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

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 September 30, 2003
|Commission File Number 0-11951      

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)

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 September 30, 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 September 30,                                                                        |     | Nine months ended September 30, |   
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | --- | ------------------------------- | --
|
|
|Net sales                              |                                                                                                                                             | $                                                                                                       | 928 |                                 | $ 
|Costs and expenses                     |                                                                                                                                             |                                                                                                         |     |                                 |   
|                                       | Cost of goods sold                                                                                                                          |                                                                                                         |     | 818                             |   
|                                       | Selling and administrative expenses                                                                                                         |                                                                                                         |     | 112                             |   
|                                       | Restructuring charges                                                                                                                       |                                                                                                         |     |                                 |   
|                                       | Loss (gain) on sale of assets                                                                                                               |                                                                                                         |     | 1                               |   
|                                       |                                                                                                                                             |                                                                                                         |     |                                 |   
|                                       |                                                                                                                                             | Income (loss) from operations                                                                           |     |                                 | (3
|Other income (expense)                 |                                                                                                                                             |                                                                                                         |     |                                 |   
|                                       | Interest income from SSCC                                                                                                                   |                                                                                                         |     | 20                              |   
|                                       | Interest expense                                                                                                                            |                                                                                                         |     | (27                             | ) 
|                                       | Loss on early extinguishment of debt                                                                                                        |                                                                                                         |     |                                 |   
|                                       | Other, net                                                                                                                                  |                                                                                                         |     | 1                               |   
|                                       |                                                                                                                                             |                                                                                                         |     |                                 |   
|                                       |                                                                                                                                             | Income (loss) from continuing operations before income taxes and cumulative effect of accounting change |     |                                 | (9
|Benefit (provision) for income taxes   |                                                                                                                                             |                                                                                                         | 7   |                                 |   
|                                       |                                                                                                                                             |                                                                                                         |     |                                 |   
|                                       |                                                                                                                                             | Income (loss) from continuing operations before cumulative effect of accounting change                  |     |                                 | (2
|Discontinued operations                |                                                                                                                                             |                                                                                                         |     |                                 |   
|                                       | Income (loss) from discontinued operations net of income tax provisions of $1 and $3 for the three and nine months ended September 30, 2002 |                                                                                                         |     |                                 |   
|                                       | Gain on disposition of discontinued operations, net of income taxes of $17                                                                  |                                                                                                         |     |                                 |   
|                                       |                                                                                                                                             |                                                                                                         |     |                                 |   
|                                       |                                                                                                                                             | Income (loss) before cumulative effect of accounting change                                             |     |                                 | (2
|Cumulative effect of accounting change |                                                                                                                                             |                                                                                                         |     |                                 |   
|                                       | Asset retirement obligations, net of income tax benefit of $2                                                                               |                                                                                                         |     |                                 |   
|                                       |                                                                                                                                             |                                                                                                         |     |                                 |   
|                                       |                                                                                                                                             | Net income (loss)                                                                                       |     | $                               | (2
|                                       |                                                                                                                                             |                                                                                                         |     |                                 |   

See notes to consolidated financial statements.

1

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JSCE, INC.

CONSOLIDATED BALANCE SHEETS

|(In millions, except share data)               |                                                                                         | September 30,
2003                   |       | December 31,
2002 |    
|---------------------------------------------- | --------------------------------------------------------------------------------------- | ------------------------------------ | ----- | ----------------- | ---
|
|Assets                                         |                                                                                         |                                      |       |                   |    
|Current assets                                 |                                                                                         |                                      |       |                   |    
|                                               | Cash and cash equivalents                                                               |                                      | $     | 11                |    
|                                               | Receivables, less allowances of $9 in 2003 and $11 in 2002                              |                                      |       | 352               |    
|                                               | Refundable income taxes                                                                 |                                      |       | 3                 |    
|                                               | Inventories                                                                             |                                      |       |                   |    
|                                               |                                                                                         | Work-in-process and finished goods   |       |                   | 96 
|                                               |                                                                                         | Materials and supplies               |       |                   | 126
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         |                                      | 222   |                   |    
|                                               | Deferred income taxes                                                                   |                                      |       | 4                 |    
|                                               | Prepaid expenses and other current assets                                               |                                      |       | 10                |    
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         | Total current assets                 |       |                   | 602
|Net property, plant and equipment              |                                                                                         |                                      | 1,399 |                   |    
|Timberland, less timber depletion              |                                                                                         |                                      | 2     |                   |    
|Goodwill                                       |                                                                                         |                                      | 187   |                   |    
|Notes receivable from SSCC                     |                                                                                         |                                      | 585   |                   |    
|Other assets                                   |                                                                                         |                                      | 137   |                   |    
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         | $                                    | 2,912 |                   | $  
|                                               |                                                                                         |                                      |       |                   |    
|Liabilities and Stockholder's Equity (Deficit) |                                                                                         |                                      |       |                   |    
|Current liabilities                            |                                                                                         |                                      |       |                   |    
|                                               | Current maturities of long-term debt                                                    |                                      | $     | 6                 |    
|                                               | Accounts payable                                                                        |                                      |       | 238               |    
|                                               | Accrued compensation and payroll taxes                                                  |                                      |       | 81                |    
|                                               | Interest payable                                                                        |                                      |       | 40                |    
|                                               | Income taxes payable                                                                    |                                      |       |                   |    
|                                               | Other current liabilities                                                               |                                      |       | 86                |    
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         | Total current liabilities            |       |                   | 451
|Long-term debt, less current maturities        |                                                                                         |                                      | 1,618 |                   |    
|Other long-term liabilities                    |                                                                                         |                                      | 505   |                   |    
|Deferred income taxes                          |                                                                                         |                                      | 420   |                   |    
|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)                                                             |                                      |       | (996              | )  
|                                               | Accumulated other comprehensive income (loss)                                           |                                      |       | (216              | )  
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         | Total stockholder's equity (deficit) |       |                   | (82
|                                               |                                                                                         |                                      |       |                   |    
|                                               |                                                                                         | $                                    | 2,912 |                   | $  
|                                               |                                                                                         |                                      |       |                   |    

See notes to consolidated financial statements.

