<PAGE>


                                    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, 2001

                                       OR
                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 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 January 31, 2002, the registrant had outstanding 56,016,572
shares of its $0.0001 par value Class A Common Stock (including 230,479 shares
held in trust for the benefit of the warrant holders) and 230,479 redeemable
exchangeable warrants to obtain Class A Common Stock.


<PAGE>

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                   PAGE
PART I.  FINANCIAL INFORMATION                                    NUMBERS
<S>      <C>                                                      <C>
Item 1.  Financial Statements                                     1  - 10

Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations            11 - 17

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                          18

Item 2.  Changes in Securities                                      18

Item 3.  Defaults Upon Senior Securities                            18

Item 4.  Submission of Matters to a Vote of Security
         Holders                                                    18

Item 5.  Other Information                                          18

Item 6.  Exhibits and Reports on Form 8-K                           18


SIGNATURES                                                          19

</TABLE>


<PAGE>

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND SEPTEMBER 30, 2001

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,         SEPTEMBER 30,
$ in millions, except per share data                                                     2001                 2001
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                <C>
ASSETS

Current assets:
   Cash and equivalents                                                               $      5.8        $      9.2
   Trade receivables (less allowances of $8.3 and
       $8.1, respectively)                                                                 117.7             138.6
   Inventories (Note 2)                                                                    100.0              84.1
   Other current assets                                                                     23.1              31.7
                                                                                      ----------        ----------
     Total current assets                                                                  246.6             263.6
                                                                                      ----------        ----------
Property, plant and equipment                                                            1,138.4           1,135.1
Less accumulated depreciation                                                             (608.2)           (595.7)
                                                                                      ----------        ----------
   Property - net                                                                          530.2             539.4
Deferred income taxes                                                                      171.2             165.9
Other assets                                                                                40.3              47.0
                                                                                      ----------        ----------
Total                                                                                 $    988.3        $  1,015.9
                                                                                      ==========        ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Current maturities of long-term debt
             (Notes 5 and 7)                                                          $    105.3        $     23.4
   Trade payables                                                                           40.9              45.1
   Accrued interest payable                                                                 11.9              15.7
   Accrued and other liabilities                                                            40.2              56.8
                                                                                      ----------        ----------
     Total current liabilities                                                             198.3             141.0
                                                                                      ----------        ----------
Long-term debt (Note 5 and 7)                                                              861.9             936.5
Other long-term liabilities                                                                 50.0              52.8
Commitments and contingencies (Note 3)                                                        --                --
Stockholders' deficit
   Class A common stock-par value, $0.0001 per share; authorized 125,000,000
    shares; issued 57,149,694 shares and 57,165,694 shares, respectively, and
    outstanding 56,002,205 shares and 55,980,272 shares,
    respectively (Note 7)                                                                     --                --
   Capital in excess of par value                                                          180.5             180.3
   Accumulated deficit                                                                    (292.3)           (283.5)
   Common stock in treasury - at cost;
    1,147,489 shares and 1,185,422 shares,
    respectively                                                                            (8.5)             (8.8)
   Accumulated other comprehensive loss:
    Unrealized holding loss                                                                 (0.3)             (1.1)
    Minimum pension liability                                                               (1.3)             (1.3)
                                                                                      ----------        ----------
     Total stockholders' deficit                                                          (121.9)           (114.4)
                                                                                      ----------        ----------
Total                                                                                 $    988.3        $  1,015.9
                                                                                      ==========        ==========

</TABLE>

See notes to condensed consolidated financial statements



                                        1


<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                             THREE MONTHS ENDED
                                                                                 DECEMBER 31,
In millions, except per share data                                        2001                  2000
-------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                      <C>
Net sales                                                            $   243.2                $   295.1
Cost of goods sold                                                       215.1                    243.8
                                                                     ---------                ---------
   Gross margin                                                           28.1                     51.3
Selling and administrative costs                                         (24.5)                   (27.1)
                                                                     ---------                ---------
   Operating earnings                                                      3.6                     24.2
Interest expense - net                                                   (21.1)                   (22.4)
Other income - net (Note 6)                                                3.1                      0.7
                                                                     ---------                ---------
   Income (loss) before taxes and accounting change                      (14.4)                     2.5
Income tax benefit (expense)                                               5.8                     (1.0)
                                                                     ---------                ---------
Income (loss) before accounting change                                    (8.6)                     1.5
Accounting change (Note 4)                                                --                        0.1
                                                                     ---------                ---------
   Net income (loss)                                                      (8.6)                     1.6
                                                                     ---------                ---------
Other comprehensive income, net of tax                                     0.8                     --
                                                                     ---------                ---------
   Comprehensive income (loss)                                       $    (7.8)               $     1.6
                                                                     =========                =========

