TREX CO INC

Previous wording

The following management discussion should be read in conjunction with the Trex Company, Inc. (Trex, Company, we or our) Annual Report on Form 10-K for the year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (SEC) and the condensed consolidated financial statements and notes thereto included in Part I, Item 1. “Financial Statements” of this quarterly report.

Current wording

The following management discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with the Trex Company, Inc. (Trex, Company, we or our) Annual Report on Form 10-K for the year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (SEC) and the condensed consolidated financial statements and notes thereto included in Part I, Item 1. “Financial Statements” of this quarterly report.

Previous wording

This management’s discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements regarding our expected financial position and operating results, our business strategy, our financing plans, forecasted demographic and economic trends relating to our industry and similar matters are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” “intend” or similar expressions. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Our actual results could be materially different from our expectations because of various factors, including the factors discussed under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC. These statements are also subject to risks and uncertainties that could cause the Company’s actual operating results to differ materially. Such risks and uncertainties include, but are not limited to: the extent of market acceptance of the Company’s current and newly developed products; the costs associated with the development and launch of new products and the market acceptance of such new products; the sensitivity of the Company’s business to general economic conditions; the impact of seasonal and weather-related demand fluctuations on inventory levels in the distribution channel and sales of the Company’s products; the availability and cost of third-party transportation services for the Company’s products and raw materials; 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 and tariffs in the macro-economic environment; the Company’s ability to maintain product quality and product performance at an acceptable cost; the Company’s ability to increase throughput and capacity to adequately match supply with demand; the level of expenses associated with warranty claims, product replacement and consumer relations expenses related to product quality; the highly competitive markets in which the Company operates; cyber-attacks, security breaches or other security vulnerabilities; the impact of current and upcoming data privacy laws and the EU General Data Protection Regulation and the related actual or potential costs and consequences; material adverse impacts from global public health pandemics, geopolitical conflicts; and material adverse impacts related to labor shortages or increases in labor costs.

Current wording

This MD&A contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements regarding our expected financial position and operating results, our business strategy, our financing plans, forecasted demographic and economic trends relating to our industry and similar matters are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” “intend” or similar expressions. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Our actual results could be materially different from our expectations because of various factors, including the factors discussed under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC. These statements are also subject to risks and uncertainties that could cause the Company’s actual operating results to differ materially. Such risks and uncertainties include, but are not limited to: the extent of market acceptance of the Company’s current and newly developed products; the costs associated with the development and launch of new products and the market acceptance of such new products; the sensitivity of the Company’s business to general economic conditions; the impact of seasonal and weather-related demand fluctuations on inventory levels in the distribution channel and sales of the Company’s products; the availability and cost of third-party transportation services for the Company’s products and raw materials; 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 and tariffs in the macro-economic environment; the Company’s ability to maintain product quality and product performance at an acceptable cost; the Company’s ability to increase throughput and capacity to adequately match supply with demand; the level of expenses associated with warranty claims, product replacement and consumer relations expenses related to product quality; the highly competitive markets in which the Company operates; cyber-attacks, security breaches or other security vulnerabilities; the impact of current and upcoming data privacy laws and the EU General Data Protection Regulation and the related actual or potential costs and consequences; material adverse impacts from global public health pandemics, geopolitical conflicts; and material adverse impacts related to labor shortages or increases in labor costs.

Previous wording

Highlights and Financial Performance Quarter-to-Date and Year-to-Date— a summary of financial performance and highlights for the three months ended March 31, 2026, a general discussion of factors that may affect our operations, and a description of relevant financial statement line items.

Current wording

Highlights and Financial Performance Quarter-to-Date and Year-to-Date –a summary of financial performance and highlights for the three months and six months ended June 30, 2026, a general discussion of factors that may affect our operations, and a description of relevant financial statement line items.

Previous wording

Results of Operations — an analysis of our consolidated results of operations for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Current wording

Results of Operations — an analysis of our consolidated results of operations for the three months and six months ended June 30, 2026 compared to the three months and six months ended June 30, 2025.

