10-Q 1 g65121e10-q.txt RIVERWOOD HOLDING, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 OR [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- --------------- Commission file number 1-11113 RIVERWOOD HOLDING, INC. (Exact name of registrant as specified in its charter) Delaware 58-2205241 ------------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1105 North Market Street Suite 1300 Wilmington, Delaware 19801 (Address of principal executive offices) (Zip Code) c/o Riverwood International Corporation (770) 644-3000 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. At November 1, 2000 there were 7,063,180 shares and 500,000 shares of the registrant's Class A and Class B common stock, respectively, outstanding. 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS As used in this Form 10-Q, unless the context otherwise requires, "RIC" refers to the corporation formerly named Riverwood International Corporation; the "Predecessor" refers to RIC and its subsidiaries in respect of periods prior to the acquisition on March 27, 1996 by Holding, through its wholly-owned subsidiaries, of RIC (the "Merger"); the "Company" refers to the registrant, Riverwood Holding, Inc., a Delaware corporation formerly named New River Holding, Inc. ("Holding") and its subsidiaries; and "Riverwood" refers to Riverwood International Corporation, a Delaware corporation formerly named Riverwood International USA, Inc. and an indirect wholly-owned subsidiary of Holding. 2 3 RIVERWOOD HOLDING, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS)

SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------ ------------ (UNAUDITED) ASSETS Current Assets: Cash and equivalents $ 19,883 $ 14,108 Receivables, net of allowances 137,484 156,734 Inventories 168,508 173,610 Prepaid expenses 14,951 10,990 ------------ ------------ Total Current Assets 340,826 355,442 Property, Plant and Equipment, net of accumulated depreciation of $543,745 in 2000 and $455,339 in 1999 1,354,825 1,429,912 Investments in Net Assets of Equity Affiliates 147,340 146,473 Goodwill, net of accumulated amortization of $35,766 in 2000 and $29,805 in 1999 282,156 288,117 Other Assets 130,781 143,198 ------------ ------------ Total Assets $ 2,255,928 $ 2,363,142 ============ ============ LIABILITIES Current Liabilities: Short-term debt $ 140,336 $ 17,339 Accounts payable and other accrued liabilities 203,904 226,336 ------------ ------------ Total Current Liabilities 344,240 243,675 Long-Term Debt, less current portion 1,575,544 1,730,898 Other Noncurrent Liabilities 99,705 101,719 ------------ ------------ Total Liabilities 2,019,489 2,076,292 ------------ ------------ Contingencies and Commitments (Note 5) Redeemable Common Stock, at current redemption value 7,173 7,202 ------------ ------------ SHAREHOLDERS' EQUITY Nonredeemable Common Stock 75 75 Capital in Excess of Par Value 749,141 749,161 Accumulated Deficit (488,272) (454,157) Cumulative Currency Translation Adjustment (31,678) (15,431) ------------ ------------ Total Shareholders' Equity 229,266 279,648 ------------ ------------ Total Liabilities and Shareholders' Equity $ 2,255,928 $ 2,363,142 ============ ============

See Notes to Condensed Consolidated Financial Statements. 3 4 RIVERWOOD HOLDING, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (IN THOUSANDS OF DOLLARS) (UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED ------------------------------ ------------------------------ SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net Sales $ 278,501 $ 268,694 $ 853,252 $ 824,058 Cost of Sales 212,354 211,217 655,871 652,393 Selling, General and Administrative 23,620 25,935 83,336 83,041 Research, Development and Engineering 1,467 1,028 3,567 3,014 Other Expense (Income), net 3,517 (1,219) 5,490 (248) ---------- ---------- ---------- ---------- Income from Operations 37,543 31,733 104,988 85,858 Interest Income 210 119 603 756 Interest Expense 47,045 45,313 139,550 133,492 ---------- ---------- ---------- ---------- Loss before Income Taxes and Equity in Net Earnings (Loss) of Affiliates (9,292) (13,461) (33,959) (46,878) Income Tax Expense 1,419 770 3,856 1,674 ---------- ---------- ---------- ---------- Loss before Equity in Net Earnings (Loss) of Affiliates (10,711) (14,231) (37,815) (48,552) Equity in Net Earnings (Loss) of Affiliates 1,414 518 3,700 (1,573) ---------- ---------- ---------- ---------- Net (Loss) $ (9,297) $ (13,713) $ (34,115) $ (50,125) ---------- ---------- ---------- ---------- Other comprehensive (Loss) Income, net of tax: Foreign currency translation adjustments (5,279) 2,314 (16,247) (2,524) ---------- ---------- ---------- ---------- Comprehensive (Loss) $ (14,576) $ (11,399) $ (50,362) $ (52,649) ========== ========== ========== ==========

See Notes to Condensed Consolidated Financial Statements. 4 5 RIVERWOOD HOLDING, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS) (UNAUDITED)

NINE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net (Loss) $ (34,115) $ (50,125) Noncash Items Included in Net Loss: Depreciation and amortization 113,045 106,972 Deferred income taxes 179 (656) Pension, postemployment and postretirement benefits, net of benefits paid 3,140 3,304 Net gain on disposal of assets (745) -- Equity in net (earnings) loss of affiliates, net of dividends (901) 4,331 Amortization of deferred debt issuance costs 8,226 7,688 Other, net 1,495 1,660 Decrease (Increase) in Current Assets: Receivables 12,607 (24,835) Inventories (1,130) (18,256) Prepaid expenses (4,429) (2,012) Decrease in Accounts payable and other accrued liabilities (19,249) (9,490) Decrease in Other Noncurrent Liabilities (193) (11,311) ---------- ---------- Net Cash Provided by Operating Activities 77,930 7,270 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of Property, Plant and Equipment (41,428) (47,689) Proceeds from Sale of Assets 5,670 -- Increase in Other Assets (1,450) (1,428) ---------- ---------- Net Cash Used in Investing Activities (37,208) (49,117) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net (Decrease) Increase in Notes Payable (28,417) 51,600 (Repurchases) Issuance of Redeemable Common Stock, net (49) 367 Payments on Debt (5,126) (13,283) ---------- ---------- Net Cash (Used in) Provided by Financing Activities (33,592) 38,684 ---------- ---------- Effect of Exchange Rate Changes on Cash (1,355) (1,181) ---------- ---------- Net Increase (Decrease) in Cash and Equivalents 5,775 (4,344) Cash and Equivalents at Beginning of Period 14,108 13,840 ---------- ---------- Cash and Equivalents at End of Period $ 19,883 $ 9,496 ========== ==========

See Notes to Condensed Consolidated Financial Statements. 5 6 RIVERWOOD HOLDING, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION The accompanying Condensed Consolidated Financial Statements of the Company included herein have been prepared by the Company without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented have been made. The Condensed Consolidated Balance Sheet as of December 31, 1999 was derived from audited financial statements. Holding and RIC Holding, Inc, a wholly-owned subsidiary, conducted no significant business and have no independent assets or operations other than in connection with the Merger and related transactions through March 27, 1996. Holding and RIC Holding, Inc. fully and unconditionally guarantees substantially all of the debt of Riverwood. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES For a summary of the Company's significant accounting policies, please refer to the Company's report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1999. The preparation of the Condensed Consolidated Financial Statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. Effective December 1, 1999, the Company changed its international subsidiaries' fiscal year end to December 31. Previously, the Company's international subsidiaries were principally consolidated and reported on the basis of fiscal years ending November 30. The Company has reclassified the presentation of certain prior period information to conform with the current presentation format. NOTE 3 - INVENTORIES The major classes of inventories were as follows:

(IN THOUSANDS OF DOLLARS) SEPTEMBER 30, 2000 DECEMBER 31, 1999 ------------------------- ------------------ ----------------- Finished goods $ 81,334 $ 80,054 Work-in-process 11,996 15,845 Raw materials 41,646 45,143 Supplies 33,532 32,568 -------- -------- Total $168,508 $173,610 ======== ========

6 7 NOTE 4 - INVESTMENTS IN NET ASSETS OF EQUITY AFFILIATES The Company has investments in affiliates that are accounted for using the equity method of accounting. As of September 30, 2000, the most significant investment was the Company's 50 percent investment in Igaras Papeis e Embalagens S.A. ("Igaras"). On July 1, 2000, Igaras spun off the multiple packaging portion of its business into a newly formed company, of which the Company owned 50 percent. On October 3, 2000, the Company announced the completion of the sale of its 50 percent investment in Igaras (see Note 9). On October 12, 2000, the Company purchased the remaining 50 percent of the newly formed company for $12.5 million. The following represents the summarized income statement information for Igaras, of which the Company recognized 50 percent in its results of operations:

