<PAGE>   1
                                    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, 2000

                                       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 February 2, 2001, the registrant had outstanding 55,848,462
shares of its $0.0001 par value Class A Common Stock (including 829,635 shares
held in trust for the benefit of the warrant holders) and 829,635 redeemable
exchangeable warrants to obtain Class A Common Stock.


<PAGE>   2
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

                                                                        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 - 13

PART II.       OTHER INFORMATION

Item 1.        Legal Proceedings                                           14

Item 2.        Changes in Securities                                       14

Item 3.        Defaults Upon Senior Securities                             14

Item 4.        Submission of Matters to a Vote of Security
               Holders                                                     14

Item 5.        Other Information                                           14

Item 6.        Exhibits and Reports on Form 8-K                            14


SIGNATURES                                                                 15



<PAGE>   3
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND SEPTEMBER 30, 2000

<TABLE>
<CAPTION>
                                                           DECEMBER 31,        SEPTEMBER 30,
$, In millions                                                2000                2000
===========================================================================================
<S>                                                        <C>                <C>
ASSETS
Current assets:
   Cash and equivalents                                    $      5.8         $      0.7
   Trade receivables (less allowances of $8.0 and
       $7.8, respectively)                                      150.9              149.6
   Inventories (Note 2)                                         111.3               92.6
   Other current assets                                          18.7               18.2
-------------------------------------------------------------------------------------------
     Total current assets                                       286.7              261.1
-------------------------------------------------------------------------------------------
Property, plant and equipment:                                1,127.6            1,179.9
Less accumulated depreciation                                  (560.1)            (604.9)
-------------------------------------------------------------------------------------------
   Property - net                                               567.5              575.0
Deferred income taxes                                           146.2              147.1
Other assets                                                     50.4               51.0
-------------------------------------------------------------------------------------------
Total                                                      $  1,050.8         $  1,034.2
===========================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Current maturities of long-term debt                    $     16.7         $     16.9
   Trade payables                                                61.7               59.9
   Accrued interest payable                                      13.0               16.7
   Accrued and other liabilities                                 67.0               68.8
-------------------------------------------------------------------------------------------
     Total current liabilities                                  158.4              162.3
-------------------------------------------------------------------------------------------
Long-term debt                                                  929.5              911.2
Other long-term liabilities                                      47.7               47.5
Commitments and contingencies (Note 3)                            --                 --
Stockholders' equity (deficit)
   Class A common stock-par value, $0.0001
    per share; authorized 125,000,000 shares;
    issued 56,923,694 shares and 55,223,694
    shares, respectively, and outstanding
    55,581,113 shares and 53,829,101 shares,
    respectively                                                  --                 --
   Capital in excess of par value                               179.3              179.1
   Accumulated deficit                                         (253.5)            (254.9)
   Common stock in treasury - at cost;
    1,342,580 shares and 1,394,593 shares,
    respectively                                                 (9.9)             (10.3)
   Accumulated other comprehensive loss:
    Minimum pension liability                                    (0.7)              (0.7)
-------------------------------------------------------------------------------------------
     Total stockholders' equity (deficit)                       (84.8)             (86.8)
-------------------------------------------------------------------------------------------
Total                                                      $  1,050.8         $  1,034.2
===========================================================================================
</TABLE>


See notes to condensed consolidated financial statements.



                                       1
<PAGE>   4

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED
                                                                       DECEMBER 31,
In millions, except per share data                               2000              1999
--------------------------------------------------------------------------------------------
<S>                                                           <C>               <C>
Net sales                                                     $   295.1         $   279.6
Cost of goods sold                                                243.8             230.2
--------------------------------------------------------------------------------------------
   Gross margin                                                    51.3              49.4
Selling and administrative costs                                  (27.1)            (26.5)
--------------------------------------------------------------------------------------------
   Operating earnings                                              24.2              22.9
Interest expense - net                                            (22.4)            (22.1)
Other income (expense) - net                                        0.7               0.6
--------------------------------------------------------------------------------------------
   Income before taxes and accounting change                        2.5               1.4
Income tax expense                                                 (1.0)             (0.5)
--------------------------------------------------------------------------------------------
Income before accounting change                                     1.5               0.9
Accounting change (Note 4)                                          0.1               --
--------------------------------------------------------------------------------------------
   Net income                                                 $     1.6         $     0.9
============================================================================================

