-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A/V58yrYsV3ZVqMnMqL+ZxxlPdoU/dNhyQM2vrKvC//gI9LJ84v+ErHbHPGLyv9j wTGYXeiQvfLB0oCSdvMWAA== 0000950134-02-002113.txt : 20020415 0000950134-02-002113.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950134-02-002113 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUTTIG BUILDING PRODUCTS INC CENTRAL INDEX KEY: 0001093082 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-LUMBER & OTHER CONSTRUCTION MATERIALS [5030] IRS NUMBER: 430334550 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14982 FILM NUMBER: 02575404 BUSINESS ADDRESS: STREET 1: 14500 S. OUTER FORTY RD STREET 2: SUITE 400 CITY: CHESTERFIELD STATE: MO ZIP: 63006-1041 BUSINESS PHONE: 3142162600 MAIL ADDRESS: STREET 1: PO BOX 1041 CITY: CHESTERFIELD STATE: MO ZIP: 63006-1041 10-K 1 c67952e10-k.txt FORM 10-K FOR PERIOD ENDED DECEMBER 31, 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO ------------- ------------- COMMISSION FILE NUMBER 1-14982 HUTTIG BUILDING PRODUCTS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 43-0334550 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) LAKEVIEW CENTER, SUITE 400 14500 SOUTH OUTER FORTY ROAD CHESTERFIELD, MISSOURI 63017 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE) (314) 216-2600 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: (Name of each exchange on (Title of each class) which registered) COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the Common Stock held by non-affiliates of the registrant as of February 25, 2002 was approximately $114,138,751. The number of shares of Common Stock outstanding on February 25, 2002 was 19,679,095 shares. Documents incorporated by reference: Portions of the Definitive Proxy Statement for the 2002 Annual Meeting of Shareholders - Part III PART I ITEM 1--BUSINESS GENERAL Huttig Building Products, Inc., originally incorporated in 1913, is one of the largest domestic distributors of building materials used principally in new residential construction and in home improvement, remodeling and repair work. We distribute our products through 59 distribution centers serving 46 states, principally to building materials dealers, who, in turn, supply the end-user, and directly to professional builders and large contractors, home centers, national buying groups and industrial and manufactured housing builders. We produce softwood mouldings at our American Pine Products manufacturing facility in Prineville, Oregon. We strive to increase shareholder value by pursuing the following business strategies: o expanding product lines and adding higher margin products; o focusing on providing efficient, high quality customer service through the deployment of information technology and implementation of industry best practices; o simplifying our business processes to make it easier for our customers and vendors to do business with us; o leveraging our size to negotiate better pricing, delivery and service terms with our suppliers; o achieving operating efficiencies by consolidating administrative systems across the company; and o pursuing opportunities to expand our product lines, service and delivery capabilities and geographic reach through acquisitions. We believe we have the product offerings, warehouse and builder support facilities, personnel, systems infrastructure and financial and competitive resources necessary for continued business success. A number of factors, however, may affect our future performance, including those discussed under "Cautionary Statement" beginning on page 20. On December 16, 1999, Crane Co. distributed to its shareholders all of the Company's outstanding common stock, par value $.01 per share. On this date, Huttig also completed the acquisition of Rugby USA, Inc., a distributor of building materials, in exchange for 6,546,424 newly issued shares of Huttig common stock. In this Annual Report on Form 10-K, when we refer to "Huttig," the "company" or "we," we mean Huttig Building Products, Inc. and its subsidiaries and predecessors, including Rugby, unless the context indicates otherwise. INDUSTRY CHARACTERISTICS AND TRENDS The home building materials distribution industry is characterized by its substantial size and dependence on the cyclical and seasonal home building industry, its highly fragmented ownership structure and an increasingly competitive environment. Residential construction activity is closely linked to a variety of factors directly affected by general economic conditions, including job and household formation, interest rates, housing prices, availability of mortgage financing, regional demographics and consumer confidence. We monitor the issuance of new housing starts on a national and regional basis and new mortgage applications as important indicators of our potential future sales volume. New housing starts in the United States in 2001 totaled approximately 1.6 million, including 1.3 million single family residences, based on data from the U.S. Census Bureau. Approximately 62% of single family new construction in 2001 occurred in markets that we serve. According to the U.S. Department of Commerce, total spending on new residential construction in 2001 was $278 billion. We estimate that aggregate expenditures for residential repair and remodeling were an additional $169 billion and believe that sales of windows, doors and other millwork accounted for approximately $17 billion in 2001. Prior to the 1970s, building materials were sold in both rural and metropolitan markets largely by local dealers, such as lumberyards and hardware stores. These dealers, who generally purchased their products from wholesale distributors, sold building products directly to homeowners, contractors and homebuilders. In the late 1970s and 1980s, in response, The Home Depot and Lowe's began to alter this distribution channel, particularly in metropolitan markets. They began displacing local dealers by marketing a broad range of competitively priced building materials to the homeowner and small home improvement contractor. At the same time, some building materials manufacturers such as Georgia Pacific and Weyerhauser began selling their products directly to home center chains and to local dealers as well. In response, most wholesale distributors have been diversifying their businesses by seeking to sell Page 2 of 42 directly to large contractors and homebuilders in selected markets and by providing home centers with fill-in and specialty products. Also, as large homebuilding companies seek to streamline the new residential construction process, building materials distributors have increasing opportunities to provide higher margin turnkey products and services. The increasingly competitive environment faced by dealers also has prompted a trend toward industry consolidation that we believe offers significant opportunities to a company like Huttig. Many distributors in the building materials industry are small, privately-held companies that generally lack the purchasing power of a larger entity and may also lack the broad lines of products and sophisticated inventory management and control systems typically needed to operate a multi-branch distribution network. These characteristics are also driving the consolidation trend in favor of companies like us that operate nationally and have significant infrastructure in place to accommodate the needs of customers across geographic regions and beyond the local market. PRODUCTS Each of our distribution centers carries a variety of products that vary by location. Our principal products are: o doors, including interior and exterior doors and pre-hung door units; o specialty building materials, such as housewrap, stair and floor systems, roofing and insulation; o lumber and other commodity building products; o mouldings, including door jambs, door and window frames, and decorative ceiling, chair and floor mouldings; and o windows. The following table sets forth information regarding the percentage of our net sales represented by our principal product categories sold during each of the last three fiscal years. While the table below generally indicates the mix of our sales by product category, changes in the prices of commodity wood products and in unit volumes sold typically change our product mix on a year-to-year basis. Our product mix in 1999 is not necessarily indicative of the mix that would result from including a full year of Rugby's sales.
2001 2000 1999 ---- ---- ---- Doors 36% 34% 34% Specialty Building Materials 26% 26% 21% Lumber and Other Commodity Products 23% 18% 15% Mouldings 9% 10% 13% Windows 6% 12% 17%
DOORS - Net sales of doors totaled $336.2 million in 2001 versus $367.7 million and $272.2 million in 2000 and 1999, respectively. We sell wood, steel and composite doors from various branded manufacturers such as Therma-Tru(R) and Masonite International(R), as well as provide value-priced unbranded products. The pre-hanging of a door within its frame is a value-added service that we provide, allowing an installer to quickly place the unit in a house opening. We also assemble many exterior doors with added sidelites and transoms. To meet the increasing demand for pre-hung doors, we invested $3.0 million in state-of-the-art equipment during 2000 and 1999 which allowed us to increase our capacity by approximately 30%. SPECIALTY BUILDING MATERIALS - Net sales of specialty building materials were $248.9 million in 2001 versus $ 276.0 million and $169.8 million in 2000 and 1999, respectively. Included in this category are products differentiated through branding or value-added characteristics. Branded products include Typar(R) housewrap, L. J. Smith Stair Systems(R), Simpson Strong-Tie(R) connectors and Owens Corning(R) roofing and insulation. Also included are trusses, wall panels and engineered wood products, such as floor systems. LUMBER AND OTHER COMMODITY PRODUCTS - Net sales of lumber and other commodity building products were $213.2 million in 2001 versus $188.2 million and $119.9 million in 2000 and 1999, respectively. Growth of lumber sales has resulted primarily from additional value-added services and the sale of higher priced product. Through strategic acquisitions in 1997 and 1998, we have significantly expanded our lumber business and our ability to sell directly to homebuilders. We continue to pursue a strategy of providing builders with the capability to purchase a house's framing and millwork package of products from one source and have each component delivered when needed. Other commodity building products include drywall, metal vents, siding, nails and other miscellaneous hardware. MOULDINGS - Net sales of mouldings were $82.6 million in 2001 versus $111.1 million and $99.7 million in 2000 and 1999, respectively. Profitability of this highly competitive, commodity-priced product depends upon efficient plant operations, rapid inventory turnover and quick reaction to changing market conditions. Mouldings are a necessary complementary product line to doors and windows as part of a house's millwork package. Page 3 of 42 WINDOWS - Net sales of windows amounted to $64.2 million in 2001 versus $129.9 million and $138.7 million in 2000 and 1999, respectively. Our windows include wood, vinyl-clad, vinyl and aluminum windows from branded manufacturers such as Caradco(R) and Weather Shield(R) as well as unbranded products. In October 2000, Andersen(R) terminated our distribution agreement and we discontinued sales of Andersen(R) trademarked products. Andersen(R) windows, which we sold to dealers through 12 of our distribution centers, accounted for approximately $63.8 million and $79.7 million of our window sales in 2000 and 1999, respectively. Excluding Andersen(R) from the product table above, windows would have accounted for 6% and 7% of total net sales in 2000 and 1999, respectively. We are working to expand the depth of our offerings of windows to include a wider range of quality and price to better serve our customers. CUSTOMERS We currently serve over 10,000 customers and no single customer accounted for more than approximately 5% of our sales in 2001. Building materials dealers represent our single largest customer group. Despite the advent of the home center chains and the trend toward consolidation of dealers and increased direct participation in wholesale distribution by some building materials manufacturers, we believe that the wholesale distribution business continues to provide opportunities for increased sales. We are targeting home centers for sales of fill-in and specialty products. In addition, some manufacturers may seek to outsource the marketing function for their products, a role that we, as a large, financially stable distributor, are well positioned to fill. Opportunities also exist for large distributors with the necessary capabilities to perform increasing amounts of services such as pre-hanging doors, thereby enabling us to enhance the value-added component of our business. The percentage of the 2001, 2000, and 1999 revenues attributable to various categories of customers are as follows:
2001 2000 1999 ---- ---- ---- Dealers 68% 66% 62% Home Centers and Buying Groups 13% 12% 15% Builders and Contractors 12% 13% 13% Industrial and Manufactured Housing 7% 9% 10%
SALES AND MARKETING In 2001, we restructured our organization from four regions with each having both sales and operations responsibilities to separate sales and operations organizations and added the position of Vice President of Sales and Marketing. We believe our new sales organization has allowed us to expand our focus on sales and customer service and better positions us to pursue opportunities for sales growth. Each of our distribution centers is focused on meeting local market needs and offering competitive prices. Inventory levels, merchandising and pricing are tailored to local markets. Our single-platform information system provides each distribution center manager with real-time pricing, inventory availability and margin analysis to facilitate this strategy. We also support our distribution centers with centralized product management, credit and financial controls, training and marketing programs and human resources expertise. Our marketing programs center on fostering strong customer relationships and providing superior service. This strategy is furthered by the high level of technical knowledge and expertise of our personnel. We have focused marketing efforts primarily on the residential new housing and remodeling markets, with slightly less effort directed toward the commercial and industrial markets. Certain of our suppliers advertise to the trade media and directly to the individual consumer through nationwide print and other media. Among our marketing initiatives for 2002 are the development of a national product catalog, which we believe will provide us with another key tool to meet our customers' needs. Additionally, we are rolling out our "Partners for Profit" national campaign, which will focus on converting customers to utilizing our door hanging operations across the country, exclusively, in consideration for preferred merchandising, stocking and pricing programs for those customers. Our distribution center sales organization consists of outside field sales personnel who serve customers on-site and who report directly to Field Sales Managers, who report to their respective Regional Sales Managers. Our outside sales force is supported by inside customer service representatives at each branch and is compensated by commissions based on return on sales or total margin on sales. Page 4 of 42 We also employ product specialists to drive sales of our branded products, including Therma Tru(R) and Masonite(R) doors, Weather Shield(R) windows and Typar(R) housewraps through the distribution channel by focusing on sales to the end user builder, architect and designer. PURCHASING We purchase our products from more than 100 different suppliers and are not materially dependent upon any single supplier. We believe that alternative sources of supply are readily available for substantially all of the products we offer, but we do believe that developing and maintaining key supplier relationships are important for us to obtain favorable pricing and service terms. We have developed an effective coordinated purchasing program designed to allow us to lower costs through volume purchases, and we believe that we have greater purchasing power than many of our smaller, local independent competitors. With the implementation of a single, company-wide information system platform in 2001, we are now positioned to better track and maintain appropriate levels of products at each of our distribution facilities. We negotiate with our major vendors on a company-wide basis to obtain favorable pricing, volume discounts and other beneficial purchase terms. A majority of our purchases are made from suppliers offering payment, discount and volume purchase programs. Distribution center managers are responsible for inventory selection and ordering on terms negotiated centrally. This approach allows the distribution centers to remain responsive to local market demand, while still maximizing purchasing leverage through volume orders. Distribution center managers are also responsible for inventory management at their respective locations. We are party to distribution agreements with certain vendors on an exclusive or non-exclusive basis, depending on the product and the territory involved. These distributorships generally are terminable at any time by either party, in some cases without notice, and otherwise on notice ranging up to 60 days. COMPETITION Our competition varies by product line, customer classification and geographic market. We compete with many local and regional building product distributors and, in certain markets and product categories, with national building product distributors and dealers. We also compete with major building materials suppliers with national distribution capability, such as Georgia-Pacific, Weyerhauser and other product manufacturers that engage in direct sales. We also act as a distributor of products for some of these manufacturers. We also sell products to large home center chains such as The Home Depot and Lowe's and, to a limited extent in certain markets, we compete with them for business from smaller contractors. Competition from such large home center chains for the business of larger contractors may increase in the future. The principal factors on which we compete in the wholesale distribution business are: o availability of product; o service and delivery capabilities; o ability to assist with problem-solving; o customer relationships; and o breadth of product offerings. Also, financial stability and geographic coverage are important to manufacturers in choosing distributors for their products. In the builder support business, our target customers generally select building products distributors on the basis of service and delivery, ability to assist with problem-solving, customer relationships and breadth of product offerings. Our relative size and financial position are advantageous in obtaining and retaining distributorships for important products. This relative size also permits us to attract experienced sales and service personnel and gives us the resources to provide company-wide sales, product and service training programs. By working closely with our customers and utilizing our information technology, our branches are able to maintain appropriate inventory levels and are well-positioned to deliver completed orders on time. SEASONALITY AND WORKING CAPITAL In the first quarter and, to a lesser extent, the fourth quarter, our results of operations are typically adversely affected by winter construction cycles and weather patterns in colder climates, as the level of activity in both the new construction and home improvement markets decreases. The effects of winter weather patterns on our business are generally not experienced in residential Page 5 of 42 construction activity during the same period in the deep South, Southwest and Southern California markets in which we participate. Our working capital requirements are generally greatest in the second and third quarters, which reflects the seasonal nature of our business. The second and third quarters are also typically our strongest operating quarters, largely due to more favorable weather throughout many of our markets compared to the first and fourth quarters. We typically generate cash from working capital reductions in the first and fourth quarters of the year. We also maintain significant inventories to meet rapid delivery requirements of our customers and to assure us of favorable pricing, delivery and service terms with our suppliers. At December 31, 2001, inventories constituted approximately 28.5% of our total assets. We also closely monitor operating expenses and inventory levels during seasonally affected periods and, to the extent possible, control variable operating costs to minimize seasonal effects on our profitability. CREDIT Huttig's corporate management establishes an overall credit policy for sales to customers and is responsible for all credit decisions. Our credit policies, together with daily computer monitoring of customer balances, have resulted in average bad debt expense of approximately 0.2% of net sales during the last three years. In addition to credit we extend to customers, we accept third-party credit cards such as MasterCard, Visa and American Express. Approximately 98% of our sales in 2001 were made to customers to whom we had extended credit for those sales. The remaining 2% of sales in 2001 included cash purchases, and purchases made with third-party credit cards. BACKLOG Our customers generally order products on an as-needed basis. As a result, virtually all product shipments in a given fiscal quarter result from orders received in that quarter. Consequently, order backlog represents only a very small percentage of the product sales that we anticipate in a given quarter and is not indicative of actual sales for any future period. TRADENAMES Historically, Huttig has operated under various tradenames in the markets we serve, retaining the name of an acquired business for a period of time to preserve local identification. To capitalize on our national presence, we converted our branch operations to the primary tradename "Huttig Building Products." Some branches continue to use historical tradenames as secondary tradenames to maintain local identity. Huttig has no material patents, trademarks, licenses, franchises, or concessions other than the Huttig Building Products(R) name and Huttig(R) logos, which are registered trademarks. ENVIRONMENTAL MATTERS We are subject to federal, state and local environmental protection laws and regulations. We believe that we are in compliance, or are taking action aimed at assuring compliance, with applicable environmental protection laws and regulations. However, there can be no assurance that future environmental liabilities will not have a material adverse effect on our financial condition or results of operations. We have been identified as a potentially responsible party in connection with the cleanup of contamination at a formerly owned property in Montana. See Part I, Item 3 - "Legal Proceedings." In addition, some of our current and former distribution centers are located in areas of current or former industrial activity where environmental contamination may have occurred, and for which we, among others, could be held responsible. We currently believe that there are no material environmental liabilities at any of our distribution center locations. EMPLOYEES As of December 31, 2001, we employed 2,503 persons, of which approximately 12% were represented by unions. We have not experienced any strikes or other work interruptions in recent years and have maintained generally favorable relations with our employees. Page 6 of 42 The following table shows the approximate breakdown by job function of our employees: Distribution Centers 1,746 Manufacturing 335 Field Sales 309 Corporate Administration 113 -------- Total 2,503 ========
ITEM 2--PROPERTIES Our corporate headquarters are located at 14500 South Outer Forty Road, Chesterfield, Missouri 63017, in leased facilities. Our manufacturing facility for softwood mouldings is a 280,000-square foot facility that we own and is located in Prineville, Oregon. We lease approximately half of our distribution centers and own the rest. Warehouse space at distribution centers aggregates approximately 4.2 million square feet. Distribution centers range in size from 12,000 square feet to 160,000 square feet. The types of facilities at these centers vary by location, from traditional wholesale distribution warehouses, which may have particular value-added service capabilities such as pre-hung door operations, to traditional lumberyards and builder support facilities with broad product offerings and capabilities for a wide range of value-added services. We believe that our locations are well maintained and adequate for their purposes. The following table sets forth the geographic location of our distribution centers as of December 31, 2001:
NUMBER OF REGION LOCATIONS ------ --------- Mid-Atlantic 8 Midwest 24 Northeast 7 Northwest 7 Southeast 9 Southwest 4 ------ Total 59 ======
