<PAGE>


                            SCHEDULE 14A INFORMATION
  Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
                                      1934

     Filed by the registrant [X]

     Filed by a party other than the registrant [_]

   Check the appropriate box:

     [_] Preliminary Proxy Statement

     [_] Confidential, for Use of the Commission Only (as permitted by Rule
  14a-6(e)(2))

     [_] Definitive Proxy Statement

     [X] Definitive additional materials

     [_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

                          REPUBLIC GROUP INCORPORATED
                    --------------------------------------
                (Name of Registrant as Specified in Its Charter)

                                 Not Applicable
                    --------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

   Payment of filing fee (Check the appropriate box):

     [_] No fee required.

     [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
  0-11.

     (1) Title of each class of securities to which transaction applies:


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

     (2) Aggregate number of securities to which transaction applies:


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

     (3) Per unit price or other underlying value of transaction computed
  pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
  filing fee is calculated and state how it was determined):


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

     (4) Proposed maximum aggregate value of transaction:

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

     (5) Total fee paid:

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

     [X] Fee paid previously with preliminary materials.

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

     [_] Check box if any part of the fee is offset as provided by Exchange
  Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
  was paid previously. Identify the previous filing by registration statement
  number, or the form or schedule and the date of its filing.

     (1) Amount previously paid:

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

     (2) Form, schedule or registration statement no.:

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

     (3) Filing party:

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

     (4) Date filed:

                       --------------------------------
<PAGE>

                       [REPUBLIC GROUP INCORPORATED LOGO]

               TO THE STOCKHOLDERS OF REPUBLIC GROUP INCORPORATED

   Republic Group Incorporated was founded in 1961 as Republic Gypsum Company.
It has operated in the gypsum wallboard and paperboard industries for thirty-
six years. This will likely be the last report that I will write to my fellow
stockholders because Republic has signed an agreement to be acquired by Premier
Construction Products Statutory Trust, subject to approval by our stockholders
and the satisfaction of certain other conditions.

   Republic announced on August 11, 2000 that it had entered into a definitive
merger agreement with Premier, a private statutory trust that is an affiliate
of Integrated Capital Associates, Inc. of San Francisco, California. Under
terms of the merger agreement, stockholders of the Company will receive cash in
the amount of $19.00 per share for their outstanding shares at closing.
Republic has filed a proxy statement with the Securities and Exchange
Commission and copies are being mailed to stockholders concurrently with this
annual report.

   Earlier this year, Republic made a decision to explore strategic
alternatives to enhance stockholder value and, after reviewing possible
alternatives with its investment banking firm, J. P. Morgan, invited a number
of other companies engaged in the manufacture of gypsum wallboard to make
proposals for an acquisition of the Company. Of the competing proposals
received by the Company, Republic's board of directors believes that the
Premier offer is most likely to maximize stockholder value.

   The board of directors of Republic has unanimously approved the Premier
merger and recommends that you vote "FOR" the adoption of the merger agreement
with Premier. In addition, the directors and executive officers of the Company,
as well as myself and members of my family, who collectively own approximately
27.3% of the outstanding shares, have entered into agreements to vote for the
Premier merger and to grant related proxies on their shares.

   In light of the pending transaction with Premier, we have decided not to
incur the added cost of printing an annual report in the normal format this
year. Instead, we have prepared an annual report to stockholders that largely
consists of the Company's Annual Report on Form 10-K, which we file annually
with the Securities and Exchange Commission. I would refer you to the Form 10-K
for a discussion of the Company's results for the year ended June 30, 2000 and
other information about the Company.

   I thank the many loyal stockholders for their continued ownership and
interest in the Company through many years. Management and the board of
directors are in favor of the proposed merger, believe it to be in the best
interest of the stockholders, and urge you to vote affirmatively.


                                          /S/ PHIL SIMPSON
                                          Phil Simpson
                                          Chairman of the Board and President

September 25, 2000
<PAGE>

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

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  Form 10-K/A
                               (Amendment No. 1)

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended June 30, 2000

                                       OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934

   For the transition period from           to
                         Commission file number 1-7210

                          Republic Group Incorporated
             (Exact name of registrant as specified in its charter)

                Delaware
    (State or other jurisdiction of
     incorporation or organization)
   811 East 30th Avenue, Hutchinson,                   67502-4341
                 Kansas                                (Zip Code)
    (Address of principal executive                    67504-1307
                offices)                               (Zip Code)
   Post Office Box 1307, Hutchinson,
                 Kansas
           (Mailing address)

                                   75-1155922
                      (I.R.S. Employer Identification No.)

       Registrant's telephone number, including area code: (316) 727-2700

          Securities registered pursuant to Section 12(b) of the Act:

          Title of each class          Name of each exchange on which registered
     Common Stock, $1.00 par value           New York Stock Exchange, Inc.
   Common Stock Share Purchase Rights        New York Stock Exchange, Inc.

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

   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.   [X] YES [_] NO

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

   On September 21, 2000, there were 11,849,037 shares of the registrant's
Common Stock and Common Stock Share Purchase Rights outstanding. The aggregate
market value of the registrant's Common Stock held by non-affiliates of the
registrant (based upon the closing price) on September 21, 2000, was
approximately $161,700,648.

                      Documents Incorporated by Reference:

   None.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                          REPUBLIC GROUP INCORPORATED

                                   FORM 10-K

                                 Annual Report
                    For the Fiscal Year Ended June 30, 2000

                                     PART I

Item 1. Business.

Recent Developments

   On August 11, 2000, Republic Group Incorporated ("Republic" or the
"Company") entered into an Agreement and Plan of Merger with Premier
Construction Products Statutory Trust ("Premier") and Premier Construction
Products Acquisition Corp. ("Acquisition Sub") (the "Premier Merger Agreement")
pursuant to which Acquisition Sub would be merged into the Company, all
outstanding shares of Common Stock of the Company would be converted into the
right to receive $19.00 in cash, and the Company would become a wholly-owned
subsidiary of Premier (the "Premier Merger").

   The Premier Merger Agreement provides for a liquidated damages payment of
$12 million by Premier if it fails to complete its financing arrangements and
close the merger and in certain other situations. Premier's obligations under
the liquidated damages provision are backed by a letter of credit in the amount
of $12 million. The Premier Merger Agreement also provides for the Company to
pay a break-up fee of $10 million if the Premier Merger Agreement is terminated
in connection with another third-party acquisition proposal and in certain
other circumstances.

   The directors and executive officers of the Company, including our Chairman,
Phil Simpson, and some members of Mr. Simpson's family, who collectively own
approximately 3.3 million shares or 27.3% of the Company's outstanding stock,
have executed Stockholder Agreements pursuant to which they have agreed to vote
their shares of the Company's stock in favor of the Premier Merger, against
other competing proposals and in certain other respects, to grant proxies to
Premier's nominees to so vote their shares, and not to dispose of or encumber
their shares of the Company's stock during the pendency of the Premier Merger
Agreement. The Stockholder Agreements will terminate upon a termination of the
Premier Merger Agreement in accordance with the terms of that agreement.

   On August 11, 2000, the Company also entered into a back-up agreement with
Centex Construction Products, Inc. ("CXP") (the "CXP Agreement") pursuant to
which the Company would be acquired by CXP if the Premier Merger Agreement were
terminated for reasons other than (1) a termination by the Company, in the
exercise of its Board of Directors' fiduciary duties, to pursue a superior
proposal from a third party or (2) a termination by the Company or Premier
because the Premier Merger Agreement is not adopted by the Company's
stockholders and no takeover proposal has been made or announced. If the
Premier Merger Agreement were terminated for one of these enumerated reasons,
the Company and CXP have agreed to execute and deliver a merger agreement
pursuant to which a subsidiary of CXP would make a cash tender offer to acquire
all the outstanding shares of the Company's stock (the "CXP Tender Offer") and,
whether or not the CXP Tender Offer were consummated, merge with the Company.
Pursuant to the merger agreement with CXP, a subsidiary of CXP would be merged
into the Company, and the Company would become a wholly-owned subsidiary of
CXP. The per share consideration in both the CXP Tender Offer and the merger
would be equal to $17.50 in cash plus a cash amount equal to a proportionate
share (based on common and common equivalent shares) of any termination fees
received by the Company from Premier. It is a condition to CXP's obligation to
enter into the merger agreement that the Company make the same representations
and warranties to CXP that it made to Premier in the Premier Merger Agreement
except where not material and that stockholder agreements like those in favor
of the Premier Merger be executed in favor of CXP by the same stockholders. The
Company is obligated to use its reasonable best efforts and take all actions
within its control to cause such conditions to be satisfied.


                                       1
<PAGE>

   The Board of Directors has unanimously approved both the Premier Merger and
the CXP Agreement. In connection with the Premier Merger, the Company will file
a proxy statement with the Securities and Exchange Commission.

   The foregoing description of the Premier Merger Agreement, the Stockholder
Agreements and the CXP Agreement is qualified in its entirety by reference to
the full text of such agreements, copies of which are either filed as exhibits
to this Report or incorporated by reference in this description.

General

   Founded in 1961, Republic Group Incorporated is an integrated manufacturer
and distributor of recycled paperboard and gypsum wallboard. The Company
operates a large gypsum wallboard plant at Duke, Oklahoma. The Company
estimates its share of the U. S. gypsum wallboard market is between 2% to 3%.
Management believes the Company is one of the leading producers in the U. S. of
certain grades of recycled paperboard sold to manufacturers of consumer and
industrial paperboard products. The Company produces paperboard primarily used
in the manufacture of tubes, cans, cores, spools, drums, partitions, puzzles
and games as well as gypsum-grade recycled paperboard sold primarily to
independent gypsum wallboard producers. In addition, the Company sells
reclaimed paper fiber for use in its recycled paperboard business, as well as
for sale to third parties. Republic sells its products to customers located in
44 states. In addition to the Duke, Oklahoma gypsum wallboard plant, the
Company has recycled paperboard mills at Commerce City, Colorado; Hutchinson,
Kansas; Lawton, Oklahoma and Halltown, West Virginia. During fiscal 2000, the
Company completed construction and commenced commercial operations at the
Lawton mill. Also, the Company operates paper fiber recycling centers at
Denver, Colorado; Topeka, Kansas and Kansas City, Missouri. The Company had net
sales and net income of $190,510,000 and $2,761,000, respectively, in fiscal
2000. Before intercompany eliminations, the Company's recycled paperboard
(which includes reclaimed paper fiber) and gypsum wallboard businesses
accounted for approximately 47% and 53%, respectively, of Republic's total net
sales during fiscal 2000.

   The following table summarizes the Company's businesses:

<TABLE>
<CAPTION>
                                                                                         Percent of
                                                                                         Fiscal 2000
                                                                                        Consolidated
     Business             Product       End-Use Market           Site(s)                  Net Sales
-------------------  ----------------  ----------------  ------------------------     ----------------
                                                                                         (including
                                                                                        intercompany)
<S>                  <C>               <C>               <C>                          <C>
Recycled Paperboard  Gypsum-grade      Internal             Commerce City, Colorado;         14%
                     recycled          (approximately       Hutchinson, Kansas;
                     paperboard        9% of fiscal         Lawton, Oklahoma
                                       2000 recycled
                                       paperboard net
                                       sales) and
                                       third-party use
                                       in the
                                       manufacture of
                                       gypsum wallboard

                     Recycled          Sale to              Commerce City, Colorado;         27%
                     paperboard rolls  manufacturers of     Hutchinson, Kansas;
                     and sheets        paperboard           Halltown, West Virginia;
                                       tubes, cans,         Lawton, Oklahoma
                                       cores, spools,
                                       drums,
                                       partitions,
                                       puzzles and
                                       games for sale
                                       to third-parties

                     Reclaimed paper   Internal             Denver, Colorado;                 6%
                     fiber             (approximately       Topeka, Kansas;
                                       64% of fiscal        Kansas City, Missouri
                                       2000 reclaimed
                                       paper fiber net
                                       sales) and
                                       third-party use
                                       in the
                                       manufacture of
                                       recycled
                                       paperboard

Gypsum Wallboard     Gypsum wallboard  Gypsum wallboard     Duke, Oklahoma                   53%
                                       distributors and
                                       residential and
                                       commercial
                                       builders and
                                       remodelers
</TABLE>

                                       2
<PAGE>

   Management has implemented a number of important strategic initiatives
designed to increase Republic's production capabilities over the last two
fiscal years. During fiscal 2000, the Company completed construction of a new
recycled paperboard mill at Lawton, Oklahoma and commenced commercial
operations in March, 2000. The Company intends to use the Lawton mill primarily
for the production of gypsum-grade recycled paperboard with weight and surface
characteristics superior to that currently available in the United States.
Management believes that the operation of the Lawton mill will position
Republic as one of the largest third-party suppliers of gypsum-grade recycled
paperboard in North America. The Lawton mill is expected to increase its
production rate gradually through the remainder of fiscal year 2001 to the
annual design capacity of approximately 220,000 tons, which will approximately
double Republic's recycled paperboard capacity. During the last half of fiscal
2001, the Company intends to sell approximately 40% to 50% of the Lawton mill's
output pursuant to a long-term supply agreement (the "Hardie Agreement") with
James Hardie Gypsum, Inc. ("Hardie"), to use approximately 20% to 25% of the
Lawton mill's output to source its own gypsum wallboard operations and to
market the remainder to other gypsum wallboard producers. The Lawton mill cost
approximately $179,000,000, inclusive of capitalized interest.

   The Company, in late January 1999, completed the second phase of a two-phase
expansion of the Duke plant that increased its theoretical capacity from 570
million to 1.2 billion square feet per year. Theoretical design capacity
assumes operating at optimum-rated production line speeds over industry
standard operating days producing only 1/2 inch gypsum wallboard. Based on the
mix of actual products produced, the Company believes its annual practical
capacity is approximately 1.0 to 1.1 billion square feet. Although fiscal 2000
production and shipments increased 25% and 23%, respectively, from fiscal 1999
levels, the Duke plant operated at less than practical capacity primarily due
to operating inefficiencies and a softer demand for its product during the last
half of the fiscal year. The Company expects improvements in production rates
and efficiencies during fiscal 2001.

Competitive Strengths

   The Company believes that it has the following competitive strengths:

   Low Cost Production. The Company strives to be a low cost producer and
continually seeks to improve efficiency and production rates in order to
maximize capacity utilization. As production rates and efficiencies improve at
both the Company's expanded Duke plant and newly constructed Lawton mill during
its ramp-up phase, management expects total per unit costs at both facilities
will decrease significantly due to economies of scale. In addition, management
believes that the strategic locations of the Company's facilities provide it
with cost advantages, including reduced transportation, warehousing costs and
advantageous labor and utility rates.

   Product Line and Geographic Diversification. The Company's growth in the
recycled paperboard business has reduced Republic's dependence on the
construction and housing industry in which gypsum wallboard is used. Management
believes that such diversification has lessened the effect of cyclical housing
and construction markets on the Company's overall operations. In addition, the
Company produces a number of specialty grades of recycled paperboard that are
sold to manufacturers of consumer and industrial paperboard products and used
for packaging and other products, thereby reducing its dependence on sales of
any one grade. Management believes that the various locations of the Company's
facilities reduce its dependence on any single geographic market.

   Well-Integrated Operations. Management believes that the Company's well-
integrated operations reduce its dependence on third-parties and its overall
production costs. The Duke plant obtains all of its requirements for raw gypsum
from quarries operated by the Company and purchases a major portion of its
requirements for recycled paperboard from the Company's Lawton mill. The
Company's recycled paperboard mills, in turn, purchase more than half of their
reclaimed paper fiber needs from the Company's own reclaimed paper fiber
operations. The Company also owns and operates a short-line railroad that it
uses to transport approximately one-third of its gypsum wallboard to major
carriers located 15 miles from the Duke plant for distribution throughout the
United States.

                                       3
<PAGE>

   High-Quality Products and Services; Strong Customer Relationships. The
Company has adopted quality control standards and procedures, which it
regularly reviews and updates. The Company believes that its ability to
consistently manufacture high quality products and to provide timely delivery
and superior customer service is an important element of the Company's success.
As a result of its focus on quality and customer service, the Company believes
that it has earned a reputation in the industry as a dependable supplier of
products, enabling the Company to develop long-standing customer relationships.

   Management Experience. The Company, which was founded by its current
president and chief executive officer in 1961, has assembled a management team
with a strong track record and an average of approximately 18 years of service
per executive officer. The Company's current management team has successfully
diversified product lines, increased sales, strengthened customer and supplier
relationships, increased productive capacity and selected and integrated
strategic acquisitions, all of which have enhanced the competitive strength of
the Company.

Business Strategy

   The Company intends to take advantage of its competitive strengths by
pursuing the following business strategy:

   Expand Productive Capabilities. Management believes that the operation of
the Lawton mill will position Republic as one of the largest third-party
producers of gypsum-grade recycled paperboard in North America. The Company
expects the Lawton mill to produce gypsum-grade recycled paperboard that is 20%
to 30% lighter, superior in quality and equal in strength characteristics to
the gypsum-grade recycled paperboard that is otherwise generally available in
the United States. Management believes that being the first producer to bring a
technologically-improved gypsum-grade recycled paperboard to market provides
Republic with a distinct competitive advantage and increases the ability of the
Company to sell its product in new markets. The Company intends to sell
approximately 40% to 50% of the Lawton mill's output pursuant to the Hardie
Agreement and expects to use an additional 20% to 25% of output to support its
gypsum wallboard business. The operation of the Lawton mill has allowed the
Company to redeploy some of its existing gypsum-grade paperboard capacity for
non-gypsum grade paperboard use, thereby allowing the Company to continue to
grow and diversify its recycled paperboard business. The Lawton mill is also
capable of producing other consumer and industrial paperboard products, which
management believes will help mitigate the impact of any future downturns in
the housing and construction industry.

   Management also believes that the ongoing upgrades and expansions to its
existing facilities will further enhance and increase the Company's overall
productive capacity. The improvements to the existing production line, together
with the addition of a second production line at the Duke plant, provides the
Company with the capability of producing both specialty products, such as the
Company's 54-inch wallboard, and increased volumes of its core products, which
management believes will allow Republic to increase its sales to existing
customers as well as obtain new customers. The Company is transitioning the
Hutchinson mill to other consumer and industrial paperboard products during the
ramp-up period of the Lawton mill. In addition, management believes that
improvements made at the Commerce City mill will allow the mill to produce a
higher quality gypsum-grade paperboard that can be used in conjunction with the
output from the Lawton mill.

   Operate as Low Cost Producer and Improve Operating Efficiencies. In order to
improve its cost position, Republic expects to continue to identify
opportunities for ongoing cost reductions. The Lawton mill is expected to be an
efficient high-speed mill with lower than average operating costs as a result
of its design specifications. In addition, management expects the production of
lighter gypsum-grade paperboard at the Lawton mill to result in freight cost
savings as well as reduced drying and delivery costs to gypsum wallboard
producers. The expansion at the Duke plant should also provide increased
economies of scale. The Company continuously scrutinizes its manufacturing
efficiencies and overhead infrastructure to conserve material and energy,
reduce set-up time and lower overhead expenses. To this end, the Company
continues to identify

                                       4
<PAGE>

additional short-term and longer-term cost saving opportunities, including
incremental process equipment upgrades.

Company Background and History

   The Company began manufacturing gypsum wallboard at the Duke plant in 1965,
and, for the next 18 years, the Company operated almost exclusively as a
producer of gypsum wallboard. Then, in 1983, in an effort to diversify and
integrate its operations so as to make the Company more resistant to cyclical
downturns in the construction industry, the Company purchased the Commerce City
mill and the Hutchinson mill; in 1993, the Company began an expansion program
to increase the productive capacity of these mills; in 1994, the Company
purchased paper fiber recycling centers at Topeka, Kansas and Kansas City,
Missouri; in 1995, the Company acquired the Halltown mill; in 1996, the Company
opened a paper fiber recycling center at Denver; in 1999, the Company
approximately doubled the practical capacity of its gypsum wallboard plant at
Duke Oklahoma; and, in 2000, the Company commenced commercial operations at its
newly constructed Lawton mill. This shift in strategic focus diversified the
Company both geographically and in terms of productive business segments.
Moreover, by adding new operations that complement its core gypsum business,
the Company has become significantly more vertically integrated. The Company's
current operations provide it with access to both a steady supply of quality
gypsum-grade recycled paperboard for its gypsum wallboard operations and
additional supplies of reclaimed paper fiber for the Company's recycled
paperboard mills.

Recycled Paperboard Operations

   Manufacturing. The Company's recycled paperboard manufacturing operations
are conducted at the Commerce City mill, the Halltown mill, the Hutchinson mill
and the Lawton mill. All of the paperboard products manufactured at the
Company's paperboard mills are produced from 100% reclaimed paper fiber and are
classified by the industry as recycled paperboard. These recycled paperboard
products include the facing paper used in the manufacture of gypsum wallboard
and recycled paperboard used by manufacturers of consumer and industrial
paperboard products such as tubes, cans, cores, spools, drums, partitions,
puzzles and games.

   Recycled paperboard is manufactured at the Company's mills in a continuous
process during which reclaimed paper fiber is mixed with water and pulped to
separate the individual fibers. The slurry is then applied to a series of
rotating wire-covered cylinders or roll formers, not unlike making a sandwich,
so that a multi-ply sheet of paper is formed as excess water is drained through
a wire mesh type fabric. The multi-ply paper mat is then mechanically pressed,
dried, trimmed to size and packaged. The finished product can be packaged
either in roll form or in sheets, according to customer specifications.

   In 1998, the Company completed a program to expand and develop its recycled
paperboard business which involved the expenditure of approximately $16,000,000
and expanded the productive capacity of the Commerce City mill and the
Hutchinson mill by approximately 25% in the aggregate. At June 30, 2000, the
rated productive capacity of the Company's four recycled paperboard mills was
approximately 433,500 tons per year (after the Lawton mill ramp-up period).

   Raw Materials. The principal raw materials used by the Company's recycled
paperboard mills are reclaimed paper fiber, water and chemicals. Reclaimed
paper fiber is currently purchased from several sources, including the
Company's own paper fiber recycling centers. Management believes that adequate
supplies of reclaimed paper fiber will continue to be available from
wholesalers located in cities near its recycled paperboard mills and its own
paper fiber recycling centers. Since reclaimed paper fiber is a commodity, its
cost is subject to fluctuations based on supply and demand. See--Item 7--
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Trends and Developments.

   Chemicals, including size, retention aids and bactericides, used by the
Company in its recycled paperboard operations are also readily available from
several manufacturers at competitive prices. Size is used principally

                                       5
<PAGE>

as a water resisting agent or strength enhancer in the production of recycled
paperboard. Retention aids are agents used to retain fiber and chemicals in the
papermaking process and not to lose them into the waste stream. Bactericides
are agents used to control bacteria and other organisms in the papermaking
process.

   The manufacture of recycled paperboard involves the use of large volumes of
water both in the production process and for cooling purposes. In Colorado and
Kansas, where two of the Company's recycled paperboard mills are located, the
appropriation of water is regulated by state laws. The Commerce City mill uses
water pumped from wells located on, or adjacent to, the Company's property.
Most of these wells have been in use for more than 20 years. In connection with
the purchase of the Commerce City mill, the Company acquired an approximate 80%
interest in certain of these water wells as tenant-in-common with Packaging
Corporation of America and the right to use up to approximately 80% of the
water produced by the wells. The Company's water rights are subject, however,
to the legal rights of prior appropriators of the same water source and to
court-decreed limitations on the permitted uses for such water. The Hutchinson
mill uses large volumes of water pumped from wells located on owned or
controlled property near the mill. The Company is authorized to appropriate
water from those wells for beneficial use, subject to vested rights and prior
appropriations, under state permits and orders. The Halltown mill uses water
from a stream running through the Company's property and has done so for over
100 years. The Company's rights to use the water from the stream are subject to
the riparian rights of other property owners in the area. The Lawton mill uses
water provided by the City of Lawton, Oklahoma municipal services. The term of
the agreement with the City of Lawton, Oklahoma is 15 years with automatic
extensions exercised unless the Company notifies the City in writing at least
six months prior to the expiration of the term or extended term. Although
adequate sources of water have historically been available to all of the
Company's recycled paperboard mills, an extended period of general water
shortages, legal curtailment of any mill's current water sources or uses, or
deterioration of the current quality of water sources could adversely affect
that mill's operations and limit its productive capacity.

   Electricity, natural gas and other utilities are available to the plants
either at contracted rates or at standard industrial rates in adequate
supplies, subject to standard industrial curtailment provisions. Management
believes there are adequate supplies of coal available to the Halltown mill on
either a contracted or spot basis. The Hutchinson and Halltown mills have the
capability to generate approximately 40% to 45% of their electricity for
internal use. The amount of electricity generated by each mill is dependent on
the input cost of fuel. During periods of natural gas curtailment, the Commerce
City mill, the Hutchinson mill and the Lawton mill are equipped to use fuel
oil. The Halltown mill can use either coal or fuel oil.

   All of the Company's recycled paperboard mills periodically contract fuel
supplies in advance for varying time limits to hedge against fluctuations in
the market. The Company has historically been successful at contracting future
supplies at favorable rates. However, because natural gas and coal are
commodities, there is always the possibility of contracting future requirements
at higher prices than actual spot prices.

