10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-14649

Trex Company, Inc.

(Exact name of registrant as specified in its charter)

Delaware	54-1910453
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
160 Exeter Drive Winchester, Virginia	22603-8605
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (540) 542-6300

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	TREX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act):    Yes  ☐    No  ☒

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding at July 22, 2022 was 110,263,432 shares.

TREX COMPANY, INC.

INDEX

		Page
PART I FINANCIAL INFORMATION			2
Item 1.	Condensed Consolidated Financial Statements		2
	Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2022 and June 30, 2021 (unaudited)		2
	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (unaudited)		3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2022 and June 30, 2021 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and June 30, 2021 (unaudited)		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		28
Item 4.	Controls and Procedures		28
PART II OTHER INFORMATION			29
Item 1.	Legal Proceedings		29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 5.	Other Information		29
Item 6.	Exhibits		30

1

PART I

FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

TREX COMPANY, INC.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands, except share and per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net sales	$	386,249		$	311,596		$	725,477		$	557,120
Cost of sales		228,872			193,323			433,188			343,046
Gross profit		157,377			118,273			292,289			214,074
Selling, general and administrative expenses		39,568			36,899			79,529			68,949
Gain on insurance proceeds		—			(983	)		—			(1,720	)
Income from operations		117,809			82,357			212,760			146,845
Interest (income) expense, net		(116	)		13			(104	)		10
Income before income taxes		117,925			82,344			212,864			146,835
Provision for income taxes		29,009			20,978			52,737			36,925
Net income	$	88,916		$	61,366		$	160,127		$	109,910
Basic earnings per common share	$	0.79		$	0.53		$	1.41		$	0.95
Basic weighted average common shares outstanding		113,099,561			115,362,757			113,864,741			115,512,231
Diluted earnings per common share	$	0.79		$	0.53		$	1.40		$	0.95
Diluted weighted average common shares outstanding		113,259,514			115,662,626			114,052,447			115,839,183
Comprehensive income	$	88,916		$	61,366		$	160,127		$	109,910

See Notes to Condensed Consolidated Financial Statements (Unaudited).

2

TREX COMPANY, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	June 30, 2022			December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	16,648		$	141,053
Accounts receivable, net		178,084			151,096
Inventories		100,872			83,753
Prepaid expenses and other assets		23,645			25,152
Total current assets		319,249			401,054
Property, plant and equipment, net		505,395			460,365
Operating lease assets		36,250			34,571
Goodwill and other intangible assets, net		18,791			19,001
Other assets		7,609			5,330
Total assets	$	887,294		$	920,321
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	57,825		$	24,861
Accrued expenses and other liabilities		74,698			58,041
Accrued warranty		6,300			5,800
Total current liabilities		138,823			88,702
Deferred income taxes		43,967			43,967
Operating lease liabilities		29,239			28,263
Non-current accrued warranty		22,230			22,795
Other long-term liabilities		11,560			11,560
Total liabilities		245,819			195,287
Commitments and contingencies		—			—
Stockholders’ equity:
Preferred stock, $0.01 par value, 3,000,000 shares authorized; none issued and outstanding		—			—
Common stock, $0.01 par value, 360,000,000 shares authorized; 140,798,762 and 140,734,753 shares issued and 111,563,381 and 115,148,152 shares outstanding at June 30, 2022 and December 31, 2021, respectively		1,408			1,407
Additional paid-in capital		129,109			127,787
Retained earnings		1,106,175			946,048
Treasury stock, at cost, 29,235,381 and 25,586,601 shares at June 30, 2022 and December 31, 2021, respectively		(595,217	)		(350,208	)
Total stockholders’ equity		641,475			725,034
Total liabilities and stockholders’ equity	$	887,294		$	920,321

See Notes to Condensed Consolidated Financial Statements (Unaudited).

3

TREX COMPANY, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

(In thousands, except share data)

	Common Stock					Additional Paid-In Capital			Retained Earnings		Treasury Stock					Total
	Shares			Amount							Shares		Amount
Balance, December 31, 2021		115,148,152		$	1,407	$	127,787		$	946,048		25,586,601	$	(350,208	)	$	725,034
Net income		—			—		—			71,211		—		—			71,211
Employee stock plans		9,081			—		523			—		—		—			523
Shares withheld for taxes on awards		(35,856	)		—		(2,912	)		—		—		—			(2,912	)
Stock-based compensation		79,926			1		2,225			—		—		—			2,226
Repurchases of common stock		(833,963	)		—		—			—		833,963		(75,017	)		(75,017	)
Balance, March 31, 2022		114,367,340		$	1,408	$	127,623		$	1,017,259		26,420,564	$	(425,225	)	$	721,065
Net income		—			—		—			88,916		—		—			88,916
Employee stock plans		8,834			—		429			—		—		—			429
Stock-based compensation		2,024			—		1,057			—		—		—			1,057
Repurchases of common stock		(2,814,817	)		—		—			—		2,814,817		(169,992	)		(169,992	)
Balance, June 30, 2022		111,563,381		$	1,408	$	129,109		$	1,106,175		29,235,381	$	(595,217	)	$	641,475

	Common Stock					Additional Paid-In Capital			Retained Earnings		Treasury Stock					Total
	Shares			Amount							Shares		Amount
Balance, December 31, 2020		115,799,503		$	1,406	$	126,087		$	737,311		24,777,502	$	(276,273	)	$	588,531
Net income		—			—		—			48,545		—		—			48,545
Employee stock plans		28,286			—		460			—		—		—			460
Shares withheld for taxes on awards		(38,212	)		—		(4,045	)		—		—		—			(4,045	)
Stock-based compensation		76,094			—		2,176			—		—		—			2,176
Repurchases of common stock		(504,275	)		—		—			—		504,275		(45,523	)		(45,523	)
Balance, March 31, 2021		115,361,396		$	1,406	$	124,678		$	785,855		25,281,777	$	(321,796	)	$	590,143
Net income		—			—		—			61,366		—		—			61,366
Employee stock plans		20,341			—		400			—		—		—			400
Shares withheld for taxes on awards		(13,491	)		—		(1,446	)		—		—		—			(1,446	)
Stock-based compensation		17,210			1		2,132			—		—		—			2,133
Repurchases of common stock		(40,751	)		—		—			—		40,751		(3,820	)		(3,820	)
Balance, June 30, 2021		115,344,705		$	1,407	$	125,764		$	847,221		25,322,528	$	(325,616	)	$	648,776

See Notes to Condensed Consolidated Financial Statements (Unaudited).

4

TREX COMPANY, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Six Months Ended June 30,
	2022			2021
Operating Activities
Net income	$	160,127		$	109,910
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		21,804			15,702
Stock-based compensation		3,282			4,308
Gain on disposal of property, plant and equipment		(43	)		(1,083	)
Other non-cash adjustments		(365	)		(226	)
Changes in operating assets and liabilities:
Accounts receivable		(26,988	)		(157,117	)
Inventories		(17,119	)		(8,994	)
Prepaid expenses and other assets		949			(6,878	)
Accounts payable		32,943			14,907
Accrued expenses and other liabilities		13,175			10,763
Income taxes receivable/payable		2,227			466
Net cash provided by (used in) operating activities		189,992			(18,242	)
Investing Activities
Expenditures for property, plant and equipment		(66,606	)		(94,831	)
Proceeds from sales of property, plant and equipment		45			1,314
Net cash used in investing activities		(66,561	)		(93,517	)
Financing Activities
Borrowings under line of credit		—			286,000
Principal payments under line of credit		—			(236,500	)
Repurchases of common stock		(247,921	)		(54,832	)
Proceeds from employee stock purchase and option plans		951			860
Financing costs		(866	)		—
Net cash used in financing activities		(247,836	)		(4,472	)
Net decrease in cash and cash equivalents		(124,405	)		(116,231	)
Cash and cash equivalents, beginning of period		141,053			121,701
Cash and cash equivalents, end of period	$	16,648		$	5,470
Supplemental Disclosure:
Cash paid for interest, net of capitalized interest	$	—		$	—
Cash paid for income taxes, net	$	48,915		$	36,457

See Notes to Condensed Consolidated Financial Statements (Unaudited).

5

TREX COMPANY, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2022 and 2021

(Unaudited)

1. BUSINESS AND ORGANIZATION

Trex Company, Inc. (Trex), a Delaware corporation, was incorporated on September 4, 1998. Together, Trex and its wholly-owned subsidiary, Trex Commercial Products, Inc., are referred to as the Company. The Company operates in two reportable segments, Trex Residential Products (Trex Residential) and Trex Commercial Products (Trex Commercial). Trex Residential, the Company’s principal business based on net sales, is the world’s largest manufacturer of high-performance, low-maintenance wood-alternative decking and residential railing and outdoor living products and accessories, marketed under the brand name Trex®, with more than 30 years of product experience. A majority of its products are manufactured in a proprietary process that combines reclaimed wood fibers and scrap polyethylene. Also, the Company is a leading national provider of custom-engineered railing and staging systems for the commercial and multi-family market, including sports stadiums and performing arts venues. The principal executive offices are located at 160 Exeter Drive, Winchester, Virginia 22603, and the telephone number at that address is (540) 542-6300.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments, except as otherwise described herein) considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company for all periods presented. Intercompany accounts and transactions have been eliminated in consolidation.

The unaudited consolidated results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. The Company’s results of operations are affected by a number of factors, including, but not limited to, the cost to manufacture and distribute products, cost of raw materials, inflation, consumer spending and preferences, interest rates, the impact of any supply chain disruptions, economic conditions, and/or any adverse effects from the COVID-19 pandemic and geopolitical conflicts.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2021 and 2020 and for each of the three years in the period ended December 31, 2021 included in the Annual Report of Trex Company, Inc. on Form 10-K, as filed with the U.S. Securities and Exchange Commission.

3. RECENTLY ADOPTED ACCOUNTING STANDARDS

In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”. The guidance requires business entities to make annual disclosures about transactions with a government they account for by analogizing to a grant or contribution accounting model, such as IAS 20, ASC 958-605. The annual disclosure requirements include: the nature of the transactions, the entities related accounting policy used, the line items on the balance sheet and income statement that are affected and the amounts applicable to each financial statement line item, and significant terms and conditions of the transactions. The disclosure requirements could be applied either prospectively to all transactions in the scope of the amendments that are reflected in the financial statements at the date of initial application and new transactions that are entered into after the date of initial application, or retrospectively. The guidance was effective for fiscal years beginning after December 15, 2021, with early application permitted. Adoption of the guidance did not have a material effect on the Company’s consolidated financial statements.

6

4. NEW ACCOUNTING STANDARDS NOT YET ADOPTED

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. The guidance provides temporary optional expedients and exceptions related to contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates. The new guidance allows entities to elect not to apply certain modification accounting requirements, if certain criteria are met, to contracts affected by what the guidance calls reference rate reform. An entity that makes this election would consider changes in reference rates and other contract modifications related to reference rate reform to be events that do not require contract remeasurement at the modification date or reassessment of a previous accounting determination. The ASU notes that changes in contract terms that are made to effect the reference rate reform transition are considered related to the replacement of a reference rate if they are not the result of a business decision that is separate from or in addition to changes to the terms of a contract to effect that transition. The guidance is effective upon issuance and generally can be applied as of March 12, 2020 through December 31, 2022. The Company does not expect adoption of the guidance to have a material effect on its consolidated financial statements.

5. INVENTORIES

Inventories valued at LIFO (last-in, first-out), consist of the following (in thousands):

	June 30, 2022			December 31, 2021
Finished goods	$	62,271		$	58,401
Raw materials		67,857			56,441
Total FIFO (first-in, first-out) inventories		130,128			114,842
Reserve to adjust inventories to LIFO value		(36,467	)		(36,467	)
Total LIFO inventories	$	93,661		$	78,375

The Company utilizes the LIFO method of accounting related to its Trex Residential wood-alternative decking and residential railing products, which generally provides for the matching of current costs with current revenues. However, under the LIFO method, reductions in annual inventory balances cause a portion of the Company’s cost of sales to be based on historical costs rather than current year costs (LIFO liquidation). Reductions in interim inventory balances expected to be replenished by year-end do not result in a LIFO liquidation. Accordingly, interim LIFO calculations are based, in part, on management’s estimates of expected year-end inventory levels and costs, which may differ from actual results. Since inventory levels and costs are subject to factors beyond management’s control, interim results are subject to the final year-end LIFO inventory valuation. There were no LIFO inventory liquidations or related impact on cost of sales in the six months ended June 30, 2022.

Inventories valued at lower of cost (FIFO method) and net realizable value were $7.2 million at, June 30, 2022 and $5.4 million at December 31, 2021, consisting primarily of raw materials. The Company utilizes the FIFO method of accounting related to its Trex Commercial products.

6. PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consist of the following (in thousands):

	June 30, 2022		December 31, 2021
Prepaid expenses	$	14,373	$	15,061
Revenues in excess of billings		7,905		9,109
Income tax receivable		894		406
Other		473		576
Total prepaid expenses and other assets	$	23,645	$	25,152

7. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

The carrying amount of goodwill by reportable segment at June 30, 2022 and December 31, 2021 was $14.2 million for Trex Residential. The Company’s intangible assets consist of domain names. At June 30, 2022 and December 31, 2021, intangible assets were $6.3 million and accumulated amortization was $1.7 million and $1.5 million, respectively. Intangible asset amounts were determined based on the estimated economics of the asset and are amortized over the estimated useful lives on a straight-line basis over 15 years, which approximates the pattern in which the economic benefits are expected to be received. The Company evaluates the recoverability of intangible assets periodically and considers events or circumstances that may warrant revised estimates of useful lives or that may indicate an impairment. Intangible asset amortization expense for the six months ended June 30, 2022 and June 30, 2021 was $0.2 million and $0.2 million, respectively.

7

8. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following (in thousands):

	June 30, 2022		December 31, 2021
Sales and marketing	$	38,945	$	16,439
Compensation and benefits		15,741		25,450
Operating lease liabilities		7,646		7,066
Manufacturing costs		3,923		4,110
Income taxes		2,715		—
Billings in excess of revenues		1,535		1,436
Other		4,193		3,540
Total accrued expenses and other liabilities	$	74,698	$	58,041

9. DEBT

Revolving Credit Facility

Indebtedness on and after May 18, 2022. On May 18, 2022, the Company, as borrower; Trex Commercial Products, Inc. (TCP), as guarantor; Bank of America, N.A. (BOA), as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; Wells Fargo Bank, National Association (Wells Fargo), as lender and Syndication Agent; Regions Bank, PNC Bank, National Association, and TD Bank, N.A. (each, a Lender and collectively, the Lenders), arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner, entered into a Credit Agreement (Credit Agreement) to amend and restate the Fourth Amended and Restated Credit Agreement dated as of November 5, 2019.

Under the Credit Agreement, the Lenders agreed to provide the Company with one or more Revolving Loans in a collective maximum principal amount of $400,000,000 (Loan Limit) throughout the term, which ends May 18, 2027 (Term). Included within the Loan Limit are sublimits for a Letter of Credit facility in an amount not to exceed $60,000,000; and Swing Line Loans in an aggregate principal amount at any time outstanding not to exceed $20,000,000. The Revolving Loans, the Letter of Credit facility and the Swing Line Loans are for the purpose of raising working capital and supporting general business operations.

The Facility provides the Company, in the aggregate, the ability to borrow an amount up to the Loan Limit during the Term. The Company is not obligated to borrow any amount under the Loan Limit. Within the Loan Limit, the Company may borrow, repay and reborrow at any time or from time to time while the Notes are in effect. Base Rate Loans (as defined in the Credit Agreement) under the Revolving Loans and the Swing Line Loans accrue interest at the Base Rate plus the Applicable Rate (as defined in the Credit Agreement) and Term SOFR Loans for the Revolving Loans accrue interest at the rate per annum equal to the sum of Term SOFR for such interest period plus the Applicable Rate (as defined in the Credit Agreement). The Base Rate for any day is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by BOA as its prime rate, and (c) the Term SOFR plus 1.0% subject to certain interest rate floors. Repayment of all then outstanding principal, interest, fees and costs is due at the end of the Term.

The Company and BofA Securities, Inc. as a sustainability coordinator, are entitled to establish specified key performance indicators (KPIs) with respect to certain environmental, social and governance targets of the Company and its subsidiaries. The sustainability coordinator and the Company may amend the Credit Agreement for the purpose of incorporating the KPIs and other related provisions, unless the Lenders object to such amendment on or prior to the date that is ten business days after the date on which such amendment is posted for review by the Lenders. Based on the performance of the Company and its subsidiaries against the KPIs, certain adjustments (increase, decrease or no adjustment) to otherwise applicable pricing will be made; provided that the amount of such adjustments shall not exceed certain aggregate caps as in the definitive loan documentation.

Under the terms of the Security and Pledge Agreement, the Company and TCP, subject to certain permitted encumbrances, as collateral security for the above-stated loans and all other present and future indebtedness of the Company owing to the Lenders grants to BOA, as Administrative Agent for the Lenders, a continuing security interest in certain collateral described and defined in the Security and Pledge Agreement but excluding the Excluded Property (as defined in the Security and Pledge Agreement).

8

Indebtedness prior to May 18, 2022. On November 5, 2019, the Company entered into a Fourth Amended and Restated Credit Agreement (Fourth Amended Credit Agreement) as borrower, Trex Commercial Products, Inc., as guarantor; Bank of America, N.A. as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; and certain other lenders including Wells Fargo Bank, N.A., who is also Syndication Agent, and Truist Bank, arranged by BOA Securities, Inc., as Sole Lead Arranger and Sole Bookrunner, to amend and restate the Third Amended and Restated Credit Agreement (Third Amended Credit Agreement), dated as of January 12, 2016, as amended. The Fourth Amended Credit Agreement provides the Company with one or more Revolving Loans in a collective maximum principal amount of $250 million from January 1 through June 30 of each year and a maximum principal amount of $200 million from July 1 through December 31 of each year throughout the term, which ends November 5, 2024.

On May 26, 2020, the Company entered into a First Amendment to the Original Credit Agreement (the First Amendment) to provide for an additional $100 million line of credit through May 26, 2022. As a matter of convenience, the parties incorporated the amendments to the Original Credit Agreement made by the First Amendment into a new Fourth Amended and Restated Credit Agreement (New Credit Agreement). In the New Credit Agreement, the revolving commitments under the Original Credit Agreement are referred to as Revolving A Commitments and the new $100 million line of credit is referred to as Revolving B Commitments. In the New Credit Agreement, all of the material terms and conditions related to the original line of credit (Revolving A Commitments) remained unchanged from the Original Credit Agreement.

The Company’s revolving credit facility executed November 5, 2019 was completely replaced by the Company’s revolving credit facility executed May 18, 2022. The Company had no outstanding borrowings under its revolving credit facility and available borrowing capacity of $400 million at June 30, 2022.

