<PAGE>

                      Securities and Exchange Commission
                            Washington, D.C. 20549

                                   Form 10-K

[X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934
For the fiscal year ended December 31, 2000
or
[_]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934
For the transition period from _________to_________

Commission file number 0-11951

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

              Delaware                                    37-1337160
(State of incorporation or organization)       (I.R.S. Employer Identification)

         150 North Michigan Avenue
         Chicago, IL                                        60601
(Address of principal executive offices)                 (Zip Code)

                 Registrant's Telephone Number: (312) 346-6600

                                 ____________


Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether 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___
    ----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

As of January 31, 2001, none of the registrant's voting stock was held by
non-affiliates.

The number of shares outstanding of the registrant's common stock as of January
31, 2001: 1,000

DOCUMENTS INCORPORATED BY REFERENCE:

                                               Part of Form 10-K Into Which
Document                                         Document is Incorporated
--------                                         ------------------------
                                                           None

The registrant meets the conditions set forth in General Instruction (I) (1) (a)
and (b) of Form 10-K and is therefore filing this form with the reduced
disclosure format permitted thereby.
<PAGE>

                                  JSCE, Inc.
                          Annual Report on Form 10-K
                                December 31, 2000

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I                                                                                             Page No.
<S>                                                                                                <C>
Item 1.   Business.....................................................................................  2
Item 2.   Properties...................................................................................  7
Item 3.   Legal Proceedings............................................................................  7

PART II
Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters........................  9
Item 6.   Selected Financial Data...................................................................... 10
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations........ 11
Item 7a.  Quantitative and Qualitative Disclosures About Market Risk................................... 18
Item 8.   Financial Statements and Supplementary Data.................................................. 20
Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure......... 46

PART IV
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................. 46
</TABLE>

FORWARD-LOOKING STATEMENTS
Except for the historical information container in this Annual Report on Form
10-K, certain matters discussed herein, including (without limitation) under
Part 1, Item 1, "Business - Environmental Compliance", under Part I, Item 3,
"Legal Proceedings" and under Part II, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", contain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Although we believe that, in making any such
statements, our expectations are based on reasonable assumptions, any such
statements may be influenced by factors that could cause actual outcomes and
results to be materially different from those projected. When used in this
document, the words "anticipates," "believes," "expects," "intends," and similar
expressions, as they relate to JSCE, Inc. or its management, are intended to
identify such forward-looking statements. These forward-looking statements are
subject to numerous risks and uncertainties. There are important factors that
could cause actual results to differ materially from those in forward-looking
statements, certain of which are beyond our control. These factors, risks and
uncertainties include among others, the following:

 . the impact of general economic conditions where we do business;
 . general industry conditions, including competition and product and raw
  material prices;
 . fluctuations in exchange rates and currency values;
 . capital expenditure requirements;
 . interest rates;
 . legislative or regulatory requirements;
 . fluctuations in energy prices;
 . access to capital markets; and
 . other factors described in this document.

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

                                       1
<PAGE>

                                    PART I

ITEM 1. BUSINESS
        --------

Unless the context otherwise requires, "we", "us", "our" or JSCE refers to the
business of JSCE, Inc. and its subsidiaries.

GENERAL
-------

JSCE, Inc., a Delaware corporation, is an integrated producer of containerboard,
corrugated containers and other packaging products. We conduct all of our
business operations through our wholly-owned subsidiary Jefferson Smurfit
Corporation (U.S.), a Delaware corporation. Jefferson Smurfit (U.S.) has
extensive operations throughout the United States. For the year ended December
31, 2000, net sales were $3,867 million and net income was $151 million.

We are a wholly-owned subsidiary of Smurfit-Stone Container Corporation, a
Delaware corporation. Smurfit-Stone is a holding company with no business
operations of its own. Smurfit-Stone conducts its business operations through
two wholly-owned subsidiaries: JSCE and Stone Container Corporation, a Delaware
corporation.

PRODUCTS
--------

Our operations are organized by industry segments: 1) Containerboard and
Corrugated Containers, 2) Consumer Packaging and 3) Reclamation. For financial
information relating to the segments, see the information set forth in Note 14
in the Notes to Consolidated Financial Statements.

CONTAINERBOARD AND CORRUGATED CONTAINERS SEGMENT

Sales for the Containerboard and Corrugated Container segment in 2000 were
$2,080 million (including $47 million of intersegment sales). This segment
includes four paper mills, 46 container plants and a wood products plant located
in the United States, one container plant located in Mexico and one container
plant located in Puerto Rico. In addition, we own 63% of a medium paper mill
located in New Hampshire. The primary products of the Containerboard and
Corrugated Containers segment include:

 . corrugated containers;
 . containerboard; and
 . solid bleached sulfate.

JSCE offers a full range of high quality corrugated containers designed to
protect, ship, store and display products and satisfy customers' merchandising
and distribution needs. Corrugated containers are sold to a broad range of
manufacturers of consumable goods. Corrugated containers are used to ship such
diverse products as home appliances, electric motors, small machinery, grocery
products, produce, computers, books, furniture and many other products. We
provide customers with innovative packaging solutions to advertise and sell
their products. JSCE, along with its affiliates, has the most complete line of
graphic capabilities in the industry, including flexographic and lithographic
preprint, colored and coated substrates, lithographic labels and high resolution
post print. In addition, we offer a complete line of retail ready, point of
purchase displays and a full line of specialty products, including pizza boxes,
corrugated clamshells for the food industry, Cordeck(R) recyclable pallets and
custom die-cut boxes to display packaged merchandise on the sales floor. Our
container plants serve local customers and large national accounts.

                                       2
<PAGE>

Production for the paper mills, including our proportionate share of the
affiliate mill, and sales volume for the corrugated container facilities for the
last three years were:

                                                         2000    1999    1998
                                                         ----    ----    ----
Tons produced (in thousands)
   Containerboard...................................... 1,433   1,592   1,978
   Solid bleached sulfate..............................   190     189     185
Corrugated containers sold (in billion sq. ft.)........  28.7    29.1    29.9

Our containerboard mills produce a full line of containerboard, which, for 2000,
included 878,000 tons of unbleached kraft linerboard, 275,000 tons of white top
linerboard and 280,000 tons of recycled medium. The containerboard mills and
corrugated container operations are highly integrated, with the majority of the
containerboard production used internally by our corrugated container operations
or by Stone Container's corrugated container operations. In 2000, the container
plants consumed 1,876,000 tons of containerboard.

We also produce solid bleached sulfate, some of which is consumed internally by
the folding carton plants. In addition, another containerboard mill produces
uncoated recycled boxboard, which is consumed by consumer packaging plants.

CONSUMER PACKAGING SEGMENT

Sales for the Consumer Packaging segment in 2000 were $1,043 million (including
$26 million of intersegment sales). This segment includes seven paper mills, 17
folding carton plants and nine other converting plants located in the United
States. The primary products of our Consumer Packaging segment include:

 . folding cartons;
 . coated recycled boxboard;
 . uncoated recycled boxboard;
 . paper, foil and heat transfer labels; and
 . rotogravure cylinders.

Folding cartons are used primarily to protect customers' products, while
providing point of purchase advertising. We offer a full range of carton styles
appropriate to nearly all carton end uses. The folding carton plants offer
extensive converting capabilities, including sheet and web lithographic,
rotogravure and flexographic printing and laminating. The folding carton plants
also provide a full line of structural and graphic design services tailored to
specific technical requirements, as well as photography for packaging, sales
promotion concepts and point of purchase displays. Converting capabilities
include gluing, tray forming, windowing, waxing and laminating, plus other
specialties. The customer base is made up primarily of producers of packaged
foods, beverages, fast food, detergents, paper, pharmaceuticals and cosmetics.
Our customers range from local accounts to large national accounts.

All of our boxboard is made from 100 percent reclaimed fiber. Production for the
coated and uncoated boxboard mills and sales volume for the folding carton
facilities for the last three years were:

                                                         2000    1999    1998
                                                         ----    ----    ----

Tons produced (in thousands)
   Coated boxboard.....................................   590     581     582
   Uncoated boxboard...................................   126     118     128
Folding cartons sold (tons, in thousands)..............   561     549     507

                                       3
<PAGE>

Our coated boxboard mills produce the broadest range of recycled grades in the
industry, including clay-coated newsback, kraftback and whiteback, as well as
waxable and laminated grades. The coated boxboard mills and folding carton
operations are highly integrated, with the majority of the coated boxboard
production used internally by the folding carton operations. In 2000, the
folding carton and lamination plants consumed 561,000 tons of recycled boxboard
and solid bleached sulfate, representing an integration level of approximately
68%.

Our uncoated boxboard production is used primarily in the manufacture of paper
tube and core products. Uncoated boxboard products include reclaimed fiber drum
stock, tube stock, bending chip, shoe boxboard, partitions and electrostatic
disapative board (PROTECH(R)).

We produce paper and metallized paper labels and DI-NA-CAL(R) heat transfer
labels which are used in a wide range of industrial and consumer product
applications. DI-NA-CAL(R) is a proprietary labeling system that applies high-
speed heat transfer labels to plastic containers. We also produce specialized
laminations of film, foil and paper and high-quality rotogravure cylinders. We
have a full-service organization experienced in the production of color
separations and lithographic film for the commercial printing, advertising and
packaging industries.

RECLAMATION SEGMENT

Our reclamation operations procure fiber resources for Smurfit-Stone's paper
mills as well as for other producers. We operate reclamation facilities
throughout the United States that collect, sort, grade and bale recovered paper.
We also collect aluminum and glass. In addition, we operate a nationwide
brokerage system whereby we purchase and resell recovered paper to
Smurfit-Stone's recycled paper mills and other producers on a regional and
national contract basis. Brokerage contracts provide bulk purchasing, resulting
in lower prices and cleaner recovered paper. Many of the reclamation facilities
are located close to Smurfit-Stone's recycled paper mills, ensuring availability
of supply with minimal shipping costs. Domestic tons of recovered paper
collected for 2000, 1999 and 1998 were 6,768,000, 6,560,000 and 5,155,000,
respectively. Sales of recycled materials in 2000 were $726 million (including
$121 million of intersegment sales).

OTHER NON-REPORTABLE SEGMENTS

Specialty Packaging
We produce paper tubes and cores, solid fiber partitions and flexible packaging
products at 22 locations in the United States and one plant in Canada. Paper
tubes and cores are used primarily for paper, film and foil, yarn carriers and
other textile products and furniture components. Solid fiber partitions are used
by customers in the pharmaceutical, cosmetics, glass container, automotive and
medical supply industries. In addition, our contract packaging plant provides
custom contract packaging services, including cartoning, bagging, liquid-filling
or powder-filling and high-speed overwrapping. In 2000, sales of specialty
packaging products were $205 million (including $9 million of intersegment
sales).

Cladwood(R)
Cladwood(R) is a wood composite panel used by the housing industry, manufactured
from sawmill shavings and other wood residuals and overlaid with recycled
newsprint. Cladwood(R) is produced at two locations in Oregon. Sales for
Cladwood(R) in 2000 were $16 million.

FIBER RESOURCES
---------------

Wood fiber and reclaimed fiber are the principal raw materials used in the
manufacture of our paper products. We satisfy the majority of our need for wood
fiber through purchases on the open market or under supply agreements. We
satisfy essentially all of our need for reclaimed fiber through our reclamation
operations and our nationwide brokerage system.

                                       4
<PAGE>

Wood fiber and reclaimed fiber are purchased in highly competitive, price-
sensitive markets, which have historically exhibited price and demand
cyclicality. Conservation regulations have caused, and will likely continue to
cause, a decrease in the supply of wood fiber and higher wood fiber costs in
some of the regions in which we procure wood fiber. Fluctuations in supply and
demand for reclaimed fiber have occasionally caused tight supplies of reclaimed
fiber and, at those times, we have experienced an increase in the cost of such
fiber. While we have not experienced any significant difficulty in satisfying
our need for wood fiber and reclaimed fiber, we can give no assurances that this
will continue to be the case for any or all of our mills.

MARKETING
---------

Our marketing strategy is to sell a broad range of paper-based packaging
products to marketers of industrial and consumer products. In managing the
marketing activities of our paperboard mills, we seek to meet the quality and
service needs of the customers at our package converting plants at the most
efficient cost, while balancing those needs against the demands of our open
market customers. Our converting plants focus on supplying both specialized
packaging with high value graphics that enhance a product's market appeal and
high volume sales of commodity products.

We seek to serve a broad customer base for each of our segments and as a result
serve thousands of accounts. Each plant has its own sales force and many have
product design engineers and other service professionals who are in close
contact with customers to respond to their specific needs. We complement our
local plants' marketing and service capabilities with regional and national
design and service capabilities. We also maintain national sales offices for
customers who purchase through a centralized purchasing office. National account
business may be allocated to more than one plant because of production capacity
and equipment requirements.

Our business is not dependent upon a single customer or upon a small number of
major customers. We do not believe the loss of any one customer would have a
materially adverse effect on our business.

COMPETITION
-----------

The markets in which we sell our principal products are highly competitive and
comprised of many participants. Although no single company is dominant, we do
face significant competitors in each of our businesses. Our competitors include
large vertically integrated companies as well as numerous smaller companies. The
industries in which we compete are particularly sensitive to price fluctuations
brought about by shifts in industry capacity and other cyclical industry
conditions. Other competitive factors include design, quality and service, with
varying emphasis depending on product line.

BACKLOG
-------

Demand for our major product lines is relatively constant throughout the year
and seasonal fluctuations in marketing, production, shipments and inventories
are not significant. Backlogs are not a significant factor in the industry. We
do not have a significant backlog of orders as most orders are placed for
delivery within 30 days.

RESEARCH AND DEVELOPMENT
------------------------

Our research and development center, located in Carol Stream, Illinois, uses
state-of-the-art technology to assist all levels of the manufacturing and sales
processes, from raw material supply through finished packaging performance.
Research programs have provided improvements in coatings and barriers,
stiffeners, inks and printing. The technical staff conducts basic, applied and
diagnostic research, develops processes and products and provides a wide range
of other technical services.

                                       5
<PAGE>

We actively pursue applications for patents on new inventions and designs and
attempt to protect our patents against infringement. Nevertheless, we believe
our success and growth are more dependent on the quality of our products and our
relationships with customers, than on the extent of our patent protection. We
hold or are licensed to use certain patents, licenses, trademarks and trade
names on products. However, we do not consider the successful continuation of
any material aspect of our business to be dependent upon such intellectual
property.

EMPLOYEES
---------

We had approximately 14,100 employees at December 31, 2000, of which
approximately 13,900 were employees of U.S. operations. Of the domestic
employees, approximately 8,700 (63%) are represented by collective bargaining
units. The expiration dates of union contracts for our major paper mill
facilities are as follows:

 . the Brewton, Alabama mill, expiring in October 2002 and
 . the Fernandina Beach, Florida mill, expiring in June 2003.

We believe our employee relations are generally good. We are currently in the
process of bargaining with unions representing production employees at a number
of our operations. While the terms of these agreements may vary, we believe the
material terms of our collective bargaining agreements are customary for the
industry, the type of facility, the classification of the employees and the
geographic location covered by such agreements.

ENVIRONMENTAL COMPLIANCE
------------------------

Our operations are subject to extensive environmental regulation by federal,
state and local authorities. In the past, we have made significant capital
expenditures to comply with water, air, solid and hazardous waste and other
environmental laws and regulations. We expect to make significant expenditures
in the future for environmental compliance. Because various environmental
standards are subject to change, it is difficult to predict with certainty the
amount of capital expenditures that will ultimately be required to comply with
future standards.

