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TABLE OF CONTENTS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

United States Securities and Exchange Commission Washington, D.C. 20549

~~Securities and Exchange Commission~~Form 10-K

Washington, D.C. 20549


ý		Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2010
or
o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to

~~Form~~ 10Commission file number 1-K03439

~~[X] Annual~~Smurfit-Stone ~~Report~~Container ~~Pursuant~~Corporation (Exact toname ~~Section 13~~of orregistrant ~~15(d) of the~~as ~~Securities~~specified ~~Exchange~~in ~~Act~~its ofcharter) ~~1934~~

For the fiscal year ended December 31, 2009 or


Delaware (State of incorporation or organization)		36-2041256 (I.R.S. Employer Identification No.)
222 North LaSalle Street Chicago, Illinois (Address of principal executive offices)		60601 (Zip Code)

~~[ ] Transition Report Pursuant~~Registrant's toTelephone ~~Section 13~~Number: ~~or 15~~(d312) ~~of the Securities Exchange Act of 1934~~346-6600

~~For~~Securities ~~the~~registered ~~transition~~pursuant ~~period from~~ to Section 12(b) of the Act:

Commission file number 1-03439

Title of Each Class		Name of Each Exchange on Which Registered

Common Stock, $0.001 Par Value		New York Stock Exchange

~~Smurfit-Stone~~Securities registered ~~Container~~pursuant ~~Enterprises,~~to ~~Inc.~~Section 12(g) of the Act: None

~~(Exact~~Indicate ~~name of~~by check mark if the registrant is a well-known seasoned issuer, as ~~specified~~defined in ~~its~~Rule 405 ~~charter)~~of the Securities Act. Yes ý No o

Delaware		36-2041256
(State of incorporation or organization)		(I.R.S. Employer Identification No.)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

222 North LaSalle Street
Chicago, Illinois	60601	(312) 346-6600
(Address of principal executive offices)	(Zip code)	Registrant’s Telephone Number

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

~~Securities~~Indicate ~~registered~~by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to ~~Section~~Rule 405 of Regulation S-T during the preceding 12 months (b)or offor such shorter period that the ~~Act:~~registrant ~~None~~was required to submit and post such files). Yes o No o

~~Securities~~Indicate ~~registered~~by check mark if disclosure of delinquent filers pursuant to ~~Section~~ Item ~~12(g)~~ 405 of Regulation S-K is not contained herein, and will not be contained, to the ~~Act: None~~best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark ifwhether the registrant is a ~~well~~large accelerated filer, an accelerated filer, a non-~~known~~accelerated ~~seasoned~~filer ~~issuer~~or a smaller reporting company. See the definitions of "large accelerated filer", as"accelerated ~~defined~~filer" and "smaller reporting company" in Rule ~~405~~12b-2 of the ~~Securities~~ Exchange Act.

~~Yes No X~~ Large accelerated filer ý Accelerated filer o Non-accelerated filer o Smaller Reporting Company o

Indicate by check mark ifwhether the registrant is ~~not~~a ~~required~~shell tocompany ~~file~~(as ~~reports~~defined ~~pursuant~~in ~~to Section~~Rule 1312b-2 ~~or Section 15(d)~~ of the Exchange Act). Yes o No ý

~~Yes No X~~ The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrant's most recently completed second fiscal quarter was $2.5 billion, based on the closing price of $24.75 per share of such stock on the New York Stock Exchange on June 30, 2010.

~~Indicate by check mark whether the~~The ~~registrant~~number ~~(1) has filed all reports required to be filed by Section 13 or 15(d)~~ of ~~the~~shares ~~Securities~~outstanding ~~Exchange Act~~ of ~~1934 during~~ the ~~preceding 12 months (or for such shorter period that the~~ registrant's ~~was~~common ~~required~~stock toas ~~file such~~of ~~reports)~~February 9, ~~and~~2011: ~~(2) has been subject to such filing requirements for the past 90 days~~93,564,459.

~~Yes X No~~ DOCUMENTS INCORPORATED BY REFERENCE:

~~Indicate by~~Document ~~check~~Part ~~mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405~~ of ~~Regulation S~~Form 10-TK ~~during the~~Into ~~preceding~~Which ~~12 months~~Document ~~(or~~Is ~~for~~Incorporated ~~such shorter period that the registrant was required to submit and post such files).~~None

~~Yes No~~ Table of Contents

~~Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S~~ SMURFIT-KSTONE isCONTAINER ~~not~~CORPORATION ANNUAL ~~contained~~REPORT ~~herein,~~ON ~~and~~FORM ~~will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form~~ 10-K ~~or any amendment to this Form~~ December ~~10-K. [X]~~31, 2010

~~Indicate by~~ TABLE ~~check~~OF mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.CONTENTS

Large accelerated filer ___ Accelerated filer ___ Non-accelerated filer Smaller Reporting Company X

		Page No.

PART I
Item 1.	Business	2
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	21
Item 2.	Properties	22
Item 3.	Legal Proceedings	23
Item 4.	Reserved	25
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
Item 6.	Selected Financial Data	28
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 8.	Financial Statements and Supplementary Data	55
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	125
Item 9A.	Controls and Procedures	125
Item 9B.	Other Information	125
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	126
Item 11.	Executive Compensation	132
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	171
Item 13.	Certain Relationships and Related Transactions, and Director Independence	174
Item 14.	Principal Accountant Fees and Services	175
PART IV
Item 15.	Exhibits and Financial Statement Schedules	176

~~Indicate by~~ ~~check mark whether the registrant is a shell company (as defined in Rule 12b~~FORWARD-~~2 of~~LOOKING ~~the Act).~~ STATEMENTS

~~Yes~~Except for the historical information contained in this Annual Report on Form 10-K, certain matters discussed herein contain Noforward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Although we believe that, in making any such statements, our expectations are X based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those contained in such forward-looking statements. When used in this document, the words "anticipates," "believes," "expects," "intends" and similar expressions as they relate to Smurfit-Stone Container Corporation, its operations or its management are intended to identify such forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. There are important factors that could cause actual results to differ materially from those in forward-looking statements, certain of which are beyond our control. These factors, risks and uncertainties are discussed in Part I, Item 1A, "Risk Factors."

AsOur ofactual ~~June 30~~results, ~~2009~~performance or achievement could differ materially from those expressed in, ~~the~~or ~~last~~implied ~~day~~by, these forward-looking statements. Accordingly, we can give no assurances that any of the events ~~registrant’s~~anticipated ~~most~~by ~~recently~~the ~~completed second~~forward-looking ~~quarter~~statements will transpire or occur or, ~~none~~if any of ~~the~~them ~~registrant’s~~do ~~voting~~so, ~~stock~~what ~~was~~impact ~~held~~they bywill ~~non~~have on our results of operations or financial condition. We expressly decline any obligation to publicly revise any forward-~~affiliates~~looking statements that have been made to reflect the occurrence of events after the date hereof.

~~The number of shares outstanding of the registrant’s common stock as of February 26, 2010: 770~~1

Table of Contents

~~SMURFIT-STONE~~ ~~CONTAINER~~ ~~ENTERPRISES,~~ PART ~~INC.~~I

~~ANNUAL~~ ~~REPORT~~ ITEM ~~ON FORM 10-K~~1. BUSINESS

~~December 31~~Unless the context otherwise requires, "we," "us," "our," "Company" and "Smurfit-Stone" refer to the business of Smurfit-Stone Container Corporation ~~2009~~and its subsidiaries.

~~TABLE~~ ~~OF CONTENTS~~GENERAL

		Page No.
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	21
Item 3.	Legal Proceedings	22
Item 4.	Reserved	23
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 8.	Financial Statements and Supplementary Data	43
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	96
Item 9A(T).	Controls and Procedures	96
Item 9B.	Other Information	96
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	96
Item 11.	Executive Compensation	97
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	121
Item 13.	Certain Relationships and Related Transactions, and Director Independence	121
Item 14.	Principal Accountant Fees and Services	121
PART IV
Item 15.	Exhibits and Financial Statement Schedules	123

Smurfit-Stone Container Corporation ("SSCC" or the "Company"), incorporated in Delaware in 1987, was a holding company with no business operations of its own. SSCC conducted its business operations through its wholly-owned subsidiary, Smurfit-Stone Container Enterprises, Inc. ("SSCE"), a Delaware corporation. On June 30, 2010 ("Effective Date"), SSCC emerged from its Chapter 11 and Companies' Creditors Arrangement Act ("CCAA") bankruptcy proceedings. As of the Effective Date and pursuant to the Plan of Reorganization (as hereafter defined), the Company merged with and into SSCE. SSCE changed its name to Smurfit-Stone Container Corporation and became the Reorganized Smurfit-Stone Container Corporation ("Reorganized Smurfit-Stone").

~~FORWARD~~Smurfit-~~LOOKING~~Stone Container ~~STATEMENTS~~Corporation is one of the industry's leading integrated manufacturers of paperboard and paper-based packaging in North America, including containerboard and corrugated containers, and is one of the world's largest paper recyclers. We have a complete line of graphics capabilities for packaging. For the Successor period six months ended December 31, 2010 and Predecessor period six months ended June 30, 2010, our net sales were $3,262 million and $3,024 million, and our net income attributable to common stockholders was $114 million and $1,320 million, respectively. Net income attributable to common stockholders included bankruptcy related reorganization items income (expense), net of $12 million expense and $1,178 million income for the six months ended December 31, 2010 and June 30, 2010, respectively.

~~Except for~~ ~~the~~SUBSEQUENT historical information contained in this Annual Report on Form 10-K, certain matters discussed herein contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Although we believe that, in making any such statements, our expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those contained in such forward-looking statements. When used in this document, the words “anticipates,” “believes,” “expects,” “intends” and similar expressions as they relate to Smurfit-Stone Container Enterprises, Inc., its operations or its management are intended to identify such forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. There are important factors that could cause actual results to differ materially from those in forward-looking statements, certain of which are beyond our control. These factors, risks and uncertainties are discussed in Part I, Item 1A, “Risk Factors.”EVENTS

~~Our actual~~On ~~results~~January 23, ~~performance or achievement could differ materially from those expressed in~~2011, orthe ~~implied~~Company ~~by,~~and ~~these forward~~Rock-~~looking~~Tenn ~~statements. Accordingly,~~Company we("Rock-Tenn") ~~can~~entered ~~give~~into noan ~~assurances~~Agreement ~~that any~~and Plan of Merger (the "Merger ~~events~~Agreement"), ~~anticipated~~pursuant byto which the ~~forward-looking~~Company ~~statements~~ will ~~transpire or~~merge ~~occur~~with ~~or,~~and ifinto ~~any~~a subsidiary of ~~them~~Rock-Tenn do(the"Merger"). soThis Merger, ~~what~~unanimously ~~impact~~approved ~~they~~by ~~will~~the ~~have~~Boards onof ~~our~~Directors ~~results~~ of ~~operations~~ ~~or financial condition. We~~both ~~expressly~~companies, ~~decline~~will ~~any~~create ~~obligation~~a toleader ~~publicly~~in ~~revise~~the ~~any~~North ~~forward-looking statements~~American ~~that~~paperboard ~~have~~packaging ~~been~~market ~~made~~with tocombined ~~reflect~~revenues ~~the occurrence~~ of ~~events~~approximately ~~after the date hereof~~$9 billion.

2For each share of our common stock, our stockholders will be entitled to receive 0.30605 shares of Rock-Tenn common stock and $17.50 in cash, representing 50% cash and 50% stock on the date of the signing of the Merger Agreement. On January 23, 2011, the equity consideration was $35 per our common share or approximately $3.5 billion, consisting of approximately $1.8 billion of cash and the issuance of approximately 30.9 million shares of Rock-Tenn common stock. In addition, Rock-Tenn will assume our liabilities, including debt and underfunded pension liabilities, which were $1,194 million and $1,145 million, respectively, at December 31, 2010. Following the acquisition, Rock-Tenn stockholders will own approximately 56% and our stockholders will own 44% of the combined company.

~~Table~~The transaction is expected to close in the second quarter of ~~Contents~~2011 and is subject to customary closing conditions, regulatory approvals, as well as approval by both Rock-Tenn and our stockholders.

~~PART I~~ BANKRUPTCY PROCEEDINGS

~~ITEM~~ 1.Chapter 11 ~~BUSINESS~~Bankruptcy Filings

~~Unless~~On January 26, 2009 (the ~~context~~"Petition ~~otherwise requires~~Date"), “we,” ~~“us,”~~and “our,” U.S. and ~~“Company”~~Canadian ~~refer~~subsidiaries to(collectively, the ~~business~~"Debtors") offiled a voluntary petition ~~Smurfit-Stone~~(the ~~Container~~"Chapter 11 ~~Enterprises,~~Petition") for relief under Chapter ~~Inc.~~11 ~~and~~of ~~its~~the ~~subsidiaries.~~United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court in

~~GENERAL~~2

~~Smurfit-Stone~~Table ~~Container Enterprises, Inc. (SSCE), incorporated in Delaware in 2000, is one~~ of the industry’s leading integrated manufacturers of paperboard and paper-based packaging in North America, including containerboard and corrugated containers, and is one of the world’s largest paper recyclers. We have a complete line of graphics capabilities for packaging. For the year ended December 31, 2009, our net sales were $5,574 million and our net income was $8 million.Contents

WeWilmington, Delaware ~~are~~(the a"U.S. ~~wholly~~Court"). On the same day, our Canadian subsidiaries also filed to reorganize (the "Canadian Petition") under the CCAA in the Ontario Superior Court of Justice in Canada (the "Canadian Court"). Our operations in Mexico and Asia and certain U.S. and Canadian legal entities (the "Non-~~owned~~Debtor ~~subsidiary~~Subsidiaries") were not included in the filings and continued to operate outside of the Chapter 11 and CCAA processes. As described below, on June 21, 2010, the U.S. Court entered an order ("Confirmation Order") approving and confirming the Joint Plan of Reorganization for Smurfit-Stone Container Corporation (and its Debtor Subsidiaries and Plan of Compromise and Arrangement for Smurfit-Stone), aContainer ~~holding~~Canada Inc. ~~company~~and ~~with~~Affiliated noCanadian ~~business~~Debtors ~~operations~~("Plan of ~~its own~~Reorganization"). We emerged from our Chapter 11 and CCAA bankruptcy proceedings on June 30, 2010, the Effective Date. As of the Effective Date and pursuant to the Plan of Reorganization, we merged with and into our wholly-owned subsidiary, SSCE. SSCE changed its name to Smurfit-Stone ~~conducts~~Container ~~its~~Corporation ~~business~~and ~~operations~~became ~~through~~the usReorganized Smurfit-Stone.

~~BANKRUPTCY~~The term ~~PROCEEDINGS~~"Predecessor" refers only to us and our subsidiaries prior to the Effective Date, and the term "Successor" refers only to the Reorganized Smurfit-Stone and our subsidiaries subsequent to the Effective Date. Unless the context indicates otherwise, the terms "we", "us", "SSCC" and the "Company" are used interchangeably in this Annual Report on Form 10-K to refer to both the Predecessor and Successor Company.

~~Chapter~~Until emergence 11from bankruptcy on the Effective Date, the Debtors were operating as debtors-in-possession under the jurisdiction of the U.S. Court and the Canadian Court (the "Bankruptcy ~~Filings~~Courts") and in accordance with the applicable provisions of the Bankruptcy Code and the CCAA. In general, as debtors-in-possession, the Debtors were authorized to continue to operate as ongoing businesses, but could not engage in transactions outside the ordinary course of business without the approval of the Bankruptcy Courts.

On ~~January 26, 2009 (the Petition Date), we, Smurfit~~Debtor-~~Stone~~In-Possession ~~and our U.S. and Canadian subsidiaries~~ (~~collectively, the Debtors~~"DIP") filed a voluntary petition (the Chapter 11 Petition) for relief under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United States Bankruptcy Court in Wilmington, Delaware (the U.S. Court). On the same day, our Canadian subsidiaries also filed to reorganize (the Canadian Petition) under the Companies’ Creditors Arrangement Act (the CCAA) in the Ontario Superior Court of Justice in Canada (the Canadian Court). Our operations in Mexico and Asia and certain U.S. and Canadian legal entities (the Non-Debtor Subsidiaries) were not included in the filing and will continue to operate outside of the Chapter 11 process.Financing

~~The~~In ~~filing~~connection ofwith filing the Chapter 11 Petition and the Canadian Petition ~~constituted~~on anthe ~~event~~Petition ~~of default under our debt obligations~~Date, we and ~~those~~certain ~~debt~~of ~~obligations~~our ~~became~~affiliates ~~automatically and~~entered ~~immediately~~into ~~due~~a ~~and~~Post-Petition ~~payable,~~Credit ~~although~~Agreement ~~any~~(the ~~actions~~"DIP toCredit ~~enforce~~Agreement") ~~such~~on ~~payment obligations~~January 28, ~~were~~2009. ~~stayed~~Amendments asto athe ~~result~~DIP ofCredit ~~the~~Agreement ~~filing~~were ofentered ~~the~~into ~~Chapter~~on 11February 25 ~~Petition~~ and ~~the~~27, ~~Canadian Petition~~2009.

WeThe DIP Credit Agreement, ~~Smurfit-Stone~~as ~~and~~amended, ~~our~~provided ~~U.S.~~for ~~and~~borrowings ~~Canadian~~up ~~subsidiaries~~to ~~are~~an ~~currently operating~~aggregate ascommitted ~~“debtors-in-possession”~~amount ~~under~~of ~~the~~$750 million, ~~jurisdiction~~consisting of ~~the~~a $400 million U.S. ~~Court and~~term ~~Canadian~~loan ~~Court~~ (~~the~~"U.S. ~~Bankruptcy~~DIP ~~Courts~~Term Loan") ~~and~~for borrowings inby ~~accordance~~SSCE; ~~with~~a ~~the applicable~~$35 million ~~provisions~~Canadian ofterm ~~the~~loan ~~Bankruptcy~~("Canadian ~~Code~~DIP ~~and~~Term ~~the~~Loan") ~~CCAA~~for borrowings by Smurfit-Stone Container Canada Inc. In ~~general,~~("SSC ~~the~~Canada"); ~~Debtors~~a ~~are~~$250 million ~~authorized~~U.S. torevolving ~~continue~~loan to("U.S. ~~operate~~DIP asRevolver") ~~ongoing~~for ~~businesses,~~borrowings ~~but~~by ~~may~~SSCE ~~not~~and/or ~~engage~~SSC inCanada; ~~transactions outside~~and ~~the~~a ~~ordinary~~$65 million ~~course~~Canadian ofrevolving ~~business~~loan ~~without~~("Canadian ~~the~~DIP ~~approval~~Revolver") offor ~~the~~borrowings ~~Bankruptcy Courts~~by SSCE and/or SSC Canada.

~~Debtor-~~Under the DIP Credit Agreement, on January 28, 2009, we borrowed $440 million, consisting of a $400 million U.S. DIP Term Loan, a $35 million Canadian DIP Term loan and $5 million from the Canadian DIP Revolver. In~~-Possession~~ (accordance with the terms of the DIP) ~~Financing~~Credit Agreement, in January 2009, we used U.S. DIP Term Loan proceeds of $360 million, net of lenders' fees of $40 million, and Canadian DIP Term Loan proceeds of $30 million, net of lenders' fees of $5 million, to terminate our receivables securitization programs and repay all indebtedness outstanding of $385 million and to pay other expenses of $1 million. In addition, other fees and expenses of $17 million related to the DIP Credit Agreement were paid for with proceeds of $5 million from the Canadian DIP Revolver and available cash.

InThe outstanding ~~connection~~principal ~~with~~amount ~~filing~~of the ~~Chapter~~loans 11under ~~Petition and~~ the ~~Canadian Petition~~DIP onCredit ~~the Petition Date~~Agreement, ~~we,~~plus ~~Smurfit-Stone~~interest accrued and ~~certain~~unpaid, ofwere ~~our~~due ~~affiliates filed~~and apayable ~~motion~~in ~~with~~full ~~the~~at ~~Bankruptcy~~maturity, ~~Courts~~which ~~seeking~~was ~~approval~~January 28, to2010. ~~enter~~As ~~into a~~all ~~Post-Petition~~borrowings ~~Credit~~under ~~Agreement (~~the DIP Credit Agreement). ~~Final~~were ~~approval~~paid ~~of the~~in ~~DIP~~full ~~Credit~~as ~~Agreement~~of ~~was granted by the U.S. Court on February~~December 2331, ~~2009~~ ~~and by the Canadian Court on February 24~~2009, ~~2009. Amendments~~we toallowed the DIP Credit Agreement ~~were entered~~to ~~into~~expire on ~~February 25~~the ~~and~~maturity 27date of January 28, ~~2009~~2010.

The DIP Credit Agreement, as amended, provided for borrowings up to an aggregate committed amount of $750 million, consisting of a $400 million U.S. term loan (U.S. DIP Term Loan) for borrowings by us; a $35 million Canadian term loan (Canadian DIP Term Loan) for borrowings by Smurfit-Stone Container Canada Inc. (SSC Canada); a $250 million U.S. revolving loan (U.S. DIP Revolver) for borrowings by us and/or SSC Canada; and a $65 million Canadian revolving loan (Canadian DIP Revolver) for borrowings by us and/or SSC Canada.3

3Table of Contents

~~Table~~ ofReorganization ~~Contents~~Process

~~Under~~The ~~the~~Bankruptcy ~~DIP~~Courts ~~Credit~~approved ~~Agreement,~~payment onof ~~January 28, 2009,~~certain weof ~~borrowed~~our ~~$440~~pre-petition ~~million~~obligations, ~~consisting~~including ofemployee ~~a $400 million U.S. DIP Term Loan~~wages, asalaries ~~$35 million Canadian DIP Term loan~~ and $5benefits, ~~million from the Canadian DIP~~and ~~Revolver. In accordance with~~ the ~~terms~~payment of ~~the~~vendors ~~DIP~~and ~~Credit Agreement,~~other onproviders ~~January 28,~~in ~~2009,~~the weordinary ~~used~~course ~~U.S.~~for ~~DIP~~goods ~~Term~~received ~~Loan proceeds of $360 million, net of lenders’ fees of $40 million,~~ and ~~Canadian~~services ~~DIP~~rendered ~~Term~~subsequent ~~Loan proceeds~~to ofthe ~~$30~~filing ~~million, net~~ of ~~lenders’ fees of $5 million, to terminate~~ the ~~receivables~~ ~~securitization~~Chapter 11 ~~programs~~Petition and ~~repay~~Canadian ~~all~~Petition ~~indebtedness~~and ~~outstanding of~~other ~~$385~~business-related ~~million~~payments ~~and~~necessary to ~~pay~~maintain ~~other~~the ~~expenses~~operation of $1our ~~million~~business. In ~~addition,~~We ~~other~~retained ~~fees~~legal and ~~expenses~~financial ofprofessionals ~~$17 million related~~ to ~~the~~advise ~~DIP~~us ~~Credit~~on ~~Agreement were paid for with proceeds of $5 million from~~ the ~~Canadian~~bankruptcy ~~DIP Revolver and available cash~~proceedings.

~~The~~Immediately after ~~outstanding~~filing ~~principal~~the ~~amount~~Chapter 11 Petition and Canadian Petition, we notified all known current or potential creditors of the ~~loans~~bankruptcy filings. Subject to certain exceptions under the Bankruptcy ~~DIP~~Code ~~Credit Agreement~~and the CCAA, ~~plus~~our ~~interest~~bankruptcy ~~accrued~~filings ~~and~~automatically ~~unpaid~~enjoined, ~~were~~or ~~due~~stayed, ~~and~~the ~~payable~~continuation inof ~~full~~any atjudicial or administrative proceedings or other actions against us or our property to ~~maturity~~recover, ~~which~~collect ~~was~~or ~~January 28,~~secure ~~2010. During~~a ~~2009,~~claim wearising ~~made~~prior ~~voluntary~~to ~~prepayments~~the filing of ~~$383~~the ~~million on~~Chapter 11 ~~the~~Petition Uand Canadian Petition.S. ~~DIP~~Thus, ~~Term~~for ~~Loan~~example, ~~with~~most ~~available~~creditor ~~cash~~actions ~~provided~~to byobtain ~~operating~~possession ~~activities. In~~of ~~addition~~property from us, ~~during~~or ~~2009~~to create, weperfect ~~repaid~~or ~~$17~~enforce ~~million~~any lien against our property, or to collect on ~~the~~monies ~~U.S.~~owed ~~DIP~~or ~~Term~~otherwise ~~Loan~~exercise ~~with proceeds~~rights ~~from~~or ~~property~~remedies ~~sales. As~~with ofrespect ~~December 31, 2009,~~to noa ~~borrowings~~pre-petition claim were ~~outstanding~~enjoined unless ~~under~~and until the ~~U.S.~~Bankruptcy ~~DIP~~Courts ~~Term~~lifted ~~Loan or~~ the ~~U.S. DIP~~automatic ~~Revolver~~stay.

~~During~~As required ~~2009~~by the Bankruptcy Code, wethe ~~repaid~~United ~~$35~~States ~~million on~~Trustee for the ~~Canadian~~District ~~DIP~~of ~~Term~~Delaware ~~Loan~~(the ~~primarily~~"U.S. ~~with~~Trustee") ~~proceeds~~appointed ~~from~~an ~~property~~official ~~sales including~~committee ~~$27~~of ~~million~~unsecured ~~from~~creditors (the ~~sale~~"Creditors' ofCommittee"). ~~our~~The Creditors' ~~Canadian~~Committee ~~timberlands. In~~and ~~addition,~~its ~~during~~legal ~~2009,~~representatives wehad ~~repaid~~a ~~$5 million~~right to be heard on ~~the~~all ~~Canadian~~matters ~~DIP~~that ~~Revolver~~came before the U.S. AsCourt ofwith ~~December 31,~~respect ~~2009,~~to ~~no borrowings~~us. ~~were~~A ~~outstanding~~monitor ~~under~~was appointed by the Canadian ~~DIP~~Court ~~Term~~with ~~Loan~~respect to orproceedings before the Canadian ~~DIP~~ ~~Revolver~~Court.

AsUnder the Bankruptcy Code, the Debtors either assumed or rejected pre-petition executory contracts, including real property leases, subject to the approval of the Bankruptcy Courts and certain other conditions. In this context, "assumption" meant that we agreed to perform our obligations and cure all ~~borrowings~~existing defaults under the ~~DIP~~contract or lease, and "rejection" meant that we were ~~Credit~~relieved ~~Agreement~~from our obligations to perform further under the contract or lease, but were ~~paid~~subject into ~~full~~a aspre-petition ofclaim ~~December 31~~for damages for the breach thereof, ~~2009~~subject to certain limitations. Any damages resulting from rejection of executory contracts and unexpired leases, weand ~~allowed~~from the determination of the U.S. Court (or agreement by parties of interest) of allowed claims for contingencies ~~DIP~~and ~~Credit~~other ~~Agreement~~disputed amounts, that were permitted to ~~expire~~be onrecovered under the ~~maturity~~Bankruptcy ~~date~~Code ofwere ~~January 28,~~treated ~~2010~~as liabilities subject to compromise unless such claims were secured prior to the Petition Date.

Plan of Reorganization ~~Process~~and Exit Credit Facilities

~~The~~In ~~Bankruptcy~~order ~~Courts~~for ~~approved payment~~the ofDebtors ~~certain~~to ofsuccessfully ~~our~~emerge ~~pre-petition~~from ~~obligations~~bankruptcy, ~~including~~the ~~employee~~Bankruptcy ~~wages, salaries~~Courts ~~and~~had ~~benefits,~~to ~~and~~confirm ~~the~~a ~~payment~~plan of ~~vendors~~reorganization ~~and~~that ~~other~~satisfied ~~providers in~~ the ~~ordinary~~requirements ~~course~~of ~~for~~the ~~goods~~Bankruptcy ~~received~~Code and ~~services~~the ~~rendered~~CCAA. ~~subsequent~~A toplan ~~the filing~~ of ~~the~~reorganization ~~Chapter~~was 11required ~~Petition~~to, ~~and~~among ~~Canadian~~other ~~Petition~~things, ~~and~~resolve ~~other business~~the Debtors' pre-~~related~~petition ~~payments~~obligations, ~~necessary~~set toforth ~~maintain~~ the ~~operation~~revised capital structure of ~~our business. We~~the ~~have~~newly ~~retained~~reorganized ~~legal~~entity and ~~financial~~ ~~professionals~~provide tofor ~~advise~~corporate usgovernance onsubsequent ~~the~~to ~~bankruptcy~~our ~~proceedings~~exit from bankruptcy.

~~Immediately~~ ~~after~~Plan ~~filing the Chapter 11 Petition and Canadian Petition, we notified all known current or potential creditors~~ of the bankruptcy filings. Subject to certain exceptions under the Bankruptcy Code and the CCAA, our bankruptcy filings automatically enjoined, or stayed, the continuation of any judicial or administrative proceedings or other actions against us or our property to recover, collect or secure a claim arising prior to the filing of the Chapter 11 Petition and Canadian Petition. Thus, for example, most creditor actions to obtain possession of property from us, or to create, perfect or enforce any lien against our property, or to collect on monies owed or otherwise exercise rights or remedies with respect to a pre-petition claim are enjoined unless and until the Bankruptcy Courts lift the automatic stay.Reorganization

AsOn ~~required~~December 1, by2009, the ~~Bankruptcy~~Debtors ~~Code, the~~filed ~~United~~their ~~States~~Plan ~~Trustee~~of ~~for~~Reorganization ~~the~~and ~~District~~Disclosure ofStatement ~~Delaware~~ ("Disclosure Statement") with the U.S. ~~Trustee)~~Court. On ~~appointed~~December 22, an2009, ~~official~~January 27, ~~committee~~2010, ofand ~~unsecured~~February 4, ~~creditors~~2010, (the ~~Creditors’ Committee).~~Debtors ~~The~~filed ~~Creditors’~~amendments ~~Committee~~to the Plan of Reorganization and ~~its~~the ~~legal~~Disclosure ~~representatives~~Statement. ~~have~~On aMarch 19, ~~right~~2010, the Debtors filed a supplement to bethe ~~heard~~Plan onof ~~all~~Reorganization, ~~matters~~and ~~that~~on ~~come~~May 27, ~~before~~2010, the ~~U.S.~~Debtors ~~Court~~filed ~~with~~the ~~respect~~final ~~to us. A~~Plan ~~monitor~~of ~~was~~Reorganization ~~appointed~~reflecting by the ~~Canadian~~ ~~Court~~resolution ~~with~~of ~~respect~~certain toobjections ~~proceedings~~by ~~before~~equity security ~~the~~holders ~~Canadian~~and ~~Court~~other non-material modifications.

~~Under~~On January 29, ~~the Bankruptcy Code~~2010, the ~~Debtors~~U.S. ~~generally~~Court ~~must~~approved ~~assume or~~the ~~reject~~Debtors' ~~pre-petition~~Disclosure ~~executory~~Statement ~~contracts,~~as ~~including~~containing ~~but~~adequate ~~not~~information ~~limited~~for ~~to real property leases, subject to~~ the ~~approval~~holders of ~~the~~impaired ~~Bankruptcy~~claims ~~Courts~~ and ~~certain other~~equity ~~conditions. In this context~~interests, ~~“assumption” means~~who ~~that~~were weentitled ~~agree~~ to ~~perform our obligations and cure all existing defaults~~ ~~under~~vote ~~the contract or lease, and “rejection” means that we are relieved from our obligations~~ to ~~perform~~accept ~~further under the contract~~ or ~~lease,~~reject ~~but are subject to a pre-petition claim for damages for~~ the ~~breach~~Plan ~~thereof subject to certain limitations. Any damages resulting from rejection~~ of ~~executory contracts that are permitted to be recovered under the Bankruptcy Code will be treated as liabilities subject to compromise unless such claims were secured prior to the Petition Date~~Reorganization.

Since the Petition Date, we received approval from the Bankruptcy Courts to reject a number of leases and other executory contracts of various types. We are continuing to review all of our executory contracts 4

4Table of Contents

~~Table~~The Plan of ~~Contents~~Reorganization was overwhelmingly approved by number and dollar amount of the required classes of creditors of each of the Debtors, with the exception of Stone Container Finance Company of Canada II ("Stone FinCo II"). Stone FinCo II was removed from the Plan of Reorganization. A meeting of creditors was held for the Canadian debtor subsidiaries on April 6, 2010, at which the necessary votes were received to confirm the Plan of Reorganization by all requisite classes of creditors other than Stone FinCo II.

~~and unexpired leases to determine~~The ~~which~~Bankruptcy ~~additional~~Code ~~contracts~~required ~~and~~the ~~leases we will reject~~U.S. WeCourt, ~~expect~~after ~~that~~appropriate ~~additional liabilities~~notice, ~~subject~~ to ~~compromise~~hold ~~will~~a ~~arise~~hearing ~~due~~on toconfirmation ~~rejection~~of a plan of ~~executory contracts,~~reorganization. ~~including~~The ~~leases,~~confirmation ~~and~~hearing ~~from~~on the ~~determination~~Plan of Reorganization began in the U.S. Court ~~(or agreement~~on byApril 15, ~~parties~~2010, inand ~~interest)~~concluded ofon ~~allowed~~May 4, ~~claims~~2010. ~~for~~A ~~contingencies~~hearing ~~and~~was ~~other disputed~~conducted ~~amounts. We~~in ~~also expect that~~ the ~~assumption~~Canadian ofCourt ~~additional~~on ~~executory~~May 3, ~~contracts~~2010, and ~~unexpired leases will convert certain of~~ the ~~liabilities~~Canadian ~~shown~~Court onissued ~~the~~an ~~accompanying~~order ~~consolidated~~on ~~balance~~May 13, ~~sheet~~2010, asapproving ~~liabilities subject to compromise to liabilities not subject to compromise. Due to~~ the ~~uncertain nature~~Plan of ~~many~~Reorganization ofin the ~~potential~~CCAA ~~claims,~~proceedings wein ~~cannot project the magnitude of such claims with certainty~~Canada.

~~In June 2009, the Bankruptcy Courts entered an order~~On ~~establishing August~~May 2824, ~~2009~~2010, as the ~~bar~~Debtors ~~date~~announced ~~for~~that ~~potential~~they ~~creditors~~reached ~~to file~~a ~~claims. The~~resolution ~~bar~~with ~~date~~certain isholders of the ~~date~~Company's bypreferred ~~which~~and ~~certain~~common ~~claims~~stock ~~against~~that ~~us must~~had be filed ifobjections ~~the claimants wish~~ to ~~receive any distribution in~~ the ~~bankruptcy~~ ~~cases.~~confirmation ~~Proof~~ of ~~claim forms received after~~ the ~~bar date are~~Plan ~~typically not eligible for consideration~~ of ~~recovery~~Reorganization. asOn ~~part~~May 28, of2010, ~~our~~the ~~bankruptcy cases~~U. ~~Creditors~~S. ~~were~~Court ~~notified~~approved ofnotice ~~the bar~~procedures ~~date~~with ~~and~~respect ~~the requirement~~ to ~~file~~this aresolution. ~~proof~~On ofJune 21, ~~claim~~2010, ~~with~~ the ~~Bankruptcy Courts~~U. ~~Differences~~S. ~~between~~Court ~~liability amounts~~entered ~~estimated~~the byConfirmation usOrder ~~and claims filed by creditors are being investigated~~which approved and, ifconfirmed ~~necessary,~~ the ~~Bankruptcy~~Plan ~~Courts will make a final determination~~ of ~~the allowable claim~~Reorganization. ~~The~~We ~~determination~~emerged offrom ~~how~~our ~~liabilities~~Chapter 11 ~~will~~and ~~ultimately~~CCAA ~~be treated~~bankruptcy ~~cannot~~proceedings beon ~~made~~June 30, ~~until the Bankruptcy Courts approve a plan of reorganization. Accordingly~~2010, the ~~ultimate~~Effective ~~amount or treatment of such liabilities is not determinable at this time~~Date.

~~In September 2009, the U.S.~~As ~~Trustee denied a request by certain holders~~ of ~~Smurfit-Stone’s common stock and 7% Series A Cumulative Exchangeable Redeemable Convertible Preferred Stock (Preferred Stock) to form an official equity committee to represent~~ the ~~interests~~ ofEffective ~~equity~~Date, ~~holders~~we onsubstantially ~~matters~~consummated ~~before~~ the ~~U.S.~~various ~~Court.~~transactions ~~The~~contemplated ~~equity holders~~under ~~subsequently filed a motion for~~ the ~~appointment~~Plan of anReorganization ~~equity~~and ~~committee with~~ the ~~U.S.~~Confirmation ~~Court. In December 2009~~Order, ~~the~~ ~~U.S.~~including ~~Court entered an order denying~~ the ~~motion for an order appointing an~~ ~~official~~following: ~~committee of equity security holders.~~

•: we merged with and into SSCE, with SSCE being the survivor entity and renaming itself Smurfit-Stone Container Corporation, and becoming the Reorganized Smurfit-Stone. Reorganized Smurfit-Stone is governed by a board of directors that includes Patrick J. Moore, our Chief Executive Officer, Steven J. Klinger, our former President and Chief Operating Officer until he resigned effective December 31, 2010, and nine independent directors, including a non-executive chairman selected by the Creditors' Committee in consultation with the Debtors;
•: Reorganized Smurfit-Stone filed the Amended and Restated Certificate of Incorporation of the Company, which authorized Reorganized Smurfit-Stone to issue 160,000,000 shares, consisting of 150,000,000 shares of common stock, par value $.001 per share ("Common Stock") and 10,000,000 shares of preferred stock, par value $.001 per share ("Preferred Stock"). Reorganized Smurfit-Stone issued or reserved for issuance 100,000,000 shares of Common Stock for distribution to creditors and interest holders pursuant to the Plan of Reorganization. Under the Plan of Reorganization, we issued an aggregate of 91,014,189 shares of Common Stock, including 89,854,782 shares of Common Stock issued on June 30, 2010 and an additional 1,159,407 shares of Common Stock subsequently issued through August 13, 2010 (collectively, the "Initial Distribution"). None of the Preferred Stock was issued or outstanding as of the Effective Date;
•: all of the existing secured debt of the Debtors was fully repaid with cash;
•: substantially all of the general unsecured claims against SSCE, and us, including all of the outstanding unsecured senior notes, were exchanged for Common Stock;
•: holders of unsecured claims against SSCE of less than or equal to $10,000 received payment of 100% of such claims in cash, and eligible cash-out participants who so indicated on their ballot received the percentage amount of their allowed claim they elected to receive in cash in lieu of Common Stock;
•: holders of our 7% Series A Cumulative Exchangeable Redeemable Convertible preferred stock received a pro-rata distribution of 2,172,166 shares of Common Stock and holders of our

~~Proposed Plan of Reorganization and Exit Credit Facilities~~5

InTable ~~order to successfully emerge from bankruptcy, we must propose and obtain confirmation by the Bankruptcy Courts~~ of a plan of reorganization that satisfies the requirements of the Bankruptcy Code and the CCAA. A plan of reorganization would resolve our pre-petition obligations, set forth the revised capital structure of the newly reorganized entity and provide for corporate governance subsequent to our exit from bankruptcy.Contents

~~Under the priority scheme~~common ~~established~~stock byreceived ~~the~~a ~~Bankruptcy Code and the CCAA, unless creditors agree otherwise, pre~~pro-~~petition~~rata ~~liabilities and post-petition liabilities must be satisfied in full before Smurfit-Stone stockholders are entitled to receive any~~ distribution ~~or retain any property under a plan~~ of ~~reorganization. The ultimate recovery to creditors and/or Smurfit-Stone’s stockholders~~2, ~~if any~~171,935 ~~will not be determined until confirmation of a plan or plans of reorganization~~shares. NoAll ~~assurance~~shares ~~can be given as to what values, if any, will be ascribed to each~~ of ~~these constituencies or what types or amounts of distributions, if any, they would receive. Because of such possibilities, the value of our liabilities and securities, including Smurfit-Stone’s~~ common stock, ~~is highly speculative. Appropriate caution should be exercised with respect to existing~~ and ~~future~~preferred ~~investments~~stock inof ~~any~~the ~~of our~~Predecessor ~~liabilities~~Company ~~and/or~~were ~~securities.~~cancelled;

•: Reorganized Smurfit-Stone adopted the Equity Incentive Plan, pursuant to which, among other things, it reserved for issuance 8,695,652 shares of Common Stock representing eight percent of the fully diluted new Common Stock. In accordance with the terms of the Equity Incentive Plan, 2,895,909 stock options and 914,498 Restricted Stock Units ("RSU's") were granted to executive officers and other key employees of Reorganized Smurfit-Stone on the Effective Date;
•: the assets of the Canadian Debtors, other than Stone FinCo II, were sold to a newly-formed Canadian subsidiary of Reorganized Smurfit-Stone free and clear of existing claims, liens and interests in exchange for (i) the repayment in cash of the secured debt obligations of the Canadian Debtors, (ii) cash to the Canadian Debtors' unsecured creditors and (iii) the assumption of certain liabilities and obligations of the Canadian Debtors;
•: Reorganized Smurfit-Stone and its newly-formed Canadian subsidiary assumed all of the existing obligations under the qualified defined benefit pension plans in the United States and Canada sponsored by the Debtors, as well as all of the collective bargaining agreements in the United States and Canada between the Debtors and their labor unions.

~~The~~On October 29, ~~Proposed~~2010, ~~Plan~~we issued an additional 648,363 shares and cancelled 34,000 shares previously issued in the Initial Distribution, leaving approximately 8.4 million shares of Common ~~Reorganization~~Stock held in reserve as of December 31, 2010. On January 27, 2011, we issued an additional 1,778,204 shares, leaving approximately 6.6 million shares of Common Stock in reserve.

~~On December 1, 2009, the~~From ~~Debtors~~the ~~filed~~approximately ~~their~~6.6 million ~~Joint~~shares ~~Proposed Plan~~ of ~~Reorganization~~Common ~~and~~Stock ~~Plan~~remaining ~~of Compromise~~in ~~and~~reserve, ~~Arrangement~~approximately ~~and~~3.5 million ~~Disclosure~~shares ~~Statement~~were ~~with~~reserved in the ~~U.S.~~Stone ~~Court.~~FinCo OnII ~~December 22, 2009,~~Contribution ~~January 27,~~Reserve ~~2010~~ and approximately ~~February~~3.1 4,million ~~2010~~shares ~~the~~remain ~~Debtors~~in ~~filed amendments to~~ the ~~Proposed~~SSCE ~~Plan~~Distribution ofReserve ~~Reorganization~~for ~~(the~~Holders ~~Proposed Plan~~ of ~~Reorganization)~~ ~~and~~General toUnsecured ~~the Disclosure Statement~~Claims. ~~Key~~ ~~elements of the Proposed Plan of Reorganization were as follows:~~

~~· we and~~On ~~Smurfit-Stone~~January 10, ~~would~~2011, ~~merge~~the ~~and~~Bankruptcy ~~become~~Court issued an order that disallowed the ~~reorganized~~claim ~~company~~filed ~~(Reorganized~~on behalf of the Holders of the Stone FinCo II Contribution Claim. Therefore, the approximately ~~Smurfit-~~3.5 million shares in the Stone) ~~that~~FinCo ~~would~~II Contribution Reserve will not be ~~governed~~distributed byto athe ~~board~~Holders of ~~directors~~the ~~that~~Stone ~~will~~FinCo ~~include Patrick~~II JContribution Claim. ~~Moore~~Instead, ~~Smurfit-~~the Plan of Reorganization requires that these shares in the Stone’s ~~current~~FinCo ~~Chairman~~II ~~and~~Contribution ~~Chief~~Reserve ~~Executive~~be ~~Officer~~distributed as follows: (i) 95.5% (approximately 3.3 million shares) to the SSCE Distribution Reserve, to be distributed to the ~~Steven~~Holders Jof Allowed General Unsecured Claims under the terms of the Plan of Reorganization; (ii) 2.25% ~~Klinger~~(approximately 75,000 ~~Smurfit-Stone’s~~shares) ~~current~~to ~~President~~the ~~and~~Holders ~~Chief~~of ~~Operating~~SSCC Preferred Interests; and ~~Officer~~(iii) 2.25% (approximately 75,000 ~~and~~shares) ato ~~number~~the Holders of ~~independent~~SSCC ~~directors,~~Common ~~including~~Interests. aWe ~~non-executive chairman,~~expect to bedistribute ~~selected~~the byapproximately 150,000 shares for the ~~Creditors’~~SSCC ~~Committee~~Preferred inInterests ~~consultation~~and ~~with~~SSCC ~~the~~Common ~~Debtors;~~Interests by March 31, 2011.

Subsequent to the SSCC Preferred Interest and SSCC Common Interest distributions, the SSCE Distribution Reserve will include approximately 6.4 million shares of Common Stock. By March 31, 2011, we expect to distribute a minimum of 3.5 million shares from the SSCE Distribution Reserve on a pro-rata basis to Holders of Allowed General Unsecured Claims who had previously received distributions of shares under the terms of the Plan of Reorganization. The remaining 2.9 million shares in the SSCE Distribution Reserve are being held for Holders of General Unsecured Claims that are still unliquidated or subject to dispute. These shares will be distributed as these claims are liquidated or resolved, in accordance with the Plan of Reorganization. To the extent shares remain after resolution of these claims, these excess shares will also be re-distributed on a pro-rata basis to the Holders of Allowed General Unsecured Claims who had previously received distributions.

