HOUSTON, TX — (Marketwired) — 11/12/13 — Houston Wire & Cable Company (NASDAQ: HWCC) (the “Company”) announced operating results for the third quarter ended September 30, 2013.
Selected results were:
Sales of $95.2 million
Operating cash flow of $4.2 million
Net loss of $3.2 million
Adjusted net income of $3.5 million excluding impairment charge relating to the Southern Wire division
Adjusted diluted EPS of $0.20 per share
Debt decreased to $44.5 million, lowest level since Q1 2010
Declared a dividend of $0.11 per share
Adjustments to net income and diluted EPS for the impairment charge are detailed in the reconciliation schedules below.
Jim Pokluda, President and Chief Executive Officer, commented, “Our third quarter sales declined 0.9% from the prior year period due to continued inconsistency in regional markets and slower than expected broad market recovery, affecting major capital project spend. We estimate that sales increased 1% when adjusted for deflation in the price of metals. Project business from our long term growth initiatives encompassing Environmental Compliance, Engineering & Construction, Industrials, LifeGuard (and other private branded products), Utility Power Generation, and Mechanical was down approximately 17% from the prior year period. Positive revenue trends continued in our major revenue stream, Maintenance, Repair and Operations (MRO), which increased approximately 8% over the third quarter of 2012, or 10% on a constant metals basis.”
Demand inconsistencies, overall competitiveness of the marketplace, increased customer rebates and softening metals prices collectively caused gross margins to shrink 50 basis points from the 2012 period, to 22% in the current year period.
Operating expenses were up $8.0 million or 55.5% primarily driven by a goodwill impairment charge of $7.6 million related to the Southern Wire division. Absent this charge, sales and marketing expenses from a higher headcount and increased medical costs, offset by lower commissions, caused a 3.2% increase from the prior year period.
Interest expense declined from $0.3 million in the 2012 period to $0.2 million in 2013, a decrease of 31.7%. Outstanding debt at September 2013 of $44.5 million was down $20.5 million or 31.5% from the $65.0 million level in 2012. The average effective interest rate fell to 1.9% from 2.0% in 2012.
Adjusted net income of $3.5 million decreased by $0.7 million from the third quarter of 2012 and adjusted diluted earnings per share were $0.20 compared to the $0.24 in the prior year period. Pokluda further commented, “We were pleased to see the continued growth in our MRO sales, which now marks the fourth consecutive quarter over quarter growth in this area of our business. Unfortunately, the return of project demand has not followed the MRO growth trend, as projects in our under-performing regions have yet to materialize as quickly as originally anticipated and continue to be pushed into future quarters. Despite the impact of these demand inconsistencies, I am pleased with the improvement in our operating cash flow, debt reduction and overall leverage and that our strong balance sheet again allowed us to return funds to our shareholders through the $0.11 per share dividend.”
Sales for the nine month period were up slightly versus the prior year period and increased approximately 3% when adjusted for deflation in the price of metals. MRO sales increased approximately 5%, reflecting a continuing recovery in certain geographic regions and growth in certain end markets. Project sales within the six long-term growth initiatives were down approximately 9% as project activity varied by region, due to delays in project starts and general market uncertainty.
“The marketplace remains very competitive and varies by region depending upon the level of economic activity. Margins at 22.2%, down 30 basis points from the prior year, reflect the pricing required to maintain market competitiveness,” said Mr. Pokluda.
Total operating expenses of $52.3 million including the effect of the goodwill impairment of $7.6 million, increased 20.3% over the prior year period. Excluding the impairment, operating expenses increased by 2.9% or $1.3 million. This was due to the increased headcount, principally in sales and marketing personnel. Pokluda further commented, “We remain committed to ensuring we provide world class service to our customers, while at the same time being appropriately aggressive as we leverage our model to maximize results. We continue to closely scrutinize operating expenses based on the current level of demand in order to improve the overall efficiency of our operation.”
Interest expense of $0.8 million was 18.9% lower than the prior year-s $0.9 million as average debt levels fell from $57.0 million in 2012 to $53.3 million in 2013 and as interest rates decreased from 2.1% in 2012 to 1.9% in 2013.
Adjusted net income for the period of $11.4 million fell 9.7% from the $12.7 million level in the prior year period and adjusted diluted earnings per share were $0.64 compared to $0.71.
The Company will host a conference call to discuss third quarter results today, Tuesday, November 12, 2013, 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 .
Approximately two hours after the completion of the live call, a telephone replay will be available until November 19, 2013.
Replay, Toll-Free #: 855-859-2056
Replay, Toll #: 404-537-3406
Conference ID # 95424648
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, primary and secondary aluminum distribution cables, private branded products, including a low-smoke, zero-halogen cable, and related hardware, including , lifting products and .
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.
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 .
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.
The accompanying Notes are an integral part of these Consolidated Financial Statements.
The accompanying Notes are an integral part of these Consolidated Financial Statements.
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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.
CONTACT:
Nicol G. Graham
Chief Financial Officer
Direct: 713.609.2125
Fax: 713.609.2168
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