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

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FORM 10-Q

|ý | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | ----------------------------------------------------------------------------------------

For Quarter Ended March 31, 2002

|o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | -----------------------------------------------------------------------------------------

Commission File Number 0-11951

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

Delaware(State or other jurisdiction of
incorporation or organization)

37-1337160(IRS Employer Identification No.)150 North Michigan Avenue, Chicago, Illinois

60601(Address of principal executive offices)

(Zip Code)


(312) 346-6600(Registrant's telephone number, including area code)

Not Applicable(Former name, former address and former fiscal year, if changed since last report)

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of March 31, 2002, the registrant had outstanding 1,000 shares of common stock, $.01 par value per share, all of which are owned by Smurfit-Stone
Container Corporation.

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PART IFINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

JSCE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

|Three Months Ended March 31, (In millions) |                                                                   | 2002                                              |     | 2001 |   
|------------------------------------------ | ----------------------------------------------------------------- | ------------------------------------------------- | --- | ---- | --
|Net sales                                  |                                                                   | $                                                 | 801 |      | $ 
|Costs and expenses                         |                                                                   |                                                   |     |      |   
|                                           | Cost of goods sold                                                |                                                   |     | 692  |   
|                                           | Selling and administrative expenses                               |                                                   |     | 74   |   
|                                           | Restructuring charge                                              |                                                   |     | 1    |   
|                                           | Gain on sale of assets                                            |                                                   |     |      |   
|                                           |                                                                   |                                                   |     |      |   
|                                           |                                                                   | Income from operations                            |     |      | 34
|Other income (expense)                     |                                                                   |                                                   |     |      |   
|                                           | Interest income from SSCC                                         |                                                   |     | 18   |   
|                                           | Interest expense                                                  |                                                   |     | (24  | ) 
|                                           |                                                                   |                                                   |     |      |   
|                                           |                                                                   | Income before income taxes and extraordinary item |     |      | 28
|Provision for income taxes                 |                                                                   |                                                   | (11 | )    |   
|                                           |                                                                   |                                                   |     |      |   
|                                           |                                                                   | Income before extraordinary item                  |     |      | 17
|Extraordinary item                         |                                                                   |                                                   |     |      |   
|                                           | Loss from early extinguishment of debt, net of income taxes of $0 |                                                   |     |      |   
|                                           |                                                                   |                                                   |     |      |   
|                                           | Net income                                                        |                                                   | $   | 17   |   
|                                           |                                                                   |                                                   |     |      |   

See
notes to consolidated financial statements.

1

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JSCE, INC.

