FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(Mark One)
       X       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended December 31, 1999

                                       OR
                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to        to

        For Quarter Ended December 31, 1999 Commission file number 1-9915

                          GAYLORD CONTAINER CORPORATION
             (Exact name of registrant as specified in its charter)

                     Delaware             36-3472452
(State or other jurisdiction of           (I.R.S. Employer
incorporation or organization)            Identification No.)

                          500 Lake Cook Road, Suite 400
                            Deerfield, Illinois 60015
                            Telephone: (847) 405-5500
          (Address, including zip code, and telephone number, including
                  area code, of registrant's principal offices)


         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 ___

         As of February  7, 2000,  the  registrant  had  outstanding  53,750,363
shares of its $0.0001 par value Class A Common Stock (including 1,050,179 shares
held in trust for the benefit of the warrant  holders) and 1,050,179  redeemable
exchangeable warrants to obtain Class A Common Stock.


<PAGE>





                                                                   PAGE
PART I.        FINANCIAL INFORMATION                              NUMBERS
-------        ---------------------                              -------

Item 1.        Financial Statements                               1 - 8

Item 2.        Management's Discussion and Analysis of
               Financial Condition and Results of Operations      9 - 15

PART II.       OTHER INFORMATION
--------       -----------------

Item 1.        Legal Proceedings                                    16

Item 2.        Changes in Securities                                16

Item 3.        Defaults Upon Senior Securities                      16

Item 4.        Submission of Matters to a Vote of Security
               Holders                                              16

Item 5.        Other Information                                    16

Item 6.        Exhibits and Reports on Form 8-K                     16


SIGNATURES                                                          17
----------



<PAGE>

<TABLE>
<CAPTION>

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------

CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND SEPTEMBER 30, 1999
----------------------------------------------------------------------------------------------------------
                                                                     DECEMBER 31,            SEPTEMBER 30,
<S>                                                                      <C>                       <C>

                                                                        1999                      1999
ASSETS                                                                         (In millions)
CURRENT ASSETS:
    Cash and equivalents                                             $    16.3                  $    10.4
    Trade receivables (less allowances of $9.4 million and $6.7
      million, respectively)                                             150.9                      149.8
    Inventories (Note 2)                                                 118.9                       67.1
    Other current assets                                                  17.5                       12.8
                                                                     ---------                  ---------
        Total current assets                                             303.6                      240.1
                                                                     ---------                  ---------
PROPERTY, PLANT AND EQUIPMENT:

    Property, plant and equipment, at cost                             1,175.4                    1,119.3
    Less accumulated depreciation                                       (586.1)                    (560.4)
                                                                     ---------                  ---------
        Property - net                                                   589.3                      558.9
                                                                     ---------                  ---------
DEFERRED INCOME TAXES                                                    150.3                      150.3

OTHER ASSETS                                                              54.6                       68.7
                                                                     ---------                  ---------
        TOTAL                                                        $ 1,097.8                  $ 1,018.0
                                                                     =========                  =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Current maturities of long-term debt                             $    11.7                  $    10.9
    Trade payables                                                        76.2                       56.2
    Accrued interest payable                                              12.4                       16.2
    Accrued and other liabilities                                         83.7                       61.1
                                                                     ---------                  ---------
        Total current liabilities                                        184.0                      144.4
                                                                     ---------                  ---------
LONG-TERM DEBT                                                           958.2                      924.8

OTHER LONG-TERM LIABILITIES                                               45.2                       39.6

COMMITMENTS AND CONTINGENCIES (Note 3)                                       -                          -

STOCKHOLDERS' EQUITY (DEFICIT):

    Class A common stock - par value, $0.0001 per share;
      authorized 125,000,000 shares; issued 55,200,909 shares
      and 54,991,409 shares, respectively, and outstanding
      53,744,338 shares and 53,523,443 shares, respectively                  -                          -
    Capital in excess of par value                                       178.4                      178.2
    Accumulated deficit                                                 (256.1)                    (257.0)
    Common stock in treasury - at cost; 1,456,571 shares and
      1,467,966 shares, respectively                                     (10.8)                     (10.9)
    Accumulated other comprehensive income (loss):
      Minimum pension liability                                           (1.1)                      (1.1)
                                                                     ---------                  ---------
    Total stockholders' equity (deficit)                                 (89.6)                     (90.8)
                                                                     ---------                  ---------
        TOTAL                                                        $ 1,097.8                  $ 1,018.0
                                                                     =========                  =========
<FN>
See notes to condensed consolidated financial statements.
</FN>
                                                             1
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1999 AND 1998 (In millions, except per share data)
--------------------------------------------------------------------------------------------------
                                                              THREE MONTHS ENDED DECEMBER 31,
                                                            --------------------------------------
<S>                                                             <C>                         <C>

