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

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FORM 10-Q

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

For Quarter Ended March 31, 2002

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

Commission File Number 1-3439

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STONE CONTAINER CORPORATION(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

36-2041256(IRS Employer Identification No.)150 North Michigan Avenue, Chicago, Illinois(Address of principal executive offices)

60601(Zip Code)


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

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

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

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PART IFINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

STONE CONTAINER CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

|Three months ended March 31, (In millions) |                                                                         | 2002                                              |       | 2001  |   
|------------------------------------------ | ----------------------------------------------------------------------- | ------------------------------------------------- | ----- | ----- | --
|Net sales                                  |                                                                         | $                                                 | 1,323 |       | $ 
|Costs and expenses                         |                                                                         |                                                   |       |       |   
|                                           | Cost of goods sold                                                      |                                                   |       | 1,121 |   
|                                           | Selling and administrative expenses                                     |                                                   |       | 128   |   
|                                           | Restructuring charges                                                   |                                                   |       | 6     |   
|                                           | Gain on sale of assets                                                  |                                                   |       |       |   
|                                           |                                                                         |                                                   |       |       |   
|                                           |                                                                         | Income from operations                            |       |       | 68
|Other income (expense)                     |                                                                         |                                                   |       |       |   
|                                           | Interest expense, net                                                   |                                                   |       | (68   | ) 
|                                           | Equity income of affiliates                                             |                                                   |       | 3     |   
|                                           | Other, net                                                              |                                                   |       |       |   
|                                           |                                                                         |                                                   |       |       |   
|                                           |                                                                         | Income before income taxes and extraordinary item |       |       | 3 
|Provision for income taxes                 |                                                                         |                                                   |       |       |   
|                                           |                                                                         |                                                   |       |       |   
|                                           | Income before extraordinary item                                        |                                                   |       | 3     |   
|Extraordinary item                         |                                                                         |                                                   |       |       |   
|                                           | Loss from early extinguishment of debt, net of income tax benefit of $2 |                                                   |       |       |   
|                                           |                                                                         |                                                   |       |       |   
|                                           |                                                                         | Net income                                        |       | $     | 3 
|                                           |                                                                         |                                                   |       |       |   

See
notes to consolidated financial statements.

1

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STONE CONTAINER CORPORATION

CONSOLIDATED BALANCE SHEETS

|(In millions, except share data)                    |                                                                                         | March 31,
2002                     |                            | December 31,
2001         |    
|--------------------------------------------------- | --------------------------------------------------------------------------------------- | ---------------------------------- | -------------------------- | ------------------------- | ---
|
|Assets                                              |                                                                                        
|Current assets                                      |                                                                                         |                                    |                            |                           |    
|                                                    | Cash and cash equivalents                                                               |                                    | $                          | 12                        |    
|                                                    | Receivables, less allowances of $36 in 2002 and $43 in 2001                             |                                    |                            | 343                       |    
|                                                    | Inventories                                                                             |                                    |                            |                           |    
|                                                    |                                                                                         | Work-in-process and finished goods |                            |                           | 146
|                                                    |                                                                                         | Materials and supplies             |                            |                           | 344
|                                                    |                                                                                         |                                    |                            |                           |    
|                                                    |                                                                                         |                                    | 490                        |                           |    
|                                                    | Deferred income taxes                                                                   |                                    |                            | 136                       |    
|                                                    | Prepaid expenses and other current assets                                               |                                    |                            | 45                        |    
|                                                    |                                                                                         |                                    |                            |                           |    
|                                                    |                                                                                         |                                    | Total current assets       |                           |    
|Net property, plant and equipment                   |                                                                                         |                                    | 4,095                      |                           |    
|Timberland, less timber depletion                   |                                                                                         |                                    | 44                         |                           |    
|Goodwill                                            |                                                                                         |                                    | 3,106                      |                           |    
|Investment in equity of non-consolidated affiliates |                                                                                         |                                    | 130                        |                           |    
|Other assets                                        |                                                                                         |                                    | 209                        |                           |    
|                                                    |                                                                                         |                                    |                            |                           |    
|                                                    |                                                                                         | $                                  | 8,610                      |                           | $  
|                                                    |                                                                                         |                                    |                            |                           |    
|Liabilities and Stockholder's Equity                |                                                                                        
|Current liabilities                                 |                                                                                         |                                    |                            |                           |    
|                                                    | Current maturities of long-term debt                                                    |                                    | $                          | 29                        |    
|                                                    | Accounts payable                                                                        |                                    |                            | 331                       |    
|                                                    | Accrued compensation and payroll taxes                                                  |                                    |                            | 102                       |    
|                                                    | Interest payable                                                                        |                                    |                            | 38                        |    
|                                                    | Other current liabilities                                                               |                                    |                            | 141                       |    
|                                                    |                                                                                         |                                    |                            |                           |    
|                                                    |                                                                                         |                                    |                            | Total current liabilities |    
|Long-term debt, less current maturities             |                                                                                         |                                    | 3,559                      |                           |    
|Other long-term liabilities                         |                                                                                         |                                    | 742                        |                           |    
|Deferred income taxes                               |                                                                                         |                                    | 708                        |                           |    
|Stockholder's equity j                              |                                                                                         |                                    |                            |                           |    
|                                                    | Common stock, par value $.01 per share; 1,000 shares authorized, issued and outstanding |                                    |                            |                           |    
|                                                    | Additional paid in capital                                                              |                                    |                            | 3,016                     |    
|                                                    | Retained earnings                                                                       |                                    |                            | 15                        |    
|                                                    | Accumulated other comprehensive income (loss)                                           |                                    |                            | (71                       | )  
|                                                    |                                                                                         |                                    |                            |                           |    
|                                                    |                                                                                         |                                    | Total stockholder's equity |                           |    
|                                                    |                                                                                         |                                    |                            |                           |    
|                                                    |                                                                                         | $                                  | 8,610                      |                           | $  
|                                                    |                                                                                         |                                    |                            |                           |    