   Sales, Marketing and Distribution. The recycled paperboard products
manufactured by the Company are sold to gypsum wallboard manufacturers and to
converters that manufacture composite cans, cores, tubes and other packaging
and specialty products. During fiscal 2000, approximately 9% of the recycled
paperboard manufactured and shipped by the Company's recycled paperboard mills
was consumed by the Company's gypsum wallboard manufacturing operations,
approximately another 22% was shipped to other gypsum wallboard manufacturers
and the balance was shipped to over 150 different converter customers. When the
Hardie Agreement is fully implemented, Hardie is expected to account for a
significant percentage of consolidated gross sales. See--Item 1--The Hardie
Agreement.

   In fiscal 2000, approximately 64% of the Company's reclaimed paper fiber
sales were to the Company's recycled paperboard mills. The balance was sold to
external customers. Most customers are located within 600 miles of the
particular paper fiber recycling center. The Company's paper fiber recycling
centers have the capability to sort and bale reclaimed paper fiber purchased
from generators and haulers. In addition, the Company's paper fiber recycling
centers act as brokers for certain generators of reclaimed paper fiber by
arranging for direct shipments from the generator to the purchaser of the
reclaimed fiber.

                                       6
<PAGE>

   Sales of recycled paperboard and reclaimed paper fiber are typically made on
credit terms in accordance with normal industry practice. Currently, recycled
paperboard production normally occurs after an order is received, and recycled
paperboard is not generally produced for general inventory purposes. The
backlog of orders for recycled paperboard is usually not significant.
Deliveries of recycled paperboard and reclaimed paper fiber are made to
customers by common carriers, as well as by rail, and some customers pick up
their orders at the Company's facilities.

   Competition. In selling the portion of its production not consumed by its
own gypsum wallboard manufacturing operations, the Company competes with
approximately eight other manufacturers of gypsum-grade paperboard, six of
which have gypsum wallboard manufacturing operations. Substantially all of
these competitors have greater financial resources than the Company. During
periods of peak demand for gypsum wallboard, the demand for recycled paperboard
typically matches or exceeds the productive capacities of the gypsum-grade
paperboard producers. During periods of reduced demand for gypsum wallboard,
the demand for recycled paperboard falls, and selling prices may decrease. In
selling recycled paperboard to the packaging industry, the Company competes
with approximately 75 producers, many of whom have substantially greater
financial resources than the Company. Management believes that its sales
constitute less than approximately 5% of total sales of recycled paperboard
nationally.

   Price, quality, personal relationships and timeliness of deliveries are the
principal methods of competition among paperboard producers. The locations of
the Company's recycled paperboard mills allow the Company to serve a variety of
markets, including several gypsum wallboard plants in the midwest, southeast,
southwest and western United States. The Halltown mill is within an hour and a
half of the metropolitan centers of Baltimore, Maryland and Washington, D.C.
The centralized location of the Commerce City mill and the Hutchinson mill
does, however, make some of the Company's operations farther from packaging,
fiber tube, fiber can and fiber core customers located in or near the
population centers of the east and west coasts. Moreover, many of the Company's
competitors are more vertically integrated than the Company and produce end-use
products utilizing recycled paperboard manufactured from their own recycled
paperboard mills.

The Lawton Mill

   The Lawton mill is located in southwestern Oklahoma and commenced commercial
operations in March 2000. The Lawton mill is designed to manufacture gypsum-
grade recycled paperboard utilizing technologies that have been successfully
employed in recycled paperboard mills but that have not yet been entirely
incorporated into any gypsum-grade recycled paperboard mills in the United
States. These technologies include (i) the use of an advanced paper forming
section using the roll-forming process utilizing a hydraulic headbox and a twin
wired de-watering system forming a paper sheet which allows for speeds in
excess of 2,000 feet per minute, thereby allowing reduced labor costs per ton
produced, (ii) an advanced control system, which immediately senses changes in
the paper as it is being formed and adjusts the forming section of the paper
machine to maintain the uniformity of the paper and also monitors and adjusts
the reclaimed paper fiber cleaning process to maintain the quality of this raw
material, (iii) modern pressing technology, which permits water removal in a
way that provides more uniformity and enhances the properties of the paper,
(iv) dryer felts on all dryer sections, which improve drying efficiency and
reduce shrinkage, and (v) an enhanced cleaning and screening process for the
reclaimed paper fiber that enhances the strength, surface characteristics and
overall surface uniformity of the paperboard.

   The Company expects that the Lawton mill will be able to produce recycled
paperboard that is technologically superior to and approximately 20% to 30%
lighter than that currently generally available in the United States, but that
has equal strength characteristics. The Company believes that being the first
to produce higher quality, lower basis-weight recycled paperboard will give it
a competitive advantage over other recycled paperboard manufacturers until
other mills using similar technology come on-line. The Company is aware of two
other competitors that have announced or begun conversions of older, existing
paperboard mills that may be able to produce a light weight gypsum-grade
paperboard. Because gypsum-grade recycled paperboard generally is sold on the
basis of surface area, manufacturing lighter paper potentially translates into

                                       7
<PAGE>

higher profit margins per ton for the recycled paperboard manufacturer. Lighter
recycled paperboard also reduces drying costs associated with the production of
gypsum wallboard and reduces inbound and outbound freight costs for both
recycled paperboard and gypsum wallboard. In addition, because the Lawton mill
is designed as an efficient, high-speed mill, operating costs are expected to
be lower than existing mills now producing recycled paperboard for the
wallboard industry. In addition to producing a product which should be more
attractive to customers, it is anticipated that the lighter weight, better
quality recycled paperboard from the Lawton mill will reduce production and
transportation costs at the Company's gypsum wallboard plant at Duke, Oklahoma.

   The Lawton mill is ultimately expected to have the capacity to produce
approximately 11 billion square feet, or approximately 220,000 tons, of gypsum-
grade recycled paperboard annually. Production from the Lawton mill will be
used both internally at the Duke plant and sold externally to other gypsum
wallboard manufacturers. With the expansion of the Duke plant, the Company's
internal demand for gypsum-grade recycled paperboard is ultimately expected to
be approximately 2.25 billion square feet when operating at capacity, or
approximately 40,000 to 50,000 tons per year, which represents approximately
20% to 25% of the Lawton mill's capacity. An additional 5.2 billion square
feet, or approximately 90,000 to 110,000 tons, or approximately 40% to 50% of
the Lawton mill's output, is expected to be purchased by Hardie pursuant to a
long-term requirements agreement. Although primarily designed for the
production of gypsum-grade recycled paperboard, the Lawton mill is also capable
of producing recycled paperboard for other uses. To date, the Lawton mill has
produced and sold other, lower margined, paperboard products in addition to
gypsum-grade paperboard. During the remainder of fiscal year 2001, the Company
plans to produce more gypsum-grade paperboard and less of the other paperboard
products as its gypsum wallboard customers shift from their current suppliers
when their existing supply agreements expire. The total cost of the Lawton mill
was approximately $179,000,000, inclusive of capitalized interest.

The Hardie Agreement

   On May 14, 1998, the Company entered into the Hardie Agreement, pursuant to
which the Company has agreed to supply at least approximately 90% of the
gypsum-grade recycled paperboard requirements of Hardie's three gypsum
wallboard plants with the bulk of such sales beginning in October 2000-January
2001. The Company expects the amount of paperboard supplied to Hardie pursuant
to the Hardie Agreement eventually to account for approximately 40% to 50% of
the Lawton mill's production. The Duke plant is expected to utilize another
approximately 20% to 25% of the Lawton mill's output. There can be no assurance
that the Company will be successful in obtaining supply agreements for the
remainder of the output of the Lawton mill, and, in that case, the Company
would attempt to sell the excess production in the spot market or under other
short term arrangements.

   Subject to earlier termination, the current term of the Hardie Agreement
will terminate on the later of October 1, 2010 or ten years after the start of
commercial production. The Hardie Agreement specifies that commercial
production has been achieved when the Lawton mill has produced, for two
consecutive months, recycled paperboard meeting the required product
specifications in an amount equal to or greater than approximately 30% of the
Lawton mill's planned monthly capacity. Under the Hardie Agreement, the Company
has agreed to provide to Hardie, and Hardie has agreed to purchase, the
following volumes of recycled gypsum-grade paperboard: (i) approximately 7% of
the requirements of Hardie's gypsum wallboard plant near Nashville, Arkansas
until December 31, 2000; (ii) at least 90% of the requirements of Hardie's
gypsum wallboard plant near Nashville, Arkansas beginning January 1, 2001; and
(iii) at least 90% of the requirements of Hardie's gypsum wallboard plants near
Las Vegas, Nevada and Seattle, Washington beginning October 1, 2000. Under the
Hardie Agreement, the Company will maintain a minimum inventory of 2,000 tons
of gypsum-grade recycled paperboard at the Lawton mill as to which Hardie will
have priority of shipment.


                                       8
<PAGE>

   Initially, each sale to Hardie will be made at a fixed base price determined
at the execution of the Hardie Agreement that is subject to adjustment based on
changes in the major variable costs of production of recycled paperboard,
including the cost of power, transportation and the primary raw materials, and
changes in the purchaser price index for industrial commodities and a reference
employment cost index. The Hardie Agreement also contains a "most favored
nations" clause requiring the Company to offer Hardie the lowest price that is
available from the Company to other third-party purchasers of its recycled
paperboard. The "most favored nations" clause requires the Company to offer the
same price on an equivalent volume as the volume being sold to the third party
at such price, but makes the price applicable to all sales while such third-
party pricing remains in effect if the third-party price offered is pursuant to
a long-term agreement of more than two years. As a result of the pricing
formula, Hardie may be able to make purchases at substantially below market
prices if market prices rise faster than the cost of production. Because of the
"most favored nations" clause, if the Company were unable to sell its
uncommitted production from the Lawton mill to third parties at prices equal to
or exceeding the pricing to Hardie, then it either would have to forego such
third party sales or lower the selling price to Hardie.

   In addition, the Hardie Agreement is a "requirements" contract, and a
termination or reduction of Hardie's production of gypsum wallboard could have
a material adverse effect on the Company. If, after October 1, 2004, technology
changes make it substantially more economical for Hardie to utilize paperboard
of a kind not presently commercially available and that is not contemplated for
the Lawton mill, then Hardie and the Company are obligated to negotiate in good
faith to include such recycled paperboard within the scope of the Hardie
Agreement. However, any failure to reach an agreement on this point could
result in a reduction or termination of Hardie's purchases from the Lawton
mill, and, as a result, could have a material adverse effect on the Company.

   The Hardie Agreement imposes detailed specifications for the gypsum-grade
recycled paperboard sold to Hardie. The Company believes that the production
from its Lawton mill will be able to meet such specifications. However, if the
Company were unable to produce gypsum-grade recycled paperboard meeting such
specifications or achieve satisfactory commercial production by October 1,
2000, then the Company would be obligated to supply Hardie with gypsum-grade
recycled paperboard from its other mills or from purchases from third parties
or otherwise compensate Hardie for its additional costs in obtaining
replacement gypsum-grade recycled paperboard. If Republic is unable to give
notice that commercial production has been achieved at the Lawton mill by July
1, 2001, then Hardie may terminate the Hardie Agreement. The inability of the
Company to achieve commercial production at the Lawton mill could have a
material adverse effect on the Company.

   The Hardie Agreement provides that, during the two year period beginning on
the later of October 1, 2005 or the fifth anniversary of commercial production,
the parties will negotiate in good faith toward a long-term extension of the
agreement past its initial term on mutually acceptable terms.

Gypsum Wallboard Operations

   Manufacturing. The Company's gypsum wallboard manufacturing operations are
conducted at the Duke plant near the Company's principal gypsum deposits. The
addition of the second production line will ultimately increase the Duke
plant's theoretical design capacity from 570 million to 1.2 billion square feet
of gypsum wallboard per year. Theoretical design capacity assumes operating at
optimum-rated production line speeds over industry standard operating days
producing only 1/2-inch gypsum wallboard. Based on the mix of actual products
produced, the Company believes its annual practical capacity is approximately
1.0 to 1.1 billion square feet. During fiscal 2000, the Company shipped a
record 726 million square feet of gypsum wallboard.

   The Company produces gypsum wallboard by a method common to most gypsum
wallboard manufacturers. Initially, crude gypsum is quarried by open-face
mining methods and crushed on site. The raw gypsum is hauled to the Duke plant
and pulverized. The powdered gypsum is then placed in kettles for a continuous
calcining process that converts it into plaster of Paris. The plaster of Paris
is cooked and then mixed

                                       9
<PAGE>

with chemicals, other raw materials and water to produce a slurry that is
placed on the production line between two continuous sheets of recycled
paperboard and allowed to harden while in motion. After the slurry hardens
between the recycled paperboard, the sheet is cut into appropriate lengths,
dried in kilns and packaged for sale. The Company produces gypsum wallboard in
standard industry thicknesses and varieties, and also produces 54-inch
wallboard, a premium product used in commercial and residential applications
with 9-foot ceilings, which management believes is currently produced at only a
limited number of manufacturing facilities in the United States.

   Gypsum Supply. The Company owns in fee simple substantially all surface
rights and mineral rights to gypsum, gypsite and anhydride with respect to
approximately 2,500 acres of land near the Duke plant. Additionally,
approximately 740 acres of mineral rights for gypsum, gypsite and anhydride are
leased by the Company with an option to lease approximately another 720 acres.
The Company estimates that the reserves of these gypsum deposits should be
sufficient to supply the Duke plant operating at capacity for approximately 15
years. The land on which the deposits are located is adjacent either to paved
or rock-surfaced roads and near a paved state highway which can be used during
inclement weather for transporting the raw gypsum to the plant site. In the
Company's opinion, other gypsum deposits are located in the immediate area and
may be obtained at a reasonable cost. Ordinarily, a four to six-week supply of
crushed raw gypsum is maintained at the Duke plant. The Company also owns
substantial non-producing gypsum reserves in Nova Scotia, Canada.

   Other Raw Materials, Utilities and Fuel. Other than gypsum, the principal
raw material used by the Company in manufacturing gypsum wallboard is recycled
paperboard. The primary source of this recycled paperboard is currently the
Lawton mill. See--Item 1--Recycled Paperboard Operations.

   Water, electricity and natural gas are also required by the Company's
manufacturing process. Water wells located near the Duke plant produce
sufficient quantities of water for current and anticipated plant requirements.
The Company can establish additional wells if necessary. A 125,000 gallon
overhead water storage tank is also situated adjacent to the Duke plant. In
addition, the Duke plant can purchase water from the public water supply system
of the town of Duke, Oklahoma. Electric power is supplied to the Company at
standard industrial rates by a local electric cooperative.

   Sales, Marketing and Distribution. In 2000, approximately 63% of the
Company's shipments of gypsum wallboard products went to customers located in
its primary historical markets of Texas, Oklahoma, Colorado and Kansas. The
remaining 37% of shipments went to customers in other states, with an emphasis
on the midwestern and southeastern regions of the United States.

   Gypsum wallboard is sold directly to building materials dealers and, in
areas where custom of the trade dictates, to contractors and applicators. The
Company did not have a gypsum wallboard customer which accounted for more than
5% of the Company's consolidated sales in 2000. Sales representatives, working
in separate territories, market gypsum wallboard for the Company. Most of these
sales representatives have significant experience in the building materials
industry.

   Sales are made on credit terms allowing a cash discount for prompt payment
in accordance with normal industry practice. Typically, orders are filled upon
receipt. The Company produces to inventory, but balances inventories with
orders. The backlog of orders for the Company's gypsum wallboard generally is
not significant.

   The Company utilizes contract and common carriers with dedicated tractors
and trailers to meet the majority of the Company's trucking delivery
requirements. The Company supplements the services provided by these dedicated
carriers with other common carriers. The Company's strategy has enabled the
Company to ship economically without affecting the timeliness of deliveries.
Additionally, the Company ships approximately one-third of its product by rail.
Rail shipments are facilitated by the Company's subsidiary, the Hollis &
Eastern Railroad Company, a short-line railroad that connects the Duke plant
with major rail lines located 15 miles away, thus enabling the Company to ship
to distant markets economically. The Company also owns 155

                                       10
<PAGE>

railcars that operate in, and are dispatched through, the national rail system.
The Company receives car hire revenues from its railcars.

   The Company also ships gypsum wallboard by rail to public warehouses located
strategically throughout the country. During late fiscal 2000, the Company
added four new warehouse locations and now utilizes a total of six. The
warehouses unload and store the gypsum wallboard until the Company instructs
them to arrange deliveries by truck to customers located in the region
surrounding the warehouses. Freight cost savings can be achieved to many
destinations in this manner because the majority of the shipping distance is by
rail which, at these distances, is typically cheaper than truck delivery.

   Competition. Each of the products sold by the Company competes with several
different brands of the same product and with different products designed for
the same purposes. Very little differentiation currently exists between the
gypsum wallboard produced by the Company and its competitors. However, the
lower weight and the enhanced technical characteristics of the recycled
paperboard produced by the Company's Lawton mill for gypsum wallboard
manufacturers should give the Company's own gypsum wallboard plant and those
producers which utilize the Company's paperboard a competitive advantage. The
Company also believes that price, personal relationships with customers,
quality and timeliness of deliveries will continue to be important methods of
differentiating itself from the competition.

   There are approximately 10 manufacturers of gypsum wallboard in the United
States, many of which have significantly greater financial resources than the
Company. Three of these companies, Georgia-Pacific, National and USG, sell, in
the aggregate, an estimated 75% of the wallboard in the United States. The
Company believes that presently its sales represent approximately 2% to 3% of
the total gypsum wallboard sold nationally and approximately 8% to 10% of the
total gypsum wallboard sold in its primary historical markets.

   In addition to the Company's expansion of the Duke plant, nearly all gypsum
wallboard manufacturers in the United States have added or have announced
additional capacity to their gypsum wallboard operations. This increase in
capacity is through both expansions of existing facilities and new
construction. The Company believes this could have a material adverse effect on
gypsum wallboard shipments and selling prices from the Duke plant.

   Larger, multiple-plant gypsum wallboard manufacturers often have a
competitive advantage over the Company in markets outside the Company's primary
markets because of the strategic location of their plants as well as other cost
efficiencies, such as the ability to spread fixed costs over several plants and
freight costs. See Item 7--Management's Discussion and Analysis of Financial
Condition and Results of Operations--Gypsum Wallboard.

Employees and Employee Relations

   The Company employs approximately 1,020 people. Approximately 630 are
covered by collective bargaining agreements with four labor unions. The
expirations of current collective bargaining agreements range from 2002 to
2004. The Company believes that its relations with employees are satisfactory.

Environmental Regulation

   The Company's operations are subject to various federal, state and local
environmental laws and regulations, including those governing discharges into
the air and water, the storage, handling and disposal of wastes, the
remediation of contaminated soil and groundwater and the health and safety of
employees. The nature of the Company's operations, which include quarrying
gypsum by open-face mining methods and the manufacture of recycled paperboard,
which involves the discharge of large volumes of waste water and solid waste,
expose it to the risk of liability or claims with respect to environmental and
worker health and safety matters. The Company believes that it is in material
compliance with applicable federal, state and local environmental laws and
regulations governing its operations.

                                       11
<PAGE>

   A number of the Company's facilities have a history of industrial use. Under
certain environmental laws a current or previous owner or operator of property,
or the generator of wastes disposed of offsite, may be jointly and severally
liable for site cleanup costs, regardless of fault. Responsible parties may
also be subject to common law claims by third parties based on damages and
costs resulting from environmental contamination emanating from a site. In
connection with the Company's preparation for a warehouse addition to the
Commerce City mill, the Company discovered and has been investigating the
presence of subsurface petroleum hydrocarbons. The Company retained an
environmental consultant who concluded that fuel oil, jet fuel, and gasoline
additives had migrated in the subsurface of the Company's property from an
adjacent property. The Company has conducted its own investigations and the
adjacent property owners have conducted their own investigations. Also, the
Company and the adjacent owners have jointly sponsored investigations. As a
result of the most recent jointly sponsored investigation, the Company again
substantially verified the results obtained in earlier investigations.
Additionally, the investigation uncovered newly discovered environmental
conditions that appear to stem from underground storage tank use on the
Company's property. The Company notified the Oil Inspection Section of the
Colorado Department of Labor and Employment of the most recent results. The
Company and a former owner of the Commerce City paper mill have entered into a
participation agreement to respond to those conditions that appear to stem from
historical underground storage tank use. Under the participation agreement,
Republic and the former owner will share costs associated with the underground
storage tanks including studies and remediation, if any, 25% and 75%,
respectively. At this time, the Company has not ascertained the future
liability, if any, of the above matters. Environmental expenditures directly
related to these matters were not material for the last three fiscal years.

   Management believes that compliance with environmental laws and regulations
is a cost of manufacturing that has widespread applicability to the members of
the industries in which the Company is competing. Historically, the Company has
not incurred material costs or penalties with respect to the remediation of
environmental problems, however, the discovery of new facts and future events,
including changes in the law, unknown practices by prior owners and spills by
neighboring facilities, could result in material environmental problems, and
there can be no assurance that such matters will not adversely affect the
Company in the future.

Item 2. Properties.

   The Company operates a gypsum wallboard manufacturing plant located at Duke,
Oklahoma, four recycled paperboard mills located at Commerce City, Colorado;
Hutchinson, Kansas; Lawton, Oklahoma and Halltown, West Virginia and three
reclaimed paper recycling centers located at Kansas City, Missouri; Topeka,
Kansas and Denver, Colorado. In addition, the Company owns an office building
at Hutchinson, Kansas, in which its corporate offices are located and leases
office space at Irving, Texas, for its Chairman. The Company considers all of
its properties, together with the related machinery and equipment contained
therein, to be well maintained, suitable and adequate for their intended
purpose and adequately utilized within reasonable limits. The following table
sets forth certain information with respect to such significant properties.

                                       12
<PAGE>

                                   PROPERTIES

   The Company's principal properties are shown below.

<TABLE>
<CAPTION>
                              Nature of         Date   Company's    Approx.       Annual Productive
       Location               Business        Acquired Interest   No. of Acres         Capacity         Type Construction
       --------         --------------------- -------- --------- -------------- ----------------------  ------------------
<S>                     <C>                   <C>      <C>       <C>            <C>                     <C>
30th Avenue             Corporate office        1992     Owned                3                    --   Open span,
 Hutchinson, Kansas                                                                                     steel and concrete
Greenway Drive          Chairman's office       1993    Leased              --                     --   Open span,
 Irving, Texas                                                                                          steel and concrete
Highway 62              Manufacture gypsum      1964    Owned/        197 plant 1.2 billion sq. ft. (1) Open span,
 Duke, Oklahoma         wallboard                       Leased       site; 2500                         steel
                                                                     owned, 740
                                                                  leased gypsum
                                                                    deposits (1)
Baddeck, Nova Scotia    Gypsum deposit          1971     Owned              492          Non-producing  --
                                                                                              Reserves
Halstead and Sherman    Manufacture recycled    1983     Owned    29 plant site         91,000 tons (2) Open span,
 Hutchinson, Kansas     paperboard                               40 other sites                         steel and concrete
Brighton Boulevard      Manufacture recycled    1983     Owned                9         52,500 tons (2) Open span,
 Commerce City,         paperboard                                                                      steel and concrete
 Colorado
Main Street             Reclaimed paper fiber   1994     Owned                2         30,000 tons (3) Open span,
 Kansas City, Missouri                                                                                  brick and concrete
Adams Street            Reclaimed paper fiber   1994     Owned              1/2         15,000 tons (3) Open span,
 Topeka, Kansas                                                                                         steel and concrete
Ironton Street          Reclaimed paper fiber   1995     Owned              1.7         10,000 tons (3) Open span,
 Denver, Colorado                                                                                       steel and concrete
Old Route 340           Manufacture recycled    1995     Owned               48         70,000 tons (2) Open span,
 Halltown, West         paperboard                                                                      steel, concrete,
 Virginia                                                                                               and concrete block
Lee Boulevard           Manufacture recycled    1998     Owned               69        220,000 tons (4) Open span,
 Lawton, Oklahoma       paperboard                                                                      steel, concrete,
                                                                                                        and concrete block
</TABLE>
--------
(1) Based on theoretical capacity operating at optimum-rated production line
    speeds 6 2/3 days per week, 24 hours per day producing only 1/2-inch gypsum
    wallboard. See Item 1--Business--Gypsum Wallboard Operations--Manufacturing
    and Gypsum Supply.
(2) Estimated capacity during current fiscal year, based on 350 production
    days, 24 hours per day.
(3) Based on a one or two shift operation, 6 days per week.
(4) The Company expects to increase the production rate gradually to the annual
    design capacity during the remainder of fiscal year 2001.

Item 3. Legal Proceedings.

   In November 1999, a former management employee of the Company's Halltown,
West Virginia recycled paperboard mill filed a civil action lawsuit in the
Circuit Court of Jefferson County West Virginia naming Republic Group
Incorporated, Republic Paperboard Company of West Virginia, d/b/a Halltown
Paperboard Company, and three others as defendants. The plaintiff alleges a
work related disability, retaliation, conspiracy and discrimination and is
seeking compensatory and punitive damages in an unspecified amount. The Company
is contesting the allegations and believes it has valid defenses against the
claim. This lawsuit is in its early stages and, at this time, the Court has
scheduled a jury trial for January, 2001. The Company has not ascertained the
future liability, if any, of the above matter.

