The following discussion and analysis presents the factors that had a material effect on our financial position as of June 30, 2009 and our results of operations for the three and six months ended June 30, 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 as part of our strategy to transition to a premium fine paper and technical products company. In 2006, we sold 500,000 acres of woodlands in Nova Scotia, divested our Terrace Bay pulp operations and acquired the German technical and specialty paper business of FiberMark, Inc. In 2007, we purchased Fox Valley Corporation and its subsidiary, Fox River Paper Company, LLC (collectively, "Fox River"). 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. With the sale of the Pictou Mill, we no longer had any pulp manufacturing operations or supply agreements with Kimberly-Clark.

We currently own approximately 500,000 acres of woodlands in Nova Scotia, Canada (the "Woodlands") and 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. 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. For the three and six months ended June 30, 2009 and 2008, we reported the results of the Pictou Mill and the Woodlands as discontinued operations.

Results of Continuing Operations

For the three months ended June 30, 2009, our consolidated net sales decreased approximately $59 million from the prior year period to $135.2 million. The decrease was primarily due to lower volume as a result of substantially reduced market demand due to continued global economic weakness.

We recorded a consolidated operating loss of $10.5 million for the three months ended June 30, 2009 due to a pre-tax charge of $18 million for costs associated with permanently closing the Ripon Mill in May 2009. Closing the Ripon Mill reflects our strategy to drive consolidation in the premium fine paper category through leading brands and a cost efficient manufacturing platform. Excluding such closure costs and a gain of approximately $2.9 million in the second quarter of 2008 on the sale of certain assets acquired in the acquisition of Fox River, consolidated operating income of $7.5 million decreased $3.8 million compared to the prior year primarily due to lower volume 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.

Results of Discontinued Operations

For the three months ended June 30, 2009, timber sales to Northern Pulp pursuant to the Stumpage Agreement resulted in net sales from discontinued operations of $0.5 million. Net sales of discontinued operations for the three months ended June 30, 2008 were $48.1 million primarily from pulp sales at the Pictou Mill.

For the three months ended June 30, 2009, we recognized pre-tax income from discontinued operations of $0.6 million compared to a pre-tax loss from operations of $8.9 million in the prior year period. The pre-tax operating loss in the prior year period was primarily due to scheduled maintenance downtime at the Pictou Mill. In addition, results for the three months ended June 30, 2008, include a pre-tax loss on disposal of $43.9 million. The loss on disposal was primarily due to recognition of a non-cash charge of $53.7 million for the reclassification from accumulated other comprehensive income of deferred adjustments related to pensions and other post-employment benefits in connection with the transfer of post-employment benefit plans for the Pictou Mill to Northern Pulp. In addition, we recognized pre-tax income of $9.8 million to adjust the estimated loss on transfer to the actual loss recognized upon closing the transaction.

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 and six months ended June 30, 2009 and 2008.

Analysis of Net Sales- Three and Six Months Ended June 30, 2009 and 2008



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



                      Three Months Ended June 30,      Six Months Ended June 30,
                         2009             2008           2009             2008
Fine Paper                     45 %             43 %           47 %             45 %
Technical Products             55 %             57 %           53 %             55 %
Total                         100 %            100 %          100 %            100 %

Commentary:



The following table presents our net sales by segment for the three months ended
June 30, 2009 compared to the three months ended June 30, 2008:



                                                                     Change in Net Sales Compared to Prior Period
                                                                                             Change Due To
                            Three Months Ended June 30,                                          Average
                             2009                2008         Total Change        Volume        Net Price      Currency
Fine Paper              $          61.3     $          84.5   $       (23.2 )  $       (24.2 )  $      1.0    $         -
Technical Products                 73.9               110.0           (36.1 )          (29.9 )         1.1           (7.3 )
Consolidated            $         135.2     $         194.5   $       (59.3 )  $       (54.1 )  $      2.1    $      (7.3 )

Consolidated net sales of $135.2 million for the three months ended June 30, 2009 were $59.3 million lower than the prior year period primarily due to reduced volume.

† Net sales in our fine paper business of $61.3 million decreased $23.2 million or 27 percent primarily due to a 29 percent decrease in shipments. The lower volume reflected an unusually large decline in market demand for premium uncoated free sheet papers due to weaker economic conditions. The effect of lower volume was only partly offset by higher average net selling prices resulting from the realization of price increases implemented in 2008.

