UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
______________
FORM 8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): August 6, 2013
TREX
COMPANY, INC.
(Exact
Name of Registrant as Specified in Charter)
|
Delaware |
001-14649 |
54-1910453 |
|
(State or Other Jurisdiction of Incorporation) |
(Commission File Number)
|
(IRS Employer Identification No.) |
|
160 Exeter Drive |
22603-8605 |
| (Address of Principal Executive Offices) |
(ZIP Code) |
Registrant’s telephone number, including area code: (540) 542-6300
Not Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction A.2. below):
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On August 6, 2013 Trex Company, Inc. issued a press release announcing
financial results for the quarter ended June 30, 2013. A copy of such
press release is attached hereto as Exhibit 99.1 and incorporated herein
by reference.
The information contained in this report on Form 8-K shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section.
Item 9.01 Financial Statements and Exhibits
(d) Trex Company herewith files the following exhibit:
|
Exhibit |
Description of Exhibit |
|
| 99.1 | Press release dated August 6, 2013 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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TREX COMPANY, INC. |
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| Date: | August 6, 2013 |
/s/ James E. Cline |
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James E. Cline |
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Chief Financial Officer |
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Exhibit 99.1
Trex Company Reports Second-Quarter Revenue and EPS Growth
- Net Sales of $99 Million
- GAAP EPS of $0.76; Pro-Forma EPS of $0.86
- 57% GAAP EPS Growth; 46% Pro-Forma EPS Growth
- Announces Share Buyback Program
WINCHESTER, Va.--(BUSINESS WIRE)--August 6, 2013--Trex Company, Inc. (NYSE: TREX), the world’s largest manufacturer of wood-alternative decking and railing products, today announced financial results for the second quarter ended June 30, 2013.
Net sales for the second quarter of 2013 totaled $98.6 million compared to net sales of $94.3 million for the 2012 second quarter, an increase of 4.5%. The Company reported net income of $13.2 million, or $0.76 per diluted share, for the 2013 period compared to $8.4 million, or $0.48 per diluted share, for the prior-year period, a 57% increase in earnings per share. During the 2013 second quarter, the Company recognized a $1.7 million adjustment to the mold class action provision. During the second quarter of 2012, the Company recognized a $1.1 million increase to its warranty reserve for decking material manufactured at its Nevada plant prior to 2007 and $0.7 million of severance charges. On a pro-forma basis, 2013 net income was $14.9 million, or $0.86 per diluted share, a 46% increase over pro-forma earnings per share in the 2012 period.
For the six months ended June 30, 2013, the Company reported net sales of $206.4 million compared to net sales of $190.4 million for the prior-year period, an increase of 8.4%. The Company reported net income of $34.8 million, or $2.01 per diluted share, for the first six months of 2013 compared to net income of $20.7 million, or $1.22 per diluted share, for the 2012 period, a 65% increase in earnings per share. The Company recognized $1.9 million of adjustments to the mold class action provision in the 2013 period. The Company recognized an increase of $1.5 million to the warranty reserve and $0.7 million severance charges in the 2012 period. On a pro-forma basis, 2013 net income was $36.7 million, or $2.12 per diluted share, a 58% increase over pro-forma earnings per share in the 2012 period.
Chairman, President and CEO Ronald W. Kaplan commented, “Our 2013 strategy of providing a full line-up of high-performance decking and railing products made a strong contribution to our growth in sales. All of our product introductions for 2013, which give homeowners even more options for creating their ideal outdoor living space, have been well received in the marketplace.
“Our expanded array of best-in-class products is also helping us build stronger relationships with our distributors, dealers and contractors. Our product strategy has strengthened loyalty in the marketplace.
“This year’s branding strategy, featuring our Engineered Artistry advertising campaign, coupled with a strong focus on digital marketing, has been very successful. We dominated the Decking: Composite and Vinyl category in all areas measured in Remodeling Magazine’s 2013 Brand Use Study.
“Gross margin for the second quarter rose to 37.5%, 70 basis points higher than pro-forma gross margin for last year’s period. These improved results indicate that our product innovation, sales programs and low-cost manufacturing strategies continue to contribute to our goal of increasing shareholder value. At the same time, our strong cash generation is further bolstering our capital structure, giving us an even stronger foundation and more flexibility to grow our business and pursue strategic opportunities.
“For the third quarter of 2013, we expect net sales of approximately $72 million, a gain of approximately 2% over the prior-year period.”
Share Repurchase Program
The Company also announced that its Board of Directors has authorized a common stock repurchase program of up to $25 million of the Company's outstanding common stock over a six-month period.
