Trex
Annual Report 2013

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the fiscal year ended December 31, 2013 ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the transition period from to Commission file number: 001-14649 Trex Company, Inc.(Exact name of registrant as specified in its charter) Delaware 54-1910453(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)160 Exeter Drive, Winchester, Virginia 22603-8605(Address of principal executive offices) (Zip Code)(540) 542-6300Registrant’s telephone number, including area code: Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered:Common Stock, par value $0.01 per share New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes  No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File requiredto be submitted and posed pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes  No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting Company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting Company” in Rule 12b-2 of the Exchange Act. Large accelerated filer  Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting Company) Smaller reporting company ¨ Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No The aggregate market value of the registrant’s common equity held by non-affiliates of the registrant at June 30, 2013, which was the last business day ofthe registrant’s most recently completed second fiscal quarter, was approximately $805.6 million based on the closing price of the common stock as reportedon the New York Stock Exchange on such date and assuming, for purposes of this computation only, that the registrant’s directors, executive officers andbeneficial owners of 10% or more of the registrant’s common stock are affiliates.The number of shares of the registrant’s common stock outstanding on February 13, 2014 was 16,741,324.DOCUMENTS INCORPORATED BY REFERENCEPortions of the following documents are incorporated by reference in this Form 10-K as indicated herein: Document Part of 10-K into which incorporatedProxy Statement relating toRegistrant’s 2014Part IIIAnnual Meeting of Stockholders Table of ContentsTABLE OF CONTENTS Page PART I Item 1. Business 1 Item 1A. Risk Factors 9 Item 1B. Unresolved Staff Comments 13 Item 2. Properties 13 Item 3. Legal Proceedings 14 Item 4. Mine Safety Disclosures 15 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 16 Item 6. Selected Financial Data 18 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 31 Item 8. Financial Statements and Supplementary Data 31 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 31 Item 9A. Controls and Procedures 31 Item 9B. Other Information 34 PART III Item 10. Directors, Executive Officers and Corporate Governance 35 Item 11. Executive Compensation 35 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 35 Item 13. Certain Relationships and Related Transactions, and Director Independence 35 Item 14. Principal Accounting Fees and Services 35 PART IV Item 15. Exhibits and Financial Statement Schedules 36 Index to Consolidated Financial Statements F-1 iTable of ContentsNOTE ON FORWARD-LOOKING STATEMENTSThis report, including the information it incorporates by reference, contains forward-looking statements within the meaning of Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend our forward-looking statements to be covered by the safe harborprovisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our businessstrategy, our financing plans, forecasted demographic and economic trends relating to our industry and similar matters are forward-looking statements. Thesestatements can sometimes be identified by our use of forward-looking words such as “believe,” “may,” “will,” “anticipate,” “estimate,” “expect” or “intend.”We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Our actual results could be materially differentfrom our expectations because of various factors, including the factors discussed under “Risk Factors” in this report. iiTable of ContentsPART ISome of the information contained in this report concerning the markets and industry in which we operate is derived from publicly availableinformation and from industry sources. Although we believe that this publicly available information and the information provided by these industry sourcesare reliable, we have not independently verified the accuracy of any of this information. Item 1.BusinessGeneralTrex Company, Inc. (the “Company”), founded as a Delaware corporation in 1998, is the world’s largest manufacturer of wood-alternative decking andrailing products, which are marketed under the brand name Trex. Our principal executive offices are located at 160 Exeter Drive, Winchester, Virginia22603, and our telephone number at that address is (540) 542-6300.ProductsWe offer a comprehensive set of aesthetically durable, low maintenance product offerings in the decking, railing, porch, fencing, trim and steel deckframing categories. We believe that the range and variety of our product offerings allow consumers to design much of their outdoor living space using Trexbrand products. The majority of our products are made in a proprietary process that combines waste wood fibers and reclaimed polyethylene. Our productsare provided in a wide selection of popular sizes and lengths and are available with several finishes and/or numerous colors.Decking. We market our decking products under a number of brand names. Our principal brand names for decking are: • Trex Transcend, Trex Enhance and Trex Select, which each feature a protective shell for enhanced protection against fading, staining, moldand scratching; and • Trex Accents, which offers a smooth surface on one side and subtle wood grain on the other.We also have Trex Hideaway, which is a hidden fastening system for specially grooved boards.On December 31, 2013, we discontinued the manufacture of Trex Accents, which we do not believe will have a material impact on our results ofoperations or cash flow.Railing. Our railing products are Trex Transcend Railing, Trex Designer Series Railing, Trex Select Railing, and Trex Reveal aluminum railing. TrexTranscend Railing is available in the colors of Trex Transcend decking and finishes that make it appropriate for use with Trex decking products as well asother decking materials, which we believe will enhance the sales prospects of our railing business. Our Designer Series Railing system consists of a decorativetop and bottom rail, refined balusters, our Trex RailPost™, and post caps and skirts. Trex Select Railing, which is white, is for consumers who desire asimple clean finished look for their deck. Trex Reveal aluminum railing, which is available in three colors, is for consumers who want a sleek, contemporaryaesthetic look.On December 31, 2013, we discontinued the manufacture of Trex Designer Series Railing, which we do not believe will have a material impact on ourresults of operations or cash flow.Porch. Our Trex Transcend Porch Flooring and Railing System is an integrated system of porch components and accessories.Fencing. We offer our Trex Seclusions fencing product through two specialty distributors. This product consists of structural posts, bottom rail,pickets, top rail and decorative post caps. 1®®®®®®®®®Table of ContentsTrim. Our TrexTrim™ product is a low maintenance cellular PVC residential exterior trim product that offers exceptional workability, durability, visualappeal and a low level of required maintenance.Miscellaneous. We offer a steel deck framing system called Trex Elevations. We also offer a line of energy-efficient LED dimmable deck lighting,which is designed for use on posts, floors and steps, called Trex DeckLighting™. The line includes a post cap light, deck rail light, riser light and a recesseddeck light.We are a licensor in a number of licensing agreements with third parties to manufacture and sell products under the Trex trademark. For 2013, ourlicensed products are: • Trex Outdoor Furniture™, which is a line of outdoor furniture products manufactured and sold by Poly-Wood, Inc.; • Trex RainEscape, which is an above joist deck drainage system manufactured and sold by Dri-Deck Enterprises, LLC; • Trex CustomCurve, which is an on-site system that allows contractors to heat and bend Trex products manufactured and sold by CurveIt,LLC; • Trex Pergolas™, which are pergolas made from TrexTrim™, our low maintenance cellular PVC trim product, marketed by Home and Leisure,Inc. dba Backyard America; • Diablo Trex Blade, which is a specialty saw blade for wood-plastic composite decking manufactured and sold by Freud America, Inc.; and • Trex SpiralStairs™ and Structural Steel Posts (for use with the Elevations system), manufactured and sold by M. Cohen and Sons, Inc. dbaThe Iron Shop.Trex products offer a number of significant aesthetic advantages over wood while eliminating many of wood’s major functional disadvantages, whichinclude warping, splitting and other damage from moisture. Our products require no staining, are resistant to moisture damage, provide a splinter-free surfaceand need no chemical treatment against rot or insect infestation. These features eliminate most of the on-going maintenance requirements for a wood deck andmake Trex products less costly than wood over the life of the deck. Like wood, Trex products are slip-resistant (even when wet) and are less vulnerable todamage from ultraviolet rays. Special characteristics (including resistance to splitting, the ability to bend, and ease and consistency of machining andfinishing) facilitate deck, railing, fencing and trim installation, reduce contractor call-backs and afford customers a wide range of design options. Trexdecking products do not have the tensile strength of wood and, as a result, are not used as primary structural members in posts, beams or columns used in adeck’s substructure. However, Trex does offer the Trex Elevations steel deck framing system.We have received product building code listings from the major U.S. and Canadian building code listing agencies for both our decking and railingsystems. Our listings facilitate the acquisition of building permits by deck builders and promote consumer and industry acceptance of our products as analternative to wood in decking. In addition, Trex Seclusions privacy fencing has passed the Miami/Dade County wind load testing, a widely regardedstandard for assessing a fencing product’s performance under extreme environmental conditions.Growth StrategiesOur long-term goal is to perpetuate our position as the leading producer of branded superior wood-alternative outdoor living products by increasing ourmarket share and expanding into new product categories and geographic markets. To attain this goal, we intend to employ the following long-term strategies: • Innovation: Bring to the market new products that address unmet consumer and trade professional needs. Provide a compelling value propositionthrough ease of installation, low maintenance, long-term durability and superior aesthetics. 2®®®®Table of Contents • Brand: Expand preference and commitment for the Trex brand with both the consumer and trade professional. Deliver on the brand’s promise ofsuperior quality, functionality, aesthetics and overall performance in the outdoor living space. Leverage online efforts to build a bigger Trex brandpresence digitally, extending our footprint nationally and globally. • Channels: Achieve comprehensive market segment and geographic coverage for Trex products by increasing the number of stocking dealers andretailers and expanding our international presence, thereby making our products available wherever our customers choose to purchase theirdecking, railing, porch and trim products. • Quality: Continuously advance the quality of all operational and business processes, with the goal of achieving superior product quality andservice levels, thereby giving us a sustainable competitive advantage. • Cost: Through capital investments and process engineering, continuously seek to lower the cost to manufacture Trex products. Investments inplastic recycling capabilities will allow us to expand our ability to use a wider breadth of waste streams and, as a result, lower our raw materialcosts. We plan to concentrate on improving the productivity of our production process, from raw materials preparation through extrusion intofinishing and packaging.Customers and DistributionWe distribute and/or sell our products as follows:Wholesale Distributors/Retail Lumber Dealers. In 2013, we generated most of our sales through our wholesale distribution network by selling Trexproducts to wholesale distributors, who in turn, marketed our products to retail lumber outlets. These retail dealers sell to both homeowners and contractors,but they emphasize sales to professional contractors, remodelers and homebuilders. Contractor-installed decks generally are larger installations withprofessional craftsmanship. Our retail dealers generally provide sales personnel trained in Trex products, contractor training, inventory commitment andpoint-of-sale display support.We believe that attracting wholesale distributors, who are committed to our products and marketing approach and can effectively sell higher valueproducts to contractor-oriented lumber yards and other retail outlets, is important to our future growth. Our distributors are able to provide value-added servicein marketing our products because they sell premium wood decking products and other innovative building materials that typically require product trainingand personal selling efforts. We typically appoint a distributor on a non-exclusive basis to distribute Trex products within a specified area. The distributorgenerally purchases our products at prices in effect at the time we ship the product to the distributor. Based on our 2013 net sales, sales to one of ourdistributors, Boise Cascade, exceeded 10% of our net sales.Home Depot and Lowe’s. We sell our products through Home Depot and Lowe’s stores. Home Depot and Lowe’s purchase products directly from usfor stocking on their shelves. They also purchase product through our wholesale distributors for special orders placed by consumers. Although Home Depotand Lowe’s serve the contractor market, the largest part of their sales are to “do-it-yourself” homeowner customers that shop for their materials at Home Depotand Lowe’s stores rather than at retail lumber dealers. We believe that brand exposure through Home Depot and Lowe’s distribution promotes consumeracceptance and generates sales to contractors that purchase from independent dealers.Manufacturing ProcessWe have manufacturing facilities in Winchester, Virginia and Fernley, Nevada, which had floor space of approximately 455,000 square feet and250,000 square feet, respectively, at December 31, 2013. In September 2007, we suspended operations at our Olive Branch, Mississippi facility andconsolidated all of our manufacturing operations into our Winchester and Fernley sites. 3Table of ContentsTrex products are primarily manufactured from waste wood fiber and reclaimed polyethylene, which we sometimes refer to as “PE material” in thisreport. Our primary manufacturing process involves mixing wood particles with plastic, heating and finally extruding, or forcing, the highly viscous andabrasive material through a profile die. We have many proprietary and skill-based advantages in this process.Production of a non-wood decking alternative such as ours requires significant capital investment, special process expertise and time to develop. Wehave continuously invested the capital necessary to expand our manufacturing capacity and improve our manufacturing processes. We have also broadenedthe range of raw materials that we can use to produce a consistent and high-quality finished product. We maintain research and development operations in theTrex Technical Center adjacent to our Winchester, Virginia manufacturing facilities. In connection with our building code listings, we maintain a qualitycontrol testing program that is monitored by an independent inspection agency.We utilize Six Sigma practices and Standard Lean Manufacturing methodology within our plant operations. We also incorporate the use of these toolsthroughout our Company in the planning and execution of those projects that are the most important to our success.Research and DevelopmentOur research and development efforts focus on innovation and developing new products, lowering the cost of manufacturing our existing products andredesigning existing product lines to increase efficiency and enhance performance. For the years ended December 31, 2013, 2012, and 2011, research anddevelopment costs were $2.9 million, $2.9 million, and $2.5 million, respectively, and have been included in “Selling, general and administrative expenses”in the accompanying consolidated statements of comprehensive income.SuppliersThe production of most of our products requires the supply of waste wood fiber and PE material.We fulfill requirements for raw materials under both purchase orders and supply contracts. In the year ended December 31, 2013, we purchasedsubstantially all of our waste wood fiber requirements under purchase orders, which do not involve long-term supply commitments. Substantially all of ourPE material purchases are under short-term supply contracts that average approximately two years, for which pricing is negotiated as needed.Waste Wood Fiber. Woodworking plants or mills are our preferred suppliers of waste wood fiber because the waste wood fiber produced by theseoperations contains little contamination and is low in moisture. These facilities generate waste wood fiber as a byproduct of their manufacturing operations.If the waste wood fiber meets our specifications, our waste wood fiber supply agreements generally require us to purchase at least a specified minimumand at most a specified maximum amount of waste wood fiber each year. Depending on our needs, the amount of waste wood fiber that we actually purchasewithin the specified range under any supply agreement may vary significantly from year to year.PE Material. The PE material we consumed in 2013 was primarily composed of recovered plastic film and plastic bags. Approximately two billionpounds of polyethylene resin are used in the manufacture of stretch film and plastic bags in the United States each year. We will continue to seek to meet ourfuture needs for plastic from the expansion of our existing supply sources and the development of new sources, including post-industrial waste and plasticcoatings. We believe our use of multiple sources provides us with a cost advantage and facilitates an environmentally responsible approach to our procurementof PE material.Our ability to source and use a wide variety of PE material is important to our cost strategy. We maintain this ability through the continued expansion ofour plastic reprocessing operations in combination with the advancement of our proprietary material preparation and extrusion processes. 4Table of ContentsThird-Party Manufacturing. We outsource the production of certain products to third-party manufacturers under supply contracts that commit us topurchase minimum levels for each year extending through 2015. We have purchase commitments under the third-party manufacturing contracts of $4.4million and $1.9 million for the years ending December 31, 2014 and 2015, respectively.CompetitionIn decking, we compete with wood and other manufacturers of wood alternative decking products. Many of the conventional lumber suppliers withwhich we compete have established ties to the building and construction industry and have well-accepted products. In railing, we compete with wood and othermanufacturers of composite, non-wood and plastic products, as well as with railings using metal, glass, vinyl and other materials. In privacy fencing, wecompete with wood, vinyl and other manufacturers of composites. In trim, we compete against wood, engineered wood, fiber cement, and other manufacturersof cellular PVC and similar plastic products.Our primary competition consists of wood products, which constituted a substantial majority of 2013 decking and railing sales, as measured by linearfeet of lumber. A majority of the lumber used in wooden decks is pressure-treated lumber. Southern yellow pine and fir have a porosity that readily allows thechemicals used in the pressure treating process to be absorbed. The same porosity makes southern yellow pine susceptible to absorbing moisture, whichcauses the lumber to warp, crack, splinter and expel fasteners. In addition to pine and fir, other segments of wood material for decking include redwood, cedarand tropical hardwoods, such as ipe, teak and mahogany. These products are often significantly more expensive than pressure-treated lumber, but do noteliminate many of the disadvantages of other wood products.Industry studies indicate that we have the leading market share of the wood-plastic composite / PVC segment of the decking and railing market. Ourprincipal competitors include Advanced Environmental Recycling Technologies, Inc., Azek Building Products, Inc. and Fiber Composites, LLC.Our ability to compete depends, in part, on a number of factors outside our control, including the ability of our competitors to develop new non-wooddecking and railing alternatives that are competitive with our products. We believe that the principal competitive factors in the decking and railing marketinclude product quality, price, aesthetics, maintenance cost, distribution and brand strength. We believe we compete favorably with respect to these factors.We believe that our products offer aesthetic and cost advantages over the life of a deck when compared to other types of decking and railing materials.Although a contractor-installed deck built with Trex products in 2013 using a pressure-treated wood substructure generally costs more than a deck madeentirely from pressure-treated wood, Trex products eliminate many of the on-going maintenance required for a pressure-treated deck and are, therefore, lesscostly over the life of the deck. We believe that our manufacturing process and utilization of relatively low-cost raw material sources provide us with acompetitive cost advantage relative to other wood/plastic composite and 100% plastic decking products. The scale of our operations also confers costefficiencies in manufacturing, sales and marketing.SeasonalityOur net sales, gross profit and income from operations have historically varied from quarter to quarter. Such variations are often attributable to seasonal trendsin the demand for Trex. We have historically experienced lower net sales during the fourth quarter because holidays and adverse weather conditions in certainregions reduce the level of home improvement and construction activity.Government RegulationWe are subject to federal, state and local environmental regulation. The emissions of particulates and other substances from our manufacturing facilitiesmust meet federal and state air quality standards implemented through air permits issued to us by the Department of Environmental Quality of theCommonwealth of Virginia, 5Table of Contentsthe Division of Environmental Protection of Nevada’s Department of Conservation and Natural Resources and the Mississippi Department of EnvironmentalQuality. Our facilities are regulated by federal and state laws governing the disposal of solid waste and by state and local permits and requirements withrespect to wastewater and storm water discharge. Compliance with environmental laws and regulations has not had a material adverse effect on our business,operating results or financial condition.Our operations also are subject to work place safety regulation by the U.S. Occupational Safety and Health Administration, the Commonwealth ofVirginia, the State of Nevada and the State of Mississippi. Our compliance efforts include safety awareness and training programs for our production andmaintenance employees.Intellectual PropertyOur success depends, in part, upon our intellectual property rights relating to our products, production processes and other operations. We rely upon acombination of trade secret, nondisclosure and other contractual arrangements, and patent, copyright and trademark laws, to protect our proprietary rights.We have made substantial investments in manufacturing process improvements that have enabled us to increase manufacturing line production rates, facilitateour development of new products, and produce improvements in our existing products’ dimensional consistency, surface texture and color uniformity.Intellectual property rights may be challenged by third parties and may not exclude competitors from using the same or similar technologies, brands orworks. We seek to secure effective rights for our intellectual property, but cannot provide assurance that third parties will not successfully challenge, or avoidinfringing, our intellectual property rights.We have obtained two patents for complementary methods of preparing the raw materials for the manufacturing phase of production, one patent on anapparatus for implementing one of the methods, and one patent on a tool for use with the installation of the decking board. We intend to maintain our existingpatents in effect until they expire, beginning in 2015, as well as to seek additional patents as we consider appropriate.We consider our trademarks to be of material importance to our business plans. The U.S. Patent and Trademark Office has granted us federalregistrations for many of our trademarks. Federal registration of trademarks is effective for as long as we continue to use the trademarks and renew theirregistrations. We do not generally register any of our copyrights with the U.S. Copyright Office, but rely on the protection afforded to such copyrights by theU.S. Copyright Act. This law provides protection to authors of original works, whether published or unpublished, and whether registered or unregistered. Weenter into confidentiality agreements with our employees and limit access to and distribution of our proprietary information. If it is necessary to discloseproprietary information to third parties for business reasons, we require that such third parties sign a confidentiality agreement prior to any disclosure.EmployeesAt December 31, 2013, we had approximately 590 full-time employees, approximately 445 of whom were employed in our manufacturing operations.Our employees are not covered by collective bargaining agreements. We believe that our relationships with our employees are favorable.Web Sites and Additional InformationThe SEC maintains an Internet web site at www.sec.gov that contains reports, proxy statements, and other information regarding our Company. Inaddition, we maintain an Internet corporate web site at www.trex.com. We make available through our web site our annual reports on Form 10-K, quarterlyreports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, as soon as reasonably practicable after we electronically file orfurnish such material with or to the SEC. We do not charge any fees to view, print or access these reports on our web site. The contents of our web site are nota part of this report. 6Table of ContentsExecutive Officers and DirectorsThe table below sets forth information concerning our executive officers and directors as of February 15, 2014. Name Age Positions with CompanyRonald W. Kaplan 62 Chairman, President and Chief Executive Officer; DirectorJames E. Cline 62 Senior Vice President and Chief Financial OfficerF. Timothy Reese 61 Senior Vice President, OperationsChristopher P. Gerhard 41 Vice President, SalesWilliam R. Gupp 54 Chief Administrative Officer, General Counsel and SecretaryAdam D. Zambanini 37 Vice President, MarketingPaul A. Brunner 78 DirectorMichael F. Golden 59 DirectorJay M. Gratz 61 Director, Lead Independent DirectorFrank H. Merlotti, Jr. 63 DirectorRichard E. Posey 67 DirectorPatricia B. Robinson 61 DirectorRonald W. Kaplan has served as Chairman, President and Chief Executive Officer of the Company since May 2010. From January 2008 to May 2010,Mr. Kaplan served as a director and President and Chief Executive Officer of the Company. From February 2006 through December 2007, Mr. Kaplan servedas Chief Executive Officer of Continental Global Group, Inc., a manufacturer of bulk material handling systems. For 26 years prior to this, Mr. Kaplan wasemployed by Harsco Corporation, an international industrial services and products company, at which he served in a number of capacities, including asSenior Vice President-Operations, and, from 1994 through 2005, as President of Harsco’s Gas Technologies Group, which manufactures containment andcontrol equipment for the global gas industry. Mr. Kaplan received a B.A. degree in economics from Alfred University and an M.B.A. degree from theWharton School of Business, University of Pennsylvania.James E. Cline has served as Senior Vice President and Chief Financial Officer of the Company since August 2013 and as Vice President and ChiefFinancial Officer between March 2008 and July 2013. Mr. Cline served from July 2005 through December 2007 as the President of Harsco GasServ, asubsidiary of Harsco Corporation and a manufacturer of containment and control equipment for the global gas industry. From January 2008 through February2008, in connection with the purchase of Harsco GasServ by Taylor-Wharton International LLC, which is owned by Windpoint Partners Company,Mr. Cline served as a consultant to the buyers by providing transition management and financial services. From April 1994 through June 2005, Mr. Clineserved as the Vice President and Controller of Harsco GasServ. Mr. Cline served in various capacities with Huffy Corporation from June 1976 to February1994, including as the Director of Finance of its True Temper Hardware subsidiary, a manufacturer of lawn care and construction products with ninemanufacturing locations in the United States, Canada and Ireland. Mr. Cline received a B.S.B.A. degree in accounting from Bowling Green State University.F. Timothy Reese has served as Senior Vice President, Operations of the Company since August 2013 and as Vice President, Operations betweenFebruary 2008 and July 2013. From March 2007 through January 2008, Mr. Reese served as Operations Director for the Americas Region of DuPont TeijinFilms, a DuPont Teijin Films U.S. Limited Partnership and producer of polyester films. From 1979 to March 2007, Mr. Reese served in various positionswith DuPont, including Global Director, Business and Integrated Operations, DuPont High Performance Films, from November 1995 through November1998; Director/Plant Manager, Global Operations, Cyrel Packaging Graphics Products, from December 1998 through May 2000; Director, GlobalOperations and Six Sigma Champion, Cyrel Packaging Graphics Products, from June 2000 through February 2001; and Director/Plant Manager in multipleassignments from March 2001 through February 2007, including in Corporate Operations, Human Resources and DuPont Chemical Solutions Enterprise.Mr. Reese served in the U.S. Navy and received a B.S. in ocean engineering with an emphasis on mechanical engineering from the U.S. Naval Academy. 