Houston Wire & Cable Company
Houston Wire & Cable CO (Form: 10-Q, Received: 08/10/2009 08:19:14)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2009

or

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to

Commission File Number: 000-52046

(Exact name of registrant as specified in its charter)

Delaware
36-4151663
(State or other jurisdiction of  incorporation or organization)
(I.R.S. Employer Identification No.)
   
10201 North Loop East
Houston, Texas
77029
(Address of principal executive offices)
(Zip Code)

(713) 609-2100
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days   YES      x        NO      ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES    ¨        NO    ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act

Large Accelerated Filer    ¨
Accelerated Filer    x
Non-Accelerated Filer    ¨
Smaller Reporting Company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

YES    ¨ NO    x

At August 3, 2009 there were 17,649,737 outstanding shares of the registrant’s common stock, $0.001 par value per share.
 

 
HOUSTON WIRE & CABLE COMPANY
Form 10-Q
For the Quarter Ended June 30, 2009

INDEX
 
PART I. FINANCIAL INFORMATION
  2
   
Item 1.  Financial Statements (Unaudited)
  2
Consolidated Balance Sheets
  2
Consolidated Statements of Income
  3
Consolidated Statements of Cash Flows
  4
Notes to Consolidated Financial Statements
  5
   
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
  7
Overview
  7
Results of Operations
  9
Impact of Inflation and Commodity Prices
  12
Liquidity and Capital Resources
  12
Contractual Obligations
  13
Cautionary Statement for the Purposes of the “Safe Harbor”
  13
   
Item 3. Quantitative and Qualitative Disclosures about Market Risk
  13
Item 4. Controls and Procedures
  13
   
PART II. OTHER INFORMATION
  14
   
Item 1.     Legal Proceedings
  14
Item 1A.  Risk Factors
  14
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds
  14
Item 3.     Defaults Upon Senior Securities
  14
Item 4.     Submission of Matters to a Vote of Security Holders
  14
Item 5.     Other Information
  15
Item 6.     Exhibits
  15
   
Signature Page
  16
 
1

 
PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
 
HOUSTON WIRE & CABLE COMPANY
Consolidated Balance Sheets
(In thousands, except share data)

   
June 30,
   
December 31,
 
   
2009
   
2008
 
   
(unaudited)
       
Assets
           
Current assets:
           
Accounts receivable, net
  $ 40,497     $ 50,798  
Inventories, net
    72,316       73,459  
Deferred income taxes
    1,475       1,384  
Prepaid expenses
    1,078       829  
Income taxes receivable
    90        
Total current assets
    115,456       126,470  
                 
Property and equipment, net
    3,176       3,274  
Goodwill
    2,996       2,996  
Deferred income taxes
    2,196       1,926  
Other assets
    78       87  
Total assets
  $ 123,902     $ 134,753  
                 
Liabilities and stockholders' equity
               
Current liabilities:
               
Book overdraft
  $ 2,030     $ 4,933  
Trade accounts payable
    14,253       10,091  
Accrued and other current liabilities
    11,610       11,682  
Income taxes payable
          1,644  
Short term obligations
    17,343        
Total current liabilities
    45,236       28,350  
                 
Long term obligations
          29,808  
                 
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: 17,649,737 and 17,642,552 outstanding at June 30, 2009 and December 31, 2008, respectively
    21       21  
Additional paid-in-capital
    56,946       55,901  
Retained earnings
    76,449       75,540  
Treasury stock
    (54,750 )     (54,867 )
Total stockholders' equity
    78,666       76,595  
Total liabilities and stockholders' equity
  $ 123,902     $ 134,753  
 
The accompanying Notes are an integral part of these Consolidated Financial Statements
 
2

 
HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Income
(Unaudited)
(In thousands, except share and per share data)

   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2009
   
2008
   
2009
   
2008
 
                         
Sales
  $ 61,882     $ 97,384     $ 127,714     $ 186,825  
Cost of sales
    48,910       73,153       100,929       139,927  
Gross profit
    12,972       24,231       26,785       46,898  
                                 
Operating expenses:
                               
Salaries and commissions
    5,201       6,095       10,739       12,171  
Other operating expenses
    4,512       5,001       9,132       9,985  
Depreciation and amortization
    141       129       283       256  
Total operating expenses
    9,854       11,225       20,154       22,412  
Operating income
    3,118       13,006       6,631       24,486  
Interest expense
    108       450       263       991  
Income before income taxes
    3,010       12,556       6,368       23,495  
Income taxes
    1,165       4,811       2,459       9,013  
Net income
  $ 1,845     $ 7,745     $ 3,909     $ 14,482  
                                 
Earnings per share:
                               
Basic
  $ 0.10     $ 0.44     $ 0.22     $ 0.81  
Diluted
  $ 0.10     $ 0.44     $ 0.22     $ 0.81  
Weighted average common shares outstanding:
                               
Basic
    17,647,982       17,760,989       17,645,433       17,921,399  
Diluted
    17,663,522       17,798,403       17,656,445       17,959,842  
                                 
Dividends declared per share
  $ 0.085     $ 0.085     $ 0.17     $ 0.17  
 
The accompanying Notes are an integral part of these Consolidated Financial Statements
 
3

 
HOUSTON WIRE& CABLE COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)

