Exhibit 99.1
Trex Company, Inc.
Pro Forma Profit and Loss Statement
Three Months Ended September 30
(amounts in 000’s)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, 2008 | | | Three Months Ended September 30, 2007 | |
| | | Q3 ‘08
Reported | | | Adjustments | | | Q3 ‘08
Pro Forma | | | Q3 ‘07
Reported | | | Adjustments | | | Q3 ‘07
Pro Forma | |
Net sales | | $ | 85,379 | | | $ | 0 | | | $ | 85,379 | | | $ | 63,971 | | | $ | 20,114 | | | $ | 84,085 | |
Cost of sales | | $ | 61,827 | | | $ | (2,291 | ) | | $ | 59,536 | | | $ | 73,631 | | | $ | (9,400 | ) | | $ | 64,231 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit | | $ | 23,552 | | | $ | 2,291 | | | $ | 25,843 | | | $ | (9,660 | ) | | $ | 29,514 | | | $ | 19,854 | |
% of Net sales | | | 27.6 | % | | | | | | | 30.3 | % | | | -15.1 | % | | | | | | | 23.6 | % |
| | | | | | |
SG&A expenses | | $ | 15,112 | | | $ | (458 | ) | | $ | 14,654 | | | $ | 52,074 | | | $ | (34,599 | ) | | $ | 17,475 | |
% of Net Sales | | | 17.7 | % | | | | | | | 17.2 | % | | | 81.4 | % | | | | | | | 20.8 | % |
Income from operations | | $ | 8,440 | | | $ | 2,749 | | | $ | 11,189 | | | $ | (61,734 | ) | | $ | 64,113 | | | $ | 2,379 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
% of Net sales | | | 9.9 | % | | | | | | | 13.1 | % | | | -96.5 | % | | | | | | | 2.8 | % |
Pro Forma Adjustments
1.Q3 ‘08 - Total adjustments of $2.7 million: $2.3 million of adjustments to cost of sales comprised of $1.4 million related to inventory valuation adjustments for finished goods product that was manufactured at the Company's idled Olive Branch site and $0.9 million of freight expense to move inventories from the Olive Branch site to our other two production facilities; $0.5 million of adjustments to SG&A expenses related to incremental incentive compensation compared to Q3 '07 and severance charges.
2.Q3 ‘07 - Total adjustments of $64.1 million: $20.1 million of adjustments to net sales primarily for material costs related to West Coast production that exhibited surface flaking characteristics; $9.4 million of adjustments to cost of sales related to inventory valuation adjustments; $34.6 million of adjustments to SG&A expenses, all of which related to West Coast production that exhibited surface flaking characteristics. Total charges to net sales and SG&A expenses for the West Coast surface flaking was $54.3 million, which includes actual expenditures for claims paid during the three-month period and the increase to the warranty reserve during the three-month period. Effective October 1, 2007, these costs have been recognized against the warranty reserve.
Trex Company, Inc.
Pro Forma Profit and Loss Statement
Nine Months Ended September 30
(amounts in 000’s)
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| | | Nine Months Ended September 30, 2008 | | | Nine Months Ended September 30, 2007 | |
| | | YTD ‘08
Reported | | | Adjustments | | | YTD ‘08
Pro Forma | | | YTD ‘07
Reported | | | Adjustments | | | YTD ‘07
Pro Forma | |
Net sales | | $ | 299,905 | | | $ | 0 | | | $ | 299,905 | | | $ | 298,663 | | | $ | 25,367 | | | $ | 324,030 | |
Cost of sales | | $ | 215,372 | | | $ | (4,743 | ) | | $ | 210,629 | | | $ | 254,530 | | | $ | (11,254 | ) | | $ | 243,276 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit | | $ | 84,533 | | | $ | 4,743 | | | $ | 89,276 | | | $ | 44,133 | | | $ | 36,621 | | | $ | 80,754 | |
% of Net sales | | | 28.2 | % | | | | | | | 29.8 | % | | | 14.8 | % | | | | | | | 24.9 | % |
| | | | | | |
SG&A expenses | | $ | 54,338 | | | $ | (7,457 | ) | | $ | 46,881 | | | $ | 91,974 | | | $ | (36,105 | ) | | $ | 55,869 | |
% of Net Sales | | | 18.1 | % | | | | | | | 15.6 | % | | | 30.8 | % | | | | | | | 17.2 | % |
Income from operations | | $ | 30,195 | | | $ | 12,200 | | | $ | 42,395 | | | $ | (47,841 | ) | | $ | 72,726 | | | $ | 24,886 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
% of Net sales | | | 10.1 | % | | | | | | | 14.1 | % | | | -16.0 | % | | | | | | | 7.7 | % |
Pro Forma Adjustments
1.YTD ‘08 - Total adjustments of $12.2 million: $4.7 million of adjustments to cost of sales, $3.2 million of which related to inventory valuation adjustments, primarily related to inventory manufactured at the Company's idled Olive Branch site, $0.9 million of freight expense to move inventories from the Olive Branch site to our other two production facilities and $0.6 million related to a change in the depreciable lives on certain assets related to raw material storage; $7.5 million of adjustments to SG&A expenses, $5.7 million of which related to incremental incentive compensation compared to the YTD '07 period due to improved financial performance, $1.0 million due to severance expense, primarily related to the first quarter reduction in force, and $0.8 million of costs related to a patent infringement legal proceeding.
2.YTD ‘07 - Total adjustments of $72.7 million: $25.3 million of adjustments to net sales primarily for material costs related to West Coast production that exhibited surface flaking characteristics; $11.3 million of adjustments to cost of sales related to inventory valuation adjustments; $36.1 million of adjustments to SG&A expenses, $39.4 million of which related to West Coast production that exhibited surface flaking characteristics and a $3.25 million credit for a settlement with ExxonMobil which represented a portion of the attorney's fees incurred by the Company in connection with a patent infringement litigation. Total charges to net sales and SG&A expenses for the West Coast surface flaking was $64.0 million, which includes actual expenditures for claims paid during the nine-month period and the increase to the warranty reserve during the nine-month period. Effective October 1, 2007, these costs have been recognized against the warranty reserve.
