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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended September 30, 2002
 
 
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
 
Trex Company, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
(State or other jurisdiction of
incorporation or organization)
 
54-1910453
(I.R.S. Employer Identification No.)
 
160 Exeter Drive
Winchester, Virginia
(Address of principal executive offices)
 
 
22603-8605
(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)
 
 
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 x         No ¨
 
 
The number of shares of the registrant’s common stock, par value $.01 per share, outstanding at October 31, 2002 was 14,293,997 shares.
 


Table of Contents
 
TREX COMPANY, INC.
 
INDEX
 
PART I
  
FINANCIAL INFORMATION
    
Item 1.
  
Financial Statements
    
       
3
       
4
       
5
       
6
Item 2.
     
9
Item 3.
     
13
Item 4.
     
13
PART II.
  
OTHER INFORMATION
    
Item 1.
     
14
Item 5.
     
14
Item 6.
     
14
  
15
  
15

2


Table of Contents
 
PART I.    FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
TREX COMPANY, INC.
 
Condensed Consolidated Balance Sheets
 
    
December 31,
2001

    
September 30, 2002

 
           
(unaudited)
 
ASSETS
                 
Current assets:
                 
Cash and cash equivalents
  
$
—  
 
  
$
29,948,000
 
Trade accounts receivable
  
 
2,507,000
 
  
 
12,098,000
 
Inventories
  
 
33,168,000
 
  
 
7,885,000
 
Prepaid expenses and other assets
  
 
1,306,000
 
  
 
1,739,000
 
Income tax receivable
  
 
1,137,000
 
  
 
—  
 
Deferred income taxes
  
 
1,946,000
 
  
 
1,727,000
 
    


  


Total current assets
  
 
40,064,000
 
  
 
53,397,000
 
Property, plant, and equipment, net
  
 
137,223,000
 
  
 
132,800,000
 
Goodwill
  
 
6,837,000
 
  
 
6,837,000
 
Other assets
  
 
513,000
 
  
 
1,522,000
 
    


  


Total assets
  
$
184,637,000
 
  
$
194,556,000
 
    


  


LIABILITIES AND STOCKHOLDERS’ EQUITY
                 
Current liabilities:
                 
Trade accounts payable
  
$
9,495,000
 
  
$
14,192,000
 
Accrued expenses
  
 
630,000
 
  
 
6,211,000
 
Income taxes payable
  
 
—  
 
  
 
3,038,000
 
Other current liabilities
  
 
964,000
 
  
 
805,000
 
Mortgages
  
 
759,000
 
  
 
892,000
 
Term loan
  
 
25,000,000
 
  
 
—  
 
    


  


Total current liabilities
  
 
36,848,000
 
  
 
25,138,000
 
    


  


Deferred income taxes
  
 
7,800,000
 
  
 
9,306,000
 
Line of credit
  
 
12,153,000
 
  
 
—  
 
Debt-related derivatives
  
 
1,381,000
 
  
 
2,796,000
 
Mortgages, net of current portion
  
 
15,196,000
 
  
 
17,476,000
 
Long-term debt
  
 
32,986,000
 
  
 
40,000,000
 
Debt discount
  
 
(3,712,000
)
  
 
—  
 
    


  


Total liabilities
  
 
102,652,000
 
  
 
94,716,000
 
    


  


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; 14,155,083 and 14,292,328 shares issued and outstanding at December 31, 2001 and September 30, 2002, respectively
  
 
142,000
 
  
 
143,000
 
Additional capital
  
 
46,079,000
 
  
 
49,171,000
 
Retained earnings
  
 
36,620,000
 
  
 
54,801,000
 
Deferred compensation
  
 
—  
 
  
 
(2,542,000
)
Accumulated other comprehensive net loss
  
 
(856,000
)
  
 
(1,733,000
)
    


  


Total stockholders’ equity
  
 
81,985,000
 
  
 
99,840,000
 
    


  


Total liabilities and stockholders’ equity
  
$
184,637,000
 
  
$
194,556,000
 
    


  


 
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED  
FINANCIAL STATEMENTS (UNAUDITED).

3


Table of Contents
 
TREX COMPANY, INC.
 
