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SPEAKERS

Chris KingEditor

Roofing Contractor

Bob TafaroPresident & CEO

GAF Materials Corp

Paul BromfieldVice President, Marketing

GAF Materials Corp

Tom WattsAssociate Editor

Roofing Contractor

Archivewww.roofingcontractor.com

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BACKGROUND

For the third year in a row, Roofing Contractor and BNP Media Market Research teamed up to conduct a

research study to get the contractors’ perspective on the roofing industry. The State of the Industry survey,

sponsored, sponsored by GAF Materials Corporation, was designed to find out how contractors fared in

2010 and how they expect their businesses to perform this year and beyond.

PURPOSE AND OBJECTIVES

Specific research objectives of the State of the Industry study included:

• Measuring sales volumes in 2010, 2011 and over the next three years.

• Determining trends among different product categories.

• Finding out the percentage of contractors using the Internet, websites, smart phones and social media

for business purposes.

• Indentifying key problems contractors currently face.

Study Overview

Study Results

Other

6%

Manager/

Supervisor

26%

Senior Executive

(Owner/President/

CEO/VP)

68%

Which one of the following best describes your job title?

Job Title

Estimator (4) Administrative (3) Sales (2) Foreman

33%

17%

5%

12%

6%

7%

20%

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

21 to 40 Employees

11 to 20 Employees

7 to 10 Employees

5 to 6 Employees

3 to 4 Employees

1 to 2 Employees

In total, how many full time people does your company employ?

Number of Full Time Employees

Mean = 35 EmployeesMore than 40 Employees

24%

19%

7%

9%

4%

37%

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

$5 million or more

$500,000 to $999,000

$250,000 to $499,999

$100,000 to $249,000

Less than $100,000

Roughly, what were your gross annual sales for 2010?

2010 Gross Annual Sales

Mean = $4,920,355

$1 million to $4.9 million

What percentage of your business revenue comes from the following?

Business Revenue Sources

33%30%

13%

10% 9%6%

0%

10%

20%

30%

40%

50%

CommercialReplacement

Residential Replacement

CommercialRepair

CommercialNew Construction

ResidentialNew Construction

ResidentialRepair

-10%

-12%

-22%-19%

10%

27%

18%

60%

48%

32%

19%

10%

8%

-2%

-4%

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

2010 Compared to 2009

1. Compared to 2009, do you expect your 2010 total annual sales volume to…?

2. Thinking ahead to 2011, how do you expect your 2011 total annual sales volume to do compared to 2010?

3. Over the next three years, do you expect your company’s total sales volume to…?

Total Annual Sales Volume

Decrease Greatly Decrease Slightly Remain the Same Increase Slightly Increase Greatly

In the next 3 years

In the next 12 months

-20%

-23%

-12%

-7%

-15%

-19%

-18%

-23%

-17%

-14%

-9%

-9%

-7%

-6%

-9%

50%

42%

55%

60%

39%

40%

32%

53%

34%

20%

13%

14%

11%

14%

27%

29%

30%

26%

32%

40%

5%

5%

6%

6%

8%

10%

7%

10%

8%

-7%

-14%

-16%

-15%

-13%

1%

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

Have your sales for each of the following products increased, remained the same or decreased in 2010…?

Change in Product Sales Over Past 12 Months

Decrease Greatly Decrease Slightly Remain the Same Increase Slightly Increase Greatly

Mean / n=

Single-Ply Roofing 3.22 / 237

Metal Roofing 3.14 / 219

Cool Roof Coatings 3.14 / 195

Steep-Slope Asphalt 2.96 / 220

Garden Roofing 2.92 / 122

Low-Slope Asphalt 2.71 / 224

Slate 2.74 / 150

Concrete Tile 2.64 / 138

Solar 3.20 / 132

Overall Sales 3.15 / 261

-13%

-14%

-16%

-6%

-11%

-8%

-6%

-10%

-8%

-6%

62%

54%

40%

48%

38%

48%

37%

37%

31%

22%

14%

24%

31%

29%

36%

32%

40%

41%

47%

56%

5%

6%

9%

12%

11%

12%

13%

9%

-4%

-2%-7%

-4%

-6%

-3%

-3%

-11%

-9%

-10%

1%

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

In 2011, do you think product sales for each of the following categories will increase, remained the same or decrease?