ACCUMULATED DEFICIT:
  Beginning of Period                                         $  (254.9)
  Excess of cost over issuance price of
    treasury stock                                                 (0.2)
                                                              -----------
  End of Period                                               $  (253.5)
                                                              ===========

INCOME PER COMMON SHARE
  Basic                                                       $     0.03        $     0.02
                                                              ===========       ============
  Diluted                                                     $     0.03        $     0.02
                                                              ===========       ============

WEIGHTED AVERAGE COMMON AND COMMON SHARE EQUIVALENTS

BASIC:
  WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                       54.9              53.7

DILUTED:
  EFFECT OF DILUTIVE SECURITIES:
     Employee and director stock options                            --                0.3
                                                              -----------       ------------
Weighted average common and common
  share equivalents                                                54.9              54.0
                                                              ===========       ============
</TABLE>


See notes to condensed consolidated financial statements.


                                       2
<PAGE>   5
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
DECEMBER 31, 2000 AND 1999


                                                 THREE MONTHS ENDED DECEMBER 31,
In millions                                             2000        1999
--------------------------------------------------------------------------------
CASH FLOWS FROM OPERATIONS:
Net income                                            $   1.6      $   0.9
Adjustments to reconcile net income to net
  cash provided by (used in) operations:
    Depreciation and amortization                        13.7         13.3
    Deferred tax expense                                  1.0          0.5
    Change in current assets and liabilities,
      excluding acquisitions and dispositions           (23.4)        (1.4)
    Other - net                                          (1.0)        (1.7)
--------------------------------------------------------------------------------
Net cash (used in) provided by operations                (8.1)        11.6
--------------------------------------------------------------------------------

CASH FLOWS FROM INVESTMENTS:
  Capital expenditures                                   (7.0)        (8.3)
  Capitalized interest                                   (0.2)        (0.1)
  Proceeds from asset sales                               2.4           --
  Acquisition - net                                        --          1.4
  Other investments - net                                (0.1)        (0.5)
--------------------------------------------------------------------------------
Net cash used in investments                             (4.9)        (7.5)
--------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING:
  Senior debt repayments                                 (1.9)        (3.3)
  Revolving credit agreement borrowings - net            20.0          4.9
  Other financing - net                                    --          0.2
--------------------------------------------------------------------------------
Net cash provided by financing                           18.1          1.8
--------------------------------------------------------------------------------
Net increase in cash and equivalents                      5.1          5.9
Cash and equivalents, beginning of period                 0.7         10.4
--------------------------------------------------------------------------------
Cash and equivalents, end of period                   $   5.8      $  16.3
================================================================================

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest expense                        $  25.6      $  24.9
Cash paid for income taxes                            $   0.1      $    --
Supplemental schedule of non-cash
   investing and financing activities:
    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
<PAGE>   6

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, 2000 and
the results of operations and cash flows for the three months ended December 31,
2000 and 1999, 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, 2000.

2.   INVENTORIES

Inventories consist of:

                                               DECEMBER 31,    September 30,
                                            ----------------------------------
In millions                                        2000             2000
------------------------------------------------------------------------------
Finished products                                 $ 29.3          $ 29.1
In process                                          66.3            53.2
Raw materials                                       11.8             6.7
Supplies                                            15.4            14.9
------------------------------------------------------------------------------
                                                   122.8           103.9
LIFO valuation adjustment                          (11.5)          (11.3)
------------------------------------------------------------------------------
  Total                                          $ 111.3          $ 92.6
==============================================================================

3.   CONTINGENCIES

The Company has a contract to sell a specified amount of electricity from its
cogeneration facility to Pacific Gas & Electricity ("PG&E") through 2013. The
Company does not intend to terminate this contract, however, if terminated by
the Company, penalties of approximately $6.7 million could be imposed against
the Company. At the end of the first quarter of fiscal 2001, the receivable due
from PG&E was $3.8 million. At the end of January 2001, the amount outstanding
was $6.4 million including $2.8 million that is past due. In February 2001 PG&E
made a $0.4 million payment on the amounts owed. Although not certain, the
Company believes substantially all amounts due from PG&E will be collected.