See
notes to consolidated financial statements.

2

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STONE CONTAINER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

|Three months ended March 31, (In millions)       |                                                                                              | 2002                                                                                        |                                                | 2001 |    
|------------------------------------------------ | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ---------------------------------------------- | ---- | ---
|Cash flows from operating activities             |                                                                                              |                                                                                             |                                                |      |    
|                                                 | Net income                                                                                   |                                                                                             | $                                              | 3    |    
|                                                 | Adjustments to reconcile net income to net cash provided by (used for) operating activities: |                                                                                             |                                                |      |    
|                                                 |                                                                                              | Extraordinary loss from early extinguishment of debt                                        |                                                |      |    
|                                                 |                                                                                              | Depreciation and amortization                                                               |                                                |      | 69 
|                                                 |                                                                                              | Amortization of deferred debt issuance costs                                                |                                                |      | 2  
|                                                 |                                                                                              | Deferred income taxes                                                                       |                                                |      | (5 
|                                                 |                                                                                              | Non-cash employee benefits                                                                  |                                                |      |    
|                                                 |                                                                                              | Non-cash restructuring charge                                                               |                                                |      | 1  
|                                                 |                                                                                              | Foreign currency transaction gains                                                          |                                                |      |    
|                                                 |                                                                                              | Equity income of affiliates                                                                 |                                                |      | (3 
|                                                 |                                                                                              | Gain on sale of assets                                                                      |                                                |      |    
|                                                 |                                                                                              | Change in current assets and liabilities, net of effects from acquisitions and dispositions |                                                |      |    
|                                                 |                                                                                              |                                                                                             | Receivables                                    |      |    
|                                                 |                                                                                              |                                                                                             | Inventories                                    |      |    
|                                                 |                                                                                              |                                                                                             | Prepaid expenses and other current assets      |      |    
|                                                 |                                                                                              |                                                                                             | Accounts payable and other current liabilities |      |    
|                                                 |                                                                                              |                                                                                             | Interest payable                               |      |    
|                                                 |                                                                                              |                                                                                             | Income taxes                                   |      |    
|                                                 |                                                                                              | Other, net                                                                                  |                                                |      | (10
|                                                 |                                                                                              |                                                                                             |                                                |      |    
|                                                 | Net cash provided by (used for) operating activities                                         |                                                                                             |                                                | (38  | )  
|                                                 |                                                                                              |                                                                                             |                                                |      |    
|Cash flows from investing activities             |                                                                                              |                                                                                             |                                                |      |    
|                                                 | Expenditures for property, plant and equipment                                               |                                                                                             |                                                | (16  | )  
|                                                 | Proceeds from sales of assets                                                                |                                                                                             |                                                | 2    |    
|                                                 |                                                                                              |                                                                                             |                                                |      |    
|                                                 | Net cash used for investing activities                                                       |                                                                                             |                                                | (14  | )  
|                                                 |                                                                                              |                                                                                             |                                                |      |    
|Cash flows from financing activities             |                                                                                              |                                                                                             |                                                |      |    
|                                                 | Proceeds from long-term debt                                                                 |                                                                                             |                                                |      |    
|                                                 | Net borrowings (repayments) of debt                                                          |                                                                                             |                                                | 49   |    
|                                                 | Debt repurchase premiums                                                                     |                                                                                             |                                                |      |    
|                                                 | Deferred debt issuance costs                                                                 |                                                                                             |                                                |      |    
|                                                 |                                                                                              |                                                                                             |                                                |      |    
|                                                 | Net cash provided by financing activities                                                    |                                                                                             |                                                | 49   |    
|                                                 |                                                                                              |                                                                                             |                                                |      |    
|                                                 | Effect of exchange rate changes on cash                                                      |                                                                                             |                                                |      |    
|                                                 |                                                                                              |                                                                                             |                                                |      |    
|Increase (decrease) in cash and cash equivalents |                                                                                              |                                                                                             | (3                                             | )    |    
|Cash and cash equivalents                        |                                                                                              |                                                                                             |                                                |      |    
|                                                 | Beginning of period                                                                          |                                                                                             |                                                | 15   |    
|                                                 |                                                                                              |                                                                                             |                                                |      |    
|                                                 | End of period                                                                                |                                                                                             | $                                              | 12   |    
|                                                 |                                                                                              |                                                                                             |                                                |      |    