   Other than as set forth above, there are no material pending legal
proceedings involving the Company, other than ordinary routine litigation
incidental to the business of the Company.


                                       13
<PAGE>

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

   No matters were submitted to a vote of stockholders of the Company during
the fourth quarter of fiscal year 2000.

Item 4A. Executive Officers of the Registrant.

   The following table sets forth certain information concerning the executive
officers of the Company. All of the officers, except Lon D. Lewis, James A.
Nelson, David P. Simpson and Michael W. Dirks, have been employed by the
Company during the past five years. Each officer has continually served as an
officer of the Company from the time he or she first became an officer. All
officers were elected by the Board of Directors of the Company to serve until
the next annual meeting of the Board of Directors. Phil Simpson and David P.
Simpson are father and son, respectively.

<TABLE>
<CAPTION>
Name                  Position with the Company      Age First Became an Officer
----                  -------------------------      --- -----------------------
<S>               <C>                                <C> <C>
Phil Simpson      Chairman of the Board, President    65          1961
                  Chief Executive Officer and
                  Director
Doyle R. Ramsey   Executive Vice President and        49          1992
                  Chief Financial Officer
David P. Simpson  Executive Vice President-           39          2000
                  Paperboard and Director
Geary D. Cribbs   Senior Vice President               57          1992
Todd T. Brown     Vice President                      46          1992
Susan G. Hall     Vice President                      54          1993
James M. Britz    Vice President                      49          1994
Janey L. Rife     Vice President, Secretary and       55          1995
                  Treasurer
Lon D. Lewis      Vice President                      56          1996
James A. Nelson   Vice President                      50          2000
Michael W. Dirks  Vice President and Principal        38          1998
                  Accounting Officer
</TABLE>

   Phil Simpson has been Chairman of the Board of Directors, President and
Chief Executive Officer for more than five years.

   Doyle R. Ramsey was elected Executive Vice President in August 1998 and
continues to hold the position of Chief Financial Officer. Mr. Ramsey has
overall responsibility for finance, treasury, credit and human resources. From
1998 to 2000, in addition to his financial duties as CFO, his responsibilities
included the Company's recycled paperboard segment. Prior thereto, he served as
Vice President-Finance and Chief Financial Officer from 1992 to 1998.

   David P. Simpson was elected Executive Vice President-Paperboard and to the
Company's Board of Directors in April 2000. He joined Republic in 1998 as
Manager of Mill Operations. Prior to joining the Company, he served as a
director of the Company from 1994 to 1998. He held positions as President of
Simpson Publishing Company and Manager of Avinger Timber Company prior to
joining Republic.

   Geary D. Cribbs was elected Senior Vice President in March 1998. He is
responsible for the Company's gypsum wallboard operations. Prior thereto, Mr.
Cribbs served as Vice President from 1992 to 1998, and as General Manager of
the Company's gypsum wallboard operations at Duke, Oklahoma.

   Todd T. Brown was elected Vice President in September 1992. He is
responsible for gypsum-grade paperboard sales and operations, primarily at the
Lawton and Commerce City mills.

   Susan G. Hall was elected Vice President in October 1993. She is responsible
for gypsum sales.


                                       14
<PAGE>

   James M. Britz was elected Vice President in August 1994. He is responsible
for safety and human resource functions of the Company. He served as Director
of Environmental, Safety and Health, and Human Resources from February 1993 to
August 1994.

   Janey L. Rife was elected Vice President in August 1998. She has served as
Treasurer and Secretary since May 1993.

   Lon D. Lewis was elected Vice President in September 1996. He is responsible
for diversified paperboard product sales and operations, primarily at the
Hutchinson and Halltown mills. Prior to his current responsibilities, he was
responsible for recycled paperboard sales and the Company's recovered fiber
operations. He served as Director of Engineering from March 1996 to October
1996. Prior thereto, he held various management positions with Simkins
Industries Inc. and Jefferson Smurfit Corporation.

   James A. Nelson was elected Vice President in June 2000. He is responsible
for engineering, environmental services and capital expenditure programs for
the Company. Mr. Nelson joined the Company in 1997 as Director of Engineering
and directed construction at the Lawton mill. Prior to joining Republic, Mr.
Nelson held a wide variety of positions with Fluor Daniel Inc., Marathon
Engineers/Architects/Planners and Weyerhauser Company.

   Michael W. Dirks was elected Vice President and Principal Accounting Officer
in August 1998. He has overall responsibility for accounting and management
information services. Since 1991 Mr. Dirks has held the positions of Mill
Controller, Corporate Accounting Manager, Special Projects Manager, and Manager
of Internal Audit and Management Information Services. From May 1995 to
December 1996, Mr. Dirks was employed by a public accounting and consulting
firm.

                                       15
<PAGE>

                                    PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

                      PER SHARE MARKET PRICE AND DIVIDENDS

                              YEARS ENDED JUNE 30

<TABLE>
<CAPTION>
                                          2000                    1999
                                 ----------------------- -----------------------
                                  Price Range             Price Range
                                 ------------- Dividends ------------- Dividends
                                  High   Low     Paid     High   Low     Paid
                                 ------ ------ --------- ------ ------ ---------
<S>                              <C>    <C>    <C>       <C>    <C>    <C>
First quarter................... $19.75 $13.75   $0.09   $20.88 $13.25   $0.09
Second quarter..................  18.50  13.25    0.09    20.94  13.00    0.09
Third quarter...................  16.25  10.31    0.09    21.25  12.88    0.09
Fourth quarter..................  12.00   7.69    0.09    19.75  14.69    0.09
                                                 -----                   -----
                                                 $0.36                   $0.36
                                                 =====                   =====
</TABLE>

   Republic Group Incorporated common stock is traded on the New York Stock
Exchange under the symbol "RGC". At September 21, 2000, the number of
stockholders of record was approximately 880.

   Pursuant to the Premier Merger Agreement, the Company is required to suspend
dividend payments to its stockholders.

                                       16
<PAGE>

Item 6. Selected Financial Data.

                                FINANCIAL REVIEW

             In thousands, except per share, ratio and percent data

<TABLE>
<CAPTION>
                                2000      1999      1998      1997      1996
                              --------  --------  --------  --------  --------
<S>                           <C>       <C>       <C>       <C>       <C>
Net sales...................  $190,510  $137,942  $128,285  $123,697  $117,902
Income before income taxes
 (5)........................     4,603    24,940    28,182    31,141    23,974
Net income (5)..............     2,761    15,232    17,799    19,663    14,912
Total capital employed (1)..   324,785   243,307   110,214    88,289    96,716
Stockholders' equity, at
 year-end...................   102,912   104,015    92,179    77,845    62,664
Total assets................   349,163   268,168   125,475   100,400   106,124
Interest-bearing debt
 (including current
 portion)...................   200,000   125,000     5,950       --     24,840
PER SHARE DATA
Basic earnings per share
 (4)........................  $   0.23  $   1.29  $   1.52  $   1.68  $   1.28
Diluted earnings per share
 (4)........................      0.23      1.29      1.51      1.67      1.27
Common dividends (4)........     0.360     0.360     0.360     0.344     0.259
Stockholders' equity, at
 year-end (4)...............      8.68      8.78      7.81      6.60      5.34
RATIO AND PERCENT DATA
Net operating profit after-
 tax as a percent of net
 sales (2)..................         3%       13%       14%       17%       13%
Return on average capital
 employed (percent) (2).....         3        16        21        20        19
Return on average
 stockholders' equity
 (percent) (3)..............         3        16        21        28        26
Interest-bearing debt as a
 percent of total capital
 employed...................        62        51         5       --         26
Ratio of current assets to
 current liabilities........       2.0       1.5       1.7       2.1       2.8
Ratio of year-end market
 value per common share to
 diluted earnings per share
 (4)........................      39.1      14.0      13.9      12.1      10.2
Ratio of average market
 value per share to average
 book value per share (4)...       1.6       2.0       2.7       2.5       2.4
Basic weighted-average
 shares outstanding (4).....    11,825    11,771    11,705    11,698    11,640
Diluted weighted-average
 shares outstanding (4).....    11,852    11,851    11,798    11,795    11,736
</TABLE>
--------
     Notes:
(1)  Total capital employed is equivalent to total assets less noninterest-
     bearing current liabilities.
(2)  Net operating profit after-tax is equivalent to operating profit reduced
     by taxes computed using federal statutory tax rates. Return on average
     capital employed relates net operating profit after-tax to average total
     capital employed. Construction in progress assets related to the expansion
     of the Duke, Oklahoma gypsum wallboard plant and the construction of the
     Lawton, Oklahoma paperboard mill began in fiscal year 1997. These assets,
     along with excess cash associated with the financing of these projects
     (defined as cash, cash equivalents and investments exceeding $2,000,000)
     were not included in total capital employed until those assets were placed
     in service, as they would distort period-to-period comparisons.
     Substantially all of the assets related to the Duke plant expansion and
     the Lawton mill construction were placed in service during the December
     1998 and March 2000 quarters, respectively.
(3)  Return on average stockholders' equity is net income divided by average
     stockholders' equity employed during the year.
(4)  All references to share amounts, per share amounts, and stock prices
     reflect a 10% stock dividend distributed in March 1997.
(5)  During fiscal year 2000, the Company wrote down the assets of the
     Halltown, West Virginia recycled paperboard mill. The Company incurred a
     non-cash charge of approximately $16,724,000 or $10,034,000 after taxes.
     Additionally, pre-operating costs associated with the start up of the
     Lawton mill in fiscal years 1999 and 2000 were $1,123,000 and $2,679,000,
     respectively.

                                       17
<PAGE>

Item 7. Management's Discussion And Analysis of Financial Condition And Results
of Operations.

Overview

   Republic Group Incorporated is an integrated manufacturer and distributor of
gypsum wallboard and recycled paperboard and also collects, processes and
markets reclaimed paper fiber. The Company's operations are split into two
operating segments: (i) recycled paperboard operations, which includes its
reclaimed paper fiber operations, and (ii) gypsum wallboard operations. Before
intercompany eliminations, the Company's recycled paperboard and gypsum
wallboard businesses accounted for approximately 47% and 53%, respectively, of
Republic's total net sales in fiscal 2000.

   During fiscal 2000, the Company's gypsum wallboard business segment received
approximately half of its recycled paperboard requirements (approximately 9% of
total recycled paperboard shipments) from its own internal recycled paperboard
mills. Historically, the Company's Hutchinson and Commerce City mills have
supplied substantially all of the Company's gypsum-grade recycled paperboard
requirements for the Duke gypsum wallboard plant. In fiscal 2000, the demand
for gypsum-grade recycled paperboard was very strong and the Company elected to
sell more of this grade to other outside gypsum wallboard manufacturers.
Additionally, in anticipation of the commencement of the Lawton mill's
beginning commercial operations during fiscal 2000, the Company began
transitioning approximately one-third of the Hutchinson mill's production from
gypsum-grade paperboard to other paperboard products. These events made it
necessary for the Duke plant to purchase a larger portion of its gypsum-grade
paperboard needs from external suppliers. With commercial operations commencing
at the Company's Lawton mill in March 2000, the Company expects substantially
all of the requirements for gypsum-grade paperboard for the Company's gypsum
wallboard operations will be supplied internally during fiscal 2001. In fiscal
2000, the Company's recycled paperboard operations purchased approximately 70%
of its requirements for reclaimed paper fiber from the Company's paper
recycling operations and the remainder from many non-affiliated suppliers. The
Company does enter into long-term contracts with its reclaimed paper suppliers
for a portion of its requirements, however, the majority is purchased month to
month under long-standing relationships. The Company believes that its sales of
recycled paperboard and reclaimed paper fiber to third parties at market prices
partially hedge against increased costs of these products incurred by the
Company's gypsum wallboard and recycled paperboard operations, respectively.

   In 1997, the Company began a strategic initiative to effectively double the
productive capacity of both of its operating segments. The Company's gypsum
wallboard segment has experienced strong results in the last several years as a
result of the strong demand for gypsum wallboard, primarily attributable to the
strength of the economy in general and the construction industry in particular.
During fiscal 1999, the Company completed an expansion project at its Duke
gypsum wallboard plant that increased its productive theoretical design
capacity from 570 million to 1.2 billion square feet annually. Theoretical
design capacity assumes operating at optimum-rated production line speeds over
industry standard operating days producing only 1/2-inch gypsum wallboard.
Depending on the mix of actual products produced, the Company believes its
annual practical capacity is approximately 1.0 to 1.1 billion square feet. In
fiscal 2000, production and shipments increased 25% and 23%, respectively, from
fiscal 1999 levels; however, the Duke plant operated at approximately 70% of
practical capacity primarily due to operating inefficiencies and weaker demand
in the last half of the fiscal year. The Company is continuing to experience
weakening demand and a softening of prices for its gypsum wallboard products.
The Company believes production improvements can be obtained during fiscal 2001
with additional training and minimal capital investment.

   In March 2000, the Company commenced commercial operations at its newly
constructed recycled paperboard mill at Lawton, Oklahoma. The Lawton mill will
produce primarily light-weight gypsum-grade paperboard. Management believes
that the operation of the Lawton mill will position Republic as one of the
largest third-party suppliers of gypsum-grade recycled paperboard in North
America. The addition of the Lawton mill approximately doubled the Company's
recycled paperboard capacity. The Company intends to sell approximately 40% to
50% of the Lawton mill's output pursuant to a long-term supply agreement with
James Hardie Gypsum, Inc. and to use approximately 20% to 25% of the Lawton
mill's output to source its own

                                       18
<PAGE>

gypsum wallboard operations at Duke, Oklahoma. The Company has signed gypsum-
grade paperboard supply agreements with two other gypsum wallboard
manufacturers. The cost of the Lawton mill totaled approximately $179,000,000,
inclusive of capitalized interest.

   The Company's revenues have increased significantly since 1994. In 1994, the
Company purchased reclaimed paper fiber operations at Kansas City, Missouri and
Topeka, Kansas. These two facilities provide the Hutchinson, Kansas and the
Lawton, Oklahoma recycled paperboard mills with a portion of their reclaimed
paper fiber needs along with sales to non-affiliated customers. In 1995, the
Company purchased a 100% recycled paperboard mill at Halltown, West Virginia
giving the Company a presence in the East Coast region. The Company, in early
fiscal 1996, began operations at a paper fiber recycling center at Denver,
Colorado with a portion of its shipments used to supply the Commerce City,
Colorado recycled paperboard mill. In 1998, the Company completed a five-year
plan to increase its productive capacity of the Commerce City and Hutchinson
mills by 25%. In fiscal 1999, the Company added a second production line at its
Duke gypsum wallboard plant that approximately doubled its capacity. In March
2000, the Company commenced commercial operations at its newly constructed
Lawton, Oklahoma 100% recycled paperboard mill that will primarily produce
gypsum-grade paperboard. As of June 30, 2000, the rated annual capacity of the
Company's four recycled paperboard mills was 433,500 tons. The rated capacity
includes 220,000 tons at the Lawton mill. The Company expects the Lawton mill
will reach its productive capacity levels, after the start-up phase, during
fiscal year 2001.

Presentation of Financial Information

   In the following discussion of the Company's results of operations, segment
results are presented prior to intercompany eliminations. Sales of recycled
paperboard to the Duke plant are accounted for as sales by the recycled
paperboard segment and included in cost of sales by the gypsum wallboard
segment. These intersegment sales during fiscal years 2000, 1999 and 1998
accounted for approximately 9%, 14%, and 13%, respectively, of the recycled
paperboard segment's net sales. Unless otherwise stated, sales of reclaimed
paper fiber within the recycled paperboard segment are eliminated in
determining recycled paperboard segment results of operations. The Company
believes that its intercompany sales approximate prevailing market prices. In
determining operating profits for each segment, corporate general and
administrative expenses have not been allocated to that segment.

Fiscal 2000 Compared to Fiscal 1999

   General. In fiscal 2000, the Company recorded record net sales of
$190,510,000, a 38% increase from the $137,942,000 posted in fiscal 1999. The
increase in fiscal 2000 was principally the result of a 23% increase in gypsum
wallboard shipments, a 16% increase in selling prices of gypsum wallboard and
commencement of commercial operations at the Lawton mill in March 2000.

   Financial results in fiscal 2000 were adversely affected by a non-cash
impairment charge associated with a write-down of the assets at the Company's
Halltown recycled paperboard mill due to poor operating results and continued
weakness in East Coast paperboard markets. In June 2000, the Company initiated
a process to solicit potential buyers of the Halltown mill and now believes
that after the impairment write-down, the carrying value of the mill
approximates the fair market value of the facility. The Company incurred an
after-tax charge of approximately $10,034,000, or $0.85 per diluted share, in
fiscal 2000 due to the impairment. Consolidated operating profits in fiscal
2000 of $26,334,000, excluding the impairment charge, were 2% below the
$26,861,000 recorded in fiscal 1999. Selling and administrative expenses as a
percent of net sales decreased to 12% in fiscal 2000 from 14% in fiscal 1999
chiefly due to the substantial increase in net sales. Consolidated net income
was adversely affected by a $3,125,000 increase in interest expense, net of
interest income, in fiscal 2000 from fiscal 1999. The majority of the net
interest expense increase was realized in the June 2000 quarter. Prior to
commencement of commercial operations at the Lawton mill, the Company
capitalized a significant portion of its interest expense as a cost of
constructing the mill. Interest expense charges will negatively affect the
Company's consolidated net income in future periods.

                                       19
<PAGE>

   As a result of the factors listed above, the Company's net income decreased
to $2,761,000 in fiscal 2000 from $15,232,000 in fiscal 1999. Diluted earnings
per share decreased in fiscal 2000 to $0.23 per share, down from $1.29 per
share in fiscal 1999.

   Recycled Paperboard. Shipments of recycled paperboard increased 15% from
185,793 tons in fiscal 1999 to 213,033 tons in fiscal 2000 largely as a result
of commencement of commercial operations at the Lawton mill during March 2000.
Additionally, shipments to unaffiliated customers of recovered paper fiber
increased to 108,855 tons from 95,161 tons in fiscal 1999, a 14% increase.

   Net sales for the recycled paperboard segment increased 25% to $93,362,000
in fiscal 2000 from $74,474,000 in fiscal 1999 due to the aforementioned
increase in shipments, and a 3% and 76% increase in per unit selling prices of
recycled paperboard and recovered paper fiber, respectively. The increase in
recycled paperboard per unit selling prices was more than offset by a 31%
increase in per unit variable cost of sales. A significant portion of the
increase was attributable to the cost of reclaimed paper fiber, the principal
raw material used in the manufacture of recycled paperboard, and to a lesser
extent, higher utility costs at the paperboard facilities and inefficiencies
associated with the start-up at the Lawton mill. See--Trends and Developments--
Recycled Paperboard. The segment's operating profits declined from $6,530,000
in fiscal 1999 to an operating loss of $26,380,000 in fiscal 2000. The non-cash
impairment charge at the Halltown mill accounted for $16,724,000 of the fiscal
2000 operating loss. In addition to the impairment charge, the Halltown mill
posted an operating loss of $5,665,000 in fiscal 2000 compared to an operating
loss of $754,000 in fiscal 1999. The Halltown mill has been hindered by
softness in the East Coast markets for the products it produces and increased
reclaimed paper fiber costs. Shipments from the Halltown mill have declined 6%
and 14%, respectively, over the last two fiscal years.

   In addition, fiscal 2000 operating results were unfavorably affected by pre-
operating costs of $2,679,000 incurred as a result of the Lawton mill project.
Also, the June 2000 quarter was the first full quarter that non-cash
depreciation expense was recognized for the Lawton mill. The Company
anticipates depreciation charges, related to the construction of the Lawton
mill, will total approximately $9,000,000 annually. During the Company's June
2000 quarter, the Lawton mill operated at approximately 60%-65% of capacity.
Currently the mill is operating at approximately 70% of capacity. This is in
line with the Company's expectations for this stage of the production ramp-up
schedule. The Company expects to increase the production rate of the Lawton
mill gradually to the design capacity during the remainder of fiscal year 2001.
During the June 2000 quarter, the Lawton mill produced and sold other, lower-
margined, paperboard products in addition to gypsum-grade paperboard. During
fiscal year 2001, the Company plans to produce more gypsum-grade paperboard
each quarter and less of the other paperboard products as its gypsum wallboard
customers shift from their current suppliers when their existing supply
agreements expire.

   Gypsum Wallboard. During fiscal 2000, shipments of gypsum wallboard
increased 23% to 725,885 million square feet from 589,894 million square feet
in fiscal 1999 due to the expansion of the Duke plant and the strong demand for
gypsum wallboard. The increase in shipments and a 16% increase in average
selling prices resulted in net sales of the gypsum wallboard segment to
increase 44% to $105,566,000 in fiscal 2000 from $73,557,000 in fiscal 1999.
Due to similar factors, operating profits for the segment increased to
$44,738,000 in fiscal 2000 from $28,478,000 in fiscal 1999, a 57% improvement.
Operating profits were negatively influenced by a 10% increase in unit
operating costs, a majority of which was due to the increase in the cost of
gypsum-grade paperboard and, to a lesser extent, higher natural gas prices.
See--Trends and Developments--Gypsum Wallboard.

Fiscal 1999 Compared to Fiscal 1998

   General. In fiscal 1999, the Company recorded record net sales of
$137,942,000, an 8% increase from the $128,285,000 posted in fiscal 1998. The
increase in fiscal 1999 was principally the result of a 4% increase in gypsum
wallboard shipments and a 15% increase in selling prices of gypsum wallboard.


                                       20
<PAGE>

   Consolidated operating profits in fiscal 1999 of $26,861,000 approximated
the $27,005,000 recorded in fiscal 1998. Selling and administrative expenses as
a percent of net sales increased to 14% in fiscal 1999 from 12% in fiscal 1998
mainly due to an increase of management and support staff related to expansion
projects at the Duke wallboard plant and the Lawton mill. Consolidated net
income was adversely affected by a $2,038,000 increase in interest expense, net
of interest income, in fiscal 1999 from fiscal 1998 primarily associated with
the $100,000,000 of Senior Subordinated Notes (the "Notes") issued in July
1998. In fiscal 1998, consolidated net income was augmented by $1,000,000 of
non-taxable life insurance income from a policy owned by the Company on an
executive officer. A shift in state income tax liabilities increased the
Company's effective tax rate to 39% in fiscal 1999 from 37% in fiscal 1998. The
fiscal 1998 effective tax rate benefited from the aforementioned non-taxable
life insurance income.

   Primarily as a result of the factors stated above, the Company's
consolidated net income during fiscal 1999 decreased to $15,232,000 from
$17,799,000 in fiscal 1998, a decrease of 14%. Diluted earnings per share
decreased in fiscal 1999 to $1.29 per share, down from $1.51 in fiscal 1998.

   Recycled Paperboard. Shipments of recycled paperboard decreased 3% from
190,614 tons in fiscal 1998 to 185,793 in fiscal 1999 chiefly as a result of
weakness in the East Coast uncoated recycled paperboard markets which adversely
affected the sales of certain primary products produced by the Company. The
Company was able to increase its overall shipments of recovered paper fiber by
23%. Additionally, shipments to unaffiliated customers of recovered paper fiber
increased to 95,161 tons from 78,441 in fiscal 1998, a 21% increase.

   Net sales for the recycled paperboard segment decreased 6% to $74,474,000 in
fiscal 1999 from $79,228,000 in fiscal 1998 due to a 3% decrease in recycled
paperboard shipments and a 4% decline in per unit net selling prices of
recycled paperboard. The decline in per unit net selling prices was partially
offset by a 4% decrease in per unit variable cost of sales, principally
reclaimed paper fiber. The segment's operating profits declined from $9,658,000
in fiscal 1998 to $6,530,000 in 1999. The reduction in shipments, weakness in
East Coast markets, and $1,123,000 of expenses related to the accelerated
hiring and training of new employees at the Lawton mill were the primary
factors for the decline in the segment's operating profits. Operating margins
for the recycled paperboard segment, excluding expenses associated with the
Lawton mill, were 10% and 12%, respectively, for fiscal 1999 and fiscal 1998.

   Gypsum Wallboard. During the fourth quarter of fiscal 1999, the Company
shipped a record 189 million square feet of gypsum wallboard compared to 137
million square feet in the June 1998 quarter. This was the first full quarter
of operations for the expanded Duke plant. Additionally, during fiscal 1999,
shipments of gypsum wallboard also increased to a record 590 million square
feet from the 566 million square feet shipped in fiscal 1998. This resulted
primarily from the expansion project at the Duke plant and the strong demand
for gypsum wallboard. The increased shipments and 15% increase in selling
prices caused the gypsum wallboard segment net sales to increase to $73,557,000
in fiscal 1999 compared to $59,462,000 in fiscal 1998, a 24% increase. Total
per unit costs increased 23% in fiscal 1999 from fiscal 1998. The principal
factors affecting the increase in per unit costs were (i) inefficiencies in
operating the Duke plant while constructing the second line, (ii) the addition
and training of new production and management employees several months in
advance of start-up of the second production line, (iii) inefficiencies with a
slower than anticipated start-up of the re-configured Duke plant, and (iv)
additional depreciation related to the expansion. The increase in shipments and
selling prices more than offset the increase in costs. As a result, operating
profits increased to $28,478,000 in fiscal 1999 from $24,342,000 in fiscal
1998. Operating margins for the gypsum wallboard segment were 39% in fiscal
1999 compared to 41% in fiscal 1998.