   
Six Months Ended 
June 30,
 
   
2009
   
2008
 
             
Operating activities
           
Net income
 
$
3,909
   
$
14,482
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
283
     
256
 
Amortization of capitalized loan costs
   
40
     
40
 
Amortization of unearned stock compensation
   
1,194
     
1,058
 
Provision for doubtful accounts
   
     
14
 
Provision for returns and allowances
   
(45
)
   
27
 
Provision for inventory obsolescence
   
238
     
(6
)
Deferred income taxes
   
(415
)
   
(363
)
Changes in operating assets and liabilities:
               
Accounts receivable
   
10,346
     
(5,029
)
Inventories
   
905
     
(2,940
)
Prepaid expenses
   
(249
)
   
(377
)
Other assets
   
(31
)
   
(53
)
Book overdraft
   
(2,903
)
   
(3,854
Trade accounts payable
   
4,162
     
3,328
 
Accrued and other current liabilities
   
(72
)
   
(6,817
)
Income taxes payable/receivable
   
(1,734
)
   
2,209
 
Net cash provided by operating activities
   
15,628
     
1,975
 
Investing activities
               
Expenditures for property and equipment
   
(186
)
   
(211
)
Net cash used in investing activities
   
(186
)
   
(211
)
Financing activities
               
Borrowings on revolver
   
130,433
     
192,696
 
Payments on revolver
   
(142,898
)
   
(176,797
)
Proceeds from exercise of stock options
   
18
     
54
 
Excess tax benefit for stock options
   
5
     
255
 
Payment of dividends
   
(3,000
)
   
(3,040
)
Purchase of treasury stock
   
     
(13,789
Net cash used in financing activities
   
(15,442
)
   
(621
)
Net change in cash
   
     
1,143
 
Cash at beginning of period
   
     
 
Cash at end of period
 
$
   
$
1,143
 
 
The accompanying Notes are an integral part of these Consolidated Financial Statements.
 
4

 
HOUSTON WIRE & CABLE COMPANY
Notes to Consolidated Financial Statements
(Unaudited)
(In thousands, except share and per share data)
1. Basis of Presentation

Houston Wire & Cable Company (“HWC” or the “Company”) through its wholly owned subsidiaries, HWC Wire & Cable Company, Advantage Wire & Cable and Cable Management Services Inc., distributes specialty electrical wire and cable to the U.S. electrical distribution market through eleven locations in ten states throughout the United States. The Company has no other business activity.

The consolidated financial statements as of June 30, 2009 and for the three and six months ended June 30, 2009 and 2008 have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year.

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant estimates are those relating to the allowance for doubtful accounts, the reserve for returns and allowances, the inventory obsolescence reserve and the accrual for vendor rebates. These estimates are continually reviewed and adjusted as necessary, but actual results could differ from those estimates.

For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed with the Securities and Exchange Commission (the “SEC”).

Adoption of New Accounting Policy
 
In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”). SFAS 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. SFAS 141(R) also requires transaction costs related to the business combination to be expensed as incurred and establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company adopted SFAS 141 (R) on January 1, 2009. The adoption did not have an impact on the financial statements.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events . This standard is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, this standard sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS No. 165 is effective for fiscal years and interim periods ended after June 15, 2009. The Company adopted this standard effective June 15, 2009 and has evaluated any subsequent events through August 10, 2009. The Company has disclosed these subsequent events in Note 7.

2. Earnings per Share

In accordance with SFAS No. 128, Earnings per Share , basic earnings per share is calculated by dividing the net income by the weighted average number of common shares outstanding. Diluted earnings per share include the dilutive effects of stock option awards. The denominator for each period presented was determined as follows:
 
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2009
   
2008
   
2009
   
2008
 
                         
Weighted average common shares for basic earnings per share
    17,647,982       17,760,989       17,645,433       17,921,399  
Effect of dilutive securities
    15,540       37,414       11,012       38,443  
Weighted average common shares for diluted earnings per share
    17,663,522       17,798,403       17,656,445       17,959,842  
 
5

 
The weighted average common shares for diluted earnings per share for the three months ended June 30, 2009 and 2008 exclude stock options to purchase 1,127,679 and 828,644 shares, respectively, and 1,145,590 and 838,072 shares for the six months ended June 30, 2009 and 2008, respectively. Since these options have exercise prices that are higher than the average market price of the Company’s common stock, including them in the calculation would have an anti-dilutive effect on earnings per share for the respective periods.

3. Long Term Obligations

The Company’s current loan and security agreement provides for a $75,000 revolving loan, bears interest at the agent bank’s base interest rate and matures on May 21, 2010. The lender has a security interest in all of the assets of the Company and availability is calculated as a percentage of qualifying accounts receivable and inventory. The Company is in compliance with the financial covenants governing its indebtedness.

4. Stockholders’ Equity

The Board of Directors approved a stock repurchase program to be completed on or before December 31, 2009, where the Company is authorized to purchase from time to time up to $75,000 of its outstanding shares of common stock, depending on market conditions, trading activity, business conditions and other factors. Shares of stock purchased under the program are currently being held as treasury stock and may be used to satisfy the exercise of options, to fund acquisitions, or for other uses as authorized by the Board of Directors. During the quarter ended June 30, 2009, the Company did not repurchase any of its stock. During the quarter ended June 30, 2008, the Company repurchased 194,152 shares for a total cost of $3,601.

During each of the first two quarters of 2009, the Board of Directors approved a quarterly dividend of $0.085 per share payable to stockholders. Dividends paid were $3,000 and $3,040 during the six months ended June 30, 2009 and 2008, respectively.

