Press Release
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Trex Company Announces Third-Quarter 2011 Sales of $67.9 Million
- Repurchases $5.6 Million of Convertible Notes and Ends Q3 with $50.2 Million in Cash
- Expands Product Line-up with Trex Enhance(TM) and Trex Pergola(TM)
- Extends Maturity of Revolving Credit Facility
WINCHESTER, Va., Oct 31, 2011 (BUSINESS WIRE) -- 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, 2011.
Net sales for the third quarter of 2011 totaled $67.9 million compared to net sales of $60.6 million for the 2010 third quarter. The Company reported a net loss of $0.5 million, or $0.03 per diluted share, for the 2011 period compared to a net loss of $8.8 million, or $0.58 per diluted share, for the 2010 period. The Company recognized an accelerated non-cash charge of $0.5 million during the 2011 period related to its repurchase of $5.6 million of its senior subordinated convertible notes due in July 2012. Before giving effect to this charge, the Company had net income of $28,000. During the 2010 period, the Company recognized $3.9 million of unusual charges. Before giving effect to those charges, the Company had a net loss of $5.0 million, or $0.33 per diluted share for the 2010 period.
For the nine months ended September 30, 2011, the Company reported net sales of $215.3 million compared to net sales of $242.4 million for the prior-year period. The Company reported net income of $6.7 million, or $0.41 per diluted share, for the first nine months of 2011 compared to a net loss of $9.6 million, or $0.63 per diluted share for 2010. The 2011 results reflect the favorable resolution of uncertain tax positions in the first quarter of 2011 that positively impacted income taxes by $2.6 million as well as the $0.5 million accelerated non-cash charge related to its convertible notes repurchase. Before giving effect to these items, net income for 2011 was $4.6 million, or $0.28 per diluted share. During 2010, the Company recognized a total of $17.2 million of unusual charges. Before giving effect to those charges, net income for the 2010 period totaled $7.6 million, or $0.49 per diluted share.
Chairman, President and CEO Ronald W. Kaplan commented,"During the third quarter, we executed well in a challenging environment, increasing year-over-year net sales by 12% even as consumer confidence deteriorated and the economic recovery lost steam. The new products we introduced over the past year have begun contributing to our sales growth. Market acceptance of Trex Deck Lighting(TM) has been strong and our new deck substructure product, Trex Elevations(TM), is starting to generate considerable interest.
"Year to date, our gross margin rose to 29.6%, reflecting our continued focus on driving down basic manufacturing costs combined with eliminating the impact of start-up costs related to the 2010 introduction of Trex Transcend(R). During the quarter, our strong cash position enabled us to opportunistically purchase $5.6 million of the senior subordinated convertible notes the Company issued in 2007. As of September 30, 2011, our cash balance reached $50.2 million. We recently reached an agreement to extend the maturity on $55 million of our revolving credit facility to December 31, 2012 and are exploring other sources of financing that will provide additional borrowing capacity and greater flexibility to prosecute our growth strategies.
"Earlier this month we announced a new decking option, Trex Enhance(R), to our product line-up, giving consumers another notable choice for meeting their outdoor living needs. Enhance is a capped, high-performance decking product that utilizes the Transcend technology. Offering a 20-year fade and stain warranty, scratch resistance and two rich colors, Enhance fits in the middle of our 'good, better, best' product platform strategy. In addition, we entered into a trademark licensing agreement with Backyard America to develop and market Trex Pergola(TM) kits.
"We believe our product offerings and sales strategies represent a solid platform for growth and we look forward to a robust winter and spring sales program. We expect sales patterns to differ from last year primarily due to a change in our pricing strategy and early buy program. Early in the 2010 fourth quarter we announced a price increase on Transcend for 2011, which significantly increased sales in that quarter. We expect net sales of approximately $50-55 million for the fourth quarter of 2011. However, based on the feedback we received at our recent annual distributor meeting, we anticipate sales in the first quarter of 2012 to exceed the first quarter of 2011 by at least 25%. Moreover, we expect sales for the full year 2012 to grow significantly."
Third-Quarter 2011 Conference Call and Webcast Information
Trex will hold a conference call to discuss its third-quarter 2011 results on Monday, October 31, 2011 at 10:00 a.m. ET. To participate in the live call by telephone, please dial 706-634-1218 and reference conference ID #15908011. A live webcast of the conference call will also be available in the Investor Relations section of the Trex Company website at http://www.trex.com. The call will also be simulcast at http://www.streetevents.com.
