SOURCE: Houston Wire & Cable Company

Houston Wire & Cable Company

November 09, 2012 07:00 ET

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

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

Selected highlights were:

  • Sales of $96.1 million
  • Gross margin reached 22.5%
  • Operating margins reached 7.4%
  • Net income of $4.2 million
  • Diluted EPS of $0.24
  • Declared dividends totaling $0.09 cents per share 

Third Quarter Summary

Jim Pokluda, President and Chief Executive Officer commented, "The markets for our products in the third quarter remained inconsistent, as different parts of the country and industries experience economic recovery at different rates. While I am encouraged by the performance of our largest regions, which saw robust sales and delivered positive growth during the quarter, demand in smaller markets remained uneven, and we continue to experience regional sales performance differentials. Comparisons with the prior year period remain difficult, as the third quarter of 2011 had the highest sales in the history of the Company and included significant mega project sales. When adjusted for an estimated 6% negative impact from metals price fluctuations, we estimate that revenues were down just over 3% year-over-year and essentially flat sequentially.

Similar to our experience in the second quarter, notwithstanding inconsistent market conditions and related customer activity, key performance metrics including opportunity pipeline and sequential transactional activity continued to grow. We added 76 new customers during the quarter, which we believe will drive further share gains and continued to invest in more sales and marketing resources, new products and broader geographic coverage. We believe this is the prudent approach to strengthen the company, and to generate long term results for our investors. We are encouraged by these positive trends; however, we remain mindful that our performance, to varying degrees, will remain a function of post-recession recovery and market strength." 

Gross margin was 22.5%, or 80 basis points higher than prior year period. While it fell 20 basis points sequentially, gross margin continued the recent overall trend of exceeding the prior year's margin. 

Operating expenses decreased by 1.1% or $0.2 million, primarily due to lower commissions, offset by an increase in salaries. On a sequential basis operating expenses decreased by 1.8% or $0.3 million. The quarterly decrease in sales impacted operating margins which fell from 7.9% in 2011 to 7.4% in 2012 and sequentially from 7.7%.

Interest expense of $0.3 million was lower than the $0.4 million in prior year period. While the average debt levels increased from $61.9 million in 2011 to $62.6 million in the third quarter of 2012, the effective interest rate declined from 2.3% in 2011 to 2.0% in 2012. The effective tax rate for the quarter of 38.0% remained in line with the 2011 annual rate and with the 38.1% level in the comparable 2011 quarter. On a sequential basis the decline from the 38.6% in the second quarter, was due to the impact of lower state taxes.

Net income decreased by 14.8% or $0.7 million from 2011 and sequentially by 4.3% or $0.2 million. Diluted earnings per share were $0.24, compared to the $0.25 on a sequential basis.

Nine 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 were largely driven by multiple small to medium sized project orders. Large projects, while still present, were fewer than the prior year period and sales volume to a large extent was replaced by an increase in smaller projects centered around industrial manufacturing, alternative fuel and natural gas power generation and up-stream, mid-stream and down-stream hydrocarbon extraction, transfer and refining. 

Although daily sales for the period remained inconsistent, and primarily a function of post-recession geographic strength, positive momentum involving increased MRO order count continued during the period. We estimate sales declines from the prior year period were equally dispersed between project and MRO markets. For the nine month period, management estimates that metals market price fluctuations negatively impacted revenues by approximately 3%.

Gross margins, at 22.5%, improved 20 basis points over the prior year period. "Market conditions continue to place pressure on our margins, but I am pleased that we have been able to maintain the overall higher margin trend compared with the prior year," said Mr. Pokluda. Gross profit dollars decreased by $4.0 million or 5.8% primarily due to lower sales.

Operating expenses increased by 6.4% or $2.6 million in the current year. Excluding the impact of a $1.7 million expense reversal in 2011 resulting from a stock compensation adjustment, operating expenses increased, 2.2% or $0.9 million, primarily due to the impact of the higher headcount and higher consulting and professional fees. 

 Interest expense of $0.9 million was lower than the prior year's $1.1 million as average debt levels fell by 5.5% from $60.4 million in 2011 to $57.0 million in 2012 and interest rates decreased from 2.3% to 2.1%. The effective tax rate for the period of 38.4% was in line with both the prior year period and the 2011 annual rate.

Net income for the period of $12.7 million fell 18.7% from the $15.6 million level (excluding the impact of the stock compensation reversal) in the prior year period.

Conference Call

The Company will host a conference call to discuss third quarter results on Friday, November 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 November 16, 2012.

