1. Innovation Drives Excellence20 0 4 A N N U A L R E P O R TS M U R F I T - S TO N E C O N TA I N E R C O R P O R AT I O N

2. FINANCIAL HIGHLIGHTS20 0 4 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)2003 2002Summary of Operations $ 8,291 Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,722$ 7,483 263 Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47462(343) Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(341)(355) Income (loss) from continuing operations before (46)cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(198)59 (57) Net income (loss) available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (208)54 Basic Earnings per Share Income (loss) from continuing operations before $(.23)cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (.85)$.20(.23) Net income (loss) available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(.85) .22253 Weighted average shares outstanding (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246244 Diluted Earnings per Share Income (loss) from continuing operations before $(.23)cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (.85)$.20(.23) Net income (loss) available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(.85) .22253 Weighted average shares outstanding (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246246 Other Financial Data $ 273 Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $162 $503 232 Capital investments and acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238570 290 Working capital, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282590 4,682 Property, plant, equipment and timberland, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,9745,182 9,725 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,102 10,805 4,498 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,8074,990 2,259 Stockholders equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,2702,320 35,300 Number of employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,700 38,600 OUR VISION INDUSTRY SAFETY LEADERSM Smurfit-Stones vision is embodied in our CustomerONE operatingSafety continues to be Smurfit-Stones top operating priority, and is SM philosophy: Smurfit-Stone will be recognized as North Americas premierone of the core values represented in our CustomerONE philosophy. packaging company working as ONE team to deliver exceptional value toOur objective is to achieve an accident-free workplace, and we subscribe our customers, employees, shareholders, and the communities in which to the belief that safety is everyones responsibility. we do business.Smurfit-Stone led the industry in safety performance for the fourthconsecutive year in 2004. Our Smurfit-Stone Accident-Free Environment(SAFE) process is the linchpin of our safety efforts. With SAFE, wehave developed a model for building a workplace where continuousimprovement is the normal operating procedure, supported bycomprehensive employee training and the commitment to workingsafely with every job we do. 3. 1 I N NOVATION DRIVES EXCELLENCE Smurfit-Stone is more than just a packaging company. We have a deep involvement in product development and a commitment to innovation. We are taking new directions at Smurfit-Stone, providing significant value to our customers. AN INNOVATIVE PACKAGING PORTFOLIO p.3 Smurfit-Stones strategy is to provide products and services that help our customers grow, and to deliver shareholder value by innovating through our products, our services and our business practices. DELIVERING VALUE TO CUSTOMERS p.8 Smurfit-Stone has the expertise and infrastructure to rapidly spot new trends and reenergize brands. We are creating fresh packaging concepts and speeding them to market. In the process, we are changing customer perceptions of what packaging can do and what Smurfit-Stone can deliver. INNOVATIVE SOLUTIONSp.12 Smurfit-Stone is poised to take advantage of the increased influence of retailers and the willingness of customers to pay SMURFIT-STONE AT A GLANCE p.2 for creativity and innovation. Smurfit-Stone is better positioned LETTER TO STOCKHOLDERS p.8to capitalize on those trends than any other provider in the BOARD OF DIRECTORS AND CORPORATE OFFICERS p.16packaging industry. SMURFIT-STONE FORM 10-K p.17STOCKHOLDER INFORMATION AND DIVISION OFFICERS Inside Back Cover 4. 2 2004 At A Glance... Smurfit-Stone Container Corporation is the industrys leading integrated manufacturer of paperboard packaging. Smurfit-Stone is the leading producer of containerboard, including white topPORTFOLIO linerboard; corrugated containers; multiwall and specialty bags; and clay-coated recycled boxboard. We are one of the worlds largest paper recyclers, annually processing and selling more than 6.5 millionPACKAGING tons. Smurfit-Stone is a leading producer of solid bleached sulfate, folding cartons, flexible packaging, labels, and point-of-purchase displays. The company operates more than 250 facilities andI N NOVATIVE employs approximately 35,300 people.AN 5. 7 Containerboard and Corrugated Containers Containerboard and corrugated containers represent Smurfit-Stones largest business segment. We are the largest containerboard manufacturer, and offer the most comprehensive line of board substrates. Smurfit-Stone is North Americas leading corrugated container manufacturer, providing innovative packaging solutions to global consumer products companies,Containerboard and corrugated regional and local customers.containers represent 75% ofSmurfit-Stones business. 