TREX CO INC 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure 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 December 31, 2024. 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. 36 Table of Contents Management’s Report on Internal Control Over Financial Reporting We, as members of management of Trex Company, Inc. (Company), are responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. We assessed the Company’s internal control over financial reporting as of December 31, 2024, based on criteria for effective internal control over financial reporting established in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO Framework). Based on this assessment, we concluded that, as of December 31, 2024, our internal control over financial reporting was effective, based on the COSO Framework. The effectiveness of our internal control over financial reporting as of December 31, 2024, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which follows hereafter. TREX COMPANY, INC. February 24, 2025 By: /S/ BRYAN H. FAIRBANKS Bryan H. Fairbanks President and Chief Executive Officer (Principal Executive Officer) February 24, 2025 By: /S/ BRENDA K. LOVCIK Brenda K. Lovcik Senior Vice President and Chief Financial Officer (Principal Financial Officer) Changes in Internal Control Over Financial Reporting There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation described above in “Management’s Report on Internal Control Over Financial Reporting” that occurred during the Company’s fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 37 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Trex Company, Inc. Opinion on Internal Control Over Financial Reporting We have audited Trex Company, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Trex Company, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2024 consolidated financial statements of the Company and our report dated February 24, 2025 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Baltimore, Maryland February 24, 2025 38 Table of Contents Item 9B. Othe r Information Insider Trading Arrangements . During the quarter ended December 31, 2024 , no ne of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as identified in Item 408(c) of Regulation S-K). Item 9C. Disclosure R egarding Foreign Jurisdictions that Prevent Inspections None. 39 Table of Contents PART III Item 10. Directors, Ex ecutive Officers and Corporate Governance Information responsive to this Item 10 is incorporated herein by reference to the sections titled “Information About Nominating and Continuing Directors,” “Named Executive Officers,” and “Corporate Governance” that will be included in our definitive proxy statement for our 2025 annual meeting of stockholders, which we will file with the U.S. Securities and Exchange Commission (SEC) on or before 120 days after our 2024 fiscal year-end. We have adopted a Code of Conduct and Ethics, which is applicable to all directors, officers and employees, including our Chief Executive Officer and Chief Financial Officer. The code is available on our corporate web site and in print to any stockholder who requests a copy. We also make available on our web site, at www.trex.com/our-company/corporate-governance , and in print to any stockholder who requests them, copies of our corporate governance principles and the charters of each standing committee of our board of directors. Requests for copies of these documents should be directed to Corporate Secretary, Trex Company, Inc., 2500 Trex Way, Winchester, Virginia 22601. To the extent required by SEC rules, we intend to disclose any amendments to our code of conduct and ethics, and any waiver of a provision of the code with respect to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on our web site referred to above within four business days following any such amendment or waiver, or within any other period that may be required under SEC rules from time to time. We have adopted an Insider Trading Policy that governs the purchase or sale of securities by employees, directors, officers, and any other company including customers or suppliers of Trex Company, Inc. A copy of our insider trading policy is filed as Exhibit 19.1 to this Annual Report. Item 11. Exe cutive Compensation Information responsive to this Item 11 is incorporated herein by reference to the sections titled “Non-Employee Director Compensation,” “2024 Non-Employee Director Compensation,” “2024 Non-Employee Director Equity Awards,” “Compensation Discussion and Analysis,” “Report of the Compensation Committee of the Board of Directors of Trex Company, Inc.,” “Summary Compensation Table,” “All Other Compensation Table,” “Grants of Plan-Based Awards,” “Outstanding Equity Awards at Fiscal-Year End,” “2024 Option / SAR Exercises and Stock Vested,” “Retention, Severance and Change in Control Agreements,” “Severance and Change in Control Compensation as of December 31, 2024,” “The Company’s Compensation Policies and Practices as They Relate to Risk,” “Corporate Governance – Compensation Committee Interlocks and Insider Participation” that will be included in our definitive proxy statement for our 2025 annual meeting of stockholders, which we will file with the SEC on or before 120 days after our 2024 fiscal year-end. Item 12. Security O wnership of Certain Beneficial Owners and Management and Related Stockholder Matters Information responsive to this Item 12 is incorporated herein by reference to the sections titled “Security Ownership” and “Equity Compensation Plan Information” that will be included in our definitive proxy statement for our 2025 annual meeting of stockholders, which we will file with the SEC on or before 120 days after our 2024 fiscal year-end. Item 13. Certain R elationships and Related Transactions, and Director Independence Information responsive to this Item 13 is incorporated herein by reference to the sections titled “Corporate Governance – Board Leadership Structure – Director Independence” and “Transactions with Related Persons” that will be included in our definitive proxy statement for our 2025 annual meeting of stockholders, which we will file with the SEC on or before 120 days after our 2024 fiscal year-end. Item 14. Principal Accounting Fees and Services Information responsive to this Item 14 is incorporated herein by reference to the section titled “Independent Registered Public Accounting Firm” that will be included in our definitive proxy statement for our 2025 annual meeting of stockholders, which we will file with the SEC on or before 120 days after our 2024 fiscal year-end. 40 Table of Contents PART IV Item 15. Exhibits an d Financial Statement Schedules (a)(1) The following Consolidated Financial Statements of the Company are incorporated by reference in Part II, Item 8 of this Form 10-K: Report of Independent Registered Public Accounting Firm (PCAOB ID 42) F-2 Consolidated Financial Statements Consolidated Statements of Comprehensive Income for the three years ended December 31, 2024 F- 4 Consolidated Balance Sheets as of December 31, 2024 and 2023 F- 5 Consolidated Statements of Changes in Stockholders’ Equity for the three years ended December 31, 2024 F- 6 Consolidated Statements of Cash Flows for the three years ended December 31, 2024 F- 7 Notes to Consolidated Financial Statements F- 8 (a)(2) The following financial statement schedule is filed as part of this report: Schedule II—Valuation and Qualifying Accounts and Reserves F- 29 All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable or not material and, therefore, have been omitted. (a)(3) See Exhibit Index at the end of the Annual Report on Form 10-K for the information required by this Item. Item 16. Form 10-K Summary None. 41 Table of Contents 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 dated February 21, 2024. 10-K 3.3 February 26, 2024 001-14649 4.1 Specimen certificate representing the Company’s common stock. S-1/A 4.1 March 24, 1999 333-63287 4.2 First Amendment to Credit Agreement dated as of December 22, 2022 to the Credit Agreement dated May 18, 2022 by and among the Company, as borrower; the guarantors party thereto; Bank of America, N.A. (BOA), as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; TD Bank, N.A. as lender and Syndication Agent; Regions Bank, PNC Bank, National Association, and Wells Fargo Bank, National Association (each, a Lender and collectively, the Lenders), arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner. 8-K 4.1 December 23, 2022 001-14649 4.3 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 4.4 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.A. 8-K 4.2 May 20, 2022 001-14649 4.5 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 4.6 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 4.7 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 4.8 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 4.9 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 42 Table of Contents Incorporated by reference Exhibit Number Description Form Exhibit Filing Date File No. 4.10 Fourth Amended and Restated Credit Agreement dated as of November 5, 2019 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; and certain other lenders including Wells Fargo Bank, N.A., who is also Syndication Agent, SunTrust Bank, and Branch Banking and Trust Company arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner. 8-K 4.1 November 6, 2019 001-14649 4.11 First Amendment to the Credit Agreement by and among Trex Company, Inc. 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; Truist Bank; and Regions Bank, arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner dated May 26, 2020. 8-K 4.1 May 28, 2020 001-14649 4.12 Fourth Amended and Restated Credit Agreement 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; and certain other lenders including Wells Fargo Bank, N.A., who is also Syndication Agent, Truist Bank; and Regions Bank, arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner, dated May 26, 2020. 8-K 4.2 May 28, 2020 001-14649 4.13 Note dated November 5, 2019 payable by the Company to Bank of America, N.A. in the amount of the lesser of $125,000,000 or the outstanding revolver advances made by Bank of America, N.A. 8-K 4.2 November 6, 2019 001-14649 4.14 Note dated November 5, 2019 payable by the Company to Wells Fargo Bank, N.A. in the amount of the lesser of $70,000,000 or the outstanding revolver advances made by Wells Fargo Bank, N.A. 8-K 4.3 November 6, 2019 001-14649 4.15 Note dated November 5, 2019 payable by the Company to SunTrust Bank in the amount of the lesser of $30,000,000 or the outstanding revolver advances made by SunTrust Bank. 8-K 4.4 November 6, 2019 001-14649 4.16 Note dated November 5, 2019 payable by the Company to Branch Banking and Trust Company in the amount of the lesser of $25,000,000 or the outstanding revolver advances made by Branch Banking and Trust Company. 8-K 4.5 November 6, 2019 001-14649 4.17 Note dated May 26, 2020 payable by the Company to Regions Bank. 8-K 4.6 May 28, 2020 001-14649 4.18 Fourth Amended and Restated Security and Pledge Agreement dated as of November 5, 2019 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 4.6 November 6, 2019 001-14649 4.19 Description of Securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. 10-K 4.19 February 22, 2021 001-14649 4.20 Second Amendment to Credit Agreement dated as of October 10, 2024 by and among the Company, as borrower; the guarantors party thereto; Bank of America, N.A. (BOA), as a Lender, Administrative Agent, Swing Line Lender and L/C Issuer; TD Bank, N.A. Syndication Agent, arranged by BofA Securities, Inc. as Sole Lead Arranger and Sole Bookrunner. 