What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-28 compared with 2021-02-22 · 195 added, 259 removed, 943 unchanged (32% of the section changed)

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February 28, 2022

/ S / B RYAN H.

President and Chief Executive Officer

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February 28, 2022

/ S / D ENNIS C.

Senior Vice President and Chief Financial Officer

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The annual equity award for service on the Board was increased from $110,000 to $120,000.

The annual committee fee for members of the Audit Committee was increased from $8,750 to $10,000.

The annual committee fee for members of the Compensation Committee was increased from $7,500 to $10,000.

The annual committee fee for members of the Nominating and Corporate Governance Committee was increased from $6,250 to $10,000.

The annual committee fee for the chairman of the Audit Committee was increased from $17,500 to $20,000.

The annual committee fee for the chairman of the Compensation Committee was increased from $15,000 to $20,000.

The annual committee fee for the chairman of the Nominating/Corporate Governance Committee was increased from $12,500 to $20,000.

The additional compensation for the Lead Independent Director was increased from $20,000 to $25,000.

The additional compensation for a non-executive

Chairman of the Board was increased from $80,000 to $85,000.

The additional compensation for a non-executive

Vice Chairman of the Board was increased from $50,000 to $55,000.

The Nominating and Corporate Governance Committee and the Board of Directors of the Company amended the Outside Directors Plan as described above based upon a Board of Directors compensation study undertaken by Korn Ferry Hay Group, which is the Company’s independent compensation consultant.

The foregoing description of the amendment to the Outside Directors Plan is qualified in its entirety by reference to the full text of the Outside Directors Plan, which is filed as Exhibit 10.3 to this Form 10-K.

Trex Residential Arkansas Manufacturing Facility

On October 26, 2021, the Company announced its plan to add a third U.S.-based Trex Residential manufacturing facility in Little Rock, Arkansas.

The new campus will sit on nearly 300 acres of land and will address increased demand for Trex Residential outdoor living products.

Construction is slated to begin in early 2022 with the first production output anticipated in 2024.

Funded primarily through ongoing cash generation, the Company expects to invest approximately $400 million over the next five years in the development of the new Arkansas site.

Directors, Executive Officers and Corporate Governance

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Exhibits and Financial Statement Schedules

(a)(1) The following Consolidated Financial Statements of the Company appear on pages F-2

of this report and are incorporated by reference in Part II, Item 8:

Report of Independent Registered Public Accounting Firm

(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 )

Consolidated Financial Statements

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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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate 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 matters 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 matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Surface Flaking Warranty

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The actuarial analysis utilized determines a reasonably possible range of claims to be received and the percentage of those claims that will ultimately require payment.

Auditing the surface flaking warranty reserve is complex and required the involvement of specialists due to the highly judgmental nature of the actuarially determined number of claims.

Auditing the reserve is also complex due to the judgmental nature of the significant assumptions made by management (e.g., the size of the affected decks, the availability and type of replacement material used, the cost of production of replacement material and the method of claim settlement) and used in the measurement process.

Auditing the surface flaking warranty reserve is complex and required the involvement of a specialist due to the highly judgmental nature of the actuarially determined number of claims.

replacement material) and used in the measurement process.

These determinations, assumptions and judgments have a significant effect on the surface flaking reserve.

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We performed audit procedures on the completeness and accuracy of the underlying data used by the Company in its analysis.

Valuation of Goodwill

Description of the Matter

At December 31, 2021, the Company’s goodwill totaled $14.2 million.

As discussed in Note 2 of the consolidated financial statements, goodwill is tested for impairment annually during the fourth quarter and when events or changes in circumstances indicate the carrying value of reporting units might exceed their current fair values.

The Company determined that it was necessary to perform a quantitative annual goodwill impairment test as of October 31, 2021 of its commercial railing and staging reporting units utilizing a combination of the income and market approaches.

As a result of the annual test performed, the Company recorded $54.2 million of impairment losses in the fourth quarter of 2021.

Auditing management’s annual goodwill impairment test was complex and highly judgmental due to the significant estimation required in determining the fair value of the reporting units.

In particular, the fair value estimates were sensitive to changes in significant assumptions, such as the weighted average cost of capital and assumptions used in the prospective financial information (including the long-term rate of growth and profitability of the business), which are affected by expectations about future market or economic conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s annual goodwill impairment review process, including controls over management’s review of the significant assumptions described above and the completeness and accuracy of the underlying data.

To test the estimated fair value of the Company’s reporting units, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above as well as the underlying data used by the Company in its analysis.

For example, we compared the significant assumptions used by management in the prospective financial information to current industry and economic trends and to historical results.

We performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions.

We inquired of the Company’s executives to understand the business initiatives supporting the assumptions in the prospective financial information and assessed the historical accuracy of management’s estimates.

We also involved a valuation specialist to assist in our evaluation of the Company’s valuation methodology and certain significant assumptions, such as the weighted average cost of capital.

/s/ Ernst & Young LLP

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Selling, general and administrative expenses

Goodwill impairment losses

Gain on insurance proceeds

Income from operations

Interest (income) expense, net

Interest income, net

Income before income taxes

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Employee stock plans

Shares withheld for taxes on awards

Shares withheld for taxes on

Stock-based compensation

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Employee stock plans

Shares withheld for taxes on awards

Shares withheld for taxes on

Stock-based compensation

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Adjustments to reconcile net income to net cash provided by operating activities:

Goodwill impairment losses

Depreciation and amortization

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Net cash used in financing activities

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

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Supplemental disclosures of cash flow information:

Cash paid for interest

Cash paid for interest, net of capitalized interest

Cash paid for income taxes, net

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The Company operates in two reportable segments, Trex Residential Products (Trex Residential) and Trex Commercial Products (Trex Commercial).

