SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001 Commission file number 1-14982
HUTTIG BUILDING PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-0334550
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation No.)
or organization)
Lakeview Center, Suite 400
14500 South Outer Forty Road
Chesterfield, Missouri 63017
(Address of principal executive offices)
(314) 216-2600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X] No [ ]
The number of shares of Common Stock outstanding on March 31, 2001 was
20,583,219 shares.
PART I. FINANCIAL INFORMATION Page No.
Item 1..Financial Statements
Consolidated Balance Sheets as of March 31, 2000
and December 31, 2000 3-4
Consolidated Statements of Income for the three months
ended March 31, 2001 and 2000 5
Consolidated Statement of Shareholders' Equity for the three
months ended March 31, 2001 and 2000 6
Consolidated Statements of Cash Flows for the three months ended
March 31, 2001 and 2000 7
Notes to Consolidated Financial Statements. 8-9
Item 2..Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-12
Item 3...Quantitative and Qualitative Disclosures about Market Risk 12
PART II. OTHER INFORMATION
Item 6...Exhibits and Reports on Form 8-K 12
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Share Data)
March 31
2001 December 31
(unaudited) 2000
-------------- --------------
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 6.2 $ 3.6
Accounts receivable, net 98.9 83.5
Inventories 77.2 71.5
Prepaid expenses 1.9 1.5
Income tax receivable 1.8 1.3
-------------- --------------
Total current assets 186.0 161.4
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT -
At cost:
Land 6.7 6.7
Buildings and improvements 34.7 34.6
Machinery and equipment 31.6 30.9
-------------- --------------
Gross property, plant and equipment 73.0 72.2
Less accumulated depreciation 33.7 32.6
-------------- --------------
Property, plant and equipment - net 39.3 39.6
-------------- --------------
OTHER ASSETS:
Costs in excess of net assets acquired, net 36.0 36.6
Other 5.5 5.3
Deferred income taxes 7.3 6.3
-------------- --------------
-------------- --------------
Total other assets 48.8 48.2
-------------- --------------
-------------- --------------
TOTAL $ 274.1 $ 249.2
============== ==============
<FN>
see notes to consolidated financial statements
</FN>
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Millions, Except Share Data)
March 31
2001 December 31
(unaudited) 2000
--------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of debt $ 0.2 $ 0.2
Accounts payable - trade and collections as agents 72.3 63.1
Deferred income taxes 0.4 -
Accrued payrolls 5.8 9.6
Accrued insurance 3.9 4.3
Other accrued liabilities 7.1 8.6
--------------- --------------
Total current liabilities 89.7 85.8
--------------- --------------
NON-CURRENT LIABILITIES:
Debt 100.3 80.9
Fair value of derivative instruments 3.7 -
Accrued postretirement benefits 1.5 1.5
--------------- --------------
Total non-current liabilities 105.5 82.4
--------------- --------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred shares; $.01 par (5,000,000 shares authorized) - -
Common shares; at March 31, 2001 - $.01 par (50,000,000 shares authorized-
20,896,145 shares issued); at December 31, 2000 - $.01 par (50,000,000
shares authorized - 20,866,145 shares issued) 0.2 0.2
Additional paid-in capital on common stock 33.4 33.2
Retained earnings 49.0 49.1
Unearned compensation - restricted stock (0.5) (0.4)
Accumulated other comprehensive loss (1.9) -
Less: Treasury shares (312,926 and 278,433 shares at cost) (1.3) (1.1)
--------------- --------------
Total shareholders' equity 78.9 81.0
--------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 274.1 $ 249.2
=============== ==============
<FN>
see notes to consolidated financial statements
</FN>
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
(In Millions, Except Per Share Amounts)
Three Months ended March 31
2001 2000
------------------ ------------------
NET SALES $ 217.6 $ 281.9
OPERATING COSTS AND EXPENSES:
Cost of sales 171.4 227.8
Operating expenses 41.3 47.8
Depreciation and amortization 2.0 1.8
Restructuring charges, net - 1.2
Gain on disposal of capital assets - (5.1)
------------------ ------------------
Total operating costs and expenses 214.7 273.5
------------------ ------------------
OPERATING PROFIT 2.9 8.4
------------------ ------------------
OTHER INCOME (EXPENSE):
Interest expense (2.5) (2.2)
Unrealized loss on derivatives (0.6) -
------------------ ------------------
