<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                        FORM 10-Q FINANCIAL INFORMATION*

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

                   For the quarterly period ended JULY 1, 2001
                                  ------------

                                       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: 33-88496*

                               S.D. WARREN COMPANY
             (Exact name of registrant as specified in its charter)

Pennsylvania                                                         23-2366983
-------------------------------------------------------------------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

225 Franklin Street, Boston, Massachusetts                             02110
-------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)

                                 (617) 423-7300
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes / / No / / Not Applicable /X*/

-------------------------------------------------------------------------------
*This report is being voluntarily filed with the Securities and Exchange
Commission (the "Commission") pursuant to the registrant's contractual
obligations to file with the Commission all financial information that would be
required to be filed on a Form 10-Q. The registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

NOTE REGARDING FORWARD-LOOKING STATEMENTS

The Company wishes to caution readers that this Report on Form 10-Q for S.D.
Warren Company and subsidiaries (the "Company") contains certain
"forward-looking statements" as that term is defined under the Private
Securities Litigation Reform Act of 1995. The words "believe," "anticipate,"
"intend," "estimate," "plan," "assume," and other similar expressions which are
predictions of or indicate future events and future trends which do not relate
to historical matters identify forward-looking statements. Reliance should not
be placed on forward-looking statements because they involve known and unknown
risks, uncertainties and other factors which are in some cases beyond the
control of the Company and may cause the actual results, performance or
achievements of the Company to differ materially from anticipated future
results, performance or achievements expressed or implied by such
forward-looking statements. Certain factors that may cause such differences
include, but are not limited to the following: (a) increased competition from
either domestic or foreign paper producers, including increases in competitive
capacity through construction of new mills or conversion of older facilities to
produce competitive products, (b) variations in demand for the Company's
products, (c) changes in the cost or availability of the raw materials used by
the Company, particularly market pulp and wood, and energy, (d) costs of
compliance with new environmental laws and regulations, (e) decisions by the
Company to make a significant acquisition or a significant increase in
production capacity, (f) competitive pricing pressures for the Company's
products, (g) unanticipated manufacturing disruptions, and (h) changes in
environmental, tax and other laws and regulations. These and other factors that
might cause differences between actual and anticipated results, performance, and
achievements are discussed in greater detail in this Report on Form 10-Q. See
also "Market Overview" under Part I, Item 2, Management's Discussion and
Analysis of Results of Operations and Financial Condition.

                                       1
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                            PAGE NO.
<S>                                                                                                         <C>
PART I - FINANCIAL INFORMATION

   ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      Condensed Consolidated Statements of Operations for the three and nine months ended
         June 28, 2000 and July 1, 2001 ..................................................................... 3, 4

      Condensed Consolidated Balance Sheets at September 27, 2000 and July 1, 2001 ............................. 5

      Condensed Consolidated Statements of Cash Flows for the nine months ended June 28, 2000
         and July 1, 2001 ...................................................................................... 6

      Notes to Unaudited Condensed Consolidated Financial Statements............................................. 7

   ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION................ 14

   ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................................... 20

PART II - OTHER INFORMATION..................................................................................... 21

      Item 1. Legal Proceedings................................................................................. 21

      Item 2. Changes in Securities............................................................................. 21

      Item 3. Default upon Senior Securities.................................................................... 21

      Item 4. Submission of Matters to a Vote of Security Holders............................................... 21

      Item 5. Other Information................................................................................. 21

      Item 6. Exhibits and Reports on Form 8-K.................................................................. 21

   SIGNATURE.................................................................................................... 22
</TABLE>

                                       2
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                            (IN MILLIONS, UNAUDITED)

<TABLE>
<CAPTION>
                                                                    THREE MONTHS                      THREE MONTHS
                                                                       ENDED                             ENDED
                                                                   JUNE 28, 2000                      JULY 1, 2001
                                                             ---------------------------       ---------------------------
<S>                                                          <C>                               <C>
Net sales                                                                       $ 379.6                           $ 331.4
Cost of goods sold                                                                296.8                             302.2
                                                             ---------------------------       ---------------------------
Gross profit                                                                       82.8                              29.2
Selling, general and administrative expense                                        39.4                              43.8
Restructuring and other charges                                                       -                             164.5
                                                             ---------------------------       ---------------------------
Income/(Loss) from operations                                                      43.4                            (179.1)
Other income, net                                                                   2.4                               1.2
Interest expense                                                                   13.8                              10.6
                                                             ---------------------------       ---------------------------
Income/(Loss) before income taxes                                                  32.0                            (188.5)
Income tax expense/(benefit)                                                       12.7                             (74.5)
                                                             ---------------------------       ---------------------------
Net income/(loss) applicable to common stockholder                               $ 19.3                          $ (114.0)
                                                             ===========================       ===========================
</TABLE>

      See accompanying notes to unaudited condensed consolidated financial
                                  statements.

                                       3
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                            (IN MILLIONS, UNAUDITED)

<TABLE>
<CAPTION>
                                                                 NINE MONTHS                       NINE MONTHS
                                                                    ENDED                             ENDED
                                                                JUNE 28, 2000                      JULY 1, 2001
                                                          ---------------------------       ---------------------------
<S>                                                       <C>                               <C>
Net sales                                                                  $ 1,128.3                         $ 1,086.0
Cost of goods sold                                                             886.8                             949.2
                                                          ---------------------------       ---------------------------
Gross profit                                                                   241.5                             136.8
Selling, general and administrative expense                                    116.1                             121.9
Restructuring and other charges                                                    -                             164.5
                                                          ---------------------------       ---------------------------
Income/(Loss) from operations                                                  125.4                            (149.6)
Other income, net                                                                5.7                               5.9
Interest expense                                                                46.0                              33.7
                                                          ---------------------------       ---------------------------
Income/(Loss) before income taxes                                               85.1                            (177.4)
Income tax expense/(benefit)                                                    33.8                             (70.1)
                                                          ---------------------------       ---------------------------
Income before extraordinary items                                               51.3                            (107.3)
Extraordinary items, net of tax                                                (10.6)                                -
                                                          ---------------------------       ---------------------------
Net income/(loss) applicable to common stockholder                            $ 40.7                          $ (107.3)
                                                          ===========================       ===========================
</TABLE>

