<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as Permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) orss.240.14a-12
Trex Company, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
<PAGE>
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
TREX COMPANY INC.
20 South Cameron Street
Winchester, Virginia 22601
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 3, 2000
----------------
To our stockholders:
Notice is hereby given that the 2000 annual meeting of stockholders of Trex
Company, Inc. will be held at the Hampton Inn, 1204 Berryville Avenue,
Winchester, Virginia 22601, on Wednesday, May 3, 2000, at 11:00 a.m., local
time, for the following purposes:
1. to consider and vote upon a proposal to elect two directors of Trex
Company, Inc.; and
2. to transact such other business as may properly come before the annual
meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on March 24, 2000 will
be entitled to notice of, and to vote at, the annual meeting or any adjournment
or postponement thereof.
By Order of the Board of Directors,
/s/ Lynn E. MacDonald
Lynn E. MacDonald
Secretary
Dated: March 31, 2000
YOUR VOTE IS VERY IMPORTANT, WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING. PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
<PAGE>
TREX COMPANY, INC.
20 South Cameron Street
Winchester, Virginia 22601
Annual Meeting of Stockholders
May 3, 2000
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
Proxy Solicitation
This proxy statement is furnished in connection with the solicitation of
proxies by the board of directors of Trex Company, Inc. for use at the
Company's 2000 annual meeting of stockholders to be held at the Hampton Inn,
1204 Berryville Avenue, Winchester, Virginia 22601, on Wednesday, May 3, 2000,
at 11:00 a.m., local time. The purpose of the annual meeting and the matters to
be acted upon are set forth in the accompanying notice of annual meeting.
The Company will pay the cost of all proxy solicitation. In addition to the
solicitation of proxies by use of the mails, officers and other employees of
the Company and its subsidiary may solicit proxies by personal interview,
telephone and telegram. None of these individuals will receive compensation for
such services, which will be performed in addition to their regular duties. The
Company also has made arrangements with brokerage firms, banks, nominees and
other fiduciaries to forward proxy solicitation material for shares held of
record by them to the beneficial owners of such shares. The Company will
reimburse such persons for their reasonable out-of-pocket expenses in
forwarding such material.
This proxy statement and the enclosed proxy are first being mailed to the
Company's stockholders on or about March 31, 2000.
Voting and Revocability of Proxies
A proxy for use at the annual meeting and a return envelope are enclosed.
Shares of the Company's common stock represented by a properly executed proxy,
if such proxy is received in time and not revoked, will be voted at the annual
meeting in accordance with the instructions indicated in such proxy. If no
instructions are indicated, such shares will be voted "FOR" approval of each
proposal considered at the annual meeting. Discretionary authority is provided
in the proxy as to any matters not specifically referred to in the proxy.
Management is not aware of any other matters which are likely to be brought
before the annual meeting. If any other matter is properly presented at the
annual meeting for action, the persons named in the accompanying proxy will
vote on such matter in their own discretion.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise at the annual meeting by (1) giving written notice of revocation to
the Secretary of the Company, (2) properly submitting to the Company a duly
executed proxy bearing a later date or (3) voting in person at the annual
meeting. Unless revoked, the shares represented by each such proxy will be
voted at the meeting and any adjournment or postponement of the meeting.
Presence at the meeting of a stockholder who has signed a proxy but does not
provide a notice of revocation or request to vote in person does not revoke
that proxy. All written notices of revocation or other communications with
respect to revocation of proxies should be addressed to Trex Company, Inc., 20
South Cameron Street, Winchester, Virginia 22601, Attention: Secretary.
Voting Procedure
All holders of record of the common stock at the close of business on March
24, 2000 will be eligible to vote at the annual meeting. Each holder of common
stock is entitled to one vote at the annual meeting for each share held by such
stockholder. As of March 24, 2000, there were 14,122,566 shares of common stock
outstanding.
<PAGE>
The holders of a majority of the shares of common stock issued and
outstanding and entitled to vote at the annual meeting, present in person or by
proxy, will constitute a quorum at the annual meeting. Abstentions and broker
non-votes, which are described below, will be counted for purposes of
determining the presence of a quorum at the annual meeting.
Votes cast in person or by proxy at the annual meeting will be tabulated by
the inspector of election appointed for the annual meeting, who will determine
whether or not a quorum is present. Votes may be cast for, against or as
abstentions. Broker-dealers who hold their customers' shares in street name
may, under the applicable rules of the exchange and other self-regulatory
organizations of which the broker-dealers are members, sign and submit proxies
for such shares and may vote such shares on routine matters, which, under such
rules, typically include the election of directors. Broker-dealers may not vote
such shares on other matters without specific instructions from the customers
who beneficially own such shares. Proxies signed and submitted by broker-
dealers which have not been voted on matters described in the previous sentence
are referred to as broker non-votes. Broker non-votes on a particular matter
are not deemed to be shares present and entitled to vote on such matter and,
assuming the presence of a quorum, will not affect whether the proposal for
election of directors is approved at the annual meeting.
