<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


                                  FORM 10-Q


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934


For the Quarterly Period Ended:  September 28, 1997   Commission File Number: 
33-93494
--------------------------------------------------------------------------------

                               CROWN PAPER CO.
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)


            Virginia                                  54-1752385
--------------------------------------------------------------------------------
    (State or other jurisdiction of              (I.R.S. Employer
    incorporation or organization)               Identification No.)


    300 Lakeside Drive, Oakland, CA                   94612-3592
--------------------------------------------------------------------------------
    (Address of principal executive offices)           (Zip Code)


            (510) 874-3400
--------------------------------------------------------------------------------
   (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    X           No
                                                     ---------         ---------

Number of shares of no par value common stock outstanding as of the close of
business on
November 12, 1997:

             One (1) share, which is owned by Crown Vantage Inc.
             ---------------------------------------------------
<PAGE>

                                    INDEX
                               CROWN PAPER CO.




PART I:  Financial Information

         Item 1.       Financial Statements

                  -  Condensed Consolidated Balance Sheets - September 28, 1997
                     and December 29, 1996.

                  -  Condensed Consolidated Statements of Operations - Three
                     months and nine months ended September 28, 1997 and
                     September 29, 1996.

                  -  Condensed Consolidated Statements of Cash Flows - Nine
                     months ended September 28, 1997 and September 29, 1996.

                  -  Notes to Condensed Consolidated Financial Statements.

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

PART II: Other Information

         Item 6.  Exhibits and Reports on Form 8-K

SIGNATURES

                                       2
<PAGE>

PART I  --  FINANCIAL INFORMATION

ITEM 1  --  FINANCIAL STATEMENTS


                               CROWN PAPER CO.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                           (IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>

ASSETS                                                          SEPTEMBER 28, 1997    DECEMBER 29, 1996
                                                                -----------------     -----------------
                                                                    (UNAUDITED)
                                                                    -----------
<S>                                                                  <C>                  <C>
Current Assets:
        Cash and cash equivalents                                    $  10,205            $   1,175
        Accounts receivable, net                                        50,233               56,004
        Inventories                                                     94,362               97,975
        Prepaid expenses and other current assets                        6,793               15,217
        Deferred income taxes                                           14,191               14,191
                                                                      --------             --------
                 Total current assets                                  175,784              184,562
Property, plant and equipment, net                                     652,678              678,154
Other assets                                                            38,780               36,759
Unamortized debt issue costs                                            14,554               16,023
Intangibles, net                                                        29,258               30,101
                                                                      --------             --------
                 Total Assets                                        $ 911,054            $ 945,599
                                                                      --------             --------
                                                                      --------             --------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
        Accounts payable                                             $  45,251            $  60,612
        Accrued liabilities                                             72,373               80,920
        Current portion of long-term debt                               10,065                6,761
                                                                      --------             --------
                 Total current liabilities                             127,689              148,293
Long-term debt                                                         466,754              447,229
Accrued postretirement benefits other than pensions                    101,383              101,273
Other long-term liabilities                                             15,463               15,373
Deferred income taxes                                                   89,730              102,468
                                                                      --------             --------
                 Total Liabilities                                     801,019              814,636
                                                                      --------             --------
Shareholder's Equity:
        Preferred Stock, no par value;
           Authorized - 5,000 shares;
           Issued and outstanding - None
        Common Stock, no par value;
           Authorized - 5,000 shares;
           Issued and outstanding one (1) 
                share at September 28, 1997 
                and December 29, 1996                                  131,698              129,058
        Minimum pension liability                                         (892)                (892)
        Cumulative foreign currency translation adjustment                (126)               3,365
        Retained deficit                                               (20,645)              (  568)
                                                                      --------             --------
                                                                       110,035              130,963
                                                                      --------             --------
Total Liabilities and Shareholder's Equity                           $ 911,054            $ 945,599
                                                                      --------             --------
                                                                      --------             --------
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       3
<PAGE>

                               CROWN PAPER CO.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
         For the Third Quarter (13 weeks) and Nine Months (39 weeks)
               Ended September 28, 1997 and September 29, 1996
                 (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE)

