Washington, D.C. 20549
Huttig Building Products, Inc. Savings and Profit Sharing Plan
St. Louis, MO 63141
23.1 Consent of Brown Smith Wallace, LLP, Independent Registered Public Accounting Firm
EIN #43-0334550 Plan No. 006
N
o
tes to F
i
nanc
i
al S
t
ateme
n
ts
December
31,
2018
and 2017
(1)
|
Descriptio
n of the Plan
|
The following description of the Huttig Building Products, Inc. Savings and Profit Sharing Plan (the “Plan”) is provided for financial statement purposes only. Participants should refer to the Plan document for more complete information.
The Plan is a defined contribution plan established by Huttig Building Products, Inc. (“Huttig” or the “Company”) under the provisions of Section 401(a) of the Internal Revenue Code (“IRC”), which includes a qualified cash or deferred salary arrangement as described in Section 401(k) of the IRC, for the benefit of eligible employees of the Company. The Plan was established December 16, 1999 to offer the employees of the Company a means of saving funds, on a pre-tax basis or after-tax basis, for retirement. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974. Participation is voluntary.
Full-time employees are eligible to participate in the Plan beginning the first day of the calendar month following completion of 30 days of regular service. The Plan covers all employees of the Company or any other corporation affiliated with the Company, which has adopted the Plan, who have completed 30 days of service, as defined by the Plan, and are not leased employees. Each employee may become a participant of the Plan on the first day of any calendar month coinciding with, or following, the fulfillment of the eligibility requirements.
The Plan is administered by executives of the Company. Prudential Trust Company serves as the Plan Trustee (the “Trustee”) and The Prudential Investment Company of America serves as Plan Recordkeeper and Custodian.
Plan participants may contribute a percentage of their annual compensation, up to the maximum allowable under Section 402 (g) of the IRC. Contributions may be made prior to Federal and certain other income taxes pursuant to Section 401(k) of the IRC or on an after-tax basis. Plan participants must elect out of the minimum annual contribution. Eligible employees are automatically enrolled at 4% with an automatic deferral percentage increase of 1% each Plan year up to a maximum of 10% of compensation. Employees have an option to elect out of the automatic enrollment and automatic increase. Participants attaining the age of 50 before the end of the year are eligible to make catch-up contributions of an extra $6,000. The Plan allows participants to make Roth contributions to the Plan.
Company matching contributions are discretionary as determined by the Board of Directors. The Company makes matching contributions of 50% of each employee’s elective contribution, not to exceed 6% of the employee’s compensation. The Company made matching contributions of $1,811,567 and $1,560,632 in 2018 and 2017, respectively.
The Company may also make a profit-sharing contribution on a discretionary basis on behalf of all eligible participants employed on the last day of the Plan year, as defined by the Plan, whether or not they make an elective matching contribution for the Plan year. Profit-sharing contributions are based on the Company’s profitability and are allocated based on a participant’s yearly eligible compensation as a percentage of total eligible compensation for that particular year. These contributions are also subject to certain limitations. There were no discretionary profit sharing contributions remitted to the Plan in 2018 or 2017.
Participants may elect to place their deferred or non-deferred contributions into the following investments: Huttig Common Stock, Prudential Guaranteed Income Fund, and various mutual funds. As a result of the spin-off of the Company by Crane Co. in 1999, all assets resulting from such transfer held in Crane Common Stock are held as a separate investment fund; however, participants are not permitted to direct any contributions to the Crane Common Stock fund after the effective date of the Plan.
|
(d)
|
Vesting and Forfeitures
|
Participants are always 100% vested in the value of their contributions and the earnings thereon. Vesting of Company contributions and the earnings thereon is determined based on the participant’s years of vesting service. A participant is vested 20% after each year of service and becomes fully vested after five years of service or if employment terminates by reason of death, permanent disability, or retirement at age 65. A terminated participant forfeits non-vested Company contributions on the one year anniversary of the participant’s termination.
5
HUTTIG BUILDING
PRODUCTS, INC.