      See accompanying notes to unaudited condensed consolidated financial
                                   statements

                                       4
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (IN MILLIONS, EXCEPT FOR SHARE DATA)

<TABLE>
<CAPTION>

                                                                                       SEPTEMBER 27,           JULY 1,
                                                                                           2000                  2001
                                                                                                             (UNAUDITED)
                                                                                    --------------------  -------------------
<S>                                                                                 <C>                   <C>
                                              ASSETS
Current Assets:
        Cash and cash equivalents                                                                $ 39.5               $ 30.6
        Trade accounts receivable, net                                                             74.7                 29.5
        Other receivables                                                                          18.2                 15.2
        Inventories, net                                                                          210.1                204.8
        Deferred income taxes                                                                      12.3                 52.5
        Other current assets                                                                       19.6                 42.8
                                                                                    --------------------  -------------------
             Total current assets                                                                 374.4                375.4
Plant assets, net                                                                                 977.1                901.4
Goodwill, net                                                                                      75.0                 64.6
Deferred financing fees, net                                                                       12.9                 11.0
Other assets, net                                                                                  33.0                 35.3
                                                                                    --------------------  -------------------
              Total assets                                                                    $ 1,472.4            $ 1,387.7
                                                                                    ====================  ===================

                                                  LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
        Current maturities of long-term debt                                                     $ 14.8               $ 14.6
        Accounts payable                                                                          155.1                122.2
        Accrued and other current liabilities                                                     110.3                141.0
                                                                                    --------------------  -------------------
              Total current liabilities                                                           280.2                277.8
                                                                                    --------------------  -------------------
Long-term debt:
        Term loans                                                                                211.2                219.3
        Exchange debentures                                                                       134.0                134.6
        Revenue bonds                                                                             106.9                106.2
                                                                                    --------------------  -------------------
              Total long-term debt                                                                452.1                460.1
Deferred income taxes                                                                             129.0                118.2
Other liabilities                                                                                 120.3                148.1
                                                                                    --------------------  -------------------
              Total liabilities                                                                   981.6              1,004.2
                                                                                    --------------------  -------------------
Stockholder's equity:
        Common stock ($.01 par value; 1,000 shares authorized; 100 shares
          issued and outstanding)                                                                     -                    -
        Capital in excess of par value                                                            321.4                321.4
        Retained earnings                                                                         169.4                 62.1
                                                                                    --------------------  -------------------
              Total stockholder's equity                                                          490.8                383.5
                                                                                    --------------------  -------------------
              Total liabilities and stockholder's equity                                      $ 1,472.4            $ 1,387.7
                                                                                    ====================  ===================
</TABLE>

      See accompanying notes to unaudited condensed consolidated financial
                                   statements

                                       5
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (IN MILLIONS, UNAUDITED)

<TABLE>
<CAPTION>
                                                                                    NINE MONTHS ENDED
                                                                           ---------------------------------
                                                                                 JUNE 28,           JULY 1,
                                                                                   2000              2001
                                                                           --------------   ----------------
<S>                                                                        <C>              <C>
Cash Flows from Operating Activities:
      Net income/(Loss)                                                           $ 40.7           $ (107.3)
      Adjustments to reconcile net income to net cash provided by
          operating activities:
          Depreciation and amortization                                             74.4               74.0
          Deferred income taxes                                                     13.1              (51.0)
          Non-cash extraordinary items                                              17.5                  -
          Other non-cash items                                                       0.2                0.6
          Restructuring and other related charges                                      -              186.3
      Changes in assets and liabilities:
             Trade and other accounts receivable, net                                2.9               40.7
             Inventories, net                                                      (58.1)             (12.4)
             Accounts payable, accrued and other current liabilities                (1.2)             (45.9)
             Other assets and liabilities                                           15.4              (13.5)
                                                                           --------------   ----------------
                Net cash provided by operating activities                          104.9               71.5
                                                                           --------------   ----------------
Cash Flows from Investing Activities:
      Investment in plant assets                                                   (48.1)             (87.6)
                                                                           --------------   ----------------
                Net cash used in investing activities                              (48.1)             (87.6)
                                                                           --------------   ----------------
Cash Flows from Financing Activities:
      Repayments of short-term borrowings                                              -               (7.8)
      Proceeds from long-term borrowings                                           195.0               40.0
      Repayments of long-term debt, including premiums paid                       (302.1)             (25.0)
                                                                           --------------   ----------------
          Net cash  provided by (used in) financing activities                    (107.1)               7.2
                                                                           --------------   ----------------
Net change in cash and cash equivalents                                            (50.3)              (8.9)
                                                                           --------------   ----------------
Cash and cash equivalents:
      Beginning of period                                                           73.8               39.5
                                                                           --------------   ----------------
      End of period                                                               $ 23.5             $ 30.6
                                                                           --------------   ----------------
Supplemental Cash Flow Information:
      Cash paid during the period for:
          Interest                                                                $ 66.8             $ 42.2
                                                                           ==============   ================
          Income taxes                                                             $ 4.1                $ -
                                                                           ==============   ================
</TABLE>

      See accompanying notes to unaudited condensed consolidated financial
                                   statements

                                       6

<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                             FORM 10-Q, JULY 1, 2001

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements include
the accounts of S.D. Warren Company and its subsidiaries, doing business as
Sappi Fine Paper North America ("SFPNA" or the "Company"). Intercompany balances
and transactions have been eliminated in the preparation of the accompanying
unaudited condensed consolidated financial statements.

The Company is a direct wholly owned subsidiary of SDW Holdings Corporation
("Holdings"). Holdings is an indirect wholly owned subsidiary of Sappi Limited
("Sappi").