ITEM 3--LEGAL PROCEEDINGS We are involved in various lawsuits, claims and proceedings arising in the ordinary course of business. While the outcome of any lawsuits, claims or proceedings cannot be predicted, we do not believe that the disposition of any pending matters will have a material adverse effect on our financial condition, results of operations or liquidity. We have been identified as a potentially responsible party in connection with the cleanup of contamination at a formerly owned property in Montana. We are voluntarily remediating this property under the oversight of the Montana Department of Environmental Quality ("DEQ"). When the state agency issues its final risk assessment of this property, we will conduct a feasibility study to evaluate alternatives for cleanup, including continuation of our remediation measures already in place. The DEQ then will select a final remedy, publish a record of decision and negotiate with us for an administrative order of consent on the implementation of the final remedy. We currently believe that this process may take several more years to complete and intend to continue monitoring and remediating the site, evaluating cleanup alternatives and reporting regularly to the DEQ during this interim period. Environmental costs expensed in the income statement during fiscal 2001, 2000, and 1999 were $0.8 million, $0.2 million and $1.2 million, respectively related to this site. Based on our experience to date in remediating this site, we do not believe that the scope of remediation that the DEQ ultimately determines will have a materially adverse effect on our results of operations or financial condition. Until the DEQ selects a final remedy, however, we can give no assurance as to the scope or cost to us of the final remediation order. We are one of many defendants in three pending actions filed in California state court by three separate claimants against manufacturers, building materials distributors and retailers, and other defendants by individuals alleging that they have suffered personal injury as a result of exposure to asbestos-containing products. The plaintiffs in these cases seek unspecified damages and allege that they were exposed to asbestos contained in products distributed by a business acquired in 1994 by Rugby Building Products, Inc. We believe we are entitled to indemnification of any costs arising from these cases from The Rugby Group Limited, our principal stockholder, under the Page 7 of 42 terms of the share exchange agreement pursuant to which we acquired the stock of Rugby USA, Inc., the parent of Rugby Building Products, Inc., in December 1999. Rugby Group has denied any obligation to defend or indemnify us for any of these cases. While we believe that the factual allegations and legal claims asserted against us in the complaints are without merit, there can be no assurance at this time that we will recover any costs relating to these claims from insurance carriers or from Rugby Group or that such costs will not have a material adverse effect on our business or financial condition. ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to our shareholders during the fourth quarter of 2001. EXECUTIVE OFFICERS OF THE COMPANY Huttig executive officers as of February 25, 2002 and their respective ages and positions are set forth below:
NAME AGE POSITION ---- --- -------- Barry J. Kulpa 54 President and Chief Executive Officer Thomas S. McHugh 37 Vice President, Finance and Chief Financial Officer George M. Dickens, Jr. 39 Vice President, Sales and Marketing John M. Mullin 38 Vice President, Operations Nick H. Varsam 40 Vice President, General Counsel and Corporate Secretary
Set forth below are the positions held with the company and other principal occupations and employment of Huttig's executive officers. Mr. Dickens serves in his capacity pursuant to the terms of an employment agreement with the company. Barry J. Kulpa has served as the company's President and Chief Executive Officer since October 1997. Prior to joining Huttig, Mr. Kulpa served as Senior Vice President and Chief Operating Officer of Dal-Tile International a manufacturer and distributor of ceramic tile from 1994 to 1997. Thomas S. McHugh was named Vice President, Finance and Chief Financial Officer in January 2002. Prior to that, Mr. McHugh served as Corporate Controller and Treasurer since April 2001 and Corporate Controller since May 2000, when he joined Huttig. From 1993 until joining Huttig, Mr. McHugh worked at XTRA Corporation, an international lessor of transportation equipment, most recently as Corporate Controller. George M. Dickens, Jr. has served as Vice President, Sales and Marketing since September 2001. From 1999 to 2001, Mr. Dickens was a Regional Vice President of the company. From 1997 until 1999, Mr. Dickens was Vice President of Rugby Building Products Millwork Division. From 1996 to 1997, Mr. Dickens was the President of Rugby's Midwest Division. John M. Mullin has served as Vice President, Operations since January 2001. Mr. Mullin joined Huttig in July 1999 as Director of Operations. From 1997 to 1999, Mr. Mullin was Director of Logistics for Crane Supply, an industrial plumbing distributor and a division of Crane Co. From 1995 to 1997, Mr. Mullin was Logistics Manager for Canwel Distribution, a building products distributor. Nick H. Varsam has served as Vice President, General Counsel and Corporate Secretary since May 2001. From January 1999 to May 2001, Mr. Varsam was a partner with Bryan Cave LLP, a leading international law firm based in St. Louis, where he focused on securities matters and mergers and acquisitions. From September 1996 to December 1998, Mr. Varsam was an associate with Bryan Cave LLP. PART II ITEM 5--MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is listed on the New York Stock Exchange and trades under the symbol "HBP." At February 25, 2002, there were approximately 3,111 holders of record of our common stock. The following table sets forth the range of high and low sale prices of the common stock on the New York Stock Exchange Composite Tape during each fiscal quarter of the fiscal years ended December 31, 2001 and 2000: Page 8 of 42
HIGH LOW ----- ----- 2001 First Quarter $5.00 $3.87 Second Quarter 5.10 3.90 Third Quarter 6.50 5.00 Fourth Quarter 6.24 4.60 2000 First Quarter 5.00 3.88 Second Quarter 5.00 4.13 Third Quarter 5.00 4.00 Fourth Quarter 4.94 3.88
We do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future in order to make cash generated available for use in operations, possible acquisitions and debt reduction. Our loan agreements contain covenants that restrict the payment of dividends and limits the amount of our common stock that we can repurchase. Under the most restrictive provisions of our secured revolving credit facility, the amount available to repurchase our own common stock was limited to $2.6 million at December 31, 2001. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." RECENT SALES OF UNREGISTERED SECURITIES On January 22, 2001, the Board of Directors approved the grant of options to purchase 20,000 shares of common stock to each of Messrs. E. Thayer Bigelow, Jr., Richard S. Forte, Dorsey R. Gardner and James L. L. Tullis, directors of Huttig. The exercise price of these options is $4.34, which is the average of the high and low prices of Huttig's common stock on the New York Stock Exchange for the 10 consecutive trading days ending on January 22, 2001. The options expire on January 22, 2011 and become exercisable for up to 50% of the shares on January 22, 2002, 75% on January 22, 2003 and 100% on January 22, 2004. These option grants were made in reliance upon the exemption from the registration requirements of the Securities Act of 1933 under Section 4(2) of the Securities Act. ITEM 6--SELECTED CONSOLIDATED FINANCIAL DATA The following table summarizes certain selected financial data of Huttig for each of the five years in the period ended December 31, 2001. The information contained in the following table may not necessarily be indicative of our past or future performance as a separate stand-alone company. Such historical data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and notes thereto included elsewhere in this report. Page 9 of 42
YEAR ENDED DECEMBER 31, ------------------------------------------------------------- 2001 2000 1999 1998 1997 --------- ---------- --------- --------- --------- (IN MILLIONS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Net sales $ 945.1 $ 1,072.9 $ 800.3 $ 707.5 $ 625.5 Depreciation and amortization 7.7 7.3 6.6 5.6 4.4 Operating profit 21.0 34.0 22.8 28.6 19.8 Interest expense, net 10.0 11.1 7.8 6.9 4.5 Income before taxes and extraordinary item 9.2 22.9 14.4 21.8 14.8 Provision for income taxes 3.5 8.5 5.9 8.2 5.8 Net income 5.7 13.6 8.5 13.6 9.1 Net income per share (basic and diluted) 0.28 0.66 0.59 1.17 0.65 BALANCE SHEET DATA (AT END OF YEAR): Total assets 246.3 249.2 301.3 218.5 154.0 Debt - bank and capital leases 73.6 81.1 122.1 1.4 1.7 Note payable - Crane -- -- -- 93.9 67.1 Total shareholders' equity 79.1 81.0 67.3 41.5 27.8
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Huttig is one of the largest domestic distributors of building materials used principally in new residential construction and in home improvement, remodeling and repair work. We distribute our products through 59 distribution centers serving 46 states. Our wholesale distribution centers, which sell principally to building materials dealers and home centers, who, in turn, supply the end-user, are organized into Northeast, Mid-Atlantic, Southeast, Midwest, Northwest, Southwest and Industrial regions. Our Builder Resource locations sell directly to professional builders and large contractors. Our American Pine Products manufacturing facility in Prineville, Oregon, produces softwood mouldings. Approximately 38% of American Pine's sales were to Huttig's distribution centers during fiscal 2001. During 2000, we completed the integration of Rugby USA, Inc., the parent of Rugby Building Products, Inc., a residential building materials distributor, which we acquired in December 1999. In 2001, we turned our focus to expanding our product line and improving our operating efficiencies. The implementation of our company-wide, single-platform information system in 2001 has allowed us to centralize our accounting and procurement functions and improve the quality and consistency of management reporting and business analysis. We believe our new information system also will allow us to leverage our size and serve as a standard foundation for new applications that can be implemented cost-effectively on a company-wide basis in the future. During 2002, we intend to continue to: o expand our product lines and add higher margin products; o focus on providing efficient, high quality customer service through the deployment of information technology and implementation of industry best practices; o simplify our business processes to make it easier for our customers and vendors to do business with us; o leverage our size to negotiate better pricing, delivery and service terms with our suppliers; o achieve operating efficiencies by consolidating administrative systems across the company; and o pursue opportunities to expand our product lines, service and delivery capabilities and geographic reach through acquisitions. Various factors historically have caused our operations to fluctuate from period to period. These factors include levels of construction, home improvement and remodeling activity, weather, prices of commodity wood products, interest rates, availability of credit and other local, regional and economic conditions. All of these factors are cyclical or seasonal in nature. We anticipate that Page 10 of 42 fluctuations from period to period will continue in the future. Our first quarter and, occasionally, our fourth quarter are adversely affected by winter weather patterns in the Midwest and Northeast, which result in seasonal decreases in levels of construction activity in these areas. We believe we have the product offerings, warehouse and builder support facilities, personnel, systems infrastructure and financial and competitive resources necessary for continued business success. Our future revenues, costs and profitability, however, are all influenced by a number of risks and uncertainties, including those discussed under "Cautionary Statement" below. CRITICAL ACCOUNTING POLICIES We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the U.S., which require management to make estimates and assumptions (see Note 1 to the consolidated financial statements). Management bases these estimates and assumptions on historical results and known trends as well as our forecasts as to how these might change in the future. Actual results could differ from these estimates and assumptions. We believe that of our significant accounting policies, the following may involve a higher degree of judgment and complexity. Inventories - Inventories are stated at the lower of cost or market. Approximately 72% and 78% of inventories were determined by using the LIFO (last in, first out) method of inventory valuation as of December 31, 2001 and 2000, respectively; the remainder were determined by the FIFO (first in, first out) method. During 2001, 2000 and 1999, LIFO inventory quantities were reduced, resulting in a partial liquidation of the LIFO bases, the effect of which increased net income by $1.7 million, $1.7 million and $1.6 million, respectively. An additional allowance for excess and obsolete inventory is recorded based on our review of quantities on hand compared to estimated future usage and sales. Insurance - We carry insurance policies on insurable risks that we believe are appropriate. We generally have self-insured retention limits and have obtained fully insured layers of coverage above such self-insured retention limits. Accruals for self-insurance losses are made based on our claims experience. We have certain liabilities with respect to existing or unreported claims, and accrue for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. FISCAL 2001 COMPARED TO FISCAL 2000 Net sales decreased 11.9% from $1,072.9 million in 2000 to $945.1 million in 2001. Excluding sales attributable to branches which were closed or consolidated, same branch net sales decreased 7.1% from the prior year. The decrease in net sales was partially attributable to discontinuing the distribution of Andersen(R) windows, which accounted for $63.8 million of net sales during the year ended December 31, 2000. Industrial product net sales were $21.6 million less in 2001 versus 2000. Deflation in the commodity wood market is estimated to have reduced net sales by $7.0 million in the current year. Other factors contributing to the decrease in net sales included adverse weather conditions as compared to 2000, primarily in the first quarter of 2001 and the general downturn in the economy compared to 2000. The decrease in total net sales also reflects the closing of five branches during the year, three of which sold Andersen(R) products. Non-Andersen(R) related net sales at these closed branches were $22.2 million lower in 2001 than 2000. Gross profit decreased $19.6 million to $196.1 million in 2001 from $215.7 million in 2000 and as a percentage of sales was 20.7% in 2001 versus 20.1% in 2000. The increase in gross profit as a percentage of net sales resulted from improved product mix. Net door sales increased from 34% to 36% of our total net sales while windows declined from 12% to 6% of total net sales during the year. In 2001, door sales generated a 21% margin compared to a window sales margin of 19%. Gross profit in both 2001 and 2000, was negatively impacted by $1.1 million of restructuring charges for inventory losses which were recorded as an increase to costs of sales. Operating expenses were $166.2 million in 2001 compared to $178.8 million in 2000, a 7.0% decrease. The decrease is partially attributable to lower sales volume, causing a decrease in selling and delivery expense of $7.7 million. General and administrative costs were $3.8 million lower primarily due to lower compensation expense resulting from a reduction in headcount and lower bonus expense. These decreases were offset by increased warehouse rent and supply costs at our facilities of approximately $2.2 million and increased provision for bad debt of $0.4 million. Also included in operating expenses in 2001 were $1.5 million of costs related to the implementation of our single-platform information system and $0.8 million related to our on-going environmental remediation work. Included in operating expenses in 2000 were $6.0 million of non-recurring costs related to the restructuring of our operations and various integration costs associated with the Rugby acquisition. During the fourth quarter of 2001, we recorded $3.2 million of restructuring charges related to the closure of certain historically under-performing branches, of which $1.1 million was recorded in cost of sales. The charge was primarily for severance, inventory Page 11 of 42 writedowns, vacant facilities and other shutdown-related costs. We expect the closures to be substantially completed during the first half of 2002. Gains on disposal of assets were $0.9 million in 2001 compared to $6.5 million in 2000. The gains in both years resulted primarily from the disposal of duplicate capital assets in conjunction with our restructuring and branch consolidation efforts. Net interest expense decreased by $1.1 million to $10.0 million in 2001 from $11.1 million in 2000. Our average outstanding debt decreased by $21.9 million compared to the prior year, resulting in a decrease in interest expense that was partially offset by an increase in the average interest rate. The higher rates are attributable to the interest rate swap agreements that we entered into during the second quarter of 2000 which effectively provide for a fixed rate of interest. A total unrealized loss on derivatives of $1.8 million was recorded after operating profit in 2001. This includes $0.9 million that was amortized from other comprehensive income ("OCI") and $0.9 million related to the change in fair value on two interest rate swaps that do not qualify as hedges for accounting purposes. The interest rate swap that is designated as a cash flow hedge was determined to be highly effective and substantially all of the change in the fair value was charged to OCI. FISCAL 2000 COMPARED TO FISCAL 1999 Net sales increased 34.1% from $800.3 million in 1999 to $1,072.9 million in 2000. Although the 1999 acquisition of Rugby contributed $384.1 million to total net sales in 2000, this increase was offset by a decrease in same branch net sales of 14% or $112.0 million. Contributing to the decrease in same branch net sales was deterioration in commodity wood prices which is believed to have negatively impacted net sales by $42.0 million versus 1999. Additionally, we stopped distributing Andersen(R) products in October 2000. In 2000, total net sales of Andersen(R) products was $63.8 million compared to $79.7 million in 1999. Gross profit grew 35.8% to $215.7 million in 2000 from $156.8 million in 1999. The increase resulted primarily from the Rugby acquisition and was offset by a decrease in same branch results of 11% or $17.0 million and the deterioration in commodity wood prices which is believed to have negatively impacted gross profit by $8.0 million. Gross profit as a percentage of sales was 20.1% in 2000 versus 19.8% in 1999. Gross profit in 2000 was also negatively impacted by $1.1 million of restructuring charges for inventory losses which was recorded as an increase to cost of sales. Operating expenses increased by $52.8 million from $126.0 million in 1999 to $178.8 million in 2000. This increase included approximately $51.0 million attributable to the acquisition of Rugby and was offset by a decrease in same branch expenses of $7.0 million. Operating expenses in 2000 include $6.0 million of costs incurred as a result of the restructuring activities described below. Operating expenses in 1999 include a $5.9 million gain from the curtailment of a post-retirement health benefit plan which was partially offset by $3.0 million of other one time costs. Non-recurring charges, which are included in cost of sales, operating expenses and restructuring charges on the income statement totaled $9.2 million in 2000. This includes $3.2 million of restructuring charges related to the termination of our distribution agreement with Andersen(R) and a strategic plan to consolidate and integrate various branch and support operations of which $1.1 million was recorded in cost of sales. The charge was primarily for severance, inventory losses and facility and other shutdown-related costs. We also incurred $6.0 million of costs that were not chargeable against reserves and are included in operating expenses. Gains on disposal of assets were $6.5 million in 2000 compared to a loss on disposal in 1999 of $0.3 million. The gains in 2000 resulted primarily from the disposal of duplicate capital assets in conjunction with our restructuring and branch consolidation efforts. Interest expense increased $3.3 million primarily as a result of higher average debt outstanding and other expenses declined $0.6 million. In 2000, we refinanced our revolving credit facility with Chase Manhattan Bank. In conjunction with the refinancing of the previously existing facility, we recorded an extraordinary expense of $0.8 million ($0.5 million net of tax) for the write-off of unamortized loan fees. LIQUIDITY AND CAPITAL RESOURCES We depend on cash flow from operations and funds available under our secured credit facility to finance seasonal working capital needs, capital expenditures and acquisitions. Our working capital requirements are generally greatest in the second and third quarters, Page 12 of 42 which reflects the seasonal nature of our business. The second and third quarters are also typically our strongest operating quarters, largely due to more favorable weather throughout many of our markets compared to the first and fourth quarters. We measure our working capital as the sum of net trade accounts receivable, net FIFO inventories and trade accounts payable. At December 31, 2001 and 2000, our working capital was as follows:
2001 2000 ------- ------- Trade accounts receivable, net $ 74.0 $ 76.3 FIFO inventories, net 78.0 82.1 Trade accounts payable (66.9) (62.2) ------- ------- Working captial, net 85.1 96.2 Working capital as a % of annualized quarterly sales 9.6% 10.6% Inventory turns 6.8 7.1
For the year ended December 31, 2001, cash and equivalents increased by $2.0 million due principally to cash generated from operating activities. Changes in operating assets and liabilities provided $9.6 million in cash from operating activities due to decreases in trade accounts receivable and inventories and increases in trade accounts payable. In 2000, more cash was provided by decreases in trade accounts receivable and inventories and more cash was used by decreases in accrued liabilities than in 2001 due to the liquidation of accounts receivable, inventories and accrued liabilities acquired in December 1999 from Rugby. Cash used in investing activities reflects $3.3 million of capital expenditures and $1.2 million relating to our purchase of assets from Monarch Manufacturing, Inc. in Baltimore, Maryland and Hope Lumber and Supply Corporation in Kansas City, Missouri. These expenditures were offset, in part, by $0.9 million of proceeds on disposals of assets, as part of our restructuring and branch consolidation efforts. In 2000, disposals of assets during these branch consolidation efforts generated $9.2 million which provided cash for capital expenditures of $5.6 million. Cash used in financing activities in each of the last two years have been driven by payments of debt. In 2001, bank debt decreased $10.8 million and $6.7 million of treasury stock was repurchased. We have a $200.0 million secured revolving credit facility with Chase Manhattan Bank as agent. At December 31, 2001, we had three interest rate swap agreements having a total notional amount of $80.0 million. These swap agreements, in combination with the revolving credit agreement, effectively provide for a fixed weighted average rate of 8.9% on up to $80.0 million of our outstanding revolving credit borrowings. The interest rate on the remainder of the committed outstanding borrowings under the revolving credit agreement is a floating rate equal to LIBOR plus 175 basis points, 3.6% at December 31, 2001. When actual borrowings are less than the total notional amount of the swaps, we incur an expense equal to the difference between $80.0 million and the actual amount borrowed, times the difference between the fixed rate on the interest rate swap agreement and the 90-day LIBOR rate. See Item 7A - "Quantitative and Qualitative Disclosures About Market Risk." As of February 25, 2002, we had letters of credit outstanding under the revolving credit facility totaling $6.1 million. As of February 25, 2002, we had approximately $111.0 million of unused credit available under our revolving credit facility. Provisions of the secured revolving credit facility contain various covenants which, among other things, limit our ability to incur indebtedness, incur liens, declare or pay dividends or make restricted payments, consolidate, merge or sell assets and require us to attain certain financial ratios in regards to leverage (net debt to consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA")), consolidated net worth, and interest expense coverage (consolidated EBITDA less capital expenditures to consolidated cash interest expense). We believe that cash generated from operations and funds available under our credit facility will provide sufficient funds to meet our currently anticipated short-term and long-term liquidity and capital expenditure requirements. Page 13 of 42 STOCK REPURCHASE AUTHORIZATION In August 2001, our Board of Directors authorized a $15.0 million stock repurchase program. During 2001, we repurchased 1.1 million shares of our common stock for $6.7 million. Of these shares, we purchased 790,484 shares from The Rugby Group Limited, our largest shareholder, for a cash purchase price of $4.7 million, or a per share price of $5.99, the closing price on the New York Stock Exchange of our common stock on the date of our agreement with Rugby. As part of our repurchase agreement with Rugby, our repurchase of these shares did not affect Rugby's existing right to nominate up to three members of our Board of Directors under our registration rights agreement with Rugby entered into as part of our acquisition of Rugby Building Products. We hold repurchased shares as treasury stock and make them available for use in connection with employee benefit plans and other general corporate purposes. At December 31, 2001, we had $8.3 million remaining under the stock repurchase authorization. RESTRUCTURING ACTIVITIES During the fourth quarter of 2000, we recorded $3.2 million of restructuring charges related to the termination of our distribution agreement with Andersen(R) and our adoption of a strategic plan to consolidate and integrate various branch and support operations of which $1.1 million was included in cost of sales. The charge was primarily for severance, inventory losses and facility and other