2. Table of Contents
Financial Highlights 6
Letter to Shareholders 7
Smurfit-Stone at a Glance 10
Bringing New Perspective to an Established Industry 13
Board of Directors and Officers 22
Smurfit-Stone Form 10-K 23
We are.
Smurfit-Stone’s leadership role in the paper and packaging industry is no illusion.
To improve that position, we are taking another look at how we manage our
business, satisfy our customers, and deliver value to all stakeholders. In today’s
economic environment, we hope our business fundamentals and track record
of financial discipline will encourage you to take another look at Smurfit-Stone.
3. 1
Look again.
>
1 leadership
perspective
We’ve adopted the following principles to run our business:
empowered employees, ongoing learning
s s
teamwork, and consensus
continuous process improvement
s
shared leadership
s
data-based decisions
s
open, two-way communication
s
People
4. 2
Look again.
>
2 customer
perspective
Smurfit-Stone is the best positioned paper-based packaging company to anticipate and
respond to rapidly changing conditions in the packaging market. As a customer-led company,
we listen to our customers in order to deliver the types of products and services they
and their customers will need in the short- and long-term. In other words, we make the
products they want, rather than merely selling the products we make.
Products
5. Products
operational
perspective
In 2000, we continued to refine the benchmarking process we began at the time of
the merger of Jefferson Smurfit Corporation and Stone Container. We identified the best
operations within our manufacturing system and throughout the industry and challenged
our operations to close the gap between where they are and where
3
they ought to be. The results produced higher operating efficiencies
and lower costs.
>
Look again.
3
6. 4
Look again.
>
4 financial
perspective
Our number one financial goal for 2001 is to reduce debt and continue to increase our
financial flexibility. We are focused on cost containment, cost reduction, and cash generation
to pay down debt. Smurfit-Stone’s plan is to conduct business with a unified packaging focus,
have better assets in play, and complete our strategy of exiting businesses that do not meet
our strategic objectives.
Performance
7. Performance
accountability
perspective
Our challenge at the start of the 21st century is to examine the practices of our predecessor
companies and adopt only the very best. As a company that employs approximately 40,000
people, operates more than 300 manufacturing facilities throughout North America, and holds
a leadership position in our industry, we take seriously our obligations
5
to all stakeholders.
>
Look again.
5
9. Smurfit-Stone Container Corporation
LETTER TO SHAREHOLDERS
Dear Shareholder, Significant Improvement in
F
or Smurfit-Stone, Operating Performance
2000 was a year of A key measure of our progress
financial and operating is improvement in operating
accomplishments tempered by performance.
market challenges. It brought For the full year 2000, the
the acquisition of St. Laurent company reported net income
Paperboard Inc. — which available to common share-
accelerated our strategic holders of $224 million, or $0.96
development as a full-service, per diluted share, compared
paper-based packaging with net income of $157 million
company — as well as in 1999, or $0.71 per diluted
economic conditions that forced share. The 1999 results included
us to schedule mill downtime after-tax gains on the sale of
7
equal to about 10 percent of our non-core assets of $268 million,
> Michael W. J. Smurfit, Chairman of the
Board (left), and Ray M. Curran, President
containerboard capacity. or $1.22 per diluted share. In
and Chief Executive Officer.
We began 2000 with our 2000, higher product prices and
role as industry leader firmly the addition of St. Laurent’s
established. The merger of Jefferson Smurfit higher-value product mix contributed to an 18 percent
Corporation (JSC) and Stone Container Corporation increase in sales to $8.8 billion compared with 1999.
in 1998 made us the largest paper-based packaging The operations of St. Laurent, included in the com-
company in North America and provided pany’s results for the last seven months of the year,
unparalleled opportunities to improve service added $96 million in operating profits.
to customers, rationalize operating systems, These favorable results were achieved despite
and enhance operating efficiencies. higher energy costs of about $88 million and the need
We immediately acted on these opportunities. to take 758,000 tons of economic downtime to manage
Even so, the path from packaging manufacturer to inventory levels and conserve working capital in the
packaging solutions provider demands new skills, containerboard mill system.
sometimes difficult production decisions, and a We continued to make progress in strengthening
willingness to accept new kinds of challenges. As we our financial position. The St. Laurent acquisition added
build these skills, we are becoming a stronger company $1 billion in debt without weakening the credit profile of
with a more efficient integrated system and greater the company. Operating profits and synergies from the
flexibility to meet these challenges. acquisition supplemented our operating cash flow and
enabled us to reduce debt by approximately $370 million
during the second half of 2000. Total debt was $5.3 billion
at the end of the year. Interest expense in 2000 was
$527 million, a $36 million decrease from the prior year.