See
notes to consolidated financial statements.

3

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STONE CONTAINER CORPORATION

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular
amounts in millions)

1. Significant Accounting Policies

The accompanying consolidated financial statements and notes thereto of Stone Container Corporation ("Stone" or the "Company") have been prepared in accordance
with the instructions to Form 10-Q and reflect all adjustments which management believes necessary (which include only normal recurring accruals) to present fairly the financial
position, results of operations and cash flows. These statements, however, do not include all information and footnotes necessary for a complete presentation of financial position, results of
operations and cash flows in conformity with generally accepted accounting principles. Interim results may not necessarily be indicative of results which may be expected for any other interim period
or for the year as a whole. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001, filed March 13, 2002, with the Securities Exchange Commission.

The
Company is a wholly-owned subsidiary of Smurfit-Stone Container Corporation ("SSCC"). On November 18, 1998, Stone was merged with a wholly-owned subsidiary of SSCC. On
May 31, 2000, the Company acquired (the "St. Laurent Acquisition") St. Laurent Paperboard, Inc. ("St. Laurent").

2. Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

3. Restructuring and Exit Liabilities

The Company recorded a restructuring charge of $6 million during the first quarter of 2002 related to the closure of two converting facilities. The assets
of these closed operations were adjusted to the estimated fair value less cost to sell resulting in a $1 million non-cash write-down. These shutdowns resulted in
approximately 100 employees being terminated. The sales and operating losses of these facilities in 2001 were $7 million and $4 million, respectively.

At
December 31, 2001, the Company had $37 million of exit liabilities related to the restructuring of operations in connection with the merger and the St. Laurent
Acquisition. During the first quarter, the Company had $1 million of cash disbursements related to these exit liabilities.

4. Long-Term Debt

In April 2002, the Company redeemed $125 million in aggregate principal of the 12.58% rating adjustable unsecured senior notes due August 1,
2016 and paid $7 million in call premiums and other expenses from the borrowings under the revolving credit facility. An extraordinary loss of $3 million (net of tax of
$2 million) will be recorded in the second quarter due to the early extinguishment of debt.

5. Gain on Sale of Assets

The Company completed the sale of its Bathurst, New Brunswick, Canada, sawmill during the first quarter of 2001, resulting in a gain on the sale of assets of
$6 million.

4

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6. Non-Consolidated Affiliates

The Company has several non-consolidated affiliates that are engaged in paper and packaging operations in North America and Europe. Investments in
majority-owned affiliates where control does not exist and non majority-owned affiliates are accounted for under the equity method.