<TABLE>
<CAPTION>
                                          Third Quarter                   Nine Months
                                     -----------------------        -----------------------
                                       1997           1996            1997           1996
                                     --------       --------        --------       --------
                                           (UNAUDITED )                   (UNAUDITED )
<S>                                <C>            <C>               <C>           <C>
Net sales                            $226,808       $221,064        $680,381      $ 704,481
Cost of goods sold                    206,210        209,732         631,867        637,206
                                     --------       --------        --------       --------
Gross margin                           20,598         11,332          48,514         67,275
Selling and administrative expenses    13,963         13,792          42,732         38,132
                                     --------       --------        --------       --------
         Operating income (loss)        6,635      (   2,460)          5,782         29,143
Interest expense                     ( 13,039)     (  11,952)        (38,082)       (37,323)
Other income, net                          71            211             929            603
                                     --------       --------        --------       --------
         Loss before income taxes    (  6,333)     (  14,201)        (31,371)      (  7,577)
Benefit for income taxes             (  2,144)     (   6,672)        (11,294)      (  4,040)
                                     --------       --------        --------       --------
              NET LOSS              $(  4,189)    $(   7,529)       $(20,077)     $(  3,537)
                                     --------       --------        --------       --------
                                     --------       --------        --------       --------
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       4
<PAGE>

                               CROWN PAPER CO.
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        For the Nine Months (39 weeks)
               Ended September 28, 1997 and September 29, 1996
                         (IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
                                                                              Nine Months
                                                                     -----------------------------
                                                                         1997             1996
                                                                     ------------     ------------
                                                                              (UNAUDITED)
<S>                                                                    <C>              <C>
Cash Provided by (Used for) Operating Activities:
       Net loss                                                         $(20,077)         $(3,537)
       Items not affecting cash:
             Depreciation and cost of timber harvested                    61,548           57,712
             Amortization of goodwill and other intangibles                  844              844
             Non-cash interest                                             2,050            2,385
             Other, net                                                    1,939            3,009
       Changes in current assets and liabilities:
             Accounts receivable (includes $40,000 sold in 1996)           5,771           49,885
             Inventories                                                   3,613            4,109
             Other current assets                                          8,425          (10,546)
             Accounts payable                                             (7,885)         (11,483)
             Other current liabilities                                   (10,119)          (2,424)
       Decrease in deferred income taxes                                 (12,738)          (2,183)
       Other, net                                                         (3,603)           1,906
                                                                     ------------     ------------
             Cash Provided by Operating Activities                        29,768           89,677
                                                                     ------------     ------------


Cash Provided by (Used for) Investing Activities:
       Expenditures for property, plant and equipment                    (45,005)         (58,907)
       Other, net                                                          2,078             (371)
                                                                     ------------     ------------
             Cash Used for Investing Activities                          (42,927)         (59,278)
                                                                     ------------     ------------
                                                                     ------------     ------------

Cash Provided by (Used for) Financing Activities:
       Proceeds from draw down of Revolving Credit                        97,000          171,000
       Repayments of Revolving Credit                                    (74,000)        (163,000)
       Proceeds  from issuance of 
             Industrial Revenue Bonds, net                                 7,241           12,100
       Repayments of Term Loans and other long-term debt                  (8,052)        ( 49,631)
                                                                     ------------     ------------
             Cash Provided by (Used for)  Financing Activities            22,189         ( 29,531)
                                                                     ------------     ------------

Increase in cash and cash equivalents                                      9,030              868
Cash and cash equivalents at beginning of year                             1,175            5,335
                                                                     ------------     ------------
Cash and cash equivalents at end of period                             $  10,205        $   6,203
                                                                     ------------     ------------
                                                                     ------------     ------------
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       5
<PAGE>

                               CROWN PAPER CO.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (UNAUDITED)


NOTE 1  --  ORGANIZATION AND BASIS OF PRESENTATION

    The accompanying unaudited condensed consolidated financial statements
include the consolidated operations, assets, and liabilities of Crown Paper Co.,
and Crown Paper Co.'s consolidated subsidiaries.  Crown Paper Co. and
subsidiaries (The "Company") is a wholly owned subsidiary of Crown Vantage Inc.
(the "Parent").  The Parent became an independent company after the Board of
Directors of James River Corporation of Virginia ("James River"), now known as
Fort James Corporation ("Fort James"), approved the spin-off of assets,
liabilities and operations which comprised a substantial part of James River's
Communication Papers Business and the paper-based part of its Food and Consumer
Packaging Business ("Predecessor Business").  At the close of business on August
25, 1995, James River distributed to its common shareholders all of the
outstanding shares of the Parent (the "Distribution").  The Distribution was
made in the form of a tax-free dividend on the basis of one share of the
Parent's common stock for every ten shares of James River common stock.  A total
of 8,446,362 shares of the Parent's common stock was issued and began trading on
NASDAQ on August 28, 1995.

    The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X.  Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for annual
financial statements.  The condensed consolidated balance sheet as of December
29, 1996 was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles for annual
financial statements.  In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.  Operating results for the nine months ended September 28, 1997
are not necessarily indicative of the results that may be expected for the year
ended December 28, 1997.  For further information, refer to the consolidated
financial statements and footnotes thereto included in Crown Paper Co.'s Form
10-K for the year ended December 29, 1996.  Certain 1996 amounts have been
reclassified to conform with the 1997 presentation.


