U.S. Luxury Vinyl Tile Market Briefing

for the Resilient Floor Covering Institiute

May 9, 2018

Provided by: Santo Torcivia, President Market Insights LLC

Reading, PA

610-927-2299

storcivia@marketinsightstorcivia.com

San

Market Insights LLC

Briefing Topics •  Founder & Company Background •  General Flooring Industry Trends •  Luxury Vinyl Tile (LVT)

Market Insights LLC

Background

Market Insights LLC

Founders Background Founder: Santo Torcivia, President, Market Insights LLC

•  Graduated Temple Univ.: BA Economics •  1973 to 1981: American Bank & Trust; lastly

as VP Marketing •  1981 to 1997: Mannington Mills; VP Business

Analysis & Planning •  1997 to present; Pres. Market Insights LLC •  Contributing Editor & Economist- Floor

Focus magazine •  Expert Witness in US Federal Court •  BOD charitable & faith-based organizations

Market Insights LLC

Company Products •  Market Monitor Report •  U.S. FLOOReport •  Canada FLOOReport •  County Market Report •  Speaker & Marketing Consultant •  Custom research

•  Penetration reports •  CARE state recycling reports •  Market expansion analysis Market Insights LLC

Clients •  Flooring manufacturers •  Raw material suppliers to flooring industry •  Flooring adhesive & accessory producers •  Associations •  Distributors •  Retailers & Retail/Contract Groups •  Investment Banks •  Logistic Firms •  Floor Focus magazine

Market Insights LLC

General Flooring Industry Trends

Market Insights LLC

Imports Share of U.S. Flooring

Market Insights LLC

Note: Figures shown are imports share of total product type consumption per yearSources:U.S.CensusBureau,IHSMarkit

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Total Fl. Resil. Fl. Lamin. Fl.Wood Fl. Cer. Tile Carpet & Rugs

Imports Dominate U.S. Flooring & China Dominates Imports

Market Insights LLC

Source:U.S.ITC,MarketInsightsLLCresearch

0% 20% 40% 60% 80% 100%

Total

Resilient Fl.

Laminate Fl.

Wood Fl.

Ceramic Tile

Carpet & Rugs

Rubber Fl.

% of Total

% Imports/Total% China/Imports

Flooring Sales by Channel- 2017

Market Insights LLC

Source:U.S.FLOOReport-2018Edition

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All OtherContractorsOther RetailersHome CentersFlooring Stores

Flooring Use in U.S. Buildings in 2015

Market Insights LLC

Total Resilient Laminate Wood CeramicBuilding Types Flooring Flooring Floors Floors Fl. Tile Carpet

Health Care 9% 17% 7% 3% 8% 6%Education & Institutional 30% 43% 20% 52% 43% 22%Retail 29% 17% 49% 28% 31% 34%Offices 22% 20% 11% 17% 8% 25%Lodgings 10% 3% 13% 1% 9% 14% Total- 100% 100% 100% 100% 100% 100%

Health Care 100% 50% 1.1% 0.4% 10% 38%Education & Institutional 100% 37% 0.9% 2.1% 15% 44%Retail 100% 16% 2.1% 1.1% 11% 70%Offices 100% 24% 0.7% 1.0% 4% 70%Lodgings 100% 8% 1.6% 0.1% 9% 81% Total- 100% 26% 1% 1% 11% 61%

Total Quantity Market (SF, MM) 4,065 1,066 52 49 433 2,465

Building Type Shares per Product Type (percents add down)

Product Type Shares per Building Type (percents add across)

Market Shifting to Hard Surface Flooring

Market Insights LLC

Source:U.S.FLOOReport-2018Edition

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Total Flooring $ % Soft Surface % Area Rugs % Hard Surface

Laminate Flooring Only Hard Surface Laggard

Market Insights LLC

Source:U.S.FLOOReport-2018Edition

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Hard Surface $ % Ceramic Tile % Laminate Fl.% Wood Fl. % Resilient Fl.