BUSINESS

The Company manufactures printing, publishing and specialty papers and has pulp
operations vertically integrated with certain of its manufacturing facilities.
The Company currently operates four paper mills with total annual production
capacity of approximately 1.5 million tons of paper. The Company also owns a
sheeting facility in Allentown, Pennsylvania, with annual sheeting capacity of
approximately 100,000 tons, and has other sheeting capabilities located at its
Muskegon, Michigan mill (205,000 tons annually) and Mobile, Alabama mill
(144,000 tons annually). On May 15, 2001, the Company announced that it had
finalized its decision to exit the uncoated business and to close the Mobile,
Alabama paper mill (see Note 4). The Company also operates several regional
distribution facilities. Together these represent the Company's single line of
business.

CONTROL BY SAPPI

The Company is a wholly owned subsidiary of Holdings. On March 30, 2000, Sappi
acquired through an indirect wholly-owned subsidiary the 24.93% equity interest
in Holdings previously held by Heritage Springer Limited, a British Virgin
Islands company. Sappi now indirectly owns 100% of the issued and outstanding
common stock of Holdings.

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting of normal recurring
adjustments, necessary for the fair presentation of the Company's financial
position and results of operations. The accompanying unaudited condensed
consolidated financial statements should be read in conjunction with the audited
financial statements included in the Company's Annual Report on Form 10-K for
the fiscal year ended September 27, 2000. The unaudited condensed consolidated
results of operations for the three and nine months ended July 1, 2001 are not
necessarily indicative of results that could be expected for a full year.

COMPREHENSIVE INCOME

The Company's only component of comprehensive income is Net Income.

                                       7
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

RECLASSIFICATIONS

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

NOTE 2. ACCOUNTING PRONOUNCEMENTS

In September 2000, the Financial Accounting Standards Board, ("FASB"), issued
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities-a
replacement of FASB Statement No. 125"("SFAS No. 140"). This statement replaces
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This statement revises the standard for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but carries over most of SFAS No.
125's provisions without consideration. The accounting requirements of SFAS No.
140 are effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001, and must be
applied prospectively. The disclosures related to securitization transactions
are required for fiscal years ending after December 15, 2000, and comparative
disclosures for prior periods are not required. The Company has adopted SFAS No.
140 in accounting and reporting for all transfers and servicing of securitized
trade receivables occurring after March 31, 2001. The implementation of this
statement did not have a material effect on the Company's consolidated financial
statements. (see Note 9).

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
141, "Business Combinations"("SFAS No. 141"). SFAS No. 141 addresses financial
accounting and reporting for business combinations and amends or supercedes a
number of interpretations concerning business combinations. SFAS No. 141
requires companies to use the purchase method of accounting for all business
combinations, whereas previous interpretations provided for the use of another
method (pooling of interests method) if certain criteria were met. This
statement also amends the recognition policies of intangible assets and goodwill
and provides for additional disclosure requirements for business combinations.
The provisions for this statement apply to all business combinations initiated
after June 30, 2001.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets"("SFAS No. 142"). This statement
supercedes APB Opinion No. 17, "Intangible Assets"("APB No. 17") and addresses
financial accounting and reporting for intangible assets, but not those acquired
in a business combination at acquisition. SFAS No. 142 addresses financial
accounting and reporting of goodwill and other intangible assets subsequent to
their acquisition, assigning a definite or indefinite useful life to these
assets. Goodwill and other intangible assets having an indefinite useful life
will not be amortized, but rather tested at least annually for impairment. It
also provides guidance on how to define, measure and record impairment losses on
goodwill and other intangible assets and provides for additional disclosures
regarding these assets in years subsequent to their acquisition. The provisions
for this statement are required to be applied for fiscal years beginning after
December 15, 2001, although earlier adoption is permitted. The Company has not
completed its evaluation of SFAS No. 142 and has not yet determined its effect
on its consolidated financial statements. Amortization of goodwill for the nine
months ended July 1, 2001 was $2.9 million.

                                       8
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

NOTE 3. RELATED PARTY TRANSACTIONS

The Company sells products to certain Sappi subsidiaries (Sappi Europe, Sappi
UK, Sappi South Africa, Specialty Pulp Services, and U.S. Paper). These
subsidiaries then resell the Company's products to external customers at market
prices and remit the proceeds from such sales to the Company, net of a 5% sales
commission. Net of commissions, the Company shipped $30.8 million and $92.1
million to certain Sappi subsidiaries for the three and nine months ended July
1, 2001, respectively. For the same periods in the prior fiscal year, the
Company shipped $37.6 million and $105.6 million net of commissions, to these
Sappi subsidiaries, respectively. At July 1, 2001 and September 27, 2000,
interaffiliate trade and non-trade receivables totaled $26.6 million and $35.6
million, respectively.

The Company also imports products from certain affiliates (Sappi UK, Hannover
Papier and KNP Leykam) for sale to the Company's North American customers. The
Company resells these products at market prices and remits the proceeds, net of
a 5% sales commission, to the Sappi affiliates. Net of commissions, the Company
imported approximately $24.8 million and $78.9 million of products from these
Sappi affiliates for the three and nine months ended July 1, 2001 and $25.1
million and $74.0 million for the three and nine months ended June 28, 2000,
respectively. Accounts payable at July 1, 2001 and September 27, 2000, included
$38.4 million and $28.3 million, respectively, due to subsidiaries of Sappi.

In addition to the above, the Company has contracted through a management
services agreement with Sappi Fine Paper Plc ("SFP") to provide management
advisory services. The aggregate fee paid by the Company is limited to an annual
amount of $1.0 million. The aggregate fees charged to the Company by SFP were
$2.5 million and $7.6 million for the three and nine months ended July 1, 2001,
respectively, and $2.3 million and $6.8 million for the three and nine months
ended June 28, 2000, respectively. The accompanying condensed consolidated
balance sheets at July 1, 2001 and September 27, 2000 include accrued management
advisory service fees of $21.0 million and $14.4 million, respectively.

