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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Qx   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

OR

o   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 1-11113

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

|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 58-2205241
(I.R.S. Employer
Identification No.)

3350 Riverwood Parkway, S.E.
Suite 1400
Atlanta, Georgia 30339
(Address of principal executive offices)
(Zip Code)

(770) 644-3000

(Registrants telephone number, including area code)

(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes   o   No   x

At August 2, 2002 there were 7,063,680 shares and 500,000 shares of the
registrants Class A and Class B common stock, respectively, outstanding.





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|                                                   |  |  |  |  |  |  |  | 
|-------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                     
|SIGNATURE                                         
|RECONCILIATION OF INCOME FROM OPERATIONS TO EBITDA



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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS









As used in this Form 10-Q, unless the context otherwise requires, RIC refers
to the corporation formerly named Riverwood International Corporation; the
Predecessor refers to RIC and its subsidiaries in respect of periods prior to
the acquisition on March 27, 1996 by Holding, through its wholly-owned
subsidiaries, of RIC (the Merger); the Company refers to the registrant,
Riverwood Holding, Inc., a Delaware corporation formerly named New River
Holding, Inc. (Holding) and its subsidiaries; and Riverwood refers to
Riverwood International Corporation, a Delaware corporation formerly named
Riverwood International USA, Inc. and an indirect wholly-owned subsidiary of
Holding.

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RIVERWOOD HOLDING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(unaudited)

|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |         | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------- | ------- | ------------ | - | --------- | ------- | 
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   | June 30,  |         | December 31,
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   | 2002      |         | 2001        
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |             
|ASSETS                                                                                                                                                            |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|Current Assets:                                                                                                                                                   |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|                                                                                                                                                                  | Cash and Equivalents                                                                                                                                                                                                                                             |   | $         | 31,433  |              |   | $         | 27,983  | 
|                                                                                                                                                                  | Receivables, Net of Allowances                                                                                                                                                                                                                                   |   |           | 176,157 |              |   |           | 140,099 | 
|                                                                                                                                                                  | Inventories                                                                                                                                                                                                                                                      |   |           | 184,152 |              |   |           | 181,305 | 
|                                                                                                                                                                  | Prepaid Expenses                                                                                                                                                                                                                                                 |   |           | 11,229  |              |   |           | 6,770   | 
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|Total Current Assets                                                                                                                                              |                                                                                                                                                                                                                                                                  |   | 402,971   |         |              |   | 356,157   |        
|Property, Plant and Equipment, Net of Accumulated
Depreciation of $713,548 in 2002 and $659,945 in 2001                                                           |                                                                                                                                                                                                                                                                  |   | 1,262,106 |         |              |   | 1,289,915 |        
|Goodwill                                                                                                                                                          |                                                                                                                                                                                                                                                                  |   | 276,482   |         |              |   | 276,482   |        
|Other Assets                                                                                                                                                      |                                                                                                                                                                                                                                                                  |   | 129,836   |         |              |   | 136,914   |        
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|Total Assets                                                                                                                                                      |                                                                                                                                                                                                                                                                  | $ | 2,071,395 |         |              | $ | 2,059,468 |        
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|LIABILITIES                                                                                                                                                       |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|Current Liabilities:                                                                                                                                              |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|                                                                                                                                                                  | Short-Term Debt                                                                                                                                                                                                                                                  |   | $         | 60,810  |              |   | $         | 19,958  | 
|                                                                                                                                                                  | Accounts Payable and Other Accrued Liabilities                                                                                                                                                                                                                   |   |           | 222,188 |              |   |           | 218,764 | 
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|Total Current Liabilities                                                                                                                                         |                                                                                                                                                                                                                                                                  |   | 282,998   |         |              |   | 238,722   |        
|Long-Term Debt, Less Current Portion                                                                                                                              |                                                                                                                                                                                                                                                                  |   | 1,499,772 |         |              |   | 1,523,082 |        
|Other Noncurrent Liabilities                                                                                                                                      |                                                                                                                                                                                                                                                                  |   | 71,870    |         |              |   | 73,738    |        
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|Total Liabilities                                                                                                                                                 |                                                                                                                                                                                                                                                                  |   | 1,854,640 |         |              |   | 1,835,542 |        
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|Contingencies and Commitments (Note 4)                                                                                                                            |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|Class A Redeemable Common Stock $120/share redemption value; 63,680
and 67,180 shares issued and outstanding at June 30, 2002 and
December 31, 2001, respectively |                                                                                                                                                                                                                                                                  |   | 7,641     |         |              |   | 8,061     |        
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|SHAREHOLDERS EQUITY                                                                                                                                              |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|Common Stock par value $.01 per Share;                                                                                                                            |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|                                                                                                                                                                  | Class A Common Stock, 9,000,000 shares authorized; 7,063,680 and 7,067,180
shares designated at June 30, 2002 and December 31, 2001, respectively;
7,000,000 shares of non-redeemable Common Stock issued and outstanding
at June 30, 2002 and December 31, 2001 |   |           | 70      |              |   |           | 70      | 
|                                                                                                                                                                  | Class B Common Stock, 3,000,000 shares authorized; 500,000 shares
of non-redeemable Common Stock issued and outstanding
at June 30, 2002 and at December 31, 2001                                                                                                |   |           | 5       |              |   |           | 5       | 
|Capital in Excess of Par Value                                                                                                                                    |                                                                                                                                                                                                                                                                  |   | 748,753   |         |              |   | 748,753   |        
|Accumulated Deficit                                                                                                                                               |                                                                                                                                                                                                                                                                  |   | (511,171  | )       |              |   | (493,771  | )      
|Accumulated Derivative Instruments Loss                                                                                                                           |                                                                                                                                                                                                                                                                  |   | (4,032    | )       |              |   | (4,570    | )      
|Cumulative Currency Translation Adjustment                                                                                                                        |                                                                                                                                                                                                                                                                  |   | (24,511   | )       |              |   | (34,622   | )      
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|Total Shareholders Equity                                                                                                                                        |                                                                                                                                                                                                                                                                  |   | 209,114   |         |              |   | 215,865   |        
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        
|Total Liabilities and Shareholders Equity                                                                                                                        |                                                                                                                                                                                                                                                                  | $ | 2,071,395 |         |              | $ | 2,059,468 |        
|                                                                                                                                                                  |                                                                                                                                                                                                                                                                  |   |           |         |              |   |           |        

See Notes to Condensed Consolidated Financial Statements.

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RIVERWOOD HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(In thousands of dollars)
(unaudited)

|                                                                                                  |                                          |   |                    |        |                  |   |          |        |          |   |         |        |  |   |         |        |  
|------------------------------------------------------------------------------------------------- | ---------------------------------------- | - | ------------------ | ------ | ---------------- | - | -------- | ------ | -------- | - | ------- | ------ |  | - | ------- | ------ | -
|                                                                                                  |                                          |   | Three Months Ended |        | Six Months Ended
|                                                                                                  |                                          |   |                    |        |                 
|                                                                                                  |                                          |   | June 30,           |        | June 30,         |   | June 30, |        | June 30,
|                                                                                                  |                                          |   | 2002               |        | 2001             |   | 2002     |        | 2001    
|                                                                                                  |                                          |   |                    |        |                  |   |          |        |         
|Net Sales                                                                                         |                                          | $ | 348,046            |        |                  | $ | 340,873  |        |          | $ | 648,158 |        |  | $ | 629,473 |       
|Cost of Sales                                                                                     |                                          |   | 269,975            |        |                  |   | 267,701  |        |          |   | 510,564 |        |  |   | 505,582 |       
|Selling, General and Administrative                                                               |                                          |   | 32,656             |        |                  |   | 29,977   |        |          |   | 61,263  |        |  |   | 60,753  |       
|Research, Development and Engineering                                                             |                                          |   | 1,146              |        |                  |   | 1,165    |        |          |   | 2,461   |        |  |   | 2,335   |       
|Other Expense, Net                                                                                |                                          |   | 3,118              |        |                  |   | 5,112    |        |          |   | 1,538   |        |  |   | 13,068  |       
|                                                                                                  |                                          |   |                    |        |                  |   |          |        |          |   |         |        |  |   |         |       
|Income from Operations                                                                            |                                          |   | 41,151             |        |                  |   | 36,918   |        |          |   | 72,332  |        |  |   | 47,735  |       
|Interest Income                                                                                   |                                          |   | 613                |        |                  |   | 350      |        |          |   | 1,068   |        |  |   | 556     |       
|Interest Expense                                                                                  |                                          |   | 38,369             |        |                  |   | 39,989   |        |          |   | 77,429  |        |  |   | 80,203  |       
|                                                                                                  |                                          |   |                    |        |                  |   |          |        |          |   |         |        |  |   |         |       
|Income (Loss) before Income Taxes                                                                 |                                          |   | 3,395              |        |                  |   | (2,721   | )      |          |   | (4,029  | )      |  |   | (31,912 | )     
|Income Tax Expense                                                                                |                                          |   | 1,571              |        |                  |   | 1,951    |        |          |   | 1,862   |        |  |   | 2,425   |       
|                                                                                                  |                                          |   |                    |        |                  |   |          |        |          |   |         |        |  |   |         |       
|Income (Loss) before Extraordinary Item and
Cumulative Effect of a Change in Accounting Principle |                                          |   | 1,824              |        |                  |   | (4,672   | )      |          |   | (5,891  | )      |  |   | (34,337 | )     
|Extraordinary Loss on Early Extinguishment of Debt,
Net of Tax of $0                              |                                          |   | (11,509            | )      |                  |   | (2,770   | )      |          |   | (11,509 | )      |  |   | (2,770  | )     
|                                                                                                  |                                          |   |                    |        |                  |   |          |        |          |   |         |        |  |   |         |       
|(Loss) before Cumulative Effect of a Change in
Accounting Principle                               |                                          |   | (9,685             | )      |                  |   | (7,442   | )      |          |   | (17,400 | )      |  |   | (37,107 | )     
|Cumulative Effect of a Change in Accounting Principle
Net of Tax of $0                            |                                          |   |                   |        |                  |   |         |        |          |   |        |        |  |   | (499    | )     
|                                                                                                  |                                          |   |                    |        |                  |   |          |        |          |   |         |        |  |   |         |       
|Net (Loss)                                                                                        |                                          |   | (9,685             | )      |                  |   | (7,442   | )      |          |   | (17,400 | )      |  |   | (37,606 | )     
|                                                                                                  |                                          |   |                    |        |                  |   |          |        |          |   |         |        |  |   |         |       
|Other Comprehensive Income (Loss), Net of Tax:                                                    |                                          |   |                    |        |                  |   |          |        |          |   |         |        |  |   |         |       
|                                                                                                  | Derivative Instruments (Loss) Gain       |   |                    | (612   | )                |   |          | (1,388 | )        |   |         | 538    |  |   |         | (2,447 | )
|                                                                                                  | Foreign Currency Translation Adjustments |   |                    | 10,949 |                  |   |          | (2,094 | )        |   |         | 10,111 |  |   |         | (7,232 | )
|                                                                                                  |                                          |   |                    |        |                  |   |          |        |          |   |         |        |  |   |         |       
|Comprehensive Income (Loss)                                                                       |                                          | $ | 652                |        |                  | $ | (10,924  | )      |          | $ | (6,751  | )      |  | $ | (47,285 | )     
|                                                                                                  |                                          |   |                    |        |                  |   |          |        |          |   |         |        |  |   |         |       

See Notes to Condensed Consolidated Financial Statements.

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RIVERWOOD HOLDING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(unaudited)

|                                                                           |                                                                                   |   |                  |        |               |   |          |        |  
|-------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | - | ---------------- | ------ | ------------- | - | -------- | ------ | -
|                                                                           |                                                                                   |   | Six Months Ended
|                                                                           |                                                                                   |   |                 
|                                                                           |                                                                                   |   | June 30, 2002    |        | June 30, 2001
|                                                                           |                                                                                   |   |                  |        |              
|Cash Flows from Operating Activities:                                      |                                                                                   |   |                  |        |               |   |          |       
|Net (Loss)                                                                 |                                                                                   | $ | (17,400          | )      |               | $ | (37,606  | )     
|Noncash Items Included in Net (Loss):                                      |                                                                                   |   |                  |        |               |   |          |       
|                                                                           | Depreciation and Amortization                                                     |   |                  | 64,772 |               |   |          | 72,341 |  
|                                                                           | Cumulative Effect of a Change in Accounting Principle                             |   |                  |       |               |   |          | 499    |  
|                                                                           | Extraordinary Loss on Early Extinguishment of Debt, Net of Tax of $0              |   |                  | 2,967  |               |   |          | 2,770  |  
|                                                                           | Deferred Income Taxes                                                             |   |                  | 609    |               |   |          | (1,638 | )
|                                                                           | Pension, Postemployment and Postretirement Benefits
Expense, Net of Contributions |   |                  | 5,155  |               |   |          | 2,635  |  
|                                                                           | Equity in Net Earnings of Affiliates, Net of Dividends                            |   |                  |       |               |   |          | 710    |  
|                                                                           | Amortization of Deferred Debt Issuance Costs                                      |   |                  | 3,313  |               |   |          | 3,938  |  
|                                                                           | Other                                                                             |   |                  | (527   | )             |   |          | 5,549  |  
|Changes in Operating Assets & Liabilities, Net of Subsidiary Consolidated: |                                                                                   |   |                  |        |               |   |          |       
|Receivables                                                                |                                                                                   |   | (29,500          | )      |               |   | (19,132  | )     
|Inventories                                                                |                                                                                   |   | (561             | )      |               |   | (9,698   | )     
|Prepaid Expenses                                                           |                                                                                   |   | (5,374           | )      |               |   | (141     | )     
|Accounts Payable and Other Accrued Liabilities                             |                                                                                   |   | (7,445           | )      |               |   | (1,870   | )     
|Other Noncurrent Liabilities                                               |                                                                                   |   | (1,315           | )      |               |   | (2,864   | )     
|                                                                           |                                                                                   |   |                  |        |               |   |          |       
|Net Cash Provided by Operating Activities                                  |                                                                                   |   | 14,694           |        |               |   | 15,493   |       
|                                                                           |                                                                                   |   |                  |        |               |   |          |       
|Cash Flows from Investing Activities:                                      |                                                                                   |   |                  |        |               |   |          |       
|Purchases of Property, Plant and Equipment                                 |                                                                                   |   | (23,182          | )      |               |   | (25,316  | )     
|Cash Acquired of Subsidiary Consolidated                                   |                                                                                   |   |                 |        |               |   | 17,985   |       
|Increase in Other Assets                                                   |                                                                                   |   | (2,126           | )      |               |   | (846     | )     
|                                                                           |                                                                                   |   |                  |        |               |   |          |       
|Net Cash Used in Investing Activities                                      |                                                                                   |   | (25,308          | )      |               |   | (8,177   | )     
|                                                                           |                                                                                   |   |                  |        |               |   |          |       
|Cash Flows from Financing Activities:                                      |                                                                                   |   |                  |        |               |   |          |       
|Borrowings under Revolving Credit Facilities                               |                                                                                   |   | 164,150          |        |               |   | 256,135  |       
|Payments on Revolving Credit Facilities                                    |                                                                                   |   | (137,920         | )      |               |   | (247,282 | )     
|Proceeds from Issuance of Debt                                             |                                                                                   |   | 250,000          |        |               |   | 257,500  |       
|Increase in Debt Issuance Costs                                            |                                                                                   |   | (3,336           | )      |               |   | (6,004   | )     
|Premium Paid on Early Extinguishment of Debt                               |                                                                                   |   | (8,542           | )      |               |   |         |       
|Payments on Debt                                                           |                                                                                   |   | (250,938         | )      |               |   | (251,781 | )     
|Repurchases of Redeemable Common Stock                                     |                                                                                   |   | (420             | )      |               |   |         |       
|Issuance of Redeemable Common Stock                                        |                                                                                   |   |                 |        |               |   | 300      |       
|                                                                           |                                                                                   |   |                  |        |               |   |          |       
|Net Cash Provided by Financing Activities                                  |                                                                                   |   | 12,994           |        |               |   | 8,868    |       
|Effect of Exchange Rate Changes on Cash                                    |                                                                                   |   | 1,070            |        |               |   | 667      |       
|                                                                           |                                                                                   |   |                  |        |               |   |          |       
|Net Increase in Cash and Equivalents                                       |                                                                                   |   | 3,450            |        |               |   | 16,851   |       
|Cash and Equivalents at Beginning of Period                                |                                                                                   |   | 27,983           |        |               |   | 18,417   |       
|                                                                           |                                                                                   |   |                  |        |               |   |          |       
|Cash and Equivalents at End of Period                                      |                                                                                   | $ | 31,433           |        |               | $ | 35,268   |       
|                                                                           |                                                                                   |   |                  |        |               |   |          |       

See Notes to Condensed Consolidated Financial Statements.

