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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




---

FORM 10-Q/A

(Amendment No. 1)


|           |  |                                                                                                                   
|---------- |  | ------------------------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                                   
|x          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR
    15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934                   
|           |  | For the quarterly period ended March 31,
    2002                                                                 
|           |  | OR                                                                                                                
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
|           |  | For the transition period
    from                to                                                              

Commission File Number 0-20646



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Caraustar Industries, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                            
|------------------------------------------------------------------ |  | -------------------------------------------
|North Carolina                                                     |  | 58-1388387                                 
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification Number)
|                                                                  
|3100 Joe Jerkins Blvd., Austell,
    Georgia                       |  | 30106                                      
|(Address of principal executive offices)                           |  | (Zip Code)                                 

(770) 948-3101

(Registrants telephone number, including
area code)


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for 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 x                     No o

Indicate the number of shares outstanding of each
of issuers classes of common stock, as of the latest
practicable date, May 3, 2002.

|                             |  |              
|---------------------------- |  | -------------
|Common Stock, $.10 par value |  | 27,856,107   
|                             |  |              
|(Class)                      |  | (Outstanding)



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TABLE OF CONTENTS



|                                                                                                                 |  |  |  |  |  |  |  | 
|---------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|CONDENSED CONSOLIDATED BALANCE SHEETS                                                                           
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                                 
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2002 (UNAUDITED)                                 
|CARAUSTAR INDUSTRIES, INC. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|CARAUSTAR INDUSTRIES, INC. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|SIGNATURES                                                                                                      
|CERTIFICATION                                                                                                   
|EXHIBIT INDEX                                                                                                   
|EX-11.01 COMPUTATION OF EARNINGS PER SHARE                                                                      
|EX-99.01 CERTIFICATION OF THE CEO                                                                               
|EX-99.02 CERTIFICATION OF THE CFO                                                                               



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002

CARAUSTAR INDUSTRIES, INC.

TABLE OF CONTENTS

|              |  |                                                                                                                                                                       |    |      |    | 
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|              |  |                                                                                                                                                                       |    | Page
|              |  |                                                                                                                                                                       |    |     
|PART I       |  | FINANCIAL INFORMATION                                                                                                                                                 |    |      |    | 
|              |  | Purpose of Amendment No. 1                                                                                                                                            |    |      | 3  | 
|             
|Item 1.       |  | Condensed Consolidated Financial Statements:                                                                                                                          |    |      |    | 
|              |  | Condensed Consolidated Balance Sheets as of
    March 31, 2002 and December 31, 2001                                                                                  |    |      | 4  | 
|              |  | Condensed Consolidated Statements of Operations
    for the three-month periods ended March 31, 2002 and
    March 31, 2001                                           |    |      | 5  | 
|              |  | Condensed Consolidated Statements of Cash Flows
    for the three-month periods ended March 31, 2002 and
    March 31, 2001                                           |    |      | 6  | 
|              |  | Notes to Condensed Consolidated Financial
    Statements                                                                                                              |    |      | 7  | 
|             
|Item 2.       |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations for the
    three-month periods ended March 31, 2002 and March 31,
    2001 |    |      | 26 | 
|             
|Item 3.       |  | Quantitative and Qualitative Disclosures About
    Market Risk                                                                                                        |    |      | 46 | 
|Signatures    |  |                                                                                                                                                                       | 47 |     
|Exhibit Index |  |                                                                                                                                                                       | 50 |     

2



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002

PART I


EXPLANATORY NOTE

The purpose of this amendment on Form 10-Q/A
(this Amendment) to our March 31, 2002
Form 10-Q for the three months ended March 31, 2002
(the Original March 31, 2002 Form 10-Q) is
to amend and restate the financial statements included in
Part I, Item I  Notes to Condensed
Consolidated Financial Statements, to include footnote 11,
Guarantor Condensed Consolidated Financial
Statements. This footnote discloses the Financial
Statements of our subsidiaries that guarantee our senior and
senior subordinated indebtedness. In order to preserve the
nature and character of the disclosures set forth in the
March 31, 2002 Form 10-Q as originally filed, except
as otherwise expressly stated herein, this amendment does not
speak to, or reflect, events occurring after the original filing
of our March 31, 2002 Form 10-Q on May 14, 2002.

The Items of our March 31, 2002
Form 10-Q which are amended and restated herein are:



| |    |                                                                                                                                                    
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Part I, Item I  Condensed
    Consolidated Financial Statements.                                                                                  
|
| | 2. | Part I, Item II 
    Managements Discussion and Analysis of Financial Condition
    and Results Operations.                                      
|
| | 3. | Part I, Item III 
    Quantitative and Qualitative Disclosure About Market Risk.                                                                  
|
| | 4. | Signatures.                                                                                                                                        
|
| | 5. | The certifications required by Section 302
    of the Sarbanes-Oxley Act of 2002 have been added.                                                  
|
| | 6. | The certifications required by Section 90G
    of the Sarbanes-Oxley Act of 2002 have been filed with the SEC
    as correspondence to this filing.

All information contained in the March 31,
2002 Form 10-Q, as amended hereby, shall be deemed updated
or superseded, as applicable, by the reports (including any
amendments to such reports) we have filed, and will file, with
the SEC subsequent to the original filing of our March 31,
2002 Form 10-Q. You should read this amendment together
with these subsequent reports, including our Annual Report on
Form 10-K for the year ended December 31, 2002, for
updated disclosures on matters discussed in our March 31,
2002 Form 10-Q.

3



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FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002

PART I, ITEM 1.


CARAUSTAR INDUSTRIES, INC. AND
SUBSIDIARIES




CONDENSED CONSOLIDATED BALANCE
SHEETS

(In thousands, except share data)


|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |          |         | 
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ------- | ------------ | ------- | - | ------- | -------- | ------- | 
|                                         |                                                                                                                                                                                       | March 31,                 |         | December 31,
|                                         |                                                                                                                                                                                       | 2002                      |         | 2001        
|                                         |                                                                                                                                                                                       |                           |         |             
|                                         |                                                                                                                                                                                       | (Unaudited)               |         |             
|ASSETS                                  
|CURRENT ASSETS:                          |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|                                         | Cash and cash equivalents                                                                                                                                                             |                           | $       | 67,450       |         |   | $       | 64,244   |        
|                                         | Receivables, net of allowances                                                                                                                                                        |                           |         | 102,710      |         |   |         | 86,297   |        
|                                         | Inventories                                                                                                                                                                           |                           |         | 97,970       |         |   |         | 101,823  |        
|                                         | Refundable income taxes                                                                                                                                                               |                           |         | 17,563       |         |   |         | 17,949   |        
|                                         | Prepaid pension                                                                                                                                                                       |                           |         | 0            |         |   |         | 10,036   |        
|                                         | Other current assets                                                                                                                                                                  |                           |         | 20,047       |         |   |         | 6,420    |        
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|                                         |                                                                                                                                                                                       | Total current assets      |         |              | 305,740 |   |         |          | 286,769 | 
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|PROPERTY, PLANT AND EQUIPMENT:           |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|                                         | Land                                                                                                                                                                                  |                           |         | 12,620       |         |   |         | 12,620   |        
|                                         | Buildings and improvements                                                                                                                                                            |                           |         | 137,438      |         |   |         | 135,727  |        
|                                         | Machinery and equipment                                                                                                                                                               |                           |         | 628,542      |         |   |         | 625,691  |        
|                                         | Furniture and fixtures                                                                                                                                                                |                           |         | 14,509       |         |   |         | 14,326   |        
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|                                         |                                                                                                                                                                                       |                           | 793,109 |              |         |   | 788,364 |         
|                                         | Less accumulated depreciation                                                                                                                                                         |                           |         | (352,157     | )       |   |         | (337,988 | )      
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|                                         | Property, plant and equipment, net                                                                                                                                                    |                           |         | 440,952      |         |   |         | 450,376  |        
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|GOODWILL, net                            |                                                                                                                                                                                       |                           | 146,465 |              |         |   | 146,465 |         
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|INVESTMENT IN UNCONSOLIDATED AFFILIATES  |                                                                                                                                                                                       |                           | 61,289  |              |         |   | 62,285  |         
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|OTHER ASSETS                             |                                                                                                                                                                                       |                           | 14,486  |              |         |   | 15,086  |         
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|                                         |                                                                                                                                                                                       | $                         | 968,932 |              |         | $ | 960,981 |         
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|LIABILITIES AND SHAREHOLDERS
    EQUITY
|CURRENT LIABILITIES:                     |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|                                         | Current maturities of debt                                                                                                                                                            |                           | $       | 48           |         |   | $       | 48       |        
|                                         | Accounts payable                                                                                                                                                                      |                           |         | 56,299       |         |   |         | 52,133   |        
|                                         | Accrued liabilities                                                                                                                                                                   |                           |         | 48,400       |         |   |         | 37,749   |        
|                                         | Dividends payable                                                                                                                                                                     |                           |         | 0            |         |   |         | 833      |        
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|                                         |                                                                                                                                                                                       | Total current liabilities |         |              | 104,747 |   |         |          | 90,763  | 
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|LONG-TERM DEBT, less current maturities  |                                                                                                                                                                                       |                           | 497,848 |              |         |   | 508,691 |         
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|DEFERRED INCOME TAXES                    |                                                                                                                                                                                       |                           | 66,915  |              |         |   | 66,760  |         
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|DEFERRED COMPENSATION                    |                                                                                                                                                                                       |                           | 1,666   |              |         |   | 1,741   |         
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|OTHER LIABILITIES                        |                                                                                                                                                                                       |                           | 16,816  |              |         |   | 12,512  |         
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|MINORITY INTEREST                        |                                                                                                                                                                                       |                           | 913     |              |         |   | 935     |         
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|COMMITMENTS AND CONTINGENCIES            |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|SHAREHOLDERS EQUITY:                    |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|                                         | Preferred stock, $.10 par value; 5,000,000 shares
    authorized, none issued                                                                                                         |                           |         | 0            |         |   |         | 0        |        
|                                         | Common stock, $.10 par value; 60,000,000 shares
    authorized, 27,856,839 and 27,853,897 shares issued and
    outstanding at March 31, 2002 and December 31, 2001,
    respectively |                           |         | 2,785        |         |   |         | 2,785    |        
|                                         | Additional paid-in capital                                                                                                                                                            |                           |         | 180,120      |         |   |         | 180,116  |        
|                                         | Retained earnings                                                                                                                                                                     |                           |         | 97,987       |         |   |         | 97,488   |        
|                                         | Accumulated other comprehensive loss                                                                                                                                                  |                           |         | (865         | )       |   |         | (810     | )      
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|                                         |                                                                                                                                                                                       |                           | 280,027 |              |         |   | 279,579 |         
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         
|                                         |                                                                                                                                                                                       | $                         | 968,932 |              |         | $ | 960,981 |         
|                                         |                                                                                                                                                                                       |                           |         |              |         |   |         |         

The accompanying notes are an integral part of
these financial statements.

4



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.


CARAUSTAR INDUSTRIES, INC. AND
SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS

(In thousands, except per share
data)


|                                                                                |                                                          |                         |         |        |        |   |         |        |        |  
|------------------------------------------------------------------------------- | -------------------------------------------------------- | ----------------------- | ------- | ------ | ------ | - | ------- | ------ | ------ | -
|                                                                                |                                                          |                        
|                                                                                |                                                          | For the Three Months   
|                                                                                |                                                          | Ended March 31,        
|                                                                                |                                                          |                        
|                                                                                |                                                          | 2002                    |         | 2001  
|                                                                                |                                                          |                         |         |       
|                                                                                |                                                          |                        
|                                                                                |                                                          | (Unaudited)            
|SALES                                                                           |                                                          | $                       | 222,163 |        |        | $ | 233,088 |       
|COST OF SALES                                                                   |                                                          |                         | 165,480 |        |        |   | 178,407 |       
|                                                                                |                                                          |                         |         |        |        |   |         |       
|                                                                                |                                                          | Gross profit            |         |        | 56,683 |   |         |        | 54,681 |  
|FREIGHT COSTS                                                                   |                                                          |                         | 13,021  |        |        |   | 12,986  |       
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                    |                                                          |                         | 33,995  |        |        |   | 36,717  |       
|RESTRUCTURING COSTS                                                             |                                                          |                         | 0       |        |        |   | 7,083   |       
|                                                                                |                                                          |                         |         |        |        |   |         |       
|                                                                                |                                                          | Operating income (loss) |         |        | 9,667  |   |         |        | (2,105 | )
|OTHER (EXPENSE) INCOME:                                                         |                                                          |                         |         |        |        |   |         |       
|                                                                                | Interest expense                                         |                         |         | (9,302 | )      |   |         | (9,210 | )     
|                                                                                | Interest income                                          |                         |         | 376    |        |   |         | 88     |       
|                                                                                | Equity in income (loss) of unconsolidated
    affiliates |                         |         | 3      |        |   |         | (1,585 | )     
|                                                                                | Other, net                                               |                         |         | (32    | )      |   |         | 278    |       
|                                                                                |                                                          |                         |         |        |        |   |         |       
|                                                                                |                                                          |                         | (8,955  | )      |        |   | (10,429 | )     
|                                                                                |                                                          |                         |         |        |        |   |         |       
|INCOME (LOSS) BEFORE MINORITY INTEREST,
    INCOME TAXES AND EXTRAORDINARY LOSS |                                                          |                         | 712     |        |        |   | (12,534 | )     
|MINORITY INTEREST                                                               |                                                          |                         | 23      |        |        |   | (28     | )     
|PROVISION (BENEFIT) FOR INCOME TAXES                                            |                                                          |                         | 236     |        |        |   | (4,431  | )     
|                                                                                |                                                          |                         |         |        |        |   |         |       
|INCOME (LOSS) BEFORE EXTRAORDINARY LOSS                                         |                                                          |                         | 499     |        |        |   | (8,131  | )     
|EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF
    DEBT, NET OF TAX BENEFIT    |                                                          |                         | 0       |        |        |   | (2,695  | )     
|                                                                                |                                                          |                         |         |        |        |   |         |       
|NET INCOME (LOSS)                                                               |                                                          | $                       | 499     |        |        | $ | (10,826 | )     
|                                                                                |                                                          |                         |         |        |        |   |         |       
|BASIC                                                                           |                                                          |                         |         |        |        |   |         |       
|INCOME (LOSS) PER COMMON SHARE BEFORE
    EXTRAORDINARY LOSS                    |                                                          | $                       | 0.02    |        |        | $ | (0.29   | )     
|EXTRAORDINARY LOSS PER COMMON SHARE                                             |                                                          | $                       | 0.00    |        |        | $ | (0.10   | )     
|                                                                                |                                                          |                         |         |        |        |   |         |       
|NET INCOME (LOSS) PER COMMON SHARE                                              |                                                          | $                       | 0.02    |        |        | $ | (0.39   | )     
|                                                                                |                                                          |                         |         |        |        |   |         |       
|Weighted average number of shares outstanding                                   |                                                          |                         | 27,857  |        |        |   | 27,815  |       
|                                                                                |                                                          |                         |         |        |        |   |         |       
|DILUTED                                                                         |                                                          |                         |         |        |        |   |         |       
|INCOME (LOSS) PER COMMON SHARE BEFORE
    EXTRAORDINARY LOSS                    |                                                          | $                       | 0.02    |        |        | $ | (0.29   | )     
|EXTRAORDINARY LOSS PER COMMON SHARE                                             |                                                          | $                       | 0.00    |        |        | $ | (0.10   | )     
|                                                                                |                                                          |                         |         |        |        |   |         |       
|NET INCOME (LOSS) PER COMMON SHARE                                              |                                                          | $                       | 0.02    |        |        | $ | (0.39   | )     
|                                                                                |                                                          |                         |         |        |        |   |         |       
|Diluted weighted average number of shares
    outstanding                       |                                                          |                         | 27,888  |        |        |   | 27,815  |       
|                                                                                |                                                          |                         |         |        |        |   |         |       

The accompanying notes are an integral part of
these financial statements.

5



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FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.


CARAUSTAR INDUSTRIES, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands)


|                           |                                                  |                                                                                 |   |        |        |   |   |        |          |  
|-------------------------- | ------------------------------------------------ | ------------------------------------------------------------------------------- | - | ------ | ------ | - | - | ------ | -------- | -
|                           |                                                  |                                                                                
|                           |                                                  | For the Three Months                                                           
|                           |                                                  | Ended March 31,                                                                
|                           |                                                  |                                                                                
|                           |                                                  | 2002                                                                            |   | 2001  
|                           |                                                  |                                                                                 |   |       
|                           |                                                  |                                                                                
|                           |                                                  | (Unaudited)                                                                    
|Cash provided by (used in) |                                                  |                                                                                 |   |        |        |   |   |       
|                           | Operating activities:                            |                                                                                 |   |        |        |   |   |        |         
|                           |                                                  | Net income (loss)                                                               |   | $      | 499    |   |   | $      | (10,826  | )
|                           |                                                  | Extraordinary loss from early extinguishment of
    debt                        |   |        | 0      |   |   |        | 4,305    |  
|                           |                                                  | Depreciation and amortization                                                   |   |        | 15,492 |   |   |        | 15,398   |  
|                           |                                                  | Restructuring costs                                                             |   |        | 0      |   |   |        | 3,987    |  
|                           |                                                  | Other noncash adjustments                                                       |   |        | 189    |   |   |        | (6,320   | )
|                           |                                                  | Equity in income or loss of unconsolidated
    affiliates, net of distributions |   |        | 997    |   |   |        | 1,585    |  
|                           |                                                  | Changes in current assets and liabilities                                       |   |        | (1,145 | ) |   |        | (2,735   | )
|                           |                                                  |                                                                                 |   |        |        |   |   |       
|                           |                                                  | Net cash provided by operating activities                                       |   |        | 16,032 |   |   |        | 5,394    |  
|                           |                                                  |                                                                                 |   |        |        |   |   |       
|                           | Investing activities:                            |                                                                                 |   |        |        |   |   |        |         
|                           |                                                  | Purchases of property, plant and equipment                                      |   |        | (5,832 | ) |   |        | (11,826  | )
|                           |                                                  | Acquisition of businesses, net of cash acquired                                 |   |        | 0      |   |   |        | (34      | )
|                           |                                                  | Other                                                                           |   |        | 967    |   |   |        | (716     | )
|                           |                                                  |                                                                                 |   |        |        |   |   |       
|                           |                                                  | Net cash used in investing activities                                           |   |        | (4,865 | ) |   |        | (12,576  | )
|                           |                                                  |                                                                                 |   |        |        |   |   |       
|                           | Financing activities:                            |                                                                                 |   |        |        |   |   |        |         
|                           |                                                  | Proceeds from senior credit facility                                            |   |        | 0      |   |   |        | 18,000   |  
|                           |                                                  | Repayments of senior credit facility                                            |   |        | 0      |   |   |        | (212,000 | )
|                           |                                                  | Proceeds from the issuance of the 7 1/4% and
    9 7/8% notes                   |   |        | 0      |   |   |        | 291,200  |  
|                           |                                                  | Repayments of other long and short-term debt                                    |   |        | (6,581 | ) |   |        | (67,051  | )
|                           |                                                  | 7.74% senior notes prepayment penalty                                           |   |        | 0      |   |   |        | (3,565   | )
|                           |                                                  | Dividends paid                                                                  |   |        | (833   | ) |   |        | (4,698   | )
|                           |                                                  | Other                                                                           |   |        | (547   | ) |   |        | (1,375   | )
|                           |                                                  |                                                                                 |   |        |        |   |   |       
|                           |                                                  | Net cash (used in) provided by financing
    activities                         |   |        | (7,961 | ) |   |        | 20,511   |  
|                           |                                                  |                                                                                 |   |        |        |   |   |       
|                           | Net increase in cash and cash equivalents        |                                                                                 |   | 3,206  |        |   |   | 13,329 |         
|                           | Cash and cash equivalents at beginning of period |                                                                                 |   | 64,244 |        |   |   | 8,900  |         
|                           |                                                  |                                                                                 |   |        |        |   |   |       
|                           | Cash and cash equivalents at end of period       |                                                                                 | $ | 67,450 |        |   | $ | 22,229 |         
|                           |                                                  |                                                                                 |   |        |        |   |   |       
|                           | Supplemental Disclosures:                        |                                                                                 |   |        |        |   |   |        |         
|                           |                                                  | Cash payments for interest                                                      |   | $      | 3,167  |   |   | $      | 7,092    |  
|                           |                                                  |                                                                                 |   |        |        |   |   |       
|                           |                                                  | Cash payments for income taxes                                                  |   | $      | 22     |   |   | $      | 628      |  
|                           |                                                  |                                                                                 |   |        |        |   |   |       
|                           |                                                  | Stock issued for acquisitions                                                   |   | $      | 0      |   |   | $      | 18,799   |  
|                           |                                                  |                                                                                 |   |        |        |   |   |       

The accompanying notes are an integral part of
these financial statements.

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FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.







NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

MARCH 31, 2002


(UNAUDITED)




|         |                      
|-------- | ---------------------
|Note  1. | Basis of Presentation



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The financial information included herein is
    unaudited; however, such information reflects all adjustments
    (consisting of normal recurring adjustments) which are, in the
    opinion of management, necessary for a fair statement of results
    for the interim periods. Certain notes and other information
    have been condensed or omitted from the interim financial
    statements, therefore, these financial statements should be read
    in conjunction with the Companys Annual Report on
    Form 10-K for the fiscal year ended December 31, 2001.
    The results of operations for the three months ended
    March 31, 2002 are not necessarily indicative of the
    results to be expected for the full year.



|         |          
|-------- | ---------
|Note  2. | Inventory



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During the second quarter of 2001, the Company
    completed a restructuring within the carton and custom packaging
    segment whereby certain subsidiaries were merged into an
    existing subsidiary in that segment. The restructuring was
    completed to simplify reporting and facilitate the management of
    segment operations. In connection with this restructuring, the
    Company changed, effective June 30, 2001, its inventory
    costing method of accounting for one of the merged subsidiaries
    from LIFO to FIFO in order to conform with the methodologies of
    the surviving subsidiary and all other Company-owned
    subsidiaries. The accompanying financial statements have been
    restated for this change. The effect of the change was to
    increase net assets as of March 31, 2001 by $776,000. The
    effect on net income for the three months ended March 31,
    2001 was $18,000.
|
| | Inventories are carried at the lower of cost or
    market. Cost includes materials, labor and overhead. Market,
    with respect to all inventories, is replacement cost or net
    realizable value. As described above, all inventories are valued
    using the first-in, first-out method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | Inventories at March 31, 2002 and
    December 31, 2001 were as follows (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                                   |  |           |        |              |  |   |         | 
|---------------------------------- |  | --------- | ------ | ------------ |  | - | ------- | 
|                                   |  | March 31, |        | December 31,
|                                   |  | 2002      |        | 2001        
|                                   |  |           |        |             
|Raw materials and supplies         |  | $         | 37,536 |              |  | $ | 40,357  | 
|Finished goods and work in process |  |           | 60,434 |              |  |   | 61,466  | 
|                                   |  |           |        |              |  |   |         | 
|Total inventory                    |  | $         | 97,970 |              |  | $ | 101,823 | 
|                                   |  |           |        |              |  |   |         | 



|         |                             
|-------- | ----------------------------
|Note  3. | Comprehensive Income or Loss



| |                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Total comprehensive income or loss, consisting of
    net income or loss plus changes in foreign currency translation
    adjustment for the three months ended March 31, 2002 and
    2001 was income of $444,000 and a loss of $10,964,000,
    respectively.