~~Table of Contents~~6

~~· all~~Table of ~~the existing secured debt of the Debtors would be fully repaid with cash;~~Contents

~~· substantially all~~ ofExit ~~the~~Credit existing unsecured debt and claims against us, including all of the outstanding unsecured senior notes, would be exchanged for common stock of the Reorganized Smurfit-Stone, which would be traded on either the New York Stock Exchange (NYSE) or the NASDAQ market, with holders of unsecured claims against us of less than or equal to $10,000 entitled to receive payment of 100% of such claims in cash, and eligible cash-out participants having the opportunity to indicate on their ballot the percentage amount of their allowed claim they would be willing to receive in cash in lieu of common stock;Facilities

~~· all~~On ~~of Smurfit-Stone’s~~January 14, ~~existing~~2010, ~~equity~~the ~~securities~~U.S. ~~would~~Court beentered ~~cancelled~~an ~~and~~order ~~existing~~authorizing the Debtors to (i) enter into an exit term loan facility engagement ~~shareholders~~and ofarrangement ~~Smurfit-Stone’s~~letter ~~common~~and fee letters, (ii) pay associated fees and ~~Preferred~~expenses ~~Stock~~and ~~would~~(iii) furnish ~~receive~~related noindemnities. On February 1, 2010, we filed a motion with the U.S. Court ~~distribution~~seeking onapproval ~~account~~to ofenter ~~their~~into ~~shares;~~a senior secured term loan exit facility ("Term Loan Facility").

· On February 16, 2010, the ~~assets of~~U.S. Court granted the ~~Canadian~~motion ~~Debtors~~and ~~would~~authorized beus ~~sold~~and certain of our affiliates to aenter ~~newly-formed~~into ~~Canadian~~the ~~subsidiary~~Term ~~of Reorganized~~Loan ~~Smurfit-Stone~~Facility. ~~free~~On ~~and~~the ~~clear~~same ofdate, ~~existing~~the ~~claims~~U.S. Court also granted our February 3, ~~liens~~2010 motion seeking approval to enter into a commitment letter and ~~interests~~ infee ~~exchange~~letters for an asset-based revolving credit facility (i) the ~~repayment~~"ABL inRevolving ~~cash~~Facility") of(together with the ~~secured debt~~Term ~~obligations~~Loan ofFacility, the ~~Canadian~~"Exit ~~Debtors,~~Credit ~~(ii~~Facilities"). Based on such approvals, on February ~~cash~~22, to2010, we and certain of our subsidiaries entered into the ~~Canadian~~Term ~~Debtors’~~Loan Facility that provides for an ~~unsecured~~aggregate ~~creditors~~term ifloan ~~they~~commitment ~~vote~~of to$1,200 million. ~~accept~~In addition, we entered into the ~~Proposed~~ABL ~~Plan~~Revolving Facility with aggregate commitments of ~~Reorganization and~~$650 million (~~iii~~including a $100 million Canadian Tranche), on April ~~the~~15, ~~assumption~~2010. ofThe ~~certain~~ABL ~~liabilities~~Revolving ~~and~~Facility ~~obligations~~includes ofa ~~the Canadian~~$150 million ~~Debtors;~~sub-limit ~~and~~for letters of credit.

~~· Reorganized~~On ~~Smurfit-Stone~~June 30, 2010, the Term Loan Facility was funded and ~~our~~borrowings ~~newly-formed~~became ~~Canadian~~available ~~subsidiary~~under ~~would~~the ~~assume~~ABL ~~all~~Revolving Facility. The proceeds of the ~~existing~~ ~~obligations~~borrowings under the ~~qualified~~Term ~~defined~~Loan ~~benefit~~Facility ~~pension~~of $1,200 million, ~~plans~~together inwith ~~the United~~available ~~States~~cash, were used to repay our outstanding secured indebtedness under our pre-petition Credit Facility and ~~Canada~~pay ~~sponsored~~remaining fees, costs and expenses related to and contemplated by the ~~Debtors,~~Exit asCredit ~~well~~Facilities asand ~~all~~the Plan of Reorganization. See Note 1 of the Notes to Consolidated Financial Statements — Fresh Start ~~collective~~Accounting. ~~bargaining~~As ~~agreements~~of inDecember 31, 2010, we had no borrowings under the ~~United~~ABL ~~States~~Revolving Facility and ~~Canada~~$1,194 million ~~between~~under the Term Loan Facility. Borrowings under the ABL Revolving Facility ~~Debtors~~are available for working capital purposes, capital expenditures, permitted acquisitions and ~~their~~general ~~labor~~corporate ~~unions~~purposes. As of December 31, 2010, our borrowing base under the ABL Revolving Facility was $618 million and the amount available for borrowings after considering outstanding letters of credit was $534 million.

~~The Proposed Plan of Reorganization~~As ~~will not become effective until certain conditions are satisfied or waived, including: (i) entry~~ of ~~an order by the Bankruptcy Courts confirming the Proposed Plan of Reorganization, (ii)~~December ~~all actions~~31, ~~documents and agreements necessary to implement the Proposed Plan of Reorganization having been effected or executed~~2010, ~~(iii) access of~~ the ~~Debtors~~Company toalso ~~funding~~had ~~under~~available ~~the~~unrestricted ~~exit~~cash ~~credit facility~~ and ~~(iv) specified~~cash ~~claims~~equivalents of ~~the~~$449 million ~~Debtors’~~primarily ~~secured~~invested ~~lenders~~in ~~having been~~money ~~paid~~market infunds ~~full~~at ~~pursuant~~a tovariable ~~the~~interest ~~Proposed~~rate ~~Plan~~ of ~~Reorganization~~ 0.13%.

On ~~January 14,~~Financial ~~2010,~~Reporting the U.S. Court granted approval to extend the Debtors’ exclusive right to file a plan of reorganization to July 21, 2010, and granted the Debtors’ approval to solicit acceptance of a plan of reorganization until May 21, 2011. If the Debtors’ exclusivity period lapses, any party in interest would be able to file a plan of reorganization. In addition to being voted on by holders of impaired claims and equity interests, a plan of reorganization must satisfy certain requirements of the Bankruptcy Code and the CCAA and must be approved, or confirmed, by the Bankruptcy Courts in order to become effective.Considerations

OnSubsequent ~~January 29,~~to ~~2010~~the Petition Date, we applied the ~~U.S.~~Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 852, ~~Court~~"Reorganizations" ~~approved~~("ASC 852"), in preparing the ~~Debtors’~~consolidated ~~Disclosure~~financial ~~Statement~~statements. asASC ~~containing~~852 ~~adequate~~requires that the financial ~~information~~statements ~~for~~distinguish transactions and events that are directly associated with the ~~holders~~reorganization from the ongoing operations of ~~impaired~~the ~~claims~~business. ~~and~~Accordingly, ~~equity~~certain ~~interests~~revenues, ~~who~~expenses ~~are~~(including ~~entitled~~professional tofees), ~~vote~~realized togains ~~accept~~and losses and provisions for losses that are realized or ~~reject~~incurred in the ~~Debtors’~~bankruptcy ~~Proposed~~proceedings ~~Plan~~were recorded in reorganization items in the consolidated statements of operations. In addition, pre-petition obligations that were impacted by the bankruptcy reorganization process were classified on the consolidated balance sheet at December 31, ~~Reorganization~~2009 in liabilities subject to compromise.

The Bankruptcy Code requires the U.S. Court, after appropriate notice, to hold a hearing on confirmation of a plan of reorganization. The confirmation hearing on the Proposed Plan of Reorganization is scheduled to begin on April 14, 2010. The confirmation hearing may be adjourned from time to time by the Bankruptcy Court without further notice except for an announcement of the adjourned date made at the confirmation hearing or any subsequent adjourned confirmation hearing. There can be no assurance at this time that the Proposed Plan of Reorganization will be confirmed by the Bankruptcy Courts or that any such plan will be implemented successfully.7

~~Exit~~Table ~~Credit~~of ~~Facilities~~Contents

On ~~January 14,~~Reorganization 2010, the U.S. Court entered an order authorizing the Debtors to (i) enter into an exit term loan facility engagement and arrangement letter and fee letters, (ii) pay associated fees and expenses and (iii) furnish related indemnities. On February 1, 2010, we filed a motion with the U.S. Court seeking approval to enter into a senior secured term loan exit facility (Term Loan Facility).Items

6Our reorganization items directly related to the process of our reorganizing under Chapter 11 and the CCAA, and our emergence on June 30, 2010, as recorded in our consolidated statements of operations, consist of the following:

Table of Contents

		Successor			Predecessor

		Six Months Ended December 31, 2010			Six Months Ended June 30, 2010			Year Ended December 31, 2009
Income (Expense)
Provision for rejected/settled executory contracts and leases		$			$	(106	)	$	(78	)
Professional fees			(12	)		(43	)		(56	)
Accounts payable settlement gains						5			11
Reversal of accrued post-petition unsecured interest expense									163
Gain due to plan effects						580
Gain due to fresh start accounting adjustments						742

	Total reorganization items	$	(12	)	$	1,178		$	40

~~On February 16,~~In ~~2010~~addition, ~~the~~an ~~U.S.~~income ~~Court~~tax ~~granted~~benefit ~~the motion and authorized us, Smurfit-Stone and certain~~ of ~~our~~$200 million ~~affiliates~~related to ~~enter into~~ the ~~Term~~effects ~~Loan~~of ~~Facility. On~~ the ~~same~~plan ~~date,~~of ~~the~~reorganization ~~U.S. Court also granted our February 3, 2010 motion seeking approval to enter into a commitment letter~~ and ~~fee~~application ~~letters~~of ~~for~~fresh anstart ~~asset-based~~accounting ~~revolving~~was ~~credit~~recorded ~~facility~~in (the ~~ABL Revolving~~six ~~Facility)~~months ~~(together with the Term Loan Facility, the Exit Credit~~ended ~~Facilities). Based on such approvals, on February~~June 2230, 2010, ~~we,~~primarily Smurfit-Stone and certain of our subsidiaries entered into the Term Loan Facility that provides for an aggregate term loan commitment of $1,200 million. In addition, we entered into a commitment letter and related ~~fee letters for the ABL Revolving Facility with aggregate commitments of $650 million (including a $100 million Canadian Tranche), which we expect~~ to ~~enter~~adjustments ~~into prior to exiting bankruptcy. The ABL Revolving Facility will include a $150 million sub-limit~~ for ~~letters~~cancellation of ~~credit. The commitments for the Term Loan Facility and the ABL Revolving Facility will terminate on July 16~~indebtedness, ~~2010~~valuation ~~unless~~allowances ~~our emergence from bankruptcy~~ and ~~satisfaction~~unrecognized oftax ~~certain funding date conditions under the Term Loan Facility and the ABL Revolving Facility occur on or prior to such date, and the Term Loan Facility is funded~~benefits.

~~We are permitted, subject to obtaining lender commitments,~~Professional tofees ~~add~~directly ~~one~~related ~~or more incremental facilities~~ to the ~~Term~~reorganization ~~Loan~~include ~~Facility~~fees inassociated ~~an aggregate~~with ~~amount~~advisors up to ~~$400 million. Each incremental facility is conditioned on (a) there existing no defaults, (b) in~~ the ~~case of incremental term loans~~Company, ~~such loans have a final maturity no earlier than, and a weighted average life no shorter than,~~ the ~~Term~~Creditors' ~~Loan~~Committee ~~Facility,~~ and ~~(c) after~~certain ~~giving effect to one or more incremental facilities, the consolidated senior~~ secured ~~leverage ratio shall be less than 3~~creditors.00 toDuring ~~1.00. If~~ the ~~interest rate~~six ~~spread~~months ~~applicable to any incremental facility exceeds the interest rate~~ended ~~spread~~December 31, ~~applicable to the Term Loan Facility by more than 0.25%~~2010, ~~then~~ the ~~interest~~ ~~rate~~Company ~~spread~~continued ~~applicable~~ to ~~the~~incur ~~Term~~costs ~~Loan~~related ~~Facility will be increased~~ to ~~equal~~ ~~the~~professional ~~interest~~fees ~~rate~~that ~~spread~~are ~~applicable~~directly attributable to the ~~incremental facility~~reorganization.

~~On the date we emerge from~~Net ~~bankruptcy,~~cash ~~the~~paid ~~Term~~for ~~Loan~~reorganization ~~will~~items berelated ~~funded and borrowings are expected~~ to beprofessional ~~available~~fees ~~under~~for the ~~ABL~~six ~~Revolving Facility. The~~months ~~proceeds~~ended ~~of the borrowings under the Term Loan Facility~~December 31, ~~together~~2010 ~~with available cash will be used to repay our outstanding secured indebtedness under our pre-petition Credit Facility~~ and ~~pay fees~~June 30, ~~costs~~2010, and ~~expenses of approximately $50 million related to and contemplated by~~ the ~~Exit~~year ~~Credit~~ended ~~Facilities~~December 31, ~~and~~2009 ~~the Proposed Plan of~~totaled ~~Reorganization. Borrowings under the ABL Revolver Facility will be available for working capital purposes~~$38 million, ~~capital expenditures~~$32 million, ~~permitted acquisitions~~ and ~~general~~ ~~corporate~~$41 million, ~~purposes~~respectively.

~~The term loan (Term Loan) matures~~Reorganization ~~six~~items ~~years~~exclude ~~from~~employee ~~the~~severance ~~funding date of the Term Loan Facility~~ and isother ~~repayable~~restructuring ~~in equal~~charges ~~quarterly~~recorded ~~installments~~during ~~of $3 million beginning on September 30,~~ 2010, with the balance payable at maturity. Additionally, following the end of each fiscal year, varying percentages of our excess cash flow, as defined in the Term Loan Facility, based on certain agreed levels of secured leverage ratios, must be used to repay outstanding principal amounts under the Term Loan. Subject to specified exceptions, the Term Loan Facility will also require us to use the net proceeds of asset sales and ~~the~~ ~~net proceeds of the incurrence of indebtedness to repay outstanding borrowings under the Term Loan Facility~~2009.

~~The~~Interest expense ~~Term~~recorded ~~Loan~~on ~~will~~the ~~bear~~Predecessor ~~interest~~unsecured ~~at our~~debt ~~option~~subsequent atto athe ~~rate~~Petition ~~equal~~date ~~to:~~was ~~(A) 3.75%~~zero ~~plus~~for the ~~alternate~~six ~~base~~months ~~rate (Term~~ended ~~Loan~~June 30, ~~ABR)~~2010 ~~defined~~and as$163 million for the ~~greater~~year ~~of:~~ended December 31, ~~(i)~~2009. Contractual interest expense on unsecured debt was $98 million and $196 million for the ~~U.S.~~six ~~prime~~months ~~rate,~~ended ~~(ii)~~June 30, 2010 and the year ended ~~overnight~~December 31, ~~federal~~2009, ~~funds~~respectively. ~~rate~~Under ~~plus~~the ~~0.50%~~Plan of Reorganization, orinterest ~~(iii)~~ expense on the ~~one~~unsecured ~~month~~senior ~~adjusted LIBOR~~notes ~~rate~~subsequent ~~plus~~to 1the Petition Date was not paid.0% In the fourth quarter of 2009, ~~provided~~we concluded it was not probable that interest expense on the ~~Term~~Predecessor ~~Loan~~unsecured ~~ABR~~senior ~~shall~~notes ~~never~~subsequent to the Petition Date would be ~~lower~~an ~~than 3~~allowed claim.~~00%~~ ~~per~~As ~~annum~~a result, orin ~~(B) the~~December ~~adjusted~~2009, ~~LIBOR~~we ~~rate~~recorded income ~~plus~~in ~~4.75%,~~reorganization ~~provided~~items ~~that~~ for the ~~adjusted~~reversal ~~LIBOR~~of ~~rate~~$163 million ~~shall~~post-petition ~~never~~unsecured beinterest ~~lower~~expense ~~than~~accrued ~~2.00%~~from ~~per~~the ~~annum~~Petition Date through November 30, 2009, and discontinued recording unsecured interest expense.

~~The ABL revolver loan (ABL Revolver)~~In ~~will~~addition, ~~mature~~in ~~four years from~~ the ~~funding~~fourth ~~date~~quarter of ~~the~~2009, ~~ABL~~we ~~Revolving~~concluded ~~Facility.~~it ~~We will~~was ~~have~~not ~~the~~probable ~~option~~that toPreferred ~~borrow~~Stock atdividends athat ~~rate~~were ~~equal~~accrued subsequent to: ~~(A)~~ the ~~base~~Petition ~~rate, defined~~Date aswould ~~the~~be ~~greater~~allowed ~~of 2~~claims.~~50%~~ ~~plus:(i) the~~Preferred ~~US Prime Rate, (ii) the~~Stock ~~overnight~~dividends ~~federal~~that ~~funds~~were ~~rate~~accrued ~~plus~~post-petition ~~0.50%~~and orincluded ~~(iii) LIBOR~~in ~~rate~~liabilities ~~plus~~subject ~~1.0%,~~to orcompromise ~~(B) the LIBOR~~were ~~rate~~reversed ~~plus~~in ~~3.50% for~~ the ~~first~~fourth 90quarter ~~days~~of ~~then 3~~2009.~~25%~~ ~~thereafter.~~Preferred ~~The~~Stock ~~rate could~~dividends ~~be adjusted~~ in ~~the~~arrears ~~future from 3.25% to a rate as high as 3.75% based on~~were ~~the~~$13 million ~~average~~at ~~historical utilization under~~ the ~~ABL~~Effective ~~Revolving~~Date ~~Facility. We~~and ~~would~~$9 million ~~also~~as ~~pay~~of ~~either~~December 31, ~~a 0~~2009.~~50%~~ orThe ~~0.75%~~Preferred ~~per annum~~Stock ~~unused~~dividends ~~commitment~~in ~~fee~~arrears ~~based~~since on the ~~average~~Petition ~~historical~~Date ~~utilization under the ABL Revolving Facility. The ABL Revolving Facility borrowings~~ are ~~subject~~presented toin athe ~~borrowing base derived from a formula~~Predecessor ~~based~~consolidated onstatements ~~certain~~of ~~eligible~~operations ~~accounts~~only ~~receivable~~to ~~and~~reflect ~~inventory, less certain reserves.~~

Table of Contents

~~Borrowings under the Exit Credit Facilities will be guaranteed by us,~~preferred ~~Smurfit-Stone~~stockholders' ~~and~~rights ~~certain~~to ofdividends ~~our~~over ~~subsidiaries,~~common ~~and~~stockholders ~~would be secured by first priority liens~~ and ~~second~~are ~~priority~~not ~~liens~~reflected onin ~~substantially~~the ~~all~~Preferred ~~our~~Stock ~~presently owned~~value ~~and~~in ~~hereafter acquired assets and those of each of our subsidiaries party to~~ the ~~Exit Credit Facilities~~December 31, ~~subject~~2009 toconsolidated ~~certain~~balance ~~exceptions and permitted liens~~sheet.

~~The~~ ~~Exit~~Other ~~Credit~~Bankruptcy ~~Facilities~~Related contain affirmative and negative covenants that impose restrictions on our financial and business operations and those of certain of our subsidiaries, including their ability to incur indebtedness, incur liens, make investments, sell assets, pay dividends or make acquisitions. The Exit Credit Facilities contain events of default customary for financings of this type.Costs

~~Going~~Debtor-in-possession ~~Concern~~debt issuance costs of $63 million were incurred and paid during the first quarter of 2009 in ~~Matters~~connection with entering into the DIP Credit Agreement, and are separately presented in the 2009 consolidated statements of operations.

~~The~~ ~~consolidated~~Liabilities ~~financial statements~~Subject ~~and related notes have been prepared assuming that we will continue as a going concern, although our bankruptcy filings raise substantial doubt about our ability~~ to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to restructure our obligations in a manner that allows us to obtain confirmation of a plan of reorganization by the Bankruptcy Courts. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or to the amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as a going concern.Compromise

~~Financial~~Liabilities ~~Reporting~~subject to compromise represent pre-petition unsecured obligations that were expected to be settled under the Plan of ~~Considerations~~Reorganization. These liabilities represented the amounts expected to be allowed on known or potential claims to be resolved through the Chapter 11 and CCAA process. Liabilities subject to compromise also included certain items, such as qualified defined benefit pension and retiree medical obligations that were assumed under the Plan of Reorganization, and as such, have been recorded in liabilities under the Reorganized Smurfit-Stone.

~~For periods subsequent to the~~We ~~bankruptcy~~rejected ~~filings,~~certain weexecutory ~~have~~contracts ~~applied~~and ~~the~~unexpired ~~Financial~~leases ~~Accounting~~with ~~Standards~~respect ~~Board (FASB)~~to ~~Accounting~~our ~~Standards~~operations ~~Codification~~with ~~(ASC)~~the ~~852,~~approval ~~Reorganizations~~of ~~(ASC 852), in preparing~~ the ~~consolidated~~Bankruptcy ~~financial statements~~Courts. ~~ASC~~ ~~852~~Damages ~~requires~~resulting ~~that the financial statements distinguish transactions and events that are directly associated with the reorganization~~ from ~~the~~rejection ~~ongoing operations~~ of ~~the~~executory ~~business. Accordingly,~~contracts ~~certain revenues, expenses (including professional fees), realized gains~~ and ~~losses and provisions for~~ ~~losses~~unexpired ~~that~~leases ~~are~~were ~~realized~~generally ortreated ~~incurred~~as ingeneral ~~the~~unsecured ~~bankruptcy~~claims ~~proceedings~~and ~~have~~were ~~been recorded in reorganization items in the consolidated statement of operations. In addition, pre-petition obligations that may be impacted by the bankruptcy reorganization process have been~~ classified onas ~~the consolidated balance sheet in~~ liabilities subject to compromise. ~~These~~ ~~liabilities are reported at the amounts expected to be allowed by the Bankruptcy Courts, even if they may be settled for lesser or greater amounts.~~

~~Reorganization~~Liabilities subject ~~Items~~to compromise at December 31, 2009 consisted of the following:

Our reorganization items directly related to the process of our reorganizing under Chapter 11 and the CCAA, as recorded in our 2009 consolidated statement of operations, consist of the following:

		Predecessor December 31, 2009

Unsecured debt		$	2,439
Accounts payable			339
Interest payable			47
Retiree medical obligations			176
Pension obligations			1,136
Unrecognized tax benefits			46
Executory contracts and leases			72
Other			17

	Liabilities subject to compromise	$	4,272

	2009
Provision for rejected/settled executory contracts and leases	$ (78	)
Professional fees	(56	)
Accounts payable settlement gains	11
Reversal of accrued post-petition unsecured interest expense	163
Total reorganization items	$ 40

For information regarding the discharge of liabilities subject to compromise, see Note 1 of the Notes to Consolidated Financial Statements — Fresh Start Accounting.

~~Provision~~ ~~for~~Fresh ~~rejected/settled executory~~Start ~~contracts and leases for 2009 includes a $9 million special termination benefits charge due to funding obligations related to certain non-qualified pension plans.~~Accounting

~~Professional~~In ~~fees~~accordance ~~directly~~with ~~related to~~ASC 852, we adopted fresh start accounting as of the close of business on June 30, 2010, because the reorganization ~~include~~value of ~~fees~~the ~~associated~~assets ~~with~~of ~~advisors~~the toPredecessor usCompany immediately before the date of confirmation of the Plan of Reorganization was less than the total of all post-petition liabilities and allowed claims, and the holders of the Predecessor Company's voting shares immediately before confirmation of the Plan of Reorganization received less than 50 percent of the voting shares of the ~~Creditors’~~Successor ~~Committee~~Company. Upon adoption of fresh start accounting, the Company became a new entity for financial reporting purposes reflecting the Successor capital structure. As such, a new accounting basis in the identifiable assets and ~~certain~~liabilities ~~secured~~assumed ~~creditors~~was established with no retained earnings or accumulated other comprehensive income (loss) ("OCI").

~~Under~~For information ~~the~~regarding ~~Proposed~~fresh ~~Plan~~start ~~of Reorganization~~accounting, ~~interest~~see ~~expense~~Note 1 onof the ~~unsecured~~Notes ~~senior notes subsequent~~ to ~~the~~ ~~Petition~~Consolidated ~~Date~~Financial ~~would not be paid. As a result, we concluded it is not probable that interest expense that was accrued from the Petition Date through November~~Statements ~~30,~~— ~~2009~~Fresh ~~would~~Start ~~be an allowed claim~~Accounting. In ~~December 2009, we recorded income in reorganization items for the reversal of $163 million of accrued post-petition unsecured interest expense in the consolidated statement of operations.~~

Table of Contents

~~Net~~ ~~cash~~FINANCIAL ~~paid~~INFORMATION ~~for~~CONCERNING ~~reorganization items~~INDUSTRY ~~for 2009 totaled $41 million related to professional fees.~~SEGMENTS

~~Reorganization~~We ~~items~~operate ~~exclude employee~~as ~~severance~~one segment. For financial information for the last three fiscal years, including our net sales to external customers by country of origin and ~~other~~total ~~restructuring~~long-lived ~~charges~~assets ~~recorded~~by ~~during~~country, ~~2009~~see the information set forth in Note 24 of the Notes to Consolidated Financial Statements.

~~Other~~ ~~Bankruptcy Related Costs~~PRODUCTS

~~Debtor-in-possession~~Our ~~debt~~operations ~~issuance costs~~include of12 ~~$63~~paper ~~million~~mills ~~were~~(10 ~~incurred~~located ~~and~~in ~~paid~~the ~~during~~United ~~2009~~States and two in ~~connection~~Canada), ~~with entering~~103 ~~into~~container plants (84 located in the ~~DIP~~United ~~Credit~~States, ~~Agreement~~13 in Canada, three in Mexico, two in China and ~~are~~one ~~separately~~in ~~presented~~Puerto Rico), 30 recycling plants located in the United States and one lamination plant located in Canada. We also operate wood harvesting ~~2009~~facilities ~~consolidated~~in ~~statement~~Canada ofand ~~operations~~the United States. Our primary products include:

•: containerboard;
•: corrugated containers;
•: market pulp;
•: kraft paper; and
•: reclaimed fiber

~~Liabilities~~We produce ~~Subject~~a full range of high-quality corrugated containers designed to ~~Compromise~~protect, ship, store and display products made to our customers' merchandising and distribution specifications. Corrugated containers are sold to a broad range of manufacturers of consumer goods. Our container plants serve local customers and large national accounts. Corrugated containers are used to transport such diverse products as home appliances, electric motors, small machinery, grocery products, produce, books and furniture. We provide customers with innovative packaging solutions to advertise and sell their products. In addition, we manufacture and sell a variety of retail ready, point of purchase displays and a full line of specialty products, including pizza boxes, corrugated clamshells for the food industry, Cordeck® recyclable pallets and custom die-cut boxes to display packaged merchandise on the sales floor. We also provide custom, proprietary and standard automated packaging machines, offering customers turn-key installation, automation, line integration and packaging solutions.

~~Liabilities~~ ~~subject to~~Containerboard ~~compromise~~and ~~consist~~Corrugated ~~of the following:~~Containers

		December 31, 2009
Unsecured debt		$ 2,439
Accounts payable		339
Interest payable		47
Retiree medical obligations		176
Pension obligations		1,136
Unrecognized tax benefits		46
Executory contracts and leases		72
Other		16
Liabilities subject to compromise		$ 4,271

Successor

~~Liabilities~~Our ~~subject~~containerboard tomills ~~compromise represent~~produce ~~pre-petition~~a ~~unsecured~~full ~~obligations~~line ~~that will be settled under a plan~~ of ~~reorganization. Generally~~containerboard, ~~actions~~which tois ~~enforce~~used orprimarily ~~otherwise~~in ~~effect~~the ~~payment~~production of ~~pre-Chapter~~ 11corrugated orpackaging. ~~CCAA~~We ~~liabilities are stayed.~~ produced ~~Pre-petition~~1,619,000 ~~liabilities~~tons ~~that~~of ~~are~~unbleached ~~subject~~kraft tolinerboard, ~~compromise~~500,000 ~~are~~tons ~~reported~~of ~~at the~~white ~~amounts~~top ~~expected~~linerboard toand ~~be allowed~~1,018,000 ~~even~~tons ifof ~~they~~medium ~~may~~for bethe ~~settled~~six ~~for~~months ~~lesser~~ended ~~or greater~~December 31, ~~amounts~~2010. ~~These~~ ~~liabilities represent~~Our ~~the~~containerboard ~~amounts~~mills ~~expected~~and corrugated tocontainer beoperations ~~allowed~~are onhighly ~~known~~integrated, orwith ~~potential claims to be resolved through~~ the ~~Chapter~~majority 11of ~~and~~our ~~CCAA~~containerboard ~~process,~~used ~~and~~internally ~~remain~~by ~~subject~~our tocorrugated ~~future adjustments~~container ~~arising~~operations. ~~from~~For ~~negotiated~~the ~~settlements,~~six ~~actions~~months ofended ~~the Bankruptcy~~December 31, ~~Courts~~2010, ~~rejection~~our ofcorrugated ~~executory~~container ~~contracts~~plants ~~and~~consumed ~~unexpired leases~~2,228,000 ~~the~~tons ~~determination as~~of tocontainerboard. ~~the~~Net ~~value~~sales of ~~collateral~~corrugated ~~securing~~containers for the ~~claims,~~six ~~proofs~~months ofended ~~claim~~December 31, or2010 ~~other events. Liabilities~~represented ~~subject~~63% ~~to compromise~~of ~~also~~our ~~include~~total ~~certain items, such as qualified defined benefit~~net ~~pension~~sales. ~~and~~Net ~~retiree~~sales ~~medical~~of ~~obligations~~containerboard ~~that~~to ~~may~~third beparties ~~assumed~~for ~~under~~ the ~~Proposed Plan~~six ofmonths ~~Reorganization,~~ended ~~and as such~~December 31, ~~may~~2010 berepresented ~~subsequently~~20% ~~reclassified~~of ~~to liabilities~~our ~~not~~total ~~subject~~net ~~to compromise~~sales.

~~The~~ Bankruptcy Courts approved payment of certain pre-petition obligations, including employee wages, salaries and benefits, and the payment of vendors and other providers in the ordinary course for goods and services received after the filing of the Chapter 11 Petition and the Canadian Petition and other business-related payments necessary to maintain the operation of our business. Obligations associated with these matters are not classified as liabilities subject to compromise.Predecessor

We ~~have~~produced ~~rejected~~1,649,000 ~~certain~~tons ~~pre-petition~~of ~~executory~~unbleached ~~contracts and~~kraft ~~unexpired~~linerboard, ~~leases~~474,000 ~~with~~tons ~~respect~~of towhite ~~our~~top ~~operations~~linerboard ~~with~~and ~~the~~1,007,000 ~~approval~~tons of medium for the six months ended ~~Bankruptcy~~June 30, ~~Courts~~2010. ~~and~~For ~~may~~the ~~reject~~six ~~additional~~months ~~contracts~~ended orJune 30, ~~unexpired~~2010, ~~leases~~our ~~in the~~corrugated ~~future~~container plants consumed 2,264,000 tons of containerboard. ~~Damages~~ ~~resulting~~Net ~~from rejection~~sales of ~~executory~~corrugated ~~contracts~~containers for the six months ended June 30, 2010, and ~~unexpired~~the ~~leases~~years ~~are~~ended ~~generally~~December 31, ~~treated~~2009 ~~as general~~and ~~unsecured~~2008 ~~claims~~represented 65%, 71% and ~~are~~63%, ~~classified~~respectively, asof ~~liabilities~~our ~~subject~~total ~~to compromise~~net sales. Net sales of

~~FINANCIAL INFORMATION CONCERNING INDUSTRY SEGMENTS~~10

WeTable ~~operate as one segment. For financial information for the last three fiscal years, including our net sales to external customers by country~~ of ~~origin~~ ~~and total long-lived assets by country, see the information set forth in Note 23 of the Notes to Consolidated Financial Statements.~~Contents

9containerboard to third parties for the six months ended June 30, 2010, and years ended December 31, 2009 and 2008 represented 19%, 17% and 20%, respectively, of our total net sales.

~~Table~~ ofMarket ~~Contents~~Pulp and Kraft Paper

~~PRODUCTS~~Our paper mills also produce market pulp, solid bleached liner (SBL), kraft paper, and other specialty products. We produce bleached southern hardwood pulp, bleached southern softwood pulp and fluff pulp, which are sold to manufacturers of paper products, including specialty papers, as well as the printing and writing sectors. Kraft paper is used in numerous products, including consumer and industrial bags, grocery and shopping bags, counter rolls, handle stock and refuse bags.

~~Our~~ ~~operations include~~Reclaimed ~~12 paper mills (10 located in the United States~~ and ~~two~~Brokered in Canada), 110 container plants (90 located in the United States, 14 in Canada, three in Mexico, two in China and one in Puerto Rico), 29 reclamation plants located in the United States and one lamination plant located in Canada. Also, we operate wood harvesting facilities in Canada and the United States. Our primary products include:Fiber

~~· containerboard;~~Our recycling operations procure fiber resources for our paper mills as well as other producers. We operate 30 recycling facilities that collect, sort, grade and bale recovered paper. We also collect aluminum and plastics for resale to manufacturers of these products. In addition, we operate a nationwide brokerage system whereby we purchase and resell recovered paper to our recycled paper mills and other producers on a regional and national contract basis. Our waste reduction services extract additional recyclables from the waste stream by partnering with customers to reduce their waste expenses and increase efficiencies. Brokerage contracts provide bulk purchasing, often resulting in lower prices and cleaner recovered paper. Many of our recycling facilities are located close to our recycled paper mills, ensuring availability of supply with minimal shipping costs. For the six months ended December 31, 2010, our paper mills consumed 1,190,000 tons of the fiber reclaimed and brokered by our recycling operations, representing an integration level of approximately 40%. For the six months ended June 30, 2010, our paper mills consumed 1,252,000 tons of the fiber reclaimed and brokered by our recycling operations, representing an integration level of approximately 43%.

~~· corrugated~~Production ~~containers;~~for our paper mills, sales volume for our corrugated container facilities and fiber reclaimed and brokered are as follows:

· market pulp;

				Predecessor

		Successor		Predecessor
		Successor				Year Ended December 31,
		Six Months Ended December 31, 2010		Six Months Ended June 30, 2010		Year Ended December 31,
(In thousands of tons, except as noted)		Six Months Ended December 31, 2010		Six Months Ended June 30, 2010		2009		2008
Mill Production
	Containerboard		3,137		3,130		6,033		6,853
	Market pulp		146		134		294		470
	Solid bleached liner		60		66		130		125
	Kraft paper		53		55		110		145
Corrugated containers sold (in billion square feet)			34.0		34.2		67.1		71.5
Fiber reclaimed and brokered			2,952		2,891		5,182		6,462

~~· kraft~~ ~~paper; and~~RAW MATERIALS

· Wood fiber and reclaimed fiber are the principal raw materials used in the manufacture of our paper products. We satisfy the majority of our need for ~~and~~wood ~~brokered~~fiber through purchases on the open market or under supply agreements. We satisfy essentially all of our need for reclaimed fiber through our recycling facilities and nationwide brokerage system.

We ~~produce~~MARKETING aAND full range of high quality corrugated containers designed to protect, ship, store and display products made to our customers’ merchandising and distribution specifications. Corrugated containers are sold to a broad range of manufacturers of consumer goods. Corrugated containers are used to transport such diverse products as home appliances, electric motors, small machinery, grocery products, produce, books and furniture. We provide customers with innovative packaging solutions to advertise and sell their products. In addition, we manufacture and sell a variety of retail ready, point of purchase displays and a full line of specialty products, including pizza boxes, corrugated clamshells for the food industry, Cordeck® recyclable pallets and custom die-cut boxes to display packaged merchandise on the sales floor. We also provide custom, proprietary and standard automated packaging machines, offering customers turn-key installation, automation, line integration and packaging solutions. Our container plants serve local customers and large national accounts. Net sales of corrugated containers for 2009, 2008 and 2007 represented 71%, 63% and 60%, respectively, of our total net sales.DISTRIBUTION

Our ~~containerboard~~marketing ~~mills~~strategy ~~produce a full line of containerboard, which~~ is ~~used~~to ~~primarily~~sell ina ~~the~~broad ~~production~~range of ~~corrugated~~ paper-based packaging~~. We~~ ~~produced 3,395,000~~products ~~tons~~to ofmanufacturers ~~unbleached kraft linerboard, 794,000 tons~~ of ~~white~~industrial ~~top linerboard~~ and ~~1,844,000~~consumer ~~tons of medium in 2009~~products. ~~Our~~ ~~containerboard~~We ~~mills~~seek ~~and corrugated~~to ~~container~~meet ~~operations~~the ~~are~~quality ~~highly~~and ~~integrated,~~service ~~with~~needs of the ~~majority~~customers of our ~~containerboard~~ ~~used~~converting ~~internally by our corrugated container operations. In 2009, our corrugated container~~ plants ~~consumed~~ ~~4,406,000~~at ~~tons~~the ofmost ~~containerboard. Net~~efficient ~~sales of containerboard to third parties for 2009~~cost, ~~2008~~while ~~and~~balancing ~~2007 represented~~those ~~17%,~~needs ~~20%~~against ~~and~~the ~~21%,~~demands ~~respectively,~~ of our ~~total net sales.~~

Our paper mills also produce market pulp, solid bleached liner (SBL), kraft paper, and other specialty products. We produce southern hardwood pulp, bleached southern softwood pulp and fluff pulp, which are sold to manufacturers of paper products, including specialty papers, as well as the printing and writing sectors. Kraft paper is used in numerous products, including consumer and industrial bags, grocery and shopping bags, counter rolls, handle stock and refuse bags.11

~~Our~~Table reclamation operations procure fiber resources for our paper mills as well as other producers. We operate 29 reclamation facilities that collect, sort, grade and bale recovered paper. We also collect aluminum and plastics for resale to manufacturers of ~~these~~ products. In addition, we operate a nationwide brokerage system whereby we purchase and resell recovered paper to our recycled paper mills and other producers on a regional and national contract basis. Our waste reduction services extract additional recyclables from the waste stream by partnering with customers to reduce their waste expenses and increase efficiencies. Brokerage contracts provide bulk purchasing, often resulting in lower prices and cleaner recovered paper. Many of our reclamation facilities are located close to our recycled paper mills, ensuring availability of supply with minimal shipping costs. In 2009, our paper mills consumed 1,952,000 tons of the fiber reclaimed and brokered by our reclamation operations, representing an integration level of approximately 38%.Contents

10open market paperboard customers. Our converting plants focus on supplying both specialized packaging with high value graphics that enhance a product's market appeal and high-volume commodity products.

~~Table~~We serve a broad customer base, including thousands of ~~Contents~~accounts from our plants and sell packaging and other products directly to end users and converters, as well as through resellers. Our corrugated container sales organization is centralized and has sales responsibilities for all converting plants. This organizational structure allows us to better focus on revenue growth and assign the appropriate resources to the best opportunities. Marketing of containerboard and pulp to third parties is centralized in our board sales group. Total tons of containerboard and market pulp sold to third parties for the six months ended December 31, 2010 and June 30, 2010, and the years ended December 31, 2009 and 2008, respectively, were 1,177,000 tons, 1,169,000 tons, 2,245,000 tons and 3,024,000 tons.

~~Production~~Our business ~~for~~is ~~our~~not ~~paper~~dependent ~~mills, sales~~upon ~~volume~~a ~~for~~single ~~our~~customer ~~corrugated~~or ~~container~~upon ~~facilities~~a ~~and~~small ~~fiber~~number ~~reclaimed~~of ~~and brokered~~major ~~for~~customers. We do not believe the ~~last~~loss ~~three~~of ~~years~~any ~~were:~~one customer would have a material adverse effect on our business.

~~(In~~ ~~thousands of tons, except as noted)~~COMPETITION

	2009	2008	2007
Mill Production
Containerboard	6,033	6,853	7,336
Market pulp	294	470	574
Solid bleached sulfate (SBS/SBL)	130	125	269
Kraft paper	110	145	177
Corrugated containers sold (in billion square feet)	67.1	71.5	74.8
Fiber reclaimed and brokered	5,182	6,462	6,842

The markets in which we sell our principal products are highly competitive and comprised of many participants. Although no single company is dominant, we do face significant competitors, including large vertically integrated companies as well as numerous smaller companies. The markets in which we compete have historically been sensitive to price fluctuations brought about by shifts in industry capacity and other cyclical industry conditions. While we compete primarily on the basis of price in many of our product lines, other competitive factors include design, quality and service, with varying emphasis depending on product line.

~~RAW~~ ~~MATERIALS~~BACKLOG

~~Wood fiber~~Demand ~~and~~for ~~reclaimed~~our ~~fiber~~major ~~are~~product ~~the~~lines ~~principal~~is ~~raw~~relatively ~~materials~~constant ~~used~~throughout in the ~~manufacture~~ ofyear, ~~our~~and ~~paper~~seasonal ~~products. We satisfy~~fluctuations ~~the~~in ~~majority~~marketing, ofproduction, ~~our~~shipments ~~need~~and inventories ~~for~~are ~~wood~~not ~~fiber~~significant. ~~through~~Backlog ~~purchases~~orders onare ~~the~~not ~~open market~~a orsignificant ~~under~~factor ~~supply~~in ~~agreements~~the industry. We ~~satisfy~~ ~~essentially~~do ~~all~~not ofhave ~~our~~a ~~need~~significant ~~for~~backlog ~~reclaimed~~of ~~fiber~~orders ~~through~~as ~~our~~most ~~reclamation facilities~~orders ~~and~~are ~~nationwide~~placed ~~brokerage~~for ~~system~~delivery within 30 days.

~~MARKETING~~ RESEARCH AND ~~DISTRIBUTION~~NEW PRODUCT DEVELOPMENT

~~Our~~The ~~marketing strategy~~majority isof toour ~~sell~~research aand ~~broad~~new ~~range~~product ofdevelopment ~~paper-based~~activities ~~packaging~~are ~~products~~performed ~~to manufacturers~~at ofour ~~industrial~~facility ~~and~~located ~~consumer~~in ~~products~~Carol Stream, Illinois. We ~~seek~~use advanced technology to ~~meet~~assist all levels of the ~~quality~~manufacturing and ~~service~~sales ~~needs~~processes, from raw material supply through finished packaging performance. Research programs have provided improvements in coatings and ofbarriers, ~~the~~stiffeners, ~~customers~~inks ofand ~~our~~printing. ~~converting~~Our ~~plants~~technical atstaff ~~the~~conducts ~~most~~basic, ~~efficient~~applied ~~cost~~and diagnostic research, ~~while balancing~~develops ~~those~~processes ~~needs~~and ~~against~~products ~~the~~and ~~demands~~provides a wide range of ~~our~~other ~~open~~technical ~~market~~services. ~~paperboard~~For ~~customers. Our~~research ~~converting~~and ~~plants~~new ~~focus on~~product ~~supplying~~development ~~both~~activities, ~~specialized~~we ~~packaging~~spent ~~with~~$2 million, ~~high~~$2 million, ~~value~~$3 million ~~graphics~~and ~~that~~$3 million ~~enhance~~for ~~a product’s~~the ~~market~~six ~~appeal~~months ended December 31, 2010 and June 30, ~~high-volume~~2010, ~~commodity~~and ~~products~~the years ended December 31, 2009 and 2008, respectively.

We ~~serve~~INTELLECTUAL a broad customer base. We serve thousands of accounts from our plants and sell packaging and other products directly to end users and converters, as well as through resellers. Our corrugated container sales organization is centralized with sales responsibilities for all converting plants. This allows us to better focus on revenue growth and assign the appropriate resources to the best opportunities. Marketing of containerboard and pulp to third parties is centralized in our board sales group. Total tons of containerboard and market pulp sold to third parties in 2009, 2008 and 2007 were 2,245,000, 3,024,000 and 3,381,000, respectively.PROPERTY

~~Our~~We ~~business~~actively pursue applications for patents on new technologies and designs and attempt to protect our patents against infringement. Nevertheless, we isbelieve ~~not~~our success and growth are more dependent ~~upon~~on athe ~~single~~quality ~~customer~~of orour ~~upon~~products aand ~~small~~our ~~number~~relationships ofwith ~~major~~ customers than on the extent of our patent protection. We hold or are licensed to use certain patents, licenses, trademarks and trade names on our products, but do not ~~believe~~consider the ~~loss~~successful continuation of any ~~one~~material ~~customer~~aspect ~~would~~of ~~have~~our abusiness ~~material~~to ~~adverse~~be ~~effect~~dependent onupon ~~our~~such ~~business~~intellectual property.

~~COMPETITION~~12

~~The markets~~Table ~~in which we sell our principal products are highly competitive and comprised~~ of many participants. Although no single company is dominant, we do face significant competitors, including large vertically integrated companies as well as numerous smaller companies. The markets in which we compete have historically been sensitive to price fluctuations brought about by shifts in industry capacity and other cyclical industry conditions. While we compete primarily on the basis of price in many of our product lines, other competitive factors include design, quality and service, with varying emphasis depending on product line.Contents

~~BACKLOG~~ EMPLOYEES

~~Demand for~~We ~~our~~had ~~major~~approximately ~~product~~17,100 ~~lines~~employees isat ~~relatively~~December 31, ~~constant throughout the year~~2010, ~~and seasonal~~of ~~fluctuations~~which inapproximately ~~marketing~~10,500 ~~production,~~(62%) ~~shipments~~were ~~and~~represented ~~inventories~~by ~~are not~~collective ~~significant~~bargaining units. ~~Backlog~~ ~~orders~~Approximately ~~are~~13,800 ~~not a~~(81%) ~~significant~~of ~~factor~~our employees are in ~~the~~our ~~industry~~U. ~~We do~~S. ~~not~~operations. ~~have~~The aexpiration ~~significant~~dates ~~backlog~~ of ~~orders~~union ascontracts ~~most~~for ~~orders~~our ~~are~~paper ~~placed~~mills ~~for delivery~~are ~~within~~as 30follows: ~~days.~~

•: West Point, Virginia - September 2009
•: Hopewell, Virginia - July 2011
•: Panama City, Florida - March 2012
•: Matane, Quebec, Canada - April 2012
•: Fernandina Beach, Florida - June 2012
•: Coshocton, Ohio - July 2012
•: La Tuque, Quebec, Canada - August 2013
•: Hodge, Louisiana - June 2014
•: Jacksonville, Florida - June 2014
•: Florence, South Carolina - August 2014

11A labor agreement covering approximately 400 employees at our West Point, Virginia paper mill expired in 2009. Negotiations to reach a new agreement with the local union bargaining committee at the West Point mill have been unsuccessful, and we have advised the union that we believe negotiations are at an impasse. Absent an agreement by the union members to accept our last contract offer, and barring an unexpected change in their position, we intend to unilaterally implement contract terms in the near future. Our implementation of contract terms could potentially result in a work stoppage by the union, although we intend to continue to operate the mill throughout the duration of any such work stoppage. While a work stoppage by the union could potentially have a negative impact on the mill's production and costs in the short-term, we believe that this matter will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

~~Table~~Except as noted above, we believe our employee relations are generally good. While the terms of ~~Contents~~our collective bargaining agreements may vary, we believe the material terms of the agreements are customary for the industry, the type of facility, the classification of the employees and the geographic location covered thereby.