NOTE 4. RESTRUCTURING AND OTHER CHARGES

On May 15, 2001, the Company announced that it had finalized its decision to
exit the uncoated paper business in the United States and close the Mobile,
Alabama paper mill. As of July 1, 2001, the Company has permanently shut one
paper machine and will permanently shut the other two paper machines at the mill
over the next several months and cease all operations at the Mobile site.

The Company has recorded a charge to earnings of $186.3 million for the
impairment losses and write-downs of certain operating assets and severance and
other costs to exit the uncoated business. Of this amount, approximately $17.7
million represented lower of cost or market inventory provisions and $4.1
million of reserves for trade accounts receivable as a result of the decision to
close the Mobile mill. These amounts have been included in the condensed
consolidated statement of operations as components of Cost of goods sold and
Selling, general and administrative expense, respectively, and components of
Inventories, net and Trade accounts receivable, net, respectively, in the
accompanying condensed consolidated balance sheets at July 1, 2001.

                                       9
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

The remaining charge to earnings of $164.5 million has been included under the
caption "Restructuring and other charges" in the condensed consolidated
statement of operations. This charge is comprised of the following; (1) $101.1
million primarily to write assets down to their estimated salvage value,
including $7.6 million of unamortized goodwill attributable to the Mobile mill,
(2) $30.5 million of severance and benefits costs covering the termination of
583 employees, and (3) other exit costs of $32.9 million, primarily related to
lease and contract terminations. The accompanying condensed consolidated balance
sheets at July 1, 2001 include $47.2 million and $15.9 million, respectively, of
severance and benefits costs and other exit costs recorded as "Accrued and other
current liabilities" and "Other liabilities".

As of July 1, 2001, the Company has paid $0.3 million of severance costs and 126
employees have been terminated. Excluding restructuring charges, the Mobile mill
had operating revenues of $59.6 million and $191.8 million for the three and
nine month periods ending July 1, 2001, respectively and pre-tax operating
losses of $4.9 million and $29.2 million for the three and nine month periods
ending July 1, 2001, respectively.

NOTE 5. INVENTORIES, NET (IN MILLIONS)

<TABLE>
<CAPTION>
                                           SEPTEMBER 27, 2000        JULY 1, 2001
                                           ------------------        ------------
<S>                                        <C>                       <C>
Finished products                               $94.0                  $103.3
Work in process                                  37.5                    27.6
Pulp, logs and pulpwood                          37.4                    28.9
Maintenance parts and other supplies             41.2                    45.0
                                               ------                  ------
                                               $210.1                  $204.8
                                               ======                  ======
</TABLE>

NOTE 6. ENVIRONMENTAL AND SAFETY MATTERS

The Company is subject to a wide variety of environmental laws and regulations
relating to, among other matters, air emissions, wastewater discharges past and
present landfill operations and hazardous waste management. These laws include
the Federal Clean Air Act, the Clean Water Act, the Resource Conservation and
Recovery Act and their respective state counterparts. The Company will continue
to incur significant capital and operating expenditures to maintain compliance
with applicable federal and state environmental laws. These expenditures include
costs of compliance with federal worker safety laws, landfill expansions and
wastewater treatment system upgrades.

In 1995, the Company, as one of several industrial plaintiffs, initiated
litigation in state court against the County of Muskegon (the "County")
challenging an Ordinance governing the County's industrial wastewater
pretreatment program. The lawsuit challenged, among other things, the treatment
capacity availability and local effluent limit provisions of the Ordinance. In
1996, the state trial court ruled substantially in favor of the Company. In
1998, a state appeals court affirmed the lower court's ruling. However, in
February 1999, the County passed a similar ordinance in connection with a
federal consent decree. If the Company and other plaintiffs do not prevail in
any future appeal regarding the consent decree or are not successful in ongoing
negotiations with government authorities, the Company may not

                                       10
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

be able to obtain additional treatment capacity for future expansions and the
County could impose stricter permit limits.

In June 1997, the United States and Environmental Protection Agency ("EPA") sued
the County in federal court for failure (a) to meet its discharge permit limits
for the wastewater facility and (b) to develop and enforce an industrial
pretreatment program. A group of industrial users, including the Company and a
group of municipalities filed motions to intervene in the EPA lawsuit to protect
the earlier state court ruling. In December 1998, however, the federal court
approved a motion filed by the County to terminate the industrial users' rights
to discharge certain pollutant loadings, but not the right to discharge certain
volumes of wastewater to the system. The court also authorized the County to
readopt the Ordinance previously invalidated by the state courts. The Company
has appealed the federal ruling, and the appeal is pending. The Company also
believes that under Michigan contract law, related contracts and county bond
resolutions, the County does not have the authority to unilaterally terminate
the service agreements and may pursue litigation on these issues. If the Company
and other plaintiffs do not prevail on their appeal, or in any future litigation
regarding the Ordinance, or are not successful in ongoing negotiations with
government authorities, the Company may not be able to obtain additional
treatment capacity for future expansions and the County could impose stricter
permit limits. This, in turn, could result in substantial expenditures to add
pretreatment at the Muskegon facility or potential fines being levied by the
County.

In April 1998, the EPA issued final regulations that impose new air and water
quality standards aimed at further reductions of pollutants from pulp and paper
mills, particularly those conducting bleaching operations (generally referred to
as the "cluster rules"). Compliance with the cluster rules was required
beginning in April 2001 for the Somerset, Maine and Muskegon, Michigan mills.
Approximately $70.0 million has already been incurred, primarily for required
improvements at the Somerset and Muskegon mills.

The Company believes that future capital expenditures for environmental
compliance, the bulk of which are for cluster rules compliance at Muskegon, will
aggregate approximately $5.0 million to $15.0 million through fiscal year 2002.

