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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|ý                                | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|-------------------------------- | ----------------------------------------------------------------------------------------
|o                                | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|For Quarter Ended March 31, 2003

Commission file number:    0-11951

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JSCE, Inc.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)
37-1337160(IRS Employer Identification No.)150 North Michigan Avenue, Chicago, Illinois(Address of principal executive offices)
60601(Zip Code)(312) 346-6600(Registrant's telephone number, including area code)Not Applicable(Former name, former address and former fiscal year, if changed since last report)


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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 ý        No o

Indicate
by check mark if the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act). Yes  o        No  ý

APPLICABLE ONLY TO CORPORATE ISSUERS:

As
of March 31, 2003, the registrant had outstanding 1,000 shares of common stock, $.01 par value per share, all of which are owned by Smurfit-Stone Container Corporation.

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PART IFINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

JSCE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

|                                       |                                                                       | Three months ended March 31,                                                                     |    
|-------------------------------------- | --------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ---
|
|
|Net sales                              |                                                                       | $                                                                                                | 899
|Costs and expenses                     |                                                                       |                                                                                                  |    
|                                       | Cost of goods sold                                                    |                                                                                                  |    
|                                       | Selling and administrative expenses                                   |                                                                                                  |    
|                                       | Restructuring charges                                                 |                                                                                                  |    
|                                       |                                                                       |                                                                                                  |    
|                                       |                                                                       | Income from operations                                                                           |    
|Other income (expense)                 |                                                                       |                                                                                                  |    
|                                       | Interest income from SSCC                                             |                                                                                                  |    
|                                       | Interest expense                                                      |                                                                                                  |    
|                                       | Other, net                                                            |                                                                                                  |    
|                                       |                                                                       |                                                                                                  |    
|                                       |                                                                       | Income from continuing operations before income taxes
and cumulative effect of accounting change |    
|Provision for income taxes             |                                                                       |                                                                                                  | (4 
|                                       |                                                                       |                                                                                                  |    
|                                       |                                                                       | Income from continuing operations before cumulative effect of accounting change                  |    
|Discontinued operations                |                                                                       |                                                                                                  |    
|                                       | Income from discontinued operations net of income tax provision of $1 |                                                                                                  |    
|                                       |                                                                       |                                                                                                  |    
|                                       |                                                                       | Income before cumulative effect of accounting change                                             |    
|Cumulative effect of accounting change |                                                                       |                                                                                                  |    
|                                       | Asset retirement obligations, net of income tax benefit of $2         |                                                                                                  |    
|                                       |                                                                       |                                                                                                  |    
|                                       |                                                                       | Net income                                                                                       |    
|                                       |                                                                       |                                                                                                  |    

See
notes to consolidated financial statements.

1

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JSCE, INC.

CONSOLIDATED BALANCE SHEETS

|(In millions, except share data)               |                                                                                         | March 31,
2003                       |       | December 31,
2002 |    
|---------------------------------------------- | --------------------------------------------------------------------------------------- | ------------------------------------ | ----- | ----------------- | ---
|
|Assets                                         |                                                                                         |                                      |       |                   |    
|Current assets                                 |                                                                                         |                                      |       |                   |    
|                                               | Cash and cash equivalents                                                               |                                      | $     | 16                |    
|                                               | Receivables, less allowances of $10 in 2003 and $11 in 2002                             |                                      |       | 346               |    
|                                               | Inventories                                                                             |                                      |       |                   |    
|                                               |                                                                                         | Work-in-process and finished goods   |       |                   | 91 
|                                               |                                                                                         | Materials and supplies               |       |                   | 126
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         |                                      | 217   |                   |    
|                                               | Deferred income taxes                                                                   |                                      |       | 4                 |    
|                                               | Prepaid expenses and other current assets                                               |                                      |       | 20                |    
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         | Total current assets                 |       |                   | 603
|Net property, plant and equipment              |                                                                                         |                                      | 1,424 |                   |    
|Timberland, less timber depletion              |                                                                                         |                                      | 39    |                   |    
|Goodwill                                       |                                                                                         |                                      | 172   |                   |    
|Notes receivable from SSCC                     |                                                                                         |                                      | 570   |                   |    
|Other assets                                   |                                                                                         |                                      | 141   |                   |    
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         | $                                    | 2,949 |                   | $  
|                                               |                                                                                         |                                      |       |                   |    
|Liabilities and Stockholder's Equity (Deficit) |                                                                                         |                                      |       |                   |    
|Current liabilities                            |                                                                                         |                                      |       |                   |    
|                                               | Current maturities of long-term debt                                                    |                                      | $     | 74                |    
|                                               | Accounts payable                                                                        |                                      |       | 261               |    
|                                               | Accrued compensation and payroll taxes                                                  |                                      |       | 72                |    
|                                               | Interest payable                                                                        |                                      |       | 34                |    
|                                               | Income taxes payable                                                                    |                                      |       | 34                |    
|                                               | Other current liabilities                                                               |                                      |       | 56                |    
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         | Total current liabilities            |       |                   | 531
|Long-term debt, less current maturities        |                                                                                         |                                      | 1,541 |                   |    
|Other long-term liabilities                    |                                                                                         |                                      | 536   |                   |    
|Deferred income taxes                          |                                                                                         |                                      | 433   |                   |    
|Stockholder's deficit                          |                                                                                         |                                      |       |                   |    
|                                               | Common stock, par value $.01 per share; 1,000 shares authorized, issued and outstanding |                                      |       |                   |    
|                                               | Additional paid-in capital                                                              |                                      |       | 1,130             |    
|                                               | Retained earnings (deficit)                                                             |                                      |       | (1,009            | )  
|                                               | Accumulated other comprehensive income (loss)                                           |                                      |       | (213              | )  
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         | Total stockholder's equity (deficit) |       |                   | (92
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         | $                                    | 2,949 |                   | $  
|                                               |                                                                                         |                                      |       |                   |    

