Good morning, my name is Bernard and I will be your conference operator today, at this time I would like to welcome everyone to the Neenah paper second quarter 2014 earnings conference call, all line have been placed on mute to prevent any background noise. After the prepared remarks there will be a question and answer session (Operator Instructions). As a reminder ladies and gentlemen this conference is being recorded today August 7, 2014. Thank you, I will now turn the call over to Mr. Bill McCarthy, Vice President of Financial Analysis and Investor Relations. Please go ahead, sir.

Okay good morning everyone and welcome to Neenah’s 2014 second quarter earnings call, we released earnings yesterday afternoon and also posted backup data in an updated presentation in the Investor Relations section of our website. This morning after I recap a few headlines, John O’Donnell our Chief Executive Officer and Bonnie Lynd our Chief Financial Officer will discuss our activities and financial results in detail. As usual following these prepared remarks we’ll open up the call for questions. At the risk of sounding like a broken record I’ll start off noting that in this past quarter we in fact broke a number of records. Consolidated net sales were a record 230 million, up 9% from a year ago, operating income of 25.9 million and earnings per share of $0.88 each grew approximately 15% to record levels, this performance was supported by both business units as Fine Paper achieved record sales and profits and technical products was just 1% short of record levels which they achieved in the first quarter. Our adjusted earnings were $0.90 per share and this excluded costs of $0.02 for restructuring in our recent acquisition. Last year adjusted earnings in the second earnings in the second quarter were $0.80 and excluded $0.03 for debt refinancing, restructuring integration costs and a pension settlement charge. Adjusted earnings were provided to aid in comparability between periods but our non GAAP measure and our reconciled to corresponding GAAP figures in our press release. Finally I’ll remind everyone that our call today contains forward looking statements, risks and uncertainties that could cause actual results to differ materially from these statements are outlined both in our SEC filings and in the Safe Harbor disclaimer on our website, and with that I’d like to turn things over to John. John O’Donnell: Thanks Bill. As…

Thanks John. As you’ve heard our consolidated financial results were driven by terrific performance in both business segments. I’ll start with technical products. Sales were up 117 million up 10% compared to prior year’s sales of 106 million. Higher volumes accounted for 8% of the growth with the remainder due to favorable currency translation partly offset by slightly lower net prices. In present growth we’re seeing across all categories as sales of filtration and backing products each grew 9% and specialties being 13%. We are seeing benefits from improved global economic conditions as well as from share gains in many categories as we expand our geographic presence and capture new business. Excluding $0.5 million for restructuring cost, operating income was almost $14 million up 15% from $12 million in the second quarter of last year. Higher income resulted primarily from our sales growth as manufacturing costs were relative flat year-on-year. Year-to-date our growth with growing sales and better operating performance profit margins have improved by 40 basis points continuing the longer term improvement trend we’ve seen in this segment. Turning to fine paper, sales in the quarter were 107 million an all-time record and up 7% compared with a 100 million last year like technical products sales growth was driven by higher volumes with shipments up 6%. Volume growth resulted from gains in our core premium brand, growth in digital and international sales and the 35% increase in premium packaging we are now supplying packaging media for a number of well-known consumer products as well as have greater penetration in labels as we expand beyond wine into other areas such as the craft beer segment. In addition sales reflect our expanded line of products following last September’s distribution agreement with Gruppo Cordenons that bought complementary new products and added capabilities…

(Operator Instructions) Our first question comes from the line of Steve Chercover.

So we don't really know how many tons of paper you produce. But I was just wondering if you could tell us how many tons of pulp you buy. And if in fact there is a decline in market pulp prices, how that might benefit you. John O’Donnell: We buy about 230,000 tons roughly of pulp from that. If you look, about half of it's in the fine paper business which is predominantly the hardwood portion and softwood in the technical product side. In the fine paper side business we move -- our prices move up very -- in small increments if you will because there tends to be a stickiness in that business so, we do not produce pricing with pulp in that business predominantly how the inventory and branded. On the technical side of the business there is about third of our business that has escalators and would move with any type of price movement overall.

