Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company")
announced operating results for the second quarter ended June 30,
2012.
Selected highlights were:
- Sales of $98.1 million
- Gross margin reached 22.7%
- Operating margins reached 7.7%
- Net income of $4.4 million
- Diluted EPS of $0.25
- Declared dividends totaling $0.09 cents per share
Second Quarter Summary
Jim Pokluda, President and Chief Executive Officer, commented,
"I am pleased that we achieved a 4% increase in sales over the
first quarter of 2012, which was itself 8% higher than the fourth
quarter of 2011, although 5% lower than the prior year quarter.
When adjusted for an estimated 4% negative impact from metal price
fluctuations, revenues were down slightly less than 1% year over
year and up approximately 8% sequentially. Nevertheless, market
demand remains inconsistent. Comparables to the prior year period
are difficult, as the second quarter of 2011 had reflected 32.9%
organic sales growth over the prior year as a result of significant
project billings and delayed MRO (maintenance, repair and
operations) spend from the recession.
"Similar to the first quarter, customer activity and market
conditions showed some signs of improvement.We continued to invest
in additional sales and marketing resources and to expand our
product lines, and we added 107 new customers during the quarter,
which drove further share gains. We believe the collective benefits
of these ongoing investments will provide a broader footprint in
the market and will generate additional traction for our business
as the market regains its strength."
Gross margins continued the recent upward trend on a sequential
basis reaching 22.7%, only 20 basis points lower than the prior
year period.
Operating expenses increased 20.7% or $2.5 million from the
prior year, or 3.6% or $0.5 million excluding the impact of the
$2.0 million credit in 2011, resulting from a stock compensation
adjustment, which we believe provides a more meaningful comparison.
Excluding the stock compensation adjustment, this increase was
primarily the result of healthcare costs associated with higher
claims and an increase in headcount. The sequential increase in
sales, coupled with our expense control leverage, moved operating
margins to 7.7%, up 50 basis points from the first quarter of 2012.
The resulting operating income of $7.5 million was up 10.7%
sequentially.
Interest expense of $0.3 million was lower than the $0.4 million
in prior year period, as average debt levels fell from $63.9
million in 2011 to $60.9 million in the second quarter of 2012, and
the effective interest rate declined from 2.3% in 2011 to 2.1% in
2012. The effective tax rate for the quarter of 38.6% remained in
line with the 2011 annual rate and with the 38.5% level in the
comparable 2011 quarter.
Net income increased sequentially by 10.1% to $4.4 million, from
$4.0 million. Diluted earnings per share were $0.25, compared to
the $0.23 on a sequential basis.
Six month summary
Sales activity within the five long-term growth initiatives of
Utility Power Generation, Environmental Compliance, Engineering
& Construction, Industrials and LifeGuard™, our proprietary
private-label product, remained active and continued to be the
primary drivers of our sales. Project sales during the current
period were primarily composed of a number of small to medium sized
projects, as compared to the large projects that drove sales in the
prior year period.
Daily sales for the period were somewhat choppy, as we
experienced solid volume and sales growth in regions that have come
out of the recession, while other regions are still performing
below our expectations. Sales declines from the prior year period
were equally dispersed between project and MRO markets, which was
primarily due to the slow start in activity during the first two
months of the year and the completion of several mega-project jobs
in the prior year period. For the current period, management
estimates that metals market price fluctuations negatively impacted
revenues by approximately 3%.
Gross margins were near flat at 22.5% for the 2012 period
compared to 22.6% for the prior year. "Pricing remains competitive
in the marketplace, but I am pleased that we have maintained
margins in these circumstances," said Mr. Pokluda. Gross profit
dollars decreased by $2.6 million or 5.6% primarily due to the
sales shortfall.
Operating expenses increased by 10.5% or $2.8 million in the
current year, or 3.9% or $1.1 million (excluding the $1.7 million
year-to-date impact of the credit in 2011, resulting from the stock
compensation adjustment), primarily due to the impact of health
insurance costs associated with higher claims and increased
headcount and higher consulting and professional fees.
Interest expense of $0.6 million was lower than the prior year's
$0.7 million as average debt levels fell from $59.6 million in 2011
to $54.3 million in 2012 and as interest rates decreased from 2.3%
to 2.1%. The effective tax rate for the period of 38.6% was in line
with both the prior year period and the 2011 annual rate.
Net income for the period of $8.4 million fell 20.6% from the
$10.6 million level in the prior year period, excluding the impact
of the stock compensation reversal.
Conference Call
The Company will host a conference call to discuss first quarter
results on Thursday, August 9, 2012 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 August 16, 2012.
