Trex Q3 sales rise 26%; gross margin falls to 36%
Higher depreciation, transportation costs and labor as production began at the Arkansas facility were among the factors Trex cited for lower gross margins.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Rhea-AI Filing Summary
Trex Company, Inc. (TREX) reported third-quarter 2026 net sales of $359.5 million, up 26.0% from $285.3 million a year earlier, largely on higher volume. Gross profit increased 12.2% to $129.5 million, but gross margin narrowed to 36.0% from 40.5%. Net income was $52.5 million, up 1.4%, and diluted earnings per share were $0.52 versus $0.48.
For the first nine months, sales rose 10.6% to $1,120.9 million, while net income fell 6.6% to $175.8 million and diluted earnings per share declined to $1.70 from $1.75. Gross margin was 38.1%, down from 40.6%; management attributed the pressure primarily to higher depreciation, transportation costs and labor as production began at the Arkansas facility. Nine-month operating cash flow was $248.4 million, versus $292.6 million.
As of September 30, 2026, Trex had $170.0 million outstanding on its revolving credit facility and $526.9 million available; the company reported compliance with its debt covenants. It repurchased 5.2 million shares during the nine-month period and projected 2026 capital expenditures of approximately $100 million.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter net sales rose 26.0% to $359.5 million.
- Moderate pointNine-month net sales increased 10.6% to $1,120.9 million.
- Moderate pointThird-quarter EBITDA increased 9.6% to $94.7 million.
Negative
- Moderate pointNine-month net income declined 6.6% to $175.8 million.
- Moderate pointOperating cash flow declined $44.3 million year over year.
- Moderate pointThird-quarter gross margin fell to 36.0% from 40.5%.
Filing Explained
At
Key Figures
Key Terms
EBITDA financial
gross margin financial
equity cure mechanism financial
operating lease right-of-use (ROU) assets financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were TREX's third-quarter 2026 sales?
Why did TREX's gross margin decline in the third quarter?
What is the size and maturity of TREX's revolving credit facility?
What is TREX's 2026 capital expenditure guidance?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
|
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act): Yes ☐ No
The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding at October 14, 2026 was
TREX COMPANY, INC.
INDEX
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Page |
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PART I FINANCIAL INFORMATION |
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2 |
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Item 1. |
Condensed Consolidated Financial Statements |
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2 |
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Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2026 and September 30, 2025 (unaudited) |
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2 |
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Condensed Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025 (unaudited) |
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3 |
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Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2026 and September 30, 2025 (unaudited) |
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Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2026 and September 30, 2025 (unaudited) |
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5 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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15 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
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25 |
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Item 4. |
Controls and Procedures |
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25 |
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PART II OTHER INFORMATION |
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26 |
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Item 1. |
Legal Proceedings |
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26 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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26 |
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Item 5. |
Other Information |
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26 |
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Item 6. |
Exhibits |
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26 |
1
PART I
FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
TREX COMPANY, INC.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands, except share and per share data)
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Three Months Ended |
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Nine Months Ended |
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2026 |
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2025 |
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2026 |
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2025 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Other expenses |
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— |
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— |
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Income from operations |
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Interest expense, net |
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— |
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— |
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Income before income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Basic earnings per common share |
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$ |
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$ |
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$ |
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$ |
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Basic weighted average common shares outstanding |
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Diluted earnings per common share |
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$ |
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$ |
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$ |
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$ |
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Diluted weighted average common shares outstanding |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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||||
See Notes to Condensed Consolidated Financial Statements (Unaudited).
2
TREX COMPANY, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
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September 30, |
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December 31, |
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(Unaudited) |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use (ROU) assets |
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Goodwill and other intangible assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other liabilities |
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Accrued warranty |
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Line of credit |
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Total current liabilities |
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Deferred income taxes |
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Operating lease liabilities |
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Non-current accrued warranty |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies |
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Stockholders’ equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Treasury stock, at cost, |
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( |
) |
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( |
) |
Total stockholders’ equity |
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||
Total liabilities and stockholders’ equity |
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$ |
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$ |
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||
See Notes to Condensed Consolidated Financial Statements (Unaudited).
3
TREX COMPANY, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
(In thousands, except share data)
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Common Stock |
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Additional |
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Retained |
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Treasury Stock |
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|||||||||||||
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Shares |
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Amount |
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Capital |
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Earnings |
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Shares |
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Amount |
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Total |
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|||||||
Balance, December 31, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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||||||
Net income |
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— |
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— |
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— |
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— |
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|||
Employee stock plans |
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— |
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— |
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— |
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||||
Shares withheld for taxes on awards |
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( |
) |
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( |
) |
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— |
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— |
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— |
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|
( |
) |
|
Stock-based compensation |
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|
|
|
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|
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— |
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— |
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— |
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||||
Repurchases of Common Stock |
|
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( |
) |
|
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— |
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— |
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( |
) |
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( |
) |
||
Unsettled accelerated share repurchase |
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— |
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( |
) |
|
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— |
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— |
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|
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— |
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|
|
( |
) |
|
Balance, March 31, 2026 |
|
|
|
|
$ |
|
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$ |
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$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
||||||
Net income |
|
|
— |
|
|
|
— |
|
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— |
|
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|
|
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— |
|
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— |
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||
Employee stock plans |
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— |
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— |
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— |
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— |
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|
|||
Shares withheld for taxes on awards |
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( |
) |
|
|
— |
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|
|
( |
) |
|
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— |
|
|
|
— |
|
|
|
— |
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|
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( |
) |
Stock-based compensation |
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— |
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— |
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— |
|
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— |
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|||
Repurchases of Common Stock |
|
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( |
) |
|
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— |
|
|
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— |
|
|
|
— |
|
|
|
|
|
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( |
) |
|
|
( |
) |
|
Unsettled accelerated share repurchase |
|
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— |
|
|
|
— |
|
|
|
|
|
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— |
|
|
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— |
|
|
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— |
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||
Balance, June 30, 2026 |
|
|
|
|
$ |
|
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$ |
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$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
||||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Employee stock plans |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Shares withheld for taxes on awards |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
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|
|
|
|||
Repurchases of Common Stock |
|
|
( |
) |
|
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— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Balance, September 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
||||||
|
|
Common Stock |
|
|
Additional |
|
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Retained |
|
|
Treasury Stock |
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|||||||||||||
|
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Shares |
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Amount |
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Capital |
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Earnings |
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Shares |
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Amount |
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Total |
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|||||||
Balance, December 31, 2024 |
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|
|
|
$ |
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$ |
|
|
$ |
|
|
|
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|
$ |
( |
) |
|
$ |
|
||||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
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|
||
Employee stock plans |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Shares withheld for taxes on awards |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Stock-based compensation |
|
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|
|
|
|
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|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Balance, March 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
||||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Employee stock plans |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Shares withheld for taxes on awards |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Stock-based compensation |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
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|
|||
Balance, June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
||||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
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— |
|
|
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— |
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||
Employee stock plans |
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— |
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|
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— |
|
|
|
— |
|
|
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— |
|
|
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|
|||
Shares withheld for taxes on awards |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Stock-based compensation |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Balance, September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
||||||
See Notes to Condensed Consolidated Financial Statements (Unaudited).
