Trex Company, Inc. (NYSE: TWP), manufacturer and distributor of
Trex® decking, railing, fencing and trim, today announced financial
results for the third quarter ended September 30, 2009.
Net sales for the third quarter of 2009 totaled $61.9 million
compared to net sales of $85.4 million for the 2008 third quarter.
The company reported a net loss of $22.5 million, or $1.49 per
diluted share, for the 2009 third quarter compared to net income of
$5.2 million, or $0.34 per diluted share, for the 2008 period. The
company recognized a non-cash impairment charge of $23.3 million in
the 2009 quarter relating to its Olive Branch, Mississippi
facility. The company also recorded a $7.2 million non-cash charge
related to inventory manufactured prior to 2008 that management has
determined is no longer saleable or does not meet its current
quality standards. The inventory charge gave rise to an offsetting
favorable LIFO adjustment of $7.4 million. Excluding these charges,
the company had net income for the 2009 third quarter of $0.6
million, or $0.04 per diluted share.
For the nine months ended September 30, 2009, Trex Company
reported net sales of $221.1 million compared to net sales of
$299.9 million for the prior-year period. The company reported a
net loss of $18.2 million, or $1.21 per diluted share, compared to
net income of $19.1 million, or $1.26 per diluted share, for the
first nine months of 2008. Before giving effect to the above noted
non-cash charges taken in the first nine months of 2009, the
company had net income for the period totaling $4.8 million, or
$0.32 per diluted share.
President and CEO Ronald W. Kaplan commented, “Trex’s net sales
for the third quarter were impacted by the market’s anticipation of
our launch of a groundbreaking new line of decking and railing, to
be unveiled at this week’s 2009 Trex Distributor Meeting, as well
as by ongoing weakness in the home building and remodeling sector.
We began discussing our new product – which has been the primary
focus of our R&D efforts since the middle of last year – with
Trex’s major distributors this summer, after which some started
implementing inventory adjustments. While for competitive reasons,
we can’t provide full details on this exciting product until next
week, it represents a major step forward in technology, offering
significant performance and aesthetic improvements.
“This summer we also told our major distributors about a
comprehensive enhancement of Trex’s current decking product
platform, causing some to make additional inventory adjustments
that impacted our third-quarter sales. The enhancements, which
we’re now rolling out, streamline our manufacturing process, and
provide more flexibility and design options to consumers, as well
as more convenience and efficiency to distributors and dealers.
“I’m pleased to note that our third-quarter gross margin was
29.8%, a 290-basis-point improvement over last year’s period. This
increase reflects the continued effectiveness of our focus on
operations process improvements and cost containments. Since this
management team joined Trex in January 2008, we have significantly
increased the company’s manufacturing productivity by implementing
fundamental process improvements. Reflecting the extraordinary
progress we’ve made in increasing capacity at Trex’s Winchester,
Va. and Fernley, Nev. plants, we took a charge in the third quarter
for our Olive Branch facility, whose operations were suspended in
September 2007.
“Trex continues to weather the economic downturn better than
most of our competitors. Even after the redemption of $25 million
in revenue bonds in September of this year, our cash balance at
quarter-end was approximately $40 million and we haven’t borrowed
against our revolver for almost 18 months.”
Mr. Kaplan concluded, “With the launch of our groundbreaking new
decking and railing product, the overhaul of our current product
line-up and our much improved manufacturing capabilities, we are
beginning a new era at Trex Company. Consumers’ interest in
products that enhance their outdoor living experience is higher
than ever, and we have positioned Trex to deliver the beauty,
comfort, durability and value they’re seeking. Our goal is to
elevate the entire decking category, creating new standards for
performance and aesthetics, and we expect Trex to reap the benefits
of these efforts in future years.
“Our guidance for the fourth quarter reflects the market and
economic trends I described earlier. We expect net sales to
approximate $40-$45 million for the fourth quarter of 2009.”
Trex also announced that the ticker symbol of its shares on the
New York Stock Exchange will change to "TREX" from “TWP” effective
at the start of trading on Monday, November 23, 2009. Trex’s new
symbol will reinforce the company's 15-plus year brand identity and
align the company’s profile in the investment community more
closely with its products.
Third-Quarter-2009 Conference Call and Webcast
Information
Trex will hold a conference call to discuss its
third-quarter-2009 results on Monday, November 9, 2009 at 8:00 a.m.
ET. To participate in the live call by telephone, please dial
706-634-1218 and reference conference ID #35691729. A live webcast
of the conference call will also be available to all investors in
the Investor Relations section of the Trex Company website at
www.trex.com. The call will
also be simulcast at www.streetevents.com.
For those who cannot listen to the live broadcast, the webcast
will be available on Trex’s website for 30 days. A telephone replay
of the call will also be available for seven days, beginning at
approximately 11:00 a.m. ET on November 9. To listen to the
telephone replay, dial 706-645-9291 and enter conference ID
#35691729.
