SOURCE: Houston Wire & Cable Company

Houston Wire & Cable Company

March 13, 2014 07:15 ET

Houston Wire & Cable Company Reports Results for the Quarter Ended December 31, 2013

HOUSTON, TX--(Marketwired - Mar 13, 2014) - Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company") announced operating results for the fourth quarter and year ended December 31, 2013.

Selected results were:

  • Sales of $94.4 million
  • Net income of $3.1 million
  • Diluted EPS of $0.18
  • Declared a dividend of $0.11 per share

Selected highlights for 2013:

  • Metals adjusted sales flat with 2012
  • Diluted EPS of $0.44, or $0.82 excluding the goodwill impairment
  • Declared dividends totaling $0.42 per share
  • Operating cash flow of $20.7 million
  • Debt to equity ratio of 43.3%

Fourth Quarter Summary
Jim Pokluda, President and Chief Executive Officer commented, "The inconsistent market strength trends experienced in the first three quarters of the year continued in the fourth quarter. As a result, our fourth quarter year-over-year results were again mixed as we experienced an increase in Maintenance, Repair and Operations (MRO) sales of just over 3%, or approximately 6% on a metals adjusted basis, but a project sales decrease of approximately 30%, or 27% on a metals adjusted basis. Total sales, on a metals adjusted basis, fell approximately 7% from Q4 2012."

Despite the continued overall competitiveness of the marketplace, varying levels of market demand, and softening metals prices, gross margin at 21.8% was near flat sequentially and up 70 basis points over the prior year period, which contained a greater amount of low margin project sales. Operating expenses were up 4.4% compared to Q4 2012, primarily due to headcount related expenses and the costs of expanding the distribution network. 

Interest expense of $0.2 million was down from the $0.3 million in the prior year period. Average debt levels fell by 23.8% from $60.8 million in 2012 to $46.3 million in 2013, and the effective interest rate declined from 2.0% in 2012 to 1.9% in 2013. The effective tax rate for the quarter of 39.1% was up slightly from the 2012 tax rate of 38.6% due to higher state tax rates.

Net income of $3.1 million decreased 27.9% from the fourth quarter of 2012. Diluted earnings per share was $0.18 compared to $0.25 in the prior year quarter.

Twelve month summary
Sales for the year were $383.3 million or essentially flat with 2012 on a metals adjusted basis. We estimate that metals adjusted MRO sales increased 7%, while project sales decreased 14%. Mr. Pokluda commented, "We were encouraged by the continued growth of our MRO sales, which is the largest component of overall revenues, but disappointed with our project sales results, which have been a function of ongoing delays and lack of industry investment in large capital projects. While certain industries such as oil and gas are outside of this trend, many industries have adopted conservative capital allocation strategies which favor high levels of plant utilization over more aggressive strategies which have traditionally involved new plant construction, expansion and investment. We continue to see large regional demand variances, with the West and Central the least active, the Northeast and Southeast showing signs of recovery, and the Gulf Coast extremely busy. Until we see activity levels in the underperforming regions improve, our sales and net income results will be constrained."

Gross margin was flat with 2012. "Considering the continuing competitive pricing environment, I was pleased that we managed to maintain margins at their present level. Our 7% MRO volume gains helped to support overall company margins," said Mr. Pokluda. 

Operating expenses increased 16.3%, primarily as a result of the $7.6 million impairment of goodwill on the Southern Wire reporting unit. Excluding the impairment charge, operating expenses increased by 3.3% or $1.9 million in the current year, primarily due to the impact of the higher headcount and higher operating expenses related to additional facilities and higher inventory levels. Mr. Pokluda further commented, "We have taken steps to reduce the level of operating expenses, including a reduction in headcount, which we expect to save approximately $1.0 million to $1.5 million on an annual basis."

Interest expense of $1.0 million was lower than the prior year's $1.3 million as average debt levels fell by 17.5% from $58.0 million in 2012 to $47.8 million in 2013 and interest rates decreased from 2.1% to 1.9%. The effective tax rate, excluding the impairment of goodwill, was 38.4% unchanged from 2012.

Net income for 2013 was $7.9 million, or $14.6 million excluding the impairment of goodwill. Adjusted net income fell 14.4% from the $17.0 million level in the prior year.

Conference Call
The Company will host a conference call to discuss fourth quarter results on Thursday, March 13, 2014 at 10:00 a.m., C.T. Hosting the call will be James Pokluda, President and Chief Executive Officer 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 March 20, 2014.

Replay, Toll-Free #: 855-859-2056
Replay, Toll #: 404-537-3406
Conference ID # 9507440

About the Company
With 39 years of 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, the Company has sales and distribution facilities strategically located throughout the nation.

