What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2026-02-25 compared with 2025-02-24 · 153 added, 185 removed, 482 unchanged (41% of the section changed)

Our business operates in one reportable segment, Trex Residential, and is subject to a number of risks, including the following.

Our business operates in one reportable segment, Trex, and is subject to a number of risks, including the following.

Risks Related to the Distribution and Sale of Our Product

30 unchanged sentences

A limited number of our customers account for a significant percentage of our sales.

For the years ended December 31, 2024, 2023, and 2022, three customers of Trex Residential represented approximately 81%, 72%, and 64%, respectively, of the Company’s total net sales.

For the years ended December 31, 2025, 2024, and 2023, three customers of Trex represented approximately 73%, 81%, and 72%, respectively, of the Company’s total net sales.

We expect that a significant portion of our sales will continue to be sold through a small number of customers, and certain customers will continue to account for a significant portion of our sales.

46 unchanged sentences

In order to expand our net sales and sustain profitable operations we must maintain the quality and performance of our products.

We continue to receive and settle claims and maintain a warranty reserve related to decking product produced at our Nevada facility prior to 2007 that exhibits surface flaking.

We have limited our financial exposure by settling a nationwide class action lawsuit that provides that a consumer’s remedy is limited to the replacement of product and a partial labor reimbursement.

However, because the establishment of reserves is an inherently uncertain process involving estimates of the number of future claims and the average cost of claims, our ultimate losses may differ from our warranty reserve.

Increases to the warranty reserve and payments for related claims have had a material adverse effect on our profitability and cash flows.

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

We continue to receive and settle claims and maintain a warranty reserve related to decking, railing, and accessory products sold, including decking products produced at our Nevada facility prior to 2007 that exhibits surface flaking.

We have limited our financial exposure for surface flaking by settling a nationwide class action lawsuit that provides that a consumer’s remedy is limited to the replacement of product and a partial labor reimbursement.

The establishment of reserves is an inherently uncertain process involving estimates of the number of future claims and the average cost of claims, our ultimate losses may differ from our warranty reserve.

Increases to the warranty reserve and payments for related claims could have a material adverse effect on our future profitability and cash flows.

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

In addition, to the extent we source raw materials internationally, changes in trade policies, including the imposition of tariffs, could negatively impact our business, financial condition, and results of operations.

In addition, to the extent we source raw materials internationally, changes in trade policies, including the imposition of tariffs, have and could continue to negatively impact our business, financial condition, and results of operations.

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.

5 unchanged sentences

The imposition of tariffs and other potential changes in U.S.

trade policy could increase the cost and/or limit the availability of raw materials, which could hurt our competitive position and adversely impact our business, financial condition and results of operations.

trade policy have increased the cost and/or limited the availability of raw materials, which has adversely impacted our business, financial condition and results of operations and could hurt our competitive position.

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

35 unchanged sentences

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.

There is 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 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.

Compliance with newly enacted laws and regulations could impose operational and compliance burdens which may 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.

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.

19 unchanged sentences

Despite these proactive measures, there is no guarantee that these measures will prevent a cybersecurity incident that could have a material adverse effect on the Company.

Technical and regulatory limitations may impact our ability to effectively and timely adopt Artificial Intelligence (AI) and machine learning solutions.

We have made and may continue to make advancements in adopting AI and machine learning throughout our business.

We anticipate that the continued implementation of this technology will improve efficiency and create cost savings across the organization.

While we are currently using AI and machine learning in various areas of our business, technical and regulatory limitations may impact our ability to utilize AI and machine learning across other areas of our business.

Failure to adopt AI and machine learning in other areas could cause advancements in our business and production process to fall behind our competitors, impacting our ability to compete effectively.

Our ability to continue to adopt AI and machine learning depends, in part, on the resources available to develop, deploy, and monitor these systems.

Accordingly, our organization has adopted guiding principles, as well as a governance policy for AI and machine learning.

Our guiding principles focus on the risks and consideration associated with AI and machine learning and help support the Company's responsible use of these technologies.

Our AI governance policy provides a structured approach to identifying, assessing, and prioritizing use cases anticipated to yield optimal business value while simultaneously minimizing business risks.

Our Information Technology department, in partnership with our Legal department, and other business leaders, are responsible for monitoring the use of AI and machine learning within the organization, along with the regulatory environment in which AI and machine learning operate.

While the Company has adopted the use of AI and machine learning in various areas of the organization and intends to adopt AI and machine learning in other areas, adoption does not guarantee efficiencies, optimizations, or innovations are made throughout the organization.

Unr esolved Staff Comments

7 unchanged sentences

Mitigation of risk efforts are coordinated by the Company’s Director of Information Security, utilizing internal resources and third-party providers.

The Company has not had any cybersecurity risks that have materially affected the Company, including its business strategy, results of operations, or financial condition.

The Company has not had any cybersecurity risks that have materially affected, or are reasonably likely to affect, the Company, including its business strategy, results of operations, or financial condition.

Cybersecurity risks are disclosed in Part I Item 1A.

5 unchanged sentences

Our Director of Information Security has 28 years of experience in infrastructure and security operations and a degree in Information Technology Management.

Our Director of Information Security is the chair of the Company’s Information Security Committee.

