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Houston Wire & Cable Company Reports Results for the Quarter Ended December 31, 2013

HOUSTON, TX -- (Marketwired) -- 03/13/14 -- Houston Wire & Cable Company (NASDAQ: HWCC) (the "Company") announced operating results for the fourth quarter and year ended December 31, 2013.

Selected results were:

  • Sales of $94.4 million
  • Net income of $3.1 million
  • Diluted EPS of $0.18
  • Declared a dividend of $0.11 per share

Selected highlights for 2013:

  • Metals adjusted sales flat with 2012
  • Diluted EPS of $0.44, or $0.82 excluding the goodwill impairment
  • Declared dividends totaling $0.42 per share
  • Operating cash flow of $20.7 million
  • Debt to equity ratio of 43.3%

Fourth Quarter Summary
Jim Pokluda, President and Chief Executive Officer commented, "The inconsistent market strength trends experienced in the first three quarters of the year continued in the fourth quarter. As a result, our fourth quarter year-over-year results were again mixed as we experienced an increase in Maintenance, Repair and Operations (MRO) sales of just over 3%, or approximately 6% on a metals adjusted basis, but a project sales decrease of approximately 30%, or 27% on a metals adjusted basis. Total sales, on a metals adjusted basis, fell approximately 7% from Q4 2012."

Despite the continued overall competitiveness of the marketplace, varying levels of market demand, and softening metals prices, gross margin at 21.8% was near flat sequentially and up 70 basis points over the prior year period, which contained a greater amount of low margin project sales. Operating expenses were up 4.4% compared to Q4 2012, primarily due to headcount related expenses and the costs of expanding the distribution network.

Interest expense of $0.2 million was down from the $0.3 million in the prior year period. Average debt levels fell by 23.8% from $60.8 million in 2012 to $46.3 million in 2013, and the effective interest rate declined from 2.0% in 2012 to 1.9% in 2013. The effective tax rate for the quarter of 39.1% was up slightly from the 2012 tax rate of 38.6% due to higher state tax rates.

Net income of $3.1 million decreased 27.9% from the fourth quarter of 2012. Diluted earnings per share was $0.18 compared to $0.25 in the prior year quarter.

Twelve month summary
Sales for the year were $383.3 million or essentially flat with 2012 on a metals adjusted basis. We estimate that metals adjusted MRO sales increased 7%, while project sales decreased 14%. Mr. Pokluda commented, "We were encouraged by the continued growth of our MRO sales, which is the largest component of overall revenues, but disappointed with our project sales results, which have been a function of ongoing delays and lack of industry investment in large capital projects. While certain industries such as oil and gas are outside of this trend, many industries have adopted conservative capital allocation strategies which favor high levels of plant utilization over more aggressive strategies which have traditionally involved new plant construction, expansion and investment. We continue to see large regional demand variances, with the West and Central the least active, the Northeast and Southeast showing signs of recovery, and the Gulf Coast extremely busy. Until we see activity levels in the underperforming regions improve, our sales and net income results will be constrained."

Gross margin was flat with 2012. "Considering the continuing competitive pricing environment, I was pleased that we managed to maintain margins at their present level. Our 7% MRO volume gains helped to support overall company margins," said Mr. Pokluda.

Operating expenses increased 16.3%, primarily as a result of the $7.6 million impairment of goodwill on the Southern Wire reporting unit. Excluding the impairment charge, operating expenses increased by 3.3% or $1.9 million in the current year, primarily due to the impact of the higher headcount and higher operating expenses related to additional facilities and higher inventory levels. Mr. Pokluda further commented, "We have taken steps to reduce the level of operating expenses, including a reduction in headcount, which we expect to save approximately $1.0 million to $1.5 million on an annual basis."

Interest expense of $1.0 million was lower than the prior year's $1.3 million as average debt levels fell by 17.5% from $58.0 million in 2012 to $47.8 million in 2013 and interest rates decreased from 2.1% to 1.9%. The effective tax rate, excluding the impairment of goodwill, was 38.4% unchanged from 2012.

Net income for 2013 was $7.9 million, or $14.6 million excluding the impairment of goodwill. Adjusted net income fell 14.4% from the $17.0 million level in the prior year.

Conference Call
The Company will host a conference call to discuss fourth quarter results on Thursday, March 13, 2014 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 March 20, 2014.

Replay, Toll-Free #: 855-859-2056
Replay, Toll #: 404-537-3406
Conference ID # 9507440

About the Company
With 39 years of 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 cable; control and power cable; electronic wire and cable; flexible and portable cords; instrumentation and thermocouple cable; lead and high temperature cable; medium voltage cable; premise and category wire and cable; primary and secondary aluminum distribution cable; wire rope and wire rope slings, as well as synthetic slings, chain, shackles and other related hardware. We also offer private branded products including our proprietary brand, LifeGuard™, a low-smoke, zero-halogen cable. 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,
                                                        2013        2012
                                                     ----------  ----------
                                                      (In thousands, except
                                                           share data)

Current assets:
  Cash                                               $       --  $      274
  Accounts receivable, net                               60,408      65,892
  Inventories, net                                       96,107      84,662
  Deferred income taxes                                   2,591       2,455
  Income taxes                                              420          --
  Prepaids                                                  762         841
                                                     ----------  ----------
Total current assets                                    160,288     154,124

Property and equipment, net                               7,974       5,824
Intangible assets, net                                   10,234      11,967
Goodwill                                                 17,520      25,082
Other assets                                                159         158
                                                     ----------  ----------
Total assets                                         $  196,175  $  197,155
                                                     ==========  ==========

