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:

  • Sales of $69.3 million down 1.5% but up 1%  metals adjusted, from Q4 2015
  • Net loss of $(1.8) million
  • Adjusted net loss (non-GAAP) of $(1.2) million, excluding Vertex acquisition expenses
  • Diluted EPS of $(0.11)
  • Adjusted diluted EPS (non-GAAP) of $(0.08), excluding acquisition expenses
  • Cash flow of $1.3 million

Selected annual results were:             

  • Sales of $261.6 million down 15.1% or down 8% metals adjusted, from 2015
  • Net loss of $(6.0) million
  • Adjusted net loss (non-GAAP) of $(3.3) million, excluding impairment charges and acquisition expenses
  • Diluted EPS of $(0.37)
  • Adjusted diluted EPS (non-GAAP) of $(0.21), excluding  impairment charges and acquisition expenses
  • Cash flow of $17.2 million
  • Completed the acquisition of Vertex in October 2016

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

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