Atlas Q3 2010 Review

A Report to our Partners, Investors, Employees and Friends

We are pleased to report that our family of businesses continued to post strong operating and financial results in Q3 2010 and that we significantly expanded our international footprint.

The last several months have been transformative for Atlas — we acquired the global AGI media packaging business from MeadWestvaco Corporation and, in early November, our newly formed Detroit Renewable Energy LLC acquired Detroit Thermal, LLC and a very large energy-from-waste facility — critical infrastructure and power generation assets in Detroit, Michigan. In addition, we added key players as Operating Partners and to our management team to support our new endeavors.

Safety performance was consistent with Q2 2010 levels, marking our best two consecutive quarters since inception. Notably, Bridgewell has ZERO recordable incidents to date for 2010, and RedBuilt, Chester Wood Products and Moncure had ZERO recordable incidents for Q3.

On November 4, Finch Paper hosted our annual cross-company Atlas Safety Committee, which convened to discuss best practices to prevent repetitive motion injuries and to review progress on the implementation of each company’s 5-year safety plan. Led by Operating Partners Bill Corbin and Lee Alford, we discussed expectations for the 2011 safety plans, which each company will formally present at our Naples meeting in January. We greatly appreciate Bill’s and Lee’s contribution to our effort to achieve world-class safety performance and also want to thank Joe Raccuia, Sandy LeBarron and the entire Finch Paper team for hosting a first-class event.

From our visit and tour of the mill, it is clear that Finch is undergoing a radical cultural transformation from its historic “command and control” management style to an environment of employee engagement, empowerment and accountability. Nowhere does a transition of this sort show up more quickly than in safety performance, and Finch has a safety track record in 2010 that is second to none. We will set aside some time at our Naples meeting for the Senior Leadership Team of Finch to share some of their “war stories” on this front.

The overall financial performance of our businesses in Q3 2010 exceeded Q2 2010 levels, buoyed by particularly strong performances from Northern Pulp, Forest Resources (both Hartford City Paper and Canampac), Finch Paper and Phoenix International Services. In each case, operating performance was excellent and improving market conditions supported strong sales and margins.

Capital Equipment Resources’ performance accelerated modestly as order rates for spare parts and new equipment increased in line with the slow recovery in global manufacturing. After a very strong Q2 driven by short-term supply disruptions caused by the Chilean earthquake and wet weather in the U.S. South, market conditions and, consequently, financial performance, for Wood Resources deteriorated in Q3 as the residential and commercial construction markets in the U.S. remained anemic. As well, in this challenging construction environment, RedBuilt continued to struggle to fill its order book. Notwithstanding a disappointing Q3 from a financial performance standpoint, both Wood Resources and RedBuilt are very well managed and highly competitive businesses that are poised to capture the market upturn when it inevitably occurs.

On September 30, 2010, we acquired the AGI media packaging businesses from MeadWestvaco Corporation (NYSE: MWV). AGI is a network of global media and entertainment packaging businesses. The AGI businesses specialize in innovative packaging for Blu-ray discs, DVDs and video games. Principal operations are in the U.S., U.K., Austria, France, Ireland, Germany, Poland, the Netherlands and Australia.

This acquisition is consistent with our investment strategy. It leverages our extensive operating expertise in the packaging sector and we were able to acquire the business at compelling value, arguably well below the intrinsic value of the enterprise. This “bargain purchase” was facilitated, in part, because of the complex transition required to move AGI from a large corporate parent to a stand-alone operation. We would like to thank Mark Caines, CEO of Boehmer Box, for assisting in the due diligence and transition of the business.

While not a Q3 event, in early November we completed the simultaneous acquisitions of (i) Detroit Thermal, LLC, the City of Detroit’s underground district heating system, (ii) a Detroit-based energy-from-waste plant that produces power for sale to DTE Energy and steam for Detroit Thermal and (iii) several other ancillary businesses. These businesses, which we now operate as Detroit Renewable Energy LLC (“DRE”), control a group of assets critical to the infrastructure of Detroit and we believe that their linkage under common ownership, together with our commitment to revitalize the assets, creates an opportunity for significant long-term value.

