Segment Information

9 Months Ended

Sep. 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 nine months ended September 30, 2020 and 2019 includes data for Trex Residential and Trex Commercial (in thousands):

Segment Data:

	Three Months Ended September 30, 2020						Three Months Ended September 30, 2019
	Trex Residential		Trex Commercial		Total		Trex Residential		Trex Commercial		Total
Net sales	$	218,435	$	13,067	$	231,502	$	182,775	$	11,776	$	194,551
Net income	$	42,225	$	485	$	42,710	$	41,381	$	595	$	41,976
EBITDA	$	60,619	$	853	$	61,472	$	57,639	$	970	$	58,609
Depreciation and amortization	$	4,326	$	209	$	4,535	$	3,422	$	165	$	3,587
Income tax expense	$	14,276	$	159	$	14,435	$	13,580	$	210	$	13,790
Capital expenditures	$	36,887	$	197	$	37,084	$	17,766	$	99	$	17,865
Total assets	$	624,904	$	93,331	$	718,235	$	482,825	$	87,945	$	570,770

Reconciliation of Net Income to EBITDA:

	Three Months Ended September 30, 2020								Three Months Ended September 30, 2019
	Trex Residential			Trex Commercial		Total			Trex Residential			Trex Commercial		Total
Net income	$	42,225		$	485	$	42,710		$	41,381		$	595	$	41,976
Interest income, net		(208	)		—		(208	)		(744	)		—		(744	)
Income tax expense		14,276			159		14,435			13,580			210		13,790
Depreciation and amortization		4,326			209		4,535			3,422			165		3,587
EBITDA	$	60,619		$	853	$	61,472		$	57,639		$	970	$	58,609

Segment Data:

	Nine Months Ended September 30, 2020						Nine Months Ended September 30, 2019
	Trex Residential		Trex Commercial		Total		Trex Residential		Trex Commercial		Total
Net sales	$	614,187	$	38,358	$	652,545	$	541,722	$	38,853	$	580,575
Net income	$	129,157	$	3,174	$	132,331	$	107,859	$	1,382	$	109,241
EBITDA	$	183,064	$	4,854	$	187,918	$	150,058	$	2,282	$	152,340
Depreciation and amortization	$	11,855	$	595	$	12,450	$	9,947	$	433	$	10,380
Income tax expense	$	42,853	$	1,085	$	43,938	$	33,046	$	474	$	33,520
Capital expenditures	$	98,913	$	783	$	99,696	$	35,584	$	1,342	$	36,926
Total assets	$	624,904	$	93,331	$	718,235	$	482,825	$	87,945	$	570,770

Reconciliation of Net Income to EBITDA:

	Nine Months Ended September 30, 2020								Nine Months Ended September 30, 2019
	Trex Residential			Trex Commercial		Total			Trex Residential			Trex Commercial			Total
Net income	$	129,157		$	3,174	$	132,331		$	107,859		$	1,382		$	109,241
Interest income, net		(801	)		—		(801	)		(794	)		(7	)		(801	)
Income tax expense		42,853			1,085		43,938			33,046			474			33,520
Depreciation and amortization		11,855			595		12,450			9,947			433			10,380
EBITDA	$	183,064		$	4,854	$	187,918		$	150,058		$	2,282		$	152,340