##### Table of Contents

---

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



---



FORM 10-Q



---



(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended September 30, 2004



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------



Commission file number: 333-42201



---



BEAR ISLAND PAPER COMPANY, L.L.C.

(Exact name of registrant as specified in its charter)



---



|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Virginia                                                       |  | 06-0980835                             
|(State or other jurisdiction of Incorporation or organization) |  | (I.R.S. Employer Identification Number)



10026 Old Ridge Road

Ashland, VA

(Address of Principal Executive Offices)



23005

(Zip Code)



(804) 227-3394

(Registrants
telephone number, including area code)



---



Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  
x    No ̈



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: Not
Applicable.



---



---

##### Table of Contents

BEAR ISLAND PAPER COMPANY, L.L.C.

INDEX



|                                                                                      |  |        
|------------------------------------------------------------------------------------- |  | -------
|                                                                                      |  | Page(s)
|Part I.     
Financial Information                                                    |  |        
|                                                                                      | 
|Item 1.     
Financial Statements                                                     |  |        
|                                                                                      | 
|Condensed Balance Sheets                                                              |  | 1      
|                                                                                      | 
|Condensed Statements of Operations                                                    |  | 2      
|                                                                                      | 
|Condensed Statements of Cash Flows                                                    |  | 3      
|                                                                                      | 
|Notes to Condensed Financial Statements                                               |  | 4      
|                                                                                      | 
|Item 2.                                                                               |  |        
|                                                                                      | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 6      
|                                                                                      | 
|Item 3.                                                                               |  |        
|                                                                                      | 
|Quantitative and Qualitative Disclosures About Market Risk                            |  | 8      
|                                                                                      | 
|Item 4.                                                                               |  |        
|                                                                                      | 
|Controls and Procedures                                                               |  | 8      
|                                                                                      | 
|Part II.     
Other Information                                                       |  |        
|                                                                                      | 
|Item 6.     
Exhibits and Reports on Form 8-K                                         |  | 9      
|                                                                                      | 
|Signatures                                                                            |  | 10     
|                                                                                      | 
|Certifications                                                                        |  | 11     



---

##### Table of Contents

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS



BEAR ISLAND PAPER COMPANY, L.L.C.