~~RESEARCH~~ ~~AND~~ENVIRONMENTAL ~~NEW PRODUCT DEVELOPMENT~~COMPLIANCE

~~The majority~~Our ofoperations ~~our~~are ~~research~~subject ~~and~~to ~~new~~extensive ~~product~~environmental ~~development~~regulation ~~activities~~by ~~are~~federal, ~~performed at~~state, ~~our~~local ~~facility~~and ~~located~~foreign inauthorities. ~~Carol~~In ~~Stream~~the past, ~~Illinois. We~~we ~~use~~have ~~advanced~~made significant ~~technology~~capital expenditures to ~~assist~~comply ~~all levels~~with ofwater, ~~the~~air, ~~manufacturing~~solid and ~~sales~~hazardous ~~processes,~~waste ~~from~~and ~~raw~~other ~~material~~environmental ~~supply through~~laws ~~finished~~and ~~packaging performance~~regulations. ~~Research~~ ~~programs~~We ~~have~~expect ~~provided~~to ~~improvements~~make significant expenditures in ~~coatings~~the ~~and~~future ~~barriers,~~for ~~stiffeners,~~environmental ~~inks and printing~~compliance. ~~Our technical~~ ~~staff~~Because ~~conducts~~various ~~basic,~~environmental ~~applied~~standards ~~and~~are ~~diagnostic~~subject ~~research~~to change, ~~develops processes~~it ~~and~~is ~~products~~difficult ~~and~~to ~~provides~~predict awith ~~wide~~certainty ~~range~~the amount of ~~other~~capital ~~technical services. In~~expenditures ~~each~~that ofwill ~~2009,~~ultimately ~~2008~~be ~~and~~required ~~2007,~~to wecomply ~~spent~~with ~~approximately~~future ~~$3 million on research and new product development activities~~standards.

~~INTELLECTUAL~~The U.S. ~~PROPERTY~~Congress and several states in which we operate are considering legislation that would mandate the reduction of greenhouse gas emissions from facilities in various sectors of the economy, including manufacturing. The United States Environmental Protection Agency ("EPA") also has taken steps to address climate change by issuing new Clean Air Act permitting regulations which apply to facilities that emit greenhouse gases. These new regulations became effective for certain greenhouse gas sources on January 2, 2011, with implementation for other sources to be phased in over the next several years. Enactment of EPA's new greenhouse gas regulations and/or future climate change legislation may require capital expenditures to modify assets to meet greenhouse gas reduction

We actively pursue applications for patents on new technologies and designs and attempt to protect our patents against infringement. Nevertheless, we believe our success and growth are more dependent on the quality of our products and our relationships with customers than on the extent of our patent protection. We hold or are licensed to use certain patents, licenses, trademarks and trade names on our products, but do not consider the successful continuation of any material aspect of our business to be dependent upon such intellectual property.13

~~EMPLOYEES~~Table of Contents

Werequirements, ~~had~~increase ~~approximately~~energy ~~19,000~~costs ~~employees~~above atthe ~~December 31,~~level ~~2009,~~ of ~~which approximately~~general 11inflation,~~000~~ ~~(58%)~~and ~~were~~could ~~employees~~result ~~represented~~in bydirect ~~collective~~compliance ~~bargaining~~and other costs. It is not currently possible to estimate the costs or timing of ~~units~~compliance with such laws or regulations. ~~Approximately~~ 15We have taken voluntary actions to reduce greenhouse gas emissions from our manufacturing operations and,~~400~~ ~~(81~~with our membership in the Chicago Climate Exchange, made a commitment to reduce these emissions by 6% from baseline (emissions from 1998 to 2001) by the end of ~~our~~2010. We believe we have exceeded the reduction obligation contingent upon review and ~~total~~approval ~~employees~~by ~~are~~the ~~employed~~Chicago atClimate ~~U.S.~~Exchange, ~~operations~~which will take place in 2011. ~~The~~ ~~expiration~~We ~~dates~~expect ofthat ~~union~~we ~~contracts~~will ~~for our~~not ~~paper~~be ~~mills~~disproportionately ~~are~~affected by new climate change laws or regulations as ~~follows:~~compared to our competitors who have comparable, energy-intensive operations in the United States.

~~· Florence~~In 2004, ~~South~~EPA ~~Carolina~~promulgated a Maximum Achievable Control Technology ("MACT") regulation to limit hazardous air pollutant emissions from certain industrial boilers ("Boiler MACT"). Several of our mills were required to install new pollution control equipment in order to meet the compliance deadline of September 13, 2007. The Boiler MACT rule was challenged by third parties in litigation, and in mid-2007, ~~August~~the United States District Court of Appeals for the D.C. Circuit issued a decision vacating Boiler MACT and remanding the rule to the EPA. All projects required to bring us into compliance with the now vacated Boiler MACT requirements were completed. We spent approximately $80 ~~2009~~million on Boiler MACT projects principally through 2007 with insignificant amounts spent in 2008 through 2010. On June 4, 2010, EPA published a new, proposed Boiler MACT rule. Very few existing industrial boilers could comply with the extremely stringent emission limits proposed by the EPA, and we likely would be required to install additional pollution control devices and other equipment on power boilers at many of our mills to comply with the draft rule. The American Forest & Paper Association ("AF&PA") has estimated that the forest products industry as a whole would be required to make approximately $7 billion in capital investments to comply with the proposed Boiler MACT. EPA plans to issue a final Boiler MACT rule in 2011, and the emissions limits and other compliance requirements in the final rule may change from those contained in the proposal. As a result, we are unable to estimate our cost of complying with the forthcoming Boiler MACT rule.

~~· La~~Excluding the ~~Tuque~~spending on Boiler MACT projects described above and other one-time compliance costs, ~~Quebec~~for the past three years we spent an average of approximately $5 million annually on capital expenditures for environmental purposes. We anticipate additional capital expenditures related to environmental compliance in the future. Since our principal competitors are subject to comparable environmental standards, ~~Canada~~it -is ~~August~~our opinion, based on current information, that compliance with existing environmental standards should not adversely affect our competitive position or operating results. However, we could incur significant expenditures due to changes in law or the discovery of new information, which could have a material adverse effect on our operating results. See Part ~~2009~~I, Item 3. Legal Proceedings — "Environmental Matters."

~~· West~~ ~~Point,~~EXECUTIVE ~~Virginia~~OFFICERS -OF ~~September 2009~~THE REGISTRANT

~~· Hodge,~~Set ~~Louisiana~~forth -below ~~June 2010~~is certain information relating to our current executive officers:

~~· Jacksonville~~Matthew T. Denton, ~~Florida~~age 48, born on December 11, 1962, was appointed Senior Vice President — Business Planning and Analysis on February 1, 2010. He had been Vice President — Business Planning and Analysis since January 2007 and prior to that had been Vice President of Business Transformation since he joined Smurfit- Stone in June 2006. Prior to joining Smurfit-Stone, Mr. ~~2010~~Denton was employed by Georgia Pacific Corporation from 1992 to 2006, where he held positions of increasing responsibility, including Vice President of Strategic Sourcing for Georgia Pacific's North American consumer products and bleached pulp and paper operations, and Vice President of Finance for the containerboard and packaging segment and pulp division.

~~· Matane~~Michael P. Exner, ~~Quebec~~age 56, ~~Canada~~born –on ~~April~~June ~~2011~~20, 1954, was appointed Senior Vice President and General Manager — Containerboard Mill Division on January 1, 2010. Prior to joining Smurfit-Stone, Mr. Exner was employed by International Paper Company, most recently as the Vice President of

~~· Hopewell, Virginia - July 2011~~14

~~· Panama~~Table ~~City,~~of ~~Florida - March 2012~~Contents

~~· Fernandina~~Manufacturing — Containerboard ~~Beach~~since July 2003, ~~Florida~~Director -of ~~June~~Manufacturing ~~2012~~— Commercial Printing and Imaging Papers from February 1997 to June 2003 and Mill Manager from June 1992 to January 1997.

~~· Coshocton~~Craig A. Hunt, ~~Ohio~~age -49, ~~July~~born on May ~~2012~~31, 1961, was appointed Chief Administrative Officer and General Counsel on November 1, 2010. He had been Senior Vice President, Secretary and General Counsel since February 2005, and prior to that had been Vice President, Secretary and General Counsel since November 1998.

~~Labor agreements~~Paul ~~covering~~K. ~~approximately 1~~Kaufmann,~~200~~ ~~employees~~age ~~at our Florence~~56, ~~South Carolina,~~born Laon ~~Tuque~~May 11, ~~Quebec and West Point~~1954, ~~Virginia~~was ~~paper~~appointed ~~mills~~Senior ~~expired~~Vice ~~in 2009. Negotiations~~President ~~to reach new agreements have been unsuccessful. While we consider relations with these employees to be good~~ and weCorporate doController ~~not~~on ~~expect a work stoppage~~February to23, ~~occur~~2005, ~~the outcome of the negotiations regarding the~~and ~~expired~~prior ~~labor~~to ~~agreements~~that ~~are~~had ~~not~~been ~~entirely~~Vice ~~within~~President ~~our control~~ and, ~~therefore,~~Corporate ~~we can~~Controller ~~provide~~since noNovember ~~assurance regarding the outcome or the timing of the negotiations or their effect on our results of operations~~1998.

~~We believe~~John ~~our~~L. ~~employee~~Knudsen, ~~relations~~age ~~are~~53, ~~generally~~born ~~good~~on August 29, 1957, was appointed Senior Vice President, Supply Chain and Board Sales on June 1, 2010. ~~While~~ ~~the~~He had ~~terms~~been Senior Vice President of ~~our~~Corporate ~~collective~~Strategy ~~bargaining agreements~~since ~~may~~November ~~vary,~~2008. weHe ~~believe~~had ~~the~~been ~~material~~Senior ~~terms~~Vice President of Manufacturing for the ~~agreements~~Container ~~are~~Division since October 2005. He was Vice President of ~~customary~~Strategic Planning for the ~~industry,~~Container ~~the~~Division ~~type~~from ofApril ~~facility~~2005 to October 2005. Prior to that, ~~the~~he ~~classification~~was ofVice ~~the employees~~President and Regional Manager for the ~~geographic~~Container ~~location~~Division ~~covered~~from ~~thereby~~August 2000 to April 2005.

~~ENVIRONMENTAL~~Patrick ~~COMPLIANCE~~J. Moore, age 56, born on September 7, 1954, has served as Chief Executive Officer since May 2006. Mr. Moore has announced his intention to retire as Chief Executive Officer within one year after our emergence from bankruptcy. He had been Chairman, President and Chief Executive Officer since May 2003, and prior to that he was President and Chief Executive Officer since January 2002, when he was also elected as a Director. He was Vice President and Chief Financial Officer from November 1998 until January 2002. Mr. Moore is a director of Archer Daniels Midland Company.

~~Our operations~~Mark ~~are~~R. ~~subject~~O'Bryan, toage ~~extensive~~48, ~~environmental~~born ~~regulation~~on ~~by federal~~January 15, ~~state~~1963, ~~local~~ ~~and~~was ~~foreign~~appointed ~~authorities. In~~Senior ~~the past,~~Vice wePresident — ~~have~~Strategic ~~made~~Initiatives ~~significant~~and ~~capital~~Chief Information ~~expenditures~~Officer toon ~~comply with water~~April 1, ~~air, solid~~2007. ~~and~~He ~~hazardous~~had ~~waste~~been ~~and~~Senior ~~other~~Vice ~~environmental~~President — ~~laws~~Strategic ~~and~~Initiatives ~~regulations. We~~since ~~expect~~July to2005 ~~make~~and ~~significant~~prior ~~expenditures~~to ~~in the~~that ~~future~~had ~~for~~been ~~environmental~~Vice ~~compliance.~~President — ~~Because~~Operational ~~various~~Improvement ~~environmental~~for ~~standards~~the ~~are~~Consumer ~~subject~~Packaging toDivision ~~change,~~from itApril ~~is difficult~~2004 to ~~predict~~July ~~with~~2005. ~~certainty~~He ~~the~~was ~~amount~~Vice ofPresident — ~~capital~~Procurement ~~expenditures~~from ~~that will~~October ~~ultimately~~1999 ~~be required~~ to ~~comply~~April ~~with future standards~~2004.

12Michael R. Oswald, age 54, born on October 29, 1956, was appointed Senior Vice President and General Manager of the Recycling Division on August 1, 2005. Prior to that, he was Vice President of Operations for the Recycling Division from January 1997 to August 2005.

~~Table~~Steven C. Strickland, age 58, born on July 12, 1952, was appointed Senior Vice President of Container Operations on November 1, 2008. He ~~Contents~~had been Senior Vice President of Sales for the Container Division since October 27, 2006. Prior to joining Smurfit-Stone, Mr. Strickland was employed by Unisource, most recently as Senior Vice President of Packaging and Supply from September 2006 to October 2006, Senior Vice President of Packaging from March 2004 to August 2006, Senior Vice President of Operations — East from March 2003 to March 2004 and Vice President of National Sales from September 1999 to March 2003.

~~The~~ ~~U.S.~~AVAILABLE Congress and several states in which we operate are considering legislation that would mandate the reduction of greenhouse gas emissions from facilities in various sectors of the economy, including manufacturing. The United States Environmental Protection Agency (EPA) is also taking steps to regulate greenhouse gas emissions under certain Clean Air Act programs. Enactment of new climate change laws or regulations may require capital expenditures to modify assets to meet greenhouse gas reduction requirements, increase energy costs above the level of general inflation, and could result in direct compliance and other costs. It is not yet known when such greenhouse gas emission laws or regulations may come into effect, nor is it currently possible to estimate the costs of compliance with such laws or regulations. We have taken voluntary actions to reduce greenhouse gas emissions from our manufacturing operations and, with our membership in the Chicago Climate Exchange, have committed to reduce these emissions by 6% over baseline (emissions from 1998 to 2001) by the end of 2010. We expect that we will not be disproportionately affected by new climate change laws or regulations as compared to our competitors who have comparable, energy-intensive operations in the United States.INFORMATION

InWe ~~2004,~~make ~~EPA~~available ~~promulgated~~free aof ~~Maximum Achievable~~charge ~~Control~~our ~~Technology~~annual ~~(MACT)~~report ~~regulation~~on toForm 10-K, ~~limit~~quarterly ~~hazardous~~reports ~~air pollutant~~on ~~emissions~~Form 10-Q, ~~from~~current reports ~~certain~~on ~~industrial~~Form 8-K ~~boilers~~and ~~(Boiler~~amendments ~~MACT). Several of our mills were required~~ to ~~install new~~those ~~pollution~~reports ~~control~~filed ~~equipment~~or infurnished ~~order~~as torequired ~~meet~~by ~~the~~Section 13(a) ~~compliance~~or ~~deadline~~15(d) of ~~September 13, 2007. The~~the ~~Boiler MACT~~Securities ~~rule was challenged~~Exchange byAct ~~third~~of ~~parties in litigation~~1934, ~~and~~as amended (the ~~United States District Court~~"Exchange ofAct"), ~~Appeals~~through ~~for~~our ~~the~~Internet DWebsite (www.Csmurfit-stone.com) ~~Circuit~~as ~~issued~~soon aas ~~decision~~reasonably ~~vacating~~practicable ~~Boiler~~after ~~MACT~~we ~~and remanding~~electronically ~~the~~file ~~rule to~~such ~~the~~material ~~EPA. All projects~~with, ~~required~~or tofurnish ~~bring~~it usto, ~~into compliance with~~ the ~~now~~Securities ~~vacated~~and ~~Boiler~~Exchange ~~MACT~~Commission ~~requirements were completed~~("SEC"). We ~~spent~~You ~~approximately~~may ~~$80~~access ~~million~~these onSEC ~~Boiler MACT~~filings ~~projects~~via ~~principally through 2007 with insignificant amounts spent in 2008 and 2009 as~~ the ~~project~~hyperlink ~~neared~~that ~~completion. It~~we isprovide ~~presently unclear~~on ~~whether~~our ~~future~~Website ~~rulemaking will require us~~ to ~~install~~a ~~additional~~third-party ~~pollution~~SEC ~~control~~filings ~~equipment on industrial boilers at our facilities~~Website.

Excluding the spending on Boiler MACT projects described above and other one-time compliance costs, for the past three years we spent an average of approximately $4 million annually on capital expenditures for environmental purposes. We anticipate additional capital expenditures related to environmental compliance in the future. Since our principal competitors are subject to comparable environmental standards, it is our opinion, based on current information, that compliance with existing environmental standards should not adversely affect our competitive position or operating results. However, we could incur significant expenditures due to changes in law or the discovery of new information, which could have a material adverse effect on our operating results. See Part I, Item 3. Legal Proceedings - “Environmental Matters.”15

~~EXECUTIVE~~ Table ~~OFFICERS~~of OFContents ~~THE REGISTRANT~~

~~Set~~ ~~forth~~ ~~below~~ ITEM is1A. RISK ~~certain information relating to our current executive officers:~~FACTORS

~~Mathew~~We are ~~Blanchard~~subject to certain risks and events that, ~~born September 9~~ if one or more of them occur, ~~1959~~could adversely affect our business, ~~was~~our ~~appointed~~financial ~~Senior~~condition ~~Vice~~and ~~President~~results of operations, and ~~General~~the ~~Manager~~trading price of our -common ~~Board~~stock. ~~Sales~~You ~~Division~~should consider the following risk factors, in ~~March 2008~~addition to the other information presented in this report, as well as the other reports and ~~prior~~registration tostatements ~~that~~we ~~had~~file ~~been~~from ~~Vice~~time ~~President~~to time with the SEC, in evaluating us, our business and ~~General~~an ~~Manager~~investment –in ~~Board~~our ~~Sales~~securities. ~~Division~~The ~~since~~risks ~~July 2000~~below are not the only ones we face. Additional risks not currently known to us or that we currently deem immaterial also may adversely impact our business.

~~Matthew~~ T.Global ~~Denton, born~~economic ~~December 11,~~conditions ~~1962, was appointed Senior Vice President - Business Planning~~ and ~~Analysis~~credit intightening ~~February 2010. He~~materially ~~had been Vice President - Business Planning~~ and ~~Analysis~~adversely ~~since~~affect ~~January 2007 and~~our ~~prior to that had been Vice President of Business Transformation since he joined SSCE in June 2006~~business. Prior to joining SSCE, Mr. Denton was employed by Georgia-Pacific Corporation from 1992 to 2006, where he held positions of increasing responsibility, including Vice President of Strategic Sourcing for Georgia-Pacific’s North American consumer products and bleached pulp and paper operations, and Vice President of Finance for the containerboard and packaging segment and pulp division.

~~Michael~~Our P.business ~~Exner, born June 20,~~has ~~1954,~~been ~~was~~materially ~~appointed~~and ~~Senior~~adversely ~~Vice~~affected ~~President~~by changes in regional, national and ~~General~~global ~~Manager~~economic –conditions. Such changes have included ~~Containerboard~~or ~~Mill~~may ~~Division~~include onreduced ~~January 1~~consumer spending, ~~2010. Prior~~reduced toavailability ~~joining~~of ~~SSCE~~capital, ~~Mr. Exner~~inflation, ~~was employed~~deflation, byadverse ~~International~~changes ~~Paper~~in ~~Company~~interest rates, ~~most~~fluctuations ~~recently~~in asthe value of local currency versus the ~~Vice~~U.S. ~~President~~dollar, reduced energy availability and increased energy costs and government initiatives to manage economic conditions. Continuing instability in financial markets and the deterioration of other national and ~~Manufacturing~~global –economic ~~Containerboard~~conditions ~~since~~may ~~July 2003~~have further materially adverse effects on our operations, ~~Director~~financial ofresults ~~Manufacturing~~or ~~– Commercial~~liquidity, ~~Printing~~including ~~and~~the ~~Imaging~~financial ~~Papers~~stability ~~from~~of ~~February 1997~~our tocustomers ~~June 2003~~or suppliers which may be ~~and~~compromised, ~~Mill~~which ~~Manager~~could ~~from~~result ~~June 1992~~in toadditional ~~January 1997~~bad debts for us or non-performance by suppliers.

13Uncertainty about current economic conditions may cause consumers of our products to postpone or refrain from spending in response to tighter credit, negative financial news, declines in income or asset values, or other adverse economic events or conditions, which could reduce demand for our products and materially adversely affect our financial condition and operating results. Further deterioration of economic conditions would likely exacerbate these adverse effects, result in wide-ranging, adverse and prolonged effects on general business conditions, and materially adversely affect our operations, financial results and liquidity.

~~Table~~ ofOur ~~Contents~~industry is cyclical and highly competitive.

~~Ronald~~Our Doperating results reflect the cyclicality of our industry. ~~Hackney~~In addition, ~~born November 9,~~ ~~1946~~the industry is capital intensive, ~~was~~which ~~appointed~~leads ~~Senior Vice~~to ~~President~~high –fixed ~~Human~~costs. ~~Resources~~These conditions onhave ~~February 23,~~contributed ~~2005,~~to substantial price competition and ~~prior~~volatility toin ~~that had~~the industry. The majority of our products have been ~~Vice~~and ~~President~~are -likely ~~Human~~to ~~Resources~~continue ~~since~~to ~~July 2003~~be subject to extreme price competition. He ~~was~~Some ~~Division~~segments ~~Human~~of ~~Resource~~our ~~Manager~~industry ~~for the~~have ~~Containerboard~~capacity ~~Mill~~in ~~and~~excess ~~Forest~~of ~~Resources~~demand, ~~Division~~which ~~from~~may ~~April 1995~~require us to ~~July 2003~~take downtime periodically to reduce inventory levels during periods of weak demand.

~~Craig~~The paperboard A.and ~~Hunt,~~packaging ~~born~~products ~~May 31~~industries are highly competitive and are particularly sensitive to price fluctuations as well as other factors including innovation, ~~1961~~design, ~~was~~quality ~~appointed~~and ~~Senior~~service, with ~~Vice~~varying ~~President~~emphasis on these factors depending on the product line. To the extent that one or more of our competitors become more successful with respect to any key competitive factor, ~~Secretary~~our ability to attract and ~~General~~retain ~~Counsel~~customers oncould ~~February 23,~~be ~~2005~~materially adversely affected. Some of our competitors are less leveraged, have financial and ~~prior~~other toresources ~~that~~greater ~~had~~than ~~been~~ours and are more capable to ~~Vice~~withstand ~~President~~the adverse nature of the business cycle. If our facilities are not as cost efficient as those of our competitors, ~~Secretary~~we may need to temporarily or permanently close such facilities and ~~General~~suffer a ~~Counsel~~resulting ~~since~~reduction ~~November 1998~~in our revenues.

~~Paul~~ K.Our ~~Kaufmann,~~Exit ~~born~~Credit ~~May 11,~~Facilities ~~1954,~~may ~~was~~limit ~~appointed~~our ~~Senior~~ability ~~Vice~~to ~~President~~plan ~~and~~for ~~Corporate Controller~~or onrespond ~~February 23, 2005, and prior~~ to ~~that~~changes ~~had~~in ~~been~~our ~~Vice President and Corporate Controller since November 1998~~business.

~~Steven~~Our J.Exit ~~Klinger,~~Credit ~~born~~Facilities ~~March 5,~~include ~~1959,~~financial ~~was~~and ~~appointed~~other ~~President~~covenants ~~and~~that ~~Chief~~impose ~~Operating Officer~~restrictions on ~~May 11,~~our ~~2006.~~financial ~~Prior to joining SSCE, Mr. Klinger was employed by Georgia Pacific Corporation for 23 years, most recently as Executive Vice President, Packaging from February 2003 to May 2006~~ and ~~President,~~business ~~Packaging~~operations and ~~Containerboard~~those ~~Sales~~of ~~/ Logistics from August 2001~~our ~~to January 2003~~subsidiaries. A ~~member~~These ofcovenants ~~the~~could ~~Company’s~~have ~~board of directors, Mr. Klinger was appointed to the board of Smurfit-Stone on December 11, 2008 and is~~ a ~~director~~ ofmaterial ~~Navistar~~adverse ~~International Corporation.~~

John L. Knudsen, born August 29, 1957, was appointed Senior Vice President of Corporate Strategy in November 2008. He had been Senior Vice President of Manufacturing for the Container Division since October 2005. He was Vice President of Strategic Planning for the Container Division from April 2005 to October 2005. Prior to that, he was Vice President and Regional Manager for the Container Division from August 2000 to April 2005.16

~~Patrick~~Table J. Moore, born September 7, 1954, has served as Chief Executive Officer since May 2006. Mr. Moore has announced his intention to retire as Chief Executive Officer within one year after our emergence from bankruptcy. He had been President and Chief Executive Officer since January 2002. He was Vice President and Chief Financial Officer from November 1998 until January 2002. A member of ~~the Company’s board of directors, Mr. Moore was appointed to the board of Smurfit-Stone in January 2002 and is a director of Archer Daniels Midland Company.~~Contents

~~John~~impact on Rour operations. ~~Murphy,~~Our ~~born~~failure ~~June 28,~~to ~~1950,~~comply ~~was appointed~~with ~~Senior~~any ~~Vice~~of ~~President~~these ~~and~~covenants ~~Chief~~could ~~Financial~~result ~~Officer~~in onan ~~May 18, 2009. He~~event ~~resigned~~of asdefault athat, ~~director~~if ~~and officer~~not ofcured ~~the~~or ~~Company~~waived, ~~effective~~requires asus ofto ~~February~~repay ~~25,~~the ~~2010. Prior~~borrowings tounder ~~joining~~the ~~SSCE,~~Exit ~~Mr. Murphy was~~Credit ~~employed~~Facilities bybefore ~~Accuride~~their ~~Corporation,~~due ~~most~~date. ~~recently~~The asExit ~~the~~Credit ~~President,~~Facilities ~~Chief Executive~~also ~~Officer~~contain ~~and~~other ~~Director~~events ~~from~~of ~~October 2007~~default tocustomary ~~September 2008, President~~for ~~and~~similar ~~Chief~~financings. ~~Operating~~If ~~Officer~~we ~~from~~are ~~January 2007~~unable to ~~October 2007, President~~repay ~~and~~or ~~Chief~~otherwise ~~Financial~~refinance ~~Officer~~our ~~from~~borrowings ~~February 2006~~when due, tothe ~~December 2006 and~~lenders ~~Executive~~could ~~Vice~~foreclose ~~President/Finance~~on ~~and~~our ~~Chief~~assets. ~~Financial~~If ~~Officer~~we ~~from~~are ~~March 1998~~ unable to ~~January 2006. A~~refinance ~~member~~these ofborrowings ~~the Company’s~~on ~~board~~favorable ~~of directors~~terms, ~~Mr. Murphy~~our iscosts aof ~~director~~borrowing ofcould ~~O’Reilly Automotive, Inc~~increase significantly.

~~Susan~~There can M.be ~~Neumann,~~no ~~born~~assurance ~~February 5,~~that ~~1954,~~we ~~was~~will ~~appointed~~have ~~Senior~~sufficient ~~Vice~~liquidity ~~President, Corporate Communications on November 15, 2006. Prior~~ to ~~joining~~repay ~~SSCE,~~or ~~Ms. Neumann~~refinance ~~was~~borrowings ~~employed~~under bythe ~~Albertsons, Inc., most~~Exit ~~recently~~Credit asFacilities ~~Senior~~if ~~Vice~~such ~~President,~~borrowings ~~Education,~~were ~~Communications~~accelerated ~~and~~upon ~~Public Affairs~~an ~~from~~event ~~November 2003~~of ~~to November 2006, Group Vice President, Communications and Education from January 2002 to November 2003 and Vice President, Communications from January 1996 to January 2002~~default.

~~Mark~~ R.Factors ~~O’Bryan,~~beyond ~~born~~our ~~January 15,~~control ~~1963,~~could ~~was appointed~~hinder ~~Senior~~our ~~Vice~~ability ~~President~~to –service ~~Strategic~~our ~~Initiatives~~debt and ~~Chief~~meet ~~Information Officer~~our inoperating ~~April 2007~~requirements. He had been Senior Vice President – Strategic Initiatives since July 2005 and prior to that had been Vice President - Operational Improvement for the Consumer Packaging Division from April 2004 to July 2005. He was Vice President – Procurement from October 1999 to April 2004.

~~Michael~~Our R.ability ~~Oswald,~~to ~~born~~meet ~~October 29,~~our ~~1956,~~obligations ~~was appointed~~and ~~Senior~~to ~~Vice~~comply ~~President~~with ~~and~~the ~~General~~terms ~~Manager~~contained ofin ~~the~~our ~~Reclamation~~debt ~~Division in~~instruments ~~August 2005~~will largely depend on our future performance. ~~Prior~~ Our performance will be subject to ~~that~~financial, ~~he was~~business ~~Vice~~and ~~President~~other factors affecting us. Many of ~~Operations~~these ~~for~~factors ~~the~~are ~~Reclamation~~beyond ~~Division~~our ~~from~~control, ~~January 1997 to~~such ~~August 2005.~~as:

•: the state of the economy;
•: the financial markets;
•: demand for, and selling prices of, our products;
•: performance of our major customers;
•: costs of raw materials and energy;
•: hurricanes and other major weather-related disruptions; and
•: legislation and other factors relating to the paperboard and packaging products industries generally or to specific competitors.

14If operating cash flows, net proceeds from borrowings, divestitures or other financing sources do not provide us with sufficient liquidity to meet our operating and debt service requirements, we will be required to pursue other alternatives to repay debt and improve liquidity. Such alternatives may include:

•: sales of assets;
•: cost reductions;
•: deferral of certain discretionary capital expenditures and benefit payments; and
•: amendments or waivers to our debt instruments.

~~Table~~We might not successfully complete any of ~~Contents~~these measures or they may not generate the liquidity we require to operate our business and service our obligations.

~~Steven C.~~ ~~Strickland,~~Our ~~born~~pension ~~July 12,~~plans ~~1952,~~are ~~was~~underfunded appointed Senior Vice President of Container Operations in November 2008. He had been Senior Vice President of Sales for the Container Division since October 27, 2006. Prior to joining SSCE, Mr. Strickland was employed by Unisource, most recently as Senior Vice President of Packaging and ~~Supply~~will ~~from~~require ~~September 2006~~additional tocash October 2006, Senior Vice President of Packaging from March 2004 to August 2006, Senior Vice President of Operations – East from March 2003 to March 2004 and Vice President of National Sales from September 1999 to March 2003contributions.

OnWe ~~January 26, 2009,~~have ~~the~~made ~~date~~substantial ofcontributions ~~the~~to ~~filing~~our ofpension plans in the ~~Chapter~~past 11five ~~Petition~~years and expect to make substantial contributions in the ~~Canadian~~coming years ~~Petition,~~in ~~each~~order to ensure that our funding levels remain adequate in light of projected liabilities and to meet the ~~executive~~requirements ~~officers~~of ~~listed,~~the ~~other~~Pension ~~than~~Protection ~~Messrs~~Act of 2006 in the U. ~~Denton,~~S. and the applicable funding ~~Exner~~rules in Canada. Future contributions to our pension and ~~Murphy~~other postretirement plans will be dependent on future regulatory changes, ~~served~~future aschanges anin ~~executive~~discount ~~officer~~rates and the return performance of our plan assets. These contributions reduce the ~~Company~~amount of cash available for us to repay indebtedness or make capital investments.

~~AVAILABLE INFORMATION~~17

WeTable ~~make available free~~ of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished as required by Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), through Smurfit-Stone’s Internet Website (www.smurfit-stone.com) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC). You may access these SEC filings via the hyperlink that we provide on Smurfit-Stone’s Website to a third-party SEC filings Website.Contents

~~ITEM~~At December 31, 1A2010, the qualified defined benefit pension plans maintained by us were under-funded by approximately $1,132 million. ~~RISK~~We ~~FACTORS~~will likely be required to make significant cash contributions to these plans under applicable U.S. and Canadian laws over the next several years in order to amortize the existing under-funding and satisfy current service obligations under the plans. These contributions will significantly impact future cash flows that might otherwise be available for repayment of debt, capital expenditures, and other corporate purposes. We currently estimate that the cash contributions under the United States and Canadian qualified pension plans will be approximately $109 million in 2011. We currently estimate that contributions will be in the range of approximately $250 million to $340 million annually in 2012 through 2015. Projected pension contributions reflect that we have elected funding relief under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, and also reflect our election of Canada's funding relief measures made in 2009 and 2010. The actual required amounts and timing of such future cash contributions will be highly sensitive to changes in the applicable discount rates and returns on plan assets, and could also be impacted by future changes in the laws and regulations applicable to plan funding.

We ~~are~~Price ~~subject~~fluctuations ~~to certain~~in ~~risks~~energy costs and ~~events~~raw ~~that,~~materials ~~if one or more of them occur,~~ could adversely affect our ~~business,~~manufacturing ~~our financial condition and results of operations~~costs. You should consider the following risk factors, in addition to the other information presented in this report, as well as the other reports and registration statements we file from time to time with the SEC, in evaluating us, our business and an investment in our securities. The risks below are not the only ones we face. Additional risks not currently known to us or that we currently deem immaterial also may adversely impact our business.

~~Bankruptcy~~The cost of producing and transporting our products is highly sensitive to the price of energy. Energy prices, in particular oil and natural gas, ~~Related~~have ~~Risk~~experienced ~~Factors~~significant volatility in recent years, with a corresponding effect on our production and transportation costs. Energy prices may continue to fluctuate and may rise to higher levels in future years. This could adversely affect our production costs and results of operations.

WeWood fiber ~~filed~~and ~~for~~reclaimed ~~protection~~fiber, the principal raw materials used in the manufacture of our paper products, are purchased in highly competitive, price sensitive markets, which have historically ~~under~~exhibited ~~Chapter~~price 11and demand cyclicality. Adverse weather, conservation regulations and the shutdown of a number of sawmills have caused, and will likely continue to cause, a decrease in the ~~Bankruptcy~~supply ~~Code~~of wood fiber and ~~our~~higher ~~Canadian~~wood ~~subsidiaries~~fiber ~~filed~~costs toin some of the regions in which we procure wood fiber. Fluctuations in supply and demand for reclaimed fiber, particularly export demand from Asian producers, ~~reorganize~~have ~~under~~occasionally caused tight supplies of reclaimed fiber. At such times, we may experience an increase in the ~~CCAA~~cost onof ~~January 26~~fiber or may temporarily have difficulty obtaining adequate supplies of fiber. If we are not able to obtain wood fiber and reclaimed fiber at favorable prices or at all, ~~2009~~our results of operations may be materially adversely affected.

~~During~~ ~~our bankruptcy~~Work ~~proceedings,~~stoppage ~~our operations~~ and ~~our~~other ~~ability~~labor torelations ~~execute~~matters ~~our~~may ~~business plan~~have ~~are~~an ~~subject~~adverse toeffect ~~the~~on ~~risks and uncertainties associated with bankruptcy. Risks and uncertainties associated with~~ our ~~bankruptcy~~financial ~~proceedings include the following:~~results.

~~· Our~~A ~~ability~~significant number of our employees in North America are governed by collective bargaining agreements. Expired contracts are in the process of torenegotiation. ~~obtain~~We ~~court~~may ~~approval~~not ~~with~~be ~~respect~~able to ~~motions~~successfully ~~filed~~negotiate innew union contracts without work stoppages or labor difficulties. If we are unable to successfully renegotiate the ~~bankruptcy~~terms of any of these ~~proceedings~~agreements ~~from~~or ~~time~~an industry association is unable to ~~time;~~successfully negotiate a national agreement when they expire, or if we experience any extended interruption of operations at any of our facilities as a result of strikes or other work stoppages, our results of operations and financial condition could be materially adversely affected.

~~· Our~~ ~~ability~~ We are subject to ~~obtain~~environmental ~~confirmation~~regulations and ~~consummate~~liabilities ~~our~~that ~~Proposed~~could ~~Plan~~weaken ofour ~~Reorganization~~operating ~~with respect~~results toand ~~the~~financial ~~bankruptcy proceedings;~~condition.

~~· Our~~Federal, ~~ability~~ state, provincial, foreign and local environmental requirements, particularly those relating to ~~obtain~~air and ~~maintain~~water ~~commercially~~quality, ~~reasonable~~are ~~terms~~a significant factor in our business. Maintaining compliance with ~~vendors~~existing environmental laws, as well as complying with requirements imposed by new or changed environmental laws, including EPA's new greenhouse gas regulations and ~~service~~Boiler MACT, may require capital expenditures for compliance. Although we satisfied our potential liability relating to certain third party potentially responsible parties ("PRPs") and ~~providers;~~formerly owned sites as unsecured claims in our

~~· Our ability to renew contracts that are critical to our operations;~~18

~~· Our~~Table ~~ability to~~of ~~retain management and other key individuals;~~Contents

~~· There~~bankruptcy proceedings, ~~can~~other ~~be no~~ongoing ~~assurance~~remediation ~~that~~costs ~~the~~and ~~Creditors’~~future ~~Committee~~remediation ~~will~~liability ~~support~~at ~~our~~sites ~~positions~~where ~~on matters~~we tomay be ~~presented~~a toPRPs ~~the~~for ~~Bankruptcy~~cleanup ~~Courts~~activity inunder the ~~future;~~Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") and analogous state and other laws may materially adversely affect our results of operations and financial condition.

~~· Disagreements between~~ usRock-Tenn ~~and~~Merger ~~the~~Agreement ~~Creditors’~~Risk ~~Committee could protract the Chapter 11 proceedings, negatively impact our ability to operate and delay our emergence from the Chapter 11 proceedings.~~Factors

~~· Objections~~ If the Merger is completed, the combined company may not be able to successfully integrate the ~~Plan~~business of ~~Reorganization~~the ~~could~~Company ~~protract~~and Rock-Tenn and therefore may not be able to realize the ~~Chapter~~anticipated 11benefits ~~proceedings~~of the Merger.

~~These~~At ~~risks~~the ~~and~~effective ~~uncertainties~~time ~~could affect~~of ~~our~~the ~~business and operations in various ways. For example~~Merger, ~~negative events~~each orshare ~~publicity~~of ~~associated with~~ our ~~bankruptcy~~common ~~proceedings~~stock ~~could~~issued ~~adversely affect our sales~~ and ~~relationships~~outstanding ~~with~~immediately ~~our~~prior ~~customers,~~to asthe ~~well~~effective astime ~~with~~of ~~vendors and~~the ~~employees,~~Merger ~~which in turn could adversely affect our operations and~~will ~~financial~~be ~~condition,~~converted ~~particularly~~into if the ~~bankruptcy~~right ~~proceedings~~to ~~are~~receive ~~protracted~~$17. ~~Also,~~50 ~~transactions~~in ~~outside~~cash ~~the~~and ~~ordinary~~0.30605 ~~course~~ of ~~business~~a ~~are~~share ~~subject to the prior approval~~ of ~~the~~Rock-Tenn ~~Bankruptcy~~Class A ~~Courts~~common stock, ~~which~~par ~~may~~value ~~limit~~$0.01 ~~our~~per ~~ability~~share to(collectively, ~~respond timely~~the to"Merger ~~certain events or take advantage of certain opportunities~~Consideration").

15Because a portion of the Merger Consideration consists of Rock-Tenn common stock, realization of the anticipated benefits in the Merger will depend, in part, on the combined company's ability to successfully integrate the businesses and operations of Rock-Tenn and us. The combined company will be required to devote significant management attention and resources to integrating its business practices, operations, and support functions. The challenges the combined company may encounter include the following:

•: combining diverse product and service offerings, customer plans, and sales and marketing approaches;
•: preserving customer, supplier, and other important relationships and resolving potential conflicts that may arise as a result of the merger;
•: consolidating and integrating duplicative facilities and operations, including back-office systems;
•: addressing differences in business cultures, preserving employee morale, and retaining key employees while maintaining focus on providing consistent, high-quality customer service and meeting its operational and financial goals; and
•: adequately addressing business integration issues.

~~Table~~The process of ~~Contents~~integrating Rock-Tenn's and our operations could cause an interruption of, or loss of momentum in, the combined company's business and financial performance. The diversion of management's attention and any delays or difficulties encountered in connection with the Merger and the integration of the two companies' operations could have an adverse effect on the business, financial results, financial condition, or stock price of Rock-Tenn (as the combined company following the Merger). The integration process may also result in additional and unforeseen expenses. There can be no assurance that the contemplated expense savings and synergies anticipated from the merger will be realized.

~~Because~~ ofFailure ~~the risks~~to ~~and~~complete ~~uncertainties~~the ~~associated~~Merger ~~with~~could ~~our~~negatively ~~bankruptcy proceedings, the ultimate~~ impact ~~that events that occur during these proceedings will have on~~ our business, financial condition and results of operations cannot be accurately predicted or quantified. We cannot provide any assurance as to what values, if any, will be ascribed in our bankruptcy proceedings to our various pre-petition liabilities, common stock ~~and other securities. As a result of the bankruptcy proceedings~~price, ~~Smurfit-Stone’s~~future ~~currently~~business ~~outstanding common~~ and ~~Preferred~~ ~~Stock~~financial is expected to have no value and would be canceled under our Proposed Plan of Reorganization and, therefore, we believe that the value of our various pre-petition liabilities and other securities is highly speculativeresults. ~~Accordingly, caution should be exercised with respect to existing and future investments in any of these liabilities or securities.~~

~~Failure~~Although the parties to the Merger Agreement have agreed to use their reasonable best efforts to obtain ~~confirmation~~stockholder approval of certain proposals relating to the ~~Proposed~~Merger, ~~Plan~~there ofis ~~Reorganization~~no ~~may~~assurance ~~result~~that inthese ~~liquidation~~proposals orwill ~~alternative~~be ~~plan~~approved, onand ~~less~~there ~~favorable~~is ~~terms.~~no assurance that the necessary regulatory approvals will

Although we believe that the Proposed Plan of Reorganization will satisfy all requirements for confirmation under the Bankruptcy Code and sanction under the CCAA, there can be no assurance that the Bankruptcy Courts will reach the same conclusion. In addition, confirmation of the Proposed Plan of Reorganization is subject to certain conditions. Failure to meet any of these conditions could result in the Proposed Plan of Reorganization not being confirmed. If the Proposed Plan of Reorganization is not confirmed there can be no assurance that the Chapter 11 Petition will continue rather than be converted into Chapter 7 liquidation cases or that any alternative plan or plans of reorganization would be on terms as favorable to the holders of claims. If a liquidation or protracted reorganization of our business or operations were to occur, there is a substantial risk that our going concern value would be substantially eroded to the detriment of all stakeholders.19

~~The~~Table ~~market for the new common stock~~ of ~~the Reorganized Smurfit-Stone may not develop. The common stock might also have certain restrictions and could incur significant price fluctuations, depression, dilution or liquidity.~~Contents

~~There can~~ be noreceived ~~assurance~~or that anthe ~~active~~other ~~market~~conditions ~~for~~to the ~~Reorganized~~completion ~~Smurfit-Stone~~of ~~common stock~~the ~~(New~~Merger ~~Common Stock)~~ will ~~develop, nor can any assurance~~ be ~~given~~satisfied. asIf to the ~~prices~~ atMerger ~~which New Common Stock will trade. It~~ is not ~~known~~completed tofor ~~what~~any ~~extent some stockholders will sell our New Common Stock shortly after issuance. Any sales of substantial amounts of the New Common Stock in the public market~~reason, ~~or the~~we ~~perception that such sales might occur, could cause declines in the market price. We do not anticipate that cash dividends or other distributions~~ will be ~~made~~subject ~~by Reorganized Smurfit-Stone with respect~~ to ~~the~~several ~~New Common Stock in the near future. Further~~risks, ~~such~~including ~~restrictions on dividends may have an adverse impact on~~ the ~~market demand for the New Common Stock as certain~~ ~~institutional~~following: investors may invest only in dividend-paying equity securities or may operate under other restrictions that may prohibit or limit their ability to invest in the New Common Stock. The trading prices of our New Common Stock may fluctuate significantly, depending on these and many other factors, some of which may be beyond our control and may not be directly related to our operating performance.

•: possibly being required to pay Rock-Tenn a termination fee of $120 million, which is required under certain circumstances relating to termination of the Merger Agreement;
•: possibly being required to pay Rock-Tenn's costs and expenses relating to the merger, including legal, accounting, and financial advisor expenses, which is required under certain circumstances relating to termination of the Merger Agreement;
•: under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger which may adversely affect our ability to exercise certain of our business strategies; and
•: having had the focus of our management directed towards the Merger and integration planning instead of our core business and other opportunities that could have been beneficial to us.

~~Although~~In addition, we ~~have~~would ~~agreed~~not torealize ~~use~~any ~~our reasonable~~of ~~efforts to obtain~~ the ~~listing~~expected benefits of ~~New~~having ~~Common~~completed ~~Stock for trading on~~ the ~~NYSE~~ orMerger ~~the~~and ~~NASDAQ~~would ~~Stock~~continue ~~Market,~~to ~~there~~have ~~can~~risks ~~be no assurance~~ that we ~~will~~currently beface ~~able to~~as ~~obtain this listing or, even if such listing is obtained, that~~ an ~~active~~independent ~~or liquid trading market will develop for our New Common Stock~~company.

