May 11, 2006. /Lesprom Network/. Neenah Paper, Inc. reported on May 9 net income of $0.9 million for the first quarter 2006, or $0.06 per diluted common share, compared with net income of $2.7 million, or $0.18 per diluted common share during the first quarter of 2005. First quarter 2005 results included after-tax charges for the closure of the Terrace Bay №1 mill of $0.19 per diluted common share. In January 2006, the company adopted SFAS 123R for recognizing stock-based compensation costs and first quarter 2006 results include a charge of $0.06 per share for the expense of such costs under this new standard. For the fine paper business, first quarter 2006 net sales of $58.1 million exceeded sales of $57.9 million in the same quarter last year, as higher average selling prices and an improved sales mix offset a 3% decline in volumes. Operating income for the current quarter was $15.6 million compared with $17.0 million in 2005. The reduction in operating income was primarily attributable to higher costs for energy and raw materials in 2006, partly offset by the higher selling prices and more favorable mix. Technical products net sales of $33.0 million in the first quarter of 2006 compared with $35.9 million in the same period of 2005. The lower sales reflected an 11% decline in volumes which was primarily due to the timing of orders for tape products. Operating income for the quarter was $2.0 million compared with $4.7 million in the first quarter of 2005 largely due to reduced sales and manufacturing inefficiencies associated with the lower volumes. Higher costs of energy and raw materials were offset by improved selling prices. Net sales for pulp of $78.7 million in the first quarter compared with sales of $109.2 million in the same period of 2005. The decline in sales was due to lower volumes at the Terrace Bay mill following the closure of the №1 mill in May 2005 and suspension of production in February 2006 due to a strike in the woodlands operations. Operating losses in the pulp segment improved $3.3 million, from a loss of $11.1 million in the first quarter of 2005 to a loss of $7.8 million in the same period 2006. In 2005, pulp operating results included $4.3 million for closure costs of the №1 mill at Terrace Bay. Excluding 2005 closure costs, year-on-year losses widened slightly in 2006 primarily due to a stronger Canadian dollar, higher energy and material costs and unscheduled maintenance downtime at the Pictou mill. These items were partly offset by reduced spending at Terrace Bay during the strike-related shutdown, reimbursements from the Ontario government for certain forestry activities at Terrace Bay and gains on currency hedging operations. Commenting on results and recent strategic announcements, Sean Erwin, chairman and chief executive officer said, “Our paper businesses remain on solid footing despite the continued impact of higher raw material and energy prices versus a year ago. We remain committed to grow these businesses and enhance margins through product introductions and additional cost savings initiatives and look forward to being able to focus on these actions in coming months. ” “We have devoted a lot of effort towards our strategic objectives of evolving Neenah Paper into a leading fine paper and technical products company and unlocking value in our pulp operations. I am extremely pleased with the progress that has been made. The recent agreements to transfer our Terrace Bay operations and to sell a major portion of our timberlands in Nova Scotia represent two very important accomplishments and the culmination of a lot of hard work.” Neenah Paper manufactures and distributes a wide range of premium and specialty paper grades. 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 manufacturing operations in Wisconsin, Michigan and in the Canadian provinces of Ontario and Nova Scotia.