PACKAGING CORP OF AMERICA, S-1, 1999-09-13

PACKAGING CORP OF AMERICA
S-1, 1999-09-13
PAPERBOARD CONTAINERS & BOXES

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 13, 1999.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933
------------------

PACKAGING CORPORATION OF AMERICA

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 2631 36-4277050
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>

--------------------

1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
TELEPHONE: (847) 482-2000

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

----------------------

Copies to:

<TABLE>
<S> <C> <C>
RICHARD B. WEST JAMES S. ROWE MICHAEL A. BECKER
PACKAGING CORPORATION OF AMERICA KIRKLAND & ELLIS GERARD M. MEISTRELL
1900 WEST FIELD COURT 200 EAST RANDOLPH DRIVE CAHILL GORDON & REINDEL
LAKE FOREST, ILLINOIS 60045 CHICAGO, ILLINOIS 60601 80 PINE STREET
TELEPHONE: (847) 482-2000 TELEPHONE: (312) 861-2000 NEW YORK, NEW YORK 10005
(Name, address, including zip code, and TELEPHONE: (212) 701-3000
telephone number, including area code,
of agent for service)
</TABLE>

--------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /

--------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $0.01 per share................... $976,204,800 $271,385
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).

--------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION. DATED SEPTEMBER 13, 1999.

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

[LOGO]
PACKAGING CORPORATION OF AMERICA

Common Stock
-----------

This is an initial public offering of shares of common stock of Packaging
Corporation of America. This prospectus relates to an offering of shares
in the United States. In addition, shares are being offered outside the
United States in an international offering.

PCA is offering of the shares to be sold in the offerings. Tenneco
Packaging Inc., the selling stockholder, is offering an additional shares.
PCA will not receive any of the proceeds from the sale of the shares being sold
by the selling stockholder.

Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $ and $ . PCA intends to list the common
stock on the New York Stock Exchange under the symbol " ".

SEE "RISK FACTORS" ON PAGE 10 TO READ ABOUT MATERIAL RISKS YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF THE COMMON STOCK.
--------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
--------------

<TABLE>
<CAPTION>
Per Share Total
----------- ---------
<S> <C> <C>
Initial public offering price......................................... $ $
Underwriting discount................................................. $ $
Proceeds, before expenses, to PCA..................................... $ $
Proceeds, before expenses, to the selling stockholder................. $ $
</TABLE>

To the extent that the underwriters sell more than shares of
common stock, the underwriters have the option to purchase up to an additional
shares from the selling stockholder at the initial public offering
price less the underwriting discount.
--------------

The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
--------------

GLOBAL COORDINATOR
GOLDMAN, SACHS & CO.
---------

GOLDMAN, SACHS & CO.

MORGAN STANLEY DEAN WITTER

SALOMON SMITH BARNEY

DEUTSCHE BANC ALEX. BROWN J.P. MORGAN & CO.
---------

Prospectus dated , 1999.
<PAGE>
[PICTURES]
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY CONTAINS BASIC INFORMATION ABOUT PACKAGING CORPORATION
OF AMERICA AND THE OFFERINGS. IT MAY NOT CONTAIN ALL OF THE INFORMATION THAT MAY
BE IMPORTANT TO YOU. YOU SHOULD READ THIS ENTIRE PROSPECTUS, INCLUDING THE
FINANCIAL DATA AND RELATED NOTES AND THE DOCUMENTS TO WHICH WE HAVE REFERRED
YOU, BEFORE MAKING AN INVESTMENT DECISION. THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND CONSOLIDATED
FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, ALL SHARE AND PER SHARE DATA IN THIS PROSPECTUS HAVE BEEN ADJUSTED TO
REFLECT A -FOR-ONE SPLIT OF OUR COMMON STOCK WHICH BECAME EFFECTIVE ON
, 1999 AND TO REFLECT THE FILING OF THE SECOND RESTATED CERTIFICATE
OF INCORPORATION OF PCA TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK AND PREFERRED STOCK.

OUR BUSINESS

OVERVIEW

PCA is the sixth largest producer of containerboard in the United States and
the sixth largest manufacturer of corrugated packaging products, based on 1998
production capacity. Our sales were $1.571 billion in 1998 and $806.2 million on
a pro forma basis for the six months ended June 30, 1999.

PRODUCTS

PCA produces corrugated containers as well as the containerboard used to
manufacture corrugated containers. Corrugated containers are the most commonly
used type of paper packaging. According to the Fibre Box Handbook, over 90% of
the goods shipped in most developed countries get to market using corrugated
packaging. Corrugated containers, sometimes referred to as cardboard boxes, are
made by combining multiple layers of heavyweight paper known as containerboard
and fabricating them into finished boxes.

CONTAINERBOARD

The two types of containerboard are linerboard and medium. Linerboard is
used for the two flat outer facings while medium is used to form the fluted
inner or middle layer of the corrugated sheet. Kraft linerboard and
semi-chemical medium are common types of linerboard and medium that are made
from a high percentage of virgin, as opposed to recycled, fiber. Virgin fiber is
produced by chemically processing wood into pulp. By industry definition, kraft
linerboard must contain no less than 80% virgin fiber and semi-chemical medium
no less than 75% virgin fiber. All other containerboard is referred to as
recycled. The recycled fiber used to make recycled containerboard comes
primarily from used corrugated containers as well as other recovered and
reprocessed papers.

CORRUGATED CONTAINERS

Converting plants fabricate corrugated sheets and produce corrugated
containers. Converting plants may be either corrugator plants or sheet plants.
Corrugator plants perform both a combining operation and a boxmaking operation.
In the combining operation, corrugated medium is fluted into a wavy sheet and
laminated to linerboard to produce corrugated, or combined sheets. In the
boxmaking operation, the combined sheet is then printed, cut, folded and joined
to create the finished boxes. Sheet plants purchase already combined sheets and
form them into finished boxes.

1
<PAGE>
OPERATIONS

PCA produces kraft linerboard and semi-chemical medium at four mill
locations. In 1998, our mills produced 2.1 million tons of containerboard, which
accounted for 6% of U.S. capacity.

PCA also operates 67 converting facilities in 25 states. Of these
facilities, 39 are corrugator plants, 26 are sheet plants and two are small,
specialty operations. These specialty operations include a collating and
distribution packaging center, as well as a machine rebuild facility. Our
corrugator plants convert approximately 75% to 80% of the containerboard we
produce into finished corrugated containers. As a result, we are considered an
integrated producer. By industry standards, integrated producers own their own
containerboard mills and use at least 50% of the containerboard production from
those mills in their converting operations. In 1998, our converting plants
shipped approximately 25 billion square feet of corrugated packaging products.
This represented 6% of all corrugated packaging products shipped in the United
States.

PCA owns approximately 800,000 acres of timberland and has the rights to cut
the wood from an additional 150,000 acres through long term lease agreements.
Over 90% of our wood supply is within 100 miles of our mill sites. This close
proximity minimizes handling and transportation costs and ensures us a reliable
supply of wood fiber. We are considering the sale of a significant portion of
our timberland. The proceeds from any sale would be used to pay down debt. The
timberland we are likely to sell is located in geographic areas where we feel we
can adequately satisfy our wood requirements by purchasing wood from third
parties or by entering into supply agreements with the purchasers of our
timberland.

COMPETITIVE STRENGTHS AND BUSINESS STRATEGIES

LOW-COST PRODUCER

Because containerboard is a commodity, containerboard producers compete
primarily on price. Therefore, having a low manufacturing cost operation is an
important competitive advantage. PCA's Counce and Tomahawk mills represent
two-thirds of PCA's containerboard production capacity. Based on studies by
Jacobs-Sirrine, an industry consulting firm, these two mills were ranked in the
lowest quartile for cash manufacturing costs in the industry. One of these
studies was a single-client study that we paid Jacobs-Sirrine to perform in
February 1998. The other was a multi-client study issued by Jacobs-Sirrine in
the fourth quarter of 1998 that was available for purchase by the general
public.

INTEGRATED OPERATIONS

The high level of integration between our containerboard and converting
operations helps to provide a stable and predictable demand for our
containerboard mill production. It also helps to dampen earnings fluctuations.
According to Pulp & Paper Week, from 1995 to 1998, industry containerboard
prices declined by 31% and earnings from our containerboard mills were adversely
affected. During the same period, our average corrugated container price fell by
only 11%. We were able to maintain relatively stable margins and earnings in our
converting operations since the costs for the containerboard purchased by our
converting plants were lower, which offset the decline in corrugated container
prices.

DIVERSIFIED CUSTOMER BASE

PCA's corrugated container customer base is broadly diversified across
industries and geographic locations. During the past year, we sold corrugated
products to over 9,000 customers, which required us to ship to over 15,000
separate customer locations. This broad customer base

2
<PAGE>
reduces our dependence on any single customer or market. No customer represents
more than 6% of our total sales and our top 10 customers represent only about
20% of our total sales.

FOCUS ON VALUE-ADDED PRODUCTS AND SERVICES

Through acquisitions and capital investments, we have broadened our ability
to provide specialized printing and package design, product features and
superior customer service. As a result, our corrugated container selling price
per thousand square feet has consistently exceeded the industry average since
1995.

EQUITY SPONSOR

Madison Dearborn Partners, LLC, a private equity investment firm, was the
financial sponsor for the transactions by which PCA acquired its current
operations. Madison Dearborn, through limited partnerships of which it is the
general partner, has approximately $4 billion of assets under management.
Madison Dearborn focuses on investments in several specific sectors including
natural resources, communications, consumer, health care and industrial. Madison
Dearborn's objective is to invest, in partnership with outstanding management
teams, in companies which have the potential for significant long-term equity
appreciation. Since 1980, Madison Dearborn's principals have invested
approximately $2 billion in more than 100 management buyout and private equity
transactions in which the firm acted as a leading investor. PCA is Madison
Dearborn's largest equity investment to date.

THE TRANSACTIONS

On April 12, 1999, Tenneco Packaging Inc., currently a wholly owned
subsidiary of Tenneco Inc., sold its containerboard and corrugated packaging
products business to PCA, an entity formed by Madison Dearborn in January 1999,
for $2.2 billion, consisting of $246.5 million in cash, the assumption of $1.76
billion of debt incurred by TPI immediately prior to the contribution, and a 45%
common equity interest in PCA valued at $193.5 million. PCA Holdings LLC, an
entity organized and controlled by Madison Dearborn, acquired the remaining 55%
common equity interest in PCA for $236.5 million in cash, which was used to
finance in part the transactions.

The financing of the transactions consisted of (1) borrowings under a new
$1.46 billion senior credit facility for which J.P. Morgan Securities Inc. and
BT Alex. Brown Incorporated (the predecessor to Deutsche Banc Alex. Brown) were
co-lead arrangers, (2) the offering of $550 million of 9 5/8% senior
subordinated notes due 2009 and $100 million of 12 3/8% senior exchangeable
preferred stock due 2010, (3) a cash equity investment of $236.5 million by PCA
Holdings and (4) an equity investment by TPI valued at $193.5 million.

The senior credit facility was entered into to finance in part the
transactions and to pay related fees and expenses and to provide future
borrowings to PCA for general corporate purposes, including working capital. The
senior credit facility consists of three term loan facilities in an original
aggregate principal amount of $1.21 billion and a revolving credit facility with
up to $250 million in availability. PCA's total borrowings under the senior
credit facility as of June 30, 1999 consisted of $1.135 billion of term loans.
No amounts were outstanding under the revolving credit facility as of that date.

3
<PAGE>
The following sets forth the current common stock ownership of PCA, before
giving effect to the sale of common stock in the offerings:

[GRAPH]
- --------------
(1) The other investors in PCA Holdings are Sixty Wall Street Fund, L.P., J.P.
Morgan Capital Corporation, BT Capital Investors, L.P. and other investors,
none of whom own more than 0.5% of the equity interests of PCA Holdings.
(2) PCA has also issued options to management to purchase common stock, which,
if exercised, would result in management owning in the aggregate
approximately 9.6% of the common equity of PCA.
(3) On July 15, 1999, Tenneco announced its intention to spin-off TPI to its
stockholders in the fall of 1999. Upon completion of the spin-off, TPI will
no longer be controlled by Tenneco.
(4) PCA was formed in January 1999 and acquired the containerboard and
corrugated packaging products business of The Containerboard Group of TPI in
April 1999 as a result of the transactions. The Containerboard Group of TPI
is often referred to in this prospectus as the Group.
After giving effect to the offerings and assuming the exercise in full of
the underwriters' over-allotment option from TPI, TPI will not own any shares of
common stock of PCA, PCA Holdings will own % of the outstanding common stock
and management will own % of the outstanding common stock, without giving
effect to the exercise of any options issued to management.

4
<PAGE>
THE OFFERINGS
The following information assumes that the underwriters do not exercise
their option to purchase additional shares from the selling stockholder in the
offerings.

<TABLE>
<S> <C> <C>
Shares offered in the U.S. offering.........
Shares offered in the international
offering..................................
-----------
Total shares offered....................
-----------
-----------
Shares offered by PCA.......................
Shares offered by selling stockholder.......
-----------
Total shares offered....................
-----------
-----------
Shares outstanding after the offerings......
Proposed New York Stock Exchange symbol.....
Use of proceeds............................. PCA will use the net proceeds from the
sale of its shares to redeem all of
its outstanding 12 3/8% senior
exchangeable preferred stock due 2010.
PCA will not receive any of the
proceeds from the sale of the shares
being sold by the selling stockholder.
</TABLE>

PRINCIPAL EXECUTIVE OFFICES
Our principal executive offices are located at 1900 West Field Court, Lake
Forest, Illinois 60045 and our telephone number is (847) 482-2000.

5
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

Set forth below are the summary historical and pro forma financial data of
PCA and The Containerboard Group of TPI, which we refer to in this prospectus as
the Group. The historical financial data as of and for the years ended December
31, 1996, 1997 and 1998 has been derived from the audited combined financial
statements of the Group, which was acquired by PCA in the transactions, and the
related notes thereto included elsewhere in this prospectus. The historical
financial data as of and for the years ended December 31, 1994 and 1995 has been
derived from the unaudited financial statements of the Group. The historical
financial data for the six months ended June 30, 1998 and the period from
January 1, 1999 to April 11, 1999 has been derived from the unaudited condensed
combined financial statements of the Group included elsewhere in this
prospectus. The historical financial data as of June 30, 1999 and for the period
from April 12, 1999 to June 30, 1999 has been derived from the unaudited
consolidated financial statements of PCA included elsewhere in this prospectus.
The unaudited pro forma financial data as of and for the six months ended June
30, 1999 and for the year ended December 31, 1998 was derived from the unaudited
pro forma financial information included elsewhere in this prospectus. The
information in the following table should be read in conjunction with "The
Transactions," "Unaudited Pro Forma Financial Information," "Selected Financial
and Other Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the historical combined financial statements of the
Group and the related notes, and the historical consolidated financial
statements of PCA and the related notes contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
GROUP PCA GROUP
-------------------------------------------------------------------- ------------ ----------
PRO FORMA SIX MONTHS
YEAR ENDED DECEMBER 31, YEAR ENDED ENDED
-------------------------------------------------------------------- DEC. 31, JUNE 30,
1994 1995 1996 1997 1998 1998 1998
------------ ------------ ------------ ------------ ------------ ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.......................... $ 1,441,673 $ 1,844,708 $ 1,582,222 $ 1,411,405 $ 1,571,019 $1,571,019 $ 777,042
Cost of sales...................... (1,202,996) (1,328,838) (1,337,410) (1,242,014) (1,289,644) (1,270,184) (629,281)
------------ ------------ ------------ ------------ ------------ ------------ ----------
Gross profit..................... 238,677 515,870 244,812 169,391 281,375 300,835 147,761
Selling and administrative
expenses......................... (71,312) (87,644) (95,283) (102,891) (108,944) (102,568) (52,432)
Corporate overhead/allocation(3)... (34,678) (38,597) (50,461) (61,338) (63,114) (63,114) (32,373)
Restructuring/impairment
charge(4)........................ -- -- -- -- (14,385) (14,385) --
Other income (expense)............. (4,701) (16,915) 56,243 44,681 26,818 41,592 16,015
------------ ------------ ------------ ------------ ------------ ------------ ----------
Income (loss) before interest,
income taxes and extraordinary
item........................... 127,986 372,714 155,311 49,843 121,750 162,360 78,971
Interest expense, net.............. (740) (1,485) (5,129) (3,739) (2,782) (159,476) (1,681)
------------ ------------ ------------ ------------ ------------ ------------ ----------
Income (loss) before income taxes
and extraordinary item........... 127,246 371,229 150,182 46,104 118,968 2,884 77,290
Income tax expense................. (50,759) (147,108) (59,816) (18,714) (47,529) (516) (30,822)
------------ ------------ ------------ ------------ ------------ ------------ ----------
Income (loss) before
extraordinary item............. 76,487 224,121 90,366 27,390 71,439 2,368 46,468
Extraordinary item................. -- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ----------
Net income (loss)................ $ 76,487 $ 224,121 $ 90,366 $ 27,390 $ 71,439 $ 2,368 $ 46,468
------------ ------------ ------------ ------------ ------------ ------------ ----------
------------ ------------ ------------ ------------ ------------ ------------ ----------

<CAPTION>
PCA(2)
------------------------
APRIL 12, PRO FORMA
JAN. 1, 1999 1999 SIX MONTHS
THROUGH THROUGH ENDED
APRIL 11, JUNE 30, JUNE 30,
1999 1999 1999
------------ ---------- ------------

<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.......................... $ 433,182 $ 373,035 $ 806,217
Cost of sales...................... (367,483) (297,055) (660,410)
------------ ---------- ------------
Gross profit..................... 65,699 75,980 145,807
Selling and administrative
expenses......................... (30,584) (25,136) (54,316)
Corporate overhead/allocation(3)... (14,890) (5,188) (20,078)
Restructuring/impairment
charge(4)........................ (230,112) -- --
Other income (expense)............. (2,207) (266) (104)
------------ ---------- ------------
Income (loss) before interest,
income taxes and extraordinary
item........................... (212,094) 45,390 71,309
Interest expense, net.............. (221) (34,079) (78,195)
------------ ---------- ------------
Income (loss) before income taxes
and extraordinary item........... (212,315) 11,311 (6,886)
Income tax expense................. 83,716 (4,545) 2,541
------------ ---------- ------------
Income (loss) before
extraordinary item............. (128,599) 6,766 (4,345)
Extraordinary item................. (6,327) -- --
------------ ---------- ------------
Net income (loss)................ $ (134,926) $ 6,766 $ (4,345)
------------ ---------- ------------
------------ ---------- ------------
</TABLE>

6
<PAGE>
<TABLE>
<CAPTION>
GROUP PCA GROUP
-------------------------------------------------------------------- ------------ ----------
PRO FORMA SIX MONTHS
YEAR ENDED DECEMBER 31, YEAR ENDED ENDED
-------------------------------------------------------------------- DEC. 31, JUNE 30,
1994 1995 1996 1997 1998 1998 1998
------------ ------------ ------------ ------------ ------------ ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Basic earnings per share(7):
Income (loss) before
extraordinary item.............
Extraordinary item...............
Net income (loss) per common
share..........................

Diluted earnings per share(7):
Income (loss) before
extraordinary item.............
Extraordinary item...............
Net income (loss) per common
share..........................

Weighted average common shares
outstanding......................

OTHER DATA:
EBITDA (1)......................... $ 178,148 $ 435,620 $ 234,041 $ 137,595 $ 218,700 $ 310,901 $ 126,356
Rent expense on operating leases
bought out as part of the
transactions(1).................. 93,600 94,900 94,700 73,900 72,500 -- 35,946
Net cash provided by operating
activities....................... 107,642 336,599 55,857 107,213 195,401 170,581 103,803
Net cash used for investing
activities....................... (113,119) (371,068) (74,232) (111,885) (177,733) (93,535) (51,841)
Net cash (used for) provided by
financing activities............. 6,112 36,454 16,767 3,646 (17,668) (22,030) (51,962)
Capital expenditures............... $ 110,853 $ 252,745 $ 168,642 $ 110,186 $ 103,429 $ 103,429 $ 46,557

<CAPTION>
PCA(2)
------------------------
APRIL 12, PRO FORMA
JAN. 1, 1999 1999 SIX MONTHS
THROUGH THROUGH ENDED
APRIL 11, JUNE 30, JUNE 30,
1999 1999 1999
------------ ---------- ------------

<S> <C> <C> <C>
Basic earnings per share(7):
Income (loss) before
extraordinary item.............
Extraordinary item...............
Net income (loss) per common
share..........................
Diluted earnings per share(7):
Income (loss) before
extraordinary item.............
Extraordinary item...............
Net income (loss) per common
share..........................
Weighted average common shares
outstanding......................
OTHER DATA:
EBITDA (1)......................... $ (181,189) $ 79,042 $ 149,117
Rent expense on operating leases
bought out as part of the
transactions(1).................. 17,746 -- --
Net cash provided by operating
activities....................... 153,649 147,630 154,627
Net cash used for investing
activities....................... (1,121,145) (26,053) (45,794)
Net cash (used for) provided by
financing activities............. 967,496 (74,723) (83,365)
Capital expenditures............... $ 1,128,255 $ 23,419 $ 46,141
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------
(PRO
(ACTUAL) FORMA)
---------- ----------
<S> <C> <C>

BALANCE SHEET DATA:
Working capital(5)................................ $ 152,646 $ 155,795
Total assets...................................... 2,428,619 2,427,619
Total long-term obligations(6).................... 1,781,968 1,685,468
Total stockholders' equity........................ 341,762 440,411
</TABLE>

7
<PAGE>
NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PCA(2)
-----------------
PCA GROUP PRO
-------- ---------------- APRIL FORMA
GROUP PRO SIX JAN. 1, 12, SIX
------------------------------------------------ FORMA MONTHS 1999 1999 MONTHS
YEAR ENDED THROUGH THROUGH ENDED
YEAR ENDED DECEMBER 31, ENDED JUNE APRIL JUNE JUNE
------------------------------------------------ DEC. 31, 30, 11, 30, 30,
1994 1995 1996 1997 1998 1998 1998 1999 1999 1999
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before
interest, income taxes
and extraordinary
item................... $127,986 $372,714 $155,311 $ 49,843 $121,750 $162,360 $78,971 $(212,094) $45,390 $71,309
Add: Depreciation,
depletion and
amortization....... 50,162 62,906 78,730 87,752 96,950 148,541 47,385 30,905 33,652 77,808
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
EBITDA................... $178,148 $435,620 $234,041 $137,595 $218,700 $310,901 $126,356 $(181,189) $79,042 $149,117
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
</TABLE>

For the historical periods, income (loss) before interest, income taxes and
extraordinary item, includes charges for rent expense on operating leases
bought out as part of the transactions. As a result of the lease buy out,
PCA will no longer incur this rent expense, but will record non-cash charges
for depreciation and depletion related to these assets, which are now owned
rather than leased. This depreciation/depletion expense will be similar, but
not identical, to the amount of rent expense. On a pro forma basis for 1998,
the incremental depreciation/depletion was $7,200 less than the historical
rent expense, resulting in a net increase of $4,284 to pro forma 1998 net
income. To better understand historical EBITDA in relation to pro forma
EBITDA for the periods presented, we believe it may be useful to add back
this rent expense to reported EBITDA for the historical periods.

PCA's EBITDA is included in this prospectus because it is a financial
measure used by PCA's management to assess PCA's operating results and
liquidity, and because several of the indebtedness covenants in PCA's senior
credit facility and in the notes indenture are based upon a calculation that
utilizes EBITDA.

EBITDA should not be considered in isolation or viewed as a substitute for
cash flow from operations, net income or other measures of performance as
defined by generally accepted accounting principles, or as a measure of a
company's overall profitability or liquidity. In addition, EBITDA does not
represent the cash available to investors because capital expenditures, debt
service and income taxes are not deducted when calculating EBITDA.

PCA understands that EBITDA as used herein is not necessarily comparable to
other similarly titled captions of other companies due to potential
inconsistencies in the method of calculation.

In analyzing 1998 pro forma EBITDA for liquidity purposes, PCA also believes
that the following additional adjustments should be considered by investors:

<TABLE>
<S> <C>
Pro forma EBITDA for 1998.............................................................. $ 310,901
Adjustments:
Other income(a)...................................................................... (41,592)
Non-recurring restructuring charge(b)................................................ 14,385
Reduction in corporate overhead(c)................................................... 32,954
Cost savings from restructuring(d)................................................... 10,800
---------
Adjusted pro forma EBITDA for 1998..................................................... $ 327,448
---------
---------
</TABLE>

a) Other income for 1998 consists substantially of nonrecurring items, such
as gains on the sale of non-strategic woodlands and a recycled paperboard
joint venture investment, that PCA believes are not relevant in analyzing
recurring EBITDA.

8
<PAGE>
b) During the fourth quarter of 1998, the Group adopted a restructuring
plan to eliminate approximately 100 personnel and close down four
facilities associated with the Group's business. As of December 31, 1998,
substantially all actions specified in the plan had been completed. A
charge of $14,385 was recorded for severance benefits, exit costs and
asset impairments, and is reflected in the Group's 1998 operating profit.
PCA believes that this non-recurring charge is not relevant in analyzing
recurring EBITDA.

c) As part of Tenneco, the Group was allocated $63,114 of Tenneco corporate
and TPI overhead expenses based on a variety of allocation methods. In
analyzing the carved-out business on a stand-alone basis, PCA estimates
that these costs will be approximately $30,160 for the first year
following the closing of the transactions. The determination of that
estimate is based on detailed analyses that consider (1) compensation and
benefits for TPI and new employees who are employed by PCA in corporate
functions such as in information technology, human resources, finance and
legal, and (2) non-payroll costs incurred by these departments. Where
applicable, the estimates consider the terms of transition service
arrangements between PCA and TPI.

d) The restructuring referred to in Note (b) above will result in reduced
cost of sales and selling and administrative expenses. This adjustment
represents the Group's estimate of the cost savings that would have been
achieved in 1998 if the restructuring had been in effect for all of 1998.

2) There was no activity for PCA from January 25, 1999, its date of inception,
through April 11, 1999.

3) The corporate overhead allocation represents the amounts charged by Tenneco
and TPI to the Group for its share of Tenneco's and TPI's corporate
expenses. On a stand-alone basis, management estimates that PCA's overhead
expense will be $30,160 for the first twelve months following the
acquisition.

4) This line item consists of non-recurring charges recorded in the fourth
quarter of 1998 and the first quarter of 1999 pertaining to a restructuring
charge and an impairment charge, respectively. For further information about
these charges, refer to Notes 7 and 14 to the Group's audited combined
financial statements and Note 7 to PCA's unaudited consolidated financial
statements.

5) Working capital represents (a) total current assets excluding cash and cash
equivalents less (b) total current liabilities excluding the current
maturities of long-term debt.

6) Total long-term obligations includes long-term debt, the current maturities
of long-term debt, and redeemable preferred stock.

7) Earnings per share through April 11, 1999 has been calculated using the
historical earnings of the Group and the number of common shares resulting
from the closing of the acquisition on April 12, 1999 ( common
shares). For the PCA historical period from April 12, 1999 to June 30, 1999,
earnings available to common stockholders includes a reduction for $2,749 of
preferred stock dividends. For both pro forma periods, there is no reduction
for preferred dividends because the preferred stock redemption to be
completed using proceeds from the offerings is treated as if it occurred at
the beginning of 1998.

For all periods presented through April 11, 1999, basic and diluted earnings
per share are the same because there are no potentially dilutive other
securities. For the PCA historical period from April 12, 1999 to June 30,
1999 and both pro forma periods, diluted earnings per share includes the
dilutive effect of the options granted in June 1999. This dilutive
effect is calculated using the treasury stock method and the expected
initial public offering price.

9
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE OTHER
INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO MAKE AN
INVESTMENT IN THE COMMON STOCK. IF ANY OF THE EVENTS DESCRIBED BELOW ACTUALLY
OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD BE ADVERSELY
AFFECTED IN A MATERIAL WAY. THIS COULD CAUSE THE TRADING PRICE OF OUR COMMON
STOCK TO DECLINE, PERHAPS SIGNIFICANTLY.

INDUSTRY RISKS

INDUSTRY EARNINGS CYCLICALITY--PERIODIC IMBALANCES OF SUPPLY AND DEMAND AFFECT
THE PRICE AT WHICH WE CAN SELL CONTAINERBOARD AND OUR EARNINGS.

The price at which we can sell containerboard could fall if industry
oversupply conditions return or economic conditions deteriorate. This could
significantly reduce our cash flow and could have a material adverse effect on
our results of operations and our financial condition.

Historically, prices for containerboard have reflected changes in
containerboard supply and demand. Changes in containerboard supply result from
capacity additions or reductions, as well as changes in inventory levels.
Containerboard demand is dependent upon both domestic demand for corrugated
packaging products and the demand for linerboard exports, which represent about
20% of total U.S. linerboard shipments, according to the Pulp & Paper 1999 North
American Fact Book. Domestic demand for corrugated packaging is the more stable
factor. It generally corresponds to changes in the rate of growth in the U.S.
economy.

From 1994 to 1996, capacity additions outpaced both domestic and export
demand for containerboard. This excess supply led to lower industry operating
rates and declining prices from late-1995 until mid-1997. Although prices
generally improved from mid-1997 through mid-1998, the containerboard market was
still adversely affected by weaker containerboard exports. This weakness was
most apparent in shipments to Asia during the second half of 1998.

The supply/demand balance has improved in recent months and the average
price of linerboard has risen approximately 25% since January 1999. However,
industry oversupply conditions could return or economic conditions could
deteriorate in the future.

PCA produced approximately 2.1 million tons of containerboard in 1998. If
the price per ton of containerboard sold by PCA decreased by $10 per ton, PCA's
operating income would have decreased by about $21 million.

COMPETITION--THE INTENSITY OF COMPETITION IN OUR INDUSTRY COMBINED WITH THE
COMMODITY NATURE OF CONTAINERBOARD COULD RESULT IN DOWNWARD PRESSURE ON PRICING,
WHICH COULD HAVE AN ADVERSE EFFECT ON OUR OPERATING RESULTS.

PCA operates in an industry that is highly competitive, with no single
containerboard or corrugated packaging producer having a dominant position.
PCA's primary competition for sales of containerboard are a number of large,
diversified paper companies, including Georgia-Pacific Corporation,
International Paper Company, Smurfit-Stone Container Corporation, Temple-Inland
Inc., Weyerhaeuser Company and Willamette Industries, Inc. All of the companies
other than Willamette are larger than PCA based on 1998 production capacity. On
a national level, our primary competitors for corrugated packaging include Four
M Corporation, Gaylord Container Corporation, Georgia-Pacific Corporation,
International Paper Company, Smurfit-Stone Container Corporation, Temple-Inland
Inc., Weyerhaeuser Company and Willamette Industries, Inc. Many of these
companies are larger than PCA based on 1998 production capacity. The intensity
of competition, together with the commodity nature of containerboard, can lead
to lower prices.

10
<PAGE>
PCA produced approximately 2.1 million tons of containerboard in 1998. If
the price per ton of containerboard sold by PCA decreased by $10 per ton, PCA's
operating income would have decreased by about $21 million.

We can not assure you that containerboard and corrugated packaging pricing
will not decline in the future.

CLUSTER RULE COMPLIANCE--PCA WILL INCUR INCREASED CAPITAL COSTS TO MEET CLUSTER
RULE REQUIREMENTS.

We currently expect to spend approximately $60 million between 1999 and 2005
to achieve compliance with new Cluster Rule requirements. Our costs to achieve
Cluster Rule compliance could be significantly higher than our estimate.

In April 1998, the United States Environmental Protection Agency finalized
the Cluster Rules, which govern all pulp and paper mill operations, including
those at our mills. Over the next several years, the Cluster Rules will limit
our allowable discharges of air and water pollutants. As a result, we and our
competitors are required to incur costs to ensure compliance with these new
rules During 1997 and 1998, we spent approximately $3 million on Cluster Rule
compliance. We currently estimate that total capital costs for Cluster Rule
compliance will be $13 million for 1999 and $18 million for 2000.

COMPANY RISKS

LEVERAGE--OUR BUSINESS MAY BE ADVERSELY IMPACTED AS A RESULT OF OUR SUBSTANTIAL
LEVERAGE, WHICH REQUIRES THE USE OF A SUBSTANTIAL PORTION OF OUR EXCESS CASH
FLOW AND MAY LIMIT OUR ACCESS TO ADDITIONAL CAPITAL.

After the offerings, we will continue to have a significant amount of
indebtedness, and we have the right to incur additional indebtedness. The
following chart shows important credit statistics as of the closing of the
transactions on April 12, 1999 and as of June 30, 1999:

<TABLE>
<CAPTION>
AT APRIL 12, AT JUNE 30,
1999 1999
------------- -----------
(IN MILLIONS)
<S> <C> <C>
Total indebtedness............................................... $ 1,769.0 $ 1,685.5
Preferred stock.................................................. $ 100.0 $ 100.0
Stockholders' equity............................................. $ 325.8 $ 341.8
</TABLE>

For the period from January 1, 1999 to April 11, 1999, earnings were
insufficient to cover fixed charges by $212.3 million. On a pro forma basis for
the six months ended June 30, 1999, earnings were insufficient to cover (1)
fixed charges by $6.9 million and (2) fixed charges and preferred stock
dividends by $13.1 million.

Our substantial indebtedness could have important consequences to you. For
example, it could:

- prevent us from satisfying our obligations with respect to our outstanding
indebtedness, which could lead to an event of default and an acceleration
of that indebtedness;

- increase our vulnerability to general adverse economic and industry
conditions by limiting our flexibility in planning for and reacting to
changes in our business and industry;

- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital,

11
<PAGE>
capital expenditures, research and development efforts and other general
corporate purposes;

- limit our ability to make strategic acquisitions or take other corporate
action;

- place us at a competitive disadvantage compared to our competitors that
have proportionately less debt; and

- limit our ability to borrow additional funds and increase the cost of
funds that we can borrow.

ADDITIONAL BORROWINGS AVAILABLE--WE AND OUR SUBSIDIARIES MAY BE ABLE TO INCUR
SUBSTANTIALLY MORE DEBT, WHICH COULD INCREASE THE RISKS CREATED BY OUR
SUBSTANTIAL INDEBTEDNESS.

We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. For example, the senior credit facility permits
additional borrowings of up to $250.0 million, all of which are currently
available for borrowing, and the indenture governing our notes also permits us
to incur additional indebtedness. If new debt is added to our or our
subsidiaries' current debt levels, the related risks that we and they now face
could intensify.

RESTRICTIONS IMPOSED BY THE SENIOR CREDIT FACILITY AND THE INDENTURE GOVERNING
OUR NOTES-- OUR OPERATING FLEXIBILITY IS LIMITED IN SIGNIFICANT RESPECTS BY THE
RESTRICTIVE COVENANTS IN OUR SENIOR CREDIT FACILITY AND THE INDENTURE GOVERNING
OUR NOTES.

Our senior credit facility and the indenture governing our notes impose
restrictions on us that could increase our vulnerability to general adverse
economic and industry conditions by limiting our flexibility in planning for and
reacting to changes in our business and industry. Specifically, these
restrictions limit our ability, among other things, to:

<TABLE>
<S> <C>
- - incur additional indebtedness; - enter into transactions with affiliates;

- - pay dividends and make distributions; - enter into sale and leaseback transactions;

- - issue stock of subsidiaries; - make capital expenditures;

- - make investments; - merge or consolidate our company; and

- - repurchase stock; - transfer and sell assets.

- - create liens;
</TABLE>

COST OF RAW MATERIALS--AN UNEXPECTED INCREASE IN THE COST OF WOOD FIBER COULD
HAVE AN ADVERSE EFFECT ON OUR BUSINESS.

We may not have continued access to sufficient quantities of wood fiber at
current prices. Wood fiber is the largest component we use in producing
containerboard. We presently satisfy about 20% of our fiber needs with wood cut
from company-owned or leased timberland. We purchase wood fiber from others to
meet about 60% of our fiber requirements. The remaining 20% of our fiber needs
are met with recycled fiber. We are more dependent on purchased wood fiber than
some of our competitors. As a result, we may be more vulnerable than some
competitors to increases in the market price for wood fiber.

In addition, we are considering the possible sale of a significant portion
of our timberland. If we cannot negotiate a wood fiber purchase agreement with
the potential buyer or locate other sources of wood fiber at costs comparable to
our current levels, our vulnerability to market price increases will increase.
PCA spends approximately $150 million annually for purchased wood fiber. If the
price of all wood fiber purchased increased by 10%, our annual fiber cost would
increase by about $15 million.

12
<PAGE>
DEPENDENCE UPON KEY PERSONNEL--A LOSS OF KEY PERSONNEL COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.

Our success is highly dependent on the skills, experience and efforts of
Paul T. Stecko, our Chairman of the Board and Chief Executive Officer, William
J. Sweeney, our Executive Vice President-Corrugated Products and Mark W.
Kowlzan, our Vice President-Containerboard/Wood Products. These executives are
not bound by employment contracts. The loss of services of one or more of these
individuals could have a material adverse effect on our company.

In addition, as our business develops and expands, we believe that our
future success will depend on our continued ability to attract and retain highly
skilled and qualified personnel. We cannot assure you that we will be able to
continue to employ key personnel or that we will be able to attract and retain
qualified personnel in the future. Failure to retain or attract key personnel
could have a material adverse effect on our business, financial condition and
results of operations.

ENVIRONMENTAL MATTERS--PCA MAY INCUR SIGNIFICANT ENVIRONMENTAL REMEDIATION COSTS
WITH RESPECT TO BOTH PAST AND FUTURE OPERATIONS.