SECURITY OWNERSHIP
The information presented below regarding beneficial ownership of the
Company's common stock has been presented in accordance with rules of the SEC
and is not necessarily indicative of beneficial ownership for any other
purpose. Under these rules, beneficial ownership of common stock includes any
shares as to which a person, directly or indirectly, has or shares voting power
or investment power and also any shares as to which a person has the right to
acquire such voting or investment power within 60 days through the exercise of
any stock option or other right.
As of March 1, 2000, there were 14,122,566 shares of common stock
outstanding.
The following table presents, as of March 1, 2000, information based upon the
Company's records and filings with the SEC regarding beneficial ownership of
the common stock by (1) each person known to the Company to be the beneficial
owner of more than 5% of the common stock, (2) each director and each nominee
to the board of directors, (3) each executive officer of the Company named in
the summary compensation table under the "Executive Compensation" section of
this proxy statement and (4) all directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
Name of Beneficial Owner Ownership(1) Class
- ------------------------ ------------ ----------
<S> <C> <C>
Scudder Kemper Investments, Inc.(2) .................. 838,600 5.9%
345 Park Avenue
New York, New York 10154
Anthony J. Cavanna.................................... 2,137,500 15.1
Andrew U. Ferrari..................................... 2,137,500 15.1
Robert G. Matheny..................................... 2,137,500 15.1
Roger A. Wittenberg................................... 2,137,600 15.1
William F. Andrews(3)................................. 9,375 *
William H. Martin, III(4)............................. 9,475 *
All directors and executive officers as a group (6
persons)(5).......................................... 8,568,950 60.7
</TABLE>
- --------
* Less than 1%.
(1) Percentage of beneficial ownership as to any person as of a particular date
is calculated by dividing the number of shares beneficially owned by such
person by the sum of the number of shares outstanding as of
2
<PAGE>
such date and the number of shares as to which such person has the right to
acquire voting or investment power within 60 days. Except as we note below,
we believe that all persons listed in the table have sole voting and
investment power with respect to their shares.
(2) Based upon a Schedule 13G filed with the SEC on January 28, 2000. The
reporting person reports that it has sole voting power with respect to
667,800 of the shares shown, shared voting power with respect to 8,500 of
the shares shown and sole dispositive power with respect to all of the
shares shown.
(3) Includes options exercisable within 60 days of March 1, 2000 to purchase
375 shares.
(4) Includes options exercisable within 60 days of March 1, 2000 to purchase
375 shares.
(5) Includes options exercisable within 60 days of March 1, 2000 to purchase
750 shares.
ELECTION OF DIRECTORS
Nominees for Election as Directors
The Company's restated certificate of incorporation provides that the board
of directors is to be divided into three classes of directors, with the
classes to be as nearly equal in number as possible. The terms of office of
the three current classes of directors expire at this annual meeting, at the
annual meeting of stockholders in the year 2001 and at the annual meeting of
stockholders in the year 2002, respectively. Upon the expiration of the term
of office of each class, the nominees for such class will be elected for a
term of three years to succeed the directors whose terms of office expire.
Anthony J. Cavanna and Roger A. Wittenberg have been nominated for election
to the class with a three-year term which will expire at the annual meeting of
stockholders in the year 2003. Both nominees are incumbent directors and have
served on the board of directors since the Company's formation in September
1998.
Approval of the nominees requires the affirmative vote of a plurality of the
votes cast at the annual meeting. Unless authority to do so is withheld, it is
the intention of the persons named in the proxy to vote such proxy for the
election of each of the nominees. In the event that any nominee should become
unable or unwilling to serve as a director, the persons named in the proxy
intend to vote for the election of such substitute nominee for director as the
board of directors may recommend. It is not anticipated that any nominee will
be unable or unwilling to serve as a director.
The board of directors unanimously recommends that the stockholders of Trex
Company, Inc. vote "FOR" the election of the nominees to serve as directors.
Biographical information concerning each of the nominees and each of the
directors continuing in office is presented below.
Nominees for Election for Three-Year Terms
<TABLE>
<CAPTION>
Name Age Director Since
---- --- --------------
<S> <C> <C>
Anthony J. Cavanna.................................... 60 1998
Roger A. Wittenberg................................... 51 1998
</TABLE>
Anthony J. Cavanna has served as the Chief Financial Officer of TREX
Company, LLC, which is currently the Company's wholly-owned subsidiary, since
August 1996 and as Executive Vice President and Chief Financial Officer of the
Company since September 1998. From July 1994 to August 1996, he was a Group
Vice President of Mobil Chemical Company, referred to below as "Mobil
Chemical," which was a division of Mobil Oil Corporation, referred to below as
"Mobil." From July 1992 to July 1994, he was the Vice President- Planning and
Finance for Mobil Chemical. From November 1986 to July 1992, Mr. Cavanna
served as a Vice President of Mobil Chemical and the General Manager of its
Films Division Worldwide. From November 1981 to November 1986, he was the
President and General Manager of Mobil Plastics Europe. From January 1981 to
November
3
<PAGE>
1981, he was the Vice President-Planning and Supply of the Films Division of
Mobil Chemical. Between 1962 and 1981, Mr. Cavanna held a variety of positions
within Mobil, including engineering, manufacturing and project/group leader
positions. Mr. Cavanna received a B.S. degree in Chemical Engineering from
Villanova University and an M.S. degree in Chemical Engineering from the
Polytechnic Institute of Brooklyn.
