Trex
Annual Report 2014

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K (Mark One) þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2014 ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For 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 þIndicate 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 þIndicate 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 þ No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data Filerequired to be submitted and posed pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes þ 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. þIndicate 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 þ 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 þThe aggregate market value of the registrant’s common equity held by non-affiliates of the registrant at June 30, 2014, which was the last business day ofthe registrant’s most recently completed second fiscal quarter, was approximately $908.9 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 10, 2015 was 32,020,203.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 2015Annual Meeting of Stockholders Part III 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 14 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 15 Item 6. Selected Financial Data 17 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 31 Item 8. Financial Statements and Supplementary Data 32 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 32 Item 9A. Controls and Procedures 32 Item 9B. Other Information 35 PART III Item 10. Directors, Executive Officers and Corporate Governance 36 Item 11. Executive Compensation 36 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 36 Item 13. Certain Relationships and Related Transactions, and Director Independence 36 Item 14. Principal Accounting Fees and Services 36 PART IV Item 15. Exhibits and Financial Statement Schedules 37 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. We operate in one business segment.ProductsWe offer a comprehensive set of aesthetically durable, low maintenance product offerings in the decking, railing, porch, fencing, trim, steel deckframing and outdoor lighting categories. We believe that the range and variety of our product offerings allow consumers to design much of their outdoorliving space using Trex brand products. A majority of our products are made in a proprietary process that combines waste wood fibers and scrap polyethylene.Our products are provided in a wide selection of popular sizes and lengths and are available with several finishes and numerous colors.Decking. We market our decking products under a number of brand names. Our principal brand names for decking are: Trex Transcend, Trex Enhanceand Trex Select, which each feature a protective shell for enhanced protection against fading, staining, mold and scratching. We also offer Trex Hideaway,a hidden fastening system for specially grooved boards.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 enhances the sales prospects of our railing products. 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 a simpleclean finished look for their deck. Trex Reveal aluminum railing, which is available in three colors, is for consumers who want a sleek, contemporaryaesthetic look.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.Trim. 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.Steel Deck Framing. We offer a triple-coated steel deck framing system called Trex Elevations.Outdoor Lighting. Our outdoor lighting systems are Trex DeckLighting™ and Trex Landscape Lighting™. Trex DeckLighting is a line of energy-efficient LED dimmable deck lighting, which is designed for use on posts, floors and steps. The line includes a post cap light, deck rail light, riser light and arecessed deck light. Trex Landscape Lighting line includes an energy-efficient well light, path light, multifunction light and spotlight. 1®®®®®®®®®Table of ContentsWe are a licensor in a number of licensing agreements with third parties to manufacture and sell products under the Trex trademark. Our licensedproducts 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.; • Trex SpiralStairs™ and Structural Steel Posts (for use with the Elevations system), manufactured and sold by M. Cohen and Sons, Inc. dba TheIron Shop; and • Trex Outdoor Cabinets, which are outdoor storage cabinets manufactured and sold by NatureKast Products LLC.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 deckand make Trex products less costly than wood over the life of the deck. Like wood, Trex products are slip-resistant (even when wet) but 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.During the second half of 2014, we began manufacturing and selling polyethylene pellets made from recycled plastic into the plastic bag, film andsheet markets and other commercial business applications. Our entry into this adjacent industry enables us to leverage our core recycling and extrusioncapabilities, adding significant value to our polyethylene sales. As of December 31, 2014, one polyethylene pellet manufacturing line was operational, andan additional three lines are expected to be built during the first half of 2015.Growth StrategiesOur long-term goal is to perpetuate our position as the leading producer of branded superior wood-alternative outdoor living products by increasingour market share and expanding into new product categories and geographic markets. To attain this goal, we intend to employ the following long-termstrategies: • 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 Trexbrand presence 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, trim, steel deck framing and outdoor lighting 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 add significant value to our polyethylene sales and expand our ability to use a wider breadth ofwaste streams thereby lowering our raw material costs. We plan to concentrate on improving the productivity of our production process, from rawmaterials preparation through extrusion into finishing and packaging.Customers and DistributionWe distribute our products as follows:Wholesale Distributors/Retail Lumber Dealers. We generate most of our sales through our wholesale distribution network by selling Trex products towholesale distributors, who in turn, sell our products to retail lumber outlets. These retail dealers market to both homeowners and contractors, but theyemphasize sales to professional contractors, remodelers and homebuilders. Contractor-installed decks generally are larger installations with professionalcraftsmanship. Our retail dealers generally provide sales personnel trained in Trex products, contractor training, inventory commitment and point-of-saledisplay 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-addedservice in marketing our products because they sell premium wood decking products and other innovative building materials that typically require producttraining and personal selling efforts. We typically appoint two distributors on a non-exclusive basis to distribute Trex products within a specified area. Thedistributor generally purchases our products at prices in effect at the time we ship the product to the distributor. Based on our 2014 net sales, sales to one ofour distributors, 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 us forstocking on their shelves. They also purchase product through our wholesale distributors for special orders placed by consumers. Although Home Depot andLowe’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 Depot andLowe’s stores rather than at retail lumber dealers. We believe that brand exposure through Home Depot and Lowe’s distribution promotes consumeracceptance of our products.Manufacturing ProcessWe operate manufacturing facilities located in Winchester, Virginia and Fernley, Nevada.Trex products are primarily manufactured from waste wood fiber and scrap polyethylene. Our primary manufacturing process involves mixing woodparticles with plastic, heating and finally extruding, or forcing, the highly viscous and abrasive material through a profile die. We have many proprietary andskill-based advantages in this process. 3Table of ContentsProduction of a wood-alternative decking such as ours requires significant capital investment, special process expertise and time to develop. We havecontinuously invested the capital necessary to expand our manufacturing throughput and improve our manufacturing processes. We have also broadened therange 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, 2014, 2013 and 2012, research anddevelopment costs were $2.3 million, $2.9 million and $2.9 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 scrap polyethylene.We fulfill requirements for raw materials under both purchase orders and supply contracts. In the year ended December 31, 2014, we purchasedsubstantially all of our waste wood fiber requirements under purchase orders, which do not involve long-term supply commitments. Substantially all of ourpolyethylene 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.Scrap Polyethylene. The polyethylene we consumed in 2014 was primarily composed of scrap 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 scrap polyethylene from the expansion of our existing supply sources and the development of new sources. We believe our use of multiplesources provides us with a cost advantage and facilitates an environmentally responsible approach to our procurement of polyethylene.Our ability to source and use a wide variety of polyethylene is important to our cost strategy. We maintain this ability through the continuedexpansion of our plastic reprocessing operations in combination with the advancement of our proprietary material preparation and extrusion processes.Third-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 $1.9million for the year ending December 31, 2015. 4Table of ContentsCompetitionOur primary competition consists of wood products, which constitutes a substantial majority of decking and railing sales, as measured by linear feet oflumber. Many of the conventional lumber suppliers with which we compete have established ties to the building and construction industry and have well-accepted products. A majority of the lumber used in wood decks is pressure-treated lumber. Southern yellow pine and fir have a porosity that readily allowsthe chemicals 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.In addition to wood, we also compete with other manufacturers of wood-alternative products. Industry studies indicate that we have the leading marketshare of the wood-alternative segment of the decking and railing market. Our principal competitors include Advanced Environmental RecyclingTechnologies, Inc., CPG International 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 wood-alternative decking and railing products that are competitive with our products. We believe that the principal competitive factors in the decking and railingmarket include product quality, price, aesthetics, maintenance cost, distribution and brand strength. We believe we compete favorably with respect to thesefactors. We believe that our products offer aesthetic and cost advantages over the life of a deck when compared to other types of decking and railingmaterials. Although a contractor-installed deck built with Trex products 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 manufacturers of wood-alternative decking and railing 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 seasonaltrends in the demand for our products. We have historically experienced lower net sales during the fourth quarter because holidays and adverse weatherconditions in certain regions 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 manufacturingfacilities must meet federal and state air quality standards implemented through air permits issued to us by the Department of Environmental Quality of theCommonwealth of Virginia, the Division of Environmental Protection of Nevada’s Department of Conservation and Natural Resources and the MississippiDepartment of Environmental Quality. Our facilities are regulated by federal and state laws governing the disposal of solid waste and by state and localpermits and requirements with respect to wastewater and storm water discharge. Compliance with environmental laws and regulations has not had a materialadverse 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. 5Table of ContentsIntellectual 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,facilitate our development of new products, and produce improvements in our existing products’ dimensional consistency, surface texture and coloruniformity.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 ourexisting patents 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, 2014, we had approximately 630 full-time employees, approximately 470 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 16, 2015. Name Age Positions with CompanyRonald W. Kaplan 63 Chairman, President and Chief Executive Officer; DirectorJames E. Cline 63 Senior Vice President and Chief Financial OfficerWilliam R. Gupp 55 Senior Vice President, General Counsel and SecretaryF. Timothy Reese 62 Senior Vice President, OperationsChristopher P. Gerhard 42 Vice President, SalesAdam D. Zambanini 38 Vice President, MarketingMichael F. Golden 60 DirectorJay M. Gratz 62 DirectorFrank H. Merlotti, Jr. 64 Director, Lead Independent DirectorRichard E. Posey 68 DirectorPatricia B. Robinson 62 DirectorGerald Volas 60 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 a M.B.A. degree from the WhartonSchool 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. Clineserved as a consultant to the buyers by providing transition management and financial services. From April 1994 through June 2005, Mr. Cline served as theVice President and Controller of Harsco GasServ. Mr. Cline served in various capacities with Huffy Corporation from June 1976 to February 1994, includingas the Director of Finance of its True Temper Hardware subsidiary, a manufacturer of lawn care and construction products with nine manufacturing locationsin the United States, Canada and Ireland. Mr. Cline received a B.S.B.A. degree in accounting from Bowling Green State University.William R. Gupp has served as Senior Vice President, General Counsel and Secretary of the Company since August 2014. From October 2009 to August2014, Mr. Gupp served as Chief Administrative Officer, General Counsel and Secretary, and from May 2001 to October 2009, Mr. Gupp served as VicePresident and General Counsel. From March 1993 to May 2001, Mr. Gupp was employed by Harsco Corporation, an international industrial services andproducts company, most recently as Senior Counsel and Director-Corporate Development. From August 1985 to March 1993, Mr. Gupp was employed by thelaw firm of Harter, Secrest & Emery. Mr. Gupp received a B.S. degree in accounting from Syracuse University and a J.D. from the University of PennsylvaniaLaw School.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, 7Table of ContentsMr. Reese served as Operations Director for the Americas Region of DuPont Teijin Films, a DuPont Teijin Films U.S. Limited Partnership and producer ofpolyester films. From 1979 to March 2007, Mr. Reese served in various positions with DuPont, including Global Director, Business and IntegratedOperations, DuPont High Performance Films, from November 1995 through November 1998; Director/Plant Manager, Global Operations, Cyrel PackagingGraphics Products, from December 1998 through May 2000; Director, Global Operations and Six Sigma Champion, Cyrel Packaging Graphics Products,from June 2000 through February 2001; and Director/Plant Manager in multiple assignments from March 2001 through February 2007, including inCorporate Operations, Human Resources and DuPont Chemical Solutions Enterprise. Mr. Reese served in the U.S. Navy and received a B.S. in oceanengineering with an emphasis on mechanical engineering from the U.S. Naval Academy.Christopher 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 with KraftFoods North America, a manufacturer of food and beverages, most recently as Southeast Region Customer Category Manager. Mr. Gerhard received a B.A. inEnglish from the University of North Carolina—Greensboro, and a Masters in Science from Ohio University.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.Michael F. Golden has served as a director of the Company since February 2013. Mr. Golden is retired. Mr. Golden served as President and ChiefExecutive Officer of Smith and Wesson Holding Corporation, a manufacturer of firearms and firearms-related products and accessories, from December 2004until his retirement in September 2011, and currently serves as a director of such company. Mr. Golden was employed in various executive positions with theKohler Company, which manufactures kitchen and bath plumbing fixtures, furniture, tile, engines, and generators, and operates resorts, from February 2002until December 2004, with his most recent position being the President of its Cabinetry Division. Mr. Golden was the President of Sales for theIndustrial/Construction Group of the Stanley Works Company, which manufactures tools and hardware, from 1999 until 2002; Vice President of Sales forKohler’s North American Plumbing Group from 1996 until 1998; and Vice President, Sales and Marketing for a division of The Black & Decker Corporation,which manufactures tools and hardware, where he was employed from 1981 until 1996. Mr. Golden also serves on the Board of Directors of Quest ResourcesHolding Company. Mr. Golden received a B.S. degree in Marketing from Pennsylvania State University and a M.B.A. degree from Emory University.Jay M. Gratz has served as a director of the Company since February 2007. Mr. Gratz has served as the Chief Financial Officer of VisTracks, Inc., anapplication enabling platform service provider, since March 2010, and a director of such company since April 2010. Mr. Gratz was a partner in Tatum LLC, anational executive services and consulting firm that focuses on the needs of the Office of the CFO between February 2010 and March 2010. From October2007 through February 2010, Mr. Gratz was an independent consultant. From 1999 through October 2007, Mr. Gratz served as Executive Vice President andChief Financial Officer of Ryerson Inc., a metals processor and distributor, and as President of Ryerson Coil Processing Division from November 2001 untilOctober 2007. Mr. Gratz served as Vice President and Chief Financial Officer of Inland Steel Industries, a steel company, from 1994 through 1998, and servedin various other positions, including Vice President of Finance, within that company since 1975. Mr. Gratz is a Certified Public Accountant. He received aB.A. degree in economics from State University of New York in Buffalo and a M.B.A. degree from Northwestern University Kellogg Graduate School ofManagement.Frank H. Merlotti, Jr. has served as a director of the Company since February 2006 and as Lead Independent Director since April 2014. Mr. Merlotti isretired. Mr. Merlotti served as President of the Coalesse 8®®Table of Contentsbusiness unit of Steelcase, Inc., a manufacturer of office furniture and furniture systems, from October 2006 until his retirement in September 2013, and asPresident of Steelcase North America from September 2002 through September 2006. Mr. Merlotti served as President and Chief Executive Officer of G&TIndustries, a manufacturer and distributor of fabricated foam and soft-surface materials for the marine, office furniture and commercial building industries,from August 1999 to September 2002. From 1991 through 1999, Mr. Merlotti served as President and Chief Executive Officer of Metropolitan FurnitureCompany, a Steelcase Design Partnership company. From 1985 through 1999, Mr. Merlotti served as General Manager of the Business Furniture Division ofG&T Industries.Richard E. Posey has served as a director of the company since May 2009. Mr. Posey is retired. He served as President and Chief Executive Officer ofMoen Incorporated, a manufacturer of faucets, from January 2002 until his retirement in September 2007. Prior to joining Moen, Mr. Posey was President andChief 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 and other household products, where for 22 years he served in a series of increasingly responsible managementpositions, 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 School of Engineering Foundation. He received a B.A. degree in English from The University of Southern California anda M.B.A. degree from The University of Michigan.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 a M.B.A. degreefrom the Darden School at the University of Virginia.Gerald Volas has served as a director of the Company since March 2014. Mr. Volas has been employed by Masco Corporation, one of the world’sleading manufacturers of brand-name products for the home improvement and new home construction industries, in various positions of increasingresponsibility since 1982. Since February 2005, he has served as a Group Executive responsible for almost all of Masco’s operating companies at one time oranother. He currently is responsible for a number of Masco operating companies accounting for approximately 50% of Masco’s revenues in 2012. From April2001 to February 2005, he served as President of Liberty Hardware, a Masco operating company, from January 1996 to April 2001, he served as a GroupController supporting a variety of Masco operating companies, and from May 1982 to January 1996, he served in progressive financial roles including VicePresident/Controller at BrassCraft Manufacturing Company, a Masco operating company. Mr. Volas is a Certified Public Accountant. He received a Bachelorof Business Administration degree from the University of Michigan. 