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 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



                                       4
<PAGE>   7

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


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, all actions in Louisiana arising out of
the October 23, 1995, accident have been consolidated in the Twenty-Third
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.

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.

The trial court required all persons who claim exposure within the class
boundaries to complete and file proofs by June 21, 2000. By that deadline,
16,592 persons filed proof of claim forms. In addition, 3,978 persons have
"opted out" of the Louisiana class proceeding. All but 92 of the opt out
claimants are also plaintiffs in the Mississippi action described below. On July
21, 2000, 18 initial trial plaintiffs were selected at random from the class
claimants based on their claimed locations


                                       5
<PAGE>   8

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


of exposure. The claims of these 18 will be tried to a jury in an initial
compensatory damage trial set to begin on June 12, 2001. The liability results
of this first phase will bind all class members and defendants. For any
defendant found liable for punitive damages a second phase punitive damage trial
will begin one week later. In this second phase, the jury will be asked to award
punitive damages, if any, for the entire Louisiana class. The Company and
Gaylord Chemical are vigorously contesting all claims arising out of the October
23, 1995, explosion.

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 purport 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, accident. 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, 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' motions for a new trial
or, alternatively, judgment notwithstanding the verdict were all denied.
Plaintiffs did not timely appeal the verdict or the trial court's rulings. The
trial court has ordered that the results of the first 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


                                       6
<PAGE>   9

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


approximately 4,000 Mississippi plaintiffs will be required to prove their own
individual claims of liability or compensatory or punitive damages. The trial
court has set a trial date of January 15, 2002 for the next group of 20
Mississippi plaintiffs.

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. 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. The Louisiana Court of Appeal heard oral arguments on November
18, 2000, but has not issued a decision. 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 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 discovery is
proceeding. After investigation of the facts, the Company believes the
allegations are without merit and is vigorously defending itself.



                                       7
<PAGE>   10

GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


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.

4.   ADOPTION OF NEW ACCOUNTING STANDARDS

Effective October 1, 2000, the Company adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), 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.














                                       8
<PAGE>   11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS

FIRST QUARTER OF FISCAL 2001 COMPARED WITH FIRST QUARTER OF FISCAL 2000

Net sales for the first quarter of fiscal 2001 were $295.1 million compared to
net sales of $279.6 million for the first quarter of fiscal 2000. Operating
income for the current quarter was $24.2 million compared to $22.9 million for
the year-ago quarter. Net income for the current quarter totaled $1.6 million,
or $0.03 per basic and diluted common share, compared to a net income of $0.9
million, or $0.02 per basic and diluted common share, for the year-ago quarter.

In the first quarter of fiscal 2001, sales increased approximately $15.5 million
due primarily to increased average net selling prices ($15 million). Increased
volume in fiscal 2001 primarily due to the additional month of S&G Packaging
sales was offset by reduced mill volume.

Gross margin for the first quarter of fiscal 2001 increased to $51.3 million
from $49.4 million in the prior-year quarter primarily from higher average
selling prices for its products ($11 million, net of $4 million in higher paper
costs) and lower average fiber costs ($8 million). These gains were partially
offset by higher energy costs ($8 million) and by reduced mill volume
($8 million).