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RIVERWOOD HOLDING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1  ORGANIZATION AND BASIS OF PRESENTATION

Riverwood Holding, Inc. (Riverwood Holding) and its wholly-owned subsidiary
RIC Holding, Inc. (RIC Holding) and the corporation formerly named CDRO
Acquisition Corporation were incorporated in 1995 to acquire the stock of our
predecessor, the corporation formerly named Riverwood International Corporation
(the Predecessor).

On March 27, 1996, Riverwood Holding, through its wholly-owned subsidiaries,
acquired all of the outstanding shares of common stock of the Predecessor. On
such date, CDRO Acquisition Corporation was merged into the Predecessor. The
Predecessor, as the surviving corporation in the Merger, became a wholly-owned
subsidiary of RIC Holding. On March 28, 1996, the Predecessor transferred
substantially all of its properties and assets to the corporation formerly
named Riverwood International USA, Inc., other than the capital stock of
Riverwood International USA, Inc, and the Predecessor was merged into RIC
Holding. Thereupon, Riverwood International USA, Inc. was renamed Riverwood
International Corporation. Upon consummation of the Subsequent Merger, RIC
Holding, as the surviving corporation in the Subsequent Merger, became the
parent company of Riverwood International Corporation (Riverwood
International).

Riverwood Holding and RIC Holding, a wholly-owned subsidiary, conducted no
significant business and have no independent assets or operations other than in
connection with the Merger and related transactions through March 27, 1996.
Riverwood Holding and RIC Holding fully and unconditionally guarantee
substantially all of the debt of Riverwood International.

In connection with the Merger, the purchase method of accounting was used to
establish and record a new cost basis for the assets acquired and liabilities
assumed. The difference between the purchase price and the fair market values
of the assets acquired and liabilities assumed was recorded as goodwill.

References to the Company are to Riverwood Holding and its subsidiaries.

The accompanying Condensed Consolidated Financial Statements of the Company
included herein have been prepared by the Company without an audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments necessary for a fair presentation of the financial position,
results of operations and cash flows for the interim periods presented have
been made. The Condensed Consolidated Balance Sheet as of December 31, 2001 was
derived from audited financial statements.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

For a summary of the Companys significant accounting policies, please refer to
the Companys report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 2001.

The preparation of the Condensed Consolidated Financial Statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates

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and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the Condensed Consolidated Financial
Statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from those estimates.

The Companys Condensed Consolidated Financial Statements include all
significant subsidiaries in which the Company has the ability to exercise
direct or indirect control over operating and financial policies. Intercompany
transactions and balances are eliminated in consolidation.

The Company has reclassified the presentation of certain prior period
information to conform with the current presentation format.

NOTE 3  INVENTORIES

The major classes of inventories were as follows:

|                          |  |               |         |                   |  |   |         | 
|------------------------- |  | ------------- | ------- | ----------------- |  | - | ------- | 
|(In thousands of dollars) |  | June 30, 2002 |         | December 31, 2001
|                          |  |               |         |                  
|Finished goods            |  | $             | 81,506  |                   |  | $ | 87,728  | 
|Work-in-process           |  |               | 13,989  |                   |  |   | 12,194  | 
|Raw materials             |  |               | 52,704  |                   |  |   | 45,656  | 
|Supplies                  |  |               | 35,953  |                   |  |   | 35,727  | 
|                          |  |               |         |                   |  |   |         | 
|Total                     |  | $             | 184,152 |                   |  | $ | 181,305 | 
|                          |  |               |         |                   |  |   |         | 

NOTE 4  CONTINGENCIES AND COMMITMENTS

The Company is committed to compliance with all applicable foreign, federal,
state and local environmental laws and regulations. Environmental law is,
however, dynamic rather than static. As a result, costs, which are
unforeseeable at this time, may be incurred when new laws are enacted, and when
environmental agencies adopt or revise rules and regulations.

In general, the environmental laws that the Company
is subject to regulate discharges
and emissions of constituents to the air, soil and water, prescribe procedures
for the use, reuse, reclamation, recycling and disposal of designated waste
materials and impose liability and requirements relating to the cleanup of
contamination. In certain instances, state environmental laws may be stricter
than their federal counterparts.

The federal Clean Air Act imposes stringent limits on air emissions,
establishes a federal permit program (Title V) and provides for civil and
criminal enforcement sanctions. In response to these requirements, in the early
1990s the Company switched from solvent-based to water-based inks and
varnishes at our converting operations in order to reduce and meet requirements
with respect to emissions of volatile organic compounds. Where necessary, our
plants have received or submitted an application to the appropriate permitting
authority for a Title V permit.

The federal Clean Water Act establishes a system of minimum national effluent
standards for each industry, water quality standards for the nations waterways
and a permit program that provides discharge limitations. It also regulates
releases and spills of oil and toxic chemicals and wastewater and stormwater
discharges. The Companys mill in West Monroe, Louisiana is the only one of the
Companys facilities that is a direct discharger to a water body and a permit
currently covers its discharges to the Ouachita River. The Companys other
operations discharge to publicly owned treatment works and are subject to
pretreatment requirements and limitations.

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The federal Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA) establishes liability for waste generators, current and former
site owners and operators and others in connection with releases of hazardous
materials. The Company has been, and in the future may again be, identified as
a potentially responsible party at sites under CERCLA and similar state laws.

In 1998, the U.S. Environmental Protection Agency adopted regulations
(generally referred to as the cluster rules) that mandate more stringent
controls on air and water discharges from the United States pulp and paper
mills. The Company estimates that the capital spending that may be required to
comply with the cluster rules could reach $55 million to be spent at its two
U.S. paper mills over a seven-year period that began in 2000. As of June 30,
2002, the Company estimates that it has spent approximately one-third of that
amount for such compliance.

In late 1995, the Louisiana Department of Environmental Quality (DEQ)
notified the Predecessor of potential liability for the remediation of
hazardous substances at a wood treatment site in Shreveport, Louisiana that the
Predecessor or its predecessors previously operated, and at a former oil
refinery site in Caddo Parish, Louisiana which is on land that the Company
previously owned. In response to these notices, the Company has provided
additional information concerning these sites and has commenced its own
evaluation of any claims and remediation liabilities for which it may be
responsible. Subsequent to receipt in May 1996 of a Special Demand Letter from
DEQ to remediate the site in Shreveport, the Company performed a soil and
groundwater investigation at the site pursuant to an agreement with DEQ. In
August 2001, the Company entered into a Cooperative Agreement for Remedial
Action with DEQ and the landowners of the site, as well as a Mutual Release and
Settlement Agreement with the landowners. Under the Cooperative Agreement, the
Company developed a remedial design which included, among other things, removing
contaminated soils, capping a portion of the site and future operations and
maintenance, or O&M. If the Company fails to comply with the requirements of
the cooperative agreement, including the prescribed time periods, the DEQ can
impose stipulated penalties as specified in the cooperative agreement ranging
from $250 to $1,000 per day of non-compliance. The Company has engaged a
qualified contractor and expects completion of the work by the end of 2002.
Total costs for the Shreveport remedial action are approximately
$1.3 million. The Company has reached a settlement agreement
with another responsible party that has already reimbursed the
Company for certain past costs and will reimburse the Company for 50%
of future costs incurred in connection with the remediation plan. To
date, the Company has paid approximately $50,000 to the contractor.
Costs could
increase if, for example, there is an increase in the amount of contaminated
soils found on site. In addition, for the initial five years, O&M costs are
estimated to be approximately $0.1 million and groundwater monitoring costs are
estimated to be approximately $0.1 million. The Company has not estimated O&M or
groundwater monitoring costs beyond this initial five-year period because the
extent of any such O&M or groundwater monitoring obligation is
unknown. The Company has accrued $0.8 million for its
approximate 50 percent share of the Shreveport remedial action.

In September 1996, the Company received a Special Demand Letter from DEQ to
remediate the site in Caddo Parish. On July 6, 2000, the Company and DEQ entered into a Settlement Agreement that
describes in detail the remedial actions necessary for the Company to obtain
full release of all future liability at this site. The Company contracted
with a vendor to perform the remedial actions as outlined in the Settlement
Agreement. The remedial action required,
among other things, the neutralization, stabilization and consolidation of
sludges and soils at the site, the capping of the consolidated materials, the
establishment of a vegetative cover and five years of post-closure care of the
capped area. The lump sum contract price with the contractor is approximately
$1.6 million, of which the Company has already paid
approximately $1.3 million. The
Company no longer owns the site since transferring the property to another
entity on October 22, 2000. The remedial actions outlined in the Settlement
Agreement have been completed and the Company expects to obtain the appropriate
release from DEQ in the fourth quarter of 2002.

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The Company is involved in environmental remediation projects for certain
properties currently or formerly owned or operated by the Company, certain
properties divested by the Company for which responsibility was retained, and
waste disposal sites where waste was shipped by the Predecessor or its
predecessors or for which the Company might have corporate successor liability.
Some of these projects are being addressed under federal and state statutes,
such as the CERCLA and analogous state laws. The Companys costs in certain
instances cannot be reliably estimated until the remediation process is
substantially underway or liability has been addressed. To address these
contingent environmental costs, the Company has accrued reserves when such
costs are probable and can be reasonably estimated. The Company believes that,
based on current information and regulatory requirements, the accruals
established by the Company for environmental expenditures are adequate. Based
on current knowledge, to the extent that additional costs may be incurred that
exceed the accrued reserves, such amounts are not expected to have a material
impact on the results of operations, cash flows or financial condition although
the Company may incur significant costs in excess of accrued reserves in
connection with clean-up activities at these properties, including the
Shreveport and Caddo Parish sites referred to above.

The Company is a party to a number of lawsuits arising out of the ordinary
conduct of its business. While there can be no assurance as to their ultimate
outcome, the Company does not believe that these lawsuits will have a material
impact on the results of operations, cash flows or financial condition of the
Company.

The Company has been a plaintiff in actions against The MeadWestvaco
Corporation (MeadWestvaco), successor by merger to The Mead Corporation, and
R.A. Jones Co. Inc. (R.A. Jones) claiming infringement of the Companys
patents for its packaging machines. The patents in suit were found infringed
but invalid by a jury in a trial against R.A. Jones in August 2001. This
finding of invalidity has been appealed to the Court of Appeals for the Federal
Circuit. The suit against MeadWestvaco was dismissed by mutual agreement
pending the outcome of the appeal of the decision in the case against R.A.
Jones. If the finding of invalidity is upheld on appeal, the Company
anticipates it will be required to take an approximate $11 million charge
associated with writing off the unamortized carrying cost of the
patents in suit.

NOTE 5  BUSINESS SEGMENT INFORMATION

The Company reports its results in two business segments: Coated Board and
Containerboard. These segments are evaluated by the chief operating decision
maker based primarily on income from operations and EBITDA. The Companys
reportable segments are strategic business units that offer different products.
The Coated Board business segment includes the production and sale of coated
board for cartons from its West Monroe, Louisiana and Macon, Georgia mills and
white lined chip board from its mill in Sweden; carton converting facilities in
the United States, the United Kingdom, Spain, France and Brazil; and the
design, manufacture and installation of packaging machinery related to the
assembly of beverage cartons. The Containerboard business segment includes the
production and sale of linerboard, corrugating medium and kraft paper from
paperboard mills in the United States.

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Business segment information is as follows:

|                            |  |                    |         |                  |  |          |         |          |  |   |         |   |  |   |         |  
|--------------------------- |  | ------------------ | ------- | ---------------- |  | -------- | ------- | -------- |  | - | ------- | - |  | - | ------- | -
|                            |  | Three Months Ended |         | Six Months Ended
|                            |  |                    |         |                 
|                            |  | June 30,           |         | June 30,         |  | June 30, |         | June 30,
|(In thousands of dollars)   |  | 2002               |         | 2001             |  | 2002     |         | 2001    
|                            |  |                    |         |                  |  |          |         |         
|NET SALES:                  |  |                    |         |                  |  |          |         |          |  |   |         |   |  |   |         |  
|Coated Board                |  | $                  | 329,371 |                  |  | $        | 317,596 |          |  | $ | 610,325 |   |  | $ | 578,590 |  
|Containerboard              |  |                    | 18,675  |                  |  |          | 23,277  |          |  |   | 37,833  |   |  |   | 50,883  |  
|                            |  |                    |         |                  |  |          |         |          |  |   |         |   |  |   |         |  
|                            |  | $                  | 348,046 |                  |  | $        | 340,873 |          |  | $ | 648,158 |   |  | $ | 629,473 |  
|                            |  |                    |         |                  |  |          |         |          |  |   |         |   |  |   |         |  
|INCOME FROM OPERATIONS:     |  |                    |         |                  |  |          |         |          |  |   |         |   |  |   |         |  
|Coated Board                |  | $                  | 51,862  |                  |  | $        | 43,018  |          |  | $ | 96,312  |   |  | $ | 69,327  |  
|Containerboard              |  |                    | (4,888  | )                |  |          | (3,025  | )        |  |   | (13,164 | ) |  |   | (6,501  | )
|Corporate And Eliminations  |  |                    | (5,823  | )                |  |          | (3,075  | )        |  |   | (10,816 | ) |  |   | (15,091 | )
|                            |  |                    |         |                  |  |          |         |          |  |   |         |   |  |   |         |  
|                            |  | $                  | 41,151  |                  |  | $        | 36,918  |          |  | $ | 72,332  |   |  | $ | 47,735  |  
|                            |  |                    |         |                  |  |          |         |          |  |   |         |   |  |   |         |  
|Credit Agreement EBITDA(A): |  |                    |         |                  |  |          |         |          |  |   |         |   |  |   |         |  
|Coated Board                |  | $                  | 82,796  |                  |  | $        | 72,303  |          |  | $ | 152,431 |   |  | $ | 136,576 |  
|Containerboard              |  |                    | (1,251  | )                |  |          | 692     |          |  |   | (6,300  | ) |  |   | 1,286   |  
|Corporate And Eliminations  |  |                    | (1,740  | )                |  |          | (873    | )        |  |   | (3,620  | ) |  |   | (6,556  | )
|                            |  |                    |         |                  |  |          |         |          |  |   |         |   |  |   |         |  
|                            |  | $                  | 79,805  |                  |  | $        | 72,122  |          |  | $ | 142,511 |   |  | $ | 131,306 |  
|                            |  |                    |         |                  |  |          |         |          |  |   |         |   |  |   |         |  

The following represents a reconciliation of Income from Operations to Credit
Agreement EBITDA:

|                                   |                           |      |                    |       |                  |      |          |       |          |   |         |       |  |   |         |        | 
|---------------------------------- | ------------------------- | ---- | ------------------ | ----- | ---------------- | ---- | -------- | ----- | -------- | - | ------- | ----- |  | - | ------- | ------ | 
|                                   |                           |      | Three Months Ended |       | Six Months Ended
|                                   |                           |      |                    |       |                 
|                                   |                           |      | June 30,           |       | June 30,         |      | June 30, |       | June 30,
|(In thousands of dollars)          |                           | 2002 |                    | 2001  |                  | 2002 |          | 2001 
|                                   |                           |      |                    |       |                  |      |          |      
|Income from Operations             |                           | $    | 41,151             |       |                  | $    | 36,918   |       |          | $ | 72,332  |       |  | $ | 47,735  |       
|Add: Depreciation and amortization |                           |      | 32,638             |       |                  |      | 31,073   |       |          |   | 64,772  |       |  |   | 72,341  |       
|                                   | Dividends                 |      |                    |      |                  |      |          | 710   |          |   |         |      |  |   |         | 710    | 
|                                   | Other non-cash charges(B) |      |                    | 6,016 |                  |      |          | 3,421 |          |   |         | 5,407 |  |   |         | 10,520 | 
|                                   |                           |      |                    |       |                  |      |          |       |          |   |         |       |  |   |         |       
|Credit Agreement EBITDA(A)         |                           | $    | 79,805             |       |                  | $    | 72,122   |       |          | $ | 142,511 |       |  | $ | 131,306 |       
|                                   |                           |      |                    |       |                  |      |          |       |          |   |         |       |  |   |         |       

Notes:

(A)  Credit Agreement EBITDA is calculated based on the definitions of EBITDA
and GAAP contained in the Companys Senior Secured Credit Agreement. Credit
Agreement EBITDA is defined as consolidated net income (exclusive of non-cash
charges resulting from purchase accounting during the periods subsequent to the
Merger) before consolidated interest expense, consolidated income taxes,
consolidated depreciation and amortization, and other non-cash charges deducted
in determining consolidated net income, extraordinary items and the cumulative
effect of accounting changes and earnings of, but including dividends from,
non-controlled affiliates. The Company believes that EBITDA provides useful
information regarding the Companys ability to service debt, but should not be
considered in isolation or as

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a substitute for the Condensed Consolidated
Statements of Operations or cash flow data. The Companys definition of EBITDA
may not be comparable to other companies definitions of EBITDA.