Roger A. Wittenberg has served as the Vice President of Technical Operations
of TREX Company, LLC since August 1996 and as Executive Vice President of
Technical Operations of the Company since September 1998. Mr. Wittenberg also
serves as a director of Elite Textiles Ltd., a textile manufacturer. From May
1992 to August 1996, he was the Technical Manager of the Composite Products
Division of Mobil Chemical. Mr. Wittenberg founded Rivenite Corporation in 1987
and was its Chief Executive Officer until April 1992, when Mobil Chemical
acquired the assets of Rivenite Corporation. Before 1987, Mr. Wittenberg
founded and operated three companies in the textile, food and animal feed
supplements industries. Mr. Wittenberg received a B.S. degree in Chemistry from
High Point College.
Directors Whose Terms Expire in 2001
<TABLE>
<CAPTION>
Name Age Director Since
---- --- --------------
<S> <C> <C>
William F. Andrews.................................... 68 1999
Andrew U. Ferrari..................................... 53 1998
</TABLE>
William F. Andrews has served as Chairman of the Board of Directors of
Scovill Fasteners, Inc., a designer, manufacturer and distributor of apparel
fasteners and specialty industrial fasteners, since 1996. From 1981 to 1986,
Mr. Andrews served as the Chairman, President and Chief Executive Officer of
Scovill Manufacturing Co., where he worked for over 20 years. From 1995 to
1998, he served as the Chairman of Schrader-Bridgeport International, Inc., a
manufacturer of tire valves and pressure control devices. From January 1993 to
January 1995, Mr. Andrews served as Chairman and Chief Executive Officer of
Amdura Corporation, a manufacturer of hardware and industrial equipment. From
February 1992 to February 1994, he served as Chairman of Utica Corporation, a
manufacturer of fan blades for aerospace and land-based gas turbine engines,
and as an adviser and consultant to Investor International (U.S.), Inc., a
financial adviser. Mr. Andrews also serves as a director of Black Box
Corporation, Corrections Corporation of America, Johnson Controls, Inc., Katy
Industries, Inc., Navistar, Inc., Northwestern Steel and Wire Co. and Dayton
Superior Corporation.
Andrew U. Ferrari has served as the Vice President of Sales and Marketing of
TREX Company, LLC since August 1996 and as Executive Vice President of Sales
and Marketing of the Company since September 1998. From April 1992 to August
1996, he was the Director of Sales and Marketing of the Composite Products
Division of Mobil Chemical. From February 1990 to April 1992, Mr. Ferrari
served as the New Business Manager for Mobil Chemical. From January 1984 to
February 1990, he served as Marketing Director of the Consumer Products
Division of Mobil Chemical. Mr. Ferrari received a B.A. degree in Economics
from Whitman College and an M.B.A. degree from Columbia University.
Directors Whose Terms Expire in 2002
<TABLE>
<CAPTION>
Name Age Director Since
---- --- --------------
<S> <C> <C>
William H. Martin, III................................ 69 1999
Robert G. Matheny..................................... 54 1998
</TABLE>
William H. Martin, III has served as Chairman of the Board of Martin
Industries, Inc., a manufacturer and producer of gas grills, gas space heaters,
gas logs and pre-engineered fireplaces, since April 1994 and as a director of
Martin Industries since 1974. From 1971 to 1987, he served as President and
Chief Executive Officer of Martin Industries. From 1987 to 1993, Mr. Martin
served as Executive Assistant to the Rector of Trinity Church in New York City.
Since 1993, Mr. Martin has been managing private investments and serving as a
director of Aluma Form, Inc., a manufacturing company. Mr. Martin is a graduate
of Vanderbilt University.
4
<PAGE>
Robert G. Matheny has served as the President of TREX Company, LLC since
August 1996 and as the President of the Company since September 1998. From July
1992 to August 1996, he was the General Manager of the Composite Products
Division of Mobil Chemical. From August 1987 to July 1992, he served as the
General Manager of the Chemical Specialties Group of Mobil Chemical and as a
Vice President of Mobil Chemical Products International. From 1970 to August
1987, Mr. Matheny held various positions in sales, marketing and manufacturing
at Mobil. Mr. Matheny received a B.S. degree in Industrial Engineering and
Operations Research from Virginia Polytechnic Institute.
Board of Directors and Committees of the Board
The board of directors held three meetings during the Company's 1999 fiscal
year following its initial public offering. During fiscal 1999, each director
attended at least 75% of the aggregate of the total number of meetings of the
board of directors held during the period he served as a director and the total
number of meetings held by each committee of the board of directors on which he
served during the period for which he served.
