UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM
10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023March 31, 2024
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from       to      
Commission File Number:
001-14649
 
LOGO
Trex Company, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
54-1910453
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
2500 Trex Way
Winchester, Virginia
 
22601
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
(540) 542-6300
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading Symbol(s)
  
Name of each exchange on which registered
Common stock
  
TREX
  
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.:
Large accelerated filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company 
   Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule
12b-2
of the Exchange Act): Yes ☐ No ☒
The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding at October 16, 2023April 25, 2024 was 108,595,381108,692,757 shares.
 



PART I
FINANCIAL INFORMATION
 
Item 1.
Condensed Consolidated Financial Statements
TREX COMPANY, INC.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands, except share and per share data)
 
   
Three Months Ended

September 30,
   
Nine Months Ended

September 30,
 
   
2023
  
2022
   
2023
   
2022
 
Net sales
  $303,836  $188,472   $899,092   $913,950 
Cost of sales
   172,941   142,264    517,321    575,452 
  
 
 
  
 
 
   
 
 
   
 
 
 
Gross profit
   130,895   46,208    381,771    338,498 
Selling, general and administrative expenses
   44,532   26,857    133,694    106,387 
  
 
 
  
 
 
   
 
 
   
 
 
 
Income from operations
   86,363   19,351    248,077    232,111 
Interest (income) expense, net
   (734  —     2,555    (103
  
 
 
  
 
 
   
 
 
   
 
 
 
Income before income taxes
   87,097   19,351    245,522    232,214 
Provision for income taxes
   21,831   4,928    62,089    57,665 
  
 
 
  
 
 
   
 
 
   
 
 
 
Net income
  $65,266  $14,423   $183,433   $174,549 
  
 
 
  
 
 
   
 
 
   
 
 
 
Basic earnings per common share
  $0.60  $0.13   $1.69   $1.55 
  
 
 
  
 
 
   
 
 
   
 
 
 
Basic weighted average common shares outstanding
   108,583,009   110,140,496    108,707,699    112,609,684 
  
 
 
  
 
 
   
 
 
   
 
 
 
Diluted earnings per common share
  $0.60  $0.13   $1.69   $1.55 
  
 
 
  
 
 
   
 
 
   
 
 
 
Diluted weighted average common shares outstanding
   108,702,495   110,300,017    108,829,374    112,787,994 
  
 
 
  
 
 
   
 
 
   
 
 
 
Comprehensive income
  $65,266  $14,423   $183,433   $174,549 
  
 
 
  
 
 
   
 
 
   
 
 
 
   
Three Months Ended

March 31,
 
   
2024
  
2023
 
Net sales  $373,635  $238,718 
Cost of sales   204,023   144,290 
         
Gross profit   169,612   94,428 
Selling, general and administrative expenses   50,600   37,480 
         
Income from operations   119,012   56,948 
Interest (income) expense, net   (5  1,985 
         
Income before income taxes   119,017   54,963 
Provision for income taxes   29,947   13,832 
         
Net income
  
$
89,070
 
 
$
41,131
 
         
Basic earnings per common share  $0.82  $0.38 
         
Basic weighted average common shares outstanding   108,640,168   108,771,958 
         
Diluted earnings per common share
  
$
0.82
 
 
$
0.38
 
         
Diluted weighted average common shares outstanding   108,790,625   108,916,261 
         
Comprehensive income  $89,070  $41,131 
         
See Notes to Condensed Consolidated Financial Statements (Unaudited).
 
2

TREX COMPANY, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
 
  
September 30,

2023
 
December 31,
2022
   
March 31,

2024
 
December 31,

2023
 
            
  
(Unaudited)
   
(Unaudited)
 
ASSETS
   
Current assets
   
Cash and cash equivalents  $4,644  $12,325   $3,053  $1,959 
Accounts receivable, net   200,909   98,057    373,470   41,136 
Inventories   60,384   141,355    123,885   107,089 
Prepaid expenses and other assets   7,130   35,105    12,958   22,070 
            
Total current assets
   273,067   286,842    513,366   172,254 
Property, plant and equipment, net   671,035   589,892    729,993   709,402 
Operating lease assets   27,286   30,991    25,010   26,233 
Goodwill and other intangible assets, net   18,267   18,582    18,058   18,163 
Other assets   7,157   7,398    6,531   6,833 
            
Total assets
  
$
996,812
 
 
$
933,705
 
  
$
1,292,958
 
 
$
932,885
 
            
LIABILITIES AND STOCKHOLDERS’ EQUITY
   
Current liabilities
   
Accounts payable  $31,795  $19,935   $49,350  $23,963 
Accrued expenses and other liabilities   88,919   44,064    91,940   56,734 
Accrued warranty   5,092   4,600    4,901   4,865 
Line of credit   56,500   222,000    223,000   5,500 
            
Total current liabilities
   182,306   290,599    369,191   91,062 
Deferred income taxes   68,224   68,224    67,226   72,439 
Operating lease liabilities   20,197   23,974    17,602   18,840 
Non-current
accrued warranty
   17,874   20,999    18,233   17,313 
Other long-term liabilities   16,560   11,560    16,560   16,560 
            
Total liabilities
   305,161   415,356   
 
488,812
 
 
 
216,214
 
            
Commitments and contingencies   —    —     —    —  
Stockholders’ equity
   
Stockholders’ equity
Stockholders’ equity
Stockholders’ equity
Preferred stock, $0.01 par value, 3,000,000 shares authorized; none issued and outstanding   —    —     —    —  
Common stock, $0.01 par value, 360,000,000 shares authorized; 140,958,411 and 140,841,833 shares issued and 108,595,105 and 108,743,423 share outstanding, at September 30, 2023 and December 31, 2022, respectively   1,410   1,408 
Common stock, $0.01 par value, 360,000,000 shares authorized; 141,056,063 and 140,974,843 shares issued and 108,692,757 and 108,611,537 share outstanding, at March 31, 2024 and December 31, 2023, respectively   1,411   1,410 
Additional
paid-in
capital
   137,088   131,539    138,561   140,157 
Retained earnings   1,314,107   1,130,674    1,425,128   1,336,058 
Treasury stock, at cost, 32,363,306 shares at September 30, 2023 and 32,098,410 shares at December 31, 2022   (760,954  (745,272
Treasury stock, at cost, 32,363,306 and 32,363,306 shares at March 31, 2024 and December 31, 2023   (760,954  (760,954
            
Total stockholders’ equity
   691,651   518,349   
 
804,146
 
 
 
716,671
 
            
Total liabilities and stockholders’ equity
  
$
996,812
 
 
$
933,705
 
  
$
1,292,958
 
 
$
932,885
 
            
See Notes to Condensed Consolidated Financial Statements (Unaudited).
 
3

TREX COMPANY, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(In thousands, except share data)
 
  
Common Stock
   
Additional
Paid-In

Capital
 
Retained
Earnings
   
Treasury Stock
  
Total
   
Common Stock
   
Additional

Paid-In

Capital
 
Retained

Earnings
   
Treasury Stock
  
Total
 
  
Shares
 
Amount
   
Shares
   
Amount
   
Shares
 
Amount
   
Shares
   
Amount
 
Balance, December 31, 2022
  
 
108,743,423
 
 
$
1,408
 
  
$
131,539
 
 
$
1,130,674
 
  
 
32,098,410
 
  
$
(745,272
 
$
518,349
 
Balance, December 31, 2023
  
 
108,611,537
 
 
$
1,410
 
  
$
140,157
 
 
$
1,336,058
 
  
 
32,363,306
 
  
$
(760,954
 
$
716,671
 
Net income   —    —     —    41,131    —     —    41,131    —    —     —    89,070    —     —    89,070 
Employee stock plans   8,504   —     316   —     —     —    316    5,640   —     397   —     —     —    397 
Shares withheld for taxes on awards   (28,773  —     (1,592  —     —     —    (1,592   (55,103  —     (5,146  —     —     —    (5,146
Stock-based compensation   80,362   1    1,972   —     —     —    1,973    130,683   1    3,153   —     —     —    3,154 
                                                
Balance, March 31, 2023
  
 
108,803,516
 
 
$
1,409
 
  
$
132,235
 
 
$
1,171,805
 
  
 
32,098,410
 
  
$
(745,272
 
$
560,177
 
Net income   —    —     —    77,036    —     —    77,036 
Employee stock plans   7,971   —     323   —     —     —    323 
Shares withheld for taxes on awards   (15,663  —     (855  —     —     —    (855
Stock-based compensation   36,888   —     2,590   —     —     —    2,590 
Repurchases of common stock   (264,896  —     —    —     264,896    (15,746  (15,746
Balance, March 31, 2024
  
 
108,692,757
 
 
$
1,411
 
  
$
138,561
 
 
$
1,425,128
 
  
 
32,363,306
 
  
$
(760,954
 
$
804,146
 
                                                
Balance, June 30, 2023
  
 
108,567,816
 
 
$
1,409
 
  
$
134,293
 
 
$
1,248,841
 
  
 
32,363,306
 
  
$
(761,018
 
$
623,525
 
Net Income   —    —     —    65,266   —     —    65,266 
Employee stock plans   5,448   —     286   —     —     —    286 
Shares withheld for taxes on awards   (4,140  —     (312  —     —     —    (312
Stock-based compensation   25,981   1   2,821   —     —     —    2,822 
Repurchases of common stock   —    —     —    —     —     64   64 
                         
Balance, September 30, 2023
  
 
108,595,105
 
 
$
1,410
 
  
$
137,088
 
 
$
1,314,107
 
  
 
32,363,306
 
  
$
(760,954
 
$
691,651
 
                         
 
  
Common Stock
   
Additional
Paid-In

Capital
 
Retained
Earnings
   
Treasury Stock
  
Total
   
Common Stock
   
Additional

Paid-In

Capital
 
Retained

Earnings
   
Treasury Stock
  
Total
 
  
Shares
 
Amount
   
Shares
   
Amount
   
Shares
 
Amount
   
Shares
   
Amount
 
Balance, December 31, 2021
  
 
115,148,152
 
 
$
1,407
 
  
$
127,787
 
 
$
946,048
 
  
 
25,586,601
 
  
$
(350,208
 
$
725,034
 
Balance, December 31, 2022
  
 
108,743,423
 
 
$
1,408
 
  
$
131,539
 
 
$
1,130,674
 
  
 
32,098,410
 
  
$
(745,272
 
$
518,349
 
Net income   —    —     —    71,211    —     —    71,211    —    —     —    41,131    —     —    41,131 
Employee stock plans   9,081   —     523   —     —     —    523    8,504   —     316   —     —     —    316 
Shares withheld for taxes on awards   (35,856  —     (2,912  —     —     —    (2,912   (28,773  —     (1,592  —     —     —    (1,592
Stock-based compensation   79,926   1    2,225   —     —     —    2,226    80,362   1    1,972   —     —     —    1,973 
Repurchases of common stock   (833,963  —     —    —     833,963    (75,017  (75,017
                                                
Balance, March 31, 2022
  
 
114,367,340
 
 
$
1,408
 
  
$
127,623
 
 
$
1,017,259
 
  
 
26,420,564
 
  
$
(425,225
 
$
721,065
 
Net income   —    —     —    88,916    —     —    88,916 
Employee stock plans   8,834   —     429   —     —     —    429 
Stock-based compensation   2,024   —     1,057   —     —     —    1,057 
Repurchases of common stock   (2,814,817  —     —    —     2,814,817    (169,992  (169,992
Balance, March 31, 2023
  
 
108,803,516
 
 
$
1,409
 
  
$
132,235
 
 
$
1,171,805
 
  
 
32,098,410
 
  
$
(745,272
 
$
560,177
 
                                                
Balance, June 30, 2022
  
 
111,563,381
 
 
$
1,408
 
  
$
129,109
 
 
$
1,106,175
 
  
 
29,235,381
 
  
$
(595,217
 
$
641,475
 
Net income   —    —     —    14,423    —     —    14,423 
Employee stock plans   11,003   —     429   —     —     —    429 
Shares withheld for taxes on awards   (57  —     (3  —     —     —    (3
Stock-based compensation   10,520   —     249   —     —     —    249 
Repurchases of common stock   (1,710,676  —     —    —     1,710,676    (100,035  (100,035
                         
Balance, September 30, 2022
  
 
109,874,171
 
 
$
1,408
 
  
$
129,784
 
 
$
1,120,598
 
  
 
30,946,057
 
  
$
(695,252
 
$
556,538
 
                         
See Notes to Condensed Consolidated Financial Statements (Unaudited).
 
4
TREX COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
  
Nine Months Ended
September 30,
   
Three Months Ended

March 31,
 
  
2023
 
2022
   
2024
 
2023
 
OPERATING ACTIVITIES
   
Net income  $183,433  $174,549   $89,070  $41,131 
Adjustments to reconcile net income to net cash provided by operating activities:   
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization   37,194   33,269    14,154   11,915 
Deferred Income Taxes   (5,212  —  
Stock-based compensation   7,384   3,531    3,155   1,972 
Loss (gain) on disposal of property, plant and equipment   1,081   (43   2,122   —  
Other
non-cash
adjustments
   (169  (171   121   121 
Changes in operating assets and liabilities:   
Accounts receivable   (102,852  62,343    (332,333  (204,014
Inventories   80,971   (48,362   (16,796  13,571 
Prepaid expenses and other assets   4,376   7,125    (319  291 
Accounts payable   10,678   (3,769   26,238   2,975 
Accrued expenses and other liabilities   39,039   8,842    12,041   3,361 
Income taxes receivable/payable   27,090   7,079    33,715   13,206 
            
Net cash provided by operating activities
  
 
288,225
 
 
 
244,393
 
Net cash used in operating activities
  
 
(174,044
 
 
(115,471
            
INVESTING ACTIVITIES
   
Expenditures for property, plant and equipment   (112,920  (108,163   (37,720  (39,192
Proceeds from sales of property, plant and equipment   —    45    106   —  
            
Net cash used in investing activities
  
 
(112,920
 
 
(108,118
  
 
(37,614
 
 
(39,192
            
FINANCING ACTIVITIES
   
Borrowings under line of credit   509,500   156,000   258,500   200,500 
Principal payments under line of credit   (675,000  (80,000   (41,000  (53,000
Repurchases of common stock   (18,441  (347,957   (5,145  (1,592
Proceeds from employee stock purchase and option plans   925   1,381    397   316 
Financing costs   30   (867   —    30 
            
Net cash used in financing activities
  
 
(182,986
 
 
(271,443
Net cash provided by financing activities
  
 
212,752
 
 
 
146,254
 
            
Net decrease in cash and cash equivalents
  
 
(7,681
 
 
(135,168
Net increase (decrease) in cash and cash equivalents   1,094   (8,409
Cash and cash equivalents, beginning of period   12,325   141,053    1,959   12,325 
            
Cash and cash equivalents, end of period
  
$
4,644
 
 
$
5,885
 
  
$
3,053
 
 
$
3,916
 
            
Supplemental Disclosure:   
Cash paid for interest, net of capitalized interest  $4,165  $—    $—   $1,817 
Cash paid for income taxes, net  $35,106  $50,585   $1,444  $733 
Supplemental
non-cash
investing and financing disclosure:
   
Capital expenditures in accounts payable  $1,183  $787   $851  $229 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
 
5

TREX COMPANY, INC.
Notes to Condensed Consolidated Financial Statements
For the NineThree Months Ended September 30,March 31, 2023 and September 30, 20222024
(Unaudited)
 
1.
BUSINESS AND ORGANIZATION
Trex Company, Inc. (Trex or Company), a Delaware corporation, was incorporated on September 4, 1998. As of December 30, 2022, the Company operates in one reportable segment, Trex Residential Products (Trex Residential). Through December 30, 2022, Trex had one wholly-owned subsidiary, Trex Commercial Products, Inc. (Trex Commercial) and operated in two reportable segments, Trex Residential and Trex Commercial.
Trex Residential, the Company’s principal business based on net sales, is the world’s largest manufacturer of high-performance,
low-maintenance
wood-alternative decking and residential railing and outdoor living products and accessories, marketed under the brand name Trex
®
, with more than 30 years of product experience. A majority of its products are manufactured in a proprietary process that combines reclaimed wood fibers and scrap polyethylene. The Company is incorporated in Delaware. The principal executive offices are located at 2500 Trex Way, Winchester, Virginia 22601, and the telephone number at that address is
(540) 542-6300.
The Company operates in a
single
reportable segment.
 
