SOURCE: Houston Wire & Cable Company

Houston Wire & Cable Company

August 06, 2015 07:30 ET

Houston Wire & Cable Company Reports Results for the Quarter Ended June 30, 2015

HOUSTON, TX--(Marketwired - Aug 6, 2015) -  Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company") announced operating results for the second quarter ended June 30, 2015.

Selected quarterly highlights were:

  • Sales of $78 million
  • Completed the Southwest Wire Rope Houston facility consolidation
  • Net loss of $0.6 million
  • Adjusted net income of $1.5 million excluding the impairment charge relating to the Southwest Wire division and certain tradenames.
  • Debt decreased to $40.3 million, lowest level since Q 1 2010
  • Declared a dividend of $0.12 cents per share on August 4, 2015

Second Quarter Summary
Jim Pokluda, President and Chief Executive Officer commented, "Market conditions did not improve in the second quarter and the combination of reduced demand in oil and gas and industrial markets and deflation in the price of metals significantly impacted our operating results. Sales decreased 24.6% from the second quarter of 2014, or approximately 20% when adjusted for declining metals prices. We estimate that Maintenance, Repair and Operations (MRO) sales fell 20% or approximately 15% on a metals-adjusted basis, while project sales decreased approximately 35%, or 30% on a metals-adjusted basis. Metals adjusted project and total sales excluding the negative impact resulting from a decline in a large and ongoing infrastructure project fell approximately 13% and 14%, respectively. Total transactional invoice activity decreased by 11%."

Gross margin at 21.7% was flat with the second quarter of 2014. Operating expenses at $17.2 million included an impairment charge for the goodwill associated with the Southwest Wire Rope division and certain tradenames totaling $3.0 million. Net of this charge operating expenses were $14.2 million, a decrease of 8.8% from the $15.6 million level in 2014. 

Pokluda commented, "Given today's challenging operating environment we have amplified our efforts to drive exceptionally high levels of focus and strong organizational execution involving new business development, expense management, efficient working capital utilization, gross margin optimization and customer satisfaction. Similar to the first quarter, new business development initiatives involving product line expansions into highly engineered power and control cable, aluminum cable and most recently flexible cable, continue to gain traction. Year-over-year expenses continue to decrease, largely as a result of our major expense reduction initiative implemented in early 2014. Inventory re-profiling has driven significant investment reductions which have favorably impacted working capital requirements, cash flow and debt. Gross margins have remained at levels experienced in more robust economic conditions, and operational excellence at 98% + order accuracy and on-time performance, continue to produce very high levels of customer satisfaction." 

Interest expense of $0.2 million decreased 37% from $0.3 million in the prior year period. Average debt levels decreased by 26% from $61.2 million in 2014 to $45.1 million in 2015, while the effective interest rate decreased from 2.1% in 2014 to 2.0% in 2015. 

Adjusted net income of $1.5 million decreased by $2.5 million from the second quarter of 2014. Diluted earnings per share excluding the impairment were $0.09 compared to $0.23 in the prior year quarter.

Mr Pokluda further commented, "Despite the current demand levels, we delivered strong operating cash flow, debt reduction continued, and our strong balance sheet again allowed us to return funds to our shareholders through the $0.12 per share dividend."

Six month summary
Sales for the six month period were down 21.7% versus the prior year period and down approximately 17% on a metals adjusted basis. We estimate that MRO sales decreased 9%, and project sales decreased 30%, on a metals adjusted basis. Metals adjusted project and total sales excluding the negative impact resulting from a decline in a large and ongoing infrastructure project fell approximately 12% and 10% respectively. 

Gross margin at 21.7% was flat with the 2014 period. "Pricing remains very competitive in the marketplace, especially in those regions where demand for product remains depressed and on large projects. Despite the continuing market pricing pressure, the achievement of this level of gross margin is a testimony to the ability of our sales force to execute under difficult conditions," said Mr. Pokluda. Gross profit dollars decreased $9.5 million or 21.5%, primarily due to the decrease in sales.

Operating expenses increased $0.3 million or 0.8%, primarily driven by the $3.0 million impairment charge. Absent this charge, operating expenses decreased 8.8% from $30.9 million to $28.2 million. 

Interest expense of $0.5 million decreased 21% from $0.6 million. Average debt levels decreased 19% from $58.1 million in 2014 to $47.1 million in 2015, while interest rates remained flat at 2%.

Adjusted net income of $3.7 million decreased $4.1 million from the $7.8 million level in the prior year period. 

Conference Call
The Company will host a conference call to discuss first quarter results on Thursday, August 6, 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 at www.houwire.com.  

Approximately two hours after the completion of the live call, a telephone replay will be available until August 13, 2015.