CONDENSED BALANCE SHEETS



|                                             |  |                   |             |   |                  |   |             |  
|-------------------------------------------- |  | ----------------- | ----------- | - | ---------------- | - | ----------- | -
|                                             |  | September 30,2004 |             |   | December 31,2003 |  
|                                             |  | (Unaudited)       |             |   |                  |  
|ASSETS                                       |  |                   |             |   |                  |   |             |  
|Current assets:                              |  |                   |             |   |                  |   |             |  
|Cash and short-term investments              |  | $                 | 3,600,648   |   |                  | $ | 2,532,451   |  
|Accounts receivable, net                     |  |                   | 13,288,715  |   |                  |   | 10,444,056  |  
|Inventories, net                             |  |                   | 11,262,584  |   |                  |   | 10,910,630  |  
|Other current assets                         |  |                   | 660,277     |   |                  |   | 942,818     |  
|                                             |  |                   |             |   |                  |   |             |  
|Total current assets                         |  |                   | 28,812,224  |   |                  |   | 24,829,955  |  
|                                             |  |                  
|Property, plant and equipment                |  |                   | 230,250,420 |   |                  |   | 228,745,231 |  
|Less accumulated depreciation                |  |                   | (76,888,967 | ) |                  |   | (67,423,680 | )
|                                             |  |                   |             |   |                  |   |             |  
|Net property, plant and equipment            |  |                   | 153,361,453 |   |                  |   | 161,321,551 |  
|                                             |  |                   |             |   |                  |   |             |  
|Deferred financing costs, net                |  |                   | 4,056,773   |   |                  |   | 4,011,061   |  
|                                             |  |                   |             |   |                  |   |             |  
|Total assets                                 |  | $                 | 186,230,450 |   |                  | $ | 190,162,567 |  
|                                             |  |                   |             |   |                  |   |             |  
|LIABILITIES AND MEMBERS EQUITY              |  |                   |             |   |                  |   |             |  
|Current liabilities:                         |  |                   |             |   |                  |   |             |  
|Accounts payable and accrued liabilities     |  | $                 | 14,727,242  |   |                  | $ | 13,913,297  |  
|Accrued interest payable                     |  |                   | 3,961,871   |   |                  |   | 840,718     |  
|Capital lease obligations                    |  |                   | 48,636      |   |                  |   | 37,184      |  
|                                             |  |                   |             |   |                  |   |             |  
|Total current liabilities                    |  |                   | 18,737,749  |   |                  |   | 14,791,199  |  
|                                             |  |                  
|Long-term debt and capital lease obligations |  |                   | 139,146,892 |   |                  |   | 141,662,187 |  
|                                             |  |                   |             |   |                  |   |             |  
|Total liabilities                            |  |                   | 157,884,641 |   |                  |   | 156,453,386 |  
|                                             |  |                   |             |   |                  |   |             |  
|Members equity:                             |  |                   |             |   |                  |   |             |  
|Contributed capital                          |  |                   | 94,581,074  |   |                  |   | 94,581,074  |  
|Accumulated deficit                          |  |                   | (66,235,265 | ) |                  |   | (60,871,893 | )
|                                             |  |                   |             |   |                  |   |             |  
|Total members equity                        |  |                   | 28,345,809  |   |                  |   | 33,709,181  |  
|                                             |  |                   |             |   |                  |   |             |  
|Total liabilities and members equity        |  | $                 | 186,230,450 |   |                  | $ | 190,162,567 |  
|                                             |  |                   |             |   |                  |   |             |  



See accompanying notes to the
condensed financial statements.



1



---

##### Table of Contents

BEAR ISLAND PAPER COMPANY, L.L.C.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                              |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |             |  
|--------------------------------------------- |  | -------------------------------- | ---------- | - | ------------------------------- | - | ---------- | ---- |  | - | ----------- | - |  | - | ----------- | -
|                                              |  | Three months ended September 30, |            |   | Nine months ended September 30, |  
|                                              |  | 2004                             |            |   | 2003                            |   |            | 2004 |  |   | 2003        |  
|Net sales                                     |  | $                                | 29,584,848 |   |                                 | $ | 22,864,915 |      |  | $ | 89,913,233  |   |  | $ | 74,502,731  |  
|Cost of sales                                 |  |                                  | 27,008,591 |   |                                 |   | 25,009,541 |      |  |   | 84,149,459  |   |  |   | 78,462,233  |  
|                                              |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |             |  
|Gross profit (loss)                           |  |                                  | 2,576,257  |   |                                 |   | (2,144,626 | )    |  |   | 5,763,774   |   |  |   | (3,959,502  | )
|                                              |  |                                  |            |  
|Selling, general and administrative expenses: |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |             |  
|Management fees to Brant-Allen                |  |                                  | (280,077   | ) |                                 |   | (215,899   | )    |  |   | (850,478    | ) |  |   | (700,715    | )
|Other                                         |  |                                  | 58,908     |   |                                 |   | (103,999   | )    |  |   | (41,816     | ) |  |   | (171,939    | )
|                                              |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |             |  
|Income (loss) from operations                 |  |                                  | 2,355,088  |   |                                 |   | (2,464,524 | )    |  |   | 4,871,480   |   |  |   | (4,832,156  | )
|                                              |  |                                  |            |  
|Other income (deductions):                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |             |  
|Interest expense                              |  |                                  | (3,385,178 | ) |                                 |   | (3,401,936 | )    |  |   | (10,244,855 | ) |  |   | (10,168,985 | )
|Other income                                  |  |                                  | 5,527      |   |                                 |   | 2,109      |      |  |   | 10,003      |   |  |   | 720,530     |  
|                                              |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |             |  
|Net (loss)                                    |  | $                                | (1,024,563 | ) |                                 | $ | (5,864,351 | )    |  | $ | (5,363,372  | ) |  | $ | (14,280,611 | )
|                                              |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |             |  



See accompanying notes to the
condensed financial statements.