7



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.




|         |                                                    
|-------- | ---------------------------------------------------
|Note  4. | Senior Credit Facility and Other Long Term
    Debt



| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | At March 31, 2002 and December 31,
    2001, total long-term debt consisted of the following (in
    thousands):

|                                        |  |           |         |              |  |   |         |  
|--------------------------------------- |  | --------- | ------- | ------------ |  | - | ------- | -
|                                        |  | March 31, |         | December 31,
|                                        |  | 2002      |         | 2001        
|                                        |  |           |         |             
|Senior credit facility                  |  | $         |        |              |  | $ |        |  
|7 1/4 percent senior notes              |  |           | 25,520  |              |  |   | 25,449  |  
|7 3/8 percent senior notes              |  |           | 189,472 |              |  |   | 197,716 |  
|9 7/8 percent senior subordinated notes |  |           | 274,656 |              |  |   | 277,326 |  
|Other notes payable                     |  |           | 8,248   |              |  |   | 8,248   |  
|                                        |  |           |         |              |  |   |         |  
|Total debt                              |  |           | 497,896 |              |  |   | 508,739 |  
|Less current maturities                 |  |           | (48     | )            |  |   | (48     | )
|                                        |  |           |         |              |  |   |         |  
|Total long-term debt                    |  | $         | 497,848 |              |  | $ | 508,691 |  
|                                        |  |           |         |              |  |   |         |  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On March 29, 2001, the Company obtained a
    credit facility that provides for a revolving line of credit in
    the aggregate principal amount of $75,000,000 for a term of
    three years, including subfacilities of $10,000,000 for
    swingline loans and $15,000,000 for letters of credit, usage of
    which reduces availability under the facility. No borrowings
    were outstanding under the facility as of March 31, 2002,
    although an aggregate of $10,000,000 in letter of credit
    obligations were outstanding. The Company intends to use the
    facility for working capital, capital expenditures and other
    general corporate purposes. Although the facility is unsecured,
    the Companys obligations under the facility are
    unconditionally guaranteed, on a joint and several basis, by all
    of its existing and subsequently acquired wholly-owned domestic
    subsidiaries.                                                                                      
|
| | Borrowings under the facility bear interest at a
    rate equal to, at the Companys option, either (1) the
    base rate (which is equal to the greater of the prime rate most
    recently announced by Bank of America, N.A., the
    administrative agent under the facility, or the federal funds
    rate plus one-half of 1 percent) or (2) the adjusted
    Eurodollar Interbank Offered Rate, in each case plus an
    applicable margin determined by reference to the Companys
    leverage ratio (which is defined under the facility as the ratio
    of the Companys total debt to its total capitalization).
    Based on the Companys leverage ratio at March 31,
    2002, the current margins are 2.0 percent for Eurodollar
    rate loans and 0.75 percent for base rate loans.
    Additionally, the undrawn portion of the facility is subject to
    a facility fee at an annual rate that is currently set at
    0.5 percent based on the Companys leverage ratio at
    March 31, 2002.
|
| | The facility contains covenants that restrict,
    among other things, the Companys ability and its
    subsidiaries ability to create liens, merge or
    consolidate, dispose of assets, incur indebtedness and
    guarantees, pay dividends, repurchase or redeem capital stock
    and indebtedness, make certain investments or acquisitions,
    enter into certain transactions with affiliates, make capital
    expenditures or change the nature of the Companys
    business. The facility also contains several financial
    maintenance covenants, including covenants establishing a
    maximum leverage ratio (as described above), minimum tangible
    net worth and a minimum interest coverage ratio.                                                                                                                                                                                                                                                                                       
|
| | The facility contains events of default
    including, but not limited to, nonpayment of principal or
    interest, violation of covenants, incorrectness of
    representations and warranties, cross-default to other
    indebtedness, bankruptcy and other insolvency events, material
    judgments, certain ERISA events, actual or asserted invalidity
    of loan documentation and certain changes of control of the
    Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

8



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During the third and fourth quarters of 2001 and
    the first quarter of 2002, the Company completed three
    amendments to its senior credit facility agreement. The first
    amendment, dated September 10, 2001, allows the Company to
    acquire up to $30,000,000 of its senior subordinated notes so
    long as no default or event of default exists on the date of the
    transaction, or will result from the transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | The second amendment, dated November 30,
    2001, provides for the issuance of letters of credit under the
    senior credit facility having an original expiration date more
    than one year from the date of issuance, if required under
    related industrial revenue bond documents and agreed to by the
    issuing lender.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | The third amendment was completed on
    January 22, 2002 with an effective date of
    September 30, 2001. The Company obtained this amendment in
    order to avoid the occurrence of an event of default under its
    senior credit facility agreement resulting from a violation of
    the interest coverage ratio covenant contained in this
    agreement. This amendment modified the definitions of
    Interest Expense, Premier Boxboard Interest
    Expense and Standard Gypsum Interest Expense
    to include interest income and the benefit or expense derived
    from interest rate swap agreements or other interest hedge
    agreements. Additionally, the amendment lowered the minimum
    allowable interest coverage ratio for the fourth quarter of 2001
    from 2.5:1.0 to 2.25:1.0, the first quarter of 2002 from
    2.75:1.0 to 2.25:1.0, and the second quarter of 2002 from
    2.75:1.0 to 2.50:1.0.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | See the Subsequent Events footnote
    for additional amendments related to the Companys joint
    venture debt agreements and the senior credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | On March 22, 2001, the Company obtained
    commitments and executed an agreement for the issuance of
    $285,000,000 of 9 7/8 percent senior subordinated
    notes due April 1, 2011 and $29,000,000 of
    7 1/4 percent senior notes due May 1, 2010. These
    senior subordinated notes and senior notes were issued at a
    discount to yield effective interest rates of 10.5 percent
    and 9.4 percent, respectively. Under the terms of the
    agreement, the Company received aggregate proceeds, net of
    issuance costs, of approximately $291,200,000 on March 29,
    2001. These proceeds were used to repay borrowings outstanding
    under the Companys former senior credit facility and its
    7.74 percent senior notes. In connection with the repayment
    of the 7.74 percent senior notes, the Company incurred a
    prepayment penalty of approximately $3,600,000. The Company
    recorded an extraordinary loss of $2,695,000, which included the
    prepayment penalty and unamortized issuance costs of $705,000,
    net of tax benefit of $1,610,000. The difference between issue
    price and principal amount at maturity of the Companys
    7 1/4 percent senior and 9 7/8 percent
    senior subordinated notes will be accreted each year as interest
    expense in its financial statements. These notes are unsecured,
    but are guaranteed, on a joint and several basis, by all of the
    Companys domestic subsidiaries, other than one that is not
    wholly-owned. Management considers this nonguarantor domestic
    subsidiary immaterial to investors, therefore, separate
    financial statements are not presented.
|
| | During 1998, the Company registered with the
    Securities and Exchange Commission a total of $300,000,000 in
    public debt securities for issuance in one or more series and
    with such specific terms as to be determined from time to time.
    On June 1, 1999, the Company issued $200,000,000 in
    aggregate principal amount of its 7 3/8 percent notes
    due June 1, 2009. The 7 3/8 percent notes were
    issued at a discount to yield an effective interest rate of
    7.473 percent and pay interest semiannually. The
    7 3/8 percent notes are unsecured obligations of the
    Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | During the second and third quarters of 2001, the
    Company entered into four interest rate swap agreements in
    notional amounts totaling $285,000,000. The agreements, which
    have payment and expiration dates that correspond to the terms
    of the note obligations they cover, effectively converted
    $185,000,000 of the Companys fixed rate
    9 7/8 percent senior subordinated notes and
    $100,000,000 of the Companys fixed rate
    7 3/8 percent senior notes into variable rate
    obligations. The variable rates are based on the three-month
    LIBOR plus a fixed margin.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

9



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.




| |                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following table identifies the debt
    instrument hedged, the notional amount, the fixed spread and the
    three-month LIBOR at March 31, 2002 for each of the
    Companys interest rate swaps. The March 31, 2002
    three-month LIBOR is presented for informational purposes only
    and does not represent the Companys actual effective rates
    in place at March 31, 2002.

|                                        |  |          |         |        |  |             |       |               |  |  |       |   |  |  |       |  
|--------------------------------------- |  | -------- | ------- | ------ |  | ----------- | ----- | ------------- |  |  | ----- | - |  |  | ----- | -
|                                        |  |          |         |        |  | Three-Month |       |              
|                                        |  | Notional |         |        |  | LIBOR at    |       |              
|                                        |  | Amount   |         | Fixed  |  | March 31,   |       | Total        
|Debt Instrument                         |  | (000s)  |         | Spread |  | 2002        |       | Variable Rate
|                                        |  |          |         |        |  |             |       |              
|7 3/8 percent senior notes              |  | $        | 50,000  |        |  |             | 2.365 | %             |  |  | 2.031 | % |  |  | 4.396 | %
|7 3/8 percent senior notes              |  |          | 25,000  |        |  |             | 1.445 |               |  |  | 2.031 |   |  |  | 3.476 |  
|7 3/8 percent senior notes              |  |          | 25,000  |        |  |             | 1.775 |               |  |  | 2.031 |   |  |  | 3.806 |  
|9 7/8 percent senior subordinated notes |  |          | 185,000 |        |  |             | 4.400 |               |  |  | 2.031 |   |  |  | 6.431 |  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In October 2001, the Company unwound its
    $185,000,000 interest rate swap agreement related to the
    9 7/8 percent senior subordinated notes and received
    $9,093,000 from the bank counter-party. Simultaneously, the
    Company executed a new swap agreement with a fixed margin that
    was 85 basis points higher than the original swap
    agreement. The new swap agreement is the same notional amount,
    has the same terms and covers the same notes as the original
    agreement. The $9,093,000 gain, which is classified as a
    component of debt, will be accreted to interest expense over the
    life of the notes and will partially offset the increase in
    interest expense. The Company executed these transactions in
    order to take advantage of market conditions.
|
| | See the Subsequent Events footnote
    regarding transactions related to our interest rate swap
    agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | Under the provisions of SFAS No. 133, the
    Company has designated and accounted for its interest rate swap
    agreements as fair value hedges. The Company has assumed no
    ineffectiveness with regard to these agreements as they qualify
    for the short-cut method of accounting for fair value hedges of
    debt obligations, as prescribed by SFAS No. 133. The
    aggregate fair value of the swap agreements of approximately
    $11,669,000 as of March 31, 2002 and $7,418,000 as of
    December 31, 2001 are classified as a component of other
    long-term liabilities.                                                                                                                                                                                                               



|        |                              
|------- | -----------------------------
|Note 5. | New Accounting Pronouncements



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In June 2001, the FASB issued SFAS No. 141,
    Business Combinations (SFAS
    No. 141) and SFAS No. 142, Goodwill and
    Other Intangible Assets (SFAS No. 142).
    SFAS No. 141 supercedes Accounting Principles Board
    (APB) Opinion No. 16 Business
    Combinations and SFAS No. 38, Accounting for
    Preacquisition Contingencies for Purchased Enterprises.
    SFAS No. 141 prescribes the accounting principles for
    business combinations and requires that all business
    combinations be accounted for using the purchase method of
    accounting. This pronouncement is effective for all business
    combinations after June 30, 2001.
|
| | SFAS No. 142 supercedes APB Opinion
    No. 17, Intangible Assets. This pronouncement
    prescribes the accounting practices for goodwill and other
    intangible assets. Under this pronouncement, goodwill will no
    longer be amortized to earnings, but instead will be reviewed
    periodically (at least annually) for impairment. The Company
    adopted this pronouncement effective January 1, 2002. The
    Company was required to complete the initial impairment test
    within six months of adoption of SFAS 142. The Company has
    completed its initial impairment test and has determined that no
    impairment of goodwill exists.                
|
| | In July 2001, the FASB issued SFAS No. 143,
    Accounting for Asset Retirement Obligations
    (SFAS no. 143). This pronouncement requires
    entities to record the fair value of a liability for an                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

10



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | asset retirement obligation in the period in
    which it is incurred. When the liability is initially recorded,
    the entity capitalizes the cost by increasing the carrying
    amount of the related long-lived asset. Over time, the liability
    is accreted to its present value each period and the capitalized
    cost is depreciated over the useful life of the related asset.
    Upon settlement of the liability, the entity either settles the
    obligation for the amount recorded or incurs a gain or loss.
    SFAS No. 143 is effective for fiscal years beginning after
    June 15, 2002. The Company is currently evaluating this
    pronouncement and does not expect the adoption of this
    pronouncement to have a material impact on its consolidated
    financial statements.
|
| | In August 2001, the FASB issued SFAS
    No. 144, Accounting for the Impairment or Disposal of
    Long-Lived Assets (SFAS No. 144). This
    pronouncement addresses financial accounting and reporting for
    the impairment or disposal of long-lived assets and supercedes
    SFAS No. 121. SFAS No. 144 is effective for fiscal
    years beginning after December 15, 2001. The Company
    adopted SFAS No. 144 as of January 1, 2002. This
    pronouncement did not have a material impact on the
    Companys consolidated financial statements upon adoption.                                                                                                                                                                                                                                  



|        |                    
|------- | -------------------
|Note 6. | Segment Information



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company operates principally in three
    business segments based on its products. The paperboard segment
    consists of facilities that manufacture 100 percent
    recycled uncoated and clay-coated paperboard and facilities that
    collect recycled paper and broker recycled paper and other paper
    rolls. The tube, core, and composite container segment is
    principally made up of facilities that produce spiral and
    convolute-wound tubes, cores, and cans. The carton and custom
    packaging segment consists of facilities that produce printed
    and unprinted folding and set-up cartons and facilities that
    provide contract manufacturing and contract packaging services.
    Intersegment sales are recorded at prices which approximate
    market prices.
|
| | Operating income includes all costs and expenses
    directly related to the segment involved. Corporate expenses
    include corporate, general, administrative, and unallocated
    information systems expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | The following table presents certain business
    segment information for the periods indicated (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|                            |                                     |                 |   |        |         |  |   |        |         | 
|--------------------------- | ----------------------------------- | --------------- | - | ------ | ------- |  | - | ------ | ------- | 
|                            |                                     |                
|                            |                                     | Three Months   
|                            |                                     | Ended March 31,
|                            |                                     |                
|                            |                                     | 2002            |   | 2001  
|                            |                                     |                 |   |       
|Sales (external customers): |                                     |                 |   |        |         |  |   |       
|                            | Paperboard                          |                 | $ | 77,829 |         |  | $ | 82,798 |        
|                            | Tube, core, and composite container |                 |   | 64,858 |         |  |   | 68,146 |        
|                            | Carton and custom packaging         |                 |   | 79,476 |         |  |   | 82,144 |        
|                            |                                     |                 |   |        |         |  |   |       
|                            |                                     | Total           |   | $      | 222,163 |  |   | $      | 233,088 | 
|                            |                                     |                 |   |        |         |  |   |       
|Sales (intersegment):       |                                     |                 |   |        |         |  |   |       
|                            | Paperboard                          |                 | $ | 32,258 |         |  | $ | 35,643 |        
|                            | Tube, core, and composite container |                 |   | 879    |         |  |   | 1,002  |        
|                            | Carton and custom packaging         |                 |   | 157    |         |  |   | 135    |        
|                            |                                     |                 |   |        |         |  |   |       
|                            |                                     | Total           |   | $      | 33,294  |  |   | $      | 36,780  | 
|                            |                                     |                 |   |        |         |  |   |       

11



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.


|                                                                                |                                     |                 |        |       |        |   |         |       |       | 
|------------------------------------------------------------------------------- | ----------------------------------- | --------------- | ------ | ----- | ------ | - | ------- | ----- | ----- | 
|                                                                                |                                     |                
|                                                                                |                                     | Three Months   
|                                                                                |                                     | Ended March 31,
|                                                                                |                                     |                
|                                                                                |                                     | 2002            |        | 2001 
|                                                                                |                                     |                 |        |      
|Operating income (loss):                                                        |                                     |                 |        |       |        |   |         |      
|                                                                                | Paperboard(A)                       |                 | $      | 9,291 |        |   | $       | (212  | )    
|                                                                                | Tube, core, and composite container |                 |        | 3,273 |        |   |         | 3,028 |      
|                                                                                | Carton and custom packaging(B)      |                 |        | 1,092 |        |   |         | (978  | )    
|                                                                                |                                     |                 |        |       |        |   |         |      
|                                                                                |                                     | Total           |        |       | 13,656 |   |         |       | 1,838 | 
|Corporate expense                                                               |                                     |                 | (3,989 | )     |        |   | (3,943  | )    
|                                                                                |                                     |                 |        |       |        |   |         |      
|Operating income (loss)                                                         |                                     |                 | 9,667  |       |        |   | (2,105  | )    
|Interest expense                                                                |                                     |                 | (9,302 | )     |        |   | (9,210  | )    
|Interest income                                                                 |                                     |                 | 376    |       |        |   | 88      |      
|Equity in income (loss) of unconsolidated
    affiliates                        |                                     |                 | 3      |       |        |   | (1,585  | )    
|Other, net                                                                      |                                     |                 | (32    | )     |        |   | 278     |      
|                                                                                |                                     |                 |        |       |        |   |         |      
|Income (loss) before income taxes, minority
    interest and extraordinary loss |                                     | $               | 712    |       |        | $ | (12,534 | )    
|                                                                                |                                     |                 |        |       |        |   |         |      





| |     |                                                                                                                                                                                                                                                                                      
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (A) | Results for 2001 include a charge to operations
    of $4,447,000 for restructuring costs related to the closing of
    the Chicago, Illinois paperboard mill. This charge was related
    to the paperboard segment and is reflected in the segments
    operating income. (Note 8)



| |     |                                                                                                                                                                                                                                                                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (B) | Results for 2001 include a charge to operations
    of $2,636,000 related to the consolidation of the operations of
    the Salt Lake City, Utah carton plant into the Denver, Colorado
    carton plant. This charge was related to the carton and custom
    packaging segment and is reflected in the segments
    operating income. (Note 8)



|        |                    
|------- | -------------------
|Note 7. | Goodwill Accounting



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

12



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.




| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Loss before extraordinary item, net loss and
    related losses per share for the first quarter of 2001 adjusted
    to exclude goodwill amortization expense are as follows (in
    thousands, except per share information):

|                                |                                         |                                         |   |                |         |         |   |       |       |   |   |       |       |  
|------------------------------- | --------------------------------------- | --------------------------------------- | - | -------------- | ------- | ------- | - | ----- | ----- | - | - | ----- | ----- | -
|                                |                                         |                                         |   |               
|                                |                                         | Three Months                            |   | Loss Per Share
|                                |                                         | Ended                                   |   |               
|                                |                                         | March 31, 2001                          |   | Basic          |         | Diluted
|                                |                                         |                                         |   |                |         |        
|Loss before extraordinary item: |                                         |                                         |   |                |         |         |   |       |       |   |   |      
|                                | Reported loss before extraordinary item |                                         | $ | (8,131         | )       |         | $ | (0.29 | )     |   | $ | (0.29 | )    
|                                | Goodwill amortization                   |                                         |   | 702            |         |         |   | 0.02  |       |   |   | 0.02  |      
|                                |                                         |                                         |   |                |         |         |   |       |       |   |   |      
|                                |                                         | Adjusted loss before extraordinary item |   | $              | (7,429  | )       |   | $     | (0.27 | ) |   | $     | (0.27 | )
|                                |                                         |                                         |   |                |         |         |   |       |       |   |   |      
|Net loss:                       |                                         |                                         |   |                |         |         |   |       |       |   |   |      
|                                | Reported net loss                       |                                         | $ | (10,826        | )       |         | $ | (0.39 | )     |   | $ | (0.39 | )    
|                                | Goodwill amortization                   |                                         |   | 702            |         |         |   | 0.02  |       |   |   | 0.02  |      
|                                |                                         |                                         |   |                |         |         |   |       |       |   |   |      
|                                |                                         | Adjusted net loss                       |   | $              | (10,124 | )       |   | $     | (0.37 | ) |   | $     | (0.37 | )
|                                |                                         |                                         |   |                |         |         |   |       |       |   |   |      



| |                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As of January 1, 2002, goodwill of
    $146,500,000 (net of $20,500,000 of amortization) was
    attributable to the Companys segments as follows:
    $77,700,000 for Paperboard, $25,600,000 for Tube, Core and
    Composite Container and $43,200,000 for Carton and Custom
    Packaging. During the first quarter of 2002, no goodwill was
    acquired, impaired or written off.



|         |                    
|-------- | -------------------
|Note  8. | Restructuring Costs



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In January 2001, the Company initiated a plan to
    close its paperboard mill located in Chicago, Illinois and
    recorded a pretax charge to operations of approximately
    $4,447,000. The mill was profitable through 1998, but declining
    sales resulted in losses of approximately $2,600,000 and
    $1,500,000 in 1999 and 2000, respectively. The $4,447,000 charge
    included a $2,237,000 noncash asset impairment write down of
    fixed assets to estimated net realizable value and a $1,221,000
    accrual for severance and termination benefits for 16 salaried
    and 59 hourly employees terminated in connection with this plan
    as well as a $989,000 accrual for other exit costs. The
    remaining other exit costs were paid by December 31, 2002.
    As of December 31, 2002, one employee remained to assist in
    the closing of the mill. The Company is currently marketing the
    property.
|
| | The following is a summary of restructuring
    activity from plan adoption to March 31, 2002
    (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                                 |         |            |       |               |  |            |        |       |  |   |      |     |  |   |        |       | 
|-------------------------------- | ------- | ---------- | ----- | ------------- |  | ---------- | ------ | ----- |  | - | ---- | --- |  | - | ------ | ----- | 
|                                 |         |            |       | Severance and |  |            |        |      
|                                 |         |            |       | Other         |  |            |        |      
|                                 |         | Asset      |       | Termination   |  | Other Exit |        |      
|                                 |         | Impairment |       | Benefits      |  | Costs      |        | Total
|                                 |         |            |       |               |  |            |        |      
|2001 provision                   |         | $          | 2,237 |               |  | $          | 1,221  |       |  | $ | 989  |     |  | $ | 4,447  |      
|                                 | Noncash |            |       | 2,237         |  |            |        |      |  |   |      |    |  |   |        | 2,237 | 
|                                 |         |            |       |               |  |            |        |       |  |   |      |     |  |   |        |      
|                                 | Cash    |            |       |              |  |            |        | 1,221 |  |   |      | 989 |  |   |        | 2,210 | 
|2001 cash activity               |         |            |      |               |  |            | (1,221 | )     |  |   | (597 | )   |  |   | (1,818 | )    
|                                 |         |            |       |               |  |            |        |       |  |   |      |     |  |   |        |      
|Balance as of December 31, 2001  |         |            |      |               |  |            |       |       |  |   | 392  |     |  |   | 392    |      
|First quarter 2002 cash activity |         |            |      |               |  |            |       |       |  |   | (177 | )   |  |   | (177   | )    
|                                 |         |            |       |               |  |            |        |       |  |   |      |     |  |   |        |      
|Balance as of March 31, 2002     |         | $          |      |               |  | $          |       |       |  | $ | 215  |     |  | $ | 215    |      
|                                 |         |            |       |               |  |            |        |       |  |   |      |     |  |   |        |      



| |                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In March 2001, the Company initiated a plan to
    consolidate the operations of the Salt Lake City, Utah carton
    plant into the Denver, Colorado carton plant and recorded a
    pretax charge to operations of approximately $2,636,000. The
    $2,636,000 charge included a $1,750,000 noncash asset impair-

13



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.




| |                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ment write down of fixed assets to estimated net
    realizable value and a $464,000 accrual for severance and
    termination benefits for 5 salaried and 31 hourly employees
    terminated in connection with this plan as well as a $422,000
    accrual for other exit costs. All exit costs were paid as of
    December 31, 2001, and the exit plan was completed.



|         |           
|-------- | ----------
|Note  9. | Litigation



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On March 26, 2002, the Company reached a
    final settlement with a significant customer concerning the
    dispute regarding the terms of the long-term supply agreement
    that had been the subject of the Companys previously
    reported litigation with the customer. The Company and a
    wholly-owned subsidiary of the customer have resolved the
    dispute by entering into a new five-year paperboard supply
    agreement that provides that the Company will produce and sell
    to the customer between 0.378 and 0.756 billion square feet
    (10,000 to 20,000 tons) of paper per year to be used in their
    ToughRock wallboard. This new paperboard supply agreement
    supersedes the terms of the tentative settlement previously
    announced on May 9, 2001 and the agreement and transition
    period that had been a part of that tentative settlement. As a
    result of the final settlement, the Companys previously
    filed suit against the customer in the General Court of Justice,
    Superior Court Division of Mecklenburg County, North Carolina
    (Case No. 00-CVS-12302), and the customers previously
    reported separate action filed in the Superior Court of Fulton
    County, Georgia (Case No. 2000-CV-27684), were each dismissed
    with prejudice on April 1 and 2, 2002, respectively.



|          |                        
|--------- | -----------------------
|Note  10. | Income (Loss) Per Share



| |                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following is a reconciliation of the
    numerators and denominators of the basic and diluted income
    (loss) per share computations for income (loss) before
    extraordinary item (in thousands, except per share information):

|                                                                           |  |           |        |      |  |   |        |  
|-------------------------------------------------------------------------- |  | --------- | ------ | ---- |  | - | ------ | -
|                                                                           |  |          
|                                                                           |  | March 31,
|                                                                           |  |          
|                                                                           |  | 2002      |        | 2001
|                                                                           |  |           |        |     
|Calculation of Basic Income (Loss) Per Share:                              |  |           |        |      |  |   |        |  
|Income (loss) before extraordinary item                                    |  | $         | 499    |      |  | $ | (8,131 | )
|Weighted average number of common shares
    outstanding                   |  |           | 27,857 |      |  |   | 27,815 |  
|                                                                           |  |           |        |      |  |   |        |  
|Basic income (loss) per share                                              |  | $         | 0.02   |      |  | $ | (0.29  | )
|                                                                           |  |           |        |      |  |   |        |  
|Calculation of Diluted Income (Loss) Per Share:                            |  |           |        |      |  |   |        |  
|Income (loss) before extraordinary item                                    |  | $         | 499    |      |  | $ | (8,131 | )
|Weighted average number of common shares
    outstanding                   |  |           | 27,857 |      |  |   | 27,815 |  
|Effect of dilutive stock options                                           |  |           | 31     |      |  |   | 0      |  
|                                                                           |  |           |        |      |  |   |        |  
|Weighted average number of common shares
    outstanding assuming dilution |  |           | 27,888 |      |  |   | 27,815 |  
|                                                                           |  |           |        |      |  |   |        |  
|Diluted income (loss) per share                                            |  | $         | 0.02   |      |  | $ | (0.29  | )
|                                                                           |  |           |        |      |  |   |        |  



| |                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Approximately 1,756,000 and 1,771,000 common
    stock equivalents are excluded from the three month periods
    ended March 31, 2002 and 2001, respectively, diluted income
    (loss) per common share calculation because such are
    anti-dilutive.