See
notes to consolidated financial statements.

2

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JSCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

|                                                 |                                                                                  | Three months ended March 31,                                            |                                          
|------------------------------------------------ | -------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | -----------------------------------------
|
|
|Cash flows from operating activities             |                                                                                  |                                                                         |                                          
|                                                 | Net income                                                                       |                                                                         | $                                        
|                                                 | Adjustments to reconcile net income to
net cash provided by operating activities |                                                                         |                                          
|                                                 |                                                                                  | Cumulative effect of accounting change for asset retirement obligations |                                          
|                                                 |                                                                                  | Depreciation, depletion and amortization                                |                                          
|                                                 |                                                                                  | Amortization of deferred debt issuance costs                            |                                          
|                                                 |                                                                                  | Deferred income taxes                                                   |                                          
|                                                 |                                                                                  | Pension and post-retirement benefits                                    |                                          
|                                                 |                                                                                  | Non-cash interest income from SSCC                                      |                                          
|                                                 |                                                                                  | Change in current assets and liabilities                                |                                          
|                                                 |                                                                                  |                                                                         | Receivables                              
|                                                 |                                                                                  |                                                                         | Inventories                              
|                                                 |                                                                                  |                                                                         | Prepaid expenses and other current assets
|                                                 |                                                                                  |                                                                         | Accounts payable and accrued liabilities 
|                                                 |                                                                                  |                                                                         | Interest payable                         
|                                                 |                                                                                  | Other, net                                                              |                                          
|                                                 |                                                                                  |                                                                         |                                          
|                                                 | Net cash provided by operating activities                                        |                                                                         |                                          
|                                                 |                                                                                  |                                                                         |                                          
|Cash flows from investing activities             |                                                                                  |                                                                         |                                          
|                                                 | Expenditures for property, plant and equipment                                   |                                                                         |                                          
|                                                 | Notes receivable from SSCC                                                       |                                                                         |                                          
|                                                 |                                                                                  |                                                                         |                                          
|                                                 | Net cash used for investing activities                                           |                                                                         |                                          
|                                                 |                                                                                  |                                                                         |                                          
|Cash flows from financing activities             |                                                                                  |                                                                         |                                          
|                                                 | Net borrowings (repayments) under accounts
receivable securitization program     |                                                                         |                                          
|                                                 | Net repayments of debt                                                           |                                                                         |                                          
|                                                 | Dividends paid                                                                   |                                                                         |                                          
|                                                 | Deferred debt issuance costs                                                     |                                                                         |                                          
|                                                 |                                                                                  |                                                                         |                                          
|                                                 | Net cash provided by (used for) financing activities                             |                                                                         |                                          
|                                                 |                                                                                  |                                                                         |                                          
|Increase (decrease) in cash and cash equivalents |                                                                                  |                                                                         | 11                                       
|Cash and cash equivalents                        |                                                                                  |                                                                         |                                          
|                                                 | Beginning of period                                                              |                                                                         |                                          
|                                                 |                                                                                  |                                                                         |                                          
|                                                 | End of period                                                                    |                                                                         | $                                        
|                                                 |                                                                                  |                                                                         |                                          

See
notes to consolidated financial statements.

