HOUSTON, TX--(Marketwire - Aug 8, 2011) - Houston Wire & Cable Company (
Selected highlights for the second quarter of 2011 compared to the prior year period:
- Record sales of $103.4 million resulting from an organic sales increase of 32.9% and from acquisitions
- Gross margin increased 270 basis points to 22.9%
- Net income of $6.8 million or $5.6 million, excluding the impact of a onetime non-cash compensation adjustment
- Diluted EPS of $0.38 up from $0.10 per share
- The Company declared a dividend of $0.09 per share
Second Quarter Summary
Revenue growth in the second quarter of 63.5% includes 32.9% organic sales growth and $20.4 million in sales from the acquired businesses. The $103.4 million in sales set another quarterly high for the Company and a 3.7% increase over the previous historical high, achieved in the first quarter of 2011.
Excluding the acquired businesses, sales in the core Repair and Replacement business, also referred to as Maintenance, Repair and Operations (MRO), increased approximately 25% to 30% for the quarter, as the broad economy continued to display signs of improvement. Sales within the five long-term growth initiatives of Utility Power Generation, Environmental Compliance, Engineering & Construction, Industrials and LifeGuard™, our proprietary private-label product, were up approximately 45% for the quarter. Management estimates that copper inflation, which primarily affects our stock shipments and lags broad market moves due to our average cost inventory accounting treatment, had a favorable impact on sales of approximately 9%.
Gross profit at $23.7 million increased 86.0% from $12.8 million due to the higher sales volume and an improved gross margin of 22.9%, which was 270 basis points greater than the second quarter of 2010.
Operating expenses increased by 25.1% from the prior year period, primarily due to the businesses acquired in June 2010 offset by the onetime non-cash adjustment of approximately $2.0 million related to an expected forfeiture of non-vested options.
Operating expenses as a percentage of sales decreased to 11.8% in the second quarter of 2011 from 15.4% in the prior year period due to operating leverage, ongoing cost control initiatives and the impact of the expected options forfeiture.
Interest expense of $0.4 million was higher than the second quarter of 2010, as average debt levels rose from $9.5 million in the second quarter of 2010 to $63.9 million in the second quarter of 2011 primarily as a result of the June 2010 acquisitions and to fund the increase in working capital.
Operating income more than tripled to $11.5 million from $3.0 million. The effective tax rate for the quarter of 38.5% was lower than the 39.4% in 2010, which reflected the impact of non-deductible acquisition expenses incurred in 2010.
Net income for the quarter was $6.8 million and diluted earnings per share was $ 0.38.
Six Month Results Summary
Revenue growth for the first six months of 2011 of 63.3% includes 33.7% organic sales growth and $37.9 million in sales from the acquired businesses.
Excluding the acquired businesses, MRO sales increased approximately 25% to 30% for the period and sales within the five long-term growth initiatives were up approximately 50%. Management estimates that copper inflation, which primarily affects our stock shipments and lags broad market moves due to our average cost inventory accounting treatment, had a favorable impact on sales of approximately 9%.
Gross profit at $46.0 million increased 82.0% from $25.3 million due to the higher sales volume and the Company attained a 22.6% gross margin level, which was 230 basis points greater than the prior year period.
Operating expenses increased by 35.5% from the prior year period, primarily due to the businesses acquired in June 2010. Operating expenses as a percentage of sales decreased to 12.9% from 15.6% in the prior year period, due to operating leverage, ongoing cost control initiatives and the impact of the expected options forfeiture.
Interest expense of $0.7 million was higher than the prior year, as average debt levels rose from $11.0 million in 2010 to $59.6 million in 2011 primarily as a result of the June 2010 acquisitions and to fund the increase in working capital.
Operating income of $19.7 million was more than three times higher than the $5.9 million level in 2010. The effective tax rate for the period of 38.5% was lower than the prior year's 39.0% as 2010 reflected the impact of non-deductible acquisition expenses.
Net income for the period more than tripled to $11.7 million, from $3.5 million in the prior year period.
Chuck Sorrentino, Chief Executive Officer, commented, "Our long-term growth initiatives are driving sales growth in our targeted markets. Sales momentum continues to build as the economy recovers, and we are excited to see this improving trend within our industry comparables.
"We achieved strong operating results for the third consecutive quarter, buoyed by sequential sales growth and additional operating expense leverage. This resulted in net income contribution of 5.4%. Our teams remain focused on gaining market share, as we acquired almost 80 new customers during the quarter, bringing us over 130 new relationships during the first six months.
"We have been working on the acquisition integration over the last year, sales are exceeding expectations and all locations are now utilizing our enterprise resource platform.
