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

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

For the quarterly period ended September 30, 2002

OR

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

For the transition period from    to

Commission file number 1-11113

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

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

At November 5, 2002 there were 7,063,930
shares and 500,000 shares of the registrants Class A and Class
B common stock, respectively, outstanding.





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TABLE OF CONTENTS



|                                               |                                                                                 |  |  |  |  |  |  | 
|---------------------------------------------- | ------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                 
|ITEM 1. FINANCIAL STATEMENTS                  
|                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                                          
|                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                
|                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                           
|SIGNATURE                                     
|CERTIFICATIONS                                
|EX-99 RECONCILIATION OF INCOME FROM OPERATIONS



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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 Riverwood 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. (Riverwood Holding) and its subsidiaries; and Riverwood
International refers to Riverwood International Corporation, a Delaware
corporation formerly named Riverwood International USA, Inc. and an indirect
wholly-owned subsidiary of Riverwood Holding.

2



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##### Table of Contents



RIVERWOOD HOLDING, INC.




CONDENSED CONSOLIDATED BALANCE SHEETS


(In thousands of dollars)
(unaudited)


|                                                                                                                                                                       |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------- | ------- | ------------ | - | --------- | ------- | 
|                                                                                                                                                                       |                                                                                                                                                                                                                                                                            |   | September 30, |         | December 31,
|                                                                                                                                                                       |                                                                                                                                                                                                                                                                            |   | 2002          |         | 2001        
|                                                                                                                                                                       |                                                                                                                                                                                                                                                                            |   |               |         |             
|ASSETS                                                                                                                                                                 |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |        
|Current Assets:                                                                                                                                                        |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |        
|                                                                                                                                                                       | Cash and Equivalents                                                                                                                                                                                                                                                       |   | $             | 26,655  |              |   | $         | 27,983  | 
|                                                                                                                                                                       | Receivables, Net of Allowances                                                                                                                                                                                                                                             |   |               | 164,330 |              |   |           | 140,099 | 
|                                                                                                                                                                       | Inventories                                                                                                                                                                                                                                                                |   |               | 199,721 |              |   |           | 181,305 | 
|                                                                                                                                                                       | Prepaid Expenses                                                                                                                                                                                                                                                           |   |               | 13,838  |              |   |           | 6,770   | 
|                                                                                                                                                                       |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |        
|Total Current Assets                                                                                                                                                   |                                                                                                                                                                                                                                                                            |   | 404,544       |         |              |   | 356,157   |        
|Property, Plant and Equipment, Net of Accumulated
Depreciation of $748,194 in 2002 and $659,945 in 2001                                                                |                                                                                                                                                                                                                                                                            |   | 1,244,288     |         |              |   | 1,289,915 |        
|Goodwill                                                                                                                                                               |                                                                                                                                                                                                                                                                            |   | 276,482       |         |              |   | 276,482   |        
|Other Assets                                                                                                                                                           |                                                                                                                                                                                                                                                                            |   | 128,927       |         |              |   | 136,914   |        
|                                                                                                                                                                       |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |        
|Total Assets                                                                                                                                                           |                                                                                                                                                                                                                                                                            | $ | 2,054,241     |         |              | $ | 2,059,468 |        
|                                                                                                                                                                       |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |        
|LIABILITIES                                                                                                                                                            |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |        
|Current Liabilities:                                                                                                                                                   |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |        
|                                                                                                                                                                       | Short-Term Debt                                                                                                                                                                                                                                                            |   | $             | 57,695  |              |   | $         | 19,958  | 
|                                                                                                                                                                       | Accounts Payable and Other Accrued Liabilities                                                                                                                                                                                                                             |   |               | 219,564 |              |   |           | 218,764 | 
|                                                                                                                                                                       |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |        
|Total Current Liabilities                                                                                                                                              |                                                                                                                                                                                                                                                                            |   | 277,259       |         |              |   | 238,722   |        
|Long-Term Debt, Less Current Portion                                                                                                                                   |                                                                                                                                                                                                                                                                            |   | 1,474,644     |         |              |   | 1,523,082 |        
|Other Noncurrent Liabilities                                                                                                                                           |                                                                                                                                                                                                                                                                            |   | 71,441        |         |              |   | 73,738    |        
|                                                                                                                                                                       |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |        
|Total Liabilities                                                                                                                                                      |                                                                                                                                                                                                                                                                            |   | 1,823,344     |         |              |   | 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 September 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 September 30, 2002 and December 31, 2001, respectively;
7,000,000 shares of non-redeemable Common Stock issued and outstanding
at September 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 September 30, 2002 and at December 31, 2001                                                                                                     |   |               | 5       |              |   |           | 5       | 
|Capital in Excess of Par Value                                                                                                                                         |                                                                                                                                                                                                                                                                            |   | 748,753       |         |              |   | 748,753   |        
|Accumulated Deficit                                                                                                                                                    |                                                                                                                                                                                                                                                                            |   | (494,622      | )       |              |   | (493,771  | )      
|Accumulated Derivative Instruments Loss                                                                                                                                |                                                                                                                                                                                                                                                                            |   | (3,434        | )       |              |   | (4,570    | )      
|Cumulative Currency Translation Adjustment                                                                                                                             |                                                                                                                                                                                                                                                                            |   | (27,516       | )       |              |   | (34,622   | )      
|                                                                                                                                                                       |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |        
|Total Shareholders Equity                                                                                                                                             |                                                                                                                                                                                                                                                                            |   | 223,256       |         |              |   | 215,865   |        
|                                                                                                                                                                       |                                                                                                                                                                                                                                                                            |   |               |         |              |   |           |        
|Total Liabilities and Shareholders Equity                                                                                                                             |                                                                                                                                                                                                                                                                            | $ | 2,054,241     |         |              | $ | 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 |        | Nine Months Ended
|                                                                                                  |                                          |   |                    |        |                  
|                                                                                                  |                                          |   | Sept. 30,          |        | Sept. 30,         |   | Sept. 30, |        | Sept. 30,
|                                                                                                  |                                          |   | 2002               |        | 2001              |   | 2002      |        | 2001     
|                                                                                                  |                                          |   |                    |        |                   |   |           |        |          
|Net Sales                                                                                         |                                          | $ | 339,934            |        |                   | $ | 321,682   |        |           | $ | 988,092 |       |  | $ | 951,155 |       
|Cost of Sales                                                                                     |                                          |   | 252,540            |        |                   |   | 247,512   |        |           |   | 763,104 |       |  |   | 753,094 |       
|Selling, General and Administrative                                                               |                                          |   | 31,948             |        |                   |   | 30,303    |        |           |   | 93,211  |       |  |   | 91,056  |       
|Research, Development and Engineering                                                             |                                          |   | 1,266              |        |                   |   | 1,248     |        |           |   | 3,727   |       |  |   | 3,583   |       
|Other Expense, Net                                                                                |                                          |   | 523                |        |                   |   | 2,503     |        |           |   | 2,061   |       |  |   | 15,571  |       
|                                                                                                  |                                          |   |                    |        |                   |   |           |        |           |   |         |       |  |   |         |       
|Income from Operations                                                                            |                                          |   | 53,657             |        |                   |   | 40,116    |        |           |   | 125,989 |       |  |   | 87,851  |       
|Interest Income                                                                                   |                                          |   | 148                |        |                   |   | 151       |        |           |   | 1,216   |       |  |   | 707     |       
|Interest Expense                                                                                  |                                          |   | 35,081             |        |                   |   | 39,378    |        |           |   | 112,510 |       |  |   | 119,581 |       
|                                                                                                  |                                          |   |                    |        |                   |   |           |        |           |   |         |       |  |   |         |       
|Income (Loss) before Income Taxes                                                                 |                                          |   | 18,724             |        |                   |   | 889       |        |           |   | 14,695  |       |  |   | (31,023 | )     
|Income Tax Expense                                                                                |                                          |   | 2,175              |        |                   |   | 2,717     |        |           |   | 4,037   |       |  |   | 5,142   |       
|                                                                                                  |                                          |   |                    |        |                   |   |           |        |           |   |         |       |  |   |         |       
|Income (Loss) before Extraordinary Item and
Cumulative Effect of a Change in Accounting Principle |                                          |   | 16,549             |        |                   |   | (1,828    | )      |           |   | 10,658  |       |  |   | (36,165 | )     
|Extraordinary Loss on Early Extinguishment of Debt,
Net of Tax of $0                              |                                          |   |                   |        |                   |   | (5,954    | )      |           |   | (11,509 | )     |  |   | (8,724  | )     
|                                                                                                  |                                          |   |                    |        |                   |   |           |        |           |   |         |       |  |   |         |       
|Income (Loss) before Cumulative Effect of a Change in
Accounting Principle                        |                                          |   | 16,549             |        |                   |   | (7,782    | )      |           |   | (851    | )     |  |   | (44,889 | )     
|Cumulative Effect of a Change in Accounting Principle
Net of Tax of $0                            |                                          |   |                   |        |                   |   |          |        |           |   |        |       |  |   | (499    | )     
|                                                                                                  |                                          |   |                    |        |                   |   |           |        |           |   |         |       |  |   |         |       
|Net Income (Loss)                                                                                 |                                          |   | 16,549             |        |                   |   | (7,782    | )      |           |   | (851    | )     |  |   | (45,388 | )     
|                                                                                                  |                                          |   |                    |        |                   |   |           |        |           |   |         |       |  |   |         |       
|Other Comprehensive Income (Loss), Net of Tax:                                                    |                                          |   |                    |        |                   |   |           |        |           |   |         |       |  |   |         |       
|                                                                                                  | Derivative Instruments Gain (Loss)       |   |                    | 598    |                   |   |           | (3,657 | )         |   |         | 1,136 |  |   |         | (6,104 | )
|                                                                                                  | Foreign Currency Translation Adjustments |   |                    | (3,005 | )                 |   |           | 3,535  |           |   |         | 7,106 |  |   |         | (3,697 | )
|                                                                                                  |                                          |   |                    |        |                   |   |           |        |           |   |         |       |  |   |         |       
|Comprehensive Income (Loss)                                                                       |                                          | $ | 14,142             |        |                   | $ | (7,904    | )      |           | $ | 7,391   |       |  | $ | (55,189 | )     
|                                                                                                  |                                          |   |                    |        |                   |   |           |        |           |   |         |       |  |   |         |       

