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

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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T ~~(232.405~~(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ 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 ~~definition~~the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company”in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

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, 2017~~July 26, 2021 was ~~25,879,812~~27,399,870 shares.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Net sales

$
199.6

$
192.8

$
574.0

$
549.5

Cost of sales

158.3

151.4

455.0

433.9

Gross margin

41.3

41.4

119.0

115.6

Operating expenses

38.2

33.6

113.3

94.7

Operating income

3.1

7.8

5.7

20.9

Interest expense, net

0.9

0.5

2.2

1.6

Income from continuing operations before income taxes

2.2

7.3

3.5

19.3

Income tax expense

0.9

2.5

0.8

7.1

Income from continuing operations

1.3

4.8

2.7

12.2

Income (loss) from discontinued operations, net of taxes

0.1

(0.1
)

—

4.3

Net income

$
1.4

$
4.7

$
2.7

$
16.5

Income from continuing operations per share - basic and diluted

$
0.05

$
0.19

$
0.10

$
0.48

Income (loss) from discontinued operations per share - basic
and diluted

$
0.00

$
0.00

$
0.00

$
0.17

Net income per share - basic and diluted

$
0.05

$
0.19

$
0.10

$
0.65

Weighted average shares outstanding:

Basic and diluted shares outstanding

24.9

24.6

24.8

24.5

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net sales	$	247.4	$	192.0	$	462.1	$	395.0
Cost of sales		192.1		153.3		361.1		315.4
Gross margin		55.3		38.7		101.0		79.6
Operating expenses		39.5		34.7		76.4		73.7
Goodwill impairment		—		—		—		9.5
Restructuring charge		—		1.5		—		1.5
Operating income (loss)		15.8		2.5		24.6		(5.1	)
Interest expense, net		0.6		0.9		1.3		2.2
Income (loss) from operations before income taxes		15.2		1.6		23.3		(7.3	)
Income tax expense		0.3		—		0.3		—
Income (loss) from continuing operations		14.9		1.6		23.0		(7.3	)
Loss from discontinued operations, net of taxes		—		—		—		—
Net income (loss)	$	14.9	$	1.6	$	23.0	$	(7.3	)

Earnings (loss) per share:
Earnings (loss) from continuing operations per share- basic	$	0.54	$	0.06	$	0.84	$	(0.28	)
Loss from discontinued operations per share- basic		—		—		—		—
Net earnings (loss) per share - basic	$	0.54	$	0.06	$	0.84	$	(0.28	)

Earnings (loss) from continuing operations per share- diluted	$	0.54	$	0.06	$	0.84	$	(0.28	)
Loss from discontinued operations per share- diluted		—		—		—		—
Net income (loss) per share- diluted	$	0.54	$	0.06	$	0.84	$	(0.28	)

Weighted average shares outstanding:
Basic shares outstanding		27.4		26.0		27.3		26.0
Diluted shares outstanding		27.5		26.2		27.5		26.0

	June 30,		December 31,		June 30,
	2021		2020		2020
ASSETS
CURRENT ASSETS:
Cash and equivalents	$	2.9	$	0.3	$	1.8
Trade accounts receivable, net		105.8		69.3		95.5
Inventories, net		120.3		105.7		108.5
Other current assets		13.1		10.6		9.2
Total current assets		242.1		185.9		215.0

PROPERTY, PLANT AND EQUIPMENT:
Land		5.0		5.0		5.0
Buildings and improvements		31.8		32.3		32.6
Machinery and equipment		59.7		58.2		58.8
Gross property, plant and equipment		96.5		95.5		96.4
Less accumulated depreciation		68.7		67.1		66.6
Property, plant and equipment, net		27.8		28.4		29.8

OTHER ASSETS:
Operating lease right-of-use assets		34.1		33.9		38.6
Other		4.3		4.4		4.8
Total other assets		38.4		38.3		43.4
TOTAL ASSETS	$	308.3	$	252.6	$	288.2

	June 30,		December 31,			June 30,
	2021		2020			2020
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	1.8	$	1.7		$	1.7
Current maturities of operating lease right-of-use liabilities		9.1		9.1			9.8
Trade accounts payable		75.3		53.1			62.9
Accrued compensation		12.5		10.0			5.5
Other accrued liabilities		17.8		15.7			15.3
Total current liabilities		116.5		89.6			95.2
NON-CURRENT LIABILITIES:
Long-term debt, less current maturities		97.5		92.4			125.6
Operating lease right-of-use liabilities, less current maturities		25.0		24.9			29.0
Other non-current liabilities		2.4		2.4			2.2
Total non-current liabilities		124.9		119.7			156.8

SHAREHOLDERS’ EQUITY:
Preferred shares: $.01 par (5,000,000 shares authorized)		—		—			—
Common shares: $.01 par (75,000,000 shares authorized: 27,399,870; 26,889,190; and 26,894,006 shares issued and outstanding at June 30, 2021, December 31, 2020 and June 30, 2020, respectively)		0.3		0.3			0.3
Additional paid-in capital		50.1		49.5			48.8
Retained earnings (accumulated deficit)		16.5		(6.5	)		(12.9	)
Total shareholders’ equity		66.9		43.3			36.2

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	308.3	$	252.6		$	288.2

	Common Shares		Additional			Retained Earnings			Total
	Outstanding,		Paid-In			(Accumulated			Shareholders’
	at Par Value		Capital			Deficit)			Equity
Balance at January 1, 2020	$	0.3	$	48.2		$	(5.6	)	$	42.9
Net loss		—		—			(8.9	)		(8.9	)
Stock compensation expense		—		0.3			—			0.3
Balance at March 31, 2020	$	0.3	$	48.5		$	(14.5	)	$	34.3
Net loss		-		-			1.6			1.6
Stock compensation expense		-		0.3			-			0.3
Balance at June 30, 2020	$	0.3	$	48.8		$	(12.9	)	$	36.2


Balance at January 1, 2021	$	0.3	$	49.5		$	(6.5	)	$	43.3
Net income		—		—			8.1			8.1
Payment for taxes related to share settlement of equity awards		—		(0.2	)		—			(0.2	)
Stock compensation expense		—		0.4			—			0.4
Balance at March 31, 2021	$	0.3	$	49.7		$	1.6		$	51.6
Net income		-		-			14.9			14.9
Stock compensation expense		-		0.4			-			0.4
Balance at June 30, 2021	$	0.3	$	50.1		$	16.5		$	66.9

September 30,

December 31,

September 30,

2017

2016

2016

ASSETS

CURRENT ASSETS:

Cash and equivalents

$
1.2

$
0.3

$
1.1

Trade accounts receivable, net

87.5

59.3

78.7

Net inventories

108.1

81.0

84.4

Other current assets

12.1

9.5

7.2

Total current assets

208.9

150.1

171.4

PROPERTY, PLANT AND EQUIPMENT:

Land

5.0

5.0

5.0

Buildings and improvements

30.8

29.7

29.5

Machinery and equipment

49.5

43.5

41.5

Gross property, plant and equipment

85.3

78.2

76.0

Less accumulated depreciation

55.5

53.3

52.6

Property, plant and equipment, net

29.8

24.9

23.4

OTHER ASSETS:

Goodwill

9.5

9.5

9.5

Deferred income taxes

11.3

10.3

7.8

Other

7.0

7.5

14.8

Total other assets

27.8

27.3

32.1

TOTAL ASSETS

$
266.5

$
202.3

$
226.9

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Cash Flows From Operating Activities:
Net income (loss)	$	14.9		$	1.6		$	23.0		$	(7.3	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		1.2			1.4			2.5			2.7
Non-cash interest expense		—			—			0.1			0.1
Stock-based compensation		0.4			0.3			0.8			0.6
Goodwill impairment		—			—			—			9.5
Restructuring charge		—			1.5			—			1.5
Changes in operating assets and liabilities:
Trade accounts receivable		1.6			1.2			(36.5	)		(35.0	)
Inventories, net		2.3			38.8			(14.6	)		30.9
Trade accounts payable		(4.7	)		(22.6	)		22.2			6.1
Other		0.3			2.5			2.0			1.2
Cash provided by (used in) continuing operating activities		16.0			24.7			(0.5	)		10.3
Cash used in discontinued operating activities		(0.3	)		—			(0.3	)		(0.1	)
Total cash provided by (used in) operating activities		15.7			24.7			(0.8	)		10.2
Cash Flows From Investing Activities:
Capital expenditures		(0.3	)		(0.4	)		(0.5	)		(0.8	)
Total cash used in investing activities		(0.3	)		(0.4	)		(0.5	)		(0.8	)
Cash Flows From Financing Activities:
Borrowings (repayments) of debt, net		(16.9	)		(22.9	)		4.1			(9.8	)
Repurchase of shares to satisfy employee tax withholdings		—			—			(0.2	)		-
Total cash provided by (used in) financing activities		(16.9	)		(22.9	)		3.9			(9.8	)
Net increase (decrease) in cash and equivalents		(1.5	)		1.4			2.6			(0.4	)
Cash and equivalents, beginning of period		4.4			0.4			0.3			2.2
Cash and equivalents, end of period	$	2.9		$	1.8		$	2.9		$	1.8

Supplemental Disclosure of Cash Flow Information:
Interest paid	$	0.6		$	1.0		$	1.2		$	2.2
Income taxes paid		0.4			0.3			0.4			0.4
Non-cash financing activities:
Assets acquired with debt obligations		1.0			0.2			1.1			0.2

September 30,

December 31,

September 30,

2017

2016

2016

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Current maturities of long-term debt

$
1.2

$
1.0

$
0.8

Trade accounts payable

66.7

47.2

57.2

Deferred income taxes

—

—

5.0

Accrued compensation

3.5

6.8

5.2

Other accrued liabilities

13.7

15.1

13.0

Total current liabilities

85.1

70.1

81.2

NON-CURRENT LIABILITIES:

