Huttig Records 3% Sales Decline in 3Q - Modern Distribution Management

Huttig Records 3% Sales Decline in 3Q

Huttig Building Products Inc., St. Louis, MO, distributor of millwork, building materials and wood products, reported sales declined 3% in the third quarter 2006 to $294.2 million.


Sales to national accounts represented 33.5% of sales in the third quarter of 2006, as compared to 31.7% in the same period in 2005. Building products and engineered wood sales increased 4% and 3%, respectively, in the 2006 third quarter as compared to the 2005 third quarter, while sales of millwork products decreased 2% from the 2005 third quarter.


Three of Huttig’s four regions experienced sales declines in the 2006 third quarter over the prior year period. Huttig’s gross margins were negatively impacted by the $4.9 million of charges related to the inventory liquidations and write-downs, and lower margins on commodity wood products and doors.


Sales for the first nine months were $871.6 million, a 4.6% increase from the same period a year ago.


Huttig announced its decision to close in the fourth quarter of 2006 two smaller distribution centers, one in Albany, NY, and the other in Grand Rapids, MI. In addition, Huttig expects to reduce its work force by an additional 130 positions in the fourth quarter of 2006. After this, the company will have reduced its workforce by about 240 positions or 11% from June 30, 2006, levels, including 60 positions eliminated at closed branches. The company’s third quarter and fourth quarter reductions in force are expected to generate approximately $7.5 million in savings on an annualized basis.


“While no company wants to take these actions, we believe they are necessary to improve our cost structure and operating margins, and ensure that Huttig remains focused and operates at maximum efficiency during the current weakness in the housing market,” said Jon Vrabely, Chief Operating Officer, who, on January 1, 2007, will become Huttig’s CEO, as previously announced.


 


Outlook
“We expect housing starts to remain under pressure for the next 12 to 24 months,” Vrabely said. “As a result, during the balance of 2006 we are focusing on reducing our cost structure and improving our operating efficiencies so that we will be well positioned for what will likely be a challenging market in 2007. Going forward, we will continue our national products, national accounts and geographic expansion strategies, but with an increased focus on profitability.


“As a result of the charges to be recorded in 2006 associated with our restructuring program, and taking into account the difficult housing market, we now expect to record a modest operating loss (before interest, write-off of unamortized loan fees and taxes) for 2006 on sales of close to $1.1 billion.”

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