Good day and welcome to the Neenah Fourth Quarter and Full Year Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note today’s event is being recorded. I would now like to turn the conference over to Bill McCarthy, Vice President, Investor Relations. Please go ahead, sir.

Thank you. On the call with me today are John O’Donnell, Chief Executive Officer and Bonnie Lind, Chief Financial Officer. As you may have noticed, we’ve had to change the time of our earnings call this quarter, but we do expect to return to morning calls for the remainder for the year. As usual, after our prepared remarks, covering financial results and progress against key initiatives, we will open up the call for questions. We released earnings this morning and reported quarterly revenues of 241 million, down 1% from the prior year and earnings per share of $0.76, which compared to $1.10 in the fourth quarter of 2017. A key event in the quarter was the sale of our nonstrategic facility in Brattleboro, Vermont on December 31. This plant was previously expected to be closed and earnings in the quarter were positively impacted by a reduction in the impairment loss for the facility based on terms of the sale. Excluding this and other items in both years, adjusted fourth quarter earnings per share were $0.53 and compared to $1.06 in the prior year. Further detail on adjusting items along with the reconciliation to comparable GAAP figures can be found in our press release. I’ll also note that our comments today will include forward-looking statements and that actual results could differ from these statements due to uncertainties and risks outlined in our website and in our SEC filings. With that, I'd like to turn things over to John. John O’Donnell: Thank you and good afternoon, everyone. Bonnie will cover the fourth quarter financials in detail, but I'll just say that clearly it was a challenging one. In Q4, we felt much weaker demand, driven by global economic uncertainties and our customers desire to manage down their inventories. Even more significant was…

Thank you. Hello, everyone. We noted at the start of the call that there were adjusting items in the quarter with the two largest being a reduction to the Brattleboro impairment loss and a favorable adjustment related to the Coldenhove acquisition. In total, a pretext net benefit of 4.1 million in 2018 was excluded from adjusted earnings and this compared to added costs of 1 million in 2017 that were excluded. Today, I'll focus just on adjusted results and start with technical products. Sales of 130 million were up 3% in the quarter. Results benefited from a higher value mix of products sold with growth in digital transfer, security and transportation filtration grades and from higher selling prices. Volume was flat overall as growth in transportation filtration and in certain specialty grades offset lower sales in backings and other industrial products. Backings were challenged by slowing markets as well as integrated competitors during this period of extremely high pulp prices. Sales of technical products were also 2 million lower due to a weaker euro and on a constant currency basis, sales grew 4%. Technical products’ adjusted operating income of 6.1 million was down 5 million from a year ago. Pulp cost increases of 5 million were the highest of the year and results were also impacted by 3 million of higher manufacturing costs, largely due to fixed costs under absorption. As a reminder, we take our largest annual filtration maintenance down in October. This year, the plan down was slightly longer to complete an environmental compliance project and we took added downtime to match year end customer demand. These added costs were only partly offset by benefits in the quarter from higher selling prices and the more profitable mix. Turning next to fine paper and packaging, revenues of 106 million…

[Operator Instructions] Today's first question comes from Jon Tanwanteng of CJS Securities.

What are your customers saying to you in Q1? Are there inventories still higher, are they still saying any pull through of their product? John O’Donnell: Yeah. As I’ve tried to foreshadow on the call there, I would say that Q4, which is a normal end of the year, inventory reduction was probably magnified because of the end of the year. But I would also say, there's still a lot of caution that remains, especially in our markets overseas and I talked about our backings category on the call being down 1% this year and there's a category that's grown average price 7% for two years prior and it's more of a GDP type of a category. So when they're feeling really good about the business, our saturated backings business does fairly well. When they're more cautious, we really see it in that category first.

And then John, I think you mentioned you could recover input pricing, given the forecast for the rest of the year. Can you also recover headwinds from currency, is that in the plan or is that a little bit harder to do? John O’Donnell: Well, so how much can I stack on the shoulders here, $45 million to $50 million of input costs over two years for this team is pretty impressive recovery from a selling price and as you can appreciate, we're trying to balance the pressure that puts on very top end brands, if you will. As a reminder, we play in that high end niche and by playing in that high end niche, when our costs go up to their highest levels as they are now and we're competing with commodity players that are one-third, the costs, it really puts a lot of pressure on volume and that's what we're feeling. So, our intention is to -- I mean, we've had some tailwinds from currency in the past and we've got some headwinds now and I don't think we've been disadvantaged one way or the other in that sense. I think I'm going to be reporting those to you, doing everything we can through cost reduction efforts, but at the same time, that's really something I think is not in the control of the organization and probably second to recovery in those prices, there's no larger impact to our margin restoration than capturing the prices that we've announced out there.