The
Company's significant non-consolidated affiliate at March 31, 2002 is Smurfit-MBI, a Canadian corrugated container company, in which the Company owns a
50% interest. The remaining 50% interest is indirectly owned by Jefferson Smurfit Group plc, a significant shareholder of SSCC.
Smurfit-MBI had net sales of $102 million and $108 million for the three months ended March 31, 2002 and 2001, respectively.

Combined
summarized financial information for all of the Company's non-consolidated affiliates that are accounted for under the equity method of accounting is presented
below:

Three months ended
March 31,2002

2001Results of operationsNet sales

$
141

$
143Cost of sales


122


124Income before income taxes, minority interest and extraordinary charges


8


6Net income


8


6


7. Derivative Instruments and Hedging Activities

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS
No. 137 and SFAS No. 138 requires that all derivatives be recorded on the consolidated balance sheets at fair value. Changes in the fair value of derivatives not qualifying as hedges are
recorded each period in earnings. Changes in the fair value of derivatives qualifying as hedges are either offset against the change in fair value of the hedged item through earnings or recognized in
Other Comprehensive Income ("OCI") until the hedged item is recognized in earnings, depending on the nature of the hedge. The ineffective portion of the change in fair value of all derivatives is
recognized in earnings. Hedges related to anticipated transactions are designated and documented at hedge inception as cash flow hedges and evaluated for hedge effectiveness quarterly.

The
Company's derivative instruments and hedging activities relate to minimizing exposures to fluctuations in the price of commodities used in its operations and the movement in foreign
currency exchange rates.

Commodity Future Contracts

The Company uses exchange traded futures contracts to manage fluctuations in cash flows resulting from commodity price risk in the procurement of natural gas. The
objective is to fix the price of a portion of the Company's forecasted purchases of natural gas used in the manufacturing process. The changes in the market value of such contracts have historically
been, and are expected to continue to be, highly effective at offsetting changes in price of the hedged item. As of March 31, 2002, the maximum length of time over which the Company is hedging
its exposure to the variability in future cash flows associated with natural gas forecasted transactions is approximately nine months. For the period ended March 31, 2002, the Company
reclassified a $3 million loss from OCI to cost of goods sold when the hedged items were recognized. The fair value of the Company's futures contracts at March 31, 2002 is a
$2 million loss included in other current liabilities.

For
the period ended March 31, 2002, the Company recorded a $1 million loss in cost of goods sold on settled commodity future contracts, related to the ineffective portion
of hedges and contracts not qualifying as hedges.

5

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Foreign Currency Forward Contracts

The Company enters into foreign currency forward contracts with financial institutions to purchase Canadian dollars, primarily to protect against currency
exchange risk associated with expected future cash flows. Contracts typically have maturities of approximately one year. The fair value of the Company's foreign currency forward contracts at
March 31, 2002 is a $3 million loss included in other current liabilities. The change in fair value of these contacts is recorded in OCI until the underlying transaction is recorded.

The
cumulative deferred hedge loss on all commodity and foreign currency contracts is $3 million (net of tax of $2 million) at March 31, 2002. The Company expects to
reclassify $3 million into earnings during the next twelve months.

8. Comprehensive Income (Loss)

Comprehensive income (loss) is as follows:

Three months ended
March 31,2002

2001Net income

$
3

$
8Other comprehensive income (loss), net of tax:Deferred hedge loss


(4
)

(1
)Foreign currency translation adjustment


4Comprehensive income

$
3

$
7


9. Goodwill Accounting

Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 requires that goodwill no
longer be amortized, but instead tested for impairment at least annually. The Company has completed the required transitional impairment test as of January 1, 2002 and found no impairment of
goodwill. On an ongoing basis (absent any impairment indicators), we expect to perform our impairment tests during the fourth quarter.

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

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

As
of January 1, 2002, goodwill of $3,106 million (net of $245 million of amortization) was attributable to our segments as follows: $2,780 million for
Containerboard and Corrugated Containers, $122 million for International and $204 million for Other. During the first quarter of 2002, no goodwill was acquired, impaired, or written off.

6

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10. Business Segment Information

The Company has two reportable segments: (1) Containerboard and Corrugated Containers and (2) International. 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 International segment is primarily composed
of the Company's containerboard mills and corrugating facilities located in Europe.

