SOURCE: Houston Wire & Cable Company

Houston Wire & Cable Company

August 07, 2014 07:30 ET

Houston Wire & Cable Company Reports Results for the Second Quarter of 2014

Record Second Quarter Sales

HOUSTON, TX--(Marketwired - Aug 7, 2014) - Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company") announced operating results for the second quarter ended June 30, 2014.

Selected highlights were:

  • Record sales of $103.5 million up 4.2% over Q2 2013
  • Net income of $4.0 million
  • Diluted EPS of $0.23 per share
  • Declared a dividend of $0.12 per share

Second Quarter Summary
Jim Pokluda, President and Chief Executive Officer commented, "I am pleased to report another record sales quarter, as sales increased 4.2% over the prior year quarter, up approximately 7% when adjusted for deflation in metals prices, and 4% sequentially. Our revenue performance reflects continued execution in regional geographies where end markets have recovered from post-recession lows, despite disappointing weakness in certain regions where demand remains sluggish. In addition, we are pleased to see growing strength and activity involving the project end of our business, although overall market conditions in this space remain very competitive, pressuring our gross and operating margins.

We estimate Maintenance, Repair and Operations (MRO) sales increased 2% or approximately 5% on a metals adjusted basis, while project business increased 8% or approximately 11% on a metals adjusted basis over the prior year quarter. Our new product initiatives, including specialty oil and gas cables and aluminum cables, continued to help the top line."

Gross margin at 21.7% decreased 20 basis points from the second quarter of 2013 due to competitive pricing and the impact of lower metals prices. Operating expenses were up $0.7 million or 4.7% from the prior year period, principally due to the cost of operating three new distribution locations and additional operating salaries to support the increased sales.

Interest expense of $0.3 million was slightly higher than the prior year period, as outstanding debt at $53.2 million increased from $46.6 million at June 30, 2013, but decreased from March 31, 2014 by $5.0 million or 8.6%. The average effective interest rate remained flat year to year at 2.1%. The effective tax rate for the period of 38.4% was lower than the 38.7% rate in the prior year period, due to a slightly lower state tax rate in 2014.

Net income of $4.0 million was flat with the second quarter of 2013. Diluted earnings per share were $0.23 consistent with the prior year period. Pokluda further commented, "I am pleased that our financial performance and strong balance sheet again allowed us to return funds to our shareholders through the $0.12 per share dividend and the repurchase of approximately 243,000 shares of stock."

Six month summary
Sales for the six month period were up 5.2% versus the prior year period and increased approximately 7% on a metals adjusted basis. We estimate that MRO sales increased 4%, while project sales increased 14%, on a metals adjusted basis.

Gross margin at 21.7% was down 60 basis points from the 2013 period. "Pricing remains very competitive in the marketplace, especially in those regions where demand for product remains depressed and on large projects, which is an area that has really just started to recover. Overall, we were pleased to see our margins remain at respectable levels, while we continue to gain market share as evidenced by our top line growth, especially on a metals adjusted basis," said Mr. Pokluda. Gross profit dollars increased $1.0 million or 2.4%, primarily due to the increase in sales.

Operating expenses increased by 3.5% or $1.1 million in the current year period. Pokluda further commented, "Rigorous expense management remains a top priority and although expenses are up, primarily due to increased sales, the three new distribution facilities and professional fees, these additional expenses are being partially offset by savings realized from the expense reduction initiative executed earlier in the year, which remains on target."

Interest expense of $0.6 million was higher than the prior year's $0.5 million as average debt levels increased from $49.7 million in 2013 to $58.1 million in 2014, while interest rates remained flat at 2%. The effective tax rate for the period of 38.4% was higher than the 37.8% rate in the prior year period, as the prior year included a state tax credit.

Net income for the period of $7.8 million fell 1.8% from the $7.9 million level in the prior year period. However, diluted earnings per share of $0.44 were consistent with the prior year period.

Conference Call
The Company will host a conference call to discuss second quarter results today, Tuesday, August 7, 2014, at 10:00 a.m., C.D.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 14, 2014.

