Houston Wire & Cable Company Reports Results for the Quarter Ended December 31, 2013

HOUSTON, TX--(Marketwired - Mar 13, 2014) - Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company") announced operating results for the fourth quarter and year ended December 31, 2013.

Selected results were:

• Sales of $94.4 million
• Net income of $3.1 million
• Diluted EPS of $0.18
• Declared a dividend of $0.11 per share
  
  

Selected highlights for 2013:

• Metals adjusted sales flat with 2012
• Diluted EPS of $0.44, or $0.82 excluding the goodwill impairment
• Declared dividends totaling $0.42 per share
• Operating cash flow of $20.7 million
• Debt to equity ratio of 43.3%
  
  

Fourth Quarter Summary
Jim Pokluda, President and Chief Executive Officer commented, "The inconsistent market strength trends experienced in the first three quarters of the year continued in the fourth quarter. As a result, our fourth quarter year-over-year results were again mixed as we experienced an increase in Maintenance, Repair and Operations (MRO) sales of just over 3%, or approximately 6% on a metals adjusted basis, but a project sales decrease of approximately 30%, or 27% on a metals adjusted basis. Total sales, on a metals adjusted basis, fell approximately 7% from Q4 2012."

Despite the continued overall competitiveness of the marketplace, varying levels of market demand, and softening metals prices, gross margin at 21.8% was near flat sequentially and up 70 basis points over the prior year period, which contained a greater amount of low margin project sales. Operating expenses were up 4.4% compared to Q4 2012, primarily due to headcount related expenses and the costs of expanding the distribution network. 

Interest expense of $0.2 million was down from the $0.3 million in the prior year period. Average debt levels fell by 23.8% from $60.8 million in 2012 to $46.3 million in 2013, and the effective interest rate declined from 2.0% in 2012 to 1.9% in 2013. The effective tax rate for the quarter of 39.1% was up slightly from the 2012 tax rate of 38.6% due to higher state tax rates.

Net income of $3.1 million decreased 27.9% from the fourth quarter of 2012. Diluted earnings per share was $0.18 compared to $0.25 in the prior year quarter.

Twelve month summary
Sales for the year were $383.3 million or essentially flat with 2012 on a metals adjusted basis. We estimate that metals adjusted MRO sales increased 7%, while project sales decreased 14%. Mr. Pokluda commented, "We were encouraged by the continued growth of our MRO sales, which is the largest component of overall revenues, but disappointed with our project sales results, which have been a function of ongoing delays and lack of industry investment in large capital projects. While certain industries such as oil and gas are outside of this trend, many industries have adopted conservative capital allocation strategies which favor high levels of plant utilization over more aggressive strategies which have traditionally involved new plant construction, expansion and investment. We continue to see large regional demand variances, with the West and Central the least active, the Northeast and Southeast showing signs of recovery, and the Gulf Coast extremely busy. Until we see activity levels in the underperforming regions improve, our sales and net income results will be constrained."

Gross margin was flat with 2012. "Considering the continuing competitive pricing environment, I was pleased that we managed to maintain margins at their present level. Our 7% MRO volume gains helped to support overall company margins," said Mr. Pokluda. 

Operating expenses increased 16.3%, primarily as a result of the $7.6 million impairment of goodwill on the Southern Wire reporting unit. Excluding the impairment charge, operating expenses increased by 3.3% or $1.9 million in the current year, primarily due to the impact of the higher headcount and higher operating expenses related to additional facilities and higher inventory levels. Mr. Pokluda further commented, "We have taken steps to reduce the level of operating expenses, including a reduction in headcount, which we expect to save approximately $1.0 million to $1.5 million on an annual basis."

Interest expense of $1.0 million was lower than the prior year's $1.3 million as average debt levels fell by 17.5% from $58.0 million in 2012 to $47.8 million in 2013 and interest rates decreased from 2.1% to 1.9%. The effective tax rate, excluding the impairment of goodwill, was 38.4% unchanged from 2012.

Net income for 2013 was $7.9 million, or $14.6 million excluding the impairment of goodwill. Adjusted net income fell 14.4% from the $17.0 million level in the prior year.

Conference Call
The Company will host a conference call to discuss fourth quarter results on Thursday, March 13, 2014 at 10:00 a.m., C.T. Hosting the call will be James Pokluda, President and Chief Executive Officer and Nicol Graham, Vice President and Chief Financial Officer.

A live audio web cast of the call will be available on the Investor Relations section of the Company's website www.houwire.com.  

Approximately two hours after the completion of the live call, a telephone replay will be available until March 20, 2014.

Replay, Toll-Free #: 855-859-2056
Replay, Toll #: 404-537-3406
Conference ID # 9507440

About the Company
With 39 years of experience in the industry, Houston Wire & Cable Company is one of the largest providers of wire and cable in the U.S. market. Headquartered in Houston, Texas, the Company has sales and distribution facilities strategically located throughout the nation.

Standard stock items available for immediate delivery include: continuous and interlocked armor cable; control and power cable; electronic wire and cable; flexible and portable cords; instrumentation and thermocouple cable; lead and high temperature cable; medium voltage cable; premise and category wire and cable; primary and secondary aluminum distribution cable; wire rope and wire rope slings, as well as synthetic slings, chain, shackles and other related hardware. We also offer private branded products including our proprietary brand, LifeGuard™, a low-smoke, zero-halogen cable. Comprehensive value-added services include same-day shipping, knowledgeable sales staff, inventory management programs, just-in-time delivery, logistics support, customized internet-based ordering capabilities and 24/7/365 service.

