Huttig Building Products, Inc. Announces Second Quarter 2019 Results
Second Quarter 2019 Highlights:
- Net sales of
$218.5 million - Operating income increased 57% to
$3.3 million - Operating cash needs reduced by
$15.6 million - Successfully completed a major enterprise resource planning system upgrade
“Our sales are slightly behind last year’s pace due to some market softening caused in part by inclement weather across many parts of the country in the first half of the year,” said
Three Months Ended June 30, | |||||||||||
2019 | 2018 | ||||||||||
Net sales | $ | 218.5 | 100.0 | % | $ | 223.4 | 100.0 | % | |||
Gross margin | 44.3 | 20.3 | % | 45.1 | 20.2 | % | |||||
Operating expenses | 41.0 | 18.8 | % | 43.0 | 19.2 | % | |||||
Operating income | 3.3 | 1.5 | % | 2.1 | 0.9 | % | |||||
Income (loss) from continuing operations | (10.3 | ) | -4.7 | % | 0.2 | 0.1 | % | ||||
Net income (loss) | (10.3 | ) | -4.7 | % | 0.2 | 0.1 | % | ||||
Income (loss) from continuing operations per share - basic and diluted | $ | (0.40 | ) | $ | 0.01 | ||||||
Net loss per share - basic and diluted | $ | (0.40 | ) | $ | 0.01 | ||||||
Six Months Ended June 30, | |||||||||||
2019 | 2018 | ||||||||||
Net sales | $ | 415.9 | 100.0 | % | $ | 421.4 | 100.0 | % | |||
Gross margin | 81.7 | 19.6 | % | 83.8 | 19.9 | % | |||||
Operating expenses | 80.6 | 19.4 | % | 82.2 | 19.5 | % | |||||
Operating income | 1.1 | 0.3 | % | 1.6 | 0.4 | % | |||||
Loss from continuing operations | (13.5 | ) | -3.2 | % | (0.3 | ) | -0.1 | % | |||
Net loss | (13.5 | ) | -3.2 | % | (0.3 | ) | -0.1 | % | |||
Loss from continuing operations per share - basic and diluted | $ | (0.53 | ) | $ | (0.01 | ) | |||||
Net loss per share - basic and diluted | $ | (0.53 | ) | $ | (0.01 | ) | |||||
Results of Operations
Three Months Ended
Net sales were
Millwork product sales decreased 3.9% in the second quarter of 2019 to
Gross margin was
Operating expenses decreased
Net interest expense was
Income tax expense was
As a result of the foregoing factors, we reported a loss from continuing operations of
Adjusted EBITDA was
Six Months Ended
Net sales were
Millwork product sales decreased 2.0% in the first six months of 2019 to
Gross margin was
Operating expenses decreased
Net interest expense was
Income tax expense was
As a result of the foregoing factors, we reported a loss from continuing operations of
Adjusted EBITDA was
Balance Sheet & Liquidity
Cash used in continuing operating activities was
Conference Call
About Huttig
Huttig, currently in its 135th year of business, is one of the largest domestic distributors of millwork, building materials and wood products used principally in new residential construction and in-home improvement, remodeling and repair work. Huttig distributes its products through 27 distribution centers serving 41 states. Huttig's wholesale distribution centers sell principally to building materials dealers, national buying groups, home centers and industrial users, including makers of manufactured homes.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “believe,” “estimate,” “project” or similar expressions may identify forward-looking statements, although not all forward-looking statements contain such words. Statements made in this press release looking forward in time, including, but not limited to, statements regarding our current views with respect to financial performance, future growth in the housing market, distribution channels, sales, favorable supplier relationships, inventory levels, the ability to meet customer needs, enhanced competitive posture, strategic initiatives, absence of material financial impact from litigation or contingencies, including environmental proceedings, are included pursuant to the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995.
These statements present management’s expectations, beliefs, plans and objectives regarding our future business and financial performance. We cannot guarantee that any forward-looking statements will be realized or achieved. These forward-looking statements are based on current projections, estimates, assumptions and judgments, and involve known and unknown risks and uncertainties. We disclaim any obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise.
There are a number of factors, some of which are beyond our control that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. These factors include, but are not limited to, the strength of construction, home improvement and remodeling markets and the recovery of the homebuilding industry to levels consistent with the historical annual average; the cyclical nature of our industry; the successful implementation of our growth initiatives; the effects of increased inventories to support our growth initiatives and the impact if levels become excessive; the uncertainties resulting from changes to
Non-GAAP Financial Measures
Huttig supplements its reporting of net income with the non-GAAP measurement of Adjusted EBITDA. This supplemental information should not be considered in isolation or as a substitute for GAAP measures.
