UNITED STATES

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 September 30, 2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

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

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

555 Maryville University Drive Suite 400

St. Louis, Missouri

 

63141

(Address of principal executive offices)

 

(Zip code)

(314) 216-2600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

 Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common, par value $0.01 per share

HBP

The NASDAQ Stock Market LLC

Preferred Share Purchase Rights

HBP*

The NASDAQ Stock Market LLC

*The rights currently transfer with the shares of Common Stock

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

The number of shares of Common Stock outstanding on September 30, 2019 was 26,538,181 shares.

 

 

 

 


 

 

 

 

 

Page No.

PART I. FINANCIAL INFORMATION

  

 

 

 

 

 

 

Item 1.

  

Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended  September 30, 2019 and 2018 (unaudited)

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2019, December 31, 2018 and September 30, 2018 (unaudited)

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statement of Shareholders’ Equity for the three and nine months ended September 30, 2019 and 2018 (unaudited)

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2019 and 2018 (unaudited)

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

8

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

13

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

18

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

18

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

18

 

 

 

 

 

Item 1A.

 

Risk Factors

 

18

 

 

 

 

 

Item 6.

 

Exhibits

 

19

 

 

 

 

 

Signatures

 

20

 

 

 

 

 

 

 

 

 

 

 

2


PART I FINANCIAL INFORMATION

 

ITEM 1 — FINANCIAL STATEMENTS

HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in millions, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net sales

 

$

215.7

 

 

$

222.0

 

 

$

631.6

 

 

$

643.4

 

Cost of sales

 

 

171.0

 

 

 

177.4

 

 

 

505.2

 

 

 

515.1

 

Gross margin

 

 

44.7

 

 

 

44.6

 

 

 

126.4

 

 

 

128.3

 

Operating expenses

 

 

41.4

 

 

 

41.1

 

 

 

122.0

 

 

 

123.2

 

Operating income

 

 

3.3

 

 

 

3.5

 

 

 

4.4

 

 

 

5.1

 

Interest expense, net

 

 

1.7

 

 

 

1.8

 

 

 

5.2

 

 

 

4.6

 

Income (loss) from operations before income taxes

 

 

1.6

 

 

 

1.7

 

 

 

(0.8

)

 

 

0.5

 

Income tax expense (benefit)

 

 

 

 

 

0.5

 

 

 

11.1

 

 

 

(0.4

)

Income (loss) from continuing operations

 

 

1.6

 

 

 

1.2

 

 

 

(11.9

)

 

 

0.9

 

Income (loss) from discontinued operations, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1.6

 

 

$

1.2

 

 

$

(11.9

)

 

$

0.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations per share- basic

 

$

0.06

 

 

$

0.05

 

 

$

(0.47

)

 

$

0.04

 

Income (loss) from discontinued operations per share- basic

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share- basic

 

$

0.06

 

 

$

0.05

 

 

$

(0.47

)

 

$

0.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations per share- diluted

 

$

0.06

 

 

$

0.05

 

 

$

(0.47

)

 

$

0.04

 

Income (loss) from discontinued operations per share- diluted

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share- diluted

 

$

0.06

 

 

$

0.05

 

 

$

(0.47

)

 

$

0.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic shares outstanding

 

 

25.5

 

 

 

25.1

 

 

 

25.4

 

 

 

25.1

 

Diluted shares outstanding

 

 

25.6

 

 

 

25.1

 

 

 

25.4

 

 

 

25.1

 

 

See notes to condensed consolidated financial statements

 

 

3


HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in millions)

 

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

 

 

2019

 

 

2018

 

 

2018

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

$

2.9

 

 

$

0.8

 

 

$

1.5

 

 

Trade accounts receivable, net

 

 

88.5

 

 

 

69.0

 

 

 

96.3

 

 

Inventories, net

 

 

142.7

 

 

 

134.0

 

 

 

153.7

 

 

Other current assets

 

 

13.1

 

 

 

14.7

 

 

 

13.1

 

 

Total current assets

 

 

247.2

 

 

 

218.5

 

 

 

264.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROPERTY, PLANT AND EQUIPMENT:

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

 

5.0

 

 

 

5.0

 

 

 

5.0

 

 

Buildings and improvements

 

 

32.5

 

 

 

32.3

 

 

 

32.4

 

 

Machinery and equipment

 

 

57.3

 

 

 

56.0

 

 

 

54.6

 

 

Gross property, plant and equipment

 

 

94.8

 

 

 

93.3

 

 

 

92.0

 

 

Less accumulated depreciation

 

 

63.2

 

 

 

60.0

 

 

 

59.1

 

 

Property, plant and equipment, net

 

 

31.6

 

 

 