shutdown-related costs. We charged approximately $1.0 million against this reserve during the fourth quarter of 2000, leaving a balance of $1.1 million at December 31, 2000. We fully utilized the remaining balance during 2001. During the fourth quarter of 2001, we recorded $3.2 million of restructuring charges related to the closure of several historically under-performing branches, of which $1.1 million was recorded in cost of sales for the writedown of inventory to realizable value. Other components of the charge were $0.8 million for severance related costs and $1.3 million for facility and other shutdown-related costs. Severance costs relate to approximately 175 employees primarily at distribution center locations. Included in amounts charged against this restructuring reserve in 2001 was $0.5 million for inventory losses and $0.3 million for facility shutdown costs. We expect the closures to be substantially completed during the first half of 2002. NEW ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board issued Statement No. 142, Goodwill and Other Intangible Assets, which is required to be adopted in fiscal years beginning after December 15, 2001. Under the provisions of this statement, goodwill is no longer subject to amortization over its estimated useful life. Alternatively, goodwill will be subject to at least an annual assessment for impairment by applying a fair value based test. Goodwill existing as of January 1, 2002 will be subject to a transitional assessment of any impairment issues during 2002. Goodwill amortization for the years ended December 31, 2001 and 2000 was $2.4 million per year. We are currently evaluating the impact of this pronouncement, as it relates to the transitional and annual assessments for impairment of recorded goodwill on our consolidated financial statements. In October 2001, the Financial Accounting Standards Board issued Statement No. 144, Accounting for the Impairment of Disposal of Long-lived Assets, which is required to be adopted for fiscal years beginning after December 15, 2001. This statement establishes a single accounting model for the impairment or disposal of long-lived assets and broadens the presentation of discontinued operations. We believe the adoption of Statement No. 144 will not have a material impact on our consolidated financial statements. CAUTIONARY STATEMENT This Annual Report on Form 10-K and our annual report to shareholders contain "forward-looking statements" within the meaning 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. These forward-looking statements are based on current projections, estimates, assumptions and judgments, and involve known and unknown risks and uncertainties. There are a number of factors that could cause our actual results to differ materially from those expressed or implied in these forward-looking statements. These factors include, but are not limited to, the strength of the national and local new residential construction and home improvement and remodeling markets, which in turn depend on factors such as interest rates, employment levels, availability of credit, prices of commodity wood products, consumer confidence, adverse weather conditions, the level of competition in our industry, our relationships with suppliers of the products we distribute and our exposure to costs of complying with environmental laws and regulations. Additional information concerning these and other factors is included below. We disclaim any obligation to publicly update or revise any of these forward-looking statements. Page 14 of 42 OUR SALES AND PROFITABILITY DEPEND SIGNIFICANTLY ON NEW RESIDENTIAL CONSTRUCTION AND HOME IMPROVEMENT ACTIVITY, WHICH IS HIGHLY CYCLICAL AND SEASONAL. Our sales depend heavily on the strength of national and local new residential construction and home improvement and remodeling markets. The strength of these markets depends on new housing starts and residential renovation projects, which are a function of many factors beyond our control. Some of these factors include interest rates, employment levels, availability of credit, prices of commodity wood products and consumer confidence. Future downturns in the markets that we serve or in the economy generally could have a material adverse effect on our operating results and financial condition. Reduced levels of construction activity may result in intense price competition among building materials suppliers, which may adversely affect our gross margins. Our first quarter revenues and, to a lesser extent, our fourth quarter revenues are typically adversely affected by winter construction cycles and weather patterns in colder climates as the level of activity in the new construction and home improvement markets decreases. Because much of our overhead and expense remains relatively fixed throughout the year, our profits also tend to be lower during the first and fourth quarters. THE BUILDING MATERIALS DISTRIBUTION INDUSTRY IS EXTREMELY COMPETITIVE AND WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY WITH SOME OF OUR EXISTING COMPETITORS OR NEW ENTRANTS IN THE MARKETS WE SERVE. The building materials distribution industry is extremely competitive. Our competition varies by product line, customer classification and geographic market. The principal competitive factors in our industry are: o availability of product; o service and delivery capabilities; o ability to assist with problem-solving; o customer relationships; and o breadth of product offerings. Also, financial stability and geographic coverage are important to manufacturers in choosing distributors for their products. We compete with many local, regional and, in some markets and product categories, national building materials distributors and dealers. We also compete with major integrated product manufacturers with national distribution capability, such as Georgia-Pacific, Weyerhauser and Boise-Cascade. To a limited extent in some of our markets, we compete with the large home center chains like The Home Depot and Lowe's for the business of smaller contractors. Some of our competitors have greater financial and other resources and may be able to withstand sales or price decreases better than we can. We can give no assurance that we will continue to compete effectively with these existing or new competitors. THE TERMINATION OF KEY SUPPLIER RELATIONSHIPS MAY HAVE AN IMMEDIATE ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS. We distribute building materials that we purchase from a number of major suppliers. As is customary in our industry, most of our contracts with these suppliers are terminable without cause on short notice. In October 2000, Andersen(R) Windows terminated our distribution agreement, at which time we stopped distributing Andersen(R) windows and were forced to find alternative window suppliers. Andersen(R) windows sales accounted for $63.8 million and $79.7 million in 2000 and 1999, respectively. As a result of the termination of the distribution agreement, sales of windows represented 6% of our total sales in 2001, compared with 12% and 17% in 2000 and 1999, respectively. Although we believe that relationships with our existing suppliers are strong and that we would have access to similar products from competing suppliers, any disruption in our sources of supply, particularly of our most commonly sold items, could have a material adverse effect on our financial condition and results of operations. We also can give no assurance that any supply shortages resulting from unanticipated demand or production difficulties will not occur from time to time or have a material adverse effect on our financial condition and results of operations. FLUCTUATION IN PRICES OF COMMODITY WOOD PRODUCTS THAT WE BUY AND THEN RESELL MAY HAVE A SIGNIFICANT IMPACT ON OUR RESULTS OF OPERATIONS. Parts of our business, such as the softwood moulding manufacturing operation and our distribution centers that sell directly to home builders and large contractors, directly face the risk of periodic fluctuations in the prices of wood commodities. Changes in wood Page 15 of 42 commodity prices between the time we buy these products and the time we resell them have occurred in the past and we expect fluctuations to occur again in the future. There can be no assurance that we will be able to manage these fluctuations effectively or minimize any impact of these changes on our financial condition and results of operations. WE FACE RISKS OF INCURRING SIGNIFICANT COSTS TO COMPLY WITH ENVIRONMENTAL REGULATIONS. We are subject to federal, state and local environmental protection laws and regulations. We can give no assurance that future environmental liabilities will not have a material adverse effect on our financial condition or results of operations. We have been identified as a potentially responsible party in connection with the clean up of contamination at a formerly owned property in Montana. We are voluntarily remediating this property under the oversight of the Montana Department of Environmental Quality ("DEQ"). When the state agency issues its final risk assessment of this property, we will conduct a feasibility study to evaluate alternatives for cleanup, including continuation of our remediation measures already in place. The DEQ then will select a final remedy, publish a record of decision and negotiate with us for an administrative order of consent on the implementation of the final remedy. We currently believe that this process may take several more years to complete and intend to continue monitoring and remediating the site, evaluating cleanup alternatives and reporting regularly to the DEQ during this interim period. Based on our experience to date in remediating this site, we do not believe that the scope of remediation that the DEQ ultimately determines will have a materially adverse effect on our results of operations or financial condition. Until the DEQ selects a final remedy, however, we can give no assurance as to the scope or cost to us of the final remediation order. In addition, some of our current and former distribution centers are located in areas of current or former industrial activity where environmental contamination may have occurred, and for which we, among others, could be held responsible. We currently believe, but can give no assurance, that there are no material environmental liabilities at any of our distribution center locations. WE FACE THE RISKS THAT PRODUCT LIABILITY CLAIMS AND OTHER LEGAL PROCEEDINGS RELATING TO THE PRODUCTS WE DISTRIBUTE MAY ADVERSELY AFFECT OUR BUSINESS AND RESULTS OF OPERATIONS. As is the case with other companies in our industry, we face the risk of product liability and other claims in the event that the use of products that we have distributed results in personal injury or other damages. For example, we are currently defending lawsuits involving plaintiffs who allege that they have suffered personal injury as a result of exposure to asbestos-containing products. See Part I, Item 3 - "Legal Proceedings." Product liability claims in the future, regardless of their ultimate outcome and whether or not they are covered under our insurance policies or may be indemnified by our suppliers, could result in costly litigation and have a material adverse effect on our business and results of operations. OUR FUTURE GROWTH WILL DEPEND ON OUR ABILITY TO IDENTIFY ACQUISITION OPPORTUNITIES, INTEGRATE ACQUIRED BUSINESSES AND REALIZE THE VALUE WE EXPECTED AT THE TIME OF THEIR ACQUISITION. As part of our business strategy, we plan to pursue additional acquisitions of comparable businesses to expand our product offerings and geographic coverage and for other strategic reasons. We may not be successful in finding desirable acquisition candidates or acquiring businesses that we do identify. Depending upon the size of a particular transaction or the magnitude of all of our acquisition activity, future acquisitions could require additional equity capital, further borrowings and the consent of our lenders. There can be no assurances that our lenders will consent to any capital raising or acquisition transactions. If we are not correct when we assess the value, strengths, weaknesses, liabilities and potential profitability of acquisition candidates or if we are not successful in integrating the operations of the acquired businesses, it could have a material adverse effect on our financial condition and results of operation. OUR FAILURE TO ATTRACT AND RETAIN KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FUTURE SUCCESS. Our future success depends, to a significant extent, upon the continued service of our executive officers and other key management and technical personnel and on our ability to continue to attract, retain and motivate qualified personnel. The loss of the services of one or more key employees or our failure to attract, retain and motivate qualified personnel could have a material adverse effect on our business. ITEM 7A--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Huttig has exposure to market risk as it relates to the effects of changes in interest rates. We had bank debt outstanding at December 31, 2001 and 2000, under our revolving credit agreement of $69.8 million and $80.0 million, respectively. Also at December 31, 2001, we had three interest rate swap agreements having a total notional principal amount of $80.0 million. These swap agreements in Page 16 of 42 combination with the terms of our revolving credit agreement, effectively provide for a fixed weighted average rate of 8.9% on up to $80.0 million of our outstanding borrowings. The interest rate on the committed outstanding borrowings in excess of $80.0 million under the revolving credit agreement is a floating rate equal to LIBOR plus 175 basis points, 3.6% at December 31, 2001. When actual borrowings under the revolving credit agreement are less than the notional amount of the interest rate swaps, we incur an expense equal to the difference between $80.0 million and the actual amount borrowed, times the difference between the fixed rate on the interest rate swap agreement and the 90-day LIBOR rate. Included in the financial results is the impact of adopting SFAS No. 133, which established accounting and reporting standards for derivative and hedging activities. We have three interest rate swap agreements that provide for fixed interest rates on $80.0 million of our outstanding borrowings. Under the accounting treatment prescribed by SFAS No. 133, our liabilities include the fair value of these swaps of $4.5 million and shareholders' equity includes $1.7 million, net of tax, which is recorded as other comprehensive income. Fair value is determined by using discounted cash flows based on estimated forward 90-day LIBOR rates through the date of maturity, May 2003, on the swaps. Included in expense, after profit from operations, is $1.8 million of an unrealized loss related to the portion of our swap agreements, which do not qualify for hedge accounting treatment according to the SFAS No. 133 criteria. This unrealized loss resulted in a decrease to net income per share of $0.05 in 2001. There is no impact on cash flow as a result of the accounting treatment required by SFAS No. 133. Effective January 1, 2002, we entered into a price swap agreement to purchase specified levels of heating oil on a monthly basis at a fixed price, in an effort to hedge the cost of our diesel fuel consumption for our delivery fleet. As heating oil rate changes effectively correlate to diesel fuel rate changes, we intend to account for this agreement as a cash flow hedge under SFAS No. 133. This swap agreement is intended to hedge approximately 60% of our estimated 2002 consumption of diesel fuel or approximately 1.8 million gallons. As a result of the agreement, we are subject to commodity price risk for changes in the price of diesel fuel because we have locked in a fixed rate of $0.585 per gallon of heating oil. We are subject to periodic fluctuations in the price of wood commodities. Profitability is influenced by these changes as prices change between the time we buy and sell the wood. In addition, to the extent changes in interest rates affect the housing and remodeling market, we would be affected by such changes. Page 17 of 42 ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEPENDENT AUDITORS' REPORT To the Shareholders of Huttig Building Products, Inc.: We have audited the accompanying consolidated balance sheets of Huttig Building Products, Inc. and its subsidiaries (the "Company") as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP St. Louis, Missouri January 25, 2002 Page 18 of 42 HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Millions)
December 31, --------------------- 2001 2000 -------- -------- ASSETS CURRENT ASSETS: Cash and equivalents $ 5.6 $ 3.6 Trade accounts receivable, net 74.0 76.3 Inventories, net 70.1 71.5 Other current assets 9.5 10.0 -------- -------- Total current assets 159.2 161.4 -------- -------- PROPERTY, PLANT AND EQUIPMENT: Land 6.7 6.7 Buildings and improvements 35.0 34.6 Machinery and equipment 36.4 30.9 -------- -------- Gross property, plant and equipment 78.1 72.2 Less accumulated depreciation 36.6 32.6 -------- -------- Property, plant and equipment, net 41.5 39.6 -------- -------- OTHER ASSETS: Goodwill, net 34.3 36.6 Other 4.1 5.3 Deferred income taxes 7.2 6.3 -------- -------- Total other assets 45.6 48.2 -------- -------- TOTAL ASSETS $ 246.3 $ 249.2 ======== ========
see notes to consolidated financial statements Page 19 of 42 HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Millions, Except Share and Per Share Data)
December 31, ------------------------ 2001 2000 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of debt $ 0.9 $ 0.2 Trade accounts payable 66.9 62.2 Deferred income taxes 1.3 -- Accrued compensation 4.9 9.6 Accrued insurance 2.5 4.3 Other accrued liabilities 11.0 8.4 -------- -------- Total current liabilities 87.5 84.7 -------- -------- NON-CURRENT LIABILITIES: Debt 72.7 80.9 Fair value of derivative instruments 4.5 -- Other non-current liabilities 2.5 2.6 -------- -------- Total non-current liabilities 79.7 83.5 -------- -------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred shares; $.01 par (5,000,000 shares authorized) -- -- Common shares; $.01 par (50,000,000 shares authorized; at December 31, 2001 - 19,645,893 shares issued and outstanding; at December 31, 2000 - 20,866,145 shares issued and outstanding) 0.2 0.2 Additional paid-in capital 33.4 33.2 Retained earnings 54.8 49.1 Unearned compensation - restricted stock (0.4) (0.4) Accumulated other comprehensive loss (1.7) -- Less: Treasury shares, at cost (1,250,252 shares at December 31, 2001 and 278,433 shares at December 31, 2000) (7.2) (1.1) -------- -------- Total shareholders' equity 79.1 81.0 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 246.3 $ 249.2 ======== ========
see notes to consolidated financial statements Page 20 of 42 HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (In Millions, Except Share and Per Share Data)
Year Ended December 31, -------------------------------------- 2001 2000 1999 ---------- ---------- ---------- NET SALES $ 945.1 $ 1,072.9 $ 800.3 ---------- ---------- ---------- COST OF SALES AND OPERATING EXPENSES: Cost of sales 749.0 857.2 641.5 Operating expenses 166.2 178.8 126.0 Depreciation and amortization 7.7 7.3 6.6 Restructuring charges 2.1 2.1 3.1 (Gain) loss on disposal of capital assets (0.9) (6.5) 0.3 ---------- ---------- ---------- Total cost of sales and operating expenses 924.1 1,038.9 777.5 ---------- ---------- ---------- OPERATING PROFIT 21.0 34.0 22.8 ---------- ---------- ---------- OTHER EXPENSES: Interest expense - Crane -- -- (7.3) Interest expense - net (10.0) (11.1) (0.5) Unrealized loss on derivatives (1.8) -- -- Other miscellaneous - net -- -- (0.6) ---------- ---------- ---------- Total other expense (11.8) (11.1) (8.4) ---------- ---------- ---------- INCOME BEFORE TAXES 9.2 22.9 14.4 PROVISION FOR INCOME TAXES 3.5 8.8 5.9 ---------- ---------- ---------- INCOME BEFORE EXTRAORDINARY ITEM 5.7 14.1 8.5 Extraordinary item (less applicable income taxes of $0.3) -- (0.5) -- ---------- ---------- ---------- NET INCOME $ 5.7 $ 13.6 $ 8.5 ========== ========== ========== NET INCOME PER BASIC SHARE BEFORE EXTRAORDINARY ITEM $ 0.28 $ 0.68 $ 0.59 LOSS PER SHARE FROM EXTRAORDINARY ITEM -- (0.02) -- ---------- ---------- ---------- NET INCOME PER BASIC SHARE $ 0.28 $ 0.66 $ 0.59 ========== ========== ========== WEIGHTED AVERAGE BASIC SHARES OUTSTANDING 20.3 20.6 14.3 NET INCOME PER DILUTED SHARE BEFORE EXTRAORDINARY ITEM $ 0.28 $ 0.68 $ 0.59 LOSS PER SHARE FROM EXTRAORDINARY ITEM -- (0.02) -- ---------- ---------- ---------- NET INCOME PER DILUTED SHARE $ 0.28 $ 0.66 $ 0.59 ========== ========== ========== WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING 20.4 20.6 14.3
see notes to consolidated financial statements Page 21 of 42 HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (IN MILLIONS)
Accumulated Common Shares Additional Unearned Other Treasury Total Outstanding, Paid-In Retained Compensation- Comprehensive Shares, Shareholders' at Par Value Capital Earnings Restricted Stock Loss at Cost Equity ------------- ---------- -------- ---------------- ------------- -------- ------------- Balance at January 1, 1999 $ -- $ 0.7 $ 40.7 $ -- $ -- $ -- $ 41.4 Net income 8.5 8.5 Dividends paid to Crane (13.7) (13.7) Capital contribution from Crane 4.5 4.5 Recapitalization in connection with spin-off from Crane 0.1 1.0 (1.1) -- Shares issued in acquisition of Rugby 0.1 26.5 26.6 Restricted stock issued, net of amortization expense 0.2 (0.2) -- ---------- --------- -------- ---------- ---------- -------- ---------- Balance at December 31, 1999 $ 0.2 $ 32.9 $ 35.5 $ (0.2) $ -- $ (1.1) $ 67.3 Net income 13.6 13.6 Restricted stock issued, net of amortization expense 0.3 (0.2) 0.1 ---------- --------- -------- ---------- ---------- -------- ---------- Balance at December 31, 2000 $ 0.2 $ 33.2 $ 49.1 $ (0.4) $ -- $ (1.1) $ 81.0 Net income 5.7 5.7 Fair market value adjustment of derivatives, net of tax (1.7) (1.7) -------- ---------- ---------- Comprehensive income (loss) 5.7 (1.7) 4.0 Restricted stock issued, net of amortization expense 0.2 0.6 0.8 Treasury stock purchases (6.7) (6.7) ---------- --------- -------- ---------- ---------- -------- ---------- Balance at December 31, 2001 $ 0.2 $ 33.4 $ 54.8 $ (0.4) $ (1.7) $ (7.2) $ 79.1 ========== ========= ======== ========== ========== ======== ==========
Page 22 of 42 HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Millions)
Year Ended December 31, ----------------------------------- 2001 2000 1999 --------- ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5.7 $ 13.6 $ 8.5 (Gain) loss on disposal of capital assets (0.9) (6.5) 0.3 Depreciation and amortization 9.0 7.9 6.5 Deferred income taxes 1.4 7.3 3.0 Unrealized loss on derivatives, net 1.7 -- -- Accrued postretirement benefits (0.5) (0.6) (5.2) Changes in operating assets and liabilities (exclusive of acquisitions): Trade accounts receivable 2.5 34.1 11.2 Inventories 2.4 5.4 5.1 Other current assets 0.5 0.4 -- Trade accounts payable 4.7 (1.1) (8.9) Accrued liabilities (3.2) (22.5) 2.4 Other (0.2) (3.9) (0.2) -------- -------- -------- Total cash from operating activities 23.1 34.1 22.7 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (3.3) (5.6) (8.5) Proceeds from disposition of capital assets 0.9 9.2 2.4 Cash (used) received for acquisitions (1.2) -- 0.1 -------- -------- -------- Total cash from investing activities (3.6) 3.6 (6.0) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividend paid to Crane -- -- (13.7) Payments of debt (307.3) (120.9) (126.3) Borrowings of debt 296.5 80.0 120.7 Purchase of treasury shares (6.7) -- -- -------- -------- -------- Total cash from financing activities (17.5) (40.9) (19.3) -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 2.0 (3.2) (2.6) CASH AND EQUIVALENTS, BEGINNING OF PERIOD 3.6 6.8 9.4 -------- -------- -------- CASH AND EQUIVALENTS, END OF PERIOD $ 5.6 $ 3.6 $ 6.8 ======== ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 9.2 $ 9.4 $ 9.5 Income taxes paid (received) - net of refunds $ (2.0) $ 7.0 $ 4.3 Non-cash financing activities: Equipment acquired with capital lease obligations $ 3.4 $ -- $ -- Restricted stock issued in connection with compensation plans $ 0.8 $ -- $ -- Liabilities assumed in connection with asset acquisitions $ -- $ 2.2 $ 74.3 Capital contribution from Crane through reduction in payable to Crane $ -- $ -- $ 4.5
