HOUSTON, TX--(Marketwired - Nov 5, 2015) - Houston Wire & Cable Company (
Selected highlights, including non-GAAP adjusted, were:
- Sales of $78.3 million down 19.1%, or 10% metals adjusted, from Q3 2014
- GAAP net income of $0.7 million, tax adjusted net income of $1.0 million
- Diluted GAAP EPS of $0.04 per share, tax adjusted diluted EPS of $0.06 per share
- Debt decreased to $38.8 million, the lowest level since Q1 2010
- Revised capital allocation to shareholders
- Declared a dividend of $0.06 per share on November 5, 2015
- Repurchased 216,000 shares
Third Quarter Summary
Jim Pokluda, President and Chief Executive Officer commented, "The level of industrial activity remained disappointing in the third quarter and the continuing combination of metals deflation and reduction in oil and gas related activity severely affected operating results and comparisons to the prior year period. Sales decreased 19.1% or approximately 10% on a metals adjusted basis. We estimate that Maintenance, Repair and Operations (MRO) sales decreased 20% or approximately 11% on a metals adjusted basis, while project sales decreased 18% or on a metals adjusted basis approximately 9%. Total transactional activity, as measured by invoice count, decreased by 12%."
Gross margin at 20.6% decreased 120 basis points from the third quarter of 2014 primarily due to lower product margins and vendor rebates, partially offset by lower customer incentives. Operating expenses at $14.3 million were down $0.7 million or 5.0% from the prior year period, principally due to the continued impact of our disciplined expense management.
Pokluda commented, "Although operating conditions remain depressed, we have continued to drive exceptionally high levels of operational execution, achieved sales growth with items in our expanded product mix that target MRO demand - the largest portion of our business, and received very positive customer feedback on our most recent customer service enhancement - a digital portal called "My ePower." In addition to the above, extreme focus on driving increasingly more efficient use of working capital and expense management remain top priorities."
Interest expense of $0.2 million was slightly lower than the prior year period, as average debt of $41.5 million decreased 20% from $52.1 million for the period ended September 30, 2014. The average effective interest rate of 2.2% remained near flat with the rate in 2014. The effective tax rate for the period of 56.3% was higher than the 38.4% rate in the prior year period, due to the non-deductible portion of the impairment charge in the second quarter of 2015, which also impacts the subsequent 2015 quarters.
Net income of $0.7 million was down 81% from the third quarter of 2014, as was the diluted earnings per share of $0.04. If the tax rate had been calculated using a marginal rate of 39%, net income would have been $1.0 million and diluted earnings per share would have been $0.06.
Pokluda further commented, "Despite the disappointing financial performance results, our healthy operating cash flow allowed us to again reduce debt and strengthen our balance sheet, including the buy-back of an additional 216,000 shares of stock. The Company considers its performance, stock price, dividend yield and financial position in deciding the best way to increase shareholder value. Accordingly, the upcoming dividend will be paid at the rate of $0.06 cents per share. We believe that the long-term outlook for the Company remains positive and that a reduction in the dividend will allow for greater flexibility involving capital allocation, including the option for increased stock repurchases, which over an extended time horizon has the potential to provide attractive returns to our shareholders. However, the Company remains cognizant of its responsibility to shareholders to ensure that the Company's long term needs are balanced with the short term opportunities of the stock repurchases."
Nine month summary
Sales for the nine month period were down 20.9% versus the prior year period and down approximately 15% on a metals adjusted basis. We estimate that MRO sales decreased 16% or approximately 10% on a metals adjusted basis, while project sales decreased 30% or on a metals adjusted basis approximately 24%. Metals adjusted project and total sales, excluding the negative impact resulting from a decline in a large and ongoing infrastructure project, fell approximately 12% and 11%, respectively.
Gross margin at 21.4% was down 30 basis points from the 2014 period. Gross profit dollars decreased $14.4 million or 22.1%, primarily due to the sales shortfall.
Operating expenses decreased by $0.5 million, despite the $3.0 million impairment charge in the second quarter. Excluding this charge, operating expenses decreased by 7.6% or $3.5 million in the current year period, principally due to the lower headcount and reduced commissions resulting from lower sales and gross margin.
