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Trex Company Reports Record Results for First Quarter 2022
40% Residential Sales Growth Driven by Double-Digit Increases in Volume and Pricing
Residential Gross Margin Expansion and Cost Efficiencies Generate Improved Operating Leverage
Second Quarter Revenues Expected to Grow 22% Year-on-Year at the Midpoint
Strong Double-digit Revenue Growth Expected for 2022
First Quarter 2022 Highlights
- Consolidated net sales increased 38% to
$339 million - Net income of
$71 million , up 47%; diluted earnings per share of$0.62 , up 48% - EBITDA up 49% to
$105 million ; EBITDA margin of 31.1%, up 220 basis points
CEO Comments
“2022 is off to a strong start with Trex Residential posting 40% revenue growth, reflecting a double-digit increase in volume from strong secular trends, as homeowners continue to invest in existing residences and pursue renovations that enhance their outdoor living spaces. Price increases to address inflationary pressures were absorbed by the market and also benefitted net sales. As the category leader with newly expanded capacity, we believe that Trex is capturing more than its share of the ongoing conversion from wood to composite products,” said
“We are pleased with our first quarter gross margin performance in light of global cost pressures and supply chain challenges, as consolidated gross margin was 39.8%. Favorable gross margin comparisons were driven by pricing taken to offset inflation and a disciplined focus on cost reductions through our continuous improvement initiatives. We also have been able to effectively hire and train our labor force to support our expanded capacity while we prioritize the pipeline of cost savings and manufacturing projects that we expect will generate additional efficiencies in future periods.
“We achieved strong operating leverage in the first quarter, converting 38% sales growth into increases of 49% in EBITDA, and 48% in diluted earnings per share, while making additional SG&A investments in branding and marketing. With our significant operating cash flow generation and confidence in the Company’s long-term growth prospects, we repurchased 833,963 shares of our outstanding common stock for
First Quarter 2022 Results
First quarter 2022 consolidated net sales were
Consolidated gross margin was 39.8%, an 80-basis point increase over the 2021 first quarter, as increased utilization, pricing actions and production efficiencies more than offset inflationary pressures on raw material, labor and logistics costs. First quarter 2022 gross margin for Trex Residential and Trex Commercial were 40.9% and 10.4%, respectively, compared to 40.2% and 17.2%, respectively, in the 2021 first quarter.
Selling, general and administrative expenses were
Net income for the 2022 first quarter was
Summary and Outlook
“Trex Company’s long-term secular growth trends remain strong. Substantially all of our revenue is tied to the repair and remodel sector, in which outdoor living remains one of the fastest growing categories. In addition to providing comfortable outdoor environments that extend their living spaces, consumers recognize that their investments in Trex decking and railing products add value to their lives and homes by significantly reducing maintenance time and expense. This underpins our conviction that the wood alternative category will consistently and rapidly gain share from wood and Trex, as the market leader, will garner an increased share of that conversion opportunity. Trex invented composite decking and railing, and we continue to innovate this category, while maintaining our brand recognition, low-cost manufacturing advantage and industry-leading distribution network.
“Built on green values, Trex composite decking is sustainably manufactured primarily from recycled and reclaimed materials. Sustainability is becoming the cornerstone of home design and the products consumers are seeking, as they assess the environmental impacts of their homes and purchasing decisions. As one of the largest recyclers of plastic film in
“For the 2022 second quarter, we expect consolidated net sales to range from
First Quarter 2022 Conference Call and Webcast Information
Trex will hold a conference call to discuss its first quarter 2022 results on
A live webcast of the conference call will be available in the Investor Relations section of the
Use of Non-GAAP Measures
The Company reports its financial results in accordance with accounting principles generally accepted in
Reconciliation of net income (GAAP) to EBITDA (non-GAAP) is as follows:
| Three Months Ended | ||||||
|
|
2022 |
|
|
2021 |
|
|
| ($ in thousands) | ||||||
| Net Income |
$ |
71,211 |
|
$ |
48,545 |
|
| Interest expense (income), net |
|
14 |
|
|
(3 |
) |
| Income tax expense |
|
23,727 |
|
|
15,947 |
|
| Depreciation and amortization |
|
10,473 |
|
|
6,423 |
|
| EBITDA |
$ |
105,425 |
|
$ |
70,912 |
|
| Net income as a percentage of net sales |
|
21.0 |
% |
|
19.8 |
% |
| EBITDA as a percentage of net sales (EBITDA margin) |
|
31.1 |
% |
|
28.9 |
% |
About
