SOURCE: Houston Wire & Cable Company

Houston Wire & Cable Company

August 09, 2016 07:30 ET

Houston Wire & Cable Company Reports Results for the Quarter Ended June 30, 2016

HOUSTON, TX--(Marketwired - Aug 9, 2016) - Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company") announced operating results for the second quarter ended June 30, 2016.

Selected quarterly results were:

  • Sales of $62.5 million
  • Net loss from operations of $2.6 million
  • Adjusted net loss (non-GAAP) of $0.7 million, excluding the impairment charge
  • Cash flow from operations of $5.5 million
  • Declared a dividend of $0.03 per share on August 9, 2016

Second Quarter Summary
Jim Pokluda, President and Chief Executive Officer commented, "The weak levels of industrial demand and the depressed oil and gas market experienced in the first quarter continued into the second quarter. While transactional activity increased in the early part of the quarter, indicative of a possible sales rebound, we closed the period with a return to more sluggish demand levels. Overall transactional activity, as measured by invoice count, increased by only 0.5% over the prior year period. While activity was slightly up over the first quarter, the sales shortfall was particularly impacted by the decrease in project activity. Sales decreased 19.9% or approximately 11% on a metals adjusted basis from the second quarter of 2015. We estimate that Maintenance, Repair and Operations (MRO) sales decreased 14% or approximately 5% on a metals adjusted basis, while project sales decreased 35% or approximately 26% on a metals adjusted basis."

Gross margin at 19.9% decreased 180 basis points from the second quarter of 2015, as lower industrial demand and extremely competitive market conditions collectively drove prices down. Operating expenses decreased $1.7 million or 9.8% to $15.5 million from $17.2 million in 2015. Excluding the impairments in both periods, operating expenses fell $1.1 million or 7.5% to $13.1 million in 2016 from $14.2 million in 2015. As market conditions remain depressed, cost reductions and judicious expense management are the primary areas of emphasis to ensure maximum operating leverage and efficiency.

Interest expense of $0.1 million was down 31.3% from $0.2 million in the prior year period. Average debt levels decreased by 28.9% from $45.1 million in 2015 to $32.0 million in 2016, while the effective interest rate decreased from 2.0% in 2015 to 1.7% in 2016. 

The results of operations produced a net loss of $2.6 million, as compared to a net loss of $0.6 million in 2015. Excluding the impairments in both periods, the second quarter of 2016 produced a net loss of $0.7 million, compared to net income of $1.5 million in the prior year period.

Mr. Pokluda further commented "The sales reduction continues to heavily impact our operating results. While we have continued to cut our operating expenses, we cannot make up for the current lower sales operating margin contribution. We are experiencing sales successes through our commercial product line expansions; however, these sales channels, while a helpful revenue addition, cannot compensate for the reduced level of industrial demand, including project, oil and gas and MRO activity." 

Pokluda continued, "Although our operating results were disappointing, I was pleased with our ability to efficiently manage our working capital investment and the resulting $5.5 million in operating cash flow that was generated. This allowed us to reduce our debt and purchase an additional 104,000 shares of stock. The Company considers its performance, stock price, dividend yield and financial position in deciding the best way to return value to our shareholders. In order to allow the Company to continue to invest in its business, including through its stock repurchase program, given the recent financial performance and the continuing difficult industrial market, the upcoming dividend will be paid at the rate of $0.03 per share."

Six month summary
Sales for the six month period were down 20.3% versus the prior year period and down approximately 12% on a metals adjusted basis. We estimate that MRO sales decreased 7%, and project sales decreased 22%, in each case on a metals adjusted basis. 

Gross margin at 20.3% was down from the 21.7% level of the 2015 period. "Heavy market pricing pressure continued in light of the depressed level of industrial demand including the overall lackluster level of activity in the oil and gas arena," said Mr. Pokluda. Gross profit dollars decreased $8.8 million or 25.5%, primarily due to the decrease in sales.

Operating expenses decreased $2.2 million or 7.2% to $28.9 million from $31.2 million. Excluding the impairment charges from both periods, operating expenses decreased $1.6 million or 5.8%. 

Interest expense of $0.3 million decreased 32.8% from $0.5 million. Average debt levels decreased 27.0% to $34.4 million in 2016, from $47.1 million in 2015, while interest rates fell to 1.7% from 2.0% in 2015.

The results of operations produced a net loss of $2.7 million, as compared to net income of $1.6 million in 2015. Excluding the impairments in both periods, the net loss for 2016 was $0.9 million, compared to a net income of $3.7 million in the prior year period.

Conference Call
The Company will host a conference call to discuss second quarter results on Tuesday, August 9, 2016 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 August 16, 2016.