"While industrial demand, in my opinion, has only returned to approximately 50% of pre-recession levels and is displaying some signs of inconsistency, I am pleased with our continued sales momentum."
Conference Call
The Company will host a conference call to discuss second quarter results on Monday, August 8th at 10:00 am CT. Hosting the call will be Charles Sorrentino, Chief Executive Officer; James Pokluda, President and Nicol Graham, Vice President and Chief Financial Officer.
A live audio web cast of the call will be available on the Investor Relations section of the Company's website, www.houwire.com.
Approximately two hours after the completion of the live call, a telephone replay will be available until August 15, 2011.
| Replay Dial In: | 888.203.1112 | |
| International Replay: | 719.457.0820 | |
| Confirmation Code: | 6540203 |
About the Company
With 35 years experience in the industry, Houston Wire & Cable Company is one of the largest providers of wire and cable in the U.S. market. Headquartered in Houston, Texas, HWCC has sales and distribution facilities strategically located throughout the nation.
Standard stock items available for immediate delivery include continuous and interlocked armor, instrumentation, medium voltage, high temperature, portable cord, power cables, private branded products, including LifeGuard™, a low-smoke, zero-halogen cable, mechanical wire and cable and related hardware, including wire rope, lifting products and synthetic rope and slings.
HWCC's comprehensive value-added services include same-day shipping, knowledgeable sales staff, inventory management programs, just-in-time delivery, logistics support, customized internet-based ordering capabilities and 24/7/365 service.
Forward-Looking Statements
This release contains comments concerning management's view of the Company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain and projections about future events may, and often do, vary materially from actual results.
Other risk factors that may cause actual results to differ materially from statements made in this press release can be found in the Company's Annual Report on Form 10-K and other documents filed with the SEC. These documents are available under the Investor Relations section of the Company's website at www.houwire.com.
Any forward-looking statements speak only as of the date of this press release and the Company undertakes no obligation to publicly update such statements.
| HOUSTON WIRE & CABLE COMPANY | |||||||||
| Consolidated Balance Sheets | |||||||||
| (In thousands, except share data) | |||||||||
| June 30, | December 31, | ||||||||
| 2011 | 2010 | ||||||||
| (unaudited) | |||||||||
| Assets | |||||||||
| Current assets: | |||||||||
| Accounts receivable, net | $ | 65,954 | $ | 67,838 | |||||
| Inventories, net | 80,280 | 67,503 | |||||||
| Deferred income taxes | 2,508 | 2,399 | |||||||
| Prepaids | 1,120 | 763 | |||||||
| Total current assets | 149,862 | 138,503 | |||||||
| Property and equipment, net | 6,190 | 6,255 | |||||||
| Intangible assets, net | 14,559 | 15,557 | |||||||
| Goodwill | 25,082 | 25,082 | |||||||
| Other assets | 167 | 93 | |||||||
| Total assets | $ | 195,860 | $ | 185,490 | |||||
| Liabilities and stockholders' equity | |||||||||
| Current liabilities: | |||||||||
| Book overdraft | $ | 2,625 | $ | 3,055 | |||||
| Trade accounts payable | 14,904 | 19,987 | |||||||
| Accrued and other current liabilities | 17,831 | 19,781 | |||||||
| Income taxes payable | 199 | 1,036 | |||||||
| Total current liabilities | 35,559 | 43,859 | |||||||
| Debt | 65,626 | 54,825 | |||||||
| Other long term obligations | 134 | 141 | |||||||
| Deferred income taxes | 1,329 | 945 | |||||||
| Total liabilities | 102,648 | 99,770 | |||||||
| Stockholders' equity: | |||||||||
| Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued and outstanding | -- | -- | |||||||
| Common stock, $0.001 par value; 100,000,000 shares authorized: 20,988,952 shares issued: 17,766,973 and 17,748,487 outstanding at June 30, 2011 and December 31, 2010, respectively | 21 | 21 | |||||||
| Additional paid-in-capital | 57,263 | 58,642 | |||||||