Huttig defines Adjusted EBITDA as net income adjusted for interest, income taxes, depreciation and amortization and other items as listed in the table below.
Huttig presents Adjusted EBITDA because it is a primary measure used by management, and by similar companies in the industry, to evaluate operating performance and Huttig believes it enhances investors’ overall understanding of the financial performance of our business. Adjusted EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net income as a measure of operating performance. Huttig compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors affecting the business. Because not all companies use identical calculations, Huttig’s presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
Adjusted EBITDA
The following table presents a reconciliation of net income, the most directly comparable financial measure under GAAP, to Adjusted EBITDA for the periods presented (in millions):
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||
Net income (loss) | $ | (10.3 | ) | $ | 0.2 | $ | (13.5 | ) | $ | (0.3 | ) | |||
Interest expense, net | 1.8 | 1.7 | 3.5 | 2.8 | ||||||||||
Benefit from income taxes | 11.8 | 0.2 | 11.1 | (0.9 | ) | |||||||||
Depreciation and amortization | 1.3 | 1.3 | 2.7 | 2.6 | ||||||||||
Stock compensation expense | 0.6 | 0.6 | 1.1 | 1.2 | ||||||||||
Other expenses (1) | - | 2.5 | - | 3.3 | ||||||||||
Adjusted EBITDA | $ | 5.2 | $ | 6.5 | $ | 4.9 | $ | 8.7 | ||||||
1 Primarily expenses associated with litigation and settlement of litigation. | ||||||||||||||
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARY | ||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
(unaudited) | ||||||||||||||
(In Millions, Except Per Share Data) | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||
Net sales | $ | 218.5 | $ | 223.4 | $ | 415.9 | $ | 421.4 | ||||||
Cost of sales | 174.2 | 178.3 | 334.2 | 337.6 | ||||||||||
Gross margin | 44.3 | 45.1 | 81.7 | 83.8 | ||||||||||
Operating expenses | 41.0 | 43.0 | 80.6 | 82.2 | ||||||||||
Operating income | 3.3 | 2.1 | 1.1 | 1.6 | ||||||||||
Interest expense, net | 1.8 | 1.7 | 3.5 | 2.8 | ||||||||||
Income (loss) from operations before income taxes | 1.5 | 0.4 | (2.4 | ) | (1.2 | ) | ||||||||
Income tax expense (benefit) | 11.8 | 0.2 | 11.1 | (0.9 | ) | |||||||||
Income (loss) from continuing operations | (10.3 | ) | 0.2 | (13.5 | ) | (0.3 | ) | |||||||
Income (loss) from discontinued operations, net of taxes | — | — | — | — | ||||||||||
Net income (loss) | $ | (10.3 | ) | $ | 0.2 | $ | (13.5 | ) | $ | (0.3 | ) | |||
Income (loss) from continuing operations per share - basic and diluted | $ | (0.40 | ) | $ | 0.01 | $ | (0.53 | ) | $ | (0.01 | ) | |||
Income (loss) from discontinued operations per share - basic and diluted |
$ | — | $ | — | $ | — | $ | — | ||||||
Net income (loss) per share - basic and diluted | $ | (0.40 | ) | $ | 0.01 | $ | (0.53 | ) | $ | (0.01 | ) | |||
Weighted average shares outstanding: | ||||||||||||||
Basic and diluted shares outstanding | 25.5 | 25.2 | 25.4 | 25.2 | ||||||||||
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARY | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(unaudited) | ||||||||
(In Millions) | ||||||||
June 30, | December 31, | June 30, | ||||||
2019 | 2018 | 2018 | ||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and equivalents | $ | 1.1 | $ | 0.8 | $ | 1.6 | ||
Trade accounts receivable, net | 96.7 | 69.0 | 118.5 | |||||
Inventories, net | 141.7 | 134.0 | 147.4 | |||||
Other current assets | 13.4 | 14.7 | 12.1 | |||||
Total current assets | 252.9 | 218.5 | 279.6 | |||||
PROPERTY, PLANT AND EQUIPMENT: | ||||||||
Land | 5.0 | 5.0 | 5.0 | |||||
Buildings and improvements | 32.5 | 32.3 | 31.8 | |||||
Machinery and equipment | 56.5 | 56.0 | 53.3 | |||||
Gross property, plant and equipment | 94.0 | 93.3 | 90.1 | |||||
Less accumulated depreciation | 62.0 | 60.0 | 58.0 | |||||
Property, plant and equipment, net | 32.0 | 33.3 | 32.1 | |||||
