HOUSTON, Aug. 14, 2006 (PRIMEZONE) -- Houston Wire & Cable Company (Nasdaq:HWCC) (the "Company") announced today record performance for its second quarter and six months ended June 30, 2006.
Highlights for the second quarter of 2006 compared with the second
quarter of 2005:
- Sales increased 80 percent to $84.2 million from $46.7 million.
Internal growth accounted for the entire increase in sales
- Gross Margin increased to 29.1 percent from 25.8 percent
- Operating Income increased 241.0 percent to $14.6 million from
$4.3 million
- Net Income increased 268.5 percent to $8.3 million from
$2.2 million
- Basic and diluted earnings per share were $0.48 for the second
quarter of 2006
Highlights for the first six months of 2006 compared to the first six
months of 2005:
- Sales increased 68 percent to $150.6 million from $89.8 million.
Internal growth accounted for the entire increase in sales.
- Gross Margin increased to 28.2 percent from 25.9 percent
- Operating Income increased 187.9 percent to $23.5 million from
$8.2 million
- Net Income increased 207 percent to $13.1 million from
$4.3 million
- Basic and diluted earnings per share were $0.77 for the six
months ended June 30, 2006
Charles Sorrentino, President and CEO, commented, "We are obviously very pleased to report these results in our first quarter as a public company. Strong end-user market customer demand, increased customer penetration and higher commodity prices contributed to the sales growth in the quarter. We continue to gain traction from our five key growth initiatives, including Emission Controls, Engineering & Construction, Industrials, LifeGuard(TM) private branded products and Utility Power Generation. In spite of record sales and a significant increase in throughput within our distribution facilities we were able to maintain very high customer service levels.
"Customer activity continues to be relatively strong. We expect revenue growth in the second half of 2006 compared to second half of 2005 to be 15-20 percent, which is in excess of our long-term annual growth target of 10-15 percent. Gross margin at 29.1 percent was a record quarterly high for our Company. However, the combination of significant second quarter demand when matched with our expanded inventory position provided pricing opportunities that we believe will not be repeatable in the second half. If sales reach these revised levels, we expect net income in the range of $11-13 million for the second half of 2006. As a reminder, we still approximate future annual sales growth targets in the range of 10-15 percent.
"We remain very enthusiastic about the long term growth opportunities for our Company."
Second Quarter 2006 Results
Sales in the second quarter of 2006 increased 80 percent to a record $84.2 million from $46.7 million in the second quarter of 2005. Internal growth accounted for the entire increase in sales. The Company estimates that of this 80 percent increase, approximately 15-20 percent is attributable to growth in demand from its core distributor business, 10-15 percent reflects increased commodity prices for certain components of the Company's products, principally copper and polymers, and 45-55 percent represents growth from the five major growth initiatives, encompassing Emission Controls, Engineering & Construction, Industrials, LifeGuard(TM) private branded products and Utility Power Generation.
Gross Profit increased 103.5 percent to $24.5 million for the second quarter of 2006 from $12.1 million in 2005, and gross margin increased to 29.1 percent in 2006 from 25.8 percent in 2005. The increase in the Company's gross margin for the second quarter of 2006 as compared to the second quarter of 2005 was principally a result of an improved product mix and better price realization from the Company's decision to improve product availability and service through increased inventory levels. Finally, increased demand for value-added services such as Cable Management enhanced gross margin. We believe that the 29.1 percent gross margin the Company achieved in the second quarter to be a peak and likely not sustainable near term.
Operating Expenses for the second quarter increased $2.2 million, or 28.0 percent, to $10.0 million in 2006 compared to $7.8 million in 2005, reflecting an increase in salaries and commissions of $1.5 million from the higher sales level and modest increases in other operating costs. As a percentage of sales, overall operating expenses decreased to 11.8 percent in 2006 from 16.7 percent in 2005, reflecting the Company's ability to leverage fixed costs over the higher sales volume.
Operating Income increased 241.0 percent to a record $14.6 million in 2006 from $4.3 million in 2005 as a result of the significant increase in sales, gross margin and operating leverage. As a percentage of sales, operating income increased to 17.3 percent from 9.2 percent, reflecting the increase in gross margin and the lower operating expense rate and continued productivity improvements.
Interest Expense increased $0.4 million to $1.1 million for the second quarter of 2006, due primarily to higher borrowing levels used to pay a one-time dividend to shareholders in December of 2005. Income tax expense for the quarter was $5.2 million in 2006, an effective tax rate of 38.6 percent, compared to $1.3 million in 2005, an effective rate of 36.8 percent. We expect our fiscal 2006 effective income tax rate to be approximately 38.8 percent.
The Company achieved record second quarter net income of $8.3 million in 2006 compared to net income of $2.2 million in 2005, an increase of 268.5 percent.