33.3

 

 

 

32.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

 

39.5

 

 

 

 

 

 

 

 

Goodwill

 

 

9.5

 

 

 

9.5

 

 

 

9.5

 

 

Deferred income taxes

 

 

0.1

 

 

 

11.1

 

 

 

10.1

 

 

Other

 

 

5.2

 

 

 

5.6

 

 

 

6.1

 

 

Total other assets

 

 

54.3

 

 

 

26.2

 

 

 

25.7

 

 

TOTAL ASSETS

 

$

333.1

 

 

$

278.0

 

 

$

323.2

 

 

See notes to condensed consolidated financial statements

 

 

4


HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in millions, except share data)

 

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

 

 

2019

 

 

2018

 

 

2018

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

1.7

 

 

$

1.8

 

 

$

1.5

 

 

Current maturities of operating lease right-of-use liabilities

 

 

9.6

 

 

 

 

 

 

 

 

Trade accounts payable

 

 

68.4

 

 

 

51.5

 

 

 

64.7

 

 

Accrued compensation

 

 

2.7

 

 

 

5.0

 

 

 

3.2

 

 

Other accrued liabilities

 

 

14.4

 

 

 

18.0

 

 

 

16.1

 

 

Total current liabilities

 

 

96.8

 

 

 

76.3

 

 

 

85.5

 

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current maturities

 

 

151.8

 

 

 

137.1

 

 

 

166.8

 

 

Operating lease right-of-use liabilities, less current maturities

 

 

30.5

 

 

 

 

 

 

 

 

Other non-current liabilities

 

 

2.4

 

 

 

2.6

 

 

 

2.2

 

 

Total non-current liabilities

 

 

184.7

 

 

 

139.7

 

 

 

169.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares: $.01 par (5,000,000 shares authorized)

 

 

 

 

 

 

 

 

 

 

Common shares: $.01 par (75,000,000 shares authorized: 26,538,181;

   25,993,441; and 26,040,012 shares issued at September 30, 2019,

   December 31, 2018 and September 30, 2018, respectively)

 

 

0.3

 

 

 

0.3

 

 

 

0.3

 

 

Additional paid-in capital

 

 

47.5

 

 

 

46.0

 

 

 

45.4

 

 

Retained earnings

 

 

3.8

 

 

 

15.7

 

 

 

23.0

 

 

Total shareholders’ equity

 

 

51.6

 

 

 

62.0

 

 

 

68.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

333.1

 

 

$

278.0

 

 

$

323.2

 

 

 

See notes to condensed consolidated financial statements

 

 


5


HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(unaudited)

(in millions)

 

 

Common Shares

 

 

Additional

 

 

Retained Earnings

 

 

Total

 

 

 

Outstanding,

 

 

Paid-In

 

 

(Accumulated

 

 

Shareholders’

 

 

 

at Par Value

 

 

Capital

 

 

Deficit)

 

 

Equity

 

Balance at January 1, 2018

 

$

0.3

 

 

$

44.0

 

 

$

22.1

 

 

$

66.4

 

Net loss

 

 

-

 

 

 

-

 

 

 

(0.5

)

 

 

(0.5

)

Payment for taxes related to share

   settlement of equity awards

 

 

-

 

 

 

(0.4

)

 

 

-

 

 

 

(0.4

)

Stock compensation expense

 

 

-

 

 

 

0.6

 

 

 

-

 

 

 

0.6

 

Balance at March 31, 2018

 

$

0.3

 

 

$

44.2

 

 

$

21.6

 

 

$

66.1

 

Net income

 

 

-

 

 

 

-

 

 

 

0.2

 

 

 

0.2

 

Stock compensation expense

 

 

-

 

 

 

0.6

 

 

 

-

 

 

 

0.6

 

Balance at June 30, 2018

 

$

0.3

 

 

$

44.8

 

 

$

21.8

 

 

$

66.9

 

Net income

 

 

-

 

 

 

-

 

 

 

1.2

 

 

 

1.2

 

Stock compensation expense

 

 

-

 

 

 

0.6

 

 

 

-

 

 

 

0.6

 

Balance at September 30, 2018

 

$

0.3

 

 

$

45.4

 

 

$

23.0

 

 

$

68.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2019

 

$

0.3

 

 

$

46.0

 

 

$

15.7

 

 

$

62.0

 

Net loss

 

 

-

 

 

 

-

 

 

 

(3.2

)

 

 

(3.2

)

Payment for taxes related to share

   settlement of equity awards

 

 

-

 

 

 

(0.1

)

 

 

-

 

 

 

(0.1

)

Stock compensation expense

 

 

-

 

 

 

0.5

 

 

 

-

 

 

 