Expected Change in Product Sales for 2011

Decrease Greatly Decrease Slightly Remain the Same Increase Slightly Increase Greatly

Mean / n=

Single-Ply Roofing 3.61 / 238

Metal Roofing 3.45 / 220

Cool Roof Coatings 3.49 / 201

Steep-Slope Asphalt 3.31 / 218

Garden Roofing 3.15 / 128

Low-Slope Asphalt 3.10 / 227

Slate 2.83 / 151

Concrete Tile 2.91 / 140

Solar 3.39 / 143

Overall Sales 3.59 / 258

Do you have access to the Internet at work?

Internet Access at Work

Yes

97%

No

3%

76%

22%

<1% 2%

0%

20%

40%

60%

80%

100%

More than

once a day

Daily Once a

week

Less than

once a

week

Yesresponses

How often do you access the Internet at work?

1%

1%

6%

14%

78%

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

Other

Which search engine do you prefer?

Preferred Search Engine

Other Mentions: Dogpile Manufacturer

Google (www.google.com)

Yahoo (www.yahoo.com)

Bing (www.bing.com)

YouTube (www.YouTube.com)

Does your company have a website?

Company Website

Yes

80%

No

20%

Who designs, builds, and manages your website?

Website Manager/Features

2%

8%

30%

61%

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

Other

In-house

Which of the following does your website feature? (Multiple response allowed)

10%

8%

19%

20%

63%

93%

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

Other

Relative or friend

Professional Web hosting/design service

―Contact us‖ online form for requesting service or estimates

Links to roofing manufacturers websites

Video demonstrations of your services

Introduction video

Page One optimized for Smartphones

Other Mentions: Built by a professional company managed in house CEO In-house with professional webhosting and design assistance Self

Other Mentions: Project photos/descriptions (7) Company overview (2) Angie’s list Counter Customer testimonials Insurance contact information, warnings, deals Links to associates Links to organizations Product information References Video

When was the last significant update of your website?

Website Update/Annual Cost

What is your annual cost for your website (including “search engine optimization” costs)?

21%

20%

13%

13%

34%

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

Less than $500

$501 to $999

$1,000 to $1,499

$1,500 to $2,499

$2,500 or More

Less than one

year ago

70%

More than one

year ago

25%

Never

5%

Mean = $1,634

Which method(s) do you access to the Internet for business

purposes? (Multiple response allowed)

Internet Access Method/Mobile Device Used for Business Purposes

31%

15%13%

19%22%

0%

10%

20%

30%

40%

50%

Blackberry Droid iPhone Other None

Which mobile device do you use for business purposes?

Personal homecomputer/laptop

Mobile device/ Blackberry/Smartphone

12%

11%

43%

90%

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

Netbook/iPad

OtherOther Mentions: Business computer (29) iPod (2)

Other Mentions: Cell phone (36) Smartphone (4) Laptop (3) Windows mobile phone (2) Epic

Evo iTouch, iPod Nextel radio phones Omnia II Palm pre

Do you send and receive text messages between your office and: (Multiple response allowed)

Office Text Messaging Usage

62%

46% 43%

34%

0%

20%

40%

60%

80%

100%

Your employees Your customers Your vendors Do not send or

receive text

messages

48%

1%

2%

3%

5%

6%

10%

11%

13%

25%

30%

5%

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

Other

DIGG (Collaboration Tool)

Flickr (Multimedia Tool)

Wikipedia (Collaboration Tool)

MySpace (Social Network)

Plaxo (Social Network)

Twitter (Micro Blogs)

Blogs

YouTube (Multimedia Tool)

LinkedIn (Social Network)

Facebook (Social Network)

Which of the following social media websites do you use for business purposes? (Multiple response allowed)

Social Media Website Usage

Other Mentions: Company website (2) Yellow book (2) Emails Gmail Google KSL Manufacturers and suppliers Personal site for bookkeeping Roofer’s coffee shop

I do not use the social media sites for business purposes

How often do you log into social media websites (blogs/ micro blogs/social networks/collaboration tools/multimedia tools) for business purposes?