The Company’s principal business based on net sales is the manufacture and distribution of Trex Residential wood and plastic composite products, as well as related accessories, primarily for residential decking and railing applications.

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 designs, engineers and markets modular and architectural railing and staging systems for the commercial and multi-family market, including sports stadiums and performing arts venues.

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Intercompany accounts and transactions have been eliminated in consolidation.

pandemic remains an evolving situation and while macro-economic recovery seems likely, the duration and extent of the recovery remains uncertain.

However, the Company continues to manage its business to ensure the continuity of its operations and the safety of its employees.

Trex Residential has not experienced any decline in demand for its outdoor living products.

Trex Commercial had not experienced any material reduction to its net sales.

However, measures taken to contain the spread of the virus have reduced new project commitments from its customer base.

The reduction in project commitments was influenced by a delay in new projects due to lingering uncertainty created in the commercial railing and staging markets by the COVID-19 virus.

The delay in new projects, coupled with the Company’s successful fulfillment of its pre-pandemic projects, resulted in lower project backlog and reduced forecasted net sales and EBITDA, which became apparent in the fourth quarter of 2021.

The Company continued to assess the impact on project commitments throughout the year and, during the fourth quarter of 2021, determined that the impact will adversely affect Trex Commercial’s financial condition and results of operations in future periods.

The continued impact of COVID-19

and its effect on project commitments was a consideration in the Company’s quantitative assessment for goodwill impairment testing at its commercial railing and staging reporting units as of October 31, 2021.

Use of Estimates

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Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments purchased with original maturities of

three months or less.

Cash equivalents consist of highly liquid investments purchased with original maturities of three months or less.

Concentrations and Credit Risk

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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, 2020, substantially all deposits are maintained in one financial institution.

As of December 31, 2021,

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.

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In the years ended December 31, 2021, 2020, and 2019 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 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.

For the year ended December 31, 2021, three customers of Trex Residential represented approximately 61 % 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.

At December 31, 2021 two customers represented 29 % and 25 %, respectively, of the Company’s total accounts receivable balance.

At December 31, 2020 two customers represented 27 % and 15 %, respectively, of the Company’s accounts receivable balance.

At December 31, 2019 three customers represented 30 %, 24 % and 10 %, respectively, of the Company’s total accounts receivable balance.

For each year ended December 31, 2020, 2019, and 2018, approximately 28 %, 27 %, and 33 %, respectively, of the Company’s materials purchases at Trex Residential were purchased from its

four largest suppliers.

Inventories for the Company’s composite decking and railing products are valued at the lower of cost (last-in,

For each year ended December 31, 2021, 2020, and 2019, approximately 26 %, 28 %, and 27 %, respectively, of the Company’s materials purchases at Trex Residential were purchased from its four largest suppliers.

Inventories for the Company’s composite decking and railing products at Trex Residential are valued at the lower of cost (last-in,

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 estimated realizable value.

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.

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Due to the nature of the LIFO valuation methodology, liquidations of inventories will result in a portion of the Company’s cost of sales being based on historical rather than current year costs.

There were no LIFO inventory liquidations or related impact on cost of sales in 2021.

A majority of the Company’s products at Trex Residential are made in a proprietary process that combines reclaimed wood fibers and scrap polyethylene.

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The costs of additions and improvements are capitalized, while maintenance and repairs are expensed as incurred.

Unpaid liabilities related to property, plant and equipment are included in accounts payable and were $ 12.9 million and $ 0.8 million at December 31, 2020 and December 31, 2019, respectively.

Unpaid liabilities related to property, plant

and equipment are included in accounts payable and were $ 2.6 million and $ 12.9 million at December 31, 2021 and December 31, 2020, respectively.

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 over the following estimated useful lives:

Depreciation is provided using the straight-line method generally over the following estimated useful lives:

Machinery and equipment

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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.

Long-lived assets held for sale are stated at the lower of cost or fair value less cost to sell.

The Company leases office space, storage warehouses and certain plant equipment under various operating leases.

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As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

The Company gives consideration to instruments with similar characteristics when calculating its incremental borrowing rate.

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.

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The Company identified its reporting units based on the way it manages its operating segments.

The Company has determined that it has 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.

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.

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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 measures fair value of the reporting units based on a present value of future cash flows (discounted cash flows model) and a market valuation approach.

The discounted cash flows model indicates the fair value of the reporting unit based on the present value of the cash flows that the reporting unit is expected to generate in the future.

Significant estimates in the discounted cash flows model include:

the weighted average cost of capital;

long-term rate of growth and profitability of the business;

The Company measures fair value of the reporting units based on a combination of the Income Approach (i.e., the Discounted Cash Flow Method) and a Market Approach.

The Discounted Cash Flow Method is a multiple period discounting model in which the fair value of the reporting units are determined by discounting the projected free cash flows using an appropriate discount rate and indicates the fair value of the reporting units based on the present value of the cash flows that the reporting unit is expected to generate in the future.

Significant assumptions in the Discounted Cash Flow Method include:

the weighted average cost of capital (or discount rate);

residual growth rate;

future cash flow projections;

and working capital effects.

The market valuation approach indicates the fair value of the business based on a comparison of the Company against certain market information.

