Trex Company Announces Record Sales and EPS for 2014

  • 2014 Net Sales Increase 14% to $392 Million
  • 2014 EPS Rises 26% to $1.27
  • 1Q15 Revenue Guidance an Increase of 19% to $120 Million
  • Awarded #1 Ranking in BUILDER 2015 Brand Study

WINCHESTER, Va.--()--Trex Company, Inc. (NYSE:TREX), the world’s largest manufacturer of wood-alternative decking and railing products, today announced financial results for the fourth quarter and year ended December 31, 2014.

For the fourth quarter of 2014, net sales totaled $74.2 million compared to $63.8 million for the 2013 quarter, an increase of 16.2%. The Company recognized earnings before taxes of $8.6 million for the 2014 quarter, a $4.4 million, or 103%, increase compared to the 2013 quarter. The Company reported net income of $5.2 million, or $0.16 per diluted share, for the 2014 quarter compared to net income of $15.1 million, or $0.45 per diluted share, for the 2013 period. The Company’s 2013 fourth-quarter net income includes the effect of a favorable tax valuation allowance. Excluding the favorable tax valuation allowance, the 2013 fourth-quarter diluted earnings per share would have been $0.08.

For the full year 2014, Trex Company reported net sales of $391.7 million compared to net sales of $342.5 million for 2013, an increase of 14.3%. The Company reported net income of $41.5 million, or $1.27 per diluted share, compared to net income of $34.6 million, or $1.01 per diluted share, for 2013. During 2013, the Company recognized $24.5 million of non-operating charges, most notably a $20.0 million increase to its warranty reserve for decking material manufactured at its Nevada plant prior to 2007. The Company’s 2013 net income includes the effect of a favorable tax valuation allowance. Excluding the effect of the $24.5 million pre-tax non-operating charges and excluding the favorable tax valuation allowance, the Company’s 2013 earnings per diluted share would have been $0.86.

Chairman, President and CEO Ronald W. Kaplan commented, “Our strong fourth-quarter financial performance contributed to our record-setting sales and earnings in 2014. In addition, we generated free cash flow of $46 million, up $13 million over the prior year, and returned $50 million of capital to shareholders through share repurchases. We also entered new specialty material markets that leverage Trex’s extrusion and recycling expertise.

“Our record results reflect continued strong execution across our four guiding principles for enhancing shareholder value – our superior product platform, unsurpassed branding, enhanced global distribution presence and efficient manufacturing processes. We are pleased with our successful market share advancement initiatives in 2014. In addition, Trex recently achieved a category sweep and a #1 ranking in Builder Magazine’s Brand Study for 2015. We were awarded top rankings across all four sub-categories measuring brand and quality for the Composite/PVC Decking category. This marks the first time in recent history that a single manufacturer has topped all four categories.

“We entered 2015 with momentum and are optimistic about our prospects for this year. For the first quarter of 2015, we expect net sales of approximately $120 million, a 19% increase from the prior-year period.”

Fourth-Quarter 2014 Conference Call and Webcast Information

Trex will hold a conference call to discuss its fourth-quarter 2014 results on Tuesday, February 24, 2015 at 10:00 a.m. ET. To participate in the live call by telephone, please dial 706-634-1218 or 888-803-7638 and reference conference ID #67667733. A live webcast of the conference call will also be available in the Investor Relations section of the Trex Company website at trex.com.

For those who cannot listen to the live broadcast, an audio replay of the earnings call will be available on the Trex website for 30 days.

Forward-Looking Statements

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 impact of weather-related demand fluctuations on inventory levels in the distribution channel and sales of the Company’s products; 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. Documents filed with the Securities and Exchange Commission by the Company, including in particular its latest annual report on Form 10-K and quarterly reports on Form 10-Q, 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.

About Trex Company

Trex Company is the world’s largest manufacturer of wood-alternative decking and railing, with more than 20 years of product experience. Stocked in more than 6,700 retail locations throughout the world, Trex® outdoor living products offer a wide range of style options with fewer ongoing maintenance requirements than wood, as well as a truly environmentally responsible choice. For more information, visit trex.com.

