Item 5. Market for Registrant’s Common Equity
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Common Stock
Our common stock has been listed on the New York Stock Exchange (NYSE) since April 8, 1999. Between April 8, 1999 and November 22, 2009, it was listed under the symbol “TWP”. Effective November 23, 2009, the symbol changed to “TREX”.
Dividend Policy
We have never paid cash dividends on our common stock and our credit agreement places limitations on our ability to pay cash dividends. We intend to retain future earnings to finance the development and expansion of our business or the repurchase of our common shares and, therefore, have no current intention to pay cash dividends. However, we reconsider our dividend policy on a regular basis and may determine to pay dividends in the future.
Issuer Purchases of Equity Securities
The following table provides information relating to the purchases of our common stock during the three months ended December 31, 2020 in accordance with Item 703 of Regulation S-K:
Period
(a)
Total Number of
Shares (or Units)
Purchased (1)
(b)
Average Price Paid
per Share (or Unit)
($)
(c)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs (2)
(d)
Maximum number of
Shares (or Units) that
May Yet Be
Purchased Under the
Plan or Program
October 1, 2020 – October 31,
2020
—
$
—
—
8,797,222
November 1, 2020 – November 30, 2020
5,877
$
70.90
—
8,797,222
December 1, 2020 – December 31, 2020
—
$
—
—
8,797,222
Quarter ended December 31, 2020
5,877
—
(1)
During the three months ended December 31, 2020, 5,877 shares were withheld by, or delivered to, the Company pursuant to provisions in agreements with recipients of restricted stock granted under the Company’s 2014 Stock Incentive Plan allowing the Company to withhold, or the recipient to deliver to the Company, the number of shares having the fair value equal to tax withholding due.
(2)
On February 16, 2018, the Company’s Board of Directors authorized a common stock repurchase program of up to 11.6 million shares of the Company’s outstanding common stock (Stock Repurchase Program). The Stock Repurchase Program was publicly announced on February 21, 2018.
Stockholder Return Performance Graph
The following graph and table show the cumulative total stockholder return on the Company’s common stock for the last five fiscal years compared to the Russell 2000 Index and the Standard and Poor’s 600 Building Products Index (S&P 600 Building Products). The graph assumes $100 was invested on December 31, 2015 in (1) the Company’s common stock, (2) the Russell 2000 Index and (3) the S&P 600 Building Products and assumes reinvestment of dividends and market capitalization weighting as of December 31, 2016, 2017, 2018, 2019 and 2020.
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Comparison of Cumulative Total Return
Among Trex Company, Inc., Russell 2000 Index, and S&P 600 Building Products Index
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
Trex Company, Inc.
$
100.00
$
169.30
$
284.96
$
312.09
$
472.56
$
880.34
Russell 2000 Index
$
100.00
$
121.31
$
139.08
$
123.77
$
155.37
$
186.38
S&P 600 Building Products
$
100.00
$
129.78
$
156.02
$
123.59
$
175.73
$
221.52
Other Stockholder Matters
As of January 29, 2021, there were approximately 146 holders of record of our common stock, although we believe that there are a significantly larger number of beneficial owners of our common stock.
In 2020, we submitted to the NYSE in a timely manner the annual certification that our Chief Executive Officer was not aware of any violation by us of the NYSE corporate governance listing standards.
Item 6.
Selected Financial Data
The following table presents selected financial data as of December 31, 2020, 2019, 2018, 2017 and 2016 and for each year in the five-year period ended December 31, 2020.
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The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and related notes thereto appearing elsewhere in this report.
Year Ended December 31, (1)
2020
2019 (2)
2018
2017 (3)
2016 (4)
(In thousands, except share and per share data)
Statement of Comprehensive Income Data:
Net sales
$
880,831
$
745,347
$
684,250
$
565,153
$
479,616
Cost of sales
521,374
438,844
389,356
321,780
292,521
Gross profit
359,457
306,503
294,894
243,373
187,095
Selling, general and administrative expenses
125,822
118,304
118,225
100,993
83,140
Income from operations
233,635
188,199
176,669
142,380
103,955
Interest (income) expense, net
(999
)
(1,503
)
(192
)
461
1,125
Income before income taxes
234,634
189,702
176,861
141,919
102,830
Provision for income taxes
59,003
44,964
42,289
46,791
34,983
Net income
$
175,631
$
144,738
$
134,572
$
95,128
$
67,847
Basic earnings per share
$
1.52
$
1.24
$
1.15
$
0.81
$
0.58
Basic weighted average shares outstanding
115,888,859
116,861,194
117,479,340
117,570,236
117,578,236
Diluted earnings per share
$
1.51
$
1.24
$
1.14
$
0.81
$
0.58
Diluted weighted average shares outstanding
116,252,866
117,315,498
118,134,604
118,301,840
118,450,676
Cash Flow Data:
Cash provided by operating activities
$
187,294
$
156,352
$
138,121
$
101,865
$
85,293
Cash used in investing activities
(170,658
)
(67,244
)
(33,733
)
(86,789
)
(10,202
)
Cash used in financing activities
(43,768
)
(45,974
)
(29,203
)
(3,226
)
(62,422
)
Other Data:
EBITDA (non-GAAP)
(5)
$
251,575
$
202,230
$
193,136
$
159,110
$
118,136
Balance Sheet Data:
Cash and cash equivalents
$
121,701
$
148,833
$
105,699
$
30,514
$
18,664
Working capital
215,644
224,534
177,450
86,289
54,264
Total assets
770,492
592,239
465,122
326,227
221,430
Total debt
—
—
—
—
—
Total stockholders’ equity
$
588,531
$
449,175
$
342,963
$
231,250
$
134,161
1)
All common stock share and per share data in the above table are presented on a post-split basis to reflect the two-for-one
stock split of our common stock in the form of a stock dividend distributed on September 14, 2020 to stockholders of record at the close of business on August 19, 2020.