Long-term debt, less current maturities

102.3

54.5

68.1

Other non-current liabilities

3.4

7.2

7.3

Total non-current liabilities

105.7

61.7

75.4

SHAREHOLDERS' EQUITY:

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

—

—

—

Common shares: $.01 par (75,000,000 shares authorized: 25,879,812;
25,638,862; and 25,466,252 shares issued at September 30, 2017,
December 31, 2016 and September 30, 2016, respectively)

0.3

0.3

0.3

Additional paid-in capital

43.5

42.8

42.4

Retained earnings

31.9

27.4

27.6

Total shareholders' equity

75.7

70.5

70.3

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$
266.5

$
202.3

$
226.9

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Cash Flows From Operating Activities:

Net income

$
1.4

$
4.7

$
2.7

$
16.5

Adjustments to reconcile net income to net cash provided by
(used in) operating activities:

Income (loss) from discontinued operations

(0.1
)

0.1

—

(4.3
)
Depreciation and amortization

1.3

1.0

3.6

2.8

Non-cash interest expense

—

0.1

0.2

0.3

Stock-based compensation

0.5

0.4

1.6

1.2

Deferred taxes

0.9

2.4

0.8

9.3

Changes in operating assets and liabilities:

Trade accounts receivable

13.6

4.1

(28.2
)

(20.9
)
Net inventories

(11.2
)

(6.0
)

(27.1
)

(18.0
)
Trade accounts payable

3.1

1.0

19.5

12.7

Other

(3.3
)

2.5

(7.6
)

(1.1
)
Cash provided by (used in) continuing operating activities

6.2

10.3

(34.5
)

(1.5
)
Cash (used in) provided by discontinued operating activities

(2.2
)

(0.8
)

(3.9
)

3.6

Total cash provided by (used in) operating activities

4.0

9.5

(38.4
)

2.1

Cash Flows From Investing Activities:

Capital expenditures

(2.2
)

(1.5
)

(5.7
)

(2.7
)
Acquisition

—

—

—

(17.3
)
Total cash used in investing activities

(2.2
)

(1.5
)

(5.7
)

(20.0
)
Cash Flows From Financing Activities:

Borrowings of debt, net

(1.6
)

(7.7
)

45.9

19.1

Repurchase shares of common stock

—

—

(0.9
)

(0.4
)
Total cash (used in) provided by financing activities

(1.6
)

(7.7
)

45.0

18.7

Net increase in cash and equivalents

0.2

0.3

0.9

0.8

Cash and equivalents, beginning of period

1.0

0.8

0.3

0.3

Cash and equivalents, end of period

$
1.2

$
1.1

$
1.2

$
1.1

Supplemental Disclosure of Cash Flow Information:

Interest paid

$
0.8

$
0.5

$
1.9

$
1.4

Income taxes paid

—

—

0.4

0.4

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, ~~2016.~~2020.

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.~~year, or any other interim period, which may differ materially due to, among other things, the factors described in Part I, Item 2 of this Quarterly Report on Form 10-Q and those set forth under Part I, Item 1A – “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. 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.

~~In March 2016, the Financial~~Adoption of New Accounting Standards ~~Board (the “FASB”~~

On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) ~~issued~~2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU ~~2016-09 "Improvements~~2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to ~~Employee Share-Based Payment Accounting",~~be assessed for impairment under the current expected credit loss model rather than an incurred loss model. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. The primary financial asset of the Company within the scope of ASU 2016-13 is trade receivables. The adoption of ASU 2016-13 did not materially impact the Company's consolidated financial statements.

Recent accounting pronouncements pending adoption and not discussed above are either not applicable or will not have, or are not expected to have, a material impact on our consolidated financial condition, results of operations, or cash flows.

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 ~~simplified the income tax consequences, accounting~~includes gross revenue adjustments for ~~forfeitures and classification~~estimated returns, cash payment discounts based on the ~~Statements~~satisfaction of ~~Consolidated Cash Flows. Huttig adopted this standard~~outstanding receivables, and volume purchase rebates. The Company’s customer payment terms vary by customer, location, and the products purchased, but are typical for the Company’s industry.

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. Direct sales as a percentage of net sales were 20.4% and 18.2% in the three month periods ended June 30, 2021 and 2020, respectively, and 22.9% and 20.0% in the six month periods ended June 30, 2021 and 2020, respectively.

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

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.

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

	June 30,			December 31,			June 30,
	2021			2020			2020
Operating Leases:
Operating lease right-of-use assets	$	34.1		$	33.9		$	38.6

Current maturities of operating lease right-of-use assets		9.1			9.1			9.8
Operating lease right-of-use liabilities, less current maturities		25.0			24.9			29.0
Total operating lease liabilities	$	34.1		$	34.0		$	38.8

Finance Leases:
Gross property, plant and equipment	$	11.7		$	11.1		$	10.8
Accumulated depreciation		(6.8	)		(6.3	)		(5.7	)
Property, plant and equipment, net	$	4.9		$	4.8		$	5.1

Current maturities of long-term lease liabilities	$	1.5		$	1.4		$	1.4
Long-term lease liabilities, less current maturities		2.1			1.9			2.3
Total finance lease liabilities	$	3.6		$	3.3		$	3.7

As of June 30, 2021, the weighted average remaining lease term for the Company’s operating leases was 4.8 years and for its financing leases was 3.1 years. These leases have weighted average discount rates of 5.9% and 5.0% for operating leases and financing leases, respectively. The rate implicit in the lease is used to discount leases when known. While the implicit rate is often known for finance leases, the Company is generally unable to calculate the implicit rate in operating leases because it does not have access to the lessor’s residual value estimates nor the amount of the lessor’s deferred initial direct costs. When the implicit rate is not known, the Company uses the incremental borrowing rate for secured loans of similar term. The Company uses available data for unsecured loans to borrowers of similar credit to the Company and adjusts the rate to reflect the effect of providing collateral equivalent to the outstanding obligation balance.

The following cash flow items are included on the condensed consolidated statement of cash flows (in millions):

Goodwill is reviewed for impairment annually, or more frequently if certain indicators arise. The Company assesses each reporting period whether events and circumstances warrant a revision to the previously established useful lives.

During the first quarter of ~~2017, which had an immaterial impact to the consolidated financial statements and related disclosures.~~

~~In February 2016, the FASB issued accounting guidance, "Leases", which will supersede the existing lease guidance and will require all leases with~~2020, a ~~term greater than 12 months to be recognized~~decline in the statement of financial position and eliminate current real estate-specific lease guidance, while maintaining substantially similar classification criteria for distinguishing between finance leases and operating leases. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. This standard will be adopted on a modified retrospective basis. Huttig is required to adopt the standard in the first quarter of 2019. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements and related disclosures.

~~In May 2014, the FASB issued accounting guidance, "Revenue from Contracts with Customers", which has been further clarified and amended. The core principle~~market value of the ~~new standard is for companies to recognize revenue to depict~~Company’s public equity concurrent with the ~~transfer~~COVID-19 pandemic triggered an assessment of ~~goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services.~~goodwill. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and clarify guidance for multiple-element arrangements. Entities have the option to apply the new guidance underfair value of each reporting unit was determined using a ~~retrospective~~market approach to consider factors such as market capitalization of the Company at March 31, 2020, observed ratios of enterprise value to earnings and the relative sales contribution of each ~~prior~~ reporting ~~period presented or~~unit. If a modified retrospective approach with the cumulative effect of initially applying the new guidance recognized at the date of initial application within the Statement of Consolidated Financial Position. In August 2015, the FASB amended the guidance to allowreporting unit’s carrying value exceeded its estimated fair value, an impairment was recorded for the ~~deferral~~amount in excess. As a result of the ~~effective date~~interim goodwill impairment test, the Company recognized a goodwill impairment charge of ~~this standard.~~$9.5 million. The ~~standard is effective~~following table summarizes goodwill activity for ~~fiscal years,~~the three and ~~interim~~six month periods within those years, beginning after December 15, 2017. Accordingly, Huttig is required to adopt this standard in the first quarter of fiscal year 2018. The Company is in process of implementing this guidance, including assembling an implementation teamended June 30, 2021 and performing a review of all revenue streams to identify any differences in the timing, measurement or presentation of revenue recognition. The Company is continuing to evaluate the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures.2020 (in millions):

Comprehensive income refers to net income adjusted by gains and losses that in conformity with GAAP are excluded from net income. Other comprehensive items are amounts that are included in shareholders’ equity inThe allowance for doubtful accounts consisted of the ~~condensed consolidated balance sheets. The Company has no comprehensive income items and therefore comprehensive net income (loss) is equal to net income (loss) for all periods presented.~~following (in millions):

Credit ~~Agreement~~Facility — ~~In July 2017, the~~The Company ~~amended and extended its~~has a $250.0 million asset-based senior secured revolving credit facility ~~(“credit~~(the “credit facility”) with Wells Fargo Capital Finance, Bank of America and JP Morgan Chase. The amendment, among other things, increased the borrowing capacity from $160 million to $250 million, reduced the interest rate, reduced the minimum fixed charge coverage ratio and extended the maturity to July 14, 2022.. Borrowing availability under the credit facility is based on eligible accounts receivable, inventory and real estate. The real estate component of the borrowing base amortizes monthly over 12.5 years on a straight-line basis. Borrowings under the credit facility are collateralized by substantially all of the Company’s assets, and the Company is subject to certain operating limitations applicable to a loan of this type, which, among other things, place limitations on indebtedness, liens, investments, mergers and acquisitions, dispositions of assets, cash dividends and transactions with affiliates. The entire unpaid balance under the credit facility is due and payable on July 14, 2022. The Company is in discussions with prospective lenders to refinance its credit facility and expects to execute a new credit facility with the lenders during the third quarter of 2021. The Company believes that it is probable the new credit facility will be executed within this timeframe, and although unexpected events and conditions could influence the timing and completion of the new facility, the Company does not believe that is likely.

