ST. LOUIS, MO – Huttig Building Products, Inc. (“Huttig”) (NASDAQ: HBP), a domestic distributor of millwork, building materials and wood products, today reported financial results for the second quarter ended June 30, 2016.
“We delivered our 21st consecutive quarterly improvement over prior year’s quarter, excluding unusual items, in the second quarter of 2016,” said Jon Vrabely, Huttig President and CEO. “I am very pleased with our financial results and our continued success in executing our strategic priorities in the quarter. We closed the acquisition of BenBilt Building Systems, accelerated our revenue and margin growth, and continued our investments in people, capital, and technology, which we believe will support our growth and profitability going forward.”
Results of Operations
Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015.
Net sales were $197.9 million in 2016, which was $22.8 million, or 13%, higher than in 2015. The increase was primarily due to higher levels of construction activity, the addition of a new product line and the acquisition that was completed during the quarter.
Sales increased in all product categories in 2016 compared to 2015. Millwork sales increased 16% in 2016 to $96.5 million, primarily due to increased construction activity and the acquisition. Building products sales increased 10% in 2016 to $80.5 million. Wood product sales increased 9% in 2016 to $20.9 million.
Gross margin increased 19% to $42.2 million in 2016 compared to $35.6 million in 2015. As a percentage of sales, gross margin increased to 21.3% in 2016 from 20.3% in 2015. The increase in gross margin percentage was primarily due to our operational initiatives as well as improved product mix as we continue to expand our value-add capabilities to serve the repair/remodel construction segment.
Operating expenses increased $2.2 million to $32.2 million in 2016, compared to $30.0 million in 2015. The increase was primarily due to higher personnel costs as a result of hiring additional personnel and expenses attributable to higher variable costs associated with increased sales and profitability. The increase in personnel costs was partially offset by a decrease in fuel expense due to lower diesel costs. As a percentage of sales, operating expenses were 16.3% in 2016 and 17.1% in 2015.
Net interest expense was $0.6 million in both 2016 and 2015
Income tax expense of $3.5 million was recognized for the quarter ended June 30, 2016, as compared to the quarter ended June 30, 2015 when a full valuation allowance was applicable and no income tax expense was recognized.
As a result of the foregoing factors, we reported income from continuing operations of $5.9 million in the second quarter of 2016 compared to $5.4 million in the second quarter of 2015. In the second quarter of 2015 income from continuing operations benefited by $2.0 million primarily related to a reduction in the valuation allowance, which resulted in zero tax expense. Net income in the second quarter of 2016 was $10.4 million compared to $5.1 million in the second quarter of 2015.
Special Items in the second quarter of 2016 from Discontinued Operations totaled $4.4 million in net after tax income, or $0.18 per share, related to settlement agreements with insurers, as well as with Crane Co., in connection with a previously disclosed declaratory action filed in the United States District court for the Eastern District of Missouri.
Adjusted EBITDA was $11.5 million in 2016, representing a 69% increase over Adjusted EBITDA of $6.8 million for the prior year. Adjusted EBITDA is a non-GAAP measurement. See attached reconciliation of Non-GAAP Financial Measures.
Total available liquidity was $74.7 million at June 30, 2016, representing a 21% increase over total liquidity of $61.6 million at June 30, 2015. At June 30, 2016, total available liquidity included $0.8 million of cash plus $73.9 million of availability under the credit facility, while at June 30, 2015, total available liquidity included $2.5 million of cash plus $59.1 million of availability under the credit facility