10. In January 2001, we simplified our balance sheet Average prices for most paperboard and packaging
with a $1.05 billion bond offering by Stone Container. products showed significant improvement in 2000.
The bond offering replaced several higher-coupon Containerboard prices posted the greatest improvement,
issues with lower-interest debt and extended our increasing about 20 percent on average and partially
maturities, improving our credit profile and restoring profit margins lost in the second half of the
financial flexibility. 1990s. The company successfully implemented price
Capital expenditures for the year were $363 mil- increases on corrugated containers, boxboard, and
lion, a substantial increase from the $156 million spent folding cartons, as well as multiwall bags.
in 1999. This was primarily Our packaging
driven by heavy environ- businesses continued to
mental compliance spending enhance their positions
in our mill system. We with customers seeking
expect capital spending to additional graphics and
stay well below depreciation specialized service. In a
and amortization levels for difficult year for the industry,
the foreseeable future. our folding carton business
Smurfit-Stone has increased market share and
benefited from more than profitability as a result of our
$350 million in annualized demonstrated commitment
synergy savings from the to consistent customer
integration of the JSC and service and production
Stone manufacturing and quality. This helps to
corporate systems. These provide a stable profit base.
8
savings, a major priority in > In addition to Ray Curran, the company’s Executive
Committee members are (sitting, left to right)
1999, were fully implemented
Patrick J. Moore, vice president and chief financial
by the second quarter Positive Trends and
officer; Peter F. Dages, vice president and general
of 2000. Continued Progress
manager, corrugated container division; and
(standing, left to right) John M. Riconosciuto,
A strong economy The achievements recorded
vice president and general manager, specialty
from most vantage points and challenges faced in 2000
packaging division; William N. Wandmacher, vice
nevertheless brought special signal changes afoot in our
president and general manager, North American
containerboard mill and forest resources division;
challenges for the packaging industry. We believe the
and F. Scott Macfarlane, vice president and general
industry. Because of the industry trends bode well
manager, consumer packaging division.
strength of the dollar, for Smurfit-Stone. Here are
U.S. consumers bought some reasons for optimism.
an increased level of goods manufactured and packaged Customers continue to embrace high-end
abroad. Additionally, the dollar’s strength impaired packaging, including boxes that combine corrugated
U.S. manufacturers’ ability to export their goods in U.S.- packaging’s structural features with the customer
made boxes, and U.S. linerboard producers found their appeal of high-impact graphics. Evolving customer
prices uncompetitive in export markets. Despite the preferences will give us opportunities to grow, although
impressive performance overall from the U.S. economy, change also carries the potential to reduce demand in
domestic shipments of corrugated containers declined other parts of our business. We believe the net benefit of
roughly one percent in 2000. these changes can increase revenues and profit margins.
In this environment, Smurfit-Stone worked hard The acquisition of St. Laurent expands our
to manage our production to meet demand. As a result, capabilities and positions us well to meet customers’
we benefited from stable to improving prices and better changing needs. St. Laurent’s outstanding capabilities
margins compared with the prior year. in developing and producing high-end containerboard
complement Smurfit-Stone’s existing product lines.
11. With St. Laurent, we also acquired additional marketing We are reviewing our methods for reducing
resources, which support our aim of being a market- production as necessary to manage inventory.
driven company rather than an operations-driven one. Unscheduled downtime is costly — in increased
We now have approximately 7.8 million tons of manufacturing costs as well as disruptions to employees
containerboard capacity in the combined Smurfit-Stone and customer schedules — and is prompting a thorough
and St. Laurent system. We consume more than five assessment of the best approach. Our options include
million tons in our corrugated container operations. extending scheduled maintenance downtime, slowing
We have been improving the market mix of this business the rate at which machines run, and temporarily
for the past two years, taking advantage of opportunities shutting down high-cost machines in certain cases.
to substitute higher-margin, high-impact packaging Our goal is to make our system more cost efficient and
for products with lower margins. Adding St. Laurent’s better positioned to respond to customer demand.
packaging and marketing skills has aided that process. In the near term we expect economic challenges
About 20 percent of our containerboard mill to continue. There are signs that the U.S. dollar may
production is higher-value containerboard. This weaken. This may stimulate packaging demand later
includes one million tons of white top linerboard in 2001 and thereafter. We plan to hold capital spending
as well as lightweight medium and coated white below 2000 levels now that the bulk of the environ-
linerboard. These constitute the most consistently mental compliance spending is behind us. We also
profitable grades in a changing packaging environment. plan to use cash flow to further reduce debt, which is
Integrating the JSC, Stone, and St. Laurent our number one financial priority. We have achieved
production facilities into a single system gave us more $20 million in annualized synergy savings from the
manufacturing flexibility. Soon after the acquisition of St. Laurent acquisition, and we expect to realize the
St. Laurent, we shut down one of the smaller Smurfit- total $50 million targeted by the end of 2001.