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JSCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

|Nine months ended September 30, (In millions) |                                                                                  | 2003                                                                                        |                                           | 2002 |    
|--------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ----------------------------------------- | ---- | ---
|Cash flows from operating activities          |                                                                                  |                                                                                             |                                           |      |    
|                                              | Net income                                                                       |                                                                                             | $                                         | 20   |    
|                                              | Adjustments to reconcile net income to net cash provided by operating activities |                                                                                             |                                           |      |    
|                                              |                                                                                  | Gain on disposition of discontinued operations                                              |                                           |      |    
|                                              |                                                                                  | Loss on early extinguishment of debt                                                        |                                           |      | 2  
|                                              |                                                                                  | Cumulative effect of accounting change for asset retirement obligations                     |                                           |      | 5  
|                                              |                                                                                  | Depreciation, depletion and amortization                                                    |                                           |      | 101
|                                              |                                                                                  | Amortization of deferred debt issuance costs                                                |                                           |      | 3  
|                                              |                                                                                  | Deferred income taxes                                                                       |                                           |      | (4 
|                                              |                                                                                  | Pension and post-retirement benefits                                                        |                                           |      | (41
|                                              |                                                                                  | Non-cash interest income from SSCC                                                          |                                           |      | (60
|                                              |                                                                                  | Change in current assets and liabilities, net of effects from acquisitions and dispositions |                                           |      |    
|                                              |                                                                                  |                                                                                             | Accounts receivable                       |      |    
|                                              |                                                                                  |                                                                                             | Inventories                               |      |    
|                                              |                                                                                  |                                                                                             | Prepaid expenses and other current assets |      |    
|                                              |                                                                                  |                                                                                             | Accounts payable and accrued liabilities  |      |    
|                                              |                                                                                  |                                                                                             | Interest payable                          |      |    
|                                              |                                                                                  |                                                                                             | Income taxes                              |      |    
|                                              |                                                                                  | Other, net                                                                                  |                                           |      | 20 
|                                              |                                                                                  |                                                                                             |                                           |      |    
|                                              | Net cash provided by operating activities                                        |                                                                                             |                                           | 20   |    
|                                              |                                                                                  |                                                                                             |                                           |      |    
|Cash flows from investing activities          |                                                                                  |                                                                                             |                                           |      |    
|                                              | Expenditures for property, plant and equipment                                   |                                                                                             |                                           | (72  | )  
|                                              | Payment on acquisition                                                           |                                                                                             |                                           | (26  | )  
|                                              | Proceeds from property and timberland disposals and sale of businesses           |                                                                                             |                                           | 43   |    
|                                              | Notes receivable from SSCC                                                       |                                                                                             |                                           | 28   |    
|                                              |                                                                                  |                                                                                             |                                           |      |    
|                                              | Net cash used for investing activities                                           |                                                                                             |                                           | (27  | )  
|                                              |                                                                                  |                                                                                             |                                           |      |    
|Cash flows from financing activities          |                                                                                  |                                                                                             |                                           |      |    
|                                              | Proceeds from long-term debt                                                     |                                                                                             |                                           | 300  |    
|                                              | Net borrowings (repayments) under the accounts receivable securitization program |                                                                                             |                                           | (16  | )  
|                                              | Net repayments of debt                                                           |                                                                                             |                                           | (262 | )  
|                                              | Deferred debt issuance costs                                                     |                                                                                             |                                           | (3   | )  
|                                              | Debt repurchase premiums paid                                                    |                                                                                             |                                           |      |    
|                                              | Dividends paid                                                                   |                                                                                             |                                           | (6   | )  
|                                              |                                                                                  |                                                                                             |                                           |      |    
|                                              | Net cash provided by financing activities                                        |                                                                                             |                                           | 13   |    
|                                              |                                                                                  |                                                                                             |                                           |      |    
|Increase in cash and cash equivalents         |                                                                                  |                                                                                             | 6                                         |      |    
|Cash and cash equivalents                     |                                                                                  |                                                                                             |                                           |      |    
|                                              | Beginning of period                                                              |                                                                                             |                                           | 5    |    
|                                              |                                                                                  |                                                                                             |                                           |      |    
|                                              | End of period                                                                    |                                                                                             | $                                         | 11   |    
|                                              |                                                                                  |                                                                                             |                                           |      |    

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

In the second quarter of 2003, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," effective as of January 1, 2003. The Company selected the prospective transition method as allowed in SFAS No. 148, "Accounting for Stock-Based
CompensationTransition and Disclosure," which requires expensing options prospectively, beginning in the year of adoption. Because the prospective method was used and awards vest over
three to eight years, the 2003 expense is less than what would have been recognized if the fair value based method had been applied to all awards since the original effective date of SFAS
No. 123. The Company recorded an immaterial amount of expense in the three and nine month periods ended September 30, 2003.

