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Houston Wire & Cable Company Announces Results for the Quarter Ended September 30, 2020, Update on Continuing Cost and Debt Reduction - GlobeNewswire

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HOUSTON, Nov. 05, 2020 (GLOBE NEWSWIRE) -- Houston Wire & Cable Company (NASDAQ: HWCC) (the “Company”) announced operating results for the third quarter ended September 30, 2020 and progress on its continuing cost and debt reduction programs.

Third Quarter 2020

  • Revenue of $70.2 million up 5.2% sequentially from $66.8 million in Q2
  • Operating expenses as a percentage of sales decreased 252 bps, a 5.6% improvement sequentially versus Q2
  • Revolver debt decreased $19.3 million or 25.8% sequentially versus Q2 and $30.6 million or 35.7% versus Q1 2020
  • Return to positive EBITDA of $0.4 million for Q3
  • Net loss of ($0.7) million identical to a net loss of ($0.7) million in the third quarter of 2019

Operational Update

President & Chief Executive Officer James Pokluda commented, “Throughout the third quarter, the Company made notable progress with the execution of its business recovery plan. Performance improved in several key areas including total gross profit contribution, operating expense reduction, debt reduction, and return to positive EBITDA. Given present market conditions, and understanding that economic recovery will evolve overtime, we exit the quarter an increasingly lean and profitable Company and better positioned for the period ahead.”

Third quarter results were generally better sequentially versus the second quarter, although COVID headwinds persisted. Reduced petrochemical prices curtailed investments in upstream and midstream oil and gas markets, and diminished consumer confidence stalled investments in large capital projects. Given the continued economic uncertainty of today’s operating environment, our goals remain to control what is within our realm, increase profitability through gross margin optimization and expense management, and to manage working capital prudently to drive positive cash flow.

Third quarter highlights include:

  • Total operating expenses of $15.5 million improved 20.5% or $4.0 million over Q3 2019, $0.9 million or 5.6% sequentially over Q2, and $2.5 million or 13.9% over Q1 2020
  • Revolver debt at $55.3 million decreased $22.6 million or 29.0% from Q3 2019, $19.3 million or 25.8% sequentially over Q2, and $30.6 million or 35.7% versus Q1 2020
  • Cash provided by operating activities was $14.6 million, as we monetized working capital
  • Revenue increased 5.2% sequentially
  • Return to positive EBITDA

The operating expense measures taken in the second and third quarters reduced third quarter operating expenses by $0.9 million, or approximately 5.6% sequentially versus the second quarter. Second quarter operating expenses included severance and accrued vacation payments, and other expenses generated by shrinking our cost structure. We hope to realize additional savings in the fourth quarter, as we see the full impact of our expense reduction initiatives, as well as savings from on-going LEAN projects, processes and controls.

Selected Third Quarter 2020 Financial Highlights

  Three Months Ended September 30
  2020
  2019
  (in thousands, except per share data)
Sales $ 70,247     $ 85,403  
Gross Margin (1)   21.3 %     22.8 %
Operating Expenses
Interest Expense
$
$
15,509
344
    $
$
19,518
812
 
Diluted Earnings (Loss) per share $ (0.04 )   $ (0.04 )
Revolver Debt $ 55,288     $ 77,903  

(1)   Gross margin decreased to 21.3% in 2020 from 22.8% in 2019 primarily due to the decline in demand for our products as a result of the decline in oil and gas prices, the pandemic and lower vendor rebates and prompt pay discounts.


Improved Liquidity

The Company made great progress reducing net debt in the third quarter. The Company received a Paycheck Protection Program (“PPP”) loan of $6.2 million on May 4, 2020 funded under the Coronavirus Aid, Relief, and Economic Security Act. Our PPP loan and Revolver debt have been reduced to $57.8 million at November 4, 2020. Debt in 2020 hit a peak of approximately $95 million in the middle of the first quarter, which is a total debt reduction of $37.2 million. Our Revolver debt at November 4, 2020 was $51.6 million. The Company’s year-end goal is to reduce Revolver debt to $45 million, which would be a total Revolver debt reduction of approximately $50 million from peak to trough. The Company believes this substantial debt reduction reduces financial risk, without any deterioration of its ability to provide excellent customer service.

In addition to the programs mentioned above, we are pursuing the following medium-term initiatives to build the value of the Company:

  • Concentrating the Company’s business development in areas less-exposed to the cyclicality of oil prices
  • Maintaining a tight linkage between the Company’s performance and executive compensation
  • Investing in Revenue, Gross Margin, and Expense Reduction initiatives that will impact 2021 and beyond

Mr. Pokluda concluded, “The Board of Directors and I sincerely appreciate all the hard work, sacrifice, and contributions our team has made in order to accomplish these results and position us for continued improvements in the periods ahead.”

