Trex Company, Inc. (NYSE: TWP), manufacturer and distributor of
Trex� decking, railing, fencing and trim, today announced financial
results for the fourth quarter and fiscal year ended December 31,
2008.
For fiscal year 2008, Trex Company reported net sales of $329.2
million, compared to net sales of $329.0 million for fiscal year
2007. The Company reported net income of $13.6 million, or $0.90
per diluted share, for 2008 compared to a net loss of $75.9
million, or $5.10 per diluted share, for 2007. The Company�s
full-year 2007 results were adversely affected by charges totaling
$92.0 million, of which $37.8 million were recognized in net sales.
Before giving effect to these charges, net sales for 2007 totaled
$366.8 million.
Net sales for the fourth quarter of 2008 totaled $29.3 million
compared to net sales of $30.3 million for the 2007 fourth quarter.
The Company reported a net loss for the 2008 fourth quarter of
$10.0 million, or $0.67 per diluted share, compared to a net loss
of $41.0 million, or $2.75 per diluted share, for the fourth
quarter of 2007. The Company�s fourth-quarter 2007 results were
adversely affected by charges totaling $19.3 million. Of these
charges, $12.5 million were recognized in net sales. Before giving
effect to these charges, net sales for the 2007 fourth quarter
totaled $42.8 million.
The Company recognized an income tax benefit of $0.8 million and
$1.0 million in the 2008 fourth quarter and full year,
respectively. The low 2008 effective tax rate, as compared to 2007,
was primarily due to the recognition of a benefit resulting from
the realization of a portion of the Company�s previously reserved
deferred tax assets.
President and CEO Ronald W. Kaplan commented, �As our results
clearly demonstrate, 2008 was an excellent year for Trex, during
which we made significant progress in restoring the company to
financial health and grew shareholder value based on our four
guiding principles � providing a best-in-class product offering,
expanding our distribution presence, increasing our brand
leadership and advancing our low-cost competitive advantage. Our
new products, including Trex Escapes� ultra-low maintenance decking
and grooved Trex Brasilia� with the Trex Hideaway� fastening
system, were well received, and the many cost efficiencies,
productivity and process improvements we implemented also
contributed to the successful progress of our business turnaround.
All of us are very proud of the long way Trex has come over the
past 12 months, especially given the extremely difficult economic
environment.
�Although we reported a net loss in the 2008 fourth quarter � as
Trex typically does due to the highly seasonal nature of outdoor
home improvements � on a pro forma basis, our results improved
significantly over the same period in 2007. Our gross margin for
fiscal year 2008 climbed to 27.8% or 29.1% on a pro forma basis
from 12.0% or 24.1% on a pro forma basis for the 2007 year. Free
cash flow for the 2008 year (defined as cash provided by, or used
in, operating activities less cash used for capital expenditures)
rose substantially to $25.2 million from negative $25.2 million in
2007 and we ended 2008 with a cash balance of $23.2 million,
greatly enhancing our financial and operational flexibility in the
coming year.
�Moving forward we will complete the business turnaround that we
began a year ago and maintain our focus on long-term growth in
shareholder value by responding to consumers� desire for
attractive, high quality outdoor living products. We will continue
building our exceptional brand recognition, best-in-class products,
and leading distribution presence, as well as leveraging our
low-cost manufacturing advantage. An important goal will be to
provide people more choices that enable them to build decks,
railing and fences that are both distinctive and provide a value
proposition against traditional wood. We are also assessing
strategies that will enable Trex to take advantage of today�s tough
competitive conditions and gain additional market share.
�While the current economic turmoil makes it difficult to
forecast net sales in 2009, we have established a target of $60
million in net sales for the first quarter. This estimate reflects
the fact that we expect a shift in purchasing patterns as our
customers order based more on pull-through demand due to the
current economic conditions and the redesign of our early buy sales
program. We expect this to shift sales activity in 2009 from the
first to the second and third quarters. Throughout 2009, we will
maintain our strong focus on free cash flow through earnings and
working capital management, and will keep inventory and capital
expenditures low as compared to historical levels.�
About the Attached Pro Forma Information
To supplement the Company�s Financial Statements presented in
accordance with GAAP, the Company is providing Pro Forma
information. The attached Pro Forma Profit and Loss Statements are
not intended to be considered in isolation or as a substitute for
the Financial Statements that were prepared in accordance with GAAP
or as a measure of liquidity. The items excluded from the Pro Forma
Profit and Loss Statements but reported in the Financial Statements
are material, and should be considered in performing a
comprehensive assessment of the Company�s overall financial
results.
The Pro Forma Profit and Loss Statements provide meaningful
supplemental information and are useful in understanding the
Company�s results of operations and analyzing of trends because
they eliminate certain unusual charges included in gross profit and
income from operations. These adjusted financial measures are
useful to investors and analysts in allowing for greater
transparency with respect to the supplemental information used by
the Company in its financial and operational decision-making. In
addition, investors, analysts and lenders benefit from referring to
these adjusted measures when assessing the Company�s performance
and expectations of future performance. However, this information
should not be used as a substitute for the Company�s GAAP financial
information; rather it should be used in conjunction with the
Financial Statements prepared in accordance with GAAP.
