<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: June 29, 1997  Commission File Number:  1-13868
-------------------------------------------------------------------------------


                                  CROWN VANTAGE INC.
-------------------------------------------------------------------------------
                (Exact name of registrant as specified in its charter)
                                           

                       Virginia                            54-1752384
-------------------------------------------------------------------------------

               (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 August 8, 1997:
                                   9,658,194 Shares
                            -------------------------------


<PAGE>

                                         INDEX 
                                  CROWN VANTAGE INC.
                                           



PART I:  Financial Information

         Item 1.   Financial Statements

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

            -Condensed Consolidated Statements of Operations - Three months and
             six months ended June 29, 1997 and June 30, 1996.

            -Condensed Consolidated Statements of Cash Flows - Six months ended
             June 29, 1997 and June 30, 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 VANTAGE INC.
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                              (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
ASSETS                                              JUNE 29, 1997   DECEMBER 29, 1996
                                                    -------------   -----------------
                                                    (UNAUDITED)
                                                    -----------
<S>                                                 <C>             <C>
Current Assets:
         Cash and cash equivalents                      $  8,287    $  1,175
         Accounts receivable, net                         52,177      56,004
         Inventories                                      96,340      97,975
         Prepaid expenses and other current assets        12,861      15,214
         Deferred income taxes                            14,191      14,191
                                                        --------    --------
               Total current assets                      183,856     184,559
Property, plant and equipment, net                       660,411     678,154
Other assets                                              37,519      36,759
Unamortized debt issue costs                              14,927      16,023
Intangibles, net                                          29,539      30,101
                                                        --------    --------
               Total Assets                             $926,252    $945,596
                                                        --------    --------
                                                        --------    --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
         Accounts payable                               $ 56,033    $ 60,612
         Accrued liabilities                              81,135      80,920
         Current portion of long-term debt                 7,358       6,761
                                                        --------    --------
               Total current liabilities                 144,526     148,293
Long-term debt                                           562,711     545,971
Accrued postretirement benefits other than pensions      102,371     101,273
Other long-term liabilities                               19,580      19,626
Deferred income taxes                                     88,584     101,360
                                                        --------    --------
               Total Liabilities                         917,772     916,523
                                                        --------    --------
Shareholders' Equity:
          Preferred Stock, no par value;
            Authorized - 500,000 shares;
            Issued and outstanding - None
          Common Stock, no par value;
            Authorized - 50,000,000 shares;
            Issued and outstanding 9,659,920 and 
               9,107,535 shares at June 29, 1997 
               and December 29, 1996, respectively        45,342      44,578
Unearned ESOP shares and other                            (6,250)     (7,253)
Cumulative foreign currency translation adjustment         1,491       3,365
Retained deficit                                         (32,103)    (11,617)
                                                        --------    --------
                                                           8,480      29,073
                                                        --------    --------
Total Liabilities and Shareholders' Equity              $926,252    $945,596
                                                        --------    --------
                                                        --------    --------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                               3
<PAGE>


                                  CROWN VANTAGE INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             For the Second Quarter (13 weeks) and Six Months (26 weeks)
                        Ended June 29, 1997 and June 30, 1996
                     (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE)
                                           
<TABLE>
<CAPTION>

                                                  Second Quarter             Six Months
                                             -------------------------  ----------------------
                                                 1997         1996         1997        1996
                                             -----------    ----------  ---------   ----------
<S>                                          <C>            <C>         <C>         <C>
                                                    (UNAUDITED )             (UNAUDITED )

