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Trex Company Reports Third Quarter 2019 Results
-- Strong Demand Led to a 24% Increase in Trex Residential Product Sales --
--
-- Double-Digit Year-on-Year Sales Growth Expected for Fourth Quarter --
Third Quarter Highlights
-
Consolidated net sales were
$195 million , an increase of 17% - Consolidated gross margin of 42.4%, up 200 basis points
-
Consolidated earnings per share of
$0.72 per share, up 44%
Third Quarter 2019 Results
Consolidated net sales for the third quarter of 2019 were
Net income for the third quarter of 2019 was
“We continued to experience robust demand for our residential decking products in the third quarter. Growth was led by the appeal of the Trex brand and the value proposition our products represent, strong demand for the new Enhance product line and positive market conditions. We achieved strong double-digit growth despite softer than expected sales in the Trex Commercial Products segment. The 170 point sequential expansion in Residential Products gross margin that was achieved in the third quarter reflected improved production performance that has enhanced our ability to deliver product to our customers. The margin improvement was driven by cost savings initiatives and higher capacity utilization that was partially offset by added material costs for the Enhance product line. Strong sales growth in Trex Residential Products, increased operating efficiencies, and cost management resulted in significant operating leverage, with consolidated earnings per diluted share increasing 26% from the comparable adjusted diluted EPS of
Nine Month 2019 Results
Net sales for the nine months of 2019 were
Recent Recognitions
-
Trex Company was named 2019 eco-leader by Green Builder Media. - Trex Transcend® Earth Tones decking line earned a spot on Professional Remodeler’s list of Top 100 Products of 2019.
-
Ascent® Windscreen System by Trex Commercial Products captured top honors in the 2019
Glass Magazine Awards. The innovative glass windscreen was chosen by voters as the year’s “Best Product Hardware or System.”
Summary and Outlook
“The repair and remodel market remains vibrant, and our brand and market leadership positions together with our expanded product line have resulted in accelerated conversion from the traditional wood market. Based on our current visibility heading into 2020, we expect to see continued strong demand growth next year.
“Increased throughput levels at both production facilities and the addition of capacity at our Fernley facility have increased our ability to meet the elevated market demand. We continue to absorb the additional material costs that currently are required to maintain higher throughput levels for our new Enhance products. We have begun to make modest material reductions and we expect material costs to continue to decline over the next 12 to 18 months. The multi-year capital expenditure program that we announced in June is moving forward on time and, in addition to expanded capacity, is designed to bring further manufacturing efficiencies to our production operations.
“For the fourth quarter of 2019, we expect consolidated net sales of approximately
“We continued to execute on our long-term capital allocation priorities in the 2019 third quarter, funding organic growth projects and repurchasing 125,000 shares of our common stock for
Third 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 September 30, |
Nine Months Ended September 30, |
||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||||
| (Unaudited) | (Unaudited) | ||||||||||||
| Net sales |
$ |
194,551 |
$ |
166,380 |
$ |
580,575 |
$ |
544,279 |
|||||
| Cost of sales |
|
112,120 |
|
99,170 |
|
345,334 |
|
309,241 |
|||||
| Gross profit |
|
82,431 |
|
67,210 |
|
235,241 |
|
235,038 |
|||||
| Selling, general and administrative expenses |
|
27,409 |
|
28,132 |
|
93,281 |
|
90,603 |
|||||
| Income from operations |
|
55,022 |
|
39,078 |
|
141,960 |
|
144,435 |
|||||
| Interest (income) expense, net |
|
(744) |
|
(222) |
|
(801) |
|
377 |
|||||
| Income before income taxes |
|
55,766 |
|
39,300 |
|
142,761 |
|
144,058 |
|||||
| Provision for income taxes |
|
13,790 |
|
9,829 |
|
33,520 |
|
34,657 |
|||||
| Net income |
$ |
41,976 |
$ |
29,471 |
$ |
109,241 |
$ |
109,401 |
|||||
| Basic earnings per common share |
$ |
0.72 |
$ |
0.50 |
$ |
1.87 |
$ |
1.86 |
|||||
| Basic weighted average common shares outstanding |
|
58,401,183 |
|
58,741,973 |
|
58,476,430 |
|
58,785,546 |
|||||