2.
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form
10-Q
and Article 10 of Regulation
S-X
and, accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments, except as otherwise described herein) considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. Certain reclassifications have been made to prior period balances to conform to current year presentation. The unaudited condensed consolidated financial statements include the accounts of the Company for all periods presented. Intercompany accounts and transactions have been eliminated in consolidation.
The unaudited consolidated results of operations for the three and nine months ended September 30, 2023,March 31, 2024, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023.2024. The Company’s results of operations are affected by a number of factors, including, but not limited to, the cost to manufacture and distribute products, cost of raw materials, inflation, consumer spending and preferences, interest rates, the impact of any supply chain disruptions, economic conditions, and/or any adverse effects from global health pandemics and geopolitical conflicts. Towards the end of June 2022, the Company experienced a reduction in demand from its distribution partners, which the Company believed was primarily spurred by concerns over a potential easing in consumer demand due to rising interest rates, declining consumer sentiment and expectations of a general slowing in the economy. As a result, beginning in the third quarter of 2022 the Company’s channel partners met demand partially through inventory drawdown rather than reordering products and maintaining current inventories. This inventory recalibration was completed by year end.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2022, and December 31, 2021, and for each of the three years in the period ended December 31, 2022,notes thereto included in the Annual Report of Trex Company, Inc. on Form
10-K
for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission.
 
3.
SALE OF TREX COMMERCIAL PRODUCTS, INC.
On December 30, 2022, the Company completed the sale of substantially all of the assets of its wholly-owned subsidiary and reportable segment, Trex Commercial. The divestiture reflected the Company’s decision to focus on driving the most profitable growth strategy for the Company and its shareholders through the execution of its outdoor living strategy. The divestiture did not represent a strategic shift with a major effect on the Company’s operations. The results of operations of Trex Commercial are consolidated in the Company’s results of operations for the three months and nine months ended September 30, 2022.
6

4.
RECENTLY ADOPTED ACCOUNTING STANDARDS
In December 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
No. 2022-06
“Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848.” The amendments in this update defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. In March 2020, the FASB issued ASU
No. 2020-04
“Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. ASU
No. 2020-04
provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The FASB included a sunset provision within Topic 848 based on the expectations of when the LIBOR would cease being published intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2024 and can be adopted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020. The amendments did not have a material effect on the Company’s consolidated financial statements.
 
6

4.
NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
No. 2023-07,
“Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The guidance requires disclosure of significant segment expenses which are regularly provided to the chief operating decision maker (CODM), the composition of and amount of other segment items, the CODM’s title and position within the organization, and how the CODM uses the reported measure(s) of segment’s profit or loss to assess the performance of the segment. In addition, on an interim basis, all segment profit or loss and asset disclosures currently required on an annual basis must be reported, as well as those required by Topic 280. The guidance allows for multiple measure of a segment’s profit or loss to be reported. Entities which have a single reportable segment must apply Topic 280 in its entirety. The guidance is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. Early adoption is permitted. Entities are required to apply the amendments of this update retrospectively for all prior periods presented in the financial statements. The Company does not intend to early adopt the standard and does not expect adoption of this guidance to have a material effect on its consolidated results of operations and financial position.
In December 2023, the FASB issued ASU
No. 2023-09,
“Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The guidance requires public entities to disclose additional categories of information related to federal, state, and foreign income taxes and additional details related to reconciling items should they meet a quantitative threshold. The guidance requires disclosure of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and to disaggregate the information by jurisdiction based on quantitative thresholds. The guidance is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance should be applied on a prospective basis, retrospective application is permitted. The Company does not intend to early adopt the standard and does not expect adoption of the guidance to have a material effect on its consolidated results of operations and financial position.
5.
INVENTORIES
Inventories valued at LIFO
(last-in,
first-out),
consist of the following (in thousands):
 
  
September 30,
2023
   
December 31,
2022
   
March 31,

2024
   
December 31,

2023
 
Finished goods  $43,180   $107,114   $89,619   $88,840 
Raw materials   52,255    69,292    67,705    51,688 
              
Total FIFO
(first-in,
first-out)
inventories
   95,435    176,406    157,324    140,528 
Reserve to adjust inventories to LIFO value   (35,051   (35,051   (33,439   (33,439
              
Total LIFO inventories  $60,384   $141,355   $123,885   $107,089 
              
The Company utilizes the LIFO method of accounting, related to its Trex Residential wood-alternative decking and residential railing products, which generally provides for the matching of current costs with current revenues. However, under the LIFO method, reductions in annual inventory balances may cause a portion of the Company’s cost of sales to be based on historical costs rather than current year costs (LIFO liquidation). Reductions in interim inventory balances expected to be replenished by
year-end
do not result in a LIFO liquidation. Accordingly, interim LIFO calculations are based, in part, on management’s estimates of expected
year-end
inventory levels and costs and may differ from actual results. Since inventory levels and costs are subject to factors beyond management’s control, interim results are subject to the final
year-end
LIFO inventory valuation.
In the nine months ended September 30, 2023, the Company had a reduction in There were no LIFO inventory that it does not expect will be replenished by year end. However, the Company estimates that the LIFO liquidation will not have a materialliquidations or related impact on cost of sales for the year ended December 31, 2023 and, accordingly, it did not impact the cost of sales forin the ninethree months ended September 30, 2023.March 31, 2024.
 
6.
PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets consist of the following (in thousands):
 
  
September 30,

2023
   
December 31,
2022
   
March 31,

2024
   
December 31,
2023
 
Prepaid expenses  $ 6,859   $10,787   $12,329   $11,830 
Income tax receivable   —     23,979    —     9,611 
Other   271    339    629    629 
              
Total prepaid expenses and other assets  $7,130   $35,105   $12,958   $22,070 
              
 
7.
GOODWILL AND OTHER INTANGIBLE ASSETS, NET
The carrying amount of goodwill at September 30, 2023,March 31, 2024, and December 31, 2022,2023, was $14.2 million for Trex Residential.million. The Company’s intangible assets, purchased in 2018, consist of domain names for Trex Residential.names. At September 30, 2023,March 31, 2024, and December 31, 2022,2023, intangible assets were $6.3 million and accumulated amortization was $2.2$2.5 million and $1.9$2.4 million, respectively. Intangible asset amounts were determined based on the
7

estimated economics of the asset and are amortized over the estimated useful lives on a straight-line basis over 15 years, which approximates the pattern in which the economic benefits are expected to be received.
7

The Company evaluates the recoverability of intangible assets periodically and considers events or circumstances that may warrant revised estimates of useful lives or that may indicate an impairment. Intangible asset amortization expense for the ninethree months ended September 30,March 31, 2024, and March 31, 2023, and September 30, 2022, was $0.3$0.1 million and $0.3$0.1 million, respectively.
 
8.
ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following (in thousands):
 
  
September 30,

2023
   
December 31,
2022
   
March 31,

2024
   
December 31,

2023
 
Sales and marketing  $45,374   $ 19,194   $33,754   $15,496 
Income Taxes   24,104    —  
Compensation and benefits   24,470    8,646    16,719    25,859 
Operating lease liabilities   7,409    7,488    7,629    7,663 
Manufacturing costs   3,507    3,425    3,193    3,382 
Income taxes   3,111    —  
Other   5,048    5,311    6,541    4,334 
              
Total accrued expenses and other liabilities  $ 88,919   $44,064   $91,940   $56,734 
              
 
9.
DEBT
Revolving Credit Facility
Indebtedness on and after May
 18, 2022 and prior to December
 22, 2022
. On May 18, 2022, the Company as borrower; Trex Commercial, as guarantor; BOA, as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; Wells Fargo, as lender and Syndication Agent; Regions Bank, PNC Bank, National Association (PNC), and TD Bank, N.A. (TD)(each, a Lender and collectively, the Lenders), arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner, entered into a Credit Agreement (Credit Agreement) with certain lending parties thereto (Lenders) to amend and restate the Fourth Amended and Restated Credit Agreement dated as of November 5, 2019.
Under the Credit Agreement, the Lenders agreed to provide the Company with one or more Revolving Loans in a collective maximum principal amount of $400,000,000 (Loan Limit) throughout the term, which ends May 18, 2027 (Term). Included within the Loan Limit are sublimits for a Letter of Credit facility in an amount not to exceed $60,000,000; and Swing Line Loans in an aggregate principal amount at any time outstanding not to exceed $20,000,000. The Revolving Loans, the Letter of Credit facility and the Swing Line Loans are for the purpose of raising working capital and supporting general business operations.
TheOn December 22, 2022, the Company entered into a First Amendment to the Credit Agreement provides(First Amendment). As a part of the First Amendment, the Credit Agreement was amended and restated to provide for an additional Revolving B Loan (as hereinafter defined). Under the First Amendment, the Lenders agreed to provide the Company with a Revolving B Loan consisting of one or more revolving loans in a collective maximum principal amount of $150,000,000 (Revolving B Loan Limit) throughout the term, which ends December 22, 2024 (Revolving B Loan Term). Previously, under the Credit Agreement, there was no Revolving B Loan. The First Amendment also provided that TD Bank, N.A. would serve as Syndication Agent.
In conjunction with the First Amendment, on December 22, 2022, the Credit Agreement was amended and restated to refer to this loan as the Revolving A Loan. The amended and restated Credit Agreement was made an Exhibit A to the First Amendment. All of the terms of the Credit Agreement apply to the Revolving B Loan.
The Notes provide the Company, in the aggregate, the ability to borrow an amount up to the Revolving A Loan Limit during the Revolving A Loan Term and Revolving B Loan Limit during the Revolving B Loan Term. The Company is not obligated to borrow any amount under the Loan Limit.revolving loans. Within the Loan Limit,respective loan limit, the Company may borrow, repay and reborrow at any time or from time to time while the Notes are in effect.
Base Rate Loans (as defined in the Credit Agreement) under the Revolving LoansA Loan and the Swing Line Loans accrue interest at the Base Rate plus the Applicable Rate (as defined in the Credit Agreement) and Term SOFR Loans for the Revolving Loans accrue interest at the rate per annum equal to the sum of Term SOFR for such interest period plus the Applicable Rate (as defined in the Credit Agreement). The Base Rate for any day is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by BOA as its prime rate, and (c) the Term SOFR plus 1.0% subject to certain interest rate floors. Repayment of all then outstanding principal, interest, fees and costs is due at the end of the Term.
The Company and BofA Securities as a sustainability coordinator, are entitled to establish specified key performance indicators (KPIs) with respect to certain environmental, social and governance targets of the Company and its subsidiaries. The sustainability coordinator and the Company may amend the Credit Agreement for the purpose of incorporating the KPIs and other related provisions, unless the Lenders object to such amendment on or prior to the date that is ten business days after the date on which such amendment is posted for review by the Lenders. Based on the performance of the Company and its subsidiaries against the KPIs, certain adjustments (increase, decrease or no adjustment) to otherwise applicable pricing will be made; provided that the amount of such adjustments shall not exceed certain aggregate caps as in the definitive loan documentation.
8

Under the terms of the Security and Pledge Agreement, the Company and Trex Commercial, subject to certain permitted encumbrances, as collateral security for the above-stated loans and all other present and future indebtedness of the Company owing to the Lenders grants to BOA, as Administrative Agent for the Lenders, a continuing security interest in certain collateral described and defined in the Security and Pledge Agreement but excluding the Excluded Property (as defined in the Security and Pledge Agreement).
Indebtedness On and After December
 22, 2022
. As of December 22, 2022, the Company entered into a First Amendment to the Credit Agreement (First Amendment) by and among the Company, as borrower, the guarantors party thereto; BOA, as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; TD as lender and Syndication Agent; Regions Bank, PNC, and Wells Fargo (each, a Lender and collectively, the Lenders), arranged by BofA Securities as Sole Lead Arranger and Sole Bookrunner, amending that certain Credit Agreement dated as of May 18, 2022, by and among the Company, as borrower, the guarantors party thereto, BOA, as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer and the other lenders identified therein (as so amended, the “Credit Agreement”). The First Amendment removes Trex Commercial as a guarantor to any and all indebtedness under the Credit Agreement.
As a part of the First Amendment, the Credit Agreement was amended and restated to provide for an additional Revolving B Loan (as hereinafter defined).
Under the First Amendment, the Lenders agreed to provide the Company with a Revolving B Loan consisting of one or more revolving loans in a collective maximum principal amount of $150,000,000 (Revolving B Loan Limit) throughout the term, which ends December 22, 2024 (Revolving B Loan Term). Previously, under the Credit Agreement, there was no Revolving B Loan. The First Amendment also provided that TD would serve as Syndication Agent.
As of December 22, 2022, the Credit Agreement was amended and restated to refer to this loan as the Revolving A Loan. The amended and restated Credit Agreement was made an Exhibit A to the First Amendment. All of the terms of the Credit Agreement apply to the Revolving B Loan. The Credit Agreement continues to include sublimits under the Revolving A Loan for a Letter of Credit facility in an amount not to exceed $60,000,000; and Swing Line Loans in an aggregate principal amount at any time outstanding not to exceed $20,000,000. The Revolving Loans, the Letter of Credit facility and the Swing Line Loans under Revolving A Loan are for the purpose of raising working capital and supporting general business operations.
The Notes provide the Company, in the aggregate, the ability to borrow an amount up to the Revolving A Loan Limit during the Revolving A Loan Term and Revolving B Loan Limit during the Revolving B Loan Term. The Company is not obligated to borrow any amount under the revolving loans. Within the respective loan limit, the Company may borrow, repay and reborrow at any time or from time to time while the Notes are in effect. With respect to Revolving B Loans (as defined in the First Amendment), for any day, the rate per annum is a tiered pricing based upon the Consolidated Debt to Consolidated EBITDA Ratio. The applicable rate for Revolving B Loans that are Base Rate Loans range between 1.20% and 2.15% and the applicable rate for Revolving B Loans that are Term SOFR/Term SOFR Daily Floating Rate range between 0.20% and 1.15%.
8

Under the terms of the Security and Pledge Agreement, the Company, subject to certain permitted encumbrances, as collateral security for the above-stated loans and all other present and future indebtedness of the Company owing to the Lenders grants a continuing security interest in certain collateral described and defined in the Security and Pledge Agreement but excluding the Excluded Property (as defined in the Security and Pledge Agreement).
The Company had $56.5$223 million in borrowings outstanding under its revolving credit facility and available borrowing capacity of $493.5$327 million at September 30, 2023.March 31, 2024. The weighted average interest rate on the revolving credit facility was 6.11%6.22% as of September 30, 2023.March 31, 2024.
Compliance with Debt Covenants and Restrictions
Pursuant to the terms of the Credit Agreement, the Company is subject to certain loan compliance covenants. The Company was in compliance with all covenants as of September 30, 2023.March 31, 2024. Failure to comply with the financial covenants could be considered a default of repayment obligations and, among other remedies, could accelerate payment of any amounts outstanding.
 