The activities of the Information Security Committee are reviewed by the Executive Information Security Oversight Committee, which is comprised of members of our senior leadership team including our Vice President and Chief Information Officer, Senior Vice President, Chief Financial Officer, Senior Vice President, Chief Legal Officer and Secretary and Senior Vice President, Chief Human Resources Officer .

The Executive Information Security Oversight Committee facilitates notification to the Audit Committee of emerging cybersecurity risks, and threats, the status of projects to strengthen the Company’s information security systems, and updates on any cybersecurity incidents.

Our Vice President and Chief Information Officer escalates emerging cybersecurity risks and threats, provides updates on the status of projects to strengthen the Company’s information security systems, and provides updates on any cybersecurity incidents to members of our senior leadership team, including our Senior Vice

President, Chief Financial Officer, Senior Vice President, Chief Legal Officer and Secretary, and Senior Vice President, Chief Human Resources Officer.

These leaders facilitate notification to the Audit Committee of the Board of Directors.

The Audit Committee of the Board of Directors oversees cybersecurity related risks.

2 unchanged sentences

We own and lease certain properties, as noted in the below table:

Corporate Headquarters

Trex Residential

Virginia / West Virginia /

Warehouse, Research and

Corporate Headquarters Office

Corporate Headquarters Land

Trex Warehouse, Research and

Development, Storage,

Manufacturing Facilities

Trex Residential

1,525,254 SF /

Manufacturing Facilities,

Virginia / West Virginia /

Trex Manufacturing Facilities,

Storage and Office Space

1,530,236 SF /

We regularly evaluate our various facilities and equipment and make capital investments where necessary.

In 2024, we spent a total of $232.3 million on capital expenditures, primarily at our Trex Residential facilities, including $174.8 million related to construction of our Arkansas facility, $14.7 million related to capacity expansion at our Virginia facilities, $14.5 million related to general plant cost reduction initiatives at our Virginia and Nevada facilities, and $17.0 million for general support, safety and environmental initiatives.

In 2025, we spent a total of $233.6 million on capital expenditures and intangibles, including $167.8 million related to construction of our Arkansas facility, $21.2 million in safety, environmental, and general support, $10.0 million investment in our Enterprise Resource Planning (ERP) tool and other platforms, and $22.0 million in all other including cost reduction initiatives and capacity expansion at our existing facilities.

In October 2021, the Company announced plans to add a third manufacturing facility located in Little Rock, Arkansas (Little Rock).

72 unchanged sentences

the Company’s ability to obtain raw materials, including scrap polyethylene, wood fiber and other materials used in making our products, at acceptable prices;

increasing inflation in the macro-economic environment;

increasing inflation and tariffs in the macro-economic environment;

the Company’s ability to maintain product quality and product performance at an acceptable cost;

16 unchanged sentences

• New Accounting Standards — a general description of new accounting standards applicable to our business and a discussion of their expected impact.

The Company is the world’s largest manufacturer of high-performance, low-maintenance wood-alternative decking and residential railing and outdoor living products and accessories, marketed under the brand name Trex ® , with more than 30 years of product experience.

The Company is the world’s largest manufacturer of high-performance, low-maintenance wood-alternative decking and railing and outdoor living products and accessories, marketed under the brand name Trex ® , with more than 30 years of product experience.

A majority of our products are manufactured in a proprietary process that combines reclaimed wood fibers and recycled polyethylene.

The Company is focused on using renewable resources within our Trex Residential segment.

Also, through December 30, 2022, the Company provided custom-engineered commercial railing and staging systems for the commercial and multi-family market, including sports stadiums and performing arts venues.

During the year ended December 31, 2022, the Company operated in two reportable segments:

Trex Residential Products (Trex Residential), the Company’s principal business based on net sales, and Trex Commercial Products (Trex Commercial).

On December 30, 2022, we completed the sale of substantially all of the assets of our wholly-owned subsidiary and reportable segment, Trex Commercial.

Subsequent to the sale of Trex Commercial, the Company operates in one reportable segment, Trex Residential.

Outdoor living remains one of the fastest growing categories within the repair and remodel sector, and the strength of the Trex Residential brand coupled with our expanded manufacturing capacity, our key competitive advantages, help us to effectively unlock potential market share and drive long term growth.

The Company is focused on using renewable resources.

Outdoor living remains one of the fastest growing categories within the repair and remodel sector, and the strength of the Trex brand coupled with our expanded manufacturing capacity, our key competitive advantages, help us to effectively unlock potential market share and drive long term growth.

We continue to benefit from increasing consumer interest in our environmentally friendly, low maintenance product portfolio that transforms and enhances the outdoor living experience.

We continue to focus on cost reduction projects and identifying continuous improvement opportunities to enhance our margins.

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

At the same time, we intend to expand our marketing campaigns, continue highlighting the advantages of Trex Residential decking over wood, as well as focusing on innovation and new product development to further strengthen our consumer brand and distribution advantages.

Specifically, our efforts are primarily centered on increased automation, modernization, enhanced energy efficiency and

improvements to raw material processing.

At the same time, we intend to expand our marketing campaigns, continue highlighting the advantages of Trex decking over wood, as well as focusing on innovation and new product development to further strengthen our consumer brand and distribution advantages.

These initiatives should help drive continued topline and profit growth and accelerated market share conversion.