LVT Carrying Resilient Flooring

Market Insights LLC

Source:U.S.FLOOReport-2018Edition

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Total Resilient Fl. $ % Resil. Sheet % LVT % VCT

U.S. Population Moving South & West favors tile & wood looks

•  Sandy soil •  Mediterranean/ Spanish architecture •  Growing Latino & Asian populations •  More tract housing & apartments •  Generally warmer climate= outdoor living--

brings outside to inside •  Commercial fashion follows residential:

lodgings, retail, education, institutional

Market Insights LLC

Market Insights LLC

% Change of states not shown: Alaska= 20.2% & Hawaii= 21.0%Total U.S. Population % Change= 16.0%

State Percent Change in U.S. Total Population 2000 to 2017

Recent Flooring Trends Conclusions

•  Population shift favors hard surface flooring versus soft surface- LVT & ceramic primarily

•  LVT attributes favor the product: –  Competitive price –  Attractive styling- wood look, boards, etc. –  Easy to install –  Durable & quiet

•  Market moving slowly to sustainability (maximum price premium= <10%)

•  Slow online sales growth (<5%)

Market Insights LLC

Luxury Vinyl Tile

Market Insights LLC

2 Basic Types of LVT: Flexible & Rigid

–  Flexible: Wearlayer over printed deco sheet with vinyl carrier & backing

Rigid/ Non-WPC: Wearlayer over printed deco sheet with solid foam or polymer core/backing

Rigid/ WPC: Wearlayer over printed deco sheet with wood polymer composite core & backing, moisture resistant

Market Insights LLC

LVT U.S. Plant Investments

Market Insights LLC

Brand/ Manufacturer Acquisition Amount(Headquarters Nation) Plant Location Notes* Amount Invested Notes/Remarks

($, MM) ($, MM)Amtico/ Mannington (US) Madison, GA (*2/) 130 50 50% of sales in USArmstrong (US) Lancaster, PA N/A 41 Resd'l LVT

Kankakee, IL N/A 15 Est., Comm'l LVTCongoleum (US) Trenton, NJ (*1/) N/A 40 Est., over 10 yrs.+FloorFolio (US) Edison, NJ* N/A 15 Est.Gemtec (US) New York (Brooklyn), NY (*1/) N/A 10 Est., over 10 yrs.+IVC/ Mohawk (US) Dalton, GA (*3/) N/A 80 NOX Corp. (South Korea) Fostoria, OH N/A 35 Est.Shaw (US) Ringgold, GA N/A 100 Tarkett (Fr.) Florence, AL (*4/) 25 25

Totals- 90 411 =(B) =(A)= (50% x $130MM + $25 MM)

Total Investment (adjusted acquisition price & investment)= 501 =(A) + (B) N/A =not applicableSources: Company reports & web sites, FloorDaily.net, and Market Insights LLC

U.S. LVT Sales by Type- 2017

Market Insights LLC

Source:MarketInsightsLLCresearch,Mar.2018

Non-Rigid30%

Rigid SPC15%

Rigid WPC37%

Other18%

U.S. LVT Market

Market Insights LLC

Sources:U.S.InternationalTradeCommission,U.S.FLOOReport-2018Edition

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ile Im

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LVT % Imports/Total Resil. Tile

U.S. LVT & Resilient Tile Imports by Nation of Origin FY 2017

Market Insights LLC

Total Imports Value FY 2017 ($, MM @ landed duty value)= $2.2 Bn.Note: Imports shown include LVT and other resilient tilesSource:U.S.InternationalTradeCommission

China, 87%

Korea, 8%

Taiwan, 2%

All Others, 3%

U.S. LVT Market is Heavily Private Labeled- 2017

Market Insights LLC

Total Market in 2017= $2.1 Bn. At mill sell price*Note: Domestic brands have U.S. production but may import private label LVT;

private labels have no U.S. productionSource:MarketInsightsLLCestimate

Total Private Label, 54%

Domestic Brand*, 46%

Wood Flooring Most Desired Flooring by Consumers

Market Insights LLC

Wood Advantages: - Adds value to home - Most attractive - Easy Maintenance

% Shown= % Ranking Product First out of 5 placesBase: n= 1,059 consumersSource: Floor Focus consumer research, June 2014

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44%

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Consumers Rank Ordering of Flooring Types by Desirability- 2014

Would Not Consider#5 (Fifth)#4 (Fourth)#3 (Third)#2 (Second)#1 (First)

Wood Flooring Looks Dominate Hard Surface Floor Sales- 2017

Market Insights LLC

Source: Market Insights LLC research, 2018

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Resilient Sheet Luxury Vinyl Tile Ceramic Tile LaminateFlooring

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U.S. Wood-Look Flooring Market FY 2017= $6.3 Bn.

