PIN Wave 10 Week Results Review Returns Position and Policy

1. PIN Wave 10 Week Results ReviewReturns Position and Policy

2. Background /Opportunity / Goal Background • External: NPI position and criteria for product return requests is unclear. • Published policy beyond 100 day rule • Marketing stocking incentive policy • Exceptions • Internal: After return is received, standard process for disposition of the returned item • Prioritization • Standardization • Immediate reduction, forward looking anticipation Opportunity Statement (What Was Agreed To Last Meeting) • NPI’s returns position is unclear and lacks a standard approach to reconcile and process return requests. Opportunities exist to limit exposure, set market expectations, anticipate returns activity, and improve internal efficiencies. What Success Looks Like /Razor Sharp Goal (What Was Agreed To Last Meeting) • Create and communicate externally facing policy and position on returns criteria. • Develop a position and standard processes to settle accommodation return requests that fall outside stated policy return limits. Train internally on position and train CLMs/ASDs on processes. • Develop and implement a clear process to efficiently dispose of returned product once is returned to NP. Eliminate any current pain points. • Reduce current returns inventory by 40% in $ value. • Ensure sustainable results: returns inventory <1.5% of monthly average sales. • Develop approach to anticipating returns and slow moving inventory residing in the market.

3. Results Review / Deliverables • Returns Position and Policy • Finalized new policy statement and released to sales force • Stock guide and price book updates underway • Internal process on returns exceptions • New approach to returns exceptions have been applied to numerous requests. • Results have mitigated exposure by 40%, >$100K YTD. • Approach is documented – ASDs and CLMS have been trained. • Return inventory pile reduction • 45%, or $400K reduction in inventory value since start of PIN. • Returns processing pain points • Process changes enhancements to reduce pain points implemented or in development. • Returns anticipation and forward looking process • Developed returns anticipation model to proactively indentify potential slow moving inventory. • Recommend SPOT enhancement as automated tool.

4. New Returns Policy Accommodation Returns Policy • Above policy applies only to active branded stock products. Make products are not eligible for accommodation returns. • Products which have had a replenishment orders are not eligible for return. See appendix for stock guide and price book changes

5. Returns Inventory Pile Reduction • Since start of PIN project, approximately $800K in inventory returns has been processed and $400K in new returns have been received for a net decrease of $400K. • We continue to strive towards the goal of 1.5% of average monthly sales, or approximately $350K. We project to achieve this goal by the sustainability review.

6. Returns Pain Points and Actions Implemented • Identifying returns disposition prior to receipt of return • Disposition of all items currently in inventory have been defined by planning and is being processed accordingly. • Planning is now identifying disposition instructions on returns as they are entered into Oracle so FC knows what to do with returns prior to receiving. • Upon receipt, returns are being segregated according to planning disposition for simplified reprocessing. • Validating return items and quantities prior to receipt • Item list for returns generated prior to receiving so returns can be checked for accuracy up-front. • Current manual querying being developed into automated report. • Physical return does not match return request • Simplify freight and reconditioning fee adjustments to happen in Oracle (in development) • Quality complaint returns not handled in Oracle. • Addition of generic service items to allow entry in Oracle (in development) • Labor • Press Time • Blankets • Sorting • Claims Misc.

7. Returns Anticipation Model Purpose: • Identify potential slow moving stock items already in the market to proactively engage customers on selling opportunities and gauge returns exposure. Model: Purchase Period (User defined date range) Sell Period (Purchase Period through current) 6.5 million pounds Items with no same-location replenishment during sell period 22% 100% 78% 30 million pounds Total sales 23.5 million pounds Items with same-location replenishment during sell period Q2 2008 Purchase Period Sales All active stock sales in user defined date range Sell Period Replenishment orders after Purchase Period. Based on same-location sales

8. Returns Anticipation Crest and Linen Revision Purchase Period Sell Period 1.4 million pounds Items with no same-location replenishment during sell period 33% 100% 4.2 million pounds Total sales 67% 2.8 million pounds Items with same-location replenishment during sell period September 2008 Purchase Period Sales Active stock Crest and Linen Only Sell Period Of the 1.4 million pounds with no replenishment activity, ~200K pounds are new Crest and Linen items.

9. Returns Anticipation in SPOT • Building this functionality within SPOT will provide accessibility and automation. • Transaction level data by sold-to location is already resident within SPOT. • Drill-down feature in SPOT provides granularity • Isolate by product type: brand, weight, SKU specific • Isolate by demographics: region, market, custom market, specific sold-to location

10. Sustainability Plan • Return policy to be published in price books and stock guide – Sheila Burnett • Continue to reduce inventory pile to 1.5% of average monthly sales and maintain levels – Don Missall • Continue to oversee inventory returns processing pain points – Don Missall / Gregg Dietrich • Work with high activity returns customers – CLMs • Implement returns anticipation module in SPOT – Tom Lee • Working capital reduction program (including actions on recent marketing revisions) – next PIN wave

11. Key Learnings and Recommendations Other Key Learnings • Better understanding of how xpedx and Unisource “treat” slow moving inventory and the need for a returns program in alignment with their needs. • Coding returns within Oracle seemed to be inconsistent among the Customer Service group. This project provided the opportunity to more clearly define reason codes and reinforce with CS. • Positive experience with Finishing Center to provide resources for inventory pile reduction. Initial estimate for significant labor dollars turned out to be unnecessary. Recommendations • Many of the learnings from this PIN project dovetail nicely with the Working Capital Guarantee project in the next PIN. Some members of this team should be involved with this next PIN project. • More research should be done on high return activity customers. This information has been passed to Customer Logistics Managers. Overall process recommendations: • Positive feedback on newer format (2 week early traction, 6 week progress, 10 week results, 24 week sustainability). • Providing review presentation materials at least 2 days prior to review call would allow participants to review materials prior to call and make for a more impactful meeting.