(B)  Other non-cash charges include non-cash charges for LIFO accounting,
pension, postretirement and postemployment benefits, and amortization of
premiums on hedging contracts deducted in determining net income.

NOTE 6  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to fluctuations in interest rates on its variable rate
debt and fluctuations in foreign currency transaction cash flows. The Company
actively monitors these fluctuations and uses derivative instruments from time
to time to manage its exposure. In accordance with its risk management
strategy, the Company uses derivative instruments only for the purpose of
managing risk associated with fluctuations in the cash flow of the underlying
exposures identified by management. The Company does not trade or use
derivative instruments with the objective of earning financial gains on
interest or currency rates, nor does it use leveraged instruments or
instruments where there are no underlying exposures identified. The Companys
use of derivative instruments may result in short-term gains or losses and may
increase volatility in its earnings.

On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments
and Hedging Activities  Deferral of the Effective Date of FASB Statement No.
133, and SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities(SFAS No. 133), which requires all derivative
instruments to be measured at fair value and recognized on the balance sheet as
either assets or liabilities. In addition, all derivative instruments used in
hedging relationships must be designated, reassessed and documented pursuant to
the provisions of SFAS No. 133. Upon adoption of SFAS No. 133, the Company
recognized a one-time after-tax transition adjustment to decrease earnings by
approximately $0.5 million and decrease other comprehensive income by
approximately $1.1 million. These amounts have been presented as a cumulative
effect of change in accounting principle in the accompanying Condensed
Consolidated Statement of Operations and Comprehensive Income (Loss) for the
six months ended June 30, 2001.

The following is a summary of the Companys derivative instruments as of June
30, 2002 and the accounting policies it employs:

Hedges of Anticipated Cash Flows

The following is a reconciliation of current period changes in the fair value
of the interest rate swap agreements and foreign currency forward and option
contracts which have been recorded as Accumulated Derivative Instruments Loss
in the accompanying Condensed Consolidated Balance Sheet at June 30, 2002 and
as Derivative Instruments (Loss) Gain in the accompanying Condensed
Consolidated Statement of Operations and Comprehensive Income (Loss) for the
Six Months Ended June 30, 2002.

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|                                      |  |   |        |  
|------------------------------------- |  | - | ------ | -
|(In thousands of dollars)             |  |   |        |  
|                                      |  |   |        |  
|SFAS No. 133 transition adjustment    |  | $ | (1,094 | )
|Reclassification to earnings          |  |   | 3,898  |  
|Current period decrease in fair value |  |   | (7,374 | )
|                                      |  |   |        |  
|Balance at December 31, 2001          |  |   | (4,570 | )
|Reclassification to earnings          |  |   | 2,986  |  
|Current period decrease in fair value |  |   | (2,448 | )
|                                      |  |   |        |  
|Balance at June 30, 2002              |  | $ | (4,032 | )
|                                      |  |   |        |  

During the first six months ended June 30, 2002, there was no material
ineffective portion related to the changes in fair value of the interest rate
swap agreements or foreign currency forward and option contracts and there were
no amounts excluded from the measure of effectiveness. During the
second quarter of 2002, the Company de-designated certain of its
foreign currency forward and option contracts due to such contracts
no longer meeting the Companys established effectiveness test.
As a result, during the second quarter of 2002, the Company
recognized a mark-to-market loss of approximately $1.8 million
dollars in the accompanying Condensed Consolidated Statement of
Operations and Comprehensive Income (Loss); had the foreign currency forward
and option contracts not been de-designated, this approximate
$1.8 million mark-to-market loss would have been deferred into
Other Comprehensive Income (Loss) and would have been recognized in
the Condensed Consolidated Statement of Operations and Comprehensive
Income (Loss) at the time the underlying hedged transaction was recognized.
Included in Accumulated Derivative Instruments Loss in the
accompanying Condensed Consolidated Balance Sheet as of June 30,
2002, is a balance of approximately $0.2 million related to
the foreign currency forward and option contracts that were de-designated
in the second quarter of 2002 that will be recognized as income in
its statement of operations at the time the underlying hedged
transaction occurs.

The balance of $4.0
million recorded in Accumulated Derivative Instruments Loss at June 30, 2002 is
expected to be reclassified into future earnings, contemporaneously with and
offsetting changes in the related hedged exposure. The estimated amount to be
reclassified into future earnings as interest expense over the next twelve
months through June 30, 2003 is approximately $3.3 million. The actual amount
that will be reclassified to future earnings over the next twelve months will
vary from this amount as a result of changes in market conditions. No amounts
were reclassified to earnings during the first six months of 2002 in connection
with forecasted transactions that were no longer considered probable of
occurring.

The Company uses interest rate swap agreements to fix a portion of its variable
rate Term Loan Facility to a fixed rate in order to reduce the impact of
interest rate changes on future income. The differential to be paid or received
under these agreements is recognized as an adjustment to interest expense
related to the debt. At June 30, 2002, the Company had interest rate swap
agreements with a notional amount of $310 million, which expire on various
dates through the year 2003, under which the Company will pay fixed rates of
2.96 percent to 5.36 percent and receive three-month LIBOR.

Derivatives not Designated as Hedges

The Company has foreign currency forward contracts used to hedge the exposure
associated with foreign currency denominated receivables. These contracts are
presently being marked-to-market through the income statement and will continue
to be marked-to-market through the income statement.

The Company enters into fixed price natural gas contracts designed to
effectively hedge prices for a substantial portion of its natural gas
requirements at its two U.S. mills. The purpose of the fixed price natural gas
contracts is to eliminate or reduce price risk with a focus on making cash
flows more predictable. As of June 30, 2002, the Company had entered into
contracts to hedge substantially all of its natural gas requirements for its
two U.S. mills through June 30, 2003. The contract price and fair value of
these natural gas contracts was approximately $21.4 million and $20.1 million,
respectively. These contracts are not accounted for as derivative instruments
under SFAS No. 133, as they qualify for the normal purchase exemption.

NOTE 7  NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141 (SFAS No. 141), Business Combinations, which was effective as of
January 1, 2002. SFAS No. 141 requires the purchase method of accounting for
business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company adopted SFAS No. 141 on January 1,
2002 and the adoption did not have a significant impact on its financial
position and results of operations.

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In June 2001, the FASB issued SFAS No. 142 (SFAS No. 142), Goodwill and
Other Intangible Assets, which was effective January 1, 2002. SFAS No. 142
requires, among other things, the discontinuance of goodwill amortization. In
addition, the standard includes provisions for the reclassification of certain
existing recognized intangibles as goodwill, reassessment of the useful lives
of existing recognized intangibles, reclassification of certain intangibles out
of previously reported goodwill and the identification of reporting units for
purposes of assessing potential future impairments of goodwill. SFAS No. 142
also requires the Company to complete a transitional goodwill impairment test
six months from the date of adoption. The adoption of SFAS No. 142 resulted in
the discontinuation of amortization of goodwill recorded at December 31, 2001
of approximately $8 million annually. Intangible assets with a determinable
life will continue to be amortized over that period. The Company adopted SFAS
No. 142 on January 1, 2002 and upon implementation recorded a write-off of
approximately $0.8 million related to patents to which no value was associated
at June 30, 2002 which is reflected in Other Expense, Net in the accompanying
Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the
Six Months Ended June 30, 2002. The following table shows Net (Loss) for the
first six months of 2002 and adjusted Net (Loss) for the first six months of
2001 exclusive of goodwill amortization.

|                               |  |                    |        |                  |  |          |        |          |  |   |         |   |  |   |         |  
|------------------------------ |  | ------------------ | ------ | ---------------- |  | -------- | ------ | -------- |  | - | ------- | - |  | - | ------- | -
|                               |  | Three Months Ended |        | Six Months Ended
|                               |  |                    |        |                 
|                               |  | June 30,           |        | June 30,         |  | June 30, |        | June 30,
|(In thousands of dollars)      |  | 2002               |        | 2001             |  | 2002     |        | 2001    
|                               |  |                    |        |                  |  |          |        |         
|Net (Loss)                     |  | $                  | (9,685 | )                |  | $        | (7,442 | )        |  | $ | (17,400 | ) |  | $ | (37,606 | )
|Plus: Amortization of Goodwill |  |                    |       |                  |  |          | 1,935  |          |  |   |        |   |  |   | 3,870   |  
|                               |  |                    |        |                  |  |          |        |          |  |   |         |   |  |   |         |  
|Adjusted Net (Loss)            |  | $                  | (9,685 | )                |  | $        | (5,507 | )        |  | $ | (17,400 | ) |  | $ | (33,736 | )
|                               |  |                    |        |                  |  |          |        |          |  |   |         |   |  |   |         |  

The following table shows Income (Loss) before Extraordinary Item and
Cumulative Effect of a Change in Accounting Principle for the first six months
of 2002 and adjusted Income (Loss) before Extraordinary Item and Cumulative
Effect of a Change in Accounting Principle for the first six months of 2001
exclusive of goodwill amortization.

|                                                                                                           |  |                    |       |                  |  |          |        |          |  |   |        |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------ | ----- | ---------------- |  | -------- | ------ | -------- |  | - | ------ | - |  | - | ------- | -
|                                                                                                           |  | Three Months Ended |       | Six Months Ended
|                                                                                                           |  |                    |       |                 
|                                                                                                           |  | June 30,           |       | June 30,         |  | June 30, |        | June 30,
|(In thousands of dollars)                                                                                  |  | 2002               |       | 2001             |  | 2002     |        | 2001    
|                                                                                                           |  |                    |       |                  |  |          |        |         
|Income (Loss) before Extraordinary Item and
Cumulative Effect of a Change in Accounting
Principle          |  | $                  | 1,824 |                  |  | $        | (4,672 | )        |  | $ | (5,891 | ) |  | $ | (34,337 | )
|Plus: Amortization of Goodwill                                                                             |  |                    |      |                  |  |          | 1,935  |          |  |   |       |   |  |   | 3,870   |  
|                                                                                                           |  |                    |       |                  |  |          |        |          |  |   |        |   |  |   |         |  
|Adjusted Income (Loss) before Extraordinary
Item and Cumulative Effect of a Change in Accounting Principle |  | $                  | 1,824 |                  |  | $        | (2,737 | )        |  | $ | (5,891 | ) |  | $ | (30,467 | )
|                                                                                                           |  |                    |       |                  |  |          |        |          |  |   |        |   |  |   |         |  

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The following table displays the intangible assets that continue to be subject
to amortization and aggregate amortization expense as well as intangible assets
not subject to amortization as of June 30, 2002 and December 31, 2001:

|                               |            |   |                     |         |              |   |              |        |  |   |        |         | 
|------------------------------ | ---------- | - | ------------------- | ------- | ------------ | - | ------------ | ------ |  | - | ------ | ------- | 
|                               |            |   | As of June 30, 2002
|                               |            |   |                    
|                               |            |   | Gross Carrying      |         | Accumulated  |   | Net Carrying
|                               |            |   | Amount              |         | Amortization |   | Amount      
|                               |            |   |                     |         |              |   |             
|Amortized intangible assets:   |            |   |                     |         |              |   |              |        |  |   |        |        
|                               | Patents    |   | $                   | 23,276  |              |   | $            | 8,703  |  |   | $      | 14,573  | 
|                               | Licenses   |   |                     | 3,598   |              |   |              | 1,102  |  |   |        | 2,496   | 
|                               | Trademarks |   |                     | 39,638  |              |   |              | 12,360 |  |   |        | 27,278  | 
|                               |            |   |                     |         |              |   |              |        |  |   |        |        
|                               |            | $ | 66,512              |         |              | $ | 22,165       |        |  | $ | 44,347 |        
|                               |            |   |                     |         |              |   |              |        |  |   |        |        
|Unamortized intangible assets: |            |   |                     |         |              |   |              |        |  |   |        |        
|                               | Goodwill   |   | $                   | 276,482 |              |   |              |       |  |   | $      | 276,482 | 
|                               |            |   |                     |         |              |   |              |        |  |   |        |        

|                               |            |   |                         |         |              |   |              |        |  |   |        |         | 
|------------------------------ | ---------- | - | ----------------------- | ------- | ------------ | - | ------------ | ------ |  | - | ------ | ------- | 
|                               |            |   | As of December 31, 2001
|                               |            |   |                        
|                               |            |   | Gross Carrying          |         | Accumulated  |   | Net Carrying
|                               |            |   | Amount                  |         | Amortization |   | Amount      
|                               |            |   |                         |         |              |   |             
|Amortized intangible assets:   |            |   |                         |         |              |   |              |        |  |   |        |        
|                               | Patents    |   | $                       | 23,926  |              |   | $            | 7,986  |  |   | $      | 15,940  | 
|                               | Licenses   |   |                         | 3,598   |              |   |              | 997    |  |   |        | 2,601   | 
|                               | Trademarks |   |                         | 39,624  |              |   |              | 11,370 |  |   |        | 28,254  | 
|                               |            |   |                         |         |              |   |              |        |  |   |        |        
|                               |            | $ | 67,148                  |         |              | $ | 20,353       |        |  | $ | 46,795 |        
|                               |            |   |                         |         |              |   |              |        |  |   |        |        
|Unamortized intangible assets: |            |   |                         |         |              |   |              |        |  |   |        |        
|                               | Goodwill   |   | $                       | 321,976 |              |   | $            | 45,494 |  |   | $      | 276,482 | 
|                               |            |   |                         |         |              |   |              |        |  |   |        |        

Amortization expense for intangible assets subject to amortization was
approximately $1.9 million for the first six months of 2002, and is expected to
be approximately $4 million annually for the next five fiscal years.

In August 2001, the FASB issued SFAS No. 144 (SFAS No. 144), Accounting for
the Impairment or Disposal of Long-Lived Assets, which was effective January
1, 2002. SFAS No. 144 addresses financial accounting and reporting for the
impairment or disposal of long-lived assets, as well as eliminating the
exception to consolidation for a subsidiary for which control is likely to be
temporary. The Company adopted SFAS No. 144 on January 1, 2002 and the adoption
did not have a significant impact on its financial position and results of
operations.

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

Overview

Riverwood Holding, its wholly-owned subsidiary RIC Holding and the corporation
formerly named CDRO Acquisition Corporation were organized to acquire our
predecessor, the corporation formerly named Riverwood International
Corporation. Riverwood Holding, RIC Holding and CDRO Acquisition Corporation
were incorporated in 1995 under the laws of the State of Delaware. On March 27,
1996, Riverwood Holding, through its wholly-owned subsidiaries, acquired all of
the outstanding shares of common stock of the corporation formerly named
Riverwood International Corporation, which we refer to as the predecessor. On
such date, CDRO Acquisition Corporation was merged into the predecessor. The
predecessor, as the surviving corporation in the merger, became a wholly-owned
subsidiary of RIC Holding.

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On March 28, 1996, the predecessor transferred substantially all of its
properties and assets to the corporation formerly named Riverwood International
USA, Inc., other than the capital stock of Riverwood
International USA, Inc., and the predecessor was merged into RIC Holding.
Thereupon, Riverwood International USA, Inc. was renamed Riverwood
International Corporation.