CONSOLIDATED BALANCE SHEETS

|(In millions, except share data)               |                                                                                         | March 31,
2002                     |                                      | December 31, 2001 |    
|---------------------------------------------- | --------------------------------------------------------------------------------------- | ---------------------------------- | ------------------------------------ | ----------------- | ---
|
|Assets                                         |                                                                                         |                                    |                                      |                   |    
|Current assets                                 |                                                                                         |                                    |                                      |                   |    
|                                               | Cash and cash equivalents                                                               |                                    | $                                    | 8                 |    
|                                               | Receivables, less allowances of $11 in 2002 and in 2001                                 |                                    |                                      | 318               |    
|                                               | Inventories                                                                             |                                    |                                      |                   |    
|                                               |                                                                                         | Work-in-process and finished goods |                                      |                   | 83 
|                                               |                                                                                         | Materials and supplies             |                                      |                   | 108
|                                               |                                                                                         |                                    |                                      |                   |    
|                                               |                                                                                         |                                    | 191                                  |                   |    
|                                               | Refundable income taxes                                                                 |                                    |                                      | 4                 |    
|                                               | Prepaid expenses and other current assets                                               |                                    |                                      | 18                |    
|                                               |                                                                                         |                                    |                                      |                   |    
|                                               |                                                                                         |                                    | Total current assets                 |                   |    
|Net property, plant and equipment              |                                                                                         |                                    | 1,212                                |                   |    
|Goodwill                                       |                                                                                         |                                    | 191                                  |                   |    
|Notes receivable from SSCC                     |                                                                                         |                                    | 510                                  |                   |    
|Other assets                                   |                                                                                         |                                    | 100                                  |                   |    
|                                               |                                                                                         |                                    |                                      |                   |    
|                                               |                                                                                         | $                                  | 2,552                                |                   | $  
|                                               |                                                                                         |                                    |                                      |                   |    
|Liabilities and Stockholder's Equity (Deficit) |                                                                                         |                                    |                                      |                   |    
|Current liabilities                            |                                                                                         |                                    |                                      |                   |    
|                                               | Current maturities of long-term debt                                                    |                                    | $                                    | 161               |    
|                                               | Accounts payable                                                                        |                                    |                                      | 219               |    
|                                               | Accrued compensation and payroll taxes                                                  |                                    |                                      | 63                |    
|                                               | Interest payable                                                                        |                                    |                                      | 37                |    
|                                               | Deferred income taxes                                                                   |                                    |                                      | 6                 |    
|                                               | Other current liabilities                                                               |                                    |                                      | 61                |    
|                                               |                                                                                         |                                    |                                      |                   |    
|                                               |                                                                                         |                                    | Total current liabilities            |                   |    
|Long-term debt, less current maturities        |                                                                                         |                                    | 1,251                                |                   |    
|Other long-term liabilities                    |                                                                                         |                                    | 265                                  |                   |    
|Deferred income taxes                          |                                                                                         |                                    | 515                                  |                   |    
|Stockholder's deficit                          |                                                                                         |                                    |                                      |                   |    
|                                               | Common stock, par value $.01 per share; 1,000 shares authorized, issued and outstanding |                                    |                                      |                   |    
|                                               | Additional paid-in capital                                                              |                                    |                                      | 1,129             |    
|                                               | Retained earnings (deficit)                                                             |                                    |                                      | (1,098            | )  
|                                               | Accumulated other comprehensive income (loss)                                           |                                    |                                      | (57               | )  
|                                               |                                                                                         |                                    |                                      |                   |    
|                                               |                                                                                         |                                    | Total stockholder's equity (deficit) |                   |    
|                                               |                                                                                         |                                    |                                      |                   |    
|                                               |                                                                                         | $                                  | 2,552                                |                   | $  
|                                               |                                                                                         |                                    |                                      |                   |    

See notes to consolidated financial statements.

2

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JSCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