Replay Dial In: 404.537.3406
International Replay: 855.859.2056
Confirmation Code: 16376463
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
(In thousands, except share data)
June 30, December 31,
2012 2011
------------ ------------
(unaudited)
Assets
Current assets:
Accounts receivable, net $ 62,698 $ 59,731
Inventories, net 81,910 69,517
Deferred income taxes 2,104 2,268
Income taxes 163 1,693
Prepaids 1,187 828
------------ ------------
Total current assets 148,062 134,037
Property and equipment, net 5,883 6,029
Intangible assets, net 12,833 13,700
Goodwill 25,082 25,082
Other assets 306 305
------------ ------------
Total assets $ 192,166 $ 179,153
============ ============
Liabilities and stockholders' equity
Current liabilities:
Book overdraft $ 2,656 $ 2,270
Trade accounts payable 12,503 10,099
Accrued and other current liabilities 11,322 19,101
------------ ------------
Total current liabilities 26,481 31,470
Debt 60,463 47,967
Other long term obligations 115 128
Deferred income taxes 1,874 2,250
------------ ------------
Total liabilities 88,933 81,815
------------ ------------
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000
shares authorized, none issued and
outstanding 0 0
Common stock, $0.001 par value; 100,000,000
shares authorized: 20,988,952 shares issued:
17,830,595 and 17,811,806 outstanding at June
30, 2012 and December 31, 2011, respectively 21 21
Additional paid-in-capital 56,009 55,760
Retained earnings 98,838 93,588
Treasury stock (51,635) (52,031)
------------ ------------
Total stockholders' equity 103,233 97,338
------------ ------------
Total liabilities and stockholders' equity $ 192,166 $ 179,153
============ ============
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Income
(Unaudited)
(In thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2012 2011 2012 2011
----------- ----------- ----------- -----------
Sales $ 98,082 $ 103,420 $ 192,544 $ 203,147
Cost of sales 75,830 79,700 149,154 157,175
----------- ----------- ----------- -----------
Gross profit 22,252 23,720 43,390 45,972
Operating expenses:
Salaries and commissions 7,695 5,415 14,924 12,719
Other operating expenses 6,288 5,980 12,662 12,043
Depreciation and
amortization 739 798 1,472 1,525
----------- ----------- ----------- -----------
Total operating expenses 14,722 12,193 29,058 26,287
----------- ----------- ----------- -----------
Operating income 7,530 11,527 14,332 19,685
Interest expense 329 395 595 728
----------- ----------- ----------- -----------
Income before income taxes 7,201 11,132 13,737 18,957
Income taxes 2,780 4,290 5,300 7,297
----------- ----------- ----------- -----------
Net income $ 4,421 $ 6,842 $ 8,437 $ 11,660
=========== =========== =========== ===========
Earnings per share:
Basic $ 0.25 $ 0.39 $ 0.48 $ 0.66
=========== =========== =========== ===========
Diluted $ 0.25 $ 0.38 $ 0.47 $ 0.66
=========== =========== =========== ===========
Weighted average common
shares outstanding:
Basic 17,725,549 17,682,217 17,712,075 17,673,601
=========== =========== =========== ===========
Diluted 17,805,979 17,816,061 17,810,441 17,795,720
=========== =========== =========== ===========
Dividend declared per share $ 0.09 $ 0.09 $ 0.18 $ 0.175
=========== =========== =========== ===========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months
Ended June 30,
--------------------------
2012 2011
------------ ------------
Operating activities
Net income $ 8,437 $ 11,660
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,472 1,525
Amortization of capitalized loan costs 9 44
Amortization of unearned stock compensation 537 (1,225)
Provision for doubtful accounts 15 68
Provision for returns and allowances (55) 132
Provision for inventory obsolescence 350 319
Deferred income taxes (218) 275
Changes in operating assets and liabilities:
Accounts receivable (2,927) 1,684
Inventories (12,743) (13,096)
Prepaids (359) (357)
Other assets (10) (118)
Book overdraft 386 (430)
Trade accounts payable 2,404 (5,083)
Accrued and other current liabilities (7,779) (1,607)
Income taxes receivable/(payable) 1,527 (837)
Other long term obligations (13) (7)
------------ ------------
Net cash used in operating activities (8,967) (7,053)
Investing activities
Expenditures for property and equipment (459) (462)
Cash paid for acquisition 0 (343)
------------ ------------
Net cash used in investing activities (459) (805)
Financing activities
Borrowings on revolver 200,578 216,710
Payments on revolver (188,082) (205,909)
Proceeds from exercise of stock options 137 112
Excess tax benefit for stock options 34 37
Payment of dividends (3,187) (3,092)
Purchase of treasury stock (54) 0
------------ ------------
Net cash provided by financing activities 9,426 7,858
------------ ------------
Net change in cash - -
Cash at beginning of period - -
------------ ------------
Cash at end of period $ - $ -
============ ============
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
CONTACT: Nicol G. Graham Chief Financial Officer Direct:
713.609.2125 Fax: 713.609.2168 ngraham@houwire.com
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