~~The~~If the ~~New~~Merger ~~Common~~is ~~Stock~~not tocompleted, bethe ~~issued under~~price ~~the~~of ~~Proposed~~our ~~Plan~~common ofstock ~~Reorganization~~may ~~has~~decline ~~not~~to ~~been~~the ~~registered~~extent ~~under~~that the ~~Securities~~ ~~Act~~current market price of ~~1933,~~the asstock ~~amended,~~reflects ~~any~~a ~~state~~market ~~securities~~assumption ~~laws~~that orthe ~~“blue~~Merger ~~sky” laws~~will be completed or ~~the~~as a ~~laws~~result of ~~any~~the ~~other~~market's ~~jurisdiction. Absent~~perceptions ~~such~~that ~~registration,~~ the ~~New~~Merger ~~Common~~was ~~Stock~~not ~~may~~consummated bedue ~~offered~~to oran ~~sold only~~adverse change in ~~certain~~our ~~transactions~~business. In addition, ~~the~~our ~~New~~business ~~Common~~may ~~Stock~~be toharmed, beand ~~issued~~the toprice ~~any~~of ~~Canadian~~our ~~residents~~stock ~~would~~may bedecline as a ~~issued~~result, ~~under~~to anthe ~~exemption~~extent ~~from~~that ~~the~~employees, ~~prospectus~~customers, ~~requirements~~suppliers, ~~under~~and ~~applicable Canadian~~others ~~securities~~believe ~~laws. Any~~that ~~resale~~we ~~of our~~cannot ~~New~~compete ~~Common~~in ~~Stock~~the ~~may~~marketplace beas ~~subject~~effectively towithout ~~resale~~the ~~restrictions~~Merger ~~under~~or ~~applicable~~otherwise remain uncertain about our ~~Canadian~~future ~~securities~~prospects ~~laws~~in the absence of the Merger.

16In addition, if the Merger is not completed and our Board of Directors determines to seek another business combination transaction, there can be no assurance that a transaction creating stockholder value comparable to the value perceived to be created by the Merger will be available to us.

~~Table~~ The Merger Agreement limits our ability to pursue an alternative acquisition proposal to the Merger and requires Smurfit-Stone to pay a termination fee of $120 million ~~Contents~~if it does.

~~Other~~The ~~Risk~~Merger ~~Factors~~Agreement prohibits Rock-Tenn and us from soliciting, initiating, encouraging, or facilitating certain alternative acquisition proposals with third parties, subject to exceptions set forth in the Merger Agreement. The Merger Agreement also provides that we are required to pay a termination fee of $120 million if the Merger Agreement is terminated under certain circumstances in connection with a third party initiating a competing acquisition proposal for Smurfit-Stone. These provisions limit our ability to pursue offers from third parties that could result in greater value to our stockholders than the value resulting from the Merger. The termination fee may also discourage third parties from pursuing an acquisition proposal with respect to Smurfit-Stone.

~~Global~~ ~~economic~~In ~~conditions~~order to complete the Merger, the Company and ~~credit~~Rock-Tenn ~~tightening~~must ~~materially~~obtain certain governmental approvals, and if such approvals are not granted or are granted with ~~adversely~~burdensome ~~affect~~conditions, ~~our~~the ~~business~~completion of the Merger may be jeopardized or the anticipated benefits of the Merger may be reduced.

~~Our~~Completion ~~business~~of ~~has been~~the ~~materially~~Merger ~~and~~is ~~adversely~~conditioned ~~affected~~upon bythe ~~changes~~receipt inof ~~regional,~~certain ~~national~~governmental ~~and global~~clearances ~~economic~~or ~~conditions.~~approvals, ~~Such~~including, ~~changes~~but ~~have~~not ~~included~~limited to, the expiration or ~~may~~termination ~~include~~of ~~reduced consumer~~the ~~spending~~applicable waiting period, ~~reduced~~or ~~availability~~receipt of ~~capital~~approval, ~~inflation,~~under ~~deflation, adverse~~each ~~changes~~foreign inantitrust ~~interest~~law ~~rates,~~that ~~reduced~~relates ~~energy~~to ~~availability~~the ~~and~~merger ~~increased energy~~where ~~costs~~the ~~and~~failure ~~government~~to ~~initiatives~~obtain tosuch ~~manage~~approval ~~economic~~or ~~conditions.~~meet such ~~Continuing~~waiting ~~instability~~period inunder ~~financial~~the ~~markets~~applicable ~~and~~foreign ~~the~~anti-trust ~~deterioration~~law ofwould ~~other national~~have ~~and~~a ~~global~~material ~~economic~~adverse ~~conditions~~effect. ~~may~~Although Rock-Tenn and we have ~~further~~agreed ~~materially~~in ~~adverse~~the Merger Agreement to use reasonable ~~effects~~best onefforts ~~our~~to ~~operations,~~obtain ~~financial~~the ~~results~~requisite orgovernmental ~~liquidity~~approvals, ~~including~~there ~~the following:~~can be no assurance

~~· the financial stability of our customers or suppliers may be compromised, which could result in additional bad debts for us or non-performance by suppliers; or~~20

~~· one~~Table ~~or more~~ of ~~the financial institutions that make available our Exit Credit Facilities may become unable to fulfill their funding obligations, which could materially and adversely affect our liquidity.~~Contents

~~Uncertainty about~~that ~~current~~these ~~economic~~approvals ~~conditions~~will ~~may~~be ~~cause~~obtained. ~~consumers~~In ofaddition, ~~our~~the ~~products~~governmental toauthorities ~~postpone~~from ~~or refrain~~which ~~from~~these ~~spending~~approvals are required have broad discretion in ~~response~~administering the governing regulations. As a condition to ~~tighter~~approval ~~credit~~of the Merger, ~~negative~~these ~~financial~~governmental ~~news~~authorities may impose requirements, ~~declines~~ inlimitations ~~income~~or costs; or ~~asset~~require ~~values,~~divestitures; or ~~other~~place ~~adverse~~restrictions ~~economic~~on ~~events~~the orconduct of the business of the ~~conditions,~~combined ~~which~~company ~~could~~after ~~materially~~the ~~reduce~~completion ~~demand~~of ~~for~~the ~~our~~Merger. ~~products~~Under ~~and materially~~the ~~and~~terms ~~adversely~~of ~~affect~~the ~~our~~Merger ~~financial~~agreement, ~~condition~~neither ~~and~~we ~~operating~~nor ~~results.~~Rock-Tenn are required to undertake any divestiture or hold separate assets to ~~Further~~the ~~deterioration~~extent ofthat ~~economic~~such ~~conditions~~action would ~~likely~~be ~~exacerbate~~reasonably ~~these~~ expected to have a material adverse ~~effects~~effect on Rock-Tenn or us. However, ~~result~~if, innotwithstanding ~~wide~~the provisions of the Merger Agreement, either Rock-~~ranging~~Tenn or we become subject to any term, ~~adverse~~condition, ~~and~~obligation ~~prolonged~~or ~~effects~~restriction on(whether because such term, condition, obligation or restriction does not rise to the specified level of ~~general~~materiality ~~business~~or ~~conditions~~Rock-Tenn otherwise consents to its imposition), ~~and~~the ~~materially~~imposition ~~and~~of such term, condition, obligation or restriction could adversely affect the ability to integrate our operations into Rock-Tenn's operations, ~~financial~~reduce ~~results~~the anticipated benefits of the Merger or otherwise adversely affect the combined company's business and ~~liquidity~~results of operations after the completion of the Merger.

~~Our~~ ~~industry~~Pending litigation against us, Rock-Tenn, and certain of our directors and officers could result in an injunction preventing completion of the Merger, or the payment of damages in the event the Merger is ~~cyclical~~completed and/or ~~highly~~may ~~competitive~~adversely affect the combined company's business, financial condition or results of operations following the Merger.

~~Our~~Since ~~operating results~~the ~~reflect~~announcement ~~the~~on ~~industry’s~~January 23, ~~general~~2011 ~~cyclical~~of ~~pattern.~~the Insigning ~~addition,~~of the ~~industry~~ isMerger ~~capital intensive~~Agreement, ~~which~~Rock-Tenn ~~leads~~and tous, ~~high~~as ~~fixed~~well ~~costs. These~~as ~~conditions~~certain ~~have~~of ~~contributed~~our toofficers and ~~substantial~~members ~~price~~of ~~competition~~the ~~and~~Board ~~volatility~~of Directors, have been named as defendants in several lawsuits brought by our stockholders challenging the ~~industry~~proposed Merger. The ~~majority~~lawsuits ofgenerally ~~our~~allege, ~~products~~among ~~have~~other ~~been and~~things, ~~are~~that ~~likely~~the toconsideration ~~continue~~agreed to bein ~~subject~~the toMerger ~~extreme~~Agreement ~~price~~is ~~competition.~~inadequate ~~Some segments~~and ofunfair to our ~~industry~~stockholders, ~~have~~that ~~capacity~~the inindividual ~~excess~~defendants ofbreached ~~demand,~~their ~~which~~fiduciary ~~may~~duties ~~require us~~in toapproving ~~take~~the ~~downtime~~Merger ~~periodically~~Agreement and tothat ~~reduce~~those ~~inventory~~breaches were ~~levels~~aided ~~during~~and ~~periods~~abetted ~~of weak~~by ~~demand.~~Rock-Tenn, ~~Decreases~~among inothers. ~~prices~~The ~~for~~lawsuits ~~our~~seek, ~~products~~among ~~may~~other ~~adversely~~things, ~~impact~~injunctive ~~our ability~~relief to ~~respond~~enjoin tothe ~~competition~~defendants ~~and~~from tocompleting ~~other~~the ~~market~~Merger ~~conditions~~on orthe ~~to otherwise~~agreed-upon ~~take~~terms, ~~advantage~~monetary relief ofand ~~business~~attorneys' ~~opportunities~~fees.

~~The paperboard and~~One ~~packaging~~of ~~products~~the ~~industries~~conditions ~~are~~to ~~highly~~the ~~competitive~~closing ~~and~~of ~~are~~the ~~particularly sensitive~~Merger tois ~~price~~that ~~fluctuations~~no asorder ~~well~~issued asby ~~other~~a ~~factors~~governmental ~~including~~authority ~~innovation, design,~~of ~~quality~~competent ~~and~~jurisdiction ~~service,~~or ~~with~~law ~~varying~~or ~~emphasis~~other onlegal ~~these~~restraint ~~factors~~or ~~depending on~~prohibition making the ~~product~~Merger illegal ~~line.~~or Topermanently ~~the~~restraining, ~~extent~~enjoining, ~~that~~or ~~one~~otherwise prohibiting or ~~more~~preventing the consummation of ~~our~~the ~~competitors~~Merger ~~become more~~or ~~successful~~the ~~with~~other ~~respect~~transactions tocontemplated ~~any~~by ~~key~~the ~~competitive~~Merger ~~factor,~~Agreement ~~our~~be ~~ability~~in toeffect. ~~attract~~Consequently, ~~and~~if ~~retain~~the ~~customers~~plaintiffs ~~could~~secure beinjunctive ~~materially~~or ~~adversely~~other ~~affected.~~relief ~~Some~~prohibiting, ~~of our~~delaying, ~~competitors~~or ~~are~~otherwise ~~less~~adversely ~~leveraged,~~affecting ~~have~~the ~~financial~~defendants' ~~and~~ability ~~other~~to ~~resources~~complete ~~greater than~~the ~~ours~~Merger, ~~and~~then ~~are~~such ~~more~~injunctive ~~capable~~or toother relief ~~withstand~~may prevent the ~~adverse~~Merger ~~nature~~from ofbecoming ~~the~~effective ~~business cycle.~~within Inthe ~~addition,~~expected ~~our~~time ~~filing~~frame ~~the~~or ~~Chapter 11~~at ~~Petition~~all. ~~and~~If ~~the~~completion ~~Canadian Petition~~of ~~and~~ the ~~associated~~Merger ~~risks~~is ~~and~~prevented ~~uncertainties~~or ~~may~~delayed, beit ~~used~~could byresult ~~competitors~~ in ansubstantial ~~attempt~~costs to ~~divert~~us ~~our~~and Rock-Tenn. ~~existing~~In ~~customers~~addition, orwe ~~may~~and ~~discourage~~Rock-Tenn ~~future customers~~could ~~from~~incur ~~purchasing~~significant ~~our~~costs ~~products~~in ~~under~~connection ~~long-term~~with ~~arrangements.~~the Iflawsuits, ~~our facilities~~including ~~are~~costs ~~not~~associated aswith ~~cost~~the ~~efficient~~indemnification ~~as those~~ of our ~~competitors~~directors and officers. See Part I, weItem 3. ~~may~~Legal ~~need to~~Proceedings — ~~temporarily~~"Litigation" orfor ~~permanently~~more ~~close~~information ~~such~~about ~~facilities~~the ~~and~~lawsuits ~~suffer~~that ahave ~~resulting reduction~~been infiled ~~our~~related ~~revenues~~to the Merger.

~~Our~~ ~~capital structure in our Proposed Plan of Reorganization will~~ ~~include~~ ITEM a1B. UNRESOLVED ~~significant~~STAFF ~~amount of indebtedness.~~COMMENTS

~~Although the Proposed Plan of Reorganization will result in the reduction of debt, we will continue to have a significant amount of indebtedness that could have significant consequences for us~~None. ~~A substantial~~ portion of our cash flow from operations may be needed to meet the payment of principal and interest on our indebtedness and other obligations and may not be available for our working capital, capital expenditures and other general corporate purposes. In addition our level of debt makes us vulnerable to economic downturns and may reduce our operational and business flexibility in responding to changing business and economic conditions and opportunities, including obtaining additional financing for working

1721

Table of Contents

~~capital,~~ ~~capital~~ ~~expenditures,~~ ITEM ~~product development, debt service requirements, acquisitions and general corporate or other purposes important to our growth and productivity improvement programs~~2. ~~To the extent that we are more highly leveraged than our competitors, this may place us at a competitive disadvantage.~~ PROPERTIES

~~Our~~The ~~Exit~~manufacturing ~~Credit~~facilities ~~Facilities~~of ~~may limit~~our consolidated subsidiaries are located primarily in North America. We believe that our ~~ability~~facilities toare ~~plan~~adequately insured, properly maintained and equipped with machinery suitable for orour ~~respond~~use. toWe ~~changes~~have invested significant capital in our ~~business~~operations to upgrade or replace corrugators and converting machines, while closing higher cost facilities. See Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — "Restructuring Activities." Our manufacturing facilities as of December 31, 2010 are summarized below:

Our Exit Credit Facilities may include financial and other covenants that impose restrictions on our financial and business operations and those of our subsidiaries. These covenants may have a material adverse impact on our operations. Our failure to comply with any of these covenants could result in an event of default that, if not cured or waived, requires us to repay the borrowings under the Exit Credit Facilities before their due date. The Exit Credit Facilities may also contain other events of default customary for similar financings. If we are unable to repay or otherwise refinance our borrowings when due, the lenders could foreclose on our assets. If we are unable to refinance these borrowings on favorable terms, our costs of borrowing could increase significantly.

				Number of Facilities

				Number of Facilities						State Locations(a)
				Total		Owned		Leased		State Locations(a)
United States
	Paper mills				10		10				7
	Corrugated container plants				84		60		24		29
	Recycling plants				30		15		15		14

		Subtotal			124		85		39		34
Canada and Other North America
	Paper mills				2		2				N/A
	Corrugated container plants				17		14		3		N/A
	Laminating plant				1		1				N/A

		Subtotal			20		17		3
China
	Corrugated container plants				2		2				N/A

			Total		146		104		42

~~There can be~~ no ~~assurance that we will have sufficient liquidity to repay or refinance~~ ~~borrowings under~~ (a)Reflects the ~~Exit~~number ~~Credit~~of ~~Facilities~~states ifin ~~such~~which ~~borrowings~~we ~~were~~have ~~accelerated upon~~at anleast ~~event~~one ofmanufacturing ~~default~~facility.

~~Factors~~Our paper ~~beyond~~mills ~~our~~represent ~~control~~approximately ~~could~~72% ~~hinder~~of our ~~ability~~investment in property, plant and equipment. In addition to ~~service~~manufacturing ~~our~~facilities, ~~debt~~ we operate wood harvesting facilities in Canada and ~~meet~~the United States. The approximate annual tons of productive capacity of our ~~operating~~paper ~~requirements.~~mills at December 31, 2010 were:

Our ability to meet our obligations and to comply with the terms contained in our debt instruments will largely depend on our future performance. Our performance will be subject to financial, business and other factors affecting us. Many of these factors are beyond our control, such as:

		Annual Capacity (in thousands)

		United States		Canada		Total
Containerboard			5,939		521		6,460
Market pulp			274				274
SBL					131		131
Kraft paper			79				79

	Total		6,292		652		6,944

~~· the~~Substantially all ~~state~~ of our North American operating facilities have been pledged as collateral under our Exit Credit Facilities. See Part II, Item 7. Management's Discussion and Analysis ~~the~~of ~~economy;~~Financial Condition and Results of Operations — Liquidity and Capital Resources — "Net Cash Provided By (Used For) Financing Activities."

~~· the financial markets;~~22

~~· demand~~Table ~~for, and selling prices~~ of, ~~our products;~~Contents

~~· performance~~ of ITEM ~~our~~3. LEGAL ~~major customers;~~PROCEEDINGS

~~· costs~~ ~~of raw materials and energy;~~LITIGATION

~~· hurricanes~~On January 26, 2009, we and our U.S. and Canadian subsidiaries filed the Chapter 11 Petition for relief under Chapter 11 of the Bankruptcy Code in the U.S. Court. On the same day, our Canadian subsidiaries also filed the Canadian Petition under the CCAA in the Canadian Court. Our operations in Mexico and ~~other~~Asia ~~major~~and ~~weather~~certain Non-~~related~~Debtor ~~disruptions;~~subsidiaries were not included in the filings and continued to operate outside of the Chapter 11 and CCAA processes. On June 21, 2010, the U.S. Court entered the Findings of Fact, Conclusions of Law and Order Confirming the Joint Plan for Smurfit-Stone Container Corporation and its Debtor Subsidiaries and Plan of Compromise and Arrangement for Smurfit-Stone Container Canada Inc. and Affiliated Canadian Debtors (the "Confirmation Order"), which approved and confirmed the Plan of Reorganization. On June 30, 2010 (the "Effective Date"), the Plan of Reorganization became effective and the Debtors consummated their reorganization through a series of transactions contemplated by the Plan of Reorganization and emerged from Chapter 11 bankruptcy proceedings. See Part I, Item 1. Business — "Bankruptcy Proceedings."

~~· legislation~~In May 2009, a lawsuit was filed in the United States District Court for the Northern District of Illinois against four individual committee members of the Administrative Committee ("Administrative Committee") of our Savings Plans (the "Savings Plans") and Patrick Moore, our Chief Executive Officer (together, the "Defendants"). During the first quarter of 2010, two additional Employee Retirement Income Security Act ("ERISA") class action lawsuits were filed in the United States District Court for the Western District of Missouri and one in the United States District Court for the District of Delaware. The defendants in these cases are individual committee members of the Administrative Committee, several other ~~factors~~of ~~relating~~our current and former executives and individual members of the predecessor Company's Board of Directors. The suits were consolidated into one matter in January 2011 in the Northern District of Illinois. The consolidated complaint alleges certain ERISA violations between January 1, 2008 and January 26, 2009. The plaintiffs brought the complaint on behalf of themselves and a class of similarly situated participants and beneficiaries of four of our Savings Plans. The plaintiffs assert that the Defendants breached their fiduciary duties to the ~~paperboard~~Savings Plans' participants and ~~packaging~~beneficiaries ~~products~~by ~~industries~~allegedly making imprudent investments with the Savings Plans' assets, making misrepresentations and failing to disclose material adverse ~~generally~~facts orconcerning our business conditions, debt management and viability, and not taking appropriate action to ~~specific~~protect ~~competitors~~the Savings Plans' assets. Even though we are not a named defendant in the case, management believes that any indemnification obligations to the Defendants would be covered by applicable insurance.

IfIn September ~~operating~~2010, ~~cash~~four putative class action complaints (the "Complaints") were filed in the United States District Court for the Northern District of Illinois against us and several other paper and ~~flows~~packaging companies (collectively referred to as the "Class Action Defendants"). The Complaints allege that we and the Class Action Defendants engaged in anti-competitive activities and violation of antitrust laws by reaching agreements in restraint of trade that affected the manufacture, ~~net~~sale ~~proceeds~~and pricing of corrugated products. The Complaints seek an unspecified amount of damages arising from ~~borrowings~~the sale of corrugated products from 2005 to the date the lawsuit was filed. A consolidated complaint was filed on November 8, ~~divestitures~~2010 orby ~~other~~the ~~financing~~Complainants ~~sources~~which docontains allegations ~~not~~that ~~provide~~limit usour ~~with~~liability ~~sufficient~~to ~~liquidity~~conduct that arose subsequent to ~~meet~~the ~~our~~bankruptcy ~~operating~~Effective ~~and~~Date. ~~debt~~Given ~~service requirements~~the limited time period for potential liability, we believe the resolution of these matters will benot have ~~required~~a tomaterial ~~pursue~~adverse ~~other~~effect ~~alternatives~~on toour ~~repay~~consolidated ~~debt and~~financial ~~improve~~condition, ~~liquidity.~~results ~~Such~~of ~~alternatives~~operations ~~may~~or ~~include:~~cash flows.

~~· sales~~Four complaints on behalf of ~~assets~~the same putative class of our stockholders have been filed in the Circuit Court for Cook County, Illinois challenging the Merger Agreement: (i) Gold v. Smurfit-Stone Container Corp.; (ii) Roseman v. Smurfit-Stone Container Corp.; (iii) Findley v. Smurfit-Stone Container Corp.; and (iv) Czech v. Smurfit-Stone Container Corp. (collectively, the "Illinois Complaints"). The Illinois Complaints were filed against us, Rock-Tenn and its merger subsidiary, and

~~· cost reductions;~~23

~~· deferral~~Table of ~~certain discretionary capital expenditures and benefit payments; and~~Contents

~~· amendments~~the individual ormembers ~~waivers~~of toour Board of Directors (the "Merger Defendants"). The Illinois Complaints allege that our ~~debt~~directors breached fiduciary duties in considering and entering into the Merger ~~instruments~~Agreement, and that the Company, Rock-Tenn and its merger subsidiary aided and abetted such breaches. The Illinois Complaints seek equitable relief, including an injunction prohibiting consummation of the Merger Agreement and imposition of a constructive trust. On February 4, 2011, plaintiffs moved for consolidation of the Illinois Complaints, and on February 10, 2011, all four complaints were consolidated under Gold v. Smurfit-Stone Container Corp., et al.

WeOn February 2, ~~might~~2011, ~~not successfully~~a ~~complete~~putative ~~any~~class action complaint asserting substantially similar claims was filed against the same Merger Defendants in the Delaware Court of ~~these~~Chancery ~~measures~~under orthe ~~they~~caption ~~may~~of Marks ~~not~~v. ~~generate~~Smurfit-Stone Container Corp., (the "Delaware Complaint"). The Delaware Complaint also seeks equitable relief, including an injunction prohibiting consummation of the Merger Agreement and an ~~liquidity~~accounting wefor ~~require~~alleged damages. On February 7, 2011, the plaintiff served a request for production of documents directed to ~~operate~~all ~~our~~Merger ~~business~~Defendants. On February 8, 2011, the plaintiff moved for expedited proceedings and ~~service~~a ~~our~~preliminary ~~obligations~~injunction prohibiting consummation of the Merger Agreement.

~~Our~~We believe ~~pension~~the ~~plans~~Illinois Complaints and Delaware Complaint are ~~underfunded~~without merit and will ~~require~~vigorously ~~additional~~defend ~~cash contributions~~against the allegations.

WeAll ~~have~~litigation ~~made~~that ~~substantial~~arose ~~contributions~~or tomay ~~our~~arise ~~pension~~out ~~plans~~of inpre-petition ~~the~~or ~~past~~pre-discharge ~~five~~conduct ~~years and~~or ~~expect~~acts is subject to ~~make~~the ~~substantial~~Bankruptcy ~~contributions~~Discharge inOrder ~~the~~and ~~coming~~is ~~years~~either inresolved ~~order~~consistent towith ~~ensure~~all ~~that~~other ~~our~~general ~~funding~~unsecured ~~levels~~claims ~~remain adequate~~ in ~~light~~the ofbankruptcy ~~projected liabilities~~or ~~and~~subject to ~~meet~~dismissal ~~the~~based ~~requirements~~on offailure ~~the~~to ~~Pension~~properly ~~Protection~~file ~~Act~~a ~~of 2006~~claim. ~~Future~~ ~~contributions~~As toa ~~our~~result, ~~pension~~we ~~and~~believe ~~other~~that ~~postretirement~~these ~~plans~~matters will ~~be dependent~~not onhave ~~future~~a ~~regulatory~~material ~~changes, future changes in discount rates, the~~adverse ~~earnings~~effect ~~performance~~on of our ~~plan~~consolidated ~~assets~~financial condition, ~~and~~results ~~the impact~~ of ~~the~~operations ~~bankruptcy filings.~~or ~~These contributions reduce the amount of~~ cash ~~available for us to repay indebtedness or make capital investments~~flows.

AtWe are ~~December 31,~~a ~~2009,~~defendant in a number of lawsuits and claims arising out of the ~~qualified~~conduct ~~defined benefit~~of ~~retirement~~our ~~plans~~business. ~~maintained~~While bythe ultimate results of such suits or other proceedings against us ~~were~~cannot ~~under~~be ~~funded~~predicted with certainty, we believe the resolution of these matters will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

18 ENVIRONMENTAL MATTERS

~~Table~~Federal, state, local and foreign environmental requirements are a significant factor in our business. We employ processes in the manufacture of pulp, ~~Contents~~paperboard and other products which result in various discharges, emissions and wastes. These processes are subject to numerous federal, state, local and foreign environmental laws and regulations, including reporting and disclosure obligations. We operate and expect to continue to operate under permits and similar authorizations from various governmental authorities that regulate such discharges, emissions and wastes.

~~by approximately $~~On October 1,~~129~~ ~~million. We~~2010, ~~will~~our ~~likely~~Hopewell, beVirginia ~~required~~paperboard tomill ~~make significant~~received ~~cash~~a ~~contributions~~Finding toof ~~these~~Violation ~~plans under applicable U.S.~~ and ~~Canadian~~ ~~laws~~Notice ~~over~~of ~~the~~Violation ~~next~~("NOV") ~~several years following emergence~~ from ~~bankruptcy in~~EPA ~~order~~Region toIII ~~amortize~~alleging ~~the~~certain ~~existing~~violations ~~under~~of ~~funding~~regulations ~~and satisfy current service obligations under the plans. These contributions will significantly impact future cash flows~~ that ~~might otherwise~~ berequire ~~available~~treatment ~~for repayment~~ of ~~debt,~~kraft ~~capital~~pulping ~~expenditures, and other corporate purposes~~condensates. We ~~currently~~strongly ~~estimate~~disagree ~~that these~~with ~~cash contributions under~~ the ~~United~~assertion ~~States~~of and Canadian qualified pension plans will be approximately $77 million in 2010, and potentially up to approximately $107 million depending upon how unpaid Canadian contributions for 2009 are impacted by the ~~Proposed~~violations ~~Plan of Reorganization. We currently estimate that contributions will be~~ in the ~~range~~NOV ~~of approximately $290 million to $330 million annually in 2011 through 2013,~~ and ~~will~~plan ~~then decrease~~ to ~~approximately~~vigorously ~~$280~~defend ~~million~~ourselves in ~~2014, approximately~~this ~~$240~~matter. ~~million~~Based inon ~~2015, $170 million in 2016 and $60 million in~~information ~~2017,~~currently atavailable ~~which~~to ~~point almost all of~~ the ~~shortfall~~Company, ~~would~~we bedo ~~funded. The~~not ~~actual~~believe ~~required~~that ~~amounts~~this ~~and~~matter ~~timing of such future cash contributions~~ will behave ~~highly~~a ~~sensitive~~material toadverse ~~changes~~effect ~~in the applicable discount rates and returns~~ on ~~plan~~our ~~assets~~financial condition, ~~and~~results ~~could~~of ~~also~~operations ~~be impacted~~or bycash ~~future changes in the laws and regulations applicable to plan funding~~flows.

~~Price~~We also ~~fluctuations~~face inpotential ~~energy~~liability ~~costs~~as a result of releases, or threatened releases, of hazardous substances into the environment from various sites owned and ~~raw~~operated ~~materials~~by ~~could~~third ~~adversely~~parties at which ~~affect~~Company-generated ~~our~~wastes ~~manufacturing~~have allegedly been deposited. Generators of hazardous substances sent to off-site disposal locations at which environmental problems exist, as well as the owners of those sites and certain other classes of persons, all of whom are referred to as PRPs, are, in most instances, subject to joint and several liability for response costs for the investigation and remediation of such sites under CERCLA and analogous state laws, regardless of fault or the lawfulness of the original disposal. However, liability for CERCLA sites is typically shared with other PRPs and costs are commonly

The cost of producing and transporting our products is highly sensitive to the price of energy. Energy prices, in particular oil and natural gas, have experienced significant volatility in recent years, with a corresponding effect on our production and transportation costs. Energy prices may continue to fluctuate and may rise to higher levels in future years. This could adversely affect our production costs and results of operations.24

~~Wood~~Table ~~fiber and reclaimed fiber, the principal raw materials used in the manufacture~~ of our paper products, are purchased in highly competitive, price sensitive markets, which have historically exhibited price and demand cyclicality. Adverse weather, conservation regulations and the shutdown of a number of sawmills have caused, and will likely continue to cause, a decrease in the supply of wood fiber and higher wood fiber costs in some of the regions in which we procure wood fiber. Fluctuations in supply and demand for reclaimed fiber, particularly export demand from Asian producers, have occasionally caused tight supplies of reclaimed fiber. At such times, we may experience an increase in the cost of fiber or may temporarily have difficulty obtaining adequate supplies of fiber. If we are not able to obtain wood fiber and reclaimed fiber at favorable prices or at all, our results of operations may be materially adversely affected.Contents

~~Work~~allocated according ~~stoppage~~ to relative amounts of waste deposited. Although we satisfied our potential liability relating to certain third party PRP and formerly owned sites as unsecured claims in our bankruptcy proceedings, we may face liability at other ~~labor~~ongoing ~~relations~~remediation ~~matters~~sites and future remediation liability at sites where we may ~~have~~be ana PRP for cleanup activity under the CERCLA and analogous ~~adverse~~state ~~effect~~and onother laws. In addition to participating in the remediation of sites owned by third parties, we are conducting the investigation and/or remediation of certain of our ~~financial~~owned ~~results~~and formerly owned properties.

ABased on ~~significant~~current ~~number~~information, ofwe ~~our~~believe ~~employees in~~the ~~North~~costs ~~America~~of ~~are~~the ~~governed~~potential byenvironmental ~~collective~~enforcement ~~bargaining~~matters ~~agreements~~discussed ~~that~~above, ~~have either~~response ~~already~~costs ~~expired~~under orCERCLA ~~will~~and dosimilar sostate ~~before~~laws, ~~2013. Expired~~and ~~contracts are in~~ the ~~process~~remediation of owned ~~renegotiation. We~~and ~~may~~formerly ~~not~~owned beproperty ~~able~~will ~~to successfully~~not ~~negotiate~~have ~~new~~a ~~union~~material ~~contracts~~adverse ~~without~~effect ~~work~~on ~~stoppages or~~our ~~labor difficulties. If~~financial wecondition ~~are~~or ~~unable~~results ~~to successfully~~of ~~renegotiate~~operations. ~~the~~As ~~terms~~ of ~~any~~December 31, of2010, ~~these~~we ~~agreements~~had orapproximately an$8 million ~~industry~~reserved ~~association~~for isenvironmental ~~unable~~liabilities. toWe ~~successfully~~believe ~~negotiate~~our aliability ~~national~~for ~~agreement~~these ~~when~~matters ~~they expire,~~was oradequately ifreserved ~~we experience any extended interruption of operations~~ at ~~any~~December 31, ~~of our~~2010, ~~facilities~~and asthat athe ~~result~~possibility ofis ~~strikes~~remote orthat ~~other~~we ~~work~~would ~~stoppages,~~incur ~~our~~any ~~results of~~material ~~operations~~liabilities ~~and~~for ~~financial~~which ~~condition~~we ~~could~~have benot ~~materially~~recorded ~~adversely~~adequate ~~affected~~reserves.

We ~~are subject to environmental regulations and liabilities that could~~ ~~weaken~~ ITEM ~~our operating results and financial condition~~4. RESERVED

Federal, state, provincial, foreign and local environmental requirements, particularly those relating to air and water quality, are a significant factor in our business. Maintaining compliance with existing environmental laws, as well as complying with requirements imposed by new or changed environmental laws, including greenhouse gas emissions, may require capital expenditures for compliance. In addition, ongoing remediation costs and future remediation liability at sites where we may be a potentially responsible party (PRP) for cleanup activity under the Comprehensive Environmental Response, 25

19 Table of Contents

~~Table~~ of ~~Contents~~ PART II

~~Compensation~~ ~~and~~ ~~Liability~~ ITEM ~~Act~~5. MARKET ofFOR ~~1980~~REGISTRANT'S ~~(CERCLA)~~COMMON ~~and~~EQUITY, ~~analogous~~RELATED ~~state~~STOCKHOLDER ~~and~~MATTERS ~~other~~AND ~~laws~~ISSUER ~~may materially~~PURCHASES ~~adversely~~OF ~~affect~~EQUITY ~~our results of operations and financial condition.~~SECURITIES

~~Foreign~~ ~~currency~~MARKET ~~risks and exchange rate fluctuations could hinder the results of our Canadian operations.~~INFORMATION

~~Our~~Prior ~~assets~~to ~~and liabilities~~February 4, ~~outside~~2009, ~~the~~shares ~~United~~of ~~States~~our ~~are~~Predecessor ~~primarily~~common ~~located~~stock in(the ~~Canada.~~"Predecessor ~~Our principal~~Common ~~foreign~~Stock") ~~exchange~~traded ~~exposure~~on is the ~~Canadian~~NASDAQ ~~dollar.~~under ~~The~~the ~~functional~~symbol ~~currency~~"SSCC." ~~for~~Shares of our ~~Canadian~~Predecessor ~~operations~~Common isStock issued and outstanding from February 4, 2009 to June 30, 2010 traded on the ~~U.S.~~Pink ~~dollar.~~Sheets ~~Our~~Electronic ~~net~~Quotation ~~income~~Service ~~could~~("Pink Sheets"). The beticker ~~reduced~~symbol "SSCCQ.PK" was assigned to ~~the~~our ~~extent~~Predecessor weCommon ~~have~~Stock unfor over-~~hedged~~the-counter ~~positions~~quotations. On June 30, ~~our~~2010, ~~hedging~~the ~~procedures~~Predecessor ~~do not~~Common ~~perform~~Stock aswas ~~planned~~cancelled pursuant orto the ~~Canadian~~terms ~~dollar~~of ~~strengthens.~~our ~~Our~~Plan ~~financial performance~~of isReorganization ~~directly~~and ~~affected~~we byhave ~~exchange~~no ~~rates~~continuing ~~because:~~obligations with respect to the Predecessor Common Stock.

~~· certain~~Pursuant to the Plan of ~~our~~ ~~products~~Reorganization, ~~are~~we ~~manufactured~~issued inor ~~Canada,~~reserved ~~but~~for ~~sold~~issuance inup Uto 100 million shares of common stock (the "Successor Common Stock").S. ~~dollars;~~Upon emergence, the Successor Common Stock was listed on the New York Stock Exchange ("NYSE") and began trading under the ticker symbol "SSCC."

· The following table sets forth for the ~~monetary assets~~periods indicated, the high and ~~liabilities~~low ofsales price for our ~~Canadian~~Predecessor ~~operations~~Common ~~are~~Stock ~~translated~~as ~~into~~reported ~~U.S.~~on the Pink Sheets for the period through June 30, 2010, and ~~dollars~~for our Successor Common Stock for ~~financial~~the ~~reporting~~period ~~purposes~~beginning June 30, 2010.

~~ITEM~~At February 9, 1B2011, approximately 22,000 stockholders, including stockholders of record and beneficial owners held our common stock. ~~UNRESOLVED~~The ~~STAFF~~high ~~COMMENTS~~and low closing prices of our common stock in 2010 and 2009 were:

None.

	Successor Company Stock(1)				Predecessor Company Stock(2)

	2010				2010				2009
	High		Low		High		Low		High		Low
First Quarter					$	0.43	$	0.15	$	0.43	$	0.02
Second Quarter					$	0.31	$	0.14	$	0.27	$	0.04
Third Quarter	$	22.00	$	16.67					$	0.56	$	0.11
Fourth Quarter	$	26.08	$	18.25					$	0.99	$	0.09

20 (1)The Successor Common Stock was trading on June 30, 2010 on a "when-issued" basis and closed at $24.75. (2)The Predecessor Common Stock was canceled pursuant to the terms of our Plan of Reorganization and no further trading occurred after June 30, 2010.

~~Table~~ ofDIVIDENDS ~~Contents~~ON COMMON STOCK

~~ITEM~~During 2the period covered by this report, we have not paid cash dividends on our Successor Common Stock and do not intend to pay dividends in the foreseeable future. ~~PROPERTIES~~Our ability to pay dividends in the future is restricted by certain provisions contained in various agreements relating to our outstanding indebtedness.

The manufacturing facilities of our consolidated subsidiaries are located primarily in North America. We believe that our facilities are adequately insured, properly maintained and equipped with machinery suitable for our use. We have invested significant capital in our operations to upgrade or replace corrugators and converting machines, while closing higher cost facilities. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - “Restructuring Activities.” Our manufacturing facilities as of December 31, 2009 are summarized below:26

	Number of Facilities			State
	Total	Owned	Leased	Locations(a)
United States
Paper mills	10	10		7
Corrugated container plants	90	62	28	29
Reclamation plants	29	15	14	14
Subtotal	129	87	42	34
Canada and Other North America
Paper mills	2	2		N/A
Corrugated container plants	18	14	4	N/A
Laminating plant	1	1		N/A
Subtotal	21	17	4
China
Corrugated container plants	2	2		N/A
Total	152	106	46	N/A

Table of Contents

~~(a) Reflects the~~ ~~number~~STOCK ofPERFORMANCE ~~states in which we have at least one manufacturing facility.~~GRAPH

~~Our paper~~The ~~mills~~information ~~represent~~set ~~approximately~~forth ~~66%~~under ofthis ~~our~~caption ~~investment~~shall innot ~~property,~~be ~~plant and~~deemed ~~equipment. In addition~~ to ~~manufacturing~~ ~~facilities,~~be we"filed" ~~operate~~or ~~wood~~incorporated ~~harvesting~~by ~~facilities~~reference ininto ~~Canada~~any ~~and the United States. The approximate annual tons~~ of ~~productive capacity of~~ our ~~paper~~other ~~mills~~filings atwith ~~December 31, 2009~~the ~~were:~~SEC.

	Annual Capacity (in thousands)
	United States		Canada		Total
Containerboard	5,723		492		6,215
Market pulp	276				276
SBL			129		129
Kraft paper		114				114
Total		6,113		621		6,734

The following graph compares the cumulative total returns during the period June 30, 2010 to December 31, 2010 of our Successor Common Stock to the Standard & Poor's 500 Stock Index and the Peer Group, which consists of International Paper Company, Packaging Corporation of America, Rock-Tenn Company and Temple-Inland, Inc. The comparison assumes $100 was invested on June 30, 2010 in our Successor Common Stock and the indices and assumes that all dividends were reinvested. Data for periods prior to June 30, 2010 is not shown because we were in bankruptcy and the financial results of the Successor Company are not comparable with the financial results of the Predecessor Company. Our common stock price shown on the following graph is not necessarily indicative of future price performance.

~~Substantially~~ ~~all~~ of Comparison ~~our North American operating facilities have been pledged as collateral under our various credit agreements. See Part II, Item 7. Management’s Discussion and Analysis~~ of ~~Financial~~Cumulative ~~Condition~~Total ~~and Results of Operations - Liquidity and Capital Resources – “Net Cash Provided By (Used For) Financing Activities.”~~Return

21 INDEXED RETURNS

Table of Contents

			Months Ending

	Base Period 6/30/10		Months Ending
Company Name / Index	Base Period 6/30/10		7/31/10		8/31/10		9/30/10		10/31/10		11/30/10		12/31/10
Smurfit-Stone Container Corporation		100		84.24		69.37		74.22		92.93		96.57		103.43
S&P 500 Index		100		107.01		102.18		111.29		115.53		115.54		123.27
Peer Group		100		105.90		91.31		97.65		111.01		110.91		117.42

~~ITEM 3. LEGAL PROCEEDINGS~~27

~~LITIGATION~~Table of Contents

On ~~January 26, 2009, we, Smurfit-Stone and our U.S. and Canadian~~ ~~subsidiaries~~ ITEM ~~filed the Chapter 11 Petition for relief under Chapter 11 of the Bankruptcy Code in the U~~6.S. SELECTED ~~Court. On the~~FINANCIAL same day, our Canadian subsidiaries also filed the Canadian Petition under the CCAA in the Canadian Court. Our operations in Mexico and Asia were not included in the filing and will continue to operate outside of the Chapter 11 process. See Part I, Item 1. Business – “Bankruptcy Proceedings.”DATA

InThe ~~January 2009,~~application weof ~~settled~~fresh ~~two putative~~start ~~class~~accounting ~~action~~affected ~~cases~~certain ~~filed~~assets, inliabilities, ~~California state court on behalf of current~~ and ~~former~~expenses. ~~hourly~~As ~~employees~~a atresult, ~~our~~certain ~~California~~financial ~~corrugated~~information ~~container facilities. These cases alleged violations~~ of the ~~California on-duty meal~~ ~~break~~Successor ~~and~~as ~~rest period statutes. The court approved a settlement for a total~~ of $9and ~~million~~ for ~~both~~any ~~cases~~period onafter ~~January~~June 2130, ~~2009. The~~2010 ~~cases were~~is ~~automatically~~not ~~stayed~~comparable ~~due~~ to ~~the~~Predecessor ~~filing~~financial ofinformation. ~~the~~Refer ~~Chapter~~to ~~11 Petition on January~~Note ~~26, 2009. We~~1 ~~had established reserves of $9 million during 2008 related~~ to ~~these~~ ~~matters. It is anticipated that~~ our ~~liability~~Notes ~~for~~to ~~the~~Consolidated ~~settlement~~Financial ofStatements ~~these cases will be satisfied as an~~for ~~unsecured~~additional ~~claim~~information inon ~~the~~fresh ~~U.S.~~start ~~bankruptcy proceedings~~accounting.

In May 2009, a lawsuit was filed in the United States District Court for the Northern District of Illinois against the four individual committee members of the Administrative Committee (Administrative Committee) of our savings plans and Patrick Moore, our Chief Executive Officer (together, the Defendants). The suit alleges violations of the Employee Retirement Income Security Act (ERISA) (the 2009 ERISA Case) between January 2008 and the date it was filed. The plaintiffs in the 2009 ERISA Case brought the complaint on behalf of themselves and a class of similarly situated participants and beneficiaries of four of our savings plans (the Savings Plans). The plaintiffs assert that the Defendants breached their fiduciary duties to the Savings Plans’ participants and beneficiaries by allegedly making imprudent investments with the Savings Plans’ assets, making misrepresentations and failing to disclose material adverse facts concerning our business conditions, debt management and viability, and not taking appropriate action to protect the Savings Plans’ assets. Even though we are not a named defendant in the 2009 ERISA Case, management believes that any indemnification obligations to the Defendants would be covered by applicable insurance.