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)


|                                                                           |                                                                                   |   |                   |         |                |   |          |         |  
|-------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | - | ----------------- | ------- | -------------- | - | -------- | ------- | -
|                                                                           |                                                                                   |   | Nine Months Ended
|                                                                           |                                                                                   |   |                  
|                                                                           |                                                                                   |   | Sept. 30, 2002    |         | Sept. 30, 2001
|                                                                           |                                                                                   |   |                   |         |               
|Cash Flows from Operating Activities:                                      |                                                                                   |   |                   |         |                |   |          |        
|Net (Loss)                                                                 |                                                                                   | $ | (851              | )       |                | $ | (45,388  | )      
|Noncash Items Included in Net (Loss):                                      |                                                                                   |   |                   |         |                |   |          |        
|                                                                           | Depreciation and Amortization                                                     |   |                   | 97,731  |                |   |          | 104,319 |  
|                                                                           | Cumulative Effect of a Change in Accounting Principle                             |   |                   |        |                |   |          | 499     |  
|                                                                           | Extraordinary Loss on Early Extinguishment of Debt, Net of Tax of $0              |   |                   | 2,967   |                |   |          | 8,724   |  
|                                                                           | Deferred Income Taxes                                                             |   |                   | 650     |                |   |          | (1,574  | )
|                                                                           | Pension, Postemployment and Postretirement Benefits
Expense, Net of Contributions |   |                   | 7,011   |                |   |          | 4,047   |  
|                                                                           | Equity in Net Earnings of Affiliates, Net of Dividends                            |   |                   |        |                |   |          | 710     |  
|                                                                           | Amortization of Deferred Debt Issuance Costs                                      |   |                   | 5,090   |                |   |          | 5,771   |  
|                                                                           | LIFO Valuation Adjustments                                                        |   |                   | (11,844 | )              |   |          | (314    | )
|                                                                           | Other                                                                             |   |                   | (467    | )              |   |          | 4,819   |  
|Changes in Operating Assets & Liabilities, Net of Subsidiary Consolidated: |                                                                                   |   |                   |         |                |   |          |        
|                                                                           | Receivables                                                                       |   |                   | (19,471 | )              |   |          | (10,732 | )
|                                                                           | Inventories                                                                       |   |                   | (6,752  | )              |   |          | (11,590 | )
|                                                                           | Prepaid Expenses                                                                  |   |                   | (9,887  | )              |   |          | 501     |  
|                                                                           | Accounts Payable and Other Accrued Liabilities                                    |   |                   | (10,088 | )              |   |          | 3,829   |  
|                                                                           | Other Noncurrent Liabilities                                                      |   |                   | (1,693  | )              |   |          | (3,514  | )
|                                                                           |                                                                                   |   |                   |         |                |   |          |        
|Net Cash Provided by Operating Activities                                  |                                                                                   |   | 52,396            |         |                |   | 60,107   |        
|                                                                           |                                                                                   |   |                   |         |                |   |          |        
|Cash Flows from Investing Activities:                                      |                                                                                   |   |                   |         |                |   |          |        
|Purchases of Property, Plant and Equipment                                 |                                                                                   |   | (34,877           | )       |                |   | (38,574  | )      
|Cash Acquired of Subsidiary Consolidated                                   |                                                                                   |   |                  |         |                |   | 17,985   |        
|Increase in Other Assets                                                   |                                                                                   |   | (4,278            | )       |                |   | (2,391   | )      
|                                                                           |                                                                                   |   |                   |         |                |   |          |        
|Net Cash Used in Investing Activities                                      |                                                                                   |   | (39,155           | )       |                |   | (22,980  | )      
|                                                                           |                                                                                   |   |                   |         |                |   |          |        
|Cash Flows from Financing Activities:                                      |                                                                                   |   |                   |         |                |   |          |        
|Borrowings under Revolving Credit Facilities                               |                                                                                   |   | 217,100           |         |                |   | 357,060  |        
|Payments on Revolving Credit Facilities                                    |                                                                                   |   | (217,125          | )       |                |   | (469,686 | )      
|Proceeds from Issuance of Debt                                             |                                                                                   |   | 250,000           |         |                |   | 592,500  |        
|Increase in Debt Issuance Costs                                            |                                                                                   |   | (3,726            | )       |                |   | (18,399  | )      
|Premium Paid on Early Extinguishment of Debt                               |                                                                                   |   | (8,542            | )       |                |   |         |        
|Payments on Debt                                                           |                                                                                   |   | (252,404          | )       |                |   | (488,294 | )      
|Repurchases of Redeemable Common Stock                                     |                                                                                   |   | (420              | )       |                |   | (360     | )      
|Issuance of Redeemable Common Stock                                        |                                                                                   |   |                  |         |                |   | 300      |        
|                                                                           |                                                                                   |   |                   |         |                |   |          |        
|Net Cash Used in Financing Activities                                      |                                                                                   |   | (15,117           | )       |                |   | (26,879  | )      
|Effect of Exchange Rate Changes on Cash                                    |                                                                                   |   | 548               |         |                |   | (2,963   | )      
|                                                                           |                                                                                   |   |                   |         |                |   |          |        
|Net (Decrease) Increase in Cash and Equivalents                            |                                                                                   |   | (1,328            | )       |                |   | 7,285    |        
|Cash and Equivalents at Beginning of Period                                |                                                                                   |   | 27,983            |         |                |   | 21,586   |        
|                                                                           |                                                                                   |   |                   |         |                |   |          |        
|Cash and Equivalents at End of Period                                      |                                                                                   | $ | 26,655            |         |                | $ | 28,871   |        
|                                                                           |                                                                                   |   |                   |         |                |   |          |        

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
(RIC).

On March 27, 1996, Riverwood Holding, through its wholly-owned subsidiaries,
acquired all of the outstanding shares of common stock of RIC. On such date,
CDRO Acquisition Corporation was merged into RIC. RIC, as the surviving
corporation in the Merger, became a wholly-owned subsidiary of RIC Holding. On
March 28, 1996, RIC 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 RIC 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 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.

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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 to the current presentation format.

NOTE 3  INVENTORIES

The major classes of inventories were as follows:

|                          |  |                    |         |                   |  |   |         | 
|------------------------- |  | ------------------ | ------- | ----------------- |  | - | ------- | 
|(In thousands of dollars) |  | September 30, 2002 |         | December 31, 2001
|                          |  |                    |         |                  
|Finished goods            |  | $                  | 85,291  |                   |  | $ | 87,728  | 
|Work-in-process           |  |                    | 15,277  |                   |  |   | 12,194  | 
|Raw materials             |  |                    | 61,896  |                   |  |   | 45,656  | 
|Supplies                  |  |                    | 37,257  |                   |  |   | 35,727  | 
|                          |  |                    |         |                   |  |   |         | 
|Total                     |  | $                  | 199,721 |                   |  | $ | 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.

