-----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, QVh3y+kt6Gv/qjgv6yvGk8HmQFjVDwtu6j+3EOh1v4py0XZdrzVh7l5wioZla+7u tA2Mn9y/PY4SwRCB/7qA6w== /in/edgar/work/0001093082-00-000013/0001093082-00-000013.txt : 20001115 0001093082-00-000013.hdr.sgml : 20001115 ACCESSION NUMBER: 0001093082-00-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 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: 763817 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 September 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 incorporation No.) 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) 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 November 10, 2000 was 20,587,712 shares. PART I. FINANCIAL INFORMATION Page No. Item 1..Financial Statements Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 3-4 Consolidated Statements of Income for the three and nine months ended September 30, 2000 and 1999 5 Consolidated Statement of Shareholders' Equity for the three and nine months ended September 30, 2000 and 1999 6 Consolidated Statements of Cash Flows for the nine months ended September 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 12-13 PART II. OTHER INFORMATION Item 6...Exhibits and Reports on Form 8-K 13-15 HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data)
Sept. 30, Dec. 31 2000 1999 (unaudited) --------------- -------------- ASSETS CURRENT ASSETS Cash $9,597 $6,794 Accounts Receivable, net 111,361 116,602 Inventories 78,680 78,133 Prepaid Expenses 1,989 2,788 Deferred tax asset - 1,247 --------------- -------------- Total current assets 201,627 205,564 --------------- -------------- PROPERTY, PLANT AND EQUIPMENT At cost: Land 6,724 7,324 Buildings and improvements 33,583 36,660 Machinery and equipment 29,537 28,764 --------------- -------------- Gross property, plant and equipment 69,844 72,748 Less accumulated depreciation 31,939 33,207 --------------- -------------- Property, plant and equipment - net 37,905 39,541 --------------- -------------- OTHER ASSETS: Costs in excess of net assets acquired, net 37,151 38,952 Other 5,382 3,656 Deferred income taxes 12,198 13,638 --------------- -------------- Total other assets 54,731 56,246 --------------- -------------- TOTAL $294,263 $301,351 =============== ============== see notes to consolidated financial statements
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Data)
Sept. 30, Dec. 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 82,618 72,478 Income taxes payable 4,017 5,254 Accrued payrolls 8,962 9,226 Accured insurance 2,496 6,164 Accrued liabilities 10,474 15,959 Deferred Tax Liability 705 - --------------- -------------- Total current liabilities 109,535 109,344 --------------- -------------- NON-CURRENT LIABILITIES Other long-term debt 101,920 121,817 Accrued postretirement benefits 1,864 2,089 Deferred credit - 798 --------------- -------------- Total non-current liabilities 103,784 124,704 --------------- -------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred shares; $.01 par (5,000,000 shares authorized) Common shares; At Sept. 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 49,001 35,438 Unearned compensation - restricted stock (488) (263) Less: Treasury shares (278,433 shares at cost) (1,131) (1,131) --------------- -------------- Total shareholders' equity 80,944 67,303 --------------- -------------- TOTAL $294,263 $301,351 =============== ============== see notes to consolidated financial statements
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30 (UNAUDITED) (In Thousands, Except Per Share Amounts)
Three Months Ended Sept 30, Nine Months Ended Sept 30, 2000 1999 2000 1999 -------------- --------------- --------------- ----------- NET SALES $ 278,244 $ 214,160 $ 845,753 $ 594,914 -------------- --------------- --------------- ----------- OPERATING COSTS AND EXPENSES: Cost of sales 220,286 171,613 676,380 477,117 Operating expenses 45,224 32,631 138,322 92,778 Depreciation and amortization 1,652 1,648 5,141 4,954 Restructuring provision - - 261 - Loss (gain) on disposal of capital assets (1) (1) (5,720) 224 -------------- --------------- --------------- ----------- Total operating costs and expenses 267,162 205,890 814,385 575,074 -------------- --------------- --------------- ----------- OPERATING PROFIT 11,082 8,269 31,368 19,840 -------------- --------------- --------------- ----------- OTHER INCOME (EXPENSE): Interest expense - Crane - 1,904 - 5,691 Interest expense, net 3,047 33 8,449 98 Other miscellaneous - net - (23) - 523 -------------- --------------- --------------- ----------- Total other expense - net 3,047 1,914 8,449 6,312 INCOME BEFORE TAXES 8,035 6,355 22,919 13,527 PROVISION FOR INCOME TAXES 3,045 2,347 8,848 5,074 -------------- --------------- --------------- ----------- INCOME BEFORE EXTRAORDINARY ITEM 4,990 4,008 14,071 8,453 Extraordinary item (less applicable income taxes of $309) - - 508 - -------------- --------------- --------------- ----------- NET INCOME $ 4,990 $ 4,008 $ 13,563 $ 8,453 ============== =============== =============== =========== NET INCOME PER BASIC SHARE BEFORE EXTRAORDINARY ITEM $ 0.24 $ 0.28 $ 0.68 $ 0.59 LOSS PER SHARE FROM EXTRAORDINARY ITEM - - (0.02) - NET INCOME PER BASIC SHARE $ 0.24 $ 0.28 $ 0.66 $ 0.59 AVERAGE BASIC SHARES OUTSTANDING (Thousands) 20,588 14,260 20,582 14,260 NET INCOME PER DILUTED SHARE $ 0.24 $ 0.28 $ 0.68 $ 0.59 LOSS PER SHARE FROM EXTRAORDINARY ITEM - - (0.02) - NET INCOME PER DILUTED SHARE $ 0.24 $ 0.28 $ 0.66 $ 0.59 AVERAGE DILUTED SHARES OUTSTANDING (Thousands) 20,617 14,260 20,599 14,260 see notes to consolidated financial statements
