Source: Houston Wire & Cable Company
Houston Wire & Cable Company Reports Results for the Third Quarter and First Nine Months of 2008
HOUSTON, Nov. 10, 2008 (GLOBE NEWSWIRE) -- Houston Wire & Cable Company (Nasdaq:HWCC) (the "Company") announced its operating results for the third quarter and first nine months of 2008.
Selected highlights for the third quarter of 2008:
* Sales matched 2007's record level of $98.9 million * Sales levels were negatively impacted by Gulf Coast hurricanes * Fully diluted earnings per share (EPS) were $0.37 * Paid quarterly dividend of $0.085 per share * Maintained excellent liquidity and generated record operating cash flow of $11.7 million
Selected highlights for the first nine months of 2008:
* Sales increased 5.8% to a record $285.7 million from $269.9 million * Organic growth accounted for the entire increase in sales * Fully diluted EPS was $1.17 vs. $1.15 * Generated record operating cash flow of $14.4 million
As previously disclosed on October 2, 2008, our results for the quarter were impacted by the recent hurricane season. Sales of $98.9 million matched the record level set for the third quarter in 2007. This was achieved despite the impact of two hurricanes on the Company's Gulf Coast operations, overall declining economic conditions and market disruptions. Sales from the Company's five major growth initiatives, encompassing Emission Controls, Engineering & Construction, Selected Industrials, LifeGuard(tm) (and other private branded products) and Utility Power Generation are estimated to have increased 5 to 10% over the third quarter of 2007 and continue to be the primary focus for our sales team. To date, these growth initiatives have been minimally impacted by the current weak economic conditions. In the Company's Repair and Replacement sector, also referred to as Maintenance Repair & Operation (MRO), sales growth was negative, as we believe this sector continued to be adversely affected by broad market conditions that influence discretionary expense deferral and it was the sector impacted by the hurricanes.
Sales for the first nine months increased 5.8% from $269.9 million in 2007 to a record level of $285.7 million in 2008. Investment and capital expansion within the Company's five major initiatives remained healthy and project business was up slightly as we benefited from continued penetration into these targeted markets. Our core MRO market was down slightly as this sector continued to face a slowing economy, market liquidity pressures resulting from the credit crisis, and significant business interruptions in large industrial markets during the quarter as a result of Hurricanes Gustav and Ike and Tropical Storm Edouard.
Gross margin for the third quarter of 22.9%, was lower than the comparative year quarter which we believe is a result of sales mix changes due to storm activity, commodity deflation, increased competitive pricing pressures and adjusted supplier incentives. On a year-to-date basis, gross margin was 24.3% and in line with longer term historical trends.
Operating expenses at 11.7% of sales in the third quarter of 2008 were 30 basis points higher than the prior year's third quarter. This slight increase was due to higher salaries and related employee expenses, primarily for additional sales personnel and sales support resources. Lower commissions due to the decrease in gross profit slightly offset these expense increases. The Company continued to invest in sales-force additions, training, CRM and business development/prospecting tools. While these investments initially contribute to increased costs, we believe them to be critical drivers of our future growth as the leverage later realized, typically eighteen to twenty-four months after investment, can be substantial and ultimately a material component of our overall profitability. Operating expenses as a percent of sales for the first nine months of 2008 increased by 20 basis points to 11.9%.
Operating cash flow for the third quarter of 2008 was a record $11.7 million. We estimate $4.0 million resulted from a delay in supplier payments related to hurricane timing, as our normal administrative and financial functions were disrupted during this time. Operating cash flow for the first nine months also reached a record at $14.4 million in 2008, compared to $11.8 million generated in the first nine months of 2007.
Interest expense for the third quarter increased to $0.5 million from $0.3 million in the prior year period and increased, on a year-to-date basis, to $1.5 million from $0.7 million in 2007. These increases were due to additional borrowings in support of the stock repurchase program.