3

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JSCE, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in millions)

1.    Significant Accounting Policies

The accompanying consolidated financial statements and notes thereto of JSCE, Inc. have been prepared in accordance with the instructions to
Form 10-Q and reflect all adjustments which management believes necessary (which include only normal recurring accruals) to present fairly the financial position, results of
operations and cash flows. These statements, however, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. Interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole.
These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the JSCE, Inc. Annual Report on
Form 10-K for the year ended December 31, 2002, filed March 10, 2003 with the Securities and Exchange Commission.

JSCE, Inc.,
hereafter referred to as the "Company," is a wholly-owned subsidiary of Smurfit-Stone Container Corporation ("SSCC"). The Company owns 100% of the equity interest in
Jefferson Smurfit Corporation (U.S.) ("JSC(U.S.)") and is a guarantor of the senior indebtedness of JSC(U.S.). The Company has no other material operations other than its investment in JSC(U.S.).
JSC(U.S.) has operations throughout the United States.

2.    Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

3.    Stock-Based Compensation

The Company accounts for stock option plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to
the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income if the Company had applied the fair value recognition provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation.

|                                                                                                                                            |  | Three months ended
March 31, |   
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | --
|
|Net income as reported                                                                                                                      |  | $                            | 3 
|Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net
of related tax effects |  |                              | (1
|                                                                                                                                            |  |                              |   
|Pro forma net income                                                                                                                        |  | $                            | 2 
|                                                                                                                                            |  |                              |   

4

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4.    Asset Retirement Obligation

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 143, "Accounting for Asset Retirement Obligations," effective for
fiscal years beginning after June 15, 2002. SFAS No. 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. The Company has adopted
the new accounting for asset retirement obligations effective January 1, 2003. Application of the new rules has resulted in an increase in net property, plant and equipment of
$1 million, recognition of an asset retirement obligation of $6 million and a charge for the cumulative effect of an accounting change of $3 million, net of taxes of
$2 million, to recognize asset retirement obligations incurred as of the adoption date. Certain of the Company's facilities have indeterminate lives because they are expected to remain in
operation for the foreseeable future. Consequently, the asset retirement obligations related to these facilities cannot be reasonably estimated.

5.    Stevenson Mill Acquisition

On September 30, 2002, the Company acquired a corrugating medium mill and related assets from MeadWestvaco Corporation. The purchase price allocation was
completed during the first quarter of 2003. The final allocation was a result of the completion of the property, plant and equipment and timberland valuations. The Company has not recorded any
goodwill related to this transaction.

6.     Restructuring and Exit Liabilities

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires
companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The Company adopted SFAS
No. 146 effective January 1, 2003.

The
Company recorded restructuring charges of $3 million during the first quarter of 2003 related to the closure of two converting facilities. No significant additional charges
related to these shutdown facilities are expected. The assets of these operations were adjusted to the estimated fair value less cost to sell resulting in an immaterial non-cash write
down. These shutdowns resulted in approximately 220 employees being terminated. The net sales and operating loss of these facilities in 2003 prior to closure were $7 million and
$1 million, respectively. The net sales and operating losses of these facilities in 2002 were $43 million and $3 million, respectively.

At
December 31, 2002, the Company had $25 million of exit liabilities related to the restructuring of operations. During the first quarter, the Company had
$3 million of cash disbursements related to these exit liabilities.

7.    Guarantees

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," which
clarifies and expands on existing disclosure requirements for guarantees and requires the Company to recognize a liability for the fair value of its obligations under that guarantee. The initial
measurement and recognition provisions are prospective for guarantees issued after December 31, 2002. Disclosure requirements are effective for guarantees issued prior to January 1,
2003.

5

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The
Company has certain woodchip processing contracts, entered into prior to January 1, 2003, extending through 2010 with minimum purchase commitments. As part of the agreements,
the Company guarantees the third party contractor's debt outstanding and has a security interest in the chipping equipment. At March 31, 2003, the maximum potential amount of future payments
related to these guarantees is approximately $27 million and decreases ratably over the life of the contracts. Proceeds from the liquidation of the chipping equipment would be based on current
market conditions and may not recover in full the guarantee payments made.

8.    Derivative Instruments and Hedging Activities

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No. 138 requires that all
derivatives be recorded on the consolidated balance sheets at fair value. Changes in the fair value of derivatives not qualifying as hedges are recorded each period in earnings. Changes in the fair
value of derivatives qualifying as hedges are either offset against the change in fair value of the hedged item through earnings or recognized in Other Comprehensive Income ("OCI") until the hedged
item is recognized in earnings, depending on the nature of the hedge. The ineffective portion of the change in fair value of all derivatives is recognized in earnings. Hedges related to anticipated
transactions are designated and documented at hedge inception as cash flow hedges and evaluated for hedge effectiveness quarterly.

