Net income at Huttig Building Products shrank to just $2.2 million in the second quarter from $10.4 million a year earlier on sales that rose just 0.4% to $198.7 million, the distributor and millwork specialist reported today.
The St. Louis-based company’s gross margin slipped to 21.2% in the April-to-June period from a year-earlier 21.3%, but operating expenses climbed 18.3% to $38.1 million as the company ramped up its Huttig-Grip and Repair and Remodel initiatives (there also were legal fees related to Huttig-Grip). That caused operating income to drop nearly 60%, hitting $4.1 million.
Huttig attributed much of the bare-bones sales increase to special promotional winter deals that led customers to buy in 2016’s first quarter rather than the second. Net sales in the first quarter were 11% above 2016’s levels, the company reported May 1.
“During the second quarter of 2017 we continued to make significant investments in the execution of our comprehensive strategic plan,” Jon P. Vrabely, Huttig’s president and CEO, said in a statement. “These investments in capital and operating expenses are required to fundamentally transform our business to consistently deliver profitable growth in the intermediate and long term.”
Like many companies, Huttig prefers to measure itself in terms of adjusted EBITDA–in this case earnings before interest, taxes, depreciation, amortization, and stock compensation expense. By that metric, the company’s adjusted EBITDA evaporated by nearly half, to $5.9 million in the second quarter from $11.5 million in 2Q16.
The company’s balance sheet shows that trade accounts receivables and net inventories account for $198 million of its $264.9 million in total assets, while its non-current long-term debt totaled $103.3 million as of June 30.