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 September
30, 2002, the Company estimates that it has spent approximately one-third of
that amount for such compliance.

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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% 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 has 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.

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.

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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 |         | Nine Months Ended
|                            |  |                    |         |                  
|                            |  | Sept. 30,          |         | Sept. 30,         |  | Sept. 30, |         | Sept. 30,
|(In thousands of dollars)   |  | 2002               |         | 2001              |  | 2002      |         | 2001     
|                            |  |                    |         |                   |  |           |         |          
|NET SALES:                  |  |                    |         |                   |  |           |         |           |  |   |         |   |  |   |         |  
|Coated Board                |  | $                  | 318,310 |                   |  | $         | 300,861 |           |  | $ | 928,635 |   |  | $ | 879,451 |  
|Containerboard              |  |                    | 21,624  |                   |  |           | 20,821  |           |  |   | 59,457  |   |  |   | 71,704  |  
|                            |  |                    |         |                   |  |           |         |           |  |   |         |   |  |   |         |  
|                            |  | $                  | 339,934 |                   |  | $         | 321,682 |           |  | $ | 988,092 |   |  | $ | 951,155 |  
|                            |  |                    |         |                   |  |           |         |           |  |   |         |   |  |   |         |  
|INCOME FROM OPERATIONS:     |  |                    |         |                   |  |           |         |           |  |   |         |   |  |   |         |  
|Coated Board                |  | $                  | 60,642  |                   |  | $         | 49,218  |           |  | $ | 156,954 |   |  | $ | 118,545 |  
|Containerboard              |  |                    | (980    | )                 |  |           | (3,970  | )         |  |   | (14,144 | ) |  |   | (10,471 | )
|Corporate And Eliminations  |  |                    | (6,005  | )                 |  |           | (5,132  | )         |  |   | (16,821 | ) |  |   | (20,223 | )
|                            |  |                    |         |                   |  |           |         |           |  |   |         |   |  |   |         |  
|                            |  | $                  | 53,657  |                   |  | $         | 40,116  |           |  | $ | 125,989 |   |  | $ | 87,851  |  
|                            |  |                    |         |                   |  |           |         |           |  |   |         |   |  |   |         |  
|Credit Agreement EBITDA(A): |  |                    |         |                   |  |           |         |           |  |   |         |   |  |   |         |  
|Coated Board                |  | $                  | 82,084  |                   |  | $         | 76,427  |           |  | $ | 234,515 |   |  | $ | 213,003 |  
|Containerboard              |  |                    | (1,332  | )                 |  |           | (1,147  | )         |  |   | (7,632  | ) |  |   | 139     |  
|Corporate and Eliminations  |  |                    | (3,577  | )                 |  |           | (2,181  | )         |  |   | (7,197  | ) |  |   | (8,737  | )
|                            |  |                    |         |                   |  |           |         |           |  |   |         |   |  |   |         |  
|                            |  | $                  | 77,175  |                   |  | $         | 73,099  |           |  | $ | 219,686 |   |  | $ | 204,405 |  
|                            |  |                    |         |                   |  |           |         |           |  |   |         |   |  |   |         |  

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

|                                   |                           |      |                    |        |                   |      |           |       |           |   |         |        |   |   |         |        | 
|---------------------------------- | ------------------------- | ---- | ------------------ | ------ | ----------------- | ---- | --------- | ----- | --------- | - | ------- | ------ | - | - | ------- | ------ | 
|                                   |                           |      | Three Months Ended |        | Nine Months Ended
|                                   |                           |      |                    |        |                  
|                                   |                           |      | Sept. 30,          |        | Sept. 30,         |      | Sept. 30, |       | Sept. 30,
|(In thousands of dollars)          |                           | 2002 |                    | 2001   |                   | 2002 |           | 2001 
|                                   |                           |      |                    |        |                   |      |           |      
|Income from Operations             |                           | $    | 53,657             |        |                   | $    | 40,116    |       |           | $ | 125,989 |        |   | $ | 87,851  |       
|Add: Depreciation and amortization |                           |      | 32,959             |        |                   |      | 31,978    |       |           |   | 97,731  |        |   |   | 104,319 |       
|                                   | Dividends                 |      |                    |       |                   |      |           |      |           |   |         |       |   |   |         | 710    | 
|                                   | Other non-cash charges(B) |      |                    | (9,441 | )                 |      |           | 1,005 |           |   |         | (4,034 | ) |   |         | 11,525 | 
|                                   |                           |      |                    |        |                   |      |           |       |           |   |         |        |   |   |         |       
|Credit Agreement EBITDA(A)         |                           | $    | 77,175             |        |                   | $    | 73,099    |       |           | $ | 219,686 |        |   | $ | 204,405 |       
|                                   |                           |      |                    |        |                   |      |           |       |           |   |         |        |   |   |         |       

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 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, post-retirement and post-employment 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 a change in accounting principle in the accompanying Condensed
Consolidated Statement of Operations and Comprehensive Income (Loss) for the
nine months ended September 30, 2001.

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The following is a summary of the Companys derivative instruments as of
September 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 Sheets at September 30, 2002
and December 31, 2001 and as Derivative Instruments (Loss) Gain in the accompanying Condensed
Consolidated Statement of Operations and Comprehensive Income (Loss) for the
nine months ended September 30, 2002 and in the Consolidated
Statement of Operations and Comprehensive (Loss) Income for the year ended December 31, 2001.

|                                      |  |   |        |  
|------------------------------------- |  | - | ------ | -
|(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          |  |   | 4,737  |  
|Current period decrease in fair value |  |   | (3,601 | )
|                                      |  |   |        |  
|Balance at September 30, 2002         |  | $ | (3,434 | )
|                                      |  |   |        |  

At September 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 September
30, 2002, is a balance of approximately $0.1 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 $3.4 million recorded in Accumulated Derivative Instruments Loss
at September 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 September 30, 2003 is approximately
$3.1 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
nine 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 September 30, 2002, the Company had interest rate swap
agreements with a notional amount of $235 million, which expire on various
dates through the year 2003, under which the Company will pay fixed rates of
2.96% to 4.75% and receive three-month LIBOR.

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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 September 30, 2002, the Company had entered into
contracts to hedge substantially all of its natural gas requirements for its
two U.S. mills through September 30, 2003. The contract price and fair value of
these natural gas contracts was approximately $19.7 million and $21.3 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.

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 nine months ended September 30, 2002. The following table shows Net
Income (Loss) for the first nine months of 2002 and adjusted Net (Loss) for the
first nine months of 2001 exclusive of goodwill amortization.

|                               |  |                    |        |                   |  |           |        |           |  |   |      |   |  |   |         |  
|------------------------------ |  | ------------------ | ------ | ----------------- |  | --------- | ------ | --------- |  | - | ---- | - |  | - | ------- | -
|                               |  | Three Months Ended |        | Nine Months Ended
|                               |  |                    |        |                  
|                               |  | Sept. 30,          |        | Sept. 30,         |  | Sept. 30, |        | Sept. 30,
|(In thousands of dollars)      |  | 2002               |        | 2001              |  | 2002      |        | 2001     
|                               |  |                    |        |                   |  |           |        |          
|Net Income (Loss)              |  | $                  | 16,549 |                   |  | $         | (7,782 | )         |  | $ | (851 | ) |  | $ | (45,388 | )
|Plus: Amortization of Goodwill |  |                    |       |                   |  |           | 1,935  |           |  |   |     |   |  |   | 5,805   |  
|                               |  |                    |        |                   |  |           |        |           |  |   |      |   |  |   |         |  
|Adjusted Net Income (Loss)     |  | $                  | 16,549 |                   |  | $         | (5,847 | )         |  | $ | (851 | ) |  | $ | (39,583 | )
|                               |  |                    |        |                   |  |           |        |           |  |   |      |   |  |   |         |  