The board of directors currently has standing audit and compensation
committees.
The audit committee, which held two meetings during fiscal 1999, currently
consists of Mr. Martin, who is the Chairman, and Mr. Andrews. This committee is
responsible for recommending to the full board of directors the selection of
the Company's independent auditors, reviewing the scope of the audit plan and
the results of each audit with management and the independent auditors,
reviewing the adequacy of the Company's system of internal accounting controls
in consultation with the independent auditors, reviewing generally the
activities and recommendations of the independent auditors, and exercising
oversight with respect to the Company's code of conduct and other policies and
procedures regarding adherence with legal requirements.
The compensation committee, which held one meeting during fiscal 1999,
currently consists of Mr. Andrews, who is the Chairman, and Mr. Martin. This
committee is responsible for establishing the compensation and benefits of the
Company's executive officers, monitoring compensation arrangements for
management employees for consistency with corporate objectives and
stockholders' interests, and administering the Company's 1999 Stock Option and
Incentive Plan, referred to in this proxy statement as the "Stock Incentive
Plan."
The board of directors does not have a nominating committee. The full board
of directors nominates candidates for membership on the board of directors. The
Company's bylaws provide that any stockholder wishing to nominate persons for
election as directors at an annual meeting must deliver to the Secretary of the
Company at the Company's principal office in Winchester, Virginia, a written
notice of the stockholder's intention to make such a nomination. The
stockholder generally is required to furnish the notice no earlier than 120
days and no later than 90 days before the first anniversary of the preceding
year's annual meeting. The notice must include the following information: (1)
such information regarding each proposed nominee as would be required to be
disclosed under SEC rules and regulations in solicitations of proxies for the
election of directors in an election contest or otherwise; (2) the written
consent of each proposed nominee to serve as a director of the Company; and (3)
as to the stockholder giving the notice and the beneficial owner, if any, of
common stock on whose behalf the nomination is made, (a) the name and address
of record of such stockholder and the name and address of such beneficial
owner, (b) the class and number of shares of the Company's capital stock which
are owned beneficially and of record by such stockholder and such beneficial
owner, (c) a representation that the stockholder is a holder of record of the
Company's capital stock entitled to vote at such meeting and intends to appear,
in person or by proxy, at the meeting to propose such nomination and (d) a
representation whether the stockholder or the beneficial owner, if any, intends
or is part of a group which intends to (A) deliver a proxy statement or form of
proxy to holders of at least the percentage of the Company's outstanding
capital stock required to elect the nominee or (B) otherwise solicit proxies
from stockholders in support of such nomination. The Company may require any
proposed nominee to furnish such other information as the Company may
reasonably require to determine the eligibility of such proposed nominee to
serve as a director of the Company.
5
<PAGE>
Director Compensation
Fees. Under the Company's 1999 Incentive Plan for Outside Directors, referred
to in this proxy statement as the "Outside Director Plan," directors who are
not employees of the Company receive an annual fee of $25,000 for their service
on the board of directors and its committees. Each non-employee director may
elect to receive up to one-half of this annual fee in cash and up to all of the
fee in the form of options to purchase common stock issued under the Outside
Director Plan. The value of the options issued in payment of any portion of a
non-employee director's annual fee is determined in accordance with the Black-
Scholes valuation model. For the portion of fiscal 1999 in which the Outside
Director Plan was in effect, Mr. Andrews and Mr. Martin, the Company's two non-
employee directors, received $9,375 and $18,750, respectively, of their 1999
annual fee of $18,750 in the form of stock options under the plan. Mr. Andrews
received options for 859 shares of common stock and Mr. Martin received options
for 1,719 shares of common stock in payment of the fee.
Stock Option Grants. The Company's current policy is to grant non-employee
directors options for 1,500 shares of common stock upon their initial
appointment or election to the board of directors. Such options are granted
under the Stock Incentive Plan. In fiscal 1999, Mr. Andrews and Mr. Martin each
received a special option award for 595 shares of common stock under the Stock
Incentive Plan. These options, as well as the options for 1,500 shares granted
to Mr. Andrews and Mr. Martin in April 1999 upon their initial appointment to
the board of directors, have the same terms as the options awarded under the
Outside Director Plan.
The exercise price per share under each option granted to a non-employee
director under the Outside Director Plan will be the fair market value of the
common stock on the option grant date. Each such option will vest with respect
to one-fourth of the shares subject to the option on each of the first, second,
third and fourth anniversaries of the date of grant. No option may be
exercisable more than ten years from the option grant date. Options will
terminate after the expiration of specified periods following the termination
of the option holder's service as a non-employee director, whether by reason of
death, disability, retirement or otherwise. The common stock issuable upon the
exercise of these options will be issued under the Stock Incentive Plan. The
Outside Director Plan is administered by an administrative committee of the
board of directors consisting of the Company's President and Chief Financial
Officer.