Previous wording

Trexis the world’s largest manufacturer of high-performance wood alternative decking and railing products and a leader in outdoor living products, which are marketed under the brand name Trex® and manufactured in the United States. With more than 30 years of product experience, we offer a comprehensive set of aesthetically appealing and durable, low-maintenance product offerings in the decking, railing, fencing and outdoor lighting categories. A majority of the products are eco-friendly and leverage recycled and reclaimed materials to the extent possible. Trex decking is made in a proprietary process that combines reclaimed wood fibers and recycled polyethylene film, making Trex one of the largest recyclers of plastic film in North America. In addition to resisting fading and surface staining, Trex products require no sanding and sealing, resist moisture damage, provide a splinter-free surface and do not require chemical treatment against rot or insect infestation. Combined, these aspects yield significant aesthetic advantages and lower maintenance than wood decking and railing and ultimately render Trex products less costly than wood over the life of the deck. Special characteristics (including resistance to splitting, the ability to bend, and ease and consistency of machining and finishing)

Current wording

Trexis the world’s largest manufacturer of high-performance composite decking and railing products and a leader in outdoor living products, which are marketed under the brand name Trex® and manufactured in the United States. With more than 30 years of product experience, we offer a comprehensive set of aesthetically appealing and durable, low-maintenance product offerings in the decking, railing, fencing and outdoor lighting categories. A majority of the products are eco-friendly and leverage recycled and reclaimed materials to the extent possible. Trex decking is made in a proprietary process that combines reclaimed wood fibers and recycled polyethylene film, making Trex one of the largest recyclers of plastic film in North America. In addition to resisting fading and surface staining, Trex products require no sanding and sealing, resist moisture damage, provide a splinter-free surface and do not require chemical treatment against rot or insect infestation. Combined, these aspects yield significant aesthetic advantages and lower maintenance than wood decking and railing and ultimately render Trex products less costly than wood over the life of the deck. Special characteristics (including resistance to splitting, the ability to bend, and ease and consistency of machining and finishing)

Previous wording

*A reconciliation of Net Income (GAAP) to EBITDA (non-GAAP) is presented on page 20 of this document under “Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).”

Current wording

*A reconciliation of Net Income (GAAP) to EBITDA (non-GAAP) is presented on pages 20 and 21 of this Quarterly Report on Form 10-Q under “Net Income and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).”

Previous wording

Capital expenditures and intangibles. During the three months ended March 31, 2026, we spent a total of $25.0 million on capital expenditures and intangibles, including $13.0 million for the Arkansas manufacturing facility, $2.6 million in cost reduction initiatives, $1.9 million for our ERP tool and other platforms, and $7.5 million in all other including capacity expansion in our existing facilities.

Current wording

Capital expenditures. During the six months ended June 30, 2026, our capital expenditures were $57.3 million primarily related to $20.0 million for the Arkansas manufacturing facility, $6.5 million in cost reduction initiatives, $4.5 million for our ERP tool and other platforms, and $26.3 million in all other including capacity expansion in our existing facilities.

Previous wording

Gross Profit. Gross profit represents the difference between net sales and cost of sales. Cost of sales consists of raw material costs, direct labor costs, manufacturing costs, subcontract costs and freight. Raw material costs generally include the costs to purchase and transport reclaimed wood fiber, reclaimed polyethylene, pigmentation for coloring our products, and commodities used in the production of railing. Direct labor costs include wages and benefits of personnel engaged in the manufacturing process. Manufacturing costs consist of costs of depreciation, utilities, maintenance supplies and repairs, indirect labor, including wages and benefits, and warehouse and equipment rental activities.

Current wording

Gross Profit. Gross profit represents the difference between net sales and cost of sales. Cost of sales consists of raw material costs, direct labor costs, manufacturing costs, subcontract costs and freight. Raw material costs generally include the costs to purchase and transport reclaimed wood fiber, reclaimed polyethylene, pigmentation for coloring our products, and commodities used in the production of railing and staging. Direct labor costs include wages and benefits of personnel engaged in the manufacturing process. Manufacturing costs consist of costs of depreciation, utilities, maintenance supplies and repairs, indirect labor, including wages and benefits, and warehouse and equipment rental activities.