Trends and Developments

   Recycled Paperboard. The primary variable affecting the results of the
Company's recycled paperboard segment, other than the aforementioned write-down
of the assets of the Company's Halltown mill, has been the cost of reclaimed
paper fiber. Because reclaimed paper fiber is a strict commodity influenced by
supply and

                                       21
<PAGE>

demand, the cost of reclaimed paper fiber can fluctuate significantly in a
short period of time. Historically, except for increases of short duration, the
Company has generally been able to raise its recycled paperboard selling prices
as the cost of reclaimed paper fiber increases, but there is generally a 30 to
90 day time lag for implementation of such selling price increases. As a
result, the time lag adversely impacts the operating results of the segment.
Conversely, the Company becomes the beneficiary of slowly declining selling
prices and rapidly declining reclaimed paper fiber costs, resulting in improved
operating results for the recycled paperboard segment. Reclaimed paper fiber
costs represented approximately 29%, 23% and 30%, respectively, of the total
operating costs for the recycled paperboard mills in fiscal 2000, fiscal 1999
and fiscal 1998. Reclaimed paper fiber costs rose sharply during the first
quarter of fiscal 1998, but gradually declined during the remainder of the
fiscal year. As the Company began to increase net selling prices during the
first half of 1998, the cost of reclaimed paper fiber started to decline thus
not allowing the implementation of a general price increase. As a result, in
fiscal 1998, the recycled paperboard segments operating margin decreased to
12%. In fiscal 1999, reclaimed paper fiber costs declined or remained steady
during most of the year, but then began increasing during the fourth quarter.
In May of 1999, the quoted price of old corrugated containers ("OCC"), the
principal grade of reclaimed paper fiber used by the Company, was approximately
$40 per ton. Throughout fiscal 2000 the price of OCC steadily increased
reaching $115 per ton by May 2000. Other grades of reclaimed paper fiber used
by the Company also increased significantly. The Company was able to modestly
increase selling prices on certain grades of recycled paperboard to mitigate
some of the increase in reclaimed paper fiber. However, the paper margin for
the Company's recycled paperboard mills, the difference between net selling
prices and the cost of reclaimed paper fiber, declined 14%, or approximately
$42 per ton, in fiscal 2000. Since June 2000, reclaimed paper fiber costs have
declined, which should help improve future operating results at the Company's
recycled paperboard mills.

   Another significant cost in the manufacture of recycled paperboard is fuel,
or more specifically, natural gas. The cost of natural gas increased
significantly during the last half of fiscal year 2000, and at this time, the
trend is continuing. All of the Company's recycled paperboard mills
periodically contract fuel supplies in advance for varying time limits to hedge
against fluctuations in the cost of fuel. The Company has historically been
successful at contracting future supplies at favorable rates. At the current
time, the recycled paperboard mills do not have significant amounts of a
natural gas supply under contract and are purchasing most of the supply at spot
market prices. Until these prices recede, the Company's recycled paperboard
operating results will continue to be adversely impacted.

   The Company is aware of one other competitor that is in the process of
converting an existing paperboard mill to produce gypsum-grade paperboard.
Production at that mill is anticipated to begin by the end of calendar year
2000. Another competitor has announced plans to convert an existing paperboard
mill that will primarily produce gypsum-grade paperboard for its own use.
Production at that mill is anticipated to begin by the end of calendar year
2001. This new capacity could have a material adverse effect on the Company's
gypsum-grade paperboard business.

   Gypsum Wallboard. The price of and demand for gypsum wallboard depends on
the level of new construction, home repair and remodel activity and industry
capacity, which in turn, depends on general economic conditions, interest rates
and the availability of short and long-term financing. Low interest rates, a
strong domestic economy and industry capacity constraints caused demand for
gypsum wallboard to be very strong throughout fiscal years 1998 and 1999.
Interest rate hikes, a decrease in housing starts and new gypsum wallboard
capacity coming on-line during fiscal year 2000 have negatively affected gypsum
wallboard demand and selling prices during the last half of the fiscal year.
Average selling prices of gypsum wallboard declined approximately 15% during
the June 2000 quarter from the December 1999 quarter. Additionally, the Company
realized a 9% decrease in shipments during the last six months of fiscal 2000
compared to the first six months of the year. The Company is still experiencing
a decrease in demand and a further softening in selling prices.

   In addition to the Company's expansion of the Duke plant, a significant
number of gypsum wallboard manufacturers in the United States have added or
have announced additional capacity increases either by

                                       22
<PAGE>

expansions of existing facilities or new construction. The Company believes the
increase in gypsum wallboard capacity could have a material adverse effect on
shipments and selling prices of gypsum wallboard.

   The expansion of the Duke plant increased its practical capacity to
approximately 1.0 to 1.1 billion square feet annually. Although fiscal 2000
production and shipments increased 25% and 23%, respectively, from fiscal 1999
levels, the Duke plant operated at approximately 70% of practical capacity
primarily due to operating inefficiencies and weaker demand during the last
half of the fiscal year. The Company believes that these inefficiencies are the
primary cause for per unit operating costs increasing 35% from fiscal 1998
costs. The Company expects significant production improvements will be obtained
during fiscal 2001. Additionally, gypsum wallboard operating costs in fiscal
2000 were affected by natural gas prices and the cost of gypsum-grade
paperboard which were influenced by the cost of reclaimed paper fiber. See--
Trends and Developments--Recycled Paperboard.

Environmental Matters

   In connection with the Company's construction of a warehouse addition to its
paperboard mill located at Commerce City, Colorado, a suburb of Denver, the
Company discovered and has been investigating the presence of subsurface
petroleum hydrocarbons. The Company retained an environmental consultant who
concluded that fuel oil, jet fuel and gasoline additives had migrated in the
subsurface of the Company's property from an adjacent property. The Company has
conducted its own investigations and the adjacent property owners have
conducted their own investigations. Also, the Company and the adjacent owners
have jointly sponsored investigations. As a result of the most recent jointly
sponsored investigation, the Company again substantially verified the results
obtained in earlier investigations. Additionally, the investigation uncovered
newly discovered environmental conditions that appear to stem from historical
underground storage tank use on the Company's property. The Company notified
the Oil Inspection Section of the Colorado Department of Labor and Employment
of the most recent results. The Company and a former owner of the Commerce City
paper mill have entered into a participation agreement to respond to those
conditions that appear to stem from historical underground storage tank use.
Under the participation agreement, Republic and the former owner will share
costs associated with the underground storage tank including studies and
remediation, if any, 25% and 75%, respectively. At this time, the Company has
not ascertained the future liability, if any, of the above matters.
Environmental expenditures directly related to these matters were not material
during the last three fiscal years.

   Management believes that compliance with environmental laws and regulations
is a cost of manufacturing that has widespread applicability to the members of
the industries in which the Company is competing. Historically, the Company has
not incurred material costs or penalties with respect to the remediation of
environmental problems, however, the discovery of new facts and future events,
including changes in the law, unknown practices by prior owners and spills by
neighboring facilities, could result in material environmental problems, and
there can be no assurance that such matters will not adversely affect the
Company's financial condition, results of operations or competitive position in
the future.

Effect of Inflation

   Management believes that general inflation has not had a material impact on
the Company's net sales or operating income the last three fiscal years. The
cost of reclaimed paper fiber, which is the principal raw material component
used in the manufacture of recycled paperboard and the cost of natural gas, has
both increased and decreased significantly during the past three years. The
Company believes these shifts were caused by changes in supply and demand and
not general inflation or deflation.

                                       23
<PAGE>

Liquidity and Capital Resources

   The following is a summary of certain financial statistics and balances
related to the liquidity and financial condition of the Company for the three
fiscal years ended June 30.

<TABLE>
<CAPTION>
                                                      2000     1999     1998
                                                    -------- -------- --------
                                                          (in thousands)
                                                          --------------
<S>                                                 <C>      <C>      <C>
Working capital.................................... $ 34,738 $ 13,126 $ 11,024
Current ratio......................................    2.0:1    1.5:1    1.7:1
Cash and cash equivalents plus investments and
 marketable securities............................. $  7,414 $  6,192 $  1,124
Net cash provided by operating activities.......... $ 12,094 $ 29,031 $ 28,299
Additions to property, plant and equipment......... $ 81,674 $135,471 $ 31,191
Dividends paid..................................... $  4,257 $  4,238 $  4,215
Long-term debt..................................... $200,000 $125,000 $  5,950
Total capital employed (total assets less
 noninterest-bearing current liabilities).......... $324,785 $243,307 $110,214
</TABLE>

   On July 15, 1998, the Company received proceeds from the sale of
$100,000,000 of 9.5% Senior Subordinated Notes (the "Notes") with a maturity
date of July 15, 2008. The proceeds from the Notes, along with a credit
facility of up to $85,000,000 entered into with a bank syndicate on July 15,
1998 were used primarily to finance the construction of the Lawton mill and for
general and corporate purposes, including working capital. On July 15, 1998,
the Company used a portion of the proceeds from the sale of the Notes to repay
the outstanding principal balance ($5,950,000) of a then existing revolving
credit facility along with accrued interest. Upon repayment, the Company
terminated the revolving credit facility. Due to the recently expanded scope of
the Company's business and increased working capital requirements, the Company
signed amendments to the existing credit facility on March 1, 2000 and June 27,
2000, increasing the amount available to $115,000,000.

   Interest payment dates on the Notes are January 15 and July 15, and
commenced on January 15, 1999. Each semiannual interest payment is $4,750,000.
The Notes are redeemable at the option of the Company, in whole or in part, at
any time on or after July 15, 2003, at a redemption price of 104.75% which
reduces to 100% on or after July 15, 2005. In addition, prior to July 15, 2001,
the Company may redeem up to 35% of the principal amount of the Notes with the
net cash proceeds received by the Company from one or more public equity
offerings, at a redemption price of 109.50%. The Notes include financial and
other covenants of the kind generally included in such indebtedness.

   The amended $115,000,000 credit facility includes a $60,000,000 term loan
effective March 1, 2000 and a $55,000,000 revolving credit facility. The
principal of the term loan is being paid quarterly over four years and
commenced on June 1, 2000 with payments of $1,500,000, $7,500,000, $13,500,000,
$19,500,000 and $18,000,000 due during fiscal years 2000, 2001, 2002, 2003 and
2004, respectively. At June 30, 2000, the Company had borrowed $41,500,000
under the revolving credit facility. Borrowings in excess of $40,000,000 are
payable on April 2, 2001 and the balance will mature on March 1, 2004.
Consequently, the $1,500,000 payable on April 2, 2001 has been reflected as a
short-term note payable in the accompanying balance sheet. Availability under
the credit facility is not subject to a borrowing base. The borrowings under
the credit facility are guaranteed by each of the Company's material
subsidiaries and are secured by a mortgage on the Lawton mill, a pledge of
stock of the Company's subsidiaries and security interests in substantially all
other personal property of the Company and its subsidiaries. During any period
that outstanding loans under the credit facility exceed $50,000,000, the
lenders may require that other real property and improvements of the Company
and its subsidiaries be mortgaged as security for the credit facility.
Outstanding principal amounts on the credit facility bear interest at a
variable rate equal to, at the election of the Company, (i) LIBOR, plus an
agreed margin (ranging from 75 to 225 basis points), which is to be established
quarterly based upon the Company's leverage ratio or (ii) the higher of (a)
Bank of America corporate prime rate and (b) the sum of 1/2 of 1% plus the
federal funds rate, plus, in each case, an agreed margin (ranging from 0 to 100
basis points). Interest payments under

                                       24
<PAGE>

the credit facility are payable quarterly. Under the credit facility, the
Company is required to adhere to a number of financial and other covenants,
including covenants relating to excess cash flow, debt to EBITDA (earnings
before interest, taxes, depreciation and amortization) ratio, interest coverage
ratio, minimum EBITDA, and limitations on capital expenditures and dividends.
The credit facility does not restrict the transfer of funds to the parent by
the subsidiaries. The Company had borrowings outstanding of $100,000,000 under
the credit facility at June 30, 2000 at a weighted-average interest rate of
9.00%.

   For the year ended June 30, 2000, the Company funded $81,674,000 of
additions to property, plant and equipment, $4,257,000 of dividends to
shareholders and $417,000 of debt issue costs with $12,094,000 of cash
generated from operations and $75,000,000 of borrowings from its bank credit
facility. Capital expenditures to complete the Lawton mill were approximately
$63,500,000 during fiscal 2000. The Company believes no significant capital
expenditures remain related to the Lawton mill or improving efficiencies at the
Duke plant. The Company anticipates capital expenditures for all facilities in
fiscal 2001 will be reduced to between $4,000,000 and $6,000,000, including
capital expenditures at the Lawton mill and Duke plant. As financial conditions
improve, the Company may consider other capital projects that could reduce
costs or increase productivity. The credit facility imposes limits on the
Company's ability to make capital expenditures, but the Company expects that
those limits will not prevent it from implementing its capital expenditure
program.

   At June 30, 2000, the Company had available for borrowing, $13,500,000 of
the $55,000,000 revolving credit facility. Additionally at June 30, 2000, the
Company had income tax refunds receivable of $16,945,000 primarily due to the
Lawton mill being placed in service in March 2000 and the associated
accelerated tax depreciation. For tax purposes, the Lawton depreciation created
a net operating loss that allows the Company to have its fiscal 2000 tax
estimates refunded and to apply the taxable net loss against prior years
taxable income. In late July 2000, the Company had received approximately
$10,000,000 of this refund and anticipates receipt of the remaining refunds
during fiscal 2001. The Company believes that the remaining portion available
under the credit facility, together with cash generated by operations in fiscal
2001, including the income tax refunds, and existing cash balances will be
sufficient (i) to fund the capital expenditure requirements identified above,
(ii) to fund the Company's working capital requirements including interest
payments, (iii) to meet its debt repayment obligations and (iv) to fund other
general and corporate requirements.

   The Company paid cash dividends of $4,257,000, $4,238,000 and $4,215,000 in
fiscal 2000, 1999 and 1998 respectively. Quarterly dividends historically have
been paid in September, December, March and June. Both the schedule and payment
of cash dividends are subject to the approval of the Company's Board of
Directors which considers the Company's general financial condition and
projected cash flows when approving the level of dividend payment, if any. The
credit facility and the Indenture impose limits on the Company's ability to pay
dividends. The Premier Merger Agreement requires the Company to suspend
dividend payments to its stockholders.

Market Risk Exposure

   The Company is exposed to market risk from changes in interest rates which
may adversely affect its financial position, results of operations and cash
flows. In seeking to minimize the risks from interest rate fluctuations, the
Company manages exposures through its regular operating and financing
activities. The Company does not use financial instruments for trading or other
speculative purposes and is not a party to any derivative financial
instruments. In general, the Company does not engage in hedging of commodities
or other contracts that would cause material exposure to market risk relating
to commodity prices or foreign currency exchange rates.

   The Company is exposed to interest rate risk primarily through its borrowing
activities. At June 30, 2000, the Company had outstanding $100,000,000 of Notes
carrying a 9.5% fixed interest rate. This fixed rate obligation does not expose
the Company to risk of earnings or cash flow loss due to the changes in market
interest rates, however, the fair value of the Notes is sensitive to changes in
interest rates. A hypothetical 100

                                       25
<PAGE>

basis point change in interest rates would result in a corresponding change of
approximately $5,400,000 in the fair value of the Notes assuming a July 15,
2008 redemption.

   At June 30, 2000, the Company had $100,000,000 of borrowings outstanding
under its credit facility under which any outstanding balance bears interest at
variable rates. With respect to all borrowings under the credit facility,
interest rate changes generally do not affect the fair value thereof, but do
impact future earnings and cash flows. A hypothetical 100 basis point change in
interest rates would have a $1,000,000 annual impact on the Company's future
earnings and cash flows based on the Company's outstanding variable rate
borrowings as of June 30, 2000. See--Liquidity and Capital Resources for
additional discussion of the terms of the Notes and the credit facility.

Forward-Looking and Other Statements

   Any statements contained in this document, including without limitation
statements to the effect that Republic or its management "believes," "expects,"
"anticipates," "plans," "may," "will," "projects," "continues" or "estimates,"
or statements concerning "potential," or "opportunity" or other variations
thereof or comparable terminology or the negative thereof, that are not
statements of historical fact should be considered forward-looking statements
pursuant to the Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995. Investors should be aware of factors and uncertainties that
could have a material, negative impact on the Company's results. These include,
but are not limited to, the following:

1. In the recent past, the Company and the industry as a whole have seen, due
   to supply and demand extremes, severe fluctuations in the cost of reclaimed
   paper fiber. A rapid rise in the cost of this raw material restricts margins
   at the Company's recycled paperboard mills. This is due generally to a 30 to
   90 day time lag between increased raw material costs and subsequent selling
   price increases. Additionally, selling price increases may only be
   achievable if recycled paperboard demand allows industry operating rates to
   remain at or above historical levels.

2. The Company's recycled paperboard mills and gypsum wallboard manufacturing
   facilities utilize large amounts of either natural gas or coal. Increases in
   the prices of either of these two commodities may be detrimental to profit
   margins. The Company's manufacturing operations are located in areas of the
   country where natural gas and coal are plentiful. The Company believes,
   discounting a short-term variation, that over the long-term its fuel costs
   will at least be comparable to its competitors.

3. The Company is generally aware of other manufacturers constructing or
   expanding their gypsum wallboard plants or recycled paperboard mills. These
   plants may compete in the Company's product and market areas which could
   have a negative impact on the Company's results. See--Trends and
   Developments.

4. Substitution of other raw materials such as plastics, aluminum or even
   virgin paperboard for recycled paperboard or other substitutions for gypsum
   wallboard could affect the Company's future results.

5. The Company believes it has sufficient reserves of gypsum ore but there are
   still risks associated with mining the ore such as removal costs, quality of
   ore, and possible future environmental regulations.

6. The impact on the Company due to industry consolidation is unknown.

7. The Company's future results could be affected negatively by unknown
   consequences of present and future governmental laws and regulations,
   including those relating to environmental compliance and, as specifically
   discussed above, concerning environmental matters at the Company's Commerce
   City, Colorado recycled paperboard mill. See--Environmental Matters.

8. The Company's business segments could be affected by recessionary and
   expansionary trends in the economy, as well as increases in prevailing
   interest rates. Specifically, the Company's results can be influenced by the
   general state of the construction industry, which includes housing starts,
   commercial construction and the repair and remodel segment of the industry.

                                       26
<PAGE>

9.  There is no assurance that the Company will be able to recover its full
    carrying value after the impairment write-down of the Halltown, West
    Virginia recycled paperboard mill.

10. The Company's degree of leverage and the restrictions imposed by financial
    covenants could have a material adverse effect on the Company's ability to
    service its debt, withstand competitive pressures or adverse economic
    conditions, make material capital investments or acquisitions, obtain
    future financing or take advantage of business opportunities that may
    arise.

11. There is no assurance that the Company's expanded Duke, Oklahoma gypsum
    wallboard plant and recently constructed Lawton, Oklahoma recycled
    paperboard mill will meet management's expectations or that the plants will
    ultimately reach their theoretical design capacities.

12. Although the Company gave Hardie notice on September 15, 2000 that the
    Lawton mill had achieved commercial production, as defined in the Hardie
    Agreement, there is no assurance that Hardie will not dispute that
    commercial production has been attained. If the Company has not achieved
    commercial production under the Hardie Agreement by October 1, 2000, it may
    be required to supply Hardie with paper meeting the contract specifications
    from sources other than the Lawton mill, including from third party
    producers. The Hardie Agreement provides that if the Company is unable to
    give notice to Hardie that commercial production has been achieved at the
    Lawton mill by July 1, 2001, then Hardie may terminate that agreement. In
    addition, the Premier Merger Agreement includes provisions that if the
    Company has not delivered the notice of commercial production to Hardie by
    October 1, 2000, Premier may elect not to close the Premier Merger and, in
    addition, may terminate the Premier Merger Agreement.

13. The Premier Merger Agreement is subject to a number of other conditions to
    closing and termination rights of the parties, and there is no assurance
    that other factors will not result in a failure of the Premier merger to
    become effective.

14. The Company is obligated under the Premier Merger Agreement to pay Premier
    a $10 million termination fee, generally in circumstances where the Premier
    Merger Agreement has been terminated following the making of an alternate
    acquisition proposal by a third party or a material breach by the Company
    of a covenant under the Premier Merger Agreement.

15. While the CXP Agreement provides that, subject to the satisfaction of
    certain conditions, the parties are to enter into a merger agreement
    providing for the CXP Tender Offer and a subsequent merger if the Premier
    Merger Agreement is terminated, there is no assurance that such conditions
    will be satisfied or that a merger agreement with CXP will be executed in
    those circumstances. Further, there is no assurance that the liquidated
    damages payable by Premier under the Premier Merger Agreement will actually
    be paid in the event of a termination of that Agreement and that the price
    per share in a transaction with CXP would be proportionately augmented by
    such a payment.

16. Even if the liquidated damages that are payable by Premier under the
    Premier Merger Agreement in certain circumstances were paid, there is no
    assurance that the amount of such payment would be adequate to compensate
    the Company's stockholders for the potential lost opportunity from that
    transaction, particularly if the back-up transaction with CXP were also not
    consummated.

   Other uncertainties and risks which could affect the Company can be found in
other sections of this report as well as in other filings with the Securities
and Exchange Commission.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

   The response to this item is set forth in Item 7 of this Form 10-K. See--
Management's Discussion and Analysis--Market Risk Exposure.

                                       27
<PAGE>

Item 8. Financial Statements and Supplementary Data.

   Financial Statements, along with the Financial Statement Schedule filed
herewith, are listed in the Index below.

<TABLE>
<CAPTION>
                                                                        Page
                                                                      Reference
                                                                     ----------
<S>                                                                  <C>
Consolidated Statements of Income for the years ended June 30,
 2000, 1999 and 1998...............................................       29
Consolidated Balance Sheets at June 30, 2000 and 1999..............       30
Consolidated Statements of Cash Flows for the years ended June 30,
 2000, 1999 and 1998...............................................       31
Consolidated Statements of Stockholders' Equity for the years ended
 June 30, 2000, 1999 and 1998......................................       32
Notes to Consolidated Financial Statements.........................    33-45
Report of Independent Public Accountants--Consolidated Financial
 Statements........................................................       46
Report of Management...............................................       47
Report of Independent Public Accountants--Report on Form 10-K......       54
Schedule II--Valuation and Qualifying Accounts and Reserves........       55
</TABLE>

                                       28
<PAGE>

                          REPUBLIC GROUP INCORPORATED

                       CONSOLIDATED STATEMENTS OF INCOME

                    Years Ended June 30, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                         2000          1999          1998
                                     ------------  ------------  ------------
<S>                                  <C>           <C>           <C>
Gross sales......................... $219,411,000  $158,886,000  $148,627,000
Less freight and discounts..........   28,901,000    20,944,000    20,342,000
                                     ------------  ------------  ------------
Net sales...........................  190,510,000   137,942,000   128,285,000
Costs and expenses:
  Cost of sales.....................  142,197,000    92,128,000    85,339,000
  Selling and administrative
   expenses.........................   21,979,000    18,953,000    15,941,000
  Asset write-down..................   16,724,000           --            --
                                     ------------  ------------  ------------
                                      180,900,000   111,081,000   101,280,000
                                     ------------  ------------  ------------
Operating profit....................    9,610,000    26,861,000    27,005,000
  Interest expense..................   (5,189,000)   (4,271,000)       (5,000)
  Interest income...................      203,000     2,410,000       182,000
  Other income (expense), net.......      (21,000)      (60,000)    1,000,000
                                     ------------  ------------  ------------
                                       (5,007,000)   (1,921,000)    1,177,000
                                     ------------  ------------  ------------
Income before income taxes..........    4,603,000    24,940,000    28,182,000
Provision for income taxes..........    1,842,000     9,708,000    10,383,000
                                     ------------  ------------  ------------
Net income.......................... $  2,761,000  $ 15,232,000  $ 17,799,000
                                     ------------  ------------  ------------
Basic earnings per share............ $       0.23  $       1.29  $       1.52
                                     ------------  ------------  ------------
Basic weighted-average shares
 outstanding........................   11,825,000    11,771,000    11,705,000
                                     ------------  ------------  ------------
Diluted earnings per share.......... $       0.23  $       1.29  $       1.51
                                     ------------  ------------  ------------
Diluted weighted-average shares
 outstanding........................   11,852,000    11,851,000    11,798,000
                                     ------------  ------------  ------------
</TABLE>


                            See accompanying notes.