And then finally, Bonnie, you mentioned you increased your revolver limit recently, do you anticipate using that additional firepower soon and what will your priorities be if you were to use it?

Our priorities are always the same, right, organic capital spending is our highest priorities and acquisition, returning cash for our shareholders, de-levering if our debt levels are high, so what we really like to have is a lot of dry powder, so that if opportunities present themselves, we can finance them with our lowest cost of available capital. John O’Donnell: And we would love for you to recognize the fact that, if in fact we are having more challenging economic times, we're in a great position with our balance sheet to continue to execute our strategies regardless of the capital allocation.

Got it. And maybe just a follow up to that, are you seeing more opportunity if everyone in your peer group is facing the same pressure. John O’Donnell: You're talking about M&A and I would tell you that I think there's a lot of money out there and I would love to believe that the multiples are coming down. But I'm seeing little evidence of that. There's a lot of activity and we're still actively participating. If I have a little button that I wear, it’s friends don't let friends overpay for companies. And so we're very diligent on that, as we look at different companies, but I haven't seen a meaningful change that would suggest that we have more opportunity than we've had in the past.

And our next question today comes from Steve Chercover of Davidson.

So I guess kind of a follow on to that first question, I was hoping you could help us kind of benchmark how much costs have yet to be recovered. I know, you really had a chance to get any of the 11 million in pulp inflation that you saw in Q4, but that plus what was paying on from the earlier quarters, $15 million or $20 million of recovery. John O’Donnell: No. I said two-thirds of the 33, so really about 21, we have been able to capture. So you're right, shorthand, if you take the 21 plus the 11 in the quarter, that's pretty close to what the full year impact was. And our 10 to 15 that I said for 2019, it's a forecast and you'll be the first one to make fun of me for my forecasting skills. So, we definitely enjoy -- we definitely have 11 million that we have experience that we need to pick up. We expect 10 to 15 especially earlier in the year. And we've got a lot of the pricing already announced, so filtration pricing is underway, it's, as we said, take place at beginning of the year, more annual contract and fine paper announced three increases, which I was unheard of last year. Two of those three will definitely roll into this year. One of them was fairly early in the year, almost experienced a full year breakthrough. So our perspective is we have probably the most of the pricing already announced that's moving into this year for the fiber that we anticipate.

And with respect to fine paper, the announcements on commodity freesheet that have just rolled through after pretty substantial closure, does that impact you at all or should we think that you're basically in a different club than the commodity guys? John O’Donnell: Yeah. I don't and I’d always love to be in the special club, but what I will tell you and where it's going to be more challenging is that most of the announcements on commodities were on their copy sheets and a lot of the more real commodity products, what touches us is opaque and opaques, they're very, very high end which many of the players took advantage of the time where we're in the highest cost period and didn't announce increases in opaque and that caused us, we've always seen trading down as print technologies get better. To that end and when the price disparity is so large and right now, it's between our sheets of work, we’re almost 3 times higher than some opaque sheets which might be good enough for that level of a pricing differential. So I think that puts a little extra pressure on us during those time periods. Again, they didn't go up in products that likely would be traded with ours.

And switching gears to filtration, if I'm not mistaken, the Appleton machine has been running now for two full years. So is that accurate and how's that going versus the plan? John O’Donnell: Yeah. Well, you're right. It has been two years, watching the kids grow up, time flies. When we said last year, we said $15 million to $20 million in top line and we did achieve that 15 million to 20 million and I think I was fairly overt in my disappointment in some of the cost, whether it's been in the run sides and the yields and as we've staffed up and candidly and I've I know I've mentioned this in the past, a little slower qualification that I would like as we're moving through -- we've got a lot of reason for optimism and we anticipate that the revenue is going to actually double in this next year, at least double from that piece of it and we will see a corresponding improvement in our results as we're moving forward. So, I think that's a pretty good summary.

Sure. And so there's still qualification yet to be received? John O’Donnell: Yeah. So when we look at next year, we're going to move from $15 million to basically $30 million in next year and our expectations are, we still have a lot of growth for a couple of years, three years after that, if you will. As we move into next year, if you said right now, at any point in time, I have got the majority, probably 3 quarters of next year's volume already qualified, okay, and that's the best I’ve looked rolling into the beginning of the year and of course everything in the first quarter is pretty much qualified to that end. So now, what we're going to see is not the product qualification, but the ramp up in the size of the orders and so it's more of a size than it is from the newness and that's where we expect to gain our efficiencies and improve our overall returns. There are still qualifications going whether it's for new projects and that's true of either of our filtration facilities.