see notes to consolidated financial statements Page 23 of 42 HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) 1. ACCOUNTING POLICIES AND PROCEDURES ORGANIZATION -- Huttig Building Products, Inc. and subsidiaries (the "Company" or "Huttig") is a distributor of doors, windows, mouldings, trim and related building products in the United States and operates one finished lumber production facility. The Company distributes its products through 59 distribution centers serving 46 states, principally for new residential construction and renovation. The Company was formerly a wholly owned subsidiary of Crane Co. ("Crane") through Crane International Holdings, a direct subsidiary of Crane. On December 16, 1999, Crane distributed all of the outstanding common stock of the Company to Crane's stockholders. In addition, on December 16, 1999, the Company acquired the building products and millwork branches of Rugby USA, Inc. ("Rugby"), a subsidiary of Rugby Group PLC. PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include the accounts of Huttig Building Products, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. REVENUE RECOGNITION -- Revenues are generally recorded when title passes to the customer, which occurs upon delivery of product, or when services are rendered. USE OF ESTIMATES -- The preparation of the Company's consolidated 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 the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. RECLASSIFICATIONS -- Certain prior year amounts have been reclassified to conform to the current year presentation. INVENTORIES -- Inventories are stated at the lower of cost or market. Substantially, all of the Company's inventory is finished goods. Approximately 72% and 78% of inventories were determined by using the LIFO (last in, first out) method of inventory valuation as of December 31, 2001 and 2000, respectively; the remainder were determined by the FIFO (first in, first out) method. Had the Company used the FIFO method of inventory valuation for all inventories, net income would have decreased by $1.7 million, $1.7 million and $1.2 million in 2001, 2000 and 1999, respectively. During 2001, 2000 and 1999, the LIFO inventory quantities were reduced, resulting in a partial liquidation of the LIFO bases, the effect of which increased net income by $1.7 million, $1.7 million and $1.6 million, respectively. The replacement cost would be higher than the LIFO valuation by $7.8 million in 2001 and $10.6 million in 2000. PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets which range from 3 to 25 years. CASH AND EQUIVALENTS -- The Company considers all liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. The carrying value of cash and equivalents approximates their fair value. OTHER ASSETS -- Goodwill is amortized on a straight-line basis over 15 to 40 years. In future periods, goodwill amortization will be affected by the Company's adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets. See Note 1, "New Accounting Pronouncements." Other intangible assets are amortized on a straight-line basis over their estimated useful lives which range from two to five years. VALUATION OF LONG-LIVED ASSETS -- The Company periodically evaluates the carrying value of its long-lived assets, including goodwill and other tangible assets, when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its Page 24 of 42 carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. STOCK REPURCHASE AUTHORIZATION - In August 2001, the Company's Board of Directors authorized a $15.0 million stock repurchase program. During 2001, Huttig repurchased 1.1 million shares of its common stock for $6.7 million. Of these shares, the Company purchased 790,484 shares from The Rugby Group Limited, Huttig's largest shareholder, for a cash purchase price of $4.7 million, or a per share price of $5.99, the closing price on the New York Stock Exchange of our common stock on the date of our agreement with Rugby. As part of the repurchase agreement with Rugby, the repurchase of these shares did not affect Rugby's existing right to nominate up to three members of the Board of Directors under the registration rights agreement with Rugby entered into as part of the acquisition of Rugby Building Products. Repurchased shares are held as treasury stock and are available for use in connection with employee benefit plans and other general corporate purposes. At December 31, 2001, the Company had $8.3 million remaining under the stock repurchase authorization. SERVICES PROVIDED BY CRANE -- Prior to the Spin-off, Crane supplied the Company certain shared services including insurance, legal, tax and treasury functions. The costs associated with these services were charged to the Company through an intercompany account based upon specific identification. SHIPPING - Costs associated with shipping our products to our customers are charged to operating expense. Shipping costs were $31.7 million, $33.4 million and $20.0 million in 2001, 2000 and 1999, respectively. INCOME TAXES -- Through the date of its Spin-off from Crane, the Company was included in the federal income tax return of Crane. The Company was charged its proportionate share of federal income taxes determined as if it filed a separate federal income tax return. Income tax payments represented payments of intercompany balances. Subsequent to December 16, 1999, the date of the Spin-off, Huttig filed stand-alone federal tax returns. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes using currently enacted tax rates. NET INCOME PER SHARE -- Basic net income per share is computed by dividing income available to common stockholders by weighted average shares outstanding. Diluted net income per share reflects the effect of all other outstanding common stock equivalents using the treasury stock method. ACCOUNTING FOR STOCK-BASED COMPENSATION - SFAS No. 123, Accounting for Stock-Based Compensation, sets forth a fair value based method of recognizing stock-based compensation expense. As permitted by SFAS No. 123, the Company has elected to apply APB No. 25, Accounting for Stock Issued to Employees, to account for its stock-based compensation plans. CONCENTRATION OF CREDIT RISK -- The Company is engaged in the distribution of building materials throughout the United States. The Company grants credit to customers, substantially all of whom are dependent upon the construction economic sector. The Company continuously evaluates its customers' financial condition but does not generally require collateral. The concentration of credit risk with respect to trade accounts receivable is limited due to the Company's large customer base located throughout the United States. The Company maintains an allowance for doubtful accounts based upon the expected collectibility of its accounts receivable. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Effective January 1, 2001, Huttig adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, which established accounting and reporting standards for derivative instruments, including certain derivative instruments used for hedging activities. All derivative instruments, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income ("OCI") and are recognized in the statement of income when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. If the derivative is not designated as a hedge for accounting purposes, changes in fair value are immediately recognized in earnings. The Company holds three interest rate swap agreements, with a total notional amount of $80.0 million, that are used to hedge interest rate risks related to its variable rate borrowings. Two of the interest rate swap agreements, with notional amounts totaling Page 25 of 42 $42.5 million, which management believes are economic hedges and mitigate exposure to fluctuations in variable interest rates, do not qualify as hedges for accounting purposes. The remaining interest rate swap, with a notional amount of $37.5 million, is accounted for as a cash flow hedge. The adoption of SFAS No. 133 on January 1, 2001 resulted in an increase to non-current liabilities of $2.8 million and a cumulative pre-tax reduction to OCI of $2.8 million ($1.8 million after-tax). Of the reduction to OCI at January 1, 2001, $1.4 million is related to the two interest rate swaps that have not been designated as hedges for accounting purposes. Of this amount, $0.5 million will be reclassified into earnings during the next twelve months. For the year ended December 31, 2001, a total unrealized loss on derivatives of $1.8 million was recorded after operating profit. This includes $0.9 million that was amortized from OCI and $0.9 million related to the change in fair value on the two interest rate swaps that do not qualify as hedges for accounting purposes. The interest rate swap that is designated as a cash flow hedge was determined to be highly effective and substantially all of the change in the fair value was charged to OCI. At December 31, 2001, liabilities include the fair value of these swaps of $4.5 million and shareholders' equity includes $1.7 million net of tax which is recorded as OCI. Fair value was determined by using discounted cash flows based on estimated forward 90-day LIBOR rates through the date of maturity, May 2003, on the swaps. There is no impact on cash flow as a result of the accounting treatment required by SFAS No. 133 for the three interest rate swap agreements. NEW ACCOUNTING PRONOUNCEMENTS - In June 2001, the Financial Accounting Standard Board issued Statement No. 142, Goodwill and Other Intangible Assets, which is required to be adopted in fiscal years beginning after December 15, 2001. Under the provisions of this statement, goodwill is no longer subject to amortization over its estimated useful life. Alternatively, goodwill will be subject to at least an annual assessment for impairment by applying a fair value based test. Goodwill existing as of January 1, 2002 will be subject to a transitional assessment of any impairment issues during 2002. Goodwill amortization for the years ended December 31, 2001 and 2000 was $2.4 million per year. The Company is currently evaluating the impact of this pronouncement as it relates to the transitional and annual assessments for impairment of recorded goodwill on its consolidated financial statements. In October 2001, the Financial Accounting Standards Board issued Statement No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets, which is required to be adopted for fiscal years beginning after December 15, 2001. This statement establishes a single accounting model for the impairment or disposal of long-lived assets and broadens the presentation of discontinued operations. The Company believes that the adoption of Statement No. 144 will not have a material impact on its consolidated financial statements. 2. SPIN-OFF FROM CRANE On December 16, 1999, the Company completed its tax-free Spin-off from Crane. Crane made a capital contribution of $4.5 million to the Company. Then Crane distributed all issued and outstanding shares of Huttig common stock, together with accompanying preferred share purchase rights (see Note 7), to holders of record of Crane common stock as of the close of business on December 8, 1999. The Spin-off was made on the basis of one share of Huttig common stock for every 4.5 shares of Crane common stock. 3. GOODWILL AND ACQUISITIONS Goodwill consists of the following at December 31, 2001 and 2000:
2001 2000 ------- ------- Goodwill $ 47.7 $ 47.6 Accumulated amortization 13.4 11.0 ------- ------- Total - Net $ 34.3 $ 36.6 ======= =======
During the first half of 2001, the Company acquired certain assets from Monarch Manufacturing, Inc. in Baltimore, Maryland and Hope Lumber and Supply Corporation in Kansas City, Missouri, for an aggregate purchase price of $1.2 million. In connection with the acquisition of Monarch Manufacturing, Inc., the Company recorded $0.1 million of goodwill. Page 26 of 42 On December 16, 1999 the Company completed its acquisition of Rugby. Crane, Huttig and Rugby Group PLC entered into a Share Exchange Agreement which provided for the transfer to Huttig of all the outstanding capital stock of Rugby in exchange for 6.5 million newly issued shares of Huttig common stock. As a result of this exchange, Rugby became a wholly owned subsidiary of Huttig. The acquisition of Rugby was accounted for under the purchase method of accounting. The $26.6 million value of the 6.5 million shares of stock issued in 1999 was allocated to the assets acquired and liabilities assumed based upon their fair values at the closing date. The relative fair values of the assets acquired and liabilities assumed were based upon valuations and other studies. However, the fair value of the net assets acquired exceeded the purchase price resulting in the write-off of all non-current assets of Rugby and a deferred credit of $0.8 million was recorded in 1999. During fiscal year 2000, the Company determined the ultimate costs related to exit plans adopted as part of the acquisition exceeded the liabilities that were initially accrued by $2.0 million. Consequently, the acquisition cost was increased by this amount. In addition, the deferred asset decreased by $2.2 million and the previously reported income taxes payable of $1.8 million was reduced to zero. As a result, the previously reported deferred credit balance of $0.8 million at December 31, 1999 was reduced to zero and assets were increased by $1.6 million. The following table summarizes the allocation of the stock consideration paid to the fair value of the assets acquired and the liabilities assumed by the Company in connection with the acquisition of Rugby: Accounts receivable $ 42.6 Inventories 39.4 Other current assets 4.7 Deferred income taxes -- non-current 11.5 Property, plant and equipment 1.6 Note payable to Rugby Group PLC (32.0) Accounts payable (26.5) Accrued liabilities (14.7) -------- Stock consideration paid $ 26.6 ========
Costs of $2.3 million for professional fees related to the acquisition were included in accrued liabilities in the allocation of the acquisition cost above. In December 1999, the Company established a $4.7 million reserve for asset impairments and costs expected to be incurred to exit certain activities connected with the acquisition of Rugby. During 2000, this reserve increased by $2.2 million as a result of a change in estimate of the planned exit costs and the Company also charged $6.7 million of costs against this reserve. The remaining balance of $0.2 million was for costs related to remaining facility shutdowns. The acquisition of Rugby was accounted for by the purchase method and, accordingly, this reserve was included in the allocation of the acquisition costs. The remaining balance was fully utilized in the first quarter of 2001. During 1999, the Company acquired Cherokee Lumber Company and Cherokee Millwork Company, a manufacturer and distributor of lumber and millwork products in the Maryville, Tennessee area, for a total cost of $1.9 million. In connection with the acquisition, the Company recorded approximately $0.6 million of goodwill which is being amortized on a straight-line basis over 15 years. All acquisitions were accounted for by the purchase method. The results of operations for all acquisitions have been included in the consolidated financial statements from their respective dates of purchase. The following unaudited pro forma financial information presents the combined results of operations of the Company and Rugby, if the acquisition of Rugby had taken place at the beginning of 1999. The pro forma amounts give effect to certain adjustments including the amortization of goodwill and intangibles, increased interest expense and income tax effects. This pro forma information does not necessarily reflect the results of operations as it would have been if the businesses had been managed by the Company during these periods and is not indicative of results that may be obtained in the future. Page 27 of 42
1999 --------- Net sales $ 1,247.1 Net income 13.3 Net income per share (basic and diluted) 0.65
4. BUSINESS RESTRUCTURING During the fourth quarter of 2001, the Company recorded $3.2 million of restructuring charges related to the closure of several historically under-performing branches, of which $1.1 million was recorded in cost of sales for the writedown of inventory to realizable value. Other components of the charge were $0.8 million for severance related costs and $1.3 million for facility and other shutdown-related costs. Severance costs relate to approximately 175 employees primarily at distribution center locations. Included in amounts charged against this restructuring reserve in 2001 were $0.5 million for inventory losses and $0.3 million for facility and other shutdown costs. The Company expects the closures to be substantially completed during the first half of 2002. During the fourth quarter of 2000, the Company recorded $2.1 million as a restructuring charge related to the termination of the Company's distribution agreement with Andersen(R), of which $0.8 million was recorded in cost of sales. The charge was primarily for the downsizing of branch operations that previously distributed Andersen(R) products. At December 31, 2000, approximately $1.1 million remained in the reserve. The remaining balance was fully utilized during the first nine months of 2001. During the fourth quarter of 1999, the Company established a $5.3 million reserve for restructuring costs expected to be incurred under a strategic plan to consolidate and integrate various branch operations and support functions, of which $2.2 million was included in cost of sales. During the fourth quarter of 2000, the Company increased this reserve by $1.1 million, of which $0.3 million was included in cost of sales. During 2000, $6.2 million of costs were charged against the reserve, which included $2.5 million related to inventory losses. The remaining balance of $0.2 million was primarily for facility shutdown costs and was fully utilized in early 2001. 5. ALLOWANCE FOR DOUBTFUL ACCOUNTS The allowance for doubtful trade accounts receivable as of December 31, 2001, 2000 and 1999 consists of the following:
2001 2000 1999 ---------- ---------- ---------- Balance at beginning of year $ 1.6 $ 0.7 $ 0.2 Provision charged to expense 2.4 1.9 0.6 Write-offs, less recoveries (1.8) (1.0) (0.1) ---------- ---------- ---------- Balance at end of year $ 2.2 $ 1.6 $ 0.7 ========== ========== ==========
6. DEBT Debt as of December 31, 2001 and 2000 consisted of the following:
2001 2000 -------- -------- Revolving credit agreement $ 69.8 $ 80.0 Industrial Revenue Bond -- 0.1 Capital lease obligations (see Note 9) 3.8 1.0 -------- -------- Total debt 73.6 81.1 Less current portion 0.9 0.2 -------- -------- Long-term debt $ 72.7 $ 80.9 ======== ========
CREDIT AGREEMENT -- During April 2000, the Company entered into a $200.0 million secured revolving credit facility (the "Credit Agreement") with Chase Manhattan Bank. The rate on the facility is LIBOR plus a variable rate based on the Company's ratio of debt to earnings before interest, taxes, depreciation and amortization ("EBITDA"). At December 31, 2001 and 2000, the Company Page 28 of 42 had outstanding three interest rate swap contracts having a total notional amount of principal of $80.0 million. These swap agreements, in combination with the revolving credit agreement, effectively provide for a fixed weighted average interest rate of 8.9% on up to $80.0 million outstanding revolving credit borrowings. The remainder of the outstanding borrowings under the revolving credit agreement are currently at a floating rate of LIBOR plus 175 basis points, 3.6% at December 31, 2001. When actual borrowings are less than the total notional amount of the swap, the Company incurs an expense equal to the difference between $80.0 million and the actual amount borrowed, times the difference between the fixed rate on the interest rate swap agreement and the 90-day LIBOR rate. The current revolving credit facility expires in April 2003. The proceeds from the facility were used to retire the previously existing $125.0 million credit facility and a $25.0 million term loan. In conjunction with the refinancing of the previously existing facility, the Company recorded an extraordinary expense in 2000 of $0.8 million ($0.5 million net of tax) for the write-off of the unamortized loan fees. Provisions of the Credit Agreement contain various covenants which, among other things, limit the Company's ability to incur indebtedness, incur liens, declare or pay dividends or make restricted payments, consolidate, merge or sell assets and require the Company to attain certain financial ratios in regards to leverage, consolidated net worth, and interest expense coverage. Under the most restrictive provisions of the Company's Credit Agreement, the amount available to repurchase the Company's common stock was limited to $2.6 million at December 31, 2001. At December 31, 2001, the Company had letters of credit outstanding under the Credit Agreement totaling $6.1 million and $124.1 million of unused credit available. The Credit Agreement is collateralized by the Company's trade accounts receivable, inventory and owned facilities. MATURITIES -- At December 31, 2001, the aggregate scheduled maturities of debt are as follows: 2002 $ 0.9 2003 70.8 2004 0.8 2005 0.7 2006 0.4 ------ Total $ 73.6 ======
The estimated fair value of the Company's debt approximates book value since the interest rates on nearly all of the outstanding borrowings are frequently adjusted. 7. PREFERRED SHARE PURCHASE RIGHTS In December 1999, the Company adopted a Shareholder Rights Plan. The Company distributed one preferred share purchase right for each outstanding share of common stock at the date of the Spin-off. The preferred rights were not exercisable when granted and may only become exercisable under certain circumstances involving actual or potential acquisitions of the Company's common stock by a person or affiliated persons. Depending upon the circumstances, if the rights become exercisable, the holder may be entitled to purchase shares of the Company's Series A Junior Participating Preferred Stock. Preferred shares purchasable upon exercise of the rights will not be redeemable. Each preferred share will be entitled to preferential rights regarding dividend and liquidation payments, voting power, and, in the event of any merger, consolidation or other transaction in which common shares are exchanged, preferential exchange rate. The rights will remain in existence until December 6, 2009 unless they are earlier terminated, exercised or redeemed. The Company has authorized 5 million shares of $.01 par value preferred stock of which 250 thousand shares have been designated as Series A Junior Participating Preferred Stock. 8. COMMITMENTS AND CONTINGENCIES The Company leases certain of its vehicles, equipment and warehouse and manufacturing facilities under capital and non-cancelable operating leases with various terms. Certain leases contain renewal or purchase options. Future minimum payments, by year, and in the aggregate, under these leases with initial or remaining terms of one year or more consisted of the following at December 31, 2001: Page 29 of 42
NON-CANCELABLE MINIMUM CAPITAL OPERATING SUBLEASE LEASES LEASES INCOME NET ------- -------------- -------- -------- 2002 $ 1.1 $ 11.0 $ 1.4 $ 9.6 2003 1.2 9.0 1.3 7.7 2004 0.9 6.9 0.7 6.2 2005 0.8 5.8 0.4 5.4 2006 0.4 5.1 0.2 4.9 Thereafter -- 12.2 -- 12.2 -------- -------- -------- -------- Total minimum lease payments 4.4 $ 50.0 $ 4.0 $ 46.0 ======== ======== ======== Amount representing interest (0.6) -------- Present value of minimum lease payments $ 3.8 ========
The weighted average interest rate for capital leases is 6.6%. These obligations mature in varying amounts through 2016. Rental expense for all operating leases was $17.7 million, $15.3 million and $8.2 million in 2001, 2000 and 1999, respectively. The cost of assets capitalized under leases is as follows at December 31, 2001 and 2000:
2001 2000 -------- -------- Land, buildings and improvements $ 5.7 $ 2.3 Less accumulated depreciation 1.6 1.3 -------- -------- Cost of leased assets - net $ 4.1 $ 1.0 ======== ========
The Company carries insurance policies on insurable risks that it believes to be appropriate. The Company generally has self-insured retention limits and has obtained fully insured layers of coverage above such self-insured retention limits. Accruals for self-insurance losses are made based on the Company's claims experience. The Company has certain liabilities with respect to existing or unreported claims, and accrues for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. The Company is involved in various lawsuits, claims and proceedings arising in the ordinary course of its business. While the outcome of any lawsuits, claims or proceedings cannot be predicted, it is the opinion of management that the disposition of any pending matters will not have a material adverse effect on our financial condition, results of operations or liquidity. The Company is subject to federal, state and local environmental protection laws and regulations. The Company's management believes the Company is in compliance, or is taking action aimed at assuring compliance, with applicable environmental protection laws and regulations. However, there can be no assurance that future environmental liabilities will not have a material adverse effect on the consolidated financial condition or results of operations. The Company has been identified as a potentially responsible party in connection with the clean up of contamination at a formerly owned property in Montana. The Company is voluntarily remediating this property under the oversight of the Montana Department of Environmental Quality ("DEQ"). When the state agency issues its final risk assessment of this property, the Company will conduct a feasibility study to evaluate alternatives for cleanup, including continuation of our remediation measures already in place. The DEQ then will select a final remedy, publish a record of decision and negotiate with us for an administrative order of consent on the implementation of the final remedy. The Company's management currently believes that this process may take several more years to complete and intends to continue monitoring and remediating the site, evaluating cleanup alternatives and reporting regularly to the DEQ during this interim period. Based on experience to date in remediating this site, management of the Company does not believe that the scope of remediation that the DEQ ultimately determines will have a materially adverse effect on its results of operations or financial condition. In addition, some of the Company's current and former distribution centers are located in areas of current or former industrial activity where environmental contamination may have occurred, and for which the Company, among others, could be held responsible. The Company's management currently believes that there are no material environmental liabilities at any of its distribution center locations. Page 30 of 42 Huttig is one of many defendants in three pending actions filed in California state court by three separate claimants against manufacturers, building materials distributors and retailers and other defendants by individuals alleging that they have suffered personal injury as a result of exposure to asbestos-containing products. The plaintiffs in these cases seek unspecified damages and allege that they were exposed to asbestos contained in products distributed by a business acquired in 1994 by Rugby Building Products, Inc. Huttig believes it is entitled to indemnification of any costs arising from these cases from The Rugby Group Limited, Huttig's principal stockholder, under the terms of the share exchange agreement pursuant to which Huttig acquired the stock of Rugby USA, Inc., the parent of Rugby Building Products, Inc., in December 1999. Rugby Group has denied any obligation to defend or indemnify Huttig for any of these cases. While Huttig believes that the factual allegations and legal claims asserted against Huttig in the complaints are without merit, there can be no assurance at this time that Huttig will recover any of its costs relating to these claims from insurance carriers or from Rugby Group or that such costs will not have a material adverse effect on Huttig's business or financial condition. 9. EMPLOYEE BENEFIT PLANS DEFINED BENEFIT PLANS -- Prior to the Spin-off, the Company participated in Crane's defined benefit pension plans covering substantially all salaried and hourly employees not covered by collective bargaining agreements. The Company was charged its proportionate share of the total expense for the plans. Pension expense related to Crane's defined benefit pension plans was $1.1 million in 1999. Effective as of the Spin-off, Company employees who had accrued benefits under a Crane pension plan became fully vested in those benefits and stopped accruing benefits under the Crane pension plan. The Company also participates in several multi-employer pension plans that provide benefits to certain employees under collective bargaining agreements. Total contributions to these plans were $0.6 million, $0.6 million, and $0.5 million in 2001, 2000 and 1999, respectively. HEALTH BENEFITS PLANS -- Prior to the Spin-off, employees hired before January 1, 1992 were eligible for post-retirement medical and life insurance benefits if they met minimum age and service requirements. Effective with the Spin-off, the Company will pay 50% of any premium or cost of such coverage for its current retirees between the ages of 55 and 65. All other employees not currently qualified will not receive post-retirement medical and life insurance benefits. The reduction in benefits resulted in a curtailment gain of $5.9 million in 1999. The following table sets forth the amounts recognized in the Company's balance sheet at December 31, 2001, 2000 and 1999 for the Company sponsored post-retirement benefit plan: Page 31 of 42
