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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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

| | For the quarterly period ended: July 4, 2004
| | --------------------------------------------



OR



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

| | For the transition period from: 
to
| | -----------------------------------



Commission file number: 333-82084



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APPLETON PAPERS INC.

(Exact name of registrant as specified in its charter)



|                                                           |  |                                     
|---------------------------------------------------------- |  | ------------------------------------
|Delaware                                                   |  | 36-2556469                          
|(State or other jurisdiction of incorporation)             |  | (I.R.S. Employer Identification No.)
|825 East Wisconsin Avenue P.O. Box 359 Appleton, Wisconsin |  | 54912-0359                          
|(Address of principal executive offices)                   |  | (Zip Code)                          



Registrants
telephone number, including area code: (920) 734-9841



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See Table of Additional Registrants Below



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



Indicate by check mark
whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x



*This report is being filed pursuant to covenants contained
in the indentures governing the Registrants senior notes and senior subordinated notes. The Registrants reporting obligations have been automatically suspended under Section 15(d) of the Securities Exchange Act of 1934, as amended.



As of August 16, 2004, 100 shares of Appleton Papers Inc.
common stock, $100.00 par value, were outstanding. There is no trading market for the common stock of Appleton Papers Inc. As of August 16, 2004, each of the additional registrants had the number of shares outstanding which is shown in the table
below. There is no trading market for the common stock of the additional registrants. No shares of the registrant or the additional registrants were held by non-affiliates.



Appleton Papers Inc. and WTA Inc. meet the conditions set forth in General Instruction H(1)(a) and (b) and are therefore
filing this form with the reduced disclosure format.



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##### Table of Contents

ADDITIONAL REGISTRANTS



|                                                   |  |                                                           |  |                                                  |  |                                    |  |                                                                                                               |  |                 
|-------------------------------------------------- |  | --------------------------------------------------------- |  | ------------------------------------------------ |  | ---------------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | ----------------
|                                                  
|Exact name ofRegistrant as specified in itscharter |  | State or otherjurisdiction ofincorporationor organization |  | Number ofShares Outstandingas of August 16, 2004 |  | I.R.S.EmployerIdentificationNumber |  | Address, including zipcode,
andtelephone number,including area code, ofRegistrantsprincipal executive office |  | Registration No.
|Paperweight Development Corp.                      |  | Wisconsin                                                 |  | 11,727,584                                       |  | 39-2014992                         |  | 825 East Wisconsin Avenue, P.O. Box 359, Appleton, Wisconsin54912-0359 (920) 734-9841                         |  | 333-82084-01    
|WTA Inc.                                           |  | Delaware                                                  |  | 1                                                |  | 51-0329653                         |  | 825 East Wisconsin Avenue, P.O. Box 359, Appleton, Wisconsin54912-0359 (920) 734-9841                         |  | 333-82084-02    
|                                                  



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##### Table of Contents

INDEX



|           |  |                                                                                                                                                                         |  |           
|---------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------
|           |  |                                                                                                                                                                         |  | PageNumber
|PART I     |  | FINANCIAL INFORMATION                                                                                                                                                   |  |           
|           |  |                                                                                                                                                                        
|Item 1     |  | Financial Statements (unaudited)                                                                                                                                        |  | 1         
|           |  |                                                                                                                                                                        
|           |  | a) Condensed Consolidated Balance Sheets                                                                                                                                |  | 1         
|           |  |                                                                                                                                                                        
|           |  | b) Condensed Consolidated Statements of Operations                                                                                                                      |  | 2         
|           |  |                                                                                                                                                                        
|           |  | c) Condensed Consolidated Statements of Cash Flows                                                                                                                      |  | 3         
|           |  |                                                                                                                                                                        
|           |  | d) Condensed Consolidated Statements of Redeemable Common Stock, (Accumulated Deficit) Retained Earnings, Accumulated Other Comprehensive Loss and Comprehensive Income |  | 4         
|           |  |                                                                                                                                                                        
|           |  | e) Notes to Condensed Consolidated Financial Statements                                                                                                                 |  | 5         
|           |  |                                                                                                                                                                        
|Item 2     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                   |  | 31        
|           |  |                                                                                                                                                                        
|Item 3     |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                              |  | 39        
|           |  |                                                                                                                                                                        
|Item 4     |  | Controls and Procedures                                                                                                                                                 |  | 39        
|           |  |                                                                                                                                                                        
|PART II    |  | OTHER INFORMATION AND SIGNATURES                                                                                                                                        |  |           
|           |  |                                                                                                                                                                        
|Item 6     |  | Exhibits and Reports on Form 8-K                                                                                                                                        |  | 41        
|           |  |                                                                                                                                                                        
|Signatures |  |                                                                                                                                                                         |  | 43        



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##### Table of Contents

PART IFINANCIAL INFORMATION



Item 1Financial Statements



PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)



|                                                                                                                                                |  |              |           |   |                 |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | --------------- | - | --------- | -
|                                                                                                                                                |  | July 4, 2004 |           |   | January 3, 2004 |  
|                                                                                                                                                |  | (unaudited)  |           |   |                 |  
|ASSETS                                                                                                                                          |  |              |           |   |                 |   |           |  
|Current assets                                                                                                                                  |  |              |           |   |                 |   |           |  
|Cash and cash equivalents                                                                                                                       |  | $            | 55,761    |   |                 | $ | 29,682    |  
|Accounts receivable, less allowance for doubtful accounts of $3,760 and $3,245, respectively                                                    |  |              | 111,106   |   |                 |   | 117,129   |  
|Inventories                                                                                                                                     |  |              | 140,540   |   |                 |   | 129,611   |  
|Other current assets                                                                                                                            |  |              | 19,399    |   |                 |   | 18,450    |  
|                                                                                                                                                |  |              |           |   |                 |   |           |  
|Total current assets                                                                                                                            |  |              | 326,806   |   |                 |   | 294,872   |  
|Property, plant and equipment, net of accumulated depreciation of $154,758 and $123,544, respectively                                           |  |              | 498,635   |   |                 |   | 522,519   |  
|Goodwill                                                                                                                                        |  |              | 49,680    |   |                 |   | 47,971    |  
|Intangible assets, net                                                                                                                          |  |              | 103,042   |   |                 |   | 117,491   |  
|Environmental indemnification receivable                                                                                                        |  |              | 76,427    |   |                 |   | 77,030    |  
|Other assets                                                                                                                                    |  |              | 16,615    |   |                 |   | 9,970     |  
|                                                                                                                                                |  |              |           |   |                 |   |           |  
|Total assets                                                                                                                                    |  | $            | 1,071,205 |   |                 | $ | 1,069,853 |  
|                                                                                                                                                |  |              |           |   |                 |   |           |  
|LIABILITIES, REDEEMABLE COMMON STOCK, ACCUMULATED DEFICIT AND ACCUMULATED OTHER COMPREHENSIVE LOSS                                              |  |              |           |   |                 |   |           |  
|Current liabilities                                                                                                                             |  |              |           |   |                 |   |           |  
|Current portion of long-term debt                                                                                                               |  | $            | 2,500     |   |                 | $ | 31,350    |  
|Accounts payable                                                                                                                                |  |              | 59,913    |   |                 |   | 56,870    |  
|Accrued interest expense                                                                                                                        |  |              | 2,491     |   |                 |   | 1,839     |  
|Restructuring reserve                                                                                                                           |  |              | 4,733     |   |                 |   | 5,757     |  
|Other accrued liabilities                                                                                                                       |  |              | 77,808    |   |                 |   | 77,182    |  
|                                                                                                                                                |  |              |           |   |                 |   |           |  
|Total current liabilities                                                                                                                       |  |              | 147,445   |   |                 |   | 172,998   |  
|Senior secured notes payable                                                                                                                    |  |              | 247,500   |   |                 |   | 135,402   |  
|Revolving line of credit                                                                                                                        |  |              |          |   |                 |   | 10,000    |  
|Variable rate industrial development bonds                                                                                                      |  |              | 8,650     |   |                 |   | 8,650     |  
|Capital lease obligation                                                                                                                        |  |              | 3,299     |   |                 |   | 3,504     |  
|Postretirement benefits other than pension                                                                                                      |  |              | 60,118    |   |                 |   | 59,469    |  
|Accrued pension                                                                                                                                 |  |              | 41,659    |   |                 |   | 39,696    |  
|Accrued income taxes                                                                                                                            |  |              | 5,723     |   |                 |   | 15,432    |  
|Environmental liability                                                                                                                         |  |              | 99,385    |   |                 |   | 99,329    |  
|Other long-term liabilities                                                                                                                     |  |              | 9,064     |   |                 |   | 8,419     |  
|Senior notes payable                                                                                                                            |  |              | 185,000   |   |                 |   |          |  
|Senior subordinated notes payable                                                                                                               |  |              | 157,000   |   |                 |   | 199,958   |  
|Deferred payment obligation                                                                                                                     |  |              |          |   |                 |   | 172,742   |  
|Commitments and contingencies (Note 12)                                                                                                         |  |              |          |   |                 |   |          |  
|Redeemable common stock, $0.01 par value, shares authorized: 30,000,000, shares issued and outstanding: 11,727,584 and 12,124,778,
respectively |  |              | 163,295   |   |                 |   | 158,279   |  
|Accumulated deficit                                                                                                                             |  |              | (48,251   | ) |                 |   | (3,587    | )
|Accumulated other comprehensive loss                                                                                                            |  |              | (8,682    | ) |                 |   | (10,438   | )
|                                                                                                                                                |  |              |           |   |                 |   |           |  
|Total liabilities, redeemable common stock, accumulated deficit and accumulated other comprehensive loss                                        |  | $            | 1,071,205 |   |                 | $ | 1,069,853 |  
|                                                                                                                                                |  |              |           |   |                 |   |           |  



The accompanying notes
are an integral part of these condensed consolidated financial statements.



1



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##### Table of Contents

PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(dollars in thousands)



|                                             |  |                                 |         |   |                                  |   |         |                              |  |   |                               |   |  |   |         |  
|-------------------------------------------- |  | ------------------------------- | ------- | - | -------------------------------- | - | ------- | ---------------------------- |  | - | ----------------------------- | - |  | - | ------- | -
|                                             |  | Three Months Ended July 4, 2004 |         |   | Three Months Ended June 29, 2003 |   |         | Six Months EndedJuly 4, 2004 |  |   | Six Months EndedJune 29, 2003 |  
|Net sales                                    |  | $                               | 233,590 |   |                                  | $ | 210,649 |                              |  | $ | 484,172                       |   |  | $ | 414,887 |  
|Cost of sales                                |  |                                 | 176,003 |   |                                  |   | 157,269 |                              |  |   | 358,425                       |   |  |   | 302,049 |  
|                                             |  |                                 |         |   |                                  |   |         |                              |  |   |                               |   |  |   |         |  
|Gross profit                                 |  |                                 | 57,587  |   |                                  |   | 53,380  |                              |  |   | 125,747                       |   |  |   | 112,838 |  
|Selling, general and administrative expenses |  |                                 | 49,759  |   |                                  |   | 39,423  |                              |  |   | 99,627                        |   |  |   | 77,773  |  
|Restructuring and other charges              |  |                                 | 416     |   |                                  |   |        |                              |  |   | 829                           |   |  |   |        |  
|                                             |  |                                 |         |   |                                  |   |         |                              |  |   |                               |   |  |   |         |  
|Operating income                             |  |                                 | 7,412   |   |                                  |   | 13,957  |                              |  |   | 25,291                        |   |  |   | 35,065  |  
|Other expense (income)                       |  |                                 |         |   |                                  |   |         |                              |  |   |                               |   |  |   |         |  
|Interest expense                             |  |                                 | 12,832  |   |                                  |   | 13,290  |                              |  |   | 26,538                        |   |  |   | 26,840  |  
|Debt extinguishment expenses                 |  |                                 | 30,779  |   |                                  |   |        |                              |  |   | 30,779                        |   |  |   |        |  
|Interest income                              |  |                                 | (245    | ) |                                  |   | (104    | )                            |  |   | (1,447                        | ) |  |   | (187    | )
|Foreign exchange loss (gain)                 |  |                                 | 754     |   |                                  |   | (574    | )                            |  |   | 942                           |   |  |   | (795    | )
|                                             |  |                                 |         |   |                                  |   |         |                              |  |   |                               |   |  |   |         |  
|(Loss) income before income taxes            |  |                                 | (36,708 | ) |                                  |   | 1,345   |                              |  |   | (31,521                       | ) |  |   | 9,207   |  
|(Benefit) provision for income taxes         |  |                                 | (835    | ) |                                  |   | 460     |                              |  |   | (1,159                        | ) |  |   | 551     |  
|                                             |  |                                 |         |   |                                  |   |         |                              |  |   |                               |   |  |   |         |  
|Net (loss) income                            |  | $                               | (35,873 | ) |                                  | $ | 885     |                              |  | $ | (30,362                       | ) |  | $ | 8,656   |  
|                                             |  |                                 |         |   |                                  |   |         |                              |  |   |                               |   |  |   |         |  



The accompanying notes
are an integral part of these condensed consolidated financial statements.



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##### Table of Contents

PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

(unaudited)

(dollars in thousands)



|                                                                                         |  |              |          |   |              |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ------------ | - | ------- | -
|                                                                                         |  | July 4, 2004 |          |   | June 29,2003 |  
|Cash flows from operating activities:                                                    |  |              |          |   |              |   |         |  
|Net (loss) income                                                                        |  | $            | (30,362  | ) |              | $ | 8,656   |  
|Adjustments to reconcile net (loss) income to net cash provided by operating activities: |  |              |          |   |              |   |         |  
|Depreciation                                                                             |  |              | 34,526   |   |              |   | 30,341  |  
|Amortization of intangible assets                                                        |  |              | 5,198    |   |              |   | 4,642   |  
|Amortization of financing fees                                                           |  |              | 1,475    |   |              |   | 1,824   |  
|Employer 401(k) noncash matching contributions                                           |  |              | 3,890    |   |              |   | 4,330   |  
|Foreign exchange loss (gain)                                                             |  |              | 942      |   |              |   | (795    | )
|Loss on disposals of equipment                                                           |  |              | 168      |   |              |   | 406     |  
|Accretion of deferred payment and capital lease obligations                              |  |              | 7,655    |   |              |   | 8,047   |  
|Accretion of environmental liability                                                     |  |              | 659      |   |              |   |        |  
|Debt extinguishment expenses                                                             |  |              | 4,596    |   |              |   |        |  
|Discount on repayment of deferred payment obligation                                     |  |              | (13,200  | ) |              |   |        |  
|(Increase)/decrease in assets and increase/(decrease) in liabilities:                    |  |              |          |   |              |   |         |  
|Accounts receivable                                                                      |  |              | 5,607    |   |              |   | (10,988 | )
|Inventories                                                                              |  |              | (10,842  | ) |              |   | (3,701  | )
|Other current assets                                                                     |  |              | (929     | ) |              |   | 743     |  
|Accounts payable and other accrued liabilities                                           |  |              | 3,055    |   |              |   | (9,084  | )
|Restructuring reserve                                                                    |  |              | (1,024   | ) |              |   | (153    | )
|Accrued income taxes                                                                     |  |              | (2,371   | ) |              |   | 184     |  
|Accrued pension                                                                          |  |              | 1,632    |   |              |   | 923     |  
|Other, net                                                                               |  |              | 6,847    |   |              |   | 355     |  
|                                                                                         |  |              |          |   |              |   |         |  
|Net cash provided by operating activities                                                |  |              | 17,522   |   |              |   | 35,730  |  
|                                                                                         |  |             
|Cash flows from investing activities:                                                    |  |              |          |   |              |   |         |  
|Proceeds from sale of equipment                                                          |  |              | 260      |   |              |   |        |  
|Acquisition of businesses                                                                |  |              | (990     | ) |              |   | (50,530 | )
|Additions to property, plant and equipment                                               |  |              | (14,707  | ) |              |   | (13,491 | )
|                                                                                         |  |              |          |   |              |   |         |  
|Net cash used by investing activities                                                    |  |              | (15,437  | ) |              |   | (64,021 | )
|                                                                                         |  |             
|Cash flows from financing activities:                                                    |  |              |          |   |              |   |         |  
|Payments of senior secured notes payable                                                 |  |              | (166,752 | ) |              |   | (29,356 | )
|Proceeds from senior secured notes payable                                               |  |              | 250,000  |   |              |   |        |  
|Payments of senior subordinated notes payable                                            |  |              | (192,958 | ) |              |   |        |  
|Proceeds from senior notes payable                                                       |  |              | 185,000  |   |              |   |        |  
|Proceeds from senior subordinated notes payable                                          |  |              | 150,000  |   |              |   |        |  
|Payment of deferred payment obligation                                                   |  |              | (167,067 | ) |              |   |        |  
|Debt acquisition costs                                                                   |  |              | (12,258  | ) |              |   |        |  
|Payments relating to capital lease obligation                                            |  |              | (335     | ) |              |   | (335    | )
|Proceeds from revolving line of credit                                                   |  |              |         |   |              |   | 60,000  |  
|Payments of revolving line of credit                                                     |  |              | (10,000  | ) |              |   | (15,000 | )
|Proceeds from issuance of redeemable common stock                                        |  |              | 4,236    |   |              |   | 4,019   |  
|Payments to redeem common stock                                                          |  |              | (17,412  | ) |              |   | (5,150  | )
|Increase (decrease) in cash overdraft                                                    |  |              | 1,416    |   |              |   | (2,316  | )
|                                                                                         |  |              |          |   |              |   |         |  
|                                                                                         |  |             
|Net cash provided by financing activities                                                |  |              | 23,870   |   |              |   | 11,862  |  
|Effect of foreign exchange rate changes on cash and cash equivalents                     |  |              | 124      |   |              |   |        |  
|Change in cash and cash equivalents                                                      |  |              | 26,079   |   |              |   | (16,429 | )
|Cash and cash equivalents at beginning of period                                         |  |              | 29,682   |   |              |   | 24,390  |  
|                                                                                         |  |              |          |   |              |   |         |  
|Cash and cash equivalents at end of period                                               |  | $            | 55,761   |   |              | $ | 7,961   |  
|                                                                                         |  |              |          |   |              |   |         |  



The accompanying notes
are an integral part of these condensed consolidated financial statements.



