Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company")
announced operating results for the fourth quarter and year ended
December 31, 2011.
Selected highlights for 2011 compared to the prior year:
- Sales of $396.4 million increased 28.5% from $308.5
million.
- Gross margin at 22.4%, increased 210 basis points from
20.3%.
- Net income of $19.7 million, increased 128.3% from $8.6
million.
- Debt reduced by $6.8 million or 12.5% to $48.0 million from
$54.8 million.
- Diluted EPS of $1.11 increased 126.5% from $0.49 per
share.
- Declared dividends totaling $0.355 cents per share, an increase
of 4.4% from $0.34 cents per share.
Selected highlights for the fourth quarter of 2011 compared to
the prior year period:
- Record operating cash flow of $15.1 million, increased 475.2%
from $2.6 million.
- Debt reduced by $13.2 million or 21.6% to $48.0 million from
$61.2 million.
- Gross margin at 22.8%, increased 170 basis points from
21.1%.
- Net income of $3.1 million, increased 5.1% from $2.9
million.
- Diluted EPS of $0.17 increased 6.3% from $0.16 per share.
- Declared a dividend of $0.09 cents per share, an increase of
5.9% from $0.085 cents per share.
Jim Pokluda, President and Chief Executive Officer commented, "I
am pleased with our overall sales and operating performance during
2011. Our long-term growth initiatives continue to drive share
gains in our targeted markets, and although there remains a degree
of uncertainty involving flattening demand, the majority of our
markets and customers are quite healthy and optimistic regarding
their 2012 outlook. As expected, sales in the fourth quarter were
affected by the gradual slow-down in shipments to large,
long-duration projects. We expect this transition will continue
during the first half of 2012, but are optimistic that we will
replace this business with higher MRO sales and smaller, quick
turnaround project business as the year progresses."
"As we move into 2012, we will continue to invest in our
industry-leading sales force, marketing and operational resources,
new products and the geographic expansion of the mechanical
businesses through our legacy distribution network. Building on our
share gains and the 285 new customers added in 2011 will remain a
priority, as will our continued diligence in further penetrating
our chosen markets which appear to have stabilized in a moderately
growing economy."
Fourth Quarter Summary
Revenue for the quarter totaled $87.5 million, down $6.1
million, or 6.5% lower, compared to the fourth quarter 2010. Net
income rose to $3.1 million, an increase of 5.1% from $2.9 million
in the fourth quarter of 2010 due to significant gross margin
improvement and expense management.
Overall market strength remained intact and project activity
within the five long-term growth initiatives of Utility Power
Generation, Environmental Compliance, Engineering &
Construction, Industrials and LifeGuard™, our proprietary
private-label product, was a significant component of overall
revenue. New project sales increased as a result of several small
to medium sized orders from plant expansions and upgrades. Total
project sales decreased approximately 13% for the quarter due to a
reduction in "mega" project backlog billings experienced in the
prior year period.
Sales activity in the Repair and Replacement market, also
referred to as Maintenance, Repair and Operations (MRO), was down
approximately 5% and remained negatively impacted in the quarter as
a result of the implementation of a new software system in the
acquired mechanical wire businesses. Excluding the estimated impact
of the software implementation, management estimates MRO sales were
up approximately 3% to 5% for the fourth quarter of 2011.
Management also estimates that increased copper prices in our
inventory during the quarter compared to those in the prior year
period, had a favorable impact on sales of approximately 4%.
Gross profit at $19.9 million increased 1% from $19.8 million
due to increased profitability realized from higher margin on
smaller sized project business and improved profitability on MRO
business. Gross margins increased 170 basis points from 21.1% to
22.8%.
Operating expenses decreased 0.4% from the prior year period,
primarily due to decreased commission expense and other operating
expenses, offset by higher healthcare costs and systems integration
expenses. However, as a percentage of sales, operating expenses
increased to 16.7% in the fourth quarter of 2011 from 15.7% in the
prior year period.
