-----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, RAVgNeM/ZJTi3OnU5SzRTHKVzl2uD1DH253270Hg9/FsG0nVK6l7xRHYHbltyZJD akjpTd+6iNEM9gR12+NzZQ== /in/edgar/work/20000810/0001093082-00-000007/0001093082-00-000007.txt : 20000921 0001093082-00-000007.hdr.sgml : 20000921 ACCESSION NUMBER: 0001093082-00-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUTTIG BUILDING PRODUCTS INC CENTRAL INDEX KEY: 0001093082 STANDARD INDUSTRIAL CLASSIFICATION: [5030 ] IRS NUMBER: 430334550 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14982 FILM NUMBER: 690762 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-Q 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 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: Common Stock, par value $.01 per share New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange (Title of each class (Name of each exchange on which registered) 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 [ ] The number of shares of Common Stock outstanding on August 8, 2000 was 20,866,145 shares. PART I. FINANCIAL INFORMATION Page No. Item 1 Financial Statements Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 3-4 Consolidated Statements of Income for the three and six months ended June 30, 2000 and 1999 5 Consolidated Statement of Stockholder's Equity for the three and six months ended June 30, 2000 and 1999 6 Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 1999 7 Notes to Consolidated Financial Statements. 8-9 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 Item 3 Quantitative and Qualitative Disclosures about Market Risk 13 PART II. OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders 13 Item 6 Exhibits and Reports on Form 8-K 13 HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data)
June 30, December 31, 2000 1999 (unaudited) -------------- -------------- ASSETS CURRENT ASSETS: Cash $ 6,207 $ 6,794 Accounts receivable, net 112,032 116,602 Inventories 83,306 78,133 Prepaid expenses 2,091 2,788 Deferred tax asset 10 1,247 -------------- -------------- Total current assets 203,646 205,564 -------------- -------------- PROPERTY, PLANT AND EQUIPMENT - At cost: Land 6,724 7,324 Buildings and improvements 33,226 36,660 Machinery and equipment 28,585 28,764 -------------- -------------- Gross property, plant and equipment 68,535 72,748 Less accumulated depreciation 30,988 33,207 -------------- -------------- Property, plant and equipment - net 37,547 39,541 -------------- -------------- OTHER ASSETS: Costs in excess of net assets acquired, net 37,751 38,952 Other 5,796 3,656 Deferred income taxes 13,341 13,638 -------------- -------------- Total other assets 56,888 56,246 -------------- -------------- TOTAL $298,081 $301,351 ============== ============== HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data) June 30, December 31, 2000 1999 (unaudited) -------------- -------------- LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 263 $ 263 Accounts payable - trade and collections as agents 80,430 72,478 Income taxes payable 169 5,765 Accrued payrolls 7,384 9,226 Accrued insurance 3,524 6,164 Accrued liabilities 11,715 15,448 --------------- -------------- Total current liabilities 103,485 109,344 --------------- -------------- NON-CURRENT LIABILITIES: Other long-term debt 116,586 121,817 Accrued postretirement benefits 2,089 2,089 Deferred credit - 798 --------------- -------------- Total non-current liabilities 118,675 124,704 --------------- -------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS EQUITY: Preferred shares; $.01 par (5,000,000 shares authorized) Common shares; At June 30, 2000 - $.01 par (50,000,000 shares authorized - 20,866,145 shares issued); At December 31, 1999 - no par value (50,000,000 shares authorized - 20,797,812 shares issued) 209 208 Additional paid-in capital on common stock 33,353 33,051 Retained earnings 44,012 35,438 Unearned compensation - restricted stock (522) (263) Less: Treasury shares (278,433 shares at cost) (1,131) (1,131) --------------- -------------- Total shareholders equity 75,921 67,303 --------------- -------------- TOTAL $298,081 $301,351 =============== ============== see notes to consolidated financial statements
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED JUNE 30, (UNAUDITED) (In Thousands, Except Per Share Amounts)
