Good morning. My name is Cassandra and I will be your conference operator today. At this time, I would like to welcome everyone to Neenah Paper's second quarter 2008 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator instructions) I would like to remind everyone that the presentation today contain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect management's beliefs and assumptions regarding future events based on currently available information. Listeners are therefore cautioned not to put undue reliance on forward-looking statements as they are not a guarantee of future performance and remain subject to a number of uncertainties and other factors that could cause actual results to differ materially from forecasts. A more detailed description of these uncertainties and risk factors is provided in Neenah Paper's earnings release and filings with the Securities and Exchange Commission, which you are encouraged to view. Except to the extent required by applicable securities laws, Neenah Paper undertakes no obligation to update or publicly revise any of the forward-looking statements that you may hear today. In addition, the Company may make certain statements during the course of this presentation that include references to non-GAAP financial measures as defined by SEC regulations as required by those regulations. If that were to happen, a reconciliation of these measures to what management believes are the most directly comparable GAAP measures would be posted on the Company's website at www.neenah.com. Thank you. I would now like to turn the call over to Bill McCarthy. Mr. McCarthy, you may begin your conference.

Thank you and good morning. With me today are Sean Erwin, our Chief Executive Officer; and Bonnie Lind, our Chief Financial Officer. I will briefly cover consolidated results and then turn things over to Sean and Bonnie to discuss in detail business performance for the quarter. Our earnings release went out yesterday with expanded balance sheet and cash flow information and our 10-Q is also filed. Consolidated net sales from continuing operations were $195 million in the second quarter of 2008 versus $206 million in the same period last year. This reflected growth in Technical Products offset by lower Fine Paper sales. Quarterly operating earnings declined from $18 million last year to $14 million in 2008. While we realized benefits from higher selling prices, improved manufacturing efficiencies, and lower SG&A, we were unable to offset the impact of lower sales and higher input costs for raw materials and energy. Earnings per share from continuing operations fell from $0.49 to $0.42 largely following the change in operating income. Losses from discontinued operations, which includes our timberlands operations as well as for the last time results from the Pictou pulp mill, were $31 million and included a mostly non-cash charge of $27 million to recognize deferred costs for the Pictou pension plan and other sale-related adjustments. Excluding this, losses were $3.5 million in 2008 and $4.8 million in 2007 with both periods including higher costs for the annual mill maintenance down. Let me now turn things over to Sean.

Thank you, Bill, and good morning. I will cover actions we are taking in each of our businesses as well as progress on key strategic initiatives. But first I'd like to comment on safety, which remains a key part of our culture. Through June, our reportable incident rate was 1.9. While our overall performance remains better than industry standards and improved from a rate of 2.2 to last year, we continue to focus on ways we can further enhance results. Let me turn to the external environment and what we're doing to address the challenges we and other companies are facing this year. The rapid and continued run-up in input prices for raw materials and energy has had a dramatic impact. In the first half, these costs were up $13 million with $9 million of this increase incurring in the second quarter. The big drivers were pulp, which represented slightly half – less than half of the total along with energy and other raw materials such as latex. In response to this, we've increased selling prices, reduced both mill and administrative spending, and continue our strong focus on driving manufacturing cost efficiencies and improvements. We have raised prices this year on both segments and in some cases multiple times. Nonetheless, as you have heard from other companies, we have not been able to recover all of the cost increases immediately through pricing. We continue to work with our customers on both selling price adjustments and/or product modifications to recover margins. Thus far, we have been able to offset about a third of the impact of higher input costs this year through price. In Technical Products we increased prices successfully across most of our lines in January and again in July, the latter increase averaging just over 4%. A third and…

Good morning. Today I will start with Fine Paper. Net sales were $85 million in the second quarter versus $104 million last year. The decrease was due to lower volumes, which reflected unusually weak market conditions. In addition, about a third of the decline was due to intentional reductions in non-strategic products. Partly offsetting the drop in volumes were gains in net selling prices. Operating income of $11.7 million included a gain from the sale of assets compared with $13.2 million a year ago. The principal cause of the declines was lower volumes as higher input costs of $6 million were largely offset by improved manufacturing efficiencies and price realization. Manufacturing costs improved as planned as we ceased remaining operations at Urbana, Ohio, and completed the consolidation of finishing and distribution centers in Wisconsin. Former Fox River sites are now live on our Oracle ERP system allowing us to have a consistent and more efficient organization across the business. We have completed integration activities on schedule and as planned including realizing synergies of almost $3 million in the quarter. We also had a few one-time items this quarter. We experienced a major operating disruption at our mill in Ripon, California when the main drive on the paper machine experienced a mechanical failure. This resulted in unplanned down time and higher costs of somewhere in the range of $1 million. Offsetting this was a gain on the sale of the Urbana mill and other miscellaneous assets of just under $3 million reflecting differences between actual proceeds and liabilities related to these sales versus our original expectations. Moving to Technical Products, quarterly net sales were $110 million, up from $102 million in 2007. Translation benefits from a stronger euro and higher prices across most of our products offset the impact of lower…