2001 2000 1999 ------ ------ ------ Change in benefit obligation: Benefit obligation at beginning of year $ 0.3 $ 0.3 $ 7.3 Plan participant contributions 0.1 0.1 0.2 Service cost -- -- 0.2 Interest cost -- -- 0.4 Amendments -- -- (1.0) Actuarial (gain) loss 0.4 0.2 (1.3) Curtailment -- -- (5.1) Benefits paid (0.3) (0.3) (0.4) ----- ----- ----- Benefit obligation at end of year $ 0.5 $ 0.3 $ 0.3 ===== ===== ===== Funded status $(0.5) $(0.3) $(0.3) Unrecognized net actuarial gain (0.5) (1.2) (1.8) ----- ----- ----- Accrued benefit cost $(1.0) $(1.5) $(2.1) ===== ===== ===== Discount rate 7.25% 7.75% 7.50% Components of net periodic benefit costs Service cost $ -- $ -- $ 0.2 Interest cost -- -- 0.4 Amortization of prior service cost -- -- (0.1) Recognized actuarial gain (0.2) (0.3) (0.1) ----- ----- ----- (0.2) (0.3) 0.4 Recognition of curtailment gain -- -- (5.9) ----- ----- ----- Net periodic benefit cost $(0.2) $(0.3) $(5.5) ===== ===== =====
In 2001, the cost of covered healthcare benefits was assumed to increase 10%, and then decrease gradually to 5% by 2007 and remain at that level thereafter. In 2000, the cost of covered healthcare benefits was assumed to increase 7.5%, and then to decrease gradually to 5.0% by 2006 and remain at that level thereafter. In 1999, the cost of covered healthcare benefits was assumed to increase 7.2%, and then to decrease gradually to 5.0% by 2005 and remain at that level thereafter. A one percentage point change would not have material effect on the total service and interest cost components or on the post retirement benefit obligation. DEFINED CONTRIBUTION PLANS -- Effective with the Spin-off, the Company established a new qualified defined contribution plan for its employees that is substantially similar to the Crane plan. At the Spin-off date, all of the account balances of employees under the Crane plan became fully vested and a corresponding amount of assets were transferred from the Crane plan to one or more of the qualified defined contribution plans maintained by the Company. The Company sponsors a qualified defined contribution plan covering substantially all its employees. The plan provides for Company matching contributions based upon a percentage of the employee's voluntary contributions. The Company's contributions were $1.8 million, $1.9 million and $1.5 million in 2001, 2000 and 1999, respectively. During 2001, the Company established a nonqualified deferred compensation plan to allow for the deferral of employee voluntary contributions that are limited under the Company's existing qualified defined contribution plan. The plan provides for deferral of up to 50% of an employee's total compensation and matching contributions based upon a percentage of the employee's voluntary contributions. During 2001, there were no contributions made to this plan. 10. STOCK AND INCENTIVE COMPENSATION PLANS 1999 STOCK INCENTIVE PLAN The 1999 Stock Incentive Plan authorizes the issuance of the lesser of 7% of the issued and outstanding stock of the Company or up to 2 million shares of common stock under the Plan. The Plan allows the Company to grant awards to key employees including restricted stock awards, stock options and stock appreciation rights, subject primarily to the requirement of continuing Page 32 of 42 employment. The awards under this Plan are available for grant over a period of ten years from the date on which the Plan was adopted, but the grants may vest beyond the ten-year period. Stock options issued by the Company become exercisable for up to 50% of the shares one year after grant, 75% two years after grant, and 100% three years after grant, and expire ten years from the date of grant. The exercise price of stock options may not be less than the fair market value of the common stock at the date of grant. In 2001, the Company granted 371,800 options with exercise prices ranging from $4.34 to $4.85 and in 2000, granted 895,500 options with exercise prices ranging from $4.29 to $4.73. The Company is authorized to grant shares of restricted stock to employees. No monetary consideration is paid by employees who receive restricted stock. Restricted stock can be granted with or without performance restrictions. In 2001, the Company granted 30,000 shares of restricted stock under the 1999 Stock Incentive Plan at a market value of $4.38 per share. In 2000, the Company granted 65,000 shares of restricted stock under the 1999 Stock Incentive Plan at a market value of $4.25 per share. The total market value of the shares granted were recorded as unearned compensation in the Statement of Shareholders' Equity. The unearned compensation is being amortized to expense over a five-year vesting period. 2001 STOCK INCENTIVE PLAN The 2001 Stock Incentive Plan authorizes the issuance of up to 500,000 shares of the issued and outstanding common stock of the Company. The Plan allows the Company to grant awards to key employees including restricted stock awards and stock options, subject primarily to the requirement of continued employment. The awards under this Plan are available for grant until the Board of Directors terminates the Plan. Stock options issued by the Company are exercisable for up to 50 % of the shares one year after grant, 75% two years after grant, and 100% three years after grant, and expire ten years from the date of grant. The exercise price of stock options may not be less than the fair market value of the common stock at the date of grant. As of December 31, 2001, no awards have been granted under this Plan. EVA INCENTIVE COMPENSATION PLAN The Company's EVA Incentive Compensation Plan (the "EVA Plan") is intended to maximize shareholder value by aligning management's interests with those of shareholders by rewarding management for sustainable and continuous improvement in operating results. Participants in the EVA Plan may elect to allocate 50% of their incentive award to a stock subaccount. Participants who make this election will have restricted shares granted to them with a two year vesting period, with the restrictions lapsing evenly each year. The number of restricted shares issued is calculated by dividing the cash award by the fair market value of the Company's stock at the date of the allocation. If the participant does not make this election, 100% of the participant's EVA award is allocated to a cash account. Each participant with a positive aggregate account balance will receive an annual payout of a specified percentage of his or her account, with the standard payout percentage being one-third each year. A participant's entire cash subaccount balance will become payable and his or her restricted stock will fully vest upon normal retirement at age 65, death, disability or a change in control (as defined in the EVA Plan). In 2001, the Company granted 154,938 shares of restricted stock under the EVA Plan at a market value of $4.38 per share. Expense recorded under the EVA Plan was ($0.2) million, $3.6 million and $1.6 million in 2001, 2000 and 1999, respectively. NON-EMPLOYEE DIRECTORS' STOCK Certain non-employee directors receive shares of restricted stock for the portion of their annual retainer that exceeds five thousand dollars. The shares are issued each year after the Company's annual meeting, are forfeitable if the director ceases to remain a director until the Company's next annual meeting and may not be sold for a period of five years or until the director leaves the board. The number of restricted shares issued is determined by dividing the amount of the retainer that exceeds five thousand dollars by the fair market value of stock on the date of issuance. In 2001, 9,440 restricted shares were issued to non-employee directors. Non-employee directors also have received ad hoc grants of stock options exercisable at the fair market value at the date of grant. During 2001, 80,000 stock options were issued and become exercisable for up to 50% of the shares one year after grant, 75% two years after grant, and 100% three years after grant. ACCOUNTING FOR STOCK-BASED COMPENSATION SFAS No. 123, Accounting for Stock-Based Compensation, sets forth a fair value based method of recognizing stock-based compensation expense. As permitted by SFAS No. 123, the Company has elected to apply APB No. 25, Accounting for Stock Issued to Employees, to account for its stock-based compensation plans. Page 33 of 42 Had the compensation cost for these plans been determined according to SFAS No. 123, the Company's net income and earnings per share would have been the following pro forma amounts for the years ended December 31, 2001 and 2000:
(Millions of dollars, except per share amounts) 2001 2000(1) ---- ------- NET INCOME As reported $ 5.7 $ 13.6 Pro forma 5.2 13.2 BASIC EPS As reported $ .28 $ .66 Pro forma .26 .64 DILUTED EPS As reported $ .28 $ .66 Pro forma .26 .64
(1) There were no stock options outstanding prior to January 1, 2000. Pro forma disclosures are not likely to be representative of the effects on reported net income for future years. For purposes of the pro forma disclosure, the fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
2001 2000 ---- ---- ASSUMPTIONS: Volatility 41% 45% Risk-free interest rate 4.4% 4.9% Dividend yield 0% 0% Expected life of options (years) 5 5 Weighted average fair value of options granted $1.85 $1.98
The following table summarizes the stock option transactions pursuant to the Company's stock incentive plans for the two years ended December 31, 2001:
Weighted Average Shares Exercise Price (000s) Per Share ------ ---------------- Options outstanding at January 1, 2000 -- $ -- Granted 896 4.34 Exercised -- -- Forfeited (94) 4.29 ------ Options outstanding at December 31, 2000 802 4.35 Granted 452 4.37 Exercised (6) 4.29 Forfeited (46) 4.29 ------ Options outstanding at December 31, 2001 1,202 4.36 ====== Shares available for grant at December 31, 2001 659
Page 34 of 42 The following table summarizes information about stock options outstanding at December 31, 2001:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE Weighted Average Number Remaining Number Range of Outstanding Contractual Life Weighted Average Exercisable Weighted Average Exercise Price (000's) (Years) Exercise Price (000's) Exercise Price -------------- ----------- ---------------- ---------------- ----------- ---------------- $ 4.29 to $ 4.85 1,202 8.5 $ 4.36 375 $ 4.36
The following table summarizes information about stock options outstanding at December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE Weighted Average Number Remaining Number Range of Outstanding Contractual Life Weighted Average Exercisable Weighted Average Exercise Price (000's) (Years) Exercise Price (000's) Exercise Price -------------- ----------- ---------------- ---------------- ----------- ---------------- $ 4.29 to $ 4.73 802 9.1 $ 4.35 -- --
11. INCOME TAXES A reconciliation between income taxes based on the application of the statutory federal income tax rate to income taxes as set forth in the consolidated statements of income follows:
2001 2000 1999 -------- -------- -------- Federal statutory rate 35.0% 35.0% 35.0% Increase (decrease) in taxes resulting from: State and local taxes 3.8 2.8 2.0 Nondeductible items and other (0.8) 0.8 4.0 -------- -------- -------- Effective income tax rate 38.0% 38.6% 41.0% ======== ======== ========
Deferred income taxes at December 31, 2001 and 2000 are comprised of the following:
2001 2000 --------------------- --------------------- ASSETS LIABILITIES ASSETS LIABILITIES -------- ----------- -------- ----------- Accelerated depreciation $ -- $ 3.8 $ -- $ 2.9 Purchase price book and tax basis differences 5.3 -- 6.0 -- Inventory related -- 2.9 -- 2.7 Insurance related 1.0 -- 1.1 -- Employee benefits related 1.0 -- 1.7 -- Unrealized loss on SFAS No. 133 related liabilities 1.8 -- -- -- Other accrued liabilities 2.3 -- 1.8 -- Other 1.2 -- 1.3 -- -------- -------- -------- -------- Total $ 12.6 $ 6.7 $ 11.9 $ 5.6 ======== ======== ======== ========
Page 35 of 42 The total deferred income tax assets (liabilities) as presented in the accompanying consolidated balance sheets are as follows:
2001 2000 ---- ---- Net current deferred taxes $ (1.3) $ -- Net long-term deferred taxes 7.2 6.3
The provision for income taxes is composed of the following:
2001 2000 1999 -------- -------- -------- Current: U.S. Federal tax $ 1.7 $ 2.3 $ 3.3 State and local tax 0.3 0.3 0.2 -------- -------- -------- Total current 2.0 2.6 3.5 Deferred: U.S. Federal tax 1.3 5.3 2.2 State and local tax 0.2 0.6 0.2 -------- -------- -------- Total deferred 1.5 5.9 2.4 -------- -------- -------- Total income tax $ 3.5 $ 8.5 $ 5.9 ======== ======== ========
12. SALES BY PRODUCT The Company operates in one business segment, the distribution of building materials used principally in new residential construction and in home improvement, remodeling and repair work. The Company derives substantially all of its revenues from domestic customers. The following table presents the Company's net sales by product:
2001 2000 1999 ---------- ---------- ---------- Doors $ 336.2 $ 367.7 $ 272.2 Specialty building materials 248.9 276.0 169.8 Lumber and other commodity products 213.2 188.2 119.9 Mouldings 82.6 111.1 99.7 Windows 64.2 129.9 138.7 ---------- ---------- ---------- Total net sales $ 945.1 $ 1,072.9 $ 800.3 ========== ========== ==========
Page 36 of 42 13. BASIC AND DILUTED NET INCOME PER SHARE The following table sets forth the computation of net income per basic and diluted share (net income amounts in millions, share amounts in thousands, per share amounts in dollars):
2001 2000 1999 ------------ ------------ ------------ Net income (numerator) $ 5.7 $ 13.6 $ 8.5 Weighted average number of basic shares outstanding (denominator) 20,335 20,584 14,260 ------------ ------------ ------------ Net income per basic share $ 0.28 $ 0.66 $ 0.59 ============ ============ ============ Weighted average number of basic shares outstanding 20,335 20,584 14,260 Common stock equivalents for diluted common shares outstanding 84 13 -- ------------ ------------ ------------ Weighted average number of diluted shares outstanding (denominator) 20,419 20,597 14,260 ------------ ------------ ------------ Net income per diluted share $ 0.28 $ 0.66 $ 0.59 ============ ============ ============
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following table provides selected consolidated financial information on a quarterly basis for each quarter of 2001 and 2000. The Company's business is seasonal and particularly sensitive to weather conditions. Interim amounts are therefore subject to significant fluctuations.
FIRST SECOND THIRD FOURTH FULL QUARTER QUARTER QUARTER QUARTER YEAR ---------- ---------- ---------- ---------- ---------- 2001 Net sales $ 217.6 $ 249.3 $ 256.7 $ 221.5 $ 945.1 Gross profit 45.5 53.1 52.3 45.2 196.1 Operating profit 2.9 10.3 7.5 0.3 21.0 Net income (loss) (0.1) 4.7 2.3 (1.2) 5.7 Basic and diluted net income (loss) per share (0.01) 0.23 0.11 (0.06) 0.28 2000 Net sales $ 282.0 $ 285.6 $ 278.2 $ 227.1 $ 1,072.9 Gross profit 53.6 56.2 57.3 48.6 215.7 Operating profit 8.4 11.8 11.1 2.7 34.0 Net income before extraordinary items 3.7 5.4 5.0 -- 14.1 Net income 3.7 4.9 5.0 -- 13.6 Basic and diluted net income per share before extraordinary items 0.18 0.26 0.24 -- 0.68 Loss per share from extraordinary items -- (0.02) -- -- (0.02) ---------- ---------- ---------- ---------- ---------- Basic and diluted net income per share 0.18 0.24 0.24 -- 0.66 ========== ========== ========== ========== ==========
ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. Page 37 of 42 PART III ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 (other than the information regarding executive officers set forth at the end of Part I of this Form 10-K) will be contained in the Company's Definitive Proxy Statement for its 2002 Annual Meeting of Shareholders under the captions "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance," and is incorporated herein by reference. ITEM 11--EXECUTIVE COMPENSATION The information required by Item 11 will be contained in the Company's Definitive Proxy Statement for its 2002 Annual Meeting of Shareholders under the captions "Election of Directors" and "Executive Compensation," and is incorporated herein by reference. ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 will be contained in the Company's Definitive Proxy Statement for its 2002 Annual Meeting of Shareholders under the caption "Beneficial Ownership of Common Stock by Directors and Management," and is incorporated herein by reference. ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 will be contained in the Company's Definitive Proxy Statement for its 2002 Annual Meeting of Shareholders under the caption "Certain Relationships and Related Transactions," and is incorporated herein by reference. Page 38 of 42 PART IV ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K (a) (1) (2) (3) Financial statements are included in Item 8--"Financial Statements and Supplementary Data". (b) No reports on Form 8-K were filed during the fourth quarter of 2001. (c) See Index to Exhibits for the list of exhibits required by Item 601 of Regulation S-K and by Item 14(c) of this report. Page 39 of 42 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HUTTIG BUILDING PRODUCTS, INC. By: /s/ BARRY J. KULPA ------------------------------------- Barry J. Kulpa President and Chief Executive Officer Date: February 25, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Barry J. Kulpa President, Chief Executive February 25, 2002 - --------------------------- Officer (Principal Barry J. Kulpa Executive) and Director /s/ Thomas S. McHugh Vice President, Finance February 25, 2002 - --------------------------- and Chief Financial Thomas S. McHugh Officer (Principal Accounting Officer) /s/ R. S. Evans Chairman February 25, 2002 - --------------------------- R. S. Evans /s/ E. Thayer Bigelow, Jr. Director February 25, 2002 - --------------------------- E. Thayer Bigelow, Jr. /s/ Alan S. Durant Director February 25, 2002 - --------------------------- Alan S. Durant /s/ R. S. Forte Director February 25, 2002 - --------------------------- R. S. Forte /s/ Dorsey R. Gardner Director February 25, 2002 - --------------------------- Dorsey R. Gardner /s/ Delbert Tanner Director February 25, 2002 - --------------------------- Delbert Tanner /s/ James L. L. Tullis Director February 25, 2002 - --------------------------- James L. L. Tullis /s/ Peter L. Young Director February 25, 2002 - --------------------------- Peter L. Young
Page 40 of 42 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.1 Distribution Agreement dated December 6, 1999 between Crane Co. and the company. (Incorporated by reference to Exhibit No. 2.1 of Amendment No. 4 to the company's Registration Statement on Form 10 (File No. 1-14982) filed with the Commission on December 6, 1999 (the "Form 10").) 2.2 Share Exchange Agreement dated October 19, 1999 among The Rugby Group p.l.c., Crane Co. and the company. (Incorporated by reference to Exhibit No. 2.2 to Amendment No. 1 to the Form 10 filed with the Commission on October 29, 1999.) 3.1 Restated Certificate of Incorporation of the company. (Incorporated by reference to Exhibit 3.1 to the Form 10 filed with the Commission on September 21, 1999.) 3.2 Bylaws of the company. (Incorporated by reference to Exhibit 3.2 to Amendment No. 4 to the Form 10 filed with the Commission on December 6, 1999.) 4.1 Rights Agreement dated December 6, 1999 between the company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent. (Incorporated by reference to Exhibit 4.1 to the company's Annual Report on Form 10-K for the year ended December 31, 1999 (the "1999 Form 10-K").) 4.2 Amendment No. 1 to Rights Agreement between the company and ChaseMellon Shareholders Services, L.L.C. (Incorporated by reference to Exhibit 4.4 to the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 (the "March 31, 2000 Form 10-Q").) 4.3 Credit Agreement dated April 25, 2000 between the company and Chase Manhattan Bank, as agent for the lenders named therein, and the Lenders. (Incorporated by reference to Exhibit 4.1 to the March 31, 2000 Form 10-Q.) 4.4 Form of Revolving Loan Note dated April 25, 2000 in favor of certain lenders. (Incorporated by reference to Exhibit 4.2 to the March 31, 2000 Form 10-Q.) 4.5 Schedule to Form of Revolving Loan Note dated April 25, 2000 in favor of certain lenders. (Incorporated by reference to Exhibit 4.3 to the March 31, 2000 Form 10-Q.) 4.6 Certificate of Designations of Series A Junior Participating Preferred Stock of the company. (Incorporated by reference to Exhibit 4.6 to the 1999 Form 10-K .) 10.1 Tax Allocation Agreement by and between Crane and the company dated December 16, 1999. (Incorporated by reference to Exhibit 10.1 to the 1999 Form 10-K.) 10.2 Employee Matters Agreement between Crane and the company dated December 16, 1999. (Incorporated by reference to Exhibit 10.2 to the 1999 Form 10-K.) *10.3 EVA Incentive Compensation Plan, as amended. *10.4 Form of Restricted Stock Agreement under the company's EVA Incentive Compensation Plan. (Incorporated by reference to Exhibit 10.4 to the 1999 Form 10-K.) *10.5 Non-Employee Director Restricted Stock Plan. (Incorporated by reference to Exhibit 10.4 to Amendment No. 4 to the Form 10 filed with the Commission on December 6, 1999.) *10.6 1999 Stock Incentive Plan. (Incorporated by reference to Exhibit 10.5 to Amendment No. 4 to the Form 10 filed with the Commission on December 6, 1999.)
Page 41 of 42 *10.7 Form of Stock Option Agreement under the company's 1999 Stock Incentive Plan. (Incorporated by reference to Exhibit 10.6 to the 1999 Form 10-K.) *10.8 Schedule to Stock Option Agreement under the company's 1999 Stock Incentive Plan. *10.9 2001 Stock Incentive Plan. *10.10 Form of Stock Option Agreement under the company's 2001 Stock Incentive Plan. *10.11 Schedule to Stock Option Agreement under the company's 2001 Stock Incentive Plan. *10.12 Form of Indemnification Agreement for Executive Officers and Directors. (Incorporated by reference to Exhibit 10.9 to the 1999 Form 10-K.) *10.13 Schedule to Indemnification Agreement for Executive Officers and Directors. (Incorporated by reference to Exhibit 10.10 to the company's Annual Report on Form 10-K for the year ended December 31, 2000 (the "2000 Form 10-K").) *10.14 Employment/Severance Agreement between the company and Barry J. Kulpa dated October 18, 1999. (Incorporated by reference to Exhibit 10.7 to Amendment No. 1 to the Form 10 filed with the Commission on October 29, 1999.) *10.15 Form of Employment Agreement between the company and certain of its executive officers. (Incorporated by reference to Exhibit 10.12 to the 1999 Form 10-K.) *10.16 Schedule to Employment Agreement between the company and certain of its executive officers. (Incorporated by reference to Exhibit 10.13 to the 2000 Forms 10-K.) 10.17 Registration Rights Agreement by and between The Rugby Group PLC and the company dated December 16, 1999. (Incorporated by reference to Exhibit 10.14 to the 1999 Form 10-K.) 10.18 Letter Agreement dated August 20, 2001 between the company and The Rugby Group Limited. (Incorporated by reference to Exhibit 10.1 to the company's Current Report on Form 8-K dated August 20, 2001). *10.19 Restricted Stock Agreement dated January 29, 2002 between the company and Barry J. Kulpa. *10.20 Restricted Stock Agreement dated January 22, 2001 between the company and Barry J. Kulpa. *10.21 Restricted Stock Agreement dated January 24, 2000 between the company and Barry J. Kulpa. (Incorporated by reference to Exhibit 10.15 to the 1999 Form 10-K.) *10.22 Restricted Stock Agreement dated December 17, 1999 between the company and Barry J. Kulpa. (Incorporated by reference to Exhibit 10.16 to the 1999 Form 10-K.) *10.23 Restricted Stock Agreement dated December 17, 1999 between the company and Barry J. Kulpa. (Incorporated by reference to Exhibit 10.17 to the 1999 Form 10-K.) *10.24 Form of Stock Option Agreement dated January 22, 2001 between the company and each of E. Thayer Bigelow, Jr., Richard S. Forte, Dorsey R. Garduer and James L.L. Tullis. *10.25 Form of Restricted Stock Agreement for awards under the company's EVA Incentive Compensation Plan. *10.26 Schedule to Restricted Stock Agreement for awards under the company's EVA Incentive Compensation Plan. 21.1 Subsidiaries. (Incorporated by reference to Exhibit 21.1 to the 2000 Form 10-K.) 23.1 Consent of Deloitte & Touche LLP, independent certified public accountants.
