================================================================================ 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 Twenty-six Weeks Ended March 25, 2001 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _________ to_________ Commission file number 333-24939 THE FONDA GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 13-3220732 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 2920 North Main Street, Oshkosh, Wisconsin 54901 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 920/235-9330 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 April 20, 2001: Common Stock, $0.01 par value - 100 shares ================================================================================ PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS THE FONDA GROUP, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data)

~~December~~(Unaudited) 24March 25, September 24, ~~2000~~2001 2000 ------------- --------------- ~~Assets~~ --~~----~~ Assets Current assets: Cash and cash equivalents $ ~~2,005~~491 $ 1,413 Receivables, less allowances of $1,~~686~~831 and $1,459, respectively 5548,~~235~~475 50,927 Inventories 5756,~~359~~408 63,145 Deferred income taxes 7,644 8,044 Refundable income taxes 298 298 Spare parts 2,~~506~~565 2,523 Other current assets 56,~~056~~145 6,328 ---------- ---------- Total current assets ~~130~~122,~~103~~026 132,678 ~~---------- ----------~~ Property, plant and equipment, net 5051,~~999~~396 49,280 Goodwill, net 21,~~677~~354 18,373 Due from SF Holdings 18,033 18,441 Other assets 10,~~539~~014 11,604 ---------- ---------- Total assets $ ~~231~~222,~~351~~823 $ 230,376 ========== ========== Liabilities and ~~Shareholders~~Shareholder's Equity ~~------------------------------------~~ Current liabilities: Accounts payable $ 139,~~992~~161 $ 15,679 Accrued payroll and related costs 78,~~858~~106 10,469 Other current liabilities 2518,~~200~~313 21,203 Current portion of long-term debt 41,~~563~~611 41,425 ---------- ---------- Total current liabilities 8877,~~613~~191 88,776 ~~---------- ----------~~ Deferred income taxes 4,~~538~~484 5,043 Long-term debt ~~120~~123,~~589~~970 120,453 Other liabilities 1,~~148~~162 1,212 ---------- ---------- Total liabilities ~~214~~206,~~888~~807 215,484 ---------- ---------- Commitments and contingencies -(See -Notes) ~~Shareholders~~Shareholder's equity: Common stock - par value $.01 per share; 1,000 shares authorized; 100 shares issued and outstanding - - Additional paid-in capital 1,~~022~~037 1,022 Retained earnings 15,~~466~~004 13,895 Accumulated other comprehensive (loss) (25) (25) ---------- ---------- Total shareholder's equity 16,016 14,892 ---------- ---------- Total liabilities and ~~shareholders~~shareholder's equity $ ~~231~~222,~~351~~823 $ 230,376 ========== ==========

See accompanying Notes to Consolidated Financial Statements. 2 THE FONDA GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands)

For the For the For the For the Thirteen Thirteen Twenty-six Twenty-six weeks ended weeks ended ~~December~~weeks 24ended weeks ended March 25, ~~December~~March 26, March 25, March 26, 2001 2000 ~~1999~~2001 2000 --------------- --------------- --------------- --------------- Net sales $ ~~100~~79,~~166~~773 $ 9778,~~572~~063 $ 179,939 $ 175,635 Cost of sales 8165,~~148~~734 7864,~~672~~142 146,882 142,814 ---------- ---------- ---------- ---------- Gross profit 1914,~~018~~039 1813,~~900~~921 33,057 32,821 Selling, general and administrative expenses 1211,~~409~~044 1311,~~000~~293 23,453 24,292 Other (income), net (57140) (75149) (197) (224) ---------- ---------- ---------- ---------- Operating income 63,~~666~~135 52,~~975~~777 9,801 8,753 Interest expense, net of interest income of $1227, $136, $39 and $83219, respectively 43,~~029~~824 43,~~200~~953 7,853 8,153 ---------- ---------- ---------- ---------- Income (loss) before income tax expense 2(benefit) and extraordinary loss (689) (1,~~637~~176) 1,~~775~~948 600 Income tax expense (benefit) (227) (476) 839 234 ---------- ---------- ---------- ---------- Income (loss) before extraordinary loss (462) (700) 1,~~066~~109 ~~710~~366 Extraordinary loss on debt extinguishment (net of income taxes of $350) - 525 - 525 ---------- ---------- ---------- ---------- Net income (loss) $ (462) $ (1,~~571~~225) $ 1,~~065~~109 $ (159) ========== ========== ========== ==========

See accompanying Notes to Consolidated Financial Statements. 3 THE FONDA GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)