10.
LEASES
The Company leases office space,manufacturing and training facilities, storage warehouses, training and manufacturing facilities,office space, and certain plant equipment under various operating leases. The Company’s operating leases have remaining lease terms of 1 year to 65 years. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
For the ninethree months ended September 30,March 31, 2024 and March 31, 2023, and September 30, 2022, total operating lease expense was $6.1$2.0 million and $6.3$2.1 million, respectively. The weighted average remaining lease term at September 30, 2023March 31, 2024 and December 31, 20222023 was 4.64.2 years and 5.24.4 years, respectively. The weighted average discount rate at September 30, 2023March 31, 2024 and December 31, 20222023 was 2.25%2.38% and 2.10%2.32%, respectively.
The following table includes supplemental cash flow information for the three months ended March 31, 2024 and March 31, 2023, and supplemental balance sheet information at March 31, 2024 and December 31, 2023 related to operating leases (in thousands):
   
Three Months Ended

March 31,
 
Supplemental cash flow information
  
2024
   
2023
 
Cash paid for amounts included in the measurement of operating lease liabilities  $ 2,007   $2,120 
Operating ROU assets obtained in exchange for lease liabilities  $578   $1,541 
Supplemental balance sheet information
  
March 31,

2024
   
December 31,
2023
 
Operating lease ROU assets  $25,010   $26,233 
Operating lease liabilities:    
Accrued expenses and other current liabilities  $7,629   $7,663 
Operating lease liabilities   17,602    18,840 
          
Total operating lease liabilities  $25,231   $26,503 
          
The following table summarizes maturities of operating lease liabilities at March 31, 2024 (in thousands):
Maturities of operating lease liabilities
 
2024  $5,942 
2025   5,950 
2026   5,051 
2027   4,549 
2028   3,982 
Thereafter   934 
     
Total lease payments   26,408 
Less imputed interest   (1,177
     
Total operating lease liabilities  $25,231 
     
9

The following table includes supplemental cash flow information for the nine months ended September 30, 2023, and September 30, 2022, and supplemental balance sheet information at September 30, 2023 and December 31, 2022 related to operating leases (in thousands):
   
Nine months Ended

September 30,
 
Supplemental cash flow information
  
2023
   
2022
 
Cash paid for amounts included in the measurement of operating lease liabilities  $6,236   $6,532 
Operating ROU assets obtained in exchange for lease liabilities  $ 1,882   $7,332 
Supplemental balance sheet information
  
September 30,

2023
   
December 31,
2022
 
Operating lease ROU assets  $27,286   $30,991 
Operating lease liabilities:    
Accrued expenses and other current liabilities  $7,409   $7,488 
Operating lease liabilities   20,197    23,974 
          
Total operating lease liabilities  $27,606   $31,462 
          
The following table summarizes maturities of operating lease liabilities at September 30, 2023 (in thousands):
Maturities of operating lease liabilities
    
2023  $1,893 
2024   7,386 
2025   5,552 
2026   4,851 
2027   4,446 
Thereafter   4,845 
     
Total lease payments   28,973 
Less imputed interest   (1,367
     
Total operating lease liabilities  $27,606 
     
11.
FINANCIAL INSTRUMENTS
The Company considers the recorded value of its financial assets and liabilities, consisting primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, other current liabilities, and debt to approximate the fair value of the respective assets and liabilities on the Condensed Consolidated Balance Sheets at September 30, 2023March 31, 2024 and December 31, 2022.2023.
 
12.
STOCKHOLDERS’ EQUITY
Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except share and per share data):
 
   
Three Months Ended

September 30,
   
Nine Months Ended

September 30,
 
   
2023
   
2022
   
2023
   
2022
 
Numerator:        
Net income available to common shareholders  $65,266   $14,423   $183,433   $174,549 
                    
Denominator:        
Basic weighted average shares outstanding   108,583,009    110,140,496    108,707,699    112,609,684 
Effect of dilutive securities:        
Stock appreciation rights and options   80,256    85,396    72,580    101,967 
Restricted stock   39,230    74,125    49,095    76,343 
                    
Diluted weighted average shares outstanding   108,702,495    110,300,017    108,829,374    112,787,994 
                    
Basic earnings per share  $0.60   $0.13   $1.69   $1.55 
                    
Diluted earnings per share  $0.60   $0.13   $1.69   $1.55 
                    
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Three Months Ended

March 31,
 
   
2024
   
2023
 
Numerator:    
Net income available to common shareholders  $89,070   $41,131 
          
Denominator:    
Basic weighted average shares outstanding   108,640,168    108,771,958 
Effect of dilutive securities:    
Stock appreciation rights and options   71,202    70,004 
Restricted stock   79,255    74,299 
          
Diluted weighted average shares outstanding   108,790,625    108,916,261 
          
Basic earnings per share  $0.82   $0.38 
          
Diluted earnings per share  $0.82   $0.38 
          
Diluted earnings per share is computed using the weighted average number of shares determined for the basic earnings per share computation plus the dilutive effect of common stock equivalents using the treasury stock method. The computation of diluted earnings per share excludes the following potentially dilutive securities because the effect would be anti-dilutive:
 
  
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
     
Three Months Ended

March 31,
 
  
2023
   
2022
   
2023
   
2022
     
2024
 
2023
 
Stock appreciation rights   86,250    47,303    95,467    41,627            55,132          108,749 
Restricted stock   —     68,008    69,764    48,552      48,597   107,571 
Stock Repurchase Program
On February 16, 2018, the Trex Board of Directors adopted a stock repurchase programthe 2018 Stock Repurchase Program of up to 11.6 million shares of itsthe Company’s outstanding common stock (Stock Repurchase Program). From January 1, 2023 through May 3, 2023, Trex did not repurchase shares of its outstanding common stock under the Stock Repurchase Program. On May 4, 2023, the Trex Board of Directors adopted a new stock repurchase program (2023 Stock Repurchase Program) of up to 10.8 million shares of its outstanding common stock, and terminated the existing Stock Repurchase Program. This repurchase programThe 2023 Stock Repurchase Program has no set expiration date. During the quarterly periodthree months ended September 30, 2023,March 31, 2024, Trex did not repurchase any shares of its outstanding common stock under the 2023 Stock Repurchase Program.
 
13.
REVENUE FROM CONTRACTS WITH CUSTOMERS
Trex Residential Products
Trex ResidentialThe Company principally generates revenue from the manufacture and sale of its high-performance,
low-maintenance,
eco-friendly
wood-alternative composite decking and residential railing products and accessories. Substantially all of its revenues are from contracts with customers, which are purchase orders of short-term duration of less than one year. Its customers, in turn, sell primarily to the residential market, which includes replacement, remodeling and new construction related to outdoor living products. Trex ResidentialThe Company satisfies its performance obligations at a point in time. The shipment
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of each product is a separate performance obligation as the customer is able to derive benefit from each product shipped and no performance obligation remains after shipment. Upon shipment of the product, the customer obtains control over the distinct product and Trex Residential satisfies its performance obligation. Any performance obligation that remains unsatisfied at the end of a reporting period is part of a contract that has an original expected duration of one year or less. Any variable consideration related to the unsatisfied performance obligation is allocated wholly to the unsatisfied performance obligation, is recognized when the product ships and the performance obligation is satisfied and is included in “Accrued expenses and other liabilities, Sales and marketing” in Note 8 to the Condensed Consolidated Financial Statements.
Trex Commercial Products
On December 30, 2022, the Company completed the sale of its wholly-owned subsidiary and reportable segment, Trex Commercial. Prior to December 30, 2022, Trex Commercial generated revenue from the manufacture and sale of its modular and architectural railing and staging systems. All of its revenues were from fixed-price contracts with customers. Trex Commercial contracts had a single performance obligation as the promise to transfer the individual goods or services were not separately identifiable from other promises in the contract and was, therefore, not distinct.
For the three months ended March 31, 2024 and nine months ended September 30,March 31, 2023, and September 30, 2022,the Company’s net sales of $
373,635
and $
238,718
, respectively, were disaggregatedrecognized at a point in time upon transfer of its outdoor living products under variable consideration contracts into the following tables by (1) market, (2) timing of revenue recognition, and (3) type of contract. The tables also include a reconciliation of the respective disaggregated net sales with the Company’s reportable segments (in thousands).building products market.
1
1

Three Months Ended September 30, 2023
    
   
Trex
Residential
and
Consolidated
 
Timing of Revenue Recognition and Type of Contract
  
Products transferred at a point in time and variable consideration contracts  $303,836 
     
  $303,836 
     
Three Months Ended September 30, 2022
  
Reportable Segment
 
   
Trex
Residential
   
Trex
Commercial
   
Total
 
Timing of Revenue Recognition and Type of Contract
      
Products transferred at a point in time and variable consideration contracts  $177,776   $—    $177,776 
Products transferred over time and fixed price contracts   —     10,696    10,696 
               
  $177,776   $10,696   $188,472 
               
Nine months Ended September 30, 2023
    
   
Trex
Residential
and
Consolidated
 
Timing of Revenue and Type of Contract
  
Products transferred at a point in time and variable consideration contracts  $899,092 
     
  $899,092 
     
Nine Months Ended September 30, 2022
  
Reportable Segment
 
   
Trex
Residential
   
Trex
Commercial
   
Total
 
Timing of Revenue Recognition and Type of Contract
      
Products transferred at a point in time and variable consideration contracts  $878,892   $—    $878,892 
Products transferred over time and fixed price contracts   —     35,058    35,058 
               
  $878,892   $35,058   $913,950 
               
 
14.
STOCK-BASED COMPENSATION
At the annual meeting of stockholders of the Company held on May 4, 2023, the Company’s stockholders approved the Trex Company, Inc. 2023 Stock Incentive Plan (Plan). The Company’s board of directors unanimously approved the Plan on April 10, 2023, subject to stockholder approval. The Plan amends and restates in its entirety the Trex Company, Inc. 2014 Stock Incentive Plan (2014 Plan), which was last approved by the Company’s stockholders at the annual meeting held on April 30, 2014. The Plan, which will be administered by the compensation committee of the board of directors, provides for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights and unrestricted stock, which are referred to collectively as “awards.” Awards may be granted under the Plan to officers, directors (including
non-employee
directors) and other employees of the Company or any subsidiary thereof, to any adviser, consultant, or other provider of services to the Company (and any employee thereof), and to any other individuals who are approved by the board of directors as eligible to participate in the Plan. Only employees of the Company or any subsidiary thereof are eligible to receive incentive stock options. Subject to certain adjustments as provided in the Plan, the total number of shares of common stock permitted to be granted under the Plan was 4,000,000 shares at the time of adoption, and as of September 30, 2023, the total number of shares available for future grants was 3,984,956.under the Plan is 4,000,000 shares.
1
2

The following table summarizes the Company’s stock-based compensation grants for the ninethree months ended September 30, 2023:March 31, 2024:
 
  
Stock Awards Granted
   
Weighted-Average

Grant Price

Per Share
   
Stock Awards Granted
   
Weighted-Average

Grant Price

Per Share
 
Time-based restricted stock units   91,742   $58.67    48,628   $90.86 
Performance-based restricted stock units (a)   96,103   $56.79    80,371   $81.01 
Stock appreciation rights   51,916   $56.80    33,277   $84.72 
 
(a)Includes 85,04455,834 of target performance-based restricted stock unit awards granted during the ninethree months ended September 30, 2023,March 31, 2024, and adjustments of 1,41325,315, and 9,646(778) to grants due to the actual performance level achieved for restricted stock and restricted stock units awarded in 20212023 and 2020,2021, respectively.
The fair value of each SAR is estimated on the date of grant using a Black-Scholes option-pricing formula. For SARs issued in the ninethree months ended September 30,March 31, 2024 and March 31, 2023, and September 30, 2022, the data and assumptions shown in the following table were used:
 
  
Nine Months Ended

September 30, 2023
 
Nine Months Ended

September 30, 2022
   
Three Months Ended

March 31, 2024
 
Three Months Ended

March 31, 2023
 
Weighted-average fair value of grants  $27.19  $33.9   $44.83  $27.19 
Dividend yield   0  0   0  0
Average risk-free interest rate   4.0  1.9   4.3  4.0
Expected term (years)   5   5    5   5 
Expected volatility   49.50  44.85   51.2  49.5
11

The Company recognizes stock-based compensation expense ratably over the period from the grant date to the earlier of: (1) the vesting date of the award, or (2) the date the grantee is eligible to retire without forfeiting the award. For performance-based restricted stock and performance-based restricted stock units, expense is recognized ratably over the performance and vesting period of each tranche based on management’s judgment of the ultimate award that is likely to be paid out based on the achievement of the predetermined performance measures. For the employee stock purchase plan, compensation expense is recognized related to the discount on purchases. Stock-based compensation expense is included in “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Comprehensive Income. The following table summarizes the Company’s stock-based compensation expense (in thousands):
 
  
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
   
Three Months Ended

March 31,
 
  
2023
   
2022
   
2023
   
2022
   
2024
   
2023
 
Stock appreciation rights  $248   $196   $660   $547   $271   $215 
Time-based restricted stock and restricted stock units   1,098    1,012    2,904    2,818    1,074    935 
Performance-based restricted stock and restricted stock units   1,425    (1,012   3,470    (5   1,642    724 
Employee stock purchase plan   50    52    350    171    166    98 
                      
Total stock-based compensation  $2,821   $248   $7,384   $3,531   $3,153   $1,972 
                      
Total unrecognized compensation cost related to unvested awards as of September 30, 2023,March 31, 2024 was $12.5$23.7 million. The cost of these unvested awards is being recognized over the requisite vesting period of each award.
 