Net sales                                      $ 224,932   $ 230,564   $ 453,573    $ 483,417
Cost of goods sold                               214,180     207,515     425,657      427,474
                                               ---------   ---------   ---------    ---------
Gross margin                                      10,752      23,049      27,916       55,943
Selling and administrative expenses               12,263      12,367      28,769       24,340
                                               ---------   ---------   ---------    ---------
        Operating Income (Loss)                   (1,511)     10,682        (853)      31,603
Interest expense                                 (16,294)    (15,718)    (32,289)     (31,830)
Other income, net                                    717         118         858          392
                                               ---------   ---------   ---------    ---------
        Income (loss) before income taxes        (17,088)     (4,918)    (32,284)         165
Provision (benefit) for income taxes              (6,236)     (1,956)    (11,798)          65
                                               ---------   ---------   ---------    ---------
            NET INCOME (LOSS)                 $  (10,852)  $  (2,962)  $ (20,486)   $     100
                                               ---------   ---------   ---------    ---------
                                               ---------   ---------   ---------    ---------
 Earnings (loss) per share                       $ (1.21)  $    (.35)  $   (2.32)   $     .01
                                               ---------   ---------   ---------    ---------
                                               ---------   ---------   ---------    ---------


</TABLE>






SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                              4
<PAGE>




                                  CROWN VANTAGE INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            For the Six Months (26 weeks) 
                        Ended June 29, 1997 and June 30, 1996
                              (IN THOUSANDS OF DOLLARS)
                                           
<TABLE>
<CAPTION>
                                                                          Six Months
                                                                    ----------------------
                                                                      1997          1996
                                                                    --------      --------
<S>                                                                 <C>           <C>
                                                                         (UNAUDITED)
Cash Provided by (Used for) Operating Activities:
    Net income (loss)                                             $ (20,486)      $   100
    Items not affecting cash:
        Depreciation and cost of timber harvested                    41,228        37,583
        Amortization of goodwill and other intangibles                  562           562
        Interest on Pay-in-Kind Notes and other non-cash interest     8,356         7,944
        Other, net                                                    1,064         1,645
    Changes in current assets and liabilities:
        Accounts receivable (includes $40,000 sold in 1996)           3,827        53,483
        Inventories                                                   1,635         1,061
        Other current assets                                          2,353          (437)
        Accounts payable                                              1,496        (6,438)
        Other current liabilities                                       215        (4,912)
    Decrease in deferred income taxes                               (12,776)         (246)
    Other, net                                                       (1,706)        4,370
                                                                  ---------      ---------
        Cash Provided by Operating Activities                        25,768        94,715
                                                                  ---------      ---------

Cash Provided by (Used for) Investing Activities:
    Expenditures for property, plant and equipment                  (30,494)      (37,652)
    Other, net                                                        1,556           353
                                                                  ---------      ---------
        Cash Used for Investing Activities                          (28,938)      (37,299)
                                                                  ---------      ---------
Cash Provided by (Used for) Financing Activities:
    Proceeds from draw down of Revolving Credit                      68,000       106,000
    Repayments of Revolving Credit                                  (54,000)     (109,000)
    Repayments of Term Loans and other long-term debt                (3,718)      (47,047)
                                                                  ---------      ---------
        Cash Provided by (Used for)  Financing Activities            10,282       (50,047)
                                                                  ---------      ---------
Increase in cash and cash equivalents                                 7,112         7,369
Cash and cash equivalents at beginning of year                        1,175         5,335
                                                                  ---------      ---------
Cash and cash equivalents at end of period                         $  8,287      $ 12,704
                                                                  ---------      ---------
                                                                  ---------      ---------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                             5
<PAGE>


                                  CROWN VANTAGE INC.
                 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 Vantage 
Inc. (the "Parent"), Crown Paper Co., and Crown Paper Co.'s consolidated 
subsidiaries.  Crown Vantage Inc. and subsidiaries  (the "Company") became an 
independent company after the Board of Directors of James River Corporation 
of Virginia ("James River") 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 Company (the "Distribution").  The Distribution was 
made in the form of a tax-free dividend on the basis of one share of the 
Company's common stock for every ten shares of James River common stock.  A 
total of 8,446,362 shares of the Company's common stock were 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 six months ended June 29, 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 Vantage Inc.'s Annual 
Report to Shareholders and  Form 10-K for the year ended December 29, 1996.  
Certain 1996 amounts have been reclassified to conform with 1997 presentation.

