CORRECTING and REPLACING - Houston Wire & Cable Company Reports Results for the Quarter Ended December 31, 2017

Houston, Texas, UNITED STATES

HOUSTON, March 16, 2018 (GLOBE NEWSWIRE) -- The company has issued a corrected press release to correct two incorrect dates in the Consolidated Statements of Cash Flows – 2016 and 2015 should be 2017 and 2016.

Houston Wire & Cable Company (NASDAQ:HWCC) (the “Company”) announced operating results for the fourth quarter and year ended December 31, 2017.

Selected quarterly results were:

  • Sales of $82.1 million up 18.6% over 2016
  • Gross margin of 25.4% up 360 basis points
  • Operating income of $3.0 million compared to a loss of $(1.6) million in 2016
  • Net income of $2.0 million compared to a net loss of $(1.8) million in 2016
  • Diluted EPS of $0.12

Selected annual results were:                                      

  • Sales of $317.7 million, up 21.4%
  • Gross margin of 22.9% up 270 basis points
  • Operating income of $4.6 million compared to a loss of $(6.5) million in 2016, of which $2.4 million was attributable to an impairment charge,
  • Net loss of  $(0.2) million compared to a net loss of $(6.0) million in 2016
  • Diluted EPS of $(0.01)

Fourth Quarter Summary
Jim Pokluda, President and Chief Executive Officer commented, “We are pleased that the upward momentum we experienced in the third quarter continued in the fourth quarter. Although not unexpected, demand in the latter part of the quarter fell in line with the normal lackluster historical trend for this time of year.  We estimate that higher metals prices in 2017 represented approximately 7% of the increase in sales. We estimate sales for our project business, which targets end markets for Utility Power Generation, Environmental Compliance, Engineering & Construction, Industrials,  and Mechanical Wire Rope, increased 33%, while Maintenance, Repair, and Operations (MRO) sales increased 16%, as compared to the fourth quarter of 2016.

Gross margin at 25.4% increased 360 basis points from the fourth quarter of 2016, primarily due to incrementally higher product margins driven by continued pricing discipline, prudent purchasing, and metals inflation.  Sequentially, gross margin increased 250 basis points, which is indicative that our margin improvement plan is working.  Operating expenses at $17.9 million were up $1.2 million or 7.0% from the prior year period, primarily due to higher variable compensation, as sales and profitability improved, and to higher distribution labor costs to handle the volume increase. Operating expenses as a percentage of revenue decreased 230 basis points from 24.1% in Q4 2016 to 21.8% in Q4 2017.

Interest expense of $0.6 million was up 48.2% from $0.4 million in the prior year period, primarily due to the additional debt incurred to fund the 2016 Vertex acquisition and additional funds for working capital to service the higher activity levels.  Average debt levels for the quarter increased 19.8% from $62.8 million in 2016 to $75.3 in 2017, while the effective interest rate increased from 2.4% in 2016 to 3.0% in 2017.

The effective tax rate for the quarter was 16.4%, which included a credit for a valuation allowance of 43.7% and additional deferred tax expense of 13.7%, both due to the impact of the Tax Cuts and Jobs Act (“the Act”).

Mr. Pokluda further commented, “We are encouraged that we have now experienced two quarters of increased sales and improved operating performance.  A full year of Vertex activities, coupled with increasing contributions from our commercial products lines and generally higher demand for our products and services, all contributed to these improved results.”

Twelve Month Summary
Sales for the twelve month period were $317.7 million, up 21.4% from the $261.6 million level in 2016. We estimate that higher metals prices in 2017 represented approximately 3% of the revenue increase.  We estimate sales for our project business, increased 3%, while MRO sales increased 15%, as compared to 2016.

Gross margin at 22.9% was up 270 basis points from the 2016 period.  “Improved pricing discipline, higher product margins from Vertex for a full year in 2017, and greater customer product demand, contributed to the margin increase” said Mr. Pokluda.

Operating expenses at $68.1 million increased 14.4% from the prior year amount of $59.5 million. The majority of the increase was due to a full year of Vertex’s operating expenses in 2017, as compared to only three months in 2016, partially offset by the absence in 2017 of the $2.4 million impairment charge recorded in 2016. Operating expenses as a percentage of revenue decreased 130 basis points from 22.7% in 2016 to 21.4% in 2017.

Interest expense of $2.1 million increased 145% from $0.8 million in 2016 due primarily to higher debt levels and an increase in average interest rates which moved from 2.0% in 2016 to 2.8% in 2017.

The full year effective tax rate of 108.8% included a 41% charge for a valuation allowance on deferred tax assets not currently expected to be realized, 15.2% for stock compensation expense and 12.9% for deferred tax assets in respect of the Act rate change.

The results of operations generated a net loss of $0.2 million, compared to a net loss of $6.0 million in 2016.

