Huttig Building Products reported its third quarter sales increased 11.2% from the year-earlier period to $220 million, while the distributor’s net income in the third quarter was $1.2 million, down 16.7% from the third quarter of 2017.
The St. Louis-based Huttig attributed the increase in net sales to the rise in residential construction activity as well as organic company growth derived from the execution of its strategic growth initiatives. The growth initiatives included an emphasis on building products.
Building products sales increased 17.3% year-over-year in the third quarter to $96.9 million, millwork product sales increased 7.4% year-over-year to $104.8 million, and wood product sales increased 4.6% year-over-year to $20.3 million in the third quarter. The company’s gross margin continued to slip, though, and was down to 20.1% in the third quarter from 20.7% in the year-earlier period. Huttig attributed the reduction in its gross margin to the higher proportionate increase in direct sales volumes for 3Q 2018 compared to 3Q 2017 and the proportional increase in building product sales as compared to the growth of other high margin product categories.
“Our sales performance in the quarter clearly demonstrates that our growth and diversification strategy is working,” Huttig president and CEO Jon Vrabely said in a news release. “While our total growth in the quarter far outpaced that of the market, of which a considerable amount was derived from outside our traditional customer segments, we need to continue to improve our margin and operating leverage to achieve our working capital targets.”
The company’s operating expenses declined year-over-year to 18.5% of sales from 19.1% in the third quarter of 2017, but its net interest expense was up $0.9 million to $1.8 million from the year-earlier period. Huttig attributed its net interest expense increase to “higher average outstanding borrowings” on credit facility as well as higher interest rates compared to the year earlier period.
The company’s balance sheet shows $166.8 million in long-term debt as of September 30 compared with $101.8 million on December, 31 2017. Cash provided by operating activities was $13.1 million for the quarter, compared to $6.2 million to the third quarter in the year-earlier period.
Huttig likes to measure itself in terms of adjusted EBITDA—earnings before interest, taxes, depreciation, amortization, stock-based compensation, and “other expenses.” Huttig’s adjusted EBITDA for the third quarter fell by $700,000 from the year-earlier period to $5.5 million.
