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Houston Wire & Cable Company Reports Results for the Quarter and Year Ended December 31, 2019

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HOUSTON, March 12, 2020 (GLOBE NEWSWIRE) -- Houston Wire & Cable Company (NASDAQ:HWCC) (the "Company") announced operating results for the fourth quarter and year ended December 31, 2019.

Full Year 2019                               

  • Net income of $2.6 million, or $0.15 per diluted share; charges for the Attleboro, MA closure negatively impacted earnings by $0.15 per share
  • Sales of $338.3 million, down 5.2%
  • Gross margin of 23.6%, decrease of 30 basis points
  • Operating expense of $73.0 million, including $3.3 million of closure costs, versus $71.3 million for 2018
  • Anticipated $1.0 million annual savings from closure and relocation of Attleboro facility

Fourth Quarter 2019

  • Net loss of $0.7 million, or a loss of $0.04 per diluted share, negatively impacted $0.05 per share by the Attleboro, MA closure
  • Sales of $82.3 million, down 6.4%
  • Operating expense was down 0.3%, reflecting $1.0 million of Attleboro closure costs

Twelve Month Summary

James Pokluda, President and Chief Executive Officer commented, "2019 was a year of significant operational change for HWCC as we completed multiple strategic projects that strengthened our value proposition.  In response to new tariffs, we reset international supply lines; LEAN processes and methodologies drove continuous improvement and expense reductions; we closed our largest fastener distribution center and relocated the inventory to two new facilities that are highly efficient and better located to service customer demand; and we completed a multi-year information technology upgrade that increased our digital capabilities and enhanced enterprise strategy.  With these and several additional projects and non-recurring expenses now behind us, we enter 2020 well positioned to serve our diverse customer base."  

Sales for the year ended December 31, 2019 were $338.3 million, down 5.2% from $356.9 million in 2018.  We estimate that the supply disruptions caused by the on-going trade negotiations with China negatively impacted sales 1% and that lower metals prices in 2019 represented an additional 2% decrease.  Adjusting for the impact of metals and the trade war, we estimate sales for our project business decreased 2%, while MRO sales decreased 3%, as compared to 2018.

Gross margin at 23.6% was down 30 basis points from 2018.  "We continue to focus on pricing discipline and maintaining optimum inventory mix profiles to service customer demand, and are pleased that we have been able to substantially maintain our margins despite a decline in commodity prices," said Mr. Pokluda.

Operating expenses at $73.0 million increased 2.4% from the prior year of $71.3 million. This increase was due to expenses of $3.3 million for the closure and relocation of the Attleboro warehouse facility.  Excluding these one-time expenses, operating expenses were down $1.6 million or 2.2%.  Going forward, it is anticipated that the net annual operating expense savings resulting from these warehouse activities will be approximately $1 million.

Interest expense of $3.1 million increased 5.2% from $2.9 million in 2018.  The increase reflected $0.2 million lower average debt of $76.6 million offset by a 10 basis point increase in average interest rates to 3.8%.

The results of operations generated net income of $2.6 million, compared to $8.6 million in 2018.  $2.3 million of the decline was due to the Attleboro closure and relocation expenses.  Mr. Pokluda commented "While our financial results were not where we would like them, 2019 was a year of significant change for our organization, and I am pleased with the extraordinary team efforts that were necessary to complete multiple projects, maintain pricing discipline, execute cost control and strengthened our position in the market."     

Fourth Quarter Summary

Mr. Pokluda further commented, "Fourth quarter results were disappointing, as positive sales trends experienced early in the quarter reduced significantly in the second half of the quarter due primarily to reduced project activity in oil and gas and fastener end markets."

Sales for the fourth quarter 2019 were $82.3 million, down 6.4% from $87.9 million in 2018.  We estimate the fastener supply disruptions caused by the on-going trade negotiations with China and lower metals prices represented a 2% sales decrease.  We estimate sales for our project business decreased 16%, while MRO sales decreased 2%, as compared to 2018.

Gross margin at 22.7% decreased 120 basis points from the fourth quarter of 2018 and was down 10 basis points sequentially, as reduced demand in the latter half of the quarter significantly increased pricing pressure.  Operating expenses of $18.6 million were up 4.7% over 2018 but down 1.2% without the Attleboro closure and relocation costs, and flat sequentially.

Quarterly interest expense of $0.8 million was up 2% from the prior year period.  Average debt levels for the quarter of $80.8 million increased $10 million over 2018, while the effective interest rate decreased from 4.1% to 3.5% in 2019.  The debt increase resulted from an increase in inventory caused by inconsistency in our international supply lines and optimizing vendor contractual agreements.

The results of operations produced net loss of $0.7 million for the quarter, as compared to net income of $1.6 million in 2018.  Excluding the closure and relocation expenses, operations produced net income of $0.1 million or $0.01 per share.

Conference Call
The Company will host a conference call to discuss fourth quarter and full year results, Friday, March 13, 2020, at 10:00 a.m., C.D.T.  Hosting the call will be James Pokluda, President and Chief Executive Officer and Christopher Micklas, 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.  

Live call dial-in numbers are as follow:
Toll-Free: (800) 936-7954
International: (720) 545-0048
Conference ID #6259450

Approximately two hours after the completion of the live call, a telephone replay will be available until March 20, 2020.

Replay, Toll-Free #: (855) 859-2056
Replay, Toll #: (404) 537-3406
Conference ID # 6259450

About the Company 
With 44 years of experience in the industry, Houston Wire & Cable Company, an industrial distributor, is a large provider of products in the U.S. market. Headquartered in Houston, Texas, the Company has sales and distribution facilities strategically located throughout the United States.