The
Company's derivative instruments and hedging activities relate to minimizing exposures to fluctuations in the price of commodities used in its operations and are designated as cash
flow hedges.

Commodity Futures Contracts

The Company uses exchange traded futures contracts to manage fluctuations in cash flows resulting from commodity price risk in the procurement of natural gas. The
objective is to fix the price of a portion of the Company's forecasted purchases of natural gas used in the manufacturing process. The changes in the market value of such contracts have historically
been, and are expected to continue to be, highly effective at offsetting changes in price of the hedged item. As of March 31, 2003, the maximum length of time over which the Company is hedging
its exposure to the variability in future
cash flows associated with natural gas forecasted transactions is nine months. For the three months ended March 31, 2003, the Company reclassified a $1 million gain from OCI to cost of
goods sold when the hedged items were recognized. The fair value of the Company's futures contracts at March 31, 2003 is a $2 million gain included in other current assets. At
March 31, 2003, the Company recorded an immaterial amount in cost of goods sold on commodity futures contracts, related to the ineffective portion of the change in fair value of certain
contracts and contracts not qualifying as hedges.

For
the three months ended March 31, 2003, the Company recorded an immaterial amount in cost of goods sold on settled commodity futures contracts, related to the ineffective
portion of hedges and contracts not qualifying as hedges.

The
cumulative deferred hedge is a $2 million gain (net of tax of $1 million) at March 31, 2003. The Company expects to reclassify $2 million into cost of
goods sold during the remainder of 2003.

6

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9.    Comprehensive Income (Loss)

Comprehensive income (loss) is as follows:

|                                               |                                                  | Three months ended
March 31,
|---------------------------------------------- | ------------------------------------------------ | ----------------------------
|
|Net income                                     |                                                  | $                           
|Other comprehensive income (loss), net of tax: |                                                  |                             
|                                               | Net changes in fair value of hedging instruments |                             
|                                               | Net loss (gain) reclassified into earnings       |                             
|                                               |                                                  |                             
|Comprehensive income                           |                                                  | $                           
|                                               |                                                  |                             

10.    Business Segment Information

On January 1, 2003, the Company began reporting the elimination of intercompany profit and the adjustment to record inventory at LIFO at the segment level
for management reporting purposes. The information for 2002 has been restated in order to conform to the 2003 presentation.

The
Company has three reportable segments: (1) Containerboard and Corrugated Containers, (2) Consumer Packaging and (3) Reclamation. The Containerboard and
Corrugated Containers segment is highly integrated. It includes a system of mills and plants that produces a full line of containerboard that is converted into corrugated containers. Corrugated
containers are used to transport such diverse products as home appliances, electric motors, small machinery, grocery products, produce, books, tobacco and furniture. The Consumer Packaging segment is
also highly integrated. It includes a system of mills and plants that produce a broad range of coated recycled boxboard that is converted into folding cartons. Folding cartons are used primarily to
protect products such as food, fast food, detergents, paper products, beverages, health and beauty aids and other consumer products, while providing point of purchase advertising. Flexible packaging,
paper and metalized paper and heat transfer labels are used in a wide range of consumer applications. The Reclamation segment collects recovered paper generated by industrial, commercial and
residential sources which is used as raw material for the Company's containerboard and boxboard mills as well as sales to external third party mills.

Other
includes corporate related items. Corporate related items include income and expense not allocated to reportable segments including corporate expenses, restructuring charges and
interest expense.

7

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|Three months ended March 31, |                                  | Container-
board & Corrugated Containers |   | Consumer Packaging |  | Reclamation |     | Other |   | Total
|---------------------------- | -------------------------------- | ---------------------------------------- | - | ------------------ |  | ----------- | --- | ----- | - | -----
|                             | 2003                             |                                          |   |                    |  |             |     |       |   |      
|                             | Revenues from external customers |                                          | $ | 536                |  | $           | 256 |       | $ | 107  
|                             | Intersegment revenues            |                                          |   | 12                 |  |             |     |       |   | 26   
|                             | Segment profit (loss)            |                                          |   | 9                  |  |             | 12  |       |   | 6    
|                             | 2002                             |                                          |   |                    |  |             |     |       |   |      
|                             | Revenues from external customers |                                          | $ | 437                |  | $           | 247 |       | $ | 84   
|                             | Intersegment revenues            |                                          |   | 11                 |  |             |     |       |   | 17   
|                             | Segment profit (loss)            |                                          |   | 19                 |  |             | 20  |       |   | 1    

11.    Contingencies

The Company's past and present operations include activities which are subject to federal, state and local environmental requirements, particularly relating to
air and water quality. The Company faces potential environmental liability as a result of violations of permit terms and similar authorizations that have occurred from time to time at its facilities.
In addition, the Company faces potential liability for response costs at various sites for which it has received notice as being a potentially responsible party ("PRP") concerning hazardous substance
contamination. In estimating its reserves for environmental remediation and future costs, the Company's estimated liability reflects only the Company's expected share after consideration for the
number of other PRPs at each site, the identity and financial condition of such parties and experience regarding similar matters.

