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Trex Company Announces Second Quarter 2007 Results
Net sales for the second quarter of 2007 totaled $118.8 million, compared to net sales of $121.5 million for the second quarter of 2006. The Company reported net income for the 2007 second quarter of $2.6 million, or $0.17 per diluted share, compared to net income of $7.5 million, or $0.50 per diluted share, for the 2006 second quarter.
For the six months ended June 30, 2007, Trex Company reported net sales of $234.7 million, compared to net sales of $226.8 million for the six months ended June 30, 2006. Net income for the 2007 six-month period totaled $6.3 million, or $0.42 per diluted share, compared to $11.6 million, or $0.78 per diluted share, for the 2006 six-month period.
Chairman and Chief Executive Officer Anthony J. Cavanna commented, "Throughout the year, Trex's sales have held up well in a difficult market. Our brand leadership, compelling array of products and expanding distribution presence have all helped sustain revenue despite persistent weakness in the homebuilding and remodeling sectors and declining lumber prices. In the second quarter, we successfully launched our new consumer brand building campaign, and sales of our new decking products, Trex Brasilia(R) and Trex Contours(TM), were strong. Demand for our railing products also increased, driven by our innovative boxed rail and hollow post sleeve offerings. Business in the 'big box' marketing arena grew, complementing our leading position in the pro lumberyard channel. In total, Trex(R) products are now stocked in more than 5,500 retail locations nationwide.
"During the quarter, we continued to focus on our strategic productivity projects, which are designed to improve quality and lower manufacturing cost. By the end of the quarter, equipment supporting our major productivity projects had been installed and was operating, and manufacturing efficiency began to improve. We continued to experience high plant labor costs and overheard expenses as a result of the quality initiatives, but expect to see reductions in these costs in the second half of 2007. In addition, as previously announced, net income was adversely affected by increasing product replacement and consumer relations costs related to product quality.
"The completion of our $97.5 million 6% convertible senior subordinated note offering was an important accomplishment. With the proceeds, we retired higher-cost senior debt and paid off the balance on our existing revolving line of credit. The refinancing decreased our weighted average cost of debt and provided us with a more flexible capital structure that will allow us to optimize the use of our current revolver.
"We are pleased with our decking and railing product offerings and will continue the national roll-out of our new fencing product, Trex Seclusions(R), during the remainder of 2007. As the year progresses, we expect to realize additional benefits from our new manufacturing equipment and look forward to manufacturing improved quality product at lower costs. We anticipate that SG&A will decrease as branding expenditures decline as usual at the end of the decking season. Although the direction of the homebuilding and remodeling markets continues to be very uncertain, which could negatively impact sales as well as plant utilization in the second half of the year, we continue to expect net sales for 2007 to be in the range of $330 to $350 million."
Trex will hold a conference call to discuss its 2007 second quarter results on Tuesday, July 31 at 10:00 a.m. ET. A live webcast of the conference call will be available to all investors at the Trex Company website at www.trex.com. The call will also be simulcast at www.streetevents.com.
For those who cannot listen to the live broadcast, an audio replay of the call will be available on these websites for 30 days. A telephone replay of the call will also be available for 7 days, beginning at 1:00 p.m. ET on July 31. To listen to the telephone replay, dial 706-645-9291 and enter conference ID #7316775.
About Trex Company
Trex Company is the nation's largest manufacturer of composite decking, railing and fencing, with over 15 years of product experience. Products are marketed under the brand name Trex(R). Made from a unique formulation of reclaimed wood and plastic, combined through a proprietary process, Trex decking, railing and fencing offer significant design flexibility with fewer ongoing maintenance requirements than wood. For more information, visit the Company's website, www.trex.com. Trex(R), Trex Brasilia(R), Trex Contours(TM), and Trex Seclusions(R) are trademarks of Trex Company, Inc., Winchester, Va.
