What changed in this filing

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Item 1. Business

2021-02-22 compared with 2020-02-24 · 87 added, 65 removed, 260 unchanged (37% of the section changed)

13 unchanged sentences

We offer a comprehensive set of aesthetically appealing and durable, low-maintenance

product offerings in the decking, railing, fencing, steel deck framing, and outdoor lighting categories.

product offerings in the decking, railing, fencing, and outdoor lighting categories.

A majority of the products are eco-friendly

and leverage recycled materials to the extent possible.

Trex Residential decking is made in a proprietary process that combines reclaimed wood fibers and recycled polyethylene film, making Trex the largest recycler of waste polyethylene plastic film in North America.

Trex Residential decking is made in a proprietary process that combines reclaimed wood fibers and recycled polyethylene film, making Trex one of the largest recyclers of waste polyethylene plastic film in North America.

Trex Residential products are sold to distributors and home centers for final resale primarily to the residential market.

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, and Trex Enhance ®

Late in 2018, we re-engineered

our Enhance line to provide homeowners with a high-performance, lower-cost deck board designed to compete more directly with wood.

Differentiating the Enhance collection is a scalloped profile that is lighter weight for easier handling and installation.

In addition, our Trex Transcend decking product can also be used as cladding.

Our high-performance, low-maintenance,

composite decking products are comprised of a blend of 95 percent reclaimed wood fibers and recycled plastic film and feature a protective polymer shell for enhanced protection against fading, staining, mold and scratching.

composite decking products are comprised of a blend of 95 percent reclaimed wood fibers and recycled polyethylene film and feature a protective polymer shell for enhanced protection against fading, staining, mold and scratching.

We also offer accessories to our decking products, including Trex Hideaway ®

, a hidden fastening system for grooved boards, and Trex DeckLighting ™

and Trex DeckLighting ™

, an outdoor lighting system.

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This product consists of structural posts, bottom rail, pickets, top rail and decorative post caps.

Our triple-coated steel deck framing system called Trex Elevations ®

leverages the strength and dimensional stability of steel to create a flat surface for our decking.

Trex Elevations provides consistency and reliability that wood does not and is fire resistant.

Trex Residential products offer a number of significant aesthetic advantages over wood while eliminating many of wood’s major functional disadvantages, which include warping, splitting and other damage from moisture.

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Combined, these aspects yield significant aesthetic advantages and lower maintenance than wood decking and railing and ultimately render Trex Residential products less costly than wood over the life of the deck.

Trex decking products do not have the tensile strength of wood and, as a result, are not used as primary structural members in posts, beams or columns used in a deck’s substructure.

However, Trex does offer the Trex Elevations steel deck framing system.

We have received product building code listings from the major U.S.

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An above joist deck drainage system manufactured and sold by DriDeck Enterprises, LLC.

Trex CustomCurve ®

A system manufactured and sold by Curvelt, LLC that allows contractors to heat and bend Trex Products while on the job site.

Trex Pergola ™

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Trex Latticeworks ™

Outdoor lattice boards manufactured and sold by Rhea Products, Inc.

dba Acurio Latticeworks.

Outdoor lattice boards manufactured and sold by Structureworks Fabrication.

Trex Cornhole ™

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Trex Outdoor Kitchens, Cabinetry and Storage

Outdoor kitchens, cabinetry and storage manufactured and sold by NatureKast Products, LLC prior to December 31, 2019, and Danver Stainless Outdoor Kitchens on and after January 1, 2020.

Outdoor kitchens, cabinetry and storage manufactured and sold by Danver Stainless Outdoor Kitchens.

Trex Outdoor Fire & Water ™

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Trex Commercial designs and engineers custom railing solutions, which are prevalent in professional and collegiate sports facilities, standardized architectural and aluminum railing systems, which target commercial and high-rise applications, and portable staging equipment for the performing arts, sports, and event production and rental market.

With a team of devoted engineers, and an industry-leading reputation for quality and dedication to customer service, Trex Commercial markets to architects, specifiers, contractors, and building owners.

Trex Commercial has a team of devoted engineers and an industry-leading reputation for quality and dedication to customer service.

Trex offers the following products through Trex Commercial:

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We believe that attracting wholesale distributors, who are committed to our products and marketing approach and can effectively sell higher value products to contractor-oriented lumber yards and other retail outlets, is important to our future growth.