NOTE 7. COMMITMENTS AND CONTINGENCIES

The Company has a long-term agreement (the "Energy Agreement") with Mobile
Energy Services Corporation ("MESC") to buy electric power and steam for the
Mobile paper mill at rates that provide for MESC to recover fuel and capital
costs. Kimberly-Clark has closed their pulp mill at the Mobile site effective
September 1999. The closure of the Kimberly-Clark pulp mill may result in a MESC
default under certain bond indentures. In January 1999, MESC filed for
bankruptcy.

The Company has given notice of termination of the Energy Agreement effective in
December 2001 in connection with the closure of the Mobile paper mill (see Note
4).

A substantial majority of the Company's electricity requirements are satisfied
through its own generation or cogeneration agreements. The Company's power
requirements at its Somerset mill are currently satisfied through a cogeneration
agreement whereby the mill cogenerates electricity and sells the output to
Central Maine Power ("CMP") at a "wash rate" which matches the average rate the
mill pays for the power it consumes. The CMP agreement relating to the Somerset
mill historically also provided, but did not require, that the mill purchase
electricity from CMP at the same rate. The Somerset agreement expires in the
year 2012. Commencing March 1, 2000, as a result of deregulation of the Maine
power

                                       11
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

industry, CMP was no longer permitted to sell power to its customers.
Accordingly, the Company has entered into a new one-year agreement with a third
party to purchase all of Somerset's power needs through February 28, 2002. The
Company continues to evaluate the impact of deregulation on its energy rates at
Somerset. The Company also has recently entered into a one-year agreement
expiring March 21, 2002 with a third party pursuant to which the Westbrook mill
cogenerates electricity and sells any excess output not used by the mill to the
third party. Power sales revenue is recognized by the Company at the time that
power is provided to or used by CMP based on fixed rates per kilowatt-hour in
the case of the Westbrook agreement and variable rates per kilowatt-hour in the
case of the Somerset agreement.

In November 1998, the Company signed a supply agreement with Plum Creek Timber
Company, L.P., which has an initial term of 25 years and three five-year renewal
options. Under the supply agreement, the Company will purchase hardwood pulpwood
at an annual minimum of 300,000 to 375,000 tons, or approximately 13% of the
Company's annual requirements, at market prices.

In April 2000, the Lemelson Medical, Educational and Research Foundation,
Limited Partnership ("Lemelson") filed a lawsuit against Sappi and over 70 other
companies in the United States Court for the District of Arizona. The lawsuit
alleges that the defendants have infringed upon various machine vision and
automatic identification patents held by Lemelson. Lemelson seeks to enjoin the
defendants from further alleged acts of infringement and to collect unspecified
damages. Sappi was formally served with a summons with respect to this lawsuit
in September 2000. Lemelson has offered to license the patents alleged to be
infringed to the defendants, and based on the Company's understanding of the
terms that Lemelson has made available to other licensees, the Company believes
that obtaining the same or similar terms would not have a material adverse
effect upon the Company's operating results or financial position. However,
there can be no assurance either that, if sought, Sappi would be offered similar
terms to those made available to other licensees, or that, if defended, this
matter will not have a material adverse effect on the Company's operating
results or financial position.

In April 2000, 18 individuals filed a lawsuit against the Company,
Kimberly-Clark and several other defendants in Somerset County Court, Maine. The
plaintiffs allege that they suffered personal injury as a result of hazardous
waste from various sources, which was allegedly transported to and stored at a
local landfill during the period from 1976 through 1986. Plaintiffs have
recently amended their complaint to bring several new theories of liability,
which relate to the air and water discharges from the Somerset and Winslow mills
and land spreading. In addition the plaintiffs allege that the defendants
fraudulently concealed the character of their waste. In terms of Sappi's
purchase of the Company from Scott Paper Company in 1994, the Company is
indemnified for monitoring, clean up and any other costs relating to or arising
out of the affected landfill. While the Company does not believe that the
lawsuit will have a material adverse effect on its operating results or
financial position, including due to the possibility that the Company is
indemnified for this matter, there can be no assurance that this will be the
case.

The Company is also involved in various other lawsuits and administrative
proceedings. The relief sought in such lawsuits and proceedings includes
injunctions, damages and penalties. Although the final results in these suits
and proceedings cannot be predicted with certainty, it is the present opinion of
the Company, after consulting with legal counsel, that they will not have a
material effect on the Company's consolidated financial position, results of
operations or cash flows.

                                       12
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

NOTE 8. SEGMENTS AND OTHER RELATED INFORMATION

The Company's segments have been aggregated into a single reportable segment
since they have similar economic characteristics, products, production
processes, types of customers and distribution methods. Business segment revenue
for the three and nine months ended June 28, 2000 and July 1, 2001 follow:

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED                                 NINE MONTHS ENDED
                                    -------------------------------------------          ----------------------------------------
                                          JUNE 28,                  JULY 1,                  JUNE 28,               JULY 1,
                                            2000                     2001                      2000                  2001
                                    ---------------------     -----------------          -----------------     ------------------
           <S>                      <C>                       <C>                        <C>                   <C>
           Coated Papers                 $276.7                   $238.2                 $    821.9               $  794.2
           Uncoated Papers                 60.4                     57.2                      186.7                  180.8
           Specialty Papers and            42.5                     36.0                      119.7                  111.0
           Other
                                     --------------------     --------------------       -----------------     ------------------
                Total                    $379.6                   $     331.4            $  1,128.3               $1,086.0
                                     ====================     ====================       =================     ==================
</TABLE>

NOTE 9. TRADE ACCOUNTS RECEIVABLE

On April 4, 2001, the Company, through a bankruptcy remote subsidiary, S.D.
Warren Finance Co. ("SDWF"), entered into a receivable sales agreement that
provides the Company with a five-year $100 million revolving accounts receivable
securitization facility (the "A/R Facility"), replacing a five year $90 million
revolving accounts receivable securitization facility. Under this facility and
pursuant to a purchase and contribution agreement between the Company and SDWF,
the Company sells to SDWF, on a non-recourse basis, all rights and interests in
its accounts receivables. Pursuant to this receivables purchase agreement, SDWF,
in turn securitizes certain interests in the accounts receivable pool owned by
SDWF under similar terms to a third-party purchaser.