Prior
to 2003, the Company accounted for stock options under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations. No stock-based employee compensation cost was reflected in 2002 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.

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The
following table illustrates the effect on net income if the fair value based method had been applied to all outstanding and unvested awards in each period.

|                                                                                                                                            |  | Three months ended September 30, |    | Nine months ended September 30, |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | -- | ------------------------------- | -
|
|Net income (loss) as reported                                                                                                               |  | $                                | (2 | )                               | $
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effects                                  |  |                                  |    |                                 |  
|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 (loss)                                                                                                                 |  | $                                | (3 | )                               | $
|                                                                                                                                            |  |                                  |    |                                 |  

4.     Discontinued Operations

On September 30, 2002, the Company sold the industrial packaging division included in the Consumer Packaging segment to a third party for approximately
$80 million and retained $12 million of accounts receivable. The sale resulted in a gain on disposition of discontinued operations of $22 million, net of tax of
$17 million. The assets sold include 17 tube and core manufacturing facilities, three fiber partition plants and three uncoated recycled boxboard mills. Net sales for these operations were
$96 million for the nine months ended September 30, 2002. These facilities employed approximately 850 hourly and salaried employees. The results of operations from the industrial
packaging division have been reclassified as discontinued operations for all periods presented.

5.     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.

6.     Acquisitions

On May 31, 2003, the Company acquired the operations of Arko Paper Products Co., Inc., a folding carton producer. The acquisition was accounted for
as a purchase business combination and, accordingly, the acquired assets and liabilities are included in the September 30, 2003 consolidated balance sheet and the related results of operations
have been included in the consolidated statement of operations after May 31, 2003. The purchase price of $30 million has been preliminarily allocated to the assets acquired and
liabilities assumed according to estimated fair values and is subject to adjustment when long-lived asset valuations are finalized. The preliminary allocation has resulted in goodwill of
$15 million, which has been allocated to the Consumer Packaging segment.

5

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On
September 30, 2002, the Company acquired a corrugating medium mill and related assets from MeadWestvaco Corporation for $350 million and an additional $25 million
in connection with certain financing arrangements. The purchase price allocation was completed during the first quarter of 2003 and the Company did not record any goodwill related to this transaction.

7.     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 an immaterial amount and $4 million in the three and nine months ended September 30, 2003, respectively, 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 for the year ended December 31, 2002 were
$43 million and $3 million, respectively. The Company had $1 million and $2 million of cash disbursements related to these charges for the three and nine months ended
September 30, 2003, respectively.

At
December 31, 2002, the Company had $25 million of exit liabilities related to the restructuring of operations. The Company had $1 million and $6 million of
cash disbursements related to these exit liabilities for the three and nine months ended September 30, 2003, respectively.

8.     Long-Term Debt

In May 2003, the Company completed an offering of $300 million of 7.50% unsecured senior notes due 2013. The Company used the proceeds of this
issuance to repay the $175 million Tranche A term loan borrowings and $122 million of the outstanding Tranche B term loan borrowings under the JSC(U.S.) credit agreement. A loss of
$2 million was recorded due to early extinguishment of debt. In accordance with SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 62, Amendment of FASB No. 13, and
Technical Corrections," the loss was not recorded as an extraordinary item, but rather as a component of income from continuing operations.

On
June 30, 2003, the Company obtained an amendment from its lender group easing certain financial covenant requirements under its bank credit agreement as of June 30, 2003
and for future periods through December 31, 2004.

9.     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.

The
Company has certain wood chip processing contracts, entered into prior to January 1, 2003, extending

6

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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 September 30, 2003, the maximum potential amount of future payments related to these guarantees is approximately $25 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.

10.   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 and other derivative contracts to manage fluctuations in cash flows resulting from commodity price risk in the
procurement of natural gas. The objective is to fix or cap 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. The Company is hedging its exposure to the
variability in future cash flows associated with natural gas with contracts typically having maturities of one year or less. For the three and nine months ended September 30, 2003, the Company
reclassified an immaterial amount and a $2 million gain, net of tax, respectively, from OCI to cost of goods sold when the hedged items were recognized. The fair value of the Company's
contracts at September 30, 2003 is an immaterial amount included in other current liabilities. At September 30, 2003, the Company recorded a $1 million loss in cost of goods sold
on commodity contracts, related to the ineffective portion of the change in fair value of certain contracts and contracts not qualifying as hedges.

For
the three and nine months ended September 30, 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 immaterial at September 30, 2003.

11.   Income Taxes

In the second quarter of 2003, the Company recorded an income tax benefit of $6 million related to the resolution of certain prior year tax matters.

The
Internal Revenue Service is currently examining the years 1999 through 2001. While the ultimate results cannot be predicted with certainty, the Company's management believes that the
examination will not have a material adverse effect on its consolidated financial condition or the results of operations. The Company has settled the examination for the years 1995 through 1998,
resulting in tax and interest of $50 million paid in the third quarter of 2003. Adequate reserves were available to cover the payment.