                                       29
<PAGE>

                          REPUBLIC GROUP INCORPORATED

                          CONSOLIDATED BALANCE SHEETS

                             June 30, 2000 and 1999

<TABLE>
<CAPTION>
                                                          2000         1999
                                                      ------------ ------------
<S>                                                   <C>          <C>
ASSETS
Current assets:
  Cash and cash equivalents.......................... $  7,414,000 $  6,192,000
  Accounts receivable, less allowance for doubtful
   accounts of $574,000 in 2000 and $520,000 in
   1999..............................................   22,020,000   18,838,000
  Income tax refunds receivable......................   16,945,000      491,000
  Inventories:
    Finished goods...................................    7,200,000    3,396,000
    Raw materials and supplies.......................   12,774,000    7,538,000
                                                      ------------ ------------
                                                        19,974,000   10,934,000
  Prepaid expenses and other.........................      811,000      902,000
  Deferred income taxes..............................      952,000      630,000
                                                      ------------ ------------
      Total current assets...........................   68,116,000   37,987,000
Property, plant and equipment, at cost:
  Land, land improvements and mineral deposits.......   12,922,000    5,055,000
  Buildings and leasehold improvements...............   52,451,000   20,621,000
  Equipment..........................................  264,721,000  141,052,000
  Construction in progress...........................    2,292,000  119,210,000
                                                      ------------ ------------
                                                       332,386,000  285,938,000
  Less accumulated depreciation, amortization and
   depletion.........................................   64,896,000   61,989,000
                                                      ------------ ------------
                                                       267,490,000  223,949,000
Unamortized debt issue costs.........................    4,476,000    4,780,000
Other assets.........................................    9,081,000    1,452,000
                                                      ------------ ------------
Total assets......................................... $349,163,000 $268,168,000
                                                      ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable................................... $ 14,483,000 $ 14,021,000
  Accrued payroll and employee benefits..............    3,742,000    3,475,000
  Income taxes payable...............................          --     1,333,000
  Accrued interest payable...........................    4,741,000    4,448,000
  Other current liabilities..........................    1,412,000    1,584,000
  Short-term notes payable...........................    1,500,000          --
  Current portion of long-term debt..................    7,500,000          --
                                                      ------------ ------------
      Total current liabilities......................   33,378,000   24,861,000
Long-term debt due after one year....................  191,000,000  125,000,000
Deferred income taxes................................   21,431,000   13,695,000
Other long-term liabilities..........................      442,000      597,000
Commitments and contingencies--see notes
Stockholders' equity:
  No par preferred stock issuable in series; 487,000
   shares authorized; none issued and outstanding....          --           --
  Common stock, $1 par value; 35,000,000 authorized;
  issued 11,842,000 in 2000 and 11,800,000 in 1999...   11,842,000   11,800,000
  Additional paid-in capital.........................   28,898,000   28,568,000
  Unrealized gain on marketable securities...........      190,000      169,000
  Retained earnings..................................   61,982,000   63,478,000
                                                      ------------ ------------
      Total stockholders' equity.....................  102,912,000  104,015,000
                                                      ------------ ------------
Total liabilities and stockholders' equity........... $349,163,000 $268,168,000
                                                      ============ ============
</TABLE>

                            See accompanying notes.

                                       30
<PAGE>

                          REPUBLIC GROUP INCORPORATED

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                    Years ended June 30, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                           2000          1999          1998
                                       ------------  ------------  ------------
<S>                                    <C>           <C>           <C>
Cash flows from operating activities:
  Net income.........................  $  2,761,000  $ 15,232,000  $ 17,799,000
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
    Income receivable--life insurance
     proceeds........................           --            --     (1,000,000)
    Depreciation, amortization and
     depletion.......................    14,451,000     9,706,000     7,738,000
    Write down of property, plant and
     equipment.......................    16,724,000           --            --
    Non-cash compensation expense....           --          3,000       320,000
    Deferred income taxes............     7,414,000     2,187,000     1,616,000
    Loss on sale of assets...........        24,000       124,000        52,000
    Changes in assets and
     liabilities:
      Accounts receivable............    (3,182,000)   (5,227,000)      282,000
      Income tax refunds receivable..   (16,454,000)      161,000      (158,000)
      Inventories....................    (9,040,000)   (2,484,000)   (1,109,000)
      Prepaid expenses...............        91,000       (51,000)     (191,000)
      Accounts payable and accrued
       liabilities...................       557,000     3,819,000     3,353,000
      Income taxes payable...........    (1,333,000)    1,333,000      (203,000)
      Accrued interest payable.......       293,000     4,448,000           --
      Other assets and liabilities...      (212,000)     (220,000)     (200,000)
                                       ------------  ------------  ------------
  Net cash provided by operating
   activities........................    12,094,000    29,031,000    28,299,000
                                       ------------  ------------  ------------
Cash flows from investing activities:
  Additions to property, plant and
   equipment.........................   (81,674,000) (135,471,000)  (31,191,000)
  Proceeds from sale of property,
   plant and equipment...............       104,000       128,000        56,000
  Proceeds from life insurance
   policy............................           --      1,000,000           --
  Purchases of investments...........           --            --    (11,470,000)
  Proceeds from sale of investments..           --            --     12,120,000
                                       ------------  ------------  ------------
  Net cash used by investing
   activities........................   (81,570,000) (134,343,000)  (30,485,000)
                                       ------------  ------------  ------------
Cash flows from financing activities:
  Dividends paid.....................    (4,257,000)   (4,238,000)   (4,215,000)
  Net proceeds under lines of
   credit............................    75,000,000    19,050,000     5,950,000
  Proceeds from issuance of debt.....           --    100,000,000           --
  Payments for debt issue costs......      (417,000)   (5,105,000)     (291,000)
  Issuance of common treasury stock..           --        150,000       128,000
  Proceeds from exercised stock
   options...........................       372,000       523,000       302,000
                                       ------------  ------------  ------------
  Net cash provided by financing
   activities........................    70,698,000   110,380,000     1,874,000
                                       ------------  ------------  ------------
Net increase (decrease) in cash and
 cash equivalents....................     1,222,000     5,068,000      (312,000)
Cash and cash equivalents at
 beginning of year...................     6,192,000     1,124,000     1,436,000
                                       ------------  ------------  ------------
Cash and cash equivalents at end of
 year................................  $  7,414,000  $  6,192,000  $  1,124,000
                                       ------------  ------------  ------------
Supplemental disclosure of cash flow
 information:
Cash paid during the year for
  Income taxes, net of refunds.......  $ 12,215,000  $  6,027,000  $  9,127,000
  Interest...........................  $ 14,479,000  $  5,172,000  $      5,000
</TABLE>
                            See accompanying notes.

                                       31
<PAGE>

                          REPUBLIC GROUP INCORPORATED

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                    Years ended June 30, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                           Treasury
                                                                             Stock
                                                                         -------------
                           Common   Additional           Unrealized Gain        Amount      Total
                          Stock, $1  Paid-In   Retained   On Marketable           at    Stockholders' Comprehensive
In thousands              Par Value  Capital   Earnings    Securities    Shares  cost      Equity        Income
------------              --------- ---------- --------  --------------- ------ ------  ------------- -------------
<S>                       <C>       <C>        <C>       <C>             <C>    <C>     <C>           <C>
Balance at June 30,
 1997...................   $11,716   $27,827   $38,995        $--          33   $(693)    $ 77,845
                           -------   -------   -------        ----        ---   -----     --------
Net income..............       --        --     17,799         --         --      --        17,799       $17,799
Cash dividends on common
 stock, $.36 per share..       --        --     (4,215)        --         --      --        (4,215)          --
Issuance of treasury
 shares.................       --        --        (35)        --         (23)    483          448           --
Exercise of stock
 options................        33       269       --          --         --      --           302           --
                                                                                                         -------
Total comprehensive
 income.................       --        --        --          --         --      --           --        $17,799
                           -------   -------   -------        ----        ---   -----     --------       -------
Balance at June 30,
 1998...................   $11,749   $28,096   $52,544        $ --         10   $(210)    $ 92,179
                           -------   -------   -------        ----        ---   -----     --------
Net income..............       --        --     15,232         --         --      --        15,232       $15,232
Cash dividends on common
 stock, $.36 per share..       --        --     (4,238)        --         --      --        (4,238)          --
Issuance of treasury
 shares.................       --        --        (60)        --         (10)    210          150           --
Exercise of stock
 options................        51       472       --          --         --      --           523           --
Unrealized gain on
 marketable securities..       --        --        --          169        --      --           169           169
                                                                                                         -------
Total comprehensive
 income.................       --        --        --          --         --      --           --        $15,401
                           -------   -------   -------        ----        ---   -----     --------       -------
Balance at June 30,
 1999...................   $11,800   $28,568   $63,478        $169        --    $  --     $104,015
                           -------   -------   -------        ----        ---   -----     --------
Net income..............       --        --      2,761         --         --      --         2,761       $ 2,761
Cash dividends on common
 stock, $.36 per share..       --        --     (4,257)        --         --      --        (4,257)          --
Exercise of stock
 options................        42       330       --          --         --      --           372           --
Unrealized gain on
 marketable securities..       --        --        --           21        --      --            21            21
                                                                                                         -------
Total comprehensive
 income.................       --        --        --          --         --      --           --        $ 2,782
                           -------   -------   -------        ----        ---   -----     --------       -------
Balance at June 30,
 2000...................   $11,842   $28,898   $61,982        $190        --    $ --      $102,912
                           =======   =======   =======        ====        ===   =====     ========
</TABLE>

                            See accompanying notes.

                                       32
<PAGE>

                          REPUBLIC GROUP INCORPORATED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          JUNE 30, 2000, 1999 and 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

   The consolidated financial statements include the accounts of Republic Group
Incorporated, a Delaware corporation, and its subsidiaries (the "Company"). All
intercompany accounts and transactions have been eliminated.

Use of Estimates in Financial Statements

   The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of certain assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during
the period. Actual results could differ from these estimates.

Cash Equivalents

   Short-term investments that are highly liquid and have original maturity
dates of three months or less are considered cash equivalents for the purpose
of the Consolidated Statements of Cash Flows. These investments are carried at
market.

Concentration of Credit Risk

   The majority of the Company's sales are to retailers, manufacturers and
wholesalers. The Company conducts ongoing credit evaluations of its customers'
financial conditions and limits the amount of trade credit extended when
necessary. The Company maintains allowances for expected credit losses.

Inventories

   Inventories are stated at the lower of cost (average or first-in, first-out)
or market and include the appropriate elements of materials, labor and
manufacturing overhead expenses.

Property, Plant and Equipment

   Plant and equipment assets are recorded at cost and depreciated generally by
the straight-line method over the estimated useful lives of the assets.
Expenditures for additions and improvements are capitalized, and costs for
repairs and maintenance are charged to operations as incurred. The estimated
useful lives for buildings range from 15 to 40 years. The estimated useful
lives for equipment range from 3 to 20 years.

Revenue Recognition

   Revenue is recognized at the time products are shipped to the customer or,
in the case of rail services, at the time service is rendered.

Investments in Marketable Securities

   The Company's investments in marketable securities are classified as
available-for-sale securities and are reported at fair value with unrealized
gains excluded from earnings and reported as a separate component of
stockholders' equity, net of tax.

                                       33
<PAGE>

Income Taxes

   The provision for income taxes includes federal and state taxes currently
payable (receivable) and deferred taxes arising from temporary differences in
determining income for financial statement and tax purposes. The Company files
a consolidated federal return which includes the results for all of its
subsidiaries. Deferred tax assets, liabilities and related expense accounts are
adjusted annually for any changes in statutory tax rates.

   State income tax credits earned in conjunction with plant construction or
expansion are recognized ratably over the average life of the related property.

Reclassification

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

Environmental Remediation and Compliance

   Environmental expenditures are expensed or capitalized, as appropriate.
Liabilities are recorded when assessments and/or remedial efforts are probable
and the cost can be reasonably estimated.

Impairment

   The carrying value of property, plant and equipment is evaluated
periodically in relation to the operating performance and future undiscounted
cash flows of the underlying business. Adjustments are made if the sum of
expected future cash flows is less than book value.

New Accounting Standard

   In 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued to establish accounting and reporting standards for
derivative instruments and hedging activities. The Company does not utilize
derivative instruments nor does it perform hedging activities as defined in the
new pronouncement. Consequently, the impact of adopting this pronouncement is
expected to be insignificant.

                                       34
<PAGE>

2. INDUSTRY SEGMENTS

   Certain information with regard to industry segments, within which the
Company operates, is as follows:

<TABLE>
<CAPTION>
                                           Recycled  Eliminations
                                  Gypsum  Paperboard  and other   Consolidated
                                 -------- ---------- ------------ ------------
<S>                              <C>      <C>        <C>          <C>
2000
Shipment units:
Gypsum wallboard (MSF)..........  725,885       --          --       725,885
Recycled paperboard (tons)......      --    213,033     (19,691)     193,342
Recovered paper fiber (tons)....      --    313,085    (204,230)     108,855
                                 --------  --------   ---------     --------
Gross sales (in thousands)
Gypsum wallboard................ $127,878  $    --    $     --      $127,878
Recycled paperboard.............      --     78,890         --        78,890
Recovered paper fiber...........      --     35,513     (22,883)      12,630
Intrasegment fiber sales........      --    (22,883)     22,883          --
Intersegment paperboard sales...      --      8,431      (8,431)         --
Other...........................      --        --           13           13
                                 --------  --------   ---------     --------
Gross sales.....................  127,878    99,951      (8,418)     219,411
Less freight and discounts......   22,312     6,589         --        28,901
                                 --------  --------   ---------     --------
Net sales....................... $105,566  $ 93,362   $  (8,418)    $190,510
                                 --------  --------   ---------     --------
Operating profit (loss) (1)..... $ 44,738  $(26,380)  $  (8,748)    $  9,610
Total assets....................   78,519   234,203      36,441      349,163
Capital expenditures............   10,962    69,302       1,410       81,674
Depreciation, depletion and
 amortization...................    4,533     8,252       1,666       14,451
1999
Shipment units:
Gypsum wallboard (MSF)..........  589,894       --          --       589,894
Recycled paperboard (tons)......      --    185,793     (27,567)     158,226
Recovered paper fiber (tons)....      --    179,286     (84,125)      95,161
                                 --------  --------   ---------     --------
Gross sales (in thousands)
Gypsum wallboard................ $ 89,678  $    --    $     --      $ 89,678
Recycled paperboard.............      --     62,927         --        62,927
Recovered paper fiber...........      --     11,556      (5,281)       6,275
Intrasegment fiber sales........      --     (5,281)      5,281          --
Intersegment paperboard sales...      --     10,095     (10,095)         --
Other...........................      --        --            6            6
                                 --------  --------   ---------     --------
Gross sales.....................   89,678    79,297     (10,089)     158,886
Less freight and discounts......   16,121     4,823         --        20,944
                                 --------  --------   ---------     --------
Net sales....................... $ 73,557  $ 74,474   $ (10,089)    $137,942
                                 --------  --------   ---------     --------
Operating profit (loss)......... $ 28,478  $  6,530   $  (8,147)    $ 26,861
Total assets....................   70,497   181,258      16,413      268,168
Capital expenditures............   22,732   112,285         454      135,471
Depreciation, depletion and
 amortization...................    2,981     5,239       1,486        9,706
</TABLE>

                                      35
<PAGE>

<TABLE>
<CAPTION>
                                           Recycled  Eliminations
                                  Gypsum  Paperboard  and other   Consolidated
                                  ------- ---------- ------------ ------------
<S>                               <C>     <C>        <C>          <C>
1998
Shipment units:
Gypsum wallboard (MSF)........... 566,424      --           --       566,424
Recycled paperboard (tons).......     --   190,614      (27,108)     163,506
Recovered paper fiber (tons).....     --   145,553      (67,112)      78,441
                                  -------  -------     --------     --------
Gross sales (in thousands)
Gypsum wallboard................. $74,755  $   --      $    --      $ 74,755
Recycled paperboard..............     --    67,677          --        67,677
Recovered paper fiber............     --    12,415       (6,227)       6,188
Intrasegment fiber sales.........     --    (6,227)       6,227          --
Intersegment paperboard sales....     --    10,412      (10,412)         --
Other............................     --       --             7            7
                                  -------  -------     --------     --------
Gross sales......................  74,755   84,277      (10,405)     148,627
Less freight and discounts.......  15,293    5,049          --        20,342
                                  -------  -------     --------     --------
Net sales........................ $59,462  $79,228     $(10,405)    $128,285
                                  -------  -------     --------     --------
Operating profit (loss).......... $24,342  $ 9,658     $ (6,995)    $ 27,005
Total assets.....................  43,993   73,212        8,270      125,475
Capital expenditures.............  16,612   13,979          600       31,191
Depreciation, depletion and
 amortization....................   1,641    5,301          796        7,738
</TABLE>
--------
(1) Operating loss for the Recycled Paperboard segment includes a $16,724,000
    asset impairment write-down for the Company's Halltown mill. See--Notes to
    Consolidated Financial Statements--Assets Held For Sale.

   Operations within the gypsum industry consist of the manufacture and sale of
gypsum wallboard. Operations within the paperboard industry consist of (i) the
manufacture and sale of recycled paperboard to the gypsum industry and other
paperboard converters which manufacture composite cans, cores, tubes and other
packaging products, and (ii) the collection and sale of reclaimed paper fiber.
The Company's gypsum wallboard operations are located at Duke, Oklahoma. The
Company's primary markets for gypsum wallboard are Texas, Oklahoma, Colorado
and Kansas with additional secondary emphasis in the midwestern and
southeastern regions of the United States. The Company operates recycled
paperboard mills at Hutchinson, Kansas, Commerce City, Colorado, Halltown, West
Virginia and Lawton, Oklahoma. The Lawton mill began commercial production in
March 2000. The Company's primary markets for recycled paperboard generally lie
within a 600 mile radius of each facility. The Company operates reclaimed paper
fiber recycling centers at Kansas City, Missouri, Topeka, Kansas, and Denver,
Colorado.

   During fiscal 2000, approximately 9% of the recycled paperboard shipped by
the mills was consumed by the Company's wallboard operations compared to 15%
and 14% respectively in fiscal 1999 and 1998. Another 22% was shipped to other
unaffiliated gypsum wallboard manufacturers in fiscal 2000 compared to 23% and
20%, respectively, in fiscal 1999 and 1998. An adverse change in the
construction industry could have a material effect on the earnings of the
Company. The Company has no customer in either the gypsum segment or the
paperboard segment who accounted for more than 10% of consolidated gross sales
in fiscal 2000.

   Over 50% of the Company's employees are covered by collective bargaining
units with four labor unions. The expirations of current bargaining agreements
range from 2002 to 2004. The Company believes its relations with employees are
satisfactory.

   Operating profit is net sales less operating expenses. Sales between
segments are made at approximately market price. Total assets by industry
segment are those used in each segment at year-end. Eliminations and other
include general corporate assets, principally cash, securities, property and
equipment and expenses.

                                       36
<PAGE>

3. LONG-TERM DEBT AND REVOLVING CREDIT FACILITY

   On July 15, 1998, the Company received proceeds from the sale of
$100,000,000 of 9.5% Senior Subordinated Notes (the "Notes") with a maturity
date of July 15, 2008. The proceeds from the Notes, along with a credit
facility of up to $85,000,000 entered into with a bank syndicate on July 15,
1998, were used primarily to finance the construction of the Lawton mill and
for general and corporate purposes. On July 15, 1998, the Company used a
portion of the proceeds from the sale of the Notes to repay the outstanding
principal balance ($5,950,000) of a then existing revolving credit facility
along with accrued interest. Upon repayment, the Company terminated the
revolving credit facility. Due to the recently expanded scope of the Company's
business and increased working capital requirements, the Company signed
amendments to the existing credit facility on March 1, 2000 and June 27, 2000,
increasing the amount available to $115,000,000.

   Interest payment dates on the Notes are January 15 and July 15, and
commenced on January 15, 1999. Each semi-annual interest payment is $4,750,000.
The Notes are redeemable at the option of the Company, in whole or in part, at
any time on or after July 15, 2003, at a redemption price of 104.75% which
reduces to 100% on or after July 15, 2005. In addition, prior to July 15, 2001,
the Company may redeem up to 35% of the principal amount of the Notes with the
net cash proceeds received by the Company from one or more public equity
offerings, at a redemption price of 109.50%. The Notes include financial and
other covenants of the kind generally included in such indebtedness.

   The amended $115,000,000 credit facility includes a $60,000,000 term loan
effective March 1, 2000 and a $55,000,000 revolving credit facility. The
principal of the term loan is being paid quarterly over four years and
commenced on June 1, 2000 with payments of $1,500,000; $7,500,000; $13,500,000;
$19,500,000 and $18,000,000 due during fiscal years 2000, 2001, 2002, 2003 and
2004, respectively. As of June 30, 2000, the Company had borrowed $41,500,000
under the revolving credit facility. Borrowings in excess of $40,000,000 are
payable on April 2, 2001 and the balance will mature on March 1, 2004.
Consequently, the $1,500,000 payable on April 2, 2001 has been reflected as a
short-term note payable in the accompanying balance sheet. Availability under
the credit facility is not subject to a borrowing base. The borrowings under
the credit facility are guaranteed by each of the Company's material
subsidiaries and are secured by a mortgage on the Lawton mill, a pledge of
stock of the Company's subsidiaries and security interests in substantially all
other personal property of the Company and its subsidiaries. During any period
that outstanding loans under the credit facility exceed $50,000,000, the
lenders may require that other real property and improvements of the Company
and its subsidiaries be mortgaged as security for the credit facility.
Outstanding principal amounts on the credit facility bear interest at a
variable rate equal to, at the election of the Company, (i) LIBOR, plus an
agreed margin (ranging from 75 to 225 basis points), which is to be established
quarterly based upon the Company's leverage ratio or (ii) the higher of (a)
Bank of America corporate prime rate and (b) the sum of 1/2 of 1% plus the
federal funds rate, plus, in each case, an agreed margin (ranging from 0 to 100
basis points). Interest payments under the credit facility are payable
quarterly. Under the credit facility, the Company is required to adhere to a
number of financial and other covenants, including covenants relating to excess
cash flow, debt to EBITDA (earnings before interest, taxes, depreciation and
amortization) ratio, interest coverage ratio, minimum EBITDA, and limitations
on capital expenditures and dividends. The credit facility does not restrict
the transfer of funds to the parent by the subsidiaries. The Company had
borrowings outstanding of $100,000,000 under the credit facility at June 30,
2000 at a weighted-average interest rate of 9.00%.

   Interest expense for the years ending June 30, 2000, 1999 and 1998 was
$5,189,000, $4,271,000 and $5,000 respectively. Additionally, the Company
capitalized interest of approximately $10,304,000 and $5,904,000 for the years
ended June 30, 2000 and 1999, respectively, and none in fiscal year 1998. The
components of interest include interest associated with the Notes and credit
facility, commitment fees based on the unused portion of the credit facility
and amortization of debt issue costs. Debt issue costs are being amortized over
the lives of the Notes and the credit facility.

                                       37
<PAGE>

4. EMPLOYEE STOCK OWNERSHIP PLAN

   The Company has an Employee Stock Ownership Plan (the "Plan") for all
salaried employees of the Company. They become eligible to participate in the
Plan on July 1 following the calendar year in which they are hired. The Plan is
a defined contribution stock bonus plan. The Board of Directors of the Company
determines if a contribution will be made and the amount of the contribution.
The Company is not obligated or required to contribute for any particular year.
Participants are neither required nor permitted to make contributions under the
Plan. The Company contribution for a particular year is allocated to the
Company Stock Account of each participant who is employed on the last day of
that plan year and each participant whose employment terminated during that
plan year because of death, retirement at or after age 65, or disability. All
contributions to the Plan are subject to a vesting schedule based on years of
service.

   During fiscal years 2000, 1999 and 1998, the Board of Directors of the
Company approved contributions of $333,000, $348,000 and $320,000 respectively,
and the compensation expense was recognized in the financial statements. The
2000 and 1999 contributions were cash contributions. The contribution for 1998
consisted of common stock issued from treasury shares valued at $320,000.

5. ASSETS HELD FOR SALE

   Due to poor operating results and continued weakness in East Coast
paperboard markets, the Company, in the fourth quarter of fiscal 2000,
initiated a process to sell its Halltown, West Virginia recycled paperboard
mill. Pursuant to SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," the Company recorded a
$16.7 million asset write-down to reflect the property and equipment associated
with the Halltown mill at its estimated fair value, less selling costs. The
carrying amount of such assets was reduced to $7.6 million. During fiscal year
2000, the Halltown paperboard mill experienced an operating loss of $5.7
million, before any related income tax benefit. The Company expects to complete
the sale of such assets in fiscal year 2001.

6. PENSION AND OTHER BENEFIT PLANS

   The Company maintains a pension plan (the "Plan") for its hourly employees
at its Hutchinson, Kansas paperboard mill. Normal monthly retirement benefits
are based on negotiated benefit levels and the employee's years of credited
service. Contributions to the Plan, historically, have been based on the
maximum tax deductible contribution; however, the Company was not required and
elected not to make a contribution for fiscal year 2000. The following tables,
in accordance with Financial Accounting Standard ("FAS") 132, present financial
statement disclosures associated with the Plan.