Significant estimates in the market approach model include identifying appropriate market multiples and assessing earnings before interest, income taxes, depreciation and amortization (EBITDA) in estimating the fair value of the reporting unit.

For the years ended December 31, 2020, 2019, and 2018, the Company completed its annual impairment test of goodwill utilizing the qualitative assessment and concluded it was not more likely than

no t that the fair value of the reporting units was less than the carrying amounts.

The Market Approach uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets and liabilities, such as a business.

Significant estimates in the Market Approach model may include identifying appropriate market multiples and assessing earnings before interest, income taxes, depreciation and amortization (EBITDA) in estimating the fair value of the reporting units.

The use of different assumptions, estimates or judgements, including estimated future cash flows and the discount rate used to discount estimated cash flows to their net present value, could materially increase or decrease the fair value of the reporting unit and impact our assessment of any goodwill impairment charges.

Also, if different conditions exist in future periods, future impairment charges could result.

The Company performs the annual impairment testing of its goodwill as of October 31 of each year.

However, actual results could differ from the Company’s estimates and projections, which would affect the assessment of impairment.

As of December 31, 2020, the Company had goodwill of $ 68.5 million that is reviewed annually for impairment.

For fiscal years 2021, 2020 and 2019, the Company completed its annual impairment test of goodwill for its residential reporting unit 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.

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.

For fiscal years 2020 and 2019, the Company completed its annual impairment test of goodwill for its commercial railing reporting unit and its staging reporting unit utilizing the qualitative assessment and concluded that it was not more likely than no t that the fair value of the respective reporting unit was less than its carrying amount.

For fiscal year 2021, the Company determined that it was necessary to perform the goodwill impairment test for its railing and staging reporting units utilizing the quantitative assessment.

The Company performed a quantitative assessment primarily due to a reduction in project commitments, which adversely impacted project backlog and forecasted net sales and EBITDA.

The reduction in project commitments was influenced by a delay in new projects due to lingering uncertainty created in the commercial railing and staging markets by the COVID-19 virus.

As a result, the Company recognized an impairment charge at its commercial railing reporting unit and at its 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.

The Company also considered the income tax effects from any tax-deductible

goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss.

For additional information regarding impairments of goodwill in the year ended December 31, 2021, see Note 5, “ Goodwill and Other Intangible Assets, Net

The Company uses assumptions that are consistent with those it believes a market participant would use.

However, the use of different events and circumstances or different assumptions, estimates or judgements, including estimated future cash flows, and the discount rate used to discount estimated cash flows to their net present value and the residual growth rate, could materially increase or decrease the fair value of the reporting unit and impact our assessment of any goodwill impairment charge.

Product Warranty

The Company warrants that its Trex Residential decking products will be free from material defects in workmanship and materials.

This warranty generally extends for a period of 25 years for residential use and

10 years for commercial use.

This warranty generally extends for a period of 25 years for residential use and 10 years for commercial use.

With respect to Trex Signature ®

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and Universal Fascia product, the Company further warrants that the product 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.

This warranty extends for a period of 25

years for residential use and 10 years for commercial use.

This warranty extends for a period of 25 years for residential use and 10 years for commercial use.

If there is a breach of such warranties, the Company has an obligation either to replace the defective product or refund the purchase price.

Depending on the product and its use, the Company also warrants its Trex Commercial products will be free of manufacturing defects for one to three years .

The Company establishes warranty reserves to provide for estimated future expenses as a result of product defects that result in claims.

Reserve estimates are based on management’s judgment, considering such factors as cost per claim, historical experience, anticipated rates of claims, and other available

Management reviews and adjusts these estimates, if necessary, based on the differences between actual

experience and historical estimates.

The Company establishes warranty reserves to provide for estimated future expenses as a result of product defects that result in

Reserve estimates are based on management’s judgment, considering such factors as cost per claim, historical experience, anticipated rates of claims, and other available information.

Management reviews and adjusts these estimates, if necessary, based on the differences between actual experience and historical estimates.

Treasury Stock

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Revenue Recognition

Effective January 1, 2018, the Company retrospectively adopted the requirements of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2014-09,

“Revenue from Contracts with Customers” (Topic 606).

The Company determined the appropriate revenue recognition for its contracts with customers by analyzing the type, terms and conditions of the 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.

Adoption of Topic 606 did not have an impact on the Company’s financial condition or results of operations.

The following provides additional information about the Company’s contracts with customers.

Trex Residential Products.

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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 7 to these Consolidated Financial Statements.

Trex Commercial Products.

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Trex Commercial contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and is, therefore, not distinct.

Trex Commercial satisfies its performance obligation over time

as work progresses because control is transferred continuously to its customers.

Trex Commercial satisfies its performance obligation over time as work progresses because control is transferred continuously to its customers.

Revenue and estimated profit are 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.

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During the year ended December 31, 2021, 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.

Insurance Proceeds

The Company maintains insurance coverage for losses it may incur from identifiable insurable events resulting in facility repairs, incremental direct costs to serve its customers and losses in operating income from the loss in net sales.

The Company recognizes a gain in the amount of any related insurance proceeds received in excess of any losses incurred.

The gain on insurance proceeds is presented in a separate line item in the Consolidated Statements of Comprehensive Income.

During the year ended December 31, 2021, the Company recognized gains on insurance proceeds of $ 8.7 million primarily related to the fire at its Virginia Facility.

Stock-Based Compensation

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Stock-based compensation expense is included in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Comprehensive Income.