The extraordinary complexity of the transaction, which required us to manage and resolve environmental, operational, technical, political and union issues, provided a pathway to purchase the subject businesses at a deep discount to intrinsic value, notwithstanding the growing appetite of many institutional investors for infrastructure businesses. DRE is also a natural extension of Atlas’ core competencies in that it leverages significant operating expertise and experience managing power generation and steam assets that we have garnered at our industrial businesses.

We have added a number of key players to the Atlas team and have repositioned others to manage our growth. In that regard, we are very excited to have named our Operating Partner Jim Toya as Bridgewell’s new Chairman and Operating Partner Bill Corbin as Wood Resources’ new

Chairman. We are also very pleased to have had several of our most recently added Operating Partners join us in the diligence phase, and subsequently in the management and oversight, of DRE. We couldn’t be happier to welcome these Operating Partners and the 1500+ employees of AGI and DRE to the Atlas family.

As we look forward to the U.S. Thanksgiving holiday, we reflect on the many things for which we are grateful. We have a strong group of companies, terrific managers, Operating Partners and employees and a growing pipeline of investment opportunities that we are assessing.

We appreciate your hard work and support.


Andrew Bursky
Managing Partner

Timothy Fazio
Managing Partner


About Bill Corbin

Bill Corbin, a former Executive Vice President of Weyerhaeuser Company, was a member of the Board of Managers of Wood Resources before being appointed Chairman of the Board.

“Bill’s background in wood products, timber resources and business management has already had a tremendous impact on Wood Resources,” said Andrew M. Bursky, Chairman of Atlas Holdings, at the time of the appointment. “We are excited and privileged that Bill has agreed to serve as Chairman and we look forward to the contributions he will continue to make to our business.”

Mr. Corbin held the position of Executive Vice President, International and Industrial Wood Products of Weyerhaeuser Company until his retirement in 2006. Previously, Mr. Corbin had served as Executive Vice President, Wood Products; and Executive Vice President, Timberlands and Distribution, for Weyerhaeuser.

Before joining Weyerhaeuser, Mr. Corbin held senior positions at Crown Zellerbach Corporation and International Paper Company. He is also a member of the Board of Directors of Conway Inc., a publicly traded transportation and logistics company, and serves on the Boards of

Managers of Bridgewell Resources LLC and RedBuilt LLC, two members of the Atlas Holdings group of companies.


About Jim Toya

Jim Toya began his career as a certified public accountant before earning a master’s degree in finance from the Wharton School of Business. He worked 18 years for Credit Suisse Group, holding various roles in sales, trading and management.

“Jim has a track record of building successful, globally focused trading organizations and shares our vision of reinvigorating a strong, decades-old culture based on merit and entrepreneurism,”

Atlas Holdings Chairman Andrew Bursky said. “Having Jim actively engaged in Bridgewell is an exciting development for the organization.”

Mr. Toya spent the last 5 years of his tenure at Credit Suisse Group as co-head of the U.S. interest rates products division and as a member of the fixed income operating committee. Mr. Toya recently retired to become more engaged as an Operating Partner of Atlas Holdings.

“I am extremely excited to have the opportunity to work with the talented people who comprise

Bridgewell Resources,” Mr. Toya said. “The organization shares my core beliefs that by focusing on customers first and foremost and offering value-added services everyday you can build a global enterprise that creates wealth for both owners and employees. Bridgewell already has some world-class divisions and its unique platform affords us a tremendous opportunity to explore new products and global markets that fit well with our core competencies.”


Bridgewell Resources LLC
Kyle Burdick, President

Bridgewell Resources LLC (“Bridgewell” or the “Company”) continues to enjoy an incident rate of zero for both Q3 and YTD.

Market conditions remain challenging in the majority of our core markets. Pricing for certain products has softened, particularly in the structural panel market, where prices have declined dramatically since the end of Q2. Flooring markets were strong in Q3 as a result of short supply rather than increasing demand, a phenomenon we are seeing across a variety of the products we trade as the broader economy lurches toward recovery. Sales volumes in domestic utility markets continue to lag prior years as domestic utility clients defer infrastructure maintenance spending.

