Neenah
Annual Report 2014

Plain-text annual report

Financial Highlights Continued Operations F I N AN C I A L (Dollar in millions, except share data) Consolidated Statement of Operations Data Continued Operations Net Sales Adj. EBIT % ROS Net Sales Adjusted EBITDA Adjusted EBIT % ROS (Dollars in millions, except share data) $ 696.0 Consolidated Statement of Operations Data $ 59.0 HIGHLIGHTS Year End December 31, 2011 2012 2013 Net Sales (In millions of U.S. dollars) Year End December 31, 2012 $ 808.8 2013 $ 844.5 2014 $696.0 $ 80.3 $ 85.2 $808.8 $844.5 $902.7 10.1% 9.9% $274.9 $ $80.3 113.2 $ $85.1 118.7 $94.1 9.9% 10.1% 10.4% 8.5% $ 93.3 $808.8 Net Sales (In millions of U.S. dollars) 29.5 $808.8 $844.5 $372.7 $29.5 $26.6 $844.5 26.6 $902.7 $401.7 $27.1 $401.8 $409.0 Earnings (loss) Per Diluted Common Share Adjusted EBITDA $113.2 $118.7 $129.1 $372.7 Adjusted Earnings from continuing operations Earnings (loss) per Diluted Common Share $ 1.91 $ 2.78 $ 2.93 $421.1 $406.6 $416.1 Weighted Average Common Diluted Shares Outstanding (in thousands) Adjusted Earnings from Continuing Operations 15,649 Cash Dividend (Average) 0.44 Weighted-Average Shares Outstanding (in thousands) $ Consolidated Balance Sheet Data Consolidated Balance Sheet Data Total Assets Total Assets Total Stockholders’ Equity Total stockholders' equity Total Debt $ 565.1 $ 166.7 16,072 $2.78 0.48 16,072 $ 16,405 $2.93 0.70 16,403 $ $3.28 16,872 11 $406.6 12 $416.1 $466.6 13 Technical Products Fine Paper Other $610.7 $675.9 $730.6 $197.8 $267.5 610.7 $ 679.7 $ $182.3 $211.9 $ 197.8 260.6 $ $288.7 $234.3 2012 2013 2014  Technical  Fine Paper Products & Packaging  Other Total Debt Cash and Cash Equivalents $ 186.2 $ $7.8 182.3 $ $73.4 211.9 $72.6 Adjusted EBIT (In millions of U.S. dollars) Debt to EBITDA Debt to EBITDA Debt to Capital Debt to Capital 2.0x 53% 1.6x 1.6x 48% 48% 1.8x 1.8x 44% 45% Other Financial Data Net Cash Flow Provided by (used for): Other Financial Data Operating Activities Net Cash flow provided by (used for): Capital Expenditures Operating activities Capital expenditures Stock Price Year-End Return on Invested Capital Cash Dividends Paid $40.1 $83.5 $94.5 8.0% $(25.1) 40.1 $ $(28.7) 83.6 $ $(27.9) 7.0% $ $28.47 (25.1) $ $42.77 $60.27 (28.7) 6.0% $ 57.2 $ (23.1) 9.3% $0.48 11.8% $0.70 12.0% $1.02 5.0% A reconciliation of adjusted income measures to comparable GAAP measures A reconciliation of adjusted income measures to comparable GAAP measures is shown below: is show below: GAAP Reconciliation Year End December 31, GAAP Reconciliation (Dollars in millions, except share data) Year End December 31, 2012 2013 2014 (Dollars in millions, except share data) EBIT (Operating Income) 2011 $70.4 2012 $83.8 2013 $87.5 $59.0 8.5% $80.3 Adjusted EBIT (In millions of U.S. dollars) 9.9% $80.3 9.9% $85.1 10.1% $85.2 10.1% $94.1 10.4% 11 12 13 Adjusted EBIT Adjusted EBIT Margins 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2012 2013 2014  Adjusted EBIT % of Sales EBIT (Operating Income) Integration/Restructuring Costs $ 56.6 $ 5.8 70.4 $ 83.8 0.6 Adjusted Earnings Per Diluted Share 2.9 Acquisition Integration Costs Pension Settlement Charge SERP Settlement Charge Cost for Early Redemption of Debt Cost of Early Redemption of Bonds Adjusted EBIT Adjusted EBIT Depreciation & Amortization 2.4 $ 59.0 Depreciation & Amortization 0.7 0.2 0.2 0.5 0.5 85.1 85.2 28.7 28.5 5.8 3.5 3.5 0.6 0.6 80.3 80.3 28.0 28.0 4.9 4.9 $ $ 30.0 4.3 Amortization Equity-Based Compensation Amortization Equity-Based Compensation Adjusted EBITDA Adjusted EBITDA $ 93.3 $ 4.9 5.0 $113.2 $118.7 $129.1 113.2 118.7 $ 1.5 Diluted Earnings per Share $2.41 $2.96 Diluted Earnings per Share Integration/Restructuring Costs $ 1.82 Acquisition Integration Costs Pension Settlement Charge SERP Settlement Charge Cost for Early Redemption of Debt Cost of Early Redemption of Bonds Prior Year R&D Tax Credit R&D Tax Credit Diluted Adjusted Earnings per Share Diluted Adjusted Earnings per Share 0.09 $ 1.91 $ $ $ 2.41 0.22 0.22 0.13 0.13 0.02 0.02 – $2.78 2.78 $ $ 2.96 0.02 0.02 0.01 0.01 0.02 0.02 (0.08) (0.08) $2.93 2.93 Adjusted Earnings Per Share $2.78 $2.93 $3.28 $1.91 $2.93 $2.78 $1.91 11 12 13 2012 2013 2014 Neenah Paper, Inc. 2014 Annual Report 1.8x 11.0% 45% 10.0% 9.0% 3.5 3.5 3 0.2 94.1 2.5 29.0 2 6.0 1 $4.03 0.5 0.11 0.13 0 0.01 (1.00) $3.28 T O O U R T O O U R SHAREHOLDERS SHAREHOLDERS It’s my pleasure to report that 2014 – our 10th year as 2012 was a highly successful year for Neenah. 2012 was a highly successful year for Neenah. a stand-alone public company – was another successful At the front and center of our efforts was the At the front and center of our efforts was the year for Neenah Paper, with each of our businesses disciplined execution of our strategy, motivated disciplined execution of our strategy, motivated delivering record results. This was due to the talents by a clear and consistent vision: To create value for by a clear and consistent vision: To create value for and determination of our employees, the quality and our customers and shareholders by improving the our customers and shareholders by improving the strength of our businesses, and a focus on effectively image and performance of everything we touch. image and performance of everything we touch. executing our strategies to increase shareholder value. Our continuing efforts to implement that vision led Our continuing efforts to implement that vision led to substantial growth in 2012, both top-line and to substantial growth in 2012, both top-line and Consolidated sales were up 7%, with organic growth bottom-line, and allowed us to deliver returns to our bottom-line, and allowed us to deliver returns to our of 6% in Technical Products and 2% in Fine Paper & shareholders of 30%, more than twice that of the shareholders of 30%, more than twice that of the Packaging. Results were further enhanced by the mid- broad markets. broad markets. year acquisition of an attractive filtration business in North America. At the same time, adjusted operating OUR STRATEGY IS BUILT ON A PLATFORM OF OUR STRATEGY IS BUILT ON A PLATFORM OF THREE IMPERATIVES: THREE IMPERATIVES: income and earnings per share grew 11% and 12%, (cid:127) (cid:127) % Change 2014 vs. 2013 Focus on profitable, specialty niche markets Focus on profitable, specialty niche markets we increased market market where we can establish where we can establish 12% respectively, as positions based on our core strengths. positions based on our core strengths. 11% margins through (cid:127) (cid:127) 7% Increase our size, growth rate and portfolio Increase our size, growth rate and portfolio mix of products, diversification in both Fine Paper and Technical diversification in both Fine Paper and Technical continued focus on a higher-value Products through organic means and Products through organic means and cost control, and complementary acquisitions. complementary acquisitions. Net Sales Adj.EBIT Adj.EPS appropriate selling (cid:127) Deliver consistent, attractive returns to our (cid:127) Deliver consistent, attractive returns to our price adjustments. Our businesses generate substantial cash flow and we shareholders through disciplined shareholders through disciplined continue to deploy our capital in a disciplined manner. management. management. In addition to spending on organic initiatives and a is evidence of our progress in each of these areas. is evidence of our progress in each of these areas. value-adding acquisition, we increased our dividend payment by almost 50%, consistent with our strategy DELIVERING PROFITABLE GROWTH AND DELIVERING PROFITABLE GROWTH AND of providing investors with an attractive cash return. SHAREHOLDER VALUE SHAREHOLDER VALUE Our balance sheet remains strong, with low debt, in 2014, putting our performance well within the top including new initiatives in specialized market niches, including new initiatives in specialized market niches, quartile of the Russell 2000 and helping to push our which we achieved despite challenging economic which we achieved despite challenging economic market capitalization over $1 billion for the first time headwinds in Europe throughout most of the year. headwinds in Europe throughout most of the year. in our history. % Change 2012 vs 2011 % Change 2012 vs 2011 FINANCIAL HIGHLIGHTS Operating Operating income increased income increased • Net sales increased 7% to $902.7 million 36% over 2011 36% over 2011 compared with $844.5 million in 2013. after adjusting after adjusting • Adjusted operating income increased 11% for acquisition for acquisition 6% 6% to $94.1 million from $85.1 million in 2013. 4% 4% integration integration After including charges for a non-cash pension and other one- and other one- 5% 5% Adj. EPS Adj. EPS Adj. EBIT Adj. EBIT Net Sales Net Sales settlement, integration costs and other items, time costs. Our time costs. Our GAAP operating income increased 4% to $87.5 higher sales and disciplined approach to managing higher sales and disciplined approach to managing million compared with $83.8 million in 2013. overhead and other costs allowed us to leverage overhead and other costs allowed us to leverage • Adjusted earnings per share increased 12% to Neenah’s infrastructure, and helped boost operating Neenah’s infrastructure, and helped boost operating $3.28 from $2.93 in the prior year. After margins to 9.9% versus 8.5% in 2011. margins to 9.9% versus 8.5% in 2011. including prior year tax credits and one-time During the year, we also actively managed our During the year, we also actively managed our charges noted above, GAAP earnings per share capital structure, redeeming $68 million of bonds capital structure, redeeming $68 million of bonds grew 36% to $4.03 in 2014 from $2.96 in 2013 and income from continuing operations entered into a new lending facility and improved the entered into a new lending facility and improved the increased 39% to $68.7 million from $49.4 terms and extended the maturity of our revolver— terms and extended the maturity of our revolver— million in 2013. • Cash from operations, which included significant working capital benefits, increased to $94.5 million from $83.5 million in the prior year. These factors combined to drive a 50% increase in These factors combined to drive a 50% increase in adjusted net income, which reached $46 million, or adjusted net income, which reached $46 million, or OUR STRATEGIES ARE WORKING $2.78 per share. This was our highest level ever. $2.78 per share. This was our highest level ever. Our performance is evidence that our strategies Increased income levels along with our continued Increased income levels along with our continued are working – investing and building positions in defensible niches that enhance our growth profile Invested Capital (ROIC) of over 11% for 2012, up Invested Capital (ROIC) of over 11% for 2012, up and diversify our business portfolio, and creating Sales increased 16% from 2011 and exceeded Sales increased 16% from 2011 and exceeded plenty of financing capacity and no near-term needs sharply from 9% in 2011. This remains a key metric sharply from 9% in 2011. This remains a key metric value for our shareholders. $800 million. This was mainly due to our successful $800 million. This was mainly due to our successful for funding – and our Return on Capital is steady at acquisition of the Wausau premium paper brands acquisition of the Wausau premium paper brands over 12%. Shareholders have seen the impact of these actions in our share price, which increased by more than 40% guiding our investment decisions. guiding our investment decisions. Expanding our presence in specialty markets – In our core profitable niche markets, we are execution enabled us to deliver on our commitment execution enabled us to deliver on our commitment broadening our lead positions and growing share. to enhance shareholder value. Our total shareholder to enhance shareholder value. Our total shareholder We are doing this by expanding our geographic return for the past year was 30%, anchored by a return for the past year was 30%, anchored by a Neenah Paper, Inc. 2014 Annual Report Neenah Paper, Inc. 2014 Annual Report • • presence in transportation filtration, building our global evolution to higher-value filter products for which global business in specialty backings, and leveraging we are known. Backings and specialties grew by 4% our strong market position in premium fine paper, FINE PAPER among other initiatives. Diversifying our portfolio – We are also looking beyond our core markets as we invest both Neenah is the leader in the North American premium Fine Paper market. Built on a tradition of quality and service, we market some of the most recognized and preferred premium papers in North America, organically and through acquisitions in profitable, growing markets like specialty filtration media, with distinguished brands including CLASSIC®, performance-oriented technical products and premium ASTROBRIGHTS®, ROYAL SUNDANCE®, packaging. With our most recent acquisition, for Southworth®, and ENVIRONMENT® Papers. example, we were able to broaden our filtration end markets, acquire new technologies, and add to product and 8%, respectively, with new and customized products that deliver performance through unique coating and chemistry applications. Fine Paper and Packaging, with 2014 revenues of $409 Neenah’s leadership role is supported by our broad range of colors, textures and other product features and we have world-class manufacturing, million, focuses on image-enhancing, textured and with three facilities located in Wisconsin. colored graphic papers for high-end commercial and We are also a pioneer in eco-friendly paper retail print communications, as well as packaging needs products. Our ENVIRONMENT® Paper is the premier offering of recycled content papers in the market. for premium goods, such as cosmetics and jewelry, spirits, retail and electronics. Sales for Fine Paper and Packaging increased by 2% in 2014, and operating development capabilities for both existing and new OUR PRODUCTS ARE IN DEMAND WHEREVER IMAGE MATTERS: margins remained steady at an attractive 15%, despite markets. This further reinforces our demonstrated • success in evolving our portfolio into higher growth for high-end traditional / digital printing for graphic imaging needs, such as business identification, marketing and promotional materials and writing papers winter months. significantly higher costs for natural gas during the 2014 specialty materials categories. for specialized uses such as upscale packaging and labels Delivering attractive returns – Because of for unique brightly colored papers for home, school or organization Our brands are effectively distributed across all the discipline we have shown in deploying capital, continuously improving efficiencies, and creating value channels, supporting our position as the clear leader in the premium fine paper market in North America. GRAPHIC IMAGING for our customers, we’ve been able to maintain a Unique colors, textures and finishes for identity, print collateral, invitations, advertising and envelopes We are growing organically through share gains and double-digit return on capital and deliver consistent, continued expansion in premium packaging, where attractive returns to our shareholders through stock price appreciation and meaningful dividend growth. BUSINESS SEGMENTS With 2014 net sales of $467 million, Technical Products sales increased by 21% in 2014. While today premium packaging represents only 10% of the Fine Paper and Packaging business, we are excited about this business and its future potential and recently renamed our Fine Paper segment “Fine Paper and Packaging,” to reflect is our largest segment and includes performance- PREMIUM PACKAGING & LABEL based products such as filtration, industrial backings the growing importance of premium packaging in our Image enhancing colors and textures of premium folded cartons, box wrap, bags, premium wine, beverage and spirit labels, food labels and hang tags and other specialty materials. Revenue increased portfolio. 12% in 2014, with very strong organic growth of 6% CATALYSTS FOR GROWTH boosted by the July 1 filtration acquisition. Operating As we move further into 2015 and beyond, our market margins increased to 10.1% from 9.3% in 2013. Transportation filtration media, our largest and most profitable product group, grew by 7%. Our continued BRIGHTS and financial positions remain strong. We will build on our success by continuing to focus on innovation, customer intimacy, cost and capital management. All of our employees have incentive plans tied to performance, Deep, rich, vivid colors for flyers, posters, school supplies, crafting, direct mail advertising and promotions success in this business reflects share gains in Europe, which keeps us focused on improving efficiencies as we our biggest market, and double-digit growth in export markets like NAFTA and Asia, all supported by the grow, and aligned with shareholder goals. Neenah Paper, Inc. 2014 Annual Report T O O U R T O O U R SHAREHOLDERS SHAREHOLDERS A number of catalysts are in place that provide new 2012 was a highly successful year for Neenah. 2012 was a highly successful year for Neenah. • We are leveraging global management of our including new initiatives in specialized market niches, including new initiatives in specialized market niches, growth opportunities and continue our expansion and At the front and center of our efforts was the At the front and center of our efforts was the production capabilities in the U.S. and Europe which we achieved despite challenging economic which we achieved despite challenging economic portfolio diversification into profitable and growing disciplined execution of our strategy, motivated disciplined execution of our strategy, motivated by a clear and consistent vision: To create value for our customers and shareholders by improving the markets: by a clear and consistent vision: To create value for • We recently announced plans to meet our customers and shareholders by improving the growing global demand for our image and performance of everything we touch. transportation filtration products by Our continuing efforts to implement that vision led image and performance of everything we touch. Our continuing efforts to implement that vision led repurposing one of our fine paper machines to substantial growth in 2012, both top-line and to substantial growth in 2012, both top-line and in Wisconsin. Since we expect to consume bottom-line, and allowed us to deliver returns to our bottom-line, and allowed us to deliver returns to our remaining capacity in Germany over the shareholders of 30%, more than twice that of the shareholders of 30%, more than twice that of the next few years, this is a capital-efficient way broad markets. broad markets. to meet the needs of our global filtration OUR STRATEGY IS BUILT ON A PLATFORM OF OUR STRATEGY IS BUILT ON A PLATFORM OF customers. At the same time, it allows us THREE IMPERATIVES: to take advantage of capacity available in THREE IMPERATIVES: fine paper – the result of productivity gains (cid:127) Focus on profitable, specialty niche markets Focus on profitable, specialty niche markets (cid:127) over the past few years – as we continue to market where we can establish where we can establish market serve these customers. positions based on our core strengths. positions based on our core strengths. (cid:127) (cid:127) • The recent filtration acquisition has Increase our size, growth rate and portfolio Increase our size, growth rate and portfolio diversification in both Fine Paper and Technical diversification in both Fine Paper and Technical strengthened our expertise in this Products through organic means and Products through organic means and category and added new 100% synthetic complementary acquisitions. wet-laid nonwoven technologies. As a complementary acquisitions. result, we have the opportunity to meet (cid:127) Deliver consistent, attractive returns to our (cid:127) Deliver consistent, attractive returns to our a wider range of product and customer shareholders through disciplined shareholders through disciplined needs from a new manufacturing base in the management. management. U.S. and expand into adjacent, high-growth filtration categories that value performance is evidence of our progress in each of these areas. is evidence of our progress in each of these areas. and innovation. DELIVERING PROFITABLE GROWTH AND DELIVERING PROFITABLE GROWTH AND SHAREHOLDER VALUE • With our high-end color and texture SHAREHOLDER VALUE $800 million. This was mainly due to our successful Sales increased 16% from 2011 and exceeded capabilities, we see significant growth Sales increased 16% from 2011 and exceeded potential in targeted premium packaging $800 million. This was mainly due to our successful niches. Combined, these represent a $300 acquisition of the Wausau premium paper brands million targeted market where we only have acquisition of the Wausau premium paper brands a small share today. Neenah Paper, Inc. 2014 Annual Report Neenah Paper, Inc. 2014 Annual Report with world-class supply chain programs to optimize headwinds in Europe throughout most of the year. headwinds in Europe throughout most of the year. our products and services to satisfy growing Operating % Change 2012 vs 2011 % Change 2012 vs 2011 Operating customer needs in these markets, as well as in emerging markets. income increased income increased 36% over 2011 36% over 2011 • Last but not least, we have the financial after adjusting after adjusting capabilities and strength to act on these for acquisition for acquisition 6% 6% 4% 4% opportunities. 5% 5% integration integration and other one- and other one- time costs. Our time costs. Our Net Sales Net Sales CULTURE AND PEOPLE Adj. EBIT Adj. EBIT Adj. EPS Adj. EPS A great deal of our success derives directly from our higher sales and disciplined approach to managing higher sales and disciplined approach to managing strong teams and a cultural framework where we overhead and other costs allowed us to leverage overhead and other costs allowed us to leverage Neenah’s infrastructure, and helped boost operating encourage internal debate, align quickly on direction Neenah’s infrastructure, and helped boost operating and move forward together – fueled by a high level of margins to 9.9% versus 8.5% in 2011. margins to 9.9% versus 8.5% in 2011. personal ownership and a “play-to-win” attitude. We also During the year, we also actively managed our During the year, we also actively managed our accept the responsibility to look out for each other, take capital structure, redeeming $68 million of bonds capital structure, redeeming $68 million of bonds time to recognize others’ accomplishments and celebrate our success. entered into a new lending facility and improved the entered into a new lending facility and improved the This kind of spirited culture supports continuous terms and extended the maturity of our revolver— terms and extended the maturity of our revolver— improvement in everything we do, and helps us to avoid unwanted volatility while delivering consistently strong results. These factors combined to drive a 50% increase in These factors combined to drive a 50% increase in adjusted net income, which reached $46 million, or adjusted net income, which reached $46 million, or SAFETY AND ENVIRONMENT $2.78 per share. This was our highest level ever. As we strive to meet our business objectives, we want to $2.78 per share. This was our highest level ever. be sure our employees are working safely and that we are Increased income levels along with our continued Increased income levels along with our continued minimizing the company’s impact on the environment. Invested Capital (ROIC) of over 11% for 2012, up In 2014, with a continued focus on employee Invested Capital (ROIC) of over 11% for 2012, up engagement across our mills, we achieved a 15% sharply from 9% in 2011. This remains a key metric sharply from 9% in 2011. This remains a key metric reduction in accident rates versus 2013, as we worked guiding our investment decisions. guiding our investment decisions. together to increase awareness and eliminate unsafe conditions and processes. execution enabled us to deliver on our commitment execution enabled us to deliver on our commitment to enhance shareholder value. Our total shareholder to enhance shareholder value. Our total shareholder return for the past year was 30%, anchored by a return for the past year was 30%, anchored by a As a user of natural resources, we have an environmental management process designed not only FINE PAPER to meet regulatory requirements 100% of the time, but to go above and beyond – such as using wood fiber endorsed for sustainability by independent third party organizations, including grades produced with “green Neenah is the leader in the North American premium Fine Paper market. Built on a tradition of quality and service, we market some of the most recognized and preferred premium papers in North America, energy”, “carbon neutral” and post-consumer fibers. CONFIDENCE IN THE FUTURE with distinguished brands including CLASSIC®, ROYAL SUNDANCE®, Let me close by saying again how pleased I am with ASTROBRIGHTS®, Southworth®, and ENVIRONMENT® Papers. Neenah’s leadership role is supported by our broad range of colors, textures and other product features and we have world-class manufacturing, with three facilities located in Wisconsin. We are also a pioneer in eco-friendly paper products. Our ENVIRONMENT® Paper is the premier offering of recycled content papers in the market. how our businesses are performing and with the plans and strategies we have in place for the future. Neenah has undergone many changes in the past ten years OUR PRODUCTS ARE IN DEMAND WHEREVER IMAGE MATTERS: that have made us the strong company we are today. Looking ahead, we will build on our historical success for high-end traditional / digital printing for graphic imaging needs, such as business identification, marketing and promotional materials and writing papers by following our well-defined course of action and for specialized uses such as upscale packaging and labels commitment to uniquely meet customer needs while for unique brightly colored papers for home, school or organization • • • creating value for our shareholders. Achieving the kind of success we’ve had takes GRAPHIC IMAGING teamwork, and I want to recognize the talent, Unique colors, textures and finishes for identity, print collateral, invitations, advertising and envelopes passion and commitment of our employees, the guidance from our board of directors, and the support of our shareholders. Because of this, we continue to look to the future – and our next ten years– with great confidence. PREMIUM PACKAGING & LABEL Image enhancing colors and textures of premium folded cartons, box wrap, bags, premium wine, beverage and spirit labels, food labels and hang tags Sincerely, John P. O’Donnell President and Chief Executive Officer BRIGHTS Deep, rich, vivid colors for flyers, posters, school supplies, crafting, direct mail advertising and promotions Neenah Paper, Inc. 2014 Annual Report TECHNICAL PRODUCTS Neenah is a leading producer of Technical Products, using various substrates to produce specialized materials that employ saturation, coating and other function- enhancing processes and abrasive backings, labels and other transportation, and water filtration, industrial applications, medical packaging, image transfer papers and many others. The Technical Products group serves customers in more than 70 countries through manufacturing facilities in the U.S. and Germany, supported by R&D efforts focused on developing new processes and products that will meet customers’ needs and drive our growth. OUR PRODUCTS DELIVER HIGH-PERFORMANCE SOLUTIONS: (cid:127) providing essential filtration capabilities for transportation, water and other uses (cid:127) meeting specialized needs for strength, durability resistance to water and contamination in products as diverse as medical packaging, labels, and outdoor advertising (cid:127) sepat dna sevisarba sa hcus snoitacilppa lairtsudni rof stcudorp ni ecnamrofrep roirepus gnilbane FILTRATION High-performance filtration media for transportation, industrial water and other markets BACKINGS Saturated and coated papers used for backing of specialty abrasives and tapes to enhance their performance SPECIALTIES Products for a variety of end markets including labels, durable printing, and medical packaging applications Neenah Paper, Inc. 2014 Annual Report FINE PAPER & PACKAGING Neenah is the leader in the North American premium fine paper market. Built on a tradition of quality and service, we market some of the most recognized and preferred premium papers in North America, with distinguished brands including CLASSIC®, ASTROBRIGHTS®, ROYAL SUNDANCE®, Southworth®, and ENVIRONMENT®, the premier offering of recycled content papers in the market. Our products are also used in premium packaging and label applications for goods such as spirits, jewelry, cosmetics and electronics. Neenah’s leadership role is supported by our broad range of colors, textures and other product features and world-class manufacturing, with four facilities located in Wisconsin. OUR PRODUCTS ARE IN DEMAND WHEREVER IMAGE MATTERS: (cid:127) (cid:127) (cid:127) for high-end traditional / digital printing for graphic imaging needs such as marketing and promotional materials, business identification, and writing papers for specialized uses such as upscale packaging and labels for unique brightly colored papers for home, school or organization GRAPHIC IMAGING PREMIUM PACKAGING Image-enhancing colors and textures of premium folded cartons, box wrap, bags, premium wine, beverage, spirit and food labels and hang tags Neenah Paper, Inc. 2014 Annual Report NEENAH PAPER, INC. 2013 ANNUAL REPORT 4 31OCT201109101132 31OCT201109101132 NOTICE OF 2015 ANNUAL MEETING AND PROXY STATEMENT NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT P r o x y P r o x y April 7, 2015 31OCT201109101132 31OCT201109101132 Dear Stockholder: On behalf of the Board of Directors, it is my pleasure to invite you to attend the 2015 Annual Meeting of Stockholders of Neenah Paper, Inc. to be held at the Company’s headquarters located at Preston Ridge III, 3460 Preston Ridge Road, Suite 600, Alpharetta, Georgia 30005 on Thursday, May 21, 2015 at 10:00 a.m., Eastern Time. 2014 was a successful year for Neenah and for our shareholders. Our teams delivered strong top and bottom line organic growth in core categories, and we increased our presence in targeted growth markets like filtration with the July acquisition of a US-based technical materials company. Our focus on asset management was reflected in a Return on Invested Capital of over 12 percent and with a balance sheet with low net debt and plenty of financial flexibility. Our businesses generate strong cash flows and we continue to deploy these in a disciplined and value-creating manner, including a commitment to direct cash returns to shareholders through an attractive dividend. With three increases in the past 18 months, our dividend has increased 50 percent from where it was at the end of 2013. All of these actions helped deliver the consistent and profitable growth our shareholders have come to expect. We are proud of our results and of the contributions of Neenah’s dedicated employees around the world that helped to create this value and provided attractive returns for our shareholders. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT The formal business to be transacted at the 2015 Annual Meeting includes: (cid:127) The election of the two nominees detailed in this Proxy Statement as Class II directors for a three-year term; (cid:127) Approval of an advisory vote on the Company’s executive compensation; and (cid:127) The ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015. At the meeting, we will provide a brief report on our results and strategies. Our directors and executive officers, as well as representatives from Deloitte & Touche LLP, will be in attendance to answer any questions you may have. Regardless of whether you choose to attend or not, please either vote electronically using the Internet, vote by telephone, or follow the procedures for requesting written copies of the proxy materials described in the attached Proxy Statement and mark, date, sign and return the proxy card included with those materials at your earliest convenience. This will assure your shares will be represented and voted at the Annual Meeting. Sincerely, 15MAR201217460616 JOHN P. O’DONNELL President and Chief Executive Officer P r o x y 31OCT201109101132 31OCT201109101132 Neenah Paper, Inc. Preston Ridge III 3460 Preston Ridge Road, Suite 600 Alpharetta, Georgia 30005 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 21, 2015 NOTICE HEREBY IS GIVEN that the 2015 Annual Meeting of Stockholders of Neenah Paper, Inc. will be held at the Company’s headquarters located at Preston Ridge III, 3460 Preston Ridge Road, Suite 600, Alpharetta, Georgia 30005 on Thursday, May 21, 2015 at 10:00 a.m., Eastern time, for the purpose of considering and voting upon: NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT 1. A proposal to elect the two nominees named as Class II directors in the attached Proxy Statement to serve until the 2018 Annual Meeting of Stockholders; 2. A proposal to approve, on an advisory basis, the Company’s executive compensation; 3. A proposal to ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm of Neenah Paper, Inc. for the fiscal year ending December 31, 2015; and 4. Such other business as properly may come before the Annual Meeting or any adjournments thereof. The Board of Directors is not aware of any other business to be presented to a vote of the stockholders at the Annual Meeting. Information relating to the above matters is set forth in the attached Proxy Statement. Stockholders of record at the close of business on March 31, 2015 are entitled to receive notice of and to vote at the Annual Meeting and any adjournments thereof. The Proxy Statement and the 2014 Annual Report to Stockholders are available at www.neenah.com/proxydocs. By order of the Board of Directors. 29APR200510193718 STEVEN S. HEINRICHS Senior Vice President, General Counsel and Secretary Alpharetta, Georgia April 7, 2015 PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN VOTE ELECTRONICALLY, BY TELEPHONE, OR REQUEST PRINTED PROXY MATERIALS AND PROMPTLY COMPLETE, EXECUTE AND RETURN THE PROXY CARD INCLUDED WITH THE PROXY MATERIALS IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. Table of Contents ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BENEFICIAL OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ELECTION OF DIRECTORS (ITEM 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 DIRECTOR COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMPENSATION COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADVISORY VOTE ON EXECUTIVE COMPENSATION (ITEM 2) . . . . . . . . . . . . . . . . . . . . . ADDITIONAL EXECUTIVE COMPENSATION INFORMATION . . . . . . . . . . . . . . . . . . . . . . COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION . . . . . . . . . SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE . . . . . . . . . . . . . . . AUDIT COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM . . . . . . . . . . . . . . . . . . . . . . . FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . STOCKHOLDERS’ PROPOSALS FOR 2015 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING . . . . . . . . . . . . . HOUSEHOLDING OF NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS . 3 3 6 9 13 15 19 21 31 32 34 43 43 44 45 45 45 46 47 47 P r o x y 31OCT201109101132 31OCT201109101132 PROXY STATEMENT General Information Our Board of Directors is soliciting proxies from our stockholders in connection with Neenah’s Annual Meeting of Stockholders. When used in this Proxy Statement, the terms ‘‘we,’’ ‘‘us,’’ ‘‘our,’’ ‘‘the Company’’ and ‘‘Neenah’’ refer to Neenah Paper, Inc. This Proxy Statement and our 2014 Annual Report are first being mailed to stockholders who requested copies, or made available on April 7, 2015. Questions and Answers about the Annual Meeting and Voting NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT When and where is the Annual Meeting? When: Thursday, May 21, 2015, at 10:00 A.M. Eastern Standard Time Where: Company headquarters located at Preston Ridge III, 3460 Preston Ridge Road, Suite 600, Alpharetta, Georgia 30005 Who is entitled to vote at the Annual Meeting? You are entitled to vote at the Annual Meeting if you owned our common stock, par value $0.01 per share, as of the close of business March 31, 2015 (the ‘‘Record Date’’), with each share entitling its owner to one vote on each matter submitted to the stockholders. On the record date 16,725,959 shares of common stock were outstanding and eligible to be voted at the Annual Meeting. The presence, in person or by proxy, of the holders of a majority of the issued and outstanding shares of our common stock is necessary to constitute a quorum at the Annual Meeting. How do I vote at the Annual Meeting? You may vote in person at the Annual Meeting or by proxy. We recommend you vote by proxy even if you plan to attend the Annual Meeting. You can always change your vote at the meeting. Giving us your proxy means you authorize us to vote your shares at the Annual Meeting in the manner you direct. If you plan to attend the meeting in person you must provide proof of your ownership of our common stock as of the record date, such as an account statement, and a form of personal identification for admission to the meeting. If you hold your shares in street name and you also wish to be able to vote at the annual meeting, you are required to obtain a proxy from your bank or broker, executed in your favor. If your shares are held in your name, you can vote by proxy in three convenient ways: (cid:127) Via the Internet: Go to http://www.proxyvote.com and follow the instructions. (cid:127) By Telephone: Call toll-free 1-800-690-6903 and follow the instructions. 3 (cid:127) By Mail: Request a printed copy of the proxy materials disclosed in this Proxy Statement and complete, sign, date and return your proxy card in the envelope included with your printed proxy materials. If your shares are held in street name, the availability of telephone and internet voting will depend on the voting processes of the applicable bank or brokerage firm; therefore, it is recommended that you follow the voting instructions on the form you receive from your bank or brokerage firm. All properly executed proxies received by Neenah in time to be voted at the Annual Meeting and not revoked will be voted at the Annual Meeting in accordance with the directions noted on the proxy card. If any other matters properly come before the Annual Meeting, the persons named as proxies will vote upon such matters according to their judgment. We are also sending the Notice and voting materials to participants in various employee benefit plans of Neenah. The trustee of each plan, as the stockholder of record of the shares of common stock held in the plan, will vote whole shares of stock attributable to each participant’s interest in the plan in accordance with the directions the participant gives or, if no directions are given by the participant, in accordance with the directions received from the applicable plan committees. Can I Change My Vote? Any stockholder of record delivering a proxy has the power to revoke it at any time before it is voted: (i) by giving written notice to Steven S. Heinrichs, Senior Vice President, General Counsel and Secretary of Neenah, at Preston Ridge III, 3460 Preston Ridge Road, Suite 600, Alpharetta, Georgia, 30005; (ii) by submitting a proxy card bearing a later date, including a proxy submitted via the Internet or by telephone; or (iii) by voting in person at the Annual Meeting. Please note, however, that any beneficial owner of our common stock whose shares are held in street name may (a) revoke his or her proxy and (b) attend and vote his or her shares in person at the Annual Meeting only in accordance with applicable rules and procedures as then may be employed by such beneficial owner’s brokerage firm or bank. What Proposals am I being asked to vote on at the Annual Meeting and what is required to approve each proposal? You are being asked to vote on three proposals; (Proposal 1) the election of the proposed nominees as Class II directors, (Proposal 2) approve, by non-binding vote, Neenah’s executive compensation, and (Proposal 3) ratify the appointment of our independent public accounting firm. In voting with regard to Proposal 1, you may vote for all nominees listed herein, withhold your vote as to all nominees or withhold your vote as to specific nominees. The vote required to approve Proposal 1 is a majority of the shares of common stock represented and entitled to vote on Proposal 1, provided a quorum is present. Votes that are withheld will be considered as shares present and entitled to vote for the proposal, and therefore will have the same legal effect as votes against the proposal. In voting with regard to Proposal 2, you may vote in favor of the proposal, against the proposal, or may abstain from voting. The vote required to approve Proposal 2 is majority of the shares of common stock represented and entitled to vote on Proposal 2, provided a quorum is present. Abstentions will be considered in determining the number of votes required to obtain the necessary majority vote for the proposal, and therefore will have the same legal effect as votes against the proposal. In voting with regard to Proposal 3, you may vote in favor of the proposal, against the proposal, or may abstain from voting. The vote required to approve Proposal 3 is a majority of the shares of common stock represented and entitled to vote at the Annual Meeting, provided a quorum is present. Abstentions will be considered as shares present and entitled to vote for the proposal, and therefore will have the same legal effect as votes against the proposal. 4 P r o x y Neenah is not aware, as of the date hereof, of any matters to be voted upon at the Annual Meeting other than those stated in this Proxy Statement. If any other matters are properly brought before the Annual Meeting, your proxy gives discretionary authority to the persons named as proxies to vote the shares represented thereby in their discretion. What happens if I don’t return my proxy card or vote my shares? 31OCT201109101132 If you hold your shares directly your shares will not be voted if you do not return your proxy card or vote in person at the Annual Meeting. If your shares are held in the name of a bank or brokerage firm (in ‘‘street name’’) and you do not vote your shares, your bank or brokerage firm can only vote your shares in their discretion for proposals which are considered ‘‘discretionary’’ proposals. We believe that Proposal 3 is a discretionary proposal. Brokers are prohibited from exercising discretionary authority for beneficial owners who have not provided voting instructions to the broker for proposals which are considered ‘‘non-discretionary’’ (a ‘‘broker non-vote’’). We believe Proposals 1 and 2 are non-discretionary proposals. As such, broker non-votes will be counted for the purpose of determining if a quorum is present, but will not be considered as shares entitled to vote on Proposals 1 and 2, and therefore will have no effect on the outcome of these proposals. What happens if I sign, date and return my proxy card but do not specify how to vote my shares? NOTICE OF 2013 ANNUAL MEETING AND If a signed proxy card is received which does not specify a vote or an abstention, then the shares PROXY STATEMENT represented by that proxy card will be voted FOR the election of all Class II director nominees described herein, FOR the approval of the Company’s executive compensation, and FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2015. Why haven’t I received a printed copy of the Proxy Statement or annual report? We are choosing to follow the Securities and Exchange Commission (‘‘SEC’’) rules that allow companies to furnish proxy materials to stockholders via the Internet. If you received a Notice of Internet Availability of Proxy Materials, or ‘‘Notice,’’ by mail, you will not receive a printed copy of the proxy materials, unless you specifically request one. The Notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report as well as how to submit your proxy over the Internet. If you received the Notice and would still like to receive a printed copy of our proxy materials, you should follow the instructions for requesting these materials included in the Notice. We plan to mail the Notice to stockholders by April 7, 2015. Who pays for the cost of this proxy solicitation? We will bear the cost of preparing, printing and filing the Proxy Statement and related proxy materials. In addition to soliciting proxies through the mail, we may solicit proxies through our directors, officers and employees, in person and by telephone or email and facsimile. We expect to retain Okapi Partners LLC to aid in the solicitation at a cost of approximately $8,000, plus reimbursement of out-of-pocket expenses. Brokerage firms, nominees, custodians and fiduciaries also may be requested to forward proxy materials to the beneficial owners of shares held of record by them. We will pay all expenses incurred in connection with the solicitation of proxies. When will voting results be made available? We will announce the final results on our web site at www.neenah.com shortly after the meeting and on Form 8-K immediately following the meeting. 5 BENEFICIAL OWNERSHIP DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth information regarding the beneficial ownership of our common stock as of March 31, 2015 with respect to: (i) each of our directors; (ii) each of the named executive officers appearing elsewhere herein; and (iii) all executive officers and directors as a group, based in each case on information furnished to us by such persons. As used in this Proxy Statement, ‘‘beneficial ownership’’ means that a person has, as of March 31, 2015, or may have within 60 days thereafter, the sole or shared power to vote or direct the voting of a security and/or the sole or shared investment power to dispose of or direct the disposition of a security. Name Shares Beneficially Owned(1) Percent of Class(2) Margaret S. Dano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sean T. Erwin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Edward Grzedzinski . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Steven S. Heinrichs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mary Ann Leeper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonnie C. Lind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Timothy S. Lucas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . John F. McGovern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Philip C. Moore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . John P. O’Donnell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Julie A Schertell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Armin Schwinn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stephen M. Wood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All directors and executive officers as a group (14 persons) . . . . . . . . . . . . . . . 0(3) 22,285(4) 16,025(5) 24,163(6) 11,785(7) 46,440(8) 13,915(9) 4,155 15,150(10) 61,454(11) 6,586(12) 3,420 32,335(13) 309,535(14) * * * * * * * * * * * * * 1.8 (1) Except as otherwise noted, the directors and executive officers, and all directors and executive officers as a group, have sole voting power and sole investment power over the shares listed. Shares of common stock held by the trustee of Neenah’s 401(k) Retirement Plan and Retirement Contribution Plan for the benefit of, and which are attributable to our executive officers are included in the table. (2) An asterisk indicates that the percentage of common stock beneficially owned by the named individual does not exceed 1% of the total outstanding shares of our common stock. (3) Ms. Dano was appointed as a director on March 24, 2015. (4) Includes 675 shares of common stock issuable upon conversion of restricted stock units that are vested or will vest within 60 days of March 31, 2015. This total does not include 1,870 vested Stock Appreciation Rights. (5) Includes 1,350 shares of common stock issuable upon conversion of restricted stock units that are vested or will vest within 60 days of March 31, 2015. (6) This total does not include 1,343 vested Stock Appreciation Rights. (7) Includes 1,350 shares of common stock issuable upon conversion of restricted stock units that are vested or will vest within 60 days of March 31, 2015. This total does not include 8,761 vested Stock Appreciation Rights. (8) This total does not include 8,761 vested Stock Appreciation Rights. 6 (9) Includes 1,350 shares of common stock issuable upon conversion of restricted stock units that are vested or will vest within 60 days of March 31, 2015. (10) Includes 683 shares of common stock issuable upon conversion of restricted stock units that are vested or will vest within 60 days of March 31, 2015. (11) This total does not include 14,489 vested Stock Appreciation Rights. (12) This total does not include 9,323 vested Stock Appreciation Rights. 31OCT201109101132 (13) Includes 1,350 shares of common stock issuable upon conversion of restricted stock units that are vested or will vest within 60 days of March 31, 2015. (14) On July 1, 2014 the Company converted all outstanding Stock Options to Stock Appreciation Rights which are not included in the calculation of beneficial ownership. Stock Appreciation Rights are disclosed in detail under the Outstanding Equity at the End of 2014 section of this Proxy Statement. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT P r o x y 7 THIRD PARTIES The following table sets forth information regarding the beneficial ownership of our common stock as of December 31, 2014 for each person known to us to be the beneficial owner of more than 5% of our outstanding common stock. Name and Address of Beneficial Owner Common Stock Beneficially Owned Number of Shares Percent of Class Blackrock, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,483,222(1) 8.9% 40 East 52nd Street New York, NY 10022 Royce & Associates LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,468,906(2) 8.8% 745 Fifth Ave. New York, NY 10151 Allianz Global Investors U.S. Holdings LLC . . . . . . . . . . . . . . . . . . . 1,019,353(3) 6.1% 680 Newport Center Drive, Suite 250 Newport Beach, CA 92660 (1) The amount shown and the following information is derived from the Schedule 13G filed by BlackRock, Inc. on January 22, 2015, reporting beneficial ownership as of December 31, 2014. Of the 1,483,222 shares shown, BlackRock, Inc. has sole dispositive power over all of the shares and sole voting power over 1,438,386 shares. (2) The amount shown and the following information is derived from the Schedule 13G filed by Royce & Associates, LLC on January 15, 2015, reporting beneficial ownership as of December 31, 2014. Of the 1,468,906 shares shown, Royce & Associates, LLC has sole dispositive power over all of the shares and sole voting power over all shares. (3) The amount shown and the following information is derived from the Schedule 13G filed by Allianz Global Investors U.S. LLC, NFJ Investment Group LLC and Allianz Global Investors Europe GmbH, on February13, 2015, each of which does not affirm the existence of a group, reporting beneficial ownership as of December 31, 2014. Of the 1,019,353 shares shown, NFJ Investment Group LLC has sole dispositive power and sole voting power over 925,910 shares, Allianz Global Investors U.S. LLC has sole dispositive power and sole voting power over 57,767 shares and Allianz Global Investors GmbH has sole dispositive power and sole voting power over 35,676 shares. 8 P r o x y ELECTION OF DIRECTORS (ITEM 1) The Board currently consists of nine members divided into three classes of three directors. Effective upon the retirement of Dr. Mary Ann Leeper as a Class II director as of the 2015 Annual Meeting, the Board will consist of eight members divided into two classes of three directors and one class of two directors. The directors in each class serve three year terms, with the terms of the Class II directors expiring at the 2015 Annual Meeting. The Board has nominated Stephen M. Wood and Margaret S. Dano, each a current director of Neenah, for re-election as Class II directors at the 2015 Annual Meeting. If elected, the nominees will serve a three-year term expiring at the 2018 Annual Meeting of Stockholders and until his or her successor has been duly elected and qualified. 31OCT201109101132 Each of the nominees has consented to serve another term as a director if re-elected. If any of the nominees should be unavailable to serve for any reason (which is not anticipated), the Board may designate a substitute nominee or nominees (in which event the persons named on the enclosed proxy card will vote the shares represented by all valid proxy cards for the election of such substitute nominee or nominees), allow the vacancies to remain open until a suitable candidate or candidates are located, or by resolution provide for a lesser number of directors. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT If any incumbent nominee for director in an uncontested election should fail to receive the required affirmative vote of the holders of a majority of the shares represented and entitled to vote at the Annual Meeting, under Delaware law the director remains in office as a ‘‘holdover’’ director until his or her successor is elected and qualified or until his or her earlier resignation, retirement, disqualification, removal from office or death. In the event of a holdover director, the Board of Directors in its discretion may request the director to resign from the Board. If the director resigns, the Board of Directors may immediately fill the resulting vacancy, allow the vacancy to remain open until a suitable candidate is located and appointed or adopt a resolution to decrease the authorized number of directors. The Board unanimously recommends that the stockholders vote ‘‘FOR’’ the proposal to elect Stephen M. Wood and Margaret S. Dano as Class II directors for a three-year term expiring at the 2018 Annual Meeting of Stockholders and until their successors have been duly Set forth below is certain information as of March 31, 2015, regarding the nominees and each director continuing in office, including their ages, principal occupations (which have continued for at least the past five years unless otherwise noted), current Board experience and participation, and how the background, experience and qualification of each nominee and director make them well suited to serve on Neenah’s Board. Information Regarding Directors Nominated for Reelection Margaret S. Dano, born in 1959, is Chairman of the Board for Superior Industries International, Inc., a leading manufacturer of aluminum road wheels for use in the automobile and light truck industry. Ms. Dano was appointed as Chairman of the Board in 2014 and has served as a director for Superior since 2007. In addition, Ms. Dano currently serves as a director of Douglas Dynamics, Inc., a manufacturer of snow and ice control equipment for the global light truck market, a position she has held since 2012. From 2002-2005 Ms. Dano served as Vice President, Worldwide Integrated Supply Chain and Operations for Honeywell Corporation. Prior to that she served as Vice President, Worldwide Supply Chain Office Products & GM Printer Papers for Avery Dennison Corporation from 1999 to 2002 and Vice President of Corporate Manufacturing & Engineering from 1996-1999. Ms. Dano received a BS in mechanical engineering from Kettering University (formerly the General Motors Institute). Ms. Dano was appointed to Neenah’s Board in 2015. Ms. Dano’s senior executive experience in global manufacturing and supply chain and her public board experience and leadership with manufacturing companies makes her an effective member of Neenah’s Board. 9 Stephen M. Wood, Ph.D., born in 1946, is an Operating Partner with Snow Phipps Group LLC, a diversified international investment company. Prior to this he served as Chairman of the Board for FiberVisions Corporation which is a leading global manufacturer of synthetic fibers for consumer products, construction and industrial applications. Dr. Wood was President and Chief Executive Officer of FiberVisions from 2006 to 2012. Dr. Wood was also Chairman of the Board of ESFV which is a global joint Venture with JNC Corporation, a leading Japanese Chemical Company. From 2001 to 2004, Dr. Wood served as President and Chief Executive Officer of Kraton Polymers, a specialties chemical company, and Chairman and Representative Director of JSR Kraton Elastomers, a Japanese joint venture company. Prior to this Dr. Wood was President of the Global Elastomers business of Shell Chemicals, Ltd., and a Vice President of that company. Dr. Wood was also elected International President of the International Institute of Synthetic Rubber Producers. Dr. Wood has a BSc in Chemistry and a Ph.D. in Chemical Engineering from Nottingham University, United Kingdom and is a graduate of the Institute of Chemical Engineers. Dr. Wood has served as a director of Neenah since November 30, 2004. Dr. Wood’s educational background and his experience as a senior executive of a chemical manufacturing company provides the knowledge base and experience to make him an effective member of Neenah’s Board. Class III Directors—Term Expiring at the 2016 Annual Meeting Edward Grzedzinski, born in 1955, served as the Chief Executive Officer of NOVA Information Systems from 1993 to 2001, and Vice Chairman of US Bancorp from November 2001 to 2004. Mr. Grzedzinski has over 25 years of experience in the electronic payments industry and was a co-founder of NOVA Information Systems in 1991. Mr. Grzedzinski served as a member of the Managing Committee of US Bancorp, and was a member of the Board of Directors of US Bank, N.A. Mr. Grzedzinski also served as Chairman of euroConex Technologies, Limited, a European payment processor owned by US Bancorp until November 2004 and was a member of the Board of Directors of Indus International, a global provider of enterprise asset management products and services until April 2005. Mr. Grzedzinski has served as a director of Marlin Business Services since May of 2005 and Neenah Paper since November 30, 2004. Mr. Grzedzinski’s experience as chief executive officer and chairman of a financial services company and experience on other boards makes him an effective member of Neenah’s Board. Sean T. Erwin, born in 1951, is the Chairman of our Board of Directors. Mr. Erwin served as Neenah’s President and Chief Executive Officer from 2004 through May 2011. Prior to the spin-off of Neenah from Kimberly-Clark Corporation on November 30, 2004 (the ‘‘spin-off’’), Mr. Erwin had been an employee of Kimberly-Clark since 1978, and had held increasingly senior positions in both finance and business management. In January 2004, Mr. Erwin was named President of Kimberly-Clark’s Pulp and Paper Sector, which comprised the businesses transferred to us by Kimberly-Clark in the spin-off. He served as the President of the Global Nonwoven business from early 2001. He has also served as the President of the European Consumer Tissue business, Managing Director of Kimberly-Clark Australia, as well as previously serving as President of the Pulp and Paper Sector, and President of the Technical Paper business. Mr. Erwin received his BS in Accounting and Finance from Northern Illinois University. Mr. Erwin currently serves as a director of Carmike Cinemas, Inc. Mr. Erwin has served as a director of Neenah since November 30, 2004. Mr. Erwin’s extensive experience as former CEO of the Company and his vast industry experience and leadership positions make him an effective member of Neenah’s Board. John F. McGovern, born in 1946, is the founder, and since 1999 a partner, of Aurora Capital LLC, a private investment and consulting firm based in Atlanta, Georgia. Prior to founding Aurora Capital, Mr. McGovern served in a number of positions of increasing responsibility at Georgia-Pacific Corporation from 1981 to 1999, including Executive Vice President/Chief Financial Officer from 1994 to 1999. Previously, Mr. McGovern had been Vice President and Director, Forest Products and Package 10 Division of Chase Manhattan Bank. He currently serves as a director of Xerium Technologies, Inc. where he serves as audit committee chairman. Mr. McGovern also served as a director of NewPage Corporation from 2012 to 2015 and Collective Brands Inc. from 2003 to 2012. From 2006 to 2010 Mr. McGovern served as lead director of Neenah’s Board for all executive sessions of non-management directors. Mr. McGovern has served as a director of Neenah since January 10, 2006. Mr. McGovern received his BS from Fordham University. Mr. McGovern’s extensive experience as the senior financial executive of a multi-national paper products company and his experience as an executive in the financial services industry as well as his experience on other public company boards make him an effective member of Neenah’s Board. 31OCT201109101132 Class I Directors—Term Expiring at the 2017 Annual Meeting Timothy S. Lucas, CPA, born in 1946, has served as an independent consultant on financial reporting issues practicing as Lucas Financial Reporting since 2002. From 1988 to 2002, Mr. Lucas worked at the Financial Accounting Standards Board (‘‘FASB’’), where he was the Director of Research and Technical Activities, and Chairman of the FASB’s Emerging Issues Task Force. Mr. Lucas has served as a director of Neenah since November 30, 2004. Mr. Lucas received his BA in Economics and BS in Accounting from Rice University and his Master of Accounting from the Jesse H. Jones Graduate School, Rice University. Mr. Lucas’ experience at FASB and his educational background make him an effective member of Neenah’s Board. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT Philip C. Moore, born in 1953, is Senior Vice President, Deputy General Counsel and Corporate Secretary of TD Bank Group, Toronto, Canada. Mr. Moore joined TD Bank Group in May, 2013, prior to which he had been a partner at McCarthy T´etrault LLP, Canada’s national law firm where he practiced corporate and securities law, with particular emphasis on corporate governance and finance, mergers and acquisitions and other business law issues. He has been involved in many corporate mergers, acquisitions, dispositions and reorganizations, as well as capital markets transactions in a variety of industries and geographies. Mr. Moore has extensive experience in corporate transactions involving the pulp and paper industries. Mr. Moore has been awarded the designation ‘‘Chartered Director’’ from the Directors College, Canada’s leading director education program run by McMaster University and the Conference Board of Canada. He has advised on the design and implementation of numerous executive compensation plans, as well as on executive compensation governance matters. From 1994 until 2000 he was a director of Imax Corporation and is currently a director of a number of private corporations. Mr. Moore has served as a director of Neenah since November 30, 2004. Mr. Moore received his BA from McMaster University and his LLB from Queen’s University. Mr. Moore’s educational background and extensive experience in corporate governance and business law makes him an effective member of Neenah’s Board. John P. O’Donnell, born in 1960, is President and Chief Executive Officer of the Company. Prior to being CEO, Mr. O’Donnell served as Chief Operating Officer of the Company and President, Fine Paper. Mr. O’Donnell was employed by Georgia-Pacific Corporation from 1985 until 2007 and held increasingly senior management positions in the Consumer Products division. Mr. O’Donnell served as President of the North American Retail Business from 2004 through 2007, and as President of the North American Commercial Tissue business from 2002 through 2004. Mr. O’Donnell received his BS from Iowa State University. Mr. O’Donnell has served as a director of Neenah since November 2010. Mr. O’Donnell’s extensive experience in the paper and consumer products industries, and his leadership positions in the Company, make him an effective member of Neenah’s Board. P r o x y 11 Director Retiring effective as of the 2015 Annual Meeting Mary Ann Leeper, Ph.D., born in 1940, retired from The Female Health Company as Senior Strategic Advisor, effective December 31, 2013. She stepped down as its President and Chief Operating Officer in May 2006; a position she held since 1996. Dr. Leeper was President and Chief Operating Officer of The Female Health Company Division of the Wisconsin Pharmacal Company from 1994 to 1996, and held other senior positions from 1987 to 1994 in the Wisconsin Pharmacal Company (renamed The Female Health Company in 1996). Dr. Leeper served as a Director of The Female Health Company from 1987 to 2013. Dr. Leeper was an Adjunct Professor at the University of Virginia’s Darden Graduate School of Business MBA program from 2001 to 2012. She held senior positions at G D Searle, was Assistant Professor at Temple University Schools of Pharmacy and Medicine, as well as a biochemist for Wyeth Laboratories and McNeil Laboratories. Dr. Leeper’s educational background includes a B.S., Drexel University; M.S., Temple University, M.M., Northwestern University and Ph.D. from Temple University. Dr. Leeper has served as a director of Neenah since November 30, 2004. Dr. Leeper’s educational background and her experience as senior executive of a technical manufacturing company makes her an effective member of Neenah’s Board. 12 P r o x y MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors conducts its business through meetings of the full Board and through committees of the Board, consisting of an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, which we refer to as the Nominating Committee. The Board of Directors held 5 meetings in 2014. The Company’s Corporate Governance Policies provide that all directors are expected to regularly attend and participate in Board and Committee meetings and encourage the directors to attend the Company’s Annual Meeting. In 2014 all of our directors attended more than 75% of the meetings of the Board and meetings of the committees of which he or she is a member. Neenah holds regularly scheduled executive sessions of the independent directors at each Board meeting. As Chairman of the Board Mr. Erwin presides at all the executive sessions. All but one of the Company’s directors were in attendance at the 2014 Annual Meeting. 31OCT201109101132 The following table describes the current membership of each of the committees and the number of meetings held during 2014: Audit Committee Nominating and Corporate Governance Committee Compensation Committee Philip C. Moore . . . . . . . . . . . . . . . . . Timothy S. Lucas . . . . . . . . . . . . . . . . Mary Ann Leeper . . . . . . . . . . . . . . . . Edward Grzedzinski . . . . . . . . . . . . . . John F. McGovern . . . . . . . . . . . . . . . Stephen M. Wood . . . . . . . . . . . . . . . . NOTICE OF 2013 ANNUAL MEETING X AND Chair* Chair PROXY STATEMENT X X X 7 4 Number of Meetings . . . . . . . . . . . . . . Chair X X 5 * The Board has determined, based on his experience at the FASB, that Mr. Lucas is an audit committee financial expert within the meaning of the SEC’s rules. Effective as of the date of the 2015 Annual Meeting, and in conjunction with Dr. Leeper’s retirement and Ms. Dano’s appointment to the Board, committee membership will be modified as follows: Audit Committee Nominating and Corporate Governance Committee Compensation Committee Sean T. Erwin . . . . . . . . . . . . . . . . . . . Philip C. Moore . . . . . . . . . . . . . . . . . Timothy S. Lucas . . . . . . . . . . . . . . . . Edward Grzedzinski . . . . . . . . . . . . . . John F. McGovern . . . . . . . . . . . . . . . Stephen M. Wood . . . . . . . . . . . . . . . . Margaret S. Dano . . . . . . . . . . . . . . . . X X Chair* X X Chair X X X Chair * The Board has determined, based on his experience at the FASB, that Mr. Lucas is an audit committee financial expert within the meaning of the SEC’s rules. Audit Committee The Audit Committee is comprised solely of directors who meet the independence requirements of the New York Stock Exchange (‘‘NYSE’’) and the Securities Exchange Act of 1934, as amended (‘‘Exchange Act’’), and are financially literate, as required by NYSE rules. At least one member of the Audit Committee is an audit committee financial expert, as defined by the rules and regulations of 13 SEC. The Audit Committee has been established in accordance with applicable rules promulgated by the NYSE and SEC. The Audit Committee assists the Board in monitoring: (cid:127) the quality and integrity of our financial statements; (cid:127) our compliance with ethical policies contained in our Code of Business Conduct and Ethics and legal and regulatory requirements as well as the administration of our policy regarding related party transactions; (cid:127) the independence, qualification and performance of our registered public accounting firm; (cid:127) the performance of our internal auditors; and (cid:127) related party transactions. The Audit Committee is governed by the Audit Committee Charter approved by the Board. The charter is available on our website at www.neenah.com. Nominating and Corporate Governance Committee The Nominating Committee is comprised solely of directors who meet the NYSE independence requirements. The Nominating Committee: (cid:127) oversees the process by which individuals are nominated to our Board; (cid:127) reviews the qualifications, performance and independence of members of our Board; (cid:127) reviews and recommends policies with respect to composition, organization, processes and practices of our Board, including diversity; and (cid:127) identifies and investigates emerging corporate governance issues and trends that may affect us. The Nominating Committee is governed by the Nominating and Corporate Governance Committee Charter approved by the Board. The charter is available on our website at www.neenah.com. Compensation Committee The Compensation Committee is comprised solely of directors who meet NYSE independence requirements, meet the requirements for a ‘‘nonemployee director’’ under the Exchange Act, and meet the requirements for an ‘‘outside director’’ under Section 162(m) of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’). The Compensation Committee: (cid:127) reviews and approves corporate goals and objectives relevant to the compensation of our Chief Executive Officer and sets such compensation; (cid:127) approves, in consultation with our Chief Executive Officer, the compensation of our officers who are elected by our Board; (cid:127) makes recommendations to our Board with respect to our equity-based plans and executive incentive compensation plans; and (cid:127) reviews with management and approves awards under our long-term incentive-compensation plans and equity-based plans. The Compensation Committee is governed by the Compensation Committee Charter approved by the Board. The charter is available on our website at www.neenah.com. Additional information regarding the Compensation Committee’s processes and procedures for consideration of executive compensation is provided in the Compensation Discussion and Analysis below. 