Stone mills, eliminating 130,000 tons of medium Smurfit-Stone aims to be recognized as a company
9
capacity. With this closing, we have permanently that delivers value to customers and shareholders. To do
shuttered 1.8 million tons of containerboard capacity that on a consistent basis requires a customer-focused
since 1998. organization with motivated and committed employees
and effective operations. Our company culture must
mirror our position as the industry leader. We are on
course to become the preeminent packaging solutions
Providing Packaging Solutions
Our strategic aim is to be the supplier of choice for provider, which is Smurfit-Stone’s strategic goal and one
two significant groups of customers: those who seek that recognizes the interests of customers, employees,
a broad-based source for efficient packaging solutions, and shareholders.
and independent packaging producers who buy our We are encouraged by our accomplishments and
containerboard products. we look forward to continued progress in 2001.
For packaging customers, we now have a rich
pool of resources to provide the service and high-impact
packaging increasingly in demand. We have initiated
a comprehensive review aimed at better serving our
customers and focusing on where we can expand and
enhance these resources to meet market needs. Michael W. J. Smurfit
The independent packaging producer is seeking Chairman of the Board
a reliable supply of high-quality containerboard. We
are working to address this need by dedicating a large
portion of our tonnage to this sector and are exploring
other ideas related to the independent market.
Ray M. Curran
President and Chief Executive Officer
12. S M U R F I T- S T O N E AT A G L A N C E
DESCRIPTION C A PA B I L I T I E S
Containerboard and Corrugated Containers
Containerboard and corrugated Full range of high-quality Graphic capabilities include
containers represent Smurfit-Stone’s corrugated containers preprint and post-print flexography,
largest business segment, with and label applications.
Innovative packaging solutions and
68 percent of the company’s sales. This
high-quality graphics Full range of domestic and export-
segment supplies hundreds of national
specific liners, including solid
Complete line of retail-ready,
and international manufacturers, as well
bleached sulfate, white top and
point-of-purchase displays
as thousands of local and regional
high-performance grades
customers. Full line of specialty products and
Full range of semi-chemical and
custom, die-cut boxes to display
recycled medium, including high-
packaged merchandise
performance grades
Consumer Packaging
Smurfit-Stone’s consumer packaging Clay-coated and uncoated recycled
products and services business boxboard in newsback, kraftback,
includes boxboard, folding cartons, and whiteback grades
printed paper, foil and heat-transfer Folding carton converting
labels, rotogravure cylinders, color capabilities include sheet and
separations, engineering services, web lithographic printing,
and full-service design. laminating, gluing, tray forming,
and windowing.
10 Labels for decorative packaging
applications
Specialty Packaging
Smurfit-Stone’s specialty packaging manufacturing, flexible packaging, and Multiwall industrial and consumer,
business includes bag packaging contract packaging services. Multiwall, specialty, and flexible bags
operations, industrial tube and core consumer, specialty, and flexible bags Paper tubes and cores
are used to ship, store, protect and
Solid fiber and paperboard
promote a wide range of products.
partitions
Tubes and cores are used by the textile,
paper, film and carpet industries. Full line of flexible, intermediate
Flexible packaging supplies products for bulk containers
detergent, fabric softeners, and liquid Packaging equipment and systems
chemicals, among others. that fill, seal, convey, and palletize
bag products
Contract packaging services
Recycled Fiber
Smurfit-Stone is unique in the paper and now collects and processes Recycling business handles Waste Reduction Services
and packaging industry in that it has approximately 7 million tons of recovered paper generated by provides waste-management
a strong position in recycled fiber. recycled paper every year. industrial, commercial, and solutions to businesses.
The company has built the largest residential sources.
reclamation business in the industry Collected material includes old
corrugated containers, newspapers,
office waste, magazines, aluminum
cans, glass, and plastics.