Executive Compensation
The following table shows information about the compensation paid to the
Company's chief executive officer, who is the President, and to each of the
Company's other executive officers for fiscal 1999, referred to in this proxy
statement as the "named executive officers":
Summary Compensation Table
<TABLE>
<CAPTION>
Annual
Compensation(1)
Fiscal ------------------ All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($)(2)
--------------------------- ------ --------- -------- ------------------
<S> <C> <C> <C> <C>
Robert G. Matheny................. 1999 304,547 290,000 83,817
President 1998 263,591 -- 52,995
Anthony J. Cavanna................ 1999 292,472 235,000 83,714
Executive Vice President and 1998 248,144 -- 52,281
Chief Financial Officer
Andrew U. Ferrari................. 1999 280,398 230,000 83,317
Executive Vice President of Sales 1998 232,698 -- 52,310
and Marketing
Roger A. Wittenberg............... 1999 280,398 230,000 83,153
Executive Vice President of Tech- 1998 232,698 -- 52,925
nical Operations
</TABLE>
- --------
(1) In accordance with SEC rules, information about other compensation in the
form of perquisites and other personal benefits has been omitted because
such perquisites and other personal benefits constituted less than the
lesser of $50,000 or 10% of the total annual salary and bonus for the named
executive officers.
6
<PAGE>
(2) The amounts shown in the "All Other Compensation" column consist of the
following: (i) for Mr. Matheny, $2,500 in fiscal 1999 and $3,025 in fiscal
1998 in matching contributions to the Company's defined contribution
employee profit sharing and 401(k) plan, referred to below as the "401(k)
plan," $5,653 in fiscal 1999 and $1,600 in fiscal 1998 in employer
discretionary contributions to the 401(k) Plan, $6,400 in fiscal 1999 and
$6,400 in fiscal 1998 in employer contributions to the Company's defined
contribution employee money purchase pension plan, referred to below as the
"Money Purchase Plan," and $69,264 in fiscal 1999 and $41,970 in fiscal
1998 in reimbursement of self-employment taxes payable by Mr. Matheny; (ii)
for Mr. Cavanna, $2,500 in fiscal 1999 and $2,613 in fiscal 1998 in
matching contributions to the 401(k) Plan, $5,653 in fiscal 1999 and $1,600
in fiscal 1998 in employer discretionary contributions to the 401(k) Plan,
$6,400 in fiscal 1999 and $6,400 in fiscal 1998 in employer contributions
to the Money Purchase Plan and $69,161 in fiscal 1999 and $41,668 in fiscal
1998 in reimbursement of self-employment taxes payable by Mr. Cavanna;
(iii) for Mr. Ferrari, $2,500 in fiscal 1999 and $2,944 in fiscal 1998 in
matching contributions to the 401(k) Plan, $5,653 in fiscal 1999 and $1,600
in fiscal 1998 in employer discretionary contributions to the 401(k) Plan,
$6,400 in fiscal 1999 and $6,400 in fiscal 1998 in employer contributions
to the Money Purchase Plan and $68,764 in fiscal 1999 and $41,366 in fiscal
1998 in reimbursement of self-employment taxes payable by Mr. Ferrari; and
(iv) for Mr. Wittenberg, $2,500 in fiscal 1999 and $3,559 in fiscal 1998 in
matching contributions to the 401(k) Plan, $5,653 in fiscal 1999 and $1,600
in fiscal 1998 in employer discretionary contributions to the 401(k) Plan,
$6,400 in fiscal 1999 and $6,400 in fiscal 1998 in employer contributions
to the Money Purchase Plan and $68,600 in fiscal 1999 and $41,366 in fiscal
1998 in reimbursement of self-employment taxes payable by Mr. Wittenberg.
Stock Option Grants and Exercises in Fiscal 1999
During fiscal 1999, the named executive officers were not granted and did not
exercise options to purchase common stock of the Company. As of December 31,
1999, no named executive officer held options to purchase common stock.
Transactions with Related Parties
Reorganization. On April 7, 1999, in connection with its initial public
offering of common stock, the Company completed a reorganization in which the
holders of junior membership interests in TREX Company, LLC exchanged those
interests for common stock of the Company, and TREX Company, LLC became a
wholly-owned subsidiary of the Company. The management holders of the junior
membership interests were Anthony J. Cavanna, Andrew U. Ferrari, Robert G.
Matheny and Roger A. Wittenberg, each of whom is a director and executive
officer of the Company and owns beneficially more than 5% of the common stock.
The institutional holders of the junior membership interests were Connecticut
General Life Insurance Company, Life Insurance Company of North America and The
Lincoln National Life Insurance Company.
Until April 7, 1999, the Company was a wholly-owned subsidiary of TREX
Company, LLC, a Delaware limited liability company. On April 7, 1999, the
members of TREX Company, LLC other than Mobil, consisting of the management
holders and the institutional holders, contributed their junior membership
interests in TREX Company, LLC to the Company in exchange for common stock.
Concurrently with such exchange, Mobil exchanged its preferred membership
interest in TREX Company, LLC for a $3.1 million note of the Company which the
Company repaid out of the net proceeds of its initial public offering.