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 deck framingsales. Since wood-alternative products were introduced to the market in the early 1990’s, their market acceptance has increased, but during the past few years,the rate of conversion from purchasing wood products to purchasing wood-alternative products slowed. Our ability to grow will depend, in part, on oursuccess in continuing to convert demand for wood products into a demand for wood-alternative Trex products. To increase our market share, we mustovercome: • the consumer lack of awareness of the enhanced value of wood-alternative decking, railing, porches, fencing, trim and deck framing products ingeneral and Trex brand products in particular; 9Table of Contents • the resistance of many consumers and contractors to change from well-established wood products; • the consumer lack of awareness that the greater initial expense of Trex products compared to wood is a one-time cost that is reduced over time asTrex products have a longer life span than wood; • the established relationships existing between suppliers of wood products and contractors and homebuilders; • actual and perceived quality issues with first generation wood-alternative products; and • the competition from other wood-alternative manufacturers.We must also compete with a number of companies in the wood-alternative segment of the decking, railing, fencing and trim markets and with woodproducers that currently have more production capacity than is required to meet the demand for such products. Our failure to compete successfully in suchmarkets could have a material adverse effect on our ability to replace wood or increase the market share of wood-alternatives compared to wood. Many of theconventional lumber suppliers with which we compete have established ties to the building and construction industry and have well-accepted products. Ourability to compete depends, in part, upon a number of factors outside our control, including the ability of competitors to develop new non-wood alternativesthat 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 ournet sales levels.Our prospects for sales growth and profitability may be adversely affected if we fail to maintain product quality and product performance at anacceptable 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 andperformance of 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 of product performance would negatively affect our profitability by impeding acceptance of our products in the marketplace and by leading to higherproduct replacement and consumer relations expenses. In recent periods, we have experienced significant warranty expenses related to material produced atour Nevada facility prior to 2007 that exhibits surface flaking. We have limited our financial exposure by agreeing to settle a nationwide class action lawsuitwhich fixes our obligation in each claim to provide replacement product and provide a partial labor reimbursement. However, because the establishment ofreserves is an inherently uncertain process involving estimates of the number of future claims and the average cost of claims, our ultimate losses may differfrom our warranty reserve. Increases we have made to the warranty reserve and payments for related claims in recent years have had a material adverse effecton our profitability and cash flows. Future increases to the warranty reserve could have a material adverse effect on our profitability and cash flows should wemake 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, all of whichhave been settled. (See Part I, Item 3, Legal Proceedings, for a 10Table of Contentsdiscussion of these lawsuits.) In the event future lawsuits are brought against us relating to alleged product quality issues, such lawsuits are a potentialfinancial exposure to us and could cause adverse publicity, which in turn could result in a loss of consumer confidence in our products and also reduce oursales. Product quality claims could increase our expenses and have a material adverse effect on demand for our products and, consequently, reduce our netsales, 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 polyethylene. Our business strategy is to create a substantial costadvantage over our competitors by using waste wood fibers and scrap polyethylene. Our business could suffer from the termination of significant sources ofraw materials, 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 scrap polyethylene depends on our success in developing new sources that meet our qualityrequirements, 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 86% of gross sales during fiscal year 2014, 89% during fiscal year 2013 and 90% during fiscal year 2012.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 in subsequentperiods.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 of thedemand for decking, railing, deck framing, fencing and trim, our distribution channel partners must forecast demand for our products, place orders for theproducts, and maintain Trex product inventories in advance of the prime deck-building season, which generally occurs in our late first through third fiscalquarters. Accordingly, our results for the second and third fiscal quarters are difficult to predict and past performance will not necessarily indicate futureperformance. Inventory levels respond to a number of changing conditions in our industry, including product price increases resulting from escalating rawmaterials costs, increases in the number of competitive producers and in the production capacity of those competitors, the rapid pace of product introductionand 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 theamount of 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 and prolonged precipitation, hurricanes, floods, and regional fires in the regions we sell our products interfere with ordinary construction, delayprojects and can even 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.We depend on third parties for transportation services and the lack of availability of transportation and/or increases in cost could materiallyadversely affect our business and operations.Our business depends on the transportation of both finished goods to our distributors and the transportation of raw materials to us. We rely on thirdparties for transportation of these items. In particular, a significant portion of our finished goods are transported by flatbed trucks, which are occasionally inhigh demand (especially at the end of calendar quarters) and/or subject to price fluctuations based on market conditions and the price of fuel.If the required supply of transportation services is unavailable when needed, we may be unable to sell our products at full value, or at all. Similarly, ifany of these providers were unavailable to deliver raw materials to us in a timely manner, we may be unable to manufacture our products in response tocustomer demand. This could harm our reputation, negatively impact our customer relationships and have a material adverse effect on our financial conditionand results of operation. In addition, a material increase in transportation rates or fuel surcharges could materially adversely affect our profitability.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 levels of activity, in turn, are affected by such factors as home equity values, credit availability, consumerconfidence and spending habits, employment, interest rates, inflation and general economic conditions. Market conditions in the housing industry slowedsignificantly in recent years, particularly in new home construction. Home equity values in many markets that decreased significantly during those timeperiods have only begun to recover. This devaluation in home equity values has adversely affected the availability of home equity withdrawals, which haveresulted in decreased home improvement spending. We cannot predict when the economy, the home remodeling and new home construction environmentswill fully recover or if the current recovery will continue. Any continued economic downturn could reduce consumer income or equity capital available forspending on discretionary items such as decking, railing, porches, fencing and trim, which could adversely affect the demand for our products.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, 2014, we had $98.7 million of net property, plant and equipment, $6.8 million of which relates to assets located at our Olive Branch,Mississippi manufacturing facility that was shut down in September 2007. In addition, each year we make significant capital investments to improve orexpand our manufacturing capabilities. These improvements sometimes involve the implementation of new technology and replacement of existingequipment at our manufacturing facilities, which may result in charges to our earnings if the existing equipment is not fully depreciated. Significantreplacement of equipment or changes in the expected cash flows related to our assets could result in 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 and ability tocompete.As of December 31, 2014, we had no outstanding indebtedness. At certain periods during the year, we borrowed significant amounts on our seniorsecured credit facility for working capital purposes, and it is 12Table of Contentsforeseeable that we will need to borrow on the facility in 2015 for similar purposes. In addition, we may borrow money in the event we elect to pursue anacquisition or other transactions. Accordingly, our future level of indebtedness could have important consequences. 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 availabilityof our 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; • 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 restrictionsmay limit 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. To remainin compliance with our credit facility, we must maintain specified financial ratios based on our levels of debt, fixed charges, and earnings (excludingextraordinary gains and extraordinary non-cash losses) before interest, taxes, depreciation and amortization, all of which are subject to the risks of ourbusiness. 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 13Table of Contentscorporate headquarters, we entered into an agreement to lease 55,047 square feet of office space in Dulles, Virginia. The lease expires in mid-2019.Subsequently, we reconsidered our decision to relocate our corporate headquarters and decided not to move. We have executed subleases for 24,732 squarefeet of the leased space and are currently marketing the remaining portion of the space to find a suitable tenant. For a description of our financial reporting inconnection with the Dulles lease agreement, see Note 12 to our consolidated financial statements appearing elsewhere in this report.We own approximately 66 contiguous acres of land in Winchester, Virginia and the buildings on this land. The site includes our research anddevelopment technical facility and manufacturing facilities, which contain approximately 465,000 square feet of space. We own approximately 37 acres ofland in Fernley, Nevada and the buildings on this land. The site includes our manufacturing facility, which contains approximately 240,000 square feet ofspace, and outside open storage. We own approximately 102 acres of land in Olive Branch, Mississippi and the buildings on this land. The site contains fourbuildings with approximately 200,000 square feet for manufacturing and raw material handling operations. In September 2007, we suspended operations atour Olive Branch facility and consolidated all of our manufacturing operations into our Winchester and Fernley sites. Our facilities provide adequatecapacity for current and anticipated future consumer demand.We lease a total of approximately one million square feet of warehouse space under leases with expiration dates ranging from 2015 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 ofour manufacturing 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 2014, we spent a total of $13.0 million oncapital expenditures, primarily related to new poly processing lines and upgrades to our existing production lines to support the manufacture of our high-performance products. We estimate that our capital expenditures in 2015 will be in approximately $20 million. We expect to use these expendituresprincipally to support cost reduction initiatives, new product launches in current and adjacent categories and general business support. Item 3.Legal ProceedingsOn December 16, 2013, the United States District Court, Northern District of California Court granted final approval of the settlement with the law firmof Hagens Berman Sobol Shapiro LLP, relating to the previously reported class action lawsuit brought on behalf of Dean Mahan, and other named andsimilarly situated plaintiffs generally which alleged certain defects in the Company’s products relating to mold growth, color fading and color variation. Asof the date of this report, the Company has distributed all cash payments and rebate certificates under the settlement. Claimants who were denied relief couldappeal Trex’s decision, and the deadline for appeals has now passed. The Company believes that payments to consumers for all relief under the settlementwill not exceed approximately $1.0 million. In addition to such amount, the Company previously paid $1.8 million related to this litigation, representingpayment of attorneys’ fees to class counsel and named plaintiff awards in the nationwide settlement and the settlement of corollary cases brought in Indiana,Kentucky, New Jersey and Michigan, all as previously disclosed.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 effecton the Company’s consolidated financial condition, results of operations, liquidity or competitive position. Item 4.Mine Safety DisclosuresNot applicable. 14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, itwas listed under the symbol “TWP”. Effective November 23, 2009, the symbol changed to “TREX”. The table below shows the reported high and low saleprices of our common stock for each quarter during 2014 and 2013 as reported by the New York Stock Exchange. All common stock share and per share datain the table below are presented on a post-split basis to reflect the two-for-one stock split of our common stock distributed on May 7, 2014 to stockholders ofrecord at the close of business on April 7, 2014. 2014 High Low First Quarter $43.43 $31.05 Second Quarter 40.51 28.26 Third Quarter 39.49 25.14 Fourth Quarter 44.82 31.08 2013 High Low First Quarter $25.75 $19.05 Second Quarter 29.02 22.62 Third Quarter 26.06 20.63 Fourth Quarter 41.52 23.13 Dividend PolicyWe have never paid cash dividends on our common stock and our credit agreement places limitations on our ability to pay cash dividends. We intendto retain future earnings to finance the development and expansion of our business and, therefore, have no current intention to pay cash dividends. However,we reconsider our dividend policy on a regular basis and may determine to pay dividends in the future. 15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 comparedto the Russell 2000 Index and the Standard and Poor’s 600 Building Products Index. The graph assumes $100 was invested on December 31, 2009 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, 2010, 2011, 2012, 2013 and 2014. December 31,2009 December 31,2010 December 31,2011 December 31,2012 December 31,2013 December 31,2014 Trex Company $100.00 $122.24 $116.84 $189.90 $405.71 $434.49 Russell 2000 $100.00 $126.85 $121.55 $141.42 $196.32 $205.92 S&P 600 BPI $100.00 $113.57 $106.72 $138.59 $202.05 $201.56 Other Stockholder MattersAs of February 10, 2015, there were approximately 186 holders of record of our common stock.In 2014, 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. 16Table of ContentsItem 6.Selected Financial DataThe following table presents selected financial data as of December 31, 2014, 2013, 2012, 2011 and 2010 and for each of the years in the five-yearperiod ended December 31, 2014.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, (1) 2014 2013 (2) 2012 (3) 2011 (4) 2010 (5) (In thousands, except share and per share data) Statement of Comprehensive Income Data: Net sales $391,660 $342,511 $307,354 $266,789 $317,690 Cost of sales 251,464 243,893 222,772 203,998 244,875 Gross profit 140,196 98,618 84,582 62,791 72,815 Selling, general and administrative expenses 72,370 73,967 71,907 60,620 67,764 Income from operations 67,826 24,651 12,675 2,171 5,051 Interest expense, net 878 602 8,946 16,364 15,288 Income (loss) before income taxes 66,948 24,049 3,729 (14,193) (10,237) Provision (benefit) for income taxes 25,427 (10,549) 1,009 (2,605) (171) Net income (loss) $41,521 $34,598 $2,720 $(11,588) $(10,066) Basic earnings (loss) per share $1.28 $1.03 $0.08 $(0.38) $(0.33) Basic weighted average shares outstanding 32,319,649 33,589,682 32,247,184 30,776,912 30,374,056 Diluted earnings (loss) per share $1.27 $1.01 $0.08 $(0.38) $(0.33) Diluted weighted average shares outstanding 32,751,074 34,273,502 34,129,712 30,776,912 30,374,056 Cash Flow Data: Cash provided by operating activities $58,642 $45,208 $60,443 $33,847 $18,994 Cash used in investing activities (12,873) (12,697) (7,484) (9,367) (9,773) Cash used in financing activities (39,997) (30,898) (55,326) (47,224) (1,465) Other Data (unaudited): EBITDA (6) $82,653 $40,597 $29,149 $20,589 $24,666 Balance Sheet Data: Cash and cash equivalents and restricted cash $9,544 $3,772 $2,159 $41,526 $27,270 Working capital 35,787 28,994 10,158 (18,574) 66,057 Total assets 195,824 188,157 168,615 228,090 247,815 Total debt (including derivatives) — — 5,000 86,425 85,095 Total stockholder’s equity $113,385 $106,616 $93,986 $92,499 $102,922 (1)All common stock share and per share data in the above table are presented on a post-split basis to reflect the two-for-one stock split of our commonstock distributed on May 7, 2014 to stockholders of record at the close of business on April 7, 2014.(2)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. 17Table of Contents(3)Year ended December 31, 2012 was materially affected by a pre-tax increase of $21.5 million to the warranty reserve.(4)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.(5)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.(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, capitalinvestment cycles and ages of related assets, as well as some recurring non-cash and non-operating charges to net income or loss. For these reasons,management believes that EBITDA provides important supplemental information to investors regarding the operating performance of the Companyand facilitates comparisons by investors between the operating performance of the Company and the operating performance of its competitors.Management believes that consideration of EBITDA should be supplemental, because EBITDA has limitations as an analytical financial measure.These limitations include the 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 beconsidered as an alternative to net income (loss), as calculated in accordance with GAAP, as a measure of operating performance, nor should it be consideredas an alternative 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, 2014 2013 2012 2011 2010 (In thousands) Net income (loss) $41,521 $34,598 $2,720 $(11,588) $(10,066) Plus interest expense, net 878 602 8,946 16,364 15,288 Plus income tax provision (benefit) 25,427 (10,549) 1,009 (2,605) (171) Plus depreciation and amortization 14,827 15,946 16,474 18,418 19,615 EBITDA $82,653 $40,597 $29,149 $20,589 $24,666 18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 1933 andSection 21E of the Securities Exchange Act of 1934. All statements regarding our expected financial position and operating results, our business strategy,our financing plans, forecasted demographic and economic trends relating to our industry and similar matters are forward-looking statements. Thesestatements can sometimes be identified by our use of forward-looking words such as “may,” “will,” “anticipate,” “estimate,” “expect,” “intend” or similarexpressions. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Our actual results could bematerially different from our expectations because of various factors, including the factors discussed under “Item 1A. Risk Factors.” These statements arealso subject to risks and uncertainties that could cause the Company’s actual operating results to differ materially. Such risks and uncertainties include theextent of market acceptance of the Company’s products; the costs associated with the development and launch of new products and the market acceptanceof such new products; the sensitivity of the Company’s business to general economic conditions; the impact of seasonal and weather-related demandfluctuations on inventory levels in the distribution channel and sales of the Company’s products; the availability and cost of third-party transportationservices for our products and raw materials; the Company’s ability to obtain raw materials at acceptable prices; the Company’s ability to maintain productquality and product performance at an acceptable cost; the level of expenses associated with product replacement and consumer relations expenses relatedto product quality; 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 the brandname Trex. We offer a comprehensive set of aesthetically durable, low maintenance product offerings in the decking, railing, porch, fencing, trim, steel deckframing and outdoor lighting categories. We believe that the range and variety of our product offerings allow consumers to design much of their outdoorliving space using Trex brand products.We offer the following products: • Three principal decking products: Trex Transcend, Trex Enhance, and Trex Select; • Three principal railing products: Trex Transcend Railing, Trex Select Railing, and Trex Reveal aluminum railing; • One porch product, Trex Transcend Porch Flooring and Railing System; • One steel deck framing system, Trex Elevations; • One fencing product, Trex Seclusions; • Two outdoor lighting systems, Trex DeckLighting™ and Trex Landscape Lighting™; and, • One cellular PVC outdoor trim product, TrexTrim™.In addition, we offer Trex Hideaway, which is a hidden fastening system for specially grooved boards.Highlights related to the fourth quarter and full year 2014 include: • Increase in net sales of 16% in the fourth quarter of 2014 and 14% in the full year of 2014 compared to the respective periods in 2013. Net salesin the full year 2014 were the highest net sales in any year of our history. • Positive cash flow from operations and no outstanding indebtedness at end of the year. • Repurchase of $50 million of our outstanding common stock during the full year 2014. • Two-for-one stock split of our common stock in the form of a stock dividend distributed on May 7, 2014 to stockholders of record at the close ofbusiness on April 7, 2014. 19®®®®®®®®Table of Contents • Amendment and restatement of our revolving credit facility agreement, providing expanded availability, more favorable borrowing rates, lessfinancial covenants and a maturity of November 2019.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 the pricespaid for Trex products. Our branding and product differentiation strategy enables us to command premium prices over wood products. Our operating resultshave historically varied from quarter to quarter, often due to seasonal trends in the demand for our products. We have historically experienced lower net salesduring the fourth quarter because holidays and adverse weather conditions in certain regions reduce the level of home improvement and constructionactivity.Sales Incentives / Early Buy Program: As part of our normal business practice and consistent with industry practices, we have historically provided ourdistributors 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 2015 decking season in December 2014. The timing and terms of the 2015 program are generally consistentwith the timing and terms of the 2014 program launched in December 2013. 