----

----

| 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) Income | 6          |
|         |                                                                                                                                             |       |
|         | e) Notes to Condensed Consolidated Financial Statements                                                                                          | 7          |
|         |                                                                                                                                             |       |
| Item 2  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                      | 35         |
|         |                                                                                                                                             |       |
| Item 3  | Quantitative and Qualitative Disclosures About Market Risk                                                                                       | 44         |
|         |                                                                                                                                             |       |
| Item 4T | Controls and Procedures                                                                                                                          | 44         |
|         |                                                                                                                                             |       |
| PART II | OTHER INFORMATION                                                                                                                                |       |
|         |                                                                                                                                             |       |
| Item 1       | Legal Proceedings                                                                                                                                | 44         |
|         |                                                                                                                                             |       |
| Item 1A | Risk Factors                                                                                                                                     | 45         |
|         |                                                                                                                                             |       |
| Item 6  | Exhibits                                                                                                                                         | 46         |
|         |                                                                                                                                             |       |
| Signatures   |                                                                                                                                             | 47         |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                                                                                                                              |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                        |   |
| CONDENSED CONSOLIDATED BALANCE SHEETS                                                                                                                                                       |   |
| (unaudited)                                                                                                                                                                                 |   |
| (dollars in thousands, except share data)                                                                                                                                                   |   |
|                                                                                                                                                                                        |   | October 3, 2010 |   |   | January 2, 2010 |   |
| ASSETS                                                                                                                                                                                      |   |   |   |   |   |   |
| Current assets                                                                                                                                                                              |   |   |   |   |   |   |
|   Cash and cash equivalents                                                                                                                                                       |   | $ | 9,871 |   |   | $ | 9,963 |   |
|   Accounts receivable, less allowance for doubtful accounts of $1,681 and $1,356, respectively                                                                                    |   |   | 99,099 |   |   |   | 81,485 |   |
|   Inventories                                                                                                                                                                     |   |   | 113,728 |   |   |   | 112,346 |   |
|   Other current assets                                                                                                                                                            |   |   | 49,015 |   |   |   | 54,758 |   |
|   Assets of discontinued operations                                                                                                                                               |   |   | - |   |   |   | 17,772 |   |
|        Total current assets                                                                                                                              |   |   | 271,713 |   |   |   | 276,324 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Property, plant and equipment, net of accumulated depreciation of  $464,641 and $431,225, respectively                                                                            |   |   | 360,541 |   |   |   | 385,129 |   |
| Intangible assets, net                                                                                                                                                                      |   |   | 49,032 |   |   |   | 50,780 |   |
| Environmental indemnification receivable                                                                                                                                                    |   |   | - |   |   |   | 28,600 |   |
| Other assets                                                                                                                                                                                |   |   | 24,352 |   |   |   | 16,815 |   |
| Assets of discontinued operations                                                                                                                                                           |   |   | - |   |   |   | 40,332 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
|        Total assets                                                                                                                                      |   | $ | 705,638 |   |   | $ | 797,980 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| LIABILITIES, REDEEMABLE COMMON STOCK, ACCUMULATED DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS                                                                                |   |   |   |   |   |   |   |   |
| Current liabilities                                                                                                                                                                         |   |   |   |   |   |   |   |   |
|   Current portion of long-term debt                                                                                                                                               |   | $ | 21,280 |   |   | $ | 5,955 |   |
|   Accounts payable                                                                                                                                                                |   |   | 52,263 |   |   |   | 55,384 |   |
|   Accrued interest                                                                                                                                                                |   |   | 16,666 |   |   |   | 5,218 |   |
|   Other accrued liabilities                                                                                                                                                       |   |   | 74,010 |   |   |   | 91,363 |   |
|   Liabilities of discontinued operations                                                                                                                                          |   |   | - |   |   |   | 5,733 |   |
|        Total current liabilities                                                                                                                         |   |   | 164,219 |   |   |   | 163,653 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Long-term debt                                                                                                                                                                              |   |   | 525,838 |   |   |   | 544,113 |   |
| Postretirement benefits other than pension                                                                                                                                                  |   |   | 50,576 |   |   |   | 50,609 |   |
| Accrued pension                                                                                                                                                                             |   |   | 89,437 |   |   |   | 101,312 |   |
| Environmental liability                                                                                                                                                                     |   |   | - |   |   |   | 28,600 |   |
| Other long-term liabilities                                                                                                                                                                 |   |   | 6,083 |   |   |   | 9,087 |   |
| Commitments and contingencies (Note 13)                                                                                                                                                     |   |   | - |   |   |   | - |   |
| Redeemable common stock, $0.01 par value,  shares authorized: 30,000,000,  shares issued and outstanding:  9,784,425 and  10,097,099, respectively  |   |   | 112,624 |   |   |   | 122,087 |   |
| Accumulated deficit                                                                                                                                                                         |   |   | (143,501 | ) |   |   | (121,764 | ) |
| Accumulated other comprehensive loss                                                                                                                                                        |   |   | (99,638 | ) |   |   | (99,717 | ) |
|        Total liabilities, redeemable common stock, accumulated       deficit and accumulated other comprehensive loss |   | $ | 705,638 |   |   | $ | 797,980 |   |