NOTE 2  --  INCOME TAX

    The income tax benefits for the quarter and nine months ended September 28,
1997 and September 29, 1996 were provided based on the Company's estimated
annual tax rates of 36% and 39.8%, respectively.  In addition, the Company
recognized a benefit of $1.0 million in the third quarter of 1996 for reduction
of estimated taxes payable for 1995.

                                       6
<PAGE>

NOTE 3  --  LONG TERM DEBT

Consolidated long-term debt consists of the following:

                                              September 28      December 29
                                                  1997             1996
                                             --------------    -------------
                                                (IN THOUSANDS OF DOLLARS)

    Bank Credit Facility:
           Revolving credit, due 2002               $48,000         $ 25,000
           Term Loan A, due 2002                     39,150           45,712
           Term Loan B, due 2003                     98,250           99,000
                                                 -----------       ---------
                                                    185,400          169,712
    11% Senior Subordinated Notes, due 2005         250,000          250,000
    Industrial Revenue Bonds, payable to 2026        41,419           34,278
                                                 -----------       ---------
                                                    476,819          453,990
    Less current portion                             10,065            6,761
                                                 -----------       ---------
                                                  $ 466,754         $447,229
                                                 -----------       ---------
                                                 -----------       ---------

    In August 1997, the Company completed a $2.5 million refinancing of 
certain industrial revenue bonds (the "Refunding Bonds") issued by the 
Michigan Strategic Fund.  The Refunding Bonds were issued to refinance 
certain of the Company's water pollution control and sewage and solid waste 
disposal facilities to be used by the Company.  The Refunding Bonds bear 
interest at 6.25% and are due August 1, 2012.  The bonds being refunded were 
repaid in October 1997.

    Also in August 1997, the Company finalized an agreement with the Michigan 
Strategic Fund whereby a total of $4.9 million of bonds (the "Project Bonds") 
were sold to finance certain sewage and solid waste disposal facilities to be 
used by the Company.  The proceeds from the sale of the Project Bonds were 
used to finance eligible project costs.  Upon sale, an amount equivalent to 
50% of the proceeds was prepaid on Term Loan A.  The Project Bonds bear 
interest at 6.5% and are due August 1, 2021.

    In the fourth quarter of 1997 Term Loan A was entirely repaid (see 
"Subsequent Events").

    Maturities of long-term debt (after repayment of Term Loan A), excluding 
the revolving credit, for the next five fiscal year ends are:  1998 - $1.0 
million;  1999 - $1.0 million; 2000 - $1.3 million; 2001 - $.8 million; and 
2002 - $47.0 million.

NOTE 4  --  INVENTORIES

<TABLE>
<CAPTION>
                                                       September 28, 1997     December 29, 1996
                                                       ------------------     -----------------
                                                                (IN THOUSANDS OF DOLLARS)
<S>                                                         <C>                    <C>
Raw materials                                               $ 25,209               $ 26,283
Work in process                                                6,766                  7,490
Finished goods                                                39,943                 42,168
Stores and supplies                                           35,356                 34,640
                                                         -------------          -------------
                                                             107,274                110,581
Reduction to state inventories at last-in, first-out cost    (12,912)               (12,606)
                                                         -------------          -------------
                                                            $ 94,362               $ 97,975
                                                         -------------          -------------
                                                         -------------          -------------
</TABLE>

                                       7
<PAGE>

NOTE 5  --  LITIGATION AND ENVIRONMENTAL MATTERS

    The Company is a party to various legal proceedings generally incidental to
its business and is subject to a variety of environmental protection statutes
and regulations.  As is the case with other companies in similar industries, the
Company faces exposure from actual or potential claims and legal proceedings
involving environmental matters.  Although the ultimate disposition of legal
proceedings cannot be predicted with certainty, it is the present opinion of the
Company's management that the outcome of any claim which is pending or
threatened, either individually or on a combined basis, will not have a
materially adverse effect on the consolidated financial position of  the Company
but could materially affect consolidated results of operations in a given
period.