† Net sales in our technical products business of $73.9 million decreased $36.1 million or 33 percent primarily due to a 27 percent decrease in shipments and unfavorable currency effects, partially offset by higher average net selling prices. Lower sales volume reflected 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 presents our net sales by segment forthe six months ended June 30, 2009 compared to the six months ended June 30, 2008:

                                                                 Change in Net Sales Compared to Prior Period
                                                                                         Change Due To
                          Six Months Ended June 30,                                          Average
                            2009             2008        Total Change        Volume         Net Price      Currency
Fine Paper              $       126.1    $       181.5   $       (55.4 )  $       (60.7 )  $       5.3    $         -
Technical Products              143.2            218.6           (75.4 )          (64.0 )          3.0          (14.4 )
Consolidated            $       269.3    $       400.1   $      (130.8 )  $      (124.7 )  $       8.3    $     (14.4 )

Consolidated net sales of $269.3 million for the six months ended June 30, 2009 were $130.8 million lower than the prior year period primarily due to reduced volume.

† Net sales in our fine paper business of $126.1 million decreased $55.4 million or 31 percent primarily due to a 33 percent decrease in shipments. The lower volume reflected an unusually large decline in market demand for premium uncoated free sheet papers in the first six months of 2009 due to weaker economic conditions and inventory destocking by customers. The effect of lower volume was only partly offset by higher average net selling prices resulting from the realization of price increases implemented in 2008 and a more favorable sales mix.

† Net sales in our technical products business of $143.2 million decreased $75.4 million or 34 percent primarily due to a 29 percent decrease in shipments and unfavorable currency effects that were only partially offset by higher average net selling prices. Lower sales volume 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 June 30,        Six Months Ended June 30,
                                       2009               2008           2009              2008

Net sales                                 100.0 %            100.0 %        100.0 %           100.0 %
Cost of products sold                      82.1               85.1           83.4              84.2
Gross profit                               17.9               14.9           16.6              15.8
Selling, general and
administrative expenses                    12.3                9.1           12.2               9.7
Other (income) expense - net                0.1               (1.5 )         (0.2 )            (1.9 )
Restructuring costs                        13.3                  -            6.7                 -
Operating income (loss)                    (7.8 )              7.3           (2.1 )             8.0
Interest expense-net                        3.9                3.1            4.1               3.1
Income (loss) from continuing
operations before income taxes            (11.7 )              4.2           (6.2 )             4.9
Provision (benefit) for income
taxes                                      (5.3 )              1.0           (2.7 )             1.2
Income (loss) from continuing
operations                                 (6.4 )%             3.2 %         (3.5 )%            3.7 %

Analysis of Operating Income-Three and Six Months Ended June 30, 2009 and 2008



Commentary:



The following table presents our operating income (loss) by segment for the
three months ended June 30, 2009 compared to the three months ended June 30,
2008:



                                                             Change in Operating Income (Loss) Compared to Prior Period
                                                                                   Change Due To
               Three Months Ended June 30,       Total                            Net         Material
                  2009            2008           Change        Volume (a)      Price (b)      Costs (c)      Currency    Other (d)(e)
Fine Paper     $    (10.0 )   $        11.7   $      (21.7 )  $       (8.7 )  $       1.5    $       4.9    $        -   $       (19.4 )
Technical
Products              3.3               6.0           (2.7 )          (8.5 )          0.8            2.8          (0.2 )           2.4
Unallocated
corporate
costs                (3.8 )            (3.5 )         (0.3 )             -              -              -             -            (0.3 )
Consolidated   $    (10.5 )   $        14.2   $      (24.7 )  $      (17.2 )  $       2.3    $       7.7    $     (0.2 ) $       (17.3 )

(b) Includes changes in selling price and product mix.

(c) Includes price changes for raw materials and energy.

(d) Includes other manufacturing costs, distribution, selling, general and administrative expenses and gains and losses on asset sales.

(e) Fine Paper results for the three months ended June 30, 2009 include a pre-tax charge to earnings of $18 million related to the closure of the Ripon
Mill. Fine Paper results for the three months ended June 30, 2008 include a gain of approximately $2.9 million from the sale of certain fixed assets acquired in the Fox River acquisition.

We reported a consolidated operating loss of $10.5 million for the three months ended June 30, 2009 primarily due to a pre-tax charge of $18 million related to the closure of the Ripon Mill. Excluding costs associated with closing the Ripon Mill and a gain of approximately $2.9 million in the second quarter of 2008 on the sale of certain assets acquired in the acquisition of Fox River, consolidated operating income of $7.5 million for the three months ended June 30, 2009 decreased $3.8 million compared to 2008 primarily due to lower volume and associated reductions in paper machine operating schedules to control inventory; that were only partially offset by lower manufacturing input costs, actions taken to reduce spending and higher average selling prices.