15.
INCOME TAXES
The Company’s effective tax rate for the ninethree months ended September 30,March 31, 2024 and March 31, 2023, was 25.3% and was comparable to the effective tax rate for the nine months ended September 30, 2022, of 24.8%25.2%, which resulted in income tax expense of $62.1$29.9 million and $57.7$13.8 million, respectively.
1
3

During the ninethree months ended September 30,March 31, 2024 and March 31, 2023, and September 30, 2022, the Company realized $0.4$0.6 million and $0.1$0.2 million, respectively, of excess tax benefits from stock-based awards and recorded a corresponding benefit to income tax expense.
The Company analyzes its deferred tax assets each reporting period, considering all available positive and negative evidence in determining the expected realization of those deferred tax assets. As of September 30, 2023,March 31, 2024, the Company maintains a valuation allowance of $3.0$3.3 million against deferred tax assets primarily related to state tax credits it estimates will expire before they are realized.
The Company operates in multiple tax jurisdictions, and, in the normal course of business, its tax returns are subject to examination by various taxing authorities. Such examinations may result in future assessments by these taxing authorities, and the Company accrues a liability when it believes that it is more likely than not that benefits of tax positions will not be realized. The Company believes that adequate provisions have been made for all tax returns subject to examination. As of September 30, 2023,March 31, 2024, for certain tax jurisdictions tax years 20192020 through 20222023 remain subject to examination. The Company believes that adequate provisions have been made for all tax returns subject to examination. Sales made to foreign distributors are not taxable in any foreign jurisdiction as the Company does not have a taxable presence in any foreign jurisdiction.
 
16.
SEGMENT INFORMATION
Through December 30, 2022, the Company operated in two reportable segments. On December 30, 2022, the Company completed the sale of its wholly-owned subsidiary and reportable segment, Trex Commercial. Subsequent to the sale of Trex Commercial, the Company operates in one reportable segment, Trex Residential:
Trex Residential manufactures wood-alternative decking and residential railing and related products marketed under the brand name Trex
®
. Trex Residential products are sold to distributors and home centers for final resale primarily to the residential market, which includes replacement, remodeling and new construction related to outdoor living products.
Trex Commercial designed, engineered, and marketed modular and architectural railing and staging systems for the commercial and multi-family market, including sports stadiums and performing arts venues. Trex Commercial products were marketed to architects, specifiers, contractors, and others doing business within the commercial and multi-family market.
The Company’s reportable segments are determined in accordance with its internal management structure, which, through December 30, 2022, was based on residential and commercial sales activities and, subsequent to December 30, 2022, is based on its residential sales activities. The Company evaluates performance of each segment primarily based on net sales and earnings before interest, income taxes, depreciation and amortization (EBITDA). The Company uses net sales to assess performance and allocate resources as this measure represents the amount of business the segment engaged in during a given period of time, is an indicator of market growth and acceptance of segment products and represents the segment’s customers’ spending habits along with the amount of product the segment sells relative to its competitors. The Company uses EBITDA to assess performance and allocate resources because it believes that EBITDA facilitates performance comparison between the segments by eliminating interest, income taxes, and depreciation and amortization charges to income. The below segment data for the three months and nine months ended September 30, 2023 and September 30, 2022 includes data for its reportable segments (in thousands):
1
4

Segment Data:
   
Three Months

Ended

September 30, 2023
   
Three Months Ended September 30, 2022
 
   
Trex Residential
and Consolidated
   
Trex
Residential
   
Trex
Commercial
   
Consolidated
 
Net sales  $303,836   $177,776   $10,696   $188,472 
Net Income (loss)  $65,266   $15,287   $(864  $14,423 
EBITDA  $99,359   $31,692   $(876  $30,816 
Depreciation and amortization  $12,996   $11,194   $271   $11,465 
Income tax expense (benefit)  $21,831   $5,211   $(283  $4,928 
Capital expenditures  $30,563   $41,403   $154   $41,557 
Total assets  $996,812   $802,926   $38,972   $841,898 
Reconciliation of Net Income to EBITDA:
   
Three Months

Ended

September 30, 2023
  
Three Months Ended September 30, 2022
 
   
Trex Residential
and Consolidated
  
Trex
Residential
   
Trex
Commercial
  
Consolidated
 
Net Income (loss)  $65,266  $15,287   $(864 $14,423 
Interest (income), net   (734  —     —    —  
Income tax expense (benefit)   21,831   5,211    (283  4,928 
Depreciation and amortization   12,996   11,194       271   11,465 
                  
EBITDA  $ 99,359  $ 31,692   $(876 $ 30,816 
                  
Segment Data:
   
Nine months

Ended

September 30, 2023
   
Nine months Ended September 30, 2022
 
   
Trex Residential
and Consolidated
   
Trex
Residential
   
Trex
Commercial
   
Consolidated
 
Net sales  $899,092   $878,892   $35,058   $913,950 
Net Income (loss)  $183,433   $176,939   $(2,390  $174,549 
EBITDA  $285,271   $267,725   $(2,344  $265,381 
Depreciation and amortization  $37,194   $32,435   $835   $33,270 
Income tax expense (benefit)  $62,089   $58,454   $(789  $57,665 
Capital expenditures  $112,920   $107,937   $226   $108,163 
Total assets  $996,812   $802,926   $38,972   $841,898 
1
5

Reconciliation of Net Income to EBITDA:
   
Nine months
Ended

September 30, 2023
   
Nine months Ended September 30, 2022
 
   
Trex Residential
and Consolidated
   
Trex
Residential
   
Trex
Commercial
   
Consolidated
 
Net Income (loss)  $183,433   $176,939   $(2,390  $174,549 
Interest expense (income), net   2,555    (103   —     (103
Income tax expense (benefit)   62,089    58,454    (789   57,665 
Depreciation and amortization   37,194    32,435    835    33,270 
                    
EBITDA  $285,271   $267,725   $(2,344  $265,381 
                    
17.
SEASONALITY
The operating results for Trex Residential have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions reduce the level of home improvement and construction activity and can shift demand for its products to a later period. As part of its normal business practice and consistent with industry practice, Trex Residential has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season in order to ensure adequate availability of its product to meet anticipated seasonal consumer demand. The seasonal effects are often offset by the positive effect of the incentive programs.
 
18.17.
COMMITMENTS AND CONTINGENCIES
Product Warranty
The Company warrants that for the applicable warranty period its Trex Residential products, when properly installed, used and maintained, will be free from material defects in workmanship and materials and its decking, cladding, fascia and railing products will not split, splinter, rot or suffer structural damage from termites or fungal decay.
12

Products sold on or after January 1, 2023: The warranty period for residential use is 50 years for Transcend
®
decking, 35 years for Select
®
decking and Universal Fascia, and 25 years for Enhance
®
decking and Transcend, Select, Enhance and Signature
®
railing. The warranty period for commercial use is 10 years, excluding Signature railing and Transcend cladding, which each have a warranty period of 25 years. The Company further warrants that Trex Transcend, Trex Enhance and Trex Select decking and cladding and Universal Fascia products will not fade in color from light and weathering exposure more than a certain amount and will be resistant to permanent staining from food and beverage substances or mold and mildew, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above. If there is a breach of such warranties, the Company has an obligation either to replace the defective product or refund the purchase price.
Products sold prior to January 1, 2023: The warranty period is 25 years for residential use and 10 years for commercial use. With respect to Trex Signature railing, the warranty period is 25 years for both residential and commercial use. The Company further warrants that Trex Transcend, Trex Enhance, Trex Select and Universal Fascia products will not fade in color more than a certain amount and will be resistant to permanent staining from food substances or mold, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above. If there is a breach of such warranties, the companyCompany has an obligation either to replace the defective product or refund the purchase price.
Trex ResidentialThe Company maintains a warranty reserve for the settlement of its product warranty claims. The Company accrues for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and future claims experience. Management reviews and adjusts these estimates, if necessary, based on the differences between actual experience and historical estimates. Additionally, the Company accrues for warranty costs associated with occasional or unanticipated product quality issues if a loss is probable and can be reasonably estimated, as necessary.
The Company continues to receive and settle claims for decking products manufactured at its Nevada facility prior to 2007 that exhibit surface flaking and maintains a warranty reserve to provide for the settlement of these claims. Estimating the warranty reserve for surface flaking claims requires management to estimate (1) the number of claims to be settled with payment and (2) the average cost to settle each claim.
To estimate the number of claims to be settled with payment, the Company utilizes actuarial techniques to determine a reasonable possible range of claims to be received and the percentage of those claims that will ultimately require payment (collectively, elements). Estimates for these elements are quantified using a range of assumptions derived from claim count history and the identification of factors influencing the claim counts to determine its best estimate of future claims for which to record a related liability. The cost per claim varies due to a number of factors, including the size of affected decks, the availability and type of replacement material used, the cost of production of replacement material and the method of claim settlement.
1
6

The Company monitors surface flaking claims activity each quarter for indications that its estimates require revision. Typically, a majority of surface flaking claims received in a year are received during the summer outdoor season, which spans the second and third quarters. It has been the Company’s practice to utilize the actuarial techniques discussed above during the third quarter, after a significant portion of all claims has been received for the fiscal year and variances to annual claims expectations are more meaningful.
Average cost per claim experienced in the nine months ended September 30, 2023 was lower than that experienced in the nine months ended September 30, 2022, which was elevated due to the closure of three large claims, and lower than the Company’s expectations for 2023. The number of incoming claims received in the ninethree months ended September 30, 2023March 31, 2024, was lower than the number of claims received in the ninethree months ended September 30, 2022,March 31, 2023, and lower than the Company’s expectations for 2023. After evaluating the declining trend in incoming claims in its actuarial analysis, the Company decreased its estimate of the number of future claims to be settled with payment. As a result of the decrease in estimated future claims,2024. Average cost per claim experienced in the three-month periodthree months ended September 30,March 31, 2024, was lower than that experienced in the three months ended March 31, 2023 and lower than the Company recorded a reduction of $3.8 million to its warranty reserveCompany’s expectations for the future settlement of surface flaking claims.2024. The Company believes the reserve at September 30, 2023March 31, 2024 is sufficient to cover future surface flaking obligations.
The Company’s analysis is based on currently known facts and a number of assumptions, as discussed above, and current expectations. Projecting future events such as the number of claims to be received, the number of claims that will require payment and the average cost of claims could cause the actual warranty liabilities to be higher or lower than those projected, which could materially affect the Company’s financial condition, results of operations or cash flows. The Company estimates that the annual number of claims received will continue to decline over time and that the average cost per claim will increase slightly, primarily due to inflation. If the level of claims received or average cost per claim differs materially from expectations, it could result in additional increases or decreases to the warranty reserve and a decrease or increase in earnings and cash flows in future periods. The Company estimates that a 10% change in the expected number of remaining claims to be settled with payment or the expected cost to settle claims may result in approximately a $1.1$1.0 million change in the surface flaking warranty reserve.
The Company also maintains a warranty reserve for the settlement
13

The following is a reconciliation of the Company’s residential product warranty reserve (in thousands):
 
  
Nine months Ended September 30, 2023
   
Three Months Ended March 31, 2024
 
  
Surface
Flaking
   
Other
Residential
   
Total
   
Product
Warranty
   
Surface
Flaking
   
Total
 
Beginning balance, January 1  $15,905   $9,694   $25,599   $12,066   $10,112   $22,178 
Provisions (changes in estimates)   (3,800   4,824    1,024 
Provisions and changes in estimates   2,068    —     2,068 
Settlements made during the period   (1,522   (2,135   (3,657   (924)   (188   (1,112)
                      
Ending balance, September 30  $10,583   $12,383   $22,966 
Ending balance, March 31  $13,210   $9,924   $23,134 
                      
 
  
Nine months Ended September 30, 2022
   
Three Months Ended March 31, 2023
 
  
Surface
Flaking
   
Other
Residential
   
Total
   
Product
Warranty
   
Surface
Flaking
   
Total
 
Beginning balance, January 1  $18,542   $10,053   $28,595   $9,694   $15,905   $25,599 
Provisions (changes in estimates)   —     3,098    3,098 
Provisions and changes in estimates   1,945    —     1,945 
Settlements made during the period   (2,243   (1,901   (4,144   (551   (316   (867
                      
Ending balance, September 30  $16,299   $11,250   $27,549 
Ending balance, March 31  $11,088   $15,589   $26,677 
                      
Legal Matters
The Company has lawsuits, as well as other claims, pending against it which are ordinary routine litigation and claims incidental to the business. Management has evaluated the merits of these lawsuits and claims and believes that their ultimate resolution will not have a material effect on the Company’s consolidated financial condition, results of operations, liquidity or competitive position.
Arkansas Facility
In October 2021, the Company announced plans to add a third U.S.-based Trex Residential manufacturing facility located in Little Rock, Arkansas, that will sit on approximately 300 acres of land. The development approach and related expenditures for the new campus will be modular and calibrated to demand trends for Trex Residentialthe Company’s outdoor living products. Construction began on the new facility in the second quarter of 2022, and in July 2022, the Company entered into a design-build agreement. As previously announced, the Company anticipates spending approximately $400 million on the facility and the budget for the design-build agreement is contained within this amount. Construction for the new facility will be funded primarily through the Company’s ongoing cash generation or its line of credit.
 
1
7
14


Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management discussion should be read in conjunction with the Trex Company, Inc. (Trex, Company, we or our) Annual Report on Form 10-K for the year ended December 31, 20222023 filed with the U.S. Securities and Exchange Commission (SEC) and the condensed consolidated financial statements and notes thereto included in Part I, Item 1. “Financial Statements” of this quarterly report.

