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 June 30, 1999

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

          For Quarter Ended June 30, 1999 Commission file number 1-9915


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

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

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


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___


         As of July 30, 1999, the registrant had outstanding  53,460,938  shares
of its $0.0001 par value Class A Common Stock  (including  1,471,997 shares held
in trust for the  benefit  of the  warrant  holders)  and  1,471,997  redeemable
exchangeable warrants to obtain Class A Common Stock.


<PAGE>




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

Item 1.        Financial Statements                                1 - 9

Item 2.        Management's Discussion and Analysis of
               Financial Condition and Results of Operations      10 - 18

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

Item 1.        Legal Proceedings                                     19

Item 2.        Changes in Securities                                 19

Item 3.        Defaults Upon Senior Securities                       19

Item 4.        Submission of Matters to a Vote of Security
               Holders                                               19

Item 5.        Other Information                                     19

Item 6.        Exhibits and Reports on Form 8-K                      19


SIGNATURES                                                           20
----------


<PAGE>
<TABLE>
<CAPTION>

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

CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND SEPTEMBER 30, 1998
--------------------------------------------------------------------------------------------

                                                             JUNE 30,           SEPTEMBER 30,
                                                               1999                 1998
                                                            ---------             ----------
<S>                                                       <C>                    <C>

ASSETS                                                                 (In millions)
CURRENT ASSETS:
    Cash and equivalents                                    $     8.7              $     5.7
    Trade receivables (less allowances of $6.2 million
      and $6.4 million, respectively)                           129.2                  122.4
    Inventories (Note 2)                                         82.8                   73.2
    Other current assets                                         12.8                    9.5
                                                            ---------              ---------
        Total current assets                                    233.5                  210.8
                                                            ---------              ---------

PROPERTY, PLANT AND EQUIPMENT:
    Property, plant and equipment, at cost                    1,125.6                1,104.1
    Less accumulated depreciation                              (562.8)                (530.7)
                                                            ---------              ---------
        Property - net                                          562.8                  573.4
                                                            ---------              ---------

DEFERRED INCOME TAXES                                           148.1                  121.5

OTHER ASSETS                                                     70.6                   74.1
                                                            ---------              ---------
        TOTAL                                               $ 1,015.0              $   979.8
                                                            =========              =========

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
    Current maturities of long-term debt                    $     7.2              $     9.7
    Trade payables                                               52.2                   42.3
    Accrued interest payable                                     12.8                   16.2
    Accrued and other liabilities                                79.0                   69.0
                                                            ---------              ---------
        Total current liabilities                               151.2                  137.2
                                                            ---------              ---------

LONG-TERM DEBT                                                  924.7                  863.3

OTHER LONG-TERM LIABILITIES                                      28.0                   26.8

COMMITMENTS AND CONTINGENCIES (Note 3)                            -                      -

STOCKHOLDERS' DEFICIT:
    Class A common stock - par value, $.0001 per share;
     authorized 125,000,000 shares; issued 54,932,392
     shares and 54,786,492 shares, respectively,  and
     outstanding 53,457,025 shares and 53,273,928
     shares, respectively                                         -                      -
    Capital in excess of par value                              178.1                  177.4
    Retained deficit                                           (253.0)                (210.6)
    Common stock in treasury - at cost; 1,475,367
     shares and 1,512,564 shares, respectively                  (10.9)                 (11.2)
    Accumulated Other Comprehensive Income:
     Minimum pension liability                                   (3.1)                  (3.1)
                                                            ---------              ---------
    Total stockholders' deficit                                 (88.9)                 (47.5)
                                                            ---------              ---------
        TOTAL                                               $ 1,015.0              $   979.8
                                                            =========              =========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>

                                                       1



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<TABLE>
<CAPTION>

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

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
JUNE 30, 1999 AND 1998 (In millions, except per share data)
-------------------------------------------------------------------------------------------------
                                                                   THREE MONTHS ENDED JUNE 30,
                                                                ---------------------------------
<S>                                                             <C>                 <C>

                                                                   1999                1998
                                                                ---------           ---------
NET SALES                                                       $   229.0           $  212.1
COST OF GOODS SOLD                                                  193.1              188.8
                                                                ---------           ---------
GROSS MARGIN                                                         35.9               23.3
SELLING AND ADMINISTRATIVE COSTS                                    (25.3)             (23.6)
                                                                ---------           ---------
OPERATING EARNINGS (LOSS)                                            10.6               (0.3)
INTEREST EXPENSE - Net                                              (21.6)             (19.9)
OTHER EXPENSE - Net                                                  (2.0)              (0.4)
                                                                ---------           ---------
LOSS BEFORE TAXES AND EXTRAORDINARY ITEM                            (13.0)             (20.6)
INCOME TAX BENEFIT                                                    5.0                7.9
                                                                ---------           ---------
NET LOSS BEFORE EXTRAORDINARY ITEM                                   (8.0)             (12.7)
EXTRAORDINARY LOSS (Note 4)                                           -                 (1.2)
                                                                ---------           ---------
NET LOSS                                                             (8.0)          $  (13.9)
                                                                =========           =========