Compliance with Debt Covenants and Restrictions

Pursuant to the terms of the Credit Agreement, the Company is subject to certain loan compliance covenants. The Company was in compliance with all covenants as of June 30, 2022. Failure to comply with the financial covenants could be considered a default of repayment obligations and, among other remedies, could accelerate payment of any amounts outstanding.

10. LEASES

The Company leases office space, storage warehouses and certain plant equipment under various operating leases. The Company’s operating leases have remaining lease terms of less than 1 year to 7 years. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

For the six months ended June 30, 2022 and June 30, 2021, total operating lease expense was $4.2 million and $4.1 million, respectively. The weighted average remaining lease term at June 30, 2022 and December 31, 2021 was 5.7 years and 5.8 years, respectively. The weighted average discount rate at June 30, 2022 and December 31, 2021 was 2.18% and 2.47%, respectively.

The following table includes supplemental cash flow information for the six months ended June 30, 2022 and June 30, 2021 and supplemental balance sheet information at June 30, 2022 and December 31, 2021 related to operating leases (in thousands):

9

	Six Months Ended June 30,
Supplemental cash flow information	2022		2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,334	$	4,131
Operating ROU assets obtained in exchange for lease liabilities	$	6,714	$	7,047

Supplemental balance sheet information	June 30, 2022		December 31, 2021
Operating lease ROU assets	$	36,250	$	34,571
Operating lease liabilities:
Accrued expenses and other current liabilities	$	7,646	$	7,066
Operating lease liabilities		29,239		28,263
Total operating lease liabilities	$	36,885	$	35,329

The following table summarizes maturities of operating lease liabilities at June 30, 2022 (in thousands):

Maturities of operating lease liabilities
2022	$	4,273
2023		7,612
2024		6,799
2025		5,463
2026		4,886
Thereafter		10,156
Total lease payments		39,189
Less imputed interest		(2,304	)
Total operating lease liabilities	$	36,885

11. FINANCIAL INSTRUMENTS

The Company considers the recorded value of its financial assets and liabilities, consisting primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, other current liabilities, and debt to approximate the fair value of the respective assets and liabilities on the Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021.

12. STOCKHOLDERS’ EQUITY

Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except share and per share data):​​​​​​​​​​​​​​

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Numerator:
Net income available to common shareholders	$	88,916	$	61,366	$	160,127	$	109,910
Denominator:
Basic weighted average shares outstanding		113,099,561		115,362,757		113,864,741		115,512,231
Effect of dilutive securities:
Stock appreciation rights and options		96,179		193,466		110,253		200,263
Restricted stock		63,774		106,403		77,453		126,689
Diluted weighted average shares outstanding		113,259,514		115,662,626		114,052,447		115,839,183
Basic earnings per share	$	0.79	$	0.53	$	1.41	$	0.95
Diluted earnings per share	$	0.79	$	0.53	$	1.40	$	0.95

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Diluted earnings per share is computed using the weighted average number of shares determined for the basic earnings per share computation plus the dilutive effect of common stock equivalents using the treasury stock method. The computation of diluted earnings per share excludes the following potentially dilutive securities because the effect would be anti-dilutive:​​​​​​​

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Stock appreciation rights		47,303		15,029		38,789		11,105
Restricted stock		63,131		—		38,823		11,540

Stock Repurchase Program

On February 16, 2018, the Trex Board of Directors adopted a stock repurchase program of up to 11.6 million shares of its outstanding common stock (Stock Repurchase Program). As of June 30, 2022, Trex has repurchased 7.3 million shares of its outstanding common stock under the Stock Repurchase Program.

First Certificate of Amendment to the Restated Certificate of Incorporation

At the annual meeting of stockholders of Trex held on May 5, 2022, its stockholders approved an amendment of the Trex Restated Certificate of Incorporation (Amendment), effective as of May 5, 2022. The Board of Directors of Trex unanimously approved the Amendment on February 23, 2022, subject to stockholder approval. The Amendment increases the number of shares of common stock, par value $.01 per share, that Trex is authorized to issue from 180 million shares to 360 million shares. The Amendment was filed with the Delaware Secretary of State on May 5, 2022.

13. REVENUE FROM CONTRACTS WITH CUSTOMERS

Trex Residential Products

Trex Residential principally generates revenue from the manufacture and sale of its high-performance, low-maintenance, eco-friendly wood-alternative composite decking and residential railing products and accessories. Substantially all of its revenues are from contracts with customers, which are purchase orders of short-term duration of less than one year. Its customers, in turn, sell primarily to the residential market, which includes replacement, remodeling and new construction related to outdoor living products. Trex Residential satisfies its performance obligations at a point in time. The shipment of each product is a separate performance obligation as the customer is able to derive benefit from each product shipped and no performance obligation remains after shipment. Upon shipment of the product, the customer obtains control over the distinct product and Trex Residential satisfies its performance obligation. Any performance obligation that remains unsatisfied at the end of a reporting period is part of a contract that has an original expected duration of one year or less. Any variable consideration related to the unsatisfied performance obligation is allocated wholly to the unsatisfied performance obligation, is recognized when the product ships and the performance obligation is satisfied and is included in “Accrued expenses and other liabilities, Sales and marketing” in Note 8 to the Condensed Consolidated Financial Statements.

Trex Commercial Products

Trex Commercial generates revenue from the manufacture and sale of its modular and architectural railing and staging systems. All of its revenues are from fixed-price contracts with customers. Trex Commercial contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and is, therefore, not distinct. The transaction price allocated to remaining performance obligations on contracts with an original duration greater than one year was $36 million as of June 30, 2022. The Company will recognize this revenue as contracts are completed, which is expected to occur within the next 24 months.

For the three months and six months ended June 30, 2022 and June 30, 2021, net sales were disaggregated in the following tables by (1) market, (2) timing of revenue recognition, and (3) type of contract. The tables also include a reconciliation of the respective disaggregated net sales with the Company’s reportable segments (in thousands).​​​​​​​

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Three Months Ended June 30, 2022	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	373,922	$	—	$	373,922
Products transferred over time and fixed price contracts		—		12,327		12,327
	$	373,922	$	12,327	$	386,249

Three Months Ended June 30, 2021	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	298,632	$	—	$	298,632
Products transferred over time and fixed price contracts		—		12,964		12,964
	$	298,632	$	12,964	$	311,596

Six Months Ended June 30, 2022	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	701,117	$	—	$	701,117
Products transferred over time and fixed price contracts		—		24,360		24,360
	$	701,117	$	24,360	$	725,477

Six Months Ended June 30, 2021	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	531,702	$	—	$	531,702
Products transferred over time and fixed price contracts		—		25,418		25,418
	$	531,702	$	25,418	$	557,120

14. STOCK-BASED COMPENSATION

The Company has one stock-based compensation plan, the 2014 Stock Incentive Plan (Plan), approved by Trex stockholders in April 2014. The Plan amended and restated in its entirety the Trex Company, Inc. 2005 Stock Incentive Plan. The Plan is administered by the Compensation Committee of the Trex Board of Directors. Stock-based compensation is granted to officers, directors and certain key employees in accordance with the provisions of the Plan. The Plan provides for grants of stock options, restricted stock, restricted stock units, stock appreciation rights (SARs), and unrestricted stock. The total aggregate number of shares of Trex common stock that may be issued under the Plan is 25,680,000 and as of June 30, 2022, the total number of shares available for future issuance is 11,070,560.​​​​​​​

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The following table summarizes the Company’s stock-based compensation grants for the six months ended June 30, 2022:

	Stock Awards Granted		Weighted-Average Grant Price Per Share
Time-based restricted stock units		39,001	$	81.85
Performance-based restricted stock units (a)		72,152	$	76.14
Stock appreciation rights		32,971	$	82.01

(a) Includes 47,072 of target performance-based restricted stock unit awards granted during the six months ended June 30, 2022, and adjustments of 8,160, 11,684, and 5,236 to grants due to the actual performance level achieved for restricted stock and restricted stock units awarded in 2021, 2020, and 2019, respectively.

The fair value of each SAR is estimated on the date of grant using a Black-Scholes option-pricing formula. For SARs issued in the six months ended June 30, 2022 and June 30, 2021 the data and assumptions shown in the following table were used:

	Six Months Ended June 30, 2022			Six Months Ended June 30, 2021
Weighted-average fair value of grants	$	33.9		$	51.84
Dividend yield		0	%		0	%
Average risk-free interest rate		1.9	%		0.6	%
Expected term (years)		5			5
Expected volatility		44.9	%		58.7	%

The Company recognizes stock-based compensation expense ratably over the period from the grant date to the earlier of: (1) the vesting date of the award, or (2) the date the grantee is eligible to retire without forfeiting the award. For performance-based restricted stock and performance-based restricted stock units, expense is recognized ratably over the performance and vesting period of each tranche based on management’s judgment of the ultimate award that is likely to be paid out based on the achievement of the predetermined performance measures. For the employee stock purchase plan, compensation expense is recognized related to the discount on purchases. Stock-based compensation expense is included in “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Comprehensive Income. The following table summarizes the Company’s stock-based compensation expense (in thousands):​​​​​​​

	Three Months Ended June 30,					Six Months Ended June 30,
	2022			2021		2022		2021
Stock appreciation rights	$	196		$	144	$	350	$	258
Time-based restricted stock and restricted stock units		959			754		1,806		1,441
Performance-based restricted stock and restricted stock units		(151	)		1,165		1,007		2,440
Employee stock purchase plan		53			69		119		169
Total stock-based compensation	$	1,057		$	2,132	$	3,282	$	4,308

Total unrecognized compensation cost related to unvested awards as of June 30, 2022 was $10.4 million. The cost of these unvested awards is being recognized over the requisite vesting period of each award.

15. INCOME TAXES

The Company’s effective tax rate for the six months ended June 30, 2022 was 24.8% and was comparable to the effective tax rate for the six months ended June 30, 2021, of 25.1%, which resulted in income tax expense of $52.7 million and $36.9 million, respectively.

During the six months ended June 30, 2022 and June 30, 2021, the Company realized $0.1 million and $1.2 million, respectively, of excess tax benefits from stock-based awards and recorded a corresponding benefit to income tax expense.

The Company analyzes its deferred tax assets each reporting period, considering all available positive and negative evidence in determining the expected realization of those deferred tax assets. As of June 30, 2022, the Company maintains a valuation allowance of $2.2 million against deferred tax assets primarily related to state tax credits it estimates will expire before they are realized.

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The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxing authorities. Such examinations may result in future assessments by these taxing authorities, and the Company accrues a liability when it believes that it is more likely than not that benefits of tax positions will not be realized. The Company believes that adequate provisions have been made for all tax returns subject to examination. As of June 30, 2022, for certain tax jurisdictions tax years 2017 through 2021 remain subject to examination. The Company believes that adequate provisions have been made for all tax returns subject to examination. Sales made to foreign distributors are not taxable in any foreign jurisdiction as the Company does not have a taxable presence in any foreign jurisdiction.

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 six months ended June 30, 2022 and June 30, 2021 includes data for Trex Residential and Trex Commercial (in thousands):

Segment Data:

	Three Months Ended June 30, 2022							Three Months Ended June 30, 2021
	Trex Residential		Trex Commercial			Total		Trex Residential		Trex Commercial		Total
Net sales	$	373,922	$	12,327		$	386,249	$	298,632	$	12,964	$	311,596
Net income (loss)	$	89,437	$	(521	)	$	88,916	$	61,089	$	277	$	61,366
EBITDA	$	129,550	$	(410	)	$	129,140	$	91,008	$	627	$	91,635
Depreciation and amortization	$	11,049	$	282		$	11,331	$	9,020	$	258	$	9,278
Income tax expense (benefit)	$	29,180	$	(171	)	$	29,009	$	20,886	$	92	$	20,978
Capital expenditures	$	44,251	$	67		$	44,318	$	36,514	$	224	$	36,738
Total assets	$	846,112	$	41,182		$	887,294	$	807,713	$	91,107	$	898,820

Reconciliation of Net Income to EBITDA:

	Three Months Ended June 30, 2022									Three Months Ended June 30, 2021
	Trex Residential			Trex Commercial			Total			Trex Residential		Trex Commercial		Total
Net income (loss)	$	89,437		$	(521	)	$	88,916		$	61,089	$	277	$	61,366
Interest (income) expense, net		(116	)		—			(116	)		13		—		13
Income tax expense (benefit)		29,180			(171	)		29,009			20,886		92		20,978
Depreciation and amortization		11,049			282			11,331			9,020		258		9,278
EBITDA	$	129,550		$	(410	)	$	129,140		$	91,008	$	627	$	91,635

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Segment Data:

	Six Months Ended June 30, 2022							Six Months Ended June 30, 2021
	Trex Residential		Trex Commercial			Total		Trex Residential		Trex Commercial		Total
Net sales	$	701,117	$	24,360		$	725,477	$	531,702	$	25,418	$	557,120
Net income (loss)	$	161,652	$	(1,525	)	$	160,127	$	109,833	$	77	$	109,910
EBITDA	$	236,031	$	(1,466	)	$	234,565	$	161,973	$	575	$	162,548
Depreciation and amortization	$	21,240	$	565		$	21,805	$	15,231	$	472	$	15,703
Income tax expense (benefit)	$	53,243	$	(506	)	$	52,737	$	36,899	$	26	$	36,925
Capital expenditures	$	66,534	$	72		$	66,606	$	93,077	$	1,754	$	94,831
Total assets	$	846,112	$	41,182		$	887,294	$	807,713	$	91,107	$	898,820

Reconciliation of Net Income to EBITDA:

	Six Months Ended June 30, 2022									Six Months Ended June 30, 2021
	Trex Residential			Trex Commercial			Total			Trex Residential		Trex Commercial		Total
Net income (loss)	$	161,652		$	(1,525	)	$	160,127		$	109,833	$	77	$	109,910
Interest (income) expense, net		(104	)		—			(104	)		10		—		10
Income tax expense (benefit)		53,243			(506	)		52,737			36,899		26		36,925
Depreciation and amortization		21,240			565			21,805			15,231		472		15,703
EBITDA	$	236,031		$	(1,466	)	$	234,565		$	161,973	$	575	$	162,548

17. SEASONALITY

The operating results for Trex Residential have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions reduce the level of home improvement and construction activity and can shift demand for its products to a later period. As part of its normal business practice and consistent with industry practice, Trex Residential has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season in order to ensure adequate availability of its product to meet anticipated seasonal consumer demand. The seasonal effects are often offset by the positive effect of the incentive programs. The operating results for Trex Commercial have not historically varied from quarter to quarter as a result of seasonality. However, they are driven by the timing of individual projects, which may vary each quarterly period.

18. COMMITMENTS AND CONTINGENCIES

Product Warranty

The Company warrants that its decking and residential railing products will be free from material defects in workmanship and materials for warranty periods ranging from 10 years to 25 years, depending on the product and its use. If there is a breach of such warranties, the Company has an obligation either to replace the defective product or refund the purchase price. Depending on the product and its use, the Company also warrants its Trex Commercial products will be free of manufacturing defects for one to three years.

The Company continues to receive and settle claims for products manufactured at its Nevada facility prior to 2007 that exhibit surface flaking and maintains a warranty reserve to provide for the settlement of these claims. Estimating the warranty reserve for surface flaking claims requires management to estimate (1) the number of claims to be settled with payment and (2) the average cost to settle each claim.

To estimate the number of claims to be settled with payment, the Company utilizes actuarial techniques to quantify both the expected number of claims to be received and the percentage of those claims that will ultimately require payment (collectively, elements). Estimates for these elements are quantified using a range of assumptions derived from claim count history and the identification of factors influencing the claim counts. The cost per claim varies due to a number of factors, including the size of affected decks, the availability and type of replacement material used, the cost of production of replacement material and the method of claim settlement.

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The Company monitors surface flaking claims activity each quarter for indications that its estimates require revision. Typically, a majority of surface flaking claims received in a year are received during the summer outdoor season, which spans the second and third quarters. It has been the Company’s practice to utilize the actuarial techniques discussed above during the third quarter, after a significant portion of all claims has been received for the fiscal year and variances to annual claims expectations are more meaningful.

The number of incoming claims received in the six months ended June 30, 2022, was significantly lower than the number of claims received in the six months ended June 30, 2021 and lower than the Company’s expectations for 2022. Average cost per claim experienced in the six months ended June 30, 2022 was significantly higher than that experienced in the six months ended June 30, 2021 and higher than the Company’s expectations for the current year. The elevated average cost per claim experienced in the six months ended June 30, 2022, was primarily the result of the closure of two large claims, which were considered in the Company’s estimation of its surface flaking warranty reserve. The Company believes its reserve at June 30, 2022 is sufficient to cover future surface flaking obligations.

The Company’s analysis is based on currently known facts and a number of assumptions, as discussed above, and current expectations. Projecting future events such as the number of claims to be received, the number of claims that will require payment and the average cost of claims could cause actual warranty liabilities to be higher or lower than those projected, which could materially affect the Company’s consolidated financial condition, results of operations or cash flows. The Company estimates that the annual number of claims received will decline over time and that the average cost per claim will increase. If the level of claims received or average cost per claim differs materially from expectations, it could result in additional increases or decreases to the warranty reserve and a decrease or an increase in earnings and cash flows in future periods. The Company estimates that a 10% change in the expected number of remaining claims to be settled with payment or the expected cost to settle claims may result in approximately a $1.7 million change in the surface flaking warranty reserve.

The following is a reconciliation of the Company’s residential product warranty reserve (in thousands):

	Six Months Ended June 30, 2022
	Surface Flaking			Other Residential			Total
Beginning balance, January 1	$	18,542		$	10,053		$	28,595
Provisions and changes in estimates		—			2,369			2,369
Settlements made during the period		(1,345	)		(1,089	)		(2,434	)
Ending balance, June 30	$	17,197		$	11,333		$	28,530

	Six Months Ended June 30, 2021
	Surface Flaking			Other Residential			Total
Beginning balance, January 1	$	21,325		$	8,148		$	29,473
Provisions and changes in estimates		—			2,429			2,429
Settlements made during the period		(1,536	)		(875	)		(2,411	)
Ending balance, June 30	$	19,789		$	9,702		$	29,491

Legal Matters

The Company has lawsuits, as well as other claims, pending against it which are ordinary routine litigation and claims incidental to the business. Management has evaluated the merits of these lawsuits and claims and believes that their ultimate resolution will not have a material effect on the Company’s consolidated financial condition, results of operations, liquidity or competitive position.