13. I N D U STRY POS ITI O N FA C I L I T I E S ACCOM PLISH M E NTS
Largest producer of containerboard Approximately 150 container Improved segment profit
facilities worldwide by $441 million
Largest producer of high-value
white top linerboard 21 paper and paperboard mills Optimized mill operations
Largest supplier of 5 strategically located Packaging
corrugated containers Solution Centers
Industry’s most
complete line
of graphic
capabilities
Record safety performance
No. 1 producer of clay-coated recycled boxboard 18 folding carton plants
Increased folding carton market share
A leading supplier of folding cartons 4 clay-coated recycled boxboard mills
Improved segment profit by 8 percent
4 label plants
Successfully combined existing folding carton
3 lamination facilities
and boxboard mill businesses with other
2 prepress operations
consumer packaging operations
1 PaperCan™ plant
3 uncoated, recycled board mills
11
Largest manufacturer of multiwall industrial and 18 tube and core plants Significant improvement in operational areas,
consumer bags especially safety
11 bag plants
A leading supplier of flexible intermediate bulk Improved cash flow from working capital
4 flexible packaging facilities
containers Integrated tube and core,
3 partition plants
A leading producer of paper tubes and cores partition, contract packaging,
1 technical and graphics center and flexible packaging operations
1 bag packaging equipment resulting in shared services and
facility multi-product sales opportunities
World’s largest paper recycler 25 U.S. collection centers Record volume year
10 brokerage offices Record export sales
1 brokerage office in Shanghai, China Division reorganization reduced SG&A
costs 7.5 percent
1 waste reduction services office
14. > Smurfit-Stone’s acquisition of
St. Laurent Paperboard Inc. in May
2000 made the company the lead-
ing manufacturer of high-quality
white top linerboard. Here,
Isabelle Dussault inspects a
sample sheet at the La Tuque,
Quebec, containerboard mill.
La Tuque, Quebec
15. Smurfit-Stone Container Corporation
BRINGING
new perspective
T O A N E S TA B L I S H E D I N D U S T RY
T
he paper-based packaging industry, like most manufacturing-
based industries, has been operations driven for most of its
history. Big paperboard mills, at their best when the machinery
was fully engaged, delivered product into inventory until buyers wanted
it. In sluggish economic times, warehouses bulged and prices fell. Those
circumstances gave rise to an inefficient and disruptive cycle.
Conditions began to change in 1998 with the combination of Jefferson
Smurfit Corporation (JSC) and Stone Container Corporation. As Smurfit- 13
Stone, we set out to be a customer-driven company in which decisions
start with the marketplace and work back through production. The
evolving market also played a significant role in our decision to acquire
St. Laurent Paperboard Inc. and its high-end containerboard capabilities.
1
Leadership
People
The combination of JSC and Stone Container gave Smurfit-Stone the No. 1
Leadership perspective ranking by size in the paper-based packaging industry. The larger com-
pany became a platform on which to build a new business model.
Greater size brought increased flexibility in operating our mill system. Our challenge was
to align the mill system more closely with market priorities and make it more efficient. Within the
first 15 months after the merger, we shuttered five mills, eliminating 1.6 million tons of inefficient
containerboard production capacity.
To add capabilities that better reflected the evolving packaging market, we acted on the
opportunity to acquire St. Laurent Paperboard. Its white top linerboard provides the substrate
for packaging customers who require colorful, marketing-oriented, high-impact graphic design.
Expanding these capabilities within Smurfit-Stone accelerated our development as a provider of
packaging solutions.
16. The acquisition further expanded our mill system, offering additional opportunities to
optimize production, achieve cost savings, and better match production to customer orders.
Smurfit-Stone’s new business model contains two key aspects. One is structural — a more
efficient mill system. The other addresses the marketplace — a product line more attuned to
customer priorities. For Smurfit-Stone, this business model laid a foundation for better inventory
management. A more predictable market environment mitigates price swings and allows man-
agers to concentrate on other aspects of the business, such as a corporate culture that reflects our
leadership position.
The vehicle through which we intend to implement the business model is CustomerONE.
More than a corporate quality program, it is a comprehensive operating philosophy and work
process that is designed to provide focus and, where necessary, change our attitude about what
it takes to succeed in the marketplace.
We are transforming how we define “customer”. In the CustomerONE environment,
a customer is any stakeholder — someone who buys our products, works at our company,
invests in us, or partners with us. Our stakeholders include the communities in which we do
business. Defining all of these relationships in the customer sense leads to a different attitude
about how we conduct our business. It focuses us on solutions.
Over the years, JSC and Stone Container had developed their
own quality programs and operating philosophies. CustomerONE
Houston, Texas
integrates their best features. More important, it provides a sense of
identity that is unique to Smurfit-Stone, at a time when our vision is > Len Murphy (left) and
Greg Traylor carry out
to be a top-tier company, not just in packaging but among all leading
a quality check at the
North American companies. Houston, Texas, corru-
14
gated container plant.
17. The changing economy gives
<
Smurfit-Stone’s
research, develop- more urgency to adopting this approach.
ment, and product
Today’s business environment presents
testing capabilities
employees with unprecedented choices.
are part of providing
total solutions to our Companies in established industries like
customers’ packaging
paper and packaging compete against
needs. Sue Ann
employers perceived to offer more
Daniels performs a
structural strength appealing career prospects.
test at the corrugated
As we apply the concept of customer
container division’s
to the workplace, we expand employees’
Westmont, Illinois,
marketing and tech- skill sets, foster management training,
nical center.
and generally enrich the work process.