    The Company has accrued estimated landfill site restoration, post-closure
and monitoring costs totaling $11.4 million and $11.1 million at September 28,
1997 and December 29, 1996, respectively.  In addition, the Company has been
identified as a potentially responsible party ("PRP"), along with others, under
the Comprehensive Environmental Response, Compensation and Liability Act or
similar federal and state laws regarding the past disposal of wastes at
approximately 20 sites in the United States.  The Company has previously settled
its remediation obligations at 11 sites.  At 8 other sites, the Company is one
of many potentially responsible parties and its alleged contribution to the site
and remediation obligation is not considered significant.  At one other site,
remedial investigation is underway.  While it is reasonably possible that a loss
may be incurred at these sites, an  estimate of potential loss is not yet
possible.  Based upon its previous experience with respect to the cleanup of
hazardous substances as well as the regular detailed review of its known
hazardous waste sites and estimated costs to remediate certain sites, the
Company has accrued $.5 million and $.7 million at September 28, 1997 and
December 29, 1996, respectively.  The liabilities can change substantially due
to such factors as the solvency of other potentially responsible parties, the
Company's share of responsibility, additional information on the nature or
extent of contamination, methods of remediation required, and other actions by
governmental agencies or private parties.  While it is not feasible to predict
the outcome of all environmental liabilities, based on its most recent review,
management is of the opinion that its share of the costs of investigation and
remediation of the sites of which it is currently aware will not have a material
adverse effect upon the consolidated financial condition of the Company.  

    However, because of uncertainties  associated with remediation activities,
regulations, technologies, and the allocation of costs among various other
parties, actual costs to be incurred at identified sites may vary from
estimates.  Therefore, management is unable to determine if the ultimate
disposition of all known environmental liabilities will have a material adverse
effect on the Company's consolidated results of operations in a given year.  In
addition, as is the case with most manufacturing and many other entities, there
can be no assurance that the Company will not be named as a PRP at additional
sites in the future or that the costs associated with such additional sites
would not be material.

    In December 1993, the EPA published draft rules which contain proposed
regulations affecting pulp and paper industry discharges of wastewater and
gaseous emissions ("Cluster Rules").  The final Cluster Rules were scheduled to
be issued in late 1995; however, issuance has been repeatedly delayed.  Current
indications are that the rules will be issued in late 1997 with a compliance
date of 2001.  These Cluster Rules may require significant changes in the
pulping, bleaching and/or wastewater treatment processes presently used in some
U.S. pulp and paper mills, including some of the Company's mills.   Based on the
Company's understanding of the proposed rules, the Company estimates that
approximately $68 million of capital expenditures may be required to comply with
the rules.

                                       8
<PAGE>

NOTE 6 -- STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121

    Statement of Financial Accounting Standards No. 121 ("Accounting for the 
Impairment of Long-Lived Assets and for Long-Lived  Assets to Be Disposed 
Of") requires that the Company assess the recoverability of its investments 
in long-lived assets to be held and used in operations whenever events or 
circumstances indicate that their carrying amounts may be impaired.  Such 
assessment requires that the future cash flows expected to result from use of 
the assets be estimated and an impairment loss recognized when future cash 
flows are less than the carrying value of such assets.  Estimating future 
cash flows requires the Company to estimate future production volumes and 
costs, future sales volumes, demand for the Company's product mix and prices 
which reflect the use of its long-lived assets and market conditions.  
Although the Company believes it has a reasonable basis for its estimates, it 
is reasonably possible that the Company's actual performance could differ 
from such estimates which could result in a material impairment loss on its 
long-lived assets (see "Subsequent Events").

NOTE 7 -- EMPLOYEE STOCK  OWNERSHIP PLAN

    On May 2, 1997 the Company and the Parent entered into an agreement with 
the Crown Vantage Inc. Employee Stock Ownership Plan (the "ESOP") whereby the 
ESOP purchased $3.0 million of Common Stock from the Parent.  The purchase 
was funded by a loan to the ESOP from Crown Paper Co. which bears interest at 
11% and is due May 1, 2004.  The ESOP purchased 500,000 shares of Common 
Stock of the Parent at the average of the high and low prices for the 
previous 10 day trading period.  The shares are to be used to satisfy the 
Company's matching obligation with respect to the ESOP and are pledged as 
collateral for the ESOP's debt.  As the Company recognizes compensation 
expense for its matching contribution, shares are committed for release from 
collateral.

NOTE 8 --SUBSEQUENT EVENTS

    In October 1997 the Company sold approximately 108,000 acres of timber 
producing properties for approximately $36 million.  These forests have 
accounted for less than 5% of the wood fiber required by the Company's pulp 
mills at Berlin and St. Francisville.  As part of the transaction in the 
Northeastern United States, the Company entered into a long-term wood supply 
contract with the buyer to supply wood for the Berlin mill.  The Company has 
retained ownership of certain standing timber in the Southeastern United 
States and entered into a cutting plan contract with the buyer in order to 
continue supplying wood fiber to the St. Francisville mill.  Proceeds from 
the sale of the Company's timber properties were used to prepay Term Loan A.

    Also in October 1997, the Company repaid the remaining $3.2 million 
balance of Term Loan A.