Condensed Consolidated Statements of Operations
(unaudited)
 
    
Three Months Ended
September 30,

    
Nine Months Ended
September 30,

 
    
2001

    
2002

    
2001

    
2002

 
Net sales
  
$
29,868,000
 
  
$
49,522,000
 
  
$
99,791,000
 
  
$
147,442,000
 
Cost of sales
  
 
16,716,000
 
  
 
25,069,000
 
  
 
55,754,000
 
  
 
78,779,000
 
    


  


  


  


Gross profit
  
 
13,152,000
 
  
 
24,453,000
 
  
 
44,037,000
 
  
 
68,663,000
 
Selling, general and administrative expenses
  
 
7,478,000
 
  
 
13,546,000
 
  
 
24,602,000
 
  
 
32,505,000
 
    


  


  


  


Income from operations
  
 
5,674,000
 
  
 
10,907,000
 
  
 
19,435,000
 
  
 
36,158,000
 
Interest expense, net
  
 
(760,000
)
  
 
(1,205,000
)
  
 
(1,708,000
)
  
 
(7,016,000
)
    


  


  


  


Income before taxes
  
 
4,914,000
 
  
 
9,702,000
 
  
 
17,727,000
 
  
 
29,142,000
 
Income taxes
  
 
1,511,000
 
  
 
3,571,000
 
  
 
6,382,000
 
  
 
10,961,000
 
    


  


  


  


Net income
  
$
3,403,000
 
  
$
6,131,000
 
  
$
11,345,000
 
  
$
18,181,000
 
    


  


  


  


Basic earnings per common share
  
$
0.24
 
  
$
0.43
 
  
$
0.80
 
  
$
1.28
 
    


  


  


  


Weighted average basic shares outstanding
  
 
14,149,049
 
  
 
14,169,102
 
  
 
14,142,686
 
  
 
14,163,267
 
    


  


  


  


Diluted earnings per common share
  
$
0.24
 
  
$
0.43
 
  
$
0.80
 
  
$
1.26
 
    


  


  


  


Weighted average diluted shares outstanding
  
 
14,171,593
 
  
 
14,416,853
 
  
 
14,172,971
 
  
 
14,463,460
 
    


  


  


  


 
 
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED  
FINANCIAL STATEMENTS (UNAUDITED).

4


Table of Contents
 
TREX COMPANY, INC.
 
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
    
Nine Months Ended September 30,

 
    
2001

    
2002

 
OPERATING ACTIVITIES
                 
Net income
  
$
11,345,000
 
  
$
18,181,000
 
Adjustments to reconcile net income to net cash provided by operating activities:
                 
Deferred income taxes
  
 
1,414,000
 
  
 
2,164,000
 
Amortization of deferred compensation and financing costs
  
 
—  
 
  
 
408,000
 
Depreciation and amortization
  
 
6,254,000
 
  
 
6,877,000
 
Amortization of debt discount
  
 
—  
 
  
 
3,712,000
 
Loss on disposal of property, plant and equipment
  
 
472,000
 
  
 
248,000
 
Changes in operating assets and liabilities:
                 
Trade accounts receivable
  
 
5,274,000
 
  
 
(9,591,000
)
Inventories
  
 
(8,985,000
)
  
 
25,282,000
 
Prepaid expenses and other assets
  
 
98,000
 
  
 
(1,442,000
)
Income tax receivable
  
 
—  
 
  
 
1,137,000
 
Trade accounts payable
  
 
(6,633,000
)
  
 
4,697,000
 
Accrued expenses
  
 
(897,000
)
  
 
5,581,000
 
Income taxes payable
  
 
(393,000
)
  
 
3,038,000
 
Other current liabilities
  
 
230,000
 
  
 
(159,000
)
    


  


Net cash provided by operating activities
  
 
8,179,000
 
  
 
60,133,000
 
    


  


INVESTING ACTIVITIES
                 
Expenditures for property, plant and equipment
  
 
(29,890,000
)
  
 
(2,702,000
)
    


  


Net cash used in investing activities
  
 
(29,890,000
)
  
 
(2,702,000
)
    


  


FINANCING ACTIVITIES