Trex Residential is the world’s largest manufacturer of wood-alternative composite decking and railing products marketed under the brand name Trex ® and manufactured in the United States.

Trex is the world’s largest manufacturer of wood-alternative composite decking and railing products manufactured in the United States.

We offer a comprehensive set of aesthetically pleasing, high-performance, low maintenance, eco-friendly products in the decking, railing, fencing, cladding and outdoor lighting categories.

We believe that the range and variety of our products allow consumers to design much of their outdoor living space using Trex brand products.

We offer the following composite decking and railing products through Trex Residential:

We offer the following composite decking and railing products:

Decking and Accessories

13 unchanged sentences

Trex Seclusions ® fencing

Trex Commercial offered modular and architectural railing and staging systems and solutions for the commercial and multifamily market, including sports stadiums and performing arts venues, through the date of divesture on December 30, 2022.

• Trex tops the Rankings of BUILDER magazine’s annual Brand Use Study.

Trex received the highest scores for brand awareness, emerged as the #1 brand used most by Pro Builders and Pro Remodel Contractors in both the Composite/PVC Decking and Deck Railings categories.

• Trex Expands Canadian Reach by partnering with Alexandria Moulding.

The leading North American manufacturer and distributor will bring Trex’s premium decking and railing products to a broader range of Canadian retailers, homeowners, and contractors.

• Trex Team with Weyerhaeuser to Expand Distribution across California, Nevada, Arizona, and New Mexico, significantly expanding Trex’s presence across the Southwest Region.

• Trex Expands Distribution with International Wood Products (IWP) strengthening presence in Northern California and Northern Nevada.

As part of this move IWP will exclusively stock Trex decking and railing at all of its distribution facilities in the Western United States.

• Trex Launches National Drop Off Directory for Plastic Bag and Film Recycling.

The directory is the only online searchable platform dedicated to connecting Americans with Trex recycling partners in their local community.

• Trex Adds Two New Enhance ® Decking Hues with heat mitigating technology.

• Trex Launches New Trex Signature ® X-Series Railing.

Trex has expanded its popular Trex Signature ® Railing line with the introduction of X-Series Cable Rail and X-Series Frameless Glass Rail.

• Trex's 2023 Sustainability Report Showcases Ongoing Progress across the broad spectrum of Company activities.

• Trex Named Most Sustainable Decking Brand by Green Builder Media for 14th Consecutive Year and the only brand to be recognized as a sustainability leader for all 14 years of the program.

• Trex Expands Railing Portfolio with Launch of Trex Signature ® X-Series .

Trex has launched two new specialty railing offerings with Trex Signature ® X-Series Cable Rail and Trex Signature ® X-Series Frameless Glass Rail.

• Trex Transcend® Lineage recognized by Good Housekeeping as a winner in their 2024 Sustainable Innovation Awards.

• Trex Named America's Most Trusted ® Outdoor Decking for fifth consecutive year, according to a nationwide study by Lifestory Research.

• Trex Expands Mid-Tier Composite Decking Options with New Performance Engineered Boards .

Additions to the Trex Select ® decking line include brightened colors, updated design aesthetics, and Trex's proprietary SunComfortable technology.

• Trex Ranked Among Barron's 100 Most Sustainable Companies for 2025.

Trex was honored by Baron’s for outstanding leadership in environmental, social, and governance practices and was the only decking brand to be included on this year’s list.

• Trex awarded Morris Tolly National Supplier of the Year by Builders FirstSource , and Supplier of the Year for the Northeast Region.

• Trex Launches Comprehensive Fastener Collection.

In February 2024, Trex launched its Hideaway ® Fastener Collection, providing solutions for every composite deck fastening and finishing need.

• Trex Celebrated with Six Awards for Product Excellence and Innovation for decking and railing products from organizations representing audiences and input from across the building industry.

Trex moved up 20 spots in its 2nd appearance on the Barron's List of 100 Most Sustainable Companies for 2025.

• Trex Releases 2025 Outdoor Living Forecast.

In February 2025, Trex released its 2025 Outdoor Living Forecast highlighting five outdoor trends it expects to shape backyards in the coming year.

• Trex Earned Top Honors at Environment + Energy Leader Awards.

Trex ® Composite Decking was named Product of the Year and Judge's Choice Award as the top-scoring entry in the Consumer + Residential category.

• Trex named Green Builder Media's Sustainable Brand Leader in the decking category.

Trex Select ® was also selected by Green Builder editors as one of the 50 most sustainable products of the year.

• Trex Takes On Real Life In New "Trex Vs" AD Campaign.

This new series of commercial spots and digital concepts showcases how the brand's Performance-Engineered decking and railing enhance and stand up to everyday life.

• Trex's 2024 Sustainability Report highlights how circular innovation is adding value to the business.

The comprehensive report details the Company's continued leadership in materials circularity, environmental stewardship, and social responsibility.

• Trex Simplifies Railing Specification with Interactive Design Tool.

The Trex ® Deck Railing Designer was launched in an effort to simplify the railing selection process with speed, accuracy, and efficiency in mind.

This new tool delivers 3D visualization and instant material estimates which simplifies the planning process for both homeowners and contractors.

• Trex Broadens Western U.S.

Reach Through Expansion with International Wood Products, LLC (IWP).