- ---------- * Management contract or compensatory plan or arrangement. The registrant hereby agrees to furnish supplementally to the Commission, upon request, a copy of any omitted schedule to any of the agreements contained or incorporated by reference herein. Page 42 of 42 EX-10.3 3 c67952ex10-3.txt EVA INCENTIVE COMPENSATION PLAN, AS AMENDED EXHIBIT 10.3 HUTTIG BUILDING PRODUCTS, INC. EVA INCENTIVE COMPENSATION PLAN As Amended Effective December 3, 2001 1. Purpose. Huttig Building Products, Inc., a Delaware corporation (the "Company"), has adopted an annual incentive compensation program based on the principles of Economic Value Added ("EVA") throughout the Company. The purpose of the EVA approach is to maximize stockholder value by aligning management's interests with those of stockholders and rewarding management for sustainable and continuous improvement in the business being managed. The Company has created this EVA Incentive Compensation Plan (the "Plan") for certain executive officers of the Company subject to the limitations of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and designated general managers and regional managers of the Company and its subsidiaries (collectively, the "Participants" and individually, the "Participant"). The Plan is intended to satisfy the specific requirements of Section 162(m) of the Code, as outlined in regulations issued by the Internal Revenue Service. The Plan was originally effective December 16, 1999 (the "Initial Effective Date"). The Plan, as amended and restated herein, is effective December 3, 2001 (the "Amended Effective Date"). This Plan is intended to be, and shall be operated as, a successor to Crane Co.'s EVA Incentive Compensation Plan (the "Prior Plan") with respect to the participation of employees of the Company who were participating in the Prior Plan prior to the Initial Effective Date. 2. Administration. The Plan will be administered by the Organization and Compensation Committee of the Board of Directors (the "Committee"). The Committee's decisions in the administration of the Plan shall be final and binding on all parties. The Committee shall have the sole discretionary authority to interpret the Plan, to establish and modify administrative rules for the Plan, to designate the employees eligible to participate in the Plan, to establish and adjust any EVA formula or calculation as provided in Sections 3 and 4, to impose such conditions and restrictions on awards under the Plan as it determines appropriate, and to take such steps in connection with the Plan and awards made under the Plan as it may deem necessary or advisable. The Committee may employ attorneys, consultants, accountants or other persons and the Committee and the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All usual and reasonable expenses of the Committee shall be paid by the Company. No Committee member shall receive compensation with respect to his or her services for the Committee except as may be authorized by the Board. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all employees who have received awards, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to this Plan or awards made hereunder, and all members of the Committee shall be fully indemnified and protected by the Company in respect of any such action, determination or interpretation. 3. Definition of EVA and Description of Formulae. EVA is defined as the difference between the return on total capital invested in the business and the cost of capital, multiplied by total capital employed ("EVA Calculation"). The Plan will be formula driven. The primary EVA formula shall be for the Company as a whole but particular EVA formulas may be tailored by the Committee to the size and unique characteristics of the business unit or units for which a specific executive is responsible. The key elements of the EVA formula applicable to any executive will be the Cost of Capital (generally the cost of capital to the Company), the Return on Capital, the Amount of Capital employed in the business unit, the net operating profit of the unit after tax, and the prior year's EVA. Awards will be calculated on the basis of year-end results. Formulas may utilize both a percentage of the change in the EVA of the Company or a business unit from the prior year, whether positive or negative, plus a percentage of the positive EVA, if any, in the current year; the EVA award may be calculated for the entire Company or an entire business unit and an executive may receive a percentage of a unit's EVA award. When an executive is responsible for more than one business unit, a formula may be based on a percentage of the aggregate EVA, positive or negative, of the units reporting to the executive or unit. The Committee has the discretion and authority to develop other EVA based formulae or goals for utilization pursuant to this Plan in future years. In any instance in which an executive participates in a unit EVA award in which a group of employees participates, the executive's percentage of the unit's EVA award will be specified. 4. Procedure. Before the beginning of each fiscal year, the Committee will establish and set forth in writing the EVA formula applicable to each Participant for that year (including the percentage of any business unit EVA award in which he or she may participate). The Committee will retain discretion to revise formulas or a Participant's percentage participation in any unit EVA award if the Committee deems it appropriate as circumstances develop during the year; provided, however, in the case of an executive officer who is subject to the limitations of Section 162(m) of the Code, such revision may only have a negative effect on the amount of such executive officer's award for the year. As soon as is reasonably practicable after the year ends, the Committee will review the EVA calculation, calculate the EVA award for each Participant pursuant to the formula established at the beginning of the year (revised downward if the Committee so determines), and certify the EVA incentive compensation award for each Participant to the Board of Directors; provided, however, that no EVA award with respect to any executive officer who is subject to the limitations of Section 162(m) of the Code may exceed $2,000,000 for any particular year. 2 5. Allocations to Participants' Bank Accounts Under the Plan. a. General. Every year, the EVA award will be credited (if the award is positive) or debited (if the award is negative) to the Participant's account. Each Participant's account will consist of a cash subaccount and a stock subaccount. Each year's EVA award will be allocated to the Participant's account in accordance with the following provisions of this Section 5. b. Prior Plan Transfer. If the Participant has an EVA account balance (either positive or negative) under the Prior Plan, such account balance will be transferred to the Plan and become the Participant's initial account balance under the Plan as of the Initial Effective Date. c. 1999 EVA Award Allocation. As soon as administratively practicable after each Participant's EVA award is determined for the year ending December 31, 1999, each Participant's award will be credited or debited, as the case may be, to the Participant's account. Each Participant who has a positive EVA account balance (consisting of any amount transferred from the Prior Plan under Section 5(b) and the Participant's 1999 EVA award) may elect, on a one-time basis under procedures established by the Committee, to allocate his or her accumulated account balance as follows: (i) 100% to the cash subaccount; or (ii) 50% to the cash subaccount and 50% to the stock subaccount. If a Participant fails to make a valid election for the allocation of his or her EVA account balance, 100% of the Participant's balance will be allocated to the Participant's cash subaccount. If the Participant elects to allocate 50% of his or her EVA account to a stock subaccount, the stock allocated to such account will be subject to the provisions of Section 7. d. Subsequent Elections and Allocations. At the beginning of each fiscal year commencing with fiscal year 2000, each Participant will be entitled to make an election, on a form provided by the Committee, with respect to the allocation of the EVA award that will be determined under the formula established under Section 3 for that fiscal year. The Participant may elect to allocate his or her EVA award for that year as follows: (i) 100% to the cash subaccount; or (ii) 50% to the cash subaccount and 50% to the stock subaccount. If a Participant fails to make a valid election for the allocation of his or her EVA award for a particular year, 100% of the Participant's EVA award for that year will be allocated 3 to the Participant's cash subaccount. After the EVA award for each Participant is determined, the EVA award will be allocated in accordance with the Participant's applicable election; provided, however, that if the Participant's EVA award for a particular year is negative, the award will be debited to the Participant's cash subaccount only and only in proportion to the Participant's allocation election. In other words, if the Participant's EVA award is negative and the Participant elected an allocation of 50% of the award to his or her cash subaccount and 50% to his or her stock subaccount, 50% of the negative EVA award will be debited to the Participant's cash subaccount and the remaining 50% will be ignored. If any of a Participant's EVA award is allocated to the Participant's stock subaccount under the Participant's election, the stock allocated to such account will be subject to the provisions of Section 7. e. Other Credits and Debits to Participants' Accounts. Each year, the Company will credit interest to a positive cash subaccount balance or debit interest on a negative cash subaccount balance at an appropriate money market rate. 6. Annual Payout. a. Determination of Annual Payout. Each year, as soon as administratively practicable after each Participant's EVA award has been determined and allocated to his or her account under Section 5, each Participant will receive a payout of a specified percentage of the value of his or her aggregate account balance, including both the cash subaccount and the stock subaccount (the value of which will be determined in accordance with Section 6(b)). Unless otherwise determined by the Committee, the minimum standard payout percentage will equal one-third (1/3) of such aggregate account balance. If EVA awards are or have been negative, the aggregate account balance may be negative. In such case, the Participant will receive no payout under this Section 6 until the aggregate of subsequent EVA awards results in a positive aggregate account balance. Payment of the annual payout, if any, will be made as follows: (i) the payout will be reduced by the value (determined in accordance with Section 6(b)) of the Participant's restricted stock in the stock subaccount that first becomes vested and distributable to the Participant under Sections 7(c) and 7(e) in the year in which the annual payout is determined; and (ii) the remaining amount of the payout, if any, will be paid from the Participant's cash subaccount in a lump sum. b. Determining Value of Stock. Solely for purposes of determining the value of the Participant's stock subaccount balance under Section 6(a) and the value of the stock that vests in a particular year under Section 6(a)(i), the Committee shall value each share of common stock held in the stock subaccount based on the fair market value (as defined in Section 7(a)) previously assigned to such stock for the purposes of allocating a Participant's EVA award to his or her stock subaccount in accordance with Section 7(a). Further, the value of the stock subaccount for purposes of Section 6(a) shall include the 4 value (as determined under the preceding sentence) of any shares of restricted stock that first become vested and distributable to the Participant under Sections 7(c) and 7(e) in the year in which the annual payout is determined. c. Participant's Equity. Following payment of the annual payout as described above, the remainder of the account balance will represent the Participant's "equity" in his or her EVA cash and stock subaccounts for future years. 7. Provisions Relating to Stock Subaccounts. a. Allocation of Stock to the Stock Subaccount. With respect to each amount allocated to a Participant's stock subaccount under Section 5(c) or Section 5(d), the Participant's stock subaccount will be credited with a number of shares of the Company's common stock equal to the dollar amount of such allocation (i.e., 50% of the Participant's account balance for allocations under Section 5(c) and 50% of the Participant's EVA award for a particular year for allocations under Section 5(d)) divided by the fair market value of the Company's common stock, determined as of the date by which the Participant's completed election form must be submitted to and received by the Company for such year in accordance with rules established by the Committee. For purposes of the Plan, "fair market value" means, with respect to any applicable date, the average of the high and low trading prices of the Company's common stock on the New York Stock Exchange on the ten (10) consecutive trading days ending on the applicable date or, if such date is not a date on which the Company's common stock was traded, the most recent prior date on which the Company's common stock was traded. No fractional shares will be credited to a Participant's stock subaccount; rather, any dollar amount of the Participant's allocation representing a fractional amount of the per share fair market value of the Company's common stock will be credited to the Participant's cash subaccount. b. Restricted Stock. Shares of Company common stock allocated to a Participant's stock subaccount for a particular year will be issued as restricted stock issued under and generally subject to (i) the provisions of the Huttig Building Products, Inc. 1999 Stock Incentive Plan, with respect to EVA awards granted prior to January 1, 2002, and (ii) the provisions of the Huttig Building Products, Inc. 2001 Stock Incentive Plan, with respect to EVA awards granted on or after January 1, 2002. Pursuant to those provisions, each Participant will be required to enter into a restricted stock agreement with the Company with respect to stock allocated to his or her stock subaccount for a particular year. c. Vesting of Restricted Stock. The restricted shares of Company common stock issued to a Participant under Section 7(b) will vest over a period of two years as follows: (i) 50% on the first anniversary of the allocation date; and 5 (ii) the remaining 50% on the second anniversary of the allocation date. d. Custody. During the period prior to the full vesting of any common stock allocated to a Participant's stock subaccount, the Company, or its designee, will hold the share certificates representing such common stock in custody for the benefit of the Participant. e. Distribution of Vested Stock. As soon as administratively practicable after the vesting of the common stock allocated to a Participant's stock subaccount, the share certificates representing that stock will be distributed to the Participant and that stock shall not be taken into account for purposes of determining the Participant's annual payout under Section 6 or for any other purposes in any year following the year in which the distribution occurs. f. Effect of Negative EVA Awards. In accordance with the provisions of Section 5(c), negative EVA awards in any year will have no effect on any Participant's stock subaccount or on the shares of restricted stock issued under this Section 7. g. Application to Awards Determined Prior to the Amended Effective Date. Solely to the extent that a Participant would be entitled to an allocation of additional shares of Company common stock to the Participant's stock subaccount, the Committee may apply the provisions of Section 7(a) as applicable on and after the Amended Effective Date to any award determined pursuant to the provisions of the Plan in effect prior to the Amended Effective Date. Any additional shares of Company common stock allocated to a Participant's stock subaccount under this Section 7(g) shall be deemed to have been allocated as of the same date that the initial allocation of stock was made with respect to the applicable EVA award. Further, such additional shares of Company common stock shall be subject to all other provisions of the Plan and any other terms and conditions imposed by the Committee in its discretion. 8. Treatment of Participants' Accounts Upon Termination of Employment or Other Events. a. General. If a Participant leaves the Company by reason of termination or resignation or ceases to be eligible to participate in the Plan, his or her account balance will be treated as follows: EVENT DISPOSITION OF ACCOUNT BALANCE/RESTRICTED SHARES - Terminate/quit Lose cash subaccount balance; forfeit unvested restricted shares - Removed from plan/demotion Cash subaccount balance paid out in two equal installments on the second and third succeeding EVA payout dates; restricted shares 6 continue to vest - Unit sold by Huttig Receive cash subaccount balance in cash; all restricted shares become fully vested - Normal retirement at Receive cash subaccount balance in age 65/ death/disability cash; all restricted shares become fully vested - Unit spun off No payout; cash subaccount balance continued with spun off company; all restricted shares become fully vested - Huttig acquired Receive cash subaccount balance in cash; all restricted shares become fully vested - Transfer to another business unit Cash subaccount balance transfers with executive; restricted shares continue to vest b. Acceleration of Distribution. The Participant's entire cash subaccount balance will become payable and his or her restricted stock will fully vest upon normal retirement (age 65), death, or disability, or a change-in-control. (The Committee will retain the discretion to pay the entire account balance upon early retirement.). c. Definition of Change in Control. For purposes of the Plan, the term "change in control" means (i) the first purchase of shares pursuant to a tender offer or exchange offer (other than a tender offer or exchange offer by the Company) for all or part of the Company's Common Stock or any securities convertible into such Common Stock, (ii) the receipt by the Company of a Schedule 13D or other advice indicating that a person is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of 20% or more of the Company's Common Stock calculated as provided in paragraph (d) of said Rule 13d-3, (iii) the date of approval by stockholders of the Company of an agreement providing for any consolidation or merger of the Company in which the Company will not be the continuing or surviving corporation or pursuant to which shares of Common Stock of the Company would be converted into cash, securities or other property, other than a merger of the Company in which the holders of Common Stock of the Company immediately prior to the merger would have the same proportion of ownership of Common Stock of the surviving corporation immediately after the merger, (iv) the date of the approval by stockholders of the Company of any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company or (v) the adoption of any plan or proposal for the liquidation (but not a partial liquidation) or dissolution of the Company or (vi) individuals who, as of the Initial Effective Date, constituted the Board of Directors of the Company (the "Board") generally and as of the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director 7 subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Plan, considered as though such person were a member of the Incumbent Board. d. Tax Gross-Up. If it is determined that any payment of an account by the Company to a Participant by reason of a change-in-control is subject to the excise tax imposed by Section 4999 of the Code, the Company shall make additional cash payments to the Participant such that after payment of all taxes including any excise tax imposed on such payments, the Participant will retain an amount equal to the excise tax on all the payments. 9. Plan Amendment and Termination. The Board of Directors may modify, suspend or terminate the Plan at any time. 8 EX-10.8 4 c67952ex10-8.txt SCHEDULE TO STOCK OPTION AGREEMENT EXHIBIT 10.8 SCHEDULE TO STOCK OPTION AGREEMENT UNDER HUTTIG BUILDING PRODUCTS, INC. 1999 STOCK INCENTIVE PLAN
OPTION HOLDER NUMBER OF SHARES EXERCISE PRICE DATE OF GRANT ------------- ---------------- -------------- ------------- George M. Dickens, Jr. 34,000 $4.29 per share January 24, 2000 R. S. Evans 100,000 $4.29 per share January 24, 2000 Barry J. Kulpa 326,000 $4.29 per share January 24, 2000 John Mullin 11,000 $4.29 per share January 24, 2000 Thomas S. McHugh 15,000 $4.40 per share May 1, 2000 Kenneth E. Thompson 100,000 $4.73 per share August 14, 2000 George M. Dickens, Jr. 29,400 $4.34 per share January 22, 2001 Barry J. Kulpa 140,000 $4.34 per share January 22, 2001 Thomas S. McHugh 13,500 $4.34 per share January 22, 2001 John Mullin 11,500 $4.34 per share January 22, 2001 Kenneth E. Thompson 20,000 $4.34 per share January 22, 2001 Nick H. Varsam 30,000 $4.85 per share June 25, 2001
EX-10.9 5 c67952ex10-9.txt 2001 STOCK INCENTIVE PLAN EXHIBIT 10.9 HUTTIG BUILDING PRODUCTS, INC. 2001 STOCK INCENTIVE PLAN 1. PURPOSE AND ADOPTION OF THE PLAN The purpose of the Huttig Buildings Products, Inc. 2001 Stock Incentive Plan (as the same may be amended from time to time, the "Plan") is (i) to attract and retain key employees of Huttig Building Products, Inc., a Delaware corporation (the "Company"), and its Subsidiaries (as defined below) who are and will be contributing to the success of the business; (ii) to motivate and reward key employees who have made significant contributions to the success of the Company and encourage them to continue to give their best efforts to its future success; (iii) to provide competitive incentive compensation opportunities; and (iv) to further opportunities for stock ownership by such key employees in order to increase their proprietary interest in the Company and their personal interest in its continued success. The Plan has been approved by the Board of Directors of the Company (the "Board") to be effective as of December 3, 2001 (the "Effective Date"). The Plan shall remain in effect until terminated by action of the Board. 2. DEFINITIONS For the purposes of this Plan, capitalized terms shall have the following meanings: (a) "Award" means any grant to a Participant of one or a combination of Non-Qualified Stock Options described in Section 6 and Restricted Shares described in Section 8. (b) "Award Agreement" means a written agreement between the Company and a Participant or a written notice or certificate from the Company to a Participant specifically setting forth the terms and conditions of an Award granted under the Plan. (c) "Beneficiary" means an individual, trust or estate who or which, by a written designation of the Participant filed with the Company or by operation of law, succeeds to the rights and obligations of the Participant under the Plan and an Award Agreement upon the Participant's death. (d) "Board" shall have the meaning given to such term in Section 1(b). (e) "Change in Control" means the first to occur of the following events after the Effective Date: (i) the first purchase of shares pursuant to a tender offer or exchange offer (other than a tender offer or exchange offer by the Company) for all or part of the Company's Common Stock or any securities convertible into such Common Stock, (ii) the receipt by the Company of a Schedule 13D or other advice indicating that a person is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Exchange Act) of 20% or more of the Company's Common Stock calculated as provided in paragraph (d) of said Rule 13d-3, (iii) the date of consummation of any Merger of the Company in which the Company will not be the continuing or surviving corporation or pursuant to which shares of Common Stock of the Company would be converted into cash, securities or other property, other than a Merger of the Company in which the holders of Common Stock of the Company immediately prior to the Merger would own more than 50% of the common stock of the surviving corporation immediately after the Merger, (iv) the date of consummation of any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, (v) the adoption of any plan or proposal for the liquidation (but not a partial liquidation) or dissolution of the Company, or (vi) the date upon which the individuals who constitute the Board as of the Effective Date (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to such date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company) shall, for purposes of this Plan, be considered as though such person were a member of the Incumbent Board. (f) "Code" means the Internal Revenue Code of 1986, as amended. References to a section of the Code include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section. (g) "Committee" means the Organization and Compensation Committee of the Board or such other committee composed of at least three members of the Board as may be designated by the Board from time to time or, if there shall be no such Committee, the Board. (h) "Company" shall have the meaning given to such term in Section 1. (i) "Common Stock" means Common Stock, par value $.01 per share, of the Company. (j) "Date of Grant" means the date as of which the Committee grants an Award. If the Committee contemplates an immediate grant to a Participant, the Date of Grant shall be the date of the Committee's action. If the Committee contemplates a date on which the grant is to be made other than the date of the Committee's action, the Date of Grant shall be the date so contemplated and set forth in or determinable from the records of action of the Committee; provided, however, that the Date of Grant shall not precede the date of the Committee's action. (k) "Effective Date" shall have the meaning given to such term in Section 1. (l) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (m) "Fair Market Value" means, as of any applicable date, for all purposes in this Plan, the average of the high and low sales prices of the Common Stock on the New York Stock 2 Exchange-Composite Transactions Tape on such date, or if no sale of stock has been recorded on such date, then on the next preceding date on which a sale was so made. In the event the Common Stock is not admitted to trade on a securities exchange, the Fair Market Value as of any given date shall be as determined in good faith by the Committee. (n) "Incentive Stock Option" means a stock option within the meaning of Section 422 of the Code. (o) "Merger" means any merger, reorganization, consolidation, share exchange, transfer of assets or other transaction having similar effect involving the Company. (p) "Non-Qualified Stock Option" means a stock option which is not an Incentive Stock Option. (q) "Options" means all Non-Qualified Stock Options granted at any time under the Plan. (r) "Participant" means a person designated to receive an Award under the Plan in accordance with Section 5. (s) "Permanent Disability" means a physical or mental disability or infirmity that prevents the performance of a Participant's services for the Company and its Subsidiaries lasting (or likely to last, based on competent medical evidence presented to the Committee) for a period of six months or longer. The Committee's reasoned and good faith judgment of Permanent Disability shall be final and shall be based on such competent medical evidence as shall be presented to it by such Participant or by any physician or group of physicians or other competent medical expert employed by the Participant or the Company to advise the Committee. (t) "Plan" shall have the meaning given to such term in Section 1(a). (u) "Purchase Price," with respect to Options, shall have the meaning set forth in Section 6(b). (v) "Restricted Shares" means Common Stock subject to restrictions imposed in connection with Awards granted under Section 8. (w) "Retirement" means a Participant's retirement at or after age 65. (x) "Subsidiary" means a subsidiary of the Company within the meaning of Section 424(f) of the Code. 3. ADMINISTRATION (a) This Plan shall be administered by the Committee; provided, however, if any member of the Committee does not meet the qualifications for a "non-employee director" established 3 from time to time by rules or regulations of the Securities and Exchange Commission under Section 16 of the Exchange Act, the remaining members of the Committee (but not less than two) shall administer the Plan. The Committee shall have the sole discretionary authority to interpret the Plan, to establish and modify administrative rules for the Plan, to impose such conditions and restrictions on Awards as it determines appropriate, and to take such steps in connection with the Plan and Awards granted hereunder as it may deem necessary or advisable. No member of the Committee shall be eligible to participate in, and no person shall become a member of the Committee if within one year prior thereto he or she shall have been eligible to participate in this Plan or any other plan of the Company or its Subsidiaries (other than the Huttig Building Products, Inc. 1999 Non-Employee Director Restricted Stock Plan) entitling the participants therein to acquire stock, stock options, stock appreciation rights or restricted stock of the Company or its Subsidiaries. Decisions of the Committee in connection with the administration of the Plan shall be final, conclusive and binding upon all parties, including the Company, its stockholders and the Participants. (b) The Committee may employ attorneys, consultants, accountants or other persons and the Committee and the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All usual and reasonable expenses of the Committee shall be paid by the Company. No Committee member shall receive compensation with respect to his or her services for the Committee except as may be authorized by the Board. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all employees who have received awards, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretations taken or made in good faith with respect to this Plan or Awards made hereunder, and all members of the Committee shall be fully indemnified and protected by the Company in respect of any such action, determination or interpretation. 