In particular, the United States Environmental Protection Agency (EPA) has
finalized significant parts of its comprehensive rule governing the pulp, paper
and paperboard industry, known as the "Cluster Rule". Compliance with this rule
has required and will continue to require substantial expenditures. We have
spent approximately $70 million (of which approximately $55 million was spent in
2000) for capital projects to comply with the initial portions of the Cluster
Rule and anticipate additional spending of approximately $13 million in 2001 to
complete these projects. Additional portions of the Cluster Rule, some of which
are not yet finalized, could require up to $15 million in capital expenditures
over the next several years. The remaining cost of complying with the
regulations cannot be predicted with certainty until the remaining portions of
the Cluster Rule are finalized.

In addition to Cluster Rule compliance, we also anticipate additional capital
expenditures related to environmental compliance. Excluding the spending on
Cluster Rule projects described above, for the past three years, we have spent
an average of approximately $3 million annually on capital expenditures for
environmental purposes. Since our principal competitors are subject to
comparable environmental standards, including the Cluster Rule, management is of
the opinion, based on current information, that compliance with environmental
standards will not adversely affect our competitive position.

                                       6
<PAGE>

ITEM 2.  PROPERTIES
         ----------

We maintain manufacturing facilities and sales offices throughout North America.
Our facilities are properly maintained and equipped with machinery suitable for
their use. Our manufacturing facilities as of December 31, 2000 are summarized
below.

                                              Number of Facilities      State
                                         ---------------------------
                                           Total   Owned    Leased    Locations
                                         -------- ------- ----------  ---------
United States
    Paper mills.........................     11      11                    8
    Corrugated container plants.........     46      34       12          21
    Consumer packaging plants...........     26      20        6          11
    Specialty packaging plants..........     23       5       18          16
    Reclamation plants..................     26      17        9          15
    Cladwood(R)plants...................      2       2                    1
    Wood products plant.................      1       1                    1
                                           ----    ----     ----
    Sub-total...........................    135      90       45          30

Canada and Other North America
    Corrugated container plants.........      2       2                  N/A
    Specialty packaging plant...........      1       1                  N/A
    Reclamation plant...................      1                1         N/A
                                           ----    ----     ----
Total...................................    139      93       46         N/A

The paper mills represent approximately 57% of our investment in property, plant
and equipment. The approximate annual tons of productive capacity of our paper
mills, including our proportionate share of the affiliate's productive capacity,
at December 31, 2000 were:

                                                                Annual Capacity
                                                                ---------------
                                                                (in thousands)

    Containerboard.............................................      1,641
    Solid bleached sulfate.....................................        200
    Coated and uncoated boxboard...............................        782
                                                                   -------
    Total......................................................      2,623

ITEM 3.  LEGAL PROCEEDINGS
         -----------------

LITIGATION
----------

Our subsidiary, Smurfit Newsprint Corporation, is a party to a Settlement
Agreement to implement a nationwide class action settlement of claims involving
Cladwood(R), a composite wood siding product manufactured by Smurfit Newsprint
that has been used primarily in the construction of manufactured or mobile
homes. The class action claimants alleged that Cladwood(R) siding on their homes
prematurely failed. The settlement was reached in connection with a class action
pending in King County, Washington and also resolved all other pending class
actions. Pursuant to the settlement, Smurfit Newsprint paid $20 million into a
settlement fund, plus up to approximately $6.5 million of administrative costs,
plaintiffs' attorneys' fees, and class representative payments. Smurfit
Newsprint retained a reversionary interest in a portion of the settlement fund
and, based on this interest, obtained a return of $10 million from the fund in
2000 in exchange for the posting of a letter of credit in the same amount. The
claims period is scheduled to expire in February 2002. We do not believe we will
incur liabilities in excess of the established reserves for this matter.

                                       7
<PAGE>

In 1998, seven putative class action complaints were filed in the United States
District Court for the Northern District of Illinois and in the United States
District Court for the Eastern District of Pennsylvania. These complaints
alleged that Stone Container reached agreements in restraint of trade that
affected the manufacture, sale and pricing of corrugated products in violation
of antitrust laws. The complaints have been amended to name several other
defendants, including Jefferson Smurfit (U.S.) and Smurfit-Stone. The suits seek
an unspecified amount of damages arising out of the sale of corrugated products
for the period from October 1,1993 through March 31, 1995. Under the provisions
of the applicable statutes, any award of actual damages could be trebled. The
Federal Multidistrict Litigation Panel has ordered all of the complaints to be
transferred to and consolidated in the United States District Court for the
Eastern District of Pennsylvania. We believe we have meritorious defenses and
are vigorously defending these cases.

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

ENVIRONMENTAL MATTERS
---------------------

Federal, state and local environmental requirements are a significant factor in
our business. We employ processes in the manufacture of paperboard and other
products, which result in various discharges, emissions, and wastes. These
processes are subject to numerous federal, state and local environmental laws
and regulations, including reporting and disclosure obligations. We operate and
expect to operate under permits and similar authorizations from various
governmental authorities that regulate such discharges, emissions, and wastes.

We also face potential liability as a result of releases, or threatened
releases, of hazardous substances into the environment from various sites owned
and operated by third parties at which company-generated wastes have allegedly
been deposited. Generators of hazardous substances sent to off-site disposal
locations at which environmental problems exist, as well as the owners of those
sites and certain other classes of persons (generally referred to as
"potentially responsible parties" or "PRPs"), are, in most instances, subject to
joint and several liability for response costs for the investigation and
remediation of such sites under the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) and analogous state laws, regardless of
fault or the lawfulness of the original disposal. We have received notice that
we are or may be a PRP at a number of federal and/or state sites where response
action may be required and as a result may have joint and several liability for
cleanup costs at such sites. However, liability for CERCLA sites is typically
shared with other PRPs and costs are commonly allocated according to relative
amounts of waste deposited. Our relative percentage of waste deposited at a
majority of these sites is quite small. In addition to participating in the
remediation of sites owned by third parties, we have entered into consent orders
for the investigation and/or remediation of certain company-owned properties.

Based on current information, we believe the probable costs of the potential
environmental enforcement matters discussed above, response costs under CERCLA
and similar state laws, and the remediation of owned property will not have a
material adverse effect on our financial condition or results of operations. We
believe that our liability for these matters was adequately reserved at December
31, 2000.

                                       8
<PAGE>

                                    PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
         ---------------------------------------------------------------------

MARKET INFORMATION
------------------

We are a wholly-owned subsidiary of Smurfit-Stone, and therefore, all of our
outstanding common stock is owned by Smurfit-Stone. As a result, there is no
established public market for our common stock.

DIVIDENDS ON COMMON STOCK
-------------------------

We have not paid cash dividends on our common stock in either 2000 or 1999. In
the future, we intend to pay dividends to Smurfit-Stone to the extent necessary
to fund, in the aggregate amount of approximately $2 million per quarter, the
dividend obligations of Smurfit-Stone to the holders of the 7% Series A
Cumulative Exchangeable Redeemable Convertible Preferred Stock of Smurfit-Stone.
Our ability to pay dividends in the future is restricted by certain provisions
contained in Jefferson Smurfit (U.S.)'s credit agreement and the indentures
relating to Jefferson Smurfit (U.S.)'s outstanding indebtedness, which we
guarantee. See Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources.

                                       9
<PAGE>

 ITEM 6.  SELECTED FINANCIAL DATA
          -----------------------

<TABLE>
<CAPTION>
(In millions, except statistical data)
---------------------------------------------------------------------------------------------------------------------
                                                                  2000      1999(a)     1998        1997       1996
---------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>         <C>      <C>          <C>       <C>
Summary of Operations(b)
Net sales(c)................................................   $ 3,867     $ 3,413   $ 3,155     $ 3,060    $ 3,218
Income (loss) from operations(d)............................       342         226       (78)        176        333
Income (loss) from continuing operations before
  extraordinary item and cumulative effect of
  accounting change.........................................       146         276      (171)        (19)        80
Discontinued operations, net of income tax provision........         6           6        27          20         37
Net income (loss)...........................................       151         272      (160)          1        112

---------------------------------------------------------------------------------------------------------------------
Other Financial Data
Net cash provided by operating activities...................   $   247     $   103   $   117     $    88    $   380
Net cash provided by (used for) investing activities........      (129)        829      (595)       (175)      (133)
Net cash provided by (used for) financing activities........      (108)       (939)      484          87       (262)
Depreciation, depletion and amortization....................       120         134       134         127        125
Capital investments and acquisitions........................       116          69       265         191        129
Working capital, net........................................       104          41       145          71         34
Property, plant, equipment and timberland, net..............     1,262       1,309     1,760       1,788      1,720
Total assets................................................     2,667       2,736     3,174       2,771      2,688
Long-term debt..............................................     1,529       1,636     2,570       2,040      1,944
Stockholder's deficit.......................................       (84)       (235)     (538)       (374)      (375)

--------------------------------------------------------------------------------------------------------------------
Statistical Data (tons in thousands)
Containerboard production (tons)............................     1,433       1,592     1,978       2,024      2,061
Solid bleached sulfate production (tons)....................       190         189       185         190        189
Coated boxboard production (tons)...........................       590         581       582         585        538
Uncoated boxboard production (tons).........................       169         165       175         176        213
Corrugated containers sold (billion sq. ft.)................      28.7        29.1      29.9        31.7       30.0
Folding cartons sold (tons).................................       561         549       507         463        449
Fiber reclaimed and brokered (tons).........................     6,768       6,560     5,155       4,832      4,464
Number of employees.........................................    14,100      14,400    15,000      15,800     15,800
</TABLE>

 (a)  We recorded a pretax gain of $407 million on the sale of our timberlands
      in 1999.

 (b)  Our subsidiary, Smurfit Newsprint, completed its exit from the newsprint
      business in May 2000. Accordingly, the newsprint operations are presented
      as a discontinued operation for all periods.

 (c)  Net sales for all periods have been restated to comply with the Emerging
      Issues Task Force Issue No. 00-10, "Accounting for Shipping and Handling
      Fees and Costs." Previously, we recognized shipping and handling costs as
      a reduction to net sales. Shipping and handling costs are now included in
      cost of goods sold. The effect of this reclassification increased net
      sales and cost of goods sold from previously reported amounts by $118
      million in 1999, $112 million in 1998, $103 million in 1997 and $109
      million in 1996. The reclassification had no effect on income from
      operations.

 (d)  In connection with the Stone Container merger, we recorded pretax charges
      of $310 million in the fourth quarter of 1998, including $257 million of
      restructuring charges, $30 million for settlement of our Cladwood(R)
      litigation and $23 million of merger-related costs. We recorded an
      additional restructuring charge of $9 million in 1999 in connection with
      the merger.

                                      10
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         ------------------------------------------------------------------
         RESULTS OF OPERATIONS
         ---------------------

GENERAL
-------

Market conditions and demand for containerboard and corrugated containers, our
primary products, have historically been subject to cyclical changes in the
economy and changes in industry capacity, both of which can significantly impact
selling prices and our profitability.

Market conditions were generally weak in 1997 and 1998 due primarily to excess
capacity within the industry. During the second half of 1998, the containerboard
industry took market related downtime, resulting in a significant reduction in
inventory levels. In addition, several paper companies, including JSCE,
permanently shut down paper mill operations approximating 6% of industry
capacity. The balance between supply and demand for containerboard improved as a
result of the shutdowns and inventories were reduced. Corrugated container
shipments for the industry were strong in 1999, increasing approximately 2%
compared to 1998. As a result of these developments, linerboard prices rose $90
per ton in 1999, and increased an additional $50 per ton in February 2000.
Domestic economic growth slowed in the second half of 2000. This slowdown, in
addition to a weak export market, exerted downward pressure on containerboard
demand. In order to maintain a balance between supply and demand, the industry
took extensive market related downtime in 2000. In January 2001, sluggish
corrugated demand resulted in a $15 per ton decline in linerboard pricing to
$465 per ton. We do not expect a recovery in demand for corrugated containers
until the U.S. economy strengthens.

Market conditions in the folding carton and boxboard mill industry, which were
weak in 1998, strengthened in the second half of 1999 and continued to improve
in 2000. With demand improving, sales price increases were implemented in the
fourth quarter of 1999 and the second quarter of 2000. On average, prices were
higher in 2000 compared to 1999. Industry shipments of folding cartons in 2000
increased 3% compared to 1999 although mill operating rates and production were
lower.

Wood fiber and reclaimed fiber are the principal raw materials used in the
manufacture of our products. Demand for reclaimed fiber, which was weak in 1998,
grew stronger in 1999 primarily as a result of strong export demand. Reclaimed
fiber prices rose in 1999, but declined in the second half of 2000 due primarily
to lower demand brought about by the extensive market related downtime taken by
containerboard mills as described above. The price of old corrugated containers,
commonly known as OCC, the principal grade used in recycled containerboard
mills, was higher in 2000 compared to 1999 by approximately 8%. Wood fiber
prices declined 4% in 2000 compared to 1999.

MERGER AND RESTRUCTURING
------------------------

On November 18, 1998, a wholly-owned subsidiary of Smurfit-Stone merged with
Stone Container. In connection with the merger, we restructured our operations.
The most significant elements of the restructuring for Jefferson Smurfit (U.S.)
included the permanent closure of three paper mills, having approximately
700,000 tons of containerboard capacity, and eight additional facilities. During
the fourth quarter of 1998, we recorded pretax charges of $257 million for
restructuring costs and $23 million for merger-related costs. The restructuring
charge included, among other things, adjustments to fair value of property,
plant and equipment associated with the permanent closure of certain facilities
and establishment of liabilities for the termination of certain employees and
long-term commitments. As part of our continuing evaluation of all areas of our
business in connection with the merger, we recorded an additional restructuring
charge of $9 million in 1999.

The restructuring of our operations in connection with the merger was completed
in 2000. Annualized synergy savings in excess of $350 million have been achieved
by Smurfit-Stone primarily as a result of optimization of the combined
manufacturing systems of Jefferson Smurfit (U.S.) and Stone Container,
purchasing leverage and reduction of selling and administrative costs.

                                      11
<PAGE>

Since the merger date, through December 31, 2000, JSCE has incurred
approximately $48 million (68%) of the planned cash expenditures to close
facilities and to pay severance and other exit liabilities. The exit liabilities
remaining as of December 31, 2000 consisted of $23 million of anticipated cash
expenditures. Future cash outlays, principally for long-term commitments, are
anticipated to be $4 million in 2001, $3 million in 2002 and $16 million
thereafter. The remaining cash expenditures will continue to be funded through
operations as originally planned.