4
TREX COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
|
Nine Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
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||
Deferred income taxes |
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||
Stock-based compensation |
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||
Loss on disposal of property, plant and equipment |
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||
Other non-cash adjustments |
|
|
( |
) |
|
|
( |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Inventories |
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|
||
Prepaid expenses and other assets |
|
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|
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|
||
Accounts payable |
|
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|
|
|
|
||
Accrued expenses and other liabilities |
|
|
|
|
|
|
||
Deferred Revenue |
|
|
|
|
|
|
||
Income taxes receivable/payable |
|
|
( |
) |
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
INVESTING ACTIVITIES |
|
|
|
|
|
|
||
Expenditures for property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Purchased intangibles |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales of property, plant and equipment |
|
|
|
|
|
|
||
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Borrowings under line of credit |
|
|
|
|
|
|
||
Principal payments under line of credit |
|
|
( |
) |
|
|
( |
) |
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
Proceeds from employee stock purchase and option plans |
|
|
|
|
|
|
||
Financing costs |
|
|
( |
) |
|
|
|
|
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Net (decrease) increase in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
Supplemental Disclosure: |
|
|
|
|
|
|
||
Cash paid for interest, net of capitalized interest |
|
$ |
|
|
$ |
|
||
Cash paid for income taxes, net |
|
$ |
|
|
$ |
|
||
Supplemental non-cash investing and financing disclosure: |
|
|
|
|
|
|
||
(Decrease) increase capital expenditures in accounts payable and accrued expenses |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
||
See Notes to Condensed Consolidated Financial Statements (Unaudited).
5
TREX COMPANY, INC.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2026 and September 30, 2025
(Unaudited)
Trex Company, Inc. (Trex or Company), is the world’s largest manufacturer of high-performance, low-maintenance wood-alternative decking and railing and outdoor living products and accessories, marketed under the brand name Trex®, with more than 30 years of product experience. A majority of its products are manufactured in a proprietary process that combines reclaimed wood fibers and scrap polyethylene. The Company is incorporated in Delaware. The principal executive offices are located at 2500 Trex Way, Winchester, Virginia 22601, and the telephone number at that address is (540) 542-6300. The Company operates in a reportable segment.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and U.S. Securities and Exchange Commission instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments, except as otherwise described herein) considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company for all periods presented.
The unaudited consolidated results of operations for the three and nine months ended September 30, 2026, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2026. The Company’s results of operations are affected by a number of factors, including, but not limited to, the cost to manufacture and distribute products, cost of raw materials, inflation, tariffs, consumer spending and preferences, interest rates, the impact of any supply chain disruptions, economic conditions, and/or any adverse effects from global health pandemics and geopolitical conflicts.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report of Trex Company, Inc. on Form 10-K for the year ended December 31, 2025, as filed with the U.S. Securities and Exchange Commission.
In December 2025, the FASB issued ASU No. 2025-10, "Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities." This guidance provides authoritative guidance for the accounting for government grants received by business entities. This update is effective for annual reporting periods beginning after December 15, 2028 and interim periods within those annual reporting periods, with
In July 2025, the FASB issued ASU No. 2025-05, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets." This guidance provides an optional practical expedient related to the estimation of expected credit losses for current accounts receivable and contract assets that arise from transactions accounted for under FASB Accounting Standards Codification 606. Specifically, this optional practical expedient allows an entity to assume that current conditions as of the balance sheet date will not change for the remaining life of the asset. The amendments to this update are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Company
In December 2025, the FASB issued ASU No. 2025-11, "Interim Reporting (Topic 270)." This update is intended to improve the guidance in Topic 270, Interim Reporting by improving the navigability of the required interim disclosures and clarifying when the guidance is applicable. The amendments also provide guidance on what disclosures should be provided in interim reporting periods. The amendments add to Topic 270, a principle that requires entities to disclose events since the end of the last annual report period
6
that have a material impact on the entity. The amendments to this update are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 for public business entities. The amendments in this update may be applied prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company does not believe adoption of this update will have a material impact on its disclosures.
In September 2025, the FASB issued ASU No. 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)." This guidance clarifies and modernizes when an entity is required to begin capitalizing software costs. Specifically, it requires capitalization when both of the following are met (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The amendments to this update are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption of this update is permitted. The amendments to this update may be applied prospectively, retrospectively, or on a modified transition approach. The Company does not believe adoption of this update will have a material impact on its consolidated results of operations and financial condition.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Disaggregation Disclosures.” This guidance requires more detailed disclosure about the types of expenses presented within the expense captions of the financial statements. Specifically, disclosure of purchases of inventory, employee compensation, depreciation, and intangible asset amortization are required on both an interim and annual basis. In addition, a qualitative description of remaining amounts in relevant expense captions which have not separately been disaggregated will be required on an interim and annual basis. On an annual basis, disclosure of an entity’s definition of selling expenses and the amount of selling expenses is required. The amendments to this update are effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption of this update is permitted. The amendments to this update should be applied prospectively to financial statements issued for reporting periods after the effective date of the update or retrospectively to any or all prior periods presented in the financial statements. The Company believes adoption will result in expanded financial statement footnote disclosure but does not believe adoption of this update will have a material impact on its consolidated results of operations. The Company is continuing to evaluate the impacts of adoption.
Inventories valued at FIFO (first-in, first-out), consist of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Finished goods |
|
$ |
|
|
$ |
|
||
Raw materials |
|
|
|
|
|
|
||
Total FIFO inventories |
|
$ |
|
|
$ |
|
||
Prepaid expenses and other assets consist of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Prepaid expenses |
|
$ |
|
|
$ |
|
||
Income tax receivable |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total prepaid expenses and other assets |
|
$ |
|
|
$ |
|
||
The carrying amount of goodwill at September 30, 2026, and December 31, 2025, was $
7
Company's Enterprise Resource Planning (ERP) and other platform tools, which approximates the pattern in which the economic benefits are expected to be received. The Company evaluates the recoverability of intangible assets periodically and considers events or circumstances that may warrant revised estimates of useful lives or that may indicate an impairment. Intangible asset amortization expense for the nine months ended September 30, 2026, and September 30, 2025, was $
Accrued expenses and other liabilities consist of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
Sales and marketing |
|
|
|
|
|
|
||
Compensation and benefits |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Manufacturing costs |
|
|
|
|
|
|
||
Capital projects |
|
|
|
|
|
|
||
Income taxes |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses and other liabilities |
|
$ |
|
|
$ |
|
||
Revolving Credit Facility
Indebtedness prior to March 26, 2026. On October 10, 2024, the Company, entered into a Second Amendment to the Credit Agreement (Second Amendment) with certain lending parties thereto (Lenders) to amend that Credit Agreement dated as of May 18, 2022, as amended by that certain First Amendment dated as of December 22, 2022.
The Second Amendment provides the Company with Revolving A Loans in the maximum principal amount of $
Base Rate Loans (as defined in the Credit Agreement) under the Revolving A Loan and the Swing Line Loans accrue interest at the Base Rate plus the Applicable Rate (as defined in the Credit Agreement) and Term SOFR Loans for the Revolving Loans accrue interest at the rate per annum equal to the sum of Term SOFR for such interest period plus the Applicable Rate (as defined in the Credit Agreement). The Base Rate for any day is a fluctuating rate per annum equal to the highest of (a)
With respect to Revolving B Loans (as defined in the Credit Agreement), for any day, the rate per annum is a tiered pricing based upon the Consolidated Debt to Consolidated EBITDA Ratio. The applicable rate for Revolving B Loans that are Base Rate Loans range between
Indebtedness on and after March 26, 2026. On March 26, 2026, the Company entered into a Credit Agreement with certain lending parties thereto (Lenders) to amend and restate the Credit Agreement dated as of May 18, 2022, as amended (the Prior Credit Agreement).