The Company has adopted SFAS No. 140 in accounting and reporting for all
transfers and servicing of securitized trade receivables occurring after March
31, 2001. The Company records no gain or loss on the sale of these receivables.
The Company's continuing involvement is limited to the servicing of the
transferred receivables for which the Company receives an annual fee of 1% of
the average outstanding balance. Proceeds from collections reinvested in
revolving-period securitizations with SDWF amounted to $225.8 million for the
three month period ended July1, 2001.

                                       13
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

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

MARKET OVERVIEW

The market for coated paper has historically experienced price fluctuations
driven by global supply and demand imbalances, inventory shifts, and the
availability and relative pricing of imported paper products. Coated free sheet
industry shipments from U.S. producers declined during the quarter ended April
1, 2001 and again in the quarter ended July 1, 2001 (as compared on a year over
year basis). This was due in large part to an increase in coated imports, a
shift in demand from coated woodfree to lightweight coated groundwood due to
postal rate increases, cost reduction moves by publishers and a general slowing
of the U.S. economy. Increasing coated free sheet imports, together with
enhanced domestic production, have over the past few years played a key role in
placing downward pressure on coated free sheet industry pricing. Similar to the
quarter ended April 1, 2001, supply exceeded demand during the quarter ended
July 1, 2001, which continued to put downward pressure on prices over the first
nine months of the fiscal year.

The uncoated paper market continues to suffer from a slowdown in demand and high
inventories. Average pricing is down versus last year. The technical papers
market is beginning to reflect the seasonal slowdown.

Market softness, increased pulp and energy costs and downward pricing pressures
contributed negatively to the Company's results of operations in the uncoated
paper business. On May 15, 2001, the Company announced that it had finalized its
decision to exit the uncoated paper business in the United States and close the
Mobile, Alabama paper mill. The closure of this mill would result in the
phase-out of the production of uncoated products, permanent shutting of 3 paper
machines and a move of its technical papers business to alternate mill sites.

As of July 1, 2001, the Company has recorded a charge to earnings of $186.3
million for the impairment losses and write-downs of certain operating assets
and severance and other costs to exit the uncoated business. Of this amount,
approximately $17.7 million represented lower of cost or market inventory
provisions and $4.1 million of reserves for trade accounts receivable as a
result of the decision to close the Mobile mill. These amounts have been
included in the condensed consolidated statement of operations as components of
cost of goods sold and selling, general and administrative expense,
respectively.

The remaining charge to earnings of $164.5 million has been included under the
caption "Restructuring and other charges" in the condensed consolidated
statement of operations. This charge is comprised of the following; (1) $101.1
million primarily to write assets down to their estimated salvage value,
including $7.6 million of unamortized goodwill attributable to the Mobile mill,
(2) $30.5 million of severance and benefits costs covering the termination of
583 employees, and (3) other exit costs of $32.9 million, primarily related to
lease and contract terminations.

As a result of the decision to exit the uncoated business, the Company expects
to generate on an annualized and pretax basis net cash savings of approximately
$15.0 million and anticipates that the benefit to expected future earnings will
approximate $25.0 million. The Company believes that cash

                                       14
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

generated by operations and amounts available under its revolving credit
facility will be sufficient to meet its ongoing obligations resulting from its
decision to exit the uncoated business.

The Company's release papers business was impacted by deteriorating global
economic conditions and a weak exchange rate in European markets. These downward
pressures have been partially offset by an improved product mix.

Any failure of the industry to maintain its current levels of shipments and
pricing or any prolonged or severe weakness in the market for any of the
Company's products in the future may adversely affect the Company's consolidated
financial position, results of operations and cash flow.

The following discussion and analysis should be read in conjunction with the
unaudited Condensed Consolidated Financial Statements and the Notes thereto.

THREE MONTHS ENDED JULY 1, 2001 COMPARED TO THREE MONTHS ENDED JUNE 28, 2000

NET SALES

Net Sales for the three months ended July 1, 2001 was $331.4 million compared to
$379.6 million for the three months ended June 28, 2000, a decrease of $48.2
million or 12.7%. Paper shipment (sales) volume for the three months ended July
1, 2001 decreased approximately 14,571 tons or 4.1% from the prior year's
quarter ended June 28, 2000. The decrease in net sales from the same prior year
quarter reflects both decreased market demand and downward pricing pressures in
the paper industry.

COST OF GOODS SOLD

Cost of goods sold for the three months ended July 1, 2001 was $302.2 million
compared to $296.8 million for the three months ended June 28, 2000. As of July
1, 2001, the Company recorded a $17.7 million lower of cost or market inventory
provision in conjunction with the decision to close the Mobile mill and included
this amount in cost of goods sold. Excluding this provision for inventories,
cost of goods sold on a per paper ton basis, increased to $830 per ton for the
three months ended July 1, 2001 from $825 per ton for the prior year quarter
ended June 28, 2000. The increase was primarily due to higher energy costs,
offset by favorable pulp pricing.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

Selling, general and administrative expense totaled $43.8 million for the three
months ended July 1, 2001 compared to $39.4 million for the three months ended
June 28, 2000. As of July 1, 2001, the Company recorded a $4.1 million provision
for trade accounts receivable in conjunction with the decision to close the
Mobile mill.

RESTRUCTURING AND OTHER CHARGES

The Company recorded non-inventory and trade accounts receivable valuation
charges to earnings of $164.5 million for the impairment losses and write-downs
of certain operating assets and severance and benefits costs and other costs to
exit the uncoated business and to close the Mobile mill.

                                       15
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

OTHER INCOME, NET

Other income, net, of $1.2 million and $2.4 million for the three months ended
July 1, 2001 and June 28, 2000, respectively, includes interest income of $0.4
million and $0.8 million.

INTEREST EXPENSE AND TAXES

Interest expense for the three months ended July 1, 2001 was $10.6 million
compared to $13.8 million for the three months ended June 28, 2000. The decrease
was primarily due to lower rates obtained on the debt incurred in connection
with the refinancing of the Notes. Interest expense includes the amortization of
deferred financing fees.