----

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

|                                                                                        |   | Three Months EndedOctober 3, 2010 |    |   | Three MonthsEndedOctober 4, 2009 |   |    | Nine MonthsEndedOctober 3, 2010 |   |   | Nine MonthsEndedOctober 4, 2009 |   |
|---------------------------------------------------------------------------------------------|--------|----------------------------------------|---------|--------|---------------------------------------|--------|---------|--------------------------------------|--------|--------|--------------------------------------|--------|
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |
| Net sales                                                                                   |   | $                                      | 214,870 |   |                                  | $      | 195,749 |                                 |   | $      | 645,662                              |   |   | $ | 573,831 |   |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
| Cost of sales                                                                               |   |                                   | 169,535 |   |                                  |   | 153,838 |                                 |   |   | 523,861                              |   |   |   | 447,565 |   |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
|   Gross profit                                                                    |   |                                   | 45,335  |   |                                  |   | 41,911  |                                 |   |   | 121,801                              |   |   |   | 126,266 |   |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
| Selling, general and administrative expenses                                                |   |                                   | 34,644  |   |                                  |   | 35,059  |                                 |   |   | 104,775                              |   |   |   | 95,179 |   |
| Environmental expense insurance recovery                                                    |   |                                   | -       |   |                                  |   | -       |                                 |   |   | (8,181                               | )      |   |   | - |   |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
| Operating income                                                                            |   |                                   | 10,691  |   |                                  |   | 6,852   |                                 |   |   | 25,207                               |   |   |   | 31,087 |   |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
| Other expense (income)                                                                      |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
|   Interest expense                                                                |   |                                   | 16,302  |   |                                  |   | 13,987  |                                 |   |   | 49,970                               |   |   |   | 38,209 |   |
|   Debt extinguishment (income) expense, net                                       |   |                                   | -       |   |                                  |   | (37,366 | )                                    |   |   | 5,532                                |   |   |   | (42,746 | ) |
|   Interest income                                                                 |   |                                   | (30     | )      |                                  |   | (10     | )                                    |   |   | (75                                  | )      |   |   | (47 | ) |
|   Foreign exchange (gain) loss                                                    |   |                                   | (1,028  | )      |                                  |   | (403    | )                                    |   |   | 332                                  |   |   |   | (1,005 | ) |
|   Other income                                                                    |   |                                   | -       |   |                                  |   | -       |                                 |   |   | -                                    |   |   |   | (820 | ) |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
| (Loss) income before income taxes                                                           |   |                                   | (4,553  | )      |                                  |   | 30,644  |                                 |   |   | (30,552                              | )      |   |   | 37,496 |   |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
| Provision for income taxes                                                                  |   |                                   | 136     |   |                                  |   | 231     |                                 |   |   | 90                                   |   |   |   | 133 |   |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
| (Loss) income from continuing operations                                                    |   |                                   | (4,689  | )      |                                  |   | 30,413  |                                 |   |   | (30,642                              | )      |   |   | 37,363 |   |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
| Discontinued operations                                                                     |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
|    Income from discontinued operations, net   of income taxes |   |                                   | 814     |   |                                  |   | 1,030   |                                 |   |   | 3,668                                |   |   |   | 2,487 |   |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
| Net (loss) income                                                                           |   | $                                      | (3,875  | )      |                                  | $      | 31,443  |                                 |   | $      | (26,974                              | )      |   | $ | 39,850 |   |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |
|                                                                                        |   |                                   |    |   |                                  |   |    |                                 |   |   |                                 |   |   |   |   |   |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                                  |   |
|-------------------------------------------------------------------------------------------------|--------|
|                                                                                            |   |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                 |   |
| FOR THE NINE MONTHS ENDED                                                                       |   |
| (unaudited)                                                                                     |   |
| (dollars in thousands)                                                                          |   |
|                                                                                            |   | October 3,2010 |   |   | October 4,2009 |   |
| Cash flows from operating activities:                                                           |   |   |   |   |   |   |
| Net (loss) income                                                                               |   | $ | (26,974 | ) |   | $ | 39,850 |   |
| Adjustments to reconcile net (loss) income to net cash (used) provided by operating activities: |   |   |   |   |   |   |   |   |
| Depreciation                                                                                    |   |   | 36,754 |   |   |   | 43,597 |   |
| Amortization of intangible assets                                                               |   |   | 2,325 |   |   |   | 2,840 |   |
| Amortization of financing fees                                                                  |   |   | 3,023 |   |   |   | 2,100 |   |
| Amortization of bond discount                                                                   |   |   | 523 |   |   |   | - |   |
| Employer 401(k) non-cash matching contributions                                                 |   |   | 2,422 |   |   |   | 2,979 |   |
| Foreign exchange loss (gain)                                                                    |   |   | 314 |   |   |   | (1,247) |   |
|         Gain on sale of Films                           |   |   |  (2,560 | )  |   |   |  - |   |
| Net gain from involuntary conversion of equipment                                               |   |   | (638 | )  |   |   | - |   |
| Loss on disposals of equipment                                                                  |   |   | 229 |   |   |   | 175 |   |
| Accretion of capital lease obligation                                                           |   |   | 31 |   |   |   | 55 |   |
| Loss (gain) on debt extinguishment                                                              |   |   | 5,437 |   |   |   | (42,746 | ) |
| Fox River insurance recoveries                                                                  |   |   | (8,248 | ) |   |   | - |   |
| (Increase)/decrease in assets and increase/(decrease) in liabilities:                           |   |   |   |   |   |   |   |   |
| Accounts receivable                                                                             |   |   | (19,762 | ) |   |   | (13,956 | ) |
| Inventories                                                                                     |   |   | (2,507 | ) |   |   | 12,390 |   |
| Other current assets                                                                            |   |   | (5,662 | ) |   |   | (749 | ) |
| Accounts payable and other accrued liabilities                                                  |   |   | 7,907 |   |   |   | 11,439 |   |
| Restructuring reserve                                                                           |   |   | - |   |   |   | (2,115 | ) |
| Accrued pension                                                                                 |   |   | (9,511 | ) |   |   | (5,970 | ) |
| Other, net                                                                                      |   |   | (5,770 | ) |   |   | (4,775 | ) |
| Net cash (used) provided by operating activities                                           |   |   | (22,667 | ) |   |   | 43,867 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                           |   |   |   |   |   |   |   |   |
|         Proceeds from sale of equipment                      |   |   | 81 |   |   |   | 27 |   |
|         Proceeds from sale of Films                          |   |   |  56,000 |   |   |   |  - |   |
|         Insurance proceeds from involuntary conversion       |   |   | 1,029  |   |   |   |  - |   |
|         Additions to property, plant and equipment           |   |   | (11,511 | )  |   |   | (16,051 | )  |
| Net cash provided (used) by investing activities                                                |   |   | 45,599 |   |   |   | (16,024 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                           |   |   |   |   |   |   |   |   |
| Payments of senior secured notes payable                                                        |   |   | (211,225 | ) |   |   | (1,687 | ) |
| Payments of senior subordinated secured notes payable                                           |   |   | - |   |   |   | (1,687 | ) |
| Proceeds from senior secured first lien notes payable                                           |   |   | 299,007 |   |   |   | - |   |
| Debt acquisition costs                                                                          |   |   | (10,708 | ) |   |   | (8,282 | ) |
| Payments relating to capital lease obligations                                                  |   |   | (588 | ) |   |   | (548 | ) |
| Proceeds from old revolving line of credit                                                      |   |   | 21,350 |   |   |   | 185,341 |   |
| Payments of old revolving line of credit                                                        |   |   | (109,575 | ) |   |   | (175,450 | ) |
| Proceeds from new revolving line of credit                                                      |   |   | 229,193 |   |   |   | - |   |
| Payments of new revolving line of credit                                                        |   |   | (229,193 | ) |   |   | - |   |
| Proceeds from State of Ohio loan                                                                |   |   | - |   |   |   | 3,000 |   |
| Payments of State of Ohio loan                                                                  |   |   | (857 | ) |   |   | (677 | ) |
| Payments of secured financing                                                                   |   |   | (2,173 | ) |   |   | (1,715 | ) |
| Proceeds from issuance of redeemable common stock                                               |   |   | 1,924 |   |   |   | 2,075 |   |
| Payments to redeem common stock                                                                 |   |   | (7,740 | ) |   |   | (12,586 | ) |
| Decrease in cash overdraft                                                                      |   |   | (2,457 | ) |   |   | (16,510 | ) |
| Net cash used by financing activities                                                      |   |   | (23,042 | ) |   |   | (28,726 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
| Effect of foreign exchange rate changes on cash and cash equivalents                            |   |   | 18 |   |   |   | 242 |   |
| Change in cash and cash equivalents                                                             |   |   | (92 | ) |   |   | (641 | ) |
| Cash and cash equivalents at beginning of period                                                |   |   | 9,963 |   |   |   | 4,180 |   |
| Cash and cash equivalents at end of period                                                      |   | $ | 9,871 |   |   | $ | 3,539 |   |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES            |   |
|-----------------------------------------------------------|--------|
|                                                      |   |
| CONSOLIDATED STATEMENTS OF REDEEMABLE COMMON STOCK,       |   |
| ACCUMULATED DEFICIT, ACCUMULATED OTHER COMPREHENSIVE LOSS |   |
| AND COMPREHENSIVE (LOSS) INCOME                           |   |
| FOR THE NINE MONTHS ENDED                                 |   |
| (unaudited)                                               |   |
| (dollars in thousands, except share data)                 |   |
|                                                      |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                      |   | Redeemable Common Stock |   |   |   |   |   |   |   |   |   |   |
|                                                      |   | SharesOutstanding |   |   | Amount |   |   | AccumulatedDeficit |   |   | AccumulatedOtherComprehensiveLoss |   |   | Comprehensive(Loss) Income |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 2, 2010                                  |   |   | 10,097,099 |   |   | $ | 122,087 |   |   | $ | (121,764 | ) |   | $ | (99,717 | ) |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive loss:                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Net loss                                      |   |   |  - |   |   |   |  - |   |   |   | (26,974 | ) |   |   |  - |   |   | $ |  (26,974 | ) |
|   Changes in retiree plans, net                 |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   | 894 |   |   |   | 894 |   |
|   Realized and unrealized loss on derivatives   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (815 | ) |   |   | (815 | ) |
|     Total comprehensive loss          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | (26,895 | ) |
| Issuance of redeemable common stock                       |   |   | 292,094 |   |   |   | 3,514 |   |   |   | - |   |   |   | - |   |   |   |   |   |
| Redemption of redeemable common stock                     |   |   | (604,768 | ) |   |   | (7,740 | ) |   |   | - |   |   |   | - |   |   |   |   |   |
| Accretion of redeemable common stock                      |   |   | - |   |   |   | (5,237 | ) |   |   | 5,237 |   |   |   | - |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, October 3, 2010                                  |   |   | 9,784,425 |   |   | $ | (112,624 | ) |   | $ | (143,501 | ) |   | $ | (99,638 | ) |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 3, 2009                                  |   |   | 10,643,894 |   |   | $ | 147,874 |   |   | $ | (159,650 | ) |   | $ | (95,169 | ) |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income:                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Net income                                    |   |   | - |   |   |   | - |   |   |   | 39,850 |   |   |   | - |   |   | $ | 39,850 |   |
|   Changes in retiree plans, net                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (862 | ) |   |   | (862 | ) |
|   Realized and unrealized gain on derivatives   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 120 |   |   |   | 120 |   |
|     Total comprehensive income        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 39,108 |   |
| Issuance of redeemable common stock                       |   |   | 213,730 |   |   |   | 4,032 |   |   |   | - |   |   |   | - |   |   |   |   |   |
| Redemption of redeemable common stock                     |   |   | (614,146 | ) |   |   | (12,586 | ) |   |   | - |   |   |   | - |   |   |   |   |   |
| Accretion of redeemable common stock                      |   |   | - |   |   |   | (5,667 | ) |   |   | 5,667 |   |   |   | - |   |   |   |   |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, October 4, 2009                                  |   |   | 10,243,478 |   |   | $ | 133,653 |   |   | $ | (114,133 | ) |   | $ | (95,911 | ) |   |   |   |   |

----

----

|                                            |   | For the Three   |   |   | For the Three   |   |   | For the Nine    |   |   | For the Nine    |   |
|-------------------------------------------------|--------|-----------------|--------|--------|-----------------|--------|--------|-----------------|--------|--------|-----------------|--------|
|                                            |   | Months Ended    |   |   | Months Ended    |   |   | Months Ended    |   |   | Months Ended    |   |
|                                            |   | October 3, 2010 |   |   | October 4, 2009 |   |   | October 3, 2010 |   |   | October 4, 2009 |   |
|                                            |   |            |   |   |            |   |   |            |   |   |            |   |
| Net sales                                       |   | $               | 4,317  |   |            | $      | 26,598 |            |   | $      | 51,581          |   |   | $ | 74,477 |   |
|                                            |   |            |   |   |            |   |   |            |   |   |            |   |   |   |   |   |
| Operating income before  income taxes |   | $               | 813    |   |            | $      | 1,039  |            |   | $      | 3,682           |   |   | $ | 2,517 |   |

----

|                                                         |   | October 3, 2010 |          |   | January 2, 2010 |   |
|--------------------------------------------------------------|--------|-----------------|---------------|--------|---------------------------|--------|
| Beginning of year balance                                    |   |            |          |   |                      |   |   |   |
| Goodwill                                                |   | $               | 48,896        |   |                      | $      | 50,246 |   |
| Accumulated impairment losses                                |   |            | (45,986       | )      |                      |   | (39,645 | ) |
|                                                         |   |            | 2,910         |   |                      |   | 10,601 |   |
| Impairment losses                                       |   |            |  -       |   |                      |   | (6,341 | ) |
| Goodwill related to discontinued operations of C&H  |   |            | -             |   |                      |   |  (1,350 | ) |
| Goodwill related to discontinued operations of APC and NEX   |   |            | (2,910        | )      |                      |   |  (2,910 | ) |
| End of year balance                                     |   |            |          |   |                      |   |   |   |
| Goodwill                                                |   |            | 45,986        |   |                      |   |  45,986 |   |
| Accumulated impairment losses                           |   |            |  (45,986 | )      |                      |   |  (45,986 | ) |
|                                                         |   | $               | -             |   |                      | $      |  - |   |

|                                                                             |   | As of October 3, 2010 |   |   | As of January 2, 2010    |   |
|----------------------------------------------------------------------------------|--------|-----------------------|--------|--------|--------------------------|--------|
|                                                                             |   | Gross Carrying Amount |   |   | Accumulated Amortization |   |   | Gross Carrying Amount |   |   | Accumulated Amortization |   |
| Amortizable intangible assets:                                                   |   |                  |   |   |                     |   |   |   |   |   |   |   |
|     Trademarks                                               |   | $                     | 44,665 |   |                     | $      | 21,555 |   |   | $ | 44,665 |   |   | $ | 19,981 |   |
|      Patents                                            |   |                  | 14,013 |   |                     |   | 14,013 |   |   |   | 14,013 |   |   |   | 14,013 |   |
|      Customer relationships                             |   |                  | 5,365  |   |                     |   | 2,308 |   |   |   | 5,365 |   |   |   | 2,134 |   |
|             Subtotal |   |                  | 64,043 |   |                     | $      | 37,876 |   |   |   | 64,043 |   |   | $ | 36,128 |   |
| Unamortizable intangible assets:                                                 |   |                  |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
|    Trademarks                                                     |   |                  | 22,865 |   |                     |   |   |   |   |   | 22,865 |   |   |   |   |   |
|             Total    |   | $                     | 86,908 |   |                     |   |   |   |   | $ | 86,908 |   |   |   |   |   |