8-K 4.1 October 11, 2024 001-14649 43 Table of Contents Incorporated by reference Exhibit Number Description Form Exhibit Filing Date File No. 10.1** Trex Company, Inc. 2023 Stock Incentive Plan. 10-Q 10.1 May 8, 2023 001-14649 10.2** Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors as amended on July 26, 2023. 10-Q 10.2 July 31, 2023 001-14649 10.3** Form of Trex Company, Inc. 2023 Stock Incentive Plan Stock Appreciation Rights Agreement. 10-Q 10.3 October 28, 2024 001-14649 10.4** Form of Trex Company, Inc. 2023 Stock Incentive Plan Time-Based Restricted Stock Unit Agreement. 10-Q 10.4 October 28, 2024 001-14649 10.5** Form of Trex Company, Inc. 2023 Stock Incentive Plan Performance-Based Restricted Stock Unit Agreement. 10-Q 10.5 October 28, 2024 001-14649 10.6** Form of Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors Restricted Stock Unit Agreement. 10-Q 10.6 July 31, 2023 001-14649 10.7** Amended and Restated Severance Agreement dated July 31, 2023 by and between Trex Company, Inc. and Bryan H. Fairbanks. 10-Q 10.7 July 31, 2023 001-14649 10.8** Form of Severance Agreement between Trex Company, Inc. and Officers other than the Chief Executive Officer. 10-Q 10.8 July 31, 2023 001-14649 10.9 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 10.10 Form of Indemnity Agreement for Directors. 10-K 10.19 March 12, 2009 001-14649 10.11 Form of Indemnity Agreement for Officers. 10-K 10.20 March 12, 2009 001-14649 10.12 Form of Indemnity Agreement for Director/Officers. 10-K 10.21 March 12, 2009 001.14649 10.13 Form of Distributor Agreement of Trex Company, Inc. 10-K 10.23 March 12, 2009 001-14649 10.14 Form of Trex Company, Inc. Fencing Agreement for Installers/Retailers. 10-Q 10.4 November 9, 2006 001-14649 10.15 Asset Purchase Agreement dated as of December 30, 2022 by and between Trex Commercial Products, Inc., Trex Company, Inc. and Sightline Commercial Solutions, LLC. 8-K 10.1 December 30, 2022 001-14649 19.1 Insider Trading Policy 10-K 19.1 February 26, 2024 001-14649 21* Subsidiaries of the Company. 23* Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. 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). 97.1 Recovery of Compensation for Accounting Restatements Policy 10-K 97.1 February 26, 2024 001-14649 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 With Embedded Linkbase Documents. 44 Table of Contents Incorporated by reference Exhibit Number Description Form Exhibit Filing Date File No. 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. ** Management contract or compensatory plan or agreement. *** Furnished herewith. 45 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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: February 24, 2025 By:  /S/ B RYAN H. F AIRBANKS Bryan H. Fairbanks President and Chief Executive Officer (Duly Authorized Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed as of February 24, 2025 by the following persons on behalf of the registrant and in the capacities indicated. Signature Title /S/ B ryan H. Fairbanks Bryan H. Fairbanks President and Chief Executive Officer (Principal Executive Officer); Director /S/ Brenda K. Lovcik Brenda K. Lovcik Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) /S/ James E. Cline James E. Cline Chairman /S/ Ronald W. Kaplan Ronald W. Kaplan Vice Chairman /S/ Jay M. Gratz Jay M. Gratz Director /S/ Kristine L. Juster Kristine L. Juster Director /S/ D. C hristian K effer D. Christian Keffer Director /S/ Gena C. Lovett Gena C. Lovett Director /S/ Melkeya Mcduffie Melkeya McDuffie Director /S/ Patricia B. Robinson Patricia B. Robinson Director /S/ Gerald Volas Gerald Volas Director 46 Table of Contents TREX COMPANY, INC. Index to Consoli dated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) F-2 Consolidated Financial Statements Consolidated Statements of Comprehensive Income for the three years ended December 31, 2024 F- 4 Consolidated Balance Sheets as of December 31, 2024 and 2023 F- 5 Consolidated Statements of Changes in Stockholders’ Equity for the three years ended December 31, 2024 F- 6 Consolidated Statements of Cash Flows for the three years ended December 31, 2024 F- 7 Notes to Consolidated Financial Statements F- 8 The following Consolidated Financial Statement Schedule of the Registrant is filed as part of this Report as required to be included in Item 15(a)(2): Page Schedule II—Valuation and Qualifying Accounts and Reserves F- 29 F- 1 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Trex Company, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Trex Company, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 24, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Surface Flaking Warranty Reserve Description of the Matter At December 31, 2024, the Company’s surface flaking warranty reserve was $7.2 million. As discussed in Note 19 of the consolidated financial statements, the Company continues to receive and settle claims for decking 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. The Company’s surface flaking warranty reserve is based on management’s estimate of the number of claims to be settled with payment and the average cost to settle each claim. Auditing the surface flaking warranty reserve is complex because it involves the estimation of the number of claims to be settled with payment and requires the use of actuarial specialists. This estimate has a significant effect on the surface flaking warranty reserve. F- 2 Table of Contents How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the Company’s process to estimate the number of claims to be settled with payment. To test the estimated number of claims to be settled with payment, our audit procedures included, among others, evaluating the methodology and the significant assumptions used by management. We also involved an actuarial specialist to assist us in independently calculating a range of the expected number of claims to be settled with payment and compared that to the Company’s range. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1995. Baltimore, Maryland February 24, 2025 F- 3 Table of Contents TREX COMPANY, INC. CONSOLIDATED STATEMENTS OF C OMPREHENSIVE INCOME Year Ended December 31, 2024 2023 2022 (In thousands, except share and per share data) Net sales $ 1,151,449 $ 1,094,837 $ 1,106,043 Cost of sales 665,781 642,430 702,054 Gross profit 485,668 452,407 403,989 Selling, general and administrative expenses 179,995 176,203 141,831 Loss on sale — — 15,423 Income from operations 305,673 276,204 246,735 Interest (income) expense, net ( 11 ) 5 ( 103 ) Income before income taxes 305,684 276,199 246,838 Provision for income taxes 79,292 70,815 62,212 Net income $ 226,392 $ 205,384 $ 184,626 Basic earnings per common share $ 2.09 $ 1.89 $ 1.65 Basic weighted average common shares outstanding 108,191,635 108,680,459 111,710,676 Diluted earnings per common share $ 2.09 $ 1.89 $ 1.65 Diluted weighted average common shares outstanding 108,322,576 108,809,403 111,880,488 Comprehensive income $ 226,392 $ 205,384 $ 184,626 See Notes to Consolidated Financial Statements. F- 4 Table of Contents TREX COMPANY, INC. CONSOLIDATED B ALANCE SHEETS December 31, 2024 2023 (In thousands) ASSETS Current Assets: Cash and cash equivalents $ 1,292 $ 1,959 Accounts receivable, net 88,356 41,136 Inventories 207,282 107,089 Prepaid expenses and other assets 21,978 22,070 Total current assets 318,908 172,254 Property, plant and equipment, net 922,868 709,402 Operating lease assets 52,195 26,233 Goodwill and other intangible assets, net 22,048 18,163 Other assets 8,279 6,833 Total Assets $ 1,324,298 $ 932,885 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 61,272 $ 23,963 Accrued expenses and other liabilities 72,879 56,734 Accrued warranty 5,726 4,865 Line of credit 202,600 5,500 Total current liabilities 342,477 91,062 Deferred income taxes 56,032 72,439 Operating lease liabilities 41,979 18,840 Non-current accrued warranty 17,109 17,313 Other long-term liabilities 16,559 16,560 Total Liabilities 474,156 216,214 Commitments and contingencies — — Stockholders’ Equity: Preferred stock, $ 0.01 par value, 3,000,000 shares authorized; no ne issued and outstanding — — Common stock, $ 0.01 par value, 360,000,000 shares authorized; 141,098,251 and 140,974,843 shares issued and 107,154,305 and 108,611,537 shares outstanding at December 31, 2024 and December 31, 2023, respectively 1,411 1,410 Additional paid-in capital 148,153 140,157 Retained earnings 1,562,450 1,336,058 Treasury stock, at cost, 33,943,946 and 32,363,306 shares at December 31, 2024 and December 31, 2023, respectively ( 861,872 ) ( 760,954 ) Total Stockholders’ Equity 850,142 716,671 Total Liabilities and Stockholders’ Equity $ 1,324,298 $ 932,885 See Notes to Consolidated Financial Statements. F- 5 Table of Contents TREX COMPANY, INC. CONSOLIDATED STATEMENTS OF C HANGES IN STOCKHOLDERS’ EQUITY (In thousands, except share data) Common Stock Additional Paid-In Retained Treasury Stock Shares Amount Capital Earnings Shares Amount Total Balance, December 31, 2021 115,148,152 $ 1,407 $ 127,787 $ 946,048 25,586,601 $ ( 350,208 ) $ 725,034 Net income — — — 184,626 — — 184,626 Employee stock plans 38,320 — 1,742 — — — 1,742 Shares withheld for taxes on awards ( 45,834 ) 1 ( 3,319 ) — — — ( 3,318 ) Stock-based compensation 114,594 — 5,329 — — — 5,329 Repurchases of common stock ( 6,511,809 ) — — — 6,511,809 ( 395,064 ) ( 395,064 ) Balance, December 31, 2022 108,743,423 $ 1,408 $ 131,539 $ 1,130,674 32,098,410 $ ( 745,272 ) $ 518,349 Net income — — — 205,384 — — 205,384 Employee stock plans 27,620 — 1,223 — — — 1,223 Shares withheld for taxes on awards ( 48,736 ) 2 ( 2,769 ) — — — ( 2,767 ) Stock-based compensation 154,126 — 10,164 — — — 10,164 Repurchases of common stock ( 264,896 ) — — — 264,896 ( 15,682 ) ( 15,682 ) Balance, December 31, 2023 108,611,537 $ 1,410 $ 140,157 $ 1,336,058 32,363,306 $ ( 760,954 ) $ 716,671 Net income — — — 226,392 — — 226,392 Employee stock plans 20,604 — 1,281 — — — 1,281 Shares withheld for taxes on awards ( 65,081 ) 1 ( 5,920 ) — — — ( 5,919 ) Stock-based compensation 167,885 — 12,635 — — — 12,635 Repurchases of common stock ( 1,580,640 ) — — — 1,580,640 ( 100,918 ) ( 100,918 ) Balance, December 31, 2024 107,154,305 $ 1,411 $ 148,153 $ 1,562,450 33,943,946 $ ( 861,872 ) $ 850,142 See Notes to Consolidated Financial Statements. F- 6 Table of Contents TREX COMPANY, INC. CONSOLIDATED STATE MENTS OF CASH FLOWS Year Ended December 31, 2024 2023 2022 (In thousands) Operating Activities Net income $ 226,392 $ 205,384 $ 184,626 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 54,670 50,189 44,298 Deferred income taxes ( 16,407 ) 4,215 24,256 Loss on sale — — 15,423 Stock-based compensation 12,635 10,164 5,329 Loss (gain) on disposal of property, plant and equipment 2,644 3,140 ( 27 ) Other non-cash adjustments 187 ( 48 ) ( 117 ) Changes in operating assets and liabilities: Accounts receivable ( 47,220 ) 56,921 42,513 Inventories ( 100,193 ) 34,266 ( 64,454 ) Prepaid expenses and other assets ( 10,650 ) ( 750 ) 7,925 Accounts payable ( 819 ) 2,697 ( 5,595 ) Accrued expenses and other liabilities 12,162 8,875 ( 14,385 ) Income taxes receivable/payable 10,528 14,367 ( 23,572 ) Net cash provided by operating activities 143,929 389,420 216,220 Investing Activities Expenditures for property, plant and equipment ( 232,337 ) ( 166,089 ) ( 176,228 ) Purchased