Our Q3 financial performance saw positive momentum. Both Utility & Construction and International Wood Products posted stronger sales performance, with Panel, Domestic Wood Products and Food & Ag posting slight declines. Overall, we continue to be confident in our ability to leverage our existing cost structure as the Company grows. We believe that Bridgewell has now stabilized following the acquisition and transition out of receivership, and is poised for significant growth.

Moving into Q4, we expect to experience the traditional seasonal decline in business activity. We are well positioned to take advantage of the exciting growth prospects available to us in a variety of products in both domestic and international markets and we anticipate substantial increases in revenue and profitability in 2011.


Capital Equipment Resources LLC
Mike Thuon, Chief Financial Officer

We are very pleased to welcome Henrik Jensen as the new CEO of Capital Equipment Resources LLC (“CER” or the “Pangborn Group”). Henrik joins the Pangborn Group after a distinguished career with Sauer-Danfoss, where he served as Managing Director, Executive Vice President and President of the Work Function Division.

In regard to safety performance, the Pangborn Group had two lost time injuries in Q3 2010, resulting in 10 lost time days. These were the only recordable or lost time incidents in 2010. Prior to these injuries, the Pangborn Group had achieved nearly 12 months with no recordable or lost time incidents.

North American and European Union markets continue to strengthen with the economic recovery. Asian markets have recovered well and we are pursuing many new equipment order opportunities in China. Our experience from prior recessions suggests that the recovery in capital equipment orders tends to lag the improvement in the general economy and, specifically, in the recovery of our aftermarket sales of replacement parts and services. Consolidated EBITDA was positive in Q3 2010. The positive aftermarket trends from the first half of 2010 continued into the third quarter as utilization of customer machines in our installed base was well above prior year levels. We believe that aftermarket orders will continue to exceed prior year levels and that the prospects for new orders are improving. Nonetheless, we remain cautious and very focused on cost control and liquidity. We have taken significant steps to reduce costs, and remain prepared to take further cost reduction actions if necessary as the market dictates. In the meantime, we are making a renewed push to integrate with and capitalize on the breadth of product and knowledge gained with the acquisition of the European companies, and we are making a concerted effort to expand our geographic market coverage with new manufacturer’s representatives in Asia, Europe and North America.


Finch Paper LLC
Joseph F. Raccuia, President and Chief Executive

Finch is well on its way to achieving its safety goals for 2010. As we approach the end of year one of a five-year plan for world-class safety performance, Finch has instituted several procedures, including hands-on participation by all members of the Senior Leadership Team, daily crew huddles in all departments and mill-wide safety meetings. Achieving and maintaining world-class safety performance, as measured by our Recordable Incident Rate (currently at 1.0) and Lost Time Days Away rate (currently below 0.5), will require the full engagement and participation of all Finch employees.

Overall demand for uncoated free-sheet showed signs of softening as Q3 progressed, but prices remained at their highs for the year. As the quarter closed, an oversupply of imports reduced domestic machine backlogs, although overall pricing remained above forecast entering Q4.

The Company recorded strong Adjusted EBITDA for Q3 2010. Shipments during Q3 were average and net selling prices were above average. Finch reduced the volume of natural gas consumed in the facility by 28% during Q3 compared to the same period the prior year, resulting in a net savings. Finch also posted the strongest paper mill production rate of the year during Q3. Finch’s pulp mill also continued its strong production rate throughout the quarter.

We anticipate that Finch will sustain its recent improvements in productivity and product mix and will achieve its business plan in Q4 2010. We also expect our market share to continue to grow in all focus categories.


Forest Resources LLC
Larry Richard, President and Chief Executive

Forest Resources LLC (“Forest”), which includes our majority interest in CanAmPac, is a holding company engaged in manufacturing industrial and food packaging products, including recycled corrugated medium, clay-coated boxboard, kraft, crepe and specialty packaging papers, as well as corrugated boxes and folding cartons, at six facilities in the U.S. and Canada.