The Credit Agreement provides the Company with one or more Revolving Loans in a collective maximum principal amount of $
Base Rate Loans (as defined in the Credit Agreement) under the Revolving Loans and the Swing Line Loans accrue interest at the Base Rate plus the Applicable Rate (as defined in the Credit Agreement) and Term SOFR Loans or Term SOFR Daily Floating Rate Loans for the Revolving Loans accrue interest at the rate per annum equal to the sum of Term SOFR Loans/Term SOFR Daily Floating Rate for such interest period plus the Applicable Rate (as defined in the Credit Agreement). The Base Rate for any day is a
8
fluctuating rate per annum equal to the highest of (a)
As of September 30, 2026, the Company had $
Compliance with Debt Covenants and Restrictions
Pursuant to the terms of the Credit Agreement, the Company is subject to certain loan compliance covenants. The Credit Agreement requires the Company to maintain (a) a Consolidated Interest Coverage Ratio of not less than
The Credit Agreement also contains an equity cure mechanism, under which the Company may make cash equity contributions (funded with proceeds of common equity) to be included in the calculation of Consolidated EBITDA solely for purposes of determining compliance with the financial covenants, subject to certain conditions and limitations, including that in each consecutive four Fiscal Quarter period there must be at least two Fiscal Quarters in which no such contribution is made.
The Company was in compliance with all covenants as of September 30, 2026. Failure to comply with the financial covenants could be considered a default of repayment obligations and, among other remedies, could accelerate payment of any amounts outstanding.
The Company leases manufacturing and training facilities, storage warehouses, office space, and certain plant equipment under various operating leases. The Company’s operating leases have remaining lease terms of up to
For the three months ended September 30, 2026 and September 30, 2025, total operating lease expense was $
The following table includes supplemental cash flow information for the nine months ended September 30, 2026 and September 30, 2025, and supplemental balance sheet information at September 30, 2026 and December 31, 2025 related to operating leases (in thousands):
|
|
Nine Months Ended |
|
|||||
Supplemental cash flow information |
|
2026 |
|
|
2025 |
|
||
Cash paid for amounts included in the measurement of |
|
$ |
|
|
$ |
|
||
Operating ROU assets obtained in exchange for lease |
|
$ |
|
|
$ |
|
||
9
Supplemental balance sheet information |
|
September 30, |
|
|
December 31, |
|
||
Operating lease ROU assets |
|
$ |
|
|
$ |
|
||
Operating lease liabilities: |
|
|
|
|
|
|
||
Accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
Operating lease liabilities |
|
|
|
|
|
|
||
Total operating lease liabilities |
|
$ |
|
|
$ |
|
||
The following table summarizes maturities of operating lease liabilities at September 30, 2026 (in thousands):
Maturities of operating lease liabilities |
|
|
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
|
|
|
Less imputed interest |
|
|
( |
) |
Total operating lease liabilities |
|
$ |
|
|
The Company considers the recorded value of its financial assets and liabilities, consisting primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, other current liabilities, and debt to approximate the fair value of the respective assets and liabilities on the Condensed Consolidated Balance Sheets at September 30, 2026 and December 31, 2025.
Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except share and per share data):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income available to common shareholders |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock appreciation rights and options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted earnings per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted earnings per share is computed using the weighted average number of shares determined for the basic earnings per share computation plus the dilutive effect of common stock equivalents using the treasury stock method.
10
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Stock appreciation rights |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock Repurchase Program
On May 4, 2023, the Board of Directors authorized the repurchase of up to
During the nine months ended September 30, 2026, the Company repurchased
The Company principally generates revenue from the manufacture and sale of its high-performance, low-maintenance, eco-friendly wood-alternative composite decking and railing products and accessories. Substantially all of its revenues are from contracts with customers, which are purchase orders of short-term duration of less than one year. Its customers, in turn, sell primarily to the residential market, which includes replacement, remodeling and new construction related to outdoor living products. The Company satisfies its performance obligations at a point in time. The shipment of each product is a separate performance obligation as the customer is able to derive benefit from each product shipped and no performance obligation remains after shipment. Upon shipment of the product, the customer obtains control over the distinct product and Trex satisfies its performance obligation. Any performance obligation that remains unsatisfied at the end of a reporting period is part of a contract that has an original expected duration of one year or less. Any variable consideration related to the unsatisfied performance obligation is allocated wholly to the unsatisfied performance obligation, is recognized when the product ships and the performance obligation is satisfied and is included in “Accrued expenses and other liabilities, Sales and marketing” in Note 8 to the Condensed Consolidated Financial Statements. For the three months ended September 30, 2026 and September 30, 2025, the Company’s net sales (in thousands) were $
At the annual meeting of stockholders of the Company held on May 4, 2023, the Company’s stockholders approved the Trex Company, Inc. 2023 Stock Incentive Plan (Plan). The Company’s board of directors unanimously approved the Plan on April 10, 2023, subject to stockholder approval. The Plan, which is administered by the compensation committee of the board of directors, provides for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights and unrestricted stock, which are referred to collectively as “awards.” Awards may be granted under the Plan to officers, directors (including non-employee directors) and other employees of the Company or any subsidiary thereof, to any adviser, consultant, or other provider of services to the Company (and any employee thereof), and to any other individuals who are approved by the board of directors as eligible to participate in the Plan. Only employees of the Company or any subsidiary thereof are eligible to receive incentive stock options. Subject to certain adjustments as provided in the Plan, the total number of shares of common stock available for future grants under the Plan is
The following table summarizes the Company’s stock-based compensation grants for the nine months ended September 30, 2026:
|
|
Stock Awards |
|
|
Weighted- |
|
||
Time-based restricted stock units |
|
|
|
|
$ |
|
||
Performance-based restricted stock units (a) |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
||
11
The Company recognizes stock-based compensation expense ratably over the period from the grant date to the earlier of: (1) the vesting date of the award, or (2) the date the grantee is eligible to retire without forfeiting the award. For performance-based restricted stock and performance-based restricted stock units, expense is recognized ratably over the performance and vesting period of each tranche based on management’s judgment of the ultimate award that is likely to be paid out based on the achievement of the predetermined performance measures. For the employee stock purchase plan, compensation expense is recognized related to the discount on purchases. Stock-based compensation expense is included in “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Comprehensive Income.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Stock appreciation rights |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Time-based restricted stock and restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Performance-based restricted stock and restricted stock units |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total unrecognized compensation cost related to unvested awards as of September 30, 2026 was $
Other expenses consist of asset impairment charges and losses recognized on the disposal or retirement of property, plant, and equipment. These charges relate to assets that are no longer in service, are expected to be disposed of before the end of their useful lives, or have experienced a decline in recoverable value.
The Company’s effective tax rate for the nine months ended September 30, 2026 and September 30, 2025, was
The Company analyzes its deferred tax assets each reporting period, considering all available positive and negative evidence in determining the expected realization of those deferred tax assets. As of September 30, 2026, the Company maintains a valuation allowance of $
The Company operates in multiple tax jurisdictions, and, in the normal course of business, its tax returns are subject to examination by various taxing authorities. Such examinations may result in future assessments by these taxing authorities, and the Company accrues a liability when it believes that it is more likely than not that benefits of tax positions will not be realized. The Company believes that adequate provisions have been made for all tax returns subject to examination. As of September 30, 2026, for certain tax jurisdictions tax years remain subject to examination. Sales made to foreign distributors are not taxable in any foreign jurisdiction as the Company does not have a taxable presence in any foreign jurisdiction.
The Company operates in
Trex manufactures composite decking and railing and related outdoor living products marketed under the brand name Trex®. The products are sold to its distributors and
12
The Company’s reportable segments are determined in accordance with its internal management structure, which is based on operations. The Company has identified its President and Chief Executive Officer as the (CODM). The Company’s CODM has final authority over resource allocation decisions and performance assessments and makes key operating decisions.
The operating results for Trex have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions reduce the level of home improvement and construction activity and can shift sales of its products to a later period or decrease overall sales in affected locations. As part of its normal business practice, and consistent with industry practice, Trex has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season in order to ensure adequate availability of its product to meet anticipated seasonal consumer demand. The seasonal effects are often offset by the positive effect of the incentive programs.
Product Warranty
The Company warrants that for the applicable warranty period its products, when properly installed, used and maintained, will be free from material defects in workmanship and materials and its decking, cladding, fascia and railing products will not split, splinter, rot or suffer structural damage from termites or fungal decay.
