Houston Wire & Cable Company Provides Results for the Quarter Ended June 30, 2020, Update on Cost and Debt Reduction
07 Août 2020 - 3:48AM
Houston Wire & Cable Company (NASDAQ: HWCC) (the
“Company”) announced operating results for the second quarter
ended June 30, 2020 and progress on its cost and debt
reduction programs.
- Revenue of $66.8 million
- GAAP net loss of $2.2 million after
a $0.2 million non-cash tradename impairment charge, compared to
net income of $1.6 million in the second quarter of 2019
Operational Update
President & Chief Executive Officer James
Pokluda commented “Although the Board and the Company acted quickly
to reduce cost and debt, execute plans to provide a safe working
environment, assure business continuity and operational excellence
and reduce costs, the rapid and pervasive economic downturn
resulting from the COVID-19 pandemic negatively impacted the
Company’s financial performance during the second
quarter.”
The sales decline and operating loss were caused
by three simultaneous factors:
- Metals price deflation and the
resulting negative impact on revenue and gross margin
- A sharp reduction in the commodity
prices for oil and natural gas, which negatively impacted energy
company’s maintenance and repair capital expenditures
- A significant recessionary downturn
in most end markets, especially service businesses
Restoration of cash flow and profitability
remain top priorities. During the quarter:
- We announced and implemented a 20% reduction in operating
expenses
- We announced and implemented a program to more aggressively
monetize excess working capital and to use cash generated to pay
down the Company’s net debt, with a year-end goal of reducing it to
$40 million
- We continued to invest in initiatives to improve sales,
operational productivity, and customer experience; to service
customer demand from COVID-19 recovery efforts and regional markets
minimally affected by the pandemic
These measures reduced second quarter operating
expenses by $1.6 million, or approximately 9% sequentially versus
the first quarter. During the second quarter, operating expenses
included severance and accrued vacation payments, and other
expenses generated by shrinking our cost structure. With
those items mostly behind us, we anticipate additional savings in
the third and fourth quarters, as we see the full impact of our
expense reduction initiatives, as well as savings from LEAN
projects, processes and controls.
HWCC is also targeting a return to positive
EBITDA in the third quarter, and a return to profitability in the
fourth quarter, as a result of our cost reductions programs,
reduction of interest expense, the recently strengthened price of
copper, and our sales initiatives.
Selected Second Quarter 2020 Financial
Highlights
|
Three Months Ended June 30 |
|
2020 |
|
|
2019 |
|
(in thousands, except per share data) |
Sales |
$ |
66,777 |
|
|
$ |
85,326 |
|
|
Gross Margin (1) |
|
21.3 |
% |
|
|
24.1 |
% |
|
Operating Expenses (2) |
$ |
16,251 |
|
|
$ |
17,507 |
|
|
Diluted Earnings (Loss) per
share |
$ |
(0.13 |
) |
|
$ |
0.10 |
|
|
Revolver Debt |
$ |
74,540 |
|
|
$ |
73,107 |
|
|
(1) Gross margin decreased to 21.3% in 2020 from
24.1% in 2019 primarily due to the decline in demand for our
products as a result of the pandemic and the decline in the oil and
gas market, combined with the relatively low price of copper
through much of the quarter. Gross margin for 2020 also reflects an
impairment charge of $0.6 million for inventory returned under a
one-time agreement with a supplier.(2) Operating expenses exclude
non-cash trade name impairment charges of $0.2 million in the
second quarter 2020, but includes severance and accrued vacation
expenses.
Improved Liquidity
The Company made progress reducing net debt in
the second quarter, although receipt of products which had been
ordered before the recession temporarily offset some of the
Company’s underlying progress. 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. In July we applied all the funds received from the PPP loan to
our Revolver debt. Our PPP loan and Revolver debt has been reduced
to $75.7 million at August 5, 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 over $19 million. Our Revolver debt at
August 5, 2020 was $69.5 million. The Company’s year-end goal
remains to reduce Revolver debt to $40 million, which would be a
total Revolver debt reduction of approximately $55 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, the
Company is 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
Mr. Pokluda concluded “The Company’s employees
have done an outstanding job rising to a very difficult
occasion. The hard work, dedication, and unwavering
commitment to excellence in everything they do is remarkable, and
for that I and the board of directors express our upmost
gratitude.”
