The following discussion and analysis presents the factors that had a material effect on our financial position as of March 31, 2009 and our results of operations for the three months ended March 31, 2009 and 2008. You should read this discussion in conjunction with our consolidated financial statements and the notes to those consolidated financial statements included in our most recent Annual Report on Form 10-K. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See "Forward-Looking Statements" for a discussion of the uncertainties, risks and assumptions associated with these statements.

In this report, unless the context requires otherwise, references to "we," "us," "our," "Neenah" or the "Company" are intended to mean Neenah Paper, Inc. and its consolidated subsidiaries. (Tabular amounts in millions, except as noted)

Executive Summary

Strategic Initiatives

During the previous three years, we completed several complementary initiatives in line with our strategy to transition to a premium fine paper and technical products company. In 2006 and 2007, we sold 500,000 acres of woodlands in Nova Scotia, divested our Terrace Bay pulp operations, acquired the German technical and specialty paper business of FiberMark, Inc. and purchased Fox Valley Corporation and its subsidiary, Fox River Paper Company, LLC (collectively, "Fox River"). In February 2008, we committed to a plan to sell the Pictou Mill and the Woodlands. In June 2008, Neenah Canada sold the Pictou Mill to Northern Pulp, which assumed responsibility for all of the assets and liabilities associated with the Pictou Mill.

In conjunction with the sale of the Pictou Mill, we entered into a stumpage agreement (the "Stumpage Agreement") which allows Northern Pulp to harvest an average of approximately 400,000 metric tons of softwood timber annually from the Woodlands at market prices. An agreement to sell the Woodlands will be subject to the terms of the Stumpage Agreement.

We believe it is probable that a sale of the Woodlands will occur within twelve months. We expect to recognize a substantial gain on the sale of the Woodlands. Upon consummation of the sale of the Woodlands, we will have completely divested our pulp manufacturing operations and the revenues of our remaining businesses will be almost evenly divided between fine paper and technical products. In addition, we will have significantly changed the profile of our company by eliminating our pulp operations in favor of higher growth, more profitable and less capital-intensive specialty paper businesses.

Results of Continuing Operations

For the three months ended March 31, 2009, our consolidated net sales decreased approximately $71 million from the prior year period to $134.1 million. The decrease was primarily due to lower volumes as a result of substantially reduced market demand in the first quarter of 2009 due to continued global economic weakness. Our consolidated operating income of $4.9 million for the three months ended March 31, 2009 decreased $13.0 million compared to the prior year primarily due to lower volumes and a commensurate reduction in paper machine operating schedules to control inventory. These unfavorable factors were only partially offset by lower manufacturing input costs, reduced spending due to initiatives to control operating costs and higher average selling prices.

We have not observed any significant reduction in the ability of our customers to make payments in a timely manner or in the ability of our vendors to provide products and services due to the availability of credit. However, there can be no assurance that our customers or vendors will not experience such problems.

Results of Discontinued Operations

For the three months ended March 31, 2009, timber sales to Northern Pulp pursuant to the Stumpage Agreement resulted in net sales from discontinued operations of $0.8 million. Net sales of discontinued operations for the three months ended March 31, 2008 were $50.8 million primarily from pulp sales at the Pictou Mill.

For the three months ended March 31, 2009, we recognized pre-tax income from discontinued operations of $0.2 million compared to a pre-tax loss of $131.8 million in the prior year period. The pre-tax loss in the prior year period was primarily due to recognition of a non-cash charge of $90.5 million to write-off the long-lived assets of the Pictou Mill. In addition, we recognized a pre-tax loss of $39.5 million for the estimated loss on disposal of the Pictou Mill. Excluding the impairment charge and the estimated loss on disposal, the pre-tax loss from operations for the three months ended March 31, 2008 was $1.8 million.

Results of Operations and Related Information

In this section, we discuss and analyze our net sales, operating income and other information relevant to an understanding of our results of operations for the three months ended March 31, 2009 and 2008.

Analysis of Net Sales-Three months Ended March 31, 2009 and 2008

The following table presents net sales by segment, expressed as a percentage of total net sales:

                                                       Three Months Ended March 31,
                                                    2009                           2008
   Fine Paper                                                   48 %                           47 %
   Technical Products                                           52 %                           53 %
   Total                                                       100 %                          100 %

The following table presents our net sales by segment for the periods indicated:

                                                       Three Months Ended March 31,
                                                    2009                           2008
   Fine Paper                             $                   64.8       $                   97.0
   Technical Products                                         69.3                          108.6
   Consolidated                           $                  134.1       $                  205.6

Commentary:



Three Months Ended March 31, 2009 Compared to the Three Months Ended March 31,
2008



                                Change in Net Sales Compared to Prior Period
                                                        Change Due To
                     Total Change        Volume         Average Net Price      Currency
Fine Paper           $       (32.2 )  $       (36.5 )  $               4.3    $        -
Technical Products           (39.3 )          (34.1 )                  1.9          (7.1 )
Consolidated         $       (71.5 )  $       (70.6 )  $               6.2    $     (7.1 )

Consolidated net sales of $134.1 million for the three months ended March 31, 2009 were $71.5 million lower than the prior year period primarily due to reduced volumes.

† Net sales in our fine paper business of $64.8 million decreased $32.2 million or 33 percent primarily due to a 38 percent decrease in shipments. The lower volume reflected an unusually large decline in market demand for premium uncoated free sheet papers in the first quarter of 2009 due to both weaker economic conditions and inventory destocking by customers. The effect of lower volumes was only partly offset by higher average net selling prices resulting from the realization of price increases implemented in 2008 and a more favorable mix.

† Net sales in our technical products business of $69.3 million decreased $39.3 million or 36 percent primarily due to a 31 percent decrease in shipments and unfavorable currency effects that were only partially offset by higher average net selling prices. Lower sales volumes reflected both decreased market demand across all strategic business units due to weaker economic conditions and inventory destocking by customers. Average net selling prices increased due to pricing actions taken in 2008.

The following table sets forth line items from our condensed consolidated statements of operations as a percentage of net sales for the periods indicated and is intended to provide a perspective of trends in our historical results:

                                                      Three Months Ended March 31,
                                                         2009               2008
Net sales                                                   100.0 %            100.0 %
Cost of products sold                                        84.7               83.4
Gross profit                                                 15.3               16.6
Selling, general and administrative expenses                 12.1               10.3
Other income - net                                           (0.5 )             (2.4 )
Operating income                                              3.7                8.7
Interest expense-net                                          4.3                3.0
Income (loss) from continuing operations before
income taxes                                                 (0.6 )              5.7
Provision (benefit) for income taxes                         (0.1 )              1.6
Income (loss) from continuing operations                     (0.5 )%             4.1 %

Analysis of Operating Income-Three months Ended March 31, 2009 and 2008

The following table sets forth our operating income (loss) by segment for the periods indicated:

                                 Three Months Ended March 31,
                                  2009                2008
Fine Paper                    $         8.6     $           10.0
Technical Products                     (0.6 )                8.1
Unallocated corporate costs            (3.1 )               (0.2 )
Consolidated                  $         4.9     $           17.9