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, but are not limited to: the extent of market acceptance of the Company’s current and newly developed 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 impact of seasonal and weather-related demand fluctuations on inventory levels in the distribution channel and sales of the Company’s products; the availability and cost of third-party transportation services for the Company’s products; 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; the highly competitive markets in which the Company operates; cyber-attacks, security breaches or other security vulnerabilities; the impact of upcoming data privacy laws and the General Data Protection Regulation and the related actual or potential costs and consequences; material adverse impacts from global public health pandemics, including the strain of coronavirus known as COVID-19; and material adverse impacts related to labor shortages or increases in labor costs. Documents filed with the
| Condensed Consolidated Statements of Comprehensive Income | ||||||||
| (In thousands, except share and per share data) | ||||||||
| Three Months Ended |
||||||||
|
|
2022 |
|
2021 |
|
||||
| (Unaudited) | ||||||||
| Net sales |
$ |
339,228 |
$ |
245,524 |
|
|||
| Cost of sales |
|
204,316 |
|
149,723 |
|
|||
| Gross profit |
|
134,912 |
|
95,801 |
|
|||
| Selling, general and administrative expenses |
|
39,960 |
|
32,049 |
|
|||
| Gain on insurance proceeds |
|
- |
|
(737 |
) |
|||
| Income from operations |
|
94,952 |
|
64,489 |
|
|||
| Interest expense (income), net |
|
14 |
|
(3 |
) |
|||
| Income before income taxes |
|
94,938 |
|
64,492 |
|
|||
| Provision for income taxes |
|
23,727 |
|
15,947 |
|
|||
| Net income |
$ |
71,211 |
$ |
48,545 |
|
|||
| Basic earnings per common share |
$ |
0.62 |
$ |
0.42 |
|
|||
| Diluted earnings per common share |
$ |
0.62 |
$ |
0.42 |
|
|||
| Basic weighted average common shares outstanding |
|
114,638,424 |
|
115,663,366 |
|
|||
| Diluted weighted average common shares outstanding |
|
114,853,881 |
|
116,017,400 |
|
|||
| Comprehensive income |
$ |
71,211 |
$ |
48,545 |
|
|||
| Condensed Consolidated Balance Sheets | ||||||||
| (In thousands, except share data) | ||||||||
|
|
|
|
|
|
|
|||
| ASSETS | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents |
$ |
115,188 |
|
$ |
141,053 |
|
||
| Accounts receivable, net |
|
200,920 |
|
|
151,096 |
|
||
| Inventories |
|
98,176 |
|
|
83,753 |
|
||
| Prepaid expenses and other assets |
|
22,878 |
|
|
25,152 |
|
||
| Total current assets |
|
437,162 |
|
|
401,054 |
|
||
| Property, plant and equipment, net |
|
472,525 |
|
|
460,365 |
|
||
|
|
18,896 |
|
|
19,001 |
|
|||
| Operating lease assets |
|
37,479 |
|
|
34,571 |
|
||
| Other assets |
|
6,334 |
|
|
5,330 |
|
||
| Total assets |
$ |
972,396 |
|
$ |
920,321 |
|
||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable |
$ |
61,707 |
|
$ |
24,861 |
|
||
| Accrued expenses and other liabilities |
|
75,013 |
|
|
58,041 |
|
||
| Accrued warranty |
|
6,300 |
|
|
5,800 |
|
||
| Total current liabilities |
|
143,020 |
|
|
88,702 |
|
||
| Operating lease liabilities |
|
30,672 |
|
|
28,263 |
|
||
| Non-current accrued warranty |
|
22,112 |
|
|
22,795 |
|
||
| Deferred income taxes |
|
43,967 |
|
|
43,967 |
|
||
| Other long-term liabilities |
|
11,560 |
|
|
11,560 |
|
||
| Total liabilities |
|
251,331 |
|
|
195,287 |
|
||
| Preferred stock, |
|
— |
|
|
— |
|
||
| Common stock, |
|
1,408 |
|
|
1,407 |
|
||
| Additional paid-in capital |
|
127,623 |
|
|
127,787 |
|
||
| Retained earnings |
|
1,017,259 |
|
|
946,048 |
|
||
|
|
(425,225 |
) |
|
(350,208 |
) |
|||
| Total stockholders’ equity |
|
721,065 |
|
|
725,034 |
|
||
| Total liabilities and stockholders’ equity |
$ |
972,396 |
|
$ |
920,321 |
|
||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| Three Months Ended |
||||||||
|
|
2022 |
|
|
2021 |
|
|||
| (unaudited) | ||||||||
| Operating Activities | ||||||||
| Net income |
$ |
71,211 |
|
$ |
48,545 |
|
||
| Adjustments to reconcile net income to net cash | ||||||||
| provided by (used in) operating activities: | ||||||||
| Depreciation and amortization |
|
10,473 |
|
|
6,423 |
|
||
| Stock-based compensation |
|
2,226 |
|
|
2,176 |
|
||
| Gain on disposal of property, plant and equipment |
|
- |
|
|
(98 |
) |
||
| Other non-cash adjustments |
|
77 |
|
|
77 |
|
||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable |
|
(49,825 |
) |
|
(202,781 |
) |
||
| Inventories |
|
(14,423 |
) |
|
(6,774 |
) |
||
| Prepaid expenses and other assets |
|
1,560 |
|
|
(809 |
) |
||
| Accounts payable |
|
36,605 |
|
|
10,494 |
|
||
| Accrued expenses and other liabilities |
|
(6,149 |
) |
|
(14,453 |
) |
||
| Income taxes receivable/payable |
|
22,124 |
|
|
14,626 |
|
||
| Net cash provided by (used in) operating activities |
|
73,879 |
|
|
(142,574 |
) |
||
| Investing Activities | ||||||||
| Expenditures for property, plant and equipment |
|
(22,288 |
) |
|
(58,093 |
) |
||
| Proceeds from sales of property, plant and equipment |
|
- |
|
|
293 |
|
||
| Net cash used in investing activities |
|
(22,288 |
) |
|
(57,800 |
) |
||
| Financing Activities | ||||||||
| Borrowings under line of credit |
|
- |
|
|
142,000 |
|
||
| Principal payments under line of credit |
|
- |
|
|
(6,000 |
) |
||
| Repurchases of common stock |
|
(77,929 |
) |
|
(49,566 |
) |
||
| Proceeds from employee stock purchase and option plans |
|
523 |
|
|
460 |
|
||
| Financing costs |
|
(50 |
) |
|
- |
|
||
| Net cash (used in) provided by financing activities |
|
(77,456 |
) |
|
86,894 |
|
||
| Net decrease in cash and cash equivalents |
|
(25,865 |
) |
|
(113,480 |
) |
||
| Cash and cash equivalents, beginning of period |
|
141,053 |
|
|
121,701 |
|
||
| Cash and cash equivalents, end of period |
$ |
115,188 |
|
$ |
8,221 |
|
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20220509005646/en/
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