Condensed Consolidating Financial Information

6 Months Ended

Jun. 30, 2011

Condensed Consolidating Financial Information.

Condensed Consolidating Financial Information

Note 12.  Condensed Consolidating Financial Information

Neenah Paper Company of Canada, Neenah Paper Michigan, Inc. and Neenah Paper Sales, Inc. (the “Guarantor Subsidiaries”) guarantee the Company’s Senior Notes. The Guarantor Subsidiaries are 100 percent owned by the Company and all guarantees are full and unconditional.  The following condensed consolidating financial information is presented in lieu of consolidated financial statements for the Guarantor Subsidiaries as of June 30, 2011 and December 31, 2010 and for the three and six months ended June 30, 2011 and 2010.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2011

	Neenah Paper, Inc.			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Amounts
Net sales	$	67.8		$	40.7	$	74.4		$	—		$	182.9
Cost of products sold	51.6			32.3		65.5			—			149.4
Gross profit	16.2			8.4		8.9			—			33.5
Selling, general and administrative expenses	10.9			2.8		4.3			—			18.0
Other (income) expense - net	(0.1		)	0.1		(0.2		)	—			(0.2		)
Operating income	5.4			5.5		4.8			—			15.7
Equity in earnings of subsidiaries	(7.0		)	—		—			7.0			—
Interest expense-net	3.3			0.1		0.3			—			3.7
Income from continuing operations before income taxes	9.1			5.4		4.5			(7.0		)	12.0
Provision for income taxes	1.3			2.2		0.7			—			4.2
Net income	$	7.8		$	3.2	$	3.8		$	(7.0	)	$	7.8

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended June 30, 2010

	Neenah Paper, Inc.			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Amounts
Net sales	$	66.9		$	40.6	$	61.1		$	—		$	168.6
Cost of products sold	50.0			33.9		52.5			—			136.4
Gross profit	16.9			6.7		8.6			—			32.2
Selling, general and administrative expenses	12.1			2.8		3.8			—			18.7
Other (income) expense - net	0.1			0.2		(0.5		)	—			(0.2		)
Operating income	4.7			3.7		5.3			—			13.7
Equity in earnings of subsidiaries	(6.7		)	—		—			6.7			—
Interest expense-net	4.6			0.1		0.3			—			5.0
Income (loss) from continuing operations before income taxes	6.8			3.6		5.0			(6.7		)	8.7
Provision for income taxes	0.5			1.3		0.6			—			2.4
Net income (loss)	$	6.3		$	2.3	$	4.4		$	(6.7	)	$	6.3

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2011

	Neenah Paper, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Amounts
Net sales	$	134.9		$	76.4		$	144.3		$	—		$	355.6
Cost of products sold	102.1			60.8			126.0			—			288.9
Gross profit	32.8			15.6			18.3			—			66.7
Selling, general and administrative expenses	21.5			5.6			7.9			—			35.0
Loss on retirement of bonds	2.4			—			—			—			2.4
Other (income) expense - net	(0.3		)	0.2			(1.1		)	—			(1.2		)
Operating income	9.2			9.8			11.5			—			30.5
Equity in earnings of subsidiaries	(15.7		)	—			—			15.7			—
Interest expense-net	7.6			0.1			0.5			—			8.2
Income from continuing operations before income taxes	17.3			9.7			11.0			(15.7		)	22.3
Provision for income taxes	2.6			3.8			1.1			—			7.5
Income from continuing operations	14.7			5.9			9.9			(15.7		)	14.8
Loss from discontinued operations, net of income taxes	—			(0.1		)	—			—			(0.1		)
Net income	$	14.7		$	5.8		$	9.9		$	(15.7	)	$	14.7

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2010

	Neenah Paper, Inc.			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Amounts
Net sales	$	135.2		$	75.4	$	125.3		$	—		$	335.9
Cost of products sold	102.1			61.8		107.5			—			271.4
Gross profit	33.1			13.6		17.8			—			64.5
Selling, general and administrative expenses	22.1			5.1		7.8			—			35.0
Other (income) expense - net	(0.3		)	0.5		(0.8		)	—			(0.6		)
Operating income	11.3			8.0		10.8			—			30.1
Equity in earnings of subsidiaries	(148.6		)	—		—			148.6			—
Interest expense-net	9.9			0.2		0.6			—			10.7
Income from continuing operations before income taxes	150.0			7.8		10.2			(148.6		)	19.4
Provision for income taxes	1.8			3.1		0.9			—			5.8
Income from continuing operations	148.2			4.7		9.3			(148.6		)	13.6
Income from discontinued operations, net of income taxes	—			134.6		—			—			134.6
Net income	$	148.2		$	139.3	$	9.3		$	(148.6	)	$	148.2