In connection with the Merger, the Company entered into a credit agreement that
provided for senior secured credit facilities consisting of a term loan
facility and a $400 million revolving credit facility. Such credit agreement,
term loan facility and revolving facility, as in effect prior to the August 10,
2001 amendment and restatement discussed below, are referred to herein as the
Prior Credit Agreement, the Prior Term Loan Facility and the Prior
Revolving Facility, respectively. In addition, Riverwood International
Machinery, Inc., a wholly-owned subsidiary of Riverwood, entered into a credit
agreement providing for a $140 million secured revolving credit facility (the
Machinery Facility) for the purpose of financing or refinancing packaging
machinery. In connection with the Merger, the Company also completed an
offering of $250 million aggregate principal amount of 10 1/4 percent Senior
Notes due 2006 (the 1996 Senior Notes) and $400 million aggregate principal
amount of 10 7/8 percent Senior Subordinated Notes due 2008 (the 1996 Senior
Subordinated Notes and together with the 1996 Senior Notes, the 1996 Notes).

On July 28, 1997, the Company completed an offering of $250 million principal
amount of 10 5/8 percent Senior Notes due 2007 (the Initial Notes). The net
proceeds of this offering were applied to prepay certain revolving credit
borrowings under the Prior Revolving Facility (without any commitment
reduction) and to refinance certain tranche A term loans and other borrowings
under the Prior Credit Agreement. A registration statement under the Securities
Act of 1933, as amended, registering senior notes of the Company identical in
all material respects to the Initial Notes (the Exchange Notes) offered in
exchange for the Initial Notes became effective October 1, 1997. On November 3,
1997, the Company completed its exchange offer of the Initial Notes for the
Exchange Notes. The Initial Notes and the Exchange Notes are referred to herein
as the 1997 Notes.

In connection with the sale of Igaras on October 3, 2000, the Company entered
into Amendment No. 5 dated September 12, 2000, effective October 3, 2000, to
the Prior Credit Agreement. Pursuant to the amendment, the Company applied $145
million of the sale proceeds to term loan maturities under the Prior Term Loan
Facility. The Company recognized a loss on the early extinguishment of debt of
approximately $2.1 million in the fourth quarter of 2000. The Company applied
the remaining portion of the proceeds (approximately $48 million) to the Prior
Revolving Facility (without any commitment reduction). In connection with
Amendment No. 5, the Company canceled its Machinery Facility.

On June 21, 2001, the Company completed an offering of $250 million principal
amount of 10 5/8 percent Senior Notes due 2007 (the Initial 2001 Notes). The
Initial 2001 Notes were sold at a price of 103 percent of par. The proceeds
from this offering of approximately $251.5 million, net of approximately $6
million of transaction fees and expenses, were applied to prepay a portion of
the outstanding borrowings under the Prior Term Loan Facility. During the
second quarter of 2001, the Company recorded a non-cash, extraordinary charge
to earnings of approximately $2.8 million, net of tax of nil, related to the
write-off of the applicable portion of deferred debt issuance costs on the term
loans. In connection with this offering, on June 6, 2001, the Company entered
into Amendment No. 6 to the Prior Credit Agreement. The amendment modified
certain financial and other covenants, including minimum EBITDA requirements,
in the Prior Credit Agreement to reflect recent financial results and market
and operating conditions. A registration statement under the Securities Act
registering senior notes of the Company identical in all material respects to
the Initial 2001 Notes (the Exchange 2001 Notes) offered in exchange for the
Initial 2001 Notes became effective on August 27, 2001. On October 5, 2001, the
Company completed its exchange offer of the Initial 2001 Notes for the Exchange
2001 Notes. The Initial 2001 Notes and the Exchange 2001 Notes are referred to
herein as the 2001 Notes.

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##### Table of Contents



On August 10, 2001, the Company entered into an amendment and restatement of
the Prior Credit Agreement (the Senior Secured Credit Agreement) with certain
lenders providing for senior secured credit facilities with aggregate
commitments not to exceed $635 million (together with the 2002 Term Loan
Facility referred to below, the Facilities), including a $335 million term
loan facility (the 2001 Term Loan Facility) and a $300 million revolving
credit facility (the Revolving Facility). The proceeds of the initial
borrowings under the Facilities of approximately $386 million, including $51
million under the revolving facility, were applied to repay in full the
outstanding borrowings under the Prior Term Loan Facility and the Prior
Revolving Facility and to pay approximately $12 million of the $14 million of
fees and expenses incurred in connection with the amendment and restatement of
the Prior Credit Agreement. During the third quarter of 2001, the Company
recorded a non-cash, extraordinary charge to earnings of approximately $6.0
million, net of tax of nil, related to the write-off of the applicable
remaining deferred debt issuance costs on the Prior Term Loan Facility and the
Prior Revolving Facility.

In April 2002, the Company entered into an amendment of the Senior Secured
Credit Agreement which provided for a new, tranche B, term loan facility of
$250 million (2002 Term Loan Facility). The 2002 Term Loan Facility was drawn
on April 23, 2002 and the proceeds, together with borrowings under the
Revolving Facility of approximately $12.0 million, were used to redeem the 1996
Senior Notes which occurred on May 23, 2002 and to pay related fees, costs and
expenses. In the second quarter of 2002, the Company recorded a non-cash
extraordinary charge to earnings of approximately $3.0 million, net of tax,
related to the write-off of the remaining deferred debt issuance costs on the
1996 Senior Notes and an extraordinary charge of approximately $8.6 million,
net of tax, related to the call premium paid upon redemption of the 1996 Senior
Notes.

On May 3, 2002, Riverwood Holding filed a Form S-1 registration statement with
the Securities and Exchange Commission for the registration under the
Securities Act of 1933 of $350 million of its common stock in a proposed
initial public offering. Concurrently with the proposed initial public
offering, the Company anticipates borrowing additional amounts under the Senior
Secured Credit Agreement through an add-on term loan and selling senior notes.
The Company intends to use the net proceeds from these proposed financings to
purchase all of the 1997 Notes, the 2001 Notes and the 1996 Senior
Subordinated Notes and to repay a portion of the amounts outstanding under the
Revolving Facility.

On May 30, 2002, Riverwood International commenced tender offers to purchase
all of the outstanding 1997 Notes, 2001 Notes and 1996 Senior Subordinated
Notes and made related consent solicitations for proposed amendments to
eliminate substantially all of the restrictive covenants and a number of events
of default and related provisions in the indentures for these notes. On July 1,
2002, Riverwood International and the trustee for each issue of notes signed
supplemental indentures with respect to the proposed amendments, which will
become effective upon the consummation of the tender offers. On July 30, 2002,
Riverwood International amended the terms of the consideration for the tender
offers and granted tendering holders of notes withdrawal rights. As
of August 8, 2002, approximately $201 million in principal amount of 1997 Notes,
approximately $204 million in principal amount of 2001 Notes and
approximately $301 million in principal amount of 1996 Senior Subordinated
Notes had been tendered. The consummation of each of the tender offers and
related consent solicitations is conditioned upon the consummation of the proposed initial public offering and each of the related financing transactions.

If the Company does not complete the related financing transactions, the
Company intends to use the net proceeds of the proposed initial public offering
to repay a portion of its indebtedness. There can be no assurance that the proposed initial
public offering or any of the related financing transactions will be completed
on the terms anticipated, or at all. The Company continues to work towards the
completion of the initial public offering and related financing transactions,
subject to market conditions.

General

The Company reports its results in two business segments: Coated Board
(relating to the Companys coated unbleached kraft paperboard (CUK Board)
used in its beverage multiple packaging and consumer products packaging
businesses) and Containerboard. The Coated Board business segment includes (1)
the production and sale of CUK Board for cartons from the Companys West
Monroe, Louisiana and Macon, Georgia mills and white lined chip board (WLC)
from its paper mill in Norrköping, Sweden; (2) carton converting plants in the
United States, Europe and Brazil; and (3) the design, manufacture and
installation of packaging machinery related to the assembly of beverage
cartons. The Containerboard business segment includes the production and sale
of linerboard, corrugating medium and kraft paper from paperboard mills in the
United States. The Company intends to stop producing linerboard as it continues
to shift production capacity to higher margin CUK Board.

16



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##### Table of Contents



The table below sets forth Net Sales, Income from Operations, and EBITDA. The
Company believes that EBITDA provides useful information regarding the
Companys ability to service debt, but should not be considered in isolation or
as a substitute for the Condensed Consolidated Statements of Operations or cash
flow data. The Companys definition of EBITDA may not be comparable to other
companies definitions of EBITDA and is not a defined term under U.S. generally
accepted accounting principles.

|                                   |                            |      |                    |         |                  |      |          |         |          |   |         |         |   |   |         |         |  
|---------------------------------- | -------------------------- | ---- | ------------------ | ------- | ---------------- | ---- | -------- | ------- | -------- | - | ------- | ------- | - | - | ------- | ------- | -
|                                   |                            |      | Three Months Ended |         | Six Months Ended
|                                   |                            |      |                    |         |                 
|                                   |                            |      | June 30,           |         | June 30,         |      | June 30, |         | June 30,
|(In thousands of dollars)          |                            | 2002 |                    | 2001    |                  | 2002 |          | 2001   
|                                   |                            |      |                    |         |                  |      |          |        
|Net Sales:                         |                            |      |                    |         |                  |      |          |         |          |   |         |         |   |   |         |        
|                                   | Coated Board               |      | $                  | 329,371 |                  |      | $        | 317,596 |          |   | $       | 610,325 |   |   | $       | 578,590 |  
|                                   | Containerboard             |      |                    | 18,675  |                  |      |          | 23,277  |          |   |         | 37,833  |   |   |         | 50,883  |  
|                                   |                            |      |                    |         |                  |      |          |         |          |   |         |         |   |   |         |        
|Net Sales                          |                            | $    | 348,046            |         |                  | $    | 340,873  |         |          | $ | 648,158 |         |   | $ | 629,473 |        
|                                   |                            |      |                    |         |                  |      |          |         |          |   |         |         |   |   |         |        
|Income from Operations:            |                            |      |                    |         |                  |      |          |         |          |   |         |         |   |   |         |        
|                                   | Coated Board               |      | $                  | 51,862  |                  |      | $        | 43,018  |          |   | $       | 96,312  |   |   | $       | 69,327  |  
|                                   | Containerboard             |      |                    | (4,888  | )                |      |          | (3,025  | )        |   |         | (13,164 | ) |   |         | (6,501  | )
|                                   | Corporate and Eliminations |      |                    | (5,823  | )                |      |          | (3,075  | )        |   |         | (10,816 | ) |   |         | (15,091 | )
|                                   |                            |      |                    |         |                  |      |          |         |          |   |         |         |   |   |         |        
|Income from Operations             |                            | $    | 41,151             |         |                  | $    | 36,918   |         |          | $ | 72,332  |         |   | $ | 47,735  |        
|                                   |                            |      |                    |         |                  |      |          |         |          |   |         |         |   |   |         |        
|Credit Agreement EBITDA (A):       |                            |      |                    |         |                  |      |          |         |          |   |         |         |   |   |         |        
|                                   | Coated Board               |      | $                  | 82,796  |                  |      | $        | 72,303  |          |   | $       | 152,431 |   |   | $       | 136,576 |  
|                                   | Containerboard             |      |                    | (1,251  | )                |      |          | 692     |          |   |         | (6,300  | ) |   |         | 1,286   |  
|                                   | Corporate And Eliminations |      |                    | (1,740  | )                |      |          | (873    | )        |   |         | (3,620  | ) |   |         | (6,556  | )
|                                   |                            |      |                    |         |                  |      |          |         |          |   |         |         |   |   |         |        
|Credit Agreement EBITDA (A)        |                            |      | 79,805             |         |                  |      | 72,122   |         |          |   | 142,511 |         |   |   | 131,306 |        
|Less: Certain non-cash charges (B) |                            |      | (4,566             | )       |                  |      | (909     | )       |          |   | (5,470  | )       |   |   | (4,307  | )      
|                                   |                            |      |                    |         |                  |      |          |         |          |   |         |         |   |   |         |        
|EBITDA, as adjusted (B)            |                            | $    | 75,239             |         |                  | $    | 71,213   |         |          | $ | 137,041 |         |   | $ | 126,999 |        
|                                   |                            |      |                    |         |                  |      |          |         |          |   |         |         |   |   |         |        

Notes:



| | (A) |  | Credit Agreement EBITDA is calculated based on the definitions of EBITDA
and GAAP contained in the Companys Senior Secured Credit Agreement.
Credit Agreement EBITDA is defined as consolidated net income (exclusive
of non-cash charges resulting from purchase accounting during the periods
subsequent to the Merger) before consolidated interest expense,
consolidated income taxes, consolidated depreciation and amortization, and
other non-cash charges deducted in determining consolidated net income,
extraordinary items and the cumulative effect of accounting changes and
earnings of, but including dividends from, non-controlled affiliates.                                                                                                                                                               
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (B) |  | For purposes of Credit Agreement EBITDA, as reported above, the Company
adds back to income from operations non-cash charges for pension,
post-retirement and post-employment benefits, and expenses (credits)
relating to changes in GAAP subsequent to March 1996, which are excluded
from Credit Agreement EBITDA, as reported above. EBITDA, as adjusted, is
defined as income (loss) from operations before depreciation and
amortization expense, loss (gain) on asset write-downs/unusual asset
disposals, loss on impairment of assets and LIFO related expenses
(credits) plus dividends from equity investments recorded in the relevant
period. This definition of EBITDA, as adjusted, conforms to the
presentation in the Form S-1 registration statement for
Riverwood Holdings
proposed initial public offering.

A reconciliation of Income from Operations to EBITDA, as adjusted, is set forth
in Exhibit 99 of this Form 10-Q.

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##### Table of Contents



Business Trends and Initiatives

The Companys cash flow from operations and EBITDA are influenced by sales
volume and selling prices for its products and raw material and energy costs,
and are affected by a number of significant business, economic and competitive
factors. Many of these factors are not within the Companys control.
Historically, in the Coated Board business segment, the Company has experienced
stable pricing for its integrated beverage carton products, and moderate
cyclical pricing for its cartonboard, which historically has been principally
sold in the open market. The Companys cartonboard sales are affected by
competition from competitors CUK Board and other substrates  solid bleached
sulfate (SBS), recycled clay coated news (CCN) and, internationally, WLC 
as well as by general market conditions.

In the Containerboard business segment, conditions in the cyclical worldwide
commodity paperboard markets have a substantial impact on the Companys
Containerboard sales. During the first six months of 2002, the Company elected
to take 14 days, or approximately 5,000 tons, of medium market related downtime
at its U.S. mills that resulted in approximately $1.0 million of under-absorbed
fixed costs. The Company expects to take an additional 7 days, or approximately
3,000 tons, of medium market related downtime throughout the remainder of 2002
on its medium machine, but the amount of downtime could change depending upon
market conditions. The downtime results from a number of factors, but
principally a weak containerboard market. As a result of the expected downtime
during 2002, the Company estimates the impact on earnings at its U.S. mills for
the remainder of 2002 to be approximately $0.5 million related to the
under-absorption of fixed costs.

Energy, including natural gas, fuel oil and electricity, represents a
significant portion of the Companys manufacturing costs. During the first six
months of 2002, the Companys financial results were not
negatively affected by energy costs when compared to the first six
months of 2001. Until the latter
part of 2000, the Companys results had not been significantly affected by the
volatility of energy costs. The Company entered into fixed price contracts
designed to mitigate the impact of future energy cost increases through June
30, 2003, and will continue to evaluate its hedge position.

The Company is pursuing a number of long-term initiatives designed to improve
productivity and profitability. The Company realigned its business into
commercially-focused operating units, implemented a global restructuring
program described below, implemented a number of cost saving measures and
effected several management changes. The Company is continuing to implement a
global Total Quality Systems (TQS) initiative which uses statistical process
control to help design and manage all types of activities including production
and maintenance.

In addition, the Company is continuing to implement a strategy focused on the
expansion into the high-growth segments of the consumer products packaging
market. The Company is targeting segments of the non-beverage consumer products
packaging market where it intends to capitalize on its expertise in beverage
multiple packaging.

The Company expects capital expenditures will range from $65 million to $80
million in 2002 as the Company invests to improve its process capabilities, in
packaging machinery, and to comply with environmental cluster rules. See
Environmental and Legal Matters. The Company continues to evaluate its
current operations and assets with a view to rationalizing its operations and
improving profitability, in particular with respect to its international
converting assets and strategy. As part of this effort, the Company initiated a
$25.6 million global restructuring program, focused on the Companys European
operations, in the fourth quarter of 1998 aimed at achieving annualized savings
and cost avoidance of approximately $20 million. The Company completed the
restructuring activities during 2001. Finally, the Company is continuing to
focus on reducing working capital and increasing liquidity.