The statements in this press release regarding the Company's expected sales performance and operating results, its projections of net sales, net income, earnings per share and costs, its anticipated financial condition and its business strategy 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 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 increase production levels to meet increasing demand for its products, and the highly competitive markets in which the Company operates. The Company's report on Form 10-K filed with the Securities and Exchange Commission on April 2, 2007 and its subsequent filings on Form 10-Q and Form 8-K 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.
TREX COMPANY, INC.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2006 2007 2006 2007
------------- ------------- ------------ ------------
Net sales $ 121,454 $ 118,779 $ 226,751 $ 234,692
Cost of sales 85,655 89,615 165,812 180,899
------------- ------------- ------------ ------------
Gross profit 35,799 29,164 60,939 53,793
Selling, general
and
administrative
expenses 23,589 22,860 41,319 39,899
------------- ------------- ------------ ------------
Income from
operations 12,210 6,304 19,620 13,894
Interest
expense, net 904 2,526 1,846 4,220
------------- ------------- ------------ ------------
Income before
income taxes 11,306 3,778 17,774 9,674
Provision for
income taxes 3,816 1,190 6,219 3,361
------------- ------------- ------------ ------------
Net income $ 7,490 $ 2,588 $ 11,555 $ 6,313
============= ============= ============ ============
Diluted earnings
per share $ 0.50 $ 0.17 $ 0.78 $ 0.42
============= ============= ============ ============
Diluted weighted
average shares
outstanding 14,912,805 14,916,648 14,891,577 14,917,496
============= ============= ============ ============
TREX COMPANY, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
31-Dec-06 30-Jun-07
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 672 $ 5,937
Accounts receivable, net 18,140 41,979
Inventories 111,434 79,676
Prepaid expenses and other assets 3,201 3,861
Income taxes receivable 6,480 3,985
Deferred income taxes 3,180 2,839
----------- -----------
Total current assets 143,107 138,277
----------- -----------
Property, plant and equipment, net 198,525 205,361
Goodwill 6,837 6,837
Debt-related derivatives 359 461
Other assets 3,489 7,202
----------- -----------
Total assets $ 352,317 $ 358,138
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 60,301 $ 43,399
Line of credit 44,132 --
Current portion long-term debt 9,115 1,153
----------- -----------
Total current liabilities 113,548 44,552
----------- -----------
Deferred income taxes 17,217 18,751
Debt-related derivatives 747 545
Long-term debt, net of current portion 51,390 119,837
----------- -----------
Total liabilities 182,902 183,685
----------- -----------
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; 14,913,889 and
15,096,010 shares issued and outstanding at
December 31, 2006 and June 30, 2007 149 151
Additional paid-in capital 62,986 64,510
Accumulated other comprehensive income
(loss) (278) (343)
Retained earnings 106,558 110,135
----------- -----------
Total stockholders' equity 169,415 174,453
----------- -----------
Total liabilities and stockholders'
equity $ 352,317 $ 358,138
=========== ===========
TREX COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended June 30,
2006 2007
------------ ------------
OPERATING ACTIVITIES
Net income $ 11,555 $ 6,313
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,083 10,571
Other non-cash charges 1,530 1,485
Changes in operating assets and liabilities 2,247 (8,403)
------------ ------------
Net cash provided by operating activities $ 25,415 $ 9,966
------------ ------------
INVESTING ACTIVITIES $ (7,067) $ (17,412)
------------ ------------
FINANCING ACTIVITIES $ (12,706) $ 12,711
------------ ------------
Net increase in cash and cash equivalents $ 5,642 $ 5,265
Cash and cash equivalents at beginning of
period $ 1,395 $ 672
------------ ------------
Cash and cash equivalents at end of period $ 7,037 $ 5,937
============ ============
SOURCE: Trex Company, Inc.
Trex Company, Inc.
Paul Fletcher, 540-542-6300
Chief Financial Officer
or
Lippert/Heilshorn & Assoc.
Harriet Fried, 212-838-3777