Standard stock items available for immediate delivery include continuous and interlocked armor cable; instrumentation cable; medium voltage cable; high temperature wire; portable cord; power cable; primary and secondary aluminum distribution cable; 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; corrosion resistant fasteners, hose clamps, and rivets.

Comprehensive value-added services include same-day shipping, knowledgeable sales staff, inventory management programs, just-in-time delivery, logistics support, customized online 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,  
  2019     2018  
           
  (In thousands, except
share data)
 
           
Assets              
Current assets:              
Cash $ 4,096     $ 1,393  
Accounts receivable, net              
Trade   50,325       52,946  
Other   6,640       6,847  
Inventories, net   114,069       94,325  
Income tax receivable   1,353       435  
Prepaids and other current assets   1,002       737  
Other current assets   831        
Total current assets   178,316       156,683  
               
Property and equipment, net   14,589       11,456  
Intangible assets, net   10,282       11,179  
Goodwill   22,353       22,353  
Deferred income taxes   600       930  
Operating lease right-of-use assets, net   13,481        
Other assets   527       456  
Total assets $ 240,148     $ 203,057  
               
Liabilities and stockholders' equity              
Current liabilities:              
Trade accounts payable $ 13,858     $ 11,253  
Accrued and other current liabilities   23,261       19,232  
Operating lease liabilities   2,742        
Total current liabilities   39,861       30,485  
               
Debt   83,500       71,316  
Operating lease long term liabilities   11,182        
Other long-term obligations   1,977       578  
Total liabilities   136,520       102,379  
               
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: 16,556,950 and 16,611,651 shares outstanding at December 31, 2019 and 2018, respectively   21       21  
Additional paid-in capital   52,304       53,514  
Retained earnings   108,626       105,975  
Treasury stock   (57,323 )     (58,832 )
Total stockholders' equity   103,628       100,678  
               
Total liabilities and stockholders' equity $ 240,148     $ 203,057  
               

Houston Wire & Cable Company
 Consolidated Statements of Operations
(In thousands except, share and per share data)

    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2019     2018     2019     2018  
                                 
Sales   $ 82,287     $ 87,906     $ 338,286     $ 356,858  
Cost of sales     63,592       66,927       258,364       271,650  
Gross profit     18,695       20,979       79,922       85,208  
                                 
Operating expenses:                                
Salaries and commissions     9,507       9,232       37,180       38,110  
Other operating expenses     8,244       7,946       33,238       30,962  
Depreciation and amortization     748       551       2,502       2,178  
Impairment charge     120       60       120       60  
Total operating expenses     18,619       17,789       73,040       71,310  
                                 
Operating income     76       3,190       6,882       13,898  
Interest expense     766       751       3,057       2,907  
Income before income taxes     (690 )     2,439       3,825       10,991  
Income taxes     (34 )     811       1,275       2,355  
Net income   $ (656 )   $ 1,628     $ 2,550     $ 8,636  
                                 
Earnings per share:                                
Basic   $ (0.04 )   $ 0.10     $ 0.16     $ 0.53  
Diluted   $ (0.04 )   $ 0.10     $ 0.15     $ 0.52  
Weighted average common shares outstanding:                                
Basic     16,310,534       16,416,785       16,433,644       16,389,876  
Diluted     16,310,534       16,563,221       16,552,866       16,523,599  
                                 

Houston Wire & Cable Company
Consolidated Statements of Cash Flows
(In thousands)

  Year Ended December 31,
 
  2019     2018
 
               
Operating activities              
Net income $ 2,550     $ 8,636  
Adjustments to reconcile net income to net cash provided by operating activities:              
Impairment charge   120       60  
Depreciation and amortization   2,502       2,178  
Amortization of unearned stock compensation   1,471       1,298  
Non-cash lease expense   5,887        
Provision for doubtful accounts   119       73  
Provision for refund liability   84       37  
Provision for inventory obsolescence   515       615  
Deferred income taxes   431       (1,344 )
Other non-cash items   54       25  
Changes in operating assets and liabilities:              
Accounts receivable   2,625       (2,507 )
Inventories   (20,259 )     (6,825 )
Income taxes   (918 )     14  
Prepaid expenses   (265 )     1,201  
Lease payments   (6,194 )      
Book overdraft         (3,028 )
Trade accounts payable   2,605       2,804  
Accrued and other current liabilities   2,394       2,460  
Other operating activities   673       (359 )
Net cash provided by (used in) operating activities   (5,606 )     5,338  
               
Investing activities              
Expenditures for property and equipment   (2,379 )     (1,503 )
Proceeds from disposals of property and equipment   5       20  
Net cash used in investing activities   (2,374 )     (1,483 )
               
Financing activities              
Borrowings on revolver   364,671       367,513  
Payments on revolver   (352,487 )     (369,752 )
Proceeds from exercise of stock options          
Payment of dividends   (36 )     (48 )
Purchase of treasury stock/stock surrendered on vested awards   (1,172 )     (175 )
Lease payments   (293 )      
Net cash used in financing activities   10,683       (2,462 )
               
Net change in cash   2,703       1,393  
Cash at beginning of year   1,393        
               
Cash at end of year $ 4,096     $ 1,393  
Supplemental disclosures              
Cash paid during the year for interest $ 3,011     $ 2,811  
Cash paid during the year for income taxes $ 1,762     $ 3,696  

CONTACT:
Chris Micklas
Chief Financial Officer 
Direct:  713.609.2114
Fax:  713.609.2168
cmicklas@houwire.com

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