SOURCE: Houston Wire & Cable Company

Houston Wire & Cable Company

August 09, 2012 07:00 ET

Houston Wire & Cable Company Reports Results for the Second Quarter of 2012

HOUSTON, TX--(Marketwire - Aug 9, 2012) -  Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company") announced operating results for the second quarter ended June 30, 2012.

Selected highlights were:

  • Sales of $98.1 million
  • Gross margin reached 22.7%
  • Operating margins reached 7.7%
  • Net income of $4.4 million
  • Diluted EPS of $0.25
  • Declared dividends totaling $0.09 cents per share 

Second Quarter Summary

Jim Pokluda, President and Chief Executive Officer, commented, "I am pleased that we achieved a 4% increase in sales over the first quarter of 2012, which was itself 8% higher than the fourth quarter of 2011, although 5% lower than the prior year quarter. When adjusted for an estimated 4% negative impact from metal price fluctuations, revenues were down slightly less than 1% year over year and up approximately 8% sequentially. Nevertheless, market demand remains inconsistent. Comparables to the prior year period are difficult, as the second quarter of 2011 had reflected 32.9% organic sales growth over the prior year as a result of significant project billings and delayed MRO (maintenance, repair and operations) spend from the recession. 

"Similar to the first quarter, customer activity and market conditions showed some signs of improvement.We continued to invest in additional sales and marketing resources and to expand our product lines, and we added 107 new customers during the quarter, which drove further share gains. We believe the collective benefits of these ongoing investments will provide a broader footprint in the market and will generate additional traction for our business as the market regains its strength."

Gross margins continued the recent upward trend on a sequential basis reaching 22.7%, only 20 basis points lower than the prior year period.

Operating expenses increased 20.7% or $2.5 million from the prior year, or 3.6% or $0.5 million excluding the impact of the $2.0 million credit in 2011, resulting from a stock compensation adjustment, which we believe provides a more meaningful comparison. Excluding the stock compensation adjustment, this increase was primarily the result of healthcare costs associated with higher claims and an increase in headcount. The sequential increase in sales, coupled with our expense control leverage, moved operating margins to 7.7%, up 50 basis points from the first quarter of 2012. The resulting operating income of $7.5 million was up 10.7% sequentially.

Interest expense of $0.3 million was lower than the $0.4 million in prior year period, as average debt levels fell from $63.9 million in 2011 to $60.9 million in the second quarter of 2012, and the effective interest rate declined from 2.3% in 2011 to 2.1% in 2012. The effective tax rate for the quarter of 38.6% remained in line with the 2011 annual rate and with the 38.5% level in the comparable 2011 quarter.

Net income increased sequentially by 10.1% to $4.4 million, from $4.0 million. Diluted earnings per share were $0.25, compared to the $0.23 on a sequential basis.

Six month summary

Sales activity within the five long-term growth initiatives of Utility Power Generation, Environmental Compliance, Engineering & Construction, Industrials and LifeGuard™, our proprietary private-label product, remained active and continued to be the primary drivers of our sales. Project sales during the current period were primarily composed of a number of small to medium sized projects, as compared to the large projects that drove sales in the prior year period. 

Daily sales for the period were somewhat choppy, as we experienced solid volume and sales growth in regions that have come out of the recession, while other regions are still performing below our expectations. Sales declines from the prior year period were equally dispersed between project and MRO markets, which was primarily due to the slow start in activity during the first two months of the year and the completion of several mega-project jobs in the prior year period. For the current period, management estimates that metals market price fluctuations negatively impacted revenues by approximately 3%.

Gross margins were near flat at 22.5% for the 2012 period compared to 22.6% for the prior year. "Pricing remains competitive in the marketplace, but I am pleased that we have maintained margins in these circumstances," said Mr. Pokluda. Gross profit dollars decreased by $2.6 million or 5.6% primarily due to the sales shortfall.

Operating expenses increased by 10.5% or $2.8 million in the current year, or 3.9% or $1.1 million (excluding the $1.7 million year-to-date impact of the credit in 2011, resulting from the stock compensation adjustment), primarily due to the impact of health insurance costs associated with higher claims and increased headcount and higher consulting and professional fees. 

 Interest expense of $0.6 million was lower than the prior year's $0.7 million as average debt levels fell from $59.6 million in 2011 to $54.3 million in 2012 and as interest rates decreased from 2.3% to 2.1%. The effective tax rate for the period of 38.6% was in line with both the prior year period and the 2011 annual rate.

Net income for the period of $8.4 million fell 20.6% from the $10.6 million level in the prior year period, excluding the impact of the stock compensation reversal.

Conference Call

The Company will host a conference call to discuss first quarter results on Thursday, August 9, 2012 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, 2012.