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##### Table of Contents

PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE COMMON STOCK,

(ACCUMULATED DEFICIT) RETAINED EARNINGS,
ACCUMULATED OTHER

COMPREHENSIVE LOSS AND COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED

(unaudited)

(dollars in thousands, except share data)



|                                              |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  |   |         |  
|--------------------------------------------- |  | ----------------------- | - |  | ------------------------------------ | ------- | - | --------------------------------- | - | ------- | ------------------- |  | - | ------- | - |  | - | ------- | -
|                                              |  | Redeemable Common Stock |   |  | (AccumulatedDeficit)RetainedEarnings |         |   | AccumulatedOtherComprehensiveLoss |   |         | ComprehensiveIncome | 
|                                              |  | SharesOutstanding       |   |  | Amount                               |         |   |                                   |  
|Balance, January 3, 2004                      |  | 12,124,778              |   |  | $                                    | 158,279 |   |                                   | $ | (3,587  | )                   |  | $ | (10,438 | ) |  |   |         |  
|Comprehensive income:                         |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  |   |         |  
|Net loss                                      |  |                        |   |  |                                      |        |   |                                   |   | (30,362 | )                   |  |   |        |   |  | $ | (30,362 | )
|Foreign currency translation adjustment       |  |                        |   |  |                                      |        |   |                                   |   |         |                     |  |   | 1,224   |   |  |   | 1,224   |  
|Realized and unrealized gains on derivatives  |  |                        |   |  |                                      |        |   |                                   |   |        |                     |  |   | 532     |   |  |   | 532     |  
|                                              |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  |   |         |  
|Total comprehensive income                    |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  | $ | (28,606 | )
|                                              |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  |   |         |  
|Issuance of redeemable common stock           |  | 347,937                 |   |  |                                      | 8,126   |   |                                   |   |        |                     |  |   |        |   |  |   |         |  
|Redemption of redeemable common stock         |  | (745,131                | ) |  |                                      | (17,412 | ) |                                   |   |        |                     |  |   |        |   |  |   |         |  
|Accretion of redeemable common stock          |  |                        |   |  |                                      | 14,302  |   |                                   |   | (14,302 | )                   |  |   |        |   |  |   |         |  
|                                              |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  |   |         |  
|Balance, July 4, 2004                         |  | 11,727,584              |   |  | $                                    | 163,295 |   |                                   | $ | (48,251 | )                   |  | $ | (8,682  | ) |  |   |         |  
|                                              |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  |   |         |  
|Balance, December 28, 2002                    |  | 11,587,204              |   |  | $                                    | 133,581 |   |                                   | $ | (541    | )                   |  | $ | (1,523  | ) |  |   |         |  
|Comprehensive income:                         |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  |   |         |  
|Net income                                    |  |                        |   |  |                                      |        |   |                                   |   | 8,656   |                     |  |   |        |   |  | $ | 8,656   |  
|Realized and unrealized losses on derivatives |  |                        |   |  |                                      |        |   |                                   |   |        |                     |  |   | (771    | ) |  |   | (771    | )
|                                              |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  |   |         |  
|Total comprehensive income                    |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  | $ | 7,885   |  
|                                              |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  |   |         |  
|Issuance of redeemable common stock           |  | 415,627                 |   |  |                                      | 7,788   |   |                                   |   |        |                     |  |   |        |   |  |   |         |  
|Redemption of redeemable common stock         |  | (234,959                | ) |  |                                      | (5,150  | ) |                                   |   |        |                     |  |   |        |   |  |   |         |  
|Accretion of redeemable common stock          |  |                        |   |  |                                      | 1,876   |   |                                   |   | (1,876  | )                   |  |   |        |   |  |   |         |  
|                                              |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  |   |         |  
|Balance, June 29, 2003                        |  | 11,767,872              |   |  | $                                    | 138,095 |   |                                   | $ | 6,239   |                     |  | $ | (2,294  | ) |  |   |         |  
|                                              |  |                         |   |  |                                      |         |   |                                   |   |         |                     |  |   |         |   |  |   |         |  





The accompanying notes are an integral part of these condensed consolidated financial statements.



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1. BASIS OF PRESENTATION



In the opinion of
management, all adjustments necessary for the fair presentation of the results of operations for the three and six months ended July 4, 2004 and June 29, 2003, cash flows for the six months ended July 4, 2004 and June 29, 2003 and
financial position at July 4, 2004 have been made. All adjustments made were of a normal recurring nature.



These condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto of Paperweight
Development Corp. (PDC or the Company) and subsidiaries for each of the three years in the period ended January 3, 2004, which are included in the Form 10-K dated April 2, 2004. The consolidated balance sheet data as of
January 3, 2004, contained within these condensed financial statements, was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States
of America. Appleton Papers Inc. (Appleton) is a wholly-owned subsidiary of PDC (see Note 2 Acquisition of Businesses).



The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. Certain prior year
financial statement amounts have been reclassified to conform to their current year presentation. These reclassifications had no effect on net income.



2. ACQUISITION OF BUSINESSES



In December 2003, Appleton acquired Bemrose Group Limited, a privately-held company headquartered in Derby, England. The groups operating unit,
BemroseBooth, produces security printed vouchers and payment cards, mass transit and car parking tickets, variable data labeling, high-integrity mailing and printed promotional products such as calendars. The purchase price for this acquisition, net
of cash acquired, approximated $63.0 million and was financed with cash from operations and proceeds received from a senior secured variable rate note. Appleton is obtaining independent appraisals to allocate the purchase price to the acquired net
assets. The excess of the purchase price over the estimated fair value of the acquired net assets has been allocated to goodwill. Appleton expects that such appraisals, and the allocation of the purchase price, will be completed during fiscal 2004.
As a result of this acquisition, goodwill of approximately $26.3 million was assigned to Appletons security business unit. Bemrose Group Limited has been included in the Companys consolidated financial statements since the date of the
acquisition.



The acquisition was accounted for using the
purchase method in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed
excluding cash acquired (dollars in thousands):



|                              |  |   |        
|----------------------------- |  | - | -------
|Current assets                |  | $ | 38,713 
|Property, plant and equipment |  |   | 33,710 
|Intangible assets             |  |   | 10,184 
|Goodwill                      |  |   | 26,257 
|Other assets                  |  |   | 1,182  
|                              |  |   |        
|Total assets acquired         |  | $ | 110,046
|                              |  |   |        
|Current liabilities           |  | $ | 24,741 
|Other long-term liabilities   |  |   | 22,326 
|                              |  |   |        
|Total liabilities assumed     |  | $ | 47,067 
|                              |  |   |        
|Net assets acquired           |  | $ | 62,979 
|                              |  |   |        



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On April 30, 2003, Appleton acquired all of the
outstanding common shares of two privately-held Wisconsin-based companies, C&H Packaging Company, Inc. (C&H Packaging) and American Plastics Company, Inc. (American Plastics), which includes American Real Estate
Corporation (a real estate holding company for the real estate assets of American Plastics). C&H Packaging prints and converts flexible plastic packaging materials for companies in the food processing, household and industrial product
industries. American Plastics produces high-quality, custom multilayered films and commercial packaging. The purchase price for these acquisitions approximated $50.4 million and was financed with cash from operations and borrowings under the
revolving credit portion of Appletons old senior credit facility. Appleton obtained independent appraisals to allocate the purchase price to the acquired net assets. As a result of this acquisition, goodwill of approximately $23.5 million has
been assigned to Appletons performance packaging business unit. C&H Packaging and American Plastics have been included in the Companys consolidated financial statements from the date of acquisition.



The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed (dollars in thousands):



|                              |  |   |       
|----------------------------- |  | - | ------
|Current assets                |  | $ | 13,219
|Property, plant and equipment |  |   | 12,300
|Intangible assets             |  |   | 6,132 
|Goodwill                      |  |   | 23,531
|Other assets                  |  |   | 110   
|                              |  |   |       
|Total assets acquired         |  | $ | 55,292
|                              |  |   |       
|Current liabilities           |  | $ | 4,909 
|                              |  |   |       
|Total liabilities assumed     |  | $ | 4,909 
|                              |  |   |       
|Net assets acquired           |  | $ | 50,383
|                              |  |   |       



The following
unaudited pro forma data summarizes the results of operations for the periods indicated as if the acquisitions of C&H Packaging, American Plastics and BemroseBooth had been completed on December 29, 2002. The pro forma data gives
effect to actual operating results prior to the acquisition and adjustments to cost of sales, selling, general and administrative expenses, interest expense, amortization, depreciation and income taxes. These unaudited pro forma amounts do not
purport to be indicative of the results that would have actually been obtained if the acquisitions had occurred on December 29, 2002 or that may be obtained in the future (dollars in thousands):



|                  |  |                                        |         |                                      |   |        
|----------------- |  | -------------------------------------- | ------- | ------------------------------------ | - | -------
|                  |  | For the ThreeMonths EndedJune 29, 2003 |         | For the SixMonths EndedJune 29, 2003
|Net sales         |  | $                                      | 235,749 |                                      | $ | 469,825
|Net (loss) income |  | $                                      | 1,110   |                                      | $ | 6,758  



At the close of
business on November 9, 2001, PDC and New Appleton LLC completed the purchase of all the partnership interests of Arjo Wiggins Delaware General Partnership and its wholly-owned subsidiary, Appleton. The transaction was financed with $106.8 million
of proceeds received from the Appleton Papers Retirement Savings and Employee Stock Ownership Plan (the KSOP) ($104.7 million, net of stock issuance costs), $265 million of senior secured notes payable borrowed at the closing, $250
million in aggregate principal amount of a senior subordinated note due 2008 issued to Arjo Wiggins Appleton plc (AWA), which bore interest at the rate of 11.5% per annum, and a deferred payment obligation, with a present value of $140
million at the closing of the acquisition, to be paid to AWA.



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In conjunction with the acquisition, the Company entered
into two indemnification agreements under which AWA agreed to indemnify PDC and PDC agreed to indemnify Appleton for, and pay, all governmental and third party liabilities and all costs and expenses incurred by Appleton in defense against
governmental and third party claims, referred to as the Fox River Liabilities. The Fox River Liabilities also include fees and expenses of Appletons environmental counsel, advisers, engineers and scientific experts, and the costs incurred in
obtaining studies and other analyses concerning various remedial alternatives for the Lower Fox River. The indemnification agreements mirror one another and result in Appleton receiving indemnification payments directly or indirectly from AWA.



Under the indemnification agreements, AWA agreed to indemnify
the Company for the first $75 million of Fox River Liabilities and for those in excess of $100 million (see Note 12 Commitments and Contingencies). The Company is responsible for the $25 million of liabilities between $75 million and
$100 million. The indemnification agreements provide that it is the intent of the parties that at no time will Appleton or PDC be required to fund any costs and expenses relating to the Fox River Liabilities for which Appleton or PDC will be
indemnified. AWA has paid $24.4 million under the indemnification agreements through the second quarter of fiscal 2004.



Also as part of the purchase agreement, AWA agreed to indemnify the Company for 100% of net income tax liabilities after the November 9, 2001 acquisition,
in respect of periods through September 30, 2001, excluding 50% of amounts in excess of $5.0 million in the aggregate up to and including $10.0 million in the aggregate, representing a maximum amount of $2.5 million for which the Company would have
remained responsible. All tax refunds relating to periods through September 30, 2001 received by the Company were to first be applied against the amount of net income tax liabilities indemnified by AWA. The Company was to be allowed to retain
any excess net refunds over net income tax liabilities.



As
part of Appletons debt refinancing consummated on June 11, 2004, PDC repaid its deferred payment obligation to AWA. The accreted value of the deferred payment obligation was $180.3 million. After receiving a discount of $13.2 million, PDC paid
AWA $167.1 million in full satisfaction of the obligation. In return for the $13.2 million discount, the Company agreed to amend the purchase agreement relating to the acquisition to eliminate AWAs requirement to provide a quarterly
certification of its tangible net worth and to make an escrow deposit if tangible net worth declined below a specified amount and eliminate certain of AWAs indemnity obligations to the Company, including the aforementioned income tax
indemnification, other than those specifically related to environmental issues.



Appleton received a $1.8 million federal tax refund during the first quarter of fiscal 2004, and an additional $4.4 million state tax refund in April 2004. As these refunds related to the resolution of certain tax
contingencies that existed prior to the November 9, 2001 acquisition, they have been recorded as a reduction in purchase price via a decrease to long-lived intangible assets of $5.1 million. The remaining portion of these refunds, approximately $1.1
million, pertained to the accrual of interest subsequent to the November 9, 2001 acquisition date, and as such, is reflected within interest income for the six months ended July 4, 2004.



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



3. GOODWILL AND OTHER INTANGIBLE ASSETS



Effective December 30, 2001, Appleton adopted SFAS No. 142, Goodwill
and Other Intangible Assets. Under SFAS No. 142, goodwill and intangible assets with an indefinite life will no longer be amortized; however, they must be tested for impairment annually. Amortization will continue to be recorded for other
intangible assets with determinable lives. The changes in the carrying amount of goodwill for the six-month period ended July 4, 2004 are as follows (dollars in thousands):



|                                    |  |                 |   |                                      |   |          |  |   |                      |   |  |       |        |   |  |   |        |  
|----------------------------------- |  | --------------- | - | ------------------------------------ | - | -------- |  | - | -------------------- | - |  | ----- | ------ | - |  | - | ------ | -
|                                    |  | CoatedSolutions |   | Thermal andAdvancedTechnicalProducts |   | Security |  |   | PerformancePackaging |   |  | Total |       
|Balance as of January 3, 2004       |  | $               |  |                                      | $ |         |  | $ | 24,232               |   |  | $     | 23,739 |   |  | $ | 47,971 |  
|Goodwill from business acquisitions |  |                 |  |                                      |   |         |  |   | 1,303                |   |  |       | (208   | ) |  |   | 1,095  |  
|Currency translation                |  |                 |  |                                      |   |         |  |   | (486                 | ) |  |       |       |   |  |   | (486   | )
|Other                               |  |                 |  |                                      |   |         |  |   | 1,100                |   |  |       |       |   |  |   | 1,100  |  
|                                    |  |                 |   |                                      |   |          |  |   |                      |   |  |       |        |   |  |   |        |  
|Balance as of July 4, 2004          |  | $               |  |                                      | $ |         |  | $ | 26,149               |   |  | $     | 23,531 |   |  | $ | 49,680 |  
|                                    |  |                 |   |                                      |   |          |  |   |                      |   |  |       |        |   |  |   |        |  



The goodwill value
presented above in the security business, which relates to the BemroseBooth acquisition, is preliminary pending the Companys final purchase price allocation, which is anticipated to be completed during fiscal 2004.



Appletons other intangible assets consisted of the following (dollars
in thousands):



|                               |  |                     |         |                         |   |                     |  |                         |         |  |   |       
|------------------------------ |  | ------------------- | ------- | ----------------------- | - | ------------------- |  | ----------------------- | ------- |  | - | ------
|                               |  | As of July 4, 2004  |         | As of January 3, 2004  
|                               |  | GrossCarryingAmount |         | AccumulatedAmortization |   | GrossCarryingAmount |  | AccumulatedAmortization
|Amortized intangible assets:   |  |                     |         |                         |   |                     |  |                         |         |  |   |       
|Trademarks                     |  | $                   | 55,615  |                         | $ | 8,030               |  | $                       | 58,294  |  | $ | 6,457 
|Patents                        |  |                     | 32,678  |                         |   | 15,961              |  |                         | 36,181  |  |   | 13,141
|Customer relationships         |  |                     | 13,527  |                         |   | 1,296               |  |                         | 13,419  |  |   | 776   
|Non-compete agreements         |  |                     | 1,900   |                         |   | 333                 |  |                         | 1,908   |  |   | 48    
|Applications software          |  |                     |        |                         |   |                    |  |                         | 480     |  |   |      
|                               |  |                     |         |                         |   |                     |  |                         |         |  |   |       
|Total                          |  | $                   | 103,720 |                         | $ | 25,620              |  | $                       | 110,282 |  | $ | 20,422
|                               |  |                     |         |                         |   |                     |  |                         |         |  |   |       
|Unamortized intangible assets: |  |                     |         |                         |   |                     |  |                         |         |  |   |       
|Trademarks                     |  | $                   | 24,942  |                         |   |                     |  | $                       | 27,631  |  |   |       
|                               |  |                     |         |                         |   |                     |  |                         |         |  |   |       



Of the $128.7 million
of acquired intangible assets, $80.5 million was assigned to registered trademarks. Trademarks of $51.2 million related to carbonless paper and $4.4 million related to the Companys 2003 acquisitions are being amortized over their estimated
useful life of 20 years, while the remaining $24.9 million are considered to have an indefinite life and, as such, are not subject to amortization. The remaining acquired intangible assets are being amortized over their estimated useful lives
ranging from 3 to 25 years for patents and customer relationships, 5 years for non-compete agreements and 7 years for applications software. Amortization expense for the three and six months ended July 4, 2004 approximated $2.5 million and $5.2
million, respectively. Amortization expense for the three and six months ended June 29, 2003 approximated $2.3 million and $4.6 million, respectively.



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



4. RESTRUCTURING AND OTHER CHARGES



In order to position itself for long-term growth, Appleton reduced salaried
employment by 46 employees during fiscal 2003 and an additional 10 employees during the first half of fiscal 2004. These reductions included positions at the corporate headquarters as well as the plant and mill sites. As a result, Appleton took a
charge during the first half of 2004 of $0.8 million. Also during the first half of 2004, the Company paid out $1.4 million related to these employment termination benefits, the liabilities for which were incurred in 2004 and 2003.



During the third quarter of 1999, Appleton announced plans to close the
Newton Falls mill in 2000 and the Harrisburg plant in 2001. In the third quarter of 2000, Appleton ceased operations at the Newton Falls mill and permanently closed the mill during the third quarter of 2001. Appleton sold its Harrisburg plant in
August 2001. In 1999, the Company committed to exiting its New York distribution center in 2001 because it was no longer needed as a result of the closure of the Newton Falls mill and thus recorded $6.0 million of related restructuring and other
charges expected to be incurred until the long-term lease expires in 2007. The $0.4 million reduction to the distribution center exit cost reserve represents lease payments, net of sublease income, for this distribution center.



The table below summarizes the components of the restructuring reserve
included on the condensed consolidated balance sheets at July 4, 2004 and January 3, 2004 (dollars in thousands):



|                               |  |                       |       |                      |   |                       |  |   |                    |   |  |   |      
|------------------------------ |  | --------------------- | ----- | -------------------- | - | --------------------- |  | - | ------------------ | - |  | - | -----
|                               |  | January 3,2004Reserve |       | 2004ReserveAdditions |   | 2004Charges toReserve |  |   | July 4,2004Reserve
|Distribution center exit costs |  | $                     | 4,136 |                      | $ |                      |  | $ | (429               | ) |  | $ | 3,707
|Employee termination benefits  |  |                       | 1,621 |                      |   | 829                   |  |   | (1,424             | ) |  |   | 1,026
|                               |  |                       |       |                      |   |                       |  |   |                    |   |  |   |      
|                               |  | $                     | 5,757 |                      | $ | 829                   |  | $ | (1,853             | ) |  | $ | 4,733
|                               |  |                       |       |                      |   |                       |  |   |                    |   |  |   |      



5. INVENTORIES



Inventories consist of the following (dollars in thousands):



|                                            |  |             |         |                |   |        
|------------------------------------------- |  | ----------- | ------- | -------------- | - | -------
|                                            |  | July 4,2004 |         | January 3,2004
|Finished goods                              |  | $           | 74,281  |                | $ | 66,108 
|Raw materials, work-in-process and supplies |  |             | 66,089  |                |   | 63,333 
|                                            |  |             |         |                |   |        
|Total cost                                  |  |             | 140,370 |                |   | 129,441
|Increased cost over LIFO cost               |  |             | 170     |                |   | 170    
|                                            |  |             |         |                |   |        
|                                            |  | $           | 140,540 |                | $ | 129,611
|                                            |  |             |         |                |   |        



Stores and spare parts
inventory balances of $21.1 million at July 4, 2004 and $21.4 million at January 3, 2004 are valued at average cost and included on the raw materials, work in process and supplies line. Inventories valued using the FIFO method approximate 16% of the
Companys total inventory balance at July 4, 2004 and 11% at January 3, 2004.



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6. PROPERTY, PLANT AND EQUIPMENT



Property, plant and equipment balances consist of the following (dollars in
thousands):



|                           |  |             |          |   |                |   |          |  
|-------------------------- |  | ----------- | -------- | - | -------------- | - | -------- | -
|                           |  | July 4,2004 |          |   | January 3,2004 |  
|Land and improvements      |  | $           | 9,270    |   |                | $ | 9,118    |  
|Buildings and improvements |  |             | 91,049   |   |                |   | 93,909   |  
|Machinery and equipment    |  |             | 491,339  |   |                |   | 488,282  |  
|Software                   |  |             | 27,874   |   |                |   | 27,447   |  
|Capital lease              |  |             | 4,764    |   |                |   | 4,764    |  
|Construction in progress   |  |             | 29,097   |   |                |   | 22,543   |  
|                           |  |             |          |   |                |   |          |  
|                           |  |             | 653,393  |   |                |   | 646,063  |  
|Accumulated depreciation   |  |             | (154,758 | ) |                |   | (123,544 | )
|                           |  |             |          |   |                |   |          |  
|                           |  | $           | 498,635  |   |                | $ | 522,519  |  
|                           |  |             |          |   |                |   |          |  



Depreciation expense
for the three months ended July 4, 2004 and June 29, 2003 approximated $17.2 million and $15.2 million, respectively. Depreciation expense for the six months ended July 4, 2004 and June 29, 2003 approximated $34.5 million and $30.3 million,
respectively. Depreciation expense of approximately $14.3 million and $12.9 million for the three months ended July 4, 2004 and June 29, 2003, respectively, related to manufacturing assets and was recorded within cost of sales. Depreciation expense
of approximately $28.7 million and $25.7 million for the six months ended July 4, 2004 and June 29, 2003, respectively, related to manufacturing assets and was recorded within cost of sales. Depreciation expense of approximately $2.9 million and
$2.3 million for the three months ended July 4, 2004 and June 29, 2003, respectively, related to corporate administrative assets and was recorded within selling, general and administrative expenses. Depreciation expense of approximately $5.8 million
and $4.6 million for the six months ended July 4, 2004 and June 29, 2003, respectively, related to corporate administrative assets and was recorded within selling, general and administrative expenses.



