1. WHAT HAS CHANGED IN CERAMIC TILE DISTRIBUTION? April 18, 2011

2. 1 The RecessionHousingCeramic Tile ConsumptionCeramic Tile DistributionThe Future

3. The Recession has strongly affected the ceramic tile market 2

4. -79% +38% Source: U.S. Department of Housing and Urban Development 3

5. With the Recession came an excessive supply of housing Existing Homes + New Homes Source: Census Bureau, NAR, BofA-Merrill Lynch Global Research 4

6. …This made housing prices go down Source: S&P/Case-Shiller Home Price Indices 5

7. In order to help the economy the Federal Reserve reduced interest rates to almost ZERO 6

8. 7 Source: Board of Governors of Federal Reserve System

9. People with savings were financially hurt 8

10. Mortgage rates are lower than ever 9 Source: Board of Governors of Federal Reserve System

11. The lowest mortgage rates in history are not enough of an incentive for consumers to buy homes 10

12. The sector that has benefited most from the weakness of new construction has been REMODELING 11

13. When people cannot afford a new home they remodel the old one 12

14. Remodeling Activity is up from 2010… 13

15. From 2006 to 2011 the ceramic tile market contracted by 39% 14 Source: Board of Governors of Federal Reserve System

16. Source: U.S. Department of Commerce -39% 15

17. Before the recession imports made up about 80% of U.S. Tile Consumption In 2011 the percentage was below 70% 16

18. Million Sq. Ft. Source: U.S. Department of Commerce -48% 17

19. The deep recession in the housing sector and the decline of ceramic tile imports contributed to changes in distribution 18

20. During the recession the number of tile Contractors, Dealers, and Distributors’ outlets declined 19

21. Source: D.Grosser & Associates,ltd in 2008 in 2011 - 23.5% 20

22. 1,713 in 2008 1,353 in 2011 Source: D.Grosser & Associates,ltd - 21.0% 21

23. Source: D.Grosser & Associates,ltd 22 States20082011% Change 2008-2011 California3,2052,600-18.9% Florida2,4591,796-27.0% Texas1,5531,174-24.4% New York874721-17.5% North Carolina771560-27.4% New Jersey628527-16.1% Arizona569389-31.6% Georgia589391-33.6% South Carolina314218-30.6% Other10,7638,254-23.3% U.S.A.21,72516,630-23.5%

24. Source: D.Grosser & Associates,ltd 23 States20082011% Change 2008-2011 California307255-16.9% Florida213132-38.0% Texas13699-27.2% New Jersey7781+5.2% New York9261-33.7% Arizona6241-33.9% Georgia5236-30.8% North Carolina3933-15.4% South Carolina2026+30.0% Other715589-17.6% U.S.A.1,7131,353-21.0%

25. Results of a survey conducted in January 2011: Florida, California, Texas, New York, N. Carolina, and S. Carolina 24

26. 50% of Distributors said sales were flat or down Two distributors reported 50% increase in sales Sales were down because many retail stores went out of business Most sales were for remodeling projects 25

27. Some increases in sales (5% - 25%) But also decreases (5% - 50%) Most sales are for remodeling Some new non residential construction 26

28. A majority of distributors reported sales increases Some increase in non residential construction Good market for non residential remodeling 27

29. Most distributors reported flat or lower sales Very little new construction Most sales to remodeling 28

30. Some increases in sales But also decreases Mostly remodeling Little new construction 29

31. Home Centers 20082011 % Change 2008-2011 2,0522,195+7.0% 1,6471,797+9.1% 261262+0.4% Source: D.Grosser & Associates,ltd 30

32. 200820102011 % Change 2008-2011 Home Centers 6,9866,8027,226+3.4% Tile Retailers and Contractors 21,72516,80516,630-23.5% Tile Distributors 1,7131,3821,353-21.0% Source: D.Grosser & Associates,ltd 31

33. 20082011 % Change 2008-2011 Carpet Rug Retailers 25,72020,460-20.5% Carpet Rug Distributors 1,5401,286-16.5% Source: D.Grosser & Associates,ltd 32

34. The U.S. Dollar lost value vs. the Euro Imports lost market share due to a weak Dollar U.S. manufacturing gained market share 33

35. There are 6 Italian owned tile plants in the U.S.: Marazzi (3), Florim, Iris-Stonepeak, and Panaria-Florida Tile 34

36. These plants make up about 50% of U.S. ceramic tile production These companies invested in the U.S. due mainly to weakness of the Dollar 35

37. 36 Sector2006 Percentage2011 Percentage New Residential Construction 40%20% Residential Improvement 29%43% Non-Residential Cons./Improvement 31%37% TOTAL 100%

38. Imports lost market shareU.S. Manufacturers gained market shareHome Centers gained market shareRetailers and Distributors lost market share 37

39. U.S. Tile Manufacturers Production Foreign Tile Manufacturers U.S. Manufacturers’ Showrroms Tile Distributors FlooringDistributors Home Centers Tile Retailers Flooring Retailers New Residential Construction20% Residential Improvement 43% Non-Residential Cons./Improvement 37% Wholesale Retail Final Destination 38

40. 39

41. Those who are still in business can look with optimism to the future Many competitors have closed shopThere is increasing demand for remodelingThere is some new business in multi-housingNon residential project are increasingHousing is slowly picking up 40

42. Donato Grosser D. Grosser & Associates, Ltd. 11 Broadway, Suite 630 New York, NY 10004 Email: d@grosserconsulting.com Questions?