Total other expense (3.1) (2.2)
INCOME (LOSS) BEFORE TAXES (0.2) 6.2
PROVISION (BENEFIT) FOR INCOME TAXES (0.1) 2.5
------------------ ------------------
NET INCOME (LOSS) $ (0.1) $ 3.7
================== ==================
NET INCOME (LOSS) PER BASIC SHARE $ (0.01) $ 0.18
AVERAGE BASIC SHARES OUTSTANDING 20.6 20.6
NET INCOME (LOSS) PER DILUTED SHARE $ (0.01) $ 0.18
AVERAGE DILUTED SHARES OUTSTANDING 20.6 20.6
<FN>
see notes to consolidated financial statements
</FN>
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
(In Millions)
Accumulated
Common Shares Additional Unearned Treasury Other Total
Outstanding, Paid-In Retained Compensation - Shares, Comprehensive Shareholders'
at Par Value Capital Earnings Restricted at Cost Loss Equity
Stock
------------ ------------- ------------- ------------ ------------- ------------- -------------
Balance at
December 31, 1999 $ 0.2 $ 32.9 $ 35.5 $ (0.2) $ (1.1) $ 67.3
Net Income 3.7 3.7
Restricted stock
issued, net of
amortization expense - $ 0.3 (0.3) -
------------ ------------- ------------- ------------ ------------- ------------- -------------
Balance at
March 31, 2000 $ 0.2 $ 33.2 $ 39.2 $ (0.5) $ (1.1) $ $ 71.0
============ ============= ============= ============ ============= ============= =============
Balance at
December 31, 2000 0.2 33.2 49.1 (0.4) (1.1) - $ 81.0
Net Income (Loss) (0.1) (0.1)
Fair market value
adjustment of derivatives,
net of tax (1.9) (1.9)
------------- ------------- -------------
Comprehensive Income (Loss) (0.1) (1.9) (2.0)
Restricted stock issued, net
of amortization expense - 0.2 (0.1) 0.1
Purchase of treasury stock (0.2) (0.2)
------------ ------------- ------------- ------------ ------------- ------------- -------------
Balance at
March 31, 2001 0.2 33.4 49.0 (0.5) (1.3) (1.9) 78.9
============ ============= ============= ============ ============= ============= =============
<FN>
see notes to consolidated financial statements
</FN>
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Millions)
Three Months Ended March 31,
2001 2000
--------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (0.1) $ 3.7
Gain on disposal of capital assets - (5.1)
Depreciation and amortization 2.0 1.8
Deferred taxes (0.6) 0.3
Unrealized loss on derivatives, net 1.8 -
Changes in operating assets and liabilities
(exclusive of acquisitions):
Accounts receivable (15.4) (8.1)
Inventories (4.7) (11.2)
Other current assets (1.0) (1.3)
Accounts payable 9.2 15.6
Accrued liabilities (5.7) 0.4
--------------------- ---------------------
Total cash from operating activities (14.5) (3.9)
--------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (0.9) (1.2)
Proceeds from disposition of capital assets - 7.1
Cash used for acquisitions (1.2) -
--------------------- ---------------------
Total cash from investing activities (2.1) 5.9
--------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing (Repayment) of long-term debt - (0.1)
Borrowing (Repayment) of revolving credit agreement 19.4 (0.7)
Purchase of treasury stock (0.2) -
--------------------- ---------------------
Total cash from financing activities 19.2 (0.8)
--------------------- ---------------------
NET INCREASE IN CASH AND EQUIVALENTS 2.6 1.2
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 3.6 6.8
--------------------- ---------------------
CASH AND EQUIVALENTS, END OF PERIOD $ 6.2 $ 8.0
===================== =====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 1.8 $ 2.2
===================== =====================
Income taxes paid $ 0.2 $ 1.9
===================== =====================
<FN>
see notes to consolidated financial statements
</FN>
HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In Millions)
1........BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
Huttig Building Products, Inc. (the "Company" or "Huttig") on a consolidated
basis, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in the consolidated financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have
been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. The Company believes that the disclosures
are adequate to make the information presented not misleading. It is recommended
that these consolidated financial statements be read in conjunction with the
audited consolidated financial statements and notes thereto included in the
Company's latest Annual Report on Form 10-K. This financial information
reflects, in the opinion of management, all adjustments, consisting only of
normal recurring items, necessary to present fairly the results for the interim
periods presented.
