First Quarter 2019 Highlights:
Huttig Building Products, Inc. (“Huttig” or the “Company”) (NASDAQ:
HBP), a leading domestic distributor of millwork, building
materials and wood products, today reported financial results for
the first quarter ended March 31, 2019.
“Our sales performance in the quarter was
consistent with our results in the prior year despite lower
residential construction activity and severe weather across the
majority of our service areas,” said Jon Vrabely, Huttig’s
President and Chief Executive Officer. “Sales from our strategic
growth initiatives increased nearly 14%, and while core product
sales declined, they declined at a lower rate than the market,
resulting in estimated combined growth above the market of more
than 4% in the quarter. Operationally, we are making progress in
improving the balance sheet, but need to expedite the improvement
in our margins and expense structure to achieve greater
profitability.”
SUMMARY RESULTS FOR FIRST QUARTER ENDED MARCH
31, 2019 |
(unaudited) |
(in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2019 |
|
2018 |
Net sales |
$ |
197.4 |
|
100.0 |
% |
|
$ |
198.0 |
|
100.0 |
% |
Gross margin |
|
37.4 |
|
18.9 |
% |
|
|
38.7 |
|
19.5 |
% |
Operating expenses |
|
39.6 |
|
20.1 |
% |
|
|
39.2 |
|
19.8 |
% |
Operating loss |
|
(2.2 |
) |
-1.1 |
% |
|
|
(0.5 |
) |
-0.3 |
% |
Loss
from continuing operations |
|
(3.2 |
) |
-1.6 |
% |
|
|
(0.5 |
) |
-0.3 |
% |
Net loss |
|
(3.2 |
) |
-1.6 |
% |
|
|
(0.5 |
) |
-0.3 |
% |
Loss
from continuing operations per share - basic and diluted |
$ |
(0.13 |
) |
|
|
$ |
(0.02 |
) |
|
Net loss per share -
basic and diluted |
$ |
(0.13 |
) |
|
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
Results of Operations
Three Months Ended March 31, 2019
Compared to Three Months Ended March 31, 2018
Net sales were $197.4 million in the first
quarter of 2019, which was $0.6 million, or 0.3%, lower than the
first quarter of 2018. The decrease in net sales was primarily
attributed to a modest softening in the markets we serve coupled
with adverse winter weather in much of the Midwest and Northern
Coastal regions which negatively impacted construction
activity.
Millwork product sales remained consistent in
the first quarter of 2019 as compared to the first quarter of 2018
at $95.3 million. Building products sales increased 2.9% in the
first quarter of 2019 to $88.1 million, compared to $85.5 million
in the first quarter of 2018, and wood product sales decreased
18.6% in the first quarter of 2019 to $14.0 million, compared to
$17.2 million in the first quarter of 2018. The proportionate
increase in sales of building products is generally consistent with
our strategic growth initiatives.
Gross margin was $37.4 million in the first
quarter of 2019, compared to $38.7 million in the first quarter of
2018. As a percentage of sales, gross margin was 18.9% in the first
quarter of 2019, compared to 19.5% in the first quarter of 2018.
The reduction in gross margin percent was primarily attributed to a
higher proportional increase in building product sales as compared
to other higher margin product categories as well as a competitive
pricing environment and incremental costs from customer
programs.
Operating expenses increased $0.4 million to
$39.6 million in the first quarter of 2019, compared to $39.2
million in the first quarter of 2018. Personnel costs decreased
approximately $0.2 million, primarily as a result of lower wages
from cost reductions offset in part by higher medical costs.
Non-personnel costs increased approximately $0.6 million, primarily
as a result of higher equipment and facility costs and an increase
in contract hauling costs. As a percentage of sales, operating
expenses were 20.1% in the first quarter of 2019, compared to 19.8%
in the first quarter of 2018.
