Houston Wire & Cable Company
Houston Wire & Cable CO (Form: 8-K, Received: 03/16/2017 07:31:10)
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): March 16, 2017  

Houston Wire & Cable Company
(Exact Name of Registrant as Specified in Charter)

Delaware 000-52046 36-4151663
(State or Other Jurisdiction of Incorporation) (Commission File Number) (I.R.S. Employer Identification Number)

 

10201 North Loop East, Houston, Texas 77029
(Address of Principal Executive Offices) (Zip Code)

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

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

  [   ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  [   ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  [   ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  [   ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

Item 8.01. Other Events.

On March 16, 2017, the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

Exhibit 99.1. Press release dated March 16, 2017


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 hereunto duly authorized.

  Houston Wire & Cable Company
     
   
Date: March 16, 2017 By:  /s/ Nicol G. Graham        
    Nicol G. Graham
    Chief Financial Officer
   


EXHIBIT INDEX

 

Exhibit Number   Description
     
EXHIBIT 99.1   Press Release dated March 16, 2017

EXHIBIT 99.1

Houston Wire & Cable Company Reports Results for the Quarter Ended December 31, 2016

HOUSTON, March 16, 2017 (GLOBE NEWSWIRE) -- Houston Wire & Cable Company (NASDAQ:HWCC) (the “Company”) announced operating results for the fourth quarter and year ended December 31, 2016.

Selected quarterly results were:

Selected annual results were:             

Fourth Quarter Summary
Jim Pokluda, President and Chief Executive Officer commented, “During the quarter, industrial market conditions including the oil and gas industry remained inconsistent.  Daily sales results were quite choppy as we experienced several days of strong activity, followed by others that were disappointing.  Although such inconsistent results are frustrating, in our experience this type of deviation is usually an early sign of market recovery which is encouraging.  Sales decreased 1.5% from the fourth quarter of 2015, but increased 1% over 2015, when adjusted for the impact of metals and increased 6.2% sequentially. Excluding the $7.0 million of sales by Vertex, we estimate that Maintenance, Repair and Operations (MRO) sales increased 7% or approximately 9% on a metals adjusted basis, while project sales decreased 51% or approximately 49% on a metals adjusted basis."

Gross margin at 21.8% increased 30 basis points from the fourth quarter of 2015, primarily due to the incrementally higher margins generated by Vertex following the  acquisition. Sequentially, excluding Vertex, gross margin increased approximately 150 basis points. We experienced higher freight and shrinkage costs, offset by higher vendor rebates, due to Q4 activity and rising copper prices. Operating expenses at $16.7 million (which included approximately $0.7 million of acquisition expenses) were up $2.3 million or 16.2% from the prior year period, primarily due to the inclusion of Vertex’s operating expenses from the acquisition date. Excluding Vertex’s operating expenses and acquisition expenses, operating expenses were $13.8 million, a decrease of 3.7% from 2015.

Interest expense of $0.4 million was up 115% from $0.2 million in the prior year period, primarily due to the additional debt taken on to fund the Vertex acquisition.  Average debt levels for the quarter increased 57.8% from $39.8 million in 2015 to $62.8 in 2016, while the effective interest rate increased from 1.5% in 2015 to 2.4% in 2016.

The results of operations produced a net loss of $1.8 million, as compared to net loss of $0.2 million in the prior year period.

Mr. Pokluda further commented, “Despite our disappointment in the fourth quarter results, we were happy to see what we believe were positive activity trends that arose throughout the quarter, and are encouraged that those trends have continued into January, February and early March of 2017.  Sales, order counts and overall gross margins have shown a more consistent recovery from the levels experienced in the fourth quarter of 2016, which we believe marked the bottom for our end markets that have underperformed primarily due to the reduction of the price in oil and gas.  Our success in the expansion of our commercial products line continued and was a welcome contributor to sales and operating margins, and the acquisition of Vertex in early October was the most recent example of our efforts to broaden our product offering to the industrial market. I was also pleased that we again achieved success in reducing our working capital investment and generating operating cash flow.”