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

|                                                                                                           |  |                    |        |                   |  |           |        |           |  |   |        |  |  |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | --------- | ------ | --------- |  | - | ------ |  |  | - | ------- | -
|                                                                                                           |  | Three Months Ended |        | Nine Months Ended
|                                                                                                           |  |                    |        |                  
|                                                                                                           |  | Sept. 30,          |        | Sept. 30,         |  | Sept. 30, |        | Sept. 30,
|(In thousands of dollars)                                                                                  |  | 2002               |        | 2001              |  | 2002      |        | 2001     
|                                                                                                           |  |                    |        |                   |  |           |        |          
|Income (Loss) before Extraordinary Item and
Cumulative Effect of a Change in Accounting
Principle          |  | $                  | 16,549 |                   |  | $         | (1,828 | )         |  | $ | 10,658 |  |  | $ | (36,165 | )
|Plus: Amortization of Goodwill                                                                             |  |                    |       |                   |  |           | 1,935  |           |  |   |       |  |  |   | 5,805   |  
|                                                                                                           |  |                    |        |                   |  |           |        |           |  |   |        |  |  |   |         |  
|Adjusted Income (Loss) before Extraordinary
Item and Cumulative Effect of a Change in Accounting Principle |  | $                  | 16,549 |                   |  | $         | 107    |           |  | $ | 10,658 |  |  | $ | (30,360 | )
|                                                                                                           |  |                    |        |                   |  |           |        |           |  |   |        |  |  |   |         |  

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 September 30, 2002 and December 31, 2001:

|                               |            |   |                          |         |              |   |              |        |  |   |        |         | 
|------------------------------ | ---------- | - | ------------------------ | ------- | ------------ | - | ------------ | ------ |  | - | ------ | ------- | 
|                               |            |   | As of September 30, 2002
|                               |            |   |                         
|                               |            |   | Gross Carrying           |         | Accumulated  |   | Net Carrying
|                               |            |   | Amount                   |         | Amortization |   | Amount      
|                               |            |   |                          |         |              |   |             
|Amortized intangible assets:   |            |   |                          |         |              |   |              |        |  |   |        |        
|                               | Patents    |   | $                        | 23,454  |              |   | $            | 9,102  |  |   | $      | 14,352  | 
|                               | Licenses   |   |                          | 3,598   |              |   |              | 1,154  |  |   |        | 2,444   | 
|                               | Trademarks |   |                          | 39,640  |              |   |              | 12,856 |  |   |        | 26,784  | 
|                               |            |   |                          |         |              |   |              |        |  |   |        |        
|                               |            | $ | 66,692                   |         |              | $ | 23,112       |        |  | $ | 43,580 |        
|                               |            |   |                          |         |              |   |              |        |  |   |        |        
|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 $2.8 million for the first nine months of 2002, and is expected
to be approximately $4 million annually for the next five fiscal years.

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In June 2001, the FASB issued SFAS No. 143 (SFAS No. 143), Accounting for
Asset Retirement Obligations, which is effective January 1, 2003. SFAS No. 143
addresses financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. The Company does not believe that the adoption of SFAS No.
143 will have a significant impact on its financial position and results of
operations.

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.

In April 2002, the FASB issued SFAS No. 145
(SFAS No. 145), Recission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections as of April 2002. This Statement
rescinds SFAS No. 4 (SFAS No. 4) , Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement,
SFAS No. 64, Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements. This Statement also rescinds
SFAS No. 44, Accounting for Intangible Assets of Motor
Carriers. This Statement amends SFAS No. 13,
Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease
modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 will be effective for
fiscal 2003, which begins January 1, 2003. Management expects
that the adoption of this statement will result in a reclassification
of expenses from Extraordinary Loss on Early Extinguishment of Debt to
Income from Operations of approximately $11.5 million and $8.7
million for the nine month period ended September 30, 2002 and
the year ended December 31, 2001, respectively, associated with
the rescission of SFAS No. 4.

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##### Table of Contents



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 RIC. On such date,
CDRO Acquisition Corporation was merged into RIC. RIC, as the surviving
corporation in the merger, became a wholly-owned subsidiary of RIC Holding.

On March 28, 1996, RIC 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 RIC 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% Senior Notes due
2006 (the 1996 Senior Notes) and $400 million aggregate principal amount of
10-7/8% 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% 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.

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##### Table of Contents



On June 21, 2001, the Company completed an offering of $250 million principal
amount of 10-5/8% Senior Notes due 2007 (the Initial 2001 Notes). The Initial
2001 Notes were sold at a price of 103% 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.

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. As of September 30, 2002, the Company has
deferred approximately $2 million of costs associated with this
transaction. There can be no assurance that the proposed initial
public offering will be completed.

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 and
non-beverage consumer products 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.

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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 |         | Nine Months Ended
|                                   |                            |      |                    |         |                  
|                                   |                            |      | Sept. 30,          |         | Sept. 30,         |      | Sept. 30, |         | Sept. 30,
|(In thousands of dollars)          |                            | 2002 |                    | 2001    |                   | 2002 |           | 2001   
|                                   |                            |      |                    |         |                   |      |           |        
|Net Sales:                         |                            |      |                    |         |                   |      |           |         |           |   |         |         |   |   |         |        
|                                   | Coated Board               |      | $                  | 318,310 |                   |      | $         | 300,861 |           |   | $       | 928,635 |   |   | $       | 879,451 |  
|                                   | Containerboard             |      |                    | 21,624  |                   |      |           | 20,821  |           |   |         | 59,457  |   |   |         | 71,704  |  
|                                   |                            |      |                    |         |                   |      |           |         |           |   |         |         |   |   |         |        
|                                   |                            | $    | 339,934            |         |                   | $    | 321,682   |         |           | $ | 988,092 |         |   | $ | 951,155 |        
|                                   |                            |      |                    |         |                   |      |           |         |           |   |         |         |   |   |         |        
|Income from Operations:            |                            |      |                    |         |                   |      |           |         |           |   |         |         |   |   |         |        
|                                   | Coated Board               |      | $                  | 60,642  |                   |      | $         | 49,218  |           |   | $       | 156,954 |   |   | $       | 118,545 |  
|                                   | Containerboard             |      |                    | (980    | )                 |      |           | (3,970  | )         |   |         | (14,144 | ) |   |         | (10,471 | )
|                                   | Corporate and Eliminations |      |                    | (6,005  | )                 |      |           | (5,132  | )         |   |         | (16,821 | ) |   |         | (20,223 | )
|                                   |                            |      |                    |         |                   |      |           |         |           |   |         |         |   |   |         |        
|                                   |                            | $    | 53,657             |         |                   | $    | 40,116    |         |           | $ | 125,989 |         |   | $ | 87,851  |        
|                                   |                            |      |                    |         |                   |      |           |         |           |   |         |         |   |   |         |        
|Credit Agreement EBITDA (A):       |                            |      |                    |         |                   |      |           |         |           |   |         |         |   |   |         |        
|                                   | Coated Board               |      | $                  | 82,084  |                   |      | $         | 76,427  |           |   | $       | 234,515 |   |   | $       | 213,003 |  
|                                   | Containerboard             |      |                    | (1,332  | )                 |      |           | (1,147  | )         |   |         | (7,632  | ) |   |         | 139     |  
|                                   | Corporate and Eliminations |      |                    | (3,577  | )                 |      |           | (2,181  | )         |   |         | (7,197  | ) |   |         | (8,737  | )
|                                   |                            |      |                    |         |                   |      |           |         |           |   |         |         |   |   |         |        
|Credit Agreement EBITDA (A)        |                            |      | 77,175             |         |                   |      | 73,099    |         |           |   | 219,686 |         |   |   | 204,405 |        
|Less: Certain non-cash charges (B) |                            |      | (2,276             | )       |                   |      | (804      | )       |           |   | (7,746  | )       |   |   | (5,111  | )      
|                                   |                            |      |                    |         |                   |      |           |         |           |   |         |         |   |   |         |        
|EBITDA, as adjusted (C)            |                            | $    | 74,899             |         |                   | $    | 72,295    |         |           | $ | 211,940 |         |   | $ | 199,294 |        
|                                   |                            |      |                    |         |                   |      |           |         |           |   |         |         |   |   |         |        

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.                                                                                                                                                                                                                                                                                                                         
|
| | (C) |  | 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 nine 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 does not expect to take any additional market related
downtime throughout the remainder of 2002, but that could change depending upon
market conditions. The downtime results from a number of factors, but
principally a weak containerboard market.

Energy, including natural gas, fuel oil and electricity, represents a
significant portion of the Companys manufacturing costs. During the first nine
months of 2002, the Companys financial results were not negatively affected by
energy costs when compared to the first nine 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
September 30, 2003, and will continue to evaluate its hedge position.

