Companies Reporting Third-Quarter Financials; Results a Mixed BagNovember 4th, 2020 by Editor
As more companies are reporting third quarter earnings and other numbers, the results vary from one corporation to the next. Hutting Building Products and Builders FirstSource Inc. are two of the latest to release financial reports, reflecting the challenges a global pandemic has had on each company, as well as how the responses to it have gone.
A domestic distributor of millwork, building materials and wood products, Huttig’s financial results for the third quarter showed that though the company took a slight hit with COVID-19, the company’s response to the shifts it had to make had a positive result.
“As devastating as the impact of the COVID-19 global pandemic has been on our country, economy, and way of life, it was the catalyst for many of the changes we made to our business, contributing to our improved financial performance in the quarter,” said Jon Vrabely, president and CEO of Huttig. “I am very proud of our entire organization and our third quarter results in what remains a very challenging environment. Sales in the quarter approached prior year levels, and if not for the impact of COVID-related supply chain challenges, internal restructuring activities, and our continued product line rationalization initiative, we estimate our sales in the quarter would have exceeded prior year levels. We made meaningful improvements, reducing our expenses and debt, and have adapted to a leaner expense structure that establishes the foundation for a more profitable future.”
Compared to the same time last year, Huttig saw a slight dip in net sales, from $215.7 million in 2019 to $212.7 million in 2020. The company attributes the decline to “a number of factors,” including pandemic-induced changes to the operating environment resulting in supply chain disruption, labor shortages, which have increased lead times to our customers for value-add production sales, and the acceleration of planned restructuring activities, including the closure of two branches in the third quarter of 2020. Restructuring and other changes to the operating environment the company had to make led to a reduction in operating expenses, which dropped 13.5% from last year to $35.8 million, but operating income increased to $6.9 million compared to 2019’s $3.3 million.
Other important numbers from Huttig’s financial report, compared to third quarter 2019, include:
• Generated cash from operations of $25.4 million compared to $9.6 million;
• Adjusted EBITDA increased to $8.5 million compared to $5.3 million;
• Total liquidity increased to $69.8 million compared to $46.5 million a year ago; and
• Reduced indebtedness by $51.9 million compared to a year ago.
Builders FirstSource also reported its results for the third quarter, and theirs also show generally positive results for the company.
“Our third quarter 2020 results reflect our team’s collective efforts to execute our strategic plan, which led to record sales and Adjusted EBITDA,” said CEO Chad Crow. “These exceptional results were underpinned by strong demand for our integrated services and by our team’s ability to react quickly to market fluctuations, including the sharp rise in lumber costs. In August, we were thrilled to announce our planned merger with BMC, a transaction that is expected to create significant value for all shareholders in the coming years. As we look to the remainder of 2020, we will continue to focus on executing our growth strategy with a safety-first emphasis and planning for the transformational merger of Builders FirstSource and BMC.”
The company’s net sales for the quarter increased by 15.9% compared to the prior year period, and core organic sales increased 6.7%, excluding acquisitions and commodity impacts.
“Our team delivered a better-than-expected gross margin of 24.9% in the third quarter despite record high lumber costs. At the same time, we significantly improved SG&A as a percentage of net sales year-over-year which allowed us to hold Adjusted EBITDA margin effectively flat, demonstrating the strength of our business model,” said CFO Peter Jackson. “We entered the fourth quarter with a strong and flexible balance sheet, including $1.2 billion of liquidity and a stable net leverage ratio of 2.3x. We are at an exceptional point in our Company’s history to complete our announced merger with BMC and further position our business for continued success.”
The company also reported:
• Commodity inflation increased net sales by 7.2%;
• Acquisitions contributed net sales growth of 2.0%;
• Adjusted EBITDA increased 15% to $184 million, or 8.0% of net sales, driven by solid demand across all three customer end markets and disciplined pricing in a dynamic market;
• Net income of $85.9 million, or $0.73 per diluted share, and adjusted net income of $96.7 million, or $0.82 per diluted share;
• A quarter-end balance sheet with a net debt to Adjusted EBITDA ratio of 2.3x and liquidity of $1.2 billion.