“This share repurchase program is the first step in a comprehensive review of our capital structure and demonstrates our Board’s confidence in the Company’s strategy and long-term prospects,” said Mr. Kaplan. “We have been delivering consistently strong earnings and cash generation performance and expect to continue this trend. Our strong balance sheet – which has been a cornerstone of our strategy – enhances our ability to implement a share repurchase program while maintaining the financial flexibility necessary to grow our business.”
In connection with the repurchase program, the Company will enter into a written trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934 by which the Company will authorize the repurchase of the shares at certain designated prices. Because the repurchases under the Plan are subject to certain pricing parameters, there is no guarantee as to the exact number of shares that will be repurchased under the Plan, or that there will be any repurchases pursuant to the Plan. In addition, the stock repurchase program may be suspended, extended or terminated by the Company at any time without prior notice.
Second-Quarter 2013 Conference Call and Webcast Information
Trex will hold a conference call to discuss its second-quarter 2013 results on Tuesday, August 6, 2013 at 10:00 a.m. ET. To participate in the live call by telephone, please dial 706-634-1218 or 888-803-7566 and reference conference ID #16622046. A live webcast of the conference call will also be available in the Investor Relations section of the Trex Company website at trex.com.
For those who cannot listen to the live broadcast, an audio replay of the earnings call will be available on the Trex website for 30 days.
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 impact of weather-related demand fluctuations on inventory levels in the distribution channel and sales of 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; 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. The second quarter of 2013 includes a $1.7 million provision for costs related to the mold class action. The second quarter of 2012 includes a $1.1 million increase to its warranty reserve for decking material manufactured at the Company’s Nevada plant prior to 2007 and $0.7 million of severance charges.
Financial results for the six months ended June 30, 2013 include a $1.9 million provision for costs related to the mold class action. The 2012 period includes a $1.5 million increase to the Company’s warranty reserve for decking material manufactured at its Nevada plant prior to 2007 and $0.7 million of severance charges.
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 June 30, 2013” and “Reconciliations of Pro-Forma Results of Operations Measures to the Nearest Comparable GAAP Measures Six Months Ended June 30, 2013” 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 6,000 retail locations throughout the world, Trex® 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 Comprehensive Income | ||||||||||||||||||||||||
| (In thousands, except share and per share data) | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
|
2013 |
2012 |
2013 |
2012 |
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| Net sales | $ | 98,551 | $ | 94,279 | $ | 206,430 | $ | 190,379 | ||||||||||||||||
| Cost of sales | 61,629 | 60,689 | 127,649 | 121,369 | ||||||||||||||||||||
| Gross profit | 36,922 | 33,590 | 78,781 | 69,010 | ||||||||||||||||||||
| Selling, general and administrative expenses | 23,392 | 20,866 | 43,234 | 39,467 | ||||||||||||||||||||
| Income from operations | 13,530 | 12,724 | 35,547 | 29,543 | ||||||||||||||||||||
| Interest expense, net | 210 | 4,299 | 461 | 8,710 | ||||||||||||||||||||
| Income before income taxes | 13,320 | 8,425 | 35,086 | 20,833 | ||||||||||||||||||||
| Provision for income taxes | 96 | 86 | 293 | 182 | ||||||||||||||||||||
| Net income | $ | 13,224 | $ | 8,339 | $ | 34,793 | $ | 20,651 | ||||||||||||||||
| Basic income per common share | $ | 0.78 | $ | 0.54 | $ | 2.05 | $ | 1.33 | ||||||||||||||||