7®®Table of ContentsChristopher P. Gerhard has served as Vice President, Sales of the Company since June 2012. From May 2006 through June 2012, Mr. Gerhard servedin a number of capacities at the Company, most recently as Director, Field Sales. From 2002 to May 2006, Mr. Gerhard served in various capacities withKraft Foods North America, a manufacturer of food and beverages, most recently as Southeast Region Customer Category Manager. Mr. Gerhard received aB.A. in English from the University of North Carolina—Greensboro, and a Masters in Science from Ohio University.William R. Gupp has served as Chief Administrative Officer, General Counsel and Secretary of the Company since October 2009. From May 2001 toOctober 2009, Mr. Gupp served as Vice President and General Counsel of the Company. From March 1993 to May 2001, Mr. Gupp was employed by HarscoCorporation, an international industrial services and products company, most recently as Senior Counsel and Director-Corporate Development. From August1985 to March 1993, Mr. Gupp was employed by the law firm of Harter, Secrest & Emery. Mr. Gupp received a B.S. degree in accounting from SyracuseUniversity and a J.D. from the University of Pennsylvania Law School.Adam D. Zambanini has served as Vice President, Marketing of the Company since January 2011. From September 2005 through December 2010,Mr. Zambanini served in a number of capacities at the Company, most recently as Director, Marketing. From January 2000 through September 2005,Mr. Zambanini was employed by Rubbermaid Commercial Products, most recently as Product Manager. Mr. Zambanini received a B.S. in mechanicalengineering from Penn State University, and a M.B.A. degree from Averett University.Paul A. Brunner has served as a director of the Company since February 2003. Mr. Brunner is President and Chief Executive Officer of Spring CapitalInc., a merchant bank, which he founded in 1985. From 1982 to 1985, Mr. Brunner served as President and Chief Executive Officer of U.S. Operations ofAsea-Brown Boveri, a multi-national Swiss manufacturer of high technology products. In 1967, he joined Crouse Hinds Company, a manufacturer ofelectronics and electronic equipment, and through 1982 held various positions with that company, including President and Chief Operating Officer, ExecutiveVice President of Operations, Vice President of Finance and Treasurer, and Director of Mergers and Acquisitions. Mr. Brunner served as a director of JohnsonControls, Inc. from 1983 through 2007, and as Chairman of its Audit Committee from 1989 to 2005. From 1959 to 1967, he worked for Coopers &Lybrand, an international accounting firm, as an audit supervisor. Mr. Brunner is a Certified Public Accountant. He received a B.S. degree in accounting fromthe University of Buenos Aires and an M.B.A. degree in management from Syracuse University.Michael F. Golden has served as a director of the Company since February 2013. Mr. Golden currently serves as Co-Vice Chairman of the Board ofDirectors of Smith and Wesson Holding Corporation, a manufacturer of firearms and firearms-related products and accessories, and served as President andChief Executive Officer of such company from December 2004 until his retirement in September 2011. Mr. Golden was employed in various executivepositions with the Kohler Company, which manufactures kitchen and bath plumbing fixtures, furniture, tile, engines, and generators, and operates resorts,from February 2002 until December 2004, with his most recent position being the President of its Cabinetry Division. Mr. Golden was the President of Salesfor the Industrial/Construction Group of the Stanley Works Company, which manufactures tools and hardware, from 1999 until 2002; Vice President ofSales for Kohler’s North American Plumbing Group from 1996 until 1998; and Vice President, Sales and Marketing for a division of The Black & DeckerCorporation, which manufactures tools and hardware, where he was employed from 1981 until 1996. Mr. Golden also serves on the Board of Directors ofQuest Resources Holding Company. Mr. Golden received a B.S. degree in Marketing from Pennsylvania State University and a M.B.A. degree from EmoryUniversity.Jay M. Gratz has served as a director of the Company since February 2007, and Lead Independent Director since May 2010. Mr. Gratz has served asthe Chief Financial Officer of VisTracks, Inc., an application enabling platform service provider, since March 2010, and a director of such company sinceApril 2010. Mr. Gratz was a partner in Tatum LLC, a national executive services and consulting firm that focuses on the needs of the Office of the CFObetween February 2010 and March 2010. From October 2007 through February 2010, Mr. Gratz was 8Table of Contentsan independent consultant. From 1999 through October 2007, Mr. Gratz served as Executive Vice President and Chief Financial Officer of Ryerson Inc., ametals processor and distributor, and as President of Ryerson Coil Processing Division from November 2001 until October 2007. Mr. Gratz served as VicePresident and Chief Financial Officer of Inland Steel Industries, a steel company, from 1994 through 1998, and served in various other positions, includingVice President of Finance, within that company since 1975. Mr. Gratz is a Certified Public Accountant. He received a B.A. degree in economics from StateUniversity of New York in Buffalo and an M.B.A. degree from Northwestern University Kellogg Graduate School of Management.Frank H. Merlotti, Jr. has served as a director of the Company since February 2006. Mr. Merlotti has served as President of the Coalesse business unitof Steelcase, Inc., a manufacturer of office furniture and furniture systems, since October 2006, and served as President of Steelcase North America fromSeptember 2002 through September 2006. Mr. Merlotti served as President and Chief Executive Officer of G&T Industries, a manufacturer and distributor offabricated foam and soft-surface materials for the marine, office furniture and commercial building industries, from August 1999 to September 2002. From1991 through 1999, Mr. Merlotti served as President and Chief Executive Officer of Metropolitan Furniture Company, a Steelcase Design Partnershipcompany. From 1985 through 1999, Mr. Merlotti served as General Manager of the Business Furniture Division of G&T Industries.Richard E. Posey has served as a director of the company since May 2009. He served as President and Chief Executive Officer of Moen Incorporated, amanufacturer of faucets, for six years before retiring in 2007. Prior to joining Moen, Mr. Posey was President and Chief Executive Officer of Hamilton Beach /Proctor Silex, Inc., a manufacturer of small kitchen appliances, for five years. Mr. Posey began his career at S.C. Johnson & Son, a supplier of cleaning andother household products, where for 22 years he served in a series of increasingly responsible management positions, both overseas and in the U.S.,culminating with Executive Vice President, Consumer Products, North America. Mr. Posey is a Founding Trustee, Virginia Commonwealth University Schoolof Engineering Foundation. He received a B.A. degree in English from The University of Southern California and an M.B.A. degree from The University ofMichigan.Patricia B. Robinson has served as a director of the Company since November 2000. Ms. Robinson has been an independent consultant since 1999.From 1977 to 1998, Ms. Robinson served in a variety of positions with Mead Corporation, a forest products company, including President of Mead Schooland Office Products, Vice President of Corporate Strategy and Planning, President of Gilbert Paper, Plant Manager of a specialty machinery facility andProduct Manager for new packaging product introductions. Ms. Robinson received a B.A. degree in economics from Duke University and an M.B.A. degreefrom the Darden School at the University of Virginia. Item 1A.Risk FactorsOur business is subject to a number of risks, including the following:We may not be able to grow unless we increase market acceptance of our products, compete effectively and develop new products andapplications.Our primary competition consists of wood products, which constitute a substantial majority of decking, railing, porches, fencing, trim and deckframing sales. Since wood/plastic composite products were introduced to the market in the early 1990’s, their market acceptance has increased, but during thelast few years, the rate of conversion from purchasing wood products to purchasing wood/plastic composite products has slowed. Our ability to grow willdepend in part on our success in continuing to convert demand for wood in decking, railing, fencing, trim and deck framing applications into a demand forTrex products. To increase our market share, we must overcome: • the consumer lack of awareness of the enhanced value of non-wood decking, railing, fencing, trim and deck framing alternatives in general andTrex brand products in particular; • the resistance of many consumers and contractors to change from well-established wood products; 9Table of Contents • the consumer lack of awareness that the greater initial expense of Trex products compared to wood is a one-time cost that is realized over time asTrex products have a longer life span than wood; • the established relationships existing between suppliers of wood decking, railing, fencing, trim and deck framing products and contractors andhomebuilders; • actual and perceived quality issues with first generation wood/plastic composite products; and • the competition from other wood-alternative manufacturers.We must also compete with a number of companies in the wood/plastic composites segment of the decking, railing, fencing and trim markets and withwood producers that currently have more production capacity than is required to meet the demand for such products. Our failure to compete successfully insuch markets could have a material adverse effect on our ability to replace wood or increase the market share of wood/plastic composites compared to wood.Many of the conventional lumber suppliers with which we compete have established ties to the building and construction industry and have well-acceptedproducts. Our ability to compete depends, in part, upon a number of factors outside our control, including the ability of competitors to develop new non-woodalternatives that are more competitive with Trex products.In addition to the above, substantially all of our revenues are derived from sales of our proprietary wood/plastic composite material. Although we havedeveloped, and continue to develop, new products made from other materials, if we should experience significant problems, real or perceived, with productquality or acceptance of the Trex wood/polyethylene composite material, our lack of product diversification could have a significant adverse impact on our netsales levels.Our prospects for sales growth and profitability may be adversely affected if we fail to maintain product quality and product performanceat an acceptable cost.We will be able to expand our net sales and to sustain and enhance profitable operations only if we succeed in maintaining the quality and performanceof our products. If we should not be able to produce high-quality products at standard manufacturing rates and yields, unit costs may be higher. A lack ofproduct performance would negatively affect our profitability by impeding acceptance of our products in the marketplace and by leading to higher productreplacement and consumer relations expenses. In recent periods, we have experienced significant warranty expenses related to material produced at our Nevadafacility prior to 2007 that exhibits surface flaking. We have limited our financial exposure by agreeing to settle a nationwide class action lawsuit which fixesour obligation in each claim to provide replacement product and provide a partial labor reimbursement. However, because the establishment of reserves is aninherently uncertain process involving estimates of the number of future claims, our ultimate losses may differ from our warranty reserve. Increases we havemade to the warranty reserve and payments for related claims in recent years have had a material adverse effect on our profitability and cash flows. Futureincreases to the warranty reserve could have a material adverse effect on our profitability and cash flows should we make such increases and pay such claims.In addition, our products are used outdoors and are sometimes subject to heavy use and harsh exposure to the environment. Although our LimitedWarranty excludes any conditions attributable to “any act of God (such as flooding, hurricane, earthquake, lightning, etc., ), environmental condition (suchas air pollution, mold, mildew, etc.), staining from foreign substances (such as dirt, grease, oil, etc.), or normal weathering (defined as exposure to sunlight,weather and atmosphere which may cause any colored surface to gradually fade, chalk, or accumulate dirt or stains”), to the extent that our products areaffected in any way, this may lead to an increased risk of product liability claims or litigation.A number of class action lawsuits based upon mold growth, color fading and color variation on our products have been brought against us. (See Part I,Item 3, Legal Proceedings, for a discussion of the status of these lawsuits.) These claims, as well as other potential claims, are a potential financial exposure tous and could cause 10Table of Contentsadverse publicity, which in turn could result in a loss of consumer confidence in our products and also reduce our sales. Product quality claims couldincrease our expenses and have a material adverse effect on demand for our products and, consequently, reduce our net sales, net income and liquidity.Our business is subject to risks in obtaining the raw materials we use at acceptable prices.The production of our product requires substantial amounts of wood fiber and PE material. Our business strategy is to create a substantial costadvantage over our competitors by using recycled plastic and reclaimed wood. Our business could suffer from the termination of significant sources of rawmaterials, the payment of higher prices for raw materials or from the failure to obtain sufficient additional raw materials to meet planned increases inproduction. Our ability to obtain adequate supplies of PE material depends on our success in developing new sources that meet our quality requirements,maintaining favorable relationships with suppliers and managing the collection of supplies from geographically dispersed locations.We sell to certain customers that account for a significant portion of our sales, and the loss of one or more of these customers could have anadverse effect on our business.A limited number of customers account for a significant percentage of our sales. Specifically, sales through our 15 largest customers each yearaccounted for approximately 89% of gross sales during fiscal year 2013, 90% during fiscal year 2012 and 89% during fiscal year 2011.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 toaccount for a significant portion of our sales. The loss of a significant customer could have a negative impact on our business, financial condition and resultsof operations.We have limited ability to control or project inventory build-ups in our distribution channel that can negatively affect our sales insubsequent periods.The dynamic nature of our industry can result in substantial fluctuations in inventory levels of Trex products carried in our two-step distributionchannel. We have limited ability to control or precisely project inventory build-ups, which can adversely affect our net sales levels in subsequent periods. Wemake the substantial majority of our sales to wholesale distributors, who, in turn, sell our products to local lumber yards. Because of the seasonal nature ofthe demand for decking, railing, fencing and trim, our distribution channel partners must forecast demand for our products, place orders for the products,and maintain Trex product inventories in advance of the prime deck-building season, which generally occurs in our late first through third fiscal quarters.Accordingly, our results for the second and third fiscal quarters are difficult to predict and past performance will not necessarily indicate future performance.Inventory levels respond to a number of changing conditions in our industry, including product price increases resulting from escalating raw materials costs,increases in the number of competitive producers and in the production capacity of those competitors, the rapid pace of product introduction and innovation,changes in the levels of home-building and remodeling expenditures, and the cost and availability of credit.The demand for our products is affected by adverse weather conditions.Our products are generally purchased shortly before installation and used in outdoor environments. As a result, there is a correlation between the amountof product we sell and the weather conditions around the time they are to be installed. Weather conditions, such as very high or low temperatures, intense andprolonged precipitation, hurricanes, floods, and regional fires in the regions we sell our products interfere with ordinary construction, delay projects and caneven lead to cessation of certain construction involving our products. 11Table of ContentsSince weather conditions and seasonal cycles cannot be accurately predicted, adverse weather conditions may shift our sales to subsequent reportingperiods, or may also reduce overall sales given the limited decking season in many locations. Prolonged adverse weather conditions could have a negativeimpact on our financial statements.The demand for our products is influenced by general economic conditions and could be adversely affected by economic downturns.The demand for our products is correlated to changes in the health of the economy in general, and the level of activity in home improvements and, to amuch lesser extent, new home construction. These activity levels, in turn, are affected by such factors as home equity values, consumer spending habits,employment, interest rates and inflation. Market conditions in the housing industry slowed significantly in 2008 and subsequent periods thereafter,particularly in new home construction. Home equity values in many markets that decreased significantly during those time periods have not recovered or haveonly begun to recover. This devaluation in home equity values has adversely affected the availability of home equity withdrawals, which have resulted indecreased home improvement spending. Beginning in 2008, the economy has suffered an unprecedented downturn. We cannot predict when the economy andthe home remodeling and new home construction environments will fully recover. Any continued economic downturn could reduce consumer income or equitycapital available for spending on discretionary items such as decking, railing, porches, fencing and trim, which could adversely affect the demand for ourproducts.We have significant capital invested in property, plant and equipment that may become obsolete or impaired and result in a charge to ourearnings.At December 31, 2013, we had $100.8 million of net property, plant and equipment. The improvement we seek to make to our manufacturing processessometimes involves the implementation of new technology and replacement of equipment at our manufacturing facilities, which may result in charges to ourearnings if the existing equipment is not fully depreciated. In September 2007, we suspended operations at our Olive Branch facility and consolidated all of ourmanufacturing operations into our Winchester and Fernley sites. In September 2009, we recorded a pre-tax impairment charge of $23.3 million related to thelong-lived assets held at the facility. Of our net property, plant and equipment at December 31, 2013, approximately $6.9 million is located at our OliveBranch, Mississippi manufacturing facility. We do not currently anticipate further impairments on the remaining assets. However, changes in the expectedcash flows related to the facility could result in additional impairment charges and reduced earnings in future periods.Our level of indebtedness, and ability to continue to obtain financing on favorable terms, could adversely affect our financial health andability to compete.As of December 31, 2013, we had no outstanding indebtedness. Our indebtedness has been substantially reduced from its level on December 31, 2011due to our repayment on July 1, 2012 of the remaining $91.9 million principal balance on our 6% Convertible Senior Subordinated Notes, which matured asof such date. It is foreseeable that we will need to borrow on our current senior secured credit facility in 2014 for working capital purposes. In addition, wemay borrow money in the event we elect to pursue an acquisition or other transaction. Accordingly, our future level of indebtedness could have importantconsequences. For example, it may: • increase our vulnerability to general adverse economic and industry conditions, including interest rate fluctuations; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability ofour cash flow to fund working capital, capital expenditures and other general corporate purposes; • limit our ability to borrow additional funds to alleviate liquidity constraints, as a result of financial and other restrictive covenants in ourindebtedness; 12Table of Contents • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • place us at a competitive disadvantage relative to companies that have less indebtedness; and • limit our ability to refinance our principal secured indebtedness.In addition, our senior secured credit facility imposes operating and financial restrictions that may limit our discretion on some business matters, whichcould make it more difficult for us to expand, finance our operations and engage in other business activities that may be in our interest. These restrictions maylimit our ability to: • incur additional indebtedness and additional liens on our assets; • engage in mergers or acquisitions or dispose of assets; • enter into sale-leaseback transactions; • pay dividends or make other distributions; • voluntarily prepay other indebtedness; • enter into transactions with affiliated persons; • make investments; and • change the nature of our business.We may incur indebtedness in addition to our current indebtedness. Any additional indebtedness we may incur in the future could subject us to similaror even more restrictive conditions.Our ability to make future principal and interest payments, borrow and repay amounts under our revolving credit facility and continue to comply withour loan covenants will depend primarily on our ability to generate sufficient cash flow from operations. Our failure to comply with our loan covenants mightcause our lenders to accelerate our repayment obligations under our credit facility, which may be declared payable immediately based on a default. Our abilityto borrow under our revolving credit facility is tied to a borrowing base consisting of certain accounts receivables, inventories, machinery and equipment andreal estate. To remain in compliance with our credit facility, we must maintain specified financial ratios based on our levels of debt, capital, net worth, fixedcharges, and earnings (excluding extraordinary gains and extraordinary non-cash losses) before interest, taxes, depreciation and amortization, all of which aresubject to the risks of our business. Item 1B.Unresolved Staff CommentsNone. Item 2.PropertiesWe lease our corporate headquarters in Winchester, Virginia, which consists of approximately 32,000 square feet of office space, under a lease thatexpires in March 2020. In 2005, in anticipation of relocating our corporate headquarters, we entered into an agreement to lease approximately 55,000 squarefeet of office space in Dulles, Virginia. The lease expires in mid-2019. Subsequently, we reconsidered our decision to relocate our corporate headquarters anddecided not to move. We have executed subleases for approximately 42,000 square feet of the leased space and are currently marketing the remaining portion ofthe space to find a suitable tenant. The terms of the existing subleases expire in years 2014 to 2019. For a description of our financial reporting in connectionwith the Dulles lease agreement, see Note 12 to our consolidated financial statements appearing elsewhere in this report. 13Table of ContentsWe own approximately 74 contiguous acres of land in Winchester, Virginia and the buildings on this land. The site includes our manufacturingfacilities, which contain approximately 455,000 square feet of space, and our research and development technical facility. We own the land and themanufacturing facility on the Fernley, Nevada site, which contains approximately 250,000 square feet of manufacturing space. Our Fernley site is located onapproximately 37 acres, which includes outside open storage. We own approximately 102 acres of land in Olive Branch, Mississippi and the buildings on thisland. The site contains four buildings with approximately 200,000 square feet for manufacturing and raw material handling operations. In September 2007, wesuspended operations at our Olive Branch facility and consolidated all of our manufacturing operations into our Winchester and Fernley sites. Our facilitiesprovide adequate capacity for current and anticipated future consumer demand.We lease a total of approximately 1.0 million square feet of storage warehouse space under leases with expiration dates ranging from 2014 to 2025. Forinformation about these leases, see Note 9 to our consolidated financial statements appearing elsewhere in this report.The equipment and machinery we use in our operations consist principally of plastic and wood conveying and processing equipment. We own all of ourmanufacturing equipment. We lease forklift equipment at our facilities under operating leases.We regularly evaluate our various facilities and equipment and make capital investments where necessary. In 2013, we spent a total of $13.1 million oncapital expenditures, primarily related to new products and to make process and productivity improvements. We estimate that our capital expenditures in 2014will be in approximately $15 million. We expect to use these expenditures principally to support cost reduction initiatives, new product launches in currentand adjacent categories and general business support. Item 3.Legal ProceedingsOn January 19, 2009, a purported class action case was commenced against the Company in the Superior Court of California, Santa Cruz County, bythe lead law firm of Lieff, Cabraser, Heimann & Bernstein, LLP and certain other law firms (the “Lieff Cabraser Group”) on behalf of Eric Ross and BradleyS. Hureth and similarly situated plaintiffs. These plaintiffs generally alleged certain defects in the Company’s products, and that the Company failed toprovide adequate remedies for defective products. On February 13, 2009, the Company removed this case to the United States District Court, NorthernDistrict of California. On January 21, 2009, a purported class action case was commenced against the Company in the United States District Court, WesternDistrict of Washington by the law firm of Hagens Berman Sobol Shapiro LLP (“Hagens Berman”) on behalf of Mark Okano and similarly situated plaintiffs,generally alleging certain product defects in the Company’s products, and that the Company failed to provide adequate remedies for defective products. Thiscase was transferred by the Washington Court to the California Court as a related case to the Lieff Cabraser Group’s case.On July 30, 2009, the U.S. District Court for the Northern District of California preliminarily approved a settlement of the claims of the lawsuitcommenced by the Lieff Cabraser Group involving surface flaking of the Company’s product, and on March 15, 2010, it granted final approval of thesettlement.On March 25, 2010, the Lieff Cabraser Group amended its complaint to add claims relating to alleged defects in the Company’s products and allegedmisrepresentations relating to mold growth. Hagens Berman alleged similar claims in its original complaint. In its Final Order approving the surface flakingsettlement, the District Court consolidated these pending actions relating to the mold claims, and appointed Hagens Berman as lead counsel in this case. OnDecember 3, 2010, Hagens Berman filed an amended consolidated complaint in the United States District Court, Northern District of California relating to themold growth claims (now on behalf of Dean Mahan and other named plaintiffs). 14Table of ContentsOn December 15, 2010, a purported class action case was commenced against the Company in the United States District Court, Western District ofKentucky, by Cohen & Malad, LLP (“Cohen & Malad”) on behalf of Richard Levin and similarly situated plaintiffs in Kentucky, and on June 13, 2011, apurported class action was commenced against the Company in the Marion Circuit/Superior Court of Indiana by Cohen & Malad on behalf of EllenKopetsky and similarly situated plaintiffs in Indiana. On June 28, 2011, the Company removed the Kopetsky case to the United States District Court,Southern District of Indiana. (On September 3, 2013, the two lawsuits commenced by Cohen & Malad were settled.) On August 11, 2011, a purported classaction was commenced against the Company in the 50 Circuit Court for the County of Chippewa, Michigan on behalf of Joel and Lori Peffers and similarlysituated plaintiffs in Michigan. On August 26, 2011, the Company removed the Peffers case to the United States District Court, Western District ofMichigan. On April 4, 2012, a purported class action was commenced against the Company in Superior Court of New Jersey, Essex County by the lead lawfirm of Stull, Stull & Brody (the “Stull Group”) on behalf of Caryn Borger, M.D. and similarly situated plaintiffs in New Jersey. On May 1, 2012, theCompany removed the Borger case to the United States District Court, District of New Jersey. (On December 5, 2013, the lawsuit commenced by the StullGroup was settled.) The plaintiffs in these purported class actions alleged certain defects in the Company’s products and alleged misrepresentations relating tomold growth.On April 5, 2013, the Company signed a settlement agreement with Hagens Berman that settled the case pending in the United States District Court,Northern District of California on a nationwide basis, and the parties filed for preliminary approval of such settlement (the “nationwide settlement”). Thematerial terms of the nationwide settlement, as amended by an amended settlement agreement signed on September 3, 2013, are as follows: • Trex will make a one-time cash payment or the opportunity to receive other relief, including a rebate certificate on its newer-generation shelledproduct (Trex Transcend and Trex Enhance). This relief would be available for any consumer whose first-generation composite deckingproduct has a certain defined level of mold growth, color fading or color variation. • Trex agreed to discontinue the manufacture of non-shelled decking, railing and fencing products (other than Trex Traditional Railing and TrexSeclusions Fencing) by December 31, 2013. • Trex agreed to provide a video demonstrating cleaning instructions for non-shelled products on its website, and to distribute warranty pads toretailers. • The cost to Trex is capped at $8.25 million plus $1.45 million in attorneys’ fees to be paid to the Plaintiffs’ counsel upon final approval of thenationwide settlement by the Court.The settlement agreement provides that the nationwide settlement applies to any Trex first-generation non-shelled composite decking, railing and fencingproduct purchased between August 1, 2004 and the date of preliminary approval of the nationwide settlement.On August 27, 2013, the Court entered an Order granting preliminary approval of the settlement agreement, and on December 16, 2013, the Courtgranted final approval of the settlement. At December 31, 2013, the Company has accrued a $3.2 million liability related to this litigation. It is reasonablypossible that the Company may incur costs in excess of the recorded amounts; however, the Company expects that the total net cost to resolve the lawsuit willnot exceed approximately $10 million.The Company has other lawsuits, as well as other claims, pending against it which are ordinary routine litigation and claims incidental to thebusiness. Management has evaluated the merits of these other lawsuits and claims, and believes that their ultimate resolution will not have a material effect onthe Company’s consolidated financial condition, results of operations, liquidity or competitive position. Item 4.Mine Safety DisclosuresNot applicable. 15 th®®Table of ContentsPART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket for Common StockOur common stock has been listed on the New York Stock Exchange, or NYSE, since April 8, 1999. Between April 8, 1999 and November 22,2009, it was listed under the symbol “TWP”. Effective November 23, 2009, the symbol changed to “TREX”. The table below shows the reported high andlow sale prices of our common stock for each quarter during 2013 and 2012 as reported by the New York Stock Exchange: 2013 High Low First Quarter $51.50 $38.10 Second Quarter 58.03 45.24 Third Quarter 52.11 41.25 Fourth Quarter 83.04 46.26 2012 High Low First Quarter $32.76 $22.62 Second Quarter 33.89 25.41 Third Quarter 34.74 24.51 Fourth Quarter 40.81 32.57 Dividend PolicyWe have never paid cash dividends on our common stock. We intend to retain future earnings, if any, to finance the development and expansion of ourbusiness and, therefore, do not plan to pay any cash dividends on the common stock in the foreseeable future. Under the terms of our credit agreement, thereare restrictions on our ability to pay cash dividends. 16Table of ContentsStockholder Return Performance GraphThe following graph and table show the cumulative total stockholder return on Trex Company’s common stock for the last five fiscal years compared tothe Russell 2000 Index and the Standard and Poor’s 600 Building Products Index. The graph assumes $100 was invested on December 31, 2008 in (1) TrexCompany common stock, (2) the Russell 2000 Index and (3) the S&P 600 Building Products Index, and assumes reinvestment of dividends and marketcapitalization weighting as of December 31, 2009, 2010, 2011, 2012 and 2013. December 31,2008 December 31,2009 December 31,2010 December 31,2011 December 31,2012 December 31,2013 Trex Company $100.00 $119.08 $145.57 $139.19 $226.18 $483.17 Russell 2000 $100.00 $127.17 $161.32 $154.57 $179.84 $249.66 S&P 600 BPI $100.00 $125.46 $142.49 $133.90 $173.88 $253.49 Issuer Purchases of Equity SecuritiesOn August 1, 2013, the Board of Directors authorized the repurchase of up to $25 million of our outstanding common stock over a six-month period(the “August 2013 Stock Repurchase Program”). During the three months ended September 30, 2013, we repurchased 561,255 shares for $25.0 million at anaverage price of $44.54 per share, which completed the authorization under the August 2013 Stock Repurchase Program.On October 24, 2013, the Board of Directors authorized an additional common stock repurchase program, expiring on February 10, 2014, of up to $30million of our outstanding common stock (the “October 2013 Stock Repurchase Program”). We made no repurchases under the October 2013 StockRepurchase Program before it expired.Other Stockholder MattersAs of February 7, 2014, there were approximately 189 holders of record of our common stock.In 2013, we submitted to the NYSE in a timely manner the annual certification that our Chief Executive Officer was not aware of any violation by us ofthe NYSE corporate governance listing standards. 17Table of ContentsItem 6.Selected Financial DataThe following table presents selected financial data as of December 31, 2013, 2012, 2011, 2010 and 2009 and for each of the years in the five-yearperiod ended December 31, 2013.The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and our consolidated financial statements and related notes thereto appearing elsewhere in this report. Year Ended December 31, 2013 (1) 2012 (2) 2011 (3) 2010 (4) 2009 (5) (In thousands, except share and per share data) Statement of Comprehensive Income Data: Net sales $342,511 $307,354 $266,789 $317,690 $272,286 Cost of sales 243,893 222,772 203,998 244,875 191,759 Gross profit 98,618 84,582 62,791 72,815 80,527 Selling, general and administrative expenses 73,967 71,907 60,620 67,764 65,257 Impairment of long-lived assets — — — — 23,251 Income (loss) from operations 24,651 12,675 2,171 5,051 (7,981) Interest expense, net 602 8,946 16,364 15,288 14,699 Income (loss) before income taxes 24,049 3,729 (14,193) (10,237) (22,680) Provision (benefit) for income taxes (10,549) 1,009 (2,605) (171) (5,811) Net income (loss) $34,598 $2,720 $(11,588) $(10,066) $(16,869) Basic earnings (loss) per share $2.06 $0.17 $(0.75) $(0.66) $(1.12) Basic weighted average shares outstanding 16,794,841 16,123,592 15,388,456 15,187,028 15,061,603 Diluted earnings (loss) per share $2.02 $0.16 $(0.75) $(0.66) $(1.12) Diluted weighted average shares outstanding 17,136,751 17,064,856 15,388,456 15,187,028 15,061,603 Cash Flow Data: Cash provided by operating activities $45,208 $60,443 $33,847 $18,994 $35,063 Cash used in investing activities (12,697) (7,484) (9,367) (9,773) (6,638) Cash used in financing activities (30,898) (55,326) (47,224) (1,465) (32,100) Other Data (unaudited): EBITDA (6) $40,597 $29,149 $20,589 $24,666 $38,172 Balance Sheet Data: Cash and cash equivalents and restricted cash $3,772 $2,159 $41,526 $27,270 $19,514 Working capital 28,994 10,158 (18,574) 66,057 49,214 Total assets 188,157 168,615 228,090 247,815 244,543 Total debt (including derivatives) — 5,000 86,425 85,095 77,571 Total stockholder’s equity $106,616 $93,986 $92,499 $102,922 $110,198 (1)Year ended December 31, 2013 was materially affected by a pre-tax increase of $20.0 million to the warranty reserve and a $19.9 million income taxbenefit resulting from a significant reversal of our valuation allowance, $10.9 million of which was a direct result of the Company’s decision to exit afull valuation allowance. 18Table of Contents(2)Year ended December 31, 2012 was materially affected by a pre-tax increase of $21.5 million to the warranty reserve.(3)Year ended December 31, 2011 was materially affected by a pre-tax increase of $10.0 million to the warranty reserve and a $2.6 million income taxbenefit as a result of the settlement of uncertain tax positions.(4)Year ended December 31, 2010 was materially affected by a pre-tax increase of $15.0 million to the warranty reserve and $3.9 million for minimumpurchase penalties.(5)Year ended December 31, 2009 was materially affected by pre-tax impairment of long-lived assets at idle Olive Branch facility of $23.3 million.