Social Media Website Frequency of Usage/Time Spent

More than once

a day

16%Never

10%

Less than once

a week

28%Once

a week

13%

Daily

25%

How much time do you spend on blogs/micro blogs /social networks/collaboration tools/multimedia tools?

Less than 30

minutes

75%

More than one

hour

3%30 to 60

minutes

22%

-7%

-7%

-5%

-5%

23%

34%

28%

25%

15%

15%

13%

30%

25%

35%

27%

30%

27%

22%

30%

27%

38%

46%

49%

55%

-14%

-6%

-4%

-2%

-3%

-5%

-5%

-5%

-5%

-5%

28%

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

Thinking about 2011 and the challenges roofing contractors will face, review each category below. Rate each category using

a five point agreement scale where 1 is Completely Disagree and 5 is Completely Agree.

Expected Challenges for Roofing Contractors in 2011

Completely Disagree Somewhat Disagree Neutral Somewhat Agree Completely Agree

Mean

Weak economy 4.09

Insurance/healthcare costs 4.11

Increased material costs 3.78

Cash flow/financing 3.70

Finding qualified workers 3.63

Government intervention/regulation 3.87

Lowball pricing/bidding wars 4.18

24

Taking The Lead In

Uncertain Times

Bob Tafaro Chief Executive Officerbtafaro@gaf.com

Paul BromfieldSenior Vice President, Marketingpbromfield@gaf.com

Taking The Lead In Uncertain Times

Today’s Agenda

2010 – Year In Review

2011 – Anticipated Directions

Key Opportunities

25

2010 – Year In Review

Key Highlights We Will Review

Generally soft year for volume:

- Strong residential start weakened in back half of year as

macro trends (home sales, inventory levels, etc.)

- Commercial was improved over 2009, but still well below

historical averages

Within a relatively stable market, some sectors are performing well

- Increased TPO penetration in Single Ply market. Asphaltic membrane systems still growing

- ISO more important in roofing systems

- Solar: Small but growing

26

Volume Trends

27

Commercial experienced slight growth throughout the yearStrong start became a disappointing second half for residential volume

Source: Company estimates

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Jan feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

tho

usa

nd

s

- 26%

2010 Home Sales (New & Existing)

Source: U.S. Bureau of the Census

Home sales slumped post home buyer tax credit, intensifying pressures on volume 28

Housing Starts

Source: U.S. Bureau of the Census

Housing starts stable but well below historical average

-

500

1,000

1,500

2,000

2,500

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

tho

usa

nd

s

1990-2010 Average Housing Starts : 1.38 million

29

Distribution and Efficiency Gains

Source: U.S. Bureau of the Census

2001-2010 ratio average: 1.32

Business has become more efficient with inventories –Roofing included

30

Increased TPO Penetration

31

TPO increasing share of single ply market

Source: Company estimates

ISO Growing Importance in Systems

32

Minimum Insulation by Weather Zone

Higher insulation standards will continue to increase

ISO usage in systems

Source: PIMA

Solar – Small But Growing

Source, SEIA

69% CAGR since 2001

2009 equates to approximately 35,000 installs compared to approximately 6MM roofs installed.

33

2011 Anticipated Directions

Key Highlights We Will Review

Raw material uncertainty and cost pressures, compounded by increased inflation expectations

Residential stable or likely to experience modest growth, although pent-up demand will eventually need to be met

Commercial stable, slight growth off a low base

Capacity balanced—plant mothballing now, new capacity additions some years off

Some sectors continue to prosper (e.g., TPO, solar)34

Crude Oil & Asphalt

Increasing pressure on asphalt costs, as well as supply risksSource: Company data

35

Other Key Materials

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4

cent

s/lb

Polypropylene Contract Price

Polymer prices have been increasing, putting pressure on TPO, PVC, other plastic based materials

Source: Chemidata

36

Projected Inflation

Inflation expectations increasing

0.00%

0.50%

1.00%

1.50%

2.00%

2009 2010 2011

Average Core Inflation

Source: Federal Reserve Open CommitteeJan 2011

37

Pent Up Remodeling Demand

38

Joint Center for Housing Studies sees opportunity for increased remodeling spend and indicate pent up demand from projects delayed over past few years