On May 18, 2009, the Company’s Board of Directors adopted a stockholder rights plan and declared a dividend of one preferred stock purchase right (a “Right”) for each share of the Company’s common stock outstanding at the close of business on May 28, 2009. The Rights become exercisable (and separate from the common stock) ten business days after (i) the acquisition of 20% or more of the common stock by any person or group (an “Acquiring Person”) or (ii) the commencement of a tender or exchange offer for 20% or more of the common stock.

In the event that an Acquiring Person acquires 20% or more of the common stock, or if the Company is the surviving corporation in a merger involving an Acquiring Person, each Right (other than Rights owned by an Acquiring Person) will entitle the holder to purchase for $40 (or the then-current purchase price) a number of shares of the Company’s common stock having a market value of $80 (or twice the then-current purchase price). Similarly, if the Company is acquired in a merger or sells substantially all of its assets, each Right (other than Rights owned by an Acquiring Person) will entitle the holder to purchase for the then-current purchase price a number of shares of the surviving company’s stock having a market value of twice the then-current purchase price.

The Rights do not entitle the holder to vote or to receive dividends and may be redeemed at the option of the Company for $0.001 per Right at any time before an Acquiring Person acquires 20% or more of the common stock. At any time an Acquiring Person owns between 20% and 50% of the Common Stock, the Board of Directors may exchange all or part of the Rights (other than Rights owned by the Acquiring Person) for shares of common stock on a one-for-one basis. Unless previously exchanged or redeemed, the Rights will expire on May 18, 2012. The Board of Directors will submit the stockholder rights plan for ratification by the Company’s stockholders at the next annual meeting.

The Company is authorized to issue 5,000,000 shares of preferred stock, par value $.001 per share. The Board of Directors is authorized to fix the particular preferences, rights, qualifications and restrictions of each series of preferred stock. In connection with the adoption of the stockholder rights plan, the Board of Directors designated 100,000 shares as Series A Junior Participating Preferred Stock. No shares of preferred stock have been issued.

5. Stock Based Compensation

On May 8, 2009, at the Annual Meeting of Stockholders, the Company issued options to purchase 5,000 shares of its common stock to each non-employee director who was re-elected (other than the Chairman of the Board, who received an option to purchase 10,000 shares of the Company’s common stock), for an aggregate of 35,000 shares. Each option has an exercise price equal to the fair market value of the Company’s common stock at the close of trading on May 8, 2009, has a contractual life of ten years and vests one year after the date of grant.

On December 17, 2008, the Company granted options to purchase 65,000 shares of its common stock to the Company’s chief executive officer with the exercise price equal to the fair market value of the Company’s stock at the close of trading on December 17, 2008. These options have a contractual life of ten years and vest 50% on March 9, 2011 and the remaining 50% on March 9, 2012, provided that in the event of the chief executive officer’s death or permanent disability, such options would vest ratably based on the days served from the date of grant.
 
6

 
On May 8, 2008, at the Annual Meeting of Stockholders, the Company issued options to purchase 5,000 shares of its common stock to each non-employee director who was re-elected (other than the Chairman of the Board, who received an option to purchase 10,000 shares of the Company’s common stock) and 15,000 shares of common stock to the newly-elected non-employee director, for an aggregate of 45,000 shares. Each option has an exercise price equal to the fair market value of the Company’s common stock at the close of trading on May 8, 2008, has a contractual life of ten years and vests one year after the date of grant.

On January 9, 2008, the Company granted options to purchase 65,000 shares of its common stock to the Company’s chief executive officer with an exercise price equal to the fair market value of the Company’s stock at the close of trading on January 9, 2008. These options have a contractual life of ten years and vest 50% on March 9, 2011 and the remaining 50% on March 9, 2012, provided that in the event of the chief executive officer’s death or permanent disability, such options would vest ratably based on the days served from the date of grant.
 
The following assumptions were used to calculate the fair value of the Company’s options issued during the six months ended June 30, 2009 and 2008:

   
2009
 
2008
Expected volatility
    81%     69%
Expected life in years
 
2.0 years
 
5.5 years
Risk-free interest rate
    1.00%     3.81%
Dividend yield
    3.29%     2.28%

Total stock-based compensation cost was $591 and $538 for the three months ended June 30, 2009 and 2008, respectively, and $1,194 and $1,058 for the six months ended June 30, 2009 and 2008, respectively. Total income tax benefit recognized for stock-based compensation arrangements was $227 and $207 for the three months ended June 30, 2009 and 2008, respectively, and $460 and $407 for the six months ended June 30, 2009 and 2008, respectively.

  As of June 30, 2009, there was $5,569 of total unrecognized stock compensation cost related to nonvested share-based compensation arrangements. The cost is expected to be recognized over a weighted average period of approximately 37 months.

6. Contingencies

HWC, along with many other defendants, has been named in a number of lawsuits in the state courts of Minnesota, North Dakota and South Dakota alleging that certain wire and cable which may have contained asbestos caused injury to the plaintiffs who were exposed to this wire and cable. These lawsuits are individual personal injury suits that seek unspecified amounts of money damages as the sole remedy. It is not clear whether the alleged injuries occurred as a result of the wire and cable in question or whether HWC, in fact, distributed the wire and cable alleged to have caused any injuries. The Company maintains general liability insurance that has applied to these claims. To date, all costs associated with these claims have been covered by the applicable insurance policies and all defense of these claims has been handled by the applicable insurance companies. In addition, HWC did not manufacture any of the wire and cable at issue, and HWC would rely on any warranties from the manufacturers of such wire and cable if it were determined that any of the wire or cable that HWC distributed contained asbestos which caused injury to any of these plaintiffs. In connection with ALLTEL's sale of the Company in 1997, ALLTEL provided indemnities with respect to costs and damages associated with these claims that HWC believes it could enforce if its insurance coverage proves inadequate.