Thanks Bonnie. Let me highlight a few key items as we look at the balance of the year. We will continue to focus on cost reduction in all areas and have completed our plan to allow us to deliver expected synergies in Fine Paper from the Fox acquisition. Fine Paper brand re-launches and other activities currently underway are essential to our success in what has proven to be a very challenging market this year. Price increases being enacted in Technical Products and Fine Paper should help mitigate higher energy and material costs expected in the second half. While unusual costs for the drive failure at Ripon and start-up in Germany won't repeat, the third quarter will reflect added costs for annual maintenance downs at all of our paper mills. Timing of these downs is similar to last year. Additionally, sales particularly in Europe tend to be a little slower due to vacation and holiday. Finally, we're continuing to monitor and adjust operating schedules to balance with demand and keep inventories in check. Our labor contracts allow us to do this at most facilities with limited incremental out-of-pocket costs. To wrap up, let me repeat what I said earlier. We're pleased with the strategic moves we have made divesting in a cash positive manner two pulp mills that had required significant funding. We believe this transition represents the right move for our shareholders. We're working on the sale of our remaining timberlands, which represents the final piece of the transformation and important source of additional value for the Company and our shareholders. Our acquisitions of Fox River and Neenah Germany have helped strengthen existing businesses and had business plans designed to deliver good financial returns. We have made the necessary investments and executed our plans. Now we need to deliver the value despite a challenging external environment. We realize nothing will drive better returns than improving the margins and driving growth in our businesses. Our teams are focused on growing share with key customers, reducing costs and improving efficiencies throughout the organization. I remain confident that the value of Neenah's people, our brands, and our abilities will be recognized. Now let's open up the call to your questions.

(Operator instructions) Your first question comes from Chip Dillon with Citigroup.

Hi guys, this is James Armstrong calling for Chip. Congratulations on a good quarter in a tough environment. Can you hear me?

Yes.

Okay.

Yes, it is a tough environment. I wish – I was a little surprised. We obviously want better results. We're working damn hard to get them.

Can you give us little bit of color on where – the Fine Paper sales were off quite a bit. Where in the market is it off most in your opinion?

And I think you've seen both from AF&PA that and other companies the market took a significant dip in the second quarter, well above any trend lines. And we felt that, we felt that directly. Of the declines in volume that we mentioned, probably a third of it was self-directed. This is business that Fox River had that we've exited with the closure of some of the facilities. And so we are really talking about declines that are more in line with the market. What we saw is – and it's pretty much across the board with our customers. We're seeing more of it in areas like Florida, California, some of the merchants in Nevada where housing is the weakest because quite a bit of the text and cover products go into housing developments, condos, areas like that. So we are seeing some of it based on the regional decline but it was pretty broad-based across the customer base. We work very closely with customers. I'm confident that it's not a share issue. It's a market-driven weakness economically and other reasons and we do see where we're getting growth. For instance, I mentioned the ENVIRONMENT brand is still having double-digit growth in a very weak market, and which is one of the reasons why we're re-launching our big brands with a much stronger environmental message because as a leader in this segment, we need to act like a leader and grow this. So we're continuing down that path.

Absolutely. Are you seeing any – is it the ultra high end that's getting hit the worst or is it just across the entire price points?

We constantly monitor that. It's in discussions with all of the customers. There may have been some trading down where because of budget constraints people have dipped down the value curve. And it's our job as the leader to move them up to show them the benefit of moving it up, which is why we're re-launching as we speak with our big brands. And we have taken the position that as the leader we're not going to be a spectator to the market and just wait for things to improve. We have to take the actions to drive it.

Okay. Switching topics, on the biomass program, do you – how will the energy costs be structured? Did you contribute any capital to the project? Little unusual to hear about a third party doing it. Could you give some color on that?

Yes, we looked at our cost of capital and we did – we worked the numbers both ways. Do we want to invest in it or let the third party invest in it? And the numbers came back to say let's let him do it. We're buying steam from them. The price is tied to some indexes and we think that it does two things for us. The savings are going to be substantial, $1 million to $2 million a year and – based on kind of current and predicted prices, $1 million to $2 million a year. And as importantly we're reducing our environmental footprint in our largest Fine Paper mill by more than 50%, which is a big deal in the markets in which we compete.

Absolutely. I appreciate that. And on the tax refund in 2009, can you give us any color on when that will come and about how much it will be?

Let me turn that over to Miss Bonnie.

Yes, we expect to file a quickie return, so in early 2009. The refund refers to the 2006 and 2007 taxes paid and we expect it to be in the range of $12 million to $13 million.

Perfect. I appreciate that. Thanks for your help.

Thank you.

(Operator instructions) Your next question comes from the line of Mark Weintraub with Buckingham Research.

Good morning, Mark.

Good morning. A question for you on share repurchase. I think that in the past you've indicated there are certain restrictions related to covenants on some of your debt. Is that something that you are actively looking at changing? Is it something that you can change? And maybe just your thoughts on share repurchase in general at this point. Your stock for a while there was trading to me seemed like incredibly low levels. It's still pretty low and just wanted to get a sense as to how you feel about it.