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##### Table of Contents



Packaging machinery placements during the first six months of 2002 increased
approximately 65 percent when compared to the first six months of 2001, which
was partially due to the timing of shipments. The Company expects packaging
machinery placements for 2002 to be higher when compared to 2001 and be
comparable to 2000 as a result of a 16 percent increase in packaging machinery
orders in 2001 when compared to 2000. The Company has been and will continue to
be selective in future packaging machinery placements to ensure appropriate
returns.

Outlook

The Company expects that its 2002 full year EBITDA will exceed its 2001 EBITDA,
although no assurance can be given in this regard. The achievement of this
expectation is dependent upon (among other things) a number of profit
improvement initiatives, including increasing worldwide beverage and North
American consumer products sales volumes above 2001 levels, improving U.S. mill
throughput, continued cost savings from other actions taken to date and stable
pricing for the Companys products. In 2002, the Company expects sales volume
increases in its worldwide beverage markets, and continued growth in its North
American consumer products markets. The Company expects containerboard sales
and margins to be negatively affected in 2002 due to the negative market
pressures on containerboard pricing and sales volumes. The Company believes
that energy costs will continue to negatively impact its results for 2002 but
the negative impact is expected to be lower than in 2001.

Significant Accounting Policies

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires the
Company to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. These estimates and assumptions are based
on historical experience and various other factors that are believed to be
reasonable under the circumstances. Actual results could differ from these
estimates under different assumptions or conditions.

The Company believes the following accounting policies are the most critical
since these policies require significant judgment or involve complex
estimations that are important to the portrayal of the Companys financial
conditions and operating results:



| |  | The Company recognizes revenue when pervasive evidence of a sales
arrangement exists, delivery has occurred, the price to the buyer is
fixed and determinable, and the collectibility of the sales price is
reasonably assured, which is primarily when goods are shipped to
customers. Revenues received in advance from packaging machinery use
agreements are recognized on a straight-line basis over the term of
the agreements. Customer returns and allowances are provided for based
on estimates.           
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | The Companys inventories are stated at the lower of cost or market.
Cost of inventories is determined principally on the last-in,
first-out (LIFO) basis. Average cost basis is used to determine the
cost of supplies inventories. Inventories are stated net of an
allowance for slow-moving and obsolete inventory, which is based on
estimates. If the condition of the inventories or the state of the
Companys business would deteriorate, additional allowances may be
required which would reduce income.
| 
| |  | The Company reviews long-lived assets, including goodwill and certain
identifiable intangibles for impairment whenever events or
circumstances indicate that the carrying value of an asset may not be
recoverable. Upon determination that the carrying value of the assets
is impaired, the Company would record an impairment charge or loss.                                                                                                                                                                     

19



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##### Table of Contents





| |  | The Company faces uncertainties relating to pending litigation and
environmental remediation obligations. The Company records accruals
for such items based on estimates developed in consultation with legal
counsel and environmental consultants at the time when the liability
is probable and reasonably estimated. While there can be no assurance
as to the ultimate outcome of any current lawsuits, claims or
investigations relating to such uncertainties, the Company does not
believe that such uncertainties will have a material adverse impact on
the results of operations, cash flows or financial condition of the
Company. However, future uncertainties may have a material adverse
impact on the results of operations, cash flows or financial condition
of the Company.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

RESULTS OF OPERATIONS

|                                      |                 |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |   |         |  
|------------------------------------- | --------------- | -------------------------- | ------- | ------------------ | ------- | ---------------- | ----- | ---------- | ----- | -------- | ------- | ---------- | ------- | -------- | ------- | - | ------- | ---------- | ----- | - | ------ | - | ------- | - | ------- | -
|                                      |                 |                            |         | Three Months Ended |         | Six Months Ended
|                                      |                 |                            |         |                    |         |                 
|                                      |                 |                            |         |                    |         |                  |       | % Increase |       |          |         |            |         |          |         |   |         | % Increase |       |   |        |  
|                                      |                 |                            |         |                    |         |                  |       | (Decrease) |       |          |         |            |         |          |         |   |         | (Decrease) |       |   |        |  
|                                      |                 |                            |         | June 30,           |         | From Prior       |       | June 30,   |       | June 30, |         | From Prior |         | June 30,
|(In thousands of dollars)             |                 | 2002                       |         | Period             |         | 2001             |       | 2002       |       | Period   |         | 2001      
|                                      |                 |                            |         |                    |         |                  |       |            |       |          |         |           
|Net Sales (Segment Data):             |                 |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |  
|                                      |                 | Coated Board               |         | $                  | 329,371 |                  |       |            | 3.7   | %        |         | $          | 317,596 |          |         | $ | 610,325 |            |       |   | 5.5    | % |         | $ | 578,590 |  
|                                      |                 | Containerboard             |         |                    | 18,675  |                  |       |            | (19.8 | )        |         |            | 23,277  |          |         |   | 37,833  |            |       |   | (25.6  | ) |         |   | 50,883  |  
|                                      |                 |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |  
|Net Sales                             |                 |                            | 348,046 |                    |         |                  | 2.1   |            |       |          | 340,873 |            |         |          | 648,158 |   |         |            | 3.0   |   |        |   | 629,473 |  
|Cost of Sales                         |                 |                            | 269,975 |                    |         |                  | 0.8   |            |       |          | 267,701 |            |         |          | 510,564 |   |         |            | 1.0   |   |        |   | 505,582 |  
|                                      |                 |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |  
|Gross Profit                          |                 |                            | 78,071  |                    |         |                  | 6.7   |            |       |          | 73,172  |            |         |          | 137,594 |   |         |            | 11.1  |   |        |   | 123,891 |  
|Selling, General and Administrative   |                 |                            | 32,656  |                    |         |                  | 8.9   |            |       |          | 29,977  |            |         |          | 61,263  |   |         |            | 0.8   |   |        |   | 60,753  |  
|Research, Development and
Engineering |                 |                            | 1,146   |                    |         |                  | (1.6  | )          |       |          | 1,165   |            |         |          | 2,461   |   |         |            | 5.4   |   |        |   | 2,335   |  
|Other Expense, Net                    |                 |                            | 3,118   |                    |         |                  | (39.0 | )          |       |          | 5,112   |            |         |          | 1,538   |   |         |            | (88.2 | ) |        |   | 13,068  |  
|                                      |                 |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |  
|Income from Operations                |                 | $                          | 41,151  |                    |         |                  | 11.5  |            |       | $        | 36,918  |            |         | $        | 72,332  |   |         |            | 51.5  |   |        | $ | 47,735  |  
|                                      |                 |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |  
|Income (Loss) from Operations         |                 |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |  
|                                      | (Segment Data): |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |   |        
|                                      |                 | Coated Board               |         | $                  | 51,862  |                  |       |            | 20.6  | %        |         | $          | 43,018  |          |         | $ | 96,312  |            |       |   | 38.9   | % |         | $ | 69,327  |  
|                                      |                 | Containerboard             |         |                    | (4,888  | )                |       |            | (61.6 | )        |         |            | (3,025  | )        |         |   | (13,164 | )          |       |   | (102.5 | ) |         |   | (6,501  | )
|                                      |                 | Corporate And Eliminations |         |                    | (5,823  | )                |       |            | (89.4 | )        |         |            | (3,075  | )        |         |   | (10,816 | )          |       |   | 28.3   |   |         |   | (15,091 | )
|                                      |                 |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |  
|Income from Operations                |                 | $                          | 41,151  |                    |         |                  | 11.5  |            |       | $        | 36,918  |            |         | $        | 72,332  |   |         |            | 51.5  |   |        | $ | 47,735  |  
|                                      |                 |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |  
|Other Financial Data:                 |                 |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |  
|Net Sales:                            |                 |                            |         |                    |         |                  |       |            |       |          |         |            |         |          |         |   |         |            |       |   |        |   |         |  
|                                      |                 | Carrierboard               |         | $                  | 241,838 |                  |       |            | 4.2   | %        |         | $          | 232,183 |          |         | $ | 438,874 |            |       |   | 7.2    | % |         | $ | 409,588 |  
|                                      |                 | Cartonboard                |         |                    | 59,898  |                  |       |            | 2.8   |          |         |            | 58,256  |          |         |   | 116,062 |            |       |   | 3.2    |   |         |   | 112,421 |  
|                                      |                 | White lined chip board     |         |                    | 19,208  |                  |       |            | 7.3   |          |         |            | 17,907  |          |         |   | 38,243  |            |       |   | 1.0    |   |         |   | 37,879  |  
|                                      |                 | Containerboard             |         |                    | 18,675  |                  |       |            | (19.8 | )        |         |            | 23,277  |          |         |   | 37,833  |            |       |   | (25.6  | ) |         |   | 50,883  |  
|                                      |                 | Other (A)                  |         |                    | 8,427   |                  |       |            | (8.9  | )        |         |            | 9,250   |          |         |   | 17,146  |            |       |   | (8.3   | ) |         |   | 18,702  |  

Note:



| | (A) |  | Other primarily represents revenue recognized from packaging machinery service and use agreements and sales of certain by-products.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------

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Paperboard Shipments

The following represents shipments of Coated Board and Containerboard to
outside customers. Shipments of Coated Board represent sales to customers of
carrierboard and cartonboard. Shipments from the Swedish Mill represent sales
to customers of WLC produced at this mill. Shipments of Containerboard
represent sales to customers of linerboard, corrugating medium, kraft paper and
various other items. Other primarily represents shipments of certain
by-products. Total shipments for the three and six months ended June 30, 2002
and 2001 were as follows:

|                       |  |                    |       |                  |  |            |       |          |  |            |       |          |  |  |       |            |  |  |       |   |  |  |       | 
|---------------------- |  | ------------------ | ----- | ---------------- |  | ---------- | ----- | -------- |  | ---------- | ----- | -------- |  |  | ----- | ---------- |  |  | ----- | - |  |  | ----- | 
|                       |  | Three Months Ended |       | Six Months Ended
|                       |  |                    |       |                 
|                       |  |                    |       |                  |  | % Increase |       |          |  |            |       |          |  |  |       | % Increase |  |  |       |  
|                       |  |                    |       |                  |  | (Decrease) |       |          |  |            |       |          |  |  |       | (Decrease) |  |  |       |  
|                       |  | June 30,           |       | From Prior       |  | June 30,   |       | June 30, |  | From Prior |       | June 30,
|                       |  | 2002               |       | Period           |  | 2001       |       | 2002     |  | Period     |       | 2001    
|                       |  |                    |       |                  |  |            |       |          |  |            |       |         
|(In thousands of tons) |  |                    |       |                  |  |            |       |          |  |            |       |          |  |  |       |            |  |  |       |   |  |  |       | 
|Coated Board           |  |                    |       |                  |  |            |       |          |  |            |       |          |  |  |       |            |  |  |       |   |  |  |       | 
|Carrierboard           |  |                    | 187.5 |                  |  |            | 5.4   | %        |  |            | 177.9 |          |  |  | 341.8 |            |  |  | 10.7  | % |  |  | 308.9 | 
|Cartonboard            |  |                    | 96.4  |                  |  |            | 4.2   |          |  |            | 92.5  |          |  |  | 186.9 |            |  |  | 5.8   |   |  |  | 176.6 | 
|White Lined Chip Board |  |                    | 38.8  |                  |  |            | 3.2   |          |  |            | 37.6  |          |  |  | 78.1  |            |  |  | 1.2   |   |  |  | 77.2  | 
|Containerboard         |  |                    | 55.5  |                  |  |            | (12.0 | )        |  |            | 63.1  |          |  |  | 113.0 |            |  |  | (17.3 | ) |  |  | 136.6 | 
|Other                  |  |                    | 4.9   |                  |  |            | (30.0 | )        |  |            | 7.0   |          |  |  | 11.4  |            |  |  | (13.6 | ) |  |  | 13.2  | 
|                       |  |                    |       |                  |  |            |       |          |  |            |       |          |  |  |       |            |  |  |       |   |  |  |       | 
|                       |  |                    | 383.1 |                  |  |            | 1.3   |          |  |            | 378.1 |          |  |  | 731.2 |            |  |  | 2.6   |   |  |  | 712.5 | 
|                       |  |                    |       |                  |  |            |       |          |  |            |       |          |  |  |       |            |  |  |       |   |  |  |       | 

SECOND QUARTER 2002 COMPARED WITH SECOND QUARTER 2001

Net Sales

As a result of the factors described below, the Companys Net Sales in the
second quarter of 2002 increased by $7.2 million, or 2.1 percent, compared with
the second quarter of 2001. Net Sales in the Coated Board business segment
increased by $11.8 million in the second quarter of 2002, or 3.7 percent, to
$329.4 million from $317.6 million in the second quarter of 2001, due primarily
to higher sales volume in North American beverage carton markets (resulting, in
large part, from increased volumes under a multi-year agreement with a beer
producer customer) and, to a lesser extent, higher sales volumes in
international beverage markets and worldwide consumer products markets. Net
Sales in the Containerboard business segment decreased by $4.6 million, or 19.8
percent, to $18.7 million in the second quarter of 2002 from $23.3 million in
the second quarter of 2001, due to lower linerboard volumes resulting
from the continued shift from linerboard production to value-added CUK Board production and lower
containerboard pricing.

Gross Profit

As a result of the factors discussed below, the Companys Gross Profit for the
second quarter of 2002 increased by $4.9 million, or 6.7 percent, to $78.1
million from $73.2 million in the second quarter of 2001. The Companys gross
profit margin increased to 22.4 percent in the second quarter of 2002 from 21.5
percent in the second quarter of 2001. Gross Profit in the Coated Board
business segment increased by $8.5 million, or 11.6 percent, to $81.6 million
in the second quarter of 2002 from $73.1 million in the second quarter of 2001,
while its gross profit margin increased to 24.8 percent in the second quarter
of 2002 from 23.0 percent in the second quarter of 2001. The increase in Coated
Board Gross Profit was due primarily to worldwide cost reductions as a result
of savings gained from the Companys TQS initiative and higher Net Sales. Gross
Profit in the Containerboard business segment decreased by $1.4 million to a
loss of $3.5 million in the second quarter of 2002 from a loss of $2.1 million
in the second quarter of 2001, while its gross profit margin decreased to
(18.8) percent in the second quarter of 2002 from (9.2) percent in the second
quarter of 2001. The decrease in Containerboard Gross Profit resulted
principally from lower containerboard pricing.

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Selling, General and Administrative

Selling, General and Administrative expenses increased $2.7 million, or 8.9
percent, to $32.7 million in the second quarter of 2002 from $30.0 million in
the second quarter of 2001, due primarily to higher incentive expenses and
pension costs somewhat offset by lower warehousing, rent and consulting
expenses. As a percentage of Net Sales, Selling, General and Administrative
expenses increased from 8.8 percent in the second quarter of 2001 to 9.4
percent in the second quarter of 2002.

Research, Development and Engineering

Research, Development and Engineering expenses decreased $0.1 million, or 1.6
percent, to $1.1 million in the second quarter of 2002 from $1.2 million in the
second quarter of 2001.

Other Expense, Net

Other Expense, Net, was $3.1 million in the second quarter of 2002 as compared
to $5.1 million in the second quarter of 2001. This change was principally due
to the cessation of goodwill amortization in 2002.

Income from Operations

Primarily as a result of the factors discussed above, the Companys Income from
Operations in the second quarter of 2002 increased by $4.3 million, or 11.5
percent, to $41.2 million from $36.9 million in the second quarter of 2001,
while the Companys operating margin increased to 11.8 percent in the second
quarter of 2002 from 10.8 percent in the second quarter of 2001. Income from
Operations in the Coated Board business segment increased by $8.9 million, or
20.6 percent, to $51.9 million in the second quarter of 2002 from $43.0 million
in the second quarter of 2001, while the operating margin increased to 15.8
percent in the second quarter of 2002 from 13.5 percent in the second quarter
of 2001, primarily as a result of the factors described above. Income from
Operations in the Containerboard business segment decreased by $1.9 million to
a loss of $4.9 million in the second quarter of 2002 from a loss of $3.0
million in the second quarter of 2001, while the operating margin decreased to
(26.2) percent in the second quarter of 2002 from (13.0) percent in the second
quarter of 2001, primarily as a result of the factors described above.

