Press Release
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Trex Company Reports Second Quarter 2019 Results
-- Strong Demand Across All Residential Products --
-- Achieved Significant Sequential Improvement in Residential Production Throughput--
-- Consolidated Sales of
Second Quarter Highlights
-
Consolidated net sales were
$206 million - Consolidated gross margin of 40.4%, inclusive of new product start-up and added material cost impacts of approximately 370 basis points
-
Consolidated earnings per share of
$0.61 per share; exclusive of a one-time severance expense, consolidated earnings per share was$0.64
Second Quarter 2019 Results
Consolidated net sales for the second quarter of 2019 of
Net income for the second quarter of 2019 was
“We continued to experience strong demand across our residential product portfolio and sales channels in the second quarter. Significant sequential improvement in production throughput increased our ability to convert this demand into sales growth, and we continue to work towards reducing order lead-times. Start-up costs related to new Enhance Naturals and Basics decking products weighed on our gross margin performance, but to a much lesser extent than in this year’s first quarter. These startup costs, excluding the cost of added material to improve throughput, are largely behind us. During the quarter, we increased marketing and brand spending in line with seasonality and to support our wood conversion strategy,” noted
First Half 2019 Results
Net sales for the first half of 2019 were
Summary and Outlook
“The continued improvement in production rates and operating efficiencies has set the stage for solid double-digit year-on-year sales comparisons in the second half of this year. Demand trends indicate that the conversion from wood has accelerated at a faster pace than expected, which has caused us to move up our planned capacity expansion. In early June, we announced a new multi-year modular capital expenditure program to increase production at our
“For the third quarter of 2019, we expect consolidated net sales of approximately
“Our primary focus is on increasing throughput and meeting strong customer demand. As a result, while we expect gross margin to progressively increase in the second half of 2019, it will continue to reflect costs related to the additional material that we have added to our Enhance products to improve throughput. Considering first half results, start-up costs, and higher material costs, full year 2019 consolidated gross margin is expected to be below that of 2018, with second half 2019 consolidated incremental gross margin of approximately 45%.
“We continued to execute on our long-term capital allocation priorities in the 2019 second quarter, funding organic growth projects and repurchasing 125,000 shares for
Second Quarter 2019 Conference Call and Webcast Information
A live webcast of the conference call will be available in the Investor Relations section of the
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; and the impact of upcoming data privacy laws and the General Data Protection Regulation and the related actual or potential costs and consequences. Documents filed with the
About
| TREX COMPANY, INC. | ||||||||||||||
| Condensed Consolidated Statements of Comprehensive Income | ||||||||||||||
| (In thousands, except share and per share data) | ||||||||||||||
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
|
(Unaudited) |
|
(Unaudited) |
||||||||||||
| Net sales |
$ |
206,453 |
|
$ |
206,692 |
$ |
386,024 |
|
$ |
377,899 |
||||
| Cost of sales |
|
123,009 |
|
|
115,577 |
|
233,214 |
|
|
210,071 |
||||
| Gross profit |
|
83,444 |
|
|
91,115 |
|
152,810 |
|
|
167,828 |
||||
| Selling, general and administrative expenses |
|
35,705 |
|
|
33,513 |
|
65,872 |
|
|
62,472 |
||||
| Income from operations |
|
47,739 |
|
|
57,602 |
|
86,938 |
|
|
105,356 |
||||
| Interest (income) expense, net |
|
(1 |
) |
|
370 |
|
(57 |
) |
|
598 |
||||
| Income before income taxes |
|
47,740 |
|
|
57,232 |
|
86,995 |
|
|
104,758 |
||||
| Provision for income taxes |
|
12,030 |
|
|
14,413 |
|
19,730 |
|
|
24,828 |
||||
| Net income |
$ |
35,710 |
|
$ |
42,819 |
$ |
67,265 |
|
$ |
79,930 |
||||
| Basic earnings per common share |
$ |
0.61 |
|
$ |
0.73 |
$ |
1.15 |
|
$ |
1.36 |
||||
| Basic weighted average common shares outstanding |
|
58,486,192 |
|
|
58,760,753 |
|
58,514,676 |
|
|
58,807,694 |
||||
| Diluted earnings per common share |
$ |
0.61 |
|
$ |
0.73 |
$ |
1.14 |