IWP will exclusively stock Trex ® decking and railing products at its newly opened facility in Salt Lake City, Utah strengthening Trex's presence in Utah and across the Intermountain West.

• Trex Celebrates Completion of 2025 Sunset Idea House in Palm Springs.

Featuring performance engineered products and modeled for eco-conscious design, Trex decking and railing have been featured in the Sunset Idea House creating durable, functional, and sleek outdoor living spaces.

• Trex Grows Distribution Footprint with Weekes Forest Products.

This expanded relationship will increase channel support and product accessibility.

Weekes' distribution centers in St.

Paul and Moorhead, MN will service territories in Minnesota, Wisconsin, Iowa, and North Dakota.

• Trex Expands Distribution Collaboration with Specialty Building Products (SBP).

Longtime Trex-exclusive decking distributor SBP will now provide statewide distribution coverage in Michigan.

• Trex Name "The Coolest Thing Made in Virginia" by Virginia Manufacturing Association.

Trex earned top honors in the 2025 Virginia Manufacturing Cup, earning the title of "The Coolest Thing Made in Virginia" in the Rubber and Plastics Category.

Financial Performance Highlights for the Twelve Months Ended December 31, 2025:

1 unchanged sentence

Diluted earnings per share

*A reconciliation of Net Income to EBITDA is presented on pages 31 of this document under “Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).”

Capital expenditures .

*A reconciliation of Net Income to EBITDA is presented on page 31 of this document under “Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).”

Capital expenditures and intangibles .

In 2025, we spent a total of $233.6 million on capital expenditures, including $167.8 million related to construction of our Arkansas facility, $21.2 million in safety, environmental, and general support, $10.0 million investment in our ERP tool and other platforms, and $22.0 million in all other including cost reduction initiatives and capacity expansion at our existing facilities.

Repurchase of common shares .

8 unchanged sentences

Product Warranty.

We warrant that for the applicable warranty period our Trex Residential products, when properly installed, used and maintained, will be free from material defects in workmanship and materials and our decking, cladding, fascia and railing products will not split, splinter, rot or suffer structural damage from termites or fungal decay.

We warrant that for the applicable warranty period our products, when properly installed, used and maintained, will be free from material defects in workmanship and materials and our decking, cladding, fascia and railing products will not split, splinter, rot or suffer structural damage from termites or fungal decay.

Products sold on or after January 1, 2023:

9 unchanged sentences

We maintain a warranty reserve for the settlement of our product warranty claims.

We accrue for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and future claims experience.

We accrue for the estimated cost of product warranty claims at the time revenue is recognized based on such factors as historical claims experience and future claims projections.

To estimate our future product warranty reserves, the Company utilizes actuarial techniques to determine a reasonable possible range of amounts to be paid related to defects covered by our product warranty.

The actuarial techniques consider claims received, claims closed, and the corresponding amounts paid.

Estimates for these elements are quantified using a range of assumptions derived from claim history and consideration of additional factors influencing claim counts or costs incurred to settle claims in order determine the best estimate of future claims for which to record a related liability.

We review and adjust these estimates, if necessary, based on the differences between actual experience and historical estimates.

Additionally, we accrue for warranty costs associated with occasional or unanticipated product quality issues if a loss is probable and can be reasonably estimated.

We continue to receive and settle claims for Trex Residential products manufactured at our Nevada facility prior to 2007 that exhibit surface flaking and maintain a warranty reserve to provide for the settlement of these claims.

Estimating the warranty reserve for surface flaking claims requires management to estimate (1) the number of claims to be settled with payment and (2) the average cost to settle each claim.

To estimate the number of surface flaking claims to be settled with payment, we utilize actuarial techniques to quantify both the expected number of claims to be received and the percentage of those claims that will ultimately require payment (collectively, elements).

Estimates for these elements are quantified using a range of assumptions derived from claim count history and the identification of factors influencing the claim counts.

The cost per claim varies due to a number of factors, including the size of affected decks, the availability and type of replacement material used, the cost of production of replacement material and the method of claim settlement.

We monitor surface flaking claims activity each quarter for indications that our estimates require revision.

Typically, a majority of surface flaking claims received in a year are received during the summer outdoor season, which spans the second and third quarters.

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

Average cost per claim experienced in the year ended December 31, 2024, was lower than that experienced in the year ended December 31, 2023, and lower than our expectations for 2024.

The number of incoming claims received in the year ended December 31, 2024, was lower than the number of claims received in the year ended December 31, 2023, and higher than our expectations for 2024.

After evaluating trends in incoming claims and closures in its actuarial analysis and combining these factors with future cost estimates, the Company recorded a reduction of $1.5 million to its warranty reserve for the future settlement of Surface Flaking claims in 2024.

We believe the reserve at December 31, 2024 is sufficient to cover future surface flaking obligations.

Our analysis is based on currently known facts and a number of assumptions, as discussed above, and current expectations.

Projecting future events such as the number of claims to be received, the number of claims that will require payment and the average cost of claims could cause the actual warranty liabilities to be higher or lower than those projected, which could materially affect our financial condition, results of operations or cash flows.

We estimate that the annual number of claims received will continue to decline over time and that the average cost per claim will increase slightly, primarily due to inflation.

If the level of claims received or average cost per claim differs materially from expectations, it could result in additional increases or decreases to the warranty reserve and a decrease or increase in earnings and cash flows in future periods.