                                                               1999                         1998
                                                            ---------                    ---------
NET SALES                                                   $   279.6                    $   198.8
COST OF GOODS SOLD                                              230.2                        178.4
                                                            ---------                    ---------
GROSS MARGIN                                                     49.4                         20.4
SELLING AND ADMINISTRATIVE COSTS                                (26.5)                       (23.5)
                                                            ---------                    ---------
OPERATING INCOME (LOSS)                                          22.9                         (3.1)
INTEREST EXPENSE - Net                                          (22.1)                       (20.6)
OTHER INCOME (EXPENSE) - Net                                      0.6                         (0.8)
                                                            ---------                    ---------
INCOME (LOSS) BEFORE TAXES                                        1.4                        (24.5)
INCOME TAX (EXPENSE) BENEFIT                                     (0.5)                         9.4
                                                            ---------                    ---------
NET INCOME (LOSS)                                                 0.9                    $   (15.1)
                                                                                         =========
ACCUMULATED DEFICIT:
 Beginning of period                                           (257.0)
                                                            ---------
 End of period                                              $  (256.1)
                                                            =========
INCOME (LOSS) PER COMMON SHARE:
 Basic                                                      $    0.02                    $   (0.28)
                                                            =========                    =========
 Diluted                                                    $    0.02                    $    N/A
                                                            =========                    =========
WEIGHTED AVERAGE COMMON AND COMMON
  SHARE EQUIVALENTS

 BASIC:
  WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                     53.7                         53.3

 DILUTED:
  EFFECT OF DILUTIVE SECURITIES:
     Employee and director stock options                          0.3                          0.2
                                                            ---------                    ---------
Weighted average common and common
  share equivalents                                              54.0                         53.5
                                                            =========                    =========

See notes to condensed consolidated financial statements.
                                                             2
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
DECEMBER 31, 1999 AND 1998
---------------------------------------------------------------------------------------------------
                                                                   THREE MONTHS ENDED DECEMBER 31,
                                                                 ----------------------------------
                                                                    1999                      1998
                                                                 --------                  --------
                                                                            (In millions)
<S>                                                                  <C>                       <C>

CASH FLOWS FROM OPERATIONS:
     Net income (loss)                                           $    0.9                  $  (15.1)
     Adjustments to reconcile net income (loss) to net cash
       provided by (used for) operations:
         Depreciation and amortization                               13.3                      15.3
         Deferred tax benefit                                         0.5                      (9.5)
         Change in current assets and liabilities, excluding
           acquisitions and dispositions                             (1.4)                     (0.1)
         Other - net                                                 (1.7)                      1.3
                                                                 --------                  --------
Net cash provided by (used for) operations                           11.6                      (8.1)
                                                                 --------                  --------
CASH FLOWS FROM INVESTMENTS:
     Capital expenditures                                            (8.3)                     (4.3)
     Capitalized interest                                            (0.1)                     (0.4)
     Acquisition of S&G Packaging - net                               1.4                         -
     Other investments - net                                         (0.5)                     (1.1)
                                                                 --------                  --------
Net cash used for investments                                        (7.5)                     (5.8)
                                                                 --------                  --------
CASH FLOWS FROM FINANCING:
     Senior debt - repayments                                        (3.3)                     (1.9)
     Revolving credit agreement borrowings - net                     37.5                      21.5
     Repayment of S&G Packaging revolving credit loan               (32.6)                        -
     Other financing - net                                            0.2                       0.1
                                                                 --------                  --------
Net cash provided by financing                                        1.8                      19.7
                                                                 --------                  --------
Net increase in cash and equivalents                                  5.9                       5.8

Cash and equivalents, beginning of period                            10.4                       5.7
                                                                 --------                  --------

Cash and equivalents, end of period                              $   16.3                  $   11.5
                                                                 ========                  ========

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid (refunded) for:
     Interest                                                    $   24.9                  $   24.3
                                                                 ========                  ========
     Income taxes                                                $      -                  $      -
                                                                 ========                  ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
   ACTIVITIES:
     Property additions                                          $      -                  $    5.6
                                                                 ========                  ========
     Increase (decrease) in accrued & other liabilities          $      -                  $    5.6
                                                                 ========                  ========
Acquisition of S&G Packaging:
     Inventories                                                 $   28.7                  $      -
                                                                 ========                  ========
     Property additions                                          $   35.1                  $      -
                                                                 ========                  ========
     Other assets                                                $   15.1                  $      -
                                                                 ========                  ========
     Trade payables, accrued and other liabilities               $   47.7                  $      -
                                                                 ========                  ========
     Total debt assumed before repayment                         $   32.6                  $      -
                                                                 ========                  ========
See notes to condensed consolidated financial statements.
                                                             3
</TABLE>
<PAGE>




GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------

1. GENERAL
   -------

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements include all normal and recurring  adjustments and accruals
necessary to present  fairly the financial  position as of December 31, 1999 and
the results of operations and cash flows for the three months ended December 31,
1999 and 1998,  including  all the  accounts  of Gaylord  Container  Corporation
(including its subsidiaries, the Company), and are in conformity with Securities
and Exchange  Commission Rule 10-01 of Regulation S-X. The financial  statements
should be read in conjunction with the audited consolidated financial statements
and the notes thereto on Form 10-K for the fiscal year ended September 30, 1999.
<TABLE>
<CAPTION>

