Segment Information

9 Months Ended

Sep. 30, 2021

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 months and nine months ended September 30, 2021 and September 30, 2020 includes data for Trex Residential and Trex Commercial (in thousands):

Segment Data:

	Three Months Ended September 30, 2021						Three Months Ended September 30, 2020
	Trex Residential		Trex Commercial		Total		Trex Residential		Trex Commercial		Total
Net sales	$	319,207	$	16,665	$	335,872	$	218,435	$	13,067	$	231,502
Net income	$	72,603	$	1,192	$	73,795	$	42,225	$	485	$	42,710
EBITDA	$	106,135	$	1,862	$	107,997	$	60,619	$	853	$	61,472
Depreciation and amortization	$	9,643	$	258	$	9,901	$	4,326	$	209	$	4,535
Income tax expense	$	23,899	$	412	$	24,311	$	14,276	$	159	$	14,435
Capital expenditures	$	29,554	$	66	$	29,620	$	36,887	$	197	$	37,084
Total assets	$	858,330	$	95,121	$	953,451	$	624,904	$	93,331	$	718,235

Reconciliation of Net Income to EBITDA:

	Three Months Ended September 30, 2021								Three Months Ended September 30, 2020
	Trex Residential			Trex Commercial		Total			Trex Residential			Trex Commercial		Total
Net income	$	72,603		$	1,192	$	73,795		$	42,225		$	485	$	42,710
Interest income, net		(10	)		—		(10	)		(208	)		—		(208	)
Income tax expense		23,899			412		24,311			14,276			159		14,435
Depreciation and amortization		9,643			258		9,901			4,326			209		4,535
EBITDA	$	106,135		$	1,862	$	107,997		$	60,619		$	853	$	61,472

Segment Data:

	Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
	Trex Residential		Trex Commercial		Total		Trex Residential		Trex Commercial		Total
Net sales	$	850,909	$	42,082	$	892,991	$	614,187	$	38,358	$	652,545
Net income	$	182,437	$	1,268	$	183,705	$	129,157	$	3,174	$	132,331
EBITDA	$	268,107	$	2,437	$	270,544	$	183,064	$	4,854	$	187,918
Depreciation and amortization	$	24,873	$	731	$	25,604	$	11,855	$	595	$	12,450
Income tax expense	$	60,797	$	438	$	61,235	$	42,853	$	1,085	$	43,938
Capital expenditures	$	122,631	$	1,820	$	124,451	$	98,913	$	783	$	99,696
Total assets	$	858,330	$	95,121	$	953,451	$	624,904	$	93,331	$	718,235

Reconciliation of Net Income to EBITDA:

	Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
	Trex Residential		Trex Commercial		Total		Trex Residential			Trex Commercial		Total
Net income	$	182,437	$	1,268	$	183,705	$	129,157		$	3,174	$	132,331
Interest income, net		—		—		—		(801	)		—		(801	)
Income tax expense		60,797		438		61,235		42,853			1,085		43,938
Depreciation and amortization		24,873		731		25,604		11,855			595		12,450
EBITDA	$	268,107	$	2,437	$	270,544	$	183,064		$	4,854	$	187,918