2004 Revenue: $6,224 million Consumer Packaging The consumer packaging division offers a wide portfolio of primary packaging products and solutions that includes folding cartons, multiwall STATISTICS TM and specialty bags, flexible packaging, Lithoflute , labels and contract packaging. The various operations within this business segment share many of the same customers and serve the same consumer product markets, with high-impact graphics printing as a core manufacturingConsumer packaging representscompetency. With cross-trained sales teams supported by creative and20% of Smurfit-Stones business. technical resources, the consumer packaging division delivers added KEY value to our customers.2004 Revenue: $1,656 million Recycling Smurfit Stones recycling operations provide a secure source of recovered fiber for the companys mills and have a broad product line that includes all grades of recovered paper. The company also offers extensive services in aluminum and glass recycling. Smurfit-Stone Waste Reduction Services (SWRS) provides single-source waste management and recycling solutions to businesses.Recycling represents 5% ofSmurfit-Stones business. 2004 Revenue: $383 million 6. 3An InnovativePackagingPortfolioa ef a INNOVATIVE DESIGN The design needed to be stackable and d COOK AND SERVE PACKAGING Smurfit-Stones structural and graphiccapable of supporting 1,300 pounds, The Family Time Snacks Perfect Popper design capabilities, combined with itsable to be shopped from three sides was a design first that effectively met network of boxboard mills and pack- with no internal dividers to hide all the requirements of an extremely aging plants, enable the companyproduct, printed with five-colordemanding microwave popcorn to provide folding cartons to manygraphics and be cost effective. application. The consumer needs of the worlds most recognizedonly to pop-up the carton and cook consumer products companies.in the microwave. The carton fills with c NO LABEL LOOK popcorn, the lid peels back, and the Smurfit-Stones DI-NA-CAL heat carton becomes an instant bowl. b DISPLAY BOXES MADE EASY transfer label group played a pivotal Corrugated containers are used forrole in the national product launch e PRINTING TECHNIQUES all types of packaging solutions. Inof the Procter & Gamble Companys Downy Simple Pleasures fabric TM this case, Ocean Spray Cranberries, Smurfit-Stones printing techniques, Inc., was looking for a display tray to softener. Smurfit-Stone brings asuch as high-definition printing and promote their 6 oz. Craisin Pouches. TM cost-effective, durable, high-quality Rub n Smell scented varnish, help no label look to products.packaging sell the product. 7. 20 0 4 A N N U A L R E P O R T c db PORTFOLIO PACKAGING I N NOVATIVEg i h AN TM CANISTER PACKAGING MAXIMUM ON-SHELF IMPACTBAG-IN-BOX PACKAGING f ih An ideal alternative to bag-in-box Smurfit-Stone offers a multitude Smurfit-Stones product line of packaging, Smurfit-Stone offersof specialty lamination options that bag-in-box, ready-to-serve beverage canister packaging with a unique create maximum on-shelf impact packaging is becoming a high-demand appearance, high performance, andand influence purchase decisions convenience service container. Our TM consumer appeal. by consumers at point of sale. The JoeBox lineup features three different TMupscale image conveyed by this size packages: The BigJoe 3-gallon TMlaminated packaging enhances size, the RegularJoe 128-ounce size, g IN-LINE PERFORATED LABELSTMbrand appeal, and provides and the LittleJoe 96-ounce size. Smurfit-Stones litho label group hasimportant barrier properties. developed an innovative in-line perforation feature for cut and stacked paper labels. This offers greater flexi- bility when developing coupon and promotional programs, including multi-directional perforations. 8. S M U R F I T- STO N E C O N TA I N E R C O R P O R AT I O N Containerboard andCONTAINERBOARD OPERATIONSCorrugated Containers (North American Production) Containerboard: 7,438,000 Tons Solid bleached sulfate (SBS)Largest containerboard producer and bleached paperboard:Largest white top linerboard producer 276,000 TonsLargest corrugated container supplier Market pulp: 549,000 Tons Kraft paper: 259,000 Tons CORRUGATED CONTAINER OPERATIONS (North American Shipments) 86.5 Billion Square Feet 5,443,000 Tons Consumer PackagingFOLDING CARTON AND BOXBOARD MILL OPERATIONSLeading supplier of folding cartonsLargest producer of clay-coatedFolding cartons shipped: STATISTICSrecycled boxboard517,000 TonsIndustrys largest producer and marketer Coated recycled boxboardof bag packaging products, including produced: 560,000 Tonsmultiwall, consumer and specialty bags BAG PACKAGING OPERATIONS Multiwall bags shipped: KEY 1,157 Million Bags Recycling (Recycled Volume Processed) Recovered fiber: 6,542,000 TonsOne of the largest collectors andNon-fiber: 87,000 Tonsmarketers of recovered fiber.Open market shipments: 3,637,000 Tons 9. 