----

----

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

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

| PAPERWEIGHT DEVELOPMENT CORP.                                 | APPLETON PAPERS INC.                                          |
|---------------------------------------------------------------|---------------------------------------------------------------|
| (Exact Name of Registrant as Specified in Its Charter)        | (Exact Name of Registrant as Specified in Its Charter)        |
| Wisconsin                                                     | Delaware                                                      |
| (State or Other Jurisdiction ofIncorporation or Organization) | (State or Other Jurisdiction ofIncorporation or Organization) |
|                                                          |                                                          |
| 39-2014992                                                    | 36-2556469                                                    |
| (I.R.S. EmployerIdentification No.)                           | (I.R.S. EmployerIdentification No.)                           |
|                                                          |                                                          |
| 825 East Wisconsin Avenue, P.O. Box 359,Appleton, Wisconsin   | 54912-0359                                                    |
| (Address of Principal Executive Offices)                      | (Zip Code)                                                    |

----

|         |                                                                                                                                                            | PageNumber |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| PART I  | FINANCIAL INFORMATION                                                                                                                                           |       |
|         |                                                                                                                                                            |       |
| Item 1  | Financial Statements (unaudited)                                                                                                                                |       |
|         |                                                                                                                                                            |       |
|         | a) Condensed Consolidated Balance Sheets                                                                                                                        | 3          |
|         |                                                                                                                                                            |       |
|         | b) Condensed Consolidated Statements of Operations                                                                                                              | 4          |
|         |                                                                                                                                                            |       |
|         | c) Condensed Consolidated Statements of Cash Flows                                                                                                              | 5          |
|         |                                                                                                                                                            |       |
|         | d) Consolidated Statements of Redeemable Common Stock, Accumulated Deficit,     Accumulated Other Comprehensive Loss and Comprehensive Loss | 6          |
|         |                                                                                                                                                            |       |
|         | e) Notes to Condensed Consolidated Financial Statements                                                                                                         | 7          |
|         |                                                                                                                                                            |       |
| Item 2  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                                     | 33         |
|         |                                                                                                                                                            |       |
| Item 3  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                      | 39         |
|         |                                                                                                                                                            |       |
| Item 4  | Controls and Procedures                                                                                                                                         | 39         |
|         |                                                                                                                                                            |       |
| PART II | OTHER INFORMATION                                                                                                                                               |       |
|         |                                                                                                                                                            |       |
| Item 1       | Legal Proceedings                                                                                                                                               | 40         |
|         |                                                                                                                                                            |       |
| Item 1A | Risk Factors                                                                                                                                                    | 40         |
|         |                                                                                                                                                            |       |
| Item 6  | Exhibits                                                                                                                                                        | 42         |
|         |                                                                                                                                                            |       |
| Signatures   |                                                                                                                                                            | 43         |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                                                                                                                            |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                      |   |
| CONDENSED CONSOLIDATED BALANCE SHEETS                                                                                                                                                     |   |
| (unaudited)                                                                                                                                                                               |   |
| (dollars in thousands, except share data)                                                                                                                                                 |   |
|                                                                                                                                                                                      |   | July 3, 2011 |   |   | January 1, 2011 |   |
| ASSETS                                                                                                                                                                                    |   |   |   |   |   |   |
| Current assets                                                                                                                                                                            |   |   |   |   |   |   |
|   Cash and cash equivalents                                                                                                                                                     |   | $ | 5,000 |   |   | $ | 3,772 |   |
|   Accounts receivable, less allowance for doubtful accounts of $1,214 and $1,435, respectively                                                                                  |   |   | 93,490 |   |   |   | 93,374 |   |
|   Inventories                                                                                                                                                                   |   |   | 110,644 |   |   |   | 110,032 |   |
|   Other current assets                                                                                                                                                          |   |   | 17,415 |   |   |   | 41,992 |   |
|        Total current assets                                                                                                                            |   |   | 226,549 |   |   |   | 249,170 |   |
|                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Property, plant and equipment, net of accumulated depreciation of  $492,499 and $470,676, respectively                                                                          |   |   | 341,228 |   |   |   | 354,601 |   |
| Intangible assets, net                                                                                                                                                                    |   |   | 47,283 |   |   |   | 48,449 |   |
| Other assets                                                                                                                                                                              |   |   | 17,963 |   |   |   | 24,779 |   |
|                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
|        Total assets                                                                                                                                    |   | $ | 633,023 |   |   | $ | 676,999 |   |
|                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| LIABILITIES, REDEEMABLE COMMON STOCK,ACCUMULATED DEFICIT ANDACCUMULATED OTHER COMPREHENSIVE LOSS                                                                                          |   |   |   |   |   |   |   |   |
| Current liabilities                                                                                                                                                                       |   |   |   |   |   |   |   |   |
|   Current portion of long-term debt                                                                                                                                             |   | $ | 1,203 |   |   | $ | 18,694 |   |
|   Accounts payable                                                                                                                                                              |   |   | 48,609 |   |   |   | 48,651 |   |
|   Accrued interest                                                                                                                                                              |   |   | 2,950 |   |   |   | 3,094 |   |
|   Other accrued liabilities                                                                                                                                                     |   |   | 48,957 |   |   |   | 62,988 |   |
|        Total current liabilities                                                                                                                       |   |   | 101,719 |   |   |   | 133,427 |   |
|                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Long-term debt                                                                                                                                                                            |   |   | 550,696 |   |   |   | 540,131 |   |
| Postretirement benefits other than pension                                                                                                                                                |   |   | 44,825 |   |   |   | 45,133 |   |
| Accrued pension                                                                                                                                                                           |   |   | 77,496 |   |   |   | 88,583 |   |
| Other long-term liabilities                                                                                                                                                               |   |   | 7,320 |   |   |   | 5,716 |   |
| Commitments and contingencies (Note 13)                                                                                                                                                   |   |   | - |   |   |   | - |   |
| Redeemable common stock, $0.01 par value,  shares authorized: 30,000,000,  shares issued and outstanding:  9,360,639 and  9,713,212, respectively |   |   | 102,524 |   |   |   | 110,045 |   |
| Accumulated deficit                                                                                                                                                                       |   |   | (159,397 | ) |   |   | (153,765 | ) |
| Accumulated other comprehensive loss                                                                                                                                                      |   |   | (92,160 | ) |   |   | (92,271 | ) |
|        Total liabilities, redeemable common stock, accumulated      deficit and accumulated other comprehensive loss     |   | $ | 633,023 |   |   | $ | 676,999 |   |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES  |
|-------------------------------------------------|
|                                            |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (unaudited)                                     |
| (dollars in thousands)                          |