For the ~~Thirteen~~Twenty-six For the ~~Thirteen~~Twenty-six weeks ended weeks ended ~~December~~March 2425, ~~December~~March 26, 2001 2000 ~~1999~~ ---------------------- ---------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 1,~~571~~109 $ ~~1,065~~(159) Adjustments to reconcile net income (loss) to net cash provided by ~~(used in)~~ operating activities: Depreciation and amortization 13,~~664~~395 13,~~829~~658 Deferred income tax (benefit) (~~105~~159) (131) Loss on sale of assets 8287 3912 Changes in operating assets and liabilities (net of business acquisition: Receivables (3,~~732)~~401 ~~(7,180)~~114 Inventories 8,~~029~~980 2(4,~~090~~165) Accounts payable and accrued expenses (214,~~372~~201) 2,~~417~~733 Other, net 21,~~372~~486 1,~~933~~463 ---------- ---------- Net cash provided by operating activities 74,~~509~~098 23,~~062~~525 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (~~712~~2,540) (~~252~~782) ~~Acquisition~~Payment offor ~~company~~business acquisition (16,~~950~~654) - Due to/from SF Holdings 408 (1531,~~894~~692) Proceeds from sale of property, plant and equipment 63 281,357 ---------- ---------- Net cash (used in) investing activities (28,~~191~~723) (1631,~~118~~117) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Net (repayments) borrowings under revolving credit facilities (~~3,980~~262) 1428,~~081~~561 Borrowing for business acquisition 5,000 - Net (repayments) ~~borrowings~~ of other debt (~~746~~1,035) (~~132~~261) ---------- ---------- Net cash provided by ~~(used in)~~ financing activities (43,~~726)~~703 1328,~~949~~300 ---------- ---------- NET ~~INCREASE~~ (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ~~592~~ (~~107~~922) 708 CASH AND CASH EQUIVALENTS, beginning of period 1,413 624 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $ ~~2,005~~491 $ ~~517~~1,332 ========== ========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ 17,~~459~~989 $ ~~291~~8,104 ========== ========== Income taxes paid (refunded) $ -245 $ (~~103~~49) ========== ==========

See accompanying Notes to Consolidated Financial Statements. 4 THE FONDA GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) BASIS OF PRESENTATION The information included in the foregoing interim financial statements of The Fonda Group, Inc. (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 24, 2000. Certain prior period amounts have been reclassified to conform to current period presentation. The Company is a wholly-owned subsidiary of SF Holdings Group, Inc. ("SF Holdings"). (2) RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and requires that an entity recognize all derivatives at fair value in the balance sheet. The adoption of SFAS No. 133 did not have a significant impact on the consolidated financial statements. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements. SAB No. 101 establishes accounting and reporting standards for revenue recognition and requires that an entity not recognize revenue until it is realized or realizable and earned. The adoption of SAB No.101 did not have an impact on the consolidated financial statements. (3) INVENTORIES The components of inventories are as follows (in thousands): (Unaudited) March 25, September 24, 2001 2000 ------------- ----------------- Raw materials and supplies $ 15,718 $ 19,723 Finished products 40,319 42,732 Work in progress 371 690 -------- -------- Total inventories $ 56,408 $ 63,145 ======== ======== (4) BUSINESS ACQUISITION On September 25, 2000, pursuant to an asset purchase agreement dated August 9, 2000 (the "Springprint Agreement"), the Company purchased substantially all of the property, plant and equipment, intangibles and net working capital of Springprint Medallion, a division of Marcal Paper Mills, Inc. ("Springprint"). In addition, pursuant to the Springprint Agreement, the Company has assumed the liabilities and obligations of Springprint arising under contracts or leases that are either assets purchased by the Company or a part of the accounts payable. The aggregate purchase price for the assets and working capital was $6.7 million. The Springprint acquisition has resulted in goodwill of $3.6 5 million which is being amortized over 20 years. The Springprint acquisition has been accounted for under the purchase method and the results have been included in the consolidated statements of operations since the date of