For the three months ended July 1, 2001, the Company has recorded an income tax
benefit of $74.5 million compared to income tax expense of $12.7 million for the
three months ended June 28, 2000, primarily reflecting the change in the
Company's earnings level and the tax impact of impairment losses and write-downs
of certain operating assets and severance and benefits costs and other costs to
exit the uncoated business and to close the Mobile mill.

NINE MONTHS ENDED JULY 1, 2001 COMPARED TO THE NINE MONTHS ENDED JUNE 28, 2000

The Company changed its financial closing calendar for fiscal year 2001 which
results in an additional five days being included in the first quarter ended
December 31, 2000.

NET SALES

Net Sales for the nine months ended July 1, 2001 was $1,086.0 million compared
to $1,128.3 million for the nine months ended June 28, 2000, a decrease of $42.3
million or 3.7%. Paper shipment volume for the nine months ended July 1, 2001
increased slightly by 8,180 tons or 0.8% from the prior year's nine months ended
June 28, 2000. The positive impact of increased volume shipments continues to be
offset by downward pricing pressures evident in the paper industry.

COST OF GOODS SOLD

Cost of goods sold for the nine months ended July 1, 2001 was $949.2 million
compared to $886.8 million for the nine months ended June 28, 2000. As of July
1, 2001, the Company recorded a $17.7 million lower of cost or market inventory
provision in conjunction with the decision to close the Mobile mill and included
this amount in cost of goods sold. Excluding this provision for inventories,
cost of goods sold on a per paper ton basis increased to $849 per ton for the
nine months ended July 1, 2001. Cost of goods sold for the nine months ended
June 28, 2000 is net of a $4.0 million business interruption insurance claim
recovery received in conjunction with a fire at the Company's Muskegon mill.
Including this insurance recovery, cost of goods sold on a per paper ton basis
was $806 per ton for the corresponding prior year period. The increase was
primarily due to higher pulp and energy costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

Selling, general and administrative expense totaled $121.9 million for the nine
months ended July 1, 2001 compared to $116.1 million for the nine months ended
June 28, 2000. As of July 1, 2001, the Company recorded a $4.1 million provision
for trade accounts receivable in conjunction with the decision to close the
Mobile mill. Excluding this adjustment, the increase of $1.7 million over the
prior

                                       16
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

year's corresponding nine months is primarily attributable to the additional
five days being included in the quarter ended December 31, 2000.

RESTRUCTURING AND OTHER CHARGES

The Company recorded non-inventory and trade accounts receivable valuation
charges to earnings of $164.5 million for the impairment losses and write-downs
of certain operating assets and severance and benefits costs and other costs to
exit the uncoated business and to close the Mobile mill.

OTHER INCOME, NET

Other income, net, of $5.9 million and $5.7 million for the nine months ended
July 1, 2001 and June 28, 2000, respectively, includes interest income of $1.5
million and $3.9 million.

EXTRAORDINARY ITEM

The premium paid of $10.5 million in connection with the purchase of $232.4
million face value of the Company's Senior 12% Subordinated Notes (the "Notes"),
together with the related $7.0 million of accelerated amortization of deferred
financing fees and other costs, resulted in an extraordinary loss of $10.6
million (net of $6.9 million of tax benefits) in the nine months ended June 28,
2000. There were no extraordinary items for the nine months ended July 1, 2001.

INTEREST EXPENSE AND TAXES

Interest expense for the nine months ended July 1, 2001 was $33.7 million
compared to $46.0 million for the nine months ended June 28, 2000. The decrease
was primarily due to lower rates obtained on the debt incurred in connection
with the refinancing of the Notes. Interest expense includes the amortization of
deferred financing fees.

For the nine months ended July 1, 2001, the Company has recorded an income tax
benefit of $70.1 million compared to income tax expense of $33.8 million for the
nine months ended June 28, 2000, primarily reflecting the change in the
Company's earnings level and the tax impact of impairment losses and write-downs
of certain operating assets and severance and benefits costs and other costs to
exit the uncoated business and to close the Mobile mill.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $71.5 million for the nine months
ended July 1, 2001 compared to $104.9 million for the nine months ended June 28,
2000. This decrease of $33.4 million primarily reflects the change in the
Company's earnings level.

The Company's operating working capital, excluding restructuring amounts for the
third quarter, was $55.6 million at July 1, 2001 compared to $24.2 million at
September 27, 2000. Operating working capital is defined as trade accounts
receivable, other receivables and inventories less accounts payable and accrued
and other current liabilities. This increase resulted primarily from increased
inventory levels and higher accrued and other current liabilities offset by
lower receivables and payables.

Capital expenditures for the nine months ended July 1, 2001 were $87.6 million,
up from $48.1 million for the nine months ended June 28, 2000. The increase of
$39.5 million for the nine months ended July 1, 2001 over the nine months ended
June 28, 2000 is primarily due to environmental compliance work at the

                                       17
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

Company's Muskegon, Michigan location. Capital expenditures forecasts are
updated periodically and currently project approximately $109.0 million of
expenditures for the fiscal year ended September 30, 2001. In addition, the
Company believes that future capital expenditures for environmental compliance,
the bulk of which will be for cluster rules compliance at Muskegon, will
aggregate approximately $5.0 million to $15.0 million through fiscal year 2002.

The Company believes that cash generated by operations and amounts available
under its revolving credit facility will be sufficient to meet its ongoing
operating and capital expenditure requirements for the remainder of the fiscal
year.