Our distributors are able to provide value-added service in marketing our products because they sell premium wood decking products and other innovative building materials that typically require product training and personal selling efforts.

Our distributors provide value-added service in marketing our products because they sell premium wood decking products and other innovative building materials that typically require product training and personal selling efforts.

We typically appoint two distributors within a specified area to sell only Trex Residential decking products on an exclusive basis.

The distributor purchases our products at prices in effect at the time we ship the product to the distributor.

Sales to two of our distributors, Boise Cascade Company and U.S.

Lumber Group, LLC, each exceeded 10% of sales in 2019.

Home Depot and Lowe’s.

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We believe that brand exposure through Home Depot and Lowe’s distribution promotes consumer acceptance of our products.

Sales to Lowe’s stores exceeded 10% of sales in 2019.

In the years ended December 31, 2020, 2019, and 2018 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, 2020, three

customers of Trex Residential represented approximately 56% of the Company’s total net sales.

For the year ended December 31, 2019, three customers of Trex Residential represented approximately 57% of the Company’s total net sales.

For the year ended December 31, 2018, two customers of Trex Residential represented approximately 42% of the Company’s total net sales.

Trex Commercial:

We sell our modular and architectural railing and staging systems to the commercial and multifamily market, including sports stadiums and performing arts venues, primarily to facility owners and general contractors throughout the country.

We market these products through our direct sales staff, independent sales representatives, and bidding on projects.

We are committed to conducting business activities with the highest standards of business ethics and in accordance with all applicable laws and regulations.

Our Vendor and Customer Code of Conduct and Ethics (Code), available at www.trex.com/our-company,

applies to all parties providing goods and services to the Company, and all of our channel partners who distribute, sell and/or install our products (collectively, Business Partners).

We expect all of our Business Partners, and all of our employees, agents and subcontractors to follow our high ethical standards set forth in the Code while they are conducting business with us or on our behalf.

applies to all parties providing goods and services to the Company, and all channel partners who distribute, sell and/or install our products (collectively, Business Partners).

We expect all Business Partners, and all employees, agents and subcontractors to follow our high ethical standards set forth in the Code while they are conducting business with us or on our behalf.

In addition, we expect our Business Partners to understand and comply with the Trex Company Code of Conduct and Ethics, available at www.trex.com/our-company,

to do business with Business Partners who share the same commitment to human rights that we have and as set forth in our Human Rights Policy, available at www.trex.com/our-company

Trex Commercial:

We market these products through our direct sales staff, independent sales representatives, and bidding on projects.

Manufacturing Process

Products manufactured at our Trex Residential manufacturing facilities in Winchester, Virginia (Virginia) and Fernley, Nevada (Nevada) manufacturing facilities are primarily manufactured from reclaimed wood fiber and scrap polyethylene.

Products manufactured at our Trex Residential manufacturing facilities in Virginia and Nevada are primarily manufactured from reclaimed wood fiber and scrap polyethylene.

Our primary manufacturing process for the products involves mixing wood particles with plastic, heating and then extruding, or forcing, the highly viscous and abrasive material through a profile die.

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We fulfill requirements for raw materials under both purchase orders and supply contracts.

In the year ended December 31, 2019, we purchased substantially all of our reclaimed wood fiber requirements under purchase orders, which do not involve long-term supply commitments.

All of our polyethylene purchases are under short-term supply contracts that generally have a term of approximately one to two years for which pricing is negotiated as needed, or under purchase orders that do not involve long-term supply commitments.

In the year ended December 31, 2020, we purchased our reclaimed wood fiber requirements under purchase orders and long-term supply commitments not exceeding four years.

All of our polyethylene purchases are under short-term

supply contracts that generally have a term of approximately one to two years for which pricing is negotiated as needed, or under purchase orders that do not involve long-term supply commitments.

Reclaimed Wood Fiber

Cabinet and flooring manufacturers are our preferred suppliers of reclaimed wood fiber because the reclaimed wood fiber produced by these operations contains little

contamination and is low in moisture.

Cabinet and flooring manufacturers are our preferred suppliers of reclaimed wood fiber because the reclaimed wood fiber produced by these operations contains little contamination and is low in moisture.

These facilities generate reclaimed wood fiber as a byproduct of their manufacturing operations.

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Growth Strategies

Our long-term goals are to perpetuate our position as the leading producer of branded superior composite decking, railing and other outdoor living products, expand our addressable market to achieve growth against wood and appeal to consumers who have not previously considered composites, and to extend our position as a leading national provider of custom-engineered railing and staging systems for the commercial and multi-family market, including performing arts venues and sports stadiums.