|                                                                                              |   | Three MonthsEndedJuly 3, 2011 |    | Three MonthsEndedJuly 4, 2010 |   | Six MonthsEndedJuly 3, 2011 |    | Six MonthsEndedJuly 4, 2010 |
|---------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|------------------------------------|--------|----------------------------------|---------|---------------------------------------|
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |
| Net sales                                                                                         |   | $                                  | 216,586 |                               | $      | 220,784                          |    | $                                     | 434,601 |   | $ |                430,792 |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
| Cost of sales                                                                                     |   |                               | 174,160 |                               |   | 183,365                          |    |                                  | 345,324 |   |   |    353,650  |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
|   Gross profit                                                                          |   |                               | 42,426  |                               |   | 37,419                           |    |                                  | 89,277 |   |   |     77,142  |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
| Selling, general and administrative expenses                                                      |   |                               | 31,772  |                               |   | 35,318                           |    |                                  | 65,121 |   |   |     70,131  |
| Environmental expense insurance recovery                                                          |   |                               | -       |                               |   | -                                |    |                                  | - |   |   |      (8,181) |
| Litigation settlement                                                                             |   |                               | (82     | )                                  |   | -                                |    |                                  | 3,122 |   |   | -  |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
| Operating income                                                                                  |   |                               | 10,736  |                               |   | 2,101                            |    |                                  | 21,034 |   |   |     15,192  |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
| Other expense (income)                                                                            |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
|   Interest expense                                                                      |   |                               | 15,683  |                               |   | 16,746                           |    |                                  | 31,833 |   |   |     33,668  |
|   Debt extinguishment expense, net                                                      |   |                               | -       |                               |   | -                           |    |                                  | - |   |   |       5,532  |
|   Interest income                                                                       |   |                               | (37     | )                                  |   | (35                              | )  |                                  | (74 | )  |   |   (45) |
|   Foreign exchange (gain) loss                                                          |   |                               | (101    | )                                  |   | 1,623                            |    |                                  | (1,074 | )  |   |       1,360  |
|   Other income                                                                          |   |                               | (1,374  | )                                  |   | -                                |    |                                  | (1,374 | )  |   | - |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
| Loss before income taxes                                                                          |   |                               | (3,435  | )                                  |   | (16,233                          | )  |                                  | (8,277 | )  |   | (25,323) |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
| (Benefit) provision for income taxes                                                              |   |                               | (154    | )                                  |   | 45                               |    |                                  | 201 |   |   | (46) |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
| Loss from continuing operations                                                                   |   |                               | (3,281  | )                                  |   | (16,278                          | )  |                                  | (8,478 | )  |   | (25,277) |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
| Discontinued operations                                                                           |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
|    Income from discontinued operations, net   of income taxes       |   |                               | -       |                               |   | 1,302                            |    |                                  | - |   |   |       2,854  |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
| Net loss                                                                                          |   | $                                  | (3,281  | )                                  | $      | (14,976                          | )  | $                                     | (8,478 | )  | $ | (22,423) |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
|                                                                                              |   |                               |    |                               |   |                             |    |                                  |   |   |   |   |
| The accompanying notes are an integral part of these condensed consolidated financial statements. |   |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                                         |   |
|--------------------------------------------------------------------------------------------------------|--------|
|                                                                                                   |   |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                        |   |
| FOR THE SIX MONTHS ENDED                                                                               |   |
| (unaudited)                                                                                            |   |
| (dollars in thousands)                                                                                 |   |
|                                                                                                   |   | July 3, 2011 |   |   | July 4, 2010 |   |
| Cash flows from operating activities:                                                                  |   |   |   |   |   |   |
| Net loss                                                                                               |   | $ | (8,478 | ) |   | $ | (22,423 | ) |
| Adjustments to reconcile net loss to net cash provided (used) by operating activities:                 |   |   |   |   |   |   |   |   |
| Depreciation                                                                                           |   |   | 22,950 |   |   |   | 24,698 |   |
| Amortization of intangible assets                                                                      |   |   | 1,166 |   |   |   | 1,742 |   |
| Amortization of financing fees                                                                         |   |   | 2,137 |   |   |   | 1,965 |   |
| Amortization of bond discount                                                                          |   |   | 466 |   |   |   | 302 |   |
| Employer 401(k) non-cash matching contributions                                                        |   |   | 1,502 |   |   |   | 1,838 |   |
| Foreign exchange (gain) loss                                                                           |   |   | (1,088 | ) |   |   | 1,366 |   |
| Net gain from involuntary conversion of equipment                                                      |   |   | (1,374 | ) |   |   | - |   |
| Loss on disposals of equipment                                                                         |   |   | 201 |   |   |   | 83 |   |
| Accretion of capital lease obligation                                                                  |   |   | 5 |   |   |   | 23 |   |
| Loss on debt extinguishment                                                                            |   |   | - |   |   |   | 5,532 |   |
| Environmental expense insurance recovery (including accretion)                                         |   |   | (72 | )  |   |   | (8,214 | ) |
| (Increase)/decrease in assets and increase/(decrease) in liabilities:                                  |   |   |   |   |   |   |   |   |
| Accounts receivable                                                                                    |   |   | 680 |   |   |   | (31,062 | ) |
| Inventories                                                                                            |   |   | (458 | ) |   |   | (793 | ) |
| Other current assets                                                                                   |   |   | 14,133 |   |   |   | 573 |   |
| Accounts payable and other accrued liabilities                                                         |   |   | (930 | ) |   |   | (2,616 | ) |
| Accrued pension                                                                                        |   |   | (8,617 | ) |   |   | 3,581 |   |
| Other, net                                                                                             |   |   | 972 |   |   |   | (5,545 | ) |
| Net cash provided (used) by operating activities                                                  |   |   | 23,195 |   |   |   | (28,950 | ) |
|                                                                                                   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                  |   |   |   |   |   |   |   |   |
|         Proceeds from sale of equipment                             |   |   | - |   |   |   | 57 |   |
|         Insurance proceeds from involuntary conversion of equipment |   |   | 1,374 |   |   |   | - |   |
|         Additions to property, plant and equipment                  |   |   | (9,404 | ) |   |   | (6,799 | ) |
| Net cash used by investing activities                                                                  |   |   | (8,030 | ) |   |   | (6,742 | ) |
|                                                                                                   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                                  |   |   |   |   |   |   |   |   |
| Payments of senior secured notes payable                                                               |   |   | - |   |   |   | (211,225 | ) |
| Payments of senior subordinated notes payable                                                          |   |   | (17,491 | ) |   |   | - |   |
| Proceeds from senior secured first lien notes payable                                                  |   |   | - |   |   |   | 299,007 |   |
| Debt acquisition costs                                                                                 |   |   | - |   |   |   | (10,807 | ) |
| Payments relating to capital lease obligations                                                         |   |   | (28 | ) |   |   | (389 | ) |
| Proceeds from old revolving line of credit                                                             |   |   | - |   |   |   | 21,350 |   |
| Payments of old revolving line of credit                                                               |   |   | - |   |   |   | (109,575 | ) |
| Proceeds from new revolving line of credit                                                             |   |   | 130,300 |   |   |   | 154,793 |   |
| Payments of new revolving line of credit                                                               |   |   | (119,600 | ) |   |   | (99,350 | ) |
| Payments of State of Ohio loans                                                                        |   |   | (601 | ) |   |   | (570 | ) |
| Payments of secured financing                                                                          |   |   | - |   |   |   | (1,494 | ) |
| Proceeds from issuance of redeemable common stock                                                      |   |   | 1,382 |   |   |   | 1,924 |   |
| Payments to redeem common stock                                                                        |   |   | (7,349 | ) |   |   | (7,736 | ) |
| Decrease in cash overdraft                                                                             |   |   | (564 | ) |   |   | (6,274 | ) |
| Net cash (used) provided by financing activities                                                  |   |   | (13,951 | ) |   |   | 29,654 |   |
|                                                                                                   |   |   |   |   |   |   |   |   |
| Effect of foreign exchange rate changes on cash and cash equivalents                                   |   |   | 14 |   |   |   | (6 | ) |
| Change in cash and cash equivalents                                                                    |   |   | 1,228 |   |   |   | (6,044 | ) |
| Cash and cash equivalents at beginning of period                                                       |   |   | 3,772 |   |   |   | 9,963 |   |
| Cash and cash equivalents at end of period                                                             |   | $ | 5,000 |   |   | $ | 3,919 |   |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES            |   |
|-----------------------------------------------------------|--------|
|                                                      |   |
| CONSOLIDATED STATEMENTS OF REDEEMABLE COMMON STOCK,       |   |
| ACCUMULATED DEFICIT, ACCUMULATED OTHER COMPREHENSIVE LOSS |   |
| AND COMPREHENSIVE LOSS                                    |   |
| FOR THE SIX MONTHS ENDED                                  |   |
| (unaudited)                                               |   |
| (dollars in thousands, except share data)                 |   |
|                                                      |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   | Redeemable Common Stock |   |   |   |   |   |   |   |   |   |   |
|                                                      |   | SharesOutstanding |   |   | Amount |   |   | AccumulatedDeficit |   |   | AccumulatedOtherComprehensiveLoss |   |   | ComprehensiveLoss |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 1, 2011                                  |   |   | 9,713,212 |   |   | $ | 110,045 |   |   | $ | (153,765 | ) |   | $ | (92,271 | ) |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive loss:                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Net loss                                      |   |   |  - |   |   |   |  - |   |   |   | (8,478 | ) |   |   |  - |   |   | $ | (8,478 | ) |
|   Changes in retiree plans                      |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   | 1,404 |   |   |   | 1,404 |   |
|   Realized and unrealized loss on derivatives   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,293 | ) |   |   | (1,293 | ) |
|     Total comprehensive loss          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (8,367 | ) |
| Issuance of redeemable common stock                       |   |   | 208,340 |   |   |   | 2,674 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Redemption of redeemable common stock                     |   |   | (560,913 | ) |   |   | (7,349 | ) |   |   | - |   |   |   | - |   |   |   |   |   |
| Accretion of redeemable common stock                      |   |   | - |   |   |   | (2,846 | ) |   |   | 2,846 |   |   |   | - |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, July 3, 2011                                     |   |   | 9,360,639 |   |   | $ | 102,524 |   |   | $ | (159,397 | ) |   | $ | (92,160 | ) |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 2, 2010                                  |   |   | 10,097,099 |   |   | $ | 122,087 |   |   | $ | (129,093 | ) |   | $ | (99,717 | ) |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive loss:                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Net loss                                      |   |   | - |   |   |   | - |   |   |   | (22,423 | ) |   |   | - |   |   | $ | (22,423 | ) |
|   Changes in retiree plans                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 596 |   |   |   | 596 |   |
|   Realized and unrealized gain on derivatives   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 159 |   |   |   | 159 |   |
|     Total comprehensive loss          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (21,668 | ) |
| Issuance of redeemable common stock                       |   |   | 292,333 |   |   |   | 3,518 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Redemption of redeemable common stock                     |   |   | (604,374 | ) |   |   | (7,736 | ) |   |   | - |   |   |   | - |   |   |   |   |   |
| Accretion of redeemable common stock                      |   |   | - |   |   |   | (3,491 | ) |   |   | 3,491 |   |   |   | - |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, July 4, 2010                                |   |   | 9,785,058 |   |   | $ | 114,378 |   |   | $ | (148,025 | ) |   | $ | (98,962 | ) |   |   |   |   |

----

----

|                                                                             |   | As of July 3, 2011 |   |   | As of January 1, 2011 |   |
|----------------------------------------------------------------------------------|--------|-------------------------|--------|--------|----------------------------|--------|
|                                                                             |   | Gross Carrying Amount   |   |   | Accumulated Amortization   |   |   | Gross Carrying Amount |   |   | Accumulated Amortization |   |
| Amortizable intangible assets:                                                   |   |                    |   |   |                       |   |   |   |   |   |   |   |
|      Trademarks                                              |   | $                       | 44,665 |   |                       | $      | 23,128 |   |   | $ | 44,665 |   |   | $ | 22,079 |   |
|      Patents                                            |   |                    | 11,000 |   |                       |   | 11,000 |   |   |   | 12,376 |   |   |   | 12,376 |   |
|      Customer relationships                             |   |                    | 5,365  |   |                       |   | 2,484 |   |   |   | 5,365 |   |   |   | 2,367 |   |
|             Subtotal |   |                    | 61,030 |   |                       | $      | 36,612 |   |   |   | 62,406 |   |   | $ | 36,822 |   |
| Unamortizable intangible assets:                                                 |   |                    |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
|      Trademarks                                         |   |                    | 22,865 |   |                       |   |   |   |   |   | 22,865 |   |   |   |   |   |
|             Total    |   | $                       | 83,895 |   |                       |   |   |   |   | $ | 85,271 |   |   |   |   |   |

----

|                                        |   | July 3, 2011 |    |   | January 1, 2011 |   |
|---------------------------------------------|--------|-------------------|---------|--------|----------------------|--------|
| Finished goods                              |   | $                 | 47,058  |   |                 | $      | 44,239 |   |
| Raw materials, work in process and supplies |   |              | 63,586  |   |                 |   | 65,793 |   |
|                                        |   | $                 | 110,644 |   |                 | $      | 110,032 |   |

|                                  |   | July 3, 2011 |     |   | January 1, 2011 |   |
|---------------------------------------|--------|-------------------|----------|--------|---------------------------|--------|
| Land and improvements                 |   | $                 | 9,226    |   |                      | $      | 8,611 |   |
| Buildings and improvements            |   |              | 132,296  |   |                      |   | 131,512 |   |
| Machinery and equipment               |   |              | 649,682  |   |                      |   | 643,300 |   |
| Software                              |   |              | 32,538   |   |                      |   | 32,575 |   |
| Capital lease                         |   |              | 165      |   |                      |   | 165 |   |
| Construction in progress              |   |              | 9,820    |   |                      |   | 9,114 |   |
|                                  |   |              | 833,727  |   |                      |   | 825,277 |   |
| Accumulated depreciation/amortization |   |              | (492,499 | )      |                      |   | (470,676 | ) |
|                                  |   | $                 | 341,228  |   |                      | $      | 354,601 |   |

|                                              |   | For the Three |   |   | For the Three |   |   | For the Six  |   |   | For the Six  |   |
|---------------------------------------------------|--------|---------------|--------|--------|---------------|--------|--------|--------------|--------|--------|--------------|--------|
|                                              |   | Months Ended  |   |   | Months Ended  |   |   | Months Ended |   |   | Months Ended |   |
| Depreciation Expense                              |   | July 3, 2011  |   |   | July 4, 2010  |   |   | July 3, 2011 |   |   | July 4, 2010 |   |
| Cost of sales                                     |   | $             | 10,272 |   |          | $      | 10,246 |         |   | $      | 20,697       |   |   | $ | 20,386 |   |
| Selling, general and administrative expenses |   |          | 1,127  |   |          |   | 1,582  |         |   |   | 2,253        |   |   |   | 3,163 |   |
|                                              |   | $             | 11,399 |   |          | $      | 11,828 |         |   | $      | 22,950       |   |   | $ | 23,549 |   |

