What changed in this filing

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Item 1A. Risk Factors

2022-02-28 compared with 2021-02-22 · 27 added, 6 removed, 153 unchanged (18% of the section changed)

86 unchanged sentences

A number of class action lawsuits alleging defects in our products have been brought against us, all of which have been settled.

Our business is subject to risks in obtaining the raw materials we use at acceptable prices.

Our business is subject to risks in obtaining the raw materials we use.

Our business could suffer from the termination of significant sources of raw materials, the payment of higher prices for raw materials, the quality of available raw materials, or from the failure to obtain sufficient additional raw materials to meet planned increases in production.

2 unchanged sentences

Our ability to obtain adequate supplies of wood fiber and scrap polyethylene depends on our success in developing new sources that meet our quality requirements, maintaining favorable relationships with suppliers and managing the collection of supplies from geographically dispersed locations.

In addition to wood fiber and scrap polyethylene, we also use a small percentage of other materials in making our products, which are sometimes subject to volatility in supply and pricing and could negatively affect our profitability.

The manufacture of our Trex Commercial products requires substantial amounts of aluminum, steel, glass and wood.

These materials are also sometimes subject to volatility in pricing, which could negatively affect our profitability.

These materials are also sometimes subject to volatility in supply, which could negatively affect our profitability.

Periods of significant or prolonged inflation could affect our ability to obtain raw materials and transportation at acceptable prices and may negatively impact our profitability.

In a competitive environment, we may be unable to increase prices of our products to offset higher costs resulting from significant or prolonged inflationary pressures, which could have a material adverse effect on our business, financial condition, and operating results.

In addition, periods of sustained or rapidly increasing inflation may result in decreased spending in the residential and commercial markets and reduce demand for our products, which could further adversely impact our business.

Our business may be directly affected by significant or prolonged inflationary pressures on raw materials and transportation.

We will look to offset increased input costs through cost reduction projects, purchasing strategies, and increased production efficiencies and improvement opportunities to enhance our margins.

Specifically, our efforts would primarily center on increased automation, modernization, enhanced energy efficiency and improvements to raw material processing.

To the extent that these actions would not offset the impact of inflation we would seek to increase the price of our products to our customers.

At the same time, we would expand our marketing campaigns, including campaigns to highlight the advantages of Trex Residential decking over wood, as well as campaigns focused on innovation and new product development that further strengthens our consumer brand and distribution advantages.

In general, we believe that an effect of inflation would be a short-term disruption and that, over time, we would offset increased input costs with through cost reduction projects, purchasing strategies, and increased production efficiencies and improvement opportunities to enhance our margins.

In addition, we would be able to increase prices to counteract the majority of any inflationary effects of increasing costs and to generate sufficient cash flows to maintain our productive capability.

Labor shortages or increases in labor costs could adversely impact our business and results of operations.

13 unchanged sentences

These investments have resulted in, and may in the future result in, the recognition of goodwill.

As further described in Note 2 and Note 5 in the Notes to the Consolidated Financial Statements in this Form 10-K,

during the fourth quarter of 2021, we recognized a goodwill impairment charge at Trex Commercial’s railing reporting unit and staging reporting unit of $42.5 million and $11.8 million, respectively, which was the amount by which the carrying amount of the respective reporting unit exceeded its fair value.

As of December 31, 2021, the carrying amount of goodwill was $14.2 million at the Trex Residential reportable segment.

In addition, we have made and may continue to make significant capital investments to our property plant and equipment in order to improve or expand our manufacturing capabilities.

27 unchanged sentences

may impact our business will depend on future developments, which are highly uncertain and cannot be predicted.

Climate change and legal or regulatory responses thereto may have a long-term adverse impact on our business and results of operations.

There is increasing concern that a gradual increase in global average temperatures due to increased concentration of carbon dioxide and other greenhouse gases in the atmosphere could cause significant changes in weather patterns and an increase in the frequency, duration, and severity of natural disasters.

In addition, the increasing concern over climate change may result in additional laws or regulations designed to reduce or mitigate the effects of carbon dioxide and other greenhouse gas emissions on the environment that could negatively impact our financial condition and results of operations.

We continue to strive to minimize the environmental impact of Trex operations, remain one of the largest recyclers of polyethylene in the U.S.

and continue to benefit from increasing consumer interest in our environmentally friendly composite product offerings that leverage recycled and reclaimed materials.

Any significant changes in weather patterns or increases in the frequency, duration and severity of natural disasters are beyond our control and could disrupt our supply chain, increase our product costs, impact demand for our product, or impair our ability to deliver product to our customers.

In addition, we cannot predict what environmental legislation or regulations will be enacted in the future related to climate issues, or how existing or future laws or regulations will be administered or interpreted.

Compliance with more stringent laws or regulations, or stricter interpretation of existing laws, may require additional expenditures.

Any increased energy or compliance costs and expenses may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our products.

Cyberattacks and other security breaches could compromise our proprietary and confidential information which could harm our business and reputation.

1 unchanged sentence

Any such compromise of our data security and access to, or public disclosure or loss of, confidential business or proprietary information could disrupt our operations, damage our reputation, provide our competitors with valuable information and subject us to additional costs, which could adversely affect our business.

In the ordinary course of our business, we generate, collect and store confidential and proprietary information, including intellectual property and business information.

In the ordinary course of our business, we generate, collect and store confidential and proprietary information, including intellectual property, business information and employee data.

The secure storage, maintenance, and transmission of and access to this information is important to our operations and reputation.

3 unchanged sentences

We also collect limited information on consumers.

Although we do not collect any highly sensitive information, there is a risk that a cybersecurity attack

could compromise consumer’s names, addresses and other personal information.

Although we do not collect any highly sensitive information, there is a risk that a cybersecurity attack could compromise consumer’s names, addresses and other personal information.

Proactive measures that reduce our risk of a cybersecurity incident include:

8 unchanged sentences

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 1A. Risk Factors