This management's discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 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. These statements can sometimes be identified by our use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," "intend" or similar expressions. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Our actual results could be materially different from our expectations because of various factors, including the factors discussed under "Item 1A. Risk Factors" in our Annual Report on Form 10-K for fiscal year 2008 filed with the Securities and Exchange Commission. These statements are also subject to risks and uncertainties that could cause the Company's actual operating results to differ materially. Such risks and uncertainties include the extent of market acceptance of the Company's products; the sensitivity of the Company's business to general economic conditions; the Company's ability to obtain raw materials at acceptable prices; the Company's ability to maintain product quality and product performance at an acceptable cost; the level of expenses associated with product replacement and consumer relations expenses related to product quality; and the highly competitive markets in which the Company operates.

Overview

General. The Company is the largest U.S. manufacturer of wood-alternative decking, railing, fencing and trim products, which are marketed under the brand name Trex ®. The Company has approximately 550 employees throughout the United States with manufacturing facilities located in Olive Branch, Mississippi, Fernley, Nevada and Winchester, Virginia. In September 2007, the Company suspended operations at the Olive Branch facility for an indeterminate period and consolidated all of its manufacturing operations into the Winchester and Fernley sites.

The Company has six decking product lines: Trex Contours ®, Trex Origins®, Trex Accents®, Trex Accents Fire Defense ®, Trex Brasilia® and Trex Escapes®; two railing product lines: Trex Designer Series Railing ® and Trex Artisan Series Railing® a fencing product, Trex Seclusions® and a cellular PVC outdoor trim product, TrexTrim™. In addition, the Company offers Trex Hideaway®, which is a hidden fastening system for specially grooved boards.

Highlights related to the first quarter of fiscal 2009 include:

• We experienced sales volume decreases, consistent with the poor general macroeconomic conditions and tight credit markets. We believe that we're experiencing a shift in purchasing patterns as customers hold lower inventories. This behavior will have the effect of shifting certain sales from the first quarter into the second and third quarters of 2009.

• We believe that, despite reduced sales, we are taking market share from competitors and continue to enhance our strategic partnerships.

• We continue to improve our manufacturing efficiencies and lower manufacturing costs, although the favorable effects of these initiatives were more than offset by lower levels of capacity utilization in the 2009 quarter.

• We continue to manage the business with a focus on cash which has resulted in improved cash flows, despite reduced earnings. We ended the 2009 quarter with a cash balance of $19.5 million and have not utilized our revolving line of credit since May 2008.

• We continue to settle claims for material previously produced at the Nevada facility that exhibit surface defects (as further described in our most recent Form 10-K) against the warranty reserve. We continue to monitor the adequacy of the reserve, which if increased, would have an adverse effect on profitability.

• We adopted FASB Staff Position APB 14-1, Accounting for Convertible Debt Instruments that May Be Settled in Cash upon Conversion. The adoption of the pronouncement results in a significant non-cash increase to "Interest expense, net." The pronouncement requires retroactive application. For further information see Note 3 of the accompanying notes to condensed consolidated financial statements.

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 prices paid for Trex. The Company's branding and product differentiation strategy enables it to command premium prices over wood and to maintain price stability for Trex. To ensure adequate availability of product to meet anticipated seasonal consumer demand, the Company has historically provided its distributors and dealers incentives to build inventory levels before the start of the prime deck-building season. These incentives include prompt payment discounts or extended payment terms. In addition, the Company, from time to time, may offer price discounts on specified products and

other incentives based on increases in distributor purchases as part of specific promotional programs. There are no product return rights granted to the Company's distributors except those granted pursuant to the warranty provisions of the Company's agreement with its distributors.

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, reclaimed polyethylene, or "PE material," and pigmentation for coloring Trex products. Direct labor costs include wages and benefits of personnel engaged in the manufacturing process. Manufacturing costs consist of costs of depreciation, utilities, maintenance supplies and repairs, indirect labor, including wages and benefits, and warehouse and equipment rental activities.