Source: JCHS

New Home Inventory

8.0 8.0

7.1

6.3

9.2

8.2

8.99.1

7.6

8.68.4

6.9

5

6

7

8

9

10

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

New

Ho

me

Mo

nth

's S

up

ply

6 month Supply considered healthy

Source: U.S. Bureau of the Census

Existing home inventory will limit construction

39

Housing Starts

40

NAHB expectation of housing starts flat for first half of year, possible improvement in second half

Source: NAHB

Non-Residential Building Construction

41

Commercial construction: slight growth from a low base

Source: McGraw Hill

- 54%

+ 8%

More Solar Growth Expected

Solar expected to continue strong upward trend (Roofing industry is approximately $30 billion total market)

42

Key Opportunities

Key Highlights We Will Review

Business Fundamentals Remain The Same

With Some Key Points Of Emphasis:

•Trend to Performance & Aesthetics

•Increased Sustainability

•Technology

43

Business Fundamentals Remain The Same

44

Building Relationships… with customers, employees, distributors, and manufacturers

Quality… workmanship and accurate estimating are essential

Upsell… to higher value products, more profit from every job

Focus On… strengthening your position in your market

Work On… improving customer relationships, enhancing quality - Be innovative, understand and control your costs!

Demonstrate Value

Trend to Performance & Aesthetics

• Industry residential warranty upgrades

- Require that the industry delivers on its promise of quality

- Appearance is increasingly important in decision process

• Research shows that homeowners increasingly recognize the importance of shingle style

- 84% said the specific shape and style of the shingle was important or very important to their shingle purchase

• Commercial systems are being designed for the overall building use, with a variety of possible uses for the roof space including Solar and TPO

45

Priorities for Contractors in Age of Aesthetics

- Educate homeowners on color and cut choices

- Provide affordable luxury options

- Incorporate designer shingles in every proposal,

show samples

- ―Show them the money‖ – Curb appeal/ROI vs. price

- Recognize enhanced warranties still important

- Understand commercial building owner’s longer

term plans—not just fixing leaks

46

Trend Toward Increased Sustainability

- Importance of sustainability and a source of

differentiation

- More favorable economics

- Asphalt the most recycled material

- Programs for commercial membrane roofing recycle

- ―Green‖ Codes and standards are more important

(e.g., LEED and IGCC), regulators becoming more

involved

- Growth in Solar expected to continue

47

$80.00

$58.00

$30.00

-$18.00

$40.00

$34.00

$16.00

$28.00

$21.00

$32.00

$105.00

$40.00

$10.00

$20.00

$55.00

$35.00

$31.00

$12.00

$0.00

$50.00

$29.00

$17.00

-$20.00 $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 $140.00

C&D Disposal (NE)

Mixed Debris

Concrete, Brick, Block

Bathroom Fixtures

Clean Wood

Comm. Roofing

Doors, Window s

Glass

Metals

Asphalt Shingles

Gypsum Wallboard

Total Cost of Recycling or Disposal (Bottom Bar)

Tip Fee Per Ton Transportation Cost Per Ton

Compared to disposal (bottom bars), recycling costs much less

for nearly all construction and demolition materials.

Costs: Recycling vs Disposal

48

Growth of LEED Projects

49

Increased Sustainability

Key Priorities For Contractors

- Offer residential shingle recycling

- Understand architect/building owner needs for

commercial membrane recycling

- Solar: Consider early entry to learn as market

evolves

- Use sustainability as a tool for differentiation, stay

ahead of code changes, join USGBC

- Be active in the community, volunteer

50

Technology

Key Priorities For Contractors

Increasing technology use shown by Roofing Contractor Survey but still only 80% of contractors have a website

• Using digital media to reach out to customers

• Search engine optimization for marketing effectiveness

• Understanding your business quickly and effectively through technology

• Adopt new business technology where possible

• Look for customer self-service options, scheduling, etc

• Demonstrate value and competence

51

Summary

Continued market uncertainty is no excuse - By

continuing to take the lead on improving quality and

being innovative, our industry won't merely survive —

We can thrive.

- Differentiate (e.g., quality materials, use of solutions

that enhance aesthetic experience, thorough

installations

- Innovate through technology

- Sustain efficiency and productivity

52