The
Company's North American reportable segments are strategic business units that offer different products, and each is managed separately because they manufacture distinct products.
The International segment is managed separately because it has different customers, and its operations are based in markets outside of the North American market. Other includes one
non-reportable segment, Consumer Packaging, and corporate related items which include the elimination of intercompany profit and income and expense not allocated to reportable segments
including corporate expenses, restructuring charges, goodwill amortization in 2001, interest expense and the adjustment to record inventory at LIFO. On January 1, 2002, the Company combined the
Consumer Packaging segment with the Specialty Packaging segment.

A
summary by business segment follows:

|Three months ended March 31, |                                  | Container-
board &
Corrugated
Containers |   | International |  | Other |     | Total
|---------------------------- | -------------------------------- | ---------------------------------------- | - | ------------- |  | ----- | --- | -----
|                             | 2002                             |                                          |   |               |  |       |     |      
|                             | Revenues from external customers |                                          | $ | 1,025         |  | $     | 144 |      
|                             | Intersegment revenues            |                                          |   | 30            |  |       |     |      
|                             | Segment profit (loss)            |                                          |   | 70            |  |       | 10  |      
|                             | 2001                             |                                          |   |               |  |       |     |      
|                             | Revenues from external customers |                                          | $ | 1,203         |  | $     | 155 |      
|                             | Intersegment revenues            |                                          |   | 34            |  |       |     |      
|                             | Segment profit (loss)            |                                          |   | 126           |  |       | 15  |      

11. Contingencies

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

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

7

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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.

12. Prospective Accounting Standards

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143
establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived assets. This statement is effective for fiscal years beginning after June 15, 2002. We are currently assessing the
impact of this new standard.

8

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

FORWARD-LOOKING STATEMENTS

Some information included in this report may contain forward-looking statements within the meaning of Section 21 E of the Securities Exchange Act of 1934,
as amended. Although we believe that, in making any such statements, our expectations are based on reasonable assumptions, any such statement may be influenced by factors that could cause actual
outcomes and results to be materially different from those projected. When used in this document, the words "anticipates," "believes," "expects," "intends" and similar expressions as they relate to
Stone Container Corporation or its management, are intended to identify such forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. There are
important factors that could cause actual results to differ materially from those in forward-looking statements, certain of which are beyond our control. These factors, risks and uncertainties include
the following:



Our
actual results, performance or achievements 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.

9

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RESULTS OF OPERATIONS

First Quarter 2002 Compared to First Quarter 2001

|                                                  |                  | Three months ended March 31, |      
|------------------------------------------------- | ---------------- | ---------------------------- | -----
|
|
|
|Containerboard and corrugated containers          |                  | $                            | 1,025
|International                                     |                  |                              | 144  
|Other operations                                  |                  |                              | 154  
|                                                  |                  |                              |      
|                                                  | Total operations |                              | $    
|                                                  |                  |                              |      
|Restructuring charges                             |                  |                              |      
|Gain on sale of assets                            |                  |                              |      
|Interest expense, net                             |                  |                              |      
|Corporate expenses and other                      |                  |                              |      
|                                                  |                  |                              |      
|Income before income taxes and extraordinary item |                  |                              |      
|                                                  |                  |                              |      

Consolidated
net sales of $1.3 billion in 2002 decreased by 13% compared to 2001. Weak market conditions led to lower sales prices and reduced shipments for most
of our major products. The increase (decrease) in net sales for each of our segments is summarized in the chart below:

|                            |       | Container-
board &
Corrugated
Containers |      | International |   | Other
Operations |     | Total |    
|--------------------------- | ----- | ---------------------------------------- | ---- | ------------- | - | ---------------- | --- | ----- | ---
|
|Sales price and product mix |       | $                                        | (124 | )             | $ | (14              | )   | $     | (4 
|Sales volume                |       |                                          | (37  | )             |   | 3                |     |       | (17
|Acquisitions                |       |                                          |      |               |   |                  |     |       | 20 
|Closed or sold facilities   |       |                                          | (17  | )             |   |                  |     |       |    
|                            |       |                                          |      |               |   |                  |     |       |    
|                            | Total |                                          | $    | (178          | ) | $                | (11 | )     | $  
|                            |       |                                          |      |               |   |                  |     |       |    

Income
before income taxes and extraordinary item in 2002 was $3 million, a decrease of $31 million compared to 2001. The decrease was due primarily to the
decline in earnings of our operating segments, particularly in the Containerboard and Corrugated Containers segment. Lower interest expense and the elimination of goodwill amortization partially
offset the decline in earnings of our segments.

