Huttig Building Products reported today its net income shrank to $200,000 in the second quarter from $2.2 million in the year-earlier period, even as sales rose 12.4% to $223.4 million.
The St. Louis-based company strives to balance its millwork operations with its building and wood product sales, but sales of millwork in the April-to-June period climbed only 3% to $103.5 million while building products sales jumped 24 to $99.4 million and wood products sales rose 11% to $20.5 million. Those latter groups tend to have lower profit margins, and as a result Huttig’s gross margin slipped to 20.2% of sales from 21.2%.
Operating expenses held steady at 19.2% of sales, but net interest expense jumped to $1.7 million from $700,000 a year earlier. “The increase was primarily due to higher average outstanding borrowings on our credit facility as well as higher interest rates in the second quarter of 2018 compared to the second quarter of 2017,” Huttig said in a news release.
The company’s balance sheet shows $178.2 million in long-term debt as of June 30 compared with $101.8 million last Dec. 31. Cash provided by financing activities totaled $32.7 million in the second quarter vs. $23.9 million a year before.
Huttig likes to measure itself in terms of adjusted EBITDA–earnings before interest, taxes, depreciation, amortization, stock-based compensation, and “other expenses,” which in Huttig’s case involves a legal fight and June settlement with PrimeSource Building Products. Huttig’s adjusted EBITDA for the second quarter grew by just $100,000 from a year earlier to reach $6.5 million.
“I am pleased with the continued growth trend we achieved through the execution of our strategic growth initiatives in the quarter,” said Jon Vrabely, Huttig’s president and CEO, said in the news release. “While still in the very early stages of executing our sales growth initiatives, we estimate that our growth during the quarter, based on our current sales mix by market segment, was nearly 6% above that of the growth in the national housing market. Looking forward, we will remain focused on executing our growth plans, improving our gross margins, and managing our working capital.”
In a separate developm, Huttig announced that Philip Keipp, a former VP and chief financial officer, has rejoined the company as a senior financial consultant.