CONDENSED CONSOLIDATING BALANCE SHEET

As of June 30, 2011

	Neenah Paper, Inc.			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated Amounts
ASSETS
Current assets
Cash and cash equivalents	$	(0.5	)	$	2.2	$	0.3	$	—		$	2.0
Marketable securities	7.3			—		—		—			7.3
Accounts receivable, net	25.1			23.5		43.7		—			92.3
Inventories	36.6			9.2		33.8		—			79.6
Deferred income taxes	21.8			2.4		—		—			24.2
Intercompany amounts receivable	17.6			45.3		0.5		(63.4		)	—
Prepaid and other current assets	4.6			2.0		6.9		—			13.5
Total current assets	112.5			84.6		85.2		(63.4		)	218.9
Property, plant and equipment, at cost	268.2			101.3		226.6		—			596.1
Less accumulated depreciation	194.7			67.7		61.9		—			324.3
Property, plant and equipment — net	73.5			33.6		164.7		—			271.8
Investments In Subsidiaries	264.4			—		—		(264.4		)	—
Deferred Income Taxes	29.6			3.0		—		—			32.6
Goodwill	—			—		45.1		—			45.1
Intangible Assets—net	2.8			—		22.1		—			24.9
Other Assets	3.9			0.1		5.7		—			9.7
TOTAL ASSETS	$	486.7		$	121.3	$	322.8	$	(327.8	)	$	603.0
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Debt payable within one year	$	—		$	—	$	20.7	$	—		$	20.7
Accounts payable	14.1			5.9		16.5		—			36.5
Intercompany amounts payable	45.7			17.5		0.2		(63.4		)	—
Accrued expenses	30.9			7.9		16.2		—			55.0
Total current liabilities	90.7			31.3		53.6		(63.4		)	112.2
Long-term Debt	177.4			—		8.1		—			185.5
Deferred Income Taxes	—			—		19.4		—			19.4
Noncurrent Employee Benefits and Other	28.0			28.8		38.5		—			95.3
TOTAL LIABILITIES	296.1			60.1		119.6		(63.4		)	412.4
STOCKHOLDERS’ EQUITY	190.6			61.2		203.2		(264.4		)	190.6
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	486.7		$	121.3	$	322.8	$	(327.8	)	$	603.0

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2010

	Neenah Paper, Inc		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated Amounts
ASSETS
Current assets
Cash and cash equivalents	$	45.0	$	2.4	$	0.9	$	—		$	48.3
Accounts receivable, net	24.2		16.5		30.0		—			70.7
Inventories	33.7		9.0		26.7		—			69.4
Deferred income taxes	17.1		2.4		—		—			19.5
Intercompany amounts receivable	17.3		47.5		—		(64.8		)	—
Prepaid and other current assets	5.1		1.8		7.2		—			14.1
Total current assets	142.4		79.6		64.8		(64.8		)	222.0
Property, plant and equipment at cost	266.0		101.5		201.0		—			568.5
Less accumulated depreciation	189.5		66.3		50.8		—			306.6
Property, plant and equipment — net	76.5		35.2		150.2		—			261.9
Investments in subsidiaries	237.1		—		—		(237.1		)	—
Deferred Income Taxes	39.3		3.8		—		—			43.1
Goodwill	—		—		41.5		—			41.5
Intangible assets, net	2.8		—		21.2		—			24.0
Other Assets	8.4		0.1		5.7		—			14.2
TOTAL ASSETS	$	506.5	$	118.7	$	283.4	$	(301.9	)	$	606.7
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Debt payable within one year	$	—	$	—	$	13.6	$	—		$	13.6
Accounts payable	14.5		5.2		10.7		—			30.4
Intercompany amounts payable	47.5		17.3		—		(64.8		)	—
Accrued expenses	27.5		7.7		12.9		—			48.1
Total current liabilities	89.5		30.2		37.2		(64.8		)	92.1
Long-term Debt	223.0		—		8.3		—			231.3
Deferred Income Taxes	—		—		19.4		—			19.4
Noncurrent Employee Benefits and Other Obligations	34.8		34.2		35.7		—			104.7
TOTAL LIABILITIES	347.3		64.4		100.6		(64.8		)	447.5
STOCKHOLDERS’ EQUITY	159.2		54.3		182.8		(237.1		)	159.2
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	506.5	$	118.7	$	283.4	$	(301.9	)	$	606.7