At ~~September~~June 30, ~~2017,~~2021, the Company had revolving credit borrowings of ~~$99.6~~$94.8 million outstanding at a weighted average interest rate of ~~2.5%~~1.41% per annum, letters of credit outstanding totaling $3.2 million, primarily used as collateral for health and workers’ compensation insurance, and ~~$69.7~~$97.8 million of excess committed borrowing ~~capacity.~~availability. The Company pays an unused commitment fee of 0.25% per annum. In addition, the Company had ~~$3.9~~$0.9 million of ~~capital lease and~~ other obligations ~~outstanding~~maturing in 2023 at ~~September~~a borrowing rate of 6.11%. The Company also had $3.6 million of financing lease obligations at June 30, ~~2017.~~2021. See Note 4 – “Leases” for more information.

The sole financial covenant in the credit facility is the minimum fixed charge coverage ratio (“FCCR”) of ~~1.00:~~1.00:1.00, which must be tested by the Company if the excess committed borrowing availability falls below an amount in athe range ~~between $17.5~~of $17.5 million to $31.3 million ~~which amounts depend~~, depending on the borrowing base. In the first six months of 2021, the Company was not required to test the minimum FCCR as excess borrowing availability was greater than the minimum threshold. If the Company’s ~~borrowing base, and~~availability would have fallen below that threshold, the Company would have met the minimum FCCR. The FCCR must also be tested on a pro forma basis prior to consummation of certain significant business transactions outside the ordinary course of ~~the Company’s~~ business, as defined in the agreement.

While the Company believes its cash on hand, borrowing capacity available under the existing credit ~~agreement. At September 30, 2017,~~facility and the ~~company’s fixed charge coverage ratio exceeds 1.00:1.00. At September 30, 2017,~~anticipated new credit facility and cash flows from operations for the next twelve months will be sufficient to service its liquidity needs, it cannot predict whether future developments associated with the COVID-19 pandemic will materially adversely affect its liquidity position. See Note 13, “Impact of and Company Response to the COVID-19 Pandemic” for additional disclosure regarding the potential impact the current pandemic may have on the Company’s ~~fixed charge coverage ratio exceeds 1.00:1.00.~~ future liquidity and financial position.

The Company had other accrued liabilities consisting of the following (in millions):

The Company carries insurance policies on insurable risks with coverage and other terms that it believes to be appropriate. The Company ~~generally~~ has self-insured retention limits and has obtained fully insured layers of coverage above such self-insured retention limits. Accruals for self-insurance losses are made based on claims experience. Liabilities for existing and unreported claims are accrued ~~for~~ when it is probable that future costs will be incurred and can be reasonably estimated.

~~As described in Note 7 — “Commitments~~Environmental and ~~Contingencies” to~~Legal Matters

The Company accrues expenses for contingencies when it is probable that an asset has been impaired or a liability has been incurred and management can reasonably estimate the expense. Contingencies for which the Company has made accruals include environmental and other legal matters. It is possible, however, that actual expenses could exceed the accruals by a material amount, which could have a material adverse effect on the Company’s ~~audited consolidated~~future liquidity, financial ~~statements included~~condition, and operating results in the ~~Company’s Annual Report on Form 10-K for the year ended December 31, 2016, the~~period in which any such additional expenses are incurred or recognized.

The Company was previously identified as a potentially responsible party in connection with ~~the~~contamination cleanup ~~of contamination~~ at a formerly owned property in Montana. On February 18, 2015, the Montana Department of Environmental Quality (the “DEQ”) issued an amendment to the unilateral administrative order of the DEQ outlining the final remediation of the property in its Record of Decision (the “ROD”). Under the ROD, the DEQ estimated the remediation costs of the property to be $8.3 million. Since the ROD was issued, the Company has incurred costs which reduced the accrual to $7.1 million at December 31, 2016.

~~The Company spent $3.9 million in the first nine months of 2017 implementing~~Decision. In September 2015, the remedial action work plan ~~(the “RAWP”~~(“RAWP”). was approved.

The Company paid approximately $0.3 million in the first six months of 2021 implementing the RAWP. The Company estimates the total remaining cost of implementing the RAWP to be ~~$3.2~~$2.5 million at ~~September~~June 30, ~~2017.~~2021, with $1.1 million in short-term other accrued liabilities and $1.4 million in other non-current liabilities. As of ~~September~~June 30, ~~2017,~~2021, the Company believes the accrual represents a reasonable best estimate of the total remaining remediation costs, based on facts, circumstances, and information currently ~~available to Huttig.~~available. However, there are currently unknown variables relating to the actual levels of contaminants and amounts of soil that will ultimately require treatment or ~~removal and as~~removal. As part of the remediation process, additional soil and groundwater sampling, and bench and pilot testing isare required to ensure the remediation will achieve the ~~projected~~ outcome required by the DEQ. Potential indemnification or other claims we may be able to assert against third parties and possible insurance coverage have also been considered but any potential recoveries have not been recognized at this time. The ultimate final amount of remediation costs and expenditures ~~are~~is difficult to estimate with certainty and as a result, the amount of actual costs and expenses ultimately incurred by ~~Huttig~~the Company with respect to this property could be lower than, or exceed the amount accrued as of ~~September~~June 30, ~~2017~~2021 by a material amount. If actual costs are materially higher, the incremental expenses over the amount currently accrued could have a material adverse effect on ~~our~~the Company’s liquidity, financial condition and operating results.

8With consent of the DEQ, remediation efforts and expenditures were temporarily suspended during 2020 as a result of pandemic-related health, safety, financial and other considerations. During the first quarter of 2021, the Company re-engaged in remediation efforts in cooperation with the DEQ and expects to continue remedial activities throughout the remainder of 2021.

In addition, some of the Company’s current and former distribution centers are located in areas ~~of current or former industrial activity~~ where environmental contamination may have occurred, and for which the Company, among others, could be held responsible. The Company currently believes that there are no material environmental liabilities at any of its distribution center locations.

The Company is also involved in litigation in Colorado, Illinois, and Texas filed by PrimeSource Building Products, Inc. (“PrimeSource”) against the Company and eleven of its employees in December 2016.

The complaints allege, among other things, that certain former employees of PrimeSource have breached their contracts with PrimeSource (including non-competition, non‑interference and non-disclosure covenants) and fiduciary duties to PrimeSource, and that the former employees have misappropriated, and are using, trade secrets of PrimeSource on behalf of Huttig. The complaints seek injunctive relief, compensatory damages, and with respect to certain counts, punitive damages.

On July 26, 2017, the Company and certain of the employee defendants filed counterclaims in the Illinois cases alleging, among others things, that PrimeSource has asserted and is maintaining its trade secret misappropriation claims in bad faith, tortiously interfered with the Company’s business relationships, and filed sham litigation and engaged in other exclusionary and predatory conduct in violation of Section 2 of the Sherman Act.

While it is not possible at this time to predict with any degree of certainty the ultimate outcome of this litigation, and the Company is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome, the Company believes that PrimeSource’s claims lack merit. The Company has retained outside counsel, and is vigorously defending itself against the lawsuits. As of September 30, 2017, the Company incurred approximately $2.5 million in expenses related to the PrimeSource litigation, and expects to continue to incur such litigation expenses.

The Company accrues expenses for contingencies when it is probable that an asset has been impaired or a liability has been incurred and management can reasonably estimate the expense. Contingencies for which the Company has made accruals include environmental, product liability and other legal matters. It is possible, however, that actual expenses could exceed our accrual by a material amount which could have a material adverse effect on the Company’s future liquidity, financial condition or operating results in the period in which any such additional expenses are incurred or recognized.

The Company calculates its basic income (loss) per share by dividing net income (loss) allocated to common shares outstanding by the weighted average number of common shares outstanding. ~~Although the Company does not currently pay dividends, holders of unvested~~Unvested shares of restricted stock ~~have a right to~~ participate in dividends on the same basis as common shares. As a result, these share-based awards meet the definition of participating securities, and the Company applies the two-class method to compute earnings per share. The two-class method is an earnings allocation formula that treats participating securities as having rights to earnings that would otherwise have been available to common stockholders. In periods in which the Company has net losses, the losses are not allocated to participating securities because the participating security holders are not obligated to share in such losses.

The following table presents the number of participating securities ~~and earnings allocated to those securities~~ (in millions).:

The diluted earnings per share calculations include the effect of ~~the~~ assumed exercise using the treasury stock method for ~~both stock options and~~ unvested restricted stock units, except when the effect would be anti-dilutive. The following table presents the number of common shares used in the calculation of net income (loss) per share from continuing operations (in millions).

The Company assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of existing deferred tax assets. One component of this analysis is to determine whether the Company was in a cumulative loss position for the most recent three year period. For the three-year period ended December 31, 2020, the Company was in a cumulative loss position. As a result of the Company’s financial performance during the first six months of 2021, the Company is now in a cumulative income position for the three-year period ended June 30, 2021. The Company has determined that profitability has not been sufficiently sustained and lacks other significant positive evidence to conclude that its deferred tax assets are more likely than not to be realized. Based on this evaluation, as of June 30, 2021, the Company maintained a valuation allowance of $12.2 million to reduce net deferred tax assets as their realization did not meet the more-likely-than-not criterion. It is reasonably possible that during 2021, the Company will establish a sufficiently sustained level of profitability, and as a result, may during 2021 reverse a significant portion of

~~7. INCOME TAXES~~the valuation allowance recorded against its deferred tax assets at June 30, 2021. The reversal would result in a noncash income tax benefit.

The valuation allowance has been reduced $5.9 million during 2021 as a result of utilization of federal and state net operating losses to offset year-to-date taxable income calculated for the three- and six-month periods ended June 30, 2021.