0.5

 

Balance at March 31, 2019

 

$

0.3

 

 

$

46.4

 

 

$

12.5

 

 

$

59.2

 

Net loss

 

 

-

 

 

 

-

 

 

 

(10.3

)

 

 

(10.3

)

Stock compensation expense

 

 

-

 

 

 

0.6

 

 

 

-

 

 

 

0.6

 

Balance at June 30, 2019

 

$

0.3

 

 

$

47.0

 

 

$

2.2

 

 

$

49.5

 

Net income

 

 

-

 

 

 

-

 

 

 

1.6

 

 

 

1.6

 

Stock compensation expense

 

 

-

 

 

 

0.5

 

 

 

-

 

 

 

0.5

 

Balance at September 30, 2019

 

$

0.3

 

 

$

47.5

 

 

$

3.8

 

 

$

51.6

 

 

6


HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in millions)

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1.6

 

 

$

1.2

 

 

$

(11.9

)

 

$

0.9

 

Adjustments to reconcile net income (loss) to net cash used in

   operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1.5

 

 

 

1.4

 

 

 

4.1

 

 

 

4.0

 

Non-cash interest expense

 

 

0.1

 

 

 

0.1

 

 

 

0.2

 

 

 

0.2

 

Stock-based compensation

 

 

0.5

 

 

 

0.6

 

 

 

1.6

 

 

 

1.8

 

Deferred income taxes

 

 

 

 

 

0.5

 

 

 

11.0

 

 

 

(0.4

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade accounts receivable

 

 

8.2

 

 

 

22.3

 

 

 

(19.5

)

 

 

(29.5

)

Inventories, net

 

 

(1.0

)

 

 

(6.3

)

 

 

(8.7

)

 

 

(41.8

)

Trade accounts payable

 

 

(1.2

)

 

 

(3.7

)

 

 

16.9

 

 

 

13.7

 

Other

 

 

(0.1

)

 

 

(3.0

)

 

 

(3.9

)

 

 

(5.3

)

Cash provided by (used in) continuing operating activities

 

 

9.6

 

 

 

13.1

 

 

 

(10.2

)

 

 

(56.4

)

Cash used in discontinued operating activities

 

 

(0.1

)

 

 

(0.1

)

 

 

(0.3

)

 

 

(0.7

)

Total cash provided by (used in) operating activities

 

 

9.5

 

 

 

13.0

 

 

 

(10.5

)

 

 

(57.1

)

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(0.4

)

 

 

(2.9

)

 

 

(1.2

)

 

 

(6.8

)

Proceeds from disposition of assets

 

 

 

 

 

0.9

 

 

 

 

 

 

0.9

 

Total cash used in investing activities

 

 

(0.4

)

 

 

(2.0

)

 

 

(1.2

)

 

 

(5.9

)

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings (repayments) of debt, net

 

 

(7.3

)

 

 

(11.1

)

 

 

13.9

 

 

 

64.6

 

Repurchase of shares to satisfy employee tax withholdings

 

 

 

 

 

 

 

 

(0.1

)

 

 

(0.4

)

Total cash provided by (used in) financing activities

 

 

(7.3

)

 

 

(11.1

)

 

 

13.8

 

 

 

64.2

 

Net increase (decrease) in cash and equivalents

 

 

1.8

 

 

 

(0.1

)

 

 

2.1

 

 

 

1.2

 

Cash and equivalents, beginning of period

 

 

1.1

 

 

 

1.6

 

 

 

0.8

 

 

 

0.3

 

Cash and equivalents, end of period

 

$

2.9

 

 

$

1.5

 

 

$

2.9

 

 

$

1.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

1.8

 

 

$

1.9

 

 

$

5.1

 

 

$

4.5

 

Income taxes paid

 

 

 

 

 

 

 

 

0.1

 

 

 

0.1

 

Non-cash financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets acquired with debt obligations

 

 

0.4

 

 

 

1.2

 

 

 

0.6

 

 

 

1.8

 

 

See notes to condensed consolidated financial statements

 

 

7


HUTTIG BUILDING PRODUCTS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

 

1. BASIS OF PRESENTATION

The unaudited interim condensed consolidated financial statements of Huttig Building Products, Inc. and its subsidiary (the “Company” or “Huttig”) were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and reflect all adjustments (including normal recurring accruals) which, in the opinion of management, are considered necessary for the fair presentation of the results for the periods presented. Financial statement preparation further requires management to make estimates and assumptions. Management bases these estimates and assumptions on historical results and known trends as well as management forecasts. Actual results could differ from these estimates and assumptions and these differences may be material. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The condensed 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, or any other interim period. Due to the seasonal nature of Huttig’s business, operating profitability is usually lower in the Company’s first and fourth quarters than in the second and third quarters.