Selling, General and Administrative Expenses. The largest components of selling, general and administrative expenses are branding and other sales and marketing costs, which the Company uses to build brand awareness of Trex in the decking, railing, fencing and trim markets. Sales and marketing costs consist primarily of salaries, commissions and benefits paid to sales and marketing personnel, consumer relations, advertising expenses and other promotional costs. General and administrative expenses include salaries and benefits of personnel engaged in research and development, procurement, accounting and other business functions, office occupancy costs attributable to these functions, and professional fees. As a percentage of net sales, selling, general and administrative expenses have varied from quarter to quarter due, in part, to the seasonality of the Company's business.

Results of Operations

The following table shows, for the three months ended March 31, 2008 and 2009,
respectively, selected statement of operations data as a percentage of net
sales:



                                                           Three Months Ended March 31,
                                                            2008                   2009
Net sales                                                      100.0 %                100.0 %
Cost of sales                                                   73.0                   75.2

Gross profit                                                    27.0                   24.8
Selling, general and administrative expenses                    17.0                   24.5

Income from operations                                          10.0                    0.3
Interest expense, net                                            3.6                    5.1

Income (loss) before taxes and extraordinary item                6.4                   (4.8 )
Provision (benefit) for income taxes                             0.1                   (0.2 )

Net income (loss)                                                6.3 %                 (4.6 )%

Three Months Ended March 31, 2009 Compared With Three Months Ended March 31, 2008

Net Sales. Net sales in the quarter ended March 31, 2009 (the "2009 quarter") decreased 43.4% to $67.7 million from $119.5 million in the quarter ended March 31, 2008 (the "2008 quarter"). The decrease in net sales was primarily attributable to a 50% reduction in sales volume, which was partially offset by an 8.5% increase in the average price per unit. The decrease in sales volume was principally related to lower consumer demand attributable to poor macroeconomic conditions, which includes suppressed repair and remodeling expenditures and lower housing starts, as compared to the 2008 quarter. In addition, we believe there was a significant shift in purchasing patterns in the first quarter as customers ordered more based on pull-through demand and held inventories lower than in past years due to the poor economy. The increase in revenue per product unit resulted from a price increase, effective January 2009, of approximately 8% and increased sales of higher unit priced products primarily related to an increase in the sales mix of our railing product category. The Company has historically offered an annual early buy sales program to create an incentive for distributors and dealers to commit to purchase Trex products before the start of the decking season and to better serve end users.

Gross Profit. Gross profit decreased 48.1% to $16.8 million in the 2009 quarter from $32.3 million in the 2008 quarter. The decrease was primarily attributable to reduced sales volume. Gross profit as a percentage of net sales decreased to 24.8% in the 2009 quarter from 27.0% in the 2008 quarter. The effect of the 2009 price increase, sales mix of higher revenue per product unit and the net effect of the sales incentives offered during the early buy order season resulted in an increase in gross margin in the 2009 quarter of approximately 5.7% from the 2008 quarter. Gross margin was positively affected by an increase in production rates and yields and cost reductions due to our continued focus on manufacturing automation and standardization, which contributed to a 4% increase in gross margin. The positive effect of the foregoing factors on gross

margin in the 2009 quarter was more than offset by the negative impact on gross margin of 9% from operating at reduced levels of capacity utilization and 3% related to sales of excess poly at reduced prices. The excess poly sales were principally driven by operating at reduced levels of capacity utilization. The reduced sales price of poly was primarily driven by weak global demand.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased 18.5% to $16.6 million in the 2009 quarter from $20.3 million in the 2008 quarter. The reduction in selling, general and administrative expenses in the 2009 quarter were primarily related to lower personnel and legal expenses, which were partially offset by increased branding expenses. Personnel-related expenses declined $4.4 million in the 2009 quarter. The primary drivers to the reduced personnel-related expenses in the 2009 quarter included a $3.4 million reduction to incentive compensation and reduced average headcount for the quarter. In addition, the Company recognized $0.6 million of severance costs related to the workforce reduction in the 2008 quarter. Legal expenses were $0.2 million in the 2009 quarter, a $0.6 million reduction from the 2008 quarter. The 2008 quarter included legal fees principally related to defending a patent infringement lawsuit. Branding expenses increased $1.1 million in the 2009 quarter. As a percentage of net sales, total selling, general and administrative expenses increased to 24.5% in the 2009 quarter from 17.0% in the 2008 quarter.