2.  INVENTORIES                                             DECEMBER 31,            SEPTEMBER 30,
    -----------                                                 1999                     1999
                                                             ----------               ----------
                                                                       (In millions)
<S>                                                               <C>                      <C>

Inventories consist of:

Finished products                                            $     21.9               $      9.1
In process                                                         80.3                     42.7
Raw materials                                                       9.8                      9.0
Supplies                                                           16.0                     15.0
                                                             ----------               ----------
                                                                  128.0                     75.8
LIFO valuation adjustment                                          (9.1)                    (8.7)
                                                             ----------               ----------
         Total                                               $    118.9               $     67.1
                                                             ==========               ==========
</TABLE>

3.  CONTINGENCIES
    -------------

The  Company  is not a party to any  legal  proceedings  other  than  litigation
incidental to normal business activities, except as described below:

On October 18 and December 4, 1995,  the Company,  its  directors and certain of
its officers were named in complaints  which were  consolidated  in the Court of
Chancery of the State of Delaware  alleging  breach of  fiduciary  duties on two
counts.  The first count is a putative class action and the second is an alleged
derivative  claim  brought  on  behalf of the  Company  against  the  individual
defendants.  Both  counts  allege  that  (i) the  Company's  stockholder  Rights
Agreement,  adopted on June 12, 1995 and approved by the Company's  stockholders
on June 28, 1995; (ii) amendments to the Company's charter and by-laws,  adopted
on July 21,  1995;  and (iii) a  redemption  of  warrants  in June 1995 all were
designed to entrench the individual  defendants in their capacities as directors
at the  expense  of  stockholders  who  otherwise  would  have been able to take
advantage of a sale of the Company.  The complaint  asks the court,  among other
things, to rescind the amendments and prohibit the use of the stockholder

                                       4
<PAGE>



GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
----------------------------------------------------------------

Rights Agreement to discourage any bona fide acquirer.  In the alternative,  the
plaintiffs seek compensatory  damages. The court certified a class of holders of
common stock as of June 12, 1995, and their successors in interest,  transferees
and assignees,  immediate and remote (excluding defendants and any person, firm,
trust,  corporation or other entity related to the  defendants).  On January 26,
2000, the Chancery Court granted defendants' motion for summary judgment on both
counts and dismissed the class action in its entirety.  Plaintiffs  have 30 days
to file an appeal of the  decision.  If an appeal  is filed,  the  Company  will
continue to defend itself vigorously.

On October 23, 1995,  a rail tank car exploded on the premises of the  Bogalusa,
Louisiana plant of Gaylord Chemical Corporation,  a wholly owned,  independently
operated  subsidiary  of the Company.  The  accident  resulted in the venting of
certain chemicals,  including by-products of nitrogen tetroxide,  a raw material
used  by the  plant  to  produce  dimethyl  sulfoxide,  a  solvent  used  in the
manufacture of pharmaceutical and agricultural chemicals. More than 160 lawsuits
have been filed in both federal and state courts  naming as  defendants  Gaylord
Chemical  Corporation and/or the Company,  certain of their respective  officers
and other  unrelated  corporations  and  individuals.  The lawsuits,  which seek
unspecified  damages,  allege personal injury,  property damage,  economic loss,
related  injuries and fear of injuries as a result of the accident.  On April 1,
1996, the federal judge dismissed all but one of the federal actions for failing
to state claims under federal law and remanded the remaining state law claims to
the  district  court in  Washington  Parish,  Louisiana,  where  they  have been
consolidated.  Discovery  in the  remaining  federal  action,  a suit to recover
alleged clean-up costs, was ordered coordinated with the Louisiana state action.

Under an agreed Case Management  Order (CMO),  all actions in Louisiana  arising
out  of  the  October  23,  1995  explosion  have  been   consolidated   in  the
Twenty-Second   Judicial  district  in  Washington  Parish,   Louisiana,   where
plaintiffs  have  filed a single  Consolidated  Master  Petition  (CMP)  against
Gaylord Chemical Corporation,  the Company and twenty-one other defendants.  The
CMP, as amended,  asserts  substantially  all of the claims and theories made in
prior  lawsuits,  including  negligence,  strict  liability and other  statutory
liability.  Compensatory  and  punitive  damages  are  sought.  No  officers  or
directors of Gaylord Chemical Corporation or the Company are named defendants in
the CMP, as amended. The status of all lawsuits pending before the filing of the
CMP,  some of which  name  officers  of  Gaylord  Chemical  Corporation  and the
Company,  will be determined by the trial court after class certification issues
are finally resolved.

                                       5
<PAGE>

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
----------------------------------------------------------------

In November 1997, the Louisiana trial court certified these  consolidated  cases
as a class action. The trial court certified,  and the Court of Appeal and State
Supreme Court upheld,  a class  consisting of allegedly  injured  parties in the
City of Bogalusa  and portions of  Washington  Parish,  Louisiana,  and parts of
Marion,  Walthall  and Pike  counties  in  Mississippi.  The trial court did not
certify a single, mandatory class for punitive damages.