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 rates expected to be in effect during the year in which the differences reverse.

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, 2020, the Company has a valuation allowance of $ 2.8 million against these deferred tax assets.

As of December 31, 2021, the Company has a valuation allowance of $ 2.2 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.

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Recently Adopted Accounting Standards

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

“ Intangibles – Goodwill and Other – Internal-Use

Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of FASB Emerging Issues Task Force)

The new guidance aligns the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use

software license.

Under that model, implementation costs are capitalized or expensed depending on the nature of the costs and the project stage during which they are incurred.

Capitalized implementation costs are amortized over the term of the associated hosted cloud computing arrangement service contract on a straight-line basis, unless another systematic and rational basis is more representative of the pattern in which the entity expects to benefit from its right to access the hosted software.

Capitalized implementation costs would then be assessed for impairment in a manner similar to long-lived assets.

The new guidance was effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

Entities can adopt the new guidance either prospectively to eligible costs incurred on or after the date the guidance is first applied or retrospectively.

The Company adopted the guidance prospectively on January 1, 2020.

Adoption did not have a material impact on its consolidated financial condition or results of operations.

In January 2017, the FASB issued ASU No.

“ Intangibles—Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment

The guidance removes Step 2 of the goodwill impairment test and eliminates the need to determine the fair value of individual assets and liabilities to measure goodwill impairment.

A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary.

The guidance was applied prospectively and was effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

The Company adopted the guidance on January 1, 2020.

Adoption did not have a material impact on its consolidated financial condition or results of operations.

In June 2016, the FASB issued ASU 2016-13,

“ Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses in Financial Instruments

,” as amended.

The ASU amends the guidance on the impairment of financial instruments and adds an impairment model, known as the current expected credit loss (CECL) model.

The CECL model requires an entity to recognize its current estimate of all expected credit losses, rather than incurred losses, and applies to trade receivables and other receivables.

The CECL model is designed to capture expected credit losses through the establishment of an allowance account, which will be presented as an offset to the amortized cost basis of the related financial asset.

The new guidance was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and is applied using the modified-retrospective approach.

The Company adopted the guidance on January 1, 2020.

Adoption did not have a material impact on its consolidated financial condition or results of operations.

In December 2019, the FASB issued ASU No.

“ Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes

The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries.

The guidance also simplifies aspects of accounting for franchise taxes and enacted changes

in tax laws or rates and clarifies the accounting for transactions that result in a step-up

in the tax basis of goodwill.

The Company adopted the standard on a prospective basis on January 1, 2021.

Adoption did not have a material effect on its consolidated financial statements.

New Accounting Standards Not Yet Adopted

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Facilitation of the Effects of Reference Rate Reform on Financial Reporting

The guidance provides temporary optional expedients and exceptions related to contract modifications and hedge accounting to ease entities’ financial

reporting burdens as the market transitions from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates.

The guidance provides temporary optional expedients and exceptions related to contract modifications and hedge accounting to ease entities’ financial reporting burdens as the market transitions from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates.

The new guidance allows entities to elect not to apply certain modification accounting requirements, if certain criteria are met, to contracts affected by what the guidance calls reference rate reform.

An entity that makes this election would consider changes in reference rates and other contract modifications related to reference rate reform to be events that do not require contract remeasurement at the modification date or reassessment of a previous accounting determination.

The ASU notes that changes in contract terms that are made to affect the reference rate reform transition are considered related to the replacement of a reference rate if they are not the result of a business decision that is separate from or in addition to changes to the terms of a contract to affect that transition.

The ASU notes that changes in contract terms that are made to effect the reference rate reform transition are considered related to the replacement of a reference rate if they are not the result of a business decision that is separate from or in addition to changes to the terms of a contract to effect that transition.

The guidance is effective upon issuance and generally can be applied as of March 12, 2020 through December 31, 2022.

The Company does not expect adoption of the guidance to have a material effect on its consolidated financial statements.

In December 2019, the FASB issued ASU No.

“ Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes

The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up

in the tax basis of goodwill.

The standard will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

The Company does not intend to early adopt the standard and does not expect the standard to have a material effect on its consolidated financial statements.

In November 2021, the FASB issued ASU No.

“ Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance

The guidance requires business entities to make annual disclosures about material transactions with a government that are accounted for by analogizing to a grant or contribution accounting model, such as IAS 20, ASC 958-605.

The annual disclosure requirements include:

the nature of the transactions, the entity’s related accounting policy used, the line items on the balance sheet and income statement that are affected and the amounts applicable to each financial statement line item, and significant terms and conditions of the transactions.

The disclosure requirements can be applied either prospectively to all transactions in the scope of the amendments that are reflected in the financial statements at the date of initial application and new transactions that are entered into after the date of initial application, or retrospectively.

The guidance is effective for fiscal years beginning after December 15, 2021, with early application permitted.

The Company does not expect adoption of the guidance to have a material effect on its consolidated financial statements.

Inventories at LIFO value consist of the following as of December 31 (in thousands):

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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.

no material inventory reduction during 2020 or 2019.

There was no inventory reduction during 2021 or 2020.

Inventories valued at lower of cost (FIFO method) and net realizable value as of December 31, 2021 and December 31, 2020, were $ 5.4 million and $ 1.5 million, respectively, consisting primarily of raw materials.

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Revenues in excess of billings

Contract retainage

Income tax receivable

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GOODWILL AND OTHER INTANGIBLE ASSETS, NET

The carrying amount of goodwill by reportable segment at December 31, 2020 and 2019 was $ 14.2 million for Trex Residential and $ 54.3 million for Trex Commercial.