Net interest expense was $1.7 million in the
first quarter of 2019 compared to $1.1 million in the first quarter
of 2018. The increase was primarily due to higher average
outstanding borrowings on our credit facility as well as higher
interest rates in the first quarter of 2019 compared to the first
quarter of 2018.
Income tax benefit was $0.7 million for the
quarter ended March 31, 2019, as compared to $1.1 million for the
first quarter of 2018.
As a result of the foregoing factors, we
reported a loss from continuing operations of $3.2 million for the
quarter ended March 31, 2019, compared to a loss from continuing
operations of $0.5 million for the quarter ended March 31,
2018.
Adjusted EBITDA was $(0.3) million for the first
quarter of 2019 compared to $1.4 million for the first quarter of
2018. Adjusted EBITDA is a non-GAAP measurement. See below
reconciliation of Non-GAAP Financial Measures.
Balance Sheet &
Liquidity
Cash used in continuing operating activities was
$5.6 million for the quarter ended March 31, 2019, compared to cash
used of $39.8 million a year ago. At March 31, 2019, the Company
had $53.0 million of total liquidity including excess committed
borrowing availability of $52.1 million and cash of $0.9 million.
Total liquidity was $45.2 million at March 31, 2018 including
excess committed borrowing availability of $43.9 million and cash
of $1.3 million.
Conference Call
Huttig Building Products, Inc. will host a
conference call Tuesday, April 30, 2019 at 10:00 a.m. Central Time.
Participants can listen to the call live via webcast by going to
the investor portion of Huttig’s website at www.huttig.com.
Participants can also access the live conference call via telephone
at (866) 238-1641 or (213) 660-0927 (international). The conference
ID for this call is 8979029.
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 United States and foreign
laws, regulations and policies; the cost of environmental
compliance, including actual expenses we may incur to resolve
proceedings we are involved in arising out of the formerly owned
facility in Montana; any limitations on our ability to utilize our
deferred tax assets to reduce future taxable income and tax
liabilities; our ability to comply with, and the restrictive effect
of, the financial covenant applicable under our credit facility;
the loss of a significant customer; deterioration of our customers’
creditworthiness or our inability to forecast such deteriorations;
commodity prices; dumping duties; tariffs; risks associated with
our private brands; termination of key supplier relationships;
risks of international suppliers; competition with existing or new
industry participants; goodwill impairment; the seasonality of our
operations; significant uninsured claims; federal and state
transportation regulations; fuel cost increases; our failure to
attract and retain key personnel; deterioration in our relationship
with our unionized employees, including work stoppages or other
disputes; funding requirements for multi-employer pension plans for
our unionized employees; product liability claims and other legal
proceedings; the integration of any business we acquire and the
liabilities of such businesses; information technology system
failure, network disruptions, cybersecurity attacks and breaches in
data security; and those set forth under Part I, Item 1A –
“Risk Factors” in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2018. These factors may not constitute
all factors that could cause actual results to differ from those
discussed in any forward-looking statement. Accordingly,
forward-looking statements should not be relied upon as a predictor
of actual results.