In September 1999,  potential class members received notice of the action and in
the next few months will receive  detailed  proof of claim forms,  which must be
completed  by May 5, 2000.  A total of 3,978  persons  have  "opted  out" of the
Louisiana  class  action.  Of those,  3,888 have  claims  pending in the related
Mississippi  tort  litigation  described  below.  No trial date has been set for
these  consolidated  Louisiana  actions.  The  Company  and its  subsidiary  are
vigorously contesting all claims.

The  Company,  Gaylord  Chemical  Corporation  and  numerous  other  third-party
companies  have been named as defendants in 13 actions  brought by plaintiffs in
Mississippi  state  court,  who claim injury as a result of the October 23, 1995
accident at the Bogalusa facility.  These cases, which purported to be on behalf
of over 11,000 individuals, were not filed as a class action but rather have all
been  consolidated  before a single judge in Hinds County,  Mississippi.  All of
these cases allege claims and damages similar to those in Louisiana State Court.
Discovery  in the  consolidated  cases has been  coordinated  with the  on-going
discovery  in the  Louisiana  class  action.  Following  several  rulings by the
Mississippi trial court, over 7,000  individuals'  claims in these  consolidated
actions  have  been  either  dismissed  or  voluntarily  withdrawn.  As with the
Louisiana  class  action,  the  Company  and Gaylord  Chemical  Corporation  are
vigorously  contesting all claims in Mississippi  arising out of the October 23,
1995 explosion.  In addition,  the Company and Gaylord Chemical Corporation have
filed cross-claims for indemnity and contribution against  co-defendants in both
of the Mississippi and Louisiana  actions.  The Mississippi trial court selected
the first 20  plaintiffs  whose  claims  were  tried to a jury on all  issues of
liability  and damages  beginning on March 29, 1999 and ending on June 23, 1999.
During trial, the court dismissed with prejudice the claims of three plaintiffs.
The jury  found  Gaylord  Chemical  Corporation  and a  co-defendant,  Vicksburg
Chemical  Company,  equally at fault for the accident.  The jury also found that
none of the 17 remaining  plaintiffs  whose claims went to the jury had suffered
any damages.  Consequently,  no defendant was found liable, and no plaintiff was
awarded  any  damages.  Finally,  the jury  determined  that the Company was not
responsible for the conduct of its  subsidiary,  Gaylord  Chemical  Corporation.
Plaintiffs' motion for a new trial or, alternatively,  judgment  notwithstanding
the verdict  was denied on  November  16,  1999.  Plaintiffs  did not appeal the
verdict or the trial  court's  post-trial  rulings.  The trial court has ordered
that the results of this trial will not be binding,  either as to  liability  or
compensatory  or  punitive  damages,  on  any  of the  other  plaintiffs  in the
Mississippi  consolidated actions.  Rather, the trial court ordered that each of
the approximately  4,000 Mississippi  plaintiffs will be required to prove their
own individual claims of liability or compensatory or punitive damages.

                                       6
<PAGE>


GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
----------------------------------------------------------------

The Company and Gaylord  Chemical  Corporation  maintain $127 million of general
liability  insurance and filed separate suits seeking a declaratory  judgment of
coverage for the October 23, 1995 accident  against their general  liability and
directors and officers liability insurance carriers.  The carrier with the first
layer of coverage  under the general  liability  policies  has agreed to pay the
Company's and Gaylord Chemical  Corporation's  defense costs under a reservation
of rights.

The  coverage  action  against the  liability  insurers  was tried to a judge in
December 1998.  During trial,  one of the excess carriers settled by agreeing to
pay $5 million,  its full policy limits.  Trial concluded  against the remaining
defendants on December 10, 1998 and on February 25, 1999, the trial court issued
an opinion  holding  that the  Company  and Gaylord  Chemical  Corporation  have
insurance  coverage  for the October 23, 1995  accident  under eight of the nine
remaining  policies.  The  judge  held  that  language  in one  policy  excluded
coverage.  On March 30, 1999,  the trial court denied all the insurers'  motions
for a new trial.  The eight insurers  issuing  policies where coverage was found
have filed an appeal of the judgment  with the  Louisiana  Court of Appeal.  The
Company and Gaylord Chemical Corporation have appealed that part of the judgment
excluding  coverage  under  one  policy.  Including  coverage  afforded  by  the
settlement and by the trial court's  decision,  the Company and Gaylord Chemical
Corporation have in excess of $110 million in insurance coverage for the October
23, 1995 accident.

On May 18 and May 24, 1999, the Company was named in lawsuits  consolidated
in the Federal District Court for the Eastern District of Pennsylvania  alleging
civil violations of Section 1 of the Sherman Act. The complaints,  both putative
class actions,  allege that during the period  October 1, 1993 through  November
30, 1995 the Company agreed with nine other manufacturers of linerboard to raise
or maintain prices.  According to the complaints,  the purpose and effect of the
alleged  conspiracy was artificially to increase prices of corrugated sheets and
corrugated boxes sold to customers. Treble damages and attorney fees are sought.
The Company  has moved to dismiss the  complaints.  After  investigation  of the
facts,  the Company  believes the  allegations  have no merit and is  vigorously
defending itself.