(6)EBITDA represents net income before interest, income taxes, depreciation and amortization. EBITDA is not a measurement of financial performanceunder accounting principles generally accepted in the United States, or GAAP. The Company has included data with respect to EBITDA becausemanagement evaluates and projects the performance of the Company’s business using several measures, including EBITDA. Management considersEBITDA to be an important supplemental indicator of the Company’s operating performance, particularly as compared to the operating performance ofthe Company’s competitors, because this measure eliminates many differences among companies in capitalization and tax structures, capital investmentcycles and ages of related assets, as well as some recurring non-cash and non-operating charges to net income or loss. For these reasons, managementbelieves that EBITDA provides important supplemental information to investors regarding the operating performance of the Company and facilitatescomparisons by investors between the operating performance of the Company and the operating performance of its competitors. Management believesthat consideration of EBITDA should be supplemental, because EBITDA has limitations as an analytical financial measure. These limitations includethe following: • EBITDA does not reflect the Company’s cash expenditures, or future requirements for capital expenditures, or contractual commitments; • EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on the Company’sindebtedness; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in thefuture, and EBITDA does not reflect any cash requirements for such replacements; • EBITDA does not reflect the effect of earnings or charges resulting from matters the Company considers not to be indicative of its ongoingoperations; and • not all of the companies in the Company’s industry may calculate EBITDA in the same manner in which the Company calculates EBITDA,which limits its usefulness as a comparative measure.The Company compensates for these limitations by relying primarily on its GAAP results to evaluate its operating performance and by consideringindependently the economic effects of the foregoing items that are not reflected in EBITDA. As a result of these limitations, EBITDA should not be consideredas an alternative to net income (loss), as calculated in accordance with GAAP, as a measure of operating performance, nor should it be considered as analternative to cash flows as a measure of liquidity. The following table sets forth, for the years indicated, a reconciliation of EBITDA to net income (loss): Year Ended December 31, 2013 2012 2011 2010 2009 (In thousands) Net income (loss) $34,598 $2,720 $(11,588) $(10,066) $(16,869) Plus interest expense, net 602 8,946 16,364 15,288 14,699 Plus income tax provision (benefit) (10,549) 1,009 (2,605) (171) (5,811) Plus depreciation and amortization 15,946 16,474 18,418 19,615 22,902 Plus impairment of long-lived assets — — — — 23,251 EBITDA $40,597 $29,149 $20,589 $24,666 $38,172 19Table of ContentsItem 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThis management’s discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933and Section 21E of the Securities Exchange Act of 1934. All statements regarding our expected financial position and operating results, our businessstrategy, our financing plans, forecasted demographic and economic trends relating to our industry and similar matters are forward-lookingstatements. 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 becorrect. Our actual results could be materially different from our expectations because of various factors, including the factors discussed under “Item1A. Risk Factors.” These statements are also subject to risks and uncertainties that could cause the Company’s actual operating results to differmaterially. Such risks and uncertainties include the extent of market acceptance of the Company’s products; the costs associated with the developmentand launch of new products and the market acceptance of such new products; the sensitivity of the Company’s business to general economicconditions; the impact of seasonal and weather-related demand fluctuations on inventory levels in the distribution channel and sales of the Company’sproducts; the Company’s ability to obtain raw materials at acceptable prices; the Company’s ability to maintain product quality and productperformance at an acceptable cost; the level of expenses associated with product replacement and consumer relations expenses related to productquality; and the highly competitive markets in which the Company operates.OverviewGeneral. Trex Company, Inc. is the world’s largest manufacturer of wood-alternative decking and railing products, which are marketed under thebrand name Trex. We offer a comprehensive set of aesthetically durable, low maintenance product offerings in the decking, railing, porch, fencing, trim andsteel deck framing categories. We believe that the range and variety of our product offerings allow consumers to design much of their outdoor living spaceusing Trex brand products.We have four principal decking products: Trex Transcend, Trex Enhance, Trex Select, and Trex Accents; four railing products: Trex TranscendRailing, Trex Designer Series Railing, Trex Select Railing, and Trex Reveal aluminum railing; a porch product, Trex Transcend Porch Flooring and RailingSystem; a steel deck framing system, Trex Elevations; a fencing product, Trex Seclusions; a deck lighting system, Trex DeckLighting™; and a cellularPVC outdoor trim product, TrexTrim™. In addition, we offer Trex Hideaway, which is a hidden fastening system for specially grooved boards.On December 31, 2013, we discontinued the manufacture of Trex Accents and Trex Designer Series Railing, which we do not believe will have amaterial impact on our results of operations or cash flow.Highlights related to the fourth quarter and full year 2013 include: • Net sales increased 38% in the fourth quarter of 2013 and 11% in the full year of 2013 compared to the respective periods in 2012 due primarily toan increase in sales volumes. • We generated positive cash flow from operations and ended the year with no outstanding indebtedness. • During 2013, we used cash on hand to repurchase $25 million of our outstanding common stock under a stock repurchase program authorizedby the Board of Directors in August 2013. • We recorded a $20 million increase to the warranty reserve in 2013 to settle future claims related to material produced prior to 2007 at our Nevadafacility that exhibits surface flaking. • We reduced a substantial portion of our valuation allowance on our deferred tax assets.Net Sales. Net sales consist of sales and freight, net of returns and discounts. The level of net sales is principally affected by sales volume and theprices paid for Trex products. Our branding and product differentiation strategy enables us to command premium prices over wood products. Our operatingresults have 20®®®®®®®®®®Table of Contentshistorically varied from quarter to quarter, in part due to seasonal trends in the demand for Trex. We have historically experienced lower net sales during thefourth quarter because holidays and adverse weather conditions in certain regions reduce the level of home improvement and construction activity.Sales Incentives / Early Buy Program: As part of our normal business practice and consistent with industry practices, we have historically providedour distributors and dealers incentives to build inventory levels before the start of the prime deck-building season to ensure adequate availability of product tomeet anticipated seasonal consumer demand and to enable production planning. These incentives, which together we reference as our “early buy program,”include payment discounts and favorable payment terms. In addition, from time to time we may offer price discounts or volume rebates on specified productsand other incentives based on increases in purchases as part of specific promotional programs.We launched our early buy program for the 2014 decking season in December 2013. The timing and terms of the 2014 program are generally consistentwith the timing and terms of the 2013 program launched in December 2012. To qualify for early buy program incentives, customers must commit to the termsof the program which specify eligible products and quantities, order deadlines and available terms, discounts and rebates. Early Buy shipments in December2013 were higher than in December 2012 due, in part, to additions to our distribution network, an increase in demand for our products and a revised pricingstrategy. There are no product return rights granted to our distributors except those granted pursuant to the warranty provisions of our agreements withdistributors. We generally do not extend the payment terms beyond those offered in the program. In addition, our products are not susceptible to rapid changesin technology that may cause them to become obsolete. The early buy program can have a significant impact on our sales, receivables and inventory levels. Wehave provided further discussion of our receivables and inventory in the liquidity and capital resources section.Gross Profit. Gross profit represents the difference between net sales and cost of sales. Cost of sales consists of raw materials costs, direct labor costs,manufacturing costs and freight. Raw materials costs generally include the costs to purchase and transport waste wood fiber, reclaimed polyethylene, or “PEmaterial,” and pigmentation for coloring Trex products. 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 warehouseand equipment rental activities.Selling, General and Administrative Expenses. The largest component of selling, general and administrative expenses is personnel related costs, whichinclude salaries, commissions, incentive compensation, and benefits of personnel engaged in sales and marketing, accounting, information technology,corporate operations, research and development, and other business functions. Another component of selling, general and administrative expenses is brandingand other sales and marketing costs, which are used to build brand awareness of Trex. These costs consist primarily of advertising, merchandising, andother promotional costs. Other general and administrative expenses include professional fees, office occupancy costs attributable to the business functionspreviously referenced, and consumer relations expenses. As a percentage of net sales, selling, general and administrative expenses have varied from quarter toquarter due, in part, to the seasonality of our business.Critical Accounting EstimatesOur significant accounting policies are described in Note 2 to our consolidated financial statements appearing elsewhere in this report. Our criticalaccounting estimates include the areas where we have made what we consider to be particularly difficult, subjective or complex judgments in makingestimates, and where these estimates can significantly affect our financial results under different assumptions and conditions. We prepare our financialstatements in conformity with accounting principles generally accepted in the United States. As a result, we are required to make estimates, judgments andassumptions that we believe are reasonable based upon the information available. These estimates, judgments and assumptions affect the reported amounts ofassets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results couldbe different from these estimates. 21Table of ContentsInventories. We account for inventories at the lower of cost (last-in, first-out, or “LIFO”) or market value. We believe that our current inventory offinished goods will be saleable in the ordinary course of business and, accordingly, have not established significant reserves for estimated slow movingproducts or obsolescence. At December 31, 2013, the excess of the replacement cost of inventory over the LIFO value of inventory was approximately $24.5million.Product Warranty. We warrant that our products will be free from material defects in workmanship and materials. This warranty generally extends fora period of 25 years for residential use and 10 years for commercial use. (With respect to TrexTrim™ and Trex Reveal Railing, the warranty period is 25years for both residential and commercial use.) With respect to our Transcend, Enhance, Select and Universal Fascia product, we further warrant that theproduct 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 iscleaned within seven days of appearance). This warranty extends for a period of 25 years for residential use and 10 years for commercial use. If there is abreach of such warranties, we have an obligation either to replace the defective product or refund the purchase price.Historically, we have not had material numbers of claims submitted or settled under the provisions of our product warranties, with the exception ofclaims related to material produced at our Nevada facility prior to 2007 that exhibits surface flaking. We continue to receive and settle surface flaking claimsand maintain a warranty reserve to provide for the settlement of these claims. In 2009, we agreed to a settlement of a class action lawsuit covering the surfacedefect, stipulating our responsibilities with regard to such claims. Estimating the warranty reserve for surface flaking claims requires management to estimate(1) the average cost to settle each claim and (2) the number of claims to be settled with payment, both of which are subject to variables that are difficult toestimate.The cost per claim varies due to a number of factors, including the size of affected decks, the type of replacement material used, the cost of productionof replacement material and the method of claim settlement. Although the cost per claim does vary, it is less volatile and more predictable than the number ofclaims to be settled with payment, which is inherently uncertain.The key component driving our potential liability is the number of claims that will ultimately require payment. To estimate the number of future paidclaims, we utilize actuarial techniques to quantify both the expected number of claims to be received and the percentage of those claims that will ultimatelyrequire payment. Estimates for both of these elements (number and percentage of claims that will ultimately require payment) are quantified using a range ofassumptions derived from the recent claim count history and the identification of factors influencing the claim counts, including the downward trend inreceived claims due to the passage of time since production of the suspect material. For each of the various parameters used in the analysis, the assumedvalues in the actuarial valuation produce results that represent our best estimate for the ultimate number of claims to be settled with payment.A number of factors make estimates of the number of claims to be received inherently uncertain. We believe that production of the suspect material wasconfined to material produced from our Nevada facility prior to 2007, but are unable to determine the amount of suspect material produced or the exact time ittakes for surface flaking to become evident in the suspect material and materialize as a claim. Furthermore, the aforementioned 2009 class action settlementand related public notices led to a significant increase in claims received in 2009 and disrupted the claims data and settlement patterns. Lastly, we are notaware of any analogous industry data that might be referenced in predicting future claims to be received.The number of surface flaking claims received peaked in 2009 in conjunction with the class action settlement and related public notices and the trend ofclaims received began to decline significantly in 2010 and 2011, consistent with the our belief that the effect of the 2009 spike in claims was largely anacceleration of claims previously expected to be filed in future periods. As a result of the effects of the class action settlement and because the suspect materialhad not been produced since prior to 2007, we anticipated that the rate of decline in claims received would accelerate and the number of claims received wouldcontinue to decline significantly in 2012. 22®®®®Table of ContentsWe monitor surface flaking claims activity each quarter for indications that our estimate of the number of claims expected requires revision. Due toextensive use of decks during the summer outdoor season, variance to annual claims expectations is typically observed during the latter part of our fiscal year.During the third quarter of 2012, based on an analysis of additional claims activity, we observed that the actual rate of decline in claims received in 2012would fall short of our anticipated rate of decline. As a result, we revised our estimate of the future claims to be received to reflect a rate of decline thatincorporated levels experienced in 2012. Although the number of claims expected to be received continued to decline each year, the effect of reducing theanticipated rate of decline increased the total number of claims expected in future years. As a result of these changes in estimate, we recorded an increase to thewarranty reserve of $20 million during the three months ended September 30, 2012.During the third quarter of 2013, the number of claims received was significantly greater than our prior estimates. Although the number of claimsreceived during the first nine months of 2013 remained lower than those received during the first nine months of 2012, the number of claims received duringthe third quarter of 2013 exceeded those received during the third quarter of 2012. This represented the first quarterly year-over-year increase in the number ofclaims received since the 2009 class action settlement was made public.We believe that this unexpected increase in claims was due primarily to a response to communications made by the Company in July 2013 informinghomeowners of potential hazards associated with decking products exhibiting surface flaking that are not timely replaced. These communications included apublic press release and over 10,000 letters sent to homeowners that previously filed surface flaking claims. In addition to contributing to the increase in newclaims received, these communications resulted in the reopening of a significant number of claims previously closed. Furthermore, although not directly relatedto the surface flaking issue, in August 2013, the United States District Court, Northern District of California granted preliminary approval of a settlementagreement related to cases in which plaintiffs generally alleged certain defects in our products and alleged misrepresentations relating to mold growth. Webelieve that public notices made subsequent to the Court approval increased homeowner awareness of product-related issues and contributed to the increasednumber of surface flaking claims received during the third quarter of 2013. As a result of these public communications, we expect to experience elevated claimsactivity, both in new claims received and reopened claims, for the near future, after which we expect a return to previously-experienced rates of decline.However, the elevated claims activity resulted in a material increase in the expected number of claims to settle with payment.In addition to the increased number of expected claims to be settled with payment, we experienced an increase in the average cost to settle a claim during2013. Analysis of claims data indicates that the increased cost per claim is driven primarily by an increase in the average size of settled claims, which webelieve reflects a shift from partial deck replacements to full deck replacements. Also, our August 2013 decision to discontinue production of the Accentsproduct, which is currently used as replacement material for surface flaking claims, necessitated a change in the average cost expectations due to theimplications of transitioning to alternative replacement material.Due to the unfavorable claims and cost experience during the three months ended September 30, 2013, as described above, we recorded a $20 millionincrease to the warranty reserve.Our analysis is based on currently known facts and a number of assumptions. Projecting future events such as the number of claims to be received, thenumber 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 projectedwhich could materially affect our financial condition, results of operations or cash flow. We estimate that the number of claims received will decline over time.If the level of claims received does not diminish consistent with our expectations or if the cost to settle claims increases, it could result in additional increases tothe warranty reserve and reduced earnings and cash flows in future periods. We estimate that a 10% change in the expected number of remaining claims to besettled with payment or the expected cost to settle claims may result in approximately a $4.1 million change in the warranty reserve. 23®Table of ContentsThe following table details surface flaking claims activity related to our warranty: Year Ended December 31, 2013 2012 2011 Claims unresolved, beginning of period 4,073 4,878 4,689 Claims received (1) 4,256 4,807 5,662 Claims resolved (2) (4,080) (5,612) (5,473) Claims unresolved, end of period 4,249 4,073 4,878 Average cost per claim (3) $2,265 $2,101 $1,869 (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, for claims closed during the period, the average settlement cost of claims closed with payment (excludes claims settledwithout payment).For additional information about product warranties, see Notes 2 and 12 to the consolidated financial statements appearing elsewhere in this report.Contract Termination Costs. In anticipation of relocating our corporate headquarters, we entered into a lease agreement in 2005. We reconsidered anddecided not to move our headquarters. The lease obligates us to lease 55,047 square feet of office space through June 30, 2019. As of December 31, 2013, wehave executed subleases for 41,701 square feet of the leased space and are currently marketing the remaining portion of the space to find a suitable tenant. Weestimate that the present value of the estimated future sublease receipts, net of transaction costs, will be less than our remaining minimum lease paymentobligations under our lease and have recorded a liability for the expected shortfall. During the three months ended September 30, 2013, a subtenant defaulted onits sublease payments. As a result we revised our estimate of sublease receipts and recorded a $1.1 million charge to selling, general and administrativeexpenses to increase our liability.To estimate future sublease receipts for the periods beyond the term of the existing subleases, we have assumed that the existing subleases will berenewed or new subleases will be executed at rates consistent with rental rates in the current subleases or estimated market rates. However, management cannotbe certain that the timing of future subleases or the rental rates contained in future subleases will not differ from current estimates. Factors such as theavailability of commercial office space, poor economic conditions and subtenant preferences will influence the terms achieved in future subleases. Theinability to sublet the office space in the future or unfavorable changes to key management assumptions used in the estimate of the future sublease receiptsmay result in material charges to selling, general and administrative expenses in future periods.Income Taxes. We account for income taxes in accordance with ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized based onthe 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 whichthe differences reverse. In accordance with ASC 740, we assess the likelihood that our deferred tax assets will be realized. Deferred tax assets are reduced by avaluation allowance when, after considering all available positive and negative evidence, it is determined that it is more likely than not that some portion, orall, of the deferred tax asset will not be realized. As of December 31, 2012, we had a full valuation allowance recorded against our deferred tax assets. Ourassessment gave significant weight to the negative evidence of our cumulative loss history in the three years ended December 31, 2012.As of December 31, 2013, we determined that we more likely than not will realize most of our deferred tax assets and, as a result, reversed a significantportion of our valuation allowance. The analysis performed to assess the need for a valuation allowance included an evaluation of the four possible sources oftaxable income as identified in ASC 740, including the consideration of the positive evidence of our cumulative income history in the three years endedDecember 31, 2013. 24Table of ContentsBased on this analysis, as well as due to the realization of certain deferred tax assets during 2013, we recorded a $19.9 million reduction of ourvaluation allowance during the year ended December 31, 2013, $10.9 million of which was a direct result of our decision to exit a full valuation allowance. Asof December 31, 2013, the remaining valuation allowance is $4.2 million, primarily related to certain state tax credits we estimate will expire before they arerealized. We will analyze our position in subsequent reporting periods, considering all available positive and negative evidence, in determining the expectedrealization of our deferred tax assets.Stock-Based Compensation. Under the provisions of FASB ASC Topic 718, “Stock Compensation,” we calculate the grant date fair value of share-based awards using the Black-Scholes valuation model for grants subsequent to the adoption of ASC 718. Determining the fair value of share-based awards isjudgmental in nature and involves the use of significant estimates and assumptions, including the term of the share-based awards, risk-free interest rates overthe vesting period, expected dividend rates, the price volatility of our shares and forfeiture rates of the awards. We base our fair value estimates onassumptions we believe to be reasonable but that are inherently uncertain. Actual future results may differ from those estimates.Results of OperationsThe following table shows, for the last three years, selected statement of comprehensive income data as a percentage of net sales: Year Ended December 31, 2013 2012 2011 Net sales 100.0% 100.0% 100.0% Cost of sales 71.2 72.5 76.5 Gross profit 28.8 27.5 23.5 Selling, general and administrative expenses 21.6 23.4 22.7 Income from operations 7.2 4.1 0.8 Interest expense, net 0.2 2.9 6.1 Income (loss) before income taxes 7.0 1.2 (5.3) Provision (benefit) for income taxes (3.1) 0.3 (1.0) Net income (loss) 10.1% 0.9% (4.3%) 2013 Compared to 2012Net Sales. Net sales in 2013 increased 11.4% to $342.5 million from $307.4 million in 2012. The increase in net sales was due primarily to an 8%increase in sales volume and a 3% increase in the average price per unit in 2013 compared to 2012. We attribute the increase in sales volumes in 2013compared to 2012 to the execution of growth strategies including increased market share from additions to our distribution network, the introduction of newproduct lines and a revised pricing strategy. The increase in average price per unit in 2013 was primarily driven by sales mix including an increasedattachment rate on railing products.Gross Profit. Gross profit increased 16.6% to $98.6 million in 2013 from $84.6 million in 2012. Gross profit in 2013 and 2012 was adverselyaffected by $21.5 million and $21.5 million of non-operating charges, respectively. We recognized $20.0 million and $21.5 million of charges to increase thepreviously established warranty reserve in 2013 and 2012, respectively. In addition, in 2013, we recognized a $1.5 million charge related to market shareexpansion and a reset of prices for certain products as we transition our remaining products to the next generation product offering. Excluding theaforementioned charges in both 2013 and 2012, gross profit increased to $120.1 million in 2013 compared to $106.1 in 2012. Excluding the aforementionedcharges in both 2013 and 2012, gross profit as a percentage of net sales, gross margin, increased by 40 basis 25Table of Contentspoints to 34.9% from 34.5% in 2012. The 2012 gross margin reflected $4.5 million of LIFO inventory liquidation income. The 2013 underlying gross marginat 34.9% was 185 basis points higher than 2012 excluding the LIFO inventory liquidation income. Key drivers to the favorable underlying gross margin for2013 include lower sales related items, increased capacity utilization rates and continued manufacturing efficiencies.Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $2.1 million, or 2.9%, to $74.0 million in 2013from $71.9 million in 2012. The increase in selling, general and administrative expenses in 2013 compared to 2012 was attributable to various factorsincluding a $1.2 million decrease in the benefits recognized from reductions in the provision for future contingent payments associated with the 2011 IronDeck acquisition and a $0.9 million increase in legal and claims servicing costs primarily resulting from the mold growth class action lawsuit that was settledin December 2013 and related public and homeowner communications. As a percentage of net sales, total selling, general and administrative expenses decreasedto 21.6% in 2013 from 23.4% in 2012.Interest Expense. Net interest expense decreased 93.3% to $0.6 million in 2013 compared to $8.9 million in 2012. The decrease resulted from carryinglower debt levels at lower interest rates during 2013 compared to 2012. This was primarily driven by the repayment of the $91.9 million principal balance onthe 6.0% convertible notes on July 2, 2012. As a percentage of net sales, interest expense decreased to 0.2% in 2013 from 2.9% in 2012.Provision for Income Taxes. We recorded a benefit for income taxes of $10.5 million in 2013 compared to an expense of $1.0 million in 2012. Therelated effective tax rates were (43.9%) in 2013 and 27.1% in 2012. During 2013, our income tax benefit consisted of a reduction of a substantial portion of ourvaluation allowance on our deferred tax asset as well as statutory federal and state taxes, permanent book to tax differences, Federal tax credits, and othermiscellaneous tax items. During 2012, our income tax expense consisted of cash taxes to various states where no net operating loss carry-forward existed tooffset current year taxable income, unfavorable effect of permanent differences related to employee stock awards and increases in indefinite-lived deferred taxliabilities, primarily related to goodwill amortized for income taxes.Our effective tax rate for both years is substantially different than the statutory rate due to the effect of the valuation allowance we maintained against ournet deferred tax assets. During the three months ended December 31, 2013, we determined it to be more likely than not that we will realize most of our deferredtax assets. During 2013, we recorded a $19.9 million income tax benefit resulting from a significant reversal of our valuation allowance, $10.9 million ofwhich was a direct result of our decision to exit a full valuation allowance.2012 Compared to 2011Net Sales. Net sales in 2012 increased 15.2% to $307.4 million from $266.8 million in 2011. The increase in net sales was due primarily to a 15%increase in sales volume in 2012 compared to 2011. We attribute the increase in sales volumes in 2012 compared to 2011 to various factors, including: • Sales volumes in 2011 were depressed as a result of customers purchasing product in late 2010 to avoid an announced 2011 Transcend priceincrease; • Favorable weather conditions throughout 2012 compared to 2011 allowed for a more favorable deck-building season, and; • Execution of growth strategies including introduction of new product lines and increased market share.Gross Profit. Gross profit increased to $84.6 million in 2012 from $62.8 million in 2011. Gross profit as a percentage of net sales increased to 27.5%in 2012 from 23.5% in 2011. Gross profit in 2012 was adversely affected by a $21.5 million increase to the warranty reserve. Gross profit in 2011 wasadversely affected by a $10.0 million increase to the warranty reserve. Excluding the aforementioned charges, gross profit in 2012 was $106.1 million, a$33.3 million increase compared to 2011. Underlying gross margin in 2012 was 34.6%, a 7.3% 26Table of Contentsincrease compared to 2011. Our gross margin improvement was due to improved manufacturing efficiencies, a favorable product mix as we transition deckingsales to our shelled products and a favorable inventory valuation adjustment related to our significant reduction in inventory. This was offset by start-up costsrelated to the introduction of our high performance shelled products.Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $11.3 million, or 18.6%, to $71.9 million in2012 from $60.6 million in 2011. The increase in selling, general and administrative expenses in 2012 was primarily related to a $9.6 million increase inpersonnel related expenses due to increased incentive compensation, sales commissions and severance costs. In 2012, we recorded a $1.9 million loss on thedisposal of equipment made obsolete by improvements in manufacturing technologies and a $1.5 million expense for costs associated with the mold andmildew class action lawsuit. These increases were partially offset by a $1.4 million benefit in 2012 due to a reduction in the provision for future contingentpayments resulting from decreased near-term sales projections of steel deck framing systems. As a percentage of net sales, total selling, general andadministrative expenses increased to 23.4% in 2012 from 22.7% in 2011.Interest Expense. Net interest expense decreased 45.3% to $8.9 million in 2012 compared to $16.4 million in 2011. The decrease was the result of asignificant decrease in debt during 2012, primarily due to the repayment of the $91.9 million principal balance on the convertible notes on July 2, 2012. As apercentage of net sales, interest expense decreased to 2.9% in 2012 from 6.1% in 2011.Provision for Income Taxes. We recorded an expense for income taxes of $1.0 million in 2012 compared to a benefit of $2.6 million in 2011. Therelated effective tax rates were 27.1% in 2012 and 18.4% in 2011. The effective tax rate for both years is substantially different than the statutory rate becauseof our full valuation allowance on our net deferred tax assets. As a result, our provision for income taxes and corresponding effective tax rate, are primarily afunction of cash taxes paid to various jurisdictions, changes in indefinite-lived deferred tax liabilities and changes to liabilities associated with uncertain taxpositions. The benefit recognized in 2011 was primarily related to the effects of favorably settled uncertain federal tax positions previously reserved under theprovisions of ASC 740. The income tax expense recognized in 2012 was primarily related to cash taxes to various states where no net operating loss carry-forward is available to offset current year taxable income, unfavorable effect of permanent differences related to employee stock awards and increases inindefinite-lived deferred tax liabilities, primarily related to goodwill amortized for income taxes.Liquidity and Capital ResourcesWe finance operations and growth primarily with cash flow from operations, borrowings under the credit facility and other loans, operating leases andnormal trade credit terms from operating activities.Sources and Uses of Cash. Net cash provided by operating activities totaled $45.2 million in 2013 compared to net cash provided by operatingactivities of $60.4 million in 2012. The $15.2 million year-over-year reduction in cash provided by operating activities was primarily driven by increasedinventory and accounts receivable balances, partially offset by an increase in net sales and earnings during 2013 compared to 2012. The increase in inventorybalances at December 31, 2013 was to support conversion to our next generation product offerings and additions to our distribution network.Accounts receivable balances increased to $37.3 million at December 31, 2013 compared to $26.5 million at December 31, 2012 due to increased salesin late 2013 primarily driven by additions to our distribution network, an increase in demand for our products and a revised pricing strategy. Substantially allof the accounts receivable balances at December 31, 2013 were subject to the terms of our early buy program. We expect to collect all outstanding accountsreceivable balances by May 2014. 