The Company also estimates that net income benefited by $1.5-$2.0 million due to the effect of product inflation during the second quarter of 2006.
Year-to-Date 2006 Financial Results
Sales in the first half of 2006 increased 68 percent to a record $150.6 million from $89.8 million in the first half of 2005. Internal growth accounted for the entire increase in sales. The Company estimates that the growth in sales for the first half is attributable to 12-16 percent of growth in core distributor demand, 5-7 percent in inflation, principally from copper and higher polymer prices, and 45-51 percent of growth from the five major end-user market growth initiatives, encompassing Emission Controls, Engineering & Construction, Industrials, LifeGuard(TM) private branded products and Utility Power Generation.
Gross Profit for the six month period increased 83.2 percent to $42.5 million in 2006 from $23.2 million in 2005, and gross margin increased to 28.2 percent in 2006 from 25.9 percent in 2005. The increase in the Company's gross margin for the first half of 2006 as compared to the first half of 2005 was principally a result of an improved product mix. Better price realization, a result of a decision to improve product availability and service through increased inventory levels, was a contributor to improved gross profit. Additionally, forward inventory purchases tempered price increases from suppliers.
Operating Expenses increased $ 4.0 million, or 26.3 percent, in the first half of 2006 compared to 2005, reflecting an increase in salaries and commissions of $2.3 million from the higher sales level and modest increases in other operating costs. As a percentage of sales, overall operating expenses decreased to 12.6 percent in 2006 from 16.8 percent in 2005, reflecting the Company's ability to leverage fixed costs over the higher sales volume.
Operating Income for the six month period increased 187.9 percent to a record $23.5 million in 2006 from $8.2 million in 2005 as a result of the significant increase in sales, gross margin, and operating leverage. As a percentage of sales, operating income increased to 15.6 percent from 9.1 percent, reflecting the increase in gross margin, the lower operating expense rate, and continued productivity improvements.
Interest Expense increased $0.7 million to $2.2 million in the first half of 2006, due primarily to higher borrowing levels used to pay a one-time dividend to shareholders in December of 2005. Income tax expense for the first half was $8.3 million in 2006, an effective tax rate of 38.8 percent, compared to $2.5 million in 2005, an effective rate of 36.8 percent. We expect our fiscal 2006 effective income tax rate to be approximately 38.8 percent.
The Company achieved record net income of $13.1 million for the first half of 2006 compared to net income of $4.3 million for the first half of 2005, an increase of 207.1 percent.
The Company also estimates that net income benefited by $2.4-$3.6 million due to the effect of product inflation during the first half of 2006.
Conference Call
The Company will host a conference call to discuss second quarter 2006 financial results today at 10:00 am CST. Hosting the call will be Charles Sorrentino, President and Chief Executive Officer, and Nicol Graham, Chief Financial Officer.
This call is being webcast by Thomson/CCBN and can be accessed at HWC's Web site at www.houwire.com. Institutional investors can access the call at (www.streetevents.com), a password-protected event management site hosted by Thomson Street Events.
Once the call has been completed, the webcast will be available at www.houwire.com for 30 days. A replay of the telephone conference will be available until August 21, 2006. Interested parties should use the following replay phone numbers:
Primary Replay Number: (888) 286 - 8010 Secondary Replay Number: (617) 801 - 6888 Participant Password: 28238397
About the Company
With more than 30 years of experience in the electrical industry, Houston Wire & Cable Company is one of the largest distributors of specialty wire and cable and related services in the U.S. electrical distribution market. Headquartered in Houston, HWC has sales and distribution facilities in Atlanta, Baton Rouge, Charlotte, Chicago, Denver, Houston, Los Angeles, Philadelphia, San Francisco, Seattle and Tampa.
Standard stock items available for immediate delivery include continuous and interlocked armor, instrumentation, medium voltage, high temperature, portable cord, power cables and private branded products, including LifeGuard, a low-smoke, zero-halogen cable. HWC's 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.
The Houston Wire & Cable Company logo is available at http://www.primezone.com/newsroom/prs/?pkgid=2807
Forward-Looking Statements
This release contains information about 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. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but not limited to, economic downturns and cyclicality in the markets we serve, risks associated with inventory, fluctuations in the prices of copper and other commodities, changes in our relationships with customers, dependence on third-party manufacturers and suppliers, changes in the terms of vendor rebate programs, loss of key personnel or difficulties recruiting and retaining new qualified personnel, market acceptance of our private branded products, success of our initiatives to penetrate targeted markets, future capital needs and uncertainty of additional financing, new or changed competitors and other risks and challenges. For a discussion of these and other risks, please read the "Risk Factors" section of the prospectus relating to the Company's recent IPO.
In addition, the forward-looking statements included in this press release represent the Company's views as of the date of this press release and these views could change. However, while the Company may elect to update these forward-looking statements at some point, the Company specifically disclaims any obligation to do so other than as required by federal securities laws. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this press release.