		Successor			Predecessor

		Six Months Ended December 31, 2010			Six Months Ended June 30, 2010(a)			Year Ended December 31,
(In millions, except per share and statistical data)		Six Months Ended December 31, 2010			Six Months Ended June 30, 2010(a)			2009(b)			2008(c)			2007(d)			2006
Summary of Operations
Net sales		$	3,262		$	3,024		$	5,574		$	7,042		$	7,420		$	7,157
Operating income (loss)(e)			245			(37	)		293			(2,764	)		295			276
Income (loss) from continuing operations			114			1,324			8			(2,818	)		(103	)		(70	)
Discontinued operations, net of income tax provision																		11
Net income (loss) attributable to common stockholders			114			1,320			(3	)		(2,830	)		(115	)		(71	)
Diluted earnings per share of common stock Income (loss) from continuing operations			1.13			5.07			(.01	)		(11.01	)		(.45	)		(.32	)
	Discontinued operations, net of income tax provision																	.04
	Net income (loss) attributable to common stockholders		1.13			5.07			(.01	)		(11.01	)		(.45	)		(.28	)
Weighted average basic shares outstanding			100			258			257			257			256			255
Weighted average diluted shares outstanding			100			261			257			257			256			255
Other Financial Data
Net cash provided by (used for) operating activities		$	211		$	(85	)	$	1,094		$	198		$	243		$	265
Net cash provided by (used for) investing activities			(97	)		(73	)		(139	)		(385	)		68			706
Net cash provided by (used for) financing activities			(7	)		(206	)		(377	)		306			(313	)		(967	)
Depreciation, depletion and amortization			169			168			364			357			360			377
Capital expenditures and acquisitions			106			83			172			394			384			274
Working capital, net (f)			963						(157	)		(3,798	)		13			(141	)
Net property, plant, equipment (g)			4,374						3,081			3,509			3,454			3,731
Total assets			6,459						5,077			4,594			7,387			7,777
Total debt (f)(h)			1,194						3,793			3,718			3,359			3,634
Redeemable preferred stock									105			101			97			93
Stockholders' equity (deficit)			2,611						(1,374	)		(1,405	)		1,855			1,779
Statistical Data (tons in thousands)
Containerboard production (tons)			3,137			3,130			6,033			6,853			7,336			7,402
Market pulp production (tons)			146			134			294			470			574			564
SBS/SBL production (tons)			60			66			130			125			269			313
Kraft paper production (tons)			53			55			110			145			177			199
Corrugated containers sold (billion square feet)			34.0			34.2			67.1			71.5			74.8			80.0
Fiber reclaimed and brokered (tons)			2,952			2,891			5,182			6,462			6,842			6,614
Number of employees (i)			17,100			18,100			19,000			21,300			22,700			25,200

On January 11, 2010, a second ERISA class action lawsuit was filed in the United States District Court for the Western District of Missouri. The defendants in this case are the individual committee members of the Administrative Committee, several of our other executives and the individual members of our Board of Directors. The suit has similar allegations as the 2009 ERISA Case described above, with the addition of breach of fiduciary duty claims related to our pension plans. We expect that both of these matters will be consolidated in some manner as they purport to represent a similar class of employees and former employees and seek recovery under similar allegations and any of our indemnification obligations would be covered by applicable insurance.28

WeTable ~~are a defendant in a number~~ of ~~other~~ lawsuits and claims arising out of the conduct of our business. All litigation that arose or may arise out of pre-petition conduct or acts is subject to the automatic stay provision of the bankruptcy laws and any recovery by plaintiffs in those matters will be paid consistent with all other general unsecured claims in bankruptcy. As a result, we believe that these matters will not have a material adverse effect on our consolidated financial condition, results of our operations or cash flows.Contents

~~ENVIRONMENTAL~~Notes ~~MATTERS~~to Selected Financial Data

(a): For the six months ended June 30, 2010, we recorded reorganization items, net of $1,178 million, including a pre-tax emergence gain on plan effects of $580 million, a gain related to fresh start accounting adjustments of $742 million, and other reorganization expenses of $144 million. In addition, the benefit from income taxes includes a $200 million benefit related to the plan effect adjustments. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — "Reorganization Items and Other Bankruptcy Costs." In addition, we recorded other operating income of $11 million, net of fees and expenses associated with an excise tax credit for alternative fuel mixtures produced. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — "Alternative Fuel Tax Credit." Balance sheet information has been excluded from Other Financial Data for the six months ended June 30, 2010 since a June 30, 2010 balance sheet is not presented in the consolidated balance sheets.
(b): In 2009, we recorded other operating income of $633 million, net of fees and expenses, associated with an excise tax credit for alternative fuel mixtures produced. See Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — "Alternative Fuel Tax Credit."
(c): In 2008, we recorded goodwill and other intangible assets impairment charges of $2,757 million, net of an income tax benefit of $4 million. See Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — "Goodwill and Other Intangible Assets Impairment Charges in 2008."
(d): In 2007, we recorded a loss of $65 million (after-tax loss of approximately $97 million) related to the sale of our Brewton, Alabama mill. As a result, we no longer produce solid bleached sulfate (SBS).
(e): For the six months ended December 31, 2010 and June 30, 2010, and for the years ended December 31, 2009, 2008, 2007 and 2006, we recorded restructuring charges of $25 million, $15 million, $319 million, $67 million, $16 million and $43 million, respectively.
(f): The filing of the Chapter 11 Petition and the Canadian Petition constituted an event of default under our debt obligations, and those debt obligations became automatically and immediately due and payable. We recorded a reclassification of $3,032 million to current maturities of long-term debt from long-term debt at December 31, 2008. As of December 31, 2009, secured debt of $1,354 million was classified as a current liability in the accompanying consolidated balance sheet. At December 31, 2009, total debt included unsecured debt of $2,439 million which is recorded in liabilities subject to compromise.
(g): Certain reclassifications of prior year presentations have been made to conform to the 2010 presentation.
(h): In 2010, 2009, 2008, 2007 and 2006, debt includes obligations under capital leases of $6 million, $3 million, $5 million, $7 million and $7 million, respectively.
(i): Number of employees for 2006 excludes approximately 6,600 employees of our former Consumer Packaging division, which was sold on June 30, 2006.

Federal, state, local and foreign environmental requirements are a significant factor in our business. We employ processes in the manufacture of pulp, paperboard and other products which result in various discharges, emissions and wastes. These processes are subject to numerous federal, state, local and foreign environmental laws and regulations, including reporting and disclosure obligations. We operate and expect to continue to operate under permits and similar authorizations from various governmental authorities that regulate such discharges, emissions and wastes.29

~~We also face potential liability as~~ aTable ~~result~~ of ~~releases,~~Contents ~~or threatened releases, of hazardous substances into the environment from various sites owned and operated by third parties at which Company-generated~~

22 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Table~~ ofNON-GAAP ~~Contents~~FINANCIAL MEASURES

~~wastes~~In ~~have~~the ~~allegedly~~accompanying ~~been deposited. Generators~~analysis of ~~hazardous substances~~financial ~~sent~~information, towe ~~off-site~~use ~~disposal~~the ~~locations~~financial atmeasures ~~which~~"adjusted ~~environmental~~net ~~problems~~income (loss) attributable to common stockholders" ~~exist~~("adjusted net income (loss)"), as"adjusted ~~well~~net asincome ~~the~~(loss) ~~owners~~per ofdiluted ~~those~~share ~~sites~~attributable ~~and~~to ~~certain~~common ~~other~~stockholders" ~~classes~~("adjusted ~~of persons~~net income (loss) per diluted share"), ~~all~~"EBITDA" ofand ~~whom~~"adjusted EBITDA" which are ~~referred~~derived tofrom asour ~~PRPs,~~consolidated financial information but are, innot ~~most~~presented ~~instances,~~in ~~subject to~~our ~~joint~~financial ~~and~~statements ~~several~~prepared ~~liability~~in ~~for~~accordance ~~response~~with ~~costs~~U.S. ~~for~~generally ~~the~~accepted ~~investigation~~accounting ~~and~~principles ("GAAP"). ~~remediation~~These ofmeasures ~~such~~are ~~sites~~considered ~~under~~"non-GAAP ~~CERCLA~~financial ~~and~~measures" ~~analogous~~under ~~state~~the ~~laws,~~U.S. ~~regardless~~Securities ofand Exchange ~~fault~~Commission or("SEC") ~~the~~rules. ~~lawfulness~~Adjusted ofnet ~~the~~income ~~original~~(loss) ~~disposal. We~~and ~~have~~adjusted ~~received~~net ~~notice~~income ~~that~~(loss) weper diluted share are ornon-GAAP ~~may~~financial ~~be a~~measures ~~PRP~~that atexclude afrom ~~number~~net ofincome ~~federal~~(loss) ~~and/or~~attributable ~~state~~to common ~~sites~~stockholders ~~where~~the ~~response~~effects ~~action~~of ~~may~~reorganization ~~be required~~items ~~and~~(income) asexpense, adebtor-in-possession ~~result~~financing ~~may~~costs, ~~have~~alternative ~~joint~~fuel ~~and~~mixture ~~several~~tax ~~liability~~credits, ~~for~~loss ~~cleanup~~on ~~costs~~early atextinguishment ~~such~~of ~~sites. However~~debt, ~~liability~~non-cash ~~for CERCLA~~foreign ~~sites~~currency isexchange ~~typically~~(gains) ~~shared~~losses, ~~with~~interest ~~other~~on ~~PRPs~~Predecessor ~~and~~unsecured ~~costs~~debt, ~~are~~restructuring ~~commonly~~charges, ~~allocated according~~(gain) toloss ~~relative~~on ~~amounts~~disposal of ~~waste~~assets, ~~deposited. In~~a multi-employer ~~estimating~~pension ~~our~~plan ~~reserves~~withdrawal ~~for~~charge, ~~environmental remediation~~goodwill and ~~future~~other ~~costs~~intangible assets impairment charges, ~~our~~litigation ~~estimated~~charges, ~~liability~~loss ofon $5ineffective ~~million~~interest ~~reflects~~rate swaps ~~our~~marked-to-market ~~expected~~and ~~share~~resolution of ~~costs~~income ~~after~~tax ~~consideration~~matters. ~~for~~EBITDA ~~the~~is ~~relative~~defined ~~percentage~~as ~~of waste~~net ~~deposited~~income at(loss) ~~each~~before ~~site,~~(provision ~~the~~for) ~~number~~benefit offrom ~~other~~income ~~PRPs~~taxes, ~~the~~goodwill ~~identity~~ and other intangible ~~financial~~assets ~~condition~~impairment ofcharges, ~~such~~interest ~~parties~~expense, net and ~~experience~~depreciation, ~~regarding~~depletion ~~similar matters~~and amortization. In ~~addition~~Adjusted toEBITDA ~~participating~~is indefined as EBITDA adjusted for reorganization items (income) expense, ~~the~~debtor-in-possession ~~remediation~~financing ofcosts, ~~sites~~alternative ~~owned~~fuel bymixture ~~third~~tax ~~parties~~credits, weloss ~~are~~on ~~conducting~~early ~~the~~extinguishment of debt, non-cash foreign currency exchange (gains) losses, ~~investigation~~restructuring ~~and/or~~charges, ~~remediation~~(gain) ofloss ~~certain~~on disposal of ~~our~~assets, ~~owned~~a ~~properties~~multi-employer pension plan withdrawal charge, litigation charges, receivables discount expense and other adjustments.

~~Based~~We use onthese ~~current~~supplemental ~~information,~~non-GAAP ~~we believe~~measures ~~the~~to ~~costs~~evaluate ofperformance period over period, to analyze the ~~potential~~underlying ~~environmental~~trends ~~enforcement~~in ~~matters~~our ~~discussed above~~business, ~~response~~to ~~costs~~assess ~~under~~our ~~CERCLA~~performance relative to our competitors and ~~similar~~to ~~state~~establish ~~laws,~~operational goals and ~~the~~forecasts ~~remediation~~ that are used in allocating resources. These non-GAAP measures of ~~owned~~operating ~~property~~results ~~will~~are ~~not~~reported ~~have~~to aour ~~material~~board ~~adverse~~of ~~effect~~directors, chief onexecutive officer and our ~~financial~~president and chief operating officer and are used to make strategic and operating decisions and assess performance. These non-GAAP measures are presented ~~condition~~to enhance an understanding of our operating results and are not intended to represent cash flows or results of operations. ~~As of~~ ~~December 31~~We also believe these non-GAAP measures are beneficial to investors, ~~2009~~potential investors and other key stakeholders, weincluding ~~had~~analysts ~~approximately~~and ~~$28~~creditors ~~million~~who ~~reserved~~use ~~for environmental~~these ~~liabilities. We~~measures ~~believe~~in their evaluations of our performance from period to period and against the performance of other companies in our ~~liability~~industry. ~~for~~The use of these ~~matters~~non-GAAP ~~was~~financial ~~adequately~~measures ~~reserved~~is atbeneficial ~~December 31,~~to these stakeholders because they exclude certain items that management believes ~~2009~~are not indicative of the ongoing operating performance of our business, and ~~that~~including ~~the~~them ~~possibility~~would isdistort ~~remote~~comparisons ~~that~~to our past operating performance. Accordingly, we ~~would~~have ~~incur~~excluded ~~any~~the ~~material~~adjustments, ~~liabilities~~as detailed below, for ~~which~~the wepurpose ~~have~~of ~~not~~calculating ~~recorded~~these ~~adequate~~non-GAAP ~~reserves~~measures.

The ~~U.S. Congress and several states~~ infollowing ~~which~~is wean ~~operate~~explanation ~~are considering legislation that would mandate the reduction~~ of ~~greenhouse~~each ~~gas emissions from facilities in various sectors~~ of the ~~economy,~~ ~~including~~adjustments ~~manufacturing.~~that ~~The~~we ~~EPA~~have ismade ~~also taking steps~~ to ~~regulate greenhouse~~arrive ~~gas~~at ~~emissions~~these ~~under~~non-GAAP ~~certain~~measures ~~Clean~~for ~~Air~~(1) the ~~Act~~six ~~programs. Enactment~~months ofended ~~new climate change laws or regulations may require capital expenditures to modify assets to meet greenhouse gas reduction requirements~~December 31, ~~increase~~2010 ~~energy~~of ~~costs above~~ the ~~level of~~ ~~general inflation~~Successor, ~~and~~(2) the ~~could~~six ~~result~~months inended ~~direct compliance and other costs. It is not yet known~~June 30, ~~when~~2010 ~~such~~of ~~greenhouse~~the ~~gas emission~~Predecessor ~~laws~~and or(3) the ~~regulations~~years ~~may~~ended ~~come into effect~~December 31, ~~nor~~2009 isand it2008 ~~currently~~of ~~possible to estimate~~ the ~~costs of compliance with such laws or regulations. We have taken voluntary actions to reduce greenhouse gas emissions from our manufacturing operations and~~Predecessor, ~~with~~as ~~our membership~~well inas the ~~Chicago Climate Exchange, have committed to reduce these~~reasons ~~emissions~~management bybelieves 6%each ~~over baseline (emissions from 1998 to 2001) by the end~~ of ~~2010. We~~ ~~expect~~these ~~that~~items weis ~~will~~ not ~~be disproportionately~~indicative ~~affected~~of byoperating ~~new~~performance: ~~climate change laws or regulations as compared to our competitors who have comparable, energy-intensive operations in the United States.~~

•: Reorganization items (income) expense — These income and expense items are directly related to the process of our reorganizing under Chapter 11 and the CCAA. The items include gain due to plan effects, gain due to fresh start accounting adjustments, provision for rejected/settled executory contracts and leases, accounts payable settlement gains and professional fees. These income and expense items are not considered indicative of ongoing operating performance and are not used by us to assess our operating performance.

~~ITEM 4. RESERVED~~30

23Table of Contents

•: Debtor-in-possession financing costs — These expenses were incurred and paid during the first quarter of 2009 in connection with entering into the DIP Credit Agreement. These expense items are not considered indicative of ongoing operating performance and are not used by us to assess our operating performance.
•: Alternative fuel mixture tax credits — These amounts represent an excise tax credit for alternative fuel mixtures produced by a taxpayer for sale, or for use as a fuel in a taxpayer's trade or business, through December 31, 2009, at which time the credit expired. These items are not considered indicative of ongoing operating performance and are not used by us to assess our operating performance.
•: Loss on early extinguishment of debt — These losses represent unamortized deferred debt issuance cost and call premiums charged to expense in connection with our financing activities. These losses were not considered indicative of ongoing operating performance because they related to specific financing activities and were not used by us to assess our operating performance.
•: Non-cash foreign currency exchange (gains) losses — Through June 30, 2010, the functional currency for our Canadian operations was the U.S. dollar. Fluctuations in Canadian dollar-denominated monetary assets and liabilities resulted in non-cash gains or losses. We excluded the impact of foreign currency exchange gains and losses because the impact of foreign exchange is highly variable and difficult to predict from period to period and is not tied to our operating performance. These gains or losses are not considered indicative of ongoing operating performance and are not used by us to assess our operating performance.
•: Interest on Predecessor unsecured debt — These amounts represent the post-petition interest accrued on unsecured debt from the time of our bankruptcy filing, which was stayed and not paid as a result of the bankruptcy proceedings. In the fourth quarter of 2009, we concluded it was not probable that interest expense that was accrued from the Petition Date through November 30, 2009, would be an allowed claim. This expense was not considered indicative of our ongoing operating performance and was excluded by management in assessing our operating performance.
•: Restructuring charges — These adjustments represent the write-down of assets, primarily property, plant and equipment, to estimated net realizable values, the acceleration of depreciation for equipment to be abandoned or taken out of service, severance costs and other costs associated with our restructuring activities. These income and expense items were not considered indicative of our ongoing operating performance and were excluded by management in assessing our operating performance.
•: (Gain) loss on disposal of assets — These amounts represent gains and losses we recognized related to the sale of non-strategic assets. These gains and losses were not considered indicative of ongoing operating performance and were excluded by management in assessing our operating performance.
•: Multi-employer pension plan withdrawal charge — This amount represents the charge associated with the withdrawal from a multi-employer pension plan. This expense item was not considered indicative of our ongoing operating performance and was excluded by management in assessing our operating performance.
•: Goodwill and other intangible assets impairment charges — As the result of the significant decline in value of our equity securities and our debt instruments and downward pressure placed on earnings by the weakening U.S. economy, we recognized impairment charges on goodwill and other intangible assets of $2,757 million, net of income taxes in the fourth quarter of 2008.

~~Table of Contents~~31

~~PART~~Table IIof Contents

~~ITEM~~These charges 5.were ~~MARKET~~not ~~FOR~~considered ~~REGISTRANT’S~~indicative ~~COMMON~~of ~~EQUITY,~~future ~~RELATED~~operating ~~STOCKHOLDER~~performance ~~MATTERS~~and ~~AND~~were ~~ISSUER~~not ~~PURCHASES~~used OFby ~~EQUITY~~management ~~SECURITIES~~in assessing our operating performance.

•: Litigation charges — These charges are attributable to certain litigation matters. These amounts represent significant charges during 2008 and do not reflect expected ongoing operating expenses.
•: Loss on ineffective interest rate swaps marked-to-market — This represents a loss recorded in interest expense as a result of our intention to refinance the underlying debt prior to its maturity. This represented a significant charge to interest expense in the fourth quarter of 2008 and was not considered indicative of expected ongoing interest expense.
•: Resolution of income tax matters — These amounts represent the resolution of certain income tax matters. During 2008, we were informed by a foreign taxing authority that certain matters related to our acquisition of a company had been resolved in our favor. Primarily as a result of this favorable ruling, we reduced our liability for unrecognized tax benefits and recorded an income tax benefit of approximately $84 million during 2008. These income tax benefits were not related to the current or past years being presented and were not considered indicative of our ongoing operating performance.
•: Receivables discount expense — This amount represents the loss on sales of receivables for the accounts receivable securitization programs that were terminated on January 28, 2009, in conjunction with the filing of the Chapter 11 Petition and the Canadian Petition (See Note 8). The expense items were not considered indicative of our ongoing operating performance and was excluded by management in assessing our operating performance.
•: Other — These adjustments principally represent amounts accrued under our 2009 long-term incentive plan. These income and expense items were not considered indicative of our ongoing operating performance and were excluded by management in assessing our operating performance.

~~MARKET~~Adjusted net ~~INFORMATION~~income (loss), adjusted net income (loss) per diluted share, EBITDA and adjusted EBITDA have certain material limitations associated with their use as compared to net income (loss). These limitations are primarily due to the exclusion of certain amounts that are material to our consolidated results of operations, as discussed above. In addition, these adjusted net income (loss) and EBITDA measures may differ from adjusted net income (loss) and EBITDA calculations of other companies in our industry, limiting their usefulness as comparative measures. Because of these limitations, adjusted net income (loss), adjusted net income (loss) per diluted share, EBITDA and adjusted EBITDA should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using adjusted net income (loss), adjusted net income (loss) per diluted share, EBITDA and adjusted EBITDA only as supplemental measures of our operating performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial statements prepared in accordance with GAAP.

We ~~are~~believe athat ~~wholly~~providing these non-~~owned~~GAAP ~~subsidiary~~measures ofin ~~Smurfit~~addition to the related GAAP measures provides investors greater transparency to the information our management uses for financial and operational decision-~~Stone~~making and allows investors to see our results as management sees them. ~~Therefore,~~ ~~all~~We ofalso believe that providing this information better enables investors to understand our ~~outstanding~~operating performance ~~common~~and ~~stock~~to isevaluate ~~owned~~the methodology used by ~~Smurfit-Stone. As~~ aour ~~result~~management to evaluate and measure our operating performance, ~~there~~and isthe ~~no established~~methodology ~~public~~and ~~market~~financial ~~for~~measures used by our ~~common~~board ~~stock~~of directors to assess management's performance.

~~DIVIDENDS~~The following ONfinancial ~~COMMON~~presentation ~~STOCK~~includes a reconciliation of net income (loss) attributable to common stockholders and net income (loss) per diluted share attributable to common stockholders, the

We did not declare or pay any dividends to Smurfit-Stone in 2009. Our ability to declare and pay dividends was restricted under applicable bankruptcy law and by certain provisions contained in the DIP Credit Agreement and indentures relating to our outstanding indebtedness. See Note 9 to the Notes to the Consolidated Financial Statements.32

24Table of Contents

~~Table~~most directly comparable GAAP financial measures, to adjusted net income (loss) attributable to common stockholders and adjusted net income (loss) per diluted share attributable to common stockholders, respectively. The adjustments to GAAP net income (loss) attributable to common stockholders for the Predecessor period of the year ended December 31, 2008 and the Successor period ~~Contents~~ended December 31, 2010 were tax effected; however for the Predecessor periods of the six months ended June 30, 2010 and the year ended December 31, 2009, other than reorganization items (income) expense, the adjustments were not tax effected because it was more likely than not that substantially all of the deferred tax assets that were generated during bankruptcy would not be realized and we did not record any additional tax benefit. Due to the effects of the Plan of Reorganization, we concluded that it was more likely than not that substantially all of the deferred tax assets would be realized and we recognized an income tax benefit related to reorganization items in the six months ended June 30, 2010. For the six months ended December 31, 2010, we recorded a provision for income taxes related to the Successor statement of operations. As a result, the Successor period adjustments to net income (loss) attributable to stockholders are presented on a net of tax basis.

~~ITEM~~A reconciliation 6.of ~~SELECTED~~net ~~FINANCIAL~~income ~~DATA~~(loss) to EBITDA and adjusted EBITDA is also presented.

~~(In millions, except statistical data)~~33

	2009(a)		2008(b)		2007(c)		2006		2005
Summary of Operations
Net sales	$ 5,574		$ 7,042		$ 7,420		$ 7,157		$ 6,812
Operating income (loss)(d)	293		(2,764	)	295		276		(253	)
Income (loss) from continuing operations	8		(2,818	)	(103	)	(70	)	(381	)
Discontinued operations, net of income tax provision							11		51
Net income (loss)	8		(2,818	)	(103	)	(59	)	(327	)
Other Financial Data
Net cash provided by operating activities	$ 1,094		$ 198		$ 243		$ 265		$ 221
Net cash provided by (used for) investing activities	(139	)	(385	)	68		706		(277	)
Net cash provided by (used for) financing activities	(377	)	306		(313	)	(967	)	55
Depreciation, depletion and amortization	364		357		360		377		408
Capital investments and acquisitions	172		394		384		274		285
Working capital, net (e)	(157	)	(3,797	)	14		(139	)	(3	)
Net property, plant, equipment and timberland	3,083		3,541		3,486		3,774		4,289
Total assets	5,054		4,539		7,387		7,776		9,114
Total debt (e)(f)	3,793		3,718		3,359		3,634		4,571
Stockholders’ equity (deficit)	(1,517	)	(1,548	)	1,712		1,636		1,711
Statistical Data (tons in thousands)
Containerboard production (tons)	6,033		6,853		7,336		7,402		7,215
Market pulp production (tons)	294		470		574		564		563
SBS/SBL production (tons)	130		125		269		313		283
Kraft paper production (tons)	110		145		177		199		204
Corrugated containers sold (billion square feet)	67.1		71.5		74.8		80.0		81.3
Fiber reclaimed and brokered (tons)	5,182		6,462		6,842		6,614		6,501
Number of employees (g)	19,000		21,300		22,700		25,200		33,500

Table of Contents

~~Notes~~ Reconciliation to ~~Selected~~GAAP Financial ~~Data~~Measures

(a) In 2009, we recorded other operating income of $633 million, net of fees and expenses, associated with an excise tax credit for alternative fuel mixtures produced. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - “Alternative Fuel Tax Credit.”

					Predecessor

		Successor			Predecessor
		Successor						Year Ended December 31,
		Six Months Ended December 31, 2010			Six Months Ended June 30, 2010			Year Ended December 31,
(In millions, except per share data)		Six Months Ended December 31, 2010			Six Months Ended June 30, 2010			2009			2008
Net income (loss) attributable to common stockholders (GAAP)		$	114		$	1,320		$	(3	)	$	(2,830	)
	Reorganization items (income) expense, net of income taxes		7			(1,378	)		(40	)
	Debtor-in-possession financing costs								63
	Alternative fuel mixture tax credits					(11	)		(633	)
	Loss on early extinguishment of debt								20
	Non-cash foreign currency exchange (gains) losses					(3	)		14			(36	)
	Interest on Predecessor unsecured debt								163
	Restructuring charges, net of income taxes		15			15			319			45
	(Gain) loss on disposal of assets		(1	)					2			(1	)
	Multi-employer pension plan withdrawal charge, net of income taxes		3
	Goodwill and other intangible assets impairment charges, net of income taxes											2,757
	Litigation charges, net of income taxes											5
	Loss on ineffective interest rate swaps marked-to- market, net of income taxes											7
	Resolution of income tax matters											(84	)

Adjusted net income (loss) attributable to common stockholders		$	138		$	(57	)	$	(95	)	$	(137	)

Net income (loss) per diluted share attributable to common stockholders (GAAP)		$	1.13		$	5.07		$	(0.01	)	$	(11.01	)
	Reorganization items (income) expense, net of income taxes		0.07			(5.28	)		(0.16	)
	Debtor-in-possession financing costs								0.24
	Alternative fuel mixture tax credits					(0.04	)		(2.46	)
	Loss on early extinguishment of debt								0.08
	Non-cash foreign currency exchange (gains) losses					(0.01	)		0.06			(0.14	)
	Interest on Predecessor unsecured debt								0.63
	Restructuring charges, net of income taxes		0.15			0.06			1.24			0.17
	(Gain) loss on disposal of assets		(0.01	)					0.01
	Multi-employer pension plan withdrawal charge, net of income taxes		0.03
	Goodwill and other intangible assets impairment charges, net of income taxes											10.73
	Litigation charges, net of income taxes											0.02
	Loss on ineffective interest rate swaps marked-to- market, net of income taxes											0.03
	Resolution of income tax matters											(0.33	)

Adjusted net income (loss) per diluted share attributable to common stockholders		$	1.37		$	(0.20	)	$	(0.37	)	$	(0.53	)

(b) In 2008, we recorded goodwill and other intangible assets impairment charges of $2,757 million, net of an income tax benefit of $4 million. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - “Goodwill and Other Intangible Assets Impairment Charges in 2008.”34

~~(c) In~~Table ~~2007, we recorded a loss~~ of ~~$65 million (after-tax loss of approximately $97 million) related to the sale of our Brewton, Alabama mill. As a result, we no longer produce solid bleached sulfate (SBS).~~Contents

~~(d) In 2009,~~ ~~2008,~~Reconciliation ~~2007,~~to ~~2006,~~GAAP ~~and~~Financial ~~2005, we recorded restructuring charges of $319 million, $67 million, $16 million, $43 million, and $321 million, respectively.~~Measures

(e) The filing of the Chapter 11 Petition and the Canadian Petition constituted an event of default under our debt obligations, and those debt obligations became automatically and immediately due and payable. As a result, the accompanying consolidated balance sheet as of December 31, 2008 includes a reclassification of $3,032 million to current maturities of long-term debt from long-term debt. As of December 31, 2009, secured debt of $1,354 million is classified as a current liability in the accompanying consolidated balance sheet. At December 31, 2009, total debt includes unsecured debt of $2,439 million which is recorded in liabilities subject to compromise.

					Predecessor

		Successor			Predecessor
		Successor						Year Ended December 31,
		Six Months Ended December 31, 2010			Six Months Ended June 30, 2010			Year Ended December 31,
(In millions, except per share data)		Six Months Ended December 31, 2010			Six Months Ended June 30, 2010			2009			2008
Net income (loss) (GAAP)		$	114		$	1,324		$	8		$	(2,818	)
	(Benefit from) provision for income taxes		76			(199	)		(23	)		(177	)
	Goodwill & other intangible assets impairment charges											2,761
	Interest expense net		45			23			265			262
	Depreciation, depletion and amortization		169			168			364			357

EBITDA			404			1,316			614			385
	Reorganization items (income) expense		12			(1,178	)		(40	)
	Debtor-in-possession financing costs								63
	Alternative fuel mixture tax credits					(11	)		(633	)
	Loss on early extinguishment of debt								20
	Non-cash foreign currency exchange (gains) losses					(3	)		14			(36	)
	Restructuring charges		25			15			319			67
	(Gain) loss on disposal of assets		(1	)					3			(2	)
	Multi-employer pension plan withdrawal charge		4
	Litigation charges											8
	Receivables discount expense								1			17
	Other					9			1

Adjusted EBITDA		$	444		$	148		$	362		$	439

~~(f) In 2009, 2008, 2007, 2006, and 2005, debt includes obligations under capital leases of $3 million, $5 million, $7 million, $7 million, and $12 million, respectively.~~35

~~(g) Number~~ of Table ~~employees for 2006 excludes approximately 6,600 employees~~ of ~~our~~Contents ~~former Consumer Packaging division, which was sold on June 30, 2006.~~

25 OVERVIEW

~~Table~~We are an integrated manufacturer of ~~Contents~~paperboard and paper-based packaging. Our major products are containerboard, corrugated containers, market pulp, reclaimed fiber and kraft paper. We operate in one reportable industry segment. Our mill operations supply paper to our corrugated container converting operations. The products of our converting operations, as well as the mill and recycling tonnage in excess of what is consumed internally, are the main products sold to third parties. Our operating facilities and customers are located primarily in the United States and Canada.

~~ITEM~~Market conditions 7and demand for our products are subject to cyclical changes in the economy and changes in industry capacity, both of which can significantly impact selling prices and our profitability. ~~MANAGEMENT’~~In recent years, the loss of U.S. ~~DISCUSSION~~manufacturing ~~AND~~to ~~ANALYSIS~~offshore OFcompetition ~~FINANCIAL~~and ~~CONDITION~~the ~~AND~~changing ~~RESULTS~~retail OFenvironment ~~OPERATIONS~~in the U.S. has played a key role in reducing growth in domestic packaging demand. The influence of superstores and discount retailing giants, as well as the impact from online shopping, has resulted in a shifting of demand to packaging which is more condensed, lighter weight and less expensive. These factors have greatly influenced the corrugated industry.

~~OVERVIEW~~For the six months ended December 31, 2010 and June 30, 2010 and the year ended December 31, 2009, we had operating income (loss) of $245 million, $(37) million and $293 million, respectively. Operating income for the six months ended December 31, 2010 and June 30, 2010 was positively impacted by higher segment profits principally due to higher average selling prices for containerboard, higher third-party sales volume of containerboard and corrugated containers and reduced market-related downtime, which were partially offset by higher costs for reclaimed fiber. The 2009 operating profit was positively impacted by other operating income of $633 million related to the alternative fuel tax credits but was negatively impacted by lower average sales prices, lower sales volumes and higher restructuring expenses, due primarily to the closure of two containerboard mills.

~~On January 26, 2009, we, Smurfit-Stone and~~Our ~~our~~outlook ~~U.S.~~for ~~and~~2011 ~~Canadian~~is ~~subsidiaries filed~~ for ~~relief~~business ~~under~~fundamentals ~~Chapter~~and 11packaging ofdemand ~~the Bankruptcy~~to ~~Code~~remain instable. ~~the~~While ~~United~~we ~~States~~expect ~~Bankruptcy~~inflation ~~Court~~ in ~~Wilmington, Delaware. On~~our ~~the same day~~fiber, ~~our~~energy ~~Canadian subsidiaries~~and ~~also~~other ~~filed~~key toinput ~~reorganize~~costs, ~~under~~we ~~the~~expect ~~Companies’~~improved ~~Creditors Arrangement~~earnings ~~Act~~ in ~~the~~2011 compared ~~Ontario~~to ~~Superior~~2010 ~~Court~~due ofto ~~Justice~~higher inaverage ~~Canada. Our~~sales ~~operations~~prices inand ~~Mexico~~volumes and ~~Asia~~incremental ~~were not~~benefits ~~included~~from inour ~~the~~selling ~~filing~~ and ~~will~~administrative ~~continue~~cost ~~to operate outside of the Chapter 11 process~~reductions. ~~See Part I, Item 1. Business - “Bankruptcy Proceedings.”~~

We ~~are~~SUBSEQUENT an integrated manufacturer of paperboard and paper-based packaging. Our major products are containerboard, corrugated containers, market pulp, reclaimed fiber and kraft paper. We operate in one reportable industry segment. Our mill operations supply paper to our corrugated container converting operations. The products of our converting operations, as well as the mill and reclamation tonnage in excess of what is consumed internally, are the main products sold to third parties. Our operating facilities and customers are located primarily in the United States and Canada.EVENTS

~~Market~~On ~~conditions~~January 23, ~~and~~2011, ~~demand~~the ~~for~~Company ~~our products~~and ~~are~~Rock-Tenn ~~subject~~entered tointo ~~cyclical changes in~~ the ~~economy~~Merger ~~and changes in industry capacity~~Agreement, ~~both~~pursuant ofto which ~~can~~the ~~significantly~~Company ~~impact~~will ~~selling~~merge ~~prices~~ with and ~~our profitability. In~~into ~~recent~~a ~~years,~~subsidiary ~~the loss~~ of ~~domestic~~Rock-Tenn. ~~manufacturing~~This toMerger, ~~offshore~~unanimously ~~competition~~approved ~~and~~by the ~~changing~~Boards ~~retail environment~~of inDirectors ~~the U.S. has played a key role in reducing growth in domestic packaging demand. The influence~~ of ~~superstores~~ ~~and~~both ~~discount retailing giants~~companies, aswill ~~well~~create asa ~~the~~leader ~~impact from online shopping, has resulted~~ in athe ~~shifting~~North ofAmerican ~~demand~~paperboard to packaging ~~which is more~~market ~~condensed,~~with ~~lighter~~combined ~~weight~~revenues ~~and~~of ~~less~~approximately ~~expensive.~~$9 ~~These factors have greatly influenced the corrugated industry~~billion.

~~The U.S. economy experienced a~~For ~~severe~~each ~~downturn~~share inof ~~the~~our ~~fourth~~common ~~quarter~~stock, ofour ~~2008~~stockholders ~~with~~will ~~minimal~~be ~~improvement~~entitled ~~seen~~to ~~in 2009~~receive 0. ~~Industry-wide~~30605 ~~shipments~~shares of ~~corrugated~~ ~~products~~Rock-Tenn ~~decreased~~common 7stock and $17.7%50 in ~~2009~~cash, ~~compared~~representing to50% ~~2008. Reported~~cash ~~2009~~and ~~industry~~50% ~~containerboard~~stock on the ~~production~~date ~~decreased~~of ~~7.3%~~the ~~compared~~signing toof ~~2008~~the Merger Agreement. On January In23, ~~2009~~2011, ~~industry~~the ~~published~~equity ~~prices~~consideration ~~for~~was ~~containerboard~~$35 ~~declined~~per ~~during the~~our ~~first~~common ~~half~~share ofor ~~2009~~approximately ~~and~~$3.5 billion, ~~were~~consisting ~~down~~of approximately $701.8 billion ~~per~~of ~~ton~~cash ~~for~~and the ~~year~~issuance ~~compared~~of toapproximately ~~the December~~30.9 ~~2008 price~~million shares of Rock-Tenn common stock. ~~Reported~~In ~~industry~~addition, ~~containerboard~~Rock-Tenn ~~inventories~~will atassume ~~the~~our ~~end~~liabilities, ofincluding ~~December 2009~~debt and underfunded pension liabilities, which were ~~approximately~~$1,194 million ~~345~~and $1,~~000~~145 million, ~~tons~~respectively, orat 13December 31, 2010.9 Following the acquisition, Rock-Tenn stockholders will own approximately 56% ~~below~~and ~~December 2008~~our ~~levels~~stockholders will own 44% of the combined company.

~~Our~~The transaction ~~operating~~is ~~results~~expected ~~improved in 2009 compared~~ to ~~2008~~close ~~primarily~~in ~~as a result of~~ the ~~alternative~~second ~~fuel~~quarter ~~tax credit and lower costs, but were significantly impacted by lower sales volume and lower average sales prices as a result~~ of ~~the~~2011 ~~weak economic conditions. We experienced significant declines in sales volume~~ and ~~sales~~is ~~prices~~subject ~~for containerboard, corrugated containers and reclaimed material. In response~~ to ~~the~~customary ~~weak~~closing ~~economic~~ conditions, weregulatory ~~took~~approvals, ~~approximately one~~as ~~million~~well ~~tons~~as ofapproval ~~market~~by ~~related~~both ~~downtime~~Rock-Tenn inand ~~2009~~our stockholders.

For 2009, we had net income of $8 million compared to a net loss of $2,818 million for 2008. The 2009 results benefited from the alternative fuel tax credit income of $633 million and lower costs, but were negatively impacted by the lower sales volumes, lower average selling prices and higher restructuring expense. The higher restructuring expense was due primarily to the permanent closure of two containerboard mills. The 2008 loss includes goodwill and other intangible asset impairment charges of $2,761 million but includes a benefit of $84 million from the resolution of Canadian income tax examination matters and $36 ~~million of foreign currency exchange gains.~~

InTable ~~the second quarter~~ of 2010, we expect to emerge from bankruptcy. Excluding the impact of the alternative fuel tax credit, which expired in December 2009, we expect our operating performance to improve in 2010. As the economy continues to improve, we expect higher selling prices for containerboard and corrugated containers compared to December 2009 levels. In 2010, we project slightly higher production of containerboard and shipments of corrugated containers. We expect our 2010 results to benefit from lower costs related to operating improvements and reduced market related downtime. However, we expect the improvement will be partially offset by higher costs, including reclaimed fiber and energy.Contents

26 REORGANIZATION ITEMS AND OTHER BANKRUPTCY COSTS

~~Table~~For the six months ended December 31, 2010, we recorded reorganization items expense of ~~Contents~~$12 million as we continued to incur costs related to professional fees that are directly attributable to the reorganization.

~~ALTERNATIVE~~Reorganization items ~~FUEL~~income ~~TAX~~of ~~CREDIT~~$1,178 million for the six months ended June 30, 2010, include a gain from the bankruptcy emergence plan effects of $580 million and a gain on fresh start accounting adjustments of $742 million, which were partially offset by other reorganization charges including provision for rejected/settled executory contracts and leases and professional fees. The gain due to plan effects represents the net gains recorded as a result of implementing the Plan of Reorganization, including eliminating approximately $2,439 million of debt. The gain due to fresh start accounting represents the net gains recognized as a result of adjusting all assets and liabilities to fair value.

~~The U.S.~~During ~~Internal~~2009, ~~Revenue~~we ~~Code~~recorded ~~allowed~~income ~~an excise tax credit~~ for ~~alternative~~reorganization ~~fuel mixtures~~items ~~produced~~of ~~by a taxpayer for sale, or for use as a fuel in a taxpayer’s trade or business through December~~$40 ~~31,~~million ~~2009, at~~ which ~~time~~was ~~the~~directly ~~credit expired. In~~related ~~May 2009,~~to wethe ~~were notified~~process ~~that~~of our ~~registration~~reorganizing asunder anChapter 11 ~~alternative~~and ~~fuel mixer was approved by~~ the ~~Internal~~ ~~Revenue Service~~CCAA. We ~~subsequently~~Debtor-in-possession ~~submitted~~debt ~~refund~~issuance ~~claims~~costs of ~~approximately~~ $~~654~~ 63 million ~~for~~were ~~the period~~incurred ~~December 1,~~and ~~2008~~paid ~~through~~during ~~December 31,~~ 2009 ~~related~~in toconnection ~~production at~~with ~~ten~~entering ofinto ~~our~~the ~~U.S.~~DIP ~~mills~~Credit Agreement, ofand ~~which~~are ~~$595~~separately disclosed ~~million~~in ofthe ~~this~~consolidated ~~refund~~statements ~~request~~of ~~was received during 2009~~operations. We ~~recorded~~For ~~other operating~~additional ~~income of $633 million~~information, ~~net~~see ~~of fees and expenses~~Part I, inItem 1. ~~our~~Business — ~~consolidated~~Bankruptcy Proceedings — ~~statements~~Financial ofReporting ~~operations~~Considerations-"Reorganization ~~related~~Items" toand ~~this~~"Other ~~matter~~Bankruptcy ~~during~~Related ~~2009~~Costs."

~~RESTRUCTURING~~ ~~ACTIVITIES~~ALTERNATIVE FUEL TAX CREDIT

WeThe ~~continue~~U.S. toInternal ~~review~~Revenue ~~and~~Code ~~evaluate various~~allowed ~~restructuring~~an ~~and~~excise ~~other~~tax ~~alternatives~~credit tofor ~~streamline~~alternative ~~operations~~fuel mixtures produced by a taxpayer for sale, ~~improve~~or for use as a fuel in a ~~efficiencies~~taxpayer's ~~and~~trade ~~reduce~~or ~~costs~~business through December 31, 2009, at which time the credit expired. ~~These~~ In May 2009, we were notified that our registration as an alternative fuel mixer was approved by the ~~actions~~Internal ~~subject~~Revenue usService. We subsequently submitted refund claims of approximately $654 million for 2009 related to ~~additional~~production ~~short-term~~at ~~costs,~~ten ~~which~~of ~~may~~our ~~include~~U.S. ~~facility~~mills. We received refund claims of ~~shutdown~~$595 million ~~costs,~~in ~~asset~~2009 ~~impairment~~and ~~charges~~$59 million during the first quarter of 2010. We recorded other operating income of $633 million, ~~lease~~net ~~commitment~~of ~~costs~~fees and expenses, ~~severance~~in our consolidated statements ~~costs~~of ~~and~~operations related to this matter during 2009. In March 2010, we recorded other ~~closing~~operating ~~costs~~income of $11 million relating to an adjustment of refund claims submitted in 2009. We expect to receive the $11 million refund claim during the first quarter of 2011.

In ~~2009,~~RESTRUCTURING we closed 11 converting facilities and permanently ceased production at the Ontonagon, Michigan medium mill and the Missoula, Montana linerboard mill. As a result of these closures and other ongoing initiatives, we reduced our headcount by approximately 2,350 employees. We recorded restructuring charges of $319 million, net of gains of $4 million from the sale of properties related to previously closed facilities. Restructuring charges included non-cash charges of $254 million related to the write-down of assets, primarily property, plant and equipment, to estimated net realizable values and the acceleration of depreciation for converting equipment expected to be abandoned or taken out of service. The remaining charges of $69 million were primarily for severance and benefits. The net sales of the closed converting facilities in 2009 prior to closure and for the years ended December 31, 2008 and 2007 were $62 million, $217 million and $258 million, respectively. The majority of these net sales are expected to be transferred to other operating facilities. The Ontonagon, Michigan medium mill had annual production capacity of 280,000 tons and the Missoula, Montana linerboard mill had annual production capacity of 620,000 tons. Additional charges of up to $2 million are expected to be recorded in future periods for severance and benefits related to the closure of mill and converting facilities.ACTIVITIES

InWe ~~2008,~~continue weto ~~closed~~review ~~eight converting facilities, announced the closure of two additional converting facilities~~ and ~~permanently~~ ~~ceased~~evaluate ~~operations~~various ofrestructuring ~~our containerboard machine at the Snowflake, Arizona mill~~ and ~~production at the Pontiac pulp mill located in Portage-du-Fort, Quebec. As a result of these closures and~~ other ~~ongoing~~alternatives strategic initiatives, the Company reduced its headcount by approximately 1,230 employees. We recorded restructuring charges of $67 million, net of a gain of $2 million from the sale of a previously closed facility. Restructuring charges included non-cash charges of $23 million related to ~~the~~streamline ~~write-down~~our ~~of assets~~operations, ~~primarily~~improve ~~property, plant~~efficiencies and ~~equipment,~~reduce ~~to estimated net realizable values and the acceleration of depreciation for mill and converting equipment expected to be abandoned or taken out of service~~costs. ~~The remaining~~ ~~charges~~These ofactions ~~$46~~will ~~million~~subject ~~were~~us ~~primarily for severance and benefits. The net sales of the announced and closed converting facilities in 2008 prior~~ to ~~closure~~additional ~~and~~short-term ~~for the year ended December 31~~costs, ~~2007~~ ~~were~~which ~~$264~~may ~~million~~include ~~and~~facility ~~$393~~shutdown ~~million~~costs, ~~respectively. The~~asset ~~Snowflake,~~impairment ~~Arizona containerboard machine had the capacity to produce 135~~charges,~~000~~ ~~tons~~lease ofcommitment ~~medium annually. The Pontiac pulp mill had annual production capacity of 253~~costs,~~000~~ ~~tons~~severance ofcosts ~~northern~~and ~~bleached~~other ~~hardwood kraft paper-grade pulp,~~closing ~~which was non-core to our primary business~~costs.

InFor the ~~2007~~six months ended December 31, 2010, we closed 12two converting facilities and ~~the~~sold ~~Carthage,~~four ~~Indiana~~previously ~~and~~closed ~~Los~~facilities. ~~Angeles~~In addition, ~~California~~we ~~medium~~initiated ~~mills and~~a ~~reduced~~plan ~~our~~to ~~headcount~~reduce byour ~~approximately~~selling 1and administrative costs,~~750~~ ~~employees~~primarily through reductions in our workforce in these functions. We recorded restructuring charges of $16 25 million, ~~net~~primarily offor ~~gains~~severance ofand ~~$69~~benefits ~~million~~related ~~from~~to the closure ~~sale~~ of ~~properties~~these ~~related~~facilities ~~to previously~~and ~~closed~~the ~~facilities~~reduction in selling and administrative workforce. Restructuring charges ~~include~~included non-cash charges oftotaling $48 3 million ~~related to the write-down~~ of ~~assets,~~which ~~primarily~~$4 million was ~~property,~~due ~~plant~~to ~~and~~the ~~equipment,~~acceleration toof ~~estimated net~~stock ~~realizable~~compensation ~~values~~expense ~~and~~from the ~~acceleration~~reductions ofin ~~depreciation~~workforce, ~~for~~offset ~~equipment expected~~by toa be$1 million ~~abandoned~~non-qualified orpension ~~taken~~plan ~~out~~curtailment ~~of service~~gain. ~~The~~ ~~remaining~~We ~~charges~~reduced ~~of $37 million were~~our ~~primarily~~overall ~~for~~headcount ~~severance~~by ~~and~~approximately ~~benefits~~960 employees. The net sales of the closed converting facilities in ~~2007~~2010 prior to closure and for the years ended December 31, 2009 and 2008 were $53 million, $6544 million, and $31 million, respectively. The ~~production~~ majority of ~~the~~these ~~two~~net ~~medium~~sales ~~mills,~~are ~~which~~expected ~~had~~to ~~combined~~be ~~annual~~transferred ~~capacity~~to ofother ~~200,000~~operating ~~tons, was~~facilities. ~~partially~~We ~~offset~~expect byto ~~restarting~~realize ~~the~~net savings ~~previously~~of ~~idled~~more ~~machine~~than at$50 million ~~the Jacksonville,~~in ~~Florida~~our ~~mill~~selling ~~with~~and ~~annual~~administrative ~~capacity~~costs in 2011 compared to ~~produce~~2010 ~~170,000~~and ~~tons~~have ~~of medium~~identified opportunities for additional savings impacting 2012.