acquisition. (5) RELATED PARTY TRANSACTIONS All of the below referenced affiliates are under the common control of the Company's Chief Executive Officer or a director of the Company. During the twenty-six weeks ending March 25, 2001, the Company sold $5.0 million of paper plates to Sweetheart Holdings Inc. ("Sweetheart") and $2.8 million of scrap paper to Fibre Marketing, LLC ("Fibre Marketing"). Included in receivables as of March 25, 2001 are (i) $1.4 million due from Sweetheart, (ii) $1.1 million due from Fibre Marketing and (iii) $0.2 million due from SF Holdings. Other sales to affiliates, if any, during the twenty-six weeks ending March 25, 2001 were not significant. During the twenty-six weeks ending March 26, 2000, the Company sold $5.4 million of paper plates and $0.5 million of equipment rental and shared services to Sweetheart and $3.1 million of scrap paper to Fibre Marketing. Included in receivables as of March 26, 2000 was (i) $1.2 million due from Sweetheart, (ii) $1.0 million due from Fibre Marketing and (iii) $0.2 million due from SF Holdings. Other sales to affiliates, if any, during the twenty-six weeks ending March 26, 2000 were not significant. During the twenty-six weeks ending March 25, 2001, the Company purchased (i) $8.6 million of paper cups from Sweetheart (ii) $0.6 million of corrugated containers from Box USA Holdings, Inc. ("Box USA") and (iii) $0.4 million of travel services from Emerald Lady, Inc. Included in accounts payable, as of March 25, 2001, was $1.4 million due to Sweetheart. Other purchases from affiliates, if any, during the twenty-six weeks ending March 25, 2001 were not significant. During the twenty-six weeks ending March 26, 2000, the Company purchased (i) $6.0 million of paper cups from Sweetheart, (ii) $0.9 million of corrugated containers from Box USA and (iii) $0.2 million of travel services from Emerald Lady, Inc. Included in accounts payable, as of March 26, 2000, was $1.0 million due to Sweetheart. Other purchases from affiliates, if any, during the twenty-six weeks ending March 26, 2000 were not significant. In Fiscal 1998, the Company entered into an agreement with SF Holdings whereby the Company acquired for $7.0 million substantially all of SF Holding's rights under a Management Services Agreement dated August 31, 1993, as amended, and pursuant to which the Company has the right, subject to the direction of the board of directors of Sweetheart, to manage Sweetheart's day-to-day operations. In consideration of the Company's performance of services, the Company is entitled to receive management fees of $0.7 million, $0.9 million and $1.1 million in the first, second and third years, respectively, and $1.6 million per year for the remaining term of the Management Services Agreement. The Company believes that the terms of such agreement are at least as favorable as those it could otherwise have obtained from unrelated third parties and were negotiated on an arm's length basis. The $7.0 million payment is included in other assets and is being amortized over the term of such agreement. Management fee income, net of amortization was $0.3 million for the twenty-six weeks ending March 25, 2001 and $0.2 million for the twenty-six weeks ending March 26, 2000. The Company leases a building in Jacksonville, Florida from Dennis Mehiel, the Company's Chief Executive Officer, on terms the Company believes are no less favorable than could be obtained from independent third parties and were negotiated on an arm's length basis. Annual payments under the lease are $0.2 million plus annual increases based on changes in the Consumer Price Index ("CPI") through December 31, 2014. In addition, Mr. Mehiel can require the Company to purchase the facility 6 for $1.5 million, subject to a CPI-based escalation, until July 31, 2006. In Fiscal 1998, the Company terminated its operations at this facility and is currently subleasing the entire facility to an unrelated third party. Rent expense, net of sublease income on the portion of the premises subleased, is not significant. During the twenty-six weeks ended March 26, 2000, the Company sold certain paper cup machines to Sweetheart at a fair market value of $1.3 million. The excess of the proceeds from the sale over the Company's net book value of such equipment was recorded as a credit to equity of $0.9 million. Independent appraisals were obtained to determine the fairness of the sale price. (6) SF HOLDINGS STOCK COMPENSATION PLAN During the twenty-six weeks ended March 25, 2001, SF Holdings, the Company's parent, granted options to purchase shares of its common stock to certain employees of the Company. The options vest over a period of three years. Certain of the exercise prices of the options were below the fair market value of SF Holdings common stock at the date of the grant. During the vesting period, these discounts of $0.1 million are being amortized as compensation expense and credited to additional paid-in capital by the Company. Amortization expense relating to SF Holding's stock options was $15 thousand for the twenty-six weeks ended March 25, 2001. 