† Our fine paper business reported an operating loss of $10.0 million which was $21.7 million unfavorable to the prior year period. Excluding costs associated with closing the Ripon Mill and a gain of approximately $2.9 million in the second quarter of 2008 on the sale of certain assets acquired in the acquisition of Fox River, operating income for our fine paper business of $8.0 million decreased $0.8 million compared to the prior year primarily due to lower volume as a result of weaker economic conditions and the under absorption of fixed manufacturing costs due to reduced paper machine utilization. These unfavorable effects were largely offset by lower manufacturing input costs, principally for hardwood pulp, lower operating and administrative spending due to cost reduction initiatives and higher average net selling prices due to the realization of price increases implemented in 2008.

† Operating income for our technical products business decreased $2.7 million primarily due to lower volume and higher manufacturing costs resulting from reduced paper machine utilization. These unfavorable factors were partially offset by lower manufacturing input costs, principally for pulp and latex, lower operating and administrative spending due to cost reduction initiatives and improved pricing due to the realization of price increases implemented in 2008. We were unable to fully realize market price reductions for gas, coal and specialized pulp due to certain fixed price contracts for these input costs. In general, these fixed price contracts extend through September 2009.

† Unallocated corporate expenses increased by $0.3 million.

The following table presents our operating income (loss) by segment for the six months ended June 30, 2009 compared to the six months ended June 30, 2008:

                                                                Change in Operating Income (Loss) Compared to Prior Period
                                                                                       Change Due To
                   Six Months Ended June 30,          Total                          Net         Material
                    2009               2008          Change       Volume (a)      Price (b)     Costs (c)      Currency    Other (d)(e)
Fine Paper     $         (1.4 )   $         21.7   $     (23.1 )  $     (19.8 )  $       5.1    $      7.6    $        -   $       (16.0 )
Technical
Products                  2.7               14.1         (11.4 )        (22.1 )          2.3           3.3          (0.2 )           5.3
Unallocated
corporate
costs                    (6.9 )             (3.7 )        (3.2 )            -              -             -             -            (3.2 )
Consolidated   $         (5.6 )   $         32.1   $     (37.7 )  $     (41.9 )  $       7.4    $     10.9    $     (0.2 ) $       (13.9 )

(b) Includes changes in selling price and product mix.

(c) Includes price changes for raw materials and energy.

(d) Includes other manufacturing costs, distribution, selling, general and administrative expenses and gains and losses on asset sales.

(e) Fine Paper results for the six months ended June 30, 2009 include a pre-tax charge to earnings of $18 million related to the closure of the Ripon Mill. Fine Paper results for the six months ended June 30, 2008 include a gain of approximately $2.9 million from the sale of certain fixed assets acquired in the Fox River acquisition.

We reported a consolidated operating loss of $5.6 million for the six months ended June 30, 2009 primarily due to costs associated with the closure of the Ripon Mill. Excluding costs associated with closing the Ripon Mill and a gain of approximately $2.9 million in the second quarter of 2008 on the sale of certain assets acquired in the acquisition of Fox River, consolidated operating income of $12.4 million for the six months ended June 30, 2009 decreased $16.8 million compared to 2008 primarily due to lower volume and associated reductions in paper machine operating schedules to control inventory; that were only partially offset by lower manufacturing input costs, actions taken to reduce spending and higher average selling prices.

† Our fine paper business reported an operating loss of $1.4 million which was $23.1 million unfavorable to the prior year period. Excluding costs associated with closing the Ripon Mill and the gain of approximately $2.9 million in the second quarter of 2008 from assets sales, operating income for our fine paper business decreased $2.2 million primarily due to lower volume as a result of weaker economic conditions and the under absorption of fixed manufacturing costs due to reduced paper machine utilization. The effects of lower volume and paper machine operating schedules, including the temporary idling of one paper machine, were only partially offset by lower manufacturing input costs, principally for hardwood pulp, lower operating and administrative spending due to cost reduction initiatives and higher average net selling prices due to the realization of price increases implemented in 2008.

† Operating income for our technical products business decreased $11.4 million primarily due to lower volume and higher manufacturing costs resulting from reduced paper machine utilization. These unfavorable factors were partially offset by lower manufacturing input costs, principally for pulp and latex, lower operating and administrative spending due to cost reduction initiatives and improved pricing due to the realization of price increases implemented in 2008. As a result of certain fixed price contracts for gas, coal and specialized pulp, we were unable to fully realize market price reductions for these input costs. In general, these fixed price contracts extend through September 2009.

† Unallocated corporate expenses increased by $3.2 million. Unallocated corporate expense for the six months ended June 30, 2008 included a gain of approximately $4.3 million related to the settlement of certain postretirement benefits we retained following the sale of our Terrace Bay pulp mill. Excluding the effect of this gain, unallocated corporate expenses decreased $1.1 million due to the benefits of cost reduction initiatives implemented in 2009.