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' 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 8,453 8,453 Dividends (13,725) (13,725) ------------------ ------------------ ------------------ ------------------ ------------- -------------- Balance at September 30, 1999 $ 10 $ 746 $35,427 $ 36,183 ================== ================== ================== ================== ============= ============= Balance at December 31, 1999 $ 208 $ 33,051 $ 35,438 $ (263) $(1,131) $ 67,303 Net Income 13,563 13,563 Restricted stock issued,net of amortization expense 1 302 (225) 78 ------------------ ------------------ ------------------ ------------------ ------------- -------------- Balance at September 30, 2000 $ 209 $ 33,353 $ 49,001 $ (488) $(1,131) $ 80,944 ================== ================== ================== ================== ============= ============== see notes to consolidated financial statements
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In Thousands) Nine Months Ended September 30 2000 1999 ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 13,563 $ 8,453 (Gain) Loss on disposal of capital assets (5,720) 224 Depreciation 3,226 2,632 Amortization 2,162 2,229 Deferred Taxes 2,687 666 Accrued postretirement benefits (225) 354 Changes in operating assets and liabilities (exclusive of acquisitions): Accounts receivable 5,241 (10,708) Inventories (1,702) (8,934) Other current assets 878 (27) Accounts payable 10,215 (4,022) Accrued liabilities (10,115) (8,886) Other (1,989) (125) ----------------- ----------------- Total cash provided (used) from operating activities 18,221 (18,144) ----------------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (3,946) (7,029) Proceeds from disposition of capital assets 8,425 2,363 Cash used for Cherokee acquisition (2,000) ----------------- ----------------- Total cash provided (used) from investing activities 4,479 (6,666) ----------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term debt (197) (254) Repayment of revolving credit agreement (19,700) - Borrowings from Crane - 33,369 Cash dividend paid to Crane - (13,725) ----------------- ----------------- Total cash provided (used) from financing activities (19,897) 19,390 ----------------- ----------------- NET INCREASE (DECREASE) IN CASH 2,803 (5,420) CASH, BEGINNING OF PERIOD 6,794 9,423 ----------------- ----------------- CASH, END OF PERIOD $ 9,597 $ 4,003 ================= ================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid, net $ 6,465 $ 5,746 ================= ================= Income taxes paid, net $ 6,386 $ 3,984 ================= ================= 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 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. The activity in the restructuring reserve for the nine months ended September 30, 2000 is summarized as follows:
Inventory Lease Workforce Impairments 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 84 554 156 262 1,056 Less: Costs incurred 1,990 1,008 371 982 4,351 --------------- ----------------- ------------ ------------ ------------ Balance at September 30, 2000 $ 709 $ 260 $ 340 $ 375 $ 1,684 =============== ================= ============ ============= ============
In December 1999 the Company established a reserve for costs expected to be incurred in connection with the acquisition of Rugby USA, Inc. ("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 nine months ended September 30, 2000 is summarized as follows:
Inventory Lease Workforce Impairments Terminations Reduction Other Total --------------- ----------------- ------------ ------------ ----------- Balance at December 31, 1999 $ 1,001 $ 2,150 $ 591 $ 965 $ 4,707 Plus/Minus: Changes in estimate 706 (1,250) 1,175 616 1,247 Less: Costs incurred 1,107 627 1,054 1,218 4,006 --------------- ----------------- ------------ ------------ ----------- Balance at September 30, 2000 $ 600 $ 273 $ 712 $ 363 $ 1,948 =============== ================= ============ ============ ===========
During the first quarter and third quarter, the Company revised its estimate of the costs expected to be incurred in connection with the Rugby acquisition. This resulted in an increase to the reserve and a reallocation of the acquisition cost. As a result, the previously reported 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 September 30, 2000 and December 31, 1999: September 30, December 31, 2000 1999 -------------- --------------- Revolving credit agreements $ 101,000 $ 120,700 Capital lease obligations 1,029 1,108 Industrial revenue bond 154 272 -------------- --------------- Total debt 102,183 122,080 Less: current portion 263 263 -------------- --------------- Long-term debt $ 101,920 $ 121,817 ============== =============== At September 30, 2000, the Company had three interest rate swap contracts with a total notional principal amount 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 interest rate on the remainder of the outstanding borrowings under the revolving credit agreement is equal to a floating rate of LIBOR plus 175 basis points. Huttig will adopt SFAS 133 and the corresponding amendments under SFAS 138 on January 1, 2001. The Company is in the process of evaluating the impact of adopting SFAS 133 but at this time, it is not expected to have a material impact on the Company's consolidated results of operations, financial position or cash flows. 