Trex Company Inc. reported today that net sales at the maker of decks and railings jumped 26.3% in the second quarter from the year earlier to hit $115.5 million, and it forecast another 16.3% year-over-year jump in sales during this quarter. But Trex's financial report also revealed the company's net income shrank 23.7% in the second quarter from the year-earlier period to $5.6 million, in large part because it took $11.4 million worth of non-cash charges.

Gross profit as a share of sales slipped to 26.6 from 31.1% in April-June 2009. Selling, general, and administrative (SG&A) expenses climbed about $3.8 million from a year ago, thus depressing Trex's operating income to $9.5 million from $11.1 million.

The Winchester, Va-based company non-cash charges consisted of a $9 million increase in its warranty reserve to cover claims involving decking made at its Nevada plant before mid-2006 and a $2.4 million charge is related to its joint venture for recycling waste polyethylene in Spain.

The extra warranty money counts against Trex's cost of sales, while the Spanish charge is booked under SG&A. Take away those charges and the company's gross profit in the quarter would have improved to 34.4% while its net income would have jumped 54.6% from a year earlier to total $11.4 million.

"Our sales were even stronger than expected in the second quarter," chairman, president, and chief executive officer Ronald W. Kaplan said in a statement. "The additional manufacturing lines we retrofitted to produce ... Trex Transcend helped us meet market demand while our complementary Transcend railing system ... also drove sales. In fact, our railing sales hit an all-time record in the month of June. At the same time, the enhancements we made to Trex's traditional decking platform late last year continued to be well received, and sales of TrexTrim gained momentum during the quarter.

Kaplan added that he expects "robust sales" in the third quarter totaling $72 million. That's 16.3% above the $61.9 million in sales in 2009's third quarter.