14



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.




|          |                                                           
|--------- | ----------------------------------------------------------
|Note  11. | Guarantor Condensed Consolidating Financial
    Statements



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | These condensed consolidating financial
    statements reflect Caraustar Industries Inc. and Subsidiary
    Guarantors, which consist of all of the Companys
    wholly-owned subsidiaries other than foreign subsidiaries and
    two domestic subsidiaries that are not wholly-owned. These
    nonguarantor subsidiaries are herein referred to as
    Nonguarantor Subsidiaries. Separate financial
    statements of the Subsidiary Guarantors are not presented
    because the subsidiary guarantees are joint and several and full
    and unconditional and the Company believes the condensed
    consolidating financial statements presented are more meaningful
    in understanding the financial position of the Subsidiary
    Guarantors.

15



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.


CARAUSTAR INDUSTRIES, INC. AND
SUBSIDIARIES

| |                                                         
| | --------------------------------------------------------
| | NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS
| | (Unaudited)                                             

CONDENSED CONSOLIDATING BALANCE
SHEET

| |               
| | --------------
| | (In thousands)

|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |          |         | 
|---------------------------------------- | ------------------------------------ | ------------------------- | ------- | ------------ | ------- | ------------ | ------- | ------------ | ------ | ----- | ------ | ------- | ----- | - | -------- | -------- | ---- | - | ------- | -------- | ------- | 
|                                         |                                      |                          
|                                         |                                      | As of March 31, 2002     
|                                         |                                      |                          
|                                         |                                      |                           |         | Guarantor    |         | Nonguarantor |         |             
|                                         |                                      | Parent                    |         | Subsidiaries |         | Subsidiaries |         | Eliminations |        | Total
|                                         |                                      |                           |         |              |         |              |         |              |        |      
|ASSETS                                  
|CURRENT ASSETS:                          |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         | Cash and cash equivalents            |                           | $       | 66,223       |         |              | $       | 799          |        |       | $      | 428     |       |   | $        |         |      |   | $       | 67,450   |        
|                                         | Intercompany funding                 |                           |         | 118,370      |         |              |         | (111,261     | )      |       |        | (7,109  | )     |   |          |         |      |   |         |         |        
|                                         | Receivables, net of allowances       |                           |         | 7,629        |         |              |         | 91,897       |        |       |        | 3,184   |       |   |          |         |      |   |         | 102,710  |        
|                                         | Intercompany accounts receivable     |                           |         |             |         |              |         | 299          |        |       |        | 109     |       |   |          | (408     | )    |   |         |         |        
|                                         | Inventories                          |                           |         |             |         |              |         | 94,446       |        |       |        | 3,524   |       |   |          |         |      |   |         | 97,970   |        
|                                         | Refundable income taxes              |                           |         | 17,295       |         |              |         | 148          |        |       |        | 120     |       |   |          |         |      |   |         | 17,563   |        
|                                         | Other current assets                 |                           |         | 14,760       |         |              |         | 4,837        |        |       |        | 450     |       |   |          |         |      |   |         | 20,047   |        
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         |                                      | Total current assets      |         |              | 224,277 |              |         |              | 81,165 |       |        |         | 706   |   |          |          | (408 | ) |         |          | 305,740 | 
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|PROPERTY, PLANT AND EQUIPMENT            |                                      |                           | 10,396  |              |         |              | 757,004 |              |        |       | 25,709 |         |       |   |         |          |      |   | 793,109 |         
|                                         | Less accumulated depreciation        |                           |         | (4,982       | )       |              |         | (331,382     | )      |       |        | (15,793 | )     |   |          |         |      |   |         | (352,157 | )      
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         | Property, plant and equipment, net   |                           |         | 5,414        |         |              |         | 425,622      |        |       |        | 9,916   |       |   |          |         |      |   |         | 440,952  |        
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|INVESTMENT IN CONSOLIDATED SUBSIDIARIES  |                                      |                           | 522,958 |              |         |              | 126,773 |              |        |       |       |         |       |   | (649,731 | )        |      |   |        |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|GOODWILL, net                            |                                      |                           |        |              |         |              | 145,550 |              |        |       | 915    |         |       |   |         |          |      |   | 146,465 |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|INVESTMENT IN UNCONSOLIDATED AFFILIATES  |                                      |                           | 59,213  |              |         |              | 2,076   |              |        |       |       |         |       |   |         |          |      |   | 61,289  |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|OTHER ASSETS                             |                                      |                           | 12,567  |              |         |              | 1,566   |              |        |       | 353    |         |       |   |         |          |      |   | 14,486  |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         |                                      | $                         | 824,429 |              |         | $            | 782,752 |              |        | $     | 11,890 |         |       | $ | (650,139 | )        |      | $ | 968,932 |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|LIABILITIES AND SHAREHOLDERS
    EQUITY
|CURRENT LIABILITIES:                     |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         | Current maturities of debt           |                           | $       |             |         |              | $       | 48           |        |       | $      |        |       |   | $        |         |      |   | $       | 48       |        
|                                         | Accounts payable                     |                           |         | 12,736       |         |              |         | 41,377       |        |       |        | 2,186   |       |   |          |         |      |   |         | 56,299   |        
|                                         | Intercompany accounts payable        |                           |         |             |         |              |         | 109          |        |       |        | 299     |       |   |          | (408     | )    |   |         |         |        
|                                         | Accrued liabilities                  |                           |         | 21,371       |         |              |         | 26,194       |        |       |        | 835     |       |   |          |         |      |   |         | 48,400   |        
|                                         | Dividends payable                    |                           |         |             |         |              |         |             |        |       |        |        |       |   |          |         |      |   |         |         |        
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         |                                      | Total current liabilities |         |              | 34,107  |              |         |              | 67,728 |       |        |         | 3,320 |   |          |          | (408 | ) |         |          | 104,747 | 
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|LONG-TERM DEBT, less current maturities  |                                      |                           | 489,648 |              |         |              | 8,200   |              |        |       |       |         |       |   |         |          |      |   | 497,848 |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|DEFERRED INCOME TAXES                    |                                      |                           | 53,521  |              |         |              | 12,244  |              |        |       | 1,150  |         |       |   |         |          |      |   | 66,915  |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|DEFERRED COMPENSATION                    |                                      |                           | 1,612   |              |         |              | 54      |              |        |       |       |         |       |   |         |          |      |   | 1,666   |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|OTHER LIABILITIES                        |                                      |                           | 12,726  |              |         |              | 4,090   |              |        |       |       |         |       |   |         |          |      |   | 16,816  |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|MINORITY INTEREST                        |                                      |                           |        |              |         |              |        |              |        |       |       |         |       |   | 913      |          |      |   | 913     |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|SHAREHOLDERS EQUITY:                    |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         | Common stock                         |                           |         | 2,738        |         |              |         | 883          |        |       |        | 142     |       |   |          | (978     | )    |   |         | 2,785    |        
|                                         | Additional paid-in capital           |                           |         | 207,245      |         |              |         | 598,597      |        |       |        | 5,227   |       |   |          | (630,949 | )    |   |         | 180,120  |        
|                                         | Retained earnings                    |                           |         | 22,832       |         |              |         | 90,956       |        |       |        | 2,916   |       |   |          | (18,717  | )    |   |         | 97,987   |        
|                                         | Accumulated other comprehensive loss |                           |         |             |         |              |         |             |        |       |        | (865    | )     |   |          |         |      |   |         | (865     | )      
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         |                                      |                           | 232,815 |              |         |              | 690,436 |              |        |       | 7,420  |         |       |   | (650,644 | )        |      |   | 280,027 |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         |                                      | $                         | 824,429 |              |         | $            | 782,752 |              |        | $     | 11,890 |         |       | $ | (650,139 | )        |      | $ | 968,932 |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         

16



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.


CARAUSTAR INDUSTRIES, INC. AND
SUBSIDIARIES

| |                                                         
| | --------------------------------------------------------
| | NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS
| | (Unaudited)                                             

CONDENSED CONSOLIDATING BALANCE
SHEET

| |               
| | --------------
| | (In thousands)

|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |          |         | 
|---------------------------------------- | ------------------------------------ | ------------------------- | ------- | ------------ | ------- | ------------ | ------- | ------------ | ------ | ----- | ------ | ------- | ----- | - | -------- | -------- | ---- | - | ------- | -------- | ------- | 
|                                         |                                      |                          
|                                         |                                      | As of December 31, 2001  
|                                         |                                      |                          
|                                         |                                      |                           |         | Guarantor    |         | Nonguarantor |         |             
|                                         |                                      | Parent                    |         | Subsidiaries |         | Subsidiaries |         | Eliminations |        | Total
|                                         |                                      |                           |         |              |         |              |         |              |        |      
|ASSETS                                  
|CURRENT ASSETS:                          |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         | Cash and cash equivalents            |                           | $       | 63,277       |         |              | $       | 432          |        |       | $      | 535     |       |   | $        |         |      |   | $       | 64,244   |        
|                                         | Intercompany funding                 |                           |         | 139,496      |         |              |         | (132,948     | )      |       |        | (6,548  | )     |   |          |         |      |   |         |         |        
|                                         | Receivables, net of allowances       |                           |         | 1,817        |         |              |         | 81,669       |        |       |        | 2,811   |       |   |          |         |      |   |         | 86,297   |        
|                                         | Intercompany accounts receivable     |                           |         |             |         |              |         | 270          |        |       |        | 288     |       |   |          | (558     | )    |   |         |         |        
|                                         | Inventories                          |                           |         |             |         |              |         | 98,063       |        |       |        | 3,760   |       |   |          |         |      |   |         | 101,823  |        
|                                         | Refundable income taxes              |                           |         | 17,689       |         |              |         | 140          |        |       |        | 120     |       |   |          |         |      |   |         | 17,949   |        
|                                         | Prepaid pension                      |                           |         | 10,036       |         |              |         |             |        |       |        |        |       |   |          |         |      |   |         | 10,036   |        
|                                         | Other current assets                 |                           |         | 2,132        |         |              |         | 3,648        |        |       |        | 640     |       |   |          |         |      |   |         | 6,420    |        
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         |                                      | Total current assets      |         |              | 234,447 |              |         |              | 51,274 |       |        |         | 1,606 |   |          |          | (558 | ) |         |          | 286,769 | 
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|PROPERTY, PLANT AND EQUIPMENT            |                                      |                           | 9,830   |              |         |              | 753,133 |              |        |       | 25,401 |         |       |   |         |          |      |   | 788,364 |         
|                                         | Less accumulated depreciation        |                           |         | (4,523       | )       |              |         | (318,010     | )      |       |        | (15,455 | )     |   |          |         |      |   |         | (337,988 | )      
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         | Property, plant and equipment, net   |                           |         | 5,307        |         |              |         | 435,123      |        |       |        | 9,946   |       |   |          |         |      |   |         | 450,376  |        
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|INVESTMENT IN CONSOLIDATED SUBSIDIARIES  |                                      |                           | 522,958 |              |         |              | 126,774 |              |        |       |       |         |       |   | (649,732 | )        |      |   |        |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|GOODWILL, net                            |                                      |                           |        |              |         |              | 145,515 |              |        |       | 950    |         |       |   |         |          |      |   | 146,465 |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|INVESTMENT IN UNCONSOLIDATED AFFILIATES  |                                      |                           | 60,134  |              |         |              | 2,151   |              |        |       |       |         |       |   |         |          |      |   | 62,285  |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|OTHER ASSETS                             |                                      |                           | 12,289  |              |         |              | 2,754   |              |        |       | 43     |         |       |   |         |          |      |   | 15,086  |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         |                                      | $                         | 835,135 |              |         | $            | 763,591 |              |        | $     | 12,545 |         |       | $ | (650,290 | )        |      | $ | 960,981 |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|LIABILITIES AND SHAREHOLDERS
    EQUITY
|CURRENT LIABILITIES:                     |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         | Current maturities of debt           |                           | $       |             |         |              | $       | 48           |        |       | $      |        |       |   | $        |         |      |   | $       | 48       |        
|                                         | Accounts payable                     |                           |         | 16,861       |         |              |         | 32,866       |        |       |        | 2,406   |       |   |          |         |      |   |         | 52,133   |        
|                                         | Intercompany accounts payable        |                           |         |             |         |              |         | 288          |        |       |        | 270     |       |   |          | (558     | )    |   |         |         |        
|                                         | Accrued liabilities                  |                           |         | 8,371        |         |              |         | 28,596       |        |       |        | 782     |       |   |          |         |      |   |         | 37,749   |        
|                                         | Dividends payable                    |                           |         | 833          |         |              |         |             |        |       |        |        |       |   |          |         |      |   |         | 833      |        
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         |                                      | Total current liabilities |         |              | 26,065  |              |         |              | 61,798 |       |        |         | 3,458 |   |          |          | (558 | ) |         |          | 90,763  | 
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|LONG-TERM DEBT, less current maturities  |                                      |                           | 500,491 |              |         |              | 8,200   |              |        |       |       |         |       |   |         |          |      |   | 508,691 |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|DEFERRED INCOME TAXES                    |                                      |                           | 53,366  |              |         |              | 12,244  |              |        |       | 1,150  |         |       |   |         |          |      |   | 66,760  |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|DEFERRED COMPENSATION                    |                                      |                           | 1,687   |              |         |              | 54      |              |        |       |       |         |       |   |         |          |      |   | 1,741   |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|OTHER LIABILITIES                        |                                      |                           | 8,475   |              |         |              | 4,037   |              |        |       |       |         |       |   |         |          |      |   | 12,512  |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|MINORITY INTEREST                        |                                      |                           |        |              |         |              |        |              |        |       |       |         |       |   | 935      |          |      |   | 935     |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|SHAREHOLDERS EQUITY:                    |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         | Common stock                         |                           |         | 2,738        |         |              |         | 883          |        |       |        | 142     |       |   |          | (978     | )    |   |         | 2,785    |        
|                                         | Additional paid-in capital           |                           |         | 207,241      |         |              |         | 598,597      |        |       |        | 5,227   |       |   |          | (630,949 | )    |   |         | 180,116  |        
|                                         | Retained earnings                    |                           |         | 35,072       |         |              |         | 77,778       |        |       |        | 3,378   |       |   |          | (18,740  | )    |   |         | 97,488   |        
|                                         | Accumulated other comprehensive loss |                           |         |             |         |              |         |             |        |       |        | (810    | )     |   |          |         |      |   |         | (810     | )      
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         |                                      |                           | 245,051 |              |         |              | 677,258 |              |        |       | 7,937  |         |       |   | (650,667 | )        |      |   | 279,579 |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         
|                                         |                                      | $                         | 835,135 |              |         | $            | 763,591 |              |        | $     | 12,545 |         |       | $ | (650,290 | )        |      | $ | 960,981 |         
|                                         |                                      |                           |         |              |         |              |         |              |        |       |        |         |       |   |          |          |      |   |         |         

17



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.


CARAUSTAR INDUSTRIES, INC. AND
SUBSIDIARIES

| |                                                         
| | --------------------------------------------------------
| | NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS
| | (Unaudited)                                             

CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS

| |               
| | --------------
| | (In thousands)

|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |      |       |   |         |     |   |   |         |        |        | 
|------------------------------------------------------------------------------- | -------------------------------------------------------- | ----------------------------------------- | ------- | ------------ | ------ | ------------ | ------- | ------------ | ------ | ----- | ----- | ---- | ----- | - | ------- | --- | - | - | ------- | ------ | ------ | 
|                                                                                |                                                          |                                          
|                                                                                |                                                          | For The Three Months Ended March 31, 2002
|                                                                                |                                                          |                                          
|                                                                                |                                                          |                                           |         | Guarantor    |        | Nonguarantor |         |             
|                                                                                |                                                          | Parent                                    |         | Subsidiaries |        | Subsidiaries |         | Eliminations |        | Total
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |      
|SALES                                                                           |                                                          | $                                         |        |              |        | $            | 255,098 |              |        | $     | 5,254 |      |       | $ | (38,189 | )   |   | $ | 222,163 |       
|COST OF SALES                                                                   |                                                          |                                           |        |              |        |              | 199,484 |              |        |       | 4,185 |      |       |   | (38,189 | )   |   |   | 165,480 |       
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |      |       |   |         |     |   |   |         |       
|                                                                                |                                                          | Gross profit                              |         |              |       |              |         |              | 55,614 |       |       |      | 1,069 |   |         |     |  |   |         |        | 56,683 | 
|FREIGHT COSTS                                                                   |                                                          |                                           |        |              |        |              | 12,806  |              |        |       | 215   |      |       |   |        |     |   |   | 13,021  |       
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                    |                                                          |                                           | 3,408   |              |        |              | 29,365  |              |        |       | 1,222 |      |       |   |        |     |   |   | 33,995  |       
|RESTRUCTURING COSTS                                                             |                                                          |                                           |        |              |        |              |        |              |        |       |      |      |       |   |        |     |   |   |        |       
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |      |       |   |         |     |   |   |         |       
|                                                                                |                                                          | Operating (loss) income                   |         |              | (3,408 | )            |         |              | 13,443 |       |       |      | (368  | ) |         |     |  |   |         |        | 9,667  | 
|OTHER (EXPENSE) INCOME:                                                         |                                                          |                                           |         |              |        |              |         |              |        |       |       |      |       |   |         |     |   |   |         |       
|                                                                                | Interest expense                                         |                                           |         | (9,220       | )      |              |         | (79          | )      |       |       | (100 | )     |   |         | 97  |   |   |         | (9,302 | )     
|                                                                                | Interest income                                          |                                           |         | 458          |        |              |         | 13           |        |       |       | 2    |       |   |         | (97 | ) |   |         | 376    |       
|                                                                                | Equity in income (loss) of unconsolidated
    affiliates |                                           |         | 79           |        |              |         | (76          | )      |       |       |     |       |   |         |    |   |   |         | 3      |       
|                                                                                | Other, net                                               |                                           |         | 87           |        |              |         | (123         | )      |       |       | 4    |       |   |         |    |   |   |         | (32    | )     
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |      |       |   |         |     |   |   |         |       
|                                                                                |                                                          |                                           | (8,596  | )            |        |              | (265    | )            |        |       | (94   | )    |       |   |        |     |   |   | (8,955  | )     
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |      |       |   |         |     |   |   |         |       
|(LOSS) INCOME BEFORE MINORITY INTEREST, INCOME
    TAXES AND EXTRAORDINARY LOSS |                                                          |                                           | (12,004 | )            |        |              | 13,178  |              |        |       | (462  | )    |       |   |        |     |   |   | 712     |       
|MINORITY INTEREST                                                               |                                                          |                                           |        |              |        |              |        |              |        |       |      |      |       |   | 23      |     |   |   | 23      |       
|PROVISION FOR INCOME TAXES                                                      |                                                          |                                           | 236     |              |        |              |        |              |        |       |      |      |       |   |        |     |   |   | 236     |       
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |      |       |   |         |     |   |   |         |       
|(LOSS) INCOME BEFORE EXTRAORDINARY LOSS                                         |                                                          |                                           | (12,240 | )            |        |              | 13,178  |              |        |       | (462  | )    |       |   | 23      |     |   |   | 499     |       
|EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF
    DEBT, NET OF TAX BENEFIT    |                                                          |                                           |        |              |        |              |        |              |        |       |      |      |       |   |        |     |   |   |        |       
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |      |       |   |         |     |   |   |         |       
|NET (LOSS) INCOME                                                               |                                                          | $                                         | (12,240 | )            |        | $            | 13,178  |              |        | $     | (462  | )    |       | $ | 23      |     |   | $ | 499     |       
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |      |       |   |         |     |   |   |         |       

18



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.


CARAUSTAR INDUSTRIES, INC. AND
SUBSIDIARIES

| |                                                         
| | --------------------------------------------------------
| | NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS
| | (Unaudited)                                             

CONDENSED CONSOLIDATING STATEMENTS OF
OPERATIONS

| |               
| | --------------
| | (In thousands)

|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |     |       |   |         |      |   |   |         |        |        |  
|------------------------------------------------------------------------------- | -------------------------------------------------------- | ----------------------------------------- | ------- | ------------ | ------ | ------------ | ------- | ------------ | ------ | ----- | ----- | --- | ----- | - | ------- | ---- | - | - | ------- | ------ | ------ | -
|                                                                                |                                                          |                                          
|                                                                                |                                                          | For The Three Months Ended March 31, 2001
|                                                                                |                                                          |                                          
|                                                                                |                                                          |                                           |         | Guarantor    |        | Nonguarantor |         |             
|                                                                                |                                                          | Parent                                    |         | Subsidiaries |        | Subsidiaries |         | Eliminations |        | Total
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |      
|SALES                                                                           |                                                          | $                                         |        |              |        | $            | 264,980 |              |        | $     | 6,081 |     |       | $ | (37,973 | )    |   | $ | 233,088 |       
|COST OF SALES                                                                   |                                                          |                                           |        |              |        |              | 211,818 |              |        |       | 4,562 |     |       |   | (37,973 | )    |   |   | 178,407 |       
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |     |       |   |         |      |   |   |         |       
|                                                                                |                                                          | Gross profit                              |         |              |       |              |         |              | 53,162 |       |       |     | 1,519 |   |         |      |  |   |         |        | 54,681 |  
|FREIGHT COSTS                                                                   |                                                          |                                           |        |              |        |              | 12,785  |              |        |       | 201   |     |       |   |        |      |   |   | 12,986  |       
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                    |                                                          |                                           | 3,537   |              |        |              | 31,919  |              |        |       | 1,261 |     |       |   |        |      |   |   | 36,717  |       
|RESTRUCTURING COSTS                                                             |                                                          |                                           |        |              |        |              | 7,083   |              |        |       |      |     |       |   |        |      |   |   | 7,083   |       
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |     |       |   |         |      |   |   |         |       
|                                                                                |                                                          | Operating (loss) income                   |         |              | (3,537 | )            |         |              | 1,375  |       |       |     | 57    |   |         |      |  |   |         |        | (2,105 | )
|OTHER (EXPENSE) INCOME:                                                         |                                                          |                                           |         |              |        |              |         |              |        |       |       |     |       |   |         |      |   |   |         |       
|                                                                                | Interest expense                                         |                                           |         | (9,098       | )      |              |         | (321         | )      |       |       | (5  | )     |   |         | 214  |   |   |         | (9,210 | )     
|                                                                                | Interest income                                          |                                           |         | 59           |        |              |         | 235          |        |       |       | 8   |       |   |         | (214 | ) |   |         | 88     |       
|                                                                                | Equity in (loss) income of unconsolidated
    affiliates |                                           |         | (1,574       | )      |              |         | (11          | )      |       |       |    |       |   |         |     |   |   |         | (1,585 | )     
|                                                                                | Other, net                                               |                                           |         |             |        |              |         | 298          |        |       |       | (20 | )     |   |         |     |   |   |         | 278    |       
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |     |       |   |         |      |   |   |         |       
|                                                                                |                                                          |                                           | (10,613 | )            |        |              | 201     |              |        |       | (17   | )   |       |   |        |      |   |   | (10,429 | )     
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |     |       |   |         |      |   |   |         |       
|(LOSS) INCOME BEFORE MINORITY INTEREST, INCOME
    TAXES AND EXTRAORDINARY LOSS |                                                          |                                           | (14,150 | )            |        |              | 1,576   |              |        |       | 40    |     |       |   |        |      |   |   | (12,534 | )     
|MINORITY INTEREST                                                               |                                                          |                                           |        |              |        |              |        |              |        |       |      |     |       |   | (28     | )    |   |   | (28     | )     
|BENEFIT FOR INCOME TAXES                                                        |                                                          |                                           | (4,431  | )            |        |              |        |              |        |       |      |     |       |   |        |      |   |   | (4,431  | )     
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |     |       |   |         |      |   |   |         |       
|(LOSS) INCOME BEFORE EXTRAORDINARY LOSS                                         |                                                          |                                           | (9,719  | )            |        |              | 1,576   |              |        |       | 40    |     |       |   | (28     | )    |   |   | (8,131  | )     
|EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF
    DEBT, NET OF TAX BENEFIT    |                                                          |                                           | (2,695  | )            |        |              |        |              |        |       |      |     |       |   |        |      |   |   | (2,695  | )     
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |     |       |   |         |      |   |   |         |       
|NET (LOSS) INCOME                                                               |                                                          | $                                         | (12,414 | )            |        | $            | 1,576   |              |        | $     | 40    |     |       | $ | (28     | )    |   | $ | (10,826 | )     
|                                                                                |                                                          |                                           |         |              |        |              |         |              |        |       |       |     |       |   |         |      |   |   |         |       

19



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.