ACCUMULATED DEFICIT:
  Beginning of Period                                                $  (283.5)
  Net loss                                                                (8.6)
  Excess of cost over issuance price of
    treasury stock                                                        (0.2)
                                                                     ---------
  End of Period                                                      $  (292.3)
                                                                     =========

INCOME (LOSS) PER COMMON SHARE
  Basic                                                              $    (0.15)              $     0.03
                                                                     ==========               ==========
  Diluted                                                            $    (0.15)              $     0.03
                                                                     ==========               ==========

WEIGHTED AVERAGE COMMON AND COMMON SHARE EQUIVALENTS

BASIC:
  WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                               56.0                     54.9

DILUTED:
  EFFECT OF DILUTIVE SECURITIES:
     Employee and director stock options                                      -                        -
                                                                     ----------               ----------

Weighted average common and common
  share equivalents                                                        56.0                     54.9
                                                                     ==========              ===========
</TABLE>


See notes to condensed consolidated financial statements.

                                        2

<PAGE>

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
MONTHS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>

                                                                  THREE MONTHS ENDED DECEMBER 31,
In millions                                                         2001                    2000
-------------------------------------------------------------------------------------------------
<S>                                                               <C>                      <C>
CASH FLOWS FROM OPERATIONS:

Net income (loss)                                                 $  (8.6)                 $   1.6
Adjustments to reconcile net income to net
  cash provided by (used in) operations:
    Depreciation and amortization                                    13.8                     13.7
    Deferred tax (benefit) expense                                   (5.8)                     1.0
    Net gain on sale of equity investment                            (2.9)                      --
    Change in current assets and liabilities,
      excluding acquisitions and dispositions                        (9.7)                   (23.4)
    Other - net                                                      (2.9)                    (1.0)
                                                                  -------                  -------
Net cash used in operations                                         (16.1)                    (8.1)
                                                                  -------                  -------
CASH FLOWS FROM INVESTMENTS:
  Capital expenditures                                               (3.2)                    (7.0)
  Capitalized interest                                               (0.1)                    (0.2)
  Proceeds from asset sales                                          10.0                      2.4
  Other investments - net                                            (0.1)                    (0.1)
                                                                  -------                  -------
Net cash provided by (used in) investments                            6.6                     (4.9)
                                                                  -------                  -------

CASH FLOWS FROM FINANCING:
  Senior debt repayments                                            (11.3)                    (1.9)
  Revolving credit agreement borrowings - net                        18.6                     20.0
  Other-net                                                          (1.2)                      --
                                                                  -------                  -------
Net cash provided by financing                                        6.1                     18.1
                                                                  -------                  -------
Net increase (decrease) in cash and equivalents                      (3.4)                     5.1
Cash and equivalents, beginning of period                             9.2                      0.7
                                                                  -------                  -------
Cash and equivalents, end of period                               $   5.8                  $   5.8
                                                                  =======                  =======

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest expense                                    $  23.9                  $  25.6
Cash paid for income taxes                                        $   0.1                  $   0.1
</TABLE>


See notes to condensed consolidated financial statements.



                                        3

<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, 2001 and
the results of operations and cash flows for the three months ended December 31,
2001 and 2000, 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, 2001.

Pending Accounting Standards--In July 2001, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") 142,
"Goodwill and Other Intangible Assets", which establishes accounting and
reporting for goodwill and other intangible assets. The Company will adopt this
statement in fiscal 2003 and does not expect the adoption will have a material
impact on its results of operations or financial position.

In August 2001, FASB issued SFAS 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets", that is effective for all fiscal years beginning after
December 15, 2001. The purpose of SFAS 144 is to establish a single accounting
model for long-lived assets to be disposed of by sale. SFAS 144 establishes that
all long-lived assets classified as held for sale are measured at the lower of
its carrying amount or fair value less cost to sell and to cease depreciation.
SFAS 144 also applies to assets held within discontinued operations, which were
formerly measured on a net realizable basis. In addition, SFAS 144 intends to
resolve significant implementation issues related to SFAS 121 "Accounting for
the Impairment of Long-Lived Assets to be Disposed Of". The Company has not yet
assessed the impact of adopting SFAS 144 on its results of operations or
financial position.