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. There are no product return rightsgranted to our distributors except those granted pursuant to the warranty provisions of our agreements with distributors. We generally do not extend thepayment terms beyond those offered in the program. In addition, our products are not susceptible to rapid changes in technology that may cause them tobecome obsolete. The early buy program can have a significant impact on our sales, receivables and inventory levels. Refer to the liquidity and capitalresources section for further discussion of significant impacts on our receivables and inventory levels.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, scrap polyethylene andpigmentation for coloring Trex products. Direct labor costs include wages and benefits of personnel engaged in the manufacturing process. Manufacturingcosts consist of costs of depreciation, utilities, maintenance supplies and repairs, indirect labor, including wages and benefits, and warehouse and equipmentrental 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 isbranding and other sales and marketing costs, which are used to build brand awareness of Trex. These costs consist primarily of advertising, merchandising,and other promotional costs. Other general and administrative expenses include professional fees, office occupancy costs attributable to the businessfunctions previously referenced, and consumer relations expenses. As a percentage of net sales, selling, general and administrative expenses have varied fromquarter to quarter due, in part, to the seasonality of our business.CRITICAL ACCOUNTING POLICIES AND 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 20Table of Contentsresult, we are required to make estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates,judgments and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenueand expenses during the periods presented. Actual results could be different from these estimates.Product Warranty. We warrant that our products will be free from material defects in workmanship and materials. This warranty generally extends for aperiod of 25 years for residential use and 10 years for commercial use. (With respect to TrexTrim™ and Trex Reveal Railing, the warranty period is 25 yearsfor both residential and commercial use.) With respect to our Transcend, Enhance, Select and Universal Fascia product, we further warrant that the productwill not fade in color more than a certain amount and will be resistant to permanent staining from food substances or mold (provided the stain is cleanedwithin 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 a breach ofsuch 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 number of claims to be settled with payment and (2) the average cost to settle each claim, both of which are subject to variables that are difficult toestimate.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 timeit takes for surface flaking to become evident in the suspect material and materialize as a claim. Furthermore, the aforementioned 2009 class action settlementand communications made by us in July 2013 informing homeowners of potential hazards associated with decking products exhibiting surface flaking thatare not timely replaced led to increased claims volume and disrupted the claims data and settlement patterns. Lastly, we are not aware of any analogousindustry data that might be referenced in predicting future claims to be received. The number of surface flaking claims received peaked in 2009 inconjunction with the class action settlement and has declined each year thereafter.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 cost per claim declined from 2007 through 2009 but has increased each year thereafter.We 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 fiscalyear. 21®®®®Table of ContentsDuring the third quarter of 2013, the number of claims received was significantly greater than our prior estimates. We believe that this unexpectedincrease in claims was due primarily to a response to communications made by us in July 2013 informing homeowners of potential hazards associated withdecking products exhibiting surface flaking that are not timely replaced. These communications included a public press release and over 10,000 letters sentto homeowners that previously filed surface flaking claims. In addition to contributing to the increase in new claims received, these communications resultedin the reopening of a significant number of claims previously closed. Furthermore, although not directly related to the surface flaking issue, in August 2013,the United States District Court, Northern District of California granted preliminary approval of a settlement agreement related to cases in which plaintiffsgenerally alleged certain defects in our products and alleged misrepresentations relating to mold growth. We believe that public notices made subsequent tothe Court approval increased homeowner awareness of product-related issues and contributed to the increased number of surface flaking claims receivedduring the third quarter of 2013. Due to the unfavorable claims experience during the three months ended September 30, 2013, we revised our estimate of thenumber of remaining future claims and recorded a $20 million increase to the warranty reserve.During 2014, the number of claims received was lower than our expectations, while the average cost per claim was higher than our expectations for2014. Based on claims activity experienced during the current year, we revised our assumed future number of claims and average cost per claim. The revisedassumptions did not result in a change to our reserve, which as of December 31, 2014, we believe is sufficient to cover future surface flaking obligations. Theincrease in the amount paid to settle surface flaking claims in 2014, as compared to 2013, was primarily a result of the large number of claims received duringthe second half of 2013, as described above.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 thoseprojected which could materially affect our financial condition, results of operations or cash flow. We estimate that the number of claims received willdecline over time and that the average cost per claim will remain relatively stable. If the level of claims received or average cost per claim differs materiallyfrom expectations, it could result in additional increases to the warranty reserve and reduced earnings and cash flows in future periods. We estimate that a10% 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 $3.1million change in the surface flaking warranty reserve.The following table details surface flaking claims activity related to our warranty: Year Ended December 31, 2014 2013 2012 Claims unresolved, beginning of period 4,249 4,073 4,878 Claims received (1) 3,212 4,256 4,807 Claims resolved (2) (4,589) (4,080) (5,612) Claims unresolved, end of period 2,872 4,249 4,073 Average cost per claim (3) $2,287 $2,269 $2,098 (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 claimssettled without payment).For additional information about product warranties, see Notes 2 and 12 to the consolidated financial statements appearing elsewhere in this report. 22Table of ContentsContract 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, 2014, wehave executed subleases for 24,732 square feet of the leased space and are currently marketing the remaining portion of the space to find a suitable tenant.We estimate that the present value of the estimated future sublease receipts, net of transaction costs, will be less than the remaining minimum lease paymentobligations under our lease and have recorded a liability for the expected shortfall. We recorded a $1.1 million charge in 2013 after a subtenant defaulted onits sublease and vacated the space. During 2014, we recorded $1.5 million in charges due to downward revisions of our estimate of future sublease receiptsresulting from the departure of a subtenant that decided not to renew its sublease at the end of 2014.To estimate future sublease receipts, we have assumed that the existing subleases will be renewed or new subleases will be executed at rates consistentwith rental rates in the current subleases or estimated market rates and that existing vacancies will be filled within one year. However, management cannot becertain 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, market conditions and subtenant preferences will influence the terms achieved in future subleases. The inability tosublet the office space in the future or unfavorable changes to key assumptions used in the estimate of the future sublease receipts may result in materialcharges to selling, general and administrative expenses in future periods.Income Taxes. We recognize deferred tax assets and liabilities based on the difference between the financial statement basis and tax basis of assets andliabilities using enacted rates expected to be in effect during the year in which the differences reverse. We assess the likelihood that our deferred tax assetswill be realized. Deferred tax assets are reduced by a valuation allowance when, after considering all available positive and negative evidence, it isdetermined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.At December 31, 2013, we determined that we more likely than not will realize most of our deferred tax assets and, as a result, reversed the valuationallowance against all but a few specific items primarily related to state tax credits we estimate will expire before they are realized. As of December 31, 2014,we continue to have a valuation allowance of $4.5 million against these deferred tax assets. We will analyze our position in subsequent reporting periods,considering all available positive and negative evidence, in determining the expected realization of our deferred tax assets.Stock-Based Compensation. The fair value of each stock-based award to officers, directors and certain key employees is established on the date of thegrant. We calculate the grant date fair value of stock options and stock appreciation rights using the Black-Scholes valuation model. Determining the fairvalue of these awards is judgmental in nature and involves the use of significant estimates and assumptions, including the term of the share-based awards,risk-free interest rates over the vesting period, expected dividend rates, the price volatility of our shares and forfeiture rates of the awards. We base our fairvalue estimates on assumptions we believe to be reasonable but that are inherently uncertain. Actual future results may differ from those estimates.We grant performance-based restricted stock, the vesting of which is subject to holder’s continuing employment and our achievement of certainperformance measures. At each reporting period, we assess actual performance versus the predetermined performance measures, and adjust the stock-basedcompensation expense to reflect the relative performance achievement. Actual distributed shares are calculated upon conclusion of the service andperformance periods.Inventories. 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, 2014, the excess of the replacement cost of inventory over the LIFO value of inventory was approximately $25.3million. 23Table of ContentsRESULTS OF OPERATIONSBelow we have included a discussion of our operating results and material changes in our operating results for the years ended December 31, 2014compared to December 31, 2013 and December 31, 2013 compared to December 31, 2012.Year Ended December 31, 2014 Compared to Year Ended December 31, 2013Net Sales Year Ended December 31, $ Change % Change 2014 2013 (dollars in thousands) Net sales $391,660 $342,511 $49,149 14.3% The increase in net sales in 2014 compared to 2013 was due primarily to a 16.4% increase in sales volumes, partially offset by a 2.1% decrease in theaverage price per unit. We attribute the increase in sales volumes in 2014 compared to 2013 primarily to stronger demand from existing dealers and additionsto our distribution network in late 2013. The decrease in average price per unit in 2014 was primarily due to our revamped pricing strategy implemented inthe fourth quarter of 2013. The pricing strategy provides a more optimal pricing position for our high-performance products in the marketplace.Gross Profit Year Ended December 31, $ Change % Change 2014 2013 (dollars in thousands) Cost of sales $251,464 $243,893 $7,571 3.1% % of net sales 64.2% 71.2% Gross profit $140,196 $98,618 $41,578 42.2% Gross margin 35.8% 28.8% Gross profit in 2013 was adversely affected by $21.5 million of non-operating charges, which were comprised of a $20.0 million charge to increase thepreviously established surface flaking warranty reserve and a $1.5 million charge related to market share expansion and a reset of prices for certain productsas we transitioned our remaining products to the next generation product offering. Excluding the aforementioned charges in 2013, gross profit increased to$140.2 million in 2014 compared to $120.1 million in 2013. Excluding the aforementioned charges in 2013, gross profit as a percentage of net sales, grossmargin, increased by 90 basis points to 35.8% from 34.9% in 2013. Key drivers to the favorable underlying gross margin for 2014 include manufacturingefficiencies, cost-reduction initiatives and higher capacity utilization, partially offset by the aforementioned revamped pricing strategy.Selling, General and Administrative Expenses Year Ended December 31, $ Change % Change 2014 2013 (dollars in thousands) Selling, general and administrative expenses $72,370 $73,967 $(1,597) (2.2%) % of net sales 18.5% 21.6% The decrease in selling, general and administrative expenses in 2014 compared to 2013 was attributable to various factors including: • a $1.7 million reduction in costs related to the mold growth class action lawsuit that was settled in December 2013; 24Table of Contents • a $0.6 million decrease in personnel-related expenses primarily attributable to decreased incentive compensation; • partially offset by a $0.6 million one-time charge for expenses and breakage fees related to a terminated transaction.As a percentage of net sales, total selling, general and administrative expenses decreased to 18.5% in 2014 from 21.6% in 2013.Interest Expense Year Ended December 31, $ Change % Change 2014 2013 (dollars in thousands) Interest expense $878 $602 $276 45.8% % of net sales 0.2% 0.2% The increase in interest expense was driven by higher debt balances under the revolving credit facility during 2014 compared to 2013 primarily tofacilitate repurchases of our common stock. As a percentage of net sales, interest expense was 0.2% in both 2014 and 2013.Provision for Income Taxes Year Ended December 31, $ Change % Change 2014 2013 (dollars in thousands) Provision (benefit) for income taxes $25,427 $(10,549) $35,976 [NM] Effective tax rate 38.0% (43.9)% [NM]Not meaningful information.During 2014, our income tax expense consisted of statutory federal and state taxes, permanent book to tax differences, federal tax credits, othermiscellaneous tax items and an increase to the valuation allowance on our deferred tax asset. During 2013, our income tax benefit consisted of a reduction ofa substantial portion of our valuation allowance on our deferred tax asset as well as statutory federal and state taxes, permanent book to tax differences,federal tax credits, and other miscellaneous tax items.Our effective tax rate in 2013 was substantially different than the statutory rate due to the effect of the valuation allowance we maintained against ournet deferred tax assets. During 2013, we realized $9.1 million of deferred tax assets previously reserved under a valuation allowance. Additionally, as a resultof all positive and negative evidence available as of December 31, 2013, we determined that we would realize the majority of our remaining deferred tax assetand, as a result, reversed a significant portion of the valuation allowance resulting in a tax benefit of $10.9 million.Year Ended December 31, 2013 Compared to Year Ended December 31, 2012Net Sales Year Ended December 31, $ Change % Change 2013 2012 (dollars in thousands) Net sales $342,511 $307,354 $35,157 11.4% 25Table of ContentsThe increase in net sales in 2013 compared to 2012 was due primarily to an 8% increase in sales volume and a 3% increase in the average price perunit. We attribute the increase in sales volumes in 2013 compared to 2012 to the execution of growth strategies including increased market share fromadditions to our distribution network, the introduction of new product lines and a revised pricing strategy. The increase in average price per unit in 2013 wasprimarily driven by sales mix including an increased attachment rate on railing products.Gross Profit Year Ended December 31, $ Change % Change 2013 2012 (dollars in thousands) Cost of sales $243,893 $222,772 $21,121 9.5% % of net sales 71.2% 72.5% Gross profit $98,618 $84,582 $14,036 16.6% Gross margin 28.8% 27.5% Gross profit in 2013 and 2012 was adversely affected by $21.5 million and $21.5 million of non-operating charges, respectively. We recognized $20.0million and $21.5 million of charges to increase the previously established warranty reserve in 2013 and 2012, respectively. In addition, in 2013, werecognized a $1.5 million charge related to market share expansion and a reset of prices for certain products as we transitioned our remaining products to thenext generation product offering. Excluding the aforementioned charges in both 2013 and 2012, gross profit increased to $120.1 million in 2013 comparedto $106.1 in 2012. Excluding the aforementioned charges in both 2013 and 2012, gross profit as a percentage of net sales, gross margin, increased by 40 basispoints 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 Year Ended December 31, $ Change % Change 2013 2012 (dollars in thousands) Selling, general and administrative expenses $73,967 $71,907 $2,060 2.9% % of net sales 21.6% 23.4% The increase in selling, general and administrative expenses in 2013 compared to 2012 was attributable to various factors including a $1.2 milliondecrease in the benefits recognized from reductions in the provision for future contingent payments associated with the 2011 Iron Deck acquisition and a$0.9 million increase in legal and claims servicing costs primarily resulting from the mold growth class action lawsuit that was settled in December 2013 andrelated public and homeowner communications. As a percentage of net sales, total selling, general and administrative expenses decreased to 21.6% in 2013from 23.4% to 2012.Interest Expense Year Ended December 31, $ Change % Change 2013 2012 (dollars in thousands) Interest expense $602 $8,946 $(8,344) (93.3%) % of net sales 0.2% 2.9% 26Table of ContentsThe decrease in interest expense in 2013 compared to 2012 resulted from carrying lower debt levels at lower interest rates during 2013 compared to2012. This was primarily driven by the repayment of the $91.9 million principal balance on the 6.0% convertible notes on July 2, 2012. As a percentage ofnet sales, interest expense decreased to 0.2% in 2013 from 2.9% in 2012.Provision for Income Taxes Year Ended December 31, $ Change % Change 2013 2012 (dollars in thousands) Provision (benefit) for income taxes $(10,549) $1,009 $(11,558) [NM] Effective tax rate (43.9)% 27.1% [NM]Not meaningful information.During 2013, our income tax benefit consisted of a reduction of a substantial portion of our valuation allowance on our deferred tax asset as well asstatutory federal and state taxes, permanent book to tax differences, federal tax credits, and other miscellaneous tax items. During 2012, our income taxexpense consisted of cash taxes to various states where no net operating loss carry-forward existed to offset current year taxable income, unfavorable effect ofpermanent differences related to employee stock awards and increases in indefinite-lived deferred tax liabilities, primarily related to goodwill amortized forincome taxes.Our effective tax rate for both years was substantially different than the statutory rate due to the effect of the valuation allowance we maintainedagainst our net 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 ofour deferred tax assets. During 2013, we recorded a $19.9 million income tax benefit resulting from a significant reversal of our valuation allowance, $10.9million of which was a direct result of our decision to exit a full valuation allowance.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. The following table summarizes our cash flows from operating, investing and financing activities for the years endedDecember 31, 2014, 2013, and 2012 (in thousands): Year Ended December 31, 2014 2013 2012 Net cash provided by operating activities $58,642 $45,208 $60,443 Net cash used in investing activities $(12,873) $(12,697) $(7,484) Net cash used in financing activities $(39,997) $(30,898) $(55,326) Net increase (decrease) in cash and cash equivalents $5,772 $1,613 $(2,367) Operating ActivitiesNet cash provided by operating activities increased $13.4 million in 2014 compared to 2013. The year-over-year increase was primarily driven byfavorable cash flows relating to accounts receivable and increased net sales and earnings in 2014, partially offset by significantly higher income taxes paid in2014 compared to 2013. Net sales and associated cash collections increased primarily due to additions to our distribution network and a revised pricingstrategy in late 2013 and a stronger demand from existing dealers during 2014. The increased payments for income taxes during 2014 resulted from increasedtaxable income that exceeds available net operating loss carryforwards. 