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Trex Company 2012 Net Sales Increase 15% To $307 Million

The Company defines net income on a pro-forma basis as net income before certain charges. The fourth quarter of 2012 includes a $1.5 million provision for costs related to the mold class action. The 2011 period includes a $10.0 million increase to the Company’s warranty reserve for decking material manufactured at its Nevada plant prior to 2007.

The Company’s full-year 2012 results include a $21.5 million pre-tax increase to its warranty reserve, the $1.5 million provision for costs related to the mold class action, and $0.7 million of severance charges. Its full-year 2011 results reflect a $10.0 million increase to the Company’s warranty reserve and a net $2.3 million non-cash benefit resulting primarily from the favorable resolution of an uncertain tax position.

The Company defines related EPS as net income on a pro-forma basis divided by the weighted average outstanding shares, on a fully diluted basis. The Company uses these pro-forma financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. The Company also believes that investors and analysts benefit from referring to these pro-forma financial measures in assessing the performance and expectations of the Company’s future performance.

For more information on the reconciliation of GAAP and pro-forma financial terms, please see the two tables titled “Reconciliations of Pro-Forma Results of Operations Measures to the Nearest Comparable GAAP Measures Three Months Ended December 31, 2012” and “Reconciliations of Pro-Forma Results of Operations Measures to the Nearest Comparable GAAP Measures Twelve Months Ended December 31, 2012” at the end of this release.

About Trex Company

Trex Company is the world’s largest manufacturer of wood-alternative decking and railing, with more than 20 years of product experience. Stocked in more than 6,000 retail locations throughout the world, Trex ® outdoor living products offer a wide range of style options with fewer ongoing maintenance requirements than wood, as well as a truly environmentally responsible choice. For more information, visit trex.com.

                     
TREX COMPANY, INC.
Condensed Consolidated Statements of Comprehensive Income
(In thousands, except share and per share data)
(Unaudited)
 
 
Three Months Ended December 31, Twelve Months Ended December 31,

2012

2011

2012

2011

 
 
Net sales $ 46,155 $ 51,462 $ 307,354 $ 266,789
 
Cost of sales   32,729     52,514     222,772   203,998  
 
Gross profit (loss) 13,426 (1,052 ) 84,582 62,791
 
Selling, general and administrative expenses   16,604     13,609     71,907   60,620  
 
Income (loss) from operations (3,178 ) (14,661 ) 12,675 2,171
 
Interest expense, net   83     3,595     8,946   16,364  
 
Income (loss) before income taxes (3,261 ) (18,256 ) 3,729 (14,193 )
 
Provision (benefit) for income taxes   358     (1 )   1,009   (2,605 )
 
Net income (loss) $ (3,619 ) $ (18,255 ) $ 2,720 $ (11,588 )
 
Basic income (loss) per common share $ (0.22 ) $ (1.18 ) $ 0.17 $ (0.75 )
 
Basic weighted average common shares outstanding   16,758,829     15,433,931     16,123,592   15,388,456  
 
Diluted income (loss) per common share $ (0.22 ) $ (1.18 ) $ 0.16 $ (0.75 )
 
Diluted weighted average common shares outstanding   16,758,829     15,433,931     17,064,856   15,388,456  
 
Other comprehensive income:
Net derivative losses on interest rate swaps, before tax - - - 312

Income tax expense related to net derivative losses on

interest rate swaps

  -     -     -   128  
 
Other comprehensive income, net of tax   -     -     -   184  
 
Comprehensive income (loss) $ (3,619 ) $ (18,255 ) $ 2,720 $ (11,404 )
 

                   

TREX COMPANY, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(unaudited)

 
 

31-Dec-12

31-Dec-11

 
 

ASSETS

Current Assets:

 
Cash and cash equivalents $     2,159 $     4,526
Restricted cash - 37,000
Accounts receivable, net 26,542 29,192
Inventories 17,521 28,896
Prepaid expenses and other assets 2,188 2,118
Income taxes receivable 435 322
Deferred income taxes       3,792         -  
Total current assets 52,637 102,054

Property, plant and equipment, net

104,425 115,212

Goodwill and other intangibles

10,550 10,558

Other assets

      1,003         266  
Total Assets $     168,615   $     228,090  

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

 
Accounts payable $ 11,161 $ 11,892
Accrued expenses 18,818 16,187
Accrued warranty 7,500 6,000
Deferred income taxes - 124
Line of credit 5,000 -
Current portion of long-term debt       -         86,425  
Total current liabilities 42,479 120,628
Deferred income taxes 7,353 2,819
Non-current accrued warranty 21,487 10,345
Other long-term liabilities       3,310         1,799  
Total Liabilities       74,629         135,591  

Stockholders’ Equity:

Preferred stock, $0.01 par value, 3,000,000 shares authorized; none issued and outstanding - -

Common stock, $0.01 par value, 40,000,000 shares authorized; 17,010,493 and 15,602,132

shares issued and outstanding at December 31, 2012 and 2011, respectively

170 156
Additional paid-in capital 98,638 99,885
Retained deficit       (4,822 )       (7,542 )
Total Stockholders’ Equity       93,986         92,499  
Total Liabilities and Stockholders’ Equity $     168,615   $     228,090  
 

                 
TREX COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
Twelve Months Ended December 31,

2012

2011

 
OPERATING ACTIVITIES
Net income (loss) $     2,720 $     (11,588 )
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 22,459 28,708
Other non-cash charges 5,682 4,643
Changes in operating assets and liabilities       29,582         12,084  
 