For those who cannot listen to the live broadcast, the webcast will be available on Trex's website for 30 days. A telephone replay of the call will also be available for seven days, beginning at approximately 1:00 p.m. ET on Monday, October 31, 2011. To listen to the telephone replay, dial 404-537-3406 and enter conference ID #15908011.
Forward-Looking Statements
The statements in this press release regarding the Company's expected future performance and condition constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are subject to risks and uncertainties that could cause the Company's actual operating results to differ materially. Such risks and uncertainties include the extent of market acceptance of the Company's products;the costs associated with the development and launch of new products and the market acceptance of such new products;the sensitivity of the Company's business to general economic conditions; the Company's ability to obtain raw materials at acceptable prices; the Company's ability to maintain product quality and product performance at an acceptable cost; the level of expenses associated with product replacement and consumer relations expenses related to product quality; and the highly competitive markets in which the Company operates. Documents filed with the Securities and Exchange Commission by the Company, including in particular its latest annual report on Form 10-K and quarterly reports on Form 10-Q, discuss some of the important factors that could cause the Company's actual results to differ materially from those expressed or implied in these forward-looking statements. The Company expressly disclaims any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
About Pro-Forma Net Income and Related Earnings Per Share (EPS)
To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, the Company uses the following non-GAAP financial measures: net income on a pro-forma basis and related EPS. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.
The Company defines net income on a pro-forma basis as net income before certain charges. In the third quarter of 2011, the Company recognized an accelerated non-cash charge of $0.5 million related to its repurchase of $5.6 million of its senior subordinated convertible notes due in July 2012. 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 September 30, 2011" and "Reconciliations of Pro-Forma Results of Operations Measures to the Nearest Comparable GAAP Measures Nine Months Ended September 30, 2011" 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 5,500 retail locations throughout the world, Trex(R) 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 Operations | |||||||||||||||||||||
| (In thousands, except share and per share data) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
|
2011 |
2010 |
2011 |
2010 | ||||||||||||||||||
| Net sales | $ | 67,916 | $ | 60,579 | $ | 215,328 | $ | 242,418 | |||||||||||||
| Cost of sales | 50,644 | 51,400 | 151,484 | 188,155 | |||||||||||||||||
| Gross profit | 17,272 | 9,179 | 63,844 | 54,263 | |||||||||||||||||
| Selling, general and administrative expenses | 12,991 | 14,024 | 47,012 | 52,305 | |||||||||||||||||
| Income (loss) from operations | 4,281 | (4,845 | ) | 16,832 | 1,958 | ||||||||||||||||
| Interest expense, net | 4,795 | 3,907 | 12,769 | 11,577 | |||||||||||||||||
| Income (loss) before income taxes | (514 | ) | (8,752 | ) | 4,063 | (9,619 | ) | ||||||||||||||
| Provision (benefit) for income taxes | (18 | ) | 69 | (2,604 | ) | (65 | ) | ||||||||||||||
| Net income (loss) | $ | (496 | ) | $ | (8,821 | ) | $ | 6,667 | $ | (9,554 | ) | ||||||||||
| Basic income (loss) per common share | $ | (0.03 | ) | $ | (0.58 | ) | $ | 0.43 | $ | (0.63 | ) | ||||||||||