The Company’s effective tax rate ~~for~~from continuing operations was ~~41%~~an expense of 2.3% and 0% for the three-month, and 1.6% and 0% for the six-month periods ended June 30, 2021 and 2020, respectively.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“the Cares Act”) was signed into law, making several changes to the Internal Revenue Code. The Cares Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, alternative minimum tax credit refunds, and the creation of certain refundable employee retention credits. Under the Cares Act, the 163(j) interest deduction limitation was increased from 30% to 50% for the 2019 and 2020 tax years. The Company benefitted from the provision by being able to deduct an additional $4.3 million of interest expense in 2020. No other provisions of the ~~third quarter of 2017 and 34% in~~Cares Act were materially beneficial to the ~~third quarter of 2016.~~ ~~The Company’s effective tax rate for continuing operations was 23%~~ ~~and 37% in the nine month~~ ~~period ended September 30, 2017 and 2016, respectively.~~Company.

The tax rate for the first nine months of 2017 was impacted by the vesting of restricted stock which provided for additional income tax deduction in excess of the compensation deducted for GAAP purposes. This excess tax benefit increased the tax benefit reported on the first quarter loss. As of September 30, 2017, the Company has $6.4 million valuation allowance primarily relating to certain state net operating loss carryforwards that are not likely to be realized in future periods.

The Company recognized ~~$0.5~~$0.4 million and ~~$0.4~~$0.3 million in non-cash, stock-based compensation expense infor the ~~third~~second quarter of ~~2017~~2021 and ~~third quarter of 2016, respectively. The Company recognized $1.6~~2020, respectively and $0.8 million and ~~$1.2~~$0.6 million in non-cash, stock-based compensation expense infor the ~~nine-month~~six month periods ended ~~September~~June 30, ~~2017~~2021 and ~~September 30, 2016,~~2020, respectively. During the first ~~nine~~six months of ~~2017,~~2021, the Company granted an aggregate of ~~404,793~~436,990 shares of restricted stock at a ~~fair market~~weighted average value of ~~$6.64~~$3.63 per share under its 2005 Executive Incentive Compensation Plan, as amended and restated. Most restricted shares vest in ~~three~~3 equal installments on the first, second and third anniversaries of the grant date, or cliff vest in five years. During the first ~~nine~~six months of ~~2017,~~2021, the Company granted ~~27,696~~an aggregate of 139,880 shares of restricted stock under its Non-Employee Directors’ Restricted Stock Plan, as amended, at an average fair market value of ~~$8.68~~$3.58 per share. The directors’ restricted shares vest on the ~~date~~first anniversary of the ~~2018 Annual Meeting. The unearned~~grant date. Unearned compensation expense is ~~being~~ amortized into expense on a straight-line basis over the requisite service period for the entire award. As of ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, the total compensation expense not yet recognized related to all outstanding restricted ~~stock/unit~~stock awards was ~~$4.0~~$2.1 million and ~~$2.6~~$1.5 million, respectively.

~~On May 18, 2016,~~In March 2020, the ~~Board~~World Health Organization recognized the novel strain of ~~Directors (the “Board”)~~coronavirus, COVID-19, as a pandemic. The United States, various other countries and state and local jurisdictions have imposed, among other things, travel and business operation restrictions intended to limit the spread of the ~~Company entered into a rights agreement (the “Rights Agreement”) with Computershare Trust Company, N.A.~~COVID-19 virus and ~~declared a dividend~~have advised or required individuals to adhere to social distancing or limit or forego their time outside of ~~one preferred share purchase right (a “Right”) for each outstanding share~~their home beginning the first quarter of ~~common stock, $0.01 par value per share,~~2020. Some countries and jurisdictions began to lift these restrictions in the first six months of the Company. The dividend was payable upon the close of business on May 31, 2016 to the stockholders of record upon the close of business on that date. The Board adopted the Rights Agreement to protect stockholder value by attempting to reduce the risk that the Company’s ability to use its net operating losses to reduce potential future federal income tax obligations may become substantially limited. The Company’s stockholders approved the Rights Agreement at the 2017 Annual Meeting of Stockholders, held on April 25, 2017.

Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share (“Preferred Shares”), of the Company at a price of $13.86 per one one-hundredth of a Preferred Share, subject to adjustment. As2021 as a result of the ~~Rights Agreement, any person or group that acquires beneficial ownership~~distribution of ~~4.99% or more~~COVID-19 vaccines, but given the recent rise of COVID-19 variants, this trend may reverse and has reversed in some countries and jurisdictions experiencing a recent rise in COVID-19 cases. This pandemic and the governmental response have resulted in significant and widespread economic disruptions to, and uncertainty in, the global and U.S. economies, including in the regions in which the Company operates. In 2020, the Company and its customers were deemed “essential businesses” and continued to operate, reducing the impact of these restrictions on its operations and results for the three and six months ended June 30, 2020. We expect the Company will continue to be deemed an “essential business” throughout 2021 and will continue to operate. However, based on the potential effects of new strains of the virus and continuing global uncertainty, the Company’s management cannot reliably predict the future impact of the pandemic and the governmental response to the pandemic on the Company’s operations and future results.

With the exception of closing 2 branches as a part of the Company’s ~~common stock without the approval~~restructuring efforts in 2020, all of the ~~Board would be subject~~Company’s branches remain open and capable of meeting customer needs. The Company has taken protective measures to ~~significant dilution~~guard the health and well-being of its employees and customers. Early in the ~~ownership interest of that person or group.~~

~~In connection with the entry into the Rights Agreement, on May 18, 2016,~~COVID-19 pandemic, the Company ~~filed with~~observed certain of its customers reducing purchases and operations due to the ~~Secretary of State~~impact of the ~~State~~pandemic and governmental restrictions. The pandemic has also had an adverse impact to the supply chain, with some of ~~Delaware an Amended and Restated Certificate of Designation of Series A Junior Participating Preferred Stock to create~~ the ~~Preferred Shares.~~

~~The~~Company’s vendors putting the Company ~~recorded no after tax income or loss from discontinued operations in the nine months of 2017. The Company recorded~~ ~~income of $4.3 million in the first nine months of 2016 primarily~~ on allocation as a result of ~~payments received from settlement~~reduced inventory and labor shortages resulting in longer lead-times for the fulfillment of certain products. The Company previously took proactive measures to protect its operating liquidity, including communicating with vendors and customers, seeking modification of payment and other terms of rental and procurement agreements ~~with insurers,~~and monitoring its accounts receivable. The Company rationalized inventory levels to meet anticipated demand and previously implemented cost containment measures. The Company has not deemed these measures as ~~well as with Crane Co., in connection with~~necessary for the ~~declaratory action filed~~first six months of 2021, however, given the uncertainty of the pandemic, the Company cannot predict if these measures will be needed in the ~~United States District court for~~future. The Company has utilized its diverse domestic and overseas network to source alternative suppliers of its proprietary products, while simultaneously rationalizing its purchase volume to better align with its current sales projections and to manage the ~~Eastern District~~supply chain. While the Company believes these actions have mitigated the impact of ~~Missouri.~~the pandemic on its operations, it cannot provide any assurance that these actions will continue to be successful if the pandemic continues to have a longer-term impact on the economy.

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Relevant to Forward-Looking Information for the Purpose of “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “believe,” “estimate,” “project” or similar expressions may identify forward-looking statements, although not all forward-looking statements contain such words. Statements made in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K looking forward in time, including, but not limited to, statements regarding our current views with respect to financial performance, future growth in the housing market, distribution channels, sales, favorable supplier relationships, inventory levels, the ability to meet customer needs, enhanced competitive posture, strategic initiatives, absence of material financial impact from litigation or contingencies, including environmental proceedings, are included pursuant to the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995.

These statements present management’s expectations, beliefs, plans and objectives regarding our future business and financial performance. We cannot guarantee that any forward-looking statements will be realized or achieved. These forward-looking statements are based on current projections, estimates, assumptions and judgments, and involve known and unknown risks and uncertainties. We disclaim any obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise.

There are a number of factors, some of which are beyond our control that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. These factors include, but are not limited to,the following: the success of our growth initiatives; risks associated with our private brands; the strength of new construction, home improvement and remodeling markets and the recovery of the homebuilding industry to levels consistent with the historical annual average total housing starts from 1959 to 2020 of approximately 1.4 million starts based on statistics tracked by the U.S. Census Bureau (“Historical Average”); the cyclical nature of our industry; risks of international suppliers; the impact of global health concerns, including the current COVID-19 pandemic, and governmental responses to such concerns, on our business, results of operations, liquidity and capital resources; product liability claims and other legal proceedings; commodity prices and demand in light of the COVID-19 pandemic; competition with existing or new industry participants; our failure to attract and retain key personnel; deterioration in our relationship with our unionized employees, including work stoppages or other disputes; funding requirements for multi-employer pension plans for our unionized employees; our ability to comply with, and the restrictive effect of, the financial covenant applicable under our credit facility; deterioration of our customers’ creditworthiness or our inability to forecast such deteriorations, particularly in light of the COVID-19 pandemic; the loss of a significant customer; termination of key supplier relationships; the ability to source alternative suppliers in light of the COVID-19 pandemic; supply chain disruption; current or future litigation; the cost of environmental compliance, including actual expenses we may incur to resolve proceedings we are involved in arising out of a formerly owned facility in Montana; federal and state transportation regulations; uncertainties resulting from changes to United States and foreign laws, regulations and policies; the potential impact of changes in tariff costs, including tariffs on imported steel and aluminum, and potential anti-dumping or countervailing duties; fuel cost increases; stock market volatility; failure to meet exchange listing requirements; stockholder activist disruption; information technology failures, network disruptions, cybersecurity attacks or breaches in data security; significant uninsured claims; the integration of any business we acquire and the liabilities of such businesses; the seasonality of our operations; any limitations on our ability to utilize our deferred tax assets to reduce future taxable income and tax liabilities; intangible asset impairment; and those factors set forth under Part I, Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020. These factors may not constitute all factors that could cause actual results to differ from those discussed in any forward-looking statement. Accordingly, forward-looking statements should not be relied upon as a predictor of actual results.