----

|                                       |   | July 3, 2011 |   |   | January 1, 2011 |   |
|--------------------------------------------|--------|-------------------|--------|--------|----------------------|--------|
| Environmental indemnification receivable   |   | $                 | 6,017  |   |                 | $      | 20,580 |   |
| Environmental expense insurance recovery   |   |              | 2,888  |   |                 |   | 5,008 |   |
| Escrow from sale of Films                  |   |              | 2,000  |   |                 |   | 2,000 |   |
| Insurance recovery from coal silo accident |   |              | -      |   |                 |   | 8,183 |   |
| Other                                      |   |              | 6,510  |   |                 |   | 6,221 |   |
|                                       |   | $                 | 17,415 |   |                 | $      | 41,992 |   |

|                                     |   | July 3, 2011 |   |   | January 1, 2011 |   |
|------------------------------------------|--------|-------------------|--------|--------|----------------------|--------|
| Deferred debt issuance costs             |   | $                 | 11,617 |   |                 | $      | 13,754 |   |
| Environmental expense insurance recovery |   |              | -      |   |                 |   | 4,045 |   |
| Other                                    |   |              | 6,346  |   |                 |   | 6,980 |   |
|                                     |   | $                 | 17,963 |   |                 | $      | 24,779 |   |

|                                       |   | July 3, 2011 |   |   | January 1, 2011 |   |
|--------------------------------------------|--------|-------------------|--------|--------|----------------------|--------|
| Compensation                               |   | $                 | 8,028  |   |                 | $      | 8,997 |   |
| Trade discounts                            |   |              | 14,245 |   |                 |   | 16,035 |   |
| Workers’ compensation                |   |              | 4,220  |   |                 |   | 3,680 |   |
| Accrued insurance                          |   |              | 2,088  |   |                 |   | 2,375 |   |
| Other accrued taxes                        |   |              | 1,673  |   |                 |   | 1,428 |   |
| Postretirement benefits other than pension |   |              | 3,758  |   |                 |   | 3,758 |   |
| Fox River Liabilities                      |   |              | 6,017  |   |                 |   | 20,580 |   |
| Litigation settlement                      |   |              | 1,750  |   |                 |   | - |   |
| Other                                      |   |              | 7,178  |   |                 |   | 6,135 |   |
|                                       |   | $                 | 48,957 |   |                 | $      | 62,988 |   |

----

| Pension Benefits                               |   | For the ThreeMonths EndedJuly 3, 2011 |   |   | For the ThreeMonths EndedJuly 4, 2010 |   |   | For the SixMonths EndedJuly 3, 2011 |   |   | For the SixMonths EndedJuly 4, 2010 |   |
|------------------------------------------------|--------|-------------------------------------------------|--------|--------|--------------------------------------------|--------|--------|-----------------------------------------------|--------|--------|------------------------------------------|--------|
| Net periodic benefit cost                      |   |                                            |   |   |                                       |   |   |                                          |   |   |                                     |   |
|   Service cost                       |   | $                                               | 1,026  |   |                                       | $      | 1,516  |                                          |   | $      | 2,053                                    |   |   | $ | 3,033 |   |
|   Interest cost                      |   |                                            | 4,955  |   |                                       |   | 4,901  |                                          |   |   | 9,909                                    |   |   |   | 9,801 |   |
|   Expected return on plan assets          |   |                                            | (5,603 | )      |                                       |   | (5,318 | )                                             |   |   | (11,206                                  | )      |   |   | (10,636 | ) |
|   Amortization of prior service cost |   |                                            | 121    |   |                                       |   | 135    |                                          |   |   | 243                                      |   |   |   | 270 |   |
|   Amortization of actuarial loss     |   |                                            | 1,114  |   |                                       |   | 654    |                                          |   |   | 2,227                                    |   |   |   | 1,307 |   |
| Net periodic benefit cost                      |   | $                                               | 1,613  |   |                                       | $      | 1,888  |                                          |   | $      | 3,226                                    |   |   | $ | 3,775 |   |

----

| Other Postretirement Benefits                    |   | For the ThreeMonths EndedJuly 3, 2011 |   |   | For the ThreeMonths EndedJuly 4, 2010 |   |   | For the SixMonths EndedJuly 3, 2011 |   |   | For the SixMonths EndedJuly 4, 2010 |   |
|--------------------------------------------------|--------|-------------------------------------------------|--------|--------|--------------------------------------------|--------|--------|-----------------------------------------------|--------|--------|------------------------------------------|--------|
| Net periodic benefit cost                        |   |                                            |   |   |                                       |   |   |                                          |   |   |                                     |   |
|   Service cost                         |   | $                                               | 140    |   |                                       | $      | 196    |                                          |   | $      | 280                                      |   |   | $ | 392 |   |
|   Interest cost                        |   |                                            | 651    |   |                                       |   | 760    |                                          |   |   | 1,302                                    |   |   |   | 1,520 |   |
|   Amortization of prior service credit |   |                                            | (690   | )      |                                       |   | (538   | )                                             |   |   | (1,380                                   | )      |   |   | (1,076 | ) |
|   Amortization of actuarial loss       |   |                                            | 157    |   |                                       |   | 48     |                                          |   |   | 314                                      |   |   |   | 96 |   |
| Net periodic benefit cost                        |   | $                                               | 258    |   |                                       | $      | 466    |                                          |   | $      | 516                                      |   |   | $ | 932 |   |

----

----

----

|             •  | total remediation costs of $735 million, based on the most recent bids received with a range from $594 million to $900 million; |
|----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|

|             •  | the FWS preliminary estimate that discharges from the Appleton plant and the Combined Locks mill represent 36% to 52% of the total PCBs discharged by the PRPs, which is substantially greater than Appleton’s estimate; |
|----------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|             •  | Appleton’s responsibility for over half of the claims asserted against Appleton and NCR, based on the Company’s interim settlement agreement with NCR and the arbitration determination; and |
|----------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|             •  | $25 million in fees and expenses. |
|----------------------------------------------------------------------------------|-----------------------------------|

----

----

----

----

| Designated as a Hedge                 |   | Balance Sheet Location    |   | July 3, 2011 |   |    | January 1, 2011 |   |
|---------------------------------------|--------|---------------------------|--------|--------------|--------|---------|----------------------|--------|
| Foreign currency exchange derivatives |   | Other current assets      |   | $            | -      |    |                 | $      | 393 |   |
| Foreign currency exchange derivatives |   | Other current liabilities |   |         | (1,051 | )  |                 |   | (67 | ) |
|                                  |   |                      |   |         |   |    |                 |   |   |   |
| Not Designated as a Hedge             |   |                      |   |         |   |    |                 |   |   |   |
| Natural gas fixed swap                |   | Other current liabilities |   |         | (108   | )       |                 |   | (69 | ) |
| Pulp fixed swap                       |   | Other current assets      |   |         | 100    |    |                 |   |  - |   |

| Designated as a Hedge                                             |   | Statement of Operations Location |   | For the Three Months Ended July 3, 2011 |                                    | For the Three Months Ended July 4, 2010 |                                                                                                                                                                                                                     |           | For the Six Months Ended July 3, 2011 |                                    | For the Six Months Ended July 4, 2010 |                                                                                                                                                              |
|-------------------------------------------------------------------|--------|----------------------------------|--------|-----------------------------------------|-----------------------------------------|-----------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|---------------------------------------|-----------------------------------------|--------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Foreign currency exchange derivatives                             |   | Net sales                        |   | $                                       |       383 |                                    | $                                    (943 | )  $ |                                  |       832 |                                       | $                          (808 | ) |
|                                                              |   |                             |   |                                    |                                    |                                    |                                                                                                                                                                                                                     |           |                                  |                                    |                                       |                                                                                                                                                              |   |
| Losses (gains) recognized in accumulated other comprehensive loss |   |                             |   |                                    |                                    |                                    |                                                                                                                                                                                                                     |           |                                  | 907                                     |                                       |  (406                                                                                                                                                        | )  |
|                                                              |   |                             |   |                                    |                                    |                                    |                                                                                                                                                                                                                     |           |                                  |                                    |                                       |                                                                                                                                                              |   |
| Not Designated as a Hedge                                         |   |                             |   |                                    |                                    |                                    |                                                                                                                                                                                                                     |           |                                  |                                    |                                       |                                                                                                                                                              |   |
| Natural gas fixed swap                                            |   | Cost of sales                    |   |                                    | 63                                      |                                    | -                                                                                                                                                                                                                        |           |                                  | 122                                     |                                       | -                                                                                                                                                                 |   |
| Pulp fixed swap                                                   |   | Cost of sales                    |   |                                    | 120                                     |                                    | -                                                                                                                                                                                                                        |           |                                  | (205                                    | )                                          | -                                                                                                                                                                 |   |
| Interest rate swap contract                                       |   | Interest expense                 |   |                                    | -                                       |                                    | -                                                                                                                                                                                                                        |           |                                  | -                                       |                                       | 961                                                                                                                                                               |   |

|                                             |   | (As Reported)Impact ofHedging on Net Sales                                        |   | Error Correction |     | (As Corrected)Impact ofHedging on Net Sales |                                                                   |
|--------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|------------------|----------|---------------------------------------------|------------------------------------------------------------------------|
| For the three months ended July 4, 2010          |   | $             43 gain |   | $                | 900 gain |                                        | $         943 gain        |   |
| For the six months ended July 4, 2010  |   | $             96 gain |   | $           | 712 gain |                                        |  $         808 gain  |   |
|                                             |   |                                                                              |   |             |     |                                        |                                                                   |   |