7. OTHER ASSETS



Other assets consist of the following (dollars in thousands):



|                      |  |             |        |                |   |      
|--------------------- |  | ----------- | ------ | -------------- | - | -----
|                      |  | July 4,2004 |        | January 3,2004
|Deferred debt expense |  | $           | 12,382 |                | $ | 6,195
|Other                 |  |             | 4,233  |                |   | 3,775
|                      |  |             |        |                |   |      
|                      |  | $           | 16,615 |                | $ | 9,970
|                      |  |             |        |                |   |      



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



8. OTHER ACCRUED LIABILITIES



Other accrued liabilities consist of the following (dollars in thousands):



|                                           |  |             |        |                |   |       
|------------------------------------------ |  | ----------- | ------ | -------------- | - | ------
|                                           |  | July 4,2004 |        | January 3,2004
|Payroll                                    |  | $           | 16,272 |                | $ | 10,819
|Trade discounts                            |  |             | 28,524 |                |   | 27,004
|Workers compensation                      |  |             | 4,335  |                |   | 4,604 
|Accrued insurance                          |  |             | 2,235  |                |   | 2,325 
|Other accrued taxes                        |  |             | 2,945  |                |   | 2,032 
|Postretirement benefits other than pension |  |             | 4,131  |                |   | 4,131 
|Lower Fox River liability                  |  |             | 9,767  |                |   | 9,767 
|Other                                      |  |             | 9,599  |                |   | 16,500
|                                           |  |             |        |                |   |       
|                                           |  | $           | 77,808 |                | $ | 77,182
|                                           |  |             |        |                |   |       



9. NEW ACCOUNTING
PRONOUNCEMENTS



In January 2003, the FASB issued
FASB Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities. This interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business
enterprises of variable interest entities. FIN 46 explains the concept of a variable interest entity and requires consolidation by the primary beneficiary where there is a controlling financial interest in a variable interest entity or where the
variable interest entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties. In December 2003, the FASB released a revised version of FIN 46 (hereafter referred to
as FIN 46R) clarifying certain aspects of FIN 46 and providing certain entities with exemptions from the requirements of FIN 46. FIN 46R applies immediately for Appleton to variable interest entities created after December 31, 2003, and applies for
the first reporting period beginning after December 15, 2004 to variable interest entities in which an enterprise holds a variable interest that was acquired before January 1, 2004. Appleton is currently evaluating the impact of this statement.



During December 2003, the FASB revised SFAS No. 132,
Employers Disclosures about Pensions and Other Postretirement Benefits, to require additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit
postretirement plans. This statement also requires interim period disclosure of the components of net periodic benefit cost, and if significantly different from previously disclosed amounts, the amounts of contributions and projected contributions
to fund pension plans and other postretirement benefit plans. These interim disclosures were effective for Appleton in the first quarter of 2004.



In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) introduced a prescription drug benefit
under Medicare, as well as a federal subsidy to sponsors of retiree health care benefit plans. In May 2004, the FASB issued FASB Staff Position (FSP) No. FAS 106-2, Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003. Appleton is a sponsor of postretirement health care plans that provide prescription drug benefits. In accordance with this FSP, any measures of the accumulated postretirement
benefit obligation or net periodic postretirement benefit cost in the financial statements or accompanying notes do not reflect the effects of the Act on the plans. FSP-106-2 is effective for Appleton in the third quarter of 2004. Appleton is
currently evaluating the impact of this FSP on its consolidated financial statements.



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



10. PENSION BENEFITS



The Company has various defined benefit pension plans and a defined contribution pension plan. The components of the corresponding net periodic pension
cost include the following (dollars in thousands):



|                               |  |                                       |        |   |                                        |   |        |                                     |  |   |                                      |   |  |   |        |  
|------------------------------ |  | ------------------------------------- | ------ | - | -------------------------------------- | - | ------ | ----------------------------------- |  | - | ------------------------------------ | - |  | - | ------ | -
|                               |  | For the ThreeMonths EndedJuly 4, 2004 |        |   | For the ThreeMonths EndedJune 29, 2003 |   |        | For the SixMonths EndedJuly 4, 2004 |  |   | For the SixMonths EndedJune 29, 2003 |  
|Net periodic benefit cost      |  |                                       |        |   |                                        |   |        |                                     |  |   |                                      |   |  |   |        |  
|Service cost                   |  | $                                     | 1,767  |   |                                        | $ | 1,515  |                                     |  | $ | 3,533                                |   |  | $ | 3,029  |  
|Interest cost                  |  |                                       | 5,772  |   |                                        |   | 3,483  |                                     |  |   | 9,418                                |   |  |   | 6,967  |  
|Expected return on plan assets |  |                                       | (6,462 | ) |                                        |   | (4,470 | )                                   |  |   | (10,731                              | ) |  |   | (8,939 | )
|Amortization of                |  |                                       |        |   |                                        |   |        |                                     |  |   |                                      |   |  |   |        |  
|Prior service cost             |  |                                       | 2      |   |                                        |   | 2      |                                     |  |   | 4                                    |   |  |   | 4      |  
|Actuarial loss                 |  |                                       | 191    |   |                                        |   |       |                                     |  |   | 382                                  |   |  |   |       |  
|                               |  |                                       |        |   |                                        |   |        |                                     |  |   |                                      |   |  |   |        |  
|Net periodic benefit cost      |  | $                                     | 1,270  |   |                                        | $ | 530    |                                     |  | $ | 2,606                                |   |  | $ | 1,061  |  
|                               |  |                                       |        |   |                                        |   |        |                                     |  |   |                                      |   |  |   |        |  



The Company expects to
contribute $6 million to its pension plan in calendar 2004 for plan year 2003.



11. POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS



Appleton has defined postretirement benefit plans that provide medical, dental and life insurance for certain retirees and eligible dependents. The components of other postretirement benefit cost include the following (dollars in
thousands):



|                          |  |                                       |       |                                        |   |                                     |  |                                      |       |  |   |      
|------------------------- |  | ------------------------------------- | ----- | -------------------------------------- | - | ----------------------------------- |  | ------------------------------------ | ----- |  | - | -----
|                          |  | For the ThreeMonths EndedJuly 4, 2004 |       | For the ThreeMonths EndedJune 29, 2003 |   | For the SixMonths EndedJuly 4, 2004 |  | For the SixMonths EndedJune 29, 2003
|Net periodic benefit cost |  |                                       |       |                                        |   |                                     |  |                                      |       |  |   |      
|Service cost              |  | $                                     | 287   |                                        | $ | 260                                 |  | $                                    | 574   |  | $ | 520  
|Interest cost             |  |                                       | 1,070 |                                        |   | 1,106                               |  |                                      | 2,140 |  |   | 2,212
|                          |  |                                       |       |                                        |   |                                     |  |                                      |       |  |   |      
|Net periodic benefit cost |  | $                                     | 1,357 |                                        | $ | 1,366                               |  | $                                    | 2,714 |  | $ | 2,732
|                          |  |                                       |       |                                        |   |                                     |  |                                      |       |  |   |      



12. COMMITMENTS AND CONTINGENCIES



Lower Fox River



Various state and federal government agencies and Native American
tribes have asserted claims against Appleton and other parties with respect to historic discharges of polychlorinated biphenyls (PCBs) into the Lower Fox River in Wisconsin.



Carbonless paper containing PCBs was manufactured at what is currently the Appleton plant from 1954 until 1971. Wastewater
from the Appleton plant, the Combined Locks paper mill now owned by Appleton Coated LLC (which is owned by AWAs ultimate parent) and from other local industrial facilities carried PCBs into the Lower Fox River during this time period. As a
result, there are allegedly eleven million cubic yards of PCB-contaminated sediment spread over 39 miles of the Lower Fox River. Low levels of PCBs have also been washed by the Lower Fox River into Green Bay, which is part of Lake Michigan.



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In June 1997, the EPA published notice that it intended to
list the Lower Fox River on the National Priorities List of Contaminated Sites pursuant to the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund). The EPA identified seven
potentially responsible parties (PRPs) for PCB contamination in the Lower Fox River, including NCR Corporation (NCR) and Appleton as the former and current owners and operators of the Appleton plant, and the owners of five
paper reprocessing mills located on the Fox River, including Georgia-Pacific, P.H. Glatfelter Company, WTM I Co., owned by Chesapeake Corporation, Riverside Paper Corporation and U.S. Paper Mills Corp., which is now owned by Sonoco Products Company.



On January 7, 2003, the Wisconsin Department of Natural
Resources (DNR) issued a Record of Decision (ROD), with which the United States Environmental Protection Agency (EPA) concurred, on the first two segments of the river, which are largely upstream of the Appleton
plant. The ROD provides for dredging in the first segment and monitored natural recovery in the second segment. However, the ROD also provides that up to 25% of the remedy in the first segment may consist of capping if dredging proves not to be
cost-effective and certain conditions are met. It is Appletons position that neither Appleton nor NCR has any responsibility or liability for PCB contamination in the first segment of the Lower Fox River. On July 28, 2003, the DNR and EPA
issued a ROD covering the third, fourth and fifth segments of the Lower Fox River (which includes Green Bay) which also provides for substantial dredging in that portion of the river.



In the two RODs, the DNR estimates total costs for the Lower Fox River
remedial action plan of approximately $400 million, an increase of $67 million over prior estimates, over a 7 to 18 year time period. Most of the estimated costs relate to the removal of large quantities of sediment from the Lower Fox River by
dredging, dewatering of the dredged materials, treatment of the dredge water and off-site disposal of the remaining solids. Based on cost estimates of large-scale dredging response actions at other sites and many subjective assumptions regarding the
work to be done, engineers engaged by several of the PRPs have estimated that the cost of remediation work in the Lower Fox River could be between $740 million and $1.6 billion. The DNR strongly disputes this analysis and continues to believe that
its cost estimates are accurate.



Appleton does not believe
that the remedial action proposed by the DNR in the two RODs is appropriate or cost-effective. Appleton, along with the other PRPs, has developed a substantial body of evidence that Appleton believes demonstrates that selection of alternatives
involving active, river-wide remediation, particularly massive dredging, would be inappropriate and unnecessary. There is ongoing vigorous debate within the scientific, regulatory, legal, public policy and legislative communities over how to
properly manage contaminated sediments. Although Appleton believes that the remedy adopted in the RODs is inappropriate and may be substantially modified and improved over time through further design and experience, the issuance of the RODs greatly
reduces the uncertainty about the remedy that will be implemented in the Lower Fox River.



In October 2000, the U.S. Fish and Wildlife Service (FWS) released a proposed restoration and compensation determination plan presenting the federal and tribal natural resource trustees planned
approach for restoring natural resources injured by PCBs and calculating the potential natural resource damages (NRDs) under different remedial action scenarios. The final NRD valuation will depend on the extent of PCB cleanup; however,
the proposed plan estimates that NRDs will fall in the range of $176 million to $333 million for all PRPs in the aggregate. The total costs estimated by the DNR, EPA and FWS for the proposed remediation and NRD discussed above range from $576
million to $733 million. Over the past several years and at various natural resource damage sites, the FWS and other government agencies have settled NRD claims for amounts substantially less than original estimates or claims. In June 2002, the
state and federal trustees announced a proposed settlement of their NRD claims against Fort James Operating Company, a subsidiary of Georgia-Pacific Corporation (Fort James), the owner of one of the reprocessing mills. Under the
settlement, Fort James would pay for or conduct restoration projects with a total cost of approximately $12 million. The proposed settlement



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was challenged by an environmental group in a case brought before the U.S.
District Court in Milwaukee. On March 19, 2004, the U.S. District Court rejected the challenge and granted the state and federal trustees motion to enter the consent decree. Appleton anticipates the actual costs for the PRPs to settle NRD
claims related to the Lower Fox River to be significantly less than the initial range of $176 million to $333 million.



Appleton purchased the Appleton plant from NCR in 1978, after the use of PCBs in the manufacturing process was discontinued. Nevertheless, pursuant to
CERCLA, both Appleton and NCR are viewed by the EPA as PRPs. Accordingly, Appleton and NCR asserted indemnity claims against each other pursuant to the terms of the agreement for the purchase of the assets of the business in 1978. In order to
resolve indemnification obligations to each other, Appleton entered into an interim settlement agreement with NCR in 1998 under which the parties agreed to share both defense and liability costs arising from the Lower Fox River.



A study performed by the FWS in 2000 provided a preliminary estimate of the
amount of PCBs discharged into the Lower Fox River by each PRP and concluded that the discharges from the Appleton plant and the Combined Locks paper mill (which Appleton formerly owned and which is now owned by an affiliate of AWA) represented a
percentage in the range of 36% to 52% of the total PCBs discharged. These preliminary estimates have not yet been finalized by the FWS and may be revised. The FWS analysis will not be binding on the PRPs. The final allocation of liability among the
PRPs will be determined by negotiation, litigation or other dispute resolution process. Based on historical and technical analyses performed by environmental engineers Appleton has engaged, Appleton believes that the percentage of PCBs discharged
from the Appleton and Combined Locks facilities is less than 20% of the total discharged by all the PRPs. A portion of Appletons potential liability for the Lower Fox River may be joint and several. If, in the future, one or more of the other
PRPs were to become insolvent or unable to pay their respective share(s) of the potential liability, Appleton could be responsible for a portion of their share(s). Based on a review of publicly available financial information about the other PRPs,
Appleton believes that the other PRPs will be required, and have adequate financial resources, to pay their share of the remediation and natural resource damage claims for the Lower Fox River.



Appleton entered into a consent decree on December 10, 2001 with NCR, the
DNR, the Wisconsin Department of Justice, the EPA, the FWS, the U.S. Department of Justice, the National Oceanic and Atmospheric Administration, and the Oneida and Menomonee Indian Tribes which are collectively referred to as the intergovernmental
partners, or IGP. Pursuant to the consent decree, Appleton and NCR agreed to provide up to $41.5 million over a period of four years, to a maximum of $10.4 million per year, for interim restoration and remediation efforts directed by the IGP.
Appleton and NCR will each pay approximately half of the amounts paid under the consent decree. Through the first half of 2004, Appleton has paid approximately $8.4 million under the consent decree. Under the consent decree, the IGP agree not to sue
or take administrative action against Appleton and NCR during the four-year period including pursuant to any claims that could be made as a result of the issuance of the ROD. The consent decree does not constitute a final settlement with the IGP or
provide protection against future claims against Appleton and NCR; however, under the decree, Appleton and NCR will receive full credit against remediation costs and NRD claims for all monies expended for restoration and remediation of the Lower Fox
River during the interim period including pursuant to any claims that could be made as a result of the issuance of the RODs. Appleton recorded a charge of $19.2 million for its discounted share of the arrangement during the first quarter of 2001. At
July 4, 2004 this liability approximated $14.0 million.



A
precise estimate of Appletons ultimate share of remediation and natural resource damage liability cannot be made at this time due to uncertainties with respect to: the scope and cost of implementing the final remediation plan; the scope of
restoration and final valuation of federal and state NRD assessments; the evolving nature of remediation and restoration technologies and governmental policies; and Appletons share of remediation and NRD costs relative to the other PRPs.
However, the issuance of the RODs greatly reduces the uncertainty about the remedy that will be implemented in the Lower Fox River and provides Appleton the ability



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to reasonably estimate its potential liability. Accordingly, Appleton has
recorded a reserve for this environmental liability. At January 3, 2004 this reserve approximated $109.1 million. During the first half of 2004, the total reserve was accreted by $3.5 million while payments against the reserve totaled $3.4 million.
This resulted in a remaining reserve of $109.2 million as of July 4, 2004, of which $9.8 million is recorded in other accrued liabilities and $99.4 million is recorded as an environmental liability.



As part of the November 9, 2001 acquisition, AWA agreed to indemnify Appleton
for the first $75 million and for all amounts over $100 million in liabilities relating to the Lower Fox River (see Note 2 Acquisition of Businesses). At July 4, 2004, the total indemnification receivable from AWA is $86.2 million, of
which, $9.8 million is recorded in other current assets and $76.4 million is recorded as an environmental indemnification receivable. The $23.0 million difference between the reserve and the indemnification receivable represents the discounted share
of Lower Fox River costs for which Appleton is responsible. The $21.0 million charge was recorded against earnings in 2002 and has accreted to $23.0 million through the first half of 2004. This discounted share was calculated using a discount rate
of 6.0%, which represents Appletons estimate of the fair market interest rate at which this liability could be settled in an arms length transaction. This $21.0 million amount will accrete to $25.0 million by the end of 2005.



A summary of the indemnification receivable/environmental liability is
below (dollars in thousands):



|                                                                                                                                                          |  |                                        |         |   |                        |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | ------- | - | ---------------------- | - | -------- | -
|                                                                                                                                                          |  | EnvironmentalIndemnificationReceivable |         |   | EnvironmentalLiability |  
|Establishment of reserve for 2001 IGP consent decree                                                                                                      |  | $                                      |        |   |                        | $ | (19,209  | )
|Accretion of Lower Fox River environmental liability                                                                                                      |  |                                        |        |   |                        |   | (747     | )
|Fair market valuation of AWA indemnification receivable and the Lower Fox River liability as of the November 9, 2001 acquisition
date                     |  |                                        | 20,380  |   |                        |   | (424     | )
|                                                                                                                                                          |  |                                        |         |   |                        |   |          |  
|Balance, December 29, 2001                                                                                                                                |  | $                                      | 20,380  |   |                        | $ | (20,380  | )
|Establishment of additional indemnification receivable/environmental liability associated with the issuance of the first ROD on January 7,
2003           |  |                                        | 66,146  |   |                        |   | (66,146  | )
|Establishment of reserve for Appletons portion of the Lower Fox River environmental liability in accordance with the Fox River
Indemnification agreement |  |                                        |        |   |                        |   | (21,017  | )
|Payments made for indemnification receivable/environmental liability                                                                                      |  |                                        | (14,077 | ) |                        |   | 14,077   |  
|Accretion of Lower Fox River indemnification receivable/environmental liability                                                                           |  |                                        | 1,052   |   |                        |   | (1,052   | )
|                                                                                                                                                          |  |                                        |         |   |                        |   |          |  
|Balance, December 28, 2002                                                                                                                                |  | $                                      | 73,501  |   |                        | $ | (94,518  | )
|Establishment of additional indemnification receivable/environmental liability associated with the issuance of the second ROD on July 28,
2003            |  |                                        | 15,581  |   |                        |   | (15,581  | )
|Payments made for indemnification receivable/environmental liability                                                                                      |  |                                        | (6,867  | ) |                        |   | 6,867    |  
|Accretion of Lower Fox River indemnification receivable/environmental liability                                                                           |  |                                        | 4,582   |   |                        |   | (5,864   | )
|                                                                                                                                                          |  |                                        |         |   |                        |   |          |  
|Balance, January 3, 2004                                                                                                                                  |  | $                                      | 86,797  |   |                        | $ | (109,096 | )
|Payments made for indemnification receivable/environmental liability                                                                                      |  |                                        | (3,419  | ) |                        |   | 3,419    |  
|Accretion of Lower Fox River indemnification receivable/environmental liability                                                                           |  |                                        | 2,815   |   |                        |   | (3,475   | )
|                                                                                                                                                          |  |                                        |         |   |                        |   |          |  
|Balance, July 4, 2004                                                                                                                                     |  | $                                      | 86,193  |   |                        | $ | (109,152 | )
|                                                                                                                                                          |  |                                        |         |   |                        |   |          |  



Appleton used the
estimates described below, including the most recent government agency estimates, in evaluating its Lower Fox River environmental liability: (1) total costs for remediation of $480 million, based on



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the DNRs estimate of $400 million in total costs for remediation,
plus a 20% contingency; (2) the FWS preliminary estimate that discharges from the Appleton plant and the Combined Locks mill represent 36% to 52% of the total PCBs discharged by the PRPs, which is substantially greater than Appletons estimate
(Appleton assumes that Appleton and NCR are primarily responsible for only the discharges from the Appleton and Combined Locks facilities and not for other discharges.); (3) costs to settle NRD claims against Appleton and NCR, estimated at $20
million or less, based on the IGPs $12 million settlement of NRD claims against Fort James; (4) Appletons responsibility for about half of the claims asserted against Appleton and NCR, based on the interim settlement agreement with NCR,
the terms of which are confidential; and (5) $20 million in fees and expenses. Because of the numerous uncertainties underlying these estimates, it is possible that Appletons share of costs could be higher.