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 |
|
March 31, |
|
2019 |
|
2018 |
Net loss |
$ |
(3.2 |
) |
|
$ |
(0.5 |
) |
Interest expense,
net |
|
1.7 |
|
|
|
1.1 |
|
Benefit from income
taxes |
|
(0.7 |
) |
|
|
(1.1 |
) |
Depreciation and
amortization |
|
1.4 |
|
|
|
1.3 |
|
Stock compensation
expense |
|
0.5 |
|
|
|
0.6 |
|
Adjusted
EBITDA |
$ |
(0.3 |
) |
|
$ |
1.4 |
|
|
|
|
|
|
HUTTIG BUILDING PRODUCTS, INC. AND
SUBSIDIARY |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(unaudited) |
(In Millions, Except Per Share
Data) |
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Net sales |
$ |
197.4 |
|
|
$ |
198.0 |
|
Cost of
sales |
|
160.0 |
|
|
|
159.3 |
|
Gross
margin |
|
37.4 |
|
|
|
38.7 |
|
Operating expenses |
|
39.6 |
|
|
|
39.2 |
|
Operating
loss |
|
(2.2 |
) |
|
|
(0.5 |
) |
Interest
expense, net |
|
1.7 |
|
|
|
1.1 |
|
Loss
from continuing operations before income taxes |
|
(3.9 |
) |
|
|
(1.6 |
) |
Income
tax benefit |
|
(0.7 |
) |
|
|
(1.1 |
) |
Loss
from continuing operations |
|
(3.2 |
) |
|
|
(0.5 |
) |
Loss
from discontinued operations, net of taxes |
|
— |
|
|
|
— |
|
Net
loss |
$ |
(3.2 |
) |
|
$ |
(0.5 |
) |
|
|
|
|
Loss
from continuing operations per share - basic and diluted |
$ |
(0.13 |
) |
|
$ |
(0.02 |
) |
Loss
from discontinued operations per share - basic and
diluted |
$ |
— |
|
|
$ |
— |
|
Net loss
per share - basic and diluted |
$ |
(0.13 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
Weighted
average shares outstanding: |
|
|
|
Basic and
diluted shares outstanding |
|
25.3 |
|
|
|
25.1 |
|
|
|
|
|
|
HUTTIG BUILDING PRODUCTS, INC. AND
SUBSIDIARY |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(unaudited) |
(In Millions) |
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
March 31, |
|
2019 |
|
2018 |
|
2018 |
ASSETS |
|
|
|
|
|
CURRENT
ASSETS: |
|
|
|
|
|
Cash and
equivalents |
$ |
0.9 |
|
$ |
0.8 |
|
$ |
1.3 |
Trade
accounts receivable, net |
|
89.2 |
|
|
69.0 |
|
|
100.9 |
Inventories, net |
|
149.2 |
|
|
134.0 |
|
|
139.3 |
Other
current assets |
|
12.3 |
|
|
14.7 |
|
|
10.7 |
Total
current assets |
|
251.6 |
|
|
218.5 |
|
|
252.2 |
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT: |
|
|
|
|
|
Land |
|
5.0 |
|
|
5.0 |
|
|
5.0 |
Buildings
and improvements |
|
32.4 |
|
|
32.3 |
|
|
31.2 |
Machinery
and equipment |
|
56.2 |
|
|
56.0 |
|
|
51.8 |
Gross
property, plant and equipment |
|
93.6 |
|
|
93.3 |
|
|
88.0 |
Less
accumulated depreciation |
|
61.0 |
|
|
60.0 |
|
|
57.3 |
Property,
plant and equipment, net |
|
32.6 |
|
|
33.3 |
|
|
30.7 |
|
|
|
|
|
|
OTHER
ASSETS: |
|
|
|
|
|
Operating
lease right-of-use assets |
|
35.2 |
|
|
— |
|
|
— |
Goodwill |
|
9.5 |
|
|
9.5 |
|
|
9.5 |
Deferred
income taxes |
|
11.9 |
|
|
11.1 |
|
|
10.8 |
Other |
|
5.4 |
|
|
5.6 |
|
|
6.4 |
Total
other assets |
|
62.0 |
|
|
26.2 |
|
|
26.7 |
TOTAL
ASSETS |
$ |
346.2 |
|
$ |
278.0 |
|
$ |
309.6 |
|
|
|
|
|
|
|
HUTTIG BUILDING PRODUCTS, INC. AND
SUBSIDIARY |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(unaudited) |
(In Millions, Except Share Data) |
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