Forward-Looking Statements
This release contains comments concerning management's view of the Company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain and projections about future events may, and often do, vary materially from actual results.

Other risk factors that may cause actual results to differ materially from statements made in this press release can be found in the Company's Annual Report on Form 10-K and other documents filed with the SEC. These documents are available under the Investor Relations section of the Company's website at www.houwire.com.

Any forward-looking statements speak only as of the date of this press release and the Company undertakes no obligation to publicly update such statements.

Houston Wire & Cable Company
Consolidated Balance Sheets
			December 31,
			2013				2012
			(In thousands, except share data)
Assets
Current assets:
	Cash		$	--			$	274
	Accounts receivable, net			60,408				65,892
	Inventories, net			96,107				84,662
	Deferred income taxes			2,591				2,455
	Income taxes			420				--
	Prepaids			762				841
Total current assets				160,288				154,124
Property and equipment, net				7,974				5,824
Intangible assets, net				10,234				11,967
Goodwill				17,520				25,082
Other assets				159				158
Total assets			$	196,175			$	197,155
Liabilities and stockholders' equity
Current liabilities:
	Book overdraft		$	4,594			$	--
	Trade accounts payable			13,637				12,330
	Accrued and other current liabilities			18,772				15,379
	Income taxes			--				5
Total current liabilities				37,003				27,714
Debt				47,952				58,588
Other long-term obligations				97				103
Deferred income taxes				429				1,670
Total liabilities				85,481				88,075
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: 17,954,032 and 17,899,499 shares outstanding at December 31, 2013 and 2012, respectively			21				21
	Additional paid-in capital			55,642				55,291
	Retained earnings			104,607				104,252
	Treasury stock			(49,576	)			(50,484	)
Total stockholders' equity				110,694				109,080
Total liabilities and stockholders' equity			$	196,175			$	197,155

Houston Wire & Cable Company
Consolidated Statements of Income
			Three Months Ended						Year Ended
			December 31,						December 31,
			2013			2012			2013			2012
			(In thousands, except share and per share data)
Sales			$	94,442		$	104,379		$	383,292		$	393,036
Cost of sales				73,809			82,362			298,633			306,017
Gross profit				20,633			22,017			84,659			87,019
Operating expenses:
	Salaries and commissions			7,558			7,611			30,946			30,013
	Other operating expenses			6,933			6,221			26,068			25,139
	Depreciation and amortization			734			747			2,978			2,941
	Impairment of goodwill			--			--			7,562			--
Total operating expenses				15,225			14,579			67,554			58,093
Operating income				5,408			7,438			17,105			28,926
Interest expense				239			323			992			1,252
Income before income taxes				5,169			7,115			16,113			27,674
Income taxes				2,020			2,745			8,211			10,635
Net income			$	3,149		$	4,370		$	7,902		$	17,039
Earnings per share:
	Basic		$	0.18		$	0.25		$	0.44		$	0.96
	Diluted		$	0.18		$	0.25		$	0.44		$	0.96
Weighted average common shares outstanding:
	Basic			17,837,097			17,735,998			17,805,464			17,723,277
	Diluted			17,937,992			17,825,976			17,900,372			17,815,401
Dividend declared per share			$	0.11		$	0.09		$	0.42		$	0.36

Houston Wire & Cable Company
Consolidated Statements of Cash Flows
				Year Ended December 31,
				2013				2012
				(In thousands)
Operating activities
Net income				$	7,902			$	17,039
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
	Impairment of goodwill				7,562				--
	Depreciation and amortization				2,978				2,941
	Amortization of capitalized loan costs				18				18
	Amortization of unearned stock compensation				900				1,040
	Provision for doubtful accounts				(59	)			(19	)
	Provision for returns and allowances				27				(61	)
	Provision for inventory obsolescence				559				815
	(Gain) loss on disposals of property and equipment				(1	)			(7	)
	Deferred income taxes				(1,485	)			(773	)
	Changes in operating assets and liabilities:
		Accounts receivable			5,516				(6,081	)
		Inventories			(12,004	)			(15,960	)
		Prepaids			79				(13	)
		Other assets			(19	)			129
		Book overdraft			4,594				(2,270	)
		Trade accounts payable			1,307				2,231
		Accrued and other current liabilities			3,312				(3,722	)
		Long term liabilities			(6	)			(25	)
		Income taxes			(435	)			1,685
Net cash provided by (used in) operating activities					20,745				(3,033	)
Investing activities
	Expenditures for property and equipment				(3,396	)			(1,005	)
	Proceeds from disposals of property and equipment				2				9
	Cash paid for acquisition				--				--
Net cash used in investing activities					(3,394	)			(996	)
Financing activities
	Borrowings on revolver				396,724				402,231
	Payments on revolver				(407,360	)			(391,610	)
	Deferred loan cost				--				--
	Proceeds from exercise of stock options				492				137
	Payment of dividends				(7,466	)			(6,375	)
	Excess tax benefit for options				49				35
	Purchase of treasury stock				(64	)			(115	)
Net cash (used in) provided by financing activities					(17,625	)			4,303
Net change in cash					(274	)			274
Cash at beginning of year					274				--
Cash at end of year				$	--			$	274
Supplemental disclosures
	Cash paid during the year for interest			$	998			$	1,231
	Cash paid during the year for income taxes			$	10,236			$	9,762