RESULTS OF OPERATIONS
---------------------

<TABLE>
<CAPTION>
Segment Data
(In millions)                                                 2000                  1999                 1998
                                                      -------------------   ------------------    ------------------
                                                        Net      Profit/      Net     Profit/       Net     Profit/
                                                       Sales     (Loss)      Sales    (Loss)       Sales    (Loss)
                                                      -------    ------     -------   ------      -------   ------
<S>                                                   <C>         <C>       <C>        <C>        <C>        <C>
Containerboard and corrugated containers..........    $ 2,033    $  220     $ 1,818   $  195      $ 1,776   $  135
Consumer packaging................................      1,017        99         951       91          912      103
Reclamation.......................................        605        26         452       17          275        4
Other operations..................................        212        13         192       16          192       12
                                                      -------    ------     -------   ------      -------   ------
Total operations..................................    $ 3,867       358     $ 3,413      319      $ 3,155      254
                                                      =======               =======               =======
Restructuring charges.............................                                        (9)                 (257)
Interest expense, net.............................                 (103)                (175)                 (196)
Other, net........................................                  (10)                 327                   (80)
                                                                 ------               ------                ------
Income (loss) from continuing operations
 before income taxes, extraordinary item
 and cumulative effect of accounting change.......               $  245               $  462                $ (279)
                                                                 ======               ======                ======
</TABLE>

Other, net includes corporate expenses, intracompany profit elimination and LIFO
expense, goodwill amortization, corporate charges to segments for working
capital interest, gains or losses on asset sales and other expenses not
allocated to segments.

2000 COMPARED TO 1999
---------------------

Improvements in containerboard and other markets in 2000 were the primary
reasons for the increases in net sales and operating profits. Net sales
increased 13% compared to 1999 and operating profits increased 12%. Other, net,
which included a $407 million gain on sale of assets in 1999, declined by $337
million. Other, net was favorably impacted by lower intracompany profit
elimination and LIFO expense and an expense in 1999 of $26 million related to
the cashless exercise of Smurfit-Stone stock options under the Jefferson Smurfit
Corporation stock option plan. Interest expense, net decreased by $72 million
compared to 1999 due to lower levels of debt outstanding. The increases
(decreases) in net sales for each of our segments are shown in the chart below.

Income (loss) from continuing operations before income taxes, extraordinary item
and cumulative effect of accounting change declined compared to last year due
primarily to the gain recorded in 1999 on the sale of assets. Net income in 2000
was $151 million compared to $272 million in 1999.

<TABLE>
<CAPTION>
(In millions)                                                      2000 Compared to 1999
                                       -------------------------------------------------------------------------------
                                       Containerboard
                                       & Corrugated           Consumer                          Other
                                          Containers         Packaging      Reclamation      Operations       Total
                                       --------------        ---------      -----------      ----------       -----
<S>                                    <C>                   <C>            <C>              <C>              <C>
Increase (decrease) in net
sales due to:
  Sales prices and product mix......        $  263            $   55           $  104          $  17          $ 439
  Sales volume......................            18                15               70              3            106
  Closed facilities.................           (66)               (4)             (21)                          (91)
                                            ------            ------           ------          -----          -----
Net increase........................        $  215            $   66           $  153          $  20          $ 454
                                            ======            ======           ======          =====          =====
</TABLE>

                                      12
<PAGE>

Containerboard and Corrugated Containers Segment
Net sales for 2000 increased by 12% compared to last year and profits improved
by $25 million to $220 million. Market conditions were stronger in the first
half of the year, enabling us to implement a linerboard price increase on
February 1, followed by corresponding price increases for corrugated containers.
Although shipments grew weaker as the year progressed, we were able to maintain
the price increases achieved earlier in the year. On average, corrugated
container prices improved 16% compared to last year and linerboard was higher by
17%. Solid bleached sulfate prices also increased during the year and, on
average, were 6% higher than last year.

Production of containerboard declined 10% compared to 1999 and corrugated
container shipments declined 1%. The containerboard volume declined as a result
of higher levels of market related downtime. Corrugated container sales volume
decreased as a result of plant closures and weaker demand in the second half of
the year. Solid bleached sulfate production increased 1% compared to last year.

Profits increased due to the higher average sales prices, although market
related downtime and higher cost of energy and fiber partially offset the sales
price improvements. Cost of goods sold as a percent of net sales increased from
82% in 1999 to 83% in 2000 due primarily to the increased market related
downtime and the sale of our timberland operations.

Consumer Packaging Segment
Net sales for 2000 increased by 7% compared to 1999 due to higher sales prices
and an increase in shipments. For the year, on average, coated boxboard sales
prices were 8% higher than 1999 and folding carton sales prices were 6% higher.
Uncoated boxboard sales prices were 10% higher than 1999. Sales volume of
folding cartons increased 2% compared to 1999. Production of coated boxboard
increased 2% compared to 1999 and production of uncoated boxboard increased 7%.

Profits improved 9% compared to last year due primarily to the improvement in
sales prices. An increase in reclaimed fiber cost and higher energy cost
partially offset the improvement in pricing. Profits in the label operations
declined compared to last year due to competitive pricing and increases in raw
material cost. Cost of goods sold as a percent of net sales was 83% in 2000,
unchanged from 1999.

Reclamation Segment
Net sales for 2000 increased 34% compared to 1999 due to higher sales prices and
an increase in third party shipments. Demand for OCC was strong in the first
half of 2000, but weakened in the second half as more paper mills took downtime
to manage their inventories. Prices were higher in the first half of the year as
a result of the strong demand. On average for 2000, OCC prices increased 8% and
old newsprint prices increased 47% compared to last year. An increase in the
cost of reclaimed fiber partially offset the improvement in sales price. Profits
increased $9 million compared to 1999 due primarily to the higher sales prices
and volume and lower employee compensation cost. Cost of goods sold as a percent
of net sales increased from 89% in 1999 to 91% in 2000 due primarily to the
higher cost of reclaimed fiber.

Other Operations
Net sales for 2000 increased 10% compared to 1999 due primarily to higher sales
prices. Profits in 2000 declined $3 million to $13 million compared to 1999 due
primarily to lower sales volume.

Costs and Expenses
Cost of goods sold in the Consolidated Statements of Operations for 2000 as a
percent of net sales of 84% was comparable to 1999. The favorable effects of
higher sales prices, lower intracompany profit elimination and LIFO expense were
offset by the higher cost of energy and reclaimed fiber and the effects of the
higher level of market related downtime in 2000.

Selling and administrative expenses as a percent of net sales declined from 9%
in 1999 to 7% in 2000, primarily as a result of the higher sales prices in 2000.

                                      13
<PAGE>

Interest expense, net in 2000 declined compared to 1999 due primarily to lower
average outstanding debt levels. The overall average effective interest rate for
2000 was higher than 1999 by 0.4%. Interest expense, net for 2000 included $57
million of interest income earned on our intercompany loan to Smurfit-Stone
compared to $52 million earned in 1999.

Other, net in the Consolidated Statements of Operations for 2000 declined $405
million due primarily to a gain of $407 million recorded in 1999 on the sale of
our timberlands.

The effective income tax rate in 2000 differed from the federal statutory tax
rate due to several factors, the most significant of which was state income
taxes. For information concerning income taxes, see Liquidity and Capital
Resources and Note 7 of the Notes to Consolidated Financial Statements.

Discontinued Operations
In February 1999, we adopted a formal plan to sell the operating assets of our
subsidiary, Smurfit Newsprint. Accordingly, the newsprint operations of Smurfit
Newsprint were accounted for as a discontinued operation for all periods
presented in the Consolidated Statements of Operations. In November 1999, we
sold our Newberg, Oregon newsprint mill for approximately $211 million. In May
2000, we transferred ownership of the Oregon City, Oregon newsprint mill to a
third party, thereby completing our exit from the newsprint business. We
received no proceeds from the transfer. The 1999 results of discontinued
operations included the realized gain on the sale of the Newberg mill, an
expected loss on the transfer of the Oregon City mill, the actual results from
the measurement date through December 31, 1999 and the estimated losses on the
Oregon City mill through the expected disposition date. In 2000, we recorded a
$6 million after-tax gain to reflect adjustments to estimates made in 1999 on
disposition of discontinued operations.

1999 COMPARED TO 1998
---------------------

Net sales for 1999 were higher than 1998 by 8% due primarily to higher sales
volumes and improvements in sales prices. Operating profits for 1999 were $65
million higher than 1998 due primarily to the higher sales prices. Other, net in
1999 improved $407 million compared to 1998 due primarily to gains recorded on
sale of assets. Other, net in 1999 included higher intracompany profit
elimination and LIFO expense compared to 1998 and $26 million of expense related
to the cashless exercise of Smurfit-Stone stock options under the Jefferson
Smurfit Corporation stock option plan. Other, net in 1998 included $30 million
for the class action settlement of certain litigation and $23 million of other
merger-related cost. The increases (decreases) in net sales for each of our
segments are shown in the chart below.

The improvement in income from continuing operations before income taxes,
extraordinary item and cumulative effect of accounting change of $741 million
was due primarily to higher operating profits, lower restructuring charges and
the gain on sale of assets. Net income in 1999 was $272 million compared to a
net loss of $160 million in 1998.

<TABLE>
<CAPTION>
(In millions)                                            1999 Compared to 1998
                                    ------------------------------------------------------------------
                                    Containerboard
                                    & Corrugated     Consumer                      Other
                                      Containers    Packaging    Reclamation    Operations     Total
                                    --------------  ---------    -----------    ----------     -----
<S>                                 <C>             <C>          <C>            <C>            <C>
Increase (decrease) in net
sales due to:
  Sales prices and product mix...       $  74         $  (13)      $   35        $   (4)       $   92
  Sales volume...................          48             52          160             4           264
  1998 acquisition...............          26                                                      26
  Closed facilities..............        (106)                        (18)                       (124)
                                        -----         ------        -----        ------        ------
Net increase.....................       $  42         $   39        $ 177        $    0        $  258
                                        =====         ======        =====        ======        ======
</TABLE>

                                      14
<PAGE>

Containerboard and Corrugated Containers Segment
Net sales for 1999 increased by 2% compared to 1998. The benefit from the
improvement in sales prices was partially offset by plant closures resulting
from the Stone Container merger. Profits in 1999 improved by $60 million
compared to 1998 due primarily to the higher sales prices and the effects of the
merger. We were able to implement two price increases for containerboard in
1999, totaling $90 per ton for linerboard and $130 per ton for medium. On
average, linerboard and corrugated container prices increased 8% and 9%,
respectively, compared to 1998. The increase in corrugated prices reflects the
price increases implemented and our strategy to rationalize customer mix. Solid
bleached sulfate prices were lower than 1998 by 3%.

Containerboard production of 1,592,000 tons in 1999 declined compared to 1998
due primarily to the permanent shutdown of three Jefferson Smurfit (U.S.)
containerboard mills. Production for 1999 was favorably impacted by the
acquisition of a containerboard machine from Jefferson Smurfit Group plc in
November 1998. Production of solid bleached sulfate was higher than 1998 by 2%.
Corrugated container sales volume declined compared to 1998 by 4% due primarily
to plant closures and the rationalization of customer mix. Cost of goods sold as
a percent of net sales decreased from 86% in 1998 to 82% in 1999 due primarily
to higher sales prices, plant shutdowns and cost saving initiatives undertaken
in connection with the merger.

Consumer Packaging Segment
Net sales for 1999 increased by 4% compared to 1998 while profits decreased by
$12 million. The sales increase was due primarily to higher sales volume of
folding cartons, which increased by 9% compared to 1998. Production of coated
boxboard was comparable to 1998. On average, coated boxboard sales prices were
lower than 1998 by 9% and folding carton sales prices were comparable to 1998.
Production of uncoated boxboard decreased 8% and, on average, uncoated boxboard
sales prices declined 8% compared to 1998. Profits declined compared to 1998 due
primarily to the lower sales prices for coated and uncoated boxboard and higher
reclaimed fiber cost. Cost of goods sold as a percent of net sales increased
from 81% in 1998 to 83% in 1999 due primarily to the effect of lower sales
prices and higher reclaimed fiber costs.

Reclamation Segment
Net sales for 1999 increased 64% compared to 1998 due primarily to higher sales
volume resulting from the merger and higher sales prices. Compared to 1998, the
average price of OCC increased approximately 11% and the total tons of fiber
reclaimed and brokered increased 27% due to the additional fiber requirements
resulting from the merger. Profits increased $13 million compared to 1998 due
primarily to higher sales prices. Cost of goods sold as a percent of net sales
for 1999 was comparable to 1998.

Other Operations
Other operations include specialty packaging and Cladwood(R) operations. Net
sales in 1999 were comparable to 1998 and profits increased by $4 million to $16
million due primarily to the specialty packaging operations.

Costs and Expenses
Cost of goods sold for 1999 increased compared to 1998 due primarily to costs
associated with the increase in sales of the reclamation segment, the addition
of the paperboard machine in our Fernandina Beach, Florida paperboard mill and
higher LIFO expense. Cost of goods sold in 1999 was favorably impacted by the
plant closures in 1998. Overall cost of goods sold as a percent of net sales in
1999 was comparable to 1998.

Selling and administrative expenses as a percent of net sales decreased from 10%
in 1998 to 9% in 1999. Selling and administrative expenses for 1999 included
expense of $26 million related to the cashless exercise of Smurfit-Stone stock
options under the Jefferson Smurfit Corporation stock option plan. In 1998, we
expensed $30 million for the class action settlement of certain litigation and
$23 million of other merger-related cost.

                                      15
<PAGE>

Interest expense, net in 1999 declined compared to 1998. Interest expense, net
includes interest income, which consists primarily of interest earned on our
intercompany loan made to Smurfit-Stone in November 1998 in connection with the
merger. Interest income was $52 million for 1999 compared to $6 million in 1998.
While our average debt level for 1999 was higher compared to 1998 due primarily
to borrowings related to the merger, the higher level of interest income more
than offset the increase in interest expense. Our overall average effective
interest rate in 1999 was comparable to 1998.

Other, net for 1999 included a gain of $407 million on the sale of our
timberlands.

The effective income tax rate in 1999 differed from the federal statutory tax
rate due to several factors, the most significant of which was state income
taxes.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

General
In 2000, net cash provided by operating activities of $247 million and proceeds
of $8 million from the sale of assets were used to fund property additions of
$116 million, an increase in the intercompany loan to Smurfit-Stone of $21
million and net debt payments of $108 million.

On November 15, 2000, pursuant to an Agreement and Plan of Merger among
Smurfit-Stone, SCC Merger Co. and Stone Container, approximately 4.6 million
shares of $1.75 Series E Preferred Stock of Stone Container were converted into
approximately 4.6 million shares of 7% Series A Cumulative Exchangeable
Redeemable Convertible Preferred Stock of Smurfit-Stone. In addition, a cash
payment of $6.4425 per share, totaling approximately $30 million, was made by
Smurfit-Stone to the holders of the Stone Container Preferred Stock. The cash
payment was equal to the accrued and unpaid dividends on each share of the Stone
Container Preferred Stock, less $0.12 per share to cover certain transaction
related expenses. Smurfit-Stone funded the approximately $30 million cash
portion of the Preferred Stock exchange consideration through an intercompany
loan from the company.

Financing Activities
On March 9, 2001, we amended the Jefferson Smurfit (U.S.) accounts receivable
securitization program to (i) reduce the total program size from $315 million to
$229 million and (ii) extend the final maturity from February 2002 to February
2004.

Jefferson Smurfit (U.S.)'s bank credit facility contains various business and
financial covenants including, among other things, limitations on dividends,
redemptions and repurchases of capital stock, limitations on the incurrence of
indebtedness, limitations on capital expenditures and maintenance of certain
financial covenants. The bank credit facility also requires prepayments if
Jefferson Smurfit (U.S.) has excess cash flows, as defined, or receives proceeds
from certain asset sales, insurance or incurrence of certain indebtedness.
Jefferson Smurfit (U.S.) generated excess cash flow of approximately $59 million
in 2000. The obligations under the bank credit facility are unconditionally
guaranteed by us and certain of our subsidiaries. The obligations under the bank
credit facility are secured by a security interest in substantially all of the
assets of Jefferson Smurfit (U.S.). Such restrictions, together with our highly
leveraged position, could restrict our corporate activities, including our
ability to respond to market conditions, to provide for unanticipated capital
expenditures or to take advantage of business opportunities.