6FACI LITI ES PRODUCT LINES CAPAB I LITI ES21 containerboard millsKraft linerboardFull range of corrugated containersin the U.S. and Canada White top linerboardInnovative packaging solutionsApproximately 150 corrugated Coated white top linerboard High-quality graphics printingcontainer operations in theSemi-chemical and recycledGraphic and structural design expertiseU.S., Canada, and Mexico mediumPoint-of-purchase display consulting, Solid bleached sulfate (SBS)design, and manufacturing Bleached linerboard and paperboardFull line of specialty products and Market pulp custom die-cut boxes to display Kraft paper packaged merchandise Corrugated containers Pre-print and post-print flexography Displaysand label applications Bulk packaging Folding cartons: converting capabilities17 folding carton plants Folding cartons4 clay-coated recycled Clay-coated recycled boxboard include gluing, tray forming, windowing,boxboard mills Bag packaging waxing, and laminating Bag packaging: multiwall, consumer,11 bag plantsFlexible packaging1 bag packaging equipment plantLabelsand specialty bags Flexible packaging: polyethylene bags,5 flexible packaging plantsLaminationsTM2 heat-transfer label plants Lithoflutepouches, and sheeting and tubing Labels: foil, printed paper and heat-2 litho label plants2 lamination plantstransfer labels, including high-speed1 technical and graphics centerheat-transfer labels for plastic containers Laminations: film, foil, and paper1 contract packaging facility TM Lithoflute : combines corrugated strength with folding carton graphics printability23 collection centersOld corrugated containers Smurfit-Stone Waste Reduction Services:13 sales offices in North AmericaOld newspaperssingle-source waste management and1 sales office in Shanghai, ChinaMixed papersrecycling solutions Aluminum cans, glass, and plastic 10. 8 20 0 4 A N N U A L R E P O R T DELIVERING VALUE TO CUSTOMERS Smurfit-Stone is extending our leadership through innovative thinking, operational and financial discipline, and outstanding customer service. PAT R I C K J . M O O R E CHAIRMAN, PRESIDENT AND CH IEF EXECUTIVE OF FICER 11. 9 S M U R F I T- STO N E C O N TA I N E R C O R P O R AT I O N F ELLOW STOCKHOLDERS SM products. With i2i , we go far beyond merely marketing Our business recovered in 2004 from a four-year cycle ofboxes, cartons or bags. We are building brands. declining demand for packaging. We started to realize the We have formalized our innovation strategy and aligned benefits of our ongoing restructuring initiatives, and we resources to create a collaborative team approach that works intensified our focus on reducing costs and delivering value-addedone on one with customers. packaging products and services to our customers. In addition, we We are at the forefront of research and development in targeted growth markets and refocused our resources on fosteringnext-generation technologies such as radio frequency innovation throughout our organization. identification (RFID) tagging. RFID uses a radio wave toThe longest downturn in decades was exacerbated by a automatically identify items, and promises to offer a more strong U.S. dollar and the steady exodus of manufacturing off-sophisticated way of tracking products through the supply shore. Smurfit-Stone confronted these market realities with a chain. It could become the barcode of the 21st century. restructuring plan first announced in late 2003. We eliminatedWe have assembled a greater depth of capabilities, from non-strategic and underperforming operating assets, realigned product development and graphic design to technical production to meet customer demand, and leveraged our scale service and supply chain efficiencies. to reduce costs. Our rightsizing efforts largely offset inflation Our mill and packaging network spans North America. pressures and positioned us to benefit from steady volume and We are seizing more high-margin, value-added business. price improvement throughout the year. To further improve our Despite the companys successful cost-cutting and consoli- financial flexibility, we strengthened our balance sheet anddation efforts, we recognize that a changing market land- simplified our capital structure. The business climate remainsscape and inflationary pressures require us to do even more. extremely competitive.We are embarking on a companywide exercise to furtherWe continued to identify developing retailing trends.identify cost reduction and strategic growth opportunities. The growing influence of the mega-retailer has fundamentally redefined the role of packaging and presented a host of brandingAs North Americas largest paperboard packaging company, and execution challenges for traditional consumer productsSmurfit-Stone has the expertise and infrastructure to rapidly spot manufacturers. Todays shoppers expect to buy in bulk, experiment new trends and reenergize brands. We are creating fresh packaging with private label items and save money along the way. In this self-concepts and speeding them to market. In the process, we are service retail environment, packaging plays a crucial, if not decisive, changing customer perceptions of what packaging can do and role in buying decisions. Consumer products manufacturers, in what Smurfit-Stone can deliver. In 2005, we will do more to turn, increasingly view packaging as part of any comprehensivedeliver the full promise of this company to shareholders. We will marketing campaign. Never before have manufacturers requireddo more to seize profitable business and contain costs. We also more customer service, product quality, packaging strength andwill do more to foster a culture of innovation and collaboration. shelf appeal. We face a vastly different competitive environmentI will address these topics in greater detail. than was present in previous business cycles. F INANCIAL PERFORMANCEWith our markets in transition, we are encountering new challenges and new