To achieve our long-term goals, we intend to increase our market share and expand into new product categories and geographic markets through the design, creation and marketing of high-performance, low-maintenance,

outdoor living products that offer superior aesthetics and quality, and by expanding our sales to commercial building projects.

We will continue to explore opportunities that leverage our manufacturing and extrusion expertise and are tied to our recycling heritage.

Our long-term goals are to continue leading the category with beautiful, high-performance, low-maintenance

Trex products, including our outdoor living products, such as composite decking and railing for the residential market and custom-engineered railing systems for the commercial market.

To do this, we will increase market share and expand into new product categories and geographic markets through the design, creation and marketing of outdoor living products that offer superior aesthetics and quality and by expanding our sales to the commercial market.

Trex Residential will expand its offering of eco-friendly

decking and railing products for a breadth of audiences, whether by converting wood buyers who have not previously considered composite decking or appealing to the most discriminating high-end

homeowners seeking superior aesthetics and quality.

Trex Commercial will extend its position as a leading national provider of custom-engineered railing for the commercial and multi-family market, including sports stadiums.

Additionally, Trex will continue to explore opportunities that leverage our manufacturing and extrusion expertise and recycling heritage.

We intend to employ the following long-term strategies to achieve our goals:

Bring to the market new products that address unmet consumer and trade professional needs.

Introduce new products that address unmet consumer and trade professional needs.

Provide a compelling value proposition through ease of installation, low maintenance, long-term durability and superior aesthetics.

Expand preference and commitment for the Trex brand with both consumers and trade professionals.

Deliver on the brand’s promise of superior quality, functionality, pleasing aesthetics and overall performance in outdoor living products and custom-engineered railing and staging systems.

Leverage online efforts to extend the Trex brand digital presence, both nationally and globally.

Achieve comprehensive market segment and geographic coverage for Trex products by increasing the number of stocking dealers and retailers and expanding our international presence for

our wood-alternative outdoor living products, thereby making our products available wherever our customers choose to purchase their decking, railing, steel deck framing and outdoor lighting products, and by continuing to develop our commercial market penetration for our railing and staging systems.

Expand awareness, preference and commitment for the Trex brand with both consumers and trade professionals.

Deliver on the brand’s promise of superior quality, functionality, pleasing aesthetics and overall performance in outdoor living products and custom-engineered railing systems.

Leverage omnichannel efforts to extend the Trex brand presence, both nationally and globally.

Achieve comprehensive market segment and geographic coverage for Trex products by increasing the number of stocking dealers and retailers and expanding our international presence for our eco-friendly

wood-alternative outdoor living products, thereby making our products available wherever our customers choose to purchase their decking or railing , and by continuing to develop our commercial market penetration for our railing systems.

Continuously advance the quality of all operational and business processes, with the goal of achieving superior product quality and service levels, thereby giving us a sustainable competitive advantage.

Through capital investments and process engineering, continuously seek to lower the cost to manufacture Trex products.

Investments in plastic recycling capabilities will allow us to expand our ability to use a wider breadth of waste materials thereby lowering raw material costs of our outdoor living products.

Through capital investments and process engineering, continuously seek to lower the cost to manufacture Trex residential and commercial products.

Investments in polyethylene recycling capabilities will allow us to expand our ability to use a wider breadth of waste materials thereby lowering raw material costs of our outdoor living products.

We plan to continue to achieve significant improvements in manufacturing productivity by reducing waste and improving our production process.

Customer Service

Through our commitment to superior customer service, continually deliver consistently outstanding, personalized service to all of our customers and prospects in all target segments.

Our primary competition for our composite decking and residential railing products consists of wood products, which constitutes a substantial majority of decking and railing sales, as measured by linear feet of lumber.

Through our commitment to superior customer service, continually deliver consistently outstanding, personalized service to all customers and prospects in all segments.

Our primary competition for our composite decking and residential railing products consists of wood products, which constitute a substantial majority of decking and railing sales, as measured by linear feet of lumber.

Many of the conventional lumber suppliers with which we compete have established ties to the building and construction industry and have well-accepted products.

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Industry studies indicate that we have the leading market share of the wood-alternative segment of the decking and railing market.

Our principal competitors include The Azek Building Products, Inc., and Fiberon (a division of Fortune Brands, Inc.).