7

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12.   Comprehensive Income (Loss)

Comprehensive income (loss) is as follows:

|                                               |                                                  | Three months ended September 30, |    | Nine months ended September 30,
|---------------------------------------------- | ------------------------------------------------ | -------------------------------- | -- | -------------------------------
|
|Net income (loss)                              |                                                  | $                                | (2 | )                              
|Other comprehensive income (loss), net of tax: |                                                  |                                  |    |                                
|                                               | Net changes in fair value of hedging instruments |                                  |    | (1                             
|                                               | Net loss (gain) reclassified into earnings       |                                  |    |                                
|                                               |                                                  |                                  |    |                                
|Comprehensive income (loss)                    |                                                  | $                                | (3 | )                              
|                                               |                                                  |                                  |    |                                

13.   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 and packaging labels. 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.

|Three months ended September 30, |                                  | Container-
board &
Corrugated
Containers |   | Consumer Packaging |  | Reclamation |     | Other |   | Total | 
|-------------------------------- | -------------------------------- | ---------------------------------------- | - | ------------------ |  | ----------- | --- | ----- | - | ----- | 
|                                 | 2003                             |                                          |   |                    |  |             |     |       |   |       | 
|                                 | Revenues from external customers |                                          | $ | 553                |  | $           | 265 |       | $ | 110   | 
|                                 | Intersegment revenues            |                                          |   | 14                 |  |             |     |       |   | 29    | 
|                                 | Segment profit (loss)            |                                          |   | 27                 |  |             | 13  |       |   | 5     | 
|                                 | 2002                             |                                          |   |                    |  |             |     |       |   |       | 
|                                 | Revenues from external customers |                                          | $ | 480                |  | $           | 268 |       | $ | 163   | 
|                                 | Intersegment revenues            |                                          |   | 13                 |  |             |     |       |   | 29    | 
|                                 | Segment profit (loss)            |                                          |   | 26                 |  |             | 19  |       |   | 8     | 

8

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|Nine months ended September 30, |                                  |  |   |       |  |   |     |  |   |     | 
|------------------------------- | -------------------------------- |  | - | ----- |  | - | --- |  | - | --- | 
|                                | 2003                             |  |   |       |  |   |     |  |   |     | 
|                                | Revenues from external customers |  | $ | 1,647 |  | $ | 775 |  | $ | 335 | 
|                                | Intersegment revenues            |  |   | 36    |  |   |     |  |   | 86  | 
|                                | Segment profit (loss)            |  |   | 71    |  |   | 36  |  |   | 16  | 
|                                | 2002                             |  |   |       |  |   |     |  |   |     | 
|                                | Revenues from external customers |  | $ | 1,396 |  | $ | 767 |  | $ | 359 | 
|                                | Intersegment revenues            |  |   | 35    |  |   |     |  |   | 68  | 
|                                | Segment profit (loss)            |  |   | 83    |  |   | 59  |  |   | 15  | 

14.   Contingencies

On November 10, 2003, the Company reached an agreement to settle the antitrust class action cases pending against the Company which are based on
allegations of a conspiracy among containerboard manufacturers in 1993-95. The Company will make a settlement payment of $36 million, with one-half of such amount to be
paid in December 2003 and the remainder in January 2005. The settlement is subject to court approval following the usual notice and hearing process. All of the other defendants
previously entered into agreements to settle these cases, so consequently the settlement will effectively resolve the class actions; however, all of the defendants in the class actions continue to be
defendants in a number of unresolved lawsuits brought on behalf of parties that have opted out of the class actions to seek their own recovery. The Company recorded a pretax charge of
$39 million in the third quarter of 2003 to accrue for the settlement and the estimated liability of the opt-out cases.

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 cleanup 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.

9

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15.   Subsequent Event

On October 23, 2003, SSCC announced its plan to rationalize operations and further reduce costs in its containerboard mill, boxboard mill and packaging
operations in response to market conditions. The Company plans to permanently close one of two paper machines at its Philadelphia, Pennsylvania, coated recycled boxboard mill and continue to reduce
the cost and asset base of its corrugated containers and consumer packaging operations over the next 18 months, including the potential consolidation of some facilities. The rationalization
will result in an overall work force reduction in SSCC's subsidiaries of approximately 1,400 employees over the next 18 months. The Company expects to take a pretax charge of
approximately $12 million in the fourth quarter as a result of the rationalizations and cost cutting activities during this period, approximately $7 million of which is a
non-cash charge primarily related to the write down of fixed assets at Philadelphia. The charges are estimates that will be finalized during the fourth quarter.

10

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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.

11

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RESULTS OF OPERATIONS

Recent Developments

Litigation and Related Matters

On November 10, 2003, Smurfit-Stone reached an agreement to settle the antitrust class action cases pending against them, Stone Container Corporation and
Jefferson Smurfit Corporation (U.S.), which are based on allegations of a conspiracy among containerboard manufacturers in 1993-95. Jefferson Smurfit Corporation (U.S.) will make a
settlement payment of $36 million, with one-half of such amount to be paid in December 2003 and the remainder in January 2005. The settlement is subject to court
approval following the usual notice and hearing process. All of the other defendants previously entered into agreements to settle these cases, so consequently the settlement will effectively resolve
the class actions; however, all of the defendants
in the class actions continue to be defendants in a number of unresolved lawsuits brought on behalf of parties that have opted out of the class actions to seek their own recovery. See
Part IIOther Information, Item 1, Legal Proceedings.

Jefferson
Smurfit Corporation (U.S.) recorded a pretax charge of $39 million in the third quarter of 2003 to accrue for the settlement and the estimated liability of the
opt-out cases.

