Press Release
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Trex Company Reports Second Quarter and Six Months Results
- Revenues Increase 43% -
- Supplemental Pro Forma EPS $0.19 vs. $0.16 -
Trex Company, Inc. (NYSE:TWP), manufacturer of Trex(R) Easy Care Decking(TM), today announced financial results for the quarter and six months ended June 30, 1999.
Revenues for the 1999 second quarter increased 43% to $19.8
million compared to $13.8 million in the second quarter of 1998.
Income from operations for the 1999 second quarter increased 27% to
$4.6 million from $3.6 million. Supplemental pro forma net income for
the 1999 second quarter increased 18% to $2.7 million, or $0.19 per
share, compared to supplemental pro forma net income of $2.2 million,
or $0.16 per share, for the 1998 second quarter.
Revenues for the six-month period ended June 30, 1999 increased
44% to $42.1 million compared to $29.3 million for the comparable
period of 1998. Income from operations in the 1999 six-month period
increased 38% to $13.0 million from $9.4 million. Supplemental pro
forma net income for the 1999 six-month period increased 33% to $7.6
million, or $0.54 per share, compared to supplemental pro forma net
income of $5.7 million, or $0.40 per share, for the 1998 six-month
period.
The Company completed a reorganization on April 7, 1999 and its
initial public offering of common stock on April 13, 1999 and incurred
related, one-time charges of $2.6 million for deferred taxes and $1.1
million for the early extinguishment of debt. The net loss for the
1999 second quarter including these two charges was $1.0 million
compared to net income of $3.0 million in the second quarter of 1998.
Net income for the 1999 six-month period including the charges was
$6.6 million compared to $8.1 million for the first six months of
1998.
Consistent with Trex's strategy to continue development of brand
identity, advertising and promotional expenditures increased by
approximately 85% during the 1999 second quarter compared to the
second quarter of 1998. Selling, general and administrative expenses
including the branding activities increased by 62% to $6.9 million
compared to the 1998 second quarter. In addition to the higher
advertising and promotional expenditures, the SG&A increase is
attributable to expenses incurred to support the expansion of the
Company's business and the establishment of a second manufacturing
site in Fernley, Nevada.
Customer demand for Trex during the quarter continued to exceed
the Company's production capacity, necessitating the extension of its
sales allotment process. The new 150,000 square foot state-of-the-art
manufacturing plant in Fernley is expected to alleviate supply
constraints. Employee training for Fernley plant personnel was
conducted at the Company's Winchester, VA plant in early July and a
start-up crew initiated production on two lines at the new plant in
the second half of July. A limited quantity of product has been
shipped to West Coast customers in early August, well ahead of the
planned fall schedule.
Components for installing two additional production lines in the
Fernley plant are on order and start-up is scheduled for the first
quarter of 2000. As of June 30, 1999, Trex has spent approximately
$17.0 million of the approximately $27.5 million it estimates will be
required to establish a four-line operation at Fernley.
Robert Matheny, President, stated, "In addition to achieving
solid financial performance for the quarter we also made significant
progress on all aspects of our growth strategy. We are very encouraged
by the progress we have made at the Fernley plant and by the end of
1999 we will have doubled our production capacity over last year."
Mr. Matheny continued, "We've also been very successful on our
brand building strategy. The highlight of this activity was a
television feature describing the attributes of Trex that appeared
nationally in twenty-two major markets. Response to the 1999 Trex
media campaign has resulted in a record number of hits on the
Company's web site, www.trex.com, and a record number of calls to our
customer service number, 800-BUY-TREX."
Trex Company is the nation's largest manufacturer of non-wood
decking alternative products, which are marketed under the brand name
Trex(R). Trex is a Wood-Polymer(TM) Lumber that 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 55 wholesale distribution locations, which
in turn sell Trex to more than 2,000 independent contractor-oriented
retailer 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 or trade dress of Trex Company, Inc.,
Winchester, VA.
The statements in this press release regarding the Company's
expected sales performance and operating results, its anticipated
financial condition and its business strategy 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 Company's ability to
increase its manufacturing capacity, the sensitivity of the Company's
business to general economic conditions and the highly competitive
markets in which the Company operates. The Company's report on Form
8-K filed with the Securities and Exchange Commission on May 25, 1999
discusses some of the important factors that could cause the Company's
actual results to differ materially from those in these forward
looking statements.
TREX COMPANY, INC.
Condensed Consolidated Statements of Operations
(In thousands, except share data)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
1998 1999 1998 1999
---- ----- ---- ----
Net sales $13,802 $19,775 $29,327 $42,140
Cost of sales 5,907 8,254 13,285 18,196
------ ------ ------ ------
Gross profit 7,895 11,521 16,042 23,944
Selling, general
and administrative
expenses 4,258 6,905 6,672 10,969
----- ----- ----- ------
Income from
operations 3,637 4,616 9,370 12,975
Interest
expense, net (598) (287) (1,257) (1,087)
----- ----- ------- ------
Income before taxes
and extraordinary
item 3,039 4,329 8,113 11,888
Income taxes -- 4,279 -- 4,279
----- ----- ----- -----
Income before
extraordinary
item 3,039 50 8,113 7,609
Extraordinary loss
on the early
extinguishment
of debt,
net of taxes -- (1,056) -- (1,056)
----- ------ ------ ------
Net income (loss) $ 3,039 $(1,006) $ 8,113 $ 6,553
======= ======= ======= =======
Basic earnings
per common share
Income before
extraordinary
item $0.31 $ -- $0.83 $0.65
Extraordinary
item -- (0.07) -- (0.09)
----- ------ ------ ------
Net income (loss) $0.31 $(0.07) $0.83 $0.56
===== ====== ====== ======
Weighted average
shares
outstanding 9,500,000 13,591,336 9,500,000 11,556,970
========= ========== ========= ==========
Supplemental Pro Forma
Information: (a)
Historical income
from operations $ 3,637 $ 4,616 $ 9,370 $12,975
Supplemental pro
forma interest
income (expense),
net 96 (196) 131 (302)
Supplemental pro
forma income taxes (1,493) (1,770) (3,800) (5,070)
------ ------ ------ ------
Supplemental pro
forma net income $ 2,240 $ 2,650 $ 5,701 $7,603
====== ====== ====== ======
Supplemental pro
forma earnings
per share $0.16 $0.19 $0.40 $0.54
===== ===== ===== =====
Supplemental pro
forma weighted
average shares
outstanding (b) 14,115,450 14,115,450 14,115,450 14,115,450
========== ========== ========== ==========
(a) 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 in accordance
with Subchapter C of the Internal Revenue Code (a "C
corporation") occurred on January 1 of each period presented. The
supplemental pro forma income taxes reflect federal and state
income taxes at an assumed 40% combined effective tax rate. The
supplemental pro forma information excludes (i) interest expense
of $694,000 and $91,000 for the three-month periods ended June
30, 1998 and 1999, respectively, and $1,388,000 and $785,000 for
the six-month periods ended June 30, 1998 and 1999, respectively,
relating to debt repaid from the net proceeds of the offering,
(ii) a $1.1 million extraordinary charge in the three-month and
six-month periods ended June 30, 1999 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
in the three-month and six-month periods ended June 30, 1999,
recorded by the Company as a result of TREX Company, LLC's
conversion to C corporation status on April 7, 1999.
(b) 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
Robert G. Matheny, President
540/678-4070
or
Lippert/Heilshorn & Associates
John Nesbett/Vince Daniels
212/838-3777