Mark, we have looked at that. As you are aware, we have some covenants in our bond agreements that limit how much we can do and we have talked to some of the folks that were involved with us in the selling of the bonds. And in today's market to go out and make the modification to those agreements would be prohibitive costs. And we have all things considered some very nice interest rates and I don't think it behooves us even with the equity price where it is it behooves us to open that up because we’d get hammered with the cost of that transaction.

Fair enough. Separate question, with the weakness in the Fine Paper business from a volume perspective in particular, what is the thought process on potential additional rationalization of capacity?

We monitor that very closely. As a matter fact, the week before last we had our initial strategic review going forward in the five-year plan and we have various scenarios that we've developed. We're not going to carry excess assets if we don't need it. At the same time, we don't want to make permanent decisions for short-term situations and we are – in the meantime we are adjusting operating schedules to reflect demand. When we consolidated the mills we didn't crew up the mills for seven-day operations at all mills. So we're still very efficient at our mills for running a five to six day schedule and then taking a down time as necessary. We are very focused on working capital levels and making sure that we keep service and working capital at target levels.

Thank you very much.

Thank you, Mark.

The next question comes from the line of David Taylor [ph] with David P. Taylor & Company [ph].

Thank you.

Good morning.

We're nearly halfway through the third quarter as we speak. Can you talk to whether or not the volume trends in Fine Paper that you experienced in the second quarter on a year-to-year basis realizing there's a seasonal downturn in the third quarter every year, are continuing?

Keep in mind we don't give guidance, but we're not seeing a miraculous recovery in volume. We're having to work very hard and we have the team out there, the right team that is working directly with the customers to get the volume and we're not seeing a significant (inaudible).

It remains a tough market?

Oh, yes. Yes, but we have got some pretty tough guys.

Okay. Thank you.

Thank you.

The next question comes from the line of David Kim with Post Advisory.

Good morning.

Hi, how are you guys doing today?

Pretty good.

I just wanted to ask you about the Pictou mill sale. It seems like – I think last quarter it was still sort of expected within 12 months and I think in the latest Q you said that it's still expected in the next 12 months. Are you guys still sort of actively looking at that or are you sort of putting it on hold for a little bit until the market gets better?

No, the mill is gone. (inaudible).

I am sorry, not the Pictou mill. I meant the timberlands. Excuse me.

No, no, no. We are active in it. We're very active in it. The good news is timberland buyers have a long-term horizon. It is a tough market. Quite a few sawmills in Nova Scotia have taken down time. But we're taking a – the interested parties are looking long term at the returns they can expect from the timberlands which are still profitable. The last call we said we expected in 12 months, this time we're saying six to 12 because we are active in the process.

Would you expect sort of the value to be like sort of in the same ballpark as your previous sale of your – I think it was the other 500,000 acres?

We – and I look forward to giving the details on a transaction as soon as we sign a definitive agreement. But from an overview standpoint, it’s a similar sized tract of land at about 500,000 acres. The first half had more what they call HBU land that can be sold for cottages and other uses whereas the second half is a little better inventory situation so we think that balances itself out. We did have in the first half sale an advantage fiber supply agreement for the buyer, which is why through the '06 and most of '07 we deferred income of about $9 million. We would expect the next transaction to be a market-based fiber agreement so that deferral won't take place. You have to look at some of the changes in the C dollar also between '06 and today because we're still getting bids in C dollars.

Okay. And can you remind us what the dollar impact is for the annual maintenance? I think you said that it would be similar to last year's?

Pulp was the big hitter and pulp is gone. Pulp we would say would be $8 million to $10 million a year. I'd venture that paper mills, it's not nearly as dramatic. But there's a lot of them. So I – and I'm shooting from the hip on this – all in I would say several million dollars.

So is that like a $3 million to $4 million kind of thing, somewhere around there?

2 to 4, I would say.

Okay. And can you remind us what your CapEx budget will be for 2008?

Yes, as mentioned in the call, we have come down the last two calls. I think the last call we said $35 million. Now we're saying 30 to 35 with about 18 on a year-to-date basis.

Do you think that the – I guess sort of the EBITDA that you're going to generate for the next four quarters will be sufficient enough to cover your interest and your CapEx? Or do you feel like you'll have to draw on your revolver to cover it?

One, we don't give guidance. But with pulp gone, we think the cash flow generating capabilities and free cash flow of our business is much stronger. Bonnie, any comments?

We typically see a stronger second half cash flow generation than what we see in the first half because seasonally we have a depletion of working capital in the fourth quarter that we have to rebuild in the first half of the year.

Okay. Thanks a lot.

There are no further questions. I will turn the call back over to Mr. Erwin.

Well, thank you again for participating on the call. We look forward to updating you on our progress both with our core businesses and timberland activities over the balance of the year. So, thank you.

This concludes today's conference call. You may now disconnect.