2



---

##### Table of Contents

BEAR ISLAND PAPER COMPANY, L.L.C.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                                  |  |                                 |            |   |      |   |             |  
|--------------------------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ---- | - | ----------- | -
|                                                                                  |  | Nine months ended September 30, |           
|                                                                                  |  | 2004                            |            |   | 2003 |  
|Operating activities:                                                             |  |                                 |            |   |      |   |             |  
|Net (loss)                                                                        |  | $                               | (5,363,372 | ) |      | $ | (14,280,611 | )
|Adjustments to reconcile net (loss) to net cash provided by operating activities: |  |                                 |            |   |      |   |             |  
|Depreciation and depletion                                                        |  |                                 | 9,466,456  |   |      |   | 9,281,238   |  
|Amortization of deferred financing costs                                          |  |                                 | 737,918    |   |      |   | 533,020     |  
|(Gain) loss on disposal of property, plant and equipment                          |  |                                 | 12,413     |   |      |   | (1,600      | )
|Changes in current assets and liabilities:                                        |  |                                 |            |   |      |   |             |  
|Accounts receivable                                                               |  |                                 | (2,844,659 | ) |      |   | 2,809,947   |  
|Inventory                                                                         |  |                                 | (351,954   | ) |      |   | (1,713,481  | )
|Other current assets                                                              |  |                                 | 282,541    |   |      |   | (37,646     | )
|Accounts payable and accrued liabilities                                          |  |                                 | 813,945    |   |      |   | 2,327,386   |  
|Accrued interest payable                                                          |  |                                 | 3,121,153  |   |      |   | 2,393,603   |  
|                                                                                  |  |                                 |            |   |      |   |             |  
|Cash provided by operating activities                                             |  |                                 | 5,874,441  |   |      |   | 1,311,856   |  
|                                                                                  |  |                                 |            |   |      |   |             |  
|Investment activities:                                                            |  |                                 |            |   |      |   |             |  
|Purchases of property, plant and equipment                                        |  |                                 | (1,521,940 | ) |      |   | (5,461,465  | )
|Proceeds from disposal of property, plant and equipment                           |  |                                 | 3,169      |   |      |   | 10,334      |  
|                                                                                  |  |                                 |            |   |      |   |             |  
|Net cash used in investing activities                                             |  |                                 | (1,518,771 | ) |      |   | (5,451,131  | )
|                                                                                  |  |                                 |            |   |      |   |             |  
|Financing activities:                                                             |  |                                 |            |   |      |   |             |  
|Proceeds from issuance of debt                                                    |  |                                 | 1,000,000  |   |      |   | 4,625,000   |  
|Payment of long-term debt                                                         |  |                                 | (3,500,000 | ) |      |   |            |  
|Payment of deferred financing costs                                               |  |                                 | (783,630   | ) |      |   |            |  
|Proceeds from capital lease                                                       |  |                                 | 23,317     |   |      |   |            |  
|Payment of capital lease                                                          |  |                                 | (27,160    | ) |      |   |            |  
|                                                                                  |  |                                 |            |   |      |   |             |  
|Net cash (used by) provided by financing activities                               |  |                                 | (3,287,473 | ) |      |   | 4,625,000   |  
|                                                                                  |  |                                 |            |   |      |   |             |  
|Net increase in cash and short term investments                                   |  |                                 | 1,068,197  |   |      |   | 485,725     |  
|                                                                                  |  |                                
|Cash and short-term investments, beginning of period                              |  |                                 | 2,532,451  |   |      |   | 562,173     |  
|                                                                                  |  |                                 |            |   |      |   |             |  
|Cash and short-term investments, end of period                                    |  | $                               | 3,600,648  |   |      | $ | 1,047,898   |  
|                                                                                  |  |                                 |            |   |      |   |             |  
|Supplemental disclosures of cash flow information:                                |  |                                 |            |   |      |   |             |  
|                                                                                  |  |                                
|Non cash investing and financing activities:                                      |  |                                 |            |   |      |   |             |  
|Accounts payable for purchase of equipment                                        |  | $                               |           |   |      | $ | 1,145,976   |  
|                                                                                  |  |                                 |            |   |      |   |             |  



See accompanying notes to the
condensed financial statements.