Three Months Ended June 30, Six Months Ended June 30, 2000 1999 2000 1999 ----------------- ----------------- ------------------ ------------- NET SALES $ 285,562 $ 205,979 $ 567,508 $ 380,754 ----------------- ----------------- ------------------ ------------- OPERATING COSTS AND EXPENSES: Cost of sales 228,712 165,292 456,094 305,504 Operating expenses 44,923 31,409 93,097 60,148 Depreciation and amortization 1,659 1,468 3,489 3,306 Restructuring provision (972) - 261 - Loss (gain) on disposal of capital assets (607) 239 (5,719) 225 ----------------- ----------------- ------------------ ------------- Total operating costs and expenses 273,715 198,408 547,222 369,183 ----------------- ----------------- ------------------ ------------- OPERATING PROFIT 11,848 7,570 20,287 11,571 ----------------- ----------------- ------------------ ------------- OTHER INCOME (EXPENSE): Interest expense - Crane - 1,889 - 3,788 Interest expense, net 3,175 31 5,405 65 Other miscellaneous - net - 506 - 546 ----------------- ----------------- ------------------ ------------- Total other expense - net 3,175 2,425 5,405 4,398 INCOME BEFORE TAXES 8,673 5,145 14,882 7,173 PROVISION FOR INCOME TAXES 3,285 1,933 5,800 2,728 ----------------- ----------------- ------------------ ------------- INCOME BEFORE EXTRAORDINARY ITEM 5,388 3,213 9,082 4,445 Extraordinary item (less applicable income taxes of $309) 508 - 508 - ----------------- ----------------- ------------------ ------------- NET INCOME $ 4,880 $ 3,213 $ 8,574 $ 4,445 ================= ================= ================== ============= NET INCOME PER BASIC SHARE BEFORE EXTRAORDINARY ITEM $ 0.26 $ 0.23 $ 0.44 $ 0.31 LOSS PER SHARE FROM EXTRAORDINARY ITEM (0.02) - (0.02) - NET INCOME PER BASIC SHARE $ 0.24 $ 0.23 $ 0.42 $ 0.31 AVERAGE BASIC SHARES OUTSTANDING (Thousands) 20,588 14,260 20,579 14,260 NET INCOME PER DILUTED SHARE $ 0.26 $ 0.23 $ 0.44 $ 0.31 LOSS PER SHARE FROM EXTRAORDINARY ITEM (0.02) - (0.02) - NET INCOME PER DILUTED SHARE $ 0.24 $ 0.23 $ 0.42 $ 0.31 AVERAGE DILUTED SHARES OUTSTANDING (Thousands) 20,606 14,260 20,588 14,260 see notes to consolidated financial statements
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (UNAUDITED) (In Thousands)
Common Shares Additional Unearned Treasury Total Outstanding, Paid-In Retained Compensation - Shares, Shareholders at Par Value Capital Earnings Restricted Stock at Cost Equity -------------- ------------ ------------ ---------------- --------- ------------- Balance at December 31, 1998 $ 10 $ 746 $ 40,699 $ 41,455 Net Income 4,445 4,445 Dividends (13,725) (13,725) -------------- ------------ ------------ ---------------- ---------- -------------- Balance at June 30, 1999 $ 10 $ 746 $ 31,419 $ 32,175 ============== ============ ============ ================ ========== ============== Balance at December 31, 1999 $ 208 $ 33,051 $ 35,438 $ (263) $ (1,131) $ 67,303 Net Income 8,574 8,574 Restricted stock issued, net of amortization expense 1 302 (259) 44 -------------- ------------ ------------ ---------------- ---------- -------------- Balance at June 30, 2000 $ 209 $ 33,353 $ 44,012 $ (522) $ (1,131) $ 75,921 ============== ============ ============ ================ ========== ============== see notes to consolidated financial statements
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, 2000 1999 ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 8,574 $ 4,445 Gain on disposal of capital assets (5,719) 226 Depreciation 2,139 1,764 Amortization 1,442 1,462 Deferred Taxes 1,534 (117) Accrued postretirement benefits - 274 Changes in operating assets and liabilities (exclusive of acquisitions): Accounts receivable 4,570 (13,106) Inventories (6,328) (5,502) Other current assets 741 (38) Accounts payable 7,952 (1,582) Accrued liabilities (13,902) (7,198) Other (2,381) (82) ----------------- ----------------- Total cash provided (used) from operating activities (1,378) (19,453) ----------------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2,450) (4,791) Proceeds from disposition of capital assets 8,472 2,359 Cash used for Cherokee acquisition - (2,000) ----------------- ----------------- Total cash provided (used) from investing activities 6,022 (4,432) ----------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term debt (131) (191) Repayment of revolving credit agreement (5,100) - Borrowings from Crane - 31,875 Cash dividend paid to Crane - (13,725) ----------------- ----------------- Total cash provided (used) from financing activities (5,231) 17,959 ----------------- ----------------- NET DECREASE IN CASH (587) (5,926) CASH, BEGINNING OF PERIOD 6,794 9,423 ----------------- ----------------- CASH, END OF PERIOD $ 6,207 $ 3,497 ================= ================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid, net $ 4,109 $ 3,852 ================= ================= Income taxes paid, net $ 9,951 $ 1,377 ================= ================= see notes to consolidated financial statements