~~Huttig is~~We are a distributor of a broad array of building material products used principally in new residential construction, home improvement, and remodeling and repair projects. We distribute our products through 2725 distribution centers serving 41 states and sell primarily to building materials dealers, national buying groups, home centers and industrial users, including makers of manufactured homes.

The following table sets forth our sales by product classification as a percentage of total sales:

New housing activity ~~in 2017 is still below~~has recently recovered to a pace consistent with the historical annual average of 1.4 million total housing starts from 1959 to ~~2016~~2020 based on statistics tracked by the United States Census Bureau. Total housing starts were approximately ~~1.2~~1.4 million in ~~2016.~~2020. Through ~~September~~June 30, ~~2017,~~2021, based on the most recent data provided by the United States Census Bureau, total new housing starts were ~~approximately 3% above 2016~~25.2% higher than 2020 levels for the corresponding ~~nine-month~~six-month period.

In March 2020, the World Health Organization recognized the novel strain of coronavirus, COVID-19, as a pandemic. The United States, various other countries and state and local jurisdictions imposed, among other things, travel and business operation restrictions intended to limit the spread of the COVID-19 virus and advised or required individuals to adhere to social distancing or limit or forego their time outside of their home beginning the first quarter of 2020. Some countries and jurisdictions began to lift these restrictions in the first six months of 2021 as a result of the distribution of COVID-19 vaccines but, given the recent rise of COVID-19 variants, this trend may reverse and has reversed in some countries and jurisdictions experiencing a recent rise in COVID-19 cases. This pandemic and the governmental response have resulted in significant and widespread economic disruptions to, and uncertainty in, the global and U.S. economy, including in the regions in which we operate. In many jurisdictions, we and our customers were deemed “essential businesses” and continued to operate, reducing the impact of these restrictions on our operations and results for the three-month and six-month periods ended June 30, 2020. We expect the Company will continue to be deemed an “essential business” throughout 2021 and will continue to operate. However, we cannot reliably predict the future impact of the pandemic and the governmental response to the pandemic on our operations and future results.

With the exception of closing two branches as a part of our restructuring efforts, all of our branches remain open and capable of meeting customer needs. We have taken protective measures to guard the health and well-being of our employees and customers, including the implementation of social distancing requirements and remote work options where possible. Early in the COVID-19 pandemic, we observed certain of our customers reducing purchases and operations due to the impact of the pandemic and governmental restrictions. The pandemic has also had an adverse impact to the supply chain, with some of our vendors putting us on allocation as a result of reduced inventory and labor shortages, resulting in longer lead-times for the fulfillment of certain products. We adjusted our sales forecast accordingly and previously took proactive measures to protect our operating liquidity, including communicating with vendors and customers, seeking modification of payment and other terms of rental and procurement agreements and monitoring accounts receivable. We also rationalized inventories in response to our strategic product initiative and adjusted levels to meet changing demand. We previously implemented cost containment measures, including closing two of our branches during the third quarter of 2020, suspension of matching contributions to our qualified defined contribution plan, and eliminating non-essential spend. During the first six months of 2021 we have reimplemented the matching contributions to our qualified deferred contribution plan and increased orders for replacement capital essential to our business. We have utilized our diverse overseas network to source alternative suppliers of our proprietary products, while simultaneously adjusting our purchase volume to better align with our current sales projections and to manage the supply chain.

Early in the pandemic, we also communicated with lenders regarding potential modification of terms under our credit facility. Modification was not deemed necessary based on our financial performance at the time. We are currently in the process of refinancing our existing credit facility with a new credit facility which we expect to complete during the third quarter of 2021. If we fail to meet our borrowing covenants and obligations, our lenders would have the right to terminate the loan commitments and accelerate the repayment of the entire amount outstanding under the credit facility. Our lenders also could foreclose on our assets securing our credit facility. In that event, we would be forced to seek alternative sources of financing. Our ability to restructure our debt or refinance may depend on the condition of the financial markets and the availability of credit during the COVID-19 pandemic, which may result in credit being unavailable on terms acceptable to us or at all.

While we believe these actions have mitigated the impact of the pandemic on our operations, we cannot provide any assurance that these actions will be successful if the pandemic continues to have a longer-term impact on the economy.

Various factors ~~historically have caused~~cause our results of operations to fluctuate from period to period. These factors include levels of residential construction, the mix of single family and multi-family starts as a ~~percent~~percentage of ~~the~~ total residential construction, home improvement and remodeling activity, weather, prices of commodity wood and steel products, dumping duties, tariffs, interest rates, competitive pressures, availability of credit and other local, regional and national economic conditions. Many of these factors are cyclical or seasonal in nature. We anticipate that further fluctuations in operating results from period to period will continue in the future. Our results in the first and fourth ~~quarter~~quarters of each year are generally adversely affected by winter weather patterns in the Midwest, Northeast and Northwest, which typically result in seasonal decreases in levels of construction activity in these areas. As much of our overhead and expenses remain relatively fixed throughout the year, our operating profits tend to be lower during the first and fourth quarters.

We believe we have the product offerings, distribution channels, personnel, systems infrastructure and financial and competitive resources necessary for continued operations. Our future revenues, costs and profitability, however, are all likely to be influenced by a number of risks and uncertainties, ~~including those discussed under~~all of which may be amplified by the ~~“Cautionary Statement” below.~~COVID-19 pandemic. If the pandemic were to worsen or negatively impact our industry due to its duration, we are prepared to selectively re-activate or extend actions previously taken as part of our readiness and response plan. These actions may include deferral or cancelation of planned capital spending, negotiation of terms with vendors and customers, lay-offs and wage reductions, suspension of matching contributions to our qualified defined contribution plan, further rationalization of inventories and reduction of other fixed and variable costs.

Early and aggressive actions taken to mitigate the impact of the pandemic coupled with a subsequent level of market stability have resulted in our improved financial performance. Management believes that certain actions taken with regard to working capital management and efficiency, as well as cost reduction activities, can be sustainable and provide leverage if the economy continues to improve. However, there remains a significant amount of uncertainty related to the continued impact the pandemic may have on our operating results.

Our strategy is to increase shareholder value through focused, profitable growth and diversification of our business. To accomplish this, we have developed strategic initiatives that require investments in our infrastructure, our people and technology platform. Our goals are to accelerate profitable growth and diversify our business, which we believe will improve operating leverage over the intermediate term. We have continued to make progress on our strategic initiatives, although our ability to continue advancing these initiatives has been, and may continue to be, impaired by present and future impacts of the COVID-19 pandemic on our operations.

To accelerate profitable growth and diversification, we have made strategic capital and operating investments to execute our product line expansion and market segment penetration organic growth initiatives. The national expansion of our Huttig-Grip product line, which is sourced both domestically and internationally, expands the breadth and geographic coverage of our private label specialty building product lines. Through our investments in automated, high-capacity, pre-finish door lines and segment-focused sales resources, further penetration of the home improvement, repair and remodel market diversifies our business to be less dependent on new home construction, reinforces our position as the largest, value-add door fabricator to the professional residential construction market in the country, and accelerates our growth in higher-value, and higher-gross margin products. We evaluate our strategic initiatives on a regular basis as part of our overall strategic planning process.

In addition to the above initiatives, we continue to invest in our organization to attract the best talent to achieve our goal of creating a top-performing, disciplined organization with talented, engaged, and empowered people. We also continue to invest in our technology platform to achieve improved operating efficiencies in the functional areas of the business while delivering advanced customer interface technology to make Huttig the clear supplier of choice for the products we sell.

We prepare our condensed consolidated financial statements in accordance with ~~GAAP,~~U.S. generally accepted accounting principles, which 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. For a discussion of our significant accounting policies and estimates, see our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 in Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies.” During the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2021, there were no material changes to the critical accounting policies and estimates discussed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

Three Months Ended ~~September~~June 30, ~~2017~~2021 Compared to Three Months Ended ~~September~~June 30, ~~2016~~2020

Net sales were ~~$199.6~~$247.4 million in ~~2017,~~the second quarter of 2021, which ~~was $6.8~~were $55.4 million, or ~~4 percent,~~28.9%, higher than ~~in 2016.~~the second quarter of 2020. The increase in net sales was primarily attributable to an increase in residential construction activity as compared to the second quarter of 2020, which was significantly impacted by the onset of the pandemic. Sales and income growth in the second quarter of 2021 was moderated in comparison to the second quarter of 2020 by restructuring activities announced in the second quarter of last year, and

by our 2020 product rationalization program. Net sales in 2021 were favorably impacted by the improved pricing environment where demand-driven pricing has increased due to ~~the general increase~~supply chain disruption. Despite ongoing supply chain challenges, sales increased in ~~housing activity, which was up 1 percent over the prior year.~~all three of our product classifications.

Millwork sales of $97.3 million in the second quarter of 2021 were ~~flat in 2017 at $97.6~~$15.6 million, ~~compared to 2016.~~or 19.1%, higher than the second quarter of 2020. Millwork has been most significantly impacted by supply chain disruption and was also impacted by 2020 restructuring and product rationalization activities. Building products sales increased ~~7 percent~~29.5% in ~~2017~~the second quarter of 2021 to ~~$82.6~~$126.3 million, ~~primarily due~~compared to ~~increases~~$97.5 million in the second quarter of 2020. Second quarter 2021 building products sales benefitted from consistent high levels of demand for certain product lines within the category, including certain strategic product lines. The year-over-year sales growth in this category was mitigated by supply chain disruption and by product rationalization activities related to our ~~Huttig-Grip~~focus on higher-margin, non-commoditized products. Wood product sales increased ~~5 percent~~85.9% in ~~2017~~the second quarter of 2021 to ~~$19.4 million.~~$23.8 million, compared to $12.8 million in the second quarter of 2020. Higher market prices had a significant impact in this category.