14 P r o x y CORPORATE GOVERNANCE Board Leadership The Board selects from among its members the Chairman of the Board. The Board also elects the Chief Executive Officer of the Company. The current Board Leadership is as Follows: 31OCT201109101132 Chairman of the Board: Chief Executive Officer: Sean T. Erwin John P. O’Donnell The Board believes that at this time it is appropriate for Sean T. Erwin to serve as independent Chairman while John P. O’Donnell serves as Chief Executive Officer and a member of the Board. Mr. O’Donnell’s position as both CEO and a Director provides a continuity of leadership between the senior executive team and the Board and enhances the corporate governance environment of the Board. Independent Directors Our Amended and Restated Bylaws provide that a majority of the directors on our Board shall be NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT independent and currently eight out of our nine directors are independent and as of the 2015 Annual Meeting seven out of the eight directors will be independent. In addition, the Corporate Governance Policies adopted by the Board, described further below, provide for independence standards consistent with NYSE listing standards. Generally, a director does not qualify as an independent director if the director (or in some cases, members of the director’s immediate family) has, or in the past three years has had, certain material relationships or affiliations with the Company, its external or internal auditors, or other companies that do business with the Company. Having eight out of nine independent directors (and seven out of eight independent directors as of the 2015 Annual Meeting) provides Neenah with a sufficient level of oversight, governance and independence without unduly limiting the senior executives from acting in the best interest of the Company and its shareholders. As of the date of the Annual Meeting in 2014, Mr. Erwin was three years removed from his retirement as Chief Executive Officer of the Company, at which time he became an independent director. As such, the Board did not appoint a Presiding Director for 2015. In evaluating the independence of our independent directors, the Board also considered whether any of the independent directors had any material relationships with Neenah and concluded that no such material relationship existed that would impair their independence. See ‘‘Approval of Related Party Transactions’’ below. In making this determination, the Board relied both on information provided by our directors as well as information developed internally by Neenah. As is currently the case, immediately after the election of the nominees to the Board of Directors, a majority of all directors holding office will be independent directors. The Nominating Committee and the Board have affirmatively determined that eight of the Company’s nine directors do not have any relationship that would interfere with the exercise of independent judgment in carrying out their responsibilities as directors and are independent in accordance with NYSE listing standards, Securities and Exchange Commission (‘‘SEC’’) rules and regulations and our Corporate Governance Policies. Neenah’s independent directors are Sean T. Erwin, Margaret S. Dano, Mary Ann Leeper, Stephen M. Wood, John F. McGovern, Edward Grzedzinski, Timothy S. Lucas and Philip C. Moore. Nomination of Directors The Board of Directors is responsible for approving candidates for Board membership. The Board has delegated the screening and recruitment process to the Nominating Committee, in consultation with the Chairman of the Board and Chief Executive Officer. More specifically, our Nominating Committee has adopted, and the Board has ratified, the ‘‘Neenah Paper, Inc. Policy Regarding Qualification and Nomination of Director Candidates.’’ 15 The Nominating Committee seeks to create a Board that is as a whole strong in its collective knowledge of, and diversity of skills and experience with respect to, accounting and finance, management and leadership, vision and strategy, business operations, business judgment, crisis management, risk assessment, industry knowledge, corporate governance, education, background and global markets. Qualified candidates for director are those who, in the judgment of the Nominating Committee, possess all of the following personal attributes and a sufficient mix of the following experience attributes to assure effective service on the Board. Personal attributes of a Board candidate considered by the Nominating Committee include: leadership, ethical nature, contributing nature, independence, interpersonal skills, and effectiveness. Experience attributes of a Board candidate considered by the Nominating Committee include: financial acumen, general business experience, industry knowledge, diversity of view-points, special business experience and expertise. When the Nominating Committee reviews a potential new candidate, the Nominating Committee looks specifically at the candidate’s qualifications in light of the needs of the Board and our company at that time, given the then current mix of director attributes. Although the Company does not have a specific Board diversity policy, the Nominating Committee looks at the diversity of experience, background and Board composition in recommending director candidates as required by the Nominating Committee’s charter. The Nominating Committee utilizes a variety of methods for identifying and evaluating nominees for director. The Nominating Committee periodically assesses the appropriate size of the Board and whether any vacancies on the Board are expected. In the event that vacancies are anticipated or otherwise arise, the Nominating Committee will seek to identify director candidates based on input provided by a number of sources, including: (i) Nominating Committee members; (ii) other directors of Neenah; (iii) management of Neenah; and (iv) stockholders of Neenah. The Nominating Committee also has the authority to consult with or retain advisors or search firms to assist in the identification of qualified director candidates. The Nominating Committee will consider nominees recommended by stockholders as candidates for election to the Board. A stockholder wishing to nominate a candidate for election to the Board at the Annual Meeting is required to give written notice to the Secretary of Neenah of his or her intention to make a nomination. Pursuant to our Amended and Restated Bylaws, the notice of nomination must be received by Neenah not less than 50 days nor more than 75 days prior to the Annual Meeting, or if Neenah gives less than 60 days’ notice of the meeting date, the notice of nomination must be received within 10 days after the Annual Meeting date is announced. To recommend a nominee, a stockholder should write to Steven S. Heinrichs, Senior Vice President, General Counsel and Secretary of Neenah, at 3460 Preston Ridge Road, Preston Ridge III, Suite 600, Alpharetta, Georgia 30005. Any such recommendation must include: (cid:127) the name and address of the stockholder and a representation that the stockholder is a holder of record of shares of our common stock; (cid:127) a brief biographical description for the nominee, including his or her name, age, business and residence addresses, occupation for at least the last five years, and a statement of the qualifications of the candidate, taking into account the qualification requirements set forth above; (cid:127) a description of all arrangements or understandings between the stockholder and each nominee; and (cid:127) the candidate’s consent to serve as a director if elected. Once director candidates have been identified, the Nominating Committee will then evaluate each candidate in light of his or her qualifications and credentials and any additional factors that the 16 P r o x y Nominating Committee deems necessary or appropriate, including those set forth above. Qualified prospective candidates will be interviewed by the Chairman of the Board, the Chief Executive Officer and at least one member of the Nominating Committee. The full Board will be kept informed of the candidate’s progress. Using input from such interviews and other information obtained by the Nominating Committee, the Nominating Committee will evaluate whether a prospective candidate is qualified to serve as a director and, if so qualified, will seek full Board approval of the nomination of the candidate or the election of such candidate to fill a vacancy on the Board. 31OCT201109101132 Existing directors who are being considered for re-nomination will be re-evaluated by the Nominating Committee based on each director’s satisfaction of the qualifications described above and his or her performance as a director during the preceding year. All candidates submitted by stockholders will be evaluated in the same manner as candidates recommended from other sources, provided that the procedures set forth above have been followed. Corporate Governance Policies All of the current nominees for director are current members of the Board. Based on the Nominating Committee’s evaluation of each nominee’s satisfaction of the qualifications described above, the Nominating Committee determined to recommend the three directors for re-election. The Nominating Committee has not received any nominations from stockholders for the Annual Meeting. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT We have adopted the Neenah Paper, Inc. Corporate Governance Policies that guide the Company and the Board on matters of corporate governance, including director responsibilities, Board committees and their charters, director independence, director qualifications, director evaluations, director orientation and education, director access to management, Board access to independent advisors, and management development and succession planning. Copies of the Corporate Governance Policies are available on our website at www.neenah.com. Code of Business Conduct and Ethics We have adopted the Neenah Paper, Inc. Code of Business Conduct and Ethics, which applies to all of our directors, officers and employees. The Code of Business Conduct and Ethics meets the requirements of a ‘‘code of ethics’’ as defined by SEC rules and regulations. The Code of Business Conduct and Ethics also meets the requirements of a code of conduct under NYSE listing standards. The Code of Business Conduct and Ethics is available on our website at www.neenah.com. Risk Oversight The Board participates in risk oversight through the Company’s Enterprise Risk Evaluation conducted by our Chief Financial Officer and General Counsel, in conjunction with the Company’s senior management team. Annual findings are reported to the Audit Committee pursuant to the requirements of its charter and the full Board reviews an annual report of the findings as required by our Corporate Governance Policies. Communications with the Board of Directors We have established a process for interested parties to communicate with members of the Board, including non-management members of the Board. If you have any concern, question or complaint regarding any accounting, auditing or internal controls matter, or any issue with regard to our Code of Business Conduct and Ethics or other matters that you wish to communicate to our Board or non-management directors, send these matters in writing to c/o General Counsel, Neenah Paper, Inc., Preston Ridge III, 3460 Preston Ridge Road, Suite 600, Alpharetta, Georgia 30005. Information about our Board communications policy and procedures for processing Board communications for all 17 interested parties can be found on our website at www.neenah.com under the link ‘‘Investor Relations— Corporate Governance—Board of Directors—Board Communications Policy.’’ Approval of Related Party Transactions The charter of the Audit Committee requires that the Audit Committee review and approve any transactions that would require disclosure under SEC rules and regulations. To help identify related party transactions and relationships, each director and named executive officer, as such term is used is ‘‘Additional Executive Compensation Information—Summary Compensation Table,’’ completes a questionnaire on an annual basis that requires the disclosure of any transaction or relationships that the person, or any member of his or her immediate family, has or will have with the Company. Additionally, the Company’s Code of Business Conduct and Ethics prohibits related party transactions and requires that any employee with knowledge of such a transaction provide written notice of the relationship or transaction to the Company’s General Counsel. Neither Neenah nor the Board is aware of any matter in 2014 that required the review and approval of the Audit Committee in accordance with the terms of the charter. Shareholder Rights Plan The Company’s stockholder Rights Agreement expired on November 30, 2014. The Company has decided at this time to not put a new plan in place. We will evaluate the need for such a plan in the future as such need may arise. 18 P r o x y 2014 DIRECTOR COMPENSATION The Compensation Committee has responsibility for evaluating and making recommendations to the Board of Directors regarding compensation for our nonemployee directors. Each of our directors who are not employees receives the following compensation: 31OCT201109101132 Item Amount Annual cash retainer . . . . . . . . . . . . . . . . . . $36,000 Board and committee meeting fee . . . . . . . . . $1,500 per meeting Additional cash retainers for Committee and Board Chairs: (cid:127) Board Chairman . . . . . . . . . . . . . . . . (cid:127) Audit Committee Chairman . . . . . . . . (cid:127) Compensation Committee Chairman . . (cid:127) Nominating Committee Chairman . . . . $25,000 $10,000 $10,000 $5,000 Annual value of equity grant . . . . . . . . . . . . . NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT In 2014 the directors received either 100% RSUs, which grant was a total of 1,610 shares, or 50% $50,000 (choice of 100% restricted stock units or 50% restricted stock units / 50% non-qualified stock options) RSUs and 50% options, which grant was 675 shares and 1930 Options. The number of stock options and RSUs granted to nonemployee directors is calculated annually using a modified Black Scholes formula used to provide a total equity value equal to the annual retainer fee in the same manner as used to calculate grants for Company employees under the Long-Term Compensation Plan (‘‘LTCP’’). Stock Options, when granted, become fully vested and exercisable on the first anniversary of the date of grant. The RSUs become fully vested and convert to shares of our common stock on the first anniversary of the date of grant. Employee directors receive no additional compensation and no perquisites for serving on our Board. Neenah also established the Neenah Paper Directors’ Deferred Compensation Plan (the ‘‘Directors’ Plan’’), which enables each of our nonemployee directors to defer a portion of their cash compensation and RSU awards. In 2014 Mr. McGovern participated in the Director’s Plan. Each of our nonemployee directors are required to own Company stock equal to two times their annual cash retainer. The valuation of restricted stock and options owned by our directors is calculated pursuant to the same guidelines detailed in this Proxy Statement for our named executive officers. All of our nonemployee directors met or exceeded the guidelines as of December 31, 2014. 19 The following table shows the total compensation paid to each of our nonemployee directors in 2014. Name Fees Earned or Paid in Cash ($) Sean T. Erwin . . . . . . . . . . . . . . . . . . . . . . . . . . Edward Grzedzinski . . . . . . . . . . . . . . . . . . . . . Mary Ann Leeper . . . . . . . . . . . . . . . . . . . . . . . Timothy S. Lucas . . . . . . . . . . . . . . . . . . . . . . . John F. McGovern . . . . . . . . . . . . . . . . . . . . . . Philip C. Moore . . . . . . . . . . . . . . . . . . . . . . . . Stephen M. Wood . . . . . . . . . . . . . . . . . . . . . . . 68,500 48,000 54,500 64,000 55,500 67,000 60,000 Stock Awards Option Awards ($)(1) 35,528 65,056 65,056 65,056 65,056 35,528 65,056 ($)(2) Total ($) 27,888 — — — — 27,888 — 131,916 113,056 119,556 129,056 120,556 130,416 125,056 (1) Amounts reported in this column represent the grant date fair value of the 2014 RSU award granted to each director, calculated in accordance with Financial Accounting Standards Board Statement ASC Topic 718 (‘‘ASC 718’’), excluding any estimate of forfeitures related to service- based conditions. Due to restrictions imposed by Canadian law, Mr. Moore is not able to receive a quarterly cash dividend on his RSUs. In lieu of receiving such dividends, Mr. Moore is granted additional RSUs on the date of each dividend payment and in value to the cash dividend that he would have received. Mr. Moore received 24 of these RSUs in 2014. (2) Amounts reported in this column represent the grant date fair value with respect to stock options granted to each director, calculated in accordance with ASC 718, excluding any estimate of forfeitures related to service-based vesting conditions. The value reported in this column was determined using a Black-Scholes stock option valuation model. See Note 8 to our audited Financial Statements included in our 2014 Annual Report on Form 10-K for the assumptions used in valuing and expensing these stock options. 20 P r o x y EXECUTIVE COMPENSATION Compensation Discussion and Analysis The following section presents an analysis, summary and overview of our compensation policies and programs, including material decisions made under those policies and programs in setting the compensation levels for 2014 for our ‘‘named executive officers’’ listed below. Following this section under the heading ‘‘Additional Executive Compensation Information’’ we have included certain tables where you will find detailed compensation information for the named executive officers. This section is intended to provide additional details regarding Neenah’s compensation practices, as well as the information and process used to create and implement our compensation program for our named executive officers and our other executive officers. 31OCT201109101132 Named Executive Officers (cid:127) John P. O’Donnell, President and Chief Executive Officer (cid:127) Bonnie C. Lind, Senior Vice President, Chief Financial Officer and Treasurer (cid:127) Steven S. Heinrichs, Senior Vice President, General Counsel and Secretary NOTICE OF 2013 ANNUAL MEETING AND (cid:127) Julie A. Schertell, Senior Vice President-Fine Paper & Packaging and Technical Products U.S. PROXY STATEMENT (cid:127) Armin Schwinn, Senior Vice President and Managing Director of Neenah Germany Compensation Objectives and Philosophy Neenah’s compensation policies are designed to accomplish the following key objectives: (cid:127) Reward executives for long-term achievement of our strategic objectives and enhancement of stockholder value; (cid:127) Support a performance-oriented work environment that rewards achievement of identified internal goals and recognizes the Company’s performance against that of the market and selected peer companies; and (cid:127) Attract and retain leaders whose abilities are essential to Neenah’s long-term success and competitiveness. We believe that executive compensation, both long-term and short-term, should be directly linked with performance. Our measures of performance are keyed off of individual responsibilities, Neenah’s operational and financial goals and the creation of shareholder value. Decisions made concerning the total compensation package for our executives take into consideration the individual executive’s level of responsibility within Neenah, the performance of Neenah relative to internal targets and peer companies, and the creation of long term shareholder value. We strive to achieve a balanced and competitive compensation package through a mix of base salary, performance-based cash bonuses, long-term equity based incentives and awards, deferred compensation plans, pension plans and welfare benefits. Our Compensation-Setting Process Role of Compensation Committee The Compensation Committee is responsible for carrying out the Board’s responsibilities for determining the compensation for our named executive officers. In that capacity, the Compensation Committee (1) annually reviews and approves the corporate goals and objectives relating to our 21 executive compensation programs; (2) evaluates performance against those goals and objectives; and (3) approves the compensation payable to our named executive officers. The Role of Shareholder Say-on-Pay Votes The Company provides its shareholders with the opportunity to cast an annual advisory vote on executive compensation (a ‘‘say-on-pay proposal’’). At the Company’s annual meeting of shareholders held on May 22, 2014, approximately 98% of the votes cast on the say-on-pay proposal at that meeting were voted in favor of the proposal. The Compensation Committee considered these results and believes the voting results reflect strong shareholder support for the Company’s approach to executive compensation. The Compensation Committee will continue to consider the outcome of the Company’s say-on-pay votes in order to understand the environment of future compensation decisions for the named executive officers. Use of Compensation Consultants The Compensation Committee charter grants the Compensation Committee authority to independently retain compensation consultants, and in 2014 the Compensation Committee again engaged Hugessen Consulting Inc. (‘‘Hugessen’’) to provide it with independent advice and assistance in its deliberations regarding compensation matters. At the Committee’s request, Hugessen originated certain analyses, reviewed the information provided by management and assisted the Compensation Committee in assessing 2014 compensation for Neenah’s named executive officers. In addition, Hugessen provided input to assist the Compensation Committee in establishing the 2014 targeted compensation levels and performance criteria under the Company’s incentive plans. The Compensation Committee must pre-approve any additional work of a material nature assigned to its consultants and will not approve any such work that, in its view, could compromise Hugessen’s independence as advisor to the Committee. Hugessen does not provide any other services to Neenah. Decisions made by the Compensation Committee are the responsibility of the Committee and reflect factors and considerations in addition to the information and recommendations provided by Hugessen. In 2014 Neenah retained Meridian Compensation Partners, LLC (‘‘Meridian’’) to advise management and the Compensation Committee on developments relating to executive compensation generally, provide support to management and the Compensation Committee in their ongoing assessment of the effectiveness of Neenah’s compensation policies and programs and review materials prepared by management related to benchmarking and plan designs. In 2014, the Compensation Committee, in accordance with SEC rules, considered the independence factors having to do with consultant conflicts of interest and determined that the work of the compensation consultants did not raise any conflicts of interest. Role of Executive Officers At the request of the Compensation Committee, our President and Chief Executive Officer, along with our Vice President-Human Resources, make recommendations to our Compensation Committee regarding base salary and target levels for our annual performance bonuses and long-term equity compensation for our executive officers. Mr. O’Donnell is not involved in setting or approving his own compensation levels. These recommendations are based on the philosophy and analysis described in this Compensation Discussion and Analysis section of this Proxy Statement. 22 Peer Comparison To assist in evaluating and determining levels of compensation in 2014 for each element of pay, the Compensation Committee reviewed various sources of data prepared by management and reviewed by Meridian including: 31OCT201109101132 (cid:127) Proxy data collected and analyzed from a peer group of 13 companies in the paper, packaging, P r o x y and base materials and specialty chemical industries similar in size to Neenah (the ‘‘Peer Group’’). In 2014 the Peer Group consisted of the following companies: — AEP Industries Inc. —Omnova Solutions, Inc —Clearwater Paper Corporation —Quaker Chemical Corp —Headwaters, Inc. —Innospec, Inc. —RTI International Metals Inc. —Schweitzer-Mauduit International, Inc. —Kapstone Paper & Packaging Corp —Wausau Paper Corporation —Myers Industries Inc. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT (cid:127) Data collected from Equilar’s database using a broad industry cut of manufacturing companies —P.H. Glatfelter Company —Zep, Inc. with revenues between $500 million and $1.5 billion. To develop market figures, compensation opportunities for the named executive officers were compared to the compensation opportunities for similarly situated executives in comparable positions. Hugessen reviewed the results of these analyses and provided feedback to the Compensation Committee in connection with their review of competitive pay practices. Neenah’s management and the Compensation Committee do not believe that it is appropriate to establish compensation levels based solely on peer comparisons or benchmarking; however, marketplace information is one of the many factors that we consider in assessing the reasonableness of compensation. Management and the Compensation Committee believe that information regarding pay practices at other companies is useful to confirm that our compensation practices are competitive in the marketplace. Targeted Compensation Levels The Compensation Committee establishes targeted total compensation levels based upon performance objectives for our executive officers eligible to receive an annual cash bonus opportunity under the Management Incentive Plan (‘‘MIP’’) and the equity awards under the Long-Term Compensation Plan (‘‘LTCP’’) as authorized by the Omnibus Plan. In making these determinations, our Compensation Committee is guided by the compensation philosophy described below. Our Compensation Committee also considers historical compensation levels, pay practices at companies in the Peer Group and the relative compensation among Neenah’s senior executive officers. The Compensation Committee also considers industry conditions, corporate performance versus peer companies and the overall effectiveness of Neenah’s compensation program in achieving desired performance levels. As targeted total compensation levels are determined, our Compensation Committee also determines the portion of total compensation that will be contingent, performance-based pay. Performance-based pay includes cash awards under our MIP program and equity awards under our LTCP, which may be earned based on the Company’s achievement of performance goals and whose value depends upon long-term appreciation in stock price. 23 Neenah’s compensation philosophy is intended to provide competitive pay within the relevant market by targeting the total compensation opportunities and to reward the executives for short term and long term performance through an overall compensation mix that is targeted to include a minimum of 50% performance based compensation for named executive officers. Our Chief Executive Officer’s compensation in 2014 was approximately 70% performance based at target levels. Compensation Components Our executive compensation includes the base components described below, each of which is designed to accomplish specific goals of our compensation philosophy described above. In connection with our discussion of each of such base components, the following questions will be addressed: (cid:127) Why Neenah chooses to pay each of the base components; (cid:127) How Neenah determines the amount of the various base components; (cid:127) How each component fits into Neenah’s overall compensation scheme and supports Neenah’s compensation philosophy. Base Salary Base salary is a critical element of executive compensation because it provides our executives with a base level of monthly income and also sets the base level for performance compensation. Individual base salaries for our named executive officers are generally determined by comparing total compensation opportunities within the Peer Group as discussed above. Salary increases, if any, are reviewed and approved by the Compensation Committee on an annual basis. Factors considered in base salary increases include the Company’s performance over the past year, changes in individual executive responsibility and the position of base salary together with all other compensation as indicated by our analysis of the Peer Group. This approach to base salary supports our compensation philosophy. The Compensation Committee has determined that setting NEO base salaries at this level allows Neenah to be competitive in attracting and retaining talent, while at the same time a substantial portion of the executive’s overall compensation is performance based, thus aligning the executive’s and stockholders’ interests. 2014 and 2015 Base Salary Decisions After discussing the individual performance, experience, scope of responsibilities, and Mr. O’Donnell’s recommendations for the other NEOs, the Compensation Committee established the base salaries for each NEO in January of 2014 and again in January of 2015. In general, any increases in base pay are intended to be competitive with the market and take into consideration the individual performance and scope of responsibilities of each NEO. The following table provides the base salary received by each named executive officer for 2014 and 2015. 2013 Base Salary 2014 Base Salary % Increase 2015 Base Salary % Increase O’Donnell . . . . . . . . . . . . . . . . Lind . . . . . . . . . . . . . . . . . . . Heinrichs . . . . . . . . . . . . . . . . Schertell . . . . . . . . . . . . . . . . . Schwinn . . . . . . . . . . . . . . . . . $600,000 $330,000 $290,000 $300,000 A235,000 $625,000 $346,000 $310,000 $336,000 A235,000 4% 5% 7% 12% 0% $625,000 $346,000 $310,000 $336,000 A250,000 0% 0% 0% 0% 6% 24 Annual Performance Bonuses Annual cash incentive bonus opportunities are awarded under the MIP, and are based on our achievement of performance goals established in the beginning of each calendar year. MIP target bonuses are established as a percentage of base salary with a target bonus ranging from 40% to 80% for named executive officers. The Compensation Committee annually approves the target bonus range based on data provided from the market surveys as previously described and based on the experience and knowledge of the executive and the quality and effectiveness of their leadership within Neenah as determined by the Compensation Committee. The amount of the actual MIP bonus may be adjusted up or down from the target bonus based on Neenah’s year-end results (as measured by the objective and subjective criteria set forth in the MIP plan for the applicable year, as previously approved by the Compensation Committee). Actual MIP payments can range from 0-200% of the target bonus for our chief executive, legal, and financial officers, and 0-250% for the business unit leaders, depending on whether the results fall short of, achieve or exceed the identified performance goals. 31OCT201109101132 Under the MIP, the Compensation Committee generally sets a range of possible payments from zero to a maximum percentage of the target award based on its belief that no bonus should be earned if performance is below established thresholds and its determination that the top end of the range should provide an appropriate incentive for management to achieve exceptional performance. Under the MIP, specific performance measures and thresholds are determined by the Compensation Committee in consultation with Mr. O’Donnell, based on key metrics that support the achievement of Neenah’s short-term and long-term strategic objectives. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT Annual performance bonuses support our compensation philosophy in that they: (i) reward Neenah’s executives for meeting and exceeding goals that contribute to Neenah’s short-term and long-term strategic plan and growth; (ii) promote a performance-based work environment; and (iii) serve as a material financial incentive to attract and retain executive talent. 2014 Annual Performance Bonus Awards For 2014, the Compensation Committee approved target bonuses for our named executive officers as a percentage of base salary with a target bonus ranging from 40% to 80% as follows: P r o x y 2014 TARGET MIP (% of Base Salary) O’Donnell . . . . . . . . . . . . . . . Lind . . . . . . . . . . . . . . . . . . . Heinrichs . . . . . . . . . . . . . . . Schertell . . . . . . . . . . . . . . . . Schwinn . . . . . . . . . . . . . . . . 80% 55% 50% 50% 40% The performance goals for the 2014 MIP program were set based on the following performance criteria and the relative weighting set forth below: (i) adjusted corporate earnings before interest, income taxes, depreciation and amortization (‘‘Corporate EBITDA’’), which is calculated as net income plus income tax expenses, plus depreciation expense and amortization expense for intangibles, plus amortization expense for stock options and restricted stock units adjusted for any one time events outside of the ordinary course of business and (ii) business unit earnings before interest and taxes 25 (‘‘EBIT’’) for our Fine Paper and Technical Products business units, and (iii) Progress achieved in implementing the Company’s strategic plan: Corporate EBITDA Business Unit EBIT Strategic Initiatives O’Donnell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Heinrichs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schertell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schwinn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75% 75% 75% 25% 25% — — — 50% 50% 25% 25% 25% 25% 25% Each goal was set at levels that both the Compensation Committee and management believed to be challenging but attainable, and achievements would reflect significant performance by the Company. On a stand-alone basis, MIP EBITDA could have yielded a payout from 0% at threshold, 100% at target and 200% at outstanding, and business unit EBIT could have yielded a payout from 0% at threshold, 100% at target and 300% at maximum, based on year-end results. This increase is consistent with our desire to incentivize and reward significant growth in profits. The strategic plan objective was paid out at 200% of target reflecting performance in achieving a set of strategic objectives considered critical for long-term growth. The results included organic growth of strategic categories, the successful acquisition and integration of Crane Technical Materials, Inc. in July of 2014, the development of a targeted asset repurpose strategy, and other strategic corporate initiatives. The performance goals and results for each of the financial metrics in 2014 were as follows: Metric ($MM) Threshold Target Outstanding Maximum 2014 Results Payout % MIP EBITDA . . . . . . . . . . . . . . . . . . Fine Paper & Packaging EBIT . . . . . . Tech Products EBIT . . . . . . . . . . . . . 100.3 49.0 29.0 123.7 62.0 36.2 134.6 66.0 41.5 N/A 69.0 46.8 129.6 61.2 37.9 154% 93% 133% Based on the process described above, MIP payments were awarded as follows: 2014 MIP at Target 2014 MIP at Actual % of Target Earned O’Donnell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Heinrichs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schertell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schwinn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500,000 $189,750 $155,000 $168,000 A 94,000 $827,500 $314,036 $256,525 $233,251 A149,460 166% 166% 166% 139% 159% Long-Term Equity Compensation Long-term equity incentives under the LTCP consist of performance share units, stock options and stock appreciation rights granted on an annual basis, with stock option awards and/or stock appreciation rights representing approximately 30% of the total value of the equity incentive awards and performance shares representing approximately 70% of the total value of the equity award granted to an executive officer for that year. This reflects the Company’s desire to emphasize the performance based incentives in the LTCP. The total target LTCP grants are set at the beginning of the year for each named executive officer at a minimum of 40% of the executive’s base salary. The Company typically grants 100% of the option and/or stock appreciation rights in conjunction with the first Board meeting of each fiscal year. Each year the Compensation Committee reviews and approves a target number of performance share units for each of our named executive officers and each other participant in the LTCP plan. The number of units actually earned by each participant is determined by the Company’s corporate performance. The range of possible awards is set by the Compensation 26 Committee based on its: (i) belief that a minimal award shall be granted if the performance measures are significantly below target levels; and (ii) determination that the top end of the range provided an appropriate incentive for management to achieve exceptional performance. The combination of stock options and performance share units focuses our executives on Neenah’s financial performance and increasing shareholder value. It is aligned with and supports our stock ownership policy. Long-term incentives also help retain employees during the performance periods. 31OCT201109101132 P r o x y 2014 LTCP Awards For 2014, the Compensation Committee approved equity grants under the LTCP for our named executive officers with target values ranging from 40% to 150% of base salary pay as follows: 2014 LTCP (% of base Salary) O’Donnell . . . . . . . . . . . . . . . . Lind . . . . . . . . . . . . . . . . . . . . Heinrichs . . . . . . . . . . . . . . . . NOTICE OF 2013 ANNUAL MEETING Schertell . . . . . . . . . . . . . . . . . Schwinn . . . . . . . . . . . . . . . . . AND For each of our named executive officers, the value was divided into awards of non-qualified stock PROXY STATEMENT 150% 75% 65% 65% 40% options and a target number of performance share units, with 70% of the value in performance share units and 30% of the value in options. The range of possible awards under the LTCP was selected to tie a substantial percentage of their compensation to Neenah’s performance. The number of stock options to be awarded to each named executive officer in 2014 was determined by dividing the value of the portion of the LTCP award to be awarded as stock options (determined by the Compensation Committee as described above) by the fair value of one stock option (determined using a modified Black- Scholes formulas as modeled by Meridian), and then rounded to the nearest tens to produce the number of shares subject to the applicable option award. Each grant of options made in 2014 vests in increments of 33.34%, 33.33% and 33.33% over a three year period, with vesting occurring on each anniversary of the applicable grant and a ten year term to exercise. The process described above resulted in grants of options in 2014 to purchase the following options: 2014 Options(*) O’Donnell . . . . . . . . . . . . . . . . . Lind . . . . . . . . . . . . . . . . . . . . . Heinrichs . . . . . . . . . . . . . . . . . Schertell . . . . . . . . . . . . . . . . . . Schwinn . . . . . . . . . . . . . . . . . . 18,770 5,180 4,030 4,370 2,570 * The Company converted all outstanding stock options to stock appreciation rights on July 1, 2014. Beginning with the 2015 LTCP award the Company intends to issue stock appreciation rights instead of stock options as part of the award described in this section. 27 The target number of performance share units to be awarded to each named executive officer in 2014 was determined by dividing the value of the portion of the LTCP award to be awarded as performance share units (determined by the Compensation Committee as described above) using fair market value of the stock price as of the date of grant, and then rounded to the nearest ten shares. The target number of 2014 performance share units are increased or decreased (to an amount equal to between 40% to 200% of the target number) prior to being converted to actual shares after a two year holding period. After the end of the performance period, the adjustment of the target number of shares will be calculated based on the Company’s achievement of performance goals relative to the following equally weighted criteria: year over year growth in sales (constant currency), year over year growth in return on invested capital, free cash flow as a percentage of Net Sales and relative total shareholder return (‘‘Relative TSR’’). The Relative TSR (including dividend yield), is compared against the Russell 2000 Value Index. The payout levels for the performance share unit metrics include a 0% payout below threshold, 100% payout at target, and 200% payout at outstanding. The specific targets and results in 2014 were as follows: Metric Threshold Payout (as a % of Target) . . . . . . . . . . . 0% Return on Capital . . . . . . . . . . . . . . . . No increase Target 100% Increase of 40 basis points Growth in Sales . . . . . . . . . . . . . . . . . 0% growth 3% growth Outstanding 2014 Results Payout % 200% Increase of greater than 80 basis points More than 6% growth Increase of 54 basis points 135% 6.9% 200% Free Cash Flow as % of Sales . . . . . . . . 4% 5% 6% 6.9% Relative Total Shareholder Return . . . . . 3rd Quartile Median Top Quartile Top Quartile Aggregate Payout Percentage . . . . . . . . . 200% 200% 184% Based on the process described above and our performance against the targets noted, performance share unit (‘‘PSU’’) grants were awarded as follows: 2014 PSUs at Target 2014 PSUs % of Target Granted Earned O’Donnell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Heinrichs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schertell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schwinn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,330 4,230 3,290 4,370 2,100 28,207 7,783 6,053 8,040 3,864 184% 184% 184% 184% 184% The earned shares are now in a two year hold period and are still subject to forfeiture based on continued employment. All shares are scheduled to be released to active participants on December 31, 2016. Retirement Benefits We maintain the Neenah Paper Retirement Contribution Plan (the ‘‘Retirement Contribution Plan’’), which is a tax-qualified defined contribution plan for employees, including Mr. O’Donnell, Mr. Heinrichs, and Ms. Schertell, who are ineligible to participate in the Pension Plan, the Supplemental Pension Plan and the German Pension Plans. Further, we maintain a supplemental retirement contribution plan (the ‘‘Supplemental RCP’’) which is a non-qualified defined contribution plan which is intended to provide a tax-deferred retirement savings alternative for amounts exceeding Internal Revenue Code limitations on qualified plans. Additional information regarding the Supplemental RCP can be found in the 2014 Nonqualified Deferred Compensation table later in this 28 P r o x y Proxy Statement. We also maintain the Neenah Paper 401(k) Plan (the ‘‘401(k) Plan’’), which is a tax-qualified defined contribution plan available to all of Neenah’s U.S. employees, and the Neenah Paper Deferred Compensation Plan (the ‘‘Deferred Compensation Plan’’), which is a non-qualified deferred compensation plan for our executive officers. The Deferred Compensation Plan enables our executive officers to defer a portion of annual cash compensation (base salary and non-equity awards under our MIP). This plan is intended to assist our executive officers in maximizing the value of the compensation they receive from the Company and assist in their retention. Additional information regarding the Deferred Compensation Plan can be found in the 2014 Nonqualified Deferred Compensation table later in this Proxy Statement. 31OCT201109101132 We also maintain the Neenah Paper Pension Plan, a tax-qualified defined benefit plan (the ‘‘Pension Plan’’) and the Neenah Paper Supplemental Pension Plan, a non-qualified defined benefit plan (the ‘‘Supplemental Pension Plan’’) which provide tax-deferred retirement benefits for certain of our employees, including Ms. Lind, who was employed by Kimberly-Clark (our predecessor company prior to being spun-off) prior to December 31, 1996. Mr. O’Donnell, Mr. Heinrichs, Ms. Schertell, and Mr. Schwinn do not participate in these plans. Mr. Schwinn participates in an individual pension agreement with the Company which provides pension benefits based on earnings and service, an additional pension plan which provides benefits based on the Company’s and the employee’s contribution, and a supplemental executive retirement pension agreement, which provides benefits in addition to the two base plans if certain amounts are exceeded (collectively, the ‘‘German Pension Plans’’). Additional information regarding the Pension Plan, the Supplemental Pension Plan and the German Pension Plans can be found in the 2014 Pension Benefits table later in this Proxy Statement. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT Neenah and the Compensation Committee believe that the Pension Plan, Supplemental Pension Plan, German Pension Plans, Retirement Contribution Plan, Supplemental RCP, Deferred Compensation Plan and 401(k) Plan are core components of our compensation program. The plans are competitive with plans maintained by our peer companies and are necessary to attract and retain top level executive talent. Additionally, the plans support the long-term retention of key executives by providing a strong incentive for the executive to remain with Neenah over an extended number of years. Severance Payments The Neenah Paper Executive Severance Plan (the ‘‘Executive Severance Plan’’) covers designated officers, including all of our named executive officers (except for Mr. Schwinn who is covered by an individual employment agreement, the terms of which are described in detail below), and provides certain severance benefits upon termination of employment following a change in control of Neenah. Upon termination of the officer’s employment by Neenah without ‘‘cause’’ or by the officer for ‘‘good reason’’ (as defined in the Executive Severance Plan) within the two-year period following a change in control or a termination by us without ‘‘cause’’ during the one-year period preceding such a change in control, the officer will be entitled to a lump-sum cash payment equal to the sum of: (i) two times the sum of his annual base salary and targeted annual bonus; (ii) any qualified retirement plan benefits forfeited as a result of such termination; (iii) the amount of retirement benefits such officer would have received under the qualified and supplemental retirement plans but for his or her termination for the two-year period following his or her termination; (iv) the cost of medical and dental COBRA premiums for a period of two years; and (v) a cash settlement of any accrued retiree welfare benefits. In addition, the officer will be eligible to receive outplacement services for a period of two years (up to a maximum cost to us of $50,000). Payment of the benefits under the Executive Severance Plan is subject to the applicable executive executing an agreement that includes restrictive covenants and a general release of claims against us. These benefits are intended to recruit and retain key executives and provide continuity in Neenah’s management in the event of a change in control. We believe the Executive Severance Plan is consistent 29 with similar plans maintained by our peer companies and therefore is a core component of our compensation program necessary to attract and retain key executives. In 2011 the Compensation Committee closed the excise gross up provision of the Executive Severance Plan to new participants and determined that it would phase out the excise tax gross up provision in the Executive Severance Plan over time for the current named executive officers. Mr. Schwinn does not participate in the Executive Severance Plan. He is covered by a separate employment agreement which provides a twelve month notice period from the end of the calendar year. Mr. Schwinn’s equity grants contain change in control provisions that provide for vesting and payments for his 2013 and 2014 LTCP performance shares. The value at the end of 2014 was $442,338. The equity awards contain provisions that are similar to the U.S. provisions in the case of illness, accident or death. In addition, Mr. Schwinn’s employment contract provides for salary continuation to him or his surviving family members for a period of three months in the case of illness, accident or death. Timing of Compensation Base salary adjustments, if any, are made by our Compensation Committee at the first meeting of each fiscal year (with the adjustments effective as of January 1 of that same year). Stock option grants and performance share unit target levels and awards are made in the manner described above. We do not coordinate the timing of equity awards with the release of non-public information. The exercise price of the stock options is established at the fair market value of the closing price of our stock on the date of the grant. Tax and Accounting Consideration In general, the tax and accounting treatment of compensation for our named executive officers has not been a core component used in setting compensation. In limited circumstances we do consider such treatment and attempt to balance the cost to Neenah against the overall goals we intend to achieve through our compensation philosophy. In particular, our intent is to maximize deductibility of our named executive officers’ compensation under Code Section 162(m) while maintaining the flexibility necessary to appropriately compensate our executives based on performance and the existing competitive environment. The MIP and LTCP programs are performance based and are designed to be fully deductible under Code Section 162(m). Stock Ownership Guidelines The Compensation Committee has adopted stock ownership guidelines to foster long-term stock holdings by company leadership. These guidelines create a strong link between stockholders’ and management’s interests. Named executive officers are required to own a designated multiple of their respective annual salaries. The multiple was increased in 2014 to four times base salary for all NEOs except for Mr. O’Donnell, whose multiple remained at six times base salary. Stock Ownership Multiple of Salary O’Donnell . . . . . . . . . . . . . . . . Lind . . . . . . . . . . . . . . . . . . . . Heinrichs . . . . . . . . . . . . . . . . Schertell . . . . . . . . . . . . . . . . . Schwinn . . . . . . . . . . . . . . . . . 6x 4x 4x 4x 4x Each of the named executive officers is required to hold at least 50% of their annual performance share grants until they reach the ownership guidelines. The following holdings are counted toward fulfilling guidelines, with each being valued using our stock price as of December 31 of each year; 30 (i) stock held in the 401(k) plan, other deferral plans, outright or in brokerage accounts; (ii) performance share units or restricted stock units earned but not vested or not paid out; and (iii) ‘in the money’ value of vested or unvested stock options. Penalties for continued failure to meet the guidelines include payment of MIP compensation in Neenah stock and reduction of LTCP compensation. All of our named executive officers met or exceeded the guidelines as of December 31, 31OCT201109101132 2014, except for Mr. Schwinn. As a result, Mr. Schwinn will be subject to the restrictions set forth above until the requirement is met. Clawback Policy The Compensation Committee adopted a ‘‘clawback policy’’ for all executives and other employees participating in our MIP program concerning the future payment of MIP payments and long term equity grants under the LTCP program. This new policy gives the Board the authority to reclaim certain overstated payments made to Neenah employees due to materially inaccurate results presented in the Company’s audited financial statements. Hedging Policy Our insider trading policy provides that directors, officers and employees are prohibited from engaging in short sales and buying or selling puts or calls or other derivative securities of Neenah. Directors and officers are also prohibited from holding Neenah securities in a margin account or pledging Neenah securities as collateral for a loan. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT COMPENSATION COMMITTEE REPORT The Compensation Committee oversees Neenah’s compensation policies and programs on behalf of the Board. In fulfilling this responsibility, the Compensation Committee has reviewed and discussed with Neenah’s management the Compensation Discussion and Analysis included in this Proxy Statement. In reliance on such review and discussions, the Compensation Committee recommended to Neenah’s Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. P r o x y Compensation Committee: Philip C. Moore, Chairman John F. McGovern Stephen M. Wood 31 ADVISORY VOTE ON EXECUTIVE COMPENSATION (ITEM 2) Section 14A of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’) requires that we include in this proxy statement a non-binding stockholder vote on our executive compensation as described in this proxy statement (commonly referred to as ‘‘Say-on-Pay’’). We encourage stockholders to review the Compensation Discussion and Analysis (‘‘CD&A’’) section of this proxy statement. Our executive compensation program has been designed to pay for performance and align our compensation programs with business strategies focused on long-term growth and creating value for stockholders while also paying competitively and focusing on total compensation. The Company’s executive compensation programs are designed to attract, motivate and retain highly qualified executive officers who are able to achieve corporate objectives and create stockholder value. The Compensation Committee believes the Company’s executive compensation programs reflect a strong pay-for-performance philosophy and are well aligned with the stockholders’ long-term interests without promoting excessive risk. We feel this design is evidenced by the following: (cid:127) A majority of our executives’ compensation is directly linked to our performance and the creation of stockholder value. The overall compensation mix is targeted to include at least 50% performance based compensation for the named executive officers with a higher percentage of our CEO’s compensation being performance based. In 2014 70% of our CEO’s compensation was performance based at target levels. (cid:127) Our long-term incentive awards are exclusively in the form of performance share units, stock options and stock appreciation rights and all of our incentive plans have capped payouts. (cid:127) LTCP grants are split with 70% of the total value of the awards granted as performance share units with a three-year vesting period, and 30% as stock options or stock appreciation rights with annual vesting over a three-year period. This reflects the Company’s desire to emphasize performance based incentives. For our performance share units, we use objective performance metrics closely tied to financial performance and shareholder value, such as increasing return on invested capital, revenue growth, cash flow generation and relative total shareholder return. In 2014 LTCP grants were awarded at 184% of target based on achieved growth in corporate sales, free cash flow as a percent of sales, improvement in return on invested capital, and total shareholder return. (cid:127) Our short-term incentive plan (MIP) also is based on a pay-for-performance philosophy, with target bonus opportunities ranging from 40% to 80% of base salary based on improvements in corporate and business unit profits and successful execution of strategic objectives. In 2014, executives received a payment of 139% to 166% of target as a result of significant increases in corporate EBITDA, business unit EBIT and the successful execution of strategic objectives. (cid:127) We have meaningful stock ownership requirements for our named executive officers. (cid:127) Except for Mr. Schwinn, our foreign-based named executive officer, we do not have employment agreements or other individual arrangements with our named executive officers that provide for a specified term of employment, compensation terms or specific benefits upon a termination of employment. (cid:127) Benefits are payable under our Executive Severance Plan only on a double trigger basis (i.e., following both a change in control and a qualifying termination of employment). (cid:127) The Compensation Committee is advised by an independent compensation consultant who keeps the Compensation Committee apprised of developments and best practices. (cid:127) The Company has a clawback policy which allows the Company to recoup awards if payment or vesting was based on financial criteria that are later deemed to be materially inaccurate. 32 The Board strongly endorses the Company’s executive compensation program and recommends that stockholders vote in favor of the following resolution: RESOLVED, that the stockholders approve the compensation of the Company’s named executive officers as described in this proxy statement under ‘‘Executive Compensation’’, including the Compensation Discussion and Analysis and the tabular and narrative disclosure contained in this proxy statement. 31OCT201109101132 Because the vote is advisory, it will not be binding upon the Board of Directors or the Compensation Committee and neither the Board of Directors nor the Compensation Committee will be required to take any action as a result of the outcome of the vote on this proposal. The Compensation Committee will consider the outcome of the vote when considering future executive compensation arrangements. The Board of Directors unanimously recommends that the stockholders vote ‘‘FOR’’ the approval of the Company’s executive compensation. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT P r o x y 33 ADDITIONAL EXECUTIVE COMPENSATION INFORMATION Summary Compensation Table The following table reflects compensation paid to or earned by our named executive officers for services rendered during 2014, 2013 and 2012 and: Change in Pension Value and Non-Qualified Deferred Non-Equity Name and Principal Position Year Salary ($) Stock Awards ($)(1) Option Awards Compensation ($)(2) ($)(3) Incentive Plan Compensation 236,502 John P. O’Donnell . . . . . . . . . . . 2014 625,000 1,144,078 724,170 237,367 551,650 1,306,618 President and Chief Executive Officer 2013 600,000 2012 525,000 Bonnie C. Lind . . . . . . . . . . . . 2014 346,000 2013 330,000 2012 330,000 Senior Vice President, Chief Financial Officer and Treasurer Steven S. Heinrichs . . . . . . . . . . 2014 310,000 2013 290,000 2012 290,000 Senior Vice President, General Counsel and Secretary Julie A. Schertell Senior Vice President Fine Paper & Packaging and Technical Products U.S. . . . . . . . . . . . 2014 336,000 2013 300,000 2012 280,000 Armin S. Schwinn(6) . . . . . . . . . 2014 285,643 2013 323,501 2012 297,343 Senior Vice President, and Managing Director—Neenah Germany 315,685 197,175 259,600 245,533 150,570 197,945 266,430 143,400 175,230 156,723 100,380 120,065 65,268 65,348 53,592 50,778 49,972 40,600 55,062 47,089 36,540 32,382 32,674 30,229 827,500 501,600 653,231 314,036 189,668 322,616 256,525 151,527 257,741 233,251 189,000 327,950 181,669 112,578 113,226 Earnings ($)(4) — — — 695,665 77,002 595,585 — — — — — — 561,476 219,584 314,378 All Other Compensation ($)(5) 101,590 111,986 88,503 13,079 8,883 9,263 41,951 49,598 38,761 46,385 51,685 37,582 7,968 9,024 8,662 Total ($) 2,934,670 2,175,123 3,125,002 1,749,733 868,076 1,570,656 904,787 691,666 825,047 937,128 731,174 857,302 1,225,861 797,741 878,847 (1) Amounts shown reflect the aggregate grant date fair value with respect to performance share units, restricted stock units and restricted stock granted pursuant to our Omnibus Plan, all disregarding any estimates of forfeitures related to service- based vesting conditions. The amounts for represent the grant date fair value of the awards on the date of the grant in accordance with ASC 718. The grant date fair value of the stock awards is equal to the fair market value of the underlying common stock on the date of grant. See Note 8 to the audited Financial Statement included in our 2014 Annual Report on Form 10-K for the assumptions used in valuing the performance share units. (2) Amounts shown reflect the aggregate grant date fair value with respect to stock options granted pursuant to our Omnibus Plan, disregarding any estimates of forfeitures related to service-based vesting conditions. The amounts represent grant date fair value of the options on the date of the grant in accordance with ASC 718. The grant date fair value of the option awards is determined using the Black-Scholes option valuation model. See Note 8 to the audited Financial Statement included in our 2014 Annual Report on Form 10-K for the assumptions used in valuing the stock options. For Mr. O’Donnell in 2012 this amount includes $1,193,750 for the value of the special option grant of 125,000 options discussed in the Company’s 2013 Proxy Statement in section titled ‘‘2012 CEO Special Option Grant’’, The exercise price of the options is $24.09, which is the closing price of the company stock on the date of grant, January 25, 2012. 100% of the options will be earned, vest and be exercisable on December 31, 2016 if, during the 5-year period from the Grant Date to the Vesting Date, Neenah Stock achieves annualized total shareholder return (‘‘TSR’’) of 11% or above, but if 100% of the options have not been earned as set out above, (i) 25% of the options will nonetheless have been earned and will vest and be exercisable on December 31, 2016 if, during the time period from the Grant Date to a measurement date occurring at the end of the last 90 trading days of 2014, Neenah Stock achieves annualized TSR of 11% or above, and (ii) 25% of the options will nonetheless have been earned and will vest and be exercisable on December 31, 2016 if, during the time period from the Grant Date to a measurement date occurring at the end of the last 90 trading days of 2015, Neenah Stock achieves annualized TSR of 11% or above. All options that are earned as set out above will fully vest and become exercisable on December 31, 2016, and have a 10-year term ending December 31, 2021. All options which have not been earned as set out above by December 31, 2016 shall expire and terminate. The material conditions to vesting and exercise are set forth in greater detail in the Form 8-K filed by the company dated January 31, 2012. (3) Amounts shown reflect annual performance bonuses earned in the fiscal year and paid in the following year, and are described in detail in the portion of our Compensation Discussion and Analysis, captioned ‘‘2014 Annual Performance Bonus Awards.’’ 34 (4) Amounts shown reflect the aggregate change during the year in the actuarial present value of accumulated benefit under our Pension Plan and Supplemental Pension Plan. The large variability in value year-to-year is caused, for the most part, by changes in the discount rates used to calculate the value from year to year, and not any increase or change in the pension plan for any individual named executive officer. Messrs. Heinrichs, O’Donnell and Ms. Schertell do not participate in any of the defined pension plans. (5) ‘‘All Other Compensation’’ includes Neenah’s contribution to the 401(k) account of each of our named executive officers except Mr. Schwinn. The amounts shown for Messrs. Heinrichs, O’Donnell and Ms. Schertell also include Neenah’s contribution to their accounts in the Retirement Contribution Plan and Supplemental Retirement Contribution Plan. The amounts shown for Ms. Lind and Mr. Heinrichs include expenses for an annual physical. The totals shown for Messrs. O’Donnell, Heinrichs, and Ms. Schertell in 2014, 2013, and 2012 include expenses for tax preparation and financial planning. All amounts shown for Mr. Schwinn are for an annual car allowance. 31OCT201109101132 (6) Mr. Schwinn’s compensation has been converted from Euros to US Dollars as follows; December 31, 2012 conversion of Euros to US Dollars at 1 to 1.3215, and December 31, 2013 conversion of Euro to US Dollars at 1 to 1.3766, and December 31, 2014 conversion of Euros to US Dollars at 1 to 1.2155. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT P r o x y 35 2014 Grants of Plan Based Awards The following table contains information relating to the plan based awards grants made in 2014 to our named executive officers under the Omnibus Plan and is intended to supplement the 2014 Summary Compensation Table listed above. Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) Estimated Future Payouts Under Equity Incentive Plan Awards(2) All Other Option Awards (3) Grant Date Fair Exercise Number of or Base Value of Securities Price of Stock and Underlying Option Award ($/SH) Option Awards ($) (#) Name and Principal Position Plan Grant Date John P. O’Donnell . . President and Chief Executive Officer . . . . MIP 01/28/2014 Performance Units 01/28/2014 Stock Options 01/28/2014 . . . Bonnie C. Lind . . Senior Vice President, Chief Financial Officer and Treasurer . . MIP 01/28/2014 Performance Units 01/28/2014 Stock Options 01/28/2014 Steven S. Heinrichs . . Senior Vice President, General Counsel and Secretary . . . MIP 01/28/2014 Performance Units 01/28/2014 Stock Options 01/28/2014 . . . Julie A. Schertell . Senior Vice President, and President—Fine Paper & Packaging and Technical Products U.S. . . MIP 01/28/2014 Performance Units 01/28/2014 Stock Options 01/28/2014 Threshold Target Maximum Threshold Target Maximum Options (#) (#) (#) ($) ($) ($) 0 0 0 0 500,000 1,000,000 6,132 15,330 30,660 195,250 390,500 1,692 4,230 8,460 155,000 310,000 1,316 3,290 6,580 168,000 336,000 1,428 3,570 7,140 18,770 42.82 5,180 42.82 4,030 42.82 4,370 42.82 1,144,078 236,502 315,365 65,268 245,533 50,778 266,430 55,062 . Armin S. Schwinn . . Senior Vice President, Managing Director— Neenah Germany . . . MIP 01/28/2014 Performance Units 01/28/2014 Stock Options 01/28/2014 0 118,935 297,338 840 2,100 4,200 2,570 42.82 156,723 32,382 (1) (2) Reflects the range of potential annual incentive bonus payments that could have been earned by each named executive officer under Neenah’s MIP in 2014. The actual bonuses earned in 2014 are reflected in the Summary Compensation Table above under the caption ‘‘Non-Equity Incentive Plan Compensation.’’ For more information regarding annual incentive bonus opportunities, see the discussion in the Compensation Discussion and Analysis. The value of Mr. Schwinn’s incentive bonus payment has been converted from Euros to US Dollars using a December 31, 2014 conversion of Euro to US Dollars at 1 to 1.2155. Reflects the range of potential performance share units that may be earned by each named executive officer, based on the Company’s level of achievement of performance goals in 2014 and total shareholder return relative to a peer group for the performance period ending December 31, 2014. For more information regarding the performance share units, including how the number of performance share units awarded was determined and the vesting terms applicable to such units, see the discussion in the Compensation Discussion and Analysis. Outstanding restricted share units receive dividends at the same rate as other stockholders. (3) The stock options vest as to one-third of the shares on each of the first three anniversaries of the grant date. 36 Outstanding Equity Awards at 2014 Fiscal Year-End The following table sets forth information concerning outstanding equity awards for our named executive officers as of December 31, 2014. or Other Rights That Have Not Vested ($) P r o x y Option Awards Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Option 31OCT201109101132 Stock Awards Equity Incentive Equity Incentive Plan Awards: Plan Awards: Market or Number of Unearned Payout Value of Unearned Shares, Units Shares, Units Number of Number of Securities Securities Underlying Underlying Unexercised Unexercised Options (#) Options (#) Exercisable Unexercisable Options (#) Price ($) Number of Shares or Market Value of Units or shares or Rights That Stock That Option Units of Exercise Expiration Have Not Stock Date Have Not Vested Unearned or Other Vested Name and Principal Position John P. O’Donnell . . . . . . . . . . . President and Chief Executive Officer 700 700 0 0 0 0 0 0 4,634 125,000 16,467 18,770 0 0 0 0 0 0 7.41(1) 01/28/2019 8.99(2) 07/28/2019 24.09(4) 01/24/2022 24.09(5) 01/24/2022 31.23(6) 01/28/2023 42.82(7) 01/27/2024 Bonnie C. Lind . . . . . . . . . . . . . Senior Vice President, Chief Financial Officer and Treasurer NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT 19.25(3) 01/27/2021 24.09(4) 01/24/2022 31.23(6) 01/29/2023 42.82(7) 01/27/2024 0 2,201 4,534 5,180 2,563 0 0 0 0 0 0 0 20,200(8) 15,330(9) 863,954 1,144,078 Steven S. Heinrichs . . . . . . . . . . . Senior Vice President, General Counsel and Secretary 1,901 3,332 1,733 0 Julie A. Schertell . . . . . . . . . . . . Senior Vice President, —Fine Paper & Packaging and Technical Products U.S. Armin S. Schwinn, . . . . . . . . . . . Senior Vice President, Managing Director —Neenah Germany 0 0 0 0 0 0 0 1,668 3,467 4,030 1,601 3,000 4,900 4,370 1,034 2,267 2,570 0 0 0 0 0 0 0 0 0 0 19.25(3) 01/27/2021 24.09(4) 01/24/2022 31.23(6) 01/28/2023 42.82(7) 01/27/2024 19.25(3) 01/27/2021 24.09(4) 01/24/2022 31.23(6) 01/28/2023 42.82(7) 01/27/2024 24.09(4) 01/24,2022 31.23(6) 01/28/2023 42.82(7) 01/27/2024 5,500(8) 4,230(9) 235,235 315,685 4,200(8) 3,290(9) 179,634 245,533 4,000(8) 3,570(9) 171,080 266,429 2,800(8) 2,100(9) 235,791 119,756 (1) (2) (3) (4) (5) (6) These options were granted on January 29, 2009, and vested as follows: 33.34% on January 29, 2010 and 33.33% on both January 29, 2011 and January 29, 2012. These options were converted to stock appreciation rights on July 1, 2014. These options were granted on July 28, 2009, and vested as follows: 33.34% on July 28, 2010 and 33.33% on both July 28, 2011 and July 28, 2012. These options were converted to stock appreciation rights on July 1, 2014. These options were granted on January 28, 2011 and vested as follows: 33.34% on January 28, 2012 and 33.33% on both January 28, 2013 and January 28, 2014. These options were converted to stock appreciation rights on July 1, 2014. These options were granted on January 25, 2012 and vest as follows: 33.34% on January 25, 2013 and 33.33% on both January 25, 2014 and January 25, 2015. These options were converted to stock appreciation rights on July 1, 2014. These options were granted to Mr. O’Donnell on January 25, 2013 and vest as further described in the CD&A section of the Company’s 2012 Proxy Statement under the title ‘‘2012 CEO Special Option Grant’’ and footnote 2 to the Summary Compensation Table in this Proxy Statement. These options were converted to stock appreciation rights on July 1, 2014. These options were granted on January 29, 2013, and vest as follows: 33.34% on January 29, 2014 and 33.33% on both January 29, 2015 and January 29, 2016. These options were converted to stock appreciation rights on July 1, 2014. 