NOTE 2 --EARNINGS (LOSS) PER SHARE

    The computations of earnings (loss) per share for the quarters ended June 
29, 1997 and June 30, 1996 are based on the weighted average number of shares 
of common stock and dilutive common stock equivalents outstanding during the 
periods (8,836,897 and 8,543,021 for the six months ended June 29, 1997 and 
June 30, 1996, respectively, and 8,937,280 and 8,562,097 for the quarters 
ended June 29, 1997 and June 30, 1996, respectively).  The number of shares 
considered outstanding does not include 483,615 shares and 308,209 shares 
held by the Employee Stock Ownership Plan Trust at  June 29, 1997 and June 
30, 1996, respectively.  In accordance with Statement of Position 93-6 
("Employers' Accounting for Employee Stock Ownership Plans"), shares held by 
the Trust are not considered outstanding for purposes of computing earnings 
per share until the shares are committed for release from the Trust.

                                       6
<PAGE>


NOTE 3  --  INCOME TAX

    The income tax benefit for the quarter and six months ended June 29, 1997 
and the quarter ended June 30, 1996 and income tax expense for the six months 
ended June 30, 1996 have been provided at the Company's estimated tax rates 
of approximately 36.5% and 39.8%, respectively.

NOTE 4  --  LONG TERM DEBT

Consolidated long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                       June 29     December 29
                                                        1997          1996
                                                      ---------   -------------
<S>                                                   <C>         <C>
                                                      (IN THOUSANDS OF DOLLARS)

CROWN PAPER CO.
    Bank Credit Facility:
        Revolving credit, due 2002                    $ 39,000      $ 25,000
        Term Loan A, due 2002                           43,234        45,712
        Term Loan B, due 2003                           98,500        99,000
                                                      --------      --------
                                                       180,734       169,712
    11% Senior Subordinated Notes, due 2005            250,000       250,000
    Industrial Revenue Bonds, payable to 2026           33,555        34,278
                                                      --------      --------
                                                       464,289       453,990


CROWN VANTAGE INC.
    11.45% Senior Pay-in-Kind Notes, due 2007
        less unamortized discount                      105,780        98,742
                                                      --------      --------
                                                       570,069       552,732
    Less current portion                                 7,358         6,761
                                                      --------      --------
                                                      $562,711      $545,971
                                                      --------      --------
                                                      --------      --------
</TABLE>

    Maturities of long-term debt, excluding the revolving credit, for the 
next five fiscal year ends are:  1998 - $8.6 million;  1999 - $8.6 million; 
2000 -$11.1 million; 2001 - $7.5 million; and 2002 - $56.4 million.

NOTE 5  --  INVENTORIES
<TABLE>
<CAPTION>
                                                       June 29     December 29
                                                        1997          1996
                                                      ---------   -------------
<S>                                                   <C>         <C>
                                                      (IN THOUSANDS OF DOLLARS)

Raw materials                                         $ 26,328      $ 26,283
Work in process                                          6,396         7,490
Finished goods                                          40,663        42,168
Stores and supplies                                     34,835        34,640
                                                      --------      --------
                                                       108,222       110,581
Reduction to state inventories at last-in,
  first-out cost                                       (11,882)      (12,606)
                                                      --------      --------
                                                      $ 96,340      $ 97,975
                                                      --------      --------
                                                      --------      --------
</TABLE>

                                                7
<PAGE>

NOTE 6  --  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 totalling $10.9 million and $11.1 million at June 29, 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 18 sites in the United States.  The Company has previously settled
its remediation obligations at many of these sites and is awaiting final
delisting as a PRP.  At 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 certain other sites, 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 
$.6 million and $ .7 million at June 29, 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 2000 to 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 7 -- 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 make certain estimates of future 
production volumes and costs, as well as future sales volumes, demand for the 
Company's product mix, and prices which are expected to occur from 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.

NOTE 8 -- EMPLOYEE STOCK  OWNERSHIP PLAN

    On May 2, 1997 Crown Paper Co. and the Company 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 Company.  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 Company 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 and shares become
outstanding for earnings (loss) per share computations.

