Composite decking and rail manufacturer Trex Company, Inc. (NYSE: TWP), reported increased profits for 1Q08, due in part to a tax benefit, but predicted a drop in second-quarter revenue as a result of the U.S. economic outlook and troubles in the housing market.
The company reported net income for 1Q08 of $8.9 million, or $0.60 per diluted share, compared to net income of $3.7 million, or $0.25 per diluted share, for 1Q07, representing a 140% increase.
Net sales for 1Q08 totaled $119.5 million, compared to net sales of $115.9 million for 1Q07, representing a 3.1% increase.
The Company had an effective tax rate of approximately 1% for 1Q08 as a result of recognizing a decrease in the valuation allowance against the deferred tax asset, which accounted for $0.22 of the increase in earnings per share.
President and CEO Ronald W. Kaplan said, "We managed liquidity well during the 2008 first quarter, ending the period with $22 million of borrowings on our revolving line of credit, which has a maximum borrowing capacity of $70 million during the ‘early buy’ sales season. As of May 6, 2008, we have paid down all borrowings on our revolving line of credit and are carrying a positive cash balance."
Kaplan continued, "We are pleased with the performance of our early buy sales program, which is designed to meet current demand as well as place sufficient product into distribution before the deck-building season moves into high gear. At the same time, given the inclement winter weather in many parts of the U.S., which delayed many outdoor projects, coupled with building material dealers choosing to operate with depressed inventory levels and the uncertain economic outlook, we are cautious regarding second quarter revenue. We are therefore projecting second quarter 2008 revenue to be 23% to 33% below the level attained during the second quarter of 2007, when net sales totaled $118.8 million."
About Trex Company
Based in Winchester, Virginia, Trex Company is the nation’s largest manufacturer of composite decking, railing and fencing, with over 15 years of product experience. Built on "green" principles and values, Trex makes its products from a unique formulation of reclaimed wood and waste plastic, combined through a proprietary process. Trex decking, railing and fencing offer significant design flexibility with fewer ongoing maintenance requirements than wood, as well as a truly environmentally responsible choice.
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