Arkansas Facility

In October 2021, the Company announced plans to add a third U.S.-based Trex Residential manufacturing facility in Little Rock, Arkansas. The new campus will sit on approximately 300 acres of land and will address increased demand for Trex Residential outdoor living products. Construction began on the new facility in the second quarter of 2022, and in July 2022, the Company entered into a design-build agreement. As previously announced, the Company anticipates spending approximately $400 million on the facility and the budget for the design-build agreement is contained within this amount. Construction for the new facility will be funded primarily through the Company’s ongoing cash generation or its line of credit. The first production output is anticipated in 2024.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management discussion should be read in conjunction with the Trex Company, Inc. (Trex) Annual Report on Form 10-K for the year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission (SEC) and the condensed consolidated financial statements and notes thereto included in Part I, Item 1. “Financial Statements” of this quarterly report. Trex has one wholly-owned subsidiary, Trex Commercial Products, Inc. Together, Trex and Trex Commercial Products, Inc. are referred to as the Company, we or our.

NOTE ON FORWARD-LOOKING STATEMENTS

This management’s discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements regarding our expected financial position and operating results, our business strategy, our financing plans, forecasted demographic and economic trends relating to our industry and similar matters are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” “intend” or similar expressions. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Our actual results could be materially different from our expectations because of various factors, including the factors discussed under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC. These statements are also subject to risks and uncertainties that could cause the Company’s actual operating results to differ materially. Such risks and uncertainties include, but are not limited to: the extent of market acceptance of the Company’s current and newly developed products; the costs associated with the development and launch of new products and the market acceptance of such new products; the sensitivity of the Company’s business to general economic conditions; the impact of seasonal and weather-related demand fluctuations on inventory levels in the distribution channel and sales of the Company’s products; the availability and cost of third-party transportation services for the Company’s products and raw materials; the Company’s ability to obtain raw materials, including scrap polyethylene, wood fiber, and other materials used in making our products, at acceptable prices; increasing inflation in the macro-economic environment; the Company’s ability to maintain product quality and product performance at an acceptable cost; the Company’s ability to increase throughput and capacity to adequately match supply with demand; the level of expenses associated with product replacement and consumer relations expenses related to product quality; the highly competitive markets in which the Company operates; cyber-attacks, security breaches or other security vulnerabilities; the impact of upcoming data privacy laws and the EU General Data Protection Regulation and the related actual or potential costs and consequences; material adverse impacts from global public health pandemics, including the strain of coronavirus known as COVID-19; and material adverse impacts related to labor shortages or increases in labor costs.

OVERVIEW

The following MD&A is intended to help the reader understand the operations and current business environment of the Company. The MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying notes thereto contained in “Item 1. Condensed Consolidated Financial Statements” of this report. MD&A includes the following sections:

• Operations and Products — a general description of our business, a brief overview of our reportable segments’ products, and a discussion of our operational highlights.

• Financial Highlights for the three months ended June 30, 2022 – a summary of the financial highlights for the quarterly period ended June 30, 2022, a description of relevant financial statement line items, and a general discussion of factors that may affect our operations.

• Results of Operations — an analysis of our consolidated results of operations for the three months and six months in the period ended June 30, 2022 compared to three months and six months in the period ended June 30, 2021, respectively.

• Liquidity and Capital Resources — an analysis of cash flows; contractual obligations, and a discussion of our capital and other cash requirements.

OPERATIONS AND PRODUCTS

The Company currently operates in two reportable segments: Trex Residential Products (Trex Residential), the Company’s principal business based on net sales, and Trex Commercial Products (Trex Commercial). Refer to Note 16, Segments, in the Notes to the Condensed Consolidated Financial Statements in Part I. Item 1. Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for additional information. The Company is focused on using renewable resources within both our Trex Residential and Trex Commercial segments.

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Trex Residential is the world’s largest manufacturer of high-performance composite decking and residential railing products, which are marketed under the brand name Trex® and manufactured in the United States. We offer a comprehensive set of aesthetically appealing and durable, low-maintenance product offerings in the decking, residential railing, fencing and outdoor lighting categories. A majority of the products are eco-friendly and leverage recycled materials to the extent possible. Trex Residential decking is made in a proprietary process that combines reclaimed wood fibers and recycled polyethylene film, making Trex Residential one of the largest recyclers of plastic film in North America. In addition to resisting fading and surface staining, Trex Residential products require no sanding and sealing, resist moisture damage, provide a splinter-free surface and do not require chemical treatment against rot or insect infestation. Combined, these aspects yield significant aesthetic advantages and lower maintenance than wood decking and railing and ultimately render Trex Residential products less costly than wood over the life of the deck. Special characteristics (including resistance to splitting, the ability to bend, and ease and consistency of machining and finishing) facilitate installation, reduce contractor call-backs and afford consumers a wide range of design options. Trex Residential products are sold to distributors and home centers for final resale primarily to the residential market.

Trex offers the following products through Trex Residential:

Decking and Accessories	Our principal decking products are Trex Transcend®, Trex Select® and Trex Enhance®. In addition, our Trex Transcend decking product can also be used as cladding. Our high-performance, low-maintenance, eco-friendly composite decking products are comprised of a blend of 95 percent reclaimed wood fibers and recycled polyethylene film and feature a protective polymer shell for enhanced protection against fading, staining, mold and scratching. We also offer accessories to our decking products, including Trex Hideaway® and Trex DeckLighting™, an outdoor lighting system. Trex DeckLighting is a line of energy-efficient LED dimmable deck lighting, which is designed for use on posts, floors and steps. The line includes a post cap light, deck rail light, riser light and a recessed deck light.
Railing	Our residential railing products are Trex Transcend® Railing, Trex Select® Railing, Trex Enhance® Railing and Trex Signature® aluminum railing. Trex Transcend Railing, made from approximately 40 percent recycled content, is available in the colors of Trex Transcend decking and finishes that make it appropriate for use with Trex decking products as well as other decking materials, which we believe enhances the sales prospects of our railing products. Trex Select Railing, made from approximately 40 percent recycled content, is offered in a white finish and is ideal for consumers who desire a simple clean finished look for their deck. Trex Enhance, made from approximately 40 percent recycled content, is available in three colors and is offered through home improvement retailers in kits that contain the complete railing system. Trex Signature aluminum railing, made from a minimum of 40 percent recycled content, is available in three colors and designed for consumers who want a sleek, contemporary look.
Fencing	Our Trex Seclusions® fencing product is offered through two specialty distributors. This product consists of structural posts, bottom rail, pickets, top rail and decorative post caps.

Trex Commercial is a leading national provider of custom-engineered railing and staging systems. Trex Commercial designs and engineers custom solutions, which are prevalent in professional and collegiate sports facilities, commercial and high-rise applications, performing arts, sports, and event production and rentals. With a team of devoted engineers, and industry-leading reputation for quality and dedication to customer service, Trex Commercial markets to architects, specifiers, contractors, and building owners.

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Trex offers the following products through Trex Commercial:

Architectural Railing Systems	Our architectural railing systems are pre-engineered guardrails with options to accommodate styles ranging from classic and elegant wood top rail combined with sleek stainless components and glass infill, to modern and minimalist stainless cable and rod infill choices. Trex Commercial can also design, engineer and manufacture custom railing systems tailored to the customer’s specific material, style and finish. Many railing styles are achievable, including glass, mesh, perforated railing and cable railing.
Aluminum Railing Systems	Our Trex Signature aluminum railings, made from a minimum of 40 percent recycled content, are a versatile, cost-effective and low-maintenance choice for a variety of interior and exterior applications that we believe blend form, function and style. Its straightforward, unobtrusive design features traditional balusters and contemporary vertical rods, and can be installed with continuously graspable rail options for added safety, comfort and functionality. The strength and durability of Trex Signature railings make them a choice for any commercial setting, from high-rise condominiums and resort projects to public walkways and balconies. Aluminum railings come in a variety of colors and stock lengths to accommodate project needs.
Staging Equipment and Accessories	Our advanced modular, lightweight custom staging systems include portable platforms, orchestra shells, guardrails, stair units, barricades, camera platforms, VIP viewing decks, ADA infills, DJ booths, pool covers, and other custom applications. Our systems provide superior staging product solutions for facilities and venues with custom needs. Our modular stage equipment is designed to appear seamless, feel permanent, and maximize the functionality of the space.

Operational Highlights:

Trex Residential Begins Production of New Product. On May 16, 2022, we announced the expansion of our premium Trex Residential decking line with the introduction of Transcend® Lineage™. The new Transcend Lineage boards feature an elevated aesthetic with subtle, elegant graining, available in two new color options that expand the Transcend collection with nature-inspired tones and texturing that today’s homeowners are seeking. Like all Trex Residential decking, Lineage boards are made from 95% recycled and reclaimed content and engineered with a proprietary, high-traffic formulation and ultra-durable integrated shell. Transcend Lineage decking launched in mid-May and will be sold nationwide through Trex Residential dealers and major home centers. Production and sale of the new Transcend Lineage boards began in May 2022.

Trex Residential Arkansas Facility. Construction began on the new Trex Residential Arkansas manufacturing facility in the second quarter 2022. The new campus will sit on approximately 300 acres of land and will address increased demand for Trex Residential outdoor living products. In July 2022, the Company entered into a design-build agreement and, as previously announced, anticipates spending approximately $400 million on the facility. The budget for the design-build agreement is contained within this amount. The first production output is anticipated in 2024.

Strategic Investments in the Six Months Ended June 30, 2022. During the six months ended June 30, 2022, we made strategic investments to enhance the support of our Trex Residential brand and channel partners, including the debut of our new “We See It Too” marketing campaign. We also launched Trex Academy, an online multimedia content hub dedicated to helping the Trex Residential Do-It-Yourself customer bring their deck dreams to life by providing how-to content. In addition, we are investing to drive margin enhancement through supply chain and manufacturing cost out programs, and recently hired a new director at Trex Residential to lead a team dedicated to spearheading these initiatives.

Publication of 2021 Environmental, Social and Governance Report. On June 23, 2022, the Company published its 2021 Environmental, Social and Governance (ESG) report. The annual ESG report highlights how the Company is “Building a Better Tomorrow Together” through a broad spectrum of initiatives to address its most material ESG priorities. Highlights include:

• Investing to reduce environmental impact and advance sustainability;

• Prioritizing employee safety and career growth;

• Nurturing a diverse, equitable and inclusive workplace;

• Conducting business responsibly through strong governance and ethics; and

• Adding value to the communities where we operate.

Russian Invasion of Ukraine. The conflict between Russia and Ukraine has not directly affected our business and results of operations. We have no operations in Russia or Ukraine but continue to monitor the potential economic impact of the conflict on supply chains, commodity and fuel prices, and prices of raw materials. We cannot predict the impact of the continued conflict on the global economy, our industry or our business.

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FINANCIAL HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2022:

◾ Increase in net sales of 24%, or $74.7 million, to $386.2 million for the three months ended June 30, 2022 compared to $311.6 million for the three months ended June 30, 2021.

◾ Increase in net income to $88.9 million, or $0.79 per diluted share, for the three months ended June 30, 2022 compared to $61.4 million, or $0.53 per diluted share, for the three months ended June 30, 2021.

◾ Increase in EBITDA (earnings before interest, income tax and depreciation and amortization) of 40.9%, or $37.5 million, to $129.1 million for the three months ended June 30, 2022 compared to $91.6 million for the three months ended June 30, 2021.

◾ Capital expenditures of $44.3 million at Trex Residential, primarily related to cost reduction initiatives, the new Arkansas manufacturing facility, capacity expansion in our existing facilities, our new corporate headquarters, and safety, environmental and general support.

◾ Repurchase of 2.8 million shares of our outstanding common stock during the three months ended June 30, 2022 under our Stock Repurchase Program for a total 7.3 million shares repurchased under the program as of June 30, 2022.

Net Sales. Net sales consist of sales and freight, net of discounts. The level of net sales is principally affected by sales volume and the prices paid for Trex products. Trex Residential operating results have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions reduce the level of home and commercial improvement and residential and commercial construction and can shift demand for our products to a later period. As part of our normal business practice and consistent with industry practice, we have historically provided our distributors and dealers of our Trex Residential products incentives to build inventory levels before the start of the prime deck-building season to ensure adequate availability of our product to meet anticipated seasonal consumer demand and to enable production planning. These incentives include payment discounts, favorable payment terms, price discounts, or volume rebates on specified products and other incentives based on increases in purchases as part of specific promotional programs. The timing of our incentive programs can significantly impact sales, receivables and inventory levels during the offering period. In addition, the operating results for Trex Commercial are driven by the timing of individual projects, which may vary each quarterly period.

Gross Profit. Gross profit represents the difference between net sales and cost of sales. Cost of sales consists of raw material costs, direct labor costs, manufacturing costs, subcontract costs and freight. Raw material costs generally include the costs to purchase and transport reclaimed wood fiber, reclaimed polyethylene, pigmentation for coloring our products, and commodities used in the production of railing and staging. Direct labor costs include wages and benefits of personnel engaged in the manufacturing process. Manufacturing costs consist of costs of depreciation, utilities, maintenance supplies and repairs, indirect labor, including wages and benefits, and warehouse and equipment rental activities.

Selling, General and Administrative Expenses. The largest component of selling, general and administrative expenses is personnel related costs, which includes salaries, commissions, incentive compensation, and benefits of personnel engaged in sales and marketing, accounting, information technology, corporate operations, research and development, and other business functions. Another component of selling, general and administrative expenses is branding and other sales and marketing costs, which are used to build brand awareness. These costs consist primarily of advertising, merchandising, and other promotional costs. Other general and administrative expenses include professional fees, office occupancy costs attributable to the business functions previously referenced, and consumer relations expenses. As a percentage of net sales, selling, general and administrative expenses may vary from quarter to quarter due, in part, to the seasonality of our business.

Product Warranty. We warrant that our Trex Residential products will be free from material defects in workmanship and materials for warranty periods ranging from 10 years to 25 years, depending on the product and its use. If there is a breach of such warranties, we have an obligation either to replace the defective product or refund the purchase price. Depending on the product and its use, we also warrant our Trex Commercial products will be free of manufacturing defects for periods ranging from 1 year to 3 years.

We continue to receive and settle claims for decking products manufactured at our Trex Residential Nevada facility prior to 2007 that exhibit surface flaking and maintain a warranty reserve to provide for the settlement of these claims. We monitor surface flaking claims activity each quarter for indications that our estimates require revision. Typically, a majority of surface flaking claims received in a fiscal year are received during the summer outdoor season, which spans the second and third fiscal quarters.

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It has been our practice to utilize actuarial techniques during the third quarter, after a significant portion of all claims has been received for the fiscal year and variances to annual claims expectations are more meaningful. Our actuarial analysis is based on currently known facts and a number of assumptions. Projecting future events such as the number of claims to be received, the number of claims that will require payment and the average cost of claims could cause the actual warranty liabilities to be higher or lower than those projected, which could materially affect our financial condition, results of operations or cash flows.

The number of incoming claims received in the six months ended June 30, 2022, was significantly lower than the number of claims received in the six months ended June 30, 2021 and lower than our expectations for 2022. Average cost per claim experienced in the six months ended June 30, 2022 was significantly higher than that experienced in the six months ended June 30, 2021 and higher than our expectations for the current year. The elevated average cost per claim experienced in the six months ended June 30, 2022, was primarily the result of the closure of two large claims, which were considered in our estimation of the surface flaking warranty reserve. We believe the reserve at June 30, 2022 is sufficient to cover future surface flaking obligations. Refer to Note 18, Commitments and Contingencies, Product Warranty, in the Notes to the Condensed Consolidated Financial Statements in Part I. Item 1. Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for additional information.

We estimate that the annual number of claims received will decline over time and that the average cost per claim will increase. If the level of claims received or average cost per claim differs materially from expectations, it could result in additional increases or decreases to the warranty reserve and a decrease or increase in earnings and cash flows in future periods. We estimate that a 10% change in the expected number of remaining claims to be settled with payment or the expected cost to settle claims may result in approximately a $1.7 million change in the surface flaking warranty reserve.

The following table details surface flaking claims activity related to our warranty:

	Six Months Ended June 30,
	2022			2021
Claims open, beginning of period		1,759			1,799
Claims received (1)		292			523
Claims resolved (2)		(304	)		(515	)
Claims open, end of period		1,747			1,807
Average cost per claim (3)	$	5,233		$	3,610

(1) Claims received include new claims received or identified during the period.

(2) Claims resolved include all claims settled with or without payment and closed during the period.

(3) Average cost per claim represents the average settlement cost of claims closed with payment during the period.

RESULTS OF OPERATIONS

General. Our results of operations are affected by a number of factors, including, but not limited to, the cost to manufacture and distribute products, cost of raw materials, inflation, interest rates, consumer spending and preferences, the impact of any supply chain disruptions, economic conditions, and any adverse effects from the COVID-19 pandemic and geopolitical conflicts.

Strong sales growth at Trex Residential continued through the second quarter reflecting an increase in average price per unit and volume growth from strong secular trends, including growth in the outdoor living category, and the successful execution of our wood-to-composite market share conversion strategy. Price increases to address inflationary pressures were absorbed by the market and also benefitted net sales. In late June we experienced a reduction in demand from our distribution partners, spurred by concerns over a potential easing in consumer demand due to rising interest rates, declining consumer sentiment and expectations of a general slowing in the economy. We expect our channel partners to meet demand partially through inventory drawdown, rather than reordering product. We believe the drawdown will likely impact the next two quarters. In response to this new environment, we immediately took measures to manage a production slowdown, including selective labor force and production optimization, as well as other coast reduction actions.

Below is the discussion and analysis of our operating results and material changes in our operating results for the three months ended June 30, 2022 (2022 quarter) compared to the three months ended June 30, 2021 (2021 quarter), and for the six months ended June 30, 2022 (2022 six-month period) compared to the six months ended June 30, 2021 (2021 six-month period).

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Three Months Ended June 30, 2022 Compared To The Three Months Ended June 30, 2021

Net Sales

	Three Months Ended June 30,				$ Change			% Change
	2022		2021
	(dollars in thousands)
Total net sales	$	386,249	$	311,596	$	74,653			24.0	%
Trex Residential net sales	$	373,922	$	298,632	$	75,290			25.2	%
Trex Commercial net sales	$	12,327	$	12,964	$	(637	)		(4.9	)%

Total net sales increased by 24.0% in the 2022 quarter compared to the 2021 quarter reflecting a 25.2% increase in Trex Residential net sales and a 4.9% decrease in Trex Commercial net sales. The increase in Trex Residential net sales was primarily due to an increase in average price per unit of 20.3% and an increase in volume of 4.0%. The increase in price was due to price increases taken in 2021 and 2022 on certain products to address inflationary pressures across many key raw materials, labor and transportation. The sustained broad-based demand continued to reflect strong secular trends, including growth in the outdoor living category. In addition, we continue to execute on our wood-to-composite market share conversion strategy and drive consumers from wood decking to our eco-friendly Trex decking. The increase in sales also reflected channel inventory build. Over the last four quarters the channel has continued to build and restock inventory. This was due, in part, to strong consumer demand, but was also a consequence of improved product availability following more than two years of the capacity constraints and product allocations.