12. Appendix

13. 2008 Returns Activity

14. 2008 Returns Activity Merchants with highest 2008 returns activity

15. Returns Position What are Accommodation Return Requests? Accommodation Returns Requests are customer requests to return inventory in new and sellable condition. Usually, an accommodation return request results because a product has not sold in the marketplace despite the customer’s efforts. There are several reasons why this may happen: • New items were purchased to support a marketing brand revision or product re-launch and did not sell in the marketplace. • Initial stocking orders from newly authorized merchants did not sell in the marketplace. • Customer purchased product and is unable to sell in the marketplace. What is NPI’s position on Accommodation Returns with customers? • It is important for NPI to have a clearly stated and simple returns policy that customers are fully aware of in order to set expectations in the marketplace. • The NPI accommodation return policy is meant to support merchants in their attempt to grow business with NPI. It is not meant to provide relief for merchants who make poor stocking decisions or display poor buying behavior. • The NPI accommodation return policy should allow customers a reasonable period of time to sell products in the marketplace. • Make products are not eligible for accommodation returns. • Any exceptions to the NPI return policy require the approval of the ASD and CLM. How does this create value for the customer and NPI? • Returns policy allows merchants with a reasonable amount of time to establish items in the marketplace and exchange them for higher velocity products. • Clearly established return periods allow merchants to gauge exposure on inventory not selling in the marketplace to set expectations and anticipate return activity internally and with NPI.

16. Returns Policy Stock Guide and Price Book Statement OLD VERBAGE: When paper is authorized for return to the mill because of incorrect specifications placed by customer, or for some other reason other than design, it is the Neenah Paper policy for the customer to pay original transportation charges to destination and transportation charges for returning to the mill, plus minimum charge of $100.00 or $20.00 per cwt., whichever is greater, for handling refinishing, repacking, etc. This procedure is based on the assumption that the returned paper is fully up to standard in every respect. Stock will not be accepted for return more than 100 days after its date of shipment from the mill. Replacement of paper will be allowed only where unusual circumstances warrant and must have prior approval of Marketing Manager. NEW PROPOSED VERBAGE: Neenah may authorize accommodation returns due to incorrect specifications placed by customer or for reasons other than design and quality. For new items and initial stocking orders, Neenah will accept returns beginning 9 months after the date of initial purchase. Return of inventory must be completed within one year of purchase and requires a replacement order of equal dollar value. In addition, the customer is responsible for the return freight charge. For all other product returns, Neenah will accept returns within 100 days from the date of purchase and require a $20 per Cwt. or $100 minimum re-stocking fee for handling, refinishing, repacking, etc. In addition, the customer is responsible for the original freight cost incurred by Neenah as well as the return freight charge. All returned paper must arrive damage-free and in saleable condition in full cartons only. This policy applies only to active branded stock products and does not pertain to special make products. In addition, products which have had replenishment orders since original purchase are not eligible for return.

17. Internal process for exceptional accommodation return requests • Do not accept return requests for: • Discontinued items • Items showing replenishment history after the initial stocking order. • Items with high sales volumes in the customer’s immediate market. • SPOT analysis can be used to determine if there is sales potential through fair-share analysis. • ABC velocity analysis can be performed for that customer’s immediate market. A items (items representing top 60% to 80% of sales) should not be returned. • Alternatives to consider: • If the customer has multiple locations in various markets, use SPOT analysis to determine if the item(s) have better velocity in one of those markets. If so, consider transferring items to another location within the customer’s network. • If the item is a slow moving item for all markets or about to be discontinued, offer customer a % discount credit to keep the inventory. The customer must discount the item to move it in the market. This should be monitored to ensure that the customer cannot come back later and request to return it again. • Avoid: • Avoid discount credits to keep the inventory if the inventory cannot be monitored through end consumption. This avoids the issue of a future return on the same item. YTD Exceptional Accommodation Returns Requests Some requests still pending Approximately $100K in returns avoidance

18. Competitive Returns Policies Competitive Returns Policies

19. Reason Code Descriptions Reason Code Descriptions

20. Reason Code Descriptions Reason Code Descriptions

21. Reason Code Descriptions Reason Code Descriptions

22. Inventory Disposition Process Inventory Disposition Process

23. Q2 2008 Returns Anticipation Model Detail

24. Q2 2008 Returns Anticipation Model Detail

25. Q2 2008 Returns Anticipation Model Detail

26. Crest and Linen Returns Anticipation Model Detail

27. Team Work Plan