In the exchange transaction, the junior membership interests in TREX Company,
LLC were exchanged for shares of common stock as follows: (1) the membership
interests of the management holders were exchanged for a total of 8,550,000
shares of common stock; and (2) the membership interests of the institutional
holders were exchanged for a total of 950,000 shares of common stock. The
Company received no additional consideration in connection with the exchange of
membership interests for shares of common stock. Immediately following the
exchange transaction, the management holders and the institutional holders
beneficially owned 90% and 10%, respectively, of the outstanding common stock,
which is the same proportion in which they held membership interests in TREX
Company, LLC immediately before the exchange transaction.
7
<PAGE>
Before the exchange transaction, TREX Company, LLC exercised an option to
repurchase from the institutional holders approximately 667 junior membership
interests. As a result of exercise of this option, the beneficial ownership of
outstanding junior membership interests by the institutional holders decreased
to 10% from 25%, while the beneficial ownership of outstanding junior
membership interests by the management holders increased to 90% from 75%. The
terms of this option were set forth in an agreement which TREX Company, LLC,
the management holders and the institutional holders entered into in connection
with the acquisition of the operations of TREX Company, LLC from Mobil's
Composite Products Division in August 1996. The option exercise price was $.01
for each junior membership interest repurchased. The number of junior
membership interests TREX Company, LLC repurchased pursuant to the option was
based on the internal rate of return earned since such acquisition by the
institutional holders on their investment in TREX Company, LLC, which consisted
of senior notes, subordinated notes and their junior membership interests. The
initial public offering price of the common stock was one component of the
internal rate of return calculation.
Repayment of Indebtedness. Approximately $28.1 million of the net proceeds of
the initial public offering were used to repay indebtedness of TREX Company,
LLC to the institutional holders, which was evidenced by the senior and
subordinated notes issued by TREX Company, LLC in connection with the 1996
acquisition. The indebtedness repaid consisted of $26.3 million principal
amount of indebtedness, $0.3 million of accrued and unpaid interest thereon and
a related prepayment premium of approximately $1.5 million.
In connection with the reorganization, TREX Company, LLC issued non-interest
bearing promissory notes to or for the benefit of each management holder and
each institutional holder in the following principal amounts: Connecticut
General Life Insurance Company ($846,027); Life Insurance Company of North
America ($172,973); The Lincoln National Life Insurance Company ($551,000);
Anthony J. Cavanna ($979,000); Andrew U. Ferrari ($990,000); Robert G. Matheny
($970,000); and Roger A. Wittenberg ($991,000). These notes, all of which were
repaid upon the closing of the Company's initial public offering on April 13,
1999, represented the balance of the estimated cash distribution described
below which was owed but unpaid as of the reorganization date to the management
holders and institutional holders.
Cash Distribution. In connection with the exchange transaction described
above, TREX Company, LLC made an aggregate cash distribution of approximately
$13.4 million to the management holders and the institutional holders. Of this
distribution, approximately $11.1 million represented the amount of the
previously recognized and undistributed income of TREX Company, LLC through the
reorganization date on which such former members of TREX Company, LLC had paid,
or will pay, income tax, and approximately $2.3 million represented a return of
capital. The amount of the cash distribution paid to each member was as
follows: Connecticut General Life Insurance Company ($1,866,513); Life
Insurance Company of North America ($298,004); The Lincoln National Life
Insurance Company ($1,079,966); Anthony J. Cavanna ($2,542,005); Andrew U.
Ferrari ($2,542,001); Robert G. Matheny ($2,542,003); and Roger A. Wittenberg
($2,542,002).
Other Transactions. TREX Company, LLC paid the institutional holders interest
on the senior notes and subordinated notes of approximately $0.8 million for
1999 in addition to the payments on such notes described above which the
Company made upon the closing of its initial public offering.
The Company applied a portion of the net proceeds of the initial public
offering to repay borrowings outstanding under its credit facility.
Approximately $4.4 million of such borrowings was used to fund a portion of the
cash distribution described above.
8
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Report of the Compensation Committee of the
Board of Directors of Trex Company, Inc.
on Executive Compensation
The Compensation Committee of the Trex Company, Inc. Board of Directors,
which is composed exclusively of non-employee directors, offers this report
regarding its executive compensation policy and compensation program in effect
for fiscal 1999 for the Company's chief executive officer, who is the
President, and the Company's other executive officers. This report, as well as
the performance graph on page 11, are not soliciting materials, are not deemed
filed with the SEC and are not incorporated by reference in any filing of the
Company under the Securities Act of 1933 or the Securities Exchange Act of
1934, whether made before or after the date of this proxy statement and
irrespective of any general incorporation language in any such filing.
Compensation Policy. The overall goal of the Committee is to develop
compensation policies and practices which support the attainment of the
Company's strategic business objectives. The Committee uses the services of
independent executive compensation consultants in developing and evaluating
compensation plans in order to achieve these objectives.
The Committee compares executive compensation levels for the chief executive
officer and the Company's other executive officers to the compensation of
executives employed by companies considered to be in the Company's peer group.