Twelve month summary
Sales for the twelve month period were down 15.1% versus the prior year period and down approximately 8% on a metals adjusted basis.  Excluding the $7.0 million of sales by Vertex, we estimate that MRO sales increased 1% and project sales decreased 34%, in each case on a metals adjusted basis. Mr. Pokluda commented, “This has been an extremely difficult year as the level of industrial demand continued to fall short of more normal historical levels. Our model loses leverage at these activity levels which severely impacts operating margin. The results were also affected by the impairment charge for the HWC division, which was directly impacted by the low demand levels from the industrial and oil and gas sectors. I am pleased, however, with the progress we have made towards our ability to re-align our operations with current demand levels and with the operating cash flow of $17.2 million, as we continued to drive more efficiencies in our inventory profiles and other aspects of our working capital investment.”

Gross margin at 20.2% was down 120 basis points from the 2015 period.  “The higher margins generated by Vertex helped the overall margin, but legacy market conditions remained extremely competitive and pricing and margin pressure continued,” said Mr. Pokluda.

Operating expenses at $59.5 million (including Vertex) decreased 1% from the prior year amount of $59.9. Excluding the impairment charges from both periods, the impact of Vertex’s operating expenses and the acquisition expenses, operating expenses decreased by 4.2% or $2.4 million, principally due to lower facility costs, reduced commissions resulting from lower sales and gross margin, and lower employee related expenses.

Interest expense of $0.9 million decreased 6.2% from 2015, while interest rates increased from 1.9% in 2015 to 2.0% in 2016.

The full year effective tax rate of 18.8% included the 7.5% effect of the non-deductible portion of the impairment charge and the 9.9% impact of forfeited equity awards.

The results of operations generated a net loss of $6.0 million, compared to net income of $2.0 million in 2015.

Conference Call
The Company will host a conference call to discuss fourth quarter results today, Thursday, March 16, 2017, 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 March 23, 2017.

Replay, Toll-Free #: 855-859-2056
Replay, Toll #: 404-537-3406
Conference ID #   77191821

About the Company 
With over 40 years’ experience in the industry, Houston Wire & Cable Company, an industrial distributor, is a large provider of industrial products in the U.S market. Headquartered in Houston, Texas, the Company has sales and distribution facilities strategically located throughout the United States.

Standard stock items available for immediate delivery include continuous and interlocked armor cable; instrumentation cable; medium voltage cable; high temperature wire; portable cord; power cable; primary and secondary aluminum distribution cable; 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; corrosion resistant fasteners, hose clamps, and rivets.

Comprehensive value-added services include same-day shipping, knowledgeable sales staff, inventory management programs, just-in-time delivery, logistics support, customized online 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.

Non-GAAP Financial Disclosures and Reconciliations
While the Company reports financial results in accordance with U.S. GAAP, this press release includes non-GAAP measures. We use the non-GAAP measures to evaluate and manage our operations and provide the information to assist investors in performing financial analysis that is consistent with financial models developed by research analysts. Investors should consider non-GAAP measures in addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.


HOUSTON WIRE & CABLE COMPANY
Reconciliation of Non-GAAP Measures
(Unaudited)
(In thousands, except per share data)
 
Adjusted net income (loss) and adjusted diluted EPS   Three Months Ended
December 31, 2016
 
    Net Income (Loss)   Diluted EPS  
           
Net income (loss), as reported under GAAP   $ (1,826 )   $ (0.11 )  
Acquisition expenses     748       0.04    
Tax effect of  acquisition expenses     (106 )     (0.01 )  
Adjusted net income (loss)   $ (1,184 )   $ (0.08 )  
               

 

Adjusted net income (loss) and adjusted diluted EPS   Year Ended
December 31, 2016
 
    Net Income (Loss)   Diluted EPS  
           
Net income (loss), as reported under GAAP    $ (6,006 )   $ (0.37 )  
Acquisition expenses     861       0.05    
Impairment charge     2,384       0.15    
Tax effect of  acquisition expenses and impairment charge     (547 )     (0.04 )  
Adjusted net income (loss)   $  (3,346 )   $ (0.21 )  


Houston Wire & Cable Company
Consolidated Balance Sheets
(In thousands, except share data)
 
    December 31,  
    2016     2015  
    (unaudited)    
Assets                
Current assets:                
Accounts receivable, net   $ 44,677     $ 46,250  
Inventories, net     79,783       75,777  
Income taxes     1,948       932  
Prepaids     456       648  
Total current assets     126,864       123,607  
                 
Property and equipment, net     11,261       10,899  
Intangible assets, net     13,378       5,984  
Goodwill     22,770       14,866  
Deferred income taxes     892       3,338  
Other assets     591       419  
Total assets   $ 175,756     $ 159,113  
                 
