One of the largest plastic lumber manufacturers hopes to raise $45 million through an initial public stock offering.
Trex Co. Inc. will become a publicly held company March 29 or 30, when shares begin trading on the New York Stock Exchange under the symbol TWP. Some 3.35 million shares are being sold with an initial stock price of between $11 and $12, said Trex Chief Financial Officer Tony Cavanna.
According to the Winchester, Va.-based company's Securities and Exchange Commission documents, Trex plans to use approximately $28 million of the net proceeds to repay $26.3 million in debt.
After some other payments, Trex intends to use the remaining proceeds, about $2.8 million, to equip the company's second plant — a 150,000-square-foot facility now under construction in Fernley, Nev.
Trex was formed in August 1996 in a buyout of the assets of the 4-year-old Composite Products Division of Mobil Oil Corp. The buyout was led by Trex managers Cavanna, Andrew Ferrari, Robert Matheny and Roger Wittenberg, then senior executives with Mobil.
The company extrudes composite lumber using a proprietary process that combines waste wood fibers and recycled polyethylene. The company consumed 101 million pounds of wood and 87 million pounds of PE last year. The post-consumer PE is mainly grocery sacks and stretch film — about 5 percent of the 2 billion pounds of sacks manufactured each year in the United States are returned for recycling.
The lumber is made at the company's 100,000-square-foot facility in Winchester. The plant operates eight automated production lines. The company employs 217.
Since its inception, the company has invested $34 million on equipment, process improvements, new product development and product enhancements.
Trex added a production line in December and another in January. The company expects these lines to reach full operating capacity in the middle of this year. With the new lines, the Winchester plant's capacity will be 215 million pounds per year.
The $19.6 million Fernley plant will begin production in the fourth quarter this year with two production lines.
Some 85 percent of Trex's sales come from residential and commercial decking applications. Other products include industrial block flooring, playground structures, picnic tables, benches, fencing, marine applications and landscape edging.
Since it was founded, Trex has grown rapidly. Sales have risen from $600,000 in 1992 to $46.8 million last year. About 95 percent of Trex sales are made through the company's wholesale distribution network, which is directed at professional contractors, remodelers and homebuilders. The remaining 5 percent of the company's sales are made directly to industrial floor fabricators, playground material distributors and other accounts.
Trex competes with wood, other wood/plastic composites and 100 percent plastic lumber for use as decking. The primary competition for Trex is wood decking, which accounts for 97 percent of the total $1.9 billion 1997 decking market. Wood/plastic composite decking comprised 2 percent and 100 percent plastic decking held 1 percent of the market.
Trex's main competitors in the nonwood decking market include Advanced Environmental Recycling Technologies Inc. of Springdale, Ark.; Crane Plastics in Columbus, Ohio; Milford, Ind.-based Royal Crown Ltd.; and U.S. Plastic Lumber Corp. of Boca Raton, Fla. Trex claimed more than 80 percent of 1998 total factory sales of wood/plastic composites to the decking market.
The firm's goals are to continue to increase its market share of the decking market and to expand new products and geographic markets. Part of the strategy is to increase the number of dealer outlets selling Trex during the next three years by 50 percent to about 3,000. Trex also plans to increase exports to Canada and explore opportunities in the Caribbean, Latin America and parts of Europe.