----

|                                        |   | October 3, 2010 |    |   | January 2, 2010 |   |
|---------------------------------------------|--------|-----------------|---------|--------|----------------------|--------|
|                                        |   |            |    |   |                 |   |
| Finished goods                              |   | $               | 61,251  |   |                 | $      | 65,575 |   |
| Raw materials, work in process and supplies |   |            | 64,378  |   |                 |   | 59,019 |   |
|                                        |   |            | 125,629 |   |                 |   | 124,594 |   |
| Inventory reserve                           |   |            | (3,420  | )      |                 |   | (3,767 | ) |
|                                        |   |            | 122,209 |   |                 |   | 120,827 |   |
| Last-in, first-out ("LIFO") reserve         |   |            | (8,481  | )      |                 |   | (8,481 | ) |
|                                        |   | $               | 113,728 |   |                 | $      | 112,346 |   |

|                                  |   | October 3, 2010 |     |   | January 2, 2010 |   |
|---------------------------------------|--------|-----------------|----------|--------|----------------------|--------|
| Land and improvements                 |   | $               | 8,617    |   |                 | $      | 8,617 |   |
| Buildings and improvements            |   |            | 130,598  |   |                 |   | 129,758 |   |
| Machinery and equipment               |   |            | 639,281  |   |                 |   | 634,502 |   |
| Software                              |   |            | 32,051   |   |                 |   | 31,779 |   |
| Capital leases                        |   |            | 4,929    |   |                 |   | 4,764 |   |
| Construction in progress              |   |            | 9,706    |   |                 |   | 6,934 |   |
|                                  |   |            | 825,182  |   |                 |   | 816,354 |   |
| Accumulated depreciation/amortization |   |            | (464,641 | )      |                 |   | (431,225 | ) |
|                                  |   | $               | 360,541  |   |                 | $      | 385,129 |   |

|                                |   | For the Three   |   |   | For the Three   |   |   | For the Nine    |   |   | For the Nine    |   |
|-------------------------------------|--------|-----------------|--------|--------|-----------------|--------|--------|-----------------|--------|--------|-----------------|--------|
|                                |   | Months Ended    |   |   | Months Ended    |   |   | Months Ended    |   |   | Months Ended    |   |
| Depreciation Expense                |   | October 3, 2010 |   |   | October 4, 2009 |   |   | October 3, 2010 |   |   | October 4, 2009 |   |
|                                |   |            |   |   |            |   |   |            |   |   |            |   |
| Cost of sales                       |   | $               | 10,499 |   |            | $      | 12,045 |            |   | $      | 30,885          |   |   | $ | 35,443 |   |
| Selling, general and                |   |            |   |   |            |   |   |            |   |   |            |   |   |   |   |   |
|   administrative expenses |   |            | 1,579  |   |            |   | 1,622  |            |   |   | 4,742           |   |   |   | 4,868 |   |

|   |   | $ |    12,078 |   |   | $ | 13,667 |   |   | $ | 35,627 |   |   | $ | 40,311 |   |
|--------|--------|---|--------------------------|--------|--------|---|--------|--------|--------|---|--------|--------|--------|---|--------|--------|

----

|                                       |   | October 3, 2010 |   |   | January 2, 2010 |   |
|--------------------------------------------|--------|-----------------|--------|--------|----------------------|--------|
| Environmental indemnification receivable   |   | $               | 29,480 |   |                 | $      | 47,100 |   |
| Alternative fuels tax credit receivable    |   |            | -      |   |                 |   | 925 |   |
| Environmental expense insurance recovery   |   |            | 4,216  |   |                 |   | - |   |
| Receivable from sale of Films              |   |            | 2,000  |   |                 |   | - |   |
| Insurance recovery from coal silo accident |   |            | 7,196  |   |                 |   | - |   |
| Other                                      |   |            | 6,123  |   |                 |   | 6,733 |   |
|                                       |   | $               | 49,015 |   |                 | $      | 54,758 |   |

|                                     |   | October 3, 2010 |   |   | January 2, 2010 |   |
|------------------------------------------|--------|-----------------|--------|--------|----------------------|--------|
| Deferred debt issuance costs             |   | $               | 15,034 |   |                 | $      | 12,786 |   |
| Environmental expense insurance recovery |   |            | 4,032  |   |                 |   | - |   |
| Other                                    |   |            | 5,286  |   |                 |   | 4,029 |   |
|                                     |   | $               | 24,352 |   |                 | $      | 16,815 |   |

|                                       |   | October 3, 2010 |   |   | January 2, 2010 |   |
|--------------------------------------------|--------|-----------------|--------|--------|----------------------|--------|
| Compensation                               |   | $               | 10,582 |   |                 | $      | 10,137 |   |
| Trade discounts                            |   |            | 16,286 |   |                 |   | 16,472 |   |
| Workers’ compensation                |   |            | 3,533  |   |                 |   | 4,460 |   |
| Accrued insurance                          |   |            | 1,873  |   |                 |   | 1,864 |   |
| Other accrued taxes                        |   |            | 1,460  |   |                 |   | 1,519 |   |
| Postretirement benefits other than pension |   |            | 3,609  |   |                 |   | 3,609 |   |
| Fox River Liabilities                      |   |            | 29,480 |   |                 |   | 47,100 |   |
| Other                                      |   |            | 7,187  |   |                 |   | 6,202 |   |
|                                       |   | $               | 74,010 |   |                 | $      | 91,363 |   |

----

----

| Pension Benefits                               |   | For the ThreeMonths EndedOctober 3, 2010 |   |   | For the ThreeMonths EndedOctober 4, 2009 |   |   | For the NineMonths EndedOctober 3, 2010 |   |   | For the NineMonths EndedOctober 4, 2009 |   |
|------------------------------------------------|--------|-----------------------------------------------|--------|--------|-----------------------------------------------|--------|--------|----------------------------------------------|--------|--------|----------------------------------------------|--------|
| Net periodic benefit cost                      |   |                                          |   |   |                                          |   |   |                                         |   |   |                                         |   |
|   Service cost                       |   | $                                             | 1,516  |   |                                          | $      | 1,458  |                                         |   | $      | 4,549                                        |   |   | $ | 4,374 |   |
|   Interest cost                      |   |                                          | 4,900  |   |                                          |   | 4,909  |                                         |   |   | 14,701                                       |   |   |   | 14,726 |   |
|   Expected return on plan assets     |   |                                          | (5,318 | )      |                                          |   | (5,200 | )                                            |   |   | (15,954                                      | )      |   |   | (15,599 | ) |
|   Amortization of prior service cost |   |                                          | 134    |   |                                          |   | 134    |                                         |   |   | 404                                          |   |   |   | 404 |   |
|   Amortization of actuarial loss     |   |                                          | 654    |   |                                          |   | 123    |                                         |   |   | 1,961                                        |   |   |   | 368 |   |
| Net periodic benefit cost                      |   | $                                             | 1,886  |   |                                          | $      | 1,424  |                                         |   | $      | 5,661                                        |   |   | $ | 4,273 |   |

| Other Postretirement Benefits                    |   | For the ThreeMonths EndedOctober 3, 2010 |   |   | For the ThreeMonths EndedOctober 4, 2009 |   |   | For the NineMonths EndedOctober 3, 2010 |   |   | For the NineMonths EndedOctober 4, 2009 |   |
|--------------------------------------------------|--------|----------------------------------------------------|--------|--------|----------------------------------------------------|--------|--------|---------------------------------------------------|--------|--------|---------------------------------------------------|--------|
| Net periodic benefit cost                        |   |                                               |   |   |                                               |   |   |                                              |   |   |                                              |   |
|   Service cost                         |   | $                                                  | 197    |   |                                               | $      | 186    |                                              |   | $      | 589                                               |   |   | $ | 556 |   |
|   Interest cost                        |   |                                               | 760    |   |                                               |   | 767    |                                              |   |   | 2,280                                             |   |   |   | 2,301 |   |
|   Amortization of prior service credit |   |                                               | (538   | )      |                                               |   | (545   | )                                                 |   |   | (1,614                                            | )      |   |   | (1,635 | ) |
|   Amortization of actuarial loss       |   |                                               | 48     |   |                                               |   | -      |                                              |   |   | 144                                               |   |   |   | - |   |
| Net periodic benefit cost                        |   | $                                                  | 467    |   |                                               | $      | 408    |                                              |   | $      | 1,399                                             |   |   | $ | 1,222 |   |

----

----

----

|   | • | total remediation costs of $690 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; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | costs to settle NRD claims against Appleton and NCR, estimated at $20 million or less, based on the IGP’s settlement of other NRD claims; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 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      |   | October 3, 2010 |   |   | January 2, 2010 |   |
|---------------------------------------|-----------------------------|--------|-----------------|--------|--------|-----------------|--------|
| Foreign currency exchange derivatives | Accounts receivable         |   | $               | -      |   |            | $      | 308 |   |
| Foreign currency exchange derivatives | Other current liabilities   |   |            | (358   | )      |            |   | (35 | ) |
| Natural gas fixed swap                | Other current liabilities   |   |            | (112   | )      |            |   | - |   |
| Natural gas fixed swap                | Other long-term liabilities |   |            | (43    | )      |            |   | - |   |
|                                  |                        |   |            |   |   |            |   |   |   |
| Not Designated as a Hedge             |                        |   |            |   |   |            |   |   |   |
| Interest rate swap contract           | Other long-term liabilities |   |            | -      |   |            |   | (3,813 | ) |

| Designated as a Hedge                                                                       | Statement of Operations Location |   | For the ThreeMonths EndedOctober 3, 2010 |   |   | For the ThreeMonths EndedOctober 4, 2009 |   |   | For the NineMonths EndedOctober 3, 2010 |   |   | For the NineMonths EndedOctober 4, 2009 |   |
|---------------------------------------------------------------------------------------------|----------------------------------|--------|------------------------------------------|--------|--------|------------------------------------------|--------|--------|-----------------------------------------|--------|--------|-----------------------------------------|--------|
| Foreign currency exchange derivatives                                                       | Net sales                        |   | $                                        | 65     |   |                                     | $      | 339    |                                    |   | $      | (32                                     | )      |   | $ | 479 |   |
|                                                                                        |                             |   |                                     |   |   |                                     |   |   |                                    |   |   |                                    |   |   |   |   |   |
| Losses recognized in accumulated other comprehensive loss as presented on the balance sheet |                             |   |                                     |   |   |                                     |   |   |                                    |   |   | 569                                     |   |   |   | 185 |   |
|                                                                                        |                             |   |                                     |   |   |                                     |   |   |                                    |   |   |                                    |   |   |   |   |   |
| Not Designated as a Hedge                                                                   |                             |   |                                     |   |   |                                     |   |   |                                    |   |   |                                    |   |   |   |   |   |
| Interest rate swap contract                                                                 | Interest expense                 |   |                                     | -      |   |                                     |   | 527    |                                    |   |   | 961                                     |   |   |   | (389) |   |

