Trex narrows Q3 net loss to US$0.5M from loss of US$8.8M last year on sales 12% higher at US$67.9M; new products contributing to sales growth, despite slowdown in economic recovery

Lorena Madrigal

WINCHESTER, Virginia , October 31, 2011 (press release) – Trex Company, Inc. (NYSE: TREX), the world's largest manufacturer of wood-alternative decking and railing products, today announced financial results for the third quarter ended September 30, 2011.

Net sales for the third quarter of 2011 totaled $67.9 million compared to net sales of $60.6 million for the 2010 third quarter. The Company reported a net loss of $0.5 million, or $0.03 per diluted share, for the 2011 period compared to a net loss of $8.8 million, or $0.58 per diluted share, for the 2010 period. The Company recognized an accelerated non-cash charge of $0.5 million during the 2011 period related to its repurchase of $5.6 million of its senior subordinated convertible notes due in July 2012. Before giving effect to this charge, the Company had net income of $28,000. During the 2010 period, the Company recognized $3.9 million of unusual charges. Before giving effect to those charges, the Company had a net loss of $5.0 million, or $0.33 per diluted share for the 2010 period.

For the nine months ended September 30, 2011, the Company reported net sales of $215.3 million compared to net sales of $242.4 million for the prior-year period. The Company reported net income of $6.7 million, or $0.41 per diluted share, for the first nine months of 2011 compared to a net loss of $9.6 million, or $0.63 per diluted share for 2010. The 2011 results reflect the favorable resolution of uncertain tax positions in the first quarter of 2011 that positively impacted income taxes by $2.6 million as well as the $0.5 million accelerated non-cash charge related to its convertible notes repurchase. Before giving effect to these items, net income for 2011 was $4.6 million, or $0.28 per diluted share. During 2010, the Company recognized a total of $17.2 million of unusual charges. Before giving effect to those charges, net income for the 2010 period totaled $7.6 million, or $0.49 per diluted share.

Chairman, President and CEO Ronald W. Kaplan commented,"During the third quarter, we executed well in a challenging environment, increasing year-over-year net sales by 12% even as consumer confidence deteriorated and the economic recovery lost steam. The new products we introduced over the past year have begun contributing to our sales growth. Market acceptance of Trex Deck Lighting(TM) has been strong and our new deck substructure product, Trex Elevations(TM), is starting to generate considerable interest.

"Year to date, our gross margin rose to 29.6%, reflecting our continued focus on driving down basic manufacturing costs combined with eliminating the impact of start-up costs related to the 2010 introduction of Trex Transcend(R). During the quarter, our strong cash position enabled us to opportunistically purchase $5.6 million of the senior subordinated convertible notes the Company issued in 2007. As of September 30, 2011, our cash balance reached $50.2 million. We recently reached an agreement to extend the maturity on $55 million of our revolving credit facility to December 31, 2012 and are exploring other sources of financing that will provide additional borrowing capacity and greater flexibility to prosecute our growth strategies.

"Earlier this month we announced a new decking option, Trex Enhance(R), to our product line-up, giving consumers another notable choice for meeting their outdoor living needs. Enhance is a capped, high-performance decking product that utilizes the Transcend technology. Offering a 20-year fade and stain warranty, scratch resistance and two rich colors, Enhance fits in the middle of our 'good, better, best' product platform strategy. In addition, we entered into a trademark licensing agreement with Backyard America to develop and market Trex Pergola(TM) kits.

"We believe our product offerings and sales strategies represent a solid platform for growth and we look forward to a robust winter and spring sales program. We expect sales patterns to differ from last year primarily due to a change in our pricing strategy and early buy program. Early in the 2010 fourth quarter we announced a price increase on Transcend for 2011, which significantly increased sales in that quarter. We expect net sales of approximately $50-55 million for the fourth quarter of 2011. However, based on the feedback we received at our recent annual distributor meeting, we anticipate sales in the first quarter of 2012 to exceed the first quarter of 2011 by at least 25%. Moreover, we expect sales for the full year 2012 to grow significantly."

Third-Quarter 2011 Conference Call and Webcast Information

Trex will hold a conference call to discuss its third-quarter 2011 results on Monday, October 31, 2011 at 10:00 a.m. ET. To participate in the live call by telephone, please dial 706-634-1218 and reference conference ID #15908011. A live webcast of the conference call will also be available in the Investor Relations section of the Trex Company website at http://www.trex.com. The call will also be simulcast at http://www.streetevents.com.

For those who cannot listen to the live broadcast, the webcast will be available on Trex's website for 30 days. A telephone replay of the call will also be available for seven days, beginning at approximately 1:00 p.m. ET on Monday, October 31, 2011. To listen to the telephone replay, dial 404-537-3406 and enter conference ID #15908011.

About Trex Company

Trex Company is the world's largest manufacturer of wood-alternative decking and railing, with more than 20 years of product experience. Stocked in more than 5,500 retail locations throughout the world, Trex(R) outdoor living products offer a wide range of style options with fewer ongoing maintenance requirements than wood, as well as a truly environmentally responsible choice. For more information, visit trex.com.

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