2737

Table of Contents

~~REORGANIZATION~~For the ~~ITEMS~~six ~~AND~~months ended June 30, 2010, we closed four converting facilities and sold five previously closed facilities. As a result of these closure activities and other ongoing initiatives, ~~OTHER~~we ~~BANKRUPTCY~~reduced ~~COSTS~~our headcount by approximately 900 employees. We recorded restructuring charges of $15 million, including a $12 million gain related to the sale of previously closed facilities, of which $8 million resulted from the legal release of environmental liability obligations. Restructuring charges included non-cash charges of $11 million related to the acceleration of depreciation for converting equipment abandoned or taken out of service. The remaining charges of $16 million were for severance and benefits, lease commitments and facility closure costs. The net sales of these closed converting facilities in 2010 prior to closure and for the years ended December 31, 2009 and 2008 were $21 million, $97 million, and $125 million, respectively. The majority of these net sales are expected to be transferred to other operating facilities.

~~During~~ In 2009, we ~~recorded~~closed ~~income~~11 ~~for~~converting facilities and permanently ceased production at the Ontonagon, Michigan medium mill and the Missoula, Montana linerboard mill. As a result of these closures and other ~~reorganization~~ongoing ~~items~~initiatives, we reduced our headcount by approximately 2,350 employees. We recorded restructuring charges of $40319 million, net of gains of $4 million ~~which~~from ~~was~~the ~~directly~~sale of properties related to previously closed facilities. Restructuring charges included non-cash charges of $254 million related to the ~~process~~ write-down of ~~our~~assets, ~~reorganizing~~primarily ~~under~~property, ~~Chapter~~plant and 11equipment, to estimated net realizable values and the ~~CCAA~~acceleration of depreciation for converting equipment expected to be abandoned or taken out of service. ~~Debtor-in-possession~~ ~~debt~~The ~~issuance~~remaining ~~costs~~charges of $63 69 million were ~~incurred~~primarily ~~and~~for ~~paid~~severance ~~during~~and ~~2009~~benefits. inThe ~~connection~~net ~~with~~sales ~~entering~~of ~~into~~ the ~~DIP~~closed ~~Credit~~converting ~~Agreement,~~facilities ~~and~~in ~~are~~2009 ~~separately~~prior ~~disclosed~~to inclosure and for the ~~consolidated statements~~year ofended ~~operations. For~~December 31, ~~additional~~2008 were ~~information,~~$62 million ~~see~~and ~~Part~~$217 Imillion, ~~Item 1~~respectively. ~~Business~~The –Ontonagon, ~~Bankruptcy~~Michigan ~~Proceedings~~medium ~~– Financial~~mill ~~Reporting~~had ~~Considerations-~~annual ~~“Reorganization~~production ~~Items”~~capacity of 280,000 tons and ~~“Other~~the Missoula, Montana linerboard mill had annual ~~Bankruptcy~~production ~~Related~~capacity ~~Costs~~of 620,000 tons.”

~~GOODWILL~~In 2008, ~~AND~~we ~~OTHER~~closed eight converting facilities, announced the closure of two additional converting facilities and permanently ceased operations of our containerboard machine at the Snowflake, Arizona ~~INTANGIBLE~~mill ~~ASSETS~~and ~~IMPAIRMENT~~production ~~CHARGES~~at INthe Pontiac pulp mill located in Portage-du-Fort, Quebec. As a result of these closures and other ongoing initiatives, we reduced our headcount by approximately 1,230 employees. We recorded restructuring charges of $67 million, net of a gain of $2 million from the sale of a previously closed facility. Restructuring charges included non-cash charges of $23 million related to the write-down of assets, primarily property, plant and equipment, to estimated net realizable values and the acceleration of depreciation for mill and converting equipment expected to be abandoned or taken out of service. The remaining charges of $46 million were primarily for severance and benefits. The net sales of the announced and closed converting facilities in 2008 prior to closure were $264 million. The Snowflake, Arizona containerboard machine had the capacity to produce 135,000 tons of medium annually. The Pontiac pulp mill had annual production capacity of 253,000 tons of northern bleached hardwood kraft paper-grade pulp, which was non-core to our primary business.

As ~~the~~GOODWILL ~~result~~AND ofOTHER ~~the~~INTANGIBLE ~~significant decline~~ASSETS inIMPAIRMENT ~~value~~CHARGES ofIN Smurfit-Stone’s equity securities and our debt instruments and downward pressure placed on earnings by the weakening U.S. economy, we evaluated the carrying amount of our goodwill and other intangible assets for potential impairment in the fourth quarter of 2008. We obtained third-party valuation reports as of December 31, 2008 that indicated the carrying amounts of our goodwill and other intangible assets were fully impaired based on declines in current and projected operating results and cash flows due to the current economic conditions. As a result, we recognized pretax impairment charges on goodwill and other intangible assets of $2,727 million and $34 million, respectively, during 2008. The goodwill consisted primarily of amounts recorded in connection with our merger with Stone Container Corporation in November of 1998.

~~SALE~~As OFthe ~~ASSETS~~result INof ~~2007~~the significant decline in value of our equity securities and our debt instruments and downward pressure placed on earnings by the weakening U.S. economy, we evaluated the carrying amount of our goodwill and other intangible assets for potential impairment in the fourth quarter of 2008. We obtained third-party valuation reports as of December 31, 2008 that indicated the carrying amounts of our goodwill and other intangible assets were fully impaired based on declines in current and projected operating results and cash flows due to the current economic conditions. As a result, we recognized pretax impairment charges on goodwill and other intangible assets of $2,727 million and $34 million, respectively, during 2008. The goodwill consisted primarily of amounts recorded in connection with our merger with Stone Container Corporation in November of 1998.

In September 2007, we completed the sale of the Brewton, Alabama, mill assets for $355 million. We received cash proceeds of $338 million, which excluded $16 million of accounts receivable previously sold to Stone Receivables Corporation under the accounts receivable securitization program and was net of $1 million of other closing adjustments. The Brewton mill had annual production capacity of approximately 300,000 tons of white top linerboard and 190,000 tons of SBS. We continue to produce white top linerboard at two of our mills. Substantially all of the proceeds were applied directly to debt reduction. We recorded a pretax loss of $65 million, and a $32 million income tax provision, resulting in a net loss of $97 million. The after-tax loss was the result of a provision for income taxes that was higher than the statutory income tax rate due to non-deductible goodwill of $146 million.38

~~RESULTS~~Table OFof ~~OPERATIONS~~Contents

~~Recently~~ ~~Adopted~~RESULTS ~~Accounting Standards~~OF OPERATIONS

~~The~~ ~~FASB’s~~Recently ~~ASC~~Adopted ~~105 was released on July 1, 2009 and became the single source of authoritative U.S. Generally Accepted~~ Accounting Principles (GAAP). The change was established by ASC 105, Generally Accepted Accounting Principles (ASC 105). Pursuant to the provisions of ASC 105, we have updated our references to GAAP in our consolidated financial statements issued for the period ended December 31, 2009. The adoption of ASC 105 did not impact our financial position, results of operations or cash flows.Standards

Effective ~~June~~January 151, ~~2009~~2010, we adopted the ~~provisions~~amendments ofto ASC ~~855~~ 860, ~~Subsequent~~"Transfers ~~Events~~and Servicing" ("ASC ~~855~~ 860"). ~~ASC~~ ~~855~~The ~~requires~~amendments ~~entities~~removed the toconcept ~~evaluate subsequent~~of ~~events~~a ~~through~~qualifying ~~the~~special-purpose ~~date~~entity and the related impact on consolidation, thereby potentially requiring consolidation of such special-purpose entities previously excluded from the consolidated financial statements ~~were issued~~. WeThe ~~have~~amendments ~~determined~~to ~~that~~ASC 860 nodid ~~material~~not ~~subsequent~~impact ~~events~~our ~~have~~consolidated ~~occurred~~financial statements.

Effective January 1, ~~2009~~2010, we adopted the ~~provisions~~amendments ofto ASC ~~810-10-65-1~~ 820, ~~Transition~~"Fair ~~Related~~Value toMeasurements ~~FASB~~and ~~Statement No.~~Disclosures" ("ASC ~~160,~~820"). ~~Non-controlling~~The ~~Interest~~amendments inrequire ~~Consolidated~~new ~~Financial~~disclosures ~~Statements~~for ~~– An~~transfers ~~Amendment~~in and out of ~~ARB~~fair ~~No. 51~~value ~~(ASC~~hierarchy ~~810-10-65-~~Levels 1~~). ASC~~ ~~810-10-65-1~~and ~~changes~~2 ~~the~~and ~~accounting~~activity ~~for non-controlling~~within ~~(minority)~~fair ~~interests~~value inhierarchy ~~consolidated~~Level 3. ~~financial~~The ~~statements, requires~~amendments ~~non-controlling~~also ~~interests~~clarify toexisting bedisclosures ~~reported~~regarding asthe ~~part~~disaggregation for each class of ~~equity~~assets and ~~changes~~ liabilities, and the ~~income~~disclosures ~~statement~~about ~~presentation~~inputs ofand ~~income~~valuation ortechniques. ~~losses~~The ~~attributable~~amendments to ~~non-controlling~~ ~~interests.~~ ASC ~~810-10-65-1~~ 820 did not have a material impact on our consolidated financial statements.

~~Effective~~ ~~December 31,~~Financial 2009, we adopted the provisions of ASC 715-20-65-2, Compensation - Retirement Benefits, which requires further disclosures about plan assets of a defined benefit pension or other post-retirement plan, including the employer’s investment policies and strategies, major categories Data

							Predecessor

		Successor					Predecessor
		Successor										Year Ended December 31,
		Six Months Ended December 31, 2010					Six Months Ended June 30, 2010					Year Ended December 31,
		Six Months Ended December 31, 2010					Six Months Ended June 30, 2010					2009					2008
(In millions)		Net Sales		Profit/ (Loss)			Net Sales		Profit/ (Loss)			Net Sales		Profit/ (Loss)			Net Sales		Profit/ (Loss)
Containerboard, corrugated containers and recycling operations		$	3,262	$	390		$	3,024	$	116		$	5,574	$	243		$	7,042	$	317
Restructuring expense					(25	)				(15	)				(319	)				(67	)
Goodwill and intangible asset impairment charges																				(2,761	)
Gain (loss) on disposal of assets					1										(3	)				5
Alternative fuel tax credit										11					633
Interest expense, net					(45	)				(23	)				(265	)				(262	)
Debtor-in-possession debt issuance costs															(63	)
Loss on early extinguishment of debt															(20	)
Foreign currency exchange gains (losses)										3					(14	)				36
Reorganization items income (expense), net					(12	)				1,178					40
Corporate expenses and other (Note 1)					(119	)				(145	)				(247	)				(263	)

	Income (loss) before income taxes			$	190				$	1,125				$	(15	)			$	(2,995	)

~~Table~~Note 1: Corporate ofexpenses ~~Contents~~and other include corporate expenses and other expenses that are not allocated to operations.

of ~~plan~~2010 ~~assets,~~COMPARED ~~inputs~~TO and valuation techniques used to measure the fair value of plan assets, the effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period and concentrations of risk within plan assets.2009

~~Financial~~ ~~Data~~Effect of Fresh Start Accounting

(In millions)	2009			2008				2007
	Net Sales	Profit/ (Loss)		Net Sales	Profit/ (Loss)			Net Sales	Profit/ (Loss)
Containerboard, corrugated containers and reclamation operations	$5,574	$243		$7,042	$317			$7,420	$604
Restructuring expense		(319)			(67)				(16)
Goodwill and intangible asset impairment charges					(2,761)
Gain (loss) on sale of assets		(3)			5				(62)
Alternative fuel tax credit		633
Interest expense, net		(265)			(262)				(285)
Debtor-in-possession debt issuance costs		(63)
Loss on early extinguishment of debt		(20)							(29)
Foreign currency exchange gains (losses)		(14)			36				(52)
Reorganization items		40
Corporate expenses and other (Note 1)			(247)			(263)				(236)
Loss before income taxes			$ (15)		$(2,995		)		$ (76)

The application of fresh start accounting affected certain assets, liabilities, and expenses. As a result, certain financial information of the Successor as of and for the period after June 30, 2010 is not comparable to Predecessor financial information. Therefore, for comparative purposes, we did not combine certain financial information for the Successor period July 1, 2010 through December 31, 2010 with the Predecessor period January 1, 2010 through June 30, 2010. Because net sales were not affected

~~Note 1: Corporate expenses and other include corporate expenses and other expenses that are not allocated to operations.~~39

~~2009~~Table ~~COMPARED~~of ~~TO 2008~~Contents

~~We had net income of $8 million~~by ~~compared~~fresh tostart ~~a net loss of $2~~accounting,~~818~~ ~~million~~ for ~~2008. The 2009 results benefited from~~ the ~~alternative~~ ~~fuel~~purpose ~~tax credit income~~ of ~~$633~~the ~~million~~following ~~and lower costs~~discussion, ~~but~~we ~~were negatively~~have ~~impacted~~combined byour ~~higher~~net ~~restructuring expense of $252 million and lower~~ sales ~~prices and sales volume~~ for ~~corrugated~~the ~~containers~~Successor and ~~containerboard. The~~Predecessor ~~2008~~periods ~~loss includes goodwill and other intangible assets impairment charges~~ of ~~$2,761~~2010. ~~million~~Refer ~~but~~to ~~includes~~Note 1 ato ~~benefit~~our ofNotes ~~$84~~to ~~million~~Consolidated ~~from~~Financial ~~the~~Statements ~~resolution~~for ofadditional ~~Canadian~~information ~~income~~on ~~tax~~fresh ~~examination~~start ~~matters and $36 million of foreign currency exchange gains~~accounting.

~~Net~~ ~~sales~~Combined ~~decreased 20.8% in 2009 compared to last year.~~ Net sales were $846 million lower in 2009, as a result of lower third-party sales volume of containerboard, corrugated containers and reclaimed fiber. Third-party shipments of containerboard were lower due primarily to weaker demand in the markets in which we operate. North American shipments of corrugated containers in 2009 were negatively impacted by weaker market conditions and container plant closures. Net sales were also impacted by lower average selling prices ($622 million) for containerboard, corrugated containers and reclaimed fiber. The average price for old corrugated containers (OCC) decreased approximately $45 per ton compared to last year.Sales

Our containerboard mills operated at 85.4% of capacity in 2009, compared to 95.5% in 2008. Containerboard production was 12.0% lower compared to last year due primarily due to the market related downtime taken by our mills as a result of lower demand in 2009. In response to the weaker market conditions in 2009, we took approximately 1,029,000 tons of containerboard market related downtime compared to 245,000 tons in 2008. Production of market pulp decreased by 37.4% compared to last year due primarily to the closure of the Pontiac pulp mill in October 2008. Production of kraft paper decreased 24.1% compared to last year due primarily to lower demand, which resulted in market related downtime incurred during the first half of 2009. Total tons of fiber reclaimed and brokered decreased 19.8% compared to last year due to the lower containerboard production and weaker demand.

	Successor		Predecessor		Combined Successor and Predecessor		Predecessor

(In millions)	Six Months Ended December 31, 2010		Six Months Ended June 30, 2010		Year Ended December 31, 2010		Year Ended December 31, 2009
Net sales	$	3,262	$	3,024	$	6,286	$	5,574

~~Cost of~~Net ~~goods~~sales ~~sold~~increased as12.8% ain ~~percent~~2010 ofcompared ~~net~~to last year. Net sales inwere ~~2009~~positively ~~was~~impacted ~~90.1%~~by higher average selling prices ($504 million) for containerboard, ~~comparable~~corrugated tocontainers ~~90.0%~~and reclaimed material in 2010. The average price for old corrugated containers ("OCC") increased approximately $80 per ton compared to last year. ~~Cost~~ ofNet ~~goods~~sales ~~sold~~were ~~decreased from~~also ~~$6,338~~favorably impacted by $208 million in ~~2008~~2010 toas $5a result of higher third-party sales volume of containerboard,~~023~~ ~~million~~corrugated incontainers ~~2009~~and ~~due~~reclaimed material. Third party shipments of containerboard were higher due primarily to ~~lower sales~~stronger demand in the domestic market.

29 Cost of Goods Sold

Table of Contents

	Successor					Predecessor

(In millions)	Six Months Ended December 31, 2010		Percentage of Net Sales			Six Months Ended June 30, 2010		Percentage of Net Sales			Year Ended December 31, 2009		Percentage of Net Sales
Cost of goods sold	$	2,723		83.5	%	$	2,763		91.4	%	$	5,023		90.1	%

~~volumes~~Our ~~($761~~cost ~~million)~~of goods sold as a percentage of net sales for ~~containerboard~~the six months ended December 31, ~~corrugated~~2010 ~~containers~~was ~~and~~positively ~~reclaimed materials~~impacted ~~and~~by ~~lower~~higher ~~costs~~average asselling aprices. ~~result~~Our containerboard mills operated at 97.4%, 98.7% and 85.4% of capacity for the ~~additional~~six ~~market~~months ~~related~~ended ~~downtime taken~~December 31, in2010 and June 30, 2010, and the year ended 2009, respectively. In ~~addition,~~Due to market conditions we ~~had~~took ~~lower~~approximately ~~costs~~22,000 tons, zero tons and 1,029,000 tons of ~~reclaimed~~containerboard ~~material~~market ~~($268~~related ~~million)~~downtime for the six months ended December 31, ~~freight~~2010 ~~($64~~and ~~million)~~June 30, 2010, and ~~energy~~the year ended December 31, ~~($53~~2009, ~~million)~~respectively.

~~Selling~~ and administrative expense decreased $76 million in 2009 compared to 2008 primarily due to cost reductions from ongoing and prior year initiatives. In addition, 2008 includes the impact of the Calpine Corrugated charges totaling $22 million (See Note 6 of the Notes to Consolidated Financial Statements). Selling and ~~administrative~~Administrative ~~expense as a percent of net sales increased to 10.2% in 2009 from 9.2% in 2008 due primarily to the lower sales volume.~~Expenses

Interest expense, net was $265 million in 2009. The $3 million increase compared to 2008 was impacted by higher average borrowings ($35 million), which were partially offset by lower average interest rates ($20 million) in 2009. The higher average borrowings in 2009 were primarily due to borrowings under the DIP Credit Agreement, which were repaid in the second half of 2009. Our overall average effective interest rate in 2009 was lower than 2008 by 0.50%. In 2009, interest expense on unsecured debt of $180 million was stayed and not paid as a result of the bankruptcy proceedings. In December 2009, we recorded income in reorganization items for the reversal of $163 million of accrued post-petition unsecured interest expense in the consolidated statement of operations. For additional information on reorganization items, see Part I, Item 1. Business – Bankruptcy Proceedings – Financial Reporting Considerations – “Reorganization Items.” In 2008, a portion of our interest rate swap contracts were deemed to be ineffective and were marked-to-market, resulting in $12 million of additional interest expense.

	Successor					Predecessor

(In millions)	Six Months Ended December 31, 2010		Percentage of Net Sales			Six Months Ended June 30, 2010		Percentage of Net Sales			Year Ended December 31, 2009		Percentage of Net Sales
Selling and administrative expenses	$	270		8.3	%	$	294		9.7	%	$	569		10.2	%

InSelling and ~~2009~~administrative expenses for the six months ended December 31, we2010 ~~recorded~~were afavorably ~~loss~~impacted onby ~~early extinguishment~~the initiation of ~~debt~~our ofplan ~~$20~~to ~~million~~reduce ~~for~~our ~~the~~selling ~~non-cash~~and ~~write-off~~administrative ofcosts, ~~deferred~~primarily ~~debt~~through ~~issuance~~reductions ~~costs~~in ~~related~~our toworkforce in these functions. Selling and administrative expenses for the ~~Stevenson~~six months ended June 30, ~~Alabama~~2010 ~~mill~~were ~~industrial~~unfavorably ~~revenue~~impacted by amounts accrued under our 2009 ~~bonds,~~long-term ~~which~~incentive ~~were~~plan ~~repaid~~and higher benefit cost in the first half of the year due to timing.

~~In 2009, we recorded non-cash foreign currency exchange losses of $14 million compared to gains of $36 million for the same period in 2008.~~40

~~For~~Table ~~2009, we recorded a gain~~ of $40 million related to the process of reorganizing under Chapter 11 and the CCAA. For additional information on reorganization items, see Part I, Item 1. Business – Bankruptcy Proceedings – Financial Reporting Considerations – “Reorganization Items.”Contents

~~The benefit~~ from income taxes for the year ended December 31, 2009 of $23 million differed from the amount computed by applying the statutory U.S. federal income tax rate to loss before income taxes due primarily to the effect of refunds for previously unrecognized alternative minimum tax (AMT) credits that we expect to receive in 2010.Other

~~2008~~Interest ~~COMPARED~~expense, TOnet ~~2007~~was $45 million for the six months ended December 31, 2010, including amortization of deferred debt issuance costs and original issue discount of $5 million. Average borrowings under the Successor Exit Credit Facilities were $1,198 million, with an overall average effective interest rate of approximately 6.75%.

WeInterest expense, ~~had a~~ net ~~loss~~was of$23 million and $2265 million for the six months ended June 30,~~818~~ ~~million~~2010 and the year ended December 31, 2009, respectively. Average borrowings under ~~for~~the ~~2008~~Predecessor ~~compared~~credit tofacilities awere ~~net~~$3,801 million ~~loss~~and $4,095 million, including average secured borrowings of $~~103~~1,362 million and $1,656 million, for ~~2007~~the six months ended June 30, 2010 and the year ended December 31, 2009, respectively. ~~The~~ ~~higher~~Our ~~loss~~overall inaverage ~~2008~~effective ~~compared~~interest torate, ~~2007~~excluding unsecured debt, was ~~due~~ ~~primarily~~approximately to3.5% and 5.4% for the ~~goodwill~~six months ended June 30, 2010 and ~~other~~the ~~intangible~~year ~~asset~~ended ~~impairment~~December 31, ~~charges~~2010, ~~of $2~~respectively. For the year ended December 31,~~761~~ ~~million~~2009, ~~lower~~we ~~segment~~recorded ~~operating~~interest ~~profits~~expense of $~~287~~ 163 million ~~and higher~~on ~~restructuring~~unsecured ~~charges~~debt offrom ~~$51~~the ~~million~~Petition Date through November 30, 2009. ~~The~~In ~~2008~~December ~~results~~2009, ~~benefited~~we ~~$84~~discontinued ~~million from~~recording interest expense on unsecured debt when the ~~resolution~~Proposed Plan of ~~certain~~Reorganization ~~Canadian~~was issued, ~~income~~and ~~tax~~we ~~examination~~concluded ~~matters~~it ~~and~~was ~~from $36~~not ~~million~~probable ofthat ~~foreign~~interest ~~currency~~expense ~~exchange~~that ~~gains.~~was accrued from the Petition Date through November ~~The~~30, ~~2007~~2009 ~~results~~would ~~were~~be ~~negatively~~an ~~impacted~~allowed byclaim. ~~the~~In ~~after-tax~~December ~~loss~~2009, onwe ~~the~~recorded ~~sale~~income in reorganization items for the reversal of ~~our~~$163 million ~~Brewton,~~post-petition ~~Alabama~~unsecured ~~mill~~interest ~~and~~expense accrued from ~~$52~~the ~~million~~Petition ofDate ~~foreign~~through ~~currency~~November 30, 2009, and ~~exchange~~discontinued ~~losses~~recording unsecured interest expense.

~~Net sales decreased 5.1% in 2008~~In ~~compared~~2009, towe ~~2007. Net~~recorded ~~sales were negatively impacted by $623 million in 2008 as~~ a ~~result~~loss ofon ~~the~~early ~~sale~~extinguishment of ~~the Brewton,~~debt ~~Alabama mill in September 2007, lower corrugated container sales volume and lower third-party sales~~ of ~~containerboard. Net sales were favorably impacted by higher average selling prices (~~$~~245~~ 20 million) for ~~corrugated~~the ~~containers~~non-cash ~~and~~write ~~containerboard. Average~~off ~~domestic~~of ~~linerboard~~deferred ~~prices~~issuance ~~for~~costs ~~2008 were~~related ~~7.1% higher compared~~ to ~~2007. Our average~~the ~~North~~Stevenson, ~~American~~Alabama ~~selling~~mill ~~price for corrugated containers increased by~~industrial ~~3.6%~~revenue ~~compared to 2007. Our average sales prices for market pulp~~bonds, ~~SBS/SBL~~which and kraft paper increased 2.4%, 1.8% and 6.2%, respectively, compared to 2007. The average price for OCC decreased approximately $10 per ton compared to 2007. Third party shipments of containerboard decreased 8.8% compared to 2007. North American shipments of corrugated containers on a total and a per day basis were 4repaid.3% ~~and 4.7% lower, respectively, compared to 2007 due primarily to container plant closures, actions to improve margins by exiting unprofitable accounts and weaker market conditions.~~

We recorded non-cash foreign currency exchange gains of $3 million and losses of $14 million for the six months ended June 30, 2010 and the year ended December 31, 2009, respectively. Upon emergence, we reviewed the primary economic indicators for our Canadian operations under the Reorganized Smurfit-Stone and determined the functional currency for our Canadian operations to be the local currency. As a result, effective July 1, 2010, translation gains or losses are included with stockholders' equity as part of OCI.

~~Table~~For the six months ended June 30, 2010, we recorded an income tax benefit of ~~Contents~~$199 million primarily due to the $200 million income tax benefit related to the effects of the plan of reorganization and application of fresh start accounting which principally includes adjustments for cancellation of indebtedness, valuation allowances and unrecognized tax benefits.

~~Our containerboard mills operated at~~For ~~95.5%~~the ofsix ~~capacity~~months inended ~~2008~~December 31, ~~while~~2010, ~~containerboard~~we ~~production~~recorded ~~was~~an ~~6.6%~~income ~~lower compared~~tax toprovision ~~2007 due primarily to the sale~~ of ~~the~~$76 million. ~~Brewton,~~The ~~Alabama~~provision ~~mill,~~for ~~other mill~~income ~~closures~~taxes ~~and~~differed from the ~~market~~amount ~~related~~computed ~~downtime taken~~ by ~~our~~applying ~~mills in~~ the ~~fourth~~statutory ~~quarter of 2008~~U. InS. ~~the~~federal ~~fourth~~income ~~quarter of~~tax ~~2008, our containerboard mill operating~~ rate ~~declined~~ to ~~83.6%~~income ~~due~~before toincome ~~lower demand. Production~~taxes ~~of market pulp decreased by 18.1% compared to 2007~~ due primarily to ~~the~~income ~~closure~~adjustments ofresulting ~~the~~from ~~Pontiac pulp~~reconciling ~~mill~~filed intax ~~October 2008~~returns ~~and market related downtime taken in the fourth quarter of 2008. Production of kraft paper decreased 18.1% compared~~ to ~~2007. Production of SBS/SBL decreased by 53.5% compared to 2007 due primarily to~~ the ~~sale~~recorded oftax ~~the Brewton~~provision, ~~Alabama~~state ~~mill. Total~~income ~~tons~~taxes, ofand ~~fiber~~the ~~reclaimed~~effects ~~and~~of ~~brokered~~foreign ~~decreased~~tax 5rates.6% ~~compared to 2007 due to weakening export market conditions.~~

~~Cost~~ ~~of goods~~2009 ~~sold~~COMPARED asTO ~~a percent of net sales in~~ 2008 was 90.0%, compared to 86.3% in 2007. The increase was due primarily to higher costs for our major inputs and the negative impact of lower sales volume and market related downtime. Cost of goods sold decreased from $6,404 million in 2007 to $6,338 million in 2008 due primarily to cost reductions resulting from the sale of the Brewton, Alabama mill and the market related downtime taken at our mills in the fourth quarter of 2008, and lower costs of reclaimed material ($26 million), which was offset by higher costs of energy ($142 million), freight ($63 million), wood fiber ($77 million), and chemicals ($41 million).

~~Selling~~We ~~and administrative~~had ~~expense~~a ~~increased~~net $2loss attributable to common stockholders of $3 million, inor ~~2008~~$0.01 per share, compared to ~~2007~~a net loss of $2,830 million, or $11. ~~Selling~~01 per share, for 2008. The 2009 results benefited from the alternative fuel tax credit income of $633 million and ~~administrative~~lower ~~expense~~costs, asbut awere ~~percent~~negatively impacted by higher restructuring expense of ~~net~~$252 million and lower sales ~~increased~~prices ~~from~~and ~~8.7%~~sales involume ~~2007~~for tocorrugated 9containers and containerboard.2% inThe 2008 ~~due~~loss ~~primarily~~includes togoodwill and other intangible assets impairment charges of $2,761 million, or $10.74 per share, but includes a benefit of $84 million, or $0.33 per share, from the resolution of Canadian income tax examination matters and $36 million of ~~lower~~foreign ~~sales~~currency ~~volume~~exchange gains.

Interest expense, net was $262 million in 2008. The $23 million decrease compared to 2007 was positively impacted by lower average borrowings ($7 million) and lower average interest rates ($28 million). The lower average borrowings were primarily due to debt reduction from the sale of the Brewton, Alabama mill. Our overall average effective interest rate in 2008 was lower than 2007 by 0.85%. Our Tranche B and Tranche C term loans were expected to be refinanced prior to their current maturity. As a result, a portion of our interest rate swap contracts were deemed to be ineffective and were marked-to-market, resulting in $12 million of additional interest expense during 2008.41

InTable ~~2007, we recorded a loss on early extinguishment~~ of ~~debt of $29 million including $23 million for tender premiums and $6 million for the non-cash write-off of deferred debt issuance cost.~~Contents

InNet sales ~~2008~~decreased 20.8% in 2009 compared to last year. Net sales were $846 million lower in 2009, weas ~~recorded~~a ~~non~~result of lower third-~~cash~~party ~~foreign~~sales volume of containerboard, corrugated containers and ~~currency~~reclaimed ~~exchange~~fiber. ~~gains~~Third-party shipments of ~~$36~~containerboard ~~million~~were ~~compared~~lower due primarily to ~~losses~~weaker demand in the markets in which we operate. North American shipments of ~~$52~~corrugated containers in 2009 were negatively impacted by weaker market conditions and container plant closures. Net sales were also impacted by lower average selling prices ($622 million) for containerboard, corrugated ~~the~~containers ~~same~~and ~~period~~reclaimed infiber. ~~2007~~The average price for OCC decreased approximately $45 per ton compared to last year.

~~The~~Our ~~benefit~~containerboard ~~from~~mills ~~income~~operated ~~taxes~~at ~~for~~85.4% ~~the~~of ~~year~~capacity ~~ended~~in ~~December 31~~2009, compared to 95.5% in 2008. ~~differed from~~Containerboard ~~the~~production ~~amount~~was ~~computed~~12.0% bylower ~~applying~~compared ~~the~~to ~~statutory~~2008 ~~U.S.~~due ~~federal~~primarily ~~income~~due ~~tax~~to ~~rate~~the market related downtime totaken ~~loss~~by ~~before~~our ~~income~~mills ~~taxes~~as ~~due~~a ~~primarily~~result of lower demand in 2009. In response to the ~~non-deductibility~~weaker ofmarket ~~goodwill and~~conditions ~~other~~in ~~intangible~~2009, ~~assets~~we ~~impairment~~took ~~charges~~approximately 1,029,000 ~~the~~tons ~~$84~~of ~~million~~containerboard ~~benefit~~market related downtime compared to 245,000 tons in 2008. Production of market pulp decreased by 37.4% compared to ~~the~~last year ~~favorable~~due ~~resolution~~primarily to the closure of the ~~Canadian~~Pontiac ~~income~~pulp ~~tax~~mill ~~examination~~in ~~matters, non-cash~~October ~~foreign~~2008. ~~currency~~Production ~~exchange~~of ~~gains,~~kraft ~~state~~paper ~~income~~decreased ~~taxes,~~24.1% compared to last year due primarily to lower ~~effective tax~~demand, ~~rates~~which resulted in ~~certain~~market related ~~foreign~~downtime ~~jurisdictions~~incurred ~~and~~during the ~~effect~~first half of ~~other~~2009. ~~permanent differences~~Total tons of fiber reclaimed and brokered decreased 19.8% compared to last year due to the lower containerboard production and weaker demand.

~~LIQUIDITY~~Cost of ~~AND~~goods ~~CAPITAL~~sold as a percent of net sales in 2009 was 90.1%, comparable to 90.0% in 2008. Cost of goods sold decreased from $6,338 million in 2008 to $5,023 million in 2009 due ~~RESOURCES~~primarily to lower sales volumes ($761 million) for containerboard, corrugated containers and reclaimed materials and lower costs as a result of the additional market related downtime taken in 2009. In addition, we had lower costs of reclaimed material ($268 million), freight ($64 million) and energy ($53 million).

~~Since the Petition Date, our~~Selling ~~liquidity~~and ~~position~~administrative ~~has~~expense ~~improved~~decreased ~~significantly.~~$76 Atmillion ~~December 31,~~in 2009, wecompared ~~had~~to ~~unrestricted~~2008 ~~cash~~primarily ~~and~~due ~~cash~~to ~~equivalents of~~cost ~~$704~~reductions ~~million~~from ~~compared~~ongoing toand ~~$126~~prior ~~million~~year atinitiatives. ~~December 31~~In addition, 2008. Asincludes ofthe ~~December 31,~~impact ~~2009,~~of wethe ~~had~~Calpine noCorrugated ~~outstanding~~charges ~~borrowings~~totaling ~~under~~$22 million ~~the~~(See ~~DIP~~Note 6 ~~Credit~~of ~~Agreement. The~~the ~~improvement~~Notes into ~~liquidity~~Consolidated ~~primarily resulted~~Financial ~~from~~Statements). ~~the~~Selling ~~favorable~~and ~~impact~~administrative ~~from~~expense ~~the~~as ~~receipt~~a percent of ~~$595~~net ~~million for the~~sales ~~alternative~~increased ~~fuel~~to ~~tax~~10.2% ~~credit~~in ~~and~~2009 ~~the~~from ~~stay~~9.2% ofin ~~payment~~2008 ofdue ~~liabilities~~primarily ~~subject~~ to ~~compromise~~ ~~resulting from~~ the ~~bankruptcy~~lower ~~filings~~sales volume.

Interest expense, net was $265 million in 2009. The $3 million increase compared to 2008 was impacted by higher average borrowings ($35 million), which were partially offset by lower average interest rates ($20 million) in 2009. The higher average borrowings in 2009 were primarily due to borrowings under the DIP Credit Agreement, which were repaid in the second half of 2009. Our overall average effective interest rate in 2009 was lower than 2008 by 0.50%. For the year ended December 31, 2009, we recorded interest expense of $163 million on unsecured debt from the Petition Date through November 30, 2009. In December 2009, we discontinued recording interest expense on unsecured debt when the Proposed Plan of Reorganization was issued and we concluded it was not probable that interest expense that was accrued from the Petition Date through November 30, 2009 would be an allowed claim. In December 2009, we recorded income in reorganization items for the reversal of $163 million of accrued post-petition unsecured interest expense in the consolidated statement of operations. For additional information on reorganization items, see Part I, Item 1. Business — Bankruptcy Proceedings — Financial Reporting Considerations — "Reorganization Items." In 2008, a portion of our interest rate swap contracts were deemed to be ineffective and were marked-to-market, resulting in $12 million of additional interest expense.

~~Table~~In 2009, we recorded a loss on early extinguishment of ~~Contents~~debt of $20 million for the non-cash write-off of deferred debt issuance costs related to the Stevenson, Alabama mill industrial revenue bonds, which were repaid.

~~The~~In 2009, ~~following~~we ~~table~~recorded ~~presents~~non-cash ~~a summary~~foreign currency exchange losses of ~~our~~$14 million ~~cash~~compared ~~flows~~to gains of $36 million for the ~~years~~same ~~ended~~period ~~December 31:~~in 2008.

(In millions)	2009			2008				2007
Net cash provided by (used for):
Operating activities	$ 1,094			$	198			$	243
Investing activities	(139)			(385)				68
Financing activities			(377)				306			(313)
Net increase (decrease) in cash	$	578		$		119		$		(2)

~~Net~~ ~~Cash~~ Table ~~Provided~~of ByContents ~~(Used For) Operating Activities~~

~~The~~For ~~net~~2009, ~~cash~~we ~~provided~~recorded bya ~~operating activities~~gain ~~for~~of ~~the year ended December~~$40 ~~31,~~million ~~2009~~related ~~was higher than 2008 due primarily~~ to the ~~alternative~~process ~~fuel tax credit receipts~~ of ~~$595~~reorganizing ~~million~~under Chapter 11 and the ~~impact~~ ~~of the bankruptcy filing~~CCAA. ~~Our 2009~~ ~~cash~~For ~~flow~~additional ~~from~~information ~~operating~~on ~~activities was favorably impacted by the stay of~~reorganization ~~payment of liabilities subject to compromise~~items, ~~including~~see ~~accounts payable and interest payable~~Part I, ~~resulting from the bankruptcy filings~~Item 1. In ~~addition,~~Business — weBankruptcy ~~discontinued~~Proceedings — ~~interest payments~~Financial ~~since~~Reporting ~~the~~Considerations — ~~Petition~~"Reorganization ~~Date on our unsecured senior notes and certain other unsecured debt~~Items."

~~Net~~The benefit ~~Cash~~from ~~Provided~~income Bytaxes ~~(Used~~for ~~For)~~the year ended December 31, 2009 of $23 million differed from the amount computed by applying the statutory U.S. federal income tax rate to loss before ~~Investing~~income ~~Activities~~taxes due primarily to the effect of refunds for previously unrecognized alternative minimum tax credits that we expect to receive in 2010.

~~Net~~ ~~cash~~LIQUIDITY ~~used~~AND ~~for~~CAPITAL investing activities was $139 million for the year ended December 31, 2009. Expenditures for property, plant and equipment were $172 million for 2009, compared to $394 million for 2008. The amount expended for property, plant and equipment in 2009 included $169 million for projects related to upgrades, cost reductions and ongoing initiatives and $3 million for environmental projects. During 2009, we received proceeds of $48 million primarily related to the sale of our Canadian timberlands ($27 million) and previously closed facilities. In 2008, we received proceeds of $9 million primarily from the sale of properties of previously closed facilities. Advances to affiliates, net in 2009 of $15 million are principally related to funding an obligation pertaining to a guarantee for a previously non-consolidated affiliate.RESOURCES

~~Net~~At ~~Cash~~December 31, ~~Provided~~2010, Bywe ~~(Used~~had ~~For)~~cash and cash equivalents of $449 million compared to $704 million at December 31, 2009. ~~Financing~~Related ~~Activities~~to our Plan of Reorganization, our debt was reduced from $3,793 million at December 31, 2009 to $1,194 million upon emergence at June 30, 2010. Long-term debt at December 31, 2010 was $1,194 million. As of December 31, 2010, the amount available for borrowings under the ABL Revolving Facility after considering outstanding letters of credit was $534 million.

~~Net cash used for financing~~The ~~activities~~following ~~for~~table ~~2009~~presents ~~was~~a ~~$377~~summary ~~million. Proceeds from the DIP Credit Agreement~~ of ~~$440 million were used to terminate~~ our receivables securitization programs and repay all indebtedness under the programs of $385 million. DIP debt issuance costs of $63 million were incurred and paid with the DIP Credit Agreement proceeds and available cash~~. During~~ ~~2009,~~flows ~~letters of credit in the amount of $71 million were drawn on to fund obligations principally related to non-qualified pension plans, commodity derivative instruments and a guarantee~~ for ~~a previously non-consolidated affiliate which increased borrowings under our credit agreement. During 2009, amounts borrowed under~~ the ~~DIP~~noted ~~Credit~~periods: Agreement were repaid in full. In 2008, we had net increase of debt of $314 million. The net increase in debt primarily funded our capital investments. We paid dividends to Smurfit-Stone in 2008 for an aggregate amount of $8 million to fund the dividend obligation to holders of Smurfit-Stone’s Preferred Stock. No dividends were paid in 2009 to Smurfit-Stone as they were prohibited from paying dividends under the DIP Credit Agreement.

Event of Default

		Successor			Predecessor

								Year Ended December 31,
		Six Months Ended December 31, 2010			Six Months Ended June 30, 2010			Year Ended December 31,
(In millions)		Six Months Ended December 31, 2010			Six Months Ended June 30, 2010			2009			2008
Net cash provided by (used for):
	Operating activities	$	211		$	(85	)	$	1,094		$	198
	Investing activities		(97	)		(73	)		(139	)		(385	)
	Financing activities		(7	)		(206	)		(377	)		306
Effect of exchange rate changes on cash			2

Net increase (decrease) in cash		$	109		$	(364	)	$	578		$	119

~~The~~ ~~filing~~Net ofCash ~~the~~Provided ~~Chapter 11 Petition~~By ~~and~~(Used ~~the~~For) ~~Canadian~~Operating Petition constituted an event of default under our debt obligations, and those debt obligations became automatically and immediately due and payable. Any efforts to enforce such payment obligations are stayed as a result of the filing of the Chapter 11 Petition and the Canadian Petition. The accompanying consolidated balance sheet as of December 31, 2008 includes a reclassification of $3,032 million to current maturities of long-term debt from long-term debt. Due to the filing of the bankruptcy petitions, our unsecured long-term debt of $2,439 million is included in liabilities subject to compromise at December 31, 2009.Activities

~~Bank~~ ~~Credit Facilities~~Successor

~~Smurfit-Stone~~The asnet ~~guarantor,~~cash weprovided ~~and our~~by ~~subsidiary,~~operating ~~SSC~~activities ~~Canada,~~for ~~as borrowers, entered into a credit agreement, as amended (~~the ~~Credit~~six ~~Agreement)~~months onended ~~November~~December 131, ~~2004. The~~2010 ~~Credit Agreement provided for (i) a revolving credit facility~~ of $~~600~~ 211 million tobenefited usfrom ~~(U.S.~~higher ~~Revolver), of which $512~~selling ~~million~~prices ~~was borrowed as of December 31, 2009~~ and ~~(ii) a~~operating ~~revolving credit~~income. ~~facility~~Operating ofcash ~~$200~~flows ~~million~~were tounfavorably usimpacted ~~and~~by ~~SSC~~pension ~~Canada~~contributions ~~(SSC Canada Revolver),~~ of ~~which~~ $~~198~~ 185 million, ~~was~~including ~~borrowed~~a asdiscretionary ofpension ~~December 31,~~contribution ~~2009. Each~~ of ~~these revolving credit facilities matured on November~~$105 ~~1, 2009~~million. ~~The Credit~~ ~~Agreement provided for a Tranche B~~

32 Predecessor

~~Table~~The net cash used for operating activities for the six months ended June 30, 2010 of ~~Contents~~$85 million was impacted by payments of $202 million to settle prepetition liabilities, excluding debt.