----

|                                                                                                                                                                                                                   |   | October 3, 2010 |    |   | January 2, 2010 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|---------|--------|----------------------|--------|
| The senior secured variable rate notes payable were paid off, in full, and terminated on February 8, 2010. At January 2, 2010 the notes were at 6.625%, $542 due quarterly with $204,184 due June 2013. |   | $               | -       |   |                 | $      | 211,225 |   |
| Secured term note payable at 14.25%, approximately $200 due monthly with $6,831 due December 2013                                                                                                                      |   |            | 17,521  |   |                 |   | 19,695 |   |
| At January 2, 2010 the old revolving credit facility was at approximately 6.7%. On February 8, 2010, it was repaid in full and terminated.                                                                             |   |            | -       |   |                 |   | 88,225 |   |
| Unsecured variable rate industrial development bonds, 0.5% average interest rate at October 3, 2010, $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                                                                                                                |   |            | 7,325   |   |                 |   | 7,965 |   |
| State of Ohio loan at 1% until July 2011, then 3% until May 2019, approximately $30 due monthly and final payment due May 2019                                                                          |   |            | 2,639   |   |                 |   | 2,856 |   |
| Senior notes payable at 8.125%, due June 2011                                                                                                                                                                     |   |            | 17,491  |   |                 |   | 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 |   |                 |   | - |   |
| Unamortized discount on 10.5% senior secured first lien notes payable, due June 2015                                                                                                                                   |   |            | (5,469  | )      |                 |   | - |   |
| Second lien notes payable at 11.25%, due December 2015                                                                                                                                                                 |   |            | 161,766 |   |                 |   | 161,766 |   |
|                                                                                                                                                                                                                   |   |            | 547,118 |   |                 |   | 550,068 |   |
| Less obligations due within one year                                                                                                                                                                                   |   |            | (21,280 | )      |                 |   | (5,955 | ) |
|                                                                                                                                                                                                                   |   | $               | 525,838 |   |                 | $      | 544,113 |   |

----

----

----

|                                    |   | October 3, 2010 |    |   | January 2, 2010 |    |
|-----------------------------------------|--------|----------------------|---------|--------|---------------------------|---------|
|                                    |   | Carrying             |    |   | Fair                      |    |   | Carrying |   |   | Fair |   |
| Financial Instruments                   |   | Amount               |    |   | Value                     |    |   | Amount |   |   | Value |   |
| Senior subordinated notes payable       |   | $                    | 32,195  |   |                      | $       | 15,293 |   |   | $ | 32,195 |   |   | $ | 19,317 |   |
| Senior notes payable                    |   |                 | 17,491  |   |                      |    | 16,966 |   |   |   | 17,491 |   |   |   | 17,491 |   |
| Senior secured first lien notes payable |   | 299,531              |    |   |                      | 280,810 |   |   |   | - |   |   |   | - |   |
| Second lien notes payable               |   | 161,766              |    |   |                      | 116,472 |   |   |   | 161,766 |   |   |   | 161,766 |   |
| Senior credit facility                  |   | -                    |    |   |                      | -       |   |   |   | 211,225 |   |   |   | 211,225 |   |
| Secured term note payable               |   | 17,521               |    |   |                      | 18,732  |   |   |   | 19,695 |   |   |   | 19,695 |   |
| Revolving credit facility               | -      | -                    | 88,225  | 88,225 |
| State of Ohio loans                     | 9,964  | 10,618               | 10,821  | 10,941 |
| Industrial development bonds            |   |                 | 8,650   |   |                      |    | 8,650 |   |   |   | 8,650 |   |   |   | 8,650 |   |
|                                    |   | $                    | 547,118 |   |                      | $       | 467,541 |   |   | $ | 550,068 |   |   | $ | 537,310 |   |
|                                    |   |                 |    |   |                      |    |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap derivative           |   | $                    | -       |   |                      | $       | - |   |   | $ | 3,813 |   |   | $ | 3,813 |   |

----

|                          |   | For the ThreeMonths EndedOctober 3, 2010 |   |   | For the ThreeMonths EndedOctober 4, 2009 |    | For the NineMonths EndedOctober 3, 2010 |          |   | For the NineMonths EndedOctober 4, 2009 |   |
|-------------------------------|--------|-----------------------------------------------|--------|--------|-----------------------------------------------|---------|----------------------------------------------|---------------|--------|----------------------------------------------|--------|
| Net sales                     |   |                                          |   |   |                                          |    |                                         |          |   |                                         |   |
| Carbonless papers             | $      | 117,090                                       |   | $      | 119,953                                       |    | $                                            | 369,715       |   |                                         | $      | 355,854 |   |
| Thermal papers                |   | 89,052                                        |   |   | 71,139                                        |    |                                         | 256,428       |   |                                         |   | 206,624 |   |
|                          |   | 206,142                                       |   |   | 191,092                                       |    |                                         | 626,143       |   |                                         |   | 562,478 |   |
|                          |   |                                          |   |   |                                          |    |                                         |          |   |                                         |   |   |   |
| Encapsys                 |   |   14,163                                 |   |   |   10,591                                 |    |                                         |   37,518 |   |                                         |   |   29,310 |   |
| Intersegment (A)              |   | (5,435                                        | )      |   | (5,934                                        | )  |                                         | (17,999       | )      |                                         |   | (17,957 | ) |
| Total                         | $      | 214,870                                       |   | $      | 195,749                                       |    | $                                            | 645,662       |   |                                         | $      | 573,831 |   |
|                          |   |                                          |   |   |                                          |    |                                         |          |   |                                         |   |   |   |
| Operating income (loss)       |   |                                          |   |   |                                          |    |                                         |          |   |                                         |   |   |   |
| Carbonless papers             | $      | 9,056                                         |   | $      | 14,078                                        |    | $                                            | 21,781        |   |                                         | $      | 45,953 |   |
| Thermal papers                |   | 520                                           |   |   | (1,923                                        | )       |                                         | (3,841        | )      |                                         |   | (7,666 | ) |
|                          |   | 9,576                                         |   |   | 12,155                                        |    |                                         | 17,940        |   |                                         |   | 38,287 |   |
|  Encapsys                |   | 2,986                                         |   |   | 740                                           |    |                                         |   6,133  |   |                                         |   |   1,910 |   |
| Unallocated corporate charges |   | (1,353                                        | )      |   | (4,975                                        | )  |                                         | 3,879         |   |                                         |   | (6,372 | ) |
| Intersegment (A)              |   | (518                                          | )      |   | (1,068                                        | )  |                                         | (2,745        | )      |                                         |   | (2,738 | ) |
| Total                         | $      | 10,691                                        |   | $      | 6,852                                         |    | $                                            | 25,207        |   |                                         | $      | 31,087 |   |
|                          |   |                                          |   |   |                                          |    |                                         |          |   |                                         |   |   |   |
| Depreciation and amortization |   |                                          |   |   |                                          |    |                                         |          |   |                                         |   |   |   |
| Carbonless papers             | $      | 6,879                                         |   | $      | 8,233                                         |    | $                                            | 20,618        |   |                                         | $      | 24,723 |   |
| Thermal papers                |   | 4,964                                         |   |   | 5,013                                         |    |                                         | 14,833        |   |                                         |   | 15,017 |   |
|                          |   | 11,843                                        |   |   | 13,246                                        |    |                                         | 35,451        |   |                                         |   | 39,740 |   |
|                          |   |                                          |   |   |                                          |    |                                         |          |   |                                         |   |   |   |
| Encapsys                 |   |  751                                     |   |   |   922                                    |    |                                         |   1,760  |   |                                         |   |   2,078 |   |
| Unallocated corporate charges |   | 68                                            |   |   | 160                                           |    |                                         | 165           |   |                                         |   | 242 |   |
| Total                         | $      | 12,662                                        |   | $      | 14,328                                        |    | $                                            | 37,376        |   |                                         | $      | 42,060 |   |