Replay, Toll-Free #: 855-859-2056
Replay, Toll #: 404-537-3406
Conference ID # 81743235

About the Company
With over 39 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, 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,  
    2014     2013  
    (unaudited)        
Assets                
Current assets:                
  Accounts receivable, net   $ 63,954     $ 60,408  
  Inventories, net     87,368       96,107  
  Deferred income taxes     2,784       2,591  
  Income taxes     696       420  
  Prepaids     1,432       762  
Total current assets     156,234       160,288  
                 
Property and equipment, net     8,280       7,974  
Intangible assets, net     9,367       10,234  
Goodwill     17,520       17,520  
Other assets     172       159  
Total assets   $ 191,573     $ 196,175  
                 
Liabilities and stockholders' equity                
Current liabilities:                
  Book overdraft   $ 2,418     $ 4,594  
  Trade accounts payable     11,630       13,637  
  Accrued and other current liabilities     13,004       18,772  
Total current liabilities     27,052       37,003  
                 
Debt     53,161       47,952  
Other long term obligations     96       97  
Deferred income taxes     303       429  
Total liabilities     80,612       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: 17,679,771 and 17,954,032 outstanding at June 30, 2014 and December 31, 2013, respectively     21       21  
  Additional paid-in-capital     55,563       55,642  
  Retained earnings     108,267       104,607  
  Treasury stock     (52,890 )     (49,576 )
Total stockholders' equity     110,961       110,694  
                 
Total liabilities and stockholders' equity   $ 191,573     $ 196,175  
                 
                 
 
 
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,
    2014   2013   2014   2013
                         
Sales   $ 103,461   $ 99,332   $ 203,760   $ 193,636
Cost of sales     81,022     77,607     159,617     150,532
Gross profit     22,439     21,725     44,143     43,104
                         
Operating expenses:                        
  Salaries and commissions     8,061     7,785     16,184     15,752
  Other operating expenses     6,728     6,315     13,220     12,596
  Depreciation and amortization     762     758     1,503     1,503
Total operating expenses     15,551     14,858     30,907     29,851
                         
Operating income     6,888     6,867     13,236     13,253
Interest expense     345     252     613     525
Income before income taxes     6,543     6,615     12,623     12,728
Income taxes     2,512     2,562     4,847     4,813
Net income   $ 4,031   $ 4,053   $ 7,776   $ 7,915
                         
Earnings per share:                        
  Basic   $ 0.23   $ 0.23   $ 0.44   $ 0.45
  Diluted   $ 0.23   $ 0.23   $ 0.44   $ 0.44
Weighted average common shares outstanding:                        
  Basic     17,647,936     17,800,056     17,748,863     17,776,500
  Diluted     17,713,021     17,898,911     17,821,479     17,872,307
                         
Dividend declared per share   $ 0.12   $ 0.11   $ 0.23   $ 0.20
                         
                         
   
   
HOUSTON WIRE & CABLE COMPANY  
Consolidated Statements of Cash Flows  
(Unaudited)  
(In thousands)  
   
    Six Months
Ended June 30,
 
    2014     2013  
                 
Operating activities                
Net income   $ 7,776     $ 7,915  
Adjustments to reconcile net income to net cash provided by operating activities:                
  Depreciation and amortization     1,503       1,503  
  Amortization of unearned stock compensation     450       433  
  Provision for inventory obsolescence     704       226  
  Deferred income taxes     (319 )     (183 )
  Other non-cash items     89       (15 )
  Changes in operating assets and liabilities:                
    Accounts receivable     (3,626 )     1,399  
    Inventories     8,035       604  
    Book overdraft     (2,176 )     6,529  
    Trade accounts payable     (2,007 )     (175 )
    Accrued and other current liabilities     (5,880 )     (1,783 )
    Income taxes     (289 )     (661 )
    Other operating activities     (693 )     (433 )
Net cash provided by operating activities     3,567       15,359  
                 
Investing activities                
  Expenditures for property and equipment     (942 )     (600 )
Net cash used in investing activities     (942 )     (600 )
                 
Financing activities                
  Borrowings on revolver     204,327       192,540  
  Payments on revolver     (199,118 )     (204,479 )
  Payment of dividends     (4,077 )     (3,552 )
  Purchase of treasury stock     (3,852 )     (6 )
  Other financing activities     95       464  
Net cash used in financing activities     (2,625 )     (15,033 )
                 
Net change in cash     -       (274 )
Cash at beginning of period     -       274  
                 
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