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 $541.7 million and $491.4 million in the nine months ended September 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 $38.9 million and $52.9 million in the nine months ended September 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 nine months ended September 30, 2019 and 2018 includes data for Trex Residential and Trex Commercial (in thousands):

Segment Data:


	Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
	Trex Residential		Trex Commercial		Total		Trex Residential		Trex Commercial		Total
Net sales	$	182,775	$	11,776	$	194,551	$	146,998	$	19,382	$	166,380
Net income	$	41,381	$	595	$	41,976	$	27,755	$	1,716	$	29,471
EBITDA	$	57,639	$	970	$	58,609	$	40,067	$	2,780	$	42,847
Depreciation and amortization	$	3,422	$	165	$	3,587	$	3,275	$	494	$	3,769
Income tax expense	$	13,580	$	210	$	13,790	$	9,259	$	570	$	9,829
Capital expenditures	$	17,766	$	99	$	17,865	$	3,693	$	221	$	3,914
Total assets	$	482,825	$	87,945	$	570,770	$	352,014	$	82,895	$	434,909

Reconciliation of Net Income to EBITDA:


	Three Months Ended September 30, 2019								Three Months Ended September 30, 2018
	Trex Residential			Trex Commercial		Total			Trex Residential			Trex Commercial		Total
Net income	$	41,381		$	595	$	41,976		$	27,755		$	1,716	$	29,471
Interest income, net		(744	)		—		(744	)		(222	)		—		(222	)
Income tax expense		13,580			210		13,790			9,259			570		9,829
Depreciation and amortization		3,422			165		3,587			3,275			494		3,769

EBITDA	$	57,639		$	970	$	58,609		$	40,067		$	2,780	$	42,847

Segment Data:


	Nine Months Ended September 30, 2019						Nine Months Ended September 30, 2018
	Trex Residential		Trex Commercial		Total		Trex Residential		Trex Commercial		Total
Net sales	$	541,722	$	38,853	$	580,575	$	491,399	$	52,880	$	544,279
Net income	$	107,859	$	1,382	$	109,241	$	107,449	$	1,952	$	109,401
EBITDA	$	150,058	$	2,282	$	152,340	$	151,839	$	5,663	$	157,502
Depreciation and amortization	$	9,947	$	433	$	10,380	$	10,004	$	3,063	$	13,067
Income tax expense	$	33,046	$	474	$	33,520	$	34,009	$	648	$	34,657
Capital expenditures	$	35,584	$	1,342	$	36,926	$	14,274	$	1,050	$	15,324
Total assets	$	482,825	$	87,945	$	570,770	$	352,014	$	82,895	$	434,909

Reconciliation of Net Income to EBITDA:


	Nine Months Ended September 30, 2019									Nine Months Ended September 30, 2018
	Trex Residential			Trex Commercial			Total			Trex Residential		Trex Commercial		Total
Net income	$	107,859		$	1,382		$	109,241		$	107,449	$	1,952	$	109,401
Interest (income) expense, net		(794	)		(7	)		(801	)		377		—		377
Income tax expense		33,046			474			33,520			34,009		648		34,657
Depreciation and amortization		9,947			433			10,380			10,004		3,063		13,067

EBITDA	$	150,058		$	2,282		$	152,340		$	151,839	$	5,663	$	157,502