3



---

##### Table of Contents

BEAR ISLAND PAPER COMPANY, L.L.C.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)



|1. | In the opinion of management, the accompanying condensed financial statements of Bear Island Paper Company, L.L.C. (the Company) contain all adjustments necessary to
present fairly, in all material respects, the Companys financial position as of September 30, 2004 and December 31, 2003 and the Companys condensed results of operations for the three- and nine-month periods ended September 30, 2004 and
2003 as well as the Companys condensed cash flows for the nine-month periods ended September 30, 2004 and 2003. All adjustments are of a normal and recurring nature. These condensed financial statements should be read in conjunction with the
financial statements and notes thereto included in the Companys 2003 Form 10-K filed on March 30, 2004, as amended on May 13, 2004 (the Annual Report). The December 31, 2003 balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally accepted accounting principles.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The results of operations for the nine-month period ended September 30, 2004 should not be regarded as necessarily indicative of the results that may be
expected for the entire year.



|2. | The Company incurred net losses of $5,363,372 and $17,975,219 for the nine months ended September 30, 2004 and year ended December 31, 2003, respectively, and had an accumulated
deficit of $66,235,265 at September 30, 2004. The accompanying financial statements have been prepared on a going concern basis that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In the past Brant-Allen Industries, Inc.
(Brant-Allen) made subordinated loans to the Company aggregating $15 million. In December 2003 recognizing the Companys need for additional equity capital, Brant-Allen converted these loans to equity. Although not legally
committed, Brant-Allen has indicated its willingness to continue to support the Company. On January 5, 2004, the Company fully drew down its available borrowings under the Companys 6-year Senior Secured Reducing Revolving Credit Facility (the
Revolving Credit Facility) in connection with the refinancing of the Facility. As of September 30, 2004, the Company had $3.5 million of additional borrowing capacity under the Revolving Credit Facility. The Company also has the ability
to access approximately $6.7 million of additional capital equipment financing through the use of certain leasing options. Based on current market conditions, management anticipates being able to meet liquidity requirements for 2004; however, there
exists a range of reasonably possible outcomes which could significantly impact the ability to achieve the aforementioned.



|3. | The Company is a wholly owned subsidiary of Brant-Allen Industries, Inc., a Delaware corporation.
|-- | -------------------------------------------------------------------------------------------------



A component of selling, general and administrative expenses as shown on the statements of operations includes aggregate
management fees charged by Brant-Allen. The management fees payable to Brant-Allen are calculated pursuant to the Management Services Agreement and constitute 1% of the Companys net sales.



There are also certain restrictions on distributions paid to Brant-Allen.
Distributions are allowed for a portion of profits in excess of certain amounts.



|4. | No provision for income taxes is required in the financial statements since each member of the parent Company is individually liable for any income tax that may be payable on the
Companys taxable income.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. | Finished goods and raw materials inventories are valued at the lower of cost or market, with cost determined on the first-in, first-out (FIFO) basis. Stores inventories
are valued at the lower of average cost or market.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Inventories consisted of:



|               |  |                    |            |                   |   |           
|-------------- |  | ------------------ | ---------- | ----------------- | - | ----------
|               |  | September 30, 2004 |            | December 31, 2003
|Raw materials  |  | $                  | 1,820,376  |                   | $ | 1,859,434 
|Stores         |  |                    | 6,970,893  |                   |   | 6,610,980 
|Finished goods |  |                    | 2,471,315  |                   |   | 2,440,216 
|               |  |                    |            |                   |   |           
|               |  | $                  | 11,262,584 |                   | $ | 10,910,630
|               |  |                    |            |                   |   |           