    On October 28, 1997 the Company announced its intention to close its 
Newark, Delaware facility by the end of the year and seek a buyer for the 
site. Newark has produced approximately 1,800 tons of paper during the first 
nine months of 1997.  The Company expects to shift most of the Newark mill's 
production to other mills.  The Company anticipates recording a charge 
related to the closure or divestiture of the mill in the fourth quarter of 
1997.

                                       9
<PAGE>

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

    Crown Paper Co. and subsidiaries (the "Company") is a major producer of 
value-added paper products for a diverse array of end-uses.  The Company's  
two business sectors and corresponding principal product categories are (i) 
printing and publishing papers, for applications such as special interest 
magazines, books, custom business forms and corporate communications and 
promotions (e.g., annual reports and stationery); and  (ii) specialty papers, 
principally for food and  retail packaging applications and conversion into 
such items as coffee filters, cups and plates.  

    The Company operates 11 facilities using 33 paper machines and is 
approximately 75% integrated with the Company's pulp operations.  The 
Company's two largest facilities are integrated operations located in St. 
Francisville, Louisiana and Berlin and Gorham, New Hampshire.  St. 
Francisville produces coated groundwood papers for magazines and catalogs and 
uncoated specialty converting papers.  Berlin-Gorham primarily produces 
uncoated printing and publishing papers as well as  market pulp.  The Company 
also produces uncoated printing and publishing papers at its non-integrated 
facilities in Adams, Massachusetts; Newark, Delaware; Ypsilanti, Michigan; 
and Dalmore and Guardbridge, Scotland.  The Company's food and retail 
packaging papers are produced primarily at non-integrated  facilities in Port 
Huron and Parchment, Michigan, and Milford, New Jersey.  In addition to its 
primary paper-making operations, the Company operates a cast-coating facility 
in Richmond, Virginia.

RESULTS OF OPERATIONS

    The Company's net sales for each business sector as well as pulp and 
miscellaneous are as follows:

<TABLE>
<CAPTION>
                                              Net Sales and Tonnage by Sector
                                                 for the Nine Months Ended
                                         September 28, 1997        September 29, 1996
                                       ----------------------    ----------------------
                                         Tons         Sales        Tons         Sales
                                       --------     ---------    --------     ---------
                                                   (thousands)               (thousands)
<S>                                     <C>          <C>          <C>          <C>
Printing and Publishing Papers
   Coated groundwood                    213,769      $147,839     193,396      $170,546
   Uncoated                             182,875       177,561     181,885       181,112


Specialty Papers
   Food and retail packaging            175,887       222,545     176,880       229,703
   Converting                           132,975       117,437     125,341       112,547

Pulp and Miscellaneous                   40,652        14,999      28,742        10,573
                                       ----------    ----------  ----------    ----------

                                        746,158      $680,381     706,244      $704,481
                                       ----------    ----------  ----------    ----------
                                       ----------    ----------  ----------    ----------
</TABLE>

                                      10
<PAGE>

<TABLE>
<CAPTION>
                                              Net Sales and Tonnage by Sector
                                                 for the Nine Quarter Ended
                                         September 28, 1997        September 29, 1996
                                       ----------------------    ----------------------
                                         Tons         Sales        Tons         Sales
                                       --------     ---------    --------     ---------
                                                   (thousands)               (thousands)
<S>                                     <C>         <C>          <C>          <C>
    Printing and Publishing Papers
        Coated groundwood                70,913     $ 52,713      69,362       $53,191
        Uncoated                         59,251       57,505      60,084        56,613
    Specialty Papers
        Food and retail packaging        58,606       72,838      57,722        69,681
        Converting                       44,301       37,427      44,647        37,419

    Pulp and Miscellaneous               16,496        6,325      11,659         4,160
                                       --------     ---------    --------     ---------

                                        249,567     $226,808     243,474      $221,064
                                       --------     ---------    --------     ---------
                                       --------     ---------    --------     ---------
</TABLE>

NET SALES

    The Company's net sales decreased 3.4% to $680.4 million for the nine 
months ended September 28, 1997 as compared to $704.5 million for the same 
period in 1996.  Net sales increased 2.6% to $226.8 million for the quarter 
ended September 28, 1997 as compared to $221.1 million for the same period in 
1996.  The decrease for the nine month period of 1997 resulted primarily from 
an 8.6% decline in average selling price per ton, which was partially offset 
by a 5.7% increase in sales volume.  The increase in net sales for the 
quarter ended September 28, 1997 as compared to the quarter ended September 
29, 1996 was primarily due to a 2.5% increase in sales volume.