|Three Months Ended March 31, (In millions) |                                                                        | 2002                                                                                        |                                                      | 2001                                      |  
|------------------------------------------ | ---------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------- | -
|Cash flows from operating activities       |                                                                        |                                                                                             |                                                      |                                           |  
|                                           | Net income                                                             |                                                                                             | $                                                    | 17                                        |  
|                                           |                                                                        | Adjustments to reconcile net income to net cash provided by (used for) operating activities |                                                      |                                           |  
|                                           |                                                                        |                                                                                             | Extraordinary loss from early extinguishment of debt |                                           |  
|                                           |                                                                        |                                                                                             | Depreciation, depletion and amortization             |                                           |  
|                                           |                                                                        |                                                                                             | Amortization of deferred debt issuance costs         |                                           |  
|                                           |                                                                        |                                                                                             | Deferred income taxes                                |                                           |  
|                                           |                                                                        |                                                                                             | Gain on sale of assets                               |                                           |  
|                                           |                                                                        |                                                                                             | Non-cash interest income from SSCC                   |                                           |  
|                                           |                                                                        |                                                                                             | Change in current assets and liabilities             |                                           |  
|                                           |                                                                        |                                                                                             |                                                      | Receivables                               |  
|                                           |                                                                        |                                                                                             |                                                      | Inventories                               |  
|                                           |                                                                        |                                                                                             |                                                      | Prepaid expenses and other current assets |  
|                                           |                                                                        |                                                                                             |                                                      | Accounts payable and accrued liabilities  |  
|                                           |                                                                        |                                                                                             |                                                      | Interest payable                          |  
|                                           |                                                                        |                                                                                             |                                                      | Income taxes                              |  
|                                           |                                                                        |                                                                                             | Other, net                                           |                                           |  
|                                           |                                                                        |                                                                                             |                                                      |                                           |  
|                                           | Net cash provided by (used for) operating activities                   |                                                                                             |                                                      | 31                                        |  
|                                           |                                                                        |                                                                                             |                                                      |                                           |  
|Cash flows from investing activities       |                                                                        |                                                                                             |                                                      |                                           |  
|                                           | Expenditures for property, plant and equipment                         |                                                                                             |                                                      | (18                                       | )
|                                           | Notes receivable from SSCC                                             |                                                                                             |                                                      | 2                                         |  
|                                           | Proceeds from property and timberland disposals and sale of businesses |                                                                                             |                                                      |                                           |  
|                                           |                                                                        |                                                                                             |                                                      |                                           |  
|                                           | Net cash used for investing activities                                 |                                                                                             |                                                      | (16                                       | )
|                                           |                                                                        |                                                                                             |                                                      |                                           |  
|Cash flows from financing activities       |                                                                        |                                                                                             |                                                      |                                           |  
|                                           | Net repayments under accounts receivable securitization program        |                                                                                             |                                                      | (5                                        | )
|                                           | Net borrowings (repayments) of debt                                    |                                                                                             |                                                      | (10                                       | )
|                                           | Dividends paid                                                         |                                                                                             |                                                      | (2                                        | )
|                                           | Deferred debt issuance costs                                           |                                                                                             |                                                      | (1                                        | )
|                                           |                                                                        |                                                                                             |                                                      |                                           |  
|                                           | Net cash provided by (used for) financing activities                   |                                                                                             |                                                      | (18                                       | )
|                                           |                                                                        |                                                                                             |                                                      |                                           |  
|Decrease in cash and cash equivalents      |                                                                        |                                                                                             | (3                                                   | )                                         |  
|Cash and cash equivalents                  |                                                                        |                                                                                             |                                                      |                                           |  
|                                           | Beginning of period                                                    |                                                                                             |                                                      | 11                                        |  
|                                           |                                                                        |                                                                                             |                                                      |                                           |  
|                                           | End of period                                                          |                                                                                             | $                                                    | 8                                         |  
|                                           |                                                                        |                                                                                             |                                                      |                                           |  

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, 2001, filed March 13, 2002 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. Exit Liabilities

At December 31, 2001, the Company had $20 million of exit liabilities related to the restructuring of operations. During the first quarter, the
Company had $1 million of cash disbursements related to these exit liabilities.

4. Long-Term Debt

Bank Credit Facilities

In January 2002, JSC(U.S.) obtained a waiver and an amendment from its lender group for relief from certain financial covenant requirements under the
JSC(U.S.) Credit Agreement as of December 31, 2001. The amendment eased certain quarterly financial covenant requirements as of December 31, 2001 and for future periods.

Senior Notes

On May 1, 2002, JSC(U.S.) repaid its $100 million 10.75% unsecured senior notes at maturity with borrowings under the JSC(U.S.) revolving credit
facility.

4

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5. Derivative Instruments and Hedging Activities

Statement of Financial Accounting Standards ("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 Future Contracts

The Company uses exchange traded futures contracts to manage fluctuations in cash flows resulting from commodity price risk in the procurement of natural gas. The
objective is to fix the price of a portion of the Company's forecasted purchases of natural gas used in the manufacturing process. The changes in the market value of such contracts have historically
been, and are expected to continue to be, highly effective at offsetting changes in price of the hedged item. As of March 31, 2002, the maximum length of time over which the Company is hedging
its exposure to the variability in future cash flows associated with natural gas forecasted transactions is approximately nine months. For the period ended March 31, 2002, the Company
reclassified a $2 million loss from OCI to cost of goods sold when the hedged items were recognized. The fair value of the Company's futures contracts at March 31, 2002 is a
$2 million loss included in other current liabilities.

The
cumulative deferred hedge loss on all commodity contracts is $1 million (net of tax of $1 million) at March 31, 2002. The Company expects to reclassify
$1 million into earnings during the next twelve months.