Net cash provided by operating activities $     60,443   $     33,847  
 
INVESTING ACTIVITIES $     (7,484 ) $     (9,367 )
 
FINANCING ACTIVITIES $     (55,326 ) $     (47,224 )
 
Net decrease in cash and cash equivalents $ (2,367 ) $ (22,744 )
Cash and cash equivalents at beginning of period $     4,526   $     27,270  
 
Cash and cash equivalents at end of period $     2,159   $     4,526  
 

                           
Trex Company, Inc.
Reconciliations of Pro-Forma results of operations measures to the nearest comparable GAAP measures
Three Months Ended December 31,
(amounts in 000's except for EPS)
 
 
                           
2011 Reconciliation 2012 Reconciliation
 
GAAP Pro-Forma Pro-Forma GAAP Pro-Forma Pro-Forma
2011 Adjustments (1) 2011 2012 Adjustments (2) 2012
 
Net sales $ 51,462 $ 0 $ 51,462 $ 46,155 $ 0 $ 46,155
 
Cost of sales $ 52,514 ($9,976 ) $ 42,538 $ 32,729 $ 0 $ 32,729
           
Gross Profit ($1,052 ) $ 9,976 $ 8,924 $ 13,426 $ 0 $ 13,426

% of Net sales

-2.0 % 19.4 % 17.3 % 29.1 % 0.0 % 29.1 %
 
SG&A Expenses $ 13,609 $ 0 $ 13,609 $ 16,604 ($1,500 ) $ 15,104
% of Net sales 26.4 % 0.0 % 26.4 % 36.0 % -3.2 % 32.7 %
 
Interest expense, net $ 3,595   $ 0   $ 3,595   $ 83   $ 0   $ 83  
 
Income (loss) before income taxes ($18,256 ) $ 9,976 ($8,280 ) ($3,261 ) $ 1,500 ($1,761 )
 
Income taxes ($1 ) $ 0 ($1 ) $ 358 $ 0 $ 358
           
Net income (loss)   ($18,255 ) $ 9,976     ($8,279 )   ($3,619 ) $ 1,500     ($2,119 )
% of Net sales -35.5 % 19.4 % -16.1 % -7.8 % 3.2 % -4.6 %
 
Diluted earnings (loss) per common share   ($1.18 ) $ 0.64     ($0.54 )   ($0.22 ) $ 0.09     ($0.13 )
 
 
(1) 2011 Pro-Forma Adjustment is a $10.0MM charge to the previously established warranty reserve (Cost of Sales).
 
(2) 2012 Pro-Forma Adjustment is a $1.5MM provision for costs related to the mold class action.
 

                           
Trex Company, Inc.
Reconciliations of Pro-Forma results of operations measures to the nearest comparable GAAP measures
Twelve Months Ended December 31,
(amounts in 000's except for EPS)
 
 
                           
2011 Reconciliation 2012 Reconciliation
 
GAAP Pro-Forma Pro-Forma GAAP Pro-Forma Pro-Forma
2011 Adjustments (1) 2011 2012 Adjustments (2) 2012
 
Net sales $ 266,789 $ 0 $ 266,789 $ 307,354 $ 0 $ 307,354
 
Cost of sales $ 203,998 ($9,976 ) $ 194,022 $ 222,772 ($21,487 ) $ 201,285
           
Gross Profit $ 62,791 $ 9,976 $ 72,767 $ 84,582 $ 21,487 $ 106,069
% of Net sales 23.5 % 3.7 % 27.3 % 27.5 % 7.0 % 34.5 %
 
SG&A Expenses $ 60,620 $ 0 $ 60,620 $ 71,907 ($2,173 ) $ 69,734
% of Net sales 22.7 % 0.0 % 22.7 % 23.4 % -0.7 % 22.7 %
 
Interest expense, net $ 16,364     ($324 ) $ 16,040   $ 8,946   $ 0   $ 8,946  
 
Income (loss) before income taxes ($14,193 ) $ 10,300 ($3,893 ) $ 3,729 $ 23,660 $ 27,389
 
Income taxes ($2,605 ) $ 2,616 $ 11 $ 1,009 $ 0 $ 1,009
           
Net income (loss)   ($11,588 ) $ 7,684     ($3,904 ) $ 2,720   $ 23,660   $ 26,380  
% of Net sales -4.3 % 2.8 % -1.5 % 0.9 % 7.7 % 8.6 %
 
Diluted earnings (loss) per common share   ($0.75 ) $ 0.50     ($0.25 ) $ 0.16   $ 1.39   $ 1.55  
 
(1) 2011 Pro-Forma Adjustments include a $10.0MM charge to the previously established warranty reserve (Cost of Sales), a $0.3MM charge to interest expense and related $42 thousand income tax credit due to the non-cash acceleration of interest charges related to the $5.6MM repurchase of convertible notes and a $2.6MM income tax benefit related to the favorable resolution of uncertain tax positions.
 
(2) 2012 Pro-Forma Adjustments include a $21.5MM charge to the previously established warranty reserve (Cost of sales), a $0.7MM severance charge (SG&A Expenses) and a $1.5MM provision for costs related to the mold class action (SG&A Expenses). A $1.9MM charge related to fixed assets was offset by a combined $1.9MM benefit related to the Iron Deck acquisition goodwill and a reduction in the allowance for doubtful accounts all of which were recognized in SG&A Expenses.
 




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