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 that are 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. Currently, approximately 30% of American Pine's sales are 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 nine months ended September 30, 2000 and 1999:
Three Months Ended September 30, Nine Months Ended September 30, 2000 1999 2000 1999 -------------- ------------- -------------- ------------ Doors 33% 33% 33% 34% Specialty Building Materials 27% 22% 26% 22% Lumber & Other Commodity Materials 16% 14% 18% 14% Windows 14% 18% 13% 17% Mouldings 10% 13% 10% 13% -------------- ------------- -------------- ----------- 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 6.5 million newly issued shares of Huttig common stock. Rugby was 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 September 30, 2000 Compared to Three Months Ended September 30, 1999 Net sales for the three months ended September 30, 2000 were $278,244, a 30% increase from the third quarter of 1999 when sales were $214,160. 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 closed or were consolidated with other branches, same branch sales decreased by approximately 13% or $24 million 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 third quarter of 2000 by approximately $15,000 compared to the third quarter of last year. Gross profit, as a percentage of net sales, increased to 21% for the three months ended September 30, 2000 compared to 20% for the three months ended September 30 1999. Operating expenses were $45,224 in the third quarter of 2000 compared to $32,631 in the third 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 third quarter of 2000 are $657 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. Net interest expense increased to $3,047 in the third quarter of 2000 from $1,937 in the same period of 1999. The increase is due primarily to higher average debt outstanding. 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. As a result of the foregoing factors, pretax income, increased by $1,680, or 26%, to $8,035. Income taxes were provided at effective tax rates of 38% and 37% for the quarters ended September 30, 2000 and 1999, respectively. Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999 Net sales for the nine months ended September 30, 2000 were $845,753 a 42% increase from the comparable period of 1999 when sales were $594,914. 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 consolidated with other branches, same branch sales were 5% or $25 million lower 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 $27,000 compared to last year. Gross profit, as a percentage of net sales, was 20% for the nine months ended September 30, 2000 and 1999, respectively. Operating expenses were $138,322 in the nine months ended September 30, 2000 compared to $92,778 in the comparable period 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 first nine months of 2000 are $6,200 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 nine 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 2). This was recorded due to changes in management's estimate of the restructuring costs. Management anticipates that the restructuring activities will be complete by the end of 2000. Gains on disposal of assets were $5,720 during the first nine months of 2000. This gain is due primarily to gains from the sale of property in connection with the Company's restructuring and branch consolidation efforts. Net interest expense increased to $8,449 in the nine months ended September 30, 2000 from $5,789 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 2000. 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, net of tax, related to the write-off of loan origination fees as a result of refinancing in April 2000 of substantially all of the Company's debt. As a result of the foregoing factors, pretax income, excluding the extraordinary item, increased by $9,392, or 69%, to $22,919. Income taxes were provided at effective tax rates of 39% and 38% for the nine months ended September 30, 2000 and 1999, respectively. The Company anticipates that the overall effective tax rate for fiscal 2000 will be 39%. 