Mar 09, 2007. /Lesprom Network/. Neenah Paper, Inc. reported on March 7 income from continuing operations for the fourth quarter 2006 of $3.2 million, or $0.21 per diluted common share, compared with a loss from continuing operations of $2.7 million, or $0.18 per diluted common share, for the fourth quarter of 2005. Net sales for the fourth quarter 2006 increased 30% versus the prior year to $177.2 million, while operating income increased from $0.6 million in the fourth quarter 2005 to $9.0 million in the current quarter. Fourth quarter 2006 results reflect the inclusion of Neenah's German operations, which were acquired from FiberMark on October 11, 2006. Commenting on the performance, Sean Erwin, chairman and chief executive officer said, "Results for the fourth quarter were well ahead of last year, reflecting significant improvement in pulp operations resulting from both higher selling prices and improved costs, a more favorable pricing environment in our paper segments, and growth in technical products. Our businesses continued to generate strong cash flows, providing us with sound financial footing and flexibility to act on attractive opportunities like the Fox River acquisition. We made good progress during the quarter toward integrating our German operations and look forward to being able to deliver even more efficiencies as we consolidate Fox River with our fine paper business." For the full year ending December 2006, net sales of $594.3 million increased 11% compared to the same period in 2005. Excluding sales from the acquired German operations, revenues increased 2%, with growth in all three segments. Year-to-date income from continuing operations was $95.4 million, compared with $22.3 million in 2005. Net income in 2006 included after-tax gains of $77.5 million, or $5.22 per diluted common share, related to the sale of timberlands. Total earnings per share from continuing operations were $6.43 in 2006 and compared to $1.51 in 2005. After excluding the gain from the timberlands sale, net income declined in 2006 as a result of a stronger Canadian dollar, increased raw material and energy costs, losses on pulp price hedges, and higher corporate expenses that offset the benefits of higher volumes and selling prices. Corporate expense increased primarily due to the adoption in January 2006 of SFAS 123R to expense stock-based compensation and from depreciation of costs associated with installing a new ERP system. Outlook The company indicated the following items are likely to influence results in 2007 or comparisons with 2006: - Pulp prices have continued to strengthen and market forecasts indicate 2007 northern softwood prices may exceed 2006 by over $50/MT on average, with larger year-on-year differentials occurring in the first half of 2007. - All remaining pulp price hedges expired by December 2006 and the company has no current plans to enter into similar new hedges. In 2006, the company incurred losses of approximately $11 million on these hedges. - The annual maintenance down for Pictou is scheduled in the second quarter 2007 and was completed in the fourth quarter of 2006. - Capital spending in 2007 is expected to be $50-55 million, including spending for both Neenah Germany and Fox River Paper. - Results in 2007 will include a full year of Neenah Germany, which was purchased on October 11, 2006, and a partial year for Fox River Paper, which was acquired on March 1, 2007. Neenah Paper manufactures and distributes a wide range of premium and specialty paper grades, with well-known brands such as CLASSIC(R), ENVIRONMENT(R), STARWHITE(R), ESSE(R), KIMDURA(R) and MUNISING LP(R), Gessner(R) and varitess(R). The company also produces and sells bleached pulp, primarily for use in the manufacture of tissue and writing papers. Neenah Paper is based in Alpharetta, Georgia, and has paper manufacturing operations in the United States and Germany, and a pulp mill and related timberlands in Nova Scotia, Canada.