NOTE 9 -- NEW ACCOUNTING PRONOUNCEMENTS 

    In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125 ("Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities").  Statement of
Financial Accounting Standards No. 125 ("SFAS No. 125") provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities.  SFAS No. 125  is effective for transactions
occurring after December 31, 1996.  The Company's adoption of SFAS No. 125  in
the first quarter of 1997 did not have a material effect on  its financial
position or results of operations. 

    In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("Earnings per Share") which the
Company is required to adopt on December 28, 1997, the Company's 1997 fiscal
year end.  At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods. 
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded.  Adopting Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128") is not expected to
materially impact the loss per share for the second quarter of 1997, second
quarter of 1996 and the six months ended June 29, 1997, or earnings per share
for the six months ended June 30, 1996 on either a primary or fully diluted
basis.

                                         9
<PAGE>

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

    Crown Vantage Inc. 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 Six Months Ended
                                      June 29, 1997         June 30, 1996
                                 ---------------------  ----------------------
                                    Tons         Sales     Tons       Sales
                                 ----------   ---------  ---------  ----------
<S>                              <C>          <C>        <C>        <C>
                                 (thousands) (millions) (thousands) (millions)
Printing and Publishing Papers
      Coated groundwood             142.9       $ 95.1      124.0    $ 117.4
      Uncoated                      123.6        120.1      121.8      124.5

Specialty Papers
      Food and retail packaging     117.3        149.7      119.2      160.0
      Converting                     88.7         80.0       80.6       75.1

Pulp and Miscellaneous               24.1          8.7       17.1        6.4
                                ---------    ---------   ---------   ---------
                                    496.6      $ 453.6      462.7    $ 483.4
                                ---------    ---------   ---------   ---------
                                ---------    ---------   ---------   ---------
</TABLE>
                                               10
<PAGE>



<TABLE>
<CAPTION>

                                                  Net Sales and Tonnage by Sector
                                                       for the Quarter Ended
                                              June 29, 1997             June 30, 1996
                                         -----------------------  -----------------------
                                            Tons        Sales        Tons         Sales
                                         ----------  -----------  ----------   ----------
<S>                                      <C>         <C>          <C>          <C>
                                         (thousands)  (millions)  (thousands)  (millions)
      Printing and Publishing Papers
         Coated groundwood                  71.0       $ 47.9        60.4        $ 53.6
         Uncoated                           60.1         58.6        60.3          58.8

      Specialty Papers
         Food and retail packaging          58.3         74.4        59.3          75.3
         Converting                         45.1         39.3        43.2          38.5

      Pulp and Miscellaneous                12.9          4.7        13.9           4.4
                                         ----------  ----------   ----------    ----------
                                           247.4       $224.9       237.1        $230.6
                                         ----------  ----------   ----------    ----------
                                         ----------  ----------   ----------    ----------

</TABLE>

NET SALES

    The Company's net sales decreased  6.2% to $453.6 million for the six
months ended June 29, 1997 as compared to $483.4 million for the same period in
1996.  Net sales decreased 2.4% to $224.9 million for the quarter ended June 29,
1997 as compared to $ 230.6 million for the same period in 1996.  The decrease
for the six month period of 1997 resulted primarily from a 12.6% decline in
average selling price per ton, which was partially offset by a 7.3% increase in
sales volume.  The decrease in net sales for the quarter ended June 29, 1997 as
compared to the quarter ended June 30, 1996 was principally due to a 6.5%
decline in average selling price per ton, which was partially offset by a 4.3%
increase in sales volume.

    Net sales of coated groundwood paper (which is used principally in the
production of magazines and catalogs) for the six month period ended June 29,
1997 were $95.1 million, a decline of 18.9% as compared to the same period in
1996.  Sales volume increased 18,900 tons for the first six months of 1997
compared to 1996, while the average sales price per ton declined from $946 in
1996 to $665 in 1997.  Net sales of coated groundwood papers decreased $5.7
million in the second quarter of 1997 as compared to the second quarter of 1996,
a 10.6% decline.  This decrease in net sales is primarily due to a 23.9% decline
in average selling price per ton which was partially offset by a 17.5% increase
in sales volume.