We expect that internally generated cash flows and existing financing resources
will be sufficient for the next several years to meet our ordinary course
obligations, including debt service, restructuring payments, expenditures under
the Cluster Rule and capital expenditures. We intend to hold capital
expenditures below our annual depreciation levels for the next several years.
Scheduled debt payments are $10 million in 2001 and $172 million in 2002, with
increasing amounts thereafter. We expect to use any excess cash flows provided
by operations to make further debt reductions. As of December 31,

                                      16
<PAGE>

2000, we had $498 million of unused borrowing capacity under the bank credit
facility and $88 million of unused borrowing capacity under our $315 million
accounts receivable securitization program, subject to Jefferson Smurfit
(U.S.)'s level of eligible accounts receivable.

Income Tax Matters
At December 31, 2000, we had approximately $51 million of net operating loss
carryforwards for U.S. federal income tax purposes that expire in 2018 and 2019
with a tax value of $18 million, and approximately $20 million of net operating
loss carryforwards for state purposes that expire in the years 2001 through
2020. A valuation allowance of $10 million has been established for a portion of
these deferred tax assets. In addition, we had approximately $41 million of
alternative minimum tax credit carryforwards for U.S. federal income tax
purposes, which are available indefinitely.

Environmental Matters
Our operations are subject to extensive environmental regulation by federal,
state and local authorities in the United States. We have made, and expect to
continue to make, significant capital expenditures to comply with water, air,
solid and hazardous waste and other environmental laws and regulations. Capital
expenditures for environmental control equipment and facilities were
approximately $15 million in 1999 and $56 million in 2000. We anticipate that
environmental capital expenditures will approximate $14 million in 2001. The
majority of the expenditures in 2000 and 2001 relate to projects required to
comply with the Cluster Rule. In November 1997, the EPA issued the Cluster Rule,
which made existing requirements for discharge of wastewater under the Clean
Water Act more stringent and imposed new, more stringent requirements on air
emissions under the Clean Air Act for the pulp and paper industry. Although
portions of the Cluster Rule are still not fully promulgated, we currently
believe we may be required to make additional capital expenditures of up to $15
million during the next several years in order to meet the requirements of the
new regulations. Also, additional operating expenses will be incurred as capital
installations required by the Cluster Rule are put into service.

In addition, we are from time to time subject to litigation and governmental
proceedings regarding environmental matters in which compliance action and
injunctive and/or monetary relief are sought. We have been named as a PRP at a
number of sites, which are the subject of remedial activity under CERCLA or
comparable state laws. Although we are subject to joint and several liability
imposed under CERCLA, at most of the multi-PRP sites there are organized groups
of PRPs and costs are being shared among PRPs. Payments related to cleanup at
existing and former operating sites and CERCLA sites were not material to our
liquidity during 2000. Future environmental regulations may have an
unpredictable adverse effect on our operations and earnings, but they are not
expected to adversely affect our competitive position.

Although capital expenditures for environmental control equipment and facilities
and compliance costs in future years will depend on engineering studies and
legislative and technological developments which cannot be predicted at this
time, such costs could increase as environmental regulations become more
stringent. Environmental expenditures include projects that, in addition to
meeting environmental concerns, may yield certain benefits to us in the form of
increased capacity and production cost savings. In addition to capital
expenditures for environmental control equipment and facilities, other
expenditures incurred to maintain environmental regulatory compliance (including
any remediation costs) represent ongoing costs to us.

Effects of Inflation
Although inflation has slowed in recent years, it is still a factor in the
economy and we continue to seek ways to mitigate its impact. In 2000, energy
resources were tight in certain areas of the United States and prices of natural
gas and purchased electricity escalated dramatically. Our paper mills are large
users of energy and we attempt to mitigate these cost increases through hedging
programs and supply contracts. With the exception of energy costs, inflationary
increases in operating costs have been moderate during the last three years and
have not had a material impact on our financial position or operating results.

                                      17
<PAGE>

We use the last-in, first-out method of accounting for approximately 82% of our
inventories. Under this method, the cost of goods sold reported in the financial
statements approximates current cost and thus provides a closer matching of
revenue and expenses in periods of increasing costs. On the other hand,
depreciation charges represent the allocation of historical costs incurred over
past years and are significantly less than if they were based on the current
cost of productive capacity being consumed.

Prospective Accounting Standards
In 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which is
required to be adopted in the years beginning after June 15, 2000. We will adopt
Statement No. 133 effective January 1, 2001. The statement requires us to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
the derivatives will either be offset against the change in fair value of the
hedged assets, liabilities or firm commitments through earnings or recognized in
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings.

Based on our derivative positions at December 31, 2000, we estimate that upon
adoption, we will record an asset for the fair value of existing derivatives of
approximately $4 million and a corresponding reduction in cost of goods sold.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         ----------------------------------------------------------

Interest Rate Risk
Our earnings and cash flows are significantly affected by the amount of interest
on our indebtedness. Our financing arrangements include both fixed and variable
rate debt in which changes in interest rates will impact the fixed and variable
debt differently. A change in the interest rate of fixed rate debt will impact
the fair value of the debt, whereas a change in the interest rate on the
variable rate debt will impact interest expense and cash flows. Management's
objective is to protect JSCE from interest rate volatility and reduce or cap
interest expense within acceptable levels of market risk. We may periodically
enter into interest rate swaps, caps or options to hedge interest rate exposure
and manage risk within company policy. We do not utilize derivatives for
speculative or trading purposes. Any derivative would be specific to the debt
instrument, contract or transaction, which would determine the specifics of the
hedge. There were no derivative contracts outstanding at December 31, 2000.

                                      18
<PAGE>

The table below presents principal amounts by year of anticipated maturity for
our debt obligations and related average interest rates based on the weighted
average interest rates at the end of the period. Variable interest rates
disclosed do not attempt to project future interest rates. This information
should be read in conjunction with Note 5 of the Notes to Consolidated Financial
Statements.

Short and Long-Term Debt
Outstanding as of December 31, 2000

<TABLE>
<CAPTION>
                                                                                              There                  Fair
(in millions)                                     2001      2002     2003     2004     2005   -after      Total      Value
----------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>       <C>      <C>      <C>      <C>      <C>      <C>        <C>
Bank term loans and revolver
  8.71% average interest rate (variable).....    $        $   50   $   50    $  75   $  126   $   56   $    357   $    355
Accounts receivable securitization
  6.63% average interest rate (variable).....                 15      212                                   227        227
Senior notes
  10.35% average interest rate (fixed).......                100      500      287                          887        893
Industrial revenue bonds
  7.33% average interest rate (fixed)........                           4                         24         28         28
Other........................................        10        7        5        1        1        6         30         30
                                                 ---------------------------------------------------------------------------
Total debt...................................    $   10   $  172   $  771    $ 363   $  127   $   86   $  1,529   $  1,533
                                                 ===========================================================================
</TABLE>

                                      19
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         -------------------------------------------

<TABLE>
<CAPTION>
Index to Financial Statements:                                                              Page No.
                                                                                            --------
<S>                                                                                         <C>
     Management's Responsibility for Financial Statements....................................   21
     Report of Independent Auditors..........................................................   22
     Consolidated Balance Sheets--December 31, 2000 and 1999.................................   23
     For the years ended December 31, 2000, 1999 and 1998:
          Consolidated Statements of Operations..............................................   24
          Consolidated Statements of Stockholder's Equity (Deficit)..........................   25
          Consolidated Statements of Cash Flows..............................................   26
     Notes to Consolidated Financial Statements..............................................   27

The following consolidated financial statement schedule is included in Item 14(a):

     II.  Valuation and Qualifying Accounts and Reserves.....................................   45
</TABLE>

All other schedules specified under Regulation S-X have been omitted because
they are not applicable, because they are not required or because the
information required is included in the financial statements or notes thereto.

                                      20
<PAGE>

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of JSCE is responsible for the information contained in the
consolidated financial statements and in other parts of this report. The
consolidated financial statements have been prepared by us in accordance with
accounting principles generally accepted in the United States appropriate in the
circumstances and necessarily include certain amounts based on management's best
estimate and judgment.

We maintain a system of internal accounting control, which we believe is
sufficient to provide reasonable assurance that in all material respects
transactions are properly authorized and recorded, financial reporting
responsibilities are met and accountability for assets is maintained. In
establishing and maintaining any system of internal control, judgment is
required to assess and balance the relative costs and expected benefits.
Management believes that through the careful selection of employees, the
division of responsibilities and the application of formal policies and
procedures, JSCE has an effective and responsive system of internal accounting
controls. The system is monitored by our staff of internal auditors, who
evaluate and report to management on the effectiveness of the system.





/s/ Ray M. Curran
----------------------------------
Ray M. Curran
President and Chief Executive Officer




/s/ Paul K. Kaufmann
----------------------------------
Paul K. Kaufmann
Vice President and Corporate Controller
(Principal Accounting Officer)

                                      21
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors
JSCE, Inc.

We have audited the accompanying consolidated balance sheets of JSCE, Inc. as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 2000. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of JSCE, Inc. at
December 31, 2000 and 1999, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31, 2000
in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the financial statements, in 1998 JSCE changed its
method of accounting for start-up costs.


                                                  /s/ Ernst & Young LLP
                                                  ---------------------
                                                  Ernst & Young LLP


St. Louis, Missouri
January 29, 2001
except for paragraph 8 of Note 5, as to which the date is March 9, 2001

                                      22
<PAGE>

                                  JSCE, INC.
                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
December 31,  (In millions, except share data)                                           2000            1999
-------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>              <C>
Assets

Current assets
  Cash and cash equivalents.......................................................   $     21        $     11
  Receivables, less allowances of $9 in 2000 and $9 in 1990.......................        342             396
  Inventories
    Work-in-process and finished goods............................................         93              95
    Materials and supplies........................................................        124             139
                                                                                     ------------------------
                                                                                          217             234
  Refundable income taxes.........................................................          7               7
  Deferred income taxes...........................................................          5              42
  Prepaid expenses and other current assets.......................................         20              22
                                                                                     ------------------------
      Total current assets........................................................        612             712
Net property, plant and equipment.................................................      1,262           1,309
Goodwill, less accumulated amortization of $79 in 2000 and $72 in 1999............        198             205
Notes receivable from SSCC........................................................        439             364
Other assets......................................................................        156             146
                                                                                     ------------------------
                                                                                     $  2,667        $  2,736
=============================================================================================================
Liabilities and Stockholder's Deficit

Current liabilities
  Current maturities of long-term debt............................................   $     10        $     12
  Accounts payable................................................................        312             389
  Accrued compensation and payroll taxes..........................................         88              88
  Interest payable................................................................         27              30
  Other current liabilities.......................................................         71             152
                                                                                     ------------------------
      Total current liabilities...................................................        508             671
Long-term debt, less current maturities...........................................      1,519           1,624
Other long-term liabilities.......................................................        236             253
Deferred income taxes.............................................................        488             423
Stockholder's equity (deficit)
  Common stock, par value $.01 per share; 1,000
    shares authorized, issued and outstanding.....................................
  Additional paid-in capital......................................................      1,129           1,129
  Retained earnings (deficit).....................................................     (1,213)         (1,364)
                                                                                     ------------------------
      Total stockholder's equity (deficit)........................................        (84)           (235)
                                                                                     ------------------------
                                                                                     $  2,667        $  2,736
=============================================================================================================
</TABLE>

See notes to consolidated financial statements.

                                      23
<PAGE>

                                  JSCE, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
Year Ended December 31, (In millions)                                                    2000            1999             1998
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>              <C>              <C>
Net sales..........................................................................  $  3,867         $ 3,413          $ 3,155
Costs and expenses
   Cost of goods sold..............................................................     3,250           2,871            2,654
   Selling and administrative expenses.............................................       275             307              322
   Restructuring charges...........................................................                         9              257
                                                                                     -----------------------------------------
     Income (loss) from operations.................................................       342             226              (78)
Other income (expense)
   Interest expense, net...........................................................      (103)           (175)            (196)
   Other, net......................................................................         6             411               (5)
                                                                                     -----------------------------------------
     Income (loss) from continuing operations before
        income taxes, extraordinary item and
        cumulative effect of accounting change.....................................       245             462             (279)
Benefit from (provision for) income taxes..........................................       (99)           (186)             108
                                                                                     -----------------------------------------
   Income (loss) from continuing operations before extraordinary
     item and cumulative effect of accounting change...............................       146             276             (171)
Discontinued operations
   Income from discontinued operations
     net of income taxes of $1 in 1999 and $17 in 1998.............................                         2               27
   Gain on disposition of discontinued operations
     net of income taxes of $4 in 2000 and $2 in 1999..............................         6               4
                                                                                     -----------------------------------------
        Income (loss) before extraordinary item and
          cumulative effect of accounting change...................................       152             282             (144)
Extraordinary item
   Loss from early extinguishment of debt, net of income
     tax benefit of $0 in 2000, $6 in 1999 and $9 in 1998..........................        (1)            (10)             (13)
Cumulative effect of accounting change
   Start-up costs, net of income tax benefit of $2.................................                                         (3)
                                                                                     -----------------------------------------
     Net income (loss).............................................................  $    151         $   272          $  (160)
==============================================================================================================================
</TABLE>

See notes to consolidated financial statements.

                                      24
<PAGE>

                                  JSCE, INC.
           CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)


<TABLE>
<CAPTION>
(In millions, except share data)
---------------------------------------------------------------------------------------------------------------------------------
                                                               Common Stock
                                                              --------------                               Accumulated
                                                              Number    Par     Additional   Retained         Other
                                                                of     Value,    Paid-In     Earnings     Comprehensive
                                                              Shares    $.01     Capital     (Deficit)    Income (Loss)    Total
                                                              -------------------------------------------------------------------
<S>                                                           <C>       <C>       <C>        <C>          <C>              <C>
Balance at January 1, 1998...................................  1,000    $         $ 1,102    $ (1,476)    $                $ (374)

Comprehensive income (loss)
   Net loss..................................................                                    (160)                       (160)
   Other comprehensive income (loss), net of tax
     Minimum pension liability adjustment....................                                                     (4)          (4)
                                                              -------------------------------------------------------------------
       Comprehensive income (loss)...........................                                    (160)            (4)        (164)
                                                              -------------------------------------------------------------------
Balance at December 31, 1998.................................  1,000                1,102      (1,636)            (4)        (538)

   SSCC stock option exercises...............................                          26                                      26
   SSCC capital contribution.................................                           1                                       1
Comprehensive income
   Net income................................................                                     272                         272
   Other comprehensive income (loss), net of tax
     Minimum pension liability adjustment....................                                                      4            4
                                                              -------------------------------------------------------------------
       Comprehensive income..................................                                     272              4          276
                                                              -------------------------------------------------------------------
Balance at December 31, 1999.................................  1,000                1,129      (1,364)                       (235)

Comprehensive income
   Net income................................................                                     151                         151
                                                              -------------------------------------------------------------------
       Comprehensive income..................................                                     151                         151
                                                              -------------------------------------------------------------------
Balance at December 31, 2000.................................  1,000    $         $ 1,129    $ (1,213)    $                $  (84)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.