Gross Profit

	Three Months Ended June 30,						$ Change		% Change
	2022			2021
	(dollars in thousands)
Cost of sales	$	228,872		$	193,323		$	35,549		18.4	%
% of total net sales		59.3	%		62.0	%
Gross profit	$	157,377		$	118,273		$	39,104		33.1	%
Gross margin		40.7	%		38.0	%

Gross profit as a percentage of net sales, gross margin, was 40.7% in the 2022 quarter compared to 38.0% in the 2021 quarter. Gross margin for Trex Residential and Trex Commercial was 41.7% and 12.6%, respectively, in the 2022 quarter compared to 38.7% and 21.6%, respectively, in the 2021 quarter. The increase in consolidated gross margin was driven primarily by a 10.8% increase from pricing realization at Trex Residential and a continuing focus on cost reductions, offset by inflationary pressures on raw materials, labor and transportation.

Selling, General and Administrative Expenses

	Three Months Ended June 30,						$ Change		% Change
	2022			2021
	(dollars in thousands)
Selling, general and administrative expenses	$	39,568		$	36,899		$	2,669		7.2	%
% of total net sales		10.2	%		11.8	%

The increase in selling, general and administrative expenses in the 2022 quarter compared to the 2021 quarter was primarily the result of a $5.6 million increase in marketing and branding spend and a $1.8 million increase in technology and other operating expenses, offset by a $4.4 million decrease in personnel related expenses.

Provision for Income Taxes

	Three Months Ended June 30,						$ Change		% Change
	2022			2021
	(dollars in thousands)
Provision for income taxes	$	29,009		$	20,978		$	8,031		38.3	%
Effective tax rate		24.6	%		25.5	%

The effective tax rate for the 2022 quarter of 24.6% was relatively unchanged compared to the effective tax rate of 25.5% for the 2021 quarter.

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Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)1 (in thousands)

Reconciliation of net income (GAAP) to EBITDA (non-GAAP):

	Three Months Ended June 30, 2022
	Trex Residential			Trex Commercial			Total
Net income (loss)	$	89,437		$	(521	)	$	88,916
Interest (income) expense, net		(116	)		—			(116	)
Income tax expense (benefit)		29,180			(171	)		29,009
Depreciation and amortization		11,049			282			11,331
EBITDA	$	129,550		$	(410	)	$	129,140

	Three Months Ended June 30, 2021
	Trex Residential		Trex Commercial		Total
Net income	$	61,089	$	277	$	61,366
Interest expense, net		13		—		13
Income tax expense		20,886		92		20,978
Depreciation and amortization		9,020		258		9,278
EBITDA	$	91,008	$	627	$	91,635

	Three Months Ended June 30,					$ Change			% Change
	2022			2021
	(dollars in thousands)
Total EBITDA	$	129,140		$	91,635	$	37,505			40.9	%
Trex Residential EBITDA	$	129,550		$	91,008	$	38,542			42.4	%
Trex Commercial EBITDA	$	(410	)	$	627	$	(1,037	)		(165.4	)%

Total EBITDA increased 40.9% to $129.1 million for the 2022 quarter compared to $91.6 million for the 2021 quarter. The increase was driven by a 42.4% increase in Trex Residential EBITDA, primarily due to the pricing actions coupled with cost reductions, production efficiencies and spending controls.

Six Months Ended June 30, 2022 Compared To The Six Months Ended June 30, 2021

Net Sales

	Six Months Ended June 30,				$ Change			% Change
	2022		2021
	(dollars in thousands)
Total net sales	$	725,477	$	557,120	$	168,357			30.2	%
Trex Residential net sales	$	701,117	$	531,702	$	169,415			31.9	%
Trex Commercial net sales	$	24,360	$	25,418	$	(1,058	)		(4.2	)%

Total net sales increased by 30.2% in the 2022 six-month period compared to the 2021 six-month period reflecting a 31.9% increase in Trex Residential net sales and a 4.2% decrease in Trex Commercial net sales. The increase in Trex Residential net sales was primarily due to an increase in average price per unit of 19.1% and an increase in volume of 10.7%. The increase of 31.9% in Trex Residential net sales during the 2022 six-month period was primarily driven by sustained broad-based demand and market share gains from wood and was also impacted by our price increases taken in 2021 and 2022 to address inflationary pressures across many key raw materials, labor and transportation.

1  EBITDA represents net income before interest, income taxes, depreciation and amortization. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States (GAAP). We have included data with respect to EBITDA because management believes it facilitates performance comparison between the Company and its competitors, and management evaluates the performance of its reportable segments using several measures, including EBITDA. Management considers EBITDA to be an important supplemental indicator of our core operating performance because it eliminates interest, income taxes, and depreciation and amortization charges to net income or loss. In relation to competitors, EBITDA eliminates differences among companies in capitalization and tax structures, capital investment cycles and ages of related assets. For these reasons, management believes that EBITDA provides important information regarding the operating performance of the Company and its reportable segments. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP and are not meant to be considered superior to or a substitute for our GAAP results.

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Gross Profit

	Six Months Ended June 30,						$ Change		% Change
	2022			2021
	(dollars in thousands)
Cost of sales	$	433,188		$	343,046		$	90,142		26.3	%
% of total net sales		59.7	%		61.8	%
Gross profit	$	292,289		$	214,074		$	78,215		36.5	%
Gross margin		40.3	%		38.4	%

Gross profit as a percentage of net sales, gross margin, was 40.3% in the 2022 six-month period compared to 38.4% in the 2021 six-month period. Gross margin for Trex Residential and Trex Commercial products in the 2022 six-month period were 41.3% and 11.5%, respectively, compared to 39.3% and 19.4%, respectively, in the 2021 six-month period. The increase in consolidated gross margin was driven primarily by a 10.8% increase from pricing realization at Trex Residential and a continuing focus on cost reductions, offset by inflationary pressures on raw materials, labor and transportation.

Selling, General and Administrative Expenses

	Six Months Ended June 30,						$ Change		% Change
	2022			2021
	(dollars in thousands)
Selling, general and administrative expenses	$	79,529		$	68,949		$	10,580		15.3	%
% of total net sales		11.0	%		12.4	%

The $10.6 million increase in selling, general and administrative expenses in the 2022 six-month period compared to the 2021 six-month period resulted primarily from a $10.4 million increase in marketing and branding spend.

Provision for Income Taxes

	Six Months Ended June 30,						$ Change		% Change
	2022			2021
	(dollars in thousands)
Provision for income taxes	$	52,737		$	36,925		$	15,812		42.8	%
Effective tax rate		24.8	%		25.1	%

The effective tax rate for the 2022 six-month period was comparable to the effective tax rate for the 2021 six-month period.

Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)2 (in thousands)

Reconciliation of net income (GAAP) to EBITDA (non-GAAP):

2  EBITDA represents net income before interest, income taxes, depreciation and amortization. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States (GAAP). We have included data with respect to EBITDA because management believes it facilitates performance comparison between the Company and its competitors, and management evaluates the performance of its reportable segments using several measures, including EBITDA. Management considers EBITDA to be an important supplemental indicator of our core operating performance because it eliminates interest, income taxes, and depreciation and amortization charges to net income or loss. In relation to competitors, EBITDA eliminates differences among companies in capitalization and tax structures, capital investment cycles and ages of related assets. For these reasons, management believes that EBITDA provides important information regarding the operating performance of the Company and its reportable segments.

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	Six Months Ended June 30, 2022
	Trex Residential			Trex Commercial			Total
Net income (loss)	$	161,652		$	(1,525	)	$	160,127
Interest income, net		(104	)		—			(104	)
Income tax expense (benefit)		53,243			(506	)		52,737
Depreciation and amortization		21,240			565			21,805
EBITDA	$	236,031		$	(1,466	)	$	234,565

	Six Months Ended June 30, 2021
	Trex Residential		Trex Commercial		Total
Net income	$	109,833	$	77	$	109,910
Interest expense, net		10		—		10
Income tax expense		36,899		26		36,925
Depreciation and amortization		15,231		472		15,703
EBITDA	$	161,973	$	575	$	162,548

	Six Months Ended June 30,					$ Change			% Change
	2022			2021
	(dollars in thousands)
Total EBITDA	$	234,565		$	162,548	$	72,017			44.3	%
Trex Residential EBITDA	$	236,031		$	161,973	$	74,058			45.7	%
Trex Commercial EBITDA	$	(1,466	)	$	575	$	(2,041	)		(355.0	)%

Total EBITDA increased 44.3% to $234.6 million for the 2022 six-month period compared to $162.5 million for the 2021 six-month period. The increase was driven by a 45.7% increase in Trex Residential EBITDA, primarily due to the increase in net sales at Trex Residential.

LIQUIDITY AND CAPITAL RESOURCES

We finance operations and growth primarily with cash flows from operations, borrowings under our revolving credit facilities, operating leases and normal trade credit terms from operating activities. At June 30, 2022 we had $16.6 million of cash and cash equivalents.

Sources and Uses of Cash. The following table summarizes our cash flows from operating, investing and financing activities (in thousands):

	Six Months Ended June 30,
	2022			2021
Net cash provided by (used in) operating activities	$	189,992		$	(18,242	)
Net cash used in investing activities		(66,561	)		(93,517	)
Net cash used in financing activities		(247,836	)		(4,472	)
Net decrease in cash and cash equivalents	$	(124,405	)	$	(116,231	)

Operating Activities

Cash provided by operations was $190 million during the 2022 six-month period compared to cash used in operations of $18.2 million during the 2021 six-month period. The increase of $208.2 million in cash provided by operating activities was primarily due to an increase in net sales at Trex Residential and higher collection of accounts receivables in the 2022 six-month period compared to the 2021 six-month period.

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Investing Activities

Capital expenditures in the 2022 six-month period were $66.5 million at Trex Residential, primarily related to cost reduction initiatives, the new Arkansas manufacturing facility, capacity expansion in our existing facilities, our new corporate headquarters, and safety, environmental and general support.

Financing Activities

Net cash used in financing activities of $247.8 million in the 2022 six-month period consisted primarily of repurchases of our common stock.

Stock Repurchase Program. On February 16, 2018, the Trex Board of Directors adopted a stock repurchase program of up to 11.6 million shares of its outstanding common stock (Stock Repurchase Program). As of June 30, 2022, the Company has repurchased 7.3 million shares under the Stock Repurchase Program.

Indebtedness On and After May 18, 2022. On May 18, 2022, the Company, as borrower; Trex Commercial Products, Inc. (TCP), as guarantor; Bank of America, N.A. (BOA), as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; Wells Fargo Bank, National Association (Wells Fargo), as lender and Syndication Agent; Regions Bank, PNC Bank, National Association, and TD Bank, N.A. (each, a Lender and collectively, the Lenders), arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner, entered into a Credit Agreement (Credit Agreement) to amend and restate the Fourth Amended and Restated Credit Agreement dated as of November 5, 2019.

Under the Credit Agreement, the Lenders agreed to provide the Company with one or more Revolving Loans in a collective maximum principal amount of $400,000,000 (Loan Limit) throughout the term, which ends May 18, 2027 (Term). Included within the Loan Limit are sublimits for a Letter of Credit facility in an amount not to exceed $60,000,000; and Swing Line Loans in an aggregate principal amount at any time outstanding not to exceed $20,000,000. The Revolving Loans, the Letter of Credit facility and the Swing Line Loans are for the purpose of raising working capital and supporting general business operations.

The Facility provides the Company, in the aggregate, the ability to borrow an amount up to the Loan Limit during the Term. The Company is not obligated to borrow any amount under the Loan Limit. Within the Loan Limit, the Company may borrow, repay and reborrow at any time or from time to time while the Notes are in effect. Base Rate Loans (as defined in the Credit Agreement) under the Revolving Loans and the Swing Line Loans accrue interest at the Base Rate plus the Applicable Rate (as defined in the Credit Agreement) and Term SOFR Loans for the Revolving Loans accrue interest at the rate per annum equal to the sum of Term SOFR for such interest period plus the Applicable Rate (as defined in the Credit Agreement). The Base Rate for any day is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by BOA as its prime rate, and (c) the Term SOFR plus 1.0% subject to certain interest rate floors. Repayment of all then outstanding principal, interest, fees and costs is due at the end of the Term.

The Company and BofA Securities, Inc. as a sustainability coordinator, are entitled to establish specified key performance indicators (KPIs) with respect to certain environmental, social and governance targets of the Company and its subsidiaries. The sustainability coordinator and the Company may amend the Credit Agreement for the purpose of incorporating the KPIs and other related provisions, unless the Lenders object to such amendment on or prior to the date that is ten business days after the date on which such amendment is posted for review by the Lenders. Based on the performance of the Company and its subsidiaries against the KPIs, certain adjustments (increase, decrease or no adjustment) to otherwise applicable pricing will be made; provided that the amount of such adjustments shall not exceed certain aggregate caps as in the definitive loan documentation.

Under the terms of the Security and Pledge Agreement, the Company and TCP, subject to certain permitted encumbrances, as collateral security for the above-stated loans and all other present and future indebtedness of the Company owing to the Lenders grants to BOA, as Administrative Agent for the Lenders, a continuing security interest in certain collateral described and defined in the Security and Pledge Agreement but excluding the Excluded Property (as defined in the Security and Pledge Agreement).

Indebtedness Prior to May 18, 2022. Our Fourth Amended and Restated Credit Agreement (Fourth Amended Credit Agreement) provides us with revolving loan capacity in a collective maximum principal amount of $250 million from January 1 through June 30 of each year, and a maximum principal amount of $200 million from July 1 through December 31 of each year throughout the term, which ends November 5, 2024.

26

On May 26, 2020, the Company entered into a First Amendment to the Original Credit Agreement (the First Amendment) to provide for an additional $100 million line of credit. As a matter of convenience, the parties incorporated the amendments to the Original Credit Agreement made by the First Amendment into a new Fourth Amended and Restated Credit Agreement (New Credit Agreement). In the New Credit Agreement, the revolving commitments under the Original Credit Agreement are referred to as Revolving A Commitments and the new $100 million line of credit is referred to as Revolving B Commitments. In the New Credit Agreement, all of the material terms and conditions related to the original line of credit (Revolving A Commitments) remained unchanged from the Original Credit Agreement.

The Company entered into the First Amendment, as borrower; Trex Commercial Products, Inc. (TCP), as guarantor; Bank of America, N.A. (BOA), as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; and certain other lenders including Wells Fargo Bank, N.A. (Wells Fargo), who is also Syndication Agent; Truist Bank (Truist); and Regions Bank (Regions) (each, a Lender and collectively, the Lenders), arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner. The First Amendment further provides that the New Credit Agreement is amended and restated by changing Schedule 2.01 to add applicable Lender percentages related to the Revolving B Commitment for BOA of 47.5%, Well Fargo of 28.0% and Regions of 24.5%.

The Company’s revolving credit facility executed November 5, 2019 was completely replaced by the Company’s revolving credit facility executed May 18, 2022. At June 30, 2022, we had no outstanding borrowings under the revolving credit facilities and borrowing capacity under the facilities of $400 million.

Compliance with Debt Covenants. Pursuant to the terms of the Fourth Amended Credit Agreement, the Company is subject to certain loan compliance covenants. The Company was in compliance with all covenants as of June 30, 2022. Failure to comply with the financial covenants could be considered a default of repayment obligations and, among other remedies, could accelerate payment of any amounts outstanding.

We believe that cash on hand, cash from operations and borrowings expected to be available under our revolving credit facilities, as amended, will provide sufficient funds to fund planned capital expenditures, make scheduled principal and interest payments, fund warranty payments, and meet other cash requirements. We currently expect to fund future capital expenditures from operations and financing activities. The actual amount and timing of future capital requirements may differ materially from our estimate depending on the demand for Trex products and new market developments and opportunities.

Capital Requirements. In October 2021, we announced plans to add a third U.S.-based Trex Residential manufacturing facility in Little Rock, Arkansas. The new campus will sit on approximately 300 acres of land and will address increased demand for Trex Residential outdoor living products. Construction began on the new facility in the second quarter 2022, and in July 2022, the Company entered into a design-build agreement. As previously announced, the Company anticipates spending approximately $400 million on the facility and the budget for the design-build agreement is contained within this amount. Construction for the new facility will be funded primarily through the Company’s ongoing cash generation or its line of credit. The first production output is anticipated in 2024.

Our capital expenditure guidance for 2022 is $170 million to $180 million. In addition to the construction of our third facility in Arkansas, our capital allocation priorities include expenditures for internal growth opportunities, manufacturing cost reductions, upgrading equipment and support systems, and acquisitions which fit our long-term growth strategy as we continue to evaluate opportunities that would be a good strategic fit for Trex, and return of capital to shareholders

Inventory in Distribution Channels. We sell our Trex Residential decking and railing products through a tiered distribution system. We have over 50 distributors worldwide and two national retail merchandisers to which we sell our products. The distributors in turn sell the products to dealers and retail locations who in turn sell the products to end users. Significant increases in inventory levels in the distribution channel without a corresponding change in end-use demand could have an adverse effect on future sales.

Seasonality. The operating results for Trex Residential have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions reduce the level of home improvement and construction activity and can shift demand for its products to a later period. As part of its normal business practice and consistent with industry practice, Trex Residential has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season in order to ensure adequate availability of its product to meet anticipated seasonal consumer demand. The seasonal effects are often offset by the positive effect of the incentive programs. The operating results for Trex Commercial have not historically varied from quarter to quarter as a result of seasonality. However, they are driven by the timing of individual projects, which may vary significantly each quarterly period.

27

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures about Market Risk,” in Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There were no material changes to the Company’s market risk exposure during the six months ended June 30, 2022.

Item 4. Controls and Procedures

The Company’s management, with the participation of its President and Chief Executive Officer, who is the Company’s principal executive officer, and its Senior Vice President and Chief Financial Officer, who is the Company’s principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2022. Based on this evaluation, the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective. There have been no changes in the Company’s internal control over financial reporting during the six-month period ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

28

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

The Company has lawsuits, as well as other claims, pending against it which are ordinary routine litigation and claims incidental to the business. Management has evaluated the merits of these lawsuits and claims and believes that their ultimate resolution will not have a material effect on the Company’s consolidated financial condition, results of operations, liquidity or competitive position.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table provides information relating to the purchases of our common stock during the three months ended June 30, 2022 in accordance with Item 703 of Regulation S-K:

Period	(a) Total Number of Shares (or Units) Purchased (1)		(b) Average Price Paid per Share (or Unit) ($)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2)		(d) Maximum number of Shares (or Units) that May Yet Be Purchased Under the Plan or Program
April 1, 2022 – April 30, 2022		1,168,344	$	64.21		1,168,344		5,985,816
May 1, 2022 – May 31, 2022		—		—		—		5,985,816
June 1, 2022 – June 30, 2022		1,646,473	$	57.68		1,646,473		4,339,343
Quarterly period ended June 30, 2022		2,814,817				2,814,817

(1) During the three months ended June 30, 2022, no shares were withheld by, or delivered to, the Company pursuant to provisions in agreements with recipients of restricted stock granted under the Trex 2014 Stock Incentive Plan allowing the Company to withhold, or the recipient to deliver to the Company, the number of shares having the fair value equal to tax withholding due.