RETAINED DEFICIT:
 Beginning of period                                               (245.0)
                                                                ---------
 End of period                                                  $  (253.0)
                                                                =========

LOSS PER COMMON SHARE:
 Basic:

   Net loss before extraordinary item                           $   (0.15)          $  (0.24)
   Extraordinary loss                                                 -                (0.02)
                                                                ---------           ---------
   Net Loss                                                     $   (0.15)          $  (0.26)
                                                                =========           =========

 Diluted: (A)

   Net loss before extraordinary item                           $   N/A             $   N/A
   Extraordinary loss                                               N/A                 N/A
                                                                ---------           ---------
   Net Loss                                                     $   N/A             $   N/A
                                                                =========           =========

WEIGHTED AVERAGE OUTSTANDING AND
 POTENTIAL COMMON SHARES OUTSTANDING:

 BASIC:
  WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                         53.4               53.2

 DILUTED:
  EFFECT OF DILUTIVE SECURITIES:
     Employee and director incentive
     stock options                                                    0.5                0.5
                                                                ---------           --------
Weighted Average Outstanding and
 Potential Common Shares Outstanding                                 53.9               53.7
                                                                =========           ========

<FN>
See notes to condensed consolidated financial statements.

(A) Not presented where the effect of potential shares is antidilutive.
</FN>
</TABLE>
                                                       2



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<TABLE>
<CAPTION>

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

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
JUNE 30, 1999 AND 1998 (In millions, except per share data)
--------------------------------------------------------------------------------------------------
                                                                   NINE MONTHS ENDED JUNE 30,
                                                                ----------------------------------
                                                                    1999                    1998
                                                                ---------                ---------
<S>                                                             <C>                     <C>

NET SALES                                                       $   628.8                $   628.8
COST OF GOODS SOLD                                                  557.2                    572.4
                                                                ---------                ---------
GROSS MARGIN                                                         71.6                     56.4
SELLING AND ADMINISTRATIVE COSTS                                    (73.6)                   (66.9)
                                                                ---------                ---------
OPERATING LOSS                                                       (2.0)                   (10.5)
INTEREST EXPENSE - Net                                              (63.7)                   (61.6)
OTHER EXPENSE - Net                                                  (3.0)                    (3.0)
                                                                ---------                ---------
LOSS BEFORE TAXES AND EXTRAORDINARY ITEMS                           (68.7)                   (75.1)
INCOME TAX BENEFIT                                                   26.3                     28.8
                                                                ---------                ---------
NET LOSS BEFORE EXTRAORDINARY ITEMS                                 (42.4)                   (46.3)
EXTRAORDINARY LOSS (Note 4)                                           -                      (25.1)
                                                                ---------                ---------
NET LOSS                                                            (42.4)               $   (71.4)
                                                                =========                =========

RETAINED DEFICIT:
 Beginning of period                                               (210.6)
                                                                ---------
 End of period                                                  $  (253.0)
                                                                =========

LOSS PER COMMON SHARE:

 Basic:
   Net loss before extraordinary items                          $   (0.79)               $   (0.87)
   Extraordinary loss                                                -                       (0.47)
                                                                ---------                ---------
   Net Loss                                                     $   (0.79)               $   (1.34)
                                                                =========                =========

 Diluted: (A)

   Net loss before extraordinary items                          $   N/A                  $  N/A
   Extraordinary loss                                               N/A                     N/A
                                                                ---------                ---------
   Net Loss                                                     $   N/A                  $  N/A
                                                                =========                =========

WEIGHTED AVERAGE OUTSTANDING
 AND POTENTIAL COMMON SHARES OUTSTANDING:

 BASIC:
  WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                         53.4                     53.1

 DILUTED:
  EFFECT OF DILUTIVE SECURITIES:
     Employee and director incentive
     stock options                                                    0.3                      0.5
                                                                ---------                ---------
Weighted Average Outstanding and
 Potential Common Shares Outstanding                                 53.7                     53.6
                                                                =========                =========

<FN>
See notes to condensed consolidated financial statements.