4



---

##### Table of Contents

BEAR ISLAND PAPER COMPANY, L.L.C.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)



|6. | Long-term debt and capital lease obligations consisted of:
|-- | ----------------------------------------------------------



|                                                   |  |                    |             |                   |   |            
|-------------------------------------------------- |  | ------------------ | ----------- | ----------------- | - | -----------
|                                                   |  | September 30, 2004 |             | December 31, 2003
|Senior Secured Notes                               |  | $                  | 100,000,000 |                   | $ | 100,000,000
|Term Loan Facility                                 |  |                    | 17,444,121  |                   |   | 17,444,121 
|Revolving Credit Facility                          |  |                    | 21,500,000  |                   |   | 24,000,000 
|Capital lease obligations                          |  |                    | 251,407     |                   |   | 255,250    
|                                                   |  |                    |             |                   |   |            
|                                                   |  |                    | 139,195,528 |                   |   | 141,699,371
|Less current portion                               |  |                    | 48,636      |                   |   | 37,184     
|                                                   |  |                    |             |                   |   |            
|Total long-term debt and capital lease obligations |  | $                  | 139,146,892 |                   | $ | 141,662,187
|                                                   |  |                    |             |                   |   |            



On January 5, 2004,
the Bank Credit Facility was refinanced with a financial lending institution at a rate of Libor plus a margin of 5.0%. This margin is adjustable downward upon the achievement in the future of certain financial operating results. See Fourth Amendment
to the Bank Credit Agreement dated January 5, 2004 (the Amendment), filed as Exhibit 10.1d to the Companys Annual Report. The Revolving Credit Facility and Term Loan Facility mature on September 30, 2007.



|7. | The Companys receivables and payables with their affiliates were as follow:
|-- | ----------------------------------------------------------------------------



|                                       |  |                    |            |   |                   |   |            |  
|-------------------------------------- |  | ------------------ | ---------- | - | ----------------- | - | ---------- | -
|                                       |  | September 30, 2004 |            |   | December 31, 2003 |  
|Due to Brant-Allen                     |  | $                  | (2,747,864 | ) |                   | $ | (2,374,742 | )
|Due from Newsprint Sales               |  |                    | 867,022    |   |                   |   | 75,279     |  
|Due from F.F. Soucy, Inc. and Partners |  |                    | 36,217     |   |                   |   | 27,914     |  
|Due to F.F. Soucy, Inc.                |  |                    | (117,867   | ) |                   |   | (640,442   | )
|Due to Timberlands Company, L.L.C.     |  |                    | (459,135   | ) |                   |   | (459,185   | )



5



---

##### Table of Contents

ITEM 2.



MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS



The following is managements discussion and analysis of certain significant factors affecting the results of operations of the Company
during the periods included in the accompanying condensed statements of operations and the changes in the Companys financial condition since December 31, 2003.



General:



The Company manufactures and is dependent on one product, newsprint, which is used in general printing and the newspaper publishing industry and for advertising
circulars. Accordingly, demand for newsprint fluctuates with the economy, newspaper circulation and purchases of advertising lineage which significantly impacts the Companys selling price of newsprint and, therefore, its revenues and
profitability. In addition, variation in the balance between supply and demand as a result of global capacity additions have an increasing impact on both selling prices and inventory levels in the North American markets. Capacity is typically added
in large blocks because of the scale of new newsprint machines.



As a result,
the newsprint market is highly cyclical, depending on changes in global supply, demand and inventory levels. These factors significantly impact the Companys sales volume and newsprint prices and, therefore, the Companys revenues and
profitability. Given the commodity nature of newsprint, the Company, like other suppliers to this market, has little influence over the timing and extent of price changes. Sales are recognized at the time of shipment from the Companys mill.
However, significant fluctuations in revenue can and do occur as a result of the timing of shipments caused by increases and decreases in mill inventory levels.