CARAUSTAR INDUSTRIES, INC. AND
SUBSIDIARIES

| |                                                         
| | --------------------------------------------------------
| | NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS
| | (Unaudited)                                             

CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS

| |               
| | --------------
| | (In thousands)

|                                                 |                                                               |                                           |        |              |   |              |       |              |   |       |      |      |   |   |   |   |  |   |        |        |  
|------------------------------------------------ | ------------------------------------------------------------- | ----------------------------------------- | ------ | ------------ | - | ------------ | ----- | ------------ | - | ----- | ---- | ---- | - | - | - | - |  | - | ------ | ------ | -
|                                                 |                                                               |                                          
|                                                 |                                                               | For The Three Months Ended March 31, 2002
|                                                 |                                                               |                                          
|                                                 |                                                               |                                           |        | Guarantor    |   | Nonguarantor |       |             
|                                                 |                                                               | Parent                                    |        | Subsidiaries |   | Subsidiaries |       | Eliminations |   | Total
|                                                 |                                                               |                                           |        |              |   |              |       |              |   |      
|Net cash provided by operating activities        |                                                               | $                                         | 11,694 |              |   | $            | 3,804 |              |   | $     | 534  |      |   | $ |  |   |  | $ | 16,032 |       
|                                                 |                                                               |                                           |        |              |   |              |       |              |   |       |      |      |   |   |   |   |  |   |        |       
|Investing activities:                            |                                                               |                                           |        |              |   |              |       |              |   |       |      |      |   |   |   |   |  |   |        |       
|                                                 | Purchases of property, plant and equipment                    |                                           |        | (565         | ) |              |       | (5,002       | ) |       |      | (265 | ) |   |   |  |  |   |        | (5,832 | )
|                                                 | Acquisitions of businesses, net of cash acquired              |                                           |        |             |   |              |       |             |   |       |      |     |   |   |   |  |  |   |        |       |  
|                                                 | Other                                                         |                                           |        | (222         | ) |              |       | 1,565        |   |       |      | (376 | ) |   |   |  |  |   |        | 967    |  
|                                                 |                                                               |                                           |        |              |   |              |       |              |   |       |      |      |   |   |   |   |  |   |        |       
|                                                 | Net cash used in investing activities                         |                                           |        | (787         | ) |              |       | (3,437       | ) |       |      | (641 | ) |   |   |  |  |   |        | (4,865 | )
|                                                 |                                                               |                                           |        |              |   |              |       |              |   |       |      |      |   |   |   |   |  |   |        |       
|Financing activities:                            |                                                               |                                           |        |              |   |              |       |              |   |       |      |      |   |   |   |   |  |   |        |       
|                                                 | Proceeds from senior credit facility                          |                                           |        |             |   |              |       |             |   |       |      |     |   |   |   |  |  |   |        |       |  
|                                                 | Repayments of senior credit facility                          |                                           |        |             |   |              |       |             |   |       |      |     |   |   |   |  |  |   |        |       |  
|                                                 | Proceeds from the issuance of the 7 1/4% and
    9 7/8% notes |                                           |        |             |   |              |       |             |   |       |      |     |   |   |   |  |  |   |        |       |  
|                                                 | Repayments of other long and short-term debt                  |                                           |        | (6,581       | ) |              |       |             |   |       |      |     |   |   |   |  |  |   |        | (6,581 | )
|                                                 | 7.74% senior notes prepayment penalty                         |                                           |        |             |   |              |       |             |   |       |      |     |   |   |   |  |  |   |        |       |  
|                                                 | Dividends paid                                                |                                           |        | (833         | ) |              |       |             |   |       |      |     |   |   |   |  |  |   |        | (833   | )
|                                                 | Other                                                         |                                           |        | (547         | ) |              |       |             |   |       |      |     |   |   |   |  |  |   |        | (547   | )
|                                                 |                                                               |                                           |        |              |   |              |       |              |   |       |      |      |   |   |   |   |  |   |        |       
|                                                 | Net cash used in financing activities                         |                                           |        | (7,961       | ) |              |       |             |   |       |      |     |   |   |   |  |  |   |        | (7,961 | )
|                                                 |                                                               |                                           |        |              |   |              |       |              |   |       |      |      |   |   |   |   |  |   |        |       
|Net change in cash and cash equivalents          |                                                               |                                           | 2,946  |              |   |              | 367   |              |   |       | (107 | )    |   |   |  |   |  |   | 3,206  |       
|Cash and cash equivalents at beginning of period |                                                               |                                           | 63,277 |              |   |              | 432   |              |   |       | 535  |      |   |   |  |   |  |   | 64,244 |       
|                                                 |                                                               |                                           |        |              |   |              |       |              |   |       |      |      |   |   |   |   |  |   |        |       
|Cash and cash equivalents at end of period       |                                                               | $                                         | 66,223 |              |   | $            | 799   |              |   | $     | 428  |      |   | $ |  |   |  | $ | 67,450 |       
|                                                 |                                                               |                                           |        |              |   |              |       |              |   |       |      |      |   |   |   |   |  |   |        |       

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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.


CARAUSTAR INDUSTRIES, INC. AND
SUBSIDIARIES

| |                                                         
| | --------------------------------------------------------
| | NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS
| | (Unaudited)                                             

CONDENSED CONSOLIDATING STATEMENTS OF CASH
FLOWS

| |               
| | --------------
| | (In thousands)

|                                                        |                                                               |                                           |        |              |   |              |        |              |   |       |       |        |   |   |   |   |  |   |        |          |  
|------------------------------------------------------- | ------------------------------------------------------------- | ----------------------------------------- | ------ | ------------ | - | ------------ | ------ | ------------ | - | ----- | ----- | ------ | - | - | - | - |  | - | ------ | -------- | -
|                                                        |                                                               |                                          
|                                                        |                                                               | For The Three Months Ended March 31, 2001
|                                                        |                                                               |                                          
|                                                        |                                                               |                                           |        | Guarantor    |   | Nonguarantor |        |             
|                                                        |                                                               | Parent                                    |        | Subsidiaries |   | Subsidiaries |        | Eliminations |   | Total
|                                                        |                                                               |                                           |        |              |   |              |        |              |   |      
|Net cash (used in) provided by operating
    activities |                                                               | $                                         | (8,954 | )            |   | $            | 13,591 |              |   | $     | 757   |        |   | $ |  |   |  | $ | 5,394  |         
|                                                        |                                                               |                                           |        |              |   |              |        |              |   |       |       |        |   |   |   |   |  |   |        |         
|Investing activities:                                   |                                                               |                                           |        |              |   |              |        |              |   |       |       |        |   |   |   |   |  |   |        |         
|                                                        | Purchases of property, plant and equipment                    |                                           |        | (236         | ) |              |        | (10,456      | ) |       |       | (1,134 | ) |   |   |  |  |   |        | (11,826  | )
|                                                        | Acquisitions of businesses, net of cash acquired              |                                           |        |             |   |              |        | (34          | ) |       |       |       |   |   |   |  |  |   |        | (34      | )
|                                                        | Other                                                         |                                           |        | 991          |   |              |        | (1,565       | ) |       |       | (142   | ) |   |   |  |  |   |        | (716     | )
|                                                        |                                                               |                                           |        |              |   |              |        |              |   |       |       |        |   |   |   |   |  |   |        |         
|                                                        | Net cash provided by (used in) investing
    activities       |                                           |        | 755          |   |              |        | (12,055      | ) |       |       | (1,276 | ) |   |   |  |  |   |        | (12,576  | )
|                                                        |                                                               |                                           |        |              |   |              |        |              |   |       |       |        |   |   |   |   |  |   |        |         
|Financing activities:                                   |                                                               |                                           |        |              |   |              |        |              |   |       |       |        |   |   |   |   |  |   |        |         
|                                                        | Proceeds from senior credit facility                          |                                           |        | 18,000       |   |              |        |             |   |       |       |       |   |   |   |  |  |   |        | 18,000   |  
|                                                        | Repayments of senior credit facility                          |                                           |        | (212,000     | ) |              |        |             |   |       |       |       |   |   |   |  |  |   |        | (212,000 | )
|                                                        | Proceeds from the issuance of the 7 1/4% and
    9 7/8% notes |                                           |        | 291,200      |   |              |        |             |   |       |       |       |   |   |   |  |  |   |        | 291,200  |  
|                                                        | Repayments of other long and short-term debt                  |                                           |        | (66,200      | ) |              |        | (851         | ) |       |       |       |   |   |   |  |  |   |        | (67,051  | )
|                                                        | 7.74% senior notes prepayment penalty                         |                                           |        | (3,565       | ) |              |        |             |   |       |       |       |   |   |   |  |  |   |        | (3,565   | )
|                                                        | Dividends paid                                                |                                           |        | (4,698       | ) |              |        |             |   |       |       |       |   |   |   |  |  |   |        | (4,698   | )
|                                                        | Other                                                         |                                           |        | (1,375       | ) |              |        |             |   |       |       |       |   |   |   |  |  |   |        | (1,375   | )
|                                                        |                                                               |                                           |        |              |   |              |        |              |   |       |       |        |   |   |   |   |  |   |        |         
|                                                        | Net cash provided by (used in) financing
    activities       |                                           |        | 21,362       |   |              |        | (851         | ) |       |       |       |   |   |   |  |  |   |        | 20,511   |  
|                                                        |                                                               |                                           |        |              |   |              |        |              |   |       |       |        |   |   |   |   |  |   |        |         
|Net change in cash and cash equivalents                 |                                                               |                                           | 13,163 |              |   |              | 685    |              |   |       | (519  | )      |   |   |  |   |  |   | 13,329 |         
|Cash and cash equivalents at beginning of period        |                                                               |                                           | 7,338  |              |   |              | 536    |              |   |       | 1,026 |        |   |   |  |   |  |   | 8,900  |         
|                                                        |                                                               |                                           |        |              |   |              |        |              |   |       |       |        |   |   |   |   |  |   |        |         
|Cash and cash equivalents at end of period              |                                                               | $                                         | 20,501 |              |   | $            | 1,221  |              |   | $     | 507   |        |   | $ |  |   |  | $ | 22,229 |         
|                                                        |                                                               |                                           |        |              |   |              |        |              |   |       |       |        |   |   |   |   |  |   |        |         



|          |                  
|--------- | -----------------
|Note  12. | Subsequent Events



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In January 2002, the Company completed a third
    amendment to its senior credit facility that modified the
    definitions of Interest Expense, Premier
    Boxboard Interest Expense and Standard Gypsum
    Interest Expense to include interest income and the
    benefit or expense derived from interest rate swap agreements or
    other interest hedge agreements. Additionally, the amendment
    lowered the minimum allowable interest coverage ratio for the
    fourth quarter of 2001 from 2.5:1.0 to

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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.25:1.0, the first quarter of 2002 from 2.75:1.0
    to 2.25:1.0, and the second quarter of 2002 from 2.75:1.0 to
    2.50:1.0.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | Also in January 2002, the Company entered into
    agreements with the PBL and Standard Gypsum lenders that
    correspond to the amendments made in the third amendment to the
    senior credit facility described above, in order to avoid events
    of default under those guarantees resulting from a violation of
    the interest ratio coverage covenants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | In June 2002, the Company recorded a $985
    thousand noncash, pretax restructuring charge related to the
    permanent closure of the Companys Camden and Chicago
    paperboard mills, which were shut down in 2000 and 2001,
    respectively. The $985 thousand charge represents a revised
    estimate of fixed asset disposals at these mills. The Chicago
    mill recorded a $1.5 million additional provision while the
    Camden mill overestimated the fixed asset write-off and recorded
    a credit of $500 thousand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | In August 2002, the Company unwound its
    $185.0 million interest rate swap agreement related to the
    9 7/8% senior subordinated notes and received
    $5.5 million from the bank counter-party. Simultaneously,
    the Company executed a new swap agreement with a fixed spread
    that was 17 basis points higher than the original swap
    agreement. The new swap agreement is the same notional amount,
    has the same terms and covers the same notes as the original
    agreement. In September 2002, the Company repaid the
    $5.5 million and entered into a new swap agreement that
    lowered the fixed spread by 7.5 basis points from the
    August 2002 swap.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | On September 30, 2002, the Company acquired
    certain operating assets (excluding accounts receivable) of the
    Smurfit Industrial Packaging Group, a business unit of Jefferson
    Smurfit Corporation (U.S.), for approximately
    $67.1 million, and assumed $1.7 million of
    indebtedness outstanding under certain industrial revenue bonds.
    The acquisition was funded with cash on hand. Goodwill of
    approximately $31.9 million and intangible assets of
    approximately $8.7 million were recorded in conjunction
    with the Smurfit Industrial Packaging Group acquisition. The
    intangible asset is associated with the value of acquired
    customer relationships and will be amortized over 15 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | Smurfit Industrial Packaging Group operations
    included 17 paper tube and core plants, 3 uncoated
    recycled paperboard mills and 3 partition manufacturing
    plants. These facilities are located in 16 states across
    the U.S. and in Canada.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | In September 2002, in connection with the
    Companys acquisition of the Smurfit Industrial Packaging
    Group, the Company entered into a fourth amendment to its senior
    credit facility. The purpose of this amendment was to obtain the
    required lender consent under the senior credit facility for the
    consummation of the acquisition (and the incurrence of up to
    $60.0 million in subordinated debt financing to refinance
    borrowings under the credit facility and restore cash used to
    fund a portion of the acquisition price), to lower the minimum
    allowable tangible net worth for all periods after the effective
    date of the amendment, and to increase the maximum permitted
    leverage ratio covenant to 70.0% for the fiscal quarters ending
    December 31, 2002, March 31, 2003 and June 30,
    2003, and 67.5% for the fiscal quarter ending September 30,
    2003. Additionally, the minimum interest coverage ratio covenant
    was replaced with a minimum fixed charge coverage ratio covenant
    beginning with the third quarter of 2002. These modifications,
    in addition to increasing the Companys flexibility to
    finance the acquisition, were necessary to enable the Company to
    avoid violations of the leverage ratio and interest coverage
    ratio covenants for the third quarter of 2002 and violations of
    the leverage ratio covenant in future periods.
|
| | In exchange for these modifications, the
    Companys lenders required an increase in the applicable
    margin component of the interest rates applicable to borrowings
    under the facility and the facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | fee rate applicable to the undrawn portion of the
    facility. The amendment provided for a margin pricing increase
    of 0.25% effective November 15, 2002, if the Company had
    not issued at least $50.0 million in senior subordinated
    notes by that date, and an increase of 0.25% every three months
    after that date until the first date on which the Companys
    balance of cash and cash equivalents is at least
    $50.0 million and the Company has no loans outstanding
    under the facility (subject to a maximum interest margin of
    3.75% for Eurodollar rate loans and 2.50% for base rate loans).
    In addition, under the terms of the fourth amendment, the
    Company was required to enter into a security agreement under
    which the Company and its subsidiary guarantors under the senior
    credit facility granted a first priority security interest in
    their respective accounts receivable and inventory to secure
    their obligations under the credit facility and the
    Companys obligations under its 50% guarantees of the
    credit facilities of Standard Gypsum and Premier Boxboard.
|
| | In November 2002, the Company unwound
    $50.0 million of its $185.0 million interest rate swap
    agreement related to the 9 7/8% senior subordinated notes,
    and received approximately $2.8 million from the bank
    counter-party. Simultaneously, the Company unwound
    $50.0 million of one of its interest rate swap agreements,
    related to the 7 3/8% senior notes, and received
    approximately $3.4 million. The $6.2 million gain will
    be accreted to interest expense over the life of the notes and
    will partially offset the increase in interest expense. The
    $2.8 million gain lowered the effective interest rate of
    the 9 7/8% senior subordinated notes from 10.0% to 9.8%.
    The $3.4 million gain lowered the effective interest rate
    of the 7 3/8% senior subordinated notes from 7.5% to 7.2%.                                                                                                                                                                                                                                                                                                      
|
| | On December 27, 2002, the Company completed
    a fifth amendment to its senior credit facility. This amendment
    modified the calculation of net worth for purposes of our
    leverage ratio and tangible net worth financial maintenance
    covenants to exclude adjustments to other comprehensive loss
    related to the Companys defined benefit pension plan. The
    amendment also allows the Company to exclude from these
    financial maintenance covenant calculations any restructuring
    costs recorded in the fourth quarter of 2002 and first quarter
    of 2003 as long as the aggregate of these restructuring costs
    does not exceed $16.0 million, on an after tax basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | In December 2002, the Company initiated a plan to
    permanently close its Halifax paperboard mill located in Roanoke
    Rapids, North Carolina. This mill was idled in June 2001 and the
    Company planned to restart it when industry demand improved. The
    Company made the decision to permanently close and dismantle the
    mill based on the current and foreseeable conditions of
    paperboard demand. In connection with this plan, the Company
    recorded a pretax charge to operations of approximately
    $3.4 million. The $3.4 million charge included a
    $3.0 million noncash write down of assets to estimated net
    realizable value and a $370 thousand accrual for other exit
    costs.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | In December 2002, the Company initiated a plan to
    consolidate its Carolina Converting, Inc. facility in
    Fayetteville, North Carolina into its Carolina Component
    Concepts facility located in Mooresville, North Carolina and
    recorded a pretax charge to operations of approximately
    $6.0 million. The decision to consolidate these facilities
    was initiated by the loss of a significant customer, combined
    with a significant decline in demand in other specialty
    converted products. The $6.0 million charge included an
    accrual for a $2.4 million noncash write down of assets to
    estimated net realizable value and a $3.6 million accrual
    for other exit costs.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | In December 2002, the Company initiated a plan to
    restructure its carton plant in Ashland, Ohio to serve a
    smaller, more focused carton market and recorded a pretax charge
    to operations of approximately $2.4 million. The
    $2.4 million charge included an accrual for a
    $1.2 million noncash write down of assets to estimated net
    realizable value, a $494 thousand accrual for severance and
    termination benefits for 18 hourly and 8 salaried
    employees terminated in connection with this plan, as well as a
    $688 thousand accrual for other exit costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In January 2003, the company effectively unwound
    $85.0 million of its $135.0 million interest rate swap
    agreement related to the 9 7/8% senior subordinated notes
    by assigning the Companys rights and obligations under the
    swap to one of the Companys lenders under the senior
    credit facility. In exchange, the Company received approximately
    $4.3 million. The Company will accrete this gain into
    interest expense over the remaining term of the notes, which
    will partially offset the increase in interest expense. The gain
    will lower the effective interest rate of the 9 7/8% senior
    subordinated notes from 9.8% to 9.5%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | In February 2003, the Company announced the
    indefinite idling of one of two coated recycled paperboard
    machines at its Rittman, Ohio paperboard mill. Recently
    completed upgrades in the Companys mill system will
    facilitate the transfer of production from the idled machine to
    the Companys other mills, including Rittmans other
    machine. The Rittman workforce will be indefinitely reduced by
    80 hourly employees, and the Company will recognize a
    related expense of approximately $1.2 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | On March 28, 2003, the Company completed a
    sixth amendment to its senior credit facility. This amendment
    increased the Companys maximum permitted leverage ratio to
    70.0% for the fiscal quarters ending September 30, 2003 and
    December 31, 2003 and 67.5% for each succeeding fiscal
    quarter, lowered the Companys minimum fixed charge
    coverage ratio from 1.50:1.0 for all fiscal quarters to 0.95:1.0
    for the fiscal quarter ending March 31, 2003, 0.85:1.0 for
    the fiscal quarters ending June 30, 2003 and
    September 30, 2003 and 1.05:1.0 for the fiscal quarter
    ending December 31, 2003, lowered the Companys
    minimum tangible net worth covenant for all periods on and after
    the effective date of the amendment, and lowered the
    Companys maximum permitted capital expenditures to
    $30.0 million per fiscal year. For purposes of calculating
    compliance with the Companys leverage ratio and net worth
    covenants, this amendment also establishes a maximum of
    $30.0 million for aggregate adjustments to other
    comprehensive loss related to the Companys defined benefit
    pension plan. This amendment also increases to
    $43.0 million the Companys subfacility for the
    issuance of letters of credit under the facility, in order to
    permit the Company to obtain a letter of credit to replace the
    Companys Standard Gypsum joint venture guarantee as
    described below. Finally, this amendment terminated the
    quarterly pricing increase established under the fourth
    amendment to the facility entered into in September 2002 and
    fixed the Companys maximum interest margins at 3.25% for
    LIBOR loans and 2.00% for base rate loans. The financial
    covenant modifications were necessary to enable the Company to
    avoid possible violations of its leverage ratio covenant for the
    third and fourth quarters of 2003, its fixed charge coverage
    ratio covenant for all quarters during 2003 and its net worth
    covenant for the second quarter of 2003.
|
| | In exchange for these modifications, the
    Companys lenders required it to permanently reduce the
    aggregate commitments under the facility from $75.0 million
    to $47.0 million, to shorten the maturity of the facility
    from March 29, 2005 to April 1, 2004, and to pay a
    monthly fee beginning on July 1, 2002 equal to 1.0% of the
    aggregate commitments under the facility. The Companys
    lenders also required the establishment of a borrowing base that
    restricts availability under the facility based on monthly
    computations of eligible accounts receivable and inventory,
    reduced by the Companys net hedging obligations owed to
    lenders under the facility and by the amount of the
    Companys guarantee obligations under its joint venture
    guarantees that are not secured or replaced by letters of
    credit. Additionally, the Company will not be permitted to
    borrow or request the issuance of letters of credit under the
    facility unless the Company has less than $10.0 million in
    freely available cash and cash equivalents on its consolidated
    balance sheet both before and immediately after giving effect to
    the application of the proceeds of such borrowing. The amendment
    also requires the Company to prepay outstanding loans under the
    facility and/or cash collateralize outstanding letters of credit
    with the net cash proceeds from any issuance of debt or equity
    or, to the extent not reinvested in similar assets, from any
    sale of assets or insurance or condemnation award. The                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

24



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | amendment further requires the Company to provide
    consolidated financial statements and joint venture financial
    statements to the lenders on a monthly basis. Finally, the
    amendment prohibits the Company from incurring capital leases or
    other indebtedness, making acquisitions or other investments, or
    prepaying other indebtedness unless the Companys fixed
    charge coverage ratio for the most recently reported fiscal
    quarter exceeds 1.50:1.0 (calculated on a pro forma basis with
    regard to acquisitions), and completely eliminates the
    Companys ability to pay dividends or repurchase shares of
    its stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | In connection with this amendment, the Company
    was also required to amend its security agreement to provide for
    a springing lien on its machinery and equipment that will become
    effective on July 1, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | Prior to this amendment to the Companys
    senior credit facility, its Standard Gypsum joint venture
    guarantee contained financial maintenance covenants that were
    identical to those contained in its senior credit facility.
    However, the lenders to Standard Gypsum were unwilling to agree
    to the modifications that the Company made under the amendment
    to the senior credit facility. In order to avoid an event of
    default under that guarantee, the Company obtained a letter of
    credit under its senior credit facility in the face amount of
    $28.4 million. This letter of credit is issued in favor of
    the Standard Gypsum lenders and replaces the Companys
    guarantee obligations. In exchange for this letter of credit,
    the Standard Gypsum lenders terminated the Companys
    guarantee agreement and released its security interests in the
    Companys accounts receivable and inventory. The Company
    must also pay a fee on October 28, 2003 in the amount of 2%
    of the full amount of this letter of credit in the event the
    letter of credit remains outstanding on that date. The letter of
    credit is renewable annually and may be drawn in the event of a
    default under the Standard Gypsum credit facility.                                                                                                                                 
|
| | Concurrently with the amendments to the
    Companys senior credit facility and the issuance of the
    letter of credit to the Standard Gypsum joint venture lenders as
    described above, the Company entered into an amendment of its
    Premier Boxboard guarantee that made changes to the financial
    covenants corresponding to those made in the sixth amendment to
    the Companys senior credit facility. In exchange for this
    amendment, the Premier Boxboard lenders required that the
    maturity of the Premier Boxboard credit facility be shortened
    from June 26, 2005 to January 5, 2004 and that the
    aggregate commitments under the facility be reduced to equal the
    amount of outstanding loans and letters of credit of
    $20.3 million. Any reductions of outstanding loans under
    the facility may not be reborrowed and will permanently reduce
    the commitments, thereby effectively requiring the Company to
    fund Premier Boxboards operations from its internal cash
    flow and from any cash contributions that the Company and its
    joint venture partner are permitted to make. In addition, the
    Company will be required to pay a fee to the Premier Boxboard
    lenders of $100,000 on July 1, 2003 and on the first day of
    each month thereafter until the facility is terminated and all
    outstanding borrowings under the facility are fully paid.
|
| | In March 2003, the Company announced the
    permanent closure of its Buffalo Paperboard mill located in
    Lockport, New York. The Company expects to record a
    restructuring charge of approximately $5.0 million in
    connection with this closure. The Buffalo mill had an annual
    production capacity of approximately 72 thousand tons. In
    2002, the mill operated at approximately 50% of capacity and
    recorded approximately $9.0 million in trade sales. Buffalo
    sales will be transferred to the Companys other mills.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 1.


FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002

PART I, ITEM 2.





CARAUSTAR INDUSTRIES, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION

AND RESULTS OF OPERATIONS


The following is managements discussion and
analysis of certain significant factors that have affected our
financial condition and operating results during the periods
included in the accompanying condensed consolidated financial
statements.

General

We are a major manufacturer of recycled
paperboard and converted paperboard products. We operate in
three business segments. The paperboard segment manufactures
100% recycled uncoated and clay-coated paperboard and collects
recycled paper and brokers recycled paper and other paper rolls.
The tube, core and composite container segment produces spiral
and convolute-wound tubes, cores and cans. The carton and custom
packaging segment produces printed and unprinted folding and
set-up cartons and provides contract manufacturing and packaging
services.

Our business is vertically integrated to a large
extent. This means that our converting operations consume a
large portion of our own paperboard production, approximately
37% in the first three months of 2002. The remaining 63% of our
paperboard production is sold to external customers in any of
the four recycled paperboard end-use markets: tube, core and
composite containers; folding cartons; gypsum wallboard facing
paper and other specialty products. We are the only major
manufacturer to serve all four end-use markets. As part of our
strategy to maintain optimum levels of production capacity, we
regularly purchase paperboard from other manufacturers in an
effort to minimize the potential impact of demand declines on
our own mill system. Additionally, each of our mills can produce
recycled paperboard for more than one end-use market. This
allows us to shift production between mills in response to
customer or market demands.

Recovered fiber, which is derived from recycled
paper stock, is our most significant raw material. Historically,
the cost of recovered fiber has fluctuated significantly due to
market and industry conditions. For example, our average
recovered fiber cost per ton of paperboard produced increased
from $43 per ton in 1993 to $144 per ton in 1995, an increase of
235%, before dropping to $66 per ton in 1996. Same-mill
recovered fiber cost per ton averaged $65 during 2001 and $60
during the first three months of 2002.

We raise our selling prices in response to
increases in raw material costs. However, we often are unable to
pass the full amount of these costs through to our customers on
a timely basis, and as a result often cannot maintain our
operating margins in the face of dramatic cost increases. We
experience margin shrinkage during all periods of price
increases due to customary time lags in implementing our price
increases. We cannot assure you that we will be able to recover
any future increases in the cost of recovered fiber by raising
the prices of our products. Even if we are able to recover
future cost increases, our operating margins and results of
operations may still be materially and adversely affected by
time delays in the implementation of price increases.

Excluding labor, energy is our most significant
manufacturing cost. Energy is used to generate steam used in the
paper making process and to operate our paperboard machines and
all of our other converting machinery. Our energy costs
increased steadily throughout 2000 and the first quarter of 2001
before showing some improvement by the end of 2001. In 2001, the
average energy cost in our mill system was approximately $57 per
ton. During the first three months of 2002, energy costs
decreased 14.0% to approximately $49 per ton. The decrease was
due primarily to decreases in natural gas and fuel oil costs.
Until recently, our business had not been significantly affected
by energy costs, and we historically have not passed increases
in energy costs through to our customers. Consequently, we were
not able to pass through to our customers all of the energy cost
increases we incurred. As a result, our operating margins were
adversely affected. We continue to evaluate our energy costs and
consider ways to factor energy costs into our pricing. However,
we cannot assure you that

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FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 2.


our operating margins and results of operations
will not continue to be adversely affected by rising energy
costs.

Historically, we have grown our business,
revenues and production capacity to a significant degree through
acquisitions. Based on the difficult operating climate for our
industry and our financial position, the pace of our acquisition
activity, and accordingly, our revenue growth, has slowed as we
have focused on maximizing the productivity of our existing
facilities. We made no acquisitions during the first three
months of 2002.

We are a holding company that currently operates
our business through 19 subsidiaries, as of March 2002. We
also own a 50% interest in two joint ventures with
Temple-Inland, Inc. We have an additional joint venture with an
unrelated entity in which our investment and share of earnings
of this venture is immaterial. We account for these interests in
our joint ventures under the equity method of accounting. See
 Liquidity and Capital Resources below.

Critical Accounting Policies

Our accompanying consolidated financial
statements have been prepared in conformity with accounting
principles generally accepted in the United States of America,
which require management to make estimates that affect the
amounts of revenues, expenses, assets and liabilities reported.
The following are critical accounting matters which are both
very important to the portrayal of our financial condition and
results and which require some of managements most
difficult, subjective and complex judgments. The accounting for
these matters involves the making of estimates based on current
facts, circumstances and assumptions which, in managements
judgment, could change in a manner that would materially affect
managements future estimates with respect to such matters
and, accordingly, could cause future reported financial
condition and results to differ materially from financial
condition and results reported based on managements
current estimates.

Revenue Recognition.We recognize revenue in accordance with SEC Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial
Statements, (SAB 101). SAB 101
requires that four basic criteria must be met before revenue can
be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred; (3) the selling
price is fixed and determinable; and (4) collectibility is
reasonably assured. Determination of criterion (4) is based
on managements judgments regarding the collectibility of
our accounts receivable. Generally, we recognize revenue when we
ship our manufactured products or when we complete a service.

Accounts Receivable.We perform ongoing credit evaluations of our customers and
adjust credit limits based upon payment history and the
customers current credit worthiness, as determined by our
review of their current credit information. We continuously
monitor collections from our customers and maintain a provision
for estimated credit losses based upon our historical experience
and any specific customer collection issues that we have
identified. While such credit losses have historically been
within our expectations and the provisions established, we
cannot guarantee that we will continue to experience the same
credit loss rates that we have in the past.

Inventory.Inventories are carried at the lower of cost or market. Cost
includes materials, labor and overhead. Market, with respect to
all inventories, is replacement cost or net realizable value.
Management frequently reviews inventory to determine the
necessity of reserves for excess, obsolete or unsaleable
inventory. These reviews require management to assess customer
and market demand. These estimates may prove to be inaccurate,
in which case we may have understated the reserve required for
excess, obsolete or unsaleable inventory.

Impairment of Long-Lived Assets and
Goodwill.We periodically evaluate
acquired businesses for potential impairment indicators.
Effective January 1, 2002 we adopted SFAS No. 142,
Goodwill and Other Intangible Assets. This
pronouncement requires us to perform a goodwill impairment test
at least annually. See Note 7

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FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 2.


of Notes to Consolidated Financial
Statements for additional information regarding our
goodwill accounting. Our judgments regarding the existence of
impairment indicators are based on legal factors, market
conditions and operational performance of our acquired
businesses. Future events could cause us to conclude that
impairment indicators exist and that goodwill associated with
our acquired businesses is impaired. Evaluating the impairment
of goodwill also requires us to estimate future operating
results and cash flows, which also require judgment by
management. Any resulting impairment loss could have a material
adverse impact on our net income and our balance sheet.

Self-Insurance.We
are self-insured for the majority of our workers
compensation costs and group health insurance costs, subject to
specific retention levels. Consulting actuaries and
administrators assist us in determining our liability for
self-insured claims. While we believe that our assumptions are
appropriate, significant differences in our actual experience or
significant changes in our assumptions may materially affect our
workers compensation costs and group health insurance
costs.

Accounting for Income
Taxes.As part of the process of
preparing our consolidated financial statements we are required
to estimate our income taxes in each of the jurisdictions in
which we operate. This process involves estimating our actual
current tax exposure, together with assessing temporary
differences resulting from differing treatment of items for tax
and accounting purposes. These differences result in deferred
tax assets and liabilities, which are included within our
consolidated balance sheet. We must then assess the likelihood
that our deferred tax assets will be recovered from future
taxable income and to the extent we believe that recovery is not
likely, we must establish a valuation allowance. To the extent
we establish a valuation allowance or increase this allowance in
a period, we must include an expense within the tax provision in
the statement of operations.

Significant management judgment is required in
determining our provision for income taxes, our deferred tax
assets and liabilities and any valuation allowance recorded
against our deferred tax assets. We record valuation allowances
due to uncertainties related to our ability to utilize some of
our deferred tax assets, primarily consisting of certain state
net operating losses carried forward and state tax credits,
before they expire. The valuation allowance is based on our
estimates of taxable income by jurisdiction in which we operate
and the period over which our deferred tax assets will be
recoverable. In the event that actual results differ from these
estimates or we adjust these estimates in future periods we may
need to establish an additional valuation allowance which could
have a material negative impact on our net income and our
balance sheet.

Pension and Other Postretirement
Benefits.The determination of our
obligation and expense for pension and other postretirement
benefits is dependent on our selection of certain assumptions
used by actuaries in calculating such amounts. Those assumptions
include, among others, the discount rate, expected long-term
rate of return on plan assets and rates of increase in
compensation and healthcare costs. In accordance with generally
accepted accounting principles, actual results that differ from
our assumptions are accumulated and amortized over future
periods and therefore, generally affect our recognized expense,
recorded obligation and funding requirements in future periods.
While we believe that our assumptions are appropriate,
significant differences in our actual experience or significant
changes in our assumptions may materially affect our pension and
other postretirement benefit obligations and our future expense.

Three Months Ended March 31, 2002 and
2001

The following table shows volume, gross paper
margins and related data for the periods indicated. The volume
information shown below includes shipments of unconverted
paperboard and converted paperboard products. Tonnage volumes
from our business segments, excluding tonnage produced or
converted by our unconsoli-

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FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 2.


dated joint ventures, are combined and presented
along end-use market lines. Additional financial information is
reported by segment in the notes to the consolidated financial
statements.

|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |       |       |       |      |  
|------------------------------------------------------------- | --------------------------------------------------------- | ------------------------------ | -------------------------------------- | ----------------------------------------- | ---- | ------ | ----- | ------ | ---- | --- | ----- | ---- | ---- | --- | ---- | ----- | ----- | ----- | ---- | -
|                                                              |                                                           |                                |                                        |                                           |      |       
|                                                              |                                                           | Three Months Ended             |                                        |                                           |      |       
|                                                              |                                                           | March 31,                      |                                        |                                           |      |       
|                                                              |                                                           |                                |                                        |                                           |      | %     
|                                                              |                                                           | 2002                           |                                        | 2001                                      |      | Change |       | Change
|                                                              |                                                           |                                |                                        |                                           |      |        |       |       
|Production source of paperboard tons sold (in
    thousands): |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              | From paperboard mill production                           |                                |                                        | 227.0                                     |      |        |       | 217.9  |      |     |       | 9.1  |      |     |      | 4.2   | %    
|                                                              | Outside purchases                                         |                                |                                        | 32.0                                      |      |        |       | 31.7   |      |     |       | 0.3  |      |     |      | 0.9   | %    
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              |                                                           |                                |                                        | Total paperboard tonnage                  |      |        | 259.0 |        |      |     | 249.6 |      |      |     | 9.4  |       |       |       | 3.8  | %
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              | Tons sold by market (in thousands):                       |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |       |      
|                                                              | Tube, core and composite container volume                 |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |       |      
|                                                              |                                                           | Paperboard (internal)          |                                        |                                           | 44.4 |        |       |        | 46.7 |     |       |      | (2.3 | )   |      |       | -4.9  | %    
|                                                              |                                                           | Outside purchases              |                                        |                                           | 5.6  |        |       |        | 6.7  |     |       |      | (1.1 | )   |      |       | -16.4 | %    
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              | Tube, core and composite container converted
    products |                                |                                        | 50.0                                      |      |        |       | 53.4   |      |     |       | (3.4 | )    |     |      | -6.4  | %    
|                                                              | Unconverted paperboard                                    |                                |                                        | 8.4                                       |      |        |       | 7.5    |      |     |       | 0.9  |      |     |      | 12.0  | %    
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              |                                                           |                                |                                        | Tube, core and composite container volume |      |        | 58.4  |        |      |     | 60.9  |      |      |     | (2.5 | )     |       |       | -4.1 | %
|                                                              | Folding carton volume                                     |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |       |      
|                                                              |                                                           | Paperboard (internal)          |                                        |                                           | 22.9 |        |       |        | 20.0 |     |       |      | 2.9  |     |      |       | 14.5  | %    
|                                                              |                                                           | Outside purchases              |                                        |                                           | 25.0 |        |       |        | 23.4 |     |       |      | 1.6  |     |      |       | 6.8   | %    
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              | Folding carton converted products                         |                                |                                        | 47.9                                      |      |        |       | 43.4   |      |     |       | 4.5  |      |     |      | 10.4  | %    
|                                                              | Unconverted paperboard                                    |                                |                                        | 58.7                                      |      |        |       | 54.9   |      |     |       | 3.8  |      |     |      | 6.9   | %    
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              |                                                           |                                |                                        | Folding carton volume                     |      |        | 106.6 |        |      |     | 98.3  |      |      |     | 8.3  |       |       |       | 8.4  | %
|                                                              | Gypsum wallboard facing paper volume                      |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |       |      
|                                                              |                                                           | Unconverted paperboard         |                                        |                                           | 39.7 |        |       |        | 35.1 |     |       |      | 4.6  |     |      |       | 13.1  | %    
|                                                              |                                                           | Outside purchases (for resale) |                                        |                                           |     |        |       |        |     |     |       |      |     |     |      |       |      |      
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              |                                                           |                                |                                        | Gypsum wallboard facing paper volume      |      |        | 39.7  |        |      |     | 35.1  |      |      |     | 4.6  |       |       |       | 13.1 | %
|                                                              | Other specialty products volume                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |       |      
|                                                              |                                                           | Paperboard (internal)          |                                        |                                           | 16.4 |        |       |        | 18.7 |     |       |      | (2.3 | )   |      |       | -12.3 | %    
|                                                              |                                                           | Outside purchases              |                                        |                                           | 1.4  |        |       |        | 1.6  |     |       |      | (0.2 | )   |      |       | -12.5 | %    
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              | Other specialty converted products                        |                                |                                        | 17.8                                      |      |        |       | 20.3   |      |     |       | (2.5 | )    |     |      | -12.3 | %    
|                                                              | Unconverted paperboard                                    |                                |                                        | 36.5                                      |      |        |       | 35.0   |      |     |       | 1.5  |      |     |      | 4.3   | %    
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              |                                                           |                                |                                        | Other specialty products volume           |      |        | 54.3  |        |      |     | 55.3  |      |      |     | (1.0 | )     |       |       | -1.8 | %
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              |                                                           |                                |                                        | Total paperboard tonnage                  |      |        | 259.0 |        |      |     | 249.6 |      |      |     | 9.4  |       |       |       | 3.8  | %
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|Gross paper margins ($/ton):                                  |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              |                                                           | Paperboard mill:               |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |       |       |      
|                                                              |                                                           |                                | Average same-mill net selling price    |                                           | $    | 394    |       |        | $    | 422 |       |      | $    | (28 | )    |       |       | -6.6  | %   
|                                                              |                                                           |                                | Average same-mill recovered fiber cost |                                           |      | 60     |       |        |      | 69  |       |      |      | (9  | )    |       |       | -13.0 | %   
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              |                                                           |                                |                                        | Paperboard mill gross paper margin        |      | $      | 334   |        |      | $   | 353   |      |      | $   | (19  | )     |       |       | -5.4 | %
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              |                                                           | Tube and core:                 |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |       |       |      
|                                                              |                                                           |                                | Average net selling price              |                                           | $    | 771    |       |        | $    | 797 |       |      | $    | (26 | )    |       |       | -3.3  | %   
|                                                              |                                                           |                                | Average paperboard cost                |                                           |      | 434    |       |        |      | 453 |       |      |      | (19 | )    |       |       | -4.2  | %   
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      
|                                                              |                                                           |                                |                                        | Tube and core gross paper margin          |      | $      | 337   |        |      | $   | 344   |      |      | $   | (7   | )     |       |       | -2.0 | %
|                                                              |                                                           |                                |                                        |                                           |      |        |       |        |      |     |       |      |      |     |      |      

Sales.Our
consolidated sales for the three months ended March 31,
2002 were $222.2 million, a decrease of 4.7% from
$233.1 million in the same period of 2001. This decline was
due primarily to a decrease in selling prices in all segments,
partially offset by increased volume in the paperboard segment.

Total paperboard tonnage for the first quarter of
2002 increased 3.8% to 259.0 thousand tons compared to 249.6
thousand tons in the first quarter of 2001. This increase was
primarily due to higher shipments of

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FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 2.


unconverted paperboard to external customers in
the gypsum wallboard facing paper and the folding carton
markets. First quarter 2002 outside purchases increased 0.9% to
32.0 thousand tons. Tons sold from paperboard mill production
increased 4.2% for the first three months of 2002 to 227.0
thousand tons, compared with 217.9 thousand tons for the same
period last year. Total tonnage converted decreased 1.2% for the
first quarter of 2002 to 115.7 thousand tons compared to 117.1
thousand tons in the first quarter of 2001.

Gross Margin.Gross
margin for the first three months of 2002 increased to 25.5% of
sales from 23.5% in the same period in 2001. This margin
increase was due primarily to improved margins in the paperboard
segment. Despite lower selling prices in the paperboard segment,
margins increased due to higher volume, a decline in recovered
fiber and energy costs and cost-cutting efforts that resulted in
reduced manufacturing expenses.

Restructuring Costs.In January 2001, we initiated a plan to close our paperboard
mill located in Chicago, Illinois and recorded a pretax charge
to operations of approximately $4.4 million. The mill was
profitable through 1998, but declining sales resulted in losses
of approximately $2.6 million and $1.5 million in 1999
and 2000, respectively. We expect the proceeds from the sale of
the real estate to more than offset the pretax charge. The
$4.4 million charge included a $2.2 million noncash
asset impairment write down of fixed assets to estimated net
realizable value, a $1.2 million accrual for severance and
termination benefits for 16 salaried and 59 hourly employees
terminated in connection with this plan and a $989 thousand
accrual for other exit costs. During 2001 and the first quarter
of 2002, we paid $1.2 million in severance and termination
benefits and $774 thousand in other exit costs. The remaining
other exit costs were paid by December 31, 2002. As of
December 31, 2002, one employee remained to assist in the
closing of the mill. We currently are marketing the property.

In March 2001, we initiated a plan to consolidate
the operations of our Salt Lake City, Utah carton plant into our
Denver, Colorado carton plant and recorded a pretax charge to
operations of approximately $2.6 million. The $2.6 million
charge included a $1.8 million noncash asset impairment
write down of fixed assets to estimated net realizable value, a
$464 thousand accrual for severance and termination benefits for
5 salaried and 31 hourly employees terminated in connection with
this plan and a $422 thousand accrual for other exit costs. All
exit costs were paid as of December 31, 2001, and the exit
plan was completed.

Operating Income.Operating income for the first three
months of 2002 was $9.7 million, an improvement of
$11.8 million from a $2.1 million loss for the same
period last year. The improvement in operating income was due to
the following:



| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Restructuring costs of $7.1 million were
    recorded in the first quarter of 2001 and none were recorded in
    2002                                       
|
| |  | Goodwill amortization expense of
    $1.0 million was recorded in the first quarter of 2001 and
    no expense was recorded in 2002 pursuant to SFAS No. 142
|
| |  | Higher volume and lower energy costs in the
    paperboard segment                                                                                          

Partially offsetting the improvements above was a
decline in selling prices in the carton and custom packaging
segment due to intense competition in that market.

Selling, general and administrative expenses
decreased by $2.7 million, or 7.4%, in the first quarter of 2002
compared to the first quarter of 2001. This decrease was
attributable primarily to the discontinuation of goodwill
amortization expense in the first quarter of 2002, as described
above, combined with decreased expenses in the paperboard
segment due to cost-cutting efforts.

In April 1999, we purchased International Paper
Companys Sprague boxboard mill located in Versailles,
Connecticut. This acquisition has had a significant impact on
our earnings since that time. Sprague incurred an operating loss
of $1.4 million in the first three months of 2002, which is
an improvement of $3.7 million over first quarter of 2001
operating loss of $5.1 million. The first quarter 2001 loss
was attributable to a combination of unfavorable fixed price
contracts and low capacity utilization. Our primary objectives at

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FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 2.


Sprague have been to improve quality, reduce
costs and increase sales volume. We have made significant
progress in quality and cost and are beginning to realize the
benefits. Based on improvements we have made since the
acquisition, we now believe Sprague is competitive in terms of
cost and quality, and we expect Spragues financial
performance to improve with increases in sales volume. Although
we expect losses at Sprague to continue to decline, in light of
current difficult industry conditions, we do not expect Sprague
to be profitable until at least the second half of 2002.

Other Income
(Expense).Interest expense for the
first three months of 2002 was $9.3 million versus
$9.2 million in the same period of 2001. This slight
increase was due to higher outstanding debt balances at higher
interest rates, which were offset by savings from interest rate
swap agreements which effectively converted portions of our
fixed rate notes into variable rate obligations. See
Liquidity and Capital Resources for additional
information regarding our debt, interest expense and interest
rate swap agreements.