CustomerONE promotes open, two-way
communications, solicits employees’ ideas
Westmont, Illinois
and creativity, and facilitates teamwork
and consensus building. Smurfit-Stone
empowers employees to engage in natural work teams, pool knowledge and talent to create
new ideas, and deal with operational challenges.
The work teams have been an important factor in improving plant safety, a top priority
at Smurfit-Stone. The safety initiative also demonstrates the value of training, and we are using
it as a model for other career and quality training programs.
We have a comprehensive safety process — Smurfit-Stone Accident Free Environment, or
SAFE — which has helped position us as an industry leader in safety practices and measurement.
15
The name of the process speaks to its goal — to create an accident-free work environment. Since
its inception in 1994, safety performance has improved 68 percent as measured by the number
of incidents involving injuries requiring medical attention, logged according to rules of the
Occupational Safety and Health Administration. We continued to make progress in safety in
2000, solidifying our ranking in the top quartile of our industry.
2
Understanding Our Customers’ Perspective
Products
In the marketplace, CustomerONE encourages us to focus on packaging
Customer perspective solutions, not just manufacturing efficiency. We recognize that a highly
competitive retail environment forces merchants to look to packaging to display, promote, and
safely transport products. We have responded by working closely with our customers to develop
appropriate packaging solutions and expand our high-end, higher-margin capabilities. In
addition, we respect the intense competitive cost pressures faced by our customers. To respond,
we have invested heavily to improve our supply chain operations.
Our goals are clear. We aim to:
Anticipate customers’ packaging needs.
Exceed customers’ expectations with value-added services.
Be the supplier of choice for a wide range of products.
Be cost competitive without compromising innovation or quality.
We start production decisions at the point of package content and end-user expectations,
rather than at the mill. Working with our customers, our sales force may recognize the need for
a nontraditional packaging solution: lighter substrates than the mills have typically produced,
18. Missoula, Montana
larger semi-bulk packages, protective packaging, or a
different type of packaging altogether. Smurfit-Stone’s > Smurfit-Stone achieved significant
cost reductions at our Missoula,
integrated system makes it possible to deliver the best
Montana, mill by concentrating its pro-
solutions, whether they are boxes, folding cartons, duction on brown board and moving
multiwall bags, or industrial packaging. its white top production to Brewton,
Alabama. Missoula employees such as
We constantly are analyzing efforts to improve
Mark Snead, right, helped implement
delivery of our products and services and to build the change. In addition, the Missoula
new business without sacrificing profit margins. mill continues its role as an environ-
mental steward. The wastewater
A company-wide assessment is underway to examine
holding ponds that dominate 800 acres
services, capabilities, and technical resources, as well alongside the mill provide refuge for
as initiatives such as e-commerce and cross selling. 196 species of birds, migrants, and
resident breeders. Volunteers such as
During 2000, we reorganized three non-corrugated
Larry Weeks (inset) have helped put up
container packaging businesses into two businesses fences to keep cows away and planted
concentrating on consumer packaging and specialty pack- cottonwoods to improve the stream-
side vegetation.
aging. This action streamlined management, enhanced
our ability to identify opportunities for cross selling to
large customers, and generated synergy savings.
E-commerce initiatives quickly are becoming
necessities, not merely opportunities. The largest
packaging users — the customers Smurfit-Stone is
uniquely positioned to serve by virtue of our size and
product scope — have determined that competitiveness
increasingly rests on driving down cost and speeding
16
up transactions by carrying out more processes over
the Internet. Smurfit-Stone is building electronic
procurement capabilities to compete in this environment.
We have implemented forecasting, inventory
management, and replenishment applications. Improve-
ments in these transactional tasks allow us to redeploy
employee efforts to focus on more value-added activities
on behalf of customers.
Driving many of these initiatives is an enterprise
transformation process with the basic premise that
improving how we do business delivers a better value
proposition to our customers. We are analyzing how we
do business within and across our operating divisions,
as well as general and administrative functions, to best
determine how to better serve customers. The better we
comprehend both aspects of the customer relationship —
their expectations of us and how we are organized to
deliver on those expectations — the better our decisions
regarding investments in technology, organizational
initiatives, and product development.
Smurfit-Stone serves a broad range of customers,
from those who buy our packaging to those who buy our
products as their raw materials. As we have closed mills
20. and consolidated production, some independent corrugated customers have expressed concern
about dependability of their supply. Smurfit-Stone is dedicating a part of our mill system to
meet the needs of these key customers and has committed a minimum of one million tons of
containerboard products annually to the independent marketplace.