    Net sales of coated groundwood paper (which is used principally in the 
production of magazines and catalogs) for the nine month period ended 
September 28, 1997 were $147.8 million, a decline of 13.3% as compared to the 
same period in 1996.  Sales volume increased 20,400 tons for the first nine 
months of 1997 compared to 1996, while the average sales price per ton 
declined 21.6% from $882 in 1996 to $692 in 1997.  During the third quarter 
of 1997 as compared to the third quarter of 1996 a 2.2% increase in volume 
was offset by a 3.1% decrease in average selling price per ton.

    Net sales of uncoated printing and publishing papers decreased $3.6 
million from $181.1 million for the first nine months of 1996 to $177.6 
million for the first nine months of 1997, a 2.0 % decline.  Average selling 
price per ton for the first nine months of 1997 declined by $25 (or 2.5%) as 
compared to the same period in 1996, while 1997 sales volume increased .5% as 
compared to 1996.  Net sales of uncoated printing and publishing papers in 
the third quarter of 1997 increased 1.6% to $57.5 million from the third 
quarter of 1996.  The increase from third quarter 1996 to third quarter 1997 
is due to an average sales price per ton increase of 3.0% which was partially 
offset by a volume decrease of 1.4%.

    Food and retail packaging paper net sales totaled $222.5 million during 
the first nine months of 1997, a $7.2 million decline from the same period in 
1996. The 3.1% decrease in net sales is primarily the result of a 2.6% 
decrease in average selling price per ton during the nine month period ended 
September 28, 1997 as compared to the same period in 1996.  Price movements 
within the Company's food and retail packaging papers business are closely 
aligned with pulp price changes.  Industry pulp prices began to decline in 
first quarter 1996 and remained at low levels through the third quarter of 
1997; although, pulp prices showed a slight increase for the third quarter of 
1997 as compared to the third

                                      11
<PAGE>

quarter of 1996.  The decline in pulp prices negatively affected average 
selling prices per ton in the first nine months of 1997 as compared to the 
first nine months of 1996.  For the third quarter of 1997, net sales were 
$72.8 million, a 4.5% increase from third quarter 1996.  Sales volume 
increased 1.5% and average sales price per ton increased 3.0% from quarter to 
quarter.

    Net sales of specialty converting papers during the first nine months of 
1997 were $117.4 million, a 4.3 % increase compared to the first nine months 
of 1996.  The increase is the result of a 6.1 % increase in tons sold in 1997 
compared to 1996 which was partially offset by a 1.6 % decrease in average 
selling price per ton.  Net sales of specialty converting papers in the third 
quarter of 1997 totaled $37.4 million, which is unchanged from third quarter 
1996 net sales.  The Richmond mill is rapidly phasing out production of 
approximately 10,000 tons (annualized) for a customer representing 
approximately one third of the mill's capacity.  The loss of these tons could 
have a material negative impact on the sales and operating results for the 
converting sector in the fourth quarter of 1997 and beyond, but it is not 
expected to materially impact sales or operating results for the Company as a 
whole.  The Company has begun the effort to develop new products and business 
to replace the lost tonnage.  The ultimate impact on net sales and operating 
results depends on the Company's timing of replacement of the lost tons and 
the terms of the sales agreements.

    Net sales of pulp and miscellaneous products increased to $15.0 million 
for the nine months ended September 28, 1997 as compared to $10.6 million in 
the same period of 1996. Tons of pulp sold is a function of market demand as 
well as managing, to the Company's best advantage, internal pulp integration. 
 Tons sold in the first nine months of 1997 increased to 40,652 compared to 
28,742 in the same period of 1996.  In the third quarter of 1997 net sales 
increased to $6.3 million from $4.2 million in the third quarter of  1996.  
The increase in net sales for the third quarter of 1997 as compared to the 
third quarter of 1996 is due to an increase in average selling price per ton 
of 7.5% and a 4,837 ton increase in sales volume.

OPERATING INCOME (LOSS)

<TABLE>
<CAPTION>
                                     Operating Income by  Sector             Operating Income by Sector
                                        for the Quarter Ended                 for the Nine Months Ended
                                 -----------------------------------     -----------------------------------
                                 Sept. 28, 1997       Sept. 29, 1996     Sept. 28, 1997       Sept. 29, 1996
                                 --------------       --------------     --------------       --------------
                                             (Thousands)                             (Thousands)
<S>                                  <C>                 <C>                <C>                <C>
Printing and Publishing Papers       $ 2,161             $(1,086)           $(8,341)           $ 21,004
Food and retail packaging              1,530              (1,366)             5,913               3,853
Converting                             1,730                 820              7,743              10,321
Pulp and Miscellaneous                 1,214              (  828)               467              (6,035)
                                 --------------       --------------     --------------       --------------
                                     $ 6,635             $(2,460)           $ 5,782            $ 29,143 
                                 --------------       --------------     --------------       --------------
                                 --------------       --------------     --------------       --------------
</TABLE>