----

|                                                                                                                                                      |   | July 3, 2011 |    |   | January 1, 2011 |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|----------------------|---------|
| Revolving credit facility at approximately 4.0% at July 3, 2011                                                                                      |   |  $           | 40,000  |   |                 |  $ | 29,300 |   |
| Secured variable rate industrial development bonds, 0.5% average interest rate at July 3, 2011, $2,650 due in 2013 and $6,000 due in 2027  |   |              | 8,650   |   |                 |    | 8,650 |   |
| State of Ohio assistance loan at 6%, approximately $100 due monthly and final payment due May 2017                                                   |   |              | 6,650   |   |                 |    | 7,105 |   |
| State of Ohio loan at 1% until July 2011, then 3% until May 2019, approximately $30 due monthly and final payment due May 2019             |   |              | 2,421   |   |                 |    | 2,567 |   |
| Senior notes payable at 8.125%, due June 2011                                                                                                        |   |              | -       |   |                 |    | 17,491 |   |
| Senior subordinated notes payable at 9.75%, due June 2014                                                                                            |   |              | 32,195  |   |                 |    | 32,195 |   |
| Senior secured first lien notes payable at 10.5%, due June 2015                                                                                           |   |              | 305,000 |   |                 |    | 305,000 |   |
| Unamortized discount on 10.5% senior secured first lien notes payable, due June 2015                                                                      |   |              | (4,783  | )      |                 |    | (5,249 | ) |
| Second lien notes payable at 11.25%, due December 2015                                                                                                    |   |              | 161,766 |   |                 |    | 161,766 |   |
|                                                                                                                                                      |   |              | 551,899 |   |                 |    | 558,825 |   |
| Less obligations due within one year                                                                                                                      |   |              | (1,203  | )      |                 |    | (18,694 | ) |
|                                                                                                                                                      |   | $                 | 550,696 |   |                 | $       | 540,131 |   |

----

----

|                                    |   | July 3, 2011 |    |   | January 1, 2011 |    |
|-----------------------------------------|--------|------------------------|---------|--------|---------------------------|---------|
|                                    |   | Carrying               |    |   | Fair                      |    |   | Carrying |   |   | Fair |   |
| Financial Instruments                   |   | Amount                 |    |   | Value                     |    |   | Amount |   |   | Value |   |
| Senior subordinated notes payable       |   | $                      | 32,195  |   |                      | $       | 28,815 |   |   | $ | 32,195 |   |   | $ | 15,293 |   |
| Senior notes payable                    |   |                   | -       |   |                      |    | - |   |   |   | 17,491 |   |   |   | 16,966 |   |
| Senior secured first lien notes payable |   | 300,217                |    |   |                      | 315,978 |   |   |   | 299,751 |   |   |   | 299,751 |   |
| Second lien notes payable               |   | 161,766                |    |   |                      | 164,192 |   |   |   | 161,766 |   |   |   | 130,222 |   |
| Revolving credit facility               |   | 40,000                 |    |   |                      | 40,000  |   |   |   | 29,300 |   |   |   | 29,300 |   |
| State of Ohio loans                     | 9,071  | 9,819                  | 9,672   | 10,185 |
| Industrial development bonds            |   |                   | 8,650   |   |                      |    | 8,650 |   |   |   | 8,650 |   |   |   | 8,650 |   |
|                                    |   | $                      | 551,899 |   |                      | $       | 567,454 |   |   | $ | 558,825 |   |   | $ | 510,367 |   |

----

|                          |   |   | For the Three Months EndedJuly 3, 2011                                                                                     |   |   | For the Three Months EndedJuly 4, 2010                                                                                     |    | For the Six Months EndedJuly 3, 2011 |         |   | For the Six Months EndedJuly 4, 2010 |   |
|-------------------------------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|---------|------------------------------------------------|--------------|--------|------------------------------------------------|--------|
| Net sales                     |   |   |                                                                                                                                 |   |   |                                                                                                                                 |    |                                           |         |   |                                           |   |
| Carbonless papers             |   |   | $                 116,692                  |   |   | $                 128,001                            |    | $                                              | 235,988      |   |                                           | $      | 252,625 |   |
| Thermal papers                |   |   | 91,733                                                                                                                          |   |   | 87,151                                                                                                                               |    |                                           | 180,660      |   |                                           |   | 167,376 |   |
|                          |   |   | 208,425                                                                                                                         |   |   | 215,152                                                                                                                              |    |                                           | 416,648      |   |                                           |   | 420,001 |   |
|                          |   |   |                                                                                                                                 |   |   |                                                                                                                                 |    |                                           |         |   |                                           |   |   |   |
| Encapsys                 |   |   |   14,018                                                                                                                   |   |   |   11,887                                                                                                                        |    |                                           |  29,494 |   |                                           |   |   23,355 |   |
| Intersegment (A)              |   |   | (5,857)                                                                                                                              |   |   | (6,255                                                                                                                               | )  |                                           | (11,541      | )      |                                           |   | (12,564 | ) |
| Total                         |   |   | $                 216,586                       |   |   | $                 220,784                            |    | $                                              | 434,601      |   |                                           | $      | 430,792 |   |
| Operating income (loss)       |   |   |                                                                                                                                 |   |   |                                                                                                                                 |    |                                           |         |   |                                           |   |   |   |
| Carbonless papers             |   |   | $                     5,461 |   |   | $                     4,910      |    | $                                              | 15,000       |   |                                           | $      | 13,143 |   |
| Thermal papers                |   |   | 4,664                                                                                                                           |   |   | (2,015                                                                                                                               | )       |                                           | 7,192        |   |                                           |   | (4,103 | ) |
|                          |   |   | 10,125                                                                                                                          |   |   | 2,895                                                                                                                                |    |                                           | 22,192       |   |                                           |   | 9,040 |   |
|  Encapsys                |   |   | 3,218                                                                                                                           |   |   | 1,614                                                                                                                                |    |                                           |   7,150 |   |                                           |   |   3,147 |   |
| Unallocated corporate charges |   |   | (1,769)                                                                                                                              |   |   | (1,329                                                                                                                               | )  |                                           | (6,578       | )      |                                           |   | 5,232 |   |
| Intersegment (A)              |   |   | (838)                                                                                                                                |   |   | (1,079                                                                                                                               | )  |                                           | (1,730       | )      |                                           |   | (2,227 | ) |
| Total                         |   |   | $                   10,736                 |   |   | $                     2,101 |    | $                                              | 21,034       |   |                                           | $      | 15,192 |   |
| Depreciation and amortization |   |   |                                                                                                                                 |   |   |                                                                                                                                 |    |                                           |         |   |                                           |   |   |   |
| Carbonless papers             |   |   | $                     6,509      |   |   | $                     6,883      |    | $                                              | 13,009       |   |                                           | $      | 13,739 |   |
| Thermal papers                |   |   | 4,596                                                                                                                           |   |   | 4,931                                                                                                                                |    |                                           | 9,192        |   |                                           |   | 9,869 |   |
|                          |   |   | 11,105                                                                                                                          |   |   | 11,814                                                                                                                               |    |                                           | 22,201       |   |                                           |   | 23,608 |   |
|                          |   |   |                                                                                                                                 |   |   |                                                                                                                                 |    |                                           |         |   |                                           |   |   |   |
| Encapsys                 |   |   |  839                                                                                                                            |   |   |  548                                                                                                                            |    |                                           | 1,837        |   |                                           |   |   1,009 |   |
| Unallocated corporate charges |   |   | 38                                                                                                                                   |   |   | 49                                                                                                                                   |    |                                           | 78           |   |                                           |   | 97 |   |
| Total                         |   |   | $                   11,982            |   |   | $                   12,411            |    | $                                              | 24,116       |   |                                           | $      | 24,714 |   |

