Houston Wire & Cable Company
Houston Wire & Cable CO (Form: 8-K, Received: 11/09/2017 07:31:22)
 

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): November 9, 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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [    ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [    ]

 
 

Item 2.02. Results of Operations and Financial Condition.

On November 9 , 2017, Houston Wire & Cable Company announced financial results for the third quarter ended September 30, 2017 .   A copy of Houston Wire & Cable Company ’s press release is attached as Exhibit 99.1 and incorporated by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits
            99.1        Press Release of Houston Wire & Cable Company dated November 9, 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: November 9, 2017 By:  /s/ Nicol G. Graham        
    Nicol G. Graham
    Vice President & CFO
   


Exhibit Index

 

Exhibit No.   Description
     
99.1   Press Release of Houston Wire & Cable Company dated November 9, 2017  

EXHIBIT 99.1

Houston Wire & Cable Company Reports Results for the Third Quarter of 2017

HOUSTON, Nov. 09, 2017 (GLOBE NEWSWIRE) -- Houston Wire & Cable Company (NASDAQ:HWCC) (the “Company”) announced operating results for the third quarter ended September 30, 2017.

Selected quarterly results were:

Third Quarter Summary

Jim Pokluda, President and Chief Executive Officer commented, “Although our third quarter sales activity started with an unspectacular July, improvement throughout the quarter resulted in 24.5% revenue growth.  An increase in industrial demand coupled with disciplined execution of our strategic business plan were the major drivers of the sales improvement. We estimate that revenues for the quarter were negatively impacted by the three major storms by less than 1%.  I am pleased that sales of $81.2 million reached their highest levels since the October 2016 acquisition of Vertex, and excluding Vertex, the highest level since Q 3 2015’s $78.3 million. Vertex contributed $7.8 million in sales, while sales of wire and cable products increased $8.2 million or 12.6% over 2016. We estimate that higher metals prices in 2017 represented approximately 5% of the increase in wire and cable sales. We estimate wire and cable sales for our project business, which targets end markets for Utility Power Generation, Environmental Compliance, Engineering & Construction, Industrials,  and Mechanical Wire Rope, decreased 10%, while Maintenance, Repair, and Operations (MRO) sales increased 15%, as compared to 2016.

Gross margin at 22.9% increased 440 basis points from the third quarter of 2016 and was up 130 basis points sequentially driven from a combination of strong pricing discipline, metals inflation and Vertex.  Operating expenses at $16.5 million increased primarily due to the operating expenses of Vertex.

Interest expense of $0.5 million was up $0.4 million, from $0.1 million in the prior year period, primarily due to the incremental debt from the Vertex acquisition. Average debt levels were $71.2 million in 2017 compared to $28.5 million in 2016, while the effective interest rate increased to 3.0% in 2017 from 1.7% in 2016.
  
The income tax expense of $3.2 million was higher than the $0.5 million benefit in 2016 primarily due to a change in the estimated annual earnings for 2017, the cumulative effect of which is reflected in the current quarter, and a valuation allowance on deferred tax assets not expected to be realized.

The results of operations produced a net loss of $1.7 million versus a net loss of $1.4 million in 2016. As adjusted to reflect income taxes at the statutory rate, a non-GAAP measure, net income is $0.9 million as compared to a net loss of $1.2 million in the prior year period. (See attached reconciliation of Non-GAAP measures).

Nine month summary
Mr. Pokluda further commented, “We are pleased that the final accounting for the purchase of Vertex has been completed. Accordingly, our results for the first nine month period include the inventory purchase step-up which negatively impacted our gross profit by $0.2 million and non-recurring integration expense which negatively impacted our operating expenses by an estimated $0.5 million”

Sales for the nine month period were $235.6 million, up 22.4% or $43.2 million, including $23.6 million from Vertex and $19.5 million or 10.2% from wire and cable products. We estimate that higher metals prices in 2017 represented approximately 3% of the increase in wire and cable sales. We estimate wire and cable sales for our project business, which targets end markets for Utility Power Generation, Environmental Compliance, Engineering & Construction, Industrials, and Mechanical Wire Rope, decreased 9%, while MRO sales increased 14%, as compared to 2016.