    The Company had operating income of $5.8 million for the nine month 
period in 1997 compared to operating income of $29.1 million for the same 
period in 1996.  Lower prices in the first three quarters of 1997 decreased 
operating income by $60.5 million as compared to the same period in 1996.  
Higher volumes and lower costs in the first nine months of 1997 as compared 
to the same period in 1996 improved operating performance by $36.4 million 
and $.8 million, respectively.  In the third quarter of 1997, operating 
income was $6.6 million, compared to an operating loss of $2.5 million for 
the third quarter of 1996. Operating income increased in the third quarter of 
1997 as compared to the third quarter of 1996 primarily due to increased 
volumes and lower costs which increased operating performance by $5.5 million 
and $3.6 million, respectively. The lower costs for the third quarter of 1997 
as compared to third quarter of 1996 were primarily due to reductions in 
manufacturing costs which were partially offset by increases in pulp costs.

                                      12
<PAGE>

    Operating income for printing and publishing papers decreased to a loss 
of $8.3 million in the nine months of 1997 compared to income of $21.0 
million for the same period in 1996.  The decrease in operating income 
resulted primarily from the decrease in paper prices discussed above.  
Operating income of $2.2 million  in the third quarter of 1997 increased by 
$3.3 million from a $1.1 million operating loss in the third quarter of 1996. 
 The increase was primarily due to the net .6% increase in volume and reduced 
manufacturing costs.

    Food and retail packaging operating income increased from $3.9 million 
for the first nine months of 1996 to $5.9 million in the first nine months of 
1997. The increase in operating profits is attributable to lower pulp costs 
and other cost saving initiatives during the first nine months of 1997 as 
compared to the same period in 1996.  Lower pulp costs generally benefit 
operating results at the Company's packaging mills that are non-integrated.  
These cost savings were partially offset by the decline of 2.6% in average 
sales price per ton when comparing the two periods.  Operating results 
increased from a net loss of $1.4 million in the third quarter of 1996 to 
$1.5 million operating income in the third quarter of 1997.  Third quarter 
1997 operating results improved primarily due to the  3.0% increase in 
average net sales price which was partially offset by higher pulp costs in 
the third quarter of 1997 as compared to the third quarter of 1996.

    Operating income for converting papers decreased to $7.7 million in the 
first nine months of 1997 as compared to $10.3 million in the first nine 
months of 1996.  The decrease in operating profits is primarily attributable 
to the average selling price per ton decreasing 1.6% for the first nine 
months of 1997 compared to 1996.  Operating profits for the third quarter of 
1997 increased to $1.7 million from operating profits of $.8 million in the 
third quarter of 1996 (see "Net Sales").

    Selling and administrative expenses increased $4.6 million for the nine 
month period of 1997 compared to the same period in 1996.  The increase is 
due to higher commissions, higher depreciation on certain computer systems 
placed in service after September 29, 1996, and expenses associated with the 
Company's accounts receivable securitization which were classified as 
interest expense in the first quarter and most of the second quarter in 1996. 
 Selling and administrative expenses were virtually the same for the third 
quarter 1997 as compared to the third quarter 1996.

INTEREST EXPENSE

    Interest expense for the nine month periods of 1997 and 1996 was $38.1 
million and $37.3 million, respectively.  Interest expense for the third 
quarters of 1997 and 1996 was $13.0 and $12.0, respectively.

LIQUIDITY AND SOURCES OF CAPITAL

    In connection with the Spin-Off, the Company obtained $250 million in 
financing through a public offering of Senior Subordinated Notes and $253 
million initial borrowings under a $350 million credit facility from a group 
of banks (collectively, the "Financing").  The net proceeds from the 
Financing were paid to James River together with $100 million Senior 
Pay-in-Kind Notes issued by the Parent as a return of James River's capital 
investment.

    Under the bank credit facility the revolving credit available is in the
aggregate amount of $150 million with a $75 million sublimit for letters of
credit (of which $41.1 million has been used at September 28, 1997) and can be
used for general corporate purposes, working capital needs and

                                      13
<PAGE>

permitted investments.  At September 28, 1997, $48.0 million of the revolving 
credit was outstanding and $60.9 million of the aggregate line was available 
if needed.

    Cash flows provided by operating activities were $29.8 million for the 
nine months ended September 28, 1997 compared to $89.7 million for the nine 
months ended September 29, 1996.  The decrease in operating cash flows is 
mainly attributable to the $20.1 million loss as compared to a $3.5 million 
net loss for the first nine months of 1997 and 1996, respectively, and the 
sale of $40 million of trade accounts receivable in June 1996.  Earnings 
before interest, taxes, depreciation and amortization (EBITDA) were $69.1 
million for the first nine months of 1997 as compared to $88.3 million for 
the comparable period in 1996.