The consolidated results of operations and resulting cash flows for the interim
periods presented are not necessarily indicative of the results that might be
expected for the full year. Due to the seasonal nature of Huttig's business,
profitability is usually lower in the Company's first and fourth quarters than
in the second and third quarters.
2. RESERVE ACTIVITY
In December 1999, the Company recorded restructuring costs to consolidate and
integrate various branch operations and support functions. During fiscal 2000,
approximately $6.2 million was charged against this reserve, which included $2.5
million for inventory impairment, leaving a balance of $0.2 million at December
31, 2000. The remaining balance was fully utilized during the first quarter of
2001.
Also in December 1999, the Company established a reserve for asset impairments
and costs expected to be incurred to exit certain activities connected with the
acquisition of Rugby USA, Inc. ("Rugby".) During fiscal 2000, approximately $6.7
million was charged against this reserve, leaving a balance of $0.2 million at
December 31, 2000. The remaining balance was fully utilized in the first quarter
of 2001.
During the fourth quarter of 2000, the Company recorded $2.1 million as a
restructuring charge related to the termination of Huttig's distribution
agreement with Andersen Windows and Doors, of which $0.8 million was included in
cost of sales. The charge was primarily for items related to inventory
impairment and downsizing of branch operations that previously distributed
Andersen products. Approximately $1.0 million was charged against this reserve
during the fourth quarter of 2000, leaving a balance of $1.1 million at December
31, 2000. During the first quarter of 2001, $0.4 million was charged against
this reserve, which includes $0.2 million for inventory impairment. The Company
anticipates that the remaining restructuring activity will be substantially
complete by the end of the second quarter of 2001.
3. DEBT
Debt consisted of the following at March 31, 2001 and December 31, 2000:
March 31 December 31,
2001 2000
-------------- ---------------
Revolving credit agreement $ 99.5 $ 80.0
Capital lease obligations 0.9 1.0
Industrial revenue bond 0.1 0.1
-------------- ---------------
Total debt 100.5 81.1
Less: current portion 0.2 0.2
-------------- ---------------
-------------- ---------------
Long-term debt $ 100.3 $ 80.9
============== ===============
At March 31, 2001, the Company had three interest rate swap agreements with a
total notional principal amount of $80 million. These swap agreements currently
provide for a fixed weighted average rate of 8.9% on $80 million of the
Company's revolving credit borrowings. The interest rate on the remainder of the
outstanding borrowings under the revolving credit agreement is equal to a
floating rate of LIBOR plus 175 basis points.
4. DERIVATIVES AND INTEREST RATE RISK MANAGEMENT
Effective January 1, 2001, Huttig adopted SFAS 133, which establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments used for hedging activities. All derivative instruments, whether
designated in hedging relationships or not, are required to be recorded on the
balance sheet at fair value. If the derivative is designated as a cash flow
hedge, the effective portions of changes in the fair value of the derivative are
recorded in other comprehensive income (OCI) and are recognized in the income
statement when the hedged item affects earnings. Ineffective portions of changes
in the fair value of cash flow hedges are recognized in earnings. If the
derivative is not designated as a hedge for accounting purposes, changes in fair
value are immediately recognized in earnings.
The Company holds three interest rate swap agreements, with a total notional
amount of $80 million, that are used to hedge interest rate risks related to its
variable rate borrowings. Two of the interest rate swap agreements, with
notional amounts totaling $42.5 million, which management believes are economic
hedges and mitigate exposure to fluctuations in variable interest rates, do
not qualify as hedges for accounting purposes. The remaining interest
rate swap, with a notional amount of $37.5 million, is accounted for as a cash
flow hedge.