                                      25
<PAGE>

                                  JSCE, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS




<TABLE>
<CAPTION>
Year Ended December 31, (In millions)                                                     2000         1999            1998
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>           <C>            <C>
Cash flows from operating activities
Net income (loss)...................................................................   $   151       $  272         $  (160)
Adjustments to reconcile net income (loss) to
  net cash provided by operating activities
    Gain on disposition of discontinued operations..................................       (10)          (2)
    Extraordinary loss from early extinguishment of debt............................         1           16              22
    Cumulative effect of accounting change for start-up costs.......................                                      5
    Depreciation, depletion and amortization........................................       120          134             134
    Amortization of deferred debt issuance costs....................................         7           10               8
    Deferred income taxes...........................................................       104          154             (92)
    Gain on sale of assets..........................................................                   (407)
    Non cash employee benefit (income) expense......................................       (21)          30               5
    Non cash restructuring charge...................................................                      4             179
    Change in current assets and liabilities
        Receivables.................................................................        54         (100)              8
        Inventories.................................................................        17          (15)              3
        Prepaid expenses and other current assets...................................         2          (13)             (1)
        Accounts payable and accrued liabilities....................................      (117)          64             (16)
        Interest payable............................................................       (59)         (46)             (4)
        Income taxes................................................................        (3)          12             (16)
    Other, net......................................................................         1          (10)             42
                                                                                       ------------------------------------
  Net cash provided by operating activities.........................................       247          103             117
                                                                                       ------------------------------------
Cash flows from investing activities
  Property additions................................................................      (116)         (69)           (265)
  Notes receivable from SSCC........................................................       (21)          25            (336)
  Proceeds from property and timberland
    disposals and sale of businesses................................................         8          873               6
                                                                                       ------------------------------------
  Net cash provided by (used for) investing activities..............................      (129)         829            (595)
                                                                                       ------------------------------------
Cash flows from financing activities
  Borrowings under bank credit facilities...........................................                                  1,441
  Net borrowings (repayments) under accounts
  receivable securitization program.................................................         3           15              (1)
  Payments of long-term debt........................................................      (111)        (954)           (921)
  Deferred debt issuance costs......................................................                                    (35)
                                                                                       ------------------------------------
  Net cash provided by (used for) financing activities...,,.........................      (108)        (939)            484
                                                                                       ------------------------------------
Increase (decrease) in cash and cash equivalents....................................        10           (7)              6
Cash and cash equivalents
  Beginning of year.................................................................        11           18              12
                                                                                       ------------------------------------
  End of year.......................................................................   $    21       $   11         $    18
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

                                      26
<PAGE>

                                  JSCE, Inc.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         (Tabular amounts in millions)


1.   Significant Accounting Policies

Basis of Presentation: JSCE, Inc., hereafter referred to as the "Company," is a
wholly owned subsidiary of Smurfit-Stone Container Corporation ("SSCC"),
formerly known as Jefferson Smurfit Corporation ("JSC"). On November 18, 1998, a
subsidiary of JSC was merged with Stone Container Corporation ("Stone"), an
action hereafter referred to as the "Merger," and Stone became a subsidiary of
SSCC. The Company owns 100% of the equity interest in Jefferson Smurfit
Corporation (U.S.) ("JSC(U.S.)") and is a guarantor of the senior unsecured
indebtedness of JSC(U.S.). The Company has no operations other than its
investment in JSC(U.S.). JSC(U.S.) has extensive operations throughout the
United States.

The deficit in stockholder's equity is primarily due to SSCC's 1989 purchase of
JSC(U.S.)'s common equity owned by Jefferson Smurfit Group plc ("JS Group") and
the acquisition by JSC(U.S.) of its common equity owned by the Morgan Stanley
Leveraged Equity Fund I, L.P., which were accounted for as purchases of treasury
stock.

Nature of Operations: The Company's major operations are in containerboard and
corrugated containers, consumer packaging, specialty packaging and reclaimed
fiber resources. In February 1999, the Company announced its intention to divest
its newsprint subsidiary, and accordingly, its newsprint segment is accounted
for as a discontinued operation (See Note 9). The Company transferred ownership
of the Oregon City, Oregon, newsprint mill to a third party in May 2000, thereby
completing its exit from the newsprint business.

The Company's paperboard mills procure virgin and reclaimed fiber and produce
paperboard for conversion into corrugated containers, folding cartons and
industrial packaging at Company-owned facilities and third-party converting
operations. Paper product customers represent a diverse range of industries
including paperboard and paperboard packaging, wholesale trade, retailing and
agri-business. Recycling operations collect or broker wastepaper for sale to
Company-owned and third-party paper mills. Customers and operations are
principally located in the United States. Credit is extended to customers based
on an evaluation of their financial condition.

Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and majority-owned and controlled subsidiaries.
Significant intercompany accounts and transactions are eliminated in
consolidation.

Cash and Cash Equivalents: The Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents. Cash
and cash equivalents of $18 million and $3 million were pledged at December 31,
2000 and 1999, as collateral for obligations associated with the accounts
receivable securitization program (See Note 5).

Revenue Recognition: In December 1999, the Securities and Exchange Commission
staff issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements." SAB No. 101 further defines the basic principles of
revenue recognition and was adopted by the Company on October 1, 2000. The
Company recognizes revenue at the time products are shipped to external
customers. The adoption of SAB No. 101 did not have a material effect on the
2000 financial statements.

Shipping and Handling Costs: During 2000, the Emerging Issues Task Force
("EITF") issued EITF 00-10, "Accounting for Shipping and Handling Fees and
Costs." Previously, the Company recognized shipping and handling costs as a
reduction to net sales. Effective with the adoption of SAB No. 101 on October 1,
2000,

                                      27
<PAGE>

EITF 00-10 requires shipping and handling costs to be included in cost of goods
sold. Accordingly, shipping and handling costs have been reclassified to cost of
goods sold for all periods presented. The effect of adopting EITF 00-10
increased net sales and cost of goods sold from previously reported amounts by
$118 million in 1999 and $112 million in 1998.

Inventories: Inventories are valued at the lower of cost or market under the
last-in, first-out ("LIFO") method except for $39 million in 2000 and 1999 which
are valued at the lower of average cost or market. First-in, first-out ("FIFO")
costs (which approximate replacement costs) exceed the LIFO value by $65 million
and $52 million at December 31, 2000 and 1999, respectively.

Net Property, Plant and Equipment: Property, plant and equipment are carried at
cost. The costs of additions, improvements and major replacements are
capitalized, while maintenance and repairs are charged to expense as incurred.
Provisions for depreciation and amortization are made using straight-line rates
over the estimated useful lives of the related assets and the terms of the
applicable leases for leasehold improvements. Estimated useful lives of
papermill machines average 23 years, while major converting equipment and
folding carton presses have an estimated useful life ranging from 12 to 20
years.

Goodwill: The excess of cost over the fair value assigned to the net assets
acquired is recorded as goodwill and is being amortized using the straight-line
method over 40 years.

Deferred Debt Issuance Costs: Deferred debt issuance costs included in other
assets are amortized over the terms of the respective debt obligations using the
interest method.

Long-Lived Assets: In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed of," long-lived assets held and used by
the Company and the related goodwill are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.

Income Taxes: The Company accounts for income taxes in accordance with the
liability method of accounting for income taxes. Under the liability method,
deferred assets and liabilities are recognized based upon anticipated future tax
consequences attributable to differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases (See Note 7).

Transfers of Financial Assets: The Company accounts for transfers of financial
assets in accordance with SFAS No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." Accordingly, financial
assets transferred to qualifying special purpose entities and the liabilities of
such entities are not reflected in the consolidated financial statements of the
Company. Gain or loss on sale of financial assets depends in part on the
previous carrying amount of the financial assets involved in the transfer,
allocated between the assets sold and the retained interests based on their
relative fair value at the date of transfer. Quoted market prices are generally
not available for retained interests, so the Company generally estimates fair
value based on the present value of expected cash flows estimated by using
management's best estimates of key assumptions. The Company has complied with
the disclosure requirements of SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140
replaces SFAS No. 125, effective March 31, 2001, and more clearly defines the
accounting standards for transfers of financial assets (See Note 4).

Employee Stock Options: The Company's employees participate in SSCC's
stock-based plans. Accounting for stock-based plans is in accordance with
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" (See Note 10).

                                      28
<PAGE>

Environmental Matters: The Company expenses environmental expenditures related
to existing conditions resulting from past or current operations from which no
current or future benefit is discernible. Expenditures that extend the life of
the related property or mitigate or prevent future environmental contamination
are capitalized. Reserves for environmental liabilities are established in
accordance with the American Institute of Certified Public Accountants ("AICPA")
Statement of Position ("SOP") 96-1, "Environmental Remediation Liabilities." The
Company records a liability at the time when it is probable and can be
reasonably estimated. Such liabilities are not discounted or reduced for
potential recoveries from insurance carriers.

Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Reclassifications: Certain reclassifications of prior year presentations have
been made to conform to the 2000 presentation.

Start-up Costs: In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs
of Start-Up Activities," which requires that costs related to start-up
activities be expensed as incurred. Prior to 1998, the Company capitalized
certain costs to open new plants or to start new production processes. The
Company adopted the provisions of the SOP in its financial statements as of the
beginning of 1998. The Company recorded a charge for the cumulative effect of an
accounting change of $3 million, net of taxes of $2 million, to expense costs
that had been capitalized prior to 1998.

Prospective Accounting Pronouncements: In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, as amended by SFAS No. 138, "Accounting for
Derivative Instruments and Hedging Activities," which is required to be adopted
by the Company, effective January 1, 2001. The statement requires the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings.

Based on the Company's derivative positions at December 31, 2000, the Company
estimates that upon adoption it will record an asset for the fair value of
existing derivatives of approximately $4 million and a corresponding reduction
in cost of goods sold.


2.  Merger and Restructurings

During the fourth quarter of 1998, in connection with SSCC's Merger with Stone,
the Company recorded a restructuring charge of $257 million related to the
permanent shutdown of certain containerboard mill operations and related
facilities formerly operated by JSC(U.S.), the termination of certain JSC(U.S.)
employees, and liabilities for lease commitments at the closed JSC(U.S.)
facilities. The containerboard mill facilities were permanently shut down on
December 1, 1998. The assets at these facilities were adjusted to their
estimated fair value, less cost to sell, based upon appraisals. The sales and
operating income of these mill facilities in 1998 prior to closure were $209
million and $9 million, respectively. The terminated employees included
approximately 700 employees at these mills and 50 employees in the Company's
corporate office. These employees were terminated in December 1998.

During 1999, the Company permanently closed eight additional facilities, which
resulted in approximately 400 employees being terminated. A $14 million
restructuring charge was recorded related to these

                                      29
<PAGE>

closures. The sales and operating loss of these facilities in 1999 prior to
closure were $32 million and $7 million, respectively. The 1999 adjustments
include a reduction to 1998 exit liabilities of $5 million and a
reclassification of pension liabilities of $12 million.

The following is a summary of the restructuring liabilities recorded:


<TABLE>
<CAPTION>
                              Write-down of
                              Property and                       Lease       Pension      Facility
                              Equipment to                      Commit-      Curtail-     Closure
                               Fair Value         Severance      ments         ments       Costs      Other     Total
                             ------------------------------------------------------------------------------------------
<S>                          <C>                  <C>           <C>          <C>         <C>          <C>       <C>
Opening balance                    $ 179             $ 27         $ 21          $  9        $ 13      $  8      $ 257
    Payments                                           (3)          (1)                       (3)                  (7)
    Adjustments                     (179)                                                                        (179)
                             ------------------------------------------------------------------------------------------
Balance at
December 31,1998                                       24           20             9          10         8         71

    Charge                             4                4                          3           1         2         14
    Payments                                          (26)          (3)                       (3)       (3)       (35)
    Adjustments                       (4)                                        (12)                   (5)       (21)
                             ------------------------------------------------------------------------------------------
Balance at
December 31, 1999                                       2           17                         8         2         29

    Payments                                           (2)          (3)                                 (1)        (6)
                             ------------------------------------------------------------------------------------------
Balance at
December 31, 2000                  $                $             $ 14          $           $  8       $ 1      $  23
                             ------------------------------------------------------------------------------------------
</TABLE>

Future cash outlays are anticipated to be $4 million in 2001, $3 million in
2002, $3 million in 2003, and $13 million thereafter.

The Company recorded $23 million of Merger-related charges as selling and
administrative expenses during the fourth quarter of 1998. These charges
pertained to professional management fees to achieve operating efficiencies from
the Merger, fees for management personnel changes and other Merger costs.


3.  Net Property, Plant and Equipment

Net property, plant and equipment at December 31 consists of:

                                                               2000      1999
                                                          ----------------------
Land.....................................................   $   52      $   57
Buildings and leasehold improvements.....................      245         247
Machinery, fixtures and equipment........................    1,788       1,762
Construction in progress.................................       52          40
                                                          ----------------------
                                                             2,137       2,106
Less accumulated depreciation and amortization..........      (875)       (797)
                                                          ----------------------
Net property, plant and equipment.......................    $1,262      $1,309
                                                          ----------------------

Depreciation and depletion expense was $113 million, $127 million and $127
million for 2000, 1999 and 1998, respectively. Property, plant and equipment
include capitalized leases of $57 million and $58 million and related
accumulated amortization of $36 million and $30 million at December 31, 2000 and
1999, respectively.

                                      30
<PAGE>

4.  Timberland Sale and Note Monetization

The Company sold approximately 980,000 acres of owned and leased timberland in
Florida, Georgia and Alabama in October 1999. The final purchase price, after
adjustments, was $710 million. The Company received $225 million in cash, with
the balance $485 million in the form of installment notes.

The Company entered into a program to monetize the installment notes receivable.
The notes were sold to Timber Notes Holdings, a qualified special purpose entity
under the provisions of SFAS No. 125, for $430 million cash proceeds and a
residual interest in the notes. The transaction has been accounted for as a sale
under SFAS No. 125. The cash proceeds from the sale and the monetization
transactions were used to prepay borrowings under the JSC(U.S.) Credit
Agreement. The residual interest included in other assets was $37 million and
$33 million at December 31, 2000 and 1999, respectively. The key economic
assumption used in measuring the residual interest at the date of the
monetization was the rate at which the residual cash flows were discounted (9%).
At December 31, 2000, the sensitivity on the current fair value of the residual
cash flows to immediate 10% and 20% adverse changes in the assumed rate at which
residual cash flows were discounted (9%) was $2 million and $4 million,
respectively.

The gain of $407 million on the timberland sale and the related note
monetization program is included in other, net in the 1999 consolidated
statements of operations.