About the Company With 44
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
COMPANYConsolidated Balance Sheets(In
thousands, except share data)
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
(unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
5,696 |
|
|
$ |
4,096 |
|
Accounts receivable, net: |
|
|
|
|
|
|
|
|
Trade |
|
|
43,593 |
|
|
|
50,325 |
|
Other |
|
|
2,921 |
|
|
|
6,640 |
|
Inventories, net |
|
|
106,018 |
|
|
|
114,069 |
|
Income taxes |
|
|
1,314 |
|
|
|
1,353 |
|
Prepaids and other
current assets |
|
|
2,885 |
|
|
|
1,833 |
|
Total current assets |
|
|
162,427 |
|
|
|
178,316 |
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
|
15,774 |
|
|
|
14,589 |
|
Intangible assets, net |
|
|
9,521 |
|
|
|
10,282 |
|
Goodwill |
|
|
22,353 |
|
|
|
22,353 |
|
Deferred income taxes |
|
|
900 |
|
|
|
600 |
|
Operating lease right-of-use
assets, net |
|
|
12,244 |
|
|
|
13,481 |
|
Other assets |
|
|
380 |
|
|
|
527 |
|
Total assets |
|
$ |
223,599 |
|
|
$ |
240,148 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
stockholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
10,212 |
|
|
$ |
13,858 |
|
Accrued and other current liabilities |
|
|
14,932 |
|
|
|
23,261 |
|
Operating lease liabilities |
|
|
2,803 |
|
|
|
2,742 |
|
Total current liabilities |
|
|
27,947 |
|
|
|
39,861 |
|
|
|
|
|
|
|
|
|
|
Revolver Debt |
|
|
74,540 |
|
|
|
83,500 |
|
Paycheck Protection Program
Loan |
|
|
6,185 |
|
|
|
— |
|
Operating lease long term
liabilities |
|
|
9,946 |
|
|
|
11,182 |
|
Other long term
liabilities |
|
|
2,227 |
|
|
|
1,977 |
|
Total liabilities |
|
|
120,845 |
|
|
|
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:
16,591,818 and 16,556,950 outstanding at June 30, 2020 and December
31, 2019, respectively |
|
|
21 |
|
|
|
21 |
|
Additional
paid-in-capital |
|
|
52,484 |
|
|
|
52,304 |
|
Retained earnings |
|
|
107,008 |
|
|
|
108,626 |
|
Treasury stock, at
cost |
|
|
(56,759 |
) |
|
|
(57,323 |
) |
Total stockholders’
equity |
|
|
102,754 |
|
|
|
103,628 |
|
Total liabilities and
stockholders’ equity |
|
$ |
223,599 |
|
|
$ |
240,148 |
|
|
|
|
|
HOUSTON WIRE & CABLE
COMPANYConsolidated Statements of
Operations(Unaudited)(In thousands, except share and per
share data)
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
66,777 |
|
|
$ |
85,326 |
|
|
$ |
150,310 |
|
|
$ |
170,596 |
|
Cost of sales |
|
|
52,541 |
|
|
|
64,789 |
|
|
|
116,482 |
|
|
|
128,800 |
|
Gross profit |
|
|
14,236 |
|
|
|
20,537 |
|
|
|
33,828 |
|
|
|
41,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and commissions |
|
|
8,407 |
|
|
|
9,244 |
|
|
|
17,881 |
|
|
|
18,424 |
|
Other operating expenses |
|
|
7,029 |
|
|
|
7,729 |
|
|
|
14,594 |
|
|
|
15,392 |
|
Depreciation and amortization |
|
|
815 |
|
|
|
534 |
|
|
|
1,582 |
|
|
|
1,087 |
|
Impairment charge |
|
|
173 |
|
|
|
— |
|
|
|
373 |
|
|
|
— |
|
Total operating expenses |
|
|
16,424 |
|
|
|
17,507 |
|
|
|
34,430 |
|
|
|
34,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(2,188 |
) |
|
|
3,030 |
|
|
|
(602 |
) |
|
|
6,893 |
|
Interest expense |
|
|
474 |
|
|
|
738 |
|
|
|
1,287 |
|
|
|
1,479 |
|
Income (loss) before income
taxes |
|
|
(2,662 |
) |
|
|
2,292 |
|
|
|
(1,889 |
) |
|
|
5,414 |
|
Income tax (benefit)
expense |
|
|
(499 |
) |
|
|
