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1998 Annual Report


To build an integrated company, Smurfit-Stone will optimize its financial discipline and marketing strengths; eliminate redundancies and apply resources across all divisions; create an environment in which people can learn, grow, and succeed; and equip employees with appropriate and timely training and fair compensation.
Build a Unified, Cohesive Organization

Smurfit-Stone has an exceptional opportunity to build a solid identity and culture, based on the strengths and best practices of the new partners — Jefferson Smurfit Corporation and Stone Container. This will require a number of initiatives, such as incorporating financial discipline in order to manage leverage and spread cost over a greater number of plants; providing sales incentives, based on retaining high-margin business and profit-margin performance; and investing in the maintenance and improvement of operations.
     One of the most daunting aspects of any merger is combining the assets, functions, and corporate styles of two distinct organizations in order to create a single, corporate structure. The first step will be to eliminate redundancies and apply corporate resources more efficiently across all divisions. The company has already embarked on a number of actions to achieve this objective. It has established its corporate headquarters in Chicago and, to save the cost and disruption of a major relocation, also maintains offices at the former Jefferson Smurfit Corporation sites in St. Louis, Missouri, and Alton, Illinois.
     Merging two distinct cultures is another challenge. To that end, the company is committed to building a strong leadership team and to encouraging every person at every level of the organization to understand, adopt, and practice the new organization's core values. Adoption of such values can only be accomplished through active engagement in open, two-way communication, with information flowing up and down through easily accessible channels. Several programs are already in place to enhance internal and external communications.
     A third critical focus will be on providing appropriate and timely training and fair compensation, based on achievement of corporate goals. Smurfit-Stone has created new incentive plans for 1999 and beyond. Short-term incentives will be driven by earnings, achievement of synergies, cost take-out, asset divestitures, and debt reduction. Long-term incentives will be based on creating value.

     Smurfit-Stone's guiding strategy is to improve the financial performance of the combined company throughout the paper cycle by selling non-core businesses — newsprint, pulp, and woodlands — and focusing on packaging. Existing businesses tend to be balanced between those that are influenced by large fluctuations in price, such as corrugated containers, and those that have had a history of steady earnings, such as folding cartons, industrial bags, and specialty packaging.
     The company now has an opportunity to smooth out the instability of earnings by managing the supply side of its business. By strengthening some of the less cyclical businesses, avoiding losses during periods of downturn, and creating a steadier earnings environment through balancing the company's own supply and demand, Smurfit-Stone should become very attractive to long-term investors.


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Marsha Strickler, a finisher at Smurfit-Stone's Wabash, Indiana, boxboard mill, moves a roll of coated boxboard from storage to be shipped to a converting plant, where it will be made into folding cartons. The roll was produced under the company's new stock optimization system, which allows the mill to use old newspapers and residential mixed paper to produce coated boxboard — a more economical fiber source than pulp substitutes used in the past.

Across the company, Smurfit-Stone's strict quality control measures ensure that customers will receive consistent, superior products each and every time. At the Kansas City, Missouri, bag packaging plant, a press operator checks the print quality of a multiwall bag to guarantee a flawless image.
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