| Diluted earnings per common share |
$ |
0.72 |
$ |
0.50 |
$ |
1.86 |
$ |
1.85 |
|||||
| Diluted weighted average common shares outstanding |
|
58,605,726 |
|
59,084,117 |
|
58,706,960 |
|
59,111,303 |
|||||
| Comprehensive income |
$ |
41,976 |
$ |
29,471 |
$ |
109,241 |
$ |
109,401 |
|||||
| TREX COMPANY, INC. | |||||||||
| Condensed Consolidated Balance Sheets | |||||||||
| (In thousands, except share data) | |||||||||
| September 30, | December 31, | ||||||||
|
2019 |
2018 |
||||||||
| ASSETS | (Unaudited) | ||||||||
| Current assets: | |||||||||
| Cash and cash equivalents |
$ |
133,282 |
|
$ |
105,699 |
|
|||
| Accounts receivable, net |
|
117,386 |
|
|
91,163 |
|
|||
| Inventories |
|
43,923 |
|
|
57,801 |
|
|||
| Prepaid expenses and other assets |
|
13,254 |
|
|
15,562 |
|
|||
| Total current assets |
|
307,845 |
|
|
270,225 |
|
|||
| Property, plant and equipment, net |
|
143,893 |
|
|
117,144 |
|
|||
| Goodwill and other intangible assets, net |
|
74,189 |
|
|
74,503 |
|
|||
| Operating lease assets |
|
41,317 |
|
— | |||||
| Other assets |
|
3,526 |
|
|
3,250 |
|
|||
| Total assets |
$ |
570,770 |
|
$ |
465,122 |
|
|||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accounts payable |
$ |
24,641 |
|
$ |
31,084 |
|
|||
| Accrued expenses and other liabilities |
|
57,483 |
|
|
56,291 |
|
|||
| Accrued warranty |
|
5,400 |
|
|
5,400 |
|
|||
| Line of credit | — | — | |||||||
| Total current liabilities |
|
87,524 |
|
|
92,775 |
|
|||
| Operating lease liabilities |
|
35,662 |
|
— | |||||
| Deferred income taxes |
|
2,125 |
|
|
2,125 |
|
|||
| Non-current accrued warranty |
|
21,894 |
|
|
25,354 |
|
|||
| Other long-term liabilities |
|
15 |
|
|
1,905 |
|
|||
| Total liabilities |
|
147,220 |
|
|
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; 70,175,776 and 69,998,336 shares issued and 58,353,973 and 58,551,653 shares outstanding at September 30, 2019 and December 31, 2018, respectively |
|
702 |
|
|
700 |
|
|||
| Additional paid-in capital |
|
122,841 |
|
|
124,224 |
|
|||
| Retained earnings |
|
526,183 |
|
|
416,942 |
|
|||
| Treasury stock, at cost, 11,821,803 and 11,446,683 shares at September 30, 2019 and December 31, 2018, respectively |
|
(226,176 |
) |
|
(198,903 |
) |
|||
| Total stockholders’ equity |
|
423,550 |
|
|
342,963 |
|
|||
| Total liabilities and stockholders’ equity |
$ |
570,770 |
|
$ |
465,122 |
|
|||
| TREX COMPANY, INC. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| Nine Months Ended September 30, |
||||||||
|
2019 |
|
2018 |
||||||
| (unaudited) | ||||||||
| Operating Activities | ||||||||
| Net income |
$ |
109,241 |
|
$ |
109,401 |
|
||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization |
|
10,477 |
|
|
13,164 |
|
||
| Stock-based compensation |
|
5,844 |
|
|
5,045 |
|
||
| Loss (gain) on disposal of property, plant and equipment |
|
90 |
|
|
50 |
|
||
| Other non-cash adjustments |
|
(372 |
) |
|
(408 |
) |
||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable |
|
(26,225 |
) |
|
(21,034 |
) |
||
| Inventories |
|
13,878 |
|
|
(927 |
) |
||
| Prepaid expenses and other assets |
|
2,129 |
|
|
(3,155 |
) |
||
| Accounts payable |
|
(6,443 |
) |
|
8,245 |
|
||
| Accrued expenses and other liabilities |
|
(10,262 |
) |
|
619 |
|
||
| Income taxes receivable/payable |
|
629 |
|
|
4,369 |
|
||
| Net cash provided by operating activities |
|
98,986 |
|
|
115,369 |
|
||
| Investing Activities | ||||||||
| Expenditures for property, plant and equipment and intangibles |
|
(36,926 |
) |
|
(21,611 |
) |
||
| Proceeds from sales of property, plant and equipment |
|
21 |
|
|
83 |
|
||
| Net cash used in investing activities |
|
(36,905 |
) |
|
(21,528 |
) |
||
| Financing Activities | ||||||||
| Borrowings under line of credit |
|
89,500 |
|
|
172,250 |
|
||
| Principal payments under line of credit |
|
(89,500 |
) |
|
(172,250 |
) |
||
| Repurchases of common stock |
|
(35,216 |
) |
|
(17,723 |
) |
||
| Proceeds from employee stock purchase and option plans |
|
718 |
|
|
681 |
|
||
| Net cash used in financing activities |
|
(34,498 |
) |
|
(17,042 |
) |
||
| Net increase in cash and cash equivalents |
|
27,583 |
|
|
76,799 |
|
||
| Cash and cash equivalents at beginning of period |
|
105,699 |
|
|
30,514 |
|
||
| Cash and cash equivalents at end of period |
$ |
133,282 |
|
$ |
107,313 |
|
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20191028005684/en/
Source:
Bryan Fairbanks
Exec. Vice President and CFO
540-542-6300
Lynn Morgen/Viktoriia Nakhla
AdvisIRy Partners
212-750-5800