27Table of ContentsAccounts receivable balances decreased slightly to $36.4 million at December 31, 2014 compared to $37.3 million at December 31, 2013.Substantially all of the accounts receivable balances at December 31, 2014 were subject to the terms of our early buy program. We expect to collect alloutstanding accounts receivable balances by May 2015.Net cash provided by operating activities decreased $15.2 million in 2013 compared to 2012. The year-over-year reduction in cash provided byoperating activities was primarily driven by increased inventory and accounts receivable balances, partially offset by an increase in net sales and earningsduring 2013 compared to 2012. The increase in inventory balances at December 31, 2013 was to support conversion to our next generation product offeringsand 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 collected all outstanding accountsreceivable balances by May 2014.Investing ActivitiesNet cash used in investing activities increased $0.2 million in 2014 compared to 2013. Capital expenditures in 2014 totaled $13.0 million related tonew poly processing lines and upgrades to existing production lines to support the manufacture of our high-performance products.Net cash used in investing activities increased $5.2 million in 2013 compared to 2012. The increase was primarily attributable to an increase in capitalexpenditures in 2013 compared to 2012 due to a focus on new product launches and manufacturing efficiencies. Capital expenditures in 2013 consistedprimarily of manufacturing equipment for process and productivity improvements, including upgrading lines to produce new products.Financing ActivitiesNet cash used in financing activities increased $9.1 million in 2014 compared to 2013. The increase was due primarily to an increase in repurchases ofour outstanding common stock under stock repurchase programs authorized by the Board of Directors. During 2014, we repurchased $50.0 million of ouroutstanding common stock using cash on hand and borrowings from our revolving credit facility. During 2013, we used cash on hand to repurchase $25.0million of our outstanding common stock. Cash flow in 2014 was favorably affected by $12.9 million of excess tax benefits related to stock-based awardscompared to $1.5 million in 2013.Net cash used in financing activities decreased $24.4 million in 2013 compared to 2012. The 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 million principal balance on our convertibles notes. In 2013, we used cashon hand to repurchase $25.0 million of our common stock.Stock Repurchase Programs. On October 24, 2013, our Board of Directors authorized a common stock repurchase program, expiring on February 10,2014, of up to $30 million of our outstanding common stock (the “October 2013 Stock Repurchase Program”). We made no repurchases under the October2013 Stock Repurchase Program before it expired.On February 19, 2014, our Board of Directors authorized a common stock repurchase program of up to $50 million of our outstanding common stock(the “February 2014 Stock Repurchase Program”). This authorization had no expiration date. During the three months ended June 30, 2014, we repurchased1,657,919 shares for $50.0 million at an average price of $30.16 per share, which completed the authorization under the February 2014 Stock RepurchaseProgram. The share and per share data for the repurchases are reflective of the two-for-one stock split distributed on May 7, 2014. 28Table of ContentsOn October 23, 2014, our Board of Directors authorized a common stock repurchase program of up to two million shares of our outstanding commonstock (the “October 2014 Stock Repurchase Program”). This authorization has no expiration date. As of December 31, 2014, no repurchases have been madeunder the October 2014 Stock Repurchase ProgramInventory 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. The distributors in turn sell the products to approximately 3,700 dealers who in turn sell the products to the endusers. Consistent with industry practices, to ensure adequate availability of product to meet anticipated seasonal consumer demand and to enable productionplanning, we have historically provided our distributors and dealers incentives to build inventory levels before the start of the prime deck-building season.These incentives include prompt payment discounts and favorable payment terms. In addition, from time to time, we may offer price discounts or volumerebates on specified products and other incentives based on increases in purchases as part of specific promotional programs. There are no product return rightsgranted to our distributors except those granted pursuant to the warranty provisions of our agreements with distributors. While we do not typically receiveany information regarding inventory in the distribution channel from any dealers, we receive limited information from some but not all of our distributorsregarding their inventory. Because few distributors provide us with any information regarding their inventory, we cannot definitively determine the level ofinventory in the distribution channel at any time. Our sales in the fourth quarter of 2014 were higher than our sales in the fourth quarter of 2013. We believethat distributor inventory levels at December 31, 2014 are comparable to distributor inventory levels at December 31, 2013. Significant increases 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 havehad little difficulty replacing a distributor and have experienced little or no disruption to operations or liquidity. We believe that in the event we needed toreplace a distributor, 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 surfaceflaking and regularly monitor the adequacy of the warranty reserve. During the year ended December 31, 2014, we paid approximately $8.9 million to settleclaims against the warranty reserve, which had a material adverse effect on cash flow from operations. We estimate that the number of claims received willdecline over time and that the average cost per claim will remain relatively stable. If the level of claims received or average cost per claim differs materiallyfrom our expectations, it could result in additional increases to the warranty reserve and reduced earnings and cash flow in future periods.Indebtedness. On November 20, 2014, we entered into a Second Amended and Restated Credit Agreement (the “Second Amended Credit Agreement”)with Branch Banking and Trust Company (“BB&T”), as a Lender, Administrative Agent, Swing Line Lender and Letter of Credit Issuer; Citibank, N.A. andBank of America, N.A., each as a Lender, and BB&T Capital Markets, as Lead Arranger. The Second Amended Credit Agreement amended and restated theAmended and Restated Credit Agreement dated as of January 6, 2012 by and among us, as borrower; BB&T as a Lender, Administrative Agent, Swing LineLender, Letter of Credit Issuer and a Collateral Agent; Wells Fargo Capital Finance, LLC, as a Lender and Collateral Agent; and BB&T Capital Markets, asLead Arranger, and as further amended (the “Prior Credit Agreement”). Under the Prior Credit Agreement, BB&T and Wells Fargo provided us with one ormore revolving loans in a collective maximum principal amount of $100 million. The Second Amended Credit Agreement terminated the Revolver Notesand Swing Advance Note under the Prior Credit Agreement. No additional fees were due or owing as a result of the termination of the aforementionedagreements.The Second Amended Credit Agreement provides us with one or more revolving loans in a collective maximum principal amount of $150 million fromJanuary 1 through June 30 of each year, reducing to a maximum principal amount of $100 million from July 1 through December 31 of each year (the“Revolving Loan Limit”) throughout the term, which ends November 20, 2019. 29Table of ContentsIncluded within the Revolving Loan Limit are sublimits for a letter of credit facility in an amount not to exceed $15 million and swing advances in anaggregate principal amount at any time outstanding not to exceed $5 million. The Revolver Loans, the Letter of Credit Facility and the Swing Advance loansare for the purpose of raising working capital and supporting general business operations. We are not obligated to borrow any amount under the RevolvingLoan Limit. Additionally, within the Revolving Loan Limit, we may borrow, repay, and reborrow, at any time or from time to time while the Revolving Loansare in effect.Base Rate Advances (as defined in the Second Amended Credit Agreement) under the Revolver Loans and the Swing Advances accrue interest at theBase Rate plus the Applicable Margin (as defined in the Second Amended Credit Agreement) and Euro-dollar Advances for the Revolver Loans and SwingAdvances accrue interest at the Adjusted London InterBank Offered Rate plus the Applicable Margin (as defined in the Second Amended Credit Agreement).Repayment of all then outstanding principal, interest, fees and costs is due on November 20, 2019.We 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) one business day after the payment under such Letter of Credit by BB&T.The Second Amended Credit Agreement is secured by interest in real property owned by us and certain collateral (as described in the Second Amendedand Restated Security Agreement and Intellectual Property Security Agreement).At December 31, 2014, we had no outstanding borrowings under the Revolver Loans and additional available borrowing capacity of approximately$100 million.Compliance 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 Second Amended Credit Agreement, we are required to maintain specified financialratios based on levels of debt, 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 Second Amended Credit Agreement at December 31, 2014. Under the Second Amended Credit Agreement, thematerial financial covenants and restrictions are as follows: (a)Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio is not permitted to be less than 1.5 to 1.0, measured as of the end of each FiscalQuarter, commencing with the Fiscal Quarter ended September 30, 2014. (b)Consolidated Debt to Consolidated EBITDA Ratio. The Consolidated Debt to Consolidated EBITDA Ratio is not permitted to exceed 3.00 to1.0 measured as of the end of each Fiscal Quarter (and in the case of Consolidated EBITDA, for the four-quarter period ending on such date).Failure to comply with the financial covenants in our Second Amended Credit Agreement could be considered a default of our repayment obligationsand, among other remedies, could accelerate payment of any amounts outstanding under our Second Amended Credit Agreement.At December 31, 2014, we had no outstanding indebtedness, and the interest rate on the revolving credit facility was 1.3%. 30Table of ContentsContractual Obligations. The following tables show, as of December 31, 2014, 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) 44,494 25,471 18,975 48 — Operating leases 38,118 6,753 16,168 7,474 7,723 Total contractual cash obligations $82,612 $32,224 $35,143 $7,522 $7,723 (1)Purchase commitments represent supply contracts with third-party manufacturers and raw material vendors. Open purchase orders written in the normalcourse of business for goods or services that are provided on demand have been excluded as the timing of which is not certain.Off-Balance Sheet Arrangements. We do not have off-balance sheet financing arrangements other than operating leases.Capital and Other Cash Requirements. We made capital expenditures of $13.0 million in 2014, $13.1 million in 2013 and $7.6 million in 2012,primarily related to new products and to make process and productivity improvements. We currently estimate that capital expenditures in 2015 will beapproximately $20 million. Capital expenditures in 2015 are expected to be used primarily to support cost reduction initiatives, new product launches incurrent and adjacent categories and general business support.We 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 duringthe next 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 toour business plan. Debt financing would increase our level of indebtedness, while equity financing would dilute the ownership of our stockholders. There canbe no 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 inour existing debt agreements.NEW ACCOUNTING STANDARDSNew accounting standards are discussed in Note 2. Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements inthis report. 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 31Table of ContentsDecember 31, 2014, we had no debt outstanding under our revolving line of credit. While variable rate debt obligations expose us to the risk of rising interestrates, an increase of 1% in interest rates would not have a material adverse effect on our overall financial position, results of operations or liquidity based onbalances outstanding at December 31, 2014.In certain instances we may use interest rate swap agreements to modify fixed rate obligations to variable rate obligations, thereby adjusting theinterest rates to current market rates and ensuring that the debt instruments are always reflected at fair value. We had no interest rate swap agreementsoutstanding as of December 31, 2014. Item 8.Financial Statements and Supplementary DataThe financial statements listed in Item 15 and appearing on pages F-2 through F-26 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, 2014. 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, 2014. 32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 thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonabledetail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have amaterial effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies and procedures may deteriorate.We assessed the Company’s internal control over financial reporting as of December 31, 2014, based on criteria for effective internal control overfinancial reporting established in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the TreadwayCommission (the “COSO Framework”). Based on this assessment, we concluded that, as of December 31, 2014, 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, 2014, 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, 2015 By: /s/ RONALD W. KAPLAN Ronald W. Kaplan Chairman, President and Chief Executive Officer (Principal Executive Officer)February 24, 2015 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 abovein “Management’s Report on Internal Control Over Financial Reporting’ that occurred during the Company’s fourth fiscal quarter that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. 33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, 2014, based on criteria established in InternalControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 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.Our responsibility 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 aswe considered 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 financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with 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, 2014,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, 2014 and 2013, and the related consolidated statements of comprehensive income, changes instockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2014 of Trex Company, Inc. and our report datedFebruary 24, 2015 expressed an unqualified opinion thereon./s/ Ernst & Young LLPRichmond, VirginiaFebruary 24, 2015 34Table of ContentsItem 9B.Other InformationOn February 18, 2015, the Board of Directors approved an amendment to the Amended and Restated 1999 Incentive Plan for Outside Directors (the“Outside Directors Plan”). Prior to such amendment, the Outside Directors Plan provided for the grant of stock appreciation rights (“SARS”) or options to newdirectors in the amount of $55,000, an annual grant to directors of restricted stock in the amount of $55,000, and it permitted directors to elect to receive allor any portion of their annual board and committee fees in the form of 50% SARs or options and 50% restricted stock. As a result of the amendment, theNominating and Corporate Governance Committee will now determine, prior to any grant of equity, whether such grant shall be in the form of options, SARsor Restricted Stock, or any combination thereof.The foregoing description of the amendment to the Outside Directors Plan is qualified in its entirety by reference to the full text of Outside DirectorsPlan, which is filed as Exhibit 10.3 to this Form 10-K. 35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 2015 annualmeeting of stockholders, which we will file with the SEC on or before 120 days after our 2014 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 ExecutiveOfficer and Chief Financial Officer. The code is available on our corporate web site and in print to any stockholder who requests a copy. We also makeavailable on our web site, at www.trex.com, and in print to any stockholder who requests them, copies of our corporate governance principles and the chartersof each standing committee of our board of directors. Requests for copies of these documents should be directed to Corporate Secretary, Trex Company, Inc.,160 Exeter 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 2015 annual meeting ofstockholders, which we will file with the SEC on or before 120 days after our 2014 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 2015 annual meeting ofstockholders, which we will file with the SEC on or before 120 days after our 2014 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 2015 annual meeting ofstockholders, which we will file with the SEC on or before 120 days after our 2014 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 2015 annual meeting ofstockholders, which we will file with the SEC on or before 120 days after our 2014 fiscal year-end. 36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-26 of this report and are incorporated byreference in Part II, Item 8: Report of Ernst & Young LLP, Independent Registered Public Accounting Firm F-2 Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 2014 and 2013 F-3 Consolidated Statements of Comprehensive Income for the three years ended December 31, 2014 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the three years ended December 31, 2014 F-5 Consolidated Statements of Cash Flows for the three years ended December 31, 2014 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-27 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 RegistrationStatement on Form S-1 (No. 333-63287) and incorporated herein by reference. 3.2 Certificate of Amendment to the Restated Certificate of Incorporation of Trex Company, Inc. dated April 30, 2014. Filed as Exhibit 3.2 tothe Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 and incorporated herein by reference. 3.3 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, 2008 andincorporated 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 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. 4.3 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. 37Table of ContentsExhibitNumber Exhibit Description 4.4 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 asExhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 and incorporated herein byreference. 4.5 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. 4.6 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. 4.7 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. 4.8 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 4.8to the Company’s Current Report on Form 8-K filed on November 6, 2009 and incorporated herein by reference. 4.9 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. 4.10 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. 4.11 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. 4.12 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’sCurrent Report on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.13 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’s CurrentReport on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 38Table of ContentsExhibitNumber Exhibit Description 4.14 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. 4.15 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 Banking andTrust Company and Wells Fargo Capital Finance, LLC, as Beneficiary relating to real property partially located in the County of Frederick,Virginia and partially located in the City of Winchester, Virginia. Filed as Exhibit 4.6 to the Company’s Current Report on Form 8-K filed onJanuary 12, 2012 and incorporated herein by reference. 4.16 Deed of Trust, dated as of January 6, 2012, by and among the Company as grantor, First American Title Insurance Company, as trustee, andBranch Banking and Trust Company, as Collateral Agent for Branch Banking and Trust Company and Wells Fargo Capital Finance, LLC, asBeneficiary relating to real property located in the County of Fernley, Nevada. Filed as Exhibit 4.7 to the Company’s Current Report on Form8-K filed on January 12, 2012 and incorporated herein by reference. 4.17 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. Filed asExhibit 4.1 to the Company’s Amended Current Report on Form 8-K filed April 18, 2013 and incorporated herein by reference. 4.18 Revolver Note dated February 26, 2013 payable by Trex Company, Inc. to Branch Banking and Trust Company in the amount of the lesser of$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. 4.19 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. 4.20 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. 4.21 Letter Agreement dated October 23, 2014 to Amended and Restated Credit Agreement Dated as of January 6, 2012, as amended, between theCompany and Branch Banking and Trust Company, as a Lender and Administrative Agent, and Wells Fargo Capital Finance, LLC as aLender. Filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 andincorporated herein by reference. 4.22 Second Amended and Restated Credit Agreement dated as of November 20, 2014 between the Company and Branch Banking and TrustCompany, as a Lender, Administrative Agent, Swing Line Lender and Letter of Credit Issuer; Citibank, N.A. as a Lender; Bank of America,N.A. as a Lender; and BB&T Capital Markets, as Lead Arranger. Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filedNovember 25, 2014 and incorporated herein by reference. 39Table of ContentsExhibitNumber Exhibit Description 4.23 Revolver Note dated November 20, 2014 payable by the Company to Branch Banking and Trust Company in the amount of the lesser of$80,000,000 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 November 25, 2014 and incorporated herein by reference. 4.24 Revolver Note dated November 20, 2014 payable by the Company to Citibank, N.A. in the amount of the lesser of $45,000,000 or theoutstanding revolver advances made by Citibank, N.A. Filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K filedNovember 25, 2014 and incorporated herein by reference. 4.25 Revolver Note dated November 20, 2014 payable by the Company to Bank of America, N.A. in the amount of the lesser of $25,000,000 orthe outstanding revolver advances made by Bank of America, N.A. Filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K filedNovember 25, 2014 and incorporated herein by reference. 