The following discussion and analysis presents the factors that had a material effect on our results of operations during the years ended December 31, 2012, 2011 and 2010. Also discussed is our financial position as of the end of those periods. You should read this discussion in conjunction with our consolidated financial statements and the notes to those consolidated financial statements included elsewhere in this 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.

Introduction

This Management's Discussion and Analysis of Financial Condition is intended to provide investors with an understanding of the historical performance of our business, its financial condition and its prospects. We will discuss and provide our analysis of the following:

º •
º Overview of Business;

º •
º Business Segments;

º •
º Results of Operations and Related Information;

º •
º Liquidity and Capital Resources;

º •
º Adoption of New Accounting Pronouncements; and

º •
º Critical Accounting Policies and Use of Estimates.

Overview of Business

We are a leading producer of technical products and premium fine papers. We have two primary operations: our technical products business and our fine paper business.

Our mission is to create value by improving the image and performance of everything we touch. We expect to create value by expanding our presence in growing technical products markets, while delivering attractive returns from our fine paper business.

In managing our businesses, we believe that achieving and maintaining a leadership position in our markets, responding effectively to customer needs and competitive challenges, employing capital optimally, controlling costs and managing risks are important to long-term success. Changes in input costs and general economic conditions also impact our results. In this discussion and analysis, we will refer to these factors.

º •
º Competitive Environment - Our past results have been and our future prospects will be significantly affected by the competitive environment in which we operate. In most of our markets, our businesses compete directly with well-known competitors, some of which are larger and more diversified. While our businesses are oriented to premium performance and quality they may also face competitive pressures from lower value products.

º •
º Economic Conditions and Input Costs - The markets for all of our products are affected to a significant degree by economic conditions, including rapid changes in input costs, particularly for pulp, latex and natural gas. Our results are also affected by fluctuations in exchange rates, particularly for the Euro.

Business Segments

Our technical products business is a leading international producer of transportation and other filter media and durable, saturated and coated substrates for a variety of end markets. We focus on categories where we believe we are, or can be, a market leader, which include, among others, the transportation and other filtration media, tape, abrasive, nonwoven wall coverings, label, medical packaging and image transfer technical products markets. Our technical products manufacturing facilities are located near Munich and Frankfurt, Germany and in Munising, Michigan.

We believe our fine paper business is the leading supplier of premium writing, text and cover papers, bright papers and specialty papers in North America. Our products include some of the most recognized and preferred papers in North America, where we enjoy leading market positions in many of our product categories. We sell our products primarily to authorized paper distributors, converters, major national retailers and specialty businesses. We believe that our fine paper manufacturing facilities located in Appleton, Neenah and Whiting, Wisconsin are among the most efficient for their markets and make us one of the lowest cost producers in the product categories in which we compete.

The other segment includes the Index, Tag and Vellum Bristol brands acquired from Wausau.

Results of Operations and Related Information

In this section, we discuss and analyze our net sales, income before interest and income taxes (which we refer to as "operating income" in this Management's Discussion and Analysis of Financial Condition and Results of Operations) and other information relevant to an understanding of our results of operations.

Executive Summary

On January 31, 2012, we purchased certain premium paper brands and other assets from Wausau. We paid approximately $21million for (i) the premium fine paper brands ASTROBRIGHTS®, ASTROPARCHE® and ROYAL, (ii) exclusive, royalty free and perpetual license rights for a portion of the EXACT® brand specialty business, including Index, Tag and Vellum Bristol, (iii) approximately one month of finished goods inventory and (iv) certain converting equipment used for retail grades.

For the year ended December 31, 2012, consolidated net sales increased $112.8 million from the prior year to $808.8 million primarily due to incremental volume from the brands acquired from Wausau.

Consolidated operating income of $70.4 million for the year ended December 31, 2012 increased $13.8 million from the prior year. Excluding acquisition related integration costs of approximately $5.8 million, a SERP settlement charge of $3.5 million and costs of $0.6 million related to the early redemption of Senior Notes in 2012 and costs of $2.4 related to the early redemption of Senior Notes in 2011, operating income for the year ended December 31, 2012 increased $21.3 million or 36 percent from the prior year. The favorable variance was primarily due to incremental volume related to the acquisition of the Wausau brands, higher average net price for both businesses and lower manufacturing input costs in our fine paper business, partially offset by additional costs related to the acquisition of the Wausau brands, including higher selling, general and administrative ("SG&A") spending and non-cash charges for the revaluation of inventory and profit in inventory.