If
all or most of the other PRPs are unable to satisfy their portion of the clean up costs at one or more of the significant sites in which the Company is involved or the Company's
expected share increases, the resulting liability could have a material adverse effect on the Company's consolidated financial condition or results of operations.

The
Company is a defendant in a number of lawsuits and claims arising out of the conduct of its business, including those related to environmental matters. While the ultimate results of
such suits or other proceedings against the Company cannot be predicted with certainty, the management of the Company believes that the resolution of these matters will not have a material adverse
effect on its consolidated financial condition or results of operations.

8

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Some information included in this report may contain forward-looking statements within the meaning of Section 21 E of the Securities Exchange Act of 1934,
as amended. Although we believe that, in making any such statements, our expectations are based on reasonable assumptions, any such statement may be influenced by factors that could cause actual
outcomes and results to be materially different from those projected. When used in this document, the words "anticipates," "believes," "expects," "intends" and similar expressions, as they relate to
JSCE, Inc. or its management, are intended to identify such forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. There are important
factors that could cause actual results to differ materially from those in forward-looking statements, certain of which are beyond our control. These factors, risks and uncertainties include the
following:



Our
actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and accordingly, we can give no assurances
that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on our results of operations or financial condition.
We expressly decline any obligation to publicly revise any forward-looking statements that have been made to reflect the occurrence of events after the date hereof.

9

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RESULTS OF OPERATIONS

First Quarter 2003 Compared to First Quarter 2002

|                                                                                                 |                  | Three months ended March 31, |    
|------------------------------------------------------------------------------------------------ | ---------------- | ---------------------------- | ---
|
|
|Containerboard and corrugated containers                                                         |                  | $                            | 536
|Consumer packaging                                                                               |                  |                              | 256
|Reclamation                                                                                      |                  |                              | 107
|Other operations                                                                                 |                  |                              |    
|                                                                                                 |                  |                              |    
|                                                                                                 | Total operations |                              | $  
|                                                                                                 |                  |                              |    
|Restructuring charges                                                                            |                  |                              |    
|Interest income from Smurfit-Stone                                                               |                  |                              |    
|Interest expense                                                                                 |                  |                              |    
|Corporate expenses and other                                                                     |                  |                              |    
|                                                                                                 |                  |                              |    
|Income from continuing operations before income taxes and cumulative effect of accounting change |                  |                              |    
|                                                                                                 |                  |                              |    

Consolidated
net sales of $899 million in 2003 were 16% higher compared to 2002 due primarily to the acquisition of the Stevenson, Alabama containerboard mill and related
corrugated container assets, which were acquired on September 30, 2002 (the Stevenson Mill Acquisition), and higher average sales prices for corrugated containers and reclaimed fiber. Harsh
winter weather conditions in much of the country and uncertainty created by the geopolitical situation resulted in demand weakness and some packaging price erosion during the first quarter of 2003.
Compared to the fourth quarter of 2002, our containerboard and corrugated container shipments declined more sharply than expected in what is a seasonally softer quarter.

The
increase (decrease) in net sales for each of our segments is summarized in the chart below:

|(In millions)                |       | Container-
board &
Corrugated
Containers |    | Consumer
Packaging |   | Reclamation |   | Other
Operations |    | Total | 
|---------------------------- | ----- | ---------------------------------------- | -- | ------------------ | - | ----------- | - | ---------------- | -- | ----- | 
|Sales prices and product mix |       | $                                        | 4  |                    | $ | (1          | ) | $                | 25 |       | 
|Sales volume                 |       |                                          | 15 |                    |   | 11          |   |                  | (2 | )     | 
|Acquisition                  |       |                                          | 82 |                    |   |             |   |                  |    |       | 
|Closed or sold facilities    |       |                                          | (2 | )                  |   | (1          | ) |                  |    |       | 
|                             |       |                                          |    |                    |   |             |   |                  |    |       | 
|                             | Total |                                          | $  | 99                 |   | $           | 9 |                  | $  | 23    | 
|                             |       |                                          |    |                    |   |             |   |                  |    |       | 

Cost
of goods sold increased in 2003 due primarily to the Stevenson Mill Acquisition ($73 million) and the higher cost of reclaimed fiber ($26 million) and energy
($9 million). Cost of goods sold as a percent of net sales increased from 87% in 2002 to 89% in 2003 due primarily to the higher cost of reclaimed fiber and energy.