We estimate that a 10% change in the expected number of remaining claims to be settled with payment or the expected cost to settle claims may result in approximately a $0.6 million change in the estimate of the surface flaking warranty reserve.

The following table details surface flaking warranty claims activity:

Year Ended December 31,

Claims unresolved beginning of period

Claims received (1)

Claims resolved (2)

Claims unresolved end of period

Average cost per claim (3)

(1) Claims received include new claims received or identified during the period.

(2) Claims resolved include all claims settled with or without payment and closed during the period.

(3) Average cost per claim represents the average settlement cost of claims closed with payment during the period.

The Company uses the best and most complete underlying information available and a rational methodology to determine its warranty obligations.

The Company considers all available evidence to assess the reasonableness of all key assumptions underlying its estimated warranty obligations.

During the fourth quarter of 2025, the Company utilized an actuary for the first time to review data on its product warranty.

This resulted in a change to the methodology in which the Company estimated its product warranty liability.

The reserve increased during the period, largely due to the refined methodology, which decreased the Company’s income before income taxes by $6.0 million, decreased net income by $4.4 million, and reduced diluted earnings per share by $0.04.

For additional information about product warranties, see Notes 3 and 19 to the Consolidated Financial Statements appearing elsewhere in this report.

We evaluate the recoverability of goodwill in accordance with Accounting Standard Codification (ASC) Topic 350, “ Intangibles—Goodwill and Other ,” annually or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount.

We evaluate the recoverability of goodwill at the reporting unit level.

During the year ended December 31, 2022, we determined that the Company had three reporting units:

a residential reporting unit in the Trex Residential reportable segment, and a commercial railing reporting unit and a staging reporting unit in the Trex Commercial reportable segment.

On December 30, 2022, we completed the sale of substantially all of the assets of our wholly-owned subsidiary and reportable segment, Trex Commercial.

Subsequent to the sale of Trex Commercial, the Company has one reporting unit in Trex Residential reportable segment.

Goodwill is considered impaired when the carrying amount of a reporting unit exceeds its fair value, and an impairment loss is recognized in an amount equal to that excess but limited to the total amount of goodwill allocated to that reporting unit.

We first assess qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill.

Qualitative factors we consider include events and circumstances such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other relevant Company-specific events.

We evaluate, based on the weight of evidence, the significance of all identified events and circumstances in the context of determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

Weighing the effect of various positive and negative factors is challenging and requires the use of significant judgment.

The weight we place on each factor depends on certain conditions, including uncertainty about future events.

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

If the qualitative assessment indicates that the carrying amount of the reporting unit exceeds its fair value, including goodwill, we are then required to perform a quantitative goodwill impairment test.

The quantitative goodwill impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares the fair value of a reporting unit with its carrying amount, including goodwill.

The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date.

If the carrying amount of a reporting unit is in excess of the estimated fair value of that reporting unit, a goodwill impairment charge is recognized in the amount by which the reporting unit’s carrying amount exceeds its fair value, but not to exceed the total goodwill assigned to the reporting unit.

Revenue Recognition.

Trex Residential Products

Trex Residential principally generates revenue from the manufacture and sale of its high-performance, low-maintenance, eco-friendly outdoor living products, consisting of composite decking and railing products, hidden fasteners, and a broad offering of outdoor living accessories.

Trex principally generates revenue from the manufacture and sale of its high-performance, low-maintenance, eco-friendly outdoor living products, consisting of composite decking and railing products, hidden fasteners, and a broad offering of outdoor living accessories.

Substantially all of its revenues are from contracts with customers, which are individual customer purchase orders of short-term duration of less than one year.

Trex Residential satisfies its performance obligations at a point in time.

Trex satisfies its performance obligations at a point in time.

The shipment of each product is a separate performance obligation as the customer is able to derive benefit from each product shipped and no performance obligation remains after shipment.

Upon shipment of the product, the customer obtains control over the distinct product and Trex Residential satisfies its performance obligation.

Upon shipment of the product, the customer obtains control over the distinct product and Trex satisfies its performance obligation.

Any performance obligation that remains unsatisfied at the end of a reporting period is part of a contract that has an original expected duration of one year or less.

Any variable consideration related to the unsatisfied performance obligation is allocated wholly to the unsatisfied performance obligation and recognized when the product ships and the performance obligation is satisfied and is included in “Accrued expenses and other liabilities, Sales and marketing” in Note 8 to the Consolidated Financial Statements presented in this Form 10-K.

Trex Residential may offer various sales incentive programs throughout the year.

Trex may offer various sales incentive programs throughout the year.

It estimates the amount of sales incentive to allocate to each performance obligation, or product shipped, based on direct sales to the customer.

2 unchanged sentences

Should estimates change or prove to have been incorrect, it could negatively affect our results of operations and financial condition.

In addition to sales incentive programs, Trex Residential may offer payment discounts.

In addition to sales incentive programs, Trex may offer payment discounts.

It estimates the payment discount that it believes will be taken by the customer based on prior history using the most-likely-amount method of estimation.

Trex Commercial Products

Trex Commercial generated revenue from the manufacture and sale of its custom, modular and architectural railing and staging systems.

All of its revenues were from fixed-price contracts with customers.

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

Trex Commercial satisfied its performance obligation over time as work progressed because control was transferred continuously to its customers.