----

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                                                                               |
|----------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                         |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)                                                                           |
|                                                                                                                                         |
| CONDENSED CONSOLIDATING BALANCE SHEET                                                                                                        |
| OCTOBER 3, 2010                                                                                                                              |
| (unaudited)                                                                                                                                  |
| (dollars in thousands)                                                                                                                       |
|                                                                                                                                         |
|                                                                                                                                         |   | ParentGuarantor |   |   | Issuer |   |   | SubsidiaryGuarantors |   |   | Non-Guarantor Subsidiary |   |   | Eliminations |   |   | Consolidated |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ASSETS                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current assets                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Cash and cash equivalents                                                                                                       |   | $ | - |   |   | $ | 8,656 |   |   | $ | - |   |   | $ | 1,215 |   |   | $ | - |   |   | $ | 9,871 |
|    Accounts receivable, net                                                                                                        |   |   | - |   |   |   | 92,624 |   |   |   | 102 |   |   |   | 6,373 |   |   |   | - |   |   |   | 99,099 |
|    Inventories                                                                                                                     |   |   | - |   |   |   | 112,190 |   |   |   | - |   |   |   | 1,538 |   |   |   | - |   |   |   | 113,728 |
|    Other current assets                                                                                                       |   |   | 29,480 |   |   |   | 19,469 |   |   |   | - |   |   |   | 66 |   |   |   | - |   |   |   | 49,015 |
|       Total current assets                                                                                     |   |   | 29,480 |   |   |   | 232,939 |   |   |   | 102 |   |   |   | 9,192 |   |   |   | - |   |   |   | 271,713 |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Property, plant and equipment, net                                                                                              |   |   | - |   |   |   | 360,537 |   |   |   | - |   |   |   | 4 |   |   |   | - |   |   |   | 360,541 |
|    Investment in subsidiaries                                                                                                      |   |   | 162,865 |   |   |   | 12,959 |   |   |   | - |   |   |   | - |   |   |   | (175,824) |   |   |   | - |
|    Other assets                                                                                                               |   |   | 12 |   |   |   | 73,255 |   |   |   | - |   |   |   | 117 |   |   |   | - |   |   |   | 73,384 |
|        Total assets                                                                                            |   | $ | 192,357 |   |   | $ | 679,690 |   |   | $ | 102 |   |   | $ | 9,313 |   |   | $ | (175,824) |   |   | $ | 705,638 |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES, REDEEMABLE COMMON STOCK, ACCUMULATED DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Current portion of long-term debt                                                                                               |   | $ | - |   |   | $ | 21,280 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 21,280 |
|    Accounts payable                                                                                                                |   |   | - |   |   |   | 52,177 |   |   |   | - |   |   |   | 86 |   |   |   | - |   |   |   | 52,263 |
|    Due to (from) parent and affiliated companies                                                                                   |   |   | 322,872 |   |   |   | (316,765 | ) |   |   | 102 |   |   |   | (6,209 | ) |   |   | - |   |   |   | - |
|    Other accrued liabilities                                                                                                       |   |   | - |   |   |   | 88,387 |   |   |   | - |   |   |   | 2,289 |   |   |   | - |   |   |   | 90,676 |
|        Total current liabilities                                                                               |   |   | 322,872 |   |   |   | (154,921 | ) |   |   | 102 |   |   |   | (3,834 | ) |   |   | - |   |   |   | 164,219 |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term debt                                                                                                                               |   |   | - |   |   |   | 525,838 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 525,838 |
| Other long-term liabilities                                                                                                                  |   |   | - |   |   |   | 145,908 |   |   |   | - |   |   |   | 188 |   |   |   | - |   |   |   | 146,096 |
| Redeemable common stock, accumulated deficit and accumulated other comprehensive loss                                                        |   |   | (130,515) |   |   |   | 162,865 |   |   |   | - |   |   |   | 12,959 |   |   |   | (175,824) |   |   |   | (130,515) |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total liabilities, redeemable common stock, accumulated deficit and accumulated other comprehensive loss |   | $ | 192,357 |   |   | $ | 679,690 |   |   | $ | 102 |   |   | $ | 9,313 |   |   | $ | (175,824) |   |   | $ | 705,638 |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                                                                               |
|----------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                         |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)                                                                           |
|                                                                                                                                         |
| CONDENSED CONSOLIDATING BALANCE SHEET                                                                                                        |
|                                                                                                                                         |
| JANUARY 2, 2010                                                                                                                              |
|                                                                                                                                         |
| (dollars in thousands)                                                                                                                       |
|                                                                                                                                         |
|                                                                                                                                         |   | ParentGuarantor |   |   | Issuer |   |   | SubsidiaryGuarantors |   |   | Non-Guarantor Subsidiary |   |   | Eliminations |   |   | Consolidated |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ASSETS                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current assets                                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Cash and cash equivalents                                                                                                       |   | $ | - |   |   | $ | 9,161 |   |   | $ | 1 |   |   | $ | 801 |   |   | $ | - |   |   | $ | 9,963 |
|    Accounts receivable, net                                                                                                        |   |   | - |   |   |   | 76,248 |   |   |   | - |   |   |   | 5,237 |   |   |   | - |   |   |   | 81,485 |
|    Inventories                                                                                                                     |   |   | - |   |   |   | 110,174 |   |   |   | - |   |   |   | 2,172 |   |   |   | - |   |   |   | 112,346 |
|    Other current assets                                                                                                       |   |   | 47,100 |   |   |   | 7,518 |   |   |   | - |   |   |   | 140 |   |   |   | - |   |   |   | 54,758 |
|    Assets of discontinued operations                                                                                          |   |   | - |   |   |   | - |   |   |   | 17,772 |   |   |   | - |   |   |   | - |   |   |   | 17,772 |
|       Total current assets                                                                                     |   |   | 47,100 |   |   |   | 203,101 |   |   |   | 17,773 |   |   |   | 8,350 |   |   |   | - |   |   |   | 276,324 |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Property, plant and equipment, net                                                                                              |   |   | - |   |   |   | 385,120 |   |   |   | - |   |   |   | 9 |   |   |   | - |   |   |   | 385,129 |
|    Investment in subsidiaries                                                                                                      |   |   | 179,787 |   |   |   | 96,505 |   |   |   | - |   |   |   | - |   |   |   | (276,292) |   |   |   | - |
|    Other assets                                                                                                               |   |   | 28,612 |   |   |   | 67,430 |   |   |   | - |   |   |   | 153 |   |   |   | - |   |   |   | 96,195 |
|    Assets of discontinued operations                                                                                          |   |   |   - |   |   |   | - |   |   |   | 40,332 |   |   |   | - |   |   |   | - |   |   |   | 40,332 |
|        Total assets                                                                                            |   | $ | 255,499 |   |   | $ | 752,156 |   |   | $ | 58,105 |   |   | $ | 8,512 |   |   | $ | (276,292) |   |   | $ | 797,980 |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES, REDEEMABLE COMMON STOCK, ACCUMULATED DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Current portion of long-term debt                                                                                               |   | $ | - |   |   | $ | 5,955 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 5,955 |
|    Accounts payable                                                                                                                |   |   | - |   |   |   | 55,280 |   |   |   | - |   |   |   | 104 |   |   |   | - |   |   |   | 55,384 |
|    Due to (from) parent and affiliated companies                                                                                   |   |   | 354,893 |   |   |   | (316,974 | ) |   |   | (31,823 | ) |   |   | (6,096 | ) |   |   | - |   |   |   | - |
|    Other accrued liabilities                                                                                                       |   |   | - |   |   |   | 94,485 |   |   |   | - |   |   |   | 2,096 |   |   |   | - |   |   |   | 96,581 |
|    Liabilities of discontinued operations                                                                                     |   |   | - |   |   |   |   - |   |   |   | 5,733 |   |   |   | - |   |   |   | - |   |   |   | 5,733 |
|        Total current liabilities                                                                               |   |   | 354,893 |   |   |   | (161,254 | ) |   |   | (26,090 | ) |   |   | (3,896 | ) |   |   | - |   |   |   | 163,653 |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term debt                                                                                                                               |   |   | - |   |   |   | 544,113 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 544,113 |
| Other long-term liabilities                                                                                                                  |   |   | - |   |   |   | 189,510 |   |   |   | - |   |   |   | 98 |   |   |   | - |   |   |   | 189,608 |
| Redeemable common stock, accumulated deficit and accumulated other comprehensive loss                                                        |   |   | (99,394 | ) |   |   | 179,787 |   |   |   | 84,195 |   |   |   | 12,310 |   |   |   | (276,292) |   |   |   | (99,394) |
|                                                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total liabilities, redeemable common stock, accumulated deficit and accumulated other comprehensive loss |   | $ | 255,499 |   |   | $ | 752,156 |   |   | $ | 58,105 |   |   | $ | 8,512 |   |   | $ | (276,292) |   |   | $ | 797,980 |