    Net sales of uncoated printing and publishing papers decreased $4.4 million
from $124.5 million for the first six months of 1996 to $120.1 million for the
first six months of 1997, a 3.6% decline.  Average selling price per ton for the
first six months of 1997 declined by $51 (or 5.0%) as compared to the same
period in 1996, while 1997 sales volume increased 1.5% as compared to 1996.  Net
sales of uncoated printing and publishing papers in the second quarter of 1997
were $58.6 million, which was virtually unchanged from the second quarter of
1996.  Sales volume and average sales price per ton did not significantly
fluctuate from quarter to quarter.


                                      11
<PAGE>


    Food and retail packaging paper net sales totaled $149.7 million during the
first six months of 1997, a $10.3 million decline from the same period in 1996. 
The 6.4% decrease in net sales is primarily the result of a 4.9% decrease in
average selling price per ton and a 1.6% decline in sales volume during the six
month period ended June 29, 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 second quarter of
1997.  The decline in pulp prices negatively affected average selling prices per
ton in the first and second quarter of 1997 as compared to the first and second
quarter of 1996.  For the second quarter of 1997, net sales were $74.4 million
which was virtually unchanged from second quarter 1996.  Sales volume and
average sales price per ton did not significantly fluctuate from quarter  to
quarter.

    Net sales of specialty converting papers during the first six months of 
1997 were $80.0 million, a 6.5% increase compared to the first six months of 
1996.  The increase is the result of a 9.9% increase in tons sold in 1997 
compared to 1996 which was partially offset by a 3.1% decrease in average 
selling price per ton.  Net sales of specialty converting papers in the 
second quarter of 1997 totaled $39.3 million, a 2.1% increase from second 
quarter 1996 net sales of $38.5 million.  Tons sold in the second quarter of 
1997 were 45,100, a 4.2% increase over the same period in 1996.  However, 
average selling price per ton in the second quarter of 1997 declined 2.1% as 
compared to the second quarter of 1996.

    Net sales of pulp and miscellaneous products increased to $8.7 million for
the six months ended June 29, 1997 as compared to $6.4 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 half of 1997 increased to 24,100 compared to 17,100 in the same
period of 1996.  In the second quarter of 1997 net sales increased to $4.7
million from $4.4 million in the second quarter of  1996.  The increase in net
sales for the second quarter is due to an increase in average selling price per
ton of 13.8% which was partially offset by a decrease of 1,000 tons in sales
volume.

OPERATING INCOME

<TABLE>
                                    Operating Income by  Sector     Operating Income by Sector
                                       for the Quarter Ended          for the Six Months Ended
                                 -------------------------------  --------------------------------
                                 June 29, 1997     June 30, 1996  June 29, 1997     June 30,  1996
                                 -------------     -------------  -------------     --------------
                                           (Millions)                        (Millions)
<S>                              <C>               <C>            <C>               <C>
Printing and Publishing Papers    $ (6.3)              $  8.2        $ (10.5)         $ 22.1
Food and retail packaging            2.9                  3.7            4.4             5.2
Converting                           1.7                  3.5            6.0             9.5
Pulp and Miscellaneous                .2                 (4.7)           (.8)           (5.2)
                                  -------              -------        -------          -------
                                  $ (1.5)              $ 10.7        $   (.9)         $ 31.6
                                  -------              -------        -------          -------
                                  -------              -------        -------          -------
</TABLE>

    The Company had an operating loss of $.9 million for the six month period
in 1997 compared to operating income of $31.6 million for the same period in
1996.  Lower prices in the first two quarters of 1997 decreased operating income
by $57.8 million as compared to the same period in 1996.  Higher volumes and
lower costs in the first half of 1997 as compared to the same period in 1996
improved operating performance by $19.6 million and $5.8 million, respectively. 
In the second quarter of 1997, the operating loss was $1.5 million, compared to
operating income of $10.7 million for the second quarter of 1996.  Operating
income declined in the second quarter of 1997 as compared to the second quarter
of 1996 due to lower prices and higher costs which decreased operating
performance by $14.4 million and 

                                     12
<PAGE>


$4.8 million respectively.  Higher volumes of $6.9 million improved operating 
income in the second quarter of 1997 as compared to the same quarter of 1996. 
In addition, the increase in second quarter costs was caused by once-a-year 
scheduled maintenance downs and inspections at the Company's Berlin-Gorham, 
St. Francisville, and Richmond mills, which in the prior year had been spread 
across several quarters.  These downs reduced operating results by 
approximately $9 million during the quarter.