Interest expense of $0.7 million was lower than the prior year's $0.9 million, as average debt levels decreased by 19% from $56.1 million in 2014 to $45.2 million in 2015, while interest rates were near flat at 2.1%. The effective tax rate for the period of 50.8% was higher than the 38.4% rate in the prior year period, primarily due to the non-deductible portion of the impairment charge recorded in the second quarter of 2015.
Net income for the period of $2.2 million fell 80% from the $11.3 million level in the prior year period, while diluted earnings per share of $0.13 also fell at the same rate. Excluding the impairment, net income was $4.8 million while diluted earnings per share was $0.28.
Conference Call
The Company will host a conference call to discuss third quarter results today, Thursday, November 5, 2015, at 10:00 a.m., C.S.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 November 12, 2015.
Replay, Toll-Free #: 855-859-2056
Replay, Toll #: 404-537-3406
Conference ID # 63722339
About the Company
With over 40 years' 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, instrumentation, medium voltage, high temperature, portable cord, power cables, primary and secondary aluminum distribution cables, 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.
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.
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 and adjusted diluted EPS | Three Months Ended September 30, 2015 |
||||
| Amount | Diluted EPS | ||||
| Net income, as reported under GAAP | $ | 676 | $ | 0.04 | |
| Tax rate impact of the nondeductible impairment charge | 366 | 0.02 | |||
| Adjusted net income | $ | 1,042 | $ | 0.06 | |
| Adjusted net income and adjusted diluted EPS | Nine Months Ended September 30, 2015 |
|||||||
| Amount | Diluted EPS | |||||||
| Net income, as reported under GAAP | $ | 2,243 | $ | 0.13 | ||||
| Impairment charge | 2,994 | 0.18 | ||||||
| 5,237 | 0.31 | |||||||
| Tax effect of impairment charge | (472 | ) | (0.03 | ) | ||||
| Adjusted net income | $ | 4,765 | $ | 0.28 | ||||
| HOUSTON WIRE & CABLE COMPANY | |||||||||
| Consolidated Balance Sheets | |||||||||
| (In thousands, except share data) | |||||||||
| September 30, | December 31, | ||||||||
| 2015 | 2014 | ||||||||
| (unaudited) | |||||||||
| Assets | |||||||||
| Current assets: | |||||||||
| Accounts receivable, net | $ | 51,173 | $ | 61,599 | |||||
| Inventories, net | 76,940 | 88,958 | |||||||
| Deferred income taxes | 3,376 | 3,188 | |||||||
| Income taxes | 1,093 | 219 | |||||||
| Prepaids | 776 | 565 | |||||||
| Total current assets | 133,358 | 154,529 | |||||||
| Property and equipment, net | 11,045 | 8,954 | |||||||
| Intangible assets, net | 6,841 | 8,501 | |||||||
| Goodwill | 14,866 | 17,520 | |||||||
| Other assets | 371 | 309 | |||||||
| Deferred income taxes | 324 | - | |||||||
| Total assets | $ | 166,805 | $ | 189,813 | |||||
| Liabilities and stockholders' equity | |||||||||
| Current liabilities: | |||||||||
| Book overdraft | $ | 2,305 | $ | 3,113 | |||||
| Trade accounts payable | 9,257 | 7,993 | |||||||
| Accrued and other current liabilities | 13,213 | 13,282 | |||||||
| Total current liabilities | 24,775 | 24,388 | |||||||
| Debt | 38,826 | 53,847 | |||||||
| Other long term obligations | 95 | 96 | |||||||
| Deferred income taxes | - | 175 | |||||||
| Total liabilities | 63,696 | 78,506 | |||||||
| 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: 16,962,173 and 17,508,015 outstanding at September 30, 2015 and December 31, 2014, respectively | 21 | 21 | |||||||
| Additional paid-in-capital | 55,565 | 54,871 | |||||||
| Retained earnings | 107,253 | 111,233 | |||||||
| Treasury stock | (59,730 | ) | (54,818 | ) | |||||
