Huttig Building Products, Inc. Announces Record First Quarter Net Earnings
First Quarter 2021 Highlights (as compared to prior year quarter):
–Net sales of $214.7 million compared to $203.0 million
–Gross margins increased to 21.3% compared to 20.1%
–Net earnings increased to $8.1 million compared to a loss of $8.9 million, which included a $9.5 million goodwill impairment charge
–Total liquidity increased to $85.4 million compared to $55.4 million
–Reduced indebtedness by $34.7 million
–Adjusted EBITDA increased to $10.5 million compared to $3.5 million
Huttig Building Products, Inc. (“Huttig” or the “Company”), a leading domestic distributor of millwork, building materials and wood products, reported financial results for the first quarter ended March 31, 2021.
“The continued execution of our strategy combined with strong demand in residential construction resulted in substantial gains in our first quarter operating results,” said Jon Vrabely, President and CEO of Huttig. “Our focus on profitable sales growth of our strategic product categories and disciplined management of the expense structure contributed to record first quarter operating results as a public company. Our performance would not be possible without the commitment and dedication of our entire team of associates. I am proud of the entire organization as our collective efforts have created a very bright future for our company and our stakeholders.”
Results of Operations
Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020
Net sales were $214.7 million in the first quarter of 2021, which were $11.7 million, or 5.8%, higher than the first quarter of 2020. The increase in net sales was primarily attributable to an increase in residential construction activity. Income growth in the first quarter of 2021 was moderated in comparison to the first quarter of 2020 by restructuring activities announced in the second quarter of last year, and by our 2020 product rationalization program. We also continued to experience supply chain disruption across several key product categories which mitigated revenue growth, although first quarter sales were favorably impacted by pricing for certain products we sell.
Millwork sales of $96.2 million in the first quarter were unchanged from the first quarter of last year. Millwork is the category most impacted by supply chain disruption and was also impacted by 2020 restructuring and product rationalization activities. Building products sales increased 10.0% in the first quarter of 2021 to $101.9 million, compared to $92.6 million in the first quarter of 2020, with first quarter 2021 sales benefitting from consistent high levels of demand for certain product lines within the category, including certain strategic product lines. The year-over-year sales growth in this category was mitigated by supply chain disruption and by product rationalization activities related to our objective of focusing on higher-margin, non-commoditized products. Wood product sales increased 16.9% in the first quarter of 2021 to $16.6 million, compared to $14.2 million in the first quarter of 2020.
Gross margin was $45.7 million in the first quarter of 2021, compared to $40.9 million in the first quarter of 2020. As a percentage of sales, gross margin was 21.3% in the first quarter of 2021, compared to 20.1% in the first quarter of 2020. Gross margins were favorably impacted by our continued focus on non-commoditized strategic product lines, which carry higher margins, as well as improved pricing management. The increase in our gross margin percentage from these actions was more pronounced considering we had a disproportionate increase in direct sales in the first quarter of 2021 as compared to 2020. These sales were at lower margins as compared to warehouse shipments.
Operating expenses decreased $2.1 million to $36.9 million in the first quarter of 2021, compared to $39.0 million in the first quarter of 2020. Personnel costs decreased $0.6 million, or 2.7%, reflecting workforce and other adjustments made to our cost structure. These cost reductions were partially offset by higher incentive compensation driven by improved operating results. Non-personnel costs decreased $1.5 million, or 8.9%. Operationally, first quarter discretionary spending such as travel and advertising was curtailed, due in part to the COVID-19 pandemic. Additionally, our bad debt provision improved in the first quarter of 2021 as pandemic-related disruption began to subside. Higher insurance costs for property and vehicles partially offset the reduction in operating costs. Overall, the cost structure was levered against higher sales volume. As a percentage of net sales, operating expenses were 17.2% in the first quarter of 2021 compared to 19.2% in the first quarter of 2020.
Net interest expense was $0.7 million in the first quarter of 2021 compared to $1.3 million in the first quarter of 2020. The lower expense in the first quarter of 2021 reflects both lower average debt balances and lower interest rates.
Income taxes were zero for the quarters ended both March 31, 2021 and 2020.
As a result of the foregoing factors, we reported net income of $8.1 million for the quarter ended March 31, 2021, compared to net loss of $8.9 million for the quarter ended March 31, 2020. Adjusted for the goodwill impairment charge in 2020, adjusted net income was $0.6 million.
Adjusted EBITDA was $10.5 million for the first quarter of 2021, compared to $3.5 million for the first quarter of 2020. Adjusted EBITDA is a non-GAAP measurement. See the below reconciliation of non-GAAP financial measures.
Balance Sheet & Liquidity
Cash used in operating activities was $16.5 million during the first three months of 2021, compared to cash usage of $14.5 million during the first three months of 2020. The increase in cash used in operating activities was primarily due to investment in inventories for the normal seasonal build for anticipated increases in sales activity. Inventory growth during the first three months of 2020 was curtailed by inventory reduction efforts commencing late in the quarter as a result of our actions around an anticipated decline in sales demand. The impact from the increased inventory investment in 2021 was substantially offset by higher cash flows from improved financial results in the first three months of 2021 compared to the first three months of 2020.
At March 31, 2021, we had total liquidity of $85.4 million, including excess committed borrowing availability of $81.0 million and cash of $4.4 million. At March 31, 2020, total liquidity was $55.4 million, including excess committed borrowing availability of $55.0 million and cash of $0.4 million.
For the complete Press Release, click here.
Huttig, currently in its 137th 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 25 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.
Source: Huttig Building Products, Inc.