So I mean, I guess, it's my job as a paper analyst to have an opinion on pulp. And it seems like we might get a little bit of a tailwind on the hardwood side, which would benefit fine paper. John O’Donnell: Yes, we could winkle for that.

Yes, well, I know some guys who have been waiting for it for 12 of the last 4 quarters. So – John O’Donnell: It’s right.

Yes, go ahead, John. John O’Donnell: That’s why it’s really important to our results are directly attributable to the input cost changes because we know that pulp goes up until it comes down again. I think what’s unique in Neenah is that our intention is to always overcome that with price in this mix activities to keep our margins fairly stable.

Yes, it sounds like the opportunity in premium packaging is actually quite exciting. Do you have a sense of what your share of that, at $300 million addressable market, might be? John O’Donnell: Well, about 10% of our business right now is in that premium packaging so about 40 million and we said that addressable market about 300 so, I can do the math but I know it's (above 15%) [ph].

Perfect, thanks for that granularity. And then switching gears into filtration, it looks like Italy is tipping back into recession and there is a lot of risk in all of Europe. Any chance that would impact your auto filtration? John O’Donnell: Well the majority of our demand is not in that market but it is in Germany, we have three facilities in Germany, obviously a poor economic environment can put pressure on all of our businesses. We like to believe that our transportation filtration business since its 30% to OEM and 70% to aftermarket that consumption will continue whether it’s new card or not and has historically been relatively recession proof that the great recession as the exclusion but obviously that help us from a piece of it but I am not overly concerned about their ability to continue to drive improvement in that business.

Great. And then I think Crane has two facilities in Pittsfield. Is there a reason that there are two? Are there any chances to exact any efficiencies? John O’Donnell: Our whole focus with that business is to continue to grow it. So that’s not one I would think about being in consolidation. One of the facilities has two machines in it. The other one has one machine in it with room for incremental growth if we need to have that incremental growth. So they are about a quarter mile from each other and that’s almost right next door as far as some of these facilities goes. No I think our focus is going to be on continue to grow into that and I would also suggest these are not real capital intensive as are the additions in this business as well. So that’s another positive thing from a growth aspect.

Perfect. And the final one, will you call out the $2 million in integration expenses as one time in nature? John O’Donnell: Yes we will.

Our next question comes from the line of Jon Tanwanteng with CJS Securities

And again, just really nice fine paper margins there. I'm just wondering what the sustainable components of that were and maybe some more detail on how we should think about that, heading into your seasonal maintenance period, I mean, I know you touched on the input prices, but maybe more on the mix and other factors. John O’Donnell: Sure. On the Fine Papers margin side, if you follow I know you have for some time that they have been sustainable mid teen margins these are very strong. And I think it’s really the value of consolidated market, the brand leader in the consolidated market from that standpoint and then their image focus versus a more commodity focus of transferring data. So mid-teen margins are very sustainable in that business. As you look to the third quarter, I'll give you a little color again, I tried to talk about some of the moving pieces and I really want you to just get to the answer which is cost in the third quarter for maintenance downs will be about the same as they were last year which is typically about $3 million impact, but there is an incremental maintenance down in the fourth quarter tied to a value adding capacity addition of filtration and that’s going to impact by 2 million. In regards to mix, all of our fine paper businesses are predominantly out of inventory so we will move through there and we are managing our technical products businesses downs to ensure there are no interruptions in any of the customer demand from that standpoint. So you shouldn’t see dramatic top line impact other than what happens with our customers. Now if our customers and many do take their downs in the third quarter and holidays in the third quarter so the consumption is lower, which is what’s driving our seasonality. Expect a seasonally slower back half no impact to the top line, 3 million maintenance in third quarter, 2 million in incremental in the fourth quarter.

