Houston Wire & Cable Company
Aug 7, 2014

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

Record Second Quarter Sales

HOUSTON, TX -- (Marketwired) -- 08/07/14 -- Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company") announced operating results for the second quarter ended June 30, 2014.

Selected highlights were:

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

Source: Houston Wire & Cable Company

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