                                        4

<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

2. INVENTORIES

Inventories consist of:

<TABLE>
<CAPTION>
                                             DECEMBER 31,          September 30,
                                            ------------------------------------
In millions                                   2001                     2001
--------------------------------------------------------------------------------
<S>                                         <C>                       <C>
Finished products                           $   21.4                  $  21.9
In process                                      67.7                     51.0
Raw materials                                    8.9                      9.6
Supplies                                        15.6                     16.0
                                            --------                  -------
                                               113.6                     98.5
LIFO valuation adjustment                      (13.6)                   (14.4)
                                            --------                  -------
  Total                                     $  100.0                  $  84.1
                                            ========                  =======
</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 23, 1995, a rail tank car of nitrogen tetroxide exploded at the
Bogalusa, Louisiana plant of Gaylord Chemical Corporation, a wholly owned,
independently operated subsidiary of the Company. Following the explosion, more
than 160 lawsuits were filed against the Company, Gaylord Chemical and third
parties alleging personal injury, property damage, economic loss, related
injuries and fear of injuries. Plaintiffs sought compensatory and punitive
damages.

In 1997, the Washington Parish, Louisiana trial court certified these
consolidated cases as a class action. By the deadline to file proof of claim
forms, 16,592 persons had filed and 3,978 persons had "opted out" of the
Louisiana class proceeding. All but 12 of the-opt out claimants are also
plaintiffs in the Mississippi action described below. The claims of 18 trial
plaintiffs, selected at random, are scheduled for trial in the Louisiana class
action in September 2002.


                                       5

<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED


The Company, Gaylord Chemical Corporation and other third-parties were also
named defendants in approximately 4,000 individual actions brought by plaintiffs
in Mississippi State Court, who claim injury as a result of the same accident.
These cases were consolidated in Hinds County, Mississippi and allege claims and
damages similar to those in Louisiana State Court.

Claims of the first 20 plaintiffs were tried to a jury in 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,
awarded no damages to any of them, and returned a verdict in favor of all
defendants. The jury also determined that the Company was not responsible for
the conduct of its subsidiary, Gaylord Chemical Corporation. Plaintiffs did not
appeal the verdict or the trial court's rulings. The trial court has not set a
trial date for the next group of 20 Mississippi plaintiffs.

The Company and Gaylord Chemical Corporation filed suits seeking a declaratory
judgment of insurance coverage for claims arising from the October 23, 1995
accident. The coverage action against the liability insurers was tried to a
judge in December 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 policies
that were at issue. The judge held that language in one policy excluded
coverage. The Louisiana Court of Appeal affirmed the trial court's finding that
coverage was afforded by eight of the nine carriers and reversed the trial
court's finding that the ninth carrier's policy did not provide coverage.
Following denial of the writ, the Company and Gaylord Chemical Corporation had
in excess of $125 million in insurance coverage for the October 23, 1995,
accident. The insurers appealed the decision of the Court of Appeal to the
Louisiana Supreme Court, and on December 7, 2001 the Louisiana Supreme Court
denied the insurers' application for writ of certiorari to review the Court of
Appeals decision. The Supreme Court also denied the insurers' motion to
reconsider denial of the writ.

On May 4, 2001, the Company and Gaylord Chemical Corporation agreed in principle
to settle all claims arising out of the October 23, 1995 explosion. In exchange
for payments by its primary insurance carrier and the first five excess layers
of coverage and assignment of the Company's insurance coverage action against
the remaining carriers, the Company and Gaylord Chemical Corporation will
receive full releases and/or dismissals of all claims for damages, including
punitive damages. Neither


                                       6

<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

the Company nor Gaylord Chemical Corporation contributed to the settlement. The
settlement agreement was fully executed on September 14, 2001, and all
settlement funds have been deposited in escrow. A hearing for preliminary
approval of the settlement will be scheduled by the Spring of 2002.

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 to artificially increase prices of corrugated sheets
and corrugated boxes sold to customers. Treble damages and attorney fees are
sought. Motions to dismiss the complaints were denied, and defendants' appeal of
the order granting class certification is pending in the Third Circuit Court of
Appeals. After investigation of the facts, the Company believes the allegations
are without merit and is vigorously defending itself.