intangibles ( 4,304 ) — — Proceeds from sale of assets — — 7,290 Proceeds from sales of property, plant and equipment 106 — 54 Net cash used in investing activities ( 236,535 ) ( 166,089 ) ( 168,884 ) Financing Activities Borrowings under line of credit 842,300 593,500 425,000 Principal payments under line of credit ( 645,200 ) ( 810,000 ) ( 203,000 ) Repurchases of common stock ( 105,940 ) ( 18,450 ) ( 398,382 ) Proceeds from employee stock purchase and option plans 1,282 1,223 1,742 Financing costs ( 503 ) 30 ( 1,424 ) Net cash provided by (used in) financing activities 91,939 ( 233,697 ) ( 176,064 ) Net decrease in cash and cash equivalents ( 667 ) ( 10,366 ) ( 128,728 ) Cash and cash equivalents at beginning of year 1,959 12,325 141,053 Cash and cash equivalents at end of year $ 1,292 $ 1,959 $ 12,325 Supplemental disclosures of cash flow information: Cash paid for interest, net of capitalized interest $ — $ 51 $ — Cash paid for income taxes, net $ 85,171 $ 52,340 $ 59,934 Supplemental non-cash investing and financing disclosure: Capital expenditures in accounts payable $ 38,129 $ 1,332 $ 1,814 See Notes to Consolidated Financial Statements. F- 7 Table of Contents TREX COMPANY, INC. NOTES TO CONSO LIDATED FINANCIAL STATEMENTS 1. BUSINESS AND ORGANIZATION Trex Company, Inc. (Trex), a Delaware corporation, was incorporated on September 4, 1998. Through December 30, 2022, Trex had one wholly-owned subsidiary, Trex Commercial Products, Inc. Together, Trex and Trex Commercial Products, Inc. are referred to as the Company. Through December 30, 2022, the Company operated in two reportable segments, Trex Residential Products (Trex Residential) and Trex Commercial Products (Trex Commercial). On December 30, 2022, the Company completed the sale of substantially all of the assets of its wholly-owned subsidiary and reportable segment, Trex Commercial. Refer to Note 3 below for more information on the sale. Subsequent to December 30, 2022, the Company operates in one reportable segment, Trex Residential. The Company’s principal business based on net sales is the manufacture and distribution of Trex Residential high-performance, low-maintenance wood-alternative decking and residential railing and outdoor living products and accessories, marketed under the brand name Trex ® . A majority of its products are manufactured in a proprietary process that combines reclaimed wood fibers and recycled polyethylene. Trex Commercial designed, engineered and marketed modular and architectural 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 2500 Trex Way, Winchester, Virginia 22601, and the telephone number at that address is (540) 542-6300. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The consolidated financial statements include the accounts of the Company. Intercompany accounts and transactions have been eliminated in consolidation. 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, tariffs, consumer spending and preferences, interest rates, the impact of any supply chain disruptions, economic conditions, and/or any adverse effects from global health pandemics and geopolitical conflicts. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Cash and Cash Equivalents Cash equivalents consist of highly liquid investments purchased with original maturities of three months or less. Concentrations and Credit Risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. The Company from time to time may have bank deposits in excess of insurance limits of the Federal Deposit Insurance Corporation. As of December 31, 2024 , substantially all deposits are maintained in one financial institution. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to its cash and cash equivalents. The Company routinely assesses the financial strength of its customers and believes that its trade receivables credit risk exposure is limited. Trade receivables are recognized at the amount of revenue recognized on each shipment for Trex Residential products as the Company has an unconditional right to consideration from the customer and payment is due based solely on the passage of time. An estimate of expected credit losses is recognized as a valuation allowance and adjusted each reporting period. The estimate is based on the current expected credit loss model and is determined using an aging schedule, including past events, current conditions and reasonable and supportable forecasts about the future. There was no material valuation allowance recorded as of December 31, 2024 and December 31, 2023. In the years ended December 31, 2024 , 2023, and 2022, sales to certain customers of Trex Residential accounted for 10 % or more of the Company’s total net sales. For the year ended December 31, 2024 , three customers of Trex Residential represented approximately 81 % of the Company’s total net sales. For the year ended December 31, 2023 , three customers of Trex Residential represented 72 % of the Company’s total net sales. For the year ended December 31, 2022 , three customers of Trex Residential F- 8 Table of Contents represented approximately 64 % of the Company’s total net sales. No other customer represented 10% or more of the Company’s total net sales. At December 31, 2024 , two customers represented 33 %, and 32 %, respectively, of the Company’s total accounts receivable balance. At December 31, 2023 , three customers represented 27 %, 23 % and 20 %, respectively, of the Company’s total accounts receivable balance. For each year ended December 31, 2024 , 2023, and 2022, approximately 21.4 %, 26.7 %, and 17.5 %, respectively, of the Company’s materials purchases at Trex Residential were purchased from its four largest suppliers. Inventories Inventories for the composite decking and railing products at Trex Residential are valued at the lower of cost (last-in, first-out, or LIFO, method) and market as this method results in a better matching of costs and revenues. The Company periodically reviews its inventory for slow moving or obsolete items and writes down the related products to the lower of cost or market. The Company’s reserves for estimated slow moving products or obsolescence are not material. At December 31, 2024 , the excess of the replacement cost of inventory over the LIFO value of inventory was approximately $ 49.7 million. Due to the nature of the LIFO valuation methodology, liquidations of inventories result in a portion of the Company's cost of sales being based on historical rather than current year costs. There were no LIFO liquidations or related impact on cost of sales in 2024. A majority of the products at Trex Residential are made in a proprietary process that combines reclaimed wood fibers and scrap polyethylene. Trex Residential grinds up scrap materials generated from its manufacturing process and inventories deemed no longer salable and reintroduces the reclaimed material into the manufacturing process as a substitute for raw materials. The reclaimed material is valued at the costs of the raw material components of the material. Property, Plant and Equipment Property, plant and equipment are stated at historical cost. The costs of additions and improvements are capitalized, while maintenance and repairs are expensed as incurred. Cash flows for capital expenditures as reported in cash flows from investing activities in the Consolidated Statements of Cash Flows are adjusted to exclude unpaid amounts accrued at period end. Depreciation is provided using the straight-line method generally over the following estimated useful lives: Buildings 40 years Machinery and equipment 3 - 11 years Furniture and fixtures 10 years Forklifts and tractors 5 years Computer equipment and software 5 years Leasehold improvements are amortized over the shorter of the lease term or 15 years. The Company reviews its long-lived assets, including property, plant and equipment, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine the recoverability of its long-lived assets, the Company evaluates the probability that future estimated undiscounted net cash flows will be less than the carrying amount of the long-lived assets. If the estimated cash flows are less than the carrying amount of the long-lived assets, the assets are written down to their fair value. The Company’s estimates of anticipated cash flows and the remaining estimated useful lives of long-lived assets could be reduced in the future. As a result, the carrying amount of long-lived assets could be reduced in the future. Long-lived assets held for sale are stated at the lower of cost or fair value less cost to sell. Leases The Company leases office space, storage warehouses, training and manufacturing facilities, and certain office and plant equipment under various operating leases. At inception of an arrangement, the Company evaluates, among other things, whether it has the right to control the use of an identified asset in order to determine if the arrangement is or contains a lease. Operating leases are included in operating lease right-of-use (ROU) assets, accrued expenses and other current liabilities, and operating lease liabilities in the consolidated balance sheets. Operating leases with an initial term of 12 months or less are not included in the consolidated balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. ROU assets represent the right to use an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the implicit rates of the Company’s leases are not readily determinable, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease F- 9 Table of Contents payments. The Company considers instruments with similar characteristics when calculating its incremental borrowing rate. Certain events, such as a modification to the arrangement or a change in the lease term, are assessed by the Company to determine if it is required to reassess estimates and judgments and remeasure the lease liability and ROU asset. The Company reviews its ROU asset for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. The carrying amount of the ROU asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. An impairment loss is measured as the amount by which the carrying amount of the ROU asset exceeds its fair value. The Company’s operating leases have remaining lease terms up to 11 years . Lease terms may include options to extend or terminate the lease when the Company determines that it is reasonably certain it will exercise the option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for separately. Consideration for non-lease components is stated on a stand-alone basis in the applicable agreements. Fair Value Measurement Assets and liabilities measured at fair value are measured at the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and classified into one of the following fair value hierarchies: • Level 1 – Quoted prices for identical instruments in active markets. • Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which all significant inputs and significant value drivers are observable in active markets. • Level 3 – Valuations derived from management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Goodwill Goodwill represents the excess of cost over net assets acquired resulting from the Company’s 1996 purchase of the Mobil Composite Products Division, the 2011 purchase of the assets of the Iron Deck Corporation, and the 2017 purchase of certain assets and the assumption of certain liabilities of SC Company. The Company evaluates the recoverability of goodwill in accordance with Accounting Standard Codification Topic 350, “ Intangibles – Goodwill