5.  Long-Term Debt

Long-term debt as of December 31 is as follows:


<TABLE>
<CAPTION>
                                                                         2000         1999
                                                                   ---------------------------
<S>                                                                  <C>           <C>
Bank Credit Facilities
Tranche A Term Loan (8.3% weighted average variable rate),
  payable in various installments through March 31, 2005...........   $   275     $   275
Tranche B Term Loan (10.1% weighted average variable rate),
  payable in various installments through March 31, 2006...........        65         115
Revolving Credit Facility (10.0% weighted average
  variable rate), due March 31, 2005...............................        17          50

Accounts Receivable Securitization Program Borrowings
Accounts receivable securitization program borrowings (6.6%
  weighted average variable rate), due in February 2002............       227         224

Senior Unsecured Notes
11.25% Series A unsecured senior notes, due May 1, 2004............       287         300
10.75% Series B unsecured senior notes, due May 1, 2002............       100         100
9.75% Senior Notes, due April 1, 2003..............................       500         500

Other Debt
Other (including obligations under capitalized leases
  of $27 million and $34 million)..................................        58          72
                                                                    ---------------------
Total debt.........................................................     1,529       1,636
Less current maturities............................................       (10)        (12)
                                                                    ---------------------
Long-term debt.....................................................   $ 1,519     $ 1,624
                                                                    ---------------------
</TABLE>

                                      31
<PAGE>

The amounts of total debt outstanding at December 31, 2000 maturing during the
next five years are as follows:

              2001.....................................  $    10
              2002.....................................      172
              2003.....................................      771
              2004.....................................      363
              2005.....................................      127
              Thereafter...............................       86

Bank Credit Facilities
JSC(U.S.) has a bank credit facility (the "JSC(U.S.) Credit Agreement")
consisting of a $550 million revolving credit facility ("Revolving Credit
Facility") of which up to $150 million may consist of letters of credit, and two
senior secured term loans (Tranche A and Tranche B) aggregating $340 million at
December 31, 2000. The JSC(U.S.) Credit Agreement was entered into in March
1998, and the net proceeds were used to repay the 1994 term loans and Revolving
Credit Facility. The write-off of related deferred debt issuance costs, totaling
$13 million (net of income tax benefits of $9 million) for 1998, is reflected in
the accompanying consolidated statements of operations as an extraordinary item.

A commitment fee of 0.375% per annum is assessed on the unused portion of the
Revolving Credit Facility. At December 31, 2000, the unused portion of this
facility, after giving consideration to outstanding letters of credit, was $498
million.

On March 22, 2000, JSC(U.S.) and its bank group amended the JSC(U.S.) Credit
Agreement to (i) permit the acquisition of St. Laurent Paperboard Inc. by SSCC
and (ii) approve the divestiture of the Oregon City newsprint mill.

On October 15, 1999, JSC(U.S.) and its bank group amended the JSC(U.S.) Credit
Agreement to (i) permit the sale of the timberlands and the Newberg newsprint
mill, (ii) permit the cash proceeds from these asset sales to be applied as
prepayments against the JSC(U.S.) Credit Agreement, (iii) permit certain
prepayments of other indebtedness, and (iv) ease certain quarterly financial
covenants for 1999 and 2000. The proceeds from the timberland sale and the
Newberg newsprint mill were used to reduce the balance of the Tranche A and
Tranche B term loans. The write-off of related deferred debt issuance costs,
totaling $10 million (net of income tax benefits of $6 million) for 1999, is
reflected in the accompanying consolidated statements of operations as an
extraordinary item.

The JSC(U.S.) Credit Agreement contains various covenants and restrictions
including, among other things, (i) limitations on dividends, redemptions and
repurchases of capital stock, (ii) limitations on the incurrence of
indebtedness, liens, leases and sale-leaseback transactions, (iii) limitations
on capital expenditures, and (iv) maintenance of certain financial covenants.
The JSC(U.S.) Credit Agreement also requires prepayments if JSC(U.S.) has excess
cash flows, as defined, or receives proceeds from certain asset sales, insurance
or incurrence of certain indebtedness. As a result of excess cash flow in 2000,
JSC(U.S.) is required to make a $59 million prepayment on the Tranche A term
loan prior to March 31, 2001. The Company intends to either fund the $59 million
prepayment with available borrowings under the Revolving Credit Facility or
amend the JSC(U.S.) Credit Agreement, and therefore it is classified as long
term debt.

The obligations under the JSC(U.S.) Credit Agreement are unconditionally
guaranteed by SSCC, the Company and its subsidiaries and are secured by a
security interest in substantially all of the assets of JSC(U.S.) and its
material subsidiaries, with the exception of cash, cash equivalents and trade
receivables. The JSC(U.S.) Credit Agreement is also secured by a pledge of all
the capital stock of the Company and each of its material subsidiaries and by
certain intercompany notes.

                                      32
<PAGE>

Accounts Receivable Securitization Program Borrowings
JSC(U.S.) has a $315 million accounts receivable securitization program (the
"Securitization Program") which provides for the sale of certain of the
Company's trade receivables to a wholly owned, bankruptcy remote, limited
purpose subsidiary, Jefferson Smurfit Finance Corporation ("JS Finance"). The
accounts receivable purchases are financed through the issuance of commercial
paper or through borrowings under a revolving liquidity facility and a $15
million term loan. Under the Securitization Program, JS Finance has granted a
security interest in all its assets, principally cash and cash equivalents and
trade accounts receivable. The Company has $88 million available for additional
borrowing at December 31, 2000, subject to eligible accounts receivable.

Under the current program, liquidation requirements were to begin in December
2001. On March 9, 2001, the Securitization Program was amended to (i) reduce the
borrowings available through the issuance of commercial paper or under the
Revolving Credit Facility from $300 million to $214 million and (ii) extend the
final maturity on these borrowings from February 2002 to February 2004. The $15
million term loan remains outstanding with a February 2002 maturity date,
bringing the total program size to $229 million. As a result, all debt under the
Securitization Program is classified as long term.

Senior Unsecured Notes
The 11.25% Series A unsecured senior notes are redeemable in whole or in part at
the option of JSC(U.S.), at any time on or after May 1, 2000 with a premium of
2.813% of the principal amount and after May 1, 2001 at par. The 10.75% Series B
unsecured senior notes and the 9.75% Senior Notes are not redeemable prior to
maturity. Holders of the JSC(U.S.) Senior Notes have the right, subject to
certain limitations, to require JSC(U.S.) to repurchase their securities at 101%
of the principal amount plus accrued and unpaid interest, upon the occurrence of
a change in control or, in certain events, from proceeds of major asset sales,
as defined.

The Senior Notes, which are unconditionally guaranteed on a senior basis by the
Company, rank pari passu with the JSC(U.S.) Credit Agreement and contain
business and financial covenants which are less restrictive than those contained
in the JSC(U.S.) Credit Agreement.

Other
Interest costs capitalized on construction projects in 2000, 1999 and 1998
totaled $4 million, $3 million and $2 million, respectively. Interest payments
on all debt instruments for 2000, 1999 and 1998 were $157 million, $214 million
and $184 million, respectively.


6.  Leases

The Company leases certain facilities and equipment for production, selling and
administrative purposes under operating leases. Future minimum rental
commitments (exclusive of real estate taxes and other expense) under operating
leases having initial or remaining noncancelable terms in excess of one year,
excluding lease commitments on closed facilities, are reflected below:

           2001.............................................  $  33
           2002.............................................     27
           2003.............................................     24
           2004.............................................     21
           2005.............................................     17
           Thereafter.......................................     40
                                                              -----
            Total minimum lease payments...................   $ 162
                                                              -----

                                      33
<PAGE>

Net rental expense for operating leases, including leases having a duration of
less than one year, was approximately $49 million, $50 million and $54 million
for 2000, 1999 and 1998, respectively.


7.  Income Taxes

Significant components of the Company's deferred tax assets and liabilities at
December 31 are as follows:


<TABLE>
<CAPTION>
                                                                              2000        1999
                                                                          --------------------
<S>                                                                       <C>           <C>
Deferred tax liabilities
  Property, plant and equipment and timberland...........................   $ (404)     $ (399)
  Inventory..............................................................      (27)        (20)
  Prepaid pension costs..................................................      (31)        (31)
  Timber installment sale................................................     (129)       (129)
  Other..................................................................     (109)        (82)

                                                                          --------------------
    Total deferred tax liabilities.......................................     (700)       (661)
                                                                          --------------------

Deferred tax assets
  Employee benefit plans.................................................       79          91
  Net operating loss, alternative minimum tax and tax credit
    carryforwards........................................................       79         148
  Minimum pension liability..............................................        2           2
  Restructuring..........................................................        7           7
  Other..................................................................       60          42
                                                                          --------------------
    Total deferred tax assets............................................      227         290
  Valuation allowance for deferred tax assets............................      (10)        (10)
                                                                          --------------------
    Net deferred tax assets..............................................      217         280
                                                                          --------------------

    Net deferred tax liabilities.........................................   $ (483)     $ (381)
                                                                          --------------------
</TABLE>

At December 31, 2000, the Company had approximately $51 million of net operating
loss carryforwards for U.S. federal income tax purposes that expire in 2018 and
2019, with a tax value of $18 million. Further, the Company had net operating
loss carryforwards for state purposes with a tax value of $20 million, which
expire from 2001 through 2020. A valuation allowance of $10 million has been
established for a portion of these deferred tax assets. The Company had
approximately $41 million of alternative minimum tax credit carryforwards for
U.S. federal income tax purposes, which are available indefinitely.

                                      34
<PAGE>

Benefit from (provision for) income taxes on income (loss) from continuing
operations before income taxes, extraordinary item and cumulative effect of
accounting change is as follows:

<TABLE>
<CAPTION>
                                                                              2000       1999     1998
                                                                           ----------------------------
<S>                                                                        <C>         <C>       <C>
Current
  Federal...............................................................    $  (6)     $ (10)    $   9l
  State and local.......................................................       (1)                    3
                                                                           ----------------------------
  Total current benefit (expense).......................................       (7)       (10)        12

Deferred
  Federal...............................................................      (78)      (147)        88
  State and local.......................................................      (14)       (29)         8
                                                                           ----------------------------
  Total deferred benefit (expense)......................................      (92)      (176)        96

                                                                           ----------------------------
  Total benefit from (provision for) income taxes.......................    $ (99)     $(186)    $  108
                                                                            ---------------------------
</TABLE>
The Company's benefit from (provision for) income taxes differed from the amount
computed by applying the statutory U.S. federal income tax rate to income (loss)
from continuing operations before income taxes, extraordinary item and
cumulative effect of accounting change as follows:

<TABLE>
<CAPTION>
                                                                              2000       1999     1998
                                                                           ----------------------------
<S>                                                                        <C>         <C>       <C>
U.S. federal income tax benefit (provision) at
  federal statutory rate................................................    $ (86)     $(162)    $   99
Permanent differences from applying purchase
  accounting............................................................       (2)        (3)        (3)
Other permanent differences.............................................       (1)        (2)        (2)
State income taxes, net of federal income tax effect....................      (10)       (19)       (12)
Effect of valuation allowances on deferred tax
  assets, net of federal benefit........................................                              1
Other...................................................................                              1
                                                                           ----------------------------
Total benefit from (provision for) income taxes.........................    $ (99)     $(186)      $108
                                                                           ----------------------------
</TABLE>

The Internal Revenue Service has examined the Company's tax returns for all
years through 1994, and the years have been closed through 1988. The years 1995
through 1998 are currently under examination. While the ultimate results of such
examination cannot be predicted with certainty, the Company's management
believes that the examination will not have a material adverse effect on its
consolidated financial condition or results of operations.

The Company made income tax payments of $30 million, $33 million and $16 million
in 2000, 1999 and 1998, respectively.


8.  Employee Benefit Plans

Defined Benefit Plans
The Company participates in the SSCC sponsored noncontributory defined benefit
pension plans covering substantially all employees. On December 31, 1998, the
defined benefit plans of the Company were merged with the domestic defined
benefit plans of Stone, and the assets of these plans are available to meet the
funding requirements of the combined plans. The Company intends to fund its
proportionate share of the future contributions based on the funded status of
the Company's plan determined on an actuarial basis. Therefore, the plan asset
information provided below is based on an actuarial estimate of

                                      35
<PAGE>

assets and liabilities, excluding the effect of the plan merger, in order to be
consistent with the presentation of the consolidated statements of operations
and the consolidated balance sheets.

The benefit obligation, fair value of plan assets and the under funded status of
the Stone domestic merged defined benefit plans at December 31, 2000 were $643
million, $431 million and $212 million, respectively.

Approximately 34% of SSCC's domestic pension plan assets at December 31, 2000
are invested in cash equivalents or debt securities, and 66% are invested in
equity securities. Equity securities at December 31, 2000 include 0.7 million
shares of SSCC common stock with a market value of approximately $11 million and
26 million shares of JS Group common stock having a market value of
approximately $52 million. Dividends paid on JS Group common stock during 2000
and 1999 were approximately $2 million in each year.

Postretirement Health Care and Life Insurance Benefits
The Company provides certain health care and life insurance benefits for all
salaried as well as certain hourly employees. The assumed health care cost trend
rate used in measuring the accumulated postretirement benefit obligation
("APBO") was 5.25% at December 31, 2000. The effect of a 1% increase in the
assumed health care cost trend rate would increase the APBO as of December 31,
2000 by $1 million and have an immaterial effect on the annual net periodic
postretirement benefit cost for 2000.

                                      36
<PAGE>

The following provides a reconciliation of benefit obligations, plan assets, and
funded status of the plans:

<TABLE>
<CAPTION>
                                                                            Defined Benefit         Postretirement
                                                                                 Plans                  Plans
                                                                         --------------------    ---------------------
                                                                            2000       1999        2000         1999
                                                                         --------------------    ---------------------
<S>                                                                      <C>         <C>         <C>         <C>
Change in benefit obligation:
Benefit obligation at January 1......................................    $   957     $1,011        $   94    $   105
Service cost.........................................................         18         21             1          2
Interest cost........................................................         75         69             7          7
Amendments...........................................................          4          5
Plan participants' contributions.....................................                                   4          4
Curtailments.........................................................         (1)                      (2)        (2)
Actuarial (gain) loss................................................         63        (90)            9         (7)
Benefits paid........................................................        (64)       (59)          (17)       (15)
                                                                         --------------------    ---------------------
Benefit obligation at December 31....................................    $ 1,052     $  957        $   96    $    94
                                                                         --------------------    ---------------------

Change in plan assets:
Fair value of plan assets at January 1...............................    $ 1,155     $1,008        $         $
Actual return on plan assets.........................................        (19)       205
Employer contributions...............................................          1          1            13         11
Plan participants' contributions.....................................                                   4          4
Benefits paid........................................................        (64)       (59)          (17)       (15)
                                                                         --------------------    ---------------------
Fair value of plan assets at December 31..............................   $ 1,073     $1,155        $         $
                                                                         --------------------    ---------------------

Over (under) funded status:                                              $    21     $  198        $   (96)  $   (94)
Unrecognized actuarial (gain) loss...................................          2       (189)             4        (3)
Unrecognized prior service cost......................................         36         40             (1)       (2)
Net transition asset.................................................         (1)        (6)
                                                                         --------------------    ---------------------
Net amount recognized................................................    $    58     $   43        $   (93)  $   (99)
                                                                         --------------------    ---------------------

Amounts recognized in the balance sheets:
Prepaid benefit cost................................................     $    88     $   71        $         $
Accrued benefit liability...........................................         (32)       (28)           (93)      (99)
Additional minimum liability........................................                     (3)
Intangible asset....................................................           2          3
                                                                         --------------------    ---------------------
Net amount recognized...............................................     $    58     $   43        $   (93)  $   (99)
                                                                         --------------------    ---------------------
</TABLE>

The weighted average assumptions used in the accounting for the defined benefit
plans and postretirement plans were:

<TABLE>
<CAPTION>
                                                                            Defined Benefit         Postretirement
                                                                                 Plans                  Plans
                                                                         --------------------    ---------------------
                                                                            2000       1999        2000         1999
                                                                         --------------------    ---------------------
<S>                                                                      <C>           <C>       <C>            <C>
Weighted average discount rate......................................        7.50%      8.00%         7.50%      8.00%
Rate of compensation increase.......................................        4.00%      4.50%          N/A        N/A
Expected return on assets...........................................        9.50%      9.50%          N/A        N/A
Health care cost trend on covered charges...........................         N/A        N/A          5.25%      6.50%
</TABLE>

                                      37
<PAGE>

The components of net pension expense for the defined benefit plans and the
components of the postretirement benefit costs follow:

<TABLE>
<CAPTION>
                                                            Defined Benefit Plans       Postretirement Plans
                                                     ------------------------------   --------------------------
                                                         2000     1999       1998      2000     1999      1998
                                                     ------------------------------   --------------------------
<S>                                                  <C>        <C>         <C>       <C>      <C>        <C>
Service cost..........................................  $  22   $   26      $  24      $       $  1       $  1
Interest cost.........................................     75       69         68         7       7          7
Expected return on plan assets. ......................    (99)     (91)       (85)
Amortization of transitional asset....................     (4)      (4)        (4)
Recognized actuarial loss (gain)......................     (8)       4          4
Curtailment cost......................................               6          2
                                                     ------------------------------   --------------------------
Net periodic benefit cost...........................   $  (14)  $   10      $   9      $  7    $  8       $  8
                                                     ------------------------------   --------------------------
</TABLE>

The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $35 million, $32 million and zero, respectively, as
of December 31, 2000 and $33 million, $31 million and zero as of December 31,
1999.