And then just on the Crane business. Are there seasonal downs in that segment at all? John O’Donnell: The seasonality of their top probably meres really close to our technical products business like 52 to 48. As far as planned maintenance downs there no plant maintenance downs for the rest of this year and then will obviously some sort of part of the family as July 1 we will communicate the implications to any maintenance downs next year as we get closer to the third quarter.

Okay, great. And then on the business itself, can you discuss maybe the opportunities it creates, both maybe quantify the potential for cost or sales synergies with the existing technical products and maybe the potentials of platform for future M&A here in the US? John O’Donnell: A few things, which we’re 37 days in from that standpoint. So it’s relatively new to us. So I think the -- but what isn’t new to us is the technologies were attractive, their markets are meaningful. And the growth opportunity really with our German businesses is where we see is the biggest opportunity. These technologies again 100% synthetic typically polyester in our RO filtration or glass fibers in our Crane mat businesses are incremental to our German facility’s capabilities. And we found that the combination of moldable technologies whether it’s a filtration base sheet and a melt blown to create a unique attribute. We found that the crane technologies will add incremental opportunities for our German substrates as well and meet new market solutions for the existing customers that we have good relationship in our transportation filtration business. You’ve noticed I didn’t quantify anything there for you and that’s on purpose. So it’s really for us this was a growing business, brought new technologies initiated a footprint into the U.S. which we believe is a good growth opportunity for our future and we wasted no time in having our R&D teams it was actually on the eighth day which sounds a bit biblical but we had our German teams in our Pittsfield facilities working with the R&D teams there.

Okay, that's great color. And just one more quick one. In terms of M&A preference going forward, and I know you're still integrating Crane here, but are you more focusing on leveraging that as a technical platform domestically or are you focusing more on the packaging space, given the growth opportunity there? John O’Donnell: If we find the right opportunity that leverages it, that’s ideally what -- when we’re looking, we’re being selective when we’re looking at acquisitions we’re looking to totally add on to something that we can’t leverage in a more meaningful way especially in filtration and our filtration buyers. The fact that it's a U.S. platform for us is another key advantage there. So, I don’t want to say that we’re specifically looking to leverage it and nor do I suggest that we aren’t in that regards. From an M&A standpoint best way to think about it for us is defensible markets, performance materials, bias towards filtration, bias towards the U.S., that’s way to think about it.

The next question comes from the line of Dan Ducome with Sidoti & Company.

Thanks for taking the question. I see you are selling some of the retail fine paper brands in Costco. And I was just kind of wondering just kind of big picture, are Costco and sort of Walmart, I know they are not huge businesses, but just wondering, are those meeting your expectations or any granularity there?

Yes, so just to remind that our retail business is a pretty meaningful business about $90 million overall from that standpoint, any distribution you can get with Walmart and any of the retail channels that are winning like you mentioned Costco as well, those are very important for us. We’ve had a lot of success recently in that business as well, I wouldn’t forget the one that like Amazon and others that aren’t brick and mortar but we're growing very, very well with them as well. So, it’s clearly a growth opportunity for us and we’re very pleased. Again some meaningful size business for us and the new channel we [indiscernible].

Okay, great, good to hear. I guess turning to technical products, what you mentioned there was -- what exactly is going to be the symbiosis, I guess, in between sort of auto in Germany and then the water filtration in the US? It sounds like you're not going to be doing any water filtration out of Germany, right?

Yes, there is not going to be that direct link of transportation filtration out of our water filtration facilities and vice versa, it’s really the combination of technologies, majority of the products that we build in our Neenah technical materials are from the Crane facilities are unique to customers and they’re really designed in with end use capabilities. It’s taking advantage of the knowledge that exists there and the knowledge in the Germans to create a defensible unique solution to as I said before in existing market, we’re desirably to a new market for us as well. We believe we’ve got good solutions to some of the existing markets.

Okay, good, good. And I guess staying there, I guess one of your transportation filtration competitors reported this weekend they had very good numbers and they are also raising prices. Looks pretty aggressively. But you guys are growing faster than them, but also raising prices. I'm just kind of wondering if you can even speak to that, what's giving you guys the edge right now?