Because liability for remediation costs under environmental laws is strict,
meaning that liability is imposed without fault, joint and several, meaning that
liability is imposed on each party without regard to contribution, and
retroactive, we could receive notifications of cleanup liability in the future
and this liability could be material. From January 1994 through June 1999,
remediation costs at our mills and converting plants totaled about $2.3 million.
As of June 30, 1999, we maintained a reserve of $83,000 for environmental
remediation liability as well as a general overall environmental reserve of
$3,369,000, which includes funds relating to onsite landfills and surface
impoundments as well as on-going and anticipated remedial projects. We currently
estimate that total capital costs for environmental matters, including Cluster
Rule compliance, will be $16 million for 1999 and $22 million for 2000.

We could also incur environmental liabilities as a result of claims by third
parties for civil damages, including liability for personal injury or property
damage, arising from releases of hazardous substances or contamination on
properties on which we now conduct or formerly conducted operations.

TECHNOLOGY, FINANCIAL AND ADMINISTRATIVE REQUIREMENTS--WE MAY INCUR INCREASED
COSTS TO OBTAIN NECESSARY TECHNOLOGICAL, FINANCIAL AND ADMINISTRATIVE SERVICES
AFTER OUR TRANSITION AGREEMENT WITH TPI EXPIRES.

Before the transactions, the Group operated as a division of TPI, which is a
subsidiary of Tenneco. Tenneco provided the Group with treasury, tax and
selected administrative, financial reporting and information system services. As
part of the sale of the Group, we negotiated a Technology, Financial and
Administrative Transition Services Agreement with TPI for TPI and its affiliates
to provide these services to PCA for a period of twelve months. PCA has an
option to extend this agreement for an additional six months.

13
<PAGE>
To continue to operate, we will need to extend the agreement with TPI,
locate another service provider or develop the capability to provide these
services internally. We may not be able to obtain these services at comparable
costs after expiration of the existing agreement.

This agreement covers storage and maintenance services for management and
operating data, telecommunications and data communications support services,
technical computer assistance for personal and mainframe computer users, and
disaster planning and recovery services, payroll and related functions, periodic
financial reporting, bank account reconciliation, fixed asset accounting, and
treasury and cash management administration. This agreement establishes fixed
hourly rates for providing these services. The rates charged reflect TPI's
actual costs, including TPI's overhead, for providing these services, but do not
reflect any Tenneco corporate overhead. There is a cost cap to ensure that TPI
uses its resources efficiently and we have the right to cancel any services with
90-days notification.

Under the existing agreement, we will pay TPI up to $13.0 million annually.
If our cost to obtain these services increases by 10%, our annual costs for
these services would increase by $1.3 million.

UNCERTAINTY OF FUTURE BUSINESS WITH TPI AND ITS AFFILIATE, TENNECO
AUTOMOTIVE--IF WE ARE UNABLE TO RENEW OUR PURCHASE/SUPPLY AGREEMENTS WITH TPI
AND TENNECO AUTOMOTIVE THERE MAY BE AN ADVERSE EFFECT ON OUR EARNINGS.

We have agreed to supply TPI and Tenneco Automotive, Inc. with their
containerboard and corrugated packaging requirements for five years, through
April 11, 2004. The agreements cover all containerboard and corrugated products
that were purchased by TPI and its affiliates during the 12 months before April
12, 1999. We may not be able to extend these agreements beyond five years, and
the loss of TPI and Tenneco Automotive as customers could have an adverse impact
on our earnings if we are unable to replace that business at comparable profit
levels.

As a result of these agreements, TPI and its affiliates are our largest
customer for all products, which includes both linerboard and corrugated
products, and our largest customer for corrugated products only. For the six
months ended June 30, 1999, TPI and its affiliates accounted for $43.7 million,
or 5.4%, of our sales of all products and $37.8 million, or 5.6%, of our sales
of corrugated products.

Prices under these agreements were established based on prices charged to
these customers before the closing of the transactions and will be adjusted if
the published market price for containerboard changes. In addition, we may
change prices annually for changes in the actual cost of items other than
containerboard. We believe that the pricing, terms and conditions for these
agreements are competitive by market standards for customers with comparable
volume and product specifications.

If PCA had to replace all of its business with TPI and its affiliates with
new business which was only 75% as profitable, PCA's annual operating income
would decrease by approximately $2 million.

CONTROLLING STOCKHOLDER; POTENTIAL CONFLICTS--THE INTERESTS OF OUR CONTROLLING
STOCKHOLDER COULD CONFLICT WITH THOSE OF THE OTHER HOLDERS OF THE COMMON STOCK.

After the offerings, PCA Holdings will beneficially own % of the
outstanding common stock of PCA on a fully diluted basis. As a result, PCA
Holdings will have the ability to elect all of the members of our board of
directors, appoint new management and approve any action requiring the approval
of our stockholders. The directors have the authority to make decisions
affecting our capital structure, including the issuance of additional
indebtedness and the declaration of dividends.

14
<PAGE>
The interests of PCA Holdings could conflict with the interests of the other
holders of the common stock.

YEAR 2000 ISSUE--OUR FAILURE, OR THE FAILURE OF OUR SUPPLIERS OR CUSTOMERS, TO
ADDRESS INFORMATION TECHNOLOGY ISSUES RELATED TO THE YEAR 2000 COULD ADVERSELY
AFFECT OUR OPERATIONS.

PCA has substantially completed an inventory of its information technology
and non-information technology systems to identify and assess Year 2000 issues
and is in the process of remediating or replacing any non-compliant systems. As
of June 30, 1999, 75% of our information technology systems and 100% of our
non-information technology systems were Year 2000 compliant. We have sent Year
2000 compliance surveys to our significant suppliers and other vendors to
determine whether they will be able to resolve in a timely manner any Year 2000
problems that may affect PCA. As a result of our initial survey, we identified
13 suppliers who did not satisfy our Year 2000 compliance guidelines. We have
identified alternative sources of supply and alternative manufacturing locations
as contingency plans to address any failure of supply associated with these
suppliers. We have not attempted to evaluate the Year 2000 compliance of our
customers because we do not think it is practicable to do so.

The potential effect if we or third parties with whom we do business are
unable to timely resolve Year 2000 issues is not determinable, but we believe
that our most reasonably likely Year 2000 worst case scenario would involve:

- short-term down time for some of our equipment as a result of process
control device malfunctions at our mills and corrugated products plants;

- temporary disruption of deliveries of supplies and products due to truck
shortages;

- a lack of supplies from the 13 vendors we have identified as not being
sufficiently prepared for the Year 2000; and

- possible errors and delays, as well as increased labor costs, associated
with manually taking orders, scheduling, production reporting and
processing billing and shipping information if our customers experience
system failures.

Based on current estimates, we expect to incur costs of approximately $5
million to address Year 2000 issues. As of June 30, 1999, we had paid $3.5
million of those costs.

INVESTMENT RISKS

USE OF PROCEEDS--WE EXPECT TO USE THE NET PROCEEDS OF THE PRIMARY OFFERINGS TO
REDEEM ALL OF OUR OUTSTANDING SENIOR EXCHANGEABLE PREFERRED STOCK AND, AS A
RESULT, WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL AND LIQUIDITY REQUIREMENTS.

We expect to use the net proceeds of the primary offerings of our common
stock to redeem all of our outstanding senior exchangeable preferred stock. As a
result, none of the net proceeds will be available to fund current or future
operations. We expect that our principal sources of funds following the
offerings will be cash generated from operating activities and, if necessary,
borrowings under our senior credit facility. We cannot assure you that these
funds will provide us with sufficient liquidity and capital resources for us to
meet our current and future financial obligations, or to provide funds for our
working capital, capital expenditures and other needs for the foreseeable
future. We may require additional equity or debt financing to meet our working
capital requirements or to fund our capital expenditures. Additional financing
may not be available if and when required or, if available, may not be on terms
satisfactory to us.

15
<PAGE>
ABSENCE OF PUBLIC MARKET--THE ABSENCE OF A PUBLIC MARKET FOR OUR COMMON STOCK
CREATES UNCERTAINTY IN THE MARKET PRICE.

Immediately before the offerings, you could not buy or sell our common stock
publicly. We and the selling stockholder will negotiate and determine the
initial public offering price with the representatives of the underwriters based
on several factors including:

- prevailing market conditions;

- PCA's historical performance;

- estimates of the business potential and earnings prospects of PCA;

- an assessment of PCA's management; and

- consideration of the above factors in relation to the market valuation of
companies in related businesses.

The negotiated initial public offering price may not accurately reflect the
true market value of PCA.

ABSENCE OF PUBLIC MARKET--YOU MAY NOT BE ABLE TO RESELL YOUR COMMON STOCK, OR
MAY HAVE TO SELL IT AT A DISCOUNT IF AN ACTIVE TRADING MARKET IS NOT DEVELOPED
AND MAINTAINED.

No public market currently exists for our common stock. Although we intend
to list the common stock on the New York Stock Exchange, a liquid market for the
common stock may not develop or be maintained. As a result, you may not be able
to sell your shares of common stock or may have to sell them at a discount.

PRICE AND VOLUME FLUCTUATIONS--THE TRADING VOLUME AND PRICE OF OUR COMMON STOCK
COULD FLUCTUATE SUBSTANTIALLY.

The market for our shares may be subject to extreme price and volume
fluctuations. We believe that a number of factors, both within and outside our
control, could cause the trading volume and price of our common stock to
fluctuate, perhaps substantially. Important factors that could cause our common
stock to fluctuate include:

- announcements of developments related to our business or our competitors'
or customers' businesses;

- fluctuations in our financial results;

- general conditions or developments in the containerboard and corrugated
packaging products business;

- potential sales of our common stock into the marketplace by us or our
stockholders; and

- a shortfall in revenue, gross margin, earnings or other financial results
or changes in research analysts' expectations.

AVAILABILITY OF SIGNIFICANT AMOUNTS OF COMMON STOCK FOR SALE--THE MARKET PRICE
OF OUR COMMON STOCK COULD BE ADVERSELY AFFECTED AS A RESULT OF THE AVAILABILITY
OF A SIGNIFICANT AMOUNT OF OUR COMMON STOCK FOR SALE.

The future sale of a substantial number of shares of common stock in the
public market following the offerings, or the perception that future sales could
occur, could adversely affect the prevailing market price of our common stock.
Approximately shares of our common stock will be outstanding after
completion of the offerings and approximately additional shares

16
<PAGE>
of common stock will be subject to currently exercisable options. All the
shares of common stock being offered in the offerings will be eligible for
immediate resale in the public market without restriction, except for shares
purchased by one of our affiliates.

Our officers and directors and all of our existing stockholders have agreed
not to offer, sell, contract to sell, hedge or otherwise dispose of any of their
shares of common stock or any other securities of PCA that they own that are
substantially similar to the common stock for a period of at least 180 days
after the date of the offerings without the prior written approval of Goldman,
Sachs & Co. After the 180 day lock-up period expires, these shares will be
freely tradeable, subject to limitations imposed by Rule 144 and Rule 701 under
the Securities Act and, in some cases, to transfer restrictions contained in
management equity agreements.

Beginning 180 days after the completion of the offerings, PCA Holdings,
which currently holds shares of our common stock, will have the right
to require us to register its shares of common stock under the Securities Act at
our expense.

CHARTER DOCUMENTS--SOME OF THE PROVISIONS OF OUR CHARTER DOCUMENTS COULD
DISCOURAGE POTENTIAL ACQUISITION PROPOSALS AND COULD DELAY, DETER OR PREVENT A
CHANGE IN CONTROL.

PCA's certificate of incorporation and its bylaws may have the effect of
making it more difficult for a third party to acquire, or could discourage a
third party from attempting to acquire, control of PCA.

PCA's certificate of incorporation authorizes its board of directors,
subject to any limitations prescribed by law, to issue shares of preferred stock
in one or more series without stockholder approval. The issuance of preferred
stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or discouraging a third party from
acquiring, a majority of PCA's outstanding voting stock.

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements about us that are
subject to risks and uncertainties. Forward-looking statements include
information concerning our future financial condition and business strategy.
Statements that contain words such as "believes," "expects," "anticipates,"
"intends," "estimated" or similar expressions are forward-looking statements. We
have based these forward-looking statements on our current expectations and
projections about future events. While we believe these expectations and
projections are reasonable, forward-looking statements are inherently subject to
risks, uncertainties and assumptions about us, including, among other things,
those risks identified under the caption "Risk Factors."

17
<PAGE>
THE TRANSACTIONS

In July 1998, Tenneco announced its intent to pursue strategic alternatives
which could result in the separation of Tenneco's automotive, specialty
packaging and containerboard and corrugated packaging products businesses.
Tenneco analyzed various alternatives for the separation of TPI's containerboard
and corrugated packaging products business, which we often refer to in this
prospectus as the Group, including a sale, merger, spin-off or initial public
offering. TPI entered into negotiations with Madison Dearborn for the sale of
the Group in January 1999. Madison Dearborn, a private equity investment firm
that invests in this sector, believed that the Group represented an attractive
investment opportunity.

On January 25, 1999, TPI entered into a contribution agreement to sell the
Group to PCA, an entity formed by Madison Dearborn in January 1999, for $2.2
billion, consisting of $246.5 million in cash, the assumption of $1.76 billion
of debt incurred by TPI immediately prior to the contribution, and a 45% common
equity interest in PCA valued at $193.5 million. Under the terms of the
contribution agreement, PCA Holdings, an entity organized and controlled by
Madison Dearborn, acquired the remaining 55% common equity interest in PCA for
$236.5 million in cash, which was used to finance in part the transactions.

The financing of the transactions consisted of (1) borrowings under the
senior credit facility, (2) the offering of the senior subordinated notes, (3)
the offering of the senior exchangeable preferred stock, (4) a cash equity
investment of $236.5 million by PCA Holdings and (5) an equity investment by TPI
valued at $193.5 million.

The following table sets forth the sources and uses of funds for the
transactions.

<TABLE>
<S> <C>
DOLLARS IN THOUSANDS
SOURCES OF FUNDS:
Senior credit facility
Revolving credit facility (a).............................. $ 9,000
Term Loan A................................................ 460,000
Term Loan B................................................ 375,000
Term Loan C................................................ 375,000
Notes........................................................ 550,000
Preferred stock.............................................. 100,000
PCA Holdings equity investment............................... 236,500
TPI equity investment........................................ 193,500
----------
Total...................................................... $2,299,000
----------
----------
USES OF FUNDS:
Acquisition consideration (b)................................ $2,200,000
Estimated fees, expenses and working capital (c)............. 99,000
----------
Total...................................................... $2,299,000
----------
----------
</TABLE>

- --------------

(a) Immediately after the closing of the transactions, we had $241 million in
additional availability under our new revolving credit facility. As of June
30, 1999, we had $250 million in availability

18
<PAGE>
and no borrowings outstanding under the revolving credit facility. If we
had, the interest rate would have been 7.75% per annum on any amounts
borrowed.

(b) The acquisition consideration does not include the impact of a post-closing
price adjustment based on changes to the net working capital of the
containerboard business from September 30, 1998 through the closing. On
August 25, 1999, PCA Holdings and TPI agreed that the acquisition
consideration should be reduced as a result of this adjustment by an amount
equal to $20 million plus interest through the date of payment by TPI. PCA
recorded $11.9 million of this amount on the June 30, 1999 balance sheet,
representing the amount that was previously agreed to, and intends to record
the remaining amount in August 1999.

(c) Includes a fee paid to Madison Dearborn at the closing of the transactions
of $15 million plus out-of-pocket expenses incurred in connection with the
transactions.

Before the closing of the transactions in April 1999, it was agreed that
after the closing, members of PCA's management would have the right to acquire
PCA common stock at the same price per share being paid by PCA Holdings in the
transactions, and receive options with an exercise price equal to the amount
being paid by PCA Holdings for common stock in the transactions. After the
closing of the transactions, PCA offered to 125 members of management of PCA
shares of common stock of PCA at the same price per share paid by PCA Holdings.
These employees included five executive officers, 11 senior managers and 109
facility and key managers. Of these employees, 113 elected to purchase common
stock in the offering. PCA sold a total of shares of common stock in
the management offering. The proceeds were used to redeem shares from
PCA Holdings and shares from TPI. PCA also issued to management options
to purchase shares.

Before the closing of the transactions, TPI agreed under the terms of the
contribution agreement to purchase certain timberland that was leased by TPI for
use by the containerboard business and buy-out all remaining mill operating
leases (collectively, the "Lease Buy-out"). As a result of the Lease Buy-out,
PCA owns approximately 800,000 acres of timberland, has lease or harvest rights
to 150,000 acres of timberland and owns all of its mills.

19
<PAGE>
USE OF PROCEEDS

The net proceeds to PCA from the sale of the shares of common
stock being offered by it in the offerings are estimated to be approximately
$ at an assumed initial public offering price of $ per share, after
deducting the estimated underwriting discounts and offering expenses payable by
PCA.

PCA will use the net proceeds to redeem all outstanding shares of its
12 3/8% senior exchangeable preferred stock due 2010 (1,058,094 shares as of
October 1, 1999) at a redemption price of 112.375% of its liquidation
preference, plus accrued and unpaid dividends through the date of redemption. If
the redemption occurred on November 1, 1999, the redemption price would be
112.375% of $105,809,375, plus $1,091,159 of accrued and unpaid dividends, or
$119,994,444.

Any net proceeds received by PCA in excess of the amounts required to redeem
the outstanding senior exchangeable preferred stock will be used to pay down
debt or for general corporate purposes, including working capital. PCA intends
to use excess cash or borrowings under its revolving credit facility if the net
proceeds received by PCA are insufficient to redeem all of the outstanding
senior exchangeable preferred stock.

PCA will not receive any of the proceeds from the sale of the shares by the
selling stockholder in the offerings.

20
<PAGE>
DILUTION

The net tangible book value of PCA as of June 30, 1999 was approximately
$ , or $ per share of common stock. Net tangible book value per
share represents the amount of our stockholders' equity, less intangible assets,
divided by shares of common stock outstanding as of June 30, 1999.

After giving effect to the sale of the shares of common stock being
offered by PCA at an assumed initial public offering price of $ per share,
after deducting estimated underwriting discounts and commissions and offering
expenses payable by PCA, and after using the net proceeds to redeem the senior
exchangeable preferred stock, the pro forma net tangible book value of PCA as of
June 30, 1999 would have been approximately $ , or $ per share of
common stock. This represents an immediate increase in pro forma net tangible
book value of $ per share to existing stockholders and an immediate dilution of
$ per share to new investors. The following table illustrates this per share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.... $
Net tangible book value per share at June 30,
1999........................................... $
Increase per share attributable to new
investors......................................
----------
Pro forma net tangible book value per share after
the offerings....................................
----------
Net tangible book value dilution per share to new
investors........................................ $
----------
----------
</TABLE>

The following table summarizes on a pro forma basis, as of June 30, 1999,
the differences between the existing stockholders and new investors with respect
to the number of shares of common stock purchased from PCA, the aggregate cash
consideration paid and the average price per share paid, before deducting
estimated underwriting discounts and commissions and offering expenses payable
by PCA:

<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION
----------------- ------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................% $% $
New investors...........................
------- -------- -------- -------- -------------
Total................................. $
------- -------- -------- --------
------- -------- -------- --------
</TABLE>

The foregoing discussion and tables assume no exercise of any stock options
outstanding as of June 30, 1999. As of June 30, 1999, there were options
outstanding to purchase a total of shares of common stock with a
weighted average exercise price of approximately $ per share. To the extent
that any of these options are exercised, there will be further dilution to new
investors.

21
<PAGE>
DIVIDEND POLICY

We intend to retain all earnings for the foreseeable future for use in the
operation and expansion of our business and to repay existing indebtedness.
Accordingly, we currently have no plans to pay dividends on our common stock.
The payment of any future dividends will be determined by PCA's board of
directors in light of conditions then existing, including PCA's earnings,
financial condition and capital requirements, restrictions in financing
agreements, business conditions and other factors. Under the terms of the
agreements governing our outstanding indebtedness, we are prohibited or
restricted from paying dividends on our common stock. In addition, under
Delaware law, we are prohibited from paying any dividends unless we have
"capital surplus" or "net profits" available for this purpose, as these terms
are defined under Delaware law.

22
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of PCA as of June 30, 1999
on an actual basis, and as adjusted to reflect the sale of the shares of
common stock offered by PCA in the offerings at an assumed initial public
offering price of $ per share, after deducting the estimated underwriting
discounts and offering expenses payable by us, the application of the net
proceeds therefrom as described in "Use of Proceeds." The information in this
table should be read in conjunction with "Unaudited Pro Forma Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," the audited combined financial statements of the Group
and the related notes and the audited financial statements of PCA and the
related note, which appear elsewhere in this prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------------
ACTUAL AS ADJUSTED
---------------- -------------
(IN THOUSANDS)

<S> <C> <C>
Cash............................................................................. $ 46,855 $ 46,855
---------------- -------------
---------------- -------------
Debt:
Senior credit facility
Revolving credit facility (a)................................................ -- --
Term Loan A.................................................................. 431,488 431,488
Term Loan B.................................................................. 351,756 351,756
Term Loan C.................................................................. 351,756 351,756
Notes.......................................................................... 550,000 550,000
Other.......................................................................... 468 468
---------------- -------------
Total debt................................................................... 1,685,468 1,685,468

Senior exchangeable preferred stock, liquidation preference $100 per share;
3,000,000 shares authorized, 1,000,000 shares issued and outstanding........... 96,500 --

Stockholders' equity:
Preferred stock, par value $.01 per share, shares authorized, no
shares issued and outstanding................................................ -- --
Common stock, par value $.01 per share, shares authorized;
shares issued and outstanding, actual; shares issued and
outstanding, as adjusted (b)................................................. 4 4
Additional paid-in capital..................................................... 337,741 452,865
Retained earnings.............................................................. 4,017 (12,458)
---------------- -------------
Total stockholders' equity..................................................... 341,762 440,411
---------------- -------------
Total capitalization......................................................... $2,123,730 $ 2,125,879
---------------- -------------
---------------- -------------
</TABLE>

- --------------

(a) As of June 30, 1999, we had $250 million in additional availability and no
borrowings outstanding under our revolving credit facility. If we had, the
interest rate would have been 7.75% per annum on any amounts borrowed.

(b) Does not give effect to the proposed -for-one split of common stock.
Excludes shares of common stock issuable upon exercise of stock
options issued under PCA management equity agreements at an exercise price
of approximately $ per share. All of these options will become
exercisable upon completion of the offerings.

23
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma financial information has been derived by
the application of pro forma adjustments, which give effect to the April 12,
1999 transactions, to the historical combined financial statements of the Group,
which was acquired by PCA in the transactions, and the historical consolidated
financial statements of PCA, both of which are included elsewhere in this
prospectus. The transactions include the following related events:

- borrowings under the senior credit facility;

- the Lease Buy-out;

- TPI's contribution of the containerboard and corrugated packaging products
business to PCA in exchange for TPI's equity investment and cash;

- issuance of PCA common stock to PCA Holdings in exchange for cash;

- PCA's issuance of the notes and preferred stock; and

- PCA's grant of options to management.

The unaudited pro forma statements of income for the year ended December 31,
1998 and the six months ended June 30, 1999 give effect to the above
transactions as if the transactions had been consummated on January 1, 1998. The
pro forma adjustments exclude the impacts, if any, resulting from the potential
effect of interest rate hedges on the senior credit facility.

See "The Transactions" for more information about the sale of equity to PCA
management. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Market Risk and Risk Management Policies" for more
information about the interest rate hedges on the senior credit facility.

The transactions represented a series of related transactions that fall
within the scope of EITF Issue No. 88-16, BASIS IN LEVERAGED BUY-OUT
TRANSACTIONS. However, in accordance with the guidance in EITF 88-16, because a
change in control was deemed not to have occurred due to the existence of
certain participating veto rights held by PCA directors designated by TPI, the
transactions are considered a recapitalization-restructuring for which a change
in accounting basis is not appropriate. Accordingly, PCA has recorded the Group
net assets contributed by TPI at their historical values.

The pro forma financial information also reflects the issuance by PCA of
shares of common stock in the offerings and the application of the net
proceeds therefrom as described in "Use of Proceeds."

The unaudited pro forma financial information is for comparative purposes
only and does not purport to represent what PCA's results of operations would
actually have been had the transactions in fact occurred on the assumed dates or
to project PCA's results of operations for any future period. The unaudited pro
forma financial information should be read in conjunction with the Group's
historical combined financial statements and related notes, PCA's historical
consolidated financial statements and related notes, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and other
financial information included elsewhere in this prospectus.

The pro forma and other adjustments, as described in the accompanying notes
to the unaudited pro forma balance sheet and statements of income, are based on
available information and assumptions that management believes are reasonable.

24
<PAGE>
PACKAGING CORPORATION OF AMERICA
UNAUDITED PRO FORMA BALANCE SHEET

<TABLE>
<CAPTION>
PCA PRO FORMA PCA
JUNE 30, 1999 ADJUSTMENTS PRO FORMA
-------------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 46,855 $ $ 46,855
Accounts receivable, net............................................ 197,631 197,631
Receivables from affiliated companies............................... -- --
Notes receivable.................................................... 701 701
Inventories......................................................... 152,815 152,815
Prepaid expenses and other current assets........................... 15,334 15,334
-------------- ------------ -----------
TOTAL CURRENT ASSETS.............................................. 413,336 413,336

Property, plant and equipment, at cost:
Land, timber, timberlands and buildings............................. 708,367 708,367
Machinery and equipment............................................. 1,868,973 1,868,973
Other, including construction in progress........................... 129,306 129,306
Less: Accumulated depreciation and depletion........................ (790,128) (790,128)
-------------- ------------ -----------
PROPERTY, PLANT AND EQUIPMENT, NET................................ 1,916,518 1,916,518

Intangible assets................................................... 1,649 1,649
Other long-term assets.............................................. 96,122 (1,000)(c) 95,122
Investments......................................................... 994 994
-------------- ------------ -----------
TOTAL ASSETS...................................................... $ 2,428,619 $ (1,000) $2,427,619
-------------- ------------ -----------
-------------- ------------ -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................... $ 7,703 $ $ 7,703
Accounts payable.................................................... 117,935 117,935
Payables to Tenneco affiliates...................................... -- --
Accrued interest.................................................... 30,682 30,682
(400)(c)
Accrued liabilities................................................. 65,218 (2,749)(a) 62,069
-------------- ------------ -----------
TOTAL CURRENT LIABILITIES......................................... 221,538 (3,149) 218,389

Long-term liabilities:
Long-term debt...................................................... 1,677,765 1,677,765
Deferred taxes...................................................... 84,107 84,107
Other liabilities................................................... 6,947 6,947
-------------- ------------ -----------
TOTAL LONG-TERM LIABILITIES....................................... 1,768,819 1,768,819

Mandatorily redeemable preferred stock (liquidation preference $100
per share, 3,000,000 shares authorized, 1,000,000 shares issued
and outstanding).................................................. 96,500 (96,500)(a) --

Stockholders' equity:
Preferred stock (par value $.01 per share, no shares authorized,
actual; shares authorized, pro forma; no shares issued
and outstanding, actual and pro forma)............................ -- -- --
Junior preferred stock (liquidation preference $1.00 per share, 100
shares authorized, issued and outstanding)........................ -- --
Common stock (par value $.01 per share, shares authorized;
shares issued and outstanding, actual; shares
issued and outstanding, pro forma) (b)............................ 4 (a) 4
Additional paid in capital.......................................... 337,741 115,124(a) 452,865
(600)(c)
Retained earnings................................................... 4,017 (15,875)(a) (12,458)
-------------- ------------ -----------
TOTAL STOCKHOLDERS' EQUITY........................................ 341,762 98,649 440,411
-------------- ------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................ $ 2,428,619 $ (1,000) $2,427,619
-------------- ------------ -----------
-------------- ------------ -----------
</TABLE>

25
<PAGE>
PACKAGING CORPORATION OF AMERICA
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(DOLLARS IN THOUSANDS)

(a) Assumes the net proceeds from the sale of new shares of common stock
will be used to redeem all of the outstanding shares of PCA's 12 3/8% senior
exchangeable preferred stock due 2010 (1,000,000 shares as of June 30, 1999)
at a redemption price of 112.375% of its liquidation preference, plus
accrued and unpaid dividends, as follows:

<TABLE>
<CAPTION>
ISSUANCE OF REDEMPTION OF NET
COMMON STOCK PREFERRED STOCK ADJUSTMENT
--------------- --------------- -----------
<S> <C> <C> <C>
Cash......................................... 115,124 (115,124) --
Accrued dividends............................ -- (2,749) (2,749)
Preferred stock.............................. -- (96,500) (96,500)
Common stock................................. --
Additional paid-in capital................... 115,124 -- 115,124
-- (3,500) --
Retained earnings............................ -- (12,375) (15,875)
</TABLE>

(b) Common stock and additional paid-in capital as of June 30, 1999 have not
been adjusted for the -for-one stock split.

(c) Represents the accelerated vesting of the bonus paid to PCA's CEO as a
result of the completion of these offerings of PCA's common stock. As this
charge is non-recurring, it has not been reflected as an adjustment to the
unaudited pro forma statement of income.

26
<PAGE>
PACKAGING CORPORATION OF AMERICA
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------
GROUP APRIL 12, 1999 STOCK PCA PRO
HISTORICAL TRANSACTION OFFERINGS FORMA(L)
-------------- --------------- ------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales........................................ $ 1,571,019 $ -- $ -- $ 1,571,019
7,200(a) --
Cost of sales.................................... (1,289,644) 12,260(b) -- (1,270,184)
-------------- --------------- ------------- --------------
Gross profit................................... 281,375 19,460 -- 300,835
1,449(b)
(1,973)(c)
2,500(d)
Selling and administrative expenses.............. (108,944) 4,400(e) -- (102,568)
Corporate overhead allocation.................... (63,114) -- -- (63,114)
Non-recurring restructuring charge............... (14,385) -- -- (14,385)
Other income..................................... 26,818 14,774(g) -- 41,592
-------------- --------------- ------------- --------------
Income before interest and income taxes........ 121,750 40,610 -- 162,360
Interest expense, net............................ (2,782) (156,694)(h) -- (159,476)
-------------- --------------- ------------- --------------
Income before income taxes..................... 118,968 (116,084) -- 2,884
Income tax (expense) benefit..................... (47,529) 47,013(i) -- (516)
-------------- --------------- ------------- --------------
Net income....................................... 71,439 (69,071) -- 2,368
Preferred dividends and accretion of preferred
stock issuance costs........................... -- (12,693)(k) 12,693(n) --
-------------- --------------- ------------- --------------
Net income available to common stockholders...... $ 71,439 $ (81,764) $ 12,693 $ 2,368
-------------- --------------- ------------- --------------
-------------- --------------- ------------- --------------
Basic net income per common share (o)............ $
--------------
--------------
Diluted net income per common share (o).......... $
--------------
--------------
</TABLE>

27
<PAGE>
PACKAGING CORPORATION OF AMERICA

UNAUDITED PRO FORMA STATEMENT OF INCOME

SIX MONTHS ENDED JUNE 30, 1999

<TABLE>
<CAPTION>
GROUP PRO FORMA ADJUSTMENTS
JANUARY 1, PCA -----------------------
1999 APRIL 12, 1999 APRIL 12,
THROUGH THROUGH 1999 STOCK PCA PRO
APRIL 11, 1999 JUNE 30, 1999(M) TRANSACTION OFFERINGS FORMA
-------------- ---------------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 433,182 $ 373,035 $ -- $ -- $ 806,217
688(a)
Cost of sales............................. (367,483) (297,055) 3,440(b) -- (660,410)
-------------- ---------------- ----------- --------- ---------
Gross profit............................ 65,699 75,980 4,128 $ -- 145,807

367(b)
(493)(c)
701(d)
Selling and administrative expenses....... (30,584) (25,136) 829(e) -- (54,316)
Corporate overhead allocation............. (14,890) (5,188) -- -- (20,078)
Non-recurring impairment charge........... (230,112) -- 230,112(f) -- --
Other income (expense), net............... (2,207) (266) 2,369(g) -- (104)
-------------- ---------------- ----------- --------- ---------
Income (loss) before interest, income
taxes and extraordinary item.......... (212,094) 45,390 238,013 -- 71,309
Interest expense, net..................... (221) (34,079) (43,895)(h) -- (78,195)
-------------- ---------------- ----------- --------- ---------
Income (loss) before income taxes....... (212,315) 11,311 194,118 -- (6,886)
Income tax benefit........................ 83,716 (4,545) (76,630)(i) -- 2,541
-------------- ---------------- ----------- --------- ---------
Income (loss) before extraordinary item... (128,599) 6,766 117,488 -- (4,345)
-------------- ---------------- ----------- --------- ---------
Extraordinary item........................ (6,327) -- 6,327(j) -- --
-------------- ---------------- ----------- --------- ---------
Net income (loss)......................... (134,926) 6,766 123,815 -- (4,345)
Preferred dividends and accretion of
preferred stock issuance costs.......... -- (2,749) (3,598)(k) 6,347(n) --
-------------- ---------------- ----------- --------- ---------
Net income (loss) available to common
stockholders............................ $(134,926) $ 4,017 $120,217 $ 6,347 $ (4,345)
-------------- ---------------- ----------- --------- ---------
-------------- ---------------- ----------- --------- ---------
Basic net income (loss) per common
share(o)................................ $
---------
---------
Diluted net income (loss) per common
share(o)................................ $
---------
---------
</TABLE>

28
<PAGE>
PACKAGING CORPORATION OF AMERICA

NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(a) To record the estimated depletion/depreciation on the timber and mill
assets acquired in the Lease Buy-out, and to remove the operating lease
expense related to those leases, resulting in a net decrease to cost of
sales as follows:

<TABLE>
<CAPTION>
JANUARY 1, 1999
YEAR ENDED THROUGH
DECEMBER 31, 1998 APRIL 11, 1999
------------------- ----------------
<S> <C> <C>
New depreciation/depletion............................. $ 65,300 $ 17,058
Eliminate lease expense................................ (72,500) (17,746)
-------- --------
$ (7,200) $ (688)
-------- --------
-------- --------
</TABLE>

(b) Because the contributed net assets have a carrying value greater than their
fair value, as determined by the value of the acquisition consideration, an
asset impairment was recorded by TPI in connection with the transactions
relating to the Group's fixed and intangible assets. The pre-tax impairment
charge was reflected in the Group's separate financial statements in the
first quarter of 1999 and consisted of the following components:

<TABLE>
<S> <C>
Write-off remaining goodwill..................................... $ 46,206
Reduction in property, plant and equipment....................... 183,906
---------
$ 230,112
---------
---------
</TABLE>

The following adjustment reflects reduced depreciation and amortization
resulting from this impairment charge:

<TABLE>
<CAPTION>
JANUARY 1, 1999
YEAR ENDED THROUGH
DECEMBER 31, 1998 APRIL 11, 1999
------------------- ----------------
<S> <C> <C>
Goodwill amortization................................... $ 1,449 $ 367
Property, plant and equipment depreciation.............. 12,260 3,440
-------- -------
$ 13,709 $ 3,807
-------- -------
-------- -------
</TABLE>

(d) To reduce OPEB expense relating to the portion of the Group post-retirement
health care benefit obligations being retained by TPI as part of the
transactions and not assumed by PCA.

(e) To eliminate specialty rebates provided by the Group on boxes sold to
Tenneco affiliates. As part of the transactions, TPI has agreed that PCA
will no longer provide these rebates.

(f) The impairment charge recorded by the Group in the six months ended June
30, 1999 is eliminated with a pro forma adjustment because it is directly
related to the transactions and is non-recurring.

(g) To eliminate the discount expense recognized on the sale of factored
receivables because the receivables were acquired by PCA in connection with
the transactions.

29
<PAGE>
PACKAGING CORPORATION OF AMERICA

NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(h) To record interest expense and amortization of deferred financing costs on
the debt incurred to finance the transactions, calculated as follows:

<TABLE>
<CAPTION>
JANUARY 1, 1999
YEAR ENDED THROUGH
DECEMBER 31, 1998 APRIL 11, 1999
------------------- ----------------
<S> <C> <C>
Revolving Credit Facility
($9,000 @7.75%)....................................... $ 698 $ 195
Term Loan A
($460,000 @ 7.75%).................................... 35,185 9,399
Term Loan B
($375,000 @ 8.25%).................................... 30,879 8,599
Term Loan C
($375,000 @ 8.50%).................................... 31,815 8,860
Senior Subordinated Notes
($550,000 @ 9.625%)................................... 52,938 14,829
---------- --------
151,515 41,882
---------- --------
Eliminate interest on debt not assumed.................. (2,782) (221)
Amortization of deferred financing costs................ 7,125 1,999
Amortization of settlement payment on interest rate
protection agreement related to the notes............. 836 235
---------- --------
Pro forma interest adjustment....................... $ 156,694 $ 43,895
---------- --------
---------- --------
</TABLE>

The above interest amounts on the Revolving Credit Facility and Term
Loans assume a Eurodollar rate, equivalent to LIBOR, of 5% and give effect
to the principal payments required on the Term Loans during the first 18
months. The effect on interest expense pertaining to the variable rate
Revolving Credit Facility and Term Loans of a 1/8(th) of one percent
variance in interest rates would be $1,515 and $726 for the year ended
December 31, 1998 and the six months ended June 30, 1999, respectively.

(i) To record the income tax effect on all pro forma adjustments, at an
effective tax rate of 40.5% for December 31, 1998, and 39.5% for June 30,
1999. The tax rate is higher than the federal statutory rate of 35% due to
state income taxes.

(j) To eliminate the extraordinary loss, net of taxes, on the early
extinguishment of debt as part of the transactions.