Revenue and estimated profit were recognized over time based on the proportion of actual costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the performance obligation.

Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.

Incurred costs included all direct material, labor, subcontract and certain indirect costs.

The Company reviewed and updated its estimates regularly and recognized adjustments in estimated profit on contracts under the cumulative catch-up method.

Under this method, the impact of the adjustment on revenue and estimated profit to date on a contract is recognized in the period the adjustment is identified.

If at any time the estimate of contract profitability indicated an anticipated loss on the contract, the Company recognized the total loss in the period it was identified.

During the year ended December 31, 2022, no adjustment to any one contract was material to the Company’s Consolidated Financial Statements and no material impairment loss on any contract was recorded.

RESULTS OF OPERATIONS

2 unchanged sentences

The level of net sales is principally affected by sales volume and the prices paid for Trex products.

The operating results for Trex Residential have historically varied from quarter to quarter, often due to seasonal trends in the demand for outdoor living products.

The operating results for Trex have historically varied from quarter to quarter, often due to seasonal trends in the demand for outdoor living products.

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.

As part of its normal business practice and consistent with industry practices, Trex Residential has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season to ensure adequate availability of its product to meet anticipated seasonal consumer demand and to enable production planning.

As part of its normal business practice and consistent with industry practices, Trex has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season to ensure adequate availability of its product to meet anticipated seasonal consumer demand and to enable production planning.

These incentives include prompt payment discounts and favorable payment terms.

1 unchanged sentence

The timing of sales incentive programs can impact sales, receivables and inventory levels during the offering period.

In addition, the operating results for Trex Commercial have not historically varied from quarter to quarter as a result of seasonality, but are driven by the timing of individual projects, which may vary significantly each period.

Gross Profit.

4 unchanged sentences

Manufacturing costs consist of costs of depreciation, utilities, maintenance supplies and repairs, indirect labor, including wages and benefits, and warehouse and equipment rental activities.

Tariffs account for less than 5% of our cost of sales.

The majority of the tariffs are related to purchases of aluminum and steel used in our railing and fastening products.

We have and will further mitigate some of the impact on our cost of sales through supplier negotiations and pricing actions.

Selling, General and Administrative Expenses.

9 unchanged sentences

Total net sales

Total net sales in 2024 increased $56.6 million, or 5.2%, compared to total net sales in 2023, primarily due to the changes to our early-buy program running January to March, rather than our historical December to March timeframe.

Total net sales in 2025 increased $22.8 million, or 2.0%, compared to total net sales in 2024.

The increase was substantially all driven by price, as the result of a mid-single digit price increase on many of our decking products in 2025.

Additionally, 2024 had the benefit of customers purchasing ahead of the price increase announced for January 1, 2025.

Year Ended December 31,

3 unchanged sentences

Gross profit as a percentage of net sales, gross margin, was 39.2% in 2025 compared to 43.6% in 2024.

The increase was primarily due to efficiencies resulting from cost saving initiatives.

The increase was partially offset by higher labor costs and overhead expenses.

The decrease was primarily the result of higher raw material costs on aluminum and steel, tariffs, changes to production process driven by refinements made to our Enhance ® decking product line, and inefficiencies associated with start-up costs at our Arkansas facility, partially offset by higher pricing.

Selling, General and Administrative Expenses

3 unchanged sentences

% of total net sales

Selling, general and administrative expenses decreased slightly year over year as a percentage of net sales, primarily as a result of increased sales offset by a $3.8 million increase in expense.

The increase was due to a $4.7 million increase in branding expenses, a $1.2 million increase in facilities and support, and a $1.0 million increase in depreciation and amortization, partially offset by a decrease of $3.3 million in personnel expenses, due to lower incentive compensation.

Selling, general and administrative expenses increased $22.0 million to $202.0 million, or 17.2% of net sales in 2025.

The increase primarily related to increases of $9.6 million in personnel expenses primarily for increased self-insured medical costs and incentive programs, $7.5 million in branding, $3.5 million in digital transformation, and $2.5 million in Arkansas start-up costs, partially offset by lower miscellaneous expenses year over year.

Provision for Income Taxes

3 unchanged sentences

Effective tax rate

The effective tax rate for 2024 of 25.9% was comparable to the effective tax rate for 2023 of 25.6%.

The effective tax rate for 2025 was 26.2% compared to 25.9% for 2024.

The increase in the effective rate was primarily due to excess tax expense from stock-based awards in 2025 and excess tax benefit from stock-based awards in 2024, as well as reduction in the allowable deduction for foreign derived intangible income.

Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) 1 (dollars in thousands)

1 unchanged sentence

December 31, 2025

Interest (income), net

Interest expense, net

Income tax expense

1 unchanged sentence

Year Ended December 31, 2024

Net income (loss)

Interest expense, net

Income tax expense (benefit)

Interest income, net

Income tax expense

Depreciation and amortization

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).

We have included data with respect to EBITDA because management believes the measures facilitate performance comparison between the Company and its competitors.

Management considers EBITDA to be important supplemental indicators of our core operating performance because the measures eliminate interest, income taxes, and depreciation and amortization charges to net income.

In relation to its competitors, EBITDA eliminates differences among companies in capitalization and tax structures, capital investment cycles and ages of related assets, especially when comparing financial results to prior periods.