West Carrollton Mill



The West Carrollton mill operates pursuant to various state and federal
permits for discharges and emissions to air and water. As a result of the de-inking of carbonless paper containing PCBs through the early 1970s, there have been releases of PCBs and volatile organic compounds into the soil in the area of the
wastewater impoundments at the West Carrollton facility and low levels of PCBs have been detected in groundwater immediately under this area. In addition, PCB contamination is present in sediment in the adjacent Great Miami River, but it is believed
that this contamination is from a source other than the West Carrollton mill.



Based on investigation and delineation of PCB contamination in soil and groundwater in the area of the wastewater impoundments, Appleton believes that it could be necessary to undertake remedial action in the future,
although Appleton is currently under no obligation to do so. Appleton has not had any discussions or communications with any federal, state or local agencies or authorities regarding remedial action to address PCB contamination at the West
Carrollton mill. Remedial action to address PCB contamination in the area of the wastewater impoundments is expected to involve construction of a cap to prevent exposure to PCBs. In addition, remedial action could involve long-term monitoring of
groundwater or the construction and operation of a groundwater pump-and-treat system to prevent migration of PCB contamination in groundwater, and the removal and disposal of PCB-contaminated sediment in the Great Miami River. The cost for remedial
actionincluding installation of a cap, long-term pumping, treating and/or monitoring of groundwater and removal of sediment in the Great Miami Riveris estimated to range up to approximately $10.5 million, with approximately $3 million in
short-term capital costs and the remainder to be incurred over a period of 30 years. However, costs could exceed this amount if additional contamination is discovered, if additional remedial action is necessary or if the remedial action costs are
more than expected.



Because of the uncertainty surrounding the
ultimate course of action for the West Carrollton mill, the Great Miami River remediation and Appletons share of these remediation costs, if any, no provision has been recorded in the accompanying financial statements for estimated remediation
costs. In conjunction with the acquisition of the Company in 2001, AWA agreed to indemnify the Company for 50% of all environmental liabilities up to $5.0 million and 100% of all such environmental costs exceeding $5.0 million. In addition, the
former owner and operator of the West Carrollton mill may be liable for all or part of the cost of remediation of historic PCB contamination. Other than the PCB contamination in the area of the wastewater impoundments, there are no other known
material liabilities with respect to environmental issues at the West Carrollton mill.



Other



From time to
time, Appleton may be involved in product liability and various other suits incident to the operation of its business. A comprehensive insurance program is maintained and estimated costs are recorded for claims and suits of this nature. It is
managements opinion that none of these claims or suits will have a materially adverse effect on the Companys financial position, results of operations or cash flows.



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13. EMPLOYEE STOCK OWNERSHIP PLAN



The Appleton Papers Retirement Savings Plan, was amended and restated
effective as of January 1, 2001, in the form of the Appleton Papers Retirement Savings and Employee Stock Ownership Plan (KSOP). The KSOP includes a separate employee stock ownership plan component (ESOP). The KSOP is a
tax-qualified retirement plan that also contains a 401(k) feature, which provides participants the ability to make pre-tax contributions to the KSOP by electing to defer a percentage of their compensation. The ESOP is a tax-qualified employee stock
ownership plan that is designed to invest primarily in the common stock of PDC.



Eligible participants, as named fiduciaries under ERISA, were offered a one-time irrevocable election to acquire a beneficial interest in the common stock of PDC by electing to direct the transfer of all
or a portion of their existing account balances in the KSOP and the 401(a) plan (Appleton Papers Inc. Retirement Medical Savings Plan) to the Company Stock Fund. The total proceeds transferred by eligible participants to the Company Stock Fund were
approximately $106.8 million. All proceeds of the offering were used by the ESOP trustee to purchase 10,684,373 shares of PDC common stock. As a result of this purchase, the ESOP owns 100% of the common stock of PDC.



The value of each participants account balance will be paid to that
participant, or that participants beneficiary, in the case of the participants death, upon the participants retirement, death, disability, resignation, dismissal or permanent layoff. Requests for lump sum distributions from the
Company Stock Fund will be granted in accordance with a uniform, nondiscriminatory policy established by the ESOP committee. In general, all requests for lump sum distributions in any plan year will be granted to the extent that the aggregate amount
requested does not exceed the amount of new deferrals to the Company Stock Fund, less any distributions that must be made in accordance with the statutory requirements and installment distributions the KSOP is obligated to make under prior year
distribution elections. Covenants in the agreements providing for the new senior credit facility, the Senior Notes and the Senior Subordinated Notes restrict Appletons ability to pay dividends to PDC which could limit PDCs ability to
repurchase shares distributed to ESOP participants who have terminated employment or who are entitled to diversification rights. PDC has obligations to make distributions to former participants in the ESOP under ERISA and these obligations may
supersede the terms of the respective agreements. If lump sum distributions cannot be made, distributions to former participants will be made in up to five equal annual installments.



Appletons matching contributions charged to expense amounted to $2.0 million and $1.9 million for the three months
ended July 4, 2004 and June 29, 2003, respectively, all of which will be deposited into the Company Stock Fund. Appletons matching contributions charged to expense for the six months ended July 4, 2004 and June 29, 2003 were $3.9
million and $4.3 million, respectively, all of which will be deposited into the Company Stock Fund. As a result of hardship withdrawals, diversification and employee terminations, 745,131 shares of PDC redeemable common stock were repurchased during
the first half of 2004 at an aggregate price of $17.4 million. During the same period, the ESOP trustee purchased 181,410 shares of PDC redeemable common stock for an aggregate price of $4.2 million from pre-tax deferrals, rollovers and loan
payments made by employees, as well as interest received by the trust, during the first half of 2004, while Appletons matching deferrals over this same period resulted in an additional 166,527 shares of redeemable common stock being issued.



In accordance with EITF Topic D-98, redeemable equity
securities are required to be accreted (i.e., increased) so the amount in the balance sheet reflects the estimated amount redeemable at the earliest redemption date based upon the redemption value at each period end. Redeemable common stock is being
accreted up to the earliest redemption date based upon the estimated fair market value of the redeemable common stock as of July 4, 2004. The earliest redemption date occurs when the holder reaches 55 years of age and has 10 years of
participation in the KSOP. At that point, the holder has the right to make diversification elections for a period of



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six years. Appleton accreted the redeemable common stock by $14.3 million
for the six months ended July 4, 2004. Based upon the estimated fair value of the redeemable common stock, an ultimate redemption liability of approximately $306 million was determined. The redeemable common stock recorded book value as of
July 4, 2004 was $163 million, which leaves a remaining unrecognized liability to be accreted of approximately $143 million. The fair value of the redeemable common stock is determined by an independent, third party appraiser selected by State
Street Global Advisors, the ESOP Trustee, as required by law and the ESOP. Such valuations are made as of June 30 and December 31. Until the independent valuation is received, the fair value of the stock is estimated by management. Because the
calculations of the third party appraiser are not provided by the ESOP Trustee to management, these interim estimates as of the first and third quarter of each year may differ from the values determined by the appraiser as of June 30 and December
31. Adjustments (if any) as of the first quarter and third quarter of each year will be recorded when the independent valuation is received. The accretion is being charged to retained earnings as redeemable common stock is the only class of shares
outstanding.



14. LONG-TERM OBLIGATIONS



Long-term obligations, excluding the capital lease obligation, consist of
the following (dollars in thousands):



|                                                                                                                                             |  |             |         |   |                |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ------- | - | -------------- | - | ------- | -
|                                                                                                                                             |  | July 4,2004 |         |   | January 3,2004 |  
|Senior secured variable rate note payable at LIBOR plus 3.0%, $2,330 due quarterly ending November 8, 2005                                   |  | $           |        |   |                | $ | 26,752  |  
|Senior secured variable rate note payable at LIBOR plus 2.5%, $327 due quarterly with $127,711 due November 8, 2006                          |  |             |        |   |                |   | 140,000 |  
|Senior secured variable rate note payable at LIBOR plus 2.25%, $625 due quarterly with $235,625 due June 11, 2010                            |  |             | 250,000 |   |                |   |        |  
|Revolving line of credit at LIBOR plus 3.0%                                                                                                  |  |             |        |   |                |   | 10,000  |  
|                                                                                                                                             |  |             |         |   |                |   |         |  
|                                                                                                                                             |  |             | 250,000 |   |                |   | 176,752 |  
|Less obligations due within one year                                                                                                         |  |             | (2,500  | ) |                |   | (31,350 | )
|                                                                                                                                             |  |             |         |   |                |   |         |  
|                                                                                                                                             |  | $           | 247,500 |   |                | $ | 145,402 |  
|Unsecured variable rate industrial development bonds, 1. 3% average interest rate at July 4, 2004, $2,650 due in 2013 and $6,000 due in
2027 |  |             | 8,650   |   |                |   | 8,650   |  
|Senior notes payable at 8.125%, due June 15, 2011                                                                                            |  |             | 185,000 |   |                |   |        |  
|Senior subordinated notes payable at 12.5%, due December 15, 2008                                                                            |  |             | 7,000   |   |                |   | 199,958 |  
|Senior subordinated notes payable at 9.75%, due June 15, 2014                                                                                |  |             | 150,000 |   |                |   |        |  
|Deferred payment obligation, due May 8, 2010 at 10% per annum compounded semi-annually to the date of repayment                              |  |             |        |   |                |   | 172,742 |  



On November 9, 2001,
Appleton entered into a $340 million senior credit facility, which we refer to as the old senior credit facility. The old senior credit facility included the following: a four-year credit facility of up to $75 million for revolving loans, including
letters of credit; a four-year senior secured note of $115 million; and a five-year senior secured note of $150 million. The old senior credit facility was unconditionally, jointly and severally guaranteed by PDC and by WTA Inc., C&H Packaging
Company, Inc., American Plastics Company, Inc., American Real Estate Corporation, Rose Holdings Limited, Bemrose Group Limited, The Henry Booth Group Limited, BemroseBooth Limited, HBGI Holdings Limited, Bemrose Security & Promotional Printing
Limited and BemroseBooth USA, Inc., each of which is a direct or indirect wholly-owned subsidiary of Appleton.



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From November 18, 2002 through April 1, 2003 the
Companys defined leverage ratio was calculated at less than 2.00 to 1.00 but greater than or equal to 1.50 to 1.00 and, as a result, the interest rate on the $115 million senior secured note and the revolving credit facility was reduced to
LIBOR plus 2.5%. From April 2, 2003 through May 15, 2003, the Companys defined leverage ratio was calculated at less than 2.5 to 1.00 but greater than or equal to 2.00 to 1.00 and, as a result, the interest rate was increased to LIBOR plus
3.0%. From May 16, 2003 through August 19, 2003 the Companys defined leverage ratio was calculated at less than 2.00 to 1.00 but greater than or equal to 1.50 to 1.00 and, as a result, the interest rate was decreased to LIBOR plus
2.5%. Since August 20, 2003 and continuing through June 10, 2004, the interest rate was increased to LIBOR plus 3.0% because the Companys defined leverage ratio was calculated at less than 2.5 to 1.00 but greater than or equal to 2.00 to 1.00.



In April 2003 an amendment to the old senior credit facility
was approved by a majority of the lenders that allowed Appleton to make acquisitions of $150 million in total over the life of the term loans, with no single acquisition totaling more than $60 million. In addition, the amendment allowed for an
increase in the revolving line of credit from $75 million to $100 million should Appleton have needed to access additional funds. It also allowed Appleton to repurchase and retire an additional $50 million of aggregate principal amount of its 12.5%
Series B Senior Subordinated Notes due 2008.



In December 2003
an amendment to the old senior credit facility was approved by a majority of the lenders which amended the related financial covenants to provide additional flexibility, allow the establishment of a UK subsidiary, allow for Euro and British
Sterling borrowings, classify the acquisition of American Plastics, C & H Packaging and BemroseBooth as permitted investments, thereby preserving the $150 million limit for future acquisitions as permitted under the April 18, 2003
amendment and increased the single acquisition limit from $60 million to $75 million. In addition, the amendment also allowed for the refinancing discussed below.



Through June 5, 2002, borrowings under the $150 million senior secured note bore interest at LIBOR plus 4.25% per annum,
subject to a minimum LIBOR rate of 2.5%. On June 6, 2002, Appleton refinanced the $112.4 million remaining principal amount and replaced it with similar debt carrying a reduced interest rate of LIBOR plus 3.25%, not subject to a minimum LIBOR rate.
The terms of this refinanced debt also allowed Appleton to repurchase up to $50 million in aggregate principal amount of its 12.5% Senior Subordinated Notes due 2008. In December 2003, Appleton refinanced the remaining $83.3 million of the $150
million senior secured note and borrowed an additional $56.7 million with which to make the Bemrose Group Limited acquisition. This debt, which was similar to the previous debt, carried an interest rate of LIBOR plus 2.5%. As a result of this
refinancing, $1.4 million of deferred debt issuance costs were written off in fiscal 2003 as debt extinguishment expenses.



On December 14, 2001, Appleton issued $250 million aggregate principal amount of its 12.5% Series A Senior Subordinated Notes due 2008, which were used to
redeem in full, at par, the senior subordinated note due 2008 held by AWA (see Note 2 Acquisition of Businesses). On June 12, 2002, Appletons Registration Statement on Form S-4, relating to the offer to exchange up to $250 million
of its registered 12.5% Series B Senior Subordinated Notes due 2008 for any and all of its outstanding 12.5% Series A Senior Subordinated Notes due 2008, was declared effective by the Securities and Exchange Commission. The exchange offer closed on
July 12, 2002. The entire outstanding principal balance of Series A notes was exchanged for Series B notes. During 2002, Appleton purchased and retired $50.0 million of its Series B notes. The Company paid a premium of $1.8 million on the
purchase and retirement of these Series B notes.



On June 11,
2004 Appleton completed a voluntary refinancing of its debt. The new senior credit facility includes a six-year, $250 million term loan bearing interest at a base rate, or at LIBOR, at Appletons option, plus an applicable margin, which is
initially set at 1.25% for base rate loans and 2.25% for LIBOR loans, but which is determined by reference to a pricing grid for subsequent quarters. Mandatory principal payments of



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



$625,000 are due quarterly with the remaining balance due June 11, 2010.
The new senior credit facility also includes a five-year, $125 million revolving credit facility. The new senior credit facility contains covenants under which certain minimum leverage and coverage ratios must be met. As part of the 2004
refinancing, Appleton also issued $185 million aggregate principal amount of 8.125% Senior Notes due 2011 and $150 million aggregate principal amount of 9.75% Senior Subordinated Notes due 2014. The proceeds of the new senior credit facility were
used to repay the amounts outstanding under the old senior credit facility, plus interest, consisting of Term Loan A and Term Loan D of $14.0 million and $130.7 million, respectively. The balance of the proceeds of the new senior credit facility,
together with the proceeds of the offering of the senior notes and the senior subordinated notes, were used to repurchase approximately $193 million, plus interest, of the approximately $200 million in aggregate principal amount outstanding of the
12.5% Senior Subordinated Notes due 2008 and the deferred payment obligation. The deferred payment obligation, which was due May 8, 2010, had accreted at 10% per annum to $180.3 million as of June 11, 2004. AWA discounted this obligation by $13.2
million and accepted $167.1 million as payment in full of the obligation.



The new senior credit facility is unconditionally guaranteed by Paperweight Development Corp. and by substantially all of Appletons subsidiaries, other than certain immaterial subsidiaries. In addition, it is
secured by liens on substantially all of Appletons, the subsidiary guarantors and certain of Appletons other subsidiaries assets and by a pledge of Appletons and its subsidiaries capital stock. The Senior Notes
and Senior Subordinated Notes are unconditionally guaranteed by Paperweight Development Corp., WTA Inc., C&H Packaging Company, Inc., American Plastics Company, Inc., American Real Estate Corporation, Appleton Steam Inc., Rose Holdings
Limited, Bemrose Group Limited, The Henry Booth Group Limited, BemroseBooth Limited, HBGI Holdings Limited, Bemrose Security & Promotional Printing Limited and BemroseBooth USA, Inc. As a result of the 2004 refinancing, $4.6 million of deferred
debt issuance costs were written off. A premium of $37.2 million was also paid in conjunction with the repurchase of the 12.5% Senior Subordinated Notes. Related fees of $2.2 million were also incurred. These total costs of $44.0 million, less the
$13.2 million discount discussed above, were recorded as debt extinguishment expenses.



The one-month LIBOR rate at July 4, 2004 was 1.4%.



Prior to the June 11, 2004 refinancing, Appleton made mandatory debt repayments of $22.1 million, plus interest, during 2004 on its outstanding senior secured notes.



15. SEGMENT INFORMATION



Appleton operates in four business segments: coated solutions, thermal and advanced technical products, security products
and performance packaging. Based upon quantitative thresholds, coated solutions and the thermal and advanced technical products segment constitute Appletons reportable segments. Management evaluates the performance of the segments based
primarily on operating income. Items excluded from the determination of segment operating income are unallocated corporate charges, business development costs not associated with existing segments, interest income, interest expense, debt
extinguishment expenses, minority interest expense and foreign currency gains and losses.



The carbonless business is the largest component of the coated solutions segment. Carbonless paper is used to make multipart business forms such as invoices and credit card receipts. As part of its coated solutions
business, Appleton produces coated products for inkjet printing, point-of-sale displays and other design and print applications. Appleton reorganized its business segments in 2003, and for all periods presented, to include carbonless products with
security features in the coated solutions segment. Appleton also offers customers custom coating solutions and the potential for strategic partnerships through its engineered manufacturing solutions, or toll coating, program. This program focuses on
Appletons ability to apply barrier and/or printable



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



coatings to substrates. Appleton supplies coated solutions products to
merchants, printers and paper converters primarily in North America.



The thermal and advanced technical products segment consists of the thermal business as well as the development of non-thermal products and related substrates for the transaction and item identification markets. These products are routinely
used for point-of-sale receipts and coupons; event and transportation tickets; lottery and gaming tickets; tags for airline baggage and retail applications; and label products for grocery, shipping, medical and retail applications. Appleton supplies
thermal and advanced technical products primarily to paper converters in North America.



The security business produces products with basic security features that make them resistant to forgery and counterfeiting. From that foundation Appleton is building a comprehensive business that incorporates
security technologies including watermarks, taggants, embedded threads and fibers and machine-readable technologies. The focus of the security business is on checks, business and government documents and the emerging brand protection market. In
December 2003, Appleton acquired BemroseBooth, located in the United Kingdom, in order to gain greater access to international security product markets.



Appleton entered the performance packaging market in 2003 by acquiring two Wisconsin-based companies that produce high-quality, custom multilayered films
and commercial packaging and print and convert flexible plastic packaging materials for companies in the food processing, household and industrial product industries.