Rationalizations and Cost Cutting Activities

Smurfit-Stone recently announced plans to rationalize operations and further reduce costs in its containerboard mill, boxboard mill and packaging operations. This
action is in response to lower demand for packaging in the U.S., as manufacturing is being shifted overseas. The following are among the actions planned, as they apply to Jefferson Smurfit (U.S.):



The
rationalization process will result in an overall workforce reduction in Smurfit-Stone's subsidiaries of approximately 1,400 employees over the next 18 months.
Jefferson Smurfit (U.S.)'s annual production capacity of boxboard will be reduced by about 70,000 tons (approximately 12%). Jefferson Smurfit (U.S.) expects to realize annual savings of approximately
$40 million as a result of these actions.

We
expect to take a pretax charge of approximately $12 million in the fourth quarter as a result of the rationalizations and cost cutting activities during this period, the
majority of which is a non-cash charge related to the write-down of fixed assets at Philadelphia. We will continue to evaluate system-wide packaging requirements on
an ongoing basis.

General

Growth in the manufacturing sector of the U.S. economy in the third quarter continued to be slow, resulting in sluggish demand for containerboard and corrugated
containers. Demand for corrugated packaging showed signs of improvement by the middle of September. Corrugated container prices remained relatively stable and demand for consumer packaging showed a
slight seasonal strengthening during the third quarter. We do not expect to see any significant price improvement for containerboard and corrugated containers until there is a meaningful improvement
in business activity.

Acquisition

On May 31, 2003, Jefferson Smurfit (U.S.) acquired the operations of Arko Paper Products Co., Inc., a folding carton producer (the Arko
Acquisition). The acquisition was accounted for as a purchase business combination and, accordingly, the acquired assets and liabilities are included in the September 30, 2003

12

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balance
sheet and the results of operations are included in the consolidated statement of operations after May 31, 2003. The purchase price of $30 million has been preliminarily
allocated to the assets acquired and liabilities assumed according to estimated fair values and is subject to adjustment when long-lived asset valuations are finalized. The preliminary
allocation has resulted in goodwill of $15 million, which has been allocated to the Consumer Packaging segment.

Third Quarter 2003 Compared to Third Quarter 2002

|                                         |                                                                                                         | Three months ended September 30, |    
|---------------------------------------- | ------------------------------------------------------------------------------------------------------- | -------------------------------- | ---
|
|
|Containerboard and corrugated containers |                                                                                                         | $                                | 553
|Consumer packaging                       |                                                                                                         |                                  | 265
|Reclamation                              |                                                                                                         |                                  | 110
|Other operations                         |                                                                                                         |                                  |    
|                                         |                                                                                                         |                                  |    
|                                         | Total operations                                                                                        |                                  | $  
|                                         |                                                                                                         |                                  |    
|Restructuring charges                    |                                                                                                         |                                  |    
|Loss on sale of assets                   |                                                                                                         |                                  |    
|Interest income from Smurfit-Stone       |                                                                                                         |                                  |    
|Interest expense                         |                                                                                                         |                                  |    
|Loss on early extinguishment of debt     |                                                                                                         |                                  |    
|Corporate expenses and other             |                                                                                                         |                                  |    
|                                         |                                                                                                         |                                  |    
|                                         | Income (loss) from continuing operations before income taxes and cumulative effect of accounting change |                                  |    
|                                         |                                                                                                         |                                  |    

Compared to last year, our third quarter results declined due primarily to the litigation charge of $39 million, lower prices on open market containerboard
sales, higher energy and employee benefits costs. The increases in cost compared to last year were partially offset by the operating results of our Stevenson, Alabama containerboard mill and related
corrugated container assets, which were acquired on September 30, 2002 (the Stevenson Mill Acquisition) and a lower loss on early extinguishment of debt.

Consolidated
net sales of $928 million in 2003 were 2% higher compared to 2002 due primarily to the Stevenson Mill Acquisition partially offset by lower prices for reclaimed fiber
and plant closures. The change 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         |       | $                                        | (7 | )                  | $ | (7          | )  | $                | (41 | )     | $
|Sales volume, including acquisitions |       |                                          | 86 |                    |   | 8           |    |                  | (12 | )     |  
|Closed or sold facilities            |       |                                          | (6 | )                  |   | (4          | )  |                  |     |       |  
|                                     |       |                                          |    |                    |   |             |    |                  |     |       |  
|                                     | Total |                                          | $  | 73                 |   | $           | (3 | )                | $   | (53   | )
|                                     |       |                                          |    |                    |   |             |    |                  |     |       |  

Cost of goods sold increased in 2003 due primarily to the Stevenson Mill Acquisition and the higher costs of energy ($6 million) and employee benefits.
Cost of goods sold as a percent of net sales in 2003 was 88%, comparable to 2002.

Selling
and administrative expenses increased in 2003 due primarily to the litigation charge.

13

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Interest
expense increased $5 million due to the impact of $4 million from higher average borrowings and $1 million due to higher overall average interest rates. The
overall average effective interest rate in 2003 was higher than 2002 by approximately 15 basis points. Interest income for 2003 included $20 million of accrued interest on our intercompany
notes receivable from Smurfit-Stone, an increase of $1 million compared to 2002.

Provision
for income taxes in the third quarter of 2003 differed from the statutory U.S. federal income tax rate due primarily to state income taxes and the effects of other permanent
differences.