37 (7) (8) (9) These options were granted on January 28, 2014, and vest as follows: 33.34% on January 28, 2015 and 33.33% on both January 28, 2016 and January 28, 2017. These options were converted to stock appreciation rights on July 1, 2014. These performance share units target levels were set on January 29, 2013 and were earned and vested on December 31, 2013, based on the Company’s achievement of performance goals relating to return on invested capital and total shareholder return during the performance period ending December 31, 2013. The awards were granted at 123% of target as disclosed in the CD&A Section of the Company’s 2014 Proxy Statement and the market value disclosed in this table reflects the sizing of these awards. These performance share units are subject to a two year hold requirement after vesting. These performance share units target levels were set on January 28, 2014 and were earned and vested on December 31, 2014, based on the Company’s achievement of performance goals relating to return on invested capital and total shareholder return during the performance period ending December 31, 2014. The awards were granted at 184% of target as disclosed in the CD&A Section of this Proxy Statement and the market value disclosed in this table reflects the sizing of these awards. These performance share units are subject to a two year hold requirement after vesting. 38 Option Exercises and Stock Vested in 2014 The following table sets forth information regarding options exercised and stock awards vested for our named executive officers in 2014. Option Awards 31OCT201109101132 Stock Awards(2) Name Number of Shares Acquired on Exercise (#) John P. O’Donnell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonnie C. Lind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Steven S. Heinrichs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Julie A. Schertell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Armin S. Schwinn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,699 32,265 8,850 — 6,050 (1) Reflects the market value of the shares on the vesting date. Value Realized on Exercise ($) 3,963,690 1,061,421 135,334 — 109,905 Number of Shares Acquired on Vesting (#) 25,330 11,920 9,089 8,046 5,735 Value Realized on Vesting ($)(1) 1,526,639 718,418 547,794 484,932 345,648 (2) These shares represent the vesting of the Performance Share Units granted to each of our named executive officer Pension Plans in January of 2012, which vested on December 31, 2014, after a one year performance and two year holding period. NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT The Neenah Paper Pension Plan is a broad-based, tax-qualified defined benefit pension plan, which provides a benefit upon retirement to eligible employees of the Company. The Neenah Paper Supplemental Pension Plan is a non-qualified defined benefit pension plan which covers pay and benefits above the qualified limits in the Pension Plan. The compensation covered by these defined benefit plans includes the salary and non-equity incentive payments set forth above in the Summary Compensation Table. Under our Pension Plan an employee is entitled to receive an annual standard benefit based on years of service and integrated with social security benefits. The Code generally places limits on the amount of pension benefits that may be paid from the tax qualified Pension Plan. However, we will pay any participant in our Supplemental Pension Plan the amount of the benefit payable under the Pension Plan that is limited by the Code. Retirement benefits for participants in the Pension Plan who have at least five years of service may begin on a reduced basis at age 55 or on an unreduced basis at the normal retirement age of 65. Unreduced benefits also are available (i) for participants with ten years of service at age 62 or as early as age 60 with thirty years of service and (ii) as described below, for certain involuntary terminations. Ms. Lind, our Chief Financial Officer, is eligible for early retirement on a reduced basis. None of our other named executive officers currently is eligible for retirement under our Pension Plan or Supplemental Pension Plan. P r o x y 39 The normal form of benefit is a single-life annuity payable monthly and other optional forms of benefit are available including a joint and survivor benefit. Accrued benefits under our Supplemental Pension Plan will, at the participant’s option, either be paid as monthly payments in the same form as the retirement payments from the Pension Plan or as an actuarially determined lump sum payment upon retirement after age 55. Mr. Schwinn participates in an individual pension agreement with the Company which provides pension benefits based on earnings and service, an additional pension plan which provides benefits based on the Company’s and the employee’s contribution, and a supplemental executive retirement pension agreement, which provides benefits in addition to the two base plans if certain amounts are exceeded (collectively, the ‘‘German Pension Plans’’). For a discussion of how we value these obligations and the assumption we use in that valuation, see Note 7 to our financial statements included in our 2014 Annual Report on Form 10-K. For purposes of determining the present value of accumulated benefits, we have used the normal retirement age under the plans, which is 65. 2014 Pension Benefits The following table sets forth information as of December 31, 2014 regarding accumulated benefits to our named executive officers under our Pension Plan, Supplemental Pension Plan and German Pension Plans. Name Plan Name Number of Years Credited Service(1) Present Value of Accumulated Benefit ($)(2) Bonnie C. Lind . . . . . . . . . . . Neenah Paper Pension Plan 33.0 1,477,164 Armin S. Schwinn(3) . . . . . . . Neenah Paper Supplemental Pension Plan German Pension Plan German Additional Pension Plan Gessner Pension Plan 33.0 19.0 19.0 19.0 1,936,473 1,335,764 112,142 292,160 (1) Includes years of service credited for employment with Kimberly-Clark prior to Neenah’s spin-off for Ms. Lind and years of service for Mr. Schwinn related to employment with companies acquired by Neenah as part of its acquisition of Neenah Germany. (2) For a description of the assumptions applied in determining the present value of accumulated benefits reported above, see Note 7 to the audited Financial Statements included in our 2014 Annual Report on Form 10-K. (3) Mr. Schwinn participates exclusively in German Pension Plans. The value of these plans has been converted from Euros to US Dollars using a December 31, 2014 conversion of Euro to US Dollars at 1 to 1.2155. 2013 Nonqualified Deferred Compensation The Supplemental RCP is a nonqualified excess benefit and supplemental retirement plan pursuant to which the Company provides additional retirement benefits to certain highly compensated employees. These Company contributions are intended to provide contributions to those individuals whose benefits under tax-qualified programs are restricted by the limitations permitted by the Internal Revenue Code. Contributions are held for each participant in either an excess benefit or supplemental benefit unfunded separate account. Participant accounts are credited with earnings, gains and losses 40 based on the rate of return of investment funds selected by the participant, which the participant may elect to change in accordance with the participant’s elections under the Supplemental RCP. Payments can be tied to termination of employment, including retirement, and would be paid in lump sum. If a participant dies before receiving the full value of their account balance, the participant’s beneficiary would receive the remainder of the benefit in one lump sum payment. All accounts would be immediately distributed upon a change in control, subject to a 10% reduction in a current participant’s account and a 5% reduction in an account for a retired participant. The Deferred Compensation Plan enables our executive officers to defer a portion of annual cash compensation (base salary and non-equity awards under our MIP). This plan is intended to assist our executive officers in maximizing the value of the compensation they receive from the Company and assist in their retention. Named executive officer participation in the Supplemental RCP and the Deferred Compensation Plan in 2014 is as follows: 31OCT201109101132 Name Executive Contributions in last Fiscal Year(1) Company Contributions in last Fiscal Year(1) Aggregate Earnings in last Fiscal Year Aggregate Withdrawal/ Distributions John P. O’Donnell . . . . . . . . . . . . . . . . 0 $71,494 $(15,980) President and Chief Executive Officer NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT $ 8,588 $15,114 0 Steven S. Heinrichs . . . . . . . . . . . . . . . Senior Vice President, General Counsel and Secretary Julie A. Schertell . . . . . . . . . . . . . . . . . 0 $19,875 $ 5,365 Senior Vice President, —Fine Paper & Packaging and Technical Products U.S. 0 0 0 P r o x y Aggregate Balance at Last Fiscal Year $342,355 $139,993 $ 95,111 (1) None of our named executive officers elected to defer compensation in 2014 under the Deferred Compensation Plan (2) Amounts are reported as 2014 compensation in the ‘‘All Other Compensation’’ column of the Summary Compensation Table. Potential Payments Upon Termination Except for Mr. Schwinn as noted in footnote 8 below, we do not have employment agreements or other individual arrangements with our named executive officers that provide for specific benefits upon a termination of employment. In general, upon termination of employment, an executive officer will receive compensation and benefits for which he or she has already vested. This includes accrued but unpaid salary, accrued and unused vacation pay, and payments and benefits accrued under our broad- based benefit programs. The following section describes certain payments and benefits that would be payable to our named executive officers in the event of their involuntary termination in connection with a change-in-control of Neenah, or other involuntary termination. Involuntary Termination in Connection with a Change in Control The Executive Severance Plan covers designated officers, including all of our named executive officers except Mr. Schwinn, and provides certain severance benefits upon termination of employment following a change in control of Neenah. Upon termination of the officer’s employment by Neenah without ‘‘cause’’ or by the officer for ‘‘good reason’’ (as defined in the Executive Severance Plan) within the two-year period following a change in control or a termination by us without ‘‘cause’’ during 41 the one-year period preceding such a change in control, the officer will be entitled to a lump-sum cash payment equal to the sum of: (i) two times the sum of his annual base salary and targeted annual bonus; (ii) any qualified retirement plan benefits forfeited as a result of such termination; (iii) the amount of retirement benefits such officer would have received under the qualified and supplemental retirement plans but for his or her termination for the two-year period following his or her termination; (iv) the cost of medical and dental COBRA premiums for a period of two years; and (v) a cash settlement of any accrued retiree medical credits. In addition, the officer will be eligible to receive outplacement services for a period of two years (up to a maximum cost to us of $50,000). Payment of the benefits under the Executive Severance Plan is subject to the applicable executive executing an agreement that includes restrictive covenants and a general release of claims against us. The Executive Severance Plan has been designed to limit exposure for any ‘‘parachute’’ excise taxes; but if such excise taxes apply, we will reimburse the officer on an after-tax basis for any excise taxes incurred by that executive due to payments received under the Executive Severance Plan. The following table shows the payments that would be made to each of our named executive officers under the Executive Severance Plan in connection with a change-in-control termination. Payments(8) John P. O’Donnell Bonnie C. Lind Steven S. Heinrichs Julie A. Schertell Severance(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prorated Non-Equity Incentive Payment(2) . . . . . . . . . Unvested Stock Option Spread(3) . . . . . . . . . . . . . . . . Unvested Restricted Stock(4) . . . . . . . . . . . . . . . . . . . LTCP Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retirement Benefit Payment(5) . . . . . . . . . . . . . . . . . Welfare Benefit Values(6) . . . . . . . . . . . . . . . . . . . . . Outplacement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excise Tax & Gross-Up(7) . . . . . . . . . . . . . . . . . . . . . Aggregate Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 2,250,000 500,000 5,495,863 3,197,504 0 193,320 39,204 50,000 3,839,715 15,565,606 1,069,000 189,750 301,634 876,808 0 730,333 39,204 50,000 0 3,257,229 930,000 155,000 231,295 676,230 0 66,195 39,204 50,000 0 2,147,924 1,008,000 168,000 225,391 692,442 0 74,565 39,204 50,000 0 2,257,602 (1) Severance payment equal to two times the sum of the executive’s annual base salary at the time of the termination plus the target bonus. (2) The Target Non-Equity Incentive Payment is prorated for the number of days in the calendar year prior to termination due to assumed termination on December 31, 2014. (3) Total value of unvested stock option spread and unvested restricted stock that would become vested upon a change in control assuming a share price of $60.27 and a change-in-control date of December 31, 2014. (4) All unearned target performance share units vest upon a change-in-control event. Amounts are based on target 2013 and 2014 performance share unit grants. (5) Actuarial value attributable to retirement benefits. (6) Estimated value associated with the continuation of life insurance, medical, dental, and disability benefits for two years post-termination. (7) Gross-up payments covering the full cost of applicable excise taxes under Code sections 280G and 4999. In 2011 the Compensation Committee closed the plan to new participants and determined that it would phase out the excise tax gross up provision in the Executive Severance Plan for the current named executive officers. (8) Mr. Schwinn does not participate in the Neenah Paper Executive Severance Plan. He is covered by a separate employment agreement which provides a twelve month notice period from the end of 42 P r o x y the calendar year. Mr. Schwinn’s equity grants contain change in control provisions that provide for vesting and payments for his 2013 and 2014 LTCP performance shares. The value at the end of 2014 was $442,338. The equity awards contain provisions that are similar to the U.S. provisions in the case of illness, accident or death. In addition, Mr. Schwinn’s employment contract provides for salary continuation to him or his surviving family members for a period of three months in the case of illness, accident or death. 31OCT201109101132 Other Involuntary Termination The Neenah Paper Severance Pay Plan (the ‘‘Severance Pay Plan’’) provides regular severance to our executive officers. Participation in the Severance Pay Plan is conditioned upon each participant’s execution of a noncompete agreement. In the event of a qualifying termination, the Severance Pay Plan generally provides officers (including named executive officers) severance equal to one year of base salary. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The following directors served on the Compensation Committee during 2014: Messrs. Moore, NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT McGovern and Dr. Wood. None of the members of the Compensation Committee was an officer or employee of Neenah during 2014 or any time prior thereto, and none of the members had any relationship with Neenah during 2014 that required disclosure under Item 404 of Regulation S-K. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our Board of Directors or Compensation Committee. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act and rules and regulations of the SEC thereunder require our directors, officers and persons who beneficially own more than 10% of our common stock, as well as certain affiliates of such persons, to file initial reports of their ownership of our common stock and subsequent reports of changes in such ownership with the SEC. Directors, officers and persons owning more than 10% of our common stock are required by SEC rules and regulations to furnish us with copies of all Section 16(a) reports they file. Based solely on our review of the copies of such reports received by us and on information provided by the reporting persons, we believe that during 2014, our directors, officers and owners of more than 10% of our common stock complied with all applicable filing requirements, except that Mr. Moore filed a Form 4 late on March 31, 2015 representing restricted stock units granted in lieu of a quarterly cash dividend granted in 2014 and 2015. 43 AUDIT COMMITTEE REPORT The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to the accuracy and integrity of Neenah’s financial reporting, including the performance and the independence of Neenah’s independent registered public accounting firm, Deloitte & Touche LLP (‘‘Deloitte’’). On November 30, 2004, our Board of Directors adopted an Audit Committee Charter, which sets forth the responsibilities of the Audit Committee. The Audit Committee reviewed and discussed with management and Deloitte our audited financial statements for the fiscal year ended December 31, 2014. The Audit Committee also discussed with Deloitte the matters required to be discussed under Statement on Auditing Standards No. 61, as amended (Codification of Statements on Auditing Standards, AU § 380). The Audit Committee received the written disclosures and other communications from Deloitte that are required by the applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte’s communications with the Audit Committee, which included independence considerations. The Audit Committee reviewed the audit and non-audit services provided by Deloitte for the fiscal year ended December 31, 2014 and determined to engage Deloitte as the independent registered public accounting firm of Neenah for the fiscal year ending December 31, 2015. The Audit Committee also received and reviewed a report by Deloitte outlining communications required by NYSE listing standards describing: (1) the firm’s internal quality control procedures; (2) any material issue raised by a) the most recent internal quality control review of the firm, b) peer review of the firm, or c) any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with issues; and (3) (to assess Deloitte’s independence) all relationships between Deloitte and us. Based upon the Audit Committee’s review of the audited financial statements and the discussions noted above, the Audit Committee recommended that the Board of Directors include the audited financial statements for the year ended December 31, 2014 in our Annual Report on Form 10-K for the year ended December 31, 2014 for filing with the SEC. Audit Committee: Timothy S. Lucas, Chairman Philip C. Moore Stephen M. Wood 44 P r o x y RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (ITEM 3) The Audit Committee of our Board of Directors, in accordance with its charter and authority delegated to it by the Board, has appointed the firm of Deloitte & Touche LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2015. As a matter of good corporate practice, the Board has directed that such appointment be submitted to our stockholders for ratification at the Annual Meeting. Deloitte & Touche LLP has served as our independent registered public accounting firm since our spin-off from Kimberly-Clark Corporation in November 2004 and is considered by our Audit Committee to be well qualified. If the stockholders do not ratify the appointment of Deloitte & Touche LLP, the Audit Committee will reconsider the appointment. Even if the stockholders ratify the appointment, the Audit Committee, in its discretion, may appoint a different independent auditor at any time during the year if the Audit Committee determines that such a change would be in the best interests of Neenah and its stockholders. 31OCT201109101132 Representatives of Deloitte & Touche LLP will be present at the Annual Meeting and will have an opportunity to make a statement if they desire to do so. They also will be available to respond to appropriate questions from stockholders. NOTICE OF 2013 ANNUAL MEETING AND The Audit Committee and the Board unanimously recommend that the stockholders vote ‘‘FOR’’ PROXY STATEMENT the proposal to ratify the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES Audit Fees Aggregate fees for professional services rendered for us by Deloitte & Touche LLP, the member firms of Deloitte Touche and Tohmatsu and their respective affiliates (‘‘Deloitte & Touche’’) as of or for the fiscal years ended December 31, 2014 and December 31, 2013 are set forth below. The aggregate fees included in the Audit category are fees billed for the fiscal year for the integrated audit of our annual financial statements and review of statutory and regulatory filings. The aggregate fees included in each of the other categories are fees billed in the fiscal years. Audit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Audit-Related Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,711,455 0 66,355 0 $ $1,664,982 0 0 0 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,777,810 $1,664,982 2014 2013 Audit Fees were for professional services rendered for the audit of our annual consolidated financial statements including the audit of our internal control over financial reporting and review of quarterly reports on Form 10-Q filed by us with the SEC. Tax Fees were for professional services rendered to assist us with compliance with the revised Tangible Property Regulations of the Internal Revenue Service. 45 Policy on Audit Committee Pre-Approval To avoid potential conflicts of interest in maintaining auditor independence, the law prohibits a publicly-traded company from obtaining certain non-audit services from its independent registered public accounting firm. The law also requires the audit committee of a publicly traded company to pre-approve other services provided by the independent registered public accounting firm. Pursuant to its charter, the Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. In its pre-approval of non-audit services, the Audit Committee considers, among other factors, the possible effect of the performance of such services on the auditor’s independence. The Audit Committee may delegate pre-approval authority to a member of the Audit Committee. The decisions of any Audit Committee member to whom pre-approval authority is delegated shall be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee pre-approved all services performed by the independent registered public accounting firm in fiscal 2014 and fiscal 2013, including those services described in the table above under the captions ‘‘Audit Fees’’. STOCKHOLDERS’ PROPOSALS FOR 2016 ANNUAL MEETING Proposals of stockholders, excluding nominations for the Board, intended to be presented at the 2016 Annual Meeting should be submitted by certified mail, return receipt requested, and must be received by us at our executive offices in Alpharetta, Georgia, on or before the date that is 120 calendar days prior to the first anniversary of the date that this Proxy Statement is released to stockholders, to be eligible for inclusion in our Proxy Statement and form of proxy relating to that meeting and to be introduced for action at the 2016 Annual Meeting. In the event that the date of the 2016 Annual Meeting is changed more than thirty days from the date of this year’s meeting, notice by stockholders should be received no later than the close of business on the later of the 150th calendar day prior to the 2016 meeting or the 10th calendar day on which public announcement of the date of such meeting is first made. Any stockholder proposal must be in writing and must comply with Rule 14a-8 under the Exchange Act and must set forth (i) a description of the business desired to be brought before the meeting and the reasons for conducting the business at the meeting; (ii) the name and address, as they appear on our books, of the stockholder submitting the proposal; (iii) the class and number of shares that are beneficially owned by such stockholder; (iv) the dates on which the stockholder acquired the shares; (v) documentary support for any claim of beneficial ownership as required by Rule 14a-8; (vi) any material interest of the stockholder in the proposal; (vii) a statement in support of the proposal; and (viii) any other information required by the rules and regulations of the SEC. Stockholder nominations for the Board must comply with the procedures set forth above under ‘‘Corporate Governance— Nomination of Directors.’’ The failure of a stockholder to deliver a proposal in accordance with the requirements of the preceding paragraph may result in it being excluded from our Proxy Statement and ineligible for consideration at the 2016 Annual Meeting. Further, the submission of a proposal in accordance with the requirements of the preceding paragraph does not guarantee that we will include it in our Proxy Statement or that it will be eligible for consideration at the 2016 Annual Meeting. We strongly encourage any stockholder interested in submitting a proposal to contact our Corporate Secretary in advance of the submission deadline to discuss the proposal. 46 OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING Our Board knows of no matters other than those referred to in the accompanying Notice of Annual Meeting of Stockholders which may properly come before the Annual Meeting. However, if any other matter should be properly presented for consideration and vote at the Annual Meeting or any adjournment(s) thereof, it is the intention of the persons named as proxies on the enclosed form of proxy card to vote the shares represented by all valid proxy cards in accordance with their judgment of what is in the best interest of Neenah and its stockholders. 31OCT201109101132 HOUSEHOLDING OF NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS The SEC’s proxy rules permit companies and intermediaries, such as brokers and banks, to satisfy delivery requirements for Notices, and if applicable, the proxy statements and annual reports, with respect to two or more stockholders sharing the same address by delivering a single Notice to those stockholders. This method of delivery, often referred to as householding, should reduce the amount of duplicate information that stockholders receive and lower printing and mailing costs for companies. Neenah and certain intermediaries are householding Notices, and if applicable, proxy statements and annual reports, for shareholders of record in connection with its 2015 Annual Meeting. This means that: NOTICE OF 2013 ANNUAL MEETING AND PROXY STATEMENT (cid:127) Only one Notice, and if applicable, proxy statement and annual report, will be delivered to multiple stockholders sharing an address unless you notify your broker or bank to the contrary; (cid:127) You can contact Neenah by calling 678-566-6500 or by writing to INVESTOR RELATIONS, Neenah Paper, Inc., at 3460 Preston Ridge Road, Preston Ridge III, Suite 600, Alpharetta, Georgia 30005 to request a separate copy of the Notice, and if applicable, proxy statement and annual report, for the 2015 Annual Meeting and for future meetings or, if you are currently receiving multiple copies, to receive only a single copy in the future or you can contact your bank or broker to make a similar request; and (cid:127) You can request delivery of a single copy of the Notice, and if applicable, proxy statement and annual report, from your bank or broker if you share the same address as another Neenah shareholder and your bank or broker has determined to household proxy materials. P r o x y 47 Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. UNITED STATES The following tables present further information about our businesses by geographic area (dollars in millions): SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Year Ended December 31, 2012 2011 2010 (Mark One) Net sales United States Europe (cid:31) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES Consolidated EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2014 OR (cid:30) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES December 31, 2012 2011 2010 $543.4 265.4 $416.2 279.8 $413.6 244.1 $808.8 $696.0 $657.7 Total Assets EXCHANGE ACT OF 1934 United States Canada Europe For the transition period from to Consolidated Commission file number 001-32240 NEENAH PAPER, INC. (Exact name of registrant as specified in its charter) Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. 20-1308307 (I.R.S. Employer Identification No.) $610.7 $565.1 $606.7 Delaware (State or other jurisdiction of incorporation or organization) 3460 Preston Ridge Road Alpharetta, Georgia (Address of principal executive offices) Raw Materials 30005 (Zip Code) $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 297.7 F o r m 1 0 - K Registrant’s telephone number, including area code: (678) 566-6500 Securities registered pursuant to Section 12(b) of the Act: Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Common Stock — $0.01 Par Value Preferred Stock Purchase Rights Securities registered pursuant to Section 12(g) of the Act: None Name of Each Exchange on Which Registered New York Stock Exchange Title of Each Class Indicate by check mark if the registrant is a well-seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:31) No (cid:30) Act. Yes (cid:30) No (cid:31) Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the an interruption of production at any one supplier, we believe that each of these suppliers individually would be Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:31) No (cid:30) able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes (cid:31) No (cid:30) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:30) significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that smaller reporting company. See definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ and ‘‘smaller reporting company’’ in all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five Rule 12b-2 of the Exchange Act. (Check one): percent of the total fiber requirements of our fine paper business, are readily available from several sources and Large accelerated filer (cid:31) Smaller reporting company (cid:30) that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Accelerated filer (cid:30) Non-accelerated filer (cid:30) (Do not check if a smaller reporting company) We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:30) No (cid:31) increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the The aggregate market value of the registrant’s common stock held by non-affiliates on June 30, 2014 (based on the closing ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. stock price on the New York Stock Exchange) on such date was approximately $880,000,000. As of February 13, 2015, there were 16,700,000 shares of the Company’s common stock outstanding. Certain information contained in the definitive proxy statement for the Company’s Annual Meeting of Stockholders to be held on May 21, 2015 is incorporated by reference into Part III hereof. DOCUMENTS INCORPORATED BY REFERENCE 5 (This page has been left blank intentionally.) TABLE OF CONTENTS Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. Page The following tables present further information about our businesses by geographic area (dollars in millions): Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 2011 Year Ended December 31, 2010 $543.4 265.4 $416.2 279.8 $413.6 244.1 Net sales United States Europe Consolidated $808.8 $696.0 $657.7 Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $322.5 0.2 288.0 $286.4 0.3 278.4 December 31, $610.7 $565.1 2012 2011 $308.9 0.1 297.7 $606.7 2010 Total Assets United States Canada Europe Consolidated Part 1 Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Part II Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. 1 10 17 17 18 18 19 21 23 37 38 39 39 39 Part III Item 10. Item 11. Item 12. Item 13. Item 14. Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities 40 Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business 41 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by 41 Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . business segment. 41 Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . 41 Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Raw Materials Part IV Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our Exhibits and Financial Statement Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 15. technical products business. The technical products business purchases softwood pulp, specialty pulp and latex Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. 42 46 F o r m 1 0 - K Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. 5 (This page has been left blank intentionally.) PART I Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than In this report, unless the context requires otherwise, references to ‘‘we,’’ ‘‘us,’’ ‘‘our,’’ ‘‘Neenah’’ or the ‘‘Company’’ 10 percent of our consolidated net sales. are intended to mean Neenah Paper, Inc., its consolidated subsidiaries and predecessor companies. The following tables present further information about our businesses by geographic area (dollars in millions): Item 1. Business Overview Year Ended December 31, 2012 2011 2010 Consolidated Net sales United States Europe We are organized into two primary businesses: a performance-based technical products business and a premium fine paper and packaging business (formerly known as the fine paper business). On January 1, 2015, we changed $413.6 the name of our fine paper business to fine paper and packaging. The name change better reflects the increasing 244.1 importance, and plans for continued growth, of our premium packaging products. $657.7 Our technical products business is a leading international producer of filter media for transportation, water and other markets and saturated and coated substrates for industrial products backings and a variety of other end markets. The business is focused on categories where we believe we are a market leader or have a competitive 2010 advantage, including, among others, transportation, water and other filter media, specialty tape, label, abrasive, medical packaging and image transfer and customer-specific applications in furniture veneer backing and durable $308.9 print and cover applications. Our customers are located in more than 70 countries. In July 2014, we purchased all 0.1 of the outstanding equity of Crane Technical Materials, Inc. from Crane & Co., Inc. The acquired Crane Technical 297.7 Materials business provides performance-oriented wet laid nonwovens media for filtration end markets as well as $606.7 environmental, energy and industrial uses. Our technical products manufacturing facilities are located in Munising, Michigan, Pittsfield, Massachusetts and near Munich and Frankfurt, Germany. Total Assets United States Canada Europe $322.5 0.2 288.0 $286.4 0.3 278.4 $543.4 265.4 $416.2 279.8 Consolidated December 31, $610.7 $808.8 $696.0 $565.1 2012 2011 Raw Materials Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities We believe our fine paper and packaging business is the leading supplier of premium printing, packaging and and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business other high end specialty papers in North America. We are also focused on increasing our presence in international Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by markets. Our premium writing, text, cover and specialty papers are used in commercial offset and digital printing business segment. and imaging applications for corporate identity packages, invitations, personal stationery, premium labels and luxury packaging. Our bright papers are used in applications such as direct mail, advertising inserts, scrapbooks and marketing collateral. Our products include some of the most recognized and preferred fine paper brands and Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our we enjoy leading market positions in many of our product categories. We sell our products primarily to authorized technical products business. The technical products business purchases softwood pulp, specialty pulp and latex paper distributors, as well as through converters, specialty businesses and major retail customers. Our fine paper from various suppliers. The technical products business purchases substantially all of its raw material requirements and packaging manufacturing facilities are located in Appleton, Neenah and Whiting, Wisconsin. externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Our corporate structure consists of Neenah Paper, Inc., and six direct wholly owned subsidiaries. Company Structure Neenah Paper, Inc. is a Delaware corporation that holds our trademarks and patents related to all of our U.S. businesses (except Neenah Paper FVC, Inc), all of our U.S. inventory, the real estate, mills and manufacturing assets associated with our fine paper and packaging operations in Neenah and Whiting, Wisconsin, and all of the equity in our subsidiaries listed below. The common stock of Neenah is publicly traded on the New York Stock Exchange under the symbol ‘‘NP.’’ Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term Neenah Paper Michigan, Inc. is a Delaware corporation and a wholly owned subsidiary of Neenah that owns the disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp real estate, mill and manufacturing assets associated with our U.S. technical products business in Munising, grades or other latex grades that would allow us to meet required product performance characteristics and incur Michigan. only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Neenah Paper FVC, LLC is a Delaware limited liability company and wholly owned subsidiary of Neenah that owns all of the equity of Neenah Paper FR, LLC. Neenah Paper FR, LLC is a Delaware limited liability company Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other that owns the real estate, mills and manufacturing assets associated with our fine paper and packaging operation significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, in Appleton, Wisconsin. cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five Neenah Paper International Holding Company, LLC is a Delaware limited liability company and wholly owned percent of the total fiber requirements of our fine paper business, are readily available from several sources and subsidiary of Neenah that owns all of the equity of Neenah Paper International, LLC. Neenah Paper that the loss of a single supplier would not cause a shutdown of our manufacturing operations. International, LLC is a Delaware limited liability company that owns all of the equity of Neenah Germany GmbH and in conjunction with Neenah Germany GmbH all of the equity of Neenah Services GmbH & Co. KG. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. 1 5 F o r m 1 0 - K NPCC Holding Company LLC is a Delaware limited liability company and wholly owned subsidiary of Neenah that owns all of the equity of Neenah Paper Company of Canada (‘‘Neenah Canada’’). Neenah Canada is a Nova Scotia unlimited liability corporation that holds certain post-employment liabilities of our former Canadian operations. Neenah Paper International Finance Company BV is a private company with limited liability organized under the laws of the Netherlands and a wholly owned subsidiary of Neenah that facilitates the financing of our international operations. Neenah Filtration, LLC is a Delaware limited liability company and wholly owned subsidiary of Neenah that owns all of the equity of Neenah Technical Materials, Inc. (‘‘NTM’’). NTM is a Massachusetts corporation that owns all of the real estate, mills and manufacturing assets associated with our technical materials business in Pittsfield. Massachusetts. History of the Businesses Neenah was incorporated in April 2004 in contemplation of the spin-off by Kimberly-Clark Corporation (‘‘Kimberly-Clark’’) of its technical products and fine paper businesses in the United States and its Canadian pulp business (collectively, the ‘‘Pulp and Paper Business’’). We had no material assets or activities until Kimberly- Clark’s transfer to us of the Pulp and Paper business on November 30, 2004. On that date, Kimberly-Clark completed the distribution of all of the shares of our common stock to the stockholders of Kimberly-Clark (the ‘‘Spin-Off’’). Following the Spin-Off, we are an independent public company and Kimberly-Clark has no ownership interest in us. Technical Products. In 1952, we purchased what is now our Munising, Michigan mill. Subsequent to the purchase, we converted the mill to produce durable, saturated and coated papers for sale and use in a variety of industrial applications for our technical products business. In October 2006, we purchased the outstanding interests of FiberMark Services GmbH & Co. KG and the outstanding interests of FiberMark Beteiligungs GmbH (collectively ‘‘Neenah Germany’’). The Neenah Germany assets consist of two mills located near Munich, Germany and a third mill near Frankfurt, Germany, that produce a wide range of products, including transportation, beverage and other filter media, nonwoven wall coverings, masking and other tapes, abrasive backings, and specialized printing and coating substrates. In July 2014, we purchased all of the outstanding equity of Crane Technical Materials, Inc. from Crane & Co., Inc. for approximately $72 million. The acquired technical materials business provides performance-oriented wet laid nonwovens media for water filtration end markets as well as environmental, energy and industrial uses. The technical materials business has two manufacturing facilities in Pittsfield, Massachusetts. Fine Paper and Packaging. The fine paper and packaging business was incorporated in 1885 as Neenah Paper Company, which initially operated a single paper mill in Neenah, Wisconsin. We acquired the mill in 1956. In 1981, we purchased an additional mill located in Whiting, Wisconsin to increase the production capacity of the fine paper and packaging business. In the late 1980s and early 1990s, we expanded the capacity of the fine paper and packaging business by building two new paper machines at the Whiting mill, rebuilding two existing paper machines at the Whiting mill and completing a major expansion of the Neenah facility with the installation of a new paper machine, a new finishing center, a new customer service center and a distribution center expansion. In March 2007, we acquired Fox Valley Corporation (now named Neenah Paper FVC, Inc.), which owned Fox River Paper Company, LLC (‘‘Fox River,’’ now named Neenah Paper FR, LLC). The Fox River assets consisted of four U.S. paper mills and various related assets, producing premium fine papers with well-known brands including STARWHITE�, SUNDANCE�, ESSE� and OXFORD�. In integrating the operations of Fox River with those of our existing fine paper and packaging mills, we closed three of the Fox River paper mills. We closed the Housatonic mill, located near Great Barrington, Massachusetts in May 2007, the fine paper mill located in Urbana, Ohio during the second quarter of 2008 and the fine paper mill located in Ripon, California in May 2009. In January 2012, we purchased certain premium fine paper brands and other assets from Wausau Paper Mills, LLC, a subsidiary of Wausau Paper Corp. (‘‘Wausau’’). In January 2013, we purchased certain premium business paper brands from the Southworth Company (‘‘Southworth’’). Former Pulp Operations. At the Spin-Off, our pulp operations consisted of mills located in Terrace Bay, Ontario and Pictou, Nova Scotia and approximately 975,000 acres of related woodlands. We disposed of these mills and woodlands in a series of transactions from 2006 to 2010. In March 2010, we sold approximately 475,000 acres of woodland assets in Nova Scotia, substantially completing our exit from pulp operations. 2 Business Strategy Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. Our mission is to create value by improving the image and performance of everything we touch. We expect to create value by growing in specialized niche markets that value performance or image and where we have The following tables present further information about our businesses by geographic area (dollars in millions): competitive advantages. 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 Year Ended December 31, optimally, controlling costs and managing risks are important to our long-term success. Strategies to deliver value include: 2012 2011 2010 Net sales United States Europe Leading in profitable, specialty niche markets — We will increase our participation in niche markets that can provide us with leading positions and value our core competencies in performance-based fiber and non-wovens media production, coating and saturating. Key markets include filtration, specialty backings and technical products, and premium fine paper and packaging. $416.2 279.8 $413.6 244.1 $543.4 265.4 Consolidated $808.8 $696.0 $657.7 Increasing our size, growth rate and portfolio diversification — We will invest and focus resources in higher growth specialty markets to grow with customers in new geographies and to enter into adjacent markets that are growing and profitable. We will do this both through organic initiatives that build on our technologies and capabilities, and through acquisitions that fit with our competencies and provide attractive financial returns. December 31, 2012 2011 2010 Delivering consistent, attractive returns to our shareholders with disciplined financial management — We will continue to use Return on Invested Capital (‘‘ROIC’’) as a key metric to evaluate investment decisions, measure our performance, maintain a prudent capital structure and deploy cash flows in ways that can provide value, including direct cash returns to shareholders through a meaningful dividend. Consolidated $610.7 $565.1 $606.7 $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 297.7 Total Assets United States Canada Europe F o r m 1 0 - K Products Raw Materials Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Technical Products. The technical products business is a leading producer of filtration media and durable, saturated Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by and coated substrates for a variety of end uses. In general, our technical products are sold to other manufacturers business segment. as key components for their finished products. Several of our key market segments served, including filtration, specialty tape and abrasives, are global in scope. JET-PRO�SofStretch�, KIMDURA�, MUNISING LP�, PREVAIL�, NEENAH�, GESSNER� and varitess� are brands of our technical products business. Our technical products business had net sales of $467 million, $416 million and $407 million in 2014, 2013 and 2012, respectively. Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Filtration media for induction air, fuel, oil, and cabin air applications in automotive transportation. Transportation filtration media are sold to suppliers of automotive companies as original equipment on new cars and trucks as well as to the automotive aftermarket, which represents the majority of sales. The following is a description of certain key products and markets: Filtration media for water and other industrial end markets. Primary applications include reverse osmosis, nanofiltration, ultrafiltration, pervaporation and vapor permeation, as well as other applications for specialty markets. Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative Finished lightweight abrasive paper is used in the automotive, construction, metal and woodworking industries for pulp or latex grades would have a material effect on our operations. both waterproof and dry sanding applications. Specialty tape including both saturated and unsaturated crepe and flat paper tapes sold to manufacturers to produce finished pressure sensitive products for sale in automotive, transportation, manufacturing, building construction, and industrial general purpose applications, including sales in the consumer-do-it-yourself retail channel. Label and tag products made from both saturated base label stock and purchased synthetic base label stock, with Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other coatings applied to allow for high quality variable and digital printing. The synthetic label stock is recognized as a significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, high quality, UV (ultra-violet) stable product used for outdoor applications. Label and tag stock is sold to pressure cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that sensitive coaters, who in turn sell the coated label and tag stock to the label printing community. all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Other latex saturated and coated papers for use by a wide variety of manufacturers. Premask paper is used as a protective over wrap for products during the manufacturing process and for applying signs, labeling and other finished products. Medical packaging paper is a polymer impregnated base sheet that provides a breathable sterilization barrier that provides unique properties. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the Image transfer papers used to transfer an image from paper to tee shirts, hats, coffee mugs, and other surfaces ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton using a proprietary imaging coating for use in digital printing applications. Decorative components papers used in fiber supply issues to have a material effect on our operations. book covers, stationery and fancy packaging. Other specialty products include clean room papers, durable printing papers, release papers and furniture backers. 3 5 Wall covering substrates made from saturated and coated wet-laid nonwovens are marketed to converters serving primarily European commercial and consumer-do-it-yourself markets. Fine Paper and Packaging. The fine paper and packaging business manufactures and sells world-class branded premium writing, text, cover and specialty papers and envelopes used in corporate identity packages, invitations, personal stationery, premium labels, and luxury packaging. Often these papers are characterized by distinctive colors and textures. Our fine paper and packaging business had net sales of $409 million, $402 million and $373 million in 2014, 2013 and 2012, respectively. Premium writing papers are used for business and personal stationery, corporate identity packages and similar end-use applications. Market leading writing papers are sold by the fine paper and packaging business under the CLASSIC�, ENVIRONMENT�, CAPITOL BOND�, ROYAL SUNDANCE� and SOUTHWORTH� trademarks, which are denoted by a brand watermark in each sheet of writing paper. Our fine paper and packaging business has an exclusive agreement to manufacture, market and distribute Crane & Co.’s CRANE’S CREST�, CRANE’S BOND�, and CRANE’S LETTRA�, branded fine papers. Our fine paper and packaging business has an exclusive agreement to market and distribute Gruppo Cordenons SpA’s SO...SILK�, PLIKE� and STARDREAM� branded fine papers. The fine paper and packaging business also sells private watermarked paper and other specialty writing papers. Text and cover papers and envelopes are used in applications such as corporate brochures, pocket folders, corporate annual reports, advertising inserts, direct mail, business cards, hang tags, scrapbooks, and a variety of other uses where colors, textured finishes or heavier weight papers are desired. Our brands in this category include CLASSIC�, CLASSIC CREST�, ESSE�, ENVIRONMENT� and ROYAL SUNDANCE�. We also sell a variety of custom colors, paper finishes, and duplex/laminated papers. Premium packaging and label papers are used for wine, spirits and beer labels, folding cartons, box wrap, bags, hang tags, and stored value cards servicing high-end retail, cosmetics, spirits, and electronics end-use markets. Bright papers are used in applications such as direct mail, advertising inserts, scrapbooks and marketing collateral. Our brands in this category include ASTROBRIGHTS� and EXACT BRIGHTS�. The fine paper and packaging business also produces and sells other specialty papers that address a consumer’s need for enhanced image such as translucent papers, art papers, papers for optical scanning and other specialized applications. Markets and Customers Technical Products. The technical products business sells its products globally into product categories generally used as base materials in the following applications: filtration, component backing materials for manufactured products such as tape and abrasives, and other specialized product uses such as graphics and identification. Several products (filtration media, wall coverings, abrasives, specialty tapes, labels) are used in markets that are directly affected by economic business cycles. Other market segments such as image transfer papers used in small/ home office and consumer applications are relatively stable. Most products are performance-based and require qualification at customers; however, certain categories may also be subject to price competition and the substitution of lower cost substrates in some less demanding applications. The technical products business relies on a team of direct sales representatives and customer service representatives to market and sell approximately 95 percent of its sales volume directly to customers and converters. The technical products business has over 500 customers worldwide. The distribution of sales in 2014 was approximately 55 percent in Europe, 30 percent in North America and 15 percent in Latin America and Asia. Customers typically convert and transform base papers and film into finished rolls and sheets by adding adhesives, coatings, and finishes. These transformed products are then sold to end-users. 4 Sales to the technical products business’s three largest customers represented approximately 20 percent of total Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than sales for the segment in 2014. Although a complete loss of any of these customers would cause a temporary 10 percent of our consolidated net sales. decline in the business’s sales volume, the decline could be partially offset by expanding sales to existing customers, and further offset over a several month period with the addition of new customers. The following tables present further information about our businesses by geographic area (dollars in millions): Fine Paper and Packaging. We believe our fine paper and packaging business is the leading supplier of premium Year Ended December 31, writing, text and cover papers, premium packaging papers, bright papers and specialty papers in North America. 2010 The text and cover paper segment of the market, used in corporate identification applications, is split between smooth papers and textured papers. Text papers have traditionally been utilized for special, high end collateral $413.6 material such as corporate brochures, marketing materials and special edition books. Cover papers are primarily 244.1 used for business cards, pocket folders, brochures and report covers. Our premium packaging business includes other products such as food and beverage labels and high-end packaging materials such as specialty boxes used for luxury retail goods. The stationery segment of the premium fine papers market is divided into cotton and sulphate grades and includes writing papers and envelopes. Bright papers are generally used by consumers for flyers, direct mail and packaging. Net sales United States Europe $416.2 279.8 $543.4 265.4 Consolidated December 31, $808.8 $696.0 $657.7 2012 2011 2012 2011 2010 Consolidated Total Assets United States Canada Europe The fine paper and packaging business has historically sold its products through our sales and marketing organizations primarily in three channels: authorized paper distributors, as well as through converters and direct $308.9 $286.4 sales. With the purchase of the Wausau and Southworth brands, products are also sold into the retail channel 0.3 0.1 through major national retailers. Sales to distributors, including distributor owned paper stores, account for 297.7 278.4 approximately 60 to 65 percent of revenue in the fine paper and packaging business. During 2014, approximately $606.7 eight percent of the sales of our fine paper and packaging business were exported to markets outside the United States. Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities Sales to the largest customer of the fine paper and packaging business represented approximately 20 percent of its and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business total sales in 2014. We practice selective sales distribution to improve our ability to control the marketing of our Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by products. Although a complete loss of any of these customers would cause a temporary decline in the business’s business segment. sales volume, the decline could be partially offset by expanding sales to existing customers, and further offset over a several month period with the addition of new customers. $322.5 0.2 288.0 Raw Materials $610.7 $565.1 Concentration. In July 2014, Unisource Worldwide, Inc (‘‘Unisource’’) and xpedx, formerly owned by International Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our Paper (‘‘xpedx’’) merged to form Veritiv Corporation. For the years ended December 31, 2014, 2013 and 2012 technical products business. The technical products business purchases softwood pulp, specialty pulp and latex sales to Unisource and xpedx represented approximately 10 percent of our consolidated net sales and from various suppliers. The technical products business purchases substantially all of its raw material requirements approximately 20 percent of net sales of the fine paper business. externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. The following tables present further information about our businesses by geographic area (dollars in millions): F o r m 1 0 - K 2013 2014 $612.0 290.7 $564.4 280.1 Net sales United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, Our technical products business acquires all of its specialized pulp requirements from two global suppliers and 2012 certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our $543.4 needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of 265.4 an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative 2012 pulp or latex grades would have a material effect on our operations. Total Assets United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $322.5 Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other 0.2 significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, 288.0 cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $610.7 percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. December 31, 2013 $456.1 0.4 274.1 $365.1 1.0 309.8 $902.7 $844.5 $808.8 $730.6 $675.9 2014 5 5 Raw Materials Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Fine Paper and Packaging. Hardwood pulp is the primary fiber used to produce products of the fine paper and packaging business. Other significant raw material inputs in the production of fine paper and packaging products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper and packaging business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper and packaging operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper and packaging business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. Energy and Water The equipment used to manufacture the products of our technical products and fine paper and packaging businesses use significant amounts of energy, primarily electricity, natural gas, oil and coal. We generate substantially all of our electrical energy at the Munising mill and approximately 25 of the electrical energy at our mills in Appleton, Wisconsin and Bruckm¨uhl, Germany. We also purchase electrical energy from external sources, including electricity generated from renewable sources. Availability of energy is not expected to be a problem in the foreseeable future, but the purchase price of such energy can and likely will fluctuate significantly based on changes in demand and other factors. An adequate supply of water is needed to manufacture our products. We believe that there is an adequate supply of water for this purpose at each of our manufacturing locations. Working Capital Technical Products. The technical products business maintains approximately 25 to 30 days of raw materials and supplies inventories to support its manufacturing operations and approximately 25 to 35 days of finished goods and semi-finished goods inventory to support customer orders for its products. Sales terms in the technical products business vary depending on the type of product sold and customer category. Extended credit terms of up to 120 days are offered to customers located in certain international markets. In general, sales are collected in approximately 45 to 55 days and supplier invoices are paid within 20 to 30 days. Fine Paper and Packaging. The fine paper and packaging business maintains approximately 10 days of raw material inventories to support its paper making operations and about 55 days of finished goods inventory to fill customer orders. Fine paper and packaging sales terms range between 20 and 30 days with discounts of zero to two percent for customer payments, with discounts of one percent and 20-day terms used most often. Extended credit terms are offered to customers located in certain international markets. Supplier invoices are typically paid within 30 days. 6 Competition Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. Technical Products. Our technical products business competes in global markets with a number of large multinational competitors, including Ahlstrom Corporation, Munksj¨o, ArjoWiggins SAS and Hollingsworth & Vose The following tables present further information about our businesses by geographic area (dollars in millions): Company. It also competes in some, but not all, of these segments with smaller regional manufacturers, such as Monadnock Paper Mills, Inc., Expera Specialty Solutions LLC., Potsdam Specialty Paper, Inc. and Paper Line S.p.A. We believe the bases of competition in most of these segments are the ability to design and develop 2010 customized product features to meet customer specifications while maintaining quality, customer service and price. Net sales We believe our research and development program gives us an advantage in customizing base papers to meet United States customer needs. Europe $413.6 244.1 Fine Paper and Packaging. We believe our fine paper and packaging business is the leading supplier of premium $657.7 printing, packaging and other high end specialty papers in North America. Our fine paper and packaging business also competes globally in the premium segment of the uncoated free sheet market. The fine paper and packaging business competes directly in North America with Mohawk Fine Paper Inc. and other smaller companies. We believe the primary bases of competition for premium fine papers are brand recognition, product quality, customer service, product availability, promotional support and variety of colors and textures. Price also can be a factor particularly for lower quality printing needs that may compete with opaque and offset papers. We have and will $308.9 continue to invest in advertising and other programs aimed at graphic designers, printers and corporate end-users 0.1 in order to maintain a high level of brand awareness as well as communicate the advantages of using our products. 297.7 Total Assets United States Canada Europe $322.5 0.2 288.0 $286.4 0.3 278.4 Year Ended December 31, $543.4 265.4 $416.2 279.8 Consolidated December 31, $808.8 $696.0 2012 2011 2012 2011 2010 F o r m 1 0 - K Research and Development Consolidated $610.7 $565.1 $606.7 Raw Materials Our technical products business maintains research and development laboratories in Feldkirchen-Westerham, Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities Germany, Munising, Michigan and Pittsfield, Massachusetts to support its strategy of developing new products and and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business technologies, and to support growth in its existing product lines and other strategically important markets. In 2014, Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by we consolidated our Roswell, Georgia and Munising, Michigan research and development laboratories at our business segment. manufacturing facility in Munising, Michigan to bring our research and development laboratories in closer proximity to our manufacturing operation. We have continually invested in product research and development with spending of $6.4 million in 2014, $6.1 million in 2013 and $5.6 million in 2012. Intellectual Property Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements The KIMDURA� and MUNISING LP� trademarks have made a significant contribution to the marketing of externally. We believe that all of the raw materials for our technical products operations, except for certain synthetic film and clean room papers of the technical products business. The GESSNER� and varitess� specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a trademarks have played an important role in the marketing of Neenah Germany product lines. single supplier would not cause a shutdown of our manufacturing operations. We own more than 40 patents and have multiple pending patent applications in the United States, Canada, Our technical products business acquires all of its specialized pulp requirements from two global suppliers and Western Europe and certain other countries covering image transfer paper, abrasives and medical packaging. We certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by believe our image transfer patents have contributed to establishing the technical products business as a leading formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our supplier of image transfer papers. needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be We own more than 50 trademarks with registrations in approximately 50 countries. Our fine paper and packaging able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term business has built its market leading reputation on trademarked brands that date back as far as 1908. The disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp CLASSIC� family of brands is one of the most well-known and respected trademarks in the printing and writing grades or other latex grades that would allow us to meet required product performance characteristics and incur industry. The CLASSIC� family includes CLASSIC CREST�, CLASSIC� Laid, CLASSIC� Linen, CLASSIC only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative COLUMNS� and CLASSIC COTTON� papers. Our branded products, which also include the pulp or latex grades would have a material effect on our operations. ENVIRONMENT� brand and brands such as STARWHITE�, SUNDANCE� and ESSE�, have played an important role in the marketing of the product lines of the fine paper and packaging business, which are Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other recognized as an industry leader for quality, consistency and printing applications. Our fine paper and packaging significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, business has an exclusive licensing agreements to market and distribute Crane’s CRANE’S CREST�, CRANE’S cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that BOND�, CRANE’S LETTRA�, CRANE’S PALETTE� and CRANE’S� Choice Papers branded fine papers and all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five Gruppo Cordenons SpA’s SO...SILK�, PLIKE� and STARDREAM� branded fine papers. In conjunction with the percent of the total fiber requirements of our fine paper business, are readily available from several sources and acquisition of the Wausau fine paper business in January 2012, we acquired the ASTROBRIGHTS�, that the loss of a single supplier would not cause a shutdown of our manufacturing operations. ASTROPARCHE� and ROYAL premium writing, text and cover brands. In conjunction with the acquisition of the Southworth premium business paper business in January 2013, we acquired the SOUTHWORTH� premium business paper brand. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. 7 5 Backlog and Seasonality Technical Products. In general, sales and profits for the technical products business have been relatively stronger in the first half of the year with reductions in the third quarter due to reduced customer converting schedules and in the fourth quarter due to a reduction in year-end inventory levels by our customers. The order flow for the technical products business is subject to seasonal peaks for several of its products, such as the larger volume grades of specialty tape, abrasives, premask, and label stock used primarily in the downstream finished goods manufacturing process. To assure timely shipments during these seasonal peaks, the technical products business provides certain customers with finished goods inventory on consignment. Historically, consignment sales have represented approximately 15 percent of the technical products business’s annual sales. Orders are typically shipped within six to eight weeks of receipt of the order. However, the technical products business periodically experiences periods where order entry levels surge, and order backlogs can increase substantially. Raw materials are purchased and manufacturing schedules are planned based on customer forecasts, current market conditions and individual orders for custom products. The order backlog in the technical products business on December 31, 2014 was approximately $110 million and represented approximately 25 percent of prior year sales. The order backlog in the technical products business on December 31, 2013 was approximately $100 million and represented approximately 25 percent of prior year sales. We have previously filled the order backlog from December 31, 2013 and expect to fill the order backlog from December 31, 2014 within the current fiscal year. Fine Paper and Packaging. The fine paper and packaging business has historically experienced a steady flow of orders. Orders for stock products are typically shipped within two days, while custom orders are shipped within two to three weeks of receipt. Raw material purchases and manufacturing schedules are planned based on a combination of historical trends, customer forecasts and current market conditions. The order backlogs in the fine paper and packaging business on December 31, 2014 and 2013 were $17.0 million and $22.9 million, respectively, which represent approximately 15 days of sales and 21 days of sales, respectively. The order backlogs from December 31, 2014 and 2013 were filled in the respective following years. The operating results at each of our businesses are influenced by the timing of our annual maintenance downs, which are generally scheduled in the third quarter. Employee and Labor Relations As of December 31, 2014, we had 2,000 regular full-time employees of whom 830 hourly and 395 salaried employees were located in the United States and 490 hourly and 285 salaried employees were located in Germany. Except for our Pittsfield, Massachusetts mills which are non-union, hourly employees at our U.S. paper mills are represented by the United Steelworkers Union (the ‘‘USW’’). The collective bargaining agreement between the Whiting, Neenah, Munising and Appleton paper mills and the USW expire on January 31, 2018, June 30, 2018, July 14, 2018 and May 31, 2019, respectively. On pension matters our U.S. paper mills have bargained jointly with the union. The current agreement on pension matters will remain in effect until September 2019. Approximately 50 percent of salaried employees and 80 percent of hourly employees of Neenah Germany are eligible to be represented by the Mining, Chemicals and Energy Trade Union, Industriegewerkschaft Bergbau, Chemie and Energie (the ‘‘IG BCE’’). In June 2013, the IG BCE and a national trade association representing all employers in the industry signed a collective bargaining agreement covering union employees of Neenah Germany that expires in June 2015. We believe we have satisfactory relations with our employees covered by collective bargaining agreements and do not expect the negotiation of new collective bargaining agreements to have a material effect on our results of operations or cash flows. 