Amortization
of goodwill ceased on January 1, 2002, when we adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets".
Goodwill amortization for the three months ended March 31, 2001 was $21 million. We performed our transitional impairment test for each of our reporting units, as required by SFAS
No. 142, during the first quarter of 2002. Under SFAS No. 142, an impairment is recognized when a reporting unit's carrying amount of goodwill exceeds its implied fair value. Based upon
the results of our transitional impairment test the carrying amount of our goodwill as of January 1, 2002 was not impaired. We determined the fair value of our reporting units based upon
discounted cash flow models supported by recent acquisitions within our industry and various other valuation techniques.

Consolidated
cost of goods sold decreased due primarily to the lower sales volume. In addition, energy cost was lower by $27 million and the elimination of goodwill amortization
reduced cost by $21 million. Cost of goods sold as a percent of net sales increased to 85% in 2002 from 84% in 2001 due primarily to the lower average sales prices.

10

---

Selling
and administrative expenses were comparable to last year. Selling and administrative expense as a percent of net sales increased to 9.7% in 2002 from 8.4% in 2001 due primarily
to the lower average sales prices.

During
2002, we recorded a restructuring charge of $6 million related to the permanent shutdown of two converting facilities.

Interest
expense, net decreased $26 million due to the favorable impacts of $14 million from lower interest rates and $12 million from lower average borrowings. Our
overall average effective interest rate in 2002 was lower than 2001 by 1.9%.

The
effective income tax rate for the first quarter of 2002 decreased compared the same period in the prior year, primarily the result of discontinuing non-deductible
goodwill amortization upon the adoption of SFAS No. 142.

Containerboard and Corrugated Containers Segment

Net sales decreased by 15% due primarily to lower average sales prices for containerboard, corrugated containers and market pulp and lower sales volume for
containerboard and corrugated containers. The weak market conditions experienced during 2001continued into the first quarter of 2002. We continued to take market related downtime in order to maintain
a lower level of inventory. On average, corrugated container sales prices decreased by 7% and linerboard sales prices were lower by 9%. The average sales price of kraft paper decreased by 11%. The
average sales price for market pulp decreased by 28%.

Production
of containerboard and kraft decreased by 2% and 20%, respectively, due to lower demand. We incurred approximately 219,000 tons of containerboard market related downtime in
2002. Our North America shipments of corrugated containers decreased by 3%. Our production of market pulp increased by 32% compared to last year due primarily to a lower level of market related
downtime in 2002. Solid bleach sulfate production was comparable to last year.

Profits
decreased by $56 million due primarily to the lower average sales prices. Profits were favorably impacted by lower energy cost in the first quarter of 2002 compared to
last year. Cost of goods sold as a percent of net sales increased to 84% for 2002 compared to 82% for 2001 due primarily to the lower average sales prices.

International Segment

Net sales decreased by 7% and profit decreased by $5 million. The decrease in net sales was due to lower average sales prices for corrugated containers and
containerboard. Profits were unfavorably impacted by the lower average sales prices for containerboard. Cost of goods sold as a percent of net sales increased to 86% for 2002 compared to 84% for 2001
due primarily to the lower average sales prices.

Other Operations

On January 1, 2002, we combined the Consumer Packaging operations with the Specialty Packaging operations. Net sales decreased 1% compared to last year due
primarily to lower sales volume and lower average sales prices. The decrease in net sales was substantially offset by the acquisitions of a multiwall bag packaging facility and a flexible packaging
facility. Profits decreased by $1 million due primarily to the lower sales volume and lower average sales prices.

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Statistical Data

|                                             |                        | Three months ended
March 31,
|-------------------------------------------- | ---------------------- | ----------------------------
|
|
|Mill production                              |                        |                             
|                                             | Containerboard         |                             
|                                             | Kraft paper            |                             
|                                             | Market pulp            |                             
|                                             | Solid bleached sulfate |                             
|                                             | Coated boxboard        |                             
|Corrugated containers sold (billion sq. ft.) |                        | 15.7                        
|Multiwall bags sold (million bags)           |                        | 271                         

RESTRUCTURING AND EXIT LIABILITIES

We recorded a restructuring charge of $6 million during the first quarter of 2002 related to the closure of two converting facilities. The assets of these
closed operations were adjusted to the estimated fair value less cost to sell resulting in a $1 million non-cash write-down. The cash portion of the restructuring
charge consists of approximately $4 million in severance costs to be paid over the remaining nine months of 2002 and $1 million in other costs. These shutdowns resulted in approximately
100 employees being terminated.

