Branches of the Future (BOTF)

1. KPI’s – How did we get here? Branches of the Future (BOTF) • The centralization and reengineering of inside sales or customer support teams to enhance the FOCUS on our customers and business segments • Clearly redefining the function and or role of satellites/branches in the future to FOCUS on our customers and business segments • The output of this enhanced FOCUS will drive sales, profitability, and efficiency • It is NOT a phone system – But it is supported by VOIP technology

2. What do the future branches look like? • We have flags in the ground for a reason • Not all branches are the same Hub, Main, Local, Xpress – definition is key (see slide) • Counters are a key focus in most every market • Showrooms – destination or attached - a growing billion dollar business • Logistical needs vary by market branch size • In a perfect world – the focus on revenue and GP through bricks in mortar will not be the key to success • Measuring customer penetration, customer facing activities, and logistical flow through will become the new KPI’s

3. Branch definitions • Hub– The workhorse for the branch, inventory, redistribution, main distribution arm • Main – Extension of the hub, delivery capabilities • Local – Immediate service provider, limited delivery • Xpress – Typically counter only, no delivery

4. Location Level KPI’s – FY2014 Plan for FY2014: • Eliminate location level budgets, as measurements to budget were incenting bad behavior within a logon • Many GM’s were establishing Sales Goals to Budget for Satellite Managers • Compliance with Facilities Maintenance Sales Reporting • Use our standard location P&L (no budget info) and supplement that with KPI’s (“interim step”) • Focus KPI’s on Sales, Margin, Productivity and some customer service type metrics • The KPI’s are focused on Location Level measurements and not Logon Level • Introduction of the Concept of “Throughput” • Current Location Level KPI’s were limited to information that already existed or we could easily obtain

5. Location Level KPI’s – FY2015 Plan for FY2015: • There is a Larger Reporting and Analytics project (part of STEP) which kicks off in October. • New and improved Management Reporting • Will address both Logon (BU) and Location Level Reporting • Incorporate new KPI’s that will need to be developed • Will Focus on How we view Sales – Many different ways • “Ship to Zip” – Future vision for measuring market penetration, market share, etc. • “Sales by customer” / “Market share by customer” – Lines up with sales management reporting and how we will measure our Sales Managers • “Sales by Selling Location” / “Sales by Shipping Location” • Throughput Measurement

6. Location Level KPI’s – FY2015 Other Potential Financial KPI’s • Counter, Showroom, Direct – Leads us into larger channel profitability work • With proper job codes from HR, could match labor costs up to channel and throughput – Counter labor with counter sales; SR labor with SR sales; throughput labor (drivers, warehouse, etc.) with throughput • GM$ per counter ticket; GM$ per showroom order / ticket; GM per sq foot • Other “retail type” measurements being worked with Sam Rose / Henry Wood and Deloitte (STEP consultants) Other Potential Non-Financial KPI’s • Ecommerce Sales % of total sales and YOY Growth (selling location) • Self Service Events and YOY Growth (logon measurement only) • Fill Rate • Price Matrix Utilization (selling location) • BPR Customer Service • Credit Memos % of total gross invoices (customer service related CM’s)

7. KPI Reports • Currently being produced out of PeopleSoft Financials • Typically will not be available until 10th – 15th of the month • District Controllers will move to Folders with other month end reports • Major Categories: Sales, Throughput, Gross Margin, Labor, Other Expense, Non-Financial • Displays YTD, Current Month and trailing 5 months • Many calculations are based on “Year Over Year” (YOY) growth • All YOY Calculations based on SPWD (sales per working day) or billing days • Reports will print for all locations • Ignore Admins, Revenue Centers, OUCC’s, Ghost warehouses, etc. • Overall BU Reports available for comparison purposes

8. KPI Reports - Sales • Total Sales Growth – YOY Comparison • Channel Breakdown – YOY Comparison • Counter, Direct, Showroom (per STATs/SRI) • Other Sales (Net Sales less Counter, Direct and Showroom) • Sales $ per Ticket • Counter and Showroom

9. KPI Reports - Throughput • Throughput Definition • Movement of product out the door • Valued at Average Cost, not Sales (includes misc cost) • Includes External Sales, I/C Sales and I/B Transfer transactions • Excludes Directs, BO orders, and Credit Memos • Detailed Report available in Cognos to support • KPI Components • Total Throughput dollars • YOY Throughput growth

10. KPI Reports – Gross Margins • Provides Gross Margin percentages for Total Gross Profit and by Channel • Counter, Direct, Showroom • Other (Total Gross Profit less Counter, Direct and Showroom) • Gross Profit Growth • Total and by Channel • YOY comparisons • Gross Profit $ per Ticket • Counter and Showroom

11. KPI Reports - Labor • Total Labor Growth % - YOY • Labor Productivity KPI’s • Sales Growth % Less Labor Growth % • Margin Growth % Less Labor Growth % • Throughput Growth % Less Labor Growth % • Channel Breakdowns of Labor Costs – Not available yet • Counter - Costs of Counter associates • Showroom - Costs of Showroom associates • Throughput – Costs of Warehouse and Delivery associates • Measure Labor Growth % YOY • Total Headcount and Change from prior year • Includes both Permanent and Temporary Headcount • Temporary Headcount is calculated • Total Temp Labor Costs divided by average monthly cost of a temp

12. KPI Reports – Other Expenses • Total Other Expense Growth % YOY • Channel Breakdown - YOY • Showroom – Includes the following three GL accounts • GL 7153 – Depreciation Showroom Improvement • GL 7456 – Showroom Expense • GL 7820 – Showroom Displays Not Capitalized • Only displaying YTD info; Monthly info gets skewed • Throughput • Total Infrastructure and Distribution Expenses • No measurement for Counter Other Costs

13. KPI Reports – Non-Financial • Ecommerce Sales • Definition • Expressed as percent of Total Sales • Sales Growth % YOY • Fill Rate (Actual) • Managed Price Usage – Percent • Usage of Standard Price Matrix and Contract Overrides • Customer Service (BPR) • Lines shipped complete • Excludes cribs, specials, temps, directs, backorders and tickets with deposit history