(k) To record dividends on the preferred stock and accretion of the preferred
stock issuance costs as follows:

<TABLE>
<CAPTION>
JANUARY 1, 1999
YEAR ENDED THROUGH
DECEMBER 31, 1998 APRIL 11, 1999
------------------- ----------------
<S> <C> <C>
Preferred stock dividend................................ $ 12,375 $ 3,439
Accretion of preferred stock issuance costs............. 318 159
-------- -------
$ 12,693 $ 3,598
-------- -------
-------- -------
</TABLE>

30
<PAGE>
PACKAGING CORPORATION OF AMERICA

NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(l) There are no historical financial statements for PCA for 1998 because PCA
was not incorporated until January 25, 1999.

(m) There was no activity for PCA from January 25, 1999, its date of inception,
through April 11, 1999.

(n) The pro forma financial information also reflects the redemption of the
preferred stock using proceeds from the offerings. As a result, dividends
on the preferred stock and accretion of the preferred stock issuance costs
are eliminated.

(o) All share and per share data have been adjusted to reflect a -for-one
split of PCA's common stock which became effective on , 1999.
The following table sets forth the computation of basic and diluted income
per share:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1999
------------------- ----------------
<S> <C> <C>
Numerator:
Net income (loss)..................................... $ 2,368 $ (4,345)
---------- ----------------
---------- ----------------
Denominator:
Basic common shares outstanding.......................
Effect of dilutive securities:
Stock options......................................... N/A
---------- ----------------

Diluted common shares outstanding.......................

Basic income (loss) per common share.................... $ $
Diluted income (loss) per common share.................. $ $
</TABLE>

The effect of options for the six months ended June 30, 1999 has not been
included as it would be anti-dilutive.

31
<PAGE>
SELECTED FINANCIAL AND OTHER DATA

The following table sets forth the selected historical financial and other
data of PCA and the Group, and pro forma financial and other data of PCA. The
selected historical financial and other data as of and for the years ended
December 31, 1996, 1997 and 1998 was derived from the audited combined financial
statements of the Group and the related notes thereto included elsewhere in this
prospectus. The selected historical financial and other data as of and for the
years ended December 31, 1994 and 1995 was derived from the unaudited combined
financial statements of the Group. The historical financial data for the six
months ended June 30, 1998 and for the period from January 1, 1999 to April 11,
1999 has been derived from the unaudited condensed combined financial statements
of the Group included elsewhere in this prospectus. The historical financial
data as of June 30, 1999 and for the period from April 12, 1999 to June 30, 1999
has been derived from the unaudited consolidated financial statements of PCA
included elsewhere in this prospectus. The unaudited pro forma financial and
other data as of and for the six months ended June 30, 1999 and for the year
ended December 31, 1998 was derived from the unaudited pro forma financial
information of PCA included elsewhere in this prospectus. The pro forma
financial data does not purport to represent what PCA's financial position or
results of operations would actually have been had the transactions in fact
occurred on the assumed dates or to project PCA's financial position or results
of operations for any future date or period. The information contained in the
following table also should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Unaudited Pro
Forma Financial Information," the historical combined financial statements of
the Group including the notes thereto and the historical consolidated financial
statements of PCA including the notes thereto, contained elsewhere in this
prospectus.
<TABLE>
<CAPTION>
GROUP
GROUP PCA ----------------------
--------------------------------------------------------------- ------------ JAN. 1,
PRO FORMA 1999
YEAR ENDED DECEMBER 31, YEAR ENDED SIX MONTHS THROUGH
--------------------------------------------------------------- DEC. 31, ENDED JUNE APRIL 11,
1994 1995 1996 1997 1998 1998 30, 1998 1999
----------- ----------- ----------- ----------- ----------- ------------ ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales................ $ 1,441,673 $ 1,844,708 $ 1,582,222 $ 1,411,405 $ 1,571,019 $1,571,019 $ 777,042 $ 433,182
Cost of sales............ (1,202,996) (1,328,838) (1,337,410) (1,242,014) (1,289,644) (1,270,184) (629,281) (367,483)
----------- ----------- ----------- ----------- ----------- ------------ ---------- ----------
Gross profit........... 238,677 515,870 244,812 169,391 281,375 300,835 147,761 65,699
Selling and
administrative
expenses............... (71,312) (87,644) (95,283) (102,891) (108,944) (102,568) (52,432) (30,584)
Corporate overhead/
allocation(3).......... (34,678) (38,597) (50,461) (61,338) (63,114) (63,114) (32,373) (14,890)
Restructuring/ impairment
charge(4).............. -- -- -- -- (14,385) (14,385) -- (230,112)
Other income
(expense)(5)........... (4,701) (16,915) 56,243 44,681 26,818 41,592 16,015 (2,207)
----------- ----------- ----------- ----------- ----------- ------------ ---------- ----------
Income (loss) before
interest, income
taxes and
extraordinary item... 127,986 372,714 155,311 49,843 121,750 162,360 78,971 (212,094)
Interest expense, net.... (740) (1,485) (5,129) (3,739) (2,782) (159,476) (1,681) (221)
----------- ----------- ----------- ----------- ----------- ------------ ---------- ----------
Income (loss) before
income taxes and
extraordinary item... 127,246 371,229 150,182 46,104 118,968 2,884 77,290 (212,315)
Income tax expense....... (50,759) (147,108) (59,816) (18,714) (47,529) (516) (30,822) 83,716
----------- ----------- ----------- ----------- ----------- ------------ ---------- ----------
Income (loss) before
extraordinary item... 76,487 224,121 90,366 27,390 71,439 2,368 46,468 (128,599)
Extraordinary item..... -- -- -- -- -- -- -- (6,327)
----------- ----------- ----------- ----------- ----------- ------------ ---------- ----------
Net income (loss)...... $ 76,487 $ 224,121 $ 90,366 $ 27,390 $ 71,439 $ 2,368 $ 46,468 $ (134,926)
----------- ----------- ----------- ----------- ----------- ------------ ---------- ----------
----------- ----------- ----------- ----------- ----------- ------------ ---------- ----------

<CAPTION>
PCA(2)
----------------------
APRIL 12, PRO FORMA
1999 SIX MONTHS
THROUGH ENDED
JUNE 30, JUNE 30,
1999 1999
---------- ----------

<S> <C> <C>
STATEMENT OF INCOME DATA:
Net sales................ $ 373,035 $ 806,217
Cost of sales............ (297,055) (660,410 )
---------- ----------
Gross profit........... 75,980 145,807
Selling and
administrative
expenses............... (25,136) (54,316 )
Corporate overhead/
allocation(3).......... (5,188) (20,078 )
Restructuring/ impairment
charge(4).............. -- --
Other income
(expense)(5)........... (266) (104 )
---------- ----------
Income (loss) before
interest, income
taxes and
extraordinary item... 45,390 71,309
Interest expense, net.... (34,079) (78,195 )
---------- ----------
Income (loss) before
income taxes and
extraordinary item... 11,311 (6,886 )
Income tax expense....... (4,545) 2,541
---------- ----------
Income (loss) before
extraordinary item... 6,766 (4,345 )
Extraordinary item..... -- --
---------- ----------
Net income (loss)...... $ 6,766 $ (4,345 )
---------- ----------
---------- ----------
</TABLE>

32
<PAGE>
<TABLE>
<CAPTION>
GROUP
GROUP PCA ----------------------
--------------------------------------------------------------- ------------ JAN. 1,
PRO FORMA 1999
YEAR ENDED DECEMBER 31, YEAR ENDED SIX MONTHS THROUGH
--------------------------------------------------------------- DEC. 31, ENDED JUNE APRIL 11,
1994 1995 1996 1997 1998 1998 30, 1998 1999
----------- ----------- ----------- ----------- ----------- ------------ ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Basic earnings per
share(9):
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before
extraordinary item...
Extraordinary item.....
Net income (loss) per
common share.........
Diluted earnings per
share(9):
Income (loss) before
extraordinary item...
Extraordinary item.....
Net income (loss) per
common share.........
Weighted average common
shares outstanding.....
OTHER DATA:
EBITDA(1)................ $ 178,148 $ 435,620 $ 234,041 $ 137,595 $ 218,700 $ 310,901 $ 126,356 $ (181,189)
Rent expense on operating
leases bought out as
part of the
transactions(1)........ 93,600 94,900 94,700 73,900 72,500 -- 35,946 17,746
Net cash provided by
operating activities... 107,642 336,599 55,857 107,213 195,401 170,581 103,803 153,649
Net cash used for
investing activities... (113,119) (371,068) (74,232) (111,885) (177,733) (93,535) (51,841) (1,121,145)
Net cash (used for)
provided by financing
activities............. 6,112 36,454 16,767 3,646 (17,668) (22,030) (51,962) 967,496
Depreciation, depletion,
amortization........... 50,162 62,906 78,730 87,752 96,950 148,541 47,385 30,905
Capital expenditures..... 110,853 252,745 168,642 110,186 103,429 103,429 46,557 1,128,255
BALANCE SHEET DATA:
Working capital
(deficit)(6)........... $ (101,281) $ (150,429) $ (102,278) $ 34,314 $ 80,027 $ -- $ 64,887 $
Total assets............. 863,568 1,202,536 1,261,051 1,317,263 1,367,403 -- 1,341,300
Total long-term
obligations (7)........ 20,267 21,739 20,316 27,864 17,552 -- 16,621
Total stockholders'
equity (8)............. 389,981 640,483 784,422 854,060 908,392 -- 851,487

<CAPTION>
PCA(2)
----------------------
APRIL 12, PRO FORMA
1999 SIX MONTHS
THROUGH ENDED
JUNE 30, JUNE 30,
1999 1999
---------- ----------

Basic earnings per
share(9):
<S> <C> <C>
Income (loss) before
extraordinary item...
Extraordinary item.....
Net income (loss) per
common share.........
Diluted earnings per
share(9):
Income (loss) before
extraordinary item...
Extraordinary item.....
Net income (loss) per
common share.........
Weighted average common
shares outstanding.....
OTHER DATA:
EBITDA(1)................ $ 79,042 $ 149,117
Rent expense on operating
leases bought out as
part of the
transactions(1)........ -- --
Net cash provided by
operating activities... 147,630 154,627
Net cash used for
investing activities... (26,053) (45,794 )
Net cash (used for)
provided by financing
activities............. (74,723) (83,365 )
Depreciation, depletion,
amortization........... 33,652 77,808
Capital expenditures..... 23,419 46,141
BALANCE SHEET DATA:
Working capital
(deficit)(6)........... $ 152,646 $ 155,795
Total assets............. 2,428,619 2,427,619
Total long-term
obligations (7)........ 1,781,968 1,685,468
Total stockholders'
equity (8)............. 341,762 440,411
</TABLE>

33
<PAGE>
NOTES TO SELECTED FINANCIAL AND OTHER DATA

(DOLLARS IN THOUSANDS)

1) PCA calculates "EBITDA" as income (loss) before interest, income taxes
and extraordinary item, as reported, plus depreciation, depletion and
amortization as reported in the statement of cash flows, as presented in
the following table:
<TABLE>
<CAPTION>
GROUP
GROUP PCA ------------------------
----------------------------------------------------- ----------- JAN. 1,
PRO FORMA 1999
YEAR ENDED DECEMBER 31, YEAR ENDED SIX MONTHS THROUGH
----------------------------------------------------- DEC. 31, ENDED JUNE APRIL 11,
1994 1995 1996 1997 1998 1998 30, 1998 1999
--------- --------- --------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before
interest, income taxes
and extraordinary
item.................... $ 127,986 $ 372,714 $ 155,311 $ 49,843 $ 121,750 $ 162,360 $ 78,971 $(212,094)
Add: Depreciation,
depletion and
amortization............ 50,162 62,906 78,730 87,752 96,950 148,541 47,385 30,905
--------- --------- --------- --------- --------- ----------- ----------- -----------
EBITDA.................... $ 178,148 $ 435,620 $ 234,041 $ 137,595 $ 218,700 $ 310,901 $ 126,356 $(181,189)
--------- --------- --------- --------- --------- ----------- ----------- -----------
--------- --------- --------- --------- --------- ----------- ----------- -----------

<CAPTION>
PCA(2)
------------------------
APRIL 12, PRO FORMA
1999 SIX MONTHS
THROUGH ENDED
JUNE 30, JUNE 30,
1999 1999
----------- -----------
<S> <C> <C>
Income (loss) before
interest, income taxes
and extraordinary
item.................... $ 45,390 $ 71,309
Add: Depreciation,
depletion and
amortization............ 33,652 77,808
----------- -----------
EBITDA.................... $ 79,042 $ 149,117
----------- -----------
----------- -----------
</TABLE>

For the historical periods, income (loss) before interest, income taxes and
extraordinary item includes charges for rent expense on operating leases
bought out as part of the transactions. As a result of the Lease Buy-out,
PCA will no longer incur this rent expense, but will record non-cash charges
for depreciation and depletion related to these assets, which are now owned
rather than leased. This depreciation/depletion expense will be similar, but
not identical, to the amount of rent expense. On a pro forma basis for 1998,
the incremental depreciation/depletion was $7,200 less than the historical
rent expense, resulting in a net increase of $4,284 to pro forma 1998 net
income. To better understand historical EBITDA in relation to pro forma
EBITDA for the periods presented, we believe it may be useful to add back
this rent expense to reported EBITDA for the historical periods.

PCA's EBITDA is included in this prospectus because it is a financial
measure used by PCA's management to assess the company's operating results
and liquidity, and because several of the indebtedness covenants in PCA's
senior credit facility and in the notes indenture are based upon a
calculation that utilizes EBITDA.

PCA understands that EBITDA as used herein is not necessarily comparable to
other similarly titled captions of other companies due to potential
inconsistencies in the method of calculation.

In analyzing 1998 pro forma EBITDA for liquidity purposes, PCA also believes
that the following additional adjustments should be considered by investors:

<TABLE>
<S> <C>
Pro forma EBITDA for 1998...................................................... $ 310,901
Adjustments:
Other income(a).............................................................. (41,592)
Non-recurring restructuring charge(b)........................................ 14,385
Reduction in corporate overhead(c)........................................... 32,954
Cost savings from restructuring(d)........................................... 10,800
---------
Adjusted pro forma EBITDA for 1998............................................. $ 327,448
---------
---------
</TABLE>

34
<PAGE>
NOTES TO SELECTED FINANCIAL AND OTHER DATA (CONTINUED)

(DOLLARS IN THOUSANDS)

(a) Other income for 1998 consists substantially of nonrecurring items,
such as gains on the sale of non-strategic woodlands and a recycled
paperboard joint venture investment, that PCA believes are not
relevant in analyzing recurring EBITDA.

(b) During 1998, TPI adopted a restructuring plan to eliminate
approximately 100 personnel and close down four facilities associated
with the Group's business. As of December 31, 1998, substantially all
actions specified in the plan had been completed. A charge of $14,385
was recorded for severance benefits, exit costs and asset
impairments, and is reflected in the Group's 1998 operating profit.
PCA believes that this non-recurring charge is not relevant in
analyzing recurring EBITDA.

(c) As part of Tenneco, the Group was allocated $63,114 of Tenneco
corporate and TPI overhead expenses based on a variety of allocation
methods. In analyzing the carved-out business on a stand-alone basis,
PCA estimates that these costs will be approximately $30,160 for the
first year following the closing of the transactions. The
determination of that estimate is based on detailed analyses that
consider (1) compensation and benefits for TPI and new employees who
are employed by PCA in corporate functions such as in information
technology, human resources, finance and legal, and (2) non-payroll
costs incurred by these departments. Where applicable, the estimates
consider the terms of transition service arrangements between PCA and
TPI.

(d) The restructuring referred to in Note (b) above will result in
reduced cost of sales and selling and administrative expenses. This
adjustment represents the Group's estimate of the cost savings that
would have been achieved in 1998 if the restructuring had been in
effect for all of 1998.

2) There was no activity for PCA from January 25, 1999, its date of
inception, through April 11, 1999.

3) The corporate overhead allocation represents the amounts charged by
Tenneco and TPI to the Group for its share of Tenneco's and TPI's
corporate expenses. On a stand-alone basis, management estimates that
PCA's overhead expense will be $30,160 for the first twelve months
following the acquisition.

4) This line item consists of non-recurring charges recorded in the fourth
quarter of 1998 and first quarter of 1999 pertaining to a restructuring
charge and an impairment charge, respectively. For further information
about these charges, refer to Notes 7 and 14 to the Group's audited
combined financial statements and Note 7 to PCA's unaudited consolidated
financial statements.

5) Other income, net consists of nonrecurring items, the largest components
of which are as follows:

<TABLE>
<C> <S>
Fiscal year 1994 No individually significant items that are
considered non-recurring.
Fiscal year 1995 No individually significant items that are
considered non-recurring.
Fiscal year 1996 A $50,000 gain on the sale of recycled paperboard
mills.
Fiscal year 1997 A $37,730 gain on the refinancing of operating
leases.
</TABLE>

35
<PAGE>
NOTES TO SELECTED FINANCIAL AND OTHER DATA (CONTINUED)

(DOLLARS IN THOUSANDS)

<TABLE>
<C> <S>
Fiscal year 1998 A $16,944 gain on the sale of non-strategic
woodlands and a $15,060 gain on the sale of the
Caraustar recycled paperboard joint venture
interest.
Six months ended $15,060 gain on the sale of the Caraustar recycled
June 30, 1998 paperboard joint venture interest.
Six months ended No individually significant items that are
June 30, 1999 considered non-recurring.
</TABLE>

6) Working capital represents (a) total current assets excluding cash and
cash equivalents less (b) total current liabilities excluding the
current maturities of long-term debt.

7) Total long-term obligations include long-term debt, the current
maturities of long-term debt and redeemable preferred stock. The amount
excludes amounts due to TPI or other Tenneco affiliates as part of the
Group's interdivision account or other financing arrangement.

8) Represents the Group's interdivision account with TPI for the historical
period through April 11, 1999.

9) Earnings per share through April 11, 1999 has been calculated using the
historical earnings of the Group and the number of common shares
resulting from the closing of the acquisition on April 12, 1999
( common shares). For the PCA historical period from April 12,
1999 to June 30, 1999, earnings available to common stockholders
includes a reduction for $2,749 of preferred stock dividends. For both
pro forma periods, there is no reduction for preferred dividends because
the preferred stock redemption to be completed using proceeds from the
offerings is treated as if it occurred at the beginning of 1998.

For all periods presented through April 11, 1999, basic and diluted
earnings per share are the same because there are no potentially dilutive
other securities. For the PCA historical period from April 12, 1999 to
June 30, 1999 and both pro forma periods, diluted earnings per share
includes the dilutive effect of the options granted in June
1999. This dilutive effect is calculated using the treasury stock method
and the expected initial public offering price.

36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion of historical results of operations and financial
condition should be read in conjunction with the audited financial statements
and the notes thereto which appear elsewhere in this prospectus.

OVERVIEW

In connection with the transactions, PCA acquired The Containerboard Group
of TPI, which consisted of its containerboard and corrugated packaging products
business and which we refer to in this prospectus as the Group. Since its
formation in January 1999 and through the closing of the acquisition on April
12, 1999, PCA did not have any significant operations. Accordingly, the
historical financial results described below are those of the Group.

The Group has historically operated as a division of TPI, and has not
historically operated as a separate, stand-alone entity. As a result, the
historical financial information included in this prospectus does not
necessarily reflect what the Group's financial position and results of
operations would have been had the Group been operated as a separate,
stand-alone entity during the periods presented.

As a division of TPI, the Group was allocated corporate overhead expenses in
the amounts of $50.5 million, $61.3 million and $63.1 million for the years
ended December 31, 1996, 1997 and 1998, respectively. These expenses were
allocated to the Group based upon the relative level of effort and time spent on
Group activities by the Tenneco affiliates. This was generally measured using a
formula based upon the Group's percentage of Tenneco's total fixed assets,
revenues and payroll. PCA estimates that these expenses will be approximately
$30.2 million on a stand-alone basis for the first twelve months following the
acquisition, based on detailed analyses of compensation benefits for employees
who are now employed by PCA as a result of the acquisition and related
non-payroll costs incurred after the acquisition. In addition, future operating
results are expected to be affected by changes in depreciation and amortization
expense related to impaired assets, elimination of certain lease financing costs
and intercompany transactions with affiliates of Tenneco, and other items
resulting from the acquisition. See "Unaudited Pro Forma Financial Information"
included elsewhere in this prospectus. We cannot assure you that we will be able
to realize all of the benefits we expect as a stand-alone entity.

The acquisition was accounted for using historical values for the
contributed assets. Purchase accounting was not applied because, under the
applicable accounting guidance, a change of control was deemed not to have
occurred as a result of the participating veto rights held by TPI after the
closing of the transactions under the terms of the stockholders agreement.

GENERAL

The market for containerboard is highly cyclical. Historically, prices for
containerboard have reflected changes in containerboard supply that result from
capacity additions and reductions, as well as changes in inventory levels.

Containerboard demand is dependent upon both domestic demand for corrugated
packaging products and linerboard export activity. Domestic demand for
corrugated packaging products is the more stable factor. It generally
corresponds to changes in the rate of growth in the U.S. economy. Exports
represent about 20% of total linerboard shipments.

From 1994 to 1996, capacity additions outpaced both domestic and export
demand for containerboard. This excess supply led to lower industry operating
rates and declining prices from

37
<PAGE>
late-1995 until mid-1997. Although prices generally improved from mid-1997
through mid-1998, the containerboard market was adversely affected by weaker
containerboard exports. This weakness was most apparent in shipments to Asia in
the second half of 1998, which resulted in lower prices.

While export shipments for the first six months of 1999 continued to be
lower than the first six months of 1998, the supply/demand balance has improved
in recent months, and the average price of linerboard has risen approximately
25% since January 1999. However, industry oversupply conditions could return or
economic conditions could deteriorate in the future.

In recent months, several major containerboard manufacturers have announced
production curtailments and mill shutdowns, and only minimal capacity additions
have been publicly announced through 2001 according to the American Forest &
Paper Association.

Pulp & Paper Week, an industry publication, reported in its July 1999 update
that major containerboard producers had implemented average price increases for
kraft linerboard and corrugating medium of $38 and $50 per ton, respectively.
According to Pulp & Paper Week, after giving effect to the price increases,
average prices in July 1999 for linerboard and corrugating medium were 13% and
25% higher, respectively, than July 1998 prices. Pulp & Paper Week also reported
in its July 1999 update that almost all integrated and independent box
converters have announced price increases for corrugated products of 10% to 13%
beginning in August 1999.

RESULTS OF OPERATIONS

The historical results of operations of the Group and PCA are set forth
below:

<TABLE>
<CAPTION>
GROUP PCA
------------------------------------------------------------------- --------------------------------
FOR THE FOR THE FOR THE
FOR THE YEAR ENDED FOR THE PERIOD FROM PERIOD FROM PRO FORMA
DECEMBER 31, SIX MONTHS JANUARY 1, 1999 APRIL 12, 1999 SIX MONTHS
------------------------------- ENDED THROUGH THROUGH ENDED
1996 1997 1998 JUNE 30, 1998 APRIL 11, 1999 JUNE 30, 1999 JUNE 30, 1999
--------- --------- --------- --------------- ----------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $ 1,582.2 $ 1,411.4 $ 1,571.0 $ 777.0 $ 433.2 $ 373.0 $ 806.2
--------- --------- --------- ------- ------- ------- -------
--------- --------- --------- ------- ------- ------- -------
Operating Income
(Loss)................ $ 155.3 $ 49.8 $ 121.7 $ 79.0 $ (212.1) $ 45.4 $ 71.3
Interest Expense........ (5.1) (3.7) (2.8) (1.7) (0.2) (34.1) (78.2)
Income (Loss) Before
Taxes and
Extraordinary Item.... 150.2 46.1 118.9 77.3 (212.3) 11.3 (6.9)
Provision for Income
Taxes................. (59.8) (18.7) (47.5) (30.8) 83.7 (4.5) 2.5
--------- --------- --------- ------- ------- ------- -------
Income (Loss) Before
Extraordinary Item.... $ 90.4 $ 27.4 $ 71.4 $ 46.5 $ (128.6) $ 6.8 $ (4.3)
--------- --------- --------- ------- ------- ------- -------
Extraordinary Item...... -- -- -- -- (6.3) -- --
--------- --------- --------- ------- ------- ------- -------
Net Income (Loss)....... $ 90.4 $ 27.4 $ 71.4 $ 46.5 $ (134.9) $ 6.8 $ (4.3)
--------- --------- --------- ------- ------- ------- -------
--------- --------- --------- ------- ------- ------- -------
</TABLE>

38
<PAGE>
Operating income included several significant unusual or non-recurring items
for each of the periods presented. Excluding these items, operating income would
have been as follows:
<TABLE>
<CAPTION>
GROUP PCA
------------------------------------------------------------------- -----------------
FOR THE FOR THE
FOR THE YEAR ENDED FOR THE PERIOD FROM PERIOD FROM
DECEMBER 31, SIX MONTHS JANUARY 1, 1999 APRIL 12, 1999
------------------------------- ENDED THROUGH THROUGH
1996 1997 1998 JUNE 30, 1998 APRIL 11, 1999 JUNE 30, 1999
--------- --------- --------- --------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Operating Income (Loss) as
Reported................ $ 155.3 $ 49.8 $ 121.7 $ 79.0 $ (212.1) $ 45.4
Recycled Paperboard Mills
Divestiture
Divestiture Gain (1).... (50.0) -- (15.1) (15.1) -- --
Earnings................ (4.0) -- -- -- -- --
Joint Venture Income
(1)................... (0.6) (1.7) (0.3) (0.3) -- --

Non-Strategic Woodlands
Divestitures (1)........ -- (4.4) (16.9) -- -- --
Mill Lease Refinancing
(1)..................... -- (37.7) -- -- -- --
Restructuring Charge...... -- -- 14.4 -- -- --
Impairment Charge......... -- -- -- -- 230.1 --
--------- --------- --------- ------ ------- -----
Adjusted Operating
Income.................. $ 100.7 $ 6.0 $ 103.8 $ 63.6 $ 18.0 $ 45.4
--------- --------- --------- ------ ------- -----
--------- --------- --------- ------ ------- -----

FOR THE
PRO FORMA
SIX MONTHS
ENDED
JUNE 30, 1999
-----------------

<S> <C>
Operating Income (Loss) as
Reported................ $ 71.3
Recycled Paperboard Mills
Divestiture
Divestiture Gain (1).... --
Earnings................ --
Joint Venture Income
(1)................... --
Non-Strategic Woodlands
Divestitures (1)........ --
Mill Lease Refinancing
(1)..................... --
Restructuring Charge...... --
Impairment Charge......... --
-----
Adjusted Operating
Income.................. $ 71.3
-----
-----
</TABLE>

- ------------------

(1) Included in other income as part of the audited financial statements.

RECYCLED PAPERBOARD MILLS DIVESTITURE

In 1996, the Group sold two recycled paperboard mills, located in Rittman,
Ohio and Tama, Iowa, and a recycling center and brokerage operation to a joint
venture with Caraustar Industries. The Group received cash and a 20 percent
interest in the joint venture and recognized a gain of $50.0 million in the
second quarter as a result of the transaction.

Operating income for the recycled paperboard business reported in 1996
before the formation of the joint venture was approximately $4.0 million.

In 1998, the Group divested its 20 percent interest in the joint venture
with Caraustar and recognized a $15.1 million gain in the second quarter on the
divestiture.

The Group's share of operating income from the joint venture was $0.6
million, $1.7 million and $0.3 million, respectively, for the years ended
December 31, 1996, 1997 and 1998.

NON-STRATEGIC WOODLANDS DIVESTITURES

In the third quarter of 1998, the Group recognized a $16.9 million gain on
the sale of approximately 18,500 acres of woodlands used as a fiber source for
the Counce mill. These woodlands were not considered a strategic fiber source
for the Counce operation.

In the third quarter of 1997, the Group recognized a $4.4 million gain on
the sale of non-strategic woodlands known as the Willow Flowage property located
near the Tomahawk mill.

MILL LEASE REFINANCING

On January 31, 1997, TPI entered into an operating lease agreement with
Credit Suisse Leasing 92A, L.P., as lessor, and a group of financial
institutions led by Citibank, N.A., as agent. The agreement refinanced previous
operating leases between General Electric Credit Corporation and

39
<PAGE>
TPI, which were entered into at the same time as General Electric Credit's
purchase of certain assets from Georgia-Pacific Corporation in January 1991.
Through this refinancing, several capital lease obligations were extinguished as
the assets were incorporated into the new operating lease. In connection with
this refinancing, certain fixed assets and deferred credits were eliminated,
resulting in a net gain recognized in the first quarter of 1997 of approximately
$37.7 million.

RESTRUCTURING CHARGE

In the fourth quarter of 1998, the Group recorded a pre-tax restructuring
charge of $14.4 million. This charge was recorded following the approval by
Tenneco's board of directors of a comprehensive restructuring plan for all of
Tenneco's operations, including those of the Group. In connection with this
restructuring plan, the Group has or will eliminate a total of 109 positions,
including the closing of four converting facilities. The following table
reflects the components of this charge:
<TABLE>
<CAPTION>
FIRST AND SECOND TPI
RESTRUCTURING FOURTH QUARTER DECEMBER 31, 1998 QUARTER 1999 BALANCE
CHARGE 1998 ACTIVITY BALANCE ACTIVITY(1) RETAINED
--------------- --------------- ----------------- ----------------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cash Charges:
Severance................... $ 5.1 $ (0.8) $ 4.3 $ (2.0) $ (1.9)
Facility Exit Costs and
Other..................... 3.1 (0.4) 2.6 (0.6) --
----- ----- --- ----- -----
Total Cash Charges.......... 8.2 (1.2) 6.9 (2.6) (1.9)

Non-cash Charges:
Asset Impairments........... 6.2 (3.9) 2.4 (1.7) --
----- ----- --- ----- -----
$ 14.4 $(5.1) $9.3 $(4.3 ) $(1.9)
----- ----- --- ----- -----
----- ----- --- ----- -----

JUNE 30, 1999
PCA BALANCE
-----------------

<S> <C>
Cash Charges:
Severance................... $ 0.4
Facility Exit Costs and
Other..................... 2.0
---
Total Cash Charges.......... 2.4
Non-cash Charges:
Asset Impairments........... 0.7
---
$ 3.1
---
---
</TABLE>

- ----------------

(1) Includes activity for both the Group (January 1, 1999 through April 11,
1999) and PCA (April 12, 1999 through June 30, 1999).

The fixed assets at the closed facilities were written down to their
estimated fair value. No significant cash proceeds are expected from the
ultimate disposal of these assets. Of the $2.4 million remaining cash charges at
June 30, 1999, approximately $1.4 million is expected to be spent in the second
half of 1999.

IMPAIRMENT CHARGE

As a result of the transactions, the Group recorded a non-cash impairment
charge of $230.1 million in the first quarter of 1999, which is described in
Note 14 of the Group's audited combined financial statements and Note 7 of PCA's
unaudited consolidated financial statements.

EXTRAORDINARY LOSS

During the first quarter of 1999, the Group extinguished $16.6 million of
debt incurred to finance a boiler at the Counce mill. In connection with that
extinguishment, an extraordinary loss of $10.5 million was recorded, which was
$6.3 million net of the related tax effect.

40
<PAGE>
PRO FORMA SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO REPORTED SIX MONTHS ENDED
JUNE 30, 1998

NET SALES

Net sales increased by $29.2 million, or 3.8%, for the pro forma six months
ended June 30, 1999 from the comparable period in 1998. The increase was the
result of increased sales volume of both corrugated products and containerboard,
partially offset by lower prices for both corrugated products and
containerboard.

Average prices for corrugated products decreased by 3.6% for the pro forma
six months ended June 30, 1999 from the comparable period in 1998, while
corrugated products volume increased by 9.6%, from 12.1 billion square feet in
1998 to 13.3 billion square feet in 1999.

Average containerboard prices for third party sales decreased by 6.7% for
the pro forma six months ended June 30, 1999 from the comparable period in 1998,
while volume to external domestic and export customers increased 7.5%, to
264,030 tons in 1999 from 245,657 tons in 1998.

According to Pulp & Paper Week, an industry publication, average linerboard
and semi-chemical medium prices for 42 lb. Liner-East and 26 lb. Medium-East,
which are representative benchmark grades, were $378 and $322, respectively, per
ton in the first six months of 1999. This compares to $388 and $337,
respectively, per ton in the first six months of 1998. According to the Fibre
Box Association, average sales prices for corrugated products decreased by 3.2%
in the first six months of 1999 from the first six months of 1998.

INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES AND EXTRAORDINARY ITEM
(OPERATING INCOME)

Adjusted operating income increased by $7.7 million, or 12.1%, for the pro
forma six months ended June 30, 1999 from the comparable period in 1998.

Gross profit decreased $2.0 million, or 1.3%, for the pro forma six months
ended June 30, 1999 from the comparable period in 1998. Gross profit as a
percentage of sales declined from 19.0% of sales in the first six months of 1998
to 18.1% of sales in the pro forma first six months of 1999, primarily due to
the price decreases for corrugated products and containerboard described above.

Selling and administrative expenses increased by $1.9 million, or 3.6%, for
the pro forma six months ended June 30, 1999 from the comparable period in 1998,
primarily as a result of increased sales commissions and Year 2000 remediation
expenses.

Corporate overhead for the pro forma six months ended June 30, 1999
decreased by $12.3 million, or 38.0%, primarily reflecting a full six months of
TPI overhead allocations in 1998 compared to approximately three and one-half
months of TPI overhead allocations in 1999.

INTEREST EXPENSE AND INCOME TAXES

Interest expense increased by $76.5 million, or 4,551.7%, for the pro forma
six months ended June 30, 1999 from the comparable period in 1998, primarily due
to interest expense related to the senior credit facility term loans and senior
subordinated notes utilized to finance the transactions.

The Group's effective tax rate was 36.9% for the pro forma six months ended
June 30, 1999 and 39.9% for the comparable period in 1998. The tax rate was
higher than the federal statutory rate of 35% due to state income taxes.

41
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

NET SALES

Net sales increased by $159.6 million, or 11.3%, from 1997 to 1998. The
increase was primarily the result of increases in prices for both corrugated
products and containerboard and, to a lesser extent, increases in shipments of
corrugated products.

Average prices for corrugated products increased by 7.0% in 1998 from 1997,
while corrugated volume increased by 4.6% in 1998, from 23.9 billion square feet
in 1997 to 25.0 billion square feet in 1998.

Average containerboard prices for external third party sales increased by
11.7% in 1998 from 1997, while volume to external domestic and export customers
decreased 8.4%, to 527,000 tons in 1998 from 575,000 tons in 1997.

According to Pulp & Paper Week, an industry publication, average linerboard
and semi-chemical medium prices for 42 lb. Liner-East and 26 lb. Medium-East,
which are representative benchmark grades, were $373 and $315, respectively, per
ton in 1998. This compares to $333 and $268, respectively, per ton in 1997.
According to the Fibre Box Association, average sale prices for corrugated
products increased by 4.0% in 1998 from 1997.

INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES (OPERATING INCOME)

Adjusted operating income increased by $97.8 million, or 1,630.0%, from 1997
to 1998 as a result of both higher sales prices and sales volumes, which
primarily contributed to the gross margin improvement of $112.0 million, or
66.1%.

Gross margins improved from 12.0% of sales in 1997 to 17.9% of sales in
1998, primarily due to the price increases described above. These price
increases were partially offset by a higher level of depreciation attributable
to the Group's capital expenditure program and to higher costs incurred as a
result of changes in product mix.

Selling and administrative expenses increased by $6.1 million, or 5.9%, from
1997 to 1998, primarily as a result of costs incurred to support the increased
focus on graphics design and other value added product services in corrugated
products.

Corporate allocations increased by $1.8 million, or 2.9%, primarily as a
result of the Group's increased use of the Tenneco shared services center
located in The Woodlands, Texas.

INTEREST EXPENSE AND INCOME TAXES

The Group's interest expense for 1998 and 1997 primarily related to the cost
of debt incurred to finance a boiler at the Counce mill. The interest expense
declined by approximately $1.0 million, or 25.6%, in 1998, as a portion of this
debt was retired during the year.

The Group's effective tax rate was 40.0% in 1998 and 40.6% in 1997. The tax
rate is higher than the federal statutory rate of 35% due to state income taxes.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

NET SALES

Net sales decreased by $170.8 million, or 10.8%, from 1996 to 1997.
Approximately $48.3 million of the decrease was the result of the divestiture in
June 1996 of two recycled paperboard mills. The balance of the decrease was
primarily the result of decreases in prices for both

42
<PAGE>
corrugated products and containerboard, partially offset by increases in
shipments of corrugated products and containerboard to external third parties.

Average prices for corrugated products decreased by 7.8% in 1997 from 1996,
while corrugated volume increased by 1.3% in 1997 from 23.6 billion square feet
in 1996 to 23.9 billion square feet in 1997.

Average containerboard prices for external third party sales decreased by
10.2% in 1997 from 1996, while volume to external domestic and export customers
increased 30.4%, to 575,000 tons in 1997 from 441,000 tons in 1996.

According to Pulp & Paper Week, average linerboard and semi-chemical medium
prices for 42 lb. Liner-East and 26 lb. Medium-East, which are representative
benchmark grades, were $333 and $268, respectively, per ton in 1997. This
compares to $382 and $315, respectively, per ton in 1996. According to the Fibre
Box Association, average sale prices for corrugated products decreased by 10.3%
in 1997 from 1996.

INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES (OPERATING INCOME)

Excluding a one-time $50.0 million gain and $4.6 million of income from
recycled paperboard mill operations in 1996, adjusted operating income declined
$94.7 million, or 94.0% from 1996 to 1997. This decline was primarily the result
of the lower pricing described above, partially offset by variable cost
reductions at the mills resulting in a net decline in gross profit of $75.4
million, or 30.8%.