(2) On February 16, 2018, the Trex Board of Directors authorized a common stock repurchase program of up to 11.6 million shares of its outstanding common stock (Stock Repurchase Program). The Stock Repurchase Program was publicly announced on February 21, 2018. The Company purchased 2,814,817 shares of its common stock under the Stock Repurchase Program during the three months ended June 30, 2022.

Item 5. Other Information

First Certificate of Amendment to the Restated Certificate of Incorporation

At the annual meeting of stockholders of Trex held on May 5, 2022, its stockholders approved an amendment of the Trex Restated Certificate of Incorporation (Amendment), effective as of May 5, 2022. The Trex Board of Directors unanimously approved the Amendment on February 23, 2022, subject to stockholder approval. The Amendment increases the number of shares of common stock, par value $.01 per share, that Trex is authorized to issue from 180 million shares to 360 million shares. The Amendment was filed with the Delaware Secretary of State on May 5, 2022.

The foregoing description of certain terms and conditions in the Amendment is qualified in its entirety by reference to the full text of the Restated Certificate of Incorporation of Trex, which is filed as Exhibit 3.1 to this Form 10-Q and the First Amendment of the Restated Certificate of Incorporation of Trex, which is filed as Exhibit 3.2, both of which are incorporated herein by reference in their entirety.

29

Trex Residential Earns Top Honors in Builder Brand Use Study. For the fourth time in the 15-year history of the Builder Brand Use Study, the Company earned top honors across all of the measured criteria for the Composite/PVC Decking category and outperformed all other brands in the Deck Railing category as well. The annual Builder Brand Use Study measures the attitudes of builders, developers, and contractors toward the products they recognize, use, and trust. The results of this year’s study are based on input from more than 850 building professionals who, for the 15th consecutive year, voted Trex #1 for “brand familiarity,” “brand used during the past two years,” and “brand used most” in the Composite/PVC Decking category. Trex also secured top honors for the same criteria in the Deck Railing category. Additionally, Trex received the highest score for “Product Quality” among the 27 composite and PVC decking brands included in the study.

Item 6. Exhibits

See Exhibit Index at the end of the Quarterly Report on Form 10-Q for the information required by this Item which is incorporated by reference.

30

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TREX COMPANY, INC.
Date: August 8, 2022	By:	/s/ Dennis C. Schemm
		Dennis C. Schemm
		Senior Vice President and Chief Financial Officer
		(Duly Authorized Officer and Principal Financial Officer)

EXHIBIT INDEX

		Incorporated by reference
Exhibit Number	Description	Form		Exhibit		Filing Date		File No.
3.1	Restated Certificate of Incorporation of Trex Company, Inc. dated July 28, 2021.		10-Q		3.6		August 2, 2021		001-14649
3.2	First Certificate of Amendment to the Restated Certificate of Incorporation of Trex Company, Inc. dated May 5, 2022		10-Q		3.2		May 9, 2022		001-14649
3.3	Amended and Restated By-Laws of the Company.		8-K		3.2		May 1, 2019		001-14649
4.1	Credit Agreement dated as of May 18, 2022 between the Company, as borrower; Trex Commercial Products, Inc., as guarantor, Bank of America, N.A., as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; Wells Fargo Bank, National Association, as lender and Syndication Agent, Regions Bank, PNC Bank, National Association, and TD Bank, N.A., arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner.		8-K		4.1		May 20, 2022		001-14649
4.2	Note dated May 18, 2022 payable by the Company to Bank of America, N.A. in the amount of the lesser of $180,000,000 or the outstanding revolver advances made by Bank of America, N.		8-K		4.2		May 20, 2022		001-14649
4.3	Note dated May 18, 2022 payable by the Company to Wells Fargo Bank, National Association in the amount of the lesser of $120,000,000 or the outstanding revolver advances made by Wells Fargo Bank, N.A.		8-K		4.3		May 20, 2022		001-14649
4.4	Note dated May 18, 2022 payable by the Company to Regions Bank in the amount of the lesser of $40,000,000 or the outstanding revolver advances made by Regions Bank.		8-K		4.4		May 20, 2022		001-14649
4.5	Note dated May 18, 2022 payable by the Company to PNC Bank, National Association in the amount of the lesser of $30,000,000 or the outstanding revolver advances made by PNC Bank, National Association.		8-K		4.5		May 20, 2022		001-14649
4.6	Note dated May 18, 2022 payable by the Company to TD Bank, N.A. in the amount of the lesser of $30,000,000 or the outstanding revolver advances made by TD Bank, N.A.		8-K		4.6		May 20, 2022		001-14649
4.7	Security and Pledge Agreement dated as of May 18, 2022 between the Company, as debtor, Trex Commercial Products, Inc., as additional obligor; and Bank of America, N.A. as Administrative Agent (including Notices of Grant of Security Interest in Copyrights and Trademarks).		8-K		4.7		May 20, 2022		001-14649
10.1	AIA document A141 – 2014 Agreement dated July 7, 2022 by and between Trex Company, Inc. and Gray Construction, Inc.		8-K		10.1		July 12, 2022		001-14649
31.1*	Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2*	Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32***	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350).

		Incorporated by reference
Exhibit Number	Description	Form	Exhibit	Filing Date	File No.
101.INS*	Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104.1	Cover Page Interactive Data File—The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

* Filed herewith.

*** Furnished herewith.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Bryan H. Fairbanks, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Trex Company, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function(s)):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2022

/s/ Bryan H. Fairbanks

Bryan H. Fairbanks

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Dennis C. Schemm, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Trex Company, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function(s)):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2022

/s/ Dennis C. Schemm

Dennis C. Schemm

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

EX-32

Exhibit 32

Certifications of Chief Executive Officer and Chief Financial Officer

Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

The undersigned, the President and Chief Executive Officer and the Vice President and Chief Financial Officer of Trex Company, Inc. (the “Company”), each hereby certifies that, on the date hereof:

(a) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2022 filed on the date hereof with the U.S. Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 8, 2022	/s/ Bryan H. Fairbanks
	Bryan H. Fairbanks
	President and Chief Executive Officer
Date: August 8, 2022	/s/ Dennis C. Schemm
	Dennis C. Schemm
	Senior Vice President and Chief Financial Officer

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2022	Jul. 22, 2022
Cover [Abstract]
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Type	10-Q
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001069878
Current Fiscal Year End Date	--12-31
Document Transition Report	false
Entity Registrant Name	TREX CO INC
Document Period End Date	Jun. 30, 2022
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Trading Symbol	TREX
Entity Shell Company	false
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		110,263,432
Entity File Number	001-14649
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	54-1910453
Entity Address, Address Line One	160 Exeter Drive
Entity Address, City or Town	Winchester
Entity Address, Postal Zip Code	22603-8605
Entity Address, State or Province	VA
City Area Code	540
Local Phone Number	542-6300
Title of 12(b) Security	Common stock
Security Exchange Name	NYSE
Document Quarterly Report	true

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Statement [Abstract]
Net sales	$ 386,249	$ 311,596	$ 725,477	$ 557,120
Cost of sales	228,872	193,323	433,188	343,046
Gross profit	157,377	118,273	292,289	214,074
Selling, general and administrative expenses	39,568	36,899	79,529	68,949
Gain on insurance proceeds		(983)		(1,720)
Income from operations	117,809	82,357	212,760	146,845
Interest (income) expense, net	(116)	13	(104)	10
Income before income taxes	117,925	82,344	212,864	146,835
Provision for income taxes	29,009	20,978	52,737	36,925
Net income	$ 88,916	$ 61,366	$ 160,127	$ 109,910
Basic earnings per common share	$ 0.79	$ 0.53	$ 1.41	$ 0.95
Basic weighted average common shares outstanding	113,099,561	115,362,757	113,864,741	115,512,231
Diluted earnings per common share	$ 0.79	$ 0.53	$ 1.4	$ 0.95
Diluted weighted average common shares outstanding	113,259,514	115,662,626	114,052,447	115,839,183
Comprehensive income	$ 88,916	$ 61,366	$ 160,127	$ 109,910

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 16,648	$ 141,053
Accounts receivable, net	178,084	151,096
Inventories	100,872	83,753
Prepaid expenses and other assets	23,645	25,152
Total current assets	319,249	401,054
Property, plant and equipment, net	505,395	460,365
Operating lease assets	36,250	34,571
Goodwill and other intangible assets, net	18,791	19,001
Other assets	7,609	5,330
Total assets	887,294	920,321
Current liabilities:
Accounts payable	57,825	24,861
Accrued expenses and other liabilities	74,698	58,041
Accrued warranty	6,300	5,800
Total current liabilities	138,823	88,702
Deferred income taxes	43,967	43,967
Operating lease liabilities	29,239	28,263
Non-current accrued warranty	22,230	22,795
Other long-term liabilities	11,560	11,560
Total liabilities	245,819	195,287
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 3,000,000 shares authorized; none issued and outstanding	0	0
Common stock, $0.01 par value, 360,000,000 shares authorized; 140,798,762 and 140,734,753 shares issued and 111,563,381 and 115,148,152 shares outstanding at June 30, 2022 and December 31, 2021, respectively	1,408	1,407
Additional paid-in capital	129,109	127,787
Retained earnings	1,106,175	946,048
Treasury stock, at cost, 29,235,381 and 25,586,601 shares at June 30, 2022 and December 31, 2021, respectively	(595,217)	(350,208)
Total stockholders' equity	641,475	725,034
Total liabilities and stockholders' equity	$ 887,294	$ 920,321

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	3,000,000	3,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	360,000,000	360,000,000
Common stock, shares issued	140,798,762	140,734,753
Common stock, shares outstanding	111,563,381	115,148,152
Treasury stock, shares	29,235,381	25,586,601

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings (Deficit) [Member]	Treasury Stock [Member]
Beginning Balance at Dec. 31, 2020	$ 588,531	$ 1,406	$ 126,087	$ 737,311	$ (276,273)
Beginning Balance, Shares at Dec. 31, 2020		115,799,503			24,777,502
Net income	48,545			48,545
Employee stock plans	460		460
Employee stock plans, Shares		28,286
Shares withheld for taxes on awards	(4,045)		(4,045)
Shares withheld for taxes on awards, Shares		(38,212)
Stock-based compensation	2,176		2,176
Stock-based compensation, Shares		76,094
Repurchases of common stock	(45,523)				$ (45,523)
Repurchases of common stock, Shares		(504,275)			504,275
Ending Balance at Mar. 31, 2021	590,143	$ 1,406	124,678	785,855	$ (321,796)
Ending Balance, Shares at Mar. 31, 2021		115,361,396			25,281,777
Beginning Balance at Dec. 31, 2020	588,531	$ 1,406	126,087	737,311	$ (276,273)
Beginning Balance, Shares at Dec. 31, 2020		115,799,503			24,777,502
Net income	109,910
Ending Balance at Jun. 30, 2021	648,776	$ 1,407	125,764	847,221	$ (325,616)
Ending Balance, Shares at Jun. 30, 2021		115,344,705			25,322,528
Beginning Balance at Mar. 31, 2021	590,143	$ 1,406	124,678	785,855	$ (321,796)
Beginning Balance, Shares at Mar. 31, 2021		115,361,396			25,281,777
Net income	61,366			61,366
Employee stock plans	400		400
Employee stock plans, Shares		20,341
Shares withheld for taxes on awards	(1,446)		(1,446)
Shares withheld for taxes on awards, Shares		(13,491)
Stock-based compensation	2,133	$ 1	2,132
Stock-based compensation, Shares		17,210
Repurchases of common stock	(3,820)				$ (3,820)
Repurchases of common stock, Shares		(40,751)			40,751
Ending Balance at Jun. 30, 2021	648,776	$ 1,407	125,764	847,221	$ (325,616)
Ending Balance, Shares at Jun. 30, 2021		115,344,705			25,322,528
Beginning Balance at Dec. 31, 2021	725,034	$ 1,407	127,787	946,048	$ (350,208)
Beginning Balance, Shares at Dec. 31, 2021		115,148,152			25,586,601
Net income	71,211			71,211
Employee stock plans	523		523
Employee stock plans, Shares		9,081
Shares withheld for taxes on awards	(2,912)		(2,912)
Shares withheld for taxes on awards, Shares		(35,856)
Stock-based compensation	2,226	$ 1	2,225
Stock-based compensation, Shares		79,926
Repurchases of common stock	(75,017)				$ (75,017)
Repurchases of common stock, Shares		(833,963)			833,963
Ending Balance at Mar. 31, 2022	721,065	$ 1,408	127,623	1,017,259	$ (425,225)
Ending Balance, Shares at Mar. 31, 2022		114,367,340			26,420,564
Beginning Balance at Dec. 31, 2021	725,034	$ 1,407	127,787	946,048	$ (350,208)
Beginning Balance, Shares at Dec. 31, 2021		115,148,152			25,586,601
Net income	160,127
Ending Balance at Jun. 30, 2022	641,475	$ 1,408	129,109	1,106,175	$ (595,217)
Ending Balance, Shares at Jun. 30, 2022		111,563,381			29,235,381
Beginning Balance at Mar. 31, 2022	721,065	$ 1,408	127,623	1,017,259	$ (425,225)
Beginning Balance, Shares at Mar. 31, 2022		114,367,340			26,420,564
Net income	88,916			88,916
Employee stock plans	429		429
Employee stock plans, Shares		8,834
Stock-based compensation	1,057		1,057
Stock-based compensation, Shares		2,024
Repurchases of common stock	(169,992)				$ (169,992)
Repurchases of common stock, Shares		(2,814,817)			2,814,817
Ending Balance at Jun. 30, 2022	$ 641,475	$ 1,408	$ 129,109	$ 1,106,175	$ (595,217)
Ending Balance, Shares at Jun. 30, 2022		111,563,381			29,235,381

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Operating Activities
Net income	$ 160,127	$ 109,910
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	21,804	15,702
Stock-based compensation	3,282	4,308
Gain on disposal of property, plant and equipment	(43)	(1,083)
Other non-cash adjustments	(365)	(226)
Changes in operating assets and liabilities:
Accounts receivable	(26,988)	(157,117)
Inventories	(17,119)	(8,994)
Prepaid expenses and other assets	949	(6,878)
Accounts payable	32,943	14,907
Accrued expenses and other liabilities	13,175	10,763
Income taxes receivable/payable	2,227	466
Net cash provided by (used in) operating activities	189,992	(18,242)
Investing Activities
Expenditures for property, plant and equipment	(66,606)	(94,831)
Proceeds from sales of property, plant and equipment	45	1,314
Net cash used in investing activities	(66,561)	(93,517)
Financing Activities
Borrowings under line of credit		286,000
Principal payments under line of credit		(236,500)
Repurchases of common stock	(247,921)	(54,832)
Proceeds from employee stock purchase and option plans	951	860
Financing costs	(866)
Net cash used in financing activities	(247,836)	(4,472)
Net decrease in cash and cash equivalents	(124,405)	(116,231)
Cash and cash equivalents, beginning of period	141,053	121,701
Cash and cash equivalents, end of period	16,648	5,470
Supplemental Disclosure:
Cash paid for interest, net of capitalized interest	0	0
Cash paid for income taxes, net	$ 48,915	$ 36,457

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Business and Organization

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business and Organization

1. BUSINESS AND ORGANIZATION

Trex Company, Inc. (Trex), a Delaware corporation, was incorporated on September 4, 1998. Together, Trex and its wholly-owned subsidiary, Trex Commercial Products, Inc., are referred to as the Company. The Company operates in two reportable segments, Trex Residential Products (Trex Residential) and Trex Commercial Products (Trex Commercial). Trex Residential, the Company’s principal business based on net sales, is the world’s largest manufacturer of high-performance, low-maintenance wood-alternative decking and residential railing and outdoor living products and accessories, marketed under the brand name Trex®, with more than 30 years of product experience. A majority of its products are manufactured in a proprietary process that combines reclaimed wood fibers and scrap polyethylene. Also, the Company is a leading national provider of custom-engineered railing and staging systems for the commercial and multi-family market, including sports stadiums and performing arts venues. The principal executive offices are located at 160 Exeter Drive, Winchester, Virginia 22603, and the telephone number at that address is (540) 542-6300.

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Basis of Presentation

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

2. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments, except as otherwise described herein) considered necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company for all periods presented. Intercompany accounts and transactions have been eliminated in consolidation.

The unaudited consolidated results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. The Company’s results of operations are affected by a number of factors, including, but not limited to, the cost to manufacture and distribute products, cost of raw materials, inflation, consumer spending and preferences, interest rates, the impact of any supply chain disruptions, economic conditions, and/or any adverse effects from the COVID-19 pandemic and geopolitical conflicts.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2021 and 2020 and for each of the three years in the period ended December 31, 2021 included in the Annual Report of Trex Company, Inc. on Form 10-K, as filed with the U.S. Securities and Exchange Commission.

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Recently Adopted Accounting Standards

6 Months Ended

Jun. 30, 2022

Accounting Changes and Error Corrections [Abstract]

Recently Adopted Accounting Standards

3. RECENTLY ADOPTED ACCOUNTING STANDARDS

In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”. The guidance requires business entities to make annual disclosures about transactions with a government they account for by analogizing to a grant or contribution accounting model, such as IAS 20, ASC 958-605. The annual disclosure requirements include: the nature of the transactions, the entities related accounting policy used, the line items on the balance sheet and income statement that are affected and the amounts applicable to each financial statement line item, and significant terms and conditions of the transactions. The disclosure requirements could be applied either prospectively to all transactions in the scope of the amendments that are reflected in the financial statements at the date of initial application and new transactions that are entered into after the date of initial application, or retrospectively. The guidance was effective for fiscal years beginning after December 15, 2021, with early application permitted. Adoption of the guidance did not have a material effect on the Company’s consolidated financial statements.

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New Accounting Standards Not Yet Adopted

6 Months Ended

Jun. 30, 2022

Accounting Changes and Error Corrections [Abstract]

New Accounting Standards Not Yet Adopted

4. NEW ACCOUNTING STANDARDS NOT YET ADOPTED

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. The guidance provides temporary optional expedients and exceptions related to contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates. The new guidance allows entities to elect not to apply certain modification accounting requirements, if certain criteria are met, to contracts affected by what the guidance calls reference rate reform. An entity that makes this election would consider changes in reference rates and other contract modifications related to reference rate reform to be events that do not require contract remeasurement at the modification date or reassessment of a previous accounting determination. The ASU notes that changes in contract terms that are made to effect the reference rate reform transition are considered related to the replacement of a reference rate if they are not the result of a business decision that is separate from or in addition to changes to the terms of a contract to effect that transition. The guidance is effective upon issuance and generally can be applied as of March 12, 2020 through December 31, 2022. The Company does not expect adoption of the guidance to have a material effect on its consolidated financial statements.