~~term loan to us in the aggregate~~Net ~~principal~~cash ~~amount~~provided ofby ~~$975~~operating ~~million,~~activities ~~with~~in an2009 ~~outstanding balance~~ of $~~137~~ 1,094 million at ~~December 31,~~was ~~2009. The~~primarily ~~Credit Agreement~~due ~~also provided~~ to ~~SSC~~alternative ~~Canada~~fuel atax ~~Tranche~~credit Creceipts ~~term loan in the aggregate principal amount~~ of $~~300~~ 595 million and ~~a Tranche C-1 term loan in~~ the ~~aggregate principal~~impact ~~amount~~ of ~~$90~~the ~~million,~~bankruptcy ~~with~~filing. ~~outstanding balances of $258 million and~~Our ~~$78~~cash ~~million,~~flow ~~respectively,~~from atoperating ~~December 31,~~activities ~~2009. The~~was ~~term~~favorably ~~loans~~impacted ~~are~~by ~~payable~~the instay ~~quarterly installments~~of ~~ending~~payment onof ~~November 1,~~liabilities ~~2011. Borrowings~~subject ~~at a rate equal~~ to ~~LIBOR~~compromise, ~~plus~~including ~~2.25%~~accounts orpayable ~~alternate~~and ~~base~~interest ~~rate (ABR)~~payable, ~~plus~~resulting ~~1.25%~~from ~~for~~ the ~~term loan facilities and LIBOR plus 2.50% or ABR plus~~bankruptcy 1filings.~~50%~~ ~~for the revolving credit facilities (the Applicable Rate).~~

~~Our~~ ~~obligations~~Net ~~under~~Cash ~~the~~Provided ~~Credit Agreement~~By ~~are~~(Used ~~unconditionally~~For) ~~guaranteed~~Investing by Smurfit-Stone and our material U.S. subsidiaries. The obligations of SSC Canada under the Credit Agreement are unconditionally guaranteed by Smurfit-Stone, us, our material U.S. subsidiaries and the material Canadian subsidiaries of SSC Canada. Our obligations under the Credit Agreement are secured by a security interest in substantially all of our assets and properties, and those of Smurfit-Stone and our material U.S. subsidiaries, by a pledge of all of our capital stock and our material U.S. subsidiaries and by a pledge of 65% of the capital stock of SSC Canada that is directly owned by us. The security interests securing our obligation under the Credit Agreement exclude cash, cash equivalents, certain trade receivables and the land and buildings of certain corrugated container facilities. The obligations of SSC Canada under the Credit Agreement are secured by a security interest in substantially all of the assets and properties of SSC Canada and the material Canadian subsidiaries of SSC Canada, by a pledge of all of the capital stock of the material Canadian subsidiaries of SSC Canada and by the same U.S. assets, properties and capital stock that secure our obligations under the Credit Agreement. The security interests securing SSC Canada’s obligation under the Credit Agreement excludes certain other real property located in New Brunswick and Quebec.Activities

~~The~~ Credit Agreement contains various covenants and restrictions including (i) limitations on dividends, redemptions and repurchases of capital stock, (ii) limitations on the incurrence of indebtedness, liens, leases and sale-leaseback transactions, (iii) limitations on capital expenditures and (iv) maintenance of certain financial covenants. The Credit Agreement also requires prepayments if we have excess cash flows, as defined therein, or receive proceeds from certain asset sales, insurance or incurrence of certain indebtedness.Successor

AsNet ofcash ~~December 31,~~used ~~2009,~~for asinvesting ~~a result~~activities ofwas ~~our~~$97 million ~~default, we had no availability~~ for ~~borrowings~~the ~~under~~six ~~our revolving~~months ~~credit~~ended ~~facilities after giving consideration to outstanding letters of credit of $87 million. As of~~ December 31, ~~2009,~~2010. weExpenditures ~~had~~for ~~available unrestricted~~property, ~~cash~~plant and equipment ~~cash~~were ~~equivalents of~~ $~~704~~ 106 million. ~~primarily~~The ~~invested~~amount ~~in money~~expended ~~market~~for ~~funds~~property, ~~at a variable interest rate of 0.13%.~~

The Credit Agreement provided for a deposit funded letter of credit facility, related to the variable rate industrial revenue bonds, for approximately $122 million that was due to mature on November 1, 2010. In February 2009, due to an event of default under the bond indentures, this credit facility was drawn on to fully repay the industrial revenue bonds in the aggregate principal amount of $120 million.43

~~DIP~~Table ~~Credit~~of ~~Agreement~~Contents

Inplant and ~~connection~~equipment ~~with~~included ~~filing~~$104 million ~~the~~for ~~Chapter~~projects 11related ~~Petition~~to ~~and the Canadian Petition~~upgrades, oncost ~~January 26,~~reductions ~~2009~~and ~~we,~~ongoing ~~Smurfit-Stone~~initiatives and ~~certain~~$2 million offor ~~our affiliates~~environmental ~~filed a motion with the Bankruptcy Courts seeking approval to enter into a DIP Credit Agreement~~projects. ~~Final approval~~ ofDuring the ~~DIP~~six ~~Credit~~months ~~Agreement was granted by the U.S. Court on February~~ended December 2331, ~~2009~~ ~~and~~2010, bywe ~~the~~received ~~Canadian~~proceeds ~~Court~~of ~~on February~~$9 ~~24,~~million ~~2009. Amendments~~primarily related to the ~~DIP~~sales ~~Credit~~of ~~Agreement~~previously ~~were entered~~closed ~~into on February 25 and 27, 2009~~facilities.

~~The~~ DIP Credit Agreement, as amended, provided for borrowings up to an aggregate committed amount of $750 million, consisting of a $400 million U.S. DIP Term Loan for borrowings by us; a $35 million Canadian DIP Term Loan for borrowings by SSC Canada; a $250 million U.S. DIP Revolver for borrowings by us and/or SSC Canada; and a $65 million Canadian DIP Revolver for borrowings by us and/or SSC Canada.Predecessor

~~The~~For ~~use~~the ofsix ~~proceeds~~months ~~under~~ended ~~the~~June 30, ~~DIP~~2010, ~~Credit~~net ~~Agreement~~cash ~~was~~used ~~limited~~for toinvesting ~~(i) working capital,~~activities ~~letters~~was of$73 million ~~credit~~including ~~and capital~~ expenditures; ~~(ii) other~~for ~~general~~property, ~~corporate~~plant ~~purposes~~and equipment of ~~ours~~$83 million, ~~and~~which ~~certain~~were ofpartially ~~our~~offset ~~subsidiaries~~by ~~(including~~net ~~certain intercompany~~proceeds ~~loans);~~of ~~(iii)~~$10 ~~the~~million ~~refinancing~~from insales ~~full~~ of ~~indebtedness outstanding~~previously ~~under~~closed ~~our~~facilities.

33Net cash used for investing activities was $139 million in 2009. Expenditures for property, plant and equipment were $172 million. During 2009, we received proceeds of $48 million primarily related to the sale of our Canadian timberlands ($27 million) and previously closed facilities. Advances to affiliates, net in 2009 of $15 million were principally related to funding an obligation pertaining to a guarantee for a previously non-consolidated affiliate.

~~Table~~ ofNet ~~Contents~~Cash Provided By (Used For) Financing Activities

~~receivables~~ securitization programs; (iv) payment of any related transaction costs, fees and expenses; and (v) the costs of administration of the cases arising out of the Chapter 11 Petition and the Canadian Petition.Successor

~~Under~~Net ~~the~~cash ~~DIP~~used ~~Credit~~for ~~Agreement,~~financing onactivities ~~January 28, 2009,~~for wethe ~~borrowed~~six ~~$440~~months ~~million,~~ended ~~consisting of a $400 million U.S. DIP Term Loan~~December 31, a2010 ~~$35~~was ~~million Canadian DIP Term loan and~~ $5 7 million ~~from the Canadian DIP Revolver~~. In ~~accordance~~During ~~with~~ the ~~terms~~six ofmonths ~~the DIP Credit~~ended ~~Agreement, on January~~December 2831, ~~2009~~2010, we ~~used~~paid ~~U.S. DIP Term Loan proceeds of~~ $~~360~~ 6 million, ~~net~~on ofthe ~~lenders fees of $40 million, and Canadian DIP~~ Term Loan ~~proceeds~~ ofas ~~$30~~required ~~million,~~under ~~net of lenders fees of $5 million, to terminate~~ the ~~receivables~~ ~~securitization~~Term ~~programs~~Loan ~~and repay all indebtedness outstanding of $385 million and to pay other expenses of $1 million~~Facility. In ~~addition, other fees and expenses of $17 million related to the DIP Credit Agreement were paid for with proceeds of $5 million from the Canadian DIP Revolver and available cash.~~

~~During~~ 2009, we made voluntary prepayments of $383 million on the U.S. DIP Term Loan with available cash provided by operating activities. In addition, during 2009, we repaid $17 million of the U.S. DIP Term Loan with proceeds from property sales. As of December 31, 2009, no borrowings were outstanding under the U.S. DIP Term Loan or the U.S. DIP Revolver.Predecessor

~~During~~Net ~~2009,~~cash ~~we repaid~~used ~~$35~~for ~~million~~financing onactivities for the ~~Canadian~~six ~~DIP~~months ~~Term~~ended ~~Loan~~June 30, ~~primarily~~2010 ~~with~~was $206 million. We obtained proceeds ~~from~~of ~~property~~$1,188 million ~~sales~~(net ~~including~~of $27 12 million ~~from~~original ~~the~~issue ~~sale~~discount) ofunder ~~our~~the ~~Canadian Timberlands. In~~Term ~~addition~~Loan Facility, wewhich ~~repaid~~together ~~$5 million~~with onavailable ~~the~~cash, ~~Canadian~~were ~~DIP~~used ~~Revolver. As~~ to repay Predecessor debt of ~~December 31~~$1,347 million and ~~2009,~~pay nodebt ~~borrowings~~issuance ~~are~~costs ~~outstanding~~on ~~under~~exit ~~the~~credit ~~Canadian~~facilities ~~DIP Term~~and ~~Loan~~other orfinancing ~~the~~costs ~~Canadian~~of ~~DIP Revolver~~$47 million.

At ~~December 31,~~Exit ~~2009, we had outstanding letters of credit of $15 million under the DIP~~ Credit ~~Agreement. Prior~~ ~~to the maturity of the DIP Credit Agreement on January 28, 2010, we transferred $15 million of available cash to a restricted cash account to secure these letters of credit.~~Facilities

~~U.S.~~Pursuant ~~and Canadian borrowings were each subject~~ to athe ~~borrowing~~approval ~~base~~of ~~derived~~the ~~from~~U.S. aCourt ~~formula based~~ on ~~certain eligible~~February 22, ~~accounts~~2010, ~~receivable~~we and ~~inventory,~~certain ~~and~~of anour ~~amount~~subsidiaries ~~attributable~~entered tointo ~~real property~~the ~~and~~Term ~~equipment,~~Loan ~~less~~Facility ~~certain reserves.~~ that Asprovides offor ~~December 31,~~an ~~2009,~~aggregate ~~the~~term ~~applicable~~loan ~~borrowing~~commitment ~~base~~of ~~was~~ $~~680~~ 1,200 million. ~~and~~In ~~the~~addition, ~~amount~~we ~~available~~entered ~~for~~into ~~borrowings under~~ the ~~DIP~~ABL ~~Credit~~Revolving ~~Agreement was~~Facility ~~$300~~with ~~million. As~~aggregate ~~all~~commitments ~~borrowings~~of ~~under~~$650 million ~~the~~(including ~~DIP~~a $100 million ~~Credit~~Canadian ~~Agreement~~Tranche) ~~were paid~~on ~~in full~~April 15, we2010. ~~allowed~~The ~~the~~ABL ~~DIP~~Revolving ~~Credit~~Facility ~~Agreement~~includes toa ~~expire~~$150 million onsub-limit ~~the~~for ~~maturity date~~letters of ~~January 28, 2010~~credit.

~~Exit~~We ~~Credit~~are ~~Facilities~~permitted, subject to obtaining lender commitments, to add one or more incremental facilities to the Term Loan Facility in an aggregate amount up to $400 million. Each incremental facility is conditioned on (a) there existing no defaults, (b) in the case of incremental term loans, such loans have a final maturity no earlier than, and a weighted average life no shorter than, the Term Loan Facility, and (c) after giving effect to one or more incremental facilities, the consolidated senior secured leverage ratio shall be less than 3.00 to 1.00. If the interest rate spread applicable to any incremental facility exceeds the interest rate spread applicable to the Term Loan Facility by more than 0.25%, then the interest rate spread applicable to the Term Loan Facility will be increased to equal the interest rate spread applicable to the incremental facility.

~~On February 16,~~We ~~2010,~~are ~~the U.S. Court granted the motion and authorized us~~permitted, ~~Smurfit-Stone~~subject ~~and certain of our affiliates~~ to ~~enter~~obtaining ~~into~~lender ~~the Term Loan Facility. On the same date~~commitments, ~~the U.S. Court also granted our February 3, 2010 motion seeking approval~~ to ~~enter~~add ~~into~~incremental acommitments ~~commitment letter~~under ~~and fee letters for an asset-based revolving credit facility (~~the ABL Revolving Facility) ~~(together~~in with the Term Loan Facility, the Exit Credit Facilities). Based on such approvals, on February 22, 2010, we, Smurfit-Stone and certain of our subsidiaries entered into the Term Loan Facility that provides for an aggregate ~~term~~amount ~~loan commitment~~up ofto $~~1,200~~ 150 million. ~~In addition,~~ weEach ~~entered~~incremental ~~into a~~ commitment ~~letter and related fee letters for the~~ ~~ABL~~is ~~Revolving~~conditioned ~~Facility~~on ~~with aggregate commitments of $650 million~~ (~~including~~ a ~~$100~~) there ~~million~~existing ~~Canadian~~no ~~Tranche)~~defaults, ~~which~~(b) any wenew ~~expect~~lender toproviding ~~enter~~an ~~into~~incremental ~~prior~~commitment toshall ~~exiting bankruptcy. The~~require ~~ABL~~the ~~Revolving~~consent ~~Facility will include a $150 million sub-limit for letters~~ of ~~credit. The commitments for~~ the ~~Term~~Administrative ~~Loan~~Agent, ~~Facility and~~each ~~the~~Issuing ~~ABL Revolving Facility will terminate on July 16~~Lender, ~~2010 unless our~~the ~~emergence~~Swingline ~~from~~Lender ~~bankruptcy~~ and ~~satisfaction of certain funding date conditions under~~ the ~~Term~~Fronting ~~Loan~~Lender, ~~Facility and~~ (c) the ~~ABL~~minimum ~~Revolving~~amount ~~Facility~~of ~~occur~~any onincrease ormust ~~prior to~~be ~~such~~at ~~date~~least $25 million, ~~and the Term Loan Facility is funded.~~

We are permitted, subject to obtaining lender commitments, to add one or more incremental facilities to the Term Loan Facility in an aggregate amount up to $400 million. Each incremental facility is conditioned on (a) there existing no defaults, (b) in the case of incremental term loans, such loans have a final maturity no earlier than, and a weighted average life no shorter than, the Term Loan Facility, and (c) after giving effect to one or more incremental facilities, the consolidated senior secured leverage ratio shall be less than 3.00 to 1.00. If the interest rate spread applicable to any incremental facility exceeds the interest rate spread applicable to the Term Loan Facility by more than 0.25%, then the interest rate spread applicable to the Term Loan Facility will be increased to equal the interest rate spread applicable to the incremental facility.44

34Table of Contents

~~Table~~(d) we shall not increase the commitments more than three times in the aggregate, (e) if the interest rate margins and commitment fees with respect to the incremental commitments are higher than those applicable to the existing commitments under the ABL Revolving Facility, then the interest rate margins and commitment fees for the existing commitments under the ABL Revolving Facility will be increased to match those for the incremental commitments, and (f) the satisfaction of ~~Contents~~other customary closing conditions.

On ~~the date we emerge from~~ ~~bankruptcy~~June 30, 2010, the Term Loan ~~will~~Facility bewas funded and borrowings ~~are~~became ~~expected to be~~ available under the ABL Revolving Facility. The proceeds of the borrowings under the Term Loan Facility of $1,200 million, together with available cash, ~~will~~were be used to repay our outstanding secured indebtedness under our pre-petition Credit Facility and pay remaining fees, costs and expenses ~~of approximately $50 million~~ related to and contemplated by the Exit Credit Facilities and the ~~Proposed~~ Plan of Reorganization. ~~Borrowings~~As of December 31, 2010 we had no borrowings under the ABL ~~Revolver~~Revolving Facility ~~will~~and $1,194 million beunder ~~available~~the Term Loan Facility. As a result of Excess Cash Flows, as defined in our Term Loan Facility, during the six months ended December 31, 2010, we are required to pay $23 million in March 2011 on the Term Loan Facility. Borrowings under the ABL Revolving Facility are available for working capital purposes, capital expenditures, permitted acquisitions and general corporate purposes. As of December 31, 2010, our borrowing base under the ABL Revolving Facility was $618 million and the amount available for borrowings after considering outstanding letters of credit was $534 million.

For additional information on the Exit Credit Facilities, see Part I, Item 1. Business — - Bankruptcy Proceedings — - Proposed Plan of Reorganization and Exit Credit Facilities — ~~- “~~"Exit Credit Facilities”."

FUTURE CASH FLOWS

Contractual Obligations and Commitments

In addition to our debt commitments at December 31, ~~2009~~2010, we had other commitments and contractual obligations that require us to make specified payments in the future. The filing of the Chapter 11 Petition and Canadian Petition constituted an event of default under our debt obligations, and those debt obligations became automatically and immediately due and payable, subject to an automatic stay of any action to collect, assert, or recover a claim against us and the application of applicable bankruptcy law. The following table ~~summarizes~~indicates the total amounts due as of December 31, 2009 under all debt agreements, commitments and other contractual obligations. We are in the process of evaluating our executory contracts in order to determine which contracts will be assumed in our bankruptcy proceedings. The table indicates the years in which payments are due under the contractual obligations.

					~~Amounts Payable During~~	Amounts Payable During
(In millions)		~~Total~~	Total		~~2010~~	2011		~~2011-12~~	2012-13		~~2013-14~~	2014-15		~~2015 & Beyond~~	2016 & Thereafter
Long-term debt, including capital leases (1)		$3,793			$	3,793		$			$			$
Debt, including capital leases(1)			$	1,194		$	16		$	22		$	22		$	1,134
Operating leases		~~333~~		291	61		52	86		76	58		53	~~128~~		110
Purchase obligations (2)		338			109			103			62			64
Purchase obligations(2)				174			70			66			19			19
Commitments for capital expenditures (3)		147			147
Commitments for capital expenditures(3)				50			50
Net unrecognized tax benefits (4)
Other long-term liabilities(4)				1,360			146			618			580			16
Other long-term liabilities (5)		1,212			128			657			411			16
	Total contractual obligations		$	3,069		$	334		$	782		$	674		$	1,279
Total contractual obligations		$	5,823		$	4,238		$	846		$	531		$	208

(1) Projected contractual interest payments are excluded. Based on interest rates in effect and long-term debt balances outstanding as of December 31, ~~2009~~ 2010, hypothetical projected contractual interest payments would be approximately $~~232~~ 80 million in ~~2010~~2011 and for each future year. ~~However,~~ ~~due to the bankruptcy proceedings, we do not expect to pay interest on our unsecured senior notes ($182 million) and certain other unsecured debt ($10 million).~~ For the purpose of this disclosure, our variable and fixed rate long-term debt would be replaced at maturity with similar long-term debt. This disclosure does not attempt to predict future cash flows or changes in ~~interest~~ interest rates. See Item 7A, “"Quantitative and Qualitative Disclosures About Market Risk, Interest Rate Risk.~~” Outstanding~~" (2)Amounts shown ~~secured~~consist ~~debt~~primarily of ~~$1,354~~national ~~million~~supply ~~at December 31,~~contracts ~~2009~~to ispurchase ~~expected~~steam toand beother ~~paid~~energy inresources, ~~cash~~the ~~with~~processing ~~proceeds~~of ~~from~~wood ~~our Exit~~and ~~Credit~~to ~~Facilities~~purchase containerboard. In ~~addition, unsecured~~We ~~debt~~do ofnot ~~$2,439~~aggregate ~~million~~open ispurchase ~~expected~~orders toexecuted bein ~~exchanged~~the ~~for~~normal ~~common~~course ~~stock~~ of ~~Reorganized~~business ~~Smurfit-Stone~~by ~~upon~~each of our ~~emergence~~operating ~~from~~locations ~~bankruptcy~~and insuch ~~the~~purchase ~~second quarter~~orders ofare ~~2010~~therefore excluded from the table.

(2) Amounts shown consist primarily of national supply contracts to purchase steam and other energy resources, the processing of wood and to purchase containerboard. Compared to 2008, our purchase obligations have declined significantly due primarily to the rejection of executory contracts for electricity, natural gas and coal. We do not aggregate open purchase orders executed in the normal course of business by each of our operating locations and such purchase orders are therefore excluded from the table.45

~~(3) Amounts~~Table ~~shown are estimates~~ of ~~future~~ ~~spending on capital projects which were committed to prior to December 31, 2009, but were not completed by December 31, 2009.~~Contents

(3): Amounts shown are estimates of future spending on capital projects which were committed to prior to December 31, 2010, but were not completed by December 31, 2010.
(4): Amounts shown consist primarily of future minimum pension contributions. The amounts also include severance costs, other rationalization expenditures and environmental liabilities which have been recorded in our December 31, 2010 consolidated balance sheet. The table does not include our deferred income tax liability and accruals for self-insured losses because it is not certain when these liabilities will become due. See Future Cash Flows — "Pension Obligations."

35We expect further improvement in our cash flow from operations in 2011. We expect that our cash flow from operations and our unused borrowing capacity under the Exit Credit Facilities, in combination, will be sufficient to meet our obligations and commitments, including debt service, pension funding, costs related to environmental compliance, and other capital expenditures.

~~Table~~ ofContingent ~~Contents~~Obligations

~~(4) As~~We issue standby letters of ~~December 31,~~credit ~~2009,~~primarily ~~our ASC~~for ~~740,~~performance ~~Income~~bonds ~~Taxes~~and ~~(ASC~~for ~~740),~~self-insurance. ~~net~~Letters ~~unrecognized~~of ~~tax~~credit ~~benefits~~are ~~totaled~~issued ~~$37~~under our ~~million~~revolving credit facilities, ~~which~~generally ~~are~~have ~~excluded~~a ~~from~~one-year ~~the~~maturity ~~table~~and ~~since~~are werenewed ~~cannot~~annually. ~~make~~As aof ~~reasonably reliable~~December 31, ~~estimate~~2010, ofwe ~~the~~had ~~timing~~approximately $84 million of ~~future~~letters ~~payments~~of credit outstanding.

~~(5) Amounts~~We have ~~shown~~certain ~~consist~~woodchip ~~primarily~~processing contracts, which provide for guarantees of ~~future~~ ~~minimum~~third ~~pension~~party ~~contributions~~contractors' debt outstanding, ~~severance~~with ~~costs~~a ~~and~~security ~~other~~interest ~~rationalization expenditures~~in ~~and~~the ~~environmental~~chipping ~~liabilities~~equipment. ~~which~~Guarantee ~~have~~payments ~~been~~would be ~~recorded~~triggered in ~~our~~the event of a loan default by any of the contractors. The maximum potential amount of future payments related to all of such arrangements as of December 31, ~~2009~~ ~~consolidated~~2010 ~~balance sheet~~was $22 million. ~~The~~Cash proceeds ~~table~~received ~~does~~from ~~not~~liquidation ~~include~~of ~~our~~the ~~deferred~~chipping ~~income tax~~equipment ~~liability~~would ~~and~~be ~~accruals~~based ~~for~~on ~~self-insured~~market ~~losses~~conditions ~~because~~at itthe istime ~~not~~of ~~certain when~~sale, ~~these~~and ~~liabilities~~we ~~will~~may ~~become~~not ~~due. See~~recover ~~Future~~in ~~Cash~~full ~~Flows~~the -guarantee ~~“Pension~~payments ~~Obligations~~made.”

~~Contingent~~ Pension Obligations

WeAt ~~issue~~December 31, ~~standby~~2010, ~~letters~~the qualified defined pension benefit plans, which were assumed under the Plan of ~~credit~~Reorganization, were underfunded by ~~primarily~~approximately ~~for~~$1,132 million ~~performance~~based ~~bonds~~on actual asset values and ~~for~~the ~~self-insurance~~discount rates effective on December 31, 2010. ~~Letters~~ ofThe ~~credit~~weighted ~~are~~average ~~issued~~discount ~~under~~rates ~~our~~used at December 31, 2010 for ~~revolving~~the ~~credit~~U.S. ~~facilities~~and Canadian qualified defined benefit pension plans were 5.32% and 5.21%, ~~generally~~respectively. ~~have~~We acurrently ~~one-year~~estimate ~~maturity~~that the cash contributions under the U.S. and ~~are~~Canadian ~~renewed~~qualified pension plans ~~annually~~will be approximately $109 million in 2011. As We currently estimate that contributions will be in the range of ~~December~~approximately $250 ~~31,~~million ~~2009,~~to $340 million annually in 2012 through 2015. Projected pension contributions reflect that we ~~had~~have ~~approximately~~elected ~~$102~~funding ~~million~~relief ofunder ~~letters~~the Preservation of ~~credit~~Access ~~outstanding~~to Care for Medicare Beneficiaries and Pension Relief Act of 2010, ~~including~~and also reflect ~~$15~~our ~~million~~election ~~under~~of ~~our~~Canada's ~~DIP~~funding ~~Credit~~relief ~~Agreement~~measures made in 2009 and 2010. The actual required amounts and timing of such future cash contributions will be highly sensitive to changes in the applicable discount rates and returns on plan assets.

We ~~have~~Exit certain woodchip processing contracts, which provide for guarantees of third party contractors’ debt outstanding, with a security interest in the chipping equipment. Guarantee payments would be triggered in the event of a loan default by any of the contractors. The maximum potential amount of future payments related to all of such arrangements as of December 31, 2009 was $25 million. Cash proceeds received from liquidation of the chipping equipment would be based on market conditions at the time of sale, and we may not recover in full the guarantee payments made.Liabilities

~~Pension~~ ~~Obligations~~Successor

AsWe ofrecorded ~~December 31, 2009,~~restructuring ~~our~~charges ~~pension benefit obligations exceeded the fair value~~ of ~~pension plan assets by~~ $~~1,129~~ 25 million, anfor ~~increase~~the ofsix ~~$123~~months ~~million~~ended ~~from $1,006 million at the end~~ December 31, ~~2008. The majority of the increase was due to lower discount rates in 2009. Approximately $1~~2010,~~020~~ ~~million~~primarily offor ~~this~~severance amount relates to qualified defined benefit pension plans, which are expected to be assumed under the Proposed Plan of Reorganization. We currently estimate that these cash contributions under the U.S. and ~~Canadian~~benefits ~~qualified~~related ~~pension plans will be approximately $77 million in 2010, and potentially up~~ to ~~approximately $107 million depending upon how unpaid Canadian contributions for 2009 are impacted by~~ the ~~Proposed~~closure ~~Plan~~ of ~~Reorganization. We~~ ~~currently~~facilities ~~estimate that contributions will be in the range of approximately $290 million to $330 million annually in 2011 through 2013,~~ and ~~will then decrease to approximately $280 million in 2014, approximately $240 million in 2015, $170 million in 2016 and $60 million in 2017, at which point almost all of~~ the ~~shortfall~~reduction ~~would be funded. The actual required amounts and timing of such future cash contributions will be highly sensitive to changes~~ in ~~the~~ ~~applicable~~our ~~discount~~selling ~~rates~~ and ~~returns~~administrative ~~on plan assets, and could also be impacted by future changes in the laws and regulations applicable to plan funding~~workforce.

~~Exit~~We had ~~Liabilities~~$25 million of exit liabilities as of June 30, 2010, related to the restructuring of our operations. For the six months ended December 31, 2010, we incurred cash expenditures of $20 million for these exit liabilities. The exit liabilities remaining as of December 31, 2010, including the 2010 restructuring activities, totaled $27 million. Future cash outlays, principally for severance and benefits cost and

We recorded restructuring charges of $319 million in 2009, net of gains of $4 million from the sale of properties related to previously closed facilities. Restructuring charges include non-cash charges of $254 million related to the write-down of assets, primarily property, plant and equipment, to estimated net realizable values and the acceleration of depreciation for converting equipment expected to be abandoned or taken out of service. The remaining charges of $69 million were primarily for severance and benefits. In 2009, we incurred cash expenditures of $31 million for these exit liabilities.46

WeTable ~~had $33 million~~ of exit liabilities as of December 31, 2008, related to the restructuring of our operations. During 2009, we incurred cash expenditures of $10 million for these exit liabilities and reduced lease commitment exit liabilities by $7 million. The exit liabilities remaining as of December 31, 2009, including the 2009 restructuring activities, totaled $54 million. Future cash outlays, principally for severance and benefits cost and long-term lease commitments and facility closure cost, are expected to be $49 million in 2010, $3 million in 2011, an insignificant amount in 2012 and $2 million thereafter. We intend to continue funding exit liabilities through operations as originally planned.Contents

~~Environmental~~long-term ~~Matters~~lease commitments and facility closure cost, are expected to be $26 million in 2011, insignificant amounts in 2012 and 2013, and $1 million thereafter. We intend to continue funding exit liabilities through operations as originally planned.

As discussed in Part I, Item 1. Business, “Environmental Compliance,” we completed all projects required to bring us into compliance with the now vacated Boiler MACT. However, we could incur significant expenditures due to changes in law or discovery of new information. In addition, it is not yet known when greenhouse gas emission laws or regulations may come into effect, nor is it currently possible to estimate the cost of compliance with such laws or regulations. Excluding the spending on the Boiler MACT Predecessor

36We recorded restructuring charges of $15 million for the six months ended June 30, 2010, net of gains of $12 million from the sale of properties related to previously closed facilities, of which $8 million resulted from the legal release of environmental liability obligations. Restructuring charges include non-cash charges of $11 million related to the acceleration of depreciation for converting equipment abandoned or taken out of service. The remaining charges of $16 million were for severance and benefits, lease commitments and facility closure costs.

~~Table~~We had $54 million of ~~Contents~~exit liabilities as of December 31, 2009, related to the restructuring of our operations. For the six months ended June 30, 2010, we incurred $23 million of cash disbursements, primarily severance and benefits, related to these exit liabilities. In addition, these exit liabilities were reduced by $8 million resulting from the release of environmental liability obligations upon the sale of previously closed facilities and $3 million due to the reclassification of multi-employer pension plan liabilities to liabilities subject to compromise. During the six months ended June 30, 2010, we incurred $11 million of cash disbursements, primarily severance and benefits, related to exit liabilities established during 2010.

~~projects~~ ~~and other~~Environmental one-time compliance costs, we have spent an average of approximately $4 million in each of the last three years on capital expenditures for environmental purposes and, we expect to spend approximately $6 million in 2010.Matters

~~OFF~~As discussed in Part I, Item 1. Business, "Environmental Compliance," we completed all projects required to bring us into compliance with the now vacated Boiler MACT. However, we could incur significant expenditures due to changes in law or discovery of new information. In addition, it is not yet known when greenhouse gas emission laws or regulations may come into effect, nor is it currently possible to estimate the cost of compliance with such laws or regulations. Excluding spending on Boiler MACT projects and other one-~~BALANCE~~time ~~SHEET~~compliance ~~ARRANGEMENT~~costs, we have spent an average of approximately $5 million in each of the last three years on capital expenditures for environmental purposes and, we expect to spend approximately $3 million in 2011.

At ~~December 31, 2009, we had one off~~OFF-~~balance~~BALANCE ~~sheet~~SHEET ~~financing arrangement.~~ARRANGEMENT

WeAt ~~sold 980,000 acres of owned and leased timberland in October~~December ~~1999. The final purchase price~~31, ~~after adjustments~~2010, ~~was~~ ~~$710~~we ~~million.~~had Weone received $225 million in cash and $485 million in the form of installment notes. Under our program to monetize the installment notes receivable, the notes were sold, without recourse, to Timber Note Holdings LLC (TNH), a qualified special purpose entity under the provisions of ASC 860, Transfers and Servicing (ASC 860), for $430 million in cash proceeds and a residual interest in the notes. The residual interest included in other assets in the accompanying consolidated off-balance sheet ~~was~~financing ~~$36 million at December 31, 2009~~arrangement. ~~TNH~~ ~~and its creditors have no recourse to us in the event of a default on the installment notes.~~

~~EFFECTS~~We sold OF980,000 ~~INFLATION~~acres of owned and leased timberland in October 1999. The final purchase price, after adjustments, was $710 million. We received $225 million in cash and $485 million in the form of installment notes. Under our program to monetize the installment notes receivable, the notes were sold, without recourse, to Timber Note Holdings LLC ("TNH"), a non-consolidated variable interest entity under the provisions of ASC 860, for $430 million in cash proceeds and a residual interest in the notes. The residual interest included in other assets in the accompanying consolidated balance sheet was $21 million at December 31, 2010 (See Note 8 of the Notes to Consolidated Financial Statements). TNH and its creditors have no recourse to us in the event of a default on the installment notes.

~~Increases~~ inEFFECTS ~~costs~~OF for fiber, energy, freight, chemicals and other materials including corn starch and ink have had an adverse impact on our operating results. Although we experienced lower costs for these items in 2009, we expect to see increases in these costs in 2010. Fiber, energy and freight cost increases are strongly influenced by supply and demand factors including competition in global markets and from hurricanes or other natural disasters in certain regions of the United States, and when supplies become tight, we have experienced increases in the cost of these items. We continue to seek ways to mitigate the impact of such cost increases and, to the extent permitted by competition, pass the increased cost on to customers by increasing sales prices over time.INFLATION

WeWhile ~~used~~inflationary ~~the~~increases ~~last-~~in certain input costs, ~~first-out method~~such ofas ~~accounting~~fiber, ~~for~~energy ~~approximately~~and ~~41%~~freight ofcosts, ~~our~~have ~~inventories~~an atimpact ~~December 31~~on our operating results, changes in ~~2009. Under~~general ~~this~~inflation ~~method,~~have ~~the~~had ~~cost~~minimal ~~of goods~~impact ~~sold~~on ~~reported~~our operating results in each of the ~~financial~~last ~~statements~~three ~~approximates~~years. ~~current~~Fiber, energy and freight cost increases are strongly influenced by supply and demand factors ~~thus~~including ~~provides~~competition ain ~~closer~~global ~~matching~~markets and from hurricanes or other natural disasters in certain regions of ~~revenue~~the United States, and ~~expenses~~when supplies become tight, we have experienced increases in ~~periods~~the cost of ~~increasing~~ ~~costs~~these items. We continue to seek ways to mitigate the impact of

Replacement of existing fixed assets in future years will be at higher costs, but this will take place over many years. New assets will result in higher depreciation charges; but, in many cases, due to technological improvements, there may be operating cost savings as well.47

~~CRITICAL~~Table ~~ACCOUNTING~~of ~~POLICIES AND USE OF ESTIMATES~~Contents

~~Our consolidated financial~~such ~~statements~~cost ~~have~~increases ~~been~~and, ~~prepared in accordance with U.S. GAAP. The preparation of financial statements in accordance with U.S. GAAP requires our management~~ to ~~make~~the ~~estimates~~extent ~~and assumptions~~permitted ~~that~~by ~~affect~~competition, ~~the~~pass ~~amounts reported in~~ the ~~consolidated~~increased ~~financial statements~~cost ~~and accompanying notes. Our estimates and assumptions are based~~ on historical experiences and changes in the business environment. However, actual results may differ from these estimates. Critical accounting policies and estimates are defined as those that are both most important to ~~the~~customers ~~portrayal~~by ofincreasing ~~our~~sales ~~financial~~prices ~~condition~~over ~~and results and require management’s most subjective judgments~~time. ~~Our~~ ~~most critical accounting policies and use of estimates are described below.~~

~~Going~~We used ~~Concern~~the last-in, first-out method of accounting for approximately 56% of our inventories at December 31, 2010. Under this method, the cost of goods sold reported in the financial statements approximates current cost and thus provides a closer matching of revenue and expenses in periods of increasing costs.

~~The~~Upon emergence ~~consolidated~~from ~~financial statements~~Chapter 11 and ~~related~~CCAA ~~notes~~bankruptcy ~~have~~proceedings, ~~been prepared assuming that we will continue as a going concern~~property, ~~although~~plant ~~our~~and ~~bankruptcy~~equipment ~~filings~~was ~~raise~~valued ~~substantial~~at ~~doubt about~~fair ~~our~~value ~~ability~~which toapproximates ~~continue~~replacement ascosts ~~a going concern. The consolidated financial statements do not include any adjustments related to the recoverability and classification~~ of ~~recorded~~ ~~assets~~existing orfixed ~~to the amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as a going concern~~assets.

~~Long-Lived~~ ~~Assets~~CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

~~We conduct~~Our ~~impairment~~consolidated ~~reviews~~financial ofstatements ~~long-lived~~have ~~assets~~been prepared in accordance with ~~ASC~~U.S. GAAP. ~~360-10, Impairment~~The orpreparation ~~Disposal~~ of ~~Long-Lived~~financial ~~Assets~~statements in accordance with U.S. ~~Based~~GAAP ~~upon~~requires our ~~review~~management asto ofmake ~~December 31,~~estimates ~~2009~~and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our estimates and assumptions are based on historical experiences and changes in the business environment. However, weactual ~~determined~~results may differ from these estimates. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results and require management's most subjective judgments. Our most critical accounting policies and use of estimates are described below.

37 Fresh-Start Accounting

~~Table~~Upon ofemergence ~~Contents~~from Chapter 11, we adopted fresh start accounting as prescribed by ASC 852, which required us to revalue our assets and liabilities to fair value. ASC 852, among other things, defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements.

~~there~~Fresh ~~was~~start noaccounting ~~impairment~~provides, among other things, for a determination of ~~long-lived~~the ~~assets. Such~~value ~~reviews~~to ~~require~~be usassigned to ~~make~~the ~~estimates~~equity of ~~future~~the ~~cash~~emerging ~~flows~~company ~~and~~as ~~fair values. Our~~of ~~cash~~a ~~flow~~date ~~projections include~~selected ~~significant~~for ~~assumptions~~financial ~~about~~reporting ~~economic~~purposes. ~~conditions~~In conjunction with the bankruptcy proceedings, ~~demand~~a ~~and~~third ~~pricing for~~party ~~our~~financial ~~products~~advisor ~~and~~provided ~~costs.~~an ~~Our~~enterprise ~~estimates~~value of ~~fair~~the ~~value~~Company ~~are~~of ~~determined~~approximately ~~using~~$3,145 million to $3,445 million with a midpoint ~~variety~~of $3,295 million. Enterprise value of the Company was estimated using various valuation ~~techniques,~~methods including: ~~cash~~(i) comparable ~~flows.~~public ~~While~~company ~~significant~~analysis, (ii) discounted cash flow ~~judgment~~analysis is("DCF") ~~required,~~and we(iii) precedent ~~believe~~transaction ~~that~~analysis. ~~our~~The ~~estimates~~preliminary ofequity ~~future~~value ~~cash~~set ~~flows~~forth ~~and fair~~by ~~value~~the ~~are~~third ~~reasonable. However~~party was $2, ~~should~~360 million, ~~our~~using ~~assumptions~~the ~~change~~midpoint inenterprise ~~future~~value ~~years~~of $3,295 million ~~our~~and ~~fair~~adjusting ~~value~~for ~~models~~expected ~~could indicate~~cash ~~lower~~and ~~fair~~debt ~~values~~balances ~~for~~upon ~~long-lived~~emergence ~~assets,~~and ~~which~~expected ~~could~~cash ~~materially~~proceeds ~~affect~~ from the ~~carrying~~sale of non-operating assets. The final equity value of ~~property~~$2,352 was ~~plant~~determined ~~and~~consistent ~~equipment~~with ~~and~~the ~~results~~third party methodology using the midpoint enterprise value of ~~operations~~$3,295 million.

~~Restructurings~~The Company's reorganization value was allocated to its assets and liabilities in conformity with the procedures specified by ASC 805, "Business Combinations." As a result of adopting fresh start accounting, the Company recorded goodwill of $93 million which represents the excess of reorganization value over amounts assigned to the other assets.

~~In recent years~~All estimates, weassumptions ~~have~~and ~~closed~~financial ~~a number of operating facilities~~projections, including ~~paper mills, and exited non-core businesses. Identifying and calculating~~ the ~~cost~~fair tovalue ~~exit these businesses requires certain assumptions to be made~~adjustments, the ~~most~~ ~~significant~~financial ~~of which are anticipated future liabilities~~projections, ~~including leases~~ and ~~other contractual obligations, and~~ the ~~adjustment~~enterprise ofvalue ~~property, plant~~ and ~~equipment~~ toreorganization ~~net realizable~~ value~~. We believe~~ ~~our~~projections, ~~estimates~~ are ~~reasonable, considering our knowledge of the paper~~inherently ~~industry,~~subject ~~previous~~to ~~experience~~significant inuncertainties ~~exiting activities~~ and ~~valuations received from independent third parties in~~ the ~~calculation~~resolution of ~~such~~contingencies ~~estimates. Although~~beyond our ~~estimates~~control. ~~have~~Accordingly, ~~been~~there ~~reasonably accurate~~can inbe ~~the~~no ~~past,~~assurance ~~significant~~that ~~judgment~~the ~~is required~~estimates, ~~and~~assumptions ~~these estimates~~ and ~~assumptions~~ ~~may~~financial ~~change~~projections aswill ~~additional~~be realized, ~~information~~and ~~becomes~~actual ~~available~~results ~~and~~could ~~facts~~vary ~~or circumstances change~~materially.

~~Allowance~~For the ~~for~~impact ~~Doubtful~~that ~~Accounts~~the adoption of fresh start accounting had on our consolidated balance sheet, see Note 1 of the Notes to the Consolidated Financial Statements.

We evaluate the collectibility of accounts receivable on a case-by-case basis and make adjustments to the bad debt reserve for expected losses. We also estimate reserves for bad debts based on historical experience and past due status of the accounts. We perform credit evaluations and adjust credit limits based upon each customer’s payment history and credit worthiness. While credit losses have historically been within our expectations and the provisions established, actual bad debt write-offs may differ from our estimates, resulting in higher or lower charges in the future for our allowance for doubtful accounts.48

~~Pension~~Table ~~and~~of ~~Postretirement Benefits~~Contents

We ~~have significant long~~Long-~~term liabilities~~Lived ~~related~~Assets toIncluding ~~our~~Goodwill ~~defined benefit pension~~ and ~~postretirement~~Other ~~benefit plans. The~~Intangible determination of pension obligations and expense is dependent upon our selection of certain assumptions, the most significant of which are the expected long-term rate of return on plan assets and the discount rates applied to plan liabilities. Consulting actuaries assist us in determining these assumptions, which are described in Note 15 of the Notes to Consolidated Financial Statements. In 2009, the expected long-term rates of return on our U.S. plan assets and foreign plan assets were 8.50% and 7.50%, respectively, which were consistent with 2008. The weighted average discount rates used to determine the benefit obligations for the U.S. and foreign retirement plans at December 31, 2009 were 5.88% and 6.30%, respectively. The assumed rate for the long-term return on plan assets was determined based upon target asset allocations and expected long-term rates of return by asset class. For determination of the discount rate, the present value of the cash flows as of the measurement date is determined using the spot rates from the Mercer Yield Curve, and based on the present values, a single equivalent discount rate is developed. This rate is the single uniform discount rate that, when applied to the same cash flows, results in the same present value of the cash flows as of the measurement date. A decrease in the assumed rate of return of 0.50% would increase pension expense by approximately $12 million. A decrease in the discount rate of 0.50% would increase our pension expense by approximately $17 million and our pension benefit obligations by approximately $182 million.Assets

~~Related~~We toconduct ~~our~~impairment ~~postretirement~~reviews of long-lived assets in accordance with ASC 360-10, "Impairment or Disposal of ~~benefit~~Long-Lived ~~plans~~Assets" and ASC 350, "Intangibles-Goodwill and Other." Based upon our review as of December 31, 2010, we determined that there was no impairment of long-lived assets, including goodwill. Such reviews require us to make ~~assumptions~~estimates ~~for~~of future ~~trends~~cash ~~for~~flows ~~medical~~and ~~care~~fair values. Our cash flow projections include significant assumptions about economic conditions, demand and pricing for our products and costs. ~~The~~ ~~effect~~Our estimates of afair 1%value ~~change~~are indetermined ~~the assumed~~using ~~health~~a ~~care~~variety ~~cost~~of ~~trend~~valuation ~~rate~~techniques, ~~would~~including ~~increase~~cash ~~our~~flows. ~~accumulated~~While significant judgment ~~postretirement~~is ~~benefit~~required, ~~obligation~~we asbelieve that our estimates of ~~December 31~~future cash flows and fair value are reasonable. However, ~~2009~~should byour ~~$10~~assumptions ~~million and~~change ~~would~~in ~~increase~~future ~~the~~years, ~~annual~~our ~~net~~fair ~~periodic~~value ~~postretirement~~models ~~benefits~~could ~~cost~~indicate bylower $1fair ~~million~~values for ~~2009~~long-lived assets, including goodwill and other intangible assets, which could materially affect the carrying value of these assets and results of operations.

~~Income~~ ~~Taxes~~Restructurings

WeIn ~~apply~~recent ~~the~~years, ~~provisions~~we ofhave ~~ASC~~closed ~~740 which~~a ~~creates~~number aof ~~single~~operating ~~model~~facilities, toincluding ~~address~~paper ~~accounting~~mills, ~~for~~and ~~uncertainty~~exited innon-core ~~tax positions~~businesses. Identifying and calculating ~~clarifies~~ the ~~accounting~~cost ~~for~~to ~~income~~exit ~~taxes~~these bybusinesses ~~prescribing~~requires ~~a minimum~~certain ~~recognition~~assumptions ~~threshold~~to abe ~~tax~~made, ~~position~~the ismost ~~required~~significant toof ~~meet~~which ~~before~~are ~~being recognized~~anticipated infuture ~~the~~liabilities, ~~financial~~including ~~statements.~~ leases and other contractual ~~Under~~obligations, and the ~~provisions~~adjustment of ~~ASC 740~~property, weplant ~~elected~~and equipment to ~~classify~~net ~~interest~~realizable ~~and penalties~~value. ~~related~~We tobelieve our ~~unrecognized~~estimates ~~tax~~are ~~benefits~~reasonable, inconsidering our knowledge of the ~~income~~paper ~~tax~~industry, ~~provision~~previous experience ~~(See~~in ~~Note~~exiting 14activities and valuations received from independent third parties in the calculation of such estimates. Although our estimates have been reasonably accurate in the ~~Notes~~past, tosignificant judgment ~~Consolidated~~is ~~Financial~~required, ~~Statements)~~and these estimates and assumptions may change as additional information becomes available and facts or circumstances change.

38 Allowance for Doubtful Accounts

~~Table~~We evaluate the collectibility of ~~Contents~~accounts receivable on a case-by-case basis and make adjustments to the bad debt reserve for expected losses. We also estimate reserves for bad debts based on historical experience and past due status of the accounts. We perform credit evaluations and adjust credit limits based upon each customer's payment history and credit worthiness. While credit losses have historically been within our expectations and the provisions established, actual bad debt write-offs may differ from our estimates, resulting in higher or lower charges in the future for our allowance for doubtful accounts.