Containerboard and Corrugated Containers Segment

Net sales increased by 15% due primarily to the Stevenson Mill Acquisition. Corrugated container prices were flat compared to last year while open market
containerboard prices were lower by 7%. The sales price of solid bleached sulfate (SBS) increased by 1%.

Production
of containerboard increased by 58% due primarily to the Stevenson Mill Acquisition. During the third quarter of 2003, our containerboard mills operated at an average rate of
88.6% of capacity. Shipments of corrugated containers increased 5% due to the Stevenson Mill Acquisition. Wet weather conditions in the Southeastern U.S. hampered our ability to source wood fiber,
resulting in lower production at our SBS mill in that region. Production of SBS was 13% lower compared to last year.

Profits
increased by $1 million due primarily to the Stevenson Mill Acquisition. Profits were unfavorably impacted by lower prices on open market board sales, higher costs,
including energy ($3 million) and employee benefits.

Consumer Packaging Segment

Net sales declined by approximately 1% due to the closure of a folding carton operation and lower pricing and product mix. The declines were partially offset by
the Arko Acquisition. Shipments of folding cartons declined by 2% and coated recycled boxboard production was lower by 3%. Folding carton sales prices were 3% lower in 2003, while coated recycled
boxboard sales prices were comparable to last year. We announced a $40 per ton price increase for coated recycled boxboard effective April 2, 2003 and began implementing price increases on
recycled boxboard and folding cartons in the third quarter.

Profits
decreased by $6 million due principally to lower sales prices and product mix and higher costs for energy ($1 million) and employee benefits.

Reclamation Segment

Net sales in 2003 decreased by 33% compared to 2002 due primarily to lower sales prices. The price of old corrugated containers (OCC) decreased by approximately
$35 per ton. Total tons of fiber reclaimed and brokered decreased 3% compared to last year. Profits decreased $3 million due primarily to the lower reclaimed fiber prices and lower sales
volume.

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Nine Months 2003 Compared to Nine Months 2002

|                                         |                                                                                                  | Nine months ended September 30, |      
|---------------------------------------- | ------------------------------------------------------------------------------------------------ | ------------------------------- | -----
|
|
|Containerboard and corrugated containers |                                                                                                  | $                               | 1,647
|Consumer packaging                       |                                                                                                  |                                 | 775  
|Reclamation                              |                                                                                                  |                                 | 335  
|Other operations                         |                                                                                                  |                                 |      
|                                         |                                                                                                  |                                 |      
|                                         | Total operations                                                                                 |                                 | $    
|                                         |                                                                                                  |                                 |      
|Restructuring charges                    |                                                                                                  |                                 |      
|Gain (loss) on sale of assets            |                                                                                                  |                                 |      
|Interest income from Smurfit-Stone       |                                                                                                  |                                 |      
|Interest expense                         |                                                                                                  |                                 |      
|Loss on early extinguishment of debt     |                                                                                                  |                                 |      
|Corporate expenses and other             |                                                                                                  |                                 |      
|                                         |                                                                                                  |                                 |      
|                                         | Income from continuing operations before income taxes and cumulative effect of accounting change |                                 |      
|                                         |                                                                                                  |                                 |      

The decline in our results compared to last year was due primarily to the litigation charges of $44 million and higher costs of energy, fiber and employee
benefits. The increases in cost were partially offset by the Stevenson Mill Acquisition and a lower loss on early extinguishment of debt.

Consolidated
net sales of $2,757 million in 2003 were 9% higher compared to 2002 due primarily to the Stevenson Mill Acquisition. The change 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         |       | $                                        | (1  | )                  | $ | (15         | ) | $                | (5  | )     | $
|Sales volume, including acquisitions |       |                                          | 262 |                    |   | 31          |   |                  | (19 | )     |  
|Closed or sold facilities            |       |                                          | (10 | )                  |   | (8          | ) |                  |     |       |  
|                                     |       |                                          |     |                    |   |             |   |                  |     |       |  
|                                     | Total |                                          | $   | 251                |   | $           | 8 |                  | $   | (24   | )
|                                     |       |                                          |     |                    |   |             |   |                  |     |       |  

Cost of goods sold increased in 2003 due primarily to the Stevenson Mill Acquisition and the higher costs of energy ($21 million) and employee benefits.
Cost of goods sold as a percent of net sales in 2003 was 88%, compared to 87% in 2002 due primarily to the higher cost of energy and lower sales prices.

Selling
and administrative expenses increased in 2003 due primarily to the litigation charges, acquisitions and higher employee benefits cost. Selling and administrative expense as a
percent of net sales increased from 8% in 2002 to 10% in 2003 due primarily to the litigation charges and employee benefits.

Interest
expense increased $8 million due to the impact of $11 million from higher average borrowings, offset by $3 million due to lower overall average interest
rates. The overall average effective interest rate in 2003 was lower than 2002 by approximately 25 basis points. Interest income for 2003 included $60 million of accrued interest on our
intercompany notes receivable from Smurfit-Stone, an increase of $6 million compared to 2002.

15

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A
loss on early extinguishment of debt of $2 million was recorded in 2003 for the write-off of deferred debt issuance cost attributable to the prepayment of Jefferson
Smurfit (U.S.) term loans.

Annualized
synergy savings from the Stevenson Mill Acquisition achieved in the nine months ended September 30, 2003, including administrative cost reductions, system optimization
and purchasing savings, exceeded our targeted annual savings of $40 million.