Interest Expense. Net interest expense decreased $0.9 million to $3.4 million in the 2009 quarter from $4.3 million in the 2008 quarter. Net interest expense included $1.4 million and $1.6 million of charges to the 2008 and 2009 quarters respectively in non-cash interest related to the adoption of Accounting Standards Board Staff Position No. APB 14-1 ("FSP APB 14-1"), "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)." Excluding the aforementioned charges related to APB 14-1 net interest expense was $1.8 million in the 2009 quarter, a $1.1 million reduction to the 2008 quarter. The decrease in net interest expense in the 2009 quarter, excluding the effects of APB 14-1, included $0.5 million less in unrealized losses on debt-related derivatives, $0.4 million reduced expenses recognized under FIN 48, accounting for uncertain tax positions and $0.2 million of reduced interest due to the Company carrying a reduced level of average net debt.

Provision for Income Taxes. The Company's effective tax rate for the 2009 quarter and 2008 quarter was 3.7% and 1.1%, respectively, which resulted in a benefit of $0.1 million and an expense of $0.1 million, respectively. The effective tax rate was substantially lower than the statutory rate in both quarters due to the fact the Company maintains a valuation allowance against its net deferred tax assets which offsets statutory tax expense or benefits. The higher tax rate in the 2009 quarter as compared to the 2008 quarter was primarily due to the reversal of $0.1 million of its liabilities for uncertain tax positions that have been settled.

Liquidity and Capital Resources

The Company finances its operations and growth primarily with cash flow from operations, borrowings under its revolving credit facility and other loans, operating leases and normal trade credit terms from operating activities.

At March 31, 2009, the Company had $19.5 million of cash and cash equivalents.

The Company believes that cash on hand, cash from operations and borrowings expected to be available under the Company's existing revolving credit facility will provide sufficient funds to enable the Company to fund its planned capital expenditures, make scheduled principal and interest payments, fund the warranty reserve and meet its other cash requirements. The Company currently expects that it will fund its future capital expenditures from operations and financing activities. The actual amount and timing of the Company's future capital requirements may differ materially from the Company's estimate depending on the demand for Trex and new market developments and opportunities.

Sources and Uses of Cash. The Company's cash used in operating activities for the 2009 quarter was $1.0 million compared to $17.3 million for the 2008 quarter. The Company generated operating cash flow before changes in operating assets and liabilities of $5.5 million in the 2009 quarter, compared to $16.4 million in the 2008 quarter. The decrease is attributable to a net decrease of $10.7 million in net income.

The Company's cash used in investing activities totaled $2.0 million in the 2009 quarter, compared to cash used in investing activities of $4.0 million in the 2008 quarter. In the 2009 quarter, the Company applied its expenditures primarily to normal capital expenditures, consisting of manufacturing equipment and ERP system upgrade.

The Company's cash used by financing activities was $0.7 million in the 2009 quarter compared to cash provided by financing activities of $21.3 million in the 2008 quarter. The Company's net borrowings from its revolving credit facility were $21.8 million in the 2008 quarter compared to no borrowings in the 2009 quarter. The use of these borrowings in 2008 to meet cash requirements was necessitated by the extended customer payment terms offered as incentives to distributors.

Indebtedness. At March 31, 2009, the Company's indebtedness, including the fair value of the interest rate swaps and excluding the unamortized debt discount, totaled $133.4 million and the annualized overall weighted average interest rate of such indebtedness, including the effect of the Company's interest rate swaps, was approximately 5.44%.

The Company's ability to borrow under its revolving credit facility is tied to a borrowing base that consists of certain receivables and inventories. At March 31, 2009, the Company had no borrowings outstanding under its revolving credit facility and $52.3 million of available borrowing capacity.

Debt Covenants. To remain in compliance with covenants contained within its debt agreements, the Company must maintain specified financial ratios based on its levels of debt, capital, net worth, fixed charges, and earnings before interest, taxes, depreciation and amortization. At March 31, 2009, the Company was in compliance with these covenants.

Capital Requirements.The Company made capital expenditures in the 2009 quarter totaling $2.0 million, primarily for manufacturing equipment and an ERP system upgrade. The Company currently estimates that its capital requirements in 2009 will be approximately $10 million.