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.