----

|                                                               |   |
|--------------------------------------------------------------------|--------|
| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                     |   |
|                                                               |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) |   |
|                                                               |   |
| CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS                    |   |
| FOR THE NINE MONTHS ENDED OCTOBER 3, 2010                          |   |
| (unaudited)                                                        |   |
| (dollars in thousands)                                             |   |
|                                                               |   |
|                                                               |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                               |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Net sales                                                          |   | $ | - |   |   | $ | 643,474 |   |   | $ | - |   |   | $ | 35,119 |   |   | $ | (32,931 | ) |   | $ | 645,662  |   |
| Cost of sales                                                      |   |   | - |   |   |   | 523,745 |   |   |   | - |   |   |   | 33,638 |   |   |   | (33,522 | ) |   |   | 523,861  |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                       |   |   | - |   |   |   | 119,729 |   |   |   | - |   |   |   | 1,481 |   |   |   | 591 |   |   |   | 121,801  |   |
| Selling, general and administrative expenses                       |   |   | - |   |   |   | 103,392 |   |   |   | - |   |   |   | 1,383 |   |   |   | - |   |   |   | 104,775  |   |
| Environmental expense insurance recovery                           |   |   | - |   |   |   | (8,181 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (8,181) |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income                                                   |   |   | - |   |   |   | 24,518 |   |   |   | - |   |   |   | 98 |   |   |   | 591 |   |   |   | 25,207  |   |
| Interest expense                                                   |   |   | 9,973 |   |   |   | 50,327 |   |   |   | - |   |   |   | - |   |   |   | (10,330 | ) |   |   | 49,970  |   |
| Debt extinguishment expense, net                                   |   |   | - |   |   |   | 5,532 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,532  |   |
| Interest income                                                    |   |   | - |   |   |   | (10,048 | ) |   |   | - |   |   |   | (357 | )  |   |   | 10,330 |   |   |   | (75) |   |
| Loss in equity investments                                         |   |   | 17,001 |   |   |   | 24,611 |   |   |   | - |   |   |   | - |   |   |   | (41,612 | ) |   |   | - |   |
| Other expense (income)                                             |   |   | - |   |   |   | 558 |   |   |   | - |   |   |   | (281 | ) |   |   | 55 |   |   |   | 332  |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income before income taxes                                  |   |   | (26,974 | )  |   |   | (46,462 | ) |   |   | - |   |   |   | 736 |   |   |   | 42,148 |   |   |   | (30,552) |   |
| Provision for income taxes                                         |   |   | - |   |   |   |                            4 |   |   |   | - |   |   |   | 86 |   |   |   | - |   |   |   | 90  |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income from continuing operations                           |   |   | (26,974 | )  |   |   | (46,466 | ) |   |   | - |   |   |   | 650 |   |   |   | 42,148 |   |   |   | (30,642) |   |
| Income (loss) from discontinued operations, net of income taxes    |   |   | - |   |   |   | 29,465 |   |   |   | (25,797 | ) |   |   | - |   |   |   | - |   |   |   | 3,668  |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                                                  |   | $ | (26,974 | )  |   | $ | (17,001 | ) |   | $ | (25,797 | ) |   | $ | 650 |   |   | $ | 42,148 |   |   | $ | (26,974) |   |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                     |   |
|--------------------------------------------------------------------|--------|
|                                                               |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) |   |
|                                                               |   |
| CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS                    |   |
| FOR THE NINE MONTHS ENDED OCTOBER 4, 2009                          |   |
| (unaudited)                                                        |   |
| (dollars in thousands)                                             |   |
|                                                               |   |
|                                                               |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                               |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Net sales                                                          |   | $ | - |   |   | $ | 572,605 |   |   | $ | - |   |   | $ | 33,428 |   |   | $ | (32,202 | ) |   | $ | 573,831 |   |
| Cost of sales                                                      |   |   | - |   |   |   | 447,303 |   |   |   | - |   |   |   | 32,761 |   |   |   | (32,499 | ) |   |   | 447,565 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                       |   |   | - |   |   |   | 125,302 |   |   |   | - |   |   |   | 667 |   |   |   | 297 |   |   |   | 126,266 |   |
| Selling, general and administrative expenses                       |   |   | - |   |   |   | 94,045 |   |   |   | - |   |   |   | 1,134 |   |   |   | - |   |   |   | 95,179 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income (loss)                                            |   |   | - |   |   |   | 31,257 |   |   |   | - |   |   |   | (467 | )  |   |   | 297 |   |   |   | 31,087 |   |
| Interest expense                                                   |   |   | 9,378 |   |   |   | 38,209 |   |   |   | 25 |   |   |   | - |   |   |   | (9,403 | ) |   |   | 38,209 |   |
| Debt extinguishment income, net                                    |   |   | - |   |   |   | (42,746 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (42,746 | ) |
| Interest income                                                    |   |   | - |   |   |   | (9,423 | ) |   |   | (25 | ) |   |   | (2 | )  |   |   | 9,403 |   |   |   | (47 | ) |
| Income in equity investments                                       |   |   | (49,228 | ) |   |   | (2,913 | ) |   |   | - |   |   |   | - |   |   |   | 52,141 |   |   |   | -  |   |
| Other income                                                       |   |   | - |   |   |   | (699 | ) |   |   | - |   |   |   | (1,254 | )  |   |   | 128 |   |   |   | (1,825 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income before income taxes                                         |   |   | 39,850 |   |   |   | 48,829 |   |   |   | - |   |   |   |           789 |    |   |   | (51,972 | ) |   |   | 37,496 |   |
| Provision (benefit) for income taxes                               |   |   | - |   |   |   | 311 |   |   |   | - |   |   |   | (178 | )  |   |   | - |   |   |   | 133 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income from continuing operations                                  |   |   | 39,850 |   |   |   | 48,518 |   |   |   | - |   |   |   |             967 |   |   |   | (51,972 | ) |   |   | 37,363 |   |
| Income from discontinued operations, net of income taxes           |   |   | - |   |   |   | 710 |   |   |   | 1,777 |   |   |   | - |   |   |   | - |   |   |   | 2,487 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                         |   | $ | 39,850 |   |   | $ | 49,228 |   |   | $ | 1,777 |   |   | $ |             967 |   |   | $ | (51,972) |   |   | $ | 39,850 |   |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                     |   |
|--------------------------------------------------------------------|--------|
|                                                               |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) |   |
|                                                               |   |
| CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS                    |   |
| FOR THE THREE MONTHS ENDED OCTOBER 3, 2010                         |   |
| (unaudited)                                                        |   |
| (dollars in thousands)                                             |   |
|                                                               |   |
|                                                               |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                               |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Net sales                                                          |   | $ | - |   |   | $ | 213,786 |   |   | $ | - |   |   | $ | 11,628 |   |   | $ | (10,544 | ) |   | $ | 214,870 |   |
| Cost of sales                                                      |   |   | - |   |   |   | 169,684 |   |   |   | - |   |   |   | 10,681 |   |   |   | (10,830 | ) |   |   | 169,535 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                       |   |   | - |   |   |   | 44,102 |   |   |   | - |   |   |   | 947 |   |   |   | 286 |   |   |   | 45,335 |   |
| Selling, general and administrative expenses                       |   |   | - |   |   |   | 34,180 |   |   |   | - |   |   |   | 464 |   |   |   | - |   |   |   | 34,644 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income                                                   |   |   | - |   |   |   | 9,922 |   |   |   | - |   |   |   | 483 |   |   |   | 286 |   |   |   | 10,691 |   |
| Interest expense                                                   |   |   | 3,327 |   |   |   | 16,359 |   |   |   | - |   |   |   | - |   |   |   | (3,384 | ) |   |   | 16,302 |   |
| Interest income                                                    |   |   | - |   |   |   | (3,357 | ) |   |   | - |   |   |   | (57 | ) |   |   | 3,384 |   |   |   | (30 | ) |
| Loss in equity investments                                         |   |   | 548 |   |   |   | 27,564 |   |   |   | - |   |   |   | - |   |   |   | (28,112 | ) |   |   | - |   |
| Other income                                                       |   |   | - |   |   |   | (695 | ) |   |   | - |   |   |   | (374 | ) |   |   | 41 |   |   |   | (1,028 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income before income taxes                                  |   |   | (3,875 | ) |   |   | (29,949 | ) |   |   | - |   |   |   | 914 |   |   |   | 28,357 |   |   |   | (4,553 | ) |
| (Benefit) provision for income taxes                               |   |   | - |   |   |   | (40 | ) |   |   | - |   |   |   | 176 |   |   |   | - |   |   |   | 136 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income from continuing operations                           |   |   | (3,875 | ) |   |   | (29,909 | ) |   |   | - |   |   |   | 738 |   |   |   | 28,357 |   |   |   | (4,689 | ) |
| Income (loss) from discontinued operations, net of income taxes    |   |   | - |   |   |   | 29,361 |   |   |   | (28,547 | ) |   |   | - |   |   |   | - |   |   |   | 814 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                                                  |   | $ | (3,875 | ) |   | $ | (548 | ) |   | $ | (28,547 | ) |   | $ | 738 |   |   | $ | 28,357 |   |   | $ | (3,875 | ) |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                     |   |
|--------------------------------------------------------------------|--------|
|                                                               |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) |   |
|                                                               |   |
| CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS                    |   |
| FOR THE THREE MONTHS ENDED OCTOBER 4, 2009                         |   |
| (unaudited)                                                        |   |
| (dollars in thousands)                                             |   |
|                                                               |   |
|                                                               |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                               |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Net sales                                                          |   | $ | - |   |   | $ | 194,564 |   |   | $ | - |   |   | $ | 11,428 |   |   | $ | (10,243 | ) |   | $ | 195,749 |   |
| Cost of sales                                                      |   |   | - |   |   |   | 153,486 |   |   |   | - |   |   |   | 10,799 |   |   |   | (10,447 | ) |   |   | 153,838 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                       |   |   | - |   |   |   | 41,078 |   |   |   | - |   |   |   | 629 |   |   |   | 204 |   |   |   | 41,911 |   |
| Selling, general and administrative expenses                       |   |   | - |   |   |   | 34,664 |   |   |   | - |   |   |   | 395 |   |   |   | - |   |   |   | 35,059 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income                                                   |   |   | - |   |   |   | 6,414 |   |   |   | - |   |   |   | 234 |   |   |   | 204 |   |   |   | 6,852 |   |
| Interest expense                                                   |   |   | 3,194 |   |   |   | 13,987 |   |   |   | 8 |   |   |   | - |   |   |   | (3,202 | ) |   |   | 13,987 |   |
| Debt extinguishment income, net                                    |   |   | - |   |   |   | (37,366 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (37,366 | ) |
| Interest income                                                    |   |   | - |   |   |   | (3,203 | ) |   |   | (8 | ) |   |   | (1 | ) |   |   | 3,202 |   |   |   | (10 | ) |
| Income in equity investments                                       |   |   | (34,637 | ) |   |   | (1,591 | ) |   |   | - |   |   |   | - |   |   |   | 36,228 |   |   |   | -  |   |
| Other expense (income)                                             |   |   | - |   |   |   | 160 |   |   |   | - |   |   |   | (769 | ) |   |   | 206 |   |   |   | (403 | ) |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income before income taxes                                         |   |   | 31,443 |   |   |   | 34,427 |   |   |   | - |   |   |   | 1,004 |   |   |   | (36,230 | ) |   |   | 30,644 |   |
| Provision for income taxes                                         |   |   | - |   |   |   | 151 |   |   |   | - |   |   |   | 80 |   |   |   | - |   |   |   | 231 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income from continuing operations                                  |   |   | 31,443 |   |   |   | 34,276 |   |   |   | - |   |   |   | 924 |   |   |   | (36,230 | ) |   |   | 30,413 |   |
| Income from discontinued operations, net of income taxes           |   |   | - |   |   |   | 361 |   |   |   | 669 |   |   |   | - |   |   |   | - |   |   |   | 1,030 |   |
|                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                         |   | $ | 31,443 |   |   | $ | 34,637 |   |   | $ | 669 |   |   | $ | 924 |   |   | $ | (36,230 | ) |   | $ | 31,443 |   |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                                  |   |
|-------------------------------------------------------------------------------------------------|--------|
|                                                                                            |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)                              |   |
|                                                                                            |   |
| CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS                                                 |   |
| FOR THE NINE MONTHS ENDED OCTOBER 3, 2010                                                       |   |
| (unaudited)                                                                                     |   |
| (dollars in thousands)                                                                          |   |
|                                                                                            |   |
|                                                                                            |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                                                            |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
|                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from operating activities:                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                                                                               |   | $ | (26,974 | ) |   | $ | (17,001 | ) |   | $ | (25,797 | ) |   | $ | 650 |   |   | $ | 42,148 |   |   | $ | (26,974 | ) |
| Adjustments to reconcile net (loss) income to net cash provided (used) by operating activities: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                                   |   |   | - |   |   |   | 37,349 |   |   |   | 1,726 |   |   |   | 4 |   |   |   | - |   |   |   | 39,079 |   |
| Other                                                                                           |   |   | - |   |   |   | 814 |   |   |   | - |   |   |   | (281 | ) |   |   | - |   |   |   | 533 |   |
| Change in assets and liabilities, net                                                      |   |   | 64,811 |   |   |   |   (50,857 | ) |   |   | (7,265 | )  |   |   | 154 |   |   |   | (42,148 | ) |   |   |   (35,305 | ) |
| Net cash provided (used) by operating activities                                                |   |   | 37,837 |   |   |   | (29,695 | ) |   |   | (31,336 | ) |   |   | 527 |   |   |   | - |   |   |   | (22,667 | ) |
| Cash flows from investing activities:                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sale of equipment                                                                 |   |   | - |   |   |   | 81 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 81 |   |
| Proceeds from sale of Films                                                                     |   |   | - |   |   |   | 56,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 56,000 |   |
| Insurance proceeds from involuntary conversion                                             |   |   |  - |   |   |   |  1,029 |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  1,029 |   |
| Additions to property, plant and equipment                                                      |   |   | - |   |   |   | (10,921 | ) |   |   | (590 | ) |   |   | - |   |   |   | - |   |   |   | (11,511 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash provided (used) by investing activities                                                |   |   | - |   |   |   | 46,189 |   |   |   | (590 | ) |   |   | - |   |   |   | - |   |   |   | 45,599 |   |
| 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                                                                          |   |   | - |   |   |   | (10,708 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (10,708 | ) |
| Payments relating to capital lease obligations                                                  |   |   | - |   |   |   | (588 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (588 | ) |
| 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                                                      |   |   | - |   |   |   | 229,193 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 229,193 |   |
| Payments of new revolving line of credit                                                        |   |   | - |   |   |   | (229,193 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (229,193 | ) |
| Payments of State of Ohio loans                                                                 |   |   | - |   |   |   | (857 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (857 | ) |
| Payments of secured financing                                                                   |   |   | - |   |   |   | (2,173 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (2,173 | ) |
| Due to parent and affiliated companies, net                                                     |   |   | (32,021 | ) |   |   | 209 |   |   |   | 31,925 |   |   |   | (113 | ) |   |   | - |   |   |   | - |   |
| Proceeds from issuance of redeemable common stock                                               |   |   | 1,924 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,924 |   |
| Payments to redeem common stock                                                            |   |   | (7,740 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   |  - |   |   |   |  (7,740 | )  |
| Decrease in cash overdraft                                                                 |   |   | - |   |   |   | (2,457 | )  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (2,457 | )  |
|                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash (used) provided by financing activities                                                |   |   | (37,837 | ) |   |   | (17,017 | ) |   |   | 31,925 |   |   |   | (113 | ) |   |   | - |   |   |   | (23,042 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect of foreign exchange rate changes on cash and cash equivalents                            |   |   | - |   |   |   | 18 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 18 |   |
| Change in cash and cash equivalents                                                             |   |   | - |   |   |   | (505 | ) |   |   | (1 | ) |   |   | 414 |   |   |   | - |   |   |   | (92 | ) |
| Cash and cash equivalents at beginning of period                                                |   |   | - |   |   |   | 9,161 |   |   |   | 1 |   |   |   | 801 |   |   |   | - |   |   |   | 9,963 |   |
| Cash and cash equivalents at end of period                                                      |   | $ | - |   |   | $ | 8,656 |   |   | $ | - |   |   | $ | 1,215 |   |   | $ | - |   |   | $ | 9,871 |   |