Cash provided by financing activities for the nine months ended July 1, 2001 was
$7.2 million compared to $107.1 million used in financing activities for the
corresponding period of the previous year. During the nine months ended July 1,
2001, the Company received net long-term advances of $15.0 million on its
long-term revolving credit facility (the "Credit Facility"), thereby increasing
the total principal outstanding on the Facility to $155.0 million at July 1,
2001. Pursuant to the credit agreement, relating to the Credit Facility (the
"Credit Agreement"), the Company made payments of $4.2 million on the term loan
during the first six months, thereby decreasing the total principal outstanding
on the term loan to $78.2 million at July 1, 2001. In addition, the Company made
payments totaling $3.6 million on its Skowhegan Series C and D and Westbrook
Series A 1973 Revenue Bonds, thereby reducing the total principal outstanding on
the Revenue bonds to $106.9 million at July 1, 2001.

LONG-TERM DEBT

At July 1, 2001, long-term debt, excluding current maturities, was $460.1
million compared to $452.1 million at September 27, 2000.

OTHER ITEMS

ENVIRONMENTAL AND SAFETY MATTERS

The Company is subject to a wide variety of environmental laws and regulations
relating to, among other matters, air emissions, wastewater discharges, past and
present landfill operations and hazardous waste management. See Note 6 -
Environmental and Safety Matters in the Notes to Unaudited Condensed
Consolidated Financial Statements included in this Form 10-Q for a discussion of
these matters.

NEW ACCOUNTING PRONOUNCEMENTS

See Note 2 to the Unaudited Condensed Consolidated Financial Statements - New
Accounting Pronouncements

LONG-TERM CONTRACTS

See Note 7 to the Unaudited Condensed Consolidated Financial Statements -
Commitments and Contingencies.

                                       18
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

CONSIDERATIONS RELATING TO HOLDINGS' CASH OBLIGATIONS

The Company expects that it may make certain cash payments to Holdings or other
affiliates during fiscal 2001 to the extent cash is available and to the extent
it is permitted to do so under the terms of the Credit Agreement, and the
Indenture relating to the Company's 14% Subordinated Exchange Debentures due
2006, (the " Exchange Debentures"). Such payments may include, among other
things, (i) amounts under a tax sharing agreement between the Company and
Holdings necessary to enable Holdings to pay the Company's taxes, (ii) an
administrative fee to Holdings and amounts to cover specified costs and expenses
of Holdings, (iii) an annual advisory fee for management advisory services to
Sappi and/or its affiliates, the cash payment of which is limited to $1.0
million in any one year and (iv) any dividends that might be paid to Sappi. The
accompanying condensed consolidated balance sheets at July 1, 2001 and September
27, 2000, respectively, include accrued management advisory fees of $21.0
million and $14.4 million, respectively, the payment of which is subject to the
above mentioned limitations under the terms of its current financial
instruments.

Because Holdings has no material assets other than the outstanding common stock
of the Company (all of which is pledged to the lenders under the Company's
Credit Agreement) and all of the operations of Holdings (other than the
management of its investment in the Company) are currently conducted through the
Company and its subsidiaries, Holdings' ability to meet its cash obligations is
dependent upon the earnings of the Company and its subsidiaries and the
distribution or other provision of those earnings to Holdings. Holdings has no
material indebtedness outstanding (other than advances that may be owed from
time to time to the Company and guarantees in respect of indebtedness of the
Company and its subsidiaries). Holdings does, however, have various obligations
with respect to its equity securities (including in respect of registration
rights granted by Holdings) that have required and are likely to continue to
require cash expenditures by Holdings. The Company believes that the Credit
Agreement and the Indenture relating to the Exchange Debentures permit the
Company to pay a dividend or otherwise provide funds to Holdings to enable
Holdings to meet its known cash obligations for the foreseeable future, provided
that the Company meets certain conditions. Among such conditions are that the
Company maintain specified financial ratios and comply with certain financial
tests.

                                       19
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to market risk associated with changes in interest rates.
The Company's objective in managing its exposure to interest rate change is to
limit the impact of interest rate changes in earnings and cash flow and to lower
its overall borrowings costs. Short-term borrowings, if required, are used to
meet working capital requirements and long-term borrowings are generally used to
finance long-term investments. The Company's financial instruments consist
mainly of cash and cash equivalents, accounts receivable, accounts payable and
debt. The carrying amounts of cash, cash equivalents, accounts receivable and
accounts payable approximate fair value due to the short-term nature of these
instruments.

The Company's Credit Facility bears interest at rates which fluctuate with
changes in the Eurodollar rate. The majority of the Company's long-term debt,
approximately $241.4 million at July 1, 2001, is at fixed interest rates. The
Company's interest expense on its Credit Facility and the fair value of its
fixed long-term debt is sensitive to changes in market interest rates. The
effect of a 10% adverse change in market interest rates on the Company's
interest expense and the fair value of its long-term debt would not be
materially different than that disclosed in the Company's Annual Report on Form
10-K for the year ended September 27, 2000.

During the three and nine months ended July 1, 2001, the Company did not engage
in foreign currency hedging activities. The currency exchange impact from the
Company's transactions with its affiliates was immaterial.


                                       20
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Intentionally omitted.*


ITEM 2.  CHANGES IN SECURITIES

         Intentionally omitted.*

ITEM 3.  DEFAULT UPON SENIOR SECURITIES

         Intentionally omitted.*


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

         Intentionally omitted.*

ITEM 5.  OTHER INFORMATION

         Intentionally omitted.*

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         Intentionally omitted.*


-------------------------------------------------------------------------------

*  This report is being voluntarily filed with the Commission pursuant to the
   registrant's contractual obligations to file with the Commission all
   financial information that would be required to be filed on a Form 10-Q. The
   registrant is not required to file reports pursuant to Section 13 or 15(d) of
   the Securities Exchange Act of 1934.

                                       21
<PAGE>

                      S.D. WARREN COMPANY AND SUBSIDIARIES
                            FORM 10-Q, JULY 1, 2001

                                    SIGNATURE

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.

                                       S.D. Warren Company

Date: August 15, 2001                  By: /s/ Mark T. Becker
                                           ------------------------------------
                                           Mark T. Becker
                                           Vice President, Treasurer and
                                           Chief Financial Officer
                                           (Principal Financial and Accounting
                                              Officer)




                                       22