Gross margin at 22.0%, which included the impact of Vertex’s higher margins, was up 230 basis points from the 19.7% level in the 2016 period.  

Operating expenses at $50.2 million increased $7.4 million from the prior year of which $4.9 million was related to Vertex and includes non-recurring integration expenses estimated at $0.5 million

Interest expense of $1.5 million increased from $0.5 million in the prior year period, mainly due to the additional debt incurred for the Vertex acquisition. In addition, average interest rates increased to 2.8% in 2017 from 1.7% in the prior year period.

The income tax expense of $2.4 million fluctuated from the $1.2 million income tax benefit in 2016 primarily due to a change in the estimated annual earnings for 2017 and a $2.3 million valuation allowance on deferred tax assets not expected to be realized.

The results of operations generated a net loss of $2.2 million primarily due to the valuation allowance, compared to a net loss of $4.2 million in 2016. As adjusted to reflect income taxes at the statutory rate (and in 2016, the impact of an impairment charge), a non-GAAP measure, net income is $0.1 million, as compared to net loss of $1.8 million in the prior year period. (See attached reconciliation of Non-GAAP measures),  

Conference Call
The Company will host a conference call to discuss third quarter results today, Thursday, November 9, 2017, at 10:00 a.m., C.S.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.

Live call dial-in numbers are as follow:
Toll-Free: (800) 936-7954
International: (720) 545-0048
Conference ID # 4297639

Approximately two hours after the completion of the live call, a telephone replay will be available until November 16, 2017.

Replay, Toll-Free #: 855-859-2056
Replay, Toll #: 404-537-3406
Conference ID #   4297639

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.

CONTACT:

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


HOUSTON WIRE & CABLE COMPANY
Reconciliation of Non-GAAP Measures
(Unaudited)
 (In thousands, except per share data)


Non-GAAP Financial Disclosures and Reconciliations

While the Company reports financial results in accordance with U.S. GAAP, this press release includes information on adjusted net income and adjusted earnings per share, 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.

The following table shows the reconciliation between the net (loss) as reported under GAAP and the adjusted net income (loss) for the period. The Company believes presenting this information as adjusted for the impact of the non-cash valuation allowance involving deferred taxes and in the prior year period the impact of the non-cash impairment charge enhances some investors’ understanding of the Company’s performance.

           

           
    Three Months Ended
September 30, 2017
  Three Months Ended
September 30, 2016
 
    Net Income   Diluted EPS   Net Income   Diluted EPS    
                         
Net (loss), as reported under GAAP    $ (1,711 ) $ (0.11 ) ) $ (1,439 ) $ (0.09 )  
Income tax as reported, which includes the valuation allowance     3,215     0.20       (494 )   (0.03 )  
Adjusted income (loss) before income taxes     1,504     0.09       (1,933 )   (0.12 )  
Pro-forma tax expense (benefit) at the statutory rate     587     0.03       (754 )   (0.05 )  
Adjusted net income (loss) – non-GAAP   $ 917   $ 0.06     $ (1,179 ) $ (0.07 )  
                               


           
    Nine Months Ended
September 30, 2017
  Nine Months Ended
September 30, 2016
 
    Net Income   Diluted EPS   Net Income   Diluted EPS  
                       
Net (loss), as reported under GAAP    $ (2,218 ) $ (0.14 ) $ (4,180 ) $ (0.26 )  
Impairment charge             2,384     0.15    
Income tax as reported, which includes the valuation allowance     2,361     0.15     (1,178 )   (0.07 )  
Adjusted income (loss) before income taxes and impairment charge
  143     0.01     (2,974 )   (0.18 )  
Pro-forma tax expense (benefit) at the statutory rate     56     0.00     (1,160 )   (0.07 )  
Adjusted net income (loss) – non-GAAP   $ 87   $ 0.01   $ (1,814 ) $ (0.11 )  
                             


HOUSTON WIRE & CABLE COMPANY
 Consolidated Balance Sheets
(In thousands, except share data)

             
    September 30,     December 31,  
    2017     2016  
      (unaudited)          
Assets                
Current assets:                
Accounts receivable, net   $ 57,381     $ 44,677  
Inventories, net     82,211       79,783  
Income taxes receivable     2,690       1,948  
Prepaids     1,209       570  
Total current assets     143,491       126,978  
                 