6. Comprehensive Income (Loss)

Comprehensive income (loss) is as follows:

|                                               |                                                   | Three months ended
March 31, |   
|---------------------------------------------- | ------------------------------------------------- | ---------------------------- | --
|
|Net income                                     |                                                   | $                            | 17
|Other comprehensive income (loss), net of tax: |                                                   |                              |   
|                                               | Net changes in fair value of hedging transactions |                              |   
|                                               | Net loss reclassified into earnings               |                              |   
|                                               | Foreign currency translation adjustment           |                              |   
|                                               |                                                   |                              |   
|Comprehensive income                           |                                                   | $                            | 20
|                                               |                                                   |                              |   

7. Goodwill Accounting

Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 requires that goodwill no
longer be amortized, but instead tested for impairment at least annually. The Company has completed the required transitional impairment test as of January 1, 2002

5

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and
found no impairment of goodwill. On an ongoing basis (absent any impairment indicators), we expect to perform our impairment tests during the fourth quarter.

Income
before extraordinary item and net income for the first quarter of 2001 adjusted to exclude goodwill amortization expense is as follows:

|                                  |                                           | Three months
ended
March 31, 2001        
|--------------------------------- | ----------------------------------------- | -----------------------------------------
|Income before extraordinary item: |                                           |                                          
|                                  | Reported income before extraordinary item |                                          
|                                  | Goodwill amortization                     |                                          
|                                  |                                           |                                          
|                                  |                                           | Adjusted income before extraordinary item
|                                  |                                           |                                          
|Net Income:                       |                                           |                                          
|                                  | Reported net income                       |                                          
|                                  | Goodwill amortization                     |                                          
|                                  |                                           |                                          
|                                  |                                           | Adjusted net income                      
|                                  |                                           |                                          

As
of January 1, 2002, goodwill of $191 million (net of $86 million of amortization) was attributable to our segments as follows: $119 million
for Containerboard and Corrugated Containers and $72 million for Consumer Packaging. During the first quarter of 2002, no goodwill was acquired, impaired, or written off.

8. Business Segment Information

On January 1, 2002, the Company combined the Consumer Packaging segment with the Specialty Packaging segment. The Specialty Packaging segment was
previously not a reportable segment. The information for 2001 has been restated from the prior year in order to conform to the 2002 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 the elimination of intercompany profit and income and expense not allocated to reportable segments including
corporate expenses, restructuring charges, goodwill amortization in 2001, interest expense and the adjustment to record inventory at LIFO.

6

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|Three months ended March 31, |                                  | Container-
board &
Corrugated
Containers |   | Consumer
Packaging |  | Recla-
mation |     | Other |   | Total
|---------------------------- | -------------------------------- | ---------------------------------------- | - | ------------------ |  | ------------- | --- | ----- | - | -----
|                             | 2002                             |                                          |   |                    |  |               |     |       |   |      
|                             | Revenues from external customers |                                          | $ | 437                |  | $             | 276 |       | $ | 84   
|                             | Intersegment revenues            |                                          |   | 11                 |  |               | 2   |       |   | 17   
|                             | Segment profit (loss)            |                                          |   | 17                 |  |               | 22  |       |   | 1    
|                             | 2001                             |                                          |   |                    |  |               |     |       |   |      
|                             | Revenues from external customers |                                          | $ | 482                |  | $             | 296 |       | $ | 105  
|                             | Intersegment revenues            |                                          |   | 12                 |  |               | 1   |       |   | 17   
|                             | Segment profit (loss)            |                                          |   | 25                 |  |               | 25  |       |   | 1    

9. Contingencies

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

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

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

10. Prospective Accounting Standards

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations." 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.
This statement is effective for fiscal years beginning after June 15, 2002. We are currently assessing the impact of this new standard.

7

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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.

8

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RESULTS OF OPERATIONS

First Quarter 2002 Compared to First Quarter 2001

|                                                  |                  | Three months ended March 31, |    
|------------------------------------------------- | ---------------- | ---------------------------- | ---
|
|
|Containerboard and corrugated containers          |                  | $                            | 437
|Consumer packaging                                |                  |                              | 276
|Reclamation                                       |                  |                              | 84 
|Other operations                                  |                  |                              | 4  
|                                                  |                  |                              |    
|                                                  | Total operations |                              | $  
|                                                  |                  |                              |    
|Restructuring charges                             |                  |                              |    
|Gain on sale of assets                            |                  |                              |    
|Interest income                                   |                  |                              |    
|Interest expense                                  |                  |                              |    
|Corporate expenses and other                      |                  |                              |    
|                                                  |                  |                              |    
|Income before income taxes and extraordinary item |                  |                              |    
|                                                  |                  |                              |    