On October 1, 2001, two hedge funds filed a putative class action seeking to
enjoin the Temple-Inland Inc. (Temple-Inland) tender offers (see Note 7) on the
ground that the Company had breached fiduciary duties allegedly owed to
plaintiffs. Plaintiffs also contend that trustees for the Company's two senior
note issues violated the Trust Indenture Act and that Temple-Inland's tender
offers are coercive. The lawsuit, pending in Federal District Court in New York,
names the Company, Temple-Inland and the trustees for the Company's 9 3/4%
senior notes and 9 3/8% senior notes. As of October 5, 2001, plaintiffs together
owned $500,000 principal amount of the 9 3/4% senior notes and a short position
on 212,200 shares of the Company's stock, both purchased shortly before the
tender offers were announced.

On October 11, 2001, Temple-Inland agreed to extend the consent payment date for
the note tender offer until the expiration date for the offer. The parties
subsequently agreed that any discovery and a hearing on plaintiffs' claims would
be completed in 12 days following a new announcement, if any, of any revised
tender offer by Temple-Inland. Temple-Inland announced a new tender offer on
December 3, 2002, and the parties then agreed that in view of the materially
revised terms, to delay the Company's obligation to answer or otherwise move
against the complaint until after expiration of the new tender offer. On January
7, 2002 the new tender offer expired and the original merger agreement was
terminated. On January 21, 2002, Temple-Inland announced a new tender offer
that, unless extended, expires on February 19, 2002. The Company has until
February 20, 2002 to answer or otherwise plead to the complaint.



                                       7

<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED


On February 6, 2002, plaintiffs filed a motion for a temporary restraining order
requesting that Temple-Inland be: (i) restrained from distributing an amount not
in excess of $3 million (inclusive of expenses) of the tender offer payment for
the 9 3/4% senior notes and the 9 3/8% senior notes as security against
plaintiff's counsel's contested fees; and (ii) ordered to deposit $3 million in
an interest-bearing escrow account pending resolution of the fee request.

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.

4. ADOPTION OF NEW ACCOUNTING STANDARDS

Effective October 1, 2000, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended, which establishes accounting and reporting standards
for derivative instruments. The cumulative effect of this accounting change was
income net of taxes of $0.1 million.

5. LONG-TERM DEBT

Over the next twelve months, the Company will be required to repay approximately
$5 million of non-bank debt and reduce commitments and or repay bank credit
agreement debt by $20 million on or before March 31, 2002, and by an additional
$100 million on or before December 31, 2002. The Company anticipates that it
will fund these repayments with cash from operations, borrowings under its
credit agreements and the proceeds from the sale of assets. If the Company is
unable to generate the required cash from these sources it will be required to
seek modifications to or refinance its bank credit agreement. There are no
assurances that either of these alternatives can be implemented successfully.

Under the terms of its bank credit agreement the Company is required to meet
financial performance covenants including minimum levels of EBITDA, as defined,
and interest coverage ratios each quarter based upon the latest twelve months
results. Based on current prices for converted and primary products (including
the impact of the December decline in published prices), raw materials and
energy (including current natural gas commitments), and assuming maintenance
levels of capital spending, no material increase in required working capital and
the successful implementation of a cost reduction program, the Company believes
that it will comply with its financial covenants and that cash provided by
operations, borrowings available under its credit agreements and asset sales,
will provide adequate


                                       8


<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

liquidity to meet debt service obligations and other liquidity requirements up
to March 31, 2003. Unless there is price improvement by then, the Company will
need to renegotiate or refinance its bank credit agreement. In the event that
product prices decline further and/or projected sales volumes are not achieved,
the Company will be required to renegotiate its bank agreement covenants and
will likely require an additional infusion of liquidity through asset sales
and/or expansion of its bank credit lines. There are no assurances that either
of these alternatives can be implemented successfully. The Company will be
required to refinance its bank credit agreement debt by June 2003 when it
matures. At December 31, 2001, the bank credit agreement contained $241 million
of borrowing commitments to the Company, of which approximately $203 million
including $10 million of standby letters of credit were outstanding and
approximately $38.8 million of credit available under the revolving portion of
its credit agreements of which $17.5 million was restricted in its availability.

6.   SALE OF INTEREST IN JOINT VENTURE

Other income - net includes a $2.9 million pretax gain from the sale of a 50
percent interest in a joint venture that produced corrugated sheets and
corrugated containers in Mexico.

