SOURCE: Houston Wire & Cable Company

Houston Wire & Cable Company

March 12, 2015 07:30 ET

Houston Wire & Cable Company Reports Results for the Quarter Ended December 31, 2014

Record Metals-Adjusted Full Year Sales

HOUSTON, TX--(Marketwired - Mar 12, 2015) - Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company") announced operating results for the fourth quarter and year ended December 31, 2014.

Selected quarterly results were:

  • Sales of $89.5 million
  • Net income of $3.7 million
  • Diluted EPS of $0.21
  • Paid a dividend of $0.12 cents per share on November 28, 2014

Selected highlights for 2014:

  • Net income of $15.0 million
  • Diluted EPS of $0.85
  • Declared dividends totaling $0.47 cents per share
  • Repurchased 545,000 shares, 3% of outstanding shares

Fourth Quarter Summary
Jim Pokluda, President and Chief Executive Officer commented, "While we were pleased with the fourth quarter net income increase, which was up 16.5% over 2013 and 4% sequentially, we were disappointed that reduced demand from infrastructure and certain industrial markets, including oil and gas, delivered lower than expected results on the top line. Activity in Q4 slowed in most of the regions, primarily due to unfavorable economic conditions which were more pronounced towards the end of the quarter. As a result, total sales declined 5%, or approximately 2% on a metals-adjusted basis. Maintenance, Repair and Operations (MRO) sales fell 4% or approximately 1% on a metals-adjusted basis, while project sales decreased approximately 11%, or 8% on a metals-adjusted basis."

Gross margin at 23.1% increased 130 basis points from the fourth quarter of 2013. We estimate that approximately 50 basis points resulted from reduced customer sales incentives due to lower sales volume in Q4 2014, with the balance due to reduced project business, and vendor rebates which slightly exceeded our estimates. Operating expenses at $14.5 million fell 4.7% or $0.7 million from Q4 2013. Pokluda commented, "I was very pleased to see the decrease in our operating expenses, which we have worked hard to reduce over the past year. Q4's results indicate that our cost savings and expense management initiatives are working."

Interest expense of $0.3 million was higher than the $0.2 million amount in the prior year period. Average debt levels increased by 16.6% from $46.3 million in 2013 to $54.0 million in 2014, and the effective interest rate increased from 1.9% in 2013 to 2.2% in 2014. The effective tax rate for the quarter of 37.9% was down from the 2013 tax rate of 39.1% due to lower state tax rates in 2014.

Net income of $3.7 million increased 16.5% from the fourth quarter of 2013. Diluted earnings per share were $0.21 compared to $0.18 in the prior year quarter.

Twelve month summary
Sales for the year were $390.0 million, up approximately 2% from 2013 and up over 4% when adjusted for the negative impact in the price of metals. Metals-adjusted 2014 full year sales, when compared to all prior years' metals adjusted sales, was also at a record level. We estimate that MRO sales increased 1%, while project sales increased 9%, on a metals-adjusted basis. Mr. Pokluda commented, "The team worked very hard in 2014 and drove solid improvements in several areas of our business. Despite difficult headwinds from an inconsistently performing industrial economy, metals deflation, and the late year negative impact from the decrease in the price of oil, we successfully increased revenue, contained expenses, grew net income (even when adjusted for the goodwill impairment charge in 2013) and continued our practice of returning earnings to shareholders through dividends and share repurchases."

Gross margin at 22.0% was down 10 basis points from the 2013 period. "Considering the competitiveness of the marketplace and the continual reduction in the price of copper throughout the year, I believe the team has performed well with its ability to maintain gross margin," said Mr. Pokluda.

Operating expenses increased 0.9% from the 2013 amount, excluding the impact of the $7.6 million goodwill impairment charge in 2013, primarily due to increased costs of the distribution network, including the addition of two new operating locations; higher commissions resulting from increased sales; and bonuses. These increases were partially offset by lower benefit and employee related expenses and salaries, as the full-time employee headcount decreased. Mr. Pokluda further commented, "We have worked diligently over the past year to reduce our operating expenses and we believe we have laid the foundation for an efficient expense structure as we go into 2015."

Interest expense of $1.2 million was higher than the prior year's $1.0 million as average debt levels increased by 16.2% from $47.8 million in 2013 to $55.6 million in 2014 and interest rates increased from 1.9% to 2.1%. The full year effective tax rate of 38.3% was consistent with the rates in the first three quarters and our historical rates.

Net income for 2014 was $15.0 million, up 2.6% from the $14.6 million (excluding the goodwill impairment charge) attained in 2013.

Conference Call
The Company will host a conference call to discuss fourth quarter results on Thursday, March 12, 2015 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 19, 2015.