THREE MONTHS ENDED SEPTEMBER 30, 2004, COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2003



Net sales increased by $6.7 million, or 29%, to $29.6 million in the third quarter of 2004,
from $22.9 million in the third quarter of 2003. This increase was attributable to a 19% increase in sales volumes and a 9% increase in the average net selling price of the Companys products. The volume of tonnage sold for the third quarter of
2004 was 56,700 metric tons (tonnes) compared to the third quarter of 2003 volume of 47,550 tonnes. The Companys net selling price for newsprint increased to an average of $522 per tonne in the third quarter of 2004 from an average
of $479 per tonne in the third quarter of 2003.



Cost of sales increased by
$2.0 million, or 8%, to $27.0 million in the third quarter of 2004 from $25.0 million in the third quarter of 2003. Higher production volumes increased total manufacturing costs, however, unit cost of manufacturing in dollars per tonne decreased by
10%. Distributing fixed costs over a greater production volume helped reduce unit cost of production. This was partially offset by a 37% increase in the cost of ONP in the third quarter of 2004. Cost of sales as a percentage of net sales decreased
to 91% in the third quarter of 2004, from 110% in the third quarter of 2003, due to the net decrease in unit costs of manufacturing partially offset by the increase in newsprint selling prices as noted above.



The Companys selling, general and administrative expenses decreased by $0.1 million or
33%, to $0.2 million in the third quarter of 2004 from $0.3 million in the third quarter of 2003. This decrease was attributable to a $0.2 million gain on the sale of previously written off accounts receivable balance, offset by a 30% increase in
the management fee paid to Brant-Allen due to the increase in net sales as stated above.



As a result of the above factors, income from operations increased by $4.9 million to $2.4 million in the third quarter of 2004 from a loss of $2.5 million in the third quarter of 2003.



The Companys interest expense for the third quarter of 2004 and the third quarter of
2003 was $3.4 million.



As a result of the above factors, the Company reported
a net loss of $1.0 million in the third quarter of 2004 compared to net loss of $5.9 million in the third quarter of 2003.



NINE MONTHS ENDED SEPTEMBER 30, 2004, COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2003



Net sales increased by $15.4 million, or 21%, to $89.9 million in the first nine months of
2004, from $74.5 million in the first nine months of 2003. This increase was attributable to a 9% increase in sales volumes and an 11% increase in the average net selling price of the Companys products. The volume of tonnage sold for the first
nine months of 2004 was 174,000 tonnes compared to the first nine months 2003 volume of 160,150 tonnes. The Companys net selling price for newsprint increased to an average of $517 per tonne in the first nine months of 2004 from an average of
$465 per tonne in the first nine months of 2003.



Cost of sales increased by
$5.7 million, or 7%, to $84.1 million in the first nine months of 2004 from $78.4 million in the first nine months of 2003. Higher production volumes increased total manufacturing costs, however, unit cost of manufacturing in dollars per tonne
decreased by 1%. This was partially offset by a 28% increase in the cost of ONP in the first nine months of 2004. Cost of sales as a percentage of net sales decreased to 94% in the nine months of 2004, from 105% in the nine months of 2003, primarily
due to the net decrease in unit costs of manufacturing partially offset by the increase in newsprint selling prices in the nine months of 2004.



6



---

##### Table of Contents

The Companys selling, general and administrative expenses for the first nine months of 2004 and the first nine
months of 2003 was $0.9 million.



As a result of the above factors, income from
operations increased by $9.7 million to income of $4.9 million in the first nine months of 2004 from a net loss of $4.8 million in the first nine months of 2003.



The Companys interest expense for the first nine months of 2004 and the first nine months of 2003 was $10.2 million.



Other income decreased by $0.7 million to $0.0 million in the first nine months of 2004 from
$0.7 million in the first nine months of 2003 as a result of an insurance recovery gain on an involuntary conversion arising from a fire in the Companys recycling facility in 2003.