----

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                                                                               |
|----------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                         |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)                                                                           |
|                                                                                                                                         |
| CONDENSED CONSOLIDATING BALANCE SHEET                                                                                                   |
| July 3, 2011                                                                                                                                 |
| (unaudited)                                                                                                                                  |
| (dollars in thousands)                                                                                                                       |
|                                                                                                                                         |
|                                                                                                                                         |   | ParentGuarantor |   |   | Issuer |   |   | SubsidiaryGuarantors |   |   | Non-Guarantor Subsidiary |   |   | Eliminations |   |   | Consolidated |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ASSETS                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current assets                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Cash and cash equivalents                                                                                                       |   | $ | 38  |   |   | $ | 4,907 |   |   | $ | - |   |   | $ | 55 |   |   | $ | - |   |   | $ | 5,000  |
|    Accounts receivable, net                                                                                                        |   |   | -  |   |   |   | 85,851 |   |   |   | - |   |   |   | 7,639 |   |   |   | - |   |   |   | 93,490  |
|    Inventories                                                                                                                     |   |   | -  |   |   |   | 108,942 |   |   |   | - |   |   |   | 1,702 |   |   |   | - |   |   |   | 110,644  |
|    Other current assets                                                                                                       |   |   | 6,017  |   |   |   | 11,364 |   |   |   | - |   |   |   | 34 |   |   |   | - |   |   |   | 17,415  |
|       Total current assets                                                                                     |   |   | 6,055  |   |   |   | 211,064 |   |   |   | - |   |   |   | 9,430 |   |   |   | - |   |   |   | 226,549  |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Property, plant and equipment, net                                                                                              |   |   | -  |   |   |   | 341,211 |   |   |   | - |   |   |   | 17 |   |   |   | - |   |   |   | 341,228  |
|    Investment in subsidiaries                                                                                                      |   |   | 159,989  |   |   |   | 15,738 |   |   |   | - |   |   |   | - |   |   |   | (175,727) |   |   |   | -  |
|    Other assets                                                                                                               |   |   | 12  |   |   |   | 65,101 |   |   |   | - |   |   |   | 133 |   |   |   | - |   |   |   | 65,246  |
|        Total assets                                                                                            |   | $ | 166,056  |   |   | $ | 633,114 |   |   | $ | - |   |   | $ | 9,580 |   |   | $ | (175,727) |   |   | $ | 633,023  |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES, REDEEMABLE COMMON STOCK, ACCUMULATED DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Current portion of long-term debt                                                                                               |   | $ | -  |   |   | $ | 1,203 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 1,203 |
|    Accounts payable                                                                                                                |   |   | -  |   |   |   | 48,531 |   |   |   | - |   |   |   | 78 |   |   |   | - |   |   |   | 48,609 |
|    Due to (from) parent and affiliated companies                                                                                   |   |   | 315,089  |   |   |   | (306,588 | ) |   |   | - |   |   |   | (8,501 | ) |   |   | - |   |   |   | -  |
|    Other accrued liabilities                                                                                                       |   |   | -  |   |   |   | 49,749 |   |   |   | - |   |   |   | 2,158 |   |   |   | - |   |   |   | 51,907  |
|        Total current liabilities                                                                               |   |   | 315,089  |   |   |   | (207,105 | ) |   |   | - |   |   |   | (6,265 | ) |   |   | - |   |   |   | 101,719  |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term debt                                                                                                                               |   |   | -  |   |   |   | 550,696 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 550,696  |
| Other long-term liabilities                                                                                                                  |   |   | -  |   |   |   | 129,534 |   |   |   | - |   |   |   | 107 |   |   |   | - |   |   |   | 129,641  |
| Redeemable common stock, accumulated deficit and accumulated other comprehensive loss                                                        |   |   | (149,033) |   |   |   | 159,989 |   |   |   | - |   |   |   | 15,738 |   |   |   | (175,727) |   |   |   | (149,033) |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total liabilities, redeemable common stock, accumulated deficit and accumulated other comprehensive loss |   | $ | 166,056  |   |   | $ | 633,114 |   |   | $ | - |   |   | $ | 9,580 |   |   | $ | (175,727) |   |   | $ | 633,023  |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                                                                               |
|----------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                         |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)                                                                           |
|                                                                                                                                         |
| CONDENSED CONSOLIDATING BALANCE SHEET                                                                                                        |
|                                                                                                                                         |
| JANUARY 1, 2011                                                                                                                              |
|            (unaudited)                                                                          |
| (dollars in thousands)                                                                                                                       |
|                                                                                                                                         |
|                                                                                                                                         |   | ParentGuarantor |   |   | Issuer |   |   | SubsidiaryGuarantors |   |   | Non-GuarantorSubsidiary |   |   | Eliminations |   |   | Consolidated |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ASSETS                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current assets                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Cash and cash equivalents                                                                                                       |   | $ | -  |   |   | $ | 3,399 |   |   | $ | - |   |   | $ | 373 |   |   | $ | -  |   |   | $ | 3,772  |
|    Accounts receivable, net                                                                                                        |   |   | -  |   |   |   | 85,988 |   |   |   | 101 |   |   |   | 7,285 |   |   |   | -  |   |   |   | 93,374  |
|    Inventories                                                                                                                     |   |   | -  |   |   |   | 107,908 |   |   |   | - |   |   |   | 2,124 |   |   |   | -  |   |   |   | 110,032  |
|    Other current assets                                                                                                       |   |   | 20,580  |   |   |   | 21,364 |   |   |   | - |   |   |   | 48 |   |   |   | -  |   |   |   | 41,992  |
|       Total current assets                                                                                     |   |   | 20,580  |   |   |   | 218,659 |   |   |   | 101 |   |   |   | 9,830 |   |   |   | -  |   |   |   | 249,170  |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Property, plant and equipment, net                                                                                              |   |   | -  |   |   |   | 354,597 |   |   |   | - |   |   |   | 4 |   |   |   | -  |   |   |   | 354,601  |
|    Investment in subsidiaries                                                                                                      |   |   | 161,559  |   |   |   | 13,462 |   |   |   | - |   |   |   | - |   |   |   | (175,021) |   |   |   | -  |
|    Other assets                                                                                                               |   |   | 12  |   |   |   | 73,087 |   |   |   | - |   |   |   | 129 |   |   |   | -  |   |   |   | 73,228  |
|        Total assets                                                                                            |   | $ | 182,151  |   |   | $ | 659,805 |   |   | $ | 101 |   |   | $ | 9,963 |   |   | $ | (175,021) |   |   | $ | 676,999  |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES, REDEEMABLE COMMON STOCK, ACCUMULATED DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Current portion of long-term debt                                                                                               |   | $ | -  |   |   | $ | 18,694 |   |   | $ | - |   |   | $ | - |   |   | $ | -  |   |   | $ | 18,694  |
|    Accounts payable                                                                                                                |   |   | -  |   |   |   | 48,608 |   |   |   | - |   |   |   | 43 |   |   |   | -  |   |   |   | 48,651  |
|    Due to (from) parent and affiliated companies                                                                                   |   |   | 318,142  |   |   |   | (312,040 | ) |   |   | 101 |   |   |   | (6,203 | ) |   |   | -  |   |   |   | -  |
|    Other accrued liabilities                                                                                                  |   |   | -  |   |   |   | 63,524 |   |   |   | - |   |   |   | 2,558 |   |   |   | -  |   |   |   | 66,082  |
|        Total current liabilities                                                                               |   |   | 318,142  |   |   |   | (181,214 | ) |   |   | 101 |   |   |   | (3,602 | ) |   |   | -  |   |   |   | 133,427  |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term debt                                                                                                                               |   |   | -  |   |   |   | 540,131 |   |   |   | - |   |   |   | - |   |   |   | -  |   |   |   | 540,131  |
| Other long-term liabilities                                                                                                                  |   |   | -  |   |   |   | 139,329 |   |   |   | - |   |   |   | 103 |   |   |   | -  |   |   |   | 139,432  |
| Redeemable common stock, accumulated deficit and accumulated other comprehensive loss                                                        |   |   | (135,991) |   |   |   | 161,559 |   |   |   | - |   |   |   | 13,462 |   |   |   | (175,021) |   |   |   | (135,991) |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total liabilities, redeemable common stock, accumulated deficit and accumulated other comprehensive loss |   | $ | 182,151  |   |   | $ | 659,805 |   |   | $ | 101 |   |   | $ | 9,963 |   |   | $ | (175,021) |   |   | $ | 676,999  |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                     |   |
|--------------------------------------------------------------------|--------|
|                                                               |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) |   |
|                                                               |   |
| CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS                    |   |
| FOR THE SIX MONTHS ENDED JULY 3, 2011                              |   |
| (unaudited)                                                        |   |
| (dollars in thousands)                                             |   |
|                                                               |   |
|                                                               |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                               |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Net sales                                                          |   | $ | - |   |   | $ | 431,465 |   |   | $ | - |   |   | $ | 25,966 |   |   | $ | (22,830 | ) |   | $ | 434,601 |   |
| Cost of sales                                                      |   |   | - |   |   |   | 344,923 |   |   |   | - |   |   |   | 23,348 |   |   |   | (22,947 | ) |   |   | 345,324 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                       |   |   | - |   |   |   | 86,542 |   |   |   | - |   |   |   | 2,618 |   |   |   | 117 |   |   |   | 89,277 |   |
| Selling, general and administrative expenses                       |   |   | - |   |   |   | 64,172 |   |   |   | - |   |   |   | 949 |   |   |   | - |   |   |   | 65,121 |   |
| Litigation settlement                                              |   |   | - |   |   |   | 3,122 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,122 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income                                                   |   |   | - |   |   |   | 19,248 |   |   |   | - |   |   |   | 1,669 |   |   |   | 117 |   |   |   | 21,034 |   |
| Interest expense                                                   |   |   | 6,797 |   |   |   | 31,995 |   |   |   | - |   |   |   | - |   |   |   | (6,959 | ) |   |   | 31,833 |   |
| Interest income                                                    |   |   | - |   |   |   | (6,871 | ) |   |   | - |   |   |   | (162 | ) |   |   | 6,959 |   |   |   | (74 | ) |
| Loss (income) in equity investments                                |   |   | 1,681 |   |   |   | (2,466 | ) |   |   | - |   |   |   | - |   |   |   | 785 |   |   |   | - |   |
| Other income                                                       |   |   | - |   |   |   | (1,833 | ) |   |   | - |   |   |   | (542 | ) |   |   | (73 | ) |   |   | (2,448 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income before income taxes                                  |   |   | (8,478 | ) |   |   | (1,577 | ) |   |   | - |   |   |   | 2,373 |   |   |   | (595 | ) |   |   | (8,277 | ) |
| Provision for income taxes                                         |   |   | - |   |   |   | 104 |   |   |   | - |   |   |   | 97 |   |   |   | - |   |   |   | 201 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                                                  |   | $ | (8,478 | ) |   | $ | (1,681 | ) |   | $ | - |   |   | $ | 2,276 |   |   | $ | (595 | ) |   | $ | (8,478 | ) |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                     |   |
|--------------------------------------------------------------------|--------|
|                                                               |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) |   |
|                                                               |   |
| CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS                    |   |
| FOR THE SIX MONTHS ENDED JULY 4, 2010                              |   |
| (unaudited)                                                        |   |
| (dollars in thousands)                                             |   |
|                                                               |   |
|                                                               |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                               |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Net sales                                                          |   | $ | - |   |   | $ | 429,688 |   |   | $ | - |   |   | $ | 23,491 |   |   | $ | (22,387 | ) |   | $ | 430,792 |   |
| Cost of sales                                                      |   |   | - |   |   |   | 353,385 |   |   |   | - |   |   |   | 22,957 |   |   |   | (22,692 | ) |   |   | 353,650 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                       |   |   | - |   |   |   | 76,303 |   |   |   | - |   |   |   | 534 |   |   |   | 305 |   |   |   | 77,142 |   |
| Selling, general and administrative expenses                       |   |   | - |   |   |   | 69,212 |   |   |   | - |   |   |   | 919 |   |   |   | - |   |   |   | 70,131 |   |
| Environmental expense insurance recovery                           |   |   | - |   |   |   | (8,181 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (8,181 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income (loss)                                            |   |   | - |   |   |   | 15,272 |   |   |   | - |   |   |   | (385 | ) |   |   | 305 |   |   |   | 15,192 |   |
| Interest expense                                                   |   |   | 6,646 |   |   |   | 33,968 |   |   |   | - |   |   |   | - |   |   |   | (6,946 | ) |   |   | 33,668 |   |
| Debt extinguishment expense, net                                   |   |   | - |   |   |   | 5,532 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,532 |   |
| Interest income                                                    |   |   | - |   |   |   | (6,691 | ) |   |   | - |   |   |   | (300 | ) |   |   | 6,946 |   |   |   | (45 | ) |
| Loss (income) in equity investments                                |   |   | 15,777 |   |   |   | (2,953 | ) |   |   | - |   |   |   | - |   |   |   | (12,824 | ) |   |   | - |   |
| Other loss                                                         |   |   | - |   |   |   | 1,253 |   |   |   | - |   |   |   | 93 |   |   |   | 14 |   |   |   | 1,360 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations before income taxes                |   |   | (22,423 | ) |   |   | (15,837 | ) |   |   | - |   |   |   | (178 | ) |   |   | 13,115 |   |   |   | (25,323 | ) |
| Provision (benefit) for income taxes                               |   |   | - |   |   |   | 44 |   |   |   | - |   |   |   | (90 | ) |   |   | - |   |   |   | (46 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations                                    |   |   | (22,423 | ) |   |   | (15,881 | ) |   |   | - |   |   |   | (88 | ) |   |   | 13,115 |   |   |   | (25,277 | ) |
| Income from discontinued operations, net of income taxes           |   |   | - |   |   |   | 104 |   |   |   | 2,750 |   |   |   | - |   |   |   | - |   |   |   | 2,854 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                                                  |   | $ | (22,423 | ) |   | $ | (15,777 | ) |   | $ | 2,750 |   |   | $ | (88 | ) |   | $ | 13,115 |   |   | $ | (22,423 | ) |