The carrying amount of goodwill by reportable segment at December 31, 2021 and 2020 was as follows (in thousands):

Trex Residential

Trex Commercial Segment

Reporting Unit

Railing Reporting

Reporting Unit

Balance, December 31, 2020

Impairment Charge

Balance, December 31, 2021

For fiscal years 2021, 2020 and 2019, 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.

For fiscal years 2020 and 2019, the Company completed its annual impairment test of goodwill for its commercial railing reporting unit and its staging reporting unit in Trex Commercial utilizing the qualitative assessment and concluded that it was not more likely than not that the fair value of the respective reporting unit was less than its carrying amount.

For fiscal year 2021, the Company elected to perform the impairment test of goodwill for its commercial railing reporting unit and its staging reporting unit utilizing the quantitative assessment.

The Company performed a quantitative assessment primarily due to a reduction in project commitments, which adversely impacted project backlog and forecasted net sales and EBITDA.

The reduction in project commitments was influenced by a delay in new projects due to lingering uncertainty created in the commercial railing and staging markets by the COVID-19 virus.

In performing the quantitative assessment, the Company employed a combination of the Income Approach (i.e., Discounted Cash Flow Method) and the Market Approach.

The Discounted Cash Flow Method is a multiple period discounting model in which the fair values of the reporting units are determined by discounting the projected free cash flows using an appropriate discount rate.

Using these methodologies resulted in the recognition of an impairment loss of

$ 42.5 million and $ 11.8 million at its

commercial railing and staging reporting units, respectively.

The impairment loss was the amount by which the carrying amount exceeded the fair value of each reporting unit, not to exceed the amount of goodwill of each reporting unit.

The Company also considered the income tax effects from any tax-deductible

goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss.

Level 3 inputs used to determine the fair value of each reporting unit include management’s future cash flow projections, a weighted average cost of capital and a residual growth rate.

The cash flows used to determine fair value are dependent on a number of significant management assumptions, such as expectations of future performance and the expected future economic environment, which are partly based on historical experience.

Differences between actual and expected results may be material and dependent on future actions and plans.

The discount rate and the residual growth rate are based on management’s judgment of the rates that would be utilized by a hypothetical market participant.

The use of different assumptions, estimates or judgments, including the estimated future cash flows, the discount rate used to discount estimated cash flows to their net present value, and the residual growth rate, could materially increase or decrease the fair value of the reporting unit and, accordingly, could materially increase or decrease related impairment charges.

The Company’s intangible assets consist of domain names purchased in May 2018.

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Intangible asset amortization expense for the years ended December 31, 2021, December 31, 2020, and December 31, 2019, was $ 0.4 million, $ 0.4 million, and $ 0.4 million, respectively.

Intangible asset amortization expense for the year ended December 31, 2018 included amortization expense for customer backlog and trade names and trademarks, which were fully amortized as of December 31, 2018.

PROPERTY, PLANT AND EQUIPMENT

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The Company had construction in process as of December 31, 2021 of approximately $ 87.7 million.

The Company expects that the construction in process will be completed and put into service in the year ending December 31, 2021.

The Company expects that substantially all of the above noted construction in process will be completed and put into service in the year ending December 31, 2022.

Depreciation expense for the years ended December 31, 2021, 2020, and 2019, totaled $ 35.5 million, $ 17.5 million, and $ 13.6 million, respectively.

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Manufacturing costs

Customer deposits

Billings in excess of revenues

Total accrued expenses

Customer deposits

Total accrued expenses and other liabilities

The Company’s debt consists of a revolving credit facility.

8 unchanged sentences

On May 26, 2020, the Company entered into a First Amendment to the Original Credit Agreement (the First Amendment) to provide for an additional $ 100 million line of credit through May 26, 2022.

The purpose of the additional $ 100 million line of credit is primarily to reduce risk associated with the COVID-19

pandemic should the Company need to secure additional capital to continue its strategy of accelerating the conversion of wood decking to Trex composite decking and expanding its addressable market.

As a matter of convenience, the parties incorporated the amendments to the Original Credit Agreement made by the First Amendment into a new Fourth Amended and Restated Credit Agreement (New Credit Agreement).

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as Sole Lead Arranger and Sole Bookrunner.

The First Amendment further provides that the New Credit Agreement is amended and restated by changing Schedule 2.01 to add applicable Lender percentages related to the Revolving B Commitment for BOA of 47.5 %, Wells

Fargo of 28.0 % and Regions of 24.5 %.

The Notes and interest rates for the Revolving A Commitments remained unchanged and are the same as previously disclosed.

The Notes for Revolving A Commitments and Revolving B Commitments provide the Company, in the aggregate, the ability to borrow an amount up to the respective Revolving A Loan Limit and Revolving B Loan Limit during the respective Revolving A Term and Revolving B Term.

The Notes for Revolving A Commitments and Revolving B Commitments provide the Company, in the aggregate, the ability to borrow an amount up to the respective Revolving A Loan Limit and

Revolving B Loan Limit during the respective Revolving A Term and Revolving B Term.

The Company is not obligated to borrow any amount under either the Revolving A Loan or the Revolving B Loan.

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The weighted average discount rate at December 31, 2021 and December 31, 2020 was 2.47 % and 3.47 %, respectively.