27Table of ContentsNet cash used in investing activities totaled $12.7 million in 2013 compared to cash used in investing activities of $7.5 million in 2012. The increase isprimarily attributable to an increase in capital expenditures in 2013 compared to 2012 due to a focus on new product launches and manufacturing efficiencies.Capital expenditures in 2013 consisted primarily of manufacturing equipment for process and productivity improvements, including retrofitting lines toproduce new products. In 2012, net cash used in investing activities totaled $7.5 million compared to $9.4 million in 2011.Net cash used in financing activities was $30.9 million in 2013 compared to cash used in financing activities of $55.3 million in 2012. The $24.4million improvement in 2013 was due to the fact that, in 2012, we used cash on hand and $37.0 million of restricted cash to fully repay the $91.9 millionprincipal balance on our convertibles notes. In 2013, we used cash on hand to repurchase $25.0 million of our common stock. Net cash used in financingactivities was $55.3 million in 2012 compared to net cash used in financing activities of $47.2 million in 2011.On February 19, 2014, our Board of Directors authorized an additional common stock repurchase program of up to $50 million of our outstandingcommon stock. This authorization has no expiration date.Inventory in Distribution Channels. We sell our products through a tiered distribution system. We have approximately 20 distributors and two massmerchandisers to which we sell our products. These distributors in turn sell the products to approximately 3,100 dealers who in turn sell the products to theend users. Consistent with industry practices, to ensure adequate availability of product to meet anticipated seasonal consumer demand and to enableproduction planning, we have historically provided our distributors and dealers incentives to build inventory levels before the start of the prime deck-buildingseason. These incentives include prompt payment discounts and favorable payment terms. In addition, from time to time, we may offer price discounts orvolume rebates on specified products and other incentives based on increases in purchases as part of specific promotional programs. There are no productreturn rights granted to our distributors except those granted pursuant to the warranty provisions of our agreements with distributors. While we do nottypically receive any information regarding inventory in the distribution channel from any dealers, we receive limited information from some but not all of ourdistributors regarding their inventory. Because few distributors provide us with any information regarding their inventory, we cannot definitively determine thelevel of inventory in the distribution channel at any time. Our sales in the fourth quarter of 2013 were higher than our sales in the fourth quarter of 2012. Webelieve that distributor inventory levels at December 31, 2013 are comparable to distributor inventory levels at December 31, 2012. Significant changes ininventory levels in the distribution channel without a corresponding change in end-user demand could have an adverse effect on future sales.We seek to maintain favorable relationships with our distributors. However, on occasion, we may need to replace a distributor. Historically, we have hadlittle difficulty replacing a distributor and have experienced little or no disruption to operations or liquidity. We believe that in the event we needed to replace adistributor, it would not have an adverse effect on our profitability or liquidity.Product Warranty. We continue to receive and settle claims related to material produced at our Nevada facility prior to 2007 that exhibits surface flakingand regularly monitor the adequacy of the warranty reserve. During the year ended December 31, 2013, we paid approximately $8.2 million to settle claimsagainst the warranty reserve, which had a material adverse effect on cash flow from operations, and increased the warranty reserve an additional $20.0million. We estimate that the number of claims received will decline over time. If the level of new claims received does not diminish consistent with ourexpectations, it could result in additional increases to the warranty reserve and reduced earnings and cash flow in future periods.Indebtedness. On January 6, 2012, we entered into an Amended and Restated Credit Agreement (the “Amended Credit Agreement”) with BB&T, as alender, Administrative Agent, Swing Line Lender, Letter of Credit Issuer and a Collateral Agent; Wells Fargo Capital Finance, LLC (“Wells Fargo”) as a lenderand a Collateral Agent; and BB&T Capital Markets (“BB&T Capital”), as Lead Arranger to amend the Credit 28Table of ContentsAgreement. BB&T and Wells Fargo are referenced herein as the “Lenders.” These new agreements replace our previous revolver note, the swing advance noteand the letter of credit facility, in their entireties and account for all of our debt capacity. No additional fees were due or owing as a result of the termination ofthe previous agreements.Under the Amended Credit Agreement, the Lenders agreed to provide us with one or more revolving loans in a collective maximum principal amount of$100 million (the “Revolver Loans”).Included within the Revolver Loan limit are sublimits for a Letter of Credit Facility in an amount not to exceed $15 million (the “Letter of CreditFacility”); and Swing Advances in an aggregate principal amount at any time outstanding not to exceed $5 million (the “Swing Advance Loan”). The RevolverLoans, the Letter of Credit Facility and the Swing Advance Loan are collectively referred to herein as the “Loans.” The Loans were obtained for the purpose ofraising working capital and refinancing our existing indebtedness.The Revolver Loans, the Swing Advances and the Letter of Credit Facility provide us, in the aggregate, the ability to borrow a principal amount not toexceed $100 million at any one time outstanding (the “Revolving Loan Limit”) (subject to certain Borrowing Base requirements as described in the AmendedCredit Agreement which include limits on Eligible Accounts and Inventory as described in the Amended Credit Agreement and any written agreement whichmay be executed from time to time by us and each of the Collateral Agents). We are not obligated to borrow any amount under the Revolving Loan Limit.Within the Revolving Loan Limit, we may borrow or repay at any time or from time to time while the Revolving Loans are in effect.Base Rate Advances (as defined in the Amended Credit Agreement) under the Revolver Loans and the Swing Advances accrue interest at the Base Rateplus the Applicable Margin (as defined in the Amended Credit Agreement) and Euro-Dollar Advances for the Revolver Loans and Swing Advances accrueinterest at the Adjusted London InterBank Offered Rate plus the Applicable Margin (as defined in the Amended Credit Agreement). Repayment of all thenoutstanding principal, interest, fees and costs is due on January 9, 2015.The Letter of Credit Facility provides that upon our application, BB&T shall issue to our credit one or more letters of credit in the aggregate amount ofup to $15 million, or such lesser amount as may be required by law. We shall reimburse BB&T for all amounts payable, including interest, under a Letter ofCredit at the earlier of (i) the date set forth in the application or (ii) on business day after the payment under such Letter of Credit by BB&T.On February 26, 2013, we entered into a First Amendment (“First Amendment”) to the Amended Credit Agreement dated as of January 6, 2012.Pursuant to the First Amendment, the Amended Credit Agreement was amended to temporarily increase the maximum amount of the Revolver Loans from $100million to $125 million during the period from February 26, 2013 through and including June 30, 2013 to meet seasonal cash requirements and reduce certaininterest rate margins and costs. In conjunction with the First Amendment, the Revolver Notes executed by us to each of BB&T and Wells Fargo dated as ofJanuary 6, 2012 were amended and restated. The maximum amount of the Revolver Loans reverted to $100 million on July 1, 2013.On December 17, 2013, we entered into a Second Amendment (“Second Amendment”) to the Amended Credit Agreement dated as of January 6, 2012, asamended by the First Amendment dated February 26, 2013 (the “Credit Agreement”). Pursuant to the Second Amendment, the Credit Agreement was amendedto temporarily increase the maximum amount of the Revolver Loans from $100 million to $125 million during the period from January 1, 2014 through andincluding June 30, 2014 to meet seasonal cash requirements. No other material changes were made to the terms of the Credit Agreement.Amounts drawn under the Revolver Loans are subject to a borrowing base consisting of certain accounts receivables, inventories, machinery andequipment and real estate. At December 31, 2013, we had no outstanding borrowings under the Revolver Loans and additional available borrowing capacity ofapproximately $71.9 million. 29Table of ContentsCompliance with Debt Covenants and Restrictions. Our ability to make scheduled principal and interest payments, borrow and repay amounts underany outstanding revolving credit facility and continue to comply with any loan covenants depends primarily on our ability to generate sufficient cash flowfrom operations. To remain in compliance with financial covenants in the Credit Agreement, we are required to maintain specified financial ratios based onlevels of debt, capital, net worth, fixed charges, and earnings (excluding extraordinary gains and extraordinary non-cash losses) before interest, taxes,depreciation and amortization, all of which are subject to the risks of the business, some of which are discussed in this report under “Risk Factors.” We werein compliance with all covenants contained in our Loans at December 31, 2013. Under the Credit Agreement, the material financial covenants and restrictionsare as follows: (a)Minimum Consolidated Net Worth. We agreed that we will maintain Consolidated Net Worth, measured as of the end of each Fiscal Quarter,commencing with the Fiscal Quarter ended December 31, 2011, of not less than $85 million. (b)Fixed Charge Coverage Ratio. We agreed that we will not permit the Fixed Charge Coverage Ratio to be less than 1.15 to 1.0, measured as of theend of each Fiscal Quarter, commencing with the Fiscal Quarter ended December 31, 2011. (c)Consolidated Debt to Consolidated EBITDA Ratio. We agreed that we will not permit the Consolidated Debt to Consolidated EBITDA Ratio toexceed 3.5 to 1.0 measured as of the end of each Fiscal Quarter (and in the case of Consolidated EBITDA, for the four-quarter period ending onsuch date) after the date on which the Senior Subordinated Notes have been redeemed in full.Failure to comply with the financial covenants in our Credit Agreement could be considered a default of our repayment obligations and, among otherremedies, could accelerate payment of any amounts outstanding under our Credit Agreement.At December 31, 2013, we had no outstanding indebtedness, and the interest rate on the revolving credit facility was 1.9%.Contractual Obligations. The following tables show, as of December 31, 2013, our contractual obligations and commercial commitments, whichconsist primarily of purchase commitments and operating leases (in thousands):Contractual ObligationsPayments Due by Period Total Less than1 year 1-3 years 4-5 years After5 years Purchase commitments (1) 35,581 23,608 11,924 49 — Operating leases 44,272 6,803 11,651 10,620 15,198 Total contractual cash obligations $79,853 $30,411 $23,575 $10,669 $15,198 (1)Purchase commitments represent supply contracts with third-party manufacturers and raw material vendors.We do not have off-balance sheet financing arrangements other than operating leases.Capital and Other Cash Requirements. We made capital expenditures of $13.1 million in 2013, $7.6 million in 2012 and $7.4 million in 2011,primarily related to new products and to make process and productivity improvements. We currently estimate that capital expenditures in 2014 will beapproximately $15 million. Capital expenditures in 2014 are expected to be used primarily to support cost reduction initiatives, new product launches incurrent and adjacent categories and general business support. 30Table of ContentsWe believe that cash on hand, cash flow from operations and borrowings expected to be available under our revolving credit facility will providesufficient funds to enable us to fund planned capital expenditures, make scheduled principal and interest payments, fund the warranty reserve, meet othercash requirements and maintain compliance with terms of our debt agreements for at least the next 12 months. We currently expect to fund future capitalexpenditures from operations and borrowings under the revolving credit facility. The actual amount and timing of future capital requirements may differmaterially from our estimate depending on the demand for Trex and new market developments and opportunities. Our ability to meet our cash needs during thenext 12 months and thereafter could be adversely affected by various circumstances, including increases in raw materials and product replacement costs,quality control problems, higher than expected product warranty claims, service disruptions and lower than expected collections of accounts receivable. Inaddition, any failure to negotiate amendments to our existing debt agreements to resolve any future noncompliance with financial covenants could adverselyaffect our liquidity by reducing access to revolving credit borrowings needed primarily to fund seasonal borrowing needs. We may determine that it isnecessary or desirable to obtain financing through bank borrowings or the issuance of debt or equity securities to address such contingencies or changes to ourbusiness plan. Debt financing would increase our level of indebtedness, while equity financing would dilute the ownership of our stockholders. There can beno assurance as to whether, or as to the terms on which, we would be able to obtain such financing, which would be restricted by covenants contained in ourexisting debt agreements. Item 7A.Quantitative and Qualitative Disclosures About Market RiskWe are subject to market risks from changing interest rates associated with our borrowings. To meet our seasonal working capital needs, we borrowperiodically on our variable rate revolving line of credit. At December 31, 2013, we had no debt outstanding under our revolving line of credit. While variablerate debt obligations expose us to the risk of rising interest rates, an increase of 1% in interest rates would not have a material adverse effect on our overallfinancial position, results of operations or liquidity based on balances outstanding at December 31, 2013.In certain instances we may use interest rate swap agreements to modify fixed rate obligations to variable rate obligations, thereby adjusting the interestrates to current market rates and ensuring that the debt instruments are always reflected at fair value. We had no interest rate swap agreements outstanding asof December 31, 2013. Item 8.Financial Statements and Supplementary DataThe financial statements listed in Item 15 and appearing on pages F-2 through F-27 are incorporated by reference in this Item 8 and are filed as part ofthis report. Item 9.Changes in and Disagreements With Accountants on Accounting and Financial DisclosureNone. Item 9A.Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer, who is our principal executive officer, and our Chief Financial Officer, who isour principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934) as of December 31, 2013. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officerconcluded that our disclosure controls and procedures were effective as of December 31, 2013. 31Table of ContentsManagement’s Report on Internal Control Over Financial ReportingWe, as members of management of Trex Company, Inc. (the “Company”), are responsible for establishing and maintaining adequate internal controlover financial reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internalcontrol over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately andfairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company arebeing made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies and procedures may deteriorate.We assessed the Company’s internal control over financial reporting as of December 31, 2013, based on criteria for effective internal control overfinancial reporting established in “Internal Control-Integrated Framework (1992)” issued by the Committee of Sponsoring Organizations of the TreadwayCommission (the “COSO Framework”). Based on this assessment, we concluded that, as of December 31, 2013, our internal control over financial reportingwas effective, based on the COSO Framework.The effectiveness of our internal control over financial reporting as of December 31, 2013, has been audited by Ernst & Young LLP, an independentregistered public accounting firm, as stated in their report, which follows hereafter. TREX COMPANY, INC.February 24, 2014 By: /s/ RONALD W. KAPLAN Ronald W. Kaplan Chairman, President and Chief Executive Officer (Principal Executive Officer)February 24, 2014 By: /s/ JAMES E. CLINE James E. Cline Senior Vice President and Chief Financial Officer (Principal Financial Officer)Changes in Internal Control Over Financial ReportingThere have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation described above in“Management’s Report on Internal Control Over Financial Reporting’ that occurred during the Company’s fourth fiscal quarter that have materially affected, orare reasonably likely to materially affect, the Company’s internal control over financial reporting. 32Table of ContentsReport of Ernst & Young LLP, Independent Registered Public Accounting Firm,on Internal Control Over Financial ReportingThe Board of Directors and Stockholders of Trex Company, Inc.We have audited Trex Company, Inc.’s internal control over financial reporting as of December 31, 2013, based on criteria established in InternalControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria).Trex Company, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectivenessof internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting in Item 9A. Ourresponsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, Trex Company, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013,based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of Trex Company, Inc., as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income, changes in stockholders’equity, and cash flows for each of the three years in the period ended December 31, 2013 of Trex Company, Inc. and our report dated February 24, 2014expressed an unqualified opinion thereon./s/ Ernst & Young LLPRichmond, VirginiaFebruary 24, 2014 33Table of ContentsItem 9B.Other InformationAppointment of Gerald Volas as a Director of the CompanyOn February 19, 2014, the Board of Directors of the Company increased the size of the Board from seven members to eight members, and appointedGerald Volas as a director to fill the resulting vacancy, both to be effective on March 1, 2014. Mr. Volas was appointed to the class of directors whose term ofoffice expires at the annual meeting of stockholders scheduled for April 30, 2014, and Mr. Volas will be included among the nominees being submitted forelection at such annual meeting. Mr. Volas will receive compensation for service on the Board of Directors and any committees pursuant to the Company’sAmended and Restated 1999 Incentive Plan for Outside Directors (the “Incentive Plan for Outside Directors”). The Incentive Plan for Outside Directors wasamended and restated as of July 24, 2012, and filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period endedSeptember 30, 2012.Mr. Volas has been employed by Masco Corporation, one of the world’s leading manufacturers of brand-name products for the home improvement andnew home construction industries, in various positions of increasing responsibility since 1982. Since February 2005, he has served as a Group Executiveresponsible for almost all of Masco’s operating companies at one time or another. He currently is responsible for a number of Masco operating companiesaccounting for approximately 50% of Masco’s revenues in 2012. From April 2001 to February 2005, he served as President of Liberty Hardware, a Mascooperating company, from January 1996 to April 2001, he served as a Group Controller supporting a variety of Masco operating companies, and from May1982 to January 1996, he served in progressive financial roles including Vice President/Controller at BrassCraft Manufacturing Company, a Mascooperating company. Mr. Volas is a Certified Public Accountant. He received a Bachelor of Business Administration degree from the University of Michigan.Stock SplitOn February 19, 2014, the Board of Directors of the Company approved a two -for-one stock split of the Company’s common stock, par value$0.01. The stock split will be in the form of a stock dividend to be distributed on May 7, 2014 to stockholders of record at the close of business on April 7,2014. The financial statements presented in this Form 10-K appropriately do not reflect the effects of the stock split. 34Table of ContentsPART III Item 10.Directors, Executive Officers and Corporate GovernanceSee “Executive Officers and Directors” in Part I, Item 1 of this report for the information about our executive officers, which is incorporated by responsein this Item 10. Other information responsive to this Item 10 is incorporated herein by reference to our definitive proxy statement for our 2014 annual meeting ofstockholders, which we will file with the SEC on or before 120 days after our 2013 fiscal year-end.We have adopted a code of conduct and ethics, which is applicable to all of our directors, officers and employees, including our Chief Executive Officerand Chief Financial Officer. The code is available on our corporate web site and in print to any stockholder who requests a copy. We also make available onour web site, at www.trex.com, and in print to any stockholder who requests them, copies of our corporate governance principles and the charters of eachstanding committee of our board of directors. Requests for copies of these documents should be directed to Corporate Secretary, Trex Company, Inc., 160Exeter Drive, Winchester, Virginia 22603-8605. To the extent required by SEC rules, we intend to disclose any amendments to our code of conduct andethics, and any waiver of a provision of the code with respect to our principal executive officer, principal financial officer, principal accounting officer orcontroller, or persons performing similar functions, on our web site referred to above within four business days following any such amendment or waiver, orwithin any other period that may be required under SEC rules from time to time. Item 11.Executive CompensationInformation responsive to this Item 11 is incorporated herein by reference to our definitive proxy statement for our 2014 annual meeting of stockholders,which we will file with the SEC on or before 120 days after our 2013 fiscal year-end. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersInformation responsive to this Item 12 is incorporated herein by reference to our definitive proxy statement for our 2014 annual meeting of stockholders,which we will file with the SEC on or before 120 days after our 2013 fiscal year-end. Item 13.Certain Relationships and Related Transactions, and Director IndependenceInformation responsive to this Item 13 is incorporated herein by reference to our definitive proxy statement for our 2014 annual meeting of stockholders,which we will file with the SEC on or before 120 days after our 2013 fiscal year-end. Item 14.Principal Accounting Fees and ServicesInformation responsive to this Item 14 is incorporated herein by reference to our definitive proxy statement for our 2014 annual meeting of stockholders,which we will file with the SEC on or before 120 days after our 2013 fiscal year-end. 35Table of ContentsPART IV Item 15.Exhibits and Financial Statement Schedules(a)(1) The following consolidated financial statements of the Company appear on pages F-2 through F-27 of this report and are incorporated by referencein Part II, Item 8: Report of Independent Registered Public Accounting Firm F-2 Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 2013 and 2012 F-3 Consolidated Statements of Comprehensive Income for the three years ended December 31, 2013 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the three years ended December 31, 2013 F-5 Consolidated Statements of Cash Flows for the three years ended December 31, 2013 F-6 Notes to Consolidated Financial Statements F-7 (a)(2) The following financial statement schedule is filed as part of this report: Schedule II—Valuation and Qualifying Accounts and Reserves F-28 All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not requiredunder the related instructions or are inapplicable or not material and, therefore, have been omitted.(a)(3) The following exhibits are either filed with this Form 10-K or are incorporated herein by reference. The Company’s Securities Exchange Act filenumber is 001-14649. ExhibitNumber Exhibit Description 3.1 Restated Certificate of Incorporation of Trex Company, Inc. (the “Company”). Filed as Exhibit 3.1 to the Company’s Registration Statementon Form S-1 (No. 333-63287) and incorporated herein by reference. 3.2 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 7, 2008and incorporated herein by reference. 4.1 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. 4.2 Indenture, dated as of June 18, 2007, between Trex Company, Inc. and The Bank of New York, as trustee. Filed as Exhibit 4.1 to theCompany’s Current Report on Form 8-K filed on June 19, 2007 and incorporated herein by reference. 4.3 Supplemental Indenture, dated as of June 18, 2007, between Trex Company, Inc. and The Bank of New York, as trustee, including theform of 6.00% Convertible Senior Subordinated Note due 2012. Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed onJune 19, 2007 and incorporated herein by reference. 4.4 Credit Agreement dated as of November 4, 2009 between the Company and Branch Banking and Trust Company as Administrative Agentand Letter of Credit Issuer, BB&T Capital Markets as Lead Arranger and the Lenders listed on the signature pages thereof. Filed as Exhibit4.1 to the Company’s Current Report on Form 8-K filed on November 6, 2009 and incorporated herein by reference. 4.5 Swing Advance Note dated November 4, 2009 payable by the Company Inc. to Branch Banking and Trust Company in the amount of thelesser of $5,000,000 or the outstanding swing advances made by Branch Banking and Trust Company. Filed as Exhibit 4.6 to theCompany’s Current Report on Form 8-K filed on November 6, 2009 and incorporated herein by reference. 36Table of ContentsExhibitNumber Exhibit Description 4.6 First Amendment, dated October 28, 2011, of Credit Agreement dated as of November 4, 2009 between the Company and Branch Bankingand Trust Company as Administrative Agent, Letter of Credit Issuer and Lender, and BB&T Capital Markets Letter as Lead Arranger. Filedas Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 and incorporated hereinby reference. 4.7 Revolver Note dated October 28, 2011 payable by the Company to Branch Banking and Trust Company in the amount of the lesser of$40,000,000 or the outstanding revolver advances made by Branch Banking and Trust Company. Filed as Exhibit 4.2 to the Company’sQuarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 and incorporated herein by reference. 4.8 Reducing Revolver Note dated October 28, 2011 payable by the Company to Branch Banking and Trust Company in the amount of thelesser of $15,000,000 or the outstanding revolver advances made by Branch Banking and Trust Company. Filed as Exhibit 4.3 to theCompany’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 and incorporated herein by reference. 4.9 Amended and Restated Security Agreement between the Company and Branch Banking and Trust Company as Collateral Agent for theLenders, dated as of November 4, 2009. Filed as Exhibit 4.7 to the Company’s Current Report on Form 8-K filed on November 6, 2009 andincorporated herein by reference. 4.10 Amended and Restated Credit Line Deed of Trust, dated November 4, 2009, by and among the Company, as grantor, BB&T-VA CollateralService Corporation, as trustee, and Branch Banking and Trust Company, as Collateral Agent for the Lenders, as Beneficiary relating to realproperty partially located in the County of Frederick, Virginia and partially located in the City of Winchester, Virginia. Filed as Exhibit 4.8 tothe Company’s Current Report on Form 8-K filed on November 6, 2009 and incorporated herein by reference. 4.11 Deed of Trust, dated November 4, 2009, by and among the Company, as grantor, Eric L. Sappenfield, as trustee, and Branch Banking andTrust Company, as Collateral Agent for the Lenders, as Beneficiary relating to real property located in the County of De Soto, Mississippi.Filed as Exhibit 4.9 to the Company’s Current Report on Form 8-K filed on November 6, 2009 and incorporated herein by reference. 4.12 Amended and Restated Credit Agreement dated as of January 6, 2012 between the Company and Branch Banking and Trust Company, as aLender, Administrative Agent, Swing Line Lender, Letter of Credit Issuer and a Collateral Agent; Wells Fargo Capital Finance, LLC, as aLender and a Collateral Agent; and BB&T Capital Markets, as Lead Arranger. Filed as Exhibit 4.1 to the Company’s Current Report on Form8-K filed on January 12, 2012 and incorporated herein by reference. 4.13 Revolver Note dated January 6, 2012 payable by the Company to Branch Banking and Trust Company in the amount of the lesser of$55,000,000 or the outstanding revolver advances made by Branch Banking and Trust Company. Filed as Exhibit 4.2 to the Company’sCurrent Report on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.14 Revolver Note dated January 6, 2012 payable by the Company to Wells Fargo Capital Finance, LLC in the amount of the lesser of$45,000,000 or the outstanding revolver advances made by Wells Fargo Capital Finance, LLC. Filed as Exhibit 4.3 to the Company’s CurrentReport on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 37Table of ContentsExhibitNumber Exhibit Description 4.15 Swing Advance Note dated January 6, 2012 payable by the Company to Branch Banking and Trust Company in the amount of the lesser of$5,000,000 or the outstanding swing advances made by Branch Banking and Trust Company. Filed as Exhibit 4.4 to the Company’sCurrent Report on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.16 Amended and Restated Security Agreement dated as of January 6, 2012 between the Company, as debtor, and Branch Banking and TrustCompany as Collateral Agent for Branch Banking and Trust Company and Wells Fargo Capital Finance, LLC. Filed as Exhibit 4.5 to theCompany’s Current Report on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.17 Modification to Amended and Restated Credit Line Deed of Trust, dated as of January 6, 2012, by and among the Company as grantor,BB&T-VA Collateral Service Corporation, as trustee, and Branch Banking and Trust Company, as Collateral Agent for Branch Bankingand Trust Company and Wells Fargo Capital Finance, LLC, as Beneficiary relating to real property partially located in the County ofFrederick, Virginia and partially located in the City of Winchester, Virginia. Filed as Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.18 Deed of Trust, dated as of January 6, 2012, by and among the Company as grantor, First American Title Insurance Company, as trustee,and Branch Banking and Trust Company, as Collateral Agent for Branch Banking and Trust Company and Wells Fargo Capital Finance,LLC, as Beneficiary relating to real property located in the County of Fernley, Nevada. Filed as Exhibit 4.7 to the Company’s Current Reporton Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.19 First Amendment dated February 26, 2013 to Amended and Restated Credit Agreement dated as of January 6, 2012 between the Companyand Branch Banking and Trust Company, as a Lender and Administrative Agent, and Wells Fargo Capital Finance, LLC as a Lender. Filedas Exhibit 4.1 to the Company’s Amended Current Report on Form 8-K filed April 18, 2013 and incorporated herein by reference. 4.20 Revolver Note dated February 26, 2013 payable by Trex Company, Inc. to Branch Banking and Trust Company in the amount of the lesserof $67,500,000 or the outstanding revolver advances made by Branch Banking and Trust Company. Filed as Exhibit 4.2 to the Company’sCurrent Report on Form 8-K filed February 26, 2013 and incorporated herein by reference. 4.21 Revolver Note dated February 26, 2013 payable to Trex Company, Inc. to Wells Fargo Capital Finance, LLC in the amount of the lesser of$57,500,000 or the outstanding revolver advances made by Wells Fargo Capital Finance, LLC. Filed as Exhibit 4.3 to the Company’sCurrent Report on Form 8-K filed February 26, 2013 and incorporated herein by reference. 4.22 Second Amendment dated December 17, 2013 to Amended and Restated Credit Agreement dated as of January 6, 2012, as amended by a FirstAmendment dated February 26, 2013, between the Company and Branch Banking and Trust Company, as a Lender and AdministrativeAgent, and Wells Fargo Capital Finance, LLC as a Lender. Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filedDecember 19, 2013 and incorporated herein by reference.10.1 Description of Management Compensatory Plans and Arrangements. Filed herewith. **10.2 Trex Company, Inc. 2005 Stock Incentive Plan. Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterlyperiod ended March 31, 2013 and incorporated herein by reference. **10.3 Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors. Filed as Exhibit 10.1 to the Company’s QuarterlyReport on Form 10-Q for the quarterly period ended September 30, 2012 and incorporated herein by reference. ** 38Table of ContentsExhibitNumber Exhibit Description10.4 Form of Trex Company, Inc. 2005 Stock Incentive Plan Non-Incentive Stock Option Agreement. Filed as Exhibit 10.1 to the Company’sQuarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 and incorporated herein by reference. **10.5 Form of Trex Company, Inc. 2005 Stock Incentive Plan Stock Appreciation Rights Agreement. Filed as Exhibit 10.5 to the Company’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2011 and incorporated herein by reference. **10.6 Form of Trex Company, Inc. 2005 Stock Incentive Plan Restricted Stock Agreement. Filed as Exhibit 10.7 to the Company’s Annual Reporton Form 10-K for the fiscal year ended December 31, 2011 and incorporated herein by reference. **10.7 Form of Trex Company, Inc. 2005 Stock Incentive Plan Time-Based Restricted Stock Agreement. Filed herewith. **10.8 Form of Trex Company, Inc. 2005 Stock Incentive Plan Performance-Based Restricted Stock Agreement. Filed herewith. **10.9 Form of Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors Non-Incentive Stock Option Agreement forDirectors. Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 andincorporated herein by reference. **10.10 Form of Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors Stock Appreciation Rights Agreement. Filed asExhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 and incorporated herein byreference. **10.11 Form of Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors Restricted Stock Agreement. Filed as Exhibit10.10 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and incorporated herein by reference. **10.12 Amendment and Restatement of Employment Agreement, dated as of July 24, 2012, between Trex Company, Inc. and Ronald W. Kaplan.Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 and incorporatedherein by reference. **10.13 Amendment and Restatement of Change in Control Severance Agreement, dated as of August 3, 2011, between Trex Company, Inc. andRonald W. Kaplan. Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 9, 2011 and incorporated herein byreference. **10.14 Form of Amendment and Restatement of Change in Control Severance Agreement between Trex Company, Inc. and Officers other than theChief Executive Officer. Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on August 9, 2011 and incorporated hereinby reference. **10.15 Form of Severance Agreement between Trex Company, Inc. and Officers other than the Chief Executive Officer. Filed as Exhibit 10.1 to theCompany’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 and incorporated herein by reference. **10.16 Retention Agreement, dated as of July 24, 2012, between Trex Company, Inc. and Ronald W. Kaplan. Filed as Exhibit 10.3 to the Company’sQuarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 and incorporated herein by reference. **10.17 Retention Agreement, dated as of July 24, 2012, between Trex Company, Inc. and James E. Cline. Filed as Exhibit 10.4 to the Company’sQuarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 and incorporated herein by reference. ** 39Table of ContentsExhibitNumber Exhibit Description10.18 Retention Agreement, dated as of July 24, 2012, between Trex Company, Inc. and William R. Gupp. Filed as Exhibit 10.5 to theCompany’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 and incorporated herein by reference.*, **10.19 Retention Agreement, dated as of July 24, 2012, between Trex Company, Inc. and F. Timothy Reese. Filed as Exhibit 10.6 to theCompany’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 and incorporated herein by reference. **10.20 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 endedDecember 31, 2008 and incorporated herein by reference.10.21 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 endedDecember 31, 2008 and incorporated herein by reference.10.22 Form of Indemnity Agreement for Director/Officers. Filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the fiscalyear ended December 31, 2008 and incorporated herein by reference.10.23 Form of Distributor Agreement of TREX Company, Inc. Filed as Exhibit 10.23 to the Company’s Annual Report on Form 10-K for thefiscal year ended December 31, 2008 and incorporated herein by reference.10.24 Form of Trex Company, Inc. Fencing Agreement for Installers/Retailers. Filed as Exhibit 10.4 to the Company’s Quarterly Report on Form10-Q for the quarterly period ended September 30, 2006 and incorporated herein by reference.10.25 Deed of Lease, dated June 15, 2000, between TREX Company, LLC and Space, LLC. Filed as Exhibit 10.16 to the Company’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2000 and incorporated herein by reference.10.26 Amendment, dated February 22, 2010, of Deed of Lease dated as of June 15, 2000, between Trex Company, Inc, as successor by mergerto Trex Company, LLC, and TC.V.LLC, as successor to Space, LLC. Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form10-Q for the quarterly period ended March 31, 2010 and incorporated herein by reference.10.27 Deed of Lease, dated as of July 27, 2005, between the Company and 1 Dulles Town Center, L.L.C. Filed as Exhibit 10.34 to theCompany’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 and incorporated herein by reference.*21 Subsidiaries of the Company. Filed herewith.23 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. Filed herewith.31.1 Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. Filedherewith.31.2 Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. Filedherewith.32 Certifications pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. § 1350. Filed herewith.101.INS XBRL Instance Document. Filed herewith.101.SCH XBRL Taxonomy Extension Schema Document. Filed herewith. 40Table of ContentsExhibitNumber Exhibit Description101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.101.DEF XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.101.LAB XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith. *Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidentialtreatment.**Management contract or compensatory plan or agreement. 41Table of ContentsTREX COMPANY, INC.Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm F-2 Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 2013 and 2012 F-3 Consolidated Statements of Comprehensive Income for the three years ended December 31, 2013 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the three years ended December 31, 2013 F-5 Consolidated Statements of Cash Flows for the three years ended December 31, 2013 F-6 Notes to Consolidated Financial Statements F-7 The following Consolidated Financial Statement Schedule of the Registrant is filed as part of this Report as required to be included in Item 15(a)(2): Page Schedule II—Valuation and Qualifying Accounts and Reserves F-28 F-1Table of ContentsReport of Ernst & Young LLP, Independent Registered Public Accounting FirmThe Board of Directors and Stockholders of Trex Company, Inc.We have audited the accompanying consolidated balance sheets of Trex Company, Inc. as of December 31, 2013 and 2012, and the related consolidatedstatements of comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2013. Ouraudits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe thatour audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trex Company,Inc. at December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, whenconsidered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Trex Company, Inc.’sinternal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated February 24, 2014 expressed an unqualifiedopinion thereon./s/ Ernst & Young LLPRichmond, VirginiaFebruary 24, 2014 F-2Table of ContentsTREX COMPANY, INC.CONSOLIDATED BALANCE SHEETS December 31, 2013 2012 (In thousands) ASSETS Current Assets: Cash and cash equivalents $3,772 $2,159 Accounts receivable, net 37,338 26,542 Inventories 22,428 17,521 Prepaid expenses and other assets 2,761 2,188 Income taxes receivable 384 435 Deferred income taxes 9,497 3,792 Total current assets 76,180 52,637 Property, plant and equipment, net 100,783 104,425 Goodwill and other intangibles 10,542 10,550 Other assets 652 1,003 Total Assets $188,157 $168,615 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $14,891 $11,161 Accrued expenses 23,295 18,818 Accrued warranty 9,000 7,500 Line of credit — 5,000 Total current liabilities 47,186 42,479 Deferred income taxes 360 7,353 Non-current accrued warranty 31,812 21,487 Other long-term liabilities 2,183 3,310 Total Liabilities 81,541 74,629 Commitments and contingencies Stockholders’ Equity: Preferred stock, $0.01 par value, 3,000,000 shares authorized; none issued and outstanding — — Common stock, $0.01 par value, 40,000,000 shares authorized; 17,299,062 and 17,010,493 shares issued and16,737,807 and 17,010,493 shares outstanding at December 31, 2013 and 2012, respectively 173 170 Additional paid-in capital 101,667 98,638 Retained earnings (deficit) 29,776 (4,822) Treasury stock, at cost, 561,255 shares (25,000) — Total Stockholders’ Equity 106,616 93,986 Total Liabilities and Stockholders’ Equity $188,157 $168,615 See accompanying notes to financial statements. F-3Table of ContentsTREX COMPANY, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, 2013 2012 2011 (In thousands, except share and per share data) Net sales $342,511 $307,354 $266,789 Cost of sales 243,893 222,772 203,998 Gross profit 98,618 84,582 62,791 Selling, general and administrative expenses 73,967 71,907 60,620 Income from operations 24,651 12,675 2,171 Interest expense, net 602 8,946 16,364 Income (loss) before income taxes 24,049 3,729 (14,193) Provision (benefit) for income taxes (10,549) 1,009 (2,605) Net income (loss) $34,598 $2,720 $(11,588) Basic earnings (loss) per common share $2.06 $0.17 $(0.75) Basic weighted average common shares outstanding 16,794,841 16,123,592 15,388,456 Diluted earnings (loss) per common share $2.02 $0.16 $(0.75) Diluted weighted average common shares outstanding 17,136,751 17,064,856 15,388,456 Other comprehensive income: Net derivative losses on interest rate swaps, before tax — — 312 Income tax expense related to net derivative losses on interest rate swaps — — 128 Other comprehensive income, net of tax — — 184 Comprehensive income (loss) $34,598 $2,720 $(11,404) See accompanying notes to financial statements. F-4Table of ContentsTREX COMPANY, INC.CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Common Stock AdditionalPaid-InCapital AccumulatedOtherComprehensiveLoss RetainedEarnings(Deficit) Treasury Stock Total Shares Amount Shares Amount (Dollars in thousands) Balance, December 31, 2010 15,458,002 $155 $98,905 $(184) $4,046 — $— $102,922 Net loss — — — — (11,588) — — (11,588) Net derivatives losses on interest rate swaps,net of tax — — — 184 — — — 184 Employee stock purchase and option plans 139,228 1 1,426 — — — — 1,427 Shares withheld for taxes on share-basedpayment awards (62,543) — (3,092) — — — — (3,092) Stock-based compensation 67,445 — 3,146 — — — — 3,146 Repurchases of convertible notes — — (500) — — — — (500) Balance, December 31, 2011 15,602,132 156 99,885 — (7,542) — — 92,499 Net income — — — — 2,720 — — 2,720 Employee stock purchase and option plans 234,552 2 820 — — — — 822 Shares withheld for taxes on share-basedpayment awards (37,151) 1 (5,525) — — — — (5,524) Stock-based compensation 149,215 — 3,469 — — — — 3,469 Common stock issued upon conversion ofnotes 1,061,745 11 (11) — — — — — Balance, December 31, 2012 17,010,493 170 98,638 — (4,822) — — 93,986 Net income — — — — 34,598 — — 34,598 Employee stock purchase and option plans 271,335 3 4,029 — — — — 4,032 Shares withheld for taxes on share-basedpayment awards (29,365) — (6,277) — — — — (6,277) Stock-based compensation 46,599 — 3,811 — — — — 3,811 Excess tax benefits from stockcompensation — — 1,466 — — — — 1,466 Shares repurchased under our publiclyannounced share repurchase programs (561,255) — — — — 561,255 (25,000) (25,000) Balance, December 31, 2013 16,737,807 $173 $101,667 $— $29,776 561,255 $(25,000) $106,616 See accompanying notes to financial statements. F-5Table of ContentsTREX COMPANY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2013 2012 2011 (In thousands) Operating Activities Net income (loss) $34,598 $2,720 $(11,588) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 16,255 17,009 18,170 Debt discount amortization — 5,450 10,538 Deferred income taxes (12,698) 618 165 Stock-based compensation 3,811 3,469 3,146 Loss on disposal of property, plant and equipment 587 1,909 711 Excess tax benefits from stock compensation (1,466) — — Other non-cash adjustments (337) (314) 621 Changes in operating assets and liabilities: Accounts receivable (10,844) 2,660 23,931 Inventories (4,907) 11,376 125 Prepaid expenses and other assets (213) (405) (19) Accounts payable 3,731 (731) (3,215) Accrued expenses and other liabilities 15,173 16,784 (8,385) Income taxes receivable/payable 1,518 (102) (353) Net cash provided by operating activities 45,208 60,443 33,847 Investing Activities Expenditures for property, plant and equipment (13,060) (7,593) (7,419) Proceeds from sales of property, plant and equipment 176 3 28 Purchase of acquired company, net of cash acquired — (11) (2,075) Notes receivable, net 187 117 99 Net cash used in investing activities (12,697) (7,484) (9,367) Financing Activities Financing costs (119) (750) (135) Restricted cash — 37,000 (37,000) Borrowings under line of credit 74,500 93,700 — Principal payments under line of credit (79,500) (88,700) — Principal payments under mortgages and notes — (91,875) (2,542) Repurchases of convertible notes — — (5,882) Repurchases of common stock (31,277) (5,522) (3,092) Proceeds from employee stock purchase and option plans 4,032 821 1,427 Excess tax benefits from stock compensation 1,466 — — Net cash used in financing activities (30,898) (55,326) (47,224) Net increase (decrease) in cash and cash equivalents 1,613 (2,367) (22,744) Cash and cash equivalents at beginning of year 2,159 4,526 27,270 Cash and cash equivalents at end of year $3,772 $2,159 $4,526 Supplemental disclosures of cash flow information: Cash paid for interest, net of capitalized interest $348 $5,792 $6,349 Cash paid for income taxes, net $672 $590 $658 See accompanying notes to financial statements. F-6Table of ContentsTREX COMPANY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.BUSINESS AND ORGANIZATIONTrex Company, Inc. (together with its subsidiary, the “Company”), a Delaware corporation, was incorporated on September 4, 1998. The Companymanufactures and distributes wood/plastic composite products, as well as related accessories, primarily for residential and commercial decking and railingapplications. The majority of its products are manufactured in a proprietary process that combines waste wood fibers and reclaimed polyethylene (“PEmaterial”). The Company operates in one business segment. 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of AccountingThe accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the UnitedStates and include the accounts of the Company and its wholly-owned subsidiary, Trex Wood-Polymer Espana, S.L. (“TWPE”). Intercompany accounts andtransactions have been eliminated in consolidation.TWPE was formed to hold the Company’s 35% equity interest in Denplax, S.A. (“Denplax”), a joint venture with a Spanish Company responsible forpublic environmental programs in southern Spain and with an Italian equipment manufacturer. The joint venture was formed to recycle polyethylene at afacility in El Ejido, Spain. The Company’s investment in Denplax is accounted for using the equity method. During 2010, the Company determined that itsinvestment in Denplax and a related note receivable were no longer recoverable and recorded a $2.4 million charge to earnings to fully reserve the equityinvestment and note. Both the equity investment and note remain fully reserved as of December 31, 2013.Iron Deck AcquisitionOn May 2, 2011, the Company completed the acquisition of substantially all of the assets of Iron Deck Corporation, a manufacturer of steel deckframing systems located in Denver, Colorado, for approximately $2 million in cash plus the assumption of certain liabilities. As a result of the acquisition,the Company recorded an increase of $3.7 million to Goodwill. No other material tangible or intangible assets were identified. The provisions of the purchaseagreement allow for future payments contingent upon certain future sales targets. The contingent payments were estimated as purchase consideration at theacquisition date and may be revised if actual sales differ from projected sales. As a result of decreased near-term sales projections of steel deck framingsystems, the Company reduced its provision for future contingent payments and recorded a $0.2 million and $1.4 million benefit to selling, general andadministrative expenses in the years ended December 31, 2013 and 2012, respectively.Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to makeestimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differfrom those estimates.Cash and Cash EquivalentsCash equivalents consist of highly liquid investments purchased with original maturities of three months or less. F-7Table of ContentsConcentrations and Credit RiskThe Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and tradeaccounts receivable. The Company from time to time may have bank deposits in excess of insurance limits of the Federal Deposit Insurance Corporation. Asof December 31, 2013, substantially all deposits are maintained in one financial institution. The Company has not experienced any losses in such accountsand believes it is not exposed to any significant credit risk related to its cash and cash equivalents.The Company routinely assesses the financial strength of its customers and believes that its trade receivables credit risk exposure is limited. Tradereceivables are carried at the original invoice amount less an estimate made for payment discounts and doubtful accounts. A valuation allowance is providedfor known and anticipated credit losses and disputed amounts, as determined by management in the course of regularly evaluating individual customerreceivables. This evaluation takes into consideration a customer’s financial condition and credit history, as well as current economic conditions.In the years ended December 31, 2013, 2012 and 2011, sales to certain customers accounted for 10% or more of the Company’s total net sales. For theyear ended December 31, 2013, one customer of the Company represented approximately 28% of the Company’s net sales. For the year ended December 31,2012, two customers of the Company represented approximately 26% and 10% of the Company’s net sales. For the year ended December 31, 2011, onecustomer of the Company represented approximately 24% of the Company’s net sales. As of December 31, 2013, three customers represented 29%, 15%, and12%, respectively, of the Company’s accounts receivable balance.Approximately 44%, 40%, and 33% of the Company’s raw materials purchases for the years ended December 31, 2013, 2012 and 2011, respectively,were purchased from its four largest suppliers.InventoriesInventories are stated at the lower of cost (last-in, first-out, or “LIFO” method) or market value. The Company periodically reviews its inventory forslow moving or obsolete items and writes down the related products to estimated realizable value. The Company has not established significant reserves forestimated slow moving products or obsolescence. At December 31, 2013, the excess of the replacement cost of inventory over the LIFO value of inventory wasapproximately $24.5 million. Due to the nature of the LIFO valuation methodology, liquidations of inventories will result in a portion of the Company’s cost ofsales being based on historical rather than current year costs.The majority of the Company’s products are made in a proprietary process that combines waste wood fibers and reclaimed polyethylene. The Companygrinds up scrap materials generated from its manufacturing process and inventories deemed no longer salable and reintroduces the “reclaimed” material into themanufacturing process as a substitute for raw materials. The reclaimed material is valued at the costs of the raw material components of the material.Property, Plant and EquipmentProperty, plant and equipment are stated at historical cost. The costs of additions and improvements are capitalized, while maintenance and repairs areexpensed as incurred. Depreciation is provided using the straight-line method over the following estimated useful lives: Buildings 40 years Machinery and equipment 5-11 years Furniture and equipment 10 years Forklifts and tractors 5 years Computer equipment and software 3-5 years F-8Table of ContentsLeasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset.The Company reviews its long-lived assets, including property, plant and equipment, whenever events or changes in circumstances indicate that thecarrying amount of the assets may not be fully recoverable. To determine the recoverability of its long-lived assets, the Company evaluates the probability thatfuture estimated undiscounted net cash flows will be less than the carrying amount of the long-lived assets. If the estimated cash flows are less than thecarrying amount of the long-lived assets, the assets are written down to their fair value. The Company’s estimates of anticipated cash flows and the remainingestimated useful lives of long-lived assets could be reduced in the future. As a result, the carrying amount of long-lived assets could be reduced in the future.Contract Termination CostsIn anticipation of relocating its corporate headquarters, the Company entered into a lease agreement in 2005. The Company reconsidered and decided notto move its headquarters. The lease obligates the Company to lease 55,047 square feet of office space through June 30, 2019. As of December 31, 2013, theCompany has executed subleases for 41,701 square feet of the leased space and is currently marketing the remaining portion of the space to find a suitabletenant. The Company estimates that the present value of the estimated future sublease receipts, net of transaction costs, will be less than the Company’sremaining minimum lease payment obligations under its lease and has recorded a liability for the expected shortfall. During the three months endedSeptember 30, 2013, a subtenant defaulted on its sublease payments. As a result, the Company revised its estimate of sublease receipts and recorded a $1.1million charge to selling, general and administrative expenses to increase its liability.To estimate future sublease receipts for the periods beyond the term of the existing subleases, we have assumed that the existing subleases will berenewed or new subleases will be executed at rates consistent with rental rates in the current subleases or estimated market rates. However, management cannotbe certain that the timing of future subleases or the rental rates contained in future subleases will not differ from current estimates. Factors such as theavailability of commercial office space, poor economic conditions and subtenant preferences will influence the terms achieved in future subleases. Theinability to sublet the office space in the future or unfavorable changes to key management assumptions used in the estimate of the future sublease receiptsmay result in material charges to selling, general and administrative expenses in future periods.GoodwillGoodwill represents the excess of cost over net assets acquired resulting from the Company’s 1996 purchase of the Mobil Composite Products Divisionand the 2011 purchase of the assets of the Iron Deck Corporation. The Company evaluates the recoverability of goodwill annually or more frequently if anevent occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount. Goodwill isconsidered to be impaired when the net book value of the reporting unit exceeds its estimated fair value.In the evaluation of goodwill for impairment, the Company first compares the fair value of the reporting unit to its carrying value. If the carrying valueof a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and step two of the impairment analysis is performed. Instep two of the analysis, an impairment loss is recorded equal to the excess of the carrying value of the reporting unit’s goodwill over its implied fair valueshould such a circumstance arise.The Company measures fair value of the reporting unit based on a present value of future discounted cash flows and a market valuation approach. Thediscounted 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 togenerate in the future. Significant estimates in the discounted cash flows model include: the weighted average cost of capital; long-term F-9Table of Contentsrate of growth and profitability of the business; and working capital effects. The market valuation approach indicates the fair value of the business based on acomparison of the Company against certain market information. Significant estimates in the market approach model include identifying appropriate marketmultiples 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, 2013, 2012 and 2011, the Company completed its annual impairment test of goodwill and noted no impairment. TheCompany performs the annual impairment testing of its goodwill as of October 31 of each year. However, actual results could differ from the Company’sestimates and projections, which would affect the assessment of impairment. As of December 31, 2013, the Company had goodwill of $10.5 million that issubject to at least annual review of impairment.Product WarrantyThe Company warrants that its products will be free from material defects in workmanship and materials. This warranty generally extends for a periodof 25 years for residential use and 10 years for commercial use. (With respect to TrexTrim™ and Trex Reveal Railing, the warranty period is 25 years forboth residential and commercial use.) With respect to the Company’s Transcend, Enhance, Select and Universal Fascia product, the Company furtherwarrants 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 (providedthe 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. Ifthere is a breach of such warranties, the Company has an obligation either to replace the defective product or refund the purchase price. The Companyestablishes warranty reserves to provide for estimated future expenses as a result of product defects that result in claims. Reserve estimates are based onmanagement’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, on a quarterly basis based on the differences between actual experience and historical estimates.Treasury StockThe Company records the repurchase of shares of its common stock at cost. These shares are considered treasury stock, which is a reduction tostockholders’ equity. Treasury stock is included in authorized and issued shares but excluded from outstanding shares.Revenue RecognitionThe Company recognizes revenue when title is transferred to customers, which is generally upon shipment of the product to the customer. The Companydoes not grant contractual product return rights to customers other than pursuant to its product warranty. The Company does not expect future product returnsto be material and, consequently, does not maintain an allowance for product returns.The Company records all shipping and handling fees in sales and records all of the related costs in cost of sales. The Company offers sales incentiveprograms to dealers and distributors, including rebates, pricing discounts, favorable payment terms and cooperative advertising, many of which result incash consideration made to dealers and distributors. The Company accounts for consideration made pursuant to these programs in accordance withaccounting guidance that governs consideration given by a vendor to a customer. With the exception of cooperative advertising, the Company classifies salesincentives as a reduction in revenue in “Net sales.” Sales incentives are recorded in the period in which they are earned by customers. The Company’scooperative advertising program meets the requirements for exclusion from net sales and the costs are recorded as expenses in “Selling, general andadministrative expenses” in the accompanying consolidated statements of comprehensive income. Cooperative advertising costs are expensed as incurred. F-10®®®®Table of ContentsStock-Based CompensationThe Company measures share-based compensation at the grant date of the award based on the fair value, and is recognized on a straight line basis asexpense in the accompanying consolidated statements of comprehensive income over the vesting periods of the award, net of an estimated forfeiture rate.Income TaxesThe Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized based on thedifference 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 thedifferences reverse. In accordance with ASC 740, the Company assesses the likelihood that its deferred tax assets will be realized. Deferred tax assets arereduced by a valuation allowance when, after considering all available positive and negative evidence, it is determined that it is more likely than not that someportion, or all, of the deferred tax asset will not be realized. As of December 31, 2012, the Company had a full valuation allowance recorded against itsdeferred tax assets. The Company’s assessment gave significant weight to the negative evidence of its cumulative loss history in the three years endedDecember 31, 2012.As of December 31, 2013, the Company determined that it more likely than not will realize most of its deferred tax assets and, as a result, reversed asignificant portion of its valuation allowance. The analysis performed to assess the need for a valuation allowance included an evaluation of all availablepositive and negative evidence and the four possible sources of taxable income as identified in ASC 740, including the consideration of the positive evidence ofits cumulative income history in the three years ended December 31, 2013.Research and Development CostsResearch and development costs are expensed as incurred. For the years ended December 31, 2013, 2012 and 2011, research and development costs were$2.9 million, $2.9 million and $2.5 million, respectively, and have been included in “Selling, general and administrative expenses” in the accompanyingconsolidated statements of comprehensive income.Advertising CostsThe Company expenses its branding and advertising communication costs as incurred. Significant production costs are deferred and recognized asexpense in the period that the related advertisement is first used. At December 31, 2013 and December 31, 2012, $0.5 million and $0.6 million, respectively,were included in prepaid expenses for production costs.For the years ended December 31, 2013, 2012 and 2011, branding expenses, including advertising expenses as described above, were $20.9 million,$20.5 million and $19.4 million, respectively.Fair Value of Financial InstrumentsThe Company considers the recorded value of its financial assets and liabilities, consisting primarily of cash and cash equivalents, restricted cash,accounts receivable, accounts payable, accrued expenses and other current liabilities to approximate the fair value of the respective assets and liabilities atDecember 31, 2013 and 2012.Comprehensive Income (Loss)Comprehensive income (loss) consists of net income (loss) and net unrealized gains and losses on interest rate swap contracts. Amounts related tointerest rate swap contracts that were previously included in “Accumulated other comprehensive loss” and reclassified to “Interest expense, net” wereimmaterial for the year ended December 31, 2011. Comprehensive income consisted solely of net income for the years ended December 31, 2013 and 2012. F-11Table of Contents3.INVENTORIESInventories (at LIFO value) consist of the following as of December 31 (in thousands): 2013 2012 Finished goods $30,423 $23,172 Raw materials 16,502 18,068 Total FIFO inventories 46,925 41,240 Reserve to adjust inventories to LIFO value (24,497) (23,719) Total LIFO inventories $22,428 $17,521 Inventory is stated at the lower of LIFO cost or net realizable value. The Company periodically reviews its inventory for slow moving or obsolete itemsand writes down the related products to estimated net realizable value.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 yearcosts. During the year ended December 31, 2012, the Company recognized a $4.5 million benefit due to a reduction in inventory. No such inventory reductionoccurred during the years ended December 31, 2013 and 2011. 