For these reasons, management believes that EBITDA provides important information regarding the operating performance of the Company.

Non-GAAP measures are not meant to be considered superior to or a substitute for our GAAP results.

Year Ended December 31,

(dollars in thousands)

Total EBITDA increased 10.4% to $360.3 million for 2024 compared to $326.4 million for 2023.

The increase was driven by an increase in net sales and gross profit.

Total EBITDA decreased 14.8% to $320.9 million for 2025 compared to $376.6 million for 2024.

The decrease was driven by lower gross profit and higher selling, general, and administrative expenses.

Year Ended December 31, 2024 Compared To Year Ended December 31, 2023

5 unchanged sentences

The following table summarizes our cash flows from operating, investing and financing activities for the years ended December 31, 2025, 2024, and 2023 (in thousands):

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).

We have included data with respect to EBITDA because management believes the measures facilitate performance comparison between the Company and its competitors.

For these reasons, management believes that EBITDA provides important information regarding the operating performance of the Company.

Non-GAAP measures are not meant to be considered superior to or a substitute for our GAAP results.

Year Ended December 31,

1 unchanged sentence

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents

Operating Activities

Cash provided by operating activities in 2025 was $358.1 million compared to cash provided by operating activities of $143.9 million in 2024.

The $216.2 million decrease in cash provided by operating activities was primarily a result of an increase in inventories, and to a lesser extent, impacted by increases in accounts receivable.

The increase in inventories is the result of increased production in 2024 compared to 2023 as we prepare for our 2025 early buy program, the launch of new products, and to ensure appropriate product availability during the peak of the season.

The $214.2 million increase in cash provided by operating activities was primarily a result of a decrease in inventories and decreases in accounts receivable.

The decrease in inventories is the result of decreased production in 2025 compared to 2024, while the decrease in accounts receivable was related to the non-recurrence of distributors buying ahead of the January 2025 price increase.

Investing Activities

In 2024, cash used in investing activities for capital expenditures was $232.2 million, primarily at our Trex Residential facilities, including $174.8 million related to construction of our Arkansas facility, $14.7 million related to capacity expansion at our Virginia facilities, $14.5 million related to general plant cost reduction initiatives at our Virginia and Nevada facilities, and $17.0 million for general support, safety, and environmental initiatives.

In 2025, cash used in investing activities for capital expenditures and intangibles was $233.6 million, including $167.8 million related to construction of our Arkansas facility, $21.2 million in safety, environmental, and general support, $10.0 million for our ERP tool and other platforms, and $22.0 million in all other including cost reduction initiatives and capacity expansion at our existing facilities.

Financing Activities

Net cash provided by financing activities in 2024 consisted primarily of borrowings under our revolving credit facility used to fund our capital expenditures and to a lesser extent share repurchases.

Net cash used in financing activities in 2025 consisted primarily of borrowings under our revolving credit facility used to fund our capital expenditures and to a lesser extent share repurchases.

Stock Repurchase Program.

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

The Company repurchased 10.1 million shares under the Stock Repurchase Program.

On May 4, 2023, the Trex Board of Directors adopted a new stock repurchase program (2023 Stock Repurchase Program) of up to 10.8 million shares of its outstanding common stock, and terminated the existing stock repurchase program.

1 unchanged sentence

Inventory in Distribution Channels .

We sell our Trex Residential decking and railing products through a tiered distribution system.

We sell our Trex decking and railing products through a tiered distribution system.

We have over 50 distributors worldwide and two national retail merchandisers to which we sell our products.

2 unchanged sentences

Seasonality .

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

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

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

As part of its normal business practice and consistent with industry practice, Trex Residential has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season in order to ensure adequate availability of its product to meet anticipated seasonal consumer demand.

As part of its normal business practice and consistent with industry practice, Trex has historically offered incentive programs to its distributors and dealers to build inventory levels before the start of the prime deck-building season in order to ensure adequate availability of its product to meet anticipated seasonal consumer demand.

The seasonal effects are often offset by the positive effect of the incentive programs.

6 unchanged sentences

On December 22, 2022, the Company entered into a First Amendment to the Credit Agreement (First Amendment).

As a part of the First Amendment, the Credit Agreement was amended and restated to provide for an additional Revolving B Loan (as hereinafter

Under the First Amendment, the Lenders agreed to provide the Company with a Revolving B Loan consisting of one or more revolving loans in a collective maximum principal amount of $150,000,000 (Revolving B Loan Limit) throughout the term, which ended December 22, 2024 (Revolving B Loan Term).

As a part of the First Amendment, the Credit Agreement was amended and restated to provide for an additional Revolving B Loan (as hereinafter defined).

ended December 22, 2024 (Revolving B Loan Term).

Previously, under the Credit Agreement, there was no Revolving B Loan.

8 unchanged sentences

Base Rate Loans (as defined in the Credit Agreement) under the Revolving A Loan and the Swing Line Loans accrue interest at the Base Rate plus the Applicable Rate (as defined in the Credit Agreement) and Term SOFR Loans for the Revolving Loans accrue interest at the rate per annum equal to the sum of Term SOFR for such interest period plus the Applicable Rate (as defined in the Credit Agreement).

The Base Rate for any day is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by BOA as its prime rate, and (c) the Term SOFR plus 1.0% subject to certain interest rate floors.