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (In Thousands) 1. BASIS OF PRESENTATION The consolidated financial statements included herein have been prepared by Huttig Building Products, Inc. (the "Company" or "Huttig") on a consolidated basis, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company believes that the disclosures are adequate to make the information presented not misleading. It is recommended that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's latest Annual Report on Form 10-K. This financial information reflects, in the opinion of management, all adjustments consisting of only adjustments necessary to present fairly the results for the interim periods. The consolidated results of operations and resulting cash flows for the interim periods presented are not necessarily indicative of the results that might be expected for the full year. Due to the seasonal nature of Huttig's business, profitability is usually lower in the Company's first and fourth quarters than in the second and third quarters. 2. RESERVE ACTIVITY In December 1999, the Company established a reserve for restructuring costs expected to be incurred under a strategic plan to consolidate and integrate various branch operations and support functions. Included in "Other" in the table below are costs expected to be incurred for uncollectible accounts receivable and other costs incidental to consolidating and closing branches. In the second quarter of 2000, the Company reversed $1,056 as a result of a change in the estimate of the restructuring costs. This reversal is attributable primarily to completing year to date restructuring activities at lower than expected costs and anticipated lower costs on remaining restructuring efforts. The activity in the restructuring reserve for the six months ended June 30, 2000 is summarized as follows:
Inventory Lease Workforce Adjustments Terminations Reduction Other Total ---------------- ----------------- ------------- ---------------- ------------ Balance at December 31, 1999 $ 2,210 $ 1,752 $ 494 $ 829 $ 5,285 Plus: Additional charges 573 70 373 790 1,806 Less: Reversals 84 - - 972 1,056 Less: Costs incurred 1,754 571 239 474 3,038 ---------------- ----------------- ------------- ---------------- ------------ Balance at June 30, 2000 $ 945 $ 1,251 $ 628 $ 173 $ 2,997 ================ ================= ============= ================ ============
In December 1999 the Company established a reserve for costs expected to be incurred in connection with the acquisition of Rugby USA ("Rugby"). 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 activity in this reserve for the six months ended June 30, 2000 is summarized as follows:
Inventory Lease Workforce Adjustments Terminations Reduction Other Total ---------------- ----------------- ------------- ---------------- ------------ Balance at December 31, 1999 $ 1,001 $ 2,150 $ 591 $ 965 $ 4,707 Plus: Additional charges 1,155 - - 91 1,246 Less: Costs incurred 961 42 591 854 2,448 ---------------- ----------------- ------------- ---------------- ------------ Balance at June 30, 2000 $ 1,195 $ 2,108 $ - $ 202 $ 3,505 ================ ================= ============= ================ ============
During the first quarter, the Company made a change in estimate of the costs expected to be incurred which resulted in an increase to the reserve and a reallocation of the acquisition cost. As a result of the change in estimate made during the first quarter, the deferred credit balance of $798 at December 31, 1999 was reduced to zero and assets increased by $448. 3. DEBT Debt consisted of the following at June 30, 2000 and December 31, 1999: June 30, December 31, 2000 1999 --------------- --------------- Revolving credit agreement $ 115,600 $ 120,700 Capital Lease Obligations 1,055 1,108 Industrial revenue bond 193 272 --------------- --------------- Total debt 116,848 122,080 Less: current portion 263 263 --------------- --------------- Long-term debt $ 116,585 $ 121,817 =============== =============== During April 2000, the Company closed on a new $200,000 secured revolving credit facility. 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 June 30, 2000, the Company had outstanding, three interest rate swap contracts having a total notional amount of principal of $80,000. These swap contracts currently provide for a fixed weighted average rate of 8.9% on $80,000 of the Company's 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. The proceeds from the facility were used to retire the previously existing $125,000 facility and a $25,000 term loan. In conjunction with the refinancing of the previously existing facility, the Company recorded an extraordinary expense for the write-off of the unamortized loan fees. The Company is currently evaluating the impact that Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, will have on the financial statements. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Huttig Building Products, Inc. is one of the largest domestic distributors of building materials used principally in new residential construction and in home improvement, remodeling and repair work. Its products are distributed through 62 distribution centers serving 45 states, principally to building materials dealers (who, in turn, supply the end-user), directly to professional builders and large contractors, and to home centers, national buying groups and industrial and manufactured housing builders. The Company's American Pine Products manufacturing facility, located in Prineville, Oregon, produces softwood moldings. Approximately 30% of American Pine's sales are currently to Huttig's distribution centers. The following table sets forth the Company's sales, by product classification as a percentage of net sales, for the three and six months ended June 30, 2000 and 1999:
Three Months Ended June 30, Six Months Ended June 30, 2000 1999 2000 1999 -------------------------------------- -------------------------------------- Doors 33% 33% 33% 34% Specialty Building Materials 26% 22% 26% 22% Lumber & Other Commodity Materials 17% 14% 17% 14% Windows 14% 17% 13% 17% Mouldings 10% 14% 11% 14% -------------------------------------- -------------------------------------- Total Net Product Sales 100% 100% 100% 100% ====================================== ======================================
On December 16, 1999, Crane Co. ("Crane") distributed to its stockholders (the "Spin-Off") all of the Company's outstanding common stock, par value $.01 per share (the "Common Stock"). Immediately after the Spin-Off, Huttig completed the acquisition of Rugby USA, Inc. ("Rugby") in exchange for 6,546 newly issued shares of Huttig common stock. Rugby is also a distributor of building materials. For its year ended December 31, 1999, Rugby's revenues were approximately $458,000. Results from Operations Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999 Net sales for the three months ended June 30, 2000 were $285,562, a 39% increase from the second quarter of 1999 when sales were $205,979. The increase is attributable to acquisitions completed during the second half of 1999, the largest of which was Rugby in December of 1999. Excluding sales attributable to acquisitions in 1999 and branches which were closed or are consolidating, same branch sales decreased by approximately 5% from the comparable prior year period. This decrease is primarily attributable to deflation in the commodity wood market which is believed to have negatively impacted sales in the second quarter of 2000 by approximately $12 million compared to last year. Gross profit, as a percentage of net sales, was 20% for the three months ended June 30, 2000 and 1999, respectively. Operating expenses were $44,923 in the second quarter of 2000 as compared to $31,409 in the second quarter of 1999. The increase is primarily attributable to costs associated with an increase in the size of the business resulting from the acquisitions that were completed during the second half of 1999. Included in operating expenses in the second quarter of 2000 are $500 of non-recurring costs related to the restructuring of the Company's operations and various integration costs associated with the acquisition of Rugby. Operating expenses, as a percentage of net sales, were flat during the comparable periods. The Company reversed $1,056 of restructuring reserves in the second quarter of 2000 related to the restructuring plan that was initiated in December 1999 (see footnote 3). This reversal is attributable primarily to completing year to date restructuring activities at lower than expected costs and anticipated lower costs on remaining restructuring efforts. Management anticipates that the restructuring will be complete by the end of 2000. Gains on disposal of assets increased $846 from the second quarter of 1999 to the second quarter of 2000. This increase is due primarily to gains from the sale of property resulting from the Company's restructuring efforts. Net interest expense increased to $3,175 in the second quarter of 2000 from $1,920 in the same period of 1999. The increase is due primarily to higher average debt outstanding and the amortization of loan origination fees related to the refinancing of the Company's debt in April. Average debt outstanding is higher than the previous year due primarily to costs incurred for the Spin-Off, integration costs associated with the Rugby acquisition and costs associated with restructuring activities. The Company recorded an extraordinary item of $508 related to the write-off of loan origination fees resulting from the April refinancing of substantially all of the Company's debt. As a result of the foregoing factors, pretax income, excluding the extraordinary item, increased by $3,528, or 69%, to $8,673. Income taxes were provided at effective tax rates of 38.0% and 37.6% for the quarters ended June 30, 2000 and 1999, respectively. Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999 Net sales for the six months ended June 30, 2000 were $567,508, a 49% increase from the comparable period of 1999 when sales were $380,754. The increase is primarily attributable to acquisitions completed during the second half of 1999, the largest of which was Rugby in December of 1999. Excluding sales attributable to acquisitions in 1999 and branches which were closed or are consolidating, same branch sales were flat compared to the comparable prior year period. Deflation in the commodity wood market is believed to have negatively impacted year to date sales in 2000 by approximately $12 million compared to last year. Gross profit, as a percentage of net sales, was 20% for the six months ended June 30, 2000 and 1999, respectively. Operating expenses were $93,097 in the six months ended June 30, 2000 compared to $60,148 in 1999. The increase is primarily attributable to costs associated with an increase in the size of the business resulting from the acquisitions that were completed during the second half of 1999. Included in operating expenses in the first six months of 2000 are $5,500 of non-recurring costs related to the restructuring of the Company's operations and various integration costs associated with the acquisition of Rugby. During the first six months of fiscal 2000, the Company recorded a net increase of $750 to the restructuring reserves related to the restructuring plan that was initiated in December 1999 (see footnote 3). This was recorded due to management's changes in estimate during the first and second quarters. Management anticipates that the restructuring will be complete by the end of 2000. Gains on disposal of assets increased $5,944 from the first six months of 1999 to 2000. This increase is due primarily to gains from the sale of property resulting from the Company's restructuring and branch consolidation efforts. Net interest expense increased to $5,405 in the six months ended June 30, 2000 from $3,853 in the same period of 1999. The increase is due primarily to higher average debt outstanding and the amortization of loan origination fees related to the refinancing of the Company's debt in April. Average debt outstanding is higher than the previous year due primarily to costs incurred for the Spin-Off, integration costs associated with the Rugby acquisition and costs associated with restructuring activities. The Company recorded an extraordinary item of $508 related to the write-off of loan origination fees as a result of the April refinancing of substantially all of the Company's debt. As a result of the foregoing factors, pretax income, excluding the extraordinary item, increased by $7,709, or 107%, to $14,882. Income taxes were provided at effective tax rates of 39.0% and 38.0% for the six months ended June 30, 2000 and 1999, respectively. The Company anticipates that the overall effective rate for fiscal 2000 will be 38.5%. Liquidity and Capital Resources Huttig has depended primarily on the cash generated from its own operations to finance its needs. The combination of income from operations and cash generation from improved working capital management has been used to finance capital expenditures and seasonal working capital needs. The Company's working capital requirements are generally greatest in the first eight months of the year and generates cash from working capital reductions in the last four months of the year. Prior to the Spin-Off, to the extent internal funds generated were insufficient, Huttig borrowed from Crane and to the extent cash generated by Huttig was greater than current requirements, the cash was returned to Crane. For the six months ended June 30, 2000, cash decreased by $587 compared to a decrease of $5,926 in the prior year comparable period. The $5,339 improvement was due primarily due to an increase in cash provided from operating activities and proceeds on the disposal of assets which was offset by a decrease in cash used for financing activities. During the second quarter