These factors, combined with the impact of the 1996 divestiture of the
recycled paperboard mills, contributed to a decline in gross margins from 15.5%
in 1996 to 12.0% in 1997.

Selling and administrative expenses increased by $7.6 million, or 8.0%, from
1996 to 1997. This increase was primarily the result of greater expenses
incurred to increase the number of sales and design personnel for the corrugated
products business.

Corporate allocations increased by $10.9 million, or 21.6%, from 1996 to
1997. The increase was the result of an overall increase in TPI's overhead, and
consequently higher allocations to the Group.

INTEREST EXPENSE AND INCOME TAXES

The Group's interest expense declined by $1.4 million, or 27.1%, from 1996
to 1997, primarily as a result of the termination of capital leases that were
extinguished when the new mill operating lease agreement was entered into in
January 1997.

The Group's effective tax was 40.6% in 1997 and 39.8% in 1996. The tax rate
was higher than the federal statutory rate of 35% due to state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

HISTORICAL

As a division of TPI, the Group did not maintain separate cash accounts
other than for petty cash. The Group's disbursements for payroll, capital
projects, operating supplies and expenses were processed and funded by TPI
through centrally managed accounts. In addition, cash receipts from the
collection of accounts receivable and the sales of assets were remitted directly
to bank accounts controlled by TPI.

Because of TPI's centrally managed cash system, in which the cash receipts
and disbursements of TPI's various divisions were commingled, it was not
feasible to segregate cash

43
<PAGE>
received from TPI, such as financing for the business, from cash transmitted to
TPI, such as a distribution. Accordingly, the net effect of these cash
transactions with TPI is represented as a single line item within the financing
section of the statement of cash flows. Similarly, the activity of the
interdivision account presents the net transfer of funds and charges between TPI
and the Group as a single line item.

Effective April 12, 1999, PCA maintains its own cash accounts.

The following table sets forth the Group's cash flows for the periods shown:

<TABLE>
<CAPTION>
GROUP PCA
------------------------------------------------------------------ --------------------------------
FOR THE
FOR THE YEAR ENDED FOR THE FOR THE PERIOD FOR THE PERIOD PRO FORMA
DECEMBER 31, SIX MONTHS JANUARY 1, 1999 APRIL 12, 1999 SIX MONTHS
------------------------------- ENDED THROUGH THROUGH ENDED
1996 1997 1998 JUNE 30, 1998 APRIL 11, 1999 JUNE 30, 1999 JUNE 30, 1999
--------- --------- --------- --------------- ---------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
CASH PROVIDED (USED) BY:
Operating Activities...... $ 55.8 $ 107.2 $ 195.4 $ 103.8 $ 153.6 $ 147.6 $ 154.6
Investing Activities...... (74.2) (111.9) (177.7) (51.8) (1,121.1) (26.0) (45.8)
Financing Activities...... 16.8 3.7 (17.7) (52.0) 967.5 (74.7) (83.4)
--------- --------- --------- ------- ---------------- ------- -------
Net Cash Change........... $ (1.6) $ (1.0) $ -- $ -- $ -- $ 46.9 $ 25.4
--------- --------- --------- ------- ---------------- ------- -------
--------- --------- --------- ------- ---------------- ------- -------
</TABLE>

OPERATING ACTIVITIES

Cash flow provided by operating activities increased $50.8 million, or
48.9%, for the six months ended June 30, 1999 from the comparable period in
1998. The increase was primarily due to increases in depreciation, depletion and
amortization and reduced working capital.

Cash flow provided by operating activities increased by $88.2 million, or
82.3%, from 1997 to 1998. The increase was due primarily to higher net income of
$44.0 million, collection of a higher level of receivables and increased
non-cash charges for restructuring and depreciation.

Cash provided by operating activities increased by $51.4 million, or 91.9%,
from 1996 to 1997. The lower net income of $63.0 million resulting from lower
pricing was more than offset by a deferred tax increase of $76.8 million
resulting from accelerated depreciation on tax owned assets and higher
depreciation, depletion and amortization.

INVESTING ACTIVITIES

Net cash used for investing activities decreased $6.0 million, or 11.7%, for
the pro forma six months ended June 30, 1999 from the comparable period in 1998,
primarily as a result of lower capital expenditures.

Cash used for investing activities increased by $65.8 million, or 58.9%,
from 1997 to 1998. The increase was primarily attributable to a prepaid lease
payment made in late-December 1998 of $84.2 million to acquire timberland as
part of the Lease Buy-out. Proceeds from assets sales were $15.8 million higher
in 1998, due to the 1998 timberland sale transaction previously described.
During 1997 and 1998, additions to property, plant and equipment totaled $110.2
million and $103.4 million, respectively.

Net cash used for investing activities increased by $37.7 million, or 50.7%,
from 1996 to 1997. During 1996 and 1997, additions to property, plant and
equipment totaled $168.6 million and $110.2 million, respectively. The higher
level of capital expenditures in 1996 was attributable to the rebuild of a
machine at the Counce mill, for which a total of $78.4 million in capital
expenditures was spent, with the majority of the spending occurring in 1996.
Included in the 1996 investing

44
<PAGE>
activities are $122.7 million of proceeds from disposals compared to $10.5
million in 1997. The proceeds from disposals were primarily related to the sale
of the 80% interest in the recycled paperboard assets to Caraustar Industries.
Cash expended for other long-term assets decreased $16.5 million, primarily due
to lower cash funding of pension assets.

As of June 30, 1999, PCA had commitments for capital expenditures of $62.4
million. PCA believes operating cash flow from continuing operations will be
sufficient to fund these commitments.

FINANCING ACTIVITIES

Cash used for financing activities increased $31.4 million, or 60.4%, for
the pro forma six months ended June 30, 1999 from the comparable period in 1998.
The increase was primarily attributable to the transactions.

Cash provided by financing activities decreased by $21.4 million, or 584.6%,
from 1997 to 1998, primarily reflecting the change in the net transfer of funds
between the Group and TPI. The Group also retired $10.3 million of debt during
1998, which related to the financing of a boiler at the Counce mill.

Cash provided by financing activities decreased by $13.1 million, or 78.3%,
from 1996 to 1997, primarily due to changes in the net transfer of funds between
the Group and TPI.

AFTER THE TRANSACTIONS

Following the transactions, PCA's primary sources of liquidity are cash flow
from operations and borrowings under PCA's new revolving credit facility. PCA's
primary uses of cash are for debt service and capital expenditures. PCA expects
to be able to fund its debt service and capital expenditures from these sources.

PCA incurred substantial indebtedness in connection with the transactions.
On April 12, 1999, PCA had approximately $1.769 billion of indebtedness
outstanding as compared to historical indebtedness outstanding of approximately
$0.5 million. PCA's significant debt service obligations following the
transactions could have material consequences to PCA's securityholders,
including holders of common stock. See "Risk Factors."

Concurrently with the transactions, PCA issued the notes and preferred stock
and entered into the senior credit facility. The senior credit facility provides
for three term loans in an aggregate amount of $1.21 billion and a revolving
credit facility with up to $250.0 million in availability. Upon the closing of
the acquisition, PCA borrowed the full amount available under the term loans and
$9.0 million under the revolving credit facility. The following table provides
the interest rate as of June 30, 1999 for each of the term loans and the
revolving credit facility:

<TABLE>
<CAPTION>
BORROWING ARRANGEMENT INTEREST RATE
- ------------------------------------------------------------- -----------------
<S> <C>
Term Loan A.................................................. 7.75%
Term Loan B.................................................. 8.25%
Term Loan C.................................................. 8.50%
Revolver
Revolver--Eurodollar....................................... 7.75%
Revolver--Base Rate........................................ 9.50%
</TABLE>

The borrowings under the revolving credit facility are available to fund
PCA's working capital requirements, capital expenditures and other general
corporate purposes. The Term Loan A must be repaid in quarterly installments
from September 1999 through 2005. The Term Loan B must be

45
<PAGE>
repaid in quarterly installments from September 1999 through 2007. The Term Loan
C must be repaid in quarterly installments from September 1999 through 2008. The
revolving credit facility will terminate in 2005. See "Description of Certain
Indebtedness."

On May 18, 1999, PCA prepaid $75.0 million on the term loans using excess
cash. In addition, PCA repaid the $9.0 million drawn on the revolver using
excess cash. On July 15, 1999, PCA prepaid an additional $10.0 million on the
term loans using excess cash.

The instruments governing PCA's indebtedness and the preferred stock,
including the senior credit facility, the indenture governing the notes and the
certificate of designation governing the preferred stock, contain financial and
other covenants that restrict, among other things, the ability of PCA and its
subsidiaries to:

- incur additional indebtedness,

- pay dividends or make certain other restricted payments,

- consummate certain asset sales,

- incur liens,

- enter into certain transactions with affiliates, or

- merge or consolidate with any other person or sell or otherwise dispose of
all or substantially all of the assets of PCA.

These limitations, together with the highly leveraged nature of PCA, could
limit corporate and operating activities. See "Risk Factors--Company
Risks--Leverage."

PCA intends to use the net proceeds received by it from the offerings to
redeem all of the outstanding shares of preferred stock at an aggregate
redemption price of approximately $120 million, assuming that the preferred
stock is redeemed on or about November 1, 1999.

PCA estimates that it will make approximately $118 million in capital
expenditures in 1999. These expenditures will be used primarily for cost
reduction, business growth, maintenance and environmental and other regulatory
compliance.

As previously announced, PCA plans to sell a significant portion of its
800,000 acres of owned timberland. In August 1999, PCA signed purchase and sales
agreements with various buyers to sell approximately 400,000 acres of
timberland. PCA expects to close these transactions by the end of the third
quarter of 1999. The net proceeds of these sales, if any, would be used to
reduce borrowings under the senior credit facility. PCA is permitted under the
terms of the senior credit facility and the indenture governing the notes to use
net proceeds in excess of $500.0 million, if any, to redeem up to $192.5 million
of the notes, or to pay a dividend on or repurchase its equity interests. PCA
may use the net proceeds of a timberland sale to redeem not more than 35% of the
aggregate principal amount of notes issued and outstanding under the notes
indenture, excluding notes held by PCA and its subsidiaries.

PCA must make the redemption within 60 days of the timberland sale and must
pay a redemption price equal to 109.625% of the principal amount of notes to be
redeemed plus accrued and unpaid interest and liquidated damages, if any, to the
date of redemption.

PCA may only use the net proceeds of a timberland sale to pay a dividend or
repurchase its equity interests if PCA's debt to cash flow ratio at the time of
payment or repurchase, after giving effect to the payment or repurchase, the
application of the proceeds of the timberland sale, and any increase in fiber,
stumpage or similar costs as a result of the timberland sale, would be no
greater than 4.5 to 1 and PCA's debt and preferred stock to cash flow ratio no
greater than 5.0 to 1. The

46
<PAGE>
senior credit facility imposes similar restrictions on the ability of PCA to use
the net proceeds of a timberland sale to make these payments or repurchases.

PCA believes that cash generated from operations will be adequate to meet
its anticipated debt service requirements, capital expenditures and working
capital needs for the next 12 months, and that cash generated from operations
and amounts available under the revolving credit facility will be adequate to
meet its anticipated debt service requirements, capital expenditures and working
capital needs for the foreseeable future. There can be no assurance, however,
that PCA's business will generate sufficient cash flow from operations or that
future borrowings will be available under the senior credit facility or
otherwise to enable it to service its indebtedness, including the senior credit
facility and the notes, to retire or redeem the notes when required or to make
anticipated capital expenditures. PCA's future operating performance and its
ability to service or refinance the notes and to service, extend or refinance
the senior credit facility will be subject to future economic conditions and to
financial, business and other factors, many of which are beyond PCA's control.
See "Risk Factors."

ENVIRONMENTAL MATTERS

We are subject to, and must comply with, a variety of federal, state and
local environmental laws, particularly those relating to air and water quality,
waste disposal and the cleanup of contaminated soil and groundwater. Because
environmental regulations are constantly evolving, we have incurred, and will
continue to incur, costs to maintain compliance with those laws. In particular,
the United States Environmental Protection Agency recently finalized the Cluster
Rules which govern pulp and paper mill operations, including those at the
Counce, Filer City, Valdosta and Tomahawk mills. Over the next several years,
the Cluster Rules will affect our allowable discharges of air and water
pollutants, and require us to spend money to ensure compliance with those new
rules.

As is the case with any industrial operation, we have, in the past, incurred
costs associated with the remediation of soil or groundwater contamination, as
required by the federal Comprehensive Environmental Response, Compensation and
Liability Act, commonly known as the federal "Superfund" law, and analogous
state laws. Cleanup requirements arise with respect to properties we currently
own or operate, former facilities and off-site facilities where we have disposed
of hazardous substances. Because liability under these laws is strict, meaning
that liability is imposed without fault, joint and several, meaning that
liability is imposed on each party without regard to contribution, and
retroactive, we could receive notifications of cleanup liability in the future
and this liability could be material. Under the terms of the contribution,
agreement, TPI has agreed to retain all liability for all former facilities and
all sites associated with pre-closing off-site waste disposal. TPI has also
retained environmentally impaired real property in Filer City, Michigan
unrelated to current mill operations.

YEAR 2000 ISSUE

YEAR 2000 ISSUE. Year 2000 issues address the ability of electronic
processing equipment to process date sensitive information and recognize the
last two digits of a date as occurring in or after the year 2000. Many of our
computer software and hardware systems, and some of our non-information
technology infrastructure and manufacturing equipment, that utilize
date-sensitive data, were structured to use a two-digit data field. As a result,
these IT and non-IT systems will not be able to properly recognize dates in or
after the Year 2000. If we are unable to complete the remediation or replacement
of critical IT and non-IT systems in a timely manner, or if those with whom we
conduct business are unsuccessful in implementing timely solutions, Year 2000
issues could have a material adverse effect on our results of operations.

47
<PAGE>
YEAR 2000 PROGRAM. Our predecessor, TPI, created a Year 2000 management
team in June of 1998 to address the Year 2000 issue. The Year 2000 program,
started by TPI and continued by PCA, involves three primary phases:

- identifying and testing all information technology systems and all
non-information technology infrastructure and equipment that have a
potential Year 2000 issue;

- remediating or replacing all non-compliant systems and equipment; and

- testing all remediated or replaced systems and equipment.

In addition, our Year 2000 efforts have involved assessing and monitoring
the Year 2000 readiness of our major suppliers and vendors, responding to
customer inquiries regarding our state of readiness, tracking Year 2000 related
expenditures and developing contingency or continuity plans.

STATE OF READINESS. PCA has completed the initial phase of identifying
non-compliant systems and has substantially completed the final two phases of
its program, namely the remediation or replacement of non-compliant systems and
the testing of those systems. As of June 30, 1999:

- we had completed 95% of programming, remediation, replacement and testing
of non-compliant IT systems;

- all of our corrugated products and mill manufacturing equipment process
control systems had been upgraded, if necessary, and were Year 2000
compliant; and

- all of our corrugated products and mill non-IT infrastructure components,
such as elevators, telephones, security systems, and heating, ventilation
and air conditioning had been remediated, where necessary, and were Year
2000 compliant.

We expect to conclude the programming, remediation, replacement and testing
of the remaining 5% of non-compliant IT systems by the end of 1999.

In addition, we have developed and are testing a standard purchasing,
accounts payable and maintenance tracking system for our mills. We have
installed this system in two mills and expect to have it installed in all
remaining mills. It is anticipated that all mills will be Year 2000 compliant by
the end of 1999. In conjunction with our Year 2000 project we have also
implemented new order entry, corrugator scheduling, converting scheduling, shop
floor manufacturing, shipping, inventory management and invoicing systems as
part of an overall modernization project for our corrugated products plants.

We have hired an external consultant to validate the results of our
assessment of our Year 2000 readiness. As of June 30, 1999, the consultant had
conducted a Year 2000 compliance audit of all of our mills and 90% of our
corrugated packaging plants. We expect the consultant to review the remaining
corrugated packaging plants in the third quarter of 1999. The consultant has not
identified any Year 2000 non-compliance issues.

In August 1998, we began identifying and surveying all of our major
suppliers. We completed an initial evaluation of all suppliers in June 1999 and
identified 13 suppliers that did not satisfy our Year 2000 compliance
guidelines. As a contingency plan, we have identified alternative supply sources
and alternative manufacturing locations to minimize the potential impact on our
plants. We have not attempted to evaluate the Year 2000 compliance of our
customers because we do not think it is practical to do so.

YEAR 2000 COSTS. Based on current estimates, we expect to incur costs of
approximately $5 million to address Year 2000 issues, of which $3.5 million had
been paid as of June 30, 1999.

48
<PAGE>
Approximately 20% to 30% of the remaining costs will be reimbursed by TPI under
a transition services agreement. We are expensing these costs as they are
incurred, except in instances where we determine that replacing existing
computer systems or equipment is more effective and efficient, particularly
where additional functionality is available.

YEAR 2000 RISKS. At this time, we believe we will be able to resolve our
own Year 2000 issues. However, it is possible that there will be unanticipated
problems with systems that we have renovated and tested. Further, although we
are monitoring the Year 2000 readiness of our major suppliers we cannot control
the outcome of their compliance efforts. The potential effect if we or third
parties with whom we do business are unable to timely resolve Year 2000 issues
is not determinable but we believe that our most reasonably likely Year 2000
worst case scenario would involve:

- short-term down time for some of our equipment as a result of process
control device malfunctions at our mills and corrugated products plants;

- temporary disruption of deliveries of supplies and products due to truck
shortages;

- a lack of supplies from the 13 vendors we have identified as not being
sufficiently prepared for the Year 2000; and

CONTINGENCY PLANNING. We have developed contingency plans to minimize the
impact of any Year 2000 problems. Each of our mills and corrugated packaging
plants has developed its own business continuity plan. Where practicable, we
have identified alternative methods to perform mission critical functions such
as order processing, shipping finished goods, production scheduling and ship
floor data control. We have also identified alternative suppliers and
alternative manufacturing sites to address potential supply problems. We are
creating an event management team, made up of individuals with various areas of
technological expertise. This team will be dedicated to identifying and
resolving any Year 2000 issues that arise between mid-December 1999 and
mid-January 2000.

IMPACT OF INFLATION

PCA does not believe that inflation has had a material impact on its
financial position or results of operations during the past three years.

MARKET RISK AND RISK MANAGEMENT POLICIES

Historically, PCA has not had any material market risk due to the fact that
its debt financing and risk management activities were conducted by TPI or
Tenneco. As a result of the transactions, PCA is exposed to the impact of
interest rate changes and changes in the market value of its financial
instruments. PCA periodically enters into derivatives in order to minimize these
risks, but not for trading purposes.

On March 5, 1999, PCA entered into an interest rate protection agreement
with J.P. Morgan Securities Inc. to lock in then current interest rates on
10-year U.S. Treasury notes. PCA entered into this agreement to protect it
against increases in the 10-year U.S. Treasury note rate, which served as a
reference in determining the interest rate applicable to the notes, which have a
comparable term. The agreement has a notional amount of $450.0 million and a
10-year U.S. Treasury note reference rate of 5.41%. As a result of a decrease in
the interest rate on 10-year U.S. Treasury notes, PCA was obligated to make a
single payment of approximately $8.4 million to

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J.P. Morgan Securities Inc. upon settlement of the agreement which was made on
the date of the closing of the notes offering.

Under the terms of the senior credit facility, PCA is required to maintain
for at least two years after the closing of the transactions interest rate
protection agreements establishing a fixed maximum interest rate with respect to
at least 50% of the outstanding term loans under the senior credit facility.

As a result, PCA has entered into three interest rate collar agreements
which protect against rising interest rates and simultaneously guarantee a
minimum interest rate. The notional amount of these collars is $720 million. The
weighted average floor of the interest rate collar agreements is 4.97% and the
weighted average ceiling of the interest rate collar agreements is 6.75%. The
interest rate on approximately 60% of PCA's term loan obligations at June 30,
1999 are capped. PCA receives payments under the collar agreements if the LIBOR
rate exceeds the ceiling. Correspondingly, PCA makes payments under the collar
agreements if the LIBOR rate goes below the floor. In both cases, the amount
received or paid is based on the notional amount and the difference between the
actual LIBOR rate and the ceiling or floor rate. The weighted average duration
of the interest rate collar agreements is approximately four years.

PCA's earnings are affected by changes in short-term interest rates as a
result of borrowings under the term loans. If LIBOR interest rates for these
borrowings increase one percent, PCA's interest expense would increase, and
income before income taxes would decrease, by approximately $11.4 million
annually until the LIBOR rate exceeds the ceiling rate. At that point, only 40%
of the debt would result in additional interest rate expense. As of June 30,
1999, the interest rate on the term loans was based on a LIBOR rate of 5.0%,
which was adjusted to 5.3% on July 12, 1999. The effect of the interest rate
change to the fair market value of the outstanding debt is insignificant. This
analysis does not consider any other impacts on fair value that could exist in
such an interest rate environment. In the event of a change in interest rates,
management could take actions to further mitigate its exposure to the change.
However, due to the uncertainty of the specific actions that would be taken and
their possible effects, the sensitivity analysis assumes no changes in PCA's
financial structure.

NEW ACCOUNTING STANDARDS

For a description of changes in accounting principles affecting PCA, see
Note 2 to the Group's audited combined financial statements included elsewhere
in this prospectus. None of the new accounting standards required to be adopted
on January 1, 1999 had any material impact on the Group's or PCA's results of
operations. In addition, management does not expect that new accounting
standards currently pending will materially impact PCA's operating results.

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BUSINESS

GENERAL

PCA is the sixth largest producer of containerboard and corrugated products
in the United States, based on production capacity as reported in the Pulp &
Paper 1999 North American Fact Book. With 1998 net sales of $1.6 billion, PCA
produced 2.1 million tons of containerboard and shipped about 25 billion square
feet of corrugated products.

In 1998, we produced over 1.3 million tons of kraft linerboard at our mills
located in Counce, TN and Valdosta, GA. We also produced 800,000 tons of
semi-chemical medium at our mills located in Tomahawk, WI and Filer City, MI.
About 20% of our total fiber requirements were met with wood from our 950,000
acres of owned or leased timberland, which are generally located within 100
miles of our mills.

Our converting operations produce a wide variety of corrugated packaging
products, including conventional shipping containers used to protect and
transport manufactured goods. We also produce multi-color boxes and displays
with strong visual appeal that help to merchandise the packaged product in
retail locations. Finally, we are a large producer of meat boxes and wax-coated
boxes for the agricultural industry.

INDUSTRY OVERVIEW

CORRUGATED CONTAINERS

According to the Fibre Box Association, the value of industry shipments of
corrugated containers was over $20 billion in 1998. According to this source,
corrugated container volume has grown at a compound annual rate of 3.1% since
1975. Demand for corrugated containers has increased in all but four years
during this 23-year period. At no time during this period did demand for
corrugated containers decrease in consecutive years.

Most converting plants are either corrugator plants or sheet plants. There
are approximately 612 corrugator plants in the United States. Corrugater plants
have equipment on-site that flutes the medium and combines it with linerboard to
create corrugated sheets. These sheets are then converted into corrugated
containers on-site.

There are approximately 860 sheet plants in the United States. Sheet plants
purchase corrugated sheets from corrugator plants and convert these sheets into
finished corrugated containers. According to the Fibre Box Association,
corrugator plants account for 84% of the industry's corrugated container
shipments, while sheet plants contribute the remaining 16%.

The primary end-use markets for corrugated containers are shown below:

<TABLE>
<S> <C>
Food, beverages and agricultural products............................ 39.2%
Paper and fiber products............................................. 22.6%
Petroleum, plastic, synthetic and rubber products.................... 10.3%
Glass, pottery, fabricated metal and metal containers................ 6.8%
Electrical and electronic machinery and appliances................... 3.7%
</TABLE>

High-volume, national account customers typically seek suppliers with
multiple plant locations that can provide broad geographic coverage, an array of
manufacturing capabilities and flexibility to provide products in critical
situations. Local accounts tend to place a greater emphasis on local sales and
customer service support, quick order turnaround and specialized services. All
types of customers value price, quality and dependability.

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Corrugated containers are generally delivered by truck. Compared to many
other products, the amount of corrugated containers that can fit into a
truckload weighs much less. This, coupled with the relatively low price per ton
of corrugated containers, make shipping costs account for a relatively high
portion of total costs. As a result, converting plants tend to be located in
close proximity to customers to minimize freight costs. Most converters serve
markets within a 150-mile radius of their plants and employ a locally based
sales force to solicit accounts in that market area.

The corrugated products industry is highly fragmented, with an estimated 715
companies in the United States. The top five U.S. integrated corrugated
manufacturers produce approximately 60% of total U.S. industry production.
Integrated producers accounted for approximately three-quarters of total
corrugated container shipments.

CONTAINERBOARD

Containerboard, which includes both linerboard and corrugating medium, is
the principal raw material used to manufacture corrugated containers. Linerboard
is used as the inner and outer facings, or liners, of a corrugated container.
Corrugating medium is fluted and laminated to linerboard in corrugator plants to
produce corrugated sheets. The sheets are subsequently printed, cut, folded and
glued in corrugator plants or sheet plants to produce corrugated containers.

Containerboard may be manufactured from both softwood and hardwood fibers,
as well as from recycled fibers from used corrugated containers and waste
clippings from corrugated converting operations. Kraft linerboard is made
predominantly from softwoods like pine. Semi-chemical medium is made from
hardwoods such as oak. Wood may be brought to the mill as logs to be chipped, or
as already-chipped wood. The chips are chemically treated and cooked to form
virgin fiber, also known as wood pulp. This pulp can be processed alone or
blended with some percentage of recycled fiber on paper machines. The pulp is
mixed with water and flows onto a moving wire screen, which allows the water to
drain and concentrates the fibers. What remains is a paper mat that is
compressed by a series of presses and then dried. The paper is wound into large
rolls, which are slit to size as required by converters, and shipped to them.

Linerboard is made in a range of grades or basis weights. 42 lb. linerboard
is the most common weight, but linerboard is produced in weights that vary from
under 26 lb. to over 90 lb. The number represents the weight in pounds per
thousand square feet of that linerboard. Producers also market linerboard by
performance characteristics, appearance and color. The following table describes
different product weight, performance and color characteristics:

<TABLE>
<CAPTION>
CATEGORY PRODUCTS DESCRIPTION
- --------------------------------- ------------------ --------------------------------------
<S> <C> <C>
Weights (lb./1,000 sq. ft.)...... 26 - 38 lb. Lightweights
41 - 56 Middleweights
61 - 90 Heavyweights
>90 Super heavyweights

Performance...................... High ring crush stacking or compression strength
Tare weight minimal variations in basis weight
Wet strength strength while wet

Color............................ Mottled white bleached pulp applied to unbleached
sheet; mottled appearance
White top even, white surface appearance
Full bleached solid white throughout
</TABLE>

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The market demand for high performance grades, lightweights and white
linerboard continue to grow at a faster rate because customers are seeking
better strength characteristics at a lower cost as well as improved appearance.

Recycled linerboard production has also grown rapidly in recent years due to
favorable economics, customer demand for recycled packaging, and improved
quality and performance characteristics. Recycled linerboard accounted for
approximately 18% of total U.S. linerboard production in 1998. A recycled
linerboard mill is typically smaller and less capital-intensive than kraft
linerboard mills. These mills are likely to be located near a major urban area
where the supply of recycled material is abundant and converter operations are
more geographically concentrated.

U.S. linerboard producers export nearly 20% of their production. The top
three markets are Europe, Asia and Latin America, which together consumed about
90% of the U.S. linerboard exports during 1998. Linerboard exports have grown at
an average rate of 6% a year during the last 15 years, reaching a record 4.6
million tons in 1997. Due to the strong U.S. dollar and weak Asian markets,
exports of linerboard were significantly lower in 1998 at 3.7 million tons. The
market for exported medium is considerably smaller than for linerboard. About
2.5% of the corrugating medium produced in the United States is exported.

Despite recent consolidation activity, the containerboard industry remains
relatively fragmented, with the top five producers accounting for 53% of
production capacity and the top ten accounting for 72%.

Containerboard is a commodity-like product whose price tends to be highly
cyclical. Historically, pricing for containerboard has reflected changes in
containerboard supply that resulted from capacity additions and reductions, as
well as changes in inventory levels and demand. The supply/demand balance has
improved in recent months and the average price of linerboard has risen about
25% since January. In 1999, several major containerboard manufacturers announced
production curtailments and mill shutdowns. These reductions represent nearly 2
million tons or 5% of North American capacity. Only minimal capacity additions
have been publicly announced through 2001 according to the American Forest &
Paper Association.

BUSINESS STRATEGY

Our on-going operating strategy focuses on three elements:

- Building upon our low cost mill status and continuing to reduce
manufacturing costs in our containerboard mills;

- Focusing our sales and marketing efforts for corrugated containers on
value-added, higher margin products and customers; and

- Emphasizing investment and growth in our corrugated container operations
to further increase our level of integration.

COMPETITIVE STRENGTHS

- LOW-COST PRODUCER. Based on two studies performed in 1998 by
Jacobs-Sirrine, an industry consulting firm, PCA's two largest containerboard
mills were ranked in the lowest quartile for cash manufacturing costs in the
industry. One of these studies was a single-client study that we paid
Jacobs-Sirrine to perform in February 1998. The other was a multi-client study
issued by Jacobs-Sirrine in the fourth quarter of 1998 that was available for
purchase by the general public. The Counce and Tomahawk mills represent
two-thirds of PCA's production capacity. Counce produces linerboard and Tomahawk
makes semi-chemical medium. The industry uses cash manufacturing cost per ton as
a measure of operating cost effectiveness for containerboard mill

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production. Cash manufacturing costs are the out-of-pocket costs associated with
producing containerboard, which include costs for fiber, chemicals, energy,
other materials and consumables, hourly labor and salaried supervision.

Valdosta, our second kraft linerboard mill, uses only virgin fiber. In
February 1998, Jacobs-Sirrine also ranked it as a low cost, or first quartile,
mill. In the fourth quarter 1998 study, Valdosta's ranking fell to below average
cost, or third quartile. This was due primarily to a decline in recycled fiber
prices. This decline improved the relative cost position of recycled mills.
Recycled fiber costs have increased recently to nearly the same level as in
February 1998. This recycled fiber cost increase has improved Valdosta's cost
position, returning it to the lowest cost quartile.

Filer City, our smallest mill, produces semi-chemical medium. Filer City
ranks as an average cost mill in both of the Jacobs-Sirrine studies.

Fiber represents the single largest cost element in manufacturing
containerboard. Our mills are located near abundant supplies of wood fiber.
Additionally, our ability to vary the percentage of softwood, hardwood and
recycled fiber enables us to react to changes in fiber prices and minimize fiber
costs. Overall, our fiber costs are among the lowest in the industry.

In recent years, we have also made significant productivity and efficiency
gains. These include labor savings, higher machine speeds, reduced waste and
lower chemical and energy costs.

- INTEGRATED OPERATIONS. Our level of containerboard integration with our
converting facilities is approximately 75% to 80%. This high level of
integration provides a stable and predictable demand for our containerboard mill
production. The remaining 20% to 25% of production is sold externally, with
about two-thirds going to domestic corrugated converters and one-third to the
export market. According to Pulp & Paper Week, during the period of 1995 to
1998, industry containerboard prices declined by 31% while our average
corrugated box price fell by only 11%. The relative earnings stability of our
converting plants acts to somewhat offset the more cyclical earnings of our
mills. Containerboard pricing behaves much as a commodity and is highly
dependent on the relative balance of containerboard supply and demand.
Corrugated container demand has been fairly stable over the past 20 years and
tracks general economic growth as measured by Gross Domestic Product and
industrial production.

- DIVERSIFIED CUSTOMER BASE. Our broad customer base enables us to minimize
our dependence on any one industry, geography or individual customer. We have
focused our sales efforts on smaller, local accounts, which usually demand more
customized products and services than higher volume national accounts.
Approximately 75% of our current revenues are derived from local accounts.

- FOCUS ON VALUE-ADDED PRODUCTS AND SERVICES. We have pursued a strategy of
providing our customers with value-added products, enhanced graphics and
superior customer service. Since 1995, we have acquired nine converting
facilities. Four of these acquisitions significantly increased our graphics
capabilities, while five sheet plant acquisitions improved our ability to
provide shorter production runs and faster turnaround times in those markets. We
have also established five geographically dispersed graphics design centers that
use sophisticated computer design software to create visually appealing
customized boxes. Our close proximity to our customers, our broad geographic
coverage and our ability to provide value-added products and services has
consistently resulted in a higher selling price than the industry average.

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OPERATIONS AND PRODUCTS

MILLS

Our two linerboard mills can manufacture a broad range of linerboard grades
ranging from 26 lb. to 96 lb. Our two semi-chemical medium mills can manufacture
grades ranging in weight from 21 lb. to 47 lb. All four of our mills have
completed an extensive independent review process to become ISO 9002 certified.
ISO 9002 is an international quality certification that verifies a facility
maintains and follows stringent procedures for manufacturing, sales and customer
service.

COUNCE. Our Counce, Tennessee mill is one of the five largest linerboard
mills in the United States out of approximately 70 linerboard mills. Its
production capacity is approximately 937,000 tons per year. In 1998, we produced
880,600 tons of kraft linerboard on two paper machines at Counce. We produced a
broad range of basis weights from 31 lb. to 96 lb. Our Counce mill machines also
produce a variety of performance and specialty grades of linerboard including
high-ring crush and wet strength. In 1998 we developed the capability to produce
linerboard grades with a mottled white printing surface. Mottled white has a
marble-like coloration and is typically priced from $130 to $175 per ton higher
than kraft linerboard, but is more expensive to produce.

VALDOSTA. Our Valdosta, Georgia mill is a kraft linerboard mill and has a
production capacity of approximately 450,000 tons per year. In 1998, our single
paper machine at Valdosta produced approximately 424,500 tons of linerboard.
Valdosta primarily produces middleweight linerboard ranging from 42 lb. to 56
lb., and heavyweight/super heavyweight linerboard ranging from 61 lb. to 96 lb.

TOMAHAWK. Our Tomahawk, Wisconsin mill is the second largest medium mill in
the United States out of 69 medium mills. Its production capacity is 533,000
tons per year. In 1998, we produced approximately 503,900 tons of semi-chemical
medium at Tomahawk using three paper machines, one of which is the third largest
corrugated medium machine in the United States. These machines produce a broad
range of basis weights from 23 lb. to 47 lb. Our Tomahawk mill also produces a
variety of performance and specialty grades of semi-chemical medium. This
includes high ring crush, wet strength, tare weight and super heavyweight.

FILER CITY. Our Filer City, Michigan mill is a semi-chemical medium
operation. In 1998, Filer City produced approximately 295,500 tons of medium on
three paper machines. In July 1998, we shut down one machine at Filer City. Mill
production capacity at Filer City is now 280,000 tons a year. Filer City
produces a range of medium grades in basis weights from 21 lb. to 40 lb.

CORRUGATED PRODUCTS

We operate 39 corrugator plants, 28 sheet/specialty plants and five graphic
design centers. The 39 corrugator plants have a corrugator on site and
manufacture both combined sheets and finished boxes. Twenty-six sheet plants
purchase combined sheets and create finished boxes. Two other small specialty
facilities include a collating and distribution packaging center, as well as a
machine rebuild facility. The five graphic design centers are located in
Westmont, Illinois; Cincinnati, Ohio; Dallas, Texas; North Brunswick, New
Jersey; and Southgate, California.

These graphic design centers were established in response to customers'
increasing need for sophisticated, high impact graphics on their corrugated
boxes. Customers are increasingly using special in-store corrugated displays to
market their products and are requiring more intricate packaging designs. In
response, our graphic design centers offer state-of-the-art computers and
equipment that are capable of 24-hour design turnaround and reduced product
delivery times.

Our converting locations are spread throughout the United States. Each
corrugator plant serves a market radius that typically averages 150 miles. Our
sheet plants are generally located in close

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proximity to our larger corrugating facilities which enables us to offer
additional services and converting capabilities such as small volume, quick
turnaround items.

We produce a wide variety of products ranging from basic corrugated shipping
containers to specialized packaging such as wax-coated boxes for the agriculture
industry. We also have multi-color printing capabilities to make high-impact
graphics boxes and displays that offer customers more attractive packaging.

TIMBERLAND

We own, lease, manage or have cutting rights to approximately 950,000 acres
of timberland located near our Counce, Valdosta and Tomahawk mills. The acreage
we control includes 800,000 acres of owned land and another 150,000 acres of
long term leases. Virtually all of these leases have terms over 20 years.

Over 90% of our timberland is located within 100 miles of our mills which
results in lower wood transportation costs and a secure source of wood fiber. In
1998, 20% of our total fiber requirements were supplied by wood from timberland
owned or leased by us. This timberland contains approximately 54% softwood,
which is primarily pine. The other 46% is hardwood such as oak.

In addition to the timberland we manage ourselves, we have initiated a
Forest Management Assistance Program. Through this program we provide
professional forestry assistance to private timberland owners to improve harvest
yields and to optimize their harvest schedule. We have managed the regeneration
of over 97,000 acres by supplying pine seedlings. In exchange for our expertise,
we are given the right of first refusal over timber sales from those lands.
These private lands include over 200,000 acres of timberland. We expect to
harvest over 150,000 cords of wood from these forests annually.

We also participate in the Sustainable Forestry Initiative, which is
organized by the American Forest and Paper Association. This initiative is aimed
at ensuring the long-term health and conservation of America's forestry
resources. Activities include limiting tree harvest sizes, replanting harvest
acreage, and participating in flora and fauna research and protecting water
streams.