March 31, |
|
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 |
|
9.1 |
|
|
— |
|
|
— |
Trade
accounts payable |
|
86.6 |
|
|
51.5 |
|
|
80.5 |
Accrued
compensation |
|
2.1 |
|
|
5.0 |
|
|
2.5 |
Other
accrued liabilities |
|
14.7 |
|
|
18.0 |
|
|
11.5 |
Total
current liabilities |
|
114.2 |
|
|
76.3 |
|
|
95.8 |
NON-CURRENT LIABILITIES: |
|
|
|
|
|
Long-term
debt, less current maturities |
|
143.6 |
|
|
137.1 |
|
|
145.4 |
Operating
lease right-of-use liabilities, less current maturities |
|
26.6 |
|
|
— |
|
|
— |
Other
non-current liabilities |
|
2.6 |
|
|
2.6 |
|
|
2.3 |
Total
non-current liabilities |
|
172.8 |
|
|
139.7 |
|
|
147.7 |
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY: |
|
|
|
|
|
Preferred
shares: $.01 par (5,000,000 shares authorized) |
|
— |
|
|
— |
|
|
— |
Common
shares: $.01 par (75,000,000 shares authorized:
26,548,886; 25,993,441; and 26,070,616 shares issued at March
31, 2019, December 31, 2018 and March 31, 2018, respectively) |
|
0.3 |
|
|
0.3 |
|
|
0.3 |
Additional paid-in capital |
|
46.4 |
|
|
46.0 |
|
|
44.2 |
Retained
earnings |
|
12.5 |
|
|
15.7 |
|
|
21.6 |
Total
shareholders’ equity |
|
59.2 |
|
|
62.0 |
|
|
66.1 |
|
|
|
|
|
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ |
346.2 |
|
$ |
278.0 |
|
$ |
309.6 |
|
|
|
|
|
|
|
HUTTIG BUILDING PRODUCTS, INC. AND
SUBSIDIARY |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(unaudited) |
(In
Millions) |
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2019 |
|
2018 |
Cash
Flows From Operating Activities: |
|
|
|
Net Loss |
$ |
(3.2 |
) |
|
$ |
(0.5 |
) |
Adjustments to reconcile net loss to net cash used
in operating activities: |
|
|
|
Depreciation and amortization |
|
1.4 |
|
|
|
1.3 |
|
Non-cash
interest expense |
|
0.1 |
|
|
|
0.1 |
|
Stock-based compensation |
|
0.5 |
|
|
|
0.6 |
|
Deferred
income taxes |
|
(0.8 |
) |
|
|
(1.1 |
) |
Changes
in operating assets and liabilities: |
|
|
|
Trade
accounts receivable |
|
(20.2 |
) |
|
|
(34.1 |
) |
Inventories, net |
|
(15.2 |
) |
|
|
(27.5 |
) |
Trade
accounts payable |
|
35.1 |
|
|
|
29.5 |
|
Other |
|
(3.3 |
) |
|
|
(8.1 |
) |
Cash used
in continuing operating activities |
|
(5.6 |
) |
|
|
(39.8 |
) |
Cash used
in discontinued operating activities |
|
(0.1 |
) |
|
|
(0.3 |
) |
Total
cash used in operating activities |
|
(5.7 |
) |
|
|
(40.1 |
) |
Cash
Flows From Investing Activities: |
|
|
|
Capital
expenditures |
|
(0.4 |
) |
|
|
(1.6 |
) |
Total
cash used in investing activities |
|
(0.4 |
) |
|
|
(1.6 |
) |
Cash
Flows From Financing Activities: |
|
|
|
Borrowings of debt, net |
|
6.3 |
|
|
|
43.1 |
|
Repurchase of shares to satisfy employee tax withholdings |
|
(0.1 |
) |
|
|
(0.4 |
) |
Total
cash provided by financing activities |
|
6.2 |
|
|
|
42.7 |
|
Net
increase in cash and equivalents |
|
0.1 |
|
|
|
1.0 |
|
Cash and
equivalents, beginning of period |
|
0.8 |
|
|
|
0.3 |
|
Cash and
equivalents, end of period |
$ |
0.9 |
|
|
$ |
1.3 |
|
|
|
|
|
For more information, contact:
investor@huttig.com
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