4.PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment consist of the following as of December 31 (in thousands): 2013 2012 Building and improvements $48,774 $57,435 Machinery and equipment 195,873 218,359 Furniture and fixtures 2,062 1,999 Forklifts and tractors 6,191 5,373 Computer equipment 8,353 7,371 Construction in process 7,619 1,855 Land 8,858 8,858 277,730 301,250 Accumulated depreciation (176,947) (196,825) Total property, plant and equipment, net $100,783 $104,425 The Company had construction in process as of December 31, 2013 of approximately $7.6 million. The Company expects that the construction inprocess will be completed and put into service in the year ending December 31, 2014.Depreciation expense for the years ended December 31, 2013, 2012 and 2011 totaled $15.9 million, $16.5 million and $18.4 million, respectively. F-12Table of Contents5.ACCRUED EXPENSESAccrued expenses consist of the following (in thousands): 2013 2012 Accrued compensation and benefits $9,135 $10,080 Accrued sales and marketing costs 5,269 3,402 Accrued legal contingency 3,174 — Accrued rent obligations 1,787 1,103 Accrued manufacturing expenses 1,107 1,350 Other 2,823 2,883 Total accrued expenses $23,295 $18,818 6.DEBTThe Company’s debt consists of a revolving credit facility. At December 31, 2013, the Company had no outstanding indebtedness, and the interest rateon the revolving credit facility was 1.9%.Revolving Credit FacilityOn January 6, 2012, the Company entered into an Amended and Restated Credit Agreement (the “Amended Credit Agreement”) with BB&T, as alender, Administrative Agent, Swing Line Lender, Letter of Credit Issuer and a Collateral Agent; Wells Fargo Capital Finance, LLC (“Wells Fargo”) as a lenderand a Collateral Agent; and BB&T Capital Markets (“BB&T Capital”), as Lead Arranger to amend the Credit Agreement. BB&T and Wells Fargo arereferenced herein as the “Lenders.” These new agreements replace the previous revolver note, the swing advance note and the letter of credit facility, in theirentireties and account for all of the Company’s debt capacity. No additional fees were due or owing as a result of the termination of the previous agreements.Under the Amended Credit Agreement, the Lenders agreed to provide the Company with one or more revolving loans in a collective maximum principalamount of $100 million (the “Revolver Loans”).Included within the Revolver Loan limit are sublimits for a Letter of Credit Facility in an amount not to exceed $15 million (the “Letter of CreditFacility”); and Swing Advances in an aggregate principal amount at any time outstanding not to exceed $5 million (the “Swing Advance Loan”). The RevolverLoans, the Letter of Credit Facility and the Swing Advance Loan are collectively referred to herein as the “Loans.” The Loans were obtained for the purpose ofraising working capital and refinancing the Company’s existing indebtedness.The Revolver Loans, the Swing Advances and the Letter of Credit Facility provide the Company, in the aggregate, the ability to borrow a principalamount not to exceed $100 million at any one time outstanding (the “Revolving Loan Limit”) (subject to certain Borrowing Base requirements as described inthe Amended Credit Agreement which include limits on Eligible Accounts and Inventory as described in the Amended Credit Agreement and any writtenagreement which may be executed from time to time by the Company and each of the Collateral Agents). The Company is not obligated to borrow any amountunder the Revolving Loan Limit. Within the Revolving Loan Limit, the Company may borrow or repay at any time or from time to time while the RevolvingLoans are in effect.Base Rate Advances (as defined in the Amended Credit Agreement) under the Revolver Loans and the Swing Advances accrue interest at the Base Rateplus the Applicable Margin (as defined in the Amended Credit Agreement) and Euro-Dollar Advances for the Revolver Loans and Swing Advances accrueinterest at the Adjusted London InterBank Offered Rate plus the Applicable Margin (as defined in the Amended Credit Agreement). Repayment of all thenoutstanding principal, interest, fees and costs is due on January 9, 2015. F-13Table of ContentsThe Letter of Credit Facility provides that upon the Company’s application, BB&T shall issue to the Company’s credit one or more letters of credit inthe aggregate amount of up to $15 million, or such lesser amount as may be required by law. The Company shall reimburse BB&T for all amounts payable,including interest, under a Letter of Credit at the earlier of (i) the date set forth in the application or (ii) on business day after the payment under such Letter ofCredit by BB&T.On February 26, 2013, the Company entered into a First Amendment (“First Amendment”) to the Amended Credit Agreement dated as of January 6,2012. Pursuant to the First Amendment, the Amended Credit Agreement was amended to temporarily increase the maximum amount of the Revolver Loansfrom $100 million to $125 million during the period from February 26, 2013 through and including June 30, 2013 to meet seasonal cash requirements andreduce certain interest rate margins and costs. In conjunction with the First Amendment, the Revolver Notes executed by the Company to each of BB&T andWells Fargo dated as of January 6, 2012 were amended and restated. The maximum amount of the Revolver Loans reverted to $100 million on July 1, 2013.On December 17, 2013, the Company entered into a Second Amendment (“Second Amendment”) to the Amended Credit Agreement dated as ofJanuary 6, 2012, as amended by the First Amendment dated February 26, 2013 (the “Credit Agreement”). Pursuant to the Second Amendment, the CreditAgreement was amended to temporarily increase the maximum amount of the Revolver Loans from $100 million to $125 million during the period fromJanuary 1, 2014 through and including June 30, 2014 to meet seasonal cash requirements. No other material changes were made to the terms of the CreditAgreement.Amounts drawn under the Revolver Loans are subject to a borrowing base consisting of certain accounts receivables, inventories, machinery andequipment and real estate. At December 31, 2013, the Company had no outstanding borrowings under the Revolver Loans and additional available borrowingcapacity of approximately $71.9 million.Compliance with Debt Covenants and RestrictionsThe Company’s ability to make scheduled principal and interest payments, borrow and repay amounts under any outstanding revolving credit facility,and continue to comply with any loan covenants depends primarily on the Company’s ability to generate sufficient cash flow from operations. To remain incompliance with financial covenants in the Credit Agreement, the Company is required to maintain specified financial ratios based on levels of debt, capital,net worth, fixed charges, and earnings (excluding extraordinary gains and extraordinary non-cash losses) before interest, taxes, depreciation and amortization,all of which are subject to the risks of the business, some of which are discussed in this report under “Risk Factors.” The Company was in compliance withall covenants contained in the Loans at December 31, 2013. Under the Credit Agreement, the material financial covenants and restrictions are as follows: (a)Minimum Consolidated Net Worth. The Company agreed that it will maintain Consolidated Net Worth, measured as of the end of each FiscalQuarter, commencing with the Fiscal Quarter ended December 31, 2011, of not less than $85 million. (b)Fixed Charge Coverage Ratio. The Company agreed that it will not permit the Fixed Charge Coverage Ratio to be less than 1.15 to 1.0, measured asof the end of each Fiscal Quarter, commencing with the Fiscal Quarter ended December 31, 2011. (c)Consolidated Debt to Consolidated EBITDA Ratio. The Company agreed that it will not permit the Consolidated Debt to Consolidated EBITDARatio to exceed 3.5 to 1.0 measured as of the end of each Fiscal Quarter (and in the case of Consolidated EBITDA, for the four-quarter periodending on such date) after the date on which the Senior Subordinated Notes have been redeemed in full.Failure to comply with the financial covenants in the Credit Agreement could be considered a default of the Company’s repayment obligations and,among other remedies, could accelerate payment of any amounts outstanding under the Credit Agreement. F-14Table of Contents7.STOCKHOLDERS’ EQUITYEarnings Per ShareThe following table sets forth the computation of basic and diluted earnings per share (in thousands, except share and per share data): Year Ended December 31, 2013 2012 2011 Numerator: Net income (loss) $34,598 $2,720 $(11,588) Denominator: Basic weighted average shares outstanding 16,794,841 16,123,592 15,388,456 Effect of dilutive securities: SARS and options 255,353 406,482 — Restricted stock 86,557 51,799 — Convertible notes — 482,983 — Diluted weighted average shares outstanding 17,136,751 17,064,856 15,388,456 Basic earnings (loss) per share $2.06 $0.17 $(0.75) Diluted earnings (loss) per share $2.02 $0.16 $(0.75) Diluted earnings per share is computed using the weighted average number of shares determined for the basic earnings per share computation plus thedilutive effect of common stock equivalents using the treasury stock method. The computation of diluted earnings per share excludes the following potentiallydilutive securities because the effect would be anti-dilutive: Year Ended December 31, 2013 2012 2011 Restricted stock and stock options 59,298 117,322 323,562 Stock appreciation rights 36,577 121,206 1,195,462 Stock Repurchase ProgramsOn August 1, 2013, the Company’s Board of Directors authorized the repurchase of up to $25 million of the Company’s outstanding common stockover a six-month period (the “August 2013 Stock Repurchase Program”). During the three months ended September 30, 2013, the Company repurchased561,255 shares for $25.0 million at an average price of $44.54 per share, which completed the authorization under the August 2013 Stock RepurchaseProgram.On October 24, 2013, the Company’s Board of Directors authorized an additional common stock repurchase program, expiring on February 10, 2014,of up to $30 million of the Company’s outstanding common stock (the “October 2013 Stock Repurchase Program”). The Company made no repurchasesunder the October 2013 Stock Repurchase Program before it expired.On February 19, 2014, the Company’s Board of Directors authorized an additional common stock repurchase program of up to $50 million of theCompany’s outstanding common stock. This authorization has no expiration date.Stock SplitOn February 19, 2014, the Board of Directors approved a two-for-one stock split of the Company’s common stock, par value $0.01. The stock splitwill be in the form of a stock dividend to be distributed on May 7, 2014 to stockholders of record at the close of business on April 7, 2014. The financialstatements presented in this Form 10-K appropriately do not reflect the effects of the stock split. F-15Table of Contents8.STOCK-BASED COMPENSATIONThe Company has one stock-based compensation plan, the 2005 Stock Incentive Plan (the “Plan”). The Plan is administered by the CompensationCommittee of the Company’s Board of Directors. Stock-based compensation is granted to officers, directors and certain key employees in accordance with theprovisions of the Plan. The Plan provides for grants of stock options, stock appreciation rights (“SARs”), restricted stock and performance share awards.The total aggregate number of shares of the Company’s common stock that may be issued under the Plan is 3,150,000 shares. For the years endedDecember 31, 2013, 2012 and 2011, stock compensation expense related to awards under the Plan was $3.8 million, $3.5 million and $3.1 million,respectively. This expense is included in “Selling, general and administrative expenses” in the accompanying consolidated statements of comprehensiveincome.Stock Options and Stock Appreciation RightsThe Plan authorizes the grant of stock options and SARs. Stock options are granted with an exercise price and SARs are granted with a grant price equalto the closing market price of the Company’s common stock on the date of grant. These awards have ten-year contractual terms and vest based on the terms ofthe individual awards. The options and SARs are generally forfeitable upon termination of a holder’s service as an employee or director, unless theindividual’s service is terminated due to retirement, death or permanent disability. The Company recognizes compensation cost on a straight-line basis over thevesting period for the award. Prior to 2006, the Company granted stock options and all stock options outstanding at December 31, 2013 are fully vested. In2006, the Company began the use of SARs instead of stock options.As of December 31, 2013, there was $1.5 million of unrecognized compensation cost related to SARs expected to be recognized over a weighted-averageperiod of approximately 1.7 years. The fair value of each stock option award and SAR is estimated on the date of grant using a Black-Scholes option-pricingmodel. For SARs issued in the years ended December 31, 2013, 2012 and 2011, respectively, the assumptions shown in the following table were used: Year Ended December 31, 2013 2012 2011 Dividend yield 0% 0% 0% Average risk-free interest rate 0.7% 0.8% 2.0% Expected term (years) 5 5 5 Volatility 63.7% 65.9% 65.0% Expected Volatility. Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or isexpected to fluctuate (expected volatility) during a period. The Company has used the historical volatility over the average expected term of the options grantedas the expected volatility.Risk-Free Interest Rate. This is the U.S. Treasury rate having a term that most closely resembles the expected term of the option.Expected Term. The expected term is the period of time that the SARs granted is expected to remain unexercised. SARs granted during the year endedDecember 31, 2013 had a maximum term of ten years. The Company used historical exercise behavior with further consideration given to the class ofemployees to whom the equity awards were granted to estimate the expected term of the SAR.The forfeiture rate is the estimated percentage of equity awards granted that are expected to be forfeited or canceled before becoming fully vested. TheCompany estimates forfeitures based on historical experience with further consideration given to the class of employees to whom the equity awards weregranted. F-16Table of ContentsThe weighted-average grant date fair value of SARs granted during the year ended December 31, 2013 was $43.89.Stock option activity under the Plan and a predecessor stock incentive plan is as follows: Options Weighted-AverageExercisePricePer Share Weighted-AverageRemainingContractualLife (Years) AggregateIntrinsicValue as ofDecember 31,2013 Outstanding at December 31, 2010 222,446 $33.20 Granted — $— Exercised (57,027) $27.94 Canceled (20,350) $31.71 Outstanding at December 31, 2011 145,069 $38.08 Granted — $— Exercised (23,189) $31.35 Canceled (1,242) $20.00 Outstanding at December 31, 2012 120,638 $40.37 Granted — $— Exercised (93,484) $49.83 Canceled (6,010) $36.31 Outstanding at December 31, 2013 21,144 $40.09 1.0 $833,948 Vested at December 31, 2013 21,144 $40.09 1.0 $833,948 Exercisable at December 31, 2013 21,144 $40.09 1.0 $833,948 SAR activity under the Plan is as follows: SARs Weighted-AverageGrantPricePer Share Weighted-AverageRemainingContractualLife (Years) AggregateIntrinsicValue as ofDecember 31,2013 Outstanding at December 31, 2010 1,246,495 $13.70 Granted 96,765 $25.76 Exercised (180,555) $28.34 Canceled — $— Outstanding at December 31, 2011 1,162,705 $13.17 Granted 100,914 $25.75 Exercised (567,953) $13.08 Canceled (8,476) $24.15 Outstanding at December 31, 2012 687,190 $18.56 Granted 60,588 $43.89 Exercised (374,667) $15.39 Canceled (3,514) $26.20 Outstanding at December 31, 2013 369,597 $25.85 6.9 $2,547,706 Vested at December 31, 2013 230,604 $21.37 6.0 $1,386,104 Exercisable at December 31, 2013 230,604 $21.37 6.0 $1,386,104 F-17Table of ContentsRestricted StockThe fair value of the restricted stock is determined based on the closing price of the Company’s shares on the grant date. Shares of restricted stock vestbased on the terms of the awards. Unvested restricted stock is generally forfeitable upon termination of a holder’s service as an employee, unless theindividual’s service is terminated due to retirement, death or permanent disability. In the years ended December 31, 2013, 2012 and 2011, 47,015, 156,927and 67,945 restricted shares were granted at $44.42, $27.18 and $25.86 per share, respectively. The total fair value of restricted shares vested for the yearsended December 31, 2013, 2012 and 2011 was $3.1 million, $2.5 million, and $4.1 million, respectively. In the years ended December 31, 2013, 2012 and2011, $2.5 million, $2.0 million and $1.6 million of compensation expense, respectively, was recognized related to restricted stock awards. At December 31,2013, there was $3.6 million of total compensation expense related to unvested restricted stock remaining to be recognized over a weighted-average period ofapproximately 1.9 years. Compensation expense related to restricted stock is included in “Selling, general and administrative expenses” in the accompanyingconsolidated statements of comprehensive income.Restricted stock activity under the Plan is as follows: RestrictedStock Weighted-AverageGrant PricePer Share Nonvested at December 31, 2010 244,436 $13.65 Granted 67,945 $25.86 Vested (151,706) $27.06 Forfeited (500) $17.41 Nonvested at December 31, 2011 160,175 $22.99 Granted 156,927 $27.18 Vested (94,705) $26.88 Forfeited (7,712) $25.47 Nonvested at December 31, 2012 214,685 $24.16 Granted 47,015 $44.42 Vested (69,797) $44.55 Forfeited (416) $32.32 Nonvested at December 31, 2013 191,487 $27.56 Employee Stock Purchase PlanThe Company has an employee stock purchase plan (“ESPP”) that permits eligible employees to purchase shares of common stock of the Company at apurchase 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. Eligibleemployees 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 dayof each quarter, each participant’s contribution account is used to purchase the maximum number of whole shares of common stock determined by dividingthe contribution account’s balance by the purchase price. The aggregate number of shares of common stock that may be purchased under the plan is 300,000.Through December 31, 2013, employees had purchased approximately 200,000 shares under the plan. In the years ended December 31, 2013, 2012 and 2011,compensation expense of $98.7 thousand, $65.3 thousand and $86.3 thousand, respectively, was recognized related to the discount on ESPP purchases.Compensation expense related to ESPP purchases is included in “Selling, general and administrative expenses” in the accompanying consolidated statementsof comprehensive income. F-18Table of Contents9.LEASESThe Company leases office space, storage warehouses and certain office and plant equipment under various operating leases. Minimum annualpayments under these non-cancelable leases as of December 31, 2013 were as follows (in thousands): Year Ending December 31, 2014 $6,803 2015 6,289 2016 5,362 2017 5,343 2018 5,277 Thereafter 15,198 Total minimum lease payments $44,272 For the years ended December 31, 2013, 2012 and 2011, the Company recognized rental expenses of approximately $6.5 million, $7.5 million and$8.0 million, respectively. 10.EMPLOYEE BENEFIT PLANSThrough December 31, 2013, the Company had a 401(k) Profit Sharing Plan for the benefit of all employees who meet certain eligibility requirements.The plan covered substantially all of the Company’s full-time employees. The plan documents provide for the Company to match contributions equal to 100%of an employee’s contribution to the plan up to 6% of base salary. The Company’s contributions to the plan totaled $1.8 million, $1.6 million and $1.6million for the years ended December 31, 2013, 2012 and 2011. 11.INCOME TAXESIncome tax provision (benefit) for the years ended December 31, 2013, 2012 and 2011 consists of the following (in thousands): Year Ended December 31, 2013 2012 2011 Current income tax provision (benefit): Federal $1,745 $303 $(2,738) State 404 88 (32) 2,149 391 (2,770) Deferred income tax provision (benefit): Federal (11,182) 510 164 State (1,516) 108 1 (12,698) 618 165 Total income tax provision (benefit) $(10,549) $1,009 $(2,605) F-19Table of ContentsThe income tax provision (benefit) differs from the amount of income tax determined by applying the U.S. federal statutory rate to income before taxes asa result of the following (in thousands): Year Ended December 31, 2013 2012 2011 U.S. federal statutory taxes $8,417 $1,305 $(4,826) State and local taxes, net of U.S. federal benefit 1,061 (418) (650) Permanent items 225 198 96 Federal credits (566) (54) (59) Other 244 46 (275) Increase (decrease) in valuation allowance (19,930) (68) 3,109 Total income tax provision (benefit) $(10,549) $1,009 $(2,605) Deferred tax assets and liabilities as of December 31, 2013 and 2012 consist of the following (in thousands): As of December 31, 2013 2012 Deferred tax assets: Net operating losses $483 $9,962 Warranty reserve 16,085 11,406 Stock-based compensation 2,383 2,654 Accruals not currently deductible and other 6,210 8,193 Inventories 3,843 5,008 State tax credit carryforwards 3,714 4,105 Gross deferred tax assets, before valuation allowance 32,718 41,328 Valuation allowance (4,201) (24,131) Gross deferred tax assets, after valuation allowance 28,517 17,197 Deferred tax liabilities: Depreciation and other (19,380) (20,758) Gross deferred tax liabilities (19,380) (20,758) Net deferred tax asset (liability) $9,137 $(3,561) The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized based on thedifference 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 thedifferences reverse. In accordance with ASC 740, the Company assesses the likelihood that its deferred tax assets will be realized. Deferred tax assets arereduced by a valuation allowance when, after considering all available positive and negative evidence, it is determined that it is more likely than not that someportion, or all, of the deferred tax asset will not be realized. As of December 31, 2012, the Company had a full valuation allowance recorded against itsdeferred tax assets. The Company’s assessment gave significant weight to the negative evidence of its cumulative loss history in the three years endedDecember 31, 2012.As of December 31, 2013, the Company determined that it more likely than not will realize most of its deferred tax assets and, as a result, reversed asignificant portion of its valuation allowance. The analysis performed to assess the need for a valuation allowance included an evaluation of the four possiblesources of taxable income as identified in ASC 740, including the consideration of the positive evidence of its cumulative income history in the three yearsended December 31, 2013.Based on this analysis, as well as due to the realization of certain deferred tax assets during 2013, the Company recorded a $19.9 million reduction ofits valuation allowance during the year ended December 31, 2013, $10.9 million of which was a direct result of the Company’s decision to exit a full valuationallowance. As F-20Table of Contentsof December 31, 2013, the remaining valuation allowance is $4.2 million, primarily related to certain state tax credits the Company estimates will expire beforethey are realized. The Company will analyze its position in subsequent reporting periods, considering all available positive and negative evidence, indetermining the expected realization of its deferred tax assets.The Company recognizes excess tax benefits for stock-based awards as an increase to additional paid-in capital only when realized. The Companyrealized $1.5 million of excess tax benefits during 2013 and, accordingly, recorded an increase to additional paid-in capital. Deferred tax assets are notrecognized for net operating loss carryfowards resulting from excess tax benefits related to exercised stock-based awards. As of December 31, 2013, deferredtax assets do not include $10.3 million of excess tax benefits that are a component of the Company’s net operating loss carryforwards. Accordingly, additionalpaid-in capital will increase up to an additional $10.3 million if and when such excess tax benefits are realized.The Company has federal net operating losses of $18.2 million at December 31, 2013 that begin to expire in 2028.As of December 31, 2013, the Company has effectively eliminated all unrecognized tax benefits. The following table illustrates changes to recordedunrecognized tax benefits for the years ended December 31, 2013, 2012 and 2011 (in thousands): Year Ended December 31, 2013 2012 2011 Unrecognized tax benefits balance at January 1 $— $60 $3,126 Gross increases related to prior year tax positions — — 1 Gross decreases related to prior year tax positions — (36) (2,760) Settlements — (22) (245) Lapse of statute of limitations — (2) (62) Unrecognized tax benefits balance at December 31 $— $— $60 The Company recognizes interest and penalties related to tax matters as a component of “Selling, general and administrative expenses” in theaccompanying consolidated statements of comprehensive income. As of December 31, 2013 and December 31, 2012, the Company had no material amountsaccrued for interest or penalties related to uncertain tax positions.The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxingauthorities. Such examinations may result in future assessments by these taxing authorities and the Company has accrued a liability when it believes that it isnot more likely than not that it will realize the benefits of tax positions that it has taken or for the amount of any tax benefit that exceeds the cumulativeprobability threshold in accordance with ASC 740. As of September 30, 2013, federal tax years 2010 through 2013 remain subject to examination, while taxreturns in certain state tax jurisdictions for years 2008 through 2013 remain subject to examination. The Company has been notified by the state of Michiganthat returns filed for tax years 2008 through 2011 will be examined during 2014. The Company believes that adequate provisions have been made forMichigan and all tax returns subject to examination.In September 2013, the Internal Revenue Service issued Treasury Decision 9636, which enacted final tax regulations regarding the capitalization andexpensing of amounts paid to acquire, produce, or improve tangible property. The regulations also include guidance regarding the retirement of depreciableproperty. The regulations are required to be effective in taxable years beginning on or after January 1, 2014. The Company is currently assessing the impact ofthe final regulations on its financial statements. F-21Table of Contents12.COMMITMENTS AND CONTINGENCIESLegal MattersOn January 19, 2009, a purported class action case was commenced against the Company in the Superior Court of California, Santa Cruz County, bythe lead law firm of Lieff, Cabraser, Heimann & Bernstein, LLP and certain other law firms (the “Lieff Cabraser Group”) on behalf of Eric Ross and BradleyS. Hureth and similarly situated plaintiffs. These plaintiffs generally alleged certain defects in the Company’s products, and that the Company failed toprovide adequate remedies for defective products. On February 13, 2009, the Company removed this case to the United States District Court, NorthernDistrict of California. On January 21, 2009, a purported class action case was commenced against the Company in the United States District Court, WesternDistrict of Washington by the law firm of Hagens Berman Sobol Shapiro LLP (“Hagens Berman”) on behalf of Mark Okano and similarly situated plaintiffs,generally alleging certain product defects in the Company’s products, and that the Company failed to provide adequate remedies for defective products. Thiscase was transferred by the Washington Court to the California Court as a related case to the Lieff Cabraser Group’s case.On July 30, 2009, the U.S. District Court for the Northern District of California preliminarily approved a settlement of the claims of the lawsuitcommenced by the Lieff Cabraser Group involving surface flaking of the Company’s product, and on March 15, 2010, it granted final approval of thesettlement.On March 25, 2010, the Lieff Cabraser Group amended its complaint to add claims relating to alleged defects in the Company’s products and allegedmisrepresentations relating to mold growth. Hagens Berman alleged similar claims in its original complaint. In its Final Order approving the surface flakingsettlement, the District Court consolidated these pending actions relating to the mold claims, and appointed Hagens Berman as lead counsel in this case. OnDecember 3, 2010, Hagens Berman filed an amended consolidated complaint in the United States District Court, Northern District of California relating to themold growth claims (now on behalf of Dean Mahan and other named plaintiffs).On December 15, 2010, a purported class action case was commenced against the Company in the United States District Court, Western District ofKentucky, by Cohen & Malad, LLP (“Cohen & Malad”) on behalf of Richard Levin and similarly situated plaintiffs in Kentucky, and on June 13, 2011, apurported class action was commenced against the Company in the Marion Circuit/Superior Court of Indiana by Cohen & Malad on behalf of EllenKopetsky and similarly situated plaintiffs in Indiana. On June 28, 2011, the Company removed the Kopetsky case to the United States District Court,Southern District of Indiana. (On September 3, 2013, the two lawsuits commenced by Cohen & Malad were settled.) On August 11, 2011, a purported classaction was commenced against the Company in the 50 Circuit Court for the County of Chippewa, Michigan on behalf of Joel and Lori Peffers and similarlysituated plaintiffs in Michigan. On August 26, 2011, the Company removed the Peffers case to the United States District Court, Western District ofMichigan. On April 4, 2012, a purported class action was commenced against the Company in Superior Court of New Jersey, Essex County by the lead lawfirm of Stull, Stull & Brody (the “Stull Group”) on behalf of Caryn Borger, M.D. and similarly situated plaintiffs in New Jersey. On May 1, 2012, theCompany removed the Borger case to the United States District Court, District of New Jersey. (On December 5, 2013, the lawsuit commenced by the StullGroup was settled.) The plaintiffs in these purported class actions alleged certain defects in the Company’s products and alleged misrepresentations relating tomold growth.On April 5, 2013, the Company signed a settlement agreement with Hagens Berman that settled the case pending in the United States District Court,Northern District of California on a nationwide basis, and the parties filed for preliminary approval of such settlement (the “nationwide settlement”). Thematerial terms of the nationwide settlement, as amended by an amended settlement agreement signed on September 3, 2013, are as follows: • Trex will make a one-time cash payment or the opportunity to receive other relief, including a rebate certificate on its newer-generation shelledproduct (Trex Transcend and Trex Enhance). This relief would be available for any consumer whose first-generation composite deckingproduct has a certain defined level of mold growth, color fading or color variation. F-22 th®®Table of Contents • Trex agreed to discontinue the manufacture of non-shelled decking, railing and fencing products (other than Trex Traditional Railing and TrexSeclusions Fencing) by December 31, 2013. • Trex agreed to provide a video demonstrating cleaning instructions for non-shelled products on its website, and to distribute warranty pads toretailers. • The cost to Trex is capped at $8.25 million plus $1.45 million in attorneys’ fees to be paid to the Plaintiffs’ counsel upon final approval of thenationwide settlement by the Court.The settlement agreement provides that the nationwide settlement applies to any Trex first-generation non-shelled composite decking, railing and fencingproduct purchased between August 1, 2004 and the date of preliminary approval of the nationwide settlement.On August 27, 2013, the Court entered an Order granting preliminary approval of the settlement agreement and on December 16, 2013, the Courtgranted final approval of the settlement. As of December 31, 2013, the Company has accrued a $3.2 million liability related to this litigation. It is reasonablypossible that the Company may incur costs in excess of the recorded amounts; however, the Company expects that the total net cost to resolve the lawsuit willnot exceed approximately $10 million.The Company has other lawsuits, as well as other claims, pending against it which are ordinary routine litigation and claims incidental to thebusiness. Management has evaluated the merits of these other lawsuits and claims, and believes that their ultimate resolution will not have a material effect onthe Company’s consolidated financial condition, results of operations, liquidity or competitive position.Purchase CommitmentsThe Company fulfills requirements for raw materials under both purchase orders and supply contracts. In the year ended December 31, 2013, theCompany purchased substantially all of its waste wood fiber requirements under purchase orders, which do not involve long-term supply commitments.Substantially all of the Company’s polyethylene (“PE material”) purchases are under short-term supply contracts that average approximately two years, forwhich pricing is negotiated as needed.The waste wood and PE material supply contracts generally provide that the Company is obligated to purchase all of the waste wood or PE material asupplier provides, if the waste wood or PE material meets certain specifications. The amount of waste wood and PE material the Company is required topurchase under these contracts varies with the production of its suppliers and, accordingly, is not fixed or determinable. As of December 31, 2013, theCompany has purchase commitments under raw material supply contracts of $19.2 million, $8.6 million, $1.5 million and $49 thousand for the yearsending December 31, 2014, 2015, 2016 and 2017, respectively.The Company outsources the production of certain products to third-party manufacturers under supply contracts that commit the Company to purchaseminimum levels for each year extending through 2015. The Company has purchase commitments under the third-party manufacturing contracts of $4.4million and $1.9 million for the years ending December 31, 2014 and 2015, respectively.Contract Termination CostsIn anticipation of relocating its corporate headquarters, the Company entered into a lease agreement in 2005. The Company reconsidered and decided notto move its headquarters. The lease obligates the Company to lease 55,047 square feet of office space through June 30, 2019. As of December 31, 2013, theCompany has executed subleases for 41,701 square feet of the leased space and is currently marketing the remaining portion of the space to find a suitabletenant. The Company estimates that the present value of the estimated future sublease receipts, net of transaction costs, will be less than the Company’sremaining minimum lease payment obligations under its F-23Table of Contentslease and has recorded a liability for the expected shortfall. During the three months ended September 30, 2013, a subtenant defaulted on its subleasepayments. As a result, the Company revised its estimate of sublease receipts and recorded a $1.1 million charge to selling, general and administrative expensesto increase its liability.To estimate future sublease receipts for the periods beyond the term of the existing subleases, the Company has assumed that the existing subleases willbe renewed or new subleases will be executed at rates consistent with rental rates in the current subleases or estimated market rates. However, managementcannot be certain that the timing of future subleases or the rental rates contained in future subleases will not differ from current estimates. Factors such as theavailability of commercial office space, poor economic conditions and subtenant preferences will influence the terms achieved in future subleases. Theinability to sublet the office space in the future or unfavorable changes to key management assumptions used in the estimate of the future sublease receiptsmay result in material charges to selling, general and administrative expenses in future periods.As of December 31, 2013, the minimum payments remaining under the Company’s lease over the years ending December 31, 2014, 2015, 2016, 2017,and 2018 are $1.7 million, $1.7 million, $1.8 million, $1.8 million and $1.8 million, respectively, and $0.9 million thereafter. The minimum