We believe that the wood supplies near our Valdosta, Filer City and Tomahawk
mills are very good and will remain so for the foreseeable future. As a result,
we are considering the sale of a large percentage of our timberland in these
regions. We currently believe that we will be able to purchase our wood
requirements at competitive prices. At Counce, where pine is in shorter supply,
we would consider selling a significant portion of our timberland if we could
obtain a competitively priced, long-term supply agreement from the buyer.

SOLID WOOD AND RECYCLING FACILITIES

We own three sawmills located in Ackerman, Mississippi; Selmer, Tennessee;
and Fulton, Mississippi. These three sawmills produce approximately 150 million
board feet annually of lumber used to make furniture and building products. We
also have an air-dry yard operation in Burnsville, Mississippi that holds newly
cut lumber while it dries. Finally, we have a 50% interest in a wood chipping
joint venture in Fulton, Mississippi that provides us with wood chips for use at
our Counce Mill. The solid wood products group enables us to maximize the value
of our timber through lumber sales, when appropriate, and also provides us with
a supply of wood chips.

We also operate three paper recycling centers, one in Jackson, Tennessee and
two in Nashville, Tennessee. These recycling centers collect old corrugated
containers, newspapers and other paper and provide a source of recycled fiber to
our nearby Counce mill.

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PERSONNEL

An on-site mill manager oversees each of our mills. The mill manager's
operating staff includes personnel who support mill operations and woodlands, as
well as support groups for scheduling and shipping, technical services and
process control, maintenance and reliability, and engineering and technology.
Our administrative support groups include accounting, information systems,
payroll and human resources. All of the groups mentioned above report to each
respective mill manager. Headquarters corporate support, located in Lake Forest,
Illinois includes the containerboard sales group and the production scheduling
group, which processes customer orders. We also maintain a 14-member corporate
mill engineering staff that provides engineering, procurement, construction and
start-up services for the four mills.

Each of our converting plants is managed by a team, which usually includes a
general manager, a sales manager, a production manager, a controller and a
customer service manager. We also have a centralized technical support group
comprised of 14 packaging engineers and technicians. This group provides
services to our 67 converting facilities that include testing, engineering,
manufacturing and technical support. Our technical support group also works with
our customers on location to assure that our customers' quality and performance
standards are consistently met. Our converting plants are grouped into seven
geographic areas. Plants in each area report to an area general manager.

SALES AND MARKETING

Our containerboard sales group is responsible for the sale of linerboard and
corrugating medium to our own corrugating plants, to other domestic customers
and to the export market. This group handles order processing for all shipments
of containerboard from our own mills to our own converting plants. These
personnel also coordinate and execute all containerboard trade agreements with
other containerboard manufacturers.

Our corrugated products are sold through a direct sales and marketing
organization of approximately 350 sales personnel. Sales representatives and a
sales manager at each manufacturing facility serve local and regional accounts.
Corporate account managers serve large national accounts at multiple customer
locations. Additionally, our graphic design centers maintain an on-site
dedicated graphics sales force. General marketing support is located at our
corporate headquarters.

In addition to the 350 direct sales and marketing personnel, we have almost
100 support personnel that are new product development engineers and product
graphics and design specialists. These individuals are located at both the
corrugating facilities as well as the graphic design centers.

DISTRIBUTION

Finished goods produced in our mills are shipped by rail or truck. Our
individual mills do not own or maintain outside warehousing facilities. We do
use several third-party warehouses for short-term storage.

Our corrugated containers are usually delivered by truck due to our large
number of customers and their demand for timely service. Shipping costs
represent a relatively high percentage of our total costs due to the high bulk
and relatively low value of corrugated containers. As a result, our converting
plants typically service customers within a 150 miles radius.

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CUSTOMERS

CONTAINERBOARD. Our converting plants, either directly or through exchange
agreements, consume more than three-quarters of our mills' containerboard
production. These exchanges, or trades, allow us to swap containerboard produced
in our mills for containerboard manufactured at other companies' locations.
Trades, which are common in the industry, reduce the distance the rolls of
containerboard have to be shipped, and, in turn, overall freight costs. Trades
also encourage more efficient production for the industry, since companies can
trade for containerboard grades they cannot manufacture as efficiently on their
own equipment.

The containerboard that we do not consume directly or through trades is sold
to independent domestic converters and export customers. We also sell
containerboard to manufacturers of fiber drums, air bags, protective packaging
and other specialty products.

CORRUGATED PACKAGING. About three-quarters of our corrugated packaging
customers are regional and local accounts, and they are broadly diversified
across industries and geographic locations. Based on an internal customer survey
conducted in 1998, we estimate that nearly 40% of our customers have purchased
from us for over five years. Our top ten corrugated products customers accounted
for about 20% of our 1998 gross revenues and no single customer represented over
6% of our gross revenues.

RAW MATERIALS

FIBER SUPPLY. Fiber is the single largest cost in the manufacture of
containerboard. To reduce our fiber costs we have invested in processes and
equipment to ensure a high degree of fiber flexibility. Our mills have the
capability to shift a portion of their fiber consumption between softwood,
hardwood and recycled sources. With the exception of our Valdosta mill, all of
our mills can utilize some recycled fiber in their containerboard production.
Our ability to use various types of virgin and recycled fiber helps mitigate the
impact of changes in the prices of various fibers.

ENERGY SUPPLY. Energy at the mills is obtained through purchased
electricity or through various fuels which are then converted to steam or
electricity on-site. Fuel sources include coal, natural gas, oil, bark and
byproducts of the containerboard manufacturing and pulping process. These fuels
are burned in boilers to produce steam. Steam turbine generators are used to
produce electricity.

Our two kraft linerboard mills at Counce and Valdosta generate approximately
60% to 70% of their energy requirements from their own byproducts. Presently,
50% of our electricity consumption for the four mills is generated on-site.

COMPETITION

CONTAINERBOARD. Containerboard is generally considered a commodity-type
product and can be purchased from numerous suppliers. While the containerboard
industry has been consolidating over the last two decades, it is still
relatively fragmented compared with other basic manufacturing industries such as
steel, automotive, commodity chemicals and petroleum. Approximately 59 companies
currently produce containerboard and the top five represent 53% of total
industry shipments. As a result, no single company has a dominant position in
the industry. PCA's primary competition for our external sales of containerboard
are a number of large, diversified paper companies, including Georgia-Pacific
Corporation, International Paper Company, Smurfit-Stone Container Corporation,
Temple-Inland Inc., Weyerhaeuser Company and Willamette Industries, Inc., as
well as other regional manufacturers.

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CORRUGATED CONTAINERS. Corrugated containers are produced by more than 715
U.S. companies operating nearly 1,500 plants. While the capability to make
corrugated containers are offered by these hundreds of companies, very few boxes
are produced as standard, or stock, items. Most corrugated containers are custom
manufactured to the customer's specifications for that container. Finished
containers are shipped to the customer flat, to be assembled for filling at the
customer's operation. Corrugated producers generally sell within a 150-mile
radius of their plants and compete with other corrugated facilities in their
local market. In fact, the Fibre Box Association tracks industry data by 47
distinct market regions.

The larger, multi-plant integrated companies may also solicit larger,
multi-plant users of boxes who purchase for all their user facilities on a
consolidated basis. These customers are often referred to as national or
corporate accounts. Typically, prices charged to national accounts reflect the
benefit to the corrugated manufacturer of the volume and scale economies these
large accounts bring.

Corrugated container businesses seek to differentiate themselves through
pricing, quality, service, design and product innovation. We compete for both
local and national account business and we compete against producers of other
types of packaging products. On a national level, our competitors include Four M
Corporation, Gaylord Container Corporation, Georgia-Pacific Corporation,
International Paper Company, Smurfit-Stone Container Corporation, Temple-Inland
Inc., Weyerhaeuser Company and Willamette Industries, Inc. However, with our
strategic focus on local and regional accounts, we believe we compete as much
with the smaller, independent converters as with the larger, integrated
producers.

EMPLOYEES

As of June 30, 1999, we had approximately 7,700 employees. Approximately
2,100 of these employees were salaried and approximately 5,600 were hourly.
Approximately 75% of our hourly employees are represented by unions. Our
unionized employees are represented primarily by the Paper, Allied Industrial,
Chemical, Energy Workers International Union, the Graphic Communications
International Union and the United Steel Workers of America.

Contracts for our unionized mill employees expire between October 2000 and
September 2003. Contracts for unionized converting plant employees expire
between September 1999 and March 2005. We are currently in negotiations to renew
or extend any union contracts expiring in the near future.

There have been no instances of significant work stoppages in the past 15
years. We believe we have satisfactory relations with our employees.

ENVIRONMENTAL MATTERS

Compliance with environmental requirements is a significant factor in our
business operations. We commit substantial resources to maintaining
environmental compliance and managing environmental risk. We are subject to, and
must comply with, a variety of federal, state and local environmental laws,
particularly those relating to air and water quality, waste disposal and the
cleanup of contaminated soil and groundwater. We believe that we are currently
in material compliance with all applicable environmental rules and regulations.
Because environmental regulations are constantly evolving, we have incurred, and
will continue to incur, costs to maintain compliance with those laws. We work
diligently to anticipate and budget for the impact of applicable environmental
regulations and do not currently expect that future environmental compliance
obligations will materially affect our business or financial condition.

59
<PAGE>
In April 1998, the United States Environmental Protection Agency finalized
the Cluster Rules, which govern all pulp and paper mill operations, including
those at our mills. Over the next several years, the Cluster Rules will affect
our allowable discharges of air and water pollutants. As a result, PCA and its
competitors are required to incur costs to ensure compliance with these new
rules. Our current spending projections to complete Cluster Rule compliance
implementation at our four mills is about $60 million from 1999 to 2005. During
1997 and 1998, we spent approximately $3 million on Cluster Rule compliance. We
currently estimate total capital costs for environmental matters, including
Cluster Rule compliance, at $16 million for 1999 and $22 million for 2000.

As is the case with any industrial operation, we have in the past incurred
costs associated with the remediation of soil or groundwater contamination. From
January 1994 through June 1999, remediation costs at our mills and converting
plants totaled about $2.3 million. We do not believe that any on-going remedial
projects are material in nature. As of June 30, 1999, we maintained a reserve of
$83,000 for environmental remediation liability as well as a general overall
environmental reserve of $3,369,000, which includes funds relating to onsite
landfill and surface impoundments as well as on-going and anticipated remedial
projects. We believe these reserves are adequate.

We could also incur environmental liabilities as a result of claims by third
parties for civil damages, including liability for personal injury or property
damage, arising from releases of hazardous substances or contamination. We are
not aware of any claims of this type currently pending against us.

In the transactions, TPI agreed to retain all liability for all former
facilities and all sites associated with pre-closing waste disposal. TPI also
retained environmental liability for a closed landfill located near the Filer
City mill.

PROPERTIES

MILLS. The table below provides a summary of our containerboard mills, the
principal products produced, each mill's capacity and their capacity
utilization.

<TABLE>
<CAPTION>
LOCATION FUNCTION CAPACITY UTILIZATION (%)*
- ------------------------------------------- ----------------- ----------- -------------------
<S> <C> <C> <C>
Counce, TN................................. Kraft Linerboard 937,000 94%
mill

Filer City, MI............................. Semi-chemical 280,000 93%
Medium mill

Tomahawk, WI............................... Semi-chemical 533,000 95%
Medium mill

Valdosta, GA............................... Kraft Linerboard 450,000 95%
mill
-----------

Total.................................. 2,200,000
-----------
-----------
</TABLE>

- --------------

*UTILIZATION IS DEFINED AS 1998 TONS PRODUCED DIVIDED BY ANNUAL CAPACITY.

Each of the mills is currently subject to a mortgage held by Morgan Guaranty
Trust Company of New York on behalf of the lenders under the senior credit
facility.

OTHER FACILITIES. In addition to our mills, we own 37 corrugator plants and
seven specialty plants. We also own three sawmills, an air-drying yard, one
recycling facility, one warehouse and miscellaneous other property, which
includes sales offices and woodlands forest management

60
<PAGE>
offices. These sales offices and woodlands forest management offices generally
have one to four employees and serve as administrative offices. We lease two
corrugator plants, 21 sheet specialty plants, five regional design centers, two
recycling facilities and numerous other distribution centers, warehouses and
facilities. PCA has no owned or leased properties outside of the continental
United States. All of our owned real property is subject to a first priority
mortgage held by Morgan Guaranty Trust Company of New York on behalf of the
lenders under the senior credit facility.

TIMBERLAND. We own or lease approximately 950,000 acres of timberland as
shown below:

<TABLE>
<CAPTION>
OWN LEASE TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Counce, TN..................................... 348,000 56,000 404,000
Tomahawk, WI................................... 163,000 -- 163,000
Valdosta, GA................................... 289,000 94,000 383,000
--------- --------- ---------
Total Acres.................................. 800,000 150,000 950,000
--------- --------- ---------
--------- --------- ---------
</TABLE>

All of our owned timberland is subject to a mortgage held by Morgan Guaranty
Trust Company of New York on behalf of the lenders under the senior credit
facility. Lease agreements are generally for 35 to 66 years and offer fiber
harvest rights on the leased properties.

HEADQUARTERS. We currently lease and will continue to lease our executive
and administrative offices in Lake Forest, Illinois from Tenneco Packaging, Inc.
for up to four years.

We currently believe that our facilities and properties are sufficient to
meet our operating requirements for the foreseeable future.

LEGAL PROCEEDINGS

We are party to various legal actions arising in the ordinary course of our
business. These legal actions cover a broad variety of claims spanning our
entire business. We believe that the resolution of these legal actions will not,
individually or in the aggregate, have a material adverse effect on our
financial condition or results of operations.

61
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The names, ages and positions of the persons who are the directors and
executive officers of PCA are provided below:

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --------- -------------------------------------------------------------------
<S> <C> <C>
Paul T. Stecko........................ 54 Chairman of the Board and Chief Executive Officer
William J. Sweeney.................... 58 Executive Vice President--Corrugated Products
Richard B. West....................... 47 Chief Financial Officer and Secretary
Mark W. Kowlzan....................... 44 Vice President--Containerboard/Wood Products
Andrea L. Davey....................... 43 Vice President--Human Resources, Paperboard Packaging
Dana G. Mead.......................... 63 Director
Theodore R. Tetzlaff.................. 55 Director
Samuel M. Mencoff..................... 42 Director and Vice President
Justin S. Huscher..................... 45 Director and Assistant Secretary
Thomas S. Souleles.................... 31 Director and Assistant Secretary
</TABLE>

PAUL T. STECKO has served as Chief Executive Officer of PCA since January
1999 and as Chairman of the Board of PCA since March 1999. From November 1998 to
April 1999, Mr. Stecko served as President and Chief Operating Officer of
Tenneco. From January 1997 to that time, Mr. Stecko served as Chief Operating
Officer of Tenneco. From December 1993 through January 1997, Mr. Stecko served
as President and Chief Executive Officer of TPI. Prior to joining Tenneco, Mr.
Stecko spent 16 years with International Paper Company. Mr. Stecko is a member
of the board of directors of Tenneco, American Forest and Paper Association and
State Farm Mutual Insurance Company.

WILLIAM J. SWEENEY has served as Executive Vice President--Corrugated
Products of PCA since April 1999. From May 1997 to April 1999, Mr. Sweeney
served as Executive Vice President-- Paperboard Packaging of TPI. From May 1990
to May 1997, Mr. Sweeney served as Senior Vice President and General
Manager--Containerboard Products of TPI. From 1983 to that time, Mr. Sweeney
served as General Manager and Vice President of Stone Container Corporation.
From 1978 to 1983, Mr. Sweeney served as Sales Manager, Operations Manager and
Division Vice President at Continental Group and from 1967 to that time, as
Sales Manager and General Manager of Boise Cascade Corporation.

RICHARD B. WEST has served as Chief Financial Officer of PCA since March
1999 and as Secretary since April 1999. From March 1999 to June 1999, Mr. West
also served as Treasurer of PCA. Mr. West served as Vice President of Finance of
TPI's containerboard group from 1995 to April 1999. Prior to joining Tenneco,
Mr. West spent 20 years with International Paper Company where he served as an
Internal Auditor, Internal Audit Manager and Manufacturing Controller for the
Printing Papers Group and Director/Business Process Redesign.

MARK W. KOWLZAN has served as Vice President--Containerboard/Wood Products
of PCA since April 1999. From 1998 to April 1999, Tenneco employed Mr. Kowlzan
as Vice President and General Manager--Containerboard/Wood Products and from May
1996 to 1998, as Operations Manager and Mill Manager of the Counce mill. Prior
to joining Tenneco, Mr. Kowlzan spent 15 years at International Paper Company,
where he held a series of operational positions within its mill organization.

ANDREA L. DAVEY has served as Vice President--Human Resources, Paperboard
Packaging of PCA since April 1999. From 1994 to April 1999 Ms. Davey was
employed principally by Tenneco where she held the positions of Director of
Field Employee Relations, Director of Training and

62
<PAGE>
Development, Director of Compensation and Benefits, and Project Manager of HRIS
project and also served in the capacity of Vice President--Human Resources,
Paperboard Packaging from May 1997 to April 1999. From 1992 to joining Tenneco
in 1994, Ms. Davey served as Director of Human Resources for the Bakery division
of Sara Lee Corporation. From 1989 to that time, she served as Human Resource
Manager for the Converting Group of International Paper Company. Prior to that
time, Ms. Davey spent five years with ITT Corporation, where she served as Human
Resources Manager.

DANA G. MEAD has served as a director of PCA since March 1999. Mr. Mead is
also Chairman and Chief Executive Officer of Tenneco and has served as a
director and an executive officer of Tenneco since April 1992, when he joined
Tenneco as Chief Operating Officer. Prior to joining Tenneco, Mr. Mead served as
an Executive Vice President of International Paper Company, a manufacturer of
paper, pulp and wood products, from 1988, and served as Senior Vice President of
that company from 1981. He is also a director of Textron, Inc., Zurich Allied AG
and Pfizer Inc.

THEODORE R. TETZLAFF has served as a director of PCA since March 1999. Mr.
Tetzlaff has been a Partner in the law firm of Jenner & Block, Chicago, since
1976 and Chairman of its Executive Committee and Operations & Finance Committee
since July 1997. Mr. Tetzlaff is also General Counsel of Tenneco, serving in
that capacity since June 1992. Mr. Tetzlaff has served as a director of Case
Corp. since 1994. He was formerly Vice President, Legal and External Affairs, of
Cummins Engine Company, Inc. from 1980 to 1982. Mr. Tetzlaff is also a director
of Continental Materials Corp. and a Commissioner of the Public Building
Commission of Chicago.

SAMUEL M. MENCOFF has served as a director and Vice President of PCA since
January 1999. Mr. Mencoff has been employed principally by Madison Dearborn
Partners, Inc. since 1993 and currently serves as a Managing Director. From 1987
until 1993, Mr. Mencoff served as Vice President of First Chicago Venture
Capital. Mr. Mencoff is a member of the operating committee of the general
partner of Golden Oak Mining Company, L.P. and a member of the board of
directors of Bay State Paper Holding Company, Buckeye Technologies, Inc. and
Riverwood Holding, Inc.

JUSTIN S. HUSCHER has served as a director of PCA since March 1999 and also
as an Assistant Secretary of PCA since April 1999. Mr. Huscher has been employed
principally by Madison Dearborn Partners, Inc. since 1993 and currently serves
as a Managing Director. From 1990 until 1993, Mr. Huscher served as Senior
Investment Manager of First Chicago Venture Capital. Mr. Huscher is a member of
the operating committee of the general partner of Golden Oak Mining Company,
L.P. and a member of the board of directors of Bay State Paper Holding Company.

THOMAS S. SOULELES has served as a director of PCA since March 1999 and also
as an Assistant Secretary of PCA since April 1999. From January 1999 to April
1999, Mr. Souleles served as a Vice President and Secretary of PCA. Mr. Souleles
has been employed principally by Madison Dearborn Partners, Inc. since 1995 and
currently serves as a Director. Prior to joining Madison Dearborn Partners,
Inc., Mr. Souleles attended Harvard Law School and Harvard Graduate School of
Business Administration where he received a J.D. and an M.B.A. Mr. Souleles is a
member of the board of directors of Bay State Paper Holding Company.

Each director of PCA listed above was elected under the terms of a
stockholders agreement among TPI, PCA and PCA Holdings that was entered into in
connection with the transactions. Upon consummation of the offerings, the voting
provisions of the stockholders agreement will terminate. See "Certain
Relationships and Related Transactions--Stockholders Agreement." PCA anticipates
that Dana G. Mead and Theodore R. Tetzlaff will resign upon consummation of the
offerings and that two directors not otherwise affiliated with PCA or any of its
stockholders will be elected by the board of directors following completion of
the offerings.

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<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS

None of the executive officers of PCA received compensation from PCA prior
to the closing of the transactions. Before the closing of the transactions,
PCA's chief executive officer and its four other most highly compensated
executive officers, Mr. Stecko, Mr. Sweeney, Mr. West, Mr. Kowlzan and Ms.
Davey, were employed by, and received compensation from, Tenneco Inc. or its
affiliates. Each of these named executive officers is currently receiving
substantially the same base salary and annual perquisite allowance, and is
entitled to the same annual cash bonus target from PCA, as they were receiving
from Tenneco or its affiliates prior to the closing of the transactions. For
fiscal year 1999, the annual base salaries of Mr. Sweeney, Mr. West, Mr. Kowlzan
and Ms. Davey are $355,380, $198,018, $194,800 and $150,496, respectively; the
corresponding annual bonus targets are $175,000, $115,000, $115,000 and $65,000,
respectively, and the annual perquisite allowances are $30,000, $12,000,
$20,000, and $12,000, respectively.

Under the terms of letter agreements entered into with Mr. Stecko on January
25, 1999 and May 19, 1999, PCA pays Mr. Stecko a base salary of $600,000 per
annum, subject to increases approved by the Board, and has agreed to pay Mr.
Stecko an annual bonus of not less than $500,000 with respect to each of the
fiscal years 1999, 2000 and 2001, and an annual perquisite allowance of not less
than $60,000 payable in cash. In addition, upon commencement of Mr. Stecko's
employment with us, we paid Mr. Stecko a signing bonus payment of $1 million,
the net proceeds of which, under the terms of the letter agreements, will be
invested in common stock of PCA. If PCA terminates Mr. Stecko without cause, he
is entitled to receive an amount equal to three times the sum of his base salary
plus the amount of the highest annual bonus paid to him during the previous
three year period.

Under the terms of a memorandum from PCA to Mr. Sweeney, dated April 16,
1999, PCA agreed to pay Mr. Sweeney a bonus in the amount of $500,000 if either
PCA terminates Mr. Sweeney before April 12, 2002 for any reason other than for
cause or he is still employed by PCA on April 12, 2002. If Mr. Sweeney dies
before April 12, 2002, the bonus will be paid to his beneficiaries on a pro rata
basis. Mr. Sweeney agreed to use the after-tax proceeds of this bonus to pay off
the outstanding balance, if any, of the loan he received from PCA to purchase
equity of PCA during the June 1999 management equity issuance.

COMPENSATION OF DIRECTORS

PCA does not currently compensate directors for serving as a director or on
committees of the board of directors or pay directors any fees for attendance at
meetings of the board, although PCA may elect to compensate directors in the
future using cash or equity. All directors will be reimbursed for reasonable
out-of-pocket expenses incurred in connection with their attendance at board and
committee meetings.

MANAGEMENT EQUITY AGREEMENTS

PCA entered into management equity agreements in June 1999 with 125 of its
management-level employees, including the named executive officers. Under these
agreements, PCA sold shares of common stock to 113 of these employees
at approximately $ per share, the same price per share at which PCA Holdings
purchased equity in the transactions. PCA guaranteed bank financing in the
amount of $5,200,000 in the aggregate to enable some of these members of PCA's
management to purchase equity under their respective management equity
agreements. The amount of bank financing guaranteed by PCA with respect to any
employee did not exceed 50% of the purchase price paid by the employee under his
or her management equity agreement. The capital stock purchased under the
management equity agreements is subject to vesting and is subject to repurchase
upon a termination of employment by PCA.

64
<PAGE>
The management equity agreements also provide for the grant of options to
purchase up to an aggregate of shares of PCA's common stock at the same
price per share at which PCA Holdings purchased common stock in the
transactions. These options will become exercisable upon completion of the
offerings. The option shares are subject to contractual restrictions on transfer
for a period of up to 18 months following completion of the offering. Mr.
Stecko, Mr. Sweeney, Mr. West, Mr. Kowlzan and Ms. Davey were issued options to
acquire , , , and shares of common
stock, respectively, under the management equity agreements.

BOARD COMMITTEES

Upon completion of the offerings, PCA will have two standing committees--an
audit committee and a compensation committee. Upon completion of the offerings,
each of these committees will consist of a majority of nonmanagment directors.

The audit committee will review and recommend to the board internal
accounting and financial controls for PCA and accounting principles and auditing
practices and procedures to be used in the preparation of PCA's financial
statements. The audit committee will also make recommendations to the board
concerning the engagement of independent public accountants and the scope of
their audits. The audit committee will consist of Justin S. Huscher, chairman,
and two directors to be named.

The compensation committee will administer PCA's benefit plans and make
recommendations concerning the compensation of employees. The compensation
committee will consist of Samuel M. Mencoff, chairman, Thomas S. Souleles and a
third director to be named.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION INTERLOCKS

None of the members of the compensation committee of the board of directors,
other than Samuel M. Mencoff, has at any time since the formation of PCA been an
officer or employee of PCA. Mr. Mencoff has served as a vice president of PCA
since January 1999, and is a managing director of Madison Dearborn, the
controlling stockholder of PCA Holdings. Madison Dearborn currently beneficially
owns approximately shares of common stock of PCA. No executive
officer of PCA serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on PCA's
board of directors or compensation committee.

65
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CONTRIBUTION AGREEMENT

TPI, PCA Holdings and PCA entered into a contribution agreement governing
the sale of the containerboard and corrugated packaging products business to
PCA. PCA Holdings owns approximately 53% of the outstanding common stock of PCA
and TPI owns approximately 44% of the outstanding common stock of PCA. Under the
terms of the contribution agreement, the following occurred:

- PCA paid to Madison Dearborn, the entity that controls PCA Holdings, a
transaction fee of $15.0 million and reimbursed Madison Dearborn for
out-of-pocket expenses.

- PCA paid $2.0 million of the legal and accounting fees and expenses of TPI
incurred in connection with the transactions.

- TPI agreed to indemnify PCA, PCA Holdings and their affiliates for any
breaches of representations, warranties and covenants it made in the
contribution agreement relating to the condition of the business as of the
closing of the transactions and liabilities of the containerboard and
corrugated packaging products business which it agreed to retain. TPI's
indemnification obligation in respect of breaches of its representations
and warranties generally survives for 18 months from the closing and is
subject to a $12.5 million deductible and a $150.0 million cap.

- PCA agreed to indemnify TPI and its affiliates against those liabilities
it agreed to assume. PCA generally agreed to assume all liabilities
relating to the business. PCA did not generally assume, however,
liabilities relating to tax and employee benefit matters arising before
the closing or with respect to assets not conveyed to PCA. These
liabilities were retained by TPI. TPI also retained all environmental
liability for all former facilities, sites associated with pre-closing
waste disposal and a closed landfill located near the Filer City mill.

- TPI agreed that, for a period of five years from the closing, it would not
engage in the business conducted by PCA as of the closing anywhere in the
U.S. or induce any customer of PCA to terminate its relationship with PCA.

STOCKHOLDERS AGREEMENT

PCA, PCA Holdings and TPI entered into a stockholders agreement under which
they agreed to limit their ability to sell or transfer their common stock and to
provide for preemptive rights upon future issuances of common stock by PCA.
Under the terms of the stockholders agreement, PCA's board of directors consists
of six individuals--three directors designated by PCA Holdings (Messrs. Mencoff,
Huscher and Souleles), two directors designated by TPI (Messrs. Mead and
Tetzlaff) and the Chief Executive Officer of PCA (Mr. Stecko). TPI and PCA
Holdings agreed to vote their shares in future elections to maintain this board
composition. The stockholders agreement also identifies company actions which
TPI and PCA Holdings have agreed shall be subject to the approval of at least
four of the five directors designated by TPI and PCA Holdings as described
above, including:

(1) the approval of the adoption of, or any material change to, PCA's annual
business plan,

(2) the purchase or sale of assets having a fair market value in excess of
$32.5 million, other than in the ordinary course of business or in
connection with a sale of timberland,

(3) the acquisition of another business or participation in any joint
venture involving consideration in excess of $32.5 million, and

(4) the taking of actions that would have a disproportionate impact on TPI
or would otherwise be outside of the ordinary course of business.

The stockholders agreement will terminate as a result of the offerings.

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<PAGE>
REGISTRATION RIGHTS AGREEMENT

PCA, PCA Holdings and TPI entered into a registration rights agreement under
which TPI, PCA Holdings and their affiliates and transferees have "demand"
registration rights, which entitle them to cause PCA to register their
securities of PCA under the Securities Act. In addition, TPI, PCA Holdings and
their affiliates and transferees have "piggyback" registration rights, which
entitle them to cause PCA to include their securities in a registration in which
PCA proposes to register any of its securities under the Securities Act. TPI and
its affiliates, on the one hand, and PCA Holdings and its affiliates, on the
other hand, are each entitled to demand:

(1) three "long form" registrations on Form S-1, or a similar long form, in
which PCA will pay the registration expenses, other than underwriting
discounts and commissions,

(2) an unlimited number of "short form" registrations on Form S-2 or S-3, or
a similar short form, in which PCA will pay the registration expenses,
other than underwriting discounts and commissions, and

(3) an unlimited number of "long form" registrations on Form S-1, or a
similar long form, in which the requesting holders will pay the
registration expenses.

TPI and PCA Holdings also agreed in the registration rights agreement that
TPI and its affiliates will have first priority to participate in any
registration of PCA's securities during the 14-month period following the
closing of the transactions. After that time, PCA Holdings, TPI and their
affiliates will have equal priority, before any other holders of PCA's
securities, to participate in the registrations. TPI exercised one of its
"demand" registration rights under this agreement in order to effect the
registration of its shares of common stock for sale in the offerings.

SERVICES AGREEMENT

PCA entered into a holding company support agreement with PCA Holdings under
which PCA agreed to reimburse PCA Holdings for all fees, costs and expenses, up
to an aggregate amount of $250,000 per year, related to PCA Holdings' investment
in PCA. These expenses include PCA Holdings' general operating expenses,
franchise tax obligations, accounting, legal, corporate reporting and
administrative expenses, and any other expenses incurred by PCA Holdings as a
result of its investment in PCA.

PURCHASE/SUPPLY AGREEMENTS

PCA entered into separate purchase/supply agreements with the following
parties: TPI; Tenneco Automotive Inc., an affiliate of TPI; and Tenneco
Packaging Speciality and Consumer Products Inc., an affiliate of TPI. Under the
purchase/supply agreements, each TPI entity agreed to purchase a substantial
percentage of its requirements for containerboard and corrugated packaging
products from PCA at the prices charged by PCA to TPI and its affiliates as of
the closing. As a result of these agreements, TPI and its affiliates,
collectively, are PCA's largest customer of its overall business and PCA's
largest customer of its corrugated products business. PCA's net sales to TPI and
its subsidiaries were approximately $76.9 million for the year ended December
31, 1998 and $37.3 million for the six month period ended June 30, 1999. PCA's
net sales to other Tenneco entities were approximately $14.2 million for the
year ended December 31, 1998 and approximately $6.4 million for the six month
period ended June 30, 1999.

TRANSITION AGREEMENTS

PCA and TPI entered into a facility use agreement which provides for PCA's
use of a designated portion of TPI's headquarters located in Lake Forest,
Illinois for a period of up to four years following the closing of the
transactions. Under the facility use agreement, PCA is required to

67
<PAGE>
pay TPI rent plus additional charges for the provision of building and business
services. The rent is calculated based on PCA's proportionate square footage
usage of the property.

PCA also entered into a transition services agreement with TPI which
provides for the performance of transitional services by TPI and its affiliates
to PCA that PCA currently requires to operate the containerboard and corrugated
packaging products business. TPI charges PCA an amount substantially equal to
its actual cost of providing the services, which cost includes TPI's overhead
expenses, but does not include Tenneco's overhead expenses. The exact charge to
PCA is the lesser of (1) TPI's actual cost and (2) 105% of the cost as
forecasted by TPI with respect to providing services within the following
categories: payroll, general accounting, tax support, treasury/ cash management,
insurance/risk management, procurement and, human resources and
telecommunication and information services. The initial term of the transition
services agreement is for one year, but may be extended by PCA for additional
one year terms for a cost increase of 15% per year. PCA may terminate any of the
provided services on 90 days notice to TPI. In addition, TPI agreed in the
transition services agreement to reimburse PCA for up to $10.0 million in
expenditures incurred by PCA relating to system enhancement and Year 2000
compliance. PCA agreed to provide administrative and transitional services to
TPI's former folding carton business under the terms of the transition services
agreement.

PCA, Tenneco and TPI entered into a human resources agreement under which
TPI transferred the employment of all of its active employees engaged in the
containerboard and corrugated packaging products business to PCA as of the
closing at the same rate of pay. Under the human resources agreement, the
employees are entitled to continue their participation in TPI and Tenneco
welfare and pension plans for a period of up to five years following the closing
of the transactions depending on the plan. PCA has agreed to reimburse Tenneco
for associated costs. In addition, PCA has agreed to pay Tenneco an annualized
fee of at least $5.2 million for continued participation. PCA assumed all of the
existing collective bargaining agreements with respect to containerboard
business employees as of the closing. PCA intends to adopt compensation and
benefit plans with respect to its employees as contemplated under the terms of
the transactions.

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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of PCA's common stock as of September 1, 1999, and as adjusted to
reflect the sale of the common stock being offered hereby, assuming full
exercise of the underwriters' over-allotment options, by (1) each person or
group of affiliated persons who is known by PCA to own beneficially more than 5%
of the common stock, (2) each of PCA's directors, (3) each of PCA's executive
officers, (4) all directors and executive officers of PCA as a group and (5)
TPI. Except as otherwise noted and subject to community property laws, the
persons or entities in this table have sole voting and investment power with
respect to all the shares of common stock owned by them.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY
OWNED AFTER THE
BEFORE THE OFFERINGS (1) OFFERINGS (1)
------------------------- SHARES BEING ------------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------------------------------------- -------------- --------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
PCA Holdings LLC (2) ......................... 53.2% -- %
c/o Madison Dearborn Partners, LLC
Three First National Plaza
Chicago, IL 60602

Paul T. Stecko (3)............................ 2.2% -- %
William J. Sweeney (4)........................ * -- *
Richard B. West (5)........................... * -- *
Mark W. Kowlzan (6)........................... * -- *
Andrea L. Davey (7)........................... * -- *

Dana G. Mead.................................. -- -- -- -- --

Theodore R. Tetzlaff.......................... -- -- -- -- --

Samuel M. Mencoff (8)......................... 46.7% -- %

Justin S. Huscher (9)......................... 46.7% -- %

Thomas S. Souleles (10)....................... 46.7% -- %

All directors and executive officers as a
group (10 persons) (11)..................... 49.5% -- %
Tenneco Packaging Inc. (12)................... 43.5% -- --
1900 West Field Court
Lake Forest, IL 60045
</TABLE>

- --------------

* Denotes ownership of less than one percent.

(1) Includes the number of shares and percentage ownership represented by the
shares determined to be beneficially owned by a person in accordance with
the rules of the Securities and Exchange Commission. The number of shares
beneficially owned by a person includes shares of common stock that are
subject to options held by that person that are currently exercisable or
exercisable within 60 days of September 1, 1999. These shares are deemed
outstanding for the purpose of computing the percentage of outstanding
shares

69
<PAGE>
owned by that person. These shares are not deemed outstanding, however, for
the purposes of computing the percentage ownership of any other person.

(2) The members of PCA Holdings include Madison Dearborn Capital Partners III,
L.P. ("MDCP III"), two funds affiliated with MDCP III, J.P. Morgan Capital
Corporation ("J.P. Morgan Capital"), an affiliated fund of J.P. Morgan
Capital and BT Capital Investors, L.P. ("BT Capital"). MDCP III and its
affiliated funds may be deemed to have beneficial ownership of
shares of common stock of PCA held by PCA Holdings, J.P. Morgan Capital and
its affiliated fund may be deemed to have beneficial ownership of
shares of common stock of PCA and BT Capital may be deemed to have
beneficial ownership of shares of common stock of PCA. Shares
beneficially owned by MDCP III and its affiliated funds may be deemed to be
beneficially owned by Madison Dearborn Partners III, L.P., the general
partner or manager, as applicable, of each fund ("MDP III"), and by Madison
Dearborn, the general partner of MDP III.

(3) Mr. Stecko owns shares of common stock of PCA and the Paul T.
Stecko 1999 Dynastic Trust owns shares of common stock of PCA. Mr.
Stecko may be deemed to have beneficial ownership of the shares of common
stock of PCA owned by the Paul T. Stecko 1999 Dynastic Trust. Mr. Stecko
also has an option to acquire shares of common stock of PCA, which
will become exercisable upon the closing of the offerings.

(4) Mr. Sweeney may be deemed to have beneficial ownership of the
shares of common stock of PCA owned by the William J. Sweeney 1999
Irrevocable Trust. Mr. Sweeney also has an option to acquire
shares of common stock of PCA, which will become exercisable upon the
closing of the offerings.

(5) Mr. West has an option to acquire shares of common stock of PCA,
which will become exercisable upon the closing of the offerings.

(6) Mr. Kowlzan has an option to acquire shares of common stock of
PCA, which will become exercisable upon closing of the offerings.

