $251,508
Noncurrent assets 374,955 394,180
Current liabilities 398,808 402,037
Other liabilities 231,147 247,868
(Unaudited)
---------------------------------
For the For the
Thirteen Thirteen
weeks ended weeks ended
December 26, December 27,
1999 1998
-------------- ------------
Net sales $214,216 $203,909
Gross profit 21,477 9,053
Net income (loss) (660) (7,512)
<PAGE>
(8) SUBSEQUENT EVENTS
On January 21, 2000, the Company sold a 400,000 square-foot warehouse
facility located in Owings Mills, Maryland. The Company will continue to lease
back and occupy the property until it completes a reorganization of its
warehousing and distribution facilities later this year. The sale is expected to
result in a net realized gain.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Forward-looking statements in this filing, including those in the Notes
to Consolidated Financial Statements, are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties and actual
results could differ materially. Such risks and uncertainties include, but are
not limited to, general economic and business conditions, competitive market
pricing, increases in raw material costs, energy costs and other manufacturing
costs, fluctuations in demand for the Company's products, potential equipment
malfunctions and pending litigation. For additional information, see the
Company's annual report on Form 10-K for the most recent fiscal year.
General
On March 12, 1998, SF Holdings purchased 48% of the voting stock and
100% of the non-voting stock, or 90% of the Company's total outstanding stock
from the then existing shareholders (the "SF Holdings Investment"). The
Company's business is the successor to the businesses of Maryland Cup
Corporation, which was founded in 1911 and was a major supplier of paper and
plastic disposable foodservice and food packaging products, and Lily-Tulip, Inc.
In conjunction with the SF Holdings Investment, American Industrial Partners
Capital Fund, L.P. ("AIP") assigned the Management Services Agreement, as
amended, to SF Holdings which assigned its interest to Fonda, a wholly owned
subsidiary of SF Holdings.
The Company has historically sold its products to two principal
customer groups, institutional foodservice and food packaging. Institutional
foodservice customers primarily purchase disposable hot and cold drink cups,
lids, food containers, plates, bowls, cutlery and straws. Products are sold
directly and through distributors to quick service restaurant chains, full
service restaurants, convenience stores, hospitals, airlines, theaters, school
systems and other institutional customers. Food packaging customers primarily
purchase paper and plastic containers for the dairy and food processing
industries. Food packaging customers also lease filling and packaging machines
designed and manufactured by the Company that fill and seal the Company's
containers in customers' plants. The Company manufactures and markets its
products in Canada to national accounts and distributors. During Fiscal 1999,
the Company began selling consumer foodservice products primarily through
grocery stores, club stores and convenience stores.
The Company's business is seasonal, as away from home consumption of
disposable products increases in the late spring and summer. This results in
disproportionately higher net income in the last six months of the fiscal year
as cost absorption improves resulting from a more profitable sales and
production mix.
Thirteen Weeks Ended December 26, 1999 Compared to Thirteen Weeks Ended December
27, 1998 (Unaudited)
Net sales increased $10.3 million, or 5.1%, to $214.2 million for the
thirteen weeks ended December 26, 1999 compared to $203.9 million for the
thirteen weeks ended December 27, 1998, reflecting a 3.3% increase in sales
volume and a 1.8% increase in average realized sales price. Net sales to
institutional foodservice customers increased 5.8%, reflecting a 3.8% increase
in sales volume and a 2.0% increase in average realized sales price. This
increase is primarily the result of the Company's focus on revenue growth with
key institutional foodservice customers. Net sales to food packaging customers
decreased 1.2%, or $0.3 million, reflecting a 1.4% decrease in sales volume,
partially offset by a 0.2% increase in average realized sales price. This
decrease is primarily the result of lower demand by large accounts in the food
packaging customer base due to market conditions.
Gross profit increased $12.4 million, or 85.9%, to $26.9 million for
the thirteen weeks ended December 26, 1999 compared to $14.5 million for the
thirteen weeks ended December 27, 1998. As a
<PAGE>
percentage of net sales, gross profit increased to 12.6% for the thirteen weeks
ended December 26, 1999 from 7.1% for the thirteen weeks ended December 27,
1998. This improvement is attributable to a shift in sales to a more profitable
product mix, improved manufacturing efficiencies and improved margins through
customer price initiatives.