Consolidated
net sales of $801 million in 2002 declined by 10% compared to 2001. Weak market conditions led to lower sales prices and reduced shipments for most of
our major products. On January 1, 2002, we combined the Consumer Packaging segment with the Specialty Packaging segment. The Specialty Packaging segment was previously not a reportable segment.
The increase (decrease) in net sales for each of our segments is summarized in the chart below:

|(In millions)                |       | Container-
board &
Corrugated
Containers |     | Consumer
Packaging |   | Reclamation |     | Other
Operations |     | Total |  
|---------------------------- | ----- | ---------------------------------------- | --- | ------------------ | - | ----------- | --- | ---------------- | --- | ----- | -
|Sales prices and product mix |       | $                                        | (33 | )                  | $ | (7          | )   | $                | (15 | )     | $
|Sales volume                 |       |                                          | (11 | )                  |   | (13         | )   |                  | (5  | )     |  
|Closed or sold facilities    |       |                                          | (1  | )                  |   |             |     |                  | (1  | )     |  
|                             |       |                                          |     |                    |   |             |     |                  |     |       |  
|                             | Total |                                          | $   | (45                | ) | $           | (20 | )                | $   | (21   | )
|                             |       |                                          |     |                    |   |             |     |                  |     |       |  

Income
before income taxes and extraordinary item in 2002 was $28 million, comparable to 2001. The decline in 2002 in earnings of our operating segments,
particularly in the Containerboard and Corrugated Containers segment was offset by lower interest expense, net and the elimination of goodwill amortization compared to 2000.

Amortization
of goodwill ceased on January 1, 2002, when we adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets."
Goodwill amortization for the three months ended March 31, 2001 was $2 million. We performed our transitional impairment test for each of our reporting units, as required by SFAS
No. 142, during the first quarter of 2002. Under SFAS No. 142, an impairment is recognized when a reporting unit's carrying amount of goodwill exceeds its implied fair value. Based upon
the results of our transitional impairment test, our recorded goodwill as of January 1, 2002 was not impaired. We determined the fair value of our reporting units based upon discounted cash
flow models supported by recent acquisitions within our industry and various other valuation techniques.

Consolidated
cost of goods sold decreased due primarily to the lower sales volumes and lower reclaimed fiber cost. In addition, energy cost was lower by $10 million and the
elimination of goodwill amortization

9

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reduced
cost by $2 million. Cost of goods sold as a percent of net sales in 2002 was 86%, comparable to 2001.

Selling
and administrative expenses were comparable to last year. Selling and administrative expense as a percent of net sales increased to 9% in 2002 compared to 8% in 2001 due
primarily to our lower average sales prices.

During
2002, we recorded a restructuring charge of $1 million related to the closure of a Cladwood® plant in Oregon.

Interest
expense declined $12 million due to the favorable impacts of $10 million from lower overall average interest rates and $2 million from lower average
borrowings. The overall average effective interest rate in 2002 was lower than 2001 by 2.7%. Interest income for 2002 included $18 million of accrued interest on our intercompany notes
receivable from Smurfit-Stone, an increase of $3 million compared to last year.

The
effective income tax rate for 2002 was 39%, comparable to 2001. Provision for income taxes in 2002 differed from the federal statutory tax rate due primarily to state income taxes.

Containerboard and Corrugated Containers Segment

Net sales decreased by 9% due primarily to lower average sales prices and lower sales volumes for containerboard and corrugated containers. The weak market
conditions experienced during 2001 continued into the first quarter of 2002. Shipments of corrugated containers decreased 3%. We continued to take market related downtime in order to maintain a lower
level of inventory. Containerboard production decreased 3% due to lower demand. We incurred approximately 60,000 tons of containerboard market related downtime in 2002. On average, corrugated
container sales prices decreased by 6% and linerboard sales prices were lower by 9%. For solid bleached sulfate, the average sales price decreased 7% and production was lower by 7%.

Profits
decreased by $8 million due primarily to the lower average sales prices. Profits were favorably impacted by lower energy cost in 2002 compared to 2001. Cost of goods sold
as a percent of net sales increased to 89% in 2002 compared to 88% in 2001 due to the lower average sales prices.