THREE MONTHS ENDED NINE MONTHS ENDED -------------------------- ---------------------------- SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, 2000 1999 2000 1999 --------- --------- ---------- ---------- (IN THOUSANDS OF DOLLARS) Net Sales $ 49,649 $ 52,055 $ 162,944 $ 142,513 Cost of Sales 36,030 40,814 121,215 120,777 -------- -------- ---------- ---------- Gross Profit $ 13,619 $ 11,241 $ 41,729 $ 21,736 ======== ======== ========== ========== Income from Operations $ 6,002 $ 5,070 $ 22,682 $ 6,529 ======== ======== ========== ========== Net Income (Loss) $ 864 $ 1,055 $ 4,653 $ (5,003) ======== ======== ========== ==========

On January 14, 1999, the Central Bank of Brazil changed the foreign exchange policy by eliminating the exchange rate band, which had been used as a means to control the fluctuation of the Real against the U.S. Dollar. The exchange rate is now determined by market forces. As a consequence of such change, the Real suffered a significant devaluation related to the U.S. Dollar during the beginning of 1999. Under the Igaras joint venture agreement, Igaras was required to pay dividends equal to at least 25 percent of its net profits. During the first nine months of 2000 and 1999, the Company received dividends from Igaras totaling $1.9 million and $1.4 million, respectively, net of taxes of $0.3 million and $0.3 million, respectively. During the first nine months of 2000, the Company received dividends from a non-controlled affiliate other than Igaras totaling $0.5 million, net of taxes of $0.1 million. During the third quarter of 1999, the Company sold an investment other than Igaras, resulting in a receipt of a final dividend of $0.8 million. No significant gain or loss was recognized in accordance with the sale. NOTE 5 - CONTINGENCIES AND COMMITMENTS The Company is committed to compliance with all applicable environmental laws and regulations throughout the world. Environmental law is, however, dynamic rather than static. As a result, costs, which are unforeseeable at this time, may be incurred when new laws are enacted, and when environmental agencies promulgate or revise rules and regulations. In late 1993, the U.S. Environmental Protection Agency proposed regulations (generally referred to as the "cluster rules") that would mandate more stringent controls on air and water discharges from the United States pulp and paper mills. The cluster rules were promulgated in April 1998, and the Company 7 8 estimates the capital spending that may be required to comply with the cluster rules could reach $55 million to be spent at its two U.S. paper mills over a seven-year period beginning in 2000. In late 1995, the Louisiana Department of Environmental Quality ("DEQ") notified the Predecessor of potential liability for the remediation of hazardous substances at a wood treatment site in Shreveport, Louisiana that the Predecessor or its predecessors previously operated, and at a former oil refinery site in Caddo Parish, Louisiana which is on land that the Company previously owned. In response to these notices, the Company has provided additional information concerning these sites and has commenced its own evaluation of any claims and remediation liabilities for which it may be responsible. Subsequent to receipt in May 1996 of a Special Demand Letter from DEQ to remediate the site in Shreveport, the Company entered into an agreement with DEQ to perform a soil and groundwater investigation at the site. The Company completed this investigation work in 1999 and is in ongoing discussions with DEQ to develop an appropriate remediation plan and exit strategy. In September 1996, the Company received a Special Demand Letter from DEQ to remediate the site in Caddo Parish. The Company performed a waste inventory and treatability study at the site and subsequently met with DEQ in October 1999. On July 6, 2000, the Company and DEQ entered into a Settlement Agreement that describes in detail the remedial actions necessary for the Company to obtain full release of all future liability at this site. The Company has contracted with a vendor to perform the remedial actions as outlined in the Settlement Agreement and the work is currently proceeding. The Company no longer owns the site since transferring the property to another entity on October 22, 2000. The Company anticipates the remedial actions outlined in the Settlement Agreement will be completed during the first quarter of 2001 and, at that time, expects to be relieved of any future liability. The Company is involved in environmental remediation projects for certain properties currently owned or operated by the Company, certain properties divested by the Company for which responsibility was retained, and waste sites where waste was shipped by predecessors of the Company or for which the Company might have corporate successor liability. Certain of these projects are being addressed under federal and state statutes, such as the Comprehensive Environmental Response, Compensation and Liability Act and the state law counterparts. The Company's costs in some instances cannot be reliably estimated until the remediation process is substantially underway or liability at multiparty sites has been addressed. To address these contingent environmental costs, the Company has accrued reserves when such costs are probable and can be reasonably estimated. The Company believes that, based on current information and regulatory requirements, the accruals established by the Company for environmental expenditures are adequate. Based on current knowledge, to the extent that additional costs may be incurred that exceed the accrued reserves, such amounts are not expected to have a material impact on the results of operations, cash flows or financial condition of the Company, although no assurance can be given that material costs will not be incurred in connection with clean-up activities at these properties, including the Shreveport and Caddo Parish sites referred to above. The Company is a party to a number of lawsuits arising out of the ordinary conduct of its business. While there can be no assurance as to their ultimate outcome, the Company does not believe that these lawsuits will have a material impact on the results of operations, cash flows or financial condition of the Company. The Company is a plaintiff in several actions against Mead claiming infringement of the Company's patents for its packaging machines, as to which Mead has filed counterclaims asserting that the Company's patents are invalid. In the furthest advanced of these actions, on November 18, 1998, a federal court entered an order refusing to adopt a special master's recommended finding that the Company's patent in issue was invalid, and ruled that Mead had been unlawfully infringing the Company's patent. On February 16, 1999, Mead filed an appeal from that decision. An oral argument with regard to this appeal was held on February 9, 2000 before the Court of Appeals for the Federal Circuit. A decision of the court was issued on May 17, 2000 reversing the decision of the lower federal court and thereby reinstating the decision of the special master. 8 9 In connection with the Merger, the former majority owner of the Company agreed to bear the cost of a Section 338(h)(10) election for U.S. federal tax purposes and for purposes of state taxes for which the former majority owner and the Company filed returns on a combined basis. The Company agreed to bear the cost of this election for the purposes of other state taxes ("stand-alone taxes"), including Louisiana income tax. During 1997, the Company paid $27.5 million in estimated Louisiana stand-alone taxes relating to the election. The Company's calculation of its Louisiana tax was based on state law in effect at the time of the Merger, including a 1993 amendment. In May 1997, the Louisiana Supreme Court declared the 1993 amendment to be void under the Louisiana Constitution, retroactive to 1993. After consultation with Louisiana tax counsel, the Company filed its Louisiana income tax return for the period ended March 27, 1996 in reliance on the Louisiana tax law in effect at the time of the Merger, without the payment of any additional tax due to the voiding of the 1993 amendment. The State of Louisiana has completed its audit of the Company's tax return for the period ended March 27, 1996. On May 9, 2000, the Company received a Notice of Proposed Tax Due for this period in the amount of $47.6 million in tax and $27.8 million in statutory interest through June 4, 2000. The Company requested and received an extension to July 15, 2000 to respond to the Notice of Proposed Tax Due. On July 14, 2000, the Company filed a letter protesting the tax and interest due, and requested an informal conference with the Louisiana Department of Revenue. This action does not preclude the Company from paying the amount at issue in order to avoid the accrual of additional interest should the Company decide to pay and contest the matter before the Louisiana courts. There can be no assurance that the Company will ultimately prevail in this dispute. However, management believes that the additional tax and interest ultimately paid (if any) will be substantially less than the amounts listed on the Notice of Proposed Tax Due, although no assurance can be given in this regard. Since the law is unclear and the amounts involved are significant, it may be several years before this matter is resolved. For financial reporting purposes, any tax ultimately paid related to this matter would increase the goodwill recorded in connection with the Merger and any interest ultimately paid would be recorded as interest expense. NOTE 6 - RESTRUCTURING ACTIVITIES In connection with the global restructuring program initiated in the fourth quarter of 1998, the Company is reducing its European workforce by approximately 300 employees and is implementing other initiatives designed to improve productivity and profitability across the global organization. The initial cost of this program, scheduled to be completed during the first six months of 2001, was approximately $25.6 million of which approximately $0.8 million was used in December 1998 and related to severance payments. The following table provides information that details payments on this restructuring plan since December 31, 1998:

Other (In thousands of dollars) Severance Exit Costs Total ------------------------- --------- ---------- -------- Balance at 12/31/98 $ 21,205 $ 3,537 $ 24,742 Charges against accrual in 1999 (11,527) (791) (12,318) -------- -------- -------- Balance at 12/31/99 $ 9,678 $ 2,746 $ 12,424 Charges against accrual in first nine months of 2000 (4,349) (826) (5,175) -------- -------- -------- Balance at 9/30/00 $ 5,329 $ 1,920 $ 7,249 ======== ======== ========