(A) Not presented where the effect of potential shares is antidilutive.
</FN>
</TABLE>
                                                       3




<PAGE>
<TABLE>
<CAPTION>


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

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
JUNE 30, 1999 AND 1998
-------------------------------------------------------------------------------------------------
                                                                  NINE MONTHS ENDED JUNE 30,
                                                              -----------------------------------
                                                                 1999                     1998
                                                              ---------                ----------
<S>                                                           <C>                      <C>

                                                                         (In millions)
CASH FLOWS FROM OPERATIONS:
     Net loss                                                 $   (42.4)               $   (71.4)

     Adjustments to reconcile net loss to net cash used for
       operations:
         Extraordinary loss (Note 4)                                 -                      25.1
         Depreciation and amortization                             41.0                     49.2
         Deferred tax benefit                                     (26.5)                   (12.0)
         Change in current assets and liabilities,
           excluding acquisitions and dispositions                (16.4)                   (61.4)
         Other - net                                                4.1                      2.7
                                                              ---------                ---------
Net cash used for operations                                      (40.2)                   (67.8)
                                                              ---------                ---------

CASH FLOWS FROM INVESTMENTS:
     Capital expenditures                                         (13.2)                   (31.3)
     Capitalized interest                                          (0.5)                    (1.1)
     Other investments - net                                       (1.8)                    (0.6)
                                                              ---------                ---------
Net cash used for investments                                     (15.5)                   (33.0)
                                                              ---------                ---------

CASH FLOWS FROM FINANCING:
     Senior debt - repayments                                      (7.6)                    (9.5)
     Early retirement of debt                                       -                     (436.9)
     Issuance of Senior Notes                                       -                      200.0
     Issuance of Senior Subordinated Notes                          -                      250.0
     Issuance of Term Loan                                          -                      125.0
     Debt issuance costs                                            -                      (15.2)
     Revolving credit agreement borrowings/(repayments) -
       net                                                         66.5                    (11.0)
     Other financing - net                                         (0.2)                     1.1
                                                              ---------                ---------
Net cash provided by financing                                     58.7                    103.5
                                                              ---------                ---------

Net increase in cash and equivalents                                3.0                      2.7

Cash and equivalents, beginning of period                           5.7                      6.1
                                                              ---------                ---------

Cash and equivalents, end of period                           $     8.7                $     8.8
                                                              =========                =========

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid (refunded) for:
     Interest                                                 $    65.2                $    62.9
                                                              =========                =========

     Income taxes                                             $     -                  $    (5.1)
                                                              =========                =========

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
   ACTIVITIES:
     Write-off of deferred financing fees                     $     -                  $     8.0
                                                              =========                =========

     Property additions                                       $    11.1                $     8.9
                                                              =========                =========

     Increase in total debt                                   $     -                  $    10.5
                                                              =========                =========

     Increase (decrease) in accrued & other liabilities       $    11.1                $    (1.6)
                                                              =========                ==========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
                                                       4




<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 June 30, 1999 and the
results of  operations  for the three months and nine months ended June 30, 1999
and 1998,  and cash  flows for the nine  months  ended  June 30,  1999 and 1998,
including  all the  accounts of Gaylord  Container  Corporation  (including  its
subsidiaries,  the Company),  and are in conformity with Securities and Exchange
Commission Rule 10-01 of Regulation S-X. The financial statements should be read
in conjunction with the audited consolidated  financial statements and the notes
thereto on Form 10-K for the fiscal year ended September 30, 1998.

2. INVENTORIES
   -----------
<TABLE>
<CAPTION>
                                 JUNE 30,                SEPTEMBER 30,
                                   1999                     1998
                                 ----------                ---------
                                          (In millions)
Inventories consist of:
<S>                            <C>                       <C>

Finished products               $     17.7                $    19.0
In process                            46.1                     31.6
Raw materials                         11.5                     12.4
Supplies                              14.9                     13.6
                                 ----------                ---------
                                      90.2                     76.6
LIFO valuation adjustment             (7.4)                    (3.4)
                                 ----------                ---------
         Total                  $     82.8                $    73.2
                                 ==========                =========
</TABLE>

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

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


                                       5

<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
----------------------------------------------------------------

at the  expense  of  stockholders  who  otherwise  would  have been able to take
advantage of a sale of the Company.  The complaint  asks the court,  among other
things, to rescind the amendments and prohibit the use of the stockholder Rights
Agreement  to  discourage  any  bona  fide  acquirer.  In the  alternative,  the
plaintiffs  seek  compensatory  damages.  On December  19,  1996,  the  Delaware
Chancery  Court  denied the  Company's  motion to dismiss the  complaint  in its
entirety.  The case is now in the discovery  stage. A class has been  certified.
The Company  believes that, after  investigation  of the facts, the  allegations
are without  merit and is defending  itself  vigorously.  No trial date has been
set.

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

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

                                       6

<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
----------------------------------------------------------------

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

Potential  class members have received  notice of the action and detailed  claim
forms. No trial date has been set for these  consolidated  Louisiana  actions in
which the Company and its subsidiary are vigorously contesting all claims.