Additional Statement of Operations Commentary:

† Selling, general and administrative ("SG&A") expense of $16.6 million for the three months ended June 30, 2009 decreased $1.0 million from the prior year period primarily as a result of a reduction in controllable SG&A spending due to cost reduction initiatives implemented in 2009. For the three months ended June 30, 2009, SG&A expense as a percentage of net sales was approximately 12.3 percent and was 3.2 percentage points higher than the prior year period as the benefits of lower spending were more than offset by the 30 percent decrease in net sales.

† For the three months ended June 30, 2009 and 2008, we incurred $5.3 million and $6.1million, respectively, of net interest expense (including $0.5 million of amortization of debt issuance costs in each period). The decrease in net interest expense was due to lower average borrowings and lower average interest rates.

† For the three months ended June 30, 2009, we recorded a tax benefit of $7.2 million resulting in an effective income tax benefit rate of approximately 46 percent. We excluded the tax effects of the costs associated with closing the Ripon Mill as an infrequent and/or unusual item in estimating our full year effective tax rate. The tax effects of closing the Ripon Mill were treated as a discrete item in determining our tax benefit for the three months ended June 30, 2009. Therefore, the effective tax rate for the six months ended June 30, 2009 is not necessarily indicative of the tax rate we expect to record for the remainder of 2009. For the three months ended June 30, 2008, we recorded a tax provision of $1.9 million resulting in an effective income tax rate of approximately 23 percent. For each period, the variance from the U.S. federal statutory rate of 35 percent was primarily due to the benefits of our corporate structure and the mix of pre-tax income from tax jurisdictions with different marginal tax rates. The change in the mix of pre-tax income was primarily due to costs associated with closing the Ripon Mill.

Liquidity and Capital Resources



                                          Six Months Ended June 30,
                                            2009              2008
Net cash flow provided by (used in):
Operating activities                   $         35.2     $        0.7
Investing activities:
Capital expenditures                             (4.2 )          (17.8 )
Other investing activities                       (0.3 )            0.8
Total                                            (4.5 )          (17.0 )

Financing activities                            (28.6 )           15.7

Operating Cash Flow Commentary:

† Cash provided by operating activities of $35.2 million for the six months ended June 30, 2009 was $34.5 million favorable to cash provided by operating activities of $0.7 million in the prior year period. The favorable comparison to the prior year was due to a decrease in our investments in working capital in the current year, including the receipt of a refund of U.S. income taxes and payments related to the closure of the Ripon Mill partially offset by lower operating earnings (excluding non-cash items).

† For the six months ended June 30, 2009, we received approximately $10.9 million in refunds of U.S. income taxes. As of June 30, 2009, we had more than $100 million of U.S. federal and state net operating losses that may be carried forward to offset future taxable income through 2028.

† For the six months ended June 30, 2009, we made severance and contract termination payments of approximately $4.9 million related to the closure of the Ripon Mill. In addition, we expect to make future contract termination payments of approximately $4 million during the remainder of 2009 and in 2010.

† For the six months June 30, 2009, we made pension contributions of approximately $3.6 million and expect to make total pension contributions of approximately$9 million in calendar 2009. In addition, Neenah Germany paid approximately $0.7 million in pension benefits during the six months ended June 30, 2009 and expects to pay a total of approximately $1.6 million (based on exchange rates at June 30, 2009) for pension benefits in 2009.

Investing Commentary:

† For the six months ended June 30, 2009, cash used in investing activities was $4.5 million, a decrease of $12.5 million versus the prior year period. The reduction in cash used for investing activities was due to a decrease of $13.6 million in capital spending. We have aggregate planned capital expenditures for 2009 of approximately $10 million. We believe that the level of our capital spending for 2009 is consistent with current economic conditions and will allow us to maintain the efficiency and cost effectiveness of our manufacturing assets. The level of our capital expenditures for the next 12 months is not expected to have a material adverse effect on our financial condition, results of operations or liquidity.

Financing Commentary:

† Our liquidity requirements are provided by cash generated from operations, short- and long-term borrowings and proceeds from asset sales. Availability under our revolving credit facility varies over time depending on the value of our inventory, receivables and various capital assets. As of June 30, 2009, we had $84.3 million outstanding under our Revolver, outstanding letters of credit of $1.1 million and $51.8 million of available credit. In addition, we have €7.1 million ($9.9 million, based on exchanges rates at June 30, 2009) of available credit under our German Line of Credit.

† For the six months ended June 30, 2009, net repayments on our Revolver and our German Line of Credit were $16.8 million and $5.6 million, . . .