of 2000, the Company refinanced $113,000 of the revolving credit facility that was previously held with Bank One. As of August, 2000, the Company had commitments of approximately $1,000 for capital improvements. Financing At June 30, 2000 the Company had a $200,000 secured revolving credit facility with Chase Manhattan Bank as agent. The current rate on the facility is LIBOR plus 175 basis points. At June 30, 2000, the Company had outstanding, three interest rate swap contracts having a total notional amount of principal of $80,000. These swap contracts currently provide for a fixed weighted average rate of 8.9% on $80,000 of the Company's revolving credit borrowings. The remainder of the outstanding borrowings under the revolving credit agreement are at a floating rate of LIBOR plus 175 basis points. As of August 8, the Company had $75,600 million of unused credit available under its revolving credit agreement with Chase Manhattan Bank. The Company believes that cash, funds generated from operations and funds available under its new secured credit agreement will provide sufficient funds to meet its currently anticipated requirements. Restructuring and Acquisition Activities During the six months ended June 30, 2000 the Company recorded, as a result of changes in estimates, a net increase to the restructuring reserve of $750 for lease terminations, severance, inventory impairment and other costs associated with the closing and/or consolidation of Company distribution facilities. These changes in estimate are included in the cost of sales and operating expenses for the six months ended June 30, 2000. The Company believes that closing duplicate Huttig and Rugby distribution centers and the former Rugby corporate office and executing other strategic initiatives resulting from the acquisition will, when completed, reduce the ongoing cost structure of the Company by an estimated $15 million annually. Rugby was acquired in December 1999. Through July 31, 2000, Huttig completed the consolidation of 18 branches into eight locations in markets where the Rugby acquisition created duplicate facilities. The Company anticipates it will complete the consolidation of four more branches into two locations by the end of the year. The Company continues to service the markets where duplicate facilities were closed . The former Rugby headquarters in Alpharetta, GA was closed during the first quarter, with all job functions transferred either to Huttig's headquarters in St. Louis, MO or to other branches. In addition to the branch consolidations mentioned above, the Company closed a branch where it was not economically attractive to continue servicing that market. As a result of the consolidations and closures, the number of locations has been reduced from 76 at December 31, 1999 to 62 at July 31, 2000. Headcount decreased by 7% from 3,237 at December 31, 1999 to 3,023 at July 31, 2000. Effects of Inflation As Huttig continues to grow, its manufacturing operations should decrease as a percentage of its overall business and any impact of inflation is lessened. Furthermore, management believes that, to the extent inflation affects its costs in the future and competitive conditions permit, Huttig can offset these increased costs by increasing sales prices. Cyclicality and Seasonality Huttig's sales depend heavily on the strength of the 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 Huttig's control, including interest rates, employment levels, availability of credit, prices of commodity wood products and consumer confidence. Future downturns in the markets that Huttig serves could have a material adverse effect on Huttig's operating results or financial condition. In addition, because these markets are sensitive to cyclical changes in the economy in general, future downturns in the economy could have a material adverse effect on Huttig's financial condition and results of operations. Huttig's first quarter and, to a lesser extent, its fourth quarter, 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 Huttig's overhead and expense remains relatively fixed throughout the year, its profits also tend to be lower during the first and fourth quarters. The effects of winter weather patterns on Huttig's business are offset somewhat by the increase in residential construction activity during the same period in the deep South, Southwest and Southern California markets in which Huttig participates. It is expected that these seasonal variations will continue in the future. Environmental Regulation Huttig is subject to federal, state and local environmental laws and regulations. Huttig has been identified