Consumer Packaging Segment

Net sales decreased by 7% due primarily to lower sales volumes and lower average sales prices. Folding carton shipments decreased 8%. On average, folding carton
sales prices were 1% lower in 2002 compared to 2001, coated boxboard sales prices were 4% lower and uncoated boxboard sales prices were 10% lower. Production of coated boxboard in 2002 was comparable
to 2001 and production of
uncoated boxboard production, excluding the closure of our Los Angeles boxboard machine, increased by 7%.

Profits
decreased by $3 million due primarily to the lower average sales prices and lower sales volume. Profits were favorably impacted by lower reclaimed fiber cost and lower
energy cost. Cost of goods sold as a percent of net sales in 2002 was 83%, comparable to 2001.

Reclamation Segment

Net sales in 2002 decreased by 20% compared to 2001. Demand for reclaimed fiber, particularly for old corrugated containers, commonly known as OCC, the primary
grade used by recycled containerboard mills, was weak due to downtime in containerboard mills. The average price of OCC in 2002 was comparable to 2001, but the average price of old newsprint was lower
by approximately $15 per ton. Total tons of fiber reclaimed and brokered decreased 6%. Reclamation profits were unchanged compared to last year because the lower cost of reclaimed fiber offset the
lower average sales prices. Cost of goods sold as a percent of net sales decreased from 92% in 2001 to 90% in 2002 due primarily to the lower cost of fiber.

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Statistical Data

|                                             |                        | Three months ended
March 31,
|-------------------------------------------- | ---------------------- | ----------------------------
|
|
|Mill production:                             |                        |                             
|                                             | Containerboard         |                             
|                                             | Solid bleached sulfate |                             
|                                             | Coated boxboard        |                             
|                                             | Uncoated boxboard      |                             
|Corrugated containers sold (billion sq. ft.) |                        | 6.6                         
|Folding cartons sold                         |                        | 122                         
|Fiber reclaimed and brokered                 |                        | 1,632                       

RESTRUCTURING AND EXIT LIABILITIES

During the three months ended March 31, 2002, we recorded a restructuring charge of approximately $1 million for the closure of a
Cladwood® facility in Oregon. Approximately 30 employees were terminated.

As
of December 31, 2001, we had $21 million of exit liabilities related to the Smurfit-Stone merger and from our restructuring activities. During the three months ended
March 31, 2002, we incurred cash expenditures of approximately $1 million for exit liabilities. Through March 31, 2002, we have incurred approximately $54 million (73%) of
the planned cash expenditures to close facilities, pay severance and pay other 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

Cash provided by operating activities for the three months ended March 31, 2002 totaled $31 million compared to cash used for operating activities
of $26 million in the same period in 2001. Our primary uses of cash in 2002 were $15 million for debt repayments, $18 million for property, plant and equipment and
$2 million for dividends to Smurfit-Stone.

We
expect internally generated cash flows, available borrowing capacity under the Jefferson Smurfit (U.S.) credit agreement and future financing activities will be sufficient for the
next several years to meet our obligations, including debt service, expenditures related to environmental compliance and other capital expenditures. Scheduled debt payments for the remainder of 2002
and for 2003 total $133 million and $755 million, respectively, with varying amounts thereafter. We are exploring a number of options to repay or refinance these debt maturities. We have
historically had good access to the capital markets and expect to be able to repay or refinance these debt maturities before their maturity dates. Although we believe we will have access to the
capital markets in the future, these markets are volatile and we cannot predict the condition of the markets or the timing of any related transactions. Access to the capital markets may be limited or
unavailable due to an unpredictable material adverse event unrelated to our operational or financial performance. In such event, we would explore additional options, including, but not limited to, the
sale or monetization of assets.

We
intend to hold capital expenditures for 2002 significantly below our anticipated annual depreciation level of $116 million. As of March 31, 2002, we had authorized
commitments for capital expenditures of $41 million, including $10 million for environmental projects, $4 million to maintain competitiveness and $27 million for upgrades,
modernization and expansion.