Products sold on or after January 1, 2023: The warranty period for residential use is
Products sold prior to January 1, 2023: The warranty period is
The Company maintains a warranty reserve for the settlement of its product warranty claims. The Company accrues for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and future claims experience. To estimate our future claims experience, the Company utilizes actuarial techniques to determine a reasonable possible range of amounts to be paid related to defects covered by our product warranty. The actuarial techniques consider claims received, claims closed, and the corresponding amounts paid. Estimates for these elements are quantified using a range of assumptions derived from claim history and consideration of additional factors influencing claim counts or costs incurred to settle claims in order determine the best estimate of future claims for which to record a related liability. Management reviews and adjusts these estimates, if necessary, based on the differences between actual experience and historical estimates.
The Company monitors claims activity each quarter for indications that its estimates require revision. The Company uses the best and most complete underlying information available and a rational methodology to determine its warranty obligations. The Company considers all available evidence to assess the reasonableness of all key assumptions underlying its estimated warranty obligations.
13
The Company’s analysis is based on currently known facts and a number of assumptions, as discussed above, and current expectations. Projecting future events such as the number of claims to be received, the number of claims that will require payment and the costs associated with settling claims could cause the actual warranty liability to be higher or lower than projected, which could materially affect the Company’s financial condition, results of operations or cash flows.
The Trex product warranty reserve activity consisted of the following, and is included in Accrued warranty and Non-current accrued warranty in the Consolidated Balance Sheets (in thousands):
|
|
Nine Months Ended September 30, 2026 |
|||
|
|
Product Warranty |
|
|
|
Beginning balance, January 1 |
|
$ |
|
|
|
Provisions and changes in estimates |
|
|
|
|
|
Settlements made during the period |
|
|
( |
) |
|
Ending balance, September 30 |
|
$ |
|
|
|
|
|
Nine Months Ended September 30, 2025 |
|||
|
|
Product Warranty |
|
|
|
Beginning balance, January 1 |
|
$ |
|
|
|
Provisions and changes in estimates |
|
|
|
|
|
Settlements made during the period |
|
|
( |
) |
|
Ending balance, September 30 |
|
$ |
|
|
|
Legal Matters
The Company has lawsuits, as well as other claims, pending against it which are ordinary routine litigation and claims incidental to the business. Management has evaluated the merits of these lawsuits and claims and believes that their ultimate resolution will not have a material effect on the Company’s consolidated financial condition, results of operations, liquidity or competitive position.
Industrial Revenue Bonds
In October 2021, the Company announced plans to add a third manufacturing facility located in Little Rock, Arkansas (Little Rock). Construction on the new facility began in the second quarter of 2022. In connection with the construction of the new facility, during 2024 the Company and Little Rock entered into an agreement in which Little Rock agreed to issue up to $
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following management discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with the Trex Company, Inc. (Trex, Company, we or our) Annual Report on Form 10-K for the year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (SEC) and the condensed consolidated financial statements and notes thereto included in Part I, Item 1. “Financial Statements” of this quarterly report.
NOTE ON FORWARD-LOOKING STATEMENTS
This MD&A contains 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. All statements regarding our expected financial position and operating results, our business strategy, our financing plans, forecasted demographic and economic trends relating to our industry and similar matters are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” “intend” or similar expressions. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Our actual results could be materially different from our expectations because of various factors, including the factors discussed under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC. These statements are also subject to risks and uncertainties that could cause the Company’s actual operating results to differ materially. Such risks and uncertainties include, but are not limited to: the extent of market acceptance of the Company’s current and newly developed 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 seasonal and weather-related demand fluctuations on inventory levels in the distribution channel and sales of the Company’s products; the availability and cost of third-party transportation services for the Company’s products and raw materials; the Company’s ability to obtain raw materials, including scrap polyethylene, wood fiber, and other materials used in making our products, at acceptable prices; increasing inflation and tariffs in the macro-economic environment; the Company’s ability to maintain product quality and product performance at an acceptable cost; the Company’s ability to increase throughput and capacity to adequately match supply with demand; the level of expenses associated with warranty claims, product replacement and consumer relations expenses related to product quality; the highly competitive markets in which the Company operates; cyber-attacks, security breaches or other security vulnerabilities; the impact of current and upcoming data privacy laws and the EU General Data Protection Regulation and the related actual or potential costs and consequences; material adverse impacts from global public health pandemics, geopolitical conflicts; and material adverse impacts related to labor shortages or increases in labor costs.
OVERVIEW
The following MD&A is intended to help the reader understand the operations and current business environment of the Company. The MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying notes thereto contained in "Item 1. Condensed Consolidated Financial Statements" of this report. MD&A includes the following sections:
OPERATIONS AND PRODUCTS
Trex is the world’s largest manufacturer of high-performance composite decking and railing products and a leader in outdoor living products, which are marketed under the brand name Trex® and manufactured in the United States. With more than 30 years of product experience, we offer a comprehensive set of aesthetically appealing and durable, low-maintenance product offerings in the decking, railing, fencing and outdoor lighting categories. A majority of the products are eco-friendly and leverage recycled and reclaimed materials to the extent possible. Trex decking is made in a proprietary process that combines reclaimed wood fibers and recycled polyethylene film, making Trex one of the largest recyclers of plastic film in North America. In addition to resisting fading and surface staining, Trex products require no sanding and sealing, resist moisture damage, provide a splinter-free surface and do not require chemical treatment against rot or insect infestation. Combined, these aspects yield significant aesthetic advantages and lower maintenance than wood decking and railing and ultimately render Trex products less costly than wood over the life of the deck. Special characteristics (including resistance to splitting, the ability to bend, and ease and consistency of machining and finishing)
15
facilitate installation, reduce contractor call-backs and afford consumers a wide range of design options. Trex products are sold to distributors and home centers for final resale primarily to the residential market.
Trex offers the following products:
Decking and Accessories |
Our principal decking products are Trex Signature®, Trex Transcend® Lineage™, Trex Transcend®, Trex Refuge™, Trex Select®, and Trex Enhance®. Our high performance, low maintenance decking products feature a protective shell for enhanced protection against fading, staining, mold, and scratching. Our eco-friendly composite decking products are comprised of a blend of 95 percent reclaimed wood fibers and recycled polyethylene film, and our PVC decking product features ignition resistance. Trex Signature decking offers realistic woodgrain aesthetics that raise the bar for beauty, performance, and sustainability and is available in two luxurious hues inspired by stunning natural settings. Trex Transcend Lineage is the next generation of design and performance in composite decking and is available in seven luxurious, on-trend hues inspired by some of the most picturesque locales in the United States. Our Trex Transcend decking provides elevated aesthetics paired with the highest level of performance and is available in six multi-tonal monochromatic classical earth tones and premium tropical colors. Trex Refuge decking features a refined wire brushed grain pattern and is offered in two hues. Trex Select decking offers the perfect pairing of price and minimal maintenance and is available in two nature-inspired earth tone colors and three subtly streaked on trend hues. Our Trex Enhance boards pair the beauty of authentic wood-grain appearance with the durability of composite with minimal maintenance and the affordability of wood and is available in six natural and four basic colors. We also offer accessories to our decking products. The Trex Hideaway® Fastener Collection, offers solutions for every Trex deck fastening and finishing need, featuring color-matched screws and plugs, specially engineered bits, depth setters, and clips, designed to make installation easier and more efficient while delivering a clean, cohesive aesthetic. The Trex® Lighting collection offers a line of energy-efficient CRI LED lighting. It can be installed into the railing, stair risers, or the deck itself. The line includes a post cap light, deck rail light, and riser lights.