as a potentially responsible party in connection with the clean up of contamination at two sites. In addition, some of Huttig's distribution centers are located in areas of current or former industrial activity where environmental contamination may have occurred, and for which Huttig, among others, could be held responsible. Huttig does not believe that its contribution to the clean up of the two sites will be material or that there are any material environmental liabilities at any of its distribution center locations. Huttig believes that it is in compliance with applicable laws and regulations regulating the discharge of hazardous substances into the environment. However, there can be no assurance that environmental liabilities of Huttig or the combined company will not have a material adverse effect on Huttig's financial condition or results of operations. Year 2000 Huttig successfully completed its Year 2000 remediation plan in the fall of 1999. The plan included assessment of business critical systems and the upgrade or replacement of those systems that were determined to be Year 2000 affected. Also completed was an assessment of the Year 2000 readiness of key vendors and customers. As of this date, Huttig has experienced no significant problems as a result of the Year 2000 date change and, based upon testing and system validation studies conducted in 1999, management does not foresee any significant future problems or costs related to the Year 2000 millennium date change. However, it is possible that problems have gone undetected, or that other dates in the year 2000 may further affect computer software and systems. The Company is currently unable to assess completely whether its products, internal computer systems, or the operation of its software or the software of third parties contains errors or faults with respect to the Year 2000. Unknown errors or defects that affect the operation of the Company's software and systems or those of third parties could result in a delay or loss of revenue, interruption of services, cancellation of customer contracts, diversion of development resources, damage to reputation, increased service and warranty costs and litigation costs, any of which could harm the Company's business. Caution Certain statements made in this Form 10-Q may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors are discussed in detail in Huttig Building Products, Inc. Form 10-K for the year ended December 31, 1999. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained in the Annual Report on Form 10-K or this Form 10-Q except as required by law. ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Huttig has exposure to market risk as it relates to effects of changes in interest rates. The Company had debt outstanding at June 30, 2000 under its revolving credit agreement of $115,600. At June 30, 2000, the Company had outstanding, three interest rate swap contracts having a total notional amount of principal of $80,000. These swap contracts currently provide for a fixed weighted average rate of 8.9% on $80,000 of the Company's revolving credit borrowings. The remainder of the outstanding borrowings under the revolving credit agreement are at a floating rate of LIBOR plus 175 basis points. The Company is currently evaluating the impact that Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, will have on the financial statements. Huttig does not generate significant income from non-U.S. sources and accordingly, changes in foreign currency exchange rates do not generally have a direct effect on the Company's financial position. All transactions are denominated in U.S. dollars. Huttig is subject to periodic fluctuations in the price of wood commodities. Profitability is influenced by these changes as prices change between the time Huttig buys and sells the wood. In addition, to the extent changes in interest rates affect the housing and remodeling market, Huttig would be affected by such changes. PART II -- OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders: The Company's Annual Meeting of Shareholders was held on April 10, 2000. At the Annual Meeting, the following Directors were elected for terms of office expiring in 2003:
Votes For Votes Withheld Abstentions* Broker Non-Votes* ---------- -------------- ------------ ----------------- Dorsey R. Gardner 19,225,196 120,148 0 0 Robert E. Lambourne 19,215,632 129,712 0 0 James L.L. Tullis 19,218,738 12,606 0 0 * Pursuant to the terms of the Proxy Statement for the Annual Meeting, proxies received were voted, unless authority was withheld, in favor of the election of the three directors named above.