SAVINGS
AND PROFIT SHA
R
ING PLAN
N
o
tes to F
i
nanc
i
al S
t
ateme
n
ts
December
31,
2018
and 2017
Any amounts forfeited are first used for payment of employer matching contributions and then to pay Plan expenses. The amounts forfeited were $
136,432
and $
54,985
in 201
8
and 201
7
, respectively.
|
(e
)
|
Payments of Benefits
|
Amounts in a participant’s account and the vested portion of a participant’s employer contributions are distributed upon retirement, death, disability, or other termination of employment. Distributions from the Huttig Common Stock fund are made in cash.
|
(f)
|
Notes Receivable – Participants
|
Participants may borrow funds from their accounts up to 50% of the total vested balance but not more than $50,000, less the participant’s highest outstanding loan balance for the previous 12-month period. The minimum loan amount is $1,000. Loans are repayable through payroll deductions over 1-10 years. At December 31, 2018, the interest rates on participants’ loans ranged from 4.25% – 6.25%. The loans are secured by the balance in the participant’s account and bear interest at the initial lending rate for the life of the loan. Loans taken out in 2018 had initial lending rates of prime of 4.50% to 5.25% plus 1%, or 5.50% to 6.25%. Participant loans are measured at the unpaid principal balance plus any accrued unpaid interest. The outstanding balance of loans to participants was $1,139,045 and $787,117 as of December 31, 2018 and 2017, respectively. Interest income on the loan fund is included as interest income in the participant’s fund accounts based on their elected loan allocation.
|
(g)
|
Plan Participant Accounts
|
Individual accounts are maintained for each Plan participant to reflect the Plan participant’s share of the Plan’s income, the Company’s contribution, and the Plan participant’s contribution.
(2
)
|
Summary of Significant Accounting Policies
|
|
(a)
|
Basis of Presentation
|
The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions during the reporting period. Actual results could differ from those estimates.
|
(c)
|
Administrative Expenses
|
The assets of the Plan shall be used to pay benefits as provided in the Plan and, to the extent not paid directly by the Company, to pay the reasonable expenses of administering the Plan. Administrative expenses were $151,524 and $118,457 for the years ended December 31, 2018 and 2017, respectively, recorded in “net appreciation in fair value of investments” on the statements of changes in net assets available for benefits.
|
(d)
|
Valuation of Investments and Income Recognition
|
Investments are reported at fair value (except for fully benefit-responsive investment contracts, which are reported at contract value). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See note 3 for discussion of fair value measurements.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation and depreciation include the Plan’s gains and losses on investments bought and sold as well as held during the year.
6
HUTTIG BUILDING
PRODUCTS, INC.
SAVINGS
AND PROFIT SHA
R
ING PLAN
N
o
tes to F
i
nanc
i
al S
t
ateme
n
ts
December
31,
2018
and 2017
Benefit payments to participants are recorded upon distribution.
(3)
|
Fair Value Measurements
|
FASB ASC 820,
Fair Value Measurements and Disclosures
, establishes a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 inputs consist of unadjusted quoted prices in active markets for identical assets and have the highest priority; Level 2 inputs consist of quoted market prices in active markets for similar type assets; and Level 3 consist of unobservable inputs that have the lowest priority. The Plan uses appropriate techniques based on the available inputs to measure the fair value of its investments. When available, the Plan measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. There have been no changes in methodologies used at December 31, 2018 or 2017. The Plan had no assets measured at fair value on a nonrecurring basis.
Level 1 Fair Value Measurements
The fair value of mutual funds is based on quoted net asset values of the shares held by the Plan at year-end. The fair value of common stock is based on quoted market prices.
Level 2 Fair Value Measurements
Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Plan has no Level 2 investments.
Level 3 Fair Value Measurements
The fair value is based upon significant unobservable inputs, including the reporting entity’s own assumptions in determining the fair value of investments. The Plan has no Level 3 investments.
Recurring Measurements
The following table presents the fair value measurements of assets and liabilities recognized in the accompanying statements of net assets available for benefits measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2018 and 2017:
|
|
|
|
|
|
Fair Value Measurements Using:
|
|
|
|
|
|
|
|
Quoted Prices
in Active
Markets for
|
|
|
Other
Significant
Observable
|
|
|
Significant
Unobservable
|
|
December 31, 2018
|
|
Fair Value
|
|
|
Identical Assets
(Level 1)
|
|
|
Inputs
(Level 2)
|
|
|
Inputs
(Level 3)
|
|
Mutual Funds
|
|
$
|
48,689,438
|
|
|
$
|
48,689,438
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Huttig Common Stock
|
|
|
2,655,094
|
|
|
|
2,655,094
|
|
|
|
—
|
|
|
|
—
|
|
Crane Common Stock
|
|
|
1,413,237
|
|
|
|
1,413,237
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
52,757,769
|
|
|
$
|
52,757,769
|
|
|
$
|
—
|
|
|
$
|
—
|
|
7
HUTTIG BUILDING
PRODUCTS, INC.
