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Promotional Environment

Promotional Environment. Aggressive Competitive Environment AMWD Lowered Price Position Clutter and complexity have increased Mixed messages from competitors on strategy Home Centers driving additional promotions Cost of doing business Participating in additional incentives

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Promotional Environment

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  1. Promotional Environment Aggressive Competitive Environment • AMWD Lowered Price Position • Clutter and complexity have increased • Mixed messages from competitors on strategy • Home Centers driving additional promotions • Cost of doing business • Participating in additional incentives • Designers pushing “best value” • Selling what is easiest to close • Multi-layered promotions KraftMaid Activity • Home Centers • Promotions in place almost constantly • Spikes at end of promo period • Extreme % off on select door styles mid-March through April (gained 3 share points at THD) • Dealers • Lower level of promotions in January compared to Home Centers • Spikes at end of promo period • Planning promotions further out with some flexibility to adjust Draft - Confidential Attorney-Client Privileged

  2. Promotional Environment Promotions drive volume – must pay to play Draft - Confidential Attorney-Client Privileged

  3. Promotional Environment Financial Impact of Promotions • Revenue during non-promotional periods is extremely depressed • Some level of participation is required • Increased revenue penalty during non-promotional periods • Extreme levels of promotion are dilutive • Door style promotion gained $4.7 million in revenue with an impact of ($3.4) million to contribution margin Need to match competition, penalty to “lead the way” 600bp decline in CBM for doorstyle promotion period Other Impacts – Actively working to improve coordination and limit impacts • Efficiency - Operations and Customer Care dealing with massive demand spikes during promotional period followed by troughs afterwards • Stock Outs – Shortages of decorative hardware and plywood due specific promotions • Lead Time – Uneven demand patterns creating swings in lead time Draft - Confidential Attorney-Client Privileged

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