(7) Ms. Davey may be deemed to have beneficial ownership of the shares
of common stock of PCA owned by the Andrea Lora Davey Trust dated February
19, 1994. Andrea L. Davey also has an option to acquire shares of
common stock of PCA, which will become exercisable upon the closing of the
offerings.

(8) Mr. Mencoff is a Managing Director of Madison Dearborn and may therefore be
deemed to share beneficial ownership of the shares owned by Madison
Dearborn. Mr. Mencoff expressly disclaims beneficial ownership of the
shares owned by Madison Dearborn.

(9) Mr. Huscher is a Managing Director of Madison Dearborn and may therefore be
deemed to share beneficial ownership of the shares owned by Madison
Dearborn. Mr. Huscher expressly disclaims beneficial ownership of the
shares owned by Madison Dearborn.

(10) Mr. Souleles is a Director of Madison Dearborn and may therefore be deemed
to share beneficial ownership of the shares owned by Madison Dearborn. Mr.
Souleles expressly disclaims beneficial ownership of the shares owned by
Madison Dearborn.

(11) Includes shares issuable upon exercise of stock options, which
will become exercisable upon the closing of the offerings.

(12) Assuming no exercise of the underwriters' over-allotment options, TPI
would beneficially own shares, or % of the outstanding common
stock of PCA upon the closing of the offerings.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

PCA's second restated certificate of incorporation, the filing of which will
occur immediately prior to the closing of the offerings, authorizes the issuance
of up to shares of common stock, par value $0.01 per share,
3,000,000 shares of senior exchangeable preferred stock, par value $0.01 per
share, and 100 shares of junior preferred stock, par value $0.01 per share. As
of September 1, 1999, shares of common stock, 1,000,000 shares of
senior exchangeable preferred stock and 100 shares of junior preferred stock
were outstanding. As of September 1, 1999, PCA had 116 stockholders.

COMMON STOCK

Each holder of common stock is entitled to one vote for each share on all
matters to be voted upon by the stockholders and there are no cumulative voting
rights. Subject to preferences to which holders of senior exchangeable preferred
stock may be entitled, holders of common stock are entitled to receive ratably
the dividends, if any, as may be declared from time to time by the board of
directors out of funds legally available therefor. See "Dividend Policy." If
there is a liquidation, dissolution or winding up of PCA, holders of common
stock would be entitled to share in PCA's assets remaining after the payment of
liabilities and the satisfaction of any liquidation preference granted to the
holders of any outstanding shares of senior exchangeable preferred stock and
junior preferred stock. Holders of common stock have no preemptive or conversion
rights or other subscription rights and there are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are, and the shares of common stock offered by PCA in the offerings, when
issued and paid for, will be, fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by the rights of the holders of shares of any series
of preferred stock which PCA may designate in the future.

PREFERRED STOCK

PCA's certificate of incorporation authorizes its board of directors,
subject to any limitations prescribed by law, to issue shares of preferred stock
in one or more series without stockholder approval. Each series of preferred
stock will have the rights, preferences, privileges and restrictions, including
voting rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences, as will be determined by the board of directors. The
purpose of authorizing the board of directors to issue preferred stock and
determine its rights and preferences is to eliminate delays and uncertainties
associated with a stockholder vote on specific issuances. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or discourage a third
party from acquiring, a majority of PCA's outstanding voting stock. All of our
currently outstanding shares of senior exchangeable preferred stock will be
redeemed upon the completion of the offerings, and we have no present plans to
issue any new shares of preferred stock. See "Risk Factors--Charter Documents"
and "Use of Proceeds."

REGISTRATION RIGHTS

PCA, PCA Holdings and TPI are parties to a registration rights agreement
which provides TPI and PCA Holdings and their respective affiliates and
transferees with "demand" registration rights, entitling them to cause PCA to
register all or part of the common stock and or other securities of PCA held by
them under the Securities Act of 1933, as well as "piggyback" registration
rights. TPI exercised one of its "demand" registration rights in order to effect
the offerings of its common stock

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described herein. After the offerings, if TPI, together with its affiliates, no
longer holds shares of PCA with a fair market value of at least $500,000, it
will no longer have "demand" registration rights under the registration rights
agreement. PCA Holdings and its affiliates will continue to be entitled to
demand (1) three "long form" registrations in which PCA will pay the
registration expenses, other than underwriting discounts and commissions, (2) an
unlimited number of "short form" registrations in which PCA will pay the
registration expenses, other than underwriting discounts and commissions and (3)
an unlimited number of "long form" registrations in which the PCA Holdings will
pay the registration expenses.

EFFECT OF CERTIFICATE OF INCORPORATION AND BYLAWS

PCA's second restated certificate of incorporation and its second amended
and restated bylaws may have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of PCA.

The restated certificate will provide that stockholder action can be taken
only at an annual or special meeting of stockholders and cannot be taken by
written consent in lieu of a meeting. The restated certificate and by-laws will
provide that, except as otherwise required by law, special meetings of the
stockholders can only be called by a resolution adopted by a majority of the
board or by the chief executive officer of PCA. Stockholders will not be
permitted to call a special meeting or require the board to call a special
meeting.

The restated by-laws will establish an advance notice procedure for
stockholder proposals to be brought before an annual meeting of stockholders of
PCA, including proposed nominations of persons for election to the board.
Stockholders at an annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the
direction of the board or by a stockholder who was a stockholder of record on
the record date for the meeting, who is entitled to vote at the meeting and who
has given to the secretary of PCA timely written notice, in proper form, of the
stockholders intention to bring that business before the meeting. Although the
restated by-laws will not give the board the power to approve or disapprove
stockholder nominations of candidates or proposals regarding other business to
come before a special or annual meeting, the by-laws may have the effect of
precluding the conduct of proposed business at a meeting if the proper
procedures are not followed or may discourage or defer a potential acquiror from
conducting a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of PCA.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for our common stock is . The
address and telephone number of the Transfer Agent and Registrar is
.

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SHARES ELIGIBLE FOR FUTURE SALE

Immediately prior to the offerings, there was no public market for our
common stock. Future sales of substantial amounts of common stock in the public
market, or the perception that such future sales could occur, could adversely
affect the market price of our common stock.

Upon completion of the offerings, we will have outstanding an aggregate of
shares of common stock, assuming the issuance of
shares of common stock offered hereby and no exercise of options after
, 1999. Of these shares, the shares sold in the
offerings will be freely tradable without restriction or further registration
under the Securities Act of 1933, except for any shares purchased by
"affiliates" of PCA as that term is defined in Rule 144 under the Securities
Act. Sales by affiliates of PCA would be subject to the limitations and
restrictions described below.

The remaining shares of common stock held by existing
stockholders were issued and sold by us in reliance on exemptions from the
registration requirements of the Securities Act. All of the shares will be
subject to 180 day "lock-up" agreements beginning on the date of this
prospectus. Upon expiration of these lock-up agreements, the shares will become
eligible for sale subject to the limitations of Rule 144 and Rule 701 and, in
some cases, to contractual restrictions on transfer.

As of September 1, 1999, a total of shares of common stock have been
issued to members of management under management equity agreements. All of these
shares are subject to restrictions on transfer following the offerings. Under
these agreements, a stockholder may transfer up to 50% of his or her shares
beginning 180 days after the completion of the offerings, and the remaining 50%
over the twelve-month period following the 180th day after completion of the
offerings.

In addition, as of September 1, 1999, there were a total of shares
of common stock subject to outstanding options under our 1999 Management Equity
Compensation Plan, all of which will become vested and exercisable upon
completion of the offerings. However, all of these shares are subject to 180 day
lock-up agreements and to restrictions on transfer contained in the agreements
pursuant to which the options were acquired. Under these agreements, an option
holder may transfer up to 50% of his or her option shares beginning 180 days
after the completion of the offerings and the remaining 50% over the
twelve-month period following the 180th day after completion of the offerings.
Based on the options outstanding as of September 1, 1999, 180 days after the
effective date of the offerings, a total of approximately shares of
common stock subject to outstanding options would be available for resale in the
public market.

PCA's officers and directors and all of PCA's existing stockholders have
agreed not to offer, sell, hedge, contract to sell, hedge or otherwise dispose
of any of their shares of common stock or any other securities of PCA that they
own that are substantially similar to the common stock, including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive, common stock or any substantially similar
securities (other than pursuant to employee stock option plans existing on, or
upon the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this prospectus), for a period of 180 days after
the date of the offerings. Goldman, Sachs & Co., however, may in its sole
discretion, at any time without notice, release all or any portion of the shares
subject to lock-up agreements.

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year

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would be entitled to sell in "brokers' transactions" or to market makers, within
any three-month period, a number of shares of common stock that does not exceed
the greater of:

- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after the offerings;
or

- the average weekly trading volume in the common stock on the New York
Stock Exchange during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.

Sales under Rule 144 are generally subject to the availability of current
public information about PCA.

All of the currently outstanding shares of PCA were issued on or after April
12, 1999. Accordingly, no shares of common stock may be sold under Rule 144
prior to April 12, 2000.

RULE 144(K)

Under Rule 144(k), a person who is not deemed to have been an affiliate of
PCA at any time during the 90 days preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
the shares without having to comply with the manner of sale, public information,
volume limitation or notice filing provisions of Rule 144. No shares of common
stock of PCA are currently eligible for sale under Rule 144(k).

RULE 701

In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchase shares from us in connection with a
compensatory stock or option plan or other written agreement before the
effective date of the offerings is entitled to sell the shares 90 days after the
effective date of the offerings in reliance on Rule 144, without having to
comply with the holding period and notice filing requirements of Rule 144 and,
in the case of non-affiliates, without having to comply with the public
information, volume limitation or notice filing provisions of Rule 144.

The Commission has indicated that Rule 701 will apply to typical stock
options granted by an issuer before it becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, along with the shares
acquired upon exercise of the options whether exercised before or after the date
of this prospectus. Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning December 10, 1999, may be sold by persons other than "affiliates", as
defined in Rule 144, subject only to the "manner of sale" provisions of Rule 144
and by "affiliates" under Rule 144 without compliance with its one year minimum
holding period requirements.

Upon the expiration of the lock-up agreements and contractual restrictions
on transfer described above, approximately shares of common stock
of PCA will be eligible for resale under Rule 701.

REGISTRATION RIGHTS

Beginning 180 days after the completion of the offerings, PCA Holdings,
which currently holds shares of common stock, will have rights that
require us to register its shares of common stock under the Securities Act at
our expense. See "Certain Relationships and Related Transactions--Registration
Rights Agreement."

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DESCRIPTION OF CERTAIN INDEBTEDNESS

DESCRIPTION OF SENIOR CREDIT FACILITY

In connection with the transactions, PCA entered into a senior credit
facility on April 12, 1999 which consists of:

- a Term Loan A facility of $460.0 million in term loans;

- a Term Loan B facility of $375.0 million in term loans;

- a Term Loan C facility of $375.0 million in term loans; and

- a revolving credit facility of up to $250.0 million in revolving credit
loans and letters of credit.

As of June 30, 1999, PCA had no borrowings outstanding under the revolving
credit facility.

The borrowings under the senior credit facility bear interest at a floating
rate and may be maintained as base rate loans or as Eurodollar loans. Base rate
loans bear interest at the base rate, which is the higher of (1) the applicable
prime lending rate of the administrative agent or (2) the Federal Reserve
reported overnight funds rate plus 1/2 of 1%, plus, in each case, an applicable
margin. Eurodollar loans bear interest at the Eurodollar rate as described in
the senior credit facility, plus an applicable margin.

The revolving credit facility must be repaid on or before April 12, 2005.
Prior to that date, funds may be borrowed, repaid and reborrowed, without
premium or penalty under the terms of the senior credit facility. The term loans
mature, and as a result must be repaid, in quarterly installments on March 31,
June 30, September 30 and December 31 of each year, beginning on September 30,
1999. Term Loan A will mature in quarterly installments from September 1999
through 2005. Term Loan B will mature in quarterly installments from September
1999 through 2007. Term Loan C will mature in quarterly installments from
September 1999 through 2008.

Voluntary prepayments of amounts outstanding under the senior credit
facility are permitted at any time, so long as PCA gives notice as required by
the senior credit facility. However, if a prepayment is being made with respect
to a Eurodollar loan and the prepayment is made on a date other than an interest
payment date, PCA must pay a fee to compensate the lender for losses and
expenses incurred by the lender as a result of the prepayment.

On May 18, 1999, PCA made a voluntary prepayment of $75.0 million using
excess cash to permanently reduce its borrowings under the term loans. On July
15, 1999, PCA prepaid an additional $10.0 million on the term loans using excess
cash. As a result of these prepayments, no quarterly installments are due until
June, 2000 for Term Loan A and September, 2001 for Term Loans B and C.

The senior credit facility requires PCA to prepay the term loan facilities
and reduce commitments under the revolving credit facility with all or a portion
of the proceeds from designated financing or other transactions.

In August 1999, PCA signed purchase and sales agreements with various buyers
to sell approximately 400,000 acres of timberland. The net proceeds of these
sales, if any, would be used to reduce borrowings under the senior credit
facility.

DESCRIPTION OF SENIOR SUBORDINATED NOTES

PCA has issued $550,000,000 aggregate principal amount of 9 5/8% senior
subordinated notes due 2009. Interest on the notes is payable each April 1 and
October 1, beginning October 1, 1999. The notes are guaranteed by each of PCA's
current and future domestic subsidiaries, other than any receivables subsidiary.

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At any time after April 1, 2004, PCA may redeem some or all of the notes, at
a redemption price of 104.8125% of the principal amount, declining ratably to
par after April 1, 2007, plus accrued and unpaid interest and liquidated
damages, if any, to the redemption date.

At any time prior to April 1, 2002, PCA may use the proceeds of offerings of
its equity securities or that of its parent or timberland sales in excess of
$500 million to redeem, on one or more occasions, up to 35% of the aggregate
principal amount of the notes issued, at a redemption price of 109.625% of the
principal amount, plus accrued and unpaid interest and liquidated damages, if
any, to the redemption date.

At any time prior to April 1, 2004, if PCA undergoes specific kinds of
changes in control, PCA may redeem all but not less than all of the notes, at a
redemption price of the greater of (1) 101% of the principal amount or (2) the
excess over the principal amount of the notes of the present value on the
redemption date of 104.8125% plus all required interest payments due on the
notes through April 1, 2004, in each case plus accrued and unpaid interest and
liquidation damages, if any, to the redemption date.

If PCA undergoes specific kinds of changes of control, the holders of the
notes may require PCA to offer to purchase some or all of the notes at a price
equal to 101% of the principal amount.

The indenture governing the notes contains covenants that, among other
things, restrict PCA's ability to incur more debt, pay dividends on or purchase
stock, make investments, use assets as security in other transactions and sell
assets or merge with or into other companies.

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U.S. FEDERAL TAX CONSEQUENCES FOR
NON-UNITED STATES HOLDERS OF COMMON STOCK

The following is a summary of the material United States federal income and
estate tax consequences of the ownership and disposition of common stock
generally applicable to non-United States holders. A non-United States holder is
any beneficial owner of common stock that, for United States federal income tax
purposes, is a non-resident alien individual, a foreign corporation, a foreign
partnership or a foreign estate or trust as those terms are defined in the
Internal Revenue Code of 1986, as amended (the "Code"). This discussion is based
on the Code, existing, proposed and temporary regulations promulgated
thereunder, and administrative and judicial interpretations, all as of the date
of this prospectus, and all of which are subject to change either retroactively
or prospectively. Moreover, this discussion does not address all aspects of
United States federal income and estate taxation that may be relevant to
non-United States holders in light of their particular circumstances and does
not address any tax consequences arising under the laws of any state, local or
foreign taxing jurisdiction or the application of any particular tax treaty.
Further, it does not discuss special rules applicable to non-United States
holders that are, for example, banks, insurance companies, dealers in securities
and holders of securities held as part of a straddle, hedge or conversion
transaction. ALL PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER
TAX CONSEQUENCES OF OWNING AND DISPOSING OF COMMON STOCK.

GAIN ON DISPOSITION OF COMMON STOCK

A non-United States holder generally will not be subject to United States
federal income tax with respect to gain realized upon the sale or other
disposition of common stock unless:

(1) the gain is effectively connected with a United States trade or business
of the non-United States holder (or, if a tax treaty applies,
attributable to a permanent establishment in the United States maintained
by that non-United States holder);

(2) the non-United States holder is an individual who holds the common stock
as a capital asset, is present in the United States for a period or
periods aggregating 183 days or more during the taxable year in which the
sale or disposition occurs, and other conditions are met;

(3) the non-United States holder is an individual subject to tax pursuant to
the provisions of United States tax law applicable to United States
expatriates; or

(4) PCA is or has been a "United States real property holding corporation"
for United States federal income tax purposes at any time during the
shorter of the five-year period preceding the disposition or the holder's
holding period and (a) PCA's common stock is not regularly traded on an
established securities market or (b) the non-United States holder owns
more than 5% of PCA's common stock, as discussed below under "Foreign
Investment in Real Property Tax Act."

FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT

Under the Foreign Investment in Real Property Tax Act, as amended
("FIRPTA"), non-United States holders who would not otherwise be subject to
federal income tax on gain from dispositions of PCA common stock may,
nonetheless, be subject to United States federal income tax on disposition gain
if PCA is a "United States real property holding corporation" anytime during the
five years preceding the disposition or the holder's holding period, if shorter.
In general, PCA will be a United States real property holding corporation if 50%
or more of its assets constitute United States real property interests within
the meaning of the Code. Although PCA owns substantial

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amounts of United States real property, PCA believes that it was not a United
States real property holding corporation at the time of the transactions in
April 1999 and that PCA is not currently a United States real property holding
corporation. Because the determination of whether PCA is a United States real
property holding corporation turns on the relative value of PCA's United States
real property interests and its other assets, and because the FIRPTA rules are
complex, PCA can give no assurances that it is not a United States real property
holding corporation or that it will not become one.

Even if PCA is or becomes a United States real property holding corporation,
FIRPTA will not apply to cause a non-United States holder to be taxed on the
disposition of PCA common stock so long as PCA common stock is regularly traded
on an established securities market and the non-United States holder does not
own more than 5% of PCA's common stock anytime during the five years preceding
the disposition or the holder's holding period, if shorter, counting both direct
and indirect ownership under the ownership attribution rules of the Code.
Similarly, even if PCA is a United States real property holding corporation,
non-United States holders will not be subject to 10% withholding on the
disposition of PCA common stock so long as PCA's common stock is regularly
traded on an established securities market.

WITHHOLDING ON DIVIDEND DISTRIBUTIONS

PCA currently has no plans to pay dividends on its common stock. If PCA were
to pay dividends on its common stock in the future, a non-United States holder
would generally be subject to a United States federal withholding tax of 30% on
the dividends unless (1) an applicable tax treaty reduces or eliminates
withholding, (2) the dividends are effectively connected with a United States
trade or business (or, if a tax treaty applies, attributable to a permanent
establishment in the United States maintained by such non-United States holder),
in which case regular graduated federal income tax rates would apply and, in the
case of a non-United States holder that is a corporation, a branch profits tax
may apply or (3) if the alien holder is an individual subject to tax pursuant to
the provisions of the United States tax law applicable to United States
expatriates, in which case regular graduated federal income tax rates would
apply. PCA is required to withhold 30% of any dividend distribution to a
non-United States holder unless the non-United States holder provides PCA or its
paying agent with a properly executed IRS Form 1001 or 4224 claiming an
exemption from or a reduction in the rate of withholding based upon one of the
exceptions noted above, including under the benefit of an applicable tax treaty.
Under new withholding regulations applicable to payments made after December 31,
2000, a non-United States holder must supply PCA or its paying agent with an IRS
Form W-8BEN to claim such an exemption from or reduction in withholding.

ESTATE TAX

An individual non-United States holder who is treated as the owner of PCA's
common stock at the time of that individual's death or has made certain lifetime
transfers of an interest in the common stock will be required to include the
value of the common stock and the lifetime transfers in that individual's gross
estate for United States federal estate tax purposes and may be subject to
United States federal estate tax, unless an applicable tax treaty provides
otherwise. For United States federal estate tax purposes, a "non-United States
holder" is an individual who is neither a citizen nor a domiciliary of the
United States. Whether an individual is considered a "domiciliary" of the United
States for estate tax purposes is generally determined on the basis of all of
the facts and circumstances.

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LEGAL MATTERS

Some of the legal matters in connection with the issuance of the common
stock will be passed upon for PCA by Kirkland & Ellis, Chicago, Illinois. Some
of the partners of Kirkland & Ellis, through an investment partnership,
beneficially own, indirectly through PCA Holdings, an aggregate of approximately
0.2% of the common stock. Some of the legal matters in connection with the
offerings will be passed upon for the underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York.

EXPERTS

The balance sheet of Packaging Corporation of America as of January 31,
1999, appearing in this prospectus has been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and is included in reliance upon the authority of such firm as experts
in accounting and auditing.

The combined financial statements of The Containerboard Group, a division of
TPI, as of December 31, 1998, 1997 and 1996, and for each of the three years in
the period ended December 31, 1998, included in this prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect to the combined financial statements, and are included
herein in reliance upon the authority of the firm as experts in accounting and
auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits and schedules, under the Securities
Act of 1933, with respect to the shares of common stock to be sold in the
offerings. This prospectus, which forms a part of the registration statement,
does not contain all of the information set forth in the registration statement.
For further information with respect to us and the common stock offered in this
prospectus, we refer you to the registration statement, including the exhibits
thereto, and the financial statements and notes filed as a part thereof. With
respect to each document filed with the Commission as an exhibit to the
registration statement, we refer you to the exhibit for a more complete
description of the matter involved.

We will be filing quarterly and annual reports, proxy statements and other
information with the Commission. Any reports or documents we file with the
Commission, including the registration statement, may be inspected and copied at
the Public Reference Section of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 (telephone number: 1-800-SEC-0330), and at the
Regional Offices of the Commission at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 14th Floor, 500 West Madison Street,
Chicago, Illinois 60661. Copies of the reports or other documents may be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission
maintains a web site that contains reports and other information that is filed
through the Commission's Electronic Data Gathering Analysis and Retrieval
System. The web site can be accessed at http://www.sec.gov.

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INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE CONTAINERBOARD GROUP (A DIVISION OF TENNECO PACKAGING INC.)--AUDITED FINANCIAL
STATEMENTS
Report of Independent Public Accountants........................................... F-2
Combined Statements of Assets, Liabilities and Interdivision Account as of December
31, 1998, 1997 and 1996.......................................................... F-3
Combined Statements of Revenues, Expenses and Interdivision Account for the years
ended December 31, 1998, 1997 and 1996........................................... F-4
Combined Statements of Cash Flows for the years ended December 31, 1998, 1997 and
1996............................................................................. F-5
Notes to Combined Financial Statements............................................. F-7

PACKAGING CORPORATION OF AMERICA - AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors..................................................... F-27
Balance Sheet as of January 31, 1999............................................... F-28
Note to Balance Sheet.............................................................. F-29

PACKAGING CORPORATION OF AMERICA - UNAUDITED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1999 (unaudited) and December 31, 1998
(audited)........................................................................ F-30
Consolidated Statements of Income for the six months ended June 30, 1998
(unaudited), for the period from January 1, 1999 through April 11, 1999
(unaudited) and for the period from April 12, 1999 through June 30, 1999
(unaudited)...................................................................... F-31
Consolidated Statements of Cash Flows for the six months ended June 30, 1998
(unaudited), for the period from January 1, 1999 through April 11, 1999
(unaudited) and for the period from April 12, 1999 through June 30, 1999
(unaudited)...................................................................... F-32
Notes to Consolidated Financial Statements (unaudited)............................. F-33
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Tenneco Inc.:

We have audited the accompanying combined statements of assets, liabilities
and interdivision account of THE CONTAINERBOARD GROUP (a division of Tenneco
Packaging Inc., which is a Delaware corporation and a wholly owned subsidiary of
Tenneco Inc.) as of December 31, 1998, 1997 and 1996, and the related combined
statements of revenues, expenses and interdivision account and cash flows for
the years then ended. These financial statements are the responsibility of the
Group's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of The Containerboard
Group as of December 31, 1998, 1997 and 1996, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

Chicago, Illinois
February 26, 1999

F-2
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

COMBINED STATEMENTS OF
ASSETS, LIABILITIES AND INTERDIVISION ACCOUNT

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
(In thousands)
Current assets:
Cash...................................................................... $ 1 $ 1 $ 1,027
Accounts receivable (net of allowance for doubtful accounts of $5,220 in
1998, $5,023 in 1997 and $5,010 in 1996)................................ 13,971 27,080 16,982
Receivables from affiliated companies..................................... 10,390 19,057 10,303
Notes receivable.......................................................... 27,390 573 547
Inventories:
Raw materials............................................................. 86,681 100,781 99,459
Work in process and finished goods........................................ 48,212 38,402 36,995
Materials and supplies.................................................... 44,310 42,043 35,834
---------- ---------- ----------
Inventory, gross...................................................... 179,203 181,226 172,288
Excess of FIFO over LIFO cost............................................. (28,484) (25,445) (28,308)
---------- ---------- ----------
Inventory, net........................................................ 150,719 155,781 143,980
---------- ---------- ----------
Prepaid expenses and other current assets................................. 41,092 35,019 35,536
---------- ---------- ----------
Total current assets.................................................. 243,563 237,511 208,375
---------- ---------- ----------
Property, plant and equipment, at cost:
Land, timber, timberlands and buildings................................... 287,510 280,060 269,134
Machinery and equipment................................................... 1,289,459 1,175,805 1,082,912
Other, including construction in progress................................. 100,136 130,696 140,522
Less-Accumulated depreciation and depletion............................... (735,749) (656,915) (582,437)
---------- ---------- ----------
Property, plant and equipment, net.................................... 941,356 929,646 910,131
---------- ---------- ----------
Intangibles................................................................. 50,110 56,470 55,660
---------- ---------- ----------
Other long-term assets...................................................... 131,092 77,312 72,076
---------- ---------- ----------
Investments................................................................. 1,282 16,324 14,809
---------- ---------- ----------
Total assets................................................................ $1,367,403 $1,317,263 $1,261,051
---------- ---------- ----------
---------- ---------- ----------

LIABILITIES AND INTERDIVISION ACCOUNT
Current liabilities:
Accounts payable.......................................................... $ 87,054 $ 124,633 $ 111,588
Payables to Tenneco affiliates............................................ 7,091 6,164 29,402
Current portion of long-term debt......................................... 617 3,923 1,603
Current portion of deferred gain.......................................... -- 1,973 1,973
Accrued liabilities....................................................... 69,390 70,426 166,663
---------- ---------- ----------
Total current liabilities............................................. 164,152 207,119 311,229
---------- ---------- ----------
Long-term liabilities:
Long-term debt............................................................ 16,935 23,941 18,713
Deferred taxes............................................................ 254,064 174,127 87,165
Deferred gain............................................................. - 34,262 36,235
Other..................................................................... 23,860 23,754 23,287
---------- ---------- ----------
Total long-term liabilities........................................... 294,859 256,084 165,400
---------- ---------- ----------
Interdivision account....................................................... 908,392 854,060 784,422
---------- ---------- ----------
Total liabilities and interdivision account................................. $1,367,403 $1,317,263 $1,261,051
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

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

F-3
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

COMBINED STATEMENTS OF
REVENUES, EXPENSES AND INTERDIVISION ACCOUNT

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
Net sales............................................ $ 1,571,019 $ 1,411,405 $ 1,582,222
Cost of sales........................................ (1,289,644) (1,242,014) (1,337,410)
----------- ----------- -----------
Gross profit....................................... 281,375 169,391 244,812
Selling and administrative expenses.................. (108,944) (102,891) (95,283)
Restructuring, impairment and other.................. (14,385) -- --
Other income, net.................................... 26,818 44,681 56,243
Corporate allocations................................ (63,114) (61,338) (50,461)
----------- ----------- -----------
Income before interest, taxes and extraordinary
item............................................. 121,750 49,843 155,311
Interest expense, net................................ (2,782) (3,739) (5,129)
----------- ----------- -----------
Income before taxes and extraordinary item......... 118,968 46,104 150,182
Provision for income taxes........................... (47,529) (18,714) (59,816)
----------- ----------- -----------
Income before extraordinary item..................... 71,439 27,390 90,366
Extraordinary loss................................... -- -- --
----------- ----------- -----------
Net income........................................... 71,439 27,390 90,366
Interdivision account, beginning of period........... 854,060 784,422 640,483
Interdivision account activity, net.................. (17,107) 42,248 53,573
----------- ----------- -----------
Interdivision account, end of period................. $ 908,392 $ 854,060 $ 784,422
----------- ----------- -----------
----------- ----------- -----------
Basic and diluted earnings per share:
Income before extraordinary item................... $ 166.14 $ 63.70 $ 210.15
Extraordinary item................................. -- -- --
----------- ----------- -----------
Net income per common share........................ 166.14 63.70 210.15
----------- ----------- -----------
----------- ----------- -----------

Weighted average common shares outstanding......... 430 430 430
</TABLE>

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

F-4
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Cash flows from operating activities:
Net income.............................................. $ 71,439 $ 27,390 $ 90,366
--------- --------- ---------
Adjustments to reconcile net income to net cash provided
by operating activities--
Depreciation, depletion and amortization.............. 96,950 87,752 78,730
Extraordinary loss-early debt extinguishment..........
Restructuring and other............................... 14,385 -- --
Gain on sale of joint venture interest................ (15,060) -- --
Gain on sale of timberlands........................... (16,944) -- --
Gain on sale of assets................................ -- -- (51,268)
Gain on lease refinancing............................. -- (37,730) --
Gain on Willow Flowage................................ -- (4,449) --
Gain on sale of mineral rights........................ -- (1,646) --
Amortization of deferred gain......................... (1,973) (1,973) (1,973)
Increase (decrease) in deferred income taxes.......... 71,342 85,070 8,318
Undistributed earnings of affiliated companies........ 302 (2,264) (536)
Increase (decrease) in other noncurrent reserves...... 107 467 (27,287)
Changes in noncash components of working capital,
excluding transactions with Tenneco
Decrease (increase) in current assets--
Accounts receivable............................... 12,100 (26,092) 38,261
Inventories, net.................................. 5,062 (10,932) 1,287
Prepaid expenses and other........................ 4,572 782 (8,070)
(Decrease) increase in current liabilities--
Accounts payable.................................. (37,580) 13,045 (47,930)
Accrued liabilities............................... (9,301) (22,207) (24,041)
--------- --------- ---------
Net cash provided by operating activities....... 195,401 107,213 55,857
--------- --------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment.............. (103,429) (110,186) (168,642)
Prepaid Meridian Lease.................................. (84,198) -- --
Acquisition of businesses............................... -- (5,866) --
Other long-term assets.................................. (10,970) (6,983) (23,478)
Proceeds from disposals................................. 26,214 10,460 122,654
Other transactions, net................................. (5,350) 690 (4,766)
--------- --------- ---------
Net cash used for investing activities.......... (177,733) (111,885) (74,232)
--------- --------- ---------
</TABLE>

F-5
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Cash flows from financing activities:
Proceeds from long-term debt issued....................... $ -- $ 1,146 $ 430
Payments on long-term debt................................ (10,346) (1,618) (1,886)
(Decrease) increase in interdivision account.............. (17,109) 19,907 168,074
Working capital transactions with Tenneco and affiliated
companies--
Decrease (increase) in receivables from affiliated
companies............................................. 8,667 (8,754) (1,781)
Decrease (increase) in factored receivables............. 192 16,204 (25,563)
Increase (decrease) in accounts payable to affiliated
companies............................................. 928 (23,239) (8,007)
Dividends paid to Tenneco............................... -- -- (114,500)
--------- --------- ---------
Net cash (used for) provided by financing
activities.......................................... (17,668) 3,646 16,767
--------- --------- ---------
Net decrease in cash........................................ -- (1,026) (1,608)
Cash, beginning of period................................... 1 1,027 2,635
--------- --------- ---------
Cash, end of period......................................... $ 1 $ 1 $ 1,027
--------- --------- ---------
--------- --------- ---------
</TABLE>

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

F-6
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS

1. BUSINESS DESCRIPTION

The Containerboard Group (the "Group") is a division of Tenneco Packaging
Inc. ("Packaging") which is a wholly owned subsidiary of Tenneco Inc.
("Tenneco"). The Group is comprised of mills and corrugated products
operations.

The Mill operations ("The Mills") consist of two Kraft linerboard mills
located in Counce, Tennessee, and Valdosta, Georgia, and two medium mills
located in Filer City, Michigan, and Tomahawk, Wisconsin. The Mills also
include two recycling centers located in Nashville, Tennessee, and Jackson,
Tennessee. The Mills also control and manage approximately 950,000 acres of
timberlands. The Mills transfer the majority of their output to The
Corrugated Products operations ("Corrugated").

Corrugated operations consist of 39 corrugated combining plants, 28
specialty/sheet and other plants and 5 design centers. All plants are
located in North America. Corrugated combines linerboard and medium
(primarily from The Mills) into sheets that are converted into corrugated
shipping containers, point-of-sale graphics packaging, point-of-purchase
displays and other specialized packaging. Corrugated sells to diverse
customers primarily in North America.

The Group's sales to other Packaging entities and other Tenneco entities are
included in the accompanying combined financial statements. The net sales to
other Packaging entities for the years ended December 31, 1998, 1997 and
1996, were approximately $76,906,000, $69,981,000 and $76,745,000,
respectively. The net sales to other Tenneco entities for the years ended
December 31, 1998, 1997 and 1996, were approximately $14,251,000,
$13,108,000 and $10,376,000, respectively. The profit relating to these
sales are included in the accompanying combined financial statements.

As a result of the Group's relationship with Packaging, the combined
statements of assets, liabilities and interdivision account and the related
combined statements of revenues, expenses and interdivision account are not
necessarily indicative of what actually would have occurred had the Group
been a stand-alone entity. Additionally, these combined financial statements
are not necessarily indicative of the future financial position or results
of operations of the Group.

2. SUMMARY OF ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying combined financial statements include the selected assets,
liabilities, revenues and expenses of the Group. All significant intragroup
accounts and transactions have been eliminated.

REVENUE RECOGNITION

The Group recognizes revenue as products are shipped to customers.

ACCOUNTS RECEIVABLE

A substantial portion of the Group's trade accounts receivable are sold by
Packaging, generally without recourse, to a financing subsidiary of Tenneco
Inc. Expenses relating to cash discounts, credit losses, pricing adjustments
and other allowances on these factored receivables are

F-7
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
accrued and charged to the Group. The amount of trade accounts receivable
sold was approximately $150,099,000, $149,907,000 and $133,703,000 at
December 31, 1998, 1997 and 1996, respectively.

INVENTORIES

Inventories for raw materials and finished goods are valued using the
last-in, first-out ("LIFO") cost method and include material, labor and
manufacturing-related overhead costs. Supplies and materials inventories are
valued using a moving average cost. All inventories are stated at the lower
of cost or market.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are recorded at cost. Interest costs relating
to construction in progress are capitalized based upon the total amount of
interest cost (including interest costs on notes payable to Tenneco)
incurred by Packaging.

The amount of interest capitalized related to construction in progress at
the Group was approximately $576,000, $975,000 and $5,207,000 for the years
ended December 31, 1998, 1997 and 1996, respectively.

Depreciation is computed on the straight-line basis over the estimated
useful lives of the related assets. The following useful lives are used for
the various categories of assets:

<TABLE>
<S> <C>
Buildings and land improvements..................... 5 to 40 years
Machinery and equipment............................. 3 to 25 years
Trucks and automobiles.............................. 3 to 10 years
Furniture and fixtures.............................. 3 to 20 years
Computers and software.............................. 3 to 7 years
Period of the
Leasehold improvements.............................. lease
------------------
------------------
</TABLE>

Timber depletion is provided on the basis of timber cut during the period
related to the estimated quantity of recoverable timber. Assets under
capital leases are depreciated on the straight-line method over the term of
the lease.

Expenditures for repairs and maintenance are expensed as incurred.

Long-lived assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be fully recoverable. In the event that facts and
circumstances indicate that the carrying amount of any long-lived assets may
be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to discounted cash flows is required.

F-8
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
DEFERRED GAIN

In 1992, Packaging entered into a sale-leaseback transaction for financial
reporting purposes involving certain of its timberlands. The deferred gain
recognized upon sale is being amortized on a straight-line basis over the
initial lease term.

This deferred gain relates to a lease which was prepaid by the Group in
December, 1998 (Note 12). The 1998 financial statements have reclassed the
current and long-term portions of the deferred gain against the prepaid
payment in Prepaid Expenses and Other Current Assets and Other Long-Term
Assets.

CHANGES IN ACCOUNTING PRINCIPLES

In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes new
accounting and reporting standards requiring that all derivative instruments
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at
its fair value. The statement requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item
in the income statement and requires that a company must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. This statement is effective for all fiscal years beginning after
June 15, 1999. The adoption of this new standard is not expected to have a
significant effect on the Group's financial position or results of
operations.

In April, 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-Up Activities," which requires costs of start-up activities to be
expensed as incurred. This statement is effective for fiscal years beginning
after December 15, 1998. The statement requires capitalized costs related to
start-up activities to be expensed as a cumulative effect of a change in
accounting principle when the statement is adopted. Tenneco currently
expects to adopt this new accounting principle in the first quarter of 1999.
The adoption of this new standard is not expected to have a significant
effect on the Group's financial position or results of operations.

In March, 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which establishes
new accounting and reporting standards for the costs of computer software
developed or obtained for internal use. This statement will be applied
prospectively and is effective for fiscal years beginning after December 15,
1998. The adoption of this new standard is not expected to have a
significant effect on the Group's financial position or results of
operations.