There are no legal proceedings pending against or involving the Company that, in management's opinion, based on the current known facts and circumstances, are expected to have a material adverse effect on the Company's consolidated financial position, cash flows, or results from operations.

7. Subsequent Event

On August 7, 2009, the Board of Directors approved a dividend on the shares of common stock of the Company in the amount of $0.085 per share, payable on August 28, 2009, to stockholders of record at the close of business on August 14, 2009.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the Company’s financial position and results of operations. MD&A is provided as a supplement to the Company’s Consolidated Financial Statements (unaudited) and the accompanying Notes to Consolidated Financial Statements (unaudited) and should be read in conjunction with the MD&A included in the Company’s Form 10-K for the year ended December 31, 2008.

Overview

We are one of the largest distributors of specialty wire and cable and related services to the U.S. electrical distribution market. We serve over 3,200 customers in over 8,600 individual locations, including virtually all of the top 200 electrical distributors in the U.S. We have strong relationships with leading wire and cable manufacturers and provide them with efficient access to the fragmented electrical distribution market. We distribute approximately 22,000 SKUs (stock-keeping units) from eleven strategically located distribution centers in ten states. We are focused on providing our electrical distributor customers with a single-source solution for specialty wire and cable and related services by offering a large selection of in-stock items, exceptional customer service and high levels of product expertise.
 
7

 
We offer products in most categories of specialty wire and cable, including:

·
continuous and interlocked armor cable (cable encapsulated in either a seamless or interlocked aluminum protective sheath);
·
control and power cable (single or multiple conductor industrial cable);
·
electronic wire and cable (computer, audio and signal cable);
·
flexible and portable cords (flexible, heavy duty industrial cable);
·
instrumentation and thermocouple cable (cable used for transmitting signals for instruments and heat sensing devices);
·
lead and high temperature cable (single conductor cable used for low or high temperature applications);
·
medium voltage cable (cable used for applications between 2,001 volts and 35,000 volts); and
·
premise and category wire and cable (cable used for home and high speed data applications).

We also offer private branded products, including our LifeGuard™ low-smoke, zero-halogen cable. Low-smoke, zero-halogen products are made with compounds that produce no halogen gases and very little smoke while under combustion.

In addition to our product offerings, we provide comprehensive value-added services including: standard same day shipment from our extensive inventory and distribution network; application engineering support through our knowledgeable sales and technical support staff; custom cutting of wire and cable to exact specifications; inventory management programs that provide job-specific asset management and just-in-time delivery; job-site delivery and logistics support; 24/7/365 customer service provided by our own employees; and customized internet-based ordering capabilities.

Critical Accounting Policies

Critical accounting policies are those that both are important to the accurate portrayal of a company's financial condition and results, and require subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

In order to prepare financial statements that conform to accounting principles generally accepted in the United States, commonly referred to as GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Certain estimates are particularly sensitive due to their significance to the financial statements and the possibility that future events may be significantly different from our expectations.

We have identified the following accounting policies as those that require us to make the most subjective or complex judgments in order to fairly present our consolidated financial position and results of operations. Actual results in these areas could differ materially from management's estimates under different assumptions and conditions.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts receivable for estimated losses resulting from the inability of our customers to make required payments. We perform periodic credit evaluations of our customers and typically do not require collateral. Consistent with industry practices, we require payment from most customers within 30 days of invoice date. We have an estimation procedure, based on historical data, current economic conditions and recent changes in the aging of these receivables, which we use to record reserves throughout the year. In the last five years, write-offs against our allowance for doubtful accounts have averaged approximately $81,000 per year. A 20% change in our estimate at June 30, 2009 would have resulted in a change in income before income taxes of approximately $56,000.

Reserve for Returns and Allowances

We estimate the gross profit impact of returns and allowances for previously recorded sales. This reserve is calculated on historical and statistical returns and allowances data and adjusted as trends in the variables change. A 20% change in our estimate at June 30, 2009 would have resulted in a change in income before income taxes of approximately $134,000.

Inventories

Inventories are valued at the lower of cost, using the average cost method, or market. We continually monitor our inventory levels at each of our distribution centers. Our reserve for inventory obsolescence is based on the age of the inventory, movements of our inventory over the prior twelve months and the experience of our purchasing and sales departments in estimating demand for the product in the succeeding year. Our inventories are generally not susceptible to technological obsolescence. A 20% change in our estimate at June 30, 2009 would have resulted in a change in income before income taxes of approximately $421,000.
 
8

 
Vendor Rebates

Many of our arrangements with our vendors entitle us to receive a rebate of a specified amount when we achieve any of a number of measures, generally related to the volume of purchases from the vendor. We account for these rebates as a reduction of the prices of the vendor's products and therefore as a reduction of inventory until we sell the product, at which time these rebates reduce cost of sales. Throughout the year, we estimate the amount of rebates earned based on our estimate of purchases to date relative to the purchase levels that mark our progress toward earning the rebates. We continually revise these estimates to reflect actual rebates earned based on actual purchase levels and all estimated rebate amounts are reconciled. A 20% change in our estimate of total rebates earned during the six months ended June 30, 2009 would have resulted in a change in income before income taxes of approximately $642,000.