Analysis of Net Sales - Years Ended December 31, 2012, 2011 and 2010

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

                                          Year Ended December 31,
                                         2012        2011       2010
                  Technical Products         50 %        61 %      58 %
                  Fine Paper                 46 %        39 %      42 %
                  Other                       4 %         - %       - %

                  Total                     100 %       100 %     100 %

Commentary:

Year 2012 versus 2011

                                              Change in Net Sales Compared to the Prior Year
                 For the Year Ended                                    Change Due To
                    December 31,           Total                        Average Net
                  2012         2011        Change          Volume          Price         Currency
Technical
Products        $   406.6     $ 421.1    $     (14.5 )   $      (2.5 )     $   10.3     $     (22.3 )
Fine Paper          372.7       274.9           97.8            97.2            0.6               -
Other                29.5           -           29.5            29.5              -               -

Consolidated    $   808.8     $ 696.0    $     112.8     $     124.2       $   10.9     $     (22.3 )

Consolidated net sales for the year ended December 31, 2012 were $112.8 million higher than the prior year primarily due to incremental volume from the brands acquired from Wausau. Consolidated net sales also benefitted from a more favorable product mix in our Technical Products business and higher average selling prices for both businesses, partially offset by unfavorable currency exchange effects.

º •
º Net sales in our technical products business decreased $14.5 million, or three percent, as higher average net price was more than offset by unfavorable currency exchange effects and lower shipment volume. The higher average net price reflected a more favorable product mix due to growth in transportation filtration, labels and medical packaging products and a one percent increase in average selling prices. Unfavorable currency exchange effects reflected an eight percent weakening of the Euro relative to the U.S. dollar during 2012. Shipment volumes decreased less than one percent from the prior year as strong growth in transportation filtration, wall covering, medical packaging products and label shipments was more than offset by lower tape and abrasive volume.

º •
º Net sales in our fine paper business increased $97.8 million or 36 percent from the prior year primarily due to incremental volume related to the acquisition of the Wausau brands and strong growth in packaging, label and premium branded shipments. Average net price was marginally higher than the prior year as higher average selling prices more than offset a product mix that included a higher proportion of lower priced products.

º •
º Other net sales were $29.5 million and reflected sales volume for the acquired Index, Tag and Vellum Bristol brands acquired from Wausau.

Year 2011 versus 2010

                                             Change in Net Sales Compared to the Prior Year
                      For the Year                                  Change Due To
                   Ended December 31,      Total                       Average
                    2011         2010      Change       Volume        Net Price      Currency
 Technical
 Products         $   421.1     $ 384.3     $ 36.8     $      3.0     $     20.4     $     13.4
 Fine Paper           274.9       273.4        1.5           (7.7 )          9.2              -

 Consolidated     $   696.0     $ 657.7     $ 38.3     $     (4.7 )   $     29.6     $     13.4

Consolidated net sales for the year ended December 31, 2011 were $38.3 million higher than the prior year primarily due to higher average selling prices, a more favorable product mix for both businesses and favorable currency exchange effects, partially offset by lower fine paper volume.

º •
º Net sales in our technical products business increased $36.8 million, or 10 percent, primarily due to higher average net prices and favorable currency exchange effects. The higher average net prices reflected a three percent increase in average selling prices and a more favorable product mix due to growth in premium filtration, labels and medical packaging products. Favorable currency exchange effects reflected a five percent strengthening of the Euro relative to the U.S. dollar during 2011. Shipment volumes increased approximately one percent from the prior year primarily due to strong growth in transportation filtration, wall covering, medical packaging products and label shipments.

º •
º Net sales in our fine paper business increased $1.5 million, or approximately one percent, due to higher average net selling prices partially offset by a six percent decrease in shipment volume. Average net price was more than two percent higher than the prior year due to higher average selling prices and a more favorable product mix. The lower shipment volume was primarily due to a general decline in shipments for the premium fine paper market and a reduction in lower value special-make sales in 2011. The general decline in shipment volume due to market conditions was partially offset by increased revenue from a new envelope program and strong growth in luxury packaging and premium label shipments.

Analysis of Operating Income - Years Ended December 31, 2012, 2011 and 2010

The following table sets forth line items from our 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:

                                                            Year Ended December 31,
                                                           2012        2011      2010
 Net sales                                                   100.0 %    100.0 %   100.0 %
 Cost of products sold                                        80.3       82.0      81.8

 Gross profit                                                 19.7       18.0      18.2
 Selling, general and administrative expenses                  9.6        9.8      10.5
 SERP settlement charge                                        0.4          -         -
 Acquisition integration costs                                 0.7          -         -
 Loss on retirement of bonds                                   0.1        0.4         -
 Gain on sale of Ripon Mill                                      -          -      (0.5 )
 Other (income) expense - net                                  0.2       (0.3 )    (0.2 )