|   |
|--------|

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                     |   |
|--------------------------------------------------------------------|--------|
|                                                               |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) |   |
|                                                               |   |
| CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS                    |   |
| FOR THE THREE MONTHS ENDED JULY 3, 2011                            |   |
| (unaudited)                                                        |   |
| (dollars in thousands)                                             |   |
|                                                               |   |
|                                                               |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                               |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Net sales                                                          |   | $ | - |   |   | $ | 215,575 |   |   | $ | - |   |   | $ | 12,262 |   |   | $ | (11,251 | ) |   | $ | 216,586 |   |
| Cost of sales                                                      |   |   | - |   |   |   | 174,293 |   |   |   | - |   |   |   | 10,964 |   |   |   | (11,097 | ) |   |   | 174,160 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                       |   |   | - |   |   |   | 41,282 |   |   |   | - |   |   |   | 1,298 |   |   |   | (154 | ) |   |   | 42,426 |   |
| Selling, general and administrative expenses                       |   |   | - |   |   |   | 31,308 |   |   |   | - |   |   |   | 464 |   |   |   | - |   |   |   | 31,772 |   |
| Litigation settlement                                              |   |   | - |   |   |   | (82 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (82) |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income                                                   |   |   | - |   |   |   | 10,056 |   |   |   | - |   |   |   | 834 |   |   |   | (154 | ) |   |   | 10,736 |   |
| Interest expense                                                   |   |   | 3,421 |   |   |   | 15,769 |   |   |   | - |   |   |   | - |   |   |   | (3,507 | ) |   |   | 15,683 |   |
| Interest income                                                    |   |   | - |   |   |   | (3,458 | ) |   |   | - |   |   |   | (86 | ) |   |   | 3,507 |   |   |   | (37 | ) |
| Income in equity investments                                       |   |   | (140) |   |   |   | (1,045 | ) |   |   | - |   |   |   | - |   |   |   | 1,185 |   |   |   | - |   |
| Other income                                                       |   |   | - |   |   |   | (1,402 | ) |   |   | - |   |   |   | (101 | ) |   |   | 28 |   |   |   | (1,475 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income before income taxes                                  |   |   | (3,281) |   |   |   | 192 |   |   |   | - |   |   |   | 1,021 |   |   |   | (1,367 | ) |   |   | (3,435 | ) |
| Provision (benefit) for income taxes                               |   |   | - |   |   |   | 52 |   |   |   | - |   |   |   | (206 | ) |   |   | - |   |   |   | (154 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                                                  |   | $ | (3,281) |   |   | $ | 140 |   |   | $ | - |   |   | $ | 1,227 |   |   | $ | (1,367 | ) |   | $ | (3,281 | ) |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                     |   |
|--------------------------------------------------------------------|--------|
|                                                               |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) |   |
|                                                               |   |
| CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS                    |   |
| FOR THE THREE MONTHS ENDED JULY 4, 2010                            |   |
| (unaudited)                                                        |   |
| (dollars in thousands)                                             |   |
|                                                               |   |
|                                                               |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                               |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Net sales                                                          |   | $ | - |   |   | $ | 219,672 |   |   | $ | - |   |   | $ | 12,151 |   |   | $ | (11,039 | ) |   | $ | 220,784 |   |
| Cost of sales                                                      |   |   | - |   |   |   | 182,972 |   |   |   | - |   |   |   | 11,624 |   |   |   | (11,231 | ) |   |   | 183,365 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                       |   |   | - |   |   |   | 36,700 |   |   |   | - |   |   |   | 527 |   |   |   | 192 |   |   |   | 37,419 |   |
| Selling, general and administrative expenses                       |   |   | - |   |   |   | 34,839 |   |   |   | - |   |   |   | 479 |   |   |   | - |   |   |   | 35,318 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income                                                   |   |   | - |   |   |   | 1,861 |   |   |   | - |   |   |   | 48 |   |   |   | 192 |   |   |   | 2,101 |   |
| Interest expense                                                   |   |   | 3,347 |   |   |   | 16,796 |   |   |   | - |   |   |   | - |   |   |   | (3,397 | ) |   |   | 16,746 |   |
| Interest income                                                    |   |   | - |   |   |   | (3,382 | ) |   |   | - |   |   |   | (50 | ) |   |   | 3,397 |   |   |   | (35 | ) |
| Loss (income) in equity investments                                |   |   | 11,629 |   |   |   | (1,028 | ) |   |   | - |   |   |   | - |   |   |   | (10,601 | ) |   |   | -  |   |
| Other loss                                                         |   |   | - |   |   |   | 1,105 |   |   |   | - |   |   |   | 614 |   |   |   | (96 | ) |   |   | 1,623 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations before income taxes                |   |   | (14,976 | ) |   |   | (11,630 | ) |   |   | - |   |   |   | (516 | ) |   |   | 10,889 |   |   |   | (16,233 | ) |
| Provision for income taxes                                         |   |   | - |   |   |   | 14 |   |   |   | - |   |   |   | 31 |   |   |   | - |   |   |   | 45 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from continuing operations                                    |   |   | (14,976 | ) |   |   | (11,644 | ) |   |   | - |   |   |   | (547 | ) |   |   | 10,889 |   |   |   | (16,278 | ) |
| Income from discontinued operations, net of income taxes           |   |   | - |   |   |   | 15 |   |   |   | 1,287 |   |   |   | - |   |   |   | - |   |   |   | 1,302 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                                                  |   | $ | (14,976 | ) |   | $ | (11,629 | ) |   | $ | 1,287 |   |   | $ | (547 | ) |   | $ | 10,889 |   |   | $ | (14,976 | ) |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                           |   |
|------------------------------------------------------------------------------------------|--------|
|                                                                                     |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)                       |   |
|                                                                                     |   |
| CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS                                          |   |
| FOR THE SIX MONTHS ENDED JULY 3, 2011                                                    |   |
| (unaudited)                                                                              |   |
| (dollars in thousands)                                                                   |   |
|                                                                                     |   |
|                                                                                     |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                                                     |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from operating activities:                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                                                                        |   | $ | (8,478 | ) |   | $ | (1,681 | ) |   | $ | - |   |   | $ | 2,276 |   |   | $ | (595 | ) |   | $ | (8,478 | ) |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                            |   |   | - |   |   |   | 24,114 |   |   |   | - |   |   |   | 2 |   |   |   | - |   |   |   | 24,116 |   |
| Other                                                                                    |   |   | - |   |   |   | 2,319 |   |   |   | - |   |   |   | (542 | ) |   |   | - |   |   |   | 1,777 |   |
| Change in assets and liabilities, net                                               |   |   | 17,536 |   |   |   | (12,710 | ) |   |   | 101 |   |   |   | 258 |   |   |   | 595 |   |   |   | 5,780 |   |
| Net cash provided by operating activities                                                |   |   | 9,058 |   |   |   | 12,042 |   |   |   | 101 |   |   |   | 1,994 |   |   |   | - |   |   |   | 23,195 |   |
| Cash flows from investing activities:                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Insurance proceeds from involuntary conversion of equipment                              |   |   | - |   |   |   | 1,374 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,374 |   |
| Additions to property, plant and equipment                                               |   |   | - |   |   |   | (9,390 | ) |   |   | - |   |   |   | (14 | ) |   |   | - |   |   |   | (9,404 | ) |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash used by investing activities                                                    |   |   | - |   |   |   | (8,016 | ) |   |   | - |   |   |   | (14 | ) |   |   | - |   |   |   | (8,030 | ) |
| Cash flows from financing activities:                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Payments of senior subordinated notes payable                                            |   |   | - |   |   |   | (17,491 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (17,491 | ) |
| Payments relating to capital lease obligations                                           |   |   | - |   |   |   | (28 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (28 | ) |
| Proceeds from new revolving line of credit                                               |   |   | - |   |   |   | 130,300 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 130,300 |   |
| Payments of new revolving line of credit                                                 |   |   | - |   |   |   | (119,600 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (119,600 | ) |
| Payments of State of Ohio loan                                                           |   |   | - |   |   |   | (601 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (601 | ) |
| Due to parent and affiliated companies, net                                              |   |   | (3,053 | ) |   |   | 5,452 |   |   |   | (101 | ) |   |   | (2,298 | ) |   |   | - |   |   |   | - |   |
| Proceeds from issuance of redeemable common stock                                        |   |   | 1,382 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,382 |   |
| Payments to redeem common stock                                                          |   |   | (7,349 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (7,349 | ) |
| Decrease in cash overdraft                                                          |   |   | - |   |   |   | (564 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (564 | ) |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash used by financing activities                                                    |   |   | (9,020 | ) |   |   | (2,532 | ) |   |   | (101 | ) |   |   | (2,298 | ) |   |   | - |   |   |   | (13,951 | ) |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect of foreign exchange rate changes on cash and cash equivalents                     |   |   | - |   |   |   | 14 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 14 |   |
| Change in cash and cash equivalents                                                      |   |   | 38 |   |   |   | 1,508 |   |   |   | - |   |   |   | (318 | ) |   |   | - |   |   |   | 1,228 |   |
| Cash and cash equivalents at beginning of period                                         |   |   | - |   |   |   | 3,399 |   |   |   | - |   |   |   | 373 |   |   |   | - |   |   |   | 3,772 |   |
| Cash and cash equivalents at end of period                                               |   | $ | 38 |   |   | $ | 4,907 |   |   | $ | - |   |   | $ | 55 |   |   | $ | - |   |   | $ | 5,000 |   |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                                  |   |
|-------------------------------------------------------------------------------------------------|--------|
|                                                                                            |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)                              |   |
|                                                                                            |   |
| CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS                                                 |   |
| FOR THE SIX MONTHS ENDED JULY 4, 2010                                                           |   |
| (unaudited)                                                                                     |   |
| (dollars in thousands)                                                                          |   |
|                                                                                            |   |
|                                                                                            |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                                                            |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Cash flows from operating activities:                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                                                                               |   | $ | (22,423 | ) |   | $ | (15,777 | ) |   | $ | 2,750 |   |   | $ | (88 | ) |   | $ | 13,115 |   |   | $ | (22,423 | ) |
| Adjustments to reconcile net (loss) income to net cash provided (used) by operating activities: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                                   |   |   | - |   |   |   | 24,711 |   |   |   | 1,726 |   |   |   | 3 |   |   |   | - |   |   |   | 26,440 |   |
| Other                                                                                           |   |   | - |   |   |   | 2,881 |   |   |   | - |   |   |   | 14 |   |   |   | - |   |   |   | 2,895 |   |
| Change in assets and liabilities, net                                                      |   |   | 50,565 |   |   |   |   (70,058 | ) |   |   | (2,834 | ) |   |   | (420 | ) |   |   | (13,115 | ) |   |   |   (35,862 | ) |
| Net cash provided (used) by operating activities                                                |   |   | 28,142 |   |   |   | (58,243 | ) |   |   | 1,642 |   |   |   | (491 | ) |   |   | - |   |   |   | (28,950 | ) |
| Cash flows from investing activities:                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sale of equipment                                                                 |   |   | - |   |   |   | 57 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 57 |   |
| Additions to property, plant and equipment                                                      |   |   | - |   |   |   | (6,234 | ) |   |   | (565 | ) |   |   | - |   |   |   | - |   |   |   | (6,799 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash used by investing activities                                                           |   |   | - |   |   |   | (6,177 | ) |   |   | (565 | ) |   |   | - |   |   |   | - |   |   |   | (6,742 | ) |
| Cash flows from financing activities:                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Payments of senior secured notes payable                                                        |   |   | - |   |   |   | (211,225 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (211,225 | ) |
| Proceeds from senior secured first lien notes payable                                           |   |   | - |   |   |   | 299,007 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 299,007 |   |
| Debt acquisition costs                                                                          |   |   | - |   |   |   | (10,807 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (10,807 | ) |
| Payments relating to capital lease obligations                                                  |   |   | - |   |   |   | (389 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (389 | ) |
| Proceeds from old revolving line of credit                                                      |   |   | - |   |   |   | 21,350 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 21,350 |   |
| Payments of old revolving line of credit                                                        |   |   | - |   |   |   | (109,575 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (109,575 | ) |
| Proceeds from new revolving line of credit                                                 |   |   |   - |   |   |   | 154,793 |   |   |   |   - |   |   |   |   - |   |   |   |   - |   |   |   | 154,793 |   |
| Payments of new revolving line of credit                                                        |   |   | - |   |   |   | (99,350 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (99,350 | ) |
| Payments of State of Ohio loans                                                                 |   |   | - |   |   |   | (570 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (570 | ) |
| Payments of secured financing                                                                   |   |   | - |   |   |   | (1,494 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,494 | ) |
| Due to parent and affiliated companies, net                                                     |   |   | (22,330 | ) |   |   | 22,668 |   |   |   | (1,078 | ) |   |   | 740 |   |   |   | - |   |   |   |   | - |
| Proceeds from issuance of redeemable common stock                                               |   |   | 1,924 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,924 |   |
| Payments to redeem common stock                                                            |   |   | (7,736 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (7,736 | ) |
| Decrease in cash overdraft                                                                 |   |   | - |   |   |   | (6,274 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (6,274 | ) |
| Net cash (used) provided by financing activities                                                |   |   | (28,142 | ) |   |   | 58,134 |   |   |   | (1,078 | ) |   |   | 740 |   |   |   | - |   |   |   | 29,654 |   |
|                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect of foreign exchange rate changes on cash and cash equivalents                            |   |   | - |   |   |   | (6 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (6 | ) |
| Change in cash and cash equivalents                                                             |   |   | - |   |   |   | (6,292 | ) |   |   | (1 | ) |   |   | 249 |   |   |   | - |   |   |   | (6,044 | ) |
| Cash and cash equivalents at beginning of period                                                |   |   | - |   |   |   | 9,161 |   |   |   | 1 |   |   |   | 801 |   |   |   | - |   |   |   | 9,963 |   |
| Cash and cash equivalents at end of period                                                      |   | $ | - |   |   | $ | 2,869 |   |   | $ | - |   |   | $ | 1,050 |   |   | $ | - |   |   | $ | 3,919 |   |