Interest expense of $0.3 million was lower than the $0.4 million
incurred in fourth quarter of 2010, as average debt levels fell
from $54.9 million in the fourth quarter of 2010 to $53.0 million
in the fourth quarter of 2011, primarily due to the decrease in
working capital.
Operating income at $5.3 million was up 4.3% from the $5.1
million achieved in the prior year period. The effective tax rate
for the quarter of 38.7% was higher than the 38.3% in 2010, due to
the impact of higher state income tax rates.
Net income for the quarter was $3.1 million, a 5.1% increase
over the prior year period and diluted earnings per share were
$0.17, up from the prior year period at $0.16 per share.
Twelve Month Results Summary
Revenue for 2011 increased 28.5%, reflecting 19.1% organic sales
growth and $36.2 million in increased sales from the June 2010
acquired businesses. MRO sales increased approximately 8% to 10%
for the period and sales within our five long-term growth
initiatives were up approximately 30%. Management estimates that
copper inflation, which primarily affects our stock shipments and
lags broad market moves, had a favorable impact on sales of
approximately 5%.
Gross profit of $88.9 million increased 42.0% from $62.6 million
in the prior year due to the increased level of sales and the
improvement in gross margins. Gross margins increased from 20.3% to
22.4%, as a result of improved demand over the prior year.
Operating expenses increased 16.7% from the prior year,
primarily due to expenses of the acquired businesses, of which only
six months were included in the comparable period. Operating
expenses as a percentage of sales decreased to 14.0% from 15.4% in
the prior year, due to operating leverage, ongoing cost control
initiatives and the reversal of compensation expense of $1.7
million, recorded prior to 2011, resulting from the forfeiture of
options upon the departure of our former CEO. Operating income of
$33.4 million was more than twice the $15.0 million level in
2010.
Interest expense of $1.4 million was higher than the prior year,
as average debt levels rose from $33.5 million in 2010 to $58.5
million in 2011, primarily as a result of the June 2010 acquisition
and to fund the increase in working capital.
The effective tax rate for the period of 38.4% was lower than
the prior period level of 39.1%, primarily because 2010 reflected
the impact of non-deductible acquisition expenses.
Net income for the period more than doubled to $19.7 million,
from $8.6 million in the prior year.
Conference Call
The Company will host a conference call to discuss fourth
quarter results on Thursday March 15, 2012 at 10:00 am CT. 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 22, 2012.
Replay Dial In: 855.859.2056 International Replay: 404.537.3406
Confirmation Code: 60166235
About the Company
With over 35 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, 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,
------------------------
2011 2010
----------- -----------
(In thousands, except
share data)
Assets
Current assets:
Accounts receivable, net $ 59,731 $ 67,838
Inventories, net 69,517 67,503
Deferred income taxes 2,268 2,399
Income taxes 1,693 --
Prepaids 828 763
----------- -----------
Total current assets 134,037 138,503
Property and equipment, net 6,029 6,255
Intangible assets, net 13,700 15,557
Goodwill 25,082 25,082
Other assets 305 93
----------- -----------
Total assets $ 179,153 $ 185,490
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Book overdraft $ 2,270 $ 3,055
Trade accounts payable 10,099 19,987
Accrued and other current liabilities 19,101 19,781
Income taxes -- 1,036
----------- -----------
Total current liabilities 31,470 43,859
Debt 47,967 54,825
Other long-term obligations 128 141
Deferred income taxes 2,250 945
----------- -----------
Total liabilities 81,815 99,770
----------- -----------
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:
17,811,806 and 17,748,487 shares outstanding at