After the Annual Meeting, the term of office as a director of the Company of each of the following directors continued: R. S. Evans, Alan S. Durant, Barry J. Kulpa, E. Thayer Bigelow, Jr., Richard S. Forte and Peter L. Young. A proposal by the Board of Directors to approve the selection of Deloitte & Touche LLP as independent auditors for the Company for fiscal 2000 was approved by the shareholders at the Annual Meeting. The shareholders cast 19,261,770 votes in favor of this proposal and 64,084 votes against. There were 19,376 abstentions. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
Exhibit Number Description - -------------- ---------------------------------------------------------------------------------------- 11.1 Statement Re: Computation of Earnings Per Share for the Three Months Ended June 30, 2000 11.2 Statement Re: Computation of Earnings Per Share for the Six Months Ended June 30, 2000 27 Financial Data Schedule. (Filed herewith).
(b) Reports on Form 8-K. The Company filed no reports on Form 8-K during the quarter ended June 30, 2000. SIGNATURES Pursuant to the requirements 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. ----------------------------------------------- (Registrant) Date: August 11, 2000 /s/ Barry J.Kulpa ------------------------------------------------- Barry J. Kulpa President, Chief Executive Officer And Director (Principal Executive Officer) Date: August 11, 2000 /s/ Kenneth E. Thompson ------------------------------------------------- Kenneth E. Thompson Acting Chief Financial Officer Date: August 11, 2000 /s/ Thomas S. McHugh ------------------------------------------------- Thomas S. McHugh Corporate Controller (Principal Accounting Officer)
Exhibit 11.1 Statement re: computation of per share earnings for the three months ended June 30, 2000 Three Months Ended June 30, 2000 1999 --------------------- --------------------- Net income (in thousands) (numerator) $ 4,880 $ 3,213 ===================== ===================== Computation of Basic Shares Outstanding (in thousands, except per share amounts) - ------------------------------------------------------ Weighted average number of basic shares outstanding (denominator) 20,588 14,260 ===================== ===================== Basic earnings per common share $ 0.24 $ 0.23 ===================== ===================== Computation of Diluted Shares Outstanding (in thousands, except per share amounts) - -------------------------------------------------------- Weighted average number of basic shares outstanding 20,588 14,260 Common stock equivalents for diluted common shares outstanding 18 - --------------------- --------------------- Weighted average number of diluted shares outstanding (denominator) 20,606 14,260 ===================== ===================== Diluted earnings per common share $ 0.24 $ 0.23 ===================== =====================
Exhibit 11.2 Statement re: computation of per share earnings for the six months ended June 30, 2000
Six Months Ended June 30, 2000 1999 --------------------- --------------------- Net income (in thousands) (numerator) $ 8,575 $ 4,445 ===================== ===================== Computation of Basic Shares Outstanding (in thousands, except per share amounts) - ------------------------------------------------------- Weighted average number of basic shares outstanding (denominator) 20,579 14,260 ===================== ===================== Basic earnings per common share $ 0.42 $ 0.31 ===================== ===================== Computation of Diluted Shares Outstanding (in thousands, except per share amounts) - --------------------------------------------------------- Weighted average number of basic shares outstanding 20,579 14,260 Common stock equivalents for diluted common shares outstanding 9 - --------------------- --------------------- Weighted average number of diluted shares outstanding (denominator) 20,588 14,260 ===================== ===================== Diluted earnings per common share $ 0.42 $ 0.31 ===================== =====================
EX-27 2 0002.txt FDS
5 3-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 6,207,000 0 114,337,000 2,305,000 83,306,000 203,646,000 68,535,000 30,988,000 297,469,000 103,485,000 116,849,000 0 0 209,000 75,712,000 319,600,000 0 285,562,000 228,712,000 45,003,000 0 0 3,175,000 8,673,000 3,285,000 5,385,000 0 508,000 0 4,880,000 0.24 0.24
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