10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number:

001-14649

Trex Company, Inc.

(Exact name of registrant as specified in its charter)


Delaware		54-1910453
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

160 Exeter Drive Winchester, Virginia		22603-8605
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:

(540) 542-6300

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	TREX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule

12b-2

of the Exchange Act): Yes ☐ No ☒

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding at July 22, 2022 was 110,263,432

shares.

Table of Contents

TREX COMPANY, INC.

INDEX


		Page

PART I FINANCIAL INFORMATION			2

Item 1.	Condensed Consolidated Financial Statements		2

	Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2022 and June 30, 2021 (unaudited)		2

	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (unaudited)		3

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2022 and June 30, 2021 (unaudited)		4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and June 30, 2021 (unaudited)		5

	Notes to Condensed Consolidated Financial Statements (unaudited)		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		28

Item 4.	Controls and Procedures		28

PART II OTHER INFORMATION			29

Item 1.	Legal Proceedings		29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		29

Item 5.	Other Information		29

Item 6.	Exhibits		30

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

TREX COMPANY, INC.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net sales	$	386,249		$	311,596		$	725,477		$	557,120
Cost of sales		228,872			193,323			433,188			343,046

Gross profit		157,377			118,273			292,289			214,074
Selling, general and administrative expenses		39,568			36,899			79,529			68,949
Gain on insurance proceeds		—			(983	)		—			(1,720	)

Income from operations		117,809			82,357			212,760			146,845
Interest (income) expense, net		(116	)		13			(104	)		10

Income before income taxes		117,925			82,344			212,864			146,835
Provision for income taxes		29,009			20,978			52,737			36,925

Net income	$	88,916		$	61,366		$	160,127		$	109,910

Basic earnings per common share	$	0.79		$	0.53		$	1.41		$	0.95

Basic weighted average common shares outstanding		113,099,561			115,362,757			113,864,741			115,512,231

Diluted earnings per common share	$	0.79		$	0.53		$	1.40		$	0.95

Diluted weighted average common shares outstanding		113,259,514			115,662,626			114,052,447			115,839,183

Comprehensive income	$	88,916		$	61,366		$	160,127		$	109,910

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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TREX COMPANY, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share data)


	June 30, 2022			December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	16,648		$	141,053
Accounts receivable, net		178,084			151,096
Inventories		100,872			83,753
Prepaid expenses and other assets		23,645			25,152

Total current assets		319,249			401,054
Property, plant and equipment, net		505,395			460,365
Operating lease assets		36,250			34,571
Goodwill and other intangible assets, net		18,791			19,001
Other assets		7,609			5,330

Total assets	$	887,294		$	920,321

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	57,825		$	24,861
Accrued expenses and other liabilities		74,698			58,041
Accrued warranty		6,300			5,800

Total current liabilities		138,823			88,702
Deferred income taxes		43,967			43,967
Operating lease liabilities		29,239			28,263
Non-current accrued warranty		22,230			22,795
Other long-term liabilities		11,560			11,560

Total liabilities		245,819			195,287

Commitments and contingencies		—			—

Stockholders’ equity:
Preferred stock, $0.01 par value, 3,000,000 shares authorized; none issued and outstanding		—			—
Common stock, $0.01 par value, 360,000,000 shares authorized; 140,798,762 and 140,734,753 shares issued and 111,563,381 and 115,148,152 shares outstanding at June 30, 2022 and December 31, 2021, respectively		1,408			1,407
Additional paid-in capital		129,109			127,787
Retained earnings		1,106,175			946,048
Treasury stock, at cost, 29,235,381 and 25,586,601 shares at June 30, 2022 and December 31, 2021, respectively		(595,217	)		(350,208	)

Total stockholders’ equity		641,475			725,034

Total liabilities and stockholders’ equity	$	887,294		$	920,321

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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TREX COMPANY, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(In thousands, except share data)


	Common Stock					Additional Paid-In Capital			Retained Earnings		Treasury Stock					Total
	Shares			Amount		Additional Paid-In Capital			Retained Earnings		Shares		Amount			Total
Balance, December 31, 2021		115,148,152		$	1,407	$	127,787		$	946,048		25,586,601	$	(350,208	)	$	725,034
Net income		—			—		—			71,211		—		—			71,211
Employee stock plans		9,081			—		523			—		—		—			523
Shares withheld for taxes on awards		(35,856	)		—		(2,912	)		—		—		—			(2,912	)
Stock-based compensation		79,926			1		2,225			—		—		—			2,226
Repurchases of common stock		(833,963	)		—		—			—		833,963		(75,017	)		(75,017	)

Balance, March 31, 2022		114,367,340		$	1,408	$	127,623		$	1,017,259		26,420,564	$	(425,225	)	$	721,065
Net income		—			—		—			88,916		—		—			88,916
Employee stock plans		8,834			—		429			—		—		—			429
Stock-based compensation		2,024			—		1,057			—		—		—			1,057
Repurchases of common stock		(2,814,817	)		—		—			—		2,814,817		(169,992	)		(169,992	)

Balance, June 30, 2022		111,563,381		$	1,408	$	129,109		$	1,106,175		29,235,381	$	(595,217	)	$	641,475


	Common Stock					Additional Paid-In Capital			Retained Earnings		Treasury Stock					Total
	Shares			Amount		Additional Paid-In Capital			Retained Earnings		Shares		Amount			Total
Balance, December 31, 2020		115,799,503		$	1,406	$	126,087		$	737,311		24,777,502	$	(276,273	)	$	588,531
Net income		—			—		—			48,545		—		—			48,545
Employee stock plans		28,286			—		460			—		—		—			460
Shares withheld for taxes on awards		(38,212	)		—		(4,045	)		—		—		—			(4,045	)
Stock-based compensation		76,094			—		2,176			—		—		—			2,176
Repurchases of common stock		(504,275	)		—		—			—		504,275		(45,523	)		(45,523	)

Balance, March 31, 2021		115,361,396		$	1,406	$	124,678		$	785,855		25,281,777	$	(321,796	)	$	590,143
Net income		—			—		—			61,366		—		—			61,366
Employee stock plans		20,341			—		400			—		—		—			400
Shares withheld for taxes on awards		(13,491	)		—		(1,446	)		—		—		—			(1,446	)
Stock-based compensation		17,210			1		2,132			—		—		—			2,133
Repurchases of common stock		(40,751	)		—		—			—		40,751		(3,820	)		(3,820	)

Balance, June 30, 2021		115,344,705		$	1,407	$	125,764		$	847,221		25,322,528	$	(325,616	)	$	648,776

See Notes to Condensed Consolidated Financial Statements (Unaudited).

Table of Contents

TREX COMPANY, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2022			2021
Operating Activities
Net income	$	160,127		$	109,910
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		21,804			15,702
Stock-based compensation		3,282			4,308
Gain on disposal of property, plant and equipment		(43	)		(1,083	)
Other non-cash adjustments		(365	)		(226	)
Changes in operating assets and liabilities:
Accounts receivable		(26,988	)		(157,117	)
Inventories		(

SEC Form 10-Q filed by Trex Company Inc.