Gross margin was ~~$41.3~~$55.3 million in ~~2017,~~the second quarter of 2021, compared to ~~$41.4~~$38.7 million in ~~2016.~~the second quarter of 2020. As a percentage of sales, gross margin was ~~20.7 percent~~22.4% in ~~2017,~~the second quarter of 2021, compared to ~~21.5 percent~~20.2% in ~~2016.~~the second quarter of 2020. Gross margins were favorably impacted by our continued focus on non-commoditized, strategic product lines which carry higher margins, as well as effective pricing management. The increase in our gross margin percentage ~~decrease was primarily due~~from these actions more than offset the impact from a disproportionate increase in lower-margin direct sales in the second quarter of 2021 as compared to increased production variances on lower production millwork sales during the three months ended September 30, 2017. Production variances occur when there is a mismatch between planned and actual number of units produced.2020.

Operating expenses increased ~~$4.6~~$4.8 million to ~~$38.2~~$39.5 million in ~~2017,~~the second quarter of 2021, compared to ~~$33.6~~$34.7 million, net of a $1.5 million restructuring charge described below, in ~~2016.~~the second quarter of 2020. Personnel costs increased $4.4 million, or 22.4%, reflecting increased variable incentive compensation from improved operating results, wage increases and reinstatement of compensation reductions taken in 2020. These increases were partially offset by lower medical costs. Non-personnel costs increased $0.4 million, or 2.6%. The increase was primarily ~~due to~~driven by higher fuel and insurance costs ~~as a result of hiring additional sales and warehouse personnel related to our Huttig-Grip Division and repair and remodel growth initiatives. The increase was also impacted~~which were substantially offset by ~~legal fees incurred defending our Huttig-Grip Division’s right to compete~~an improved bad debt provision in the ~~fastener market.~~second quarter of 2021 as pandemic-related disruption continued to subside. Overall, our cost structure was levered against higher sales volume. As a percentage of net sales, operating expenses ~~increased to 19.1 percent~~were 16.0% in ~~2017~~the second quarter of 2021 compared to ~~17.4 percent~~18.1% in ~~2016.~~the second quarter of 2020.

During the second quarter of 2020, we began the process of closing our Columbus, Ohio and Selkirk, New York branch locations, which was substantially completed during the third quarter of 2020. We recorded a restructuring charge of $1.5 million for closure-related costs for personnel, facility, equipment and working capital-related costs.

Net interest expense was $0.6 million in the second quarter of 2021 compared to $0.9 million in ~~2017 and $0.5 million~~the second quarter of 2020. The lower net interest expense in ~~2016. The increase was primarily due to higher~~the second quarter of 2021 reflects both lower average debt balances and ~~higher borrowing rates in 2017 compared to 2016.~~lower interest rates.

Income ~~tax expense of $0.9~~taxes were $0.3 million ~~was recognized~~and zero for the ~~quarter~~quarters ended ~~September~~June 30, ~~2017. Income tax expense of $2.5 million was recognized for the third quarter of 2016.~~ ~~See Note 7 – “Income Taxes” of the Notes to Condensed Consolidated Financial Statements (unaudited) in Item 1 for more information.~~2021 and 2020, respectively.

As a result of the foregoing factors, we reported net income ~~from continuing operations~~ of ~~$1.3~~$14.9 million infor the ~~third~~ quarter ~~of 2017~~ended June 30, 2021, compared to ~~$4.8~~net income of $1.6 million for the quarter ended June 30, 2020. Adjusted for the restructuring charge in 2020, adjusted net income for the ~~third~~ quarter ~~of 2016.~~ended June 30, 2020 was $3.1 million.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2020

Net sales were ~~$574.0~~$462.1 million in ~~2017,~~the first six months of 2021, which was ~~$24.5~~$67.1 million, or ~~4 percent,~~17.0%, higher than ~~in 2016.~~ the first six months of 2020. The increase in net sales was primarily ~~due~~attributable to ~~higher levels of~~an increase in residential construction activity ~~which~~as the second quarter of 2020 was ~~up 3 percent over~~significantly impacted by the ~~prior year, and the completion~~onset of the ~~BenBilt Building Systems acquisition~~pandemic. Sales and income growth in the first six months of 2021 was moderated in comparison to the first six months of 2020 by restructuring activities announced in the second quarter of ~~2016.~~last year, and by our 2020 product rationalization program. Net sales in 2021 were favorably impacted by the improved pricing environment where demand-driven pricing has increased due to supply chain disruption. Despite ongoing supply chain challenges, sales increased in all three of our product classifications.

Millwork product sales increased ~~6 percent~~8.8% in ~~2017~~the first six months of 2021 to ~~$288.8~~$193.5 million, ~~primarily due~~compared to ~~increased construction activity and~~$177.9 million in the ~~acquisition. Building~~first six months of 2020; building products sales increased ~~5 percent~~20.1% in ~~2017~~the first six months of 2021 to ~~$229.6~~$228.2 million, ~~also primarily due~~compared to $190.0 million in the first six months of 2020; and wood product sales increased ~~construction activity.~~49.1% in the first six months of 2021 to $40.4 million, compared to $27.1 million in the first six months of 2020. Millwork sales, although most impacted by the disruption of our supply chain and by our 2020 restructuring and product rationalization activities, performed well and benefited from improved market pricing. Building products sales benefitted from consistent high levels of demand for certain product lines within the category, including certain strategic product lines. The year-over-year sales growth in this category was mitigated by supply chain disruption and by product rationalization activities related to our focus on higher-margin, non-commoditized products. Wood product sales ~~decreased 1 percent in 2017 to $55.6 million as we continue to de-emphasize this lower margin category.~~have been most impacted by market-driven price increases.

Gross margin ~~increased 3 percent to $119.0~~was $101.0 million in ~~2017~~the first six months of 2021, compared to ~~$115.6~~$79.6 million in ~~2016.~~the first six months of 2020. As a percentage of sales, gross margin was ~~20.7 percent~~21.9% in the ~~nine-month period ended September 30, 2017,~~first six months of 2021, compared to ~~21.0 percent~~20.2% in the ~~corresponding nine-month period~~first six months of 2020. Gross margins were favorably impacted by our continued focus on non-commoditized, strategic product lines which carry higher margins, as

well as effective pricing management. The increase in ~~2016. The~~our gross margin percentage ~~decrease was primarily due to increased production variances on millwork sales and~~from these actions more than offset the impact from a ~~higher proportion of~~disproportionate increase in lower-margin direct sales in ~~our overall mix during~~ the ~~nine~~first six months ~~ended September 30, 2017.~~of 2021 as compared to 2020.

Operating expenses, increased ~~$18.6~~$2.7 million to ~~$113.3~~$76.4 million in ~~2017,~~the first six months of 2021, compared to ~~$94.7~~$73.7 million in ~~2016. The increase~~the first six months of 2020, excluding a goodwill impairment charge of $9.5 million and restructuring costs of $1.5 million in the first six months of 2020 as described below. Personnel costs increased $3.8 million, or 9.0%, reflecting increased variable incentive compensation from improved operating results, wage increases and reinstatement of compensation reductions taken in 2020. These increases were partially offset by lower medical costs. Non-personnel costs decreased $1.1 million, or 3.4%. Discretionary spending reductions and improvements in our bad debt provision in the first half of 2021 offset higher fuel and insurance costs. Overall, our cost structure was ~~primarily due to costs incurred as a result of hiring additional~~levered against higher sales and warehouse personnel related to our Huttig-Grip Division and repair and remodel growth initiatives. The increase was also impacted by the BenBilt Building Systems operating expenses for nine months in 2017 compared to the post-acquisition period in 2016 and a general increase in costs which outpaced sales growth for the respective nine month periods.volume. As a percentage of net sales, operating expenses ~~increased to 19.7 percent~~were 16.5% in ~~2017~~the first six months of 2021 compared to ~~17.2 percent~~18.7% in ~~2016, as~~ the ~~Company increased headcount to service anticipated sales growth.~~first six months of 2020.

During the first quarter of 2020, a decline in the market value of our public equity concurrent with the COVID-19 pandemic triggered an assessment of goodwill. As a result of the interim goodwill impairment test, we recognized a goodwill impairment charge of $9.5 million. During the second quarter of 2020, we began the process of closing our Columbus, Ohio and Selkirk, New York branch locations, which was substantially completed during the third quarter of 2020. We recorded a restructuring charge of $1.5 million for closure-related costs for personnel, facility, equipment and working capital-related costs

Net interest expense ~~increased~~was $1.3 million in the first six months of 2021 compared to $2.2 million in ~~2017,~~the first six months of 2020. The lower net interest expense in the first six months of 2020 reflected both lower average borrowing and lower interest rates.

Income taxes were $0.3 million for the first six months of 2021, as compared to ~~$1.6 million in 2016. The increase was primarily due to higher average debt and higher borrowing rates in 2017 compared to 2016.~~

~~Income~~zero income tax expense ~~of $0.8 million was recognized~~ for the ~~nine-month period ended September 30, 2017. Income tax expense~~first six months of ~~$7.1 million was recognized in the nine-month period ended September 30, 2016.~~ ~~See Note 7 – “Income Taxes” of the Notes to Condensed Consolidated Financial Statements (unaudited) in Item 1 for more information.~~2020.

As a result of the foregoing factors, we reported net income ~~from continuing operations~~ of ~~$2.7~~$23.0 million and a net loss of $7.3 million for the six months ended June 30, 2021 and 2020, respectively. Adjusted for the $9.5 million goodwill impairment charge and the $1.5 million restructuring charge in ~~2017, compared to $12.2 million in 2016.~~

~~We recorded no after tax loss or~~2020, adjusted net income ~~discontinued operations in~~for the first ~~nine~~six months of 2017. We recorded $4.3 million after-tax income in the first nine months of 2016 primarily as a result of payments received from settlement agreements with insurers, as well as with Crane Co., in connection with the declaratory action filed in the United States District court for the Eastern District of Missouri.2020 was $3.7 million.