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

                                       7

<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
----------------------------------------------------------------

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

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

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

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

                                       8


<PAGE>
GAYLORD CONTAINER CORPORATION AND SUBSIDIARIES
----------------------------------------------

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
----------------------------------------------------------------

4. EXTRAORDINARY ITEMS
   -------------------
During the second  quarter of fiscal  1998,  the  Company  issued  $200  million
principal  amount of 9 3/8%  Senior  Notes due 2007 and $250  million  principal
amount of 9 7/8% Senior Subordinated Notes due 2008 (collectively the New Notes)
and  used  the  proceeds  to  retire  all  of its  outstanding  12  3/4%  Senior
Subordinated  Discount Debentures ($404.3 million outstanding  principal amount)
due 2005 (the Old Notes). In conjunction with the retirement, approximately $6.1
million of deferred  financing  fees were written off. The early  retirement  of
debt resulted in an  extraordinary  loss of $23.9 million,  net of an income tax
benefit of $14.8 million.

During the third quarter of fiscal 1998, the Company refinanced and expanded its
existing  Revolving Credit Facility (the Old Facility),  establishing a six-year
$125  million  B  Tranche  term loan due in 2004 and a  five-year  $175  million
revolving  credit  facility due in 2003.  The  proceeds  from the term loan were
used: (i) to repay the outstanding  balance on the Old Facility ($95.5 million),
which was terminated;  (ii) to repay a portion of the Company's Trade Receivable
Facility ($19.5 million);  (iii) to pay fees and expenses;  and (iv) for general
corporate  purposes.  In conjunction with this refinancing,  approximately  $1.9
million of deferred  financing fees were written off. This transaction  resulted
in an extraordinary  loss of $1.2 million,  net of an income tax benefit of $0.7
million.


5. ADOPTION OF NEW ACCOUNTING STANDARDS
   ------------------------------------
Effective October 1, 1998, the Company adopted Statement of Financial Accounting
Standards  No.  130,  "Reporting   Comprehensive  Income",  which  requires  the
reporting  and  display  of  comprehensive  income  and  its  components  in the
financial  statements.  The  Company's  comprehensive  income  is  equal  to the
consolidated  net loss for the three  months and nine months ended June 30, 1999
and 1998, which is reported on the Consolidated Statements of Operations.

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 131,
"Disclosures about Segments of an Enterprise and Related  Information".  Interim
period  segment  reporting is not required in the initial year of adoption  and,
therefore,  the Company will disclose the required segment  reporting under this
Statement in its fiscal 1999 year-end financial statements.

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 132,
"Employers'  Disclosures  about  Pensions and Other Post  Retirement  Benefits",
which revises  employers'  disclosures  about  pension and other  postretirement
benefit plans. The Company will disclose the required  information in its fiscal
1999 year-end financial statements.

                                       9

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

RESULTS OF OPERATIONS
---------------------

Third Quarter of Fiscal 1999 Compared with Third Quarter of
Fiscal 1998

Net sales for the third quarter of fiscal 1999 were $229.0  million  compared to
net sales of $212.1  million  for the third  quarter of fiscal  1998.  Operating
earnings  for the current  quarter were $10.6  million  compared to an operating
loss of $0.3  million  for the  year-ago  quarter.  The net loss for the current
quarter  totaled  $8.0  million,  or $0.15 per share,  compared to a net loss of
$13.9 million,  or $0.26 per share, for the year-ago  quarter,  which included a
$1.2 million  ($0.02 per share)  extraordinary  loss on the  refinancing  of the
Company's credit facility.

Sales in the third  quarter of fiscal  1999 were  favorably  affected  by higher
volume,  which increased net sales by approximately $15 million.  Higher average
net  selling  prices  increased  net sales by  approximately  $2  million in the
quarter-over-quarter comparison.

Gross margin for the third  quarter of fiscal 1999  increased  to $35.9  million
from $23.3 million in the prior-year quarter primarily due to higher average net
selling  prices ($6  million  including  $4 million of lower  paper costs in the
converting  facilities),  lower fiber costs ($2 million)  and higher  volume ($3
million).

Quarter-over-quarter,  total  mill  production  increased  to 4,369 tons per day
(TPD,  calculated  on the basis of the number of days in the period)  from 4,285
TPD  principally  due to  improved  productivity,  as a result of the absence of
electric  power  curtailments  by the local  utility at the Bogalusa Mill in the
current-year quarter versus the prior-year quarter. Containerboard production in
the third quarter of fiscal 1999 increased  approximately 3 percent to 3,647 TPD
from 3,538 TPD in the prior-year  quarter.  Unbleached kraft paper production in
the current quarter decreased to 722 TPD from 747 TPD in the prior-year quarter.
Corrugated  shipments  increased to 3.9 billion square feet in the third quarter
of fiscal  1999  compared to 3.7 billion  square  feet in the  year-ago  quarter
primarily as a result of increased  demand and the opening of a new sheet feeder
plant during the first quarter of fiscal 1998. Multiwall bag shipments decreased
to 12.8  thousand  tons in the current  quarter  compared to  shipments  of 13.9
thousand tons in the third quarter of fiscal 1998.