649 |
|
|
|
(271 |
) |
|
|
1,487 |
|
Net income (loss) |
|
$ |
(2,163 |
) |
|
$ |
1,643 |
|
|
$ |
(1,618 |
) |
|
$ |
3,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.13 |
) |
|
$ |
0.10 |
|
|
$ |
(0.10 |
) |
|
$ |
0.24 |
|
Diluted |
|
$ |
(0.13 |
) |
|
$ |
0.10 |
|
|
$ |
(0.10 |
) |
|
$ |
0.24 |
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
16,442,493 |
|
|
|
16,504,471 |
|
|
|
16,414,976 |
|
|
|
16,491,236 |
|
Diluted |
|
|
16,442,493 |
|
|
|
16,597,496 |
|
|
|
16,414,976 |
|
|
|
16,571,113 |
|
|
|
|
|
HOUSTON WIRE & CABLE
COMPANYConsolidated Statements of Cash
Flows(Unaudited)(In thousands)
|
|
Six MonthsEnded June 30, |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
Operating
activities |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(1,618 |
) |
|
$ |
3,927 |
|
Adjustments to reconcile net
income (loss) to net cash provided by (used in) operating
activities: |
|
|
|
|
|
|
|
|
Impairment charge |
|
|
373 |
|
|
|
— |
|
Depreciation and
amortization |
|
|
1,582 |
|
|
|
1,087 |
|
Amortization of unearned
stock compensation |
|
|
768 |
|
|
|
707 |
|
Non-cash lease
expense |
|
|
1,793 |
|
|
|
1,968 |
|
Provision for refund
liability |
|
|
77 |
|
|
|
471 |
|
Provision for inventory
obsolescence |
|
|
1,273 |
|
|
|
459 |
|
Deferred income
taxes |
|
|
(300 |
) |
|
|
460 |
|
Other non-cash items |
|
|
68 |
|
|
|
83 |
|
Changes in operating
assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
10,374 |
|
|
|
75 |
|
Inventories |
|
|
6,778 |
|
|
|
(12,407 |
) |
Prepaids |
|
|
(952 |
) |
|
|
(1,371 |
) |
Other assets |
|
|
18 |
|
|
|
(550 |
) |
Lease payments |
|
|
(1,800 |
) |
|
|
(1,963 |
) |
Book overdraft |
|
|
— |
|
|
|
330 |
|
Trade accounts payable |
|
|
(3,646 |
) |
|
|
2,106 |
|
Accrued and other current liabilities |
|
|
(8,702 |
) |
|
|
2,235 |
|
Income taxes |
|
|
39 |
|
|
|
(142 |
) |
Other operating activities |
|
|
250 |
|
|
|
359 |
|
Net cash provided by (used in)
operating activities |
|
|
6,375 |
|
|
|
(2,166 |
) |
|
|
|
|
|
|
|
|
|
Investing
activities |
|
|
|
|
|
|
|
|
Expenditures for property and equipment |
|
|
(1,626 |
) |
|
|
(875 |
) |
Net cash used in investing
activities |
|
|
(1,626 |
) |
|
|
(875 |
) |
|
|
|
|
|
|
|
|
|
Financing
activities |
|
|
|
|
|
|
|
|
Borrowings on revolver |
|
|
162,681 |
|
|
|
175,417 |
|
Payments on revolver |
|
|
(171,641 |
) |
|
|
(173,626 |
) |
Proceeds from Paycheck Protection Program loan |
|
|
6,185 |
|
|
|
— |
|
Payment of dividends |
|
|
(1 |
) |
|
|
(30 |
) |
Purchase of treasury stock/stock surrendered on vested
awards |
|
|
(24 |
) |
|
|
(65 |
) |
Lease payments |
|
|
(349 |
) |
|
|
(48 |
) |
Net cash (used in) provided by
financing activities |
|
|
(3,149 |
) |
|
|
1,648 |
|
|
|
|
|
|
|
|
|
|
Net change in cash |
|
|
1,600 |
|
|
|
(1,393 |
) |
Cash at beginning of
period |
|
|
4,096 |
|
|
|
1,393 |
|
|
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
5,696 |
|
|
$ |
— |
|
Supplemental
disclosures of non-cash activities |
|
|
|
|
|
|
|
|
Purchase of assets
under finance leases |
|
$ |
752 |
|
|
$ |
407 |
|
|
|
|
|
|
|
|
|
|
CONTACT:
Eric W. Davis
Chief Financial Officer
Direct: 713.609.2177
Fax: 713.609.2168
edavis@houwire.com
Houston Wire and Cable (NASDAQ:HWCC)
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