Fourth-Quarter and Full-Year 2008 Conference Call and Webcast
Information
Trex will hold a conference call to discuss its 2008
fourth-quarter and year-end results on Friday, February 27, 2009 at
10:00 a.m. ET. To participate in the live call by telephone, please
dial 706-634-1218 and reference conference ID # 84662541. 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 1:00 p.m. ET on February 27. To listen to the
telephone replay, dial 706-645-9291 and enter conference ID #
84662541.
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 Brasilia�, Trex
Escapes�, Trex Hideaway� and TrexTrimTM 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
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 17,
2008 and its subsequent reports on Form 10-Q filed on May 9, 2008,
August 6, 2008 and November 4, 2008 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 December 31, Year Ended
December 31,
2007
2008
2007
2008
� Net sales $ 30,289 $ 29,288 $ 328,952 $ 329,194 � Cost of sales �
34,999 � � 22,435 � � 289,529 � � 237,808 � � Gross profit (loss)
(4,710 ) 6,853 39,423 91,386 � Selling, general and administrative
expenses � 27,466 � � 14,981 � � 119,439 � � 69,320 � � Income
(loss) from operations (32,176 ) (8,128 ) (80,016 ) 22,066 �
Interest expense, net � 2,754 � � 2,651 � � 8,995 � � 9,552 � �
Income (loss) before income taxes (34,930 ) (10,779 ) (89,011 )
12,514 � Provision (benefit) for income taxes � 6,068 � � (822 ) �
(13,099 ) � (1,038 ) � Net income (loss) $ (40,998 ) $ (9,957 ) $
(75,912 ) $ 13,552 � � Diluted earnings (loss) per share $ (2.75 )
$ (0.67 ) $ (5.10 ) $ 0.90 � � � Diluted weighted average shares
outstanding � 14,899,675 � � 14,970,975 � � 14,884,174 � �
15,113,083 � � �
TREX COMPANY, INC. Condensed Consolidated
Balance Sheets (In thousands, except share data) (unaudited) � �
31-Dec-07
31-Dec-08
� ASSETS Current assets: Cash and cash equivalents $ 66 $ 23,189
Accounts receivable, net 6,588 13,555 Inventories 92,569 69,397
Prepaid expenses and other assets 2,617 5,518 Income taxes
receivable 2,376 2,554 Deferred income taxes � 16,007 � � 15,578 �
Total current assets � 120,223 � � 129,791 � Property, plant and
equipment, net 193,944 176,336 Goodwill 6,837 6,837 Other assets �
7,722 � � 7,557 � Total assets $ 328,726 � $ 320,521 � LIABILITIES
AND STOCKHOLDERS� EQUITY Current liabilities: Accounts payable and
accrued expenses $ 41,359 $ 37,666 Accrued warranty 21,084 12,310
Current portion of long-term debt � 1,198 � � 1,293 � Total current
liabilities � 63,641 � � 51,269 � Deferred income taxes 15,763
15,068 Accrued taxes 3,620 2,639 Non-current accrued warranty
18,901 9,547 Debt-related derivatives 1,044 2,069 Long-term debt �
131,730 � � 130,441 � Total liabilities � 234,699 � � 211,033 �
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;15,076,738 and 15,310,343 shares
issued and outstanding at December 31, 2007 and 2008,
respectively
151 153 Additional paid-in capital 66,523 68,965 Accumulated other
comprehensive loss (557 ) (1,092 ) Retained earnings � 27,910 � �
41,462 � Total stockholders� equity � 94,027 � � 109,488 � Total
liabilities and stockholders� equity $ 328,726 � $ 320,521 � � �
TREX COMPANY, INC. Condensed Consolidated Statements of Cash
Flows (In thousands) (Unaudited) � � � Year Ended December 31,
2007
2008
OPERATING ACTIVITIES Net income (loss) $ (75,912 ) $ 13,552
Adjustments to reconcile net
income to net cash provided��by operating activities:
Depreciation and amortization 22,491 25,876 Other non-cash charges,
net (1,997 ) 3,054 Changes in operating assets and liabilities �
54,255 � � (9,440 ) � Net cash provided by (used in) operating
activities $ (1,163 ) $ 33,042 � � INVESTING ACTIVITIES $ (24,035 )
$ (8,594 ) � FINANCING ACTIVITIES $ 24,592 � $ (1,325 ) � Net
increase (decrease) in cash and cash equivalents $ (606 ) $ 23,123
Cash and cash equivalents at beginning of year $ 672 � $ 66 � �
Cash and cash equivalents at end of year $ 66 � $ 23,189 � � �
Trex Company, Inc. Pro Forma Profit and Loss
Statement Three Months Ended December 31 (amounts in
000's) � � � � � � � � � � � �
Three Months Ended December
31, 2008 � � � � �
Three Months Ended December 31, 2007
�
Q4 '08 Q4 '08 Q4 '07 Q4 '07
Reported Adjustments Pro Forma Reported
Adjustments �
Pro Forma Net sales $29,288 $0 $29,288
$30,289 $12,461 $42,750 � Cost of sales $22,435 $358 $22,793
$34,999 $293 $35,292 � � � � � �
Gross profit (loss)
$6,853 ($358 ) $6,495 ($4,710
) $12,168 $7,458 % of Net sales
23.4 % 22.2 % -15.6 %
17.4 % � SG&A expenses $14,981 ($2,182 ) $12,799
$27,466 ($7,144 ) $20,322 % of Net Sales 51.2 % 43.7 % 90.7 % 47.5
% � � � � � �
Income (loss) from operations ($8,128
) $1,824 ($6,304 ) ($32,176
) $19,312 ($12,864 ) % of Net
sales -27.8 % -21.5 % -106.2
% -30.1 % �
Pro Forma Adjustments
� 1.