Previous wording

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

Current wording

Less than 5% of our cost of sales is projected to be impacted by tariffs. The majority of 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 higher levels of existing pre-tariff inventory and supplier negotiations.

Previous wording

Below is the discussion and analysis of our operating results and material changes in our operating results for the three months ended March 31, 2026 (2026 quarter) compared to the three months ended March 31, 2025 (2025 quarter).

Current wording

Below is the discussion and analysis of our operating results and material changes in our operating results for the three months ended June 30, 2026 (2026 quarter) compared to the three months ended June 30, 2025 (2025 quarter), and for the six months ended June 30, 2026 (2026 six-month period) compared to the six months ended June 30, 2025 (2025 six-month period).

Previous wording

Gross profit as a percentage of net sales, gross margin, was 40.5% in the 2026 quarter and the 2025 quarter. Gross margin in the 2026 quarter was favorably impacted by pricing and absorption due to higher production compared to the 2025 quarter, offset by increased incentives.

Current wording

Gross profit as a percentage of net sales, gross margin, was 39.1% in the 2026 six-month period compared to 40.7% in the 2025 six-month period. The decrease in gross margin was primarily the result of higher input and material costs, increased depreciation, and unfavorable mix, partially offset by increased productivity.

Previous wording

1 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 it facilitates performance comparison between the Company and its competitors. Management considers EBITDA to be an important supplemental indicator of our core operating performance because it eliminates interest, income taxes, and depreciation and amortization charges to net income. In relation to competitors, EBITDA eliminates differences among companies in capitalization and tax structures, capital investment cycles and ages of related assets. For these reasons, management believes that EBITDA provides important information regarding the operating performance of the Company. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP and are not meant to be considered superior to or a substitute for our GAAP results.

Current wording

1 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 it facilitates performance comparison between the Company and its competitors. Management considers EBITDA to be an important supplemental indicator of our core operating performance because it eliminates interest, income taxes, and depreciation and amortization charges to net income or loss. In relation to competitors, EBITDA eliminates differences among companies in capitalization and tax structures, capital investment cycles and ages of related assets. For these reasons, management believes that EBITDA provides important information regarding the operating performance of the Company. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP and are not meant to be considered superior to or a substitute for our GAAP results.

Previous wording

Selling, general and administrative expenses decreased $0.5 million to $55.5 million, or 16.2% of net sales, in the 2026 quarter. The decrease was related to a $3.0 million reduction in personnel expenses primarily for decreased self-insured medical costs and incentive compensation partially offset by increases of $1.4 million in branding, and $0.8 million in research and development costs.

Current wording

Selling, general and administrative expenses increased $11.2 million to $123.0 million, or 16.2% of net sales, in the 2026 six-month period. The increase primarily related to increases of $5.1 million in branding, $3.4 million in services, and $1.1 million in personnel related expenses.

Previous wording

We finance operations and growth primarily with cash flows from operations, borrowings under our revolving credit facilities, operating leases and normal trade credit terms from operating activities. At March 31, 2026, we had $4.5 million of cash and cash equivalents.

Current wording

We finance operations and growth primarily with cash flows from operations, borrowings under our revolving credit facilities, operating leases and normal trade credit terms from operating activities. At June 30, 2026, we had $6.5 million of cash and cash equivalents.

Previous wording

Cash used in investing activities for capital expenditures and intangibles in the 2026 quarter was $25.0 million primarily related to $13.0 million for the Arkansas manufacturing facility, $2.6 million in cost reduction initiatives, $1.9 million for our ERP tool and other platforms, and $7.5 million in all other including capacity expansion, and maintenance upgrades.

Current wording

Capital expenditures in the 2026 six-month period were $57.3 million primarily related to $20.0 million for the Arkansas manufacturing facility, $6.5 million in cost reduction initiatives, $4.5 million for our ERP tool and other platforms, and $26.3 million in all other including capacity expansion in our existing facilities.