   
Replay Dial In: 404.537.3406
International Replay: 855.859.2056
Confirmation Code: 16376463
   

About the Company 

With over 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, 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, 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,  
    2012     2011  
    (unaudited)        
Assets                
Current assets:                
  Accounts receivable, net   $ 62,698     $ 59,731  
  Inventories, net     81,910       69,517  
  Deferred income taxes     2,104       2,268  
  Income taxes     163       1,693  
  Prepaids     1,187       828  
Total current assets     148,062       134,037  
                 
Property and equipment, net     5,883       6,029  
Intangible assets, net     12,833       13,700  
Goodwill     25,082       25,082  
Other assets     306       305  
Total assets   $ 192,166     $ 179,153  
                 
Liabilities and stockholders' equity                
Current liabilities:                
  Book overdraft   $ 2,656     $ 2,270  
  Trade accounts payable     12,503       10,099  
  Accrued and other current liabilities     11,322       19,101  
Total current liabilities     26,481       31,470  
                 
Debt     60,463       47,967  
Other long term obligations     115       128  
Deferred income taxes     1,874       2,250  
Total liabilities     88,933       81,815  
                 
Stockholders' equity:                
  Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued and outstanding     0       0  
  Common stock, $0.001 par value; 100,000,000 shares authorized: 20,988,952 shares issued: 17,830,595 and 17,811,806 outstanding at June 30, 2012 and December 31, 2011, respectively     21       21  
  Additional paid-in-capital     56,009       55,760  
  Retained earnings     98,838       93,588  
  Treasury stock     (51,635 )     (52,031 )
Total stockholders' equity     103,233       97,338  
Total liabilities and stockholders' equity   $ 192,166     $ 179,153  
                 
The accompanying Notes are an integral part of these Consolidated Financial Statements.  
   
   
   
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,
    2012   2011   2012   2011
                         
Sales   $ 98,082   $ 103,420   $ 192,544   $ 203,147
Cost of sales     75,830     79,700     149,154     157,175
Gross profit     22,252     23,720     43,390     45,972
                         
Operating expenses:                        
  Salaries and commissions     7,695     5,415     14,924     12,719
  Other operating expenses     6,288     5,980     12,662     12,043
  Depreciation and amortization     739     798     1,472     1,525
Total operating expenses     14,722     12,193     29,058     26,287
                         
Operating income     7,530     11,527     14,332     19,685
Interest expense     329     395     595     728
Income before income taxes     7,201     11,132     13,737     18,957
Income taxes     2,780     4,290     5,300     7,297
Net income   $ 4,421   $ 6,842   $ 8,437   $ 11,660
                         
Earnings per share:                        
  Basic   $ 0.25   $ 0.39   $ 0.48   $ 0.66
  Diluted   $ 0.25   $ 0.38   $ 0.47   $ 0.66
Weighted average common shares outstanding:                        
  Basic     17,725,549     17,682,217     17,712,075     17,673,601
  Diluted     17,805,979     17,816,061     17,810,441     17,795,720
                         
Dividend declared per share   $ 0.09   $ 0.09   $ 0.18   $ 0.175
                         
The accompanying Notes are an integral part of these Consolidated Financial Statements.
 
 
 
HOUSTON WIRE & CABLE COMPANY  
Consolidated Statements of Cash Flows  
(Unaudited)  
(In thousands)  
    Six Months
Ended June 30,
 
    2012     2011  
                 
Operating activities                
Net income   $ 8,437     $ 11,660  
Adjustments to reconcile net income to net cash used in operating activities:                
  Depreciation and amortization     1,472       1,525  
  Amortization of capitalized loan costs     9       44  
  Amortization of unearned stock compensation     537       (1,225 )
  Provision for doubtful accounts     15       68  
  Provision for returns and allowances     (55 )     132  
  Provision for inventory obsolescence     350       319  
  Deferred income taxes     (218 )     275  
  Changes in operating assets and liabilities:                
    Accounts receivable     (2,927 )     1,684  
    Inventories     (12,743 )     (13,096 )
    Prepaids     (359 )     (357 )
    Other assets     (10 )     (118 )
    Book overdraft     386       (430 )
    Trade accounts payable     2,404       (5,083 )
    Accrued and other current liabilities     (7,779 )     (1,607 )
    Income taxes receivable/(payable)     1,527       (837 )
    Other long term obligations     (13 )     (7 )
Net cash used in operating activities     (8,967 )     (7,053 )
                 
Investing activities                
  Expenditures for property and equipment     (459 )     (462 )
  Cash paid for acquisition     0       (343 )
  Net cash used in investing activities     (459 )     (805 )
                 
Financing activities                
  Borrowings on revolver     200,578       216,710  
  Payments on revolver     (188,082 )     (205,909 )
  Proceeds from exercise of stock options     137       112  
  Excess tax benefit for stock options     34       37  
  Payment of dividends     (3,187 )     (3,092 )
  Purchase of treasury stock     (54 )     0  
  Net cash provided by financing activities     9,426       7,858  
                 
Net change in cash     -       -  
Cash at beginning of period     -       -  
                 
Cash at end of period   $ -     $ -  
                 
The accompanying Notes are an integral part of these Consolidated Financial Statements.  

Contact Information

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