Average  selling  prices in the third  quarter of fiscal 1999 for the  Company's
domestic  and export  linerboard  and  unbleached  kraft  paper were  relatively
unchanged from the  previous-year  quarter.  Average  selling  prices  increased
approximately 4 percent for multiwall bags and 1 percent for corrugated products
in the current-year quarter compared to the prior-year quarter.

                                       10

<PAGE>

Fiber costs  decreased  primarily due to lower average  delivered  costs for old
corrugated  containers (OCC) and wood chips. The average  delivered cost for OCC
decreased  approximately  11 percent,  in the  quarter-over-quarter  comparison,
primarily  due to decreased  demand.  The average  delivered  cost of wood chips
decreased  by  approximately  9 percent  in the  third  quarter  of fiscal  1999
compared to the prior-year  quarter mainly due to improved weather conditions in
the southern  United States.  At the end of June 1999,  however,  OCC and double
lined kraft (DLK) (together recycled fiber) prices had risen by approximately 55
percent and 87 percent, respectively, since December 1998.

Selling and  administrative  costs were $25.3  million  for the current  quarter
compared  to  $23.6  million  for the  year-ago  period.  This  increase  is due
primarily to higher information system costs related to the Year 2000 effort and
long-term incentive costs.

Net interest  expense  increased to $21.6 million in the third quarter of fiscal
1999 from $19.9 million in the  prior-year  quarter.  Higher average debt levels
increased  interest  expense by approximately  $1.1 million,  and higher average
borrowing rates increased interest expense by approximately $0.6 million.

In the third  quarter  of fiscal  1999,  the  Company  recognized  an income tax
benefit of $5.0 million compared to $7.9 million in the prior-year quarter.  The
effective tax rate was approximately 38 percent in each of the third quarters of
fiscal 1999 and fiscal 1998.

During the third quarter of fiscal 1998, the Company refinanced and expanded its
existing  Revolving Credit Facility (the Old Facility),  establishing a six-year
$125  million  B  Tranche  term loan due in 2004 and a  five-year  $175  million
revolving  credit  facility due in 2003.  The  proceeds  from the term loan were
used: (i) to repay the outstanding  balance on the Old Facility ($95.5 million),
which was terminated;  (ii) to repay a portion of the Company's Trade Receivable
Facility ($19.5 million);  (iii) to pay fees and expenses;  and (iv) for general
corporate  purposes.  In conjunction with this refinancing,  approximately  $1.9
million of deferred  financing fees were written off. This transaction  resulted
in an extraordinary  loss of $1.2 million,  net of an income tax benefit of $0.7
million.

                                       11

<PAGE>

First Nine Months of Fiscal 1999 Compared with First Nine Months of Fiscal 1998


Net sales were  $628.8  million in both the first nine months of fiscal 1999 and
fiscal 1998. The operating loss for the current period was $2.0 million compared
to $10.5 million for the year-ago  period.  The net loss for the current  period
totaled  $42.4  million,  or $0.79 per  share,  compared  to a net loss of $71.4
million,  or $1.34 per share,  for the year-ago  period,  which  included  $25.1
million ($0.47 per share) of extraordinary  loss on the early retirement of debt
and the refinancing of the Company's credit facility.

Sales in the first nine months of fiscal 1999 were unfavorably affected by lower
average net selling  prices,  which  decreased  net sales by  approximately  $22
million.  Higher corrugated  shipments  increased net sales by approximately $23
million in the period-over-period comparison.

Gross margin for the first nine months of fiscal 1999 increased to $71.6 million
from $56.4 million in the prior-year  period  primarily due to lower fiber costs
($26  million)  and higher  volume ($6  million),  offset by lower  average  net
selling  prices  ($14  million  net of $8  million of lower  paper  costs in the
converting  facilities),  and  reduced  earnings  from  the  Company's  chemical
subsidiary as a result of a significant  decline in demand for the  subsidiary's
products in Asian markets ($3 million).