Selling
and administrative expenses increased in 2003 due primarily to the Stevenson Mill Acquisition, higher fringe benefit costs and certain litigation costs. Selling and
administrative expenses as a percent of net sales was 9% in 2003, comparable to 2002.

We
recorded a restructuring charge of $3 million in 2003 related to the closure of two converting facilities.

10

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Interest
expense increased $1 million due to the impact of $3 million from higher average borrowings, offset by $2 million due to lower overall average interest
rates. The overall average effective interest rate in 2003 was lower than 2002 by 60 basis points. Interest income for 2003 included $20 million of accrued interest on our intercompany notes
receivable from Smurfit-Stone, an increase of $2 million compared to last year.

Income
from continuing operations before income taxes and cumulative effect of accounting change was $10 million in 2003, a decrease of $16 million compared to 2002. The
decline in segment earnings was due primarily to higher costs, including energy, employee benefits and fiber.

Smurfit-Stone's
targeted annual synergy savings from the Stevenson Mill Acquisition totaling $40 million are expected to be achieved through a combination of administrative cost
reductions, system optimization and purchasing savings. Synergy savings of approximately $11 million were achieved in the quarter.

Provision
for income taxes differed from the federal statutory tax rate due primarily to state income taxes.

Containerboard and Corrugated Containers Segment

Net sales increased by 23% due primarily to the Stevenson Mill Acquisition, higher containerboard and corrugated container sales volumes and higher average sales
prices for corrugated containers. On average, corrugated container sales prices increased by 2%. Despite a decrease in containerboard prices of $10 to $15 per ton in February 2003, prices for
the quarter were higher than last year by approximately 3%. We announced a $35 per ton increase for containerboard effective April 14, 2003 and will begin to implement price increases on
corrugated containers in the second quarter. For solid bleached sulfate (SBS), the average sales price decreased 1%.

Production
of containerboard increased by 55% due primarily to the Stevenson Mill Acquisition. During the first quarter, our containerboard mills ran at an average of 81.6% of capacity.
Shipments of corrugated containers increased 12% due to the Stevenson Mill Acquisition. Production of SBS was higher by 14%.

Profits
decreased by $10 million due primarily to higher costs, including energy ($6 million) and employee benefits. Profits were favorably impacted by higher pricing and
higher sales volume, including the Stevenson Mill Acquisition. Cost of goods sold as a percent of net sales increased to 91% in 2003 compared to 88% in 2002 due to the higher energy and employee
benefit cost.

Consumer Packaging Segment

Net sales for 2003 increased by 4% compared to last year due primarily to higher sales volumes for folding cartons. Folding carton shipments increased 6%, while
folding carton sales prices, on average, were 1% lower in 2003. Coated boxboard average sales prices were 1% higher. We announced a $40 per ton price increase for coated recycled boxboard effective
April 2, 2003 and will begin to implement price increases on folding cartons in the second quarter. Production of coated boxboard in 2003 was 1% lower than in 2002.

Profits
decreased by $8 million due primarily to higher energy cost ($3 million) and higher reclaimed fiber cost ($3 million). Cost of goods sold as a percent of net
sales increased from 83% in 2002 to 87% in 2003 due primarily to the higher reclaimed fiber and energy cost.

Reclamation Segment

Net sales in 2003 increased by 27% compared to 2002 due primarily to higher sales prices. Tight supplies resulting from higher export demand and reduced
collections due to weather related conditions caused prices for old corrugated containers (OCC) to increase. The average price of OCC increased by approximately $20 per ton and the average price of
old newsprint was approximately $10 per ton higher compared to last year. Total tons of fiber reclaimed and brokered increased 3% compared to last year. Profits of the reclamation operations increased
$5 million compared to last year due to the higher average sales prices. Cost of goods sold as a percent of net sales decreased from 90% in 2002 to 88% in 2003 due primarily to the improved
pricing.