The Company was recently notified by Coca-Cola
Enterprises (CCE) that CCE will not renew its supply
contract with the Company. Under this contract, which expires on
March 31, 2003, the Company supplies to CCE beverage cartons
made from the Companys CUK Board, packaging machines and
related services. The Companys supply contracts with its
independent Coca-Cola bottling company customers are not subject to
CCEs non-renewal notification. CCEs action will not impact
the Companys 2002 results of operations. The impact on
the Companys 2003 results of operations will depend, in part, on
whether and the extent to which the Company supplies beverage cartons
to CCE during a phase-out period in 2003 after the current supply
contract expires, which the Company is discussing with CCE. The
Company is exploring opportunities to replace the volumes that it
will lose as a result of CCEs decision by seeking to increase
sales to existing and new customers and to develop new applications
for its CUK Board. The Company is currently evaluating the impact of
these developments and the recent increase in beverage market
competitiveness on its future pricing for its beverage packaging
products. The Company can provide no assurances that it will
be able to replace all or any portion of the volumes it had expected
to supply to CCE in 2003 and future periods, that it will reach
agreement with CCE to supply beverage cartons to CCE during a
phase-out period in 2003, or that it will be able to maintain current
pricing levels on its beverage packaging products. If the Company cannot replace such volumes,
the Company estimates that its volumes will be negatively impacted by
approximately 28,000 tons in 2003 and 40,000 tons in 2004 and
thereafter. In 2002, it is expected that the CCE business will
represent 5% or less of the Companys consolidated net sales and
EBITDA.

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, 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 $55 million to $65
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. Finally, the Company is continuing to
focus on reducing working capital and increasing liquidity.

Packaging machinery placements during the first nine months of 2002 increased
approximately 38% when compared to the first nine months of 2001. 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% 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.

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##### Table of Contents



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.

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##### Table of Contents



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.                                                                                                                                                                                                                                                                                                                                                                                                                                               
| 
| |  | 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.

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##### Table of Contents



RESULTS OF OPERATIONS

|                                              |                            |      |                    |         |                   |      |            |       |           |        |            |         |           |   |         |         |            |  |       |       |   |   |         |         |  
|--------------------------------------------- | -------------------------- | ---- | ------------------ | ------- | ----------------- | ---- | ---------- | ----- | --------- | ------ | ---------- | ------- | --------- | - | ------- | ------- | ---------- |  | ----- | ----- | - | - | ------- | ------- | -
|                                              |                            |      | Three Months Ended |         | Nine Months Ended
|                                              |                            |      |                    |         |                  
|                                              |                            |      |                    |         |                   |      | % Increase |       |           |        |            |         |           |   |         |         | % Increase |  |       |       |  
|                                              |                            |      |                    |         |                   |      | (Decrease) |       |           |        |            |         |           |   |         |         | (Decrease) |  |       |       |  
|                                              |                            |      | Sept. 30,          |         | From Prior        |      | Sept. 30,  |       | Sept. 30, |        | From Prior |         | Sept. 30,
|(In thousands of dollars)                     |                            | 2002 |                    | Period  |                   | 2001 |            | 2002  |           | Period |            | 2001   
|                                              |                            |      |                    |         |                   |      |            |       |           |        |            |        
|Net Sales (Segment Data):                     |                            |      |                    |         |                   |      |            |       |           |        |            |         |           |   |         |         |            |  |       |       |   |   |         |        
|                                              | Coated Board               |      | $                  | 318,310 |                   |      |            | 5.8   | %         |        | $          | 300,861 |           |   | $       | 928,635 |            |  |       | 5.6   | % |   | $       | 879,451 |  
|                                              | Containerboard             |      |                    | 21,624  |                   |      |            | 3.9   |           |        |            | 20,821  |           |   |         | 59,457  |            |  |       | (17.1 | ) |   |         | 71,704  |  
|                                              |                            |      |                    |         |                   |      |            |       |           |        |            |         |           |   |         |         |            |  |       |       |   |   |         |        
|Net Sales                                     |                            |      | 339,934            |         |                   |      | 5.7        |       |           |        | 321,682    |         |           |   | 988,092 |         |            |  | 3.9   |       |   |   | 951,155 |        
|Cost of Sales                                 |                            |      | 252,540            |         |                   |      | 2.0        |       |           |        | 247,512    |         |           |   | 763,104 |         |            |  | 1.3   |       |   |   | 753,094 |        
|                                              |                            |      |                    |         |                   |      |            |       |           |        |            |         |           |   |         |         |            |  |       |       |   |   |         |        
|Gross Profit                                  |                            |      | 87,394             |         |                   |      | 17.8       |       |           |        | 74,170     |         |           |   | 224,988 |         |            |  | 13.6  |       |   |   | 198,061 |        
|Selling, General and Administrative           |                            |      | 31,948             |         |                   |      | 5.4        |       |           |        | 30,303     |         |           |   | 93,211  |         |            |  | 2.4   |       |   |   | 91,056  |        
|Research, Development and
Engineering         |                            |      | 1,266              |         |                   |      | 1.4        |       |           |        | 1,248      |         |           |   | 3,727   |         |            |  | 4.0   |       |   |   | 3,583   |        
|Other Expense, Net                            |                            |      | 523                |         |                   |      | (79.1      | )     |           |        | 2,503      |         |           |   | 2,061   |         |            |  | (86.8 | )     |   |   | 15,571  |        
|                                              |                            |      |                    |         |                   |      |            |       |           |        |            |         |           |   |         |         |            |  |       |       |   |   |         |        
|Income from Operations                        |                            | $    | 53,657             |         |                   |      | 33.8       |       |           | $      | 40,116     |         |           | $ | 125,989 |         |            |  | 43.4  |       |   | $ | 87,851  |        
|                                              |                            |      |                    |         |                   |      |            |       |           |        |            |         |           |   |         |         |            |  |       |       |   |   |         |        
|Income (Loss) from Operations
(Segment Data): |                            |      |                    |         |                   |      |            |       |           |        |            |         |           |   |         |         |            |  |       |       |   |   |         |        
|                                              | Coated Board               |      | $                  | 60,642  |                   |      |            | 23.2  | %         |        | $          | 49,218  |           |   | $       | 156,954 |            |  |       | 32.4  | % |   | $       | 118,545 |  
|                                              | Containerboard             |      |                    | (980    | )                 |      |            | 75.3  |           |        |            | (3,970  | )         |   |         | (14,144 | )          |  |       | (35.1 | ) |   |         | (10,471 | )
|                                              | Corporate and Eliminations |      |                    | (6,005  | )                 |      |            | (17.0 | )         |        |            | (5,132  | )         |   |         | (16,821 | )          |  |       | 16.8  |   |   |         | (20,223 | )
|                                              |                            |      |                    |         |                   |      |            |       |           |        |            |         |           |   |         |         |            |  |       |       |   |   |         |        
|Income from Operations                        |                            | $    | 53,657             |         |                   |      | 33.8       |       |           | $      | 40,116     |         |           | $ | 125,989 |         |            |  | 43.4  |       |   | $ | 87,851  |        
|                                              |                            |      |                    |         |                   |      |            |       |           |        |            |         |           |   |         |         |            |  |       |       |   |   |         |        
|Other Financial Data:                         |                            |      |                    |         |                   |      |            |       |           |        |            |         |           |   |         |         |            |  |       |       |   |   |         |        
|Net Sales:                                    |                            |      |                    |         |                   |      |            |       |           |        |            |         |           |   |         |         |            |  |       |       |   |   |         |        
|                                              | Carrierboard               |      | $                  | 229,812 |                   |      |            | 4.2   | %         |        | $          | 220,565 |           |   | $       | 668,686 |            |  |       | 6.1   | % |   | $       | 630,153 |  
|                                              | Cartonboard                |      |                    | 59,808  |                   |      |            | 9.0   |           |        |            | 54,847  |           |   |         | 175,870 |            |  |       | 5.1   |   |   |         | 167,268 |  
|                                              | White lined chip board     |      |                    | 21,677  |                   |      |            | 28.2  |           |        |            | 16,911  |           |   |         | 59,920  |            |  |       | 9.4   |   |   |         | 54,790  |  
|                                              | Containerboard             |      |                    | 21,624  |                   |      |            | 3.9   |           |        |            | 20,821  |           |   |         | 59,457  |            |  |       | (17.1 | ) |   |         | 71,704  |  
|                                              | Other (A)                  |      |                    | 7,013   |                   |      |            | (17.9 | )         |        |            | 8,538   |           |   |         | 24,159  |            |  |       | (11.3 | ) |   |         | 27,240  |  

Note:

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

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 of White Lined Chip board represent
sales to customers of WLC produced at the Swedish 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 nine months ended
September 30, 2002 and 2001 were as follows:

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|                       |              |      |                    |        |                   |      |            |      |           |        |            |       |           |  |         |       |            |  |       |     |   |  |         |       | 
|---------------------- | ------------ | ---- | ------------------ | ------ | ----------------- | ---- | ---------- | ---- | --------- | ------ | ---------- | ----- | --------- |  | ------- | ----- | ---------- |  | ----- | --- | - |  | ------- | ----- | 
|                       |              |      | Three Months Ended |        | Nine Months Ended
|                       |              |      |                    |        |                  
|                       |              |      |                    |        |                   |      | % Increase |      |           |        |            |       |           |  |         |       | % Increase |  |       |     |  
|                       |              |      |                    |        |                   |      | (Decrease) |      |           |        |            |       |           |  |         |       | (Decrease) |  |       |     |  
|                       |              |      | Sept. 30,          |        | From Prior        |      | Sept. 30,  |      | Sept. 30, |        | From Prior |       | Sept. 30,
|(In thousands of tons) |              | 2002 |                    | Period |                   | 2001 |            | 2002 |           | Period |            | 2001 
|                       |              |      |                    |        |                   |      |            |      |           |        |            |      
|Coated Board           |              |      |                    |        |                   |      |            |      |           |        |            |       |           |  |         |       |            |  |       |     |   |  |         |      
|                       | Carrierboard |      |                    | 177.1  |                   |      |            | 2.1  | %         |        |            | 173.4 |           |  |         | 518.9 |            |  |       | 7.6 | % |  |         | 482.3 | 
|                       | Cartonboard  |      |                    | 93.7   |                   |      |            | 5.3  |           |        |            | 89.0  |           |  |         | 280.6 |            |  |       | 5.6 |   |  |         | 265.6 | 
|White Lined Chip Board |              |      | 41.3               |        |                   |      | 14.1       |      |           |        | 36.2       |       |           |  | 119.4   |       |            |  | 5.3   |     |   |  | 113.4   |      
|Containerboard         |              |      | 60.1               |        |                   |      | 7.3        |      |           |        | 56.0       |       |           |  | 173.1   |       |            |  | (10.1 | )   |   |  | 192.6   |      
|Other                  |              |      | 5.7                |        |                   |      | 7.5        |      |           |        | 5.3        |       |           |  | 17.1    |       |            |  | (7.6  | )   |   |  | 18.5    |      
|                       |              |      |                    |        |                   |      |            |      |           |        |            |       |           |  |         |       |            |  |       |     |   |  |         |      
|                       |              |      | 377.9              |        |                   |      | 5.0        |      |           |        | 359.9      |       |           |  | 1,109.1 |       |            |  | 3.4   |     |   |  | 1,072.4 |      
|                       |              |      |                    |        |                   |      |            |      |           |        |            |       |           |  |         |       |            |  |       |     |   |  |         |      

THIRD QUARTER 2002 COMPARED WITH THIRD QUARTER 2001

Net Sales

As a result of the factors described below, the Companys Net Sales in the
third quarter of 2002 increased by $18.2 million, or 5.7%, to $339.9 million
from $321.7 million in the third quarter of 2001. Net Sales in the Coated Board
business segment increased by $17.4 million, or 5.8%, to $318.3 million in the
third quarter of 2002 from $300.9 million in the third 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
worldwide consumer products markets (driven principally by
international sales volumes) and the positive impact of foreign currency
exchange rates. Net Sales in the Containerboard business segment increased by
$0.8 million, or 3.9%, to $21.6 million in the third quarter of 2002 from $20.8
million in the third quarter of 2001, due primarily to higher medium volumes
somewhat offset by lower linerboard volumes resulting from the continued shift
from linerboard production to value-added coated board production and lower
containerboard pricing.

Gross Profit

As a result of the factors discussed below, the Companys Gross Profit for the
third quarter of 2002 increased by $13.2 million, or 17.8%, to $87.4 million
from $74.2 million in the third quarter of 2001. The Companys gross profit
margin increased to 25.7% in the third quarter of 2002 from 23.1% in the third
quarter of 2001. Gross Profit in the Coated Board business segment increased by
$10.2 million, or 13.2%, to $87.1 million in the third quarter of 2002 from
$76.9 million in the third quarter of 2001, while its gross profit margin
increased to 27.4% in the third quarter of 2002 from 25.6% in the third quarter
of 2001. The increase in Coated Board Gross Profit was due primarily to
non-cash last-in, first-out ("LIFO") inventory valuation adjustments, 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 increased by $3.5
million to a profit of $0.3 million in the third quarter of 2002 from a loss of
$3.2 million in the third quarter of 2001, while its gross profit margin
increased to 1.5% in the third quarter of 2002 from (15.2)% in the third
quarter of 2001. The increase in Containerboard Gross Profit resulted
principally from non-cash LIFO inventory valuation adjustments and higher
Net Sales somewhat offset by lower containerboard pricing.

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Selling, General and Administrative

Selling, General and Administrative expenses increased by $1.6 million, or
5.4%, to $31.9 million in the third quarter of 2002 from $30.3 million in the
third quarter of 2001, due primarily to higher incentive expenses and certain
non-recurring charges recorded in the third quarter of 2002 somewhat offset by
lower warehousing and rent expenses. As a percentage of Net Sales, Selling,
General and Administrative expenses remained constant at 9.4% for the third
quarter of both 2001 and 2002.

Research, Development and Engineering

Research, Development and Engineering expenses remained constant at $1.2
million in the third quarter of 2002 and 2001.

Other Expense, Net

Other Expense, Net, was $0.5 million in the third quarter of 2002 as compared
to $2.5 million in the third 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 third quarter of 2002 increased by $13.6 million, or 33.8%,
to $53.7 million from $40.1 million in the third quarter of 2001, while the
Companys operating margin increased to 15.8% in the third quarter of 2002 from
12.5% in the third quarter of 2001. Income from Operations in the Coated Board
business segment increased by $11.4 million, or 23.2%, to $60.6 million in the
third quarter of 2002 from $49.2 million in the third quarter of 2001, while
the operating margin increased to 19.1% in the third quarter of 2002 from 16.4%
in the third quarter of 2001, primarily as a result of the factors described
above. Income from Operations in the Containerboard business segment increased
by $3.0 million, or 75.3%, to a loss of $1.0 million in the third quarter of
2002 from a loss of $4.0 million in the third quarter of 2001, while the
operating margin increased to (4.5)% in the third quarter of 2002 from (19.1)%
in the third 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 and the Japanese Yen had a modest impact on
Net Sales, Gross Profit, Income from Operations, and operating expenses during
the third quarter of 2002.

Income Tax Expense

During the third quarter of 2002, the Company
recognized an income tax expense of $2.2 million on Income (Loss)
before Income Taxes of $18.7 million. During the third quarter of
2001, the Company recognized an income tax expense of $2.7 million on
Income (Loss) before Income Taxes of $0.9 million. Income Tax Expense
on income earned in the United States and some foreign countries for
the third quarter of both 2001 and 2002 was fully offset by a
reduction to valuation allowances recorded for those countries.
Income Tax Expense for the third quarter of 2001 and 2002 primarily
represents Income Tax Expense on income earned in other foreign
countries where no valuation allowance is recorded. Since income
earned in those foreign countries was lower for the third quarter of
2002 in comparison to the third quarter of 2001, Income Tax Expense
was lower for the same period.

FIRST NINE MONTHS 2002 COMPARED WITH FIRST NINE MONTHS 2001

Net Sales

As a result of the factors described below, the Companys Net Sales in the
first nine months of 2002 increased by $36.9 million, or 3.9%, to $988.1
million from $951.2 million in the first nine months of 2001. Net Sales in the
Coated Board business segment increased by $49.1 million, or 5.6%, to $928.6
million in the first nine months of 2002 from $879.5 million in the first nine
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 worldwide consumer products markets and international
beverage markets. Net Sales in the Containerboard business segment decreased by
$12.2 million, or 17.1%, to $59.5 million in the first nine months of 2002 from
$71.7 million in the first nine months of 2001, due to lower linerboard volumes
resulting from the continued shift from linerboard production to value-added
coated board production and lower containerboard pricing.

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Gross Profit

As a result of the factors discussed below, the Companys Gross Profit for the
first nine months of 2002 increased by $26.9 million, or 13.6%, to $225.0
million from $198.1 million in the first nine months of 2001. The Companys
gross profit margin increased to 22.8% in the first nine months of 2002 from
20.8% in the first nine months of 2001. Gross Profit in the Coated Board
business segment increased by $30.4 million, or 14.8%, to $235.4 million in the
first nine months of 2002 from $205.0 million in the first nine months of 2001,
while its gross profit margin increased to 25.3% in the first nine months of
2002 from 23.3% in the first nine 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, non-cash LIFO inventory valuation adjustments, and lower depreciation expense.
Gross Profit in the Containerboard business segment decreased by $2.4 million,
or 29.9%, to a loss of $10.4 million in the first nine months of 2002 from a
loss of $8.0 million in the first nine months of 2001, while its gross profit
margin decreased to (17.5)% in the first nine months of 2002 from (11.2)% in
the first nine months of 2001. The decrease in Containerboard Gross Profit
resulted principally from lower containerboard pricing somewhat
offset by non-cash LIFO inventory valuation adjustments.