NOTE ON FORWARD-LOOKING STATEMENTS

This management’s discussion and analysis contains 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. All statements regarding our expected financial position and operating results, our business strategy, our financing plans, forecasted demographic and economic trends relating to our industry and similar matters are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” “intend” or similar expressions. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Our actual results could be materially different from our expectations because of various factors, including the factors discussed under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20222023 filed with the SEC. These statements are also 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 and raw materials; the Company’s ability to obtain raw materials, including scrap polyethylene, wood fiber, and other materials used in making our products, at acceptable prices; increasing inflation in the macro-economic environment; the Company’s ability to maintain product quality and product performance at an acceptable cost; the Company’s ability to increase throughput and capacity to adequately match supply with demand; the level of expenses associated with warranty claims, 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; the impact of current and upcoming data privacy laws and the EU General Data Protection Regulation and the related actual or potential costs and consequences; material adverse impacts from global public health pandemics, geopolitical conflicts; and material adverse impacts related to labor shortages or increases in labor costs.

OVERVIEW

The following MD&A is intended to help the reader understand the operations and current business environment of the Company. The MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying notes thereto contained in “Item 1. Condensed Consolidated Financial Statements” of this report. MD&A includes the following sections:

 

  

Operations and Products — a general description of our business, a brief overview of our reportable segments’segment’s products, and a discussion of our operational highlights.

 

  

Highlights and Financial Performance Quarter-to-Date and Year-to-Datea summary of financial performance and highlights for the three months and nine months ended September 30, 2023,March 31, 2024, a general discussion of factors that may affect our operations, and a description of relevant financial statement line items.

 

  

Results of Operations — an analysis of our consolidated results of operations for the three months and nineended March 31, 2024 compared to the three months ended September 30,March 31, 2023, compared to three months and nine months ended September 30, 2022, respectively.

 

  

Liquidity and Capital Resources — an analysis of cash flows; contractual obligations, and a discussion of our capital and other cash requirements.

OPERATIONS AND PRODUCTS

Prior to December 30, 2022, the Company operated in two reportable segments, Trex Residential Products (Trex Residential), the Company’s principal business based on net sales, and Trex Commercial Products (Trex Commercial). Subsequent to December 30, 2022, the Company currently operates in one reportable segment, Trex Residential. Refer to Note 16, Segments, in the Notes to the Condensed Consolidated Financial Statements in Part I. Item 1. Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for additional information. The Company is focused on using renewable resources within our Trex Residential segment.

18


Trex Residentialis the world’s largest manufacturer of high-performance composite decking and residential railing products, which are marketed under the brand name Trex® and manufactured in the United States. With more than 30 years of product experience, we offer a comprehensive set of aesthetically appealing and durable, low-maintenance product offerings in the decking, residential railing, fencing and outdoor lighting categories. A majority of the products are eco-friendly and leverage recycled and reclaimed materials to the extent possible. Trex Residential decking is made in a proprietary process that combines reclaimed wood fibers and recycled polyethylene film, making Trex Residential one of the largest recyclers of plastic film in North America. In addition to resisting fading and surface staining, Trex Residential products require no sanding and sealing, resist moisture damage, provide a splinter-free surface and do not

15


require chemical treatment against rot or insect infestation. Combined, these aspects yield significant aesthetic advantages and lower maintenance than wood decking and railing and ultimately render Trex Residential products less costly than wood over the life of the deck. Special characteristics (including resistance to splitting, the ability to bend, and ease and consistency of machining and finishing) facilitate installation, reduce contractor call-backs and afford consumers a wide range of design options. Trex Residential products are sold to distributors and home centers for final resale primarily to the residential market.

Trex offers the following products through Trex Residential:products:

 

  

Decking and Accessories

  

Our principal decking products are Trex Signature®, Trex Transcend® Lineage, Trex Transcend®, Trex Signature®,Trex Select®, and Trex Enhance®. In addition, our Trex Transcend decking product can also be used as cladding. Our high-performance, low-maintenance, eco-friendly composite decking products are comprised of a blend of 95 percent reclaimed wood fibers and recycled polyethylene film and feature a protective polymer shell for enhanced protection against fading, staining, mold and scratching. Trex Signature decking offers realistic woodgrain aesthetics that raises the bar for beauty, performance and sustainability and is available in two luxurious hues inspired by stunning natural settings. Trex Transcend Lineage is the next generation of design and performance in composite decking and is available in four luxurious, on-trend hues inspired by some of the most picturesque locales in the United States. Our Trex Transcend decking provides elevated aesthetics paired with the highest level of performance and is available in eight multi-tonal monochromatic classical earth tones and premium tropical colors. Trex Signature decking offers realistic woodgrain aesthetics that raises the bar for beauty, performance and sustainability and is available in two luxurious hues inspired by stunning natural settings. Trex Select decking offers the perfect pairing of price and minimal maintenance and is available in five nature-inspired earth tone colors. Our Trex Enhance boards pair the beauty of authentic wood-grain appearance with the durability of composite with minimal maintenance and the affordability of wood and is available in natural and basic colors.

 

We also offer accessories to our decking products. Trex Hideaway®, a self-gapping universal hidden fastener designed to give a seamless finish to every project. Trex DeckLighting, an outdoor lighting system, is a line of energy-efficient LED dimmable deck lighting designed to use 75% less energy compared to incandescent lighting. It can be installed into the railing, stair risers or the deck itself. The line includes a post cap light, deck rail light, riser light, a soffit light and a recessed deck light. Pre-assembled stair panels that allow for easier installation and are designed to save time on the jobsite.

 

19


Railing

  

Our railing products are Trex Transcend Railing, Trex Select Railing, Trex Select T-Railand Trex Signature® aluminum railing. Our high-performance composite and aluminum deck railing kits and systems are sustainably manufactured, easy to install and durable. Trex railing systems are built with the same durability as Trex decking and will notwon’t rot, warp, peel or splinter and resist fading and corrosion. Trex Transcend Railing, made from approximately 40 percent recycled content, is available in the colors of Trex Transcend decking and finishes that make it appropriate for use with Trex decking products as well as other decking materials, which we believe enhances the sales prospects of our railing products. Trex Select Railing, made from approximately 40 percent recycled content, is offered in a white finish and is ideal for consumers who desire a simple clean finished look for their deck. Trex Select T-Rail, made from a minimum of 40 percent recycled materials, is available in square composite balusters in Classic White for a cohesive, coordinated look, or round aluminum balusters in Charcoal Black for a more modern contrast. Trex Signature aluminum railing, made from a minimum of 40 percent recycled content, is available in three colors and designed for consumers who want a sleek, contemporary look.

 

  

Fencing

  

Our Trex Seclusions® composite fencing product is offered through two specialty distributors. This product consists of structural posts, bottom rails,rail, pickets, top railsrail and decorative post caps. The top and bottom rails of Trex fencing are designed to provide a “picture frame’ element and the deep rich colors have a matte surface to prevent harsh sunlight reflections.

 

16


We are a licensor in a number of licensing agreements with third parties to manufacture and sell products under the Trex trademark. Our licensed products are:

 

Trex® Outdoor Furniture

 

  A line of outdoor furniture products manufactured and sold by PolyWood, Inc.
  

Trex® RainEscape® and, Trex® Protect®, Trex®RainEscape®Soffit Light, and Trex®SealLedger Flashing Tape

  

An above joist deck drainage system manufactured and sold by DriDeck Enterprises,IBP, LLC. Trex Protect Joist, Beam and Rim tape is a self-adhesive butyl tape that protects wooden deck framing/substructure elements.

Trex RainEscape Soffit Light is a plug-and-play LED Soffit light that is installed in the under-deck ceiling of a two-story deck. Trex Seal Ledger Flashing tape is butyl flashing tape with an aluminum liner.

  
Trex® Pergola  

Pergolas made from low maintenance cellular PVC and all-aluminum product, manufactured by Home & Leisure, Inc. dba Structureworks Fabrication.

 

  
Trex® LatticeworksLattice  

Outdoor lattice boards manufactured and sold by Structureworks Fabrication.

 

Trex® Cornhole  

Cornhole boards manufactured and sold by IPC Global Marketing LLC.

 

  
Trex® Blade  

A specialty saw blade for wood-alternative composite decking manufactured and sold by Freud America, Inc.

 

Trex® SpiralStairs  

A staircase alternative for use with all deck substructures manufactured and sold by M. Cohen and Sons, Inc.SS Industries dba The Iron Shop.Paragon Stairs.

 

  

Trex® Outdoor Kitchens

  

Outdoor kitchen cabinetry manufactured and sold by Danver Stainless Outdoor Kitchens.

Trex Commercial designed and engineered custom solutions prevalent in professional and collegiate sports facilities, commercial and high-rise applications, performing arts, sports, and event production and rentals. Trex Commercial marketed to architects, specifiers, contractors, and building owners.

Trex offered the following products through Trex Commercial through December 30, 2022:

Architectural railing systems;

Aluminum railing systems; and

Staging equipment and accessories.

20


HIGHLIGHTS AND FINANCIAL PERFORMANCE

Highlights:

 

  

Trex Named a 2023 Eco Leader by Green Builder Media. Trex earned highest honors awardedMost Sustainable Decking Brand by Green Builder Media in the Eco Leader category. This is the second time Trex has earned this prestigious honor having previously been recognized in 2019. Trex isfor 14th Consecutive Year and the only decking brand ever to be awarded Eco Leader status, which signifies companies acrossrecognized as a sustainability leader for all 14 years of the building products arena that are working to quantify ESG concepts in meaningful ways.program.

 

  

Trex Expands Railing Portfolio with Launch of Trex Signature®X-SeriesTM. Trex has launched two new specialty railing offerings with Trex Signature®X-SeriesTM Cable Rail and Keep Arkansas Beautiful Awarded “Recycling Education Program of the Year.” A joint initiative by Trex Company and Keep Arkansas Beautiful was celebrated in September as the “2023 Recycling Education Program of the Year” by the Arkansas Recycling Coalition (ARC). The annual ARC Awards honors organizations that have made significant contributions to the education and advancement of waste reduction, recycling, and sustainability in Arkansas over the previous year.Signature®X-SeriesTM Frameless Glass Rail.

 

  

Trex Hosts Investor DayTranscend® Lineage recognized by Good Housekeeping as a winner in New York. their 2024 Sustainable Innovation Awards.

Trex Ranked Among Barron’s 100 Most Sustainable Companies for 2024.In September, Bryan Fairbanks, President Trex was honored by Baron’s for outstanding leadership in environmental, social, and CEO laid outgovernance practices and was the company’s five-year financial targetsonly decking brand to be included on this year’s list.

Trex awarded Morris Tolly National Supplier of the Year by Builders FirstSource, and Supplier of the Year for organic growth.the Northeast Region.

 

  

Trex Launches New Community Recycling Challenge. Comprehensive Fastener CollectionThe updated NexTrex Recycling Challenge combines the company’s award-winning community. In February 2024, Trex launched its Hideaway®Fastener Collection, providing solutions for every composite deck fastening and school recycling programs and moves from competition-driven model to self-initiated challenge. Additionally, Trex has made the process easier and more equitable, so more participants have the opportunity to earn recognition and rewards for their recycling efforts. Under the new structure, any participating organization that collects at least 1,000 pounds of recycled plastic film during a 12-month period qualifies to receive a composite bench from the Trex Outdoor Furniture Collection.finishing need.

 

  

Trex Transcend Lineage Recognized in Good Housekeeping’s Renovation Awards.Celebrated with Six Awards for Product Excellence and Innovation Trex Transcend Lineage has been recognized in Good Housekeeping’s 2023 Home Renovation Awards infor decking and railing products from organizations representing audiences and input from across the Exterior Enhancements category. Enhancing its appeal, Trex Transcend Lineage offers the look and feel of real wood, but without the environmental impact of deforestation.building industry.

Financial Performance:HIGHLIGHTS AND FINANCIAL PERFORMANCE QUARTER-TO-DATE AND YEAR-TO-DATE

Financial performance. The following table presentsquarter-to-date highlights of our financial performance:

 

  Three Months Ended
September 30,
           Three Months Ended
March 31,
         
  2023   2022   $ Change   % Change   2024   2023   $ Change   % Change 
($000s omitted, except per share data)                                

Net sales

  $303,836   $188,472   $115,364    61.2  $373,635   $238,718   $134,917    56.5

Gross profit

  $130,895   $46,208   $84,687    183.3  $169,612   $94,428   $75,183    79.6

Net income

  $65,266   $14,423   $50,843    352.5  $89,070   $41,131   $47,939    116.6

EBITDA

  $99,359   $30,816   $68,543    222.4

EBITDA*

  $133,166   $68,862   $64,304    93.4

Diluted earnings per share

  $0.60   $0.13   $0.47    361.5  $0.82   $0.38   $0.44    115.8

 

   Nine months Ended
September 30,
         
   2023   2022   $ Change   % Change 
($000s omitted, except per share data)                

Net sales

  $899,092   $913,950   $(14,858   (1.6)% 

Gross profit

  $381,771   $338,498   $43,273    12.8

Net income

  $183,433   $174,549   $8,884    5.1

EBITDA

  $285,271   $265,381   $19,890    7.5

Diluted earnings per share

  $1.69   $1.55   $0.14    9.0
*

A reconciliation of Net Income (GAAP) to EBITDA (non-GAAP) is presented on page 23 of this document under “Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).”

17


Capital expenditures. During the nine months ended September 30, 2023,2024 first quarter, our capital expenditures were $112.9$37.7 million primarily related to $65.1$21.7 million for the Arkansas manufacturing facility, $17.9$4.5 million in cost reduction initiatives, $12.2and $5.1 million forin capacity expansion in our new corporate headquarters,existing facilities and $9.5 million related to other capacity expansion, safety, environmental and general support.

Repurchases of common shares. During the nine months ended September 30, 2023, we repurchased 264,896 shares of our outstanding common stock under the 2023 Stock Repurchase Program.

21


RESULTS OF OPERATIONS

General. Our results of operations are affected by a number of factors, including, but not limited to, the cost to manufacture and distribute products, cost of raw materials, inflation, interest rates, consumer spending and preferences, the impact of any supply chain disruptions, economic conditions, and any adverse effects from global health pandemics and geopolitical conflicts.

Towards the end of June 2022, Trex Residential experienced a reduction in demand from its distribution partners, spurred by concerns over a potential easing in consumer demand due to rising interest rates, declining consumer sentiment and expectations of a general slowing in the economy. As a result, beginning in the third quarter of 2022 Trex Residential’s channel partners met demand partially through inventory drawdown. The drawdown negatively impacted third quarter and fourth quarter 2022 sales. In response to this changed environment, Trex Residential immediately took measures to manage a production slowdown, including labor force reductions, production organization, as well as other cost actions.

Sale of Substantially All of the Assets of Trex Commercial Products, Inc. On December 30, 2022, we completed the sale of substantially all of the assets of our wholly-owned subsidiary and reportable segment, Trex Commercial, for net proceeds of $7.3 million. The divestiture of Trex Commercial reflects our decision to focus on driving the most profitable growth strategy for the Company and its shareholders through the execution of our outdoor living strategy. The divestiture did not represent a strategic shift with a major effect on the Company’s operations and financial results. As such, the results of operations of Trex Commercial are consolidated in the Company’s results of operations for the three months and nine months ended September 30, 2022.