Savings Plans
The Company sponsors voluntary savings plans covering substantially all salaried
and certain hourly employees. The Company match is paid in SSCC common stock, up
to an annual maximum. The Company's expense for the savings plans totaled $9
million in each of 2000, 1999 and 1998.


9.  Discontinued Operations

During February 1999, the Company adopted a formal plan to sell the operating
assets of its subsidiary, Smurfit Newsprint Corporation ("SNC"). Accordingly,
SNC was accounted for as a discontinued operation beginning with the 1998
consolidated financial statements. SNC consisted of two newsprint mills in
Oregon. In November 1999, the Company sold its Newberg, Oregon, newsprint mill
for proceeds of approximately $211 million. Net gain on disposition of
discontinued operations of $4 million in 1999 included the realized gain on the
sale of the Newberg, Oregon newsprint mill, the estimated loss on the sale of
the Oregon City, Oregon, newsprint mill, actual results from the measurement
date through December 31, 1999 and the estimated losses on the Oregon City,
Oregon newsprint mill through the expected disposition date.

On May 9, 2000, the Company transferred ownership of the Oregon City, Oregon,
newsprint mill to a third party thereby completing its exit from the newsprint
business. No proceeds from the transfer were received. During the second quarter
of 2000, the Company recorded a $6 million after tax gain to reflect adjustments
to the previous estimates on disposition of discontinued operations.

SNC revenues were $43 million, $253 million and $324 million for 2000, 1999 and
1998, respectively. The net assets of SNC included in the accompanying
consolidated balance sheet as of December 31, 1999 consisted of the following:

                                                                    1999
                                                                  ----------

Inventories and current assets....................................  $ 34
Net property, plant and equipment.................................    48
Other assets......................................................    11
Accounts payable and other current liabilities....................   (94)
Other liabilities.................................................    (4)
                                                                  ----------
Net assets (liabilities) of discontinued operations...............  $ (5)
                                                                  ----------

                                      38
<PAGE>

10.  Employee Stock Options

Prior to the Merger, the Company's parent, SSCC, maintained the 1992 Jefferson
Smurfit Corporation stock option plan (the "1992 Plan") for selected employees
of the Company. The 1992 Plan included non-qualified stock options, issued at
prices equal to the fair market value of SSCC's common stock at the date of
grant, which expire upon the earlier of twelve years from the date of grant or
termination of employment, death or disability. Effective with the Merger, all
outstanding options became exercisable and fully vested.

In November 1998, SSCC adopted the 1998 Long-term Incentive Plan (the "1998
Plan") and reserved 8.5 million shares of SSCC common stock for non-qualified
stock options and performance awards. Certain employees of the Company are
covered under the 1998 Plan, as are certain employees of Stone. The options are
exercisable at a price equal to the fair market value of SSCC's common stock at
the date of the grant and vest eight years after the date of grant subject to
accelerations based upon the attainment of preestablished stock price targets.
The options expire ten years after the date of grant.

The Company and its parent have elected to continue to follow Accounting
Principles Board Opinion No. 25 to account for stock awards granted to
employees. If the Company adopted SFAS No. 123 to account for stock awards
granted to employees, the Company's net income for the three years in the period
ended December 31, 2000, based on a Black-Scholes option pricing method, would
not have been materially different. The effects of applying SFAS No. 123 as
described above may not be representative of the effects on reported income for
future years.

During the second quarter of 1999, the Company recorded a $26 million charge in
selling and administrative expenses, related to the cashless exercise of SSCC
stock options under the 1992 Plan. The charge was reflected in the consolidated
financial statements because the options were exercised by JSC(U.S.) employees.
No future stock option expense is expected.


11.  Related Party Transactions

Transactions with JS Group
Transactions with JS Group, a significant shareholder of the Company, its
subsidiaries and affiliated companies were as follows:

<TABLE>
<CAPTION>
                                                                         2000      1999     1998
                                                                      ----------------------------
<S>                                                                   <C>           <C>      <C>
Product sales.........................................................     49       $33      $39
Product and raw material purchases....................................     21        16       54
Management services income............................................      2         3        4
Charges from JS Group for services provided...........................      1         1
Charges to JS Group for costs pertaining to the Fernandina
  No. 2 paperboard machine through November 18, 1998..................                        50
Receivables at December 31............................................      3         1        5
Payables at December 31...............................................     10        13        4
</TABLE>

Product sales to and purchases from JS Group, its subsidiaries and affiliates
are consummated on terms generally similar to those prevailing with unrelated
parties.

                                      39
<PAGE>

The Company provides certain subsidiaries and affiliates of JS Group with
general management and elective management services under separate Management
Services Agreements. In consideration for general management services, the
Company is paid a fee up to 2% of the subsidiaries' or affiliates' gross sales.
In consideration for elective services, the Company is reimbursed for its direct
cost of providing such services.

On November 18, 1998, the Company purchased the No. 2 paperboard machine located
in the Company's Fernandina Beach, Florida, paperboard mill (the "Fernandina
Mill") for $175 million from an affiliate of JS Group. Until that date, the
Company and the affiliate were parties to an operating agreement whereby the
Company operated and managed the No. 2 paperboard machine. The Company was
compensated for its direct production and manufacturing costs and indirect
manufacturing, selling and administrative costs incurred for the entire
Fernandina Mill. The compensation was determined by applying various formulas
and agreed-upon amounts to the subject costs. The amounts reimbursed to the
Company are reflected as reductions of cost of goods sold and selling and
administrative expenses in the accompanying consolidated statements of
operations.

Transactions with Stone
Transactions with Stone after November 18, 1998 are included in related party
transactions. The Company sold and purchased containerboard from Stone,
primarily at market prices, as follows:

                                                        2000     1999     1998
                                                       -----------------------
     Product sales..................................    $387      $248     $14
     Product and raw material purchases.............     422       237       8
     Net receivables at December 31.................      24        28       4

Corporate shared expenses are allocated between the Company and Stone based on
an established formula using a weighted average rate based on net book value of
fixed assets, number of employees and sales. Net receivables are settled in
cash.

Transactions with SSCC
In connection with the Merger, a $300 million intercompany loan was made to
SSCC, which was contributed to Stone as additional paid-in capital. In addition,
a $36 million intercompany loan was made to SSCC to pay certain Merger costs.
These notes bear interest at the rate of 14.21% per annum, are payable
semi-annually on December 1 and June 1 of each year commencing June 1, 1999, and
have a maturity date of November 18, 2004.

On November 15, 2000, pursuant to an Agreement and Plan of Merger among SSCC,
SCC Merger Co. and Stone, approximately 4.6 million shares of $1.75 Series E
Preferred Stock of Stone (the "Stone Preferred Stock") were converted into
approximately 4.6 million shares of Series A Cumulative Exchangeable Redeemable
Convertible Preferred Stock of SSCC (the "SSCC Preferred Stock"). In addition, a
cash payment of $6.4425 per share, totaling approximately $30 million, was made
to the holders of the Stone Preferred Stock. The cash payment was equal to the
accrued and unpaid dividends on each share of Stone Preferred Stock less $0.12
per share to cover certain transaction related expenses.

The Company made a $30 million intercompany loan to SSCC to accommodate the
completion of the merger transaction. This note bears interest at the rate of
15.39% per annum, is payable on December 1 and June 1 of each year commencing on
June 1, 2001, and has a maturity date of November 18, 2004.

SSCC has the option, in lieu of paying accrued interest in cash, to pay the
accrued interest by adding the amount of accrued interest to the principal
amount of the notes. Interest income of $53 million, $48 million and $6 million
was recorded in 2000, 1999 and 1998, respectively.

                                      40
<PAGE>

The holders of the SSCC preferred stock are entitled to cumulative dividends of
$0.4375 per quarter, payable in cash except in certain circumstances, with the
first dividend paid on February 15, 2001. This dividend of approximately $2
million was funded by a dividend from JSC(U.S.) through the Company to SSCC.


12. Fair Value of Financial Instruments

The carrying values and fair values of the Company's financial instruments are
as follows:

<TABLE>
<CAPTION>
                                                                    2000                         1999
                                                        --------------------------------------------------------
                                                          Carrying        Fair          Carrying         Fair
                                                           Amount         Value          Amount          Value
                                                        --------------------------------------------------------
<S>                                                     <C>           <C>               <C>              <C>
Cash and cash equivalents............................   $   21        $   21            $   11           $   11
Notes receivable from SSCC...........................      439           439               364              364
Residual interest in timber notes....................       37            37                33               33
Long-term debt, including current maturities.........    1,529         1,533             1,636            1,664
</TABLE>

The carrying amount of cash equivalents approximates fair value because of the
short maturity of those instruments. The fair values of notes receivable are
based on discounted future cash flows. The fair value of the Company's debt is
estimated based on the quoted market prices for the same or similar issues or on
the current rates offered to the Company for debt of the same remaining
maturities. The fair value of the residual interest in timber notes is based on
discounted future cash flows.

13. Contingencies

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

The Company and SNC are parties to a Settlement Agreement to implement a
nationwide class action settlement of claims involving Cladwood(R), a composite
wood siding product manufactured by SNC that has been used primarily in the
construction of manufactured or mobile homes. In 1998, the Company recorded a
$30 million charge, including $20 million SNC paid into a settlement fund, and
additional amounts relating to administrative costs, plaintiffs' attorneys'
fees, class representative payments and other costs. Based on the number and
magnitude of the claims paid out of the settlement fund and the fact that SNC
received a return of $10 million from the settlement fund in exchange for
posting a letter of credit, the Company reduced its estimated loss contingency
by $10 million which was recorded as a reduction to selling and administrative
expenses in the 2000 financial statements.

                                      41
<PAGE>

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

14. Business Segment Information

In the fourth quarter of 2000, the Company reorganized its business segments.
The Boxboard and Folding Carton segment was renamed as the Consumer Packaging
segment. Certain operations previously included in the Specialty Packaging
segment were reassigned to the new Consumer Packaging segment while certain
operations remained in the Specialty Packaging segment. In addition, during
2000, corporate expenses previously allocated to business segments are no longer
allocated. The information for 1999 and 1998 has been restated from the prior
year in order to conform to the 2000 presentation.

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

The Company evaluates performance and allocates resources based on profit or
loss from operations before income taxes, interest expense, and other
non-operating gains and losses. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies except that the Company accounts for inventory on a FIFO
basis at the segment level compared to a LIFO basis at the consolidated level.
Intersegment sales and transfers are recorded at market prices. Intercompany
profit is eliminated at the corporate division level.

The Company's reportable segments are strategic business units that offer
different products. The reportable segments are each managed separately because
they manufacture distinct products. Other includes corporate related items and
one nonreportable segment, Specialty Packaging. Corporate related items include
goodwill, the elimination of intercompany assets and intercompany profit and
income and expense not allocated to reportable segments including corporate
expenses, restructuring charges, goodwill amortization, interest expense and the
adjustment to record inventory at LIFO.

In 1999, corporate related items included a $407 million gain on the timberland
sale and related note monetization program (See Note 4).

                                      42
<PAGE>

A summary by business segment follows:

<TABLE>
<CAPTION>
                                                         Container-
                                                          board &
                                                         Corrugated     Consumer      Recla-
                                                         Containers     Packaging     mation   Other       Total
                                                       -----------------------------------------------------------------
<S>                                                    <C>              <C>           <C>      <C>         <C>
Year ended December 31, 2000
Revenues from external customers....................      $2,033        $1,017        $605     $  212      $3,867
Intersegment revenues...............................          47            26         121          9         203
Depreciation, depletion and amortization............          61            29           3         26         119
Segment profit (loss)...............................         220            99          26       (100)        245
Total assets at December 31.........................       1,155           495          85        932       2,667
Capital expenditures................................          76            16           1         23         116

Year ended December 31, 1999
Revenues from external customers....................      $1,818        $  951        $452     $  192      $3,413
Intersegment revenues...............................          40            20         126          6         192
Depreciation, depletion and amortization............          68            28           3         24         123
Segment profit......................................         195            91          17        159         462
Total assets at December 31.........................       1,195           512         110        919       2,736
Capital expenditures................................          30            22           2         15          69

Year ended December 31, 1998
Revenues from external customers....................      $1,776         $ 912        $275     $  192      $3,155
Intersegment revenues...............................          39            22         132          5         198
Depreciation, depletion and amortization............          70            26           3         22         121
Segment profit (loss)...............................         135           103           4       (521)       (279)
Total assets at December 31.........................       1,410           512          78      1,174       3,174
Capital expenditures................................         208            31           6         20         265
</TABLE>

The following table presents net sales to external customers by country of
origin:

                                                2000    1999      1998
                                            --------------------------
United States..............................   $3,861   $3,406   $3,149
Foreign....................................        6        7        6
                                            --------------------------
  Total net sales..........................   $3,867   $3,413   $3,155
                                           ---------------------------

                                      43
<PAGE>

15.  Quarterly Results (Unaudited)

The following is a summary of the unaudited quarterly results of operations:

<TABLE>
<CAPTION>
                                                       First              Second        Third       Fourth
                                                      Quarter             Quarter      Quarter      Quarter
                                                    ---------------------------------------------------------
<S>                                                 <C>                  <C>           <C>          <C>
2000
Net sales.........................................         $940             $1,020          $969         $938
Gross profit......................................          136                170           152          159
Income from continuing operations
  before extraordinary item.......................           22                 43            33           48
Gain on disposition of discontinued
  operations......................................                               6
Extraordinary item................................                                                         (1)
Net income .......................................           22                 49            33           47

1999
Net sales.........................................         $758             $  816          $884         $955
Gross profit......................................           95                141           140          166
Income (loss) from continuing operations
  before extraordinary item.......................          (17)                (2)            9          286
Discontinued operations...........................            4                 (1)           (4)           3
Gain on disposition of discontinued
  operations......................................                                                          4
Extraordinary item................................                                                        (10)
Net income (loss).................................          (13)                (3)            5          283
</TABLE>

The effect of adopting EITF 00-10, "Accounting for Shipping and Handling Fees
and Costs," during the fourth quarter of 2000 was to increase net sales and cost
of goods sold from previously reported amounts in the first, second and third
quarters by $30 million, $32 million and $30 million, respectively.