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Statistical Data

|                                             |                        | Three months ended
March 31,
|-------------------------------------------- | ---------------------- | ----------------------------
|
|
|Mill production:                             |                        |                             
|                                             | Containerboard         |                             
|                                             | Solid bleached sulfate |                             
|                                             | Coated boxboard        |                             
|Corrugated containers sold (billion sq. ft.) |                        | 7.4                         
|Folding cartons sold                         |                        | 129                         
|Fiber reclaimed and brokered                 |                        | 1,678                       

RESTRUCTURING AND EXIT LIABILITIES

We recorded restructuring charges of approximately $3 million during 2003 related to the closure of two converting facilities. There are no additional
significant charges expected for these closures. The assets of these operations were adjusted to the estimated fair value less cost to sell resulting in an immaterial non-cash write down.
The restructuring charges are primarily for severance costs, which will be paid in 2003. There were no material cash disbursements related to these charges for the three months ended March 31,
2003. These shutdowns resulted in approximately 220 employees being terminated.

As
of December 31, 2002, we had $25 million of exit liabilities related to the Smurfit-Stone merger, the Stevenson Mill Acquisition and from our restructuring activities.
During the three months ended March 31, 2003, we incurred cash expenditures of approximately $3 million for these exit liabilities. The remaining cash expenditures in connection with our
restructuring activities will continue to be funded through operations as originally planned.

LIQUIDITY AND CAPITAL RESOURCES

General

For the three months ended March 31, 2003, net cash provided by operating activities of $23 million, additional cash provided by net borrowings of
$13 million and proceeds from notes receivable from Smurfit-Stone of $5 million were used primarily to fund expenditures for property, plant and equipment of $28 million and
dividends of $2 million to Smurfit-Stone.

On
April 23, 2003, Jefferson Smurfit (U.S.) announced an agreement to sell approximately 81,000 acres of timberland located in Alabama and Tennessee, acquired as part of the
Stevenson Mill Acquisition, to a third party for $37.5 million. The transaction is expected to close in the second quarter of 2003. The proceeds will be used to reduce borrowings outstanding
under the Jefferson Smurfit (U.S.) credit facility.

We
expect internally generated cash flows, available borrowing capacity under the Jefferson Smurfit (U.S.) credit agreement and future financing activities will be sufficient for the
next several years to meet our obligations, including debt service, expenditures related to environmental compliance and other capital expenditures. Scheduled debt payments for the remainder of 2003
and for 2004 total $34 million and $282 million, respectively, with varying amounts thereafter. We are exploring a number of options to repay or refinance these debt maturities. We have
historically had good access to the capital markets and expect to be able to repay or refinance these debt maturities before their maturity dates. Although we believe we will have access to the
capital markets in the future, these markets are volatile and we cannot predict the condition of the markets or the timing of any related transactions. Access to the capital markets may be limited or
unavailable due to an unpredictable material adverse event unrelated to our operational or financial performance. In such event, we would explore additional options, including, but not limited to, the
sale or monetization of assets.

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We
intend to hold capital expenditures for 2003 significantly below our anticipated annual depreciation level of $133 million. As of March 31, 2003, we had authorized
commitments for capital expenditures of $64 million, including $4 million for environmental projects, $6 million to maintain competitiveness and $54 million for upgrades,
modernization and expansion.

We
expect to use any excess cash flows provided by operations to make further debt reductions. As of March 31, 2003, Jefferson Smurfit (U.S.) had $289 million of unused
borrowing capacity under its bank credit facility and $52 million of unused borrowing capacity under its $255 million accounts receivable securitization program, subject to Jefferson
Smurfit (U.S.)'s level of eligible accounts receivable.

The
obligations under the Jefferson Smurfit (U.S.) credit agreement are unconditionally guaranteed by JSCE, Smurfit-Stone and material subsidiaries of Jefferson Smurfit (U.S.). The
obligations under the Jefferson Smurfit (U.S.) credit agreement are secured by a security interest in substantially all of the assets of Jefferson Smurfit (U.S.) and the assets of its material
subsidiaries, a pledge of all of the capital stock of JSCE, Jefferson Smurfit (U.S.) and the material U.S. subsidiaries of Jefferson Smurfit (U.S.) and a pledge of 65% of the capital stock of certain
foreign subsidiaries of Jefferson Smurfit (U.S.). The security interest under the Jefferson Smurfit (U.S.) credit agreement excludes certain trade receivables and proceeds thereof.

