HOUSTON, Texas — Houston Wire & Cable Company announced operating results for the fourth quarter and year ended December 31, 2015.
Selected quarterly results were:
- Sales of $70.3 million down 21.5% or 10% metals adjusted, from Q4 2014
- Net loss of $(0.2) million
- Adjusted net income (non-GAAP) of $0.4 million, excluding the impairment charge related to certain trade names
- Diluted EPS of $(0.01), adjusted diluted EPS of $0.03
- Paid a dividend of $0.06 cents per share on November 27, 2015
- Repurchased 324,000 shares
Selected annual results were:
- Sales of $308.1 million down 21% or 14% metals adjusted, from 2014
- Net income of $2.0 million
- Adjusted net income of $5.2 million, excluding the impairment charge
- Diluted EPS of $0.12, adjusted diluted EPS of $0.30
- Declared dividends totaling $0.42 cents per share
- Record cash flow of $31.8 million
- Repurchased 859,000 shares
Fourth Quarter Summary
Jim Pokluda, President and Chief Executive Officer, commented, “Demand levels in the fourth quarter continued to trend downward, caused by extended lackluster industrial activity and the ongoing impact of the contraction in oil and gas markets. These factors combined with the impact of metals deflation depressed our operating results and comparisons to the prior year period. Sales decreased 21.5% or approximately 10% on a metals adjusted basis. We estimate that Maintenance, Repair and Operations (MRO) sales decreased approximately 25% or approximately 13% on a metals adjusted basis, while project sales decreased 15% or approximately 3% on a metals adjusted basis. Total transactional activity, as measured by invoice count, decreased by 8%.”
Gross margin at 21.5% decreased 160 basis points from the fourth quarter of 2014 primarily due to lower product margins, lower vendor rebates and higher freight costs, partially offset by lower customer incentives. Operating expenses at $14.4 million were down 1% or $0.1 million from the prior year period and, excluding the $0.4 million impairment, down 4%. We continue to drive awareness across the entire company to minimize our operating expenses.
Pokluda commented, “Despite significant metals deflation and the depressed condition of the industrial market and oil and gas market, we have put additional emphasis on customer service and operational excellence to further enhance our customers’ experience. Sales trends for our products outside our primary industrial markets were encouraging and continue to provide a solid complement to our legacy product lines. In addition, as we have done in several prior quarters, we are placing extreme emphasis on working capital efficiencies and aligning our expenses with current demand levels.”
Interest expense of $0.2 million was 39.7% less than the prior year period as average debt of $39.8 million, fell 26.2% from $54.0 million in the fourth quarter of 2014. The expense was also favorably impacted by the effective interest rate of 1.5% which decreased from 2.2% in the prior year period, primarily due to the terms of the new loan agreement signed on October 1, 2015
Adjusted net income of $0.4 million decreased 88.2% from the fourth quarter of 2014. Adjusted diluted earnings per share were $0.03 compared to $0.21 in the prior year quarter. Adjusted net income and adjusted earnings per share are non-GAAP financial measures that exclude the impact of the impairment charge.
Twelve month summary
Sales for the year were $308.1 million, down 21% versus the prior year and approximately 14% on a metals adjusted basis. We estimate that MRO sales decreased 18% or approximately 11% on a metals adjusted basis, while project sales decreased 26%, or approximately 19% on a metals adjusted basis. Mr. Pokluda commented, “This has been an extremely difficult year as industrial demand fell dramatically from the prior year and the loss of leverage we obtain from higher sales levels severely compressed our operating profit and net income. The results were also impacted by the impairment charges for certain elements of the wire rope division, which was directly impacted by the low demand levels from the industrial and oil and gas sectors. I am pleased, however, with our ability to re-align our operations with current demand levels and with the record operating cash flow of $31.8 million, as we continued to drive more efficiencies in our inventory profiles and other aspects of our working capital investment. We were also able to return to our shareholders, dividends totaling $0.42 and a share buy-back total of 859,000 shares during the year.”
Gross margin at 21.4% was down 60 basis points from 2014. Gross profit dollars decreased $20.0 million or 23.3%, primarily due to the sales shortfall.
Operating expenses of $56.5 million, excluding the impairment charge, decreased 6.7%, principally due to lower salaries, lower commissions due to reduced sales and gross profit and the continued impact of our cost reduction program.
Interest expense of $0.9 million was 22.9% lower than the prior year’s $1.2 million, as average debt decreased by 21% to $43.9 million from $55.6 million and average interest rates declined to 1.9% from 2.1%.
The full year effective tax rate of 60.1% included the 20.0% effect of the non-deductible portion of the impairment charge and the 3.7% impact of forfeited equity awards.
Net income for 2015 of $2.0 million fell 86.3% from the $15.0 million level in the prior year, while diluted earnings per share of $0.12 fell 86% from $0.85. Excluding the impairment charge, adjusted net income was $5.1 million, while adjusted diluted earnings per share was $0.30.
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