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				$	--			$	--