The following table includes supplemental cash flow information for the years ended December 31, 2020 and December 31, 2019 and supplemental balance sheet information at December 31, 2020 and December 31, 2019 related to operating leases:

For the Year Ended

The following table includes supplemental cash flow information for the years ended December 31, 2021 and December 31, 2020 and December 31, 2019 and supplemental balance sheet information at December 31, 2021 and December 31, 2020 related to operating leases (in thousands):

Supplemental Cash Flow Information

For the Year Ended

Cash paid for amounts included in the measurement of operating lease liabilities

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On February 16, 2018, the Board of Directors adopted a stock repurchase program of up to 11.6 million shares of the Company’s outstanding common stock (Stock Repurchase Program).

On March 12, 2020, the Company suspended repurchases of its common stock under the Stock Repurchase Program due to the volatility and uncertainty in the stock market associated with the COVID-19

On October 30, 2020, the Company lifted the suspension of repurchases of its common stock under the Stock Repurchase Program.

As of December 31, 2021, the Company has repurchased 3.6 million shares of the Company’s outstanding common stock under the Stock Repurchase Program.

Amendment of Restated Certificate of Incorporation

At the annual meeting of stockholders of the Company held on April 29, 2020, the Company’s stockholders approved an amendment of the Company’s Restated Certificate of Incorporation (Amendment), effective as of April 29, 2020.

The Company’s Board of Directors unanimously approved the Amendment on February 19, 2020, subject to stockholder approval.

The Amendment increases the number of shares of common stock, par value $ 0.01 per share, that the Company is authorized to issue from 120 million shares to 180 million shares.

On July 29, 2020, the Company’s Board of Directors approved a two-for-one

17 unchanged sentences

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.

For each product shipped, the transaction price by product is specified in the purchase order.

67 unchanged sentences

The total aggregate number of shares of the Company’s common stock that may be issued under the Plan is 25,680,000 and as of December 31, 2021, the total number of shares available for future issuance was 11,116,654 .

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

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 the predetermined performance measures.

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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, 2020, 2019 and 2018 there was $ 1.7 million, $ 0.8 million and $ 1.6 million, respectively, of total compensation expense related to unvested performance-based restricted stock and unvested performance-based restricted stock units remaining to be recognized over a weighted-average period of approximately two years .

At December 31, 2021, 2020 and 2019 there was $ 2.8 million, $ 1.7 million, and $ 0.8 million, respectively, of total compensation expense related to unvested performance-based restricted stock and unvested performance-based restricted stock units remaining to be recognized over a weighted-average period of approximately 1.9 years.

Performance-based restricted stock activity under the Plan is as follows:

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Restricted Stock

Weighted-Average

Nonvested at December 31, 2018

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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.

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.

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Operating lease liability

Deferred revenue

Goodwill amortization

State tax credit carryforwards

As of December 31,

Gross deferred tax assets, before valuation allowance

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Goodwill amortization

Inventories and other

Gross deferred tax liabilities

Net deferred tax liability

In accordance with accounting standards, the Company assesses the likelihood that its deferred tax assets will be realized.

As of December 31, 2021, the Company had a valuation allowance of $ 2.2 million against deferred tax assets it estimates will not be realized.

5 unchanged sentences

As of December 31, 2021, for certain tax jurisdictions, tax years 2018 through 2021 remain subject to examination.

The Company’s returns filed with the state of Utah for the tax years 2014 through 2018 are currently under examination.

No material adjustments are expected as a result of the audit.

The Company believes that adequate provisions have been made for all tax returns subject to examination.

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Trex Commercial

For the year ended December 31, 2021, total net income and net loss at Trex Commercial includes a goodwill impairment charge of $ 54.2 million.

Reconciliation of Net Income (Loss) to EBITDA (in thousands):

(Income), Net

December 31, 2021

22 unchanged sentences

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.

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, 2020, the Company has purchase commitments under material supply contracts of $ 33.6 million

$ 15.0 million for the years ending December 31, 2021 and 2022, respectively, and a total of $ 22.7 million for the years ending December 31, 2023 and 2024.

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, 2021, the Company has purchase commitments under material supply contracts of $ 47 million for the year ending December 31, 2022, and a total of $ 94 million for the years ending December 31, 2023 through 2026.

Product Warranty

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It has been the Company’s practice to utilize the actuarial techniques discussed above during the third quarter, after a significant portion of all claims has been received for the fiscal year and variances to annual claims expectations are more meaningful.

The number of incoming claims received in the year ended December 31, 2020 was higher than the number of claims received in the year ended December 31, 2019 and exceeded the Company’s expectations for 2020.

Prior to 2020, the number of incoming claims received declined each year since 2009.

After evaluating the rise in incoming claims in its actuarial analysis, the Company increased its estimate of the number of future claims to be settled with payment.

Average cost per claim experienced in the year ended December 31, 2020 was lower than that experienced in the year ended December 31, 2019, but slightly higher than the Company’s expectations for 2020.

The Company estimates that average cost per claim will increase in future years, primarily due to inflation.

As a result of the increase in estimated future claims and expected rise in future average cost per claim, in the three-month period ended September 30, 2020, the Company recorded a provision of $ 6.5 million to its warranty reserve for the future settlement of surface flaking claims.

The number of incoming claims received in the year ended December 31, 2021 was lower than the number of claims received in the year ended December 31, 2020 and lower than the Company’s expectations for 2021.

Average cost per claim experienced in the year ended December 31, 2021 was higher than that experienced in the year ended December 31, 2020 but was slightly lower than the Company’s expectations for 2021.

The Company believes its reserve at December 31, 2021 is sufficient to cover future surface flaking obligations.