The Company  believes the outcome of such litigation  should not have a material
adverse  effect on the Company's  financial  position,  results of operations or
cash flows.

                                       7
<PAGE>

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
----------------------------------------------------------------

4.  ACQUISITION OF S&G PACKAGING COMPANY L.L.C.
    -------------------------------------------

On October 28, 1999, the Company  acquired the remaining 65 percent share of S&G
Packaging   Company  L.L.C.   (S&G  Packaging)  it  did  not  already  own  from
Smurfit-Stone  Container  Corporation  (Smurfit-Stone).  S&G  Packaging  is  the
largest U.S. producer of retail paper grocery sacks and bags,  consisting of six
converting plants with annual sales of approximately $250 million. In connection
with this transaction, the Company paid to Smurfit-Stone $0.5 million for its 65
percent  interest and repaid through  borrowings on its revolver,  $32.6 million
outstanding  on  S&G  Packaging's  revolving  loan  facility,   which  was  then
terminated.  In  addition,  Smurfit-Stone  forgave  $4.0  million  of its  trade
receivable  for kraft paper sold to S&G  Packaging.  S&G Packaging  also entered
into a paper  supply  agreement  to  purchase at market  prices  60,000 tons and
48,000  tons of kraft paper in fiscal 2000 and fiscal  2001,  respectively,  and
36,000 tons each year in fiscal 2002 through 2004, from Smurfit-Stone.

The  Company  has  accounted  for  this  transaction  as  a  purchase   business
combination.  Beginning  on  November  1,  1999,  the  operating  results of S&G
Packaging have been fully consolidated with the Company's Results of Operations.
Prior to November 1, 1999,  the Company  accounted for S&G  Packaging  under the
equity  method  and  recognized  its  proportionate  share of  earnings,  net of
amortization  of goodwill,  in Other Income  (Expense) - Net. The integration of
S&G  Packaging's   corporate  functions  with  the  Company  is  ongoing.   This
integration  will  provide  cost savings by  eliminating  duplicative  functions
including S&G Packaging's  corporate  headquarters  facility.  In addition,  the
Company  announced  on  January  7,  2000 that it will  close the S&G  Packaging
facility in Yulee,  Florida to better align  capacity with customer  needs.  The
Company has  allocated  approximately  $4.4 million of the  acquisition  cost to
purchase  accounting reserves primarily relating to severance and closure costs.
The  majority  of these  costs will be  expended  over the next 12  months.  The
Company will continue to evaluate its purchase accounting reserves for severance
and closure costs and the appropriateness of its purchase price allocation.

                                       8

<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS
---------------------
First Quarter of Fiscal 2000 Compared with First Quarter of Fiscal 1999

Net sales for the first quarter of fiscal 2000 were $279.6  million  compared to
net sales of $198.8  million  for the first  quarter of fiscal  1999.  Operating
income for the current  quarter was $22.9 million  compared to an operating loss
of $3.1 million for the  year-ago  quarter.  Net income for the current  quarter
totaled $0.9 million, or $0.02 per basic and diluted common share, compared to a
net loss of $15.1  million,  or $0.28 per basic common  share,  for the year-ago
quarter.

On October 28, 1999, the Company  acquired the remaining 65 percent share of S&G
Packaging   Company  L.L.C.   (S&G  Packaging)  it  did  not  already  own  from
Smurfit-Stone Container Corporation. The operating results of S&G Packaging have
been fully  consolidated with the Company's  Results of Operations  beginning on
November 1, 1999. The Company  accounted for S&G Packaging  prior to November 1,
1999,  under the equity method of accounting and  recognized  its  proportionate
share of earnings,  net of amortization of goodwill, in Other Income (Expense) -
Net.

In the first quarter of fiscal 2000, sales increased  approximately  $50 million
due to higher volume, primarily as a result of the S&G Packaging acquisition and
increased  volume in the corrugated  converting  facilities.  Higher average net
selling prices contributed approximately $31 million in the quarter-over-quarter
comparison.

Gross margin for the first  quarter of fiscal 2000  increased  to $49.4  million
from $20.4 million in the prior-year quarter primarily due to higher average net
selling prices ($31 million) and higher volume ($8 million)  offset  somewhat by
higher fiber costs ($9 million).

Corrugated  shipments increased  approximately 6 percent in the first quarter of
fiscal 2000 to 3.8 billion  square feet  compared to 3.6 billion  square feet in
the year-ago quarter,  primarily as a result of increased demand. Industrial and
retail bag  shipments  increased to 63 thousand tons during the first quarter of
fiscal 2000 from 13 thousand tons in the prior-year quarter primarily due to the
inclusion  of  shipments  by S&G  Packaging  in the last two months of the first
quarter of fiscal 2000. Total mill production increased  approximately 4 percent
to 4,432 tons per day (TPD, calculated on the basis of the number of days in the
period)  during the first  quarter of fiscal  2000  compared to 4,272 TPD in the
prior-year  quarter.  Quarter-over-quarter,  containerboard and unbleached kraft
paper production  increased  approximately 3 percent to 3,644 TPD from 3,542 TPD
and 8 percent to 788 TPD from 730 TPD, respectively, over the prior-year.