The adoption of SFAS 133 on January 1, 2001 resulted in an increase to
non-current liabilities of $2.8 million and a cumulative pre-tax reduction to
OCI of $2.8 million ($1.8 million after-tax). Of the reduction to OCI at January
1, 2001, $1.4 million is related to the two interest rate swaps that have not
been designated as hedges for accounting purposes. Of this amount, $0.9 million
will be reclassified into earnings during the next twelve months.
For the three months ended March 31, 2001, a total unrealized loss on
derivatives of $0.6 million was recorded, after operating profit. This includes
$0.2 million that was reclassified from OCI and $0.4 million related to the
change in fair value on the two interest rate swaps that are not designated as
hedges for accounting purposes. The interest rate swap that is designated as a
cash flow hedge was determined to be highly effective and substantially all of
the change in the fair value was charged to OCI.
There is no impact on cash flow as a result of the accounting treatment required
by SFAS 133 for the three interest rate swap agreements.
5. EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common
shareholders by weighted average shares of common stock outstanding. Diluted
earnings per share reflects the effect of all other outstanding common stock
equivalents using the treasury stock method.
For the three months ended March 31, 2001, there was no difference between the
number of shares outstanding for basic and diluted loss per share as the assumed
exercise of outstanding stock options would have an anti-dilutive effect due to
the net loss.
For the three months ended March 31, 2000, there was no difference between basic
and diluted shares outstanding since the average market price of the common
stock during these three months was less than the exercise prices on outstanding
stock options.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
Huttig Building Products, Inc. is one of the largest domestic distributors of
building materials that are used principally in new residential construction and
in home improvement, remodeling and repair work. Its products are distributed
through 59 distribution centers serving 45 states, principally to building
materials dealers (who, in turn, supply the end-user), directly to professional
builders and large contractors, and to home centers, national buying groups and
industrial and manufactured housing builders. The Company's American Pine
Products manufacturing facility, located in Prineville, Oregon, produces
softwood moldings. Approximately 38% of American Pine's sales were to Huttig's
distribution centers in the three months ended March 31, 2001.
The following table sets forth the Company's sales, by product classification as
a percentage of net sales, for the three months ended March 31, 2001 and 2000:
Three Months Ended March 31
--------------------------------------
2001 2000
----------------- -------------------
Doors 38% 33%
Specialty Building Materials 32% 27%
Lumber & Other Comodity Materials 13% 17%
Windows* 6% 12%
Mouldings 11% 11%
------------------ ------------------
Total Net Product Sales 100% 100%
================== ==================
* Sales of Andersen products totaled $ 15.9 million in the three
months ended March 31, 2000. Excluding Andersen, windows would
have accounted for 6% of total net sales in the three months
ended March 31, 2000.
Results from Operations
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000
Net sales for the three months ended March 31, 2001 were $217.6 million, a 23%
decrease from the first quarter of 2000 when sales were $281.9. This decrease is
partly attributable to deflation in commodity wood and wallboard products,
which negatively impacted sales in the first quarter of 2001 by approximately
$19.5 million compared to the first quarter of last year. Additionally, the
Company stopped distributing Andersen products in October 2000. In the first
quarter of 2000, total sales of Andersen products were $15.9 million. The
Company believes that sales were also negatively affected by the slowdown in
housing starts. Per a study by FW Dodge, housing starts decreased 4.2% in the
areas that Huttig services. Adverse weather conditions over much of the
Company's sales regions caused many branches to close for days at time, also
causing lost revenue. Same branch sales decreased 19% over the same period.
Gross profit, as a percentage of net sales, increased to 21.2% for the three
months ended March 31, 2001 compared to 19.2% for the three months ended March
31, 2000. Excluding one-time charges included in the Cost of Sales in 2000,
gross profit would have been 19.4% of net sales in the three months ended March
31, 2000.
Operating expenses were $41.3 million in the first quarter of 2001 compared to
$47.8 million in the first quarter of 2000. The decrease is partly attributable
to lower sales volume, causing a decrease in selling and delivery expenses. Also
contributing to the decrease are synergies realized from combining the
operations of Huttig and Rugby. Operating expenses, as a percentage of net
sales, were 19.0% through March 2001, a 2.0% increase from the first quarter of
2000.