opportunities. Smurfit-Stones strategy is toFor the full year, Smurfit-Stone reported a net loss provide products and services that help our customers grow andattributable to common shareholders of $57 million, to deliver shareholder value by innovating through our products,or $0.23 per diluted share, compared to a net loss of our services and our business practices. For example: $208 million, or $0.85 per diluted share, in 2003. We achieved aWe have made innovation central to our growth strategy bysignificant improvement in operating results in 2004. ExcludingSMSMforming our new i2i operating unit. With i2i innovation the following items, net income would have been $.04 perto implementation we are organized to connect directly diluted share for the full year 2004:with marketing and branding decision makers. This newunit helps us provide packaging solutions that span theAn impairment charge of $73 million, or $0.19 per dilutedentire value chain, from brand creation and marketingshare, attributable to the write down of non-core pulp millto fulfillment. In our highly competitive business, we can fixed assets;sell more packaging by helping our customers sell more 12. 1020 0 4 A N N U A L R E P O R T DELIVERING VALUETO CUSTOMERS A charge of $22 million, or $0.05 per diluted share, from We continued to confront stubbornly high costs notably the impact of a non-cash foreign currency translation loss; increased pension and employee benefits charges and higher fiber, A $16 million, or $0.04 per diluted share, restructuringfreight, and energy costs. While the recovery in our business charge for plant closures;gathered steam, we benefited from ongoing cost reductions and A charge of $11 million, or $0.03 per diluted share, from process improvements totaling $159 million from the cost reduction early debt extinguishment; andprogram first announced in October 2003. We realized rewards A tax benefit of $10 million, or $0.04 per diluted share. from our ongoing efforts to restructure our asset base. Throughout the year, we closed a number of redundant and inefficient opera-Sales for the full year were $8.3 billion, compared to tions, including nine corrugated container plants. All of these steps $7.7 billion in 2003. Reflecting sound market fundamentals, set the stage for the company to benefit from the economic our shipments trended upward in all of our major product lines. momentum that built throughout 2004. Smurfit-Stones North American corrugated shipments rose A STRONGER BALANCE SHEET 1.8 percent on a per day basis in 2004. We also realized steady price increases for our mill and packaging products during theIn the fourth quarter of 2004, we merged our two operating second half of the year. Our containerboard mills increased subsidiaries Jefferson Smurfit Corporation (U.S.) and Stone production, while inventories were, at times, near 20-year lows.Container Corporation into one company, Smurfit-Stone Smurfit-Stone mill operating rates improved substantially duringContainer Enterprises, Inc. The merger enabled us to complete the year, reflecting a healthy demand climate. For the full year, a comprehensive refinancing of our bank debt and accounts containerboard operating rates were 93.8 percent, compared to receivable financing programs. These transactions will reduce 88.7 percent in 2003. our annual interest expense by $8 million. Earlier in the year, we refinanced our highest coupon debt and reduced annual interest expense by another $7 million.Our top financial priority remains dedicating available free cash flow to debt reduction. We reduced our debt levels by $168 million in the second half of 2004, exceeding our debt reduction targets. Some might consider this a good performance; we believe it is only a good start. We are committed to paying down more debt. Our goal is to generate sufficient free cash flow to reduce debt by $400 million in 2005. O UR STRATEGY FOR GROWTH: INNOVATION DRIVES EXCELLENCE Our growth strategy rests on our ability to win customers who prize our extensive capabilities, who appreciate innovative solutions and who will pay more for greater value. We have identified many of these customers. Finding more will be a major focus for the coming year. As I mentioned earlier, we are undertaking an intensive evaluation of our existing customer base to more effectively pursue longer-term, higher margin busi- ness prospects. Packaging customers demand turnkey solutions at rapid turnaround times. Smurfit-Stone is uniquely positioned to deliver. We offer the broadest array of packaging products, substrates and services in the business.As the industrys leading bag packagingAt the same time, we are pursuing niche markets. Forproducer, Smurfit-Stone provides solutions example, we built the most complete family of high-impactthat capture the consumers interest as graphics containerboard grades, and we complement our openwell as protect the packages product. 13. 11 S M U R F I T- STO N E C O N TA I N E R C O R P O R AT I O N market containerboard sales with a bundle of marketing, process SETTING THE STANDARD improvement, product testing, safety training and technical IN PACKAGING INNOVATION consulting services called Smurfit-Stone Customer Cares. Notably, Innovative, eye-catching packaging has never been more our Customer Cares initiative comes from listening to our customers important as a means to influence decisions at the point-of- and responding to their requirements. purchase, and we are making creativity core to our strategy withOn the corrugated packaging front, we are just as responsive. SM the formation of our innovation to implementation or i2i As the market for U.S.