Replay, Toll-Free #: 855-859-2056
Replay, Toll #: 404-537-3406
Conference ID # 97965630

About the Company
With over 40 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  
(In thousands, except share data)  
   
    June 30,     December 31,  
    2015     2014  
    (unaudited)        
Assets                
Current assets:                
  Accounts receivable, net   $ 52,961     $ 61,599  
  Inventories, net     76,269       88,958  
  Deferred income taxes     3,398       3,188  
  Income taxes     1,288       219  
  Prepaids     1,000       565  
Total current assets     134,916       154,529  
                 
Property and equipment, net     9,948       8,954  
Intangible assets, net     7,274       8,501  
Goodwill     14,866       17,520  
Other assets     384       309  
Deferred income taxes     245       --  
Total assets   $ 167,633     $ 189,813  
                 
Liabilities and stockholders' equity                
Current liabilities:                
  Book overdraft   $ 1,230     $ 3,113  
  Trade accounts payable     10,776       7,993  
  Accrued and other current liabilities     9,255       13,282  
Total current liabilities     21,261       24,388  
                 
Debt     40,339       53,847  
Other long term obligations     95       96  
Deferred income taxes     --       175  
Total liabilities     61,695       78,506  
                 
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: 17,172,857 and 17,508,015 outstanding at June 30, 2015 and December 31, 2014, respectively     21       21  
  Additional paid-in-capital     55,543       54,871  
  Retained earnings     108,650       111,233  
  Treasury stock     (58,276 )     (54,818 )
Total stockholders' equity     105,938       111,307  
Total liabilities and stockholders' equity   $ 167,633     $ 189,813  
 
 
 
HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2015     2014   2015   2014
                           
Sales   $ 77,959     $ 103,461   $ 159,559   $ 203,760
Cost of sales     61,024       81,022     124,900     159,617
Gross profit     16,935       22,439     34,659     44,143
                           
Operating expenses:                          
  Salaries and commissions     7,168       8,061     14,406     16,184
  Other operating expenses     6,281       6,728     12,329     13,220
  Depreciation and amortization     726       762     1,438     1,503
  Impairment charge     2,994       --     2,994     --
Total operating expenses     17,169       15,551     31,167     30,907
                           
Operating income (loss)     (234 )     6,888     3,492     13,236
Interest expense     217       345     482     613
Income (loss) before income taxes     (451 )     6,543     3,010     12,623
Income taxes     168       2,512     1,443     4,847
Net income (loss)   $ (619 )   $ 4,031   $ 1,567   $ 7,776
                           
Earnings (loss) per share:                          
  Basic   $ (0.04 )   $ 0.23   $ 0.09   $ 0.44
  Diluted   $ (0.04 )   $ 0.23   $ 0.09   $ 0.44
Weighted average common shares outstanding:                          
  Basic     17,101,952       17,647,936     17,198,927     17,748,863
  Diluted     17,101,952       17,713,021     17,251,178     17,821,479
                           
Dividend declared per share   $ 0.12     $ 0.12   $ 0.24   $ 0.23
   
   
   
HOUSTON WIRE & CABLE COMPANY  
Consolidated Statements of Cash Flows  
(Unaudited)  
(In thousands)  
   
    Six Months
Ended June 30,
 
    2015     2014  
                 
Operating activities                
Net income   $ 1,567     $ 7,776  
Adjustments to reconcile net income to net cash provided by operating activities:                
  Impairment charge     2,994       --  
  Depreciation and amortization     1,438       1,503  
  Amortization of unearned stock compensation     463       450  
  Provision for inventory obsolescence     330       704  
  Deferred income taxes     (670 )     (319 )
  Other non-cash items     83       89  
  Changes in operating assets and liabilities:                
    Accounts receivable     8,564       (3,626 )
    Inventories     12,359       8,035  
    Book overdraft     (1,883 )     (2,176 )
    Trade accounts payable     2,783       (2,007 )
    Accrued and other current liabilities     (4,009 )     (5,880 )
    Income taxes     (1,069 )     (289 )
    Other operating activities     (520 )     (693 )
Net cash provided by operating activities     22,430       3,567  
                 
Investing activities                
  Expenditures for property and equipment     (1,545 )     (942 )
Net cash used in investing activities     (1,545 )     (942 )
                 
Financing activities                
  Borrowings on revolver     151,366       204,327  
  Payments on revolver     (164,874 )     (199,118 )
  Payment of dividends     (4,110 )     (4,077 )
  Purchase of treasury stock     (3,267 )     (3,852 )
  Other financing activities     --       95  
Net cash used in financing activities     (20,885 )     (2,625 )
                 
Net change in cash     --       --  
Cash at beginning of period     --       --  
                 
Cash at end of period   $ --     $ --  
                 

Non-GAAP Financial Disclosures and Reconciliations
While the Company reports financial results in accordance with U.S. GAAP, this press release includes non-GAAP measures. We use the non-GAAP measures to evaluate and manage our operations and provide the information to assist investors in performing financial analysis that is consistent with financial models developed by research analysts. Investors should consider non-GAAP measures in addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.

   
HOUSTON WIRE & CABLE COMPANY  
Reconciliation of Non-GAAP Measures  
(Unaudited)  
(In thousands, except per share data)  
   
Adjusted net income and adjusted diluted EPS   Three Months Ended
June 30, 2015
 
    Net Income     Diluted EPS  
                 
Net income (loss), as reported under GAAP   $ (619 )   $ (0.04 )
Impairment charge     2,994       0.18  
      2,375       0.14  
Tax effect of impairment charge     (838 )     (0.05 )
Adjusted net income   $ 1,537     $ 0.09  
                 
       
Adjusted net income and adjusted diluted EPS   Six Months Ended
June 30, 2015
 
    Net Income     Diluted EPS  
                 
Net income, as reported under GAAP   $ 1,567     $ 0.09  
Impairment charge     2,994       0.18  
      4,561       0.27  
Tax effect of impairment charge     (838 )     (0.05 )
Adjusted net income   $ 3,723     $ 0.22