Corrugated shipments increased approximately 3 percent in the first quarter of
fiscal 2001 to 3.9 billion square feet compared to 3.8 billion square feet in
the year-ago quarter. Industrial and retail bag shipments increased to 81
thousand tons during the first quarter of fiscal 2001 from 63 thousand tons in
the prior-year quarter primarily due to the inclusion of shipments by S&G
Packaging for all three months in the first quarter of fiscal 2001 in contrast
to only two months of shipments for the first quarter of fiscal 2000. S&G
Packaging became a wholly owned subsidiary of the Company on October 28,
1999. Total mill production decreased approximately 5 percent to 4,195 tons per
day (TPD, calculated on the basis of the number of days in the period) during
the first quarter of fiscal 2001 compared to 4,432 TPD in the prior-year
quarter, due to market conditions. Quarter-over-quarter, containerboard and
unbleached kraft paper production decreased due to market conditions
approximately 5 percent to 3,457 TPD from 3,644 TPD and 6 percent to 738 TPD
from 788 TPD, respectively, over the prior-year.

Average net selling prices increased for corrugated products and multiwall bags
by approximately 8 percent and 4 percent, respectively, and decreased 4 percent
for retail bags in the

                                       9
<PAGE>   12
first quarter of fiscal 2001 compared with the prior-year quarter. Average net
selling prices increased for the Company's domestic linerboard and unbleached
kraft paper approximately 4 percent and 2 percent, respectively, and decreased 2
percent for export linerboard in the first quarter of fiscal 2001 compared to
the same quarter in the prior year.

Fiber costs decreased primarily due to lower average delivered costs for
recycled fiber, which consists of old corrugated containers (OCC) and double
lined kraft (DLK) clippings. The average delivered cost for OCC and DLK
decreased approximately 26 percent and 44 percent, respectively, in the first
quarter of fiscal 2001 compared to the same quarter in the prior year. In
addition, the average delivered cost for wood chips decreased approximately 6
percent in the quarter-over-quarter comparison.

Energy costs increased primarily due to an increase in natural gas prices.
Natural gas prices increased 110 percent in the first quarter of fiscal 2001
compared to the same fiscal quarter in the prior year.

Selling and administrative costs were $27.1 million for the current quarter
compared to $26.5 million for the year-ago period. This increase is due
primarily to costs associated with one additional month of S&G Packaging in the
current quarter due to S&G Packaging becoming a wholly owned subsidiary of the
Company on October 28, 1999.

Net interest expense increased to $22.4 million in the first quarter of fiscal
2001 from $22.1 million in the prior-year quarter. Lower average debt levels
decreased interest expense by approximately $0.2 million, while higher average
borrowing rates increased interest expense by $0.5 million.

In the first quarter of fiscal 2001, the Company recognized a tax provision of
$1.0 million compared to $0.5 million in the prior-year quarter. The effective
tax rate was 40 percent in the first quarter of fiscal 2001 and 38 percent in
the first quarter of fiscal 2000.

Effective October 1, 2000, the Company adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), 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.



                                       10
<PAGE>   13
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 for the first quarter of fiscal 2001 was $8.1
million, compared with net cash provided by operations of $11.6 million for the
year-ago period. The decrease was primarily due to increased working capital
requirements.

Cash flows used for investing activities decreased in the first quarter of
fiscal 2001 to $4.9 million from $7.5 million in the year-ago quarter primarily
due to proceeds from the sale of assets during the first quarter of fiscal 2001.

Cash flows from financing activities increased to $18.1 million in the first
quarter of fiscal 2001 from $1.8 million in the year-ago quarter. The increase
is primarily due to increased net borrowings from the Company's revolving credit
facility to support the increase in working capital needs.

LIQUIDITY

At December 31, 2000, the Company had cash and equivalents of $5.8 million, an
increase of $5.1 million from September 30, 2000, as cash provided by financing
activities exceeded cash used for operating and investing activities. Total debt
increased $18.1 million to $946.2 million at December 31, 2000 from $928.1
million at September 30, 2000 as a result of the increased revolver borrowings.
At December 31, 2000, the Company had approximately $138 million of borrowings
outstanding and approximately $124 million of credit available under the
revolving portions of its credit agreements. At December 31, 2000, the Company
had available liquidity (cash and cash equivalents plus revolver credit
available) of approximately $130 million.