Current year-to-date mill production was essentially unchanged at 4,225 tons per
day (TPD,  calculated on the basis of the number of days in the period) compared
to the prior-year period.  Containerboard  production was unchanged at 3,498 TPD
in the first nine  months of fiscal  1999  compared  to the  prior-year  period.
Unbleached  kraft  paper  production  decreased  approximately  1 percent in the
current-year  period,  to 727  TPD,  from  738  TPD in  the  prior-year  period.
Corrugated  shipments  increased  approximately 8 percent to 11.3 billion square
feet in the first nine months of fiscal 1999  compared  to 10.5  billion  square
feet in the year-ago period  primarily as a result of the opening of a new sheet
feeder plant in first quarter of fiscal 1998 and increased demand. Multiwall bag
shipments  decreased  to 40  thousand  tons in the  current  period  compared to
shipments of 44.9 thousand tons in the first nine months of fiscal 1998.

Average selling prices decreased for the Company's domestic  linerboard,  export
linerboard and unbleached kraft paper, by  approximately 14 percent,  9 percent,
and 11 percent,  respectively,  in the first nine months of fiscal 1999 compared
to the prior-year  period.  Average  selling prices  increased  approximately  6
percent for multiwall bags and decreased  approximately 2 percent for corrugated
products in the current-year period compared to the prior-year period.

                                       12

<PAGE>

Fiber  costs  decreased  primarily  due to lower  average  delivered  costs  for
recycled  fiber  and wood  chips.  The  average  delivered  cost for OCC and DLK
decreased  approximately  28  percent,  in  the  period-over-period  comparison,
primarily due to decreased  demand.  In addition,  the average delivered cost of
wood chips  decreased  by  approximately  13 percent in the first nine months of
fiscal 1999 compared to the prior-year  period,  mainly due to improved  weather
conditions in the southern United States. At the end of June 1999, however,  OCC
and  DLK  prices  had  risen  by   approximately  55  percent  and  87  percent,
respectively, since December 1998.

Selling and  administrative  costs were $73.6  million  for the  current  period
compared  to  $66.9  million  for the  year-ago  period.  This  increase  is due
primarily to higher information system costs related to the Year 2000 effort and
increased long-term incentive and litigation costs.

Net  interest  expense  increased  to $63.7  million in the first nine months of
fiscal 1999 from $61.6 million in the  prior-year  period.  Higher  average debt
levels increased  interest expense by  approximately  $6.3 million,  while lower
average borrowing rates reduced interest expense by approximately  $4.2 million.
The lower average borrowing rates are primarily the result of the refinancing of
the Company's Old Notes in the second quarter of fiscal 1998.

In the first nine months of fiscal 1999,  the Company  recognized  an income tax
benefit of $26.3 million compared to $28.8 million in the prior-year period. The
effective tax rate was  approximately  38 percent in both the  current-year  and
prior-year periods.

During the second  quarter of fiscal  1998,  the  Company  issued  $200  million
principal  amount of 9 3/8%  Senior  Notes due 2007 and $250  million  principal
amount of 9 7/8% Senior Subordinated Notes due 2008 (collectively the New Notes)
and  used  the  proceeds  to  retire  all  of its  outstanding  12  3/4%  Senior
Subordinated  Discount Debentures ($404.3 million outstanding  principal amount)
due 2005 (the Old Notes). In conjunction with the retirement, approximately $6.1
million of deferred  financing  fees were written off. The early  retirement  of
debt resulted in an  extraordinary  loss of $23.9 million,  net of an income tax
benefit of $14.8 million.

In the third quarter of fiscal 1998, the Company refinanced the Old Facility and
established a term loan and a new revolving credit facility. In conjunction with
the  refinancing,  approximately  $1.9 million of deferred  financing  fees were
written off. This transaction resulted in an extraordinary loss of $1.2 million,
net of an income tax benefit of $0.7 million.

                                       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.

Net cash used for  operations  was $40.2  million  for the first nine  months of
fiscal 1999, compared with net cash used for operations of $67.8 million for the
year-ago  period.  The  improvement  was  primarily due to a decrease in working
capital requirements.

In the first nine months of fiscal 1999 cash flows used for investing activities
decreased to $15.5 million from $33.0 million in the year-ago period,  primarily
due to a $18.1 million decrease in capital expenditures. Also, in the first nine
months  of  fiscal  1999,  the  Company  incurred  an  $11.1  million  liability
associated  with a capital project that will be  vendor-financed  through a debt
obligation secured by the project assets. During the first nine months of fiscal
1998,  the Company  acquired  $10.5  million of equipment  financed by a capital
lease.

Cash flows from  financing  activities  decreased to $58.7  million in the first
nine months of fiscal  1999 from  $103.5  million in the  year-ago  period.  The
decrease is primarily  due to a reduction  in the cash needed to fund  operating
and investing activities.