-made durable goods eroded, we redirected unit. Name brands are sharing more and more shelf space with our sales resources toward domestic customers with non durablein-store, or private label, alternatives. With one in five items sold product lines in the food, pharmaceuticals and personal carein the U.S. now a private label product, todays mega-retailers markets. Our preprint business provides a compelling case study.are major consumer products merchandisers by design. As these In the early 1990s, Smurfit-Stone invested heavily in preprintretailers exert influence deep into the supply chain, packaging technology to meet growing demand for cost-effective, high-impact companies face a choice. We can either let our customers dictate graphics packaging for electronics products and similar goods.merchandising and packaging decisions to us, or we can become When many of these manufacturers relocated abroad, Smurfit- a part of the decision making process. Stone responded by reinventing our business model. We pursued SMWith i2i , we made that choice. We are building on a proven customers who were less likely to move to Asia. We enhanced business model we developed in Asia, where Smurfit-Stone process efficiencies and value-added services. We embracedestablished packaging solutions centers in Hong Kong and state-of-the-art technologies, from digital flexographic plateShanghai five years ago and each became a one-stop brand printing to automatic defect detection. Today, we move forward SM development shop for many multinationals. Our i2i business with robust preprint sales and a sound vision for the future. replicates this model in North America and supplements Smurfit-Stones manufacturing muscle with strategic brand development and creative design services.SMThe i2i mandate is to bring together all the aspects of a powerful private label product campaign, from structural design and graphics expertise to logistics and quality control services. For example, when one major retailer set out to increase sales ofSM private label toy and clothing lines, i2i created a new packaging design that commands attention on the store shelf. In the process, SM i2i delivered greater distribution efficiencies, improved packaging integrity and optimized material usage. Mega-retailers need this type of integrated packaging solution.Within our consumer packaging division, we have devel- oped a structured approach to supporting innovation and aligned internal resources to focus on delivering new packaging solutions. Whether the solution creates new aesthetic appeal or provides the opportunity for alternative packaging materials, our collabo- rative approach is designed to ensure that we provide new ideas that meet the needs of consumers and ultimately our customers.In support of these efforts, our Carol Stream, IL, innovation center was created to provide a venue for developing a pipeline of new packaging concepts. The center showcases innovative packaging and offers a place for customers to brainstorm with graphic and structural designers, materials professionals, R&D experts, our innovation group, and business development teams. The Jacksonville, FL, preprint facility employs state-of-the-art technologies such asContinued on page 14 digital flexographic plate printing and automatic defect detection, and is recognized for its high-impact graphics packaging, process efficiencies, and value-added services. 14. 12I N NOVATIVE SOLUTIONS Multiplying Value ThroughMETA : Providing a Single PointTM Innovation of Contact for Packaging Needs Innovative packaging can differentiate the product, enhance brandDeli products company, Boars Head Provisions Co., leased six of loyalty, create value to the customer by satisfying a need or desire,Smurfit-Stones METATM machines an initiative that enabled Boars and increase the customers market share. As the science of boxHead to achieve significant materials and handling efficiencies, making continues to evolve into the art of packaging, Smurfit-Stoneswhile supporting the companys identity as a premium deli brand.innovation group regularly helps the company reinvent The unique, eight-sided METATM box, coupled with Smurfit-Stoneswhat it does. As North Americas premier packaginghigh quality double-wall corrugated material, improved packagecompany, Smurfit-Stone stays abreast of consumer, performance through increased compression strength at all Boarsretail, and technology trends; provides unique market-Head facilities. METAsTM quarterly audits, 24/7 technical support,place insights; and establishes and shares packagingand training contribute to a 99.6 percent up-time performanceinnovation best practices across its businesses.record. METATM is a total packaging system, which means BoarsHead has one point of contact for all of its packaging needs. TheThrough its innovation group, Smurfit-Stone leveragesMETATM System unites technical innovation and business opportunityand integrates its creative resources with manufacturing,in ways that fulfill Smurfit-Stones core strategy to become a truesales, marketing, business development, and R&D topackaging solutions partner.create a collaborative approach to providing innovativepackaging and business solutions to customers. Innovation group members (from left) Eric Lemanski, Jean Gaytan, and Karl Kohler Darrell Boyd (left) from Boars Head collaborates with Smurfit-Stones Rohan Kerr. brainstorm a solution. 