Fluctuations in U.S. Currency Exchange Rates

The weakening of the U.S. dollar currency exchange rates as compared to the
Euro and other European currencies had a modest impact on Net Sales, Gross
Profit, Income from Operations, and operating expenses during the second
quarter of 2002. However, the impact was somewhat offset by the strengthening
of the U.S. Dollar against the Japanese Yen.

FIRST SIX MONTHS 2002 COMPARED WITH FIRST SIX MONTHS 2001

Net Sales

As a result of the factors described below, the Companys Net Sales in the
first six months of 2002 increased by $18.7 million, or 3.0 percent, compared
with the first six months of 2001. Net Sales in the Coated Board business
segment increased by $31.7 million in the first six months of 2002, or 5.5
percent, to $610.3 million from $578.6 million in the first six months of 2001,
due primarily to higher sales volume in North American beverage carton markets
(resulting, in large part, from increased volumes under a multi-year agreement
with a beer producer customer) and, to a lesser extent, higher sales volumes in
international beverage markets and worldwide consumer products markets. These
increases were somewhat offset by the negative impact of foreign currency
exchange rates on sales in international markets. Net Sales in the
Containerboard business segment decreased by $13.1 million, or 25.6 percent, to
$37.8 million in the first six months of 2002 from $50.9 million in the first
six months of 2001, due to lower linerboard volumes resulting from
the continued shift
from linerboard production to value-added CUK Board production and lower containerboard
pricing.

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##### Table of Contents



Gross Profit

As a result of the factors discussed below, the Companys Gross Profit for the
first six months of 2002 increased by $13.7 million, or 11.1 percent, to $137.6
million from $123.9 million in the first six months of 2001. The Companys
gross profit margin increased to 21.2 percent in the first six months of 2002
from 19.7 percent in the first six months of 2001. Gross Profit in the Coated
Board business segment increased by $20.2 million, or 15.8 percent, to $148.3
million in the first six months of 2002 from $128.1 million in the first six
months of 2001, while its gross profit margin increased to 24.3 percent in the
first six months of 2002 from 22.1 percent in the first six months of 2001. The
increase in Coated Board Gross Profit was due primarily to worldwide cost
reductions as a result of savings gained from the Companys TQS initiative,
higher Net Sales and lower depreciation expense. Gross Profit in the
Containerboard business segment decreased by $5.9 million to a loss of $10.7
million in the first six months of 2002 from a loss of $4.8 million in the
first six months of 2001, while its gross profit margin decreased to (28.4)
percent in the first six months of 2002 from (9.5) percent in the first six
months of 2001. The decrease in Containerboard Gross Profit resulted
principally from lower containerboard pricing.

Selling, General and Administrative

Selling, General and Administrative expenses increased $0.5 million, or 0.8
percent, to $61.3 million in the first six months of 2002 from $60.8 million in
the first six months of 2001. As a percentage of Net Sales, Selling, General
and Administrative expenses decreased from 9.7 percent in the first six months
of 2001 to 9.5 percent in the first six months of 2002.

Research, Development and Engineering

Research, Development and Engineering expenses increased $0.2 million, or 5.4
percent, to $2.5 million in the first six months of 2002 from $2.3 million in
the first six months of 2001, due primarily to higher research and development
investing at the Swedish Mill.

Other Expense, Net

Other Expense, Net, was $1.5 million in the first six months of 2002 as
compared to $13.1 million in the first six months of 2001. This change was
principally due to the cessation of goodwill amortization and a non-cash
pension adjustment recorded in the first six months of 2002 as well as
non-recurring operating charges that were recorded in the first six months of
2001 primarily relating to non-cash asset retirements and a litigation reserve.

Income from Operations

Primarily as a result of the factors discussed above, the Companys Income from
Operations in the first six months of 2002 increased by $24.6 million, or 51.5
percent, to $72.3 million from $47.7 million in the first six months of 2001,
while the Companys operating margin increased to 11.2 percent in the first six
months of 2002 from 7.6 percent in the first six months of 2001. Income from
Operations in the Coated Board business segment increased by $27.0 million, or
38.9 percent, to $96.3 million in the first six months of 2002 from $69.3
million in the first six months of 2001, while the operating margin increased
to 15.8 percent in the first six months of 2002 from 12.0 percent in the first
six months of 2001, primarily as a result of the factors described above.
Income from Operations in the Containerboard business segment decreased by $6.7
million to a loss of $13.2 million in the first six months of 2002 from a loss
of $6.5 million in the first six months of 2001, while the operating margin
decreased to (34.8) percent in the first six months of 2002 from (12.8) percent
in the first six months of 2001, primarily as a result of the factors described
above.

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##### Table of Contents



Fluctuations in U.S. Currency Exchange Rates

The strengthening of the U.S. dollar currency exchange rates as compared to the
Japanese Yen had a modest impact on Net Sales, Gross Profit, Income from
Operations, and operating expenses during the first six months of 2002.

INTEREST INCOME, INTEREST EXPENSE, INCOME TAX EXPENSE, EXTRAORDINARY LOSS ON
EARLY EXTINGUISHMENT OF DEBT, AND CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE.

Interest Income

Interest Income increased by $0.5 million to $1.1 million in the first six
months of 2002 from $0.6 million in the first six months of 2001 due primarily
to interest earned on the temporary investment of the proceeds associated with
the 2002 Term Loan Facility pursuant to a 30-day call notice period required
under the indentures governing the 1996 Senior Notes.

Interest Expense

Interest Expense decreased by $2.8 million to $77.4 million in the first six
months of 2002 from $80.2 million in the first six months of 2001 due primarily
to lower average interest rates somewhat offset by the additional interest
expense incurred on the 1996 Senior Notes during the 30-day call notice period
required under such indentures.

Income Tax Expense

During the first six months of 2002, the Company recognized an income tax
expense of $1.9 million on a (Loss) before Income Taxes of $(4.0) million.
During the first six months of 2001, the Company recognized an income tax
expense of $2.4 million on a (Loss) before Income Taxes of $(31.9) million.
These expenses differed from the statutory federal income tax rate primarily
because of valuation allowances established on net operating loss carryforward
tax assets in the U.S. and certain international locations where the
realization of such benefits is not more likely than not.

Extraordinary Loss on Early Extinguishment of Debt

On April 23, 2002, the Company borrowed $250 million pursuant to an amendment
to its senior secured credit agreement. The proceeds were applied to redeem in
full the 1996 Senior Notes. In addition, the Company borrowed approximately $12
million under its revolving credit facility to pay fees, costs and expenses
related to the refinancing transaction.

On June 21, 2001, the Company completed an offering of $250 million principal
amount of the 2001 Notes, bearing interest at 10 5/8 percent. The net proceeds
of this offering were applied to prepay a portion of the Term Loan Facility
resulting in a non-cash, extraordinary charge to earnings of approximately $2.8
million, net of tax of nil, related to the write-off of the applicable portion
of deferred debt issuance costs on the term loans.

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##### Table of Contents



Cumulative Effect of a Change in Accounting Principle

On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards (''SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments
and Hedging Activities  Deferral of the Effective Date of FASB Statement No.
133, and SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities(''SFAS No. 133), which requires all derivative
instruments to be measured at fair value and recognized on the balance sheet as
either assets or liabilities. In addition, all derivative instruments used in
hedging relationships must be designated, reassessed and documented pursuant to
the provisions of SFAS No. 133. Upon adoption of SFAS No. 133, the Company
recognized a one-time after-tax transition adjustment to decrease earnings by
approximately $0.5 million.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company broadly defines liquidity as its ability to generate sufficient
cash flow from operating activities to meet its obligations and commitments. In
addition, liquidity includes the ability to obtain appropriate debt and equity
financing and to convert into cash those assets that are no longer required to
meet existing strategic and financial objectives. Therefore, liquidity cannot
be considered separately from capital resources that consist of current or
potentially available funds for use in achieving long-range business objectives
and meeting debt service commitments.

Cash Flows

Cash and Equivalents increased by approximately $3.5 million in the first six
months of 2002 primarily as a result of the net cash provided by operating
activities ($14.7 million) and the net cash provided by financing activities
($13.0 million), somewhat offset by purchases of property, plant and equipment
($23.2 million). Depreciation and amortization during the first six months of
2002 totaled approximately $65 million, and is expected to be approximately
$125 million to $135 million for the full year 2002.

The Companys cash flows from its operations and EBITDA are subject to moderate
seasonality with demand usually increasing in the spring and summer due to the
seasonality of the worldwide beverage multiple packaging markets.

Liquidity and Capital Resources

The Companys liquidity needs arise primarily from debt service on the
substantial indebtedness incurred in connection with the Merger, and from the
funding of its capital expenditures, ongoing operating costs and working
capital.

In April 2002, the Company entered into an amendment of the Senior Secured
Credit Agreement which provided for the 2002 Term B Loan Facility. The 2002
Term B Loan Facility was drawn on April 23, 2002 and the proceeds, together
with borrowings under the Revolving Facility of approximately $12.0 million,
were used to redeem the 1996 Senior Notes on May 23, 2002 and to pay related
fees, costs and expenses.

As of June 30, 2002, the Company had outstanding approximately $1,541 million
of long-term debt, consisting primarily of $400 million of the 1996 Senior
Subordinated Notes, $250 million of the 1997 Notes, $250 million of the 2001
Notes, $585 million outstanding under the Term Loan Facility and $52 million
under the Revolving Facility, and other debt issues and facilities.

On May 3, 2002, Riverwood Holding filed a Form S-1 registration statement with
the Securities and Exchange Commission for the registration under the
Securities Act of 1933 of $350 million of its common stock in a proposed
initial public offering. Concurrently with the proposed initial public
offering, the Company anticipates borrowing additional amounts under the Senior
Secured Credit Agreement through an add-on term loan and selling senior notes.
The Company intends to use the net proceeds from these proposed financings to
purchase all of the 1997 Notes, the 2001 Notes and the 1996 Senior Subordinated
Notes through tender offers, or otherwise to redeem or repay these notes in
full, and to repay a portion of the amounts outstanding under the Revolving
Facility.

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##### Table of Contents



On May 30, 2002, Riverwood International commenced tender offers to purchase
all of the outstanding 1997 Notes, 2001 Notes and 1996 Senior Subordinated
Notes and made related consent solicitations for proposed amendments to
eliminate substantially all of the restrictive covenants and a number of events
of default and related provisions in the indentures for these notes. On July 1,
2002, Riverwood International and the trustee for each issue of notes signed
supplemental indentures with respect to the proposed amendments, which will
become effective upon the consummation of the tender offers. On July 30, 2002,
Riverwood International amended the terms of the consideration for the tender
offers and granted tendering holders of notes withdrawal rights. As
of August 8, 2002, approximately $201 million in principal amount of 1997 Notes,
approximately $204 million in principal amount of 2001 Notes and
approximately $301 million in principal amount of 1996 Senior Subordinated
Notes had been tendered. The consummation of each of the tender offers and
related consent solicitations is conditioned upon the consummation of the
proposed initial public offering and each of the related financing transactions.
Subject to the satisfaction of such conditions, Riverwood International intends
to redeem all of the notes not tendered and accepted for payment pursuant to
such offers.

If the Company does not complete the related financing transactions, the
Company intends to use the net proceeds of the proposed initial public offering
to repay a portion of its indebtedness. There can be no assurance that the proposed initial
public offering or any of the related financing transactions will be completed
on the terms anticipated, or at all. The Company continues to work towards the
completion of the initial public offering and related financing transactions,
subject to market conditions.

Debt Service

The following discussion of the Companys debt service requirements, covenant
restrictions and financing sources and cash flows does not give effect to any
of the proposed financing transactions.

Principal and interest payments under the 2001 Term Loan Facility, the
Revolving Facility and the 2002 Term Loan Facility, together with interest
payments on the 2001 Notes, 1997 Notes and 1996 Senior Subordinated Notes,
represent significant liquidity requirements for the Company. The 2001 Term
Loan Facility matures on December 31, 2006 and amortizes in semi-annual
installments of $37.5 million beginning June 30, 2003 and of $46.25 million
beginning June 30, 2005, amounting to principal payments of $75.0 million,
$75.0 million, $92.5 million and $92.5 million in 2003, 2004, 2005 and 2006
respectively. The 2002 Term Loan Facility amortizes in semi-annual installments
of $1.25 million in 2002 and $2.5 million annually in each of 2003, 2004, 2005
and 2006 with the remaining principal due at maturity on March 31, 2007. The
Revolving Facility matures on December 31, 2006.

The loans under the Facilities bear interest at floating rates based upon the
interest rate option elected by the Company. The term loans under the Senior
Secured Credit Agreement bore interest as of June 30, 2002 at an average rate
per annum of 4.62 percent. The 1997 Notes, the 2001 Notes and the 1996 Senior
Subordinated Notes bear interest at rates of 10 5/8 percent, 10
5/8 percent and 10 7/8 percent, respectively. The loans under the Revolving
Facility bore interest as of June 30, 2002 at an average rate per annum of 4.89
percent.

Interest expense in 2002 is expected to be approximately $146 million,
including approximately $7 million of non-cash amortization of deferred debt
issuance costs. During the first six months of 2002, cash paid for interest was
approximately $78.8 million.

26



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##### Table of Contents



The Company expects that its working capital and business needs will require it
to continue to have access to the Revolving Facility or a similar revolving
credit facility after the maturity date, and that the Company accordingly will
have to extend, renew, replace or otherwise refinance such facility at or prior
to such date. No assurance can be given that it will be able to do so. The
Company has in the past refinanced and in the future may seek to refinance its
debt prior to the respective maturities of such debt.

The Company uses interest rate swap agreements to fix a portion of its variable
rate term loans to a fixed rate in order to reduce the impact of interest rate
changes on future income. The difference to be paid or received under these
agreements is recognized as an adjustment to interest expense related to that
debt. At June 30, 2002, the Company had interest rate swap agreements with a
notional amount of $310 million, under which the Company will pay fixed rates
of 2.96 percent to 5.36 percent and receive three-month LIBOR.

Covenant Restrictions

The Senior Secured Credit Agreement, which governs the Facilities, imposes
restrictions on the Companys ability to make capital expenditures and both the
Senior Secured Credit Agreement and the indentures governing the 1996 Senior
Subordinated Notes, the 1997 Notes and the 2001 Notes limit the Companys
ability to incur additional indebtedness. Such restrictions, together with the
highly leveraged nature of the Company, could limit the Companys ability to
respond to market conditions, meet its capital spending program, provide for
unanticipated capital investments or take advantage of business opportunities.
The covenants contained in the Senior Secured Credit Agreement, among other
things, restrict the ability of the Company and its subsidiaries to dispose of
assets, incur additional indebtedness, incur guarantee obligations, prepay
other indebtedness or amend other debt instruments, pay dividends, create liens
on assets, enter into sale and leaseback transactions, make investments, loans
or advances, make acquisitions, engage in mergers or consolidations, change the
business conducted by Riverwood and its subsidiaries, make capital expenditures
and engage in certain transactions with affiliates. The covenants contained in
the indentures governing the 1996 Senior Subordinated Notes, the 1997 Notes and
the 2001 Notes also impose restrictions on the operation of the Companys
business.