Provision
for income taxes in 2003 included a $6 million benefit related to the resolution of certain prior year tax matters. The provision for income taxes differed from the
amount computed by applying the statutory U.S. federal income tax rate to income from continuing operations before income taxes and cumulative effect of accounting change primarily due to this
benefit, state income taxes and the effects of other permanent differences.

Containerboard and Corrugated Containers Segment

Net sales increased by 18% due primarily to the Stevenson Mill Acquisition. Corrugated container sales prices increased by 1% while open market containerboard
prices were lower by 5%. SBS sales prices were comparable to last year.

Production
of containerboard increased by 55% due primarily to the Stevenson Mill Acquisition. During the first nine months of 2003, our containerboard mills operated at an average rate
of 87.2% of capacity. Shipments of corrugated containers increased 8% due primarily to the Stevenson Mill Acquisition. Production of SBS was lower by 1% compared to last year.

Profits
decreased by $12 million due primarily to higher costs, including energy ($11 million) and employee benefits. Profits were favorably impacted by the Stevenson Mill
Acquisition.

Consumer Packaging Segment

Net sales increased by 1%. Sales volumes for folding cartons and flexible packaging were higher, but were partially offset by lower pricing and the closure of a
folding carton operation. Folding carton shipments increased 2% and coated recycled boxboard production increased approximately 1%. Folding carton shipments were higher due in part to the Arko
Acquisition.

Profits
decreased by $23 million due principally to lower prices and product mix and higher costs for energy ($7 million) and employee benefits.

Reclamation Segment

Net sales in 2003 decreased by 7%. The average price of OCC decreased approximately $5 per ton compared to last year. Total tons of fiber reclaimed and brokered
was comparable to last year. Profits of the reclamation operations increased $1 million compared to last year.

Statistical Data

|                                             |                          | Three months ended September 30, |     | Nine months ended September 30,
|-------------------------------------------- | ------------------------ | -------------------------------- | --- | -------------------------------
|
|
|Mill production:                             |                          |                                  |     |                                
|                                             | Containerboard           |                                  | 524 |                                
|                                             | Solid bleached sulfate   |                                  | 42  |                                
|                                             | Coated recycled boxboard |                                  | 148 |                                
|Corrugated containers sold (billion sq. ft.) |                          | 7.7                              |     | 7.3                            
|Folding cartons sold                         |                          | 131                              |     | 133                            
|Fiber reclaimed and brokered                 |                          | 1,618                            |     | 1,675                          

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RESTRUCTURING CHARGES AND EXIT LIABILITIES

We expect to take a pretax charge of approximately $12 million in the fourth quarter as a result of the rationalizations and cost cutting activities
recently announced. See Results of Operations, Recent Developments.

In
the nine months ended September 30, 2003, we recorded restructuring charges of $4 million related to rationalization and cost reduction plans, including the closure of
two converting facilities. No significant additional charges are expected for these closures. The assets of these closed 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. We had $2 million of cash disbursements
related to these charges for the nine months ended September 30, 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 other restructuring activities.
During the nine months ended September 30, 2003, we incurred
cash expenditures of approximately $6 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 nine months ended September 30, 2003, proceeds from long-term debt of $300 million, proceeds from property and timberland
disposals of $43 million, proceeds from notes receivable from Smurfit-Stone of $28 million and cash from operating activities of $20 million were used to fund net debt payments of
$278 million, expenditures for property, plant and equipment and acquisition of $98 million, dividends to Smurfit-Stone of $6 million and deferred debt issuance cost of
$3 million.

In
May 2003, Jefferson Smurfit (U.S.) sold approximately 81,000 acres of timberland located in Alabama and Tennessee and a hardwood sawmill, acquired as part of the Stevenson Mill
Acquisition, to a third party for $38.5 million. The proceeds were used for general corporate purposes.

We
expect internally generated cash flows, available borrowing capacity under the Jefferson Smurfit (U.S.) revolving credit facility and future financing activities will be sufficient
for the next several years to meet our obligations, including debt service, pension funding, the antitrust settlement, severance costs and other rationalization expenditures, dividends to
Smurfit-Stone, expenditures related to environmental compliance and other capital expenditures. Scheduled debt payments for the remainder of 2003 and for 2004 total $4 million and
$174 million, respectively, with varying amounts thereafter. We are exploring a number of options to repay or refinance our 2004 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.

We
intend to hold capital expenditures for 2003 significantly below our anticipated annual depreciation level of $135 million. As of September 30, 2003, we had authorized
commitments for capital expenditures of $44 million, including $4 million for environmental projects, $9 million to maintain competitiveness and $31 million for upgrades,
modernization and expansion.

We
expect to use any excess cash flows provided by operations to make further debt reductions. As of September 30, 2003, Jefferson Smurfit (U.S.) had $240 million of unused
borrowing capacity under its

17

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revolving
credit facility and $83 million of unused borrowing capacity under the $255 million accounts receivable securitization program, subject to Jefferson Smurfit (U.S.)'s level of
eligible accounts receivable.

Financing Activities

In May 2003, Jefferson Smurfit (U.S.) issued $300 million of 7.50% unsecured senior notes due 2013 (the New Senior Notes). Jefferson Smurfit (U.S.)
used the proceeds of this issuance to repay the $175 million Tranche A term loan due March 31, 2005, $122 million of its outstanding Tranche B term loan due March 31, 2007
and $3 million to pay fees and other expenses. On July 30, 2003, Jefferson Smurfit (U.S.) completed a registered exchange offer of all of the then outstanding New Senior Notes for a like
principal amount of senior notes which have been registered under the Securities Act of 1933. Jefferson Smurfit (U.S.) did not receive any proceeds from the exchange offer.