Appleton does not allocate total assets internally in assessing operating performance. Net sales, operating income and
depreciation and amortization as determined by Appleton for its reportable segments are as follows (dollars in thousands):



|                                                             |  |                                       |         |   |                                        |   |         |                                     |  |   |                                      |   |  |   |         |  
|------------------------------------------------------------ |  | ------------------------------------- | ------- | - | -------------------------------------- | - | ------- | ----------------------------------- |  | - | ------------------------------------ | - |  | - | ------- | -
|                                                             |  | For the ThreeMonths EndedJuly 4, 2004 |         |   | For the ThreeMonths EndedJune 29, 2003 |   |         | For the SixMonths EndedJuly 4, 2004 |  |   | For the SixMonths EndedJune 29, 2003 |  
|Net sales                                                    |  |                                       |         |   |                                        |   |         |                                     |  |   |                                      |   |  |   |         |  
|Coated solutions                                             |  | $                                     | 148,326 |   |                                        | $ | 157,991 |                                     |  | $ | 308,418                              |   |  | $ | 317,974 |  
|Thermal and advanced technical products                      |  |                                       | 46,603  |   |                                        |   | 42,099  |                                     |  |   | 98,565                               |   |  |   | 82,594  |  
|Other (1)                                                    |  |                                       | 38,661  |   |                                        |   | 10,559  |                                     |  |   | 77,189                               |   |  |   | 14,319  |  
|                                                             |  |                                       |         |   |                                        |   |         |                                     |  |   |                                      |   |  |   |         |  
|Total                                                        |  | $                                     | 233,590 |   |                                        | $ | 210,649 |                                     |  | $ | 484,172                              |   |  | $ | 414,887 |  
|                                                             |  |                                       |         |   |                                        |   |         |                                     |  |   |                                      |   |  |   |         |  
|Operating income (loss)                                      |  |                                       |         |   |                                        |   |         |                                     |  |   |                                      |   |  |   |         |  
|Coated solutions                                             |  | $                                     | 10,940  |   |                                        | $ | 17,562  |                                     |  | $ | 31,479                               |   |  | $ | 40,996  |  
|Thermal and advanced technical products                      |  |                                       | 1,280   |   |                                        |   | 683     |                                     |  |   | 2,878                                |   |  |   | 1,514   |  
|Other (1)                                                    |  |                                       | (718    | ) |                                        |   | (1,374  | )                                   |  |   | (1,924                               | ) |  |   | (2,213  | )
|Unallocated corporate charges and business development costs |  |                                       | (4,090  | ) |                                        |   | (2,914  | )                                   |  |   | (7,142                               | ) |  |   | (5,232  | )
|                                                             |  |                                       |         |   |                                        |   |         |                                     |  |   |                                      |   |  |   |         |  
|Total                                                        |  | $                                     | 7,412   |   |                                        | $ | 13,957  |                                     |  | $ | 25,291                               |   |  | $ | 35,065  |  
|                                                             |  |                                       |         |   |                                        |   |         |                                     |  |   |                                      |   |  |   |         |  
|Depreciation and amortization                                |  |                                       |         |   |                                        |   |         |                                     |  |   |                                      |   |  |   |         |  
|Coated solutions                                             |  | $                                     | 13,546  |   |                                        | $ | 13,751  |                                     |  | $ | 27,084                               |   |  | $ | 27,706  |  
|Thermal and advanced technical products                      |  |                                       | 3,417   |   |                                        |   | 3,059   |                                     |  |   | 6,989                                |   |  |   | 5,966   |  
|Other (1)                                                    |  |                                       | 2,772   |   |                                        |   | 749     |                                     |  |   | 5,581                                |   |  |   | 1,259   |  
|Business development costs                                   |  |                                       | 35      |   |                                        |   | 26      |                                     |  |   | 70                                   |   |  |   | 52      |  
|                                                             |  |                                       |         |   |                                        |   |         |                                     |  |   |                                      |   |  |   |         |  
|Total                                                        |  | $                                     | 19,770  |   |                                        | $ | 17,585  |                                     |  | $ | 39,724                               |   |  | $ | 34,983  |  
|                                                             |  |                                       |         |   |                                        |   |         |                                     |  |   |                                      |   |  |   |         |  

---

|(1) | Other consists of security products and performance packaging.
|--- | --------------------------------------------------------------



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



16. GUARANTOR FINANCIAL INFORMATION



Appleton (the Issuer) has issued senior notes and senior
subordinated notes (the Notes), which have been guaranteed by PDC (the Parent Guarantor) and WTA Inc., C&H Packaging Company, Inc., American Plastics Company, Inc., American Real Estate Corporation, Appleton Steam Inc.,
Rose Holdings Limited, Bemrose Group Limited, The Henry Booth Group Limited, BemroseBooth Limited, HBGI Holdings Limited, Bemrose Security & Promotional Printing Limited and BemroseBooth USA, Inc., each of which is a wholly-owned subsidiary of
Appleton, (the Subsidiary Guarantors). These guarantees are full, unconditional and joint and several.



Presented below is condensed consolidating financial information for the Parent Guarantor, the Issuer, the Subsidiary Guarantors and a wholly-owned
non-guarantor subsidiary (the Non-Guarantor Subsidiary) as of July 4, 2004 and January 3, 2004 and for the three and six months ended July 4, 2004 and June 29, 2003. This financial information should be read in conjunction with the
condensed consolidated financial statements and other notes related thereto.



The condensed consolidating financial information has been presented to show the nature of the assets held, results of operations and cash flows of the Parent Guarantor, Issuer, Subsidiary Guarantors and Non-Guarantor
Subsidiary assuming the guarantee structure of the Notes was in effect at the beginning of the periods presented. Separate financial statements for the Parent and Subsidiary Guarantors are not presented based on managements determination that
they would not provide additional information that is material to readers of these financial statements.



The new senior credit facility, the Senior Notes and the Senior Subordinated Notes place restrictions on the subsidiaries of the Issuer that would limit
dividend distributions by these subsidiaries.



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING BALANCE SHEET

July 4, 2004

(unaudited)

(dollars in thousands)



|                                                                                                                             |  |                 |         |        |   |           |                      |  |   |                         |   |  |              |        |   |              |   |          |   |  |   |          
|---------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | ------ | - | --------- | -------------------- |  | - | ----------------------- | - |  | ------------ | ------ | - | ------------ | - | -------- | - |  | - | ---------
|                                                                                                                             |  | ParentGuarantor |         | Issuer |   |           | SubsidiaryGuarantors |  |   | Non-GuarantorSubsidiary |   |  | Eliminations |        |   | Consolidated
|ASSETS                                                                                                                       |  |                 |         |        |   |           |                      |  |   |                         |   |  |              |        |   |              |   |          |   |  |   |          
|Current assets                                                                                                               |  |                 |         |        |   |           |                      |  |   |                         |   |  |              |        |   |              |   |          |   |  |   |          
|Cash and cash equivalents                                                                                                    |  | $               |        |        | $ | 47,241    |                      |  | $ | 5,717                   |   |  | $            | 2,803  |   |              | $ |         |   |  | $ | 55,761   
|Accounts receivable, net                                                                                                     |  |                 |        |        |   | 86,406    |                      |  |   | 16,009                  |   |  |              | 8,691  |   |              |   |         |   |  |   | 111,106  
|Inventories                                                                                                                  |  |                 |        |        |   | 118,348   |                      |  |   | 19,799                  |   |  |              | 2,393  |   |              |   |         |   |  |   | 140,540  
|Other current assets                                                                                                         |  |                 | 9,767   |        |   | 6,309     |                      |  |   | 3,139                   |   |  |              | 184    |   |              |   |         |   |  |   | 19,399   
|                                                                                                                             |  |                 |         |        |   |           |                      |  |   |                         |   |  |              |        |   |              |   |          |   |  |   |          
|Total current assets                                                                                                         |  |                 | 9,767   |        |   | 258,304   |                      |  |   | 44,664                  |   |  |              | 14,071 |   |              |   |         |   |  |   | 326,806  
|Property, plant and equipment, net                                                                                           |  |                 |        |        |   | 448,072   |                      |  |   | 50,508                  |   |  |              | 55     |   |              |   |         |   |  |   | 498,635  
|Investment in subsidiaries                                                                                                   |  |                 | 278,917 |        |   | 338,552   |                      |  |   |                        |   |  |              |       |   |              |   | (617,469 | ) |  |   |         
|Other assets                                                                                                                 |  |                 | 76,439  |        |   | 86,017    |                      |  |   | 83,270                  |   |  |              | 38     |   |              |   |         |   |  |   | 245,764  
|                                                                                                                             |  |                 |         |        |   |           |                      |  |   |                         |   |  |              |        |   |              |   |          |   |  |   |          
|Total assets                                                                                                                 |  | $               | 365,123 |        | $ | 1,130,945 |                      |  | $ | 178,442                 |   |  | $            | 14,164 |   |              | $ | (617,469 | ) |  | $ | 1,071,205
|                                                                                                                             |  |                 |         |        |   |           |                      |  |   |                         |   |  |              |        |   |              |   |          |   |  |   |          
|LIABILITIES, REDEEMABLE COMMON STOCK, (ACCUMULATED DEFICIT) RETAINED EARNINGS AND ACCUMULATED OTHER COMPREHENSIVE LOSS       |  |                 |         |        |   |           |                      |  |   |                         |   |  |              |        |   |              |   |          |   |  |   |          
|Current liabilities                                                                                                          |  |                 |         |        |   |           |                      |  |   |                         |   |  |              |        |   |              |   |          |   |  |   |          
|Current portion of long-term debt                                                                                            |  | $               |        |        | $ | 2,500     |                      |  | $ |                        |   |  | $            |       |   |              | $ |         |   |  | $ | 2,500    
|Accounts payable                                                                                                             |  |                 |        |        |   | 43,324    |                      |  |   | 16,565                  |   |  |              | 24     |   |              |   |         |   |  |   | 59,913   
|Due to (from) parent and affiliated companies                                                                                |  |                 | 258,761 |        |   | (65,715   | )                    |  |   | (196,914                | ) |  |              | 3,868  |   |              |   |         |   |  |   |         
|Other accrued liabilities                                                                                                    |  |                 |        |        |   | 73,058    |                      |  |   | 9,262                   |   |  |              | 2,712  |   |              |   |         |   |  |   | 85,032   
|                                                                                                                             |  |                 |         |        |   |           |                      |  |   |                         |   |  |              |        |   |              |   |          |   |  |   |          
|Total current liabilities                                                                                                    |  |                 | 258,761 |        |   | 53,167    |                      |  |   | (171,087                | ) |  |              | 6,604  |   |              |   |         |   |  |   | 147,445  
|Long-term debt                                                                                                               |  |                 |        |        |   | 598,150   |                      |  |   |                        |   |  |              |       |   |              |   |         |   |  |   | 598,150  
|Capital lease obligation                                                                                                     |  |                 |        |        |   | 3,299     |                      |  |   |                        |   |  |              |       |   |              |   |         |   |  |   | 3,299    
|Other long-term liabilities                                                                                                  |  |                 |        |        |   | 197,412   |                      |  |   | 18,582                  |   |  |              | (45    | ) |              |   |         |   |  |   | 215,949  
|Deferred payment obligation                                                                                                  |  |                 |        |        |   |          |                      |  |   |                        |   |  |              |       |   |              |   |         |   |  |   |         
|Redeemable common stock, (accumulated deficit) retained earnings and accumulated other comprehensive loss                    |  |                 | 106,362 |        |   | 278,917   |                      |  |   | 330,947                 |   |  |              | 7,605  |   |              |   | (617,469 | ) |  |   | 106,362  
|                                                                                                                             |  |                 |         |        |   |           |                      |  |   |                         |   |  |              |        |   |              |   |          |   |  |   |          
|Total liabilities, redeemable common stock, (accumulated deficit) retained earnings and accumulated other comprehensive loss |  | $               | 365,123 |        | $ | 1,130,945 |                      |  | $ | 178,442                 |   |  | $            | 14,164 |   |              | $ | (617,469 | ) |  | $ | 1,071,205
|                                                                                                                             |  |                 |         |        |   |           |                      |  |   |                         |   |  |              |        |   |              |   |          |   |  |   |          



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING BALANCE SHEET

January 3, 2004

(dollars in
thousands)



|                                                                                                                             |  |                 |         |        |   |                      |  |   |                         |   |              |   |        |              |   |          |   |  |   |          
|---------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | ------ | - | -------------------- |  | - | ----------------------- | - | ------------ | - | ------ | ------------ | - | -------- | - |  | - | ---------
|                                                                                                                             |  | ParentGuarantor |         | Issuer |   | SubsidiaryGuarantors |  |   | Non-GuarantorSubsidiary |   | Eliminations |   |        | Consolidated
|ASSETS                                                                                                                       |  |                 |         |        |   |                      |  |   |                         |   |              |   |        |              |   |          |   |  |   |          
|Current assets                                                                                                               |  |                 |         |        |   |                      |  |   |                         |   |              |   |        |              |   |          |   |  |   |          
|Cash and cash equivalents                                                                                                    |  | $               |        |        | $ | 21,020               |  | $ | 5,676                   |   |              | $ | 2,986  |              | $ |         |   |  | $ | 29,682   
|Accounts receivable, net                                                                                                     |  |                 |        |        |   | 77,627               |  |   | 32,275                  |   |              |   | 7,227  |              |   |         |   |  |   | 117,129  
|Inventories                                                                                                                  |  |                 |        |        |   | 115,803              |  |   | 11,202                  |   |              |   | 2,606  |              |   |         |   |  |   | 129,611  
|Other current assets                                                                                                         |  |                 | 9,767   |        |   | 6,949                |  |   | 1,553                   |   |              |   | 181    |              |   |         |   |  |   | 18,450   
|                                                                                                                             |  |                 |         |        |   |                      |  |   |                         |   |              |   |        |              |   |          |   |  |   |          
|Total current assets                                                                                                         |  |                 | 9,767   |        |   | 221,399              |  |   | 50,706                  |   |              |   | 13,000 |              |   |         |   |  |   | 294,872  
|Property, plant and equipment, net                                                                                           |  |                 |        |        |   | 469,504              |  |   | 52,950                  |   |              |   | 65     |              |   |         |   |  |   | 522,519  
|Investment in subsidiaries                                                                                                   |  |                 | 308,924 |        |   | 365,961              |  |   |                        |   |              |   |       |              |   | (674,885 | ) |  |   |         
|Other assets                                                                                                                 |  |                 | 77,042  |        |   | 97,934               |  |   | 77,447                  |   |              |   | 39     |              |   |         |   |  |   | 252,462  
|                                                                                                                             |  |                 |         |        |   |                      |  |   |                         |   |              |   |        |              |   |          |   |  |   |          
|Total assets                                                                                                                 |  | $               | 395,733 |        | $ | 1,154,798            |  | $ | 181,103                 |   |              | $ | 13,104 |              | $ | (674,885 | ) |  | $ | 1,069,853
|                                                                                                                             |  |                 |         |        |   |                      |  |   |                         |   |              |   |        |              |   |          |   |  |   |          
|LIABILITIES, REDEEMABLE COMMON STOCK, (ACCUMULATED DEFICIT) RETAINED EARNINGS AND ACCUMULATED OTHER COMPREHENSIVE LOSS       |  |                 |         |        |   |                      |  |   |                         |   |              |   |        |              |   |          |   |  |   |          
|Current liabilities                                                                                                          |  |                 |         |        |   |                      |  |   |                         |   |              |   |        |              |   |          |   |  |   |          
|Current portion of long-term debt                                                                                            |  | $               |        |        | $ | 31,350               |  | $ |                        |   |              | $ |       |              | $ |         |   |  | $ | 31,350   
|Accounts payable                                                                                                             |  |                 |        |        |   | 39,132               |  |   | 17,716                  |   |              |   | 22     |              |   |         |   |  |   | 56,870   
|Due to (from) parent and affiliated companies                                                                                |  |                 | 78,737  |        |   | 147,528              |  |   | (228,964                | ) |              |   | 2,699  |              |   |         |   |  |   |         
|Other accrued liabilities                                                                                                    |  |                 |        |        |   | 69,774               |  |   | 12,581                  |   |              |   | 2,423  |              |   |         |   |  |   | 84,778   
|                                                                                                                             |  |                 |         |        |   |                      |  |   |                         |   |              |   |        |              |   |          |   |  |   |          
|Total current liabilities                                                                                                    |  |                 | 78,737  |        |   | 287,784              |  |   | (198,667                | ) |              |   | 5,144  |              |   |         |   |  |   | 172,998  
|Long-term debt                                                                                                               |  |                 |        |        |   | 354,010              |  |   |                        |   |              |   |       |              |   |         |   |  |   | 354,010  
|Capital lease obligation                                                                                                     |  |                 |        |        |   | 3,504                |  |   |                        |   |              |   |       |              |   |         |   |  |   | 3,504    
|Other long-term liabilities                                                                                                  |  |                 |        |        |   | 200,576              |  |   | 21,749                  |   |              |   | 20     |              |   |         |   |  |   | 222,345  
|Deferred payment obligation                                                                                                  |  |                 | 172,742 |        |   |                     |  |   |                        |   |              |   |       |              |   |         |   |  |   | 172,742  
|Redeemable common stock, (accumulated deficit) retained earnings and accumulated other comprehensive loss                    |  |                 | 144,254 |        |   | 308,924              |  |   | 358,021                 |   |              |   | 7,940  |              |   | (674,885 | ) |  |   | 144,254  
|                                                                                                                             |  |                 |         |        |   |                      |  |   |                         |   |              |   |        |              |   |          |   |  |   |          
|Total liabilities, redeemable common stock, (accumulated deficit) retained earnings and accumulated other comprehensive loss |  | $               | 395,733 |        | $ | 1,154,798            |  | $ | 181,103                 |   |              | $ | 13,104 |              | $ | (674,885 | ) |  | $ | 1,069,853
|                                                                                                                             |  |                 |         |        |   |                      |  |   |                         |   |              |   |        |              |   |          |   |  |   |          



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JULY 4, 2004

(unaudited)

(dollars in thousands)



|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|-------------------------------------------- |  | ---------------- | ------- | - | ------ | - | ------- | --------------------- |  | - | ------------------------ | - |  | ------------ | ------ | - | ------------ | - | ------- | - |  | - | ------- | -
|                                             |  | Parent Guarantor |         |   | Issuer |   |         | Subsidiary Guarantors |  |   | Non-Guarantor Subsidiary |   |  | Eliminations |        |   | Consolidated |  
|Net sales                                    |  | $                |        |   |        | $ | 415,357 |                       |  | $ | 66,857                   |   |  | $            | 33,045 |   |              | $ | (31,087 | ) |  | $ | 484,172 |  
|Cost of sales                                |  |                  |        |   |        |   | 307,432 |                       |  |   | 51,239                   |   |  |              | 31,652 |   |              |   | (31,898 | ) |  |   | 358,425 |  
|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|Gross profit                                 |  |                  |        |   |        |   | 107,925 |                       |  |   | 15,618                   |   |  |              | 1,393  |   |              |   | 811     |   |  |   | 125,747 |  
|Selling, general and administrative expenses |  |                  |        |   |        |   | 79,302  |                       |  |   | 18,566                   |   |  |              | 1,504  |   |              |   | 255     |   |  |   | 99,627  |  
|Restructuring and other charges              |  |                  |        |   |        |   | 829     |                       |  |   |                         |   |  |              |       |   |              |   |        |   |  |   | 829     |  
|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|Operating income (loss)                      |  |                  |        |   |        |   | 27,794  |                       |  |   | (2,948                   | ) |  |              | (111   | ) |              |   | 556     |   |  |   | 25,291  |  
|Interest expense                             |  |                  | 8,252   |   |        |   | 27,201  |                       |  |   | 1,549                    |   |  |              |       |   |              |   | (10,464 | ) |  |   | 26,538  |  
|Interest income                              |  |                  | (211    | ) |        |   | (2,073  | )                     |  |   | (9,611                   | ) |  |              | (16    | ) |              |   | 10,464  |   |  |   | (1,447  | )
|Debt extinguishment expenses                 |  |                  | (13,005 | ) |        |   | 43,784  |                       |  |   |                         |   |  |              |       |   |              |   |        |   |  |   | 30,779  |  
|Intercompany royalty expense (income)        |  |                  |        |   |        |   | 5,976   |                       |  |   | (5,976                   | ) |  |              |       |   |              |   |        |   |  |   |        |  
|Loss (income) in equity investment           |  |                  | 35,326  |   |        |   | (12,282 | )                     |  |   |                         |   |  |              |       |   |              |   | (23,044 | ) |  |   |        |  
|Other loss                                   |  |                  |        |   |        |   | 514     |                       |  |   |                         |   |  |              | 240    |   |              |   | 188     |   |  |   | 942     |  
|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|(Loss) income before income taxes            |  |                  | (30,362 | ) |        |   | (35,326 | )                     |  |   | 11,090                   |   |  |              | (335   | ) |              |   | 23,412  |   |  |   | (31,521 | )
|Benefit for income taxes                     |  |                  |        |   |        |   |        |                       |  |   | (1,159                   | ) |  |              |       |   |              |   |        |   |  |   | (1,159  | )
|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|Net (loss) income                            |  | $                | (30,362 | ) |        | $ | (35,326 | )                     |  | $ | 12,249                   |   |  | $            | (335   | ) |              | $ | 23,412  |   |  | $ | (30,362 | )
|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 29, 2003