Our principal competitors include The Azek Company Inc., and Fiberon (a division of Fortune Brands, Inc.).

Our ability to compete depends, in part, on a number of factors outside our control, including the ability of our competitors to develop new wood-alternative decking and railing products that are competitive with our products.

44 unchanged sentences

We have one current U.S.

Patent Application for decking technology and five U.S.

Patent for decking technology and five U.S.

Patents for various staging systems, accessories and related technologies.

2 unchanged sentences

If it is necessary to disclose proprietary information to third parties for business reasons, we require that such third parties sign a confidentiality agreement prior to any disclosure.

Employees and Corporate Governance

At December 31, 2019, Trex Residential had 1,173 full-time employees, 933 of whom were employed in its manufacturing operations, and Trex Commercial had 159 full-time employees, 62 of whom were employed in its manufacturing operations.

Human Capital

We are committed to furthering our stature as the highest quality, pre-eminent

decking brand in the world, while delivering robust value to our shareholders.

As we continue to grow, a differentiating factor continues to be the caliber of our talent.

The Company embraces a culture of diverse thinking and perspectives.

We strive for this by making human capital a key strategic pillar overseen by the Board of Directors and management.

Our focus is to attract, develop and retain a highly engaged and diverse workforce.

We accomplish this through broad and transparent employment branding efforts, competitive and equitable compensation philosophies, proactive employee relations, and by offering a work environment with meaningful career growth opportunities.

At December 31, 2020, Trex Residential employed 1,555 full-time employees and Trex Commercial employed 164 full-time employees.

Our employees are not covered by collective bargaining agreements.

We believe that our relationships with our employees are favorable.

The Company has internal standards related to hiring practices that encourage diversity, formal programs to provide skill development for our employees, and anti-discrimination standards.

The Company has not had any serious complaints or claims over the last three years.

We have adopted a Human Rights Policy across all of our operations that sets forth our values related to working conditions and human rights and underscores our philosophy about the way we conduct our business.

We believe that our relationships with our employees are favorable, and we have not had any serious complaints or claims over the last three years.

Our Human Rights Policy sets forth our values related to working conditions and human rights, and it underscores our philosophy about the way we conduct our business.

The policy is available at www.trex.com/our-company.

We believe that diversity, equity and inclusion enriches our organization, contributes to our long-term value creation, and fosters an environment of creativity and innovative thinking, which will bring forth new ideas and challenge the status quo.

The strategy we have developed aims to advance our efforts to increase the diversity of our workforce, while we continue to be a destination workplace for talent and maximize returns to our shareholders.

We believe a diverse candidate or employee is someone who is driven, bold, hard-working, determined and tenacious;

embodies our overarching ideals and identity;

and who looks, thinks or acts differently than the majority.

These differences could be represented by race, ethnicity, gender, or academic and professional backgrounds.

When comparing our ethnicity demographics against those in the geographies where we operate, we seek to accurately represent the diversity of our local communities and beyond.

We hired approximately 350 employees over the past year in support of our current expansion efforts and growth at Trex Residential and expect to continue to add additional employees to support our growth.

We continue to build our employer brand by accurately and transparently reflecting our work culture to attract candidates.

Recent actions include:

Developing a recruiting campaign specifically for Spanish-speaking job seekers.

Utilizing candidate assessment tools for certain roles to remove potential bias.

Leveraging large, diverse recruiting platforms to reach broad audiences.

Establishing a new training department focused solely on the training and development of our employees.

Launching a new, more robust and engaging careers website designed to attract ideal candidates in a competitive job market, which replaces our previous solo landing page approach with details about our organization, locations, people and benefits.

Increasing our employee and employment digital presence across many platforms.

Trex has taken these steps to ensure all employees feel comfortable, and to ensure that we remain an employer of choice, well-known for both innovation and opportunity.

All Trex employees will complete live diversity, equity and inclusion training, which addresses valuing differences, communicating inclusively, avoiding harassment and hostile work environment, and resolving unconscious bias.

Our recruitment strategy includes advanced education recruitment and veteran recruitment.

We recognize the skills learned through these pursuits align with the skills necessary to be a successful employee, and our active involvement with these recruiting paths offers many opportunities to build partnerships and reach candidate pools at various career stages that are both diverse and geographically varied.

The strategy also offers opportunities to partner with organizations that appeal to these talent groups, to increase our employer brand exposure, and to help sustain diversity and recruitment efforts.