<TABLE>
<CAPTION>
                                                    Years Ended June 30
                                                ------------------------------
                                                  2000       1999       1998
                                                ---------  ---------  --------
<S>                                             <C>        <C>        <C>
Components of Net Periodic Cost
  Service cost................................. $  64,000  $  65,000  $ 54,000
  Interest cost................................   134,000    114,000    99,000
  Expected return on assets....................  (156,000)  (104,000)  (87,000)
  Amortization of unrecognized net asset at
   compliance..................................     9,000      9,000     9,000
  Amortization of unrecognized prior service
   cost........................................    35,000     28,000    27,000
  Amortization of net gain.....................    (6,000)       --     (7,000)
                                                ---------  ---------  --------
    Net periodic cost.......................... $  80,000  $ 112,000  $ 95,000
                                                =========  =========  ========
</TABLE>

                                       38
<PAGE>

<TABLE>
<CAPTION>
                                                        Years Ended June 30
                                                      ------------------------
                                                         2000         1999
                                                      -----------  -----------
<S>                                                   <C>          <C>
Change in Benefit Obligation
  Benefit obligation at beginning of year............ $ 1,655,000  $ 1,655,000
  Service cost.......................................      64,000       65,000
  Interest cost......................................     134,000      114,000
  Plan amendments....................................     161,000          --
  Actuarial gain.....................................     (10,000)    (126,000)
  Benefits paid......................................     (54,000)     (53,000)
                                                      -----------  -----------
  Benefit obligation at end of year.................. $ 1,950,000  $ 1,655,000
                                                      ===========  ===========
Change in Plan Assets
  Fair value of assets at beginning of year.......... $ 1,972,000  $ 1,762,000
  Actual return on assets............................     288,000      164,000
  Employer contributions.............................         --        99,000
  Benefits paid......................................     (54,000)     (53,000)
                                                      -----------  -----------
  Fair value of assets at end of year................ $ 2,206,000  $ 1,972,000
                                                      ===========  ===========
Funded Status
  Accumulated and projected benefit obligation....... $(1,950,000) $(1,655,000)
  Fair value of assets...............................   2,206,000    1,972,000
  Unrecognized net asset.............................      21,000       29,000
  Unrecognized prior service cost....................     382,000      257,000
  Unrecognized net gain..............................    (435,000)    (299,000)
                                                      -----------  -----------
  Prepaid pension cost............................... $   224,000  $   304,000
                                                      ===========  ===========
Weighted-average assumptions as of June 30
  Discount rate......................................        7.50%        7.50%
  Expected return on plan assets.....................        8.00%        8.00%
</TABLE>

   The unrecognized prior service costs and unrecognized net gain are being
amortized over approximately 15 years. The assets of the Plan at June 30, 2000
were invested in corporate and government bonds, equities, cash, and cash
equivalents.

   Additionally, the Company has a voluntary 401(k) Plan at all Company
facilities, excluding the Hutchinson, Kansas paperboard mill. The 401(k) Plan
also includes all salaried employees company-wide. Although there is one 401(k)
Plan for all Company locations, there are various employee and employer
contribution limits, employer matching percentages, and employer vesting
schedules for each location. Contributions to the 401(k) Plan were $786,000,
$516,000, and $493,000 during 2000, 1999 and 1998, respectively.

   Effective July 1, 1997, the Company adopted the "Republic Group Incorporated
Employee Stock Purchase Plan." All salaried and hourly employees are eligible
to participate in the plan after meeting the eligibility requirements.
Percentage limitations and dollar limitations are in effect for each calendar
year. The price per share for which common stock is sold to participants is 90%
of the fair market value on the exercise date.

   The Company also has severance, retention, and key employee continuation
plans in which certain amounts are payable to eligible employees in the event
of a change in control of the Company.

                                       39
<PAGE>

7. STOCK OPTIONS

   Options have been granted to key employees at prices which represent fair
market value at dates of grant, have terms ranging from five to ten years and
are exercisable at 20% to 25% per year on a cumulative basis beginning one year
from date of grant. In addition, some grants are only exercisable if certain
Company performance targets are attained. The Company is authorized to grant
1,265,000 shares of common stock to key employees in the 1989 Plan of which
512,000 common shares were unissued as of June 30, 2000, and is authorized to
grant 219,000 shares to directors in the Non-Employee Director Plan of which
57,000 common shares were unissued as of June 30, 2000. A summary of
transactions for the years ended June 30, 2000, 1999 and 1998 is set forth in
the following table:

<TABLE>
<CAPTION>
                                                            Non-Employee
Shares Rounded to Thousands         1989 Plan              Director Plan
---------------------------  ------------------------ ------------------------
                                         Weighted-                Weighted-
                             Number of    Average     Number of    Average
Options:                      Shares   Exercise Price  Shares   Exercise Price
--------                     --------- -------------- --------- --------------
<S>                          <C>       <C>            <C>       <C>
Outstanding at June 30,
 1997.......................  284,000      $11.07       67,000      $ 9.86
Granted.....................  112,000       19.05       15,000       18.94
Cancelled...................  (52,000)      13.73          --          --
Exercised...................  (46,000)       8.94       (1,000)       4.65
                              -------      ------      -------      ------
Outstanding at June 30,
 1998.......................  298,000      $13.95       81,000      $11.70
                              -------      ------      -------      ------
Granted.....................  204,000       15.79       15,000       14.63
Cancelled...................  (24,000)      16.19       (2,000)      18.94
Exercised...................  (44,000)       9.78      (16,000)      12.84
                              -------      ------      -------      ------
Outstanding at June 30,
 1999.......................  434,000      $15.11       78,000      $11.84
                              -------      ------      -------      ------
Granted.....................  175,000       17.50       15,000       17.25
Cancelled...................  (55,000)      16.76       (4,000)      17.25
Exercised...................  (19,000)       8.69      (11,000)       3.41
                              -------      ------      -------      ------
Outstanding at June 30,
 2000.......................  535,000      $16.00       78,000      $13.86
                              -------      ------      -------      ------
Exercisable options--June
 30, 2000...................  196,000      $14.27       67,000      $13.30
                              =======      ======      =======      ======
</TABLE>

                                       40
<PAGE>

   The following tables summarize information about stock options outstanding
at June 30, 2000.

<TABLE>
<CAPTION>
                                                        1989 Plan
                         ------------------------------------------------------------------------
                             Options Outstanding                         Options Exercisable
                         ----------------------------                ----------------------------
                         Outstanding
  Range of                  as of    Weighted-Average   Weighted-     Exercisable    Weighted-
  Exercise                June 30,      Remaining        Average         as of        Average
   Prices                   2000     Contractual Life Exercise Price June 30, 2000 Exercise Price
  --------               ----------- ---------------- -------------- ------------- --------------
<S>                      <C>         <C>              <C>            <C>           <C>
$ 6.23 - $ 8.31.........    34,000          1.0           $ 8.18         34,000        $ 8.18
 10.38 -  12.46.........    30,000          0.3            10.91         30,000         10.91
 14.53 -  16.61.........   176,000          2.7            15.03         73,000         15.06
 16.61 -  18.69.........   212,000          4.8            17.56         20,000         17.33
 18.69 -  20.76.........    83,000          3.0            19.12         39,000         19.13
                           -------         ----           ------        -------        ------
                           535,000          3.3           $16.00        196,000        $14.27
                           =======         ====           ======        =======        ======

<CAPTION>
                                                Non-Employee Director Plan
                         ------------------------------------------------------------------------
                             Options Outstanding                         Options Exercisable
                         ----------------------------                ----------------------------
                         Outstanding    Weighted-
  Range of                  as of        Average        Weighted-     Exercisable    Weighted-
  Exercise                June 30,      Remaining        Average         as of        Average
   Prices                    2000    Contractual Life Exercise Price June 30, 2000 Exercise Price
  --------               ----------- ---------------- -------------- ------------- --------------
<S>                      <C>         <C>              <C>            <C>           <C>
$ 2.08 - $ 4.15.........    12,000         19.1           $ 3.41         12,000        $ 3.41
 12.46 -  14.53.........    13,000         10.7            12.84         13,000         12.84
 14.53 -  16.61.........    29,000         10.0            14.90         29,000         14.90
 16.61 -  18.69.........    11,000         14.3            17.25            --            --
 18.69 -  20.76.........    13,000         10.8            18.94         13,000         18.94
                           -------         ----           ------        -------        ------
                            78,000         12.2           $13.86         67,000        $13.30
                           =======         ====           ======        =======        ======
</TABLE>

   The weighted-average fair value at date of grant for options granted during
2000, 1999 and 1998 was $5.76, $5.21 and $5.97 per option, respectively. The
fair value of options at grant date was estimated using the Black-Scholes model
with the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                                        Years Ended June 30
                                                      -------------------------
                                                       2000     1999     1998
                                                      -------  -------  -------
<S>                                                   <C>      <C>      <C>
Risk free interest rate..............................    6.45%    5.75%    5.58%
Expected life........................................ 4 years  4 years  3 years
Expected volatility..................................      45%      45%      43%
Dividend yield.......................................     4.0%     1.9%     1.8%
</TABLE>

                                       41
<PAGE>

   The Company has adopted the disclosure only provisions of FAS 123,
Accounting for Stock-Based Compensation. Accordingly, no compensation expense
has been recognized for the stock options granted in years ended June 30, 2000,
1999 and 1998. Had compensation been determined based on fair value at grant
date consistent with the provisions of this statement, the Company's pro forma
net income and earnings per share would have been as follows (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                                          Years Ended June 30
                                                         ----------------------
                                                          2000   1999    1998
                                                         ------ ------- -------
<S>                                                      <C>    <C>     <C>
Net income:
  As reported........................................... $2,761 $15,232 $17,799
  Pro forma.............................................  2,319  14,885  17,579
Basic earnings per share:
  As reported...........................................   0.23    1.29    1.52
  Pro forma.............................................   0.20    1.26    1.50
Diluted earnings per share:
  As reported...........................................   0.23    1.29    1.51
  Pro forma.............................................   0.20    1.26    1.49
</TABLE>

   The Non-Employee Director Plan provides each non-employee member of the
Board of Directors an annual grant on the day following the Annual Meeting,
options to purchase 2,200 shares of common stock, exercisable 12 months from
date of grant. The options do not have fixed terms but will automatically
terminate 12 months after the director ceases to be a director by reason of his
death or permanent disability or 6 months after he ceases to be a director for
any other reason. On the date any new non-employee director becomes a member of
the Board of Directors, such director will be granted an option (exercisable
after completion of three calendar years of service on the Board of Directors)
to purchase 11,550 shares of Common Stock at a price equal to the fair market
value on the date of grant.

   On May 16, 1996, the Board of Directors of the Company declared a dividend
distribution of one Common Stock Share Purchase Right (the "Right") on each
outstanding share of its common stock. The Rights will be exercisable only if a
person or group acquires 15% or more of the Company's common stock or announces
a tender offer, the consummation of which would result in ownership by a person
or group of 15% or more of the common stock. Each Right will entitle
stockholders to buy one share of common stock of the Company at an exercise
price of $40.91. If the Company is acquired in a merger or other business
combination transaction after a person has acquired 15% or more of the
Company's outstanding common stock, each Right will entitle its holder to
purchase, at the Right's then-current exercise price, a number of the acquiring
company's common shares having a market value of twice such price. In addition,
if a person or group acquires 15% or more of the Company's outstanding common
stock, each Right will entitle its holder (other than such person or members of
such group) to purchase at the Right's then-current exercise price, a number of
the Company's common shares having a market value of twice such price. The
Rights exempt from the 15% threshold the current ownership, which exceeds such
threshold, by Phil Simpson, members of his family, family trusts and entities
controlled by them. Prior to the acquisition by a person or group of beneficial
ownership of 15% or more of the Company's common stock, the Rights are
redeemable for $.01 per Right at the option of the Board of Directors. The
Rights will expire on May 16, 2006.

8. OTHER COMMITMENTS AND CONTINGENT LIABILITIES

   In connection with the Company's construction of a warehouse addition to its
paperboard mill located at Commerce City, Colorado, a suburb of Denver, the
Company discovered and has been investigating the presence of subsurface
petroleum hydrocarbons. The Company retained an environmental consultant who
concluded that fuel oil, jet fuel and gasoline additives had migrated in the
subsurface of the Company's property from an adjacent property. The Company has
conducted its own investigations and the adjacent property owners have
conducted their own investigations. Also, the Company and the adjacent owners
have

                                       42
<PAGE>

jointly sponsored investigations. As a result of the most recent jointly
sponsored investigation, the Company again substantially verified the results
obtained in earlier investigations. Additionally, the investigation uncovered
newly discovered environmental conditions that appear to stem from historical
underground storage tank use on the Company's property. The Company notified
the Oil Inspection Section of the Colorado Department of Labor and Employment
of the most recent results. The Company and a former owner of the Commerce City
paper mill have entered into a participation agreement to respond to those
conditions that appear to stem from historical underground storage tank use.
Under the participation agreement, Republic and the former owner will share
costs associated with the underground storage tank including studies and
remediation, if any, 25% and 75%, respectively. At this time, the Company has
not ascertained the future liability, if any, of the above matters.
Environmental expenditures directly related to these matters were not material
during the last three fiscal years.

   With the completion of the Lawton recycled paperboard mill, the Company has
a ten year supply agreement with James Hardie Gypsum, Inc. to supply at least
90% of their requirements of gypsum-grade recycled paperboard from the Lawton
mill beginning in the period between October 2000 and January 2001. This
represents approximately 40% to 50% of the Lawton mill's estimated annual
productive capacity of 220,000 tons.

9. INCOME TAXES

   The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                    Years Ended June 30
                                             -----------------------------------
                                                2000         1999       1998
                                             -----------  ---------- -----------
<S>                                          <C>          <C>        <C>
Current:
  Federal................................... $(4,656,000) $6,039,000 $ 7,955,000
  State.....................................    (916,000)  1,482,000     812,000
                                             -----------  ---------- -----------
                                              (5,572,000)  7,521,000   8,767,000
                                             -----------  ---------- -----------
Deferred income tax.........................   7,414,000   2,187,000   1,616,000
                                             -----------  ---------- -----------
Total provision............................. $ 1,842,000  $9,708,000 $10,383,000
                                             ===========  ========== ===========
</TABLE>

   The differences between income taxes computed using the statutory federal
income tax rate and that shown in the Consolidated Statements of Income are
summarized as follows:

<TABLE>
<CAPTION>
                                                   Years Ended June 30
                                            ----------------------------------
                                               2000       1999        1998
                                            ---------- ----------  -----------
<S>                                         <C>        <C>         <C>
Computed federal tax at statutory rate..... $1,611,000 $8,729,000  $ 9,864,000
State taxes, net of federal tax benefit....    168,000  1,108,000      815,000
Other......................................     63,000   (129,000)    (296,000)
                                            ---------- ----------  -----------
                                            $1,842,000 $9,708,000  $10,383,000
                                            ========== ==========  ===========
</TABLE>

                                       43
<PAGE>

   Deferred income taxes reflect the tax consequences on future years of
temporary differences between the tax basis of assets and liabilities and their
financial reporting basis. The Company does not provide for a valuation reserve
on deferred tax assets based on the assumption of future taxable income. As of
June 30, 2000 and 1999, deferred tax assets (liabilities) as determined under
the provisions of FAS 109, were comprised of the following:

<TABLE>
<CAPTION>
                                                      Years Ended June 30
                                                 --------------------------
                                                     2000          1999
                                                 ------------  ------------
<S>                                              <C>           <C>
Gross deferred tax liability:
  Depreciation and amortization................. $(21,431,000) $(13,695,000)
Gross deferred tax assets:
  Employee benefit accruals.....................      378,000       301,000
  Accounts receivable reserves..................      161,000       102,000
  Other.........................................      413,000       227,000
                                                 ------------  ------------
    Gross deferred assets.......................      952,000       630,000
                                                 ------------  ------------
Net deferred tax liability...................... $(20,479,000) $(13,065,000)
                                                 ============  ============
</TABLE>

10. EARNINGS PER SHARE

   Basic earnings per share are computed by dividing net income by the
weighted-average number of common shares outstanding during the period. Diluted
earnings per share are computed by dividing net income by the sum of the
weighted-average number of shares and the number of equivalent shares assumed
outstanding under the Company's stock-based compensation plans. Diluted
earnings per share are computed as follows:

<TABLE>
<CAPTION>
                                                          Years Ended June 30
                                                        ------------------------
                                                                       Per-Share
                                                        Income  Shares  Amount
                                                        ------- ------ ---------
                                                         (in thousands, except
                                                           per share amounts)
<S>                                                     <C>     <C>    <C>
2000
Basic earnings......................................... $ 2,761 11,825   $0.23
Effects of dilutive securities-options.................     --      27     --
                                                        ------- ------   -----
Diluted earnings....................................... $ 2,761 11,852   $0.23
                                                        ------- ------   -----
1999
Basic earnings......................................... $15,232 11,771   $1.29
Effects of dilutive securities-options.................     --      80     --
                                                        ------- ------   -----
Diluted earnings....................................... $15,232 11,851   $1.29
                                                        ------- ------   -----
1998
Basic earnings......................................... $17,799 11,705   $1.52
Effects of dilutive securities-options.................     --      93    (.01)
                                                        ------- ------   -----
Diluted earnings....................................... $17,799 11,798   $1.51
                                                        ------- ------   -----
</TABLE>

   Options to purchase 524,705 shares of common stock at prices ranging from
$14.63 to $20.76 were outstanding for the year ended June 30, 2000. Options to
purchase 152,425 shares of common stock at prices ranging from $17.75 to $20.76
were outstanding for the year ended June 30, 1999. Options to purchase 10,541
shares of common stock at the price of $20.76 were outstanding for the year
ended June 30, 1998. These shares were not included in the calculation of
diluted earnings per share due to the options exercise price being greater than
the average market price of the common shares for the above periods.

                                       44
<PAGE>

11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

   The following tabulation presents selected results of operations for the
years ended June 30, 2000 and 1999 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                       Quarters Ended
                                             --------------------------------
                                             Sept. 30 Dec. 31 Mar. 31 June 30
                                             -------- ------- ------- -------
<S>                                           <C>     <C>     <C>     <C>
2000
Gross sales.................................. $53,232 $53,042 $53,911 $ 59,226
Less freight and discounts...................   6,744   6,563   7,103    8,491
                                              ------- ------- ------- --------
Net sales.................................... $46,488 $46,479 $46,808 $ 50,735
                                              ======= ======= ======= ========
Operating profit............................. $10,612 $ 9,938 $ 5,396 $(16,336)
Net income...................................   6,341   6,034   2,818  (12,432)
Basic earnings per share.....................    0.54    0.51    0.24    (1.05)
Diluted earnings per share...................    0.53    0.51    0.24    (1.05)
1999
Gross sales.................................. $38,196 $36,722 $35,576 $ 48,392
Less freight and discounts...................   5,011   4,477   4,686    6,770
                                              ------- ------- ------- --------
Net sales.................................... $33,185 $32,245 $30,890 $ 41,622
                                              ======= ======= ======= ========
Operating profit............................. $ 6,076 $ 6,633 $ 4,234 $  9,918
Net income...................................   3,285   3,778   2,394    5,775
Basic earnings per share.....................    0.28    0.32    0.20     0.49
Diluted earnings per share...................    0.28    0.32    0.20     0.49
</TABLE>

12. SUBSEQUENT EVENT (UNAUDITED)

   On August 11, 2000, the Company entered into a definitive merger agreement
to be acquired by Premier Construction Products Statutory Trust, an affiliate
of Integrated Capital Associates, Inc. Under terms of the merger agreement,
Stockholders of the Company will receive cash in the amount of $19.00 per share
for all outstanding shares at closing, which is expected to occur prior to
December 31, 2000.

                                       45
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Republic Group Incorporated:

   We have audited the accompanying consolidated balance sheets of Republic
Group Incorporated (a Delaware corporation) and subsidiaries as of June 30,
2000 and 1999, and the related consolidated statements of income, cash flows
and stockholders' equity for each of the three years in the period ended June
30, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Republic Group Incorporated
and subsidiaries as of June 30, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 2000, in conformity with accounting principles generally accepted in
the United States.

                                          Arthur Andersen LLP

Dallas, Texas
July 28, 2000

                                       46
<PAGE>

                              REPORT OF MANAGEMENT

   The Management of Republic Group Incorporated is responsible for preparing
the consolidated financial statements and other information contained in this
annual report. Management believes that the consolidated financial statements
fairly reflect, in all material respects, the form and substance of events and
transactions and that the consolidated financial statements present the
Company's financial position and results of operations in conformity with
accounting principles generally accepted in the United States. Management has
included in the Company's consolidated financial statements amounts that are
based on informed judgments and estimates which it believes are reasonable
under the circumstances.

   Republic Group Incorporated maintains a system of internal accounting
policies, procedures and controls intended to provide reasonable assurance, at
appropriate cost, that transactions are processed in accordance with Company
authorization and are properly recorded and reported in the consolidated
financial statements, and that assets are adequately safeguarded.

   Arthur Andersen LLP, the Company's independent public accountants, audits
the Company's consolidated financial statements in accordance with auditing
standards generally accepted in the United States, which provides the basis of
its report on the consolidated financial statements.

   The Board of Directors of the Company has an Audit Committee composed of
outside directors. The Committee meets with financial management and the
independent public accountants to review internal accounting controls and
accounting, auditing and financial reporting matters. In addition, Arthur
Andersen LLP has full and free access to the Audit Committee, without
management present, to discuss the results of its audits, the adequacy of the
Company's internal accounting controls and the quality of its financial
reporting.

Phil Simpson                              Doyle R. Ramsey
Chairman of the Board                     Executive Vice President
and President                             and Chief Financial Officer
July 28, 2000                             July 28, 2000

                                       47
<PAGE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.

None.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

   Certain information with respect to the beneficial ownership of shares of
the Company's Common Stock by executive officers and directors of the Company
is set forth under the caption "Security Ownership of Certain Beneficial Owners
and Management" in Item 12 of Part III of this report and is incorporated
herein by reference. Certain information with respect to persons who are or may
be deemed to be executive officers of the Company is set forth under the
caption "Executive Officers of the Registrant" in Item 4A of Part I of this
report and is incorporated herein by reference.

   The six persons named below are the directors of the Company and shall serve
in such capacity until the next Annual Meeting of Stockholders and until their
respective successors are elected and qualified. With the exception of David
Simpson, each of the individuals listed below has served as a director of the
Company since the date of his first election or appointment to the Board of
Directors of the Company. Phil Simpson and David Simpson are father and son,
respectively.

<TABLE>
<CAPTION>
                                                                        First
                                                                        Became
                            Principal Occupation During Last 5 years      A
         Name          Age   and Directorships of Public Companies     Director
         ----          --- -----------------------------------------   --------
 <C>                   <C> <S>                                         <C>
 Bert A. Nelson(a)....  68 Personal Investments                          1990

 Gerald L. Ray(a).....  67 President, Gerald L. Ray & Associates,        1969
                           Inc. (investment advisor)

 Robert F. Sexton(b)..  66 President of Bakery Associates, Inc.          1990
                           (food industry supplier); Director of
                           Ultrak, Inc.

 Phil Simpson.........  65 Chairman of the Board, President and          1961
                           Chief Executive Officer of the Company

 David P. Simpson.....  39 General Partner, Avinger Timber Company       1994
                           (timberland and related investments in
                           East Texas) until 1998. Mayor of the City
                           of Avinger, Texas from September 1993
                           until August 1998. Director of the
                           Company from 1994 until 1998; Manager of
                           Mill Operations of the Company from
                           August 1998 to April 2000; Director and
                           Executive Vice President--Paperboard of
                           the Company since April 2000.

 L. L. Wallace(b).....  85 Retired since January 1980 and prior          1980
                           thereto Vice President of Packaging
                           Corporation of America (paper product
                           manufacturer)
</TABLE>
--------
(a)  Messrs. Ray (committee chairman) and Nelson are members of the Audit
     Committee, which held two meetings during the last fiscal year. The Audit
     Committee meets with the independent accounting firm serving as auditors
     of the Company to review financial reports, to discuss that firm's
     procedures and findings and to hear its recommendations with respect to
     financial accounting matters.

(b)  Messrs. Sexton (committee chairman) and Wallace are members of the
     Compensation Committee, which held five meetings during the last fiscal
     year. The Compensation Committee reviews the performance of officers and
     employees and makes recommendations to the Board of Directors concerning
     officers' salaries, bonuses for officers and employees, the Company's
     Employee Stock Ownership Plan, the 401(k) Plan, stock options, stock
     appreciation rights, restricted stock, performance unit awards, proposed
     benefit plans and other compensation related matters.

                                       48
<PAGE>

   The Board of Directors held 9 meetings during the last fiscal year. Each
director attended at least 75% of the aggregate of (i) the total number of
meetings held by the Board and (ii) the total number of meetings held by each
committee of the Board on which he served, during the period that he served.

   The Board of Directors does not have a standing nominating committee or any
standing committee performing similar functions.

   Phil Simpson, an executive officer and director of the company, failed to
report, pursuant to Section 16(a) of the Securities Exchange Act of 1934, a
change from direct to indirect ownership with respect to 66,990 shares of
Company Common Stock transferred to his spouse, Lorraine Simpson, following the
dissolution of a limited partnership to which his spouse had transferred such
shares. Upon such dissolution, the subject shares were transferred to Ms.
Simpson.

Item 11. Executive Compensation

Summary Compensation Table

   The following table provides a summary of the compensation provided to the
Chief Executive Officer and each of the four most highly paid executive
officers of the Company (collectively, the "Named Executive Officers") for the
three fiscal years ended June 30, 2000.