Net income for the third quarter and first nine months was lower than the prior periods by 20.7% and 12.3%, respectively. Third quarter performance was impacted by lower gross margins. In spite of higher sales in the first nine months, the Company experienced lower gross margins and higher levels of operating expenses.
Basic and fully diluted EPS for the third quarter of 2008 were $0.37 compared to $0.41 in 2007. For the first nine months of 2008, basic and fully diluted earnings per share were both $1.17, compared to $1.16 and $1.15 per share, respectively, for the comparable 2007 period.
President and CEO, Charles Sorrentino commented, "In light of current economic conditions and the disastrous hurricane activity, I am pleased that we managed to maintain our 2007 sales levels in the third quarter. Sales were negatively impacted by Hurricanes Gustav and Ike and Tropical Storm Edouard, all of which hit the Gulf Coast in the third quarter of 2008. As a result, our Baton Rouge and Houston branches were closed for several days. Although our facilities suffered minimal physical damage, our customers and staff faced widespread power outages and mandatory evacuations. Those in the expanded geography of the strike zones were severely affected and electric power was disrupted or absent for approximately two weeks after each hurricane.
"While the Company faces headwinds from the overall economy and declining copper prices, our five growth initiatives, supported by a strong balance sheet, continue to drive sales in areas which we believe to be more resilient to current economic conditions. Continued additions to our sales force, enhanced sales training and product line expansions are also solidifying our sales platform.
"In the third quarter, we repurchased an additional 0.3% of our shares outstanding at December 31, 2007. At September 30, 2008 the remaining authorization to repurchase shares under the program was $19.4 million. Additionally, the Company continues to pay quarterly dividends at a rate of $0.085 cents per share. These actions represent our ongoing commitment to shareholders to manage capital in an efficient manner while still maintaining adequate resources to make acquisitions and fund future organic growth. For the twelve months ended September 30, 2008, the Company had strong financial metrics including a high return on equity, an attractive return on invested capital and high levels of cash generation.
"Despite tough economic circumstances and the personal impact of the 2008 Hurricane Season, our team members pulled together in the best interest of the Company and I am proud of everyone. Their hard work and dedication assisted the Company with the successful execution of our Business Continuity Plan so that we could maintain our 24/7/365 customer service levels.
"Traditionally, the fourth quarter is a slower time of year for our business. This, coupled with the continued economic slow down, hurricane impact and declining commodity prices, cause us to revise our 2008 earnings estimate to the range of $1.30 to $1.40 per share."
Conference Call
The Company will host a conference call to discuss third quarter results on Monday, November 10th at 10:00 am CT. Hosting the call will be Charles Sorrentino, 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. A replay of the webcast will be available for 30 days. A replay of the conference call will be available approximately two hours after the conclusion of the call. This audio replay will be available until November 17, 2008. Interested parties should use the following replay phone numbers:
Domestic Replay Number: 888.203.1112 International Replay Number: 719.457.0820 Participant Password: 6895754
About the Company
With more than 30 years 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, Texas, HWCC 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(tm), a low-smoke, zero-halogen cable. HWCC'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.globenewswire.com/newsroom/prs/?pkgid=2807
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.