The Committee also compares the Company's short-term and long-term results to
the performance of comparable companies.
The Company's executive compensation program includes a base salary, annual
cash bonuses and long-term incentive compensation in the form of stock option
awards. Overall, these programs are intended to link executive compensation to
the Company's performance. The Committee believes that a substantial portion of
cash compensation should be tied to performance-based objectives. To encourage
equity ownership by the Company's executives and to link executive compensation
with increases in stockholder value, the Committee's policy is to provide that
a significant portion of total executive compensation will be in the form of
periodic stock option awards.
Base Salary. Because the Company completed its initial public offering in
fiscal 1999, when the Committee was formed, the Committee did not approve the
base salaries of the chief executive officer or the other executive officers of
the Company for fiscal 1999.
Annual Cash Bonuses. The Company pays annual cash bonuses to its executive
officers based upon the achievement of a net income objective. This objective
is established at a level which is intended to assure that, if achieved, the
level will represent a significant improvement in stockholder value. Executive
officers have the opportunity to earn cash bonuses equal to a varying
percentage of their base salary, depending upon the attainment of this
objective.
For fiscal 1999, the Company met the net income objective. Applying the bonus
formula specified for fiscal 1999, the Committee approved an annual bonus for
the chief executive officer equal to 159% of his target annual bonus and annual
bonuses for the other executive officers equal to between 158% and 161% of
their respective target annual bonuses. All target annual bonuses for a fiscal
year are measured as a percentage of the executive's base salary for that
fiscal year.
Long-Term Incentives. Based in part upon the Company's fiscal 1999
performance, the Committee in fiscal 2000 approved the grant of stock options
under the Trex Company, Inc. 1999 Stock Option and Incentive Plan for 15,720
shares of common stock to the chief executive officer and for a total of 60,050
shares of common stock to the executive officers in the aggregate, including
the chief executive officer.
In determining the amount of stock option awards under the 1999 Stock Option
and Incentive Plan, the Committee considers each executive's current
performance and anticipated future contributions to the Company's performance,
as well as the amount and terms of the options previously granted to the
executive by
9
<PAGE>
the Company. The grant of stock options to the chief executive officer and the
other executive officers in fiscal 2000 was based on the Committee's assessment
of both the past contributions of the executive officers and their anticipated
role in increasing stockholder value.
All stock options granted to executive officers in fiscal 2000 were non-
qualified stock options with an exercise price that was equal to the fair
market value of the Company's common stock on the date of grant. The options
increase in value only to the extent of appreciation in the common stock,
thereby providing a clear link to enhancement of stockholder value. To
emphasize the long-term incentive provided by these stock options, the options
vest in equal increments over a four-year period.
Potential Effect of Section 162(m) of the Internal Revenue Code. Section
162(m) of the Internal Revenue Code of 1986 generally sets a limit of $1
million on the amount of compensation paid to executive employees (other than
enumerated categories of compensation, including performance-based
compensation) that may be deducted by a publicly-held company. The Committee's
policy is to seek to qualify executive compensation for deductibility to the
extent that such a policy is consistent with the Company's overall objectives
and executive compensation policy. Compensation attributable to stock options
granted under the 1999 Stock Option and Incentive Plan currently is excluded
from the $1 million limit as "qualified performance-based compensation"
contained in applicable Treasury regulations. The Committee believes that no
compensation for fiscal 1999 is at risk of not being fully deductible.
THE COMPENSATION COMMITTEE
William F. Andrews
William H. Martin, III
Compensation Committee Interlocks and Insider Participation
The compensation committee of the board of directors during fiscal 1999 was
composed of William F. Andrews, who is the Chairman, and William H. Martin,
III. No member of the compensation committee was an officer or employee of the
Company or its subsidiary during fiscal 1999. There are no interlock
relationships as defined in the applicable SEC rules.