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 The Company, a wholly-owned subsidiary of SF Holdings, is a converter and marketer of disposable paper foodservice products. On December 3, 1999, CEG, an affiliate of the Company in the disposable party goods products business, became an 87% owned subsidiary of SF Holdings pursuant to a merger. On December 6, 1999, pursuant to an asset purchase agreement entered into on November 21, 1999, the Company purchased the intangible assets of CEG, including domestic and foreign trademarks, patents, copyrights, and customer lists for $16 million. In addition, pursuant to the CEG Asset Purchase Agreement the Company subsequently purchased certain inventory and acquired other CEG assets for cash and in exchange for outstanding trade payables owed to the Company by CEG. As a result of this transaction, the Company markets, manufactures and distributes disposable party goods products directly to the specialty (party) channel of the Company's consumer market. The companies are under common control, and therefore, the transaction has been accounted for in a manner similar to pooling-of-interests. CEG's net assets and liabilities that were not acquired by the Company pursuant to the CEG Asset Purchase Agreement were acquired by SF Holdings and have been classified as "Due to/from SF Holdings". On September 25, 2000, pursuant to the Springprint Agreement, the Company purchased substantially all of the property, plant and equipment, intangibles and net working capital of Springprint 7 Medallion, a division of Marcal Paper Mills, Inc. In addition, pursuant to the Springprint Agreement, the Company has assumed the liabilities and obligations of Springprint arising under contracts or leases that are either assets purchased by the Company or a part of the accounts payable. The aggregate purchase price for the assets and working capital was $6.7 million. Thirteen Weeks Ended March 25, 2001 Compared to Thirteen Weeks Ended March 26, 2000 (Unaudited) Net sales increased $1.7 million, or 2.2%, to $79.8 million for the thirteen weeks ending March 25, 2001, compared to $78.1 million for the thirteen weeks ending March 26, 2000, reflecting an 8.4% increase in average realized sales price partially offset by a 6.2% decrease in sales volume. Net sales to consumer foodservice customers increased 5.0%, resulting from a 10.6% increase in average realized sales price, partially offset by a decrease in sales volume of 5.6%. Net sales to institutional foodservice customers decreased 1.3%, resulting from a 6.0% increase in average realized sales price, partially offset by a 7.3% decrease in sales volume. Selling prices to both consumer and institutional customers were positively affected by increases in raw material costs that were passed through to customers as well as more competitive market conditions. These favorable price increases were offset by lower volumes due to competitive market conditions and the Company's decision to reduce sales to certain consumer customers experiencing deteriorating credit conditions; however, these lower volumes were partially offset by additional volume from the Springprint acquisition. Gross profit increased $0.1 million, or 0.7%, to $14.0 million for the thirteen weeks ending March 25, 2001, compared to $13.9 million for the thirteen weeks ending March 26, 2000. As a percentage of net sales, gross profit decreased from 17.8% for the thirteen weeks ending March 26, 2000 to 17.5% for the thirteen weeks ending March 25, 2001. Gross profit for the thirteen weeks ending March 25, 2001 was positively affected by increased selling prices which were partially offset by higher raw material and energy costs. Selling, general and administrative expenses decreased $0.3 million, or 2.7%, to $11.0 million for the thirteen weeks ending March 25, 2001 compared to $11.3 million for the thirteen weeks ending March 26, 2000 primarily as a result of a decrease in the workforce resulting from the CEG consolidation and a reduction in selling expenses. Other (income) expense, net was unchanged at income of $0.1 million for the thirteen weeks ending March 25, 2001 and for the thirteen weeks ending March 26, 2000. Operating income increased $0.3 million, or 10.7%, to $3.1 million for the thirteen weeks ending March 25, 2001 compared to $2.8 million for the thirteen weeks ending March 26, 2000 due to the reasons discussed above. Interest expense, net of interest income decreased $0.2 million, or 5.0%, to $3.8 million for the thirteen weeks ending March 25, 2001 compared to $4.0 million for the thirteen weeks ending March 26, 2000. For the thirteen weeks ending March 25, 2001, the Company realized lower interest expense due primarily to lower average interest rates. Income tax expense (benefit) decreased $0.3 million, or 60%, to a benefit of $0.2 million for the thirteen weeks ending March 25, 2001 compared to a benefit of $0.5 million for the thirteen weeks ending March 26, 2000. The effective rate for the thirteen weeks ending March 25, 2001 was 32.9% and for the thirteen weeks ending March 26, 2000 was 40.0%. 8 Net income (loss) increased $0.7 million, or 58.3%, to a loss of $0.5 million for the thirteen weeks ending March 25, 2001 compared to a loss of $1.2 million for the thirteen weeks ending March 26, 2000, due to the reasons stated above. Twenty-six Weeks Ended March 25, 2001 Compared to Twenty-six Weeks Ended March 26, 2000 (Unaudited) Net sales increased $4.3 million, or 2.4%, to $179.9 million for the twenty-six weeks ending March 25, 2001, compared to $175.6 million for the twenty-six weeks ending March 26, 2000, reflecting a 9.6% increase in average realized sales price partially offset by a 7.2% decrease in sales volume. Net sales to consumer foodservice customers increased 0.9%, resulting from a 7.2% increase in average realized sales price, partially offset by a decrease in sales volume of 6.3%. Net sales to institutional foodservice customers increased 4.6%, resulting from a 13.5% increase in average realized sales price, partially offset by a 8.9% decrease in sales volume. Selling prices to both consumer and institutional customers were positively affected by increases in raw material costs that were passed through to customers as well as more competitive market conditions. These favorable price increases were offset by lower volumes due to competitive market conditions and the Company's decision to reduce sales to certain consumer customers experiencing deteriorating credit conditions; however, these lower volumes were partially offset by additional volumes from the Springprint acquisition. Gross profit increased $0.3 million, or 0.9%, to $33.1 million for the twenty-six weeks ending March 25, 2001, compared to $32.8 million for the twenty-six weeks ending March 26, 2000. As a percentage of net sales, gross profit decreased from 18.7% for the twenty-six weeks ending March 26, 2000 to 18.4% for the twenty-six weeks ending March 25, 2001. Gross profit for the twenty-six weeks ending March 25, 2001 was positively affected by increased selling prices which were partially offset by higher raw material and energy costs. Selling, general and administrative expenses decreased $0.8 million, or 3.3%, to $23.5 million for the twenty-six weeks ending March 25, 2001 compared to $24.3 million for the twenty-six weeks ending March 26, 2000 primarily as a result of a decrease in the workforce resulting from the CEG consolidation and a reduction in selling expenses. Other (income) expense, net was unchanged at income of $0.2 million for the twenty-six weeks ending March 25, 2001 and the twenty-six weeks ending March 26, 2000. Operating income increased $1.0 million, or 11.4%, to $9.8 million for the twenty-six weeks ending March 25, 2001 compared to $8.8 million for the twenty-six weeks ending March 26, 2000 due to the reasons discussed above. Interest expense, net of interest income decreased $0.3 million, or 3.7%, to $7.9 million for the twenty-six weeks ending March 25, 2001 compared to $8.2 million for the twenty-six weeks ending March 26, 2000. For the twenty-six weeks ending March 25, 2001, the Company realized lower interest expense due primarily to lower average interest rates. Income tax expense (benefit) increased $0.6 million, or 300%, to an expense of $0.8 million for the twenty-six weeks ending March 25, 2001 compared to a expense of $0.2 million for the twenty-six weeks ending March 26, 2000. The effective rate for the twenty-six weeks ending March 25, 2001 was 43.1% and for the twenty-six weeks ending March 26, 2000 was 40.0%. Net income (loss) increased $1.3 million, or 650%, to income of $1.1 million for the twenty-six weeks ending March 25, 2001 compared to a loss of $0.2 million for the twenty-six weeks ending March 26, 2000, due to the reasons stated above. 