Market Insights LLC

Total Wood-Look Flooring Market FY 2017 ($ @ mill sell price)= $6.3 bn.

Resilient Sheet2%

Luxury Vinyl Tile26%

Ceramic Tile7%

Laminate Flooring

11%

Wood Flooring54%

Wood-Looks Expanding Residential Market for Products

Market Insights LLC

% of Resilient Laminate Wood CeramicRoom Product Installed Purchs. Sheet LVT Floors Floors Flr. Tile Carpet

Kitchen 10% 30% 21% 22% 8% 18% 1% Bathroom 19% 46% 11% 19% 6% 23% 3%Foyer/ Entry/ Hall 11% 4% 16% 13% 19% 14% 13% Subtotal/ Wet Areas 41% 80% 48% 53% 33% 55% 16% Dining Room 8% 2% 15% 7% 13% 11% 10% Living or Family Room 10% 3% 24% 9% 16% 21% 13% Bedroom 28% 5% 4% 22% 33% 8% 41% All Other Rooms 14% 10% 9% 9% 5% 5% 20%

Total- 100% 100% 100% 100% 100% 100% 100%Source: Market Insights LLC research

Room Shares by Product FY 2017

Residential Flooring Retail Sales by Price FY 2017

Market Insights LLC

Total Resilient Laminate Wood CeramicRetail Price Points Flooring Flooring LVT Floors Floors Flr. Tile Carpet

Under $2.00/SF 52% 59% 16% 30% 2% 33% 72%$2.00 to $2.99/SF 19% 15% 22% 38% 7% 26% 16%$3.00 to $3.99/SF 14% 12% 28% 22% 18% 21% 8%$4.00 to $4.99/SF 8% 9% 18% 8% 30% 9% 2%$5.00 to $5.99/SF 5% 5% 12% 2% 27% 6% 1%$6.00/SF or more 3% 0% 4% 0% 16% 5% 1% Total- 100% 100% 100% 100% 100% 100% 100%Avg. Retail Price ($/SF) $2.31 $2.07 $3.46 $2.49 $4.86 $2.80 $1.62Installed Retail Cost ($/SF) $3.32 $4.96 $4.24 $7.21 $5.80 $2.87Source: Market Insights LLC research

Average Retail Pricing FY 2017

Implications of New Wood Look Floorings in Residential Market

•  New realistic wood simulations allowing LVT & ceramic tile to expand beyond wet areas

•  LVT & ceramic tile threaten wood flooring, carpet, & laminate flooring in public spaces

•  Simulations are realistic: look, boards, etc. •  LVT & ceramic tile durable and quiet •  LVT has low product & installed cost •  Real wood flooring will always appeal to

fashion conscious/upscale consumers

Market Insights LLC

LVT Installations by Market Segment FY 2017

Market Insights LLC

Source:U.S.FLOOReport-2018Edition(MarketInsightsLLC)

ResidentialReplace.70%

NewResidential

9%

HealthCare3%

Educ. &Institutional

2%

Retail7%

Offices7%

Lodgings2%

LUXURY VINYL TILE

Residential

Lodgings

LVT Conclusions •  Styling positive- Wood look, Boards, etc. •  Easy installation- snap, floating, or full-glue •  Pricing is competitive •  Competitive alternative to wood flooring •  Durability & moisture resistance, quiet •  Many applications- residential or commercial •  Logistics favor big boxes- in boxes on skids •  Competitive situation = low mill prices

=attractive retail margins •  Private labels= cost disadvantage •  Near Perfect Product

Market Insights LLC

Questions & Comments

Market Insights LLC