As of September 30, 2000, the Company has reduced its European workforce related to the 1998 restructuring by approximately 240 employees. In connection with and following the Merger, the Company decided to exit certain businesses and operating activities, including the sale or closure of the Company's last dedicated folding carton converting plant in the United States, located in Kankakee, Illinois, packaging machinery manufacturing plants in 9 10 Marietta, Georgia and Koln, Germany, a beverage multiple packaging converting plant in Bakersfield, California and the trucking transportation operations in West Monroe, Louisiana, as well as the consolidation and realignment of certain operations in the United States, Australia and Europe. The cost of exiting these businesses and operating activities was approximately $38.6 million which was accrued during 1996 as a purchase accounting adjustment. The costs related principally to the severance of approximately 750 employees, relocation and other plant closure costs. During the first nine months of 2000, $0.1 million was utilized and charged against the accrual primarily related to exit costs. At September 30, 2000, $1.1 million of this total was included in Other accrued liabilities on the Consolidated Balance Sheet. NOTE 7 - BUSINESS SEGMENT INFORMATION Business segment information is as follows:

THREE MONTHS ENDED NINE MONTHS ENDED ------------------------------ ------------------------------ SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, (In thousands of dollars) 2000 1999 2000 1999 ------------------------- ---------- ---------- ---------- ---------- NET SALES: Coated Board $ 250,607 $ 245,005 $ 767,935 $ 755,686 Containerboard 27,894 23,689 85,317 68,372 ---------- ---------- ---------- ---------- $ 278,501 $ 268,694 $ 853,252 $ 824,058 ========== ========== ========== ========== INCOME (LOSS) FROM OPERATIONS: Coated Board $ 41,584 $ 36,977 $ 118,923 $ 110,283 Containerboard 1,495 (1,009) 3,374 (12,343) Corporate (5,536) (4,235) (17,309) (12,082) ---------- ---------- ---------- ---------- $ 37,543 $ 31,733 $ 104,988 $ 85,858 ========== ========== ========== ========== EBITDA: Coated Board $ 76,618 $ 67,048 $ 218,394 $ 202,313 Containerboard 5,990 3,425 16,555 679 Corporate (2,032) 124 (5,412) (3,191) ---------- ---------- ---------- ---------- $ 80,576 $ 70,597 $ 229,537 $ 199,801 ========== ========== ========== ==========

NOTE 8 - NEW ACCOUNTING PRONOUNCEMENTS In June 2000, the FASB issued Statement No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133" ("SFAS No. 138"). SFAS No. 138 establishes additional guidance for the way companies account for and report on derivative instruments and hedging activities. In June 1999, the FASB issued Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities; Deferral of Effective Date of FASB Statement No. 133" ("SFAS No. 137"). SFAS No. 137 defers for one year the effective date of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 137 now will apply to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133 establishes standards for the way companies account for and report on derivative instruments and hedging activities. Based on analysis to date, the Company expects the most significant impact of this standard will be the cumulative as well as ongoing mark-to-market adjustment through the income statement of the options used to hedge certain anticipated foreign currency transactions to the extent a portion of the mark-to 10 11 market value of those options may be deemed ineffective in offsetting the change in value of the underlying hedged item. The foreign currency forward contracts used to hedge exposure associated with the foreign currency denominated receivables are presently being marked-to-market through the income statement and will continue to be marked-to-market through the income statement under SFAS No. 133 as amended by SFAS No. 138. The interest rate swap contracts used to effectively fix the LIBOR rate on a portion of the Company's variable rate borrowings are expected to remain 100% effective and therefore are expected to have no impact related to the change in the market value of these instruments on the Company's income statement. In summary, although the Company will be recognizing the fair value of these financial instruments on its balance sheet, the Company expects that the implementation of SFAS No. 133 as amended by SFAS No. 138 will not have a material impact on its income statement. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin 101 "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. SAB 101 is effective no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The Company does not anticipate that SAB 101 will have a material impact on its financial statements. NOTE 9 - SUBSEQUENT EVENT On July 1, 2000, Igaras spun off the multiple packaging portion of its business into a newly formed company, of which the Company owned 50 percent. On October 3, 2000, the Company, along with its joint venture partner, Cia Suzano de Papel e Celulose, completed the sale of the jointly-held subsidiary Igaras for approximately $510 million, including the assumption of $112 million of debt. The Company expects to recognize a gain between $65 million and $70 million, net of tax, in accordance with the sale. On October 12, 2000, the Company purchased the remaining 50 percent of the newly formed company for $12.5 million. In connection with the sale of Igaras on October 3, 2000, the Company entered into Amendment No. 5 dated September 12, 2000, effective October 3, 2000, to its Credit Agreement. Pursuant to the amendment, the Company applied $120 million and $25 million of the sale proceeds to its 2001 and 2002 term loan maturities under its term loan facility, respectively; the Company will recognize a loss on the early extinguishment of debt of approximately $2.1 million in the fourth quarter of 2000. The Company applied the remaining portion of the proceeds (approximately $48 million) to the Company's $400 million revolving credit facility ("Revolving Facility"). In connection with Amendment No. 5, the Company canceled its $140 million revolving credit facility ("Machinery Facility"). The effect of applying the proceeds to the Revolving Facility and canceling the Machinery Facility did not have a material impact to the Company's overall liquidity. This application of proceeds did not involve any reduction in the current aggregate Revolving Facility commitment of $400 million. In connection with the sale of Igaras, certain financial and other covenants in the Credit Agreement were amended to reflect recent financial results and market and operating conditions, as well as the sale of Igaras and the prepayment of term loans and other borrowings. Covenant modifications specify, among other things, the following amended minimum EBITDA requirements for each four quarter period ended during the following test periods:

Test Period EBITDA ---------------------------------------- ------------ December 31, 1999 - December 30, 2000 $265 million December 31, 2000 - December 30, 2001 $290 million December 31, 2001 - December 30, 2002 $300 million December 31, 2002 - December 30, 2003 $315 million Thereafter $340 million

11 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW In connection with the Merger, the Company entered into a credit agreement (as amended, the "Credit Agreement") that currently provides for senior secured credit facilities (the "Facilities") consisting of $633 million ($488 million after the effect of the Igaras sale) in outstanding term loans under a term loan facility (the "Term Loan Facility") and a $400 million revolving credit facility (the "Revolving Facility"). In addition, Riverwood International Machinery, Inc., a wholly-owned subsidiary of Riverwood, entered into a credit agreement providing for a $140 million secured revolving credit facility (the "Machinery Facility") for the purpose of financing or refinancing packaging machinery. In connection with the Merger, the Company also completed an offering of $250 million aggregate principal amount of 10 1/4% Senior Notes due 2006 (the "1996 Senior Notes") and $400 million aggregate principal amount of 10 7/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes" and together with the 1996 Senior Notes, the "1996 Notes"). On July 28, 1997, the Company completed an offering of $250 million principal amount of 10 5/8% Senior Notes due 2007 (the "Initial Notes"). The net proceeds of this offering were applied to prepay certain revolving credit borrowings under the Revolving Facility (without any commitment reduction) and to refinance certain Tranche A term loans and other borrowings under the Credit Agreement. A registration statement under the Securities Act of 1933, as amended, registering senior notes of the Company identical in all material respects to the Initial Notes (the "Exchange Notes") offered in exchange for the Initial Notes became effective October 1, 1997. On November 3, 1997, the Company completed its exchange offer of the Initial Notes for the Exchange Notes. The Initial Notes and the Exchange Notes are referred to herein as the 1997 Notes. In connection with the sale of Igaras Papeis e Embalagens S.A. ("Igaras") on October 3, 2000, the Company entered into Amendment No. 5 dated September 12, 2000, effective October 3, 2000, to the Credit Agreement. Pursuant to the amendment, the Company applied $120 million and $25 million of the sale proceeds to its 2001 and 2002 term loan maturities under the Term Loan Facility, respectively; the Company will recognize a loss on the early extinguishment of debt of approximately $2.1 million in the fourth quarter of 2000. The Company applied the remaining portion of the proceeds (approximately $48 million) to the Revolving Facility (without any commitment reduction). In connection with Amendment No. 5, the Company canceled its Machinery Facility. The effect of applying the proceeds to the Revolving Facility and canceling the Machinery Facility did not have a material impact to the Company's overall liquidity. In addition, certain of the financial covenants included in the Credit Agreement were amended (see "Financial Condition, Liquidity and Capital Resources - Covenant Restrictions.") GENERAL The Company reports its results in two business segments: Coated Board and Containerboard. The Coated Board business segment includes (i) the production and sale of coated unbleached kraft paperboard ("CUK Board") for packaging cartons from the paper mills in Macon, Georgia (the "Macon Mill") and in West Monroe, Louisiana (the "West Monroe Mill") and white lined chip board ("WLC") at its paper mill in Norrkoping, Sweden (the "Swedish Mill"); (ii) converting operations facilities in the United States and Europe; and (iii) the design, manufacture and installation of packaging machinery related to the assembly of beverage cartons. The Containerboard business segment includes the production and sale of linerboard, corrugating medium and kraft paper from paperboard mills in the United States. EBITDA is defined as consolidated net income (exclusive of non-cash charges resulting from purchase accounting during the periods subsequent to the Merger) before consolidated interest expense, consolidated income taxes, consolidated depreciation and amortization, and other non-cash charges 12 13 deducted in determining consolidated net income, extraordinary items and the cumulative effect of accounting changes and earnings of, but including dividends from, non-controlled affiliates. The Company believes that EBITDA provides useful information regarding the Company's debt service ability, but should not be considered in isolation.

THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------- ------------------------------ SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, 2000 1999 2000 1999 --------- --------- ---------- ---------- (IN THOUSANDS OF DOLLARS) EBITDA (Segment Data): Coated Board $ 76,618 $ 67,048 $ 218,394 $ 202,313 Containerboard 5,990 3,425 16,555 679 Corporate (2,032) 124 (5,412) (3,191) -------- -------- ---------- ---------- EBITDA $ 80,576 $ 70,597 $ 229,537 $ 199,801 ======== ======== ========== ==========

BUSINESS TRENDS AND INITIATIVES The Company's cash flow from operations and EBITDA are influenced by sales volume and selling prices for its products and raw material costs, and are affected by a number of significant business, economic and competitive factors. Many of these factors are not within the Company's control. Historically, in the Coated Board business segment, the Company has experienced stable pricing for its integrated beverage carton products, and moderate cyclical pricing for its folding cartonboard, which is principally sold in the open market. The Company's folding cartonboard sales are affected by competition from competitors' CUK Board and other substrates - solid bleached sulfate ("SBS"), recycled clay coated news ("CCN") and, internationally, WLC -- as well as by general market conditions. In the Containerboard business segment, conditions in the cyclical worldwide commodity paperboard markets have a substantial impact on the Company's Containerboard sales. During the first nine months of 2000, the Company has taken 35 days or approximately 11,900 tons of medium and bag market related downtime at the U.S. mills that resulted in approximately $2.7 million of underabsorped fixed costs. The Company expects to take an additional 23 days, or 9,500 tons, of downtime in the fourth quarter of 2000. The downtime results primarily from a number of factors, principally production above planned rates at the U.S. mills, slow recovery of soft drink demand and a weak containerboard market. As a result of the downtime in fourth quarter, the Company expects the impact on earnings at the U.S. mills to be approximately $2.0 million related to the underabsorption of fixed costs. The Company is pursuing a number of long-term initiatives designed to improve productivity and profitability while continuing to implement its Coated Board business strategy. The Company has undertaken a profit center reorganization of its operations, implemented a global restructuring program (see below), implemented a number of cost saving measures and effected several management changes. The Company is continuing to implement a global Total Quality Systems ("TQS") initiative which uses statistical process control to help design and manage all types of activities including production and maintenance. In addition, the Company recently established a management team in an effort to expand into the high-growth segments of the global consumer packaged goods sector. The Company will also offer a broad portfolio of new and enhanced products to generate additional growth in the global consumer packaged goods sector. Historically, the Company reported its Coated Board results in the beverage and folding carton markets in addition to the results from its Swedish Mill. As a result of the new strategy, the Company will report the results of the folding carton markets and results of the Swedish Mill under 13 14 the title of consumer product packaging markets. The Company expects to see the benefits of the new global consumer packaged goods strategy beginning in the first quarter of 2001. The Company expects capital expenditures will range from $65 million to $75 million in 2000 and $70 million to $80 million in 2001 as the Company invests to improve its process capabilities, to invest in packaging machinery, and to comply with environmental cluster rules. The Company continues to evaluate its current operations and assets with a view to rationalizing its operations and improving profitability, in particular with respect to its international converting assets and strategy. As part of this effort, the Company initiated a $25.6 million global restructuring program in the fourth quarter of 1998 aimed at achieving annualized savings and cost avoidance of approximately $20 million when fully implemented. The global restructuring program is focused in the Company's European operations. To date, the Company has made significant progress in completing the restructuring activities and anticipates completing this program during the first six months of 2001 (see "-- Financial Condition, Liquidity and Capital Resources -- Financing Sources and Cash Flows"). Finally, the Company is continuing to focus on reducing working capital and increasing liquidity by reducing inventory and lowering receivables. Packaging machinery placements during the first nine months of 2000 increased approximately 13 percent when compared to the first nine months of 1999. The Company has been and will continue to be selective in future packaging machinery placements to ensure appropriate returns. OUTLOOK The Company expects that its 2000 full year EBITDA will significantly exceed its 1999 EBITDA, although no assurance can be given in this regard. The achievement of this expectation is dependent upon (among other things) a number of profit improvement initiatives, including increasing worldwide beverage and North American consumer product sales volumes above 1999 levels, improving U.S. mill throughput, continued cost savings from other actions taken to date and stable pricing for the Company's products. In 2000, the Company expects stable sales volumes in its worldwide beverage markets, and renewed growth in its domestic consumer product markets. The Company does not expect to recover the volume shortfall it suffered during the 2000 North American soft drink beverage season. The Company expects containerboard market prices to be stable through the end of 2000. 14 15 RESULTS OF OPERATIONS

THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------------------- --------------------------------------- % INCREASE % INCREASE (DECREASE) (DECREASE) SEPT. 30, FROM PRIOR SEPT. 30, SEPT. 30, FROM PRIOR SEPT. 30, (IN THOUSANDS OF DOLLARS) 2000 PERIOD 1999 2000 PERIOD 1999 ------------ ----------- ------------ ----------- ------------ ----------- Net Sales (Segment Data): Coated Board $ 250,607 2.3% $ 245,005 $ 767,935 1.6% $ 755,686 Containerboard 27,894 17.8 23,689 85,317 24.8 68,372 --------- --------- --------- --------- Net Sales 278,501 3.6 268,694 853,252 3.5 824,058 Cost of Sales 212,354 0.5 211,217 655,871 0.5 652,393 --------- --------- --------- --------- Gross Profit 66,147 15.1 57,477 197,381 15.0 171,665 Selling, General and Administrative 23,620 (8.9) 25,935 83,336 0.4 83,041 Research, Development and Engineering 1,467 42.7 1,028 3,567 18.3 3,014 Other Expense (Income), net 3,517 N/A (1,219) 5,490 N/A (248) --------- --------- --------- --------- Income from Operations $ 37,543 18.3 $ 31,733 $ 104,988 22.3 $ 85,858 ========= ========= ========= ========= Income (Loss) from Operations (Segment Data): Coated Board $ 41,584 12.5% $ 36,977 $ 118,923 7.8% $ 110,283 Containerboard 1,495 N/A (1,009) 3,374 N/A (12,343) Corporate (5,536) (30.7) (4,235) (17,309) (43.3) (12,082) --------- --------- --------- --------- Income from Operations $ 37,543 18.3 $ 31,733 $ 104,988 22.3 $ 85,858 ========= ========= ========= =========

PAPERBOARD SHIPMENTS The following represents shipments of Coated Board and Containerboard to outside customers. Shipments of Coated Board represent sales to customers of beverage carrierboard, folding cartonboard and WLC (other than from the Swedish Mill). Shipments from the Swedish Mill represent sales to customers of WLC produced at this mill. Shipments of Containerboard represent sales to customers of linerboard, corrugating medium kraft paper and various other items, principally off-specification coated board. Total shipments for the three and nine months ended September 30, 2000 and 1999 were as follows:

THREE MONTHS ENDED NINE MONTHS ENDED ----------------------------- -------------------------- SEPT. 30, SEPT. 30, SEPT. 30, SEPT. 30, 2000 1999 2000 1999 ----------- ----------- ---------- ---------- (IN THOUSANDS OF TONS) Coated Board 245.2 240.9 733.4 727.1 Swedish Mill 37.8 32.3 111.8 98.5 Containerboard 73.7 68.6 230.6 230.1 ----- ------- ------- ------- 356.7 341.8 1,075.8 1,055.7 ===== ======= ======= =======