F-9
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
FREIGHT TRADES

The Group regularly trades containerboard with other manufacturers primarily
to reduce shipping costs. The freight trade transactions are accounted for
primarily as transactions in the inventory accounts; the impact on income is
not material.

ENVIRONMENTAL LIABILITIES

The estimated landfill closure and postclosure maintenance costs expected to
be incurred upon and subsequent to the closing of existing operating
landfill areas are accrued based on the landfill capacity used to date.
Amounts are estimates using current technologies for closure and monitoring
and are not discounted.

The potential costs related to the Group for various environmental matters
are uncertain due to such factors as the unknown magnitude of possible
cleanup costs, the complexity and evolving nature of governmental laws and
regulations and their interpretations, and the timing, varying costs and
effectiveness of alternative cleanup technologies. Liabilities recorded by
the Group for environmental contingencies are estimates of the probable
costs based upon available information and assumptions relating to the
Group. Because of these uncertainties, however, the Group's estimates may
change. The Group believes that any additional costs identified as further
information becomes available would not have a material effect on the
combined statements of assets, liabilities and interdivision account or
revenues, expenses and interdivision account of the Group.

COMBINED STATEMENTS OF CASH FLOWS

As a division of Packaging, the Group does not maintain separate cash
accounts other than for petty cash. The Group's disbursements for payroll,
capital projects, operating supplies and expenses are processed and funded
by Packaging through centrally managed accounts. In addition, cash receipts
from the collection of accounts receivable and the sales of assets are
remitted directly to bank accounts controlled by Packaging. In this type of
centrally managed cash system in which the cash receipts and disbursements
of Packaging's various divisions are commingled, it is not feasible to
segregate cash received from Packaging (e.g., as financing for the business)
from cash transmitted to Packaging (e.g., as a distribution). Accordingly,
the net effect of these cash transactions with Packaging are presented as a
single line item within the financing section of the cash flow statements.
Similarly, the activity of the interdivision account presents the net
transfer of funds and charges between Packaging and the Group as a single
line item.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred. The amounts charged
were $3,728,000, $4,345,000 and $4,789,000 in 1998, 1997 and 1996,
respectively.

F-10
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS

Goodwill and intangibles, net of amortization, by major category are as
follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Goodwill................................... $ 48,046 $ 52,958 $ 51,721
Intangibles................................ 2,064 3,512 3,939
--------- --------- ---------
$ 50,110 $ 56,470 $ 55,660
--------- --------- ---------
--------- --------- ---------
</TABLE>

Goodwill is being amortized on a straight-line basis over 40 years. Such
amortization amounted to $1,449,000, $1,452,000 and $1,440,000 for 1998,
1997 and 1996, respectively. Goodwill totaling approximately $3,463,000 was
written off in 1998 related to a closed facility (Note 7).

The Group has capitalized certain intangible assets, primarily trademarks
and patents, based on their estimated fair value at the date of acquisition.
Amortization is provided for these intangible assets on a straight-line
basis over periods ranging from 3 to 10 years. Covenants not to compete are
amortized on a straight-line basis over the terms of the respective
agreements. Such amortization amounted to $1,127,000, $1,234,000 and
$1,416,000 in 1998, 1997 and 1996, respectively.

Intangible assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be fully recoverable. In the event that facts and
circumstances indicate that the carrying amount of any intangible assets may
be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows through
the remaining amortization period associated with the asset would be
compared to the asset's carrying amount to determine if a write-down to
discounted cash flows is required.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

RECLASSIFICATIONS

The prior years' financial statements have been reclassified, where
appropriate, to conform to the 1998 presentation.

SEGMENT INFORMATION

The Group adopted SFAS No. 131, "Disclosure About Segments of an Enterprise
and Related Information," in 1998 and determined that the Group is primarily
engaged in one line of business: the manufacture and sale of packaging
materials, boxes and containers for industrial and consumer markets. No
single customer accounts for more than 10% of total revenues. The Group has
no foreign operations.

F-11
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

EARNINGS PER SHARE

Earnings per share has been calculated using the historical earnings of the
Group and the number of common shares resulting from the April 12, 1999
transaction (430,000 common shares), as adjusted to reflect the anticipated
-for-one stock split. For all periods presented, basic and diluted
earnings per share are the same because there are no potentially dilutive
other securities.

3. INVESTMENTS IN JOINT VENTURES

The Group has a 50% U.S. joint venture with American Cellulose Corporation
to manufacture and market hardwood chips. The net investment, which was
accounted for under the equity method, was $1,282,000, $1,310,000 and
$1,519,000 as of December 31, 1998, 1997 and 1996, respectively. In the
second quarter of 1996, Packaging entered into an agreement to form a joint
venture with Caraustar Industries whereby Packaging sold its two recycled
paperboard mills and a fiber recycling operation and brokerage business to
the joint venture in return for approximately $115 million and a 20% equity
interest in the joint venture. In June, 1998, Packaging sold its remaining
20% equity interest in the joint venture to Caraustar Industries. The net
investment, which was accounted for under the equity method, was $0,
$15,014,000 and $13,290,000 as of December 31, 1998, 1997 and 1996,
respectively.

4. LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Capital lease obligations, interest at 8.5% for 1998 and
1997 and a weighted average interest rate of 8.2% for
1996 due in varying amounts through 2000................. $ 18 $ 32 $ 18,658
Non-interest-bearing note, due in annual installments of
$70,000 through July 1, 2004, net of discount imputed at
10.0% of $182,000, $216,000 and $249,000 in 1998, 1997
and 1996, respectively................................... 308 344 381
Notes payable, interest at an average rate of 13.5%, 13.3%
and 8.8% for 1998, 1997 and 1996, respectively, with
varying amounts due through 2010......................... 16,553 26,187 680
Other obligations.......................................... 673 1,301 597
--------- --------- ---------
Total................................................ 17,552 27,864 20,316
Less--Current portion...................................... 617 3,923 1,603
--------- --------- ---------
Total long-term debt................................. $ 16,935 $ 23,941 $ 18,713
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-12
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

4. LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
In January, 1997, the General Electric Capital Corporation ("GECC")
operating leases were refinanced. Through this refinancing, several capital
lease obligations were extinguished as the assets were incorporated into the
new operating lease (Note 12).

Annual payments for debt during the next five years and thereafter are:
$617,000 (1999), $214,000 (2000), $3,569,000 (2001), $4,387,000 (2002),
$4,240,000 (2003) and $4,525,000 (2004 and thereafter).

In 1997, Tenneco contributed the Counce Limited Partnership to Packaging
which included notes payable totaling approximately $26,187,000.

In February, 1999, Tenneco Inc. paid off the remaining note payable as it
relates to the Counce Limited Partnership. The payment was $27,220,000,
including a $10,456,000 premium payment for the early extinguishment of
debt.

5. PENSION AND OTHER BENEFIT PLANS

Substantially all of the Group's salaried and hourly employees are covered
by retirement plans sponsored by Packaging and Tenneco. Benefits generally
are based on years of service and, for most salaried employees, on final
average compensation. Packaging's funding policies are to contribute to the
plans, at a minimum, amounts necessary to satisfy the funding requirements
of federal laws and regulations. The assets of the plans consist principally
of listed equity and fixed and variable income securities, including Tenneco
Inc. common stock.

The Group's eligible salaried employees participate in the Tenneco
Retirement Plan (the "Retirement Plan"), a defined benefit plan, along with
other Tenneco divisions and subsidiaries. The pension expense allocated to
the Group by Packaging for this plan was approximately $5,595,000,
$3,197,000 and $3,111,000 for the years ended December 31, 1998, 1997 and
1996, respectively. Amounts allocated are principally determined based on
payroll. This plan is overfunded and a portion of the prepaid pension costs
has not been allocated to the Group.

The Group's eligible hourly employees participate in the Tenneco Packaging
Pension Plan for Certain Hourly Rated Employees, also a defined benefit
plan, along with other Packaging divisions. As stated, due to the fact that
other divisions within Packaging participate in the plan, certain of the
disclosures required by SFAS No. 132, "Employers' Disclosures About Pension
and Other Postretirement Benefits", such as a summary of the change in
benefit obligation and the change in plan assets, are not available. The net
pension (income) cost actuarially allocated to the Group for this plan was
$(466,000), $144,000 and $2,373,000 for the years ended December 31, 1998,
1997 and 1996, respectively. This plan is overfunded, and a portion of the
related pension asset of $35,603,000, $35,137,000 and $34,429,000 for
December 31, 1998, 1997 and 1996, respectively, has been actuarially
allocated to the Group and is included in Other Long-Term Assets.

However, in connection with the pending sale of the Group as described in
Note 14 to these financial statements, the pension asset allocated to the
Group will be excluded from the sale transaction and remain with Tenneco.

F-13
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

5. PENSION AND OTHER BENEFIT PLANS (CONTINUED)
Actuarially allocated net pension cost for the Group's defined benefit
plans, excluding the Retirement Plan, consists of the following components:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost-benefits earned during the year.............. $ 3,112 $ 3,652 $ 4,021
Interest cost on projected benefit obligations............ 6,990 6,675 6,174
Expected return on plan assets............................ (11,312) (10,819) (8,389)
Amortization of-
Transition liability.................................... (164) (164) (164)
Unrecognized loss....................................... -- -- 10
Prior service cost...................................... 908 800 721
--------- --------- ---------
Net pension (income) cost........................... $ (466) $ 144 $ 2,373
--------- --------- ---------
--------- --------- ---------
</TABLE>

The funded status of the Group's allocation of defined benefit plans,
excluding the Retirement Plan, reconciles with amounts recognized in the
statements of assets and liabilities and interdivision account as follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Actuarial present value at September 30--
Vested benefit obligation............................ $ (98,512) $ (86,865) $ (79,818)
Accumulated benefit obligation....................... (108,716) (95,711) (87,481)
--------- --------- ---------
--------- --------- ---------
Projected benefit obligation........................... $(108,716) $ (96,118) $ (88,555)
Plan assets at fair value at September 30.............. 146,579 141,961 118,968
Unrecognized transition liability...................... (1,092) (1,256) (1,420)
Unrecognized net gain.................................. (14,623) (21,573) (5,111)
Unrecognized prior service cost........................ 13,455 12,123 10,547
--------- --------- ---------
Prepaid pension cost at December 31.............. $ 35,603 $ 35,137 $ 34,429
--------- --------- ---------
--------- --------- ---------
</TABLE>

The weighted average discount rate used in determining the actuarial present
value of the benefit obligations was 7.00% for the year ended December 31,
1998, and 7.75% for the years ended December 31, 1997 and 1996. The weighted
average expected long-term rate of return on plan assets was 10% for 1998,
1997 and 1996.

Middle management employees participate in a variety of incentive
compensation plans. These plans provide for incentive payments based on the
achievement of certain targeted operating results and other specific
business goals. The targeted operating results are determined each

F-14
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

5. PENSION AND OTHER BENEFIT PLANS (CONTINUED)
year by senior management of Packaging. The amounts charged to expense for
these plans were $5,920,000, $6,407,000 and $6,722,000 in 1998, 1997 and
1996, respectively.

In June, 1992, Tenneco initiated an Employee Stock Purchase Plan ("ESPP").
The plan allows U.S. and Canadian employees of the Group to purchase Tenneco
Inc. common stock through payroll deductions at a 15% discount. Each year,
an employee in the plan may purchase shares with a discounted value not to
exceed $21,250. The weighted average fair value of the employee purchase
right, which was estimated using the Black-Sholes option pricing model and
the assumptions described below except that the average life of each
purchase right was assumed to be 90 days, was $6.31, $11.09 and $10.77 in
1998, 1997 and 1996, respectively. The ESPP was terminated as of September
30, 1996. Tenneco adopted a new employee stock purchase plan effective April
1, 1997. Under the respective ESPPs, Tenneco sold 133,223 shares, 85,024
shares and 73,140 shares to Group employees in 1998, 1997 and 1996,
respectively.

In December, 1996, Tenneco adopted the 1996 Stock Ownership Plan, which
permits the granting of a variety of awards, including common stock,
restricted stock, performance units, stock appreciation rights, and stock
options to officers and employees of Tenneco. Tenneco can issue up to
17,000,000 shares of common stock under this plan, which will terminate
December 31, 2001.

The fair value of each stock option issued by Tenneco to the Group during
1998, 1997 and 1996 is estimated on the date of grant using the Black-Sholes
option pricing model using the following weighted average assumptions for
grants in 1998, 1997 and 1996, respectively: (a) risk-free interest rate of
5.7%, 6.7% and 6.0%, (b) expected lives of 10.0 years, 19.7 years and 5.0
years; (c) expected volatility of 25.6%, 27.8% and 24.6%; and (d) dividend
yield of 3.2%, 2.9% and 3.2%. The weighted-average fair value of options
granted during the year is $10.91, $13.99 and $11.51 for 1998, 1997 and
1996, respectively.

The Group applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," to its stock-based compensation plans. The
Group recognized after-tax stock-based compensation expense of approximately
$210,000 in 1998, 1997 and 1996. Had compensation costs for the Group's
stock-based compensation plans been determined in accordance with SFAS 123,
"Accounting for Stock-Based Compensation," based on the fair value at the
grant dates for the awards under those plans, the Group's pro forma net
income for the years ended December 31, 1998, 1997 and 1996, would have been
lower by $7,828,000, $8,205,000 and $1,874,000, respectively.

6. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

In addition to providing pension benefits, the Group provides certain health
care and life insurance benefits for certain retired and terminated
employees. A substantial number of the Group's employees may become eligible
for such benefits if they reach normal retirement age while working for the
Group. The cost of these benefits for salaried employees is allocated to the
Group by Packaging through a payroll charge and the interdivision account.
Amounts

F-15
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

6. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS (CONTINUED)
allocated are principally determined based on payroll. The net obligation
for these salaried benefits is maintained by Packaging and is not included
in the liabilities section of the accompanying combined statements of
assets, liabilities and interdivision account for the Group's share of the
obligation.

Currently, the Group's postretirement benefit plans are not funded and a
portion of the related postretirement obligation has been actuarially
allocated to the Group. However, due to the fact that other divisions
participate in the plan, certain of the disclosures required by SFAS No.
132, such as a summary of the change in benefit obligation, are not
available. The obligation of the plans, related to hourly employees,
reconciles with amounts recognized on the accompanying combined statements
of assets, liabilities and interdivision account at December 31, 1998, 1997
and 1996, as follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Actuarial present value at September 30--
Accumulated postretirement benefit obligation--
Retirees and beneficiaries........................... $ (8,401) $ (7,199) $ (8,213)
Fully eligible active plan participants.............. (3,582) (4,081) (4,283)
Other active plan participants....................... (2,950) (2,426) (1,738)
--------- --------- ---------
Total............................................ (14,933) (13,706) (14,234)

Plan assets at fair value at September 30.............. -- -- --
Funded status.......................................... (14,933) (13,706) (14,234)
Claims paid during the fourth quarter.................. 473 178 142
Unrecognized prior service cost........................ -- (293) (797)
Unrecognized net gain.................................. (1,764) (2,861) (2,205)
--------- --------- ---------
Accrued postretirement benefit cost at December 31....... $ (16,224) $ (16,682) $ (17,094)
--------- --------- ---------
--------- --------- ---------
</TABLE>

The net periodic postretirement benefit costs as determined by actuaries for
hourly employees for the years 1998, 1997 and 1996 consist of the following
components:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost.................................................. $ 159 $ 105 $ 144
Interest cost................................................. 1,024 1,065 1,012
Amortization of net (gain) loss............................... (138) (80) 55
Amortization of prior service cost............................ (293) (504) (643)
--------- --------- ---------
Net periodic postretirement benefit cost................ $ 752 $ 586 $ 568
--------- --------- ---------
--------- --------- ---------
</TABLE>

The amounts expensed by the Group may be different because it was allocated
by Packaging.

F-16
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

6. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS (CONTINUED)
The weighted average assumed health care cost trend rate used in determining
the 1998 and 1997 accumulated postretirement benefit obligation was 5% in
1997, remaining at that level thereafter.

The weighted average assumed health care cost trend rate used in determining
the 1996 accumulated postretirement benefit obligation was 6.0% in 1996
declining to 5.0% in 1997 and remaining at that level thereafter.

Increasing the assumed health care cost trend rate by one percentage point
in each year would increase the accumulated postretirement benefit
obligation as of September 30, 1998, 1997 and 1996, by approximately
$1,268,000, $868,000 and $1,103,000, respectively, and would increase the
net postretirement benefit cost for 1998, 1997 and 1996 by approximately
$130,000, $75,000 and $102,000, respectively.

The discount rate (which is based on long-term market rates) used in
determining the accumulated postretirement benefit obligations was 7.00% for
1998 and 7.75% for 1997 and 1996.

7. RESTRUCTURING AND OTHER CHARGES

In the fourth quarter of 1998, the Group recorded a pretax restructuring
charge of approximately $14 million. This charge was recorded following the
approval by Tenneco's Board of Directors of a comprehensive restructuring
plan for all of Tenneco's operations, including those of the Group. In
connection with this restructuring plan, the Group will close four
corrugated facilities and eliminate 109 positions. The following table
reflects components of this charge:

<TABLE>
<CAPTION>
DECEMBER 31,
RESTRUCTURING FOURTH-QUARTER 1998
COMPONENT CHARGE ACTIVITY BALANCE
- ---------------------------------------- ------------- ----------------- ---------------
<S> <C> <C> <C>
(IN THOUSANDS)
Cash charges--
Severance............................. $ 5,135 $ 852 $ 4,283
Facility exit costs and other......... 3,816 369 3,447
------------- ------- -------
Total cash charges................ 8,951 1,221 7,730
Noncash charges--
Asset impairments..................... 5,434 3,838 1,596
------------- ------- -------
$ 14,385 $ 5,059 $ 9,326
------------- ------- -------
------------- ------- -------
</TABLE>

Asset impairments include goodwill totaling approximately $5,043,000 related
to two of the facilities. The fixed assets at the closed facilities were
written down to their estimated fair value. No significant cash proceeds are
expected from the ultimate disposal of these assets. Of the $7,730,000
remaining cash charges at December 31, 1998, approximately $7,300,000 is

F-17
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

7. RESTRUCTURING AND OTHER CHARGES (CONTINUED)
expected to be spent in 1999. The actions contemplated by the restructuring
plan should be completed during the second quarter of 1999.

8. INCOME TAXES

The Group's method of accounting for income taxes requires that a deferred
tax be recorded to reflect the tax expense (benefit) resulting from the
recognition of temporary differences. Temporary differences are differences
between the tax basis of assets and liabilities and their reported amounts
in the financial statements that will result in differences between income
for tax purposes and income for financial statement purposes in future
years.

As a division, this Group is not a taxable entity. For purposes of these
combined financial statements, income taxes have been allocated to the Group
and computed on a separate return basis. These income taxes represent
liabilities to Packaging and do not reflect any tax attributes of the
Tenneco consolidated tax group.

Following is an analysis of the components of combined income tax expense
(benefit):

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Current--
U.S..................................................... $ (21,105) $ (58,813) $ 45,641
State and local......................................... (2,708) (7,545) 5,855
--------- --------- ---------
(23,813) (66,358) 51,496
--------- --------- ---------
Deferred--
U.S..................................................... 63,230 75,399 7,374
State and local......................................... 8,112 9,673 946
--------- --------- ---------
71,342 85,072 8,320
--------- --------- ---------
Income tax expense.................................. $ 47,529 $ 18,714 $ 59,816
--------- --------- ---------
--------- --------- ---------
</TABLE>

The primary difference between income taxes computed at the statutory U.S.
federal income tax rate and the income tax expense in the combined
statements of revenues, expenses and interdivision account is due to the
effect of state income taxes.

F-18
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

8. INCOME TAXES (CONTINUED)
The components of the deferred tax assets (liabilities) at December 31,
1998, 1997 and 1996, were as follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Current deferred taxes--
Accrued liabilities................................. $ 10,232 $ 6,374 $ 7,046
Employee benefits and compensation.................. (5,969) (4,946) (929)
Reserve for doubtful accounts....................... 1,275 1,230 1,261
Inventory........................................... 707 614 38
Pensions and postretirement benefits................ (2,994) (4,196) (5,053)
State deferred tax.................................. 10,096 5,724 511
Other............................................... (76) (123) (89)
--------- --------- ---------
Total current deferred taxes.................... 13,271 4,677 2,785
--------- --------- ---------
Noncurrent deferred taxes--
Pension and postretirement benefits................. 13,898 7,934 8,012
Excess of financial reporting over tax basis in
plant and equipment............................... (293,830) (210,797) (121,707)
Accrued liabilities................................. 1,336 1,701 1,947
Capital leases...................................... 9,333 7,517 24,672
Other............................................... 15,199 19,518 (89)
--------- --------- ---------
Total noncurrent deferred taxes................. (254,064) (174,127) (87,165)
--------- --------- ---------
Net deferred tax liabilities.................... $(240,793) $(169,450) $ (84,380)
--------- --------- ---------
--------- --------- ---------
</TABLE>

9. ASSETS, LIABILITIES AND OTHER INCOME, NET DETAIL

PREPAID EXPENSES AND OTHER CURRENT ASSETS

The components of prepaid expenses and other current assets include:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Prepaid stumpage........................................... $ 15,189 $ 19,231 $ 15,595
Prepaid taxes.............................................. 13,272 7,549 7,044
Current portion--Meridian Lease, net of deferred gain...... 5,193 -- --
Prepaid professional services/leases....................... 2,356 1,918 5,506
Other...................................................... 5,082 6,321 7,391
--------- --------- ---------
Total................................................ $ 41,092 $ 35,019 $ 35,536
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-19
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

9. ASSETS, LIABILITIES AND OTHER INCOME, NET DETAIL (CONTINUED)
OTHER LONG-TERM ASSETS

The components of the other long-term assets include:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Prepaid pension cost...................................... $ 35,603 $ 35,137 $ 34,429
Leased timberlands and mills.............................. 14,636 11,857 9,510
Long-term portion--Meridian Lease, net of deferred gain... 44,743 -- --
Deferred software......................................... 15,864 11,088 6,047
Timberland rights......................................... 10,919 9,775 8,615
Capitalized fees.......................................... -- 474 3,962
Other..................................................... 9,327 8,981 9,513
--------- --------- ---------
Total............................................... $ 131,092 $ 77,312 $ 72,076
--------- --------- ---------
--------- --------- ---------
</TABLE>

ACCRUED LIABILITIES

The components of accrued liabilities include:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Accrued payroll, vacation and taxes....................... $ 42,282 $ 48,119 $ 49,162
Accrued insurance......................................... 6,012 5,248 4,296
Accrued volume discounts and rebates...................... 5,727 4,428 3,515
Restructuring............................................. 9,326 -- --
Current portion of accrued postretirement benefit cost.... 1,460 875 892
Deferred lease credits.................................... 1,918 1,014 94,360
Other..................................................... 2,665 10,742 14,438
--------- --------- ---------
Total............................................... $ 69,390 $ 70,426 $ 166,663
--------- --------- ---------
--------- --------- ---------
</TABLE>

As part of the refinancing of the GECC leases in January, 1997 (Note 12),
certain deferred lease credits were eliminated.

F-20
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

9. ASSETS, LIABILITIES AND OTHER INCOME, NET DETAIL (CONTINUED)
OTHER LONG-TERM LIABILITIES

The components of the other long-term liabilities include:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Accrued postretirement benefit cost........................ $ 14,764 $ 15,807 $ 16,202
Environmental liabilities.................................. 6,599 5,421 6,673
Other...................................................... 2,497 2,526 412
--------- --------- ---------
Total................................................ $ 23,860 $ 23,754 $ 23,287
--------- --------- ---------
--------- --------- ---------
</TABLE>

OTHER INCOME, NET

The components of other income (expense), net include:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Discount on sale of factored receivables................. $ (14,774) $ (12,006) $ (12,351)
Gain on sale of timberlands.............................. 16,944 -- --
Gain on sale of joint venture interest................... 15,060 -- --
Gain on operating lease refinancing...................... -- 37,730 --
Gain on Willow Flowage................................... -- 4,449 --
Gain on sale of mineral rights........................... -- 1,646 --
Capitalization of barter credits......................... -- 1,563 --
Sylva Mill rebate income................................. -- -- 4,500
Gain on sale of recycled mills........................... -- -- 50,000
Other.................................................... 9,588 11,299 14,094
--------- --------- ---------
Total.............................................. $ 26,818 $ 44,681 $ 56,243
--------- --------- ---------
--------- --------- ---------
</TABLE>

10. RELATED-PARTY TRANSACTIONS

FUNDING OF CASH REQUIREMENTS

As discussed in Note 2, Packaging provides centralized treasury functions
and financing for the Group including funding of its cash requirements for
processing of accounts payable and payroll requirements.

CORPORATE ALLOCATIONS

Packaging and Tenneco affiliates provide services to the Group which are
typical of a consolidated entity with operations in several businesses.
These services included general management, investor and media relations,
legal, human resources, accounting, public company reporting, data
processing systems, support, training, finance, treasury, and

F-21
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

10. RELATED-PARTY TRANSACTIONS (CONTINUED)
insurance management. These expenses were allocated to the Group in the
aggregate, not individually, from Packaging and Tenneco affiliates, based
upon the relative level of effort and time spent on Group activities. This
was generally measured using a formula based upon the Group's percentage of
Tenneco's fixed assets, revenues and payroll. The Group believes the method
for the historical allocations was reasonable.

As a stand-alone entity, the Group does not expect that it will incur a
similar level of costs due to a less complex corporate structure and a
different level of need for such services. The Group estimates it will incur
approximately $30 million in stand-alone overhead costs in the first year
following the acquisition and believes this is representative of what the
costs would have been as a stand-alone entity for historical periods.

Certain receivables and transactions resulting from the financing
relationship between Packaging and Tenneco are not reflected in the
accompanying financial statements.

INSURANCE AND BENEFITS

The Group is self-insured for medical benefits and workers' compensation.
Expenses related to workers' compensation, health care claims for hourly and
salaried workers and postretirement health care benefits for hourly and
salaried workers are determined by Packaging and are allocated to the Group.
The Group incurred charges of $32,151,000, $34,004,000 and $32,298,000 in
1998, 1997 and 1996, respectively, for health care and $5,109,000,
$9,209,000 and $8,853,000 in 1998, 1997 and 1996, respectively, for workers'
compensation.

In general, all costs and expenses incurred and allocated are based on the
relationship the Group has with Tenneco. If the Group had been a stand-alone
entity, the costs and expenses would differ.

11. COMMITMENTS AND CONTINGENCIES

The Group had authorized capital expenditures of approximately $49,392,000
as of December 31, 1998, in connection with the expansion and replacement of
existing facilities.

The Group is involved in various legal proceedings and litigation arising in
the ordinary course of business. In the opinion of management and in-house
legal counsel, the outcome of such proceedings and litigation will not
materially affect the Group's financial position or results of operations.

12. LEASES

Rental expense included in the combined financial statements was
$96,193,340, $95,284,000 and $118,821,000 for 1998, 1997 and 1996,
respectively. These costs are primarily included in cost of goods sold.

On January 31, 1997, Packaging executed an operating lease agreement with
Credit Suisse Leasing 92A, L.P., and a group of financial institutions led
by Citibank, N.A. The agreement refinanced the previous operating leases
between GECC and Packaging which were entered

F-22
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

12. LEASES (CONTINUED)
into at the same time as GECC's purchase of certain assets from
Georgia-Pacific in January, 1991. Through this refinancing, several capital
lease obligations were extinguished as the assets were incorporated into the
new operating lease. Also with this refinancing, certain fixed assets and
deferred credits were eliminated resulting in a net gain of approximately
$38 million in the first quarter of 1997.

Aggregate minimum rental commitments under noncancelable operating leases
are as follows (in thousands):

<TABLE>
<S> <C>
1999....................................... $ 83,804
2000....................................... 81,368
2001....................................... 79,428
2002....................................... 686,390
2003....................................... 26,975
Thereafter................................. 113,154
----------
Total................................ $1,071,119
----------
----------
</TABLE>

Minimum rental commitments under noncancelable operating leases include $68
million for 1999, $68 million for 2000, $68 million for 2001, $676 million
for 2002, $18 million for 2003 and $34 million for years thereafter, payable
to credit Suisse Leasing 92A, L.P. and Citibank, N.A., along with John
Hancock, Metropolitan Life and others (the "Lessors") for certain mill and
timberland assets. The remaining terms of such leases extend over a period
of up to five years.

Following the initial lease period, Packaging may, under the provision of
the lease agreements, extend the leases on terms mutually negotiated with
the Lessors or purchase the leased assets under conditions specified in the
lease agreements. If the purchase options are not exercised or the leases
are not extended, Packaging will make a residual guarantee payment to the
Lessors of approximately $653 million, included in the schedule above, which
will be refunded up to the total amount of the residual guarantee payment
based on the Lessors' subsequent sales price for the leased assets.
Throughout the lease period, Packaging is required to maintain the leased
properties which includes reforestation of the timberlands harvested.

Packaging's various lease agreements require that it comply with certain
covenants and restrictions, including financial ratios that, among other
things, place limitations on incurring additional "funded debt" as defined
by the agreements. Under the provisions of the lease agreements, in order to
incur funded debt, Packaging must maintain a pretax cash flow coverage
ratio, as defined, on a cumulative four quarter basis of a minimum of 2.0,
subsequently modified to 1.75 as of December 31, 1998. Packaging was in
compliance with all of its covenants at December 31, 1998.

In December, 1998, the Group made a payment of $84 million to acquire the
Meridian timberlands utilized by the Group. This transaction was undertaken
in preparation for the separation of the Group's assets from Tenneco.
Subsequent to year end, the Group paid a fee of $50,000 to effect the
conveyance of the Meridian timberlands to the Group.

F-23
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

12. LEASES (CONTINUED)
In connection with the pending sale of the Group described in Note 14 to
these financial statements, Tenneco may purchase the Tomahawk and Valdosta
mills and selected timberland assets currently under lease prior to the
sale.

13. SALE OF ASSETS

In the second quarter of 1996, Packaging entered into an agreement to form a
joint venture with Caraustar Industries whereby Packaging sold its two
recycled paperboard mills and a fiber recycling operation and brokerage
business to the joint venture in return for cash and a 20% equity interest
in the joint venture. Proceeds from the sale were approximately $115 million
and the Group recognized a $50 million pretax gain ($30 million after taxes)
in the second quarter of 1996.

In June, 1998, Packaging sold its remaining 20% equity interest in the joint
venture to Caraustar Industries for cash and a note of $26,000,000. The
Group recognized a $15 million pretax gain on this transaction.

At December 31, 1998, the balance of the note with accrued interest is
$26,756,000.

14. SALE OF COMPANY AND RELATED IMPAIRMENT (UNAUDITED)

On January 26, 1999, Tenneco announced that it had entered into an agreement
to contribute a majority interest in the Group to a new joint venture with
Madison Dearborn Partners, in exchange for cash and debt assumption totaling
approximately $2 billion, and a 45% common equity interest in the joint
venture. The owned and leased assets to be contributed included the Group's
four linerboard and medium mills, 67 plants, three sawmills, an air-drying
yard, three recycling facilities, miscellaneous other property, which
includes sales offices and woodlands forest management offices, numerous
distribution centers, warehouses and five design centers and an ownership or
controlling interest in approximately 950,000 acres of timberland. The
transactions closed on April 12, 1999.

In connection with the transactions, Packaging borrowed approximately $1.8
billion, most of which was used to acquire assets used by the Group pursuant
to operating leases and timber cutting rights, with the remainder remitted
to Tenneco for corporate debt reduction.

Tenneco then contributed the Group's assets (subject to the new indebtedness
and the Group's liabilities) to a joint venture, Packaging Corporation of
America ("PCA") in exchange for (a) a 45% common equity interest in PCA
valued at approximately $200 million and (b) approximately $240 million in
cash. As a result of the sale transaction, Tenneco recognized a pretax loss
in the first quarter of 1999 of approximately $293 million. Part of that
loss consisted of an impairment charge relating to the Group's property,
plant and equipment and intangible assets, which was pushed down to the
Group's March 31, 1999 financial statements. The amount of the impairment
charge is approximately $230.1 million.

F-24
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

14. SALE OF COMPANY AND RELATED IMPAIRMENT (UNAUDITED) (CONTINUED)
The impairment charge of $230.1 million recorded in the Group's financial
statements has been allocated to the following financial statement line
items (in thousands):

<TABLE>
<S> <C>
Intangibles...................................................... $ 46,206
Machinery and equipment.......................................... 183,906
---------
Total.......................................................... $ 230,112
---------
---------
</TABLE>

The impairment charge will first be applied against the goodwill
specifically attributable to the containerboard assets and the remaining
amount will be applied against plant, property and equipment.

The Group's financial statements reflect $230.1 million of the $293.0
million charge representing the impairment attributable to the assets
reflected in the Group's financial statements. Tenneco has informed us that
the remaining $62.9 million charge primarily includes liabilities for direct
incremental costs of sales, severance costs and other contractual
obligations directly related to the containerboard transaction, and the
impairment of other containerboard-related assets not contributed to the
joint venture. The $62.9 million charge is not part of the Group's financial
statements.

15. EXTRAORDINARY LOSS (UNAUDITED)

During the first quarter of 1999 the Group extinguished $16.6 million of
debt related to mill assets. In connection with that extinguishment an
extraordinary loss of $10.5 million was recorded ($6.3 million, net of the
related tax effect).

16. SALE OF TIMBERLAND (UNAUDITED)

In August 1999, PCA signed purchase and sales agreements with various buyers
to sell approximately 400,000 acres of timberland. PCA expects to close
these transactions by the end of the third quarter of 1999.

17. SUMMARIZED COMBINED FINANCIAL INFORMATION ABOUT GUARANTOR SUBSIDIARIES

The following is summarized aggregated financial information for Dahlonega
Packaging Corporation, Dixie Container Corporation, PCA Hydro, Inc., PCA
Tomahawk Corporation and PCA Valdosta Corporation, each of which was a
wholly-owned subsidiary of Packaging and included in the Group's combined
financial statements. In conjunction with the sale of the Group as described
in Note 14, each of these companies became subsidiaries of PCA and fully,
unconditionally, jointly and severally guaranteed $550 million in
subordinated debt issued by PCA in conjunction with the transaction.
Separate financial statements of the guarantor

F-25
<PAGE>
THE CONTAINERBOARD GROUP
(A DIVISION OF TENNECO PACKAGING INC.)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998, 1997 AND 1996

17. SUMMARIZED COMBINED FINANCIAL INFORMATION ABOUT GUARANTOR SUBSIDIARIES
(CONTINUED)
subsidiaries are not presented because, in the opinion of management, such
financial statements are not material to investors.

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Current assets..................................... $ 49,463 $ 42,844 $ 42,664
Non-current assets................................. 13,985 46,399 45,051
--------- --------- ---------
Total assets................................. 63,448 89,243 87,715

Current liabilities................................ 13,826 12,687 10,542
Non-current liabilities............................ 7,264 4,785 4,559
--------- --------- ---------
Total liabilities............................ 21,090 17,472 15,101
--------- --------- ---------
Interdivision Account.............................. $ 42,358 $ 71,771 $ 72,614
--------- --------- ---------
--------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Net sales.......................................... $ 32,970 $ 25,758 $ 24,666
Gross profit....................................... 1,172 3,253 4,719
Net loss........................................... (866) (1,217) (351)
</TABLE>

F-26
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Packaging Corporation of America

We have audited the accompanying balance sheet of Packaging Corporation of
America as of January 31, 1999. This balance sheet is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
balance sheet based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Packaging Corporation of America at
January 31, 1999 in conformity with generally accepted accounting principles.

Ernst & Young LLP

Chicago, Illinois
August 23, 1999

F-27
<PAGE>
PACKAGING CORPORATION OF AMERICA
BALANCE SHEET
JANUARY 31, 1999

<TABLE>
<CAPTION>
<S> <C>
Shareholders' equity:
Preferred Stock, par value $1.00, authorized--100 shares; issued--none............... $ --
Common Stock, par value $1.00, authorized--10 shares; issued--none................... $ --
---

Total shareholders' equity....................................................... $ --
---
---
</TABLE>

F-28
<PAGE>
PACKAGING CORPORATION OF AMERICA
NOTE TO BALANCE SHEET

1. GENERAL

Packaging Corporation of America (PCA) was incorporated on January 25, 1999
pursuant to the General Corporation Law of the State of Delaware. PCA was
formed to acquire The Containerboard Group of Tenneco Packaging Inc., which
was completed on April 12, 1999.

PCA had no operations from the date of incorporation on January 25, 1999 to
January 31, 1999.

