Bruce Zwicker INDUSTRY CONSULTANT TOP 10 U.S. FLOORING DISTRIBUTORS

RANK COMPANY LOCATION 2017 SALES (Projected) 1 Haines Glen Burnie, MD $490m 2 BPI Memphis, TN $230m 3 Belknap White Group Mansfield, MA $210m 4 All Elk Grove, IL $200m 5 Galleher Santa Fe Springs, CA $198m 6 Tri-West Santa Fe Springs, CA $168m 7 NRF Distributors Augusta, ME $159.5m 8 William M. Bird Charleston, SC $157m 9 Apollo Dist. Co. Fairfield, NJ $156m 10 FlorStar Sales Romeoville, IL $142.8m AGENDA TOPICS

• Most Important Points

• Demand

• U.S. Wood Flooring Supply

• Summary

NOTES: Information is from various sources Flooring statistics are macro, not indicative of your area Flooring statistics are directional and not precise MOST IMPORTANT POINTS • U.S. and Europe wood flooring demand growth slowed – Price and installation expensive relative to alternatives – In U.S., average discretionary income for high ticket items not grown • Wood flooring remains consumers’ aspirational flooring choice • U.S. produces less and imports more wood flooring • LVT/MLF/WPC/SPC are taking share from wood flooring • Wood flooring isn’t going away - needs to be sold and its story told WOOD FLOORING MARKET

• More than 6 Billion square feet

• Increased 5% per year since 2012

• China is 30-35% of the total world market

• North America is 25-30% of total world market

Sources: BAZ, Market Insights & Catalina Research, Other NORTH AMERICAN FLOORING • Total North American flooring market is approximately $29 Billion • U.S. Market is approximately $26.5 Billion - 90% of North America

– U.S. wood flooring is approximately $3.5 Billion – Growth rate slowing – estimates vary – perhaps – 2% to -4% – Wood flooring is approximately 13% of total U.S. flooring – Higher percentage than most countries CONSUMPTION OF COVERING PRODUCTS IN WESTERN EUROPE, 2017 Other, 3% Wood, 5%

Vinyl 15% Textile 41% Laminate 13%

Stone/Ceramic 23% Source: FEP Estimations 2018 U.S. MARKET BY PRODUCT TYPE

Laminate Other Stone 4% 1% 6% Vinyl 6%

LVT Carpet & Rugs LVT 25% growth per year. 12% Almost all of total 44% flooring growth. Ceramic 14%

Hardwood 13% U.S. WOOD GROWTH TRENDS

2018 $3.5 billion • Approx. $200 – 300 million Industrial Use (Truck beds, Railcars, etc.) • Approx. $300 – 400 million Unfinished Flooring • Approx. $2.7 billion Prefinished Flooring

Sources: BAZ, Market Insights, NWFA & Catalina Research U.S. WOOD MARKET BY END USE Commercial is small Slowing growth Maximum of 10% - 15% New Residential 20% - 30% ​ Good but slowing growth Residential Remodel 60% - 65% Also called Retail ​ Sources: NWFA, BAZ & Catalina Research U.S. WOOD GROWTH TRENDS

2002 – 2015 7% to 10% per year

2016 – 2017 2% to 5% per year

Wood flooring sales are slowing primarily due to LVT Wood is still the homeowners top choice But, wood is expensive

Sources: BAZ, Market Insights, NWFA & Catalina Research TOP U.S. RETAILERS – ALL FLOORING TYPES

Independent Dealers are losing share % of Total Retail Flooring Sales in retail/remodeling

Independent Dealers 40% Home Depot 15% Lowes 10% Floor & Décor 5% Lumber Liquidators 2% Other retailers 28% Approximately 13,000 Independent Floor Covering Dealers with approximately 17,000 store locations. 12 Sources: BAZ, Market Insights & Catalina Research TRENDS IN FLOORING

Solid wood was over 50% of the market. Engineered wood is increasing. % of Wood $ Sales % of Wood SF

Solid Wood 2018 Solid Wood 46% Engineered 43% Engineered Wood Wood 54% 57%

Sources: BAZ, NWFA & Catalina Research WOOD FLOORING PRICE TRENDS

Solid wood flooring price has increased since 2007

Engineered wood price has decreased since 2007

2007 $2.24/SF 2017 $2.05/SF

Sources: BAZ, NWFA & Catalina Research U.S. FLOORING IMPORTS & PRODUCTION

Imports are almost 50% of U.S. consumption. China is at least a third of imports. China is 50% of wood and 85% of LVT/MLF imports. 100% 80% 60% Other Imports 40% China Imports 20% U.S. Production 0%

Sources: Market Insights & US International Trade Commission U.S. WOOD FLOORING

US Wood Flooring ($ Billion) U.S. production has decreased

% of Total Imports % Year Wood Market US Production Imports US Flooring of Market

1998 $1.4 7% $1.3 $0.1 7%

2006 $2.5 10% $2.2 $0.4 15%

2009 $1.5 9% $1.0 $0.5 30%

2018 $3.1 13% $1.4 $1.6 52%

16 WOOD FLOORING MAJOR PRODUCERS

• Top Three - Armstrong, Shaw and Mohawk = $800+ mil – Includes OEM imports • Mullican, Somerset, Lumber Liquidators, Mannington, American OEM and Others = $400 - $500 mil • Industrial and Other smaller producers = $200 - $300 mil • U.S. Production is not very profitable and there is over capacity. • Manufacturers reduced production, raised prices, and sold all or part of their wood divisions WOOD & BAMBOO IMPORTS

U.S. Wood & Bamboo Flooring Imports Southeast Asia % of Import $ imports increased 2008 2014 2015 2018 (est.) China 50% 72% 70% 55% Canada 11% 8% 8% 9% Vietnam 0% 1% 2% 7% Cambodia 0% 0% 1% 7% Indonesia 2% 2% 3% 4% Thailand 1% 0% 1% 1% Brazil 20% 3% 3% 3% Other 15% 11% 12% 14% 18 MOST IMPORTANT POINTS • U.S. and Europe wood flooring demand growth slowed – Price and installation expensive relative to alternatives – In U.S., average discretionary income for high ticket items not grown • Wood flooring remains consumers’ aspirational flooring choice • U.S. produces less and imports more wood flooring • LVT/MLF/WPC/SPC are taking share from wood flooring • Wood flooring isn’t going away - needs to be sold and its story told PANEL OF INDUSTRY LEADERS

MICHAEL BRUCE CHRIS DREW ISABELLE MARTIN ZWICKER ZIZZA HASH BROSE Chris Zizza PRESIDENT & CEO C&R FLOORING Drew Hash VP SHAW INDUSTRIES Isabelle Brose MANAGING DIRECTOR FEP PANEL OF INDUSTRY LEADERS

THREE THEMES

Innovation in flooring

Promotion of wood flooring

Labor issues in wood flooring installation EUROPEAN PARQUET MARKET EUROPEAN PARQUET MARKET

• Everybody wants parquet • Still its market share remains at 5%+ • 2006 - Real Wood initiative (licenses, website) EUROPEAN PARQUET MARKET

• 5-2-7 Project – Sensitizing the European consumer to opt for parquet as THE flooring solution – 2017 - SmartBlogs – Next steps… when & why parquet falls out of the consumers’ decision journey  Optimize the sales funnel - focusing efforts on right stages, channels and communication content