Net Sales. Net sales consist of sales, net of discounts. The level of net sales is principally affected by sales volume and the prices paid for Trex products. Trex Residential operating results have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions reduce the level of home and commercial improvement and residential and commercial construction and can shift demand for our products to a later period. As part of our normal business practice and consistent with industry practice, we have historically provided our distributors and dealers of our Trex Residential products incentives to build inventory levels before the start of the prime deck-building season to ensure adequate availability of our product to meet anticipated seasonal consumer demand and to enable production planning. These incentives include payment discounts, favorable payment terms, price discounts, or volume rebates on specified products and other incentives based on increases in purchases as part of specific promotional programs. The timing of our incentive programs can significantly impact sales, receivables and inventory levels during the offering period.

Gross Profit. Gross profit represents the difference between net sales and cost of sales. Cost of sales consists of raw material costs, direct labor costs, manufacturing costs, subcontract costs and freight. Raw material costs generally include the costs to purchase and transport reclaimed wood fiber, reclaimed polyethylene, pigmentation for coloring our products, and commodities used in the production of railing and staging. Direct labor costs include wages and benefits of personnel engaged in the manufacturing process. Manufacturing costs consist of costs of depreciation, utilities, maintenance supplies and repairs, indirect labor, including wages and benefits, and warehouse and equipment rental activities.

Selling, General and Administrative Expenses. The largest component of selling, general and administrative expenses is personnel related costs, which includes salaries, commissions, incentive compensation, and benefits of personnel engaged in sales and marketing, accounting, information technology, corporate operations, research and development, and other business functions. Another component of selling, general and administrative expenses is branding and other sales and marketing costs, which are used to build brand awareness. These costs consist primarily of advertising, merchandising, and other promotional costs. Other general and administrative expenses include professional fees, office occupancy costs attributable to the business functions previously referenced, and consumer relations expenses. As a percentage of net sales, selling, general and administrative expenses may vary from quarter to quarter due, in part, to the seasonality of our business.

Below is the discussion and analysis of our operating results and material changes in our operating results for the three months ended September 30, 2023 (2023March 31, 2024 (2024 quarter) compared to the three months ended September 30, 2022 (2022 quarter), and for the nine months ended September 30,March 31, 2023 (2023 nine-month period) compared to the nine months ended September 30, 2022 (2022 nine-month period)quarter).

22


Three Months Ended September 30, 2023March 31, 2024 Compared To The Three Months Ended September 30, 2022March 31, 2023

Net Sales

 

   Three Months Ended September 30,   $ Change   % Change 
   2023   2022 
                 
   (dollars in thousands) 

Total net sales

  $ 303,836   $ 188,472   $ 115,364    61.2

Trex Residential net sales

  $303,836   $177,776   $126,060    70.9

Trex Commercial net sales

   N/A   $10,696    N/A    N/A 
   Three Months Ended March 31,   $ Change   % Change 
   2024   2023 
   (dollars in thousands) 

Net sales

  $373,635   $238,718   $134,917    56.5

Total netNet sales increased by $134.9 million, or 56.5%, in the 20232024 quarter were higher compared to net sales in the 2022 quarter resulting in an increase of $115.4 million, or 61.2%.2023 quarter. The increase in net sales was substantially all due to increasedan increase in volume, which wasdriven, in part, by changes to our early-buy program running January to March, rather than our historical December to March time frame. This change accounted for $75 million or approximately 31% of the result of strong secular trendsgrowth in the quarter. The remainder of the growth is due to the expectations of continued favorable economic conditions for Trex’s outdoor living category and by the non-recurrence of the channel inventory drawdown that occurred during the 2022 quarter.products.

18


Gross Profit

 

  Three Months Ended September 30,  $ Change   % Change 
  2023 2022   Three Months Ended March 31,  $ Change   % Change 
              2024 2023 
  (dollars in thousands)   (dollars in thousands) 

Cost of sales

  $ 172,941  $142,264  $ 30,677    21.6  $204,023  $144,290  $59,733    41.4

% of total net sales

   56.9  75.5   

Gross profit

  $130,895  $46,208  $84,687    183.3  $169,612  $94,428  $75,184    79.6

Gross margin

   43.1  24.5   

Gross profit as a percentage of net sales, gross margin, was 43.1%45.4% in the 20232024 quarter compared to 24.5% in the 2022 quarter. Excluding the $3.8 million dollar benefit from a reduction of the surface flaking warranty reserve, gross margin for the 2023 quarter was 41.8%. Excluding Trex Commercial, gross margin for the 2022 quarter was 25.4%. The increase in gross margin in the 2023 quarter was the result of higher volume, cost out initiatives, and positive plant performance. The 2022 quarter was negatively impacted by our channel partners inventory drawdown to rightsize their inventories and additional costs as we restructured our operations for reduced production levels.

Selling, General and Administrative Expenses

   Three Months Ended September 30,  $ Change   % Change 
   2023  2022 
               
   (dollars in thousands) 

Selling, general and administrative expenses

  $ 44,532  $26,857  $ 17,675    65.8

% of total net sales

   14.7  14.2   

Selling, general and administrative expenses increased $17.7 million39.6% in the 2023 quarter. The increase was primarily due to increased capacity utilization as our channel partners build appropriate inventories to support the decking/railing season and cost efficiency programs.

Selling, General and Administrative Expenses

   Three Months Ended March 31,  $ Change   % Change 
   2024  2023 
   (dollars in thousands) 

Selling, general and administrative expenses

  $50,600  $37,480  $13,120    35.0

% of total net sales

   13.5  15.7   

Selling, general and administrative expenses increased $13.1 million in the 2024 quarter. The increase primarily related to a $10.6$8.7 million increase in personnel related expenses including incentive compensation. The 2022 quarter includedand a $2.9 million reduction in incentive compensation related to restructuring of our operations to support our channel partner inventory drawdown. Other changes to the 2023 quarter included a $5.8$3.2 million increase in branding expenses and a $1.5 million increase to other expenses.marketing program spend for newly launched products.

Provision for Income Taxes

 

  Three Months Ended September 30,  $ Change   % Change 
  2023 2022   Three Months Ended March 31,  $ Change   % Change 
              2024 2023 
  (dollars in thousands)   (dollars in thousands) 

Provision for income taxes

  $ 21,831  $4,928  $ 16,903    343.0  $29,947  $13,832  $16,115    116.5

Effective tax rate

   25.1  25.5   

The effective tax rate for the 2024 quarter and the 2023 quarter of 25.1% was comparable to the effective tax rate of 25.5% for the 2022 quarter.25.2%.

 

2319


Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)1 (dollars in thousands)

Reconciliation of net income (GAAP) to EBITDA and EBITDA margin (non-GAAP):

 

   Three Months
Ended

September 30,
2023
   Three Months Ended September 30, 2022 
   Trex Residential
and Consolidated
   Trex
Residential
   Trex
Commercial
   Consolidated 

Net Income (loss)

  $ 65,266   $ 15,287   $(864  $ 14,423 

Interest (income), net

   (734   —     —     —  

Income tax expense (benefit)

   21,831    5,211    (283   4,928 

Depreciation and amortization

   12,996    11,194    271    11,465 
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

  $99,359   $31,692   $(876  $30,816 
  

 

 

   

 

 

   

 

 

   

 

 

 
   Three Months Ended
March 31, 2024
   Three Months Ended
March 31, 2023
 

Net Income

  $89,070   $41,131 

Interest income (expense), net

   (5   1,985 

Income tax expense

   29,947    13,832 

Depreciation and amortization

   14,154    11,914 
  

 

 

   

 

 

 

EBITDA

  $133,166   $68,862 
  

 

 

   

 

 

 

 

   Three Months Ended September 30,   $ Change   % Change 
   2023   2022 
                 
   (dollars in thousands) 

Total EBITDA

  $ 99,359   $ 30,816   $ 68,543    222.4

Trex Residential EBITDA

  $99,359   $31,692   $67,667    213.5

Trex Commercial EBITDA

   N/A   $(876   N/A    N/A 
   Three Months Ended March 31,   $ Change   % Change 
   2024   2023 
   (dollars in thousands) 

EBITDA

  $133,166   $68,862   $64,304    93.4

Total EBITDA increased 222.4%93.4% to $99.4$133.2 million for the 20232024 quarter compared to $30.8$68.9 million for the 20222023 quarter. The increase in EBITDA was driven primarily by an increase in net sales and gross profit.

LIQUIDITY AND CAPITAL RESOURCES

We finance operations and growth primarily with cash flows from operations, borrowings under our revolving credit facilities, operating leases and normal trade credit terms from operating activities. At March 31, 2024, we had $3.1 million of cash and cash equivalents.

SNine Months Ended September 30, 2023 Compared To ources and Uses of Cash. The Nine Months Ended September 30, 2022

Net Salesfollowing table summarizes our cash flows from operating, investing and financing activities (in thousands):

 

   Nine months Ended September 30,   $ Change   % Change 
   2023   2022 
                 
   (dollars in thousands) 

Total net sales

  $ 899,092   $ 913,950   $ (14,858   (1.6)% 

Trex Residential net sales

  $899,092   $878,892   $20,200    2.3

Trex Commercial net sales

   N/A   $35,058    N/A    N/A 
   Three Months Ended March 31, 
   2024   2023 

Net cash used in operating activities

  $(174,044  $(115,471

Net cash used in investing activities

   (37,614   (39,192

Net cash provided by financing activities

   212,752    146,254 
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

  $1,094   $(8,409
  

 

 

   

 

 

 

TotalOperating Activities

Cash used in operations was $174 million during the first quarter of 2024 compared to cash used in operations of $115.5 million during the first quarter of 2023. The $58.5 million increase in cash used in operating activities was primarily related to an increase in accounts receivable and inventories. The increase in accounts receivable is primarily driven by the increase in net sales decreased by $14.9 million, or 1.6%, in the 2023 nine-month periodfirst quarter of 2024 compared to the 2022 nine-month period.first quarter of 2023. Substantially all of the accounts receivables balances as of March 31, 2024 will be collected during the second quarter of 2024. The reductionincrease in total net sales wasinventories is the result of increased production in the divesturefirst quarter of Trex Commercial at2024 compared to the endfirst quarter of 2022.2023. The $20.2 million, or 2.3%,effects of the increase in Trex Residentialaccounts receivable and inventory were offset, in part, by higher earnings and increases in accounts payable, accrued expenses, and income taxes payable.

Investing Activities

Capital expenditures in the 2024 quarter were $37.7 million primarily related to $21.7 million for the Arkansas manufacturing facility, $4.5 million in cost reduction initiatives, and $5.1 million in capacity expansion in our existing facilities and safety, environmental and general support.

Financing Activities

Net cash provided by financing activities in the 2024 quarter consisted primarily of net sales was primarily due to the launchborrowings under our line of premium performance products and their associated pricing designed to support the high end of the market.credit.

 

1 

EBITDA represents net income before interest, income taxes, depreciation and amortization. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States (GAAP). We have included data with respect to EBITDA because management believes it facilitates performance comparison between the Company and its competitors, and management evaluates the performance of its reportable segments using several measures, including EBITDA. Management considers EBITDA to be an important supplemental indicator of our core operating performance because it eliminates interest, income taxes, and depreciation and amortization charges to net income or loss. In relation to competitors, EBITDA eliminates differences among companies in capitalization and tax structures, capital investment cycles and ages of related assets. For these reasons, management believes that EBITDA provides important information regarding the operating performance of the Company and its reportable segments. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP and are not meant to be considered superior to or a substitute for our GAAP results.

 

2420


Gross Profit

   Nine months Ended September 30,  $ Change   % Change 
   2023  2022 
               
   (dollars in thousands) 

Cost of sales

  $ 517,321  $575,452  $ (58,131   (10.1)% 

% of total net sales

   57.5  63.0   

Gross profit

  $381,771  $338,498  $43,273    12.8

Gross margin

   42.5  37.0   

Gross profit as a percentage of net sales, gross margin, was 42.5% in the 2023 nine-month period compared to 37.0% in the 2022 nine-month period. Excluding Trex Commercial, gross margin for the 2022 quarter was 38.1%. The increase in the 2023 nine-month period was primarily the result of cost efficiencies, positive plant performance and materials management. The increase was partially offset by lower absorption due to reduced production and higher depreciation and utilities.

Selling, General and Administrative Expenses

   Nine months Ended September 30,  $ Change   % Change 
   2023  2022 
               
   (dollars in thousands) 

Selling, general and administrative expenses

  $ 133,694  $ 106,387  $ 27,307    25.7

% of total net sales

   14.9  11.6   

Selling, general and administrative expenses increased $27.3 million in the 2023 nine-month period. The increase primarily related to a $19.9 million increase in personnel related expenses including incentive compensation, a $4.5 million increase in branding expenses, a $2.9 million increase in research and development expenses and other expenses.

Provision for Income Taxes

   Nine months Ended September 30,  $ Change   % Change 
   2023  2022 
               
   (dollars in thousands) 

Provision for income taxes

  $ 62,089  $57,665  $ 4,424    7.7

Effective tax rate

   25.3  24.8   

The effective tax rate for the 2023 nine-month period of 25.3% was comparable to the effective tax rate of 24.8% for the 2022 nine-month period.

Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)2 (dollars in thousands)

2

EBITDA represents net income before interest, income taxes, depreciation and amortization. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States (GAAP). We have included data with respect to EBITDA because management believes it facilitates performance comparison between the Company and its competitors, and management evaluates the performance of its reportable segments using several measures, including EBITDA. Management considers EBITDA to be an important supplemental indicator of our core operating performance because it eliminates interest, income taxes, and depreciation and amortization charges to net income or loss. In relation to competitors, EBITDA eliminates differences among companies in capitalization and tax structures, capital investment cycles and ages of related assets. For these reasons, management believes that EBITDA provides important information regarding the operating performance of the Company and its reportable segments. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP and are not meant to be considered superior to or a substitute for our GAAP results.

25


Reconciliation of net income (GAAP) to EBITDA and EBITDA margin (non-GAAP):

   Nine months Ended
September 30, 2023
   Nine months Ended September 30, 2022 
   Trex Residential
and Consolidated
   Trex
Residential
   Trex
Commercial
   Consolidated 

Net Income (loss)

  $183,433   $176,939   $(2,390  $174,549 

Interest expense (income), net

   2,555    (103   —     (103

Income tax expense (benefit)

   62,089    58,454    (789   57,665 

Depreciation and amortization

   37,194    32,435    835    33,270 
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

  $285,271   $267,725   $(2,344  $265,381 
  

 

 

   

 

 

   

 

 

   

 

 

 

   Nine months Ended September 30,   $ Change   % Change 
   2023   2022 
                 
   (dollars in thousands) 

Total EBITDA

  $285,271   $265,381   $19,890    7.5

Trex Residential EBITDA

  $285,271   $237,725   $47,546    20.0

Trex Commercial EBITDA

   N/A   $(2,344   N/A    N/A 

Total EBITDA increased 7.5% to $285.3 million for the 2023 nine-month period compared to $265.4 million for the 2022 nine-month period. The increase in EBITDA was driven primarily by an increase in gross profit.

