Huttig Building Products Announces First Quarter 2008 Results

Huttig Building Products Inc., a St. Louis-based distributor of millwork, building materials and wood products, recently announced the results for the first quarter ended March 31, 2008.

The company reported a net loss of $9.8 million, or ($0.47) per diluted share, for the 2008 first quarter, compared to a net loss of $3.4 million, or ($0.17) per diluted share, in the corresponding year ago quarter. Net sales declined 25 percent to $166.8 million, compared to $222.4 million in the year ago period. The operating loss was $13.3 million compared to $3.8 million in the prior year quarter. Excluding the charges and gains in both periods as described below, the first quarter 2008 operating loss totaled $6 million compared to an operating loss of $0.9 million in the prior year quarter, gross profit margin was 19.1 percent versus 19.2 percent, and operating expenses declined by 13 percent.

First quarter 2008 results include a non-cash goodwill impairment charge to operating expenses of $7.0 million before tax, or $0.24 per share net of tax, reflective of a further decline in actual and forecasted operating results at certain of the company’s branch operating units. First quarter 2008 results also include net charges of $0.3 million related to previously announced cost reduction actions initiated in the 2007 fourth quarter, while first quarter 2007 results include net charges of $3.4 million from a prior cost reduction program, which charges were partially offset by a $0.5 million gain on the disposal of a facility.

During the 2008 first quarter, Huttig continued its program aimed at improving operating efficiencies and reducing its cost structure. Inventories at March 31, 2008 declined 11 percent year over year, to $92.1 million. Bank debt, net of cash, at March 31, 2008 decreased 20 percent, to $46.7 million, from $58.3 million a year ago. Total debt to total capitalization, net of cash, at March 31, 2008 decreased to 34 percent, compared to 36 percent at March 31, 2007. Cash used in operating activities of continuing operations was $23.6 million versus $21.2 million in the year ago first quarter. At the end of the March 2008 quarter, the company had $53.2 million of availability under its revolving credit facility in addition to outstanding borrowings.

“While seasonally one of our slowest quarters, the 2008 first quarter was also significantly impacted by the 29 percent year over year decline in annualized housing starts, to approximately 1.04 million, from approximately 1.46 million in the 2007 first quarter, with annualized housing starts for March 2008 decreasing to under .95 million,” said Jon Vrabely, president and chief executive officer. “Given this challenge, we continue to pursue all avenues aimed at controlling expenses, improving operating efficiencies, reducing inventories and generating cash. Although we incurred an operating loss in the quarter, our year over year sales decreased less than the overall decline in housing starts, suggesting that we have continued to increase our overall market share despite having fewer physical locations. In addition, we have essentially maintained our gross profit margin percentage despite the increased competitive pressure as a result of the market decline. That having been said, there continue to be opportunities which we will aggressively pursue to expand our market share, further improve operating efficiencies and reduce costs.”

During the quarter, Huttig successfully completed, on time and within budget, the consolidation of distribution facilities in Kansas City, Mo., and Greensburg, Pa., into adjacent facilities in Springfield, Mo., Columbus, Ohio, and Lancaster, Pa., allowing those adjacent branches to further leverage their cost structure. Looking ahead, Huttig is implementing a LEAN manufacturing initiative to identify additional opportunities to improve production and operational efficiencies. The company is also intensifying its efforts to sell slower moving inventory to free up capital and reduce debt.

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