Liabilities and stockholders' equity
Current liabilities:
  Book overdraft                                     $    4,594  $       --
  Trade accounts payable                                 13,637      12,330
  Accrued and other current liabilities                  18,772      15,379
  Income taxes                                               --           5
                                                     ----------  ----------
Total current liabilities                                37,003      27,714

Debt                                                     47,952      58,588
Other long-term obligations                                  97         103
Deferred income taxes                                       429       1,670
                                                     ----------  ----------
Total liabilities                                        85,481      88,075
                                                     ----------  ----------

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: 17,954,032
   and 17,899,499 shares outstanding at December 31,
   2013 and 2012, respectively                               21          21
  Additional paid-in capital                             55,642      55,291
  Retained earnings                                     104,607     104,252
  Treasury stock                                        (49,576)    (50,484)
                                                     ----------  ----------
Total stockholders' equity                              110,694     109,080
                                                     ----------  ----------

Total liabilities and stockholders' equity           $  196,175  $  197,155
                                                     ==========  ==========

                        Houston Wire & Cable Company
                      Consolidated Statements of Income

                                Three Months Ended          Year Ended
                                   December 31,            December 31,
                             ----------------------- -----------------------
                                 2013        2012        2013        2012
                             ----------- ----------- ----------- -----------
                             (In thousands, except share and per share data)

Sales                        $    94,442 $   104,379 $   383,292 $   393,036
Cost of sales                     73,809      82,362     298,633     306,017
                             ----------- ----------- ----------- -----------
Gross profit                      20,633      22,017      84,659      87,019

Operating expenses:
  Salaries and commissions         7,558       7,611      30,946      30,013
  Other operating expenses         6,933       6,221      26,068      25,139
  Depreciation and
   amortization                      734         747       2,978       2,941
  Impairment of goodwill              --          --       7,562          --
                             ----------- ----------- ----------- -----------
Total operating expenses          15,225      14,579      67,554      58,093
                             ----------- ----------- ----------- -----------

Operating income                   5,408       7,438      17,105      28,926
Interest expense                     239         323         992       1,252
                             ----------- ----------- ----------- -----------
Income before income taxes         5,169       7,115      16,113      27,674
Income taxes                       2,020       2,745       8,211      10,635
                             ----------- ----------- ----------- -----------
Net income                   $     3,149 $     4,370 $     7,902 $    17,039
                             =========== =========== =========== ===========

Earnings per share:
  Basic                      $      0.18 $      0.25 $      0.44 $      0.96
                             =========== =========== =========== ===========
  Diluted                    $      0.18 $      0.25 $      0.44 $      0.96
                             =========== =========== =========== ===========
Weighted average common
 shares outstanding:
  Basic                       17,837,097  17,735,998  17,805,464  17,723,277
                             =========== =========== =========== ===========
  Diluted                     17,937,992  17,825,976  17,900,372  17,815,401
                             =========== =========== =========== ===========

Dividend declared per share  $      0.11 $      0.09 $      0.42 $      0.36
                             =========== =========== =========== ===========

                        Houston Wire & Cable Company
                    Consolidated Statements of Cash Flows

                                                     Year Ended December 31,
                                                        2013        2012
                                                     ----------  -----------
                                                          (In thousands)
Operating activities
Net income                                           $    7,902  $   17,039

Adjustments to reconcile net income to net cash
 provided by (used in) operating activities:
  Impairment of goodwill                                  7,562          --
  Depreciation and amortization                           2,978       2,941
  Amortization of capitalized loan costs                     18          18
  Amortization of unearned stock compensation               900       1,040
  Provision for doubtful accounts                           (59)        (19)
  Provision for returns and allowances                       27         (61)
  Provision for inventory obsolescence                      559         815
  (Gain) loss on disposals of property and equipment         (1)         (7)
  Deferred income taxes                                  (1,485)       (773)
  Changes in operating assets and liabilities:
    Accounts receivable                                   5,516      (6,081)
    Inventories                                         (12,004)    (15,960)
    Prepaids                                                 79         (13)
    Other assets                                            (19)        129
    Book overdraft                                        4,594      (2,270)
    Trade accounts payable                                1,307       2,231
    Accrued and other current liabilities                 3,312      (3,722)
    Long term liabilities                                    (6)        (25)
    Income taxes                                           (435)      1,685
                                                     ----------  ----------
Net cash provided by (used in) operating activities      20,745      (3,033)

Investing activities
  Expenditures for property and equipment                (3,396)     (1,005)
  Proceeds from disposals of property and equipment           2           9
  Cash paid for acquisition                                  --          --
                                                     ----------  ----------
Net cash used in investing activities                    (3,394)       (996)

Financing activities
  Borrowings on revolver                                396,724     402,231
  Payments on revolver                                 (407,360)   (391,610)
  Deferred loan cost                                         --          --
  Proceeds from exercise of stock options                   492         137
  Payment of dividends                                   (7,466)     (6,375)
  Excess tax benefit for options                             49          35
  Purchase of treasury stock                                (64)       (115)
                                                     ----------   ---------
Net cash (used in) provided by financing activities     (17,625)      4,303
                                                     ----------  ----------

Net change in cash                                         (274)        274
Cash at beginning of year                                   274          --
                                                     ----------  ----------

Cash at end of year                                  $       --  $      274
                                                     ==========  ==========
Supplemental disclosures
  Cash paid during the year for interest             $      998  $    1,231
                                                     ==========  ==========

  Cash paid during the year for income taxes         $   10,236  $    9,762
                                                     ==========  ==========

Nicol G. Graham
Chief Financial Officer
Direct: 713.609.2125
Fax: 713.609.2168
[email protected]

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