Trex(US:TREX)2025-05-08 21:10PART I FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the first quarter of 2025 Item 1. Condensed Consolidated Financial Statements Presents unaudited condensed consolidated financial statements, including income, balance sheet, equity, and cash flow statements, with notes for Q1 2025 and 2024 Condensed Consolidated Statements of Comprehensive Income (Unaudited) | | Three Months Ended March 31, | | | :--- | :--- | :--- | | (In thousands, except per share data) | 2025 | 2024 | | Net sales | $339,993 | $373,635 | | Gross profit | $137,731 | $169,612 | | Income from operations | $81,663 | $119,012 | | Net income | $60,434 | $89,070 | | Diluted earnings per common share | $0.56 | $0.82 | Condensed Consolidated Balance Sheets (Unaudited) | | March 31, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | (In thousands) | | | | Total current assets | $592,190 | $318,908 | | Total assets | $1,641,199 | $1,324,298 | | Total current liabilities | $601,561 | $342,477 | | Total liabilities | $731,120 | $474,156 | | Total stockholders' equity | $910,079 | $850,142 | Condensed Consolidated Statements of Cash Flows (Unaudited) | | Three Months Ended March 31, | | | :--- | :--- | :--- | | (In thousands) | 2025 | 2024 | | Net cash used in operating activities | $(154,013) | $(174,044) | | Net cash used in investing activities | $(79,965) | $(37,614) | | Net cash provided by financing activities | $237,649 | $212,752 | | Net increase in cash and cash equivalents | $3,671 | $1,094 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2025 financial performance, detailing decreased net sales and net income, operational highlights, liquidity, and capital resources Highlights and Financial Performance Summarizes Q1 2025 financial results, showing year-over-year declines in key metrics and highlighting corporate achievements and sustainability recognition Key Financial Highlights (Unaudited) | | Three Months Ended March 31, | | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | (In thousands, except per share data) | 2025 | 2024 | | | | Net sales | $339,993 | $373,635 | $(33,642) | (9.0)% | | Gross profit | $137,731 | $169,612 | $(31,881) | (18.8)% | | Net income | $60,434 | $89,070 | $(28,636) | (32.1)% | | EBITDA* | $95,912 | $133,166 | $(37,254) | (28.0)% | | Diluted earnings per share | $0.56 | $0.82 | $(0.26) | (31.7)% | - Key achievements in Q1 2025 include: - Named America's Most Trusted® Outdoor Decking for the fifth consecutive year - Ranked among Barron's 100 Most Sustainable Companies for 2025, moving up 20 spots - Earned top honors at the Environment + Energy Leader Awards - Named Green Builder Media's Sustainable Brand Leader in the decking category83 Results of Operations Analyzes Q1 2025 operational results, detailing decreased net sales due to lower volume, contracted gross margin, and increased SG&A expenses - Net sales decreased by $33.6 million (9.0%) in Q1 2025 compared to Q1 2024, primarily due to a decrease in volume as a $40 million channel inventory build in the prior-year quarter did not reoccur in 202591 - Gross margin decreased to 40.5% in Q1 2025 from 45.4% in Q1 2024, mainly due to lower production year-over-year and changes to the production process for Enhance® decking92 - Selling, general and administrative expenses increased by $5.5 million (10.8%) in Q1 2025, primarily due to a $3.4 million increase in branding, a $1.0 million increase in personnel expenses, and $1.0 million in start-up expenses for the Arkansas facility93 Liquidity and Capital Resources Details Q1 2025 cash flow from operations, capital expenditures for the Arkansas facility, outstanding borrowings, and future capital expenditure guidance - Cash used in operations was $154.0 million for the first three months of 2025, a decrease from $174.0 million in the same period of 2024, primarily due to a decrease in inventories and reduced profitability9798 - Capital expenditures for Q1 2025 totaled $79.5 million, with $64.2 million allocated to the new Arkansas manufacturing facility8499 - As of March 31, 2025, the company had $443.9 million in outstanding borrowings under its revolving credit facility, with an available borrowing capacity of $106.1 million44113 - The company's capital expenditure guidance for the full year 2025 is projected to be between $190 million and $210 million116 Item 3. Quantitative and Qualitative Disclosures About Market Risk Confirms no material changes to market risk exposure in Q1 2025, referring to the detailed disclosure in the 2024 Annual Report on Form 10-K - There were no material changes to the Company's market risk exposure during the three months ended March 31, 2025126 Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2025, the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective127 - No changes in the Company's internal control over financial reporting occurred during the first quarter of 2025 that have materially affected, or are reasonably likely to materially affect, the internal controls127 PART II OTHER INFORMATION This section covers legal proceedings, equity security sales, other corporate information, and a list of exhibits for the first quarter of 2025 Item 1. Legal Proceedings The company is involved in routine litigation and claims, which management believes will not materially affect its financial condition or operations - The Company is involved in lawsuits and claims that are considered ordinary and incidental to its business, which management does not expect to have a material effect on the company's financial condition or results of operations71130 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the stock repurchase program in Q1 2025, though 49,949 shares were withheld for employee tax obligations - No shares were repurchased under the company's stock repurchase program during the three months ended March 31, 2025132 - A total of 49,949 shares were withheld by the company to cover tax withholding obligations for employees on restricted stock grants during the quarter131 Item 5. Other Information No Rule 10b5-1 trading plan changes by directors or officers, and the Annual Meeting results included director elections, advisory executive compensation approval, and auditor ratification - During the quarter ended March 31, 2025, no directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements133 - At the Annual Meeting of Stockholders on May 6, 2025, three directors were elected, the compensation of executive officers was approved on an advisory basis, and the selection of Ernst & Young LLP as the independent registered public accounting firm for fiscal year 2025 was ratified134135137 Item 6. Exhibits Refers to the Exhibit Index at the end of the report for a comprehensive list of all exhibits filed with this Form 10-Q - A list of exhibits filed with this Quarterly Report on Form 10-Q is available in the Exhibit Index at the end of the document138