4.26 Swing Advance Note dated November 20, 2014 payable by the Company to Branch Banking and Trust Company in the amount of the lesserof $5,000,000 or the outstanding swing advances made by Branch Banking and Trust Company. Filed as Exhibit 4.5 to the Company’sCurrent Report on Form 8-K filed November 25, 2014 and incorporated herein by reference. 4.27 Second Amended and Restated Security Agreement dated as of November 20, 2014 between the Company, as debtor, and Branch Bankingand Trust Company as Administrative Agent for Branch Banking and Trust Company, Citibank, N.A. and Bank of America, N.A. Filed asExhibit 4.6 to the Company’s Current Report on Form 8-K filed November 25, 2014 and incorporated herein by reference. 4.28 Second Modification to Amended and Restated Credit Line Deed of Trust, dated as of November 20, 2014, by and among the Company asgrantor, BB&T-VA Collateral Service Corporation, as trustee, and Branch Banking and Trust Company, as Administrative Agent for BranchBanking and Trust Company, Citibank, N.A. and Bank of America, N.A., as Beneficiaries relating to real property partially located in theCounty of Frederick, Virginia and partially located in the City of Winchester, Virginia. Filed as Exhibit 4.7 to the Company’s Current Reporton Form 8-K filed November 25, 2014 and incorporated herein by reference. 4.29 Modification to Deed of Trust, dated as of November 20, 2014, by and among the Company as grantor, First American Title InsuranceCompany, as trustee, and Branch Banking and Trust Company, as Administrative Agent for Branch Banking and Trust Company, Citibank,N.A. and Bank of America, N.A., as Beneficiaries relating to real property located in the County of Fernley, Nevada. Filed as Exhibit 4.8 tothe Company’s Current Report on Form 8-K filed November 25, 2014 and incorporated herein by reference. 4.30 Intellectual Property Security Agreement, dated November 20, 2014, by and between Trex Company, Inc. as debtor; and Branch Banking andTrust Company, in its capacity as Administrative Agent under the Second Amended and Restated Credit Agreement and acting as agent foritself and the other secured parties. Filed as Exhibit 4.9 to the Company’s Current Report on Form 8-K filed November 25, 2014 andincorporated herein by reference. 10.1 Description of Management Compensatory Plans and Arrangements. Filed herewith. ** 10.2 Trex Company, Inc. 2014 Stock Incentive Plan. Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterlyperiod ended June 30, 2014 and incorporated herein by reference. ** 10.3 Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors. Filed herewith. ** 40Table of ContentsExhibitNumber Exhibit Description 10.4 Form of Trex Company, Inc. 2005 Stock Incentive Plan Time-Based Restricted Stock Agreement. Filed as Exhibit 10.7 to the Company’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2013 and incorporated herein by reference. ** 10.5 Form of Trex Company, Inc. 2005 Stock Incentive Plan Performance-Based Restricted Stock Agreement. Filed as Exhibit 10.8 to theCompany’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and incorporated herein by reference. ** 10.6 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. ** 10.7 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. ** 10.8 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. ** 10.9 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. ** 10.10 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. ** 10.11 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. ** 10.12 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. ** 10.13 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. ** 10.14 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.*, ** 10.15 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. ** 10.16 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. 10.17 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. 41Table of ContentsExhibitNumber Exhibit Description 10.18 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. 10.19 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. 10.20 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. 10.21 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. 10.22 Amendment, dated February 22, 2010, of Deed of Lease dated as of June 15, 2000, between Trex Company, Inc., as successor by merger toTrex Company, LLC, and TC.V.LLC, as successor to Space, LLC. Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Qfor the quarterly period ended March 31, 2010 and incorporated herein by reference. 10.23 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. 42Table of ContentsTREX COMPANY, INC.Index to Consolidated Financial Statements Page Report of Ernst & Young LLP, Independent Registered Public Accounting Firm F-2 Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 2014 and 2013 F-3 Consolidated Statements of Comprehensive Income for the three years ended December 31, 2014 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the three years ended December 31, 2014 F-5 Consolidated Statements of Cash Flows for the three years ended December 31, 2014 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-27 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, 2014 and 2013, and the relatedconsolidated statements of comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period endedDecember 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule arethe responsibility of the Company’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, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period endedDecember 31, 2014, 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, 2014, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2015 expressed an unqualifiedopinion thereon./s/ Ernst & Young LLPRichmond, VirginiaFebruary 24, 2015 F-2Table of ContentsTREX COMPANY, INC.CONSOLIDATED BALANCE SHEETS December 31, 2014 2013 (In thousands) ASSETS Current Assets: Cash and cash equivalents $9,544 $3,772 Accounts receivable, net 36,391 37,338 Inventories 23,747 22,428 Prepaid expenses and other assets 6,288 3,145 Deferred income taxes 9,271 9,497 Total current assets 85,241 76,180 Property, plant and equipment, net 98,716 100,783 Goodwill and other intangibles 10,534 10,542 Other assets 1,333 652 Total Assets $195,824 $188,157 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $20,050 $14,891 Accrued expenses 20,660 23,295 Accrued warranty 8,744 9,000 Total current liabilities 49,454 47,186 Deferred income taxes 3,708 360 Non-current accrued warranty 25,097 31,812 Other long-term liabilities 4,180 2,183 Total Liabilities 82,439 81,541 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, 80,000,000 shares authorized; 34,800,552 and 34,598,124 shares issued and32,020,123 and 33,475,614 shares outstanding at December 31, 2014 and 2013, respectively 348 346 Additional paid-in capital 116,740 101,494 Retained earnings 71,297 29,776 Treasury stock, at cost, 2,780,429 and 1,122,510 shares at December 31, 2014 and 2013, respectively (75,000) (25,000) Total Stockholders’ Equity 113,385 106,616 Total Liabilities and Stockholders’ Equity $195,824 $188,157 See accompanying notes to financial statements. F-3Table of ContentsTREX COMPANY, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, 2014 2013 2012 (In thousands, except share and per share data) Net sales $391,660 $342,511 $307,354 Cost of sales 251,464 243,893 222,772 Gross profit 140,196 98,618 84,582 Selling, general and administrative expenses 72,370 73,967 71,907 Income from operations 67,826 24,651 12,675 Interest expense, net 878 602 8,946 Income before income taxes 66,948 24,049 3,729 Provision (benefit) for income taxes 25,427 (10,549) 1,009 Net income $41,521 $34,598 $2,720 Basic earnings per common share $1.28 $1.03 $0.08 Basic weighted average common shares outstanding 32,319,649 33,589,682 32,247,184 Diluted earnings per common share $1.27 $1.01 $0.08 Diluted weighted average common shares outstanding 32,751,074 34,273,502 34,129,712 Comprehensive income $41,521 $34,598 $2,720 See accompanying notes to financial statements. F-4Table of ContentsTREX COMPANY, INC.CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Common Stock AdditionalPaid-InCapital RetainedEarnings(Deficit) Treasury Stock Total Shares Amount Shares Amount Balance, December 31, 2011 31,204,264 $329 $99,712 $(7,542) — $— $92,499 Net income — — — 2,720 — — 2,720 Employee stock purchase and option plans 469,104 2 820 — — — 822 Shares withheld for taxes on share-based payment awards (74,302) 1 (5,525) — — — (5,524) Stock-based compensation 298,430 — 3,469 — — — 3,469 Common stock issued upon conversion of notes 2,123,490 11 (11) — — — — Balance, December 31, 2012 34,020,986 343 98,465 (4,822) — — 93,986 Net income — — — 34,598 — — 34,598 Employee stock purchase and option plans 542,670 3 4,029 — — — 4,032 Shares withheld for taxes on share-based payment awards (58,730) — (6,277) — — — (6,277) Stock-based compensation 93,198 — 3,811 — — — 3,811 Excess tax benefits from stock compensation — — 1,466 — — — 1,466 Shares repurchased under our publicly announced sharerepurchase programs (1,122,510) — — — 1,122,510 (25,000) (25,000) Balance, December 31, 2013 33,475,614 346 101,494 29,776 1,122,510 (25,000) 106,616 Net income — — — 41,521 — — 41,521 Employee stock purchase and option plans 133,133 1 746 — — — 747 Shares withheld for taxes on share-based payment awards (36,610) — (3,189) — — — (3,189) Stock-based compensation 105,905 1 4,806 — — — 4,807 Excess tax benefits from stock compensation — — 12,883 — — — 12,883 Shares repurchased under our publicly announced sharerepurchase programs (1,657,919) — — — 1,657,919 (50,000) (50,000) Balance, December 31, 2014 32,020,123 $348 $116,740 $71,297 2,780,429 $(75,000) $113,385 See accompanying notes to financial statements. F-5Table of ContentsTREX COMPANY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2014 2013 2012 (In thousands) Operating Activities Net income $41,521 $34,598 $2,720 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,204 16,255 17,009 Debt discount amortization — — 5,450 Deferred income taxes 3,574 (12,698) 618 Stock-based compensation 4,807 3,811 3,469 Loss on disposal of property, plant and equipment 158 587 1,909 Excess tax benefits from stock compensation (12,898) (1,466) — Other non-cash adjustments (245) (337) (314) Changes in operating assets and liabilities: Accounts receivable 867 (10,844) 2,660 Inventories (1,319) (4,907) 11,376 Prepaid expenses and other assets (624) (213) (405) Accounts payable 5,159 3,731 (731) Accrued expenses and other liabilities (7,535) 15,173 16,784 Income taxes receivable/payable 9,973 1,518 (102) Net cash provided by operating activities 58,642 45,208 60,443 Investing Activities Expenditures for property, plant and equipment (12,974) (13,060) (7,593) Proceeds from sales of property, plant and equipment 66 176 3 Purchase of acquired company, net of cash acquired (44) — (11) Notes receivable, net 79 187 117 Net cash used in investing activities (12,873) (12,697) (7,484) Financing Activities Financing costs (453) (119) (750) Restricted cash — — 37,000 Borrowings under line of credit 143,000 74,500 93,700 Principal payments under line of credit (143,000) (79,500) (88,700) Principal payments under mortgages and notes — — (91,875) Repurchases of common stock (53,189) (31,277) (5,522) Proceeds from employee stock purchase and option plans 747 4,032 821 Excess tax benefits from stock compensation 12,898 1,466 — Net cash used in financing activities (39,997) (30,898) (55,326) Net increase (decrease) in cash and cash equivalents 5,772 1,613 (2,367) Cash and cash equivalents at beginning of year 3,772 2,159 4,526 Cash and cash equivalents at end of year $9,544 $3,772 $2,159 Supplemental disclosures of cash flow information: Cash paid for interest, net of capitalized interest $520 $348 $5,792 Cash paid for income taxes, net $11,919 $672 $590 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. A majority of its products are manufactured in a proprietary process that combines waste wood fibers and scrap polyethylene. The Companyoperates 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, 2014.Stock SplitIn February 2014, the Company’s Board of Directors approved a two-for-one stock split of the Company’s common stock, par value $0.01. The stocksplit was in the form of a stock dividend distributed on May 7, 2014 to stockholders of record at the close of business on April 7, 2014. The stock splitentitled each stockholder to receive one additional share of common stock, par value $0.01, for each share they held as of the record date. All common stockshare and per share data for all periods presented in the accompanying consolidated financial statements and related notes are presented on a post-split basis.Additionally, on April 30, 2014, the Company’s stockholders approved an amendment to the Company’s Restated Certificate of Incorporation to increase thenumber of authorized shares of common stock from 40 million to 80 million shares.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, 2014, 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, 2014, 2013 and 2012, sales to certain customers accounted for 10% or more of the Company’s total net sales. For theyear ended December 31, 2014, one customer of the Company represented approximately 24% of the Company’s net sales. For the year 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 theCompany represented approximately 26% and 10% of the Company’s net sales. As of December 31, 2014, three customers represented 28%, 13%, and 11%,respectively, of the Company’s accounts receivable balance.Approximately 38%, 44%, and 40% of the Company’s raw materials purchases for the years ended December 31, 2014, 2013 and 2012, 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, 2014, the excess of the replacement cost of inventory over the LIFO value of inventorywas approximately $25.3 million. Due to the nature of the LIFO valuation methodology, liquidations of inventories will result in a portion of the Company’scost of sales being based on historical rather than current year costs.A majority of the Company’s products are made in a proprietary process that combines waste wood fibers and scrap polyethylene. The Company grindsup 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 3-11 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 probabilitythat future 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 decidednot to 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, 2014,the Company has executed subleases for 24,732 square feet of the leased space and is currently marketing the remaining portion of the space to find asuitable tenant. The Company estimates that the present value of the estimated future sublease receipts, net of transaction costs, will be less than theremaining minimum lease payment obligations under its lease and has recorded a liability for the expected shortfall. The Company recorded a $1.1 millioncharge in 2013 after a subtenant defaulted on its sublease and vacated the space. During 2014, the Company recorded $1.5 million in charges due todownward revisions of its estimate of future sublease receipts resulting from the departure of a subtenant that decided not to renew its sublease at the end of2014.To estimate future sublease receipts, the Company has assumed that the existing subleases will be renewed or new subleases will be executed at ratesconsistent with rental rates in the current subleases or estimated market rates and that existing vacancies will be filled within one year. 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, market conditions and subtenant preferences will influence the terms achieved in future subleases. The inability tosublet the office space in the future or unfavorable changes to key assumptions used in the estimate of the future sublease receipts may result in materialcharges 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. F-9Table of ContentsSignificant estimates in the discounted cash flows model include: the weighted average cost of capital; long-term rate of growth and profitability of thebusiness; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the Company againstcertain market information. Significant estimates in the market approach model include identifying appropriate market multiples and assessing earningsbefore interest, income taxes, depreciation and amortization (EBITDA) in estimating the fair value of the reporting unit.For the years ended December 31, 2014, 2013 and 2012, 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, 2014, 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 historicalestimates.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. TheCompany does not grant contractual product return rights to customers other than pursuant to its product warranty. The Company does not expect futureproduct returns to 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 in cashconsideration made to dealers and distributors. The Company accounts for consideration made pursuant to these programs in accordance with accountingguidance that governs consideration given by a vendor to a customer. With the exception of cooperative advertising, the Company classifies sales incentivesas a reduction in revenue in “Net sales.” Sales incentives are recorded in the period in which they are earned by customers. The Company’s cooperativeadvertising program meets the requirements for exclusion from net sales and the costs are recorded as expenses in “Selling, general and administrativeexpenses” in the accompanying consolidated statements of comprehensive income. Cooperative advertising costs are expensed as incurred. F-10®®®®Table of ContentsStock-Based CompensationThe Company measures stock-based compensation at the grant date of the award based on the fair value. For stock options, stock appreciation rightsand time-based restricted stock, stock-based compensation is recognized on a straight line basis over the vesting periods of the award, net of an estimatedforfeiture rate. For performance-based restricted stock, expense is recognized ratably over the performance and vesting period of each tranche based onmanagement’s judgment of the ultimate award that is likely to be paid out based on the achievement of predetermined performance measures. Stock-basedcompensation expense is included in “Selling, general and administrative expenses” in the accompanying consolidated statements of comprehensiveincome.Income TaxesThe Company recognizes deferred tax assets and liabilities based on the difference between the financial statement basis and tax basis of assets andliabilities using enacted rates expected to be in effect during the year in which the differences reverse. The Company assesses the likelihood that its deferredtax assets will be realized. Deferred tax assets are reduced by a valuation allowance when, after considering all available positive and negative evidence, it isdetermined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.At 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 thevaluation allowance against all but a few specific items primarily related to state tax credits it estimates will expire before they are realized. As ofDecember 31, 2014, the Company continues to have a valuation allowance of $4.5 million against these deferred tax assets. The Company analyzes itsposition in subsequent reporting periods, considering all available positive and negative evidence, in determining the expected realization of its deferred taxassets.Research and Development CostsResearch and development costs are expensed as incurred. For the years ended December 31, 2014, 2013 and 2012, research and development costswere $2.3 million, $2.9 million and $2.9 million, respectively, and have been included in “Selling, general and administrative expenses” in theaccompanying consolidated 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, 2014 and December 31, 2013, $0.5 million and $0.5 million, respectively,were included in prepaid expenses for production costs.For the years ended December 31, 2014, 2013 and 2012, branding expenses, including advertising expenses as described above, were $20.8 million,$20.9 million and $20.5 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, accounts receivable,accounts payable, accrued expenses and other current liabilities to approximate the fair value of the respective assets and liabilities at December 31, 2014and 2013. F-11Table of ContentsNew Accounting Standards Not Yet AdoptedIn May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers.”The new standard provides a single, comprehensive model for revenue arising from contracts with customers and supersedes most current revenue recognitionguidance. The new standard requires an entity to recognize revenue at an amount that reflects the consideration to which the company expects to be entitledin exchange for transferring goods or services to a customer. The new guidance is effective for fiscal years, and interim periods within those years, beginningafter December 15, 2016 and allows for either full retrospective or modified retrospective application. No early adoption is permitted. The Company iscurrently assessing the impact of the adoption of this new standard on its consolidated financial statements and footnote disclosures and has not yet selecteda method of adoption.ReclassificationsCertain prior year amounts have been reclassified to conform to the current year presentation. 3.INVENTORIESInventories (at LIFO value) consist of the following as of December 31 (in thousands): 2014 2013 Finished goods $32,756 $30,423 Raw materials 16,290 16,502 Total FIFO inventories 49,046 46,925 Reserve to adjust inventories to LIFO value (25,299) (24,497) Total LIFO inventories $23,747 $22,428 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 to cost of sales a $4.5 million benefit due to a reduction in inventory. No suchinventory reduction occurred during the years ended December 31, 2014 and 2013. 4.PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment consist of the following as of December 31 (in thousands): 2014 2013 Building and improvements $50,394 $48,774 Machinery and equipment 203,496 195,873 Furniture and fixtures 2,237 2,062 Forklifts and tractors 6,052 6,191 Computer equipment 8,120 8,353 Construction in process 6,707 7,619 Land 8,858 8,858 Total property, plant and equipment 285,864 277,730 Accumulated depreciation (187,148) (176,947) Total property, plant and equipment, net $98,716 $100,783 F-12Table of ContentsThe Company had construction in process as of December 31, 2014 of approximately $6.7 million. The Company expects that the construction inprocess will be completed and put into service in the year ending December 31, 2015.Depreciation expense for the years ended December 31, 2014, 2013, and 2012 totaled $14.8 million, $15.9 million and $16.5 million, respectively. 