(unaudited)

(dollars in thousands)



|                                             |  |                  |         |   |        |   |         |                       |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|-------------------------------------------- |  | ---------------- | ------- | - | ------ | - | ------- | --------------------- |  | - | ----------------------- | - |  | ------------ | ------ | - | ------------ | - | ------- | - |  | - | ------- | -
|                                             |  | Parent Guarantor |         |   | Issuer |   |         | Subsidiary Guarantors |  |   | Non-GuarantorSubsidiary |   |  | Eliminations |        |   | Consolidated |  
|Net sales                                    |  | $                |        |   |        | $ | 404,920 |                       |  | $ | 6,830                   |   |  | $            | 29,630 |   |              | $ | (26,493 | ) |  | $ | 414,887 |  
|Cost of sales                                |  |                  |        |   |        |   | 296,008 |                       |  |   | 6,193                   |   |  |              | 27,229 |   |              |   | (27,381 | ) |  |   | 302,049 |  
|                                             |  |                  |         |   |        |   |         |                       |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Gross profit                                 |  |                  |        |   |        |   | 108,912 |                       |  |   | 637                     |   |  |              | 2,401  |   |              |   | 888     |   |  |   | 112,838 |  
|Selling, general and administrative expenses |  |                  |        |   |        |   | 71,663  |                       |  |   | 3,927                   |   |  |              | 1,383  |   |              |   | 800     |   |  |   | 77,773  |  
|                                             |  |                  |         |   |        |   |         |                       |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Operating income (loss)                      |  |                  |        |   |        |   | 37,249  |                       |  |   | (3,290                  | ) |  |              | 1,018  |   |              |   | 88      |   |  |   | 35,065  |  
|Interest expense                             |  |                  | 7,905   |   |        |   | 27,027  |                       |  |   | 6                       |   |  |              |       |   |              |   | (8,098  | ) |  |   | 26,840  |  
|Interest income                              |  |                  | (190    | ) |        |   | (171    | )                     |  |   | (7,911                  | ) |  |              | (13    | ) |              |   | 8,098   |   |  |   | (187    | )
|Intercompany royalty expense (income)        |  |                  |        |   |        |   | 5,806   |                       |  |   | (5,806                  | ) |  |              |       |   |              |   |        |   |  |   |        |  
|Income in equity investment                  |  |                  | (16,371 | ) |        |   | (12,335 | )                     |  |   |                        |   |  |              |       |   |              |   | 28,706  |   |  |   |        |  
|Other income                                 |  |                  |        |   |        |   |        |                       |  |   |                        |   |  |              | (1,300 | ) |              |   | 505     |   |  |   | (795    | )
|                                             |  |                  |         |   |        |   |         |                       |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Income before income taxes                   |  |                  | 8,656   |   |        |   | 16,922  |                       |  |   | 10,421                  |   |  |              | 2,331  |   |              |   | (29,123 | ) |  |   | 9,207   |  
|Provision for income taxes                   |  |                  |        |   |        |   | 551     |                       |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | 551     |  
|                                             |  |                  |         |   |        |   |         |                       |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Net income                                   |  | $                | 8,656   |   |        | $ | 16,371  |                       |  | $ | 10,421                  |   |  | $            | 2,331  |   |              | $ | (29,123 | ) |  | $ | 8,656   |  
|                                             |  |                  |         |   |        |   |         |                       |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED JULY 4, 2004

(unaudited)

(dollars in thousands)



|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|-------------------------------------------- |  | ---------------- | ------- | - | ------ | - | ------- | --------------------- |  | - | ------------------------ | - |  | ------------ | ------ | - | ------------ | - | ------- | - |  | - | ------- | -
|                                             |  | Parent Guarantor |         |   | Issuer |   |         | Subsidiary Guarantors |  |   | Non-Guarantor Subsidiary |   |  | Eliminations |        |   | Consolidated |  
|Net sales                                    |  | $                |        |   |        | $ | 198,814 |                       |  | $ | 33,828                   |   |  | $            | 16,455 |   |              | $ | (15,507 | ) |  | $ | 233,590 |  
|Cost of sales                                |  |                  |        |   |        |   | 150,557 |                       |  |   | 25,782                   |   |  |              | 15,698 |   |              |   | (16,034 | ) |  |   | 176,003 |  
|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|Gross profit                                 |  |                  |        |   |        |   | 48,257  |                       |  |   | 8,046                    |   |  |              | 757    |   |              |   | 527     |   |  |   | 57,587  |  
|Selling, general and administrative expenses |  |                  |        |   |        |   | 39,765  |                       |  |   | 9,136                    |   |  |              | 751    |   |              |   | 107     |   |  |   | 49,759  |  
|Restructuring and other charges              |  |                  |        |   |        |   | 416     |                       |  |   |                         |   |  |              |       |   |              |   |        |   |  |   | 416     |  
|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|Operating income (loss)                      |  |                  |        |   |        |   | 8,076   |                       |  |   | (1,090                   | ) |  |              | 6      |   |              |   | 420     |   |  |   | 7,412   |  
|Interest expense                             |  |                  | 3,951   |   |        |   | 13,221  |                       |  |   | 1,549                    |   |  |              |       |   |              |   | (5,889  | ) |  |   | 12,832  |  
|Interest income                              |  |                  | (60     | ) |        |   | (925    | )                     |  |   | (5,139                   | ) |  |              | (10    | ) |              |   | 5,889   |   |  |   | (245    | )
|Debt extinguishment expenses                 |  |                  | (13,005 | ) |        |   | 43,784  |                       |  |   |                         |   |  |              |       |   |              |   |        |   |  |   | 30,779  |  
|Intercompany royalty expense (income)        |  |                  |        |   |        |   | 2,869   |                       |  |   | (2,869                   | ) |  |              |       |   |              |   |        |   |  |   |        |  
|Loss (income) in equity investment           |  |                  | 44,179  |   |        |   | (6,281  | )                     |  |   |                         |   |  |              |       |   |              |   | (37,898 | ) |  |   |        |  
|Other loss                                   |  |                  |        |   |        |   | 426     |                       |  |   |                         |   |  |              | 274    |   |              |   | 54      |   |  |   | 754     |  
|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|(Loss) income before income taxes            |  |                  | (35,065 | ) |        |   | (45,018 | )                     |  |   | 5,369                    |   |  |              | (258   | ) |              |   | 38,264  |   |  |   | (36,708 | )
|Benefit for income taxes                     |  |                  |        |   |        |   | (31     | )                     |  |   | (804                     | ) |  |              |       |   |              |   |        |   |  |   | (835    | )
|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|Net (loss) income                            |  | $                | (35,065 | ) |        | $ | (44,987 | )                     |  | $ | 6,173                    |   |  | $            | (258   | ) |              | $ | 38,264  |   |  | $ | (35,873 | )
|                                             |  |                  |         |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 29, 2003

(unaudited)

(dollars in thousands)



|                                             |  |                  |        |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|-------------------------------------------- |  | ---------------- | ------ | - | ------ | - | ------- | --------------------- |  | - | ------------------------ | - |  | ------------ | ------ | - | ------------ | - | ------- | - |  | - | ------- | -
|                                             |  | Parent Guarantor |        |   | Issuer |   |         | Subsidiary Guarantors |  |   | Non-Guarantor Subsidiary |   |  | Eliminations |        |   | Consolidated |  
|Net sales                                    |  | $                |       |   |        | $ | 201,835 |                       |  | $ | 6,830                    |   |  | $            | 14,881 |   |              | $ | (12,897 | ) |  | $ | 210,649 |  
|Cost of sales                                |  |                  |       |   |        |   | 150,811 |                       |  |   | 6,193                    |   |  |              | 13,695 |   |              |   | (13,430 | ) |  |   | 157,269 |  
|                                             |  |                  |        |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|Gross profit                                 |  |                  |       |   |        |   | 51,024  |                       |  |   | 637                      |   |  |              | 1,186  |   |              |   | 533     |   |  |   | 53,380  |  
|Selling, general and administrative expenses |  |                  |       |   |        |   | 35,855  |                       |  |   | 2,418                    |   |  |              | 761    |   |              |   | 389     |   |  |   | 39,423  |  
|                                             |  |                  |        |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|Operating income (loss)                      |  |                  |       |   |        |   | 15,169  |                       |  |   | (1,781                   | ) |  |              | 425    |   |              |   | 144     |   |  |   | 13,957  |  
|Interest expense                             |  |                  | 3,951  |   |        |   | 13,363  |                       |  |   | 6                        |   |  |              |       |   |              |   | (4,030  | ) |  |   | 13,290  |  
|Interest income                              |  |                  | (79    | ) |        |   | (93     | )                     |  |   | (3,954                   | ) |  |              | (8     | ) |              |   | 4,030   |   |  |   | (104    | )
|Intercompany royalty expense (income)        |  |                  |       |   |        |   | 2,857   |                       |  |   | (2,857                   | ) |  |              |       |   |              |   |        |   |  |   |        |  
|Income in equity investment                  |  |                  | (4,757 | ) |        |   | (6,173  | )                     |  |   |                         |   |  |              |       |   |              |   | 10,930  |   |  |   |        |  
|Other income                                 |  |                  |       |   |        |   | (2      | )                     |  |   |                         |   |  |              | (766   | ) |              |   | 194     |   |  |   | (574    | )
|                                             |  |                  |        |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|Income before income taxes                   |  |                  | 885    |   |        |   | 5,217   |                       |  |   | 5,024                    |   |  |              | 1,199  |   |              |   | (10,980 | ) |  |   | 1,345   |  
|Provision for income taxes                   |  |                  |       |   |        |   | 460     |                       |  |   |                         |   |  |              |       |   |              |   |        |   |  |   | 460     |  
|                                             |  |                  |        |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  
|Net income                                   |  | $                | 885    |   |        | $ | 4,757   |                       |  | $ | 5,024                    |   |  | $            | 1,199  |   |              | $ | (10,980 | ) |  | $ | 885     |  
|                                             |  |                  |        |   |        |   |         |                       |  |   |                          |   |  |              |        |   |              |   |         |   |  |   |         |  



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JULY 4, 2004

(unaudited)

(dollars in thousands)



|                                                                                                   |  |                  |          |   |        |   |          |                     |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | ---------------- | -------- | - | ------ | - | -------- | ------------------- |  | - | ----------------------- | - |  | ------------ | ------ | - | ------------ | - | ------- | - |  | - | -------- | -
|                                                                                                   |  | Parent Guarantor |          |   | Issuer |   |          | SubsidiaryGuarantor |  |   | Non-GuarantorSubsidiary |   |  | Eliminations |        |   | Consolidated |  
|Cash flows from operating activities:                                                              |  |                  |          |   |        |   |          |                     |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |          |  
|Net (loss) income                                                                                  |  | $                | (30,362  | ) |        | $ | (35,326  | )                   |  | $ | 12,249                  |   |  | $            | (335   | ) |              | $ | 23,412  |   |  | $ | (30,362  | )
|Adjustments to reconcile net (loss) income to net cash (used by) provided by operating activities: |  |                  |          |   |        |   |          |                     |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |          |  
|Depreciation and amortization                                                                      |  |                  |         |   |        |   | 35,473   |                     |  |   | 4,241                   |   |  |              | 10     |   |              |   |        |   |  |   | 39,724   |  
|Other                                                                                              |  |                  | (5,675   | ) |        |   | 11,620   |                     |  |   |                        |   |  |              | 240    |   |              |   |        |   |  |   | 6,185    |  
|Change in assets and liabilities, net                                                              |  |                  | 36,256   |   |        |   | 34,290   |                     |  |   | (43,892                 | ) |  |              | (1,267 | ) |              |   | (23,412 | ) |  |   | 1,975    |  
|                                                                                                   |  |                  |          |   |        |   |          |                     |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |          |  
|Net cash provided by (used by) operating activities                                                |  |                  | 219      |   |        |   | 46,057   |                     |  |   | (27,402                 | ) |  |              | (1,352 | ) |              |   |        |   |  |   | 17,522   |  
|Cash flows from investing activities:                                                              |  |                  |          |   |        |   |          |                     |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |          |  
|Proceeds from sale of equipment                                                                    |  |                  |         |   |        |   | 260      |                     |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | 260      |  
|Acquisition of businesses                                                                          |  |                  |         |   |        |   | (990     | )                   |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (990     | )
|Additions to property, plant and equipment                                                         |  |                  |         |   |        |   | (10,100  | )                   |  |   | (4,607                  | ) |  |              |       |   |              |   |        |   |  |   | (14,707  | )
|                                                                                                   |  |                  |          |   |        |   |          |                     |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |          |  
|Net cash used by investing activities                                                              |  |                  |         |   |        |   | (10,830  | )                   |  |   | (4,607                  | ) |  |              |       |   |              |   |        |   |  |   | (15,437  | )
|Cash flows from financing activities:                                                              |  |                  |          |   |        |   |          |                     |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |          |  
|Payments of senior secured notes payable                                                           |  |                  |         |   |        |   | (166,752 | )                   |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (166,752 | )
|Proceeds from senior secured notes payable                                                         |  |                  |         |   |        |   | 250,000  |                     |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | 250,000  |  
|Payments of senior subordinated notes payable                                                      |  |                  |         |   |        |   | (192,958 | )                   |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (192,958 | )
|Proceeds from senior notes payable                                                                 |  |                  |         |   |        |   | 185,000  |                     |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | 185,000  |  
|Proceeds from senior subordinated notes payable                                                    |  |                  |         |   |        |   | 150,000  |                     |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | 150,000  |  
|Payment of deferred payment obligation                                                             |  |                  | (167,067 | ) |        |   |         |                     |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (167,067 | )
|Debt acquisition costs                                                                             |  |                  |         |   |        |   | (12,258  | )                   |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (12,258  | )
|Payments relating to capital lease obligation                                                      |  |                  |         |   |        |   | (335     | )                   |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (335     | )
|Payments of revolving line of credit                                                               |  |                  |         |   |        |   | (10,000  | )                   |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (10,000  | )
|Due to parent and affiliated companies, net                                                        |  |                  | 180,024  |   |        |   | (213,243 | )                   |  |   | 32,050                  |   |  |              | 1,169  |   |              |   |        |   |  |   |         |  
|Proceeds from issuance of common stock                                                             |  |                  | 4,236    |   |        |   |         |                     |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | 4,236    |  
|Payments to redeem common stock                                                                    |  |                  | (17,412  | ) |        |   |         |                     |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (17,412  | )
|Increase in cash overdraft                                                                         |  |                  |         |   |        |   | 1,416    |                     |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | 1,416    |  
|                                                                                                   |  |                  |          |   |        |   |          |                     |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |          |  
|Net cash (used by) provided by financing activities                                                |  |                  | (219     | ) |        |   | (9,130   | )                   |  |   | 32,050                  |   |  |              | 1,169  |   |              |   |        |   |  |   | 23,870   |  
|Effect of foreign exchange rate changes on cash and cash equivalents                               |  |                  |         |   |        |   | 124      |                     |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | 124      |  
|Change in cash and cash equivalents                                                                |  |                  |         |   |        |   | 26,221   |                     |  |   | 41                      |   |  |              | (183   | ) |              |   |        |   |  |   | 26,079   |  
|Cash and cash equivalents at beginning of period                                                   |  |                  |         |   |        |   | 21,020   |                     |  |   | 5,676                   |   |  |              | 2,986  |   |              |   |        |   |  |   | 29,682   |  
|                                                                                                   |  |                  |          |   |        |   |          |                     |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |          |  
|Cash and cash equivalents at end of period                                                         |  | $                |         |   |        | $ | 47,241   |                     |  | $ | 5,717                   |   |  | $            | 2,803  |   |              | $ |        |   |  | $ | 55,761   |  
|                                                                                                   |  |                  |          |   |        |   |          |                     |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |          |  



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PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 29, 2003

(unaudited)

(dollars in thousands)



|                                                                                            |  |                 |         |   |        |   |         |                      |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------- |  | --------------- | ------- | - | ------ | - | ------- | -------------------- |  | - | ----------------------- | - |  | ------------ | ------ | - | ------------ | - | ------- | - |  | - | ------- | -
|                                                                                            |  | ParentGuarantor |         |   | Issuer |   |         | SubsidiaryGuarantors |  |   | Non-GuarantorSubsidiary |   |  | Eliminations |        |   | Consolidated |  
|Cash flows from operating activities:                                                       |  |                 |         |   |        |   |         |                      |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Net income                                                                                  |  | $               | 8,656   |   |        | $ | 16,371  |                      |  | $ | 10,421                  |   |  | $            | 2,331  |   |              | $ | (29,123 | ) |  | $ | 8,656   |  
|Adjustments to reconcile net income to net cash provided by (used by) operating activities: |  |                 |         |   |        |   |         |                      |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Depreciation and amortization                                                               |  |                 |        |   |        |   | 31,775  |                      |  |   | 3,204                   |   |  |              | 4      |   |              |   |        |   |  |   | 34,983  |  
|Other                                                                                       |  |                 | 7,905   |   |        |   | 7,207   |                      |  |   |                        |   |  |              | (1,300 | ) |              |   |        |   |  |   | 13,812  |  
|Change in assets and liabilities, net                                                       |  |                 | (14,420 | ) |        |   | (34,636 | )                    |  |   | (226                    | ) |  |              | (1,562 | ) |              |   | 29,123  |   |  |   | (21,721 | )
|                                                                                            |  |                 |         |   |        |   |         |                      |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Net cash provided by (used by) operating activities                                         |  |                 | 2,141   |   |        |   | 20,717  |                      |  |   | 13,399                  |   |  |              | (527   | ) |              |   |        |   |  |   | 35,730  |  
|Cash flows from investing activities:                                                       |  |                 |         |   |        |   |         |                      |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Proceeds from sale of equipment                                                             |  |                 |        |   |        |   |        |                      |  |   |                        |   |  |              |       |   |              |   |        |   |  |   |        |  
|Additions to property, plant and equipment                                                  |  |                 |        |   |        |   | (13,414 | )                    |  |   | (77                     | ) |  |              |       |   |              |   |        |   |  |   | (13,491 | )
|Acquisition of businesses                                                                   |  |                 |        |   |        |   | (50,530 | )                    |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (50,530 | )
|                                                                                            |  |                 |         |   |        |   |         |                      |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Net cash used by investing activities                                                       |  |                 |        |   |        |   | (63,944 | )                    |  |   | (77                     | ) |  |              |       |   |              |   |        |   |  |   | (64,021 | )
|Cash flows from financing activities:                                                       |  |                 |         |   |        |   |         |                      |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Payments of long-term debt                                                                  |  |                 |        |   |        |   | (29,356 | )                    |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (29,356 | )
|Payments relating to capital lease obligation                                               |  |                 |        |   |        |   | (335    | )                    |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (335    | )
|Proceeds from revolving line of credit                                                      |  |                 |        |   |        |   | 60,000  |                      |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | 60,000  |  
|Payments of revolving line of credit                                                        |  |                 |        |   |        |   | (15,000 | )                    |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (15,000 | )
|Due to parent and affiliated companies, net                                                 |  |                 | (1,010  | ) |        |   | 12,333  |                      |  |   | (13,253                 | ) |  |              | 1,930  |   |              |   |        |   |  |   |        |  
|Proceeds from issuance of redeemable common stock                                           |  |                 | 4,019   |   |        |   |        |                      |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | 4,019   |  
|Payments to redeem common stock                                                             |  |                 | (5,150  | ) |        |   |        |                      |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (5,150  | )
|Decrease in cash overdraft                                                                  |  |                 |        |   |        |   | (2,316  | )                    |  |   |                        |   |  |              |       |   |              |   |        |   |  |   | (2,316  | )
|                                                                                            |  |                 |         |   |        |   |         |                      |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Net cash (used by) provided by financing activities                                         |  |                 | (2,141  | ) |        |   | 25,326  |                      |  |   | (13,253                 | ) |  |              | 1,930  |   |              |   |        |   |  |   | 11,862  |  
|Change in cash and cash equivalents                                                         |  |                 |        |   |        |   | (17,901 | )                    |  |   | 69                      |   |  |              | 1,403  |   |              |   |        |   |  |   | (16,429 | )
|Cash and cash equivalents at beginning of period                                            |  |                 |        |   |        |   | 23,521  |                      |  |   | 23                      |   |  |              | 846    |   |              |   |        |   |  |   | 24,390  |  
|                                                                                            |  |                 |         |   |        |   |         |                      |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  
|Cash and cash equivalents at end of period                                                  |  | $               |        |   |        | $ | 5,620   |                      |  | $ | 92                      |   |  | $            | 2,249  |   |              | $ |        |   |  | $ | 7,961   |  
|                                                                                            |  |                 |         |   |        |   |         |                      |  |   |                         |   |  |              |        |   |              |   |         |   |  |   |         |  



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Item 2Managements Discussion and Analysis of Financial Condition and Results of Operations



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS



Introduction



This discussion summarizes the
significant factors affecting the consolidated operating results, financial condition and liquidity of Paperweight Development Corp. (PDC or the Company) and Appleton Papers Inc. (Appleton) for the fiscal quarter
and six-month period ended July 4, 2004. This discussion should be read in conjunction with the accompanying consolidated financial statements and related notes.