Equity in income from unconsolidated affiliates
was $3 thousand in the first quarter of 2002, an improvement of
$1.6 million from equity in loss of $1.6 million in the
first quarter of 2001. This increase was primarily due to
improved operating results for Standard Gypsum, L.P., our gypsum
wallboard joint venture, partially offset by lower operating
results for Premier Boxboard Limited LLC, our paper mill joint
venture. Standard Gypsums operating results improved
primarily due to increased volume and selling prices in the
gypsum wallboard market, while Premier Boxboard Limiteds
operating results declined primarily due to lower volume. Both
of these joint ventures are with Temple-Inland.

Net Income (Loss).Net income for the first three months of 2002 was $499 thousand,
or $0.02 net income per common share on a diluted basis,
compared to a net loss of $10.8 million, or $0.39 net loss
per common share on a diluted basis, for the same period last
year. The improvement from prior year was due to the following:



| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Higher operating income as explained above                                                                                                       
|
| |  | First quarter 2001 results include an
    extraordinary loss of $2.7 million (net of tax benefit)
    related to the early extinguishment of debt
|
| |  | An improvement in operating results of our
    unconsolidated joint ventures, as explained above                                                 

Events of September 11,
2001.The horrific terrorist attacks
against the United States and their aftermath did not, during
2001 or the first three months of 2002, and are not currently
expected to, have a direct material effect on our operations.
However, to the extent that those events, other terrorist
activities, the U.S. military response and the resulting
uncertainties have adversely affected, or will continue to
adversely affect, the United States economy in general, sectors
on which we depend in particular, and the U.S. capital markets,
our results of operations, financial condition and stock price
have been, and could continue to be, adversely affected.

Liquidity and Capital Resources

Liquidity Sources and
Risks.Our primary sources of
liquidity are cash from operations and borrowings under the
various debt facilities described below. Downturns in operations
can significantly affect our ability to generate cash. Factors
that can affect our operating results are discussed further in
this Report under Risk Factors. We generated
$16.0 million in cash from operations in the first quarter
of 2002 and increased our cash balance by $3.2 million. We
believe that our existing cash and liquidity position will be
further strengthened through the sale of the real estate at our
Baltimore, Maryland, Camden, New Jersey and Chicago, Illinois
paperboard mills, which we anticipate will occur in 2002.
Additionally, we received a federal tax refund of approximately
$16.0 million in April of 2002 from the carryback of the
2001 net operating loss. If, however, we were to face unexpected
liquidity needs, we could require additional funds from external
sources such as our senior credit facility. See Subsequent
Events below regarding amendments to our senior credit
facility.

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The availability of liquidity from borrowings is
primarily affected by our continued compliance with the terms of
the debt agreements governing these facilities, including the
payment of interest and compliance with various covenants and
financial maintenance tests. In addition, as described below
under  Joint Venture Financings, to the
extent we are unable to comply with financial maintenance tests
under our senior credit facility, we will fail to comply with
identical financial maintenance covenant tests under our
guarantees of the credit facilities of our joint ventures, which
could potentially materially and adversely affect us through a
series of cross-defaults under both our joint ventures and
our own obligations if we were unable to obtain appropriate
waivers or amendments with respect to the underlying violations
and any related cross-defaults.

At March 31, 2002, we were in compliance
with the leverage ratio and interest coverage ratio,
respectively, under both our senior credit facility and our
joint venture guarantees. In 2002 and 2003, we were required to
obtain additional amendments [and waivers] under both our senior
credit facility and our joint venture guarantees. See
Subsequent Events. Absent further material
deterioration of the U.S. economy as a whole or the specific
sectors on which our business depends (see Risk
Factors  Our business and financial performance may
be adversely affected by downturns in industrial production,
housing and construction and the consumption of durable and
nondurable goods), we believe it is unlikely that we will
breach our covenants under our debt agreements or joint venture
guarantees during the balance of 2003. However, we cannot assure
you that we will achieve our expected future operating results
or continued compliance with our debt covenants, or that, in
such event, necessary waivers and amendments would be available
at all or on acceptable terms. If our debt or that of our joint
ventures were placed in default, or if we were called upon to
satisfy our joint venture guarantees, our liquidity and
financial condition would be materially and adversely affected.

Borrowings.At
March 31, 2002 and 2001, and December 31, 2001, total
debt (consisting of current maturities of debt, senior credit
facility, and other long-term debt, as reported on our
consolidated balance sheets) was as follows (in thousands):

|                                 |  |           |         |              |  |      |         |  |  |   |         | 
|-------------------------------- |  | --------- | ------- | ------------ |  | ---- | ------- |  |  | - | ------- | 
|                                 |  |           |         |             
|                                 |  | March 31, |         |             
|                                 |  |           |         | December 31,
|                                 |  | 2002      |         | 2001         |  | 2001
|                                 |  |           |         |              |  |     
|Senior credit facility           |  | $         |        |              |  | $    |        |  |  | $ |        | 
|7 1/4% senior notes              |  |           | 25,520  |              |  |      | 25,243  |  |  |   | 25,449  | 
|7 3/8% senior notes              |  |           | 189,472 |              |  |      | 198,817 |  |  |   | 197,716 | 
|9 7/8% senior subordinated notes |  |           | 274,656 |              |  |      | 274,128 |  |  |   | 277,326 | 
|Other notes payable              |  |           | 8,248   |              |  |      | 8,306   |  |  |   | 8,248   | 
|                                 |  |           |         |              |  |      |         |  |  |   |         | 
|Total debt                       |  | $         | 497,896 |              |  | $    | 506,494 |  |  | $ | 508,739 | 
|                                 |  |           |         |              |  |      |         |  |  |   |         | 

On March 29, 2001, we completed a series of
financing transactions pursuant to which we (i) issued
$29.0 million in aggregate principal amount of 7 1/4%
senior notes due May 1, 2010 and $285.0 million in
aggregate principal amount of 9 7/8% senior subordinated
notes due April 1, 2011, (ii) used the proceeds from
these notes to repay in full our former senior credit facility
and 7.74% senior notes, and (iii) obtained a new
$75.0 million senior credit facility. The 7 1/4%
senior notes and 9 7/8% senior subordinated notes were
issued at a discount to yield effective interest rates of 9.4%
and 10.5%, respectively. Aggregate proceeds from the sale of
these notes, net of issuance costs, was approximately
$291.2 million. In connection with the repayment of the
7.74% senior notes, we incurred a prepayment penalty of
approximately $3.6 million. We recorded an extraordinary
loss of $2.7 million, which included the prepayment penalty
and unamortized issuance costs of $705 thousand, net of tax
benefit of $1.6 million. The difference between issue price
and principal amount at maturity of our 7 1/4% senior notes
and 9 7/8% senior subordinated notes will be accreted each
year as interest expense in our financial statements. These
notes are unsecured, but are guaranteed, on a joint and several
basis, by all of our domestic subsidiaries, other than one that
is not wholly-owned. Management considers this

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nonguarantor domestic subsidiary immaterial to
investors, therefore, separate financial statements are not
presented.

Our credit facility provides for a revolving line
of credit in the aggregate principal amount of
$75.0 million for a term of three years, including
subfacilities of $10.0 million for swingline loans and
$15.0 million for letters of credit, usage of which reduces
availability under the facility. No borrowings were outstanding
under the facility as of March 31, 2002 or March 31, 2001;
however, an aggregate of $10.0 million in letter of credit
obligations were outstanding on March 31, 2002. We intend
to use the facility for working capital, capital expenditures
and other general corporate purposes. Although the facility is
unsecured, our obligations under the facility are
unconditionally guaranteed, on a joint and several basis, by all
of our existing and subsequently acquired wholly-owned domestic
subsidiaries.

Borrowings under the facility bear interest at a
rate equal to, at our option, either (1) the base rate
(which is equal to the greater of the prime rate most recently
announced by Bank of America, N.A., the administrative agent
under the facility, or the federal funds rate plus one-half of
1%) or (2) the adjusted Eurodollar Interbank Offered Rate,
in each case plus an applicable margin determined by reference
to our leverage ratio (which is defined under the facility as
the ratio of our total debt to our total capitalization). Based
on our leverage ratio at March 31, 2002, the current
margins are 2.0% for Eurodollar rate loans and 0.75% for base
rate loans. Additionally, the undrawn portion of the facility is
subject to a facility fee at an annual rate that is currently
set at 0.5% based on our leverage ratio at March 31, 2002.

The facility contains covenants that restrict,
among other things, our ability and our subsidiaries
ability to create liens, merge or consolidate, dispose of
assets, incur indebtedness and guarantees, pay dividends,
repurchase or redeem capital stock and indebtedness, make
certain investments or acquisitions, enter into certain
transactions with affiliates, make capital expenditures or
change the nature of our business. The facility also contains
several financial maintenance covenants, including covenants
establishing a maximum leverage ratio (as described above),
minimum tangible net worth and a minimum interest coverage ratio.

The facility contains events of default
including, but not limited to, nonpayment of principal or
interest, violation of covenants, incorrectness of
representations and warranties, cross-default to other
indebtedness, bankruptcy and other insolvency events, material
judgments, certain ERISA events, actual or asserted invalidity
of loan documentation and certain changes of control of our
company.

During the third and fourth quarters of 2001 and
the first quarter of 2002, we completed three amendments to our
senior credit facility agreement. The first amendment, dated
September 10, 2001, allows us to acquire up to
$30.0 million of our senior subordinated notes so long as
no default or event of default exists on the date of the
transaction or will result from the transaction.

The second amendment, dated November 30,
2001, provides for the issuance of letters of credit under the
senior credit facility having an original expiration date more
than one year from the date of issuance, if required under
related industrial revenue bond documents and agreed to by the
issuing lender.

The third amendment was completed on
January 22, 2002 with an effective date of
September 30, 2001. We obtained this amendment in order to
avoid the occurrence of an event of default under our senior
credit facility agreement resulting from a violation of the
interest coverage ratio covenant contained in the agreement.
This amendment modified the definitions of Interest
Expense, Premier Boxboard Interest Expense and
Standard Gypsum Interest Expense to include interest
income and the benefit or expense derived from interest rate
swap agreements or other interest hedge agreements.
Additionally, the amendment lowered the minimum allowable
interest coverage ratio for the fourth quarter of 2001 from
2.5:1.0 to 2.25:1.0, the first quarter of 2002 from 2.75:1.0 to
2.25:1.0, and the second quarter of 2002 from 2.75:1.0 to
2.50:1.0.

See Subsequent Events below regarding
additional amendments to our joint venture debt agreements and
our senior credit facility.

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On June 1, 1999, we issued
$200.0 million in aggregate principal amount of our
7 3/8% senior notes due June 1, 2009. Our 7 3/8%
senior notes were issued at a discount to yield an effective
interest rate of 7.473%, are unsecured obligations of our
company and pay interest semiannually. In connection with the
offering of our 7 1/4% senior notes and 9 7/8% senior
subordinated notes, our subsidiary guarantors also guaranteed
our 7 3/8% senior notes. On February 5, 2002, we
purchased $6.75 million in principal amount of our
7 3/8% senior notes on the open market. This purchase will
lower our interest expense by approximately $500 thousand
annually.

Interest Rate Swaps.During the second and third quarters of 2001, we entered into
four interest rate swap agreements in notional amounts totaling
$285.0 million. The agreements, which have payment and
expiration dates that correspond to the terms of the note
obligations they cover, effectively converted
$185.0 million of our fixed rate 9 7/8% senior
subordinated notes and $100.0 million of our fixed rate
7 3/8% senior notes into variable rate obligations. The
variable rates are based on the three-month LIBOR plus a fixed
margin. These swap agreements decreased interest expense by
$2.5 million in the first three months of 2002. We expect
our swap agreements to continue to lower our interest expense;
however, if the three-month LIBOR increases significantly, our
interest expense could be adversely affected. Based on the
three-month LIBOR at March 31, 2002, our swaps would reduce
our interest expense by approximately $9.6 million for 2002
compared with $3.8 million in 2001. If the three-month
LIBOR increases 100 basis points, our savings on interest
expense would be reduced by approximately $2.85 million
annually.

The following table identifies the debt
instrument hedged, the notional amount, the fixed spread and the
three-month LIBOR at March 31, 2002 for each of our
interest rate swaps. The March 31, 2002 three-month LIBOR
is presented for informational purposes only and does not
represent our actual effective rates in place at March 31,
2002.

|                                 |  |          |         |        |  |             |       |          |  |  |       |   |  |  |       |  
|-------------------------------- |  | -------- | ------- | ------ |  | ----------- | ----- | -------- |  |  | ----- | - |  |  | ----- | -
|                                 |  |          |         |        |  | Three-Month |       |         
|                                 |  | Notional |         |        |  | LIBOR at    |       | Total   
|                                 |  | Amount   |         | Fixed  |  | March 31,   |       | Variable
|Debt Instrument                  |  | (000s)  |         | Spread |  | 2002        |       | Rate    
|                                 |  |          |         |        |  |             |       |         
|7 3/8% senior notes              |  | $        | 50,000  |        |  |             | 2.365 | %        |  |  | 2.031 | % |  |  | 4.396 | %
|7 3/8% senior notes              |  |          | 25,000  |        |  |             | 1.445 |          |  |  | 2.031 |   |  |  | 3.476 |  
|7 3/8% senior notes              |  |          | 25,000  |        |  |             | 1.775 |          |  |  | 2.031 |   |  |  | 3.806 |  
|9 7/8% senior subordinated notes |  |          | 185,000 |        |  |             | 4.400 |          |  |  | 2.031 |   |  |  | 6.431 |  

In October 2001, we unwound our
$185.0 million interest rate swap agreement related to the
9 7/8% senior subordinated notes and received
$9.1 million from the bank counter-party. Simultaneously,
we executed a new swap agreement with a fixed margin that was 85
basis points higher than the original swap agreement. The new
swap agreement is the same notional amount, has the same terms
and covers the same notes as the original agreement. The
$9.1 million gain will be accreted to interest expense over
the life of the notes and will partially offset the increase in
interest expense. We executed these transactions in order to
take advantage of market conditions.

See Subsequent Events below regarding
transactions related to our interest rate swap agreements.

Joint Venture
Financings.As noted above, we own a
50% interest in two joint ventures with Temple-Inland, Inc.:
Standard Gypsum, L.P. and Premier Boxboard Limited LLC. Because
we account for these interests in our joint ventures under the
equity method of accounting, the indebtedness of these joint
ventures is not reflected in the liabilities included on our
consolidated balance sheets. As described below, we have
guaranteed certain obligations of these joint ventures. A
default under these guarantees also constitutes a default under
the credit facilities of these joint ventures and our senior
credit facility. The guarantees also contain independent
financial maintenance covenants that are identical to the
covenants under our senior credit facility. Accordingly, our
default under one or more of these covenants would technically
permit the lenders under the joint venture credit facilities and
our joint venture partners respective guarantees of those
facilities, as well as the lenders under our senior credit
facility, if they so elected, to prohibit any future borrowings
under these facilities and to accelerate all such outstanding
obligations under these facilities. The

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resulting acceleration of our obligations could
also cause further defaults and accelerations under our
9 7/8% senior subordinated notes, our 7 1/4% senior
notes and our 7 3/8% senior notes. In January 2002, we
entered into agreements with the Premier Boxboard Limited and
Standard Gypsum lenders that correspond to the amendments made
in the third amendment to the senior credit facility, as
described above. At March 31, 2002, we were in compliance
with all covenants under these guarantees. See the
Subsequent Events note to the consolidated financial
statements for additional amendments to these guarantee
agreements.

Standard Gypsum is the obligor under
reimbursement agreements pursuant to which direct-pay letters of
credit in the aggregate original amount of approximately
$56.2 million have been issued for its account in support
of industrial development bond obligations. We have severally
and unconditionally guaranteed 50% of Standard Gypsums
obligations for reimbursement of letter of credit drawings,
interest, fees and other amounts. The other Standard Gypsum
partner, Temple-Inland, has similarly guaranteed 50% of Standard
Gypsums obligations. As of March 31, 2002, the
outstanding letters of credit totaled approximately
$56.2 million, of which one-half (approximately
$28.1 million) is guaranteed by us.

Premier Boxboard is the borrower under a credit
facility providing for up to $30.0 million in revolving
loans (with a subfacility for up to $1.0 million in letters
of credit). The credit facility was originally entered into in
July 1999 and matures in June 2005. We have severally and
unconditionally guaranteed 50% of Premier Boxboards
obligations under the credit facility for principal (including
reimbursement of letter of credit drawings), interest, fees and
other amounts. Temple-Inland has similarly guaranteed 50% of
Premier Boxboards obligations. As of March 31, 2002,
the outstanding principal amount of borrowings under the
facility (including outstanding letters of credit) was
approximately $20.2 million, of which one-half
(approximately $10.1 million) is guaranteed by us.

In addition to the general default risks
discussed above with respect to the joint ventures, a
substantial portion of the assets of Premier Boxboard are
pledged as security for $50.0 million in outstanding
principal amount of senior notes under which Premier Boxboard is
the obligor. These notes are guaranteed by Temple-Inland, but
are not guaranteed by us. A default under the Premier Boxboard
credit facility would also constitute an event of default under
these notes. In the event of default under these notes, the
holders would also have recourse to the assets of Premier
Boxboard that are pledged to secure these notes. Thus, any
resulting default under these notes could result in the assets
of Premier Boxboard being utilized to satisfy creditor claims,
which would have a material adverse effect on the financial
condition and operations of Premier Boxboard and, accordingly,
our interest in Premier Boxboard. Further, in such an event of
default, these assets would not be available to satisfy
obligations owing to unsecured creditors of Premier Boxboard,
including the lender under the credit facility, which might make
it more likely that our guarantee of the Premier Boxboard credit
facility would be the primary source of repayment under the
facility in the event Premier Boxboard cannot pay.

Additional contingencies relating to our joint
ventures that could affect our liquidity include possible
additional capital contributions and buy-sell triggers which,
under certain circumstances, give us and our joint venture
partner either the right, or the obligation, to purchase the
others interest or to sell an interest to the other. In
the case of both Standard Gypsum and Premier Boxboard, neither
joint venture partner is obligated or required to make
additional capital contributions without the consent of the
other. With regard to buy-sell rights, under the Standard Gypsum
joint venture, in general, either party may purchase the
others interest upon the occurrence of certain purported
unauthorized transfers or involuntary transfer events (such as
bankruptcy). In addition, under the Standard Gypsum joint
venture, either (i) in the event of an unresolved deadlock over
a material matter or (ii) at any time after April 1,
2001, either party may initiate a Russian roulette
buyout procedure by which it names a price at which the other
party must agree either to sell its interest to the initiating
party or to purchase the initiating partys interest. Under
the Premier Boxboard joint venture, in general, mutual buy-sell
rights are triggered upon the occurrence of certain purported
unauthorized or involuntary transfers, but in the event of
certain change of control or deadlock events, the buy-sell
rights are structured such that we are always the party
entitled, or obligated, as the case may be, to purchase.

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We generally consider our relationship with
Temple-Inland to be good with respect to both of our joint
ventures and do not anticipate experiencing material liquidity
events resulting from either additional capital contributions or
buy-sell contingencies with respect to our joint ventures during
2002. We cannot assure you, however, that these assumptions will
prove accurate or that such liquidity events will not arise.

Cash from
Operations.Cash generated from
operations was $16.0 million for the three month period
ended March 31, 2002, compared with $5.4 million in
the same period of 2001. The increase was due primarily to
improved operating results, a distribution from one of our joint
ventures and favorable changes in working capital.

Capital
Expenditures.Capital expenditures
were $5.8 million in the first quarter of 2002 versus
$11.8 million in the first quarter of 2001. Aggregate
capital expenditures of approximately $23.4 million are
anticipated for 2002.

Dividends.We paid
cash dividends of $833 thousand in the first quarter of 2002
versus $4.7 million in the first quarter of 2001. Since
February 2001, we have reduced our dividend payments from $0.18
per issued and outstanding common share to $0.03. Then, in
February 2002, we announced that we would suspend future
dividend payments on our common stock until our earnings
performance exceeds the dividend limitation provision of our
senior subordinated notes. We made these decisions to reduce the
quarterly dividends to preserve our financial flexibility in
light of difficult industry conditions and due to the
limitations on dividend payments in our financial covenants.
Although our former debt agreements contained no specific
limitations on the payment of dividends, our current debt
agreements contain certain limitations on the payment of future
dividends. We intend to continue assessing our ability to pay
quarterly dividends in light of difficult industry conditions,
our need to preserve financial flexibility and the limitations
on dividends included in our financial covenants.

Share Repurchases.We did not purchase any shares of our common stock during the
first three months of 2002 under our common stock purchase plan.
We have cumulatively purchased 3,169,000 shares since January
1996. Our board of directors has authorized purchases of up to
831,000 additional shares. However, our 9 7/8% senior
subordinated notes and our senior credit facility limit our
ability to purchase our common stock.

Subsequent Events

In January 2002, we completed a third amendment
to our senior credit facility that modified the definitions of
Interest Expense, Premier Boxboard Interest
Expense and Standard Gypsum Interest Expense
to include interest income and the benefit or expense derived
from interest rate swap agreements or other interest hedge
agreements. Additionally, the amendment lowered the minimum
allowable interest coverage ratio for the fourth quarter of 2001
from 2.5:1.0 to 2.25:1.0, the first quarter of 2002 from
2.75:1.0 to 2.25:1.0, and the second quarter of 2002 from
2.75:1.0 to 2.50:1.0.

Also in January 2002, we entered into agreements
with the PBL and Standard Gypsum lenders that correspond to the
amendments made in the third amendment to the senior credit
facility, as described above, in order to avoid events of
default under those guarantees resulting from a violation of the
interest ratio coverage covenants.

In February 2002, we announced that we would
suspend future dividend payments on our common stock until our
earnings performance exceeds the dividend limitation provision
of our senior subordinated notes.

In June 2002, we recorded a $985 thousand
noncash, pretax restructuring charge related to the permanent
closure of our Camden and Chicago paperboard mills, which were
shut down in 2000 and 2001, respectively. The $985 thousand
charge represents a revised estimate of fixed asset disposals at
these mills.

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In August 2002, we unwound our
$185.0 million interest rate swap agreement related to the
9 7/8% senior subordinated notes and received
$5.5 million from the bank counter-party. Simultaneously,
we executed a new swap agreement with a fixed spread that was 17
basis points higher than the original swap agreement. The new
swap agreement was the same notional amount, had the same terms
and covers the same notes as the original agreement. In
September 2002, we repaid the $5.5 million and entered into
a new swap agreement that lowered the fixed spread by 7.5 basis
points from the August 2002 swap.

In September 2002, we acquired certain operating
assets (excluding accounts receivable) of the Smurfit Industrial
Packaging Group, a business unit of Jefferson Smurfit
Corporation (U.S.), for approximately $67.1 million, and
assumed $1.7 million of indebtedness outstanding under
certain industrial revenue bonds. The acquisition was funded
with cash on hand. Goodwill and intangible assets of
approximately $40.6 million were recorded in conjunction
with the Smurfit Industrial Packaging Group acquisition.

Smurfit Industrial Packaging Group operations
included 17 paper tube and core plants, 3 uncoated recycled
paperboard mills and 3 partition manufacturing plants. These
facilities are located in 16 states across the U.S. and in
Canada. We believe that these assets enhance our capabilities in
the tube, core and composite container market and position us as
a prominent producer in this market.

In September 2002, in connection with the
acquisition of the Smurfit Industrial Packaging Group, we
entered into a fourth amendment to our senior credit facility.
The purpose of this amendment was to obtain the required lender
consent under the senior credit facility for the consummation of
the acquisition (and the incurrence of up to $60.0 million
in subordinated debt financing to refinance borrowings under the
credit facility and restore cash used to fund a portion of the
acquisition price), to lower the minimum allowable tangible net
worth for all periods after the effective date of the amendment,
and to increase the maximum permitted leverage ratio covenant to
70.0% for the fiscal quarters ending December 31, 2002,
March 31, 2003 and June 30, 2003, and 67.5% for the
fiscal quarter ending September 30, 2003. Additionally, the
minimum interest coverage ratio covenant was replaced with a
minimum fixed charge coverage ratio covenant beginning with the
third quarter of 2002. These modifications, in addition to
increasing our flexibility to finance the acquisition, were
necessary to enable us to avoid violations of the leverage ratio
and interest coverage ratio covenants for the third quarter of
2002 and violations of the leverage ratio covenant in future
periods.