At
December 31, 2001, we had $37 million of exit liabilities related primarily to the restructuring of operations in connection with the merger with Smurfit-Stone, the
acquisition of St. Laurent Paperboard Inc. and our restructuring activities. During the first quarter, we incurred cash expenditures of $1 million for these exit liabilities. Through
March 31, 2002, we have incurred approximately $207 million (84%) of the planned cash expenditures to close facilities, pay severance cost and pay other exit liabilities. The remaining
cash expenditures in connection with our restructuring activities will continue to be funded through operations as originally planned.

LIQUIDITY AND CAPITAL RESOURCES

General

Cash used for operating activities in the three months ended March 31, 2002 totaled $38 million compared to cash provided by operating activities of
$22 million in the same period in 2001. In 2002, we had additional cash provided from new borrowings totaling $49 million and asset sales of $2 million. Cash used for investing
activities in the first quarter of 2002 included $16 million for expenditures for property, plant and equipment.

We
expect internally generated cash flows, available borrowing capacity under our credit agreements and future financing activities will be sufficient for the next several years to meet
our obligations, including debt service, expenditures relating to environmental compliance and other capital expenditures. Scheduled debt payments for the remainder of 2002 and for 2003 are
$16 million and $470 million, respectively, with varying amounts thereafter. We are exploring a number of options to repay or refinance these debt maturities. We have historically had
good access to capital markets and expect to be able to repay or refinance these debt maturities before their maturity dates. Although we believe we will have access to the capital markets in the
future, these markets are volatile and we cannot predict the condition of the markets or the timing of any related transactions. Access to the capital markets may be limited or unavailable due to an
unpredictable material adverse event unrelated to our operational or financial performance. In such an event, we would explore additional options, including, but not limited to, the sale or
monetization of assets.

We
intend to hold capital expenditures for 2002 significantly below our anticipated annual depreciation level of $291 million. As of March 31, 2002, we had authorized
commitments for capital expenditures of $85

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million,
including $32 million for environmental projects, $20 million to maintain competitiveness and $33 million for upgrades, modernization and expansion.

We
expect to use any excess cash flows provided by operations to make further debt reductions. As of March 31, 2002, prior to giving consideration to the subsequent transaction
discussed in financing activities below, we and Smurfit-Stone Container Canada Inc. collectively had $474 million of unused borrowing capacity under our credit agreements.

Financing Activities

On April 19, 2002, we redeemed our 12.58% Rating Adjustable Unsecured Senior Notes due August 1, 2016 aggregating $125 million and paid
$7 million in call premiums and other expenses from the proceeds of borrowings under the revolving credit facility. An extraordinary loss of $3 million (net of tax of $2 million)
will be recorded in the second quarter due to the early extinguishment of debt.

The
obligations under our credit agreement, which provide for our revolving credit facility and our Tranche C, Tranche D, Tranche E and Tranche F term loans, are unconditionally
guaranteed by certain of our subsidiaries, other than subsidiaries acquired or created in connection with the St. Laurent acquisition. The obligations under our credit agreement are secured by a
security interest in substantially all of our assets and our U.S. subsidiaries, other than the assets acquired in the St. Laurent transaction, and 65% of the stock of Smurfit-Stone Container
Canada Inc. The security interest under our credit agreement excludes cash, cash equivalents, certain trade receivables, four paper mills and the land and buildings of the corrugated container
facilities. The Tranche G term loan under the Stone Container/Smurfit-Stone Container Canada Inc. credit agreement is unconditionally guaranteed by the U.S. subsidiaries acquired or created in
connection with the St. Laurent acquisition and is secured by a security interest in substantially all of the U.S. assets acquired in the St. Laurent acquisition. The Tranche H term loan and revolving
credit facility provided to Smurfit-Stone Container Canada Inc. under the Stone Container/Smurfit-Stone Container Canada Inc. credit agreement are unconditionally guaranteed by Stone
Container and the U.S. and Canadian subsidiaries acquired or created in connection with the St. Laurent acquisition and are secured by a security interest in substantially all of the U.S. and Canadian
assets acquired in the St. Laurent acquisition.