----

----

|                                                     |   | For the Quarter Ended |   |    |         |   |
|----------------------------------------------------------|--------|-----------------------|--------|---------|--------------|--------|
|                                                     |   | July 3,          |   |    | July 4, |   |   | Increase |   |
|                                                     |   | 2011                  |   |    | 2010         |   |   | (Decrease) |   |
|                                                     |   | (dollars in millions) |   |    |         |   |
|                                                     |   |                  |   |    |         |   |   |   |   |
| Net sales                                                |   | $                     | 216.6  |    |         | $      | 220.8 |   |   |   | -1.9 | % |
| Cost of sales                                            |   |                  | 174.2  |    |         |   | 183.4 |   |   |   | -5.0 | % |
|                                                     |   |                  |   |    |         |   |   |   |   |   |   |   |
| Gross profit                                             |   |                  | 42.4   |    |         |   | 37.4 |   |   |   | 13.4 | % |
|                                                     |   |                  |   |    |         |   |   |   |   |   |   |   |
| Selling, general and administrative expenses             |   |                  | 31.8   |    |         |   | 35.3 |   |   |   | -9.9 | % |
| Litigation settlement                                    |   |                  | (0.1   | )  |         |   | - |   |   |   |                         nm    |
|                                                     |   |                  |   |    |         |   |   |   |   |   |   |   |
| Operating income                                         |   |                  | 10.7   |    |         |   | 2.1 |   |   |   | 409.5 | % |
|                                                     |   |                  |   |    |         |   |   |   |   |   |   |   |
| Interest expense, net                                    |   |                  | 15.6   |    |         |   | 16.7 |   |   |   | -6.6 | % |
| Other non-operating (income) expense, net                |   |                  | (1.5   | )       |         |   | 1.7 |   |   | 188.2 | % |
|                                                     |   |                  |   |    |         |   |   |   |   |   |   |   |
| Loss from continuing operations before income taxes      |   |                  | (3.4   | )       |         |   | (16.3 | ) |   | 79.1 | % |
| Benefit for income taxes                                 |   |                  | (0.1   | )  |         |   | - |   |   |   | nm |   |
|                                                     |   |                  |   |    |         |   |   |   |   |   |   |   |
| Loss from continuing operations                          |   |                  | (3.3   | )       |         |   | (16.3 | ) |   | 79.8 | % |
| Income from discontinued operations, net of income taxes |   |                  | -      |    |         |   | 1.3 |   |   | -100.0 | % |
|  Net loss                                           |   | $                     | (3.3   | )       |         | $      | (15.0 | ) |   | 78.0 | % |
|  Comparison as a percentage of net sales            |   |                  |   |    |         |   |   |   |   |   |   |   |
| Cost of sales                                            |   |                  | 80.4   | %       |         |   | 83.1 | % |   |   | -2.7 | % |
| Gross margin                                             |   |                  | 19.6   | %       |         |   | 16.9 | % |   |   | 2.7 | % |
| Selling, general and administrative expenses             |   |                  | 14.7   | %       |         |   | 16.0 | % |   |   | -1.3 | % |
| Operating margin                                         |   |                  | 4.9    | %       |         |   | 0.9 | % |   |   | 4.0 | % |
| Loss from continuing operations before income taxes      |   |                  | -1.6   | %       |         |   | -7.4 | % |   |   | 5.8 | % |
| Loss from continuing operations                          |   |                  | -1.5   | %       |         |   | -7.4 | % |   |   | 5.9 | % |
| Income from discontinued operations, net of income taxes |   |                  | -      |    |         |   | 0.6 | % |   |   | -0.6 | % |
| Net loss                                                 |   |                  | -1.5   | %       |         |   | -6.8 | % |   |   | 5.3 | % |

----

|                                                     |   | For the Six Months Ended |   |    |         |   |
|----------------------------------------------------------|--------|--------------------------|--------|---------|--------------|--------|
|                                                     |   | July 3,             |   |    | July 4, |   |   | Increase |   |
|                                                     |   | 2011                     |   |    | 2010         |   |   | (Decrease) |   |
|                                                     |   | (dollars in millions)    |   |    |         |   |
|                                                     |   |                     |   |    |         |   |   |   |   |
| Net sales                                                |   | $                        | 434.6  |    |         | $      | 430.8 |   |   |   | 0.9 | % |
| Cost of sales                                            |   |                     | 345.3  |    |         |   | 353.7 |   |   |   | -2.4 | % |
|                                                     |   |                     |   |    |         |   |   |   |   |   |   |   |
| Gross profit                                             |   |                     | 89.3   |    |         |   | 77.1 |   |   |   | 15.8 | % |
|                                                     |   |                     |   |    |         |   |   |   |   |   |   |   |
| Selling, general and administrative expenses             |   |                     | 65.2   |    |         |   | 70.1 |   |   |   | -7.0 | % |
| Environmental expense insurance recovery                 |   |                     | -      |    |         |   | (8.2 | ) |   |   | -100.0% |
| Litigation settlement                                    |   |                     | 3.1    |    |         |   | - |   |   |   |                     nm |
|                                                     |   |                     |   |    |         |   |   |   |   |   |   |   |
| Operating income                                         |   |                     | 21.0   |    |         |   | 15.2 |   |   |   | 38.2 | % |
|                                                     |   |                     |   |    |         |   |   |   |   |   |   |   |
| Interest expense, net                                    |   |                     | 31.7   |    |         |   | 33.6 |   |   |   | -5.7 | % |
| Debt extinguishment expense, net                         |   |                     | -      |    |         |   | 5.5 |   |   | -100.0 | % |
| Other non-operating (income) expense, net                |   |                     | (2.4   | )       |         |   | 1.4 |   |   | 271.4 | % |
|                                                     |   |                     |   |    |         |   |   |   |   |   |   |   |
| Loss from continuing operations before income taxes      |   |                     | (8.3   | )       |         |   | (25.3 | ) |   | 67.2 | % |
| Provision for income taxes                               |   |                     | 0.2    |    |         |   | - |   |   |   |  nm |   |
|                                                     |   |                     |   |    |         |   |   |   |   |   |   |   |
| Loss from continuing operations                          |   |                     | (8.5   | )  |         |   | (25.3 | ) |   | 66.4 | % |
| Income from discontinued operations, net of income taxes |   |                     | -      |    |         |   | 2.9 |   |   | -100.0 | % |
|  Net loss                                           |   | $                        | (8.5   | )       |         | $      | (22.4 | ) |   | 62.1 | % |
|  Comparison as a percentage of net sales            |   |                     |   |    |         |   |   |   |   |   |   |   |
| Cost of sales                                            |   |                     | 79.5   | %       |         |   | 82.1 | % |   |   | -2.6 | % |
| Gross margin                                             |   |                     | 20.5   | %       |         |   | 17.9 | % |   |   | 2.6 | % |
| Selling, general and administrative expenses             |   |                     | 15.0   | %       |         |   | 16.3 | % |   |   | -1.3 | % |
| Operating margin                                         |   |                     | 4.8    | %       |         |   | 3.5 | % |   |   | 1.3 | % |
| Loss from continuing operations before income taxes      |   |                     | -1.9   | %       |         |   | -5.9 | % |   |   | 4.0 | % |
| Loss from continuing operations                          |   |                     | -1.9   | %       |         |   | -5.9 | % |   |   | 4.0 | % |
| Income from discontinued operations, net of income taxes |   |                     | -      |    |         |   | 0.7 | % |   |   | -0.7 | % |
| Net loss                                                 |   |                     | -1.9   | %       |         |   | -5.2 | % |   |   | 3.3 | % |