|
Railing |
Our railing products are Trex Signature® X-Series™ Railing, Trex Signature® aluminum railing, Trex Transcend Railing, Trex Select® Railing, Trex Select® T-Rail, and Trex Enhance™ Railing. Our high-performance cable rail, frameless glass rail, composite, and aluminum-deck railing kits and systems are sustainably manufactured, easy to install, and durable. Trex railing systems are built with the same durability as Trex decking and will not rot, warp, peel, or splinter and resist fading and corrosion. Trex Signature X-Series, made from approximately 30 percent recycled materials, is available in Charcoal Black with stainless steel or glass infill. Trex Signature aluminum railing, made from a minimum of 40 percent recycled content, is available in three colors and designed for consumers who want a sleek, contemporary look. Trex Transcend Railing, made from approximately 40 percent recycled content, is available in four colors that complement our Trex decking products. Trex Select® Railing, made from approximately 40 percent recycled content, is offered in a white finish and is ideal for consumers who desire a simple clean finished look for their deck. Trex Select® T-Rail, made from a minimum of 40 percent recycled materials, is available in square composite balusters in Classic White for a cohesive, coordinated look, or round aluminum balusters in Charcoal Black for a more modern contrast. Trex Enhance™ railing is available in four composite colors, and an Enhance Steel line was recently introduced in Charcoal Black, to expand the Trex addressable market.
|
Fencing |
Our Trex® Fencing products are Seclusions, Horizons, Solitudes, and Rail Fence. These products consist of structural posts, bottom rails, pickets, top rails, brackets and decorative post caps. Trex® Fencing is offered in four natural rich tones that stay vibrant throughout their lifetime.
|
Cladding
|
Our cladding products are Trex Signature® and Trex Transcend® Lineage™, and Trex Transcend®. Our high-performance, low-maintenance, eco-friendly composite cladding products are comprised of a blend of 95 percent reclaimed wood fibers and recycled polyethylene film and feature a protective polymer shell for enhanced protection against fading, staining, mold, and scratching. Trex Signature cladding offers realistic woodgrain aesthetics that raise the bar for beauty and performance and is available in hues inspired by stunning natural settings. Trex Transcend Lineage cladding is available in six luxurious on trend hues. Trex Transcend cladding is available in six multi-tonal monochromatic classical earth tones and premium tropical colors.
|
16
We are a licensor in a number of licensing agreements with third parties to manufacture and sell products under the Trex trademark. Our licensed products are:
Trex® Outdoor Furniture™
|
A line of outdoor furniture products manufactured and sold by PolyWood, Inc. |
Trex® RainEscape®, Trex® Protect®, Trex® RainEscape® Soffit Light, and Trex® Seal™ Ledger Flashing Tape |
An above joist deck drainage system manufactured and sold by IBP, LLC. Trex Protect Joist, Beam and Rim tape is a self-adhesive butyl tape that protects wooden deck framing/substructure elements. Trex RainEscape Soffit Light is a plug-and-play LED Soffit light that is installed in the under-deck ceiling of a two-story deck. Trex Seal Ledger Flashing tape is butyl flashing tape with an aluminum liner.
|
Trex® Pergola |
Pergolas made from low maintenance cellular PVC and all-aluminum product, manufactured by Home & Leisure, Inc. dba Structureworks Fabrication.
|
Trex® Lattice |
Outdoor lattice boards manufactured and sold by Structureworks Fabrication.
|
Trex® Cornhole |
Cornhole boards manufactured and sold by Johnson Enterprises, LLC under a Trademark License Agreement with Trex Company, Inc.
|
Trex® Blade |
A specialty saw blade for wood-alternative composite decking manufactured and sold by Freud America, Inc.
|
Trex® Spiral Stairs
|
A staircase alternative for use with all deck substructures manufactured and sold by SS Industries dba Paragon Stairs.
|
Trex® Outdoor Kitchens™
|
Outdoor kitchen cabinetry manufactured and sold by Danver Outdoor Kitchens. |
HIGHLIGHTS AND FINANCIAL PERFORMANCE
Highlights:
Financial performance. The following table presents highlights of our financial performance for the quarter and year-to-date:
17
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
($ 000s omitted, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
359,504 |
|
|
$ |
285,348 |
|
|
$ |
74,156 |
|
|
|
26.0 |
% |
Gross profit |
|
$ |
129,473 |
|
|
$ |
115,438 |
|
|
$ |
14,035 |
|
|
|
12.2 |
% |
Net income |
|
$ |
52,493 |
|
|
$ |
51,770 |
|
|
$ |
723 |
|
|
|
1.4 |
% |
EBITDA* |
|
$ |
94,688 |
|
|
$ |
86,409 |
|
|
$ |
8,279 |
|
|
|
9.6 |
% |
Diluted earnings per share |
|
$ |
0.52 |
|
|
$ |
0.48 |
|
|
$ |
0.04 |
|
|
|
8.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
($ 000s omitted, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
1,120,926 |
|
|
$ |
1,013,142 |
|
|
$ |
107,784 |
|
|
|
10.6 |
% |
Gross profit |
|
$ |
426,839 |
|
|
$ |
411,300 |
|
|
$ |
15,539 |
|
|
|
3.8 |
% |
Net income |
|
$ |
175,772 |
|
|
$ |
188,113 |
|
|
$ |
(12,341 |
) |
|
|
(6.6 |
)% |
EBITDA* |
|
$ |
302,121 |
|
|
$ |
300,527 |
|
|
$ |
1,594 |
|
|
|
0.5 |
% |
Diluted earnings per share |
|
$ |
1.70 |
|
|
$ |
1.75 |
|
|
$ |
(0.05 |
) |
|
|
(2.9 |
)% |
*A reconciliation of Net Income (GAAP) to EBITDA (non-GAAP) is presented on pages 20 and 22 of this Quarterly Report on Form 10-Q under “Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).”
Capital expenditures. During the nine months ended September 30, 2026, our capital expenditures were $75.3 million primarily related to $33.8 million for the Arkansas manufacturing facility, $8.3 million in safety, environmental and general support, $6.0 million in purchased intangibles related to digital transformation, and $24.8 million in all other including cost reduction initiatives and capacity expansion in our existing facilities.
RESULTS OF OPERATIONS
General. Our results of operations are affected by a number of factors, including, but not limited to, the cost to manufacture and distribute products, cost of raw materials, inflation, interest rates, tariffs, consumer spending and preferences, the impact of any supply chain disruptions, economic conditions, and any adverse effects from global health pandemics and geopolitical conflicts.
Net Sales. Net sales consist of sales, net of discounts. The level of net sales is principally affected by sales volume and the prices paid for Trex products. Trex operating results have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions reduce the level of home and commercial improvement and residential and commercial construction and can shift sales of our products to a later period or decrease overall sales in affected locations. As part of our normal business practice and consistent with industry practice, we have historically provided our distributors and dealers of our Trex products incentives to build inventory levels before the start of the prime deck-building season to ensure adequate availability of our product to meet anticipated seasonal consumer demand and to enable production planning. These incentives include payment discounts, favorable payment terms, price discounts, or volume rebates on specified products and other incentives based on increases in purchases as part of specific promotional programs. The timing of our incentive programs can significantly impact sales, receivables and inventory levels during the offering period.
Gross Profit. Gross profit represents the difference between net sales and cost of sales. Cost of sales consists of raw material costs, direct labor costs, manufacturing costs, subcontract costs and freight. Raw material costs generally include the costs to purchase and transport reclaimed wood fiber, reclaimed polyethylene, pigmentation for coloring our products, and commodities used in the production of railing and staging. Direct labor costs include wages and benefits of personnel engaged in the manufacturing process. Manufacturing costs consist of costs of depreciation, utilities, maintenance supplies and repairs, indirect labor, including wages and benefits, and warehouse and equipment rental activities.
