"A few months ago we identified an opportunity to start blending other polymers with our recycled pellets making it more a unique product, a more specialty product, and enabling us to potentially move into a higher margin product," Trex Vice President and Chief Financial Officer Bryan Fairbanks told analysts Oct. 27 during a quarterly conference call.
During the third quarter, Trex
also took back $1.1 million of decking material produced in prior periods because Fairbanks
said it "didn't meet our heightened aesthetics standards.
"In response to this we adjusted our plant operating parameters to meet the higher standard, which resulted in slightly lower operational efficiency during the quarter," he
"These inefficiencies have been resolved and won't carry over to future periods."
The aesthetic problem affected the Transcend tropical line and was caught before products hit the consumer level - unlike flaking issues related to material produced at Trex's
Nevada plant prior to 2007.
Warranty payments for the flaking have come to $7.8 million so far this year, which Fairbanks
said is down $1.4 million compared to the first nine months of 2014.
"I believe in the last several years there have been very few price increases," Fairbanks
Hints of the conversion started last year, Fairbanks
said, and he
expects the trend to continue throughout the U.S. and not just the northeast, where the company added distributors.