Selling, general and administrative expenses increased $0.5 million, or
3.1%, to $16.5 million in the thirteen weeks ended December 26, 1999 compared to
$16.0 million in the thirteen weeks ended December 27, 1998. This increase is
principally attributable to annual wage increases and increased costs associated
with systems development.
Other (income) expense decreased $1.4 million, to an expense of $1.2
million for the thirteen weeks ended December 26, 1999 compared to income of
$0.2 million in the thirteen weeks ended December 27, 1998 due to the write-off
of an unsecured note receivable issued in connection with the Fiscal 1998 sale
of the bakery business.
Operating income increased $10.5 million, to operating income of $9.2
million in the thirteen weeks ended December 26, 1999 compared to an operating
loss of $1.3 million in the thirteen weeks ended December 27, 1998, due to the
reasons stated above.
Interest expense, net decreased $0.6 million, or 6.0%, to $10.2 million
in the thirteen weeks ended December 26, 1999 compared to $10.8 million in the
thirteen weeks ended December 27, 1998. This decrease is attributable to lower
outstanding balances under the Company's U. S. Credit Facility, which was
partially offset by an increase in market interest rates.
Net loss decreased $6.7 million, to $0.6 million in the thirteen weeks
ended December 26, 1999 compared to $7.3 million in the thirteen weeks ended
December 27, 1998, due to the reasons stated above.
Liquidity And Capital Resources
Historically, the Company has relied on cash flow from operations and
the sale of assets to finance its working capital requirements and capital
expenditures. The Company expects to continue this method of funding for its
2000 capital expenditures.
Net cash provided by operating activities decreased $7.1 million to
$5.4 million in the thirteen weeks ended December 26, 1999 from $12.4 million in
the thirteen weeks ended December 27, 1998. This is primarily due to
management's decision to build inventory which is partially offset by more
favorable income from operating activities.
Capital expenditures for the thirteen weeks ended December 26, 1999
were $4.1 million compared to $9.8 million for the thirteen weeks ended December
27, 1998. Capital expenditures in the thirteen weeks ended December 26, 1999
included $1.4 million for new production equipment, $1.5 million spent on growth
and expansion projects, with the remaining consisting primarily of routine
capital improvements. Funding for such capital expenditures was provided
primarily by income from operations.
The Company's revolving credit facility allows up to $135.0 million in
borrowings, subject to borrowing base limitations (the "U.S. Credit Facility").
Borrowings under the U.S. Credit Facility mature on August 1, 2000; as of
December 26, 1999, $41.8 million was available under such facility. Although the
Company intends to refinance this debt, there can be no assurances that the
Company will be able to obtain such refinancing on terms and conditions
acceptable to the Company.
The Company has a credit facility which provides for a term loan of up
to Cdn $10.0 million and revolving credit of up to Cdn $10.0 million that expire
on June 15, 2001. As of December 26, 1999, Cdn $4.0 million (approximately $2.7
million) was available under such facility.
<PAGE>
The Company's Senior Secured Notes mature on September 1, 2000.
Although the Company intends to refinance this debt, there can be no assurances
that the Company will be able to obtain such refinancing on terms and conditions
acceptable to the Company.
In January 1999, the United States Supreme Court denied plaintiffs'
Petition for Writ of Certiorari in the matter of Aldridge v. Lily-Tulip, Inc.
Salary Retirement Plan Benefits Committee and Fort Howard Cup Corporation, Civil
Action No. CV 187-084. The court decided that the Plan was lawfully terminated.
On April 27, 1999, the Plaintiffs filed a motion in the District Court for
reconsideration of the court's dismissal without appropriate relief and a motion
for attorneys' fees with a request for delay in determination of entitlement to
such fees. On June 17, 1999, the District Court deferred these motions and
ordered discovery in connection therewith. The discovery process has been
extended to February 4, 2000. The Company has begun the process of paying out
the termination liability and as of December 26, 1999, the Company had disbursed
$8.6 million in termination payments. The initial estimate of the total
termination liability, less these payments, exceeds assets set aside in the Plan
by approximately $11.6 million, which amount has been fully reserved by the
Company. As of January 24, 2000, the Company has disbursed $8.8 million in
termination payments. The remaining payments are expected to be paid during
Fiscal 2000. The Company's operating plan contemplates that cash generated by
operations and amounts available under the Company's credit facilities will be
sufficient to make the required payments under the Plan when due. However, there
can be no assurance that the Company will achieve its operating plan and have
the necessary cash to make these payments. Failure by the Company to make such
payments could have a material adverse effect on the Company and its financial
condition.