About Trex Company
Trex Company is the nation’s largest manufacturer of composite
decking, railing and fencing, with more than 15 years of product
experience. Built on “green” principles and values, Trex makes its
products from a unique formulation of reclaimed wood and waste
plastic, combined through a proprietary process. Trex decking,
railing and fencing offer significant design flexibility with fewer
ongoing maintenance requirements than wood, as well as a truly
environmentally responsible choice. In addition, Trex distributes
ultra-low maintenance PVC decking under the trademark Trex Escapes®
and PVC trim under the trademark TrexTrim™. For more information,
visit the Company’s website, www.trex.com. Trex®, Trex Escapes® and
TrexTrim™ are trademarks of Trex Company, Inc., Winchester, Va.
The statements in this press release regarding the Company's
expected future performance and condition constitute
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements are subject to risks and
uncertainties that could cause the Company's actual operating
results to differ materially. Such risks and uncertainties include
the extent of market acceptance of the Company's 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
Company's ability to obtain raw materials at acceptable prices; the
Company's ability to maintain product quality and product
performance at an acceptable cost; the level of expenses associated
with product replacement and consumer relations expenses related to
product quality; and the highly competitive markets in which the
Company operates. The Company's report on Form 10-K filed with the
Securities and Exchange Commission on March 12, 2009 and its
subsequent reports on Form 10-Q filed on May 8, 2009 and August 10,
2009 discuss some of the important factors that could cause the
Company's actual results to differ materially from those expressed
or implied in these forward-looking statements. The Company
expressly disclaims any obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.
TREX COMPANY, INC. Condensed Consolidated Statements
of Operations (In thousands, except share and per share data)
(Unaudited) Three
Months Ended September 30, Nine Months Ended September 30,
2008
2009
2008
2009
Net sales $ 85,379 $ 61,949 $ 299,905 $ 221,054
Cost of sales 62,406 43,467
217,038 157,257 Gross profit 22,973
18,482 82,867 63,797 Selling, general and administrative
expenses 14,533 13,964 52,672 47,937 Impairment of
long-lived assets - 23,251 -
23,251 Income (loss) from operations 8,440
(18,733 ) 30,195 (7,391 ) Interest expense, net 3,536
3,930 11,135 11,012
Income (loss) before income taxes 4,904 (22,663 ) 19,060
(18,403 ) Provision (benefit) for income taxes (261 )
(201 ) 10 (203 ) Net income (loss) $
5,165 $ (22,462 ) $ 19,050 $ (18,200 ) Diluted
earnings (loss) per common share $ 0.34 $ (1.49 ) $ 1.26 $
(1.21 ) Diluted weighted average common shares
outstanding 15,253,680 15,082,047
15,082,325 15,048,467
TREX COMPANY,
INC. Condensed Consolidated Balance Sheets (In thousands,
except share data)
31-Dec-08
30-Sep-09
(unaudited)
ASSETS Current assets: Cash and cash equivalents
$ 23,189 $ 39,791 Accounts receivable, net 13,555 14,961
Inventories 69,397 37,676 Prepaid expenses and other assets 5,518
2,531 Income taxes receivable 2,554 201 Deferred income taxes
2,141 2,141 Total current assets
116,354 97,301 Property, plant and equipment,
net 176,336 140,425 Goodwill 6,837 6,837 Other assets 7,557
5,831 Total assets $ 307,084 $ 250,394
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable and accrued expenses $ 37,666 $
26,470 Accrued warranty 12,310 12,342 Current portion long-term
debt 1,293 1,376 Total current
liabilities 51,269 40,188 Deferred
income taxes 3,531 3,531 Accrued taxes 2,640 2,224 Non-current
accrued warranty 9,546 1,994 Debt-related derivatives 2,069 950
Long-term debt, net of current portion 100,201
79,204 Total liabilities 169,256
128,091 Stockholders’ equity: Preferred stock, $0.01 par
value, 3,000,000 shares authorized; none issued and outstanding --
-- Common stock, $0.01 par value, 40,000,000 shares authorized;
15,310,343 and 15,388,017 shares issued and outstanding at December
31, 2008 and September 30, 2009 153 154 Additional paid-in capital
92,825 95,207 Accumulated other comprehensive loss (1,092 ) (800 )
Retained earnings 45,942 27,742 Total
stockholders’ equity 137,828 122,303
Total liabilities and stockholders’ equity $ 307,084 $
250,394
TREX COMPANY, INC. Condensed
Consolidated Statements of Cash Flows (In thousands) (Unaudited)
Nine Months Ended September 30,
2008
2009
OPERATING ACTIVITIES Net income (loss) $ 19,050 $ (18,200 )
Adjustments to reconcile net
income (loss) to net cash provided by operating activities:
Depreciation and amortization 23,756 23,826 Impairment of long
lived assets -- 23,251 Other non-cash charges 1,988 2,030 Changes
in operating assets and liabilities 5,833
16,873 Net cash provided by operating activities $
50,627 $ 47,780 INVESTING ACTIVITIES $ (6,874
) $ (4,905 ) FINANCING ACTIVITIES $ (1,062 ) $ (26,273 )
Net increase in cash and cash equivalents $ 42,691 $ 16,602
Cash and cash equivalents at beginning of period $ 66 $
23,189 Cash and cash equivalents at end of period $
42,757 $ 39,791
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