Appleton creates product solutions for customers and end users through its development and use of coating formulations and
applications as well as encapsulation, security, printing and packaging technologies. Appleton operates in four business segments: coated solutions, thermal and advanced technical products, security products and performance packaging.



Appletons carbonless business is the largest component of its coated
solutions segment. The U.S. carbonless market has been in decline since 1994. Based on internal assessments, Appleton believes the annual rates of decline in the U.S. carbonless market from 1994 to 1999 were between 1% and 7%, with a compound annual
rate of approximately 4% during this period. On the same basis, it is estimated that the U.S. carbonless paper market declined by approximately 10% in 2000 and by approximately 8% annually from 2001 through 2003, and will decline at a compound rate
of approximately 9% between 2004 and 2008. The coated solutions segment accounted for approximately 72% of Appletons total net sales in fiscal 2003.



In addition to the declining U.S. carbonless market, Appletons carbonless business is subject to the impact of increasingly competitive pricing.
Other domestic carbonless producers, wanting to maintain their market share, have increased their competitive pricing actions. In addition, foreign competitors, who serve approximately 6% of the U.S. carbonless market, use an aggressive, low-price
strategy to sell into the U.S. carbonless market, which also leads to a reduction in net selling prices. In response to this increased pricing competition, Appleton has experienced a reduction in its U.S. carbonless selling prices. However, during
the first half of 2004, Appleton was able to successfully implement a price increase for both rolls and sheets in the domestic and international markets that it serves.



The U.S. and Canadian thermal market experienced strong growth during the 1990s and is expected to continue growing as the
advantages of thermal printing become more widely recognized. These advantages include its competitive cost, quiet operation, cleanliness, speed, high print quality, reliability, portability and its use of a single consumable (thermal paper) versus
other printing systems, which require paper and ink or toner cartridges. Based on internal assessments, it is estimated that the annual rates of growth in the U.S. and Canadian thermal market from 1995 to 2003 were between 1% and 13% and averaged 7%
for the period. Based on these assessments, it is believed the U.S. and Canadian thermal market will continue to grow at a compound annual rate of 5% to 6% between 2004 and 2008.



Appleton has also continued to experience the impact of competitive pricing in most segments of its thermal and advanced
technical products business from both foreign and domestic producers. However, during the second half of 2003, Appleton was able to successfully implement two price increases for its high volume, low margin point-of-sale products. A third increase
was announced in February 2004 and was effective as of April 5, 2004.



Over the past few years, Appletons management team has developed growth strategies to offset the declining nature of the U.S. carbonless market and its resulting impact on revenue and operating income. Strategies for growth include
strengthening and expanding Appletons presence in certain growing market segments and broadening its product offerings through acquisitions. In April 2003, Appleton entered the performance packaging segment through its acquisition of C&H
Packaging Company, Inc. (C&H Packaging) and American Plastics Company, Inc. (American Plastics). In December 2003, Appleton added an international



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presence to its security products segment through the acquisition of Bemrose Group Limited. Appleton has evaluated, and will continue to evaluate,
opportunities to acquire other companies that will help it achieve its business strategies.



General



Project
Venture.    In January 2002, Appletons board of directors formally approved Project Venture, a $23 million capital project to install a new enterprise resource planning system with the goal of optimizing
current business operations as well as expanding its capabilities to transform to a new products company. Appleton selected J.D. Edwards to provide the software system solution. Project Venture affects nearly every business function at Appleton
including finance, information services, product development, manufacturing, logistics, purchasing, human resources, marketing, sales and customer service. Project Venture addresses Appleton and its core businesses and will be extended to other
subsidiaries as appropriate. During 2001, an 18-member employee project team began working to identify, define and redesign work processes in preparation for the new software installation. In addition to internal dedicated resources, Appleton also
selected industry-respected implementation partners to assist in the design and installation of the J.D. Edwards software.



In order to minimize the risks associated with an implementation of this size and complexity, Appleton chose to implement Project Venture in three waves.
The first wave, which was successfully implemented in December 2002, involved financial reporting and non-stock procurement processes. The second wave, which was successfully implemented in January 2004, involved the order-to-cash cycle (order
entry, pricing, distribution, inventory planning, customer invoicing and accounts receivable). The final wave of implementation, which involves the manufacturing and stock procurement processes, began in the second quarter of 2004 and is expected to
be completed during the second half of 2004.



Recent
Acquisitions.    On April 30, 2003, Appleton acquired two privately-held, Wisconsin-based companies, C&H Packaging and American Plastics. The purchase price for these acquisitions approximated $50.4 million, net of cash
acquired. C&H Packaging, located in Merrill, Wisconsin, prints and converts flexible plastic packaging materials for companies in the food processing, household and industrial product industries. American Plastics, located in Rhinelander,
Wisconsin, produces high-quality, custom multilayered films and commercial packaging. American Plastics knowledge of films and barrier technology and the C&H Packaging portfolio of products complement Appletons expertise in coating
and microencapsulation.



In December 2003, Appleton acquired
Bemrose Group Limited, a privately-held company headquartered in Derby, England. The purchase price for this acquisition approximated $63.0 million, net of cash acquired. The groups operating unit, BemroseBooth, produces security printed
vouchers and payment cards, mass transit and car parking tickets, variable data labeling, high-integrity mailing and printed promotional products such as calendars.



Restructuring and Other Charges.    Due to the continued decline in Appletons
carbonless business, management reviewed salaried staffing requirements in fiscal 2003. As a result of these management reviews, a salaried workforce reduction program was implemented in fiscal 2003. The cost of this program, which included
severance costs and outplacement services, was $2.6 million for fiscal 2003. An additional $0.8 million was incurred in the first half of fiscal 2004.



Comparison of Results of Operations for the Three-Month Periods Ended July 4, 2004 and June 29, 2003



Net sales.    Net sales for the three months ended July 4, 2004 were $233.6 million, an increase
of $22.9 million, or 10.9%, compared to the prior year period. Coated solutions net sales were $148.3 million, a decrease of $9.7 million, or 6.1%, compared to the prior year period, due primarily to a carbonless volume reduction of 3.8%.
Competition from both domestic and foreign producers continued to place downward pressure on prices in the carbonless market during the second quarter of 2004. In addition, a higher mix of international sales during the second quarter of 2004, which
carry lower overall average selling prices, also contributed to the coated



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solutions net sales reduction. Thermal and advanced technical products net sales increased $4.5 million, or 10.7%, compared to the prior year period on a
volume increase of 10.7% for the second quarter of 2004 versus second quarter of 2003. Net sales for Appletons other two segments, security and performance packaging, increased $28.1 million, or 266%, compared to the prior year period due to a
$1.1 million increase in sales of Appletons internally developed packaging and security products and due to the inclusion in Appletons consolidated results of a full quarter of net sales for Appletons two new packaging companies,
C&H Packaging and American Plastics, which were acquired on April 30, 2003, and for Appletons new security business, BemroseBooth, which was acquired in December 2003.



Gross profit.    Gross profit was $57.6 million for the second quarter of 2004, an increase of
$4.2 million, or 7.9%, compared to the prior year period. The increase was the net result of increased volume and improved margins in Appletons thermal and advanced technical products business and the contribution from the new packaging and
security businesses, partially offset by a volume decline, mix shift, and competitive pricing pressures in Appletons carbonless business. Gross profit margin was 24.7% for the second quarter of 2004 as compared to 25.3% for the second quarter
of 2003, primarily reflecting the pricing pressures in the carbonless business as well as the increase in the lower priced international sales as a percent of the total carbonless mix.



Selling, general and administrative expenses.    Selling, general and administrative expenses for
the second quarter of 2004 were $49.8 million, an increase of $10.3 million, or 26.2%, compared to the prior year period. Of this amount, $6.2 million is attributable to BemroseBooth, for which there are no comparable figures in the prior year
results. Spending at C&H Packaging and American Plastics was up $0.7 million, largely due to the inclusion in Appletons consolidated results of three full months of charges in the second quarter of 2004 versus only recognizing two months
of post-acquisition activity in last years second quarter. Distribution costs for Appletons existing businesses for the second quarter of 2004 increased by $1.0 million due to increased freight rates, freight-to-warehouse costs and
increased volumes in thermal and advanced technical products and security products as compared to the prior year period. Headquarters expenses at Appleton were higher by $2.7 million, primarily due to an increase of $2.1 million in bonus accruals
and $0.3 million in pension costs.



Restructuring and other
charges.Pursuant to its salaried workforce reduction program implemented in fiscal 2003, Appleton recorded an additional $0.4 million in restructuring charges during the second fiscal quarter of 2004.



Operating income.    Operating income for the
second quarter of 2004 was $7.4 million, a decrease of $6.5 million, or 46.9%, compared to the prior year period. Operating income as a percentage of net sales for the second quarter of 2004 was 3.2% as compared to 6.6% of net sales for the
prior year period. Coated solutions operating income for the second quarter of 2004 decreased $6.6 million compared to the prior year period primarily due to the 3.8% decline in carbonless volume as well as increases in raw material costs in the
second quarter of 2004. Thermal and advanced technical products operating income for the second quarter of 2004 increased $0.6 million compared to the prior year period as a result of increased sales volume and the favorable impact of recent price
increases net of corresponding increases in distribution costs and certain headquarters expenses. Corporate charges and business development costs increased $1.2 million versus the second quarter of 2003 due to increased costs associated with
Appletons new business development and acquisition efforts. Appletons other segments, consisting of its security and performance packaging businesses, experienced a combined reduction in operating loss of $0.7 million for the second
quarter of 2004 as compared to the prior year period. The newly acquired packaging companies contributed an additional $1.7 million in operating income. Of this amount, $1.1 million was related to non-recurring purchase accounting expenses incurred
in the second quarter of 2003. This was offset by an operating loss of $1.2 million experienced during the second quarter by BemroseBooth, due primarily to the seasonality of its business.



Interest expense.    Interest expense for the
second quarter of 2004 was $12.8 million, a decrease of $0.5 million compared to the prior year period, primarily due to debt repayments made during the second half of 2003 and the first half of 2004 and lower rates on the new term loan entered into
in December 2003.



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Interest income.    Interest income for the second quarter of 2004 was $0.2
million, an increase of $0.1 million compared to the prior year period. The increase was due to slightly higher interest rates earned on short-term investments and higher short-term investment balances in 2004, particularly near the end of the
quarter.



Debt extinguishment
expenses.    Total debt extinguishment expense recorded during the second quarter of 2004 was $30.8 million. Appletons debt refinancing resulted in the write-off of $4.6 million in deferred debt issuance costs related
to prior debt issues. In addition, Appleton paid a $37.2 million premium in conjunction with the repurchase of its outstanding 12.5% Senior Subordinated Notes and $2.2 million in related fees. Netted against these costs was a $13.2 million discount
realized on the repayment of Appletons deferred payment obligation to AWA.



Foreign exchange loss (gain).Appleton recognized a foreign exchange loss of $0.8 million for the second quarter of 2004 as compared to a gain of $0.6 million in the comparable prior year
period. In 2003, the Canadian dollar strengthened through the second quarter, generating gains on Canadian receivables. In 2004, the Canadian dollar weakened through the second quarter, which resulted in losses upon revaluation of receivables. Also
in the second quarter of 2004, Appleton experienced an exchange loss of $0.4 million on the revaluation of the inter-company note that exists between Appleton Papers and Rose Holdings as a result of the Bemrose acquisition.



(Benefit) provision for income taxes.    In
connection with the acquisition of Appleton Papers, Paperweight Development elected to be treated as a subchapter S corporation and for its eligible subsidiaries to be treated as qualified subchapter S subsidiaries for federal and state income tax
purposes. As a result of these elections, Appleton expects to incur no future federal income tax liability and minimal state income tax liabilities. As a subchapter S corporation, Paperweight Development is subject to a corporate-level tax under
Section 1374 of the Internal Revenue Code known as the built-in gain tax. The built-in gain tax is a tax imposed on the gain inherent in assets as of the effective date of the S election if the gain is recognized within ten years after the effective
date of the S election. If Appleton sells a material portion of its assets in the future, it could be subject to a significant tax liability.



Appletons UK subsidiary is, however, subject to income taxes and has recognized an estimated tax benefit of $0.8 million, based on its operating
loss for the quarter.



Net (loss)
income.    Appleton reported a net loss for the second quarter of 2004 of $35.9 million compared to income of $0.9 million for the prior year period, a decrease of $36.8 million, due principally to the previously mentioned
debt extinguishment expenses and the decrease in operating income.



Comparison of Results of Operations for the Six-Month Periods Ended July 4, 2004 and June 29, 2003



Net sales.    Net sales for the six months ended July 4, 2004 were $484.2 million, an increase of $69.3 million, or 16.7%,
compared to the prior year period. Coated solutions net sales were $308.4 million, a decrease of $9.6 million, or 3.0%, compared to the prior year period. Carbonless volumes were actually higher by 0.7% but revenues were down based on continued
pricing pressures from both domestic and foreign producers and a higher mix of international sales during the first half of 2004, which carry lower average selling prices. Average carbonless net selling prices are 4.0% lower than a year ago. Thermal
and advanced technical products net sales were $98.6 million, an increase of $16.0 million, or 19.3%, compared to the prior year period on a volume increase of 21.3% for the first half of 2004. Sales in Appletons other segments totaled $77.2
million, an increase of $62.9 million over the 2003 period. Sales by BemroseBooth, which was first acquired in December 2003 and is not reflected in 2003 first half results, amounted to $44.1 million during this period and sales by the newly
acquired packaging companies totaled an additional $16.0 million for the first half of 2004 versus last years two-month totals post-acquisition. Appletons internally developed security products generated an additional $2.7 million in
sales, while Appletons performance packaging contributed an additional $0.1 million in sales versus the prior year period.



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Gross profit.    Gross profit was $125.7 million for the six months ended July
4, 2004, an increase of $12.9 million, or 11.4%, compared to the prior year period. The increase was due primarily to the addition of $10.0 million in gross profit from the BemroseBooth business, an increase of $4.3 million in thermal and advanced
technical products and an additional $5.1 million based on a full six months of gross profit from the new packaging companies. In addition, Appletons internally developed security and performance packaging products each generated an additional
$0.5 million in gross profit versus 2003 first half levels. This was partially offset by an approximately $7.0 million carbonless gross profit decline resulting from competitive pricing pressures in Appletons carbonless business and the
continuing impacts of increased raw material costs for pulp, wastepaper and chemicals. Gross profit margin was 26.0% for the first half of 2004 as compared to 27.2% for the first half of 2003.



Selling, general and administrative
expenses.    Selling, general and administrative expenses for the six months ended July 4, 2004 were $99.6 million, an increase of $21.8 million, or 28.1%, compared to the prior year period. Distribution costs for the first
half of 2004 increased by $2.9 million, or 10.3%, compared to the prior year period with $2.6 million of the increase due to increased freight expense based on higher carbonless and thermal and advanced technical product volumes and higher freight
rates. During the first half of 2004, selling, general and administrative expenses incurred by BemroseBooth totaled $12.4 million and expenses at the new packaging companies were $2.4 million higher for the first half of 2004 versus the two months
of activity recognized post-acquisition in the first six months of 2003. Headquarters expenses at Appleton were higher by $3.7 million based on an increase of $2.4 million in bonus accruals and $0.7 million in additional pension costs.



Restructuring and other charges.Appleton
implemented a salaried workforce reduction program in fiscal 2003. The cost of this program, which included severance costs and outplacement services, was $2.6 million for fiscal 2003. An additional $0.8 million was incurred during the first two
quarters of fiscal 2004.



Operating
income.    Operating income for the six months ended July 4, 2004 was $25.3 million, a decrease of $9.8 million, or 27.9%, compared to the prior year period. Operating income as a percentage of net sales for the first half of
2004 was 5.2% as compared to 8.5% of net sales for the prior year period. Coated solutions operating income for the first half of 2004 was $31.5 million, a decrease of $9.5 million compared to the prior year period, primarily due to the decline in
carbonless revenues as well as increases in raw material costs in the first half of 2004. Thermal and advanced technical products operating income for the first half of 2004 was $2.9 million, an increase of $1.4 million compared to the prior year
period, due to increased volumes and improved margins. Corporate charges and business development costs for the first half of 2004 increased by $1.9 million as compared to the prior year period due to increased costs associated with Appletons
new business development and acquisition efforts. Appletons other segments, security and performance packaging, experienced a combined reduction in operating loss of $0.3 million over the prior year period. The newly acquired packaging
companies contributed an additional $2.5 million in operating income, with $1.1 million of the difference being related to non-recurring purchase accounting expenses incurred in the second quarter of 2003. This was offset by an operating loss of
$2.4 million experienced by BemroseBooth in the first half of 2004, largely due to seasonal factors associated with this business.



Interest expense.    Interest expense for the six months ended July 4, 2004 was $26.5 million, a decrease of $0.3 million
compared to the prior year period. Debt repayments during 2003 of $41.3 million and lower interest rates on a portion of the term debt served to lower interest expense versus 2003. This was offset to some extent by Appletons refinancing of the
remaining balance of its $150 million term loan to complete the December 2003 BemroseBooth acquisition, which achieved a lower rate of interest on the new debt, but increased the total debt outstanding.



Interest income.    Interest income for the six
months ended July 4, 2004 was $1.4 million, an increase of $1.3 million compared to the prior year period. Of this amount, $1.1 million was due to interest realized from federal and state income tax refunds. Appleton also earned higher interest
rates on short-term investments and maintained higher short-term investment balances, especially during the latter part of the first half of 2004, as compared to the prior year period.



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Debt extinguishment expenses.Total debt extinguishment expense recorded
during the first six months of 2004 was $30.8 million, all of which was recognized in the second quarter, as described above, and all of which is attributable to Appletons debt refinancing. Appleton wrote off $4.6 million in deferred debt
issuance costs related to prior debt issues, paid a $37.2 million premium in conjunction with the repurchase of its outstanding 12.5% Senior Subordinated Notes and $2.2 million in related fees. Appleton realized a $13.2 million discount on the
repayment of Appletons deferred payment obligation to AWA, which was netted against the debt extinguishment expenses.



Foreign exchange (loss) gain.For the first six months of 2004 Appleton recognized a foreign exchange loss of $0.9 million
versus a $0.8 million gain in the prior year period. In 2003, the Canadian dollar strengthened throughout the first six months, generating gains on Canadian receivables. In 2004, the Canadian dollar weakened from the beginning of the year, which
resulted in losses upon revaluation of receivables. Also, thus far in 2004, Appleton has experienced a $0.5 million exchange loss on the revaluation of the inter-company note that exists between Appleton Papers and Rose Holdings as a result of the
Bemrose acquisition.



