Capital expenditures, excluding acquisition costs, were $58.3 million in 2000 versus $35.7 million for the same period in 1999. Aggregate capital expenditures of approximately $30.0 million are anticipated for 2001. To conserve cash, we intend to limit capital expenditures for 2001 to cost reduction and productivity improvement projects.

In February 2000, we acquired all of the outstanding stock of Mil Pak, Inc. in exchange for 248,132 shares of our common stock valued at $4.7 million and $4.7 million in cash. Mil Pak operates a facility located in Pine Brook, New Jersey that provides blister packaging, cartoning and labeling, and other contract packaging services.

In September 2000, we acquired all of the outstanding stock of Arrow Paper Products Company in exchange for 342,743 shares of our common stock valued at $5.1 million. Arrow is located in Saginaw, Michigan and operates two tube and core converting facilities that serve customers in the automotive, film, housewares and other specialty tube and core markets.

In October 2000, we completed the acquisition of 100% of the membership interests in Crane Carton Company LLC in exchange for 1,659,790 shares of our common stock valued at $19.0 million plus $5.8 million of assumed debt, including industrial development bonds in the aggregate amount of $3.5 million. Crane operates a single folding carton manufacturing facility located in suburban Chicago, Illinois. Because of the cross-default under the senior credit facility, Bankers Trust Company, the issuer of the letter of credit supporting the bonds, has the right to cause an event of default under the bonds by notifying the bond trustee that an event of default exists under the senior credit facility. The resulting event of default under the bond documents would permit the trustee to accelerate the maturity of the bonds and draw under the letter of credit to pay the bond indebtedness. Upon payment by Bankers Trust Company under the letter of credit, we would have an immediate obligation to reimburse Bankers Trust Company for the amounts drawn. We believe we have sufficient liquidity to pay these reimbursement obligations.

During the second quarter of 1999, we formed a joint venture with Temple-Inland, Inc. to own and operate Temple-Inland’s Newport, Indiana containerboard mill. The joint venture, Premier Boxboard Limited LLC, undertook a 14-month, $82.0 million project to modify the mill to enable it to produce a new, lightweight gypsum facing paper along with other containerboard grades. The mill began operations as modified at the beginning of the third quarter of 2000. Under the joint venture agreement, we contributed $50.0 million to the joint venture during the second quarter of 2000, and Temple-Inland contributed the net assets of the mill and received $50.0 million in notes issued by Premier Boxboard. Each partner has a 50% interest in the joint venture, and we account for our interest in this joint venture under the equity method. Our subsidiary, PBL Inc., manages the day-to-day operations of Premier Boxboard, pursuant to a management agreement with Temple-Inland.

In April 1999, we purchased International Paper Company’s Sprague boxboard mill located in Versailles, Connecticut for approximately $103.2 million in cash and assumed $4.7 million of long-term debt. This acquisition has had a significant impact on our earnings in 1999 and 2000. Sprague incurred operating losses of $9.3 million and $17.2 million in 1999 and 2000, respectively. The losses were attributable to a combination of unfavorable fixed price contracts, low capacity utilization and higher fiber costs that we were unable to pass through to our customers. Our primary objectives at Sprague have been to improve quality, reduce costs and increase sales volume. We have made significant progress in quality and cost and are beginning to realize the benefits. Operating losses declined from $4.2 million in the third quarter of 2000 to $2.7 million in the fourth quarter of 2000 primarily as the result of the decrease in raw material costs. Based on improvements we made during the last year and a half, we now believe Sprague is competitive in terms of cost and quality, and we expect Sprague’s financial performance to improve with increases in sale volume. Although we expect losses at Sprague to continue to decline, in light of current difficult industry conditions, we do not expect Sprague to become profitable for the balance of 2001.

We paid cash dividends of $18.5 million in 2000, versus $18.0 million in 1999. Although our former debt agreements contained no specific limitations on the payment of dividends, our new debt agreements, as described below under “Subsequent Events,” contain certain limitations on the payment of future dividends. We expect to continue dividend payments at the reduced rate we declared in the first quarter of 2001, subject to compliance with our financial covenants in the new debt agreements.

We did not purchase any shares of our common stock during 2000 under our common stock purchase plan. We have cumulatively purchased 3,169,000 shares since January 1996. Our board of directors has authorized purchases of up to 831,000 additional shares. We expect that our newly issued 9 7/8% senior subordinated notes and our new credit facility will limit our future ability to repurchase our common stock.

We believe that the remaining net proceeds from our recent sale of 7 1/4% senior notes and 9 7/8% senior subordinated notes, together with existing cash and cash from operations, will be adequate to fund our operations, working capital needs and debt service obligations for the forseeable future. If, however, we were to undertake any significant acquisitions in the next 12 months, we could require additional funds from external sources such as our new senior credit facility.

Inflation
Raw material price changes have had, and continue to have, a material effect on our operations. Energy prices had a material effect on our operations in 2000. We do not believe that general economic inflation is a significant determinant of our raw material price increases or that, except as it relates to energy prices, it has a material effect on our operations.

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