receiptsremaining under the Company’s existing subleases over the years ending December 31, 2014, 2015, 2016, 2017, and 2018 are $1.3 million, $0.8 million,$0.7 million, $0.7 million and $0.7 million, respectively, and $0.4 million thereafter.The following table provides information about the Company’s liability under the lease (in thousands): 2013 2012 Balance as of January 1, $1,103 $452 Net rental receipts (payments) (558) (115) Accretion of discount 98 39 Increase in net estimated contract termination costs 1,144 727 Balance as of December 31, $1,787 $1,103 Product WarrantyThe Company warrants that its products will be free from material defects in workmanship and materials. This warranty generally extends for a periodof 25 years for residential use and 10 years for commercial use. (With respect to TrexTrim™ and Trex Reveal Railing, the warranty period is 25 years forboth residential and commercial use.) With respect to the Company’s Transcend, Enhance, Select and Universal Fascia product, the Company furtherwarrants 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 (providedthe 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. Ifthere is a breach of such warranties, the Company has an obligation either to replace the defective product or refund the purchase price.Historically, the Company has not had material numbers of claims submitted or settled under the provisions of its product warranties, with theexception of claims related to material produced at its Nevada facility prior to 2007 that exhibits surface flaking. The Company continues to receive and settlesurface flaking claims and maintains a warranty reserve to provide for the settlement of these claims. In 2009, the Company agreed to a settlement of a classaction lawsuit covering the surface defect, stipulating its responsibilities with regard to such claims. Estimating the warranty reserve for surface flakingclaims requires management to estimate (1) the average cost to settle each claim and (2) the number of claims to be settled with payment, both of which aresubject to variables that are difficult to estimate.The cost per claim varies due to a number of factors, including the size of affected decks, the type of replacement material used, the cost of productionof replacement material and the method of claim settlement. Although the cost per claim does vary, it is less volatile and more predictable than the number ofclaims to be settled with payment, which is inherently uncertain. F-24®®®®Table of ContentsThe key component driving the Company’s potential liability is the number of claims that will ultimately require payment. To estimate the number offuture paid claims, the Company utilizes actuarial techniques to quantify both the expected number of claims to be received and the percentage of those claimsthat will ultimately require payment. Estimates for both of these elements (number and percentage of claims that will ultimately require payment) are quantifiedusing a range of assumptions derived from the recent claim count history and the identification of factors influencing the claim counts, including thedownward trend in received claims due to the passage of time since production of the suspect material. For each of the various parameters used in the analysis,the assumed values in the actuarial valuation produce results that represent the Company’s best estimate for the ultimate number of claims to be settled withpayment.A number of factors make estimates of the number of claims to be received inherently uncertain. The Company believes that production of the suspectmaterial was confined to material produced from its Nevada facility prior to 2007, but is unable to determine the amount of suspect material produced or theexact time it takes for surface flaking to become evident in the suspect material and materialize as a claim. Furthermore, the aforementioned 2009 class actionsettlement and related public notices led to a significant increase in claims received in 2009 and disrupted the claims data and settlement patterns. Lastly, theCompany is not aware of any analogous industry data that might be referenced in predicting future claims to be received.The number of surface flaking claims received peaked in 2009 in conjunction with the class action settlement and related public notices and the trend ofclaims received began to decline significantly in 2010 and 2011, consistent with the Company’s belief that the effect of the 2009 spike in claims was largelyan acceleration of claims previously expected to be filed in future periods. As a result of the effects of the class action settlement and because the suspectmaterial had not been produced since prior to 2007, the Company anticipated that the rate of decline in claims received would accelerate and the number ofclaims received would continue to decline significantly in 2012.The Company monitors surface flaking claims activity each quarter for indications that its estimate of the number of claims expected requires revision.Due to extensive use of decks during the summer outdoor season, variance to annual claims expectations is typically observed during the latter part of theCompany’s fiscal year. During the third quarter of 2012, based on an analysis of additional claims activity, the Company observed that the actual rate ofdecline in claims received in 2012 would fall short of its anticipated rate of decline. As a result, the Company revised its estimate of the future claims to bereceived to reflect a rate of decline that incorporated levels experienced in 2012. Although the number of claims expected to be received continued to decline eachyear, the effect of reducing the anticipated rate of decline increased the total number of claims expected in future years. As a result of these changes in estimate,the Company recorded an increase to the warranty reserve of $20 million during the three months ended September 30, 2012.During the third quarter of 2013, the number of claims received was significantly greater than the Company’s prior estimates. Although the number ofclaims received during the first nine months of 2013 remained lower than those received during the first nine months of 2012, the number of claims receivedduring the third quarter of 2013 exceeded those received during the third quarter of 2012. This represented the first quarterly year-over-year increase in thenumber of claims received since the 2009 class action settlement was made public.The Company believes that this unexpected increase in claims was due primarily to a response to communications made by the Company in July 2013informing homeowners of potential hazards associated with decking products exhibiting surface flaking that are not timely replaced. These communicationsincluded a public press release and over 10,000 letters sent to homeowners that previously filed surface flaking claims. In addition to contributing to theincrease in new claims received, these communications resulted in the reopening of a significant number of claims previously closed. Furthermore, althoughnot directly related to the surface flaking issue, in August 2013, the United States District Court, Northern District of California granted preliminary approvalof a settlement agreement related to cases in which plaintiffs generally alleged certain defects in the F-25Table of ContentsCompany’s products and alleged misrepresentations relating to mold growth. The Company believes that public notices made subsequent to the Courtapproval increased homeowner awareness of product-related issues and contributed to the increased number of surface flaking claims received during the thirdquarter of 2013. As a result of these public communications, the Company expects to experience elevated claims activity, both in new claims received andreopened claims, for the near future, after which it expects a return to previously-experienced rates of decline. However, the elevated claims activity resulted in amaterial increase in the expected number of claims to settle with payment.In addition to the increased number of expected claims to be settled with payment, the Company has experienced an increase in the average cost to settle aclaim during 2013. Analysis of claims data indicates that the increased cost per claim is driven primarily by an increase in the average size of settled claims,which the Company believes reflects a shift from partial deck replacements to full deck replacements. Also, the Company’s August 2013 decision todiscontinue production of the Accents product, which is currently used as replacement material for surface flaking claims, necessitated a change in theaverage cost expectations due to the implications of transitioning to alternative replacement material.Due to the unfavorable claims and cost experience during the three months ended September 30, 2013, as described above, the Company recorded a $20million increase to the warranty reserve.The Company’s analysis is based on currently known facts and a number of assumptions. Projecting future events such as the number of claims to bereceived, 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 thanthose projected which could materially affect the Company’s financial condition, results of operations or cash flow. The Company estimates that the numberof claims received will decline over time. If the level of claims received does not diminish consistent with its expectations or if the cost to settle claims increases,it could result in additional increases to the warranty reserve and reduced earnings and cash flows in future periods. The Company estimates 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 $4.1 millionchange in the warranty reserve.The following is a reconciliation of the Company’s warranty reserve (in thousands): 2013 2012 Beginning balance, January 1 $28,987 $16,345 Changes in estimates related to pre-existing warranties 20,000 21,487 Settlements made during the period (8,175) (8,845) Ending balance, December 31 $40,812 $28,987 13.INTERIM FINANCIAL DATA (Unaudited) Three Months Ended December 31,2013 (a) September 30,2013 (b) June 30,2013 March 31,2013 December 31,2012 September 30,2012 (c) June 30,2012 March 31,2012 (In thousands, except per share data) Net sales 63,831 72,249 98,551 107,880 46,155 70,819 94,279 96,100 Gross profit 19,685 151 36,922 41,860 13,426 2,146 33,590 35,419 Net income (loss) 15,103 (15,298) 13,224 21,569 (3,619) (14,312) 8,339 12,311 Basic net income (loss) per share $0.91 $(0.91) $0.78 $1.28 $(0.22) $(0.86) $0.54 $0.80 Diluted net income (loss) per share $0.90 $(0.91) $0.76 $1.25 $(0.22) $(0.86) $0.48 $0.74 F-26®Table of ContentsThe Company’s net sales, gross profit and income from operations have historically varied from quarter to quarter. Such variations are oftenattributable to seasonal trends in the demand for Trex. The Company has historically experienced lower net sales during the fourth quarter because holidaysand adverse weather conditions in certain regions reduce the level of home improvement and construction activity. (a)Three months ended December 31, 2013 was materially affected by a $10.9 million benefit as a direct result of the Company’s decision to exit a fullvaluation allowance.(b)Three months ended September 30, 2013 was materially affected by a pre-tax increase of $20.0 million to the warranty reserve.(c)Three months ended September 30, 2012 was materially affected by a pre-tax increase of $20.0 million to the warranty reserve. F-27Table of ContentsTREX COMPANY, INC.SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES(In Thousands) Descriptions Balance atBeginningof Period Additions(Reductions)Charged toCost andExpenses Other Deductions Balanceat Endof Period Year ended December 31, 2013: Allowance for doubtful accounts (a) $7 $(3) $— $(4) $— Warranty reserve $28,987 $20,000 $— $(8,175) $40,812 Income tax valuation allowance $24,131 $— $— $(19,930) $4,201 Year ended December 31, 2012: Allowance for doubtful accounts (a) $292 $(362) $— $77 $7 Warranty reserve $16,345 $21,487 $— $(8,845) $28,987 Income tax valuation allowance $24,199 $(68) $— $— $24,131 Year ended December 31, 2011: Allowance for doubtful accounts (a) $335 $23 $— $(66) $292 Warranty reserve $14,472 $9,976 $— $(8,103) $16,345 Income tax valuation allowance $21,090 $3,109 $— $— $24,199 (a)Reserve related to accounts receivable F-28Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. Trex Company, Inc.Date: February 24, 2014 By: /s/ RONALD W. KAPLAN Ronald W. KaplanChairman, President and Chief Executive Officer(Duly Authorized Officer)Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed as of February 24, 2014 by the following persons onbehalf of the registrant and in the capacities indicated. Signature Title/s/ RONALD W. KAPLAN Ronald W. Kaplan Chairman, President and Chief Executive Officer (Principal Executive Officer);Director/s/ JAMES E. CLINE James E. Cline Senior Vice President and Chief Financial Officer (Principal Financial Officer andPrincipal Accounting Officer)/s/ PAUL A. BRUNNER Paul A. Brunner Director/s/ MICHAEL F. GOLDEN Michael F. Golden Director/s/ JAY M. GRATZ Jay M. Gratz Director/s/ FRANK H. MERLOTTI, JR. Frank H. Merlotti, Jr. Director/s/ RICHARD E. POSEY Richard E. Posey Director/s/ PATRICIA B. ROBINSON Patricia B. Robinson DirectorTable of ContentsEXHIBIT INDEX ExhibitNumber Exhibit Description 3.1 Restated Certificate of Incorporation of Trex Company, Inc. (the “Company”). Filed as Exhibit 3.1 to the Company’s Registration Statementon Form S-1 (No. 333-63287) and incorporated herein by reference. 3.2 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 7, 2008and incorporated herein by reference. 4.1 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. 4.2 Indenture, dated as of June 18, 2007, between Trex Company, Inc. and The Bank of New York, as trustee. Filed as Exhibit 4.1 to theCompany’s Current Report on Form 8-K filed on June 19, 2007 and incorporated herein by reference. 4.3 Supplemental Indenture, dated as of June 18, 2007, between Trex Company, Inc. and The Bank of New York, as trustee, including theform of 6.00% Convertible Senior Subordinated Note due 2012. Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed onJune 19, 2007 and incorporated herein by reference. 4.4 Credit Agreement dated as of November 4, 2009 between the Company and Branch Banking and Trust Company as Administrative Agentand Letter of Credit Issuer, BB&T Capital Markets as Lead Arranger and the Lenders listed on the signature pages thereof. Filed as Exhibit4.1 to the Company’s Current Report on Form 8-K filed on November 6, 2009 and incorporated herein by reference. 4.5 Swing Advance Note dated November 4, 2009 payable by the Company Inc. to Branch Banking and Trust Company in the amount of thelesser of $5,000,000 or the outstanding swing advances made by Branch Banking and Trust Company. Filed as Exhibit 4.6 to theCompany’s Current Report on Form 8-K filed on November 6, 2009 and incorporated herein by reference. 4.6 First Amendment, dated October 28, 2011, of Credit Agreement dated as of November 4, 2009 between the Company and Branch Bankingand Trust Company as Administrative Agent, Letter of Credit Issuer and Lender, and BB&T Capital Markets Letter as Lead Arranger.Filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 and incorporatedherein by reference. 4.7 Revolver Note dated October 28, 2011 payable by the Company to Branch Banking and Trust Company in the amount of the lesser of$40,000,000 or the outstanding revolver advances made by Branch Banking and Trust Company. Filed as Exhibit 4.2 to the Company’sQuarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 and incorporated herein by reference. 4.8 Reducing Revolver Note dated October 28, 2011 payable by the Company to Branch Banking and Trust Company in the amount of thelesser of $15,000,000 or the outstanding revolver advances made by Branch Banking and Trust Company. Filed as Exhibit 4.3 to theCompany’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 and incorporated herein by reference. 4.9 Amended and Restated Security Agreement between the Company and Branch Banking and Trust Company as Collateral Agent for theLenders, dated as of November 4, 2009. Filed as Exhibit 4.7 to the Company’s Current Report on Form 8-K filed on November 6, 2009and incorporated herein by reference.Table of ContentsExhibitNumber Exhibit Description 4.10 Amended and Restated Credit Line Deed of Trust, dated November 4, 2009, by and among the Company, as grantor, BB&T-VA CollateralService Corporation, as trustee, and Branch Banking and Trust Company, as Collateral Agent for the Lenders, as Beneficiary relating to realproperty partially located in the County of Frederick, Virginia and partially located in the City of Winchester, Virginia. Filed as Exhibit 4.8 tothe Company’s Current Report on Form 8-K filed on November 6, 2009 and incorporated herein by reference. 4.11 Deed of Trust, dated November 4, 2009, by and among the Company, as grantor, Eric L. Sappenfield, as trustee, and Branch Banking andTrust Company, as Collateral Agent for the Lenders, as Beneficiary relating to real property located in the County of De Soto, Mississippi.Filed as Exhibit 4.9 to the Company’s Current Report on Form 8-K filed on November 6, 2009 and incorporated herein by reference. 4.12 Amended and Restated Credit Agreement dated as of January 6, 2012 between the Company and Branch Banking and Trust Company, as aLender, Administrative Agent, Swing Line Lender, Letter of Credit Issuer and a Collateral Agent; Wells Fargo Capital Finance, LLC, as aLender and a Collateral Agent; and BB&T Capital Markets, as Lead Arranger. Filed as Exhibit 4.1 to the Company’s Current Report on Form8-K filed on January 12, 2012 and incorporated herein by reference. 4.13 Revolver Note dated January 6, 2012 payable by the Company to Branch Banking and Trust Company in the amount of the lesser of$55,000,000 or the outstanding revolver advances made by Branch Banking and Trust Company. Filed as Exhibit 4.2 to the Company’sCurrent Report on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.14 Revolver Note dated January 6, 2012 payable by the Company to Wells Fargo Capital Finance, LLC in the amount of the lesser of$45,000,000 or the outstanding revolver advances made by Wells Fargo Capital Finance, LLC. Filed as Exhibit 4.3 to the Company’s CurrentReport on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.15 Swing Advance Note dated January 6, 2012 payable by the Company to Branch Banking and Trust Company in the amount of the lesser of$5,000,000 or the outstanding swing advances made by Branch Banking and Trust Company. Filed as Exhibit 4.4 to the Company’sCurrent Report on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.16 Amended and Restated Security Agreement dated as of January 6, 2012 between the Company, as debtor, and Branch Banking and TrustCompany as Collateral Agent for Branch Banking and Trust Company and Wells Fargo Capital Finance, LLC. Filed as Exhibit 4.5 to theCompany’s Current Report on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.17 Modification to Amended and Restated Credit Line Deed of Trust, dated as of January 6, 2012, by and among the Company as grantor,BB&T-VA Collateral Service Corporation, as trustee, and Branch Banking and Trust Company, as Collateral Agent for Branch Bankingand Trust Company and Wells Fargo Capital Finance, LLC, as Beneficiary relating to real property partially located in the County ofFrederick, Virginia and partially located in the City of Winchester, Virginia. Filed as Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.18 Deed of Trust, dated as of January 6, 2012, by and among the Company as grantor, First American Title Insurance Company, as trustee,and Branch Banking and Trust Company, as Collateral Agent for Branch Banking and Trust Company and Wells Fargo Capital Finance,LLC, as Beneficiary relating to real property located in the County of Fernley, Nevada. Filed as Exhibit 4.7 to the Company’s Current Reporton Form 8-K filed on January 12, 2012 and incorporated herein by reference.Table of ContentsExhibitNumber Exhibit Description 4.19 First Amendment dated February 26, 2013 to Amended and Restated Credit Agreement dated as of January 6, 2012 between the Companyand Branch Banking and Trust Company, as a Lender and Administrative Agent, and Wells Fargo Capital Finance, LLC as a Lender. Filedas Exhibit 4.1 to the Company’s Amended Current Report on Form 8-K filed April 18, 2013 and incorporated herein by reference. 4.20 Revolver Note dated February 26, 2013 payable by Trex Company, Inc. to Branch Banking and Trust Company in the amount of the lesserof $67,500,000 or the outstanding revolver advances made by Branch Banking and Trust Company. Filed as Exhibit 4.2 to the Company’sCurrent Report on Form 8-K filed February 26, 2013 and incorporated herein by reference. 4.21 Revolver Note dated February 26, 2013 payable to Trex Company, Inc. to Wells Fargo Capital Finance, LLC in the amount of the lesser of$57,500,000 or the outstanding revolver advances made by Wells Fargo Capital Finance, LLC. Filed as Exhibit 4.3 to the Company’sCurrent Report on Form 8-K filed February 26, 2013 and incorporated herein by reference. 4.22 Second Amendment dated December 17, 2013 to Amended and Restated Credit Agreement dated as of January 6, 2012, as amended by a FirstAmendment dated February 26, 2013, between the Company and Branch Banking and Trust Company, as a Lender and AdministrativeAgent, and Wells Fargo Capital Finance, LLC as a Lender. Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filedDecember 19, 2013 and incorporated herein by reference.10.1 Description of Management Compensatory Plans and Arrangements. Filed herewith. **10.2 Trex Company, Inc. 2005 Stock Incentive Plan. Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterlyperiod ended March 31, 2013 and incorporated herein by reference. **10.3 Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors. Filed as Exhibit 10.1 to the Company’s QuarterlyReport on Form 10-Q for the quarterly period ended September 30, 2012 and incorporated herein by reference. **10.4 Form of Trex Company, Inc. 2005 Stock Incentive Plan Non-Incentive Stock Option Agreement. Filed as Exhibit 10.1 to the Company’sQuarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 and incorporated herein by reference. **10.5 Form of Trex Company, Inc. 2005 Stock Incentive Plan Stock Appreciation Rights Agreement. Filed as Exhibit 10.5 to the Company’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2011 and incorporated herein by reference. **10.6 Form of Trex Company, Inc. 2005 Stock Incentive Plan Restricted Stock Agreement. Filed as Exhibit 10.7 to the Company’s Annual Reporton Form 10-K for the fiscal year ended December 31, 2011 and incorporated herein by reference. **10.7 Form of Trex Company, Inc. 2005 Stock Incentive Plan Time-Based Restricted Stock Agreement. Filed herewith. **10.8 Form of Trex Company, Inc. 2005 Stock Incentive Plan Performance-Based Restricted Stock Agreement. Filed herewith. **10.9 Form of Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors Non-Incentive Stock Option Agreement forDirectors. Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 andincorporated herein by reference. **10.10 Form of Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors Stock Appreciation Rights Agreement. Filed asExhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 and incorporated herein byreference. **Table of ContentsExhibitNumber Exhibit Description 10.11 Form of Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors Restricted Stock Agreement. Filed as Exhibit10.10 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and incorporated herein by reference. ** 10.12 Amendment and Restatement of Employment Agreement, dated as of July 24, 2012, between Trex Company, Inc. and Ronald W. Kaplan.Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 and incorporatedherein by reference. ** 10.13 Amendment and Restatement of Change in Control Severance Agreement, dated as of August 3, 2011, between Trex Company, Inc. andRonald W. Kaplan. Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 9, 2011 and incorporated herein byreference. ** 10.14 Form of Amendment and Restatement of Change in Control Severance Agreement between Trex Company, Inc. and Officers other than theChief Executive Officer. Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on August 9, 2011 and incorporated hereinby reference. ** 10.15 Form of Severance Agreement between Trex Company, Inc. and Officers other than the Chief Executive Officer. Filed as Exhibit 10.1 to theCompany’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 and incorporated herein by reference. ** 10.16 Retention Agreement, dated as of July 24, 2012, between Trex Company, Inc. and Ronald W. Kaplan. Filed as Exhibit 10.3 to the Company’sQuarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 and incorporated herein by reference. ** 10.17 Retention Agreement, dated as of July 24, 2012, between Trex Company, Inc. and James E. Cline. Filed as Exhibit 10.4 to the Company’sQuarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 and incorporated herein by reference. ** 10.18 Retention Agreement, dated as of July 24, 2012, between Trex Company, Inc. and William R. Gupp. Filed as Exhibit 10.5 to the Company’sQuarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 and incorporated herein by reference.*, ** 10.19 Retention Agreement, dated as of July 24, 2012, between Trex Company, Inc. and F. Timothy Reese. Filed as Exhibit 10.6 to the Company’sQuarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 and incorporated herein by reference. ** 10.20 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 endedDecember 31, 2008 and incorporated herein by reference. 10.21 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 endedDecember 31, 2008 and incorporated herein by reference. 10.22 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 yearended December 31, 2008 and incorporated herein by reference. 10.23 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 fiscalyear ended December 31, 2008 and incorporated herein by reference. 10.24 Form of Trex Company, Inc. 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. 10.25 Deed of Lease, dated June 15, 2000, between TREX Company, LLC and Space, LLC. Filed as Exhibit 10.16 to the Company’s AnnualReport on Form 10-K for the fiscal year ended December 31, 2000 and incorporated herein by reference.Table of ContentsExhibitNumber Exhibit Description 10.26 Amendment, dated February 22, 2010, of Deed of Lease dated as of June 15, 2000, between Trex Company, Inc, as successor by mergerto Trex Company, LLC, and TC.V.LLC, as successor to Space, LLC. Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form10-Q for the quarterly period ended March 31, 2010 and incorporated herein by reference. 10.27 Deed of Lease, dated as of July 27, 2005, between the Company and 1 Dulles Town Center, L.L.C. Filed as Exhibit 10.34 to theCompany’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 and incorporated herein by reference.* 21 Subsidiaries of the Company. Filed herewith. 23 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. Filed herewith. 31.1 Certification of Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. Filedherewith. 31.2 Certification of Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. Filedherewith. 32 Certifications pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. § 1350. Filed herewith.101.INS XBRL Instance Document. Filed herewith.101.SCH XBRL Taxonomy Extension Schema Document. Filed herewith.101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.101.DEF XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.101.LAB XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith. *Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidentialtreatment.**Management contract or compensatory plan or agreement.Exhibit 10.1Trex Company, Inc.Description of Management Compensatory Plans and ArrangementsComponents of Executive Compensation.In accordance with the rules of the New York Stock Exchange, all components of compensation for the chief executive officer and other executive officers ofTrex Company (the “Company”) are determined by the Compensation Committee of the Board of Directors, all of whom meet the independence requirementsprescribed by such rules.The Company’s executive compensation program includes a base salary, annual cash incentive and long-term equity incentive compensation in the form ofstock appreciation right awards and restricted shares issued under the Trex Company, Inc. 2005 Stock Incentive Plan (the “Stock Incentive Plan”).Base Salary. Base salaries are the only non-variable element of the Company’s total compensation. They reflect each executive officer’s responsibilities, theimpact of each executive officer’s position, and the contributions each executive officer delivers to the Company. Salaries are determined by competitive levelsin the market for executives with comparable responsibilities and job scope based on the Company’s peer group and the results of executive compensationsurveys, as well as the Company’s internal equity considerations. Each year, at its December meeting, the Compensation Committee reviews and establishesthe base salaries of the Company’s executive officers for the next calendar year. Salary increases, if any, are based on individual performance, marketconditions and Company performance. To gauge market conditions, the Compensation Committee evaluates the peer group and market data compiled by itsindependent compensation consultant. Base salaries are set upon review of the peer group and market data provided to the Compensation Committee uponconsideration of the executive officer’s experience, tenure, performance and potential.Annual Cash Incentive. The Company pays annual cash incentive to its chief executive officer, other executive officers, and other key employees generallybased upon the achievement of the Company’s planned pretax earnings and cash-flow objectives for the fiscal year, which are approved by the CompensationCommittee no later than the first quarter of the year.For each fiscal year, each participant in the plan is assigned a “target incentive,” which is expressed as a percentage of the participant’s annual base salary.The cash incentive amount paid to a participant is determined by multiplying their target incentive by a performance percentage, which is calculated based onthe extent to which the planned pretax earnings and cash flow objectives are achieved (excluding any items determined by the Compensation Committee to beextraordinary), subject to the discretion of the Compensation Committee to increase or decrease such amount. Cash incentive payments are conditional uponthe participant’s continued employment by the Company through the date of grant, and are pro-rated for employees who have served for less than a full year.Long-Term Equity Incentive Compensation. The Company maintains a long-term equity incentive compensation plan for the benefit of its chief executiveofficer, other executive officers, and other key employees. Awards under the plan are made under the Stock Incentive Plan by the Compensation Committee,and for all grants prior to 2014, were a mix of 50% stock appreciation rights and 50% time-based restricted shares. Beginning with grants in 2014, suchawards shall be a mix of 50% time-based restricted stock and 50% performance-based restricted stock. The total target long-term incentive award for eachparticipant in the plan is expressed as a percentage of the participant’s base salary. The grant of restricted shares is conditional upon the attainment of a certainpretax earnings target (excluding any items determined by the Compensation Committee to be extraordinary), subject to the discretion of the CompensationCommittee to increase or decrease the award.Personal Benefits and Perquisites. The Company maintains a limited number of benefit programs available solely to the Company’s executive officers. Thepersonal benefits are considered to constitute a part of the Company’s overall program and are presented in this light as part of the total compensation packageapproved by the Compensation Committee at the time of an executive officer’s hiring or promotion, as part of the Compensation Committee’s review of eachexecutive officer’s annual total compensation, and in compensation discussions with executive officers.Other Compensatory PlansThe Company’s executive officers also are eligible to participate in the Company’s 401(k) plan, which is available to all regular Company employees.Exhibit 10.7TREX COMPANY, INC.2005 STOCK INCENTIVE PLANRESTRICTED STOCK AGREEMENTTIME-BASED SHARESTrex Company, Inc., a Delaware corporation (the “Company”), hereby grants shares of its common stock, $.01 par value (“Shares”), to the Granteenamed below, subject to the vesting conditions set forth in the attachment. Additional terms and conditions of the grant are set forth in this cover sheet, in theattachment and in the Company’s 2005 Stock Incentive Plan (the “Plan”).Grant Date: Name of Grantee: Number of Shares of Stock Covered by Grant: Purchase Price per Share of Stock: $.01Vesting Schedule: Vesting Date Number of Shares ,20 # ,20 # ,20 #By signing this cover sheet, you agree to all of the terms and conditions described in the attached Agreement and in the Plan. Youacknowledge that you have carefully reviewed the Plan, and agree that the Plan will control in the event any provision of this Agreement shouldappear to be inconsistent. Grantee: (Signature)Company: Ronald W. Kaplan President and Chief Executive OfficerThis is not a stock certificate or a negotiable instrument. 