Huttig Building Products stressed investments over earnings today in reporting a $9.8 million net loss in the fourth quarter. That happened even as sales rose 9% from the year-earlier period to reach $179.2 million.
An $8.8 million increase in operating expenses figured significantly in the deepening of the net loss from $200,000 in 2016’s fourth quarter. St. Louis-based Huttig said personnel costs rose $4.7 million from a year before, mainly due to the hiring of additional sales and warehouse staff related to the company’s expansion of the Huttig-Grip product line as well as to repair and remodel growth initiatives. Non-personnel operating expenses rose $3.9 million for the same reasons.
In addition, the tax reform package enacted in December led the company to declare a $2.4 million income tax provision as a result of revaluing its deferred tax assets and liabilities.
“We continued to make significant investments in our infrastructure, people, and technology platform during the fourth quarter as we remained committed to the implementation of our strategic plan,” Jon Vrabely, Huttig’s president and CEO, said in a statement. “While these investments have negatively impacted our financial results in 2017, including the most recent quarter, we continue to believe that the investments made in operating expenses and capital will accelerate our growth and diversify our business, which will improve operating leverage and increase the value of the company over the intermediate term.”
The gross margin slipped to 20.5% of sales from 21.7% in 2016’s October-to-December quarter. Higher costs of millwork products were cited, along with a higher proportion of direct sales. Operating income swung to a $5.6 million loss from a $1.8 million profit.
For all of 2017, the 134-year-old distributor posted a $7.1 million net loss; that compares with 2016’s $16.3 million net profit. Sales grew 5.5% to $753.2 million. The gross margin for the year dipped to 20.7% from 21.2%, while operating income shrank to $100,000 from $22.7 million.
Huttig prefers to measure itself using adjusted EBITDA–earnings before interest, taxes, depreciation amortization, and stock compensation expense. By that yardstick, it had a negative $3.7 million adjusted EBITDA for the quarter, down from a positive $3.4 million in 4Q16. For all 2017, adjusted EBITDA shrank to $7.2 million from $28.3 million.
The company’s balance sheet as of Dec. 31 showed assets of $245.9 million and $101.8 million of long-term debt excluding current liabilities.