Less than 5% of our cost of sales is projected to be impacted by tariffs. The majority of tariffs are related to purchases of aluminum and steel used in our railing and fastening products. We have and will further mitigate some of the impact on our cost of sales through higher levels of existing pre-tariff inventory and supplier negotiations.
Selling, General and Administrative Expenses. The largest component of selling, general and administrative expenses is personnel related costs, which includes salaries, commissions, incentive compensation, and benefits of personnel engaged in sales and marketing, accounting, information technology, corporate operations, research and development, and other business functions.
18
Another component of selling, general and administrative expenses is branding and other sales and marketing costs, which are used to build brand awareness. These costs consist primarily of advertising, merchandising, and other promotional costs. Other general and administrative expenses include professional fees, office occupancy costs attributable to the business functions previously referenced, and consumer relations expenses. As a percentage of net sales, selling, general and administrative expenses may vary from quarter to quarter due, in part, to the seasonality of our business.
Below is the discussion and analysis of our operating results and material changes in our operating results for the three months ended September 30, 2026 (2026 quarter) compared to the three months ended September 30, 2025 (2025 quarter), and for the nine months ended September 30, 2026 (2026 nine-month period) compared to the nine months ended September 30, 2025 (2025 nine-month period).
Three Months Ended September 30, 2026 Compared To The Three Months Ended September 30, 2025
Net Sales
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Net sales |
|
$ |
359,504 |
|
|
$ |
285,348 |
|
|
$ |
74,156 |
|
|
|
26.0 |
% |
Net sales increased by $74.2 million, or 26.0%, in the 2026 quarter compared to the 2025 quarter. The increase was substantially all due to an increase in volume, partially offset by the mix of products sold.
Gross Profit
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Cost of sales |
|
$ |
230,031 |
|
|
$ |
169,910 |
|
|
$ |
60,121 |
|
|
|
35.4 |
% |
% of total net sales |
|
|
64.0 |
% |
|
|
59.5 |
% |
|
|
|
|
|
|
||
Gross profit |
|
$ |
129,473 |
|
|
$ |
115,438 |
|
|
$ |
14,035 |
|
|
|
12.2 |
% |
Gross margin |
|
|
36.0 |
% |
|
|
40.5 |
% |
|
|
|
|
|
|
||
Gross profit as a percentage of net sales, gross margin, was 36.0% in the 2026 quarter compared to 40.5% in the 2025 quarter. The decrease was primarily the result of increased depreciation, higher transportation costs associated with increased diesel prices, and increased labor as production began at our Arkansas facility.
Selling, General and Administrative Expenses
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Selling, general and administrative expenses |
|
$ |
56,455 |
|
|
$ |
45,041 |
|
|
$ |
11,414 |
|
|
|
25.3 |
% |
% of total net sales |
|
|
15.7 |
% |
|
|
15.8 |
% |
|
|
|
|
|
|
||
Selling, general and administrative expenses increased $11.4 million to $56.5 million, or 15.7% of net sales, in the 2026 quarter. The increase primarily related to increases of $8.0 million in personnel related expenses and $3.4 million in branding.
Other Expenses
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Other expenses |
|
$ |
496 |
|
|
$ |
— |
|
|
$ |
496 |
|
|
|
100.0 |
% |
% of total net sales |
|
|
0.1 |
% |
|
|
— |
|
|
|
|
|
|
|
||
19
Provision for Income Taxes
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Provision for income taxes |
|
$ |
19,186 |
|
|
$ |
18,627 |
|
|
$ |
559 |
|
|
|
3.0 |
% |
Effective tax rate |
|
|
26.8 |
% |
|
|
26.5 |
% |
|
|
|
|
|
|
||
The effective tax rate for the 2026 quarter was 26.8% compared to 26.5% for the 2025 quarter.
Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)1 (dollars in thousands)
Reconciliation of net income (GAAP) to EBITDA (non-GAAP):
|
|
Three Months Ended September 30, 2026 |
|
|
|
Three Months Ended September 30, 2025 |
|
||
Net income |
|
$ |
52,493 |
|
|
|
$ |
51,770 |
|
Interest expense, net |
|
|
843 |
|
|
|
|
— |
|
Income tax expense |
|
|
19,186 |
|
|
|
|
18,627 |
|
Depreciation and amortization |
|
|
22,166 |
|
|
|
|
16,012 |
|
EBITDA |
|
$ |
94,688 |
|
|
|
$ |
86,409 |
|
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
EBITDA |
|
$ |
94,688 |
|
|
$ |
86,409 |
|
|
$ |
8,279 |
|
|
|
9.6 |
% |
EBITDA increased 9.6% to $94.7 million for the 2026 quarter compared to $86.4 million for the 2025 quarter. The increase in EBITDA was primarily due to the increase in net sales.
Nine Months Ended September 30, 2026 Compared To The Nine Months Ended September 30, 2025
Net Sales
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Net sales |
|
$ |
1,120,926 |
|
|
$ |
1,013,142 |
|
|
$ |
107,784 |
|
|
|
10.6 |
% |
Total net sales increased by $107.8 million, or 10.6%, in the 2026 nine-month period compared to the 2025 nine-month period. The increase was primarily due to an increase in volume and net price.
__________________________
1EBITDA represents net income before interest, income taxes, depreciation and amortization. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States (GAAP). We have included data with respect to EBITDA because management believes it facilitates performance comparison between the Company and its competitors. Management considers EBITDA to be an important supplemental indicator of our core operating performance because it eliminates interest, income taxes, and depreciation and amortization charges to net income or loss. In relation to competitors, EBITDA eliminates differences among companies in capitalization and tax structures, capital investment cycles and ages of related assets. For these reasons, management believes that EBITDA provides important information regarding the operating performance of the Company. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP and are not meant to be considered superior to or a substitute for our GAAP results.
20
Gross Profit
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Cost of sales |
|
$ |
694,087 |
|
|
$ |
601,842 |
|
|
$ |
92,245 |
|
|
|
15.3 |
% |
% of total net sales |
|
|
61.9 |
% |
|
|
59.4 |
% |
|
|
|
|
|
|
||
Gross profit |
|
$ |
426,839 |
|
|
$ |
411,300 |
|
|
$ |
15,539 |
|
|
|
3.8 |
% |
Gross margin |
|
|
38.1 |
% |
|
|
40.6 |
% |
|
|
|
|
|
|
||
Gross profit as a percentage of net sales, gross margin, was 38.1% in the 2026 nine-month period compared to 40.6% in the 2025 nine-month period. The decrease in gross margin was primarily the result of increased depreciation, higher transportation costs associated with increased diesel prices, unfavorable mix, and increased labor as production began at our Arkansas facility.
Other Expenses
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Other expenses |
|
$ |
5,169 |
|
|
$ |
— |
|
|
$ |
5,169 |
|
|
|
100.0 |
% |
% of total net sales |
|
|
0.5 |
% |
|
|
— |
|
|
|
|
|
|
|
||
Other expenses increased $5.2 million in the 2026 nine-month period. The increase was primarily due to the write down of assets at our Virginia manufacturing facilities to reduce the carrying value of the assets to their estimated fair value.
Selling, General and Administrative Expenses
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Selling, general and administrative expenses |
|
$ |
179,452 |
|
|
$ |
156,841 |
|
|
$ |
22,611 |
|
|
|
14.4 |
% |
% of total net sales |
|
|
16.0 |
% |
|
|
15.5 |
% |
|
|
|
|
|
|
||
Selling, general and administrative expenses increased $22.6 million to $179.5 million, or 16.0% of net sales, in the 2026 nine-month period. The increase primarily related to increases of $9.1 million in personnel related expenses, $8.4 million in branding, $3.2 million in digital transformation, and $0.9 million in Arkansas start-up costs.