Corporate Governance

Information related to the Company’s governance and related activities and programs may be found in the Company’s Definitive Proxy Statement filed on March 17, 2020 in Schedule 14A.

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outlines our foundational commitment to conducting business in an ethical and socially responsible manner that respects the environment.

Environmental matters relevant to the Company’s operations are the responsibility of members of the executive management team, including the President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer, and the General Counsel.

Environmental matters relevant to the Company’s operations are the responsibility of members of the executive management team, including the President and Chief Executive Officer, the Senior Vice President and Chief Financial Officer, and the General Counsel.

Trex Residential’s eco-friendly

composite decking products consist of a blend of 95 percent reclaimed wood and recycled plastic film.

composite decking products consist of a blend of 95 percent reclaimed wood and recycled polyethylene film.

In addition, Trex Residential’s proprietary, eco-friendly

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The Company’s primary resource usage consists of water, natural gas and electricity.

The Company develops budgets and plans that improve shareholder return by ensuring the optimal use of each resource, which

promotes resource efficiency and minimal waste of the resource.

The Company develops budgets and plans that improve shareholder return by ensuring the optimal use of each resource, which promotes resource efficiency and minimal waste of the resource.

Water management is of critical importance to us and we prioritize energy savings as part of our ongoing evaluation and optimization of business operations and manufacturing processes.

We ensure that all of our manufacturing facilities meet emission standards for the locality in which they operate, and certify to applicable authorities that our emissions are within the relevant locality’s standards.

We ensure that all manufacturing facilities meet emission standards for the locality in which they operate and certify to applicable authorities that our emissions are within the relevant locality’s standards.

Market Recognition of Trex Brand’s Environmental Characteristics

The Company’s internal standards for environmental stewardship and product integrity are recognized year-over-year in the marketplace.

In 2019, Trex received the Green Builder Media 2019 Eco Leader award—the highest honor awarded by the publication’s editorial team—and received the Green Builder Media 2019 Readers’ Choice Award for “Greenest Decking—one of the most respected surveys issued by the publication.

Trex is the only composite decking manufacturer to hold this title since 2009.

In 2020, Trex received the 2020 Sustainability Leadership Award by the Business Intelligence Group, Green Builder Media’s best Brand Index score for the decking category, Green Builder Media’s Readers’ Choice Award for “Greenest Decking” – one of the most respected surveys issued by the publication – for an unprecedented 10-year

Trex Residential decking products meet LEED requirements for builders and our commercial products have contributed to the LEED certifications of some high-profile venues.

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The Company is committed to plan and perform all operations at all facilities in a manner that is safe for its employees, and has adopted an Occupational Health and Safety Policy, located on our web site at www.trex.com/our-company.

that sets forth our commitment to sustaining a compliant and safety conscious work environment and keeping safety at the forefront of our business.

The policy sets forth our commitment to sustaining a compliant and safety conscious work environment.

and keeping safety at the forefront of our business.

The commitment is based on:

2 unchanged sentences

Prevention considerations in all designs and redesigns of facilities, equipment, processes, work methods and products, and incorporation of safe design methods into all phases of hazard and risk mitigation;

Demonstrating employee safety leadership in all of our processes while striving for world class performance;

Continual improvement by analyzing this commitment through the use of leading and lagging key performance indicators, such as safety observation audit completions, attendance at monthly safety training, safety work order completions, and targets related to recordable and lost time incident rates and days away or restricted time.

Demonstrating employee safety leadership in all processes while striving for world class performance;

Continual improvement by analyzing this commitment through the use of leading and lagging key performance indicators, such as safety observation audit completions, work area audit card completion, attendance at monthly safety training, safety work order completions, and targets related to recordable and lost time incident rates and days away or restricted time.

The Company applies industry best-practices for monitoring and reporting near misses, lost days and frequency of incidents and for implementing safety systems similar to OHSAS 18001 including:

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Department of Labor/Occupational Safety and Health Administration.

In addition, each manufacturing operation has an Employee Health and Safety Manager who is a Certified Occupational Safety Specialist and Certified Occupational Safety Manager.

In addition, the Company has an Employee Health and Safety Manager who is a Certified Occupational Safety Specialist and Certified Occupational Safety Manager.

The Company is a member of the Voluntary Protection Program Participants Association, the National Safety Council, and the National Fire Protection Association.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business