Replay, Toll-Free #: 855-859-2056
Replay, Toll #: 404-537-3406
Conference ID # 52903287

About the Company
With over 40 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, 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; instrumentation cable; medium voltage cable; high temperature wire; 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 online 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

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 (loss) and adjusted diluted EPS Three Months Ended
June 30, 2016
    Three Months Ended
June 30, 2015
 
  Net Income     Diluted EPS     Net Income     Diluted EPS  
                               
Net income (loss), as reported under GAAP $ (2,557 )   $ (0.16 )   $ (619 )   $ (0.04 )
Impairment charge   2,384       0.15       2,994       0.18  
Tax effect of impairment charge   (498 )     (0.03 )     (838 )     (0.05 )
Adjusted net income (loss) $ (671 )   $ (0.04 )   $ 1,537     $ 0.09  
           
           
Adjusted net income (loss) and adjusted diluted EPS Six Months Ended
June 30, 2016
    Six Months Ended
June 30, 2015
 
  Net Income     Diluted EPS     Net Income     Diluted EPS  
                               
Net income (loss), as reported under GAAP $ (2,741 )   $ (0.17 )   $ 1,567     $ 0.09  
Impairment charge   2,384       0.15       2,994       0.18  
Tax effect of impairment charge   (498 )     (0.03 )     (838 )     (0.05 )
Adjusted net income (loss) $ (855 )   $ (0.05 )   $ 3,723     $ 0.22  
                               
                               
HOUSTON WIRE & CABLE COMPANY
Consolidated Balance Sheets
(In thousands, except share data)
 
  June 30,     December 31,  
  2016     2015  
  (unaudited)        
Assets              
Current assets:              
  Accounts receivable, net $ 41,505     $ 46,250  
  Inventories, net   64,580       75,777  
  Deferred income taxes   3,591       3,074  
  Income taxes   1,139       932  
  Prepaids   1,384       648  
Total current assets   112,199       126,681  
               
Property and equipment, net   10,814       10,899  
Intangible assets, net   5,138       5,984  
Goodwill   12,504       14,866  
Deferred income taxes   442       264  
Other assets   424       419  
Total assets $ 141,521     $ 159,113  
               
Liabilities and stockholders' equity              
Current liabilities:              
  Book overdraft $ 491     $ 3,701  
  Trade accounts payable   8,352       6,380  
  Accrued and other current liabilities   7,800       9,568  
Total current liabilities   16,643       19,649  
               
Debt   30,092       39,188  
Other long term obligations   511       275  
Total liabilities   47,246       59,112  
               
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: 16,490,559 and 16,712,626 outstanding at June 30, 2016 and December 31, 2015, respectively   21       21  
  Additional paid-in-capital   54,847       54,621  
  Retained earnings   101,308       106,048  
  Treasury stock   (61,901 )     (60,689 )
Total stockholders' equity   94,275       100,001  
Total liabilities and stockholders' equity $ 141,521     $ 159,113  
 
 
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,  
    2016     2015     2016     2015  
                         
Sales   $ 62,454     $ 77,959     $ 127,165     $ 159,559  
Cost of sales     50,024       61,024       101,336       124,900  
Gross profit     12,430       16,935       25,829       34,659  
                                 
Operating expenses:                                
  Salaries and commissions     6,838       7,168       13,747       14,406  
  Other operating expenses     5,496       6,281       11,333       12,329  
  Depreciation and amortization     774       726       1,466       1,438  
  Impairment charge     2,384       2,994       2,384       2,994  
Total operating expenses     15,492       17,169       28,930       31,167  
                                 
Operating income (loss)     (3,062 )     (234 )     (3,101 )     3,492  
Interest expense     149       217       324       482  
Income (loss) before income taxes     (3,211 )     (451 )     (3,425 )     3,010  
Income tax expense (benefit)     (654 )     168       (684 )     1,443  
Net income (loss)   $ (2,557 )   $ (619 )   $ (2,741 )   $ 1,567  
                                 
Earnings (loss) per share:                                
  Basic   $ (0.16 )   $ (0.04 )   $ (0.17 )   $ 0.09  
  Diluted   $ (0.16 )   $ (0.04 )   $ (0.17 )   $ 0.09  
Weighted average common shares outstanding:                                
  Basic     16,383,630       17,101,952       16,432,376       17,198,927  
  Diluted     16,383,630       17,101,952       16,432,376       17,251,178  
                                 
Dividend declared per share   $ 0.06     $ 0.12     $ 0.12     $ 0.24  
 
 
HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
  Six Months
Ended June 30,
 
  2016     2015  
           
Operating activities              
Net income (loss) $ (2,741 )   $ 1,567  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:              
  Impairment charge   2,384       2,994  
  Depreciation and amortization   1,466       1,438  
  Amortization of unearned stock compensation   422       463  
  Provision for inventory obsolescence   357       330  
  Deferred income taxes   (695 )     (670 )
  Other non-cash items   27       83  
  Changes in operating assets and liabilities:              
    Accounts receivable   4,738       8,564  
    Inventories   10,840       12,359  
    Book overdraft   (3,210 )     (1,883 )
    Trade accounts payable   1,972       2,783  
    Accrued and other current liabilities   (1,757 )     (4,009 )
    Income taxes   (207 )     (1,069 )
    Other operating activities   (525 )     (520 )
Net cash provided by operating activities   13,071       22,430  
               
Investing activities              
  Expenditures for property and equipment   (557 )     (1,545 )
Net cash used in investing activities   (557 )     (1,545 )
               
Financing activities              
  Borrowings on revolver   124,312       151,366  
  Payments on revolver   (133,408 )     (164,874 )
  Payment of dividends   (1,990 )     (4,110 )
  Purchase of treasury stock   (1,428 )     (3,267 )
Net cash used in financing activities   (12,514 )     (20,885 )
               
Net change in cash   --       --  
Cash at beginning of period   --       --  
               
Cash at end of period $ --     $ --  
               

Contact Information

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