Selling, General and Administrative

Selling, General and Administrative expenses increased by $2.1 million, or
2.4%, to $93.2 million in the first nine months of 2002 from $91.1 million in
the first nine months 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 decreased from 9.6% in the first nine months of 2001 to 9.4% in the
first nine months of 2002.

Research, Development and Engineering

Research, Development and Engineering expenses increased by $0.1 million, or
4.0%, to $3.7 million in the first nine months of 2002 from $3.6 million in the
first nine months of 2001.

Other Expense, Net

Other Expense, Net, was $2.1 million in the first nine months of 2002 as
compared to $15.6 million in the first nine months of 2001. This change was
principally due to the cessation of goodwill amortization and a non-cash
pension adjustment recorded in the first nine months of 2002 as well as
non-recurring operating charges that were recorded in the first nine 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 nine months of 2002 increased by $38.1 million, or
43.4%, to $126.0 million from $87.9 million in the first nine months of 2001,
while the Companys operating margin increased to 12.8% in the first nine
months of 2002 from 9.2% in the first nine months of 2001. Income from
Operations in the Coated Board business segment increased by $38.5 million, or
32.4%, to $157.0 million in the first nine months of 2002 from $118.5 million
in the first nine months of 2001, while the operating margin increased to 16.9%
in the first nine months of 2002 from 13.5% in the first nine months of 2001,
primarily as a result of the factors described above. Income from Operations in
the Containerboard business segment decreased by $3.6 million, or 35.1%, to a
loss of $14.1 million in the first nine months of 2002 from a loss of $10.5
million in the first nine months of 2001, while the operating margin decreased
to (23.8)% in the first nine months of 2002 from (14.6)% in the first nine
months of 2001, primarily as a result of the factors described above.

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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 first nine
months of 2002. However, the impact was somewhat offset by the strengthening of
the U.S. dollar against the Japanese Yen.

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 $1.2 million in the first nine
months of 2002 from $0.7 million in the first nine 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 indenture governing the 1996 Senior Notes.

Interest Expense

Interest Expense decreased by $7.1 million to $112.5 million in the first nine
months of 2002 from $119.6 million in the first nine months of 2001 due
primarily to lower average interest rates as a result of market interest rates as
well as the second quarter 2002 refinancing, somewhat offset by the additional
interest expense incurred on the 1996 Senior Notes during the 30-day call
notice period required under such indenture.

Income Tax Expense

During the first nine months of 2002, the Company recognized an Income Tax
Expense of $4.0 million on Income (Loss) before Income Taxes of $14.7 million.
During the first nine months of 2001, the Company recognized an Income Tax
Expense of $5.1 million on Income (Loss) before Income Taxes of $(31.0)
million. Income Tax Expense on income earned in the United States and
some foreign countries for the first nine months of 2002 differed
from the statutory federal income tax rate due to a reduction to
valuation allowances previously established on net operating loss
carryforward tax assets recorded for those countries. For the first
nine months of 2001, Income Tax Expense 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. Income Tax Expense for the
first nine months of 2001 and 2002 primarily represents Income Tax
Expense on income earned in other foreign countries where no
valuation allowance is recorded. Since income earned in those foreign
countries was lower for the first nine months of 2002 in comparison to
the first nine months of 2001, Income Tax Expense was lower for the
same period.

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 Facility to pay fees, costs and expenses related to
the refinancing transaction. 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 August 10, 2001, the Company entered into the Senior Secured Credit
Agreement. The proceeds of the initial borrowings under the Facilities of
approximately $386 million, including $51 million in revolving credit
borrowings, 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.

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On June 21, 2001, the Company completed an offering of $250 million principal
amount of the 2001 Notes, bearing interest at 10-5/8% annually. 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.

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 decreased by approximately $1.3 million in the first nine
months of 2002 primarily as a result of purchases of property, plant and
equipment ($34.9 million) and the net cash used in financing activities ($15.1
million), somewhat offset by the net cash provided by operating activities
($52.4 million). Depreciation and amortization during the first nine months of
2002 totaled approximately $97.7 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 September 30, 2002, the Company had outstanding approximately $1,516
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, $584 million outstanding under the Term Loan Facility and $28
million under the Revolving Facility, and other debt issues and facilities.

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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. There can be no assurance that the proposed initial
public offering will be completed.

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. The
consummation of each of the tender offers and related consent solicitations was
conditioned upon Riverwood Holdings consummation of the proposed initial
public offering. On September 6, 2002, Riverwood International terminated the
tender offers and the related consent solicitations as a result of equity
market conditions affecting the timing of the proposed initial public offering.

Debt Service

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 September 30, 2002 at an average
rate per annum of 4.53%. The 1997 Notes, the 2001 Notes and the 1996 Senior
Subordinated Notes bear interest at rates of 10-5/8%, 10-5/8% and 10-7/8%,
respectively. The loans under the Revolving Facility bore interest as of
September 30, 2002 at an average rate per annum of 4.73%.

Interest expense in 2002 is expected to be
approximately $145 million to $150 million,
including approximately $7 million of non-cash amortization of deferred debt
issuance costs. During the first nine months of 2002, cash paid for interest
was approximately $115.7 million.

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 September 30, 2002, the Company had interest rate swap agreements with
a notional amount of $235 million, under which the Company will pay fixed rates
of 2.96% to 4.75% and receive three-month LIBOR.

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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 September 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 nine months of 2002 was approximately $34.9
million, down 9.6% from $38.6 million in the first nine months of 2001. Capital
spending during the first nine months of 2002 related primarily to improving
the Companys process capabilities, manufacturing packaging machinery and
environmental cluster rules compliance. During the first nine months of 2002,
the Company had capital spending of approximately $27.3 million for improving
process capabilities, approximately $7.2 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 $55 million
and $65 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 September 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 September 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 
|(In thousands of dollars) |  | Commitments     |         | Outstanding  |  | Available (A)
|                          |  |                 |         |              |  |              
|Revolving Facility        |  | $               | 300,000 |              |  | $             | 28,300 |  |  | $ | 271,058 | 
|International Facilities  |  |                 | 16,011  |              |  |               | 7,133  |  |  |   | 8,878   | 
|                          |  |                 |         |              |  |               |        |  |  |   |         | 
|                          |  | $               | 316,011 |              |  | $             | 35,433 |  |  | $ | 279,936 | 
|                          |  |                 |         |              |  |               |        |  |  |   |         | 

Note:

(A)  In accordance with its debt agreements, the Companys availability under its Revolving
Facility as of September 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.

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.

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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 nine months ended September 30, 2001.

The following is a summary of the Companys derivative instruments as of
September 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 Sheets at September 30, 2002
and December 31, 2001 and as Derivative Instruments (Loss) Gain in the accompanying Condensed
Consolidated Statement of Operations and Comprehensive Income (Loss) for the
nine months ended September 30, 2002 and in the Consolidated
Statement of Operations and Comprehensive (Loss) Income for the year ended
December 31, 2001.

|                                      |  |   |        |  
|------------------------------------- |  | - | ------ | -
|(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          |  |   | 4,737  |  
|Current period decrease in fair value |  |   | (3,601 | )
|                                      |  |   |        |  
|Balance at September 30, 2002         |  | $ | (3,434 | )
|                                      |  |   |        |  

At September 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 September
30, 2002, is a balance of approximately $0.1 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 $3.4 million recorded in Accumulated Derivative Instruments Loss
at September 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 September 30, 2003 is approximately
$3.1 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
nine 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 September 30, 2002, the Company had interest rate swap
agreements with a notional amount of $235 million, which expire on various
dates through the year 2003, under which the Company will pay fixed rates of
2.96% to 4.75% 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 September 30, 2002, the Company had entered into
contracts to hedge substantially all of its natural gas requirements for its
two U.S. mills through September 30, 2003. The contract price and fair value of
these natural gas contracts was approximately $19.7 million and $21.3 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 September
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% 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 has 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.

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

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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 anticipated impact of CCE's non-renewal notification, (c) the improvements which the Companys long-term
initiatives, including, without limitation, its profit center reorganization
and global restructuring program, are designed to achieve, (d) the Companys
expectation that capital expenditures will range from $55 million to $65
million in 2002, and (e) 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 $145 million to $150 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 $55 million to $65
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 Form S-1, including with respect to the two 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.