                                       9
<PAGE>


Average net selling prices increased for corrugated  products and multiwall bags
by approximately 14 percent and 3 percent, respectively, in the first quarter of
fiscal 2000 compared with the  prior-year  quarter.  Average net selling  prices
increased  for  the  Company's  domestic   linerboard,   export  linerboard  and
unbleached  kraft paper  approximately  45  percent,  23 percent and 26 percent,
respectively,  in the first  quarter of fiscal 2000 compared to the same quarter
in the prior year.

Fiber costs increased due to higher average  delivered costs for recycled fiber,
which  consists  primarily of old corrugated  containers  (OCC) and double lined
kraft (DLK)  clippings.  The average  delivered  cost for OCC and DLK  increased
approximately  68  percent  and 103  percent,  respectively,  while the  average
delivered   cost  for  wood   chips   decreased   approximately   4  percent  in
quarter-over-quarter comparison.

Selling and  administrative  costs were $26.5  million  for the current  quarter
compared  to  $23.5  million  for the  year-ago  period.  This  increase  is due
primarily to selling and administrative costs associated with S&G Packaging.

Net interest  expense  increased to $22.1 million in the first quarter of fiscal
2000 from $20.6  million  in the  prior-year  quarter  due  primarily  to higher
average  debt  levels.  The higher  average  debt  levels are due in part to the
assumption  of $32.6  million  of debt as a  result  of the  acquisition  of the
remaining 65 percent of S&G Packaging during the current quarter.

In the first quarter of fiscal 2000,  the Company  recognized a tax provision of
$0.5  million  compared  to a tax  benefit  of $9.4  million  in the  prior-year
quarter.  The  effective  tax rate was 38 percent  in both the first  quarter of
fiscal 2000 and in the first quarter of fiscal 1999.

                                       10

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
General

The Company has  historically  financed  its  operations  from cash  provided by
operations,  borrowings under its credit agreements and the issuance of debt and
equity  securities.  The Company's  principal  uses of cash are to pay operating
expenses,  fund capital expenditures and service debt. The Company is prohibited
from paying  dividends and making  purchases of  additional  common stock by the
terms of its bank credit agreement and public debt securities.

Net cash provided by  operations  for the first quarter of fiscal 2000 was $11.6
million,  compared  with net cash used by  operations  of $8.1  million  for the
year-ago period. The improvement was primarily due to improved operating results
in the period-over-period comparison.

Cash flows  used for  investing  activities  increased  in the first  quarter of
fiscal 2000 to $7.5 million from $5.8 million in the year-ago quarter  primarily
due to a $4.0 million  increase in capital  expenditures in the first quarter of
fiscal 2000  compared to the  year-ago  quarter,  offset in part by the net cash
received in conjunction with the S&G Packaging acquisition. In the first quarter
of  fiscal  1999,  the  Company  incurred  a $5.6  million  liability  for costs
associated with a capital project, that was subsequently financed in fiscal 1999
through a secured debt obligation.

Cash flows from  financing  activities  decreased  to $1.8  million in the first
quarter of fiscal 2000 from $19.7  million in the  year-ago  quarter.  Financing
activities in the fiscal 2000 quarter included the repayment of $32.6 million of
S&G Packaging's revolving loan facility.

In fiscal 1992,  the Company  determined  it would be unlikely that its Antioch,
California  unbleached  kraft  paper mill (the East  Mill),  which was closed in
fiscal  1991,  could be sold as a mill site or that the East Mill,  or a portion
thereof,  could be operated economically by the Company. In the first quarter of
fiscal  2000,  the  Company  incurred  approximately  $0.5  million of costs for
demolition  and  maintenance  of the East Mill.  Such costs were net of proceeds
from the sale of scrap.  At December  31,  1999,  approximately  $0.6 million of
spending  remained  to  complete  the  demolition  work.  Management  expects to
complete the remaining  demolition during fiscal 2000. At December 31, 1999, the
balance sheet reserve for demolition was approximately  $0.6 million and the net
book value of the East Mill was $10.5 million.

                                       11
<PAGE>

Liquidity

At December 31, 1999, the Company had cash and equivalents of $16.3 million,  an
increase of $5.9 million from  September 30, 1999, as cash provided by operating
and  financing  activities  exceeded  cash  used  for  investments.  Total  debt
increased  $34.2  million to $969.9  million at  December  31,  1999 from $935.7
million at September 30, 1999 as a result of increased revolver borrowings.  The
increase in revolver  borrowings  was  primarily due to the repayment of the S&G
Packaging  revolving  loan  facility.  At  December  31,  1999,  the Company had
approximately  $133 million of borrowings  outstanding,  and approximately  $107
million  of  credit  available  under  the  revolving  portions  of  its  credit
agreements.