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 the Company typically 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 nine months ended September 30, 2000, cash increased by $2,803 compared to a decrease of $5,420 in the prior year comparable period. The $8,223 improvement was due primarily due to an increase in cash provided from operating activities and proceeds from 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 November, 2000, the Company had commitments of approximately $1,000 for capital improvements. Financing At September 30, 2000 the Company had a $200,000 secured revolving credit facility with Chase Manhattan Bank as agent. At September 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 interest rate on the remainder of the outstanding borrowings under the revolving credit agreement is a floating rate equal to LIBOR plus 175 basis points. As of November 10, the Company had $88,800 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 nine months ended September 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 the Company's distribution facilities. These changes in estimates are included in the cost of sales and operating expenses for the nine months ended September 30, 2000. The Company believes that closing overlapping 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 September 30, 2000, Huttig completed the consolidation of 18 branches\into eight locations in markets where the Rugby acquisition created overlapping facilities. The Company continues to service the markets where overlapping 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 September 30, 2000. The number of employees decreased by 9% from 3,237 at December 31, 1999 to 2,950 at September 30, 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 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 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 future environmental liabilities 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 November, 2000, 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. Cautionary Statement 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 September 30, 2000 under its revolving credit agreement of $101,000. At September 30, 2000, the Company had three interest rate swap contracts having a total notional principal amount 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 interest rate on the remainder of the outstanding borrowings under the revolving credit agreement is a floating rate equal to LIBOR plus 175 basis points. Huttig will adopt SFAS 133 and the corresponding amendments under SFAS 138 on January 1, 2001. The Company is in the process of evaluating the impact of adopting SFAS 133 but at this time, it is not expected to have a material impact on the company's consolidated results of operations, financial position or cash flows. 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 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 September 30, 2000 11.2 Statement Re: Computation of Earnings Per Share for the Nine Months Ended September 30, 2000 27 Financial Data Schedule. (Filed herewith). (b) Reports on Form 8-K. On September 1, 2000 the Company filed a Form 8-K with the Securities and Exchange Commission pursuant to Item 5 of Form 8-K to report the termination of a distribution agreement with Andersen Windows, one of its vendors. 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: November 13, 2000 /s/ Barry J.Kulpa ----------------------------------------------- Barry J. Kulpa President, Chief Executive Officer And Director (Principal Executive Officer) Date: November 13,2000 /s/ Kenneth E. Thompson ----------------------------------------------- Kenneth E. Thompson Chief Financial Officer Date: November 13, 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 September 30, 2000 Three Months Ended September 30, 2000 1999 --------- ---------- Net income (in thousands) (numerator) $ 4,990 $ 4,008 ========= ========== 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 $ 0.28 ========== ========= 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 29 - --------- ---------- Weighted average number of diluted shares outstanding (denominator) 20,617 14,260 ========== ========= Diluted earnings per common share $ 0.24 $ 0.28 ========== ========= Exhibit 11.2 Statement re: computation of per share earnings for the nine months ended September 30, 2000 Nine Months Ended September 30, 2000 1999 --------- ---------- Net income (in thousands) (numerator) $ 13,563 $ 8,453 ========= ========== Computation of Basic Shares Outstanding (in thousands, except per share amounts) - ---------------------------------------- Weighted average number of basic shares outstanding (denominator) 20,582 14,260 ========== ========= Basic earnings per common share $ 0.66 $ 0.59 ========== ========= Computation of Diluted Shares Outstanding (in thousands, except per share amounts) - ----------------------------------------- Weighted average number of basic shares outstanding 20,582 14,260 Common stock equivalents for diluted common shares outstanding 29 - --------- ---------- Weighted average number of diluted shares outstanding (denominator) 20,599 14,260 ========== ========= Diluted earnings per common share $ 0.66 $ 0.59 ========== ========= EX-27 2 0002.txt FDS
5 3-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 9,597,000 0 113,285,000 1,924,000 78,680,000 201,627,000 69,843,000 31,939,000 294,263,000 109,535,000 101,920,000 0 0 209,000 80,735,000 294,263,000 0 278,244,000 220,286,000 45,224,000 0 0 3,047,000 8,035,000 3,045,000 4,990,000 0 0 0 4,990,000 0.24 0.24
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