7.   SUBSEQUENT EVENT

On January 21, 2002, the Company and Temple-Inland Inc. announced the signing of
a new definitive merger agreement (Merger Agreement) which expires on March 15,
2002. Temple-Inland's previously announced tender offers and merger agreement to
acquire the Company were allowed to expire on January 7, 2002, because an
insufficient amount of notes were tendered to satisfy the minimum note condition
applicable to the offers. If all conditions to the new Merger Agreement are
satisfied, the Company and Temple-Inland would be merged (Merger). Pursuant to
the Merger Agreement, Temple-Inland extended cross-conditional tender offers for
all of the Company's outstanding shares of stock and senior and senior
subordinated notes (collectively, the Notes). Consummation of the Merger is
contingent upon, among other things: (i) at least two-thirds of the outstanding
shares of the Company's stock being validly tendered and not withdrawn prior to
the expiration date of the offer, and (ii) at least 90% in aggregate principal
amount of the outstanding Notes of each series being validly tendered and not
withdrawn prior to the expiration of the offer. The transaction is also subject
to regulatory approval and satisfaction or waiver of customary closing
conditions.

The tender offers for the outstanding shares of the Company and for the Notes
are scheduled to expire on February 19, 2002 but may be extended by
Temple-Inland under certain conditions. If the

                                       9

<PAGE>


GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONCLUDED

offers are accepted, each holder of common stock will receive $1.17 per share.
Holders of the 9 3/8% senior notes due 2007 and the 9 3/4% senior notes due 2007
will receive $900 per $1,000 principal amount and holders of the 9 7/8% senior
subordinated notes due 2008 will receive $400 per $1,000 principal amount.

On January 31, 2002, Temple-Inland announced that: it had received tenders and
consents from at least a majority in principal amount of each series of notes;
the withdrawal deadline with respect to the Notes offer had passed; and Notes
that have been tendered or may be tendered may not be withdrawn. If the Merger
is consummated, supplemental indentures, executed by the Company, governing each
issue of the notes will become operative, which eliminate substantially all of
the restrictive covenants, including change in control provisions. For further
information, see the Company's Schedule 14D-9, dated January 21, 2002 and as
subsequently amended.

                                       10

<PAGE>



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

RESULTS OF OPERATIONS

FIRST QUARTER OF FISCAL 2002 COMPARED WITH FIRST QUARTER OF FISCAL 2001

Net sales for the first quarter of fiscal 2002 were $243.2 million compared to
net sales of $295.1 million for the first quarter of fiscal 2001. Operating
income for the current quarter was $3.6 million compared to $24.2 million for
the year-ago quarter. Net loss for the current quarter totaled $8.6 million, or
$0.15 per basic and diluted common share, compared to net income of $1.6
million, or $0.03 per basic and diluted common share, for the year-ago quarter.

In the first quarter of fiscal 2002, net sales decreased $51.9 million due to
decreased volume ($28 million) and decreased average net selling prices ($24
million). Weak domestic economic conditions and the relative strength of the
U.S. dollar versus foreign currencies were the primary causes of the reduced
volume and lower selling prices.

Gross margin for the first quarter of fiscal 2002 decreased to $28.1 million
from $51.3 million in the prior-year quarter primarily from lower average
selling prices for its products ($20 million, net of $4 million in lower
containerboard and kraft paper costs) and lower volume ($12 million). This
decline was partially offset by favorable fiber costs ($1 million), reduced SG&A
costs ($3 million), and lower manufacturing costs ($7 million).

Corrugated shipments decreased approximately 10 percent in the first quarter of
fiscal 2002 to 3.5 billion square feet compared to 3.9 billion square feet in
the year-ago quarter while industrial and retail bag shipments decreased to 77
thousand tons from 81 thousand tons during the same time periods, both primarily
due to weak domestic economic conditions. Total mill production decreased
approximately 7 percent to 3,893 tons per day (TPD, calculated on the basis of
the number of days in the period) during the first quarter of fiscal 2002
compared to 4,195 TPD in the prior-year quarter, due to weak market conditions.
Quarter-over-quarter, containerboard and unbleached kraft paper production
decreased due to market conditions approximately 5 percent to 3,271 TPD from
3,457 TPD and 16 percent to 622 TPD from 738 TPD, respectively, over the
prior-year.

Average net selling prices decreased for corrugated products and retail bags by
approximately 8 percent and 7 percent, respectively, however, average prices
were unchanged for multiwall bags in the first quarter of fiscal 2002 compared
with


                                       11
<PAGE>

the prior-year quarter. Average net selling prices decreased for the Company's
domestic linerboard, export linerboard and unbleached kraft paper approximately
20 percent, 24 percent and 13 percent respectively, in the first quarter of
fiscal 2002 compared to the same quarter in the prior year.