15. 13 Investing in Packaging Solutionsi2i : Transforming MarketingSM and Branding Strategies Innovation and technology go hand in hand in the paperboard and Smurfit-Stones innovation to implementation division i2iSM packaging business. Technology applied to Smurfit-Stones productioncombines the creativity of the companys packaging solutions centers, processes, for example, helps keep manufacturing costs relatively the capabilities of its packaging facilities, and externally sourced stable despite considerable cost increases in raw materials, wagesproducts and services to deliver strategic brand development and and transportation. Through its research & development group, creative design to customers. Smurfit-Stone has taken the development lead in radio frequency Retailers are increasing their influence deeper into the supply chain, identification (RFID) tags. An RFID tag, also known as a smart tag, redefining the way packaging is used, placed, and promoted. With contains a chip with an antenna that communicates using radio i2iSM Smurfit-Stone transforms these marketplace challenges into, waves. Unlike bar codes, smart tags dont need to be manually profitable growth opportunities. swiped, and they dont require a line of sight to be read. i2iSM provides Smurfit-Stone customers with merchandising solutions Smurfit-Stone has identified and developed relationships with that help build their market share. the right partners, from the hardware and software vendors to tag suppliers, and is experimenting with ways to minimize the cost of applying RFID tags. Once in place, smart tags should enable significant supply chain savings. Joe LeBlanc (left) and Richard House are two Smurfit-Stone R&D experts who help Irina Liao (left), Andrew Giambroni, and Pam Nagel are part of Smurfit-Stones new create forward-thinking packaging solutions.i2iSM business unit. 16. 1420 0 4 A N N U A L R E P O R T DELIVERINGVALUE TO CUSTOMERS Smurfit-Stone is at the forefront of RFID research. We are In this central locale, we are able to leverage the many resourcesbuilding RFID expertise and experience in our Carol Stream, IL, of Smurfit-Stone to generate packaging prototypes that focusproduct testing laboratory. Our RFID consultants craft solutions on providing solutions such as improved functionality, aestheticthat make sense for each customers supply chain. enhancements, convenience and portability. Customers come away with solutions that uniquely respond to their needs.EMPLOYEE DEVELOPMENT Our innovation group has presented many new conceptsWe continue to unify all our activities and operations to a variety of customers. A case in point: when we conductedSMbehind a performance culture we call CustomerONE. an innovation fair for representatives from Procter & Gamble SMCustomerONE is an operating philosophy focused on Company, our creativity prompted P&G to partner with Smurfit-performance excellence, lean manufacturing and continuous Stones DI-NA-CAL label group for the national launch ofSMimprovement as a way of life. At its core, CustomerONE is about TM Downy Simple Pleasures fabric softener.fully utilizing our employees talents and experience. In the past, Smurfit-Stone expanded its role in this product introductioninvestors calculated a corporations market value almost solely from supplying labels and machinery to a range of value-addedon the basis of physical assets. For todays investors, human services, including graphic design support and logistics expertise.resources are part of the equation. TM Our groundbreaking VPS and META packaging systems To out-innovate the competition, we challenge our people demonstrate how Smurfit-Stone draws on an integrated productto ask questions and take qualified risks. line to offer inventive answers to tough inventory management and We have vigorously pursued a succession planning initiative efficiency challenges. The systems are designed around the rigorsto identify individuals with leadership potential and give them of the retailing environment, installed at the customers locationa stake in Smurfit-Stones success. We have worked hard to and supplied and serviced by Smurfit-Stone. With any container,foster a continuity of leadership. For example, at the end of 2004,TM the stacking strength is in the corners. Our META box offers upBill Wandmacher, vice president and general manager of our to eight sides and delivers excellent merchandising efficiencies forcontainerboard mill and forest resources division, retired after bottled and bagged products. Sales have doubled in the past year.nearly four decades of service in the packaging business. Our Our VPS design targets the produce industry by maximizingmanagement succession plan enabled us to identify Bills successor package strength, while minimizing material use. VPS boxes can Smurfit-Stone veteran Sonny Jackson. Sonny worked side-by- endure the journey from produce packers to the retail store intact,side with Bill to enable a smooth transition. and still provide visual punch in the produce aisle. Perhaps mostTM important, each VPS or META purchase represents an ongoing corrugated contract and a long-term customer partnership.RESEARCH AND DEVELOPMENT To maintain these successful customer relationships, we must invest in new ideas and embrace new technologies. Smurfit- Stones ongoing research and development efforts give us a competitive edge. Our progress exploring RFID technology illustrates the point. A microchip that transmits a unique electronic product code, the RFID smart tag tells a story as a product travels through the distribution process. Radio signals reveal how quickly a particular product sells out and inform the retailer when to restock. The result is improved inventory turns, logistical savings, and, ultimately, more comprehensive marketing data. While RFID will likely first appear at the case and pallet levels, its potential is boundless.Smurfit-Stones mill systemproduces high-quality boardsubstrates that are converted into countlesstypes of end-use packaging solutions. 