At the end of fiscal 1992, the Company  determined it would be unlikely that its
Antioch,  California  unbleached  kraft  paper mill (the East  Mill),  which was
closed in fiscal 1991,  could be sold as a mill site or that the East Mill, or a
portion thereof, could be operated economically by the Company. During the first
nine months of fiscal 1999, the Company incurred  approximately  $2.9 million of
costs for  demolition and asbestos  removal and to maintain the East Mill.  Such
costs are net of any  proceeds  from the sale of scrap.  Management  expects  to
complete the majority of the remaining  demolition and asbestos  removal efforts
in the fourth  quarter of fiscal 1999. At June 30, 1999,  balance sheet reserves
for demolition and asbestos removal were  approximately $0.5 million and the net
book value of the East Mill was $10.5 million.

                                       14

<PAGE>

Liquidity

At June 30,  1999,  the Company had cash and  equivalents  of $8.7  million,  an
increase of $3.0 million from  September  30, 1998,  as cash from  financing was
largely offset by cash used for operations and investments. Total debt increased
by $58.9  million to $931.9  million  at June 30,  1999 from  $873.0  million at
September 30, 1998 as a result of increased revolver borrowings. The increase in
revolver  borrowings  was  primarily  due to interest  payments on the Company's
public debt.  At June 30, 1999,  the Company had  approximately  $105 million of
borrowings outstanding, and approximately $135 million of credit available under
the revolving portions of its credit agreements.

At June 30, 1999, the Company had primary  working  capital  (Trade  receivables
plus  Inventories  less Trade payables) of $159.8  million,  an increase of $6.5
million from  September 30, 1998  primarily due to seasonally  higher  inventory
levels and higher trade  receivables  offset  somewhat by higher trade payables.
The  increase in trade  receivables  was  primarily  due to higher sales for the
current-year period versus the prior-year.

Published  industry prices for linerboard  increased  approximately  $45 per ton
from December 1998 to March 1999 and remained relatively  unchanged through June
1999.  Unbleached kraft paper published prices increased  approximately  $20 per
ton from December  1998 to March 1999 and an  additional  $10 per ton from March
1999 to June 1999.  Following  the  increase in  published  prices,  the Company
successfully  implemented an  approximately 9 percent  increase in the prices of
its  corrugated  products in the third quarter of fiscal 1999.  During July 1999
the  Company  successfully  completed  an  additional  $40 per ton  increase  in
linerboard  prices and is in the process of raising prices for unbleached  kraft
paper by a similar  amount.  Industry  suppliers of  corrugating  medium,  a raw
material component in corrugated products,  have raised prices by a total of $70
per ton in June and July of 1999.  Following  the  July  1999  linerboard  price
increase,   the  Company  raised  the  price  of  its  corrugated   products  by
approximately 10 percent commencing August 2, 1999.

During the first nine months of fiscal 1999,  the  Company's  average  delivered
cost of OCC and DLK  decreased  approximately  28 percent from the  prior-period
levels.  By the end of June  1999,  however,  OCC and DLK  prices  had  risen by
approximately 55 percent and 87 percent,  respectively,  from their low point at
December 1998. In addition,  the cost of wood chips decreased  approximately  13
percent in the first  nine  months of fiscal  1999  compared  to the  prior-year
period.  Since  the end of June  1999,  the  prices  for  recovered  fiber  have
increased by approximately $45 per ton. Fiber markets, however, are difficult to
predict,  and there can be no assurance of the future  direction of OCC, DLK and
wood chip prices.

Based on current  announced  price increases for  linerboard,  unbleached  kraft
paper  and  converted  products,  current  raw  material  costs  (including  the
corrugating  medium  increase)  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  additional  product  price  improvement  however,  the
Company will need to seek additional  covenant  modifications to its bank credit
agreement  by the end of  December  2000 to  maintain  continued  access  to its
liquidity.

                                       15

<PAGE>

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

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging Activities" ("SFAS 133"), which establishes accounting and reporting
standards  for  derivative  instruments.  An amendment to SFAS 133 was issued on
July 7, 1999, which defers by one year, the effective date of SFAS 133 to fiscal
years  beginning  after  June 15,  2000.  The  statement  will be adopted by the
Company in fiscal 2001. The Company has not yet determined what effect,  if any,
the statement will have on its results of operations or financial position.


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

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

The  Company  developed a  comprehensive,  phased  Year 2000  readiness  plan to
address its internal systems that are comprised of both  information  technology
("IT") and non-IT systems.  The Company's IT and non-IT systems are comprised of
computers  and  application  software for  financial  and  business  management,
electronic  data   interchange,   process  control  and  equipment   monitoring,
telecommunications, and environmental controls. The plan included development of
corporate awareness, assessment, implementation (including remediation, upgrade,
replacement,  and  deployment  of certain  products),  validation  testing,  and
contingency  planning.  The Company  believes  that,  by  modifying or upgrading
existing systems,  and/or converting to new systems,  the Year 2000 Issue can be
resolved without material operational difficulties.  Based on current estimates,
the Company  expects to spend  approximately  $6 million  through fiscal 1999 to
correct  the Year 2000  Issue,  of which  approximately  $4.6  million  has been
incurred to date.  The Company plans to fund its Year 2000 effort with cash from
operations and borrowings under its revolving credit agreements.

