Trex(US:TREX)2022-02-28 22:13Financial Performance - Net sales increased by 35.9%, or $316 million, to $1.2 billion for the twelve months ended December 31, 2021, compared to $881 million in the previous year, marking the highest sales in the company's history [148]. - Trex Residential net sales rose by 37.6%, or $311 million, to $1.14 billion for the same period, also the highest in its history [148]. - Gross profit increased by 28.1%, or $101 million, to $461 million for the twelve months ended December 31, 2021, compared to $359 million in 2020 [148]. - Net income reached $209 million, an 18.8% increase over the previous year's net income of $176 million [148]. - Total net sales for the year ended December 31, 2021, were $1,196,952 thousand, representing a 35.9% increase from $880,831 thousand in 2020 [176]. - Trex Residential net sales increased by 37.6% to $1,139,266 thousand in 2021, driven by strong demand and market share gains from wood [176]. - Gross profit for 2021 was $460,504 thousand, with a gross margin of 38.5%, down from 40.8% in 2020, primarily due to inflationary pressures and increased costs [178]. - Total EBITDA increased by 23.7% to $311.3 million in 2021, driven by a $116.7 million increase in Trex Residential EBITDA, offset by a $56.9 million decrease in Trex Commercial EBITDA [186]. Investments and Capital Expenditures - The company plans to invest approximately $400 million over the next five years to develop a new manufacturing facility in Little Rock, Arkansas, expected to begin production in 2024 [142][154]. - Capital expenditures totaled $159 million, primarily for increasing production capacity at Virginia and Nevada facilities [148]. - Capital expenditures in 2021 totaled $159.4 million, with $126.3 million allocated for capacity expansion and cost reduction initiatives [190]. - Capital expenditure guidance for 2022 is set between $200 million and $220 million, focusing on internal growth opportunities and manufacturing cost reductions [205]. Operational Efficiency and Workforce - The company welcomed approximately 400 new employees in 2021 to support growth and enhance diversity, equity, and inclusion efforts [144][145]. - The new Arkansas facility will employ approximately 500 people and is strategically located to optimize raw material access and transportation costs [142][154]. - Trex continues to focus on cost reduction through increased automation and energy efficiency to enhance margins and drive profit growth [143]. - The company’s capacity expansion program was fully operational in 2021, enabling it to capture additional growth in Trex Residential [176]. Claims and Impairments - The average cost per surface flaking claim increased to $3,519 in 2021, compared to $3,390 in 2020 [163]. - The number of unresolved surface flaking claims at the end of 2021 was 1,759, a decrease from 1,799 at the end of 2020 [163]. - The company recognized impairment charges of $42.5 million and $11.8 million for its commercial railing and staging reporting units, respectively, in Q4 2021 [169]. - Goodwill impairment loss for 2021 was $54.2 million, representing 4.5% of total net sales, due to reduced project commitments influenced by COVID-19 [180]. - The company estimates that a 10% change in the expected number of claims or the cost to settle claims could result in approximately a $1.9 million change in the warranty reserve [162]. Cash Flow and Financing - Cash flows from operating activities were $258 million for the twelve months ended December 31, 2021, compared to $187 million in 2020 [148]. - Net cash provided by operating activities rose to $258.1 million in 2021, a $71 million increase compared to 2020, attributed to a $117 million increase in Trex Residential EBITDA [189]. - As of December 31, 2021, the company had no outstanding indebtedness under revolving credit facilities, with a borrowing capacity of $300 million [197]. - The company believes that cash on hand, cash flows from operations, and borrowings from the revolving credit facility will provide sufficient funds for planned capital expenditures and other cash requirements for at least the next 12 months [206]. - The company expects to fund future capital expenditures primarily from operations and borrowings under the revolving credit facility, with actual future capital requirements potentially differing based on product demand and market developments [206]. - The company may need to obtain additional financing through bank borrowings or the issuance of debt or equity securities, which could increase indebtedness or dilute stockholder ownership [207]. - As of December 31, 2021, the company had no debt outstanding under its revolving line of credit, and a 1% increase in interest rates would not materially affect its financial position or liquidity [210]. - The company had no interest rate swap agreements outstanding as of December 31, 2021, indicating a lack of hedging against interest rate fluctuations [211]. Tax and Shareholder Returns - The effective tax rate for 2021 was 24.2%, slightly lower than the 25.2% rate in 2020 [183]. - The company repurchased 3.6 million shares under its Stock Repurchase Program, with $82.5 million used for share repurchases in 2021 [191]. - The company does not expect the adoption of new accounting standards related to reference rate reform to have a material effect on its consolidated financial statements [208]. - The company is required to disclose material transactions with government assistance, but does not expect this to materially affect its consolidated financial statements [209].