The Company has a contract to sell a specified amount of electricity from its
cogeneration facility to Pacific Gas & Electricity ("PG&E") through 2013. The
Company does not intend to terminate this contract, however, if terminated by
the Company, penalties of approximately $6.7 million could be imposed against
the Company. At the end of the first quarter of fiscal 2001, the receivable due
from PG&E was $3.8 million. At the end of January 2001, the amount outstanding
was $6.4 million including $2.8 million that is past due. In February 2001 PG&E
made a $0.4 million payment on the amounts owed. Although not certain, the
Company believes substantially all amounts due from PG&E will be collected.

At December 31, 2000, the Company had primary working capital (Trade receivables
plus Inventories less Trade payables) of $200.5 million, an increase of $18.2
million from September 30, 2000, primarily due to higher inventory levels for
rollstock.

The rationalization of capacity associated with industry consolidation
activities and reduced capacity utilization rates


                                       11
<PAGE>   14
over the past several years combined with limited new containerboard capacity
additions and have resulted in relatively balanced industry supply/demand
conditions. During fiscal 2000, published prices of linerboard and grocery sack
paper increased by $50 per ton. Subsequently, the Company implemented
corresponding price increases for its corrugated products in fiscal 2000.
Published industry prices for linerboard and kraft paper remained unchanged at
December 2000 compared to September 2000. In January 2001, published prices for
linerboard declined by $15 per ton.

In the first quarter of fiscal 2001, average delivered costs for wood chips were
essentially unchanged compared to the fourth quarter of fiscal 2000. Average
delivered prices of DLK and OCC decreased approximately 41 and 17 percent,
respectively, in the first quarter of fiscal 2001 compared to fourth quarter
fiscal 2000. Fiber markets are difficult to predict; thus, there can be no
assurance of the future direction of wood chip, OCC and DLK prices.

In the first quarter of fiscal 2001, natural gas prices increased 23 percent
versus the fourth quarter of fiscal 2000. Currently, average natural gas prices
quoted on the New York Mercantile Exchange for the quarter ending March 2001 are
substantially higher than the previous quarter. The Company has fixed price
contracts for a portion of its natural gas needs, and is continuing to evaluate
additional fixed price contracts and hedging strategies. The natural gas markets
are very difficult to predict, however, and there an be no assurance of the
future direction of these prices.

Based on current prices for converted products adjusted for the reduction in
published prices for linerboard, current raw material and energy costs
(including currently quoted futures prices for natural gas) 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 for converted products beyond current levels, however, the Company
will need to seek covenant modifications to its bank credit agreement by the end
of December 2001.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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 a annual basis from a 1 percent change in
interest rates is approximately $2.4 million.




                                       12
<PAGE>   15
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, POTENTIAL EQUIPMENT
MALFUNCTIONS AND PENDING LITIGATION.













                                       13
<PAGE>   16

                           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.

          On February 7, 2001, 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
                                      ------------------------------------------
          Daniel P. Casey               48,213,784               702,604
          Mary Sue Coleman              48,194,853               721,535
          Harve A. Ferrill              48,209,145               707,243
          John E. Goodenow              48,211,281               705,107
          David B. Hawkins              48,205,798               710,590
          Warren J. Hayford             48,194,507               721,881
          Charles S. Johnson            48,206,388               710,000
          Jerry W. Kolb                 48,208,789               707,599
          Ralph L. MacDonald Jr.        48,214,435               701,953
          Marvin A. Pomerantz           48,095,223               821,165



The appointment of Deloitte & Touche LLP to continue to serve as the Company's
independent auditors in fiscal 2001 was ratified by a vote of 48,652,170 for;
169,548 against; 94,670 withheld.

Item 5.   Other Information.

          Not applicable.

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

          Number and Description of Exhibit

          a)     No reports on Form 8-K were filed for the quarter ended
                 December 31, 2000

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




                                       14
<PAGE>   17

                                   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, 2001                     /s/ Marvin A. Pomerantz
                                            ------------------------------------
                                            Marvin A. Pomerantz
                                            Chairman and Chief Executive Officer


Date:  February 14, 2001                     /s/ Jeffrey B. Park
                                            ------------------------------------
                                            Jeffrey B. Park
                                            Vice President, Finance
                                            (Principal Accounting Officer)















                                       15