Net interest expense increased to $2.5 million in the first quarter of 2001 from
$2.2 million in the same period of 2000. The Company had $19.4 million lower
average outstanding debt compared to the prior year which was offset by an
increase in the average interest rate. The higher rates are attributable to the
interest rate swap agreements which provide for a fixed rate of interest. These
swap agreements were entered into in the second quarter of 2000.
For the three months ended March 31, 2001, a total unrealized loss on
derivatives of $0.6 million was recorded, after operating profit. This includes
$0.2 million that was reclassified from OCI and $0.4 million related to the
change in fair value on the two interest rate swaps that are not designated as
hedges for accounting purposes. The interest rate swap that is designated as a
cash flow hedge was determined to be highly effective and substantially all of
the change in the fair value was charged to other comprehensive income.
As a result of the foregoing factors, pretax income decreased by $6.4 million to
$(0.2) million.
Income taxes were provided at effective tax rates of 38.0% and 40.5% for the
quarters ended March 31, 2001 and 2000, respectively.
Liquidity and Capital Resources
Huttig has depended primarily on the cash generated from its own operations to
finance its needs. The combination of income from operations and cash generated
from improved working capital management has been used to finance capital
expenditures and seasonal working capital needs. The Company's working capital
requirements are generally greatest in the first eight months of the year and
the Company typically generates cash from working capital reductions in the last
four months of the year.
For the three months ended March 31, 2001, cash increased by $2.6 million
compared to an increase of $1.2 million in the prior year comparable period. The
$1.4 million increase was due primarily to cash provided from financing
activities. Also during the quarter, the Company purchased the assets of Monarch
Manufacturing, Inc. in Baltimore, Maryland and Hope Lumber and Supply Company in
Kansas City, Missouri for an aggregate cash purchase price of $1.2 million.
Financing
At March 31, 2001 the Company had a $200 million secured revolving credit
facility with Chase Manhattan Bank as agent. At March 31, 2001, the Company had
outstanding, three interest rate swap agreements having a total notional amount
of principal of $80 million. These swap agreements currently provide for a fixed
weighted average rate of 8.9% on $80 million of the Company's revolving credit
borrowings. The interest rate on the remainder of the outstanding borrowings
under the revolving credit agreement is a floating rate equal to LIBOR plus 175
basis points.
As of May 10, the Company had approximately $92 million of unused credit
available under its revolving credit facility.
The Company believes that cash funds generated from operations and funds
available under its secured credit agreement will provide sufficient funds to
meet its currently anticipated requirements.
Restructuring Activities
During the fourth quarter of 2000, the Company recorded $2.1 million of
restructuring charges related to the termination of Huttig's distribution
agreement with Andersen Windows and Doors, of which $0.8 million was included in
cost of sales. The charge was primarily for items related to inventory
impairment and downsizing of branch operations that previously distributed
Andersen products. Approximately $1.0 million was charged against this reserve
during the fourth quarter of 2000, leaving a balance of $1.1 million at December
31, 2000. During the first quarter of 2001, $0.4 million was charged against
this reserve, which includes $0.2 million for inventory impairment. The Company
anticipates that the remaining restructuring activity will be substantially
complete by the end of the second quarter of 2001.
Effects of Inflation
As Huttig continues to grow, its manufacturing operations should decrease as a
percentage of its overall business and any impact of inflation is lessened.
Furthermore, management believes that, to the extent inflation affects its costs
in the future and competitive conditions permit, Huttig can offset these
increased costs by increasing sales prices.
Cyclicality and Seasonality
Huttig's sales depend heavily on the strength of national and local new
residential construction and home improvement and remodeling markets. The
strength of these markets depends on new housing starts and residential
renovation projects, which are a function of many factors beyond Huttig's
control. Some of these factors include interest rates, employment levels,
availability of credit, prices of commodity wood products and consumer
confidence. Future downturns in the markets that Huttig serves could have a
material adverse effect on Huttig's operating results or financial condition. In
addition, because these markets are sensitive to cyclical changes in the economy
in general, future downturns in the economy could have a material adverse effect
on Huttig's financial condition and results of operations.