5.ACCRUED EXPENSESAccrued expenses consist of the following (in thousands): 2014 2013 Accrued compensation and benefits $9,201 $9,135 Accrued sales and marketing costs 5,963 5,269 Accrued rent obligations 1,372 1,787 Accrued manufacturing costs 1,307 1,107 Accrued legal contingency 301 3,174 Other 2,516 2,823 Total accrued expenses $20,660 $23,295 6.DEBTThe Company’s debt consists of a revolving credit facility. At December 31, 2014, the Company had no outstanding indebtedness, and the interest rateon the revolving credit facility was 1.3%.Revolving Credit FacilityOn November 20, 2014, the Company entered into a Second Amended and Restated Credit Agreement (the “Second Amended Credit Agreement”) withBranch Banking and Trust Company (“BB&T”), as a Lender, Administrative Agent, Swing Line Lender and Letter of Credit Issuer; Citibank, N.A. and Bankof America, N.A., each as a Lender, and BB&T Capital Markets, as Lead Arranger. The Second Amended Credit Agreement amended and restated theAmended and Restated Credit Agreement dated as of January 6, 2012 by and among the Company, as borrower; BB&T as Lender, Administrative Agent,Swing Line Lender, Letter of Credit Issuer and a Collateral Agent; Wells Fargo Capital Finance, LLC, as a Lender and a Collateral Agent; and BB&T CapitalMarkets, as Lead Arranger, and as further amended (the “Prior Credit Agreement”). Under the Prior Credit Agreement, BB&T and Wells Fargo provided theCompany with one or more revolving loans in a collective maximum principal amount of $100 million. The Second Amended Credit Agreement terminatedthe Revolver Notes and Swing Advance Notes under the Prior Credit Agreement. No additional fees were due or owing as a result of the termination of theaforementioned agreements.The Second Amended Credit Agreement provides the Company with one or more revolving loans in a collective maximum principal amount of $150million from January 1 through June 30 of each year, reducing to a maximum principal amount of $100 million from July 1 through December 31 of eachyear (the “Revolving Loan Limit”) throughout the term, which ends November 20, 2019.Included within the Revolving Loan Limit are sublimits for a letter of credit facility in an amount not to exceed $15 million and swing advances in anaggregate principal amount at any time outstanding not to exceed $5 million. The Revolver Loans, the Letter of Credit Facility and the Swing Advance loansare for the purpose of raising working capital and supporting general business operations. The Company is not obligated to borrow any amount under theRevolving Loan Limit. Additionally, within the Revolving Loan Limit, the Company may borrow, repay, and reborrow, at any time or from time to timewhile the Revolving Loans are in effect. F-13Table of ContentsBase Rate Advances (as defined in the Second Amended Credit Agreement) under the Revolver Loans and the Swing Advances accrue interest at theBase Rate plus the Applicable Margin (as defined in the Second Amended Credit Agreement) and Euro-dollar Advances for the Revolver Loans and SwingAdvances accrue interest at the Adjusted London InterBank Offered Rate plus the Applicable Margin (as defined in the Second Amended Credit Agreement).Repayment of all then outstanding principal, interest, fees and costs is due on November 20, 2019.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 theapplication or (ii) one business day after the payment under such Letter of Credit by BB&T.The Second Amended Credit Agreement is secured by interest in real property owned by us and certain collateral (as described in the Second Amendedand Restated Security Agreement and Intellectual Property Security Agreement).At December 31, 2014, the Company had no outstanding borrowings under the Revolver Loans and additional available borrowing capacity ofapproximately $100 million.Compliance with Debt Covenants and Restrictions. The Company’s ability to make scheduled principal and interest payments, borrow and repayamounts under any outstanding revolving credit facility and continue to comply with any loan covenants depends primarily on its ability to generatesufficient cash flow from operations. To remain in compliance with financial covenants in the Second Amended Credit Agreement, the Company is requiredto maintain specified financial ratios based on levels of debt, 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 with all covenants contained in Second Amended Credit Agreement at December 31, 2014. Under theSecond Amended Credit Agreement, the material financial covenants and restrictions are as follows: (a)Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio is not permitted to be less than 1.5 to 1.0, measured as of the end of each FiscalQuarter, commencing with the Fiscal Quarter ended September 30, 2014. (b)Consolidated Debt to Consolidated EBITDA Ratio. The Consolidated Debt to Consolidated EBITDA Ratio is not permitted to exceed 3.00 to1.0 measured as of the end of each Fiscal Quarter (and in the case of Consolidated EBITDA, for the four-quarter period ending on such date).Failure to comply with the financial covenants in the Second Amended Credit Agreement could be considered a default of repayment obligations and,among other remedies, could accelerate payment of any amounts outstanding under the Second Amended 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, 2014 2013 2012 Numerator: Net income $41,521 $34,598 $2,720 Denominator: Basic weighted average shares outstanding 32,319,649 33,589,682 32,247,184 Effect of dilutive securities: SARS and options 262,730 510,706 812,964 Restricted stock 168,695 173,114 103,598 Convertible notes — — 965,966 Diluted weighted average shares outstanding 32,751,074 34,273,502 34,129,712 Basic earnings per share $1.28 $1.03 $0.08 Diluted earnings per share $1.27 $1.01 $0.08 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 followingpotentially dilutive securities because the effect would be anti-dilutive: Year Ended December 31, 2014 2013 2012 Restricted stock and stock options 2,633 118,596 234,644 Stock appreciation rights 1,969 73,154 242,412 Stock SplitIn February 2014, the Company’s Board of Directors approved a two-for-one stock split of the Company’s common stock, par value $0.01. The stocksplit was in the form of a stock dividend distributed on May 7, 2014 to stockholders of record at the close of business on April 7, 2014. The stock splitentitled each stockholder to receive one additional share of common stock, par value $0.01, for each share they held as of the record date. All common stockshare and per share data for all periods presented in the accompanying consolidated financial statements and related notes are presented on a post-split basis.Additionally, on April 30, 2014, the Company’s stockholders approved an amendment to the Company’s Restated Certificate of Incorporation to increase thenumber of authorized shares of common stock from 40 million to 80 million shares.Stock Repurchase ProgramsOn October 24, 2013, the Board of Directors authorized a common stock repurchase program, expiring on February 10, 2014, of up to $30 million ofour outstanding common stock (the “October 2013 Stock Repurchase Program”). The Company made no repurchases under the October 2013 StockRepurchase Program before it expired.On February 19, 2014, the Board of Directors authorized a common stock repurchase program of up to $50 million of the company’s outstandingcommon stock (the “February 2014 Stock Repurchase Program”). This F-15Table of Contentsauthorization had no expiration date. During the three months ended June 30, 2014, the Company repurchased 1,657,919 shares for $50.0 million at anaverage price of $30.16 per share, which completed the authorization under the February 2014 Stock Repurchase Program. The share and per share data forthe repurchases are reflective of the two-for-one stock split distributed on May 7, 2014.On October 23, 2014, the Board of Directors authorized a common stock repurchase program of up to two million shares of the Company’s outstandingcommon stock (the “October 2014 Stock Repurchase Program”). This authorization has no expiration date. As of December 31, 2014, no repurchases weremade under the October 2014 Stock Repurchase Program. 8.STOCK-BASED COMPENSATIONOn April 30, 2014, the Company’s stockholders approved the Trex Company, Inc. 2014 Stock Incentive Plan (“the Plan”), which was previouslyapproved by the Board of Directors on February 19, 2014. The Plan amended and restated in its entirety the Trex Company, Inc. 2005 Stock Incentive Plan,as previously disclosed. The Plan is administered by the Compensation Committee of the Company’s Board of Directors. Stock-based compensation isgranted to officers, directors and certain key employees in accordance with the provisions of the Plan. The Plan provides for grants of stock options, restrictedstock, restricted stock units, stock appreciation rights (“SARs”), and unrestricted stock. The total aggregate number of shares of the Company’s commonstock that may be issued under the Plan is 6,420,000, an increase of 60,000 shares from the previous plan and adjusted to reflect the two-for-one stock splitdistributed on May 7, 2014.The Company recognizes stock-based compensation expense ratably over the period from grant date to the earlier of: (1) the vesting date of the award,or (2) the date the grantee is eligible to retire without forfeiting the award. For performance-based restricted stock, expense is recognized ratably over theperformance and vesting period of each tranche based on management’s judgment of the ultimate award that is likely to be paid out based on theachievement of the predetermined performance measures. For the employee stock purchase plan, compensation expense is recognized related to the discounton purchases. The following table summarizes the Company’s stock-based compensation expense for the years ended December 31, 2014, 2013 and 2012 (inthousands): Year Ended December 31, 2014 2013 2012 Time-based restricted stock $2,974 $2,461 $2,035 Performance-based restricted stock 727 — — Stock appreciation rights 1,035 1,251 1,369 Employee stock purchase plan 71 99 65 Total stock-based compensation $4,807 $3,811 $3,469 Stock-based compensation expense is included in “Selling, general and administrative expenses” in the accompanying consolidated statements ofcomprehensive income.Time-Based Restricted StockThe fair value of time-based restricted stock is determined based on the closing price of the Company’s shares on the grant date. Shares of time-basedrestricted stock vest based on the terms of the awards. Unvested time-based restricted stock is generally forfeitable upon termination of a holder’s service asan employee unless the individual’s service is terminated due to retirement, death or permanent disability. The total fair value of time-based restricted sharesvested for the years ended December 31, 2014, 2013 and 2012 was $3.9 million, $3.1 million, and $2.5 million, respectively. At December 31, 2014, therewas $2.8 million of total compensation expense related to unvested time-based restricted stock remaining to be recognized over a weighted-average period ofapproximately 1.5 years. F-16Table of ContentsTime-based restricted stock activity under the Plan and all predecessor stock incentive plans is as follows: Time-basedRestricted Stock Weighted-AverageGrant PricePer Share Nonvested at December 31, 2011 320,350 $11.50 Granted 313,854 $13.59 Vested (189,410) $13.44 Forfeited (15,424) $12.74 Nonvested at December 31, 2012 429,370 $12.08 Granted 94,030 $22.21 Vested (139,594) $22.28 Forfeited (832) $16.16 Nonvested at December 31, 2013 382,974 $13.78 Granted 66,511 $32.70 Vested (116,641) $33.73 Forfeited (3,282) $16.61 Nonvested at December 31, 2014 329,562 $18.89 Performance-based Restricted StockIn 2014, the Company began granting performance-based restricted stock in addition to the time-based restricted stock it previously granted. The fairvalue of performance-based restricted stock is determined based on the closing price of the Company’s shares on the grant date. Unvested performance-basedrestricted stock is generally forfeitable upon termination of a holder’s service as an employee unless the individual’s service is terminated due to retirement,death or permanent disability. The performance-based restricted shares have a three-year vesting period, vesting one-third each year based on target earningsbefore interest, taxes, depreciation and amortization, or “EBITDA”, for 1 year, cumulative 2 years and cumulative 3 years, respectively. With respect to eachvesting, the number of shares that will vest will be between 0% and 200% of the target number of shares. As of December 31, 2014, no performance-basedrestricted shares had vested. At December 31, 2014, there was $0.6 million of total compensation expense related to unvested performance-based restrictedstock remaining to be recognized over a weighted-average period of approximately 1.6 years.Performance-based restricted stock activity under the Plan is as follows: Performance-basedRestricted Stock Weighted-AverageGrant PricePer Share Nonvested at December 31, 2013 — $— Granted 42,676 $33.72 Vested — $— Forfeited — $— Nonvested at December 31, 2014 42,676 $33.72 Stock Appreciation RightsSARs are granted with a grant price equal to the closing market price of the Company’s common stock on the date of grant. These awards expire tenyears after the date of grant and vest based on the terms of the individual awards. The SARs are generally forfeitable upon termination of a holder’s service asan employee or director unless the individual’s service is terminated due to retirement, death or permanent disability. The Company recognizescompensation cost on a straight-line basis over the vesting period for the award. In 2006, the Company began the use of SARs instead of stock options. F-17Table of ContentsAs of December 31, 2014, there was $0.5 million of unrecognized compensation cost related to SARs expected to be recognized over a weighted-average period of approximately 6.5 years. The fair value of each SAR is estimated on the date of grant using a Black-Scholes option-pricing model. ForSARs issued in the years ended December 31, 2014, 2013 and 2012, respectively, the assumptions shown in the following table were used: Year Ended December 31, 2014 2013 2012 Dividend yield 0% 0% 0% Average risk-free interest rate 1.7% 0.7% 0.8% Expected term (years) 5 5 5 Expected volatility 52.6% 63.7% 65.9% 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 optionsgranted as the expected volatility.Risk-Free Interest Rate. The Company uses 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, 2014 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.The weighted-average grant date fair value of SARs granted during the years ended December 31, 2014, 2013 and 2012 was $17.78, $11.67, and $7.06,respectively.SAR activity under the Plan and all predecessor stock incentive plans is as follows: SARs Weighted-AverageGrantPricePer Share Weighted-AverageRemainingContractualLife (Years) AggregateIntrinsicValue as ofDecember 31,2014 Outstanding at December 31, 2011 2,325,410 $6.59 Granted 201,828 $12.88 Exercised (1,135,906) $6.54 Canceled (16,952) $12.08 Outstanding at December 31, 2012 1,374,380 $9.28 Granted 121,176 $21.95 Exercised (749,334) $7.70 Canceled (7,028) $13.10 Outstanding at December 31, 2013 739,194 $12.93 Granted 3,866 $37.88 Exercised (218,826) $10.96 Canceled (8,404) $4.74 Outstanding at December 31, 2014 515,830 $13.98 6.5 $14,754,320 Vested at December 31, 2014 383,488 $12.55 6.1 $11,514,749 Exercisable at December 31, 2014 383,488 $12.55 6.1 $11,514,749 F-18Table of ContentsEmployee 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 600,000,adjusted to reflect the two-for-one stock split distributed on May 7, 2014. Through December 31, 2014, employees had purchased approximately 407,000shares under the plan.Stock OptionsStock options are granted with an exercise price equal to the closing market price of the Company’s common stock on the date of grant. These awardsexpire ten years after the date of grant and vest based on the terms of the individual awards. The options are generally forfeitable upon termination of aholder’s service as an employee or director, unless the individual’s service is terminated due to retirement, death or permanent disability. The fair value ofeach stock option award is estimated on the date of grant using a Black-Scholes option-pricing model. The Company recognizes compensation cost on astraight-line basis over the vesting period for the award. Prior to 2006, the Company granted stock options and all stock options outstanding at December 31,2014 are fully vested. In 2006, the Company began the use of SARs instead of stock options.Stock option activity under the Plan and all predecessor stock incentive plans is as follows: Options Weighted-AverageExercisePricePer Share Weighted-AverageRemainingContractualLife (Years) AggregateIntrinsicValue as ofDecember 31,2014 Outstanding at December 31, 2011 290,138 $19.04 Granted — $— Exercised (46,378) $15.68 Canceled (2,484) $10.00 Outstanding at December 31, 2012 241,276 $20.19 Granted — $— Exercised (186,968) $24.92 Canceled (12,020) $18.16 Outstanding at December 31, 2013 42,288 $20.05 Granted — $— Exercised (27,942) $35.73 Canceled (1,188) $17.92 Outstanding at December 31, 2014 13,158 $23.36 0.2 $252,963 Vested at December 31, 2014 13,158 $23.36 0.2 $252,963 Exercisable at December 31, 2014 13,158 $23.36 0.2 $252,963 F-19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, 2014 were as follows (in thousands): Year Ending December 31, 2015 $6,753 2016 5,490 2017 5,370 2018 5,308 2019 4,467 Thereafter 10,730 Total minimum lease payments $38,118 For the years ended December 31, 2014, 2013 and 2012, the Company recognized rental expenses of approximately $7.5 million, $6.5 million and$7.5 million, respectively.For information related to the Company’s reconsidered corporate headquarters lease agreement, see Note 12. 10.EMPLOYEE BENEFIT PLANSThe Company has a 401(k) Profit Sharing Plan for the benefit of all employees who meet certain eligibility requirements. The plan covers substantiallyall of the Company’s full-time employees. The plan documents provide for the Company to match contributions equal to 100% of an employee’scontribution to the plan up to 6% of base salary. The Company’s contributions to the plan totaled $2.0 million, $1.8 million and $1.6 million for the yearsended December 31, 2014, 2013 and 2012. 11.INCOME TAXESIncome tax provision (benefit) for the years ended December 31, 2014, 2013 and 2012 consists of the following (in thousands): Year Ended December 31, 2014 2013 2012 Current income tax provision: Federal $18,722 $1,745 $303 State 3,131 404 88 21,853 2,149 391 Deferred income tax provision (benefit): Federal 3,118 (11,182) 510 State 456 (1,516) 108 3,574 (12,698) 618 Total income tax provision (benefit) $25,427 $(10,549) $1,009 F-20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 taxesas a result of the following (in thousands): Year Ended December 31, 2014 2013 2012 U.S. federal statutory taxes $23,432 $8,417 $1,305 State and local taxes, net of U.S. federal benefit 2,856 1,061 (418) Permanent items (868) 225 198 Federal credits (214) (566) (54) Other (43) 244 46 Increase (decrease) in valuation allowance 264 (19,930) (68) Total income tax provision (benefit) $25,427 $(10,549) $1,009 Deferred tax assets and liabilities as of December 31, 2014 and 2013 consist of the following (in thousands): As of December 31, 2014 2013 Deferred tax assets: Net operating losses $347 $483 Warranty reserve 13,032 16,085 Stock-based compensation 2,931 2,383 Accruals not currently deductible and other 5,221 6,210 Inventories 4,437 3,843 State tax credit carryforwards 4,050 3,714 Gross deferred tax assets, before valuation allowance 30,018 32,718 Valuation allowance (4,465) (4,201) Gross deferred tax assets, after valuation allowance 25,553 28,517 Deferred tax liabilities: Depreciation and other (19,990) (19,380) Gross deferred tax liabilities (19,990) (19,380) Net deferred tax asset $5,563 $9,137 The Company recognizes deferred tax assets and liabilities based on the difference between the financial statement basis and tax basis of assets andliabilities using enacted rates expected to be in effect during the year in which the differences reverse. In accordance with accounting standards, the Companyassesses the likelihood that its deferred tax assets will be realized. Deferred tax assets are reduced by a valuation allowance when, after considering allavailable positive and negative evidence, it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.During 2013, the Company realized $9.1 million of deferred tax assets previously reserved under a valuation allowance. Additionally, as a result of allpositive and negative evidence available as of December 31, 2013, the Company determined that it would realize the majority of its remaining deferred taxasset and, as a result, reversed the valuation allowance against all but a few specific items primarily related to state tax credits it estimates will expire beforethey are realized resulting in a tax benefit of $10.9 million. As of December 31, 2014, the Company continues to have a valuation allowance of $4.5 millionagainst these deferred tax assets. The Company will analyze its position in subsequent reporting periods, considering all available positive and negativeevidence, in determining the expected realization of its deferred tax assets. F-21Table of ContentsThe Company recognizes excess tax benefits for stock-based awards as an increase to additional paid-in capital only when realized. The Companyrealized $12.9 million of excess tax benefits during 2014 and, accordingly, recorded an increase to additional paid-in capital.The Company has identified no uncertain tax positions and accordingly, has not recorded any unrecognized tax benefits or associated interest andpenalties. 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.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 itis not 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 accounting standards. As of December 31, 2014, federal tax years 2011 through 2013 remain subject toexamination. The Company believes that adequate provisions have been made for all tax returns subject to examination. Sales made to foreign distributorsare not taxable in any foreign jurisdictions as the Company does not have a taxable presence. During the year ended December 31, 2014, the Company’sreturns filed with the state of Michigan for tax years 2008 through 2011 were examined. No material adjustments resulted from the audit.