Replay, Toll-Free #: (855) 859-2056
Replay, Toll #: (404) 537-3406
Conference ID # 55310663

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)  
   
    September 30,     December 31,  
    2012     2011  
    (unaudited)        
Assets                
Current assets:                
  Accounts receivable, net   $ 67,076     $ 59,731  
  Inventories, net     89,117       69,517  
  Deferred income taxes     2,342       2,268  
  Income taxes     148       1,693  
  Prepaids     869       828  
Total current assets     159,552       134,037  
                 
Property and equipment, net     5,853       6,029  
Intangible assets, net     12,400       13,700  
Goodwill     25,082       25,082  
Other assets     200       305  
Total assets   $ 203,087     $ 179,153  
                 
Liabilities and stockholders' equity                
Current liabilities:                
  Book overdraft   $ 3,498     $ 2,270  
  Trade accounts payable     13,260       10,099  
  Accrued and other current liabilities     13,395       19,101  
Total current liabilities     30,153       31,470  
                 
Debt     64,993       47,967  
Other long term obligations     111       128  
Deferred income taxes     1,690       2,250  
Total liabilities     96,947       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 September 30, 2012 and December 31, 2011, respectively     21       21  
  Additional paid-in-capital     56,281       55,760  
  Retained earnings     101,476       93,588  
  Treasury stock     (51,638 )     (52,031 )
Total stockholders' equity     106,140       97,338  
Total liabilities and stockholders' equity   $ 203,087     $ 179,153  
                 

 

 
 
HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Income
(Unaudited)
(In thousands, except share and per share data)
 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2012   2011   2012   2011
                         
Sales   $ 96,113   $ 105,782   $ 288,657   $ 308,929
Cost of sales     74,501     82,776     223,655     239,951
Gross profit     21,612     23,006     65,002     68,978
                         
Operating expenses:                        
  Salaries and commissions     7,478     7,823     22,402     20,542
  Other operating expenses     6,256     6,071     18,918     18,114
  Depreciation and amortization     722     726     2,194     2,251
Total operating expenses     14,456     14,620     43,514     40,907
                         
Operating income     7,156     8,386     21,488     28,071
Interest expense     334     371     929     1,099
Income before income taxes     6,822     8,015     20,559     26,972
Income taxes     2,590     3,050     7,890     10,347
Net income   $ 4,232   $ 4,965   $ 12,669   $ 16,625
                         
Earnings per share:                        
  Basic   $ 0.24   $ 0.28   $ 0.71   $ 0.94
  Diluted   $ 0.24   $ 0.28   $ 0.71   $ 0.93
Weighted average common shares outstanding:                        
  Basic     17,732,715     17,685,211     17,719,005     17,677,514
  Diluted     17,814,499     17,814,181     17,811,844     17,802,021
                         
Dividend declared per share   $ 0.09   $ 0.09   $ 0.27   $ 0.265
                         

 

   
   
HOUSTON WIRE & CABLE COMPANY  
Consolidated Statements of Cash Flows  
(Unaudited)  
(In thousands)  
   
    Nine Months
Ended September 30,
 
    2012     2011  
                 
Operating activities                
Net income   $ 12,669     $ 16,625  
Adjustments to reconcile net income to net cash used in operating activities:                
  Depreciation and amortization     2,194       2,251  
  Amortization of capitalized loan costs     14       61  
  Amortization of unearned stock compensation     809       (968 )
  Provision for doubtful accounts     (19 )     41  
  Provision for returns and allowances     (44 )     108  
  Provision for inventory obsolescence     563       778  
  Deferred income taxes     (640 )     135  
  Changes in operating assets and liabilities:                
    Accounts receivable     (7,282 )     (2,270 )
    Inventories     (20,163 )     (7,062 )
    Prepaids     (41 )     (343 )
    Other assets     91       (139 )
    Book overdraft     1,228       (525 )
    Trade accounts payable     3,161       (6,459 )
    Accrued and other current liabilities     (5,706 )     (1,384 )
    Income taxes     1,542       (1,584 )
    Other long term obligations     (17 )     (10 )
Net cash used in operating activities     (11,641 )     (745 )
                 
Investing activities                
  Expenditures for property and equipment     (718 )     (749 )
  Cash paid for acquisition     0       (343 )
Net cash used in investing activities     (718 )     (1,092 )
                 
Financing activities                
  Borrowings on revolver     302,142       317,572  
  Payments on revolver     (285,116 )     (311,197 )
  Proceeds from exercise of stock options     137       112  
  Excess tax benefit for stock options     34       37  
  Payment of dividends     (4,781 )     (4,684 )
  Purchase of treasury stock     (57 )     (3 )
Net cash provided by financing activities     12,359       1,837  
                 
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