The Company operates in

two

reportable segments:

•

Trex Residential manufactures wood-alternative decking and residential railing and related products marketed under the brand name Trex

. Trex Residential products are sold to distributors and home centers for final resale primarily to the residential market, which includes replacement, remodeling and new construction related to outdoor living products. Trex Residential net sales were $358.9 million and $344.4 million in the six months ended June 30, 2019 and 2018, respectively.

•

Trex Commercial designs, engineers, and markets modular and architectural railing and staging systems for the commercial and multi-family market, including sports stadiums and performing arts venues. Trex Commercial products are marketed to architects, specifiers, contractors, and others doing business within the commercial and multi-family market. Trex Commercial net sales were $27.1 million and $33.5 million in the six months ended June 30, 2019 and 2018, respectively.

The Company’s reportable segments have been determined in accordance with its internal management structure, which is organized based on residential and commercial sales activities. The Company evaluates performance of

each

segment primarily based on net sales and earnings before interest, taxes, depreciation and amortization (EBITDA). The Company uses net sales to assess performance and allocate resources as this measure represents the amount of business the segment engaged in during a given period of time, is an indicator of market growth and acceptance of segment products, and represents the segment’s customers’ spending habits along with the amount of product the segment sells relative to its competitors. The Company uses EBITDA to assess performance and allocate resources because it believes that EBITDA facilitates performance comparison between the segments by eliminating interest, taxes, and depreciation and amortization charges to income. The below segment data for the three and six months ended June 30, 2019 and 2018 includes data for Trex Residential and Trex Commercial (in thousands):


	Three Months Ended June 30, 2019
	Trex Residential		Trex Commercial		Total
Net sales	$	193,468	$	12,985	$	206,453
Net income	$	35,223	$	487	$	35,710
EBITDA	$	50,353	$	785	$	51,138
Depreciation and amortization	$	3,258	$	141	$	3,399
Income tax expense	$	11,866	$	164	$	12,030
Capital expenditures	$	10,124	$	290	$	10,414
Total assets	$	447,725	$	88,473	$	536,198

Reconciliation of net income to EBITDA:

	Three Months Ended June 30, 2019
	Trex Residential		Trex Commercial			Total
Net income	$	35,223	$	487		$	35,710
Interest expense (income), net		6		(7	)		(1	)
Income tax expense		11,866		164			12,030
Depreciation and amortization		3,258		141			3,399
EBITDA	$	50,353	$	785		$	51,138

	Six Months Ended June 30, 2019
	Trex Residential		Trex Commercial		Total
Net sales	$	358,947	$	27,077	$	386,024
Net income	$	66,478	$	787	$	67,265
EBITDA	$	92,419	$	1,312	$	93,731
Depreciation and amortization	$	6,525	$	268	$	6,793
Income tax expense	$	19,466	$	264	$	19,730
Capital expenditures	$	17,818	$	1,243	$	19,061
Total assets	$	447,725	$	88,473	$	536,198

Reconciliation of net income to EBITDA:

	Six Months Ended June 30, 2019
	Trex Residential			Trex Commercial			Total
Net income	$	66,478		$	787		$	67,265
Interest income, net		(50	)		(7	)		(57	)
Income tax expense		19,466			264			19,730
Depreciation and amortization		6,525			268			6,793
EBITDA	$	92,419		$	1,312		$	93,731

	Three Months Ended June 30, 2018
	Trex Residential		Trex Commercial		Total
Net sales	$	189,201	$	17,491	$	206,692
Net income	$	42,115	$	704	$	42,819
EBITDA	$	59,939	$	2,228	$	62,167
Depreciation and amortization	$	3,277	$	1,289	$	4,566
Income tax expense	$	14,178	$	235	$	14,413
Capital expenditures	$	11,825	$	438	$	12,263
Total assets	$	334,289	$	80,156	$	414,445

Reconciliation of net income to EBITDA:

$2,228


	Three Months Ended June 30, 2018
	Trex Residential		Trex Commercial		Total
Net income	$	42,115	$	704	$	42,819
Interest expense, net		369		—		369
Income tax expense		14,178		235		14,413
Depreciation and amortization		3,277		1,289		4,566

EBITDA	$	59,939	$	2,228	$	62,167

	Six Months Ended June 30, 2018
	Trex Residential		Trex Commercial		Total
Net sales	$	344,401	$	33,498	$	377,899
Net income	$	79,694	$	236	$	79,930
EBITDA	$	111,773	$	2,882	$	114,655
Depreciation and amortization	$	6,731	$	2,568	$	9,299
Income tax expense	$	24,750	$	78	$	24,828
Capital expenditures	$	16,868	$	829	$	17,697
Total assets	$	334,289	$	80,156	$	414,445

Reconciliation of net income to EBITDA:


	Six Months Ended June 30, 2018
	Trex Residential		Trex Commercial		Total
Net income	$	79,694	$	236	$	79,930
Interest expense, net		598		—		598
Income tax expense		24,750		78		24,828
Depreciation and amortization		6,731		2,568		9,299

EBITDA	$	111,773	$	2,882	$	114,655