and Other ,” annually or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount. Goodwill is considered to be impaired when the net book value of the reporting unit exceeds its estimated fair value. The Company assigned its goodwill to reporting units and tests each reporting unit’s goodwill for impairment at least on an annual basis, or more frequently if an event occurs or circumstances change in the interim that indicate the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill. The Company identified its reporting units based on the way it manages its operating segments. Prior to December 30, 2022, the Company had three reporting units: a residential reporting unit in the Trex Residential reportable segment, and a commercial railing reporting unit and a staging reporting unit in the Trex Commercial reportable segment. Subsequent to the sale of Trex Commercial on December 30, 2022, the Company has one reporting unit in the Trex Residential reportable segment. Each reporting unit constitutes a business with discrete financial information and operating segment management, at a level below the Company’s chief operating decision maker regularly reviews the operating results of the reporting unit. The Company assigned goodwill to the reporting units based on the excess of the fair values acquired over the fair value of the sum of the individual assets acquired and liabilities assumed that were assigned to the reporting units. In testing for goodwill impairment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If the qualitative assessment indicates that the carrying amount of the reporting unit exceeds its fair value, including goodwill, the Company is then required to perform a quantitative goodwill impairment test. The quantitative goodwill impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares the fair value of a reporting unit with its carrying amount, including goodwill. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company performs the annual impairment testing of its goodwill as of October 31 of each year. For fiscal years 2024, 2023 and 2022, the Company completed its annual impairment test of goodwill for its Trex Residential reporting segment residential reporting unit utilizing the qualitative assessment and concluded it was not more likely than not that the fair value of the residential F- 10 Table of Contents reporting unit was less than its carrying amount. Qualitative factors the Company considered include events and circumstances such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other relevant Company-specific events, as applicable. Product Warranty The Company warrants that for the applicable warranty period its Trex Residential products, when properly installed, used and maintained, will be free from material defects in workmanship and materials and its decking, cladding, fascia and railing products will not split, splinter, rot or suffer structural damage from termites or fungal decay. Products sold on or after January 1, 2023: The warranty period for residential use is 50 years for Transcend ® decking, 35 years for Select ® decking and Universal Fascia, and 25 years for Enhance ® decking and Transcend, Select, Enhance and Signature ® railing. The warranty period for commercial use is 10 years, excluding Signature railing and Transcend cladding, which each have a warranty period of 25 years. The Company further warrants that Trex Transcend, Trex Enhance and Trex Select decking and cladding and Universal Fascia products will not fade in color from light and weathering exposure more than a certain amount and will be resistant to permanent staining from food and beverage substances or mold and mildew, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above. If there is a breach of such warranties, the Company has an obligation either to replace the defective product or refund the purchase price. Products sold prior to January 1, 2023: The warranty period is 25 years for residential use and 10 years for commercial use. With respect to Trex Signature railing, the warranty period is 25 years for both residential and commercial use. The Company further warrants that Trex Transcend, Trex Enhance, Trex Select and Universal Fascia products will not fade in color more than a certain amount and will be resistant to permanent staining from food substances or mold, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above. If there is a breach of such warranties, the Company has an obligation either to replace the defective product or refund the purchase price. The Company maintains a warranty reserve for the settlement of its product warranty claims. The Company accrues for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and expected future claims experience. Management reviews and adjusts these estimates, if necessary, based on the differences between actual experience and historical estimates. Additionally, the Company accrues for warranty costs associated with occasional or unanticipated product quality issues if a loss is probable and can be reasonably estimated, as necessary. Treasury Stock The Company records the repurchase of shares of its common stock at cost. These shares are considered treasury stock, which is a reduction to stockholders’ equity. Treasury stock is included in authorized and issued shares but excluded from outstanding shares. Revenue Recognition Trex Residential Products. Trex Residential principally generates revenue from the manufacture and sale of its high-performance, low-maintenance, eco-friendly composite decking and railing products and accessories. Substantially all of its revenues are from contracts with customers, which are individual customer purchase orders of short-term duration of less than one year. 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 and 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 these Consolidated Financial Statements. Trex Commercial Products. Trex Commercial generated revenue from the manufacture and sale of its modular and architectural railing and staging systems. All of its revenues were from fixed-price contracts with customers. Trex Commercial contracts had a single performance obligation as the promise to transfer the individual goods or services was not separately identifiable from other promises in the contract and was, therefore, not distinct. On December 30, 2022, the Company sold substantially all of the assets of its wholly-owned subsidiary and reportable segment Trex Commercial. Trex Commercial satisfied its performance obligation over time as work progressed because control transferred continuously to its customers. Revenue and estimated profit were recognized over time based on the proportion of actual costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the performance obligation. Incurred costs represent work F- 11 Table of Contents performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Incurred costs included all direct material, labor, subcontract and certain indirect costs. The Company reviewed and updated its estimates regularly and recognized adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on revenue and estimated profit to date on a contract is recognized in the period the adjustment is identified. If at any time the estimate of contract profitability indicated an anticipated loss on the contract, the Company recognized the total loss in the period it was identified. During the year ended December 31, 2022 , no adjustment to any one contract was material to the Company’s Consolidated Financial Statements and no material impairment loss on any contract was recorded. Stock-Based Compensation The Company measures stock-based compensation at the grant date of the award based on the fair value. For stock options, stock appreciation rights and time-based restricted stock and time-based restricted stock units, stock-based compensation is recognized on a straight-line basis over the vesting periods of the award. The Company recognizes forfeitures as they occur. 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 probable to be paid out based on the achievement of predetermined performance measures. Stock-based compensation expense is included in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Comprehensive Income. Income Taxes The Company recognizes deferred tax assets and liabilities based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax laws and statutory tax rates. The Company assesses the likelihood that its deferred tax assets will be realized. Deferred tax assets are reduced by a valuation allowance when, after considering all available positive and negative evidence, it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. As of December 31, 2024 , the Company has a valuation allowance of $ 2.6 million against these deferred tax assets related to certain state tax credits. The Company analyzes its position in subsequent reporting periods, considering all available positive and negative evidence, in determining the expected realization of its deferred tax assets. Research and Development Costs Research and development costs are expensed as incurred. For the years ended December 31, 2024 , 2023, and 2022, research and development costs were $ 3.5 million, $ 3.3 million, and $ 0.5 million, respectively, and have been included in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Comprehensive Income. Advertising Costs The Company expenses its branding and advertising communication costs as incurred. Production costs are deferred and recognized as expense in the period that the related advertisement is first used. For the years ended December 31, 2024 , 2023, and 2022, branding expenses, including advertising expenses, were $ 53.5 million, $ 48.8 million, and $ 43.3 million, respectively. Fair Value of 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 and other current liabilities, and debt to approximate the fair value of the respective assets and liabilities on the Consolidated Balance Sheets at December 31, 2024 and 2023. F- 12 Table of Contents New Accounting Standards Recently Adopted In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The guidance requires disclosure of significant segment expenses which are regularly provided to the chief operating decision maker (CODM), the composition of and amount of other segment items, the CODM’s title and position within the organization, and how the CODM uses the reported measure(s) of segment’s profit or loss to assess the performance of the segment. In addition, on an interim basis, all segment profit or loss and asset disclosures currently required on an annual basis must be reported, as well as those required by Topic 280. The guidance allows for multiple measure of a segment’s profit or loss to be reported. Entities which have a single reportable segment must apply Topic 280 in its entirety. The guidance was effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. Early adoption was permitted. Entities are required to apply the amendments of this update retrospectively for all prior periods presented in the financial statements. The Company adopted the standard in the quarterly period ended December 31, 2024. The Company applied the standard retrospectively and accordingly, prior periods were adjusted. Adoption of this guidance did not impact consolidated results of operations and financial position . New Accounting Standards Not Yet Adopted In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Disaggregation Disclosures.” This guidance requires more detailed