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

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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 Nine Months Ended September 30, 2002. The following table shows Net
Income (Loss) for the first nine months of 2002 and adjusted Net Income (Loss)
for the first nine months of 2001 exclusive of goodwill amortization.

|                               |  |                    |        |                   |  |           |        |           |  |   |      |   |  |   |         |  
|------------------------------ |  | ------------------ | ------ | ----------------- |  | --------- | ------ | --------- |  | - | ---- | - |  | - | ------- | -
|                               |  | Three Months Ended |        | Nine Months Ended
|                               |  |                    |        |                  
|                               |  | Sept. 30,          |        | Sept. 30,         |  | Sept. 30, |        | Sept. 30,
|(In thousands of dollars)      |  | 2002               |        | 2001              |  | 2002      |        | 2001     
|                               |  |                    |        |                   |  |           |        |          
|Net Income (Loss)              |  | $                  | 16,549 |                   |  | $         | (7,782 | )         |  | $ | (851 | ) |  | $ | (45,388 | )
|Plus: Amortization of Goodwill |  |                    |       |                   |  |           | 1,935  |           |  |   |     |   |  |   | 5,805   |  
|                               |  |                    |        |                   |  |           |        |           |  |   |      |   |  |   |         |  
|Adjusted Net Income (Loss)     |  | $                  | 16,549 |                   |  | $         | (5,847 | )         |  | $ | (851 | ) |  | $ | (39,583 | )
|                               |  |                    |        |                   |  |           |        |           |  |   |      |   |  |   |         |  

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

|                                                                                                           |  |                    |        |                   |  |           |        |           |  |   |        |  |  |   |         |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | --------- | ------ | --------- |  | - | ------ |  |  | - | ------- | -
|                                                                                                           |  | Three Months Ended |        | Nine Months Ended
|                                                                                                           |  |                    |        |                  
|                                                                                                           |  | Sept. 30,          |        | Sept. 30,         |  | Sept. 30, |        | Sept. 30,
|(In thousands of dollars)                                                                                  |  | 2002               |        | 2001              |  | 2002      |        | 2001     
|                                                                                                           |  |                    |        |                   |  |           |        |          
|Income (Loss) before Extraordinary Item and
Cumulative Effect of a Change in Accounting
Principle          |  | $                  | 16,549 |                   |  | $         | (1,828 | )         |  | $ | 10,658 |  |  | $ | (36,165 | )
|Plus: Amortization of Goodwill                                                                             |  |                    |       |                   |  |           | 1,935  |           |  |   |       |  |  |   | 5,805   |  
|                                                                                                           |  |                    |        |                   |  |           |        |           |  |   |        |  |  |   |         |  
|Adjusted Income (Loss) before Extraordinary
Item and Cumulative Effect of a Change in Accounting Principle |  | $                  | 16,549 |                   |  | $         | 107    |           |  | $ | 10,658 |  |  | $ | (30,360 | )
|                                                                                                           |  |                    |        |                   |  |           |        |           |  |   |        |  |  |   |         |  

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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 September 30, 2002 and December 31, 2001:

|                               |            |   |                          |         |              |   |              |        |  |   |        |         | 
|------------------------------ | ---------- | - | ------------------------ | ------- | ------------ | - | ------------ | ------ |  | - | ------ | ------- | 
|                               |            |   | As of September 30, 2002
|                               |            |   |                         
|                               |            |   | Gross Carrying           |         | Accumulated  |   | Net Carrying
|                               |            |   | Amount                   |         | Amortization |   | Amount      
|                               |            |   |                          |         |              |   |             
|Amortized intangible assets:   |            |   |                          |         |              |   |              |        |  |   |        |        
|                               | Patents    |   | $                        | 23,454  |              |   | $            | 9,102  |  |   | $      | 14,352  | 
|                               | Licenses   |   |                          | 3,598   |              |   |              | 1,154  |  |   |        | 2,444   | 
|                               | Trademarks |   |                          | 39,640  |              |   |              | 12,856 |  |   |        | 26,784  | 
|                               |            |   |                          |         |              |   |              |        |  |   |        |        
|                               |            | $ | 66,692                   |         |              | $ | 23,112       |        |  | $ | 43,580 |        
|                               |            |   |                          |         |              |   |              |        |  |   |        |        
|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 $2.8 million for the first nine months of 2002, and is expected
to be approximately $4 million annually for the next five fiscal years.

In June 2001, the FASB issued SFAS No. 143 (SFAS No. 143), Accounting for
Asset Retirement Obligations, which is effective January 1, 2003. SFAS No. 143
addresses financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. The Company does not believe that the adoption of SFAS No.
143 will have a significant impact on its financial position and results of
operations.

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.

In April 2002, the FASB issued SFAS No. 145
(SFAS No. 145), Recission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections as of April 2002. This
Statement rescinds SFAS No. 4 (SFAS No. 4), Reporting Gains and Losses
from Extinguishment of Debt and an amendment of that
Statement, SFAS No. 64, Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements. This Statement also
rescinds SFAS No. 44, Accounting for Intangible Assets
of Motor Carriers. This Statement amends SFAS No. 13,
Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease
modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 will be effective for
fiscal 2003, which begins January 1, 2003. Management expects
that the adoption of this statement will result in a reclassification
of expenses from Extraordinary Loss on Early Extinguishment of Debt
to Income from Operations of approximately $11.5 million and $8.7
million for the nine month period ended September 30, 2002 and the
year ended December 31, 2001, respectively, associated with the
rescission of SFAS No 4.

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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 nine months of 2002. See
Note 6 in Notes to Condensed Consolidated Financial Statements.

ITEM 4.        CONTROLS AND PROCEDURES

(a)        Evaluation of disclosure controls and procedures.The Companys chief
executive officer and its chief financial officer, based on their evaluation of
the Companys disclosure controls and procedures (as defined in Exchange Act
Rule 15d-14(c)) as of a date within 90 days prior to the filing of this
quarterly report on Form 10-Q, have concluded that the Companys disclosure
controls and procedures are adequate and effective for the purposes set forth
in the definition thereof in Exchange Act Rule 15d-14(c).

(b)        Changes in internal controls. There were no significant changes in the
Companys internal controls or in other factors that could significantly affect
the Companys internal controls subsequent to the date of their most recent
evaluation.

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.

Not applicable

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 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.                                                                     
|   
|    |  | Filed on August 14, 2002 reporting certifications pursuant to the Securities
and Exchange Commissions Order of June 27, 2002 and certifications pursuant
to 18 United States Code Section 1350.
|   
|    |  | Filed on August 30, 2002 reporting management change.                                                                                                                                           
|   
|    |  | Filed on September 6, 2002 reporting termination of tender offers and
consent solicitations for senior subordinated notes and senior notes.                                                     

39



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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:
November 13, 2002 |  | By: |                         |     |  |                                                                   
|                        |  |     |                         | /s/ |  | Edward W. Stroetz Jr.                                             
|                        |  |    
|                        |  |     |                         |     |  | Edward W. Stroetz Jr.
Secretary                                   
|                       
|                       
|                        |  |     |                         |     |  |                                                                   
|Date: November 13, 2002 |  | By: |                         |     |  |                                                                   
|                        |  |     |                         | /s/ |  | Daniel J. Blount                                                  
|                        |  |    
|                        |  |     |                         |     |  | Daniel J. Blount
Senior Vice President and
Chief Financial Officer

40



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##### Table of Contents






CERTIFICATIONS

I, Stephen M. Humphrey, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Riverwood Holding,
Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)      designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
|
| | b)      evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                  
|
| | c)      presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)      all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
|
| | b)      any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

| |  |                                                          
| |  | ---------------------------------------------------------
| |  | Date: November 13, 2002                                  
| |  |                                                          
| |  | /s/ STEPHEN M. HUMPHREY                                  
| |  |                                                          
| |  | Stephen M. Humphrey
President and Chief Executive Officer

41



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##### Table of Contents



CERTIFICATIONS

I, Daniel J. Blount, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Riverwood Holding,
Inc.;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)      designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
|
| | b)      evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                  
|
| | c)      presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a)      all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
|
| | b)      any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

| |  |                                                                   
| |  | ------------------------------------------------------------------
| |  |                                                                   
| |  | Date: November 13, 2002                                           
| |  |                                                                   
| |  | /s/ DANIEL J. BLOUNT                                              
| |  |                                                                   
| |  | Daniel J. Blount
Senior Vice President and
Chief Financial Officer

42