| Basic weighted average common shares outstanding | 15,427,437 | 15,206,561 | 15,373,132 | 15,179,618 | |||||||||||||||||
| Diluted income (loss) per common share | $ | (0.03 | ) | $ | (0.58 | ) | $ | 0.41 | $ | (0.63 | ) | ||||||||||
| Diluted weighted average common shares outstanding | 15,427,437 | 15,206,561 | 16,461,674 | 15,179,618 | |||||||||||||||||
| TREX COMPANY, INC. | |||||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||||
| (In thousands, except share data) | |||||||||||||
| (unaudited) | |||||||||||||
| 30-Sep-11 | 31-Dec-10 | ||||||||||||
| ASSETS | |||||||||||||
| Current assets: | |||||||||||||
| Cash and cash equivalents | $ | 50,216 | $ | 27,270 | |||||||||
| Accounts receivable, net | 14,332 | 53,332 | |||||||||||
| Inventories | 32,993 | 29,021 | |||||||||||
| Prepaid expenses and other assets | 1,870 | 1,539 | |||||||||||
| Income taxes receivable | 327 | 70 | |||||||||||
| Deferred income taxes | 949 | 1,004 | |||||||||||
| Total current assets | 100,687 | 112,236 | |||||||||||
| Property, plant and equipment, net | 119,169 | 126,857 | |||||||||||
| Goodwill | 10,560 | 6,837 | |||||||||||
| Other assets | 953 | 1,885 | |||||||||||
| Total assets | $ | 231,369 | $ | 247,815 | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||
| Current liabilities: | |||||||||||||
| Accounts payable | $ | 9,954 | $ | 15,107 | |||||||||
| Accrued expenses | 12,699 | 23,479 | |||||||||||
| Accrued warranty | 4,627 | 7,003 | |||||||||||
| Current portion of long-term debt | 84,265 | 590 | |||||||||||
| Total current liabilities | 111,545 | 46,179 | |||||||||||
| Deferred income taxes | 3,791 | 3,614 | |||||||||||
| Accrued taxes | 85 | 3,126 | |||||||||||
| Non-current accrued warranty | 3,896 | 7,469 | |||||||||||
| Debt-related derivatives | - | 312 | |||||||||||
| Long-term debt | - | 84,193 | |||||||||||
| Other long-term liabilities | 1,803 | - | |||||||||||
| Total liabilities | 121,120 | 144,893 | |||||||||||
| 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; 15,594,652 and 15,458,002 |
156 | 155 | |||||||||||
| Additional paid-in capital | 99,380 | 98,905 | |||||||||||
| Accumulated other comprehensive loss | - | (184 | ) | ||||||||||
| Retained earnings | 10,713 | 4,046 | |||||||||||
| Total stockholders' equity | 110,249 | 102,922 | |||||||||||
| Total liabilities and stockholders' equity | $ | 231,369 | $ | 247,815 | |||||||||
| TREX COMPANY, INC. | ||||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||
| (In thousands) | ||||||||||
| (Unaudited) | ||||||||||
| Nine Months Ended September 30, | ||||||||||
|
2011 |
2010 | |||||||||
| OPERATING ACTIVITIES | ||||||||||
| Net income (loss) | $ | 6,667 | $ | (9,554 | ) | |||||
|
Adjustments to reconcile net income to net cash provided by |
||||||||||
| Depreciation and amortization | 21,918 | 22,017 | ||||||||
| Other non-cash charges | 3,078 | 4,243 | ||||||||
| Changes in operating assets and liabilities | 9,500 | 14,408 | ||||||||
| Net cash provided by operating activities | $ | 41,163 | $ | 31,114 | ||||||
| INVESTING ACTIVITIES | $ | (8,070 | ) | $ | (6,105 | ) | ||||
| FINANCING ACTIVITIES | $ | (10,147 | ) | $ | (1,373 | ) | ||||
| Net increase in cash and cash equivalents | $ | 22,946 | $ | 23,636 | ||||||
| Cash and cash equivalents at beginning of period | $ | 27,270 | $ | 19,514 | ||||||
| Cash and cash equivalents at end of period | $ | 50,216 | $ | 43,150 | ||||||
| Trex Company, Inc. | |||||||||||||||||||||
| Reconciliations of Pro-Forma results of operations measures to the nearest comparable GAAP measures | |||||||||||||||||||||
| Three Months Ended September 30, | |||||||||||||||||||||
| (amounts in 000's except for EPS) | |||||||||||||||||||||
| 2010 Reconciliation | 2011 Reconciliation | ||||||||||||||||||||
| GAAP | Pro-Forma | Pro-Forma | GAAP | Pro-Forma | Pro-Forma | ||||||||||||||||