About the Company 
With 45 years’ 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
(In thousands, except share data)

    September 30,     December 31,  
    2020     2019  
    (unaudited)        
Assets                
Current assets:                
Cash   $     $ 4,096  
Accounts receivable, net:                
Trade     46,092       50,325  
Other     2,138       6,640  
Inventories, net     89,259       114,069  
Income taxes     1,331       1,353  
Prepaids and other current assets     2,760       1,833  
Total current assets     141,580       178,316  
                 
Property and equipment, net     15,351       14,589  
Intangible assets, net     10,164       10,282  
Goodwill     22,353       22,353  
Deferred income taxes     1,041       600  
Operating lease right-of-use assets, net     12,267       13,481  
Other assets     484       527  
Total assets   $ 203,240     $ 240,148  
                 
Liabilities and stockholders’ equity                
Current liabilities:                
Book overdraft   $ 532     $  
Trade accounts payable     8,636       13,858  
Accrued and other current liabilities     15,661       23,261  
Operating lease liabilities     2,967       2,742  
Total current liabilities     27,796       39,861  
                 
Revolver Debt     55,288       83,500  
Paycheck Protection Program Loan     6,185        
Operating lease long term liabilities     9,841       11,182  
Other long term liabilities     2,224       1,977  
Total liabilities     101,334       136,520  
                 
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: 16,553,637 and 16,556,950 outstanding                 
at September 30, 2020 and December 31, 2019, respectively     21       21  
Additional paid-in-capital     52,821       52,304  
Retained earnings     106,273       108,626  
Treasury stock, at cost     (57,209 )     (57,323 )
Total stockholders’ equity     101,906       103,628  
Total liabilities and stockholders’ equity   $ 203,240     $ 240,148  

HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2020     2019     2020     2019  
                         
Sales   $ 70,247     $ 85,403     $ 220,557     $ 255,999  
Cost of sales     55,257       65,972       171,739       194,772  
Gross profit     14,990       19,431       48,818       61,227  
                                 
Operating expenses:                                
Salaries and commissions     7,503       9,249       25,384       27,673  
Other operating expenses     7,120       9,602       21,714       24,994  
Depreciation and amortization     886       667       2,468       1,754  
Impairment charge                 373        
Total operating expenses     15,509       19,518       49,939       54,421  
                                 
Operating income (loss)     (519 )     (87 )     (1,121 )     6,806  
Interest (expense)     (344 )     (812 )     (1,631 )     (2,291 )
Income (loss) before income taxes     (863 )     (899 )     (2,752 )     4,515  
Income tax (expense) benefit     128       178       399       (1,309 )
Net income (loss)   $ (735 )   $ (721 )   $ (2,353 )   $ 3,206  
                                 
Earnings (loss) per share:                                
Basic   $ (0.04 )   $ (0.04 )   $ (0.14 )   $ 0.19  
Diluted   $ (0.04 )   $ (0.04 )   $ (0.14 )   $ 0.19  
Weighted average common shares outstanding:                                
Basic     16,480,449       16,443,446       16,436,960       16,475,131  
Diluted     16,480,449       16,443,446       16,436,960       16,558,068  

HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) 

    Nine Months
Ended September 30,
 
    2020     2019  
             
Operating activities                
Net (loss) income   $ (2,353 )   $ 3,206  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
Impairment of intangibles     373        
Depreciation and amortization     2,468       1,754  
Amortization of unearned stock compensation     666       1,083  
Non-cash lease expense     2,686       5,143  
Provision for refund liability     366       751  
Provision for inventory obsolescence     907       426  
Deferred income taxes     (441 )     453  
Other non-cash items     175       101  
Changes in operating assets and liabilities:                
Accounts receivable     8,603       (1,546 )
Inventories     23,903       (11,968 )
Prepaids     (723 )     (771 )
Other assets     (204 )     (817 )
Lease payments     (2,694 )     (3,016 )
Book overdraft     532        
Trade accounts payable     (5,222 )     1,036  
Accrued and other current liabilities     (8,385 )     (1,186 )
Income taxes     22       (888 )
Other operating activities     247       1,311  
Net cash provided by (used in) operating activities     20,926       (4,928 )
                 
Investing activities                
Expenditures for property and equipment     (1,510 )     (1,742 )
Expenditures for intangibles     (838 )      
Net cash used in investing activities     (2,348 )     (1,742 )
                 
Financing activities                
Borrowings on revolver     227,805       266,322  
Payments on revolver     (256,017 )     (259,735 )
Proceeds from Paycheck Protection Program loan     6,185        
Payment of dividends     (1 )     (30 )
Purchase of treasury stock/stock surrendered on vested awards     (35 )     (1,120 )
Lease payments     (611 )     (154 )
Net cash (used in) provided by financing activities     (22,674 )     5,283  
                 
Net change in cash     (4,096 )     (1,387 )
Cash at beginning of period     4,096       1,393  
                 
Cash at end of period   $     $ 6  
                 
Supplemental disclosures of non-cash activities                
Purchase of assets under finance leases   $ 1,137     $ 1,878  

 


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Houston Wire & Cable Company Announces Results for the Quarter Ended September 30, 2020, Update on Continuing Cost and Debt Reduction - GlobeNewswire
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