LIQUIDITY AND CAPITAL RESOURCES

We finance operations and growth primarily with cash flows from operations, borrowings under our revolving credit facilities, operating leases and normal trade credit terms from operating activities. As of September 30, 2023 we had $4.6 million of cash and cash equivalents.

Sources and Uses of Cash. The following table summarizes our cash flows from operating, investing and financing activities (in thousands):

   Nine Months Ended September 30, 
   2023   2022 

Net cash provided by operating activities

  $288,225   $244,393 

Net cash used in investing activities

   (112,920   (108,118

Net cash used in financing activities

   (182,986   (271,443
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

  $(7,681)   $(135,168
  

 

 

   

 

 

 

Operating Activities

Cash provided by operating activities was $288.2 million during the 2023 nine-month period compared to cash provided by operations of $244.4 million during the 2022 nine-month period. In general, the $43.8 million increase in cash provided by operating activities reflects higher earnings and reduced investment in working capital in the 2023 period. Specifically, cash provided by operating activities was impacted significantly by two offsetting factors, an increase in accounts receivable and a decrease in inventory.

The increase in accounts receivable in the 2023 period was primarily due to increased sales in the three months ended September 2023 compared to sales in the three months ended September 2022, and, to a lesser extent, a result of differences in payment terms offered to customers in 2023 compared to those offered in 2022. We expect substantially all of the accounts receivables balances as of September 30, 2023 will be collected during the fourth quarter of 2023.

The effect of the increase in accounts receivable was offset, in part, by a decrease in inventory in the 2023 nine-month period compared to an increase in inventory in the 2022 nine-month period. The increase in inventory in the 2022 period was a result of the decline in sales that occurred as our distribution partners met demand partially through inventory drawdowns. The decrease in inventory in the 2023 period reflects a return to more normal purchase patterns from our distribution partners.

26


Investing Activities

Capital expenditures in the 2023 nine-month period were $112.9 million primarily related to $65.1 million for the Arkansas manufacturing facility, $17.9 million in cost reduction initiatives, $12.2 million for our new corporate headquarters, and $9.5 million related to other capacity expansion, safety, environmental and general support.

Financing Activities

Net cash used in financing activities in the 2023 nine-month period consisted primarily of net borrowings under our line of credit and repurchases of our outstanding common stock.

Stock Repurchase Program. On February 16, 2018, the Trex Board of Directors adopted a stock repurchase program of up to 11.6 million shares of its outstanding common stock (Stock Repurchase Program). TheAs of March 31, 2023, the Company has repurchased 10.1 million shares under the Stock Repurchase Program. On May 4, 2023, the Trex Board of Directors adopted a new stock repurchase program (2023 Stock Repurchase Program) of up to 10.8 million shares of its outstanding common stock, and terminated the existing Stock Repurchase Program. The 2023 Stock Repurchase ProgramThis repurchase program has no set expiration date and 264,896date. During the three months ended March 31, 2024, the Company did not repurchase any shares were repurchasedof its common stock under the 2023 Stock Repurchase Program as of September 30, 2023.Program.

Indebtedness on and after MayRevolving Credit Facility 18, 2022 and prior to December 22, 2022.

On May 18, 2022, the Company as borrower; Trex Commercial, as guarantor; BOA, as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; Wells Fargo, as lender and Syndication Agent; Regions Bank, PNC Bank, National Association (PNC), and TD Bank, N.A. (TD)(each, a Lender and collectively, the Lenders), arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner, entered into a Credit Agreement (Credit Agreement) with certain lending parties thereto (Lenders) to amend and restate the Fourth Amended and Restated Credit Agreement dated as of November 5, 2019.

Under the Credit Agreement, the Lenders agreed to provide the Company with one or more Revolving Loans in a collective maximum principal amount of $400,000,000 (Loan Limit) throughout the term, which ends May 18, 2027 (Term). Included within the Loan Limit are sublimits for a Letter of Credit facility in an amount not to exceed $60,000,000; and Swing Line Loans in an aggregate principal amount at any time outstanding not to exceed $20,000,000. The Revolving Loans, the Letter of Credit facility and the Swing Line Loans are for the purpose of raising working capital and supporting general business operations.

TheOn December 22, 2022, the Company entered into a First Amendment to the Credit Agreement provides(First Amendment). As a part of the First Amendment, the Credit Agreement was amended and restated to provide for an additional Revolving B Loan (as hereinafter defined). Under the First Amendment, the Lenders agreed to provide the Company with a Revolving B Loan consisting of one or more revolving loans in a collective maximum principal amount of $150,000,000 (Revolving B Loan Limit) throughout the term, which ends December 22, 2024 (Revolving B Loan Term). Previously, under the Credit Agreement, there was no Revolving B Loan. The First Amendment also provided that TD Bank, N.A. would serve as Syndication Agent.

In conjunction with the First Amendment, on December 22, 2022, the Credit Agreement was amended and restated to refer to this loan as the Revolving A Loan. The amended and restated Credit Agreement was made an Exhibit A to the First Amendment. All of the terms of the Credit Agreement apply to the Revolving B Loan.

The Notes provide the Company, in the aggregate, the ability to borrow an amount up to the Revolving A Loan Limit during the Revolving A Loan Term and Revolving B Loan Limit during the Revolving B Loan Term. The Company is not obligated to borrow any amount under the Loan Limit.revolving loans. Within the Loan Limit,respective loan limit, the Company may borrow, repay and reborrow at any time or from time to time while the Notes are in effect.

Base Rate Loans (as defined in the Credit Agreement) under the Revolving LoansA Loan and the Swing Line Loans accrue interest at the Base Rate plus the Applicable Rate (as defined in the Credit Agreement) and Term SOFR Loans for the Revolving Loans accrue interest at the rate per annum equal to the sum of Term SOFR for such interest period plus the Applicable Rate (as defined in the Credit Agreement). The Base Rate for any day is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by BOA as its prime rate, and (c) the Term SOFR plus 1.0% subject to certain interest rate floors. Repayment of all then outstanding principal, interest, fees and costs is due at the end of the Term.

The Company and BofA Securities as a sustainability coordinator, are entitled to establish specified key performance indicators (KPIs) with respect to certain environmental, social and governance targets of the Company and its subsidiaries. The sustainability coordinator and the Company may amend the Credit Agreement for the purpose of incorporating the KPIs and other related provisions, unless the Lenders object to such amendment on or prior to the date that is ten business days after the date on which such amendment is posted for review by the Lenders. Based on the performance of the Company and its subsidiaries against the KPIs, certain adjustments (increase, decrease or no adjustment) to otherwise applicable pricing will be made; provided that the amount of such adjustments shall not exceed certain aggregate caps as in the definitive loan documentation.

Under the terms of the Security and Pledge Agreement, the Company and Trex Commercial, subject to certain permitted encumbrances, as collateral security for the above-stated loans and all other present and future indebtedness of the Company owing to the Lenders grants to BOA, as Administrative Agent for the Lenders, a continuing security interest in certain collateral described and defined in the Security and Pledge Agreement but excluding the Excluded Property (as defined in the Security and Pledge Agreement).

27


Indebtedness On and After December 22, 2022. As of December 22, 2022, the Company entered into a First Amendment to the Credit Agreement (First Amendment) by and among the Company, as borrower, the guarantors party thereto; BOA, as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; TD as lender and Syndication Agent; Regions Bank, PNC, and Wells Fargo (each, a Lender and collectively, the Lenders), arranged by BofA Securities as Sole Lead Arranger and Sole Bookrunner, amending that certain Credit Agreement dated as of May 18, 2022, by and among the Company, as borrower, the guarantors party thereto, BOA, as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer and the other lenders identified therein (as so amended, the “Credit Agreement”). The First Amendment removes Trex Commercial as a guarantor to any and all indebtedness under the Credit Agreement. As a part of the First Amendment, the Credit Agreement was amended and restated to provide for an additional Revolving B Loan (as hereinafter defined).

Under the First Amendment, the Lenders agreed to provide the Company with a Revolving B Loan consisting of one or more revolving loans in a collective maximum principal amount of $150,000,000 (Revolving B Loan Limit) throughout the term, which ends December 22, 2024 (Revolving B Loan Term). Previously, under the Credit Agreement, there was no Revolving B Loan. The First Amendment also provided that TD would serve as Syndication Agent.

As of December 22, 2022, the Credit Agreement was amended and restated to refer to this loan as the Revolving A Loan. The amended and restated Credit Agreement was made an Exhibit A to the First Amendment. All of the terms of the Credit Agreement apply to the Revolving B Loan. The Credit Agreement continues to include sublimits under the Revolving A Loan for a Letter of Credit facility in an amount not to exceed $60,000,000; and Swing Line Loans in an aggregate principal amount at any time outstanding not to exceed $20,000,000. The Revolving Loans, the Letter of Credit facility and the Swing Line Loans under Revolving A Loan are for the purpose of raising working capital and supporting general business operations.

The Notes provide the Company, in the aggregate, the ability to borrow an amount up to the Revolving A Loan Limit during the Revolving A Loan Term and Revolving B Loan Limit during the Revolving B Loan Term. The Company is not obligated to borrow any amount under the revolving loans. Within the respective loan limit, the Company may borrow, repay and reborrow at any time or from time to time while the Notes are in effect. With respect to Revolving B Loans (as defined in the First Amendment), for any day, the rate per annum is a tiered pricing based upon the Consolidated Debt to Consolidated EBITDA Ratio. The applicable rate for Revolving B Loans that are Base Rate Loans range between 1.20% and 2.15% and the applicable rate for Revolving B Loans that are Term SOFR/Term SOFR Daily Floating Rate range between 0.20% and 1.15%.

Under the terms of the Security and Pledge Agreement, the Company, subject to certain permitted encumbrances, as collateral security for the above-stated loans and all other present and future indebtedness of the Company owing to the Lenders grants a continuing security interest in certain collateral described and defined in the Security and Pledge Agreement but excluding the Excluded Property (as defined in the Security and Pledge Agreement).

At September 30, 2023,March 31, 2024, we had $56.5$223 million in outstanding borrowings under the revolving credit facility and borrowing capacity under the facility of $493.5$327 million.

Compliance with Debt Covenants. Pursuant to the terms of the Credit Agreement, the Company is subject to certain loan compliance covenants. The Company was in compliance with all covenants as of September 30, 2023.March 31, 2024. Failure to comply with the financial covenants could be considered a default of repayment obligations and, among other remedies, could accelerate payment of any amounts outstanding.

21


We believe that cash on hand, cash from operations and borrowings expected to be available under our revolving credit facilities will provide sufficient funds to fund planned capital expenditures, make scheduled principal and interest payments, fund warranty payments, and meet other cash requirements. We currently expect to fund future capital expenditures from operations and financing activities. The actual amount and timing of future capital requirements may differ materially from our estimate depending on the demand for Trex products and new market developments and opportunities.

Capital Requirements. In October 2021, we announced plans to add a third U.S.-based Trex Residential manufacturing facility located in Little Rock, Arkansas. The new campus will sitArkansas, on approximately 300 acres of land andthat will address increased demand for Trex Residential outdoor living products. The development approach and related expenditures for the new campus will be modular and calibrated to demand trends for Trex Residential outdoor living products. Construction began onOur capital expenditure guidance for 2024 is $210 million to $230 million and includes estimated expenditures for the newdevelopment of the Arkansas facility in the second quarter 2022, and in July 2022, the Company entered into a design-build agreement. As previously announced, the Company anticipates spending approximately $400 million on the facility and the budget for the design-build agreement is contained within this amount.2024. Construction for the new facility will be funded primarily through the Company’s ongoing cash generation or its line of credit.

Our capital expenditure guidance for 2023 is $145 million to $155 million. In addition to the construction of our thirdthe Arkansas facility, located in Arkansas, our capital allocation priorities for 2024 include expenditures for internal growth opportunities, manufacturing cost reductions, upgrading equipment and support systems, and acquisitions which fit our long-term growth strategy as we continue to evaluate opportunities that would be a good strategic fit for Trex, and return of capital to shareholders.

28


Inventory in Distribution Channels.Channels. We sell our Trex Residential decking and railing products through a tiered distribution system. We have over 50 distributors worldwide and two national retail merchandisers to which we sell our products. The distributors in turn sell the products to dealers and retail locations who in turn sell the products to end users. Significant increases in inventory levels in the distribution channel without a corresponding change in end-use demand could have an adverse effect on future sales.

Product Warranty. The Company warrantsWe warrant that for the applicable warranty period its Trex Residentialour products, when properly installed, used and maintained, will be free from material defects in workmanship and materials and itsour decking, cladding, fascia and railing products will not split, splinter, rot or suffer structural damage from termites or fungal decay.

Products sold on or after January 1, 2023: The warranty period for residential use is 50 years for Transcend® decking, 35 years for Select® decking and Universal Fascia, and 25 years for Enhance® decking and Transcend, Select, Enhance and Signature® railing. The warranty period for commercial use is 10 years, excluding Signature railing and Transcend cladding, which each have a warranty period of 25 years. The CompanyWe further warrantswarrant that Trex Transcend, Trex Enhance and Trex Select decking and cladding and Universal Fascia products will not fade in color from light and weathering exposure more than a certain amount and will be resistant to permanent staining from food and beverage substances or mold and mildew, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above. If there is a breach of such warranties, the Company haswe have an obligation either to replace the defective product or refund the purchase price.

Products sold prior to January 1, 2023: The warranty period is 25 years for residential use and 10 years for commercial use. With respect to Trex Signature railing, the warranty period is 25 years for both residential and commercial use. The CompanyWe further warrantswarrant that Trex Transcend, Trex Enhance, Trex Select and Universal Fascia products will not fade in color more than a certain amount and will be resistant to permanent staining from food substances or mold, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above. If there is a breach of such warranties, the company haswe have an obligation either to replace the defective product or refund the purchase price.

Trex Residential continuesWe maintain a warranty reserve for the settlement of our product warranty claims. We accrue for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and future claims experience. We review and adjust these estimates, if necessary, based on the differences between actual experience and historical estimates. Additionally, we accrue for warranty costs associated with occasional or unanticipated product quality issues if a loss is probable and can be reasonably estimated.