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2011

	Neenah Paper, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Amounts
OPERATING ACTIVITIES
Net income	$	14.7		$	5.8		$	9.9		$	(15.7	)	$	14.7
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	6.1			2.1			7.4			—			15.6
Stock-based compensation	2.1			—			0.1			—			2.2
Excess tax benefit from stock-based compensation	(0.6		)	—			—			—			(0.6		)
Deferred income tax provision (benefit)	2.5			3.4			(1.6		)	—			4.3
Loss on retirement of bonds	2.4			—			—			—			2.4
Increase in working capital	(6.7		)	(5.7		)	(7.5		)	—			(19.9		)
Equity in earnings of subsidiaries	(15.7		)	—			—			15.7			—
Pension and other postretirement benefits	(1.1		)	(2.8		)	0.4			—			(3.5		)
Other	(0.1		)	(0.5		)	(0.1		)	—			(0.7		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	3.6			2.3			8.6			—			14.5
INVESTING ACTIVITIES
Capital expenditures	(2.9		)	(1.2		)	(8.8		)	—			(12.9		)
Purchase of marketable securities	(3.7		)	—			—			—			(3.7		)
Other	(0.1		)	0.1			0.6			—			0.6
NET CASH USED IN INVESTING ACTIVITIES	(6.7		)	(1.1		)	(8.2		)	—			(16.0		)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt	27.8			—			—			—			27.8
Debt issuance costs	(0.4		)	—			—			—			(0.4		)
Repayments of long-term debt	(75.0		)	—			(0.9		)	—			(75.9		)
Short-term borrowings	—			—			8.1			—			8.1
Repayments of short-term debt	—			—			(2.4		)	—			(2.4		)
Proceeds from exercise of stock options	1.1			—			—			—			1.1
Excess tax benefit from stock-based compensation	0.6			—			—			—			0.6
Cash dividends paid	(3.3		)	—			—			—			(3.3		)
Intercompany transfers - net	7.3			(1.4		)	(5.9		)	—			—
Other	(0.5		)	—			—			—			(0.5		)
NET CASH USED IN FINANCING ACTIVITIES	(42.4		)	(1.4		)	(1.1		)	—			(44.9		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	—			—			0.1			—			0.1
NET DECREASE IN CASH AND CASH EQUIVALENTS	(45.5		)	(0.2		)	(0.6		)	—			(46.3		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	45.0			2.4			0.9			—			48.3
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	(0.5	)	$	2.2		$	0.3		$	—		$	2.0

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2010

	Neenah Paper, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Amounts
OPERATING ACTIVITIES
Net income	$	148.2		$	139.3		$	9.3		$	(148.6	)	$	148.2
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	6.5			2.1			6.9			—			15.5
Stock-based compensation	2.5			—			—			—			2.5
Deferred income tax provision (benefit)	1.9			31.3			(1.4		)	—			31.8
Gain on sale of the Woodlands	—			(74.1		)	—			—			(74.1		)
Reclassification of cumulative translation adjustments related to investments in Canada	—			(87.9		)	—			—			(87.9		)
Loss on asset dispositions	0.1			—			—			—			0.1
(Increase) decrease in working capital	5.8			(3.5		)	(5.1		)	—			(2.8		)
Equity in earnings of subsidiaries	(148.6		)	—			—			148.6			—
Pension and other postretirement benefits	(1.1		)	(3.2		)	0.2			—			(4.1		)
Other	(0.1		)	(0.1		)	(0.3		)	—			(0.5		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	15.2			3.9			9.6			—			28.7
INVESTING ACTIVITIES
Capital expenditures	(1.9		)	(1.4		)	(1.4		)	—			(4.7		)
Net proceeds from sale of the Woodlands	—			78.0			—			—			78.0
Other	0.1			(0.5		)	0.9			—			0.5
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(1.8		)	76.1			(0.5		)	—			73.8
FINANCING ACTIVITIES
Repayments of long-term debt	(67.8		)	—			(0.8		)	—			(68.6		)
Short-term borrowings	—			—			4.7			—			4.7
Repayments of short-term debt	(0.9		)	—			(8.4		)	—			(9.3		)
Proceeds from exercise of stock options	0.3			—			—			—			0.3
Cash dividends paid	(2.9		)	—			—			—			(2.9		)
Intercompany transfers - net	85.3			(79.7		)	(5.6		)	—			—
Other	(0.2		)	—			—			—			(0.2		)
NET CASH PROVIDED BY (USED) IN FINANCING ACTIVITIES	13.8			(79.7		)	(10.1		)	—			(76.0		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	27.2			0.3			(1.0		)	—			26.5
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	2.1			2.0			1.5			—			5.6
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	29.3		$	2.3		$	0.5		$	—		$	32.1