Fiber costs decreased primarily due to lower average delivered costs for old
corrugated containers (OCC) and wood chips of approximately 15 percent and 3
percent, respectively, in the quarter-over-quarter comparison. Average delivered
costs for double lined kraft (DLK) clippings, however, increased approximately 6
percent in the first quarter of fiscal 2002 compared to the same quarter in the
prior year.

Selling and administrative costs were $24.5 million for the current quarter
compared to $27.1 million for the year-ago period. This decrease was due
primarily to staff reductions, reduced use of outside consultants, tightening of
incentive programs and the elimination of non-essential travel, all resulting
from the Company's cost reduction program and was partially offset by
approximately $1.5 million of expenses associated with the Temple-Inland offer.

Net interest expense decreased to $21.1 million in the first quarter of fiscal
2002 from $22.4 million in the prior-year quarter. Lower average borrowing rates
decreased interest expense by approximately $1.7 million, while higher average
debt levels increased interest expense by $0.4 million.

Other income - net included a $2.9 million pretax gain from the sale of a 50
percent interest in a joint venture that produced corrugated sheets and
corrugated containers in Mexico.

In the first quarter of fiscal 2002, the Company recognized a tax benefit of
$5.8 million compared to a tax provision of $1.0 million in the prior-year
quarter. The effective tax rate was 40 percent in both the first quarter of
fiscal 2002 and fiscal 2001.

Effective October 1, 2000, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended, which establishes accounting and reporting standards
for derivative instruments. The cumulative effect of this accounting change was
income net of taxes of $0.1 million.




                                       12
<PAGE>



RECENT DEVELOPMENTS

On January 21, 2002, the Company and Temple-Inland Inc.(Temple-Inland) announced
the signing of a new definitive merger agreement (Merger Agreement) which
expires March 15, 2002. Temple-Inland's previously announced tender offers and
merger agreement to acquire the Company were allowed to expire on January 7,
2002, because an insufficient amount of notes were tendered to satisfy the
minimum note condition applicable to the offers. If all conditions to the new
Merger Agreement are satisfied, the Company and Temple-Inland would be merged
(Merger). Pursuant to the Merger Agreement, Temple-Inland extended
cross-conditional tender offers for all of the Company's outstanding shares of
stock and senior and senior subordinated notes (collectively, the Notes).
Consummation of the Merger is contingent upon, among other things: (i) at least
two-thirds of the outstanding shares of the Company's stock being validly
tendered and not withdrawn prior to the expiration date of the offer, and (ii)
at least 90% in aggregate principal amount of the outstanding Notes of each
series being validly tendered and not withdrawn prior to the expiration of the
offer. The transaction is also subject to regulatory approval and satisfaction
or waiver of customary closing conditions.

The tender offers for the outstanding shares of the Company and for the Notes
are scheduled to expire on February 19, 2002 but may be extended by
Temple-Inland under certain conditions. If the offer is accepted, each holder of
common stock will receive $1.17 per share. Holders of the 9 3/8% senior notes
due 2007 and the 9 3/4% senior notes due 2007 will receive $900 per $1,000
principal amount and holders of the 9 7/8% senior subordinated notes due 2008
will receive $400 per $1,000 principal amount.

On January 31, 2002, Temple-Inland announced that: it had received tenders and
consents from at least a majority in principal amount of each series of notes;
the withdrawal deadline with respect to the Notes offer had passed; and Notes
that have been tendered or may be tendered may not be withdrawn. If the Merger
is consummated, supplemental indentures, executed by the Company, governing each
issue of the notes will become operative which eliminate substantially all of
the restrictive covenants, including change in control provisions. For further
information, see the Company's Schedule 14D-9, dated January 21, 2002 and as
subsequently amended.


                                       13

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

The Company has historically financed its operations through 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 used by operations was $16.1 million and $8.1 million for the first
quarter of fiscal 2002 and fiscal 2001, respectively. The unfavorable comparison
was primarily due to decreased earnings offset somewhat by decreased working
capital requirements. The reduced working capital requirements resulted from
accounts receivable that declined due to reduced sales and the realization of
natural gas contract prepayments.