disclosure about the types of expenses presented within the expense captions of the financial statements. Specifically, disclosure of purchases of inventory, employee compensation, depreciation, and intangible asset amortization are required on both an interim and annual basis. In addition, a qualitative description of remaining amounts in relevant expense captions which have not separately been disaggregated will be required on an interim and annual basis. On an annual basis, disclosure of an entity’s definition of selling expenses and the amount of selling expenses is required. The amendments to this update are effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption of this update is permitted. The amendments to this update should be applied prospectively to financial statements issued for reporting periods after the effective date of the update or retrospectively to any or all prior periods presented in the financial statements. The Company believes adoption will result in expanded financial statement footnote disclosure but does not believe adoption of this update will have a material impact on its consolidated results of operations. The Company is continuing to evaluate the impacts of the pending adoption. As such, the Company’s preliminary assessments are subject to change. In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The guidance requires public entities to disclose additional categories of information related to federal, state, and foreign income taxes and additional details related to reconciling items should they meet a quantitative threshold. The guidance requires disclosure of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and to disaggregate the information by jurisdiction based on quantitative thresholds. The guidance is effective for fiscal year beginning after December 15, 2024. Early adoption is permitted. The guidance should be applied on a prospective basis, retrospective application is permitted. The Company does not expect adoption of the guidance to have a material effect on its consolidated results of operations and financial position. 3. SALE OF TREX COMMERCIAL PRODUCTS, INC. On December 30, 2022, the Company completed the sale of substantially all of the assets of its wholly-owned subsidiary and reportable segment, Trex Commercial, for net proceeds of $ 7.3 million. The divestiture reflected the Company’s decision to focus on driving the most profitable growth strategy for the Company and its shareholders through the execution of its outdoor living strategy. With the sale complete, the Company has dedicated its resources to accelerating conversion to composites from wood and further strengthen its leadership position in the outdoor living category. The sale resulted in a loss on sale of $ 15.4 million and is reported in the Consolidated Statements of Comprehensive Income. The divestiture did not represent a strategic shift with a major effect on the Company’s operations and financial results and, therefore, was not reported as a discontinued operation. As such, the results of operations of Trex Commercial are consolidated in the Company’s results of operations for the year ended December 31, 2022. Refer to Note 17, Segment Information, for additional information on the Trex Commercial segment. F- 13 Table of Contents 4. INVENTORIES Inventories at LIFO value consist of the following as of December 31 (in thousands): 2024 2023 Finished goods $ 183,670 $ 88,840 Raw materials 73,281 51,688 Total FIFO (first-in, first-out) inventories 256,951 140,528 Reserve to adjust inventories to LIFO value ( 49,669 ) ( 33,439 ) Total LIFO inventories $ 207,282 $ 107,089 Inventory related to Trex Residential composite decking and railing products is stated at the lower of LIFO cost or market. The Company periodically reviews its inventory for slow moving or obsolete items and writes down the related products to estimated market. During the year ended December 31, 2024 the Company adjusted reserves for estimated slow moving products or obsolescence. These reserves are not material. Under the LIFO method, reductions in inventory cause a portion of the Company’s cost of sales to be based on historical costs rather than current year costs. There was no inventory reduction in 2024. During the year ended December 31, 2023, the Company had a liquidation of inventories produced in the prior year ended December 31, 2022. As a result, a portion of the Company’s cost of sales in 2023 was based on prior year costs rather than on current year costs. However, the prior year cost of inventory closely approximated the current year cost of inventory and the resulting effect of the liquidation of inventories on the Company’s cost of sales was immaterial in the year ended December 31, 2023. 5. PREPAID EXPENSES AND OTHER ASSETS Prepaid expenses and other assets consist of the following as of December 31 (in thousands): 2024 2023 Prepaid expenses $ 21,353 $ 11,830 Income tax receivable — 9,611 Other 625 629 Total prepaid expenses and other assets $ 21,978 $ 22,070 6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET The carrying amount of goodwill at December 31, 2024, and December 31, 2023 , was $ 14.2 million for Trex Residential. For fiscal years 2024, 2023 and 2022, the Company completed its annual impairment test of goodwill for its residential reporting unit in Trex Residential utilizing the qualitative assessment and concluded it was not more likely than not that the fair value of the residential reporting unit was less than its carrying amount. The Company’s intangible assets, purchased in 2018 and 2024, consist of domain names and internal use software for Trex Residential. At December 31, 2024, and December 31, 2023 , intangible assets were $ 10.6 million and $ 6.3 million and accumulated amortization was $ 2.8 million and $ 2.4 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 for domain names and 10 years for internal use software, 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 year ended December 31, 2024, December 31, 2023, and December 31, 2022 , was $ 0.4 million, $ 0.4 million, and $ 0.4 million, respectively. F- 14 Table of Contents 7. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following as of December 31 (in thousands): 2024 2023 Machinery and equipment $ 573,954 $ 545,037 Building and improvements 152,023 145,821 Forklifts and tractors 24,403 24,646 Computer equipment 18,103 18,497 Furniture and fixtures 9,473 9,489 Construction in process 463,235 247,659 Land 29,976 29,143 Total property, plant and equipment 1,271,167 1,020,292 Accumulated depreciation ( 348,299 ) ( 310,890 ) Total property, plant and equipment, net $ 922,868 $ 709,402 The Company had construction in process as of December 31, 2024 , of approximately $ 463 million. The Company expects that substantially all of the construction in process will be completed and put into service before or during the year ending December 31, 2027. Depreciation expense for the years ended December 31, 2024 , 2023, and 2022, was $ 54.3 million, $ 49.8 million, and $ 43.9 million, respectively. F- 15 Table of Contents 8. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consist of the following as of December 31 (in thousands): 2024 2023 Sales and marketing $ 22,874 $ 15,496 Compensation and benefits 16,132 $ 25,859 Capital Projects 13,274 — Operating lease liabilities 10,800 7,663 Manufacturing costs 2,904 3,382 Income Taxes 917 — Other 5,978 4,334 Total accrued expenses and other liabilities $ 72,879 $ 56,734 9. DEBT Revolving Credit Facility Indebtedness prior to October 10, 2024. On May 18, 2022, the Company entered into a Credit Agreement (Credit Agreement) with certain lending parties thereto (Lenders) 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. On December 22, 2022, the Company entered into a First Amendment to the Credit Agreement (First Amendment). As a part of the First Amendment, the Credit Agreement was amended and restated to provide for an additional Revolving B Loan (as hereinafter defined). Under the First Amendment, the Lenders agreed to provide the Company with a Revolving B Loan consisting of one or more revolving loans in a collective maximum principal amount of $ 150,000,000 (Revolving B Loan Limit) throughout the term, which ended December 22, 2024 (Revolving B Loan Term). Previously, under the Credit Agreement, there was no Revolving B Loan. The First Amendment also provided that TD Bank, N.A. would serve as Syndication Agent. In conjunction with the First Amendment, on December 22, 2022, the Credit Agreement was amended and restated to refer to the original loan as the Revolving A Loan. The amended and restated Credit Agreement was made an Exhibit A to the First Amendment. All of the terms of the Credit Agreement apply to the Revolving B Loan. The amended Credit Agreement provides the Company, in the aggregate, the ability to borrow an amount up to the Revolving A Loan Limit during the Revolving A Loan Term (which ends May 18, 2027) and Revolving B Loan Limit during the Revolving B Loan Term. The Company is not obligated to borrow any amount under the revolving loans. Within the respective loan limit, the Company may borrow, repay and reborrow at any time or from time to time while the notes issued pursuant to the Credit Agreement are in effect. Base Rate Loans (as defined in the Credit Agreement) under the Revolving A Loan 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. With respect to Revolving B Loans (as defined in the First Amendment), for any day, the rate per annum is a tiered pricing based upon the Consolidated Debt to Consolidated EBITDA Ratio. The applicable rate for Revolving B Loans that are Base Rate Loans range between 1.20 % and 2.15 % and the applicable rate for Revolving B Loans that are Term SOFR/Term SOFR Daily Floating Rate range between 0.20 % and 1.15 %. Under the terms of the Security and Pledge Agreement, the Company, 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 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). F- 16 Table of Contents Indebtedness on and after October 10, 2024. On October 10, 2024, the Company, entered into a Second Amendment to the Credit Agreement (Second Amendment) with certain lending parties thereto (Lenders) to amend that Credit Agreement dated as of May 18, 2022, as amended by that certain First Amendment dated as of December 22, 2022. The Second Amendment provides the Company with Revolving A Loans in the maximum principal amount of $ 400,000,000 (Revolving A Loans), Revolving B Loans in the maximum principal amount of $ 150,000,000 (Revolving B Loans), and Letters of Credit and Swing Line Loans (as defined in the Credit Agreement). The Second Amendment extends the maturity date of the Revolving B Loans from December 22, 2024 to December 22, 2026 . Base Rate Loans (as defined in the Credit Agreement) under the Revolving A Loan 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 (as defined in the Credit Agreement). With respect to Revolving B Loans (as defined in the Credit Agreement), for any day, the rate per annum is a tiered pricing based upon the Consolidated Debt to Consolidated EBITDA Ratio. The applicable rate for Revolving B Loans that are Base Rate Loans range between 0.20 % and 1.15 %. and the applicable rate for Revolving B Loans that are Term SOFR/Term SOFR Daily Floating Rate range between 1.20 % and 2.15 %. The Company had $ 202.6 million in borrowings outstanding under its revolving credit facility and available borrowing capacity of $ 347.4 million at December 31, 2024 . The weighted average interest rate on the revolving credit facility was 5.26 % as of December 31, 2024. 