9 Liquidity And Capital Resources Historically, the Company has relied on cash flow from operations, the sale of assets and borrowing under its credit facility to finance its working capital requirements and capital expenditures. The Company expects to continue this method of funding for its 2001 capital expenditures. Net cash provided by operating activities increased $0.6 million to $4.1 million in the twenty-six weeks ending March 25, 2001 compared to $3.5 million in the twenty-six weeks ending March 26, 2000. This increase is primarily due to a decrease in receivables as a result of better collections and a decrease in inventory as a result of improved inventory management. Capital expenditures for the twenty-six weeks ended March 25, 2001 were $2.5 million compared to $0.8 million for the twenty-six weeks ending March 26, 2000. Capital expenditures in the twenty-six weeks ending March 25, 2001 included $1.7 million for new production equipment and $0.8 million for renovations and conversions. The Company has a $55 million revolving credit facility subject to borrowing base limitations. The credit facility is collateralized by eligible accounts receivable, inventories, and certain general intangibles. The credit facility matures on September 30, 2001. Borrowings are available at the bank's prime rate plus 0.25% or at LIBOR plus 2.25% at the election of the Company. At March 25, 2001, $40.4 million was outstanding and $14.6 million was the maximum remaining advance available based upon eligible collateral. 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 addition to the revolving credit facility, the Company's credit facility also includes a term loan of $5 million. This amount is payable in equal monthly installments through the maturity date of September 30, 2001. Borrowings under the term loan bear interest, at the Company's election, equal to the bank's prime rate plus 0.5% or LIBOR plus 2.5%. The proceeds from this term loan were used to partially finance the purchase of Springprint. Pursuant to the terms of the instruments governing the indebtedness of the Company, the Company is subject to certain affirmative and negative covenants customarily contained in agreements of this type, including, without limitations covenants that restrict, subject to specified exceptions (i) mergers, consolidations, asset sales or changes in capital structure, (ii) creation or acquisition of subsidiaries, (iii) purchase or redemption of capital stock or declaration or payment of dividends or distributions on such capital stock, (iv) incurrence of additional indebtedness, (v) investment activities, (vi) granting or incurrence of liens to secure other indebtedness, (vii) prepayment or modification of the terms of subordinated indebtedness, and (viii) engaging in transactions with affiliates. In addition, such debt instruments restrict the Company's ability to pay dividends or make other distributions to SF Holdings. The credit facility also requires that certain financial covenants are satisfied. Management believes that cash generated by operations, combined with amounts available under the Company's credit facility, will be sufficient to meet the Company's working capital and capital expenditure needs in the next twelve months. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK NONE 10 PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Reports on Form 8-K: No reports on Form 8-K were filed during the twenty-six weeks ended March 25, 2001 11 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. THE FONDA GROUP, INC. (registrant) Date: April 20, 2001 By: /s/ Hans H. Heinsen -------------- -------------------- Hans H. Heinsen Senior Vice President - Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer and Duly Authorized Officer) 12

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