<TABLE>
<CAPTION>
                                                              Long Term
                                 Annual Compensation         Compensation
                         ----------------------------------- ------------
                                                                Awards
                                                             ------------
                                                Other Annual  Securities   All Other
        Name and                        Bonus   Compensation  Underlying  Compensation
   Principal Position    Year  Salary    (1)        (2)      Options (3)      (4)
   ------------------    ---- -------- -------- ------------ ------------ ------------
<S>                      <C>  <C>      <C>      <C>          <C>          <C>
Phil Simpson............ 2000 $367,308 $ --         $ --        30,000      $15,591
 Chairman, President and 1999 $351,346 $ 50,000     $ --        15,000      $10,753
 Chief Executive Officer 1998 $308,077 $146,475     $ --        11,000      $17,410

Doyle R. Ramsey......... 2000 $180,192 $ 50,000     $ --        15,000      $16,168
 Executive Vice
  President              1999 $154,692 $ 50,000     $ --        61,000      $17,416
 and Chief Financial
  Officer                1998 $113,308 $ 45,281     $ --         6,000      $14,803

Todd T. Brown........... 2000 $154,846 $ 25,000     $ --         6,000      $15,198
 Vice President          1999 $146,154 $ 37,523     $ --         6,000      $16,263
                         1998 $128,269 $ 20,000     $ --         6,000      $16,369

Lon D. Lewis............ 2000 $154,846 $ 30,000     $ --         6,000      $15,198
 Vice President          1999 $145,769 $ 34,553     $ --         6,000      $16,260
                         1998 $126,269 $ 20,000     $ --         6,000      $15,920

Geary D. Cribbs......... 2000 $158,462 $ 25,000     $ --        11,000      $15,658
 Senior Vice President   1999 $150,654 $ 25,000     $ --        11,000      $16,415
                         1998 $133,173 $ 76,850     $ --         6,000      $16,199
</TABLE>
--------
(1)  Bonuses earned with respect to a fiscal year are shown for that year, even
     if they were not paid until after the end of the fiscal year.

(2)  In each case, perquisites and other personal benefits were less than 10%
     of the total of annual salary and bonus reported.

(3)  Represents stock covered by stock options granted to the named persons
     pursuant to the Company's 1989 Long-Term Incentive Plan. No tandem or
     freestanding stock appreciation rights were granted. Upon the
     effectiveness of the Premier Merger, each such option will be converted
     into the right to receive cash in an amount equal to $19.00 less the
     exercise price of the option and any applicable withholding tax.

                                       49
<PAGE>

(4)  During 2000, the components of "All Other Compensation" were as follows:
     (a) employer contributions to the Company's Employee Stock Ownership Plan,
     Mr. Simpson--$5,418, Mr. Ramsey--$5,418, Mr. Brown--$5,418, Mr. Lewis--
     $5,418 and Mr. Cribbs--$5,418, and (b) employer contributions to the
     Company's 401(k) Plan, Mr. Simpson--$10,173, Mr. Ramsey--$10,750, Mr.
     Brown--$9,780, Mr. Lewis--$9,780 and Mr. Cribbs--$10,240.

Option Grants in Last Fiscal Year

   The following table provides a summary of individual grants of stock options
under the Company's 1989 Long-Term Incentive Plan made during the year ended
June 30, 2000 to each of the Named Executive Officers.

<TABLE>
<CAPTION>
                                                                           Potential
                                                                       Realizable Value
                                                                       at Assumed Annual
                                                                        Rates of Stock
                                                                             Price
                                                                         Appreciation
                                      Individual Grants                 for Option Term
                         --------------------------------------------- -----------------
                                     % of Total
                         Number of    Options
                         Securities  Granted to
                         Underlying  Employees  Exercise or
                          Options    in Fiscal  Base Price  Expiration    5%      10%
          Name           Granted (1)    Year    (Per Share)    Date     (3)(4)   (4)(5)
          ----           ----------  ---------- ----------- ---------- -------- --------
<S>                      <C>         <C>        <C>         <C>        <C>      <C>
Phil Simpson............ 30,000(2)     15.76%     $17.50     11-9-04   $145,048 $320,518
Doyle R. Ramsey......... 15,000(2)      7.88%     $17.50     11-9-04   $ 72,524 $160,259
Todd T. Brown...........  6,000(2)      3.15%     $17.50     11-9-04   $ 29,010 $ 64,104
Lon D. Lewis............  6,000(2)      3.15%     $17.50     11-9-04   $ 29,010 $ 64,104
Geary D. Cribbs......... 11,000(2)      5.78%     $17.50     11-9-04   $ 53,184 $117,523
</TABLE>
--------
(1)  No tandem or freestanding stock appreciation rights were granted.
(2)  All such options are incentive stock options, which become cumulatively
     exercisable in equal annual installments of 25% on the first, second,
     third and fourth anniversaries of the grant date.
(3)  Based on an assumed stock price of $22.335 per share on November 9, 2004,
     the expiration date of the options granted November 9, 1999.
(4)  Upon the effectiveness of the Premier Merger, each such option will be
     converted into the right to receive cash in an amount equal to $19.00 less
     the $17.50 exercise price and any applicable withholding tax.
(5)  Based on an assumed stock price of $28.184 per share on November 9, 2004,
     the expiration date of the options granted November 9, 1999.

Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values

   The following table provides a summary of exercises by each of the Named
Executive Officers of stock options during the fiscal year ended June 30, 2000
and the fiscal year-end value of unexercised stock options held by such
persons.

<TABLE>
<CAPTION>
                                             Number of Securities
                                            Underlying Unexercised     Value of Unexercised
                          Shares                  Options at          In-the-Money Options at
                         Acquired             June 30, 2000(1)(2)          June 30, 2000(2)
                            on     Value   ------------------------- -------------------------
          Name           Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
          ----           -------- -------- ----------- ------------- ----------- -------------
<S>                      <C>      <C>      <C>         <C>           <C>         <C>
Phil Simpson............  2,750   $16,826    23,000       49,500         $ 0          $ 0
Doyle R. Ramsey.........      0   $     0    10,725       75,125         $ 0          $ 0
Todd T. Brown...........  2,200   $13,873    11,925       14,875         $ 0          $ 0
Lon D. Lewis............      0   $     0     8,525       14,875         $ 0          $ 0
Geary D. Cribbs.........  1,100   $ 9,755    13,175       23,625         $ 0          $ 0
</TABLE>

                                       50
<PAGE>

--------
(1)  No tandem or freestanding stock appreciation rights were outstanding at
     June 30, 2000.
(2)  The Premier Merger will result in the acceleration of the exercisability
     of all outstanding options. Those options with an exercise price less than
     $19.00 will be converted into the right to receive cash in an amount equal
     to $19.00 less the exercise price. Those options with an exercise price
     equal to or in excess of $19.00 will be cancelled. With respect to each of
     the Named Executive Officers, the number of shares covered by options with
     a per share exercise price below $19.00 and the amount such Named
     Executive Officer will receive as a result of the Premier Merger with
     respect to such options are as follows: Mr. Simpson--61,959
     shares/$165,940; Mr. Ramsey--85,850 shares/$129,151; Mr. Cribbs--36,800
     shares/$110,077; Mr. Brown--26,800 shares/$81,952; and Mr. Lewis--23,400
     shares/$54,874. Of the shares listed above, the number of option shares
     the exercisability of which will be accelerated as a result of the Premier
     Merger and the amounts payable to each Named Executive Officer in respect
     of such accelerated options as a result of the Premier Merger are as
     follows: Mr. Simpson--30,000 shares/$55,209; Mr. Ramsey--53,250
     shares/$70,375; Mr. Cribbs--15,250 shares/$35,250; Mr. Brown--9,000
     shares/$19,313; and Mr. Lewis--9,000 shares/$19,313.

Other Executive Compensation Matters

   During the year ended June 30, 2000, the Company made no performance unit or
other performance-based awards to the Named Executive Officers under any long-
term incentive plan or arrangement providing for compensation intended to serve
as incentive for performance to occur over a period longer than one fiscal
year, except the grants of stock options described in the Summary Compensation
Table. No such other awards were outstanding as of June 30, 2000.

   The Company does not maintain a defined benefit or actuarial plan in which
the Named Executive Officers participate.

   During the year ended June 30, 2000 the Company did not adjust or amend the
exercise price of stock options or stock appreciation rights previously awarded
to any of the Named Executive Officers.

Compensation of Directors

   Directors' Fees. The Company currently has a policy of paying directors who
are not employees of the Company on the following basis: $20,000 per year for
service on the Board of Directors and $5,000 per year for service on each
committee of the Board of Directors on which such person serves, plus
reimbursement of expenses.

   Director Stock Option Plan. The Republic Group Incorporated Non-Employee
Director Stock Option Plan was adopted in 1989 and amended and restated in 1996
(the "Director Plan"). Upon adoption of the Director Plan, Messrs. Ray and
Wallace were each granted an option to purchase 11,550 shares of the Company's
Common Stock at an exercise price of $4.65 share, the fair market value of the
Company's Common Stock on the date the Director Plan was adopted. On the date
of their appointment to the Board of Directors, Messrs. Nelson and Sexton were
each granted options to purchase 11,550 shares of the Common Stock at an option
exercise price of $3.41 per share, the fair market value of the Company's
Common Stock on such date.

   These one-time option grants to new non-employee directors under the
Director Plan do not have a fixed term and are fully exercisable after the
director has completed three calendar years of service on the Board of
Directors, including service prior to adoption of the Director Plan. Each
option will automatically terminate 12 months after the director ceases to be a
director by reason of his death or permanent disability or six months after he
ceases to be a director for any other reason. The exercise price will be paid
to the Company in full at the time of exercise in cash or, in whole or in
combination with cash, in shares of Company Common Stock previously issued to
the optionee.

                                       51
<PAGE>

   The Director Plan, as amended in 1996, replaced the one-time grant provision
in the plan with an annual grant of options to purchase 2,200 shares of Common
Stock to each non-employee member of the Board of Directors at an option
exercise price equal to the fair market value of the Common Stock on the date
of such grant. The Director Plan provided for an initial grant of options to
purchase 2,200 shares of Common Stock on August 16, 1996, the effective date of
the amendment, which covered service during the year ending with the 1996
annual meeting, and an additional grant on October 24, 1996 following the
Annual Meeting of Stockholders, which covered the 1997 fiscal year. Thereafter,
grants have been made once annually to each non-employee director on the day
immediately following the Company's Annual Meeting of Stockholders. These
options will become exercisable in full one year following the date of grant,
provided that the non-employee director serves as a director throughout such
one-year period.

   The Board of Directors believes that annual grants of long-term incentives
based on the value of the Company's Common Stock will assist the Company in
attracting and retaining qualified members of the Board of Directors. The Board
of Directors also believes that such equity-based incentives will promote the
long-term financial interests of the Company by motivating the non-employee
members of the Board of Directors to achieve long-range goals.

   The Director Plan is administered by the Board of Directors as a whole and
contains customary provisions for the adjustment of shares covered by the
Director Plan and for the adjustment of option exercise prices in the event of
stock dividends and splits, mergers and other similar events. The Premier
Merger will result in the acceleration of the exercisability of such options,
and those options with an exercise price less than $19.00 per share will be
converted into a cash amount equal to the difference between $19.00 and the
exercise price per share.

   Director Retirement Compensation Arrangement. The Company has adopted an
arrangement whereby non-employee directors of the Company who have served on
the Board of Directors for three or more years will be paid a lump sum
retirement payment 180 days after termination of service on the Board of
Directors. The amount of the retirement payment will be the sum of (i) the
amount then being paid annually to non-employee directors for service on the
Board and on each committee on which the retiring director was serving at the
time of his termination, (ii) $500 for each year or part thereof between 1967
and 1985, inclusive, during which he was a director, (iii) $1,000 for each year
or part thereof between 1986 and 1993, inclusive, during which he was a
director and (iv) $1,500 for each year or part thereof beginning in 1994,
during which he was a director.

   The retirement payment is not payable if (i) the director is removed or is
requested (by resolution of the Board of Directors) to resign from the Board of
Directors due to the serious neglect or misconduct in the discharge of his
duties and responsibilities as a director of the Company or the commission of a
criminal act or act of dishonesty (of which the Board of Directors shall be the
sole judge), (ii) the director directly or indirectly competes with the Company
within one year after his service on the Board of Directors terminates or (iii)
the director discloses non-public, confidential or proprietary information
about the Company.

   Pursuant to the terms of the Premier Merger Agreement, each of the Company's
directors will be replaced at the effective time of the Premier Merger and will
be entitled to receive a retirement payment. The total amount of these
retirement payments is estimated to be $177,500.

Employment Contracts and Termination of Employment and Change-in-Control
Arrangements

   In connection with its decision to commence an exploration of strategic
alternatives to enhance stockholder value, the Board of Directors adopted
amendments to its existing Key Employee Continuation Plan (the "Continuation
Plan"), adopted a Retention Bonus Plan (the "Retention Bonus Plan") and amended
the definition of "Change of Control" in its 1989 Long-Term Incentive Plan and
in its other employee benefit plans to apply to consensual transactions such as
the Premier Merger. Certain information with respect to these changes is set
forth under the caption "General" in Item 13 of Part III of this report, which
description is incorporated by reference herein.

                                       52
<PAGE>

   Key Employee Continuation Plan. The Company's Continuation Plan was
established to encourage the retention and dedication of key employees. Each of
the Named Executive Officers is a participant in the Continuation Plan. The
Continuation Plan provides for a severance payment to a participant if his
employment terminates (other than for cause, disability, death, retirement or
voluntary resignation) within a period of one year following a change of
control. The severance payment will equal the employee's average annual cash
compensation for the five years preceding the change of control, multiplied by
a termination factor established by the Board of Directors between 100% and
150%. The Board of Directors has established a termination factor of 150% for
Messrs. Simpson and Ramsey and 100% for each other Named Executive Officer.

   The Continuation Plan was amended effective June 15, 2000 to change the
definition of change of control to include consensual transactions such as the
Premier Merger and to provide for a reduction of the employee's severance
payment by 50% of the retention bonus granted under the Retention Bonus Plan if
a participant in the Continuation Plan is also a participant in the Retention
Bonus Plan.

   The maximum payments under the Continuation Plan are estimated at $700,000
if the employment of all participants were terminated under circumstances
triggering the payments and they had already received full bonuses under the
Retention Bonus Plan as discussed below. Individual payments for each of the
Named Executive Officers, after giving effect to the 50% offset, are estimated
to be as follows: Mr. Simpson--$0; Mr. Ramsey--$65,687; Mr. Cribbs--$61,811;
Mr. Brown--$86,366; and Mr. Lewis--$99,806.

   Retention Bonus Plan. The Retention Bonus Plan was adopted effective June 6,
2000 and provides that participants will receive bonuses, provided they remain
employed by the Company through completion of a change of control, such as the
Premier Merger, and for a six-month period thereafter. The retention bonus is
payable in two installments, 50% upon the date of a change of control, and the
remaining 50% upon the date that is six months following a change of control.
Payment of the retention bonus is accelerated upon the involuntary termination
of employment of such employee by the Company or a successor for any reason
other than for cause, or the employee's resignation for good reason.

   Twenty-seven employees have been selected to participate in the Retention
Bonus Plan, and the total bonuses equal approximately $2.7 million. The
retention bonus payments for each of the Named Executive Officers are estimated
to be as follows: Mr. Simpson--$0; Mr. Ramsey--$382,000; Mr. Cribbs--$247,500;
Mr. Brown--$162,000; and Mr. Lewis--$163,000.

   401(k) Plan and ESOP. The Company's 401(k) Plan and Employee Stock Ownership
Plan are also being amended to provide for accelerated vesting of accounts upon
a change of control transaction such as the Premier Merger. Of the Named
Executive Officers, Mr. Lewis would receive accelerated vesting in the amount
of $31,074 under the 401(k) Plan and with respect to 708 shares of Company
Common Stock under the ESOP. All of the other Named Executive Officers are
already fully vested under both the 401(k) Plan and the ESOP based on their
years of service.

   Stock Options. As of September 21, 2000, the executive officers and
directors of the Company held options to purchase an aggregate of 421,700
shares of Company Common Stock, of which 175,129 were immediately exercisable.
The Premier Merger will result in the acceleration of the exercisability of the
remainder of such options, and, upon the consummation of the Premier Merger,
each option holder will be entitled to receive, for each share subject to such
an option with a per share exercise price of less than $19.00, an amount in
cash equal to the difference between $19.00 and the per share exercise price of
such option, less any applicable withholding tax. A holder of an option will
not receive any consideration for that option if the per share exercise price
for such option equals or exceeds $19.00. Of the 421,700 shares subject to
options held by the Company's executive officers and directors on September 21,
2000, 411,159 are at exercise prices below $19.00 per share. Based on the
Company's expectation that the Premier Merger will be completed in mid-
November, the Premier Merger would accelerate the exercisability of options
covering 163,525 of those shares. Certain information for each of the Named
Executive Officers with respect to the number of shares of Company Common Stock
covered by options with an exercise price below $19.00 and the amount to be

                                       53
<PAGE>

received by such Named Executive Officer in respect of such options pursuant to
the Premier Merger is set forth in footnote (2) of the table set forth under
the caption "Aggregated Option Exercises in Last Fiscal Year and FY-End Option
Values" in Item 11 of Part III of this report, which information is
incorporated by reference herein.

   Non-Employee Director's Retirement Compensation Arrangement. Non-employee
directors of the Company who have served on the Board of Directors for three or
more years will be paid a lump sum retirement payment 180 days after their
service on the Board of Directors terminates. Pursuant to the terms of the
Premier Merger Agreement, each of the directors will be replaced at the
effective time of the Premier Merger, and will be entitled to receive a
retirement payment. The total retirement payments are estimated to aggregate
$177,500.

   Employment Contracts. None of the Named Executive Officers has an employment
contract with the Company.

Compensation Committee Interlocks and Insider Participation

   None of the members of the Compensation Committee of the Company's Board of
Directors during the year ended June 30, 2000 (i) was an officer or employee of
the Company or any of its subsidiaries, (ii) was formerly an officer of the
Company or any of its subsidiaries or (iii) had any relationship requiring
disclosure by the Company under any paragraph of Item 404 of Securities and
Exchange Commission Regulation S-K. During the year ended June 30, 2000, there
existed no interlocking relationships involving the executive officers,
directors or Compensation Committee members of the Company and the executive
officers, directors or compensation committee members of any other entity.

                                       54
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management.

   The following table sets forth information with respect to the beneficial
ownership of equity securities of the Company as of September 21, 2000, by (i)
each person known to management to be the beneficial owner of more than 5% of
any class of the Company's voting securities, (ii) each director of the
Company, (iii) each Named Executive Officer and (iv) all directors and
executive officer of the Company as a group:

<TABLE>
<CAPTION>
                                                        Amount and
                                                         Nature of
   Title of              Name of Beneficial             Beneficial     Percent
    Class                     Owner (1)                 Ownership(2)   Of Class
 ------------            ------------------             -----------    --------
 <C>          <S>                                       <C>            <C>
 Common Stock T. Rowe Price(3)(4)....................      721,300       6.09%
 $1.00 par    James M. Britz(6)(7)...................       24,351        *
 Value (5)    Todd T. Brown(6)(7)....................       47,640        *
              Geary D. Cribbs(6)(7)..................       60,186        *
              Michael W. Dirks(6)(7).................        6,340        *
              Susan Hall(6)(7).......................       46,046(8)     *
              Catherine S. Grindinger(6)(7)..........      109,790        *
              Dennis J. Grindinger(6)(7).............       11,000        *
              Lon D. Lewis(6)(7).....................       19,475        *
              Bert A. Nelson(6)(7)...................       25,132        *
              James A. Nelson(6)(7)..................        5,303        *
              Doyle R. Ramsey(6)(7)..................       58,562        *
              Talbot Rain(6)(7)......................       12,155        *
              Gerald L. Ray(6)(7)....................      308,240(9)    2.55%
              Janey L. Rife(6)(7)....................       27,186        *
              Robert F. Sexton(6)(7).................       23,650        *
              David P. Simpson(6)(7).................      139,193(10)   1.15%
              Lorraine H. Simpson(6)(7)..............       66,990        *
              Marimon Simpson(6)(7)..................      218,000       1.84%
              Phil Simpson(6)(7).....................    2,325,429(11)  19.20%
              Susan P. Simpson(6)(7).................        1,000        *
              L. L. Wallace(6)(7)....................       29,994        *
              All Directors and Executive Officers as
               a Group (15 persons)..................    3,146,777      26.01%
</TABLE>
--------
*    The percentage of shares beneficially owned is less than 1% of issued and
     outstanding shares of the Company's Common Stock.
(1)  Messrs. Britz, Brown, Cribbs, Dirks, Lewis and Ramsey and James A. Nelson,
     Ms. Hall and Ms. Rife are executive officers of the Company; Phil Simpson
     is an executive officer and director of the Company and beneficial owner
     of more than 5% of the Company's Common Stock; Lorraine Simpson is the
     wife of Phil Simpson; David Simpson is an executive officer and director
     of the Company; Susan Simpson is the wife of David Simpson; Marimon
     Simpson and Catherine Grindinger are daughters of Phil and Lorraine
     Simpson; Dennis Grindinger is the husband of Catherine Grindinger; Messrs.
     Bert A. Nelson, Ray, Sexton and Wallace are directors of the Company; and
     Mr. Rain retired from the Board of Directors on August 15, 2000.
(2)  Includes shares with respect to which executive officers, directors, or
     their estates have the right to acquire beneficial ownership pursuant to
     the exercise of stock options exercisable at, or within 60 days after,
     September 21, 2000, as follows: Britz--18,900, Brown--17,800, Cribbs--
     21,550, Dirks--4,950, Hall--20,100, Lewis--14,400, Bert A. Nelson--11,000,
     James A. Nelson--4,500, Ramsey--32,600, Ray--11,000, Rife--17,050,
     Sexton--22,550, David Simpson--2,875, Phil Simpson--39,750, Wallace--
     11,000, and all Directors and Executive Officers as a Group--260,025. Also
     includes shares in the accounts established under the Company's Employee
     Stock Ownership Plan for persons who are salaried employees of the
     Company, with respect to which each executive officer named in the Summary

                                       55
<PAGE>

      Compensation Table has voting power, as follows: Britz--1,829, Brown--
      16,141, Cribbs--21,430, Dirks--1,031, Hall--17,401, Lewis--1,180, James
      A. Nelson--803, Ramsey--10,300, Rife--5,473, David Simpson--318, Phil
      Simpson--91,975, and all Executive Officers as a Group--167,881. Unless
      otherwise indicated, all other shares are owned directly, and the owner
      has sole voting and investment power.
(3)   For purposes of the reporting requirements of the Securities Exchange Act
      of 1934, T. Rowe Price Associates, Inc. ("T. Rowe Price") is deemed to be
      a beneficial owner of securities owned by various individual and
      institutional investors, for which it serves as investment adviser with
      power to direct investments and/or sole power to vote the securities;
      however, T. Rowe Price expressly disclaims that it is, in fact, the
      beneficial owner of these securities.
(4)   The address of T. Rowe Price is P.O. Box 17218, Baltimore, Maryland 21297
(5)   A Common Stock Purchase Right ("Purchase Right") is attached to each
      outstanding share of the Common Stock entitling the holder to buy one
      share of Common Stock for $40.91. A Purchase Right is not exercisable or
      transferable apart from the Common Stock until ten days after a person
      (other than certain exempt persons) acquires 15% or more of the Common
      Stock or ten business days after the commencement or announcement of a
      tender offer, which, if consummated, would result in ownership by a
      person or group of 15% or more of the Common Stock. Exempt persons
      include Phil Simpson, his wife, their descendants and their descendants'
      spouses, trusts or estates for any of their benefit; and partnerships,
      corporations or other entities owned 80% or more by any of them.
(6)   Each of these individuals has executed a Stockholder Agreement in
      connection with the Premier Merger Agreement. Certain information with
      respect to the Stockholder Agreements is set forth under the caption
      "Recent Developments" in Item 1 of Part I of this report and is
      incorporated herein by reference. As a result of their execution of these
      Stockholder Agreements, these individuals may be deemed to constitute a
      "group" as that term is used in Section 13(d)(3) of the Securities
      Exchange Act of 1934; however, each of these individuals expressly
      disclaims membership in any such "group."
(7)   The address for Messrs. Britz, Brown, Dirks, Lewis, Ramsey, James A.
      Nelson and David Simpson, Ms. Rife and Ms. Susan Simpson is 811 East 30th
      Avenue, Hutchinson, Kansas 67502. The address for Mr. Cribbs and Ms. Hall
      is Drawer "C", Duke, Oklahoma 73532. The address for Ms. Catherine
      Grindinger and Mr. Dennis Grindinger is 4400 Windsor Parkway, Dallas,
      Texas 75205. The address for Mr. Bert A. Nelson is 4200 Arcady, Dallas,
      Texas 75205. The address for Mr. Rain is 5719 Bordeaux, Dallas, Texas
      75209. The address for Mr. Ray is 1445 Ross Avenue, LB 201, 56th Floor,
      Dallas, Texas 75202. The address for Mr. Sexton is 4433 Potomac, Dallas,
      Texas 75205. The address for Ms. Lorraine Simpson, Ms. Marimon Simpson
      and Mr. Phil Simpson is P.O. Box 750, Dallas, Texas 75221.
(8)   Includes 3,400 options and 5,499 shares owned by Ms. Hall's spouse.
(9)   Includes 209,510 shares owned by Gerald L. Ray & Associates, Inc. of
      which Mr. Ray is the principal owner, 12,163 shares owned by Gerald L.
      Ray IRA R/O, 20,900 shares owned by Gerald L. Ray IRA R/O Defined Benefit
      Plan, of which Mr. Ray is trustee, and 54,667 shares in the Gerald L. Ray
      IRA, of which Mr. Ray is trustee.
(10)  Includes 1,000 shares owned by Mr. David Simpson's spouse, Susan Simpson,
      that are also reflected in the table as owned by her and 5,000 shares
      owned by Mr. Simpson's children, with respect to all of which he shares
      voting and investment power.
(11)  Shares beneficially owned by Mr. Phil Simpson includes 66,990 shares
      owned by his spouse, Lorraine Simpson, that are also reflected in the
      table as owned by her and with respect to which he shares voting and
      investment power. Shares beneficially owned by Mr. Simpson excludes
      466,983 shares of Common Stock held by Mr. Simpson's son and two
      daughters, who are not members of Mr. Simpson's household. Mr. Simpson
      disclaims beneficial ownership of such shares. Shares beneficially owned
      by Mr. Simpson also excludes 185,339 shares owned by other relatives who
      are not members of Mr. Simpson's household, as to which he also disclaims
      beneficial ownership.