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Ending balance, December 31

Trex Residential Arkansas Manufacturing Facility

On October 26, 2021, the Company announced its plan to add a third U.S.

based Trex Residential manufacturing facility in Little Rock, Arkansas.

The new campus will sit on nearly 300 acres of land and will address increased demand for Trex Residential outdoor living products.

Construction is slated to begin in early 2022 with the first production output anticipated in 2024.

Funded primarily through ongoing cash generation, the Company expects to invest approximately $ 400 million over the next five years in the development of the new Arkansas site.

INTERIM FINANCIAL DATA (Unaudited)

8 unchanged sentences

The operating results for Trex Residential have historically varied from quarter to quarter.

Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions reduce the level of home improvement

and construction activity and can shift demand for its products to a later period.

Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions reduce the level of home improvement and construction activity and can shift demand for its products to a later period.

The operating results for Trex Commercial have not historically varied from quarter to quarter as a result of seasonality;

20 unchanged sentences

February 28, 2022

/S/ B RYAN H.

President and Chief Executive Officer

1 unchanged sentence

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed as of February 28, 2022 by the following persons on behalf of the registrant and in the capacities indicated.

/S/ B RYAN H.

President and Chief Executive Officer (Principal Executive Officer);

/S/ D ENNIS C.

Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

/S/ J AMES E.

/S/ R ONALD W.

Vice Chairman

/S/ M ICHAEL F.

/S/ K RISTINE L.

/S/ R ICHARD E.

/S/ P ATRICIA B.

/S/ G ERALD V OLAS

/S/ K RISTINE

/S/ P ATRICIA

EXHIBIT INDEX

1 unchanged sentence

Restated Certificate of Incorporation of Trex Company, Inc.

(the “Company”).

Filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (No.

333-63287) and incorporated herein by reference.

March 24, 1999

Certificate of Amendment to the Restated Certificate of Incorporation of Trex Company, Inc.

dated April 30, 2014.

Filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 and incorporated herein by reference.

Second Certificate of Amendment to the Restated Certificate of Incorporation of Trex company, Inc.

dated May 2, 2018.

Filed as Exhibit 3.3 to the Company’s Quarter Report on Form 10-Q for the quarterly period ended March 31, 2018 and incorporated herein by reference.

Third Certificate of Amendment to the Restated Certificate of Incorporation of Trex Company, Inc.

dated May 1, 2019.

Filed as exhibit 3.1 to the Company’s Current Report on form 8-K filed May 1, 2019 and incorporated herein by reference.

Fourth Certificate of Amendment to the Restated Certificate of Incorporation of Trex Company, Inc.

dated April 29, 2020.

dated July 28, 2021.

August 2, 2021

Amended and Restated By-Laws of the Company.

Filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed May 1, 2019 and incorporated herein by reference.

Specimen certificate representing the Company’s common stock.

Filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (No.

333-63287) and incorporated herein by reference.

March 24, 1999

Third Amended and Restated Credit Agreement dated as of January 12, 2016 between the Company, as borrower;

the subsidiaries of the Company as guarantors;

Bank of America, N.A., as a Lender, Administrative Agent, Swing Line Lender and Letter of Credit Issuer;

and certain other lenders arranged by Bank of America Merrill Lynch as Sole Lead Arranger and Sole Bookrunner.

Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 14, 2016 and incorporated herein by reference.

January 14, 2016

Incorporated by reference

Revolver Note dated January 12, 2016 payable by the Company to Bank of America, N.A.

in the amount of the lesser of $110,000,000 or the outstanding revolver advances made by Bank of America, N.A.

Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on January 14, 2016 and incorporated herein by reference.

January 14, 2016

Revolver Note dated January 12, 2016 payable by the Company to Citibank, N.A.

in the amount of the lesser of $75,000,000 or the outstanding revolver advances made by Citibank, N.A.

Filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on January 14, 2016 and incorporated herein by reference.

January 14, 2016

Revolver Note dated January 12, 2016 payable by the Company to Capital One, N.A.

in the amount of the lesser of $35,000,000 or the outstanding revolver advances made by Capital One, N.A.

Filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on January 14, 2016 and incorporated herein by reference.

January 14, 2016

Revolver Note dated January 12, 2016 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.

Filed as Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on January 14, 2016 and incorporated herein by reference.

January 14, 2016

Third Amended and Restated Security and Pledge Agreement dated as of January 12, 2016 between the Company, as debtor, and Bank of America, N.A.

as Administrative Agent (including Notices of Grant of Security Interest in Copyrights and Trademarks).

Filed as Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on January 14, 2016 and incorporated herein by reference.

January 14, 2016

Assignment of Amended and Restated Credit Line Deed of Trust, Substitution of Trustee and Amendment, dated as of January 12, 2016, by and among the Company as grantor, PRLAP, INC, as trustee, and Bank of America, N.A., as Administrative Agent for Bank of America, N.A., Citibank, N.A., Capital One, N.A., and SunTrust Bank, as Beneficiaries relating to real property partially located in the County of Frederick, Virginia and partially located in the City of Winchester, Virginia.

Filed as Exhibit 4.7 to the Company‘s Current Report on Form 8-K filed on January 14, 2016 and incorporated herein by reference.

January 14, 2016

Incorporated by reference

Amended and Restated Deed of Trust, dated as of January 12, 2016, by and among the Company as grantor, First American Title Insurance Company, as trustee, and Bank of America, N.A., Citibank, N.A., Capital One, N.A., and SunTrust Bank, as Beneficiaries relating to real property located in the County of Fernley, Nevada.

