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Trex Company Reports First Quarter Revenues Increase 44 Percent
WINCHESTER, Va.--(BUSINESS WIRE)--May 13, 1999--Trex Company, Inc. (NYSE:TWP), manufacturer of Trex® Easy Care Decking™, today announced its operating results for the quarter ended March 31, 1999.
Net sales in the first quarter of 1999 increased 44% to $22.4 million from $15.5 million in the first quarter of 1998. Historical net income for the 1999 quarter increased 49% to $7.6 million, or $1,889.50 per junior unit, from $5.1 million, or $1,268.50 per junior unit in the 1998 quarter. The Company completed a reorganization on April 7, 1999 and its initial public offering of Common Stock on April 13, 1999. Giving effect to those transactions and the application of the net offering proceeds, supplemental pro forma net income for the 1999 quarter increased 43% to $5.0 million, or $0.35 per share, compared to supplemental pro forma net income of $3.5 million, or $0.25 per share, for the first quarter of 1998.
Customer demand for Trex currently exceeds the Company's production capacity. In order to meet demand and further improve customer service, the Company is constructing a new 150,000 square foot state-of-the-art manufacturing plant in Fernley, Nevada near Reno. Construction of the facility is on schedule with the installation of equipment currently underway. The new facility is expected to come on line in the Fall of 1999. The Company anticipates that the new facility will initially increase manufacturing capacity by more than 25% and, together with two new production lines added in December 1998 and January 1999 at the Company's facility in Winchester, Virginia, will more than double overall production capacity from December 1998 levels. As of April 30, 1999, the Company had expended approximately $9.8 million of the approximately $19.6 million it estimates will be required to complete construction and equipping of the Nevada facility. The Company will fund the remaining $9.8 million of expenditures from cash on hand, operating cash flow and borrowings under its construction loan and credit facility.
Robert Matheny, President, stated, ''We are very pleased with our performance for the quarter. Our recent IPO was an important milestone for the Company, strengthening our capital structure and positioning us to continue to expand our capacity and drive demand through brand development. Since 1993 we have worked very hard to differentiate the Trex brand in a market which is not generally characterized by brand identification. We have invested over $10 million during the last three years to develop the brand in the residential and commercial decking market, and during the first quarter of 1999 have further increased our branding activities. In April 1999, we received over 42,000 calls to our toll-free hotline, which was 300% of the volume we achieved in April 1998, and visits to our Web site through April were approximately 68,000, compared to 83,000 for all of 1998.
We are very focused on building out additional capacity to capitalize on the growing demand for our product. During the first quarter of this year, we were not able to supply all of the product that was requested. As we expand our capacity, we look forward to supporting our current retail lumber dealers with additional product while also expanding our distribution base.''
In its initial public offering, Trex Company sold 4,000,000 shares of Common Stock on April 13, 1999 and 615,450 additional shares on May 6, 1999 pursuant to the underwriters' exercise of their over-allotment option. Of the $35.5 million of net offering proceeds from the sale on April 13, 1999, the Company used approximately $31.2 million to repay indebtedness and approximately $4.3 million to fund tax distributions to members of TREX Company, LLC. Of the net proceeds of $5.7 million from the over-allotment exercise, the Company applied $4.4 million to repay borrowings under its credit facility and intends to use the balance of $1.3 million for working capital and other general corporate purposes.
Trex Company is the nation's largest manufacturer of non-wood decking alternative products, which are marketed under the brand name Trex®. Trex Wood-Polymer(TM) offers an attractive appearance and the workability of wood without the ongoing need for protective sealants or repairs. Trex 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 approximately 55 wholesale distribution locations, which in turn sell Trex to about 2,000 independent contractor-oriented retail lumberyards across the United States. Company sales have increased from $3.5 million in 1993 to $46.8 million in 1998.
Trex, Easy Care Decking and Wood-Polymer Lumber are either federally registered trademarks, trademarks or trade dress of Trex Company, Inc., Winchester, VA.
This press release contains 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. All statements regarding the
Company's expected financial position and operating results, its
business strategy and its financing plans are forward-looking
statements. These statements are subject to risks and uncertainties
that could cause the Company's actual results to differ materially.
TREX COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and unit data)
(Unaudited)
Three Months Ended
March 31,
1999 1998
Net sales $ 22,365 $ 15,525
Cost of sales 9,942 7,378
------------ ------------
Gross profit 12,423 8,147
Selling, general and
administrative expenses 4,065 2,414
------------ ------------
Income from operations 8,358 5,733
Interest expense, net (800) (659)
------------ ------------
Net income $ 7,558 $ 5,074
============ ============
Earnings per junior unit $ 1,889.50 $ 1,268.50
============ ============
Weighted average junior
units outstanding 4,000 4,000
============ ============
Supplemental Pro Forma
Information:(1)
Historical income from operations $ 8,358 $ 5,733
Supplemental pro forma interest
income (expense), net (106) 35
Supplemental pro forma income taxes (3,301) (2,307)
------------ ------------
Supplemental pro forma net income $ 4,951 $ 3,461
============ ============
Supplemental pro forma earnings
per share $ 0.35 $ 0.25
============ ============
Supplemental pro forma weighted
average
shares outstanding(2) 14,115,450 14,115,450
============ ============
(1) The supplemental pro forma information presents the Company's operating results as if the Company's initial public offering and the conversion of TREX Company, LLC from a partnership for federal income tax purposes to a corporation taxed as a corporation in accordance with Subchapter C of the Income Revenue Code (a ''C corporation'') occurred on January 1 of each period presented. The supplemental pro forma income taxes reflects federal and state income taxes at an assumed 40% combined effective tax rate. The supplemental pro forma information excludes (i) interest expense of $0.7 million for each period presented relating to debt repaid from the net proceeds of the offering, (ii) a $1.1 million extraordinary charge for the early extinguishment of debt repaid from the net proceeds of the offering and (iii) a net deferred tax liability of $2.6 million that would have been recorded by the Company if TREX Company, LLC had converted to C corporation status on March 31, 1999.
(2) Assumes that the 9,500,000 shares of Common Stock issued by the Company in exchange for junior units in TREX Company, LLC on April 7, 1999 and the 4,615,450 shares subsequently sold by the Company in its initial public offering were outstanding for each period presented.
Contact:
Trex Company, Winchester
Robert G. Matheny, President
540/678-4070
or
Anthony J. Cavanna, Chief Financial Officer
540/678-4077
or
Lippert/Heilshorn & Associates, New York
John Nesbett/Vince Daniels, 212/838-3777