TREX
#Morning, <UNK>.
Sure.
We have not seen any significant movement in pressure treated lumber at retail.
It's been relatively stable.
And in fact, if you looked at the higher grade of pressure treated, which is generally a cedar that has had less product available in the market than what a lot of the consumers would like to have.
And therefore that is very stable.
So, we don't really see an impact from that, nor have we seen competitors using reduced polyethylene prices to try and drive the retail price down.
I believe what's happening is over the last several years, there have been very few price increases.
And I think that it is a point in time when competitors are basically utilizing that to strengthen their margins back to where they believe they're appropriate.
Well, our primary focus is growth of the business.
The buyback of the stock is something we do on an opportunistic basis.
If we see a share price that is exceptionally low we are out there and have been and demonstrated we've been active buyers.
But our first goal is to grow the business.
We believe that through our R&D team, as well as our manufacturing team, we can offer more to shareholders through innovation with them than we probably can do with acquisitions.
Acquisitions, of course, bring all kinds of risk with them.
However, if we saw the right acquisition we would certainly be open to it.
This management group has looked at a number of potential candidates, primarily in the building products area.
And thus far, I have not found any that really met the requirements that we were looking for, which basically is a strong return on investment considering the risk associated with the acquisition.
Yes.
We haven't broken out the international sales as a segment within the business as of yet.
I expect at some point in the future we will do that when the size is appropriate.
From a European perspective in breaking that out, if you look at an overall worldwide market, about half of the composite decking sales are outside of North America.
And when you break that apart from there about 50% to 60% of that outside of North America market is going to fall within Continental Europe.
So that's the key reason for our focus within the major economies within Europe.
Of course as you'd expect, the economies that are functioning with little bit stronger economically have a better opportunity.
So we have focused on the UK, France, Germany and some of the other countries up in Scandinavia, and we'll continue to go after that as we go forward.
We currently do not have all four lines running.
We do not have the demand to support all four lines.
We anticipate that in 2016, we will move into the four lines.
Until we have fully loaded those lines or we see a demand curve that supports fully loading those, we will not be proceeding with any additional lines.
So I would say for 2016 based on our current trajectory we would probably be limited to four lines in 2016.
We typically do not have a press release.
This is where we're talking with our distribution partners, as well as our sales force on internal strategies for the company.
We've talked about our pricing.
We do have a roughly 6% price increase that we've already implemented on Transcend monochromatic.
That is the only price increase of any significance that we've passed on.
Programs also will be talking with our distributor partners and typically we do not go into those in detail with the Street.
Well, as I mentioned, the operational issues related to the heightened aesthetic standard, that's behind us at this point.
We don't provide specific gross margin guidance as we go forward, but as I mentioned in a - with a prior question, we do expect utilization to be up slightly in the fourth quarter and there will also be some benefit from the price increase on the Transcend Classic colors.
Yes.
On a year-over-year basis, we're still targeting a 45% incremental growth.
And, <UNK>, in looking at that number, I think you need to look at what occurred in prior fourth quarters to put it in relationship.
Fourth quarter is one of the lower months from an incremental margin standpoint, typically.
Third and fourth quarter are typically challenges to that number.
First and second quarter very strong.
You saw it come down slightly in the third quarter and again, typically fourth quarter is a little bit of a challenge on that 45%.
If you took the full fiscal year change in revenues and then look at a change in gross margin at 45%, you can fit the fourth quarter accordingly.
Based on everything we've seen and heard, both from our Big Box business partners, as well as the two-step channels, is we continue to expand our market share.
It is equally as clear in the third quarter as it was in the earlier part of this year.
Thank you, <UNK>.
Yes, I think one of the things you ought to look at, the Q will be out later today.
Much of that information will be contained within the Q to give you more detailed color on that.
The view is that it has been a little bit more expensive because the type of claims that have come through, more cash payments as opposed to material, delivery that really relates to our ability to deliver certain materials.
We don't have every state covered by a delivery program, so that causes that number in some cases to be a little bit higher.
With regard to the claims, the claims are still decreasing.
They aren't decreasing as quickly as what we had anticipated.
Therefore, we see the need for the increased reserve, but as it has been the case since we first started this process, claims have continued to decline and I think one of the big telling issues is for me, is when I look at the cash out, it's down considerably from prior year.
And we need to continue to see that decline.
We expect that we will continue to see that decline.
It makes the cash implications of that less and less of an issue as time goes on.
Well, certainly, we view an opportunity for further expansion sales with new distribution partners as an opportunity.
It will be a much smaller opportunity in 2016 than it was in 2015.
I think the big opportunity really comes from the conversion from wood to wood plastic composite.
We saw an indication in 2014 of it starting to move.
It's been very clear and in fact, noted by others publicly that we are starting to see people move from pressure treated to wood plastic composite.
So I think that trend is going to benefit us as we go into 2016.
We continue to take share, and just to be clear, the share gains we've had are not all from new distribution partners.
We saw share gains with new dealers across the United States.
It was not just in the northeast where we added significant new distribution.
So we're pretty excited about the growth that we've seen.
And where we are growing compared to our competitors.
We have outstanding products out there that the market recognizes and we're being rewarded for putting those good products on the market.
I'd say we're probably in the sixth to seventh inning.
There's still opportunity there, but again, that was not the primary driver for this year, it was one of the drivers.
Thank you.
This executive team remains focused on strengthening our number one brand position, our premiere distribution network, our strong product development expertise and our low-cost position.
These competitive advantages continue to allow TREX to excel in the outdoor products category and utilize our core competencies to enter new markets.
As we move into the fourth quarter, another banner year for TREX, we also have our sights set on the opportunities that lie ahead.
We look forward to updating the investment community on our overall 2015 results and our expectations moving forward in our next call.
Thank you for participating with us today.