Conference Call
The Company will host a conference call to discuss fourth quarter results today, Friday, March 16, 2018, 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  

Live call dial-in numbers are as follow:
Toll-Free: (800) 936-7954
International: (720) 545-0048
Conference ID # 5139879

Approximately two hours after the completion of the live call, a telephone replay will be available until March 23, 2018.

Replay, Toll-Free #: (855)859-2056
Replay, Toll #: (404) 537-3406
Conference ID #   5139879

About the Company 

With over 40 years’ experience in the industry, Houston Wire & Cable Company, an industrial distributor, is a large provider of 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

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
(In thousands except, share data)

  December 31, 
  2017  2016 
Current assets:        
Accounts receivable, net $57,396  $44,677 
Inventories, net  88,115   79,783 
Income taxes  449   1,948 
Prepaids  1,938   570 
Total current assets  147,898   126,978 
Property and equipment, net  11,355   11,261 
Intangible assets, net  12,015   13,378 
Goodwill  22,353   22,770 
Deferred income taxes     892 
Other assets  418   591 
Total assets $194,039  $175,870 
Liabilities and stockholders’ equity        
Current liabilities:        
Book overdraft $3,028  $3,181 
Trade accounts payable  8,449   8,406 
Accrued and other current liabilities  16,823   13,248 
Total current liabilities  28,300   24,835 
Debt  73,555   60,388 
Deferred income taxes  414    
Other long-term obligations  1,026   516 
Total liabilities  103,295   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: 16,491,181 and 16,457,525 shares outstanding at December 31, 2017 and 2016, respectively  21   21 
Additional paid-in capital  54,006   53,824 
Retained earnings  97,336   97,550 
Treasury stock  (60,619)  (61,264)
Total stockholders’ equity  90,744   90,131 
Total liabilities and stockholders’ equity $194,039  $175,870 

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, 
  2017  2016  2017  2016 
Sales $82,146  $69,257  $317,697  $261,644 
Cost of sales  61,303   54,181   245,035   208,694 
Gross profit  20,843   15,076   72,662   52,950 
Operating expenses:                
Salaries and commissions  9,923   8,474   36,570   29,369 
Other operating expenses  7,413   7,412   28,716   24,714 
Depreciation and amortization  538   820   2,772   3,018 
Impairment charge           2,384 
Total operating expenses  17,874   16,706   68,058   59,485 
Operating income  2,969   (1,630  4,604   (6,535
Interest expense  581   392   2,073   845 
Income before income taxes  2,388   (2,022  2,531   (7,380
Income taxes  392   (196  2,753   (1,374
Net income $1,996  $(1,826 $(222 $(6,006
Earnings per share:                
Basic $0.12  $(0.11 $(0.01 $(0.37
Diluted $0.12  $(0.11 $(0.01 $(0.37
Weighted average common shares outstanding:                
Basic  16,295,570   16,216,978   16,269,611   16,345,679 
Diluted  16,391,330   16,216,978   16,269,611   16,345,679 
Dividend declared per share $  $  $  $ 0.15 

Houston Wire & Cable Company
Consolidated Statements of Cash Flows
(In thousands)

  Year Ended December 31,
  2017  2016 
Operating activities        
Net income $(222 $(6,006
Adjustments to reconcile net income to net cash provided by
operating activities:
Impairment charge     2,384 
Depreciation and amortization  2,772   3,018 
Amortization of unearned stock compensation  1,176   856 
Provision for doubtful accounts  68   285 
Provision for inventory obsolescence  34   93 
Deferred income taxes  1,314   6 
Other non-cash items  222   (116)
Changes in operating assets and liabilities:        
Accounts receivable  (12,719)  4,019 
Inventories  (7,942  10,483 
Book overdraft  (153)  (517
Trade accounts payable  38   896 
Accrued and other current liabilities  3,571   2,473 
Income taxes  1,499   (1,016)
Prepaid expenses  (1,368)  124 
Other operating activities  368    147 
Net cash provided by operating activities  (11,342  17,243 
Investing activities        
Expenditures for property and equipment  (1,769)  (1,319)
Proceeds from disposals of property and equipment  8   5 
Cash paid for acquisition  193   (32,370)
Net cash used in investing activities  (1,568)  (33,684)
Financing activities        
Borrowings on revolver  333,301   302,898 
Payments on revolver  (320,133)  (281,698)
Proceeds from exercise of stock options      
Payment of dividends  (81)  (2,495)
Purchase of treasury stock  (177)  (2,264)
Net cash used in financing activities  12,910   16,441 
Net change in cash      
Cash at beginning of year      
Cash at end of year $  $ 
Supplemental disclosures        
Cash paid during the year for interest $1,961  $728 
Cash paid during the year for income taxes $64  $233 


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