4. SHARES (a) The total number of shares of Common Stock authorized to be issued under the Plan shall not exceed in the aggregate 500,000 shares. The number of shares available for issuance under the Plan shall be subject to adjustment in accordance with Section 9. The shares to be offered under the Plan shall be limited solely to issued shares of Common Stock which will have been reacquired by the Company, including shares purchased in the open market. (b) Subject to the provisions of Section 6(d), any shares subject to an Option granted under this Plan that expires or is terminated for any reason without having been exercised in full, shares of Common Stock forfeited as provided in Section 8(h) and shares of Common Stock subject to any Award that are otherwise surrendered by a Participant or terminated shall continue to be available for future grants under this Plan. If any shares of Common Stock are withheld from those otherwise issuable or are tendered to the Company, by attestation or otherwise, in connection with the exercise of an Option, only the net number of shares of Common Stock issued as a result of such exercise shall be deemed delivered for purposes of determining the maximum number of shares available for delivery under the Plan. 4 5. PARTICIPATION Participants in the Plan shall be such key employees of the Company and its Subsidiaries as the Committee, in its sole discretion, may designate from time to time. For purposes of the Plan, "key employees" shall mean officers as well as other employees (including officers and other employees who are also directors of the Company or any Subsidiary) designated by the Committee in its discretion upon the recommendation of management, but shall not include any employee who, assuming the full exercise of such Option, would own more than 10% of the combined voting power of all classes of stock of the Company or any Subsidiary. Options under the Plan shall only be Non-Qualified Stock Options and not Incentive Stock Options. Awards granted hereunder shall be evidenced by Award Agreements in such form as the Committee shall approve, which Agreements shall comply with and be subject to the terms and conditions of this Plan. 6. GRANT AND EXERCISE OF STOCK OPTIONS (a) The purchase price of each share of Common Stock upon exercise of any Options granted under the Plan shall not be less than 100% of the Fair Market Value of the stock on the date the Options are granted (the "Purchase Price"). (b) Except as otherwise permitted by the Committee or otherwise provided in an Award Agreement, each Option granted under this Plan shall be exercisable in whole or in part (in lots of ten shares or any multiple thereof) from time to time beginning from the date the Option is granted, subject to the provision that an Option may not be exercised by the Participant, except as provided in Section 6(g) or Section 7, (i) more than 90 days after the termination of the Participant's employment by the Company or a Subsidiary or more than 10 years from the Date of Grant, whichever period is shorter, or (ii) prior to the expiration of one year from the Date of Grant; provided further, that, unless otherwise determined by the Committee, the Option may not be exercised in excess of 50% of the total shares subject to such Option during the second year after the Date of Grant, 75% during the third year, and 100% thereafter. (c) The Purchase Price of the shares purchased upon the exercise of an Option shall be paid in full at the time of exercise in cash or, in whole or in part, by tendering (either actually or by attestation) shares of Common Stock. The value of each share of Common Stock delivered in payment of all or part of the Purchase Price upon the exercise of an Option shall be the Fair Market Value of the Common Stock on the date the Option is exercised. Exercise of Options shall also be permitted, if approved by the Committee, in accordance with a cashless exercise program under which, if so instructed by a Participant, shares of Common Stock may be issued directly to the Participant's broker or dealer upon receipt of an irrevocable written notice of exercise from the Participant. 5 (d) The Committee, upon such terms and conditions as it shall deem appropriate, may (but shall not be obligated to) authorize on behalf of the Company the acceptance of the surrender of the right to exercise an Option or a portion thereof (but only to the extent and in the amounts that such Option shall then be exercisable) and the payment by the Company therefor of an amount equal to the excess of the Fair Market Value on the date of surrender of the shares of Common Stock covered by such Option or portion thereof over the aggregate option price of such shares. Such payment shall be made in shares of Common Stock (valued at such Fair Market Value) or in cash, or partly in cash and partly in shares of Common Stock, as the Committee shall determine. The shares of Common Stock covered by any Option or portion thereof, as to which the right to exercise shall have been so surrendered, shall not again be available for the purposes of this Plan. (e) Each Option granted under this Plan shall not be transferable by the Participant otherwise than by will or the laws of descent and distribution, and shall be exercisable, during the Participant's lifetime, only by the Participant. Notwithstanding the foregoing, Non-Qualified Stock Options may be transferable, without payment of consideration, to immediate family members of the Participant or to trusts or partnerships for the benefit of such family members. (f) The Company, in its sole discretion, shall have the right (but shall not in any case be obligated) to withhold shares issuable upon the exercise of an Option granted hereunder sufficient to pay, or to require a Participant to pay to the Company, the cash amount of any taxes which the Company is required to withhold upon the exercise of an Option granted hereunder, provided that anything contained herein to the contrary notwithstanding, the Committee may, in accordance with such rules as it may adopt, accept shares of Common Stock received in connection with the exercise of the Option being taxed or otherwise previously acquired in satisfaction of any withholding requirements or up to the entire tax liability arising from the exercise of such Option. (g) The Committee, in its sole discretion, shall have the right (but shall not in any case be obligated), exercisable at any time after the Date of Grant, to permit the exercise of any Option prior to the time such Option would otherwise become exercisable under the terms of the Award Agreement. (h) The Committee shall have the authority to specify, either at the time of grant of an Option or at a later date, that upon exercise of all or a portion of that Option (the "Original Option") a reload stock option ("Reload Option") shall be granted under specified conditions. A Reload Option shall entitle the Participant to purchase a number of shares equal to the shares delivered in payment of all or part of the exercise price of the Original Option pursuant to Section 6(c) plus the shares delivered or withheld to satisfy the tax liability associated with such exercise pursuant to Section 6(g). The specific terms and conditions applicable for Reload Options shall be determined by the Committee and shall be set forth in rules adopted by the Committee or in agreements or other documentation evidencing such Reload Options; provided, however, that (i) the exercise price of the Reload Option shall be the Fair Market Value of the Common Stock at the Date of Grant, (ii) the Reload Option shall not be exercisable, except as provided in Section 6(g) or Section 7, earlier than six months after its Date of Grant, and (iii) the 6 expiration date of the Reload Option shall not be later than the expiration date of the Original Option. 7. EXERCISE OF OPTIONS UPON TERMINATION OF EMPLOYMENT (a) If a Participant shall retire or shall cease to be employed by the Company or by a Subsidiary by reason of Permanent Disability or after a Change in Control, all Options theretofore granted to such Participant, whether or not previously exercisable, may be exercised in whole or in part, and/or the Committee may authorize the acceptance of the surrender of the right to exercise such Options or any portion thereof as provided in Section 6(d), at any time within 90 days after such Retirement, termination by reason of Permanent Disability, or termination after a Change in Control (or such longer period as may be permitted by the Committee), but not after the expiration of the term of the Option. (b) If a Participant shall die while employed by the Company or by a Subsidiary or within 90 days of the cessation or termination of such employment under circumstances described in Section 7(a) (or such longer period as may be permitted by the Committee), all Options theretofore granted to such Participant, whether or not previously exercisable, may be exercised in whole or in part, and/or the Committee may authorize the acceptance of the surrender of the right to exercise such Options or any portion thereof as provided in Section 6(d), by the estate of such Participant (or by a person who shall have acquired the right to exercise such Option by bequest or inheritance), at any time within one year after the death of such Participant but not after the expiration of the term of the Option. (c) If a Participant's employment is terminated for any reason other than death, disability or retirement or after a Change in Control, such Participant may exercise any Option in whole or in part, at any time within 90 days after such termination of employment, but only to the extent such Option is exercisable at the date of termination in accordance with Section 6(b). In no event may any Option be exercised after the expiration of the term of the Option. 8. GRANT OF RESTRICTED SHARES (a) The Committee may grant to any Participant an Award of such number of shares of Common Stock on such terms, conditions and restrictions, whether based on performance standards, periods of service, retention by the Participant of ownership of specified shares of Common Stock or other criteria, as the Committee shall establish. The terms of any Restricted Share Award granted under this Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with this Plan and may include awards granted under the Huttig Building Products, Inc. EVA Incentive Compensation Plan, in accordance with Section 7(b) thereunder. (b) As soon as practicable after the Date of Grant of a Restricted Share Award by the Committee, the Company shall cause to be transferred on the books of the Company or its agent, 7 shares of Common Stock, registered on behalf of the Participant, evidencing the Restricted Shares covered by the Award, subject to forfeiture to the Company as of the Date of Grant if an Award Agreement with respect to the Restricted Shares covered by the Award is not duly executed by the Participant and timely returned to the Company. All shares of Common Stock covered by Awards under this Section 8 shall be subject to the restrictions, terms and conditions contained in the Plan and the applicable Award Agreements entered into by the appropriate Participants. Until the lapse or release of all restrictions applicable to an Award of Restricted Shares the share certificates representing such Restricted Shares may be held in custody by the Company, its designee, or, if the certificates bear a restrictive legend, by the Participant. Upon the lapse or release of all restrictions with respect to an Award as described in Section 8(e), one or more share certificates, registered in the name of the Participant, for an appropriate number of shares as provided in Section 8(e), free of any restrictions set forth in the Plan and the related Award Agreement shall be delivered to the Participant. (c) Beginning on the Date of Grant of a Restricted Share Award and subject to execution of the related Award Agreement as provided in Section 8(b), and except as otherwise provided in such Award Agreement, the Participant shall become a stockholder of the Company with respect to all shares subject to the Award Agreement and shall have all of the rights of a stockholder, including, but not limited to, the right to vote such shares and the right to receive dividends; provided, however, that any shares of Common Stock or other securities distributed as a dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not yet lapsed, shall be subject to the same restrictions as such Restricted Shares and held or restricted as provided in Section 8(b). (d) None of the Restricted Shares may be assigned or transferred (other than by will or the laws of descent and distribution or to an inter vivos trust with respect to which the Participant is treated as the owner under Sections 671 through 677 of the Code), pledged or sold prior to the lapse of the restrictions applicable thereto. (e) Upon expiration or earlier termination of the forfeiture period without a forfeiture and the satisfaction of or release from any other conditions prescribed by the Committee, or at such earlier time as provided under the provisions of Section 8(i), the restrictions applicable to the Restricted Shares shall lapse. As promptly as administratively feasible thereafter, subject to the requirements of Section 8(k), the Company shall deliver to the Participant or, in case of the Participant's death, to the Participant's Beneficiary, one or more share certificates for the appropriate number of shares of Common Stock, free of all such restrictions, except for any restrictions that may be imposed by law. (f) A Participant's Restricted Share Award shall not be contingent on any payment by or consideration from the Participant other than the rendering of services. (g) The Committee will have the discretion, as to any Restricted Share Award, to award a separate cash amount, payable to the Participant at the time when the forfeiture restrictions on the Restricted Shares lapse or at such earlier time as the Participant may elect to be taxed with 8 respect to such Restricted Shares equal to (i) the federal income tax and the Section 4999 golden parachute excise tax, if any, payable with respect to the lapse of such restrictions or with respect to such election, divided by (ii) one (1) minus the total effective federal income and excise tax rate applicable as a result of the lapse of such restrictions or a result of such election. (h) Subject to Sections 8(i) and 8(j), Restricted Shares shall be forfeited and returned to the Company and all rights of the Participant with respect to such Restricted Shares shall terminate unless the Participant continues in the service of the Company or a Subsidiary until the expiration of the forfeiture period for such Restricted Shares and satisfies any and all other conditions set forth in the Award Agreement. The Committee shall determine the forfeiture period (which may, but need not, lapse in installments) and any other terms and conditions applicable with respect to any Restricted Share Award. (i) Notwithstanding anything contained in this Section 8 to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Award Agreement under appropriate circumstances (including the death, disability or Retirement of the Participant or a material change in circumstances arising after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of the Restricted Shares) as the Committee shall deem appropriate. (j) Unless otherwise provided by the Committee in the applicable Award Agreement, in the event of a Change in Control, all restrictions applicable to the Restricted Share Award shall terminate fully and the Participant shall immediately have the right to the delivery of share certificates for such shares in accordance with Section 8(e). (k) The Company shall have the right (but shall not in any case be obligated), in its sole discretion, to withhold shares required to be delivered upon expiration of restrictions sufficient to pay, or to require a Participant to pay to the Company, the cash amount of any taxes which the Company is required to withhold with respect to any amount payable and/or shares issuable under such Participant's Award. The Company may defer payment of cash or issuance of shares upon exercise or vesting of an Award unless indemnified to its satisfaction against any liability for any such tax. The amount of such withholding or tax payment shall be determined by the Committee and shall be payable by the Participant at such time as the Committee determines. 9. ADJUSTMENTS TO REFLECT CAPITAL CHANGES In the event that there is an increase in the number of issued shares of the Common Stock by reason of any stock dividend, stock split, recapitalization or other similar event, the total number of shares available for Awards under the Plan and the number of shares remaining subject to purchase under each outstanding Option shall be increased and the price per share of such outstanding Options shall be decreased, in proportion to such increase in issued shares. Conversely, in case the issued shares of Common Stock shall be combined into a smaller number of shares, the total number of shares available for Awards under the Plan and the number of shares remaining subject to purchase under each outstanding Option shall be decreased and the 9 price per share of such outstanding Options shall be increased, in proportion to such decrease in issued shares. In the event of any Merger, the Committee may make such adjustment in the shares available for Awards under the Plan and the shares subject to outstanding Awards and the price thereof, if applicable, as the Committee, in its sole discretion, deems appropriate. In the event of an exchange of Common Stock, or other securities of the Company convertible into Common Stock, for the stock or securities of another corporation, the Committee may, in its sole discretion, equitably substitute such new stock or securities for a portion or all of the shares of Common Stock subject to outstanding Awards. 10. AMENDMENT AND TERMINATION This Plan may be amended or terminated at any time by the Board except with respect to any Awards then outstanding, and any Award granted under this Plan may be terminated at any time with the consent of the Participant. The Board may make such changes in and additions to this Plan as it may deem proper and in the best interest of the Company; provided, however, that no such action shall, without the consent of the Participant, materially impair any Award theretofore granted under this Plan. 11. GENERAL PROVISIONS (a) Each Option granted under this Plan shall be evidenced by a written Award Agreement containing such terms and conditions as the Committee may require, and no person shall have any rights under any Award granted under this Plan unless and until such agreement has been executed and delivered by the Company and, if required by the Committee, by the Participant. (b) In the event of any conflict between the terms of this Plan and any provision of any Option agreement, the terms of this Plan shall be controlling. (c) No Participant or other person shall have any claim of right to be granted an Award under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ of the Company or any of its Subsidiaries. Unless otherwise agreed by contract, the Company reserves the right to terminate its employment relationship with any person at any time and for any reason. (d) Income realized as a result of a grant or an exercise of any Award under this Plan shall not be included in the Participant's earnings for the purpose of any benefit plan in which the Participant may be enrolled or for which the Participant may become eligible unless otherwise specifically provided for in such plan. (e) The obligation of the Company to sell and deliver shares of Common Stock with respect to any Award granted hereunder shall be subject to, as deemed necessary or appropriate by counsel for the Company, (i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the effectiveness of 10 a registration statement under the Securities Act of 1933, and (ii) the condition that such shares shall have been duly listed on such stock exchanges as the Common Stock is then listed. (f) Anything in this Plan to the contrary notwithstanding, it is expressly agreed and understood that if any one or more provisions of this Plan shall be illegal or invalid such illegality or invalidity shall not invalidate this Plan or any other provisions thereof, but this Plan shall be effective in all respects as though the illegal or invalid provisions had not been included. (g) All determinations made and actions taken pursuant to the Plan shall be governed by the laws of the State of Delaware, other than the conflict of laws provisions thereof, and construed in accordance therewith. (h) This Plan shall be unfunded and the Company shall not be required to segregate any assets that may at any time be represented by Awards under this Plan. Neither the Company, any of its Subsidiaries, the Committee, nor the Board shall be deemed to be a trustee of any amounts to be paid under this Plan nor shall anything contained in this Plan or any action taken pursuant to its provisions create or be construed to create a fiduciary relationship between the Company and/or its Subsidiaries, and a Participant. To the extent any person acquires a right to receive an Award under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. 11 EX-10.10 6 c67952ex10-10.txt FORM OF STOCK OPTION AGREEMENT EXHIBIT 10.10 STOCK OPTION AGREEMENT HUTTIG BUILDING PRODUCTS, INC. 2001 STOCK INCENTIVE PLAN 1. GRANT OF OPTION Huttig Building Products, Inc. (the "Company") hereby grants to the recipient of the letter of the Chairman and/or Secretary of the Company ("Letter") to which this Annex A is attached ("Employee"), and the Employee accepts, an option (the "Option") to purchase from the Company, the number of shares of Huttig Building Products, Inc. common stock, $0.01 par value per share ("Common Stock"), at the option exercise price set forth in the Letter. The Letter and this Annex A together constitute the stock option agreement between the parties (the "Agreement"). Except as otherwise expressly provided herein, the Option is subject to the terms and provisions of the Huttig Building Products, Inc. 2001 Stock Incentive Plan (the "Plan"). The Option is hereby designated as a non-qualified stock option that does not qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended. 2. TERM OF OPTION; EXERCISABILITY The Option shall be exercisable in whole or in part (in lots of ten shares or any multiple thereof) from time to time beginning from the date hereof, subject to the provision that an Option may not be exercised by the Employee, except as provided in paragraphs 4 and 5 hereof, (a) more than 90 days after the termination of his employment by the Company or a subsidiary, or more than 10 years from the date the Option is granted, whichever period is shorter, or (b) prior to the expiration of one year from the date of grant as indicated in the Letter, and provided further that the Option may not be exercised in excess of 50% of the total shares subject to the Option during the second year after the date of grant, 75% during the third year and 100% thereafter during the remainder of the Option term. Notwithstanding the foregoing, the Option will be exercisable in full prior to the date indicated in the preceding sentence as of the date that the average of the high and low sales prices of the Common Stock over any 10 consecutive trading days equals or exceeds two times the option price set forth in the Letter. 3. FORM OF EXERCISE The purchase price of the shares purchased upon the exercise of the Option shall be paid in full at the time of exercise in cash or in whole or in part by tendering (either actually or by attestation) shares of Common Stock; provided, however, that if shares acquired pursuant to this Option or any other option granted under a stock compensation plan of the Company are utilized to pay such purchase price, such shares must have been acquired by the Employee more than six months prior to the exercise of this Option or held for such other period of time as the Organization and Compensation Committee of the Board of Directors of the Company (the "Committee") may establish. The value of each share delivered in payment of all or part of the purchase price upon the exercise of the Option shall be the Fair Market Value of the Common Stock on the date the Option is exercised. The Option may also be exercised in accordance with a cashless exercise program under which, if so instructed by the Employee, shares of Common Stock may be issued directly to the Employee's broker or dealer upon receipt of an irrevocable written notice of exercise from the Employee. The Committee, upon such terms and conditions as it shall deem appropriate, may (but shall not be obligated to) authorize the acceptance of the surrender of the right to exercise the Option or a portion thereof (but only to the extent and in the amounts that the Option shall then be exercisable) and payment by the Company of an amount equal to the excess of the Fair Market Value on the date of surrender of the shares of Common Stock covered by such Option, or portion thereof, over the aggregate option price of such shares. Such payment shall be made in shares of Common Stock (valued at such Fair Market Value), or in cash, or partly in cash and partly in Common Stock, as the Committee shall determine. For the purposes of this Agreement, the term "Fair Market Value" as of any day shall mean the average of the high and low sales prices of the Common Stock on the New York Stock Exchange Composite Transaction Tape on such day or, if no sale of such Common Stock has been recorded on such day, on the next preceding date on which a sale was so made. 4. EXERCISE UPON TERMINATION OF EMPLOYMENT If the Employee's employment with the Company or one of its subsidiaries terminates due to permanent disability (as determined by the Committee) or the Employee's retirement on or after reaching age 65, or after a Change In Control (as defined below), the Employee may exercise this Option, in whole or in part, whether or not previously exercisable, and/or the Committee may authorize the acceptance of the surrender of the right to exercise this Option or any portion thereof as provided in paragraph 3, at any time within 90 days after such termination due to permanent disability or retirement, or termination after a Change In Control, but not after the expiration of the term of this Option. If the Employee's employment is terminated for any reason other than death, disability or retirement or after a Change In Control, this Option may be exercised in whole or in part, at any time within 90 days after such termination of employment, but only to the extent this Option is vested and exercisable at the date of termination in accordance with Paragraph 2, and in any event, not later than the expiration of the term of this Option. For purposes of this Agreement, the term "Change In Control" shall mean (i) the first purchase of shares pursuant to a tender offer or exchange offer (other than a tender offer or exchange offer by the Company) for all or part of the Company's Common Stock or any securities convertible into such Common Stock, (ii) the receipt by the Company of a Schedule 13D or other advice indicating that a person is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Exchange Act) of 20% or more of the Company's Common Stock calculated as provided in paragraph (d) of said Rule 13d-3, (iii) the date of consummation of any Merger of the Company in which the Company will not be the continuing or surviving corporation or pursuant to which shares of Common Stock of the Company would be converted into cash, securities or other property, other than a Merger of the Company in which the holders -2- of Common Stock of the Company immediately prior to the Merger would own more than 50% of the common stock of the surviving corporation immediately after the Merger, (iv) the date of consummation of any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, (v) the adoption of any plan or proposal for the liquidation (but not a partial liquidation) or dissolution of the Company, or (vi) the date upon which the individuals who constitute the Board as of the Effective Date (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to such date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company) shall, for purposes of this Agreement, be considered as though such person were a member of the Incumbent Board. 5. DEATH If the Employee shall die while employed by the Company or a subsidiary or within 90 days of the cessation or termination of such employment due to permanent disability or retirement, or termination after a Change In Control as described in paragraph 4, this Option may be exercised, in whole or in part, whether or not previously exercisable, and/or the Committee may authorize the acceptance of the surrender of the right to exercise such Option or any portion thereof as provided in paragraph 3, by the estate of such Employee (or by a person who shall have acquired the right to exercise such Option by bequest or inheritance), at any time within one year after the death of such Employee, but not after the expiration of the term of the Option. 6. DELIVERY OF STOCK CERTIFICATES The obligation of the Company to sell and deliver shares of Common Stock under this Option shall be subject to, as deemed necessary or appropriate by counsel for the Company, (i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the effectiveness of a Registration Statement under the Securities Act of 1933, and (ii) the condition that such shares shall have been duly listed on such stock exchanges as the Common Stock is then listed. 7. ASSIGNMENT AND TRANSFER The Option shall not be transferable by the Employee otherwise than by will or the laws of descent and distribution, and shall be exercisable, during his lifetime, only by him, except that the Option may be transferable, without payment of consideration, to immediate family members of the Employee or to trusts or partnerships for the benefit of such family members. Except as provided herein, neither this Option nor the rights appurtenant hereto shall be subject to execution, attachment or similar process. Any attempt by the Employee to assign, pledge, hypothecate or otherwise dispose of this Option or of any right or privilege conferred hereby contrary to the provisions of this Agreement, shall be null and void, and the Company shall have the right, at its option, to declare this Agreement and the rights and privileges hereby conferred -3- immediately terminated. 8. ADJUSTMENT OF OPTION In the event that there is an increase in the number of issued shares of Common Stock by reason of any stock dividend, stock split, recapitalization or other similar event, the total number of shares subject to purchase under this Option shall be increased and the price per share shall be decreased, in proportion to such increase in issued shares. Conversely, in case the issued shares of Common Stock shall be combined into a smaller number of shares, the total number of shares remaining subject to purchase under this Option shall be decreased and the price per share of such outstanding Options shall be increased, in proportion to such decrease in issued shares. In the event of any merger, consolidation, reorganization or liquidation in part or in whole, the Committee may make such adjustment in the number of shares subject to this Option and the price thereof as the Committee, in its reasonable discretion, deems appropriate. In the event of an exchange of Common Stock, or other securities of the Company convertible into Common Stock, for the stock or securities of another corporation, the Committee may, in the exercise of its sole discretion, equitably substitute such new stock or securities for a portion or all of the shares of Common Stock then subject to this Option. 9. WITHHOLDING TAXES The Employee shall pay to the Company in cash the amount of any taxes which the Company is required to withhold upon the exercise of this Option, provided that the Company may, in accordance with such rules as the Committee may from time to time adopt, accept shares of Common Stock received in connection with the exercise of this Option being taxed or otherwise previously acquired in satisfaction of such withholding requirements or up to the entire tax liability arising from the exercise of such Option. 10. GENERAL Except as otherwise expressly set forth in this Agreement, any notice required to be given to the Employee shall be sent to the address of the Employee as the same appears on the records of the Company, or at such other address as the Employee may hereafter designate in writing, and all notices required to be given to the Company shall be addressed to the Secretary of the Company at the address set forth in the Letter. Any such notice shall be deemed to be duly given if and when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered and deposited, postage and registry fee prepaid, in a post office or branch post office regularly maintained by the United States. The Employee shall not be deemed for any purpose to be a stockholder of the Company in respect of any shares as to which the Option shall not have been exercised as herein provided. Nothing in this Agreement shall confer upon the Employee any right to continue in the employ of the Company or shall affect the right of the Company to terminate the employment of the Employee, with or without cause. -4- Nothing in this Agreement or otherwise shall obligate the Company to permit the Option to be exercised other than in accordance with the terms hereof or to grant any waivers of the terms of this Agreement, regardless of what actions the Company, the Board of Directors or the Committee may take or waivers the Company, the Board of Directors or the Committee may grant under the terms of or with respect to any options now or hereafter granted to any other person or any other options granted to the Employee. This Agreement shall be governed by the laws of the State of Delaware applicable to agreements made and performed wholly within the State of Delaware (regardless of the laws that might otherwise govern under applicable conflicts of laws principles). This Agreement sets forth a complete understanding between the parties with respect to its subject matter and supersedes all prior and contemporaneous agreements and understandings with respect thereto. Any modification, amendment or waiver to this Agreement will be effective only if it in writing signed by the Company and the Employee. The failure of any party to enforce at any time any provision of this Agreement shall not be construed to be a waiver of that or any other provision of this Agreement. In the event of any conflict between the terms of this Agreement and the terms of the Plan, as amended from time to time, the terms of such Plan shall be controlling. -5- EX-10.11 7 c67952ex10-11.txt SCHEDULE TO STOCK OPTION AGREEMENT EXHIBIT 10.11 SCHEDULE TO STOCK OPTION AGREEMENT UNDER HUTTIG BUILDING PRODUCTS, INC. 2001 STOCK INCENTIVE PLAN