Provision for Income Taxes
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Provision for income taxes |
|
$ |
63,276 |
|
|
$ |
66,346 |
|
|
$ |
(3,070 |
) |
|
|
(4.6 |
)% |
Effective tax rate |
|
|
26.5 |
% |
|
|
26.1 |
% |
|
|
|
|
|
|
||
The effective tax rate for the 2026 nine-month period was 26.5% compared to 26.1% for the 2025 nine month period.
21
Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)2 (dollars in thousands)
Reconciliation of net income (GAAP) to EBITDA and EBITDA margin (non-GAAP):
|
|
Nine Months Ended |
|
|
|
Nine Months Ended September 30, 2025 |
|
||
Net income |
|
$ |
175,772 |
|
|
|
$ |
188,113 |
|
Interest expense, net |
|
|
3,170 |
|
|
|
|
— |
|
Income tax expense |
|
|
63,276 |
|
|
|
|
66,346 |
|
Depreciation and amortization |
|
|
59,903 |
|
|
|
|
46,068 |
|
EBITDA |
|
$ |
302,121 |
|
|
|
$ |
300,527 |
|
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
EBITDA |
|
$ |
302,121 |
|
|
$ |
300,527 |
|
|
$ |
1,594 |
|
|
|
0.5 |
% |
Total EBITDA increased 0.5% to $302.1 million for the 2026 nine-month period compared to $300.5 million for the 2025 nine-month period.
LIQUIDITY AND CAPITAL RESOURCES
We finance operations and growth primarily with cash flows from operations, borrowings under our revolving credit facilities, and normal trade credit terms from operating activities. At September 30, 2026, we had $3.3 million of cash and cash equivalents.
Sources and Uses of Cash. The following table summarizes our cash flows from operating, investing and financing activities (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Net cash provided by operating activities |
|
$ |
248,363 |
|
|
$ |
292,627 |
|
Net cash used in investing activities |
|
|
(75,233 |
) |
|
|
(188,136 |
) |
Net cash used in financing activities |
|
|
(173,666 |
) |
|
|
(94,426 |
) |
Net (decrease) increase in cash and cash equivalents |
|
$ |
(536 |
) |
|
$ |
10,065 |
|
Operating Activities
Cash provided by operations was $248.4 million during the 2026 nine-month period compared to cash provided by operations of $292.6 million during the 2025 nine-month period. The $44.3 million decrease in cash provided by operating activities was primarily related to increased account receivable due to higher net sales, partially offset by increases in accounts payable, accrued expenses, and deferred taxes.
____________________
2EBITDA represents net income before interest, income taxes, depreciation and amortization. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States (GAAP). We have included data with respect to EBITDA because management believes it facilitates performance comparison between the Company and its competitors. Management considers EBITDA to be an important supplemental indicator of our core operating performance because it eliminates interest, income taxes, and depreciation and amortization charges to net income or loss. In relation to competitors, EBITDA eliminates differences among companies in capitalization and tax structures, capital investment cycles and ages of related assets. For these reasons, management believes that EBITDA provides important information regarding the operating performance of the Company. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP and are not meant to be considered superior to or a substitute for our GAAP results.
22
Investing Activities
Capital expenditures. During the nine months ended September 30, 2026, our capital expenditures were $75.3 million primarily related to $33.8 million for the Arkansas manufacturing facility, $8.3 million in safety, environmental and general support, $6.0 million in purchased intangibles related to digital transformation, and $24.8 million in all other including cost reduction initiatives and capacity expansion in our existing facilities.
Financing Activities
Net cash used in financing activities in the 2026 nine-month period consisted primarily of repurchases of common stock, partially offset by net borrowings on our line of credit.
Stock Repurchase Program. On May 4, 2023, the Board of Directors authorized the repurchase of up to 10.8 million shares of the Company's common stock under the 2023 Stock Repurchase Program, which has no expiration date. On April 28, 2026, the Board of Directors authorized an additional 10 million shares for repurchase under the 2023 Stock Repurchase Program, increasing the number of shares available for future repurchases under the program.
During the nine months ended September 30, 2026, the Company repurchased 5.2 million shares of common stock under the 2023 Stock Repurchase Program. As of September 30, 2026, 12.2 million shares remained available for repurchase under the 2023 Stock Repurchase Program.
Revolving Credit Facility
Indebtedness prior to March 26, 2026. On October 10, 2024, Trex entered into a Second Amendment to the Credit Agreement (Second Amendment) with certain lending parties thereto (Lenders) to amend that Credit Agreement dated as of May 18, 2022, as amended by that certain First Amendment dated as of December 22, 2022.
The Second Amendment provides us with Revolving A Loans in the maximum principal amount of $400,000,000 (Revolving A Loans), Revolving B Loans in the maximum principal amount of $150,000,000 (Revolving B Loans), and Letters of Credit and Swing Line Loans (as defined in the Credit Agreement). The Second Amendment extends the maturity date of the Revolving B Loans from December 22, 2024 to December 22, 2026.
Base Rate Loans (as defined in the Credit Agreement) under the Revolving A Loan and the Swing Line Loans accrue interest at the Base Rate plus the Applicable Rate (as defined in the Credit Agreement) and Term SOFR Loans for the Revolving Loans accrue interest at the rate per annum equal to the sum of Term SOFR for such interest period plus the Applicable Rate (as defined in the Credit Agreement). The Base Rate for any day is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America (BOA) as its prime rate, and (c) the Term SOFR plus 1.0% subject to certain interest rate floors. Repayment of all then outstanding principal, interest, fees and costs is due at the end of the Term (as defined in the Credit Agreement).
With respect to Revolving B Loans (as defined in the Credit Agreement), for any day, the rate per annum is a tiered pricing based upon the Consolidated Debt to Consolidated EBITDA Ratio. The applicable rate for Revolving B Loans that are Base Rate Loans range between 0.20% and 1.15%. and the applicable rate for Revolving B Loans that are Term SOFR/Term SOFR Daily Floating Rate range between 1.20% and 2.15%.
Indebtedness on and after March 26, 2026. On March 26, 2026 Trex entered into a Credit Agreement with certain lending parties thereto (Lenders) to amend and restate the Credit Agreement dated as of May 18, 2022, as amended (the Prior Credit Agreement).
The Credit Agreement provides us with one or more Revolving Loans in a collective maximum principal amount of $700,000,000 (Loan Limit) throughout the term, which ends March 26, 2031. Included within the Loan Limit are sublimits for, Letters of Credit (as defined in the Credit Agreement) in an amount not to exceed $60,000,000 and Swing Line Loans (as defined in the Credit Agreement) in an amount not to exceed $40,000,000.
Base Rate Loans (as defined in the Credit Agreement) under the Revolving Loans and the Swing Line Loans accrue interest at the Base Rate plus the Applicable Rate (as defined in the Credit Agreement) and Term SOFR Loans or Term SOFR Daily Floating Rate Loans for the Revolving Loans accrue interest at the rate per annum equal to the sum of Term SOFR Loans/Term SOFR Daily Floating Rate for such interest period plus the Applicable Rate (as defined in the Credit Agreement). The Base Rate for any day is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by BOA as its prime rate, and (c) the Term SOFR plus 1.0% subject to certain interest rate
23
floors. Repayment of all then outstanding principal, interest, fees and costs is due on the last day of the Term (as defined in the Credit Agreement).
Compliance with Debt Covenants and Restrictions. Pursuant to the terms of the Credit Agreement, the Company is subject to certain loan compliance covenants. The Credit Agreement requires the Company to maintain (a) a Consolidated Interest Coverage Ratio of not less than 2.50 to 1.0 and (b) a Consolidated Debt to Consolidated EBITDA Ratio of not more than 3.75 to 1.0, each measured as of the end of each Fiscal Quarter, commencing with the Fiscal Quarter ended June 30, 2026. The maximum Consolidated Debt to Consolidated EBITDA Ratio is automatically increased to 4.25 to 1.0 for the Fiscal Quarter in which a qualifying Acquisition with cash consideration (including assumed or acquired Debt) of $75,000,000 or more occurs and each of the following four Fiscal Quarters (an "Adjustment Period"), subject to a limit of two Adjustment Periods during the term of the Credit Agreement.