December 31, 2011 and 2010, respectively 21 21
Additional paid-in capital 55,760 58,642
Retained earnings 93,588 80,187
Treasury stock (52,031) (53,130)
----------- -----------
Total stockholders' equity 97,338 85,720
----------- -----------
Total liabilities and stockholders' equity $ 179,153 $ 185,490
=========== ===========
Houston Wire & Cable Company
Consolidated Statements of Income
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2011 2010 2011 2010
----------- ----------- ----------- -----------
Sales $ 87,481 $ 93,549 $ 396,410 $ 308,522
Cost of sales 67,564 73,793 307,515 245,932
----------- ----------- ----------- -----------
Gross profit 19,917 19,756 88,895 62,590
Operating expenses:
Salaries and commissions 7,511 7,800 28,053 25,281
Other operating expenses 6,399 6,102 24,513 20,565
Depreciation and
amortization 701 766 2,952 1,738
----------- ----------- ----------- -----------
Total operating expenses 14,611 14,668 55,518 47,584
----------- ----------- ----------- -----------
Operating income 5,306 5,088 33,377 15,006
Interest expense 325 378 1,424 844
----------- ----------- ----------- -----------
Income before income taxes 4,981 4,710 31,953 14,162
Income taxes 1,929 1,806 12,276 5,543
----------- ----------- ----------- -----------
Net income $ 3,052 $ 2,904 $ 19,677 $ 8,619
=========== =========== =========== ===========
Earnings per share:
Basic $ 0.17 $ 0.16 $ 1.11 $ 0.49
=========== =========== =========== ===========
Diluted $ 0.17 $ 0.16 $ 1.11 $ 0.49
=========== =========== =========== ===========
Weighted average common
shares outstanding:
Basic 17,685,489 17,662,291 17,679,524 17,657,682
=========== =========== =========== ===========
Diluted 17,798,404 17,731,157 17,801,134 17,710,123
=========== =========== =========== ===========
Dividend declared per share $ 0.09 $ 0.085 $ 0.355 $ 0.34
=========== =========== =========== ===========
Houston Wire & Cable Company
Consolidated Statements of Cash Flows
Year Ended December 31,
------------------------
2011 2010
----------- -----------
(In thousands)
Operating activities
Net income $ 19,677 $ 8,619
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,952 1,738
Amortization of capitalized loan costs 14 46
Amortization of unearned stock compensation (707) 2,260
Provision for doubtful accounts (9) 93
Provision for returns and allowances 66 (118)
Provision for inventory obsolescence 826 734
(Gain) loss on disposals of property and
equipment (2) 26
Deferred income taxes 283 (1,603)
Changes in operating assets and liabilities:
Accounts receivable 8,050 (9,785)
Inventories (2,840) 1,059
Prepaids (65) 2,954
Other assets (126) 354
Book overdraft (785) 1,668
Trade accounts payable (9,888) 5,010
Accrued and other current liabilities (337) 5,466
Long term liabilities (13) (3)
Income taxes (2,777) 755
----------- -----------
Net cash provided by operating activities 14,319 19,273
Investing activities
Expenditures for property and equipment (1,319) (459)
Proceeds from disposals of property and
equipment 452 956
Cash paid for acquisition (343) (51,162)
----------- -----------
Net cash used in investing activities (1,210) (50,665)
Financing activities
Borrowings on revolver 405,741 352,276
Payments on revolver (412,599) (314,930)
Deferred loan cost (100) --
Proceeds from exercise of stock options 114 42
Payment of dividends (6,276) (6,003)
Excess tax benefit for options 37 7
Purchase of treasury stock (26) --
----------- -----------
Net cash provided by (used in) financing
activities (13,109) 31,392
----------- -----------
Net change in cash -- --
Cash at beginning of year -- --
----------- -----------
Cash at end of year $ -- $ --
=========== ===========
Supplemental disclosures
Cash paid during the year for interest $ 1,445 $ 743
=========== ===========
Cash paid during the year for income taxes $ 14,732 $ 6,191
=========== ===========
CONTACT: Nicol G. Graham Chief Financial Officer Direct:
713.609.2125 Fax: 713.609.2168 Email Contact
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