    The Company's business is capital intensive.  Pulp and paper mills 
generally consist of an extensive network of buildings, machinery, and 
equipment, which require continual upgrades, replacement, modernization and 
improvement.  The Company's capital expenditures for the nine months ended 
September 28, 1997 were $45.0 million compared to $58.9 million in the same 
period in 1996.  Approximately $7.9 million of 1997 capital expenditures 
represents amounts that were accrued  at December 29, 1996 for which cash 
payments were made in 1997. The majority of the $7.9 million represents final 
cash payments related to the rebuild of  a coated paper-machine at the 
Company's St. Francisville, Louisiana mill.  The remaining 1997 expenditures 
primarily represented capital maintenance projects.  Capital expenditure 
projects during the first nine months of 1996 related to capital maintenance 
projects, construction of a wastewater treatment plant at Parchment, 
Michigan, and the start of the Company's rebuild of the Number 1 paper 
machine at the St. Francisville mill.  The Company's strategic capital plan 
involves aggregate capital expenditures for the remainder of 1997 of 
approximately $16 million. These capital expenditures are primarily capital 
maintenance projects and are expected to be financed  by cash flows from 
operations and available financing sources.

    In August 1997, the Company completed a $2.5 million refinancing of 
certain industrial revenue bonds (the "Refunding Bonds") issued by the 
Michigan Strategic Fund.  The Refunding Bonds were issued to refinance 
certain of the Company's water pollution and sewage and solid waste disposal 
facilities to be used by the Company.  The Refunding Bonds bear interest at 
6.25% and are due August 1, 2012.  The bonds being refunded were repaid in 
October 1997.

    Also in August 1997, the Company finalized an agreement with the Michigan 
Strategic Fund whereby a total of $4.9 million of bonds (the "Project Bonds") 
were sold to finance certain sewage and solid waste disposal facilities to be 
used by the Company.  The proceeds from the sale of the Project Bonds were 
used to finance eligible project costs.  Upon sale, an amount equivalent to 
50% of the proceeds was prepaid on Term Loan A.  The Project Bonds bear 
interest at 6.5% and are due August 1, 2021.

    In the fourth quarter of 1997 Term Loan A was entirely repaid (see 
"Subsequent Events").

SUBSEQUENT EVENTS

    In October 1997 the Company sold approximately 108,000 acres of timber
producing properties for approximately $36 million.  These forests have
accounted for less than 5% of the wood fiber required by the Company's pulp
mills at Berlin and St. Francisville.  As part of the transaction in the
Northeastern United States, the Company entered into a long-term wood supply
contract with the buyer to supply wood for the Berlin mill.  The Company has
retained ownership of certain standing timber in the Southeastern United States
and entered into a cutting plan contract with the buyer in order to continue

                                      14
<PAGE>

supplying wood fiber to the St. Francisville mill.  Proceeds from the sale of 
the Company's timber properties were used to prepay Term Loan A.

    Also in October 1997, the Company repaid the remaining $3.2 million 
balance of Term Loan A.

    On October 28, 1997 the Company announced its intention to close its 
Newark, Delaware facility by the end of the year and seek a buyer for the 
site. Newark has produced approximately 1,800 tons of paper during the first 
nine months of 1997.  The Company expects to shift most of the Newark mill's 
production to other mills.  The Company anticipates recording a charge 
related to the closure or divestiture of the mill in the fourth quarter of 
1997.  The Company believes closure of the Newark mill is a necessary step 
towards optimizing productivity.  The Company's statements concerning Newark 
and related optimization of productivity are forward looking and subject to 
various risks and uncertainties which could cause the actual results to be 
materially different from the Company's current expectations.  These include, 
but are not limited to the actual timing of the closure, the amount of the 
closure charge and disposition proceeds of the Newark mill, possible 
difficulties in shifting Newark production to other mills, successful 
implementation of the plans for optimizing production, and other factors.

                                      15
<PAGE>

PART II  --  OTHER INFORMATION


ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits
    Ex. 27         Financial Data Schedule (Electronic Filing Only)

(b) Reports on Form 8-K -- 

    None

                                      16
<PAGE>

SIGNATURES

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

CROWN PAPER CO.
(Registrant)




/s/ R. Neil Stuart                                 /s/ Michael J. Hunter
-----------------------------                      -----------------------------
R. Neil Stuart                                     Michael J. Hunter
Senior Vice President,                             Vice President,
Chief Financial Officer                            Chief Accounting Officer
(Duly Authorized Officer)                          (Duly Authorized
                                                   Chief Accounting Officer)

November 12, 1997

                                      17