The Credit Agreement also contains an equity cure mechanism, under which the Company may make cash equity contributions (funded with proceeds of common equity) to be included in the calculation of Consolidated EBITDA solely for purposes of determining compliance with the financial covenants, subject to certain conditions and limitations, including that in each consecutive four Fiscal Quarter period there must be at least two Fiscal Quarters in which no such contribution is made.
At September 30, 2026, we had $170.0 million in outstanding borrowings under the revolving credit facility. The total availability under the revolving credit facility was $526.9 million as of September 30, 2026, which reflects a reduction for outstanding letters of credit totaling $3.1 million.
We believe that cash on hand, cash from operations and borrowings expected to be available under our revolving credit facilities will provide sufficient funds to fund planned capital expenditures, make scheduled principal and interest payments, fund warranty payments, and meet other cash requirements. We currently expect to fund future capital expenditures from operations and financing activities. The actual amount and timing of future capital requirements may differ materially from our estimate depending on the demand for Trex products and new market developments and opportunities.
Capital Requirements. Our capital expenditure guidance for 2026 is approximately $100 million. Our capital allocation priorities for 2026 include expenditures for internal growth opportunities, manufacturing cost reductions, upgrading equipment and support systems, and acquisitions which fit our long-term growth strategy as we continue to evaluate opportunities that would be a good strategic fit for Trex, and return of capital to shareholders.
Inventory in Distribution Channels. We sell our decking and railing products through a tiered distribution system. We have over 100 distributor locations worldwide and two national retail merchandisers to which we sell our products. The distributors in turn sell the products to dealers and retail locations who in turn sell the products to end users. Significant increases in inventory levels in the distribution channel without a corresponding change in end-use demand could have an adverse effect on future sales.
Product Warranty. We warrant that for the applicable warranty period our products, when properly installed, used and maintained, will be free from material defects in workmanship and materials and our decking, cladding, fascia and railing products will not split, splinter, rot or suffer structural damage from termites or fungal decay.
Products sold on or after January 1, 2023: The warranty period for residential use is 50 years for Transcend® decking, 35 years for Select® decking and Universal Fascia, and 25 years for Enhance® decking and Transcend, Select, Enhance and Signature® railing. The warranty period for commercial use is 10 years, excluding Signature railing and Transcend cladding, which each have a warranty period of 25 years. We further warrant that Trex Transcend, Trex Enhance and Trex Select decking and cladding and Universal Fascia products will not fade in color from light and weathering exposure more than a certain amount and will be resistant to permanent staining from food and beverage substances or mold and mildew, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above. If there is a breach of such warranties, we have an obligation either to replace the defective product or refund the purchase price.
Products sold prior to January 1, 2023: The warranty period is 25 years for residential use and 10 years for commercial use. With respect to Trex Signature railing, the warranty period is 25 years for both residential and commercial use. We further warrant that Trex Transcend, Trex Enhance, Trex Select and Universal Fascia products will not fade in color more than a certain amount and will be resistant to permanent staining from food substances or mold, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above. If there is a breach of such warranties, we have an obligation either to replace the defective product or refund the purchase price.
We maintain a warranty reserve for the settlement of our product warranty claims. We accrue for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and future claims experience. To estimate our future claims experience, we utilize actuarial techniques to determine a reasonable possible range of amounts to be paid related to defects covered by our product warranty. The actuarial techniques consider claims received, claims closed, and the
24
corresponding amounts paid. Estimates for these elements are quantified using a range of assumptions derived from claim history and consideration of additional factors influencing claim counts or costs incurred to settle claims in order to determine the best estimate of future claims for which to record a related liability. We review and adjust these estimates, if necessary, based on the differences between actual experience and historical estimates.
We monitor claims activity each quarter for indications that our estimates require revision. We use the best and most complete underlying information available and a rational methodology to determine our warranty obligations. We consider all available evidence to assess the reasonableness of all key assumptions underlying our estimated warranty obligations.
Our analysis is based on currently known facts and a number of assumptions, as discussed above, and current expectations. Projecting future events such as the number of claims to be received, the number of claims that will require payment and the costs associated with settling claims could cause the actual warranty liability to be higher or lower than projected, which could materially affect our financial condition, results of operations or cash flows.
Seasonality. The operating results for Trex have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions may reduce the level of home improvement and construction activity and can shift demand for its products to a later period. As part of its normal business practice and consistent with industry practice, Trex has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season in order to ensure adequate availability of its product to meet anticipated seasonal consumer demand. The seasonal effects are often offset by the positive effect of the incentive programs.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures about Market Risk,” in Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. There were no material changes to the Company’s market risk exposure during the nine months ended September 30, 2026.
Item 4. Controls and Procedures
The Company’s management, with the participation of its President and Chief Executive Officer, who is the Company’s principal executive officer, and its Senior Vice President and Chief Financial Officer, who is the Company's principal financial officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2026. Based on this evaluation, the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective. There have been no changes in the Company’s internal control over financial reporting during the three-month period ended September 30, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
25
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company has lawsuits, as well as other claims, pending against it which are ordinary routine litigation and claims incidental to the business. Management has evaluated the merits of these lawsuits and claims and believes that their ultimate resolution will not have a material effect on the Company’s consolidated financial condition, results of operations, liquidity or competitive position.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Period |
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
(d) |
|
||||
July 1, 2026 –July 31, 2026 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,470,185 |
|
August 1, 2026 –August 31, 2026 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,470,185 |
|
September 1, 2026 – September 30, 2026 |
|
|
1,242,659 |
|
|
|
44.35 |
|
|
|
1,242,659 |
|
|
|
12,227,526 |
|
Quarterly period ended September 30, 2026 |
|
|
1,242,659 |
|
|
|
|
|
|
1,242,659 |
|
|
|
|
||
Item 5. Other Information
Insider Trading Arrangements. During the quarter ended September 30, 2026,
Item 6. Exhibits
See Exhibit Index at the end of the Quarterly Report on Form 10-Q for the information required by this Item which is incorporated by reference.
26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
TREX COMPANY, INC. |
||
|
|
|
|
|
Date: November 4, 2026 |
|
By: |
/s/ Prithvi S. Gandhi |
|
|
|
|
|
Prithvi S. Gandhi |
|
|
|
|
Senior Vice President and Chief Financial Officer |
|
|
|
|
(Duly Authorized Officer and Principal Financial Officer) |
27
EXHIBIT INDEX
|
|
|
|
Incorporated by reference |
||||||
Exhibit Number
|
|
Description
|
|
Form
|
|
Exhibit
|
|
Filing Date
|
|
File No.
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
Restated Certificate of Incorporation of Trex Company, Inc. dated July 28, 2021. |
|
10-Q |
|
3.6 |
|
August 2, 2021 |
|
001-14649 |
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
First Certificate of Amendment to the Restated Certificate of Incorporation of Trex Company, Inc. dated May 5, 2022 |
|
10-Q |
|
3.2 |
|
May 9, 2022 |
|
001-14649 |
|
|
|
|
|
|
|
|
|
|
|
3.3 |
|
Amended and Restated By-Laws of the Company dated February 21, 2024 |
|
10-K |
|
3.3 |
|
February 26, 2024 |
|
001-14649 |
|
|
|
|
|
|
|
|
|
|
|
31.1* |
|
Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2* |
|
Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32*** |
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104.1 |
|
Cover Page Interactive Data File—The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. |
|
|
|
|
|
|
|
|
* Filed herewith.
*** Furnished herewith.
28