F-29
<PAGE>
PACKAGING CORPORATION OF AMERICA
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

<TABLE>
<CAPTION>
GROUP (NOTE 1)
-------------------
JUNE 30, 1999 DECEMBER 31, 1998
-------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 46,855 $ 1
Accounts receivable (net of allowance for doubtful accounts of
$4,367 as of June 30, 1999 and $5,220 in 1998)............... 197,631 13,971
Receivables from affiliated companies.......................... -- 10,390
Notes receivable............................................... 701 27,390
Inventories.................................................... 152,815 150,719
Prepaid expenses and other current assets...................... 15,334 41,092
-------------- -------------------
TOTAL CURRENT ASSETS......................................... 413,336 243,563
Property, plant and equipment, at cost:
Land, timber, timberlands and buildings........................ 708,367 287,510
Machinery and equipment........................................ 1,868,973 1,289,459
Other, including construction in progress...................... 129,306 100,136
Less: Accumulated depreciation and depletion................... (790,128) (735,749)
-------------- -------------------
PROPERTY, PLANT AND EQUIPMENT, NET........................... 1,916,518 941,356
Intangible assets.............................................. 1,649 50,110
Other long-term assets......................................... 96,122 131,092
Investments.................................................... 994 1,282
-------------- -------------------
TOTAL ASSETS................................................. $ 2,428,619 $ 1,367,403
-------------- -------------------
-------------- -------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.............................. $ 7,703 $ 617
Accounts payable............................................... 117,935 87,054
Payables to Tenneco affiliates................................. -- 7,091
Accrued interest............................................... 30,682 --
Accrued liabilities............................................ 65,218 69,390
-------------- -------------------
TOTAL CURRENT LIABILITIES.................................... 221,538 164,152
Long-term liabilities:
Long-term debt................................................. 1,677,765 16,935
Deferred taxes................................................. 84,107 254,064
Other liabilities.............................................. 6,947 23,860
-------------- -------------------
TOTAL LONG-TERM LIABILITIES.................................. 1,768,819 294,859
Mandatorily redeemable preferred stock (liquidation preference
$100 per share, 3,000,000 shares authorized, 1,000,000 shares
issued and outstanding)........................................ 96,500
Stockholders' equity:
Interdivision account.......................................... -- 908,392
Junior preferred stock (liquidation preference $1.00 per share,
100 shares authorized, issued and outstanding)............... -- --
Common stock (par value $.01 per share, 1,000,000 shares
authorized, 430,000 shares issued and outstanding)........... 4 --
Additional paid in capital..................................... 337,741 --
Retained earnings.............................................. 4,017 --
-------------- -------------------
TOTAL STOCKHOLDERS' EQUITY................................... 341,762 908,392
-------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................... $ 2,428,619 $ 1,367,403
-------------- -------------------
-------------- -------------------
</TABLE>

See notes to consolidated financial statements.

Note: The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles of complete financial statements.

F-30
<PAGE>
PACKAGING CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
GROUP (NOTE 1)
--------------------------------
<S> <C> <C> <C>
SIX MONTHS JANUARY 1, 1999 APRIL 12, 1999
ENDED THROUGH THROUGH
JUNE 30, 1998 APRIL 11, 1999 JUNE 30, 1999
-------------- ---------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales.................................. $ 777,042 $ 433,182 $ 373,035
Cost of sales.............................. (629,281) (367,483) (297,055)
-------------- ---------------- --------------
Gross profit............................. 147,761 65,699 75,980

Impairment loss............................ -- (230,112) --
Selling and administrative expenses........ (52,432) (30,584) (25,136)
Other income (expense), net................ 16,015 (2,207) (266)
Corporate allocations/overhead............. (32,373) (14,890) (5,188)
-------------- ---------------- --------------
Income (loss) before interest, taxes and
extraordinary item..................... 78,971 (212,094) 45,390
Interest expense, net...................... (1,681) (221) (34,079)
-------------- ---------------- --------------
Income (loss) before taxes and
extraordinary item..................... 77,290 (212,315) 11,311
Provision for taxes........................ (30,822) 83,716 (4,545)
-------------- ---------------- --------------
Income (loss) before extraordinary
item................................... 46,468 (128,599) 6,766
Extraordinary item, net of tax............. -- (6,327) --
-------------- ---------------- --------------
Net income (loss).......................... 46,468 (134,926) 6,766
Preferred dividends and accretion of
preferred stock issuance costs........... -- -- (2,749)
-------------- ---------------- --------------
Net income (loss) available to common
stockholders............................. $ 46,468 $ (134,926) $ 4,017
-------------- ---------------- --------------
-------------- ---------------- --------------
Basic earnings per share:
Income (loss) before extraordinary
item................................... $ 108.07 $ (299.07) $ 9.34
Extraordinary item....................... -- (14.71) --
-------------- ---------------- --------------
Net income (loss) per common share....... $ 108.07 $ (313.78) $ 9.34
-------------- ---------------- --------------
-------------- ---------------- --------------
Diluted earnings per share:
Income (loss) before extraordinary
item................................... $ 108.07 $ (299.07) $ 9.34
Extraordinary item....................... -- (14.71) --
-------------- ---------------- --------------
Net income (loss) per common share....... $ 108.07 $ (313.78) $ 9.34
-------------- ---------------- --------------
-------------- ---------------- --------------
Weighted average common shares
outstanding.............................. 430 430 430
</TABLE>

See notes to consolidated financial statements.

F-31
<PAGE>
PACKAGING CORPORATION OF AMERICA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
GROUP (NOTE 1)
--------------------------------
SIX MONTHS JANUARY 1, 1999 APRIL 12, 1999
ENDED THROUGH THROUGH
JUNE 30, 1998 APRIL 11, 1999 JUNE 30, 1999
-------------- ---------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income............................................. $ 46,468 $ (134,926) $ 6,766
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation, depletion and amortization............. 47,385 30,905 33,652
Extraordinary loss - early debt extinguishment....... -- 6,327 --
(Gain)/loss on sale of assets........................ (15,060) 230,112 --
Amortization of deferred gain........................ (986) (493) --
Increase in deferred income taxes.................... 37,789 9,782 4,320
Undistributed earnings of affiliated companies....... 13 (106) 394
Increase in other noncurrent reserves................ 1,002 56 --
Changes in components of working capital, excluding
transactions with Tenneco -
Decrease (increase) in current assets -
Accounts receivable.............................. 3,817 (8,183) (4,621)
Inventories, net................................. (8,259) (7,514) 5,418
Prepaid expenses and other....................... (1,470) 4,201 (289)
(Decrease) increase in current liabilities -
Accounts payable................................. (3,836) 26,996 45,800
Accrued liabilities.............................. (3,060) (3,508) 56,190
-------------- ---------------- --------------
Net cash provided by operating activities................ 103,803 153,649 147,630
-------------- ---------------- --------------
Cash Flows from Investing Activities:
Additions to property, plant and equipment............. (46,557) (1,128,255) (23,419)
Other long-term assets................................. (5,553) 2,284 (4,426)
Proceeds from disposals................................ 4,301 825 --
Other, net............................................. (4,032) 4,001 1,792
-------------- ---------------- --------------
Net cash used for investing activities................... (51,841) (1,121,145) (26,053)
-------------- ---------------- --------------
Cash Flows from Financing Activities:
Proceeds from preferred stock.......................... -- -- 96,500
Proceeds from long-term debt issued.................... 130 1,760,000 9,000
Payments on long-term debt............................. (10,348) (27,550) (84,000)
Financing costs........................................ -- -- (97,819)
Amortization of financing costs........................ -- -- 1,596
Decrease in interdivision account...................... (49,041) (616,769) --
Working capital transactions with Tenneco and
affiliated companies -
Decrease (increase) in receivables from affiliated
companies.......................................... (3,725) 1,353 --
(Decrease) increase in factored receivables.......... 1,941 (150,099) --
Increase in accounts payable to affiliated
companies.......................................... 9,081 561 --
-------------- ---------------- --------------
Net cash (used for) provided by financing activities..... (51,962) 967,496 (74,723)
-------------- ---------------- --------------
Increase in cash and cash equivalents.................... 0 0 46,854
Cash and cash equivalents at beginning of period......... 1 1 1
-------------- ---------------- --------------
Cash and cash equivalents at end of period............... $ 1 $ 1 $ 46,855
-------------- ---------------- --------------
-------------- ---------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-32
<PAGE>
PACKAGING CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999

1. BASIS OF PRESENTATION

On April 12, 1999, Tenneco Packaging Inc. ("TPI"), currently a wholly owned
subsidiary of Tenneco Inc. ("Tenneco"), sold its containerboard and
corrugating packaging products business (the "Group") to Packaging
Corporation of America ("PCA"). The Group is the predecessor to PCA. Under
the terms of the agreement, PCA Holdings, LLC, an entity organized and
controlled by Madison Dearborn Partners, LLC, acquired a 55% common equity
interest in PCA, and TPI contributed the Group, which included $1.76 billion
of debt incurred by TPI immediately prior to the contribution to PCA, in
exchange for $246.5 million in cash and a 45% common equity interest in PCA.

PCA's consolidated financial statements as of June 30, 1999 and for the
period from April 12, 1999 to June 30, 1999, and the Group's (i.e.,
predecessor's) combined financial statements for the six months ended June
30, 1998 and for the period from January 1, 1999 to April 11, 1999, are
unaudited but include all adjustments (consisting only of normal recurring
adjustments) that management considers necessary for a fair presentation of
such financial statements. These financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with Article 10 of SEC Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. Operating results during the period ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the period
ending December 31, 1999.

As a result of the Group's relationship with TPI, the Group's combined
consolidated balance sheets and the related combined consolidated income
statements are not necessarily indicative of what actually would have
occurred had the Group been a stand-alone entity. Additionally, these
combined financial statements are not necessarily indicative of the future
financial position or results of operations of PCA.

2. SUMMARY OF ACCOUNTING POLICIES

USE OF ESTIMATES

SEGMENT INFORMATION

The Group adopted SFAS No. 131, "Disclosure About Segments of an Enterprise
and Related Information," in 1998 and determined that the Group was
primarily engaged in one line of business: the manufacture and sale of
packaging materials, boxes and containers for industrial and consumer
markets. PCA also believes that it is primarily engaged in this single line
of business. No single customer accounts for more than 10% of total
revenues. PCA has no foreign operations.

F-33
<PAGE>
PACKAGING CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999 (CONTINUED)

2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE

All share and per share data included in these unaudited financial
statements have been adjusted to reflect a -for-one split of the company's
common stock which became effective on , 1999.

The following table sets forth the computation of basic and diluted income
per share (in thousands, except per share data):

<TABLE>
<CAPTION>
SIX MONTHS JANUARY 1, 1999 APRIL 12, 1999
ENDED THROUGH THROUGH
JUNE 30, 1998 APRIL 11, 1999 JUNE 30, 1999
--------------- ---------------- ---------------
<S> <C> <C> <C>
Numerator:
Net income applicable to
common stockholders..... $ 46,468 $ (134,926) $ 4,017
--------------- ---------------- ---------------
--------------- ---------------- ---------------

Denominator:
Basic common shares
outstanding............. 430 430 430

Effect of dilutive
securities:
Stock options (Note 6).... -- --
--------------- ---------------- ---------------
Dilutive common shares
outstanding............... 430 430 430
Basic income (loss) per
common share.............. $ 108.07 $ (313.78) $ 9.34
Diluted income (loss) per
common share.............. $ 108.07 $ (313.78) $ 9.34
</TABLE>

3. INVENTORY

The components of inventories are as follows:

<TABLE>
<CAPTION>
GROUP (NOTE 1)
-------------------
JUNE 30, 1999 DECEMBER 31, 1998
-------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.......................... $ 68,476 $ 86,681
Work in process and finished goods..... 56,749 48,212
Supplies............................... 50,656 44,310
-------------- ----------
Inventories at FIFO cost............... 175,881 179,203
Excess of FIFO cost over LIFO cost..... (23,066) (28,484)
-------------- ----------
Inventory, net....................... $ 152,815 $ 150,719
-------------- ----------
-------------- ----------
</TABLE>

F-34
<PAGE>
PACKAGING CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999 (CONTINUED)

4. LONG-TERM DEBT

<TABLE>
<CAPTION>
GROUP (NOTE 1)
-------------------
JUNE 30, 1999 DECEMBER 31, 1998
-------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Senior credit facility--
Revolving credit facility, interest at LIBOR + 2.75%, $ -- $ --
due
April 12, 2005.....................................
Term Loan A, interest at LIBOR + 2.75%, due in 431,488 --
varying quarterly installments through April 12,
2005...............................................
Term Loan B, interest at LIBOR + 3.25%, due in 351,756 --
varying quarterly installments through April 12,
2007...............................................
Term Loan C, interest at LIBOR + 3.50%, due in 351,756 --
varying quarterly installments through April 12,
2008...............................................
Senior subordinated notes, interest at 9 5/8%, payable 550,000 --
semi-annually, due April 1, 2009.....................
Capital lease obligations, interest at 8.5%, due in 11 18
varying amounts through 2000.........................
Non-interest bearing note, due in annual installments 321 308
of $70 through July 1, 2004, net of discount imputed
at 10% of $169 and $182 in 1999 and 1998,
respectively.........................................
Notes payable, interest at an average rate of 13.5%, -- 16,553
due in varying amounts through 2010..................
Other 136 673
-------------- --------
Total 1,685,468 17,552
Less: Current portion.................................. 7,703 617
-------------- --------
Total long-term debt................................. $ 1,677,765 $ 16,935
-------------- --------
-------------- --------
</TABLE>

As of June 30, 1999, annual payments for debt during the next five years and
thereafter were: $7,703, $51,827, $82,197, $102,197, $117,197 and
$1,324,347.

PCA prepaid $75,000 of the term loans on May 18, 1999, and $10,000 on July
15, 1999. Accordingly, no quarterly installments are due until June, 2000
for Term Loan A and September, 2001, for Term Loans B and C.

In February, 1999, Tenneco paid off the remaining note payable as part of
the transactions. The payment was $27,220, including a $10,456 premium
payment for early extinguishment of debt.

5. MANDATORILY REDEEMABLE PREFERRED STOCK

On April 12, 1999, PCA issued 1,000,000 shares of Preferred Stock,
liquidation preference of $100 per share. 3,000,000 shares are authorized
and 1,000,000 shares are issued and outstanding. PCA incurred $3.5 million
of issuance costs related to this transaction. These costs are being
amortized through 2010, at which time the Preferred Stock is required to be
redeemed.

F-35
<PAGE>
PACKAGING CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999 (CONTINUED)

6. STOCKHOLDERS' EQUITY

On April 12, 1999, PCA issued 100 shares of Junior Preferred Stock,
liquidation preference of $1.00 per share. Holders of the Junior Preferred
Stock are not entitled to receive any dividends or distributions. Holders of
the Junior Preferred Stock have the right to elect one director to PCA's
board of directors. Under the terms of the stockholders' agreement, the
holders of the Junior Preferred Stock have agreed to elect the individual
serving as PCA's chief executive officer to fill this director position.
Shares of Junior Preferred Stock may not be reissued after being reacquired
in any manner by PCA.

In June 1999, the Company granted options to management for the purchase of
29,893 shares of common stock at the fair market value at the date of grant.
Except as noted below, these options vest as follows:

These options vest immediately upon the closing of an initial public
offering of PCA's equity. However, the option shares are subject to certain
contractual restrictions on transfer following their acquisition upon
exercise of the underlying options. At June 30, 1999, 29,893 options were
outstanding, none of which were exercisable.

7. SALE OF THE GROUP AND RELATED IMPAIRMENT

On January 26, 1999, Tenneco announced that it had entered into an agreement
to contribute a majority interest in the Group to a new joint venture with
Madison Dearborn Partners, in exchange for cash and debt assumption totaling
approximately $2 billion, and a 45% common equity interest in the joint
venture. The owned and leased assets to be contributed include the Group's
four linerboard and medium mills, 67 plants, three sawmills, an air-drying
yard, three recycling facilities, miscellaneous other property, which
includes sales offices and woodlands forest management offices, numerous
distribution centers, warehouses and five design centers and an ownership or
controlling interest in approximately 950,000 acres of timberland. The
transaction closed on April 12, 1999.

In connection with the transaction, TPI borrowed approximately $1.8 billion,
most of which was used to acquire assets used by the Group pursuant to
operating leases and timber cutting rights, with the remainder remitted to
Tenneco.

Tenneco then contributed the Group's assets (subject to the new indebtedness
and the Group's liabilities) to PCA in exchange for (a) a 45% common equity
interest in PCA valued at approximately $200 million and (b) $246.5 million
in cash. As a result of the transaction, Tenneco recognized a pretax loss in
the first quarter of 1999 of approximately $293 million. Part of that loss
consisted of an impairment charge relating to the Group's property, plant
and equipment and intangible assets, which was pushed down to the Group's
March 31, 1999

F-36
<PAGE>
PACKAGING CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999 (CONTINUED)

7. SALE OF THE GROUP AND RELATED IMPAIRMENT (CONTINUED)
financial statements. The amount of the impairment charge is approximately
$230.1 million and was allocated to the following financial statement line
items:

<TABLE>
<S> <C>
(IN THOUSANDS)
Intangibles...................................................... $ 46,206
Machinery and equipment.......................................... 183,906
---------
Total.......................................................... $ 230,112
---------
---------
</TABLE>

The impairment charge was first applied against the goodwill specifically
attributable to the containerboard assets and the remaining amount was
applied against property, plant and equipment.

The Group's financial statements reflect $230.1 million of the $293.0
million charge representing the impairment attributable to the assets
reflected in the Group's financial statements. Tenneco has informed PCA that
the remaining $62.9 million charge primarily includes liabilities for direct
incremental costs of sales, severance costs and other contractual
obligations directly related to the containerboard transaction, and the
impairment of other containerboard-related assets not contributed to PCA.
The $62.9 million charge is not part of the Group's financial statements.

8. EXTRAORDINARY LOSS

9. SUMMARIZED COMBINED FINANCIAL INFORMATION ABOUT GUARANTOR SUBSIDIARIES

The following is summarized aggregated financial information for Dahlonega
Packaging Corporation, Dixie Container Corporation, PCA Hydro, Inc., PCA
Tomahawk Corporation and PCA Valdosta Corporation, each of which was a
wholly-owned subsidiary of TPI and included in the Group's combined
financial statements. In connection with the sale of the Group to PCA, each
of these companies became subsidiaries of PCA and fully, unconditionally,
jointly and severally guaranteed $550 million in senior subordinated notes
issued by PCA in connection with the transaction. Separate financial
statements of the guarantor subsidiaries are not

F-37
<PAGE>
PACKAGING CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999 (CONTINUED)

9. SUMMARIZED COMBINED FINANCIAL INFORMATION ABOUT GUARANTOR SUBSIDIARIES
(CONTINUED)
presented because, in the opinion of management, such financial statements
are not material to investors.

<TABLE>
<CAPTION>
JUNE 30, 1999
(UNAUDITED)
---------------
<S> <C>
(IN THOUSANDS)
Current assets............................................ $ 15,730
Non-current assets........................................ 14,118
---------------
Total assets............................................ 29,848
Current liabilities....................................... 3,744
Non-current liabilities................................... 5,438
---------------
Total liabilities....................................... 9,182
---------------
Net assets................................................ $ 20,666
---------------
---------------
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1999 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
(IN THOUSANDS)
Net sales.............................................. $ 20,898 $ 15,279
Gross profit........................................... 1,459 492
Net (loss)............................................. (527) (388)
</TABLE>

10. SUBSEQUENT EVENT

F-38
<PAGE>
UNDERWRITING

PCA, the selling stockholder and the underwriters for the U.S. offering (the
"U.S. Underwriters") named below have entered into an underwriting agreement
with respect to the shares being offered in the United States. Subject to
certain conditions, each U.S. Underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated, Salomon Smith Barney Inc., Deutsche Bank Securities
Inc. and J.P. Morgan Securities Inc. are the representatives of the U.S.
Underwriters.

<TABLE>
<CAPTION>
Number of
Underwriters Shares
- ------------------------------------------------------------------------------- -------------
<S> <C>
Goldman, Sachs & Co............................................................
Morgan Stanley & Co. Incorporated..............................................
Salomon Smith Barney Inc.......................................................
Deutsche Bank Securities Inc...................................................
J.P. Morgan Securities Inc.....................................................

-------------
Total....................................................................
-------------
-------------
</TABLE>

------------------

If the U.S. Underwriters sell more shares than the total number set forth in
the table above, the U.S. Underwriters have an option to buy up to an additional
shares from the selling stockholder to cover such sales. They may exercise
that option for 30 days. If any shares are purchased pursuant to this option,
the U.S. Underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts and
commissions to be paid to the U.S. Underwriters by PCA and by the selling
stockholder. Such amounts are shown assuming both no exercise and full exercise
of the U.S. Underwriters' option to purchase additional shares.

<TABLE>
<CAPTION>
Paid by the Company
-------------------------
Full
No Exercise Exercise
----------- ------------
<S> <C> <C>
Per Share......................................................... $ $
Total............................................................. $ $
</TABLE>

<TABLE>
<CAPTION>
Paid by the Selling
Stockholder
-------------------------
Full
No Exercise Exercise
----------- ------------
<S> <C> <C>
Per Share......................................................... $ $
Total............................................................. $ $
</TABLE>

Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per share from
the initial public offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms.

U-1
<PAGE>
PCA and the selling stockholder have entered into an underwriting agreement
with the underwriters for the sale of shares outside of the United States.
The terms and conditions of both offerings are the same and the sale of shares
in both offerings are conditioned on each other. Goldman Sachs International,
Morgan Stanley Dean Witter, Salomon Brothers International Limited, Deutsche
Bank AG London and J.P. Morgan Securities Ltd. are representatives of the
underwriters for the international offering outside the United States (the
"International Underwriters"). The selling stockholder has granted the
International Underwriters a similar option to purchase up to an aggregate of an
additional shares.

The underwriters for both of the offerings have entered into an agreement in
which they agree to restrictions on where and to whom they and any dealer
purchasing from them may offer shares as a part of the distribution of the
shares. The underwriters also have agreed that they may sell shares among each
of the underwriting groups.

At the request of PCA, the underwriters have agreed to reserve up to
shares of common stock for sale to salaried and hourly employees of PCA at the
initial public offering price set forth on the cover of this prospectus. The
number of shares available for sale to the general public in the offerings will
be reduced by the number of reserved shares sold to these employees. Any
reserved shares not so purchased will be offered to the general public on the
same basis as the other shares offered hereby.

Prior to the offerings, there has been no public market for the shares. The
initial public offering price will be negotiated among the selling stockholder,
PCA and the representatives. Among the factors to be considered in determining
the initial public offering price of the shares, in addition to prevailing
market conditions, will be PCA's historical performance, estimates of the
business potential and earnings prospects of PCA, an assessment of PCA's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.

The common stock will be listed on the New York Stock Exchange under the
symbol " ". In order to meet one of the requirements for listing the common
stock on the NYSE, the underwriters have undertaken to sell lots of 100 or more
shares to a minimum of 2,000 beneficial holders.

In connection with the offerings, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offerings.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offerings are in progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the

U-2
<PAGE>
representatives have repurchased shares sold by or for the account of such
underwriter in stabilizing or short covering transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the NYSE, in the
over-the-counter market or otherwise.

The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.

PCA and the selling stockholder estimate that their share of the total
expenses of the offerings, excluding underwriting discounts and commissions,
will be approximately $ and $ , respectively. Under the terms of
the registration rights agreement, PCA has agreed to pay some of the expenses of
the selling stockholder, other than underwriting discounts and commissions, in
connection with the offerings.

PCA and the selling stockholder have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

This prospectus may be used by the underwriters and other dealers in
connection with offers and sales of the shares, including sales of shares
initially sold by the underwriters in the offering being made outside of the
United States, to persons located in the United States.

Goldman, Sachs & Co. is a lender under PCA's senior credit facility.
Goldman, Sachs & Co. represented Tenneco in connection with the sale of the
Group to PCA. Additionally, J.P. Morgan Securities Inc., and Deutsche Bank
Securities Inc. (under the name BT Alex. Brown Incorporated) were co-lead
arrangers, Bankers Trust Company, an affiliate of Deutsche Bank Securities Inc.
was the syndication agent, and Morgan Guaranty Trust Company of New York, an
affiliate of J.P. Morgan Securities Inc., was the administrative agent, for the
lenders' syndicate to the senior credit facility.

J.P. Morgan Capital Corporation, an affiliate of J.P. Morgan Securities
Inc., and BT Capital Investors, L.P., an affiliate of Deutsche Bank Securities
Inc., are co-investors with Madison Dearborn Capital Partners III, L.P. in PCA
Holdings, and, as of September 1, 1999, may be deemed to own beneficially
shares and shares of the common stock of PCA, respectively. J.P.
Morgan Securities Inc. and Deutsche Bank Securities Inc. (through its
affiliates) were the initial purchasers of the notes and the senior exchangeable
preferred stock issued in connection with the closing of the transactions and
have engaged, and may in the future engage (directly or through affiliates), in
commercial banking and/or investment banking transactions with PCA and its
affiliates.

U-3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 10
Forward-Looking Statements................................................ 17
The Transactions.......................................................... 18
Use of Proceeds........................................................... 20
Dilution.................................................................. 21
Dividend Policy........................................................... 22
Capitalization............................................................ 23
Unaudited Pro Forma Financial Information................................. 24
Selected Financial and Other Data......................................... 32
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 37
Business.................................................................. 51
Management................................................................ 62
Certain Relationships and Related Transactions............................ 66
Principal and Selling Stockholders........................................ 69
Description of Capital Stock.............................................. 71
Shares Eligible for Future Sale........................................... 73
Description of Certain Indebtedness....................................... 75
U.S. Federal Tax Consequences for Non-United States Holders of Common
Stock................................................................... 77
Legal Matters............................................................. 79
Experts................................................................... 79
Where You Can Find More Information....................................... 79
Index to Financial Statements............................................. F-1
Underwriting.............................................................. U-1
</TABLE>

--------------------

Through and including , 1999 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.

PACKAGING CORPORATION
OF AMERICA

Common Stock

-------------

[LOGO]
-------------

GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
DEUTSCHE BANC ALEX. BROWN
J.P. MORGAN & CO.

Representatives of the Underwriters

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is a statement of estimated expenses, to be paid solely by
PCA, of the issuance and distribution of the securities being registered hereby:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 271,385
NASD filing fee.................................................. 30,500
New York Stock Exchange listing fee.............................. *
Blue Sky fees and expenses (including attorneys' fees and
expenses)...................................................... 7,500
Printing expenses................................................ *
Accounting fees and expenses..................................... *
Transfer agent's fees and expenses............................... *
Legal fees and expenses.......................................... *
Miscellaneous expenses........................................... *
---------
Total.......................................................... $ *
---------
---------
</TABLE>

- --------------

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

CERTIFICATE OF INCORPORATION

The Second Restated Certificate of Incorporation of PCA will provide that to
the fullest extent permitted from time to time by the General Corporation Law of
the State of Delaware ("DGCL"), a director of PCA shall not be liable to the
company or its stockholders for monetary damages for a breach of fiduciary duty
as a director.

BY-LAWS

The Second Amended and Restated By-laws of PCA will provide that PCA shall
indemnify its directors and officers to the maximum extent permitted from time
to time by the DGCL.

DELAWARE GENERAL CORPORATION LAW

Section 145 of the DGCL provides that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. Section 145 further provides that a corporation
similarly may indemnify any such person serving in any such capacity who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor, against expenses actually and reasonably incurred in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests

II-1
<PAGE>
of the corporation and except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the Delaware
Court of Chancery or such other court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.

Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided, however, that such
provision shall not eliminate or limit the liability of a director (1) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) under Section 174 of the DGCL,
which relates to unlawful payment of dividends and unlawful stock purchases and
redemptions, or (4) for any transaction from which the director derived an
improper personal benefit.

INSURANCE

The directors and officers of PCA are covered under directors' and officers'
liability insurance policies maintained by PCA with coverage up to $50 million.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The share numbers set forth below do not give effect to the proposed stock
split referred to in this registration statement.

During the last three years, PCA has issued the following securities without
registration under the Securities Act of 1933:

(1) On April 12, 1999, in transactions exempt from registration under
Section 4(2) of the Securities Act of 1933, PCA issued:

(a) an aggregate of 236,500 shares of common stock to the PCA Holdings
LLC for an aggregate of $236.5 million;

(b) an aggregate of 193,500 shares of common stock valued at $193.5
million to TPI in partial consideration for the contribution of its
containerboard and corrugated packaging products business to PCA;

(c) an aggregate of 55 shares, liquidation preference $1.00 per share,
of junior preferred stock to PCA Holdings for nominal consideration; and

(d) an aggregate of 45 shares, liquidation preference $1.00 per share,
of junior preferred stock to TPI for nominal consideration.

(2) On April 12, 1999, in a transaction exempt from registration under
Section 4(2) of the Securities Act of 1933, PCA sold to J.P. Morgan Securities
Inc. and BT Alex. Brown Incorporated, pursuant to a Purchase Agreement, dated as
of March 30, 1999:

(a) an aggregate of $550 million aggregate principal amount of 9 5/8%
senior subordinated notes due 2009 for an aggregate consideration of $550
million less underwriting discounts and commissions of $16.5 million; and

(b) an aggregate of $100 million aggregate liquidation preference of
12 3/8% senior exchangeable preferred stock due 2010 for an aggregate
consideration of $100 million less underwriting discounts and commissions of
$3.5 million.

II-2
<PAGE>
The notes and preferred stock were immediately resold by the initial
purchasers in transactions not involving a public offering.

(3) In June 1999, in transactions exempt from registration under Rule 701 of
the Securities Act of 1933, PCA sold an aggregate of 14,240 shares of common
stock to employees of PCA for an aggregate of $14.2 million in cash. The
proceeds were used to redeem 7,832 shares from PCA Holdings and 6,408 shares
from TPI. PCA also issued options to management employees to purchase 29,893
shares of common stock.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------
<C> <S>
1.1 Form of U.S. Underwriting Agreement.*
1.2 Form of International Underwriting Agreement.*
2.1 Contribution Agreement, dated as of January 25, 1999, among Tenneco Packaging
Inc. ("TPI"), PCA Holdings LLC ("PCA Holdings") and Packaging Corporation of
America ("PCA").+
2.2 Letter Agreement Amending the Contribution Agreement, dated as of April 12,
1999, among TPI, PCA Holdings and PCA.+
3.1 Second Restated Certificate of Incorporation of PCA.*
3.2 Second Amended and Restated By-laws of PCA.*
4.1 Indenture, dated as of April 12, 1999, by and among PCA, Dahlonega Packaging
Corporation ("Dahlonega"), Dixie Container Corporation ("Dixie"), PCA Hydro
Inc. ("PCA Hydro"), PCA Tomahawk Corporation ("PCA Tomahawk"), PCA Valdosta
Corporation ("PCA Valdosta") and United States Trust Company of New York.+
4.2 Certificate of Designations, Preferences and Relative, Participating, Optional
and Other Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof of 12 3/8% Senior Exchangeable Preferred Stock due 2010
and 12 3/8% Series B Senior Exchangeable Preferred Stock due 2010 of PCA.+
4.3 Exchange Indenture, dated as of April 12, 1999, by and among PCA and U.S. Trust
Company of Texas, N.A.+
4.4 Notes Registration Rights Agreement, dated as of April 12, 1999, by and among
PCA, Dahlonega, Dixie, PCA Hydro, PCA Tomahawk, PCA Valdosta, J.P. Morgan
Securities Inc. ("J.P. Morgan") and BT Alex. Brown Incorporated ("BT").+
4.5 Preferred Stock Registration Rights Agreement, dated as of April 12, 1999, by
and among PCA, J.P. Morgan and BT.+
4.6 Form of Rule 144A Global Note and Subsidiary Guarantee.+
4.7 Form of Regulation S Global Note and Subsidiary Guarantee.+
4.8 Form of Rule 144A Global Certificate.+
4.9 Form of certificate representing shares of common stock.*
5.1 Opinion of Kirkland & Ellis.*
10.1 Purchase Agreement, dated as of March 30, 1999, by and among PCA, Dahlonega,
Dixie, PCA Hydro, PCA Tomahawk, PCA Valdosta, J.P. Morgan and BT.+
10.2 Credit Agreement, dated as of April 12, 1999, among TPI, the lenders party
thereto from time to time, J.P. Morgan, BT, Bankers Trust Company and Morgan
Guaranty Trust Company of New York ("Morgan Guaranty").+
10.3 Subsidiaries Guaranty, dated as of April 12, 1999, made by Dahlonega, Dixie,
PCA Hydro, PCA Tomahawk, PCA Valdosta and Morgan Guaranty.+
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------
<C> <S>
10.4 Pledge Agreement, dated as of April 12, 1999, among PCA, Dahlonega, Dixie, PCA
Hydro, PCA Tomahawk, PCA Valdosta and Morgan Guaranty.+
10.5 TPI Security Agreement, dated as of April 12, 1999, between TPI and Morgan
Guaranty.+
10.6 PCA Security Agreement, dated as of April 12, 1999, among PCA, Dahlonega,
Dixie, PCA Hydro, PCA Tomahawk, PCA Valdosta and Morgan Guaranty.+
10.7 Stockholders Agreement, dated as of April 12, 1999, by and among TPI, PCA
Holdings and PCA.+
10.8 Registration Rights Agreement, dated as of April 12, 1999, by and among TPI,
PCA Holdings and PCA.+
10.9 Holding Company Support Agreement, dated as of April 12, 1999, by and between
PCA Holdings and PCA.+
10.10 Facility Use Agreement, dated as of April 12, 1999, by and between TPI and
PCA.+
10.11 Human Resources Agreement, dated as of April 12, 1999, by and among Tenneco
Inc., TPI and PCA.+
10.12 Purchase/Supply Agreement, dated as of April 12, 1999, between PCA and Tenneco
Packaging Speciality and Consumer Products Inc.+
10.13 Purchase/Supply Agreement, dated as of April 12, 1999, between PCA and TPI.+
10.14 Purchase/Supply Agreement, dated as of April 12, 1999, between PCA and Tenneco
Automotive Inc.+
10.15 Technology, Financial and Administrative Transition Services Agreement, dated
as of April 12, 1999, between TPI and PCA.+
10.16 Letter Agreement Regarding Terms of Employment, dated as of January 25, 1999,
between PCA and Paul T. Stecko.+
10.17 Letter Agreement Regarding Terms of Employment, dated as of May 19, 1999,
between PCA and Paul T. Stecko.+
10.18 1999 Management Equity Compensation Plan, effective as of June 1, 1999.+
10.19 Management Equity Agreement, dated as of June 1, 1999, among PCA, Paul T.
Stecko and the Paul T. Stecko 1999 Dynastic Trust.+
10.20 Form of Management Equity Agreement, dated as of June 1, 1999, among PCA and
the members of management party thereto.+
10.21 Memorandum Regarding Special Retention Bonus, dated as of April 16, 1999, from
PCA to William J. Sweeney.+
10.22 Amended and Restated 1999 Management Equity Compensation Plan, effective as of
June 2, 1999.+
21.1 Subsidiaries of the Registrants.+
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included in the signature pages to the registration
statement).
27.1 Financial Data Schedule.
</TABLE>

- --------------

+ Incorporated herein by reference to the same numbered exhibit to PCA's
Registration Statement on Form S-4 (Registration No. 333-79511).

* To be filed by amendment.

II-4
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES.

The following consolidated financial statement schedules of PCA for the
three years ended December 31, 1998 are included in this registration statement.

Schedule II - Packaging Corporation of America - Valuation and Qualifying
Accounts.

<TABLE>
<CAPTION>
ALLOWANCE FOR DOUBTFUL ACCOUNTS BALANCE PROVISION ADDITIONS/DEDUCTIONS TRANSLATION BALANCE END
RECEIVABLE BEGINNING OF YEAR (BENEFIT) FROM RESERVES * ADJUSTMENTS OF YEAR
- ------------------------------------- ------------------- ----------- --------------------- --------------- -------------
<S> <C> <C> <C> <C> <C>

1998................................. 5,023 2,710 (2,513) -- 5,220

1997................................. 5,010 611 (598) -- 5,023

1996................................. 5,239 1,018 (1,247) -- 5,010
</TABLE>

- --------------

* Consists primarily of write-offs and recoveries of bad debts.

All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the financial statements and
therefore has been omitted.

We have audited in accordance with generally accepted auditing standards the
financial statements of The Containerboard Group (a division of Tenneco
Packaging Inc., which is a Delaware corporation and a wholly owned subsidiary of
Tenneco Inc.), included in this registration statement and have issued our
report thereon dated February 26, 1999. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed above is the responsibility of the company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Chicago, Illinois
August 26, 1999

II-5
<PAGE>
ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the underwriters
at closing specified in the underwriting agreement certificates in such
denominations and registered in such manner as requested by the underwriters to
permit prompt delivery to each purchaser.

The undersigned registrant hereby undertakes:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by any such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
or not such indemnification is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Packaging
Corporation of America has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Lake
Forest, State of Illinois, on September 10, 1999.

Packaging Corporation of America

By: /s/ RICHARD B. WEST
--------------------------------------
Name: Richard B. West

Title: Chief Financial Officer and
Secretary

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS that each officer and director of Packaging
Corporation of America whose signature appears below constitutes and appoints
Paul T. Stecko, Richard B. West and Samuel M. Mencoff, and each of them, his or
her true and lawful attorney-in-fact and agent, with full power of substitution
and revocation, for him or her and in his or her name, place and stead, in any
and all capacities, to execute any and all amendments, including any
post-effective amendments and supplements to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on September 10, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<C> <S>
/s/ PAUL T. STECKO
- -------------------------------------------- Chairman of the Board and Chief Executive
Paul T. Stecko Officer (Principal Executive Officer)

/s/ RICHARD B. WEST
- -------------------------------------------- Chief Financial Officer and Secretary
Richard B. West (Principal Financial and Accounting Officer)

/s/ DANA G. MEAD
- -------------------------------------------- Director
Dana G. Mead

/s/ THEODORE R. TETZLAFF
- -------------------------------------------- Director
Theodore R. Tetzlaff

/s/ SAMUEL M. MENCOFF
- -------------------------------------------- Director
Samuel M. Mencoff

/s/ JUSTIN S. HUSCHER
- -------------------------------------------- Director
Justin S. Huscher

/s/ THOMAS S. SOULELES
- -------------------------------------------- Director
Thomas S. Souleles
</TABLE>

II-7

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this registration statement.

ARTHUR ANDERSEN LLP

Chicago, Illinois
September 10, 1999

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated August 23, 1999 in the Registration Statement (Form
S-1 No. 333-xxxxx) and related Prospectus of Packaging Corporation of America
for the initial registration of its common stock.

ERNST & YOUNG LLP

Chicago, Illinois
September 10, 1999

<PAGE>
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<NAME> PACKAGING CORPORATION OF AMERICA
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