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 June 30, 2003 |
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
The number of shares of the registrant’s common stock, par value $.01 per share, outstanding at July 31, 2003 was 14,679,627 shares.
TREX COMPANY, INC.
2
PART I. FINANCIAL INFORMATION
| Item 1. | Financial Statements |
TREX COMPANY, INC.
Condensed Consolidated Balance Sheets
(In thousands)
| December 31, 2002 |
June 30, 2003 |
|||||||
| (unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 14,893 | $ | 21,629 | ||||
| Trade accounts receivable |
840 | 21,947 | ||||||
| Inventories |
22,429 | 15,981 | ||||||
| Prepaid expenses and other assets |
1,395 | 1,970 | ||||||
| Deferred income taxes |
2,269 | 2,256 | ||||||
| Total current assets |
41,826 | 63,783 | ||||||
| Property, plant, and equipment, net |
133,570 | 135,385 | ||||||
| Goodwill |
6,837 | 6,837 | ||||||
| Other assets |
1,323 | 1,698 | ||||||
| Total assets |
$ | 183,556 | $ | 207,703 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Trade accounts payable |
$ | 10,056 | $ | 11,673 | ||||
| Accrued expenses |
6,089 | 3,735 | ||||||
| Income taxes payable |
114 | 1,202 | ||||||
| Other current liabilities |
638 | 1,085 | ||||||
| Current portion of long-term debt |
795 | 873 | ||||||
| Total current liabilities |
17,692 | 18,568 | ||||||
| Deferred income taxes |
9,915 | 11,008 | ||||||
| Debt-related derivatives |
2,773 | 3,013 | ||||||
| Long-term debt, net of current portion |
54,401 | 53,917 | ||||||
| Total liabilities |
84,781 | 86,506 | ||||||
| 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; 14,297,711 and 14,676,322 shares issued and outstanding at December 31, 2002 and June 30, 2003, respectively |
143 | 147 | ||||||
| Additional capital |
49,354 | 55,006 | ||||||
| Retained earnings |
53,397 | 70,027 | ||||||
| Deferred compensation |
(2,400 | ) | (2,115 | ) | ||||
| Accumulated other comprehensive loss |
(1,719 | ) | (1,868 | ) | ||||
| Total stockholders’ equity |
98,775 | 121,197 | ||||||
| Total liabilities and stockholders’ equity |
$ | 183,556 | $ | 207,703 | ||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED).
3
TREX COMPANY, INC.
Condensed Consolidated Statements of Operations
(unaudited)
(In thousands, except share and per share data)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2002 |
2003 |
2002 |
2003 |
|||||||||||||
| Net sales |
$ | 45,924 | $ | 59,198 | $ | 97,920 | $ | 127,876 | ||||||||
| Cost of sales |
21,676 | 32,300 | 53,710 | 71,220 | ||||||||||||
| Gross profit |
24,248 | 26,898 | 44,210 | 56,656 | ||||||||||||
| Selling, general and administrative expenses |
11,823 | 15,903 | 18,959 | 28,462 | ||||||||||||
| Income from operations |
12,425 | 10,995 | 25,251 | 28,194 | ||||||||||||
| Interest expense, net |
(3,341 | ) | (884 | ) | (5,811 | ) | (1,797 | ) | ||||||||
| Income before taxes |
9,084 | 10,111 | 19,440 | 26,397 | ||||||||||||
| Income taxes |
3,454 | 3,578 | 7,390 | 9,767 | ||||||||||||
| Net income |
$ | 5,630 | $ | 6,533 | $ | 12,050 | $ | 16,630 | ||||||||
| Basic earnings per common share |
$ | 0.40 | $ | 0.45 | $ | 0.85 | $ | 1.15 | ||||||||
| Weighted average basic shares outstanding |
14,162,859 | 14,547,481 | 14,160,301 | 14,476,110 | ||||||||||||
| Diluted earnings per common share |
$ | 0.39 | $ | 0.44 | $ | 0.84 | $ | 1.13 | ||||||||
| Weighted average diluted shares outstanding |
14,404,296 | 14,751,928 | 14,343,799 | 14,663,715 | ||||||||||||
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED).
4
TREX COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(In thousands)
| Six Months Ended June 30, |
||||||||
| 2002 |
2003 |
|||||||
| OPERATING ACTIVITIES |
||||||||
| Net income |
$ | 12,050 | $ | 16,630 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Deferred income taxes |
528 | 1,200 | ||||||
| Equity method losses |
200 | 150 | ||||||
| Amortization of deferred compensation and financing costs |
179 | 451 | ||||||
| Amortization of debt discount |
3,712 | — | ||||||
| Depreciation and amortization |
4,479 | 6,075 | ||||||
| Loss on disposal of property, plant and equipment |
248 | 21 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Trade accounts receivable |
(12,828 | ) | (21,107 | ) | ||||
| Inventories |
23,593 | 6,448 | ||||||
| Prepaid expenses and other assets |
(1,179 | ) | (1,266 | ) | ||||
| Trade accounts payable |
(1,825 | ) | 1,617 | |||||
| Accrued expenses |
3,175 | (2,354 | ) | |||||
| Income taxes payable |
2,879 | 1,088 | ||||||
| Other current liabilities |
108 | 426 | ||||||
| Net cash provided by operating activities |
35,319 | 9,379 | ||||||
| INVESTING ACTIVITIES |
||||||||
| Expenditures for property, plant and equipment |
(952 | ) | (7,891 | ) | ||||
| Net cash used in investing activities |
(952 | ) | (7,891 | ) | ||||
| FINANCING ACTIVITIES |
||||||||
| Financing costs |
(1,231 | ) | — | |||||
| Borrowings under mortgages and term loans |
52,600 | — | ||||||
| Principal payments under mortgages and term loans |
(67,932 | ) | (406 | ) | ||||
| Payments under line of credit |
(12,153 | ) | — | |||||
| Proceeds from employee stock purchase and option plans |
78 | 386 | ||||||
| Proceeds from exercise of warrant |
— | 5,268 | ||||||
| Net cash provided by (used in) financing activities |
(28,638 | ) | 5,248 | |||||
| Net increase in cash and cash equivalents |
5,729 | 6,736 | ||||||
| Cash and cash equivalents at beginning of period |
— | 14,893 | ||||||
| Cash and cash equivalents at end of period |
$ | 5,729 | $ | 21,629 | ||||