Replay, Toll-Free #: 855-859-2056
Replay, Toll #: 404-537-3406
Conference ID # 97658691

About the Company

With over 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, instrumentation, medium voltage, high temperature, portable cord, power cables, primary and secondary aluminum distribution 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. 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,  
    2014     2013  
    (In thousands, except
share data)
 
                 
Assets                
Current assets:                
  Accounts receivable, net   $ 61,599     $ 60,408  
  Inventories, net     88,958       96,107  
  Deferred income taxes     3,188       2,591  
  Income taxes     219       420  
  Prepaids     565       762  
Total current assets     154,529       160,288  
                 
Property and equipment, net     8,954       7,974  
Intangible assets, net     8,501       10,234  
Goodwill     17,520       17,520  
Other assets     309       159  
Total assets   $ 189,813     $ 196,175  
                 
Liabilities and stockholders' equity                
Current liabilities:                
  Book overdraft   $ 3,113     $ 4,594  
  Trade accounts payable     7,993       13,637  
  Accrued and other current liabilities     13,282       18,772  
Total current liabilities     24,388       37,003  
                 
Debt     53,847       47,952  
Other long-term obligations     96       97  
Deferred income taxes     175       429  
Total liabilities     78,506       85,481  
                 
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: 17,508,015 and 17,954,032 shares outstanding at December 31, 2014 and 2013, respectively     21       21  
  Additional paid-in capital     54,871       55,642  
  Retained earnings     111,233       104,607  
  Treasury stock     (54,818 )     (49,576 )
Total stockholders' equity     111,307       110,694  
                 
Total liabilities and stockholders' equity   $ 189,813     $ 196,175  
                 
                 
 
 
Houston Wire & Cable Company
Consolidated Statements of Income
 
    Three Months Ended   Year Ended
    December 31,   December 31,
    2014   2013   2014   2013
                         
Sales   $ 89,530   $ 94,442   $ 390,011   $ 383,292
Cost of sales     68,812     73,809     304,073     298,633
Gross profit     20,718     20,633     85,938     84,659
                         
Operating expenses:                        
  Salaries and commissions     7,356     7,558     31,196     30,946
  Other operating expenses     6,4783     6,933     26,400     26,068
  Depreciation and amortization     677     734     2,919     2,978
  Impairment of goodwill     --     --     --     7,562
Total operating expenses     14,511     15,225     60,515     67,554
                         
Operating income     6,207     5,408     25,423     17,105
Interest expense     302     239     1,168     992
Income before income taxes     5,905     5,169     24,255     16,113
Income taxes     2,237     2,020     9,283     8,211
Net income   $ 3,668   $ 3,149   $ 14,972   $ 7,902
                         
Earnings per share:                        
  Basic   $ 0.21   $ 0.18   $ 0.85   $ 0.44
  Diluted   $ 0.21   $ 0.18   $ 0.85   $ 0.44
Weighted average common shares outstanding:                        
  Basic     17,407,308     17,837,097     17,605,290     17,805,464
  Diluted     17,500,014     17,937,992     17,683,931     17,900,372
                         
Dividend declared per share   $ 0.12   $ 0.11   $ 0.47   $ 0.42
                         
                         
   
   
Houston Wire & Cable Company  
Consolidated Statements of Cash Flows  
   
    Year Ended December 31,  
    2014     2013  
    (In thousands)     
Operating activities                
Net income   $ 14,972     $ 7,902  
                 
Adjustments to reconcile net income to net cash provided by operating activities:                
  Impairment of goodwill     --       7,562  
  Depreciation and amortization     2,919       2,978  
  Amortization of unearned stock compensation     868       900  
  Provision for inventory obsolescence     1,002       559  
  Deferred income taxes     (923 )     (1,485 )
  Other non-cash items     (43 )     (15 )
  Changes in operating assets and liabilities:                
    Accounts receivable     (1,144 )     5,516  
    Inventories     6,147       (12,004 )
    Book overdraft     (1,481 )     4,594  
    Trade accounts payable     (5,644 )     1,307  
    Accrued and other current liabilities     (5,616 )     3,312  
    Income taxes     184       (435 )
    Other operating activities     28       54  
Net cash provided by operating activities     11,269       20,745  
                 
Investing activities                
  Expenditures for property and equipment     (2,177 )     (3,396 )
  Proceeds from disposals of property and equipment     25       2  
Net cash used in investing activities     (2,152 )     (3,394 )
                 
Financing activities                
  Borrowings on revolver     405,884       396,724  
  Payments on revolver     (399,989 )     (407,360 )
  Proceeds from exercise of stock options     181       492  
  Payment of dividends     (8,293 )     (7,466 )
  Excess tax benefit for options     7       49  
  Purchase of treasury stock     (6,907 )     (64 )
Net cash used in financing activities     (9,117 )     (17,625 )
                 
Net change in cash     --       (274 )
Cash at beginning of year     --       274  
                 
Cash at end of year   $ --     $ --  
Supplemental disclosures                
  Cash paid during the year for interest   $ 1,160     $ 998  
                 
  Cash paid during the year for income taxes   $ 10,029     $ 10,236