Goodwill
 
Goodwill represents the excess of the amount we paid to acquire businesses over the estimated fair value of tangible assets and identifiable intangible assets acquired, less liabilities assumed. At June 30, 2009, our net goodwill balance was $3.0 million, representing 2.4% of our total assets.

In 2002, we adopted the provisions of SFAS 142, Goodwill and Other Intangible Assets . Under SFAS 142, we test goodwill for impairment annually, or more frequently if indications of possible impairment exist, by applying a fair value-based test. In October 2008, we performed our annual goodwill impairment tests for goodwill and, in light of current economic conditions, we also performed the impairment test as of March and June 2009. No impairment of goodwill was indicated from these tests. If circumstances change or events occur to indicate that our fair market value has fallen below book value, we will compare the estimated fair value of the goodwill to its carrying value. If the carrying value of goodwill exceeds the estimated fair value of goodwill, we will recognize the difference as an impairment loss in operating income.
 
Results of Operations
 
The following table shows, for the periods indicated, information derived from our consolidated statements of income, expressed as a percent of net sales for the periods presented.
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2009
   
2008
   
2009
   
2008
 
                         
Sales
    100.0 %     100.0 %     100.0 %     100.0 %
Cost of sales
    79.0 %     75.1 %     79.0 %     74.9 %
Gross profit
    21.0 %     24.9 %     21.0 %     25.1 %
                                 
Operating expenses:
                               
Salaries and commissions
    8.4 %     6.3 %     8.4 %     6.5 %
Other operating expenses
    7.3 %     5.1 %     7.2 %     5.3 %
Depreciation and amortization
    0.2 %     0.1 %     0.2 %     0.1 %
Total operating expenses:
    15.9 %     11.5 %     15.8 %     12.0 %
                                 
Operating income
    5.0 %     13.4 %     5.2 %     13.1 %
Interest expense
    0.2 %     0.5 %     0.2 %     0.5 %
                                 
Income before income taxes
    4.9 %     12.9 %     5.0 %     12.6 %
Income taxes
    1.9 %     4.9 %     1.9 %     4.8 %
                                 
Net income
    3.0 %     8.0 %     3.1 %     7.8 %
 
Note:   Due to rounding, percentages may not add up to total operating expenses, operating income, income before taxes or net income.
 
9

 
Comparison of the Three Months Ended June 30, 2009 and 2008

Sales
   
Three Months Ended
June 30,
 
( Dollars in millions )
 
2009
   
2008
   
Change
 
Sales
  $ 61.9     $ 97.4     $ (35.5     (36.5 )%
 
Sales in the second quarter of 2009 decreased 36.5% to $61.9 million from $97.4 million in the second quarter of 2008. The two primary reasons for this decrease were continued reduced demand for our products due to difficult economic conditions and the significant reduction in the price of copper, a major component in some of our products, which fell 43.4% from the average price in the second quarter of 2008 compared to the second quarter of 2009. We estimate that the decrease in copper accounted for approximately one half of the sales decrease. Sales in our core Repair and Replacement sector, also referred to as Maintenance, Repair and Operations (“MRO”), were down as a result of the challenging economy which we believe lowered overall demand and discretionary spending. In addition, sales within our five internal growth initiatives encompassing Emission Controls, Engineering & Construction, Industrials, LifeGuard™ (and other private branded products) and Utility Power Generation also decreased from the prior year period.    

Gross Profit  
   
Three Months Ended
 
   
June 30,
 
( Dollars in millions )
 
2009
   
2008
   
Change
 
Gross profit
 
$
13.0
   
$
24.2
   
$
(11.3
   
(46.5)
%
Gross profit as a percent of sales
   
21.0
%
   
24.9
 %
   
(3.9
)%
       
 
Gross profit decreased 46.5% to $13.0 million in 2009 from $24.2 million 2008. This decrease was primarily attributable to lower sales volume. Our gross profit as a percentage of sales (gross margin) was 21.0% in 2009 which was 390 basis points lower than 2008. The margin compression resulted from competitive pricing pressures due to the prolonged economic slowdown. In addition, while having less of an impact than in the first quarter of 2009, the severe drop in copper prices in the fourth quarter of 2008 continued to have an adverse effect on the profitability of certain stock products with heavy copper content.

Operating Expenses
   
Three Months Ended
 
   
June 30,
 
( Dollars in millions )
 
2009
   
2008
   
Change
 
Operating expenses:
                       
Salaries and commissions
 
$
5.2
   
$
6.1
   
$
(0.9
)    
(14.7
)%
Other operating expenses
   
4.5
     
5.0
     
(0.5
)    
(9.8
)%
Depreciation and amortization
   
0.1
     
0.1
     
0.0
     
9.3
%
Total operating expenses
 
$
9.9
   
$
11.2
   
$
(1.4
   
(12.2
)%
                                 
Operating expenses as a percent of sales
   
15.9
%
   
11.5
%
   
4.4
%
       
 
Note: Due to rounding, numbers may not add up to total operating expenses.

