ALPHARETTA, Ga., Nov. 9 /PRNewswire-FirstCall/ -- Neenah Paper, Inc. (NYSE: NP) today reported adjusted earnings, excluding special items, of $0.29 per diluted common share in the third quarter of 2009, up more than 50 percent from $0.18 per share in the third quarter of 2008 and also significantly higher than second quarter 2009 earnings.

"We continued our sequential improvement in performance in the third quarter, with sales increasing 11 percent versus the second quarter and adjusted operating income above both second quarter and levels of a year ago, which preceded the economic crisis," said Sean Erwin, Chairman and Chief Executive Officer. "Improving business conditions, benefits of more than $6 million from our cost reduction programs and lower input prices have resulted in increased profits and margins in each of our businesses. This in turn contributed to strong operating cash flows which allowed us to reduce debt by more than $15 million this quarter."

Special items excluded from the calculation of adjusted income include tax expense of $1.0 million, or $0.07 per share, in the third quarter of 2009, pre-tax restructuring costs of $18.0 million, or $0.79 per share, in the second quarter of 2009 for the closure of the Ripon Fine Paper mill, and a pre-tax gain of $3.5 million, or $0.16 per share, in the third quarter of 2008 primarily from the sale of surplus Fine Paper assets. Adjusted income is a non-GAAP measure and is reconciled to comparable GAAP measures later in this release.

Income from continuing operations was $3.4 million, or $0.23 per diluted common share, in the third quarter 2009 and $5.0 million, or $0.34 per diluted common share, in the third quarter 2008.

Quarterly Segment and Other Financial Results

Fine Paper third quarter 2009 net sales of $63.0 million increased from $61.3 million in the second quarter, but were below third quarter 2008 sales of $81.7 million. Increased sales versus the second quarter were a result of higher volumes, which reflected stabilizing market conditions. Decreased year on year sales were due to continued lower market demand for premium writing, text and cover papers.