On
June 30, 2003, Jefferson Smurfit (U.S.) obtained an amendment from its lender group easing certain financial covenant requirements under its bank credit agreement as of
June 30, 2003 and for future periods through December 31, 2004.

The
obligations under the Jefferson Smurfit (U.S.) credit agreement are unconditionally guaranteed by Smurfit-Stone, JSCE, Inc. and the 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 its material
subsidiaries, a pledge of all of the capital stock of JSCE, Inc., 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.

Pension Obligations

As discussed in our 2002 Annual Report on Form 10-K, our pension obligations exceeded the fair value of pension plan assets by
$425 million as of December 31, 2002. For the nine months ended September 30, 2003, we contributed $70 million to the pension plans and do not expect any additional
contributions in the fourth quarter of 2003. Contributions to our plans in 2004 are expected to be significant, but will be dependent upon future changes in discount rates, the earnings performance of
plan assets and the outcome of proposed pension reform legislation. A decrease in the discount rate of 0.25% would increase our pension obligations by approximately $21 million.

NEW ACCOUNTING STANDARD FOR STOCK-BASED COMPENSATION ADOPTED

In the second quarter of 2003, we adopted the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation," effective as of January 1, 2003. We selected the prospective transition method as allowed in SFAS No. 148, "Accounting for Stock-Based
CompensationTransition and Disclosure," which requires expensing options prospectively, beginning in the year of adoption. Because the prospective method was used and awards vest over
three to eight years, the 2003 expense is less than what would have been recognized if the fair value based method had been applied to all awards since the original effective date of SFAS
No. 123. We recorded an

18

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immaterial
amount of expense in the three and nine month periods ended September 30, 2003, representing a pro rata portion of all employee awards granted, modified or settled after
January 1, 2003.

Prior
to 2003, we accounted for stock options under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. No stock-based employee compensation cost was reflected in 2002 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.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including commodity price risk and interest rate 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 and other derivative contracts to manage fluctuations in cash flows resulting from commodity price risk in the
procurement of natural gas. As of September 30, 2003, we had futures contracts to hedge approximately 30% of our expected natural gas requirements for the month of October 2003 and
approximately 60% to 70% for the months of November 2003 through March 2004. Our objective is to fix or cap the price of a portion of our forecasted purchases of natural gas used in the
manufacturing process. The changes in energy cost discussed in Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations above include the impact of
the natural gas futures contracts. See Note 10 of the Notes to Consolidated Financial Statements.

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 September 30, 2003.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report and concluded that, as of such date, our
disclosure controls and procedures were adequate and effective.

Changes in Internal Controls

We are in the process of implementing a new company-wide financial system. As a result, we have updated our internal controls as necessary to
accommodate the modifications to our business processes and accounting procedures. There have not been any other significant changes in our internal controls over financial reporting during the most
recent quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

19

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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 a period during 1993-95. 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.

On
November 10, 2003, Smurfit-Stone reached an agreement to settle the antitrust class action cases pending against them, Stone Container Corporation and Jefferson Smurfit
Corporation (U.S.), which are based on allegations of a conspiracy among containerboard manufacturers in 1993-95. Jefferson Smurfit Corporation (U.S.) will make a settlement payment of
$36 million, with one-half of such amount to be paid in December 2003 and the remainder in January 2005. The settlement is subject to court approval following the
usual notice and hearing process. All of the other defendants previously entered into agreements to settle these cases, so consequently the settlement will effectively resolve the class actions;
however, all of the defendants in the class actions continue to be defendants in a number of unresolved lawsuits brought on behalf of parties that have opted out of the class actions to seek their own
recovery. All of the opt-out cases have been transferred to the same United States District Court for the Eastern District of Pennsylvania for pretrial proceedings. We continue to
vigorously defend these opt-out cases.

In
May 2003, we received a Violation Notice from the Illinois Environmental Protection Agency (IEPA) alleging that our flexible packaging facility in Schaumburg, Illinois violated
various provisions of the Illinois Environmental Protection Act and various conditions of the applicable Clean Air Act permit issued to the facility. In June 2003, we received a Notice of
Violation and Finding of Violation from the United States Environmental Protection Agency (EPA) containing similar allegations. The allegations primarily relate to the alleged failure of two
afterburner systems designed to capture and reduce certain emissions from printing presses below required levels and the potential impact of such failure on past and future regulatory standards,
permitting requirements, emission credit requirements, recordkeeping and reporting. We discovered and corrected a problem with one of
the systems and subsequently replaced certain components of the second system to ensure that it operates as designed and to reduce the potential for any future failure. We responded to the IEPA
Violation Notice and the EPA Notice of Violation and Finding of Violation and are attempting to reach an acceptable resolution with IEPA and EPA. Based on discussions to date with the two agencies, we
believe the costs to resolve this matter will not be material and will not exceed established reserves.

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

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ITEM 5.    OTHER INFORMATION

None

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

None.

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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: November 14, 2003 | /s/PAUL K. KAUFMANNPaul K. Kaufmann Vice President and
Corporate Controller
(Principal Accounting Officer)

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