The decrease in salaries and commissions was primarily a result of lower incentive compensation due to the lower sales levels, gross margin, gross profit levels and other financial metrics used in the various incentive programs. Additionally, a lower headcount reduced salaries.

Other operating expenses in 2009 decreased primarily due to our cost control initiatives involving tighter management of discretionary expenses, and lower warehouse supplies due to decreased sales.

Depreciation and amortization expense was consistent at $0.1 million.

Operating expenses as a percent of sales increased from 11.5% in 2008 to 15.9% in 2009 due to a deleveraging of operating expenses from the reduction in sales.

Interest Expense

Interest expense decreased $0.3 million or 76.0% to $0.1 million in 2009 from $0.5 million in 2008. The decrease in interest expense is due to a lower average effective interest rate resulting from market interest rate declines and lower debt levels due to the pay down of debt using cash from operations. In addition, in 2009 there were no treasury stock purchases, which we historically have funded through borrowings. The average effective interest rate decreased to 1.8% for the quarter ended June 30, 2009 from 4.0% for the quarter ended June 30, 2008. Average debt was $19.5 million for the quarter ended June 30, 2009 compared to $42.7 million for the quarter ended June 30, 2008.
 
10

 
Income Taxes

Income taxes decreased $3.6 million or 75.8% to $1.2 million in 2009 from $4.8 million in 2008 as our income before income taxes decreased 76.0%. Our effective income tax rate was 38.7% in 2009 compared to 38.3% in 2008.
 
Net Income

We achieved net income of $1.8 million in 2009 compared to $7.7 million in 2008, a decrease of 76.2%.

Comparison of the Six Months Ended June 30, 2009 and 2008

Sales
   
Six Months Ended
 
   
June 30,
 
( Dollars in millions )
 
2009
   
2008
   
Change
 
Sales
 
$
127.7
   
$
186.8
   
$
(59.1
   
(31.6
)%

Sales for the first six months of 2009 decreased 31.6% to $127.7 million from $186.8 million in the first six months of 2008. The two primary reasons for this decrease were continued reduced demand for our products due to difficult economic conditions and the significant reduction in the price of copper, a major component in some of our products, which fell 49.2% from the average price in the first six months of 2008 compared to the first six months of 2009. Sales in our core Repair and Replacement, or MRO, sector were down as a result of the challenging economy which we believe lowered overall demand and discretionary spending. Sales within our five internal growth initiatives encompassing Emission Controls, Engineering & Construction, Industrials, LifeGuard™ (and other private branded products) and Utility Power Generation, after adjusting for copper deflation, remained relatively flat to the prior year . Sales within our growth initiatives remained more resilient to the overall market and economy as these projects were already in progress and had been previously funded.  

Gross Profit  
   
Six Months Ended
 
   
June 30,
 
(Dollars in millions )
 
2009
   
2008
   
Change
 
Gross profit
  $ 26.8     $ 46.9     $ (20.1 )     (42.9 )%
Gross profit as a percent of sales
    21.0 %     25.1 %     (4.1 )%        

Gross profit decreased 42.9% to $26.8 million in 2009 from $46.9 million 2008. This decrease was primarily attributable to lower sales volume. Our gross profit as a percentage of sales (gross margin) was 21.0% in 2009 which was 410 basis points lower than 2008. The margin compression resulted from competitive pricing pressures due to the prolonged economic slowdown. In addition, the severe drop in copper prices in the fourth quarter of 2008 adversely impacted the profitability of certain stock products with heavy copper content.

Operating Expenses
   
Six Months Ended
 
   
June 30,
 
( Dollars in millions )
 
2009
   
2008
   
Change
 
Operating expenses:
                       
Salaries and commissions
 
$
10.7
   
$
12.2
   
$
(1.4
)    
(11.8
)%
Other operating expenses
   
9.1
     
10.0
     
(0.9
)    
(8.5
)%
Depreciation and amortization
   
0.3
     
0.3
     
0.0
     
10.5
%
Total operating expenses
 
$
20.2
   
$
22.4
   
$
(2.3
)    
(10.1
)%
                                 
Operating expenses as a percent of sales
   
15.8
%
   
12.0
%
   
3.8
%
       

Note: Due to rounding, numbers may not add up to total operating expenses.

The decrease in salaries and commissions was primarily a result of lower incentive compensation due to the lower sales levels, gross margin, gross profit levels and other financial metrics used in the various incentive programs. Additionally, a lower headcount in the second quarter of 2009 reduced salaries.

Other operating expenses in 2009 decreased primarily due to our cost control initiatives involving tighter management of discretionary expenses, and lower warehouse supplies due to decreased sales.

Depreciation and amortization expense was consistent at $0.3 million.

Operating expenses as a percent of sales increased from 12.0% in 2008 to 15.8% in 2009 due to a deleveraging of operating expenses from the reduction in sales.
 
11


Interest Expense

Interest expense decreased $0.7 million or 73.5% to $0.3 million in 2009 from $1.0 million in 2008. The decrease in interest expense is due to a lower average effective interest rate resulting from market interest rate declines and lower debt levels due to the pay down of debt using cash from operations. In addition, there were no treasury stock purchases in 2009, which we historically have funded through borrowings. The average effective interest rate decreased to 1.8% for the period ended June 30, 2009 from 4.5% for the period ended June 30, 2008. Average debt was $24.0 million for the period ended June 30, 2009 versus $42.0 million for the period ended June 30, 2008.