The
Jefferson Smurfit (U.S.) credit agreement contains various covenants and restrictions including, among other things, (i) limitations on dividends, redemptions and repurchases
of capital stock, (ii) limitations on the incurrence of indebtedness, liens, leases and sale-leaseback transactions, (iii) limitations on capital expenditures and
(iv) maintenance of certain financial covenants. The Jefferson Smurfit (U.S.) credit agreement also requires prepayments of the term loans from excess cash flows, as defined, and proceeds from
certain asset sales, insurance and incurrence of certain indebtedness. These restrictions, together with our highly leveraged position, could restrict our
corporate activities, including our ability to respond to market conditions, to provide for unanticipated capital expenditures or to take advantage of business opportunities. We expect to remain in
compliance with all of the financial covenants contained in the Jefferson Smurfit (U.S.) credit agreement. However, if the difficult business conditions we experienced in the first quarter of 2003
continue to persist for the remainder of the year, Jefferson Smurfit (U.S.) may need to seek an amendment or waiver to avoid violating certain financial covenants contained in its credit agreement. We
believe that Jefferson Smurfit (U.S.) could obtain such an amendment or waiver, if necessary. However, if there is a violation of any of the financial covenants and we are not successful in obtaining
an amendment or waiver, a default would occur under the Jefferson Smurfit (U.S.) credit agreement, which could result in a material adverse impact on our financial condition.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including interest rate risk and commodity price risk. To manage the volatility related to these risks, we enter into
various derivative contracts. The majority of these contracts are settled in cash. However, such settlements have not had a significant effect on our liquidity in the past, nor are they expected to be
significant in the future. We do not use derivatives for speculative or trading purposes.

Commodity Price Risk

We periodically enter into exchange traded futures contracts to manage fluctuations in cash flows resulting from commodity price risk in the procurement of
natural gas. As of March 31, 2003, we had futures contracts to hedge approximately 20% to 25% of our expected natural gas requirements for the months of April through June 2003 and
approximately 11% of our requirements for July through December 2003. Our objective is to fix the price of a portion of our forecasted purchases of natural gas used in the manufacturing
process. The change in energy cost discussed in Part I, Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations included the impact of the
natural gas futures contracts. See Note 8 of the Notes to Consolidated Financial Statements.

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Interest Rate Risk

Our earnings and cash flows are significantly affected by the amount of interest on our indebtedness. Our objective is to protect JSCE, Inc. from interest
rate volatility and reduce or cap interest expense
within acceptable levels of market risk. We may periodically enter into interest rate swaps, caps or options to hedge interest rate exposure and manage risk within company policy. Any derivative would
be specific to the debt instrument, contract or transaction, which would determine the specifics of the hedge. There were no interest rate derivatives outstanding at March 31, 2003.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date within ninety days before the filing date of this report, have concluded that, as of such date our disclosure
controls and procedures were adequate and effective to ensure that material information relating to JSCE, Inc. would be made known to them by others within the company.

Changes in Internal Controls

There were no significant changes in our internal controls or in other factors that could significantly affect JSCE Inc.'s disclosure controls and
procedures subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in JSCE, Inc.'s internal controls. As a result, no corrective actions
were required or undertaken.

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PART IIOTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

In 1998, seven putative class action complaints were filed in the United States District Court for the Northern District of Illinois and in the United States
District Court for the Eastern District of Pennsylvania. These complaints alleged that Stone Container reached agreements in restraint of trade that affected the manufacture, sale and pricing of
corrugated products in violation of antitrust laws. The complaints have been amended to name several other defendants, including Jefferson Smurfit (U.S.) and Smurfit-Stone. The suits seek an
unspecified amount of damages arising out of the sale of corrugated products for the period from October 1, 1993 through March 31, 1995. Under the provisions of the applicable statutes,
any award of actual damages could be trebled. The complaints have been transferred to and consolidated in the United States District Court for the Eastern District of Pennsylvania, which has certified
two plaintiff classes. The defendants' appeal of the class certification rulings has been denied. We continue to vigorously defend these cases.

ITEM 2.    CHANGES IN SECURITIES

None

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.    OTHER INFORMATION

None

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K



There
were no Form 8-K filings during the three months ended March 31, 2003.

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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.

|                     |  |                                                                                                           
|-------------------- |  | ----------------------------------------------------------------------------------------------------------
|                     |  | JSCE, INC. (Registrant)                                                                                   
|Date:    May 7, 2003 |  | /s/PAUL K. KAUFMANNPaul K. Kaufmann Vice President and
Corporate Controller
(Principal Accounting Officer)

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CERTIFICATIONS

I,
Patrick J. Moore, certify that:

|Date: May 7, 2003 |  |                                                                          
|----------------- |  | -------------------------------------------------------------------------
|                  |  | /s/PATRICK J. MOOREPatrick J. Moore President and Chief
Executive Officer

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I, Charles A. Hinrichs, certify that:

|                  |  |                                                                                     
|----------------- |  | ------------------------------------------------------------------------------------
|Date: May 7, 2003 |  |                                                                                     
|                  |  | /s/CHARLES A. HINRICHSCharles A. Hinrichs Vice President and Chief Financial Officer

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