(Benefit) provision for income
taxes.    In connection with the acquisition of Appleton Papers, Paperweight Development elected to be treated as a subchapter S corporation and for its eligible subsidiaries to be treated as qualified subchapter S
subsidiaries for federal and state income tax purposes. As a result of these elections, Appleton expects to incur no future federal income tax liability and minimal state income tax liabilities. As a subchapter S corporation, Paperweight Development
is subject to a corporate-level tax under Section 1374 of the Internal Revenue Code known as the built-in gain tax. The built-in gain tax is a tax imposed on the gain inherent in assets as of the effective date of the S election if the gain is
recognized within ten years after the effective date of the S election. If Appleton sells a material portion of its assets in the future, Appleton could be subject to a significant tax liability.



Appletons UK subsidiary, BemroseBooth, is subject to income taxes and
has recognized an estimated tax benefit of $1.2 million based on its operating loss for the six-month period.



Net (loss) income.    The net loss for the six months ended July 4, 2004 was $30.4 million compared to income of $8.7 million
for the prior year period, a decrease of $39.1 million, resulting primarily from the recognition of $30.8 million in debt extinguishment expenses and the decline in coated solutions operating income versus the previous year.



Liquidity and Capital Resources



Cash flows from operating activities.    Net cash
provided by operating activities for the first six months of 2004 was $17.5 million. Depreciation and amortization charges of $39.7 million more than offset the $30.4 million net loss for the period. Appleton made $3.9 million in non-cash employer
matching contributions to the KSOP during the first half of 2004. Operating cash flow was reduced by the discount on repayment of the deferred payment obligation, a $13.2 million non-cash credit, and by an increase of $10.8 million in inventories
due to a $7.5 million increase at BemroseBooth, reflecting seasonal build, and moderate increases in finished goods inventories at Appletons distribution centers and at the packaging companies. Receivables decreased by $5.6 million.
BemroseBooth collected against its year-end balances, reducing its receivables by $16.6 million, while receivables in Appletons coated solutions and thermal and advanced technical products businesses increased by $10.7 million.



Net cash provided by operating activities for the first half of 2003 was
$35.7 million. Appleton made $4.3 million in non-cash employer matching contributions to the KSOP during the first half of 2003. An increase in working capital for the first half of 2003 decreased operating cash flows by $23.2 million. Inventories
increased by $3.7 million due to planned efforts to allow for additional product development trial work during the second and third quarters of 2003. Receivables increased by $11.0 million due to a combination of increased sales of $5 million for
June 2003 as compared to December 2002 and to several customers withholding payment at quarter-end. Accounts payable and other accrued liabilities decreased by $9.1 million, with customer rebate payments made in the first quarter of 2003 related to
2002 purchases accounting for a significant portion of this change.



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Cash flows from investing activities.Net cash used by investing activities
was $15.4 million for the first half of 2004, nearly all of which was applied to capital asset additions.



Net cash used by investing activities was $64.0 million for the first half of 2003. Of this amount, $50.5 million related to the acquisition of C&H
Packaging and American Plastics on April 30, 2003. Spending on capital projects approved prior to the end of 2002 amounted to $9.7 million. The remaining $3.8 million was expended on capital projects approved in 2003.



Cash flows from financing activities.    On April
18, 2003, an amendment to the old senior credit facility was approved that allowed Appleton to make acquisitions of $150 million in total over the life of the term loans, with no single acquisition totaling more than $60 million. In addition, the
amendment also increased the revolving line of credit from $75 million to $100 million and allowed the repurchase and retirement of an additional $50.0 million of aggregate principal amount of Appletons 12.5% Series B Senior Subordinated Notes
due 2008.



In December 2003 an amendment to the old senior
credit facility was approved that amended the related financial covenants to provide additional flexibility, allow the establishment of a UK subsidiary, allow for Euro and British Sterling borrowings, classify the acquisition of American Plastics, C
& H Packaging and BemroseBooth as permitted investments, thereby preserving the $150 million limit for future acquisitions as permitted under the April 18, 2003 amendment and increased the single acquisition limit from $60 million to
$75 million.



On June 11, 2004, Appleton completed a
voluntary refinancing of its debt. The new senior credit facility includes a six-year, $250 million term loan bearing interest at a base rate, or at LIBOR, at Appletons option, plus an applicable margin, which is initially set at 1.25% for
base rate loans and 2.25% for LIBOR loans, but which is determined by reference to a pricing grid for subsequent quarters. Mandatory principal payments of $625,000 are due quarterly with the remaining balance due June 11, 2010. It also includes a
five-year, $125 million revolving credit facility. The new senior credit facility contains covenants under which certain minimum leverage and coverage ratios must be met. Based upon current estimates, Appleton expects to be in compliance with these
covenants throughout the remainder of 2004. As part of the 2004 refinancing, Appleton also issued $185 million aggregate principal amount of 8.125% Senior Notes due 2011 and $150 million aggregate principal amount of 9.75% Senior Subordinated Notes
due 2014. The proceeds of the new senior credit facility were used to repay the amounts outstanding under the old senior credit facility, plus interest, of Term Loan A and Term Loan D of $14.0 million and $130.7 million, respectively. The balance of
the proceeds of the new senior credit facility, together with the proceeds of the offering of the senior notes and senior subordinated notes, were used to repurchase approximately $193 million, plus interest, of the approximately $200 million 12.5%
Senior Subordinated Notes due 2008 and the deferred payment obligation. The deferred payment obligation, which was due May 8, 2010, had accreted at 10% per annum to $180.3 million as of June 11, 2004. AWA discounted this obligation by $13.2 million
and accepted $167.1 million as payment in full of the obligation.



As a result of the 2004 refinancing, $4.6 million of deferred debt issuance costs were written off. A premium of $37.2 million was paid in conjunction with the repurchase of the 12.5% Senior Subordinated Notes and related fees of $2.2
million were also incurred. These total costs of $44.0 million, less the $13.2 million discount discussed above, were recorded as debt extinguishment expenses. In addition, Appleton incurred $12.3 million in new debt acquisition costs.



Net cash provided by financing activities was $23.9 million for the first
half of 2004. Prior to the June 11, 2004 refinancing, Appleton made mandatory debt repayments of $22.1 million, plus interest, during 2004 on its outstanding term loans. In addition to the refinancing described immediately above, Appleton also made
payments of $10.0 million to retire revolver borrowings and paid $17.4 million to redeem shares of redeemable common stock related to employee requests for diversification, retirement or termination. In the first six months of 2004, Appleton
received net proceeds of $4.2 million from the sale of Paperweight Development redeemable common stock. The ESOP trustee purchased this stock with pre-tax deferrals, rollovers and loan payments made by employees during the last six months of 2003.
Following the refinancing, the new senior credit facility combined with cash flows from operations are expected to be adequate to meet Appletons forecasted liquidity needs.



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Net cash provided by financing activities was $11.9 million for the first half of 2003. On April 29, 2003
Appleton borrowed $45.0 million on the revolving credit portion of Appletons old senior credit facility to fund the acquisition of two privately-held Wisconsin-based companies, C&H Packaging and American Plastics. The purchase price for
these acquisitions was approximately $50.4 million. The purchase price included acquired debt of approximately $15.4 million. Of this amount, $10.2 million was retired at closing, with the remaining balance retired during the second quarter of 2003.
During the second quarter of 2003 Appleton made $5.0 million in principal repayments on the revolving credit portion of Appletons old senior credit facility.



Appleton used cash generated by operations to make mandatory repayments of $29.4 million on Appletons term loans
during the first half of 2003. In addition, Appleton received net proceeds of $4.0 million from the sale of Paperweight Development redeemable common stock. The ESOP trustee purchased this stock at $18.58 per share with pre-tax deferrals made by
employees from July 1, 2002 through December 28, 2002. During the second quarter of 2003, payments of $5.2 million were made to redeem shares of redeemable common stock related to employee requests for diversification, retirement or termination. As
of June 29, 2003 Appleton had outstanding borrowings of $45.0 million on its revolving credit portion of the old senior credit facility.



New Accounting Pronouncements



In January 2003, the FASB issued FASB Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities. This
interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities. FIN 46 explains the concept of a variable interest entity and
requires consolidation by the primary beneficiary where there is a controlling financial interest in a variable interest entity or where the variable interest entity does not have sufficient equity at risk to finance its activities without
additional subordinated financial support from other parties. In December 2003, the FASB released a revised version of FIN 46 (hereafter referred to as FIN 46R) clarifying certain aspects of FIN 46 and providing certain entities with exemptions from
the requirements of FIN 46. FIN 46R applies immediately for Appleton to variable interest entities created after December 31, 2003, and applies for the first reporting period beginning after December 15, 2004 to variable interest entities in which
an enterprise holds a variable interest that was acquired before January 1, 2004. Appleton is currently evaluating the impact of this statement.



During December 2003, the FASB revised SFAS No. 132, Employers Disclosures about Pensions and Other Postretirement Benefits, to require
additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. This statement also requires interim period disclosure of the components
of net periodic benefit cost, and if significantly different from previously disclosed amounts, the amounts of contributions and projected contributions to fund pension plans and other postretirement benefit plans. These interim disclosures were
effective for Appleton in the first quarter of 2004.



In
December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) introduced a prescription drug benefit under Medicare, as well as a federal subsidy to sponsors of retiree health care benefit plans. In
May 2004, the FASB issued FASB Staff Position (FSP) No. FAS 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Appleton is a sponsor of
postretirement health care plans that provide prescription drug benefits. In accordance with this FSP, any measures of the accumulated postretirement benefit obligation or net periodic postretirement benefit cost in the financial statements or
accompanying notes do not reflect the effects of the Act on the plans. FSP 106-2 is effective for Appleton in the third quarter of 2004. Appleton is currently evaluating the impact of this FSP on its consolidated financial statements.



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Item 3Quantitative and Qualitative Disclosures About Market Risk



For information regarding Appletons quantitative and qualitative disclosures about market risk, see the Annual Report on Form 10-K dated April 2,
2004 (Reg. No. 333-82084). There have been no material changes in Appletons quantitative or qualitative exposure to market risk from that described in the Form 10-K, except as discussed above as a result of the June 11, 2004 refinancing.



Item 4Controls and Procedures



Appleton, Paperweight Development and WTA maintain a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed by the registrants in the reports filed by the registrants under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Appleton carried out an evaluation, under the supervision and with the participation of
management, including the principal executive officer and principal financial officer of each of the registrants, of the effectiveness of the design and operation of their disclosure controls and procedures pursuant to Rule 15d-15(e) of the Exchange
Act. Based on that evaluation, the principal executive officer and principal financial officer of each of the registrants concluded that their disclosure controls and procedures are effective as of the end of the period covered by this report.



There have been no changes in the registrants internal
control over financial reporting identified in connection with the evaluation discussed above that occurred during the registrants last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the
registrants internal control over financial reporting.



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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS



This report contains forward-looking statements. The words will,
believes, anticipates, intends, estimates, expects, projects, plans or similar expressions are intended to identify forward-looking statements. All statements in
this report other than statements of historical fact, including statements which address strategy, future operations, future financial position, estimated revenues, projected costs, prospects, plans and objectives of management and events or
developments that Appleton anticipates will occur, are forward-looking statements. All forward-looking statements speak only as of the date on which they are made. They rely on a number of assumptions concerning future events and are subject to a
number of risks and uncertainties, many of which are outside of Appletons control that could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the factors listed
under the heading Risk Factors in Appletons Annual Report on Form 10-K dated April 2, 2004, which factors are incorporated herein by reference. Appleton disclaims any obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.



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PART IIOTHER INFORMATION



Item 6Exhibits and Reports on Form 8-K



| | (a) | Exhibits
| | --- | --------



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|4.1  |  | Indenture, dated as of June 11, 2004, between Appleton Papers Inc. and each of the guarantors named therein and U.S. Bank National
Association, as trustee (the Senior Notes Indenture).                                                                                                                                                                                                                                                                          
|     | 
|4.2  |  | Indenture, dated as of June 11, 2004, between Appleton Papers Inc. and each of the guarantors named therein and U.S. Bank National
Association, as trustee (the Senior Subordinated Notes Indenture).                                                                                                                                                                                                                                                             
|     | 
|4.3  |  | Form of Senior Note (included as Exhibit A1 to the Senior Notes Indenture).                                                                                                                                                                                                                                                                                                                                                                                         
|     | 
|4.4  |  | Form of Senior Subordinated Note (included as Exhibit A1 to the Senior Subordinated Notes Indenture).                                                                                                                                                                                                                                                                                                                                                               
|     | 
|4.5  |  | A/B Exchange Registration Rights Agreement, dated as of June 11, 2004 by and among Appleton Papers Inc. and the parties listed as
guarantors thereto and Bear, Stearns & Co. Inc., UBS Securities LLC, ABN AMRO Incorporated and Piper Jaffray & Co.                                                                                                                                                                                                                
|     | 
|10.1 |  | Credit Agreement, dated as of June 11, 2004, among Paperweight Development Corp., Appleton Papers Inc., as borrower, Rose Holdings Limited,
as UK Borrower, the several lenders from time to time parties thereto, UBS Securities LLC as syndication agent, Associated Bank, National Association, LaSalle Bank National Association and U.S. Bank, National Association as documentation agents, and
Bear Stearns Corporate Lending, Inc., as administrative agent.
|     | 
|10.2 |  | Amendment to Purchase Agreement by and among Arjo Wiggins US Holdings Ltd., Arjo Wiggins North America Investments Ltd., Arjo Wiggins
Appleton Ltd., Paperweight Development Corp. and New Appleton LLC, dated as of June 11, 2004                                                                                                                                                                                                                                  
|     | 
|10.3 |  | Amendment to Fox River AWA Environmental Indemnity Agreement by and among Paperweight Development Corp., New Appleton LLC, Appleton Papers
Inc. and Arjo Wiggins Appleton Ltd., dated as of June 11, 2004.                                                                                                                                                                                                                                                          
|     | 
|10.4 |  | Amendment to Fox River PDC Environmental Indemnity Agreement by and among Appleton Papers Inc., Paperweight Development Corp. and New
Appleton LLC, dated as of June 11, 2004.                                                                                                                                                                                                                                                                                      
|     | 
|10.5 |  | Amended and Restated Relationship Agreement by and among Arjo Wiggins Appleton Ltd. (f/k/a Arjo Wiggins Appleton plc.), Arjo Wiggins
(Bermuda) Holdings Limited, Paperweight Development Corp., PDC Capitol Corporation and Arjo Wiggins Appleton (Bermuda) Limited, dated as of June 11, 2004.                                                                                                                                                                     
|     | 
|10.6 |  | Amendment to Appleton Papers Retirement Savings and Employee Stock Ownership Plan effective January 1, 2001.                                                                                                                                                                                                                                                                                                                                                        
|     | 
|12.1 |  | Statement of Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                                                                                                                                                     
|     | 
|31.1 |  | Certification of Douglas P. Buth, Chairman, President and Chief Executive Officer of Appleton Papers Inc., pursuant to Rule 15d-14(a) under
the Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                                        
|     | 
|31.2 |  | Certification of Dale E. Parker, Vice President and Chief Financial Officer of Appleton Papers Inc., pursuant to Rule 15d-14(a) under the
Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                                              
|     | 
|31.3 |  | Certification of Douglas P. Buth, Chairman, President and Chief Executive Officer of Paperweight Development Corp., pursuant to Rule
15d-14(a) under the Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                               
|     | 
|31.4 |  | Certification of Dale E. Parker, Chief Financial Officer of Paperweight Development Corp., pursuant to Rule 15d-14(a) under the Securities
Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                                                        
|     | 
|31.5 |  | Certification of Dale E. Parker, President of WTA Inc., pursuant to Rule 15d-14(a) under the Securities Exchange Act of 1934, as
amended.                                                                                                                                                                                                                                                                                                                           



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|     |  |                                                                                                                                                      
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|32.1 |  | Statement of Douglas P. Buth, Chairman, President and Chief Executive Officer of Appleton Papers Inc., pursuant to 18 U.S.C. Section
1350.           
|     | 
|32.2 |  | Statement of Dale E. Parker, Vice President and Chief Financial Officer of Appleton Papers Inc., pursuant to 18 U.S.C. Section
1350.                 
|     | 
|32.3 |  | Statement of Douglas P. Buth, Chairman, President and Chief Executive Officer of Paperweight Development Corp., pursuant to 18 U.S.C.
Section 1350.  
|     | 
|32.4 |  | Statement of Dale E. Parker, Chief Financial Officer of Paperweight Development Corp., pursuant to 18 U.S.C. Section
1350.                           
|     | 
|32.5 |  | Statement of Dale E. Parker, President (Principal Executive Officer and Principal Financial Officer) of WTA Inc., pursuant to 18 U.S.C.
Section 1350.



| | (b) | Reports on Form 8-K
| | --- | -------------------



During the quarter ended July 4, 2004, the Company



| | i. | Filed a Form 8-K on April 29, 2004, reporting the issuance of a press release dated April 29, 2004 announcing a top management succession plan for the Company, pursuant to Items 5
and 7.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | Furnished a Form 8-K on May 12, 2004, reporting the issuance of a press release dated May 11 announcing the Companys first quarter 2004 financial results, pursuant to Items 7
and 12.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | Filed a Form 8-K on May 13, 2004, reporting the issuance of a press release dated May 12 announcing the Companys plans to offer Senior Notes and Senior Subordinated Notes,
pursuant to Items 5 and 7.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iv. | Filed a Form 8-K on May 13, 2004, reporting the issuance of a press release dated May 12 announcing the Companys commencement of a Tender Offer and Consent Solicitation for
its outstanding 121/2% Senior Subordinated Notes due 2008, pursuant to Items 5 and 7.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | Filed a Form 8-K on May 26, 2004, reporting the issuance of a press release dated May 26 announcing the results of the Companys Consent Solicitation for its outstanding
121/2% Senior Subordinated Notes due 2008, pursuant to Items 5 and 7.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | vi. | Filed a Form 8-K on June 7, 2004, reporting the issuance of a press release dated June 7 announcing the consideration to be paid by the Company in connection with the Tender Offer
and Consent Solicitation for its outstanding 121/2% Senior Subordinated Notes due 2008, pursuant to Items 5 and
7.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | vii. | Filed a Form 8-K on June 10, 2004, reporting the issuance of a press release dated June 10 announcing the extension of the Companys tender offer for its outstanding 121/2% Senior Subordinated Notes due 2008, pursuant to Items 5 and 7.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



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



|                      |  |  |  |                                                                                                                                       
|--------------------- |  |  |  | --------------------------------------------------------------------------------------------------------------------------------------
|                      |  | 
|                      |  |  |  | APPLETON PAPERS INC.                                                                                                                  
|                      |  |  |  | (Registrant)                                                                                                                          
|                      |  | 
|Date: August 16, 2004 |  |  |  | /S/    DALE E.
PARKER                                                                                                                 
|                      |  |  |  | Dale E. Parker Vice President and Chief Financial Officer (Signing on behalf of the Registrant and as the Principal Financial Officer)



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SIGNATURES



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



|                      |  |  |  |                                                                                                                    
|--------------------- |  |  |  | -------------------------------------------------------------------------------------------------------------------
|                      |  | 
|                      |  |  |  | PAPERWEIGHT DEVELOPMENT CORP.                                                                                      
|                      |  |  |  | (Registrant)                                                                                                       
|                      |  | 
|Date: August 16, 2004 |  |  |  | /S/    DALE E.
PARKER                                                                                              
|                      |  |  |  | Dale E. Parker Chief Financial Officer (Signing on behalf of the Registrant and as the Principal Financial Officer)



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SIGNATURES



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



|                      |  |  |  |                                                                                                      
|--------------------- |  |  |  | -----------------------------------------------------------------------------------------------------
|                      |  | 
|                      |  |  |  | WTA INC.                                                                                             
|                      |  |  |  | (Registrant)                                                                                         
|                      |  | 
|Date: August 16, 2004 |  |  |  | /S/    DALE E.
PARKER                                                                                
|                      |  |  |  | Dale E. Parker President (Signing on behalf of the Registrant and as the Principal Financial Officer)



45