HOUSTON WIRE & CABLE COMPANY
Part I. FINANCIAL INFORMATION
Consolidated Balance Sheets
(In thousands, except share data)
June 30, December 31,
2006 2005
--------- ---------
(Unaudited)
Assets
Current assets:
Accounts receivable, less allowance of
$455 at June 30, 2006 and $447 at
December 31, 2005 $ 52,844 $ 41,778
Inventories, net 53,991 31,306
Deferred income taxes 1,188 826
Prepaid expenses 453 490
--------- ---------
Total current assets 108,476 74,400
Property and equipment, net 2,807 2,733
Goodwill 2,996 2,996
Deferred income taxes 775 1,146
Other assets, net 308 435
--------- ---------
Total assets $ 115,362 $ 81,710
========= =========
Liabilities and stockholders' equity
Current liabilities:
Book overdraft $ 4,750 $ 2,119
Trade accounts payable 17,204 8,268
Accrued and other current liabilities 10,618 8,351
Income taxes payable 2,256 824
Short-term obligations 16,755 3,468
--------- ---------
Total current liabilities 51,583 23,030
--------- ---------
Long-term obligations -- 57,938
Stockholders' equity:
Common stock, $.001 par value;
100,000,000 shares authorized:
20,867,173 shares issued and
outstanding at June 30, 2006 and
16,606,673 at December 31, 2005 21 17
Additional paid-in capital 50,720 1,302
Unearned stock compensation -- (559)
Retained earnings 13,056 --
Treasury shares, at cost (18) (18)
--------- ---------
Total stockholders' equity 63,779 742
--------- ---------
Total liabilities and stockholders' equity $ 115,362 $ 81,710
========= =========
HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Income
(Unaudited)
(In thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Sales $ 84,184 $ 46,652 $ 150,612 $ 89,758
Cost of sales 59,657 34,599 108,094 66,548
---------- ---------- ---------- ----------
Gross profit 24,527 12,053 42,518 23,210
Operating Expenses:
Salaries and
commissions 5,947 4,413 11,019 8,702
Other operating
expenses 3,844 3,133 7,592 6,541
Management fee 83 125 208 250
Recovery from
litigation -- -- -- (672)
Depreciation and
amortization 90 111 183 221
---------- ---------- ---------- ----------
9,964 7,782 19,002 15,042
---------- ---------- ---------- ----------
Operating income 14,563 4,271 23,516 8,168
Interest expense 1,120 724 2,174 1,437
---------- ---------- ---------- ----------
Income before income
taxes 13,443 3,547 21,342 6,731
Income taxes 5,189 1,307 8,286 2,480
---------- ---------- ---------- ----------
Net income $ 8,254 $ 2,240 $ 13,056 $ 4,251
========== ========== ========== ==========
Earnings per share:
Basic $ 0.48 $ 0.13 $ 0.77 $ 0.26
========== ========== ========== ==========
Diluted $ 0.48 $ 0.13 $ 0.77 $ 0.25
========== ========== ========== ==========
Weighted average
common shares
outstanding
Basic 17,084,206 16,606,673 16,850,196 16,606,673
========== ========== ========== ==========
Diluted 17,186,940 16,701,880 16,948,576 16,699,517
========== ========== ========== ==========
HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
June 30,
--------------------
2006 2005
-------- --------
Operating activities
Net income $ 13,056 $ 4,251
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 183 221
Amortization of capitalized loan costs 157 62
Amortization of unearned stock compensation 56 --
Deferred interest -- 550
Provision for doubtful accounts -- 23
Provision for inventory obsolescence (224) (50)
Deferred income taxes 9 112
Changes in operating assets and liabilities:
Accounts receivable (11,066) (1,965)
Inventories (22,461) (88)
Prepaid expenses 37 (197)
Other assets (30) (8)
Book overdraft 2,631 (113)
Trade accounts payable 8,936 2,336
Accrued and other current liabilities 2,267 (669)
Income taxes payable 1,432 327
-------- --------
Net cash provided by (used in)
operating activities (5,017) 4,792
Investing activities
Expenditures for property, plant,
and equipment (257) (150)
-------- --------
Net cash used in investing activities (257) (150)
Financing activities
Borrowing on revolver 150,953 97,579
Payments on revolver 185,417) (96,221)
Payments on long-term obligations (10,187) --
Payments on junior subordinated debt -- (6,000)
Proceeds from exercise of common
stock options 6 --
Proceeds from sale of common stock 51,381 --
Payment of common stock offering costs (1,482) --
Excess income tax benefit for common
stock options 20 --
-------- --------
Net cash provided by (used in)
financing activities 5,274 (4,642)
-------- --------
Net change in cash -- --
Cash at beginning of period -- --
-------- --------
Cash at end of period $ -- $ --
======== ========