HOUSTON — Houston Wire & Cable Company (HWCC) (the “Company”) announced operating results for the second quarter ended June 30, 2019.
Second Quarter Summary
Jim Pokluda, President and Chief Executive Officer commented, “Industrial market demand weakened versus the prior-year period, and revenue declines in oil and gas, fastener, and offshore drilling end markets negatively impacted our results. We estimate that sales decreased approximately 7.0% from the prior-year quarter when adjusted for aggregate changes in metals prices. We estimate sales for our project business, which targets end markets for Utility Power Generation, Environmental Compliance, Engineering & Construction, Industrials, and Mechanical Wire Rope, increased 2%, while Maintenance, Repair, and Operations (MRO) sales were down 11%, as compared to the second quarter of 2018.
Despite recent market headwinds, we continued to make good progress with gross profit improvement and reduction of expenses. Gross margin at 24.1% increased 30 basis points from the prior period, primarily due to improved pricing discipline and product mix. Operating expenses at $17.5 million were down $0.4 million from prior period.”
Debt at the end of the second quarter of 2019 was $73.1 million, a reduction of $7.0 million and $5.8 million from the second quarter of 2018 and the first quarter of 2019, respectively. This reduction in debt is consistent with our seasonal business patterns. Average debt in the second quarter of 2019 was $74.3 million, which was $8.2 million lower than the average in the second quarter of 2018. The average effective interest rate was 3.9%, which was flat with the first quarter of 2019 and a 20 basis point increase over the second quarter 2018. The result is that interest expense for the second quarter of 2019 was flat sequentially and decreased 4.5% or $35 thousand to $738 thousand versus the prior year.
Net income was $1.6 million, as compared to $2.6 million in the same period of the prior year.
Mr. Pokluda further commented “as we move into the second half of the year, despite seeing lessened activity in certain industrial end markets, we continue to manage what is within our control, and are performing well in many areas of our business that will help offset some of the market pressures. Our operational excellence is at peak levels, customer satisfaction is very high, and expense management, working capital management, and prudent allocation of capital remain as our top priorities.”
Selected quarterly results versus the second quarter of 2018 were:
- Sales of $85.3 million, down 9.1%
- Gross margin of 24.1%, up 30 basis points
- Operating expense improved $448 thousand
- Quarter end debt decreased $7.0 million and average debt down $8.2 million
- Net income of $1.6 million, down 37%
- Fully diluted EPS of $0.10, down $0.06
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