|
$ |
1.35 |
||||
| Diluted weighted average common shares outstanding |
|
58,687,540 |
|
|
59,051,413 |
|
58,758,201 |
|
|
59,125,258 |
||||
| Comprehensive income |
$ |
35,710 |
|
$ |
42,819 |
$ |
67,265 |
|
$ |
79,930 |
||||
| TREX COMPANY, INC. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (In thousands, except share data) | ||||||||
|
June 30, |
|
December 31, |
||||||
|
2019 |
|
2018 |
||||||
| ASSETS | (Unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents |
$ |
106,084 |
|
$ |
105,699 |
|
||
| Accounts receivable, net |
|
117,909 |
|
|
91,163 |
|
||
| Inventories |
|
42,919 |
|
|
57,801 |
|
||
| Prepaid expenses and other assets |
|
19,251 |
|
|
15,562 |
|
||
| Total current assets |
|
286,163 |
|
|
270,225 |
|
||
| Property, plant and equipment, net |
|
129,612 |
|
|
117,144 |
|
||
| Goodwill and other intangibles |
|
74,294 |
|
|
74,503 |
|
||
| Operating lease assets |
|
42,571 |
|
— | ||||
| Other assets |
|
3,558 |
|
|
3,250 |
|
||
| Total assets |
$ |
536,198 |
|
$ |
465,122 |
|
||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable |
$ |
27,307 |
|
$ |
31,084 |
|
||
| Accrued expenses and other liabilities |
|
48,762 |
|
|
56,291 |
|
||
| Accrued warranty |
|
5,400 |
|
|
5,400 |
|
||
| Line of credit | — | — | ||||||
| Total current liabilities |
|
81,469 |
|
|
92,775 |
|
||
| Operating lease liabilities |
|
37,056 |
|
— | ||||
| Deferred income taxes |
|
2,125 |
|
|
2,125 |
|
||
| Non-current accrued warranty |
|
23,936 |
|
|
25,354 |
|
||
| Other long-term liabilities |
|
79 |
|
|
1,905 |
|
||
| Total liabilities |
|
144,665 |
|
|
122,159 |
|
||
| Preferred stock, $0.01 par value, 3,000,000 shares authorized; none issued and outstanding | — | — | ||||||
| Common stock, $0.01 par value, 120,000,000 shares authorized; 70,137,027 and 69,998,336 shares issued and 58,440,204 and 58,551,653 shares outstanding at June 30, 2019 and December 31, 2018, respectively |
|
701 |
|
|
700 |
|
||
| Additional paid-in capital |
|
122,720 |
|
|
124,224 |
|
||
| Retained earnings |
|
484,207 |
|
|
416,942 |
|
||
| Treasury stock, at cost, 11,696,823 and 11,446,683 shares at June 30, 2019 and December 31, 2018, respectively |
|
(216,095 |
) |
|
(198,903 |
) |
||
| Total stockholders’ equity |
|
391,533 |
|
|
342,963 |
|
||
| Total liabilities and stockholders’ equity |
$ |
536,198 |
|
$ |
465,122 |
|
||
| TREX COMPANY, INC. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
|
Six Months Ended
|
||||||||
|
2019 |
|
2018 |
||||||
| (unaudited) | ||||||||
| Operating Activities | ||||||||
| Net income |
$ |
67,265 |
|
$ |
79,930 |
|
||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization |
|
6,857 |
|
|
9,363 |
|
||
| Stock-based compensation |
|
4,918 |
|
|
3,645 |
|
||
| Loss (gain) on disposal of property, plant and equipment |
|
10 |
|
|
(29 |
) |
||
| Other non-cash adjustments |
|
(373 |
) |
|
(406 |
) |
||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable |
|
(26,746 |
) |
|
(104,250 |
) |
||
| Inventories |
|
14,882 |
|
|
(1,664 |
) |
||
| Prepaid expenses and other assets |
|
210 |
|
|
(2,616 |
) |
||
| Accounts payable |
|
(3,777 |
) |
|
14,863 |
|
||
| Accrued expenses and other liabilities |
|
(16,548 |
) |
|
(5,705 |
) |
||
| Income taxes receivable/payable |
|
(3,640 |
) |
|
5,195 |
|
||
| Net cash provided by (used in) operating activities |
|
43,058 |
|
|
(1,674 |
) |
||
| Investing Activities | ||||||||
| Expenditures for property, plant and equipment and intangibles |
|
(19,061 |
) |
|
(17,697 |
) |
||
| Proceeds from sales of property, plant and equipment |
|
- |
|
|
83 |
|
||
| Net cash used in investing activities |
|
(19,061 |
) |
|
(17,614 |
) |
||
| Financing Activities | ||||||||
| Borrowings under line of credit |
|
89,500 |
|
|
167,750 |
|
||
| Principal payments under line of credit |
|
(89,500 |
) |
|
(159,250 |
) |
||
| Repurchases of common stock |
|
(24,172 |
) |
|
(17,230 |
) |
||
| Proceeds from employee stock purchase and option plans |
|
560 |
|
|
405 |
|
||
| Net cash used in financing activities |
|
(23,612 |
) |
|
(8,325 |
) |
||
| Net increase (decrease) in cash and cash equivalents |
|
385 |
|
|
(27,613 |
) |
||
| Cash and cash equivalents at beginning of period |
|
105,699 |
|
|
30,514 |
|
||
| Cash and cash equivalents at end of period |
$ |
106,084 |
|
$ |
2,901 |
|
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190729005587/en/
Source:
Bryan Fairbanks
Exec. Vice President and CFO
540-542-6300
Lynn Morgen/Viktoriia Nakhla
AdvisIRyPartners
212-750-5800