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Strong Demand Drives Trex Company Revenue and Earnings Growth in Third Quarter
Revenue for the third quarter of 2002 increased to $49.5 million from $29.9 million in the third quarter of 2001. Income from operations in the third quarter of 2002 nearly doubled, increasing to $10.9 million from $5.7 million in the third quarter of 2001. Net income for the third quarter of 2002 was $6.1 million, or $0.43 per diluted share, compared to $3.4 million, or $0.24 per diluted share, for the third quarter of 2001.
"Sales of Trex decking remained strong throughout the summer season, exceeding our expectations," said President Robert Matheny. "This has allowed us to operate more efficiently and improve margins. Strong demand has also allowed us to reduce inventories while increasing manufacturing utilization. By the end of the third quarter, all 15 of our previously installed production lines were in operation, and two newly installed lines were in their start-up phase. Our emphasis now shifts to building inventory for the 2003 spring season."
The market for decking materials is highly seasonal, with peak periods occurring from late winter through September. As a result, the fourth quarter of every year is generally the Company's weakest period in terms of sales. During this period, the Company builds product inventory to prepare for the heavy demand anticipated for the peak periods beginning in the early part of the following year. This operating strategy helps the company realize the efficiencies of a steady pace of year-round production.
The Company's strong cash flow has resulted in substantial progress in reducing debt and adding cash to fund the normal increase in working capital during the fourth quarter. At the end of the third quarter, the cash position stood at $29.9 million, our debt to EBITDA (TTM) ratio has improved from 3.4 as of December 31, 2001 to 1.4 while our ratio of debt to total capital is at 38%.
Matheny continued, "We are especially pleased with our progress this year on the financial front, as we have successfully rebalanced the demands of business expansion with the need to continue to improve profitability. We have learned a lot over the past two years about maintaining this balance as we manage our rapidly growing company.
"Operationally, we remain focused on our long-term growth strategy of building the Trex brand in what has traditionally been a commodity-driven industry. Our aggressive brand-building campaign is designed to expose the consumer and contractor to the benefits of Trex decking as we expand our distribution network. We have an experienced marketing team that is capable of delivering results.
"Although the seasonality of our business results in weaker sales during the fourth quarter, we expect full-year revenues to exceed $160 million. We also expect to meet or slightly exceed the high end of our previous earnings projection of $1.05 to $1.10 per share for the full year. This is based on our projections for an improvement over the loss of $0.16 per share recorded in the fourth quarter of 2001."
About Trex Company
Trex Company is the nation's largest manufacturer of non-wood decking, which is marketed under the brand name Trex(R). Trex Wood-Polymer(R) lumber offers an attractive appearance and the workability of wood without the ongoing need for protective sealants or repairs. Trex decking and railing 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 95 wholesale distribution locations, which in turn sell Trex decking to approximately 2,900 independent contractor-oriented retail lumberyards across the United States.
For a Trex decking and railing dealer near you, call 1-800-BUY-TREX (289-8739) or for dealers and product details, visit www.trex.com.
Trex(R), Trex Easy Care Decking(R) and Trex Wood-Polymer(R) are trademarks of Trex Company, Inc., Winchester, VA.
Note: As previously announced, the Company has scheduled an analyst conference call for 11:00 a.m. EST on Oct. 29. A live webcast of the conference call will be available to all investors at the Trex Company web site at www.trex.com. The call will also be simulcast at www.streetevents.com. For those who cannot listen to the live broadcast, an audio replay of the call will be available on these web sites for 30 days. A telephone replay of the call will also be available through Nov. 5. To listen to the telephone replay, dial 888-266-2081 (703-925-2533 outside the U.S.) and enter passcode 6272450.
The statements in this press release regarding the Company's expected sales performance and operating results, its projections of revenues and earnings, 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 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 10-K filed with the Securities and Exchange Commission on March 21, 2002 discusses 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.
TREX COMPANY, INC.
Condensed Consolidated Statements of Operations
(In thousands, except share data)
(Unaudited)
Three Months Ended Nine Months Ended
Sept 30, Sept 30,
2002 2001 2002 2001
------------ ----------- ------------ -----------
Net sales $ 49,522 $ 29,868 $ 147,442 $ 99,791
Cost of sales 25,069 16,716 78,779 55,754
------------ ----------- ------------ -----------
Gross profit 24,453 13,152 68,663 44,037
Selling, general
and administrative
expenses 13,546 7,478 32,505 24,602
------------ ----------- ------------ -----------
Income from
operations 10,907 5,674 36,158 19,435
Interest expense,
net (1,205) (760) (7,016) (1,708)
------------ ----------- ------------ -----------
Income before taxes 9,702 4,914 29,142 17,727
Income taxes 3,571 1,511 10,961 6,382
------------ ----------- ------------ -----------
Net income $ 6,131 $ 3,403 $ 18,181 $ 11,345
============ =========== ============ ===========
Fully diluted
earnings per
common share $ 0.43 $ 0.24 $ 1.26 $ 0.80
============ =========== ============ ===========
Weighted average
fully diluted
shares outstanding 14,416,853 14,171,593 14,374,117 14,172,971
============ =========== ============ ===========
TREX COMPANY, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
December September
31, 30,
2001 2002
(unaudited)
--------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ -- $ 29,948
Trade accounts receivable 2,507 12,098
Inventories 33,168 7,885
Prepaid expenses and other assets 1,306 1,739
Income tax receivable 1,137 --
Deferred income taxes 1,946 1,727
--------- ---------
Total current assets 40,064 53,397
--------- ---------
Property, plant and equipment, net 137,223 132,800
Intangible assets, net 6,837 6,837
Other 513 1,522
--------- ---------
Total assets $184,637 $194,556
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 9,495 $ 14,192
Accrued expenses 630 6,211
Income taxes payable -- 3,038
Other current liabilities 964 805
Current portion long-term debt 25,759 892
--------- ---------
Total current liabilities 36,848 25,138
Deferred income taxes 7,800 9,306
Line of credit 12,153 --
Debt-related derivatives 1,381 2,796
Mortgages 15,196 17,476
Long-term debt 32,986 40,000
Debt discount (3,712) --
--------- ---------
Total liabilities 102,652 94,716
--------- ---------
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; 14,155,083 and
14,292,328 shares
issued and outstanding 142 143
Additional capital 46,079 49,171
Retained earnings 36,620 54,801
Deferred compensation -- (2,542)
Other comprehensive loss (856) (1,733)
--------- ---------
Total stockholders' equity 81,985 99,840
--------- ---------
Total liabilities and stockholders'
equity $184,637 $194,556
========= =========
CONTACT:
Trex Company, Inc., Winchester
Robert G. Matheny, 540/542-6300
or
Lippert/Heilshorn & Associates, New York
John Nesbett/William Walkowiak, CFA, 212/838-3777
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