Yes, I won’t be able to speak to the competitor but I can speak to ours. What we found especially in transportation filtration is the ability to have an innovative solution to the long term projects and the flexibility to work with the filter manufacturers to filter those unique needs. So, we’re always looking for new technologies that can bring tomorrow solution which is yesterday's solution. I think it’s that innovation we’ve got a significant R&D facility in Germany, we do a fabulous job of getting out in front of that and I think what makes me most comfortable about is, you're really earning that share gain with a long runway, it’s not a moment of pricing ecstasy, it's really over time. The pricing increases that we’ve been able to capture as well is an illustration of the value we’re adding during that time period more than just -- in some industry sometimes people raise price because other people are. I think what we’re able to do here is increase the price because we’re delivering value for the product, so it’s Costco up our values increased we’re able to continue to pass that through to the marketplace and recover for our shareholders.

Got you, got you. And then just two on paper and then one on pulp and I'll jump -- and I'll get off the line. But -- I guess what's the tail on this sort of the premium packaging? If you have 13% market share now and 60% in overall fine paper US, what's a reasonable sort of maturity or penetration rate for just premium packaging or -- what's reasonable?

Yes, what I would suggest here is that nobody in my groups use reasonable with any of my objectives but I would suggest that I wouldn’t took it to the 60% as you really a consolidated market versus but even if you took half of that, if you took half of that 300 that was $90 million opportunity for us. So I would suggest, it’s got the nice long runway of growth opportunities that I am very encouraged about our Group’s ability to go capture that. Now I know -- I hope I didn’t diminish their enthusiasm because I want to have a higher number than 30.

No, that addresses my question perfectly and hopefully maybe even more than -- you do more than half that, but that still be pretty incredible. And then I guess just sticking on that, so what's going to be your strategy for the craft beer market, which seems to be sort of in the news every day and pretty exciting? John O’Donnell: Well we are making a lot of progress in capturing a number of new pieces of business. Ideally, I always joke about why do you rob banks, that's where the money is. So focusing on the market leaders and from a craft beer standpoint is the best place for us to start where we've been making some significant headway. But I agree with you, it is enjoying some nice growth as are we.

And then lastly, I guess bringing it back to pulp, I guess the issue would be softwood and your filtration side. So can you remind us just what percent of your technical business is on price adjusters and which is sort of more on negotiated? John O’Donnell: Yes. That will be a third overall on adjusters and then a third of it well on annual type of contracts that’s and then a third goes with market announcements.

We have a follow up question from Steve Chercover with Davidson.

Just a quick modeling question. So you indicated in technical specialties that you've got $15 million to $20 million of seasonality, which would be less revenue in the second half. But if Crane is running at about $12 million a quarter, is it appropriate just to model flat sales Q1 -- sorry, first half to second half? John O’Donnell: I mentioned a little earlier in one of the other questions. The seasonality probably would be similar to the technical products, so the back half with the Crane would be similar from a 48% from a demand standpoint.

Even with that Steve it probably would be once we add in the acquisition of the back half, it would be probably closer to flat.

Yes, that's what I was thinking, that your -- we have some -- absent Crane, it would be (52 48) [ph]?

Right.

We have a question from Dan Ducome with Sidoti & Company.

I'm just wondering any callouts on the envelope business? I'm not sure if you mentioned it already, but how is that doing? John O’Donnell: I did mention that, we talked about that in the past, we made significant gains and headways in that business. It’s up slightly 3% I would guess overall. And that’s not a business that has a significant growth rate to it, but we continue to find ways to capture the high end of it, but very nice business for us but nice addition to the fine paper business.

So it's mostly like just pricing, right? John O’Donnell: Price is a big contributor to it, that’s exactly right more than volume.

And there are no further questions at this time. John O’Donnell: All right. Well thank you for your participation and interest in Neenah today. We look forward to updating you on our progress and results in the future. Thank you.

This does conclude today's conference. You may now disconnect.