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 assessed the impact of the finalregulations on its financial statements and does not expect any material adjustments or changes. 12.COMMITMENTS AND CONTINGENCIESLegal MattersOn December 16, 2013, the United States District Court, Northern District of California Court granted final approval of the settlement with the law firmof Hagens Berman Sobol Shapiro LLP, relating to the previously reported class action lawsuit brought on behalf of Dean Mahan, and other named andsimilarly situated plaintiffs generally which alleged certain defects in the Company’s products relating to mold growth, color fading and color variation. Asof the date of this report, the Company has distributed all cash payments and rebate certificates under the settlement. Claimants who were denied relief couldappeal Trex’s decision, and the deadline for appeals has now passed. The Company believes that payments to consumers for all relief under the settlementwill not exceed approximately $1.0 million. In addition to such amount, the Company previously paid $1.8 million related to this litigation, representingpayment of attorneys’ fees to class counsel and named plaintiff awards in the nationwide settlement and the settlement of corollary cases brought in Indiana,Kentucky, New Jersey and Michigan, all as previously disclosed.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 effecton the 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, 2014, theCompany purchased substantially all of its waste wood fiber requirements under purchase orders, which do not involve long-term supply commitments.Substantially all of F-22Table of Contentsthe Company’s scrap polyethylene purchases are under short-term supply contracts that average approximately two years, for which pricing is negotiated asneeded.The wood and polyethylene supply contracts generally provide that the Company is obligated to purchase all of the wood or polyethylene a supplierprovides, if the wood or polyethylene meets certain specifications. The amount of wood and polyethylene the Company is required to purchase under thesecontracts varies with the production of its suppliers and, accordingly, is not fixed or determinable. As of December 31, 2014, the Company has purchasecommitments under raw material supply contracts of $23.6 million, $13.3 million, $5.7 million and $48 thousand for the years ending December 31, 2015,2016, 2017 and 2018, 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 $1.9million for the year ending December 31, 2015.Contract Termination CostsIn anticipation of relocating its corporate headquarters, the Company entered into a lease agreement in 2005. The Company reconsidered and decidednot to 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, 2014,the Company has executed subleases for 24,732 square feet of the leased space and is currently marketing the remaining portion of the space to find asuitable tenant. The Company estimates that the present value of the estimated future sublease receipts, net of transaction costs, will be less than theremaining minimum lease payment obligations under its lease and has recorded a liability for the expected shortfall. The Company recorded a $1.1 millioncharge in 2013 after a subtenant defaulted on its sublease and vacated the space. During 2014, the Company recorded $1.5 million in charges due todownward revisions of its estimate of future sublease receipts resulting from the departure of a subtenant that decided not to renew its sublease at the end of2014.To estimate future sublease receipts, the Company has assumed that the existing subleases will be renewed or new subleases will be executed at ratesconsistent with rental rates in the current subleases or estimated market rates and that existing vacancies will be filled within one year. 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, market conditions and subtenant preferences will influence the terms achieved in future subleases. The inability tosublet the office space in the future or unfavorable changes to key assumptions used in the estimate of the future sublease receipts may result in materialcharges to selling, general and administrative expenses in future periods.As of December 31, 2014, the minimum payments remaining under the Company’s lease over the years ending December 31, 2015, 2016, 2017, 2018,and 2019 are $1.9 million, $1.9 million, $2.0 million, $2.0 million and $1.0 million, respectively. The minimum receipts remaining under the Company’sexisting subleases over the years ending December 31, 2015, 2016, 2017, 2018, and 2019 are $0.7 million, $0.6 million, $0.6 million, $0.6 million and $0.4million, respectively.The following table provides information about the Company’s liability under the lease (in thousands): 2014 2013 Beginning balance, January 1 $1,787 $1,103 Net rental payments (403) (558) Accretion of discount 178 98 Increase in net estimated contract termination costs 1,471 1,144 Ending balance, December 31 $3,033 $1,787 F-23Table of ContentsProduct 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 andsettle surface flaking claims and maintains a warranty reserve to provide for the settlement of these claims. In 2009, the Company agreed to a settlement of aclass action 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 number of claims to be settled with payment and (2) the average cost to settle each claim, both of which aresubject to variables that are difficult to estimate.The 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 thoseclaims that will ultimately require payment. Estimates for both of these elements (number and percentage of claims that will ultimately require payment) arequantified using a range of assumptions derived from the recent claim count history and the identification of factors influencing the claim counts, includingthe downward trend in received claims due to the passage of time since production of the suspect material. For each of the various parameters used in theanalysis, the assumed values in the actuarial valuation produce results that represent the Company’s best estimate for the ultimate number of claims to besettled with payment.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 communications made by the Company in July 2013 informing homeowners of potential hazards associated with decking products exhibitingsurface flaking that are not timely replaced led to increased claims volume and disrupted the claims data and settlement patterns. Lastly, the Company is notaware of any analogous industry data that might be referenced in predicting future claims to be received. The number of surface flaking claims receivedpeaked in 2009 in conjunction with the class action settlement and has declined each year thereafter.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 cost per claim declined from 2007 through 2009 but has increased each year thereafter.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. F-24®®®®Table of ContentsDuring the third quarter of 2013, the number of claims received was significantly greater than the Company’s prior estimates. The Company believesthat this unexpected increase in claims was due primarily to a response to communications made by the Company in July 2013 informing homeowners ofpotential hazards associated with decking products exhibiting surface flaking that are not timely replaced. These communications included a public pressrelease and over 10,000 letters sent to homeowners that previously filed surface flaking claims. In addition to contributing to the increase in new claimsreceived, these communications resulted in the reopening of a significant number of claims previously closed. Furthermore, although not directly related tothe 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 the Company’s products and alleged misrepresentations relating to moldgrowth. The Company believes that public notices made subsequent to the Court approval increased homeowner awareness of product-related issues andcontributed to the increased number of surface flaking claims received during the third quarter of 2013. Due to the unfavorable claims experience during thethree months ended September 30, 2013, the Company revised its estimate of the number of remaining future claims and recorded a $20 million increase tothe warranty reserve.During 2014, the number of claims received was lower than the Company’s expectations, while the average cost per claim was higher than theCompany’s expectations for 2014. Based on claims activity experienced during the current year, the Company revised its assumed future number of claimsand average cost per claim. The revised assumptions did not result in a change to the Company’s reserve, which as of December 31, 2014, the Companybelieves is sufficient to cover future surface flaking obligations. The increase in the amount paid to settle surface flaking claims in 2014, as compared to2013, was primarily a result of the large number of claims received during the second half of 2013, as described above.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 and that the average cost per claim will remain relatively stable. If the level of claims received or average cost perclaim differs materially from expectations, it could result in additional increases to the warranty reserve and reduced earnings and cash flows in futureperiods. The Company estimates that a 10% change in the expected number of remaining claims to be settled with payment or the expected cost to settleclaims may result in approximately a $3.1 million change in the surface flaking warranty reserve.The following is a reconciliation of the Company’s surface flaking warranty reserve (in thousands): 2014 2013 Beginning balance, January 1 $40,312 $28,487 Changes in estimates related to pre-existing warranties — 20,000 Settlements made during the period (8,893) (8,175) Ending balance, December 31 $31,419 $40,312 The remainder of the Company’s warranty reserve represents amounts accrued for non-surface flaking claims. F-25Table of Contents13.INTERIM FINANCIAL DATA (Unaudited) Three Months Ended December 31,2014 September 30,2014 June 30,2014 March 31,2014 December 31,2013 (a) September 30,2013 (b) June 30,2013 March 31,2013 (In thousands, except per share data) Net sales 74,202 95,502 121,311 100,645 63,831 72,249 98,551 107,880 Gross profit 26,635 30,369 45,026 38,167 19,685 151 36,922 41,860 Net income (loss) 5,153 8,913 15,161 12,295 15,103 (15,298) 13,224 21,569 Basic net income (loss) per share $0.16 $0.28 $0.46 $0.37 $0.46 $(0.45) $0.39 $0.64 Diluted net income (loss) per share $0.16 $0.28 $0.46 $0.37 $0.45 $(0.45) $0.38 $0.62 (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 surface flaking warranty reserve.The 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 products. The Company has historically experienced lower net sales during the fourth quarter becauseholidays and adverse weather conditions in certain regions reduce the level of home improvement and construction activity. F-26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, 2014: Allowance for doubtful accounts (a) $— $5 $— $(5) $(0) Warranty reserve $40,812 $3,774 $— $(10,745) $33,841 Income tax valuation allowance $4,201 $388 $— $(124) $4,465 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 (a)Reserve related to accounts receivable F-27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, 2015 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, 2015 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/ 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/S/ GERALD VOLAS Gerald Volas 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 RegistrationStatement on Form S-1 (No. 333-63287) and incorporated herein by reference. 3.2 Certificate of Amendment to the Restated Certificate of Incorporation of Trex Company, Inc. dated April 30, 2014. Filed as Exhibit 3.2 tothe Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 and incorporated herein by reference. 3.3 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, 2008 andincorporated 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 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. 4.3 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. 4.4 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. 4.5 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. 4.6 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. 4.7 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. 4.8 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 4.8to the Company’s Current Report on Form 8-K filed on November 6, 2009 and incorporated herein by reference.Table of ContentsExhibitNumber Exhibit Description 4.9 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. 4.10 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. 4.11 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. 4.12 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’sCurrent Report on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.13 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’s CurrentReport on Form 8-K filed on January 12, 2012 and incorporated herein by reference. 4.14 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. 4.15 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 Banking andTrust Company and Wells Fargo Capital Finance, LLC, as Beneficiary relating to real property partially located in the County of Frederick,Virginia and partially located in the City of Winchester, Virginia. Filed as Exhibit 4.6 to the Company’s Current Report on Form 8-K filed onJanuary 12, 2012 and incorporated herein by reference. 4.16 Deed of Trust, dated as of January 6, 2012, by and among the Company as grantor, First American Title Insurance Company, as trustee, andBranch Banking and Trust Company, as Collateral Agent for Branch Banking and Trust Company and Wells Fargo Capital Finance, LLC, asBeneficiary relating to real property located in the County of Fernley, Nevada. Filed as Exhibit 4.7 to the Company’s Current Report on Form8-K filed on January 12, 2012 and incorporated herein by reference. 4.17 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. Filed asExhibit 4.1 to the Company’s Amended Current Report on Form 8-K filed April 18, 2013 and incorporated herein by reference. 4.18 Revolver Note dated February 26, 2013 payable by Trex Company, Inc. to Branch Banking and Trust Company in the amount of the lesser of$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.Table of ContentsExhibitNumber Exhibit Description 4.19 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. 4.20 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. 4.21 Letter Agreement dated October 23, 2014 to Amended and Restated Credit Agreement Dated as of January 6, 2012, as amended, between theCompany and Branch Banking and Trust Company, as a Lender and Administrative Agent, and Wells Fargo Capital Finance, LLC as aLender. Filed as Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 andincorporated herein by reference. 4.22 Second Amended and Restated Credit Agreement dated as of November 20, 2014 between the Company and Branch Banking and TrustCompany, as a Lender, Administrative Agent, Swing Line Lender and Letter of Credit Issuer; Citibank, N.A. as a Lender; Bank of America,N.A. as a Lender; and BB&T Capital Markets, as Lead Arranger. Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filedNovember 25, 2014 and incorporated herein by reference. 4.23 Revolver Note dated November 20, 2014 payable by the Company to Branch Banking and Trust Company in the amount of the lesser of$80,000,000 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 November 25, 2014 and incorporated herein by reference. 4.24 Revolver Note dated November 20, 2014 payable by the Company to Citibank, N.A. in the amount of the lesser of $45,000,000 or theoutstanding revolver advances made by Citibank, N.A. Filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K filedNovember 25, 2014 and incorporated herein by reference. 4.25 Revolver Note dated November 20, 2014 payable by the Company to Bank of America, N.A. in the amount of the lesser of $25,000,000 orthe outstanding revolver advances made by Bank of America, N.A. Filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K filedNovember 25, 2014 and incorporated herein by reference. 4.26 Swing Advance Note dated November 20, 2014 payable by the Company to Branch Banking and Trust Company in the amount of the lesserof $5,000,000 or the outstanding swing advances made by Brand Banking and Trust Company. Filed as Exhibit 4.5 to the Company’sCurrent Report on Form 8-K filed November 25, 2014 and incorporated herein by reference. 4.27 Second Amended and Restated Security Agreement dated as of November 20, 2014 between the Company, as debtor, and Branch Bankingand Trust Company as Administrative Agent for Branch Banking and Trust Company, Citibank, N.A. and Bank of America, N.A. Filed asExhibit 4.6 to the Company’s Current Report on Form 8-K filed November 25, 2014 and incorporated herein by reference. 4.28 Second Modification to Amended and Restated Credit Line Deed of Trust, dated as of November 20, 2014, by and among the Company asgrantor, BB&T-VA Collateral Service Corporation, as trustee, and Branch Banking and Trust Company, as Administrative Agent for BranchBanking and Trust Company, Citibank, N.A. and Bank of America, N.A., as Beneficiaries relating to real property partially located in theCounty of Frederick, Virginia and partially located in the City of Winchester, Virginia. Filed as Exhibit 4.7 to the Company’s Current Reporton Form 8-K filed November 25, 2014 and incorporated herein by reference.Table of ContentsExhibitNumber Exhibit Description 4.29 Modification to Deed of Trust, dated as of November 20, 2014, by and among the Company as grantor, First American Title InsuranceCompany, as trustee, and Branch Banking and Trust Company, as Administrative Agent for Branch Banking and Trust Company, Citibank,N.A. and Bank of America, N.A., as Beneficiaries relating to real property located in the County of Fernley, Nevada. Filed as Exhibit 4.8 tothe Company’s Current Report on Form 8-K filed November 25, 2014 and incorporated herein by reference. 4.30 Intellectual Property Security Agreement, dated November 20, 2014 by and between Trex Company, Inc. as debtor; and Branch Banking andTrust Company, in its capacity as Administrative Agent under the Second Amended Credit Agreement and acting as agent for itself and theother secured parties. Filed as Exhibit 4.9 to the Company’s Current Report on Form 8-K filed November 25, 2014 and incorporated hereinby reference.10.1 Description of Management Compensatory Plans and Arrangements. Filed herewith. **10.2 Trex Company, Inc. 2014 Stock Incentive Plan. Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterlyperiod ended June 30, 2014 and incorporated herein by reference. **10.3 Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors. Filed herewith. **10.4 Form of Trex Company, Inc. 2005 Stock Incentive Plan Time-Based Restricted Stock Agreement. Filed as Exhibit 10.7 to the Company’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2013 and incorporated herein by reference. **10.5 Form of Trex Company, Inc. 2005 Stock Incentive Plan Performance-Based Restricted Stock Agreement. Filed as Exhibit 10.8 to theCompany’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and incorporated herein by reference. **10.6 Form of Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors Stock Appreciation Rights Agreement. Filedas Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 and incorporated hereinby reference. **10.7 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. **10.8 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. **10.9 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. **10.10 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 incorporatedherein by reference. **10.11 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. **10.12 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. **Table of ContentsExhibitNumber Exhibit Description 10.13 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. ** 10.14 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.*, ** 10.15 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. ** 10.16 Form of Indemnity Agreement for Directors. Filed as Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the fiscal yearended December 31, 2008 and incorporated herein by reference. 10.17 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. 10.18 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. 10.19 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. 10.20 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. 10.21 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. 10.22 Amendment, dated February 22, 2010, of Deed of Lease dated as of June 15, 2000, between Trex Company, Inc., as successor by merger toTrex Company, LLC, and TC.V.LLC, as successor to Space, LLC. Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Qfor the quarterly period ended March 31, 2010 and incorporated herein by reference. 10.23 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.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.