The Base Rate for any day is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America (BOA) as its prime rate, and (c) the Term SOFR plus 1.0% subject to certain interest rate floors.

Repayment of all then outstanding principal, interest, fees and costs is due at the end of the Term.

12 unchanged sentences

and the applicable rate for Revolving B Loans that are Term SOFR/Term SOFR Daily Floating Rate range between 1.20% and 2.15%.

At December 31, 2024, we had $202.6 million in outstanding borrowings under the revolving credit facility and borrowing capacity under the facility of $347.4 million.

At December 31, 2025, we had $133.5 million in outstanding borrowings under the revolving credit facility.

The total availability under the revolving credit facility was $413.4 million as of December 31, 2025, which reflects a reduction for outstanding letters of credit totaling $3.1 million.

Compliance with Debt Covenants and Restrictions.

19 unchanged sentences

Open purchase orders written in the normal course of business for goods or services that are provided on demand have been excluded as the timing of which is not certain.

As of December 31, 2024, we have purchase obligations under material supply contracts of $50.7 million for the year ending December 31, 2025, $38.5 million in 2026, $27.4 million in 2027, and $20.3 million in 2028.

As of December 31, 2025, we have purchase obligations under material supply contracts of $25.9 million for the year ending December 31, 2026, $24.6 million in 2027, and $9.7 million in 2028.

Our purchase obligations do not currently extend beyond 2028.

Please refer to Note 19 to the Consolidated Financial Statements in this filing for additional information on our purchase commitments.

7 unchanged sentences

Our capital expenditure guidance for 2026 is $100 million to $120 million.

In addition to the construction of the Arkansas facility, our capital allocation priorities for 2025 include expenditures for internal growth opportunities, manufacturing cost reductions, upgrading equipment and support systems, and acquisitions which fit our long-term growth strategy as we continue to evaluate opportunities that would be a good strategic fit for Trex, and return of capital to shareholders.

Our capital allocation priorities for 2026 include expenditures for internal growth opportunities, manufacturing cost reductions, upgrading equipment and support systems, and acquisitions which fit our long-term growth strategy as we continue to evaluate opportunities that would be a good strategic fit for Trex, and return of capital to shareholders.

We believe that cash on hand, cash flows from operations and borrowings expected to be available under our revolving credit facility will provide sufficient funds to enable us to fund planned capital expenditures, make scheduled principal and interest payments, fund the warranty reserve, meet other cash requirements, and maintain compliance with terms of our debt agreements for at least the next 12 months.

8 unchanged sentences

New Accounting Standards Recently Adopted.

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” The guidance requires disclosure of significant segment expenses which are regularly provided to the chief operating decision maker (CODM), the composition of and amount of other segment items, the CODM’s title and position within the organization, and how the CODM uses the reported measure(s) of segment’s profit or loss to assess the performance of the segment.

In addition, on an interim basis, all segment profit or loss and asset disclosures currently required on an annual basis must be reported, as well as those required by Topic 280.

The guidance allows for multiple measure of a segment’s profit or loss to be reported.

Entities which have a single reportable segment must apply Topic 280 in its entirety.

The guidance was effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024.

In December 2023, the FASB issued ASU No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” The guidance requires public entities to disclose additional categories of information related to federal, state, and foreign income taxes and additional details related to reconciling items should they meet a quantitative threshold.

The guidance requires disclosure of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and to disaggregate the information by jurisdiction based on quantitative thresholds.

The guidance is effective for fiscal year beginning after December 15, 2024.

Early adoption was permitted.

Entities are required to apply the amendments of this update retrospectively for all prior periods presented in the financial statements.

The Company adopted the standard in the quarterly period ended December 31, 2025.

2 unchanged sentences

New Accounting Standards Not Yet Adopted.

In September 2025, the FASB issued ASU No.

2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)." This guidance clarifies and modernizes when an entity is required to begin capitalizing software costs.

Specifically, it requires capitalization when both of the following are met (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended.

The amendments to this update are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods.

Early adoption of this update is permitted.

The amendments to this update may be applied prospectively, retrospectively, or on a modified transition approach.

The Company is evaluating this guidance and the impact it may have on its Consolidated Financial Statements upon adoption.

In July 2025, the FASB issued ASU No.

2025-05, "Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets." This guidance provides an optional practical expedient related to the estimation of expected credit losses for current accounts receivable and contract assets that arise from transactions accounted for under FASB Accounting Standards Codification 606.

Specifically, this optional practical expedient allows an entity to assume that current conditions as of the balance sheet date will not change for the remaining life of the asset.

The amendments to this update are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

Early adoption of this update is permitted.

The amendments to this update should be applied prospectively.

The Company continues to evaluate the guidance and does not believe adoption will have a material impact on its consolidated results of operations or financial position.

In November 2024, the FASB issued ASU No.

9 unchanged sentences

As such, the Company’s preliminary assessments are subject to change.

In December 2023, the FASB issued ASU No.

2023-09, “Income Taxes (Topic 740):

The guidance is effective for fiscal year beginning after December 15, 2024.

Early adoption is permitted.

The guidance should be applied on a prospective basis, retrospective application is permitted.

The Company does not expect adoption of the guidance to have a material effect on its consolidated results of operations and financial position.

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