We depend on our cash ~~flow~~flows from operations and funds available under our revolving credit facility to finance ~~our operations, including~~ seasonal working capital needs, capital expenditures, additional investments in our product lines, and ~~other capital needs. Our~~any acquisitions that we may undertake. We are in discussions with prospective lenders to refinance our credit facility and expect to execute a new credit facility during the third quarter of 2021. We believe that it is probable the new credit facility will be executed within this timeframe and although unexpected events and conditions could influence the timing and completion of the new facility, we do not believe that is likely. To the extent that our sales decline or our customers are unable to meet their obligations, including as a result of the current COVID-19 pandemic and global economic instability, our cash flows would be negatively affected.

Typically, our working capital requirements are ~~generally~~ greatest in the second and third quarters, which ~~reflect~~reflects the seasonal nature of our business. The second and third quarters ~~are~~ also ~~typically~~tend to be our strongest operating quarters, largely due to more favorable weather throughout many of our markets compared to the first and fourth quarters. We typically generate cash from working capital reductions in the fourth quarter of the year and ~~typically use cash as we~~ build working capital during the ~~first~~second quarter in preparation for our second and third quarters. We also maintain significant inventories to meet the rapid delivery requirements of our customers and to enable us to obtain favorable pricing, delivery and service terms with our suppliers. Accounts receivable typically increases during peak periods commensurate with the sales increase. At September 30, 2017 and September 30, 2016, inventories and accounts receivable constituted approximately 73% and 72%As part of our ~~total assets, respectively. We closely monitor operating expenses including variable operating costs,~~COVID-19 readiness and response plan, we significantly reduced our inventory levels ~~during seasonally affected periods~~in the second quarter of 2020. Reductions were made in anticipation of reduced sales demand which improved as the second and third quarters progressed. As a result, in the second and third quarters, we were able to ~~minimize seasonal effects~~generate cash from operations and reduce our indebtedness.

At June 30, 2021, we had $97.8 million of excess committed borrowing availability and $2.9 million in cash. We reduced our senior indebtedness year-over-year at June 30, 2021 by $27.6 million. However, the current COVID-19 pandemic could have a negative impact on our ~~profitability.~~excess committed borrowing availability if sales and working capital levels decline and outstanding debt increases. Our liquidity assumptions and our ability to meet our credit facility covenants are dependent on many additional factors, including those included in the “Risk Factors” set forth in Part I, Item 1A of the Form 10-K for the year ended December 31, 2020.

Operations. Cash used in operating activities ~~increased by $40.5~~was $0.8 million ~~to $38.4 million in~~during the first ~~nine~~six months of ~~2017,~~2021, compared to cash provided by operating activities of $2.1 million in the first nine months of 2016. In the first nine months of 2017, we recorded net income of $2.7 million compared to net income of $16.5 million in the corresponding period in 2016. Accounts receivable increased by $28.2$10.2 million during the first ~~nine~~six months of ~~2017,~~2020. During the first six months of 2021, we invested $14.6 million in a normal seasonal build of inventories, compared to ~~an increase~~rationalization of ~~$20.9~~$30.9 million of inventory in ~~the prior-year corresponding period. The increase in accounts receivable over year end is due~~response to the seasonality of our sales. Days’ sales outstanding was 40.0 days at September 30, 2017 as compared to 37.2 days at September 30, 2016 based on annualized third quarter sales and quarter-end accounts receivable balances for the respective periods. We believe the days’ sales outstanding will return to more historical levels in the fourth quarter of 2017 as the extended terms given at our special promotional winter buy will have concluded. Inventory increased by $27.1 millionCOVID-19 pandemic in the first ~~nine~~six months of ~~2017 compared to an increase~~2020. The impact from the increased inventory investment in 2021 was substantially offset by higher cash flows from improved financial results and management of $18.0 million in the corresponding period of 2016. The increase in inventories over the first nine months of the year represented normal seasonality and anticipated increased sales activity in 2017, including the expanded Huttig-Grip product line, as compared to year-end 2016. We expect to continue building Huttig-Grip product inventory in the fourth quarter of 2017. Our inventory turns decreased to 6.2 turns in 2017 from 7.4 turns in 2016 based on annualized third quarter cost of goods sold and average inventory balances for the respective quarters. The decrease in inventory turns is primarily related to the inventory added to support the Huttig-Grip product line. Accountsaccounts payable ~~increased by $19.5 million~~ in the first ~~nine~~six months of ~~2017,~~2021 compared to a $12.7 million increase in the corresponding prior-year period. The increase was primarily a result of our inventory build for the respective periods. Days’ payable outstanding increased to 38.4 days at September 30, 2017 from 34.5 days at September 30, 2016 based on annualized third quarter costs of goods sold and quarter-end accounts payable balances for the respective periods.

Investing. Investing activities used $0.5 million and $0.8 million of cash ~~used in investing activities was $5.7 million compared to $20.0 million~~during the first six months of 2021 and 2020, respectively. These expenditures were primarily for ~~the corresponding period in 2016. The Company invested $5.7 million in machinery and~~replacement equipment at various ~~locations in the first nine months of 2017. In the first nine months of 2016, we invested $17.3 million in an acquisition and $2.7 million in machinery and equipment.~~distribution centers.

Financing. Cash provided by financing activities of ~~$45.0~~$3.9 million during the first six months of 2021 resulted from a $5.0 million increase in net borrowings under our credit facility, offset by $0.9 million for repayment of other debt and $0.2 million for the repurchase

of shares to satisfy employee tax withholdings on stock-based awards. Cash used in financing activities of $9.8 million in the first ~~nine~~six months of ~~2017~~2020 reflected $9.0 net borrowings of $45.9 million offset by the Company’s repurchase of 0.1 million shares of its common stock for $0.9 million. Cash provided from financing activities of $20.0 million in the first nine months of 2016 reflected net borrowings of $19.1 million offset by the Company’s repurchase of 0.1 million shares of its common stock for $0.4 million. Net borrowings in 2016 included amounts borrowed to fund the acquisition. The shares repurchased in both periods were retired.

~~The Company believes that cash generated from its operations and availability~~repayment under ~~the~~our credit facility ~~will provide sufficient funds to meet~~and $0.8 million for repayment of other debt.

While we believe that our cash on hand, borrowing capacity available under our credit facility and the ~~operating needs of the Company~~anticipated new credit facility, and cash flows from operations for ~~at least~~ the next twelve ~~months. However, if~~months will be sufficient to service our liquidity needs, we cannot predict whether future developments associated with the ~~Company’s availability falls below~~COVID-19 pandemic will materially adversely affect our liquidity position. Our liquidity assumptions and our ability to meet our credit facility covenants are dependent on many additional factors, including the ~~required threshold and~~“Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the ~~Company does not meet~~year ended December 31, 2020.

At June 30, 2021, the minimum fixed charge coverage ratio ~~its~~(“FCCR”) was not required to be tested, as excess borrowing availability was greater than the minimum threshold. If our availability had fallen below that threshold, we would have met the minimum FCCR. If we are unable to maintain excess borrowing availability of more than the applicable amount in the range of $17.5 million to $31.3 million, and we did not meet the minimum FCCR, our lenders would have the right to terminate the loan commitments and accelerate the repayment of the entire amount outstanding under ~~the~~our credit facility. ~~The~~Our lenders could also foreclose on ~~the Company’s~~our assets ~~that secure~~securing the credit facility. If the credit facility iswas terminated, ~~the Company~~we would be forced to seek alternative sources of financing, which may not be available on terms acceptable to ~~it,~~us, or at all.

~~In addition to funds available from operating cash flows and~~We review goodwill annually for impairment, or more frequently if Company or market conditions indicate reporting units may be at risk of impairment. Our last review was performed as of March 31, 2020 following a broad market selloff over concerns of the ~~credit facility as described above,~~impact of COVID-19 on macroeconomic conditions; our market capitalization had declined below the carrying value of equity. Therefore, we ~~use operating leases as a principal off-balance sheet financing technique. Operating leases are employed as an alternative to purchasing certain property, plant and equipment. For a discussion~~reassessed the implied value of our ~~off-balance sheet arrangements, see~~reporting units relative to their net book value. As a result of our ~~Annual Report~~interim goodwill impairment test, we recognized a goodwill impairment charge of $9.5 million in the first quarter of 2020. We have no remaining goodwill on Form 10-K for the year ended December 31, 2016 in Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Commitments and Contingencies.” During the nine months ended September 30, 2017, there were no material changes to our ~~off-balance sheet arrangements discussed in our Annual Report on Form 10-K for the year ended December 31, 2016.~~balance sheet.

We carry insurance policies on insurable risks with coverage and other terms that we believe to be appropriate. We generally have self-insured retention limits and have obtained fully insured layers of coverage above such self-insured retention limits. Accruals for self-insurance losses are made based on claims experience. Liabilities for existing and unreported claims are accrued for when it is probable that future costs will be incurred and can be reasonably estimated.

See Note 59 – “Contingencies” of the Notes to the Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 for information on ~~certain~~ legal proceedings in which ~~the Company is~~we are involved.