17. 15 S M U R F I T- STO N E C O N TA I N E R C O R P O R AT I O N O UTLOOK: VALUE CREATION Packaging may be a mature business but it is also a very dynamic one. As North Americas largest paperboard packaging company, Smurfit-Stone is at Smurfit-Stone worked with Dominos the epicenter of emerging trends in retailing, and the broader Pizza to develop eye-catching, consumer structural changes in our markets are here to stay. To overcome friendly packaging such as the patented Buffalo inflationary pressures and build market share, we are marshaling Chicken Kickers box, with cup holders designed for easy our internal resources, and we are reaching outside the company use with a variety of dipping sauces. for fresh perspectives on potential efficiency enhancements and underserved market segments. We have anticipated and quickly adjusted to volatile market conditions. We made many right choices in difficult situations. WeBuilding a more diverse organization is part of the innovation assembled an enviable array of product and service capabilities. equation, and we are working aggressively to attract more women We know we must out-innovate and out-execute the competition and minorities. We have launched a comprehensive supplier to continue to earn our leadership standing. diversity program to provide certified minority and woman-owned I am optimistic about Smurfit-Stones future. As we enter businesses with equitable opportunities to compete for contracts. 2005, our strategic focus on value creation remains unchanged. Our diversity initiatives are bringing fresh perspectives and new We expect to achieve volume growth at or above the industry rate leadership styles to the table. in our major markets. We are challenging our managers to offset inflationary pressures with ongoing process improvements and SAFETY, GOVERNANCE AND CITIZENSHIPasset utilization initiatives. We will continue to apply available Safety Perhaps the best measure of our commitment tofree cash flow to reduce our debt and strengthen our financial coworkers remains our safety record. For four consecutive years,condition. And, we will continue to make strides in customer Smurfit-Stone has set the industry standard in safety. In fact, service and new product development. Occupational Hazards, the leading magazine of safety, healthWe are driven by a sense of tremendous opportunity. We and loss prevention, named Smurfit-Stone one of Americas have organized Smurfit-Stone to innovate, to anticipate developing safest companies. Our goal is to be the safest company in any trends and to seize profitable business. We will continue working industry and ultimately, accident-free. on your behalf to build a solid foundation for the future. Governance Following the 2003 departure of our largest shareholder, Jefferson Smurfit Group, we embarked on an 18-month effort to reconstitute our board of directors. With the election of Gene Sit, chairman, CEO and chief investment officer of Sit Investment Associates, and Connie Duckworth, an investment banker and former partner at Goldman, Sachs & Co., we rounded PATRICK J. MOORE out our 10-member board in 2004. Our corporate governance Chairman, President and Chief Executive Officer principles are designed to promote full disclosure, transparency, accuracy and integrity in our financial reporting, and we remain in full compliance with all emerging regulations and standards. Citizenship We demonstrate environmental responsi- bility everywhere we operate, and give back to the communities where we live and work. In 2004, Smurfit-Stone contributed to worthy organizations across North America, and our employees made numerous personal donations and volunteered valuable time to help neighbors in need. 18. 1620 0 4 A N N U A L R E P O R T BOARD OFDIRECTORS AND COR POR ATE OFFICERS Smurfit-Stones Board of Directors Front row (left to right): Connie K. Duckworth, Patrick J. Moore, and Alan E. Goldberg. Back row (left to right): William D. Smithburg, Thomas A. Reynolds, III, William T. Lynch, Jr., James J. OConnor, James R. Boris, Jerry K. Pearlman, and Eugene C. Sit. BOARD MEMBERS CORPORATE OFFICERS Patrick J. Moore William T. Lynch, Jr.Thomas A. Reynolds, IIIPatrick J. MooreJames P. DavisRichard P. Marra Chairman, President and CEORetiredPartnerChairman, President Senior Vice President Assistant Treasurer Smurfit-Stone ContainerPresident and CEOWinston & Strawn and Chief Executive Officer and General Manager Timothy J. P. McKenna CorporationLeo Burnett Company Corrugated Container Division Eugene C. SitCharles A. Hinrichs Senior Vice President James R. Boris James J. OConnorChairman, CEO and CIOSenior Vice President James D. Duncan Investor Relations RetiredRetiredSit Investment