Liabilities and stockholders’ equity                
Current liabilities:                
Book overdraft   $ 3,181     $ 3,701  
Trade accounts payable     8,406       6,380  
Accrued and other current liabilities     13,134       9,568  
Total current liabilities     24,721       19,649  
                 
Debt     60,388       39,188  
Other long-term obligations     516       275  
Total liabilities     85,739       59,112  
                 
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: 16,457,525 and 16,712,626 shares outstanding at December 31, 2016 and 2015, respectively     21       21  
Additional paid-in capital     53,824       54,621  
Retained earnings     97,550       106,048  
Treasury stock     (61,264 )     (60,689 )
Total stockholders’ equity     90,131       100,001  
                 
Total liabilities and stockholders’ equity   $ 175,756     $ 159,113  


Houston Wire & Cable Company
 Consolidated Statements of Operations
(In thousands except, share and per share data)
             
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2016     2015     2016     2015  
    (unaudited)   (unaudited)    
                         
Sales   $ 69,257     $ 70,314     $ 261,644     $ 308,133  
Cost of sales     54,181       55,194       208,694       242,223  
Gross profit     15,076       15,120       52,950       65,910  
                                 
Operating expenses:                                
Salaries and commissions     8,474       6,820       29,369       28,537  
Other operating expenses     7,412       6,394       24,714       25,023  
Depreciation and amortization     820       740       3,018       2,915  
Impairment charge           423       2,384       3,417  
Total operating expenses     16,706       14,377       59,485       59,892  
                                 
Operating income (loss)     (1,630     743       (6,535     6,018  
Interest expense     392       182       845       901  
Income before income taxes (loss)     (2,022     561       (7,380     5,117  
Income taxes     (196     760       (1,374     3,073  
Net income (loss)   $ (1,826   $ (199   $ (6,006   $ 2,044  
                                 
Earnings per share (loss):                                
Basic   $ (0.11   $ (0.01   $ (0.37   $ 0.12  
Diluted   $ (0.11   $ (0.01   $ (0.37   $ 0.12  
Weighted average common shares outstanding:                                
Basic     16,216,978       16,641,129       16,345,679       17,012,560  
Diluted     16,216,978       16,641,129       16,345,679       17,067,593  
                                 
Dividend declared per share   $     $ 0.06     $  0.15     $  0.42  


Houston Wire & Cable Company
Consolidated Statements of Cash Flows
(In thousands)
    Year Ended December 31,  
    2016     2015    
    (unaudited)    
Operating activities                  
Net income (loss)   $ (6,006   $ 2,044    
Adjustments to reconcile net income to net cash provided by
operating activities:
                 
Impairment charge     2,384       3,417    
Depreciation and amortization     3,018       2,915    
Amortization of unearned stock compensation     856       886    
Provision for doubtful accounts     285       97    
Provision for inventory obsolescence     93       397    
Deferred income taxes     6       (485 )  
Other non-cash items     (116 )     (59 )  
Changes in operating assets and liabilities:                  
Accounts receivable     4,019       15,352    
Inventories     10,483       12,784    
Book overdraft     (517 )     588    
Trade accounts payable     896       (1,613  
Accrued and other current liabilities     2,473       (3,557  
Income taxes     (1,016     (713 )  
Other operating activities     385       (224  
Net cash provided by operating activities     17,243       31,829    
                   
Investing activities                  
Expenditures for property and equipment     (1,319 )     (3,123 )  
Proceeds from disposals of property and equipment     5       8    
Cash paid for acquisition     (32,370 )        
Net cash used in investing activities     (33,684 )     (3,115 )  
                   
Financing activities                  
Borrowings on revolver     302,898       310,366    
Payments on revolver     (281,698 )     (325,025 )  
Proceeds from exercise of stock options           11    
Payment of dividends     (2,495 )     (7,172 )  
Excess tax benefit for options              
Purchase of treasury stock     (2,264 )     (6,894 )  
Net cash used in financing activities     16,441       (28,714 )  
                   
Net change in cash              
Cash at beginning of year              
                   
Cash at end of year   $     $    
Supplemental disclosures                  
Cash paid during the year for interest   $ 728     $ 900    
Cash paid during the year for income taxes   $ 233     $ 4,278    

 

CONTACT:

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