SAVINGS
AND PROFIT SHA
R
ING PLAN
N
o
tes to F
i
nanc
i
al S
t
ateme
n
ts
December
31,
2018
and 2017
|
|
|
|
|
|
Fair Value Measurements Using:
|
|
|
|
|
|
|
|
Quoted Prices
in Active
Markets for
|
|
|
Other
Significant
Observable
|
|
|
Significant
Unobservable
|
|
December 31, 2017
|
|
Fair Value
|
|
|
Identical Assets
(Level 1)
|
|
|
Inputs
(Level 2)
|
|
|
Inputs
(Level 3)
|
|
Mutual Funds
|
|
$
|
51,542,517
|
|
|
$
|
51,542,517
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Huttig Common Stock
|
|
|
8,752,087
|
|
|
|
8,752,087
|
|
|
|
—
|
|
|
|
—
|
|
Crane Common Stock
|
|
|
2,103,934
|
|
|
|
2,103,934
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
62,398,538
|
|
|
$
|
62,398,538
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(4)
|
Fully Benefit-Responsive Investment Contact at Contract Value
|
The Guaranteed Income Fund (“GIF”) is an insurance company-issued general-account-backed group annuity with no maturity date. This contract meets the fully benefit-responsive investment contract criteria and therefore is reported at contract value. Contract value is the relevant measure for fully benefit-responsive investment contracts because this is the amount received by participants if they were to initiate permitted transactions under the terms of the Plan. Contract value represents contributions made under the contract, plus earnings, less participant withdrawals, and administrative expenses.
The contract issuer is contractually obligated to repay the principal and interest at a specified interest rate that is guaranteed to the Plan. The crediting rate is based on a formula established by the contract issuer but may not be less than 1.50%. The crediting rate is reviewed on a semi-annual basis for resetting. The contract cannot be terminated before the scheduled maturity date.
The Plan’s ability to receive amounts due in accordance with the fully benefit-responsive investment contract is dependent on the third party issuer’s ability to meet their financial obligations. The issuer’s ability to meet their contractual obligations may be affected by future economic and regulatory developments.
Generally there were no events that could limit the ability of the Plan to transact at contract value paid within 90 days or in rare circumstances, contract value paid over time.
There are no events that allow the issuer to terminate the contract and which require the Plan to settle at an amount different than contract value paid either within 90 days or over time.
The Plan Administrator has concluded that as of December 31, 2018 and 2017, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
The Plan operates under a non-standardized adoption agreement in connection with a prototype retirement plan and trust/custodial document sponsored by The Prudential Investment Company of America. This prototype plan document has been filed with the appropriate agency and received a favorable opinion letter from the Internal Revenue Service on April 29, 2014 stating the plan, as then designed, was in compliance with the applicable Internal Revenue Code. The Plan itself has not obtained or requested a determination letter. However, the Plan Administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC and that the Plan was qualified and the related trust was tax exempt as of the financial statement date.
(6)
|
Distribution of Assets Upon Termination of the Plan
|
Huttig reserves the right to terminate the Plan, in whole or in part, at any time. In the event of termination, all amounts credited to the participant accounts will become 100% vested. If the Plan is terminated at any time or contributions are completely discontinued and Huttig determines that the trust shall be terminated, all accounts shall be revalued as if the termination date was a valuation date and such accounts shall be distributed to participants. If the Plan is terminated or contributions completely discontinued, but Huttig determines that the trust shall be continued pursuant to the terms of the trust agreement, participants or the Company shall make no
8
HUTTIG BUILDING
PRODUCTS, INC.
SAVINGS
AND PROFIT SHA
R
ING PLAN
N
o
tes to F
i
nanc
i
al S
t
ateme
n
ts
December
31,
2018
and 2017
further contributions, but the trust shall be administered as though the Plan were otherwise in e
ffect. There are no intentions to terminate the Plan at this time.
(7)
|
Related Party Transactions
|
Certain Plan investments are shares of mutual funds and the guaranteed income fund that are managed by Prudential Trust Company. Prudential Trust Company is the Trustee, as defined by the Plan, and therefore, these transactions qualify as party-in-interest transactions.
Additionally, Plan investments include shares of Huttig Building Products, Inc. common stock. Huttig Building Products, Inc. is the Plan Sponsor, as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. These party-in-interest transactions are allowable under ERISA regulations. The Plan has investments in Huttig Common Stock as of December 31, 2018 and 2017 of $2,655,094 and $8,752,087, respectively. The participant can reallocate Huttig Common Stock at any time.
As of December 31, 2018 and 2017, the Plan held approximately 1,475,052 and 1,316,103 shares, respectively, of Huttig Common Stock. Total outstanding Huttig Common Stock as of December 31, 2018, was approximately 26 million shares.