In exchange for these modifications, our lenders
required an increase in the applicable margin component of the
interest rates applicable to borrowings under the facility and
the facility fee rate applicable to the undrawn portion of the
facility. The amendment also provided for a pricing increase of
0.25% effective November 15, 2002, if we did not issue at
least $50.0 million in senior subordinated notes by that
date, which we did not, and an increase of 0.25% every three
months after that date until the first date on which our balance
of cash and cash equivalents is at least $50.0 million and
we have no loans outstanding under the facility (subject to a
maximum interest margin of 3.75% for Eurodollar rate loans and
2.50% for base rate loans). In addition, under the terms of the
fourth amendment, we were required to enter into a security
agreement under which we and our subsidiary guarantors under the
senior credit facility granted a first priority security
interest in our respective accounts receivable and inventory to
secure our obligations under the credit facility and our
obligations under our 50% guarantees of the credit facilities of
Standard Gypsum and Premier Boxboard.

In November 2002, we unwound $50.0 million
of our $185.0 million interest rate swap agreement related
to the 9 7/8% senior subordinated notes, and received
approximately $2.8 million from the bank counter-party.
Simultaneously, we unwound $50.0 million of one of our
interest rate swap agreements related to the 7 3/8% senior
notes, and received approximately $3.4 million. The
$6.2 million gain will be accreted to interest expense over
the remaining term of the notes and will partially offset the
increase in interest expense. The $2.8 million gain lowered
the effective interest rate of the 9 7/8% senior
subordinated notes from 10.0% to 9.8%. The $3.4 million
gain lowered the effective interest rate of the 7 3/8%
senior notes from 7.5% to 7.2%.

In December 2002, we completed a fifth amendment
to our senior credit facility. This amendment modified the
calculation of net worth for purposes of our leverage ratio and
tangible net worth financial maintenance

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MARCH 31, 2002


PART I, ITEM 2.


covenants to exclude adjustments to other
comprehensive loss related to our defined benefit pension plan.
This amendment also allows us to exclude from these financial
maintenance covenant calculations any restructuring costs
recorded in the fourth quarter of 2002 and first quarter of 2003
as long as the aggregate of these restructuring costs does not
exceed $16.0 million, on an after tax basis.

In December 2002, we initiated a plan to
restructure our carton plant in Ashland, Ohio to serve a
smaller, more focused carton market and recorded a pretax charge
to operations of approximately $2.4 million. The
$2.4 million charge included a $1.2 million noncash
write down of assets.

In December 2002, we initiated a plan to
permanently close our Halifax paperboard mill located in Roanoke
Rapids, North Carolina and recorded a pretax charge to
operations of approximately $3.4 million. The
$3.4 million charge included a $3.0 million noncash
write down of assets.

In December 2002, we initiated a plan to
consolidate our converting operations in Fayetteville, North
Carolina into Carolina Component Concepts, also located in North
Carolina, and recorded a pretax charge to operations of
approximately $6.0 million. The $6.0 million charge
included a $2.4 million noncash write down of assets.

In January 2003, we effectively unwound
$85.0 million of our $135.0 million interest rate swap
agreement related to the 9 7/8% senior subordinated notes
by assigning our rights and obligations under the swap to one of
our lenders under the senior credit facility. In exchange, we
received approximately $4.3 million. We will accrete this
gain into interest expense over the remaining term of the notes,
which will partially offset the increase in interest expense.
The gain will lower the effective interest rate of the
9 7/8% senior subordinated notes from 9.8% to 9.5%.

In February 2003, we announced the indefinite
idling of one of two coated recycled paperboard machines at our
Rittman, Ohio paperboard mill. Recently completed upgrades in
our mill system will facilitate the transfer of production from
the idled machine to our other mills. The Rittman workforce will
be indefinitely reduced by 80 hourly employees, and we will
recognize a related expense of approximately $1.2 million.

On March 28, 2003, we completed a sixth
amendment to our senior credit facility. This amendment
increased our maximum permitted leverage ratio to 70.0% for the
fiscal quarters ending September 30, 2003 and
December 31, 2003 and 67.5% for each succeeding fiscal
quarter, lowered our minimum fixed charge coverage ratio from
1.50:1.0 for all fiscal quarters to 0.95:1.0 for the fiscal
quarter ending March 31, 2003, 0.85:1.0 for the fiscal
quarters ending June 30, 2003 and September 30, 2003
and 1.05:1.0 for the fiscal quarter ending December 31,
2003, lowered our minimum tangible net worth covenant for all
periods on and after the effective date of the amendment, and
lowered our maximum permitted capital expenditures to
$30.0 million per fiscal year. For purposes of calculating
compliance with our leverage ratio and net worth covenants, this
amendment also establishes a maximum of $30.0 million for
aggregate adjustments to other comprehensive loss related to our
defined benefit pension plan. This amendment also increases to
$43.0 million our subfacility for the issuance of letters
of credit under the facility, in order to permit us to obtain a
letter of credit to replace our Standard Gypsum joint venture
guarantee as described below. Finally, this amendment terminated
the quarterly pricing increase established under the fourth
amendment to the facility entered into in September 2002
and fixed our maximum interest margins at 3.25% for LIBOR loans
and 2.00% for base rate loans. The financial covenant
modifications were necessary to enable us to avoid possible
violations of our leverage ratio covenant for the third and
fourth quarters of 2003, our fixed charge coverage ratio
covenant for all quarters during 2003 and our net worth covenant
for the second quarter of 2003

In exchange for these modifications, our lenders
required us to permanently reduce the aggregate commitments
under the facility from $75.0 million to
$47.0 million, to shorten the maturity of the facility from
March 29, 2005 to April 1, 2004, and to pay a monthly
fee beginning on July 1, 2002 equal to 1.0% of the
aggregate commitments under the facility. Our lenders also
required the establishment of a borrowing base that restricts
availability under the facility based on monthly computations of
eligible accounts receivable and

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PART I, ITEM 2.


inventory, reduced by our net hedging obligations
owed to lenders under the facility and by the amount of our
guarantee obligations under our joint venture guarantees that
are not secured or replaced by letters of credit. Additionally,
we will not be permitted to borrow or request the issuance of
letters of credit under the facility unless we have less than
$10.0 million in freely available cash and cash equivalents
on our consolidated balance sheet both before and immediately
after giving effect to the application of the proceeds of such
borrowing. The amendment also requires us to prepay outstanding
loans under the facility and/or cash collateralize outstanding
letters of credit with the net cash proceeds from any issuance
of debt or equity or, to the extent not reinvested in similar
assets, from any sale of assets or insurance or condemnation
award. The amendment further requires us to provide consolidated
financial statements and joint venture financial statements to
the lenders on a monthly basis. Finally, the amendment prohibits
us from incurring capital leases or other indebtedness, making
acquisitions or other investments, or prepaying other
indebtedness unless our fixed charge coverage ratio for the most
recently reported fiscal quarter exceeds 1.50:1.0 (calculated on
a pro forma basis with regard to acquisitions), and completely
eliminates our ability to pay dividends or repurchase shares of
our stock.

In connection with this amendment, we were also
required to amend our security agreement to provide for a
springing lien on our machinery and equipment that will become
effective on July 1, 2003.

We intend to refinance our senior credit facility
with a new revolving credit facility, which we expect would be
an asset-based credit facility secured by substantially all of
our assets. We expect to complete this refinancing by the end of
the second quarter of 2003. In connection with this refinancing,
we also intend to refinance our joint venture credit facilities
and our credit support of such facilities. However, we cannot
give assurance that we will be able to complete a new credit
facility on terms that are acceptable to us, or that we will be
able to refinance our joint venture credit facilities and
related credit support as part of or in connection with any such
new credit facility.

Prior to this amendment to our senior credit
facility, our Standard Gypsum joint venture guarantee contained
financial maintenance covenants that were identical to those
contained in our senior credit facility. However, the lenders to
Standard Gypsum were unwilling to agree to the modifications
that we made under the amendment to the senior credit facility.
In order to avoid an event of default under that guarantee, we
obtained a letter of credit under our senior credit facility in
the face amount of $28.4 million. This letter of credit is
issued in favor of the Standard Gypsum lenders and replaces our
guarantee obligations. In exchange for this letter of credit,
the Standard Gypsum lenders terminated our guarantee agreement
and released their security interests in our accounts receivable
and inventory. We must also pay a fee on October 28, 2003
in the amount of 2% of the full amount of this letter of credit
in the event the letter of credit remains outstanding on that
date. The letter of credit is renewable annually and may be
drawn in the event of a default under the Standard Gypsum credit
facility. However, in the event we are in default under our
senior credit facility or have insufficient availability under
the facility, we may not be able to obtain an extension or
renewal of this letter of credit, which could result in an event
of default under our Standard Gypsum credit facility. Further,
if we are not able to refinance our existing senior credit
facility prior to April 1, 2004, we may not be able to
obtain an alternate letter of credit in favor of the Standard
Gypsum lenders, which could result in an event of default under
our Standard Gypsum credit facility.

Concurrently with the amendments to our senior
credit facility and the issuance of the letter of credit to the
Standard Gypsum lenders as described above, we entered into an
amendment of our Premier Boxboard guarantee that made changes to
the financial covenants corresponding to those made in the sixth
amendment to our senior credit facility. In exchange for this
amendment, the Premier Boxboard lenders required that the
maturity of the Premier Boxboard credit facility be shortened
from June 26, 2005 to January 5, 2004 and that the
aggregate commitments under the facility be reduced to equal the
amount of outstanding loans and letters of credit of
$20.3 million. Any reductions of outstanding loans under
the facility may not be reborrowed and will permanently reduce
the commitments, thereby effectively requiring us to fund
Premier Boxboards operations from its internal cash flow
and from any cash contributions that we and our joint venture
partner

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MARCH 31, 2002


PART I, ITEM 2.


are permitted to make. In addition, we will be
required to pay a fee to the Premier Boxboard lenders of
$100,000 on July 1, 2003 and on the first day of each month
thereafter until the facility is terminated and all outstandings
under the facility are fully paid. The reduction of the
commitments under this credit facility eliminates availability
for borrowings unless we are able to reduce outstandings under
the facility, and, if we are not able to fund Premier
Boxboards operations in this manner, its performance could
be adversely affected. Further, if we are unable to refinance
this facility prior to January 5, 2004, the entire facility
would become immediately due and payable and we would be
required to satisfy our guarantee of 50% of the obligations
under the facility. Any acceleration of the obligations under
either or both of our joint venture facilities could also cause
further defaults and acceleration under our 9 7/8% senior
subordinated notes, our 7 1/4% senior notes and our
7 3/8% senior notes.

In March 2003, we announced the permanent
closure of our Buffalo Paperboard mill located in Lockport, New
York. We expect to record a restructuring charge of
approximately $5.0 million in connection with this closure.
Our Buffalo mill had an annual production capacity of
approximately 72 thousand tons. In 2002, the mill operated
at approximately 50% of capacity and recorded approximately
$9.0 million in trade sales. Buffalo sales will be
transferred to our other mills.

Georgia-Pacific Litigation

On March 26, 2002, we reached a final
settlement with Georgia-Pacific Corporation concerning the
dispute regarding the terms of the long-term supply agreement
that had been the subject of our previously reported litigation
with Georgia-Pacific. We and G-P Gypsum, a wholly-owned
subsidiary of Georgia-Pacific, have resolved the dispute by
entering into a new five-year paperboard supply agreement that
provides that we will produce and sell to G-P Gypsum between
0.378 and 0.756 billion square feet (10 to 20 thousand
tons) of paper per year to be used in G-P Gypsums
ToughRock wallboard. This new paperboard supply agreement
supersedes the terms of the tentative settlement previously
announced on May 9, 2001 and the agreement and transition
period that had been a part of that tentative settlement. As a
result of the final settlement, our previously filed suit
against Georgia-Pacific in the General Court of Justice,
Superior Court Division of Mecklenburg County, North Carolina
(Case No. 00-CVS-12302), and Georgia-Pacifics
previously reported separate action filed in the Superior Court
of Fulton County, Georgia (Case No. 2000-CV-27684), were each
dismissed with prejudice on April 1 and 2, 2002, respectively.

New Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 141,
Business Combinations (SFAS No. 141) and
SFAS No. 142, Goodwill and Other Intangible
Assets (SFAS No. 142). SFAS No. 141
supercedes Accounting Principles Board (APB) Opinion
No. 16 Business Combinations and SFAS No. 38,
Accounting for Preacquisition Contingencies for Purchased
Enterprises. SFAS No. 141 prescribes the accounting
principles for business combinations and requires that all
business combinations be accounted for using the purchase method
of accounting. This pronouncement is effective for all business
combinations after June 30, 2001.

SFAS No. 142 supercedes APB Opinion
No. 17, Intangible Assets. This pronouncement
prescribes the accounting practices for goodwill and other
intangible assets. Under this pronouncement, goodwill will no
longer be amortized to earnings, but instead will be reviewed
periodically (at least annually) for impairment. We adopted this
pronouncement effective January 1, 2002. We have completed
our initial impairment test, which was required to be completed
by June 30, 2002, and have determined that no impairment of
goodwill exists. See Note 7 of Notes to Consolidated
Financial Statements for additional information regarding
goodwill accounting.

In July 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations
(SFAS No. 143). This pronouncement requires
entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred.
When the liability is initially recorded, the entity capitalizes
the

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MARCH 31, 2002


PART I, ITEM 2.


cost by increasing the carrying amount of the
related long-lived asset. Over time, the liability is accreted
to its present value each period and the capitalized cost is
depreciated over the useful life of the related asset. Upon
settlement of the liability, the entity either settles the
obligation for the amount recorded or incurs a gain or loss.
SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. We are currently evaluating this
pronouncement and do not expect the adoption of this
pronouncement to have a material impact on our consolidated
financial statements.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS No. 144). This
pronouncement addresses financial accounting and reporting for
the impairment or disposal of long-lived assets and supercedes
SFAS No. 121. SFAS No. 144 is effective for fiscal
years beginning after December 15, 2001. We adopted SFAS
No. 144 as of January 1, 2002. This pronouncement did
not have a material impact on our consolidated financial
statements upon adoption.

Forward-Looking Information

This Quarterly Report on Form 10-Q,
including Managements Discussion and Analysis of
Financial Condition and Results of Operations, may contain
various forward-looking statements, within the
meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, that
are based on our beliefs and assumptions, as well as information
currently available to us. When used in this document, the words
believe, anticipate,
estimate, expect, intend,
should, would, could, or
may and similar expressions may identify
forward-looking statements. These statements involve risks and
uncertainties that could cause our actual results to differ
materially depending on a variety of important factors,
including, but not limited to, those identified below under
Risk Factors and other factors discussed elsewhere
in this Report and our other filings with the Securities and
Exchange Commission. With respect to such forward-looking
statements, we claim protection under the Private Securities
Litigation Reform Act of 1995. The documents that we file with
the Securities and Exchange Commission are available from us,
and also may be examined at public reference facilities
maintained by the Securities and Exchange Commission or, to the
extent filed via EDGAR, accessed through the Web Site of the
Securities and Exchange Commission (http://www.sec.gov). We do
not undertake any obligation to update any forward-looking
statements we make.

Risk Factors

Investors should consider the following risk
factors, in addition to the other information presented in this
Report and the other reports and registration statements we file
from time to time with the Securities and Exchange Commission,
in evaluating us, our business and an investment in our
securities. Any of the following risks, as well as other risks
and uncertainties, could harm our business and financial results
and cause the value of our securities to decline, which in turn
could cause investors to lose all or part of their investment in
our company. The risks below are not the only ones facing our
company. Additional risks not currently known to us or that we
currently deem immaterial also may impair our business.

Our Business and Financial Performance May Be
Harmed By Future Increases In Raw Material Costs.

Our primary raw material is recycled paper, which
is known in our industry as recovered fiber. The
cost of recovered fiber has, at times, fluctuated greatly
because of factors such as shortages or surpluses created by
market or industry conditions. Although we have historically
raised the selling prices of our products in response to raw
material price increases, sometimes raw material prices have
increased so quickly or to such levels that we have been unable
to pass the price increases through to our customers on a timely
basis, which has adversely affected our operating margins. We
cannot assure you that we will be able to pass such price
changes through to our customers on a timely basis and maintain
our margins in the face of raw material cost fluctuations in the
future.

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Our Operating Margins May Be Adversely
Affected By Rising Energy Costs.

Excluding labor, energy is our most significant
manufacturing cost. We use energy to generate steam used in the
paper making process and to operate our paperboard machines and
all of our other converting machinery. Our energy costs
increased steadily throughout 2000 and the first quarter of 2001
before showing some improvement by the end of 2001. In 2001, the
average energy cost in our mill system was approximately $57 per
ton. During the first three months of 2002, energy costs
decreased to approximately $49 per ton. The decrease was due
primarily to decreases in natural gas and fuel oil costs. Until
recently, our business had not been significantly affected by
energy costs, and we historically have not passed energy costs
through to our customers. We have not been able to pass through
to our customers all of the energy cost increases we incurred
and as a result, our operating margins have been adversely
affected. We continue to evaluate our energy costs and consider
ways to factor energy costs into our pricing. However, we cannot
assure you that our operating margins and results of operations
will not continue to be adversely affected by rising energy
costs.

Our Business and Financial Performance May Be
Adversely Affected By Downturns In Industrial Production,
Housing and Construction and the Consumption of Nondurable and
Durable Goods.

Demand for our products in our four principal end
use markets is primarily driven by the following factors:



|  |                                                                                                                                            
|- | -------------------------------------------------------------------------------------------------------------------------------------------
| | Tube, core and composite container 
    industrial production, construction spending and consumer
    nondurable consumption              
| 
| | Folding cartons  consumer nondurable
    consumption and industrial production                                                            
| 
| | Gypsum wallboard facing paper  single
    and multifamily construction, repair and remodeling construction
    and commercial construction
| 
| | Other specialty products  consumer
    nondurable consumption and consumer durable consumption.                                           

Downturns in any of these sectors will result in
decreased demand for our products. In particular, our business
has been adversely affected in recent periods by the general
slow down in industrial demand and softness in the housing
markets. These conditions are beyond our ability to control, but
have had, and will continue to have, a significant impact on our
sales and results of operations.

In addition, the September 11, 2001
terrorist attacks and the uncertainties surrounding those events
have contributed to the general slowdown in U.S. economic
activity. If those events, other terrorist activities, the U.S.
military response and the resulting uncertainties continue to
adversely affect the United States economy in general, the
sectors above may be negatively affected, which would cause our
business to be adversely affected.

We Are Adversely Affected By the Cycles,
Conditions and Problems Inherent In Our Industry.

Our operating results tend to reflect the general
cyclical nature of the business in which we operate. In
addition, our industry has suffered from excess capacity. Our
industry also is capital intensive, which leads to high fixed
costs and generally results in continued production as long as
prices are sufficient to cover marginal costs. These conditions
have contributed to substantial price competition and volatility
within our industry. In the event of a recession, demand and
prices are likely to drop substantially. Our profitability
historically has been more sensitive to price changes than to
changes in volume. Future decreases in prices for our products
would adversely affect our operating results. These factors,
coupled with our substantially leveraged financial position, may
adversely affect our ability to respond to competition and to
other market conditions or to otherwise take advantage of
business opportunities.

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Our Business May Suffer From Risks Associated
With Growth and Acquisitions.

Historically, we have grown our business,
revenues and production capacity to a significant degree through
acquisitions. In the current difficult operating climate facing
our industry and our financial position, the pace of our
acquisition activity, and accordingly, our revenue growth, has
slowed significantly as we have focused on conserving cash and
maximizing the productivity of our existing facilities. However,
we expect to continue evaluating and pursuing acquisition
opportunities on a selective basis, subject to available funding
and credit flexibility. Growth through acquisitions involves
risks, many of which may continue to affect us based on
acquisitions we have completed in the past. For example, we have
suffered significant unexpected losses at our Sprague mill in
Versailles, Connecticut, which we acquired from International
Paper Company in 1999, resulting from unfavorable fixed price
contracts, low capacity utilization, high energy costs and
higher fiber costs that we were unable to pass through to our
customers. See Managements Discussion and Analysis
of Financial Condition and Results of Operations. We
cannot assure you that our acquired businesses will achieve the
same levels of revenue, profit or productivity as our existing
locations or otherwise perform as we expect.

Acquisitions also involve specific risks. Some of
these risks include:



|  |                                                                             
|- | ----------------------------------------------------------------------------
| | assumption of unanticipated liabilities and
    contingencies;              
| 
| | diversion of managements attention; and                                    
| 
| | possible reduction of our reported asset values
    and earnings because of:



| |   |                                                 
| | - | ------------------------------------------------
| |  | goodwill impairment;                            
|
| |  | increased interest costs;                       
|
| |  | issuances of additional securities or debt; and 
|
| |  | difficulties in integrating acquired businesses.

As we grow, we can give no assurance that we will
be able to:



|  |                                                                             
|- | ----------------------------------------------------------------------------
| | use the increased production capacity of any new
    or improved facilities;
| 
| | identify suitable acquisition candidates;                                   
| 
| | complete additional acquisitions; or                                        
| 
| | integrate acquired businesses into our operations.                          

If We Cannot Raise the Necessary Capital For,
Or Use Our Stock To Finance, Acquisitions, Expansion Plans Or
Other Significant Corporate Opportunities, Our Growth May Be
Impaired.

Without additional capital, we may have to
curtail any acquisition and expansion plans or forego other
significant corporate opportunities that may be vital to our
long-term success. Although we expect to use borrowed funds to
pursue these opportunities, we must continue to comply with
financial and other covenants in order to do so. If our revenues
and cash flow do not meet expectations, then we may lose our
ability to borrow money or to do so on terms that we consider
favorable. Conditions in the capital markets also will affect
our ability to borrow, as well as the terms of those borrowings.
Existing weaknesses in the U.S. capital markets have been, and
may continue to be, aggravated by the September 11, 2001
terrorist attacks and their aftermath. In addition, our
financial performance and the conditions of the capital markets
will also affect the value of our common stock, which could make
it a less attractive form of consideration in making
acquisitions. All of these factors could also make it difficult
or impossible for us to expand in the future.

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PART I, ITEM 2.


Our Substantial Indebtedness Could Adversely
Affect Our Cash Flow and Our Ability to Fulfill Our Obligations
Under Our Indebtedness.

We have a substantial amount of outstanding
indebtedness. See Managements Discussion and
Analysis of Financial Condition and Results of Operations
and the unaudited financial statements included in this Report.
In addition, as described in Managements Discussion
and Analysis of Financial Condition and Results of
Operations, we have guaranteed indebtedness of our joint
ventures for which we could also be liable. Our substantial
level of indebtedness increases the possibility that we may be
unable to generate cash sufficient to pay when due the principal
of, interest on or other amounts due in respect of our
indebtedness. We may also obtain additional long-term debt,
increasing the risks discussed below. Our substantial leverage
could have significant consequences to holders of our debt and
equity securities. For example, it could:



|  |                                                                                                                                                                                                                                                                       
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | make it more difficult for us to satisfy our
    obligations with respect to our indebtedness;                                                                                                                                                                        
| 
| | increase our vulnerability to general adverse
    economic and industry conditions;                                                                                                                                                                                   
| 
| | limit our ability to obtain additional financing;                                                                                                                                                                                                                     
| 
| | require us to dedicate a substantial portion of
    our cash flow from operations to payments on our indebtedness,
    reducing the amount of our cash flow available for other
    purposes, including capital expenditures and other general
    corporate purposes;
| 
| | require us to sell debt or equity securities or
    to sell some of our core assets, possibly on unfavorable terms,
    to meet payment obligations;                                                                                                                  
| 
| | restrict us from making strategic acquisitions,
    introducing new technologies or exploiting business
    opportunities;                                                                                                                                            
| 
| | limit our flexibility in planning for, or
    reacting to, changes in our business and our industry;                                                                                                                                                                  
| 
| | place us at a possible competitive disadvantage
    compared to our competitors that have less debt; and                                                                                                                                                              
| 
| | adversely affect the value of our common stock.                                                                                                                                                                                                                       

Our Interest Expense Could Be Adversely
Affected By Risks Associated With Our Interest Rate Swap
Agreements.