                                      44
<PAGE>

                                   JSCE INC.
          SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                 (in millions)

<TABLE>
<CAPTION>
                    Column A                         Column B         Column C         Column D        Column E
--------------------------------------------------------------------------------------------------------------------
                                                                     Additions
                                                    Balance at       Charged to                     Balance at
                                                   Beginning of      Costs and        Deductions      End of
                   Description                        Period         Expenses          Describe       Period
--------------------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>              <C>            <C>
Allowance for doubtful accounts
and sales returns and allowances:
      Year ended December 31, 2000.............        $  9            $   6           $  6(a)           $  9
                                                  ------------------------------------------------------------------
      Year ended December 31, 1999.............        $  9            $   1           $  1(a)           $  9
                                                  ------------------------------------------------------------------
      Year ended December 31, 1998.............        $ 10            $   2           $  3(a)           $  9
                                                  ------------------------------------------------------------------


Restructuring:
      Year ended December 31, 2000.............        $ 29            $               $  6(b)           $ 23
                                                  ------------------------------------------------------------------
      Year ended December 31, 1999.............        $ 71            $  14           $ 56(b)           $ 29
                                                  ------------------------------------------------------------------
      Year ended December 31, 1998.............        $               $ 257           $186(b)           $ 71
                                                  ------------------------------------------------------------------
</TABLE>

(a)  Uncollectible amounts written off, net of recoveries.
(b)  Charges against the restructuring reserves and adjustment to 1998 exit
     liabilities.

                                      45
<PAGE>

ITEM  9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          -----------------------------------------------------------
          AND FINANCIAL DISCLOSURE
          ------------------------

None

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
          ---------------------------------------------------------------

(a)       (1) and (2) The list of Financial Statements and Financial Statement
          Schedules required by this item is included in Item 8.

          (3)  Exhibits

3.1       Certificate of Incorporation of JSCE Inc. ("JSCE") (incorporated by
          reference to Exhibit 3.1 to JSCE's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1994).

3.2       By-laws of JSCE (incorporated by reference to Exhibit 3.2 to JSCE's
          Annual Report on Form 10-K for the fiscal year ended December 31,
          1994).

Indentures and other debt instruments with respect to other long-term debt, none
of which exceeds 10 percent of the total assets of JSCE and its subsidiaries on
a consolidated basis, are not filed herewith. (The Registrant agrees to furnish
a copy of such documents to the Commission upon request).

4.1       Indenture for the Series A 1994 Senior Notes (incorporated by
          reference to Exhibit 4.1 to Smurfit-Stone Container Corporation's
          ("SSCC") Quarterly Report on Form 10-Q for the quarter ended March 31,
          1994).

4.2       Indenture for the Series B 1994 Senior Notes (incorporated by
          reference to Exhibit 4.2 to SSCC's Quarterly Report on Form 10-Q for
          the quarter ended March 31, 1994).

4.3       Indenture for the 1993 Senior Notes (incorporated by reference to
          Exhibit 4.4 to SSCC's Registration Statement on Form S-1 (File No. 33-
          75520)).

4.4       First Supplemental Indenture to the 1993 Senior Note Indenture
          (incorporated by reference to Exhibit 4.5 to SSCC's Registration
          Statement on Form S-1 (File No. 33-75520)).

10.1      Subscription Agreement among SSCC, Jefferson Smurfit Corporation
          (U.S.) ("JSC(U.S.)"), Container Corporation of America and Smurfit
          International BV ("SIBV") (incorporated by reference to Exhibit 10.4
          to SSCC's Quarterly Report on Form 10-Q for the quarter ended March
          31, 1994).

10.2*     JSC(U.S.) Deferred Compensation Plan, as amended (incorporated by
          reference to Exhibit 10.7 to SSCC's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1996).

10.3*     JSC(U.S.) Management Incentive Plan (incorporated by reference to
          Exhibit 10.10 to SSCC's Annual Report on Form 10-K for the fiscal year
          ended December 31, 1995).

10.4(a)*  Jefferson Smurfit Corporation Amended and Restated 1992 Stock Option
          Plan dated as of May 1, 1997 (incorporated by reference to Exhibit
          10.10 to SSCC's Annual Report on Form 10-K for the fiscal year ended
          December 31, 1997).
                                      46
<PAGE>

10.4(b)*   Amendment of the Jefferson Smurfit Corporation Amended and Restated
           1992 Stock Option Plan (incorporated by reference to Exhibit 10.3 to
           SSCC's Quarterly Report on Form 10-Q for the quarter ended September
           30, 1999).

10.5(a)    Amended and Restated Credit Agreement, dated as of November 18, 1998,
           among SSCC, JSCE, JSC(U.S.) and the financial institutions signatory
           thereto, The Chase Manhattan Bank and Bankers Trust Company, as
           senior managing agents, and The Chase Manhattan Bank, as
           administrative agent and collateral agent (incorporated by reference
           to Exhibit 10.6 to SSCC's Annual Report on Form 10-K for the fiscal
           year ended December 31, 1998).

10.5(b)    First Amendment of Amended and Restated Credit Agreement, dated as of
           June 30, 1999, among SSCC, JSCE, JSC(U.S.) and the financial
           institutions signatory thereto, The Chase Manhattan Bank and Bankers
           Trust Company, as senior managing agents, and The Chase Manhattan
           Bank, as administrative agent and collateral agent (incorporated by
           reference to Exhibit 10.1 to SSCC's Quarterly Report on Form 10-Q for
           quarter ended June 30, 1999).

10.5(c)    Second Amendment of Amended and Restated Credit Agreement, dated as
           of October 15, 1999, among SSCC, JSCE, JSC(U.S.) and the financial
           institutions signatory thereto, The Chase Manhattan Bank and Bankers
           Trust Company, as senior managing agents, and The Chase Manhattan
           Bank, as administrative agent and collateral agent (incorporated by
           reference to Exhibit 10.1 to SSCC's Quarterly Report on Form 10-Q for
           the quarter ended September 30, 1999).

10.5(d)    Third Amendment of Amended and Restated Credit Agreement, dated as of
           March 22, 2000, among SSCC, JSCE, JSC(U.S.) and the financial
           institutions signatory thereto, The Chase Manhattan Bank and Bankers
           Trust Company, as senior managing agents, and The Chase Manhattan
           Bank, as administrative agent and collateral agent (incorporated by
           reference to Exhibit 10.1 to SSCC's Quarterly Report on Form 10-Q for
           the quarter ended September 30, 2000).

10.5(e)    Fourth Amendment of Amended and Restated Credit Agreement, dated as
           of July 31, 2000, among SSCC, JSCE, JSC(U.S.) and the financial
           institutions signatory thereto, The Chase Manhattan Bank and Bankers
           Trust Company, as senior managing agents, and The Chase Manhattan
           Bank, as administrative agent and collateral agent banks party
           thereto (incorporated by reference to Exhibit 10.2 to SSCC's
           Quarterly Report on Form 10-Q for the quarter ended September 30,
           2000).

10.6(a)    Term Loan Agreement, dated as of February 23, 1995, among Jefferson
           Smurfit Finance Corporation ("JS Finance") and Bank Brussels Lambert,
           New York Branch (incorporated by reference to Exhibit 10.1 to SSCC's
           Quarterly Report on Form 10-Q for the quarter ended March 31, 1995).

10.6(b)    Depositary and Issuing and Paying Agent Agreement (Series A
           Commercial Paper), dated as of February 23, 1995 (incorporated by
           reference to Exhibit 10.2 to SSCC's Quarterly Report on Form 10-Q for
           the quarter ended March 31, 1995).

10.6(c)    Depositary and Issuing and Paying Agent Agreement (Series B
           Commercial Paper), dated as of February 23, 1995 (incorporated by
           reference to Exhibit 10.3 to SSCC's Quarterly Report on Form 10-Q for
           the quarter ended March 31, 1995).

10.6(d)    Receivables Purchase and Sale Agreement, dated as of February 23,
           1995, among JSC(U.S.), as Initial Servicer, and JS Finance, as
           Purchaser (incorporated by reference to Exhibit 10.4 to SSCC's
           Quarterly Report on Form 10-Q for the quarter ended March 31, 1995).

                                      47
<PAGE>

10.6(e)    Liquidity Agreement, dated as of February 23, 1995, among JS Finance,
           the Financial Institutions party thereto as Banks, Bankers Trust
           Company as Facility Agent and Bankers Trust Company as Collateral
           Agent (incorporated by reference to Exhibit 10.6 to SSCC's Quarterly
           Report on Form 10-Q for the quarter ended March 31, 1995).

10.6(f)    Commercial Paper Dealer Agreement, dated as of February 23, 1995,
           among BT Securities Corporation, Morgan Stanley & Co., JSC(U.S.) and
           JS Finance (incorporated by reference to Exhibit 10.7 to SSCC's
           Quarterly Report on Form 10-Q for the quarter ended March 31, 1995).

10.6(g)    Addendum, dated March 6, 1995, to Commercial Paper Dealer Agreement
           (incorporated by reference to Exhibit 10.8 to SSCC's Quarterly Report
           on Form 10-Q for the quarter ended March 31, 1995).

10.6(h)    First Omnibus Amendment, dated as of March 31, 1996, to the
           Receivables Purchase and Sale Agreement among JSC(U.S.), JS Finance
           and the Banks party thereto (incorporated by reference to Exhibit
           10.3 to SSCC's Quarterly Report on Form 10-Q for the quarter ended
           June 30, 1996).

10.6(i)    Affiliate Receivables Sale Agreement, dated as of March 31, 1996,
           between Smurfit Newsprint Corporation and SSCC (incorporated by
           reference to Exhibit 10.4 to SSCC's Quarterly Report on Form 10-Q for
           the quarter ended June 30, 1996).

10.6(j)    Amendment No. 2, dated as of August 19, 1997, to the Term Loan
           Agreement among JS Finance and Bank Brussels Lambert, New York Branch
           and JSC(U.S.) as Servicer (incorporated by reference to Exhibit
           10.12(j) to SSCC's Annual Report on Form 10-K for the fiscal year
           ended December 31, 1997).

10.6(k)    Amendment No. 2, dated as of August 19, 1997, to the Receivables
           Purchase and Sale Agreement among JSC(U.S.) as the Seller and
           Servicer, JS Finance as the Purchaser, Bankers Trust Company as
           Facility Agent and Bank Brussels Lambert, New York Branch as the Term
           Bank (incorporated by reference to Exhibit 10.12(k) to SSCC's Annual
           Report on Form 10-K for the fiscal year ended December 31, 1997).

10.6(l)    Amendment No. 2, dated as of August 19, 1997, to the Liquidity
           Agreement among JS Finance, Bankers Trust Company as Facility Agent,
           JSC(U.S.) as Servicer, Bank Brussels Lambert, New York Branch as Term
           Bank and the Financial Institutions party thereto as Banks
           (incorporated by reference to Exhibit 10.12(l) to SSCC's Annual
           Report on Form 10-K for the fiscal year ended December 31, 1997).

10.7*      Consulting Agreement, dated as of October 24, 1996, by and between
           James S. Terrill and JSC(U.S.) (incorporated by reference to Exhibit
           10.15 to SSCC's Annual Report on Form 10-K for the fiscal year ended
           December 31, 1996).

10.8       Registration Rights Agreement, dated as of May 10, 1998, among Morgan
           Stanley Leveraged Equity Fund ("MSLEF"), SIBV, SSCC and the other
           parties identified on the signature pages thereto (incorporated by
           reference to Exhibit 10(e) to SSCC's Registration Statement on Form
           S-4 (File No. 333-65431)).

10.9       Voting Agreement, dated as of May 10, 1998, as amended, among SIBV,
           MSLEF and Mr. Roger W. Stone (incorporated by reference to Exhibit
           10(f) to SSCC's Registration Statement on Form S-4 (File No. 333-
           65431)).

10.10(a)*  SSCC 1998 Long Term Incentive Plan (incorporated by reference to
           Exhibit 10.14 to SSCC's Annual Report on Form 10-K for the fiscal
           year ended December 31, 1998).

                                      48
<PAGE>

10.10(b)*  First Amendment of the SSCC 1998 Long Term Incentive Plan
           (incorporated by reference to Exhibit 10.2 to SSCC's Quarterly Report
           on Form 10-Q for the quarter ended September 30, 1999).

10.11*     Forms of Employment Security Agreements (incorporated by reference to
           Exhibit 10(h) to SSCC's Registration Statement on Form S-4 (File No.
           333-65431)).

10.12(a)   Purchase and Sale Agreement, effective as of July 28, 1999, between
           Rayonier, Inc. and JSC(U.S.) (incorporated by reference to Exhibit
           2.1 to JSCE's Current Report on Form 8-K dated October 25, 1999).

10.12(b)   First Amendment to Purchase and Sale Agreement, dated October 21,
           1999, between Rayonier, Inc. and JSC(U.S.) (incorporated by reference
           to Exhibit 2.2 to JSCE's Current Report on Form 8-K dated October 25,
           1999).

10.13*     Employment Agreement of Ray M. Curran (incorporated by reference to
           Exhibit 10.27 to SSCC's Annual Report on Form 10-K for the fiscal
           year ended December 31, 1999).

10.14*     Employment Agreement of Patrick J. Moore (incorporated by reference
           to Exhibit 10.27 to SSCC's Annual Report on Form 10-K for the fiscal
           year ended December 31, 1999).

10.15*     Employment agreement for Joseph J. Gurandiano (incorporated by
           reference to Exhibit 10.1 to SSCC's Quarterly Report of Form 10-Q for
           the quarter ended June 30, 2000).

10.16*     Severance benefits agreement for Joseph J. Gurandiano (incorporated
           by reference to Exhibit 10.2 to SSCC's Quarterly Report of Form 10-Q
           for the quarter ended June 30, 2000).

10.17*     Employment Agreement of William N. Wandmacher (incorporated by
           reference to Exhibit 10.31 to SSCC's Annual Report on Form 10-K for
           the fiscal year ended December 31, 2000).

10.18*     Employment Agreement of F. Scott Macfarlane (incorporated by
           reference to Exhibit 10.32 to SSCC's Annual Report on Form 10-K for
           the fiscal year ended December 31, 2000).

24.1       Power of Attorney.


*Indicates a management contract or compensation plan or arrangement.

(b) Report on Form 8-K.

None

                                      49
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

DATE   March  13, 2001                                   JSCE, Inc.
       -----------------------                 ----------------------------
                                                        (Registrant)


                                      BY       /s/ Patrick J. Moore
                                               ----------------------------
                                                   Patrick J. Moore
                                      Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities and on the date indicated.

<TABLE>
<CAPTION>
       SIGNATURE                                      TITLE                                               DATE
       ---------                                      -----                                               ----
<S>                                     <C>                                                        <C>
                           *             President and Chief Executive Officer                     March 13, 2001
----------------------------
Ray M. Curran                            and Director (Principal Executive Officer)

/s/ Patrick J. Moore                     Vice President and Chief Financial Officer and            March 13, 2001
----------------------------
Patrick J. Moore                         Director (Principal Financial Officer)


/s/ Paul K. Kaufmann                     Vice President and Corporate Controller                   March 13, 2001
---------------------------
Paul K. Kaufmann                         (Principal Accounting Officer)



* By /s/ Patrick J. Moore  ,             pursuant to Power of Attorney filed as a part of the
----------------------------
Patrick J. Moore                         Form 10-K.
</TABLE>

                                      50