15 16 THIRD QUARTER 2000 COMPARED WITH THIRD QUARTER 1999 NET SALES As a result of the factors described below, the Company's Net Sales in the third quarter of 2000 increased by $9.8 million, or 3.6 percent, compared with the third quarter of 1999. Net Sales in the Coated Board business segment increased by $5.6 million in the third quarter of 2000, or 2.3 percent, to $250.6 million from $245.0 million in the third quarter of 1999, due primarily to higher sales volume in North American consumer product markets due principally to the result of the general market recovery as well as selected switching from competing substrates to the Company's substrate and slightly improved pricing in North American beverage markets. These increases were somewhat offset by lower worldwide beverage volumes and the negative impact of foreign currency exchange rates, primarily in Europe. Net Sales in the Containerboard business segment increased by $4.2 million, or 17.8 percent, to $27.9 million in the third quarter of 2000 from $23.7 million in the third quarter of 1999, due principally to higher pricing and higher linerboard sales volume, somewhat offset by lower medium sales volume. GROSS PROFIT As a result of the factors discussed below, the Company's Gross Profit for the third quarter of 2000 increased by $8.6 million, or 15.1 percent, to $66.1 million from $57.5 million in the third quarter of 1999. The Company's gross profit margin increased to 23.8 percent in the third quarter of 2000 from 21.4 percent in the third quarter of 1999. Gross Profit in the Coated Board business segment increased by $7.0 million, or 12.3 percent, to $64.3 million in the third quarter of 2000 from $57.3 million in the third quarter of 1999, while its gross profit margin increased to 25.7 percent in the third quarter of 2000 from 23.4 percent in the third quarter of 1999. The increase in Coated Board Gross Profit is due directly to worldwide cost reductions and higher Net Sales. Gross Profit in the Containerboard business segment increased by $1.6 million to $1.9 million in the third quarter of 2000 from $0.3 million in the third quarter of 1999, while its gross profit margin increased to 6.8 percent in the third quarter of 2000 from 1.4 percent in the third quarter of 1999. The increase in Containerboard Gross Profit resulted principally from improved pricing. SELLING, GENERAL AND ADMINISTRATIVE Selling, General and Administrative expenses decreased $2.3 million, or 8.9 percent, to $23.6 million in the third quarter of 2000 from $25.9 million in the third quarter of 1999, due primarily to lower administrative expenses somewhat offset by higher depreciation expense and certain non-recurring operating credits recorded in the third quarter of 1999. As a percentage of Net Sales, Selling, General and Administrative expenses decreased from 9.6 percent in the third quarter of 1999 to 8.5 percent in the third quarter of 2000. RESEARCH, DEVELOPMENT AND ENGINEERING Research, Development and Engineering expenses increased $0.5 million, or 42.7 percent, to $1.5 million in the third quarter of 2000 from $1.0 million in the third quarter of 1999, due primarily to higher research and development investing relating to packaging machinery. OTHER EXPENSE (INCOME), NET Other Expense (Income), net, was $3.5 million in the third quarter of 2000 and $(1.2) million in the third quarter of 1999. This change was primarily due to losses on foreign currency transactions and non-recurring operating charges recorded in the third quarter of 2000. 16 17 INCOME (LOSS) FROM OPERATIONS Primarily as a result of the factors discussed above, the Company's Income from Operations in the third quarter of 2000 increased by $5.8 million, or 18.3 percent, to $37.5 million from $31.7 million in the third quarter of 1999, while the Company's operating margin increased to 13.5 percent in the third quarter of 2000 from 11.8 percent in the third quarter of 1999. Income from Operations in the Coated Board business segment increased by $4.6 million, or 12.5 percent, to $41.6 million in the third quarter of 2000 from $37.0 million in the third quarter of 1999, while the operating margin increased to 16.6 percent in the third quarter of 2000 from 15.1 percent in the third quarter of 1999, primarily as a result of the factors described above. Income from Operations in the Containerboard business segment increased by $2.5 million to a gain of $1.5 million in the third quarter of 2000 from a (Loss) from Operations of $(1.0) million in the third quarter of 1999, while the operating margin increased to 5.4 percent in the third quarter of 2000 from (4.3) percent in the third quarter of 1999 primarily as a result of the factors described above. FLUCTUATIONS IN U.S. CURRENCY EXCHANGE RATES The strengthening of the U.S. dollar currency exchange rates as compared to the Euro and related currencies did have a modest impact on Net Sales, Gross Profit, Income from Operations, and operating expenses during the third quarter of 2000. FIRST NINE MONTHS 2000 COMPARED WITH FIRST NINE MONTHS 1999 NET SALES As a result of the factors described below, the Company's Net Sales in the first nine months of 2000 increased by $29.2 million, or 3.5 percent, compared with the first nine months of 1999. Net Sales in the Coated Board business segment increased by $12.2 million in the first nine months of 2000, or 1.6 percent, to $767.9 million from $755.7 million in the first nine months of 1999, due primarily to higher sales volume in international beverage markets due principally to continued market penetration and strong demand in Japan, higher sales volume in North American consumer product markets due principally to the result of the general market recovery as well as selected switching from competing substrates to the Company's substrate, and slightly improved pricing in North American beverage markets. These increases were somewhat offset by lower North American beverage volumes due primarily to lower soft drink demand and the negative impact of foreign currency exchange rates, primarily in Europe. Net Sales in the Containerboard business segment increased $16.9 million, or 24.8 percent, to $85.3 million in the first nine months of 2000 from $68.4 million in the first nine months of 1999, due principally to higher pricing, somewhat offset by lower sales volume primarily in the medium markets. GROSS PROFIT As a result of the factors discussed below, the Company's Gross Profit for the first nine months of 2000 increased by $25.7 million, or 15.0 percent, to $197.4 million from $171.7 million in the first nine months of 1999. The Company's gross profit margin increased to 23.1 percent in the first nine months of 2000 from 20.8 percent in the first nine months of 1999. Gross Profit in the Coated Board business segment increased by $11.9 million, or 6.6 percent, to $192.0 million in the first nine months of 2000 from $180.1 million in the first nine months of 1999, while its gross profit margin increased to 25.0 percent in the first nine months of 2000 from 23.8 percent in the first nine months of 1999. The increase in Coated Board Gross Profit is due directly to worldwide cost reductions and higher Net Sales. Gross Profit in the Containerboard business segment increased by $13.5 million to a gain of $5.4 million in the first nine months of 2000 from a loss of $8.1 million in the first nine months of 1999, while its gross profit margin increased to 6.4 percent in the first nine months of 2000 from (11.8) percent in the first nine months of 1999. The increase in Containerboard Gross Profit resulted principally from improved pricing. 17 18 SELLING, GENERAL AND ADMINISTRATIVE Selling, General and Administrative expense increased by $0.3 million, or 0.4 percent, to $83.3 million in the first nine months of 2000 from $83.0 million in the first nine months of 1999, due mainly to higher depreciation expense, higher stock option compensation expense, the TQS initiative, and consulting fees related to a project within the Company's folding carton business somewhat offset by lower administrative expenses. As a percentage of Net Sales, Selling, General and Administrative expenses decreased from 10.1 percent in the first nine months of 1999 to 9.7 percent in the first nine months of 2000. RESEARCH, DEVELOPMENT AND ENGINEERING Research, Development and Engineering expenses increased by $0.6 million, or 18.3 percent, to $3.6 million in the first nine months of 2000 from $3.0 million in the first nine months of 1999, due primarily to higher research and development investing relating to packaging machinery. OTHER EXPENSE (INCOME), NET Other Expense (Income), net, was $5.5 million in the first nine months of 2000 and $(0.2) million in the first nine months of 1999. This change was primarily due to non-recurring credits recorded in the first nine months of 1999 primarily related to utility recoveries and losses on foreign currency transactions recorded in the first nine months of 2000 somewhat offset by non-recurring operating credits recorded in the first nine months of 2000. INCOME (LOSS) FROM OPERATIONS Primarily as a result of the factors discussed above, the Company's Income from Operations in the first nine months of 2000 increased by $19.1 million, or 22.3 percent, to $105.0 million from $85.9 million in the first nine months of 1999, while the Company's operating margin increased to 12.3 percent in the first nine months of 2000 from 10.4 percent in the first nine months of 1999. Income from Operations in the Coated Board business segment increased by $8.6 million, or 7.8 percent, to $118.9 million in the first nine months of 2000 from $110.3 million in the first nine months of 1999, while the operating margin increased to 15.5 percent in the first nine months of 2000 from 14.6 percent in the first nine months of 1999, primarily as a result of the factors described above. Income from Operations in the Containerboard business segment increased $15.7 million to a gain of $3.4 million in the first nine months of 2000 from a (Loss) from Operations of $(12.3) million in the first nine months of 1999, while the operating margin increased to 4.0 percent in the first nine months of 2000 from (18.1) percent in the first nine months of 1999, primarily as a result of the factors described above. FLUCTUATIONS IN U.S. CURRENCY EXCHANGE RATES The strengthening of the U.S. dollar currency exchange rates as compared to the Euro and related currencies did have a modest impact on Net Sales, Gross Profit, Income from Operations, and operating expenses during the first nine months of 2000. However, the impact was somewhat offset by the weakening of the U.S. Dollar against the Japanese Yen. INTEREST INCOME, INTEREST EXPENSE, INCOME TAX EXPENSE, EQUITY IN NET EARNINGS (LOSS) OF AFFILIATES INTEREST INCOME Interest Income decreased by $0.2 million to $0.6 million in the first nine months of 2000 from $0.8 million in the first nine months of 1999. 