    Operating income for printing and publishing papers decreased to a loss of
$10.5 million in the six months of 1997 compared to income of $22.1 million for
the same period in 1996.  The decrease in operating income resulted primarily
from the decrease in paper prices discussed above.  The operating loss of $6.3
million  in the second quarter of 1997 declined by $14.5 million from $8.2
million of operating income in the second quarter of 1996.  The decrease was
primarily due to the 23.9% decline in average selling price for coated
groundwood papers and the once-a-year scheduled maintenance downs and
inspections discussed above. 
                                           
    Food and retail packaging operating income decreased from $5.2 million 
for the first six months of 1996 to $ 4.4 million in the first six months of 
1997. The decrease in operating profits is attributable to the decline in 
average selling price per ton discussed above.  However, reduced pulp prices 
and other cost saving initiatives during the first six months of 1997 as 
compared to the same period in 1996 benefitted operating results at the 
company's packaging mills which are non-integrated. Operating results 
declined from $3.7 million in the second quarter of 1996 to $2.9 million in 
the second quarter of 1997.  Second quarter 1997 operating results declined 
as a result of higher pulp costs in the second quarter of 1997 compared to 
the second quarter of 1996.

    Operating income for converting papers decreased to $6.0 million in the 
first six months of 1997 as compared to $9.5 million in the first six months 
of 1996.  The decrease in operating profits is primarily attributable to the 
average selling price per ton decreasing 3.1% for the first six months of 
1997 compared to 1996.  Operating profits for the second quarter of 1997 were 
$1.7 million, a decrease from operating profits of $3.5 million in the second 
quarter of 1996.  The decrease in operating profit is attributable to the 
decrease in average selling price per ton and the once-a-year scheduled 
maintenance down and inspection at the Richmond mill, which were partially 
offset by the increase of 1,900 tons sold from quarter to quarter.

    Selling and administrative expenses increased $4.4 million for the six 
month period of 1997, compared to the same period in 1996.  The increase is 
due to higher commissions (which are volume related) as well as higher 
depreciation on certain computer systems placed in service after June 30, 
1996.  The increases in the second quarter of 1997 and the first six months 
of 1997 over the same periods in 1996 are also attributable to 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 second quarter 1997 as compared to second quarter 1996.

INTEREST EXPENSE

    Interest expense for the six month period of 1997 and 1996 was $32.3 
million and $31.8 million, respectively.  Interest expense for the second 
quarter of 1997 and 1996 was $16.3 and $15.7, respectively.

                                     13
<PAGE>


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 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 $43.9 million has been used at June 29, 1997) and can be 
used for general corporate purposes, working capital needs, letters of credit 
and permitted investments.  At June 29, 1997, $39.0 million of the revolving 
credit was outstanding and $67.1 million of the aggregate line was available 
if needed.

    Cash flows provided by operating activities were $25.8 million for the 
six months ended June 29, 1997 compared to $94.7 million for the six months 
ended June 30, 1996.  The decrease in operating cash flows is mainly 
attributable to the $20.5 million loss as compared to $.1 million net income 
for the first six 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 $41.8 million for the 
first six months of 1997 as compared to $70.1 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 six months ended 
June 29, 1997 were $30.5 million compared to $37.7 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 six 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 $30.5 
million. These capital expenditures are primarily capital maintenance 
projects and are expected to be financed  by cash flows from operations.

                                        14
<PAGE>


PART II  --  OTHER INFORMATION


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

(a) Exhibits
    Ex. 11     Statement re: Computation of Per Share Earnings
    Ex. 27     Financial Data Schedule (Electronic Filing Only)

(b) Reports on Form 8-K -- 

    None


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