Income Taxes

Income taxes decreased $6.6 million or 72.7% to $2.5 million in 2009 from $9.0 million in 2008 as our income before income taxes decreased 72.9%. Our effective income tax rate was 38.6% in 2009 compared to 38.4% in 2008.

Net Income

We achieved net income of $3.9 million in 2009 compared to $14.5 million in 2008, a decrease of 73.0%.

Impact of Inflation and Commodity Prices

Our results of operations are affected by changes in the inflation rate and commodity prices. Moreover, because copper and petrochemical products are components of the wire and cable we sell, fluctuations in the costs of these and other commodities have historically affected our operating results. To the extent we are unable to pass on to our customers cost increases due to inflation or rising commodity prices, it could adversely affect our operating results. To the extent commodity prices decline, the net realizable value of our existing inventory could be reduced, and our gross profits could be adversely affected. If we turn our inventory approximately four times a year, the impact of severe fluctuations in copper prices would primarily affect the results of the succeeding calendar quarter. Average copper prices for the quarter ended June 30, 2009, December 31, 2008 and June 30, 2008 were $2.15, $1.75 and $3.80, respectively.

Liquidity and Capital Resources

Our primary capital needs are for working capital obligations, debt service, capital expenditures and other general corporate purposes. Our primary sources of working capital are cash from operations supplemented by bank borrowings. During 2009, we have funded our capital expenditures through cash from operations. Our working capital amounted to $70.2 million at June 30, 2009 compared to $98.1 million at December 31, 2008.

Liquidity is defined as the ability to generate adequate amounts of cash to meet the current need for cash. We assess our liquidity in terms of our ability to generate cash to fund our operating activities. Significant factors which could affect liquidity include the following:
 
• 
the adequacy of available bank lines of credit;
• 
the ability to attract long-term capital with satisfactory terms;
• 
additional stock repurchases;
• 
cash flows generated from operating activities;
• 
payment of dividends;
• 
capital expenditures; and
• 
acquisitions.
 
Comparison of the Six Months Ended June 30, 2009 and 2008

Our net cash provided by operating activities for the six months ended June 30, 2009 was $15.6 million compared to $2.0 million in the prior year period. Our net income decreased by $10.6 million to $3.9 million in 2009 compared to $14.5 million in 2008. Accounts receivable decreased $10.3 million in 2009 due to lower sales volume. Accounts payable increased $4.2 million as a result of increased inventory purchases at the end of June. The book overdraft, which is funded by our revolving credit facility as soon as the related vendor checks clear our disbursement account, decreased $2.9 million. Inventory decreased slightly even though the Company purchased additional inventory during the second quarter to take advantage of special pricing and capture supplementary vendor rebates.

Net cash used in investing activities remained consistent at $0.2 million for 2009 and 2008 as requirements for additional capital resources remained low.

Net cash used in financing activities was $15.4 million in 2009 compared to $0.6 million in 2008. Net payments on the revolver of $12.5 million and dividend payments of $3.0 million, were the main components of cash used in financing activities.
 
12

 
Indebtedness

Our principal source of liquidity at June 30, 2009 was working capital of $70.2 million compared to $98.1 million at December 31, 2008. We also had available borrowing capacity of approximately $57.7 million at June 30, 2009 and $45.2 million at December 31, 2008 under our $75 million loan and security agreement.

We believe that we will have adequate availability of capital to fund our present operations, meet our commitments on our existing debt, continue the stock repurchase program, continue to fund our dividend payments and fund anticipated growth over the next twelve months, including expansion in existing and targeted market areas. We continually seek potential acquisitions and from time to time hold discussions with acquisition candidates. If suitable acquisition opportunities or working capital needs arise that would require additional financing, we believe that our financial position and earnings history provide a solid base for obtaining additional financing resources at competitive rates and terms. Additionally, based on market conditions, we may issue additional shares of common or preferred stock to raise funds.

Loan and Security Agreement

We have a loan and security agreement with a commercial bank that provides for a revolving loan through May 21, 2010. On September 28, 2007, we increased the facility to $75.0 million to fund the stock repurchase program and fund business growth. The agreement allows for the payment of dividends, not to exceed $10 million in the aggregate in any twelve month period; and, effective January 29, 2008, the repurchase of stock, prior to December 31, 2009, in the aggregate amount of not more than $75 million. The lender has a security interest in all of our assets, including accounts receivable and inventory. The loan bears interest at the lender’s base interest rate. Portions of the outstanding loan may be converted to LIBOR loans in minimum amounts of $1.0 million and integral multiples of $0.1 million. Upon such conversion, interest is payable at LIBOR plus a margin ranging from 1.0% to 1.5%, depending on the Company’s debt-to-EBITDA ratio. We have entered into a series of one-month LIBOR loans, which, upon maturity, are either rolled back into the revolving loan or renewed under a new LIBOR contract.
 
Contractual Obligations

The following table describes our loan commitment at June 30, 2009:
 
   
Total
   
Less than
year
   
1-3 years
   
3-5 years
   
More
than
5 years
   
   
(In thousands)
Term loans and loans payable
  $ 17,343     $ 17,343     $     $     $  
 
There were no new material changes in operating lease obligations or non-cancellable purchase obligations since December 31, 2008.