18 19 INTEREST EXPENSE Interest Expense increased by $6.1 million to $139.6 million in the first nine months of 2000 from $133.5 million in the first nine months of 1999 due primarily to higher average interest rates but also impacted by higher average debt balances. INCOME TAX EXPENSE During the first nine months of 2000, the Company recognized an income tax expense of $3.9 million on a (Loss) before Income Taxes and Equity in Net Earnings (Loss) of Affiliates of $(34.0) million. During the first nine months of 1999, the Company recognized an income tax expense of $1.7 million on a (Loss) before Income Taxes and Equity in Net Earnings (Loss) of Affiliates of $(46.9) million. These expenses differed from the statutory federal income tax rate primarily because of valuation allowances established on net operating loss carryforward tax assets in the U.S. and certain international locations where the realization of such benefits is not more likely than not. EQUITY IN NET EARNINGS (LOSS) OF AFFILIATES Equity in Net Earnings (Loss) of Affiliates is comprised primarily of the Company's equity in net earnings of Igaras, which was accounted for under the equity method of accounting. Equity in Net Earnings (Loss) of Affiliates increased $5.3 million to $3.7 million in the first nine months of 2000 from $(1.6) million in the first nine months of 1999 resulting from improved market conditions in Brazil. On January 14, 1999, the Central Bank of Brazil changed the foreign exchange policy by eliminating the exchange rate band, which had been used as a means to control the fluctuation of the Real against the U.S. Dollar. The exchange rate is now determined by market forces. As a consequence of such change, the Real suffered a significant devaluation related to the U.S. Dollar during the beginning of 1999. During the first nine months of 2000 and 1999, the Company received dividends from Igaras totaling $1.9 million and $1.4 million, respectively, net of taxes of $0.3 million and $0.3 million, respectively. During the first nine months of 2000, the Company received dividends from a non-controlled affiliate other than Igaras totaling $0.5 million net of taxes of $0.1 million. During the third quarter of 1999, the Company sold an investment other than Igaras, resulting in a receipt of a final dividend of $0.8 million. No significant gain or loss was recognized in accordance with the sale. On October 3, 2000, the Company completed the sale of the jointly-held subsidiary Igaras for approximately $510 million, including the assumption of $112 million of debt (see "Overview"). The Company expects to recognize a gain between $65 million and $70 million, net of tax, in accordance with the sale. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company broadly defines liquidity as its ability to generate sufficient cash flow from operating activities to meet its obligations and commitments. In addition, liquidity includes the ability to obtain appropriate debt and equity financing and to convert into cash those assets that are no longer required to meet existing strategic and financial objectives. Therefore, liquidity cannot be considered separately from capital resources that consist of current or potentially available funds for use in achieving long-range business objectives and meeting debt service commitments. CASH FLOWS 19 20 Cash and equivalents increased by approximately $5.8 million in the first nine months of 2000 primarily as a result of $77.9 million net cash provided by operating activities somewhat offset by $37.2 million net cash used in investing activities and $33.6 million net cash used in financing activities. Cash used in investing activities resulted primarily from purchases of property, plant and equipment. Cash used in financing activities resulted primarily from net debt reductions. Depreciation and amortization during the first nine months of 2000 totaled approximately $113 million, and is expected to be approximately $145 million to $150 million for 2000. The Company's cash flows from its operations and EBITDA are subject to moderate seasonality with demand usually increasing in the spring and summer. The Company's Coated Board business segment experiences seasonality principally due to the seasonality of the worldwide multiple packaging beverage segment. Historically, the Company's Coated Board business segment reports its strongest sales in the second and third quarters of the fiscal year driven by the seasonality of the Company's integrated beverage business. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity needs arise primarily from debt service on the substantial indebtedness incurred in connection with the Merger and from the funding of its capital expenditures. As of September 30, 2000, the Company had outstanding approximately $1,696 million of long-term debt, consisting primarily of $650 million aggregate principal amount of the 1996 Notes, $250 million of the 1997 Notes, $633 million outstanding under the Term Loan Facility and additional amounts under the Revolving Facility and other debt issues and facilities. During the first nine months of 2000, the Company repaid approximately $5.1 million of debt. The Company had a net decrease in revolving credit facilities borrowings of approximately $28.4 million. After giving effect to the Igaras sale (see "Overview"), as of September 30, 2000, the Company had outstanding approximately $1,503 million of long-term debt, consisting primarily of $650 million aggregate principal amount of the 1996 Notes, $250 million of the 1997 Notes, $488 million outstanding under the Term Loan Facility and additional amounts under the Revolving Facility and other debt issues and facilities. DEBT SERVICE Principal and interest payments under the Term Loan Facility and the Revolving Facility, together with interest payments on the 1997 Notes and 1996 Notes, represent significant liquidity requirements for the Company. The Company applied $105.0 million of the proceeds from the 1997 Notes in July 1997 to refinance a portion of the Tranche A term loans under the Term Loan Facility, $50 million of the proceeds of the 1997 Notes to refinance the Tranche D term loan under the Senior Secured Credit Agreement, and the remaining proceeds from the 1997 Notes to prepay outstanding revolving credit borrowings under the Revolving Facility. Scheduled term loan principal payments under the Term Loan Facility were reduced to reflect this application of proceeds. This application of proceeds did not involve any reduction in the current aggregate Revolving Facility commitment of $400 million. Annual term loan amortization requirements under the Term Loan Facility, after giving effect to the refinancing of the Term Loan Facility from a portion of the proceeds of the 1997 Notes, will be approximately $120 million (nil after the effect of the Igaras sale), $173 million ($148 million after the effect of the Igaras sale), $184 million and $156 million for each of the years 2001 through 2004, respectively. In connection with the sale of Igaras, the Company applied $120 million and $25 million of the sale proceeds to its 2001 and 2002 term loan maturities, respectively (see "Overview"). The loans under the Facilities bear interest at floating rates based upon the interest rate option elected by the Company. The Tranche A term loans, Tranche B term loans and Tranche C term loans under the Term Loan Facility bore interest as of September 30, 2000 at an average rate per annum of 9.6 percent. 20 21 The Senior Notes, the 1997 Notes and the Senior Subordinated Notes bear interest at rates of 10 1/4 percent, 10 5/8 percent and 10 7/8 percent, respectively. Interest expense in 2000 is expected to be approximately $185 million, including approximately $10 million of non-cash amortization of deferred debt issuance costs. The Company will recognize approximately a $2.1 million loss on early extinguishment of debt in conjunction with the application of the proceeds from the Igaras sale (see "Overview"). During the first nine months of 2000, cash paid for interest was approximately $122 million. The Revolving Facility will mature in March 2003 with all amounts then outstanding becoming due. The Company expects that its working capital and business needs will require it to continue to have access to this or a similar revolving credit facility after the maturity date, and that the Company accordingly will have to extend, renew, replace or otherwise refinance such facility at or prior to such date. No assurance can be given that it will be able to do so. The Company uses interest rate swap and cap agreements to fix or cap a portion of its variable rate Term Loan Facility to a fixed rate in order to reduce the impact of interest rate changes on future income. The difference to be paid or received under these agreements is recognized as an adjustment to interest expense related to that debt. At September 30, 2000, the Company had interest rate swap agreements with a notional amount of $200 million, under which the Company will pay fixed rates of 6.15 percent to 6.92 percent and receive three-month LIBOR. COVENANT RESTRICTIONS The Credit Agreement imposes restrictions on the Company's ability to make capital expenditures and both the Credit Agreement and the indentures governing the 1996 Notes and the 1997 Notes limit the Company's ability to incur additional indebtedness. Such restrictions, together with the highly leveraged nature of the Company, could limit the Company's ability to respond to market conditions, meet its capital spending program, provide for unanticipated capital investments or take advantage of business opportunities. The covenants contained in the Credit Agreement also, among other things, restrict the ability of the Company and its subsidiaries to dispose of assets, incur guarantee obligations, repay the relevant 1996 Notes or the 1997 Notes, pay dividends, create liens on assets, enter into sale and leaseback transactions, make investments, loans or advances, make acquisitions, engage in mergers or consolidations, make capital expenditures or engage in certain transactions with affiliates, and otherwise restrict corporate activities. The covenants contained in such indentures also impose restrictions on the operation of the Company's business. At September 30, 2000, the Company was in compliance with the financial covenants in the Credit Agreement. In connection with the sale of Igaras (see "Overview"), certain financial and other covenants in the Credit Agreement were amended to reflect recent financial results and market and operating conditions, as well as the sale of Igaras and the prepayment of term loans and other borrowings. Covenant modifications specify, among other things, the following amended minimum EBITDA requirements for each four quarter period ended during the following test periods:

Test Period EBITDA ---------------------------------------- ------------ December 31, 1999 - December 30, 2000 $265 million December 31, 2000 - December 30, 2001 $290 million December 31, 2001 - December 30, 2002 $300 million December 31, 2002 - December 30, 2003 $315 million Thereafter $340 million

21 22 CAPITAL EXPENDITURES Capital spending for the first nine months of 2000 was approximately $41.4 million, down 13.1 percent from $47.7 million in the first nine months of 1999. Capital spending during the first nine months of 2000 related primarily to increasing paper production efficiencies, increasing converting capacity and manufacturing packaging machinery. The Company expects total capital spending will range from $65 million to $75 million in 2000 and will range from $70 million to $80 million in 2001, and is expected to relate principally to improving the Company's process capabilities, the production of packaging machinery, and cluster rule compliance. 22 23 FINANCING SOURCES AND CASH FLOWS In connection with the global restructuring program initiated in the fourth quarter of 1998, the Company is reducing its European workforce by approximately 300 employees and is implementing other initiatives designed to improve productivity and profitability across the global organization. The initial cost of this program, scheduled to be completed during the first six months of 2001, was approximately $25.6 million of which approximately $0.8 million was used in December 1998 and related to severance payments. The following table provides information that details payments on this restructuring plan since December 31, 1998:

Other (In thousands of dollars) Severance Exit Costs Total ------------------------- ---------- ----------- --------- Balance at 12/31/98 $ 21,205 $ 3,537 $ 24,742 Charges against accrual in 1999 (11,527) (791) (12,318) -------- ------- -------- Balance at 12/31/99 $ 9,678 $ 2,746 $ 12,424 Charges against accrual in first nine months of 2000 (4,349) (826) (5,175) -------- ------- -------- Balance at 9/30/00 $ 5,329 $ 1,920 $ 7,249 ======== ======= ========

As of September 30, 2000, the Company has reduced its European workforce related to the 1998 restructuring by approximately 240 employees. In connection with and following the Merger, the Company decided in 1996 to exit certain businesses and operating activities, including the sale or closure of the Company's last dedicated folding cartonboard converting plant in the United States, located in Kankakee, Illinois, packaging machinery manufacturing plants in Marietta, Georgia and Koln, Germany, a beverage multiple packaging converting plant in Bakersfield, California and the trucking transportation operations in West Monroe, Louisiana, as well as the consolidation and realignment of certain operations in the United States, Australia and Europe. The cost of exiting these businesses and operating activities was approximately $38.6 million which was accrued during 1996 as a purchase accounting adjustment. The costs related principally to the severance of approximately 750 employees, relocation and other plant closure costs. During the first nine months of 2000, $0.1 million was utilized and charged against the accrual primarily related to exit costs. At September 30, 2000, $1.1 million of this total was accrued in Other accrued liabilities on the Consolidated Balance Sheet. At September 30, 2000, the Company and its U.S. and international subsidiaries had the following amounts of commitments, amounts outstanding and amounts available under revolving credit facilities:

TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT OUTSTANDING AT AVAILABLE AT OF SEPTEMBER 30, SEPTEMBER 30, COMMITMENTS 2000 2000 ------------- -------------- ------------- (IN THOUSANDS OF DOLLARS) ------------------------- Revolving Facility $400,000 $163,000 $237,000 Machinery Facility 140,000 -- 42,000 International Facilities 27,873 19,535 8,338 -------- -------- -------- $567,873 $182,535 $287,338 ======== ======== ========

In connection with the sale of Igaras (see "Overview"), the Company applied the remaining portion of the proceeds (approximately $48 million) to the Revolving Facility. In connection with Amendment No. 5 to the Credit Agreement, the Company canceled the Machinery Facility. Had the sale of Igaras occurred on September 30, 2000, the following amounts of commitments, amounts outstanding and amounts available under revolving credit facilities would have been:

Total Amount of Total Amount Total Amount Commitments Outstanding Available ------------ ------------ ------------ (in thousands of dollars) ------------------------- Revolving Facility $400,000 $115,000 $285,000 International Facilities 27,873 19,535 8,338 -------- -------- -------- $427,873 $134,535 $293,338 ======== ======== ========