During the years ended December 31, 2018 and 2017, the Plan had the following transactions involving Huttig Common Stock:
|
|
2018
|
|
|
2017
|
|
Shares purchased
|
|
|
288,508
|
|
|
|
106,132
|
|
Shares sold
|
|
|
130,405
|
|
|
|
420,003
|
|
Cost of shares purchased
|
|
$
|
1,517,825
|
|
|
$
|
703,497
|
|
Cost of shares sold
|
|
$
|
533,841
|
|
|
$
|
1,036,868
|
|
Net proceeds from shares sold
|
|
$
|
657,724
|
|
|
$
|
2,825,229
|
|
(8)
|
Risks and Uncertainties
|
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the value of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.
9
HUTTIG BUILDING
PRODUCTS, INC.
SAVINGS
AND PROFIT SHA
R
ING PLAN
Sc
h
e
d
u
le H, Line 4i – Sche
d
u
le of Asse
t
s
He
l
d (at e
n
d of yea
r
)
EIN #43-03345
50 Plan No. 006
December 31, 2018
(a)
|
(b) Identity of Issuer
|
(c) Description
|
|
(d) Cost
|
|
(e) Current Value
|
|
|
Prudential Guaranteed Income Fund*
|
Unallocated Investment Contract
|
|
**
|
|
$
|
12,266,486
|
|
|
Prudential Jennison Growth Z*
|
Mutual Fund
|
|
**
|
|
|
8,974,334
|
|
|
BlackRock Equity Dividend Instl
|
Mutual Fund
|
|
**
|
|
|
7,617,945
|
|
|
American Funds EuroPacific Growth A
|
Mutual Fund
|
|
**
|
|
|
5,969,024
|
|
|
Metropolitan West Total Return Bd M
|
Mutual Fund
|
|
**
|
|
|
3,842,202
|
|
|
Vanguard 500 Index Admiral
|
Mutual Fund
|
|
**
|
|
|
3,609,795
|
|
|
T Rowe Price Mid-Cap Growth
|
Mutual Fund
|
|
**
|
|
|
3,226,624
|
|
|
JPMorgan Mid Cap Value L
|
Mutual Fund
|
|
**
|
|
|
2,859,289
|
|
|
Huttig Common Stock*
|
Company Stock
|
|
**
|
|
|
2,655,094
|
|
|
American Balanced Fund
|
Mutual Fund
|
|
**
|
|
|
2,651,138
|
|
|
JPMorgan Diversified I
|
Mutual Fund
|
|
**
|
|
|
2,600,383
|
|
|
T Rowe Price QM US Small-Cap Gr Equity
|
Mutual Fund
|
|
**
|
|
|
2,004,758
|
|
|
Templeton Global Bond Fund A
|
Mutual Fund
|
|
**
|
|
|
1,711,398
|
|
|
Undiscovered Managers Behavioral Val L
|
Mutual Fund
|
|
**
|
|
|
1,691,225
|
|
|
Virtus Vontobel Emerging Market Opps I
|
Mutual Fund
|
|
**
|
|
|
1,564,517
|
|
|
Crane Company Common Stock
|
Company Stock
|
|
**
|
|
|
1,413,237
|
|
|
Vanguard Total Intl Stock Index Admiral
|
Mutual Fund
|
|
**
|
|
|
140,842
|
|
|
Vanguard Mid Cap Index Admiral
|
Mutual Fund
|
|
**
|
|
|
137,106
|
|
|
Vanguard Small Cap Index Admiral
|
Mutual Fund
|
|
**
|
|
|
88,858
|
|
|
Notes receivable – participants*
|
Interest rates 4.25% to 6.25%;
maturing dates vary through 2028
|
|
|
|
$
|
1,139,045
|
|
|
|
|
|
|
|
$
|
66,163,300
|
|
*
|
Represents a party-in-interest investment allowable under ERISA regulations.
|
**
|
Cost omitted for participant-directed investments
|
See accompanying report of independent registered public accounting firm
10
EXHIBIT
INDEX
11
SIGNA
TURES
The Plan.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Trustees (or other persons who administer the employee benefit plan) have duly caused this Annual Report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
HUTTIG BUILDING PRODUCTS, INC.
SAVINGS AND PROFIT SHARING PLAN
|
|
|
|
HUTTIG BUILDING PRODUCTS, INC.
|
|
(Plan Administrator)
|
|
|
Date: June 26, 2019
|
By:
|
/s/ Douglas D. Loucks
|
|
Name:
|
Douglas D. Loucks
|
|
Title:
|
Corporate Controller and Treasurer
|
12
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