Press Release
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Trex Company Announces Second Quarter Results
Revenue for the second quarter was $27.7 million versus $36.4 million in the second quarter of 2000. This is above the expected range of $24 million to $26 million that was projected in the company's guidance released on June 18. The increase is due to stronger than anticipated sales for the month of June. Income from operations was $0.9 million versus $10.1 million for the second quarter of last year. Net income for the quarter was $0.3 million, or $0.02 per diluted share, compared to $6.1 million, or $0.43 per diluted share, for the second quarter of 2000. This is in line with the company's previously announced expectations.
For the six months ended June 30, 2001, revenue was $69.9 million versus $75.5 million in the same period last year. Income from operations was $13.8 million versus $21.7 million for the first six months of last year. Net income for the first half of 2001 was $7.9 million, compared to $13.1 million in the first half of 2000. On a fully diluted per share basis, net income was $0.56 per share versus $0.92 per share in 2000.
"As we reported on June 18, a number of unusual conditions have resulted in our first year-over-year revenue decline since becoming a public company in April 1999," said Trex President Robert Matheny. "These include a significantly slower start to the decking season as a result of unfavorable weather conditions during the spring. In addition, many distributors and dealers have been adjusting their purchase patterns as they respond to the uncertainty in the economy and adapt to the non-allocated status of Trex products. As I said in June, we believe that these unusual conditions were temporary, and are now largely behind us. We believe that Trex Company is well positioned in the marketplace, and we will continue to plan for significant long-term revenue growth.
"With our increased capacity, we have been introducing a number of new products. These are all extensions of our decking materials, or closely related products that can be sold through our existing distribution network. For example, we have begun to ship landscaping products in the western states. The durability and flexibility of this edging product line makes it an ideal solution to the needs of landscaping professionals. We have also successfully introduced building code-listed railposts, making it possible to construct complete decks using Trex materials. And sales of our new color, Madeira, are enjoying enthusiastic market acceptance."
Trex Company continues to add new showcase projects, where the public may observe first hand the beauty and durability of a Trex deck. New projects include the boardwalk resurfacing in Vienna, Mass., which is being sponsored by the National Environmental Association; flooring on the Robert E. Lee Riverboat Replica Project in St. Louis Mo.; a 3,000 square foot regional meeting house for the Boy Scouts of America in Santa Rosa, Calif.; and a 4,000 square foot deck at the Snow Summit Ski Resort in Big Bear, Calif.
Another initiative aimed at increasing brand awareness is the Trex Model Home Program. Many of the nation's largest homebuilders are now displaying Trex decking on models and show homes. This marketing effort is generating substantial inquiries from potential new customers. One indication of this interest is visits to the Trex Company website, which are up more than 25% over the same period last year.
"It is clear that our brand building efforts are generating results," continued Mr. Matheny. "Trex Company was named the brand leader in all three decking categories of a recently published Remodeling Magazine survey. Survey participants rated Trex decking as the 'most heard of,' 'most used in the past two years,' and 'most used overall.'
"We believe that it is important to point out that despite the temporary decline in our revenue growth, our focus on Trex Company's long-term strategy remains undeterred. Simply stated, that strategy is to build the dominant brand in decking materials. We have created a substantial competitive advantage over other suppliers of alternative decking products, and we are working to leverage our leading position in the market."
Trex Company has scheduled an analyst conference call for 11:00 a.m. EDT on July 24. A live webcast of the conference call will be available to all investors at the Trex Company Web site at www.trex.com and on www.streetevents.com. For those who cannot listen to the live broadcast, an audio replay of the call will be available on the company's Web site for 30 days. A telephone replay of the call will also be available from 1:00 p.m. EDT on July 24 until 1:00 p.m. EDT on July 31. To listen to the telephone replay, dial 800-633-8284 (858-812-6440 outside the U.S.) and enter reservation number 19325373.
About Trex CompanyTrex Company is the nation's largest manufacturer of non-wood decking, which is marketed under the brand name Trex(R). Trex Wood-Polymer(TM) lumber offers an attractive appearance and the workability of wood without the ongoing need for protective sealants or repairs. Trex decking is manufactured in a proprietary process that combines waste wood fibers and reclaimed polyethylene and is used primarily for residential and commercial decking. The Company sells its products through 88 wholesale distribution locations, which in turn sell Trex decking to approximately 2,900 independent contractor-oriented retailer lumberyards across the United States.
Trex(R) Easy Care Decking(R) and Wood-Polymer(TM) Lumber(TM) 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 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 Company's ability to increase its manufacturing capacity, the sensitivity of the Company's business to general economic conditions, 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 March 28, 2001 discusses 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 undertakes no 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 data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2001 2000 2001 2000
Net sales(b) $ 27,727 $ 36,449 $ 69,923 $ 75,502
Cost of sales(b) 16,060 18,436 39,038 39,327
Gross profit 11,667 18,013 30,885 36,175
Selling, general
and administrative
expenses 10,721 7,940 17,124 14,450
Income from
operations 946 10,073 13,761 21,725
Interest expense,
net (483) (263) (948) (540)
Income before taxes 463 9,810 12,813 21,185
Income taxes 176 3,729 4,871 8,047
Net income $ 287 $ 6,081 $ 7,942 $ 13,138
Fully diluted
earnings per
common share $0.02 $ 0.43 $ 0.56 $ 0.92
Weighted average
fully diluted
shares
outstanding 14,177,454 14,227,860 14,174,866 14,206,265
(b) Amounts for the three and six months ended June 30, 2000 have been
reclassified to reflect the adoption of EITF 00-10, Accounting for
Shipping and Handling Fees and Costs.
TREX COMPANY, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
December 31, 2000 June 30, 2001
(unaudited)
ASSETS
Current assets:
Cash and cash
equivalents $ -- $ --
Trade accounts
receivable 10,582 7,799
Inventories 23,017 28,006
Prepaid expenses
and other assets 689 555
Income taxes
receivable -- 504
Deferred income
taxes 478 360
Total current
assets 34,766 37,224
Property, plant and
equipment, net 113,635 130,677
Intangible assets,
net 7,544 7,190
Other 650 500
Total assets $ 156,595 $ 175,591
LIABILITIES AND
STOCKHOLDERS EQUITY
Current liabilities:
Trade accounts payable $ 17,082 $ 8,496
Accrued expenses 2,053 1,909
Income taxes payable 574 --
Other current
liabilities 664 1,342
Line of credit -- 63,785
Debt related
derivatives -- 850
Current portion
of long-term debt 697 10,217
Total current
liabilities 21,070 86,599
Deferred income
taxes 5,782 6,284
Line of credit 44,748 --
Long-term debt 15,954 6,109
Total
liabilities 87,554 98,992
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;
14,135,060 and
14,145,329 shares
issued and
outstanding 141 141
Additional capital 41,330 41,473
Retained earnings 27,570 35,512
Other comprehensive
loss -- (527)
Total stockholders
equity 69,041 76,599
Total liabilities
and stockholders
equity $ 156,595 $ 175,591
CONTACT: Trex, Winchester
Robert G. Matheny, 540/678-4070
or
Lippert/Heilshorn & Associates, New York
John Nesbett or William Walkowiak, 212/838-3777