 Operating income                                              8.7        8.1       8.4
 Interest expense - net                                        1.7        2.2       3.1

 Income from continuing operations before income taxes         7.0        5.9       5.3
 Provision for income taxes                                    2.1        1.7       1.5

 Income from continuing operations                             4.9 %      4.2 %     3.8 %

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

                                                      Year Ended December 31,
       Operating income                              2012        2011      2010
       Technical Products                           $   37.6    $  33.8   $  29.2
       Fine Paper                                       50.0       39.7      40.5
       Other                                             2.4          -         -
       Unallocated corporate costs                     (19.6 )    (16.9 )   (14.6 )

       Consolidated Operating Income as Reported        70.4       56.6      55.1

       Adjustments for Unusual Items
       Fine Paper adjustments
       Acquisition integration costs                     5.8          -         -
       Gain on sale of the Ripon Mill                      -          -      (3.4 )

       Total                                             5.8          -      (3.4 )

       Unallocated corporate costs adjustments
       SERP settlement charge                            3.5          -         -
       Loss on retirement of bonds                       0.6        2.4         -

       Total                                             4.1        2.4         -

       Total adjustments                                 9.9        2.4      (3.4 )

       Consolidated Operating Income as Adjusted    $   80.3    $  59.0   $  51.7

In accordance with generally accepted accounting principles in the United States ("GAAP"), consolidated operating income includes the pre-tax effects of unusual items. We believe that by adjusting reported operating income to exclude the effects of these items, the resulting adjusted operating income is on a basis that reflects the results of our ongoing operations. We believe that providing adjusted operating results will help investors gain an additional perspective of underlying business trends and results. Adjusted operating income is not a recognized term under GAAP and should not be considered in isolation or as a substitute for operating income derived in accordance with GAAP. Other companies may use different methodologies for calculating their non-GAAP financial measures and, accordingly, our non-GAAP financial measures may not be comparable to their measures.

Commentary:

Year 2012 versus 2011

                                                  Change in Operating Income (Loss) Compared to the Prior Year
                 For the Year Ended                                              Change Due To
                    December 31,           Total                         Net         Material
                 2012          2011        Change        Volume       Price (a)      Costs (b)      Currency      Other
Technical
Products         $  37.6       $  33.8    $     3.8     $    (0.3 )    $     6.8     $      0.7     $    (1.7 )  $  (1.7 )
Fine Paper
(c)                 50.0          39.7         10.3          23.0            2.5           10.0             -      (25.2 )
Other                2.4             -          2.4           2.4              -              -             -          -
Unallocated
corporate
costs (d)          (19.6 )       (16.9 )       (2.7 )           -              -              -             -       (2.7 )

Consolidated     $  70.4       $  56.6    $    13.8     $    25.1      $     9.3     $     10.7     $    (1.7 )  $ (29.6 )

Consolidated operating income of $70.4 million for the year ended December 31, 2012 increased $13.8 million from the prior year. Excluding acquisition related integration costs of approximately $5.8 million, a SERP settlement charge of $3.5 million and costs of $0.6 million related to the early redemption of Senior Notes in 2012 and costs of $2.4 related to the early redemption of Senior Notes in 2011, operating income for the year ended December 31, 2012 increased $21.3 million or 36 percent from the prior year with gains in both business segments. The improvement in operating income was primarily due to incremental volume and manufacturing efficiencies related to the brands acquired from Wausau, lower manufacturing input costs in our fine paper business and higher average net prices. These favorable variances were partially offset by additional costs related to the acquisition of the Wausau brands, including certain non-recurring items.

º •
º Operating income for our technical products business increased $3.8 million or 11 percent from the prior year. The income improvement resulted from a more favorable product mix, reflecting growth in higher value filtration and wallcovering shipments; and higher selling prices for most products. Operating income also benefitted from manufacturing cost efficiencies.

º •
º Operating income for our fine paper business increased $10.3 million or 26 percent from the prior year. Excluding acquisition related integration costs of approximately $5.8 million, operating income increased $16.1 million or 41 percent primarily due to incremental volume related to the brands acquired from Wausau, lower manufacturing input costs and higher average net selling prices; partially offset by SG&A and other costs, including spending and non-cash charges for the revaluation of inventory and profit in inventory, related to the purchase of the Wausau brands.

º •
º Other operating income was $2.4 million and reflected the operating results for the Index, Tag and Vellum Bristol brands.

º •
º Unallocated corporate costs for the year ended December 31, 2012 were $19.6 million, or $2.7 million unfavorable to the prior year period. Excluding the SERP settlement charge and costs related to the early redemption of Senior Notes in 2012 and 2011, unallocated corporate costs were $1.0 million unfavorable to the prior year due to higher employee benefit costs.

