The ratings on Appleton Papers Inc. reflect its aggressive financial profile, declining carbonless paper volumes, lower operating margins from a shifting product mix, and potential acquisition risks. Leading market shares in certain specialty paper markets, diverse end uses, and relatively stable earnings and cash flows partially offset these factors. The Appleton, Wis.-based company is the world's largest manufacturer of carbonless paper, which includes multipart forms such as invoices, credit-card receipts, and packing slips. The industry is modestly cyclical and highly concentrated, with one primary competitor--P.H. Glatfelter Co., which acquired the carbonless paper segment of NewPage Corp. in April 2006. Factored into the ratings is the continued decline in carbonless paper volumes in the U.S., at 5%-10% annually, because of the