At ~~December 31,~~Pension ~~2009, we had $37 million of net unrecognized tax benefits. The primary differences between gross unrecognized tax benefits~~ and ~~net unrecognized~~Postretirement tax benefits are associated with offsetting benefits in other jurisdictions related to transfer pricing and the U.S. federal tax benefit from state tax deductions. (See Note 14 of the Notes to Consolidated Financial Statements for a reconciliation of 2009 activity).Benefits

~~For~~We ~~the~~have ~~year~~significant ~~ended~~long-term ~~December 31, 2009,~~liabilities ~~$3 million of interest was recorded~~ related to ~~tax~~our ~~positions~~defined ~~taken~~benefit ~~during the~~pension ~~current~~ and ~~prior~~postretirement ~~years~~benefit plans. The ~~interest~~determination ~~was computed on the difference~~of ~~between~~pension ~~the~~obligations ~~tax position recognized in accordance with ASC 740~~ and ~~the~~expense ~~amount previously~~is ~~taken~~dependent orupon ~~expected~~our toselection beof ~~taken~~certain ~~in our tax returns~~assumptions, ~~adjusted to reflect~~ the ~~impact~~most significant of ~~net~~which ~~operating~~are ~~loss~~the ~~and~~expected ~~other~~long-term ~~tax~~rate ~~carryforward~~of ~~items. During~~return ~~2009,~~on noplan ~~penalties~~assets ~~were~~and ~~recorded~~the ~~related~~discount torates ~~current~~applied ~~and~~to ~~prior~~plan ~~year~~liabilities. ~~tax~~Consulting ~~positions. At~~actuaries ~~December 31,~~assist ~~2009,~~us ~~$25~~in ~~million~~determining ~~of interest~~these ~~and~~assumptions, ~~penalties~~which are ~~recognized~~described in ~~the~~Note 15 ~~consolidated~~of ~~balance~~the ~~sheet. All~~Notes ~~net~~to ~~unrecognized~~Consolidated ~~tax~~Financial ~~benefits, if recognized, would affect our effective tax rate~~Statements.

~~Deferred tax assets and liabilities~~At ~~reflect~~June 30, ~~our~~2010, ~~assessment of future taxes to be paid~~ in ~~the~~conjunction ~~jurisdictions~~with infresh ~~which we~~start ~~operate. These assessments involve temporary differences resulting from differing treatment of items for tax and~~ accounting ~~purposes. In addition~~, ~~unrecognized~~ ~~tax~~we ~~benefits~~updated ~~under the provisions of ASC 740 reflect estimates of~~ our ~~current~~mortality ~~tax~~rate ~~exposures. Based~~table onassumptions ~~our evaluation~~which ofincreased our ~~tax~~employer ~~positions,~~benefit weliabilities ~~believe~~by ~~we were adequately reserved for~~approximately ~~these matters at December~~$58 ~~31, 2009~~million.

AtFor the six months ended December 31, ~~2009~~2010 and June 30, we2010, ~~had deferred~~and ~~tax~~the ~~assets~~year ofended $1December 31,~~353~~ ~~million. A valuation~~2009, ~~allowance~~the ofexpected ~~$382 million~~long-term ~~has~~rate ~~been~~of ~~established~~return on aour ~~portion~~U.S. ~~of these~~plan ~~deferred tax~~ assets ~~based~~was 8.50%. onFor the ~~expected~~six ~~timing~~months ofended ~~deferred~~December 31, ~~tax~~2010 ~~liability reversals~~and June 30, 2010, and the ~~expiration~~year ~~dates~~ended ofDecember 31, 2009 the ~~tax~~expected ~~loss~~long-term ~~carryforwards.~~rates ~~The~~of ~~valuation~~return on our Canadian plan ~~allowance~~assets ~~increased~~were ~~during~~6.30%, ~~2009~~6.30% and 7.50%, ~~primarily~~respectively. toThe ~~offset~~weighted ~~higher~~average ~~deferred~~discount ~~tax~~rates ~~assets related~~used to ~~tax~~determine ~~losses~~the onqualifed ~~our~~defined ~~investment~~benefit inobligations ~~our~~for ~~Canadian~~the ~~subsidiaries~~U.S. Atand foreign retirement plans at December 31, ~~2009,~~ we2010 ~~expect~~were ~~our~~5.32% ~~deferred~~and ~~tax assets~~5.21%, ~~net~~respectively. ofThe assumed rate for the ~~valuation~~long-term ~~allowance,~~return ~~will be~~on ~~fully~~plan ~~realized~~assets ~~through~~was ~~the~~determined ~~reversal~~based ofupon ~~net~~target ~~taxable~~asset ~~temporary~~allocations ~~differences.~~and

As previously disclosed, the Canada Revenue Agency (CRA) is examining our income tax returns for tax years 1999 through 2005. In connection with the examination, the CRA has issued assessments of additional income taxes, interest and penalties related to transfer prices of inventory sold by our Canadian subsidiaries to our U.S. subsidiaries. Additionally, the CRA is considering certain significant adjustments related principally to taxable income related to our acquisition of a Canadian company. We have appealed the assessments related to the transfer pricing matter. In order to appeal the assessments, we made payments of $25 million to the CRA in 2008. The remaining matters may be resolved at the examination level or subsequently upon appeal within the next twelve months. While the final outcome of the remaining CRA examination matters, including an estimate of the range of the reasonably possible changes to unrecognized tax benefits, is not yet determinable, we believe that the examination or subsequent appeals will not have a material adverse effect on our consolidated financial condition or results of operations.49

~~The~~Table ~~U.S. federal statute~~ of limitations is closed through 2005, except for any potential correlative adjustments for the years 1999 through 2005 relating to the CRA examinations noted above. There are currently no federal examinations in progress. In addition, we file tax returns in numerous states. The states’ statutes of limitations are generally open for the same years as the federal statute of limitations.Contents

~~Federal~~expected long-term ~~income~~rates ~~taxes~~of ~~have~~return ~~not~~by ~~been provided~~asset onclass. ~~undistributed~~For ~~earnings~~determination of ~~our~~the ~~foreign~~discount ~~subsidiaries~~rate, ~~during~~the ~~2007 through~~present ~~2009,~~value of the cash flows as weof ~~intend~~the tomeasurement ~~indefinitely~~date ~~reinvest~~is ~~such~~determined ~~earnings~~using ~~into~~the ~~our~~spot rates ~~foreign~~from ~~subsidiaries~~the Mercer Yield Curve. ~~The~~ ~~restrictions on~~A ~~remittance~~decrease in the assumed rate of ~~these~~return ~~earnings,~~of ~~pursuant~~0.50% towould ~~our~~increase ~~bankruptcy~~pension ~~status,~~expense ~~make~~by itapproximately ~~not practicable~~$10 million. toAn ~~determine~~increase in the ~~amount~~discount rate of ~~the~~0.50% ~~unrecognized~~would increase ~~deferred~~our ~~tax~~pension ~~liability on~~expense ~~these~~by ~~undistributed~~approximately ~~foreign~~$5 million ~~earnings~~and decrease our pension benefit obligations by approximately $201 million.

~~Legal~~Effective January 1, 2011, the expected long-term rate of return on our U.S. plan assets was reduced to 7.75%. The assumed rate for the long-term return on plan assets was determined based upon target asset allocations and ~~Environmental~~expected ~~Contingencies~~long-term rates of return by asset class.

~~Accruals~~Related to ~~for~~our ~~legal~~postretirement ~~and~~benefit ~~environmental matters~~plans, ~~are~~we ~~recorded~~make ~~when~~assumptions itfor isfuture ~~probable~~trends ~~that~~for amedical ~~liability~~care ~~has~~costs. ~~been~~The ~~incurred~~effect ~~and the amount~~ of ~~loss~~a ~~can~~1% bechange ~~reasonably~~in ~~estimated. Such~~the ~~liabilities~~assumed ~~are~~health ~~developed~~care ~~based~~cost ontrend ~~currently~~rate ~~available~~would ~~information~~increase our ~~and~~accumulated ~~require~~postretirement ~~judgments~~benefit obligation as toof ~~probable outcomes.~~December ~~Assumptions~~31, ~~are~~2010 ~~based~~by on$12 million ~~historical experience~~ and ~~recommendations~~would ~~of legal~~increase ~~counsel. Environmental~~the ~~estimates include~~annual ~~assumptions~~net ~~and~~periodic ~~judgments~~postretirement ~~about~~benefits ~~particular~~cost ~~sites,~~by ~~remediation alternatives~~an ~~and~~immaterial ~~environmental regulations~~amount. We ~~believe our accruals are adequate. However, due to uncertainties associated with these~~

39 Income Taxes

~~Table~~We apply the provisions of ~~Contents~~ASC 740, "Income Taxes" ("ASC 740"), which creates a single model to address accounting for uncertainty in tax positions and clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Under the provisions of ASC 740, we elected to classify interest and penalties related to our unrecognized tax benefits in the income tax provision (See Note 14 of the Notes to Consolidated Financial Statements).

~~assumptions~~At December 31, ~~and judgments~~2010, aswe ~~well as~~had ~~potential~~$279 million ~~changes~~of tonet ~~governmental~~unrecognized ~~regulations~~tax ~~and~~benefits. ~~environmental technologies,~~The ~~and~~primary ~~the~~differences ~~impact~~between ofgross ~~our~~unrecognized ~~bankruptcy~~tax onbenefits ~~these~~and ~~matters,~~net ~~actual~~unrecognized ~~costs~~tax benefits are ~~could~~associated ~~differ~~with ~~materially~~the U.S. federal tax benefit from state tax deductions. (See Note 14 of the ~~estimated~~Notes ~~amounts~~to Consolidated Financial Statements for a reconciliation of 2010 activity).

~~Self-Insurance~~For the six months ended December 31, 2010, and June 30, 2010, no interest or penalties were recorded related to tax positions taken during the current and prior years. At December 31, 2010, no interest or penalties were recognized in the consolidated balance sheet. All net unrecognized tax benefits, if recognized, would affect our effective tax rate.

WeDeferred tax ~~self-insure~~assets aand ~~majority~~liabilities ofreflect our ~~workers’~~ ~~compensation~~assessment ~~costs. Other workers’~~of ~~compensation~~future ~~and~~taxes ~~general~~to ~~liability~~be ~~costs~~paid ~~are~~in ~~subject~~the tojurisdictions ~~specific retention~~in ~~levels~~which ~~for~~we ~~certain policies and coverage~~operate. ~~Losses~~ ~~above~~These ~~these~~assessments ~~retention~~involve ~~levels~~temporary ~~are transferred~~differences toresulting ~~insurance~~from ~~companies. In~~differing ~~addition,~~treatment ~~we self-insure the majority~~ of ~~our~~items ~~group~~for ~~health~~tax ~~care~~and ~~costs~~accounting purposes. ~~All~~ ofIn ~~the workers’ compensation~~addition, ~~general liability~~unrecognized ~~and~~tax ~~group~~benefits ~~health~~under ~~care~~the ~~claims~~provisions ~~are~~of ~~handled~~ASC 740 byreflect ~~third-party administrators.~~estimates ~~Consulting~~of ~~actuaries and administrators assist us in determining~~ our ~~liability~~current ~~for~~tax ~~self-insured claims~~exposures. ~~Losses~~ ~~are~~Based ~~accrued~~on ~~based upon the aggregate~~our ~~self-insured~~evaluation ~~claims~~of ~~determined~~our bytax ~~the third-party administrators~~positions, ~~actuarial assumptions and our historical experience. While~~ we believe ~~that~~we ~~our~~were ~~assumptions~~adequately ~~are~~reserved ~~appropriate,~~for ~~significant differences~~these inmatters ~~our~~at ~~actual experience or significant changes in our assumptions may materially affect our workers’ compensation~~December 31, ~~general liability and group health care costs~~2010.

~~Liabilities~~At December 31, ~~Subject~~2010, we had deferred tax assets of $849 million. A valuation allowance of $30 million has been established on a portion of these deferred tax assets based on the expected timing of deferred tax liability reversals and the expiration dates of the tax loss carryforwards. The valuation allowance decreased during 2010, primarily to ~~Compromise~~reflect our ability to utilize net operating losses in future years due to our emergence from bankruptcy and adoption of fresh start accounting. At December 31, 2010, we expect our deferred tax assets, net of the valuation allowance, will be fully realized through the reversal of net taxable temporary differences and utilization of net operating losses.

~~Liabilities subject to compromise represent unsecured~~As ~~obligations~~previously ~~that will be accounted for under a plan of reorganization. Generally~~disclosed, ~~actions to enforce or otherwise effect payment of pre-Chapter 11 or CCAA liabilities are stayed. Pre-petition liabilities that are subject to compromise are reported at~~ the ~~amounts~~Canada ~~expected to~~Revenue beAgency ~~allowed,~~("CRA") ~~even~~was ifexamining ~~they~~our ~~may~~income betax ~~settled~~returns for ~~lesser~~tax ~~amounts. These~~years ~~liabilities~~1999 ~~represent the amounts expected to be allowed on known or potential claims to be resolved~~ through ~~the Chapter~~2005. 11In ~~and~~connection ~~CCAA~~with ~~process, and remain subject to future adjustments arising from negotiated settlements, actions of~~ the ~~Bankruptcy Courts~~examination, ~~rejection of executory contracts and unexpired leases,~~ the ~~determination~~CRA ashad toissued ~~the~~assessments ~~value~~ of ~~collateral~~additional ~~securing~~income ~~the claims~~taxes, ~~proofs~~interest ofand ~~claim,~~penalties orrelated ~~other events. Liabilities subject~~ to ~~compromise~~transfer ~~also include~~prices ~~certain items that may be assumed under the Proposed Plan~~ of ~~Reorganization,~~ ~~and~~inventory assold ~~such,~~by ~~may~~our beCanadian ~~subsequently~~subsidiaries ~~reclassified~~ to ~~liabilities not~~our ~~subject~~U.S. ~~to compromise~~subsidiaries. ~~Differences between~~ ~~liability~~Additionally, ~~amounts~~the ~~estimated~~CRA bywas usconsidering ~~and claims filed by creditors are~~certain ~~being~~significant ~~investigated~~adjustments ~~and,~~related ifprincipally ~~necessary,~~to ~~the~~taxable ~~Bankruptcy~~income ~~Courts~~related ~~will~~to ~~make~~our aacquisition ~~final determination~~ of ~~the~~a ~~allowable~~Canadian ~~claim~~company. ~~The determination~~ ofPursuant ~~how~~to ~~liabilities will ultimately be treated cannot be made until~~ the ~~Bankruptcy~~Plan ~~Courts approve a plan~~ of ~~reorganization. Accordingly~~Reorganization, ~~the~~we ~~ultimate~~entered ~~amount~~into oran ~~treatment of~~agreement ~~such~~with ~~liabilities~~the isCRA ~~not~~and ~~determinable at this time.~~

~~PROSPECTIVE ACCOUNTING STANDARDS~~50

InTable ~~June 2009, the FASB issued amendments to ASC 860, effective for fiscal years beginning after November 15, 2009. The amendments remove the concept~~ of a qualifying special-purpose entity and the related impact on consolidation, thereby potentially requiring consolidation of such special-purpose entities previously excluded from the consolidated financial statements. We do not expect these amendments to have a material impact on our consolidated financial statements.Contents

~~ITEM~~other provincial 7Atax authorities that took effect upon our emergence from bankruptcy which settled the open Canadian income tax matters through January 26, 2009. ~~QUANTITATIVE~~As ~~AND~~a ~~QUALITATIVE~~result ~~DISCLOSURES~~of ~~ABOUT~~this ~~MARKET~~agreement, we ~~RISK~~reported a $39 million net income tax benefit related to the final settlement of the Canadian tax claims and the release of the previously accrued unrecognized tax benefits related to the Canadian audit for the six months ended June 30, 2010.

WeThe U.S. ~~are~~federal ~~exposed~~statute toof ~~various~~limitations ~~market~~is ~~risks,~~closed ~~including~~through ~~commodity~~2006. ~~price~~There ~~risk, foreign~~are ~~currency~~currently ~~risk~~no ~~and~~federal ~~interest~~examinations ~~rate~~in ~~risk~~progress. To ~~manage~~In ~~the volatility related to these risks~~addition, we ~~have~~file ontax areturns ~~periodic basis~~in ~~entered~~numerous ~~into various derivative contracts~~states. The ~~majority~~states' statutes of limitations ~~these contracts~~ are ~~settled in~~generally ~~cash. However,~~open ~~such~~for ~~settlements have not had a significant effect on our liquidity in~~ the ~~past,~~same ~~nor~~years ~~are~~as ~~they expected to be significant in~~ the ~~future. We~~federal dostatute ~~not~~of ~~use derivatives for speculative or trading purposes~~limitations.

~~On January 26, 2009, the Chapter 11 Petition and the Canadian~~Federal ~~Petition~~income ~~effectively~~taxes ~~terminated~~have ~~all~~not ~~existing~~been ~~derivative~~provided ~~instruments. Termination fair values were calculated based~~ on ~~the~~undistributed ~~potential~~earnings ~~settlement value. During 2009, a letter~~ of ~~credit~~our inforeign ~~the~~subsidiaries ~~amount~~during ~~of $18 million was drawn on related to the settlement of certain commodity derivative instruments. Excluding these settled liabilities~~2010, ~~the Company’s~~as ~~termination~~we ~~value~~intend ~~related~~ to ~~its~~indefinitely ~~remaining~~reinvest ~~derivative~~such ~~liabilities~~earnings ~~was approximately~~into ~~$60~~our ~~million,~~foreign ~~recorded~~subsidiaries. ~~in other current liabilities in the~~At ~~consolidated balance sheet at~~ December 31, ~~2009. These derivative liabilities were stayed due to the filing of the Chapter 11 Petition and the Canadian Petition at which time~~2010, ~~these~~undistributed ~~liabilities~~earnings ~~were adjusted through OCI~~ for ~~derivative~~our ~~instruments qualifying~~foreign ~~for~~subsidiaries ~~hedge~~were ~~accounting and cost of goods sold for derivative instruments not qualifying for hedge accounting~~$9 million. ~~Subsequently,~~ ~~the amounts adjusted~~

40 Legal and Environmental Contingencies

~~Table~~Accruals for legal and environmental matters are recorded when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Such liabilities are developed based on currently available information and require judgments as to probable outcomes. Assumptions are based on historical experience and recommendations of ~~Contents~~legal counsel. Environmental estimates include assumptions and judgments about particular sites, remediation alternatives and environmental regulations. We believe our accruals are adequate. However, due to uncertainties associated with these assumptions and judgments, as well as potential changes to governmental regulations and environmental technologies, actual costs could differ materially from the estimated amounts.

~~through~~ OCI were recorded in earnings during 2009 when the underlying transaction was recognized or when the underlying transaction was no longer expected to occur, except for a $1 million loss (net of tax) which remained in OCI at December 31, 2009. See Note 10 of the Notes to Consolidated Financial Statements.Self-Insurance

~~Commodity~~We ~~Price~~self-insure ~~Risk~~a majority of our workers' compensation costs. Other workers' compensation and general liability costs are subject to specific retention levels for certain policies and coverage. Losses above these retention levels are transferred to insurance companies. In addition, we self-insure the majority of our group health care costs. All of the workers' compensation, general liability and group health care claims are handled by third-party administrators. Consulting actuaries and administrators assist us in determining our liability for self-insured claims. Losses are accrued based upon the aggregate self-insured claims determined by the third-party administrators, actuarial assumptions and our historical experience. 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, general liability and group health care costs.

We historically used financial derivative instruments, including fixed price swaps and options, to manage fluctuations in cash flows resulting from commodity price risk in the procurement of natural gas and other commodities including fuel and heating oil. Our objective was to fix the price of a portion of the purchases of these commodities used in the manufacturing process. The changes in the market value of such derivative instruments have historically been, and are expected to continue to be, highly effective at offsetting changes in price of the hedged item. Excluding the impact of derivative instruments, the potential change in our expected 2009 and 2008 natural gas cost, based upon our expected annual usage and unit cost, resulting from a hypothetical 10% adverse price change, would be approximately $9 million and $9 million, respectively. The changes in energy cost discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” include the impact of the natural gas derivative instruments. See Note 10 of the Notes to Consolidated Financial Statements.51

~~Foreign~~ Table ~~Currency~~of ~~Risk~~Contents

~~Our principal~~ ~~foreign exchange exposure is the Canadian dollar. Assets and liabilities outside the United~~ ~~States~~ ITEM ~~are primarily located in Canada~~7A. QUANTITATIVE ~~The~~AND ~~functional~~QUALITATIVE ~~currency~~DISCLOSURES ~~for~~ABOUT ~~our~~MARKET ~~Canadian operations is the U.S. dollar. Our investments in foreign subsidiaries with a functional currency other than the U.S. dollar are not hedged.~~RISK

We ~~have~~are ~~historically~~exposed ~~used~~to ~~financial derivative~~various ~~instruments~~market risks, including ~~forward~~commodity ~~contracts~~price ~~and options~~risk, ~~primarily~~foreign ~~to protect~~currency ~~against~~risk ~~Canadian~~and ~~currency~~interest ~~exchange~~rate risk. ~~associated~~To ~~with~~manage ~~expected~~the ~~future~~volatility ~~cash~~related ~~flows. These~~to ~~instruments~~these ~~typically~~ risks, we have ~~maturities~~on a periodic basis entered into various derivative contracts. The majority of ~~twelve~~these ~~months~~contracts orare ~~less~~settled in cash. In ~~2009~~However, ~~2008~~such ~~and~~settlements ~~2007,~~have ~~the~~not ~~average~~had ~~exchange~~a ~~rates~~significant effect ~~for~~on our liquidity in the ~~Canadian dollar~~past, ~~strengthened~~nor ~~(weakened)~~are ~~against~~they expected to be significant in the Ufuture.S. ~~dollar~~We bydo ~~7.1%,~~not ~~(1.0)%~~use ~~and 5.2%,~~derivatives ~~respectively~~for speculative or trading purposes.

WeOn ~~performed~~January 26, a2009, ~~sensitivity~~the ~~analysis~~Chapter 11 asPetition ofand ~~December 31,~~the ~~2009~~Canadian ~~and~~Petition ~~2008~~effectively ~~that measures~~terminated ~~the~~all ~~change~~existing inderivative instruments. Termination fair values were calculated based on the potential ~~book~~settlement value of. Our termination value related to our ~~net~~remaining ~~monetary~~derivative ~~Canadian~~liabilities ~~liability arising from~~was aapproximately ~~hypothetical~~$59 million. ~~10%~~These ~~adverse~~derivative ~~movement~~liabilities inwere ~~the~~stayed ~~exchange~~due ~~rate~~to the filing of the Chapter 11 Petition and the Canadian ~~dollar~~ ~~relative~~Petition toat ~~the~~which ~~U.S.~~time, ~~dollar~~these ~~with~~liabilities ~~all~~were ~~other~~adjusted ~~variables~~through ~~held~~OCI ~~constant. Excluding~~for ~~the~~derivative ~~impact~~instruments qualifying for hedge accounting and cost of ~~derivative~~goods sold for derivative instruments not qualifying for hedge accounting. Subsequently, the ~~potential~~amounts ~~change~~adjusted inthrough ~~fair~~OCI ~~value~~were ~~resulting~~recorded ~~from~~in aearnings ~~hypothetical~~when ~~10%~~the ~~adverse~~underlying ~~change~~transaction inwas recognized or when the ~~Canadian~~underlying ~~dollar~~transaction ~~exchange~~was ~~rate~~no atlonger ~~December~~expected to occur. As of June 3130, ~~2009~~ ~~and 2008~~2010, ~~would~~all beamounts ~~$11~~in ~~million~~OCI ~~and~~were ~~$10~~recognized ~~million,~~through ~~respectively~~earnings. ~~Fluctuations~~ inOn June 30, ~~Canadian~~2010, ~~dollar~~the ~~monetary assets~~derivative ~~and~~contract termination liabilities ~~result~~of $59 million were paid in ~~gains~~connection orwith ~~losses,~~our ~~which~~emergence ~~are~~from ~~credited~~our orChapter 11 ~~charged~~and CCAA bankruptcy proceedings. See Note 10 of the Notes to ~~income~~Consolidated Financial Statements.

~~Interest~~ ~~Rate~~Commodity Price Risk

~~Our earnings~~Prior ~~and~~to ~~cash~~filing ~~flow~~for ~~are~~bankruptcy, ~~significantly~~we ~~affected~~used byfinancial ~~the~~derivative ~~amount~~instruments, ofincluding ~~interest~~fixed ~~on our~~price ~~indebtedness. Our~~swaps, ~~financing arrangements~~to ~~include~~manage ~~both~~fluctuations ~~fixed~~in ~~and~~cash ~~variable~~flows ~~rate~~resulting from ~~debt~~commodity inprice ~~which~~risk ~~changes~~ in ~~interest~~ ~~rates~~the ~~will~~procurement ~~impact~~of ~~the~~natural ~~fixed~~gas and ~~variable~~other ~~rate~~commodities. ~~debt~~Our ~~differently. A~~objective ~~change~~was into fix the ~~interest~~price ~~rate~~of a portion of ~~fixed~~the ~~rate~~purchases of these commodities used in the manufacturing ~~debt~~process. ~~will~~The ~~impact~~changes in the ~~fair~~market value of ~~the~~such ~~debt,~~derivative ~~whereas~~instruments ahistorically ~~change~~offset the changes in price of the ~~interest rate~~hedged onitem. Excluding the ~~variable~~impact ~~rate~~of ~~debt~~derivative ~~will~~instruments, ~~impact~~the ~~interest~~change ~~expense~~in our 2010 and ~~cash flows. Our~~2009 ~~objective~~natural isgas tocost, ~~mitigate interest~~based ~~rate~~upon ~~volatility~~our ~~and~~expected ~~reduce~~annual orusage ~~cap~~and ~~interest~~unit ~~expense~~cost, ~~within~~resulting ~~acceptable levels~~from ofa ~~market~~hypothetical ~~risk. We~~10% ~~have historically~~adverse ~~entered~~price ~~into~~change, ~~interest~~would ~~rate~~be ~~swaps~~approximately $7 million and $9 million, ~~caps~~respectively. orThe ~~options~~changes toin ~~hedge interest~~energy ~~rate~~cost ~~exposure~~discussed ~~and~~in ~~manage~~Item 7, ~~risk~~"Management's ~~within~~Discussion ~~Company~~and ~~policy. Any~~Analysis ~~derivative~~of ~~would~~Financial beCondition ~~specific~~and toResults of Operations" include the ~~debt~~impact of ~~instrument,~~the ~~contract~~natural orgas ~~transaction,~~derivative ~~which~~instruments. ~~would~~See ~~determine~~Note 10 of the ~~specifics~~Notes ofto ~~the hedge~~Consolidated Financial Statements.

~~We performed~~ aForeign ~~sensitivity~~Currency analysis as of December 31, 2009 and 2008 that measures the change in interest expense on our variable rate debt arising from a hypothetical 100 basis point adverse movement in interest rates. Based on our outstanding variable rate debt as of December 31, 2009 and 2008, a hypothetical 100 basis point adverse change in interest rates would increase interest expense by approximately $14 million and $10 million, respectively.Risk

~~The filing~~Our ofprincipal ~~the~~foreign ~~Chapter 11~~exchange ~~Petition~~exposure ~~and~~is the Canadian ~~Petition~~dollar. ~~constituted~~Assets ~~an event of default under our debt obligations,~~ and ~~those~~liabilities ~~debt~~outside ~~obligations~~the ~~became automatically~~United ~~and~~States ~~immediately~~are ~~due~~primarily ~~and~~located ~~payable,~~in ~~subject~~Canada. ~~to an automatic stay of any action to collect, assert, or recover a claim against us and the application of~~

41Prior to emerging from bankruptcy, the functional currency for our Canadian operations was the U.S. dollar. Fluctuations in Canadian dollar monetary assets and liabilities resulted in gains or losses which were credited or charged to income. Upon emergence, we reviewed the primary economic indicators for our Canadian operations under the Reorganized Smurfit-Stone, including cash flow indicators, sales price indicators, sales market indicators, expense indicators, financing indicators and intercompany transactions as required by ASC 830, "Foreign Currency Matters." Based on our analysis, including current operations and financing availability within Canada, we determined the functional currency for our Canadian operations to be the local currency. As a result, effective July 1, 2010, the assets and liabilities for the Canadian operations are translated at the exchange rate in effect at the balance sheet date and income and expenses are translated at average exchange rates prevailing during the year. Translation gains or losses are included within stockholders' equity as part of OCI.

~~Table~~For the ofPredecessor periods, we used financial derivative instruments, including forward contracts and options, primarily to protect against Canadian currency exchange risk associated with expected ~~Contents~~future

applicable bankruptcy law. The following table presents principal amounts for our debt obligations and related average interest rates based on the weighted average interest rates at the end of the period. Variable interest rates disclosed do not attempt to project future interest rates and do not reflect the impact of our interest rate swap contracts. This information should be read in conjunction with Note 9 of the Notes to Consolidated Financial Statements.52

~~Current~~Table ~~Maturities~~ of ~~Debt~~Contents

As of December 31, 2009 (in millions)	Outstanding	Fair Value
Bank term loans and revolver 3.2% average interest rate (variable)	$ 1,303	$ 1,296
U.S. senior notes 8.0% average interest rate (fixed)	2,275	2,008
U.S. industrial revenue bonds 6.4% average interest rate (fixed)	164	164
Other U.S	51	51
Total debt	$3,793	$3,519

cash flows. The Canadian dollar as of June 30, 2010, compared to December 31, 2009 weakened 1.3% against the U.S. dollar. The Canadian dollar as of December 31, 2009, compared to December 31, 2008, strengthened 7.1%. We recognized non-cash foreign currency exchange gains of $3 million for the six month period ended June 30, 2010, and a loss of $14 million for the year ended December 31, 2009.

42During the Successor period ended December 31, 2010, the Canadian dollar as of December 31, 2010 compared to June 30, 2010 strengthened 6.2% against the U.S. dollar, and as a result, we recorded a $7 million gain (net of tax) in OCI related to the translation of our Canadian operations.

~~Table~~We performed a sensitivity analysis that measures the potential OCI loss from a hypothetical 10% adverse change in quoted foreign currency exchange rate of ~~Contents~~the Canadian dollar relative to the U.S. dollar with all other variables held constant. Excluding the impact of derivative instruments, the potential impact from a hypothetical 10% adverse change in the Canadian dollar exchange rate as of December 31, 2010 would be $15 million (net of tax).

~~ITEM~~During the 8six months ended December 31, 2010, we entered into foreign currency exchange derivative contracts to minimize the exposure to currency exchange rate fluctuations on a $255 million Canadian dollar denominated inter-company note established upon emergence between a U.S. ~~FINANCIAL~~subsidiary ~~STATEMENTS~~and ~~AND~~a ~~SUPPLEMENTARY~~Canadian ~~DATA~~subsidiary, whereby the U.S subsidiary is the lender. The inter-company note, which is denominated in Canadian dollars, matures on June 29, 2015 and the interest is payable quarterly. The derivative contracts are monthly or quarterly instruments with a notional amount equal to the inter-company note principal, plus accrued interest. The derivative contracts are marked-to-market through earnings on a monthly or quarterly basis.

	Page No.
Index to Financial Statements:
Management’s Report on Internal Control Over Financial Reporting	44
Reports of Independent Registered Public Accounting Firm	45
Consolidated Balance Sheets - December 31, 2009 and 2008	47
For the years ended December 31, 2009, 2008 and 2007:
Consolidated Statements of Operations	48
Consolidated Statements of Stockholder’s Equity	49
Consolidated Statements of Cash Flows	50
Notes to Consolidated Financial Statements	51
The following consolidated financial statement schedule is included in Item 15(a):
II: Valuation and Qualifying Accounts and Reserves	95

For the six months ended December 31, 2010, our U.S subsidiary recorded a $10 million foreign currency gain (net of tax) in other, net in the consolidated statements of operations related to the revaluation of the inter-company note. We recorded a $10 million loss (net of tax) in other, net in the consolidated statements of operations on the settlement of the derivative contracts. We recorded $1 million loss (net of tax) in other, net in the consolidated statements of operations related to the change in fair value of the derivative contracts.

~~All other~~ ~~schedules~~Interest ~~specified~~Rate ~~under Regulation S-X have been omitted because they are not applicable, because they are not required or because the information required is included in the financial statements or notes thereto.~~Risk

43Our earnings and cash flow are significantly affected by the amount of interest on our indebtedness. Upon emergence, our financing arrangements included variable rate debt. A change in the interest rate on the variable rate debt will impact interest expense and cash flows. Our objective is to mitigate interest rate volatility and reduce or cap interest expense within acceptable levels of market risk. We may enter into interest rate swaps, caps or options to hedge interest rate exposure and manage risk within Company policy. Any derivative would be specific to the debt instrument, contract or transaction, which would determine the specifics of the hedge (See Note 10 of the Notes to Consolidated Financial Statements).

~~Table~~We performed a sensitivity analysis that measures the change in interest expense on our variable rate debt arising from a hypothetical 100 basis point adverse movement in interest rates. Based on our outstanding variable rate debt as of ~~Contents~~December 31, 2010, a hypothetical 100 basis point change in interest rates would not impact our interest expense because the adjusted LIBOR rate as of December 31, 2010 was 0.30% compared to our minimum Term Loan Facility adjusted LIBOR rate of 2.00% per annum according to the Term Loan agreement.

~~Management’s Report on Internal Control Over Financial Reporting~~53

~~Our~~Table management is responsible for establishing and maintaining adequate internal control over financial reporting for Smurfit-Stone Container Enterprises, Inc., as such term is defined in Rule 13a-15(f) under the Exchange Act. As required by Rule 13a-15(c) under the Exchange Act, we carried out an evaluation, with the participation of our principal executive officer and principal financial officer, of the effectiveness of our internal control over financial reporting as of the end of the latest fiscal year. The framework on which such evaluation was based is contained in the report entitled “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Although there are inherent limitations in the effectiveness of any system of internal control over financial reporting, based on our evaluation, we have concluded that our internal control over financial reporting was effective as of December 31, 2009.Contents

The following ~~effectiveness~~table ofpresents principal amounts for our ~~internal control~~debt ~~over~~obligations ~~financial~~and ~~reporting~~related asaverage ofinterest ~~December 31,~~rates ~~2009~~based ~~has~~on ~~been~~the ~~audited by~~weighted ~~Ernst &~~average ~~Young~~interest ~~LLP,~~rates ~~our~~at ~~independent~~the ~~registered~~end ~~public~~of ~~accounting firm~~the period. ~~Their~~Variable ~~report,~~interest rates ~~which~~disclosed ~~expresses~~do annot ~~unqualified~~attempt ~~opinion~~to onproject ~~the~~future ~~effectiveness of~~interest ~~our~~rates. ~~internal~~This ~~control~~information ~~over~~should ~~financial~~be ~~reporting~~read asin ofconjunction ~~December~~with Note ~~31,~~9 ~~2009, is~~of ~~included~~the ~~herein~~Notes to Consolidated Financial Statements.

~~/s/~~ ~~Patrick~~Short J.and ~~Moore~~Long-Term ~~Patrick J. Moore Chief Executive Officer (Principal Executive Officer)~~Debt

/s/ Paul K. Kaufmann Paul K. Kaufmann Senior Vice President and Corporate Controller (Principal Financial and Accounting Officer)

Outstanding as of December 31, 2010 (in millions)	2011			2012			2013			2014			2015			There- after			Total			Fair Value

Bank term loans and revolver 6.75% average interest rate (variable)	$	35		$	12		$	12		$	12		$	12		$	1,111		$	1,194		$	1,212
Other debt		6			1			1			1			1			1			11			11
Original issue discount		(2	)		(2	)		(2	)		(2	)		(2	)		(1	)		(11	)		(11	)

Total debt	$	39		$	11		$	11		$	11		$	11		$	1,111		$	1,194		$	1,212

4454

Table of Contents

~~REPORT OF~~ ITEM ~~INDEPENDENT~~8. FINANCIAL ~~REGISTERED~~STATEMENTS ~~PUBLIC~~AND ~~ACCOUNTING~~SUPPLEMENTARY ~~FIRM~~DATA

The Board of Directors and Shareholder of Smurfit-Stone Container Enterprises, Inc.

			Page No.

Index to Financial Statements:
	Management's Report on Internal Control Over Financial Reporting		56
	Reports of Independent Registered Public Accounting Firm		57
	Consolidated Balance Sheets — December 31, 2010 and 2009		59
	For the Six months Ended December 31, 2010 and June 30, 2010 and the Years Ended December 31, 2009 and 2008:
		Consolidated Statements of Operations	60
		Consolidated Statements of Stockholders' Equity (Deficit)	61
		Consolidated Statements of Cash Flows	62
	Notes to Consolidated Financial Statements		63
The following consolidated financial statement schedule is included in Item 15(a):
	II: Valuation and Qualifying Accounts and Reserves		124

~~We have audited~~All ~~Smurfit-Stone~~other ~~Container~~schedules ~~Enterprises, Inc.’s~~specified ~~(the~~under ~~Company’s) internal control over financial reporting as of December~~Regulation ~~31,~~S-X ~~2009,~~have ~~based~~been ~~on criteria~~omitted ~~established~~because inthey ~~Internal~~are ~~Control –~~not ~~Integrated Framework~~applicable, ~~issued~~because ~~by the~~they ~~Committee~~are ofnot ~~Sponsoring~~required ~~Organizations~~or ofbecause the ~~Treadway~~information ~~Commission~~required ~~(the COSO criteria). The Company’s management~~ is ~~responsible for maintaining effective~~included ~~internal~~in ~~control over financial reporting and for its assessment of~~ the ~~effectiveness~~ ~~of internal control over~~ financial ~~reporting.~~statements ~~Our~~or ~~responsibility is~~notes ~~to express an opinion on the Company’s internal control over financial reporting based on our audit~~thereto.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.55

~~A company’s~~ ~~internal~~Table ~~control over financial reporting is a process designed to provide reasonable assurance regarding the reliability~~ of ~~financial~~Contents reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

~~Because~~ ~~of its~~ ~~inherent~~ ~~limitations, internal control over financial reporting may not prevent~~ or Management's ~~detect~~Report ~~misstatements.~~on ~~Also,~~Internal ~~projections~~Control ofOver ~~any~~Financial evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.Reporting

InOur ~~our~~management ~~opinion,~~ is responsible for establishing and maintaining adequate internal control over financial reporting for Smurfit-Stone Container ~~Enterprises~~ Corporation, as such term is defined in Rule ~~Inc~~13a-15(f) under the Exchange Act. ~~maintained~~As required by Rule 13a-15(c) under the Exchange Act, inwe ~~all~~carried ~~material~~out an evaluation, ~~respects~~with the participation of our principal executive officer and principal financial officer, ~~effective~~of the effectiveness of our internal control over financial reporting as of ~~December~~the end of the latest fiscal year. The framework on which such evaluation was based is contained in the report entitled "Internal Control 31— Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness ~~2009~~of controls and a conclusion on this evaluation. Although there are inherent limitations in the effectiveness of any system of internal control over financial reporting, based on ~~the~~our ~~COSO~~evaluation, ~~criteria~~we have concluded that our internal control over financial reporting was effective as of December 31, 2010.

~~We also have~~The ~~audited,~~effectiveness ~~in accordance with the standards~~ of ~~the~~our ~~Public~~internal ~~Company~~control ~~Accounting Oversight~~over ~~Board~~financial ~~(United~~reporting ~~States), the consolidated balance sheets~~ as of December 31, ~~2009~~ ~~and~~2010 ~~2008,~~has ~~and~~been ~~the~~audited ~~related~~by ~~consolidated~~Ernst & ~~statements of operations~~Young LLP, ~~stockholders’~~ ~~equity,~~our ~~and~~independent ~~cash~~registered ~~flows~~public ~~for each of the three years in the period~~accounting ~~ended December 31, 2009~~firm. ~~Our~~Their report ~~dated March 2~~, ~~2010,~~which expresses ~~expressed~~ an unqualified opinion ~~thereon~~on ~~and~~the ~~included~~effectiveness anof ~~explanatory~~our ~~paragraph~~internal ~~related~~control ~~to the~~over ~~Company’s~~financial ~~ability~~reporting toas ~~continue~~of asDecember 31, a2010, ~~going~~is ~~concern~~included herein.

/s/ ~~Ernst~~Patrick &J. ~~Young~~Moore ~~LLP~~Patrick ~~Ernst~~J. &Moore ~~Young~~Chief ~~LLP~~Executive Officer (Principal Executive Officer) /s/ Paul K. Kaufmann Paul K. Kaufmann Senior Vice President and Corporate Controller (Principal Financial and Accounting Officer)

~~St. Louis, Missouri~~56

~~March 2, 2010~~Table of Contents

45REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~Table~~The Board of ~~Contents~~Directors and Stockholders of Smurfit-Stone Container Corporation, Inc.

~~REPORT~~We have OFaudited Smurfit-Stone Container Corporation, Inc.'s (the Company's) internal control over financial reporting as of December 31, 2010, based on criteria established in Internal ~~INDEPENDENT~~Control — ~~REGISTERED~~Integrated ~~PUBLIC~~Framework, ~~ACCOUNTING~~issued ~~FIRM~~by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

~~The~~We conducted ~~Board~~our audit in accordance with the standards of ~~Directors~~the Public Company Accounting Oversight Board (United States). Those standards require that we plan and ~~Shareholder~~perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of ~~Smurfit-Stone~~internal ~~Container~~control over ~~Enterprises~~financial reporting, ~~Inc~~ assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

WeA company's ~~have~~internal ~~audited~~control over financial reporting is a process designed to provide reasonable assurance regarding the ~~accompanying~~reliability ~~consolidated~~of ~~balance~~financial ~~sheets~~reporting and the preparation of financial statements ~~Smurfit-Stone~~for ~~Container~~external ~~Enterprises, Inc~~purposes in accordance with generally accepted accounting principles. ~~(the~~A ~~Company~~company's internal control over financial reporting includes those policies and procedures that (1) pertain to asthe maintenance of ~~December 31~~records that, ~~2009~~ ~~and~~in ~~2008~~reasonable detail, accurately and fairly reflect the ~~related~~transactions ~~consolidated~~and ~~statements~~dispositions of ~~operations,~~the assets of the company; (2) provide reasonable assurance that ~~stockholders’~~transactions ~~equity,~~are ~~and~~recorded ~~cash~~as ~~flows~~necessary ~~for~~to ~~each~~permit preparation of ~~the~~financial ~~three~~statements ~~years~~ in ~~the~~accordance ~~period ended~~with ~~December 31,~~generally ~~2009.~~accepted ~~Our~~accounting ~~audits~~principles ~~also~~and ~~included~~that receipts and expenditures of the ~~financial~~company ~~statement~~are ~~schedule~~being ~~listed~~made only in ~~the~~accordance ~~Index~~with atauthorizations ~~Item~~of 15management and directors of the company; and (a3). provide ~~These~~reasonable ~~financial~~assurance ~~statements~~regarding ~~and~~prevention or timely detection of unauthorized ~~schedule~~acquisition, ~~are~~use, ~~the~~or ~~responsibility~~disposition of the ~~Company’~~company's ~~management.~~assets ~~Our~~that ~~responsibility is~~could tohave ~~express~~a anmaterial ~~opinion~~effect on ~~these~~the financial statements ~~and schedule based on our audits~~.

WeBecause of ~~conducted~~its ~~our~~inherent ~~audits~~limitations, ininternal ~~accordance~~control ~~with~~over ~~the~~financial ~~standards~~reporting ofmay ~~the~~not ~~Public Company~~prevent ~~Accounting~~or ~~Oversight~~detect ~~Board (United States)~~misstatements. ~~Those~~Also, ~~standards~~projections ~~require that~~of weany ~~plan~~evaluation ~~and~~of ~~perform~~effectiveness ~~the audit~~ to ~~obtain~~future ~~reasonable~~periods ~~assurance about whether the financial statements~~ are ~~free of material misstatement. An audit includes~~ ~~examining,~~subject onto athe ~~test~~risk ~~basis,~~that ~~evidence~~controls ~~supporting~~may ~~the~~become ~~amounts~~inadequate ~~and~~because ~~disclosures~~of changes in ~~the~~ ~~financial~~conditions ~~statements.~~or Anthat ~~audit also includes assessing~~ the ~~accounting principles~~degree ~~used~~of ~~and~~compliance ~~significant~~with ~~estimates made by management, as well as evaluating~~ the ~~overall~~policies ~~financial~~or ~~statement~~procedures ~~presentation.~~may ~~We believe that our audits provide a reasonable basis for our opinion~~deteriorate.

In our opinion, ~~the financial statements referred to above present fairly, in all material respects, the consolidated financial position of~~ Smurfit-Stone Container ~~Enterprises~~Corporation, Inc. ~~at December 31~~maintained, ~~2009~~in ~~and 2008,~~all ~~and~~material ~~the~~respects, ~~consolidated~~effective ~~results~~internal ofcontrol ~~its~~over ~~operations~~financial ~~and~~reporting ~~its~~as ~~cash flows for each~~ of ~~the three years in the period ended~~ December 31, ~~2009,~~2010 ~~in conformity with U.S. generally accepted accounting principles. Also~~(Successor), ~~in our~~ ~~opinion,~~based ~~the~~on ~~related financial statement schedule, when considered in relation to~~ the ~~basic~~COSO ~~financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein~~criteria.

~~The~~We also ~~accompanying consolidated financial statements~~ have ~~been prepared assuming that Smurfit-Stone Container Enterprises~~audited, ~~Inc.~~ ~~will continue as a going concern. As more fully described~~ in ~~Note 1~~accordance towith the ~~consolidated financial~~standards ~~statements,~~of the Public Company ~~filed~~Accounting aOversight ~~voluntary~~Board ~~petition for reorganization under Chapter 11 of the~~ (United States), ~~Bankruptcy~~the ~~Code~~consolidated ~~and~~balance ~~Companies’~~sheets ~~Creditors Arrangement~~as ~~Act~~of ~~in Canada on January~~December 2631, ~~2009,~~2010 ~~which~~(Successor) ~~raises substantial~~and

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