Huttig's first quarter revenues and, to a lesser extent, its fourth quarter
revenues are typically adversely affected by winter construction cycles and
weather patterns in colder climates as the level of activity in the new
construction and home improvement markets decreases. Because much of Huttig's
overhead and expense remains relatively fixed throughout the year, its profits
also tend to be lower during the first and fourth quarters. The effects of
winter construction cycles and weather patterns on Huttig's business are offset
somewhat by the increase in residential construction activity during the same
period in the deep South, Southwest and Southern California markets in which
Huttig participates.
Environmental Regulation
Huttig is subject to federal, state and local environmental laws and
regulations. Huttig has been identified as a potentially responsible party in
connection with the clean up of contamination at two sites. In addition, some of
Huttig's distribution centers are located in areas of current or former
industrial activity where environmental contamination may have occurred, and for
which Huttig, among others, could be held responsible. Huttig does not believe
that its contribution to the clean up of the two sites will be material or that
there are any material environmental liabilities at any of its distribution
center locations. Huttig believes that it is in compliance with applicable laws
and regulations regulating the discharge of hazardous substances into the
environment. However, there can be no assurance that future environmental
liabilities will not have a material adverse effect on Huttig's financial
condition or results of operations.
Cautionary Statement
Certain statements made in this Form 10-Q may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors are discussed in detail in Huttig
Building Products, Inc. Annual Report on Form 10-K for the year ended December
31, 2000. Given these uncertainties, investors are cautioned not to place undue
reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the results of any
revisions to any of the forward-looking statements contained in the Annual
Report on Form 10-K or this Form 10-Q except as required by law.
ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Huttig has exposure to market risk as it relates to effects of changes in
interest rates. The Company had debt outstanding at March 31, 2001 under its
revolving credit agreement of $99.5 million. At March 31, 2001, the Company had
three interest rate swap agreements having a total notional principal amount of
$80 million. These swap agreements currently provide for a fixed weighted
average rate of 8.9% on $80 million of the Company's revolving credit
borrowings. The interest rate on the remainder of the outstanding borrowings
under the revolving credit agreement is a floating rate equal to LIBOR plus 175
basis points.
Included in the financial results is the impact of adopting SFAS 133, which
establishes accounting and reporting standards for derivative and hedging
activities. Huttig has three interest rate swap agreements which provide for
fixed interest rates on $80 million of the Company's outstanding borrowings.
Under the accounting treatment prescribed by SFAS 133, Huttig's liabilities
include the fair value of these swaps of $3.7 million and shareholders' equity
includes $1.9 million, net of tax, which is recorded as other comprehensive
income. Included in expense, after profit from operations, is $0.6 million of an
unrealized loss related to the portion of the Company's swap agreements, which
do not qualify for hedge accounting treatment according to the SFAS 133
criteria. This unrealized loss resulted in a decrease to earnings per share of
$.02. There is no impact on cash flow as a result of the accounting treatment
required by SFAS 133.
Huttig does not generate significant income from non-U.S. sources and
accordingly, changes in foreign currency exchange rates do not generally have
a direct effect on the Company's financial position. All transactions are
denominated in U.S. dollars.
Huttig is subject to periodic fluctuations in the price of wood commodities.
Profitability is influenced by these changes as prices change between the time
Huttig buys and sells the wood. In addition, to the extent changes in interest
rates affect the housing and remodeling market, Huttig would be affected by such
changes.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS
ON FORM 8-K
(a) Exhibits
None filed.
(b) Reports on Form 8-K.
None filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUTTIG BUILDING PRODUCTS, INC.
---------------------------------------------
(Registrant)
Date: May 11, 2001 /s/ Barry J. Kulpa
---------------------------------------------
Barry J. Kulpa
President, Chief Executive
Officer And Director
(Principal Executive Officer)
Date: May 11,2001 /s/ Kenneth E. Thompson
---------------------------------------------
Kenneth E. Thompson
Chief Financial Officer
(Principal Financial Officer)
Date: May 11, 2001 /s/ Thomas S. McHugh
---------------------------------------------
Thomas S. McHugh
Corporate Controller and Treasurer
(Principal Accounting Officer)