Trex Company, Inc. (NYSE: TREX), the world’s largest manufacturer of wood-alternative decking and railing products, today announced financial results for the third quarter ended September 30, 2012.
Net sales for the third quarter of 2012 totaled $70.8 million compared to net sales of $67.9 million for the 2011 third quarter. The Company reported a net loss of $14.3 million, or $0.86 per diluted share, for the 2012 quarter compared to a net loss of $0.5 million, or $0.03 per diluted share, for the prior-year period. During the third quarter of 2012, the Company recognized a $20 million pre-tax increase to its warranty reserve for decking material manufactured at its Nevada plant between 2002 and 2006. Before giving effect to this charge, net income was $6.2 million, or $0.36 per diluted share. The Company’s third-quarter-2011 results included an accelerated non-cash charge of $0.5 million related to its repurchase of $5.6 million of its senior subordinated convertible notes. Before giving effect to this charge, the Company realized net income of $0.03 million, or $0.00 per diluted share, for the 2011 third quarter.
“Trex turned in another strong operating performance,” commented Chairman, President and CEO Ronald W. Kaplan. “Year over year, sales rose 4%, topping the guidance we provided. On an underlying basis, gross margin exceeded 31%, maintaining strong margins for the year and delivering solid underlying earnings. I am pleased with our results to date in 2012, especially given the continued economic challenges.
“During the quarter we recognized a $20 million increase to the warranty reserve for a legacy issue. We concluded, based on an analysis of recent claims activity, that the payments and the rate of decline in claims in 2012 will approximate the levels experienced in 2011. Although the rate of claims in 2012 has dropped off at a healthy pace – and we expect reductions to continue in subsequent years – it is now apparent that the declines will not be at the rate previously expected. This not only has an impact on this year’s claims rate, but also on the rate of expected future claims.”