----

| PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES                                           |   |
|------------------------------------------------------------------------------------------|--------|
|                                                                                     |   |
| NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)                       |   |
|                                                                                     |   |
| CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS                                          |   |
| FOR THE NINE MONTHS ENDED OCTOBER 4, 2009                                                |   |
| (unaudited)                                                                              |   |
| (dollars in thousands)                                                                   |   |
|                                                                                     |   |
|                                                                                     |   | Parent |   |   |   |   |   | Subsidiary |   |   | Non-Guarantor |   |   |   |   |   |   |   |
|                                                                                     |   | Guarantor |   |   | Issuer |   |   | Guarantors |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from operating activities:                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                               |   | $ | 39,850 |   |   | $ | 49,228 |   |   | $ | 1,777 |   |   | $ | 967 |   |   | $ | (51,972 | ) |   | $ | 39,850 |   |
| Adjustments to reconcile net income to net cash provided (used) by operating activities: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                            |   |   | - |   |   |   | 42,055 |   |   |   | 4,378 |   |   |   | 4 |   |   |   | - |   |   |   | 46,437 |   |
| Other                                                                                    |   |   | - |   |   |   | (37,430 | ) |   |   | - |   |   |   | (1,254 | ) |   |   | - |   |   |   | (38,684 | ) |
| Change in assets and liabilities, net                                               |   |   | 28,904 |   |   |   |   (90,657 | ) |   |   | 4,479 |   |   |   | 1,566 |   |   |   | 51,972 |   |   |   |   (3,736 | ) |
| Net cash provided (used) by operating activities                                         |   |   | 68,754 |   |   |   | (36,804 | ) |   |   | 10,634 |   |   |   | 1,283 |   |   |   | - |   |   |   | 43,867 |   |
| Cash flows from investing activities:                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sale of equipment                                                          |   |   | - |   |   |   | 27 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 27 |   |
| Additions to property, plant and equipment                                               |   |   | - |   |   |   | (15,164 | ) |   |   | (887 | ) |   |   | - |   |   |   | - |   |   |   | (16,051 | ) |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash used by investing activities                                                    |   |   | - |   |   |   | (15,137 | ) |   |   | (887 | ) |   |   | - |   |   |   | - |   |   |   | (16,024 | ) |
| Cash flows from financing activities:                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Payments of senior secured notes payable                                                 |   |   | - |   |   |   | (1,687 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,687 | ) |
| Payments of senior subordinated secured notes payable                                    |   |   | - |   |   |   | (1,687 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,687 | ) |
| Debt acquisition costs                                                                   |   |   | - |   |   |   | (8,282 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (8,282 | ) |
| Payments relating to capital lease obligations                                           |   |   | - |   |   |   | (548 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (548 | ) |
| Proceeds from old revolving line of credit                                               |   |   | - |   |   |   | 185,341 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 185,341 |   |
| Payments of old revolving line of credit                                                 |   |   | - |   |   |   | (175,450 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (175,450 | ) |
| Proceeds from State of Ohio loan                                                         |   |   | - |   |   |   | 3,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,000 |   |
| Payments of State of Ohio loan                                                           |   |   | - |   |   |   | (677 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (677 | ) |
| Payments of secured financing                                                            |   |   | - |   |   |   | (1,715 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,715 | ) |
| Due to parent and affiliated companies, net                                              |   |   | (58,243 | ) |   |   | 70,158 |   |   |   | (9,563 | ) |   |   | (2,352 | ) |   |   | - |   |   |   | - |   |
| Proceeds from issuance of redeemable common stock                                        |   |   | 2,075 |   |   |   | - |   |   |   | - | - |   |   | - |   |   |   | - |   |   |   | 2,075 |   |
| Payments to redeem common stock                                                     |   |   | (12,586 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   |  - |   |   |   | (12,586 | ) |
| Decrease in cash overdraft                                                          |   |   | - |   |   |   | (16,510 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (16,510 | ) |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash (used) provided by financing activities                                         |   |   | (68,754 | ) |   |   | 51,943 |   |   |   | (9,563 | ) |   |   | (2,352 | ) |   |   | - |   |   |   | (28,726 | ) |
|                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect of foreign exchange rate changes on cash and cash equivalents                     |   |   | - |   |   |   | 242 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 242 |   |
| Change in cash and cash equivalents                                                      |   |   | - |   |   |   | 244 |   |   |   | 184 |   |   |   | (1,069 | ) |   |   | - |   |   |   | (641 | ) |
| Cash and cash equivalents at beginning of period                                         |   |   | - |   |   |   | 2,111 |   |   |   | 65 |   |   |   | 2,004 |   |   |   | - |   |   |   | 4,180 |   |
| Cash and cash equivalents at end of period                                               |   | $ | - |   |   | $ | 2,355 |   |   | $ | 249 |   |   | $ | 935 |   |   | $ | - |   |   | $ | 3,539 |   |

----

----

----

|                                                         |   | For the Quarter Ended |   |   |       |   |
|--------------------------------------------------------------|--------|-----------------------|--------|--------|------------|--------|
|                                                         |   | October 3,            |   |   | October 4, |   |   | Increase |   |
|                                                         |   | 2010                  |   |   | 2009       |   |   | (Decrease) |   |
|                                                         |   | (dollars in millions) |   |   |       |   |
|                                                         |   |                  |   |   |       |   |   |   |   |
| Net sales                                                    |   | $                     | 214.9  |   |       | $      | 195.7 |   |   |   | 9.8 | % |
| Cost of sales                                                |   |                  | 169.6  |   |       |   | 153.8 |   |   |   | 10.3 | % |
|                                                         |   |                  |   |   |       |   |   |   |   |   |   |   |
| Gross profit                                                 |   |                  | 45.3   |   |       |   | 41.9 |   |   |   | 8.1 | % |
|                                                         |   |                  |   |   |       |   |   |   |   |   |   |   |
| Selling, general and administrative expenses                 |   |                  | 34.6   |   |       |   | 35.1 |   |   |   | -1.4 | % |
|                                                         |   |                  |   |   |       |   |   |   |   |   |   |   |
| Operating income                                             |   |                  | 10.7   |   |       |   | 6.8 |   |   |   | 57.4 | % |
|                                                         |   |                  |   |   |       |   |   |   |   |   |   |   |
| Interest expense, net                                        |   |                  | 16.3   |   |       |   | 14.0 |   |   |   | 16.4 | % |
| Debt extinguishment income, net                              |   |                  | -      |   |       |   | (37.4 | ) |   | -100.0 | % |
| Other non-operating income, net                              |   |                  | (1.0   | )      |       |   | (0.4 | )  |   | 150.0 | % |
|                                                         |   |                  |   |   |       |   |   |   |   |   |   |   |
| (Loss) income from continuing operations before income taxes |   |                  | (4.6   | )      |       |   | 30.6 |   |   | nm |   |
| Provision for income taxes                                   |   |                  | 0.1    |   |       |   | 0.2 |   |   |   | -50.0 | % |
|                                                         |   |                  |   |   |       |   |   |   |   |   |   |   |
| (Loss) income from continuing operations                     |   |                  | (4.7   | )      |       |   | 30.4 |   |   | nm |   |
| Income from discontinued operations, net of income taxes     |   |                  | 0.8    |   |       |   | 1.0 |   |   | -20.0 | % |
|  Net (loss) income                                      |   | $                     | (3.9   | )      |       | $      | 31.4 |   |   | nm |   |
|  Comparison as a percentage of net sales                |   |                  |   |   |       |   |   |   |   |   |   |   |
| Cost of sales                                                |   |                  | 78.9   | %      |       |   | 78.6 | % |   |   | 0.3 | % |
| Gross margin                                                 |   |                  | 21.1   | %      |       |   | 21.4 | % |   |   | -0.3 | % |
| Selling, general and administrative expenses                 |   |                  | 16.1   | %      |       |   | 17.9 | % |   |   | -1.8 | % |
| Operating margin                                             |   |                  | 5.0    | %      |       |   | 3.5 | % |   |   | 1.5 | % |
| (Loss) income from continuing operations before income taxes |   |                  | -2.1   | %      |       |   | 15.6 | % |   |   | -17.7 | % |
| (Loss) income from continuing operations                     |   |                  | -2.2   | %      |       |   | 15.5 | % |   |   | -17.7 | % |
| Income from discontinue operations, net of income taxes      |   |                  | 0.4    | %      |       |   | 0.5 | % |   |   | -0.1 | % |
| Net (loss) income                                            |   |                  | -1.8   | %      |       |   | 16.0 | % |   |   | -17.8 | % |