As a result of the above factors, the Company reported a net loss of $5.4 million in the first nine months of 2004 compared to net loss of
$14.3 million in the first nine months of 2003.



Liquidity and Capital Resources.



The Companys principal
liquidity requirements have been for working capital, capital expenditures and debt service under the Companys Loan Agreements. These requirements have been met through cash flows from operations, loans under the Companys Revolving
Credit Facility and/or additional funding from Brant-Allen.



The Companys
cash and short-term investments at September 30, 2004 were $3.6 million, representing an increase of $1.1 million from $2.5 million at December 31, 2003. Net cash provided by operating activities was $5.9 million for the nine months ended September
30, 2004. Cash used by financing activities was $3.3 million and cash used in investing activities was $1.5 million for the nine months ended September 30, 2004. The Company anticipates that cash provided from operations in the future combined with
borrowings under the Revolving Credit Facility and, if needed, funding from Brant-Allen will be sufficient to pay its operating expenses, satisfy debt-service obligations and fund capital expenditures.



In the nine months of 2004, the Companys operating cash flow increased by $4.6 million
to $5.9 million Provided by Operations in the nine months of 2004 from $1.3 million Provided by Operations in the first nine months of 2003, primarily due to higher selling prices of the Companys products. As a result, net loss in the first
nine months of 2004 decreased to $5.4 million from a net loss of $14.3 million in first nine months of 2003.



The Company made capital expenditures of $1.5 million and $5.5 million in the first nine months of 2004 and 2003, respectively, in connection with upgrading and maintaining its manufacturing facility. Management
anticipates that the Companys total capital expenditures for the balance of 2004 and 2005 will primarily relate to existing capital projects in progress and maintenance of its newsprint facilities.



At September 30, 2004, the Company had approximately $139.2 million of indebtedness,
consisting of borrowings of $21.5 million under the Revolving Credit Facility, $17.4 million under the Term Loan Facility, $100 million under the Notes and $0.3 million under capital lease obligations. At September 30, 2004, there was $3.5 million
of unused borrowing capacity under the Revolving Credit Facility.



7



---

##### Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk



There have been no material changes in the information relating to quantitative and qualitative disclosures about market risk that was provided in the Annual Report.



Item 4. Controls and Procedures



(a)
Evaluation of Disclosure Controls and Procedures. The Companys Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the end of such
period, the Companys disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information relating to the Company required to be disclosed by the Company in reports that it files
or submits under the Exchange Act.



(b) Internal Control Over
Financial Reporting. There have not been any changes in the Companys internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report
relates that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



8



---

##### Table of Contents

PART II. OTHER INFORMATION



ITEM 5. OTHER INFORMATION



Effective April 25, 2004,
Michael Conroy resigned from the Board of Directors and was replaced by Thomas M. Geiger.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



|    |  |                                                                                                                                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a)  |  | Exhibit 31.1 - Certification of the Chief Executive Officer of the Company pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the
Exchange Act.                                                                                                                                                                                          
|    |  | Exhibit 31.2 - Certification of the Chief Financial Officer of the Company pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the
Exchange Act.                                                                                                                                                                                          
|    |  | Exhibit 32.1 - Certification of the Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                              
|    |  | Exhibit 32.2 - Certification of the Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                              
|    | 
|(b) |  | A Form 8-K was filed by the Company with the Securities and Exchange Commission on July 29, 2004 in connection with the Companys announcement of its financial position and results of
operations as of and for the second quarter ended June 30, 2004. The press release containing the announcement was attached as an exhibit to the Form 8-K.



9



---

##### Table of Contents

Signatures



Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.



BEAR ISLAND PAPER COMPANY, L.L.C.By:

/s/ Peter M. BrantPeter M. BrantPresident, Chairman of the Board and Chief Executive OfficerBy:

/s/ Edward D. SherrickEdward D. SherrickVice President of Finance(Principal Financial Officer and Chief Accounting Officer)




Dated November 8, 2004



10