Q4 '08 - Total net adjustments of $1.8 million: $0.4
million of net positive adjustments to Cost of sales related to the
previously established inventory valuation for finished goods
product that was stored at the Company's idled Olive Branch
facility; $2.2 million of adjustments to SG&A expenses related
to incremental incentive compensation compared to Q4 '07 of $1.6
million and fixed asset disposal charges of $0.6 million. �
2. Q4 '07 - Total net
adjustments of $19.3 million: $12.5 million of adjustments to Net
sales, $12.0 million of which was related to customer credits
primarily for the voluntary return of older-generation Accents
product and $0.5 million of which was related to an increase to the
warranty reserve for material costs related to West coast
production that exhibited surface flaking characteristics; $0.3
million of net positive adjustments to Cost of sales related to
certain inventory returned related to the customer credits
mentioned above; $7.1 million of adjustments to SG&A expenses,
$6.1 million of which related to fixed asset disposal charges and
$1.0 million of which related to the increase to the warranty
reserve for goodwill for West coast production that exhibited
surface flaking characteristics. Total charges recognized to Net
sales and SG&A expenses related to West coast surface flaking
was $1.5 million as a result of increasing the warranty reserve at
December 31, 2007. Effective October 1, 2007, these costs have been
recognized against the warranty reserve.
� � �
Trex Company, Inc. Pro Forma Profit and Loss
Statement Year Ended December 31 (amounts in
000's) � � � � � � � � � �
Year Ended December 31, 2008
� � � �
Year Ended December 31, 2007 �
YTD '08 YTD
'08 YTD '07 YTD '07 Reported
Adjustments Pro Forma Reported
Adjustments Pro Forma Net sales $329,194 $0 $329,194
$328,952 $37,828 $366,780 � Cost of sales $237,808 ($4,386 )
$233,422 $289,529 ($10,961 ) $278,568 � � � � � �
Gross
profit $91,386 $4,386 $95,772
$39,423 $48,789 $88,212 % of Net sales
27.8 % 29.1 % 12.0 %
24.1 % � SG&A expenses $69,320 ($9,639 ) $59,681
$119,439 ($43,248 ) $76,191 % of Net Sales 21.1 % 18.1 % 36.3 %
20.8 % � � � � � �
Income (loss) from operations
$22,066 $14,025 $36,091 ($80,016
) $92,037 $12,021 % of Net sales
6.7 % 11.0 % -24.3 %
3.3 % �
Pro Forma Adjustments
� 1.
YTD '08 - Total net adjustments of $14.0 million: $4.4
million of adjustments to Cost of sales, $2.9 million of which
related to inventory valuation adjustments primarily related to
inventory stored 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; $9.6 million of adjustments to
SG&A expenses, $7.2 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,
$0.8 million of costs related to a patent infringement legal
proceeding and $0.6 million of charges related to fixed asset
disposals. �
2. YTD '07 - Total net
adjustments of $92.0 million: $37.8 million of adjustments to Net
sales, $25.5 million of which was for material costs related to
West coast production that exhibited surface flaking
characteristics and $12.3 million of which was related to customer
credits primarily for the voluntary return of older-generation
Accents product; $11.0 million of adjustments to Cost of sales
primarily related to inventory valuation adjustments; $43.2 million
of adjustments to SG&A expenses, $40.4 million of which was
goodwill related to West cost production that exhibited surface
flaking characteristics, $6.1 million of charges related to fixed
asset impairments 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 recognized to Net sales and SG&A
expenses for the West coast surface flaking were $65.9 million
which includes actual expenditures for claims paid during the
twelve-month period and the increase to the warranty reserve
through December 31, 2007.��Effective October 1, 2007, these costs
have been recognized against the warranty reserve.
�
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