| Total stockholders' equity | 103,109 | 111,307 | |||||||
| Total liabilities and stockholders' equity | $ | 166,805 | $ | 189,813 | |||||
| HOUSTON WIRE & CABLE COMPANY | |||||||||||||||||
| Consolidated Statements of Operations | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| (In thousands, except share and per share data) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||||
| Sales | $ | 78,260 | $ | 96,721 | $ | 237,819 | $ | 300,481 | |||||||||
| Cost of sales | 62,129 | 75,644 | 187,029 | 235,261 | |||||||||||||
| Gross profit | 16,131 | 21,077 | 50,790 | 65,220 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Salaries and commissions | 7,311 | 7,656 | 21,717 | 23,840 | |||||||||||||
| Other operating expenses | 6,300 | 6,702 | 18,629 | 19,922 | |||||||||||||
| Depreciation and amortization | 737 | 739 | 2,175 | 2,242 | |||||||||||||
| Impairment charge | - | - | 2,994 | - | |||||||||||||
| Total operating expenses | 14,348 | 15,097 | 45,515 | 46,004 | |||||||||||||
| Operating income | 1,783 | 5,980 | 5,275 | 19,216 | |||||||||||||
| Interest expense | 237 | 253 | 719 | 866 | |||||||||||||
| Income before income taxes | 1,546 | 5,727 | 4,556 | 18,350 | |||||||||||||
| Income taxes | 870 | 2,199 | 2,313 | 7,046 | |||||||||||||
| Net income | $ | 676 | $ | 3,528 | $ | 2,243 | $ | 11,304 | |||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 0.04 | $ | 0.20 | $ | 0.13 | $ | 0.64 | |||||||||
| Diluted | $ | 0.04 | $ | 0.20 | $ | 0.13 | $ | 0.64 | |||||||||
| Weighted average common shares outstanding: | |||||||||||||||||
| Basic | 17,017,334 | 17,520,810 | 17,137,730 | 17,672,010 | |||||||||||||
| Diluted | 17,072,128 | 17,608,402 | 17,190,664 | 17,749,708 | |||||||||||||
| Dividend declared per share | $ | 0.12 | $ | 0.12 | $ | 0.36 | $ | 0.35 | |||||||||
| HOUSTON WIRE & CABLE COMPANY | ||||||||||
| Consolidated Statements of Cash Flows | ||||||||||
| (Unaudited) | ||||||||||
| (In thousands) | ||||||||||
| Nine Months Ended September 30, |
||||||||||
| 2015 | 2014 | |||||||||
| Operating activities | ||||||||||
| Net income | $ | 2,243 | $ | 11,304 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
| Impairment charge | 2,994 | - | ||||||||
| Depreciation and amortization | 2,175 | 2,242 | ||||||||
| Amortization of unearned stock compensation | 668 | 633 | ||||||||
| Provision for inventory obsolescence | 351 | 905 | ||||||||
| Deferred income taxes | (727 | ) | (906 | ) | ||||||
| Other non-cash items | 70 | (28 | ) | |||||||
| Changes in operating assets and liabilities: | ||||||||||
| Accounts receivable | 10,370 | (5,038 | ) | |||||||
| Inventories | 11,667 | 9,105 | ||||||||
| Book overdraft | (808 | ) | (866 | ) | ||||||
| Trade accounts payable | 1,264 | (175 | ) | |||||||
| Accrued and other current liabilities | (278 | ) | (6,371 | ) | ||||||
| Income taxes | (909 | ) | 105 | |||||||
| Other operating activities | (288 | ) | (329 | ) | ||||||
| Net cash provided by operating activities | 28,792 | 10,581 | ||||||||
| Investing activities | ||||||||||
| Expenditures for property and equipment | (2,946 | ) | (1,810 | ) | ||||||
| Net cash used in investing activities | (2,946 | ) | (1,810 | ) | ||||||
| Financing activities | ||||||||||
| Borrowings on revolver | 233,187 | 303,870 | ||||||||
| Payments on revolver | (248,208 | ) | (301,314 | ) | ||||||
| Payment of dividends | (6,166 | ) | (6,173 | ) | ||||||
| Purchase of treasury stock | (4,659 | ) | (5,333 | ) | ||||||
| Other financing activities | - | 179 | ||||||||
| Net cash used in financing activities | (25,846 | ) | (8,771 | ) | ||||||
| Net change in cash | - | - | ||||||||
| Cash at beginning of period | - | - | ||||||||
| Cash at end of period | $ | - | $ | - | ||||||