~~Cautionary Statement Relevant to Forward-looking Information for the Purpose of “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995~~

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “believe,” “estimate,” “project” or similar expressions may identify forward-looking statements, although not all forward-looking statements contain such words. Statements made in this Quarterly Report on Form 10-Q See also Note 10- “Commitments and ~~our Annual Report on Form 10-K looking forward in time, including, but not limited to, statements regarding our current views with respect to financial performance, future growth~~Contingencies” in the ~~housing market, distribution channels, sales, favorable supplier relationships, inventory levels, the ability~~notes to ~~meet customer needs, enhanced competitive posture, no material~~our consolidated financial ~~impact from litigation or contingencies, including environmental proceedings, are included pursuant to the “safe harbor” provision of the Private Securities Litigation Reform Act of 1995.~~

~~These~~ statements present management’s expectations, beliefs, plans and objectives regarding our future business and financial performance. These forward-looking statements are based on current projections, estimates, assumptions and judgments, and involve known and unknown risks and uncertainties. We disclaim any obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise.

There are a number of factors, some of which are beyond our control that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. These factors include, but are not limited to: the strength of construction, home improvement and remodeling markets and the recovery of the homebuilding industry to levels consistent with the historical average of total housing starts; the cyclical nature of our industry; the uncertainties resulting from changes to policies and laws following the U.S. election in November 2016; the cost of environmental compliance, including actual expenses we may incur to resolve proceedings we are involved in arising out of the formerly owned facility in Montana; any limitations on our ability to utilize our deferred tax assets to reduce future taxable income and tax liabilities; our ability to comply with, and the restrictive effect of, the financial covenant applicable under our credit facility; the loss of a significant customer; deterioration of our customers’ creditworthiness or our inability to forecast such deteriorations; commodity prices; risks associated with our private brands; termination of key supplier relationships; risks of international suppliers; competition with existing or new industry participants; goodwill impairment; the seasonality of our operations; significant uninsured claims; federal and state transportation regulations; fuel cost increases; our failure to attract and retain key personnel; deterioration in our relationship with our unionized employees, including work stoppages or other disputes; funding requirements for multi-employer pension plans for our unionized employees; product liability claims and other claims, litigation matters or regulatory proceedings; the integration of any business we acquire and the liabilities of such businesses; and those set forth under Part I,II, Item ~~1A-“Risk Factors” in~~8 – “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016 and as set forth~~2020.

There have been no material changes in market risk from the information provided in Part II, Item ~~1A-“Risk Factors”~~7A – “Quantitative and Qualitative Disclosures About Market Risk” in ~~the Company’s Quarterly~~our Annual Report on Form ~~10-Q~~10-K for the ~~quarterly period~~year ended June 30, 2017. These factors may not constitute all factors that could cause actual results to differ from those discussed in any forward-looking statement. Accordingly, forward-looking statements should not be relied upon as a predictor of actual results.December 31, 2020.

Evaluation of Disclosure Controls and Procedures – ~~As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the~~The Company, under the supervision and with the participation of our Disclosure Committee and management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange ~~Act)~~Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures ~~are~~were effective as of ~~September~~June 30, ~~2017.~~2021 in all material respects to (a) cause information required to be disclosed by us in reports that we file or submit under the U.S. Securities and Exchange Commission’s rules and forms and (b) cause such information to be accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Control systems must reflect resource constraints and be cost-effective, can be undercut by simple errors and misjudgments, and can be circumvented by individuals within an organization. Because of these and other inherent limitations in all control systems, no matter how well they are designed, our disclosure controls and procedures and internal controls can provide reasonable, but not absolute, protection from error and fraud.

Management’s Report on Internal Control Over Financial Reporting – The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors. Based on our evaluation under the framework in Internal Control-Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of June 30, 2021.

Changes in Internal Control of Financial Reporting– ~~There have been no changes in our~~The Company did not modify any existing internal ~~control over financial reporting that occurred during~~controls as a result of its response to the ~~quarter ended September 30, 2017,~~COVID-19 pandemic that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

See Note 59 – ~~Contingencies~~“Contingencies” of the Notes to the Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 for information on legal proceedings in which the Company is involved. See also Note 10 – “Commitments and Contingencies” in the notes to our consolidated financial statements under Part I,II, Item ~~3-“Legal Proceedings” in~~8 “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item ~~1A.~~1A – “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016, as supplemented by the~~2020. Such risk ~~factor discussed in Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, which~~factors could materially affect our business, financial condition, and future results. These described risks are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition, and operating results. There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2016 as supplemented by the risk factor in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017.~~2020.

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.

Delaware		43-0334550
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

555 Maryville University DriveSuite 400 St. Louis, Missouri		63141
(Address of principal executive offices)		(Zip code)


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

Large accelerated filer	☐		Accelerated filer	☒☐

Non-accelerated filer	☐☑	~~(Do not check if smaller reporting company)~~	Smaller reporting company	☐☑

			Emerging growth company	☐

		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)	3

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017,~~2021, December 31, ~~2016~~2020 and ~~September~~June 30, ~~2016~~2020 (unaudited)	4

	Condensed Consolidated ~~Statements~~Statement of ~~Cash Flows~~Shareholders’ Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2021 and 2020 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1115

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	1521

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	1521

Item 1A.	Risk Factors	21

Item 6.	Exhibits	1622

Signatures		1723

			Accumulated			Goodwill,
	Goodwill		Impairments			Net
Balance at January 1, 2020	$	21.3	$	(11.8	)	$	9.5
Impairment		—		(9.5	)		(9.5	)
Balance at June 30, 2020	$	21.3	$	(21.3	)	$	0

Balance at January 1, 2021		21.3		(21.3	)		0
No activity in 2021		0		—			0
Balance at June 30, 2021	$	21.3	$	(21.3	)	$	0

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2017		2016			2017		2016
Net sales	$	199.6	$	192.8		$	574.0	$	549.5
Cost of sales		158.3		151.4			455.0		433.9
Gross margin		41.3		41.4			119.0		115.6
Operating expenses		38.2		33.6			113.3		94.7
Operating income		3.1		7.8			5.7		20.9
Interest expense, net		0.9		0.5			2.2		1.6
Income from continuing operations before income taxes		2.2		7.3			3.5		19.3
Income tax expense		0.9		2.5			0.8		7.1
Income from continuing operations		1.3		4.8			2.7		12.2
Income (loss) from discontinued operations, net of taxes		0.1		(0.1	)		—		4.3
Net income	$	1.4	$	4.7		$	2.7	$	16.5

Income from continuing operations per share - basic and diluted	$	0.05	$	0.19		$	0.10	$	0.48
Income (loss) from discontinued operations per share - basic and diluted	$	0.00	$	0.00		$	0.00	$	0.17
Net income per share - basic and diluted	$	0.05	$	0.19		$	0.10	$	0.65

Weighted average shares outstanding:
Basic and diluted shares outstanding		24.9		24.6			24.8		24.5

	Finance Leases			Operating Leases
2021 ⁽¹⁾	$	0.8		$	5.7
2022		1.3			9.9
2023		1.0			8.0
2024		0.5			5.1
2025		0.2			4.0
Thereafter		0.2			6.8
Total lease payments	$	4.0		$	39.5
Less: imputed interest		(0.4	)		(5.4	)
Total future lease obligation	$	3.6		$	34.1

Exhibit Number		Description

2.1		Distribution Agreement dated December 6, 1999 between Crane Co. and the Company. (Incorporated by reference to Exhibit No. 2.1 of Amendment No. 4 to the Company’s Registration Statement on Form 10 (File No. 1-14982) filed ~~with the Securities and Exchange Commission~~ on December 6, 1999).

3.1		Second Amended and Restated Certificate of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed ~~with the Securities and Exchange Commission~~ on May 2, 2017).

3.2		Amended and Restated Bylaws of the Company (as of September 26, 2007) (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed ~~with the Securities and Exchange Commission~~ on September 28, 2007).

3.3		Amended and Restated Certificate of Designation of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of Delaware on May 18, 2016 (Incorporated by reference to Exhibit 3.01 to the Company’s Current Report on Form 8-K filed ~~with the Securities and Exchange Commission~~ on May 20, 2016).

4.1		Rights Agreement, dated May 18, 2016, by and between Huttig Building Products, Inc. and Computershare Trust Company, N.A., as Rights Agents (Incorporated by reference to Exhibit 4.01 to the Company’s Current Report on Form 8-K filed ~~with the Securities and Exchange Commission~~ on May 20, 2016).

~~10.1~~4.2		~~Sixth~~First Amendment to ~~Amended and Restated Credit~~Rights Agreement, dated ~~July 14, 2017,~~as of May 6, 2019, by and ~~among the~~between Huttig Building Products, Inc. and Computershare Trust Company, ~~Huttig, Inc.~~N.A., ~~Wells Fargo Capital Finance, LLC and the other parties signatory thereto~~as Rights Agent (Incorporated by reference to Exhibit ~~10.1~~4.01 to the Company’s Current Report on Form 8-K filed ~~with the Securities and Exchange Commission~~ on ~~July 18, 2017)~~May 6, 2019).

*10.1		Second Amended and Restated Executive Agreement dated May 10, 2021 by and between Huttig Building Products, Inc. and Jon P. Vrablely (Incorporated by reference to Exhibit No. 10.1 to the Company’s Current Report on Form 8-K filed May 11, 2021).

10.2		~~Separation~~Revised Form of CEO Cash Long Term Incentive Plan (LTIP) Award Agreement ~~dated October 18, 2017, by and between Gregory W. Gurley and the Company (Incorporated by reference to Exhibit 10.1 to the Company’s current Report on Form 8-K filed on October 23, 2017).~~for Jon P. Vrabley.

31.1		Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.

31.2		Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.

32.1		Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

10l.SCH		Inline XBRL Taxonomy Extension ~~Scheme~~Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

		HUTTIG BUILDING PRODUCTS, INC.

		/s/ Jon P. Vrabely
Date: ~~October 31, 2017~~July 29, 2021
		Jon P. Vrabely
		President and Chief Executive Officer
		(Principal Executive Officer)

		HUTTIG BUILDING PRODUCTS, INC.

		/s/ ~~Oscar A. Martinez~~Philip W. Keipp
Date: ~~October 31, 2017~~July 29, 2021
		~~Oscar A. Martinez~~Philip W. Keipp
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)