Associatesand Chief Financial Officer Senior Vice President and Communications Chairman and CEO Chairman and CEOSales and Marketing William D. Smithburg Curtis A. BartonRonald J. Megna EVEREN Securities, Inc.UNICOM RetiredVice PresidentDaniel J. GarandAssistant SecretaryCommonwealth Edison Connie K. Duckworth Chairman, President and CEOEnvironmental Affairs Senior Vice President Thomas A. Pagano RetiredJerry K. PearlmanThe Quaker Oats CompanySupply Chain ManagementJeffrey S. Beyersdorfer Senior Vice President PartnerRetired Vice President and TreasurerRonald D. Hackney Corporate Development Goldman, Sachs & Co. Chairman and CEOSenior Vice PresidentMathew J. Blanchard John M. RiconosciutoZenith Electronics Corporation Alan E. Goldberg Human ResourcesVice PresidentSenior Vice President Co-Managing Partnerand General Manager Craig A. Hunt and General Manager Lindsay, Goldberg &Board Sales Senior Vice President Consumer Packaging Division Bessemer SecretaryCynthia S. Bowers David C. Stevensand General CounselVice PresidentSenior Vice PresidentCompensation and Benefits M. C. (Sonny) Jackson and General ManagerSenior Vice President Recycling Division CHAIRMAN EMERITUSJames E. Burdissand General ManagerSenior Vice PresidentContainerboard Milland Chief Information Officer Dr. Michael W. J. Smurfit& Forest Resources DivisionPaul K. KaufmannSenior Vice Presidentand Corporate Controller 19. STOCKHOLDER INFORMATIONDIVISION OFFICERS David J. PietrowiczCORRUGATEDCONSUMER i2i DIVISION Stockholders Annual MeetingVice PresidentCONTAINER PACKAGING May 11, 2005 at 10:00 a.m. Lane W. Hunterand General ManagerDIVISIONDIVISION University of Chicago Gleacher Center Vice PresidentFolding Cartons 450 N. Cityfront Plaza Drive and General ManagerJohn P. AntonucciDaniel J. BurgerMichael L. Weisheit Chicago, IL 60611 i2i merchandising businessVice PresidentVice PresidentVice PresidentSales and Marketingand Regional Managerand Regional ManagerLabel Products RECYCLING Registrar and Transfer Agent Folding CartonsJohn P. Crimmin DIVISION Mellon Investor Services LLC Vice PresidentEdward A. Byczynski Overpeck Centreand Regional ManagerVice PresidentCONTAINERBOARD Michael R. Oswald 85 Challenger Road and General Manager MILL & FORESTRichard E. Flamm Vice President Ridgefield Park, NJ 07660Bag Packaging GroupVice PresidentRESOURCES DIVISION Operations Telephone: (800) 676-0896and Regional ManagerJeffrey Deitch Mark C. Brantley www.melloninvestor.com/isd Alain L. M. BoivinVice PresidentStephen P. Folan Vice PresidentVice PresidentTechnologyVice President North Central RegionMill OperationsFlexible Packaging Groupand Area Manager Common Stock Central Region Tom E. SquiresMichael L. Hempstead Smurfit-Stone Container Corporation Common Stock James A. Henderson Vice PresidentLarry L. BurtonVice PresidentVice President is traded on The Nasdaq National Market under the South RegionVice Presidentand Regional Managerand Regional Manager symbol: SSCC Sales and MarketingJames W. PopeFolding CartonsCharles H. Holland Vice PresidentMichael L. ButlerNathan S. HolmesVice President International/West Sales Preferred StockVice PresidentVice Presidentand Regional ManagerNorth American Smurfit-Stones 7% Series A Cumulative Exchangeable Edward V. Tucciaroneand General ManagerStephen E. Jevyak Containerboard Sales Vice President Redeemable Convertible Preferred Stock is traded onBoxboard Mills andVice President Eastern SalesLamination Nasdaq under the symbol: SSCCP John E. Davisand Regional ManagerVice PresidentGary R. HustonJohn L. Knudsen Forest Resources OTHERVice President Investor Information Vice PresidentSales Alain Dubuc Investor Relations and Communicationsand Regional Manager Joseph V. LeBlancBoxboard MillsVice President Smurfit-Stone Container Corporation Vice PresidentGeorge Q. Langstaff Mill OperationsFred W. Klatt 8182 Maryland AvenueResearch and DevelopmentVice PresidentNorthern RegionVice President St. Louis, MO 63105and Director of ManufacturingMark A. Polivkaand Regional ManagerRoger M. Jansen Telephone: (314) 746-1223 Vice PresidentRodney A. Myers Bag Packaging Group Vice President Fax: (314) 746-1347 ProcurementVice PresidentSBS SalesCurtiss M. Komen www.smurfit-stone.comand Regional Manager William C. WannerVice PresidentLarry T. Price Vice PresidentRobert D. NelsonCPD Sales Vice President Timothy McKenna Supply/Demand OperationsVice PresidentMill OperationsJames B. Laurence Senior Vice President, Investor Relations and Communications and Regional ManagerVice President of Sales Eve K. Rae St. Louis, MO: (314) 746-1254James S. NolanBag Packaging Group Vice President Chicago, IL: (312) 580-4637Vice PresidentPulp SalesRobert E. LewisCorporate Sales Vice PresidentW. G. Stuart Corporate Headquarters Donald A. Petri and Regional ManagerVice PresidentVice PresidentFolding Cartons Smurfit-Stone Container CorporationMill Operationsand Regional ManagerSouthern Region 150 North Michigan AvenueDonald W. McCalla Chicago, IL 60601Stephen J. Strang Vice PresidentAndrew J. WoodroffeVice PresidentCPD Marketing Telephone: (312) 346-6600Vice Presidentand General Manager Product ManagementGary D. McDanielSmurfit-MBI and Technical ServicesVice Presidentand General Manager Donald C. WyattFlexible Packaging and Labels Vice PresidentKraft SalesJohn J. Moranand National AccountsVice PresidentStrategic ServicesMark R. OBryanVice PresidentOperations Improvement 20. 150 NORTH MICHIGAN AVENUE CHICAGO, IL 60601-7568 (312) 346-6600 www.smurfit-stone.com