----

|                                                         |   | For the Nine Months Ended |   |   |       |   |
|--------------------------------------------------------------|--------|---------------------------|--------|--------|------------|--------|
|                                                         |   | October 3,                |   |   | October 4, |   |   | Increase |   |
|                                                         |   | 2010                      |   |   | 2009       |   |   | (Decrease) |   |
|                                                         |   | (dollars in millions)     |   |   |       |   |
|                                                         |   |                      |   |   |       |   |   |   |   |
| Net sales                                                    |   | $                         | 645.7  |   |       | $      | 573.8 |   |   |   | 12.5 | % |
| Cost of sales                                                |   |                      | 523.9  |   |       |   | 447.5 |   |   |   | 17.1 | % |
|                                                         |   |                      |   |   |       |   |   |   |   |   |   |   |
| Gross profit                                                 |   |                      | 121.8  |   |       |   | 126.3 |   |   |   | -3.6 | % |
|                                                         |   |                      |   |   |       |   |   |   |   |   |   |   |
| Selling, general and administrative expenses                 |   |                      | 104.8  |   |       |   | 95.2 |   |   |   | 10.1 | % |
| Environmental expense insurance recovery                     |   |                      | (8.2   | )      |       |   | - |   |   |   | nm |   |
|                                                         |   |                      |   |   |       |   |   |   |   |   |   |   |
| Operating income                                             |   |                      | 25.2   |   |       |   | 31.1 |   |   |   | -19.0 | % |
|                                                         |   |                      |   |   |       |   |   |   |   |   |   |   |
| Interest expense, net                                        |   |                      | 49.9   |   |       |   | 38.1 |   |   |   | 31.0 | % |
| Debt extinguishment expense (income), net                    |   |                      | 5.5    |   |       |   | (42.7 | ) |   | nm |   |
| Other non-operating expense (income), net                    | 0.3    |                      | (1.8   | )      | nm         |   |
|                                                         |   |                      |   |   |       |   |   |   |   |   |   |   |
| (Loss) income from continuing operations before income taxes |   |                      | (30.5  | )      |       |   | 37.5 |   |   | nm |   |
| Provision for income taxes                                   |   |                      | 0.1    |   |       |   | 0.1 |   |   |   | - |   |
|                                                         |   |                      |   |   |       |   |   |   |   |   |   |   |
| (Loss) income from continuing operations                     |   |                      | (30.6  | )      |       |   | 37.4 |   |   | nm |   |
| Income from discontinued operations, net of income taxes     |   |                      | 3.6    |   |       |   | 2.5 |   |   | 44.0 | % |
|  Net (loss) income                                      |   | $                         | (27.0  | )      |       | $      | 39.9 |   |   | nm |   |
|  Comparison as a percentage of net sales                |   |                      |   |   |       |   |   |   |   |   |   |   |
| Cost of sales                                                |   |                      | 81.1   | %      |       |   | 78.0 | % |   |   | 3.1 | % |
| Gross margin                                                 |   |                      | 18.9   | %      |       |   | 22.0 | % |   |   | -3.1 | % |
| Selling, general and administrative expenses                 |   |                      | 16.2   | %      |       |   | 16.6 | % |   |   | -0.4 | % |
| Operating margin                                             |   |                      | 3.9    | %      |       |   | 5.4 | % |   |   | -1.5 | % |
| (Loss) income from continuing operations before income taxes |   |                      | -4.7   | %      |       |   | 6.5 | % |   |   | -11.2 | % |
| (Loss) income from continuing operations                     |   |                      | -4.7   | %      |       |   | 6.5 | % |   |   | -11.2 | % |
| Income from discontinue operations, net of income taxes      |   |                      | 0.5    | %      |       |   | 0.4 | % |   |   | 0.1 | % |
| Net (loss) income                                            |   |                      | -4.2   | %      |       |   | 6.9 | % |   |   | -11.1 | % |

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|                                                                                         |   | For the Three         |      |         | For the Nine          |   |
|----------------------------------------------------------------------------------------------|--------|-----------------------|-----------|--------------|-----------------------|--------|
|                                                                                         |   | Months Ended          |      |         | Months Ended          |   |
|                                                                                         |   | October 3, 2010 v.    |      |         | October 3, 2010 v.    |   |
|                                                                                         |   | the Three Months      |      |         | the Nine Months       |   |
|                                                                                         |   | Ended October 4, 2009 |      |         | Ended October 4, 2009 |   |
| Favorable (unfavorable) price and mix                                                        |   | $                     | 6.2  |         |                  | $      | (23.1) |   |
| Net inflation of raw material and utilities pricing                                          |   |                  | (8.6)     |         |                  |   | (19.2) |   |
| Alternative fuels tax credit                                                                 |   |                  | (5.0)     |         |                  |   | (13.0) |   |
| Higher distribution costs                                                                    |   |                  | (0.4)     |         |                  |   | (2.0) |   |
| Reduced manufacturing costs                                                                  |   |                  | 2.1  |         |                  |   | 14.6  |     |
| Reduction in mill curtailments to match customer demand                                      |   |                  | 1.4  |         |                  |   | 7.7  |   |
| Gross profit impact of shifts in shipment volumes                                       |   |                  | (1.7)     |         |                  |   | 7.6  |   |
| Reduced start-up costs related to the thermal coater at the West Carrollton, Ohio paper mill |   |                  | 1.8  |         |                  |   | 7.2  |   |
| Other                                                                                        |   |                  | 1.6  |    |                  |   | (0.1) |   |
|                                                                                         |   | $                     | (2.6)     |         |                  | $      | (20.3) |   |

| • | Third quarter 2010 carbonless papers net sales totaled $117.1 million, a decrease of $2.9 million, or 2.4%, from prior year levels. Third quarter 2010 carbonless shipment volumes were approximately 6% lower than third quarter 2009. Volumes declined largely due to a disruption in supply as a result of the temporary interruption of paper mill operations at the West Carrollton, Ohio mill because of the collapse of the coal silo in early July. Because of diminished capacity, domestic sales were emphasized over international. The negative impact of lower shipment volumes was partially offset by the benefit realized from various price increases initiated since the beginning of 2010 in response to escalating raw material costs. During the first nine months of 2010, carbonless net sales totaled $369.7 million, an increase of $13.9 million, or 3.9%, from prior year levels. Current year carbonless shipment volumes were approximately 7% higher than year-to-date 2009 volumes primarily due to strong international demand as well as the launch of the Company’s new Superior carbonless sheet product. |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Third quarter 2010 carbonless papers operating income of $9.1 million decreased $5.0 million compared to third quarter 2009. During the first nine months of 2010, operating income of $21.8 million decreased $24.2 million compared to the same 2009 period. The operating income for the three and nine months ended October 4, 2009, included a $5.0 million and $13.0 million, respectively, alternative fuels tax credit recorded as a reduction to cost of sales. This tax credit expired at the end of 2009. Despite higher year-to-date shipment volumes, mix was unfavorably impacted by strong international demand, because profit margins are lower on international sales, and low sheet mix. Higher raw material costs also drove down operating results and distribution costs were higher due to increased fuel costs and international shipments. |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Third quarter 2010 thermal papers net sales totaled $89.1 million, an increase of $17.9 million, or 25.2%, over the same prior year period. The segment benefited from increased shipment volumes of approximately 26%. Demand continues to be strong for light weight non-top coat (“LWNTC”) product offerings. During the first nine months of 2010, thermal paper net sales totaled $256.4 million, an increase of $49.8 million, or 24.1%, when compared to the same period last year. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | The thermal papers segment recorded operating income of $0.5 million for third quarter 2010. This compared to a third quarter 2009 operating loss of $1.9 million. The operating loss recorded during the first nine months of 2010 was $3.8 million less than the operating loss recorded for the first nine months of 2009. Increased net sales and the elimination of the new thermal coater start-up costs, incurred during 2009, contributed favorably to 2010 operating results. During much of 2010, competitive pricing continued to narrow LWNTC gross margins though, during third quarter 2010, LWNTC pricing began to rebound slightly due to the initiation of multiple price increases. Higher raw material costs were also unfavorably impacting 2010 margins. |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| • | Encapsys third quarter 2010 net sales of $14.2 million were $3.6 million, or 33.7%, higher than third quarter 2009. Third quarter 2010 volumes were approximately 60% higher than the prior year quarter. During the first nine months of 2010, Encapsys net sales totaled $37.5 million which was $8.2 million, or 28.0%, higher than the same period of 2009. |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | As a result of higher shipment volumes and a reduction in SG&A expense, Encapsys third quarter 2010 operating income was $3.0 million compared to $0.7 million of operating income for the same quarter of 2009. Year-to-date 2010 operating income was $6.1 million compared to $1.9 million for the first nine months of 2009. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Unallocated corporate charges decreased $3.6 million in third quarter 2010 compared to third quarter 2009. Year-to-date 2010 expense was $10.3 million lower than that of 2009 due to the recording of the $8.2 million Fox River insurance recovery during first quarter 2010. Also, third quarter 2009 charges included $4.2 million of additional expense as a result of the September 2009 voluntary debt-for-debt exchange. |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 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: November 8, 2010     |  /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: November 8, 2010     |  /s/ Thomas J. Ferree                                                                                                                                                                |
|                                                       | Thomas J. Ferree                                                                                                                                                                          |
|                                                       | Senior Vice President, Chief Financial Officer and Treasurer (Signing on behalf of the Registrant and as the Principal Financial Officer)                                                 |

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