Forest had 1 lost time incident and 8 total recordable incidents during Q3 2010. Forest‘s TRR (Total Recordable Rate) for Q3 2010 and nine months ended September 30, 2010, were 4.70 and 3.79, respectively, compared to the 3.2 industry average rate. Boehmer Box achieved 38 consecutive months of no lost time injuries as of the end of Q3 2010.

Forest recorded higher EBITDA for Q3 2010 compared to the same period last year operating in a very challenging market driven by higher fiber costs and the volatile Canadian dollar. Fiber costs remain well above 2009 levels and are forecast to increase during Q4 2010 due to low generation of wastepaper and a strong fiber export market.

Forest’s Mill Division has met these market challenges with aggressive cost and spending control initiatives and adjusted production to more closely match increasing customer demand driven by low customer inventories and tight mill capacity.

Sales at CanAmPac (Strathcona Paper and Boehmer Box) remained strong with EBITDA under the same fiber cost pressures as the Mill Division. The coated recycled board (“CRB”) market in Canada is sensitive to the strong Canadian dollar, which increases competitiveness of U.S. manufacturers and fiber costs. The strengthening Canadian dollar, which depressed earnings at Strathcona Paper in Q2, has begun to decline from recent highs.

Industry-wide inventories remain at historic low volumes; demand is increasing, but only over the extremely low levels of 2009. Continued discipline will be required by major producers to maintain production/demand balance to support the price increases already implemented this year.


Northern Pulp Nova Scotia Corporation
Tim Lowe, Chief Executive

Northern Pulp Nova Scotia Corporation (“Northern Pulp,” the “Company” or the “Mill”) had two recordable safety incidents in Q3 2010, yielding a year-to-date recordable incident rate of 1.92, which is better than the Mill’s target of 2.00. The Mill’s 12-month rolling RIR is 1.44. The Company continues to focus on safety on a daily basis through the ongoing promotion of its SAFESTART program. The Company is also developing a new safety management system (“SMS”), which it expects to introduce either in late 2010 or early 2011.

During Q3, demand from China declined and there were also three mill restarts in Canada — two in British Columbia and one in Ontario — resulting in an increase of approximately 1 million tonnes of pulp into the marketplace. In addition, Chile appeared to have experienced a full recovery from its February earthquake disaster with the exception of one mill. World inventories of softwood bleached kraft pulp grew by approximately eight days in August and September, while the Canadian dollar remained strong.

The Mill achieved a number of production records in the quarter, including best quarterly production; best monthly production; and the best five daily production days ever. Year-to-date, the Mill improved its daily production run-rate. Mill reliability also improved from 78.4% in 2009 to 91.5% in 2010.

Adjusted EBITDA for Q3 2010 was strong. Work continued on a number of cost saving initiatives identified under the Mill’s Continuous Improvement (CI) Program. Substantial savings in energy usage continued to be realized and chemical consumption improvements were also achieved.

In Q3, considerable effort went into advancing the Green Transformation Program (GTP) projects that are funded by our grant from the Canadian government. The identified projects have been clustered into three primary groups: odor reduction; improvements to the recovery cycle; and a power boiler upgrade. In addition, the Mill continued to move forward on a proposed renewable energy project.

Looking forward, pulp prices are expected to soften in Q4 and into next year as a result of mill restarts and a potential slowdown in economic recovery. The strong Canadian dollar and high fiber costs represent the greatest risks to the business at this time.


Northern Timber Nova Scotia Corporation
Wayne Gosse, Chief Executive and Chief Financial Officer

Northern Timber Nova Scotia Corporation (“Northern Timber” or the “Company”) owns approximately 420,000 acres of timberland in Nova Scotia, which it acquired in a transaction with Neenah Paper Company of Canada in March 2010.

