Segment Information

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment Information

16. SEGMENT INFORMATION

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 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.

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, income 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, income taxes, and depreciation and amortization charges to income. The below segment data for the three and six months ended June 30, 2020 and 2019 includes data for Trex Residential and Trex Commercial (in thousands):

Segment Data:

	Three Months Ended June 30, 2020						Three Months Ended June 30, 2019
	Trex Residential		Trex Commercial		Total		Trex Residential		Trex Commercial		Total
Net sales	$	208,877	$	11,771	$	220,648	$	193,468	$	12,985	$	206,453
Net income	$	45,912	$	1,306	$	47,218	$	35,223	$	487	$	35,710
EBITDA	$	65,495	$	1,964	$	67,459	$	50,353	$	785	$	51,138
Depreciation and amortization	$	3,865	$	198	$	4,063	$	3,258	$	141	$	3,399
Income tax expense	$	15,789	$	460	$	16,249	$	11,866	$	164	$	12,030
Capital expenditures	$	39,610	$	270	$	39,880	$	10,124	$	290	$	10,414
Total assets	$	577,684	$	93,306	$	670,990	$	447,725	$	88,473	$	536,198

Reconciliation of Net Income to EBITDA:

	Three Months Ended June 30, 2020								Three Months Ended June 30, 2019
	Trex Residential			Trex Commercial		Total			Trex Residential		Trex Commercial			Total
Net income	$	45,912		$	1,306	$	47,218		$	35,223	$	487		$	35,710
Interest (income) expense, net		(71	)		—		(71	)		6		(7	)		(1	)
Income tax expense		15,789			460		16,249			11,866		164			12,030
Depreciation and amortization		3,865			198		4,063			3,258		141			3,399
EBITDA	$	65,495		$	1,964	$	67,459		$	50,353	$	785		$	51,138

Segment Data:

	Six Months Ended June 30, 2020						Six Months Ended June 30, 2019
	Trex Residential		Trex Commercial		Total		Trex Residential		Trex Commercial		Total
Net sales	$	395,751	$	25,292	$	421,043	$	358,947	$	27,077	$	386,024
Net income	$	86,932	$	2,688	$	89,620	$	66,478	$	787	$	67,265
EBITDA	$	122,445	$	4,001	$	126,446	$	92,419	$	1,312	$	93,731
Depreciation and amortization	$	7,529	$	386	$	7,915	$	6,525	$	268	$	6,793
Income tax expense	$	28,577	$	927	$	29,504	$	19,466	$	264	$	19,730
Capital expenditures	$	62,026	$	587	$	62,613	$	17,818	$	1,243	$	19,061
Total assets	$	577,684	$	93,306	$	670,990	$	447,725	$	88,473	$	536,198

Reconciliation of Net Income to EBITDA:

	Six Months Ended June 30, 2020								Six Months Ended June 30, 2019
	Trex Residential			Trex Commercial		Total			Trex Residential			Trex Commercial			Total
Net income	$	86,932		$	2,688	$	89,620		$	66,478		$	787		$	67,265
Interest income, net		(593	)		—		(593	)		(50	)		(7	)		(57	)
Income tax expense		28,577			927		29,504			19,466			264			19,730
Depreciation and amortization		7,529			386		7,915			6,525			268			6,793
EBITDA	$	122,445		$	4,001	$	126,446		$	92,419		$	1,312		$	93,731