The
credit agreements contain various covenants and restrictions including, among other things, (i) limitations on dividends, redemptions and repurchases of capital stock,
(ii) limitations on the incurrence of indebtedness, liens, leases and sale-leaseback transactions, (iii) limitations on capital expenditures, and (iv) maintenance of
certain financial covenants. The credit agreements also require prepayments of the term loans from excess cash flow, as defined, and proceeds from certain asset sales, insurance, and incurrence of
certain indebtedness. We were required to pay $38 million in March 2002 related to our excess cash flows in 2001. The loan restrictions, together with our highly leveraged position,
could restrict corporate activities, including our ability to respond to market conditions, to provide for unanticipated capital expenditures or to take advantage of business opportunities. We believe
the likelihood of our breaching the debt covenants in 2002 is remote absent any material adverse event affecting the U.S. economy as a whole. We also believe that if a material adverse event would
affect us, our lenders' would provide us waivers if necessary. However, our expectations of future operating results and continued compliance with our debt covenants cannot be assured and we cannot
control our lenders' actions. If our debt is placed in default, we would experience a material adverse impact on our financial condition.

PROSPECTIVE ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143
establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal
obligations associated with the retirement of tangible long-lived assets. This statement is effective for fiscal years beginning after June 15, 2002. We are currently assessing the
impact of this new standard.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Interest Rate Risk

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

Commodity Price Risk

We periodically enter into exchange traded futures contracts to manage fluctuations in cash flows resulting from commodity price risk in the procurement of
natural gas. As of March 31, 2002, we had futures contracts to hedge approximately 25% to 30% of our expected natural gas requirements for the months of April 2002 through
October 2002. Our objective is to fix the price of a portion of our
forecasted purchases of natural gas used in the manufacturing process. The change in energy cost discussed in Part 1, Item 2 -Management's Discussion and Analysis of Financial Condition and
Results of Operations included the impact of the natural gas futures contracts. See Note 7 of the Notes to Consolidated Financial Statements.

Foreign Currency Risk

Our principal foreign exchange exposures are the Canadian dollar and the euro. The functional currency for the majority of our foreign operations is the
applicable local currency except for the operations in Canada, which is the U.S. dollar. Our investments in foreign subsidiaries with a functional currency other than the U.S. dollar are not hedged.

We
periodically enter into foreign exchange forward contracts with financial institutions to purchase Canadian dollars in order to protect against currency exchange risk associated with
expected future cash flows. Contracts typically have maturities of approximately one year or less. As of March 31, 2002, we had Canadian dollar forward purchase contracts to hedge generally 40%
to 60% of our Canadian dollar requirements for the months of April 2002 through February 2003.

The
exchange rate for the Canadian dollar and the euro as of March 31, 2002 compared to December 31, 2001 weakened against the U.S. dollar by 0.1% and 2.3%, respectively.
We recognized foreign currency transaction gains of none for the first quarter of 2002 and $4 million for the same period last year.

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PART IIOTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

In September 1997, we received a Notice of Violation and a Compliance Order from the United States Environmental Protection Agency (EPA) alleging
non-compliance with air emissions limitations for the smelt dissolving tank at our Hopewell, Virginia mill and for failure to comply with New Source Performance Standards applicable to
certain other equipment at the mill. In cooperation with the EPA, we responded to information requests, conducted tests and took measures to ensure continued
compliance with applicable emission limits. In December 1997 and November 1998, we received additional requests from the EPA for information about past capital projects at the mill. In
April 1999, the EPA issued a Notice of Violation alleging that we "modified" the recovery boiler and increased nitrogen oxide emissions without obtaining a required construction permit. We
responded to this notice and indicated the EPA's allegations were without merit. We entered into a tolling agreement with the EPA that deferred any further prosecution of this matter until at least
January 17, 2003. Upon expiration of the tolling agreement, the EPA may bring suit against us.

ITEM 2.        CHANGES IN SECURITIES

None

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.        OTHER INFORMATION

None

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

None

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

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Signatures

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

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

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