The Company’s largest revenue source is from the sale of standing timber stumpage through a Stumpage Agreement with an affiliate, Northern Pulp Nova Scotia Corporation (“Northern Pulp”). In addition, the Company receives revenue from land use activities such as campsite, cell tower and gravel pit leases. The Company recognizes depletion expense on its land as the standing timber is sold. Adjusted EBITDA for Q3 2010 was positive and liquidity remains strong, with positive cash balances at quarter’s end. Average monthly sales volumes are expected to be lower in Q4, reflecting seasonally lower production rates.


Phoenix Services International LLC
Doug Lane, President and Chief Executive

Phoenix Services International LLC (“Phoenix Services” or the “Company”) experienced an OSHA recordable rate of 3.4 in Q3 2010, with a 1ost/restricted workday rate of 1.2. Year to date, the Company has averaged an OSHA recordable rate of 3.8 relative to a slag industry standard of 5.0 and a steel industry standard of 3.7.

The domestic steel industry has seen a falloff in production since the end of Q2 2010, with weekly production falling by approximately 10% and many mills curtailing production or announcing temporary shutdowns.

The Company recorded positive EBITDA in Q3 2010. However, performance was impacted by the temporary shutdown of the Sparrows Point facility, where the Company performs a variety of contractual services, including slag handling, scrap recovery and scrap yard management.

The financial impact of the Sparrows Point shutdown has been mitigated by cost reduction measures implemented at the site, as well as the commencement of mill service operations at the Arcelor Mittal Galati mill in Romania, which marks the launch of Phoenix Services’ international operations.

Phoenix Services continues to experience strong demand for its services, both in the U.S. and internationally. The Company is currently exploring a host of additional opportunities, predominantly in North America and Eastern Europe, and has the capitalization needed to execute its growth plans. We remain extremely optimistic about the continuation of strong performance and growth at Phoenix Services.


RedBuilt LLC
Kurt Liebich, President and Chief Executive

RedBuilt’s safety culture and performance remain excellent. In the third quarter, we operated incident free, and YTD we have suffered two recordable incidents, which brings our Recordable Incident Rate to 1.23, slightly above our target of less than 1.0. The 200+ associates in the business have worked over 1,000 days without a lost time accident.

The commercial construction industry, which is RedBuilt’s primary market, remains mired in the great recession. Most indicators suggest that the worst is behind us, but we are continuing to “bounce along bottom.” We do not expect a significant recovery until at least 2012.

Since the acquisition closed in August 2009, we have developed additional products and market segments to help us survive the downturn in the commercial construction market. We have made solid progress. We have introduced a new scaffold plank and concrete forming line, and we have received code approvals to re-enter the Canadian, Japanese and Australian markets. In 2010, we will sell into these new segments, and we expect to realize significant growth in 2011, which will really help us to offset the weakness in our core commercial business.

While we will continue to experience very difficult operating conditions over the next 18 months, we remain confident that we will be able to generate long-term value.


Wood Resources LLC
Richard Yarbrough, President and Chief Executive
Eric L. Larsen, Vice President, Finance

Q3 2010 experienced a decline in the markets served by Wood Resources LLC (the “Company”) from the market peak of Q2. Although industry-wide production remained on a decline, consumption declined even faster, as buyers returned to their practice of buying only on back-to-back business. Inventories remain nearly non-existent in the channel.

Even though pricing retreated to Q1 levels by the end of Q3, improved operating performance enabled the Company to generate positive EBITDA. The Company’s commodity business, Chester Wood Products, led the Company’s performance for the quarter. Safety performance was excellent, with no incidents during Q3. Moncure Plywood continued improving its cash cost of production, achieving its best quarter to date. In addition, Moncure’s exemplary safety performance continued, with no incidents for the quarter and only one incident in the last six quarters. Olympic continued its trend of stable performance with its sixth consecutive quarter of positive EBITDA.

With current lackluster demand across most of the Company’s markets, we are anticipating prices to drop below Q3 levels and continue to languish at these levels during Q4. We remain hopeful that a moderate pickup in demand in early 2011 will have a disproportionate impact on pricing, given the extreme tightness in the channel — similar to the experience of the first half of this year. Until then, our challenge will continue to be maintaining our highly competitive cost structure.