HOUSTON — Houston Wire & Cable Company (HWC) announced operating results for the fourth quarter and year ended December 31, 2014.
Selected quarterly results were:
- Sales of $89.5 million
- Net income of $3.7 million
- Diluted EPS of $0.21
- Paid a dividend of $0.12 cents per share on November 28, 2014
Selected highlights for 2014:
- Net income of $15.0 million
- Diluted EPS of $0.85
- Declared dividends totaling $0.47 cents per share
- Repurchased 545,000 shares, 3% of outstanding shares
Fourth Quarter Summary Jim Pokluda, President and Chief Executive Officer commented, “While we were pleased with the fourth quarter net income increase, which was up 16.5% over 2013 and 4% sequentially, we were disappointed that reduced demand from infrastructure and certain industrial markets, including oil and gas, delivered lower than expected results on the top line. Activity in Q4 slowed in most of the regions, primarily due to unfavorable economic conditions which were more pronounced towards the end of the quarter. As a result, total sales declined 5%, or approximately 2% on a metals-adjusted basis. Maintenance, Repair and Operations (MRO) sales fell 4% or approximately 1% on a metals-adjusted basis, while project sales decreased approximately 11%, or 8% on a metals-adjusted basis.”
Gross margin at 23.1% increased 130 basis points from the fourth quarter of 2013. We estimate that approximately 50 basis points resulted from reduced customer sales incentives due to lower sales volume in Q4 2014, with the balance due to reduced project business, and vendor rebates which slightly exceeded our estimates. Operating expenses at $14.5 million fell 4.7% or $0.7 million from Q4 2013. Pokluda commented, “I was very pleased to see the decrease in our operating expenses, which we have worked hard to reduce over the past year. Q4’s results indicate that our cost savings and expense management initiatives are working.”
Interest expense of $0.3 million was higher than the $0.2 million amount in the prior year period. Average debt levels increased by 16.6% from $46.3 million in 2013 to $54.0 million in 2014, and the effective interest rate increased from 1.9% in 2013 to 2.2% in 2014. The effective tax rate for the quarter of 37.9% was down from the 2013 tax rate of 39.1% due to lower state tax rates in 2014.
Net income of $3.7 million increased 16.5% from the fourth quarter of 2013. Diluted earnings per share were $0.21 compared to $0.18 in the prior year quarter.
Twelve month summary Sales for the year were $390.0 million, up approximately 2% from 2013 and up over 4% when adjusted for the negative impact in the price of metals. Metals-adjusted 2014 full year sales, when compared to all prior years’ metals adjusted sales, was also at a record level. We estimate that MRO sales increased 1%, while project sales increased 9%, on a metals-adjusted basis. Mr. Pokluda commented, “The team worked very hard in 2014 and drove solid improvements in several areas of our business. Despite difficult headwinds from an inconsistently performing industrial economy, metals deflation, and the late year negative impact from the decrease in the price of oil, we successfully increased revenue, contained expenses, grew net income (even when adjusted for the goodwill impairment charge in 2013) and continued our practice of returning earnings to shareholders through dividends and share repurchases.”
Gross margin at 22.0% was down 10 basis points from the 2013 period. “Considering the competitiveness of the marketplace and the continual reduction in the price of copper throughout the year, I believe the team has performed well with its ability to maintain gross margin,” said Mr. Pokluda.
Operating expenses increased 0.9% from the 2013 amount, excluding the impact of the $7.6 million goodwill impairment charge in 2013, primarily due to increased costs of the distribution network, including the addition of two new operating locations; higher commissions resulting from increased sales; and bonuses. These increases were partially offset by lower benefit and employee related expenses and salaries, as the full-time employee headcount decreased. Mr. Pokluda further commented, “We have worked diligently over the past year to reduce our operating expenses and we believe we have laid the foundation for an efficient expense structure as we go into 2015.”
Interest expense of $1.2 million was higher than the prior year’s $1.0 million as average debt levels increased by 16.2% from $47.8 million in 2013 to $55.6 million in 2014 and interest rates increased from 1.9% to 2.1%. The full year effective tax rate of 38.3% was consistent with the rates in the first three quarters and our historical rates.
Net income for 2014 was $15.0 million, up 2.6% from the $14.6 million (excluding the goodwill impairment charge) attained in 2013.
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