At December 31, 1999, the Company had primary working capital (Trade receivables
plus  Inventories  less Trade payables) of $193.6 million,  an increase of $32.9
million  from  September  30, 1999,  primarily  due to primary  working  capital
acquired in the S&G Packaging acquisition.

Consolidation among major  containerboard  industry producers during the past 12
to 24 months has resulted in the "mothballing" of approximately 5 percent of the
domestic containerboard  capacity.  This rationalization,  combined with limited
new  containerboard  capacity  additions and stable domestic demand growth,  has
resulted in relatively  balanced industry  supply/demand  conditions.  Published
industry  prices for linerboard  and kraft paper remained  unchanged at December
1999 compared to September 1999. Because of continuing strong market conditions,
the Company has  announced  price  increases of $50 per ton for  linerboard  and
grocery bag paper  effective  February 1, 2000 and multiwall bag paper effective
March 1, 2000. In addition,  the Company has announced a minimum of a 12 percent
increase in corrugated products effective March 1, 2000.

The  Company's  average  delivered  cost of DLK and wood chips  were  relatively
unchanged  from fourth  quarter  fiscal 1999 levels while average  delivered OCC
prices  decreased  approximately  8 percent in the first  quarter of fiscal 2000
compared to fourth quarter  fiscal 1999.  However,  in February 2000,  published
prices for  recycled  fiber  increased  approximately  10 percent to 35 percent.
Fiber  markets are  difficult to predict;  thus there can be no assurance of the
future direction of wood chip, OCC and DLK prices.

Based  on  current   prices  for  converted   products   (before  the  announced
February/March  price  increases),  current  raw  material  costs  and  assuming
maintenance levels of capital spending,  the Company believes that cash provided
by operations and borrowings  available under its credit agreements will provide
adequate  liquidity  to  meet  debt  service  obligations  and  other  liquidity
requirements  over the next 12 to 24  months.  Unless  there  is  product  price
improvement beyond current levels for converted products,  however,  the Company
will need to seek additional covenant modifications to its bank credit agreement
by the end of December 2000 to maintain continued access to its liquidity.

                                       12
<PAGE>


PENDING ACCOUNTING STANDARDS
----------------------------

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging Activities" ("SFAS 133"), which establishes accounting and reporting
standards  for  derivative  instruments.  An amendment to SFAS 133 was issued in
July 1999,  which  defers by one year the  effective  date of SFAS 133 to fiscal
years  beginning  after  June 15,  2000.  The  statement  will be adopted by the
Company in fiscal 2001. The Company has not yet determined what effect,  if any,
the statement will have on its results of operations or financial position.

YEAR 2000 READINESS DISCLOSURE
------------------------------

The "Year 2000 Issue" refers  generally to the potential  problems that software
and processing  systems could  encounter in determining  the correct century for
the year. Software and processing systems with date-sensitive functions that are
not Year 2000 compliant may not be able to  distinguish  whether "00" means 1900
or 2000,  which may  result in system  failures  or the  creation  of  erroneous
results.

Following  the end of the  Company's  fiscal  year in  September  1999,  and the
calendar  year in December  1999,  the Company  experienced  no major  incidents
related to the Year 2000 Issue.

The Company incurred  approximately  $5.0 million to correct potential  problems
related to the Year 2000  Issue.  The  Company  funded its Year 2000 effort with
cash from operations and borrowings under its revolving credit agreements.

IT systems were  verified for accuracy  across the Year 2000 boundary as well as
other special calendar date situations.  A national consulting firm specializing
in Year 2000 issues assisted the Company throughout the planning process and was
retained to assist in the Year 2000 verification  testing.  The testing approach
employed was intended to identify all  potential  problems with  processing  the
Year  2000.  It is  impractical  to  assure  that all  potential  problems  were
identified  during  these  testing  procedures.   Therefore,   the  Company  may
experience limited problems into Year 2000. The IT staff, with the assistance of
designated  outside  vendor  support,  is prepared  to react and  correct  these
problems in a timely fashion,  as it does with problems that occur in the normal
course of business.

A consulting  firm  specializing in industrial  controls  developed an equipment
inventory  and assisted in the  validation of equipment  compliance  for certain
non-IT systems at the Company's paper mills. At its other  facilities,  internal
resources, both operational and IT staff, were used to inventory and to validate
the  non-IT  systems.   All  business   critical  non-IT  systems  used  in  the
manufacturing and conversion processes have been remediated,  verified,  and are
operating properly in Year 2000.

                                       13
<PAGE>

The  Company  believes  that  many of its  customers,  suppliers  and  financial
institutions  are also  impacted by the Year 2000 Issue,  which could affect the
Company.  The Company  has  assessed  the  compliance  efforts of a  significant
portion of the Company's  critical partners.  To date, no material  deficiencies
have  been  identified.  If  the  Company's  current  or  future  customers,  or
suppliers,  however, fail to achieve Year 2000 compliance,  the Company believes
that, due to lack of  concentration  of major  customers or critical  suppliers,
results of  operations,  financial  position or cash flow are not expected to be
materially adversely affected.