2)
On January 1, 2019, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-02,
“ Leases (Topic 842),
” and subsequent amendments to the initial guidance within ASU Nos. 2018-01,
2018-10,
2018-11,
2018-20,
and 2019-01
(collectively, the standard). The standard requires lessees to recognize operating leases on the balance sheet as a right-of-use
(ROU) asset and a lease liability (current and non-current).
The liability is equal to the present value of the lease
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payments over the remaining lease term. The asset is based on the liability, subject to certain adjustments. The Company elected the modified retrospective method of adoption, which allowed the Company to apply the standard as of the beginning of the period of adoption. As a result, at December 31, 2019 the Company reported an ROU asset in total assets and included the current portion of the lease liability in working capital.
3)
On July 31, 2017, the Company’s newly-formed, wholly-owned subsidiary, Trex Commercial Products, Inc. acquired certain assets and assumed certain liabilities of Staging Concepts Acquisition, LLC. The Consolidated Financial Statements include the accounts of Trex Commercial Products, Inc. from the date of acquisition. Also, the tax legislation H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018,” known as the Tax Cuts and Jobs Act (Act), was enacted on December 22, 2017. Accordingly, we have recognized the tax effects of the Act in our financial statements and related notes as of and for the year ended December 31, 2017. Deferred tax assets that existed as of the enactment date and that reversed after the Act’s effective date of January 1, 2018 were adjusted to reflect the new Federal statutory tax rate of 21%. The effect of the change in tax rate on the deferred tax assets was allocated to continuing operations as a discrete item. We finalized our analysis of the Act in 2018, which did not give rise to new deferred tax amounts.
4)
Year ended December 31, 2016 was materially affected by a pre-tax
increase of $9.8 million to the warranty reserve related to surface flaking. Also, during 2016, the Company adopted FASB ASU No. 2015-17,
“ Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.
”
5)
EBITDA represents net income before interest, income taxes, depreciation and amortization. EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States (GAAP). The Company has included data with respect to EBITDA because management evaluates and projects the performance of the Company’s business using several measures, including EBITDA. Management considers EBITDA to be an important supplemental indicator of the Company’s operating performance, particularly as compared to the operating performance of the Company’s competitors, because this measure eliminates many differences among companies in capitalization and tax structures, capital investment cycles and ages of related assets, as well as some recurring non-cash
and non-operating
charges to net income or loss. For these reasons, management believes that EBITDA provides important supplemental information to investors regarding the operating performance of the Company and facilitates comparisons by investors between the operating performance of the Company and the operating performance of its competitors. Management believes that consideration of EBITDA should be supplemental, because EBITDA has limitations as an analytical financial measure. These limitations include the following:
•
EBITDA does not reflect the Company’s cash expenditures, or future requirements for capital expenditures, or contractual commitments;
•
EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on the Company’s indebtedness;
•
Although depreciation and amortization are non-cash
charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements;
•
EBITDA does not reflect the effect of earnings or charges resulting from matters the Company considers not to be indicative of its ongoing operations; and
•
Not all entities in the Company’s industry may calculate EBITDA in the same manner in which the Company calculates EBITDA, which limits its usefulness as a comparative measure.
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The Company compensates for these limitations by relying primarily on its GAAP results to evaluate its operating performance and by considering independently the economic effects of the foregoing items that are not reflected in EBITDA. As a result of these limitations, EBITDA should not be considered as an alternative to net income, as calculated in accordance with GAAP, as a measure of operating performance, nor should it be considered as an alternative to cash flows as a measure of liquidity. The following table sets forth, for the years indicated, a reconciliation of EBITDA to net income:
Year Ended December 31,
2020
2019
2018
2017
2016
(In thousands)
Net income
$
175,631
$
144,738
$
134,572
$
95,128
$
67,847
Interest (income) expense, net
(999
)
(1,503
)
(192
)
461
1,125
Income tax provision
59,003
44,964
42,289
46,791
34,983
Depreciation and amortization
17,940
14,031
16,467
16,730
14,181
EBITDA (non-GAAP)
$
251,575
$
202,230
$
193,136
$
159,110
$
118,136
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