2. NEW ACCOUNTING STANDARDS

Adoption of New Accounting Standards

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” and all related amendments.  The Company adopted the standard using the full retrospective method, which did not require a cumulative effect adjustment to retained earnings. As a result of this adoption, there was no material impact on revenue recognition practices, income from continuing operations after taxes, net income or earnings per share.  See Note 3 - “Revenue” for further discussion, including additional required qualitative and quantitative disclosures of revenue recognition policies. 

On October 1, 2018, the Company adopted ASU 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 eliminates the two-step process that required identification of potential impairment and a separate measure of the actual impairment. The annual assessment of goodwill impairment will now consist of a comparison of the fair value of a reporting unit with its carrying amount. Any impairment will now be determined by using the difference between the carrying amount and the fair value of the reporting unit, not to exceed the total goodwill allocated to that unit.

On January 1, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements.  The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and a lease liability on the balance sheet for all leases with a term longer than 12 months.  Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.  The Company adopted the standard on its effective date using the modified retrospective approach and a package of practical expedients permitted by the transition guidance of the new standard.  The practical expedients included an accounting policy election to forgo recognition of ROU asset and liability on leases with an intial term of 12 months or less, and to forgo separate recognition of lease and non-lease components for all leases.

On January 1, 2019, the Company adopted ASU 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting.”  ASU 2018-07 more closely aligns the accounting for employee and nonemployee share-based payments.  There was no material impact to stock compensation, income from continuing operations after taxes, net income or earnings per share as a result of adoption.

The Company adopted the amendments to certain disclosure requirements in Securities Act of 1933, as amended, Release No. 33-10532, “Disclosure Update and Simplification” on November 5, 2018, the effective date of the release. Among the amendments is a requirement to present the changes in shareholders’ equity in the interim financial statements (either in a separate statement or footnote) in quarterly reports on Form 10-Q. See the Consolidated Statement of Shareholders’ Equity.

3. REVENUE

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods.  The Company reports sales revenue, including direct sales, on a net basis, which includes gross revenue adjustments for estimated returns, cash payment discounts based on the satisfaction of outstanding receivables, and volume purchase rebates.  The Company’s customer payment terms are typical for its industry. These terms vary by customer, location, and products.

Regarding direct sales, the Company is the principal of these arrangements and is responsible for fulfilling the promise to provide specific goods to its customers, including product specifications, pricing and modifications prior to delivery.

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The following table disaggregates revenue by product classification (in millions):

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Millwork products

 

$

99.6

 

 

$

104.8

 

 

$

294.3

 

 

$

303.5

 

Building products

 

$

100.4

 

 

 

96.9

 

 

$

289.7

 

 

 

281.9

 

Wood products

 

$

15.7

 

 

 

20.3

 

 

$

47.6

 

 

 

58.0

 

Net sales

 

$

215.7

 

 

$

222.0

 

 

$

631.6

 

 

$

643.4

 

 

4.  LEASES

The Company has operating and financing leases for corporate offices, distribution centers, vehicles, and certain equipment. These leases have remaining lease terms of less than 1 year to 12 years and many of the leases have renewal options.  Because the Company is not reasonably certain to exercise the renewal options, the options are not considered in determining the lease term, and associated potential option payments are excluded from lease payments and right-of-use calculations.  Leases with an initial term of 12 months or less are likewise excluded from right-of-use calculations.

In addition to fixed payments, many of the Company’s lease contracts contain variable payments. Vehicle lease variable payments typically include mileage, and real estate leases include variable charges for taxes and common area maintenance.  Variable lease payments and payments for leases with an initial term of 12 months or less are recognized in the period incurred.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

(in millions):

2019

 

 

2019

 

Operating Lease Cost

$

3.0

 

 

$

9.3

 

 

 

 

 

 

 

 

 

Finance Lease Cost:

 

 

 

 

 

 

 

Amortization of right-of-use assets

$

0.5

 

 

$

1.4

 

Interest on lease liabilities

 

0.1

 

 

 

0.2

 

Total finance lease cost

$

0.6

 

 

$

1.6

 

The following lease assets and liabilities are included on the condensed consolidated balance sheet (in millions):

 

September 30,

 

 

2019

 

Operating Leases:

 

 

 

Operating lease right-of-use assets

$

39.5

 

 

 

 

 

Current maturities of operating lease right-of-use assets

 

9.6

 

Operating lease right-of-use liabilities, less current maturities

 

30.5

 

Total operating lease liabilities

$

40.1

 

 

 

 

 

Finance Leases:

 

 

 

Gross property, plant and equipment

$

10.0