1TREX COMPANY, INC.2005 STOCK INCENTIVE PLANRESTRICTED STOCK AGREEMENTTIME-BASED SHARES Restricted Stock/Nontransferability This grant is an award of the number of Shares set forth on the cover sheet, at the purchase price set forth on the cover sheet,and subject to the vesting conditions described below (the “Restricted Stock”). To the extent not yet vested, your Restricted Stock may not be transferred, assigned, pledged or hypothecated, whether byoperation of law or otherwise, nor may the Restricted Stock be made subject to execution, attachment or similar process.Issuance and Vesting The Company will issue your Restricted Stock in your name as of the Grant Date. Your right to the Shares will vest as to thirty three and one-third percent (33%) of the total number of Shares covered by thisgrant, on each anniversary of the grant, as shown on the cover sheet; provided that you continue to provide services to theCompany or a Subsidiary as an employee or a Service Provider (“Services”) on each such vesting date. The resulting aggregatenumber of vested Shares will be rounded to the nearest whole number, and you may not vest in more than the number of Sharescovered by this grant. Upon the vesting of the Shares hereunder, the Company will issue you a share certificate for such shares, free of the legend setforth on page 5 hereof. The Purchase Price for the Shares shall be deemed to be paid at that time by your services to theCompany.Early Vesting Upon the termination of your Services, other than by reason of your death, permanent and total disability (within the meaningof Section 22(e)(3) of the Code), Retirement, or termination by the Company without “Cause” or at your election with “GoodReason,” any Restricted Stock that has not vested hereunder shall immediately be deemed forfeited. In the event of the termination of your Services because of your death, permanent and total disability (within the meaning ofSection 22(e)(3) of the Code), or Retirement, or termination by the Company without “Cause” or at your election with “GoodReason”, any Restricted Stock that has not vested hereunder shall immediately become fully vested. “Cause” means one of the following reasons for which your employment with the Company is terminated: (1) Your willful orgrossly negligent misconduct that is materially injurious to the Company; (2) Your embezzlement or misappropriation of fundsor property of the Company; (3) Your conviction of a felony or the entrance of a plea of guilty or nolo contendere to a felony; (4)Your conviction of any crime involving fraud, dishonesty, moral turpitude or breach of trust or the entrance of a plea of guiltyor nolo contendere to such a crime; or (5) Your willful failure or refusal by you to devote your full business time (other than onaccount of disability or approved leave) and attention to the performance of your duties and responsibilities if such breach hasnot been cured within 15 days after written notice thereof is given to you by the Board of Directors. “Good Reason” shall exist upon: (1) a material and adverse change in your status or position(s) as an officer or managementemployee of the Company, including, without limitation, any adverse change in your status or position as an employee of theCompany as a result of a material diminution in your duties or responsibilities (other than, if applicable, any such changedirectly attributable to the fact that the Company is no longer publicly owned) or the assignment to you of any duties orresponsibilities which are materially inconsistent with such status or position(s) (other than any 21/3 isolated and inadvertent failure by the Company that is cured promptly upon your giving notice), or any removal of you from orany failure to reappoint or reelect you to such position(s) (except in connection with your termination other than for GoodReason); (2) a 10% or greater reduction in your aggregate base salary and targeted bonus, other than any such reductionproportionately consistent with a general reduction of pay across the executive staff as a group, as an economic or strategicmeasure due to poor financial performance by the Company; (3) the failure by the Company to continue in effect any employeebenefit plan (excluding any equity compensation plan) in which you are participating (or plans providing you with similarbenefits that are not materially reduced in the aggregate) other than as a result of the normal expiration of any such plan inaccordance with its terms; or the taking of any action, or the failure to act, by the Company or any successor which wouldadversely affect your continued participation in any of such plans on at least as favorable a basis to you or which wouldmaterially reduce your benefits under any of such plans; (4) Company’s requiring you to be based at an office that is both morethan 50 miles from where your office is located and further from your then current residence; or (5) a material breach by theCompany of any agreement with you; provided, however, that if any of the conditions exists, you must provide notice to theCompany no more than ninety (90) calendar days following the initial existence of the condition and your intention to terminateyour employment for Good Reason. Upon such notice, the Company shall have a period of thirty (30) calendar days duringwhich it may remedy the condition. In the event of a Change in Control, any Restricted Stock that has not vested hereunder shall immediately become fully vested.“Change in Control” shall have the meaning given to such term in the Change in Control Severance Agreement between you andthe Company. Notwithstanding the foregoing or any other provision herein to the contrary, Restricted Stock shall also vest according to theterms and conditions, if so provided, in any separate agreement between you and the Company, including but not limited to anyEmployment Agreement, Severance Agreement or Change in Control Severance Agreement.Escrow The certificates for the Restricted Stock shall be deposited in escrow with the Secretary of the Company to be held in accordancewith the provisions of this paragraph. In the alternative, the Company may use the book-entry method of share recordation toindicate your share ownership and the restrictions imposed by this Agreement. If share certificates are issued, each depositedcertificate shall be accompanied by a duly executed Assignment Separate from Certificate in the form attached hereto as ExhibitA. The deposited certificates shall remain in escrow until such time or times as the certificates are to be released or otherwisesurrendered for cancellation as discussed below. Upon delivery of the certificates to the Company, you shall be issued aninstrument of deposit acknowledging the number of Shares delivered in escrow to the Secretary of the Company. All regular cash dividends on the Restricted Stock (or other securities at the time held in escrow) shall be paid directly to youand shall not be held in escrow. However, in the event of any stock dividend, stock split, recapitalization or other changeaffecting the Shares as a class effected without receipt of consideration, or in the event of a stock split, a stock dividend or asimilar change in the Stock, any new, substituted or additional securities or other property which is by reason of suchtransaction distributed with respect to the Restricted Stock shall be immediately delivered to the Secretary of the Company to beheld in escrow hereunder, but only to the extent the Restricted Stock is at the time subject to the escrow requirements hereof. As your interest in the Restricted Stock vests as described above, the certificates for such vested Shares shall be released fromescrow and delivered to you, at your request. 3Withholding Taxes You agree, as a condition of this grant, that you will make acceptable arrangements to pay any withholding or other taxes thatmay be due as a result of the vesting of Shares acquired under this grant. In the event that the Company determines that anyfederal, state, local or foreign tax or withholding payment is required relating to the vesting of shares arising from this grant, theCompany shall have the right to require such payments from you, withhold Shares that would otherwise have been issued toyou under this Agreement or withhold such amounts from other payments due to you from the Company or any Affiliate.Section 83(b)Election Under Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), the difference between the purchase pricepaid for the Shares and their fair market value on the date any forfeiture restrictions applicable to such shares lapse will bereportable as ordinary income at that time. You may elect to be taxed at the time the Restricted Stock is acquired rather than whensuch Restricted Stock ceases to be subject to such forfeiture restrictions by filing an election under Section 83(b) of the Codewith the Internal Revenue Service within thirty (30) days after the Grant Date. You will have to make a tax payment to the extentthe purchase price is less than the fair market value of the shares on the Grant Date. No tax payment will have to be made to theextent the purchase price is at least equal to the fair market value of the Shares on the Grant Date. The form for making thiselection is attached as Exhibit B hereto. Failure to make this filing within the thirty (30) day period will result in the recognitionof ordinary income by you (in the event the fair market value of the Shares increases after the date of purchase) as the forfeiturerestrictions lapse. YOU ACKNOWLEDGE THAT IT IS YOUR SOLE RESPONSIBILITY, AND NOT THE COMPANY’S, TO FILE ATIMELY ELECTION UNDER SECTION 83(b), EVEN IF YOU REQUEST THE COMPANY OR ITSREPRESENTATIVES TO MAKE THIS FILING ON YOUR BEHALF. YOU ARE RELYING SOLELY ON YOUROWN ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT TO FILE ANY 83(b)ELECTION.Retention Rights This Agreement does not give you the right to be retained by the Company in any capacity. The Company reserves the right toterminate your service with the Company at any time and for any reason.Shareholder Rights You shall have the right to vote the Restricted Stock and, subject to the provisions of this Agreement, to receive any dividendsdeclared or paid on such stock. Any distributions you receive as a result of any stock split, stock dividend, combination ofshares or other similar transaction shall be deemed to be a part of the Restricted Stock and subject to the same conditions andrestrictions applicable thereto. The Company may in its sole discretion require any dividends paid on the Restricted Stock to bereinvested in Shares, which the Company may in its sole discretion deem to be a part of the shares of Restricted Stock andsubject to the same conditions and restrictions applicable thereto. Except as described in the Plan, no adjustments are made fordividends or other rights if the applicable record date occurs before your stock certificate is issued.Adjustments In the event of a stock split, a stock dividend or a similar change in the Shares, the number of Shares covered by this grantshall be adjusted (and rounded down to the nearest whole number) pursuant to the Plan. Your Restricted Stock shall be subjectto the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporateactivity.Legends All certificates representing the Restricted Stock issued in connection with this grant shall, where applicable, and if issued priorto vesting, have endorsed thereon the following legend: 4 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ONTRANSFER AND OPTIONS TO PURCHASE SUCH SHARES SET FORTH IN AN AGREEMENT BETWEENTHE COMPANY AND THE REGISTERED HOLDER, OR THE HOLDER’S PREDECESSOR IN INTEREST. ACOPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BEFURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OFRECORD OF THE SHARES REPRESENTED BY THIS CERTIFICATE.”Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Delaware, other than any conflicts or choice oflaw rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of anotherjurisdiction.The Plan The text of the Plan is incorporated in this Agreement by reference. Certain capitalized terms used in this Agreement aredefined in the Plan, and have the meaning set forth in the Plan. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this grant of RestrictedStock. Any prior agreements, commitments or negotiations concerning this grant are superseded.Consent to ElectronicDelivery The Company may choose to deliver certain statutory materials relating to the Plan in electronic form. By accepting this grantyou agree that the Company may deliver the Plan prospectus and the Company’s annual report to you in an electronic format. Ifat any time you would prefer to receive paper copies of these documents, as you are entitled to receive, the Company would bepleased to provide copies. Please contact Corporate Human Resources to request paper copies of these documents.By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan. 5EXHIBIT AASSIGNMENT SEPARATE FROM CERTIFICATEFOR VALUE RECEIVED, hereby sells, assigns and transfers unto Trex Company, Inc., a Delaware corporation (the “Company”), ( ) shares of common stock of the Company represented by Certificate No. herewith and does hereby irrevocableconstitute and appoint Attorney to transfer the said stock on the books of the Company with full power of substitution in the premises.Dated: , 20 Print Name SignatureSpouse Consent (if applicable) (Purchaser’s spouse) indicates by the execution of this Assignment his or her consent to be bound by the terms herein as to his or herinterests, whether as community property or otherwise, if any, in the shares of common stock of the Company. SignatureINSTRUCTIONS: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE. THE PURPOSE OF THISASSIGNMENT IS TO ENABLE THE COMPANY TO EXERCISE ITS “REPURCHASE OPTION” SET FORTH IN THE AGREEMENTWITHOUT REQUIRING ADDITIONAL SIGNATURES ON THE PART OF PURCHASER. 6EXHIBIT BELECTION UNDER SECTION 83(b) OFTHE INTERNAL REVENUE CODEThe undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below andsupplies the following information in accordance with the regulations promulgated thereunder: 1.The name, address and social security number of the undersigned: Name: Address: Social Security No. : 2.Description of property with respect to which the election is being made: shares of common stock, par value $.01 per share, of Trex Company, Inc., a Delaware corporation (the “Company”). 3.The date on which the property was transferred is , 20 . 4.The taxable year to which this election relates is calendar year 20 . 5.Nature of restrictions to which the property is subject:The shares of stock are subject to the provisions of a Restricted Stock Agreement between the undersigned and the Company. The shares of stock aresubject to forfeiture under the terms of the Agreement. 6.The fair market value of the property at the time of transfer (determined without regard to any lapse restriction) was $ per share, for a total of$ . 7.The amount paid by taxpayer for the property was $ . 8.A copy of this statement has been furnished to the Company.Dated: , 20 Taxpayer’s Signature Taxpayer’s Printed Name 7PROCEDURES FOR MAKING ELECTIONUNDER INTERNAL REVENUE CODE SECTION 83(b)The following procedures must be followed with respect to the attached form for making an election under Internal Revenue Code section 83(b) in orderfor the election to be effective:1. You must file one copy of the completed election form with the IRS Service Center where you file your federal income tax returns within thirty(30) days after the Grant Date of your Restricted Stock.2. At the same time you file the election form with the IRS, you must also give a copy of the election form to the Secretary of the Company.3. You must file another copy of the election form with your federal income tax return (generally, Form 1040) for the taxable year in whichthe stock is transferred to you. Whether or not to make the election is your decision and may create tax consequences for you. You are advised to consult your tax advisor if you areunsure whether or not to make the election. 811Exhibit 10.8TREX COMPANY, INC.2005 STOCK INCENTIVE PLANRESTRICTED STOCK AGREEMENTPERFORMANCE-BASED SHARESTrex Company, Inc., a Delaware corporation (the “Company”), hereby grants shares of its common stock, $.01 par value (“Shares”), to the Granteenamed below, subject to the vesting conditions set forth in the attachment. Additional terms and conditions of the grant are set forth in this cover sheet, in theattachment and in the Company’s 2005 Stock Incentive Plan (the “Plan”).Grant Date: Name of Grantee: Target Number of Shares Covered by Grant: Maximum Number of Shares of Stock Covered by Grant: Purchase Price per Share of Stock: $.01Vesting Schedule: Vesting Date Target# of Shares Maximum# of Shares2015 2016 2017 The actual vesting date each year shall be the date of the first regularly scheduled Compensation Committee meeting held in that year.By signing this cover sheet, you agree to all of the terms and conditions described in the attached Agreement and in the Plan. Youacknowledge that you have carefully reviewed the Plan, and agree that the Plan will control in the event any provision of this Agreement shouldappear to be inconsistent. Grantee: (Signature)Company: Ronald W. Kaplan President and Chief Executive OfficerThis is not a stock certificate or a negotiable instrument. 1TREX COMPANY, INC.2005 STOCK INCENTIVE PLANRESTRICTED STOCK AGREEMENTPERFORMANCE-BASED SHARES Restricted Stock/Nontransferability This grant is an award of up to the maximum number of Shares set forth on the cover sheet, at the purchase price set forth onthe cover sheet, and subject to the vesting conditions described herein (the “Restricted Stock”). To the extent not yet vested, your Restricted Stock may not be transferred, assigned, pledged or hypothecated, whether byoperation of law or otherwise, nor may the Restricted Stock be made subject to execution, attachment or similar process.Issuance and Vesting The Company will issue your Restricted Stock in your name as of the Grant Date. The actual number of Shares that will vest each year, if any, will be determined based on the Company’s attainment of theperformance goals set forth on Schedule A for the time periods indicated; provided that you continue to provide services to theCompany or a Subsidiary as an employee or a Service Provider (“Services”) on each such vesting date. Each year, on thevesting date referred to on the cover sheet, the actual performance multiple, as referred to on the attached Schedule A, shall beapplied to the Target # of Shares set forth on the cover sheet to determine the actual number of Shares that shall vest (which inno event shall be more than the Maximum Number of Shares set forth on the cover sheet), with any fractional Shares beingrounded to the nearest whole number. Upon the vesting of the Shares hereunder, the Company will issue you a share certificate for such shares, free of the legend setforth on page 6 hereof. The Purchase Price for the Shares shall be deemed to be paid at that time by your services to theCompany.Early Vesting Upon the termination of your Services, other than by reason of your death, permanent and total disability (within the meaningof Section 22(e)(3) of the Code), Retirement, or termination by the Company without “Cause” or at your election with “GoodReason,” any Restricted Stock that has not vested hereunder shall immediately be deemed forfeited. In the event of the termination of your Services because of your death, permanent and total disability (within the meaning ofSection 22(e)(3) of the Code), or Retirement, or termination by the Company without “Cause” or at your election with “GoodReason”, any Restricted Stock that has not vested hereunder shall immediately become fully vested. “Cause” means one of the following reasons for which your employment with the Company is terminated: (1) Your willful orgrossly negligent misconduct that is materially injurious to the Company; (2) Your embezzlement or misappropriation of fundsor property of the Company; (3) Your conviction of a felony or the entrance of a plea of guilty or nolo contendere to a felony; (4)Your conviction of any crime involving fraud, dishonesty, moral turpitude or breach of trust or the entrance of a plea of guiltyor nolo contendere to such a crime; or (5) Your willful failure or refusal by you to devote your full business time (other than onaccount of disability or approved leave) and attention to the performance of your duties and responsibilities if such breach hasnot been cured within 15 days after written notice thereof is given to you by the Board of Directors. “Good Reason” shall exist upon: (1) a material and adverse change in your status or position(s) as an officer or managementemployee of the Company, including, without limitation, any adverse change in your status or position as an employee of theCompany as a result of a material diminution in your duties or responsibilities (other than, if applicable, any such changedirectly attributable to the fact that the Company is no longer publicly owned) or the assignment to you of any duties orresponsibilities which 2 are materially inconsistent with such status or position(s) (other than any isolated and inadvertent failure by the Company thatis cured promptly upon your giving notice), or any removal of you from or any failure to reappoint or reelect you to suchposition(s) (except in connection with your termination other than for Good Reason); (2) a 10% or greater reduction in youraggregate base salary and targeted bonus, other than any such reduction proportionately consistent with a general reduction ofpay across the executive staff as a group, as an economic or strategic measure due to poor financial performance by theCompany; (3) the failure by the Company to continue in effect any employee benefit plan (excluding any equity compensationplan) in which you are participating (or plans providing you with similar benefits that are not materially reduced in theaggregate) other than as a result of the normal expiration of any such plan in accordance with its terms; or the taking of anyaction, or the failure to act, by the Company or any successor which would adversely affect your continued participation in anyof such plans on at least as favorable a basis to you or which would materially reduce your benefits under any of such plans;(4) Company’s requiring you to be based at an office that is both more than 50 miles from where your office is located andfurther from your then current residence; or (5) a material breach by the Company of any agreement with you; provided,however, that if any of the conditions exists, you must provide notice to the Company no more than ninety (90) calendar daysfollowing the initial existence of the condition and your intention to terminate your employment for Good Reason. Upon suchnotice, the Company shall have a period of thirty (30) calendar days during which it may remedy the condition. In the event of a Change in Control, any Restricted Stock that has not vested hereunder shall immediately become fully vested.“Change in Control” shall have the meaning given to such term in the Change in Control Severance Agreement between you andthe Company. Notwithstanding the foregoing or any other provision herein to the contrary, Restricted Stock shall also vest according to theterms and conditions, if so provided, in any separate agreement between you and the Company, including but not limited to anyEmployment Agreement, Severance Agreement or Change in Control Severance Agreement. In the event Restricted Stock vests early (under any circumstance), it shall vest at the “Target” amount (and not the “Maximum”amount) (regardless of the amount of the relevant performance period that precedes such event or the level of performance todate).Escrow The certificates for the Restricted Stock shall be deposited in escrow with the Secretary of the Company to be held in accordancewith the provisions of this paragraph. In the alternative, the Company may use the book-entry method of share recordation toindicate your share ownership and the restrictions imposed by this Agreement. If share certificates are issued, each depositedcertificate shall be accompanied by a duly executed Assignment Separate from Certificate in the form attached hereto as ExhibitA. The deposited certificates shall remain in escrow until such time or times as the certificates are to be released or otherwisesurrendered for cancellation as discussed below. Upon delivery of the certificates to the Company, you shall be issued aninstrument of deposit acknowledging the number of Shares delivered in escrow to the Secretary of the Company. All regular cash dividends on the Restricted Stock (or other securities at the time held in escrow) shall be paid directly to youand shall not be held in escrow. However, in the event of any stock dividend, stock split, recapitalization or other changeaffecting the Shares as a class effected without receipt of consideration, or in the event of a stock split, a stock dividend or asimilar change in the Stock, any new, substituted or additional securities or other property which is by reason of suchtransaction distributed with respect to the Restricted Stock shall be immediately delivered to the Secretary of the Company to beheld in escrow hereunder, but only to the extent the Restricted Stock is at the time subject to the escrow requirements hereof. 3 As your interest in the Restricted Stock vests as described above, the certificates for such vested Shares shall be released fromescrow and delivered to you, at your request.Withholding Taxes You agree, as a condition of this grant, that you will make acceptable arrangements to pay any withholding or other taxes thatmay be due as a result of the vesting of Shares acquired under this grant. In the event that the Company determines that anyfederal, state, local or foreign tax or withholding payment is required relating to the vesting of shares arising from this grant, theCompany shall have the right to require such payments from you, withhold Shares that would otherwise have been issued toyou under this Agreement or withhold such amounts from other payments due to you from the Company or any Affiliate.Section 83(b)Election Under Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), the difference between the purchase pricepaid for the Shares and their fair market value on the date any forfeiture restrictions applicable to such shares lapse will bereportable as ordinary income at that time. You may elect to be taxed at the time the Restricted Stock is acquired rather than whensuch Restricted Stock ceases to be subject to such forfeiture restrictions by filing an election under Section 83(b) of the Codewith the Internal Revenue Service within thirty (30) days after the Grant Date. You will have to make a tax payment to the extentthe purchase price is less than the fair market value of the shares on the Grant Date. No tax payment will have to be made to theextent the purchase price is at least equal to the fair market value of the Shares on the Grant Date. The form for making thiselection is attached as Exhibit B hereto. Failure to make this filing within the thirty (30) day period will result in the recognitionof ordinary income by you (in the event the fair market value of the Shares increases after the date of purchase) as the forfeiturerestrictions lapse. YOU ACKNOWLEDGE THAT IT IS YOUR SOLE RESPONSIBILITY, AND NOT THE COMPANY’S, TO FILE ATIMELY ELECTION UNDER SECTION 83(b), EVEN IF YOU REQUEST THE COMPANY OR ITSREPRESENTATIVES TO MAKE THIS FILING ON YOUR BEHALF. YOU ARE RELYING SOLELY ON YOUROWN ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT TO FILE ANY 83(b)ELECTION.Retention Rights This Agreement does not give you the right to be retained by the Company in any capacity. The Company reserves the right toterminate your service with the Company at any time and for any reason.Shareholder Rights You shall have the right to vote the Restricted Stock and, subject to the provisions of this Agreement, to receive any dividendsdeclared or paid on such stock. Any distributions you receive as a result of any stock split, stock dividend, combination ofshares or other similar transaction shall be deemed to be a part of the Restricted Stock and subject to the same conditions andrestrictions applicable thereto. The Company may in its sole discretion require any dividends paid on the Restricted Stock to bereinvested in Shares, which the Company may in its sole discretion deem to be a part of the shares of Restricted Stock andsubject to the same conditions and restrictions applicable thereto. Except as described in the Plan, no adjustments are made fordividends or other rights if the applicable record date occurs before your stock certificate is issued.Adjustments In the event of a stock split, a stock dividend or a similar change in the Shares, the number of Shares covered by this grantshall be adjusted (and rounded down to the nearest whole number) pursuant to the Plan. Your Restricted Stock shall be subjectto the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporateactivity. 4Legends All certificates representing the Restricted Stock issued in connection with this grant shall, where applicable, and if issued priorto vesting, have endorsed thereon the following legend: “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ONTRANSFER AND OPTIONS TO PURCHASE SUCH SHARES SET FORTH IN AN AGREEMENT BETWEENTHE COMPANY AND THE REGISTERED HOLDER, OR THE HOLDER’S PREDECESSOR IN INTEREST. ACOPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BEFURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OFRECORD OF THE SHARES REPRESENTED BY THIS CERTIFICATE.”Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Delaware, other than any conflicts or choice oflaw rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of anotherjurisdiction.The Plan The text of the Plan is incorporated in this Agreement by reference. Certain capitalized terms used in this Agreement aredefined in the Plan, and have the meaning set forth in the Plan. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this grant of RestrictedStock. Any prior agreements, commitments or negotiations concerning this grant are superseded.Consent to ElectronicDelivery The Company may choose to deliver certain statutory materials relating to the Plan in electronic form. By accepting this grantyou agree that the Company may deliver the Plan prospectus and the Company’s annual report to you in an electronic format. Ifat any time you would prefer to receive paper copies of these documents, as you are entitled to receive, the Company would bepleased to provide copies. Please contact Corporate Human Resources to request paper copies of these documents.By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan. 5EXHIBIT BASSIGNMENT SEPARATE FROM CERTIFICATEFOR VALUE RECEIVED, hereby sells, assigns and transfers unto Trex Company, Inc., a Delaware corporation (the “Company”), ( ) shares of common stock of the Company represented by Certificate No. herewith and does herebyirrevocable constitute and appoint Attorney to transfer the said stock on the books of the Company with full power of substitution in thepremises.Dated: , 20 Print Name SignatureSpouse Consent (if applicable) (Purchaser’s spouse) indicates by the execution of this Assignment his or her consent to be bound by the terms herein as to his or herinterests, whether as community property or otherwise, if any, in the shares of common stock of the Company. SignatureINSTRUCTIONS: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE. THE PURPOSE OF THISASSIGNMENT IS TO ENABLE THE COMPANY TO EXERCISE ITS “REPURCHASE OPTION” SET FORTH IN THE AGREEMENTWITHOUT REQUIRING ADDITIONAL SIGNATURES ON THE PART OF PURCHASER. 6EXHIBIT CELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODEThe undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and suppliesthe following information in accordance with the regulations promulgated thereunder: 1.The name, address and social security number of the undersigned: Name: Address: Social Security No. : 2.Description of property with respect to which the election is being made: shares of common stock, par value $.01 per share, of Trex Company, Inc., a Delaware corporation (the “Company”). 3.The date on which the property was transferred is , 20 . 4.The taxable year to which this election relates is calendar year 20 . 5.Nature of restrictions to which the property is subject:The shares of stock are subject to the provisions of a Restricted Stock Agreement between the undersigned and the Company. The shares of stockare subject to forfeiture under the terms of the Agreement. 6.The fair market value of the property at the time of transfer (determined without regard to any lapse restriction) was $ per share, for a total of$ . 7.The amount paid by taxpayer for the property was $ . 8.A copy of this statement has been furnished to the Company.Dated: , 20 Taxpayer’s Signature Taxpayer’s Printed Name 7PROCEDURES FOR MAKING ELECTIONUNDER INTERNAL REVENUE CODE SECTION 83(b)The following procedures must be followed with respect to the attached form for making an election under Internal Revenue Code section 83(b) in orderfor the election to be effective:1. You must file one copy of the completed election form with the IRS Service Center where you file your federal income tax returns within thirty(30) days after the Grant Date of your Restricted Stock.2. At the same time you file the election form with the IRS, you must also give a copy of the election form to the Secretary of the Company.3. You must file another copy of the election form with your federal income tax return (generally, Form 1040) for the taxable year in whichthe stock is transferred to you. Whether or not to make the election is your decision and may create tax consequences for you. You are advised to consult your tax advisor if you areunsure whether or not to make the election. 822Exhibit 21Subsidiaries of Trex Company, Inc. Name of the Subsidiary Jurisdiction of FormationTrex Wood Polymer Espana, S.L. SpainExhibit 23Consent of Ernst & Young LLP, Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements: • Registration Statement (Form S-8, No. 333-76847), • Registration Statement (Form S-8, No. 333-83998), • Registration Statement (Form S-8, No. 333-124685), • Registration Statement (Form S-8, No. 333-150690), and • Registration Statement (Form S-3, No. 333-161732);of our reports dated February 24, 2014, with respect to the consolidated financial statements and schedule of Trex Company, Inc. and the effectiveness ofinternal control over financial reporting of Trex Company, Inc. included in this Annual Report (Form 10-K) of Trex Company, Inc. for the year endedDecember 31, 2013. /s/ Ernst & Young LLPRichmond, VirginiaFebruary 24, 2014Exhibit 31.1CERTIFICATIONI, Ronald W. Kaplan, certify that: 1.I have reviewed this annual report on Form 10-K of Trex Company, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: February 24, 2014 /s/ RONALD W. KAPLAN Ronald W. Kaplan Chairman, President and Chief Executive Officer (Principal Executive Officer)Exhibit 31.2CERTIFICATIONI, James E. Cline, certify that: 1.I have reviewed this annual report on Form 10-K of Trex Company, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function(s)): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: February 24, 2014 /s/ JAMES E. CLINE James E. Cline Senior Vice President and Chief Financial Officer(Principal Financial Officer)Exhibit 32Written Statement of Chief Executive Officer and Chief Financial OfficerPursuant to Section 906of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)The undersigned, the President and Chief Executive Officer and the Chief Financial Officer of Trex Company, Inc. (the “Company”), each herebycertifies that, on the date hereof:(a) the Annual Report on Form 10-K of the Company for the Period Ended December 31, 2013 filed on the date hereof with the Securities andExchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 24, 2014 /s/ RONALD W. KAPLAN Ronald W. Kaplan Chairman, President and Chief Executive OfficerDate: February 24, 2014 /s/ JAMES E. CLINE James E. Cline Senior Vice President and Chief Financial Officer

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