Year 2011 versus 2010

                                                      Change in Operating Income Compared to the Prior Year
                    For the Year                                                 Change Due To
                 Ended December 31,       Total                           Net         Material
                  2011         2010       Change       Volume (a)      Price (b)        Costs      Currency     Other (d)
Technical
Products        $    33.8     $  29.2    $     4.6      $      0.6     $     17.4     $    (16.5 )  $    0.6    $      2.5
Fine Paper           39.7        40.5         (0.8 )          (2.4 )          8.9           (5.6 )         -          (1.7 )
Unallocated
corporate
costs (c)           (16.9 )     (14.6 )       (2.3 )             -              -              -           -          (2.3 )

Consolidated    $    56.6     $  55.1    $     1.5      $     (1.8 )   $     26.3     $    (22.1 )  $    0.6    $     (1.5 )

Consolidated operating income of $56.6 million for the year ended December 31, 2011 increased $1.5 million from the prior year. Unallocated corporate costs for the year ended December 31, 2011 include $2.4 million of costs related to the Early Redemption. For the year ended December 31, 2010 results for the Fine Paper segment include a gain of $3.4 million related to the sale of the Ripon
Mill. Excluding costs related to the Early Redemption and gains related to the sale of the Ripon Mill, consolidated operating income increased $7.3 million from the prior year due to higher average net price and the on-going benefits of cost control initiatives, partially offset by increased manufacturing input costs and lower fine paper volume.

º •
º Operating income for our technical products business increased $4.6 million or 16 percent from 2010 primarily due to higher average net selling prices and a more favorable product mix due to growth in premium filtration, label and heat transfer products, partially offset by higher manufacturing input costs for latex, pulp and energy.

º •
º Operating income for our fine paper business decreased $0.8 million from the prior year. Excluding the 2010 gain related to the sale of the Ripon Mill, operating income increased $2.6 million or seven percent from the prior year period primarily due to higher average net selling prices, a more favorable product mix and a more efficient cost structure, partially offset by higher manufacturing input costs, principally for hardwood pulp and cotton, and lower shipment volume.

º •
º Unallocated corporate expenses for the year ended December 31, 2012 were $2.3 million unfavorable to the prior year period primarily due to $2.4 million of costs related to the Early Redemption. Excluding such costs, spending in 2011 was essentially unchanged from the prior year.

Additional Statement of Operations Commentary:

º •
º SG&A expense of $77.4 million for the year ended December 31, 2012 was $9.2 million higher than the prior year primarily due to higher selling and advertising costs related to the brands acquired from Wausau. SG&A expense as a percentage of net sales for the year ended December 31, 2012, was approximately 9.6 percent and was 0.2 percentage points lower than the prior year as the increase in net sales in the current year more than offset higher SG&A expenses. SG&A expense of $68.2 million for the year ended December 31, 2011 was $1.1 million lower than the prior year. For the year ended December 31, 2011 SG&A expense as a percentage of net sales was approximately 9.8 percent and was 0.7 percentage points lower than the prior year primarily due to cost control initiatives and higher sales.

º •
º For the years ended December 31, 2012, 2011 and 2010, we incurred $13.5 million, $15.6 million and $20.5 million of interest expense, respectively. The year-over-year decrease in interest expense for each year was primarily due to lower average debt levels and lower weighted average interest rates due to the early redemption of Senior Notes.

º •
º In general, our effective tax rate differs from the U.S. statutory tax rate of 35 percent primarily due to the benefits of our corporate tax structure and the proportion of pre-tax income in jurisdictions with marginal tax rates that differ from the U.S. statutory tax rate. For the year ended December 31, 2012, we recorded an income tax provision related to continuing operations of $17.1 million which resulted in an effective income tax rate of approximately 30 percent. For the year ended December 31, 2011, we recorded an income tax provision related to continuing operations of $12.0 million which resulted in an effective income tax rate of approximately 29 percent. For the year ended December 31, 2010, we recorded an income tax provision related to continuing operations of $9.8 million which resulted in an effective income tax rate of approximately 28 percent. For a reconciliation of effective tax rate to the U.S. federal statutory tax rate, see Note 5 of Notes to Consolidated Financial Statements, "Income Taxes."

Our consolidated effective tax rate is expected to increase to approximately 40 percent in 2013. The increase is primarily due to the U.S. taxation of increased cash repatriation from Germany and the impact of new German tax legislation which will eliminate certain previously allowable interest expense deductions.

Liquidity and Capital Resources

                                                             Year Ended December 31,
                                                            2012        2011      2010
Net cash flow provided by (used in):
. . .