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 December 31, 2024 . 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 For the years ended December 31, 2024, and December 31, 2023 , total operating lease cost was $ 10.4 million and $ 8.0 million, respectively. The weighted average remaining lease term at December 31, 2024 and December 31, 2023 was 6.3 years and 4.4 years, respectively. The weighted average discount rate at December 31, 2024 and December 31, 2023 was 4.57 % and 2.32 %, respectively. The following table includes supplemental cash flow information for the years ended December 31, 2024, December 31, 2023, and December 31, 2022 and supplemental balance sheet information at December 31, 2024 and December 31, 2023 related to operating leases (in thousands): Supplemental Cash Flow Information For the Year Ended December 31, 2024 2023 2022 Cash paid for amounts included in the measurement of operating lease liabilities $ 10,361 $ 8,176 $ 8,688 Operating ROU assets obtained in exchange for lease liabilities $ 35,704 $ 2,559 $ 8,064 Supplemental Balance Sheet Information December 31, 2024 December 31, 2023 Operating lease ROU assets $ 52,195 $ 26,233 Operating lease liabilities: Accrued expenses and other current liabilities $ 10,800 $ 7,663 Operating lease liabilities 41,979 18,840 Total operating lease liabilities $ 52,779 $ 26,503 F- 17 Table of Contents The following table summarizes maturities of operating lease liabilities at December 31, 2024 (in thousands): Maturities of operating lease liabilities 2025 $ 11,057 2026 11,065 2027 10,575 2028 9,618 2029 4,434 Thereafter 15,798 Total lease payments $ 62,547 Less imputed interest ( 9,768 ) Total operating liabilities $ 52,779 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 and other current liabilities, and debt to approximate the fair value of the respective assets and liabilities on the Consolidated Balance Sheets at December 31, 2024 and 2023. 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): Year Ended December 31, 2024 2023 2022 Numerator: Net income $ 226,392 $ 205,384 $ 184,626 Denominator: Basic weighted average shares outstanding 108,191,635 108,680,459 111,710,676 Effect of dilutive securities: Stock appreciation rights 51,097 71,406 94,859 Restricted stock 79,844 57,538 74,953 Diluted weighted average shares outstanding 108,322,576 108,809,403 111,880,488 Basic earnings per share $ 2.09 $ 1.89 $ 1.65 Diluted earnings per share $ 2.09 $ 1.89 $ 1.65 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: Year Ended December 31, 2024 2023 2022 Restricted stock 35,575 52,323 48,851 Stock appreciation rights 67,017 93,163 52,107 Stock Repurchase Program On May 4, 2023, the Trex Board of Directors adopted a new stock repurchase program (2023 Stock Repurchase Program) of up to 10.8 million shares of its outstanding common stock, and terminated the existing Stock Repurchase Program. The 2023 Stock Repurchase Program has no set expiration date. The Company repurchased 1,580,640 shares of its outstanding common stock under the 2023 Stock Repurchase Program during 2024. F- 18 Table of Contents 13. REVENUE FROM CONTRACTS WITH CUSTOMERS Topic 606 provides a single, comprehensive model for revenue recognition arising from contracts with customers. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized when or as the Company satisfies the performance obligation. Revenue is recognized at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring control of the goods or services to a customer. 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 and 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 Consolidated Financial Statements. For each product shipped, the transaction price by product is specified in the purchase order. The Company recognizes revenue on the transaction price less any amount offered under a sales incentive program. The Company recognizes an account receivable for the amount of revenue recognized as it has an unconditional right to consideration at the time of shipment and payment from the customer is due based solely on the passage of time. The Company receives payments from its customers based on the payment terms applicable to each individual contract and the customer pays in accordance with the billing terms specified in the purchase order, which is less than one year. The related accounts receivables are included in “Accounts receivable, net” in the Consolidated Balance Sheets. Trex Residential may offer various sales incentive programs throughout the year. It estimates the amount of sales incentive to allocate to each performance obligation, or product shipped, based on direct sales to the customer. The estimate is updated each reporting period, and any changes are allocated to the performance obligations on the same basis as at inception. Changes in estimate allocated to a previously satisfied performance obligation are recognized as a reduction of revenue in the period in which the change occurs under the cumulative catch-up method. In addition to sales incentive programs, Trex Residential may offer payment discounts. It estimates the payment discount that it believes will be taken by the customer based on prior history using the most-likely-amount method of estimation. Trex Residential pays commissions to certain employees. However, the sales commissions are not directly attributable to identifiable contracts, are discretionary in nature and are based on other factors not related to obtaining a contract, such as individual performance, profitability of the entity, annual sales targets, etc. These costs are included in selling, general and administrative expenses as incurred. Trex Residential does not grant contractual product return rights to customers other than pursuant to its assurance product warranty (see related disclosure on product warranties in Note 19, “Commitments and Contingencies”). Trex Residential accounts for all shipping and handling fees invoiced to the customer in net sales and the related costs in cost of sales. Trex Commercial Products On December 30, 2022, the Company completed the sale of its wholly-owned subsidiary and reportable segment, Trex Commercial. Prior to December 30, 2022, Trex Commercial generated revenue from the manufacture and sale of its modular and architectural railing and staging systems. All of its revenues were from fixed-price contracts with customers. Trex Commercial contracts had a single performance obligation as the promise to transfer the individual goods or services was not separately identifiable from other promises in the contract and was, therefore, not distinct. Trex Commercial satisfied its performance obligation over time as work progressed because control transferred continuously to its customers. Revenue and estimated profit was recognized over time based on the proportion of actual costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the performance obligation. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Incurred costs included all direct material, labor, subcontract and certain indirect costs. The Company reviewed and updated its estimates regularly and recognized adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment F- 19 Table of Contents on revenue and estimated profit to date on a contract is recognized in the period the adjustment is identified. Revenues and profits in future periods are recognized using the adjusted estimate. If at any time the estimate of contract profitability indicated an anticipated loss on the contract, the Company recognized the total loss in the period it is identified. During the year ended December 31, 2022, no adjustment to any one contract was material to the Company’s Consolidated Financial Statements. For each year in the three years ended December 31, 2024 , net sales are 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): Year Ended December 31, 2024 Reportable Segment Trex Residential Total Timing of Revenue Recognition and Type of Contract Products transferred at a point in time and variable consideration contracts $ 1,151,449 $ 1,151,449 Year Ended December 31, 2023 Reportable Segment Trex Residential Total Timing of Revenue Recognition and Type of Contract Products transferred at a point in time and variable consideration contracts $ 1,094,837 $ 1,094,837 Year Ended December 31, 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 $ 1,059,536 $ — $ 1,059,536 Products transferred over time and fixed price contracts — 46,507 46,507 $ 1,059,536 $ 46,507 $ 1,106,043 14. STOCK-BASED COMPENSATION At the annual meeting of stockholders of the Company held on May 4, 2023, the Company’s stockholders approved the Trex Company, Inc. 2023 Stock Incentive Plan (Plan). The Company’s board of directors unanimously approved the Plan on April 10, 2023, subject to stockholder approval. The Plan amends and restates in its entirety the Trex Company, Inc. 2014 Stock Incentive Plan (2014 Plan), which was last approved by the Company’s stockholders at the annual meeting held on April 30, 2014. The Plan, which will be administered by the compensation committee of the board of directors, provides for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights and unrestricted stock, which are referred to collectively as “awards.” Awards may be granted under the Plan to officers, directors (including non-employee directors) and other employees of the Company or any subsidiary thereof, to any adviser, consultant, or other provider of services to the Company (and any employee thereof), and to any other individuals who are approved by the board of directors as eligible to participate in the Plan. Only employees of the Company or any subsidiary thereof are eligible to receive incentive stock options. Subject to certain adjustments as provided in the Plan, the total aggregate number of shares of common stock that may be granted under the Plan is 4,000,000 shares. As of December 31, 2024 , the total number of shares available for future grants was 3,832,112 . The Company recognizes stock-based compensation expense ratably over the period from 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 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 probable to be paid out based on the achievement of the predetermined performance measures. For the F- 20 Table of Contents employee stock purchase plan, compensation expense is recognized related to the discount on purchases. The following table summarizes the Company’s stock-based compensation expense (in thousands): Year Ended December 31, 2024 2023 2022 Time-based restricted stock units $ 5,059 $ 3,897 $ 3,783 Performance-based restricted stock units 5,888 4,836 540 Stock appreciation rights 1,359 908 792 Employee stock purchase plan 329 523 214 Total stock-based compensation $ 12,635 $ 10,164 $ 5,329 Stock-based compensation expense is included in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Comprehensive Income. Time-Based Restricted Stock Units The fair value of time-based restricted stock units is determined based on the closing price of Trex shares on the grant date. Time-based restricted stock units vest based on the terms of the awards. Unvested time-based restricted stock units are generally forfeitable upon the resignation of employment or termination of employment with cause. The total fair value of vested time-based restricted stock units granted in the years ended December 31, 