Background and Basis of Presentation

Background

Neenah, Inc. ("Neenah" or the "Company"), is a Delaware corporation incorporated in April 2004. The Company has two primary operations: its technical products business and its fine paper and packaging business. See Note 12, "Business Segment Information."

Basis of Consolidation and Presentation

These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Management believes that the disclosures made are adequate for a fair presentation of the Company’s results of operations, financial position and cash flows. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results of operations, financial position and cash flows for the interim periods presented herein. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make extensive use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.

The condensed consolidated financial statements of Neenah and its subsidiaries included herein are unaudited. The condensed consolidated financial statements include the financial statements of the Company and its wholly owned and majority owned subsidiaries. Intercompany balances and transactions have been eliminated.

Earnings per Share ("EPS")

The following table presents the computation of basic and diluted EPS (dollars in millions except per share amounts, shares in thousands):

Earnings Per Basic Common Share



	Three Months Ended March 31,
	2018			2017
Income from continuing operations	$	16.2		$	17.6
Amounts attributable to participating securities	(0.1		)	(0.1		)
Income from continuing operations available to common stockholders	16.1			17.5
Loss from discontinued operations, net of income taxes	—			—
Net income available to common stockholders	$	16.1		$	17.5

Weighted-average basic shares outstanding	16,847			16,779

Continuing operations	$	0.96		$	1.04
Discontinued operations	—			—
Basic earnings per share	$	0.96		$	1.04

Earnings Per Diluted Common Share



	Three Months Ended March 31,
	2018			2017
Income from continuing operations	$	16.2		$	17.6
Amounts attributable to participating securities	(0.1		)	(0.1		)
Income from continuing operations available to common stockholders	16.1			17.5
Loss from discontinued operations, net of income taxes	—			—
Net income available to common stockholders	$	16.1		$	17.5

Weighted-average basic shares outstanding	16,847			16,779
Add: Assumed incremental shares under stock compensation plans (a)	159			246
Weighted-average diluted shares	17,006			17,025

Continuing operations	$	0.95		$	1.03
Discontinued operations	—			—
Diluted earnings per share	$	0.95		$	1.03

(a) For the three months ended March 31, 2018 and 2017, there were 197,200 and 72,000 potentially dilutive options, respectively, excluded from the computation of dilutive common shares because the exercise price of such options exceeded the average market price of the Company’s common stock.

Fair Value of Financial Instruments

The Company measures the fair value of financial instruments in accordance with Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("ASC Topic 820") which establishes a framework for measuring fair value. ASC Topic 820 provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The following table presents the carrying value and the fair value of the Company’s debt.



	March 31, 2018				December 31, 2017
	Carrying Value		Fair Value (a)(b)		Carrying Value		Fair Value (a)(b)
2021 Senior Notes (5.25% fixed rate)	$	175.0	$	168.2	$	175.0	$	170.2
Global Revolving Credit Facilities (variable rates)	91.5		91.5		76.9		76.9
German loan agreement (2.45% fixed rate)	6.3		6.3		6.4		6.4
Total debt	$	272.8	$	266.0	$	258.3	$	253.5

(a) The fair value for all debt instruments was estimated from Level 2 measurements.

(b) The fair value of short and long-term debt is estimated using rates currently available to the Company for debt of the same remaining maturities.

As of March 31, 2018, the Company had $3.6 million in marketable securities classified as "Other Assets" on the condensed consolidated balance sheet. The cost of such marketable securities was $4.1 million. Fair value for the Company’s marketable securities was estimated from Level 1 inputs. The Company’s marketable securities are designated for the payment of benefits under its supplemental employee retirement plan ("SERP"). As of March 31, 2018, Neenah Germany had investments of $1.7 million that were restricted to the payment of certain post-retirement employee benefits of which $0.6 million and $1.1 million are classified as "Prepaid and other current assets" and "Other Assets", respectively, on the condensed consolidated balance sheet.