- ------------------------------- ----------------------- -------------------------- -------------------------- OPTION HOLDER NUMBER OF SHARES EXERCISE PRICE DATE OF GRANT - ------------------------------- ----------------------- -------------------------- -------------------------- George M. Dickens, Jr. 42,000 $5.875 per share January 29, 2002 - ------------------------------- ----------------------- -------------------------- -------------------------- Barry J. Kulpa 110,000 $5.875 per share January 29, 2002 - ------------------------------- ----------------------- -------------------------- -------------------------- Thomas S. McHugh 40,000 $5.875 per share January 29, 2002 - ------------------------------- ----------------------- -------------------------- -------------------------- John Mullin 34,000 $5.875 per share January 29, 2002 - ------------------------------- ----------------------- -------------------------- -------------------------- Nick H. Varsam 34,000 $5.875 per share January 29, 2002 - ------------------------------- ----------------------- -------------------------- --------------------------
EX-10.19 8 c67952ex10-19.txt RESTRICTED STOCK AGREEMENT DATED 1/29/02 EXHIBIT 10.19 RESTRICTED STOCK AGREEMENT- HUTTIG BUILDING PRODUCTS, INC. 2001 STOCK INCENTIVE PLAN January 29, 2002 The parties to this Restricted Stock Agreement (the "Agreement") are Huttig Building Products, Inc., a Delaware corporation (the "Corporation") and Barry J. Kulpa, an employee of the Corporation (the "Participant"). Pursuant to the terms of the Huttig Building Products, Inc. 2001 Stock Incentive Plan (the "Plan"), the Corporation, upon the recommendation of the Organization and Compensation Committee of its Board of Directors (the "Committee") and upon approval of it Board of Directors, has determined to award to the Participant 30,000 shares of restricted stock subject to the terms of the Plan, as of the date of this Agreement (the "Grant Date"). As a condition to such award and pursuant to Section 8(a) of the Plan, the Corporation and the Participant hereby enter into this Agreement and agree to the terms and conditions set forth herein. 1. DEFINITIONS. Capitalized terms in this Agreement not otherwise defined herein shall have the meanings contained in the Plan. For purposes of this Agreement, and for purposes of interpreting the terms of the Plan, the following terms shall have the following meanings: (a) "Restriction Period" shall mean a period commencing on the Grant Date and ending for 20% of the grant on each subsequent anniversary date for five years ending January 22, 2007. 2. AWARD OF HUTTIG SHARES Pursuant to the provisions of the Plan and this Agreement and by the authority of the Board of Directors, the Corporation awards 30,000 shares (the "Restricted Stock") of Huttig Building Products, Inc. common stock, par value $.01 per share ("Huttig Shares"), to the Participant. 3. RESTRICTIONS AND RIGHTS (a) During the Restriction Period, the Restricted Stock is subject to forfeiture in the event that the Participant attempts to sell, transfer, assign or pledge the Restricted Shares (the "Restrictions") or the Participant violates one of the covenants contained in Section 6 of this Agreement. Except as provided under Section 5 of this Agreement, the Restrictions on the Restricted Stock shall automatically lapse: (i) upon expiration of the Restriction Period; (ii) in the event of the Participant's Retirement, Permanent Disability, or death or in the event of a Change-in-Control; provided, however, that in the event the Participant requests early retirement or otherwise leaves the employ of the Corporation, the Committee may, upon the Participant's request and in the Committee's sole discretion, waive or revise this provision to permit the lapse of Restrictions on all or a portion of the Restricted Stock awarded hereunder on or prior to such early retirement or other departure from the employ of the Corporation; or (iii) as may be otherwise provided under the terms of the Plan. (b) During the Restriction Period, the Participant will be entitled to all other rights of a shareholder of the Corporation with respect to the Restricted Stock, including the right to vote the Restricted Stock and receive dividends and other distributions thereon. 4. STOCK CERTIFICATE Each stock certificate evidencing an award of Restricted Stock shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such award substantially in the following form (the "Legend"): "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Huttig Building Products, Inc. 2001 Stock Incentive Plan and an Agreement entered into between the registered owner and Huttig Building Products, Inc. Copies of such Plan and Agreement are on file in the offices of Huttig Building Products, Inc., Lakeview Center, Suite 400, 14500 South Outer Forty Road, Chesterfield, MO 63017." 5. TERMINATION OF EMPLOYMENT The Participant's termination of employment during the Restriction Period shall result in the forfeiture of all Restricted Stock as to which the Restrictions have not lapsed, and the Participant shall be required to return all applicable stock certificates to the Corporation. 6. COVENANTS (a) The Participant agrees to be bound by all terms and provisions of the Plan, and all such provisions shall be deemed a part of this Agreement for all purposes. (b) The Participant agrees to provide the Corporation, when and if requested, with any information or documentation which the Corporation believes necessary or advisable in connection with the administration of the Plan, including data required to assure compliance with the requirements of the Securities and Exchange Commission, of any stock exchange upon which the Huttig Shares are then listed, or of any applicable federal, state or other law. (c) The Participant agrees, upon due notice and demand, to promptly pay to the Corporation the cash amount of any taxes which are required to be withheld by the Corporation either at the time the Restriction Period lapses or at the time of award (in cases where the Participant duly elects to be taxed at such earlier time); provided, however, the Corporation, in its sole discretion, may accept Restricted Stock awarded hereunder or Huttig Shares otherwise previously acquired in satisfaction thereof. 7. NO COVENANT OF EMPLOYMENT Neither the execution and delivery of this Agreement nor the granting of any award evidenced by this Agreement shall constitute, or be evidence of, any agreement or understanding, express or implied, on the part of the Corporation or any of its subsidiaries to employ the Participant for any specific period. 8. ADMINISTRATION AND INTERPRETATION OF PLAN AND AGREEMENT In the event of any conflict between the terms of this Agreement and those of the Plan, the provisions of the Plan shall prevail. The Committee shall have full authority and discretion, subject only to the terms of the Plan, to decide all matters relating to the administration or interpretation of the Plan and this Agreement, and all such action by the Committee shall be final, conclusive, and binding upon the Corporation and the Participant. The Committee shall have full authority and discretion to modify at any time the Restriction Period, the Restrictions, the other terms and conditions of this Agreement, the Legend and any other instrument evidencing this award, provided that no such modification shall increase the benefit under such award beyond that which the Committee could have originally granted at the time of the award, or shall impair the rights of the Participant under such award except in accordance with the Plan, or any applicable agreement or applicable law, or with consent of the Participant. This Restricted Stock Agreement is deemed to be issued in, the award evidenced hereby is deemed to be granted in, and both shall be governed by the laws of, the State of Delaware. There have been no representations to the Participant other than those contained herein. 9. DELIVERY All certificates for Restricted Stock delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which Huttig Shares are then listed and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. The stock certificates evidencing the Restricted Stock shall be held in custody by the Corporation or its designee until the Restrictions thereon shall have lapsed and the Committee may require, as a condition of any award, that the Participant shall have delivered a stock power endorsed in blank relating to the Restricted Stock covered by such award. As soon as administratively practicable following the lapse of the Restrictions with respect to any of the Restricted Stock without a forfeiture, and upon the satisfaction of all other applicable conditions as to the Restricted Stock, including, but not limited to, the payment by the Participant of all applicable withholding taxes, the Corporation shall deliver or cause to be delivered to the Participant a certificate or certificates for the applicable Restricted Stock which shall not bear the Legend required under Section 4 of the Agreement. 10. AMENDMENT The terms of this Agreement shall be subject to the terms of the Plan as the Plan may be amended from time to time by the Board of Directors of the Corporation unless any such amendment by its terms or by its clear intent is inapplicable to this Agreement. 11. NOTICE Any notice to the Corporation provided for in this Agreement shall be in writing and addressed to it in care of the Secretary of the Corporation, and any notice to the Participant shall be in writing and addressed to the Participant at the address contained in payroll records at the time or to such other address designated in writing by the Participant. IN WITNESS WHEREOF, the parties have executed this Restricted Stock Agreement effective the day and year first above written. HUTTIG BUILDING PRODUCTS, INC. By: ------------------------------------ Title: PARTICIPANT ---------------------------------------- EX-10.20 9 c67952ex10-20.txt RESTRICTED STOCK AGREEMENT DATED 1/22/01 EXHIBIT 10.20 RESTRICTED STOCK AGREEMENT- HUTTIG BUILDING PRODUCTS, INC. 1999 STOCK INCENTIVE PLAN January 22, 2001 The parties to this Restricted Stock Agreement (the "Agreement") are Huttig Building Products, Inc., a Delaware corporation (the "Corporation") and Barry J. Kulpa, an employee of the Corporation (the "Participant"). Pursuant to the terms of the Huttig Building Products, Inc. 1999 Stock Incentive Plan (the "Plan"), the Corporation, upon the recommendation of the Organization and Compensation Committee of its Board of Directors (the "Committee") and upon approval of it Board of Directors, has determined to award to the Participant 30,000 shares of restricted stock subject to the terms of the Plan, as of the date of this Agreement (the "Grant Date"). As a condition to such award and pursuant to Section 8(a) of the Plan, the Corporation and the Participant hereby enter into this Agreement and agree to the terms and conditions set forth herein. 1. DEFINITIONS. Capitalized terms in this Agreement not otherwise defined herein shall have the meanings contained in the Plan. For purposes of this Agreement, and for purposes of interpreting the terms of the Plan, the following terms shall have the following meanings: (a) "Restriction Period" shall mean a period commencing on the Grant Date and ending for 20% of the grant on each subsequent anniversary date for five years ending January 22, 2006. 2. AWARD OF HUTTIG SHARES Pursuant to the provisions of the Plan and this Agreement and by the authority of the Board of Directors, the Corporation awards 30,000 shares (the "Restricted Stock") of Huttig Building Products, Inc. common stock, par value $.01 per share ("Huttig Shares"), to the Participant. 3. RESTRICTIONS AND RIGHTS (a) During the Restriction Period, the Restricted Stock is subject to forfeiture in the event that the Participant attempts to sell, transfer, assign or pledge the Restricted Shares (the "Restrictions") or the Participant violates one of the covenants contained in Section 6 of this Agreement. Except as provided under Section 5 of this Agreement, the Restrictions on the Restricted Stock shall automatically lapse: (i) upon expiration of the Restriction Period; (ii) in the event of the Participant's Retirement, Permanent Disability, or death or in the event of a Change-in-Control; provided, however, that in the event the Participant requests early retirement or otherwise leaves the employ of the Corporation, the Committee may, upon the Participant's request and in the Committee's sole discretion, waive or revise this provision to permit the lapse of Restrictions on all or a portion of the Restricted Stock awarded hereunder on or prior to such early retirement or other departure from the employ of the Corporation; or (iii) as may be otherwise provided under the terms of the Plan. (b) During the Restriction Period, the Participant will be entitled to all other rights of a shareholder of the Corporation with respect to the Restricted Stock, including the right to vote the Restricted Stock and receive dividends and other distributions thereon. 4. STOCK CERTIFICATE Each stock certificate evidencing an award of Restricted Stock shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such award substantially in the following form (the "Legend"): "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Huttig Building Products, Inc. 1999 Stock Incentive Plan and an Agreement entered into between the registered owner and Huttig Building Products, Inc. Copies of such Plan and Agreement are on file in the offices of Huttig Building Products, Inc., Lakeview Center, Suite 400, 14500 South Outer Forty Road, Chesterfield, MO 63017." 5. TERMINATION OF EMPLOYMENT The Participant's termination of employment during the Restriction Period shall result in the forfeiture of all Restricted Stock as to which the Restrictions have not lapsed, and the Participant shall be required to return all applicable stock certificates to the Corporation. 6. COVENANTS (a) The Participant agrees to be bound by all terms and provisions of the Plan, and all such provisions shall be deemed a part of this Agreement for all purposes. (b) The Participant agrees to provide the Corporation, when and if requested, with any information or documentation which the Corporation believes necessary or advisable in connection with the administration of the Plan, including data required to assure compliance with the requirements of the Securities and Exchange Commission, of any stock exchange upon which the Huttig Shares are then listed, or of any applicable federal, state or other law. (c) The Participant agrees, upon due notice and demand, to promptly pay to the Corporation the cash amount of any taxes which are required to be withheld by the Corporation either at the time the Restriction Period lapses or at the time of award (in cases where the Participant duly elects to be taxed at such earlier time); provided, however, the Corporation, in its sole discretion, may accept Restricted Stock awarded hereunder or Huttig Shares otherwise previously acquired in satisfaction thereof. 7. NO COVENANT OF EMPLOYMENT Neither the execution and delivery of this Agreement nor the granting of any award evidenced by this Agreement shall constitute, or be evidence of, any agreement or understanding, express or implied, on the part of the Corporation or any of its subsidiaries to employ the Participant for any specific period. 8. ADMINISTRATION AND INTERPRETATION OF PLAN AND AGREEMENT In the event of any conflict between the terms of this Agreement and those of the Plan, the provisions of the Plan shall prevail. The Committee shall have full authority and discretion, subject only to the terms of the Plan, to decide all matters relating to the administration or interpretation of the Plan and this Agreement, and all such action by the Committee shall be final, conclusive, and binding upon the Corporation and the Participant. The Committee shall have full authority and discretion to modify at any time the Restriction Period, the Restrictions, the other terms and conditions of this Agreement, the Legend and any other instrument evidencing this award, provided that no such modification shall increase the benefit under such award beyond that which the Committee could have originally granted at the time of the award, or shall impair the rights of the Participant under such award except in accordance with the Plan, or any applicable agreement or applicable law, or with consent of the Participant. This Restricted Stock Agreement is deemed to be issued in, the award evidenced hereby is deemed to be granted in, and both shall be governed by the laws of, the State of Delaware. There have been no representations to the Participant other than those contained herein. 9. DELIVERY All certificates for Restricted Stock delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which Huttig Shares are then listed and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. The stock certificates evidencing the Restricted Stock shall be held in custody by the Corporation or its designee until the Restrictions thereon shall have lapsed and the Committee may require, as a condition of any award, that the Participant shall have delivered a stock power endorsed in blank relating to the Restricted Stock covered by such award. As soon as administratively practicable following the lapse of the Restrictions with respect to any of the Restricted Stock without a forfeiture, and upon the satisfaction of all other applicable conditions as to the Restricted Stock, including, but not limited to, the payment by the Participant of all applicable withholding taxes, the Corporation shall deliver or cause to be delivered to the Participant a certificate or certificates for the applicable Restricted Stock which shall not bear the Legend required under Section 4 of the Agreement. 10. AMENDMENT The terms of this Agreement shall be subject to the terms of the Plan as the Plan may be amended from time to time by the Board of Directors of the Corporation unless any such amendment by its terms or by its clear intent is inapplicable to this Agreement. 11. NOTICE Any notice to the Corporation provided for in this Agreement shall be in writing and addressed to it in care of the Secretary of the Corporation, and any notice to the Participant shall be in writing and addressed to the Participant at the address contained in payroll records at the time or to such other address designated in writing by the Participant. IN WITNESS WHEREOF, the parties have executed this Restricted Stock Agreement effective the day and year first above written. HUTTIG BUILDING PRODUCTS, INC. By: ------------------------------------ Title: PARTICIPANT ---------------------------------------- EX-10.24 10 c67952ex10-24.txt FORM OF STOCK OPTION AGREEMENT EXHIBIT 10.24 [Huttig Building Products letterhead] [Name of Director] [Address] [Address] [City/State/Zip] Dear [Director]: I am pleased to advise you that the Organization and Compensation Committee of the Board of Directors of Huttig Building Products, Inc. has awarded a non-qualified stock option to you for the purchase of 20,000 shares of common stock of Huttig Building Products, Inc. at $4.34 per share. The date of grant of these options is January 22, 2001. These options vest according to the following schedule: o 50% on January 22, 2002 o 25% on January 22, 2003 o 25% on January 22, 2004 Please sign and return the enclosed duplicate of this letter, which when received will constitute a binding option agreement at the price and for the number of shares set forth in this letter. Very truly yours, Barry J. Kulpa ACCEPTED AND AGREED TO: - --------------------------- [Name of Director] Date:_______________________ EX-10.25 11 c67952ex10-25.txt FORM OF RESTRICTED STOCK AGREEMENT [RESTRICTED STOCK AGREEMENT] EXHIBIT 10.25 [ANNUAL EVA PLAN RESTRICTED STOCK ELECTION] RESTRICTED STOCK AGREEMENT- HUTTIG BUILDING PRODUCTS, INC. 1999 STOCK INCENTIVE PLAN _______________, 2001 The parties to this Restricted Stock Agreement (the "Agreement") are Huttig Building Products, Inc., a Delaware corporation (the "Corporation") and __________, an employee of the Corporation (the "Participant"). Pursuant to the terms of the Huttig Building Products, Inc. EVA Incentive Compensation Plan (the "EVA Plan"), the Participant has elected to allocate 50% of the Participant's annual award under the EVA Plan to restricted Huttig common stock. According to such election and the terms of the EVA Plan, the Corporation, through the Organization and Compensation Committee of its Board of Directors (the "Committee"), has determined to award to the Participant _____ shares of restricted stock subject to the terms of the Huttig Building Products, Inc. 1999 Stock Incentive Plan (the "Plan"), as of the date of this Agreement (the "Grant Date"). As a condition to such award and pursuant to Section 8(a) of the Plan, the Corporation and the Participant hereby enter into this Agreement and agree to the terms and conditions set forth herein. 1. DEFINITIONS. Capitalized terms in this Agreement not otherwise defined herein shall have the meanings contained in the Plan. For purposes of this Agreement, and for purposes of interpreting the terms of the Plan, the following terms shall have the following meanings: (a) "Restriction Period" shall mean a period commencing on the Grant Date and ending on ____________, 2003. (b) "Change-in-Control" shall have the meaning set forth in Section 8(c) of the EVA Plan. 2. AWARD OF HUTTIG SHARES. Pursuant to the provisions of the Plan and this Agreement and by the authority of the Committee, the Corporation awards _____ shares (the "Restricted Stock") of Huttig Building Products, Inc. common stock, par value $.01 per share ("Huttig Shares"), to the Participant. 3. RESTRICTIONS AND RIGHTS. (a) During the Restriction Period, the Restricted Stock is subject to forfeiture in the event that the Participant attempts to sell, transfer, assign or pledge the Restricted Shares (the "Restrictions") or the Participant violates one of the covenants contained in Section 6 of this Agreement. Except as provided under Section 5 of this Agreement, the Restrictions on the Restricted Stock shall automatically lapse: (i) upon expiration of the Restriction Period; (ii) in the event of the Participant's Retirement, Permanent Disability, or death or in the event of a Change-in-Control; provided, however, that in the event the Participant requests early retirement or otherwise leaves the employ of the Corporation, the Committee may, upon the Participant's request and in the Committee's sole discretion, waive or revise this provision to permit the lapse of Restrictions on all or a portion of the Restricted Stock awarded hereunder on or prior to such early retirement or other departure from the employ of the Corporation; or (iii) with respect to 50% of the Restricted Stock, on the first anniversary of the Grant Date; (iv) as may be otherwise provided under the terms of the Plan or the EVA Plan. (b) During the Restriction Period, the Participant will be entitled to all other rights of a shareholder of the Corporation with respect to the Restricted Stock, including the right to vote the Restricted Stock and receive dividends and other distributions thereon. 4. STOCK CERTIFICATE. Each stock certificate evidencing an award of Restricted Stock shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such award substantially in the following form (the "Legend"): "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Huttig Building Products, Inc. 1999 Stock Incentive Plan and an Agreement entered into between the registered owner and Huttig Building Products, Inc. Copies of such Plan and Agreement are on file in the offices of Huttig Building Products, Inc., Lakeview Center, Suite 400, 14500 South Outer Forty Road, Chesterfield, MO 63017." 5. TERMINATION OF EMPLOYMENT. Except as otherwise provided in Section 8(a) of the EVA Plan, the Participant's termination of employment during the Restriction Period shall result in the forfeiture of all Restricted Stock as to which the Restrictions have not lapsed, and the Participant shall be -2- required to return all applicable stock certificates to the Corporation. 6. COVENANTS. (a) The Participant agrees to be bound by all terms and provisions of the Plan and the EVA Plan, and all such provisions shall be deemed a part of this Agreement for all purposes. (b) The Participant agrees to provide the Corporation, when and if requested, with any information or documentation which the Corporation believes necessary or advisable in connection with the administration of the Plan, including data required to assure compliance with the requirements of the Securities and Exchange Commission, of any stock exchange upon which the Huttig Shares are then listed, or of any applicable federal, state or other law. (c) The Participant agrees, upon due notice and demand, to promptly pay to the Corporation the cash amount of any taxes which are required to be withheld by the Corporation either at the time the Restriction Period lapses or at the time of award (in cases where the Participant duly elects to be taxed at such earlier time); provided, however, the Corporation, in its sole discretion, may accept Restricted Stock awarded hereunder or Huttig Shares otherwise previously acquired in satisfaction thereof. 7. NO COVENANT OF EMPLOYMENT. Neither the execution and delivery of this Agreement nor the granting of any award evidenced by this Agreement shall constitute, or be evidence of, any agreement or understanding, express or implied, on the part of the Corporation or any of its subsidiaries to employ the Participant for any specific period. 8. ADMINISTRATION AND INTERPRETATION OF PLAN AND AGREEMENT. In the event of any conflict between the terms of this Agreement and those of the Plan or the EVA Plan, the provisions of the Plan or the EVA Plan, as the case may be, shall prevail. The Committee shall have full authority and discretion, subject only to the terms of the Plan, to decide all matters relating to the administration or interpretation of the Plan and this Agreement, and all such action by the Committee shall be final, conclusive, and binding upon the Corporation and the Participant. The Committee shall have full authority and discretion to modify at any time the Restriction Period, the Restrictions, the other terms and conditions of this Agreement, the Legend and any other instrument evidencing this award, provided that no such modification shall increase the benefit under such award beyond that which the Committee could have originally granted at the time of the award, or shall impair the rights of the Participant under such award except in accordance with the Plan, or any applicable agreement or applicable law, or with consent of the Participant. -3- This Restricted Stock Agreement is deemed to be issued in, the award evidenced hereby is deemed to be granted in, and both shall be governed by the laws of, the State of Delaware. There have been no representations to the Participant other than those contained herein. 9. DELIVERY. All certificates for Restricted Stock delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which Huttig Shares are then listed and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. The stock certificates evidencing the Restricted Stock shall be held in custody by the Corporation or its designee until the Restrictions thereon shall have lapsed and the Committee may require, as a condition of any award, that the Participant shall have delivered a stock power endorsed in blank relating to the Restricted Stock covered by such award. As soon as administratively practicable following the lapse of the Restrictions with respect to any of the Restricted Stock without a forfeiture, and upon the satisfaction of all other applicable conditions as to the Restricted Stock, including, but not limited to, the payment by the Participant of all applicable withholding taxes, the Corporation shall deliver or cause to be delivered to the Participant a certificate or certificates for the applicable Restricted Stock which shall not bear the Legend required under Section 4 of the Agreement. 10. AMENDMENT. The terms of this Agreement shall be subject to the terms of the Plan and the EVA Plan as those Plans may be amended from time to time by the Board of Directors of the Corporation unless any such amendment by its terms or by its clear intent is inapplicable to this Agreement. 11. NOTICE. Any notice to the Corporation provided for in this Agreement shall be in writing and addressed to it in care of the Secretary of the Corporation, and any notice to the Participant shall be in writing and addressed to the Participant at the address contained in payroll records at the time or to such other address designated in writing by the Participant. IN WITNESS WHEREOF, the parties have executed this Restricted Stock Agreement effective the day and year first above written. HUTTIG BUILDING PRODUCTS, INC. By: ------------------------------------ -4- Title: --------------------------------- PARTICIPANT ---------------------------------------- -5- EX-10.26 12 c67952ex10-26.txt SCHEDULE TO RESTRICTED STOCK AGREEMENT EXHIBIT 10.26 SCHEDULE TO RESTRICTED STOCK AGREEMENT UNDER HUTTIG BUILDING PRODUCTS, INC. 1999 STOCK INCENTIVE PLAN AND EVA INCENTIVE COMPENSATION PLAN
OPTION HOLDER NUMBER OF SHARES DATE OF GRANT - ------------- ---------------- ---------------- George M. Dickens, Jr. 6,886 January 22, 2001 Barry J. Kulpa 52,690 January 22, 2001 Carl A. Liliequist 19,292 January 22, 2001 Kenneth E. Thompson 2,635 January 22, 2001
EX-23.1 13 c67952ex23-1.txt CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements of Huttig Building Products, Inc. on Form S-8 (Nos. 333-92495, 333-92497, 333-92499, 333-75610 and 333-81410) of our report dated January 25, 2002, appearing in the Annual Report on Form 10-K of Huttig Building Products, Inc. for the year ended December 31, 2001. /S/ Deloitte & Touche LLP St. Louis, Missouri March 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----