Cash flows provided by investing activities for the first quarter of fiscal 2002
was $6.6 million, compared with cash flows used in investing activities of $4.9
million in the year-ago quarter. Approximately $8 million of the favorable
change was due to the receipt of proceeds from asset sales, while $4 million was
due to reduced capital expenditures.

Cash flows from financing activities decreased to $6.1 million in the first
quarter of fiscal 2002 from $18.1 million in the year-ago quarter. This decrease
is primarily due to the prepayment of the term loan with the proceeds from the
asset sale.

LIQUIDITY

At December 31, 2001, the Company had cash and equivalents of $5.8 million, a
decrease of $3.4 million from September 30, 2001, as cash used in operations
exceeded cash provided by investing and financing activities. Total debt
increased $7.3 million to $967.2 million at December 31, 2001 from $959.9
million at September 30, 2001 as a result of the increased revolver borrowings
due to decreased earnings from operations.

Over the next twelve months, the Company will be required to repay approximately
$5 million of non-bank debt and reduce commitments and or repay bank credit
agreement debt by $20 million on or before March 31, 2002, and by an additional
$100 million on or before December 31, 2002. The Company anticipates that it
will fund these repayments with cash from operations, borrowings under its
credit agreements and the proceeds from the sale of assets. If the Company is
unable to generate the




                                       14
<PAGE>
required cash from these sources it will be required to seek modifications to
or refinance its bank credit agreement. There are no assurances that either
alternative can be implemented successfully.

Consolidation among major containerboard industry producers has resulted in the
reduction of domestic containerboard capacity. This rationalization, combined
with limited new containerboard capacity additions and market-related downtime
has resulted in relatively balanced industry supply/demand conditions despite
recent weak domestic and export demand. However, due to the weak demand and
despite the above efforts, published industry prices for linerboard and kraft
paper declined $20 per ton and $10 per ton, respectively, in the first quarter
of fiscal 2002 from the end of fourth quarter fiscal 2001 levels. There can be
no assurance as to when or if a domestic and global economic recovery will occur
with a resulting positive impact on prices, however continued economic weakness
will likely have a negative impact on prices for the Company's primary and
converted products.

In the first quarter of fiscal 2002, average delivered costs for wood chips and
OCC were essentially unchanged compared to the fourth quarter of fiscal 2001.
Average delivered prices of DLK increased approximately 10 percent in the first
quarter of fiscal 2002 compared to fourth quarter fiscal 2001. Fiber markets are
difficult to predict; thus, there can be no assurance of the future direction of
wood chip, OCC and DLK prices.

To manage exposures to natural gas price increases during fiscal 2001 and 2002,
the Company entered into a series of fixed price purchase contracts for delivery
of natural gas to two of its mills. The contracts, which expire at various dates
through March 2002, were accounted for under the normal purchase exception of
Statement of Financial Accounting Standard (SFAS) 133 "Accounting for Derivative
Instruments and Hedging Activities", as amended, (SFAS 133) and, accordingly,
are recorded as a cost when the natural gas is delivered. The Company also
entered into a series of natural gas financial swap agreements to manage
exposures to natural gas price increases at one of its mills. Such contracts,
which expire at various dates through March 2002, were accounted for as cash
flow hedges and, accordingly, are recorded at market value as an asset or a
liability at the balance sheet date. Changes to the fair value of such
derivative contracts are recorded to Other comprehensive income (loss). At
December 31, 2001, these derivative contracts represented a liability of $1.0
million with a corresponding unrealized holding loss, net of tax, of $0.3
million included in Accumulated other comprehensive income (loss). Under the
terms of the fixed price contracts and the natural gas financial swap agreements
the Company had on deposit at December 31, 2001, approximately $5.1 million and
classified the deposit as a prepaid expense on the balance sheet.



                                       15
<PAGE>

The three month average of the Company's total natural gas prices paid
(including the effect of the derivative contracts) declined in the first quarter
of fiscal 2002 by 29 percent when compared to the fourth quarter of fiscal 2001.
The natural gas market is difficult to predict, and there can be no assurance of
its future direction.