3
Optimizing Production Capabilities
Products
Our primary operational focus since the merger of Smurfit-Stone has
Operational perspective been higher manufacturing efficiencies and lower costs. Six mills in a pilot
program focused on improving existing processes increased efficiencies up to five percent and
reduced costs by as much as 10 percent by the end of 2000. The program will be extended to
our other mills.
Our objectives are to lower the cost per ton and balance production with current demand.
To accomplish that, Smurfit-Stone is evaluating more efficient ways to reduce operating rates
through a combination of running the mills more slowly and taking periodic shutdowns.
In the second half of 2000, we launched an incremental-cost measurement process that
focuses on the cost of the last ton made rather than average price per ton. This analysis aims to
capture total production costs, including incremental energy and transportation expenses that
are often incurred by the single-minded focus on meeting production goals. Average-cost-per-ton
calculations tend to ignore these expenses.
Our larger mill system provides opportunities to schedule production at facilities best
equipped to deliver the products most in demand. We achieved significant cost reductions at our
Missoula, Montana, mill by concentrating its production on brown linerboard and moving its
18
white top production to Brewton, Alabama. Brewton, along with the West Point, Virginia, and
La Tuque, Quebec, mills added in the St. Laurent merger, now produce the same high-quality
white top linerboard. The flexibility to shift production among the mills means customers’
orders are filled expeditiously and the mills operate more cost-effectively. The result: increased
customer focus and improved profitability at the mill level.
We are in the process of introducing uniform computer-based purchasing and maintenance
management systems. Over time that approach will become standard procedure. The supply
chain operations group is focused on signifi-
cantly improving service to integrated and
Jacksonville, Arkansas
independent customers, reducing order cycle
time, and improving inventory levels. Supply
> Smurfit-Stone is
the industry’s leading chain improvements by themselves reduced
bag packaging manu-
corrugated containerboard inventories more
facturer. Employees
than 15 percent in 2000.
such as Wendy
Hadlock at our Being a demand-driven producer enables
Jacksonville,
Smurfit-Stone to maintain the all-important
Arkansas, bag pack-
customer focus while keeping inventories in
aging facility pay
great attention to balance. The company and our workforce
production detail
benefit from steadier production that mitigates
and customer service.
downtime taken to reduce excess inventories.
21. 4
Strong Financial Management > Smurfit-Stone spent
Performance about $204 million
Enhances Performance
in 1999-2000 on
Financial perspective Smurfit-Stone has a well-established reputation environmental
for strong financial management based on setting aggressive perform- improvements at
nine mills, including
ance objectives and then achieving — if not exceeding — those goals.
the Panama City,
In the merger that created Smurfit-Stone, our goal was to achieve Florida, mill, where
$350 million in annual savings within a two-year period. We reached the Jeremy Odom is
part of the team
$350 million goal in mid-year 2000, six months ahead of the target date.
that helped the mill
By the end of the year, we realized synergy savings from the St. Laurent comply with the
acquisition of $20 million on an annual basis. We expect to reach our EPA’s Cluster Rule.
$50 million goal in total synergy savings in 2001.
Panama City, Florida
Our history of growth through acquisitions produced a high level
of debt. Our top financial objective is to reduce that debt to help lower
interest expense and improve earnings. As important as that is, we also remain committed to
maintaining financial flexibility so that we are well positioned to take advantage of strategic
and operating opportunities.
In 1999, we reduced total debt by $1.8 billion, principally from the proceeds of sales of
non-core assets. Debt reduction remained our top financial priority for 2000, but we also took
advantage of our financial flexibility and reputation for strong financial management to
acquire St. Laurent when that opportunity presented itself. The transaction represented an
22. important strategic transaction for Smurfit-Stone even though it meant $1 billion in additional
debt. In the second half of 2000, following the acquisition, we reduced debt by approximately
$370 million.
Early in 2001, we announced plans to issue $500 million of new bonds at Stone Container,
with the proceeds to be used to redeem bonds maturing in 2002. Strong market interest, signaling
an acceptance of our strategies, allowed Stone Container to increase the issue to $1.05 billion
of new bonds and redeem existing bonds with higher interest rates. This refinancing helped
us increase financial flexibility by lengthening the maturities of our bonds and lowering our
interest expense.
5
Accepting the Accountability of Leadership
Performance
Accountability improves performance. The management processes in
Accountability perspective place recognize the contributions of employees throughout the organi-
zation by giving them responsibility in their spheres of influence, within corporate guidelines
designed to promote best practices and reach common goals.