| 2010 | Adjustments(1) | 2010 | 2011 | Adjustments(2) | 2011 | ||||||||||||||||
| Net sales | $60,579 | $0 | $60,579 | $67,916 | $0 | $67,916 | |||||||||||||||
| Cost of sales | $51,400 | ($3,855 | ) | $47,545 | $50,644 | $0 | $50,644 | ||||||||||||||
| Gross Profit | $9,179 | $3,855 | $13,034 | $17,272 | $0 | $17,272 | |||||||||||||||
| % of Net sales | 15.2 | % | 6.4 | % | 21.5 | % | 25.4 | % | 0.0 | % | 25.4 | % | |||||||||
| SG&A Expenses | $14,024 | $0 | $14,024 | $12,991 | $0 | $12,991 | |||||||||||||||
| % of Net sales | 23.1 | % | 0.0 | % | 23.1 | % | 19.1 | % | 0.0 | % | 19.1 | % | |||||||||
| Interest expense, net | $3,907 | $0 | $3,907 | $4,795 | ($565 | ) | $4,230 | ||||||||||||||
| Income (loss) before income taxes | ($8,752 | ) | $3,855 | ($4,897 | ) | ($514 | ) | $565 | $51 | ||||||||||||
| Income taxes | $69 | $0 | $69 | ($18 | ) | $42 | $24 | ||||||||||||||
| Net income (loss) | ($8,821 | ) | $3,855 | ($4,966 | ) | ($496 | ) | $523 | $28 | ||||||||||||
| % of Net sales | -14.6 | % | 6.4 | % | -8.2 | % | -0.7 | % | 0.8 | % | 0.0 | % | |||||||||
| Diluted earnings (loss) per common share | ($0.58 | ) | $0.25 | ($0.33 | ) | ($0.03 | ) | $0.03 | $0.00 | ||||||||||||
| (1) 2010 Pro-Forma Adjustments include a $0.8MM increase to a previously established warranty reserve (Cost of sales) and $3.1MM of charges related to supply contracts (Cost of sales). | |
| (2) 2011 Pro-Forma Adjustments include a $0.6MM charge to interest expense and a related $42 thousand income tax credit due to the non-cash acceleration of interest charges related to the $5.6MM repurchase of convertible notes. | |
| Trex Company, Inc. | |||||||||||||||||||||
| Reconciliations of Pro-Forma results of operations measures to the nearest comparable GAAP measures | |||||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||
| (amounts in 000's except for EPS) | |||||||||||||||||||||
| 2010 Reconciliation | 2011 Reconciliation | ||||||||||||||||||||
| GAAP | Pro-Forma | Pro-Forma | GAAP | Pro-Forma | Pro-Forma | ||||||||||||||||
| 2010 | Adjustments(1) | 2010 | 2011 | Adjustments(2) | 2011 | ||||||||||||||||
| Net sales | $242,418 | $0 | $242,418 | $215,328 | $0 | $215,328 | |||||||||||||||
| Cost of sales | $188,155 | ($14,793 | ) | $173,362 | $151,484 | $0 | $151,484 | ||||||||||||||
| Gross Profit | $54,263 | $14,793 | $69,056 | $63,844 | $0 | $63,844 | |||||||||||||||
| % of Net sales | 22.4 | % | 6.1 | % | 28.5 | % | 29.6 | % | 0.0 | % | 29.6 | % | |||||||||
| SG&A Expenses | $52,305 | ($2,405 | ) | $49,900 | $47,012 | $0 | $47,012 | ||||||||||||||
| % of Net sales | 21.6 | % | -1.0 | % | 20.6 | % | 21.8 | % | 0.0 | % | 21.8 | % | |||||||||
| Interest expense, net | $11,577 | $0 | $11,577 | $12,769 | ($565 | ) | $12,204 | ||||||||||||||
| Income (loss) before income taxes | ($9,619 | ) | $17,198 | $7,579 | $4,063 | $565 | $4,628 | ||||||||||||||
| Income taxes | ($65 | ) | $0 | ($65 | ) | ($2,604 | ) | $2,616 | $12 | ||||||||||||
| Net income (loss) | ($9,554 | ) | $17,198 | $7,644 | $6,667 | ($2,051 | ) | $4,616 | |||||||||||||
| % of Net sales | -3.9 | % | 7.1 | % | 3.2 | % | 3.1 | % | -1.0 | % | 2.1 | % | |||||||||
| Diluted earnings (loss) per common share | ($0.63 | ) | $1.12 | $0.49 | $0.41 | ($0.12 | ) | $0.28 | |||||||||||||
| (1) 2010 Pro-Forma Adjustments include a $9.8MM increase to a previously established warranty reserve (Cost of sales), $5.0MM of charges related to supply contracts (Cost of sales) and a $2.4MM charge related to our joint venture in Spain (SG&A Expenses). | |
| (2) 2011 Pro-Forma Adjustments include a $0.6MM 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. | |
SOURCE: Trex Company, Inc.
Trex Company, Inc.
James Cline, 540-542-6300
Chief Financial Officer
or
Lippert/Heilshorn & Associates
Harriet Fried, 212-838-3777