OTHER ASSETS: | ||||||||
Operating lease right-of-use assets | 34.2 | — | — | |||||
Goodwill | 9.5 | 9.5 | 9.5 | |||||
Deferred income taxes | — | 11.1 | 10.6 | |||||
Other | 5.5 | 5.6 | 6.4 | |||||
Total other assets | 49.2 | 26.2 | 26.5 | |||||
TOTAL ASSETS | $ | 334.1 | $ | 278.0 | $ | 338.2 | ||
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARY | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(unaudited) | ||||||||
(In Millions, Except Share Data) | ||||||||
June 30, | December 31, | June 30, | ||||||
2019 | 2018 | 2018 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Current maturities of long-term debt | $ | 1.7 | $ | 1.8 | $ | 1.3 | ||
Current maturities of operating lease right-of-use assets | 9.2 | — | — | |||||
Trade accounts payable | 69.6 | 51.5 | 68.4 | |||||
Accrued compensation | 4.4 | 5.0 | 4.7 | |||||
Other accrued liabilities | 13.1 | 18.0 | 16.4 | |||||
Total current liabilities | 98.0 | 76.3 | 90.8 | |||||
NON-CURRENT LIABILITIES: | ||||||||
Long-term debt, less current maturities | 158.6 | 137.1 | 178.2 | |||||
Operating lease right-of-use liabilities, less current maturities | 25.5 | — | — | |||||
Other non-current liabilities | 2.5 | 2.6 | 2.2 | |||||
Total non-current liabilities | 186.6 | 139.7 | 180.4 | |||||
SHAREHOLDERS’ EQUITY: | ||||||||
Preferred shares: $.01 par (5,000,000 shares authorized) | — | — | — | |||||
Common shares: $.01 par (75,000,000 shares authorized: 26,542,639; 25,993,441; and 26,066,782 shares issued at June 30, 2019, December 31, 2018 and June 30, 2018, respectively) |
0.3 | 0.3 | 0.3 | |||||
Additional paid-in capital | 47.0 | 46.0 | 44.9 | |||||
Retained earnings | 2.2 | 15.7 | 21.8 | |||||
Total shareholders’ equity | 49.5 | 62.0 | 67.0 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 334.1 | $ | 278.0 | $ | 338.2 | ||
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARY | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
(unaudited) | |||||||||||||||
(In Millions) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Cash Flows From Operating Activities: | |||||||||||||||
Net income (loss) | $ | (10.3 | ) | $ | 0.2 | $ | (13.5 | ) | $ | (0.3 | ) | ||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|||||||||||||||
Depreciation and amortization | 1.3 | 1.3 | 2.7 | 2.6 | |||||||||||
Non-cash interest expense | — | — | 0.1 | 0.1 | |||||||||||
Stock-based compensation | 0.6 | 0.6 | 1.1 | 1.2 | |||||||||||
Deferred income taxes | 11.8 | 0.2 | 11.0 | (0.9 | ) | ||||||||||
Changes in operating assets and liabilities: | |||||||||||||||
Trade accounts receivable | (7.5 | ) | (17.7 | ) | (27.7 | ) | (51.7 | ) | |||||||
Inventories, net | 7.5 | (8.0 | ) | (7.7 | ) | (35.5 | ) | ||||||||
Trade accounts payable | (17.0 | ) | (12.1 | ) | 18.1 | 17.4 | |||||||||
Other | (0.6 | ) | 5.7 | (3.9 | ) | (2.5 | ) | ||||||||
Cash used in continuing operating activities | (14.2 | ) | (29.8 | ) | (19.8 | ) | (69.6 | ) | |||||||
Cash used in discontinued operating activities | (0.1 | ) | (0.3 | ) | (0.2 | ) | (0.6 | ) | |||||||
Total cash used in operating activities | (14.3 | ) | (30.1 | ) | (20.0 | ) | (70.2 | ) | |||||||
Cash Flows From Investing Activities: | |||||||||||||||
Capital expenditures | (0.4 | ) | (2.3 | ) | (0.8 | ) | (3.9 | ) | |||||||
Total cash used in investing activities | (0.4 | ) | (2.3 | ) | (0.8 | ) | (3.9 | ) | |||||||
Cash Flows From Financing Activities: | |||||||||||||||
Borrowings of debt, net | 14.9 | 32.7 | 21.2 | 75.8 | |||||||||||
Repurchase of shares to satisfy employee tax withholdings | — | — | (0.1 | ) | (0.4 | ) | |||||||||
Total cash provided by financing activities | 14.9 | 32.7 | 21.1 | 75.4 | |||||||||||
Net increase in cash and equivalents | 0.2 | 0.3 | 0.3 | 1.3 | |||||||||||
Cash and equivalents, beginning of period | 0.9 | 1.3 | 0.8 | 0.3 | |||||||||||
Cash and equivalents, end of period | $ | 1.1 | $ | 1.6 | $ | 1.1 | $ | 1.6 | |||||||
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Source: Huttig Building Products, Inc.