TREX CO INC Goodwill & Intangibles Disclosure
The carrying amount of goodwill at December 31, 2025, and December 31, 2024, was $14.2 million for Trex. For fiscal years 2025, 2024 and 2023, the Company completed its annual impairment test of goodwill for its reporting unit utilizing the qualitative assessment and concluded it was not more likely than not that the fair value of the Company's sole reporting unit was less than its carrying amount.
The Company’s intangible assets, purchased in 2018, 2024, and 2025, consist of domain names and internal use software. Intangible asset amounts were determined based on the estimated economics of the asset and are amortized over the estimated useful lives on a straight-line basis over 15 years for domain names and 10 years for internal use software related to the Company's ERP and other platform tools, which approximates the pattern in which the economic benefits are expected to be received. The Company evaluates the recoverability of intangible assets periodically and considers events or circumstances that may warrant revised estimates of useful lives or that may indicate an impairment.
The following table summarizes the Company's intangible assets as of December 31 (in thousands):
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2025 |
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2024 |
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Gross Carrying Amount |
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Accumulated Amortization |
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Net |
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Gross Carrying Amount |
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Accumulated Amortization |
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Net |
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Intangible Assets Subject to Amortization: |
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Domain Names |
|
$ |
6,287 |
|
$ |
(3,178 |
) |
$ |
3,109 |
|
|
$ |
6,287 |
|
$ |
(2,759 |
) |
$ |
3,528 |
|
Internal Use Software |
|
|
14,449 |
|
|
(244 |
) |
|
14,205 |
|
|
|
4,304 |
|
|
— |
|
|
4,304 |
|
Total |
|
$ |
20,736 |
|
$ |
(3,422 |
) |
$ |
17,314 |
|
|
$ |
10,591 |
|
$ |
(2,759 |
) |
$ |
7,832 |
|
Intangible asset amortization expense was $0.7 million, $0.4 million, and $0.4 million for the year ended December 31, 2025, December 31, 2024, and December 31, 2023. The following table summarizes the expected amortization expense for intangible assets for the years 2026 through 2030 and thereafter (in thousands):
2026 |
|
$ |
1,678 |
|
2027 |
|
|
1,864 |
|
2028 |
|
|
1,864 |
|
2029 |
|
|
1,864 |
|
2030 |
|
|
1,864 |
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Thereafter |
|
|
8,180 |
|
Total |
|
$ |
17,314 |
|
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.