Cautionary Statement for Purposes of the “Safe Harbor”

Forward-looking statements in this report are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate to, but are not limited to, information or assumptions about our sales and marketing strategy, sales (including pricing), income, operating income or gross margin improvements, working capital, cash flow, interest rates, impact of changes in accounting standards, future economic performance, management’s plans, goals and objectives for future operations, performance and growth or the assumptions relating to any of the forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “aim”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “project”, “should”, “will be”, “will continue”, “will likely result”, “would” and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance. The Company cautions that forward-looking statements are not guarantees because there are inherent difficulties in predicting future results. Actual results could differ materially from those expressed or implied in the forward-looking statements. The factors listed under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, as well as any cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes to our market risk as set forth in Items 7A and 7 of our Annual Report on Form 10-K for the year ended December 31, 2008.

Item 4. Controls and Procedures

As of June 30, 2009, an evaluation was performed by the Company’s management, under the supervision and with the participation of the Company’s chief executive officer and chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the chief executive officer and the chief financial officer concluded that the Company’s disclosure controls and procedures were effective. There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
13

 
Part II. Other Information
 
Item 1.  Legal Proceedings. – Not applicable and has been omitted.

Item 1A.  Risk Factors

There have been no material changes in our risk factors from those disclosed in the Form 10-K for the year ended December 31, 2008.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about our purchases of common stock for the three months ended June 30, 2009 pursuant to the Company’s stock repurchase program.
Period
 
Total number of
shares
purchased
   
Average
price paid
per share
   
Total number of
shares purchased
as part of publicly
announced plans or
programs  (1)
   
Maximum
dollar value that
may yet be used
for purchases
under the plan
 
April 1 – 30, 2009
        $           $ 19,385,303  
May 1 – 31, 2009
        $           $ 19,385,303  
June 1 – 30, 2009
        $           $ 19,385,303  
Total
        $                
 
(1)
The board authorized a stock buyback program of $30 million in August 2007. This amount was increased to $50 million in September 2007 and to $75 million effective January 2008. There were no purchases made under the Company’s stock repurchase program in the second quarter of 2009.

Item 3.  Defaults Upon Senior Securities. - Not applicable and has been omitted.

Item 4.  Submission of Matters to a Vote of Security Holders

The Company's Annual Meeting of Stockholders was held on May 8, 2009 for the purposes of (i) electing 7 directors to hold office until the next annual meeting of stockholders and (ii) ratifying the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2009. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934, and there was no solicitation in opposition to management's nominees.

All of management's nominees for director as named in the proxy statement were elected by the votes set forth in the table below.  Each nominee received no fewer than 16,126,344 votes, which amounted to 97.3% of the shares voted. There were no broker non-votes with respect to any nominees.

NOMINEES
 
FOR
 
WITHHELD
         
Michael T. Campbell
 
16,463,320
 
103,689
I. Stewart Farwell
 
16,470,120
 
96,889
Peter M. Gotsch
 
16,126,344
 
440,665
Wilson B. Sexton
 
16,467,817
 
99,192
William H. Sheffield
 
16,458,993
 
108,016
Charles A. Sorrentino
 
16,463,020
 
103,989
Scott L. Thompson
 
16,463,020
 
103,989
 
14

 
Stockholders approved the ratification of Ernst & Young LLP as the Company’s independent auditors for the year ending December 31, 2009. 16,165,404 votes were cast “FOR”, 380,844 votes were cast “AGAINST”, and 20,759 shares abstained from voting on this matter.  

Item 5.  Other Information. - Not applicable and has been omitted.

Item 6.  Exhibits

(a) Exhibits required by Item 601 of Regulation S-K.
 
Exhibit Number
 
Document Description
     
31.1
 
Certification by Charles A. Sorrentino pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2
 
Certification by Nicol G. Graham pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1
 
Certification by Charles A. Sorrentino and Nicol G. Graham pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
15


Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  August 10, 2009
HOUSTON WIRE & CABLE COMPANY
   
 
BY: /s/ Nicol G. Graham
 
Nicol G. Graham, Chief Financial Officer
 
16

 
EXHIBIT INDEX

Exhibit Number
 
Document Description
     
31.1
 
Certification by Charles A. Sorrentino pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2
 
Certification by Nicol G. Graham pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1
 
Certification by Charles A. Sorrentino and Nicol G. Graham pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
17

 
Exhibit 31.1

Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Charles A. Sorrentino, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 of Houston Wire & Cable Company;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
 
(b)
Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   August 10, 2009
/s/ Charles A. Sorrentino
 
Charles A. Sorrentino
 
Chief Executive Officer
 
 
 

 
 
Exhibit 31.2

Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Nicol G. Graham, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 of Houston Wire & Cable Company;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
 
(b)
Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   August 10, 2009
/s/ Nicol G. Graham
 
Nicol G. Graham
 
Chief Financial Officer
 
 
 

 
 
Exhibit 32.1

Certifications of CEO and CFO Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Houston Wire & Cable Company (the “Corporation”) for the fiscal quarter ended June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Charles A. Sorrentino, as Chief Executive Officer of the Corporation, and Nicol G. Graham, as Chief Financial Officer of the Corporation, each hereby certifies, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.
 
Date:   August 10, 2009
/s/ Charles A. Sorrentino
 
Charles A. Sorrentino
 
Chief Executive Officer
   
Date:   August 10, 2009
/s/ Nicol G. Graham
 
Nicol G. Graham
 
Chief Financial Officer

This certification accompanies the Report pursuant to section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by Houston Wire & Cable Company for purposes of section 18 of the Securities Exchange Act of 1934, as amended.