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 compensation, and long-term equity incentive compensationin the form of time-based and performance-based restricted shares issued under the Trex Company, Inc. 2014 Stock Incentive Plan (formerly, the 2005 StockIncentive 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 competitivelevels in the market for executives with comparable responsibilities and job scope based on the Company’s peer group and the results of executivecompensation surveys, as well as the Company’s internal equity considerations. Each year, at its December meeting, the Compensation Committee reviewsand establishes the base salaries of the Company’s executive officers for the next calendar year. Salary increases, if any, are based on individual performance,market conditions and Company performance. To gauge market conditions, the Compensation Committee evaluates the peer group and market datacompiled by its independent compensation consultant. Base salaries are set upon review of the peer group and market data provided to the CompensationCommittee upon consideration of the executive officer’s experience, tenure, performance and potential.Annual Cash Incentive Compensation. The Company pays annual cash incentive compensation to its chief executive officer, other executive officers, andother key employees generally based upon the achievement of the Company’s planned pretax earnings and cash-flow objectives for the fiscal year, which areapproved by the Compensation Committee no later than the first quarter of the year. For each fiscal year, each participant in the plan is assigned a “targetincentive,” which is expressed as a percentage of the participant’s annual base salary. The cash incentive amount paid to a participant is determined bymultiplying their target incentive by a performance percentage, which is calculated based on the extent to which the planned pretax earnings and cash flowobjectives are achieved (excluding any items determined by the Compensation Committee to be extraordinary and not considered in the establishment ofsuch targets), 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 such awards are a mix of 50% time-based restricted shares and 50% performance-based restricted shares. The restricted shares have a three-year vestingperiod, vesting one-third each year equally, with the vesting of the performance-based restricted shares based on performance against target earnings beforeinterest, taxes, depreciation and amortization, or “EBITDA,” for 1 year, cumulative 2 years and cumulative 3 years, respectively (in each case excluding anyitems determined by the Compensation Committee to be extraordinary and not considered in the establishment of such targets). The total target long-termincentive award for each participant in the plan is expressed as a percentage of the participant’s base salary. The grant of restricted shares is conditional uponthe attainment of a certain pretax earnings target for the prior year (excluding any items determined by the Compensation Committee to be extraordinary andnot considered in the establishment of such targets), subject to the discretion of the Compensation Committee 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 compensationpackage approved by the Compensation Committee at the time of an executive officer’s hiring or promotion, as part of the Compensation Committee’sreview of each executive 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 10.3TREX COMPANY, INC.AMENDED AND RESTATED1999 INCENTIVE PLAN FOR OUTSIDE DIRECTORSTABLE OF CONTENTS Page 1. DEFINITIONS 1 2. PURPOSE 2 3. SHARES SUBJECT TO THE PLAN 2 4. ANNUAL DIRECTOR AND COMMITTEE FEES 2 4.1. Annual Director Fee 2 4.1.1 Cash Portion of Annual Director Fee 2 4.1.2 Equity Portion of Annual Director Fee 3 4.2. Annual Committee Fee 3 4.3. Election 3 4.4. Proration 3 4.5. Initial Grant upon Election to Board 3 4.6. Equity 3 4.6.1 Form of Equity 3 4.6.2 Options and SARs 3 4.6.3 Restricted Stock 4 5. GRANT DATE 4 6. ELECTION TO RECEIVE ADDITIONAL RESTRICTED STOCK 4 6.1. Election Form 4 6.2. Time for Filing Election Form 4 7. ADMINISTRATION 4 7.1. Committee 4 7.2. Rules for Administration 5 7.3. Committee Action 5 7.4. Delegation 5 7.5. Services 5 7.6. Indemnification 5 8. AMENDMENT AND TERMINATION 5 9. GENERAL PROVISIONS 5 9.1. Limitation of Rights 5 9.2. No Rights as Stockholders 5 9.3. Rights as a Non-Employee Director 5 9.4. Assignment, Pledge or Encumbrance 6 9.5. Binding Provisions 6 9.6. Notices 6 9.7. Governing Law 6 9.8. Withholding 6 9.9. Effective Date 6 1. DEFINITIONSTo the extent any capitalized words used in this Plan are not defined, they shall have the definitions stated for them in the Trex Company, Inc. 2014Stock Incentive Plan.1.1 “Annual Director Fee” means an annual fee earned by an Eligible Director for service on the Board of Directors.1.2 “Annual Committee Fee” means an annual fee earned by an Eligible Director for service on various committees of the Board of Directors.1.3 “Board of Directors” or “Board” means the Board of Directors of the Company.1.4 “Cash Portion of the Annual Director Fee” means the portion of the Annual Director Fee to be received in cash, or if elected by the EligibleDirector, in Equity, as provided in Sections 4.3 and 6 hereof.1.5 “Committee” means the Nominating/Corporate Governance Committee which administers the Plan.1.6 “Common Stock” means the common stock, par value $0.01 per share, of the Company.1.7 “Company” means Trex Company, Inc., a Delaware corporation, or any successor thereto.1.8 “Election Form” means the form used by an Eligible Director to elect to receive all or a portion of the Cash Portion of the Annual Director Fee andthe Annual Committee Fee for a Plan Year in the form of Equity.1.9 “Eligible Director” for each Plan Year means a member of the Board of Directors who is not an employee of the Company or any Subsidiary.1.10 “Equity” means Options, Restricted Stock or SARs, or any combination thereof, as designated by the Committee from time to time, as provided inSection 4.6.1.11 “Equity Portion of the Annual Director Fee” means the portion of the Annual Director Fee to be received in Equity, as provided in Section 4.1.2hereof.1.12 “Fair Market Value” means the closing price of a share of Common Stock reported on the New York Stock Exchange (the “NYSE”) on the dateFair Market Value is being determined, provided that if there is no closing price reported on such date, the Fair Market Value of a share of CommonStock on such date shall be deemed equal to the closing price as reported by the NYSE for the last preceding date on which sales of shares of CommonStock were reported. Notwithstanding the foregoing, in the event that the shares of Common Stock are listed upon more than one established stockexchange, “Fair Market Value” means the closing price of the shares of Common Stock reported on the exchange that trades the largest volume ofshares of Common Stock on the date Fair Market Value is being determined. If the Common Stock is not at the time listed or admitted to trading on astock exchange, Fair Market Value means the mean between the lowest reported bid price and highest reported asked price of the Common Stock onthe date in question in the over-the-counter market, as such prices are reported in a publication of general circulation selected by the Board andregularly reporting the market price of Common Stock in such market. If the Common Stock is not listed or admitted to trading on any stock exchangeor traded in the over-the-counter market, Fair Market Value shall be as determined in good faith by the Board.1.13 “Grant Date” has the meaning set forth in Section 5 hereof.1.14 “Option” means a non-qualified Option granted pursuant to the Trex Company, Inc. 2014 Stock Incentive Plan as may be amended from time totime. 11.15 “Option Agreement” means the written agreement between the Company and the Participant that evidences and sets out the terms and conditionsof the Option.1.16 “Option Price” means the purchase price for each share of Common Stock subject to an Option.1.17 “Participant” for any Plan Year means an Eligible Director who participates in the Plan for that Plan Year in accordance with Section 6.1 hereof.1.18 “Plan” means the Trex Company, Inc. Amended and Restated 1999 Incentive Plan for Outside Directors as set forth herein and as amended fromtime to time.1.19 “Plan Year” means the twelve-month period beginning on July 1 and ending on June 30.1.20 “Restricted Stock” means shares of Common Stock, issued pursuant to the Trex Company, Inc. 2014 Stock Incentive Plan as may be amendedfrom time to time.1.21 “Restricted Stock Agreement” means the written agreement between the Company and the Participant that evidences and sets out the terms andconditions of the Restricted Stock.1.22 “SAR Agreement” means the written agreement between the Company and the Participant that evidences and sets out the terms and conditions ofthe SARs.1.23 “Stock Appreciation Right” or “SAR” means a right granted pursuant to, and in accordance with the terms of, the Trex Company, Inc. 2014 StockIncentive Plan to receive, upon exercise thereof, the excess of (x) the Fair Market Value of one share of Common Stock on the date of exercise over(y) the grant price of the SAR, determined pursuant to Section 4.6.2 hereof.1.24 “SAR Price” means the grant price of the SAR.1.25 “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Internal Revenue Code of 1986, asamended.2. PURPOSEThe purpose of the Plan is to compensate Eligible Directors for service on the Board of Directors and various committees of the Board, and to providean incentive for Eligible Directors to increase their equity holdings in the Company so that the financial interests of the Eligible Directors shall be moreclosely aligned with the financial interests of the Company’s stockholders.3. SHARES SUBJECT TO THE PLANThe shares of Common Stock issuable under the Plan shall be issued pursuant to the Trex Company, Inc. 2014 Stock Incentive Plan.4. ANNUAL DIRECTOR AND COMMITTEE FEES4.1 Annual Director FeeEach Eligible Director shall be entitled to an Annual Director Fee, which may be adjusted by the Board from time to time, as follows:4.1.1 Cash Portion of the Annual Director Fee. Each Eligible Director shall receive the amount of forty thousand dollars ($40,000) (the “CashPortion of the Annual Director Fee”). The Cash Portion of the Annual Director Fee (after reduction pursuant to Section 4.3 hereof, if any) shall be paid to anEligible Director in four equal quarterly installments in arrears on the first business day following the end of each quarter of the Plan Year in which theEligible Director provided services to the Company. Notwithstanding the foregoing, (a) any 2Eligible Director who serves as Chairman of the Board shall receive the amount of seventy thousand dollars ($70,000) in lieu of the $40,000 payment referredto above, and (b) any Eligible Director that serves as Lead Independent Director shall receive the amount of twelve thousand five hundred dollars ($12,500)in addition to the $40,000 payment referred to above, with all other provisions of this subsection being applicable to such Eligible Director(s).4.1.2 Equity Portion of the Annual Director Fee. Each Eligible Director shall receive Equity valued at fifty five thousand dollars ($55,000) (the“Equity Portion of the Annual Director Fee”). The Equity Portion of the Annual Director Fee shall be paid in arrears as provided in Section 5 below.4.2 Annual Committee FeeEach Eligible Director shall be entitled to an Annual Committee Fee, which may be adjusted by the Board from time to time, as follows(a) twelve thousand five hundred dollars ($12,500) for the Audit Committee Chairman, (b) seven thousand five hundred dollars ($7,500) for each AuditCommittee member (other than the Chairman), (c) seven thousand five hundred dollars ($7,500) for the Nominating/Corporate Governance CommitteeChairman and the Compensation Committee Chairman, and (d) five thousand dollars ($5,000) for each Compensation Committee member (other than theChairman) and Nominating/Corporate Governance Committee member (other than the Chairman). The Annual Committee Fee shall be paid to an EligibleDirector in four equal quarterly installments in arrears on the first business day following each quarter of the Plan Year in which the Eligible Director servedon the applicable committee(s).4.3 ElectionPursuant to Section 6 hereof, an Eligible Director may elect to receive all or a portion of the Cash Portion of the Annual Director Fee and theAnnual Committee Fee in the form of Equity.4.4 ProrationThe Cash Portion of the Annual Director Fee, the Equity Portion of the Annual Director Fee and the Annual Committee Fee shall be prorated forany partial periods served.4.5 Initial Grant upon Election to BoardUpon initial election to the Board (but not subsequent re-elections), each Eligible Director shall receive Equity valued at fifty five thousanddollars ($55,000).4.6 Equity4.6.1 Form of Equity. Whenever Equity is to be granted to Eligible Directors hereunder, the Committee shall, prior to such grant, determinewhether such Equity shall be in the form of Options, Restricted Stock or SARs, or any combination thereof.4.6.2 Options and SARs. If Options or SARS are granted, the number of Options or SARs granted shall be determined by dividing the dollaramount of the grant by the value of each Option or SAR on the Grant Date as determined pursuant to the methodology then in use by the Company’s FinanceDepartment to value Options and SARs granted pursuant to the Trex Company, Inc. 2014 Stock Incentive Plan. The Option Price or SAR Price of CommonStock covered by each SAR or Option, as the case may be, granted under the Plan shall be the Fair Market Value of such Common Stock on the Grant Date.Each Option or SAR, as the case may be, granted hereunder shall be exercisable in respect of 100 percent (100%) of the number of shares covered by the granton the date of the grant of such Option or SAR. Any limitation on the exercise of an Option or SAR contained in any Option or SAR Agreement may berescinded, modified or waived by the Committee, in its sole discretion, at any time and from time to time after the date of grant of such Option or SAR. TheOption or SAR, as the case may be, shall be exercisable, in whole or in part, at any time and from time to time, prior to the termination of the Option or SAR;provided, that no single exercise of the Option or SAR shall be for less than 100 shares, unless the number of shares purchased is the total number at the timeavailable for purchase under the Option or SAR. Each Option or 3SAR, as the case may be, granted under the Plan shall terminate, and all rights to purchase shares of Common Stock thereunder shall cease, upon theexpiration of ten years (eleven years if the service of the Participant as a director of the Company shall terminate due to death in the tenth year of the Optionor SAR term) from the date such Option or SAR is granted. Except as otherwise provided in the Option or SAR Agreement, upon the termination of service (a“Service Termination”) of the Participant as a director of the Company for any reason, the Participant shall have the right, at any time within five years afterthe date of such Participant’s Service Termination and prior to termination of the Option or SAR, to exercise any Option or SAR held by such Participant atthe date of such Participant’s Service Termination. After the termination of the Option or SAR, the Participant shall have no further right to purchase shares ofCommon Stock pursuant to such Option or SAR.4.6.3 Restricted Stock. If Restricted Stock is granted, the number of shares of Restricted Stock shall be determined by dividing the dollar amountof the grant by the Fair Market Value of a share of Common Stock on the Grant Date. Except as otherwise provided in the Restricted Stock Agreement, eachshare of Restricted Stock will vest on the first anniversary of the grant, provided that such Restricted Stock has not been forfeited, as provided below. Exceptas otherwise provided in the Restricted Stock Agreement, (a) in the event of a Service Termination of a Participant due to death, “permanent and totaldisability” (within the meaning of Section 22(e)(3) of the Code), or retirement effective at the end of an applicable three-year term, any unvested RestrictedStock held by such Participant shall immediately vest, and (b) in the event of a Service Termination for any other reason, any unvested Restricted Stock heldby such Participant shall immediately be deemed forfeited.5. GRANT DATEThe date of grant for the Equity Portion of the Annual Director Fee shall be the date of the first regularly scheduled Board of Directors’ Meetingfollowing the end of each Plan Year in which the Eligible Director provided services to the Company, and the date of grant for Equity issued in lieu of theCash Portion of the Annual Director Fee and the Annual Committee Fee, as provided in Section 8 hereof, shall be the date such Fees would otherwise be due(each of such dates being referred to as the “Grant Date”).6. ELECTION TO RECEIVE ADDITIONAL EQUITY6.1 Election FormA Participant who wishes to receive all or any portion of the Cash Portion of the Annual Director Fee and the Annual Committee Fee in the formof Equity shall file an Election Form with the Company, in the form and manner prescribed by the Committee. Filing of a completed Election Form willauthorize the Company to issue Equity to the Participant in lieu of all or any portion of the Cash Portion of the Annual Director Fee and the AnnualCommittee Fee, in accordance with the Participant’s instructions on the Election Form.6.2 Time for Filing Election FormAn Election Form shall be completed and filed by each newly elected Eligible Director within thirty (30) days after the Participant’s election tothe Board, and elections under the Plan made by a newly elected Eligible Director shall apply to the Participant’s Annual Director Fee and AnnualCommittee Fee for the remainder of the Plan Year and subsequent Plan Years unless and until a new Election Form is submitted by an Eligible Director to theCorporate Secretary. Notwithstanding the foregoing, a new Election Form may be submitted by each Eligible Director no more than once each Plan Year, andany new election shall not be effective until the start of the next calendar year.7. ADMINISTRATION7.1 CommitteeThe general administration of the Plan and the responsibility for carrying out its provisions shall be placed in the Nominating/CorporateGovernance Committee. 47.2 Rules for AdministrationSubject to the limitations of the Plan, the Committee may from time to time establish such rules and procedures for the administration andinterpretation of the Plan and the transaction of its business as the Committee may deem necessary or appropriate. The determination of the Committee as toany disputed question relating to the administration and interpretation of the Plan shall be conclusive.7.3 Committee ActionAny act which the Plan authorizes or requires the Committee to do may be done by a majority of its members. The action of such majority,expressed from time to time by a vote at a meeting (i) in person, or (ii) by telephone or other means by which all members can hear one another shall have thesame effect for all purposes as if assented to by all members of the Committee at the time in office. The Committee may also act without a meeting byunanimous written consent.7.4 DelegationThe members of the Committee may authorize one or more of their number to execute or deliver any instrument, make any payment or performany other act which the Plan authorizes or requires the Committee to do.7.5 ServicesThe Committee may employ or retain agents to perform such clerical, accounting and other services as it may require in carrying out theprovisions of the Plan.7.6 IndemnificationThe Company shall indemnify and save harmless each member of the Committee against all expenses and liabilities arising out of membershipon the Committee, other than expenses and liabilities arising from the such member’s own gross negligence or willful misconduct, as determined by theBoard of Directors.8. AMENDMENT AND TERMINATIONThe Company, by action of the Board of Directors or the Committee, may at any time or from time to time modify or amend any or all of the provisionsof the Plan, or may at any time terminate the Plan. No such action shall adversely affect the accrued rights of any Participant hereunder without theParticipant’s consent thereto.9. GENERAL PROVISIONS9.1 Limitation of RightsNo Participant shall have any right to any payment or benefit hereunder except to the extent provided in the Plan.9.2 No Rights as StockholdersNothing contained in this Plan shall be construed as giving any Participant rights as a stockholder of the Company.9.3 Rights as a Non-Employee DirectorNothing contained in this Plan shall be construed as giving any Participant a right to be retained as a non-employee director of the Company. 59.4 Assignment, Pledge or EncumbranceNo assignment, pledge or other encumbrance of any payments or benefits under the Plan shall be permitted or recognized and, to the extentpermitted by law, no such payments or benefits shall be subject to legal process or attachment for the payment of any claim of any person entitled to receivethe same, except to the extent such assignment, pledge or other encumbrance is in favor of the Company to secure a loan or other extension of credit from theCompany to the Participant.9.5 Binding ProvisionsThe provisions of this Plan shall be binding upon each Participant as a consequence of the Participant’s election to participate in the Plan, uponthe Company, upon the Participant’s heirs, executors and administrators and upon the successors and assigns of the Participant and the Company.9.6 NoticesAny election made or notice given by a Participant pursuant to the Plan shall be in writing to the Committee or to such representative thereof asmay be designated by the Committee for such purpose and shall be deemed to have been made or given on the date received by the Committee or itsrepresentative.9.7 Governing LawThe validity and interpretation of the Plan and of any of its provisions shall be construed under the laws of the State of Delaware without givingeffect to the choice of law provisions thereof.9.8 WithholdingThe Company shall have the right to deduct from the amounts distributable hereunder any federal, state or local taxes required by law to bewithheld with respect to such distributions, and such additional amounts of withholding as are reasonably requested by the Participant.9.9 Effective DateThis Plan shall be effective as of March 12, 1999. The Plan was amended and restated effective May 14, 2002, October 24, 2003, July 27,2004, February 10, 2005, July 21, 2005, February 8, 2006, July 20, 2006 and November 12, 2007. The Plan was amended on May 5, 2010, July 20,2010, July 24, 2012, April 30, 2014 and February 18, 2015. 6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, 2015, 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, 2014. /s/ Ernst & Young LLPRichmond, VirginiaFebruary 24, 2015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 statementsfor external 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,to the 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, 2015 /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 statementsfor external 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,to the 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, 2015 /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, 2014 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, 2015 /s/ RONALD W. KAPLAN Ronald W. Kaplan Chairman, President and Chief Executive OfficerDate: February 24, 2015 /s/ JAMES E. CLINE James E. Cline Senior Vice President and Chief Financial Officer

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