10
<PAGE>
Stockholder Return Performance Graph
The following graph and table show the cumulative total stockholder return on
the Company's common stock compared to the Russell 2000(R) Index and a self-
constructed peer group index for the periods between April 8, 1999, the date
the common stock began trading on the New York Stock Exchange, and December 31,
1999, the last trading day in fiscal 1999. The peer group index is composed of
the following public companies: U.S. Plastic Lumber Corp. and Advanced
Environmental Recycling Technologies, Inc., each of which markets non-wood
decking alternative products, and Masco Corporation, Elcor Corporation,
Restoration Hardware, Inc., American Woodmark Corporation and Ethan Allen
Interiors Inc., each of which emphasizes product branding and engages in
manufacturing and distribution of products to the building and consumer
products industries. The total stockholder return on each company included in
the peer group index has been weighted according to such company's estimated
capitalization as of April 8, 1999. The graph assumes $100 was invested on
April 8, 1999 in (1) common stock, (2) the peer group index and (3) the Russell
2000 Index, and assumes reinvestment of dividends.
[PERFORMANCE GRAPH APPEARS HERE]
APRIL 8, 1999 DECEMBER 31, 1999
------------- -----------------
Trex Company, Inc. $100.00 $267.50
Russell 2000 Index $100.00 $128.26
Peer Index $100.00 $ 97.88
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP has acted as the Company's independent accountants for the
Company's 1999 fiscal year. Representatives of Ernst & Young LLP are expected
to be present at the annual meeting and will be afforded the opportunity to
make a statement if they so desire and to respond to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than 10% of a
registered class of the Company's equity securities to file with the SEC and
the New York Stock Exchange initial reports of ownership and reports of changes
in ownership of common stock and other equity securities of the Company. Such
reporting persons are required by rules of the SEC to furnish the Company with
copies of all Section 16(a) reports they file. Based solely upon a review of
Section 16(a) reports furnished to the Company for fiscal 1999 or written
representations that no other reports were required, the Company believes that
the foregoing reporting persons complied with all filing requirements for
fiscal 1999.
11
<PAGE>
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING IN 2001
Under SEC rules, in order for stockholder proposals to be presented at the
Company's annual meeting of stockholders in 2001, such proposals must be
received by the Secretary of the Company's at the Company's principal office in
Winchester, Virginia, no later than December 1, 2000. The submission by a
stockholder of a proposal for inclusion in the proxy statement is subject to
regulation by the SEC.
In addition, the Company's bylaws require that notice of proposals by
stockholders to be brought before any annual meeting generally must be
delivered to the Company no earlier than 120 days and no later than 90 days
before the first anniversary of the preceding year's annual meeting. The notice
under the bylaws must include the following information: (1) a brief
description of the business desired to be brought before the meeting, the text
of the proposal or business (including the text of any resolutions proposed for
consideration and in the event that such business includes a proposal to amend
the Company's bylaws, the language of the proposed amendment), the reasons for
conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (2) as to the stockholder giving the notice and the
beneficial owner, if any, of common stock on whose behalf the proposal is made,
(a) the name and address of record of such stockholder and the name and address
of such beneficial owner, (b) the class and number of shares of the Company's
capital stock which are owned beneficially and of record by such stockholder
and such beneficial owner, (c) a representation that the stockholder is a
holder of record of the Company's capital stock entitled to vote at such
meeting and intends to appear, in person or by proxy, at the meeting to propose
such business and (d) a representation whether the stockholder or the
beneficial owner, if any, intends or is part of a group which intends to (A)
deliver a proxy statement or form of proxy to holders of at least the
percentage of the Company's outstanding capital stock required to adopt the
proposal or (B) otherwise solicit proxies from stockholders in support of such
proposal.
OTHER MATTERS
The board of directors does not intend to present to the meeting any other
matters not referred to above and does not presently know of any matters that
may be presented to the meeting by others. If other matters are properly
brought before the meeting, the persons named in the enclosed proxy will vote
on such matters in their own discretion.
By Order of the Board of Directors,
/s/ Lynn E. MacDonald
Lynn E. MacDonald
Secretary
Dated: March 31, 2000
12
<PAGE>
- --------------------------------------------------------------------------------
TREX COMPANY, INC.
20 SOUTH CAMERON STREET
WINCHESTER, VIRGINIA 22601
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
OF TREX COMPANY, INC. FOR THE ANNUAL MEETING ON
MAY 3, 2000 AT 11:00 A.M.
TREX COMPANY, INC.
The undersigned appoints Robert G. Matheny and Andrew U. Ferrari, and each of
them, with full power of substitution in each, the proxies of the undersigned,
to represent the undersigned and vote all shares of Trex Company, Inc. Common
Stock which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders to be held on May 3, 2000, and at any adjournment or postponement
thereof, as indicated on the reverse side. The undersigned further authorizes
such proxies to vote in their discretion upon such other matters as may properly
come before the Annual Meeting or any adjournment or postponement thereof.
Receipt of Notice of Annual Meeting and Proxy Statement is hereby acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
TREX COMPANY, INC., P.O. BOX 1628, NEW YORK, NY 10277-1628
(Continued and to be signed on reverse side)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
<TABLE>
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<S> <C> <C> <C>
Please mark [X]
your votes as
indicated in
this example
1. Election of directors
FOR all WITHHOLD Nominees: Anthony J. Cavanna and Roger A Wittenberg
nominees listed AUTHORITY
below for all nominees (INSTRUCTION: To withhold authority to vote for any individual nominee, write that
nominee's name in the space provided below.)
[_] [_]
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2. In their discretion, the proxies are CHANGE OF ADDRESS AND OR COMMENTS
authorized to vote upon such other matters MARK HERE [_]
as may properly come before the Annual
Meeting or any adjournment or postponement The signature on this Proxy should correspond exactly
thereof. with stockholder's name as printed to the left. In the
case of joint tenants, co-executors or co-trustees,
both should sign. Persons signing as Attorney,
Executors, Administrator, Trustee or Guardian should
give their full title.
Dated , 2000
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Signature
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Signature
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE)
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FOLD AND DETACH HERE
</TABLE>