Measurement is routine in the corporate culture at Smurfit-Stone. Line managers are
accountable for customer satisfaction and for managing the business to increase both sales and
profit margins. Executive management is measured on corporate performance including cash
flow, debt reduction, and overall profitability.
Smurfit-Stone also is accountable to the communities in which we operate and to the
environment in and around our plants. Realizing that employees not only work but also live
in the areas in which we do business, we strive to be a good corporate citizen and encourage
20
employees to become involved in their communities. One way we demonstrate commitment
to environmental protection is a rigorous, companywide audit program. Internal teams made
up of corporate and operating staff and legal counsel routinely inspect company facilities for
environmental compliance.
As the world’s largest paper recycler, we not only provide our mills with a secure recycled
fiber source, but our efforts help divert materials from landfills.
In 1999 and 2000, we spent approximately $204 million on environmental improvements
at nine mills to comply with the Cluster Rule, a collection of federal air and water regulations
that affect U.S. paper mills. The company is dedicated to improving water and air quality by
actively pursuing treatment
systems that remove undesirable
Panama City, Florida
particles from our manufacturing
discharges.
> Smurfit-Stone takes
a leadership role We recognize that leadership
in environmental
requires accountability to
stewardship and
customers, employees and com-
conducts rigorous
testing and auditing munities, as well as to share-
programs. Bunky
holders. From our perspective
Jones, a chemist
as North America’s leading paper-
at the Panama City
containerboard mill, based packaging solutions
gathers a water
provider, constantly taking another
sample for testing.
look at the way we do business
ensures our accountability to all.
23. > Paul Napier checks for color
accuracy at Smurfit-Stone’s Solon,
Ohio, folding carton manufacturing
facility, which converts boxboard
from several of Smurfit-Stone’s
mills and has a tradition of strong
customer relationships.
Solon, Ohio
24. Smurfit-Stone Container Corporation
BOARD OF DIRECTORS AND
C O R P O R AT E A N D D I V I S I O N O F F I C E R S
Board Members Corporate Officers
Michael W.J. Smurfit Jerry K. Pearlman Michael W.J. Smurfit James P. Davis Paul K. Kaufmann Lorne Parnell
Chairman and CEO, Retired, Chairman of the Board Vice President and Vice President, Vice President,
Jefferson Smurfit Group plc Zenith Electronics Area Manager, Controller Pacific Operations
Ray M. Curran
Corporation Corrugated Container Division
President and
Ray M. Curran Leslie T. Lederer John M. Riconosciuto
President and CEO, Chief Executive Officer Vice President, Vice President and
Thomas A. Reynolds, III James D. Duncan
Smurfit-Stone Container Partner, Vice President, Strategic Investment General Manager,
Patrick J. Moore
Corporation Winston & Strawn Corporate Sales and Marketing Dispositions Specialty Packaging Division
Vice President and
Chief Financial Officer
Richard A. Giesen Anthony P. J. Smurfit William G. Eustice F. Scott Macfarlane Jose A. Santos
Chairman and CEO, Chief Executive Officer, Vice President and Vice President and Vice President,
John F. Allgood
Continere Corporation Smurfit Europe Area Manager, General Manager, Latin American Operations
Assistant Secretary
Corrugated Container Division Consumer Packaging Division
Alan E. Goldberg Dermot F. Smurfit David C. Stevens
Curtis A. Barton
Former Managing Director, Deputy Chairman, Vice President and
Daniel J. Garand Richard P. Marra
Vice President,
Morgan Stanley & Co., Inc. Jefferson Smurfit Group plc Vice President, Assistant Treasurer General Manager,
Environmental Affairs
Supply Chain Operations Recycling Division
Howard E. Kilroy Timothy J. P. McKenna
Mathew J. Blanchard
Retired, Vice President,
Michael F. Harrington Gayle M. Sparapani
Vice President and
Jefferson Smurfit Group plc Vice President, Investor Relations and Vice President,
General Manager,
Employee Relations Communications Benefits
Containerboard Sales and
James J. O’Connor
Retired, Marketing James A. Hayssen Ronald J. Megna William N. Wandmacher
Unicom/Commonwealth Vice President, Assistant Secretary Vice President and
Cynthia S. Bowers
Edison Information Technology General Manager,
Vice President, Mark R. O’Bryan
North American
Compensation and Vice President,
Charles A. Hinrichs
Containerboard Mill and
Administration Vice President, Procurement
Forest Resources Division