 
TREX COMPANY, INC.
Condensed Consolidated Statements of Comprehensive Income
(In thousands, except share and per share data)
(Unaudited)
 
 
     

Three Months Ended
December 31,

   

Twelve Months Ended
December 31,

2014     2013 2014     2013
 
 
Net sales $ 74,202 $ 63,831 $ 391,660 $ 342,511
 
Cost of sales   47,567   44,146     251,464   243,893  
 
Gross profit 26,635 19,685 140,196 98,618
 
Selling, general and administrative expenses   17,902   15,358     72,370   73,967  
 
Income from operations 8,733 4,327 67,826 24,651
 
Interest expense, net   87   71     878   602  
 
Income before income taxes 8,646 4,256 66,948 24,049
 
Provision (benefit) for income taxes   3,493   (10,847 )   25,427   (10,549 )
 
Net income $ 5,153 $ 15,103   $ 41,521 $ 34,598  
 
Basic earnings per common share $ 0.16 $ 0.46   $ 1.28 $ 1.03  
 
Basic weighted average common shares outstanding   31,641,963   33,045,708     32,319,649   33,589,682  
 
Diluted earnings per common share $ 0.16 $ 0.45   $ 1.27 $ 1.01  
 
Diluted weighted average common shares outstanding   32,085,210   33,578,392     32,751,074   34,273,502  
 
Comprehensive income $ 5,153 $ 15,103   $ 41,521 $ 34,598  
 

 
TREX COMPANY, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
         
December 31,
2014 2013
 
ASSETS
Current assets:
 
Cash and cash equivalents $ 9,544 $ 3,772
Accounts receivable, net 36,391 37,338
Inventories 23,747 22,428
Prepaid expenses and other assets 6,288 3,145
Deferred income taxes   9,271     9,497  
Total current assets 85,241 76,180
Property, plant and equipment, net 98,716 100,783
Goodwill and other intangibles 10,534 10,542
Other assets   1,333     652  
Total assets $ 195,824   $ 188,157  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
Accounts payable $ 20,050 $ 14,891
Accrued expenses 20,660 23,295
Accrued warranty   8,744     9,000  
Total current liabilities 49,454 47,186
Deferred income taxes 3,708 360
Non-current accrued warranty 25,097 31,812
Other long-term liabilities   4,180     2,183  
Total liabilities   82,439     81,541  
Stockholders’ equity:
 
Preferred stock, $0.01 par value, 3,000,000 shares authorized; none issued and outstanding - -

Common stock, $0.01 par value, 80,000,000 shares authorized; 34,800,552 and 34,598,124

shares issued and 32,020,123 and 33,475,614 shares outstanding at December 31, 2014 and

December 31, 2013, respectively

348 346
Additional paid-in capital 116,740 101,494
Retained earnings 71,297 29,776
Treasury stock, at cost, 2,780,429 and 1,122,510 shares at December 31, 2014 and 2013, respectively   (75,000 )   (25,000 )
Total stockholders’ equity   113,385     106,616  
Total liabilities and stockholders’ equity $ 195,824   $ 188,157  
 

 
TREX COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
      Twelve Months Ended December 31,
2014     2013
 
Operating Activities
Net income $ 41,521 $ 34,598
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 15,204 16,255
Deferred income taxes 3,574 (12,698 )
Stock-based compensation 4,807 3,811
Loss on disposal of property, plant and equipment 158 587
Excess tax benefits from stock compensation (12,898 ) (1,466 )
Other non-cash adjustments (245 ) (337 )
Changes in operating assets and liabilities:
Accounts receivable 867 (10,844 )
Inventories (1,319 ) (4,907 )
Prepaid expenses and other assets (624 ) (213 )
Accounts payable 5,159 3,731
Accrued expenses and other liabilities (7,535 ) 15,173
Income taxes receivable/payable   9,973     1,518  
 
Net cash provided by operating activities   58,642     45,208  
 
Investing Activities
Expenditures for property, plant and equipment (12,974 ) (13,060 )
Proceeds from sales of property, plant and equipment 66 176
Purchase of acquired company, net of cash acquired (44 ) -
Notes receivable, net   79     187  
 
Net cash used in investing activities   (12,873 )   (12,697 )
 
Financing Activities
Financing costs (453 ) (119 )
Borrowings under line of credit 143,000 74,500
Principal payments under line of credit (143,000 ) (79,500 )
Repurchases of common stock (53,189 ) (31,277 )
Proceeds from employee stock purchase and option plans 747 4,032
Excess tax benefits from stock compensation   12,898     1,466  
 
Net cash used in financing activities   (39,997 )   (30,898 )
 
Net increase in cash and cash equivalents 5,772 1,613
Cash and cash equivalents at beginning of period   3,772     2,159  
 
Cash and cash equivalents at end of period $ 9,544   $ 3,772  
 
Supplemental Disclosure:
Cash paid for interest, net of capitalized interest $ 520 $ 348
Cash paid for income taxes, net $ 11,919 $ 672
 

Contacts

Trex Company, Inc.
James Cline, 540-542-6300
SVP & CFO
or
LHA
Harriet Fried, 212-838-3777

Contacts

Trex Company, Inc.
James Cline, 540-542-6300
SVP & CFO
or
LHA
Harriet Fried, 212-838-3777