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Inventories

6 Months Ended

Jun. 30, 2022

Inventory Disclosure [Abstract]

Inventories

5. INVENTORIES

Inventories valued at LIFO (last-in, first-out), consist of the following (in thousands):

	June 30, 2022			December 31, 2021
Finished goods	$	62,271		$	58,401
Raw materials		67,857			56,441
Total FIFO (first-in, first-out) inventories		130,128			114,842
Reserve to adjust inventories to LIFO value		(36,467	)		(36,467	)
Total LIFO inventories	$	93,661		$	78,375

The Company utilizes the LIFO method of accounting related to its Trex Residential wood-alternative decking and residential railing products, which generally provides for the matching of current costs with current revenues. However, under the LIFO method, reductions in annual inventory balances cause a portion of the Company’s cost of sales to be based on historical costs rather than current year costs (LIFO liquidation). Reductions in interim inventory balances expected to be replenished by year-end do not result in a LIFO liquidation. Accordingly, interim LIFO calculations are based, in part, on management’s estimates of expected year-end inventory levels and costs, which may differ from actual results. Since inventory levels and costs are subject to factors beyond management’s control, interim results are subject to the final year-end LIFO inventory valuation. There were no LIFO inventory liquidations or related impact on cost of sales in the six months ended June 30, 2022.

Inventories valued at lower of cost (FIFO method) and net realizable value were $7.2 million at, June 30, 2022 and $5.4 million at December 31, 2021, consisting primarily of raw materials. The Company utilizes the FIFO method of accounting related to its Trex Commercial products.

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Prepaid Expenses and Other Assets

6 Months Ended

Jun. 30, 2022

Text Block [Abstract]

Prepaid Expenses and Other Assets

6. PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consist of the following (in thousands):

	June 30, 2022		December 31, 2021
Prepaid expenses	$	14,373	$	15,061
Revenues in excess of billings		7,905		9,109
Income tax receivable		894		406
Other		473		576
Total prepaid expenses and other assets	$	23,645	$	25,152

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Goodwill and Other Intangible Assets, Net

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, Net

7. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

The carrying amount of goodwill by reportable segment at June 30, 2022 and December 31, 2021 was $14.2 million for Trex Residential. The Company’s intangible assets consist of domain names. At June 30, 2022 and December 31, 2021, intangible assets were $6.3 million and accumulated amortization was $1.7 million and $1.5 million, respectively. Intangible asset amounts were determined based on the estimated economics of the asset and are amortized over the estimated useful lives on a straight-line basis over 15 years, which approximates the pattern in which the economic benefits are expected to be received. The Company evaluates the recoverability of intangible assets periodically and considers events or circumstances that may warrant revised estimates of useful lives or that may indicate an impairment. Intangible asset amortization expense for the six months ended June 30, 2022 and June 30, 2021 was $0.2 million and $0.2 million, respectively.

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Accrued Expenses and Other Liabilities

6 Months Ended

Jun. 30, 2022

Payables and Accruals [Abstract]

Accrued Expenses and Other Liabilities

8. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following (in thousands):

	June 30, 2022		December 31, 2021
Sales and marketing	$	38,945	$	16,439
Compensation and benefits		15,741		25,450
Operating lease liabilities		7,646		7,066
Manufacturing costs		3,923		4,110
Income taxes		2,715		—
Billings in excess of revenues		1,535		1,436
Other		4,193		3,540
Total accrued expenses and other liabilities	$	74,698	$	58,041

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Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Debt

9. DEBT

Revolving Credit Facility

Indebtedness on and after May 18, 2022. On May 18, 2022, the Company, as borrower; Trex Commercial Products, Inc. (TCP), as guarantor; Bank of America, N.A. (BOA), as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; Wells Fargo Bank, National Association (Wells Fargo), as lender and Syndication Agent; Regions Bank, PNC Bank, National Association, and TD Bank, N.A. (each, a Lender and collectively, the Lenders), arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner, entered into a Credit Agreement (Credit Agreement) to amend and restate the Fourth Amended and Restated Credit Agreement dated as of November 5, 2019.

Under the Credit Agreement, the Lenders agreed to provide the Company with one or more Revolving Loans in a collective maximum principal amount of $400,000,000 (Loan Limit) throughout the term, which ends May 18, 2027 (Term). Included within the Loan Limit are sublimits for a Letter of Credit facility in an amount not to exceed $60,000,000; and Swing Line Loans in an aggregate principal amount at any time outstanding not to exceed $20,000,000. The Revolving Loans, the Letter of Credit facility and the Swing Line Loans are for the purpose of raising working capital and supporting general business operations.

The Facility provides the Company, in the aggregate, the ability to borrow an amount up to the Loan Limit during the Term. The Company is not obligated to borrow any amount under the Loan Limit. Within the Loan Limit, the Company may borrow, repay and reborrow at any time or from time to time while the Notes are in effect. Base Rate Loans (as defined in the Credit Agreement) under the Revolving Loans and the Swing Line Loans accrue interest at the Base Rate plus the Applicable Rate (as defined in the Credit Agreement) and Term SOFR Loans for the Revolving Loans accrue interest at the rate per annum equal to the sum of Term SOFR for such interest period plus the Applicable Rate (as defined in the Credit Agreement). The Base Rate for any day is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by BOA as its prime rate, and (c) the Term SOFR plus 1.0% subject to certain interest rate floors. Repayment of all then outstanding principal, interest, fees and costs is due at the end of the Term.

The Company and BofA Securities, Inc. as a sustainability coordinator, are entitled to establish specified key performance indicators (KPIs) with respect to certain environmental, social and governance targets of the Company and its subsidiaries. The sustainability coordinator and the Company may amend the Credit Agreement for the purpose of incorporating the KPIs and other related provisions, unless the Lenders object to such amendment on or prior to the date that is ten business days after the date on which such amendment is posted for review by the Lenders. Based on the performance of the Company and its subsidiaries against the KPIs, certain adjustments (increase, decrease or no adjustment) to otherwise applicable pricing will be made; provided that the amount of such adjustments shall not exceed certain aggregate caps as in the definitive loan documentation.

Under the terms of the Security and Pledge Agreement, the Company and TCP, subject to certain permitted encumbrances, as collateral security for the above-stated loans and all other present and future indebtedness of the Company owing to the Lenders grants to BOA, as Administrative Agent for the Lenders, a continuing security interest in certain collateral described and defined in the Security and Pledge Agreement but excluding the Excluded Property (as defined in the Security and Pledge Agreement).

Indebtedness prior to May 18, 2022. On November 5, 2019, the Company entered into a Fourth Amended and Restated Credit Agreement (Fourth Amended Credit Agreement) as borrower, Trex Commercial Products, Inc., as guarantor; Bank of America, N.A. as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; and certain other lenders including Wells Fargo Bank, N.A., who is also Syndication Agent, and Truist Bank, arranged by BOA Securities, Inc., as Sole Lead Arranger and Sole Bookrunner, to amend and restate the Third Amended and Restated Credit Agreement (Third Amended Credit Agreement), dated as of January 12, 2016, as amended. The Fourth Amended Credit Agreement provides the Company with one or more Revolving Loans in a collective maximum principal amount of $250 million from January 1 through June 30 of each year and a maximum principal amount of $200 million from July 1 through December 31 of each year throughout the term, which ends November 5, 2024.

On May 26, 2020, the Company entered into a First Amendment to the Original Credit Agreement (the First Amendment) to provide for an additional $100 million line of credit through May 26, 2022. As a matter of convenience, the parties incorporated the amendments to the Original Credit Agreement made by the First Amendment into a new Fourth Amended and Restated Credit Agreement (New Credit Agreement). In the New Credit Agreement, the revolving commitments under the Original Credit Agreement are referred to as Revolving A Commitments and the new $100 million line of credit is referred to as Revolving B Commitments. In the New Credit Agreement, all of the material terms and conditions related to the original line of credit (Revolving A Commitments) remained unchanged from the Original Credit Agreement.

The Company’s revolving credit facility executed November 5, 2019 was completely replaced by the Company’s revolving credit facility executed May 18, 2022. The Company had no outstanding borrowings under its revolving credit facility and available borrowing capacity of $400 million at June 30, 2022.

Compliance with Debt Covenants and Restrictions

Pursuant to the terms of the Credit Agreement, the Company is subject to certain loan compliance covenants. The Company was in compliance with all covenants as of June 30, 2022. Failure to comply with the financial covenants could be considered a default of repayment obligations and, among other remedies, could accelerate payment of any amounts outstanding.

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Leases

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Leases

10. LEASES

The Company leases office space, storage warehouses and certain plant equipment under various operating leases. The Company’s operating leases have remaining lease terms of less than 1 year to 7 years. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

For the six months ended June 30, 2022 and June 30, 2021, total operating lease expense was $4.2 million and $4.1 million, respectively. The weighted average remaining lease term at June 30, 2022 and December 31, 2021 was 5.7 years and 5.8 years, respectively. The weighted average discount rate at June 30, 2022 and December 31, 2021 was 2.18% and 2.47%, respectively.

The following table includes supplemental cash flow information for the six months ended June 30, 2022 and June 30, 2021 and supplemental balance sheet information at June 30, 2022 and December 31, 2021 related to operating leases (in thousands):

	Six Months Ended June 30,
Supplemental cash flow information	2022		2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,334	$	4,131
Operating ROU assets obtained in exchange for lease liabilities	$	6,714	$	7,047

Supplemental balance sheet information	June 30, 2022		December 31, 2021
Operating lease ROU assets	$	36,250	$	34,571
Operating lease liabilities:
Accrued expenses and other current liabilities	$	7,646	$	7,066
Operating lease liabilities		29,239		28,263
Total operating lease liabilities	$	36,885	$	35,329

The following table summarizes maturities of operating lease liabilities at June 30, 2022 (in thousands):

Maturities of operating lease liabilities
2022	$	4,273
2023		7,612
2024		6,799
2025		5,463
2026		4,886
Thereafter		10,156
Total lease payments		39,189
Less imputed interest		(2,304	)
Total operating lease liabilities	$	36,885

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Financial Instruments

6 Months Ended

Jun. 30, 2022

Investments, All Other Investments [Abstract]

Financial Instruments

11. FINANCIAL INSTRUMENTS

The Company considers the recorded value of its financial assets and liabilities, consisting primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, other current liabilities, and debt to approximate the fair value of the respective assets and liabilities on the Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Stockholders' Equity

12. STOCKHOLDERS’ EQUITY

Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except share and per share data):​​​​​​​​​​​​​​

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Numerator:
Net income available to common shareholders	$	88,916	$	61,366	$	160,127	$	109,910
Denominator:
Basic weighted average shares outstanding		113,099,561		115,362,757		113,864,741		115,512,231
Effect of dilutive securities:
Stock appreciation rights and options		96,179		193,466		110,253		200,263
Restricted stock		63,774		106,403		77,453		126,689
Diluted weighted average shares outstanding		113,259,514		115,662,626		114,052,447		115,839,183
Basic earnings per share	$	0.79	$	0.53	$	1.41	$	0.95
Diluted earnings per share	$	0.79	$	0.53	$	1.40	$	0.95

Diluted earnings per share is computed using the weighted average number of shares determined for the basic earnings per share computation plus the dilutive effect of common stock equivalents using the treasury stock method. The computation of diluted earnings per share excludes the following potentially dilutive securities because the effect would be anti-dilutive:​​​​​​​

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Stock appreciation rights		47,303		15,029		38,789		11,105
Restricted stock		63,131		—		38,823		11,540

Stock Repurchase Program

On February 16, 2018, the Trex Board of Directors adopted a stock repurchase program of up to 11.6 million shares of its outstanding common stock (Stock Repurchase Program). As of June 30, 2022, Trex has repurchased 7.3 million shares of its outstanding common stock under the Stock Repurchase Program.

First Certificate of Amendment to the Restated Certificate of Incorporation

At the annual meeting of stockholders of Trex held on May 5, 2022, its stockholders approved an amendment of the Trex Restated Certificate of Incorporation (Amendment), effective as of May 5, 2022. The Board of Directors of Trex unanimously approved the Amendment on February 23, 2022, subject to stockholder approval. The Amendment increases the number of shares of common stock, par value $.01 per share, that Trex is authorized to issue from 180 million shares to 360 million shares. The Amendment was filed with the Delaware Secretary of State on May 5, 2022.

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Revenue From Contracts With Customers

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue From Contracts With Customers

13. REVENUE FROM CONTRACTS WITH CUSTOMERS

Trex Residential Products

Trex Residential principally generates revenue from the manufacture and sale of its high-performance, low-maintenance, eco-friendly wood-alternative composite decking and residential railing products and accessories. Substantially all of its revenues are from contracts with customers, which are purchase orders of short-term duration of less than one year. Its customers, in turn, sell primarily to the residential market, which includes replacement, remodeling and new construction related to outdoor living products. Trex Residential satisfies its performance obligations at a point in time. The shipment of each product is a separate performance obligation as the customer is able to derive benefit from each product shipped and no performance obligation remains after shipment. Upon shipment of the product, the customer obtains control over the distinct product and Trex Residential satisfies its performance obligation. Any performance obligation that remains unsatisfied at the end of a reporting period is part of a contract that has an original expected duration of one year or less. Any variable consideration related to the unsatisfied performance obligation is allocated wholly to the unsatisfied performance obligation, is recognized when the product ships and the performance obligation is satisfied and is included in “Accrued expenses and other liabilities, Sales and marketing” in Note 8 to the Condensed Consolidated Financial Statements.

Trex Commercial Products

Trex Commercial generates revenue from the manufacture and sale of its modular and architectural railing and staging systems. All of its revenues are from fixed-price contracts with customers. Trex Commercial contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and is, therefore, not distinct. The transaction price allocated to remaining performance obligations on contracts with an original duration greater than one year was $36 million as of June 30, 2022. The Company will recognize this revenue as contracts are completed, which is expected to occur within the next 24 months.

For the three months and six months ended June 30, 2022 and June 30, 2021, net sales were disaggregated in the following tables by (1) market, (2) timing of revenue recognition, and (3) type of contract. The tables also include a reconciliation of the respective disaggregated net sales with the Company’s reportable segments (in thousands).​​​​​​​

Three Months Ended June 30, 2022	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	373,922	$	—	$	373,922
Products transferred over time and fixed price contracts		—		12,327		12,327
	$	373,922	$	12,327	$	386,249

Three Months Ended June 30, 2021	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	298,632	$	—	$	298,632
Products transferred over time and fixed price contracts		—		12,964		12,964
	$	298,632	$	12,964	$	311,596

Six Months Ended June 30, 2022	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	701,117	$	—	$	701,117
Products transferred over time and fixed price contracts		—		24,360		24,360
	$	701,117	$	24,360	$	725,477

Six Months Ended June 30, 2021	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	531,702	$	—	$	531,702
Products transferred over time and fixed price contracts		—		25,418		25,418
	$	531,702	$	25,418	$	557,120

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2022

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

14. STOCK-BASED COMPENSATION

The Company has one stock-based compensation plan, the 2014 Stock Incentive Plan (Plan), approved by Trex stockholders in April 2014. The Plan amended and restated in its entirety the Trex Company, Inc. 2005 Stock Incentive Plan. The Plan is administered by the Compensation Committee of the Trex Board of Directors. Stock-based compensation is granted to officers, directors and certain key employees in accordance with the provisions of the Plan. The Plan provides for grants of stock options, restricted stock, restricted stock units, stock appreciation rights (SARs), and unrestricted stock. The total aggregate number of shares of Trex common stock that may be issued under the Plan is 25,680,000 and as of June 30, 2022, the total number of shares available for future issuance is 11,070,560.​​​​​​​

The following table summarizes the Company’s stock-based compensation grants for the six months ended June 30, 2022:

	Stock Awards Granted		Weighted-Average Grant Price Per Share
Time-based restricted stock units		39,001	$	81.85
Performance-based restricted stock units (a)		72,152	$	76.14
Stock appreciation rights		32,971	$	82.01

(a) Includes 47,072 of target performance-based restricted stock unit awards granted during the six months ended June 30, 2022, and adjustments of 8,160, 11,684, and 5,236 to grants due to the actual performance level achieved for restricted stock and restricted stock units awarded in 2021, 2020, and 2019, respectively.

The fair value of each SAR is estimated on the date of grant using a Black-Scholes option-pricing formula. For SARs issued in the six months ended June 30, 2022 and June 30, 2021 the data and assumptions shown in the following table were used:

	Six Months Ended June 30, 2022			Six Months Ended June 30, 2021
Weighted-average fair value of grants	$	33.9		$	51.84
Dividend yield		0	%		0	%
Average risk-free interest rate		1.9	%		0.6	%
Expected term (years)		5			5
Expected volatility		44.9	%		58.7	%

The Company recognizes stock-based compensation expense ratably over the period from the grant date to the earlier of: (1) the vesting date of the award, or (2) the date the grantee is eligible to retire without forfeiting the award. For performance-based restricted stock and performance-based restricted stock units, expense is recognized ratably over the performance and vesting period of each tranche based on management’s judgment of the ultimate award that is likely to be paid out based on the achievement of the predetermined performance measures. For the employee stock purchase plan, compensation expense is recognized related to the discount on purchases. Stock-based compensation expense is included in “Selling, general and administrative expenses” in the Condensed Consolidated Statements of Comprehensive Income. The following table summarizes the Company’s stock-based compensation expense (in thousands):​​​​​​​

	Three Months Ended June 30,					Six Months Ended June 30,
	2022			2021		2022		2021
Stock appreciation rights	$	196		$	144	$	350	$	258
Time-based restricted stock and restricted stock units		959			754		1,806		1,441
Performance-based restricted stock and restricted stock units		(151	)		1,165		1,007		2,440
Employee stock purchase plan		53			69		119		169
Total stock-based compensation	$	1,057		$	2,132	$	3,282	$	4,308

Total unrecognized compensation cost related to unvested awards as of June 30, 2022 was $10.4 million. The cost of these unvested awards is being recognized over the requisite vesting period of each award.

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Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

15. INCOME TAXES

The Company’s effective tax rate for the six months ended June 30, 2022 was 24.8% and was comparable to the effective tax rate for the six months ended June 30, 2021, of 25.1%, which resulted in income tax expense of $52.7 million and $36.9 million, respectively.

During the six months ended June 30, 2022 and June 30, 2021, the Company realized $0.1 million and $1.2 million, respectively, of excess tax benefits from stock-based awards and recorded a corresponding benefit to income tax expense.

The Company analyzes its deferred tax assets each reporting period, considering all available positive and negative evidence in determining the expected realization of those deferred tax assets. As of June 30, 2022, the Company maintains a valuation allowance of $2.2 million against deferred tax assets primarily related to state tax credits it estimates will expire before they are realized.