We continue to receive and settle claims for decking products manufactured at itsour Nevada facility prior to 2007 that exhibit surface flaking and maintainsmaintain a warranty reserve to provide for the settlement of these claims. Estimating the warranty reserve for surface flaking claims requires management to estimate (1) the number of claims to be settled with payment and (2) the average cost to settle each claim.

To estimate the number of surface flaking claims to be settled with payment, the Company utilizeswe utilize actuarial techniques to determine a reasonable possible rangequantify both the expected number of claims to be received and the percentage of those claims that will ultimately require payment (collectively, elements). Estimates for these elements are quantified using a range of assumptions derived from claim count history and the identification of factors influencing the claim counts to determine its best estimate of future claims for which to record a related liability.counts. The cost per claim varies due to a number of factors, including the size of affected decks, the availability and type of replacement material used, the cost of production of replacement material and the method of claim settlement.

The Company monitors

22


We monitor surface flaking claims activity each quarter for indications that itsour estimates require revision. Typically, a majority of surface flaking claims received in a year are received during the summer outdoor season, which spans the second and third quarters. It has been the Company’sour practice to utilize the actuarial techniques discussed above during the third quarter, after a significant portion of all claims has been received for the fiscal year and variances to annual claims expectations are more meaningful.

Average cost per claim experienced in the nine months ended September 30, 2023 was lower than that experienced in the nine months ended September 30, 2022, which was elevated due to the closure of three large claims, and lower than the Company’s expectations for 2023. The number of incoming claims received in the ninethree months ended September 30, 2023March 31, 2024, was lower than the number of claims received in the ninethree months ended September 30, 2022,March 31, 2023, and lower than the Company’sour expectations for 2023. After evaluating the declining trend in incoming claims in its actuarial analysis, the Company decreased its estimate of the number of future claims to be settled with payment. As a result of the decrease in estimated future claims,2024. Average cost per claim experienced in the three-month periodthree months ended September 30,March 31, 2024, was lower than that experienced in the three months ended March 31, 2023 the Company recorded a reduction of $3.8 million to its warranty reserveand lower than our expectations for the future settlement of surface flaking claims. The Company believes2024. We believe the reserve at September 30, 2023March 31, 2024 is sufficient to cover future surface flaking obligations.

29


The Company’sOur analysis is based on currently known facts and a number of assumptions, as discussed above, and current expectations. Projecting future events such as the number of claims to be received, the number of claims that will require payment and the average cost of claims could cause the actual warranty liabilities to be higher or lower than those projected, which could materially affect the Company’sour financial condition, results of operations or cash flows. The Company estimatesWe estimate that the annual number of claims received will continue to decline over time and that the average cost per claim will increase slightly, primarily due to inflation. If the level of claims received or average cost per claim differs materially from expectations, it could result in additional increases or decreases to the warranty reserve and a decrease or increase in earnings and cash flows in future periods. The Company estimatesWe estimate that a 10% change in the expected number of remaining claims to be settled with payment or the expected cost to settle claims may result in approximately a $1.1$1.0 million change in the surface flaking warranty reserve.

The Company also maintains a warranty reserve for the settlement of other residential product warranty claims and records the provision at the time of product sale.

The following table details surface flaking claims activity related to our warranty:

 

  Nine Months Ended September 30,   Three Months Ended March 31, 
  2023   2022   2024   2023 

Claims open, beginning of period

   1,729    1,759    1,695    1,729 

Claims received (1)

   451    507    69    81 

Claims resolved (2)

   (453   (506   (65   (81
  

 

   

 

 

 

   

 

 

Claims open, end of period

   1,727    1,760    1,699    1,729 
  

 

   

 

 

 

   

 

 

Average cost per claim (3)

  $3,977   $5,200   $3,460   $4,114 

 

(1)

Claims received include new claims received or identified during the period.

(2)

Claims resolved include all claims settled with or without payment and closed during the period.

(3)

Average cost per claim represents the average settlement cost of claims closed with payment during the period.

Seasonality. The operating results for Trex Residential have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions may reduce the level of home improvement and construction activity and can shift demand for its products to a later period. As part of its normal business practice and consistent with industry practice, Trex Residential has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season in order to ensure adequate availability of its product to meet anticipated seasonal consumer demand. The seasonal effects are often offset by the positive effect of the incentive programs.

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures about Market Risk,” in Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.2023. There were no material changes to the Company’s market risk exposure during the ninethree months ended September 30, 2023.March 31, 2024.

 

23


Item 4.

Controls and Procedures

The Company’s management, with the participation of its President and Chief Executive Officer, (thewho is the Company’s principal executive officer)officer, and its ActingSenior Vice President and Chief Financial Officer, (thewho is the Company’s principal financial officer),officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2023.March 31, 2024. Based on this evaluation, the President and Chief Executive Officer and the ActingSenior Vice President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective. There have been no changes in the Company’s internal control over financial reporting during the three-month period ended September 30, 2023,March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

3024


PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

The Company has lawsuits, as well as other claims, pending against it which are ordinary routine litigation and claims incidental to the business. Management has evaluated the merits of these lawsuits and claims and believes that their ultimate resolution will not have a material effect on the Company’s consolidated financial condition, results of operations, liquidity or competitive position.

Item 1A.

Risk Factors

Since December 31, 2022, there have been no material changes to the risk factors previously disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022. You should carefully consider the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2022 and our other filings made with the SEC. You should be aware that such risk factors and other information may not describe every risk we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table provides information relating to the purchases of our common stock during the three months ended September 30, 2023March 31, 2024 in accordance with Item 703 of Regulation
S-K:

Period

  (a)
Total Number of
Shares (or Units)
Purchased (1)
   (b)
Average Price Paid
per Share (or Unit)

($)
   (c)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs (2)
   (d)
Maximum number of
Shares (or Units) that
May Yet Be
Purchased Under the
Plan or Program
 

July 1, 2023 – July 31, 2023

   —     —     —     10,535,104 

August 1, 2023 – August 31, 2023

   3,454   $75.95    —     10,535,104 

September 1, 2023 – September 30, 2023

   686   $72.75    —     10,535,104 
  

 

 

   

 

 

   

 

 

   

 

 

 

Quarterly period ended September 30, 2022

   4,140      —    
  

 

 

     

 

 

   

Period
  
(a)

Total Number of

Shares (or Units)

Purchased (1)
   
(b)

Average Price Paid

per Share (or Unit)

($)
   
(c)

Total Number of

Shares (or Units)

Purchased as Part of

Publicly Announced

Plans or Programs (2)
   
(d)

Maximum Number of
Shares (or Units) that

May Yet Be

Purchased Under the

Plan or Program
 
January 1, 2024 – January 31, 2024
   —     —     —     10,535,104 
February 1, 2024 – February 29, 2024
   12,588   $90.30    —     10,535,104 
March 1, 2024 – March 31, 2024
   42,515   $94.53    —     10,535,104 
  
 
 
   
 
 
   
 
 
   
 
 
 
Quarterly period ended March 31, 2024
   55,103      —    
  
 
 
     
 
 
   
(1)

During the three months ended September 30, 2023, 4,140March 31, 2024, 55,103 shares were withheld by, or delivered to, the Company pursuant to provisions in agreements with recipients of restricted stock granted under the TrexCompany’s 2014 and 2023 Stock Incentive Plan allowing the Company to withhold, or the recipient to deliver to the Company, the number of shares having the fair value equal to tax withholding due.

(2)
On May 4, 2023, the Trex Board of Directors adopted a new stock repurchase program (2023 Stock Repurchase Program) of up to 10.8 million shares of its outstanding common stock, and terminated the existing Stock Repurchase Program. This repurchase program has no set expiration date and no shares were repurchased under the program during the three months ended March 31, 2024.
Item 5.
Other Information
Submission of Matters to a Vote of Security Holders
Trex held its Annual Meeting of Stockholders on May 7, 2024. Only holders of Trex common stock at the close of business on March 11, 2024 (Record Date) were entitled to vote at the Annual Meeting. As of the Record Date, there were 108,687,117 shares of its outstanding common stock and terminatedentitled to vote. A total of 99,835,270 shares of common stock (91.86%), constituting a quorum, were represented in person or by valid proxies at the existing Stock Repurchase Program. Annual Meeting.
The 2023 Stock Repurchase Program has nostockholders voted on three proposals at the Annual Meeting. The proposals are described in detail in the Company’s definitive proxy statement dated March 25, 2024. The final results for the votes regarding each proposal are set expiration date and 264,896 shares were repurchased under the 2023 Stock Repurchase Program as of September 30, 2023.

Item 5.

Other Information

Amended and Restated By-Laws of the Company dated October 25, 2023. On October 25, 2023forth below.

Proposal 1:
Trex stockholders elected four directors to the Board to serve for a three-year term until the 2027 annual meeting of Directorsstockholders and until their successors are duly elected and qualified. The votes regarding this proposal were as follows:
   
For
   
Against
   
Abstain
   
Broker Non-Votes
 
James E. Cline
   84,323,526    8,046,900    93,358    7,371,486 
Gena C. Lovett
   90,639,582    1,566,880    257,322    7,371,486 
Melkeya McDuffie
   91,145,150    1,061,132    257,502    7,371,486 
Patricia B. Robinson
   85,029,285    7,343,772    90,727    7,371,486 
25

Proposal 2:
Trex stockholders approved, on an advisory basis, the Company approved and adopted amendments to Article IV, Section 1 and Article V, Section 2.(b)compensation of the Company’s Amended and Restated By-laws, effective immediately, to grant authority toexecutive officers named in the Chief Executive Officer to appoint officers of the Corporation at the level of Vice-President or below and to fill any vacancy among such officers, any such appointment to be reported to the Board of Directors no later than the next regular meeting of the Board of Directors after such action is taken.

31


A copy of the Amended and Restated By-Laws, as amended October 25, 2023, is attached as Exhibit 3.3 hereto and is incorporated by reference.

Appointment of Adam D. Zambanini as Executive Vice President and Chief Operating Officer. On October 25, 2023, our Board of Directors appointed Adam Zambanini to serve as our Executive Vice President and Chief Operating Officer. Mr. Zambanini, age 46, previously served as President of Trex Residential Products since July 2018. There was no change to Mr. Zambanini’s compensation, and the information related to Mr. Zambanini’s compensation set forth in ourCompany’s definitive proxy statement filed on Schedule 14A ondated March 21, 2023 is incorporated herein by reference.

25, 2024. The votes regarding this proposal were as follows:
For
 
Against
 
Abstain
 
Broker Non-Votes
85,747,668 6,605,124 110,992 7,371,486
Proposal 3:
Trex stockholders ratified the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2024. The votes regarding this proposal were as follows:
For
 
Against
 
Abstain
 
Broker Non-Votes
95,797,073 3,997,128 61,069 
Insider Trading Arrangements
During the quarter ended March 31, 2024, none of our directors or officers (as defined in Rule
16a-1(f)
of the Exchange Act) adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule
10b5-1(c)
of the Exchange Act or any
non-Rule
10b5-1
trading arrangement (as defined in Item 408(c) of Regulation
S-K).
Item 6.

Exhibits

See Exhibit Index at the end of the Quarterly Report on Form
10-Q
for the information required by this Item which is incorporated by reference.

32

26


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 thereunto duly authorized.

 

  TREX COMPANY, INC.
Date: October 30, 2023May 9, 2024  By: /s/ Bryan H. FairbanksBrenda K. Lovcik
   Bryan H. FairbanksBrenda K. Lovcik
   Senior Vice President and Chief ExecutiveFinancial Officer
   (Duly Authorized Officer and Principal Financial Officer)


EXHIBIT INDEX

 

     

Incorporated by reference

 

Exhibit

Number

 

Description

  

Form

   

Exhibit

   

Filing Date

   

File No.

 
  3.1 Restated Certificate of Incorporation of Trex Company, Inc. dated July 28, 2021.   10-Q    3.6    August 2, 2021    001-14649 
  3.2 First Certificate of Amendment to the Restated Certificate of Incorporation of Trex Company, Inc. dated May 5, 2022.   10-Q    3.2    May 9, 2022    001-14649 
  3.3* Amended and Restated By-Laws of the Company dated October 25, 2023.        
 10.1** Trex Company, Inc. 2023 Stock Incentive Plan.   10-Q    10.1    May 8, 2023    001-14649 
10.2** Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors as amended on July 26, 2023.   10-Q    10.2    July 31, 2023    001-14649 
10.3** Form of Trex Company, Inc. 2023 Stock Incentive Plan Stock Appreciation Rights Agreement.   10-Q    10.3    July 31, 2023    001-14649 
10.4** Form of Trex Company, Inc. 2023 Stock Incentive Plan Time-Based Restricted Stock Unit Agreement.   10-Q    10.4    July 31, 2023    001-14649 
10.5** Form of Trex Company, Inc. 2023 Stock Incentive Plan Performance-Based Restricted Stock Unit Agreement.   10-Q    10.5    July 31, 2023    001-14649 
10.6** Form of Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors Restricted Stock Unit Agreement.   10-Q    10.6    July 31, 2023    001-14649 
10.7** Amended and Restated Severance Agreement dated July 31, 2023 by and between Trex Company, Inc. and Bryan H. Fairbanks.   10-Q    10.7    July 31, 2023    001-14649 
10.8** Form of Severance Agreement between Trex Company, Inc. and Officers other than the Chief Executive Officer.   10-Q    10.8    July 31, 2023    001-14649 
 31.1* Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.        
 31.2* Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.        
 32*** Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350).        
101.INS* Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.        
101.SCH* Inline XBRL Taxonomy Extension Schema Document.        
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document.        
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.        
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document.        
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document.        


Incorporated by reference

Exhibit

Number

Description

Form

Exhibit

Filing Date

File No.

104.1Cover Page Interactive Data File—The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
     

Incorporated by reference

 

Exhibit

Number

 

Description

  

Form

   

Exhibit

   

Filing Date

   

File No.

 
  3.1 Restated Certificate of Incorporation of Trex Company, Inc. dated July 28, 2021.   10-Q    3.6    August 2, 2021    001-14649 
  3.2 First Certificate of Amendment to the Restated Certificate of Incorporation of Trex Company, Inc. dated May 5, 2022   10-Q    3.2    May 9, 2022    001-14649 
  3.3 Amended and Restated By-Laws of the Company dated February 21, 2024   10-K    3.3    February 26, 2024    001-14649 
 31.1* Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.        
 31.2* Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.        
 32*** Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350).        
101.INS* Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.        
101.SCH* Inline XBRL Taxonomy Extension Schema Document.        
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document.        
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.        
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document.        
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document.        
104.1 Cover Page Interactive Data File—The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.        

 

*

Filed herewith.

**

Management contract or compensatory plan or agreement.

***

Furnished herewith.