8 Environmental, Health and Safety Matters Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. Our operations are subject to federal, state and local laws, regulations and ordinances relating to various environmental, health and safety matters. Our operations are in compliance with, or we are taking actions The following tables present further information about our businesses by geographic area (dollars in millions): designed to ensure compliance with, these laws, regulations and ordinances. However, the nature of our operations exposes us to the risk of claims concerning non-compliance with environmental, health and safety laws Year Ended December 31, or standards, and there can be no assurance that material costs or liabilities will not be incurred in connection 2010 with those claims. Except for certain orders issued by environmental, health and safety regulatory agencies with which we believe we are in compliance and which we believe are immaterial to our financial condition, results of $413.6 operations and liquidity, we are not currently named as a party in any judicial or administrative proceeding 244.1 relating to environmental, health and safety matters. Net sales United States Europe $543.4 265.4 $416.2 279.8 2012 2011 Consolidated Greenhouse gas (‘‘GHG’’) emissions have increasingly become the subject of political and regulatory focus. Concern over potential climate change, including global warming, has led to legislative and regulatory initiatives directed at limiting GHG emissions. In addition to certain federal proposals in the United States to regulate GHG 2010 emissions, Germany and all the states in which we operate are currently considering GHG legislation or regulations, either individually and/or as part of regional initiatives. While not all are likely to become law it is reasonably possible that additional climate change related mandates will be forthcoming, and it is expected that $308.9 they may adversely impact our costs by increasing energy costs and raw material prices, requiring operational or 0.1 equipment modifications to reduce emissions and creating costs to comply with regulations or to mitigate the 297.7 financial consequences of such compliance. Total Assets United States Canada Europe $322.5 0.2 288.0 $286.4 0.3 278.4 December 31, 2012 2011 $808.8 $696.0 $657.7 $610.7 $565.1 $606.7 Consolidated Raw Materials While we have incurred in the past several years, and will continue to incur, capital and operating expenditures in order to comply with environmental, health and safety laws, regulations and ordinances, we believe that our future Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities cost of compliance with environmental, health and safety laws, regulations and ordinances, and our exposure to and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business liability for environmental, health and safety claims will not have a material effect on our financial condition, Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by results of operations or liquidity. However, future events, such as changes in existing laws and regulations, new business segment. legislation to limit GHG emissions or contamination of sites owned, operated or used for waste disposal by us (including currently unknown contamination and contamination caused by prior owners and operators of such sites or other waste generators) may give rise to additional costs which could have a material effect on our financial Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our condition, results of operations or liquidity. technical products business. The technical products business purchases softwood pulp, specialty pulp and latex We have planned capital expenditures to comply with environmental, health and safety laws, regulations and from various suppliers. The technical products business purchases substantially all of its raw material requirements ordinances during the period 2015 through 2017 of approximately $1 million to $2 million annually. Our externally. We believe that all of the raw materials for our technical products operations, except for certain anticipated capital expenditures for environmental projects are not expected to have a material effect on our specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a financial condition, results of operations or liquidity. single supplier would not cause a shutdown of our manufacturing operations. F o r m 1 0 - K AVAILABLE INFORMATION Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by We are subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934. As formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our such, we file annual, quarterly and current reports, proxy statements and other information with the Securities and needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Exchange Commission (‘‘SEC’’). Our SEC filings are available to the public on the SEC’s web site at www.sec.gov. an interruption of production at any one supplier, we believe that each of these suppliers individually would be You may also read and copy any document we file at the SEC’s Public Reference Room located at 100 F Street, able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp Reference Room. Our common stock is traded on the New York Stock Exchange under the symbol NP. You may grades or other latex grades that would allow us to meet required product performance characteristics and incur inspect the reports, proxy statements and other information concerning us at the offices of the New York Stock only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative Exchange, 20 Broad Street, New York, New York 10005. pulp or latex grades would have a material effect on our operations. Our web site is www.neenah.com. Information on our web site is not incorporated by reference in this document. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other Our reports on Form 10-K, Form 10-Q and Form 8-K, as well as amendments to those reports, are and will be significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, available free of charge on our web site as soon as reasonably practicable after we file or furnish such reports with cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that the SEC. In addition, you may request a copy of any of these reports (excluding exhibits) at no cost upon written all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five request to us at: Investor Relations, Neenah Paper, Inc., 3460 Preston Ridge Road, Suite 600, Alpharetta, percent of the total fiber requirements of our fine paper business, are readily available from several sources and Georgia 30005. that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. 9 5 Item 1A. Risk Factors You should carefully consider each of the following risks and all of the other information contained in this Annual Report on Form 10-K. Some of the risks described below relate principally to our business and the industry in which we operate, while others relate principally to our indebtedness. The remaining risks relate principally to the securities markets generally and ownership of our common stock. Our business, financial condition, results of operations or liquidity could be materially affected by any of these risks, and, as a result, the trading price of our common stock could decline. The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Risks Related to Our Business and Industry Our business will suffer if we are unable to effectively respond to decreased demand for some of our products due to conditions in the global economy or secular pressures in some markets. We have experienced and may experience in the future decreased demand for some of our products due to slowing or negative global economic growth, uncertainty in credit markets, declining consumer and business confidence, fluctuating commodity prices, increased unemployment and other challenges affecting the global economy. Parts of our fine paper and packaging business are subject to electronic substitution. In addition, our customers may experience deterioration of their businesses, cash flow shortages, and difficulty obtaining financing. If we are unable to implement business strategies to effectively respond to decreased demand for our products, our financial position, cash flows and results of operations would be adversely affected. Changes in international conditions generally, and particularly in Germany, could adversely affect our business and results of operations. Our operating results and business prospects could be adversely affected by risks related to the countries outside the United States in which we have manufacturing facilities or sell our products, including Germany, the Eurozone and elsewhere. Downturns in economic activity, adverse tax consequences, fluctuations in the value of local currency versus the U.S. dollar, or any change in social, political or labor conditions in any of these countries or regions could negatively affect our financial results. For example, the European sovereign debt crisis has negatively affected economic conditions in Europe and globally. We have significant operations and financial relationships based in Europe and in Germany in particular. Historically more than 40 percent of our sales have been to customers in Europe. If the European sovereign debt crisis continues or deepens, economic conditions in Europe may further deteriorate. In that case, our business in Europe and elsewhere, as well as the businesses of our customers and suppliers, may be adversely affected. Our businesses are significantly dependent on sales to their largest customers. Sales to the largest customer of the fine paper and packaging business represented approximately 20 percent the segment’s total sales for 2014. Sales to the three largest customers of the technical products business represented approximately 20 percent of total sales for the segment in 2014. A significant loss of business from any of our major fine paper and packaging or technical products customers may have a material adverse effect on our financial condition, results of operations and liquidity. We are also subject to credit risk associated with our customer concentration. If one or more of our largest fine paper and packaging or technical products customers were to become bankrupt, insolvent or otherwise were unable to pay for services provided, we may incur significant write-offs of accounts receivable. The availability of and prices for raw materials and energy will significantly impact our business. We purchase a substantial portion of the raw materials and energy necessary to produce our products on the open market, and, as a result, the price and other terms of those purchases are subject to change based on factors such as worldwide supply and demand and government regulation. We do not have significant influence over our raw material or energy prices and our ability to pass increases in those prices along to purchasers of our products may be challenged, unless those increases coincide with increased demand for the product. Therefore, raw material or energy prices could increase at the same time that prices for our products are steady or decreasing. In addition, we may not be able to recoup other cost increases we may experience, such as those resulting from inflation or from increases in wages or salaries or increases in health care, pension or other employee benefits costs, insurance costs or other costs. 10 Our technical products business acquires all of its specialized pulp requirements from two global suppliers and Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by 10 percent of our consolidated net sales. formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of The following tables present further information about our businesses by geographic area (dollars in millions): an interruption of production at any one supplier, we believe that each of these suppliers individually would be Year Ended December 31, able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. $413.6 244.1 Our fine paper and packaging business acquires a substantial majority of the cotton fiber used in the production of certain branded bond paper products pursuant to annual agreements with two North American producers. The $657.7 balance of our cotton fiber requirements are acquired through ‘‘spot market’’ purchases from a variety of other producers. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Net sales United States Europe $543.4 265.4 $416.2 279.8 Consolidated December 31, $696.0 $808.8 2011 2012 2010 2012 2011 2010 Total Assets United States Canada Europe Our operating results are likely to fluctuate. Consolidated Our operating results are subject to substantial quarterly and annual fluctuations due to a number of factors, many of which are beyond our control. Operating results could be adversely affected by general economic conditions causing a downturn in the market for paper products. Additional factors that could affect our results include, among others, changes in the market price of pulp, the effects of competitive pricing pressures, production capacity levels and manufacturing yields, availability and cost of products from our suppliers, the gain or loss of Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities significant customers, our ability to develop, introduce and market new products and technologies on a timely and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business basis, changes in the mix of products produced and sold, seasonal customer demand, the relative strength of the Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by Euro versus the U.S. dollar, increasing interest rates and environmental costs. The timing and effect of the business segment. foregoing factors are difficult to predict, and these or other factors could materially adversely affect our quarterly or annual operating results. $610.7 $565.1 $606.7 Raw Materials $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 297.7 F o r m 1 0 - K We face many competitors, several of which have greater financial and other resources. Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex We face competition in each of our business segments from companies that produce the same type of products from various suppliers. The technical products business purchases substantially all of its raw material requirements that we produce or that produce lower priced alternative products that customers may use instead of our products. externally. We believe that all of the raw materials for our technical products operations, except for certain Some of our competitors have greater financial, sales and marketing, or research and development resources than specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a we do. Greater financial resources and product development capabilities may also allow our competitors to single supplier would not cause a shutdown of our manufacturing operations. respond more quickly to new opportunities or changes in customer requirements. We cannot be certain that our tax planning strategies will be effective and that our net operating losses (‘‘NOLs’’) and research and development tax credits will continue to be available to offset our tax liability. Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of We are continuously undergoing examination by the Internal Revenue Service (the ‘‘IRS’’) as well as taxing an interruption of production at any one supplier, we believe that each of these suppliers individually would be authorities in various state and foreign jurisdictions in which we operate. The IRS and other taxing authorities able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term routinely challenge certain deductions and credits reported on our income tax returns. disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. As of December 31, 2014, we had $5.2 million of U.S. Federal and $64.4 million of U.S. State tax NOLs which may be used to offset taxable income in the future. In order to utilize the NOLs, we must generate consolidated taxable income. If not used, substantially all of the NOLs will expire in various amounts between 2020 and 2030. In addition, we had $31.4 million of U.S. federal and state research and development credits (‘‘R&D Credits’’) Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other which, if not used, will expire between 2025 and 2034 for the U.S. federal R&D Credits and between 2017 and significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, 2029 for the state R&D Credits. cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five In accordance with Accounting Standards Codification (‘‘ASC’’) Topic 740, Income Taxes (‘‘ASC Topic 740’’), as of percent of the total fiber requirements of our fine paper business, are readily available from several sources and December 31, 2014, we have recorded a liability of $7.0 million for uncertain tax positions where we believe it is that the loss of a single supplier would not cause a shutdown of our manufacturing operations. ‘‘more likely than not’’ that the benefit reported on our income tax return will not be realized. There can be no assurance, however, that the actual amount of unrealized deductions will not exceed the amounts we have recognized for uncertain tax positions. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. 11 5 We have significant obligations for pension and other postretirement benefits. We have significant obligations for pension and other postretirement benefits which could require future funding beyond that which we have funded in the past or which we currently anticipate. At December 31, 2014, our projected pension benefit obligations were $353.3 million and exceeded the fair value of pension plan assets by $65.0 million. In 2014, we made total contributions to qualified pension trusts of $24.5 million. In addition, during 2014 we paid pension benefits for unfunded qualified and supplemental retirement plans of $2.3 million. At December 31, 2014, our projected other postretirement benefit obligations were $40.8 million. No assets have been set aside to satisfy our other postretirement benefit obligations. In 2014, we made payments for postretirement benefits other than pensions of $3.8 million. A material increase in funding requirements or benefit payments could have a material effect on our cash flows. The outcome of legal actions and claims may adversely affect us. We are involved in legal actions and claims arising in the ordinary course of our business. The outcome of such legal actions and claims against us cannot be predicted with certainty. Legal actions and claims against us could have a material effect on our financial condition, results of operations and liquidity. Labor interruptions would adversely affect our business. Except for our Pittsfield, Massachusetts mills which are non-union, substantially all of our hourly employees are unionized. In addition, some key customers and suppliers are also unionized. Strikes, lockouts or other work stoppages or slowdowns involving our unionized employees could have a material effect on us. Future dividends on our common stock may be restricted or eliminated. Dividends are declared at the discretion of our Board of Directors, and future dividends will depend on our future earnings, cash flow, financial requirements and other factors. Our ability to pay cash dividends on our common stock is limited under the terms of both our bank credit agreement and the indenture for our $175 million of eight-year senior notes due November 2021 (the ‘‘2021 Senior Notes’’). As of December 31, 2014, under the most restrictive terms of the indenture for the 2021 Senior Notes, our ability to pay cash dividends on our common stock is limited to a total of $25 million in a 12-month period. There can be no assurance that we will continue to pay dividends in the future. If we have a catastrophic loss or unforeseen or recurring operational problems at any of our facilities, we could suffer significant lost production and/or cost increases. Our technical products and fine paper and packaging businesses may suffer catastrophic loss due to fire, flood, terrorism, mechanical failure, or other natural or man-made events. If any of our facilities were to experience a catastrophic loss, it could disrupt our operations, delay production, delay or reduce shipments, reduce revenue, and result in significant expenses to repair or replace the facility. These expenses and losses may not be adequately covered by property or business interruption insurance. Even if covered by insurance, our inability to deliver our products to customers, even on a short-term basis, may cause us to lose market share on a more permanent basis. Fluctuations in currency exchange rates could adversely affect our results. Exchange rate fluctuations for the Euro do not have a material effect on the operations or cash flows of our German technical products business. Our German technical products business incurs most of its costs and sells most of its production in Europe and, therefore, its operations and cash flows are not materially affected by changes in the exchange rate of the Euro relative to the U.S. dollar. Changes in the Euro exchange rate relative to the U.S. dollar will, however, have an effect on our balance sheet and reported results of operations. See ‘‘Quantitative and Qualitative Disclosures About Market Risk — Foreign Currency Risk.’’ In addition, because we transact business in other foreign countries, some of our revenues and expenses are denominated in a currency other than the local currency of our operations. As a result, changes in exchange rates between the currency in which the transaction is denominated and the local currency of our operations into which the transaction is being recorded can impact the amount of local currency recorded for such transaction. This can result in more or less local currency revenues or costs related to such transaction, and thus have an effect on our reported sales and income before income taxes. 12 Our activities are subject to extensive government regulation, which could increase our costs, cause us to incur liabilities Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than and adversely affect the manufacturing and marketing of our products. 10 percent of our consolidated net sales. Our operations are subject to federal, state and local laws, regulations and ordinances in the United States and The following tables present further information about our businesses by geographic area (dollars in millions): Germany relating to various environmental, health and safety matters. The nature of our operations requires that we invest capital and incur operating costs to comply with those laws, regulations and ordinances and exposes us to the risk of claims concerning non-compliance with environmental, health and safety laws or standards. We cannot assure that significant additional expenditures will not be required to maintain compliance with, or satisfy potential claims arising from, such laws, regulations and ordinances. Future events, such as changes in existing laws and regulations or contamination of sites owned, operated or used for waste disposal by us (including currently unknown contamination and contamination caused by prior owners and operators of such sites or other waste generators) may give rise to additional costs that could require significantly higher capital expenditures and operating costs, which would reduce the funds otherwise available for operations, capital expenditures, future business opportunities or other purposes. Net sales United States Europe Year Ended December 31, $416.2 279.8 $413.6 244.1 $543.4 265.4 Consolidated $808.8 $696.0 $657.7 2012 2011 2010 December 31, 2012 2011 2010 We are subject to risks associated with possible climate change legislation and various cost and manufacturing issues associated with such legislation. Consolidated GHG emissions have increasingly become the subject of political and regulatory focus. Concern over potential climate change, including global warming, has led to legislative and regulatory initiatives directed at limiting GHG emissions. In addition to certain federal proposals in the United States to regulate GHG emissions, Germany and all the states in which we operate are currently considering GHG legislation or regulations, either individually and/or as part of regional initiatives. While not all are likely to become law it is reasonably possible that additional Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities climate change related mandates will be forthcoming, and it is expected that they may adversely impact our costs and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business by increasing energy costs and raw material prices, requiring operational or equipment modifications to reduce Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by emissions and creating costs to comply with regulations or to mitigate the financial consequences of compliance. business segment. $610.7 $565.1 $606.7 $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 297.7 Total Assets United States Canada Europe Raw Materials Risks Relating to Our Indebtedness We may not be able to fund our future capital requirements internally or obtain third-party financing. Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex We may be required or choose to obtain additional debt or equity financing to meet our future working capital from various suppliers. The technical products business purchases substantially all of its raw material requirements requirements, as well as to fund capital expenditures and acquisitions. To the extent we must obtain financing externally. We believe that all of the raw materials for our technical products operations, except for certain from external sources to fund our capital requirements, we cannot guarantee financing will be available on specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a favorable terms, if at all. As of December 31, 2014, we have required debt payments of $1.4 million during the single supplier would not cause a shutdown of our manufacturing operations. year ending December 31, 2015. F o r m 1 0 - K We may not be able to generate sufficient cash flow to meet our debt obligations, including the 2021 Senior Notes. Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our Our ability to make scheduled payments or to refinance our obligations with respect to the 2021 Senior Notes, our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of other debt and our other liabilities will depend on our financial and operating performance, which, in turn, is an interruption of production at any one supplier, we believe that each of these suppliers individually would be subject to prevailing economic conditions and to certain financial, business and other factors beyond our control. able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term If our cash flow and capital resources are insufficient to fund our debt obligations and other liabilities, we could disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp face substantial liquidity problems and may be forced to reduce or delay scheduled expansions and capital grades or other latex grades that would allow us to meet required product performance characteristics and incur expenditures, sell material assets or operations, obtain additional capital or restructure our debt. We cannot assure only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative that our operating performance, cash flow and capital resources will be sufficient to repay our debt in the future. pulp or latex grades would have a material effect on our operations. In the event that we are required to dispose of material assets or operations or restructure our debt to meet our debt and other obligations, we can make no assurances as to the terms of any such transaction or how quickly any such transaction could be completed. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. our debt holders could declare all outstanding principal and interest to be due and payable; If we cannot make scheduled payments on our debt, we will be in default and, as a result: our senior secured lenders could terminate their commitments and commence foreclosure proceedings against our assets; and we could be forced into bankruptcy or liquidation. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton If our operating performance declines in the future or we breach our covenants under our revolving credit facility, fiber supply issues to have a material effect on our operations. we may need to obtain waivers from the lenders under our revolving credit facility to avoid being in default. We may not be able to obtain these waivers. If this occurs, we would be in default under our revolving credit facility. (cid:127) (cid:127) (cid:127) 13 5 We have significant indebtedness which subjects us to restrictive covenants relating to the operation of our business. As of December 31, 2014, we had $175 million of 2021 Senior Notes, $48.7 million in revolving credit borrowings at Neenah Germany and $10.6 million of project financing outstanding. In addition, availability under our bank credit agreement was approximately $146 million. Our leverage could have important consequences. For example, it could: (cid:127) make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on the 2021 Senior Notes and our other indebtedness; (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) place us at a disadvantage to our competitors; require us to dedicate a substantial portion of our cash flow from operations to service payments on our indebtedness, thereby reducing funds available for other purposes; increase our vulnerability to a downturn in general economic conditions or the industry in which we operate; limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and general corporate and other purposes; and limit our ability to plan for and react to changes in our business and the industry in which we operate. The terms of our indebtedness, including our bank credit agreement and the indenture governing the 2021 Senior Notes, contain covenants restricting our ability to, among other things, incur certain additional debt, make specified restricted payments, pay dividends, authorize or issue capital stock, enter into transactions with our affiliates, consolidate or merge with or acquire another business, sell certain of our assets or liquidate, dissolve or wind-up our company. As of December 31, 2014, under the most restrictive terms of our debt agreements, our ability to pay cash dividends on our common stock is limited to a total of $25 million in a 12-month period. In addition, our bank credit agreement contains covenants with which we must comply during the term of the agreement. Among other things, such covenants restrict the our ability to incur certain debt, incur or create certain liens, make specified restricted payments, authorize or issue capital stock, enter into transactions with our affiliates, consolidate, merge with or acquire another business, sell certain of their assets, or dissolve or wind up. In addition, if the aggregate availability under our revolving credit facilities is less than the greater of (i) $25 million and (ii) 12.5% of the maximum aggregate commitments under our revolving credit facilities as then in effect, we will be subject to increased reporting obligations and controls until such time as availability is more than the greater of (a) $35 million and (b) 17.5% of the maximum aggregate commitments under our revolving credit facilities as then in effect. If aggregate availability under our revolving credit facilities is less than the greater of (i) $20 million and (ii) 10% of the maximum aggregate commitments under our revolving credit facilities as then in effect, we are required to comply with a fixed charge coverage ratio (as defined in our bank credit agreement) of not less than 1.1 to 1.0 for the preceding four-quarter period, tested as of the end of each quarter. Such compliance, once required, would no longer be necessary once (x) aggregate availability under our revolving credit facilities exceeds the greater of (i) 17.5% of the aggregate commitment for our revolving credit facilities and (ii) $35 million for 60 consecutive days and (y) no default or event of default has occurred and is continuing during such 60-day period. As of December 31, 2014, aggregate availability under our revolving credit facilities exceeded the minimum required amount, and we are not required to comply with such fixed charge coverage ratio. Our revolving credit facilities accrue interest at variable rates. As of December 31, 2014, we had $48.7 million of revolving credit borrowings outstanding. We may reduce our exposure to rising interest rates by entering into interest rate hedging arrangements, although those arrangements may result in us incurring higher interest expenses than we would incur without the arrangements. If interest rates increase in the absence of such arrangements, we will need to dedicate more of our cash flow from operations to make payments on our debt. For more information on our liquidity, see ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.’’ 14 Our failure to comply with the covenants contained in our revolving credit facility or the indenture governing the 2021 Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than Senior Notes could result in an event of default that could cause acceleration of our indebtedness. 10 percent of our consolidated net sales. Our failure to comply with the covenants and other requirements contained in the indenture governing the 2021 The following tables present further information about our businesses by geographic area (dollars in millions): Senior Notes, our revolving credit facility or our other debt instruments could cause an event of default under the relevant debt instrument. The occurrence of an event of default could trigger a default under our other debt Year Ended December 31, instruments, prohibit us from accessing additional borrowings and permit the holders of the defaulted debt to declare amounts outstanding with respect to that debt to be immediately due and payable. Our assets or cash flows may not be sufficient to fully repay borrowings under our outstanding debt instruments, and we may be $543.4 unable to refinance or restructure the payments on indebtedness on favorable terms, or at all. 265.4 Net sales United States Europe $416.2 279.8 $413.6 244.1 2011 2012 2010 Despite our indebtedness levels, we and our subsidiaries may be able to incur substantially more indebtedness, which may increase the risks created by our substantial indebtedness. Consolidated $808.8 $696.0 $657.7 Because the terms of our bank credit agreement and the indenture governing the 2021 Senior Notes do not fully prohibit us or our subsidiaries from incurring additional indebtedness, we and our subsidiaries may be able to incur substantial additional indebtedness in the future, some of which may be secured. If we or any of our subsidiaries incur additional indebtedness, the related risks that we and they face may intensify. $322.5 0.2 288.0 Total Assets United States Canada Europe Our bank credit agreement is secured by a majority of our assets. $286.4 0.3 278.4 $308.9 0.1 297.7 2012 2011 2010 December 31, Consolidated Our bank credit agreement is secured by a majority of our assets. Availability under our bank credit agreement will fluctuate over time depending on the value of our inventory, receivables and various capital assets. An extended work stoppage or decline in sales volumes would result in a decrease in the value of the assets securing Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities the bank credit agreement. A reduction in availability under the bank credit agreement could have a material and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business effect on our liquidity. Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. $610.7 $565.1 $606.7 Changes in credit ratings issued by nationally recognized statistical rating organizations could adversely affect our cost of financing and have an adverse effect on the market price of our securities. Raw Materials Our debt currently has a non-investment grade rating, and there can be no assurance that any rating assigned by Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our the rating agencies will remain for any given period of time or that a rating will not be lowered or withdrawn technical products business. The technical products business purchases softwood pulp, specialty pulp and latex entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the from various suppliers. The technical products business purchases substantially all of its raw material requirements rating, such as adverse changes, so warrant. A lowering or withdrawal of the ratings assigned to our debt securities externally. We believe that all of the raw materials for our technical products operations, except for certain by rating agencies may increase our future borrowing costs and reduce our access to capital, which could have a specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a material adverse impact on our financial condition and results of operations. single supplier would not cause a shutdown of our manufacturing operations. F o r m 1 0 - K Our technical products business acquires all of its specialized pulp requirements from two global suppliers and We depend on our subsidiaries to generate cash flow to meet our debt service obligations, including payments on the 2021 certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by Senior Notes. formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our We conduct a substantial portion of our business through our subsidiaries. Consequently, our cash flow and ability needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of to service our debt obligations, including the 2021 Senior Notes, depend upon the earnings of our subsidiaries and an interruption of production at any one supplier, we believe that each of these suppliers individually would be the distribution of those earnings to us, or upon loans, advances or other payments made by these entities to us. able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term The ability of these entities to pay dividends or make other payments or advances to us will be subject to disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp applicable laws and contractual restrictions contained in the instruments governing their debt, including our grades or other latex grades that would allow us to meet required product performance characteristics and incur revolving credit facility and the indenture governing the 2021 Senior Notes. These limitations are also subject to only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative important exceptions and qualifications. pulp or latex grades would have a material effect on our operations. The ability of our subsidiaries to generate sufficient cash flow from operations to allow us to make scheduled Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other payments on our debt, including the 2021 Senior Notes, will depend upon their future financial performance, significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, which will be affected by a range of economic, competitive and business factors, many of which are outside of our cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that control as well as their ability to repatriate cash to us. If our subsidiaries do not generate sufficient cash flow from all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five operations to help us satisfy our debt obligations, including payments on the 2021 Senior Notes, or if they are percent of the total fiber requirements of our fine paper business, are readily available from several sources and unable to distribute sufficient cash flow to us, we may have to undertake alternative financing plans, such as that the loss of a single supplier would not cause a shutdown of our manufacturing operations. refinancing or restructuring our debt, selling assets, reducing or delaying capital expenditures or seeking to raise additional capital. Refinancing may not be possible, and any assets may not be saleable, or, if sold, we may not realize sufficient amounts from those sales. Additional financing may not be available on acceptable terms, if at all, or we may be prohibited from incurring it, if available, under the terms of our various debt instruments then in effect. Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms would have an adverse effect on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations on the 2021 Senior Notes. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. 15 5 FORWARD-LOOKING STATEMENTS Certain statements in this Annual Report on Form 10-K may constitute ‘‘forward-looking’’ statements as defined in Section 27A of the Securities Act of 1933 (the ‘‘Securities Act’’), Section 21E of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’), the Private Securities Litigation Reform Act of 1995 (the ‘‘PSLRA’’), or in releases made by the SEC, all as may be amended from time to time. Statements contained in this Annual Report on Form 10-K that are not historical facts may be forward-looking statements within the meaning of the PSLRA. Any such forward-looking statements reflect our beliefs and assumptions and are based on information currently available to us. Forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the ‘‘safe harbor’’ provisions of such laws. The Company cautions investors that any forward-looking statements we make are not guarantees or indicative of future performance. For additional information regarding factors that may cause our results of operations to differ materially from those presented herein, please see ‘‘Risk Factors’’ contained in this Annual Report on Form 10-K and as are detailed from time to time in other reports we file with the SEC. You can identify forward-looking statements as those that are not historical in nature, particularly those that use terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘expect,’’ ‘‘anticipate,’’ ‘‘contemplate,’’ ‘‘estimate,’’ ‘‘believe,’’ ‘‘plan,’’ ‘‘project,’’ ‘‘predict,’’ ‘‘potential’’ or ‘‘continue,’’ or the negative of these, or similar terms. In evaluating these forward-looking statements, you should consider the following factors, as well as others contained in our public filings from time to time, which may cause our actual results to differ materially from any forward-looking statement: (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) (cid:127) changes in market demand for our products due to global economic conditions; fluctuations in (i) exchange rates (in particular changes in the U.S. dollar/Euro currency exchange rates) and (ii) interest rates; increases in commodity prices, (particularly for pulp, energy and latex) due to constrained global supplies or unexpected supply disruptions; the availability of raw materials and energy; the competitive environment; capital and credit market volatility and fluctuations in global equity and fixed-income markets; unanticipated expenditures related to the cost of compliance with environmental and other governmental regulations; our ability to control costs and implement measures designed to enhance operating efficiencies; the loss of current customers or the inability to obtain new customers; increases in the funding requirements for our pension and postretirement liabilities; changes in asset valuations including write-downs of assets including property, plant and equipment; inventory, accounts receivable, deferred tax assets or other assets for impairment or other reasons; our existing and future indebtedness; our net operating losses may not be available to offset our tax liability and other tax planning strategies may not be effective; strikes, labor stoppages and changes in our collective bargaining agreements and relations with our employees and unions; other risks that are detailed from time to time in reports we file with the SEC; and other factors described under ‘‘Risk Factors’’. You are cautioned not to unduly rely on such forward-looking statements, which speak only as of the date made, when evaluating the information presented in this information statement. 16 Item 1B. Unresolved Staff Comments Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. None. The following tables present further information about our businesses by geographic area (dollars in millions): Item 2. Properties Our principal executive offices are located in Alpharetta, Georgia, a suburb of Atlanta, Georgia, and we operate 2010 research and development laboratories in Munising, Michigan and Pittsfield, Massachusetts. We own and operate six paper mills in the United States that produce printing and writing, text, cover, durable saturated and coated substrates and other specialty papers for a variety of end uses. We own and operate three paper mills in Germany $416.2 that produce transportation and other filter media, wall coverings and durable and saturated substrates. 279.8 Net sales United States Europe Year Ended December 31, $413.6 244.1 $543.4 265.4 2012 2011 Consolidated We believe that each of these facilities is adequately maintained and is suitable for conducting our operations and $657.7 business. We manage machine operating schedules at our manufacturing locations to fulfill customer orders in a timely manner and control inventory levels. $808.8 $696.0 December 31, As of December 31, 2014, following are the locations of our principal facilities and operating equipment and the products produced at each location. All the facilities are owned by us, except as otherwise noted: 2012 2011 2010 Location Total Assets United States Canada Europe Fine Paper and Packaging Segment Equipment/Resources $322.5 0.2 288.0 Products $286.4 0.3 278.4 $308.9 0.1 297.7 $565.1 $606.7 Paper finishing equipment Two paper machines; paper finishing equipment $610.7 Printing and writing, text, cover and other specialty papers Consolidated Appleton Mill Appleton, Wisconsin Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities Converting Center and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Neenah, Wisconsin Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. Neenah Mill Neenah, Wisconsin Raw Materials Whiting Mill Printing and writing, text, cover Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our Whiting, Wisconsin and other specialty papers technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain Munising Mill specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a Munising, Michigan single supplier would not cause a shutdown of our manufacturing operations. Printing and writing, text, cover and other specialty papers Printing and writing, text, cover and other specialty papers Four paper machines; paper finishing equipment Two paper machines; paper finishing equipment Technical Products Segment Tapes, abrasives, premask, medical packaging and other durable, saturated and coated substrates Two paper machines; two off line saturators; two off line coaters; specialty finishing equipment Three paper machines; eight calenders; two rewinders Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by Pittsfield Mills formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our Pittsfield, Massachusetts needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Bruckm¨uhl Mill an interruption of production at any one supplier, we believe that each of these suppliers individually would be Bruckm¨uhl, Germany able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur Lahnstein Mill only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative Lahnstein, Germany pulp or latex grades would have a material effect on our operations. One paper machine; two saturator/coaters; finishing equipment Reverse osmosis filtration and glass applications Nonwoven wall coverings, printing media and durable substrates Masking tape backings and abrasive backings One paper machine; three impregnating and coating machines; two calendars; finishing equipment Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, Weidach Mill Two paper machines; three cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that Feldkirchen-Westerham, Germany saturators; one laminator; three all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five meltblown machines; specialty percent of the total fiber requirements of our fine paper business, are readily available from several sources and finishing equipment that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Transportation filtration and other industrial filter media See Note 6 of Notes to Consolidated Financial Statements, ‘‘Debt’’ for a description of the material encumbrances We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would attached to the properties described in the table above. increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F o r m 1 0 - K 17 5 Capacity Utilization Paper machines in our manufacturing facilities generally operate on a combination of five or seven-day schedules to meet demand. We are not constrained by input factors and the maximum operating capacity of our manufacturing facilities is calculated based on operating days to account for variations in mix and different units of measure between assets. Due to required maintenance downtime and contract holidays, the maximum number of operating days is defined as 350 days per year. We generally expect to utilize approximately 85 to 95 percent of our maximum operating capacity. The following table presents our percentage utilization of maximum operating capacity by segment: Year Ended December 31, 2014 2013 2012 Technical Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper and Packaging (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88% 88% 88% 86% 86% 85% (1) The Index, Tag and Vellum Bristol product lines acquired from Wausau in January 2012 are manufactured in our Fine Paper and Packaging mills and the percentage of maximum capacity utilization for the Fine Paper and Packaging segment includes such production. As of December 31, 2014, following are the locations of our owned and leased office and laboratory space and the functions performed at each location. Administrative Location Alpharetta, Georgia Office/Other Space Leased Office Space Function Corporate Headquarters and Administration Munising, Michigan Owned Laboratory Space Research and Development for our paper businesses Pittsfield, Massachusetts Owned Laboratory Space Research and Development for the acquired technical materials business Feldkirchen-Westerham, Germany Owned Laboratory Space Research and Development for our technical product businesses Neenah and Appleton, Wisconsin Owned Office Space Administration Pittsfield, Massachusetts Owned Office Space Administration Item 3. Legal Proceedings Litigation We are involved in certain legal actions and claims arising in the ordinary course of business. While the outcome of these legal actions and claims cannot be predicted with certainty, it is the opinion of management that the outcome of any such claim which is pending or threatened, either individually or on a combined basis, will not have a material effect on our consolidated financial condition, results of operations or liquidity. Income Taxes We are continuously undergoing examination by the IRS as well as various state and foreign jurisdictions. The IRS and other taxing authorities routinely challenge certain deductions and credits we report on our income tax returns. Item 4. Mine Safety Disclosures Not applicable. 18 Securities Net sales United States Europe PART II Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity 10 percent of our consolidated net sales. The following tables present further information about our businesses by geographic area (dollars in millions): Neenah common stock is listed on the New York Stock Exchange and is traded under the ticker symbol NP. Trading, as reported on the New York Stock Exchange, Inc. Composite Transactions Tape, and dividend information follows: Year Ended December 31, 2012 2011 2010 Common Stock $416.2 Market Price 279.8 Low $543.4 265.4 High $413.6 Dividends 244.1 Declared $808.8 $61.79 $57.31 $53.87 2012 $51.72 $696.0 $51.33 $49.62 December 31, $47.82 2011 $40.64 $657.7 $0.27 $0.27 $0.24 2010 $0.24 Consolidated 2014 Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Assets United States Canada Europe Consolidated $286.4 0.3 $37.50 278.4 $31.80 $27.44 $565.1 $27.70 $322.5 0.2 $44.31 288.0 $40.38 $32.35 $610.7 $32.57 2013 Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $308.9 0.1 $0.20 297.7 $0.20 $0.15 $606.7 $0.15 Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities Dividends are declared at the discretion of the Board of Directors, and future dividends will depend on our future and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business earnings, cash flow, financial requirements and other factors. Our ability to pay cash dividends on our common Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by stock is limited under the terms of both our bank credit agreement and our 2021 Senior Notes. As of business segment. December 31, 2014, under the most restrictive terms of our debt agreements, our ability to pay cash dividends on our common stock is limited to a total of $25 million in a 12-month period. For the year ended December 31, 2014 we paid cash dividends of $1.02 per common share or $17.1 million. For the year ended December 31, 2013 we paid cash dividends of $0.70 per common share or $11.5 million. In November 2014, our Board of Directors Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our approved an 11 percent increase in the annual dividend rate on our common stock to $1.20 per share. The technical products business. The technical products business purchases softwood pulp, specialty pulp and latex dividend is scheduled to be paid in four equal quarterly installments beginning in March 2015. from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain As of February 13, 2015, Neenah had approximately 1,600 holders of record of its common stock. The closing specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a price of Neenah’s common stock on February 13, 2015 was $62.15. single supplier would not cause a shutdown of our manufacturing operations. Raw Materials Purchases of Equity Securities: The following table sets forth certain information regarding purchases of our common stock during the fourth quarter of 2013. Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be Approximate Dollar Value of Shares that May Yet able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term Be Purchased Under disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp Publicly Announced Plans or Programs grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b) Total Number of Shares Purchased Average Price Paid Per Share Period October 2014 . . . . . . . . . . . . . . . . . . . . . November 2014 . . . . . . . . . . . . . . . . . . . December 2014(a) . . . . . . . . . . . . . . . . . $23,841,000 $23,841,000 $23,841,000 (a) Transactions represent the purchase of vested restricted shares from employees to satisfy minimum tax Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that withholding requirements upon vesting of stock-based awards. None of these transactions were made in the all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five open market. The average price paid is based upon the closing sales price on the New York Stock Exchange percent of the total fiber requirements of our fine paper business, are readily available from several sources and on the date of the transaction. Such purchases are held as treasury shares. See Note 8 of Notes to that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Consolidated Financial Statements, ‘‘Stock Compensation Plans.’’ 15,000 — 53,200 14,800 — — $52.17 — $60.27 (b) On May 22, 2014, our Board of Directors authorized a program that would allow for the purchase of up to We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. $25 million of outstanding common stock through May 21, 2015. 19 5 F o r m 1 0 - K Equity Compensation Plan Information The following table summarizes information about outstanding options, share appreciation rights and restricted stock units and shares reserved for future issuance under our existing equity compensation plans as of December 31, 2014. Plan Category (a) Number of securities to be issued upon exercise of outstanding options, warrants, and rights (b) Weighted-average exercise price of outstanding options, warrants, and rights(1) (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders . . Equity compensation plans not approved by security holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587,000(2)(3) $26.49 1,675,000 — 587,000 — $26.49 — 1,675,000 (1) The weighted-average exercise price of outstanding options, warrants and rights does not take into account restricted stock units since they do not have an exercise price. (2) Includes (i) 374,500 shares issuable upon the exercise of outstanding options and stock appreciation rights (‘‘SARs’’), (ii) 107,200 shares issuable following the vesting and conversion of outstanding performance share unit awards, and (iii) 105,300 shares issuable upon the vesting and conversion of outstanding restricted stock units, all as of December 31, 2014. As of December 31, 2014, we had an aggregate of 604,000 stock options and SARs outstanding. The weighted average exercise price of the stock options and SARs was $26.49 per share and the remaining contractual life of such awards was 6.3 years. (3) Includes 282,200 shares that would be issued upon the assumed exercise of 511,700 SARs at the $60.27 per share closing price of our common stock on December 31, 2015. 20 Item 6. Selected Financial Data The following tables present further information about our businesses by geographic area (dollars in millions): Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than The following table sets forth our selected historical financial and other data. You should read the information set 10 percent of our consolidated net sales. forth below in conjunction with ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and our historical consolidated financial statements and the notes to those consolidated financial statements included elsewhere in this Annual Report. The statement of operations data for the years ended December 31, 2014, 2013 and 2012 and the balance sheet data as of December 31, 2014 and 2013 set forth below are derived from our audited historical consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The balance sheet data as of December 31, 2012, 2011 and 2010 and the statement of operations $413.6 data for the years ended December 31, 2011 and 2010 set forth below are derived from our historical consolidated 244.1 financial statements not included in this Annual Report on Form 10-K. Net sales United States Europe Year Ended December 31, $416.2 279.8 $543.4 265.4 2012 2011 2010 Consolidated $696.0 Year Ended December 31, $808.8 $657.7 2014 2013 2012 2011 2010 (Dollars in millions, except per share data) 2010 2012 2011 December 31, $902.7 725.5 $844.5 678.9 $808.8 649.7 $696.0 570.6 $657.7 537.7 Total Assets United States Canada Europe Consolidated Statement of Operations Data Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . Integration/restructuring costs (a) . . . . . . . . . . . . . . . . . . . . . . . . . . Pension plan settlement charge (b) . . . . . . . . . . . . . . . . . . . . . . . . . Loss on early extinguishment of debt (c) . . . . . . . . . . . . . . . . . . . . . Loss (gain) on closure and sale of the Ripon Mill (d) . . . . . . . . . . .. Other (income) expense — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . $308.9 120.0 0.1 69.3 297.7 — — — Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities (3.4) and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business (1.0) Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $286.4 125.4 0.3 68.2 278.4 — — 2.4 — (1.8) $322.5 159.1 0.2 77.4 288.0 5.8 3.5 0.6 — 1.4 177.2 83.2 2.9 3.5 0.2 — (0.1) 165.6 79.4 0.6 0.2 0.5 — 1.1 83.8 11.0 87.5 11.1 70.4 13.4 56.6 15.3 55.1 20.3 $610.7 $565.1 $606.7 Income from continuing operations before income taxes . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Raw Materials 76.4 7.7 72.8 23.4 57.0 17.1 41.3 12.0 34.8 9.8 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from discontinued operations, net of taxes (f) . . . . . . . Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain $ 1.69 $ 4.09 specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. $ 1.61 $ 4.03 Earnings from continuing operations per diluted share . . . . . . . . . . . Earnings from continuing operations per basic share . . . . . . . . . . . . . 25.0 134.1 29.3 (0.2) 68.7 — 49.4 2.6 39.9 4.4 $ 68.7 $ 2.41 $ 1.82 $ 52.0 $ 44.3 $ 29.1 $159.1 $ 2.96 $ 3.02 $ 2.46 $ 1.91 F o r m 1 0 - K $ 1.02 Cash dividends per common share . . . . . . . . . . . . . . . . . . . . . . . . . . Other Financial Data Net cash flow provided by (used for): Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54.5 an interruption of production at any one supplier, we believe that each of these suppliers individually would be Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17.4) able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term Other investing activities (f(3)) (g) . . . . . . . . . . . . . . . . . . . . . . . . 83.9 Financing activities (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78.3) disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp 2.6x Ratio of earnings to fixed charges (e) . . . . . . . . . . . . . . . . . . . . . . . . grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. $ 57.2 (23.1) (5.8) (63.8) 3.5x $ 40.1 (25.1) (7.2) (13.0) 4.8x $ 83.5 (28.7) (4.6) 15.0 6.7x $ 94.5 (27.9) (77.0) 10.2 6.9x December 31, $ 0.70 $ 0.48 $ 0.44 $ 0.40 2014 2013 2012 2011 2010 Consolidated Balance Sheet Data Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Working capital, less cash and cash equivalents . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, $ 48.3 7.8 cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that 81.6 138.9 all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five 606.7 610.7 percent of the total fiber requirements of our fine paper business, are readily available from several sources and 231.3 177.6 that the loss of a single supplier would not cause a shutdown of our manufacturing operations. 447.5 412.9 159.2 197.8 We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. $ 73.4 128.4 675.9 190.5 408.4 267.5 $ 19.8 70.2 565.1 164.5 398.4 166.7 $ 72.6 135.8 730.6 232.9 441.9 288.7 $ (Dollars in millions) 21 5 (a) For the year ended December 31, 2014, we incurred $1.0 million of integration costs related to the acquisition of the technical materials business and $1.9 million of restructuring costs. For the year ended December 31, 2013, we incurred $0.4 million of integration costs related to the acquisition of the Southworth brands and $0.2 million of restructuring costs. For the year ended December 31, 2012, we incurred $5.8 million integration costs related to the acquisition of the Wausau brands. (b) For the years ended December 31, 2014, 2013 and 2012, benefit payments under certain pension plans exceeded the sum of expected service cost and interest costs for the plan for the respective calendar years. In accordance with ASC Topic 715, Compensation — Retirement Benefits (‘‘ASC Topic 715’’), we measured the liabilities of the post-retirement benefit plans and recognized settlement losses of $3.5 million, $0.2 million and $3.5 million, respectively. (c) For the year ended December 31, 2014, we amended and restated our existing bank credit facility and recognized a pre-tax loss of $0.2 million for the write-off of unamortized debt issuance costs. For the year ended December 31, 2013, we redeemed $90 million of 2014 Senior Notes and repaid all outstanding term loan borrowings ($29.3 million). In connection with the early extinguishment of debt we recognized a pre-tax loss of $0.5 million for the write-off of unamortized debt issuance costs. For the year ended December 31, 2012, we completed an early redemption of $68 million in aggregate principal amount of the 2014 Senior Notes. In connection with the early redemption we recognized a pre-tax loss of $0.6 million, including a call premium and the write-off of unamortized debt issuance costs. For the year ended December 31, 2011, we completed an early redemption of $65 million in aggregate principal amount of the 2014 Senior Notes. In connection with the early redemption we recognized a pre-tax loss of $2.4 million, including a call premium and the write-off of unamortized debt issuance costs. (d) In May 2009, we permanently closed the Ripon Mill. In October 2011, we sold the remaining assets of the Ripon Mill to Diamond Pet Food Processors of Ripon, LLC for gross proceeds of $9 million. We recognized a pre-tax gain on the sale of $3.4 million in the fourth quarter of 2011. (e) For purposes of determining the ratio of earnings to fixed charges, earnings consist of income before income taxes (less interest) plus fixed charges. Fixed charges consist of interest expense, including amortization of debt issuance costs, and the estimated interest portion of rental expense. (f) The following table presents the results of discontinued operations: Year Ended December 31, 2014 2013(1) 2012(2) 2011(3) 2010 (Dollars in millions) Discontinued operations: (4) Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $4.2 $(0.1) $(0.3) $ 1.0 Gain on disposal of the Woodlands . . . . . . . . . . . . . . . . . . . . . . Reclassification of cumulative translation adjustments related to investments in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . — — — — — — — — 4.2 1.6 — — — (0.1) (4.5) — — 74.1 87.9 — 162.0 (0.3) (0.1) 163.0 28.9 Income (loss) from discontinued operations, net of taxes . . . . . . . $ — $2.6 $ 4.4 $(0.2) $134.1 (1) During the first quarter of 2013, we received a refund of excess pension contributions from the terminated Terrace Bay pension plan. As a result, we recorded income before income taxes from discontinued operations of $4.2 million and a related provision for income taxes of $1.6 million. (2) In November 2012, audits of the 2007 and 2008 tax years were finalized with a finding of no additional taxes due. As a result, we recognized a non-cash tax benefit of $4.5 million related to the reversal of certain liabilities for uncertain income tax positions. (3) In March 2010, Neenah Canada sold approximately 475,000 acres of woodland assets in Nova Scotia (the ‘‘Woodlands’’) to Northern Timber Nova Scotia Corporation, an affiliate of Northern Pulp (collectively, ‘‘Northern Pulp’’), for C$82.5 million ($78.6 million) resulting in a pre-tax gain of $74.1 million. The sale of the Woodlands resulted in the substantially complete liquidation of the Company’s investment in Neenah Canada. In accordance with Accounting Standards Codification (‘‘ASC’’) Topic 830, Foreign Currency Matters (‘‘ASC Topic 830’’), $87.9 million of cumulative currency translation adjustments attributable to the Company’s Canadian subsidiaries was reclassified into earnings and recognized as part of the gain on sale of the Woodlands. See Note 4 of Notes to Consolidated Financial Statements, ‘‘Discontinued Operations.’’ 22 (4) For the years ended December 31, 2014, 2013, 2012, 2011 and 2010, the results of operations of the Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than Pictou Mill and the Woodlands and the loss on disposal of the Pictou Mill are reported as discontinued 10 percent of our consolidated net sales. operations in the Consolidated Statement of Operations Data. (g) In July 2014, we purchased all of the outstanding equity of Crane for approximately $72 million. The following tables present further information about our businesses by geographic area (dollars in millions): Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Year Ended December 31, Net sales United States Europe The following discussion and analysis presents the factors that had a material effect on our results of operations during the years ended December 31, 2014, 2013 and 2012. Also discussed is our financial position as of the end of those years. 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. $416.2 279.8 $413.6 244.1 $543.4 265.4 Consolidated $808.8 $696.0 $657.7 2012 2011 2010 December 31, Introduction 2012 2011 2010 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: $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 297.7 Total Assets United States Canada Europe $610.7 $565.1 $606.7 (cid:127) Overview of Business; Consolidated Business Segments; (cid:127) (cid:127) Results of Operations and Related Information; Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. (cid:127) Adoption of New Accounting Pronouncements; and Liquidity and Capital Resources; (cid:127) (cid:127) Critical Accounting Policies and Use of Estimates. Raw Materials Overview of Business Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our We are a leading producer of technical products and premium fine papers and packaging. We have two primary technical products business. The technical products business purchases softwood pulp, specialty pulp and latex operations: our technical products business and our fine paper and packaging business (formerly known as the fine from various suppliers. The technical products business purchases substantially all of its raw material requirements paper business). On January 1, 2015, we changed the name of our fine paper business to fine paper and externally. We believe that all of the raw materials for our technical products operations, except for certain packaging. The name change better reflects the increasing importance, and plans for continued growth, of our specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a premium packaging products. single supplier would not cause a shutdown of our manufacturing operations. F o r m 1 0 - K (cid:127) Our mission is to create value by improving the image and performance of everything we touch. We expect to Our technical products business acquires all of its specialized pulp requirements from two global suppliers and create value by growing in specialized niche markets that value performance or image and where we have certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by competitive advantages. In managing our businesses, we believe that achieving and maintaining a leadership formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our position in our markets, responding effectively to customer needs and competitive challenges, employing capital needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of optimally, controlling costs and managing risks are important to long-term success. Changes in input costs and an interruption of production at any one supplier, we believe that each of these suppliers individually would be general economic conditions also impact our results. In this discussion and analysis, we will refer to these factors. able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term Competitive Environment — Our past results have been and our future prospects will be significantly disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp affected by the competitive environment in which we operate. In most of our markets, our businesses grades or other latex grades that would allow us to meet required product performance characteristics and incur compete directly with well-known competitors, some of which are larger and more diversified. While our only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative businesses are oriented to premium performance and quality they may also face competitive pressures pulp or latex grades would have a material effect on our operations. from lower value products. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other Economic Conditions and Input Costs — The markets for all of our products are affected to a significant significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, degree by economic conditions, including rapid changes in input costs, particularly for pulp, latex and cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that natural gas that may not be recovered immediately through pricing or other actions. Our results are also all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five affected by fluctuations in exchange rates, particularly for the Euro. percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. (cid:127) We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. 23 5 Business Segments Our technical products business is a leading international producer of transportation, water 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, water and other filtration media, specialty tape, abrasive, label and other technical products markets. Our technical products manufacturing facilities are located near Munich and Frankfurt, Germany, in Munising, Michigan and Pittsfield, Massachusetts. We believe our fine paper and packaging business is the leading supplier of premium printing, packaging and other high end 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, as well as through converters, major national retailers and specialty businesses. We believe that our fine paper and packaging 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 product lines 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 During 2014, global economic conditions generally showed improvement from the prior year. The improvement was more pronounced in the U.S., while demand remained subdued in regions such as Western Europe and slowed in certain emerging markets. In our Technical Products businesses, sales volumes for many product categories are sensitive to changes in gross domestic product in the countries in which we compete. Approximately half of the sales for our Technical Products business are in Europe. In our Fine Paper and Packaging business, which is mostly in North America, demand for these premium products is also sensitive to economic conditions, as well as pressures in some parts of the business from the use of electronic media for communication. In both of our segments, our objective is to outperform the markets through expansion into adjacent products and new geographies, through share gains and through acquisitions. In 2014, results in our Technical Products business benefitted from the purchase of the technical materials business from Crane in July, 2014. Additional external factors impacting results in 2014 were higher input costs for fiber and energy, and especially natural gas prices in North America during the first quarter due to an unusually severe winter. Over time, we target changes in selling prices and operation efficiencies to offset impacts from higher input costs. In July 2014, we purchased all of the outstanding equity of the Crane Technical Materials business from Crane & Co., Inc. for $72.4 million. The acquisition purchase price was paid from cash on hand. The acquired technical materials business provides performance-oriented wet laid nonwovens media for fast growing filtration end markets as well as environmental, energy and industrial uses. This technical materials business has two manufacturing facilities in Pittsfield, Massachusetts. For the year ended December 31, 2014, consolidated net sales increased $58.2 million from the prior year to $902.7 million primarily due to incremental technical products volume related to the acquisition of the technical materials business, higher average net prices for our heritage businesses and growth in technical products volume. Excluding incremental sales from the acquired technical materials business, consolidated net sales increased $34.1 million or four percent from the prior year. Consolidated operating income of $87.5 million for the year ended December 31, 2014 increased $3.7 million from the prior year. The favorable comparison to the prior year was primarily due to higher net price for both businesses, increased sales volumes for our technical products business and fine paper manufacturing efficiencies. These favorable variances were partially offset by $4.7 million of higher manufacturing input costs for our fine paper business which included more than $3 million for natural gas in the first quarter of 2014 due to the unusually cold winter in the United States. Excluding aggregate charges of $6.6 million in 2014 for integration and restructuring costs, costs related to the early extinguishment of debt and a pension plan settlement charge and aggregate charges of $1.3 million in 2013 for acquisition-related integration costs, costs related to the early extinguishment of debt and a pension plan settlement charge, operating income for the year ended December 31, 2014 increased $9.0 million from the prior year. 24 Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. Cash provided by operating activities of $94.5 million for year ended December 31, 2014 was $11.0 million favorable to cash provided by operating activities of $83.5 million in the prior year primarily due to higher operating income and an $8.8 million decrease in our investment in working capital for the current year compared to an increase in our investment in working capital of $6.6 million in the prior year. These favorable variances The following tables present further information about our businesses by geographic area (dollars in millions): were partially offset by increased contributions and benefit payments for post-retirement benefit obligations. Net sales United States Europe Year Ended December 31, In December 2014, we amended and restated our existing credit facility by entering into a Third Amended and 2010 Restated Credit Agreement (the ‘‘Third Amended Credit Agreement’’). The Third Amended Credit Agreement, among other things: (1) increases the maximum principal amount of our existing U.S. credit facility to $125 million (the ‘‘U.S. Revolving Credit Facility’’); (2) establishes a secured, multicurrency, revolving credit facility for Neenah Germany in the maximum principal amount of $75 million (the ‘‘German Revolving Credit Facility,’’ and together with the U.S. Revolving Credit Facility, the ‘‘Global Revolving Credit Facilities’’); (3) causes $657.7 Neenah and the other domestic borrowers to guarantee, among other things, the obligations under the German Revolving Credit Facility; (4) provides for the Global Revolving Credit Facilities to mature on December 18, 2019; and (5) provides for an accordion feature permitting one or more increases in the Global Revolving Credit Facilities in an aggregate principal amount not exceeding $50 million, such that the aggregate commitments under the Global Revolving Credit Facilities do not exceed $250 million. $413.6 244.1 $416.2 279.8 $543.4 265.4 Consolidated December 31, $808.8 $696.0 2011 2012 2011 2010 2012 Analysis of Net Sales — Years Ended December 31, 2014, 2013 and 2012 The following table presents net sales by segment and net sales expressed as a percentage of total net sales: $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 297.7 $610.7 $565.1 $606.7 Total Assets United States Canada Europe Consolidated Net sales Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities 2012 and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. Technical Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper and Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49% $406.6 48% 372.7 29.5 3% 52% $416.1 45% 401.8 26.6 3% $466.6 409.0 27.1 50% 46% — 2014 2014 2013 2013 2012 Year Ended December 31, F o r m 1 0 - K Raw Materials Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $902.7 100% $844.5 100% $808.8 100% Commentary: Year 2014 versus 2013 Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Total Change Technical Products . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper and Packaging . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Our technical products business acquires all of its specialized pulp requirements from two global suppliers and 2014 certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by $466.6 $ 1.4 formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our 409.0 — needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of 27.1 — an interruption of production at any one supplier, we believe that each of these suppliers individually would be $ 1.4 $902.7 able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp Consolidated net sales for the year ended December 31, 2014 were $58.2 million or seven percent higher than the grades or other latex grades that would allow us to meet required product performance characteristics and incur prior year due to incremental technical products volume related to the acquired technical materials business, only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative increased volume for both businesses and higher average selling prices. pulp or latex grades would have a material effect on our operations. Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in Net Sales Compared to the Prior Year For the Year Ended December 31, $416.1 401.8 26.6 $43.0 2.8 (0.2) $ 6.1 4.4 0.7 $50.5 7.2 0.5 Average Net Price Change Due To $844.5 Currency $58.2 $45.6 $11.2 Volume 2013 (cid:127) Net sales in our technical products business increased $50.5 million, or 12 percent, due to increased volume Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other and higher average selling prices. Excluding incremental sales from the acquisition, technical product sales significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, increased $26.4 million or six percent due to a five percent increase in shipments as volume increased for all cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that product categories led by backings, transportation filtration and specialty products. Average selling prices all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five increased approximately 1.5 percent from the prior year due to a more favorable product mix and higher percent of the total fiber requirements of our fine paper business, are readily available from several sources and selling prices. that the loss of a single supplier would not cause a shutdown of our manufacturing operations. (cid:127) Net sales in our fine paper and packaging business increased $7.2 million or two percent from the prior year We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would due to higher average net prices and increased volume. Average net price improved from the prior year due increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the to a more favorable product mix and a one percent increase in average selling prices. Sales volumes increased ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton approximately one percent from the prior year period primarily due to growth in shipments of core premium fiber supply issues to have a material effect on our operations. products, luxury packaging and labels, and incremental sales of approximately $1.5 million in the first quarter of 2014 from the acquisition of the Southworth brands (acquired on January 31, 2013). 25 5 Year 2013 versus 2012 For the Year Ended December 31, 2013 2012 Technical Products . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper and Packaging . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $416.1 401.8 26.6 $406.6 372.7 29.5 Change in Net Sales Compared to the Prior Year Change Due To Volume Average Net Price Currency Total Change $ 9.5 29.1 (2.9) $ 5.1 16.7 (2.9) $ (4.2) 12.4 — $ 8.2 $ 8.6 — — $ 8.6 Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $844.5 $808.8 $35.7 $18.9 Consolidated net sales for the year ended December 31, 2013 were $35.7 million higher than the prior year primarily due to incremental volume growth in both segments, a more favorable product mix for our fine paper and packaging business and favorable currency exchange rate effects. (cid:127) Net sales in our technical products business increased $9.5 million, or two percent, as favorable currency effects and increased volume more than offset lower average selling prices. Sales volumes increased approximately one percent from the prior year due to growth in transportation filtration and specialty tape shipments that more than offset a decline in wall covering volume. Favorable currency exchange effects reflected a three percent strengthening of the Euro relative to the U.S. dollar during 2013. Average selling prices decreased less than one percent from the prior year and included the effect of contractual price adjustments for certain grades due to the pass-through of lower input costs. (cid:127) Net sales in our fine paper and packaging business increased $29.1 million or eight percent from the prior year due to increased volume and a more favorable product mix. Sales volumes increased approximately four percent due to incremental volume from the acquisitions of the Southworth and Wausau brands and double- digit growth in luxury packaging shipments, partially offset by lower shipments of both lower priced non-branded products and certain branded products. Average net price improved from the prior year due to a more favorable product mix that included a greater proportion of higher priced products and modestly higher average selling prices. Analysis of Operating Income — Years Ended December 31, 2014, 2013 and 2012 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, 2014 2013 2012 Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 80.4 80.4 80.3 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . One-time adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (income) expense — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.6 9.2 0.7 — 9.7 1.2 8.5 1.2 19.6 9.4 0.2 0.1 9.9 1.3 8.6 2.8 19.7 9.6 1.2 0.2 8.7 1.7 7.0 2.1 Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3% 5.8% 4.9% 26 The following table sets forth our operating income by segment for the periods indicated: Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. Year Ended December 31, The following tables present further information about our businesses by geographic area (dollars in millions): 2014 2013 2012 Operating income Technical Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper and Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated corporate costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating Income as Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net sales United States Europe 2012 Year Ended December 31, $ 46.9 61.2 (0.4) (20.2) 2011 $ 38.6 59.8 1.2 (15.8) 2010 $ 37.6 50.0 2.4 (19.6) $416.2 279.8 83.8 $413.6 244.1 70.4 87.5 $543.4 265.4 Consolidated Adjustments for One-time Items Fine Paper and Packaging $808.8 $696.0 $657.7 Acquisition integration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.4 December 31, Technical Products Total Assets United States Unallocated corporate costs Canada Europe Integration/Restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Post-retirement benefit plan settlement charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated 2012 2011 2010 2.2 0.2 $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 297.7 $610.7 $565.1 $606.7 0.2 — 0.5 3.5 0.7 0.2 5.8 — 3.5 — 0.6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total 4.1 Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities Total One-time Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.9 and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by Operating Income as Adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . business segment. $ 85.1 $ 94.1 $ 80.3 6.6 4.4 0.7 1.3 Raw Materials 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 Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our results of our ongoing operations. We believe that providing adjusted operating results will help investors gain an technical products business. The technical products business purchases softwood pulp, specialty pulp and latex additional perspective of underlying business trends and results. Adjusted operating income is not a recognized from various suppliers. The technical products business purchases substantially all of its raw material requirements term under GAAP and should not be considered in isolation or as a substitute for operating income derived in externally. We believe that all of the raw materials for our technical products operations, except for certain accordance with GAAP. Other companies may use different methodologies for calculating their non-GAAP specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a financial measures and, accordingly, our non-GAAP financial measures may not be comparable to their measures. single supplier would not cause a shutdown of our manufacturing operations. F o r m 1 0 - K Commentary: Year 2014 versus 2013 Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Change in Operating Income (Loss) Compared to the Prior Year an interruption of production at any one supplier, we believe that each of these suppliers individually would be For the Year Ended able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term December 31, disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp Change Volume Price(a) Costs(b) Currency Other grades or other latex grades that would allow us to meet required product performance characteristics and incur Technical Products(c) . . . . . . . . . . . . . . . . . . . . . . . $ 46.9 $ 38.6 $ 8.3 $(5.3) $0.5 $ 7.0 only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative — 3.0 1.4 Fine Paper and Packaging(d) . . . . . . . . . . . . . . . . . 0.7 pulp or latex grades would have a material effect on our operations. — (2.3) (1.6) — Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (4.4) (4.4) — Unallocated corporate costs(e) . . . . . . . . . . . . . . . . Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, $(9.0) cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87.5 $ 83.8 $ 3.7 (a) Includes price changes, net of changes in product mix. 59.8 1.2 (20.2) (15.8) $ 0.3 (7.0) — — $ 5.8 4.7 0.7 — 61.2 (0.4) Change Due To $(6.7) Material $11.2 $ 7.7 $0.5 Total 2014 2013 Net (b) Includes price changes for raw materials and energy. (c) For the year ended December 31, 2014, Technical Products results include $1.0 million of integration costs We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the related to the acquired technical materials business and $1.2 million of restructuring costs. For the year ended ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton December 31, 2013, Technical Products results include $0.2 million of restructuring costs. fiber supply issues to have a material effect on our operations. 27 5 (d) For the year ended December 31, 2013, Fine Paper and Packaging results include $0.4 million of integration costs related to the Southworth acquisition. (e) For the year ended December 31, 2014 unallocated corporate costs include a pension plan settlement charge of $3.5 million, $0.2 million of costs related to the amendment and restatement of our bank credit agreement and $0.7 million of restructuring costs. For the year ended December 31, 2013 unallocated corporate costs include $0.5 million of costs related to the early redemption of 2014 Senior Notes and a $0.2 million pension plan settlement charge. Consolidated operating income of $87.5 million for the year ended December 31, 2014 increased $3.7 million from the prior year. Excluding aggregate charges of $6.6 million in 2014 for integration and restructuring costs, costs related to the early extinguishment of debt and a pension plan settlement charge and aggregate charges of $1.3 million in 2013 for acquisition-related integration costs, costs related to the early extinguishment of debt and a pension plan settlement charge, operating income for the year ended December 31, 2014 increased $9.0 million from the prior year. The improvement in operating income was primarily due to higher net price for both businesses and incremental technical products volume, including volume related to the acquired technical materials business, partially offset by higher manufacturing input costs in our fine paper and packaging business. (cid:127) Operating income for our technical products business increased $8.3 million or 22 percent from the prior year. The improvement in operating income was primarily due to a more favorable product mix, growth in shipments for all product categories and incremental volume related to the acquired technical materials business. The more favorable product mix was primarily due to growth in higher value filtration and specialty shipments. In 2014, other manufacturing costs increased versus the prior year due to additional costs related to annual maintenance downs at our German facilities, including an extended down at our filtration plant to increase the capabilities and capacity of one of the machines. Results for the years ended December 31, 2014 and 2013 include $2.2 million and $0.2 million for integration/restructuring costs, respectively. (cid:127) Operating income for our fine paper and packaging business increased $1.4 million or two percent from the prior year primarily due to higher average net selling prices, manufacturing operating efficiencies and increased shipment volume. These favorable variances were partially offset by $7.0 million in higher manufacturing input costs, including more than $3.0 million for natural gas in the first quarter of 2014. Results for the ended December 31, 2013 include $0.4 million for acquisition related integration costs. (cid:127) Unallocated corporate costs for the year ended December 31, 2014 were $20.0 million, or $4.4 million unfavorable to the prior year. Excluding aggregate charges of $4.4 million in 2014 for a pension plan settlement charge, restructuring costs and costs related to the early extinguishment of debt and aggregate charges of $0.7 million in 2013 for costs related to the early extinguishment of debt and a pension plan settlement charge, unallocated corporate expenses were $0.7 million unfavorable to the prior year. Year 2013 versus 2012 For the Year Ended December 31, Change in Operating Income (Loss) Compared to the Prior Year Total Net Material Change Due To 2013 2012 Change Volume Price(a) Costs(b) Currency Other(c) $(1.8) Technical Products . . . . . . . . . . . . . . . . . . . . . . . . $ 38.6 $ 37.6 $ 1.0 $ 2.4 9.2 Fine Paper and Packaging(d) . . . . . . . . . . . . . . . . 7.0 (1.5) — Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Unallocated corporate costs(d) . . . . . . . . . . . . . . . 50.0 2.4 (15.8) (19.6) 9.8 (1.2) 3.8 59.8 1.2 — Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83.8 $ 70.4 $13.4 $10.1 $ 5.2 $ 0.4 (3.6) — — $(3.2) $ 0.6 (0.1) — — $(0.6) (2.7) 0.3 3.8 $ 0.5 $ 0.8 (a) Includes price changes, net of changes in product mix. (b) Includes price changes for raw materials and energy. (c) For the year ended December 31, 2013, Fine Paper and Packaging results include $0.4 million of integration costs related to the Southworth acquisition. For the year ended December 31, 2012, Fine Paper and Packaging results include $5.8 million of integration costs related to the Wausau acquisition and non-cash charges for the revaluation of inventory and profit in inventory. 28 (d) For the year ended December 31, 2013 unallocated corporate costs include $0.5 million of costs related to the Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than early redemption of 2014 Senior Notes and a $0.2 million pension plan settlement charge. For the year ended 10 percent of our consolidated net sales. December 31, 2012 unallocated corporate costs include a $3.5 million pension plan settlement charge and $0.6 million of costs related to the early redemption of our 2014 Senior Notes. The following tables present further information about our businesses by geographic area (dollars in millions): Consolidated operating income of $83.8 million for the year ended December 31, 2013 increased $13.4 million Year Ended December 31, from the prior year. Excluding aggregate charges of $1.3 million in 2013 for integration and restructuring costs, 2010 costs related to the early extinguishment of debt and a pension plan settlement charge and aggregate charges of $9.9 million in 2012 for acquisition-related integration costs, costs related to the early extinguishment of debt and $413.6 a pension plan settlement charge, operating income for the year ended December 31, 2013 increased $4.8 million 244.1 from the prior year. The improvement in operating income was primarily due to incremental volume related to the Southworth and Wausau acquisitions and a more favorable product mix for both businesses partially offset by $657.7 higher operating costs in our fine paper and packaging business to support the acquired brands and lower average selling prices for our technical products business. Net sales United States Europe $543.4 265.4 $416.2 279.8 Consolidated $808.8 $696.0 2011 2012 December 31, 2012 2011 2010 (cid:127) Operating income for our technical products business increased $1.0 million or three percent from the prior year. The improvement in operating income resulted from a more favorable product mix and increased $308.9 volume, partially offset by lower average selling prices. The more favorable product mix was primarily due to 0.1 growth in higher value filtration and specialty tape shipments. 297.7 Total Assets United States Canada Europe (cid:127) Operating income for our fine paper and packaging business increased $9.8 million or 20 percent from the $606.7 prior year. Excluding acquisition related integration costs of $0.4 million in 2013 and $5.8 million in 2012, operating income increased $4.4 million or eight percent primarily due to incremental volume related to the Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities Southworth and Wausau acquisitions and a more favorable product mix, partially offset by higher and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business manufacturing inputs costs and increased distribution costs, and selling and administrative spending in support Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by of the acquired brands. business segment. $322.5 0.2 288.0 $286.4 0.3 278.4 Consolidated $610.7 $565.1 (cid:127) Raw Materials Additional Statement of Operations Commentary: (cid:127) Unallocated corporate costs for the year ended December 31, 2013 were $15.8 million, or $3.8 million favorable to the prior year. Excluding a pension plan settlement charge and costs related to the early redemption of 2014 Senior Notes in 2013 and 2012, unallocated corporate expenses were $0.4 million Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our favorable to the prior year. technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain SG&A expense of $83.2 million for the year ended December 31, 2014 was $3.8 million higher than the prior specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a year primarily due to incremental selling and administrative costs related to the acquired technical materials single supplier would not cause a shutdown of our manufacturing operations. business and increased employee compensation costs. SG&A expense as a percentage of net sales for the year Our technical products business acquires all of its specialized pulp requirements from two global suppliers and ended December 31, 2014, was approximately 9.2 percent and was 0.2 percentage points lower than the prior certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by year as the increase in net sales in the current year more than offset higher SG&A expenses. formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our SG&A expense of $79.4 million for the year ended December 31, 2013 was $2.0 million higher than the prior needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of year primarily due to higher selling and administrative costs related to the brands acquired from Southworth an interruption of production at any one supplier, we believe that each of these suppliers individually would be and Wausau. SG&A expense as a percentage of net sales for the year ended December 31, 2013, was able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term approximately 9.4 percent and was 0.2 percentage points lower than the prior year as the increase in net sales disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp in the current year more than offset higher SG&A expenses. grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative For the years ended December 31, 2014, 2013 and 2012, we incurred $11.4 million, $11.2 million and pulp or latex grades would have a material effect on our operations. $13.5 million of interest expense, respectively. For the year ended December 31, 2013, the decrease in interest expense from the prior year was primarily due to lower weighted average interest rates due to the early Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other redemption of our 2014 Senior Notes. significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that In general, our effective tax rate differs from the U.S. statutory tax rate of 35 percent primarily due to the all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five benefits of our foreign financing structure and the proportion of pre-tax income in jurisdictions with marginal percent of the total fiber requirements of our fine paper business, are readily available from several sources and tax rates that differ from the U.S. statutory tax rate. For the years ended December 31, 2014 and 2013, our that the loss of a single supplier would not cause a shutdown of our manufacturing operations. effective income tax rate related to continuing operations was 10 percent and 32 percent, respectively. The decrease in our effective tax rate for the year ended December 31, 2014 from the prior year was primarily We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would due to the recognition of R&D Credits related to activities for the years 2005 through 2014 and a change in increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the methodology. Excluding the benefit of R&D Credits related to prior year activities, our effective income tax ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton rate would be approximately 33 percent. For the year ended December 31, 2012, our effective income tax rate fiber supply issues to have a material effect on our operations. related to continuing operations was approximately 30 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.’’ (cid:127) (cid:127) F o r m 1 0 - K 29 5 Liquidity and Capital Resources Net cash flow provided by (used in): Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investing activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase of Crane Technical Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase of brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase of equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2014 2013 2012 $ 94.5 $ 83.5 $ 40.1 $ (27.9) $(28.7) $(25.1) — (14.1) — 6.9 (72.4) — (2.9) (1.7) — (5.2) — 0.6 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(104.9) $(33.3) $(32.3) Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net increase (decrease) in cash and cash equivalents (a) . . . . . . . . . . . . . . . . . . . . . . . $ 10.2 $ $ 15.0 (0.8) $ 65.6 $(13.0) $ (5.0) (a) Includes the effect of exchange rate changes on cash and cash equivalents. Operating Cash Flow Commentary (cid:127) Cash provided by operating activities of $94.5 million for the year ended December 31, 2014 was $11.0 million favorable to cash provided by operating activities of $83.5 million in the prior year. The favorable comparison was primarily due to higher operating income and an $9.0 million decrease in our investment in working capital for the year ended December 31, 2014 compared to an increase in our investment in working capital of $6.6 million in the prior year. These favorable variances were partially offset by increased contributions and benefit payments for post-retirement benefit obligations. (cid:127) Cash provided by operating activities of $83.5 million for the year ended December 31, 2013 was $43.4 million favorable to cash provided by operating activities of $40.1 million in the prior year. The favorable comparison was primarily due to a $14.3 million year-over-year reduction in our working capital requirements, a $13.4 million improvement in income from operations and lower spending for acquisitions in 2013 ($4.8 million). Investing Commentary: (cid:127) For the years ended December 31, 2014 and 2013, cash used by investing activities was $104.9 million and $33.3 million, respectively. For the year ended December 31, 2014, cash used by investing activities includes $72.4 million for the purchase of the Crane Technical Materials business and $2.9 million for the acquisition of a non-controlling equity investment in a joint venture in India. Cash used by investing activities for the year ended December 31, 2013 includes a payment of $5.2 million to acquire the Southworth brands. Cash used by investing activities for the year ended December 31, 2012 includes a payment of $14.1 million to acquire the Wausau brands offset by a $7.0 million reduction in restricted cash used to pay post-retirement benefits. (cid:127) Capital expenditures for the year ended December 31, 2014 were $27.9 million compared to spending of $28.7 million in the prior year. In general, we expect aggregate annual capital expenditures of approximately 3 to 5 percent of net sales. For 2015, we expect annual capital expenditures at the higher end of that range or approximately $45 million due to incremental investment in filtration assets in the U.S. We believe that the level of our capital spending can be more than adequately funded from cash provided from operating activities and allows us to maintain the efficiency and cost effectiveness of our assets and also invest in expanded manufacturing capabilities to successfully pursue strategic initiatives and deliver attractive returns. (cid:127) For the years ended December 31, 2013 and 2012, cash used by investing activities was $33.3 million and $32.3 million, respectively. Cash used by investing activities for the year ended December 31, 2013 includes a payment of $5.2 million to acquire the Southworth brands. Cash used by investing activities for the year ended December 31, 2012 includes a payment of $14.1 million to acquire the Wausau brands offset by a $7.0 million reduction in restricted cash used to pay SERP benefits. 30 (cid:127) Capital expenditures for the year ended December 31, 2013 were $28.7 million compared to spending of $25.1 million in the prior year. Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. Financing Commentary: The following tables present further information about our businesses by geographic area (dollars in millions): Our liquidity requirements are provided by cash generated from operations and short and long-term borrowings. Year Ended December 31, (cid:127) Net sales United States Europe 2010 For the year ended December 31, 2014, cash provided by financing activities was $10.2 million compared to cash provided by financing activities of $15.0 million for the year ended December 31, 2013. For the year ended December 31, 2014, cash provided by financing activities was $15.0 million compared to cash used in $413.6 financing activities of $13.0 million for the year ended December 31, 2013. Cash flows from financing 244.1 activities for the year ended December 31, 2013, included proceeds of $175 million from the issuance of the $657.7 2021 Senior Notes. For the years ended December 31, 2013 and 2012, cash flows from financing activities included outflows of $90 million and $68 million, respectively for the early redemption of the 2014 Senior Notes. $543.4 265.4 $416.2 279.8 Consolidated December 31, $808.8 $696.0 2012 2011 2012 2011 2010 F o r m 1 0 - K Total Assets Secured Bank Credit Facility United States Canada Europe Consolidated $308.9 0.1 297.7 $322.5 0.2 288.0 $286.4 In December 2014, we entered into the Third Amended Credit Agreement. The Third Amended Credit 0.3 Agreement, among other things: (1) increases the maximum principal amount of our existing credit facility for the 278.4 U.S. Revolving Credit Facility to $125 million; (2) establishes the German Revolving Credit Facility in the maximum principal amount of $75 million; (3) causes Neenah and the other domestic borrowers to guarantee, among other things, the obligations arising under the German Revolving Credit Facility; (4) provides for the Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities Global Revolving Credit Facilities to mature on December 18, 2019; and (5) provides for an accordion feature and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business permitting one or more increases in the Global Revolving Credit Facilities in an aggregate principal amount not Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by exceeding $50 million, such that the aggregate commitments under the Global Revolving Credit Facilities do not business segment. exceed $250 million. In addition, domestic borrowers may request letters of credit under the U.S. Revolving Credit Facility in an aggregate face amount not to exceed $20 million outstanding at any time, and German borrowers may request letters of credit under the German Revolving Credit Facility in an aggregate face amount not to exceed $2 million outstanding at any time. See Note 6 of Notes to Consolidated Financial Statements, ‘‘Debt.’’ Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain In May 2013, we issued $175 million of 2021 Senior Notes. Proceeds from this offering were used to retire the specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a remaining principal amount of 2014 Senior Notes, to repay approximately $56 million in outstanding revolver single supplier would not cause a shutdown of our manufacturing operations. borrowings under our bank credit agreement and for general corporate purposes. Unsecured Senior Notes Raw Materials $610.7 $565.1 $606.7 Our technical products business acquires all of its specialized pulp requirements from two global suppliers and In May 2013, we completed an early redemption of $20 million of our 2014 Senior Notes. The 2014 Senior Notes certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by were redeemed at par value plus accrued interest. The early redemption was financed with revolver borrowings formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our under our bank credit agreement and resulted in a pre-tax loss of $0.1 million due to the write-off of related needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of unamortized debt issuance costs. an interruption of production at any one supplier, we believe that each of these suppliers individually would be In June 2013, we used a portion of the proceeds from the issuance of the 2021 Senior Notes to retire the able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term remaining $70 million in outstanding 2014 Senior Notes. The 2014 Senior Notes were redeemed at par value plus disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp accrued interest. The retirement of the 2014 Senior Notes resulted in a pre-tax loss of $0.3 million due to the grades or other latex grades that would allow us to meet required product performance characteristics and incur write-off of related unamortized debt issuance costs. As of December 31, 2014 there were no 2014 Senior Notes only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative outstanding. See Note 6 of Notes to Consolidated Financial Statements, ‘‘Debt.’’ pulp or latex grades would have a material effect on our operations. Other Debt In June 2014, we repaid the remaining A3.7 million ($5.2 million) in outstanding project financing borrowings under the German Loan Agreement. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and In January 2013, Neenah Germany entered into the Second German Loan Agreement to finance the construction of a melt blown machine. The agreement provides for A9.0 million of construction financing which is secured by that the loss of a single supplier would not cause a shutdown of our manufacturing operations. the melt blown machine. The loan matures in September 2022 and principal is repaid in equal quarterly installments beginning in December 2014. At December 31, 2014, A8.7 million ($10.6 million, based on exchange rates at December 31, 2014) was outstanding under the Second German Loan Agreement. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. 31 5 (cid:127) Availability under our revolving credit facility varies over time depending on the value of our inventory, receivables and various capital assets. As of December 31, 2014, we had $48.7 million outstanding under our Revolver and $145.8 million of available credit (based on exchange rates at December 31, 2014). During the fourth quarter, the proceeds from Revolver borrowings in Germany were used to fund the repatriation of cash to the U.S. (cid:127) We have required debt payments through December 31, 2015 of $1.4 million on the Second German Loan Agreement. (cid:127) For the year ended December 31, 2014, cash and cash equivalents decreased $0.8 million to $72.6 million at December 31, 2014 from $73.4 million at December 31, 2013. Total debt increased $22.4 million to $234.3 million at December 31, 2014 from $211.9 million at December 31, 2013. Net debt (total debt minus cash and cash equivalents) increased by $23.2 million primarily due to the acquisition of the Crane Technical Materials business for $72.4 million partially offset by cash flow from operations. (cid:127) As of December 31, 2014, our cash balance consists of $66.0 million in the U.S. and $6.6 million held at entities outside of the U.S. We are not aware of any restrictions regarding the repatriation of our non-U.S. cash. Although we plan to use this cash at our non-U.S. entities, if we repatriated these cash balances to the U.S., we could incur significant tax expense. Transactions with shareholders (cid:127) For the years ended December 31, 2014 and 2013, we paid cash dividends of $1.02 per common share or $17.1 million and $0.70 per common share or $11.4 million, respectively. In November 2014, our Board of Directors approved an eleven percent increase in the annual dividend rate on our common stock to $1.20 per share. The dividend is scheduled to be paid in four equal quarterly installments beginning in March 2015. As of December 31, 2014, under the most restrictive terms of our debt agreements, our ability to pay cash dividends on our common stock is limited to a total of $25 million in a 12-month period. (cid:127) In May 2014, our Board of Directors authorized the 2014 Stock Purchase Plan. The 2014 Stock Purchase Plan allows us to repurchase up to $25 million of our outstanding Common Stock through May 2015. Purchases under the 2014 Stock Purchase Program will be made from time to time in the open market or in privately negotiated transactions in accordance with the requirements of applicable law. The timing and amount of any purchases will depend on share price, market conditions and other factors. The 2014 Stock Purchase Program does not require us to purchase any specific number of shares and may be suspended or discontinued at any time. For the year ended December 31, 2014, we acquired approximately 22,500 shares of common stock at a cost of $1.1 million pursuant to the 2014 Stock Purchase Program. For the years ended December 31, 2014 and 2013, we acquired approximately 56,400 and 111,000 shares of Common Stock, respectively, at a cost of $3.4 million and $4.6 million, respectively, for shares surrendered by employees to pay taxes due on vested restricted stock awards and stock appreciation rights exercised. In addition, we received $3.6 million and $3.7 million in proceeds from the exercise of employee stock options for the years ended December 31, 2014 and 2013, respectively. For the years ended December 31, 2014 and 2013, we recognized excess tax benefits of $5.6 million and $2.6 million, respectively, related to the vesting or exercise of stock-based awards. Other Items: (cid:127) As of December 31, 2014, we had $5.2 million and $64.4 million of U.S. federal and state NOLs, respectively. If not used, substantially all of the NOLs will expire in various amounts between 2020 and 2030. In addition, we had $31.4 million of U.S. federal and state R&D Credits which, if not used, will expire between 2025 and 2034 for the U.S. federal R&D Credits and between 2017 and 2029 for the state R&D Credits. We expect that we will fully utilize our U.S. federal NOLs and be required to pay U.S. federal income taxes in 2015. (cid:127) For the year ended December 31, 2014, we recognized net actuarial losses of approximately $23 million related to our post-retirement benefit plans. The losses were primarily due to the use of a lower discount rate and a decrease in the mortality assumption used to value our post-retirement benefit plan liabilities. These losses were partially offset by an actuarial gain as a result of better than expected asset returns. 32 Management believes that our ability to generate cash from operations and our borrowing capacity are adequate Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than to fund working capital, capital spending and other cash needs for the next 12 months. Our ability to generate 10 percent of our consolidated net sales. adequate cash from operations beyond 2013 will depend on, among other things, our ability to successfully implement our business strategies, control costs in line with market conditions and manage the impact of changes The following tables present further information about our businesses by geographic area (dollars in millions): in input prices and currencies. We can give no assurance we will be able to successfully implement these items. Year Ended December 31, Contractual Obligations Net sales The following table presents the total contractual obligations for which cash flows are fixed or determinable as of $413.6 United States December 31, 2014: 244.1 Europe $416.2 279.8 $543.4 265.4 2011 2012 2010 (In millions) Consolidated 2015 2016 2017 $808.8 2018 $696.0 Beyond 2019 2019 $657.7 Total Long-term debt payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Interest payments on long-term debt (a) . . . . . . . . . . . . . . . . . . . Open purchase orders (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other post-employment benefit obligations (c) . . . . . . . . . . . . . . Contributions to pension trusts . . . . . . . . . . . . . . . . . . . . . . . . . Minimum purchase commitments (d) . . . . . . . . . . . . . . . . . . . . . Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Assets United States Canada Europe 10.3 10.2 2012 1.4 $ 1.4 $ 1.4 $ 1.4 $50.0 $178.7 $234.3 December 31, 10.1 69.6 10.3 10.2 2010 — 81.9 81.9 — — — — 3.9 4.1 37.6 3.6 3.6 $322.5 $308.9 $286.4 — 12.3 12.3 — — — — 0.3 0.1 0.2 — 10.8 1.2 — 1.1 7.4 297.7 278.4 288.0 3.6 — 0.2 — 0.7 1.5 1.1 1.2 19.2 18.5 2011 3.2 Total contractual obligations . . . . . . . . . . . . . . . . . . . . . . . . . . $118.4 $17.2 $17.0 $16.9 $64.2 $216.4 $450.1 $610.7 $565.1 $606.7 Consolidated Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities (a) Interest payments on long-term debt includes interest on variable rate debt at December 31, 2014 weighted and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. (b) The open purchase orders displayed in the table represent amounts we anticipate will become payable within average interest rates. the next 12 months for goods and services that we have negotiated for delivery. Raw Materials (c) The above table includes future payments that we will make for postretirement benefits other than pensions. Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our Those amounts are estimated using actuarial assumptions, including expected future service, to project the technical products business. The technical products business purchases softwood pulp, specialty pulp and latex future obligations. from various suppliers. The technical products business purchases substantially all of its raw material requirements (d) The minimum purchase commitments in 2015 are primarily for coal contracts. Although we are primarily externally. We believe that all of the raw materials for our technical products operations, except for certain liable for payments on the above operating leases and minimum purchase commitments, based on historic specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a operating performance and forecasted future cash flows, we believe our exposure to losses, if any, under these single supplier would not cause a shutdown of our manufacturing operations. arrangements is not material. None. Adoption of New Accounting Pronouncements Critical Accounting Policies and Use of Estimates Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp The preparation of financial statements in conformity with Generally Accepted Accounting Principles (‘‘GAAP’’) grades or other latex grades that would allow us to meet required product performance characteristics and incur in the United States requires estimates and assumptions that affect the reported amounts and related disclosures only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative of assets and liabilities at the date of the financial statements and net sales and expenses during the reporting pulp or latex grades would have a material effect on our operations. period. Actual results could differ from these estimates, and changes in these estimates are recorded when known. The critical accounting policies used in the preparation of the consolidated financial statements are those that are Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other important both to the presentation of financial condition and results of operations and require significant significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, judgments with regard to estimates used. These critical judgments relate to the reported amounts of assets and cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that liabilities, disclosure of contingent assets and liabilities, and the reported amounts of expenses. all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and The following summary provides further information about the critical accounting policies and should be read in that the loss of a single supplier would not cause a shutdown of our manufacturing operations. conjunction with the notes to the Consolidated Financial Statements. We believe that the consistent application of our policies provides readers of our financial statements with useful and reliable information about our operating results and financial condition. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. We have discussed the application of these critical accounting policies with our Board of Directors and Audit Committee. F o r m 1 0 - K 33 5 Inventories We value U.S. inventories at the lower of cost, using the Last-In, First-Out (‘‘LIFO’’) method for financial reporting purposes, or market. German inventories are valued at the lower of cost, using a weighted-average cost method, or market. The First-In, First-Out value of U.S. inventories valued on the LIFO method was $95.7 million and $86.6 million at December 31, 2014 and 2013, respectively and exceeded such LIFO value by $14.0 million and $13.9 million, respectively. Cost includes labor, materials and production overhead. Income Taxes As of December 31, 2014, we have recorded aggregate deferred income tax assets of $45.7 million related to temporary differences, net operating losses and research and development and other tax credits. As of December 31, 2013, our aggregate deferred income tax assets were $36.1 million. No valuation allowance was provided at either date. In determining the need for a valuation allowance, we consider many factors, including specific taxing jurisdictions, sources of taxable income, income tax strategies and forecasted earnings for the entities in each jurisdiction. A valuation allowance would be recognized if, based on the weight of available evidence, we conclude that it is more likely than not that some portion or all of the deferred income tax assets will not be realized. As of December 31, 2014 and 2013, our liability for uncertain income taxes positions was $7.0 million and $4.3 million, respectively. In evaluating and estimating tax positions and tax benefits, we consider many factors which may result in periodic adjustments and which may not accurately anticipate actual outcomes. Pension and Other Postretirement Benefits Pension Plans Substantially all active employees of our U.S. operations participate in defined benefit pension plans and/or defined contribution retirement plans. Neenah Germany has defined benefit plans designed to provide a monthly pension benefit upon retirement to substantially all of its employees in Germany. In addition, we maintain a supplemental retirement contribution plan (the ‘‘SERP’’) which is a non-qualified defined benefit plan. We provide benefits under the SERP to the extent necessary to fulfill the intent of our defined benefit retirement plans without regard to the limitations set by the IRS on qualified defined benefit plans. Our funding policy for qualified defined benefit plans is to contribute assets to fully fund the accumulated benefit obligation, as required by the Pension Protection Act of 2006. Subject to regulatory and tax deductibility limits, any funding shortfall is to be eliminated over a reasonable number of years. Nonqualified plans providing pension benefits in excess of limitations imposed by the taxing authorities are not funded. There is no legal or governmental obligation to fund Neenah Germany’s benefit plans and as such the plans are currently unfunded. Consolidated pension expense for defined benefit pension plans was $11.8 million, $7.9 million and $11.3 million for the years ended December 31, 2014, 2013 and 2012, respectively. The weighted-average expected long-term rate of return on pension fund assets used to calculate pension expense was 6.50 percent, 7.00 percent and 7.25 percent for the years ended December 31, 2014, 2013 and 2012, respectively. The expected long-term rate of return on pension fund assets held by our pension trusts was determined based on several factors, including input from pension investment consultants and projected long-term returns of broad equity and bond indices. We also considered the plans’ historical 10-year and 15-year compounded annual returns. We anticipate that, on average, actively managed U.S. pension plan assets will generate annual long-term rates of return of approximately 6.50 percent. Our expected long-term rate of return on the assets in the plans is based on an asset allocation assumption of about 35 percent with equity managers, with expected long-term rates of return of approximately 8 to10 percent, and 65 percent with fixed income managers, with an expected long-term rate of return of approximately 4 to 6 percent. The actual asset allocation is regularly reviewed and periodically rebalanced to the targeted allocation when considered appropriate. We evaluate our investment strategy and long-term rate of return on pension asset assumptions at least annually. 34 Pension expense is estimated based on the fair value of assets rather than a market-related value that averages Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than gains and losses over a period of years. Investment gains or losses represent the difference between the expected 10 percent of our consolidated net sales. return calculated using the fair value of the assets and the actual return based on the fair value of assets. The variance between the actual and the expected gains and losses on pension assets is recognized in pension expense The following tables present further information about our businesses by geographic area (dollars in millions): more rapidly than it would be if a market-related value for plan assets was used. As of December 31, 2014, our Year Ended December 31, pension plans had cumulative unrecognized investment losses and other actuarial losses of $91.2 million. These 2010 unrecognized net losses may increase our future pension expense if not offset by (i) actual investment returns that exceed the assumed investment returns, (ii) other factors, including reduced pension liabilities arising from higher discount rates used to calculate our pension obligations or (iii) other actuarial gains, including whether such $413.6 accumulated actuarial losses at each measurement date exceed the ‘‘corridor’’ determined under ASC Topic 715. 244.1 Net sales United States Europe $543.4 265.4 $416.2 279.8 2011 2012 2010 2011 2012 $657.7 $696.0 $808.8 December 31, Consolidated Consolidated The discount (or settlement) rate that is utilized for determining the present value of future pension obligations in the U.S. is generally based on the yield for a theoretical basket of AA-rated corporate bonds currently available in the market place, whose duration matches the timing of expected pension benefit payments. The discount (or settlement) rate that is utilized for determining the present value of future pension obligations in Germany is generally based on the IBOXX index of AA-rated corporate bonds adjusted to match the timing of expected pension benefit payments. The weighted average discount rate utilized to determine the present value of future pension obligations at December 31, 2014 and 2013 was 3.91 percent and 4.88 percent, respectively. $308.9 0.1 297.7 Our consolidated pension expense in 2014 is based on the expected weighted-average long-term rate of return on assets and the weighted-average discount rate described above and various other assumptions. Pension expense beyond 2014 will depend on future investment performance, our contributions to the pension trusts, changes in discount rates and various other factors related to the covered employees in the plans. Total Assets United States Canada Europe Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business The fair value of the assets in our defined benefit plans at December 31, 2014 of approximately $288 million Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by increased approximately $27 million from the fair value of about $261 million at December 31, 2013, as business segment. investment gains and employer contributions exceeded benefit and settlement payments. At December 31, 2014, the projected benefit obligations of our defined benefit plans exceeded the fair value of plan assets by approximately $65 million which was approximately $6 million larger than the $59 million deficit at December 31, 2013. The accumulated benefit obligation exceeded the fair value of plan assets by $48.0 million and $43.6 million Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our at December 31, 2014 and 2013, respectively. Contributions to pension trusts for the year ended December 31, technical products business. The technical products business purchases softwood pulp, specialty pulp and latex 2014 were $24.5 million compared with $18.1 million for the year ended December 31, 2013. In addition, we made from various suppliers. The technical products business purchases substantially all of its raw material requirements direct benefit payments for unfunded qualified and supplemental retirement benefits of $2.3 million and externally. We believe that all of the raw materials for our technical products operations, except for certain $2.2 million for the years ended December 31, 2014 and 2013, respectively. specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. $322.5 0.2 288.0 $286.4 0.3 278.4 Raw Materials $610.7 $565.1 $606.7 Other Postretirement Benefit Plans Our technical products business acquires all of its specialized pulp requirements from two global suppliers and We maintain postretirement health care and life insurance benefit plans for active employees and former certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by employees of our Canadian pulp operations. The plans are generally noncontributory for employees who were formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our eligible to retire on or before December 31, 1992 and contributory for most employees who became eligible to needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of retire on or after January 1, 1993. We do not provide a subsidized postretirement health care or life insurance an interruption of production at any one supplier, we believe that each of these suppliers individually would be benefit to most employees hired after 2003. Our postretirement health care and life insurance benefit plans are able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term unfunded. disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. For the years ended December 31, 2014, 2013 and 2012, consolidated postretirement health care and life insurance plan benefit expense was $3.8 million, $4.2 million and $4.9 million, respectively. The weighted-average discount (or settlement) rate used to calculate postretirement health care and life insurance plan benefit expense was 4.84 percent, 4.12 percent and 5.03 percent for the years ended December 31, 2014, 2013 and 2012, Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other respectively. The discount (or settlement) rate that is utilized for determining the present value of future significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, postretirement health care and life insurance plan benefit obligations in the U.S. is generally based on the yield cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that for a theoretical basket of AA-rated corporate bonds currently available in the market place, whose duration all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five matches the timing of expected postretirement health care and life insurance benefit payments. The discount (or percent of the total fiber requirements of our fine paper business, are readily available from several sources and settlement) rate that is utilized for determining the present value of future postretirement health care and life that the loss of a single supplier would not cause a shutdown of our manufacturing operations. insurance obligations for our foreign benefit plans is generally based on an index of AA-rated corporate bonds adjusted to match the timing of expected benefit payments. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the Our consolidated postretirement health care and life insurance plan benefit expense in 2014 is based on the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton weighted-average discount rate described above and various other assumptions. Postretirement health care and life fiber supply issues to have a material effect on our operations. insurance plan benefit expense beyond 2014 will depend on future health care cost trends, changes in discount rates and various other factors related to the covered employees in the plans. F o r m 1 0 - K 35 5 Our obligations for postretirement health care and life insurance plan benefits are measured annually as of December 31. The weighted average discount rate utilized to determine the present value of future postretirement health care and life insurance obligations at December 31, 2014 and 2013 was 4.05 percent and 4.84 percent, respectively. The assumed inflationary health care cost trend rates used to determine obligations at December 31, 2014 and costs for the year ended December 31, 2014 were 7.0 percent gradually decreasing to an ultimate rate of 4.5 percent in 2027. The assumed inflationary health care cost trend rates used to determine obligations at December 31, 2013 and costs for the year ended December 31, 2014 were 7.3 percent gradually decreasing to an ultimate rate of 4.5 percent in 2027. At December 31, 2014, the projected benefit obligations for our postretirement health care and life insurance plans was approximately $41 million and was essentially unchanged from the projected benefit obligation at December 31, 2013. Impairment of Long-Lived Assets Property, Plant and Equipment Property, plant and equipment are tested for impairment in accordance with ASC Topic 360, Property, Plant, and Equipment (‘‘ASC Topic 360’’), whenever events or changes in circumstances indicate that the carrying amounts of such long-lived assets may not be recoverable from future net pre-tax cash flows. Impairment testing requires significant management judgment including estimating the future success of product lines, future sales volumes, growth rates for selling prices and costs, alternative uses for the assets and estimated proceeds from disposal of the assets. Impairment testing is conducted at the lowest level where cash flows can be measured and are independent of cash flows of other assets. An asset impairment would be indicated if the sum of the expected future net pre-tax cash flows from the use of the asset (undiscounted and without interest charges) is less than the carrying amount of the asset. An impairment loss would be measured based on the difference between the fair value of the asset and its carrying amount. We determine fair value based on an expected present value technique using multiple cash flow scenarios that reflect a range of possible outcomes and a risk free rate of interest are used to estimate fair value. The estimates and assumptions used in the impairment analysis are consistent with the business plans and estimates we use to manage our business operations. The use of different assumptions would increase or decrease the estimated fair value of the asset and would increase or decrease the impairment charge. Actual outcomes may differ from the estimates. Goodwill and Other Intangible Assets with Indefinite Lives Goodwill arising from a business combination is recorded as the excess of purchase price and related costs over the fair value of identifiable assets acquired and liabilities assumed in accordance with ASC Topic 805, Business Combinations (‘‘ASC Topic 805’’). All of our goodwill was acquired in conjunction with the acquisition of Neenah Germany in October 2006 and the technical materials business in July 2014. Under ASC Topic 350, Intangibles — Goodwill and Other (‘‘ASC Topic 350’’), goodwill is subject to impairment testing at least annually. ASC Topic 350 provides an entity with the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. If the two-step impairment test is necessary, a fair-value-based test is applied at the reporting unit level, which is generally one level below the operating segment level. The test compares the fair value of an entity’s reporting units to the carrying value of those reporting units. This test requires various judgments and estimates. We estimate the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit. An adjustment to goodwill will be recorded for any goodwill that is determined to be impaired. We test goodwill for impairment at least annually on November 30 in conjunction with preparation of its annual business plan, or more frequently if events or circumstances indicate it might be impaired. At November 30, 2014, our assessment of qualitative facts and circumstances indicated no impairment of goodwill. The qualitative factors considered included, but were not limited to, changes in the macroeconomic conditions; changes in industry and market conditions such as an increase in the competitive environment; changes in manufacturing input costs — particularly to the extent these cannot be recovered through higher selling prices; changes in the financial performance of Neenah Germany and the acquired technical materials business including earnings and cash flows; and changes in our market capitalization. 36 Certain trade names are estimated to have indefinite useful lives and as such are not amortized. Intangible assets Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than with indefinite lives are annually reviewed for impairment in accordance with ASC Topic 350. 10 percent of our consolidated net sales. Other Intangible Assets with Finite Lives The following tables present further information about our businesses by geographic area (dollars in millions): Acquired intangible assets with finite useful lives are amortized on a straight-line basis over their respective Year Ended December 31, estimated useful lives and reviewed for impairment in accordance with ASC Topic 360. Intangible assets consist 2010 primarily of customer relationships, trade names and acquired intellectual property. Such intangible assets are amortized using the straight-line method over estimated useful lives of between 10 and 15 years. 2011 2012 Our annual test of other intangible assets for impairment at November 30, 2014, 2013 and 2012 indicated that the carrying amount of such assets was recoverable. $543.4 265.4 $416.2 279.8 $413.6 244.1 $808.8 $696.0 $657.7 Stock-Based Compensation December 31, We account for stock-based compensation in accordance with the fair value recognition provisions of ASC Topic 2010 718, Compensation — Stock Compensation (‘‘ASC Topic 718’’). The amount of stock-based compensation cost recognized is based on the fair value of grants that are ultimately expected to vest and is recognized pro-rata over the requisite service period for the entire award. 2012 2011 Net sales United States Europe Consolidated Total Assets United States Canada Europe Consolidated $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 297.7 $610.7 $565.1 $606.7 Item 7A. Quantitative and Qualitative Disclosures About Market Risk As a multinational enterprise, we are exposed to risks such as changes in commodity prices, foreign currency exchange rates, interest rates and environmental regulation. A variety of practices are employed to manage these risks, including operating and financing activities and, where deemed appropriate, the use of derivative instruments. Derivative instruments are used only for risk management purposes and not for speculation or trading. Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. Presented below is a description of our most significant risks. Raw Materials Foreign Currency Risk Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex Our reported operating results are affected by changes in the exchange rates of the local currencies of our from various suppliers. The technical products business purchases substantially all of its raw material requirements non-U.S. operations relative to the U.S. dollar. For the year ended December 31, 2014, a hypothetical 10 percent externally. We believe that all of the raw materials for our technical products operations, except for certain increase in the exchange rates of the U.S dollar relative to the local currencies of our non-U.S. operations would specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a have decreased our income before income taxes by approximately $2.9 million. We do not hedge our exposure to single supplier would not cause a shutdown of our manufacturing operations. exchange risk on reported operating results. F o r m 1 0 - K Our technical products business acquires all of its specialized pulp requirements from two global suppliers and The translation of the balance sheets of our non-U.S. operations from their local currencies into U.S. dollars is certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by also sensitive to changes in the exchange rate of the U.S. dollar. Consequently, we performed a sensitivity test to formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our determine if changes in the exchange rate would have a significant effect on the translation of the balance sheets needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of of our non-U.S. operations into U.S. dollars. These translation gains or losses are recorded as unrealized an interruption of production at any one supplier, we believe that each of these suppliers individually would be translation adjustments (‘‘UTA’’, a component of accumulated other comprehensive income) within stockholders’ able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term equity. The hypothetical change in UTA is calculated by multiplying the net assets of our non-U.S. operations by a disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp 10 percent change in the exchange rate of their local currencies versus the U.S. dollar. As of December 31, 2014, grades or other latex grades that would allow us to meet required product performance characteristics and incur the net assets of our non-U.S. operations exceeded their net liabilities by approximately $120 million. As of only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative December 31, 2014, a 10 percent decrease in the exchange rate of the U.S. dollar against the local currencies of pulp or latex grades would have a material effect on our operations. our non-U.S. operations would have decreased our stockholders’ equity by approximately $13 million. Pulp Commodity Risk Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five We purchase the wood pulp used to produce our products on the open market, and, as a result, the price and percent of the total fiber requirements of our fine paper business, are readily available from several sources and other terms of those purchases are subject to change based on factors such as worldwide supply and demand and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. government regulation. We do not have significant influence over the price paid for our wood pulp purchases. Therefore, an increase in wood pulp prices could occur at the same time that prices for our products are decreasing and have an adverse effect on our results of operations, financial position and cash flows. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton Based on 2014 pulp purchases, a 10 percent increase in the average market price for pulp (approximately $85 per fiber supply issues to have a material effect on our operations. ton) would have increased our annual costs for pulp purchases by approximately $16 million. 37 5 Other Manufacturing Inputs We purchase a substantial portion of the other manufacturing inputs necessary to produce our products on the open market, and, as a result, the price and other terms of those purchases are subject to change based on factors such as worldwide supply and demand and government regulation. We do not have significant influence over our costs for such manufacturing inputs. Therefore, an increase in other manufacturing inputs could occur at the same time that prices for our products are decreasing and have an adverse effect on our results of operations, financial position and cash flows. Our technical products business acquires certain of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Cotton fiber represents less than five percent of the total fiber requirements of our fine paper and packaging business. Our fine paper and packaging business acquires a substantial majority of the cotton fiber used in the production of certain branded bond paper products pursuant to annual agreements with two North American producers. The balance of our cotton fiber requirements are acquired through ‘‘spot market’’ purchases from a variety of other producers. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. We generate substantially all of the electrical energy used by our Munising mill and approximately 25 percent of the electrical energy at our Appleton and Bruckm¨uhl mills. Availability of energy is not expected to be a problem in the foreseeable future, but the purchase price of such energy can and likely will fluctuate significantly based on fluctuations in demand and other factors. There is no assurance that that we will be able to obtain electricity or natural gas purchases on favorable terms in the future. Except for certain specialty latex grades and specialty softwood pulp used by our technical products business and cotton fiber used by our fine paper and packaging business, we are not aware of any significant concentration of business transacted with a particular supplier. Interest Rate Risk We are exposed to interest rate risk on our variable rate bank debt. At December 31, 2014, we had $48.7 million of variable rate borrowings outstanding. A 100 basis point increase in interest rates would increase our annual interest expense on outstanding variable rate borrowings by approximately $0.5 million. Environmental Regulation/Climate Change Legislation Our manufacturing operations are subject to extensive regulation primarily by U.S., German and other international authorities. We have made significant capital expenditures to comply with environmental laws, rules and regulations. Due to changes in environmental laws and regulations, including potential future legislation to limit GHG emissions, the application of such regulations and changes in environmental control technology, we are not able to predict with certainty the amount of future capital spending to be incurred for environmental purposes. Taking these uncertainties into account, we have planned capital expenditures for environmental projects during the period 2015 through 2017 of approximately $1 million to $2 million annually. We believe these risks can be managed and will not have a material effect on our business or our consolidated financial position, results of operations or cash flows. Item 8. Financial Statements and Supplementary Data The information required in Item 8 is contained in and incorporated herein by reference from pages F-1 through F-48 of this Annual Report on Form 10-K. 38 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. None. The following tables present further information about our businesses by geographic area (dollars in millions): Item 9A. Controls and Procedures Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures Year Ended December 31, 2012 2011 2010 Consolidated Net sales United States Europe The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in $413.6 Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of 244.1 the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls $657.7 and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Total Assets Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding United States required disclosure. Canada Europe $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 297.7 $543.4 265.4 $416.2 279.8 December 31, $808.8 $696.0 Management’s Annual Report on Internal Control Over Financial Reporting 2012 2011 2010 Consolidated $610.7 $565.1 $606.7 The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) or 15a-15(f) under the Securities Exchange Act of 1934. The Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business management and board of directors regarding the preparation and fair presentation of published financial Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by statements. business segment. Raw Materials Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex Management assessed the effectiveness of the Company’s internal control over financial reporting as of from various suppliers. The technical products business purchases substantially all of its raw material requirements December 31, 2014. The scope of management’s assessment of the effectiveness of internal control over financial externally. We believe that all of the raw materials for our technical products operations, except for certain reporting includes all of the Company’s businesses except for the Crane Technical Materials business acquired in specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a July 2014. The acquired business constituted approximately 11 percent of total assets, five percent of revenues, single supplier would not cause a shutdown of our manufacturing operations. and one percent of net income of the consolidated financial statement amounts as of and for the year ended December 31, 2014. Further discussion of this acquisition can be found in Note 3 ‘‘Acquisitions’’ to our Our technical products business acquires all of its specialized pulp requirements from two global suppliers and consolidated financial statements. In making this assessment, management used the criteria set forth by the certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our Framework (2013). Based upon its assessment, management believes that as of December 31, 2014, the Company’s needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of internal controls over financial reporting were effective. an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. The effectiveness of internal control over financial reporting as of December 31, 2014, has been audited by Deloitte & Touche LLP, the independent registered public accounting firm who also audited the Company’s consolidated financial statements. Deloitte & Touche’s attestation report on the Company’s internal control over financial reporting is included herein. See ‘‘Item 15 — Exhibits and Financial Statement Schedules.’’ Neenah Paper, Inc February 27, 2015 Changes in Internal Control Over Financial Reporting Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. There has been no significant change in the Company’s internal control over financial reporting during the three months ended December 31, 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Item 9B. Other Information We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. None. 39 5 F o r m 1 0 - K Item 10. Directors and Executive Officers of the Registrant PART III The information required to be set forth herein, except for the information included under Executive Officers of the Company, relating to nominees for director of Neenah and compliance with Section 16(a) of the Securities Exchange Act of 1934 is set forth under the captions ‘‘Election of Directors,’’ ‘‘Meetings and Committees of the Board of Directors,’’ ‘‘Corporate Governance’’ and ‘‘Section 16(a) Beneficial Ownership Reporting Compliance,’’ respectively, in the Proxy Statement for the Annual Meeting of Stockholders to be held on May 21, 2015. Such information is incorporated herein by reference. The definitive Proxy Statement will be filed with the Securities and Exchange Commission no later than 120 days after December 31, 2014. Executive Officers of the Company Set forth below is information concerning our executive officers. Name Position John P. O’Donnell President and Chief Executive Officer Steven S. Heinrichs Senior Vice President, General Counsel and Secretary Bonnie C. Lind Senior Vice President, Chief Financial Officer and Treasurer James R. Piedmonte Senior Vice President — Operations Julie A. Schertell Senior Vice President — Fine Paper and Packaging and Technical Products U.S. Armin S. Schwinn Senior Vice President — Managing Director of Neenah Germany John P. O’Donnell, born in 1960, is our President and Chief Executive Officer and has been in that role since May 2011. Prior to becoming President and Chief Executive Office, Mr. O’Donnell served as our Senior Vice President, Chief Operating Officer since June 2010. In November 2007, Mr. O’Donnell joined the Company as President, Fine Paper. Mr. O’Donnell was employed by Georgia-Pacific Corporation from 1985 until 2007 and held increasingly senior roles in the Consumer Products division. Mr. O’Donnell served as President of the North America Retail Business from 2004 through 2007, and as President of the North American Commercial Tissue business from 2002 through 2004. Steven S. Heinrichs, born in 1968, is our Senior Vice President, General Counsel and Secretary and has been in that role since June 2004 when he joined Kimberly-Clark as Chief Counsel, Pulp and Paper and General Counsel for Neenah Paper, Inc. Prior to his employment with Kimberly-Clark, Mr. Heinrichs served as Associate General Counsel and Assistant Secretary for Mariner Health Care, Inc., a nursing home and long-term acute care hospital company. Before joining Mariner Health Care in 2003, Mr. Heinrichs served as Associate General Counsel and Assistant Secretary for American Commercial Lines LLC, a leading inland barge and shipbuilding company from 1998 through 2003. Mr. Heinrichs engaged in the private practice of law with Skadden, Arps, Slate, Meagher and Flom LLP and Shuttleworth, Smith, McNabb and Williams PLLC from 1994 through 1998. Mr. Heinrichs received his MBA from the Kellogg School of Management at Northwestern University in 2008. Bonnie C. Lind, born in 1958, is our Senior Vice President, Chief Financial Officer and Treasurer and has been in that role since June 2004. Ms. Lind was an employee of Kimberly-Clark from 1982 until 2004, holding a variety of increasingly senior financial and operations positions. From 1999 until June 2004, Ms. Lind served as the Assistant Treasurer of Kimberly-Clark and was responsible for managing Kimberly-Clark’s global treasury operations. Prior to that, she was Director of Kimfibers with overall responsibility for the sourcing and distribution of pulp to Kimberly-Clark’s global operations. James R. Piedmonte, born in 1956, is our Senior Vice President — Operations and has been in that role since June 2004. Mr. Piedmonte had been employed by Kimberly-Clark from 1978 until 2004, and held increasingly senior positions within Kimberly-Clark’s operations function. Mr. Piedmonte was responsible for Kimberly-Clark’s pulp mill and forestry operations in Pictou, Nova Scotia, from 2001 until 2004. Previously he was the Director of Operations for the fine paper business operations, as well as mill manager at the Whiting, Wisconsin mill. 40 Julie A. Schertell, born in 1969, is our Senior Vice President — Fine Paper and Packaging and Technical Products Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than U.S., and has been in that role since January 2014. Ms. Schertell joined the Company in 2008 and served as Vice 10 percent of our consolidated net sales. President of Sales and Marketing for the Fine Paper division through December 2010 and as a Senior Vice President of the Company and President, Fine Paper through December 2013. Ms. Schertell was employed by The following tables present further information about our businesses by geographic area (dollars in millions): Georgia-Pacific Corporation in the Consumer Products Retail division, where she served as Vice President of Sales Strategy from 2007-2008, and as Vice President of Customer Solutions from 2003 through 2007. Year Ended December 31, Net sales United States Europe Armin S. Schwinn, born in 1959, is our Senior Vice President — Managing Director of Neenah Germany and has been in that role since April 2010. In July 2014, Mr. Schwinn assumed responsibility for the sales and marketing $413.6 activities of our acquired technical materials business. Mr. Schwinn had been Vice President, Finance of Neenah 244.1 Germany since our acquisition of FiberMark Germany in October 2006. Mr. Schwinn joined FiberMark Germany in 1995 and held increasingly senior positions within FiberMark Germany’s financial, purchasing and $657.7 administrative functions. Prior to this, Mr. Schwinn served in various leadership positions in other German manufacturing and service companies. $543.4 265.4 $416.2 279.8 Consolidated $808.8 $696.0 December 31, 2012 2011 2010 There are no family relationships among our directors or executive officers. 2012 2011 2010 Total Assets Code of Ethics United States Canada Europe $606.7 $610.7 Consolidated Raw Materials $286.4 0.3 278.4 $322.5 0.2 288.0 $308.9 0.1 The Neenah Paper, Inc. Code of Business Conduct and Ethics, applies to all directors, officers and employees of 297.7 Neenah. The Code of Business Conduct and Ethics meets the requirements of a ‘‘code of ethics’’ as defined by $565.1 Item 406 of Regulation S-K, and applies to our Chief Executive Officer, Chief Financial Officer (our principal financial officer) and Vice President — Controller (our principal accounting officer), as well as all other Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities employees, as indicated above. The Code of Business Conduct and Ethics also meets the requirements of a code and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business of conduct under New York Stock Exchange listing standards. The Code of Business Conduct and Ethics is posted Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by on our web site at www.neenah.com under the links ‘‘Investor Relations — Corporate Governance — Code of business segment. Ethics’’ and print copies are available upon request without charge. You can request print copies by contacting our General Counsel in writing at Neenah Paper, Inc., 3460 Preston Ridge Road, Suite 600, Alpharetta, Georgia 30005 or by telephone at 678-566-6500. The Company intends to disclose any amendments to the Code of Business Conduct and Ethics, as well as any waivers for executive officers or directors, on our web site at www.neenah.com. Information on our web site is not incorporated by reference in this document. Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a Information relating to executive compensation and other matters is set forth under the captions ‘‘Compensation, single supplier would not cause a shutdown of our manufacturing operations. Discussion and Analysis,’’ ‘‘Additional Executive Compensation,’’ ‘‘Director Compensation,’’ and ‘‘Compensation Committee Report’’ in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein Our technical products business acquires all of its specialized pulp requirements from two global suppliers and by reference. certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be Information relating to ownership of common stock of Neenah by certain persons is set forth under the caption able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term ‘‘Security Ownership of Certain Beneficial Owners and Management’’ in the Proxy Statement referred to in disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp Item 10 above. Such information is incorporated herein by reference. Information regarding securities authorized grades or other latex grades that would allow us to meet required product performance characteristics and incur for issuance under equity compensation plans of Neenah is set forth under the caption ‘‘Equity Compensation only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative Plan Information’’ in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein pulp or latex grades would have a material effect on our operations. by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management Item 11. Executive Compensation Item 13. Certain Relationships and Related Transactions and Director Independence Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Information relating to existing or proposed relationships or transactions between Neenah and any affiliate of Neenah is set forth under the caption ‘‘Certain Relationships and Related Transactions’’ in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein by reference. Item 14. Principal Accountant Fees and Services We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. Information relating to Neenah’s principal accounting fees and services is set forth under the caption ‘‘Independent Registered Public Accounting Firm Fees and Services’’ in the Proxy Statement referred to in Item 10 above. Such information is incorporated herein by reference. 41 5 F o r m 1 0 - K Item 15. Exhibits and Financial Statement Schedule (a) Documents filed as part of this report: 1. Consolidated Financial Statements PART IV The following reports and financial statements are filed herewith on the pages indicated: Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page F-2 F-3 F-4 F-5 F-6 F-7 F-8 F-9 2. Financial Statement schedule The following schedule is filed herewith: Schedule II — Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-48 All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. 3. Exhibits See (b) below (b) Exhibits The following exhibits are filed with or incorporated by reference in this report. Where such filing is made by incorporation by reference to a previously filed registration statement or report, such registration statement or report is identified in parentheses. We will furnish any exhibit at no cost upon written request to us at: Investor Relations, Neenah Paper, Inc., 3460 Preston Ridge Road, Suite 600, Alpharetta, Georgia 30005. Exhibit Number Exhibit 2 2.1 2.2 2.5 Distribution Agreement dated as of November 20, 2004 between Kimberly-Clark Corporation and Neenah Paper, Inc. (filed as Exhibit 2.1 to the Neenah Paper, Inc. Current Report on Form 8-K filed November 30, 2004 and incorporated herein by reference). Sale and Purchase Agreement dated as of August 9, 2006 by and between FiberMark, Inc., FiberMark International Holdings LLC, and Neenah Paper, Inc. (filed as Exhibit 2.1 to the Neenah Paper, Inc. Current Report on Form 8-K filed October 11, 2006 and incorporated herein by reference). Assignment of Sale and Purchase Agreement Rights dated October 11, 2006 by and between Neenah Paper, Inc. and Neenah Paper International, LLC (filed as Exhibit 2.2 to the Neenah Paper, Inc. Current Report on Form 8-K filed October 11, 2006 and incorporated herein by reference). Agreement and Plan of Merger, among Neenah Paper, Inc., Fox Valley Corporation, Fox River Paper Company, LLC and AF/CPS Holding Corporation, dated as of February 5, 2007 (filed as Exhibit 2.1 to the Neenah Paper, Inc. Current Report on Form 8-K filed March 1, 2007 and incorporated herein by reference). 42 2.7 2.8 2.9 2.10 2.11 3.1 3.2 4.1 4.2 4.3 4.4 2.6 Exhibit Number Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. The following tables present further information about our businesses by geographic area (dollars in millions): Amended and Restated Share Purchase Agreement dated as of June 24, 2008, by and among Neenah Paper Company of Canada, NPCC Holding Company, LLC, Neenah Paper, Inc., Azure Mountain Capital Holdings LP, Northern Pulp NS LP, and Azure Mountain Capital Financial LP (filed as Exhibit 10.2 to the Neenah Paper, Inc. Quarterly Report on Form 10-Q for the three Year Ended December 31, months ended June 30, 2008, filed August 11, 2008 and incorporated herein by reference). Exhibit 2011 2012 2010 Net sales United States Europe Asset Purchase Agreement dated as of June 24, 2008, by and between Neenah Paper Company of $413.6 Canada and Azure Mountain Financial Corporation (filed as Exhibit 10.3 to the Neenah Paper, Inc. 244.1 Quarterly Report on Form 10-Q for the three months ended June 30, 2008, filed August 11, 2008 and incorporated herein by reference). $543.4 265.4 $416.2 279.8 $808.8 $696.0 $657.7 Consolidated Asset Purchase Agreement dated as of June 24, 2008, by and between Neenah Paper Company of Canada and Northern Pulp Nova Scotia Corporation (filed as Exhibit 10.4 to the Neenah Paper, Inc. 2010 Quarterly Report on Form 10-Q for the three months ended June 30, 2008, filed August 11, 2008 and incorporated herein by reference). December 31, 2012 2011 $308.9 Timberland Purchase and Sale Agreement dated as of February 26, 2010 by and between Neenah 0.1 Paper Company of Canada and Northern Timber Nova Scotia Corporation (filed as Exhibit 10.1 to 297.7 the Neenah Paper, Inc. Quarterly Report on Form 10-Q for the three months ended March 31, 2010, filed May 10, 2010 and incorporated herein by reference). $322.5 0.2 288.0 $286.4 0.3 278.4 $610.7 $565.1 $606.7 Consolidated Total Assets United States Canada Europe Raw Materials Asset Purchase Agreement, by and among Neenah Paper, Inc., Wausau Paper Corp. and Wausau Paper Mills, LLC, dated as of December 7, 2011 (filed as Exhibit 2.1 to the Neenah Paper, Inc. Current Report on Form 8-K filed January 31, 2012 and incorporated herein by reference). Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. Securities Purchase Agreement by and among Crane Technical Materials, Inc., Crane & Co., Inc., Neenah Paper, Inc. and Neenah Filtration, LLC dated as of June 2, 2014 (filed as Exhibit 2.1 to the Neenah Paper, Inc. Quarterly Report on Form 10-Q for the three months ended June 30, 2014, filed August 7, 2014) (portions of this exhibit have been omitted pursuant to a confidential treatment Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our request that we have filed with the Securities Exchange Commission). technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements Amended and Restated Certificate of Incorporation of Neenah Paper, Inc. (filed as Exhibit 3.1 to externally. We believe that all of the raw materials for our technical products operations, except for certain the Neenah Paper, Inc. Current Report on Form 8-K filed November 30, 2004 and incorporated specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a herein by reference). single supplier would not cause a shutdown of our manufacturing operations. Amended and Restated Bylaws of Neenah Paper, Inc. (filed as Exhibit 3.2 to the Neenah Paper, Inc. Current Report on Form 8-K filed November 30, 2004 and incorporated herein by reference). Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by Indenture dated as of November 30, 2004 between Neenah Paper, Inc., the Subsidiary Guarantors formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our named therein and The Bank of New York Trust Company, N.A., as Trustee, including Form of 73⁄8 needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Senior Note due 2014 (filed as Exhibit 10.8 to the Neenah Paper, Inc. Current Report on Form 8-K an interruption of production at any one supplier, we believe that each of these suppliers individually would be filed November 30, 2004 and incorporated herein by reference). able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Rights Agreement between Neenah Paper, Inc. and EquiServe Trust Company, N.A., as Rights Agent, dated as of November 30, 2004 (filed as Exhibit 4.1 to the Neenah Paper, Inc. Current Report on Form 8-K filed November 30, 2004 and incorporated herein by reference). Form of Subsidiary Guarantee (included as Exhibit E to Exhibit 4.1). Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other Indenture dated as of May 23, 2013, by and among the Company, the Guarantors named therein, significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, and the 2021 Notes Trustee filed as Exhibit 4.1 to the Neenah Paper, Inc. Current Report on cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that Form 8-K, filed May 24, 2013 and incorporated herein by reference). all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five Tax Sharing Agreement dated as of November 30, 2004 by and between Kimberly-Clark Corporation percent of the total fiber requirements of our fine paper business, are readily available from several sources and and Neenah Paper, Inc. (filed as Exhibit 10.2 to the Neenah Paper, Inc. Current Report on that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Form 8-K filed November 30, 2004 and incorporated herein by reference). We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would Lease Agreement dated June 29, 2004 between Neenah Paper, Inc. and Germania Property Investors increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the XXXIV, L.P. (filed as Exhibit 10.3 to the Neenah Paper, Inc. Current Report on Form 8-K filed ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton November 30, 2004 and incorporated herein by reference). fiber supply issues to have a material effect on our operations. 10.2 10.3 F o r m 1 0 - K 43 5 Exhibit Number 10.4 10.5* 10.6* 10.7* 10.8* 10.12 10.20* 10.21* 10.22* 10.23 10.24 10.25 10.26 Exhibit Industrial Lease Agreement dated October 8, 2004 by and between Neenah Paper, Inc. and Duke Realty Limited Partnership (filed as Exhibit 10.4 to the Neenah Paper, Inc. Current Report on Form 8-K filed November 30, 2004 and incorporated herein by reference). Neenah Paper Supplemental Pension Plan (filed as Exhibit 10.5 to the Neenah Paper, Inc. Annual Report on Form 10-K for the year ended December 31, 2004, filed March 31, 2005 and incorporated herein by reference). Neenah Paper Supplemental Retirement Contribution Plan (filed as Exhibit 10.6 to the Neenah Paper, Inc. Annual Report on Form 10-K for the year ended December 31, 2004, filed March 31, 2005 and incorporated herein by reference). Neenah Paper Executive Severance Plan (filed as Exhibit 10.7 to the Neenah Paper, Inc. Annual Report on Form 10-K for the year ended December 31, 2004, filed March 31, 2005 and incorporated herein by reference). Neenah Paper Severance Pay Plan (filed as Exhibit 10.8 to the Neenah Paper, Inc. Annual Report on Form 10-K for the year ended December 31, 2006, filed March 16, 2007 and incorporated herein by reference). Form of Employee Matters Agreement by and between Kimberly-Clark Corporation and Neenah Paper, Inc. (filed as Exhibit 10.2 to the Neenah Paper, Inc. Registration Statement on Form 10, as amended, filed August 26, 2004 and incorporated herein by reference). Neenah Paper, Inc. Amended and Restated 2004 Omnibus Stock and Incentive Compensation Plan (filed as Annex A to the Neenah Paper, Inc. Definitive Proxy Statement on Schedule 14A for the year ended December 31, 2013, filed April 12, 2013 and incorporated herein by reference). Neenah Paper Deferred Compensation Plan approved on December 11, 2006 (filed as Exhibit 10.1 to the Neenah Paper, Inc. Current Report on Form 8-K filed December 15, 2006 and incorporated herein by reference). Neenah Paper Directors’ Deferred Compensation Plan approved on December 11, 2006. (filed as Exhibit 99.1 to the Neenah Paper, Inc. Registration Statement on Form S-8 filed December 21, 2006 and incorporated herein by reference). Subscription Agreement, dated as of June 24, 2008, by and between Neenah Paper Company of Canada, and Azure Mountain Capital Financial Corporation (filed as Exhibit 10.6 to the Neenah Paper, Inc. Quarterly Report on Form 10-Q for the three months ended June 30, 2008, filed August 11, 2008 and incorporated herein by reference). Amended and Restated Credit Agreement dated as of November 5, 2009 by and among Neenah Paper, Inc., certain of its subsidiaries, the lenders listed therein and JPMorgan Chase Bank, N.A., as agent for the Lenders (filed as Exhibit 10.34 to the Neenah Paper, Inc. Annual Report on Form 10-K for the year ended December 31, 2009, filed March 10, 2010 and incorporated herein by reference).+ First Amendment dated as of March 31, 2011 to the Amended and Restated Credit Agreement dated as of November 5, 2009 by and among Neenah Paper, Inc., certain of its subsidiaries, the lenders listed therein and JPMorgan Chase Bank, N.A., as agent for the Lenders (filed as Exhibit 10.1 to the Neenah Paper, Inc. Quarterly Report on Form 10-Q for the three months ended March 31, 2011, filed May 10, 2011 and incorporated herein by reference).+ Second Amendment dated as of November 16, 2011 to the Amended and Restated Credit Agreement dated as of November 5, 2009 by and among Neenah Paper, Inc., certain of its subsidiaries, the lenders listed therein and JPMorgan Chase Bank, N.A., as agent for the Lenders (filed as Exhibit 10.27 to the Neenah Paper, Inc. Annual Report on Form 10-K for the year ended December 31, 2011, filed March 8, 2012 and incorporated herein by reference). 44 10.27 Exhibit Number Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. Second Amended and Restated Credit Agreement dated as of October 11, 2012 by and among Neenah Paper, Inc., certain of its subsidiaries, the lenders listed therein and JPMorgan Chase Bank, The following tables present further information about our businesses by geographic area (dollars in millions): N.A., as agent for the Lenders (filed as Exhibit 10.28 to the Neenah Paper, Inc. Annual Report on Form 10-K for the year ended December 31, 2013, filed March 7, 2013 and incorporated herein by reference). Year Ended December 31, Exhibit 2010 2011 2012 Net sales United States Europe First Amendment dated as of June 7, 2013 to the Second Amended and Restated Credit Agreement, $416.2 dated as of October 11, 2012 by and among Neenah Paper, Inc., certain of its subsidiaries, the 279.8 lenders listed therein and JPMorgan Chase Bank, N.A., as agent for the Lenders (filed as Exhibit 99.1 to the Neenah Paper, Inc. Current Report on Form 8-K filed June 11, 2013 and incorporated herein by reference). $543.4 265.4 $413.6 244.1 $696.0 $657.7 $808.8 Consolidated Second Amendment dated December 16, 2013 to the Second Amended and Restated Credit December 31, Agreement dated as of October 11, 2012 by and among Neenah Paper, Inc., certain of its 2010 2011 subsidiaries, the lenders listed therein and JPMorgan Chase Bank, N.A., as agent for the Lenders (filed as Exhibit 99.1 to the Neenah Paper, Inc. Current Report on Form 8-K filed December 18, 2013 and incorporated herein by reference). 2012 First Amendment to the Neenah Paper Executive Severance Plan (filed as Exhibit 10.28 to the Neenah Paper, Inc. Annual Report on Form 10-K for the year ended December 31, 2013, (filed March 7, 2013 and incorporated herein by reference). $610.7 $565.1 Consolidated $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 297.7 $606.7 Total Assets United States Canada Europe 10.28 10.29 10.30 10.31 Raw Materials Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities Third Amended and Restated Credit Agreement dated December 18, 2014 by and among Neenah and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Paper, Inc., certain subsidiaries of Neenah Paper, Inc., as Domestic Borrowers, Neenah Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by Services GmbH & Co. KG and certain of its subsidiaries, as German Borrowers, certain other business segment. subsidiaries of Neenah Paper, Inc. as Guarantors, each of the financial institutions which is a signatory hereto or which may from time to time become a party hereto, as Lenders, JPMorgan Chase Bank, N.A., as Administrative Agent and Bank of America, N.A., as Syndication Agent (filed herewith).+ Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our Statement Regarding Computation of Ratio of Earnings to Fixed Charges (filed herewith) technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. List of Subsidiaries of Neenah Paper, Inc. (filed herewith). Consent of Deloitte & Touche LLP (filed herewith) Power of Attorney (filed herewith) 12 21 23 24 31.1 31.2 Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Our technical products business acquires all of its specialized pulp requirements from two global suppliers and Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’) (filed herewith). certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Exchange Act (filed herewith). an interruption of production at any one supplier, we believe that each of these suppliers individually would be Certification of Chief Executive Officer and Chief Financial Officer required by Rule 13a-14(b) or able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp Code (filed herewith). grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative XBRL Instance Document (filed herewith). pulp or latex grades would have a material effect on our operations. 101.INS 101.SCH XBRL Taxonomy Extension Schema Document (filed herewith). 32 101.CAL 101.DEF XBRL Taxonomy Extension Definition Linkbase Document (filed herewith). XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith). Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith). XBRL Taxonomy Extension Label Linkbase Document (filed herewith). 101.LAB 101.PRE * Indicates management contract or compensatory plan or arrangement. + Pursuant to a confidential treatment request portions of this exhibit have been furnished separately to the We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. Securities and Exchange Commission. (c) Financial Statement Schedule See Item 15(a) (2) above. 45 5 F o r m 1 0 - K Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURES NEENAH PAPER, INC. By: /s/ JOHN P. O’DONNELL Name: Title: Date: John P. O’Donnell President and Chief Executive Officer (in his capacity as a duly authorized officer of the Registrant and in his capacity as Chief Executive Officer) February 27, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ JOHN P. O’DONNELL John P. O’Donnell /s/ BONNIE C. LIND Bonnie C. Lind President and Chief Executive Officer (Principal Executive Officer) February 27, 2015 Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) February 27, 2015 /s/ LARRY N. BROWNLEE Larry N. Brownlee Vice President — Controller (Principal Accounting Officer) February 27, 2015 /s/ SEAN T. ERWIN* Chairman of the Board and Director February 27, 2015 Sean T. Erwin /s/ EDWARD GRZEDZINSKI* Director February 27, 2015 Edward Grzedzinski /s/ MARY ANN LEEPER* Director February 27, 2015 Mary Ann Leeper /s/ TIMOTHY S. LUCAS* Director February 27, 2015 Timothy S. Lucas /s/ JOHN F. MCGOVERN* Director February 27, 2015 John F. McGovern /s/ PHILIP C. MOORE* Director February 27, 2015 Philip C. Moore /s/ STEPHEN M. WOOD* Director February 27, 2015 Stephen M. Wood *By: /s/ STEVEN S. HEINRICHS Steven S. Heinrichs Senior Vice President, General Counsel and Secretary Attorney-in-fact 46 TABLE OF CONTENTS Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. Page The following tables present further information about our businesses by geographic area (dollars in millions): Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting . Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Changes in Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule II — Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net sales United States Europe F-2 F-3 F-4 F-5 F-6 F-7 F-8 F-9 F-48 Year Ended December 31, $543.4 265.4 $413.6 244.1 $416.2 279.8 Consolidated $808.8 $696.0 $657.7 2010 2011 2012 Total Assets United States Canada Europe Consolidated December 31, 2012 2011 2010 $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 297.7 $610.7 $565.1 $606.7 Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. Raw Materials Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. F o r m 1 0 - K Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-1 5 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Neenah Paper, Inc. Alpharetta, Georgia We have audited the internal control over financial reporting of Neenah Paper, Inc. and subsidiaries (the ‘‘Company’’) as of December 31, 2014, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Annual Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Crane Technical Materials, which was acquired on July 1, 2014 and whose financial statements constitute 11% of total assets, 5% of revenues and 1% of net income of the consolidated financial statement amounts as of and for the year ended December 31, 2014. Accordingly, our audit did not include the internal control over financial reporting at Crane Technical Materials. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2014 of the Company and our report dated February 27, 2015 expressed an unqualified opinion on those financial statements and financial statement schedules. /s/ Deloitte & Touche LLP Atlanta, Georgia February 27, 2015 F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than 10 percent of our consolidated net sales. To the Board of Directors and Stockholders of Neenah Paper, Inc. Alpharetta, Georgia The following tables present further information about our businesses by geographic area (dollars in millions): We have audited the accompanying consolidated balance sheets of Neenah Paper, Inc. and subsidiaries (the ‘‘Company’’) as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period 2010 ended December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. Net sales United States Europe Year Ended December 31, $543.4 265.4 $416.2 279.8 $413.6 244.1 2012 2011 2012 2010 2011 $696.0 $657.7 $808.8 December 31, Consolidated Consolidated Total Assets United States Canada Europe We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. $286.4 0.3 278.4 In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Neenah Paper, Inc. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board business segment. (United States), the Company’s internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 27, 2015 expressed an unqualified opinion on the Company’s internal control over financial reporting. Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Atlanta, Georgia February 27, 2015 /s/ Deloitte & Touche LLP $322.5 0.2 288.0 $308.9 0.1 297.7 Raw Materials $606.7 $610.7 $565.1 Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-3 5 F o r m 1 0 - K NEENAH PAPER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except share and per share data) Year Ended December 31, 2014 2013 2012 Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 902.7 725.5 $ 844.5 678.9 $ 808.8 649.7 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Integration/restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension plan settlement charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (income) expense — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from discontinued operations, net of taxes (Note 12) . . . . . . . . . . . . . . . 177.2 83.2 2.9 3.5 0.2 (0.1) 87.5 11.4 (0.3) 76.4 7.7 68.7 — 165.6 79.4 0.6 0.2 0.5 1.1 83.8 11.2 (0.2) 72.8 23.4 49.4 2.6 159.1 77.4 5.8 3.5 0.6 1.4 70.4 13.5 (0.1) 57.0 17.1 39.9 4.4 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68.7 $ 52.0 $ 44.3 Earnings Per Common Share Basic Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ 4.09 — 4.09 4.03 — 4.03 $ $ $ $ 3.02 0.16 3.18 2.96 0.16 3.12 $ $ $ $ 2.46 0.27 2.73 2.41 0.27 2.68 Weighted Average Common Shares Outstanding (in thousands) Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,584 16,072 15,752 Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,872 16,403 16,072 See Notes to Consolidated Financial Statements F-4 Net sales United States Europe NEENAH PAPER, INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 10 percent of our consolidated net sales. (In millions) The following tables present further information about our businesses by geographic area (dollars in millions): Year Ended December 31, Year Ended December 31, 2014 2011 2013 2010 2012 2012 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68.7 $52.0 $ 44.3 Reclassification of amounts recognized in the consolidated statement of operations: Amortization of adjustments to pension and other postretirement benefit liabilities . . . Pension plan settlement charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Amounts recognized in the consolidated statement of operations . . . . . . . . . . . . . . . . . Unrealized foreign currency translation gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain (loss) from pension and other postretirement benefit liabilities . . . . . . . . . . . Curtailment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain (loss) on ‘‘available-for-sale’’ securities . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) from other comprehensive income items before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision (benefit) for income taxes Total Assets United States Canada Europe Consolidated $543.4 265.4 $416.2 279.8 $413.6 244.1 $808.8 $696.0 $657.7 4.7 3.5 6.5 0.2 5.1 3.5 2012 $322.5 0.2 288.0 2011 8.2 6.7 December 31, 8.7 (23.7) 15.8 (34.3) — — $286.4 — (0.1) 0.3 278.4 (49.8) (8.7) 31.1 8.6 2010 8.6 4.4 (31.2) 0.3 0.1 $308.9 0.1 (17.8) 297.7 (7.7) $606.7 (10.1) $610.7 $565.1 Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41.1) 22.5 Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities $ 34.2 and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. See Notes to Consolidated Financial Statements $ 27.6 $74.5 Raw Materials Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. F o r m 1 0 - K Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-5 5 NEENAH PAPER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except share data) ASSETS Current Assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, Plant and Equipment — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible Assets — net (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2014 2013 $ 72.6 87.1 111.3 — 15.8 15.7 302.5 270.0 29.9 51.5 58.9 17.8 $ 73.4 90.5 101.1 0.6 22.8 17.0 305.4 261.7 13.3 43.1 38.5 13.9 TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $730.6 $675.9 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Debt payable within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.4 46.9 45.8 $ 21.4 36.4 45.8 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncurrent Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Noncurrent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.1 232.9 10.6 103.1 1.2 441.9 103.6 190.5 15.6 97.7 1.0 408.4 Commitments and Contingencies (Notes 10 and 11) Stockholders’ Equity Common stock, par value $0.01 — authorized: 100,000,000 shares; issued and outstanding: 17,849,000 shares and 17,383,000 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasury stock, at cost: 1,101,000 shares and 1,022,000 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 (31.7) 300.4 88.2 (68.4) 0.2 (27.2) 285.2 36.6 (27.3) Total Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288.7 267.5 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $730.6 $675.9 See Notes to Consolidated Financial Statements F-6 NEENAH PAPER, INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY 10 percent of our consolidated net sales. (In millions, shares in thousands) The following tables present further information about our businesses by geographic area (dollars in millions): Net sales United States Europe Balance, December 31, 2011 . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . Other comprehensive loss, net of Consolidated income taxes . . . . . . . . . . . . . . . . . . Dividends declared . . . . . . . . . . . . . . . Excess tax benefits from stock-based compensation . . . . . . . . . . . . . . . . . Shares purchased (Note 9) . . . . . . . . . Stock options exercised . . . . . . . . . . . . Restricted stock vesting (Note 9) . . . . . Stock-based compensation . . . . . . . . . . Total Assets United States Canada Europe Consolidated Balance, December 31, 2012 . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . Other comprehensive income, net of Common Stock Shares Amount 15,594 — $0.1 — Treasury Stock $(10.9) — Additional Paid-In Capital $257.6 — — — — — 371 861 — 16,826 — — — — — — 0.1 — 0.2 — — — — (4.1) — (7.6) — — — 6.1 — 5.3 — 4.9 (22.6) — 273.9 — Year Ended December 31, Retained Earnings/ Accumulated Deficit 2012 2011 Accumulated Other Comprehensive Income 2010 $(40.4) $543.4 44.3 265.4 $416.2 279.8 $(39.7) $413.6 — 244.1 $808.8 — (7.8) 2012 — — $322.5 — 0.2 — 288.0 — $610.7 (3.9) 52.0 $696.0 $657.7 (10.1) — December 31, 2011 $286.4 0.3 278.4 $565.1 2010 — — $308.9 — 0.1 — 297.7 — $606.7 (49.8) — Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business income taxes . . . . . . . . . . . . . . . . . . 22.5 — Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by — — Dividends declared . . . . . . . . . . . . . . . business segment. — — Dividends-in-kind . . . . . . . . . . . . . . . . Excess tax benefits from stock-based — (11.5) — — — 0.1 — — — — — — F o r m 1 0 - K — — — — — — — — 2.6 3.7 — 4.9 17,383 — — 336 221 — — (0.6) (4.0) — Balance, December 31, 2013 . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . Other comprehensive loss, net of Raw Materials compensation . . . . . . . . . . . . . . . . . Stock options exercised . . . . . . . . . . . . Restricted stock vesting (Note 9) . . . . . Stock-based compensation . . . . . . . . . . — — Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our — technical products business. The technical products business purchases softwood pulp, specialty pulp and latex — from various suppliers. The technical products business purchases substantially all of its raw material requirements (27.3) 0.2 externally. We believe that all of the raw materials for our technical products operations, except for certain — — specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. income taxes . . . . . . . . . . . . . . . . . . Our technical products business acquires all of its specialized pulp requirements from two global suppliers and Dividends declared . . . . . . . . . . . . . . . certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by Excess tax benefits from stock-based formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our compensation . . . . . . . . . . . . . . . . . — — needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Shares purchased (Note 9) . . . . . . . . . — — an interruption of production at any one supplier, we believe that each of these suppliers individually would be Stock options exercised . . . . . . . . . . . . — — able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term Restricted stock vesting (Note 9) . . . . . — — disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp Stock-based compensation . . . . . . . . . . — — grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Balance, December 31, 2014 . . . . . . . . — (1.1) — (3.4) — — — 316 150 — 5.6 — 3.6 — 6.0 — — — — — (41.1) — (27.2) — — (17.1) 285.2 — 36.6 68.7 $(68.4) $(31.7) 17,849 $300.4 $ 88.2 — — — — — — — — $0.2 See Notes to Consolidated Financial Statements Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-7 5 NEENAH PAPER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) OPERATING ACTIVITIES Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess tax benefit from stock-based compensation (Note 8) . . . . . . . . . . . . . . . . . . Deferred income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash effects of changes in liabilities for uncertain income tax positions . . . . . . Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory acquired in acquisitions (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension settlement charge, net of plan payments . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on asset dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by (used in) changes in operating working capital, net of effect of acquisitions (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension and other post-employment benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . INVESTING ACTIVITIES Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase of brands (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . Purchase of Crane Technical Materials (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase of equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from issuance of long-term debt Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayments of short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess tax benefit from stock-based compensation (Note 8) . . . . . . . . . . . . . . . . . . . Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares purchased (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES . . . . . . . . . . . . . EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . CASH AND CASH EQUIVALENTS, END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2014 2013 2012 $ 68.7 $ 52.0 $ 44.3 30.0 6.0 (5.6) 3.7 (2.0) 0.2 — 3.5 0.2 9.0 (18.3) (0.9) 94.5 (27.9) — (0.6) — — (72.4) (2.9) (1.1) (104.9) 49.5 (2.4) (5.6) 6.5 (25.4) 3.6 5.6 (17.1) (4.5) — 10.2 (0.6) (0.8) 73.4 29.4 4.9 (2.6) 19.3 (0.1) 0.5 (1.8) (0.2) 0.5 (6.6) (11.5) (0.3) 83.5 (28.7) — (0.1) (5.2) 0.6 — — 0.1 (33.3) 218.8 (3.5) (209.2) 19.3 (0.1) 3.7 2.6 (11.5) (4.6) (0.5) 15.0 0.4 65.6 7.8 28.8 4.9 (6.1) 10.7 (3.9) 0.6 (6.6) (3.4) 0.1 (20.9) (7.3) (1.1) 40.1 (25.1) 7.0 (0.1) (14.1) — — — — (32.3) 111.9 — (96.0) 1.2 (21.1) 5.3 6.1 (7.8) (11.7) (0.9) (13.0) 0.2 (5.0) 12.8 $ 72.6 $ 73.4 $ 7.8 See Notes to Consolidated Financial Statements F-8 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 1. Background and Basis of Presentation Year Ended December 31, 2012 2011 2010 Background Net sales United States Europe Neenah Paper, 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 $657.7 (formerly known as the fine paper business). On January 1, 2015, we changed the name of our fine paper business to fine paper and packaging. The name change better reflects the increasing importance, and plans for continued growth, of our premium packaging products. Consolidated December 31, $808.8 $696.0 $543.4 265.4 $416.2 279.8 $413.6 244.1 2010 The technical products business is an international producer of transportation, water and other filter media and durable, saturated and coated substrates for industrial products backings and a variety of other end markets. The $322.5 $308.9 fine paper and packaging business is a leading supplier of premium printing, packaging and other high end 0.1 0.2 specialty papers primarily in North America. The Company’s premium writing, text and cover papers, and specialty 297.7 288.0 papers are used in commercial printing and imaging applications for corporate identity packages, invitations, personal stationery and high-end advertising, as well as premium labels and luxury packaging. $610.7 Total Assets United States Canada Europe $286.4 0.3 278.4 Consolidated $565.1 $606.7 2012 2011 On July 1, 2014, the Company purchased all of the outstanding equity of Crane Technical Materials, Inc. from Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities Crane & Co., Inc. for approximately $72 million. The acquired technical materials business provides performance- and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business oriented wet laid nonwovens media for filtration end markets as well as environmental, energy and industrial uses. Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by The technical materials business has two manufacturing facilities in Pittsfield, Massachusetts. The results of this business segment. business are reported in the Technical Products segment from the date of acquisition. See Note 3, ‘‘Acquisitions.’’ Raw Materials On January 31, 2013, the Company purchased certain premium business paper brands and other assets from the Southworth Company (‘‘Southworth’’) for a payment of $7.0 million. See Note 3, ‘‘Acquisitions.’’ Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our On January 31, 2012, the Company purchased certain premium paper brands and other assets from Wausau Paper technical products business. The technical products business purchases softwood pulp, specialty pulp and latex Mills, LLC, a subsidiary of Wausau Paper Corp. (‘‘Wausau’’) for approximately $21 million. See Note 3, from various suppliers. The technical products business purchases substantially all of its raw material requirements ‘‘Acquisitions.’’ externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. In June 2008, the Company’s wholly owned subsidiary, Neenah Paper Company of Canada (‘‘Neenah Canada’’) sold its pulp mill in Pictou, Nova Scotia (the ‘‘Pictou Mill’’). In March 2010, Neenah Canada sold approximately 475,000 acres of woodland assets in Nova Scotia (the ‘‘Woodlands’’). The sale of the Woodlands resulted in the Our technical products business acquires all of its specialized pulp requirements from two global suppliers and substantially complete liquidation of the Company’s investment in Neenah Canada. For the years ended certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by December 31, 2014, 2013 and 2012, the results of operations of the Pictou Mill and the Woodlands are reported formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our as discontinued operations. See Note 12, ‘‘Discontinued Operations.’’ needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. The consolidated financial statements include the financial statements of the Company and its wholly owned and majority owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. Basis of Presentation F o r m 1 0 - K Note 2. Summary of Significant Accounting Policies Use of Estimates Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (‘‘GAAP’’) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting periods. Actual results could differ from these estimates, and changes in these estimates are We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would recorded when known. Significant management judgment is required in determining the accounting for, among increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the other things, pension and postretirement benefits, retained insurable risks, reserves for sales discounts and ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton allowances, purchase price allocations, useful lives for depreciation and amortization, future cash flows associated fiber supply issues to have a material effect on our operations. with impairment testing for tangible and intangible long-lived assets, income taxes, contingencies, inventory obsolescence and market reserves and the valuation of stock-based compensation. F-9 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 2. Summary of Significant Accounting Policies (Continued) Revenue Recognition The Company recognizes sales revenue when all of the following have occurred: (1) delivery has occurred, (2) persuasive evidence of an agreement exists, (3) pricing is fixed or determinable, and (4) collection is reasonably assured. Delivery is not considered to have occurred until the customer takes title and assumes the risks and rewards of ownership. The timing of revenue recognition is largely dependent on shipping terms. Sales are reported net of allowable discounts and estimated returns. Reserves for cash discounts, trade allowances and sales returns are estimated using historical experience. The Company’s businesses manage seasonal peaks in inventory demand by providing certain customers with finished goods inventory on consignment. The Company accounts for such inventory as finished goods until title to the inventory is transferred and the customer assumes the risks and rewards of ownership at which time the Company recognizes sales revenue. Earnings per Share (‘‘EPS’’) The Company computes basic earnings per share (‘‘EPS’’) in accordance with Accounting Standards Codification (‘‘ASC’’) Topic 260, Earnings Per Share (‘‘ASC Topic 260’’). In accordance with ASC Topic 260, share-based awards with non-forfeitable dividends are classified as participating securities. In calculating basic earnings per share, this method requires net income to be reduced by the amount of dividends declared in the current period for each participating security and by the contractual amount of dividends or other participation payments that are paid or accumulated for the current period. Undistributed earnings for the period are allocated to participating securities based on the contractual participation rights of the security to share in those current earnings assuming all earnings for the period are distributed. Holders of restricted stock and restricted stock units (‘‘RSUs’’) have contractual participation rights that are equivalent to those of common stockholders. Therefore, the Company allocates undistributed earnings to restricted stock, RSUs and common stockholders based on their respective ownership percentage, as of the end of the period. ASC Topic 260 also requires companies with participating securities to calculate diluted earnings per share using the ‘‘Two Class’’ method. The ‘‘Two Class’’ method requires first calculating diluted earnings per share using a denominator that includes the weighted average share equivalents from the assumed conversion of dilutive securities. Diluted earnings per share is then calculated using net income reduced by the amount of distributed and undistributed earnings allocated to participating securities calculated using the ‘‘Treasury Stock’’ method and a denominator that includes the weighted average share equivalents from the assumed conversion of dilutive securities excluding participating securities. Companies are required to report the lower of the diluted earnings per share amounts under the two calculations subject to the anti-dilution provisions of ASC Topic 260. Diluted EPS was calculated to give effect to all potentially dilutive non-participating common share equivalents using the ‘‘Treasury Stock’’ method. Outstanding stock options, stock appreciation rights (‘‘SARs’’) and target awards of RSUs with performance conditions (‘‘Performance Units’’) represent the only potentially dilutive non-participating security effects on the Company’s weighted-average shares. For the years ended December 31, 2014, 2013 and 2012, approximately 15,000, 450,000 and 1,015,000 potentially dilutive options, respectively, were 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 for the respective 12-month periods during which the options were outstanding. F-10 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 2. Summary of Significant Accounting Policies (Continued) Year Ended December 31, 2012 2011 2010 The following table presents the computation of basic and diluted shares of common stock used in the calculation of EPS (amounts in millions, except share and per share amounts): $543.4 265.4 $416.2 279.8 $413.6 244.1 Net sales United States Europe Earnings per basic common share Consolidated $808.8 $696.0 $657.7 Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributed and undistributed amounts allocated to participating securities . . . . . . . Income from continuing operations available to common stockholders . . . . . . . . . . . Income from discontinued operations, net of income taxes . . . . . . . . . . . . . . . . . . . Distributed and undistributed amounts allocated to participating securities . . . . . . . Total Assets United States Canada Europe Consolidated Net income available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, December 31, 2013 2011 $ 2010 $ 2012 49.4 (0.8) 39.9 (1.2) $286.4 48.6 0.3 2.6 278.4 — $565.1 $ 51.2 $308.9 0.1 297.7 38.7 4.4 (0.1) $606.7 $ 43.0 2014 2012 $ 68.7 (0.8) $322.5 67.9 0.2 — 288.0 — $610.7 $ 67.9 F o r m 1 0 - K Weighted-average basic shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities 15,752 and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by $ business segment. Basic earnings per share Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.09 — 2.46 0.27 3.02 0.16 16,072 16,584 $ Raw Materials $ 4.09 $ 3.18 $ 2.73 $ 2014 2013 2012 Earnings per diluted common share Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a 39.9 single supplier would not cause a shutdown of our manufacturing operations. (1.1) Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributed and undistributed amounts allocated to participating securities . . . . . . . $ 68.7 (0.8) Year Ended December 31, 49.4 (0.8) 48.6 2.6 — 67.9 — — Net income available to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average diluted shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations available to common stockholders . . . . . . . . . . . Income from discontinued operations, net of income taxes . . . . . . . . . . . . . . . . . . . Distributed and undistributed amounts allocated to participating securities . . . . . . . Our technical products business acquires all of its specialized pulp requirements from two global suppliers and 38.8 certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by 4.4 formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our (0.1) needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of 43.1 an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term 15,752 disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp 320 grades or other latex grades that would allow us to meet required product performance characteristics and incur 16,072 only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Weighted-average basic shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add: Assumed incremental shares under stock-based compensation plans . . . . . . . . Earnings Per Common Share Diluted earnings per share Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other $ 2.41 significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, 0.27 cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that 2.68 all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. $ 4.03 — 16,072 331 16,584 288 2.96 0.16 16,403 16,872 67.9 4.03 3.12 51.2 $ $ $ $ $ $ $ $ Cash and Cash Equivalents We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would Cash and cash equivalents include all cash balances and highly liquid investments with an initial maturity of three increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the months or less. The Company places its temporary cash investments with high credit quality financial institutions. ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton As of December 31, 2014 and 2013, $0.4 million and $0.5 million, respectively, of the Company’s cash and cash fiber supply issues to have a material effect on our operations. equivalents is restricted to the payment of postretirement benefits for certain former Fox River executives. F-11 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 2. Summary of Significant Accounting Policies (Continued) Inventories U.S. inventories are valued at the lower of cost, using the Last-In, First-Out (LIFO) method for financial reporting purposes, or market. German inventories are valued at the lower of cost, using a weighted-average cost method, or market. Cost includes labor, materials and production overhead. Foreign Currency Balance sheet accounts of Neenah Germany and Neenah Canada are translated from Euros and Canadian dollars, respectively, into U.S. dollars at period-end exchange rates, and income and expense accounts are translated at average exchange rates during the period. Translation gains or losses related to net assets located in Germany and Canada are recorded as unrealized foreign currency translation adjustments within accumulated other comprehensive income (loss) in stockholders’ equity. Gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity’s functional currency) are included in other (income) expense — net in the consolidated statements of operations. Property and Depreciation Property, plant and equipment are stated at cost, less accumulated depreciation. Certain costs of software developed or obtained for internal use are capitalized. When property, plant and equipment is sold or retired, the costs and the related accumulated depreciation are removed from the accounts, and the gains or losses are recorded in other (income) expense — net. For financial reporting purposes, depreciation is principally computed on the straight-line method over estimated useful asset lives. The weighted average remaining useful lives for buildings, land improvements and machinery and equipment are approximately 18 years, 13 years and 10 years, respectively. For income tax purposes, accelerated methods of depreciation are used. Estimated useful lives are periodically reviewed and changed when warranted. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their cost may not be recoverable. An impairment loss would be recognized when estimated undiscounted future pre-tax cash flows from the use of an asset are less than its carrying amount. Measurement of an impairment loss is based on the excess of the carrying amount of the asset over its fair value. Fair value is generally measured using discounted cash flows. The costs of major rebuilds and replacements of plant and equipment are capitalized, and the cost of maintenance performed on manufacturing facilities, composed of labor, materials and other incremental costs, is expensed as incurred. Start-up costs for new or expanded facilities, including costs related to trial production, are expensed as incurred. The Company accounts for asset retirement obligations (‘‘AROs’’) in accordance with ASC Topic 410, Asset Retirements and Environmental Obligations, which requires companies to make estimates regarding future events in order to record a liability for AROs in the period in which a legal obligation is created. Such liabilities are recorded at fair value, with an offsetting increase to the carrying value of the related long-lived asset. As of December 31, 2014, the Company is unable to estimate its AROs for environmental liabilities at its manufacturing facilities. Goodwill and Other Intangible Assets The Company follows the guidance of ASC Topic 805, Business Combinations (‘‘ASC Topic 805’’), in recording goodwill arising from a business combination as the excess of purchase price over the fair value of identifiable assets acquired and liabilities assumed. F-12 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 2. Summary of Significant Accounting Policies (Continued) Year Ended December 31, 2012 2011 2010 $696.0 $808.8 Consolidated $543.4 265.4 $416.2 279.8 Net sales United States Europe Under ASC Topic 350, Intangibles — Goodwill and Other (‘‘ASC Topic 350’’), goodwill is subject to impairment testing at least annually. ASC Topic 350 provides an entity with the option to first assess qualitative factors to $413.6 determine whether the existence of events or circumstances leads to a determination that it is more likely than not 244.1 that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or $657.7 circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. If the two-step impairment test is necessary, a fair-value-based test is applied at the reporting unit level, which is generally one level below the 2010 operating segment level. The test compares the fair value of an entity’s reporting units to the carrying value of those reporting units. This test requires various judgments and estimates. The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach. $308.9 Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of 0.1 recognized and unrecognized assets and liabilities of the reporting unit. An adjustment to goodwill will be 297.7 recorded for any goodwill that is determined to be impaired. The Company tests goodwill for impairment at least $606.7 annually on November 30 in conjunction with preparation of its annual business plan, or more frequently if events or circumstances indicate it might be impaired. Total Assets United States Canada Europe Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities At November 30, 2014, the Company’s assessment of qualitative facts and circumstances indicated no impairment and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business of goodwill. The qualitative factors considered included, but were not limited to, changes in the macroeconomic Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by conditions; changes in industry and market conditions such as an increase in the competitive environment; changes business segment. in manufacturing input costs — particularly to the extent these cannot be recovered through higher selling prices; changes in the financial performance of Neenah Germany and the acquired technical materials business including earnings and cash flows; and changes in the Company’s market capitalization. $322.5 0.2 288.0 $286.4 0.3 278.4 Raw Materials Consolidated December 31, $565.1 $610.7 2012 2011 F o r m 1 0 - K Research and Development Expense Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our Intangible assets with finite useful lives are amortized on a straight-line basis over their respective estimated useful technical products business. The technical products business purchases softwood pulp, specialty pulp and latex lives and reviewed for impairment in accordance with ASC Topic 360, Property, Plant, and Equipment. Intangible from various suppliers. The technical products business purchases substantially all of its raw material requirements assets consist primarily of customer relationships, trade names and acquired intellectual property. Such intangible externally. We believe that all of the raw materials for our technical products operations, except for certain assets are amortized using the straight-line method over estimated useful lives of between 10 and 15 years. Certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a trade names are estimated to have indefinite useful lives and as such are not amortized. Intangible assets with single supplier would not cause a shutdown of our manufacturing operations. indefinite lives are reviewed for impairment at least annually. See Note 4, ‘‘Goodwill and Other Intangible Assets.’’ Research and development costs are charged to expense as incurred and are recorded in ‘‘Selling, general and administrative expenses’’ on the consolidated statement of operations. See Note 14, ‘‘Supplemental Data — Supplemental Statement of Operations Data.’’ Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. The Company measures the fair value of pension plan assets in accordance with 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 Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, three levels of the fair value hierarchy under ASC Topic 820 are described below: cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Level 1 — Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access. Fair Value Measurements Level 2 — Inputs to the valuation methodology include: (cid:127) Quoted prices for similar assets or liabilities in active markets; We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. (cid:127) Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; (cid:127) (cid:127) Inputs that are derived principally from or corroborated by observable market data by correlation or other means. F-13 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 2. Summary of Significant Accounting Policies (Continued) If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques attempt to maximize the use of observable inputs and minimize the use of unobservable inputs. The following table sets forth by level, within the fair value hierarchy, the fair value of the Company’s pension plan assets: Assets at Fair Value at December 31, Level 1 Level 2 (a) Level 3 Total 2014 2013 2014 2013 2014 2013 2014 2013 Equity securities: Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International Debt securities Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 188.1 — Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — $ — $ — $ 63.1 36.1 1.0 1.1 $ 49.4 42.4 $ — $ — $ 63.1 36.1 — — $ 49.4 42.4 168.4 — — — — 188.1 1.0 — 168.4 1.1 Total assets at fair value . . . . . . . . . . . . . . . . . . $1.0 $1.1 $287.3 $260.2 $ — $ — $288.3 $261.3 (a) Pension plan assets are invested in a common collective trust. The common collective trust is valued at quoted net asset value. Fair Value of Financial Instruments The carrying amounts reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short maturities. 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. The following table presents the carrying value and the fair value of the Company’s debt at December 31, 2014 and 2013. December 31, 2014 December 31, 2013 Carrying Value Fair Value Carrying Value Fair Value (a) 2021 Senior Notes (5.25% fixed rate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Global Revolving Credit Facilities (variable rates) . . . . . . . . . . . . . . . . . . . Neenah Germany revolving line of credit (variable rates) . . . . . . . . . . . . . . Second German Loan Agreement (2.5% fixed rate) . . . . . . . . . . . . . . . . . . Neenah Germany project financing (3.8% fixed rate) . . . . . . . . . . . . . . . . . $175.0 48.7 — 10.6 — $169.6 48.7 — 9.0 — $175.0 — 19.3 12.4 5.2 $163.7 — 19.3 10.9 5.1 Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $234.3 $227.3 $211.9 $199.0 (a) Fair value for all debt instruments was estimated from Level 2 measurements. F-14 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 2. Summary of Significant Accounting Policies (Continued) Year Ended December 31, 2012 2011 2010 Net sales United States Europe The Company’s investments in marketable securities are accounted for as ‘‘available-for-sale securities’’ in accordance with ASC Topic 320, Investments — Debt and Equity Securities (‘‘ASC Topic 320’’). Pursuant to ASC Topic 320, marketable securities are reported at fair value on the consolidated balance sheet and temporary unrealized holding gains and losses are reported in other comprehensive income until realized upon sale. At December 31, 2014, the Company had $3.2 million in marketable securities classified as ‘‘Other Assets’’ on the consolidated balance sheet. The cost of such marketable securities was $3.2 million. Fair value for the Company’s marketable securities was estimated from Level 1 inputs. The Company’s marketable securities are restricted to 2010 the payment of benefits under its supplemental retirement contribution plan (the ‘‘SERP’’). $416.2 279.8 $413.6 244.1 $543.4 265.4 Consolidated December 31, $808.8 $696.0 $657.7 2012 2011 Total Assets United States Canada Europe Consolidated Other Comprehensive Income (Loss) $286.4 0.3 Comprehensive income (loss) includes, in addition to net income (loss), gains and losses recorded directly into 278.4 stockholders’ equity on the consolidated balance sheet. These gains and losses are referred to as other $565.1 comprehensive income items. Accumulated other comprehensive income (loss) consists of foreign currency translation gains and (losses), deferred gains and (losses) on ‘‘available-for-sale’’ securities, and adjustments Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities related to pensions and other post-retirement benefits. The Company does not provide income taxes for foreign and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business currency translation adjustments related to indefinite investments in foreign subsidiaries. Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. The components of accumulated other comprehensive income (loss), net of applicable income taxes are as follows: $322.5 0.2 288.0 $308.9 0.1 297.7 $606.7 $610.7 Raw Materials December 31, 2014 2013 Unrealized foreign currency translation gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net loss from pension and other postretirement benefit liabilities (net of income tax benefits of Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements $35.1 million and $26.3 million, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45.2) externally. We believe that all of the raw materials for our technical products operations, except for certain Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(68.4) $(27.3) specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. The following table presents changes in accumulated other comprehensive income (‘‘AOCI’’): $ (5.8) $ 17.9 (62.6) F o r m 1 0 - K Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our Tax Pretax needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Amount Effect Amount Amount Effect Amount Amount Effect Amount an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(23.7) $ — $(23.7) $ 8.7 $ — $ 8.7 $ 4.4 $ — $ 4.4 disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp (14.6) (26.1) 8.7 grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — pulp or latex grades would have a material effect on our operations. Adjustment to pension and other benefit liabilities Unrealized gain (loss) on ‘‘available-for-sale’’ Unrealized foreign currency translation gains — (0.1) — (0.1) Year Ended December 31, (8.6) 13.9 (22.3) 7.7 0.1 — (17.4) Other comprehensive income (loss) . . . . . . . . . . . $(49.8) $8.7 $(41.1) $31.1 $(8.6) $22.5 $(17.8) $7.7 $(10.1) Pretax Pretax 22.5 2014 2013 2012 0.1 Net Net Net Tax Tax Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, For the years ended December 31, 2014, 2013 and 2012, the Company reclassified $4.7 million, $6.5 million and cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that $5.1 million, respectively, of costs from accumulated other comprehensive income to cost of products sold and all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five selling, general and administrative expenses on the Consolidated Statements of Operations. For the years ended percent of the total fiber requirements of our fine paper business, are readily available from several sources and December 31, 2014, 2013 and 2012, the Company recognized an income tax benefit of $1.7 million, $2.5 million that the loss of a single supplier would not cause a shutdown of our manufacturing operations. and $1.9 million, respectively, related to such reclassifications classified as Provision for income taxes on the Consolidated Statements of Operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. For the years ended December 31, 2014, 2013 and 2012, the Company reclassified $3.5 million, $0.2 million and $3.5 million, respectively, of costs from accumulated other comprehensive income to pension plan settlement charge on the Consolidated Statements of Operations. For the years ended December 31, 2014, 2013 and 2012, the Company recognized an income tax benefit of $1.3 million, $0.1 million and $1.3 million, respectively, related to such reclassifications classified as Provision for income taxes on the Consolidated Statements of Operations. F-15 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 2. Summary of Significant Accounting Policies (Continued) Accounting Standards Changes In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09 (‘‘ASU 2014-09’’), Revenue from Contracts with Customers (‘‘ASC Topic 606’’). ASU 2014-09 supersedes the revenue recognition guidance in ASC Topic 605, Revenue Recognition. The core principle of the guidance in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in the exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016. Therefore, the Company will adopt ASU 2014-09 on January 1, 2017. The Company is still evaluating the impact of adopting ASU 2014-09 but the adoption of ASU 2014-09 is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows. As of December 31, 2014, no other amendments to the ASC had been issued that will have or are reasonably likely to have a material effect on the Company’s financial position, results of operations or cash flows. Note 3. Acquisitions Acquisition of Crane Technical Materials On July 1, 2014, the Company purchased all of the outstanding equity of the Crane Technical Materials business for approximately $72 million. The acquired business provides performance-oriented wet laid nonwovens media for filtration end markets as well as environmental, energy and industrial uses. The results of this business are reported in the Technical Products segment from the date of acquisition. The Company accounted for the transaction using the acquisition method in accordance with ASC Topic 805 ‘‘Business Combinations.’’ The allocation of the purchase price is based on estimates of the fair value of assets acquired and liabilities assumed as of July 1, 2014. The Company has not identified any material unrecorded pre-acquisition contingencies. The Company did not acquire any in-process research and development assets as part of the acquisition. The following table summarizes the allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed as of December 31, 2014: Assets Acquired Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortizable intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquired goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5.8 8.2 0.7 23.5 11.1 13.3 0.2 13.5 Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76.3 Liabilities Assumed Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 1.1 3.9 Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $72.4 F-16 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 3. Acquisitions (Continued) Year Ended December 31, 2012 2011 2010 Net sales United States Europe The Company estimated the fair value of the assets and liabilities acquired in accordance with ASC Topic 820. The fair value of amortizable and non-amortizable intangible assets was estimated by applying a royalty rate to projected revenue or the use of the excess earnings method, net of tax impacts and adjusted for present value considerations. The Company estimated the fair value of acquired property, plant and equipment using a $657.7 combination of cost and market approaches. In general, the fair value of other acquired assets and liabilities was estimated using the cost basis of the acquired technical materials business. $416.2 279.8 $413.6 244.1 $543.4 265.4 Consolidated $808.8 $696.0 December 31, 2010 2011 2012 Consolidated Total Assets United States Canada Europe The excess of the purchase price over the estimated fair value of the tangible net assets and identifiable intangible assets acquired was recorded as acquired goodwill. The factors contributing to the amount of goodwill recognized are based on several long-term strategic benefits that are expected to be realized from the acquisition of the $308.9 technical materials business. These benefits include entry into growing and profitable global markets for water 0.1 filtration, environmental/emissions control, and energy management with defensible technologies and brands. In 297.7 addition, the acquisition of brands and complementary offerings facilitates the Company’s expansion into $606.7 non-woven product lines containing fiberglass, polymer fibers and carbon fibers. Substantially all of the acquired goodwill is expected to be deductible for income tax purposes and is entirely allocated to the Technical Products segment. Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business For the year ended December 31, 2014, the Company incurred $1.0 million of acquisition-related integration costs. Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by In addition, the Company incurred approximately $1.1 million in capital costs for IT systems and infrastructure business segment. projects. For the year ended December 31, 2014, net sales and income from operations before income taxes for the acquired technical materials business were $24.1 million and $2.1 million (including the acquisition related integration costs described above), respectively. $322.5 0.2 288.0 $286.4 0.3 278.4 Raw Materials $610.7 $565.1 Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our The following selected unaudited pro forma consolidated statements of operations data for the years ended technical products business. The technical products business purchases softwood pulp, specialty pulp and latex December 31, 2014 and 2013 was prepared as though the acquisition of the technical materials business had from various suppliers. The technical products business purchases substantially all of its raw material requirements occurred on January 1, 2013. The information does not reflect future events that may occur after December 31, externally. We believe that all of the raw materials for our technical products operations, except for certain 2014 or any operating efficiencies or inefficiencies that may result from the acquisition of the technical materials specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a business. Therefore, the information is not necessarily indicative of results that would have been achieved had the single supplier would not cause a shutdown of our manufacturing operations. businesses been combined during the periods presented or the results that the Company will experience going forward. Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of 2013 an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term $889.3 disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp 84.4 grades or other latex grades that would allow us to meet required product performance characteristics and incur 49.8 only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative 2.6 pulp or latex grades would have a material effect on our operations. 52.4 Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings Per Common Share $925.3 90.1 70.3 — 70.3 Year Ended December 31, Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other Basic significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, $ 3.04 cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that 0.16 all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five $ 3.20 percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Diluted Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.98 We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would 0.16 increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton $ 3.14 fiber supply issues to have a material effect on our operations. $ 4.19 — $ 4.12 — $ 4.19 $ 4.12 2014 F o r m 1 0 - K F-17 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 3. Acquisitions (Continued) Acquisition of Southworth On January 31, 2013, the Company purchased certain premium paper brands and other assets from Southworth. The Company paid $7.0 million for (i) certain premium fine paper brands including Southworth, (ii) approximately one month of finished goods inventory valued at $1.8 million and (iii) certain converting equipment used for retail grades. The results of the Southworth brands are reported in the Fine Paper and Packaging segment from the date of acquisition. For the year ended December 31, 2013, the Company incurred $0.4 million in acquisition-related integration costs. Acquisition of Wausau On January 31, 2012, the Company purchased certain premium paper brands and other assets from Wausau. The Company paid approximately $21 million 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. The results of the Index, Tag and Vellum Bristol product lines are reported in the Other segment from the date of acquisition. The results of all other brands acquired from Wausau are reported in the Fine Paper and Packaging segment from the date of acquisition. For the year ended December 31, 2012, the Company incurred $5.8 million in acquisition-related integration costs. Note 4. Goodwill and Other Intangible Assets As of December 31, 2014, the Company had goodwill of $51.5 million which is not amortized. The following table presents changes in goodwill (all of which relates to the Company’s Technical Products segment) for the years ended December 31, 2014, 2013 and 2012: Gross Amount Accumulated Impairment Losses Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 89.1 7.0 Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill acquired in acquisition of the technical materials business . . . . . . . Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96.1 4.0 100.1 13.5 (11.8) $(48.6) (6.1) (54.7) (2.3) (57.0) — 6.7 Net $40.5 0.9 41.4 1.7 43.1 13.5 (5.1) Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $101.8 $(50.3) $51.5 Impairment As of December 31, 2014 and 2013, the carrying amount of goodwill was not impaired. F-18 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 4. Goodwill and Other Intangible Assets (Continued) Year Ended December 31, 2012 2011 2010 Other Intangible Assets Net sales United States Europe $413.6 As of December 31, 2014, the Company had net identifiable intangible assets of $58.9 million. All such intangible 244.1 assets were acquired in the acquisitions of Neenah Germany, Fox River, the Wausau and Southworth brands and $657.7 the technical materials business. The following table details amounts related to those assets. $543.4 265.4 $416.2 279.8 Consolidated $808.8 $696.0 Amortizable intangible assets Total Assets United States Canada Europe Consolidated Customer based intangibles . . . . . . . . . . . . . . . . . Trade names and trademarks . . . . . . . . . . . . . . . . Acquired technology . . . . . . . . . . . . . . . . . . . . . . Total amortizable intangible assets . . . . . . . . . . . . . . Weighted average amortization period (years) December 31, 2014 Gross Amount 2012 Accumulated Amortization December 31, December 31, 2013 2011 Gross Amount 2010 Accumulated Amortization 15 10-15 10-15 $22.7 5.1 7.5 35.3 36.9 $322.5 0.2 288.0 $ (8.1) (4.2) (1.0) $610.7 (13.3) $286.4 $17.5 0.3 5.8 278.4 1.1 $565.1 24.4 26.7 $308.9 $ (7.6) 0.1 (4.2) 297.7 (0.8) $606.7 (12.6) — Total $72.2 $51.1 $(13.3) Raw Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not amortized Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business $(12.6) Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. In conjunction with the acquisition of the technical materials business, the Company recorded $11.1 million in non-amortizable intangible trade names and $6.9 million and $6.4 million in amortizable customer based intangible assets and acquired technology, respectively. All other changes in the carrying value of the Company’s intangible assets not specifically identified are due to foreign currency translation effects. The weighted average useful lives Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our assigned to amortizable intangible trade names, trademarks and customer based intangible assets was 15 years. technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements As of December 31, 2014, $37.6 million and $21.3 million of such intangible assets are reported within the externally. We believe that all of the raw materials for our technical products operations, except for certain Technical Products and Fine Paper and Packaging segments, respectively. See Note 13, ‘‘Business Segment and specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a Geographic Information.’’ Aggregate amortization expense of acquired intangible assets for the years ended single supplier would not cause a shutdown of our manufacturing operations. December 31, 2014, 2013 and 2012 was $2.3 million, $1.9 million and $1.9 million, respectively and was reported in Cost of Products Sold on the Consolidated Statement of Operations. Estimated amortization expense for the Our technical products business acquires all of its specialized pulp requirements from two global suppliers and years ended December 31, 2015, 2016, 2017, 2018 and 2019 is $2.6 million, $2.4 million, $1.9 million, $1.9 million certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by and $1.9 million, respectively. formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-19 5 F o r m 1 0 - K NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 5. Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Income tax expense represented 10.1 percent, 32.1 percent and 30.0 percent of income from continuing operations before income taxes for the years ended December 31, 2014, 2013 and 2012, respectively. The following table presents the principal reasons for the difference between the Company’s effective income tax rate and the U.S. federal statutory income tax rate: U.S. federal statutory income tax rate . . . . . . . . . . . . . U.S. state income taxes, net of federal income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax on foreign dividends . . . . . . . . . . . . . . . . . . . . . . Foreign tax rate differences (a) . . . . . . . . . . . . . . . . . . Foreign financing structure (b) . . . . . . . . . . . . . . . . . . Research and development and other tax credits (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Uncertain income tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other differences — net Year Ended December 31, 2014 2014 2013 2013 2012 2012 35.0% $ 26.7 35.0% $25.5 35.0% $20.0 1.6 2.1% 3.0% 2.3 (2.8)% (2.1) (2.5)% (1.9) (31.5)% (24.1) 4.9 0.3 6.4% 0.4% 2.3% 1.7 2.8% 2.0 (2.4)% (1.7) (3.3)% (2.4) (3.0)% (2.2) 1.2% 0.9 (0.5)% (0.4) 1.9% 1.1 — — (2.7)% (1.6) (4.3)% (2.4) — — 1.2% 0.6 (1.1)% (0.6) Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . 10.1% $ 7.7 32.1% $23.4 30.0% $17.1 (a) Represents the impact on the Company’s effective tax rate due to changes in the mix of earnings among taxing jurisdictions with differing statutory rates. (b) Represents the impact on the Company’s effective tax rate of the Company’s financing strategies. (c) For the year ended December 31, 2014, following an extensive study of the Company’s research and development (‘‘R&D’’) activities for the years 2005 through 2014 and a change in methodology, the Company recognized a $24.1 million net benefit related to R&D tax credits. The Company’s effective income tax rate can be affected by many factors, including but not limited to, changes in the mix of earnings in taxing jurisdictions with differing statutory rates, the availability of R&D and other tax credits, changes in corporate structure as a result of business acquisitions and dispositions, changes in the valuation of deferred tax assets and liabilities, the results of audit examinations of previously filed tax returns and changes in tax laws. The following table presents the U.S. and foreign components of income from continuing operations before income taxes: Income from continuing operations before income taxes: U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $46.5 29.9 $48.0 24.8 $35.8 21.2 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $76.4 $72.8 $57.0 Year Ended December 31, 2014 2013 2012 F-20 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 5. Income Taxes (Continued) Year Ended December 31, 2012 2011 2010 The following table presents the components of the provision (benefit) for income taxes: Net sales United States Europe Consolidated Provision (benefit) for income taxes: Current: $543.4 265.4 $416.2 279.8 $413.6 244.1 Year Ended December 31, 2014 2013 2012 $808.8 $696.0 $657.7 2011 December 31, $ 0.5 — 3.5 $286.4 4.0 0.3 278.4 $ (0.5) $ (2.2) 2010 — 8.8 0.3 5.9 6.6 5.7 $308.9 0.1 297.7 6.9 $565.1 (5.9) 2.7 18.4 — (0.7) $606.7 12.0 0.4 (1.9) $322.5 0.2 288.0 $610.7 Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 Total current tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Assets United States Canada Europe Deferred: Consolidated Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities 10.5 and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23.4 $ 7.7 $17.1 17.7 3.7 Raw Materials The Company has elected to treat its Canadian operations as a branch for U.S. income tax purposes. Therefore, the amount of income (loss) before income taxes from Canadian operations are included in the Company’s consolidated U.S. income tax returns and such amounts are subject to U.S. income taxes. Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. F o r m 1 0 - K Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-21 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 5. Income Taxes (Continued) The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The components of deferred tax assets and liabilities are as follows: December 31, 2014 2013 Net current deferred income tax assets Research and development tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net operating losses and credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.6 2.9 2.5 1.5 0.9 0.4 $ 0.5 13.2 2.4 1.6 4.8 0.3 Net current deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.8 22.8 Net noncurrent deferred income tax assets Research and development tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net operating losses and credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.5 10.0 20.2 (18.6) (0.2) 1.5 8.5 22.3 (18.4) (0.6) Net noncurrent deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.9 13.3 Total deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45.7 $ 36.1 Net noncurrent deferred income tax liability Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16.7 3.5 (1.1) (8.1) (0.2) (0.2) $ 18.8 4.5 (1.9) (5.2) (0.2) (0.4) Net noncurrent deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.6 $ 15.6 As of December 31, 2014 and 2013, the Company had no valuation allowance against its income tax assets. In determining the need for a valuation allowance, the Company considers many factors, including specific taxing jurisdictions, sources of taxable income, income tax strategies and forecasted earnings for the entities in each jurisdiction. A valuation allowance is recognized if, based on the weight of available evidence, the Company concludes that it is more likely than not that some portion or all of the deferred income tax asset will not be realized. As of December 31, 2014, the Company had $5.2 million of U.S. Federal and $64.4 million of U.S. state net operating losses (‘‘NOLs’’). If not used, substantially all of the NOLs will expire in various amounts between 2020 and 2030. As of December 31, 2014, the Company had $31.4 million of U.S. federal and state R&D credits which, if not used, will expire between 2025 and 2034 for the U.S. federal R&D credits and between 2017 and 2029 for the state R&D credits. The Company also has preacquisition and recognized built-in loss carryovers of $11.8 million, net of expected limitations. In addition, the Company has $3.4 million of Alternative Minimum Tax Credit carryovers, which can be carried forward indefinitely. As of December 31, 2014 and 2013, the Company had no undistributed earnings of foreign subsidiaries. F-22 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 5. Income Taxes (Continued) Year Ended December 31, 2012 2011 2010 The following is a tabular reconciliation of the total amounts of uncertain tax positions as of and for the years ended December 31, 2014, 2013 and 2012: Net sales United States Europe $543.4 265.4 $416.2 279.8 $413.6 244.1 For the Years Ended $657.7 $696.0 December 31, Consolidated $808.8 Balance at January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 Increases in prior period tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decreases in prior period tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increases in current period tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decreases due to settlements with tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) from foreign exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . Total Assets United States Canada Europe $322.5 0.2 288.0 2014 2013 2012 2010 December 31, $ 4.3 2011 — (2.2) 5.3 $286.4 (0.2) 0.3 (0.2) 278.4 $ 4.8 0.2 (0.8) 1.3 (1.3) 0.1 $ 8.4 4.4 (7.5) — (0.5) — $308.9 0.1 297.7 Balance at December 31, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated $610.7 $ 7.0 $565.1 $ 4.3 $606.7 $ 4.8 If recognized, $6.6 million of the benefit for uncertain tax positions at December 31, 2014 would favorably affect Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities the Company’s effective tax rate in future periods. The Company does not expect that the expiration of the statute and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business of limitations or the settlement of audits in the next 12 months will result in liabilities for uncertain income tax Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by positions that are materially different than the amounts that were accrued as of December 31, 2014. business segment. Raw Materials The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and foreign jurisdictions. The Company is no longer subject to U.S. federal examination for years before 2008 and state and local examinations for years before 2007 and non-U.S. income tax examinations for Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our years before 2012. technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements The Company recognizes accrued interest and penalties related to uncertain income tax positions in the Provision externally. We believe that all of the raw materials for our technical products operations, except for certain for income taxes on the consolidated statements of operations. As of December 31, 2014 and 2013, the Company specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a had less than $0.1 million and $0.1 million, respectively, accrued for interest and penalties related to uncertain single supplier would not cause a shutdown of our manufacturing operations. income tax positions. F o r m 1 0 - K Note 6. Debt Long-term debt consisted of the following: Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be December 31, able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term 2013 disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp $175.0 grades or other latex grades that would allow us to meet required product performance characteristics and incur 19.3 only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. 2021 Senior Notes (5.25% fixed rate) due May 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Neenah Germany revolving lines of credit (variable rates) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Global Revolving Credit Facilities (variable rates) due December 2019 . . . . . . . . . . . . . . . . . . . Neenah Germany project financing (3.8% fixed rate) due in 16 equal semi-annual installments $175.0 — 48.7 2014 Second German Loan Agreement (2.45% fixed rate) due in 32 equal quarterly installments ending December 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, ending September 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4 cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five Total Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211.9 percent of the total fiber requirements of our fine paper business, are readily available from several sources and 21.4 Less: Debt payable within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $190.5 We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. 234.3 1.4 $232.9 10.6 5.2 — F-23 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 6. Debt (Continued) Unsecured Senior Notes 2021 Senior Notes In May 2013, the Company completed an underwritten offering of eight-year senior unsecured notes (the ‘‘2021 Senior Notes’’) at a face amount of $175 million. The 2021 Senior Notes bear interest at a rate of 5.25%, payable in arrears on May 15 and November 15 of each year, commencing on November 15, 2013, and mature on May 15, 2021. Proceeds from this offering were used to redeem the remaining $70 million outstanding principal amount of ten-year 7.375% senior unsecured notes, originally issued on November 30, 2004, to repay approximately $56 million in outstanding revolving credit agreement borrowings and for general corporate purposes. The 2021 Senior Notes are fully and unconditionally guaranteed by substantially all of the Company’s domestic subsidiaries (the ‘‘Guarantors’’). The 2021 Senior Notes were sold in a private placement transaction, have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold absent registration or an applicable exemption from registration requirements. The 2021 Senior Notes are senior unsecured obligations of the Company and rank equally in right of payment with all its existing and future senior unsecured indebtedness. The guarantees of the 2021 Senior Notes are senior unsecured obligations of the Guarantors and rank equally in right of payment with all existing and future senior unsecured indebtedness of the Guarantors. The 2021 Senior Notes and the guarantees of the 2021 Senior Notes are effectively subordinated to the Company’s and the Guarantors’ existing and future secured indebtedness (to the extent of the value of the collateral) and are structurally subordinated to all indebtedness and other obligations of the Company’s subsidiaries that do not guarantee the 2021 Senior Notes, including the trade creditors of such non-guarantor subsidiaries. The 2021 Senior Notes contain terms, covenants and events of default with which the Company must comply, which the Company believes are ordinary and standard for notes of this nature. Among other things, the 2021 Senior Notes contain covenants restricting our ability to incur certain additional debt, make specified restricted payments, pay dividends, authorize or issue capital stock, enter into transactions with our affiliates, consolidate or merge with or acquire another business, sell certain of our assets or liquidate, dissolve or wind-up the Company. As of December 31, 2014, the Company was in compliance with all terms of the indenture for the 2021 Senior Notes. Amended and Restated Secured Revolving Credit Facility In December 2014, the Company amended and restated its existing credit facility by entering into the Third Amended and Restated Credit Agreement (the ‘‘Third Amended Credit Agreement’’) by and among the Company and certain of its domestic subsidiaries as the ‘‘Domestic Borrowers’’, Neenah Services GmbH & Co. KG (‘‘Neenah Services’’) and certain of its German subsidiaries as the ‘‘German Borrowers’’, certain other subsidiaries as the ‘‘German Guarantors’’, the financial institutions signatory to the Third Amended Credit Agreement as lenders (the ‘‘Lenders’’), and JPMorgan Chase Bank, N.A., as agent for the Lenders (the ‘‘Administrative Agent’’). F-24 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 6. Debt (Continued) Year Ended December 31, 2012 2011 2010 Consolidated Net sales United States Europe The Third Amended Credit Agreement, among other things: (1) increases the maximum principal amount of the existing credit facility for the Domestic Borrowers to $125 million (the ‘‘U.S. Revolving Credit Facility’’); $413.6 $416.2 (2) establishes a secured, multicurrency, revolving credit facility for the German Borrowers in the maximum 244.1 279.8 principal amount of $75 million (the ‘‘German Revolving Credit Facility,’’ and together with the U.S. Revolving $657.7 Credit Facility, the ‘‘Global Revolving Credit Facilities’’); (3) causes the Company and the other Domestic Borrowers to guarantee, among other things, the obligations of the German Borrowers arising under the German Revolving Credit Facility; (4) provides for the Global Revolving Credit Facilities to mature on December 18, 2019; and (5) provides for an accordion feature permitting one or more increases in the Global Revolving Credit Facilities in an aggregate principal amount not exceeding $50 million, such that the aggregate commitments under $286.4 $308.9 the Global Revolving Credit Facilities do not exceed $250 million. In addition, the Domestic Borrowers may 0.1 0.3 request letters of credit under the U.S. Revolving Credit Facility in an aggregate face amount not to exceed 297.7 278.4 $20 million outstanding at any time, and the German Borrowers may request letters of credit under the German Revolving Credit Facility in an aggregate face amount not to exceed $2 million outstanding at any time. $606.7 $565.1 Total Assets United States Canada Europe $322.5 0.2 288.0 $543.4 265.4 Consolidated December 31, $808.8 $696.0 $610.7 2012 2011 2010 F o r m 1 0 - K Raw Materials Proceeds of borrowings under the Global Revolving Credit Facilities may be used to finance working capital needs, permitted acquisitions, permitted investments (including certain intercompany loans), certain dividends, distributions and other restricted payments, and for other general corporate purposes. Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by The right of the Domestic Borrowers to borrow and obtain letters of credit under the U.S. Revolving Credit business segment. Facility is subject to, among other things, the borrowing base of the Domestic Borrowers on a consolidated basis (the ‘‘Domestic Borrowing Base’’). The right of the German Borrowers to borrow and obtain letters of credit under the German Revolving Credit Facility is similarly subject to a borrowing base requirement (the ‘‘German Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our Borrowing Base’’). The German Borrowing Base is initially determined on a combined basis for all German technical products business. The technical products business purchases softwood pulp, specialty pulp and latex Borrowers. Under certain circumstances (including the occurrence of an event of default resulting from an act or from various suppliers. The technical products business purchases substantially all of its raw material requirements omission of any German Borrower or German Guarantor), the Administrative Agent may require the German externally. We believe that all of the raw materials for our technical products operations, except for certain Borrowing Base to be determined separately for each of the German Borrowers. At its option the Company may, specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a from time to time, allocate a portion of the Domestic Borrowing Base to the German Borrowing Base (resulting single supplier would not cause a shutdown of our manufacturing operations. in a corresponding reduction of the Domestic Borrowing Base); however, the principal amount of borrowings and the outstanding letter of credit exposure under the German Revolving Credit Facility may not at any time exceed Our technical products business acquires all of its specialized pulp requirements from two global suppliers and the German Revolving Credit Facility commitment amount then in effect. certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our The guarantees of the German Guarantors are limited solely to the German Revolving Credit Facility obligations. needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Under the terms of the Third Amended Credit Agreement and related loan documentation, neither the German an interruption of production at any one supplier, we believe that each of these suppliers individually would be Borrowers nor the German Guarantors (collectively, the ‘‘German Loan Parties’’) will be liable for any obligations able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term relating to the U.S. Revolving Credit Facility. The Global Revolving Credit Facilities are secured by liens on all or disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp substantially all of the assets of the Domestic Borrowers. The German Revolving Credit Facility is secured by liens grades or other latex grades that would allow us to meet required product performance characteristics and incur on all or substantially all of the assets of the German Borrowers and certain assets of the German Guarantors. only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative Any liens granted by the German Loan Parties secure only the German Revolving Credit Facility obligations. pulp or latex grades would have a material effect on our operations. Under the terms of the Third Amended Credit Agreement, borrowing under the U.S. Revolving Credit Facility Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other will bear interest at either (1) a prime rate-based index, (2) the federal funds rate, or (3) LIBOR (which cannot significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, be less than zero percent) plus 1.00% plus an applicable margin ranging from 0.00% to 3.00%, depending on the cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that amount of availability under the Third Amended Credit Agreement. Borrowing under the German Revolving all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five Credit Facility will bear interest at LIBOR (which cannot be less than zero percent) plus an applicable margin percent of the total fiber requirements of our fine paper business, are readily available from several sources and ranging from 1.50% to 2.00%, depending on the amount of availability under the Third Amended Credit that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Agreement. Until the tenth business day after delivery of the Company’s borrowing base compliance certificate for the month ending June 30, 2015, the applicable margin on borrowings will be 0.25% for prime rate-based We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would borrowings, and 1.75% for LIBOR-based borrowings. The Company is also required to pay a monthly commitment increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the fee on the unused amounts available under the Global Revolving Credit Facilities at a per annum rate of 0.25%. ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-25 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 6. Debt (Continued) The Third Amended Credit Agreement contains covenants with which the Company and its subsidiaries must comply during the term of the agreement, which the Company believes are ordinary and standard for agreements of this nature. Among other things, such covenants restrict the ability of the Company and its subsidiaries to incur certain debt, incur or create certain liens, make specified restricted payments, authorize or issue capital stock, enter into transactions with their affiliates, consolidate, merge with or acquire another business, sell certain of their assets, or dissolve or wind up. In addition, if the aggregate availability under the Global Revolving Credit Facilities is less than the greater of (i) $25 million and (ii) 12.5% of the maximum aggregate commitments under the Global Revolving Credit Facilities as then in effect, the Company will be subject to increased reporting obligations and controls until such time as availability is more than the greater of (a) $35 million and (b) 17.5% of the maximum aggregate commitments under the Global Revolving Credit Facilities as then in effect. If aggregate availability under the Global Revolving Credit Facilities is less than the greater of (i) $20 million and (ii) 10% of the maximum aggregate commitments under the Global Revolving Credit Facilities as then in effect, the Company is required to comply with a fixed charge coverage ratio (as defined in the Third Amended Credit Agreement) of not less than 1.1 to 1.0 for the preceding four-quarter period, tested as of the end of each quarter. Such compliance, once required, would no longer be necessary once (x) aggregate availability under the Global Revolving Credit Facilities exceeds the greater of (i) 17.5% of the aggregate commitment for the Global Revolving Credit Facilities and (ii) $35 million for 60 consecutive days and (y) no default or event of default has occurred and is continuing during such 60-day period. As of December 31, 2014, aggregate availability under the Global Revolving Credit Facilities exceeded the minimum required amount, and the Company is not required to comply with such fixed charge coverage ratio. The Third Amended Credit Agreement also contains events of default customary for financings of this type, including failure to pay principal or interest, materially false representations or warranties, failure to observe covenants and certain other terms of the Third Amended Credit Agreement, cross-defaults to certain other indebtedness, bankruptcy, insolvency, various ERISA and foreign pension violations, the incurrence of material judgments and changes in control. Subject to certain conditions (including the absence of a default or event of default under the Third Amended Credit Agreement), the Third Amended Credit Agreement permits the Company the make up to $10 million in cash repurchases of its outstanding common stock during each fiscal year, beginning in 2015, and to pay up to $25 million in cash dividends to its stockholders during any period of 12 consecutive months; however, such stock repurchases can be made, and such cash dividends can be paid, on an unlimited basis if pro forma aggregate availability under the Global Revolving Credit Facilities is greater than or equal to the greater of (i) $25 million and (ii) 12.5% of the aggregate commitment under the Global Revolving Credit Facilities, at all times during the 60-day period ending on the date of such repurchase or dividend payment. Availability under the Global Revolving Credit Facilities varies over time depending on the value of the Company’s inventory, receivables and various capital assets. As of December 31, 2014, the Company had $48.7 million outstanding under the Global Revolving Credit Facilities and $145.8 million of available credit (based on exchange rates at December 31, 2014). As of December 31, 2014, the weighted-average interest rate on outstanding Revolver borrowings was 1.8 percent per annum. In June 2013, the Company amended the Second Amended and Restated Credit Agreement (as amended, the ‘‘Bank Credit Agreement’’) to, among other things; (i) modify the Second Amended and Restated Credit Agreement’s accordion feature to permit the Company, subject to certain conditions, to increase the aggregate revolving credit facility commitments by up to $30 million, to a maximum amount of $180 million (ii) increase the Company’s allowable dividends paid to shareholders in any period of 12 consecutive months to $25 million, (iii) allow the Company to repurchase up to $30 million of its own common stock on or before December 31, 2014, with no more than $15 million of that amount to be repurchased on or before December 31, 2014, and (iv) make certain definitional and administrative changes. As of December 31, 2013, the Company had a $105 million Revolver pursuant to the Bank Credit Agreement of which no amounts were outstanding. F-26 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 6. Debt (Continued) Year Ended December 31, 2012 2011 2010 Net sales United States Europe The Company’s ability to pay cash dividends on its common stock is also limited under the terms of the 2021 Senior Notes. As of December 31, 2014, under the most restrictive terms of the 2021 Senior Notes and the Third $413.6 Amended Credit Agreement, the Company’s ability to pay cash dividends on its common stock was limited to a 244.1 total of $25 million in a 12-month period. $543.4 265.4 $416.2 279.8 $808.8 $696.0 $657.7 Consolidated Other Debt Neenah Germany Project Financing December 31, 2012 2011 2010 German Loan Agreement. In December 2006, Neenah Germany entered into a 10-year agreement with HypoVereinsbank and IKB Deutsche Industriebank AG (‘‘IKB’’) to provide A10.0 million of project financing (the $308.9 $286.4 $322.5 0.3 0.1 0.2 ‘‘German Loan Agreement’’). In May 2014, the Company terminated the German Loan Agreement by repaying the remaining A3.7 million ($5.2 million) in outstanding German Loan Agreement borrowings. 297.7 278.4 288.0 Total Assets United States Canada Europe Consolidated $606.7 Second German Loan Agreement. In January 2013, Neenah Germany entered into a project financing agreement for the construction of a melt blown machine (the ‘‘Second German Loan Agreement’’). The agreement provides Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities for A9.0 million of construction financing which is secured by the melt blown machine. The loan matures in and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business September 2022 and principal is repaid in equal quarterly installments beginning in December 2014. The interest Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by rate on amounts outstanding is 2.45% based on actual days elapsed in a 360-day year and is payable quarterly. At business segment. December 31, 2014, A8.7 million ($10.6 million, based on exchange rates at December 31, 2014) was outstanding under the Second German Loan Agreement. $565.1 $610.7 Raw Materials Neenah Germany Revolving Lines of Credit Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex HypoVereinsbank Line of Credit. Neenah Germany had a revolving line of credit with HypoVereinsbank (the ‘‘HypoVereinsbank Line of Credit’’) that provided for borrowings of up to A15 million for general corporate from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain purposes. The Company cancelled the HypoVereinsbank Line of Credit upon entering into the Third Amended Credit Agreement. As of December 31, 2013, the weighted-average interest rate on outstanding HypoVereinsbank specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a Line of Credit borrowings was 3.1 percent per annum. single supplier would not cause a shutdown of our manufacturing operations. F o r m 1 0 - K Commerzbank Line of Credit. In January 2012, Neenah Germany entered into an agreement with Commerzbank Our technical products business acquires all of its specialized pulp requirements from two global suppliers and AG (‘‘Commerzbank’’) to provide up to A3.0 million of unsecured revolving credit borrowings for general certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by corporate purposes (the ‘‘Commerzbank Line of Credit’’). In February 2013, the Company and Commerzbank formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our amended the Commerzbank Line of Credit to provide up to A5.0 million of unsecured revolving credit borrowings. needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of The Company cancelled the Commerzbank Line of Credit upon entering into the Third Amended Credit an interruption of production at any one supplier, we believe that each of these suppliers individually would be Agreement. As of December 31, 2013, the weighted average interest rate on Commerzbank Line of Credit able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term borrowings was 2.9 percent per annum. disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. The following table presents the Company’s required debt payments: Principal Payments Debt payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.4 $1.4 $1.4 $1.4 $50.0 Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, $234.3 cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Note 7. Pension and Other Postretirement Benefits 2015 2016 2017 2018 2019 Thereafter Pension Plans $178.7 Total We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would Substantially all active employees of the Company’s U.S. operations participate in defined benefit pension plans increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the and/or defined contribution retirement plans. Neenah Germany has defined benefit plans designed to provide a monthly pension upon retirement for substantially all its employees in Germany. In addition, the Company ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton maintains a SERP which is a non-qualified defined benefit plan. The Company provides benefits under the SERP fiber supply issues to have a material effect on our operations. to the extent necessary to fulfill the intent of its defined benefit retirement plans without regard to the limitations set by the Internal Revenue Code on qualified defined benefit plans. F-27 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 7. Pension and Other Postretirement Benefits (Continued) During 2014, the Company offered a one-time lump sum payout option to all eligible U.S. participants with a deferred vested pension benefit (the participant had a vested pension benefit but was no longer an employee of the Company and was not in retirement status) in the Neenah Paper Pension Plan. For the year ended December 31, 2014, approximately 425 individuals elected to receive their pension benefit as a lump-sum payment and the Company paid a total of $14.0 million in such lump-sum payments. For the years ended December 31, 2014, 2013 and 2012, benefit payments under certain post-retirement benefit plans exceeded the sum of expected service cost and interest costs for these plans for the respective calendar years. In accordance with ASC Topic 715, Compensation — Retirement Benefits (‘‘ASC Topic 715’’), the Company measured the liabilities of the post-retirement benefit plans and recognized settlement losses of $3.5 million, $0.2 million and $3.5 million, respectively. The Company’s funding policy for its U.S. qualified defined benefit plan is to contribute assets to fully fund the projected benefit obligation. Subject to regulatory and tax deductibility limits, any funding shortfall is to be eliminated over a reasonable number of years. Nonqualified plans providing pension benefits in excess of limitations imposed by taxing authorities are not funded. There is no legal or governmental obligation to fund Neenah Germany’s benefit plans and as such the Neenah Germany defined benefit plans are currently unfunded. As of December 31, 2014, Neenah Germany had investments of $2.0 million that were restricted to the payment of certain post-retirement employee benefits. As of December 31, 2014, $0.6 million and $1.4 million of such investments are classified as prepaid and other current assets and other assets, respectively, on the consolidated balance sheet. The Company uses the fair value of pension plan assets to determine pension expense, rather than averaging gains and losses over a period of years. Investment gains or losses represent the difference between the expected return calculated using the fair value of the assets and the actual return based on the fair value of assets. The Company’s pension obligations are measured annually as of December 31. During 2014, the Society of Actuaries released a new mortality table, which is believed to better reflect mortality improvements and is to be used in calculating defined benefit pension obligations. The Company adopted these new tables for its U.S. pension plans for use in determining its projected benefit obligations. Adoption of the new mortality tables increased the Company’s projected benefit obligation by approximately $5.5 million at December 31, 2014. Other Postretirement Benefit Plans The Company maintains postretirement health care and life insurance benefit plans for active employees of the Company and former employees of the Canadian pulp operations. The plans are generally noncontributory for employees who were eligible to retire on or before December 31, 1992 and contributory for most employees who became eligible to retire on or after January 1, 1993. The Company does not provide a subsidized benefit to most employees hired after 2003. The Company’s obligations for postretirement benefits other than pensions are measured annually as of December 31. At December 31, 2014, the assumed inflationary health care cost trend rates used to determine obligations at December 31, 2014 and costs for the year ended December 31, 2014 were 7.0 percent gradually decreasing to an ultimate rate of 4.5 percent in 2027. The assumed inflationary health care cost trend rates used to determine obligations at December 31, 2013 and costs for the year ended December 31, 2014 were 7.3 percent gradually decreasing to an ultimate rate of 4.5 percent in 2027. F-28 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 7. Pension and Other Postretirement Benefits (Continued) Year Ended December 31, 2012 2011 2010 The following table reconciles the benefit obligations, plan assets, funded status and net liability information of the Company’s pension and other postretirement benefit plans. Net sales United States Europe Consolidated $808.8 Pension Benefits $543.4 265.4 $416.2 279.8 $696.0 $413.6 244.1 Postretirement $657.7 Benefits Other than Pensions Year Ended December 31, December 31, 2014 2012 2013 2011 2014 2010 2013 Change in Benefit Obligation: Total Assets United States Canada Europe Consolidated $308.9 $ 46.7 Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 1.8 Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297.7 1.8 Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4.0) Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefit payments from plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.7) Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities Settlement payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.4) Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by (0.2) Gain on plan curtailment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . business segment. Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Raw Materials Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $322.5 $325.3 0.2 5.3 288.0 13.5 1.9 (12.3) (13.5) (0.4) 0.5 — 0.1 $286.4 $ 41.1 0.3 1.7 278.4 1.9 (0.5) 0.4 (3.9) — — — — $320.4 5.3 15.2 (7.0) 47.7 (14.4) (14.0) — — 0.1 $353.3 $320.4 $610.7 $565.1 $606.7 $ 41.1 $ 40.7 Change in Plan Assets: Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . $ — $ — from various suppliers. The technical products business purchases substantially all of its raw material requirements Actual gain on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — externally. We believe that all of the raw materials for our technical products operations, except for certain Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a Benefit payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — single supplier would not cause a shutdown of our manufacturing operations. — Settlement payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $239.3 15.6 18.1 (11.3) (0.4) $261.3 28.6 24.5 (12.1) (14.0) — — — — F o r m 1 0 - K $261.3 $288.3 $ — $ — Reconciliation of Funded Status Amounts recognized in statement of financial position consist of: Our technical products business acquires all of its specialized pulp requirements from two global suppliers and Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.1 an interruption of production at any one supplier, we believe that each of these suppliers individually would be Net liability recognized in statement of financial position . . . . . . . . . . . . . . . $ (65.0) $ (59.1) $(40.7) $(41.1) able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2.4) $ (2.6) $ (3.6) $ (3.9) only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (37.2) pulp or latex grades would have a material effect on our operations. Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that Postretirement all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five Benefits Pension Other than percent of the total fiber requirements of our fine paper business, are readily available from several sources and Benefits Pensions that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Amounts recognized in accumulated other comprehensive income consist of: $ (65.0) $ (59.1) $(40.7) $(41.1) $261.3 320.4 $288.3 353.3 (37.1) (62.6) (56.5) 40.7 December 31, Accumulated actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would 2013 increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the $ 4.7 ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton (0.9) fiber supply issues to have a material effect on our operations. Total recognized in accumulated other comprehensive income . . . . . . . . . . . . . . . $ 4.7 (0.7) $91.2 1.5 $64.8 1.8 $92.7 $66.6 $ 4.0 $ 3.8 2014 2013 2014 F-29 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 7. Pension and Other Postretirement Benefits (Continued) Summary disaggregated information about the pension plans follows: Assets Exceed ABO December 31, ABO Exceed Assets Total 2014 2013 2014 2013 2014 2013 Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $290.4 274.1 288.3 $266.4 251.6 261.3 $62.9 62.2 — $54.0 53.3 $353.3 336.3 — 288.3 $320.4 304.9 261.3 Components of Net Periodic Benefit Cost Pension Benefits Postretirement Benefits Other than Pensions Year Ended December 31, 2014 2013 2012 2014 2013 2012 Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected return on plan assets(a) . . . . . . . . . . . . . . . . . . . . . . . . Recognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of prior service cost (credit) . . . . . . . . . . . . . . . . . . Amount of curtailment loss recognized . . . . . . . . . . . . . . . . . . . . Amount of settlement loss recognized . . . . . . . . . . . . . . . . . . . . . $ 5.3 15.2 (16.7) 4.2 0.3 — 3.5 $ 5.3 13.5 (17.1) 5.7 0.3 — 0.2 $ 1.7 $ 4.6 14.1 1.9 (15.3) — 0.4 (0.2) — — 4.1 0.3 — 3.5 $1.8 $ 1.8 1.8 2.1 — — 0.5 0.7 0.2 (0.1) — 0.3 — — Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.8 $ 7.9 $ 11.3 $ 3.8 $ 4.2 $4.9 (a) The expected return on plan assets is determined by multiplying the fair value of plan assets at the prior year-end (adjusted for estimated current year cash benefit payments and contributions) by the expected long-term rate of return. Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income Pension Benefits Postretirement Benefits Other than Pensions Year Ended December 31, 2014 2013 2012 2014 2013 2012 Net periodic benefit expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.8 $ 7.9 $11.3 $3.8 $ 4.2 $ 4.9 Accumulated actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . Prior service cost (credit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total recognized in other comprehensive income . . . . . . . . . . . . . . . 26.4 (0.3) 26.1 (16.4) 0.2 20.8 — (5.1) (1.3) 0.2 0.4 2.7 (0.2) (16.2) 21.2 0.2 (6.4) 2.5 Total recognized in net periodic benefit cost and other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $37.9 $ (8.3) $32.5 $4.0 $(2.2) $ 7.4 The estimated net actuarial loss and prior service cost for the defined benefit pension plans expected to be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $6.7 million and $0.2 million, respectively. The estimated net actuarial loss and prior service (credit) for postretirement benefits other than pensions expected to be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $0.1 million and $(0.2) million, respectively. F-30 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 7. Pension and Other Postretirement Benefits (Continued) Year Ended December 31, 2012 2011 2010 Weighted-Average Assumptions Used to Determine Benefit Obligations at December 31 Net sales United States Europe Consolidated Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $543.4 265.4 Pension Benefits $808.8 2014 2013 $416.2 279.8 $413.6 Postretirement 244.1 Benefits Other than Pensions $657.7 2013 $696.0 2014 3.91% 4.88% 4.05% 4.84% December 31, 2.92% 2.96% — — 2010 2011 2012 Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31 $322.5 0.2 288.0 $308.9 $286.4 0.1 0.3 Postretirement Benefits Other than 297.7 278.4 Pensions Pension Benefits Total Assets United States Canada Europe Consolidated Year Ended December 31, $565.1 $610.7 $606.7 2012 Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected long-term return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.88% 4.19% 5.14% 4.84% 4.12% 5.03% 6.50% 7.00% 7.25% — — — 2.96% 2.96% 2.95% — — — 2014 2013 2012 2013 2014 F o r m 1 0 - K Expected Long-Term Rate of Return and Investment Strategies Raw Materials The expected long-term rate of return on pension fund assets held by the Company’s pension trusts was Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our determined based on several factors, including input from pension investment consultants and projected long-term technical products business. The technical products business purchases softwood pulp, specialty pulp and latex returns of broad equity and bond indices. Also considered were the plans’ historical 10-year and 15-year from various suppliers. The technical products business purchases substantially all of its raw material requirements compounded annual returns. It is anticipated that, on average, actively managed U.S. pension plan assets will externally. We believe that all of the raw materials for our technical products operations, except for certain generate annual long-term rates of return of approximately 6.50 percent. The expected long-term rate of return on specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a the assets in the plans was based on an asset allocation assumption of approximately 35 percent with equity single supplier would not cause a shutdown of our manufacturing operations. managers, with expected long-term rates of return of approximately 8 to10 percent, and 65 percent with fixed Our technical products business acquires all of its specialized pulp requirements from two global suppliers and income managers, with an expected long-term rate of return of about 4 to 6 percent. The actual asset allocation is certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by regularly reviewed and periodically rebalanced to the targeted allocation when considered appropriate. formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp Percentage of Plan Assets At grades or other latex grades that would allow us to meet required product performance characteristics and incur December 31, only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Pension plan asset allocations are as follows: Plan Assets 2013 2014 2012 Total Asset Category Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and money-market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other 35% 35% 40% significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, 65% 64% 59% cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that —% 1% 1% all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five 100% 100% 100% percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Company’s investment objectives for pension plan assets is to ensure, over the long-term life of the pension plans, an adequate pool of assets to support the benefit obligations to participants, retirees, and beneficiaries. Specifically, these objectives include the desire to: (a) invest assets in a manner such that future assets are available to fund liabilities, (b) maintain liquidity sufficient to pay current benefits when due and (c) diversify, over time, among asset classes so assets earn a reasonable return with acceptable risk to capital. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-31 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 7. Pension and Other Postretirement Benefits (Continued) The target investment allocation and permissible allocation range for plan assets by category are as follows: Strategic Target Permitted Range Asset Category Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt securities/Fixed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35% 65% 35-45% 55-65% As of December 31, 2014, no company or group of companies in a single industry represented more than five percent of plan assets. The Company’s investment assumptions are established by an investment committee composed of members of senior management and are validated periodically against actual investment returns. As of December 31, 2014, the Company’s investment assumptions are as follows: (a) the plan should be substantially fully invested in debt and equity securities at all times because substantial cash holdings will reduce long-term rates of return; (b) equity investments will provide greater long-term returns than fixed income investments, although with greater short-term volatility; (c) it is prudent to diversify plan investments across major asset classes; (d) allocating a portion of plan assets to foreign equities will increase portfolio diversification, decrease portfolio risk and provide the potential for long-term returns; (e) investment managers with active mandates can reduce portfolio risk below market risk and potentially add value through security selection strategies, and a portion of plan assets should be allocated to such active mandates; (f) a component of passive, indexed management can benefit the plans through greater diversification and lower cost, and a portion of the plan assets should be allocated to such passive mandates, and (g) it is appropriate to retain more than one investment manager, given the size of the plans, provided that such managers offer asset class or style diversification. For the years ended December 31, 2014, 2013 and 2012, no plan assets were invested in the Company’s securities. Cash Flows At December 31, 2014, the Company expects to make aggregate contributions to qualified pension trusts and payments of pension benefits for unfunded pension plans in 2015 of approximately $12.4 million (based on exchange rates at December 31, 2014). Future Benefit Payments The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid: 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Years 2019- 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15.4 16.1 17.9 17.8 20.2 102.5 $ 3.6 3.2 3.6 3.9 4.1 19.2 Pension Plans Postretirement Benefits Other than Pensions F-32 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 7. Pension and Other Postretirement Benefits (Continued) Year Ended December 31, 2012 2011 2010 Health Care Cost Trends Net sales United States Europe $413.6 Assumed health care cost trend rates affect the amounts reported for postretirement health care benefit plans. A 244.1 one-percentage-point change in assumed health care cost trend rates would have the following effects: $416.2 279.8 $543.4 265.4 Consolidated $808.8 December 31, Increase 2011 2012 $696.0 $657.7 One Percentage- Point Decrease 2010 $ — (0.4) $308.9 0.1 297.7 $ — 0.3 $286.4 0.3 278.4 $322.5 0.2 288.0 Effect on total of service and interest cost components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect on post-retirement benefit other than pension obligation . . . . . . . . . . . . . . . . . . . . . . . . Total Assets United States Canada Europe Defined Contribution Retirement Plans Consolidated Company contributions to defined contribution retirement plans are primarily based on the age and compensation of covered employees. Contributions to these plans, all of which were charged to expense, were $1.9 million in 2014 and 2013 and $1.8 million in 2012. In addition, the Company maintains a supplemental retirement Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities contribution plan (the ‘‘SRCP’’) which is a non-qualified, unfunded defined contribution plan. The Company and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business provides benefits under the SRCP to the extent necessary to fulfill the intent of its defined contribution retirement Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by plans without regard to the limitations set by the Internal Revenue Code on qualified defined contribution plans. business segment. For the years ended December 31, 2014, 2013 and 2012, the Company recognized expense related to the SRCP of $0.1 million, $0.3 million and $0.2 million, respectively. $565.1 $606.7 $610.7 Raw Materials Investment Plans Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex The Company provides voluntary contribution investment plans to substantially all North American employees. from various suppliers. The technical products business purchases substantially all of its raw material requirements Under the plans, the Company matches a portion of employee contributions. For the years ended December 31, externally. We believe that all of the raw materials for our technical products operations, except for certain 2014, 2013 and 2012, costs charged to expense for company matching contributions under these plans were specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a $1.9 million, $1.8 million and $1.7 million, respectively. single supplier would not cause a shutdown of our manufacturing operations. F o r m 1 0 - K Note 8. Stock Compensation Plans Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by The Company established the 2004 Omnibus Stock and Incentive Plan (the ‘‘2004 Omnibus Plan’’) in December formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our 2004 and reserved 3,500,000 shares of $0.01 par value common stock (‘‘Common Stock’’) for issuance under the needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of Omnibus Plan. Pursuant to the terms of the 2004 Omnibus Plan, the compensation committee of the Company’s an interruption of production at any one supplier, we believe that each of these suppliers individually would be Board of Directors may grant various types of equity-based compensation awards, including incentive and able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term nonqualified stock options, SARs, restricted stock, RSUs, RSUs with performance conditions and performance disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp units, in addition to certain cash-based awards. All grants under the Omnibus Plan will be made at fair market grades or other latex grades that would allow us to meet required product performance characteristics and incur value and no grant may be repriced. In general, the options expire ten years from the date of grant and vest over only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative a three-year service period. pulp or latex grades would have a material effect on our operations. At the 2013 Annual Meeting of Stockholders, the Company’s stockholders approved an amendment and Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other restatement of the 2004 Omnibus Plan (as amended and restated the ‘‘2013 Omnibus Plan’’). The amendment and significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, restatement authorized the Company to reserve an additional 1,577,000 shares of Common Stock for future cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that issuance. As of December 31, 2014, the Company had 1,675,000 shares of Common Stock reserved for future all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five issuance under the 2013 Omnibus Plan. As of December 31, 2014, the number of shares available for future percent of the total fiber requirements of our fine paper business, are readily available from several sources and issuance was reduced by approximately 5,000 shares for outstanding SARs where the closing market price for the that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Company’s common stock was greater than the exercise price of the SAR. The Company accounts for stock-based compensation pursuant to the fair value recognition provisions of ASC Topic 718, Compensation — Stock Compensation (‘‘ASC Topic 718’’). We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-33 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 8. Stock Compensation Plans (Continued) Valuation and Expense Information Under ASC Topic 718 Substantially all stock-based compensation expense has been recorded in selling, general and administrative expenses. The following table summarizes stock-based compensation costs and related income tax benefits. Year Ended December 31, 2014 2013 2012 Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax benefit $ 6.0 (2.3) $ 4.9 (1.9) $ 4.9 (1.9) Stock-based compensation, net of income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.7 $ 3.0 $ 3.0 The following table summarizes total compensation costs related to the Company’s equity awards and amounts recognized in the year ended December 31, 2014. Unrecognized compensation cost — December 31, 2013 . . . . . . . . . . . . . . . . . . . Grant date fair value current year grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in estimate of shares to be forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . Compensation expense recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrecognized compensation cost — December 31, 2014 . . . . . . . . . . . . . . . . . . . Expected amortization period (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.3 1.2 — (1.4) $ 1.1 1.9 $ 2.0 4.9 (0.1) (4.6) $ 2.2 1.7 Stock Options Performance Shares and RSUs Stock Options/SARs In August 2014, the Compensation Committee of the Board of Directors approved the conversion of approximately 545,000 outstanding non-qualified stock options held by U.S. employees and U.S. non-employee directors to an equal number of SARs. Upon exercise, the holder of an SAR will receive common shares equal to the number of SARs exercised multiplied by a fraction where the numerator is equal to the market price at the time of exercise minus the exercise price of the SAR and the denominator is equal to the market price at the time of exercise. The SARs can only be settled for shares of Common Stock and the Company will not receive any cash proceeds upon exercise. All other contractual terms of the SARs are unchanged from those of the non-qualified stock options converted. At the date of conversion the fair value of the SARs was equal to the fair value of the stock options exchanged. As a result, the Company did not recognize any additional compensation expense due to the conversion. The following tables present information regarding stock options awarded during the years ended December 31, 2014, 2013 and 2012. For the year ended December 31, 2012, the table excludes 125,000 nonqualified stock options awarded to the Company’s President and Chief Executive Officer as described below: Nonqualified stock options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Per share weighted average exercise price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Per share weighted average grant date fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,700 $43.17 $12.72 111,200 $ 31.23 9.61 $ 97,600 $24.14 $ 8.13 2014 2013 2012 F-34 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 8. Stock Compensation Plans (Continued) Year Ended December 31, 2012 2011 2010 Net sales United States Europe The weighted-average grant date fair value for stock options granted for the years ended December 31, 2014, 2013 and 2012 was estimated using the Black-Scholes option valuation model with the following assumptions: $416.2 279.8 2014 $657.7 $696.0 5.3 5.9 1.9% 0.9% 1.1% 36.5% 40.4% 45.4% 2011 2.2% 1.9% 2.0% $808.8 Expected term in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $413.6 244.1 $543.4 265.4 Consolidated December 31, 2012 2010 2013 2012 4.9 Expected volatility and the expected term were estimated by reference to the historical stock price performance of the Company and historical data for the Company’s stock option and SAR awards, respectively. The risk-free interest rate was based on the yield on U.S. Treasury bonds with a remaining term approximately equivalent to the expected term of the stock option and SAR awards. Forfeitures were estimated at the date of grant. $286.4 0.3 278.4 $322.5 0.2 288.0 $308.9 0.1 297.7 $610.7 $565.1 $606.7 Total Assets United States Canada Europe Consolidated F o r m 1 0 - K Raw Materials During the year ended December 31, 2012, the Company awarded nonqualified stock options to its President and Chief Executive Officer to purchase 125,000 shares of Common Stock (subject to forfeiture due to termination of Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities employment and other conditions). The exercise price of such nonqualified stock option awards was $24.09 per and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business share and the options expire in ten years. As of December 31, 2014, the Company achieved certain total return to Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by shareholder targets and 25 percent of the award vested. For the years ending December 31, 2015 and 2016, if business segment. certain absolute total return to shareholder targets are achieved, 50 percent of the award will vest on December 31, 2015 and 100 percent will vest on December 31, 2016. Any unvested shares as of December 31, 2016 will be forfeited. The grant date fair value of such stock options was $9.55 per share and was estimated using a ‘‘Monte-Carlo’’ simulation valuation model. Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex The following table summarizes stock option activity under the Omnibus Plan for the year ended December 31, from various suppliers. The technical products business purchases substantially all of its raw material requirements 2014: externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a Weighted-Average single supplier would not cause a shutdown of our manufacturing operations. Exercise Price Number of Stock Options Options outstanding — December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options outstanding — December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add: Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Options forfeited/cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be $26.49 able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. 950,668 95,670 437,089 5,288 $23.36 $43.17 $23.20 $36.25 603,961 Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-35 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 8. Stock Compensation Plans (Continued) The status of outstanding and exercisable stock options as of December 31, 2014, summarized by exercise price follows: Options Vested or Expected to Vest Exercise Price Weighted- Average Remaining Number of Contractual Life Exercise (Years) Options Price Weighted- Average Aggregate Intrinsic Number of Exercise Options Value(a) Price Weighted- Average Aggregate Intrinsic Value(a) Options Exercisable $7.41 — $18.90 . . . . . . . . . . . . . . . . . . . . . 105,529 $19.25 — $29.43 . . . . . . . . . . . . . . . . . . . . 266,351 $30.15 — $39.97 . . . . . . . . . . . . . . . . . . . . 131,615 97,641 $41.51 — $51.99 . . . . . . . . . . . . . . . . . . . . 601,136 4.5 6.3 6.1 8.8 6.3 $10.74 $23.45 $32.81 $43.10 $26.46 $ 5.2 9.8 3.6 1.7 $20.3 105,529 115,480 65,327 6,547 292,883 $10.74 $22.62 $34.42 $41.88 $21.40 $ 5.2 4.4 1.7 0.1 $11.4 (a) Represents the total pre-tax intrinsic value as of December 31, 2014 that option holders would have received had they exercised their options as of such date. The pre-tax intrinsic value is based on the closing market price for the Company’s common stock of $60.27 on December 31, 2014. The aggregate pre-tax intrinsic value of stock options exercised for the years ended December 31, 2014, 2013 and 2012 was $12.7 million, $9.8 million and $5.1 million, respectively. The following table summarizes the status of the Company’s unvested stock options as of December 31, 2014 and activity for the year then ended: Number of Weighted-Average Stock Options Grant Date Fair Value Outstanding — December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Add:Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less:Options vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less:Options forfeited/cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding — December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328,436 95,670 111,425 1,603 311,078 $ 9.17 $12.72 $ 8.80 $12.60 $10.37 As of December 31, 2014, certain participants met age and service requirements that allowed their options to qualify for accelerated vesting upon retirement. As of December 31, 2014, there were approximately 50,000 stock options subject to accelerated vesting that such participants would have been eligible to exercise if they had retired as of such date. The aggregate grant date fair value of options subject to accelerated vesting was $0.5 million. For the year ended December 31, 2014, stock-based compensation expense for such options was $0.3 million. For the year ended December 31, 2014, the aggregate grant date fair value of options vested, including options subject to accelerated vesting, was $1.5 million. Stock options that reflect accelerated vesting for expense recognition become exercisable according to the contract terms of the stock option grant. Performance Units/RSUs For the year ended December 31, 2014, the Company granted target awards of 60,900 Performance Units. The measurement period for the Performance Units is January 1, 2014 through December 31, 2014. RSUs equal to not less than 40 percent and not more than 200 percent of the Performance Unit target will be awarded based on the Company’s growth in return on invested capital, consolidated revenue growth, the percentage of consolidated free cash flow to revenue and total return to shareholders relative to the companies in the Russell 2000� Value small cap index. The RSUs will vest on December 31, 2016. During the vesting period, the holders of these RSUs are entitled to dividends, but the RSUs do not have voting rights and are subject to forfeiture due to termination of employment and other conditions. For the year ended December 31, 2014, 107,000 RSUs or approximately 185 percent of the Performance Unit targets were earned. The market price on the date of grant for the Performance Units was $42.82 per share. The Company is recognizing stock-based compensation expense pro-rata over the vesting term of the RSUs. F-36 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 8. Stock Compensation Plans (Continued) Year Ended December 31, 2012 2011 2010 Net sales United States Europe For the year ended December 31, 2014, the Company awarded 8,100 RSUs to non-employee members of the Board of Directors and 2,770 RSUs to employees. The weighted average grant date fair value of such awards was $413.6 $49.76 per share and the awards vest one year from the date of grant. During the vesting period, the holders of 244.1 the RSUs are entitled to dividends, but the RSUs do not have voting rights and are forfeited in the event the holder is no longer an employee or member of the Board of Directors on the vesting date. $543.4 265.4 $416.2 279.8 Consolidated $657.7 $696.0 $808.8 The following table summarizes the activity of the Company’s unvested stock-based awards (other than stock options) for the years ended December 31, 2014, 2013 and 2012: December 31, 2011 2012 2010 Total Assets United States Canada Europe Outstanding — December 31, 2011 . . . . . . . . . . . . . . . . . . Shares granted(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares expired or cancelled . . . . . . . . . . . . . . . . . . . . . . . Consolidated 1,045,830 12,912 (837,179) — $ 9.87 $22.72 $ 8.23 — Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business $36.13 Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by $49.28 business segment. — $36.13 $49.28 Outstanding — December 31, 2012 . . . . . . . . . . . . . . . . . . Shares granted(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance Shares vested . . . . . . . . . . . . . . . . . . . . . . . . Shares expired or cancelled . . . . . . . . . . . . . . . . . . . . . . . 221,563 12,220 (220,762) 145,871 (6,701) 97,900 78,900 — (97,900) (1,900) $16.81 $31.26 $17.23 $24.25 $19.73 Raw Materials Weighted- Average Grant Date Fair Value RSUs $322.5 Performance Units 0.2 288.0 $286.4 0.3 278.4 — 103,000 $565.1 — (5,100) $610.7 Weighted- $308.9 Average Grant Date Fair Value 0.1 297.7 — $36.13 $606.7 — $36.13 Outstanding — December 31, 2013 . . . . . . . . . . . . . . . . . . Shares granted(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance Shares vested . . . . . . . . . . . . . . . . . . . . . . . . Shares expired or cancelled . . . . . . . . . . . . . . . . . . . . . . . $49.28 Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our $74.79 technical products business. The technical products business purchases softwood pulp, specialty pulp and latex — from various suppliers. The technical products business purchases substantially all of its raw material requirements $35.85 externally. We believe that all of the raw materials for our technical products operations, except for certain $74.79 specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. 152,191 11,492 (150,270) 94,710 (2,829) 77,000 60,900 — (77,000) (2,630) $24.36 $49.78 $22.60 $29.15 $29.15 Outstanding — December 31, 2014 . . . . . . . . . . . . . . . . . . 105,294 $31.15 $74.79 58,270 F o r m 1 0 - K (a) For the years ended December 31, 2014, 2013 and 2012, includes 622 RSUs, 950 RSUs and 887 RSUs, Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our respectively, that were granted in lieu of cash dividends. Such dividends-in-kind vest concurrently with the needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of underlying RSUs. an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp The aggregate pre-tax intrinsic value of restricted stock and RSUs that vested for the years ended December 31, grades or other latex grades that would allow us to meet required product performance characteristics and incur 2014, 2013 and 2012 was $8.9 million, $9.3 million and $21.6 million, respectively. only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. (b) The aggregate pre-tax intrinsic value of outstanding RSUs as of December 31, 2014 was $6.3 million. Excess Tax Benefits Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other ASC Topic 718 requires the reporting of excess tax benefits related to the exercise or vesting of stock-based significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, awards as cash provided by financing activities within the statement of cash flows. Excess tax benefits represent cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that the difference between the tax deduction the Company will receive on its tax return for compensation recognized all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five by employees upon the vesting or exercise of stock-based awards and the tax benefit recognized for the grant date percent of the total fiber requirements of our fine paper business, are readily available from several sources and fair value of such awards. As of December 31, 2014, 2013 and 2012, because the Company had unused NOLs its that the loss of a single supplier would not cause a shutdown of our manufacturing operations. excess tax benefits did not result in a reduction in taxes paid and therefore a reduction in cash flow from operations is recorded to offset the amount of excess tax benefits reported in cash flows from financing activities. For the years ended December 31, 2014, 2013 and 2012, the Company recognized excess tax benefits related to the exercise or vesting of stock-based awards of $5.6 million, $2.6 million and $6.1 million, respectively. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-37 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 9. Stockholders’ Equity Common Stock The Company has authorized 100 million shares of Common Stock. Holders of the Company’s Common Stock are entitled to one vote per share. In May 2014, the Company’s Board of Directors authorized a program that would allow the Company to repurchase up to $25 million of its outstanding Common Stock through May 2015 (the ‘‘2014 Stock Purchase Plan’’). The Company had a $10 million share repurchase program in place during the preceding 12 months that expired in May 2014 (the ‘‘2013 Stock Purchase Plan’’). For the year ended December 31, 2014, the Company acquired 23,000 shares of Common Stock at an aggregate cost of $1.1 million under the 2014 Stock Purchase Plan. For the year ended December 31, 2013, there were no purchases under the 2013 Stock Purchase Plan. For the year ended December 31, 2012, the Company acquired 158,000 shares of Common Stock at an aggregate cost of $4.1 million pursuant to a $10 million share repurchase program authorized in May 2012. Purchases by the Company under the 2014 Stock Purchase Program are made from time to time in the open market or in privately negotiated transactions in accordance with the requirements of applicable law. The timing and amount of any purchases will depend on share price, market conditions and other factors. The 2014 Stock Purchase Program does not require the Company to purchase any specific number of shares and may be suspended or discontinued at any time. The 2014 Stock Purchase Plan is expected to be funded using cash on hand or borrowings under the Company’s bank credit facility. For the years ended December 31, 2014, 2013 and 2012, the Company acquired 56,000 shares, 111,000 shares and 302,000 shares of Common Stock, respectively, at a cost of 3.4 million, $4.6 million and $7.6 million, respectively, for shares surrendered by employees to pay taxes due on vested restricted stock awards and SARs exercised. Each share of Common Stock contains a preferred stock purchase right that is associated with the share. These preferred stock purchase rights are transferred only with shares of Common Stock. The preferred stock purchase rights become exercisable and separately certificated only upon a ‘‘Rights Distribution Date’’ as that term is defined in the stockholder rights agreement adopted by the Company at the time of the Spin-Off. In general, a Rights Distribution Date occurs ten business days following either of these events: (i) a person or group has acquired or obtained the right to acquire beneficial ownership of 15 percent or more of the outstanding shares of our Common Stock then outstanding or (ii) a tender offer or exchange offer is commenced that would result in a person or group acquiring 15 percent or more of the outstanding shares of our Common Stock then outstanding. Preferred Stock The Company has authorized 20 million shares of $0.01 par value preferred stock. The preferred stock may be issued in one or more series and with such designations and preferences for each series as shall be stated in the resolutions providing for the designation and issue of each such series adopted by the Board of Directors of the Company. The Board of Directors is authorized by the Company’s articles of incorporation to determine the voting, dividend, redemption and liquidation preferences pertaining to each such series. No shares of preferred stock have been issued by the Company. F-38 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 10. Commitments Year Ended December 31, 2012 2011 2010 Leases Net sales United States Europe $413.6 The future minimum obligations under operating leases having a noncancelable term in excess of one year as of 244.1 December 31, 2014, are as follows: $416.2 279.8 $543.4 265.4 Consolidated $808.8 $696.0 $657.7 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2011 2012 2010 $ 1.5 1.2 0.7 0.2 — — Future minimum lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $322.5 0.2 288.0 $286.4 0.3 278.4 $308.9 0.1 $ 3.6 297.7 $610.7 $565.1 $606.7 Total Assets United States Canada Europe Consolidated Purchase Commitments For the years ended December 31, 2014, 2013 and 2012 rent expense under operating leases was $4.8 million, $4.5 million and $4.2 million, respectively. Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. The Company has certain minimum purchase commitments that extend beyond December 31, 2014. Commitments under these contracts are approximately $7.4 million, $1.1 million, $1.1 million and $1.2 million for the years ended December 31, 2015, 2016, 2017 and 2018, respectively. Such purchase commitments for the year ended December 31, 2015 are primarily for coal contracts. Although the Company is primarily liable for payments on the Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our above-mentioned leases and purchase commitments, management believes exposure to losses, if any, under these technical products business. The technical products business purchases softwood pulp, specialty pulp and latex arrangements is not material. from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Note 11. Contingencies and Legal Matters Raw Materials Litigation Our technical products business acquires all of its specialized pulp requirements from two global suppliers and The Company is involved in certain legal actions and claims arising in the ordinary course of business. While the certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by outcome of these legal actions and claims cannot be predicted with certainty, it is the opinion of management that formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our the outcome of any such claim which is pending or threatened, either individually or on a combined basis, will not needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of have a material effect on the consolidated financial condition, results of operations or liquidity of the Company. an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. The Company is continuously undergoing examination by the Internal Revenue Service (the ‘‘IRS’’) as well as various state and foreign jurisdictions. These tax authorities routinely challenge certain deductions and credits reported by the Company on its income tax returns. No significant tax audit findings are being contested at this time with either the IRS or any state or foreign tax authority. Income Taxes Indemnifications Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Pursuant to a Distribution Agreement, an Employee Matters Agreement and a Tax Sharing Agreement, the Company has agreed to indemnify Kimberly-Clark for certain liabilities or risks related to the Spin-Off. Many of the potential indemnification liabilities under these agreements are unknown, remote or highly contingent. Furthermore, even in the event that an indemnification claim is asserted, liability for indemnification is subject to determination under the terms of the applicable agreement. For these reasons, the Company is unable to estimate We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would the maximum potential amount of the possible future liability under the indemnity provisions of these agreements. increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the However, the Company accrues for any potentially indemnifiable liability or risk under these agreements for which ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton it believes a future payment is probable and a range of loss can be reasonably estimated. As of December 31, fiber supply issues to have a material effect on our operations. 2014, management believes the Company’s liability, if any, under such indemnification obligations was not material to the consolidated financial statements. F-39 5 F o r m 1 0 - K NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 11. Contingencies and Legal Matters (Continued) Environmental, Health and Safety Matters The Company is subject to federal, state and local laws, regulations and ordinances relating to various environmental, health and safety matters. The Company is in compliance with, or is taking actions designed to ensure compliance with, these laws, regulations and ordinances. However, the nature of the Company’s business exposes it to the risk of claims with respect to environmental, health and safety matters, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims. Except for certain orders issued by environmental, health and safety regulatory agencies, with which management believes the Company is in compliance and which management believes are immaterial to the results of operations of the Company’s business, Neenah is not currently named as a party in any judicial or administrative proceeding relating to environmental, health and safety matters. While the Company has incurred in the past several years, and will continue to incur, capital and operating expenditures in order to comply with environmental, health and safety laws, regulations and ordinances, management believes that the Company’s future cost of compliance with environmental, health and safety laws, regulations and ordinances, and its exposure to liability for environmental, health and safety claims will not have a material effect on its financial condition, results of operations or liquidity. However, future events, such as changes in existing laws and regulations or contamination of sites owned, operated or used for waste disposal by the Company (including currently unknown contamination and contamination caused by prior owners and operators of such sites or other waste generators) may give rise to additional costs which could have a material effect on the Company’s financial condition, results of operations or liquidity. The Company incurs capital expenditures necessary to meet legal requirements and otherwise relating to the protection of the environment at its facilities in the United States and internationally. For these purposes, the Company has planned capital expenditures for environmental projects during the period 2015 through 2017 of approximately $1 million to $2 million annually. The Company’s anticipated capital expenditures for environmental projects are not expected to have a material effect on our financial condition, results of operations or liquidity. Employees and Labor Relations As of December 31, 2014, the Company had approximately 2,000 regular full-time employees of whom 830 hourly and 395 salaried employees were located in the United States and 490 hourly and 285 salaried employees were located in Germany. Except for the Pittsfield, Massachusetts mills which are non-union, hourly employees at the Whiting, Neenah, Munising and Appleton paper mills are represented by the United Steelworkers Union (the ‘‘USW’’). In February 2013, the Company reached agreement with the USW on new collective bargaining agreements for all of its U.S. paper mills. The new agreements between the Whiting, Neenah, Munising and Appleton paper mills and the USW expire on January 31, 2018, June 30, 2018, July 14, 2018 and May 31, 2019, respectively. On pension matters the Whiting, Neenah, Munising and Appleton paper mills have bargained jointly with the union. The current agreement on pension matters will remain in effect until September 2019. Approximately 50 percent of salaried employees and 80 percent of hourly employees of Neenah Germany are eligible to be represented by the Mining, Chemicals and Energy Trade Union, Industriegewerkschaft Bergbau, Chemie and Energie (the ‘‘IG BCE’’). In June 2013, the IG BCE and a national trade association representing all employers in the industry signed a collective bargaining agreement covering union employees of Neenah Germany that expires in June 2015. Under German law union membership is voluntary and does not need to be disclosed to the Company. As a result, the number of employees covered by the collective bargaining agreement with the IG BCE that expires in June 2015 cannot be determined. F-40 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 12. Discontinued Operations Year Ended December 31, 2012 2011 2010 In March 2010, the Company concluded its operating activities in Canada; however, the Company has certain continuing post-employment benefit obligations related to its former Canadian operations. Net sales United States Europe The following table presents the results of discontinued operations: Consolidated Discontinued operations: Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from discontinued operations, net of income taxes . . . . . . . . . . . . . . . Total Assets United States Canada Europe $543.4 265.4 $416.2 279.8 $413.6 244.1 $808.8 $696.0 $657.7 Year Ended December 31, 2014 2013 (a) December 31, 2012 (b) 2011 2012 $ — $ 4.2 1.6 $322.5 0.2 $ — $ 2.6 288.0 $286.4 0.3 278.4 — 2010 $ (0.1) (4.5) $308.9 0.1 $ 4.4 297.7 F o r m 1 0 - K Consolidated (a) During the first quarter of 2013, the Company received a refund of excess pension contributions from the $606.7 terminated Terrace Bay pension plan. As a result, the Company recorded income before income taxes from Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities discontinued operations of $4.2 million and a related provision for income taxes of $1.6 million. and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business (b) In November 2012, audits of the 2007 and 2008 tax years were finalized with a finding of no additional taxes Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by due. As a result, the Company recognized a non-cash tax benefit of $4.5 million related to the reversal of business segment. certain liabilities for uncertain income tax positions. $610.7 $565.1 Raw Materials Note 13. Business Segment and Geographic Information Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our The Company reports its operations in two primary segments: Technical Products and Fine Paper and Packaging technical products business. The technical products business purchases softwood pulp, specialty pulp and latex (formerly known as Fine Paper). On January 1, 2015, we changed the name of our Fine Paper segment to Fine from various suppliers. The technical products business purchases substantially all of its raw material requirements Paper and Packaging. The name change better reflects the increasing importance, and plans for continued growth, externally. We believe that all of the raw materials for our technical products operations, except for certain of our premium packaging products. specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. The technical products business is an international producer of transportation, water and other filter media and durable, saturated and coated substrates for industrial products backings and a variety of other end markets. The Our technical products business acquires all of its specialized pulp requirements from two global suppliers and fine paper and packaging business is a leading supplier of premium printing, packaging and other high end certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by specialty papers in North America. Each segment employs different technologies and marketing strategies. In formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our addition, the Company reports in the Other segment results for the non-premium Index, Tag and Vellum Bristol needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of product lines acquired as part of the purchase of the Wausau brands. Disclosure of segment information is on the an interruption of production at any one supplier, we believe that each of these suppliers individually would be same basis that management uses internally for evaluating segment performance and allocating resources. able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term Transactions between segments are eliminated in consolidation. The costs of shared services, and other disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp administrative functions managed on a common basis, are allocated to the segments based on usage, where grades or other latex grades that would allow us to meet required product performance characteristics and incur possible, or other factors based on the nature of the activity. General corporate expenses that do not directly only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative support the operations of the business segments are shown as Unallocated corporate costs. The accounting policies pulp or latex grades would have a material effect on our operations. of the reportable operating segments are the same as those described in Note 2, ‘‘Summary of Significant Accounting Policies.’’ Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and 2012 2014 that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Business Segments Year Ended December 31, 2013 Net sales Technical Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper and Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would $406.6 increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the 372.7 ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton 29.5 fiber supply issues to have a material effect on our operations. Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $466.6 409.0 27.1 $416.1 401.8 26.6 $844.5 $902.7 $808.8 F-41 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 13. Business Segment and Geographic Information (Continued) Year Ended December 31, 2014 2013 2012 Operating income (loss) Technical Products (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper and Packaging (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated corporate costs (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46.9 61.2 (0.4) (20.2) $ 38.6 59.8 1.2 (15.8) $ 37.6 50.0 2.4 (19.6) Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87.5 $ 83.8 $ 70.4 (a) Operating income for the year ended December 31, 2014 includes acquisition related integration costs of $1.0 million and $1.2 million of restructuring costs. Operating income for the year ended December 31, 2013 includes $0.2 million of restructuring costs. (b) Operating income for the years ended December 31, 2013 and 2012 include acquisition related integration costs of $0.4 million and $5.8 million, respectively. (c) Unallocated corporate costs for the year ended December 31, 2014 includes a pension plan settlement charge of $3.5 million, a loss on the early extinguishment of debt of $0.2 million and $0.7 million of restructuring costs. Unallocated corporate costs for the year ended December 31, 2013 includes a pension plan settlement charge of $0.2 million and a loss on the early extinguishment of debt of $0.5 million. Unallocated corporate costs for the year ended December 31, 2012 includes a pension plan settlement charge of $3.5 million and a loss on the early extinguishment of debt of $0.6 million. Year Ended December 31, 2014 2013 2012 Depreciation and amortization Technical Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper and Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18.5 8.6 2.9 $16.4 9.3 3.7 $15.7 9.4 3.7 Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30.0 $29.4 $28.8 Capital expenditures Technical Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper and Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16.8 10.0 1.1 $21.5 5.0 2.2 $14.7 10.2 0.2 Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27.9 $28.7 $25.1 Year Ended December 31, 2014 2013 2012 F-42 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 13. Business Segment and Geographic Information (Continued) Year Ended December 31, 2012 2011 2010 Net sales United States Europe Total Assets United States Canada Europe $543.4 265.4 December 31, $413.6 244.1 $416.2 279.8 2014 2013 2012 $322.5 0.2 288.0 2011 $730.6 2010 $675.9 $286.4 0.3 278.4 $308.9 0.1 297.7 Consolidated Total Assets (a) Technical Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fine Paper and Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate and other (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $808.8 $696.0 $419.1 223.6 December 31, 87.9 $657.7 $365.9 206.9 103.1 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) Segment identifiable assets are those that are directly used in the segments operations. (b) Corporate assets are primarily cash, deferred income taxes and deferred financing costs. F o r m 1 0 - K Consolidated Geographic Information $610.7 $565.1 $606.7 2014 2013 2012 $844.5 $902.7 $808.8 $612.0 290.7 $564.4 280.1 $543.4 265.4 Year Ended December 31, Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. Net sales United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Raw Materials Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex December 31, from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. $365.1 1.0 309.8 Total Assets United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $675.9 formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. In July 2014, Unisource Worldwide, Inc (‘‘Unisource’’) and xpedx, formerly owned by International Paper (‘‘xpedx’’) merged to form Veritiv Corporation. For the years ended December 31, 2014, 2013 and 2012 sales to Unisource and xpedx represented approximately 10 percent of the Company’s consolidated net sales. For the years ended December 31, 2014, 2013 and 2012 sales to Unisource and xpedx represented approximately 20 percent, Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other 20 percent and 25 percent, respectively of net sales of the fine paper and packaging business. Except for certain significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, specialty latex grades and specialty softwood pulp used by Technical Products, management is not aware of any cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that significant concentration of business transacted with a particular supplier that could, if suddenly eliminated, have a all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five material effect on its operations. percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. Net sales are attributed to geographic areas based on the physical location of the selling entities. $456.1 0.4 274.1 Concentrations $730.6 2014 2013 We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-43 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 14. Supplemental Data Supplemental Statement of Operations Data Summary of Advertising and Research and Development Expenses Year Ended December 31, 2014 2013 2012 Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Research and development expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7.2 6.4 $7.6 6.1 $8.4 5.6 (a) Adverting expense and research and development expense are recorded in selling, general and administrative expenses on the consolidated statements of operations. Supplemental Balance Sheet Data Summary of Accounts Receivable — net From customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less allowance for doubtful accounts and sales discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $88.8 (1.8) $92.0 (1.5) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $87.1 $90.5 December 31, 2014 2013 Summary of Inventories Inventories by Major Class: December 31, 2014 2013 Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplies and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28.5 23.2 67.1 6.5 $ 20.3 22.9 67.3 4.5 Excess of FIFO over LIFO cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125.3 (14.0) 115.0 (13.9) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $111.3 $101.1 The FIFO value of inventories valued on the LIFO method was $95.7 million and $86.6 million at December 31, 2014 and 2013, respectively. Summary of Prepaid and Other Current Assets Prepaid and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spare parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8.6 7.1 $10.3 6.7 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15.7 $17.0 December 31, 2014 2013 F-44 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 14. Supplemental Data (Continued) Summary of Property, Plant and Equipment — Net Net sales United States Europe Year Ended December 31, 2012 2011 2010 $543.4 265.4 $416.2 279.8 $413.6 December 31, 244.1 2014 2013 $808.8 $696.0 $657.7 $322.5 0.2 288.0 652.5 $286.4 382.5 0.3 $270.0 278.4 637.1 $308.9 375.4 0.1 $261.7 297.7 $610.7 $565.1 $606.7 Consolidated Total Assets United States Canada Europe Consolidated Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20.0 117.0 December 31, 500.9 14.6 2011 2012 $ 21.7 114.1 496.3 5.0 2010 Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation expense for the years ended December 31, 2014, 2013 and 2012 was $26.7 million, $26.7 million and $26.2 million, respectively. Interest expense capitalized as part of the costs of capital projects was $0.1 million, $0.2 million and $0.1 million, respectively, for the years ended December 31, 2014, 2013 and 2012. Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. Summary of Accrued Expenses Raw Materials December 31, 2014 2013 Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our $23.1 Accrued salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . technical products business. The technical products business purchases softwood pulp, specialty pulp and latex 7.5 Amounts due to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . from various suppliers. The technical products business purchases substantially all of its raw material requirements 0.4 Liability for uncertain income tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . externally. We believe that all of the raw materials for our technical products operations, except for certain 1.2 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a 2.0 Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . single supplier would not cause a shutdown of our manufacturing operations. 11.6 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24.5 8.9 — 1.2 1.0 10.2 F o r m 1 0 - K Summary of Noncurrent Employee Benefits Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be December 31, able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term 2013 disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp $57.1 grades or other latex grades that would allow us to meet required product performance characteristics and incur 40.6 only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative Total (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pulp or latex grades would have a material effect on our operations. Pension benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Post-employment benefits other than pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63.3 39.8 $103.1 $45.8 $97.7 $45.8 2014 benefits as of December 31, 2014 and 2013, respectively. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other (a) Includes $3.4 million and $4.0 million in long-term disability benefits due to Terrace Bay retirees and SRCP significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-45 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) Note 14. Supplemental Data (Continued) Supplemental Cash Flow Data Supplemental Disclosure of Cash Flow Information Cash paid during the year for interest, net of interest expense capitalized . . . . . . . . . . . . . . Cash paid during the year for income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash investing activities: Year Ended December 31, 2014 2013 2012 $10.3 6.3 $9.9 5.4 $13.1 6.7 Liability for equipment acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 1.8 2.2 Net cash provided by (used in) changes in working capital Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes (receivable) payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year Ended December 31, 2014 2013 2012 $ 4.7 (5.6) (0.3) 1.2 6.8 2.2 $(9.4) $ (7.7) (26.8) (1.1) — 5.0 9.7 4.8 (0.1) (2.7) 1.3 (0.5) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.0 $(6.6) $(20.9) Note 15. Unaudited Quarterly Data First Second Third Fourth (b)(c) Year (a)(b)(c) 2014 Quarters Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings Per Common Share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $225.1 43.4 23.0 13.2 $230.4 47.2 25.9 15.0 $230.6 42.8 22.1 13.6 $ 0.79 $ 0.89 $ 0.81 Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.78 $ 0.88 $ 0.80 $216.6 43.8 16.5 26.9 $ 1.59 $ 1.57 $902.7 177.2 87.5 68.7 $ 4.09 $ 4.03 (a) Includes integration/restructuring costs of $2.9 million. (b) Includes a loss on the early extinguishment of debt of $0.2 million. (c) Includes a pension plan settlement charge of $3.5 million. F-46 NEENAH PAPER INC. AND SUBSIDIARIES Concentration. For the years ended December 31, 2012, 2011 and 2010, no customer accounted for more than NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10 percent of our consolidated net sales. (Dollars in millions, except as noted) The following tables present further information about our businesses by geographic area (dollars in millions): Note 15. Unaudited Quarterly Data (Continued) Year Ended December 31, 2012 2011 2010 Net sales United States Europe Consolidated Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income From Continuing Operations . . . . . . . . . . . . . . . . . . . . Earnings Per Common Share From Continuing Operations: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Assets United States Canada Europe First Second $213.2 43.5 22.2 12.1 $212.3 42.8 22.6 12.8 $ 0.74 $ 0.79 $ 0.73 $ 0.77 2013 Quarters $543.4 265.4 Third $416.2 279.8 Fourth $214.1 $808.8 37.1 16.4 11.4 2012 $204.9 $696.0 42.2 22.6 December 31, 13.1 2011 $413.6 Year (a)(b)(c) 244.1 $844.5 $657.7 165.6 83.8 49.4 2010 $ 0.69 $ 0.68 $322.5 0.2 288.0 $ 0.80 $ 0.78 $286.4 0.3 278.4 $ 3.02 $308.9 $ 2.96 0.1 297.7 (a) Includes integration/restructuring costs of $0.6 million. Consolidated $610.7 $565.1 $606.7 (b) Includes a loss on the early extinguishment of debt of $0.5 million. (c) Includes a pension plan settlement charge of $0.2 million. Net sales and total assets are attributed to geographic areas based on the physical location of the selling entities and the physical location of the assets. See Note 13 of Notes to Consolidated Financial Statements ‘‘Business Segment and Geographic Information’’ for information with respect to net sales, profits and total assets by business segment. Raw Materials Technical Products. Softwood pulp, specialty pulp and latex are the primary raw materials consumed by our technical products business. The technical products business purchases softwood pulp, specialty pulp and latex from various suppliers. The technical products business purchases substantially all of its raw material requirements externally. We believe that all of the raw materials for our technical products operations, except for certain specialty latex grades and specialty softwood pulp, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. F o r m 1 0 - K Our technical products business acquires all of its specialized pulp requirements from two global suppliers and certain critical specialty latex grades from four suppliers. In general, these supply arrangements are not covered by formal contracts, but represent multi-year business relationships that have historically been sufficient to meet our needs. We expect these relationships to continue to operate in a satisfactory manner in the future. In the event of an interruption of production at any one supplier, we believe that each of these suppliers individually would be able to satisfy our short-term requirements for specialized pulp or specialty latex. In the event of a long-term disruption in our supply of specialized pulp or specialty latex, we believe we would be able to substitute other pulp grades or other latex grades that would allow us to meet required product performance characteristics and incur only a limited disruption in our production. As a result, we do not believe that the substitution of such alternative pulp or latex grades would have a material effect on our operations. Fine Paper. Hardwood pulp is the primary fiber used to produce products of the fine paper business. Other significant raw material inputs in the production of fine paper products include softwood pulp, recycled fiber, cotton fiber, dyes and fillers. The fine paper business purchases all of its raw materials externally. We believe that all of the raw materials for our fine paper operations, except for certain cotton fiber which represent less than five percent of the total fiber requirements of our fine paper business, are readily available from several sources and that the loss of a single supplier would not cause a shutdown of our manufacturing operations. We believe that a partial or total disruption in the production of cotton fibers at our two primary suppliers would increase our reliance on ‘‘spot market’’ purchases with a likely corresponding increase in cost. Since we have the ability to source cotton fiber on the ‘‘spot market’’ if faced with a supply disruption, we would not expect cotton fiber supply issues to have a material effect on our operations. F-47 5 NEENAH PAPER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (Dollars in millions, except as noted) SCHEDULE II NEENAH PAPER, INC. AND SUBSIDIARIES SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS (Dollars in millions) Description December 31, 2014 Allowances deducted from assets to which they apply Allowance for doubtful accounts . . . . . . . . . . . Allowance for sales discounts . . . . . . . . . . . . . December 31, 2013 Allowances deducted from assets to which they apply Allowance for doubtful accounts . . . . . . . . . . . Allowance for sales discounts . . . . . . . . . . . . . Valuation allowance — deferred income taxes . December 31, 2012 Allowances deducted from assets to which they apply Allowance for doubtful accounts . . . . . . . . . . . Allowance for sales discounts . . . . . . . . . . . . . Valuation allowance — deferred income taxes . Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Account Write-offs and Reclassifications Balance at End of Period $0.9 0.6 $1.4 0.5 0.4 $1.4 0.5 1.7 $ 0.5 (0.1) $ — — $(0.1) — $ 0.4 0.1 — $ 0.2 — (1.3) $ — — — $ — — — $(0.9) — (0.4) $(0.2) — — $1.3 0.5 $0.9 0.6 — $1.4 0.5 0.4 F-48 NEENAH PAPER, INC. 2013 ANNUAL REPORT 4 S H AR E H O L D E R S H AR E H O L D E R INFORMATION INFORMATION INFORMATION INFORMATION INFORMATION INFORMATION TRADEMARKS TRADEMARKS Brand names mentioned in this report are trademarks Brand names mentioned in this report are trademarks of Neenah Paper, Inc. Crane is a registered trademark of Neenah Paper, Inc. Crane is a registered trademark of Crane & Co. Inc. of Crane & Co. Inc. CORPORATE HEADQUARTERS CORPORATE HEADQUARTERS S H AR E H O L D E R Neenah Paper, Inc. Neenah Paper, Inc. S H A R E H O L D E R S H A R E H O L D E R S H AR E H O L D E R 3460 Preston Ridge Road 3460 Preston Ridge Road Suite 600 Suite 600 Alpharetta, GA 30005 Alpharetta, GA 30005 678.566.6500 678.566.6500 CORPORATE HEADQUARTERS CORPORATE HEADQUARTERS CORPORATE HEADQUARTERS www.neenah.com www.neenah.com Neenah Paper, Inc. CORPORATE HEADQUARTERS Neenah Paper, Inc. Neenah Paper, Inc. Neenah Paper, Inc. 3460 Preston Ridge Road 3460 Preston Ridge Road 3460 Preston Ridge Road ANNUAL MEETING OF SHAREHOLDERS ANNUAL MEETING OF SHAREHOLDERS 3460 Preston Ridge Road Suite 600 Suite 600 Suite 600 The 2015 annual meeting of the shareholders of The 2015 annual meeting of the shareholders of Suite 600 Alpharetta, GA 30005 Alpharetta, GA 30005 Alpharetta, GA 30005 Neenah Paper, Inc. will be held Thursday, Neenah Paper, Inc. will be held Thursday, Alpharetta, GA 30005 678.566.6500 678.566.6500 678.566.6500 May 21, 2015 at 10:00 a.m., Eastern time at May 21, 2015 at 10:00 a.m., Eastern time at 678.566.6500 www.neenah.com www.neenah.com www.neenah.com Neenah’s headquarters in Alpharetta, Georgia. Neenah’s headquarters in Alpharetta, Georgia. www.neenah.com ANNUAL MEETING OF SHAREHOLDERS ANNUAL MEETING OF SHAREHOLDERS ANNUAL MEETING OF SHAREHOLDERS As of February 28, 2015, Neenah had approximately As of February 28, 2015, Neenah had approximately The 2014 annual meeting of the shareholders of ANNUAL MEETING OF SHAREHOLDERS The 2015 annual meeting of the shareholders of The 2015 annual meeting of the shareholders of The 2015 annual meeting of the shareholders of Neenah Paper, Inc. will be held Thursday, Neenah Paper, Inc. will be held Thursday, Neenah Paper, Inc. will be held Thursday, Neenah Paper, Inc. will be held Thursday, May 22, 2014 at 10:00 a.m., Eastern time at May 21, 2015 at 10:00 a.m., Eastern time at May 21, 2015 at 10:00 a.m., Eastern time at REGISTRAR AND TRANSFER AGENT REGISTRAR AND TRANSFER AGENT May 21, 2015 at 10:00 a.m., Eastern time at Neenah’s headquarters in Alpharetta, Georgia. Neenah’s headquarters in Alpharetta, Georgia. Neenah’s headquarters in Alpharetta, Georgia. Computershare Computershare Neenah’s headquarters in Alpharetta, Georgia. P.O. Box 30170 P.O. Box 30170 As of February 28, 2014, Neenah had approximately As of March 31, 2015, Neenah had approximately As of March 31, 2015, Neenah had approximately College Station, TX 77842 College Station, TX 77842 As of February 28, 2015, Neenah had approximately 1,500 holders of record of its common stock. 1,500 holders of record of its common stock. Contact Center: Contact Center: Toll Free U.S. and Canada: 877-498-8847 Toll Free U.S. and Canada: 877-498-8847 REGISTRAR AND TRANSFER AGENT REGISTRAR AND TRANSFER AGENT REGISTRAR AND TRANSFER AGENT TDD for hearing impaired: 800-231-5469 TDD for hearing impaired: 800-231-5469 Computershare REGISTRAR AND TRANSFER AGENT Computershare Computershare Computershare Foreign Shareowners: 201-680-6578 Foreign Shareowners: 201-680-6578 P.O. Box 43006 P.O. Box 30170 P.O. Box 30170 P.O. Box 30170 TDD Foreign Shareowners: 201-680-6610 TDD Foreign Shareowners: 201-680-6610 Providence, RI 02940-3006 College Station, TX 77842 College Station, TX 77842 College Station, TX 77842 www.computershare.com/investor www.computershare.com/investor Contact Center: Contact Center: Contact Center: Contact Center: Toll Free U.S. and Canada: 877-498-8847 Toll Free U.S. and Canada: 877-498-8847 Toll Free U.S. and Canada: 877-498-8847 FINANCIAL AND OTHER COMPANY INFORMATION FINANCIAL AND OTHER COMPANY INFORMATION Toll Free U.S. and Canada: 877-498-8847 TDD for hearing impaired: 800-231-5469 TDD for hearing impaired: 800-231-5469 TDD for hearing impaired: 800-231-5469 Our Annual Report on Form 10-K for the fiscal year Our Annual Report on Form 10-K for the fiscal year TDD for hearing impaired: 800-231-5469 Foreign Shareowners: 201-680-6578 Foreign Shareowners: 201-680-6578 Foreign Shareowners: 201-680-6578 ended December 31, 2014, is available on our website ended December 31, 2014, is available on our website Foreign Shareowners: 201-680-6578 TDD Foreign Shareowners: 201-680-6610 TDD Foreign Shareowners: 201-680-6610 TDD Foreign Shareowners: 201-680-6610 at www.neenah.com. In addition, financial reports, at www.neenah.com. In addition, financial reports, TDD Foreign Shareowners: 201-680-6610 www.computershare.com/investor recent filings with the Securities and Exchange recent filings with the Securities and Exchange www.computershare.com/investor www.computershare.com/investor Commision (SEC), news releases and other information Commision (SEC), news releases and other information www.computershare.com/investor FINANCIAL AND OTHER COMPANY INFORMATION FINANCIAL AND OTHER COMPANY INFORMATION FINANCIAL AND OTHER COMPANY INFORMATION are available on our website. For a printed copy of our are available on our website. For a printed copy of our FINANCIAL AND OTHER COMPANY INFORMATION Form 10-K and Annual Report materials, without Form 10-K and Annual Report materials, without charge, please contact: charge, please contact: ended December 31, 2014 is available on our website ended December 31, 2014 is available on our website Our Annual Report on Form 10-K for the fiscal year at www.neenah.com along with financial reports, at www.neenah.com along with financial reports, ended December 31, 2014, is available on our website Neenah Paper, Inc. Neenah Paper, Inc. at www.neenah.com. In addition, financial reports, Attn: Stockholder Services Attn: Stockholder Services Commision (SEC), news releases and other information. Commision (SEC), news releases and other information. recent filings with the Securities and Exchange (SEC), news releases and other information are For a printed copy of our Form 10-K and Annual Report For a printed copy of our Form 10-K and Annual Report Commision (SEC), news releases and other information 3460 Preston Ridge Road 3460 Preston Ridge Road available on our website. For a printed copy of our materials, without charge, please contact: materials, without charge, please contact: are available on our website. For a printed copy of our Suite 600 Suite 600 Form 10-K and Annual Report materials, without Alpharetta, GA 30005 Alpharetta, GA 30005 Neenah Paper, Inc. Neenah Paper, Inc. charge, please contact: Neenah Paper, Inc. 866.548.6569 866.548.6569 Attn: Stockholder Services Attn: Stockholder Services Attn: Stockholder Services or via email to investors@neenah.com or via email to investors@neenah.com Neenah Paper, Inc. 3460 Preston Ridge Road 3460 Preston Ridge Road 3460 Preston Ridge Road Attn: Stockholder Services Suite 600 Suite 600 CERTIFICATIONS CERTIFICATIONS Suite 600 3460 Preston Ridge Road Alpharetta, GA 30005 Alpharetta, GA 30005 Certifications of Neenah’s Chief Executive Officer Certifications of Neenah’s Chief Executive Officer Alpharetta, GA 30005 Suite 600 and Chief Financial Officer regarding the quality of and Chief Financial Officer regarding the quality of 866.548.6569 866.548.6569 866.548.6569 Alpharetta, GA 30005 our public disclosure have been included as exhibits our public disclosure have been included as exhibits or via email to investors@neenah.com or via email to investors@neenah.com or via email to investors@neenah.com to its Annual Report on Form 10-K for the fiscal to its Annual Report on Form 10-K for the fiscal 866.548.6569 CERTIFICATIONS CERTIFICATIONS year ended December 31, 2014 filed with the SEC. year ended December 31, 2014 filed with the SEC. or via email to investors@neenah.com CERTIFICATIONS Neenah has included as exhibits to its Annual Report on CERTIFICATIONS our public disclosure have been included as exhibits our public disclosure have been included as exhibits Certifications of Neenah’s Chief Executive Officer and Chief Financial Officer regarding the quality of Neenah Paper, Inc. 2014 Annual Report Neenah Paper, Inc. 2014 Annual Report our public disclosure have been included as exhibits to its Annual Report on Form 10-K for the fiscal the quality of our public disclosure. year ended December 31, 2014 filed with the SEC. Neenah Paper, Inc. 2013 Annual Report Neenah Paper, Inc. 2014 Annual Report Neenah Paper, Inc. 2014 Annual Report Neenah Paper, Inc. 2014 Annual Report STOCK EXCHANGE STOCK EXCHANGE TRADEMARKS TRADEMARKS TRADEMARKS Neenah Paper’s common stock is traded on the Neenah Paper’s common stock is traded on the Brand names mentioned in this report are trademarks Brand names mentioned in this report are trademarks Brand names mentioned in this report are trademarks TRADEMARKS New York Stock Exchange under the symbol NP. New York Stock Exchange under the symbol NP. of Neenah Paper, Inc. Crane is a registered trademark Brand names mentioned in this report are trademarks of Neenah Paper, Inc. Crane is a registered trademark of Neenah Paper, Inc. Crane is a registered trademark INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM of Crane & Co. Inc. of Neenah Paper, Inc. Crane is a registered trademark of Crane & Co. Inc. of Crane & Co. Inc. Deloitte & Touche LLP Deloitte & Touche LLP of Crane & Co. Inc. STOCK EXCHANGE STOCK EXCHANGE STOCK EXCHANGE 191 Peachtree Street 191 Peachtree Street STOCK EXCHANGE Suite 1500 Suite 1500 Atlanta, GA 30303 Atlanta, GA 30303 Neenah Paper’s common stock is traded on the Neenah Paper’s common stock is traded on the Neenah Paper’s common stock is traded on the New York Stock Exchange under the symbol NP. Neenah Paper’s common stock is traded on the New York Stock Exchange under the symbol NP. New York Stock Exchange under the symbol NP. New York Stock Exchange under the symbol NP. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* Deloitte & Touche LLP Deloitte & Touche LLP Deloitte & Touche LLP INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Among Neenah Paper, Inc., the Russell 2000 Value Index and a Peer Group Among Neenah Paper, Inc., the Russell 2000 Value Index and a Peer Group 191 Peachtree Street Deloitte & Touche LLP 191 Peachtree Street 191 Peachtree Street $180 $180 Suite 1500 191 Peachtree Street Suite 1500 Suite 1500 $160 $160 Atlanta, GA 30303 Suite 1500 Atlanta, GA 30303 Atlanta, GA 30303 $140 $140 Atlanta, GA 30303 COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* $120 COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* Among Neenah Paper, Inc., the Russell 2000 Value Index and a Peer Group Among Neenah Paper, Inc., the Russell 2000 Value Index and a Peer Group Among Neenah Paper, Inc., the Russell 2000 Value Index and a Peer Group COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* $100 Among Neenah Paper, Inc., the Russell 2000 Value Index and a Peer Group $600 $80 $80 $180 $180 $120 $100 $60 $60 $180 $160 $160 $500 $40 $40 $160 $140 $140 $20 $20 $400 $140 $120 $120 $0 $0 $120 $100 $100 $300 $100 $80 $80 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 $200 $80 $60 $60 $40 $60 $40 $100 $40 $20 $20 $20 $0 $0 $0 Neenah Paper, Inc. Neenah Paper, Inc. Russell 2000 Value Russell 2000 Value Peer Group: AEP Industries Inc., Boise Inc., Buckeye Technologies Inc., Peer Group: AEP Industries Inc., Boise Inc., Buckeye Technologies Inc., CSS Industries, Inc., P.H. Glatfelter Company, KapStone Paper and CSS Industries, Inc., P.H. Glatfelter Company, KapStone Paper and Packaging Corporation, Minerals Technologies Inc., OMNOVA Solutions Inc., Packaging Corporation, Minerals Technologies Inc., OMNOVA Solutions Inc., $0 Polypore International, Inc., Schweitzer-Mauduit International, Inc., Verso Polypore International, Inc., Schweitzer-Mauduit International, Inc., Verso Paper Corp. and Wausau Paper Corp. The peer group average is weighted Paper Corp. and Wausau Paper Corp. The peer group average is weighted 2008 2012 by market capitalization. by market capitalization. 2010 2008 2011 2009 2013 2011 2012 2010 2009 2007 2014 2012 2010 2007 2009 2011 2009 2011 2007 2010 2012 Year Paper Corp. and Wausau Paper STOCK PRICE PERFORMANCE STOCK PRICE PERFORMANCE * $100 invested on December 31, 2009 in stock or index, including reinvestment of dividends. 2008 Neenah Paper, Inc. Neenah Paper, Inc. Neenah Paper, Inc. * $100 invested on December 31, 2009 in stock or index, including Russell 2000 Value Russell 2000 Value Russell 2000 Value reinvestment of dividends. Neenah Paper, Inc. Peer Group: AEP Industries Inc., Buckeye Technologies Inc., Peer Group: AEP Industries Inc., Boise Inc., Buckeye Technologies Inc., Peer Group: AEP Industries Inc., Boise Inc., Buckeye Technologies Inc., Russell 2000 Value CSS Industries, Inc., P.H. Glatfelter Company, KapStone Paper and CSS Industries, Inc., P.H. Glatfelter Company, KapStone Paper and CSS Industries, Inc., P.H. Glatfelter Company, KapStone Paper and Peer Group: AEP Industries Inc., Boise Inc., Buckeye Technologies Inc., Packaging Corporation, Minerals Technologies Inc., OMNOVA Solutions Inc., Packaging Corporation, Minerals Technologies Inc., OMNOVA Solutions Inc., Packaging Corporation, Minerals Technologies Inc., OMNOVA Solutions Inc., CSS Industries, Inc., P.H. Glatfelter Company, KapStone Paper and Polypore International, Inc., Schweitzer-Mauduit International, Inc., Verso Paper Corp. and Wausau Paper Polypore International, Inc., SWM , Verso Polypore International, Inc., SWM , Verso Packaging Corporation, Minerals Technologies Inc., OMNOVA Solutions Inc., Year Year Year Russell Russell Paper Corp. and Wausau Paper Corp. The peer group average is weighted Corp. The peer group average is weighted by market capitalization. Corp. The peer group average is weighted by market capitalization. Polypore International, Inc., Schweitzer-Mauduit International, Inc., Verso by market capitalization. 2000 2000 on Year on Year Paper Corp. and Wausau Paper Corp. The peer group average is weighted * $100 invested on December 31, 2009 in stock or index, including * $100 invested on December 31, 2009 in stock or index, including by market capitalization. * $100 invested on December 31, 2009 in stock or index, including % Change % Change reinvestment of dividends. reinvestment of dividends. reinvestment of dividends. * $100 invested on December 31, 2009 in stock or index, including reinvestment of dividends. 32% 32% 1,491.42 2013 1,491.42 2013 STOCK PRICE PERFORMANCE STOCK PRICE PERFORMANCE STOCK PRICE PERFORMANCE 2012 2012 15% 1,130.98 15% 1,130.98 STOCK PRICE PERFORMANCE Year Year Year Russell Russell Russell 2000 2000 on Year on Year -7% 979.25 -7% 979.25 2000 Year on Year Russell Value Value % Change % Change 2000 Value on Year 22% 1,058.10 22% 1,058.10 % Change Value 1,491.42 1,491.42 1,523.45 1,523.45 1491.42 28% 28% Year Year Year on Year on Year 13% 13% Year on Year % Change % Change on Year 41% 41% % Change Neenah Neenah Neenah $22.32 $22.32 Paper, Inc. Paper, Inc Paper, Inc Neenah $19.68 $19.68 Paper, Inc. Neenah Neenah Paper, Inc. Paper, Inc. $42.77 $42.77 $28.47 $28.47 % Change % Change 2010 2010 on Year on Year 50% 50% 2011 2011 Value Value 2013 2013 2014 2014 2013 2012 2012 2013 2012 1,491.42 1,130.98 1,130.98 1130.98 of the year indicated. of the year indicated. 979.25 979.25 1,130.98 979.25 2012 2011 2011 2011 % Change 32% 32% 2% 2% 32% 32% 15% 15% 15% -7% -7% 15% -7% $42.77 $42.77 $60.27 $60.27 $42.77 $42.77 $28.47 $28.47 $28.47 $22.32 $22.32 $28.47 $22.32 % Change 50% 50% 41% 41% 50% 50% 28% 28% 28% 13% 13% 28% 13% 2011 2010 2010 2010 2010 2014 2014 2009 979.25 1,058.10 1,058.10 1,058.10 1,058.10 1,523.45 1,523.45 865.82 1,523.45 2014 of the year indicated. of the year indicated. of the year indicated. of the year indicated. -7% 22% 22% 22% 22% 2% 2% 18% 2% $22.32 $19.68 $19.68 $19.68 $19.68 $60.27 $60.27 $13.95 $60.27 13% 41% 41% 41% 41% 41% 41% 58% 41% LEADERSHIP EXECUTIVE TEAM BOARD OF DIRECTORS Margaret S. Dano John F. McGovern John P. O’Donnell President and Bonnie C. Lind Senior Vice President, Former Vice President, Honeywell International Inc., Worldwide Operations of Garrett Engine Boosting Systems Sean T. Erwin Chairman of the Board, Former President and and Treasurer Neenah Paper, Inc. Partner, Aurora Capital LLC and Former Executive Vice President and Philip C. Moore Senior Vice President, Deputy General Counsel and Corporate Secretary, TD Bank Group Steven S. Heinrichs Senior Vice President, General Counsel and Secretary Edward Grzedzinski Former Chief Executive Information Systems John P. O’Donnell President and Neenah Paper, Inc. , Julie A. Schertell Senior Vice President, Fine Paper and Packaging, and Technical Products U.S. Timothy S. Lucas, CPA Independent Consultant, Lucas Financial Reporting and Former Director of Research, FASB Stephen M. Wood, Ph.D. Former President and FiberVisions Corporation Armin Schwinn Managing Director, Neenah Germany Neenah Paper, Inc. 2014 Annual Report Neenah Paper, Inc. 2013 Annual Report NEENAH PAPER, INC. 2013 ANNUAL REPORT 4 

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