The financial covenants in the Senior Secured Credit Agreement specify, among
other things, the following requirements for each four quarter period ended
during the following test periods:

|                                       |  |                          |  |                  |  |  |  | 
|-------------------------------------- |  | ------------------------ |  | ---------------- |  |  |  | 
|                                       |  | Consolidated             |  |                  |  | 
|                                       |  | Debt to Credit Agreement |  | Consolidated    
|                                       |  | EBITDA                   |  | Interest Expense
|Test Period                            |  | Leverage Ratio           |  | Ratio           
|                                       |  |                          |  |                 
|September 30, 2001 - December 30, 2002 |  | 5.85 to 1.00             |  | 1.75 to 1.00    
|December 31, 2002 - December 30, 2003  |  | 5.50 to 1.00             |  | 2.00 to 1.00    
|December 31, 2003 - December 30, 2004  |  | 5.00 to 1.00             |  | 2.10 to 1.00    
|December 31, 2004 - December 30, 2005  |  | 4.70 to 1.00             |  | 2.25 to 1.00    
|December 31, 2005 - December 30, 2006  |  | 4.40 to 1.00             |  | 2.25 to 1.00    
|December 31, 2006 - March 31, 2007     |  | 4.40 to 1.00             |  | 2.25 to 1.00    

At June 30, 2002, the Company was in compliance with the financial covenants in
the Senior Secured Credit Agreement. The Companys ability to comply in future
periods with the financial covenants in the Senior Secured Credit Agreement
will depend on its ongoing financial and operating performance, which in turn
will be subject to economic conditions and to financial, business and other
factors, many of which are beyond the Companys control and will be
substantially dependent on the selling prices for the Companys products, raw
material and energy costs, and the Companys ability to successfully implement
its overall business and profitability strategies (see Outlook). If a
violation of any of the covenants occurred, the Company would attempt to get a
waiver or an amendment from its lenders, although no assurance can be given
that the Company would be successful in this regard. The Senior Secured Credit
Agreement and the indentures governing the 1996 Senior Subordinated Notes, 1997
Notes and 2001 Notes have covenants as well as certain cross-default or
cross-acceleration provisions; failure to comply with these covenants in any
agreement could result in a violation of such agreement which could, in turn,
lead to violations of other agreements pursuant to such cross-default or
cross-acceleration provisions.

The Senior Secured Credit Agreement is secured by substantially all of the
Companys assets.

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Capital Expenditures

Capital spending for the first six months of 2002 was approximately $23.2
million, down 8.4 percent from $25.3 million in the first six months of 2001.
Capital spending during the first six months of 2002 related primarily to
improving the Companys process capabilities, manufacturing packaging machinery
and environmental cluster rules compliance. During the first six months of
2002, the Company had capital spending of approximately $17.8 million for
improving process capabilities, approximately $5.0 million for packaging
machinery manufacturing and approximately $0.4 million for compliance with the
cluster rules. Total capital spending for 2002 is expected to be between $65
million and $80 million, and is expected to relate principally to improving the
Companys process capabilities, the production of packaging machinery and
environmental cluster rules compliance. The Company estimates that the capital
spending that may be required to comply with the cluster rules could reach $55
million to be spent at its two U.S. paper mills over a seven-year period that
began in 2000 (see Environmental and Legal Matters). As of June 30, 2002, the
Company estimates that it has spent approximately one-third of that amount for
such compliance.

Financing Sources and Cash Flows

The Revolving Facility matures on December 31, 2006. At June 30, 2002, the
Company and its U.S. and international subsidiaries had the following amounts
of commitments, amounts outstanding and amounts available under revolving
credit facilities:

|                          |  |                 |         |              |  |              |        |  |  |   |         | 
|------------------------- |  | --------------- | ------- | ------------ |  | ------------ | ------ |  |  | - | ------- | 
|                          |  | Total Amount of |         | Total Amount |  | Total Amount
|                          |  | Commitments     |         | Outstanding  |  | Available   
|                          |  |                 |         |              |  |             
|(In thousands of dollars) |  |                 |         |              |  |              |        |  |  |   |         | 
|Revolving Facility        |  | $               | 300,000 |              |  | $            | 51,950 |  |  | $ | 247,408 | 
|International Facilities  |  |                 | 16,105  |              |  |              | 11,901 |  |  |   | 4,204   | 
|                          |  |                 |         |              |  |              |        |  |  |   |         | 
|                          |  | $               | 316,105 |              |  | $            | 63,851 |  |  | $ | 251,612 | 
|                          |  |                 |         |              |  |              |        |  |  |   |         | 

In accordance with its debt agreements, the Companys availability under its
Revolving Facility as of June 30, 2002 has been reduced by the amount of
standby letter of credits issued of approximately $0.6 million. The Company
anticipates pursuing additional working capital financing for its foreign
operations as necessary. The Company believes that cash generated from
operations, together with amounts available under its Revolving Facility and
other available financing sources, will be adequate to permit the Company to
meet its debt service obligations, capital expenditure program requirements,
ongoing operating costs and working capital needs until the maturity of the
Revolving Facility, although no assurance can be given in this regard. The
Companys future financial and operating performance, ability to service or
refinance its debt and ability to comply with the covenants and restrictions
contained in its debt agreements (see Covenant Restrictions), will be
subject to future economic conditions and to financial, business and other
factors, many of which are beyond the Companys control and will be
substantially dependent on the selling prices and demand for the Companys
products, raw material and energy costs, and the Companys ability to
successfully implement its overall business and profitability strategies.

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Derivative Instruments and Hedging Activities

The Company is exposed to fluctuations in interest rates on its variable rate
debt and fluctuations in foreign currency transaction cash flows. The Company
actively monitors these fluctuations and uses derivative instruments from time
to time to manage its exposure. In accordance with its risk management
strategy, the Company uses derivative instruments only for the purpose of
managing risk associated with fluctuations in the cash flow of the underlying
exposures identified by management. The Company does not trade or use
derivative instruments with the objective of earning financial gains on
interest or currency rates, nor does it use leveraged instruments or
instruments where there are no underlying exposures identified. The Companys
use of derivative instruments may result in short-term gains or losses and may
increase volatility in its earnings.

On January 1, 2001, the Company adopted SFAS No. 133 which requires all
derivative instruments to be measured at fair value and recognized on the
balance sheet as either assets or liabilities. In addition, all derivative
instruments used in hedging relationships must be designated, reassessed and
documented pursuant to the provisions of SFAS No. 133. Upon adoption of SFAS
No. 133, the Company recognized a one-time after-tax transition adjustment to
decrease earnings by approximately $0.5 million and decrease other
comprehensive income by approximately $1.1 million. These amounts have been
presented as a cumulative effect of change in accounting principle in the
accompanying Condensed Consolidated Statement of Operations and Comprehensive
Income (Loss) for the six months ended June 30, 2001.

The following is a summary of the Companys derivative instruments as of June
30, 2002 and the accounting policies it employs:

Hedges of Anticipated Cash Flows

The following is a reconciliation of current period changes in the fair value
of the interest rate swap agreements, and foreign currency forward and option
contracts which have been recorded as Accumulated Derivative Instruments Loss
in the accompanying Condensed Consolidated Balance Sheet at June 30, 2002 and
as Derivative Instruments (Loss) Gain in the accompanying Condensed
Consolidated Statement of Operations and Comprehensive Income (Loss) for the
Six Months Ended June 30, 2002.

|                                      |  |   |        |  
|------------------------------------- |  | - | ------ | -
|(In thousands of dollars)             |  |   |        |  
|                                      |  |   |        |  
|SFAS No. 133 transition adjustment    |  | $ | (1,094 | )
|Reclassification to earnings          |  |   | 3,898  |  
|Current period decrease in fair value |  |   | (7,374 | )
|                                      |  |   |        |  
|Balance at December 31, 2001          |  |   | (4,570 | )
|Reclassification to earnings          |  |   | 2,986  |  
|Current
period decrease in fair value |  |   | (2,448 | )
|                                      |  |   |        |  
|Balance at June 30, 2002              |  | $ | (4,032 | )
|                                      |  |   |        |  

During the six months ended June 30, 2002, there was no material ineffective
portion related to the changes in fair value of the interest rate swap
agreements, or foreign currency forward and option contracts and there were no
amounts excluded from the measure of effectiveness. During the
second quarter of 2002, the Company de-designated certain of its
foreign currency forward and option contracts due to such contracts
no longer meeting the Companys established effectiveness test.
As a result, during the second quarter of 2002, the Company
recognized a mark-to-market loss of approximately $1.8 million
dollars in the accompanying Condensed Consolidated Statement of
Operations and Comprehensive Income (Loss); had the foreign currency forward
and option contracts not been de-designated, this approximate
$1.8 million mark-to-market loss would have been deferred into
Other Comprehensive Income (Loss) and would have been recognized in
the Condensed Consolidated Statement of Operations and Comprehensive
Income (Loss) at the time the underlying hedged transaction was recognized.
Included in Accumulated Derivative Instruments Loss in the
accompanying Condensed Consolidated Balance Sheet as of June 30,
2002, is a balance of approximately $0.2 million related to
foreign currency forward and option contracts that were de-designated
in the second quarter of 2002 that will be recognized as income in
its statement of operations at the time the underlying hedged
transaction occurs.

The balance of $4.0 million
recorded in Accumulated Derivative Instruments Loss at June 30, 2002 is
expected to be reclassified into future earnings, contemporaneously with and
offsetting changes in the related hedged exposure. The estimated amount to be
reclassified into future earnings as interest expense over the next twelve
months through June 30, 2003 is approximately $3.3 million. The actual amount
that will be reclassified to future earnings over the next twelve months will
vary from this amount as a result of changes in market conditions. No amounts
were reclassified to earnings during the first six months of 2002 in connection
with forecasted transactions that were no longer considered probable of
occurring.

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The Company uses interest rate swap agreements to fix a portion of its variable
rate Term Loan Facility to a fixed rate in order to reduce the impact of
interest rate changes on future income. The differential to be paid or received
under these agreements is recognized as an adjustment to interest expense
related to the debt. At June 30, 2002, the Company had interest rate swap
agreements with a notional amount of $310 million, which expire on various
dates through the year 2003, under which the Company will pay fixed rates of
2.96 percent to 5.36 percent and receive three-month LIBOR.

Derivatives not Designated as Hedges

The Company has foreign currency forward contracts used to hedge the exposure
associated with foreign currency denominated receivables. These contracts are
presently being marked-to-market through the income statement and will continue
to be marked-to-market through the income statement.

The Company enters into fixed price natural gas contracts designed to
effectively hedge prices for a substantial portion of its natural gas
requirements at its two U.S. mills. The purpose of the fixed price natural gas
contracts is to eliminate or reduce price risk with a focus on making cash
flows more predictable. As of June 30, 2002, the Company had entered into
contracts to hedge substantially all of its natural gas requirements for its
two U.S. mills through June 30, 2003. The contract price and fair value of
these natural gas contracts was approximately $21.4 million and $20.1 million,
respectively. These contracts are not accounted for as derivative instruments
under SFAS No. 133, as they qualify for the normal purchase exemption.

Environmental and Legal Matters

The Company is committed to compliance with all applicable foreign, federal,
state and local environmental laws and regulations. Environmental law is,
however, dynamic rather than static. As a result, costs, which are
unforeseeable at this time, may be incurred when new laws are enacted, and when
environmental agencies adopt or revise rules and regulations.

In general, the environmental laws that the Company
is subject to regulate discharges
and emissions of constituents to the air, soil and water, prescribe procedures
for the use, reuse, reclamation, recycling and disposal of designated waste
materials and impose liability and requirements relating to the cleanup of
contamination. In certain instances, state environmental laws may be stricter
than their federal counterparts.

The federal Clean Air Act imposes stringent limits on air emissions,
establishes a federal permit program (Title V) and provides for civil and
criminal enforcement sanctions. In response to these requirements, in the early
1990s the Company switched from solvent-based to water-based inks and
varnishes at our converting operations in order to reduce and meet requirements
with respect to emissions of volatile organic compounds. Where necessary, our
plants have received or submitted an application to the appropriate permitting
authority for a Title V permit.

The federal Clean Water Act establishes a system of minimum national effluent
standards for each industry, water quality standards for the nations waterways
and a permit program that provides discharge limitations. It also regulates
releases and spills of oil and toxic chemicals and wastewater and stormwater
discharges. The Companys mill in West Monroe, Louisiana is the only one of the
Companys facilities that is a direct discharger to a water body and a permit
currently covers its discharges to the Ouachita River. The Companys other
operations discharge to publicly owned treatment works and are subject to
pretreatment requirements and limitations.

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The federal Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA) establishes liability for waste generators, current and former
site owners and operators and others in connection with releases of hazardous
materials. The Company has been, and in the future may again be, identified as
a potentially responsible party at sites under CERCLA and similar state laws.

In 1998, the U.S. Environmental Protection Agency adopted regulations
(generally referred to as the cluster rules) that mandate more stringent
controls on air and water discharges from the United States pulp and paper
mills. The Company estimates that the capital spending that may be required to
comply with the cluster rules could reach $55 million to be spent at its two
U.S. paper mills over a seven-year period that began in 2000. As of June 30,
2002, the Company estimates that it has spent approximately one-third of that
amount for such compliance.

In late 1995, the Louisiana Department of Environmental Quality (DEQ)
notified the Predecessor of potential liability for the remediation of
hazardous substances at a wood treatment site in Shreveport, Louisiana that the
Predecessor or its predecessors previously operated, and at a former oil
refinery site in Caddo Parish, Louisiana which is on land that the Company
previously owned. In response to these notices, the Company has provided
additional information concerning these sites and has commenced its own
evaluation of any claims and remediation liabilities for which it may be
responsible. Subsequent to receipt in May 1996 of a Special Demand Letter from
DEQ to remediate the site in Shreveport, the Company performed a soil and
groundwater investigation at the site pursuant to an agreement with DEQ. In
August 2001, the Company entered into a Cooperative Agreement for Remedial
Action with DEQ and the landowners of the site, as well as a Mutual Release and
Settlement Agreement with the landowners. Under the Cooperative Agreement, the
Company developed a remedial design which included, among other things, removing
contaminated soils, capping a portion of the site and future operations and
maintenance, or O&M. If the Company fails to comply with the requirements of the
cooperative agreement, including the prescribed time periods, the DEQ can
impose stipulated penalties as specified in the cooperative agreement ranging
from $250 to $1,000 per day of non-compliance. The Company has engaged a
qualified contractor and expects completion of the work by the end of 2002.
Total costs for the Shreveport remedial action are approximately
$1.3 million. The Company has reached a settlement agreement
with another responsible party that has already reimbursed the
Company for certain past costs and will reimburse the Company for 50%
of future costs incurred in connection with the remediation plan. To
date, the Company has paid approximately $50,000 to the contractor.
Costs could
increase if, for example, there is an increase in the amount of contaminated
soils found on site. In addition, for the initial five years, O&M costs are
estimated to be approximately $0.1 million and groundwater monitoring costs are
estimated to be approximately $0.1 million. The Company has not estimated O&M or
groundwater monitoring costs beyond this initial five-year period because the
extent of any such O&M or groundwater monitoring obligation is
unknown. The Company has accrued $0.8 million for its
approximate 50 percent share of the Shreveport remedial action.

In September 1996, the Company received a Special Demand Letter from DEQ to
remediate the site in Caddo Parish. On July 6, 2000, the Company and DEQ entered into a Settlement Agreement that
describes in detail the remedial actions necessary for the Company to obtain
full release of all future liability at this site. The Company contracted
with a vendor to perform the remedial actions as outlined in the Settlement
Agreement. The remedial action required,
among other things, the neutralization, stabilization and consolidation of
sludges and soils at the site, the capping of the consolidated materials, the
establishment of a vegetative cover and five years of post-closure care of the
capped area. The lump sum contract price with the contractor is approximately
$1.6 million, of which the Company has already paid
approximately $1.3 million. The
Company no longer owns the site since transferring the property to another
entity on October 22, 2000. The remedial actions outlined in the Settlement
Agreement have been completed and the Company expects to obtain the appropriate
release from DEQ in the fourth quarter of 2002.

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The Company is involved in environmental remediation projects for certain
properties currently or formerly owned or operated by the Company, certain
properties divested by the Company for which responsibility was retained, and
waste disposal sites where waste was shipped by the Predecessor or its
predecessors or for which the Company might have corporate successor liability.
Some of these projects are being addressed under federal and state statutes,
such as the CERCLA and analogous state laws. The Companys costs in certain
instances cannot be reliably estimated until the remediation process is
substantially underway or liability has been addressed. To address these
contingent environmental costs, the Company has accrued reserves when such
costs are probable and can be reasonably estimated. The Company believes that,
based on current information and regulatory requirements, the accruals
established by the Company for environmental expenditures are adequate. Based
on current knowledge, to the extent that additional costs may be incurred that
exceed the accrued reserves, such amounts are not expected to have a material
impact on the results of operations, cash flows or financial condition although
the Company may incur significant costs in excess of accrued reserves in
connection with clean-up activities at these properties, including the
Shreveport and Caddo Parish sites referred to above.

The Company is a party to a number of lawsuits arising out of the ordinary
conduct of its business. While there can be no assurance as to their ultimate
outcome, the Company does not believe that these lawsuits will have a material
impact on the results of operations, cash flows or financial condition of the
Company.