Property and equipment, net     11,243       11,261  
Intangible assets, net     12,209       13,378  
Goodwill     22,354       22,770  
Deferred income taxes           892  
Other assets     455       591  
Total assets   $ 189,752     $ 175,870  
                 
Liabilities and stockholders’ equity                
Current liabilities:                
Book overdraft   $ 1,888     $ 3,181  
Trade accounts payable     6,621       8,406  
Accrued and other current liabilities     17,132       13,248  
Total current liabilities     25,641       24,835  
                 
Debt     72,530       60,388  
Deferred income taxes     2,263        
Other long term obligations     702       516  
Total liabilities     101,136       85,739  
                 
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: 16,506,235 and
16,457,525 outstanding at September 30, 2017 and December 31, 2016, respectively
    21       21  
Additional paid-in-capital     53,772       53,824  
Retained earnings     95,340       97,550  
Treasury stock     (60,517 )     (61,264 )
Total stockholders’ equity     88,616       90,131  
Total liabilities and stockholders’ equity   $ 189,752     $ 175,870  
                 


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

             
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2017     2016     2017     2016  
                         
Sales   $ 81,196     $ 65,222     $ 235,551     $ 192,387  
Cost of sales     62,626       53,177       183,732       154,513  
Gross profit     18,570       12,045       51,819       37,874  
                                 
Operating expenses:                                
Salaries and commissions     8,975       7,148       26,647       20,895  
Other operating expenses     6,999       5,969       21,303       17,302  
Depreciation and amortization     549       732       2,234       2,198  
Impairment charge                       2,384  
Total operating expenses     16,523       13,849       50,184       42,779  
                                 
Operating income (loss)     2,047       (1,804 )     1,635       (4,905 )
Interest expense     543       129       1,492       453  
Income (loss) before income taxes     1,504       (1,933 )     143       (5,358 )
Income tax expense (benefit)     3,215       (494 )     2,361       (1,178 )
Net (loss)   $ (1,711 )   $ (1,439 )   $ (2,218 )   $ (4,180 )
                                 
Earnings (loss) per share:                                
Basic   $ (0.11 )   $ (0.09 )   $ (0.14 )   $ (0.26 )
Diluted   $ (0.11 )   $ (0.09 )   $ (0.14 )   $ (0.26 )
Weighted average common shares outstanding:                                
Basic     16,274,663       16,302,870       16,260,862       16,388,892  
Diluted     16,274,663       16,302,870       16,260,862       16,388,892  
                                 
Dividend declared per share   $     $ 0.03     $     $ 0.15  
                                 


 

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

       
    Nine Months
Ended September 30,
 
    2017     2016  
             
Operating activities                
Net (loss)   $ (2,218 )   $ (4,180 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
Impairment charge           2,384  
Depreciation and amortization     2,234       2,198  
Amortization of unearned stock compensation     770       626  
Provision for inventory obsolescence     78       355  
Deferred income taxes     3,163       (752 )
Other non-cash items     195       (11 )
Changes in operating assets and liabilities:                
Accounts receivable     (12,619 )     3,360  
Inventories     (2,082     11,859  
Prepaids     (639 )     (447 )
Income taxes receivable     (742 )     (645 )
Book overdraft     (1,293 )     (2,599 )
Trade accounts payable     (1,790 )     2,108  
Accrued and other current liabilities     4,031       1,486  
Other operating activities     18       217  
Net cash (used in) provided by operating activities     (10,894 )     15,959  
                 
Investing activities                
Expenditures for property and equipment     (1,307 )     (955 )
Cash received upon finalization of purchase price for acquisition     193        
Net cash used in investing activities     (1,114 )     (955 )
                 
Financing activities                
Borrowings on revolver     243,651       195,914  
Payments on revolver     (231,509 )     (206,483 )
Payment of dividends     (60 )     (2,477 )
Purchase of treasury stock     (74 )     (1,958 )
Net cash provided by (used in) financing activities     12,008       (15,004 )
                 
Net change in cash            
Cash at beginning of period            
                 
Cash at end of period   $     $