2024 , 2023, and 2022 was $ 4.6 million, $ 4.7 million, and $ 3.7 million, respectively. At December 31, 2024 , there was $ 5.0 million of total compensation expense related to unvested time-based restricted stock units remaining to be recognized over a weighted-average period of approximately 1.7 years. Time-based restricted stock unit activity under the Plan and all predecessor stock incentive plans is as follows: Time-based Restricted Stock Unit Weighted- Average Grant Price Per Share Nonvested at December 31, 2021 111,546 $ 52.91 Granted 57,094 $ 75.06 Vested ( 56,719 ) $ 58.13 Forfeited ( 1,286 ) $ 86.84 Nonvested at December 31, 2022 110,635 $ 61.28 Granted 97,177 $ 58.50 Vested ( 81,080 ) $ 56.52 Forfeited ( 10,228 ) $ 66.19 Nonvested at December 31, 2023 116,504 $ 65.00 Granted 62,348 $ 87.53 Vested ( 64,261 ) $ 71.29 Forfeited ( 396 ) $ 75.72 Nonvested at December 31, 2024 114,195 $ 74.03 Performance-based Restricted Stock Units The fair value of performance-based restricted stock units is determined based on the closing price of Trex shares on the grant date. Unvested performance-based restricted stock units are generally forfeitable upon the resignation of employment or termination of employment with cause. The performance-based restricted shares units have a three-year vesting period, vesting one-third each year based on target earnings before interest, taxes, depreciation, and amortization (EBITDA) for 1 year, cumulative 2 years and cumulative 3 years, respectively. The number of shares that will vest, with respect to each vesting, will be between 0 % and 200 % of the target number of shares. At December 31, 2024 , 2023, and 2022 there was $ 3.6 million, $ 4.3 million, $ 0.3 million, respectively, of total compensation expense related to unvested performance-based restricted stock units remaining to be recognized over a weighted-average period of approximately 1.8 years. F- 21 Table of Contents Performance-based restricted stock unit activity under the Plan is as follows: Performance- based Restricted Stock Units Weighted- Average Grant Price Per Share Nonvested at December 31, 2021 57,768 $ 71.21 Granted 72,152 $ 76.14 Vested ( 57,875 ) $ 64.43 Forfeited ( 562 ) $ 82.95 Nonvested at December 31, 2022 71,483 $ 81.57 Granted 96,103 $ 56.79 Vested ( 30,038 ) $ 66.26 Forfeited ( 28,163 ) $ 74.39 Nonvested at December 31, 2023 109,385 $ 65.92 Granted 80,159 $ 81.23 Vested ( 67,710 ) $ 63.83 Forfeited ( 13,390 ) $ 104.56 Nonvested at December 31, 2024 108,444 $ 75.57 Stock Appreciation Rights SARs are granted with a grant price equal to the closing market price of the Company’s common stock on the date of grant. These awards expire ten years after the date of grant and vest based on the terms of the individual awards. The SARs are generally forfeitable upon the resignation of employment or termination of employment with cause. The Company recognizes forfeitures as they occur. The Company recognizes compensation cost on a straight-line basis over the vesting period for the award. As of December 31, 2024 , there was $ 1.5 million of unrecognized compensation cost related to SARs. The fair value of each SAR is estimated on the date of grant using a Black-Scholes option-pricing model . For SARs issued in the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively, the assumptions shown in the following table were used: Year Ended December 31, 2024 2023 2022 Dividend yield 0 % 0 % 0 % Average risk-free interest rate 4.3 % 4.0 % 1.9 % Expected term (years) 5 5 5 Expected volatility 51.2 % 49.5 % 44.9 % Dividend Yield. Trex has never paid cash dividends on its common stock. Average Risk-Free Interest Rate. The Company uses the U.S. Treasury rate having a term that most closely resembles the expected term of the option. Expected Term. The expected term is the period of time that the SARs granted are expected to remain unexercised. SARs granted during the years ended December 31, 2024, December 31, 2023, and December 31, 2022 , had a maximum term of ten years . The Company used historical exercise behavior with further consideration given to the class of employees to whom the equity awards were granted to estimate the expected term of the SAR. Expected Volatility. Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company has used the historical volatility over the average expected term of the options granted as the expected volatility. The weighted-average grant date fair value of SARs granted during the years ended December 31, 2024, December 31, 2023, and December 31, 2022 , was $ 44.83 , $ 27.19 , and $ 33.90 , respectively. F- 22 Table of Contents SAR activity under the Plan and all predecessor stock incentive plans is as follows: SARs Weighted- Average Grant Price Per Share Weighted- Average Remaining Contractual Life (Years) Aggregate Intrinsic Value as of December 31, 2024 Outstanding at December 31, 2021 200,998 $ 33.86 Granted 32,971 $ 82.01 Exercised — $ — Canceled — $ — Outstanding at December 31, 2022 233,969 $ 40.64 Granted 51,916 $ 56.80 Exercised ( 53,036 ) $ 11.95 Canceled ( 12,969 ) $ 75.25 Outstanding at December 31, 2023 219,880 $ 49.34 Granted 33,277 $ 90.86 Exercised ( 58,767 ) $ 35.77 Canceled ( 4,142 ) $ 89.99 Outstanding at December 31, 2024 190,248 $ 59.91 6.3 $ 3,145,845 Vested at December 31, 2024 122,598 $ 51.41 5.1 $ 2,794,991 Exercisable at December 31, 2024 122,598 $ 51.41 5.1 $ 2,794,991 Employee Stock Purchase Plan The Company has an employee stock purchase plan (ESPP) that permits eligible employees to purchase shares of common stock of the Company at a purchase price which is the lesser of 85 % of the market price on either the first day of the calendar quarter or the last day of the calendar quarter. Eligible employees may elect to participate in the plan by authorizing payroll deductions of up to 15 % of gross compensation for each payroll period. On the last day of each quarter, each participant’s contribution account is used to purchase the maximum number of whole shares of common stock determined by dividing the contribution account balance by the purchase price. The aggregate number of shares of common stock that may be purchased under the plan is 2,400,000 . Through December 31, 2024 , employees had purchased approximately 1,918,375 shares under the plan. 15. EMPLOYEE BENEFIT PLANS At December 31, 2024 the Company has a 401(k) Profit Sharing Plan for the benefit of its employees who meet certain eligibility requirements and it matches qualifying employee contributions. The Company’s contributions to the plans totaled $ 8.6 million, $ 6.8 million, and $ 8.1 million, for the years ended December 31, 2024 , 2023, and 2022, respectively. 16. INCOME TAXES Income tax provision (benefit) consists of the following (in thousands): Year Ended December 31, 2024 2023 2022 Current income tax provision: Federal $ 75,552 $ 52,634 $ 28,830 State 20,147 13,966 9,126 95,699 66,600 37,956 Deferred income tax provision: Federal ( 14,907 ) 2,869 20,000 State ( 1,500 ) 1,346 4,256 ( 16,407 ) 4,215 24,256 Total income tax provision $ 79,292 $ 70,815 $ 62,212 The Company’s effective tax rate for the year ended December 31, 2024 , was 25.9 % and was comparable to the effective tax rate for the year ended December 31, 2023 , of 25.6 %, which resulted in income tax expense of $ 79.3 million and $ 70.8 million, respectively. F- 23 Table of Contents The income tax provision differs from the amount of income tax determined by applying the U.S. Federal statutory rate to income before taxes as a result of the following (in thousands): Year Ended December 31, 2024 2023 2022 U.S. Federal statutory taxes $ 64,194 $ 58,002 $ 51,836 State and local taxes, net of U.S. Federal benefit 13,890 12,296 10,608 Permanent items 948 1,320 ( 208 ) Excess tax benefits from vesting or settlement of stock compensation awards ( 756 ) ( 656 ) ( 11 ) Federal credits ( 636 ) ( 755 ) ( 598 ) Other 1,652 608 585 Total income tax provision $ 79,292 $ 70,815 $ 62,212 Deferred tax assets and liabilities consist of the following (in thousands): As of December 31, 2024 2023 Deferred tax assets: Operating lease liability 13,632 6,886 Product and surface flaking warranty reserves 5,833 5,645 State tax credit carryforwards 3,621 4,250 Deferred revenue 4,230 4,215 Tax Cut and Jobs Act capitalization of research and development costs 5,397 3,956 Stock-based compensation 1,828 2,361 Inventories 3,342 639 Gross deferred tax assets, before valuation allowance 37,883 27,952 Valuation allowance ( 2,638 ) ( 3,307 ) Gross deferred tax assets, after valuation allowance 35,245 24,645 Deferred tax liabilities: Depreciation ( 70,572 ) ( 74,794 ) Inventories ( 2,150 ) ( 10,627 ) Operating lease right-of-use asset ( 13,332 ) ( 6,677 ) Goodwill amortization ( 3,584 ) ( 3,536 ) Other ( 1,639 ) ( 1,450 ) Gross deferred tax liabilities ( 91,277 ) ( 97,084 ) Net deferred tax liability $ ( 56,032 ) $ ( 72,439 ) The Company recognizes deferred tax assets and liabilities based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax laws and statutory tax rates. In accordance with accounting standards, the Company assesses the likelihood that its deferred tax assets will be realized. Deferred tax assets are reduced by a valuation allowance when, after considering all available positive and negative evidence, it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized, primarily certain state income tax credits. As of December 31, 2024 , the Company had a valuation allowance of $ 2.6 million against deferred tax assets it estimates will not be realized. The Company will analyze its position in subsequent reporting periods, considering all available positive and negative evidence, in determining the expected realization of its deferred tax assets. The Company recognizes interest and penalties related to tax matters as a component of “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Comprehensive Income. As of December 31, 2024 , the Company has identified no uncertain tax position and, accordingly, has no t recorded any unrecognized tax benefits or associated interest and penalties. 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 has accrued a liability when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has taken or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with accounting F- 24 Table of Contents standards. As of December 31, 2024 , for certain tax jurisdictions, tax years 2020 through 2024 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 jurisdictions as the Company does not have a taxable presence . 