A patent infringement action seeking injunctive relief and damages
relating to the Company's production and sale of certain paper plates entitled
Fort James Corporation v. Sweetheart Cup Company Inc., Civil Action No.
97-C-1221, was filed in the United States District Court for the Eastern
District of Wisconsin on November 21, 1997. During the fourth quarter of Fiscal
1999, mediation resulted in a settlement of this action whereby the Company
agreed to pay damages of $2.6 million. This amount has been fully reserved by
the Company, with the first of two payments, $1.6 million, made on September 30,
1999. The second payment of $1.0 million is due July 1, 2000.
Management believes that cash generated by operations, amounts
available under the Company's credit facilities and funds generated from asset
sales should be sufficient to meet the Company's expected operating needs,
including termination liabilities under the Plan, planned capital expenditures
and debt service requirements in the next twelve months.
Year 2000
As of January 24, 2000, the Company has no knowledge of any material
issues relating to Year 2000 related malfunctions that could have a material
adverse effect on the Company's financial condition or results of operations.
The Company is Year 2000 ready and will continue to monitor all Year 2000
related issues.
Net Operating Loss Carryforwards
As of September 26, 1999, the Company had approximately $214 million of
net operating loss carryforwards ("NOLs") for federal income tax purposes, which
expire at various dates through 2019. Although the Company expects that
sufficient taxable income will be generated in the future to realize these NOLs,
there can be no assurance that future taxable income will be generated to
utilize the NOLs.
Item 3. QUANTATATIVE AND QUALATATIVE DISCLOSURES ABOUT MARKET RISK
NONE
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On January 11, 1999, the United States Supreme Court denied Plaintiff's
petition for Writ of Certiorari in the matter of Aldridge v. Lily-Tulip, Inc.
Salary Retirement Benefits Committee and Fort Howard Cup Corporation, Civil
Action No. CV 187-084. On April 27, 1999, the plaintiffs filed a motion in the
District Court for reconsideration of the court's dismissal without appropriate
relief and a motion for attorneys' fees with a request for delay in
determination of entitlement to such fees. On June 17, 1999, the District Court
deferred these motions and ordered discovery in connection therewith. The
discovery period has been extended to February 4, 2000. Due to the complexity
involved in connection with the claims asserted in this case, the Company cannot
determine at present with any certainty the amount of damages it would be
required to pay should the plaintiffs prevail; accordingly, there can be no
assurance that such amounts would not have a material adverse effect on the
Company's financial position or results of operations.
On December 20, 1999, the Company received an information request
letter from the EPA, pursuant to CERCLA, regarding a Container Recycling
Superfund Site in Kansas City, Kansas. The Company denies liability and has no
reason to believe the final outcome will have a material effect on the Company's
financial condition or results of operations. However, no assurance can be given
about the ultimate effect on the Company, if any, given the early stage of the
investigation.
The Company is also involved in a number of legal proceedings arising
in the ordinary course of business, none of which is expected to have a material
adverse effect on the Company's financial position or results of operations.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.0 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the thirteen weeks
ended December 26, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, its duly authorized officer and principal financial officer.
SWEETHEART HOLDINGS INC.
(registrant)
Date: January 24, 2000 By: /s/ Hans H. Heinsen
---------------- ------------------------------------
Hans H. Heinsen
Senior Vice President -
Finance and Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000908141
<NAME> Sweetheart Holdings Inc.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-24-2000
<PERIOD-START> SEP-27-1999
<PERIOD-END> DEC-26-1999
<CASH> 2,533
<SECURITIES> 0
<RECEIVABLES> 78,975
<ALLOWANCES> 1,885
<INVENTORY> 140,038
<CURRENT-ASSETS> 249,283
<PP&E> 543,120
<DEPRECIATION> 226,782
<TOTAL-ASSETS> 625,929
<CURRENT-LIABILITIES> 420,423
<BONDS> 0
0
0
<COMMON> 54
<OTHER-SE> 18,340
<TOTAL-LIABILITY-AND-EQUITY> 625,929
<SALES> 214,216
<TOTAL-REVENUES> 214,216
<CGS> 187,341
<TOTAL-COSTS> 187,341
<OTHER-EXPENSES> 17,717
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,163
<INCOME-PRETAX> (1,005)
<INCOME-TAX> (401)
<INCOME-CONTINUING> (604)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (604)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