Filed as Exhibit 4.8 to the Company’s Current Report on Form 8-K filed on January 14, 2016 and incorporated herein by reference.

January 14, 2016

Fourth Amended and Restated Credit Agreement dated as of November 5, 2019 between the Company, as borrower;

2 unchanged sentences

as Sole Lead Arranger and Sole Bookrunner.

Filed as exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 6, 2019 and incorporated herein by reference.

November 6, 2019

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as Sole Lead Arranger and Sole Bookrunner dated May 26, 2020.

Filed May 28, 2020 on Form 8-K, Exhibit 4.1

Fourth Amended and Restated Credit Agreement between the Company, as borrower;

3 unchanged sentences

as Sole Lead Arranger and Sole Bookrunner, dated May 26, 2020.

Filed May 28, 2020 on Form 8-K, Exhibit 4.2.

Incorporated by reference

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.

Filed as exhibit 4.2 to the Company’s Current Report on Form 8-K filed on November 6, 2019 and incorporated herein by reference.

November 6, 2019

1 unchanged sentence

in the amount of the lesser of $70,000,000 or the outstanding revolver advances made by Wells Fargo Bank, N.A.

Filed as exhibit 4.3 to the Company’s Current Report on Form 8-K filed on November 6, 2019 and incorporated herein by reference.

November 6, 2019

Incorporated by reference

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.

Filed as exhibit 4.4 to the Company’s Current Report on Form 8-K filed on November 6, 2019 and incorporated herein by reference.

November 6, 2019

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.

Filed as exhibit 4.5 to the Company’s Current Report on Form 8-K filed on November 6, 2019 and incorporated herein by reference.

November 6, 2019

Note dated May 26, 2020 payable by the Company to Regions Bank.

Filed May 28, 2020 on form 8-K, Exhibit 4.6.

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;

1 unchanged sentence

as Administrative Agent (including Notices of Grant of Security Interest in Copyrights and Trademarks).

Filed as exhibit 4.6 to the Company’s Current Report on Form 8-K filed on November 6, 2019 and incorporated herein by reference.

November 6, 2019

Description of Securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.

Filed herewith.

Incorporated by reference

February 22, 2021

Description of Management Compensatory Plans and Arrangements.

2 unchanged sentences

Amended and Restated 2014 Stock Incentive Plan.

Filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on November 2, 2020 and incorporated herein by reference.

November 2, 2020

3 unchanged sentences

2014 Stock Incentive Plan Stock Appreciation Rights Agreement.

Filed as Exhibit 10.1 on Form 10-Q filed on July 29, 2019 and incorporated herein by reference.

July 29, 2019

1 unchanged sentence

2014 Stock Incentive Plan Time-Based Restricted Stock Unit Agreement.

Filed as Exhibit 10.2 on Form 10-Q filed July 29, 2019 and incorporated herein by reference.

July 29, 2019

1 unchanged sentence

2014 Stock Incentive Plan Performance-Based Restricted Stock Unit Agreement.

Filed as Exhibit 10.3 on Form 10-Q filed July 29, 2019 and incorporated herein by reference.**

July 29, 2019

1 unchanged sentence

Amended and Restated 1999 Incentive Plan for Outside Directors Restricted Stock Unit Agreement.

Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 and incorporated herein by reference.**

August 3, 2015

Change in Control Severance Agreement dated May 6, 2015 by and between Trex Company, Inc.

Cline filed as exhibit 10.1 on Form 8-K on May 8, 2015 and incorporated herein by reference.

Change in Control Severance Agreement dated February 21, 2020 by and between Trex Company, Inc.

February 25, 2020

Severance Agreement dated May 6, 2015 by and between Trex Company, Inc.

Cline filed as Exhibit 10.2 to Form 8-K filed May 8, 2015.

Incorporated by reference

Amended and Restated Severance Agreement dated February 21, 2020 by and between Trex Company, Inc.

February 25, 2020

Incorporated by reference

Form of Change in Control Severance Agreement between Trex Company, Inc.

and Officers other than the Chief Executive Officer.

Filed as exhibit 10.16 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and incorporated herein by reference.**

February 21, 2017

1 unchanged sentence

and Officers other than the Chief Executive Officer.

Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 and incorporated herein by reference.**

Form of Retention Agreement for Company Officers dated May 2, 1018.

Filed as Exhibit 10.2 to the Company’s Quarterly report on Form 10-Q for the quarterly period ended March 31, 2018 and incorporated herein by reference.**

Form of Indemnity Agreement for Directors.

Filed as Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and incorporated herein by reference.

March 12, 2009

Form of Indemnity Agreement for Officers.

Filed as Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and incorporated herein by reference.

March 12, 2009

Form of Indemnity Agreement for Director/Officers.

Filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and incorporated herein by reference.

March 12, 2009

Form of Distributor Agreement of Trex Company, Inc.

Filed as Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and incorporated herein by reference.

March 12, 2009

1 unchanged sentence

Fencing Agreement for Installers/Retailers.

Filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 and incorporated herein by reference.

November 9, 2006

Incorporated by reference

Subsidiaries of the Company.

Filed herewith.

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

Filed herewith.

Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

Filed herewith.

Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

Filed herewith.

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.

Furnished herewith.

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.

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Inline XBRL Taxonomy Extension Label Linkbase Document.

Incorporated by reference

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

4 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 9A. Controls and Procedures