And our next question comes from Dan Jacome of Sidoti & Company.

Just wanted to stay on the topic of Appleton here for the moment. I think on the last call, you provided an interesting metric about what percent of total volume the Appleton was representing. But then there was an outsized contribution to your cost, do you have at handy by any chance what percent of volume versus what percent of your cost, so just want to understand what sort of progress you're making on the underlying margin structure of this new capacity? John O’Donnell: I don't have that and in fact it's not coming to memory, it has more to do with my age than it does with the fact. Good news. I know there's a transcript out there that you could reference that –

I think it was the one where what percent of your cost was representative of the revenue versus the trial cost.

Yes. It was on the 3Q call.

Dan, do you remember what our member was?

Yeah. 3Q, you said 5% of volume but 30% of the cost, so I was just trying to understand what happened in the fourth quarter, relative to that metric. John O’Donnell: I should have looked back on my notes, that was – I’m trying to look at that implementation and try to give it as much color as I can, and that’s not something we normally track. I would suppose that it was very similar, as we rolled into the fourth quarter, fourth quarter wasn't an enabling quarter just by the diminished volumes that we would normally see in a fourth quarter, even though we have another quarter of experience. Now, you’ve heightened that metric, it's going to improve all throughout of 2019, maybe that's something that, if it seems more relevant, I’ll pull it forward. I apologize, I don't have off the top of my head.

Right. No. I totally understand. So the ramp up is the next critical phase in this capacity lifecycle. Just trying to, I guess, are you still confident that the incremental revenue once the machines are fully integrated and you've attained attractive size orders, incremental revenue can be 80 million, because I think you said you did 15 this year, so if you just annualize that, that's well below 80 million. I’m just trying to understand that. John O’Donnell: Yeah. I think we’re in that 70 million to 80 million range from that piece of it. So yes, again, the bigger challenge is, early on, you're qualifying more low end value grades that are easier to produce and then as we move up the continuum, the higher value grades then move in. Our expectation is that the margins for the businesses, for the product that we sell out of Appleton will be like the margins that we sell out of [indiscernible] global businesses for like grades.

I wanted to turn the questions over now to other Vermont. Your nicely rationalizing manufacturing capacity, I was wondering, in your footprint, is there any other potential low hanging fruit, other capacity or regions that you, in the fine paper segment, that you might be looking at a little bit more closely because it sounds like the shuttering of this capacity will provide a very nice earnings tailwind in the coming year? John O’Donnell: Yeah. And just to highlight, we’re very pleased we didn't have to shutter it, we’re very happy that the employees, they are still, we’re able to retain and we repurposed it through another owner, which I think was a good outcome for all of us. You’re right. Our first focus is really keeping the assets running forward, those are timings as we go through the year in seasonality. When we look across our fine paper business, we have, up to this big spread from input costs, have done a pretty good job of offsetting the secular decline with a growing package of category. I think it was really pressured more this year, even with the decline that we experienced in the quarter and 2% for the full year, that load and asset and it's complete, it will create a little more complexity for us and then we will have to be creative in how we manage capacity at the lowest possible cost, but there's no outstanding or eminent facility closure or machine that can be removed today, which is good. That means I've got enough volume to keep them all running.

Sorry again for my poor choice of words earlier, but that brings to my last question just on premium packaging, can you just refresh our memory again on what you're targeting the organic growth rate of that business line? John O’Donnell: Yeah. So, packaging -- premium packaging, we really view the growth rate of it to be in the low single digits. We've demonstrated for 6 years prior that a double digit growth rate and we were on that track through third quarter and ended up in the high single digits for premium packaging. Our expectation is that we have a double digit growth rate on an annual basis, it's more lumpy in its order pattern, so you lose a big piece of business or gain a big piece of business again, it can have a spike that's still, our current expectation for premium packaging, our belief is that it will continue to focus on the markets in the paper business post recovery of the input costs and not have to put so much pressure on just that premium packaging category to recover all the volume.

And ladies and gentlemen, this concludes the question-and-answer session. I’d like to turn the conference back over to Mr. McCarthy for any final remarks.

Okay. I'd like to thank everyone for your interest today and as always, please feel free reach to out to me if you have any further questions. Thank you.

And thank you, sir. Today’s conference has now concluded. We thank you all for attending today’s presentation. You may now disconnect your lines.