----

|                                                |   | For the Three                                                                                                                                                                                                                                                                                                                                       |    |   | For the Six                                                                                                                                                                                                                                                                                                                                                           |   |
|-----------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                |   | Months Ended                                                                                                                                                                                                                                                                                                                                        |    |   | Months Ended                                                                                                                                                                                                                                                                                                                                                          |   |
|                                                |   | July 3, 2011 v.                                                                                                                                                                                                                                                                                                                                     |    |   | July 3, 2011 v.                                                                                                                                                                                                                                                                                                                                                       |   |
|                                                |   | the Three Months                                                                                                                                                                                                                                                                                                                                    |    |   | the Six Months                                                                                                                                                                                                                                                                                                                                                        |   |
|                                                |   | Ended July 4, 2010                                                                                                                                                                                                                                                                                                                                  |    |   | Ended July 4, 2010                                                                                                                                                                                                                                                                                                                                                    |   |
|                                                |   |                                                                                                                                                                                                                                                                                                                                                |    |   |                                                                                                                                                                                                                                                                                                                                                                  |   |
| Favorable price and mix                             |   | $                                                    14.1                       |    |   | $                                                       27.7                       |   |
| Reduced costs                                       |   |                                                         2.2 |    |   |                                                            3.8 |   |
| Net inflation of raw material and utilities pricing |   |                                                       (6.5            | )  |   |                                                       (13.7                                  | )      |
| Lower shipment volumes                              |   |                                                        (2.6           | )  |   |                                                           (4.6           | )      |
|                                                |   | $                                                      7.2            |    |   | $                                                       13.2                       |   |

| • | Second quarter 2011 carbonless papers net sales totaled $116.7 million, a decrease of $11.3 million, or 8.8%, from prior year levels. Shipment volumes during second quarter 2011 were approximately 14% lower than the same period last year. The majority of this decline in shipment volumes occurred within the carbonless roll market across all market channels. The negative impact of lower shipment volumes was partially offset by the benefits realized from price increases initiated since 2010 in response to rapidly rising raw material costs. During the first six months of 2011, carbonless net sales totaled $236.0 million, a decrease of $16.6 million, or 6.6%, from prior year levels. On a year-to-date basis, 2011 carbonless shipment volumes are approximately 12% lower than last year. |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Second quarter 2011 carbonless papers operating income of $5.5 million increased $0.6 million compared to second quarter 2010. During the first six months of 2011, operating income of $15.0 million increased $1.9 million compared to the same 2010 period. As mentioned above, operating income for the first six months of 2011 was favorably impacted by the benefit of price increases initiated in response to the ongoing negative impact of rapidly rising raw material costs. Also, second quarter operating income includes $3.5 million of spending associated with the annual maintenance shutdown at the Roaring Spring, Pennsylvania paper mill. This compares to $2.7 million spent during the second quarter 2010 shutdown. |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| • | Second quarter 2011 thermal papers net sales totaled $91.7 million, an increase of $4.6 million, or 5.3%, over the same prior year period. First half 2011 thermal papers net sales totaled $180.7 million, an increase of $13.3 million, or 7.9%, when compared to last year. During 2011, to improve profitability, Appleton has been managing volumes and price of the point of sale receipt paper (“POS”) portion of the thermal business rather than selling higher shipment volumes at lower margins. Second quarter 2011 shipment volumes, as well as first half 2011 shipment volumes of POS, were approximately 13% and 8% lower than the year before, respectively. Quarter-on-quarter, shipment volumes of tag, label and entertainment (“TLE”) were approximately 10% higher. On a year-to-date basis, TLE shipment volumes were 9% higher. The thermal papers segment also benefited from favorable pricing realized in response to escalating raw material costs. |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | The thermal papers segment recorded operating income of $4.7 million for second quarter 2011. This compared to a second quarter 2010 operating loss of $2.0 million. The thermal papers segment recorded operating income of $7.2 million for the first half of 2011 compared to an operating loss of $4.1 million for the first six months of 2010. Though 2011 operating income includes higher raw materials and utility costs, the increase in net sales and improved product mix offset the negative impact of these items. |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Encapsys second quarter 2011 net sales of $14.0 million were $2.1 million, or 17.9%, higher than second quarter 2010. Second quarter 2011 volumes were approximately 23% higher than the prior year quarter. During the first half of 2011, Encapsys net sales totaled $29.5 million which was $6.1 million, or 26.3%, higher than the same period of 2010. First half 2011 volumes were approximately 30% higher than the same period last year. |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | As a result of higher shipment volumes, improved manufacturing performance and lower SG&A expenses, Encapsys second quarter 2011 operating income was $3.2 million compared to $1.6 million during second quarter 2010. Year-to-date 2011 operating income was $7.2 million compared to $3.1 million for the first six months of 2010. |
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| • | Unallocated corporate charges and business development costs increased $0.4 million in second quarter 2011 compared to second quarter 2010. Year-to-date 2011 expense was $11.8 million higher than 2010 due to the recording of a $3.1 million litigation settlement during first half 2011 and an $8.2 million Fox River insurance recovery during first half 2010. |
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|      4.1  | Second Lien Collateral Agreement, dated as of September 30, 2009, among Appleton Papers Inc., Paperweight Development Corp. and each other Grantor identified therein in favor of U.S. Bank National Association, as Collateral Agent.                                                                                                                                                                                                                  |
|-----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|    10.1                  | Fox River AWA Environmental Indemnity Agreement by and among Arjo Wiggins Appleton p.l.c., Appleton Papers Inc., Paperweight Development Corp. and New Appleton LLC, dated as of November 9, 2001.                                                                                                                                                                                                                                                 |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|    10.2                  | Amended and Restated Relationship Agreement by and among Arjo Wiggins Appleton Ltd. (f/k/a Arjo Wiggins Appleton p.l.c.), Arjo Wiggins (Bermuda) Holdings Limited, Paperweight Development Corp., PDC Capital Corporation and Arjo Wiggins Appleton (Bermuda) Limited, dated as of June 11, 2004.                                                                                                                                                  |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|    10.3                  | Second Amendment to Credit Agreement dated as of June 5, 2007, dated as of September 30, 2009, among Appleton Papers Inc., as the U.S. Borrower, Paperweight Development Corp. as Holdings, certain subsidiaries of Holdings, as Guarantors, Bank of America, N.A. as Administrative Agent, swing line lender and L/C issuer, and Lenders as identified on the signature pages thereof.                                                                 |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|    10.4                  | Collateral Agreement made by Appleton Papers Canada Ltd. in favor of U.S. Bank National Association, as collateral agent, dated as of February 8, 2010.                                                                                                                                                                                                                                                                                                 |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|    10.5                  | Credit Agreement, dated as of February 8, 2010, among Appleton Papers Inc., as borrower, Paperweight Development Corp., as holdings, Fifth Third Bank, as administrative agent, swing line lender and an L/C issuer, the other lenders party thereto and Fifth Third Bank, as sole lead arranger and sole book manager.                                                                                                                                 |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|    10.6             | Guarantee and Collateral Agreement made by Paperweight Development Corp., Appleton Papers Inc. and certain of its  subsidiaries, in favor of Fifth Third Bank, as administrative agent, dated as of February 8, 2010.                                                                                                                                                                                                                         |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     10.7                 | Guarantee and Collateral Agreement made by Appleton Papers Canada Ltd. in favor of Fifth Third Bank, as administrative agent, dated as of February 8, 2010.                                                                                                                                                                                                                                                                                             |
|                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     10.8                 | Stock Purchase Agreement between Appleton Papers Inc. and NEX Performance Films Inc. dated as of July 2, 2010.    Incorporated by reference to Exhibit 2.1 to the Registrant’s current report on Form 8-K/A filed August 9, 2010 (exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K, but a copy will be furnished supplementally to the Securities and Exchange Commission upon request.) |

|   |                                                                                                                                                                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1   | Certification of Mark R. Richards, Chairman, President and Chief Executive Officer of Appleton Papers Inc., pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934 as amended.                               |
|   |                                                                                                                                                                                                                    |
| 31.2   | Certification of Thomas J. Ferree, Senior Vice President Finance, Chief Financial Officer and Treasurer of Appleton Papers Inc., pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934 as amended.          |
|   |                                                                                                                                                                                                                    |
| 31.3   | Certification of Mark R. Richards, Chairman, President and Chief Executive Officer of Paperweight Development Corp., pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934 as amended.                      |
|   |                                                                                                                                                                                                                    |
| 31.4   | Certification of Thomas J. Ferree, Senior Vice President Finance, Chief Financial Officer and Treasurer of Paperweight Development Corp., pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934 as amended. |
|   |                                                                                                                                                                                                                    |
| 32.1   | Certification of Mark R. Richards, Chairman, President and Chief Executive Officer of Appleton Papers Inc., pursuant to 18 U.S.C. Section 1350.                                                                         |
|   |                                                                                                                                                                                                                    |
| 32.2   | Certification of Thomas J. Ferree, Senior Vice President Finance, Chief Financial Officer and Treasurer of Appleton Papers Inc., pursuant to 18 U.S.C. Section 1350.                                                    |
|   |                                                                                                                                                                                                                    |
| 32.3   | Certification of Mark R. Richards, Chairman, President and Chief Executive Officer of Paperweight Development Corp., pursuant to 18 U.S.C. Section 1350.                                                                |
|   |                                                                                                                                                                                                                    |
| 32.4   | Certification of Thomas J. Ferree, Senior Vice President Finance, Chief Financial Officer and Treasurer of Paperweight Development Corp., pursuant to 18 U.S.C. Section 1350.                                           |

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|                                                      |                                                                                                                                              |
|-----------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                      | APPLETON PAPERS INC.            (Registrant)                                          |
|                                                      |                                                                                                                                              |
|   Date: August 11, 2011     |  /s/ Thomas J. Ferree                                                                                                                        |
|                                                      | Thomas J. Ferree                                                                                                                                  |
|                                                      | Senior Vice President Finance, Chief Financial Officer and Treasurer (Signing on behalf of the Registrant and as the Principal Financial Officer) |

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|                                                      |                                                                                                                                                                                      |
|-----------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                      | PAPERWEIGHT DEVELOPMENT CORP.                        (Registrant) |
|                                                      |                                                                                                                                                                                      |
|   Date: August 11, 2011     |  /s/ Thomas J. Ferree                                                                                                                                                                |
|                                                      | Thomas J. Ferree                                                                                                                                                                          |
|                                                      | Senior Vice President Finance, Chief Financial Officer and Treasurer (Signing on behalf of the Registrant and as the Principal Financial Officer)                                         |

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