                                       56
<PAGE>

Item 13. Certain Relationships and Related Transactions.

General

   In connection with its decision to commence an exploration of strategic
alternatives to enhance stockholder value, the Board of Directors recognized
that that process would be potentially disruptive to the Company's employees,
would place significant additional burdens upon them, would create
uncertainties among them as to their future employment and could adversely
affect morale at a critical time for the Company. Many of such employees would
potentially have other opportunities for employment and might be recruited by
other employers. In order to increase the likelihood that key employees would
remain with the Company during the process of exploring strategic alternatives
and, if a transaction were to result from that exploration, would be available
to a successor during a transition period after consummation of that
transaction, the Board of Directors adopted the Retention Bonus Plan for
executive officers and key management employees and a retention bonus program
for some non-executive employees, amended the Continuation Plan, and amended
the change of control definitions in several of its employee benefit plans to
cover a consensual transaction, like the Premier Merger. Certain information
with respect to the Company's Retention Bonus Plan, the Continuation Plan and
other employee benefit plans is set forth in Item 11 of this report under the
caption "Employment Contracts and Termination of Employment and Change-in-
Control Arrangements" and is incorporated herein by reference.

Indemnification and Insurance

   Pursuant to the Premier Merger Agreement, the indemnification provisions of
the Company's certificate of incorporation and bylaws will be included in the
certificate of incorporation and bylaws of the surviving corporation. The
Premier Merger Agreement provides that the surviving corporation (and any
successor) will for a period of six years after the effective time of the
Premier Merger indemnify present and former directors and officers of the
Company and its subsidiaries to the fullest extent permitted under the Delaware
General Corporation Law and such provisions of the certificate of incorporation
and bylaws for matters arising prior to or at the effective time of the Premier
Merger, including any claim based upon the Premier Merger Agreement or the
transactions contemplated by it. The Premier Merger Agreement also generally
requires the surviving corporation to maintain the Company's existing
directors' and officers' liability insurance policy for a period of not less
than six years after the Premier Merger.

Stockholder Agreements

   The directors and executive officers of the Company, including the Chairman,
Phil Simpson, and some members of Mr. Simpson's family have executed
Stockholder Agreements with Premier and Acquisition Sub as described in Part I,
Item 1 under the caption "Recent Developments," which description is
incorporated herein by reference.

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

  (a)1. Financial Statements
        See--Item 8--Index to Financial Statements and Schedules of
        Registrant.

    2.  Financial Statement Schedules
        See--Item 8--Index to Financial Statements and Schedules of
        Registrant.

    3. The following documents are filed or incorporated by reference as
       exhibits to this Report as required by Item 601 of Regulation S-K:

     2(a) Agreement and Plan of Merger dated August 11, 2000 among the
          Company, Premier Construction Products Statutory Trust and Premier
          Construction Products Acquisition Corp., including a list
          identifying the contents of omitted schedules (incorporated by
          reference to Exhibit 2.1 to the Company's Current Report on Form 8-
          K/A, dated September 12, 2000, SEC File Number 1-7210).

     2(b) Agreement dated August 11, 2000 between the Company and Centex
        Construction Products, Inc.*

                                       57
<PAGE>

      3(a)  Certificate of Incorporation of the Company, as amended
            (incorporated by reference to Exhibit 3(a) to the Company's
            Quarterly Report on Form 10-Q for the period ended September
            30, 1996, SEC File Number 1-7210).

      3(b)  Bylaws of the Company, as amended (incorporated by reference to
            Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for
            the period ended September 30, 1996, SEC File Number 1-7210).

      4(a)  Credit Agreement (with related forms of Note, Pledge Agreement,
            Security Agreement, Mortgage, and Subsidiary Guarantee attached
            as Exhibits thereto) dated as of July 15, 1998, among the
            Company, Morgan Guaranty Trust Company of New York, as
            Syndication Agent and NationsBank, N.A., as Administrative
            Agent, and the Banks and LC Issuing Banks, as defined therein,
            (incorporated by reference to Exhibit 99(a) to the Company's
            Current Report on Form 8-K filed September 11, 1998, SEC File
            Number 1-7210).

      4(b)  First Amendment and Restatement dated March 1, 2000 of Credit
            Agreement dated July 15, 1998 among the Company, the Banks
            Party thereto, the LC Issuing Banks referred to therein, Morgan
            Guaranty Trust Company of New York, as syndication Agent and
            Bank of America, N.A., as Administrative Agent (incorporated by
            reference to Exhibit 4.1 to the Company's Current Report on
            Form 8-K, dated August 21, 2000, SEC File Number 1-7210).

      4(c)  Second Amendment and Restatement dated June 27, 2000 of Credit
            Agreement dated July 15, 1998 among the Company, the Banks
            Party thereto, the LC Issuing Banks referred to therein, and
            Bank of America, N.A., as Administrative Agent (incorporated by
            reference to Exhibit 4.2 to the Company's Current Report on
            Form 8-K, dated August 21, 2000, SEC File Number 1-7210).

      4(d)  Amendment No. 1 to Mortgage, Assignment of Leases and Rents,
            Security Agreement and Financing Statement dated March 1, 2000
            between Republic Paperboard Company and Bank of America, N.A.
            (successor to NationsBank, N.A.), as Administrative Agent
            (incorporated by reference to Exhibit 4.3 to the Company's
            Current Report on Form 8-K dated August 21, 2000, SEC File
            Number 1-7210).

      4(e)  Amendment No. 2 to Mortgage, Assignment of Leases and Rents,
            Security Agreement and Financing Statement dated June 27, 2000
            between Republic Paperboard Company and Bank of America, N.A.
            (successor to NationsBank, N.A.), as Administrative Agent
            (incorporated by reference to Exhibit 4.4 to the Company's
            Current Report on Form 8-K dated August 21, 2000, SEC File
            Number 1-7210).

      4(f)  Indenture dated as of July 15, 1998 between the Company and UMB
            Bank, N.A., as Trustee, relating to the Company's 9 1/2% Senior
            Subordinated Notes due 2008 (incorporated by reference to
            Exhibit 99(b) to the Company's Current Report on Form 8-K dated
            September 11, 1998, SEC File Number 1-7210).

      4(g)  Registration Rights Agreement dated July 15, 1998, among the
            Company, J.P. Morgan Securities, Inc., Dain Rauscher Wessels, a
            division of Dain Rauscher Incorporated, and A.G. Edwards &
            Sons, Inc., (incorporated by reference to Exhibit 4(f) to the
            Company's Registration Statement on Form S-4 filed September
            11, 1998, SEC File Number 1-7210).

     10(a)  The 1989 Long-Term Incentive Plan (As Restated and Amended
            Effective August 16, 1996) (incorporated by reference to
            Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q
            for the period ended September 30, 1996, SEC File Number 1-
            7210).

     10(b)  Second Amendment to the Company's 1989 Long-Term Incentive
            Plan, effective June 15, 2000.*

     10(c)  Non-Employee Director Stock Option Plan (As Amended Effective
            August 16, 1996) (incorporated by reference to Exhibit 10(b) to
            the Company's Quarterly Report on Form 10-Q for the period
            ended September 30, 1996, SEC File Number 1-7210).

                                       58
<PAGE>

     10(d)  First Amendment to the Company's Non-Employee Director Stock
            Option Plan, effective June 15, 2000.*

     10(e)  Form of Non-Employee Directors' Retirement Compensation
            Agreement as amended and restated effective July 14, 1994.*

     10(f)  Tenancy in Common Agreement dated December 29, 1983, between
            Packaging Corporation of America and Republic Paperboard
            Company (incorporated by reference to Exhibit 10(d) to the
            Company's Annual Report on Form 10-K for the year ended June
            30, 1994, SEC File Number 1-7210).

     10(g)  Shared Facilities and Shared Service Agreement dated December
            28, 1983, between Packaging Corporation of America and Republic
            Paperboard Company (incorporated by reference to Exhibit 10(e)
            to the Company's Annual Report on Form 10-K for the year ended
            June 30, 1994, SEC File Number 1-7210).

     10(h)  Key Employee Continuation Plan (incorporated by reference to
            Exhibit 10(i) to the Company's Annual Report on Form 10-K for
            the fiscal year ended June 30, 1992, SEC File Number 1-7210).

     10(i)  Amendment No. 1 to the Company's Key Employee Continuation Plan
            adopted October 22, 1998 and effective October 1, 1998.*

     10(j)  Second Amendment to the Company's Key Employee Continuation
            Plan adopted June 15, 2000.*

     10(k)  The Company's Salaried Employee Severance Plan effective June
            16, 2000.*

     10(l)  The Company's Retention Bonus Plan effective June 6, 2000.*

     10(m)  Paperboard Supply Agreement, dated May 14, 1998, between the
            Company, Republic Paperboard Company and James Hardie Gypsum,
            Inc. (incorporated by reference to Exhibit 99(c) to the
            Company's Current Report on Form 8-K, dated September 11, 1998,
            SEC File Number 1-7210). Portions of this Exhibit were omitted
            pursuant to a request for confidential treatment filed with the
            Office of the Secretary of the Commission.

     10(n)  Amended and Restated Agreement for Engineering, Procurement and
            Construction dated as of June 26, 1998 between Republic
            Paperboard Company and Fluor Daniel, Inc. relating to the
            Lawton mill (incorporated by reference to Exhibit 99(d) to the
            Company's Current Report on Form 8-K, dated September 11, 1998,
            SEC File Number 1-7210). Portions of this Exhibit were omitted
            pursuant to a request for confidential treatment filed with the
            Office of the Secretary of the Commission.

     10(o)  Amended and Restated Parent Company Guarantee effective as of
            June 26, 1998 from the Company to Fluor Daniel, Inc. relating
            to the Lawton mill (incorporated by reference to Exhibit 99(e)
            to the Company's Current Report on Form 8-K, dated September
            11, 1998, SEC File Number 1-7210).


     21     Significant Subsidiaries of the Registrant.*

     23     Consent of Independent Public Accountants dated September 6,
            2000.*

     23(b)  Consent of Independent Public Accountants dated September 22,
            2000.

     24     Power of Attorney.*

     27     Financial Data Schedule (for SEC use only).*
--------
*  Previously filed.

                                       59
<PAGE>

     99(a)  Press Release dated August 14, 2000 (incorporated by reference
            to Schedule 14A of the Company filed August 14, 2000).

     99(b)  Form of Stockholder Agreement executed on August 11, 2000 by
            the Directors and Executive Officers of the Company and certain
            members of the family of Phil Simpson in favor of Premier
            Construction Products Statutory Trust and Premier Construction
            Products Acquisition Corp. (incorporated by reference to
            Exhibit 99.3 to the Company's Current Report on Form 8-K dated
            August 21, 2000, SEC File Number 1-7210).

    (b) Reports on Form 8-K.

    None filed during the period covered by this report.

                                       60
<PAGE>

                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has fully caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                          Republic Group Incorporated

                                                     /s/ Phil Simpson
                                          By: _________________________________
                                               Phil Simpson, Chairman of the
                                                    Board and President

Dated: September 25, 2000

                                       61
<PAGE>

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

<TABLE>
<CAPTION>
              Signature                          Title                   Date
              ---------                          -----                   ----

<S>                                    <C>                        <C>
           /s/ Phil Simpson            Chairman of the Board,     September 25, 2000
______________________________________  President and Director
             Phil Simpson               (principal executive
                                        officer)

                  *                    Executive Vice President   September 25, 2000
______________________________________  and Chief Financial
           Doyle R. Ramsey              Officer (principal
                                        financial officer)

                  *                    Executive Vice President-  September 25, 2000
______________________________________  Paperboard and Director
           David P. Simpson

                  *                    Vice President-Finance     September 25, 2000
______________________________________  (principal accounting
           Michael W. Dirks             officer)

                  *                    Director                   September 25, 2000
______________________________________
            Bert A. Nelson

                  *                    Director                   September 25, 2000
______________________________________
            Gerald L. Ray

                  *                    Director                   September 25, 2000
______________________________________
           Robert F. Sexton

                  *                    Director                   September 25, 2000
______________________________________
            L. L. Wallace
</TABLE>

        /s/ Phil Simpson
*By: ____________________________
        Attorney-in-fact

                                       62
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

   To: The Stockholders and Board of Directors of
       Republic Group Incorporated

   We have audited in accordance with auditing standards generally accepted in
the United States the consolidated financial statements of Republic Group
Incorporated and subsidiaries included in this Form 10-K and have issued our
report thereon dated July 28, 2000. Our audits were made for the purpose of
forming an opinion on the basic consolidated financial statements taken as a
whole. Schedule II, Valuation and Qualifying Accounts and Reserves, is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.

                                          Arthur Andersen LLP

Dallas, Texas
July 28, 2000

                                       63
<PAGE>

                          REPUBLIC GROUP INCORPORATED

          SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                   Years ended June 30, 1998, 1999, and 2000

<TABLE>
<CAPTION>
                          Balance  Additions Charged to
                            at     --------------------                 Balance
                         beginning    Cost and Other                     at end
                          of year   expenses accounts    Deductions (A) of year
                         --------- --------------------  -------------- --------
<S>                      <C>       <C>       <C>         <C>            <C>
1998:
  Allowance for doubtful
   accounts............. $748,000  $     --  $      --      $(67,000)   $681,000
                         ========  ========= ==========     ========    ========
1999:
  Allowance for doubtful
   accounts............. $681,000  $     --  $ (155,000)    $ (6,000)   $520,000
                         ========  ========= ==========     ========    ========
2000:
  Allowance for doubtful
   accounts............. $520,000  $ 185,000 $ (130,000)    $ (1,000)   $574,000
                         ========  ========= ==========     ========    ========
</TABLE>
--------
(A) Uncollectible accounts charged off, net of recoveries.

                                       64
<PAGE>

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
 Exhibit
 Number  Description
 ------- -----------
 <C>     <S>
  2(a)   Agreement and Plan of Merger dated August 11, 2000 among the Company,
         Premier Construction Products Statutory Trust and Premier Construction
         Products Acquisition Corp., including a list identifying the contents
         of omitted schedules (incorporated by reference to Exhibit 2.1 to the
         Company's Current Report on Form 8-K/A, dated September 12, 2000, SEC
         File Number 1-7210).
  2(b)   Agreement dated August 11, 2000 between the Company and Centex
         Construction Products, Inc.*
  3(a)   Certificate of Incorporation of the Company, as amended (incorporated
         by reference to Exhibit 3(a) to the Company's Quarterly Report on Form
         10-Q for the period ended September 30, 1996, SEC File Number 1-7210).
  3(b)   Bylaws of the Company, as amended (incorporated by reference to
         Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for the
         period ended September 30, 1996, SEC File Number 1-7210).
  4(a)   Credit Agreement (with related forms of Note, Pledge Agreement,
         Security Agreement, Mortgage, and Subsidiary Guarantee attached as
         Exhibits thereto) dated as of July 15, 1998, among the Company, Morgan
         Guaranty Trust Company of New York, as Syndication Agent and
         NationsBank, N.A., as Administrative Agent, and the Banks and LC
         Issuing Banks, as defined therein, (incorporated by reference to
         Exhibit 99(a) to the Company's Current Report on Form 8-K filed
         September 11, 1998, SEC File Number 1-7210).
  4(b)   First Amendment and Restatement dated March 1, 2000 of Credit
         Agreement dated July 15, 1998 among the Company, the Banks Party
         thereto, the LC Issuing Banks referred to therein, Morgan Guaranty
         Trust Company of New York, as syndication Agent and Bank of America,
         N.A., as Administrative Agent (incorporated by reference to Exhibit
         4.1 to the Company's Current Report on Form 8-K, dated August 21,
         2000, SEC File Number 1-7210).
  4(c)   Second Amendment and Restatement dated June 27, 2000 of Credit
         Agreement dated July 15, 1998 among the Company, the Banks Party
         thereto, the LC Issuing Banks referred to therein, and Bank of
         America, N.A., as Administrative Agent (incorporated by reference to
         Exhibit 4.2 to the Company's Current Report on Form 8-K, dated August
         21, 2000, SEC File Number 1-7210).
  4(d)   Amendment No. 1 to Mortgage, Assignment of Leases and Rents, Security
         Agreement and Financing Statement dated March 1, 2000 between Republic
         Paperboard Company and Bank of America, N.A. (successor to
         NationsBank, N.A.), as Administrative Agent (incorporated by reference
         to Exhibit 4.3 to the Company's Current Report on Form 8-K dated
         August 21, 2000, SEC File Number 1-7210).
  4(e)   Amendment No. 2 to Mortgage, Assignment of Leases and Rents, Security
         Agreement and Financing Statement dated June 27, 2000 between Republic
         Paperboard Company and Bank of America, N.A. (successor to
         NationsBank, N.A.), as Administrative Agent (incorporated by reference
         to Exhibit 4.4 to the Company's Current Report on Form 8-K dated
         August 21, 2000, SEC File Number 1-7210).
  4(f)   Indenture dated as of July 15, 1998 between the Company and UMB Bank,
         N.A., as Trustee, relating to the Company's 9 1/2% Senior Subordinated
         Notes due 2008 (incorporated by reference to Exhibit 99(b) to the
         Company's Current Report on Form 8-K dated September 11, 1998, SEC
         File Number 1-7210).
  4(g)   Registration Rights Agreement dated July 15, 1998, among the Company,
         J.P. Morgan Securities, Inc., Dain Rauscher Wessels, a division of
         Dain Rauscher Incorporated, and A.G. Edwards & Sons, Inc.,
         (incorporated by reference to Exhibit 4(f) to the Company's
         Registration Statement on Form S-4 filed September 11, 1998, SEC File
         Number 1-7210).
</TABLE>


                                       65
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 Number  Description
 ------- -----------
 <C>     <S>
 10(a)   The 1989 Long-Term Incentive Plan (As Restated and Amended Effective
         August 16, 1996) (incorporated by reference to Exhibit 10(a) to the
         Company's Quarterly Report on Form 10-Q for the period ended September
         30, 1996, SEC File Number 1-7210).
 10(b)   Second Amendment to the Company's 1989 Long-Term Incentive Plan,
         effective June 15, 2000.*
 10(c)   Non-Employee Director Stock Option Plan (As Amended Effective August
         16, 1996) (incorporated by reference to Exhibit 10(b) to the Company's
         Quarterly Report on Form 10-Q for the period ended September 30, 1996,
         SEC File Number 1-7210).
 10(d)   First Amendment to the Company's Non-Employee Director Stock Option
         Plan, effective June 15, 2000.*
 10(e)   Form of Non-Employee Directors' Retirement Compensation Agreement as
         amended and restated effective July 14, 1994.*
 10(f)   Tenancy in Common Agreement dated December 29, 1983, between Packaging
         Corporation of America and Republic Paperboard Company (incorporated
         by reference to Exhibit 10(d) to the Company's Annual Report on Form
         10-K for the year ended June 30, 1994, SEC File Number 1-7210).
 10(g)   Shared Facilities and Shared Service Agreement dated December 28,
         1983, between Packaging Corporation of America and Republic Paperboard
         Company (incorporated by reference to Exhibit 10(e) to the Company's
         Annual Report on Form 10-K for the year ended June 30, 1994, SEC File
         Number 1-7210).
 10(h)   Key Employee Continuation Plan (incorporated by reference to Exhibit
         10(i) to the Company's Annual Report on Form 10-K for the fiscal year
         ended June 30, 1992, SEC File Number 1-7210).
 10(i)   Amendment No. 1 to the Company's Key Employee Continuation Plan
         adopted October 22, 1998 and effective October 1, 1998.*
 10(j)   Second Amendment to the Company's Key Employee Continuation Plan
         adopted June 15, 2000.*
 10(k)   The Company's Salaried Employee Severance Plan effective June 16,
         2000.*
 10(l)   The Company's Retention Bonus Plan effective June 6, 2000.*
 10(m)   Paperboard Supply Agreement, dated May 14, 1998, between the Company,
         Republic Paperboard Company and James Hardie Gypsum, Inc.
         (incorporated by reference to Exhibit 99(c) to the Company's Current
         Report on Form 8-K, dated September 11, 1998, SEC File Number 1-7210).
         Portions of this Exhibit were omitted pursuant to a request for
         confidential treatment filed with the Office of the Secretary of the
         Commission.
 10(n)   Amended and Restated Agreement for Engineering, Procurement and
         Construction dated as of June 26, 1998 between Republic Paperboard
         Company and Fluor Daniel, Inc. relating to the Lawton mill
         (incorporated by reference to Exhibit 99(d) to the Company's Current
         Report on Form 8-K, dated September 11, 1998, SEC File Number 1-7210).
         Portions of this Exhibit were omitted pursuant to a request for
         confidential treatment filed with the Office of the Secretary of the
         Commission.
 10(o)   Amended and Restated Parent Company Guarantee effective as of June 26,
         1998 from the Company to Fluor Daniel, Inc. relating to the Lawton
         mill (incorporated by reference to Exhibit 99(e) to the Company's
         Current Report on Form 8-K, dated September 11, 1998, SEC File Number
         1-7210).
</TABLE>


                                       66
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 Number  Description
 ------- -----------
 <C>     <S>
 21      Significant Subsidiaries of the Registrant.*
 23      Consent of Independent Public Accountants dated September 6, 2000.*
 23(b)   Consent of Independent Public Accountants dated September 22, 2000.
 24      Power of Attorney.*
 27      Financial Data Schedule (for SEC use only).*
 99(a)   Press Release dated August 14, 2000 (incorporated by reference to
         Schedule 14A of the Company filed August 14, 2000).
 99(b)   Form of Stockholder Agreement executed on August 11, 2000 by the
         Directors and Executive Officers of the Company and certain members of
         the family of Phil Simpson in favor of Premier Construction Products
         Statutory Trust and Premier Construction Products Acquisition Corp.
         (incorporated by reference to Exhibit 99.3 to the Company's Current
         Report on Form 8-K dated August 21, 2000, SEC File Number 1-7210).
</TABLE>
--------
*  Previously filed.

                                       67
<PAGE>

                              Company Information

                          Republic Group Incorporated

              Corporate Office                 Dallas Office
             811 East 30th Ave.        1320 Greenway Dr., Suite 920
          Hutchinson, KS 67502-4341        Irving, TX 75038-2548
                P.O. Box 1307                  P.O. Box 750
          Hutchinson, KS 67504-1307        Dallas, TX 75221-0750
               (316) 727-2700                 (972) 550-0035
          Facsimile: (316) 727-2727      Facsimile: (972) 550-0331

                             Republic Fiber Company

  Kansas City Recycling     Topeka Recycling Center    Denver Recycling Center
         Center                834 Adams Street          4525 Ironton Street
     136 Main Street         Topeka, KS 66607-1126        Denver, CO 80239
 Kansas City, MO 64105-         (785) 235-2515             (303) 373-2703
          1221               Facsimile: (785) 235-      Facsimile: (303) 373-
     (816) 842-6963                  9420                       2704
  Facsimile: (816) 842-
          6993

                          Republic Paperboard Company

               Hutchinson Mill                  Lawton Mill
             100 North Halstead              8801 SW Lee Blvd.
          Hutchinson, KS 67501-1831          Lawton, OK 73505
                P.O. Box 1267                 (580) 510-2200
          Hutchinson, KS 67504-1267      Facsimile: (580) 510-2206
               (316) 662-2331

          Facsimile: (316) 662-7442


             Commerce City Mill                Halltown Mill
             5501 Brighton Blvd.        Old Route 340, Halltown Rd.
        Commerce City, CO 80022-3608      Halltown, WV 25423-0010
                P.O. Box 1268                   P.O. Box 10
        Commerce City, CO 80022-1268      Halltown, WV 25423-0010
               (303) 287-7456                 (304) 725-2076
          Facsimile: (303) 288-7028      Facsimile: (304) 728-7544


                            Republic Gypsum Company
                             Gypsum Wallboard Plant
                                Highway 62 West
                              Post Office Drawer C
                              Duke, OK 73532-0239
                                 (580) 679-3391
                           Facsimile: (580) 679-3918

                          Transfer Agent and Registrar
         UMB Bank, N.A. . P.O. Box 410064 . Kansas City, MO 64141-0064