The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxing authorities. Such examinations may result in future assessments by these taxing authorities, and the Company accrues a liability when it believes that it is more likely than not that benefits of tax positions will not be realized. The Company believes that adequate provisions have been made for all tax returns subject to examination. As of June 30, 2022, for certain tax jurisdictions tax years 2017 through 2021 remain subject to examination. The Company believes that adequate provisions have been made for all tax returns subject to examination. Sales made to foreign distributors are not taxable in any foreign jurisdiction as the Company does not have a taxable presence in any foreign jurisdiction.

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Segment Information

6 Months Ended

Jun. 30, 2022

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 six months ended June 30, 2022 and June 30, 2021 includes data for Trex Residential and Trex Commercial (in thousands):

Segment Data:

	Three Months Ended June 30, 2022							Three Months Ended June 30, 2021
	Trex Residential		Trex Commercial			Total		Trex Residential		Trex Commercial		Total
Net sales	$	373,922	$	12,327		$	386,249	$	298,632	$	12,964	$	311,596
Net income (loss)	$	89,437	$	(521	)	$	88,916	$	61,089	$	277	$	61,366
EBITDA	$	129,550	$	(410	)	$	129,140	$	91,008	$	627	$	91,635
Depreciation and amortization	$	11,049	$	282		$	11,331	$	9,020	$	258	$	9,278
Income tax expense (benefit)	$	29,180	$	(171	)	$	29,009	$	20,886	$	92	$	20,978
Capital expenditures	$	44,251	$	67		$	44,318	$	36,514	$	224	$	36,738
Total assets	$	846,112	$	41,182		$	887,294	$	807,713	$	91,107	$	898,820

Reconciliation of Net Income to EBITDA:

	Three Months Ended June 30, 2022									Three Months Ended June 30, 2021
	Trex Residential			Trex Commercial			Total			Trex Residential		Trex Commercial		Total
Net income (loss)	$	89,437		$	(521	)	$	88,916		$	61,089	$	277	$	61,366
Interest (income) expense, net		(116	)		—			(116	)		13		—		13
Income tax expense (benefit)		29,180			(171	)		29,009			20,886		92		20,978
Depreciation and amortization		11,049			282			11,331			9,020		258		9,278
EBITDA	$	129,550		$	(410	)	$	129,140		$	91,008	$	627	$	91,635

Segment Data:

	Six Months Ended June 30, 2022							Six Months Ended June 30, 2021
	Trex Residential		Trex Commercial			Total		Trex Residential		Trex Commercial		Total
Net sales	$	701,117	$	24,360		$	725,477	$	531,702	$	25,418	$	557,120
Net income (loss)	$	161,652	$	(1,525	)	$	160,127	$	109,833	$	77	$	109,910
EBITDA	$	236,031	$	(1,466	)	$	234,565	$	161,973	$	575	$	162,548
Depreciation and amortization	$	21,240	$	565		$	21,805	$	15,231	$	472	$	15,703
Income tax expense (benefit)	$	53,243	$	(506	)	$	52,737	$	36,899	$	26	$	36,925
Capital expenditures	$	66,534	$	72		$	66,606	$	93,077	$	1,754	$	94,831
Total assets	$	846,112	$	41,182		$	887,294	$	807,713	$	91,107	$	898,820

Reconciliation of Net Income to EBITDA:

	Six Months Ended June 30, 2022									Six Months Ended June 30, 2021
	Trex Residential			Trex Commercial			Total			Trex Residential		Trex Commercial		Total
Net income (loss)	$	161,652		$	(1,525	)	$	160,127		$	109,833	$	77	$	109,910
Interest (income) expense, net		(104	)		—			(104	)		10		—		10
Income tax expense (benefit)		53,243			(506	)		52,737			36,899		26		36,925
Depreciation and amortization		21,240			565			21,805			15,231		472		15,703
EBITDA	$	236,031		$	(1,466	)	$	234,565		$	161,973	$	575	$	162,548

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Seasonality

6 Months Ended

Jun. 30, 2022

Text Block [Abstract]

Seasonality

17. SEASONALITY

The operating results for Trex Residential have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions reduce the level of home improvement and construction activity and can shift demand for its products to a later period. As part of its normal business practice and consistent with industry practice, Trex Residential has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season in order to ensure adequate availability of its product to meet anticipated seasonal consumer demand. The seasonal effects are often offset by the positive effect of the incentive programs. The operating results for Trex Commercial have not historically varied from quarter to quarter as a result of seasonality. However, they are driven by the timing of individual projects, which may vary each quarterly period.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

18. COMMITMENTS AND CONTINGENCIES

Product Warranty

The Company warrants that its decking and residential railing products will be free from material defects in workmanship and materials for warranty periods ranging from 10 years to 25 years, depending on the product and its use. If there is a breach of such warranties, the Company has an obligation either to replace the defective product or refund the purchase price. Depending on the product and its use, the Company also warrants its Trex Commercial products will be free of manufacturing defects for one to three years.

The Company continues to receive and settle claims for products manufactured at its Nevada facility prior to 2007 that exhibit surface flaking and maintains a warranty reserve to provide for the settlement of these claims. Estimating the warranty reserve for surface flaking claims requires management to estimate (1) the number of claims to be settled with payment and (2) the average cost to settle each claim.

To estimate the number of claims to be settled with payment, the Company utilizes actuarial techniques to quantify both the expected number of claims to be received and the percentage of those claims that will ultimately require payment (collectively, elements). Estimates for these elements are quantified using a range of assumptions derived from claim count history and the identification of factors influencing the claim counts. The cost per claim varies due to a number of factors, including the size of affected decks, the availability and type of replacement material used, the cost of production of replacement material and the method of claim settlement.

The Company monitors surface flaking claims activity each quarter for indications that its estimates require revision. Typically, a majority of surface flaking claims received in a year are received during the summer outdoor season, which spans the second and third quarters. It has been the Company’s practice to utilize the actuarial techniques discussed above during the third quarter, after a significant portion of all claims has been received for the fiscal year and variances to annual claims expectations are more meaningful.

The number of incoming claims received in the six months ended June 30, 2022, was significantly lower than the number of claims received in the six months ended June 30, 2021 and lower than the Company’s expectations for 2022. Average cost per claim experienced in the six months ended June 30, 2022 was significantly higher than that experienced in the six months ended June 30, 2021 and higher than the Company’s expectations for the current year. The elevated average cost per claim experienced in the six months ended June 30, 2022, was primarily the result of the closure of two large claims, which were considered in the Company’s estimation of its surface flaking warranty reserve. The Company believes its reserve at June 30, 2022 is sufficient to cover future surface flaking obligations.

The Company’s analysis is based on currently known facts and a number of assumptions, as discussed above, and current expectations. Projecting future events such as the number of claims to be received, the number of claims that will require payment and the average cost of claims could cause actual warranty liabilities to be higher or lower than those projected, which could materially affect the Company’s consolidated financial condition, results of operations or cash flows. The Company estimates that the annual number of claims received will decline over time and that the average cost per claim will increase. If the level of claims received or average cost per claim differs materially from expectations, it could result in additional increases or decreases to the warranty reserve and a decrease or an increase in earnings and cash flows in future periods. The Company estimates that a 10% change in the expected number of remaining claims to be settled with payment or the expected cost to settle claims may result in approximately a $1.7 million change in the surface flaking warranty reserve.

The following is a reconciliation of the Company’s residential product warranty reserve (in thousands):

	Six Months Ended June 30, 2022
	Surface Flaking			Other Residential			Total
Beginning balance, January 1	$	18,542		$	10,053		$	28,595
Provisions and changes in estimates		—			2,369			2,369
Settlements made during the period		(1,345	)		(1,089	)		(2,434	)
Ending balance, June 30	$	17,197		$	11,333		$	28,530

	Six Months Ended June 30, 2021
	Surface Flaking			Other Residential			Total
Beginning balance, January 1	$	21,325		$	8,148		$	29,473
Provisions and changes in estimates		—			2,429			2,429
Settlements made during the period		(1,536	)		(875	)		(2,411	)
Ending balance, June 30	$	19,789		$	9,702		$	29,491

Legal Matters

The Company has lawsuits, as well as other claims, pending against it which are ordinary routine litigation and claims incidental to the business. Management has evaluated the merits of these lawsuits and claims and believes that their ultimate resolution will not have a material effect on the Company’s consolidated financial condition, results of operations, liquidity or competitive position.

Arkansas Facility

In October 2021, the Company announced plans to add a third U.S.-based Trex Residential manufacturing facility in Little Rock, Arkansas. The new campus will sit on approximately 300 acres of land and will address increased demand for Trex Residential outdoor living products. Construction began on the new facility in the second quarter of 2022, and in July 2022, the Company entered into a design-build agreement. As previously announced, the Company anticipates spending approximately $400 million on the facility and the budget for the design-build agreement is contained within this amount. Construction for the new facility will be funded primarily through the Company’s ongoing cash generation or its line of credit. The first production output is anticipated in 2024.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Stock-Based Compensation

The Company has one stock-based compensation plan, the 2014 Stock Incentive Plan (Plan), approved by Trex stockholders in April 2014. The Plan amended and restated in its entirety the Trex Company, Inc. 2005 Stock Incentive Plan. The Plan is administered by the Compensation Committee of the Trex Board of Directors. Stock-based compensation is granted to officers, directors and certain key employees in accordance with the provisions of the Plan. The Plan provides for grants of stock options, restricted stock, restricted stock units, stock appreciation rights (SARs), and unrestricted stock. The total aggregate number of shares of Trex common stock that may be issued under the Plan is 25,680,000 and as of June 30, 2022, the total number of shares available for future issuance is 11,070,560.​​​​​​​

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Inventories (Tables)

6 Months Ended

Jun. 30, 2022

Inventory Disclosure [Abstract]

Summary of Inventories

Inventories valued at LIFO (last-in, first-out), consist of the following (in thousands):

	June 30, 2022			December 31, 2021
Finished goods	$	62,271		$	58,401
Raw materials		67,857			56,441
Total FIFO (first-in, first-out) inventories		130,128			114,842
Reserve to adjust inventories to LIFO value		(36,467	)		(36,467	)
Total LIFO inventories	$	93,661		$	78,375

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Prepaid Expenses and Other Assets (Tables)

6 Months Ended

Jun. 30, 2022

Text Block [Abstract]

Summary of Prepaid Expenses and Other Assets

Prepaid expenses and other assets consist of the following (in thousands):

	June 30, 2022		December 31, 2021
Prepaid expenses	$	14,373	$	15,061
Revenues in excess of billings		7,905		9,109
Income tax receivable		894		406
Other		473		576
Total prepaid expenses and other assets	$	23,645	$	25,152

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Accrued Expenses and Other Liabilities (Tables)

6 Months Ended

Jun. 30, 2022

Payables and Accruals [Abstract]

Summary of Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following (in thousands):

	June 30, 2022		December 31, 2021
Sales and marketing	$	38,945	$	16,439
Compensation and benefits		15,741		25,450
Operating lease liabilities		7,646		7,066
Manufacturing costs		3,923		4,110
Income taxes		2,715		—
Billings in excess of revenues		1,535		1,436
Other		4,193		3,540
Total accrued expenses and other liabilities	$	74,698	$	58,041

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Leases (Tables)

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Supplemental Cash Flow information and Supplemental balance sheet information related to operating leases

The following table includes supplemental cash flow information for the six months ended June 30, 2022 and June 30, 2021 and supplemental balance sheet information at June 30, 2022 and December 31, 2021 related to operating leases (in thousands):

	Six Months Ended June 30,
Supplemental cash flow information	2022		2021
Cash paid for amounts included in the measurement of operating lease liabilities	$	4,334	$	4,131
Operating ROU assets obtained in exchange for lease liabilities	$	6,714	$	7,047

Supplemental balance sheet information	June 30, 2022		December 31, 2021
Operating lease ROU assets	$	36,250	$	34,571
Operating lease liabilities:
Accrued expenses and other current liabilities	$	7,646	$	7,066
Operating lease liabilities		29,239		28,263
Total operating lease liabilities	$	36,885	$	35,329

Maturities of operating lease liabilities

The following table summarizes maturities of operating lease liabilities at June 30, 2022 (in thousands):

Maturities of operating lease liabilities
2022	$	4,273
2023		7,612
2024		6,799
2025		5,463
2026		4,886
Thereafter		10,156
Total lease payments		39,189
Less imputed interest		(2,304	)
Total operating lease liabilities	$	36,885

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Computation of Basic and Diluted Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except share and per share data):​​​​​​​​​​​​​​

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Numerator:
Net income available to common shareholders	$	88,916	$	61,366	$	160,127	$	109,910
Denominator:
Basic weighted average shares outstanding		113,099,561		115,362,757		113,864,741		115,512,231
Effect of dilutive securities:
Stock appreciation rights and options		96,179		193,466		110,253		200,263
Restricted stock		63,774		106,403		77,453		126,689
Diluted weighted average shares outstanding		113,259,514		115,662,626		114,052,447		115,839,183
Basic earnings per share	$	0.79	$	0.53	$	1.41	$	0.95
Diluted earnings per share	$	0.79	$	0.53	$	1.40	$	0.95

Antidilutive Securities Excluded from Computation of Earnings Per Share

The computation of diluted earnings per share excludes the following potentially dilutive securities because the effect would be anti-dilutive:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Stock appreciation rights		47,303		15,029		38,789		11,105
Restricted stock		63,131		—		38,823		11,540

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Revenue From Contracts With Customers (Tables)

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Summary of Disaggregated Net Sales

The tables also include a reconciliation of the respective disaggregated net sales with the Company’s reportable segments (in thousands).

Three Months Ended June 30, 2022	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	373,922	$	—	$	373,922
Products transferred over time and fixed price contracts		—		12,327		12,327
	$	373,922	$	12,327	$	386,249

Three Months Ended June 30, 2021	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	298,632	$	—	$	298,632
Products transferred over time and fixed price contracts		—		12,964		12,964
	$	298,632	$	12,964	$	311,596

Six Months Ended June 30, 2022	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	701,117	$	—	$	701,117
Products transferred over time and fixed price contracts		—		24,360		24,360
	$	701,117	$	24,360	$	725,477

Six Months Ended June 30, 2021	Reportable Segment
	Trex Residential		Trex Commercial		Total
Timing of Revenue Recognition and Type of Contract
Products transferred at a point in time and variable consideration contracts	$	531,702	$	—	$	531,702
Products transferred over time and fixed price contracts		—		25,418		25,418
	$	531,702	$	25,418	$	557,120

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2022

Summary of Stock-Based Compensation Grants

The following table summarizes the Company’s stock-based compensation grants for the six months ended June 30, 2022:

	Stock Awards Granted		Weighted-Average Grant Price Per Share
Time-based restricted stock units		39,001	$	81.85
Performance-based restricted stock units (a)		72,152	$	76.14
Stock appreciation rights		32,971	$	82.01

(a) Includes 47,072 of target performance-based restricted stock unit awards granted during the six months ended June 30, 2022, and adjustments of 8,160, 11,684, and 5,236 to grants due to the actual performance level achieved for restricted stock and restricted stock units awarded in 2021, 2020, and 2019, respectively.

Summary of Assumptions Used to Estimate Fair Value of Each SAR

The fair value of each SAR is estimated on the date of grant using a Black-Scholes option-pricing formula. For SARs issued in the six months ended June 30, 2022 and June 30, 2021 the data and assumptions shown in the following table were used:

	Six Months Ended June 30, 2022			Six Months Ended June 30, 2021
Weighted-average fair value of grants	$	33.9		$	51.84
Dividend yield		0	%		0	%
Average risk-free interest rate		1.9	%		0.6	%
Expected term (years)		5			5
Expected volatility		44.9	%		58.7	%

Summary of Stock-Based Compensation Expense

The following table summarizes the Company’s stock-based compensation expense (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2022			2021		2022		2021
Stock appreciation rights	$	196		$	144	$	350	$	258
Time-based restricted stock and restricted stock units		959			754		1,806		1,441
Performance-based restricted stock and restricted stock units		(151	)		1,165		1,007		2,440
Employee stock purchase plan		53			69		119		169
Total stock-based compensation	$	1,057		$	2,132	$	3,282	$	4,308

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Details of Segment Information

The below segment data for the three months and six months ended June 30, 2022 and June 30, 2021 includes data for Trex Residential and Trex Commercial (in thousands):

Segment Data:

	Three Months Ended June 30, 2022							Three Months Ended June 30, 2021
	Trex Residential		Trex Commercial			Total		Trex Residential		Trex Commercial		Total
Net sales	$	373,922	$	12,327		$	386,249	$	298,632	$	12,964	$	311,596
Net income (loss)	$	89,437	$	(521	)	$	88,916	$	61,089	$	277	$	61,366
EBITDA	$	129,550	$	(410	)	$	129,140	$	91,008	$	627	$	91,635
Depreciation and amortization	$	11,049	$	282		$	11,331	$	9,020	$	258	$	9,278
Income tax expense (benefit)	$	29,180	$	(171	)	$	29,009	$	20,886	$	92	$	20,978
Capital expenditures	$	44,251	$	67		$	44,318	$	36,514	$	224	$	36,738
Total assets	$	846,112	$	41,182		$	887,294	$	807,713	$	91,107	$	898,820

Segment Data:

	Six Months Ended June 30, 2022							Six Months Ended June 30, 2021
	Trex Residential		Trex Commercial			Total		Trex Residential		Trex Commercial		Total
Net sales	$	701,117	$	24,360		$	725,477	$	531,702	$	25,418	$	557,120
Net income (loss)	$	161,652	$	(1,525	)	$	160,127	$	109,833	$	77	$	109,910
EBITDA	$	236,031	$	(1,466	)	$	234,565	$	161,973	$	575	$	162,548
Depreciation and amortization	$	21,240	$	565		$	21,805	$	15,231	$	472	$	15,703
Income tax expense (benefit)	$	53,243	$	(506	)	$	52,737	$	36,899	$	26	$	36,925
Capital expenditures	$	66,534	$	72		$	66,606	$	93,077	$	1,754	$	94,831
Total assets	$	846,112	$	41,182		$	887,294	$	807,713	$	91,107	$	898,820

Schedule of Reconciliation of Net Income to EBITDA

Reconciliation of Net Income to EBITDA:

	Three Months Ended June 30, 2022									Three Months Ended June 30, 2021
	Trex Residential			Trex Commercial			Total			Trex Residential		Trex Commercial		Total
Net income (loss)	$	89,437		$	(521	)	$	88,916		$	61,089	$	277	$	61,366
Interest (income) expense, net		(116	)		—			(116	)		13		—		13
Income tax expense (benefit)		29,180			(171	)		29,009			20,886		92		20,978
Depreciation and amortization		11,049			282			11,331			9,020		258		9,278
EBITDA	$	129,550		$	(410	)	$	129,140		$	91,008	$	627	$	91,635

Reconciliation of Net Income to EBITDA:

	Six Months Ended June 30, 2022									Six Months Ended June 30, 2021
	Trex Residential			Trex Commercial			Total			Trex Residential		Trex Commercial		Total
Net income (loss)	$	161,652		$	(1,525	)	$	160,127		$	109,833	$	77	$	109,910
Interest (income) expense, net		(104	)		—			(104	)		10		—		10
Income tax expense (benefit)		53,243			(506	)		52,737			36,899		26		36,925
Depreciation and amortization		21,240			565			21,805			15,231		472		15,703
EBITDA	$	236,031		$	(1,466	)	$	234,565		$	161,973	$	575	$	162,548

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Summary of Reconciliation of Company's Residential Product Warranty Reserve

The following is a reconciliation of the Company’s residential product warranty reserve (in thousands):

	Six Months Ended June 30, 2022
	Surface Flaking			Other Residential			Total
Beginning balance, January 1	$	18,542		$	10,053		$	28,595
Provisions and changes in estimates		—			2,369			2,369
Settlements made during the period		(1,345	)		(1,089	)		(2,434	)
Ending balance, June 30	$	17,197		$	11,333		$	28,530

	Six Months Ended June 30, 2021
	Surface Flaking			Other Residential			Total
Beginning balance, January 1	$	21,325		$	8,148		$	29,473
Provisions and changes in estimates		—			2,429			2,429
Settlements made during the period		(1,536	)		(875	)		(2,411	)
Ending balance, June 30	$	19,789		$	9,702		$	29,491

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Business and Organization - Additional Information (Detail) - Segment	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Accounting Policies [Abstract]
Number of reportable segments	2	2

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Inventories - Summary of Inventories (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Finished goods	$ 62,271	$ 58,401
Raw materials	67,857	56,441
Total FIFO (first-in, first-out) inventories	130,128	114,842
Reserve to adjust inventories to LIFO value	(36,467)	(36,467)
Total LIFO inventories	$ 93,661	$ 78,375

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Inventories - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
LIFO inventory liquidations	$ 0
Raw materials	$ 7,200,000	$ 5,400,000

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Prepaid Expenses and Other Assets - Summary of Prepaid Expenses and Other Assets (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Prepaid Expense and Other Assets [Abstract]
Prepaid expenses	$ 14,373	$ 15,061
Revenues in excess of billings	7,905	9,109
Income tax receivable	894	406
Other	473	576
Total prepaid expenses and other assets	$ 23,645	$ 25,152

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Goodwill and Other Intangible Assets, Net - Additional Information (Detail) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Goodwill [Line Items]
Amortization of intangible asset	$ 0.2	$ 0.2
Intangible Assets	6.3		$ 6.3
Accumulated Amortization	1.7		1.5
Residential [Member]
Goodwill [Line Items]
Goodwill	$ 14.2		$ 14.2
Domain Names [Member]
Goodwill [Line Items]
Amortization period	15 years

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Accrued Expenses and Other Liabilities - Summary of Accrued Expenses and Other Liabilities (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Payables and Accruals [Abstract]
Sales and marketing	$ 38,945	$ 16,439
Compensation and benefits	15,741	25,450
Operating lease liabilities	7,646	7,066
Manufacturing costs	3,923	4,110
Income taxes	2,715	0
Billings in excess of revenues	1,535	1,436
Other	4,193	3,540
Total accrued expenses and other liabilities	$ 74,698	$ 58,041

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Debt - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2022	May 18, 2022	May 26, 2020
Line of Credit Facility [Line Items]
Outstanding borrowing capacity	$ 0
Remaining available borrowing capacity	$ 400,000,000
Termination date of the Credit Agreement	Nov. 05, 2024
Revolver Loans Portion Effective January 1 through June 30 [Member] | Fourth Amended And Restated Credit Agreement [Member]
Line of Credit Facility [Line Items]
Revolving loans in a collective maximum principal amount	$ 250,000,000
Revolver Loans Portion Effective July 1 through December 31 [Member] | Fourth Amended And Restated Credit Agreement [Member]
Line of Credit Facility [Line Items]
Revolving loans in a collective maximum principal amount	$ 200,000,000
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Revolving loans in a collective maximum principal amount			$ 100,000,000
Revolving Credit Facility [Member] | Fifth Amendment And Restated Agreement [Member]
Line of Credit Facility [Line Items]
Termination date of the Credit Agreement	May 18, 2027
Revolving loans in a collective maximum principal amount		$ 400,000,000
Number Of Business Days Within Which Lender May Raise Objections To Amendment	10 days
Revolving Credit Facility [Member] | Fifth Amendment And Restated Agreement [Member] | Letter of Credit [Member]
Line of Credit Facility [Line Items]
Revolving loans in a collective maximum principal amount		60,000,000
Revolving Credit Facility [Member] | Fifth Amendment And Restated Agreement [Member] | Swingline Letter Of Credit [Member]
Line of Credit Facility [Line Items]
Revolving loans in a collective maximum principal amount		$ 20,000,000
Revolving Credit Facility [Member] | Base Rate [Member] | Fifth Amendment And Restated Agreement [Member]
Line of Credit Facility [Line Items]
Interest rate	0.50%
Debt instrument, description of variable rate basis	the Federal Funds Rate plus 0.50%
Revolving Credit Facility [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate [Member] | Fifth Amendment And Restated Agreement [Member]
Line of Credit Facility [Line Items]
Interest rate	1.00%
Debt instrument, description of variable rate basis	the Term SOFR plus 1.0%

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Leases - Additional Information (Detail) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Weighted average discount rate	2.18%		2.47%
Operating lease cost	$ 4.2	$ 4.1
Weighted average remaining lease term	5 years 8 months 12 days		5 years 9 months 18 days
Minimum [Member]
Operating Lease terms	1 year
Maximum [Member]
Operating Lease terms	7 years

XML

Leases - Supplemental Cash flow Information to operating leases (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Supplemental cash flow information
Cash paid for amounts included in the measurement of operating lease liabilities	$ 4,334	$ 4,131
Operating ROU assets obtained in exchange for lease liabilities	6,714	$ 7,047
Supplemental balance sheet information
Operating lease ROU assets	36,250		$ 34,571
Operating lease liabilities:
Accrued expenses and other current liabilities	7,646		7,066
Operating lease liabilities	29,239		28,263
Total operating lease liabilities	$ 36,885		$ 35,329

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Leases - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Operating Lease Liabilities, Payments Due [Abstract]
2022	$ 4,273
2023	7,612
2024	6,799
2025	5,463
2026	4,886
Thereafter	10,156
Total lease payments	39,189
Less imputed interest	(2,304)
Total operating lease liabilities	$ 36,885	$ 35,329

XML

Stockholders' Equity - Additional Information (Detail) - $ / shares	6 Months Ended
	Jun. 30, 2022	May 05, 2022	Dec. 31, 2021	Mar. 31, 2021
Equity, Class of Treasury Stock [Line Items]
Common stock, shares authorized	360,000,000	360,000,000	360,000,000	180,000,000
Common stock, par value	$ 0.01	$ 0.01	$ 0.01
Stock Repurchase Programs [Member]
Equity, Class of Treasury Stock [Line Items]
Common stock repurchase program, authorized shares	11,600,000
Number of shares repurchased by the Company	7,300,000

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Stockholders' Equity - Computation of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Numerator:
Net income	$ 88,916	$ 71,211	$ 61,366	$ 48,545	$ 160,127	$ 109,910
Denominator:
Basic weighted average shares outstanding	113,099,561		115,362,757		113,864,741	115,512,231
Effect of dilutive securities:
Diluted weighted average shares outstanding	113,259,514		115,662,626		114,052,447	115,839,183
Basic earnings per share	$ 0.79		$ 0.53		$ 1.41	$ 0.95
Diluted earnings per share	$ 0.79		$ 0.53		$ 1.4	$ 0.95
Stock appreciation rights [Member]
Effect of dilutive securities:
Dilutive securities	96,179		193,466		110,253	200,263
Restricted stock [Member]
Effect of dilutive securities:
Dilutive securities	63,774		106,403		77,453	126,689

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Stockholders' Equity - Antidilutive Securities Excluded from Computation of Earnings Per Share (Detail) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Restricted stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from the computation of diluted earnings per share	63,131	0	38,823	11,540
Stock appreciation rights [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from the computation of diluted earnings per share	47,303	15,029	38,789	11,105

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Revenue From Contracts With Customers - Additional Information (Detail) $ in Millions	6 Months Ended
	Jun. 30, 2022 USD ($)
Revenue from Contract with Customer [Abstract]
Revenue remaining performance obligation	$ 36
Revenue remaining performance obligation description	greater than one year

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Revenue From Contracts With Customers - Summary of Disaggregated Net Sales (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Disaggregation of Revenue [Line Items]
Revenue from contract with customers	$ 386,249	$ 311,596	$ 725,477	$ 557,120
Products Transferred at a Point in Time and Variable Consideration Contracts [Member]
Disaggregation of Revenue [Line Items]
Revenue from contract with customers	373,922	298,632	701,117	531,702
Products Transferred Over Time and Fixed Price Contracts [Member]
Disaggregation of Revenue [Line Items]
Revenue from contract with customers	12,327	12,964	24,360	25,418
Residential [Member]
Disaggregation of Revenue [Line Items]
Revenue from contract with customers	373,922	298,632	701,117	531,702
Residential [Member] | Products Transferred at a Point in Time and Variable Consideration Contracts [Member]
Disaggregation of Revenue [Line Items]
Revenue from contract with customers	373,922	298,632	701,117	531,702
Commercial [Member]
Disaggregation of Revenue [Line Items]
Revenue from contract with customers	12,327	12,964	24,360	25,418
Commercial [Member] | Products Transferred Over Time and Fixed Price Contracts [Member]
Disaggregation of Revenue [Line Items]
Revenue from contract with customers	$ 12,327	$ 12,964	$ 24,360	$ 25,418

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Stock-Based Compensation - Additional Information (Detail) - USD ($) $ in Millions	6 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to unvested awards	$ 10.4
2014 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total aggregate number of shares of common stock that may be issued	25,680,000
Number of common stock available for future issuance	11,070,560
Performance-Based Restricted Stock and Performance-Based Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares or rights issued		47,072
Stock Appreciation Rights [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value assumptions method used	Black-Scholes option-pricing formula
Number of shares or rights issued	32,971
Performance Based Restricted Stock Adjustment [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares or rights issued			8,160	11,684	5,236

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Stock-Based Compensation - Summary of Stock-Based Compensation Grants (Detail)	6 Months Ended
	Jun. 30, 2022 $ / shares shares
Time Based Restricted Stock Units [Member]
Stock Awards Granted | shares	39,001
Weighted-Average Grant Price Per Share | $ / shares	$ 81.85
Performance Based Restricted Stock Units [Member]
Stock Awards Granted | shares	72,152
Weighted-Average Grant Price Per Share | $ / shares	$ 76.14
Stock Appreciation Rights [Member]
Stock Awards Granted | shares	32,971
Weighted-Average Grant Price Per Share | $ / shares	$ 82.01

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Stock-Based Compensation - Summary of Assumptions Used to Estimate Fair Value of Each SAR (Detail) - Stock Appreciation Rights [Member] - $ / shares	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Share Based Compensation Arrangement by Share Based Payment Award Fair Value Assumptions and Methodology [Line Items]
Weighted-average fair value of grants	$ 33.9	$ 51.84
Dividend yield	0.00%	0.00%
Average risk-free interest rate	1.90%	0.60%
Expected term (years)	5 years	5 years
Expected volatility	44.90%	58.70%

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Stock-Based Compensation - Summary of Stock-Based Compensation Expenses (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 1,057	$ 2,132	$ 3,282	$ 4,308
Stock Appreciation Rights [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	196	144	350	258
Time-Based Restricted Stock and Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	959	754	1,806	1,441
Performance-Based Restricted Stock and Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	(151)	1,165	1,007	2,440
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 53	$ 69	$ 119	$ 169

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Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Tax Contingency [Line Items]
Valuation allowance	$ 2,200,000		$ 2,200,000
Income tax expense (benefit)	$ 29,009,000	$ 20,978,000	$ 52,737,000	$ 36,925,000
Effective tax rate			24.80%	25.10%
Excess tax benefits from stock based awards			$ 100	$ 1,200
Earliest Tax Year [Member] | Federal Tax Jurisdiction [Member]
Income Tax Contingency [Line Items]
Tax years subject to examination			2017
Latest Tax Year [Member] | Federal Tax Jurisdiction [Member]
Income Tax Contingency [Line Items]
Tax years subject to examination			2021

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Segment Information - Additional Information (Detail) - Segment	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Segment Reporting Information [Line Items]
Number of reportable segment	2	2

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Segment Information - Details of Segment Information (Detail) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Segment Reporting Information [Line Items]
Net sales	$ 386,249		$ 311,596		$ 725,477	$ 557,120
Net income (loss)	88,916	$ 71,211	61,366	$ 48,545	160,127	109,910
Depreciation and amortization					21,804	15,702
Income tax expense (benefit)	29,009		20,978		52,737	36,925
Total assets	887,294				887,294		$ 920,321
Residential [Member]
Segment Reporting Information [Line Items]
Net sales	373,922		298,632		701,117	531,702
Net income (loss)			61,089			109,833
EBITDA			91,008			161,973
Depreciation and amortization			9,020			15,231
Income tax expense (benefit)			20,886			36,899
Commercial [Member]
Segment Reporting Information [Line Items]
Net sales	12,327		12,964		24,360	25,418
Net income (loss)			277			77
EBITDA			627			575
Depreciation and amortization			258			472
Income tax expense (benefit)			92			26
Operating Segments [Member]
Segment Reporting Information [Line Items]
Net sales	386,249		311,596		725,477	557,120
Net income (loss)	88,916		61,366		160,127	109,910
EBITDA	129,140		91,635		234,565	162,548
Depreciation and amortization	11,331		9,278		21,805	15,703
Income tax expense (benefit)	29,009		20,978		52,737	36,925
Capital expenditures	44,318		36,738		66,606	94,831
Total assets	887,294		898,820	898,820	887,294	898,820
Operating Segments [Member] | Residential [Member]
Segment Reporting Information [Line Items]
Net sales	373,922		298,632		701,117	531,702
Net income (loss)	89,437		61,089		161,652	109,833
EBITDA	129,550		91,008		236,031	161,973
Depreciation and amortization	11,049		9,020		21,240	15,231
Income tax expense (benefit)	29,180		20,886		53,243	36,899
Capital expenditures	44,251		36,514		66,534	93,077
Total assets	846,112		807,713	807,713	846,112	807,713
Operating Segments [Member] | Commercial [Member]
Segment Reporting Information [Line Items]
Net sales	12,327		12,964		24,360	25,418
Net income (loss)	(521)		277		(1,525)	77
EBITDA	(410)		627		(1,466)	575
Depreciation and amortization	282		258		565	472
Income tax expense (benefit)	(171)		92		(506)	26
Capital expenditures	67		224		72	1,754
Total assets	$ 41,182		$ 91,107	$ 91,107	$ 41,182	$ 91,107

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Segment Information - Schedule of Reconciliation of Net Income to EBITDA (Detail) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Segment Reporting Information [Line Items]
Net income (loss)	$ 88,916	$ 71,211	$ 61,366	$ 48,545	$ 160,127	$ 109,910
Interest (income) expense, net	116		(13)		104	(10)
Income tax expense (benefit)	29,009		20,978		52,737	36,925
Depreciation and amortization					21,804	15,702
Residential [Member]
Segment Reporting Information [Line Items]
Net income (loss)			61,089			109,833
Interest (income) expense, net			13			10
Income tax expense (benefit)			20,886			36,899
Depreciation and amortization			9,020			15,231
EBITDA			91,008			161,973
Commercial [Member]
Segment Reporting Information [Line Items]
Net income (loss)			277			77
Income tax expense (benefit)			92			26
Depreciation and amortization			258			472
EBITDA			627			575
Operating Segments [Member]
Segment Reporting Information [Line Items]
Net income (loss)	88,916		61,366		160,127	109,910
Interest (income) expense, net	(116)		13		(104)	10
Income tax expense (benefit)	29,009		20,978		52,737	36,925
Depreciation and amortization	11,331		9,278		21,805	15,703
EBITDA	129,140		91,635		234,565	162,548
Operating Segments [Member] | Residential [Member]
Segment Reporting Information [Line Items]
Net income (loss)	89,437		61,089		161,652	109,833
Interest (income) expense, net	(116)				(104)
Income tax expense (benefit)	29,180		20,886		53,243	36,899
Depreciation and amortization	11,049		9,020		21,240	15,231
EBITDA	129,550		91,008		236,031	161,973
Operating Segments [Member] | Commercial [Member]
Segment Reporting Information [Line Items]
Net income (loss)	(521)		277		(1,525)	77
Income tax expense (benefit)	(171)		92		(506)	26
Depreciation and amortization	282		258		565	472
EBITDA	$ (410)		$ 627		$ (1,466)	$ 575

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Commitments and Contingencies - Additional Information (Detail) $ in Millions	6 Months Ended
	Jun. 30, 2022 USD ($)	Oct. 31, 2021 USD ($) a
Schedule Of Commitments And Contingencies [Line Items]
Change in warranty reserve for disclosure purposes only	$ 1.7
Area of Land | a		300
Residential Portfolio Segment [Member]
Schedule Of Commitments And Contingencies [Line Items]
Land and Land Improvements		$ 400.0
Minimum [Member]
Schedule Of Commitments And Contingencies [Line Items]
Warranty period	10 years
Maximum [Member]
Schedule Of Commitments And Contingencies [Line Items]
Warranty period	25 years
Surface Flaking Warranty Reserve [Member]
Schedule Of Commitments And Contingencies [Line Items]
Percentage change in warranty claims used as a threshold for disclosure	10.00%
Commercial Railing And Staging Systems [Member] | Commercial Use [Member] | Minimum [Member]
Schedule Of Commitments And Contingencies [Line Items]
Warranty period	1 year
Commercial Railing And Staging Systems [Member] | Commercial Use [Member] | Maximum [Member]
Schedule Of Commitments And Contingencies [Line Items]
Warranty period	3 years

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Commitments and Contingencies - Summary of Reconciliation of Company's Residential Product Warranty Reserve (Detail) - Surface Flaking Warranty Reserve [Member] - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Product Warranty Liability [Line Items]
Beginning balance	$ 28,595	$ 29,473
Provisions and changes in estimates	2,369	2,429
Settlements made during the period	(2,434)	(2,411)
Ending balance	28,530	29,491
Surface Flaking [Member]
Product Warranty Liability [Line Items]
Beginning balance	18,542	21,325
Settlements made during the period	(1,345)	(1,536)
Ending balance	17,197	19,789
Other Residential [Member]
Product Warranty Liability [Line Items]
Beginning balance	10,053	8,148
Provisions and changes in estimates	2,369	2,429
Settlements made during the period	(1,089)	(875)
Ending balance	$ 11,333	$ 9,702