The Company has been a plaintiff in actions against The MeadWestvaco
Corporation (MeadWestvaco), successor by merger to The Mead Corporation, and
R.A. Jones Co. Inc. (R.A. Jones) claiming infringement of the Companys
patents for its packaging machines. The patents in suit were found infringed
but invalid by a jury in a trial against R.A. Jones in August 2001. This
finding of invalidity has been appealed to the Court of Appeals for the Federal
Circuit. The suit against MeadWestvaco was dismissed by mutual agreement
pending the outcome of the appeal of the decision in the case against R.A.
Jones. If the finding of invalidity is upheld on appeal, the Company
anticipates it will be required to take an approximate $11 million charge
associated with writing off the unamortized carrying cost of the patents in suit.

Information Concerning Forward-Looking Statements

Certain of the statements contained in this report (other than the financial
statements and other statements of historical fact) are forward-looking
statements, including, without limitation, (i) the statements in Business
Trends and Initiatives concerning (a) the Companys expectation regarding
downtime during 2002, (b) the improvements which the Companys long-term
initiatives, including, without limitation, its profit center reorganization
and global restructuring program, are designed to achieve, (c) the Companys
expectation that capital expenditures will range from $65 million to $80
million in 2002, and (d) the Companys expectation regarding packaging
machinery placements; (ii) the statements in Outlook concerning (a) the
Companys expectation that its 2002 EBITDA will exceed its 2001 EBITDA as well
as each of the factors which the Company believes support such expectation, (b)
the Companys expectations regarding sales volumes in its worldwide beverage
multiple packaging markets and continued growth in its North American consumer
products packaging markets, (c) the Companys expectation regarding
containerboard sales and margins, and (d) the Companys expectations regarding
increased energy costs; (iii) the statements in Financial Condition, Liquidity
and Capital Resources concerning (a) the Companys expectation that
depreciation and amortization for 2002 will be approximately $125 million to
$135 million, (b) the Companys expectation that 2002 interest expense will be
approximately $146 million including approximately $7 million of non-cash
amortization of deferred debt issuance costs, (c) the Companys expectation
that total capital spending for 2002 will range from $65 million to $80
million, (d) the Companys belief that cash generated from operations, together
with amounts available under available financing sources, will be adequate to
permit the Company to meet its debt service obligations, capital expenditure
program requirements, ongoing operating costs and working capital needs until
the maturity of the Revolving Facility, and (e) the Companys expectations with
respect to capital spending that may be required to comply with the cluster
rules and that, based on current knowledge, environmental costs are not
expected to have a material impact on the results of operations, cash flows or
financial condition of the Company, and (iv) other statements as to
managements or the Companys expectations and beliefs presented in this
Managements Discussion and Analysis of Financial Condition and Results of
Operations.

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Forward-looking statements are made based upon managements current
expectations and beliefs concerning future developments and their potential
effects upon the Company. There can be no assurance that future developments
will be in accordance with managements expectations or that the effect of
future developments on the Company will be those anticipated by management. The
important factors described elsewhere in this report (including, without
limitation, those discussed in  Financial Condition, Liquidity and Capital
Resources), the Companys Report on Form 10-K for the year ended December 31,
2001, or in other Securities and Exchange Commission filings, could affect (and
in some cases have affected) the Companys actual results and could cause such
results to differ materially from estimates or expectations reflected in such
forward-looking statements.

While the Company periodically reassesses material trends and uncertainties
affecting the Companys results of operations and financial condition in
connection with its preparation of managements discussion and analysis of
results of operations and financial condition contained in its quarterly and
annual reports, the Company does not intend to review or revise any particular
forward-looking statement referenced in this report in light of future events.

Review of Form S-1 Registration
Statement

The Form S-1 registration statement for the
Companys proposed initial public offering is being reviewed by
the Staff of the SEC. Comments made by the Staff of the SEC on the
S-1, including with respect to the three accounting matters described
below, may require the Company to amend this quarterly report and
reports previously filed with the SEC.

As previously disclosed, effective January 1,
2001, the Company consolidated into its financial statements the
accounts of Rengo Riverwood Packaging, Ltd., the Companys
50%-owned Japanese joint venture. The Staff of the SEC has asked for
a supplemental explanation for such consolidation. The Company
determined that consolidation was appropriate by considering a number
of factors, including the importance of the Companys
contribution to Rengos business strategy, operational direction
and operational results.

As previously disclosed, on  October 12, 2001,
the Company agreed to pay $29.5 million to the State of
Louisiana to settle all Louisiana state income tax issues related to
the period ended March 27, 1996 and the nine month period ended
December 31, 1996. The Staff of the SEC has asked for a
supplemental explanation of the accounting treatment for any interest
component of the settlement. The Company recorded the full amount of
the settlement as an adjustment to goodwill and did not account for
interest separately since interest was not separately allocated as
part of the settlement and there was no substantive basis for
allocation of interest.

The Company reports its results in two business
segments: Coated Board and Containerboard. The Coated Board business
segment includes the production and sale of CUK Board for the
beverage multiple packaging business and the consumer products
packaging business. The Staff of the SEC has asked for a supplemental
explanation of the Companys Coated Board business segment
disclosure.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141 (SFAS No. 141), Business Combinations, which was effective as of
January 1, 2002. SFAS No. 141 requires the purchase method of accounting for
business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company adopted SFAS No. 141 on January 1,
2002 and the adoption did not have a significant impact on its financial
position and results of operations.

In June 2001, the FASB issued SFAS No. 142 (SFAS No. 142), Goodwill and
Other Intangible Assets, which was effective January 1, 2002. SFAS No. 142
requires, among other things, the discontinuance of goodwill amortization. In
addition, the standard includes provisions for the reclassification of certain
existing recognized intangibles as goodwill, reassessment of the useful lives
of existing recognized intangibles, reclassification of certain intangibles out
of previously reported goodwill and the identification of reporting units for
purposes of assessing potential future impairments of goodwill. SFAS No. 142
also requires the Company to complete a transitional goodwill impairment test
six months from the date of adoption. The adoption of SFAS No. 142 resulted in
the discontinuation of amortization of goodwill recorded at December 31, 2001
of approximately $8 million annually. Intangible assets with a determinable
life will continue to be amortized over that period. The Company adopted SFAS
No. 142 on January 1, 2002 and upon implementation recorded a write-off of
approximately $0.8 million related to patents to which no value was associated
at June 30, 2002 which is reflected in Other Expense, Net in the accompanying
Condensed Consolidated Statement of Operations and Comprehensive
Income (Loss) for the
Six Months Ended June 30, 2002. The following table shows Net (Loss) for the
first six months of 2002 and adjusted Net (Loss) for the first six months of
2001 exclusive of goodwill amortization.

|                               |  |                    |        |                  |  |          |        |          |  |   |         |   |  |   |         |  
|------------------------------ |  | ------------------ | ------ | ---------------- |  | -------- | ------ | -------- |  | - | ------- | - |  | - | ------- | -
|                               |  | Three Months Ended |        | Six Months Ended
|                               |  |                    |        |                 
|                               |  | June 30,           |        | June 30,         |  | June 30, |        | June 30,
|(In thousands of dollars)      |  | 2002               |        | 2001             |  | 2002     |        | 2001    
|                               |  |                    |        |                  |  |          |        |         
|Net (Loss)                     |  | $                  | (9,685 | )                |  | $        | (7,442 | )        |  | $ | (17,400 | ) |  | $ | (37,606 | )
|Plus: Amortization of Goodwill |  |                    |       |                  |  |          | 1,935  |          |  |   |        |   |  |   | 3,870   |  
|                               |  |                    |        |                  |  |          |        |          |  |   |         |   |  |   |         |  
|Adjusted Net (Loss)            |  | $                  | (9,685 | )                |  | $        | (5,507 | )        |  | $ | (17,400 | ) |  | $ | (33,736 | )
|                               |  |                    |        |                  |  |          |        |          |  |   |         |   |  |   |         |  

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The following table shows Income (Loss) before Extraordinary Item and
Cumulative Effect of a Change in Accounting Principle for the first six months
of 2002 and adjusted Income (Loss) before Extraordinary Item and Cumulative
Effect of a Change in Accounting Principle for the first six months of 2001 exclusive
of goodwill amortization.

|                                                                                                           |  |                    |       |                  |  |          |        |          |  |   |        |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------ | ----- | ---------------- |  | -------- | ------ | -------- |  | - | ------ | - |  | - | ------- | -
|                                                                                                           |  | Three Months Ended |       | Six Months Ended
|                                                                                                           |  |                    |       |                 
|                                                                                                           |  | June 30,           |       | June 30,         |  | June 30, |        | June 30,
|(In thousands of dollars)                                                                                  |  | 2002               |       | 2001             |  | 2002     |        | 2001    
|                                                                                                           |  |                    |       |                  |  |          |        |         
|Income (Loss) before Extraordinary Item and
Cumulative Effect of a Change in Accounting
Principle          |  | $                  | 1,824 |                  |  | $        | (4,672 | )        |  | $ | (5,891 | ) |  | $ | (34,337 | )
|Plus: Amortization of Goodwill                                                                             |  |                    |      |                  |  |          | 1,935  |          |  |   |       |   |  |   | 3,870   |  
|                                                                                                           |  |                    |       |                  |  |          |        |          |  |   |        |   |  |   |         |  
|Adjusted Income (Loss) before Extraordinary
Item and Cumulative Effect of a Change in Accounting Principle |  | $                  | 1,824 |                  |  | $        | (2,737 | )        |  | $ | (5,891 | ) |  | $ | (30,467 | )
|                                                                                                           |  |                    |       |                  |  |          |        |          |  |   |        |   |  |   |         |  

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The following table displays the intangible assets that continue to be subject
to amortization and aggregate amortization expense as well as intangible assets
not subject to amortization as of June 30, 2002 and December 31, 2001:

|                               |            |   |                     |         |              |   |              |        |  |   |        |         | 
|------------------------------ | ---------- | - | ------------------- | ------- | ------------ | - | ------------ | ------ |  | - | ------ | ------- | 
|                               |            |   | As of June 30, 2002
|                               |            |   |                    
|                               |            |   | Gross Carrying      |         | Accumulated  |   | Net Carrying
|                               |            |   | Amount              |         | Amortization |   | Amount      
|                               |            |   |                     |         |              |   |             
|Amortized intangible assets:   |            |   |                     |         |              |   |              |        |  |   |        |        
|                               | Patents    |   | $                   | 23,276  |              |   | $            | 8,703  |  |   | $      | 14,573  | 
|                               | Licenses   |   |                     | 3,598   |              |   |              | 1,102  |  |   |        | 2,496   | 
|                               | Trademarks |   |                     | 39,638  |              |   |              | 12,360 |  |   |        | 27,278  | 
|                               |            |   |                     |         |              |   |              |        |  |   |        |        
|                               |            | $ | 66,512              |         |              | $ | 22,165       |        |  | $ | 44,347 |        
|                               |            |   |                     |         |              |   |              |        |  |   |        |        
|Unamortized intangible assets: |            |   |                     |         |              |   |              |        |  |   |        |        
|                               | Goodwill   |   | $                   | 276,482 |              |   |              |       |  |   | $      | 276,482 | 
|                               |            |   |                     |         |              |   |              |        |  |   |        |        

|                               |            |   |                         |         |              |   |              |        |  |   |        |         | 
|------------------------------ | ---------- | - | ----------------------- | ------- | ------------ | - | ------------ | ------ |  | - | ------ | ------- | 
|                               |            |   | As of December 31, 2001
|                               |            |   |                        
|                               |            |   | Gross Carrying          |         | Accumulated  |   | Net Carrying
|                               |            |   | Amount                  |         | Amortization |   | Amount      
|                               |            |   |                         |         |              |   |             
|Amortized intangible assets:   |            |   |                         |         |              |   |              |        |  |   |        |        
|                               | Patents    |   | $                       | 23,926  |              |   | $            | 7,986  |  |   | $      | 15,940  | 
|                               | Licenses   |   |                         | 3,598   |              |   |              | 997    |  |   |        | 2,601   | 
|                               | Trademarks |   |                         | 39,624  |              |   |              | 11,370 |  |   |        | 28,254  | 
|                               |            |   |                         |         |              |   |              |        |  |   |        |        
|                               |            | $ | 67,148                  |         |              | $ | 20,353       |        |  | $ | 46,795 |        
|                               |            |   |                         |         |              |   |              |        |  |   |        |        
|Unamortized intangible assets: |            |   |                         |         |              |   |              |        |  |   |        |        
|                               | Goodwill   |   | $                       | 321,976 |              |   | $            | 45,494 |  |   | $      | 276,482 | 
|                               |            |   |                         |         |              |   |              |        |  |   |        |        

Amortization expense for intangible assets subject to amortization was
approximately $1.9 million for the first six months of 2002, and is expected to
be approximately $4 million annually for the next five fiscal years.

In August 2001, the FASB issued SFAS No. 144 (SFAS No. 144), Accounting for
the Impairment or Disposal of Long-Lived Assets, which was effective January
1, 2002. SFAS No. 144 addresses financial accounting and reporting for the
impairment or disposal of long-lived assets, as well as eliminating the
exception to consolidation for a subsidiary for which control is likely to be
temporary. The Company adopted SFAS No. 144 on January 1, 2002 and the adoption
did not have a significant impact on its financial position and results of
operations.

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##### Table of Contents



ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

For a discussion of certain market risks related to the Company, see Part II,
Item 7A, Quantitative and Qualitative Disclosure about Market Risk, in the
Companys Annual Report on Form 10-K for the fiscal period ended December 31,
2001. There have been no significant developments with respect to derivatives
or exposure to market risk during the first six months of 2002.

PART II  OTHER INFORMATION

ITEM 1.     Legal Proceedings.

Not applicable

ITEM 2.     Changes in Securities and Use of Proceeds.

Not applicable

ITEM 3.     Defaults Upon Senior Securities.

Not applicable

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

On May 7, 2002, a Written Consent in Lieu of Annual Meeting was executed by the
stockholders of Riverwood Holding, Inc. and the following Directors were
elected by the stockholders:

|                     |  |                    
|-------------------- |  | -------------------
|B. Charles Ames      |  | Hubbard C. Howe    
|G. Andrea Botta      |  | Stephen M. Humphrey
|Kevin J. Conway      |  | Samuel M. Mencoff  
|Alberto Cribiore     |  | Brian J. Richmand  
|Gianluigi Gabetti    |  | Lawrence C. Tucker 
|Leon J. Hendrix, Jr. |  |                    

ITEM 5.     Other Information.

Not applicable

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##### Table of Contents



ITEM 6.     Exhibits and Reports on Form 8-K.



|(a) |  | Exhibits.                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------
|   
|    |  | 99         Reconciliation of Income from Operations to EBITDA. Filed as an exhibit
hereto.                                 
|   
|(b) |  | Reports on Form 8-K.                                                                                                       
|   
|    |  | Filed on May 3, 2002 reporting intention for proposed initial public
offering of $350 million of common stock.             
|   
|    |  | Filed on June 11, 2002 reporting changes in registrants certifying
accountant.                                            
|   
|    |  | Filed on July 30, 2002 reporting extensions and amendments of tender offers
for senior subordinated notes and senior notes.
|   
|    |  | Filed on July 31, 2002 reporting extensions and amendments of tender offers
for senior subordinated notes and senior notes.

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##### Table of Contents






SIGNATURE

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

|                      |  |                         |  |     |  |                                                                    | 
|--------------------- |  | ----------------------- |  | --- |  | ------------------------------------------------------------------ | 
|                      |  | RIVERWOOD HOLDING, INC.
|                      |  |                        
|                      |  | (Registrant)           
|                      |  |                         |  |     |  |                                                                   
|Date: August 14, 2002 |  | By:                     |  |     |  |                                                                   
|                      |  |                         |  | /s/ |  | Edward W. Stroetz Jr.                                             
|                      |  |                        
|                      |  |                         |  |     |  | Edward W. Stroetz Jr.
Secretary                                   
|                      |  |                         |  |     |  |                                                                   
|Date: August 14, 2002 |  | By:                     |  |     |  |                                                                   
|                      |  |                         |  | /s/ |  | Daniel J. Blount                                                  
|                      |  |                        
|                      |  |                         |  |     |  | Daniel J. Blount
Senior Vice President and
Chief Financial Officer

38