Houston Wire & Cable Company Reports Results for the Quarter Ended December 31, 2014
Record Metals-Adjusted Full Year Sales
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HOUSTON, TX -- (Marketwired) -- 03/12/15 -- Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company") announced operating results for the fourth quarter and year ended December 31, 2014.
Selected quarterly results were:
- Sales of $89.5 million
- Net income of $3.7 million
- Diluted EPS of $0.21
- Paid a dividend of $0.12 cents per share on November 28, 2014
Selected highlights for 2014:
- Net income of $15.0 million
- Diluted EPS of $0.85
- Declared dividends totaling $0.47 cents per share
- Repurchased 545,000 shares, 3% of outstanding shares
Fourth Quarter Summary Jim Pokluda, President and Chief Executive Officer commented, "While we were pleased with the fourth quarter net income increase, which was up 16.5% over 2013 and 4% sequentially, we were disappointed that reduced demand from infrastructure and certain industrial markets, including oil and gas, delivered lower than expected results on the top line. Activity in Q4 slowed in most of the regions, primarily due to unfavorable economic conditions which were more pronounced towards the end of the quarter. As a result, total sales declined 5%, or approximately 2% on a metals-adjusted basis. Maintenance, Repair and Operations (MRO) sales fell 4% or approximately 1% on a metals-adjusted basis, while project sales decreased approximately 11%, or 8% on a metals-adjusted basis."
Gross margin at 23.1% increased 130 basis points from the fourth quarter of 2013. We estimate that approximately 50 basis points resulted from reduced customer sales incentives due to lower sales volume in Q4 2014, with the balance due to reduced project business, and vendor rebates which slightly exceeded our estimates. Operating expenses at $14.5 million fell 4.7% or $0.7 million from Q4 2013. Pokluda commented, "I was very pleased to see the decrease in our operating expenses, which we have worked hard to reduce over the past year. Q4's results indicate that our cost savings and expense management initiatives are working."
Interest expense of $0.3 million was higher than the $0.2 million amount in the prior year period. Average debt levels increased by 16.6% from $46.3 million in 2013 to $54.0 million in 2014, and the effective interest rate increased from 1.9% in 2013 to 2.2% in 2014. The effective tax rate for the quarter of 37.9% was down from the 2013 tax rate of 39.1% due to lower state tax rates in 2014.
Net income of $3.7 million increased 16.5% from the fourth quarter of 2013. Diluted earnings per share were $0.21 compared to $0.18 in the prior year quarter.
Twelve month summary Sales for the year were $390.0 million, up approximately 2% from 2013 and up over 4% when adjusted for the negative impact in the price of metals. Metals-adjusted 2014 full year sales, when compared to all prior years' metals adjusted sales, was also at a record level. We estimate that MRO sales increased 1%, while project sales increased 9%, on a metals-adjusted basis. Mr. Pokluda commented, "The team worked very hard in 2014 and drove solid improvements in several areas of our business. Despite difficult headwinds from an inconsistently performing industrial economy, metals deflation, and the late year negative impact from the decrease in the price of oil, we successfully increased revenue, contained expenses, grew net income (even when adjusted for the goodwill impairment charge in 2013) and continued our practice of returning earnings to shareholders through dividends and share repurchases."
Gross margin at 22.0% was down 10 basis points from the 2013 period. "Considering the competitiveness of the marketplace and the continual reduction in the price of copper throughout the year, I believe the team has performed well with its ability to maintain gross margin," said Mr. Pokluda.
Operating expenses increased 0.9% from the 2013 amount, excluding the impact of the $7.6 million goodwill impairment charge in 2013, primarily due to increased costs of the distribution network, including the addition of two new operating locations; higher commissions resulting from increased sales; and bonuses. These increases were partially offset by lower benefit and employee related expenses and salaries, as the full-time employee headcount decreased. Mr. Pokluda further commented, "We have worked diligently over the past year to reduce our operating expenses and we believe we have laid the foundation for an efficient expense structure as we go into 2015."
Interest expense of $1.2 million was higher than the prior year's $1.0 million as average debt levels increased by 16.2% from $47.8 million in 2013 to $55.6 million in 2014 and interest rates increased from 1.9% to 2.1%. The full year effective tax rate of 38.3% was consistent with the rates in the first three quarters and our historical rates.
Net income for 2014 was $15.0 million, up 2.6% from the $14.6 million (excluding the goodwill impairment charge) attained in 2013.
Conference Call The Company will host a conference call to discuss fourth quarter results on Thursday, March 12, 2015 at 10:00 a.m., C.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 19, 2015.
Replay, Toll-Free #: 855-859-2056 Replay, Toll #: 404-537-3406 Conference ID # 97658691
About the Company
With over 39 years of 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.