Treasurer
Peter F. Dages Thomas A. Pagano
Vice President and Vice President,
Craig A. Hunt
General Manager, Vice President, Planning
Corrugated Container Division Secretary and General Counsel
22
Division Officers
Corrugated Container Rodney A. Myers Donald C. Wyatt Consumer Packaging Specialty Packaging Michael R. Oswald
Vice President and Vice President, Vice President,
Division Division Division
Regional Manager North American Operations
LeRoy R. Crocker J. Gregor Doman L. David Fielder
Containerboard & Kraft
Vice President and Vice President, Vice President,
Robert D. Nelson James W. Pope
Sales, Board Sales
Regional Manager Vice President and Sales PaperCan Vice President,
Regional Manager International / Western Sales
John J. Curry, Jr. Nathan S. Holmes Fred W. Klatt
Vice President and Vice President and Vice President of
James S. Nolan North American Tom E. Squires
Regional Manager Vice President, General Manager Manufacturing Vice President,
Containerboard Mill
Corporate Accounts Southeast Region
and Forest Resources
Stephen P. Folan Gary R. Huston George Q. Langstaff
Division
Vice President and Vice President, Vice President and
Donald A. Petri Edward V. Tucciarone
Regional Manager Vice President and Boxboard Sales General Manager, Vice President,
Alain Boivin
Regional Manager Vice President, Industrial Group Eastern Sales
Roland F. Hauser Steven L. Kelchen
Mill Operations,
Vice President and Vice President and
Jerry D. Suiter James B. Laurence
Central Region
Regional Manager Vice President and Regional Manager Vice President of Sales Research and
Director of Manufacturing John E. Davis
James A. Henderson Curtiss M. Komen Gary D. McDaniel Development Division
Vice President,
Vice President and Vice President and Vice President and
Donald A. Tinkoff Joseph V. LeBlanc
Forest Resources
Regional Manager Vice President and Regional Manager General Manager, Vice President
Regional Manager Flexible Group
Alain Dubuc
Lane W. Hunter David J. Pietrowicz
Vice President,
Vice President and Vice President and John J. Moran Supply Chain/
Mill Operations,
Regional Manager Regional Manager Vice President,
Containerboard Sales Transportation
Northern Region Marketing, and
Stephen E. Jevyak and Marketing Division William Wanner
General Manager,
W. G. Stuart
Vice President and Vice President,
Larry L. Burton Vice President, Specialty Group
Regional Manager Vice President, Supply / Demand Operations
Mill Operations,
Sales & Marketing
John L. Knudsen Southern Region Terence J. Brown
Vice President and Recycling Division Vice President,
Michael L. Butler
Regional Manager Vice President, Transportation
Mark C. Brantley
Graphic and Specialty Sales, Vice President,
John B. Malloy
Vice President and Board Sales North Central Region
Regional Manager Andrew J. Woodroffe Steve A. Miller
Vice President, Vice President,
Technical Services & Product West Region
Management, Board Sales
25. SHAREHOLDERS’ INFORMATION
Stockholders’ Annual Meeting For Investor Information Contact
May 17, 2001 at 1:00 pm Investor Relations and Communications
The Sheraton Chicago Hotel & Towers Smurfit-Stone Container Corporation
City Front Center 8182 Maryland Avenue
301 E. North Water Street St. Louis, MO 63105
Chicago, IL 60611 Telephone: 314-746-1223
Fax: 314-746-1347
www.smurfit-stone.com
Registrar and Transfer Agent
Mellon Investor Services LLC
Overpeck Centre Timothy McKenna
85 Challenger Road Vice President,
Ridgefield Park, NJ 07660 Investor Relations and Communications
www.mellon-investor.com St. Louis: 314-746-1254
Telephone: 888-213-0965 Chicago: 312-580-4637
Common Stock Corporate Office
Smurfit-Stone Container Corporation Smurfit-Stone Container Corporation
common stock is traded on The Nasdaq 150 North Michigan Avenue
Stock Market under the symbol: SSCC Chicago, IL 60601-7568
Telephone: 312-346-6600
Preferred Stock
Smurfit-Stone’s 7% Series A Cumulative
Exchangeable Redeemable Convertible
Preferred Stock is traded on The Nasdaq
under the symbol SSCCP
Design: ProWolfe Partners; St. Louis, MO Photography: Studio — Bruton/Stroube; St. Louis, MO Location — Mark Green; Houston, TX
26. 150 North Michigan Avenue
Chicago, IL 60601-7568
(312) 346-6600
www.smurfit-stone.com
Company Profile
Smurfit-Stone Container Corporation (Nasdaq: SSCC) is
the industry’s leading integrated manufacturer of paper
and paper-based packaging, including containerboard,
corrugated containers, multiwall bags, and clay-coated
recycled boxboard, and is the world’s largest paper recy-
cler. In addition, we are a leading producer of solid bleached sulfate, folding car-
tons, paper tubes and cores, and labels.