Interest rate swap agreements carry a certain
inherent element of interest rate risk. During 2001, we entered
into several interest rate swap agreements in order to take
advantage of the current market conditions. These agreements
converted a significant portion of our fixed rate 9 7/8%
senior subordinated notes and our fixed rate 7 3/8% senior
notes into variable rate obligations. The variable rates are
based on the three-month LIBOR plus a fixed margin. These swap
agreements have lowered our interest expense, and we expect
these agreements to continue to positively affect our interest
expense. If, however, the three-month LIBOR increases
significantly, our interest expense could be adversely affected.
See Managements Discussion and Analysis of Financial
Condition and Results of Operations for additional
information on our swap agreements.

We Are Subject To Many Environmental Laws and
Regulations That Require Significant Expenditures For Compliance
and Remediation Efforts, and Changes In the Law Could Increase
Those Expenses and Adversely Affect Our Operations.

Compliance with the environmental requirements of
international, federal, state and local governments
significantly affects our business. Among other things, these
requirements regulate the discharge of materials into the water,
air and land and govern the use and disposal of hazardous
substances. Under environmental laws, we can be held strictly
liable if hazardous substances are found on real property we
have ever owned, operated or used as a disposal site. In recent
years, we have adopted a policy of assessing real property for
environmental risks prior to purchase. We are aware of issues
regarding hazardous substances at some facilities, and we have
put into place a remedial plan at each site where we believe
such a plan is necessary. We regularly make capital and
operating expenditures to stay in compliance with environmental
laws. Despite these compliance efforts, risk of environmental
liability is part of the nature of our business. We cannot assure

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PART I, ITEM 2.


you that environmental liabilities, including
compliance and remediation costs, will not have a material
adverse effect on us in the future. In addition, future events
may lead to additional compliance or other costs that could have
a material adverse effect on our business. Such future events
could include changes in, or new interpretations of, existing
laws, regulations or enforcement policies or further
investigation of the potential health hazards of certain
products or business activities.

The indictment of our former independent
auditors, Arthur Andersen LLP, may adversely affect Arthur
Andersen LLPs ability to satisfy any claims arising from
the provision of auditing services to us and may impede our
access to the capital markets.

Arthur Andersen LLP, which audited our financial
statements for the years ended December 31, 2001, 2000 and
1999, was indicted in March 2002 on federal obstruction of
justice charges arising from the governments investigation
of Enron Corporation and is currently on trial for such charges.
Arthur Andersen LLP has indicated that it intends to contest the
indictment vigorously. The Securities and Exchange Commission,
or SEC, stated that it will continue accepting financial
statements audited by Arthur Andersen LLP so long as Arthur
Andersen LLP is able to make specified representations to us. It
is possible that events arising out of the indictment may
adversely affect the ability of Arthur Andersen LLP to satisfy
any claims arising from its provision of auditing services to
us, including claims that could arise out of Arthur Andersen
LLPs audit of our financial statements included in our
periodic reports, prospectuses or registration statements filed
with the SEC.

Should we seek to access the public capital
markets, SEC rules will require us to include or incorporate by
reference in any prospectus three years of audited financial
statements. The SECs current rules would require us to
present audited financial statements for one or more fiscal
years audited by Arthur Andersen LLP and obtain their consent
and representations until our audited financial statements for
the fiscal year ending December 31, 2004 become available
in the first quarter of 2005. If prior to that time the SEC
ceases accepting financial statements audited by Arthur Anderson
LLP or if Arthur Andersen LLP becomes unable to make the
representations to us required by the SEC, it is possible that
our available audited financial statements for the years ended
December  31, 2001, 2000 and 1999 might not satisfy the
SECs requirements. In that case, we would be unable to
access the public capital markets unless Deloitte & Touche
LLP, our current independent accounting firm, or another
independent accounting firm, is able to audit the financial
statements originally audited by Arthur Anderson LLP. Any delay
or inability to access the public capital markets caused by
these circumstances could have a material adverse effect on our
business, profitability and growth prospects.

45



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002

PART I, ITEM 3.





CARAUSTAR INDUSTRIES, INC.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

For a discussion of certain market risks related
to us, see Part II, Item 7A, Quantitative and
Qualitative Disclosures about Market Risk, in our Annual
Report on Form 10-K for the fiscal year ended
December 31, 2001. There have been no significant
developments with respect to our exposure to interest rate
market risk.

46



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##### Table of Contents



FORM 10-Q/A FOR THE QUARTER ENDED
MARCH 31, 2002


PART I, ITEM 3.







SIGNATURES

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



| |                           
| | --------------------------
| | CARAUSTAR INDUSTRIES, INC.



| |     |                       
| | --- | ----------------------
| | By: | /s/ RONALD J. DOMANICO

| |                                               
| | ----------------------------------------------
| |                                               
| | Ronald J. Domanico                            
| | Vice President and Chief Financial
    Officer
| | (Principal Financial Officer)                 

Date: March 28, 2003

47



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##### Table of Contents






CERTIFICATION

I, Thomas V. Brown, President and Chief Executive
Officer, certify that:

1. I have reviewed this quarterly report on
Form 10-Q/A of Caraustar;

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
Caraustar as of, and for, the periods presented in this
quarterly report;

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



| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and
    procedures to ensure that material information relating to
    Caraustar, 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
    Caraustar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. Caraustars other certifying officer
and I have disclosed, based on our most recent evaluation, to
Caraustars auditors and the audit committee of
Caraustars board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect Caraustars ability to record, process, summarize
    and report financial data and have identified for
    Caraustar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 Caraustars internal controls; and                                                                                                                                               

6. Caraustars other certifying officer
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
an material weaknesses.



| |     |                    
| | --- | -------------------
| | By: | /s/ THOMAS V. BROWN

| |                                          
| | -----------------------------------------
| |                                          
| | Thomas V. Brown                          
| | President and Chief Executive
    Officer

Date: March 28, 2003

48



---



##### Table of Contents



CERTIFICATION

I, Ronald J. Domanico, Vice President and Chief
Financial Officer, certify that:

1. I have reviewed this quarterly report on
Form 10-Q/A of Caraustar;

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
Caraustar as of, and for, the periods presented in this
quarterly report;

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



| |                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) designed such disclosure controls and
    procedures to ensure that material information relating to
    Caraustar, including its consolidated subsidiaries, is made
    known to us by others with those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | (b) evaluated the effectiveness of
    Caraustar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 evaluations as of the Evaluation
    Date;                                                                                                                    

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



| |                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect Caraustars ability to record, process, summarize
    and report financial data and have identified for
    Caraustar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 Caraustars internal controls; and                                                                                                                                               

6. Caraustars other certifying officer
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.



| |     |                       
| | --- | ----------------------
| | By: | /s/ RONALD J. DOMANICO

| |                                               
| | ----------------------------------------------
| |                                               
| | Ronald J. Domanico                            
| | Vice President and Chief Financial
    Officer

Date: March 28, 2003

49



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##### Table of Contents






EXHIBIT INDEX

|        |    |     |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | -- | --- |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |  |            
|No.     |    |     |  | Description
|        |    |     |  |            
|        | 3  | .01 |  |            |  | Amended and Restated Articles of Incorporation of
    the Company (Incorporated by reference 
    Exhibit 3.01 to Annual Report for 1992 on Form 10-K
    [SEC File No. 0-20646])                                                                                                                                                                                                                                                                                                                                                                    
|        | 3  | .02 |  |            |  | Third Amended and Restated Bylaws of the Company
    (Incorporated by reference  Exhibit 3.02 to
    Annual Report for 2001 on Form 10-K [SEC File
    No. 0-20646])                                                                                                                                                                                                                                                                                                                                                                                 
|        | 4  | .01 |  |            |  | Specimen Common Stock Certificate (Incorporated
    by reference  Exhibit 4.01 to Registration
    Statement on Form S-1 [SEC File No. 33-50582])                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 4  | .02 |  |            |  | Articles 3 and 4 of the Companys
    Amended and Restated Articles of Incorporation (included in
    Exhibit 3.01)                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 4  | .03 |  |            |  | Article II of the Companys Third
    Amended and Restated Bylaws (included in Exhibit 3.02)                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 4  | .04 |  |            |  | Amended and Restated Rights Agreement, dated as
    of May 24, 1999, between Caraustar Industries, Inc. and The
    Bank of New York as Rights Agent (Incorporated by reference
    Exhibit 10.1 to current report on Form 8-K dated
    June 1, 1999 [SEC File No. 020646])                                                                                                                                                                                                                                                                          
|        | 4  | .05 |  |            |  | Indenture, dated as of June 1, 1999, between
    Caraustar Industries, Inc. and The Bank of New York, as Trustee,
    regarding The Companys 7 3/8% Notes due 2009
    (Incorporated by reference  Exhibit 4.05 to
    report on Form 10-Q for the quarter ended June 30,
    1999 [SEC File No. 0-20646])                                                                                                                                                                                                                                          
|        | 4  | .06 |  |            |  | First Supplemental Indenture, dated as of
    June 1, 1999, between Caraustar Industries, Inc. and The
    Bank of New York, as Trustee (Incorporated by
    reference  Exhibit 4.06 to report on
    Form 10-Q for the quarter ended June 30, 1999 [SEC
    File No. 0-20646])                                                                                                                                                                                                                                                                      
|        | 4  | .07 |  |            |  | Second Supplemental Indenture, dated as of
    March 29, 2001, between the Company, the Subsidiary
    Guarantors and The Bank of New York, as Trustee, regarding the
    Companys 7 3/8% Notes due 2009 (Incorporated by
    reference  Exhibit 4.07 to report on
    Form 10-K for the year ended December 31, 2000 [SEC
    File No. 0-20646])                                                                                                                                                                                                   
|        | 10 | .01 |  |            |  | Indenture, dated as of March 29, 2001,
    between the Company, the Guarantors and The Bank of New York, as
    Trustee, regarding the Companys 7 1/4% Senior Notes
    due 2010 (Incorporated by reference 
    Exhibit 10.01 to report on Form 10-K for the year
    ended December 31, 2000 [SEC File No. 0-20646])                                                                                                                                                                                                                              
|        | 10 | .02 |  |            |  | Indenture, dated as of March 29, 2001,
    between the Company, the Guarantors and The Bank of New York, as
    Trustee, regarding the Companys 9 7/8% Senior
    Subordinated Notes due 2011 (Incorporated by
    reference  Exhibit 10.02 to report on
    Form 10-K for the year ended December 31, 2000 [SEC
    File No. 0-20646])                                                                                                                                                                                                             
|        | 10 | .03 |  |            |  | Credit Agreement, dated as of March 29,
    2001, among the Company, certain subsidiaries of the Company,
    various lenders, Bank of America, N.A., as Administrative Agent,
    Banc of America Securities LLC and Deutsche Banc Alex. Brown
    Inc. as Joint Lead Arrangers and Joint Book Managers and Credit
    Suisse, First Boston and Credit Lyonnais New York Branch as
    Co-Documentation Agents (Incorporated by reference 
    Exhibit 10.03 to report on Form 10-K for the year
    ended December 31, 2000 [SEC File No. 0-20646])
|        | 10 | .04 |  |            |  | Amendment No. 1 to Credit Agreement, dated
    as of September 10, 2001, by and among the Company, as
    borrower, certain subsidiaries of the Company identified as
    guarantors listed therein, the banks listed therein, and Bank of
    America, N.A., as Administrative Agent (Incorporated by
    Reference  Exhibit 10.04 to report on
    Form 10-Q for the quarter ended September 30, 2001
    [SEC File No. 0-20646]                                                                                                                   
|        | 10 | .05 |  |            |  | Amendment No. 2 to Credit Agreement, dated
    as of November 30, 2001, by and among the Company, as
    borrower, certain subsidiaries of the Company identified as
    guarantors listed therein, the banks listed therein, and Bank of
    America, N.A., as Administrative Agent (Incorporated by
    reference  Exhibit 10.05 to report on
    Form 10-K for the year ended December 31, 2001 [SEC
    File No. 0-20646])                                                                                                                       
|        | 10 | .06 |  |            |  | Amendment No. 3 to Credit Agreement, dated
    as of January 22, 2002, by and among the Company, as
    borrower, certain subsidiaries of the Company identified as
    guarantors listed therein, the banks listed therein, and Bank of
    America, N.A., as Administrative Agent (Incorporated by
    reference  Exhibit 10.06 to report on
    Form 10-K for the year ended December 31, 2001 [SEC
    File No. 0-20646])                                                                                                                        

50



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##### Table of Contents



|        |    |      |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | -- | ---- |  | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      |  |            
|No.     |    |      |  | Description
|        |    |      |  |            
|        | 10 | .07  |  |            |  | Amendment No. 4 to Credit Agreement, dated
    as of September 23, 2003, by and among the Company, as
    borrower, certain subsidiaries of the Company identified as
    guarantors listed therein, the banks listed therein, and Bank of
    America, N.A., as Administrative Agent (Incorporated by
    reference  Exhibit 10.07 to report on
    Form 10-Q for the nine months ended September 30, 2002
    ([SEC File No. 0-20646])
|        | 10 | .08  |  |            |  | Amendment No. 5 to Credit Agreement, dated
    as of December 27, 2002, by and among the Company, as
    borrower, certain subsidiaries of the Company identified as
    guarantors listed therein, the banks listed therein, and Bank of
    America, N.A., as Administrative Agent (Incorporated by
    reference  Exhibit 10.08 to report on
    Form 10-K/A for the year ended December 31, 2001 [SEC
    File No. 0-20646])        
|        | 10 | .09  |  |            |  | Amendment No. 6 to Credit Agreement, dated
    as of March 28, 2003, by and among the Company, as
    borrower, certain subsidiaries of the Company identified as
    guarantors listed therein, the banks listed therein, and Bank of
    America, N.A., as Administrative Agent (Incorporated by
    reference  Exhibit 10.09 to report on Form
    10-K/A for the year ended December 31, 2001 [SEC File
    No. 0-20646])           
|        | 10 | .10  |  |            |  | Security Agreement, dated as of
    September 23, 2002, among the Company, certain subsidiaries
    of the Company identified as guarantors listed therein, and Bank
    of America, N.A., as Collateral Agent (Incorporated by
    reference  Exhibit 10.08 to report on Form 10-Q
    for the nine months ended September 30, 2002 [SEC File No.
    0-20646])                                                                        
|        | 10 | .11  |  |            |  | First Amendment to Security Agreement, dated as
    of March 28, 2003, among the Company, certain subsidiaries
    of the Company identified as guarantors listed therein, and Bank
    of America, N.A., as Collateral Agent (Incorporated by
    reference  Exhibit 10.11 to report on
    Form 10-K/A for the year ended December 31, 2001 [SEC
    File No. 0-20646])                                                               
|        | 10 | .11* |  |            |  | Employment Agreement, dated December 31,
    1990, between the Company and Thomas V. Brown (Incorporated by
    reference  Exhibit 10.06 to Registration
    Statement on Form S-1 [SEC File No. 33-50582])                                                                                                                                                                                                                             
|        | 10 | .12* |  |            |  | Deferred Compensation Plan, together with copies
    of existing individual deferred compensation agreements
    (Incorporated by reference  Exhibit 10.08 to
    Registration Statement on Form S-1 [SEC File No. 33-50582])                                                                                                                                                                                                           
|        | 10 | .13* |  |            |  | 1987 Executive Stock Option Plan (Incorporated by
    reference  Exhibit 10.09 to Registration
    Statement on Form S-1 [SEC File No. 33-50582])                                                                                                                                                                                                                                                                                       
|        | 10 | .14* |  |            |  | 1993 Key Employees Share Ownership Plan
    (Incorporated by reference  Exhibit 10.10 to
    Registration Statement on Form S-1 [SEC File No. 33-50582])                                                                                                                                                                                                                                                                               
|        | 10 | .15* |  |            |  | Incentive Bonus Plan of the Company (Incorporated
    by reference  Exhibit 10.10 to Annual Report for
    1993 on Form 10-K [SEC File No. 0-20646])                                                                                                                                                                                                                                                                                    
|        | 10 | .16* |  |            |  | 1996 Director Equity Plan of the Company
    (Incorporated by reference  Exhibit 10.12 to
    report on Form 10-Q for the quarter ended March 31,
    1996 [SEC File No. 0-20646])                                                                                                                                                                                                                                                      
|        | 10 | .17* |  |            |  | Amendment No. 1 to the Companys 1996
    Director Equity Plan, dated July 16, 1998 (incorporated by
    reference  Exhibit 10.2 to Current Report on
    Form 8-K dated June 1, 1999 [SEC File
    No. 0-20646])                                                                                                                                                                                                                       
|        | 10 | .18* |  |            |  | Second Amended and Restated 1998 Key Employee
    Incentive Compensation Plan (Incorporated by
    reference  Exhibit 10.13 to report on
    Form 10-Q for the quarter ended March 31, 2001 [SEC
    File No. 0-20646])                                                                                                                                                                                                                 
|        | 10 | .19  |  |            |  | Asset Purchase Agreement between Caraustar
    Industries, Inc., Sprague Paperboard, Inc. and International
    Paper Company, dated as of March 4, 1999 (Incorporated by
    reference  Exhibit 10.17 to report on
    Form 10-Q for the quarter ended March 31, 1999 [SEC
    File No. 0-20646])                                                                                                                                      
|        | 10 | .20  |  |            |  | Guaranty Agreement, dated as of July 30,
    1999, as amended of the Company in favor of SunTrust Bank
    Atlanta (Incorporated by reference 
    Exhibit 10.19 to report on Form 10-K for the year
    ended December 31, 2001 [SEC File No. 0-20646])                                                                                                                                                                                
|        | 10 | .21  |  |            |  | Fifth Amendment to Guaranty Agreement, dated as
    of September 20, 2002, of the Company in favor of SunTrust
    Bank Atlanta (Incorporated by reference 
    Exhibit 10.19 to report on Form 10-Q for the nine
    months ended September 30, 2002 [SEC File No. 0-20646?)                                                                                                                                                           
|        | 10 | .23  |  |            |  | Seventh Amendment to Guaranty Agreement, dated as
    of March 28, 2003, of the Company in favor of SunTrust Bank
    (Incorporated by reference  Exhibit 10.23
    to report on Form 10-K/A for the year ended
    December 31, 2001 [SEC File No. 0-20646])                                                                                                                                                                           

51



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|        |    |       |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | -- | ----- |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |  |            
|No.     |    |       |  | Description
|        |    |       |  |            
|        | 10 | .24   |  |            |  | Third amendment to Amended and Restated Revolving
    Credit Agreement, dated as of March 28, 2003, between
    Premier Boxboard Limited LLC and SunTrust Bank (Incorporated by
    reference  Exhibit 10.24 to report on
    Form 10-K/A for the year ended December 31, 2001 [SEC
    File No. 0-20646])                                                                                                           
|        | 10 | .25   |  |            |  | Second Amended and Restated Parent Guaranty,
    dated as of August 1, 1999, as amended, of the Company in
    favor of Toronto-Dominion (Texas), Inc., as Administrative Agent
    (Incorporated by reference  Exhibit 10.20 to
    report on Form 10-K for the year ended December 31,
    2001 [SEC File No. 0-20646])                                                                                            
|        | 10 | .26   |  |            |  | Revised Fifth Amendment to Parent Guaranty, dated
    as of September 23, 2002, of the Company in favor of
    Toronto-Dominion (Texas), Inc., as Administrative Agent
    (Incorporated by reference  Exhibit 10.21 to
    report on Form 10-Q for the nine months ended
    September 30, 2002 [SEC File No. 0-20646])                                                                                             
|        | 10 | .27   |  |            |  | First Agreement Regarding Amendments to Loan
    Documents, dated as of March 28, 2003, among Standard
    Gypsum L.L.C., Temple-Inland, Inc., Temple-Inland Forest
    Products Corporation, the Company and Toronto Dominion (Texas),
    Inc., as Administrative Agent (Incorporated by
    reference  Exhibit 10.27 to report on
    Form 10-K/A for the year ended December 31, 2001 [SEC
    File No. 0-20646])
|        | 10 | .28   |  |            |  | Irrevocable Standby Letter of Credit, dated
    March 28, 2003, in favor of Toronto Dominion (Texas), Inc.
    upon application of the Company (Incorporated by
    reference  Exhibit 10.28 to report on
    Form 10-K/A for the year ended December 31, 2001 [SEC
    File No. 0-20646])                                                                                                                           
|        | 10 | .29   |  |            |  | Partnership Agreement of Standard Gypsum L.P.
    (Incorporated by reference  Exhibit 10.21 to
    report on Form 10-K for the year ended December 31,
    2001 [SEC File No. 0-20646])                                                                                                                                                                                                                              
|        | 10 | .30   |  |            |  | Operating Agreement of Premier Boxboard Limited
    LLC (Incorporated by reference  Exhibit 10.22 to
    report on Form 10-K for the year ended December 31, 2001
    [SEC File No. 0-20646])                                                                                                                                                                                                                        
|        | 10 | .31   |  |            |  | Asset Purchase Agreement between Caraustar
    Industries, Inc. and Smurfit-Stone Container Corporation, dated
    as of July 22, 2002 (Incorporated by reference 
    Exhibit 2 to Current Report on Form 8-K dated October 15,
    2002)                                                                                                                                                                           
|        | 10 | .32   |  |            |  | First Amendment to Asset Purchase Agreement
    between Caraustar Industries, Inc. and Smurfit-Stone Container
    Corporation, dated as of September 9, 2002 (Incorporated by
    reference  Exhibit 10.25 to Report on
    Form 10-Q dated September 30, 2002 [SEC File
    No. 0-20646])                                                                                                                          
|        | 10 | .33*  |  |            |  | Employment Agreement, dated February 13,
    2002, between the Company and Michael J. Keough (Incorporated by
    reference  Exhibit 10.26 to Report on
    Form 10-Q dated September 30, 2002 (SEC File
    No. 0-20646])                                                                                                                                                                                           
|        | 10 | .34*  |  |            |  | Employment Agreement, dated October 1, 2002,
    between the Company and Ronald J. Domanico (Incorporated by
    reference  Exhibit 10.27 to Report on
    Form 10-Q dated September 30, 2002 [SEC File
    No. 0-20646])                                                                                                                                                                                            
|        | 10 | .35*  |  |            |  | Resignation Agreement, dated October 8,
    2002, between the Company and Henry L. Thrash, III (Incorporated
    by reference  Exhibit 10.28 to Report on
    Form 10-Q dated September 30, 2002 [SEC File
    No. 0-20646])                                                                                                                                                                                         
|        | 10 | .36   |  |            |  | Master Lease Agreement, with Riders Nos. 1
    through 3 and Equipment Schedules Nos. 1 through 4, dated
    September 30, 2002, between Caraustar Industries, Inc. and
    Banc of America Leasing & Capital, LLC (Incorporated by
    reference  Exhibit 10.29 to Report on Form 10-Q
    dated September 30, 2002 [SEC File No. 0-20646])                                                                         
|        | 10 | .37#* |  |            |  | Change in Control Severance Agreement, dated
    October 1, 2002, between the Company and Ronald J. Domanico
    (Incorporated by reference  Exhibit 10.30 to
    Report on Form 10-Q dated September 30, 2002 [SEC File
    No. 0-20646])                                                                                                                                                                           
|        | 11 | .01  |  |            |  | Computation of Earnings Per Share                                                                                                                                                                                                                                                                                                                                                                                     
|        | 99 | .01  |  |            |  | Certification of CEO                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 99 | .02  |  |            |  | Certification of CFO                                                                                                                                                                                                                                                                                                                                                                                                  

52



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---

   Filed herewith



|  |                                                                                                                                                                                  
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Management contract or compensatory plan required
    to be filed under Item 14(c) of Form 10-K and
    Item 601 of Regulation S-K of the Securities and Exchange
    Commission.



|  |                                                                                                                                                                                                                                                                                                                                                                 
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|# | This Exhibit is substantially identical to Change
    in Control Severance Agreements for the following individuals:
    Thomas V. Brown, Michael J. Keough, James L. Walden, Jimmy A.
    Russell, H. Lee Thrash, III, Gregory B. Cottrell, John
    R. Foster and William A. Nix, III, except the agreement is dated
    March 1, 2002, for these individuals.



|   |                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Pursuant to interim guidance provided in SEC
    Release No. 33-8212, this certification accompanies, but shall
    not be deemed filed as a part of, the quarterly report on Form
    10-Q/A.

53