We
expect to use any excess cash flows provided by operations to make further debt reductions. As of March 31, 2002, prior to giving consideration to the subsequent transaction
discussed in financing activities below, Jefferson Smurfit (U.S.) had $456 million of unused borrowing capacity under its bank

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credit
facility and $19 million of unused borrowing capacity under our $229 million accounts receivable securitization program, subject to Jefferson Smurfit (U.S.)'s level of eligible
accounts receivable.

Financing Activities

In January 2002, Jefferson Smurfit (U.S.) obtained a waiver and an amendment from its lender group for relief from certain financial covenant requirements
under the Jefferson Smurfit (U.S.) credit agreement as of December 31, 2001. The amendment eased certain quarterly financial covenant requirements as of December 31, 2001 and for future
periods.

On
May 1, 2002, we repaid our $100 million 10.75% Unsecured Senior Notes at maturity with borrowings under the Jefferson Smurfit (U.S.) revolving credit facility.

The
obligations under the Jefferson Smurfit (U.S.) credit agreement are unconditionally guaranteed by JSCE Inc., Smurfit-Stone and certain 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 subsidiaries. The
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 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.
Such restrictions, together with our highly leveraged position, could restrict our corporate activities, including our ability to respond to market conditions, to provide for unanticipated capital
expenditures or to take advantage of business opportunities. We believe the likelihood of our breaching our debt covenants in 2002 is remote absent any material adverse event affecting the U.S.
economy as a whole. We also believe that if a material adverse event would affect us, our lenders would provide waivers if necessary. However, our expectations of future operating results and
continued compliance with our debt covenants cannot be assured and we cannot control our lenders' actions. If our debt is placed in default, we would experience a material adverse impact on our
financial condition.

PROSPECTIVE ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Assets Retirement Obligations." 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. This statement is effective for fiscal years beginning after June 15, 2002. We are currently assessing the
impact of this new standard.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including interest rate risk and commodity price risk. To manage the volatility related to these risks, we enter into
various derivative contracts. We do not use derivatives for speculative or trading purposes.

Interest Rate Risk

Our earnings and cash flows are significantly affected by the amount of interest on our indebtedness. Our objective is to protect JSCE, Inc. from interest
rate volatility and reduce or cap interest expense within acceptable levels of market risk. We may periodically enter into interest rate swaps, caps or options to hedge interest rate exposure and
manage risk within company policy. Any derivative would be specific to the debt instrument, contract or transaction, which would determine the specifics of the hedge. There were no interest rate
derivatives outstanding at March 31, 2002.

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Commodity Price Risk

We periodically enter into exchange traded futures contracts to manage fluctuations in cash flows resulting from commodity price risk in the procurement of
natural gas. As of March 31, 2002, we had futures contracts to hedge approximately 25% to 30% of our expected natural gas requirements for the months of April 2002 through
October 2002. Our objective is to fix the price of a portion of our forecasted purchases of natural gas used in the manufacturing process. The change in energy cost discussed in Part I,
Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations included the impact of the natural gas futures contracts. See Note 5 of the Notes to
Consolidated Financial Statements.

PART IIOTHER INFORMATION

|        |  |                                                    
|------- |  | ---------------------------------------------------
|ITEM 1. |  | LEGAL PROCEEDINGS                                  
|        |  | None                                               
|        |  |                                                    
|ITEM 2. |  | CHANGES IN SECURITIES                              
|        |  | None                                               
|        |  |                                                    
|ITEM 3. |  | DEFAULTS UPON SENIOR SECURITIES                    
|        |  | None                                               
|        |  |                                                    
|ITEM 4. |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|        |  | None                                               
|        |  |                                                    
|ITEM 5. |  | OTHER INFORMATION                                  
|        |  | None                                               
|        |  |                                                    
|ITEM 6. |  | EXHIBITS AND REPORTS ON FORM 8-K                   

None

There
were no Form 8-K filings during the three months ended March 31, 2002.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                  |  |  | JSCE, INC. (Registrant)                                                                                   
|----------------- |  |  | ----------------------------------------------------------------------------------------------------------
|Date: May 7, 2002 |  |  | /s/PAUL K. KAUFMANNPaul K. Kaufmann Vice President and Corporate Controller (Principal Accounting
Officer)

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