Standard stock items available for immediate delivery include: continuous and interlocked armor cable; control and power cable; electronic wire and cable; flexible and portable cords; instrumentation and thermocouple cable; lead and high temperature cable; medium voltage cable; premise and category wire and cable; primary and secondary aluminum distribution cable; wire rope and wire rope slings, as well as synthetic slings, chain, shackles and other related hardware. We also offer private branded products including our proprietary brand, LifeGuard™, a low-smoke, zero-halogen cable. 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
 
    December 31,  
    2013     2012  
    (In thousands, except
share data)
 
                 
Assets                
Current assets:                
  Cash   $ --     $ 274  
  Accounts receivable, net     60,408       65,892  
  Inventories, net     96,107       84,662  
  Deferred income taxes     2,591       2,455  
  Income taxes     420       --  
  Prepaids     762       841  
Total current assets     160,288       154,124  
                 
Property and equipment, net     7,974       5,824  
Intangible assets, net     10,234       11,967  
Goodwill     17,520       25,082  
Other assets     159       158  
Total assets   $ 196,175     $ 197,155  
                 
Liabilities and stockholders' equity                
Current liabilities:                
  Book overdraft   $ 4,594     $ --  
  Trade accounts payable     13,637       12,330  
  Accrued and other current liabilities     18,772       15,379  
  Income taxes     --       5  
Total current liabilities     37,003       27,714  
                 
Debt     47,952       58,588  
Other long-term obligations     97       103  
Deferred income taxes     429       1,670  
Total liabilities     85,481       88,075  
                 
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: 17,954,032 and 17,899,499 shares outstanding at December 31, 2013 and 2012, respectively     21       21  
  Additional paid-in capital     55,642       55,291  
  Retained earnings     104,607       104,252  
  Treasury stock     (49,576 )     (50,484 )
Total stockholders' equity     110,694       109,080  
                 
Total liabilities and stockholders' equity   $ 196,175     $ 197,155  
                 
                 
 
 
Houston Wire & Cable Company
Consolidated Statements of Income
 
    Three Months Ended   Year Ended
    December 31,   December 31,
    2013   2012   2013   2012
    (In thousands, except share and per share data)
                 
Sales   $ 94,442   $ 104,379   $ 383,292   $ 393,036
Cost of sales     73,809     82,362     298,633     306,017
Gross profit     20,633     22,017     84,659     87,019
                         
Operating expenses:                        
  Salaries and commissions     7,558     7,611     30,946     30,013
  Other operating expenses     6,933     6,221     26,068     25,139
  Depreciation and amortization     734     747     2,978     2,941
  Impairment of goodwill     --     --     7,562     --
Total operating expenses     15,225     14,579     67,554     58,093
                         
Operating income     5,408     7,438     17,105     28,926
Interest expense     239     323     992     1,252
Income before income taxes     5,169     7,115     16,113     27,674
Income taxes     2,020     2,745     8,211     10,635
Net income   $ 3,149   $ 4,370   $ 7,902   $ 17,039
                         
Earnings per share:                        
  Basic   $ 0.18   $ 0.25   $ 0.44   $ 0.96
  Diluted   $ 0.18   $ 0.25   $ 0.44   $ 0.96
Weighted average common shares outstanding:                        
  Basic     17,837,097     17,735,998     17,805,464     17,723,277
  Diluted     17,937,992     17,825,976     17,900,372     17,815,401
                         
Dividend declared per share   $ 0.11   $ 0.09   $ 0.42   $ 0.36
                         
                         
 
 
Houston Wire & Cable Company
Consolidated Statements of Cash Flows
 
    Year Ended December 31,
    2013     2012  
    (In thousands)
Operating activities                
Net income   $ 7,902     $ 17,039  
                 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
  Impairment of goodwill     7,562       --  
  Depreciation and amortization     2,978       2,941  
  Amortization of capitalized loan costs     18       18  
  Amortization of unearned stock compensation     900       1,040  
  Provision for doubtful accounts     (59 )     (19 )
  Provision for returns and allowances     27       (61 )
  Provision for inventory obsolescence     559       815  
  (Gain) loss on disposals of property and equipment     (1 )     (7 )
  Deferred income taxes     (1,485 )     (773 )
  Changes in operating assets and liabilities:                
    Accounts receivable     5,516       (6,081 )
    Inventories     (12,004 )     (15,960 )
    Prepaids     79       (13 )
    Other assets     (19 )     129  
    Book overdraft     4,594       (2,270 )
    Trade accounts payable     1,307       2,231  
    Accrued and other current liabilities     3,312       (3,722 )
    Long term liabilities     (6 )     (25 )
    Income taxes     (435 )     1,685  
Net cash provided by (used in) operating activities     20,745       (3,033 )
                 
Investing activities                
  Expenditures for property and equipment     (3,396 )     (1,005 )
  Proceeds from disposals of property and equipment     2       9  
  Cash paid for acquisition     --       --  
Net cash used in investing activities     (3,394 )     (996 )
                 
Financing activities                
  Borrowings on revolver     396,724       402,231  
  Payments on revolver     (407,360 )     (391,610 )
  Deferred loan cost     --       --  
  Proceeds from exercise of stock options     492       137  
  Payment of dividends     (7,466 )     (6,375 )
  Excess tax benefit for options     49       35  
  Purchase of treasury stock     (64 )     (115 )
Net cash (used in) provided by financing activities     (17,625 )     4,303  
                 
Net change in cash     (274 )     274  
Cash at beginning of year     274       --  
                 
Cash at end of year   $ --     $ 274  
Supplemental disclosures                
  Cash paid during the year for interest   $ 998     $ 1,231  
                   
  Cash paid during the year for income taxes   $ 10,236     $ 9,762  
                 
                 

Contact Information

  • CONTACT:
    Nicol G. Graham
    Chief Financial Officer
    Direct: 713.609.2125
    Fax: 713.609.2168
    ngraham@houwire.com