17. SEGMENT INFORMATION Through December 30, 2022, the Company operated in two reportable segments. On December 30, 2022, the Company completed the sale of its wholly-owned subsidiary and reportable segment, Trex Commercial. Subsequent to the sale of Trex Commercial, the Company operates in one reportable segment, Trex Residential, with resource allocation and assessment of financial performance based on a consolidated basis. • Trex Residential manufactures composite decking and railing and related outdoor living products marketed under the brand name Trex ® . The products are sold to its distributors and two national retailers who, in turn, sell primarily to the residential market, which includes replacement, remodeling and new construction. • Trex Commercial designed, engineered, and marketed modular and architectural railing and staging systems for the commercial and multi-family market, including sports stadiums and performing arts venues. The segment’s products were sold through architects, specifiers, contractors, and others doing business within the segment’s commercial market. On December 30, 2022, the Company completed the sale of Trex Commercial. Refer to Note 3 to these consolidated financial statements for additional information on the sale of Trex Commercial. The Company’s reportable segments are determined in accordance with its internal management structure, which, through December 30, 2022, was based on residential and commercial operations. The Company has identified its President and Chief Executive Officer as the Chief Operating Decision Maker (CODM). The Company’s CODM has final authority over resource allocation decisions and performance assessments and makes key operating decisions. The primary objective of the CODM is to optimize positive Company-wide performance and financial results. The CODM evaluates segment performance primarily based on net income and net sales. The CODM uses net income to assess performance and allocate resources as this measure provides insight into all aspects of the segment’s operations and overall success of the segment for a given period. The CODM also 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. Segment Data (in thousands): Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022 Consolidated Consolidated Trex Residential Trex Commercial Consolidated Net Sales (1) $ 1,151,449 $ 1,094,837 $ 1,059,536 $ 46,507 $ 1,106,043 Cost of Sales 665,781 642,430 659,689 42,365 702,054 Selling, General, and Administrative Expenses 179,995 176,203 131,761 10,070 141,831 Loss on Sale (2) - - - 15,423 15,423 Depreciation and Amortization 54,670 50,189 43,173 1,125 44,298 Interest Revenue 11 73 103 - 103 Interest Expense - 78 - - - Income Tax Expense (Benefit), Net 79,292 70,815 67,313 ( 5,101 ) 62,212 Net Income (Loss) (3) 226,392 205,384 200,876 ( 16,250 ) 184,626 Capital Expenditures 232,337 166,089 175,904 324 176,228 Total Assets (4) 1,324,298 932,885 933,705 - 933,705 (1) For the year ended December 31, 2022, Trex Residential net sales excludes $ 485 k of intercompany net sales. (2) On December 30, 2022, the Company sold the assets of it wholly owned subsidiary, Trex Commercial, resulting in a loss of $ 15.4 million. (3) For the year ended December 31, 2022, Consolidated net income and Trex Commercial net loss includes a loss on sale of Trex Commercial on December 30, 2022, of $ 15.4 million. (4) The assets of Trex Commercial were sold on December 30, 2022. F- 25 Table of Contents 18. SEASONALITY The operating results for Trex Residential have historically varied from quarter to quarter. Seasonal, erratic, or prolonged adverse weather conditions may 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. 19. COMMITMENTS AND CONTINGENCIES 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. Purchase Commitments The Company fulfills requirements for raw materials under both purchase orders and supply contracts. In the year ended December 31, 2024, the Company purchased reclaimed wood fiber requirements under purchase orders and long-term supply commitments. All of the Company’s scrap polyethylene, aluminum and stainless-steel purchases are under short-term supply contracts that may average approximately one year, for which pricing is negotiated as needed, or under purchase orders that do not involve long-term supply commitments. The wood and polyethylene supply contracts generally provide that the Company is obligated to purchase all wood or polyethylene a supplier provides, if the wood or polyethylene meets certain specifications. The amount of wood and polyethylene the Company is required to purchase under these contracts varies with the production of its suppliers and, accordingly, is not fixed or determinable. As of December 31, 2024 , the Company has purchase commitments under material supply contracts of $ 50.7 million for the year ending December 31, 2025, and a total of $ 86.2 million for the years ending December 31, 2026 through 2028. Product Warranty The Company warrants that for the applicable warranty period its Trex Residential products, when properly installed, used and maintained, will be free from material defects in workmanship and materials and its decking, cladding, fascia and railing products will not split, splinter, rot or suffer structural damage from termites or fungal decay. Products sold on or after January 1, 2023: The warranty period for residential use is 50 years for Transcend ® decking, 35 years for Select ® decking and Universal Fascia, and 25 years for Enhance ® decking and Transcend, Select, Enhance and Signature ® railing. The warranty period for commercial use is 10 years, excluding Signature railing and Transcend cladding, which each have a warranty period of 25 years. The Company further warrants that Trex Transcend, Trex Enhance and Trex Select decking and cladding and Universal Fascia products will not fade in color from light and weathering exposure more than a certain amount and will be resistant to permanent staining from food and beverage substances or mold and mildew, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above. If there is a breach of such warranties, the Company has an obligation either to replace the defective product or refund the purchase price. Products sold prior to January 1, 2023: The warranty period is 25 years for residential use and 10 years for commercial use. With respect to Trex Signature railing, the warranty period is 25 years for both residential and commercial use. The Company further warrants that Trex Transcend, Trex Enhance, Trex Select and Universal Fascia products will not fade in color more than a certain amount and will be resistant to permanent staining from food substances or mold, provided the stain is cleaned within seven days of appearance, for the warranty period referred to above. If there is a breach of such warranties, the Company has an obligation either to replace the defective product or refund the purchase price. The Company maintains a warranty reserve for the settlement of its product warranty claims. The Company accrues for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and future claims experience. Management reviews and adjusts these estimates, if necessary, based on the differences between actual experience and historical estimates. Additionally, the Company accrues for warranty costs associated with occasional or unanticipated product quality issues if a loss is probable and can be reasonably estimated, as necessary. Trex Residential continues to receive and settle claims for decking 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. F- 26 Table of Contents To estimate the number of claims to be settled with payment, the Company utilizes actuarial techniques to determine a reasonable possible range 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 to determine its best estimate of future claims for which to record a related liability. 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. Average cost per claim experienced in the year ended December 31, 2024, was lower than that experienced in the year ended December 31, 2023, and lower than the Company’s expectations for 2024. The number of incoming claims received in the year ended December 31, 2024, was lower than the number of claims received in the year ended December 31, 2023 , and higher than the Company’s expectations for 2024. After evaluating trends in incoming claims and closures in its actuarial analysis and combining these factors with future cost estimates, the Company recorded a reduction of $ 1.5 million to its warranty reserve for the future settlement of surface flaking claims in 2024. The Company believes the reserve at December 31, 2024 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 the actual warranty liabilities to be higher or lower than those projected, which could materially affect the Company’s financial condition, results of operations or cash flows. The Company estimates that the annual number of claims received will continue to decline over time and that the average cost per claim will increase slightly, primarily due to inflation. 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. 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 $ 0.6 million change in the estimate of the surface flaking warranty reserve. The Trex Residential product warranty and surface flaking reserves activity consisted of the following, and is included in Accrued warranty and Non-current accrued warranty in the Consolidated Balance Sheets (in thousands): Year Ended December 31, 2024 Product Warranty Surface Flaking Total Beginning balance, January 1 $ 12,066 $ 10,112 $ 22,178 Provisions and changes in estimates 11,211 ( 1,486 ) 9,725 Settlements made during the period ( 7,681 ) ( 1,387 ) ( 9,068 ) Ending balance, December 31 $ 15,596 $ 7,239 $ 22,835 Year Ended December 31, 2023 Product Warranty Surface Flaking Total Beginning balance, January 1 $ 9,694 $ 15,905 $ 25,599 Provisions and changes in estimates 7,308 ( 3,800 ) 3,508 Settlements made during the period ( 4,936 ) ( 1,993 ) ( 6,929 ) Ending balance, December 31 $ 12,066 $ 10,112 $ 22,178 Industrial Revenue Bonds In October 2021, the Company announced plans to add a third manufacturing facility located in Little Rock, Arkansas (Little Rock). Construction on the new facility began in the second quarter of 2022. In connection with the construction of the new facility, during 2024 the Company and Little Rock entered into an agreement in which Little Rock agreed to issue up to $ 450 million of its industrial revenue bonds (IRBs) for the purpose of constructing a manufacturing facility. Under the agreement, the Company transferred ownership of the facility to Little Rock and simultaneously leased the related asset from Little Rock. The Company is also the purchaser of the IRBs and, therefore, is the bondholder as well as the borrower/lessee of the Little Rock facility purchased with the IRB proceeds. As a result of the agreement, the Company was able to reduce the cost of certain state and local tax expenditures for twenty years. The Company has a purchase option included in the lease agreement for below the fair value of the asset, which prevents the transfer of the asset to Little Rock from being recognized as a sale. Furthermore, the Company has not derecognized the F- 27 Table of Contents transferred asset and continues to recognize it in property, plant and equipment in the Consolidated Balance Sheets. The Company has the right and intends to set-off any obligations to make payments under the finance liability, with proceeds due from the IRBs. The liability and IRB asset are equal and are reported net in the Consolidated Balance Sheets. As of December 31, 2024, the gross asset and liability associated with the IRBs was $ 100 million. F- 28 Table of Contents TREX COMPANY, INC. SCHEDULE II—VALUATI ON AND QUALIFYING ACCOUNTS AND RESERVES (In thousands) Descriptions Balance at Beginning of Period Additions Charged to Cost and Expenses Deductions Balance at End of Period Year ended December 31, 2024: Trex Residential product warranty reserve $ 22,178 $ 9,725 $ ( 9,068 ) $ 22,835 Income tax valuation allowance $ 3,307 $ ( 669 ) $ — $ 2,638 Year ended December 31, 2023: Trex Residential product warranty reserve $ 25,599 $ 3,508 $ ( 6,929 ) $ 22,178 Income tax valuation allowance $ 3,026 $ 281 $ — $ 3,307 Year ended December 31, 2022: Trex Residential product warranty reserve $ 28,595 $ 1,914 $ ( 4,910 ) $ 25,599 Income tax valuation allowance $ 2,232 $ 794 $ — $ 3,026 F- 29