The Company  experienced  no unplanned  downtime of  production  facilities as a
result of Year 2000.  Contingency  plans have been  developed  to respond to any
system incidents.  Any system failure which results in a business  disruption is
expected  to be handled  in a timely  fashion,  as would any  normal  day-to-day
failures.  These potential  disruptions are not expected to result in a material
adverse  impact on the Company's  results of operations,  financial  position or
cash flow.

                                       14

<PAGE>


The preceding "Year 2000 Readiness Disclosure" contains various  forward-looking
statements  which  represent the  Company's  beliefs or  expectations  regarding
future events. The words "believes,"  "projected," "expects,"  "anticipates" and
similar  expressions  are  intended  to  identify  forward-looking   statements.
Forward-looking   statements   include,   without   limitation,   the  Company's
expectations  as to when it will complete the  remediation and testing phases of
its Year 2000 program as well as its Year 2000 contingency  plans; its estimated
cost of  achieving  Year  2000  readiness;  and the  Company's  belief  that its
internal systems and assets will be Year 2000 compliant in a timely manner.  All
forward-looking  statements  involve a number of risks  and  uncertainties  that
could cause the actual results to differ materially from the projected  results.
Factors that may cause these  differences  include,  but are not limited to, the
availability of qualified personnel and other information  technology resources;
the ability to identify and remediate all date-sensitive  lines of computer code
or to replace embedded computer chips in affected systems or equipment;  and the
actions and ability of  third-party  suppliers,  and  customers to  successfully
identify and eliminate any of their own Year 2000 problems.

                       ------------------------------


Forward-looking  statements in this filing,  including those in the footnotes to
the financial statements, are made pursuant to the safe harbor provisions of the
Private Securities  Litigation Reform Act of 1995. When used in this filing, the
words "believes," "projected," "expects," "anticipates," "estimates" and similar
expressions   are  intended  to  identify   forward-looking   statements.   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,  energy  and other  manufacturing  costs,
fluctuations in demand for the Company's  products,  Year 2000 readiness issues,
potential  equipment   malfunctions  and  pending  litigation.   For  additional
information see the Company's Form 10-K filing for the most recent fiscal year.

                                       15
<PAGE>




                           PART II. OTHER INFORMATION
                           --------------------------
Item 1.  Legal Proceedings.

              The  Company  is not a party to any legal  proceedings  other than
              litigation  incidental to normal  business  activities,  except as
              described in "Note 3 of Notes to Condensed  Consolidated Financial
              Statements."  The Company  believes the outcome of such litigation
              will not have a material adverse effect on the Company's financial
              position, results of operations or cash flows.

Item 2.  Changes in Securities.

              Not applicable.

Item 3.  Defaults Upon Senior Securities.

              Not applicable.

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

              On  February  8, 2000,  the  Company  held its  annual  meeting of
              stockholders  at which the  following  issues  were  voted upon by
              holders of the Company's common stock:

The Company's ten directors were re-elected by the following vote:

                                            For                      Withheld
                                        ----------                   --------
              Mary Sue Coleman          51,191,079                    428,610
              Harve A. Ferrill          51,203,949                    415,730
              John E. Goodenow          51,205,449                    414,230
              David B. Hawkins          51,205,249                    414,430
              Warren J. Hayford         51,296,899                    322,780
              Charles S. Johnson        47,615,660                  4,004,029
              Jerry W. Kolb             51,195,349                    424,330
              Ralph L. MacDonald Jr.    51,205,449                    414,230
              Marvin A. Pomerantz       51,302,668                    317,021
              Thomas H. Stoner          51,204,349                    415,330

An increase of 1,500,000  shares  available  under the Company's  1997 Long-Term
Equity  Incentive  Plan was  approved by a vote of  31,915,966  for;  19,725,899
against; 61,153 withheld.

The  appointment  of Deloitte & Touche LLP to continue to serve as the Company's
independent  auditors in fiscal 2000 was ratified by a vote of  51,614,741  for;
69,071 against; 19,205 withheld.

Item 5.  Other Information.

              Not applicable.

Item 6.  Exhibits and Reports on Form 8-K.

              Number and Description of Exhibit
              ---------------------------------

              a) 27.1(a) Financial Data Schedule

              b) No  reports  on Form  8-K  were  filed  for the  quarter  ended
                 December 31, 1999
                 ------------------

                 (a) Filed with this Quarterly Report

                                       16
<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 thereunto duly authorized.


                                           GAYLORD CONTAINER CORPORATION

Date:  February 11, 2000                    /s/ Marvin A. Pomerantz
                                           -------------------------------
                                           Marvin A. Pomerantz
                                           Chairman and Chief Executive Officer


Date:  February 11, 2000                   /s/ Jeffrey B. Park
                                           --------------------------------
                                           Jeffrey B. Park
                                           Vice President-Controller
                                           (Principal Accounting Officer)


                                       17