Houston Wire & Cable Company
Consolidated Balance Sheets
December 31,
------------------------
2014 2013
----------- -----------
(In thousands, except
share data)
Assets
Current assets:
Accounts receivable, net $ 61,599 $ 60,408
Inventories, net 88,958 96,107
Deferred income taxes 3,188 2,591
Income taxes 219 420
Prepaids 565 762
----------- -----------
Total current assets 154,529 160,288
Property and equipment, net 8,954 7,974
Intangible assets, net 8,501 10,234
Goodwill 17,520 17,520
Other assets 309 159
----------- -----------
Total assets $ 189,813 $ 196,175
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Book overdraft $ 3,113 $ 4,594
Trade accounts payable 7,993 13,637
Accrued and other current liabilities 13,282 18,772
----------- -----------
Total current liabilities 24,388 37,003
Debt 53,847 47,952
Other long-term obligations 96 97
Deferred income taxes 175 429
----------- -----------
Total liabilities 78,506 85,481
----------- -----------
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:
17,508,015 and 17,954,032 shares outstanding at
December 31, 2014 and 2013, respectively 21 21
Additional paid-in capital 54,871 55,642
Retained earnings 111,233 104,607
Treasury stock (54,818) (49,576)
----------- -----------
Total stockholders' equity 111,307 110,694
----------- -----------
Total liabilities and stockholders' equity $ 189,813 $ 196,175
=========== ===========
Houston Wire & Cable Company
Consolidated Statements of Income
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2014 2013 2014 2013
----------- ----------- ----------- -----------
Sales $ 89,530 $ 94,442 $ 390,011 $ 383,292
Cost of sales 68,812 73,809 304,073 298,633
----------- ----------- ----------- -----------
Gross profit 20,718 20,633 85,938 84,659
Operating expenses:
Salaries and commissions 7,356 7,558 31,196 30,946
Other operating expenses 6,4783 6,933 26,400 26,068
Depreciation and
amortization 677 734 2,919 2,978
Impairment of goodwill -- -- -- 7,562
----------- ----------- ----------- -----------
Total operating expenses 14,511 15,225 60,515 67,554
----------- ----------- ----------- -----------
Operating income 6,207 5,408 25,423 17,105
Interest expense 302 239 1,168 992
----------- ----------- ----------- -----------
Income before income taxes 5,905 5,169 24,255 16,113
Income taxes 2,237 2,020 9,283 8,211
----------- ----------- ----------- -----------
Net income $ 3,668 $ 3,149 $ 14,972 $ 7,902
=========== =========== =========== ===========
Earnings per share:
Basic $ 0.21 $ 0.18 $ 0.85 $ 0.44
=========== =========== =========== ===========
Diluted $ 0.21 $ 0.18 $ 0.85 $ 0.44
=========== =========== =========== ===========
Weighted average common
shares outstanding:
Basic 17,407,308 17,837,097 17,605,290 17,805,464
=========== =========== =========== ===========
Diluted 17,500,014 17,937,992 17,683,931 17,900,372
=========== =========== =========== ===========
Dividend declared per share $ 0.12 $ 0.11 $ 0.47 $ 0.42
=========== =========== =========== ===========
Houston Wire & Cable Company
Consolidated Statements of Cash Flows
Year Ended December 31,
------------------------
2014 2013
----------- -----------
(In thousands)
Operating activities
Net income $ 14,972 $ 7,902
Adjustments to reconcile net income to net cash
provided by operating activities:
Impairment of goodwill -- 7,562
Depreciation and amortization 2,919 2,978
Amortization of unearned stock compensation 868 900
Provision for inventory obsolescence 1,002 559
Deferred income taxes (923) (1,485)
Other non-cash items (43) (15)
Changes in operating assets and liabilities:
Accounts receivable (1,144) 5,516
Inventories 6,147 (12,004)
Book overdraft (1,481) 4,594
Trade accounts payable (5,644) 1,307
Accrued and other current liabilities (5,616) 3,312
Income taxes 184 (435)
Other operating activities 28 54
----------- -----------
Net cash provided by operating activities 11,269 20,745
Investing activities
Expenditures for property and equipment (2,177) (3,396)
Proceeds from disposals of property and
equipment 25 2
----------- -----------
Net cash used in investing activities (2,152) (3,394)
Financing activities
Borrowings on revolver 405,884 396,724
Payments on revolver (399,989) (407,360)
Proceeds from exercise of stock options 181 492
Payment of dividends (8,293) (7,466)
Excess tax benefit for options 7 49
Purchase of treasury stock (6,907) (64)
----------- -----------
Net cash used in financing activities (9,117) (17,625)
----------- -----------
Net change in cash -- (274)
Cash at beginning of year -- 274
----------- -----------
Cash at end of year $ -- $ --
=========== ===========
Supplemental disclosures
Cash paid during the year for interest $ 1,160 $ 998
=========== ===========
Cash paid during the year for income taxes $ 10,029 $ 10,236
=========== ===========
Source: Houston Wire & Cable Company
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