Previous wording

Net cash provided by financing activities in the 2026 quarter consisted primarily of net borrowings under our line of credit.

Current wording

Net cash used in financing activities in the 2026 six-month period consisted primarily of repurchases of common stock, partially offset by net borrowings on the revolving credit facility.

Previous wording

Stock Repurchase Program. On May 4, 2023, the Trex Board of Directors adopted a stock repurchase program (2023 Stock Repurchase Program) of up to 10.8 million shares of its outstanding common stock. The 2023 Stock Repurchase Program has no set expiration date. On February 26, 2026, Trex entered into an Accelerated Stock Repurchase program (ASR) under the 2023 Stock Repurchase Program. As such, we made a prepayment of $100 million to Wells Fargo and received an initial delivery of 1.9 million shares valued at approximately 80% of the prepayment amount. During the three months ended, March 31, 2026 we repurchased 1.9 million shares under the ASR based on the initial delivery described in the preceding sentence. The total number of shares we will ultimately repurchase and the average price per share will be based on the average of the daily volume-weighted average prices of our common stock during the term of the ASR Agreement, less a negotiated discount and subject to customary adjustments, and is expected to occur no later than the second quarter of 2026.

Current wording

Stock Repurchase Program. On May 4, 2023, the Trex Board of Directors adopted a stock repurchase program (2023 Stock Repurchase Program) of up to 10.8 million shares of its outstanding common stock. On February 26, 2026, Trex entered into an Accelerated Stock Repurchase program ("ASR") under the 2023 Stock Repurchase Program. On April 28, 2026, the Trex Board of Directors authorized an additional 10 million shares to be repurchased under the 2023 Stock Repurchase Program. During the six months ended, June 30, 2026, the Company repurchased an aggregate of 3.9 million shares of its common stock, consisting of 2.6 million shares by the ASR program and 1.3 million shares under the 2023 Repurchase Program. As of June 30, 2026 the remaining number of shares available for repurchase under the 2023 Stock Repurchase Program is 13,470,185.

Previous wording

The Second Amendment provides us with Revolving A Loans in the maximum principal amount of $400,000,000 (Revolving A Loans), Revolving B Loans in the maximum principal amount of $150,000,000 (Revolving B Loans), and Letters of Credit and Swing Line Loans (as defined in the Credit Agreement). The Second Amendment extends the maturity date of the Revolving B Loans from December 22, 2024 to December 22, 2026.

Current wording

The Second Amendment provides us with Revolving A Loans in the maximum principal amount of $400,000,000 (Revolving A Loans), Revolving B Loans in the maximum principal amount of $150,000,000 (Revolving B Loans), and Letters of Credit and Swing

Previous wording

Indebtedness on and after March 26, 2026. On March 26, 2026 Trex entered into a Credit Agreement with certain lending parties thereto (Lenders) to amend and restate the Credit Agreement dated as of May 18,2022, as amended (the Prior Credit Agreement).

Current wording

Indebtedness on and after March 26, 2026. On March 26, 2026 Trex entered into a Credit Agreement with certain lending parties thereto (Lenders) to amend and restate the Credit Agreement dated as of May 18, 2022, as amended (the Prior Credit Agreement).

Previous wording

At March 31, 2026, we had $382.5 million in borrowings outstanding under our revolving credit facility. The total availability under the revolving credit facility was $314.4 million as of March 31, 2026, which reflects a reduction for outstanding letters of credit totaling $3.1 million.

Current wording

At June 30, 2026, we had $253.0 million in outstanding borrowings under the revolving credit facility. The total availability under the revolving credit facility was $443.9 million as of June 30, 2026, which reflects a reduction for outstanding letters of credit totaling $3.1 million.

Previous wording

Seasonality. The operating results for Trex have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions may reduce the level of home improvement and construction activity and can shift sales of our products to a later period or decrease overall sales in affected locations. 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.

Current wording

Seasonality. The operating results for Trex have historically varied from quarter to quarter. Seasonal, erratic or prolonged adverse weather conditions in certain geographic regions 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 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.