| Basic weighted average common shares outstanding | 17,012,046 | 15,571,207 | 16,947,935 | 15,522,492 | ||||||||||||||||||||
| Diluted income per common share | $ | 0.76 | $ | 0.48 | $ | 2.01 | $ | 1.22 | ||||||||||||||||
| Diluted weighted average common shares outstanding | 17,392,270 | 17,210,177 | 17,336,714 | 16,964,082 | ||||||||||||||||||||
| Comprehensive income | $ | 13,224 | $ | 8,339 | $ | 34,793 | $ | 20,651 | ||||||||||||||||
| TREX COMPANY, INC. | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (In thousands, except share data) | |||||||||
| (Unaudited) | |||||||||
|
30-Jun-13 |
31-Dec-12 |
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| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 15,583 | $ | 2,159 | |||||
| Accounts receivable, net | 50,959 | 26,542 | |||||||
| Inventories | 14,963 | 17,521 | |||||||
| Prepaid expenses and other assets | 1,706 | 2,188 | |||||||
| Income taxes receivable | 809 | 435 | |||||||
| Deferred income taxes | 3,858 | 3,792 | |||||||
| Total current assets | 87,878 | 52,637 | |||||||
| Property, plant and equipment, net | 100,955 | 104,425 | |||||||
| Goodwill and other intangibles | 10,546 | 10,550 | |||||||
| Other assets | 1,195 | 1,003 | |||||||
| Total assets | $ | 200,574 | $ | 168,615 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 15,020 | $ | 11,161 | |||||
| Accrued expenses | 20,026 | 18,818 | |||||||
| Accrued warranty | 7,500 | 7,500 | |||||||
| Line of credit | - | 5,000 | |||||||
| Total current liabilities | 42,546 | 42,479 | |||||||
| Deferred income taxes | 7,073 | 7,353 | |||||||
| Non-current accrued warranty | 17,747 | 21,487 | |||||||
| Other long-term liabilities | 2,402 | 3,310 | |||||||
| Total liabilities | 69,768 | 74,629 | |||||||
| 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; 17,222,232 and 17,010,493 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively | 172 | 170 | |||||||
| Additional paid-in capital | 100,663 | 98,638 | |||||||
| Retained earnings (deficit) | 29,971 | (4,822 | ) | ||||||
| Total stockholders’ equity | 130,806 | 93,986 | |||||||
| Total liabilities and stockholders’ equity | $ | 200,574 | $ | 168,615 | |||||
| TREX COMPANY, INC. | |||||||||||
| Condensed Consolidated Statements of Cash Flows | |||||||||||
| (In thousands) | |||||||||||
| (Unaudited) | |||||||||||
| Six Months Ended June 30, | |||||||||||
|
2013 |
2012 |
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| OPERATING ACTIVITIES | |||||||||||
| Net income | $ | 34,793 | $ | 20,651 | |||||||
| Adjustments to reconcile net income to net cash provided by | |||||||||||
| operating activities: | |||||||||||
| Depreciation and amortization | 8,341 | 14,154 | |||||||||
| Other non-cash charges | 1,334 | 1,395 | |||||||||
| Changes in operating assets and liabilities | (21,328 | ) | (253 | ) | |||||||
| Net cash provided by operating activities | $ | 23,140 | $ | 35,947 | |||||||
| INVESTING ACTIVITIES | $ | (4,873 | ) | $ | (2,892 | ) | |||||
| FINANCING ACTIVITIES | $ | (4,843 | ) | $ | 12,990 | ||||||
| Net increase in cash and cash equivalents | $ | 13,424 | $ | 46,045 | |||||||
| Cash and cash equivalents at beginning of period | $ | 2,159 | $ | 4,526 | |||||||
| Cash and cash equivalents at end of period | $ | 15,583 | $ | 50,571 | |||||||
| Trex Company, Inc. | ||||||||||||||||||||||||||||||||||
| Reconciliations of Pro-Forma results of operations measures to the nearest comparable GAAP measures | ||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| (amounts in 000's except for EPS) | ||||||||||||||||||||||||||||||||||
| 2012 Reconciliation | 2013 Reconciliation | |||||||||||||||||||||||||||||||||
| GAAP | Pro-Forma | Pro-Forma | GAAP | Pro-Forma | Pro-Forma | |||||||||||||||||||||||||||||
| 2012 | Adjustments(1) | 2012 | 2013 | Adjustments(2) | 2013 | |||||||||||||||||||||||||||||
| Net sales | $ | 94,279 | $ | 0 | $ | 94,279 | $ | 98,551 | $ | 0 | $ | 98,551 | ||||||||||||||||||||||
| Cost of sales | $ | 60,689 | ($1,084 | ) | $ | 59,605 | $ | 61,629 | $ | 0 | $ | 61,629 | ||||||||||||||||||||||