Under the terms of its bank credit agreement the Company is required to meet
financial performance covenants including minimum levels of EBITDA, as defined,
and interest coverage ratios each quarter based upon the latest twelve months
results. Based on current prices for converted and primary products (including
the impact of the December decline in published prices), raw materials and
energy (including current natural gas commitments), and assuming maintenance
levels of capital spending, no material increase in required working capital and
the successful implementation of a cost reduction program, the Company believes
that it will comply with its financial covenants and that cash provided by
operations, borrowings available under its credit agreements and asset sales,
will provide adequate liquidity to meet debt service obligations and other
liquidity requirements up to March 31, 2003. Unless there is price improvement
by then, the Company will need to renegotiate or refinance its bank credit
agreement. In the event that product prices decline further and/or projected
sales volumes are not achieved, the Company will be required to renegotiate its
bank agreement covenants and will likely require an additional infusion of
liquidity through asset sales and/or expansion of its bank credit lines. There
are no assurances that either of these alternatives can be implemented
successfully. The Company will be required to refinance its bank credit
agreement debt by June 2003 when it matures. At December 31, 2001, the bank
credit agreement contained $241 million of borrowing commitments to the Company,
of which approximately $203 million including $10 million of standby letters of
credit were outstanding and approximately $38.8 million of credit available
under the revolving portion of its credit agreements of which $17.5 million was
restricted in its availability.

PENDING ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS 142,
"Goodwill and Other Intangible Assets", which establishes accounting and
reporting for goodwill and other intangible assets. The Company will adopt this
statement in fiscal 2003 and does not expect the adoption will have a material
impact on its results of operations or financial position.

In August 2001, FASB issued SFAS 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets", that is effective for all fiscal years beginning after
December 15, 2001. The purpose of SFAS 144 is to establish a single accounting
model for long-lived assets to be disposed of by sale. SFAS 144 establishes that
all long-lived assets classified as held for sale are




                                       16
<PAGE>

measured at the lower of its carrying amount or fair value less cost to sell and
to cease depreciation. SFAS 144 also applies to assets held within discontinued
operations, which were formerly measured on a net realizable basis. In addition,
SFAS 144 intends to resolve significant implementation issues related to SFAS
121 "Accounting for the Impairment of Long-Lived Assets to be Disposed Of". The
Company has not yet assessed the impact of adopting SFAS 144 on its results of
operations or financial position.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Interest Rate:

The Company is subject to market risk associated with changes in interest rates
due to its variable rate debt. The impact on the Company's cash flows and
pre-tax results of operations on an annual basis from a 1 percent change in
interest rates is approximately $2.7 million.


Derivative Instruments:

The Company entered into a series of natural gas financial swap agreements to
manage exposures to natural gas price increases. The contracts, which expire at
various dates through March 2002, were accounted for as cash flow hedges and
accordingly are recorded as an asset or a liability at the balance sheet date
equal to their market value. Changes to the fair value of such derivative
contracts are recorded to Other comprehensive income (loss).

The potential change in fair value resulting from a 10 percent change in the
underlying natural gas price would be approximately $0.1 million.


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 BOTH IN THE U. S., AND
GLOBALLY, COMPETITIVE MARKET PRICING, INCREASES IN RAW MATERIAL, ENERGY AND
OTHER MANUFACTURING COSTS, FLUCTUATIONS IN DEMAND FOR THE COMPANY'S PRODUCTS,
POTENTIAL EQUIPMENT MALFUNCTIONS, PENDING LITIGATION AND TIMING AND COMPLETION
OF TEMPLE-INLAND'S ANNOUNCED TENDER OFFERS FOR THE COMPANY'S SECURITIES AND THE
RELATED MERGER TRANSACTION. FOR ADDITIONAL INFORMATION SEE THE COMPANY'S FORM
10-K FILING FOR THE MOST RECENT FISCAL YEAR.


                                       17
<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
              should 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.

              Not applicable.

Item 5.       Other Information.

              Not applicable.

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

              Number and Description of Exhibit

              a)    Exhibits

              Number and Description of Exhibit

               2.1  Agreement and Plan of Merger by and among the Registrant and
                    Temple-Inland Inc. and Temple-Inland Acquisition Corporation
                    dated January 21, 2002

              10.1  Stock Option Agreement by the Registrant and Temple-Inland
                    Inc. dated January 21, 2002

              b)    No reports on Form 8-K were filed for the quarter ended
                    December 31, 2001

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



                                       18
<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 14, 2002             /s/ Marvin A. Pomerantz
                                     ------------------------------------
                                     Marvin A. Pomerantz
                                     Chairman and Chief Executive Officer


Date:  February 14, 2002             /s/ Jeffrey B. Park
                                    -------------------------------
                                     Jeffrey B. Park
                                     Vice President, Finance
                                     (Principal Accounting Officer)




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