Huttig Building Products reported net sales ticked up in the first quarter of 2020, but the distributor’s net loss during the quarter widened significantly on a year over year (YOY) basis. St. Louis-based Huttig Building Products posted net sales of $203.0 million in the first quarter of 2020, a 2.8% increase YOY from the first quarter of 2019, according to the company’s quarterly earnings report. Higher net sales was primarily attributable to an increase in new residential construction, according to Huttig.
Huttig’s millwork product sales in the first quarter of 2020 increased 0.9% YOY to $96.2 million, building product sales increased 5.1% YOY to $92.6 million, and wood product sales increased 1.4% YOY to $14.2 million.
Huttig reported its gross margin increased to $40.9 million in the first quarter of 2020, compared to $37.4 million in the first quarter of 2019. Gross margin as a percentage of sales increased to 20.1% from 18.9% in the year earlier period. Huttig attributed its gross margin improvement to product mix, including a de-emphasis of commoditized products in favor of higher margin sales opportunities.
“Our first quarter operating results were significantly better across every key financial metric as compared to the prior year quarter, “ president and CEO Jon Vrabely said in a prepared statement. “On a stand-alone basis, the first quarter of 2020 marked the first full quarter that our results began to reflect the positive impact we planned and anticipated since embarking on our accelerated growth strategy. Unfortunately, as our results were just beginning to reflect the impact of our efforts and strategy, our world, like that of virtually every other company on the planet, changed.”
Huttig said a decline in market value for its public equity concurrent with the coronavirus (COVID-19) pandemic triggered an assessment of goodwill. The distributor determined that, as of March 31, 2020, the fair value of reporting units had decreased sufficiently to fully impair goodwill and the company incurred an impairment charge of $9.5 million during the quarter.
Despite strong sales numbers in the first quarter, Huttig reported a loss from continuing operations of $8.9 million for the first quarter of 2020 compared to a loss of $3.2 million in the first quarter of 2019. Adjusted EBITDA in the first quarter was $3.5 million compared to a negative $0.3 million in the first quarter of 2019.
“The unprecedented magnitude and unpredictability of the coronavirus pandemic forced us to shift resources away from the continued execution of our growth strategy and towards the development and implementation of our COVID-19 strategy and resource plan,” Vrabely said. “While we believe we were ahead of the curve in developing and executing the earliest versions of our response plan, and have continued to make meaningful progress, we anticipate the impact of this pandemic will be significant in the second quarter and thereafter as we continue working hard to mitigate its effect on our business.”
All of Huttig’s branches remain open during the COVID-19 pandemic, but the distributor has taken protective measures to protect its employees and customers, including the implementation of social distancing guidelines and remote work options. The distributor said it anticipates a decline in sales related to COVID-19 and has taken proactive measures to protect the company’s operating liquidity. Huttig has reduced inventory levels to meet anticipated decreases in demand and have implemented cost containment measures, including layoffs, wage reductions, suspension of matching contributions, and eliminated nonessential spending.