| Gross Profit | $ | 33,590 | $ | 1,084 | $ | 34,674 | $ | 36,922 | $ | 0 | $ | 36,922 | ||||||||||||||||||||||
| % of Net sales | 35.6 | % | 1.1 | % | 36.8 | % | 37.5 | % | 0.0 | % | 37.5 | % | ||||||||||||||||||||||
| SG&A Expenses | $ | 20,866 | ($673 | ) | $ | 20,193 | $ | 23,392 | ($1,695 | ) | $ | 21,697 | ||||||||||||||||||||||
| % of Net sales | 22.1 | % | -0.7 | % | 21.4 | % | 23.7 | % | -1.7 | % | 22.0 | % | ||||||||||||||||||||||
| Income from operations | $ | 12,724 | $ | 1,757 | $ | 14,481 | $ | 13,530 | $ | 1,695 | $ | 15,225 | ||||||||||||||||||||||
| % of Net sales | 13.5 | % | 1.9 | % | 15.4 | % | 13.7 | % | 1.7 | % | 15.4 | % | ||||||||||||||||||||||
| Interest expense, net | $ | 4,299 | $ | 0 | $ | 4,299 | $ | 210 | $ | 0 | $ | 210 | ||||||||||||||||||||||
| Income (loss) before income taxes | $ | 8,425 | $ | 1,757 | $ | 10,182 | $ | 13,320 | $ | 1,695 | $ | 15,015 | ||||||||||||||||||||||
| Net income (loss) | $ | 8,339 | $ | 1,757 | $ | 10,096 | $ | 13,224 | $ | 1,695 | $ | 14,919 | ||||||||||||||||||||||
| % of Net sales | 8.8 | % | 1.9 | % | 10.7 | % | 13.4 | % | 1.7 | % | 15.1 | % | ||||||||||||||||||||||
| Diluted earnings (loss) per common share | $ | 0.48 | $ | 0.11 | $ | 0.59 | $ | 0.76 | $ | 0.10 | $ | 0.86 | ||||||||||||||||||||||
|
(1) 2012 Pro-Forma Adjustments include a $1.1MM charge to the previously established warranty reserve (Cost of sales) and a $0.7MM severance charge (SG&A Expenses). |
|
(2) 2013 Pro-Forma Adjustments include a $1.7MM charge to the previously established mold class action provision (SG&A Expenses). |
| Trex Company, Inc. | ||||||||||||||||||||||||||||||||||
| Reconciliations of Pro-Forma results of operations measures to the nearest comparable GAAP measures | ||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| (amounts in 000's except for EPS) | ||||||||||||||||||||||||||||||||||
| 2012 Reconciliation | 2013 Reconciliation | |||||||||||||||||||||||||||||||||
| GAAP | Pro-Forma | Pro-Forma | GAAP | Pro-Forma | Pro-Forma | |||||||||||||||||||||||||||||
| 2012 | Adjustments(1) | 2012 | 2013 | Adjustments(2) | 2013 | |||||||||||||||||||||||||||||
| Net sales | $ | 190,379 | $ | 0 | $ | 190,379 | $ | 206,430 | $ | 0 | $ | 206,430 | ||||||||||||||||||||||
| Cost of sales | $ | 121,369 | ($1,487 | ) | $ | 119,882 | $ | 127,649 | $ | 0 | $ | 127,649 | ||||||||||||||||||||||
| Gross Profit | $ | 69,010 | $ | 1,487 | $ | 70,497 | $ | 78,781 | $ | 0 | $ | 78,781 | ||||||||||||||||||||||
| % of Net sales | 36.2 | % | 0.8 | % | 37.0 | % | 38.2 | % | 0.0 | % | 38.2 | % | ||||||||||||||||||||||
| SG&A Expenses | $ | 39,467 | ($673 | ) | $ | 38,794 | $ | 43,234 | ($1,891 | ) | $ | 41,343 | ||||||||||||||||||||||
| % of Net sales | 20.7 | % | -0.4 | % | 20.4 | % | 20.9 | % | -0.9 | % | 20.0 | % | ||||||||||||||||||||||
| Income from operations | $ | 29,543 | $ | 2,160 | $ | 31,703 | $ | 35,547 | $ | 1,891 | $ | 37,438 | ||||||||||||||||||||||
| % of Net sales | 15.5 | % | 1.1 | % | 16.7 | % | 17.2 | % | 0.9 | % | 18.1 | % | ||||||||||||||||||||||
| Interest expense, net | $ | 8,710 | $ | 0 | $ | 8,710 | $ | 461 | $ | 0 | $ | 461 | ||||||||||||||||||||||
| Income (loss) before income taxes | $ | 20,833 | $ | 2,160 | $ | 22,993 | $ | 35,086 | $ | 1,891 | $ | 36,977 | ||||||||||||||||||||||
| Net income (loss) | $ | 20,651 | $ | 2,160 | $ | 22,811 | $ | 34,793 | $ | 1,891 | $ | 36,684 | ||||||||||||||||||||||
| % of Net sales | 10.8 | % | 1.1 | % | 12.0 | % | 16.9 | % | 0.9 | % | 17.8 | % | ||||||||||||||||||||||
| Diluted earnings (loss) per common share | $ | 1.22 | $ | 0.12 | $ | 1.34 | $ | 2.01 | $ | 0.11 | $ | 2.12 | ||||||||||||||||||||||
| (1) 2012 Pro-Forma Adjustments include a $1.5MM charge to the previously established warranty reserve (Cost of sales) and a $0.7MM severance charge (SG&A Expenses). |
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(2) 2013 Pro-Forma Adjustments include a $1.9MM charge to the previously established mold class action provision (SG&A Expenses). |
CONTACT:
Trex Company, Inc.
James Cline, 540-542-6300
Chief
Financial Officer
or
LHA
Harriet Fried, 212-838-3777