The effect of applying the proceeds to the Revolving Facility and canceling the 23 24 Machinery Facility did not have a material impact to the Company's overall liquidity and did not involve any reduction in the current aggregate Revolving Facility commitment of $400 million. Undrawn Revolving Facility availability is expected to be used to meet future working capital and other business needs of the Company. The Company anticipates pursuing additional working capital financing for its foreign operations as necessary. The Company believes that cash generated from operations, together with amounts available under its Revolving Facility and other available financing sources, will be adequate to permit the Company to meet its debt service obligations, capital expenditure program requirements, ongoing operating costs and working capital needs until the maturity of the Revolving Facility, although no assurance can be given in this regard. The Company's future financial and operating performance, ability to service or refinance its debt and ability to comply with the covenants and restrictions contained in its debt agreements (see "--Covenant Restrictions"), will be subject to future economic conditions and to financial, business and other factors, many of which are beyond the Company's control and will be substantially dependent on the selling prices for the Company's products and the Company's ability to successfully implement its overall business and profitability strategies. ENVIRONMENTAL AND LEGAL MATTERS The Company is committed to compliance with all applicable environmental laws and regulations throughout the world. Environmental law is, however, dynamic rather than static. As a result, costs, which are unforeseeable at this time, may be incurred when new laws are enacted, and when environmental agencies promulgate or revise rules and regulations. In late 1993, the U.S. Environmental Protection Agency proposed regulations (generally referred to as the "cluster rules") that would mandate more stringent controls on air and water discharges from the United States pulp and paper mills. The cluster rules were promulgated in April 1998, and the Company estimates the capital spending that may be required to comply with the cluster rules could reach $55 million to be spent at its two U.S. paper mills over a seven-year period beginning in 2000. In late 1995, the Louisiana Department of Environmental Quality ("DEQ") notified the Predecessor of potential liability for the remediation of hazardous substances at a wood treatment site in Shreveport, Louisiana that the Predecessor or its predecessors previously operated, and at a former oil refinery site in Caddo Parish, Louisiana which is on land that the Company previously owned. In response to these notices, the Company has provided additional information concerning these sites and has commenced its own evaluation of any claims and remediation liabilities for which it may be responsible. Subsequent to receipt in May 1996 of a Special Demand Letter from DEQ to remediate the site in Shreveport, the Company entered into an agreement with DEQ to perform a soil and groundwater investigation at the site. The Company completed this investigation work in 1999 and is in ongoing discussions with DEQ to develop an appropriate remediation plan and exit strategy. In September 1996, the Company received a Special Demand Letter from DEQ to remediate the site in Caddo Parish. The Company performed a waste inventory and treatability study at the site and subsequently met with the DEQ in October 1999. On July 6, 2000, the Company and DEQ entered into a Settlement Agreement that describes in detail the remedial actions necessary for the Company to obtain full release of all future liability at this site. The Company has contracted with a vendor to perform the remedial actions as outlined in the Settlement Agreement and the work is currently proceeding. The Company no longer owns the site since transferring the property to another entity on October 22, 2000. The Company anticipates the remedial actions outlined in the Settlement Agreement will be completed during the first quarter of 2001 and expects, at that time, to be relieved of any future liability. The Company is involved in environmental remediation projects for certain properties currently owned or operated by the Company, certain properties divested by the Company for which responsibility was retained, and waste sites where waste was shipped by predecessors of the Company or for which the 24 25 Company might have corporate successor liability. Certain of these projects are being addressed under federal and state statutes, such as the Comprehensive Environmental Response, Compensation and Liability Act and the state law counterparts. The Company's costs in some instances cannot be reliably estimated until the remediation process is substantially underway or liability at multiparty sites has been addressed. To address these contingent environmental costs, the Company has accrued reserves when such costs are probable and can be reasonably estimated. The Company believes that, based on current information and regulatory requirements, the accruals established by the Company for environmental expenditures are adequate. Based on current knowledge, to the extent that additional costs may be incurred that exceed the accrued reserves, such amounts are not expected to have a material impact on the results of operations, cash flows or financial condition of the Company, although no assurance can be given that material costs will not be incurred in connection with clean-up activities at these properties, including the Shreveport and Caddo Parish sites referred to above. The Company is a party to a number of lawsuits arising out of the ordinary conduct of its business. While there can be no assurance as to their ultimate outcome, the Company does not believe that these lawsuits will have a material impact on the results of operations, cash flows or financial condition of the Company. The Company is a plaintiff in several actions against Mead claiming infringement of the Company's patents for its packaging machines, as to which Mead has filed counterclaims asserting that the Company's patents are invalid. In the furthest advanced of these actions, on November 18, 1998, a federal court entered an order refusing to adopt a special master's recommended finding that the Company's patent in issue was invalid, and ruled that Mead had been unlawfully infringing the Company's patent. On February 16, 1999, Mead filed an appeal from that decision. An oral argument with regard to this appeal was held on February 9, 2000 before the Court of Appeals for the Federal Circuit. A decision of the court was issued on May 17, 2000 reversing the decision of the lower federal court and thereby reinstating the decision of the special master. TAX MATTERS RELATING TO THE MERGER In connection with the Merger, the former majority owner of the Company agreed to bear the cost of a Section 338(h)(10) election for U.S. federal tax purposes and for purposes of state taxes for which the former majority owner and the Company filed returns on a combined basis. The Company agreed to bear the cost of this election for the purposes of other state taxes ("stand-alone taxes"), including Louisiana income tax. During 1997, the Company paid $27.5 million in estimated Louisiana stand-alone taxes relating to the election. The Company's calculation of its Louisiana tax was based on state law in effect at the time of the Merger, including a 1993 amendment. In May 1997, the Louisiana Supreme Court declared the 1993 amendment to be void under the Louisiana Constitution, retroactive to 1993. After consultation with Louisiana tax counsel, the Company filed its Louisiana income tax return for the period ended March 27, 1996 in reliance on the Louisiana tax law in effect at the time of the Merger, without the payment of any additional tax due to the voiding of the 1993 amendment. The State of Louisiana has completed its audit of the Company's tax return for the period ended March 27, 1996. On May 9, 2000, the Company received a Notice of Proposed Tax Due for this period in the amount of $47.6 million in tax and $27.8 million in statutory interest through June 4, 2000. The Company requested and received an extension to July 15, 2000 to respond to the Notice of Proposed Tax Due. On July 14, 2000, the Company filed a letter protesting the tax and interest due, and requested an informal conference with the Louisiana Department of Revenue. This action does not preclude the Company from paying the amount at issue in order to avoid the accrual of additional interest should the Company decide to pay and contest the matter before the Louisiana courts. There can be no assurance that the Company will ultimately prevail in this dispute. However, management believes that the additional tax and interest ultimately paid (if any) will be substantially less than the amounts listed on the Notice of Proposed Tax Due, although no assurance can be given in this regard. Since the law is unclear and the amounts involved are significant, it may be several years before this matter is resolved. For financial reporting 25 26 purposes, any tax ultimately paid related to this matter would increase the goodwill recorded in connection with the Merger and any interest ultimately paid would be recorded as interest expense. INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS Certain of the statements contained in this report (other than the financial statements and other statements of historical fact) are forward-looking statements, including, without limitation, (i) the statements in "-Business Trends and Initiatives" concerning (a) the Company's expectation regarding downtime in the fourth quarter of 2000, (b) the improvements which the Company's long-term initiatives, including, without limitation, its profit center reorganization and global restructuring program, are designed to achieve, (c) the Company's expectation regarding the realization of the benefits of the new global consumer packaged goods strategy beginning in the first quarter of 2001, (d) the Company's expectation that capital expenditures will range from $65 million to $75 million in 2000 and $70 million to $80 million in 2001, (e) the Company's expectation that its global restructuring program will be completed during the first six months of 2001, and (f) the Company's expectation that it will reduce inventory and lower receivables; (ii) the statements in "-Outlook" concerning (a) the Company's expectation that its 2000 EBITDA will significantly exceed its 1999 EBITDA as well as each of the factors which the Company believes support such expectation, (b) the Company's expectations regarding stable sales volumes in its worldwide beverage markets and renewed growth in its domestic consumer product markets, (c) the Company's expectation that it will recover the volume shortfall it suffered during the 2000 North American soft drink beverage season, and (d) the Company's expectation that containerboard market prices will be stable through the end of 2000; (iii) the statements in "Financial Condition, Liquidity and Capital Resources" concerning (a) the Company's expectation that depreciation and amortization for 2000 will be approximately $145 million to $150 million, (b) the Company's expectation that 2000 interest expense will be approximately $185 million including approximately $10 million of non-cash amortization of deferred debt issuance costs, (c) the Company's expectation that total capital spending for 2000 will range from $65 million to $75 million and $70 million to $80 million in 2001, (d) the Company's belief that cash generated from operations, together with amounts available under available financing sources, will be adequate to permit the Company to meet its debt service obligations, capital expenditure program requirements, ongoing operating costs and working capital needs until the maturity of the Revolving Facility, (e) the Company's expectations with respect to capital spending that may be required to comply with the cluster rules and that, based on current knowledge, environmental costs are not expected to have a material impact on the results of operations, cash flows or financial condition of the Company, (f) the Company's belief and estimates in respect of certain Louisiana income tax matters relating to the Section 338(h)(10) election, including, without limitation, management's belief that additional tax and interest ultimately paid (if any) would be substantially less than the amounts listed on the Notice of Proposed Tax Due; (iv) the statements in "-Equity in Net Earnings (Loss) of Affiliates" concerning the Company's expectation regarding the expected gain on the sale of Igaras to be between $65 million and $70 million, net of tax and (v) other statements as to management's or the Company's expectations and beliefs presented in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements are made based upon management's current expectations and beliefs concerning future developments and their potential effects upon the Company. There can be no assurance that future developments will be in accordance with management's expectations or that the effect of future developments on the Company will be those anticipated by management. The important factors described elsewhere in this report (including, without limitation, those discussed in "- Financial Condition, Liquidity and Capital Resources - Liquidity and Capital Resources - Environmental and Legal Matters" and "- Tax Matters Relating to the Merger"), the Company's Report on Form 10-K for the year ended December 31, 1999, or in other Securities and Exchange Commission filings, could affect (and in some cases have affected) the Company's actual results and could cause such results to differ materially from estimates or expectations reflected in such forward-looking statements. While the Company periodically reassesses material trends and uncertainties affecting the Company's results of operations and financial condition in connection with its preparation of management's discussion 26 27 and analysis of results of operations and financial condition contained in its quarterly and annual reports, the Company does not intend to review or revise any particular forward-looking statement referenced in this report in light of future events. ACCOUNTING CHANGES In June 2000, the FASB issued Statement No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133" ("SFAS No. 138"). SFAS No. 138 establishes additional guidance for the way companies account for and report on derivative instruments and hedging activities. In June 1999, the FASB issued Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities; Deferral of Effective Date of FASB Statement No. 133" ("SFAS No. 137"). SFAS No. 137 defers for one year the effective date of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 137 now will apply to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133 establishes standards for the way companies account for and report on derivative instruments and hedging activities. Based on analysis to date, the Company expects the most significant impact of this standard will be the cumulative as well as ongoing mark-to-market adjustment through the income statement of the options used to hedge certain anticipated foreign currency transactions to the extent a portion of the mark-to-market value of those options may be deemed ineffective in offsetting the change in value of the underlying hedged item. The foreign currency forward contracts used to hedge exposure associated with the foreign currency denominated receivables are presently being marked-to-market through the income statement and will continue to be marked-to-market through the income statement under SFAS No. 133 as amended by SFAS No. 138. The interest rate swap contracts used to effectively fix the LIBOR rate on a portion of the Company's variable rate borrowings are expected to remain 100% effective and therefore are expected to have no impact related to the change in the market value of these instruments on the Company's income statement. In summary, although the Company will be recognizing the fair value of these financial instruments on its balance sheet, the Company expects that the implementation of SFAS No. 133 as amended by SFAS No. 138 will not have a material impact on its income statement. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin 101 "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. SAB 101 is effective no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The Company does not anticipate that SAB 101 will have a material impact on its financial statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK For a discussion of certain market risks related to the Company, see Part II, Item 7A, "Quantitative and Qualitative Disclosure about Market Risk", in the Company's Annual Report on Form 10-K for the fiscal period ended December 31, 1999. There have been no significant developments with respect to derivatives or exposure to market risk during the first nine months of 2000. 27 28 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Not applicable ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. Not applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable ITEM 5. OTHER INFORMATION. Not applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 27 Financial Data Schedule (for SEC use only) 99 Reconciliation of Income (Loss) from Operations to EBITDA. Filed as an exhibit hereto. (b) Reports on Form 8-K. October 3, 2000 Igaras sale and credit agreement amendment 28 29 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RIVERWOOD HOLDING, INC. ---------------------------------------- (Registrant) Date: November 9, 2000 By: /s/ Edward W. Stroetz Jr. ---------------------------------------- Edward W. Stroetz Jr. Secretary Date: November 9, 2000 By: /s/ Daniel J. Blount ---------------------------------------- Daniel J. Blount Senior Vice President and Chief Financial Officer 29