                                       16

<PAGE>

The  Company has  largely  completed  the  awareness,  assessment,  remediation,
implementation and verification testing activities for business-critical  items.
Testing will continue on non-business  critical systems through the remainder of
1999.  IT systems were  verified for accuracy  across the Year 2000  boundary as
well as other  special  calendar date  situations.  A national  consulting  firm
specializing  in Year 2000 issues  assisted the Company  throughout the planning
process and was retained to assist in the Year 2000  verification  testing.  The
testing approach  employed was intended to identify all potential  problems with
processing  the Year  2000.  It is  impractical  to  assure  that all  potential
problems will be  identified  during these testing  procedures.  Therefore,  the
Company  may  experience  a  greater-than-normal  need  for  support  activities
immediately  following  the  change in the  millennium.  The IT staff,  with the
assistance  of  designated  outside  vendor  support,  is  prepared to react and
correct these problems in a timely fashion,  as it does with problems that occur
in the normal course of business.  A consulting firm  specializing in industrial
controls  developed an equipment  inventory  and assisted in the  validation  of
equipment compliance for certain non-IT systems at the Company's paper mills. At
its other facilities,  internal  resources,  both operational and IT staff, were
used to inventory  and to validate  the non-IT  systems.  All business  critical
non-IT  systems used in the  manufacturing  and  conversion  processes have been
remediated and verified.

The  Company  believes  that  many of its  customers,  suppliers  and  financial
institutions  are also  impacted by the Year 2000 Issue,  which could affect the
Company.  The Company is therefore  conducting an  assessment of the  compliance
efforts  of  the   Company's   critical   customers,   suppliers  and  financial
institutions.  A  significant  portion of the Company's  critical  partners have
participated  in the  assessment.  To date no  material  deficiencies  have been
identified.  Assessment  activities  will continue  through the remainder of the
year. If the Company's current or future customers, or suppliers,  however, fail
to achieve  Year 2000  compliance,  the Company  believes  that,  due to lack of
concentration of major customers or critical  suppliers,  results of operations,
financial position or cash flow should not be materially adversely affected.

The Company has projected that the "most likely  worst-case  Year 2000 scenario"
would be the result of  unidentified  Year 2000  issues,  which could  result in
unplanned  downtime of  production  facilities at a rate higher than is normally
experienced.  Contingency  plans are in the final stages of development  and are
expected to be  completed  by the fall of 1999 to respond to the  likelihood  of
these higher-than-normal system incidents. Any system failure which results in a
business  disruption is expected to be handled in a timely fashion, as would any
normal day-to-day failures.  These potential  disruptions should not result in a
material  adverse  impact on the  Company's  results  of  operations,  financial
position or cash flow.

                                       17

<PAGE>

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

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


Forward-looking  statements in this filing,  including those in the footnotes to
the financial statements, are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. When used in this filing, the
words "believes," "projected," "expects," "anticipates," "estimates" and similar
expressions   are  intended  to  identify   forward-looking   statements.   Such
forward-looking  statements  are subject to risks and  uncertainties  and actual
results could differ materially.  Such risks and uncertainties  include, but are
not limited to, general  economic and business  conditions,  competitive  market
pricing,  increases  in raw  material,  energy  and other  manufacturing  costs,
fluctuations in demand for the Company's  products,  Year 2000 readiness issues,
potential  equipment   malfunctions  and  pending  litigation.   For  additional
information, see the Company's Form 10-K filing for the most recent fiscal year.

                                       18

<PAGE>

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

Item 1.  Legal Proceedings.

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

Item 2.  Changes in Securities.

         Not applicable.

Item 3.  Defaults Upon Senior Securities.

         Not applicable.

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

         Not applicable.

Item 5.  Other Information.

         Not applicable.

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

         Number and Description of Exhibit
         ---------------------------------
         a) 27.1(a) Financial Data Schedule

         b) No reports on Form 8-K were filed for the quarter ended
            June 30, 1999
            ------------------
            (a) Filed with this Quarterly Report



                                       19

<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:    August 13, 1999            /s/ Marvin A. Pomerantz
                                    ------------------------------------
                                    Marvin A. Pomerantz
                                    Chairman and Chief Executive Officer


Date:    August 13, 1999            /s/ Jeffrey B. Park
                                    ------------------------------------
                                    Jeffrey B. Park
                                    Vice President-Controller
                                    (Principal Accounting Officer)

                                       20