Risk factors that may cause actual results to differ materially from statements made in this press release can be found in the MD&A Section of the Company's Annual Report on Form 10-K for the period ended December 31, 2007. This document and other SEC filings 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
(In thousands, except share data)
September 30, December 31,
2008 2007
------------ ------------
(unaudited)
Assets
Current assets:
Cash and short-term investments $ -- $ --
Accounts receivable, net 66,633 58,202
Inventories, net 71,053 69,299
Deferred income taxes 1,121 1,054
Prepaid expenses 971 832
Income taxes receivable 711 2,004
------------ ------------
Total current assets 140,489 131,391
------------ ------------
Property and equipment, net 3,227 3,234
Goodwill 2,996 2,996
Deferred income taxes 1,834 1,356
Other assets 107 114
------------ ------------
Total assets $ 148,653 $ 139,091
============ ============
Liabilities and stockholders' equity
Current liabilities:
Book overdraft $ 4,106 $ 3,854
Trade accounts payable 16,438 12,297
Accrued and other current liabilities 13,059 17,263
------------ ------------
Total current liabilities 33,603 33,414
------------ ------------
Long term obligations 40,200 34,507
Stockholders' equity:
Common stock, $0.001 par value;
100,000,000 shares authorized; 20,988,952
shares issued: 17,642,552 and 18,577,727
outstanding at September 30, 2008 and
December 31, 2007, respectively 21 21
Additional paid-in-capital 55,337 54,131
Retained earnings 74,359 57,846
Treasury stock (54,867) (40,828)
------------ ------------
Total stockholders' equity 74,850 71,170
------------ ------------
Total liabilities and stockholders' equity $ 148,653 $ 139,091
============ ============
HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Income
(Unaudited)
(In thousands, except share and per share data)
---------------------- ----------------------
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Sales $ 98,854 $ 98,922 $ 285,679 $ 269,920
Cost of sales 76,214 74,116 216,141 198,781
---------- ---------- ---------- ----------
Gross profit 22,640 24,806 69,538 71,139
Operating expenses:
Salaries and
commissions 6,159 6,298 18,330 17,475
Other operating
expenses 5,302 4,818 15,287 13,884
Depreciation and
amortization 136 112 392 331
---------- ---------- ---------- ----------
Total operating
expenses 11,597 11,228 34,009 31,690
---------- ---------- ---------- ----------
Operating income 11,043 13,578 35,529 39,449
Interest expense 472 290 1,463 661
---------- ---------- ---------- ----------
Income before income
taxes 10,571 13,288 34,066 38,788
Income taxes 3,996 4,994 13,009 14,776
---------- ---------- ---------- ----------
Net income $ 6,575 $ 8,294 $ 21,057 $ 24,012
========== ========== ========== ==========
Earnings per share:
Basic $ 0.37 $ 0.41 $ 1.17 $ 1.16
========== ========== ========== ==========
Diluted $ 0.37 $ 0.41 $ 1.17 $ 1.15
========== ========== ========== ==========
Weighted average common
shares outstanding:
Basic 17,676,468 20,395,199 17,943,130 20,739,550
========== ========== ========== ==========
Diluted 17,704,818 20,452,695 17,978,208 20,828,983
========== ========== ========== ==========
Dividends declared per
share $ 0.085 $ 0.075 $ 0.255 $ 0.075
========== ========== ========== ==========
HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
----------------------
2008 2007
---------- ----------
Operating activities
Net income $ 21,057 $ 24,012
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 392 331
Amortization of capitalized loan costs 60 48
Employee stock-based compensation expense 1,570 1,352
Provision for doubtful accounts 114 (299)
Provision for returns and allowances 33 (151)
Provision for inventory obsolescence (43) (79)
Deferred income taxes (545) (396)
Changes in operating assets and liabilities:
Accounts receivable (8,578) (15,638)
Inventories (1,711) (3,902)
Prepaid expenses (139) (569)
Other assets (53) (48)
Book overdraft 252 1,117
Trade accounts payable 4,141 4,651
Accrued and other current liabilities (3,484) 1,941
Income taxes payable/receivable 1,293 (613)
---------- ----------
Net cash provided by operating activities 14,359 11,757
Investing activities
Expenditures for property and equipment (384) (388)
---------- ----------
Net cash used in investing activities (384) (388)
Financing activities
Borrowings on revolver 289,165 287,453
Payments on revolver (283,472) (270,917)
Proceeds from exercise of stock options 57 91
Excess tax benefit for stock options 264 1,216
Payment of dividends (4,544) (1,554)
Purchase of treasury stock (15,445) (27,658)
---------- ----------
Net cash used in financing activities (13,975) (11,369)
---------- ----------
Net change in cash -- --
Cash at beginning of period -- --
---------- ----------
Cash at end of period $ -- $ --
========== ==========