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, 2023

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

For the transition period from to

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.)

2500 Trex Way Winchester, Virginia		22601
(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 17, 2023 was 108,563,043 shares.

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, 2023 and June 30, 2022 (unaudited)		2

	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (unaudited)		3

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2023 and June 30, 2022 (unaudited)		4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and June 30, 2022 (unaudited)		5

	Notes to Condensed Consolidated Financial Statements (unaudited)		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		30

Item 4.	Controls and Procedures		30

PART II OTHER INFORMATION			31

Item 1.	Legal Proceedings		31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		31

Item 5.	Other Information		31

Item 6.	Exhibits		33

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,
	2023		2022			2023		2022
Net sales	$	356,538	$	386,249		$	595,256	$	725,477
Cost of sales		200,090		228,872			344,380		433,188

Gross profit		156,448		157,377			250,876		292,289
Selling, general and administrative expenses		51,681		39,568			89,162		79,529

Income from operations		104,767		117,809			161,714		212,760
Interest expense (income), net		1,305		(116	)		3,289		(104	)

Income before income taxes		103,462		117,925			158,425		212,864
Provision for income taxes		26,426		29,009			40,258		52,737

Net income	$	77,036	$	88,916		$	118,167	$	160,127

Basic earnings per common share	$	0.71	$	0.79		$	1.09	$	1.41

Basic weighted average common shares outstanding		108,770,204		113,099,561			108,771,077		113,864,741

Diluted earnings per common share	$	0.71	$	0.79		$	1.09	$	1.40

Diluted weighted average common shares outstanding		108,871,440		113,259,514			108,893,848		114,052,447

Comprehensive income	$	77,036	$	88,916		$	118,167	$	160,127

See Notes to Condensed Consolidated Financial Statements (Unaudited).

Table of Contents

TREX COMPANY, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share data)


	June 30, 2023			December 31, 2022
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	4,226		$	12,325
Accounts receivable, net		266,808			98,057
Inventories		74,007			141,355
Prepaid expenses and other assets		24,403			35,105

Total current assets		369,444			286,842
Property, plant and equipment, net		645,656			589,892
Operating lease assets		29,099			30,991
Goodwill and other intangible assets, net		18,372			18,582
Other assets		7,244			7,398

Total assets	$	1,069,815		$	933,705

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	32,228		$	19,935
Accrued expenses and other liabilities		79,803			44,064
Accrued warranty		4,766			4,600
Line of credit		206,000			222,000

Total current liabilities		322,797			290,599
Deferred income taxes		68,224			68,224
Operating lease liabilities		21,916			23,974
Non-current accrued warranty		21,793			20,999
Other long-term liabilities		11,560			11,560

Total liabilities		446,290			415,356

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; 140,931,122 and 140,841,833 shares issued and 108,567,816 and 108,743,423 share outstanding, at June 30, 2023 and December 31, 2022, respectively		1,409			1,408
Additional paid-in capital		134,293			131,539
Retained earnings		1,248,841			1,130,674
Treasury stock, at cost, 32,363,306 shares at June 30, 2023 and 32,098,410 shares at December 31, 2022		(761,018	)		(745,272	)

Total stockholders’ equity		623,525			518,349

Total liabilities and stockholders’ equity	$	1,069,815		$	933,705

See Notes to Condensed Consolidated Financial Statements (Unaudited).

Table of Contents

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, 2022		108,743,423		$	1,408	$	131,539		$	1,130,674		32,098,410	$	(745,272	)	$	518,349
Net income		—			—		—			41,131		—		—			41,131
Employee stock plans		8,504			—		316			—		—		—			316
Shares withheld for taxes on awards		(28,773	)		—		(1,592	)		—		—		—			(1,592	)
Stock-based compensation		80,362			1		1,972			—		—		—			1,973

Balance, March 31, 2023		108,803,516		$	1,409	$	132,235		$	1,171,805		32,098,410	$	(745,272	)	$	560,177

Net income		—			—		—			77,036		—		—			77,036
Employee stock plans		7,971			—		323			—		—		—			323
Shares withheld for taxes on awards		(15,663	)		—		(855	)		—		—		—			(855	)
Stock-based compensation		36,888			—		2,590			—		—		—			2,590
Repurchases of common stock		(264,896	)		—		—			—		264,896		(15,746	)		(15,746	)

Balance, June 30, 2023		108,567,816		$	1,409	$	134,293		$	1,248,841		32,363,306	$	(761,018	)	$	623,525


	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

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,
	2023			2022
OPERATING ACTIVITIES
Net income	$	118,167		$	160,127
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		24,198			21,804
Stock-based compensation		4,562			3,282
Gain on disposal of property, plant and equipment		1,081			(43	)
Other non-cash adjustments		(388	)

SEC Form 10-Q filed by Trex Company Inc.