| Retained earnings | 88,755 | 80,187 | |||||||
| Treasury stock | (52,827 | ) | (53,130 | ) | |||||
| Total stockholders' equity | 93,212 | 85,720 | |||||||
| Total liabilities and stockholders' equity | $ | 195,860 | $ | 185,490 | |||||
| HOUSTON WIRE & CABLE COMPANY | |||||||||||||
| Consolidated Statements of Income | |||||||||||||
| (Unaudited) | |||||||||||||
| (In thousands, except share and per share data) | |||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||
| June 30, | June 30, | ||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||
| Sales | $ | 103,420 | $ | 63,269 | $ | 203,147 | $ | 124,437 | |||||
| Cost of sales | 79,700 | 50,516 | 157,175 | 99,177 | |||||||||
| Gross profit | 23,720 | 12,753 | 45,972 | 25,260 | |||||||||
| Operating expenses: | |||||||||||||
| Salaries and commissions | 5,415 | 5,171 | 12,719 | 10,290 | |||||||||
| Other operating expenses | 5,980 | 4,424 | 12,043 | 8,819 | |||||||||
| Depreciation and amortization | 798 | 154 | 1,525 | 296 | |||||||||
| Total operating expenses | 12,193 | 9,749 | 26,287 | 19,405 | |||||||||
| Operating income | 11,527 | 3,004 | 19,685 | 5,855 | |||||||||
| Interest expense | 395 | 72 | 728 | 148 | |||||||||
| Income before income taxes | 11,132 | 2,932 | 18,957 | 5,707 | |||||||||
| Income taxes | 4,290 | 1,155 | 7,297 | 2,225 | |||||||||
| Net income | $ | 6,842 | $ | 1,777 | $ | 11,660 | $ | 3,482 | |||||
| Earnings per share: | |||||||||||||
| Basic | $ | 0.39 | $ | 0.10 | $ | 0.66 | $ | 0.20 | |||||
| Diluted | $ | 0.38 | $ | 0.10 | $ | 0.66 | $ | 0.20 | |||||
| Weighted average common shares outstanding: | |||||||||||||
| Basic | 17,682,217 | 17,655,370 | 17,673,601 | 17,654,133 | |||||||||
| Diluted | 17,787,233 | 17,714,963 | 17,781,463 | 17,709,945 | |||||||||
| Dividend declared per share | $ | 0.09 | $ | 0.085 | $ | 0.175 | $ | 0.17 | |||||
| HOUSTON WIRE & CABLE COMPANY | ||||||||||
| Consolidated Statements of Cash Flows | ||||||||||
| (Unaudited) | ||||||||||
| (In thousands) | ||||||||||
| Six Months Ended June 30, |
||||||||||
| 2011 | 2010 | |||||||||
| Operating activities | ||||||||||
| Net income | $ | 11,660 | $ | 3,482 | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||
| Depreciation and amortization | 1,525 | 296 | ||||||||
| Amortization of capitalized loan costs | 44 | 18 | ||||||||
| Amortization of unearned stock compensation | (1,225 | ) | 1,138 | |||||||
| Provision for doubtful accounts | 68 | 60 | ||||||||
| Provision for returns and allowances | 132 | (160 | ) | |||||||
| Provision for inventory obsolescence | 319 | 357 | ||||||||
| Deferred income taxes | 275 | (461 | ) | |||||||
| Changes in operating assets and liabilities: | ||||||||||
| Accounts receivable | 1,684 | 73 | ||||||||
| Inventories | (13,096 | ) | 2,663 | |||||||
| Prepaids | (357 | ) | 3,006 | |||||||
| Other assets | (118 | ) | (59 | ) | ||||||
| Book overdraft | (430 | ) | (351 | ) | ||||||
| Trade accounts payable | (5,083 | ) | 4,066 | |||||||
| Accrued and other current liabilities | (1,607 | ) | (2,102 | ) | ||||||
| Income taxes payable | (837 | ) | (265 | ) | ||||||
| Other long term obligations | (7 | ) | -- | |||||||
| Net cash provided by (used in) operating activities | (7,053 | ) | 11,761 | |||||||
| Investing activities | ||||||||||
| Expenditures for property and equipment | (462 | ) | (331 | ) | ||||||
| Cash paid for acquisition | (343 | ) | (50,000 | ) | ||||||
| Net cash used in investing activities | (805 | ) | (50,331 | ) | ||||||
| Financing activities | ||||||||||
| Borrowings on revolver | 216,710 | 170,848 | ||||||||
| Payments on revolver | (205,909 | ) | (129,311 | ) | ||||||
| Proceeds from exercise of stock options | 112 | 30 | ||||||||
| Excess tax benefit for stock options | 37 | 4 | ||||||||
| Payment of dividends | (3,092 | ) | (3,001 | ) | ||||||
| Net cash provided by financing activities | 7,858 | 38,570 | ||||||||
| Net change in cash | -- | -- | ||||||||
| Cash at beginning of period | -- | -- | ||||||||
| Cash at end of period | $ | -- | $ | -- | ||||||
Contact Information:
CONTACT:
Hope M. Novosad
Manager, Investor Relations
Direct: 713.609.2110
Fax: 713.609.2168