As filed with the Securities and Exchange Commission on May 1,31, 2006

Registration No. 333-132703

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 13 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

HOUSTON WIRE & CABLE COMPANY
(Exact name of registrant as specified in its charter)

10201 North Loop East
Houston, TX 77029
(713) 609-2100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

(1)

Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities Act.

(2)

Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price and includes the offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any.

(3)

Previously paid.

        The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), shall determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell, and we are not soliciting an offer to buy, these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED ,MAY 31, 2006

Prospectus

8,500,000 Shares

Common Stock

        This is the initial public offering of common stock of Houston Wire & Cable Company. We are selling 4,250,000 shares of common stock, and the selling stockholders identified in this prospectus are selling an additional 4,250,000 shares. We will not receive any of the proceeds from the sale of the shares by the selling stockholders. The estimated initial public offering price is between $$12.00 and $$14.00 per share.

        Prior to this offering, there has been no public market for our common stock. We intend to have our common stock listed for quotation on The Nasdaq National Market under the symbol "HWCC."

        Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 9 of this prospectus.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

        Certain of the selling stockholders have granted the underwriters an option for a period of 30 days to purchase up to 1,275,000 additional shares of our common stock on the same terms and conditions set forth above to cover over-allotments, if any.

        The underwriters expect to deliver the shares of common stock to purchasers on or about                        , 2006.

The date of this prospectus is                        , 2006.

Table of Contents

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. Offers to sell, and solicitations of offers to buy, shares of our common stock are being made only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

PROSPECTUS SUMMARY

        This summary highlights selected information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, especially "Risk Factors" beginning on page 9 and our consolidated financial statements and related notes, before making an investment decision.

Our Business

        We are one of the largest distributors of specialty wire and cable and related services to the U.S. electrical distribution market. During 2005, we served approximately 2,600 customers, including eachvirtually all of the top 200 electrical distributors in the U.S. We have strong relationships with leading wire and cable manufacturers and provide them with efficient access to the fragmented electrical distribution market. During 2005, we distributed approximately 20,000 SKUs (stock-keeping units) to over 8,300 customer locations nationwide from eleven strategically located distribution centers in ten states. We are focused on providing our electrical distributor customers with a single-source solution for specialty wire and cable and related services by offering a large selection of in-stock items, exceptional customer service and high levels of product expertise.

        We offer products in most categories of specialty wire and cable, including:

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continuous and interlocked armor cable (cable encapsulated in either a seamless or interlocked aluminum protective sheath);



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control and power cable (single or multiple conductor industrial cable);



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electronic wire and cable (computer, audio and signal cable);



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flexible and portable cords (flexible, heavy duty industrial cable);



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instrumentation and thermocouple cable (cables used for transmitting signals for instruments and heat sensing devices);



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lead and high temperature cable (single conductor cable used for low or high temperature applications);



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medium voltage cable (cables used for applications between 2,001 volts and 35,000 volts); and



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premise and category wire and cable (cable used for home and high speed data applications).

We also offer private branded products, including our LifeGuard™ low-smoke, zero-halogen cable. Low-smoke, zero halogen products are made with compounds that produce no halogen gases and very little smoke while under combustion.

        In addition to our product offerings, we provide comprehensive value-added services including: standard same day shipment from our extensive inventory and distribution network; application engineering support through our knowledgeable sales and technical support staff; custom cutting of wire and cable to exact specifications; inventory management programs that provide job-specific asset management and just-in-time delivery; job-site delivery and logistics support; 24/7/365 customer service provided by our own employees; and customized internet-based ordering capabilities.

        We were founded in 1975 and have a long history of reliable customer service, broad product selection and strong product expertise. In 1987, we completed an initial public offering and were subsequently purchased in 1989 by ALLTEL Corporation. In 1997, we were purchased by an investment fund affiliated with Code Hennessy & Simmons LLC. During our 31 year history, we have successfully expanded our business from one original location in Houston, Texas to eleven strategic locations nationwide.

        In 2000, we acquired our largest direct competitor, the Futronix division of Kent Electronics Corporation. In 2003, we implemented a new sales and marketing strategy to expand our sales force, introduce new private branded products and work in concert with our distributor customers to generate demand from end-users in our targeted markets, including the utility, industrial and infrastructure markets. As part of this initiative, we are partnering with our distributor customers and strengthening our relationships with project and specifying engineers to stimulate demand for our specialty wire and cable. With this sales and marketing strategy, we have achieved strong financial and operating growth. Our revenue has increased from $149.1 million in 2003 to $214.0 million in 2005, a compound annual growth rate (CAGR) of 19.8%. During the same period, our operating income increased from $4.7 million to $22.1$22.8 million, a CAGR of 116.9%120.2%.

Industry Overview

        We operate within the U.S. electrical distribution market, whichElectrical Wholesaling magazine estimates had industry-wide sales of $74.3 billion in 2005 and will grow 7.9% to $80.2 billion in 2006. Electrical distribution has historically been a growing segment of the industrial distribution industry, with a CAGR of 5.1% over the last 20 years.

        Within the electrical distribution industry, our business focuses on specialty wire and cable. According to the U.S. Census Bureau, the total value of manufacturers' shipments of specialty wire and cable totaled approximately $7.0 billion in 2004. The sales channel for specialty wire and cable depends on a number of factors, including order type, product selection, service level expectations, inventory management and delivery requirements. The greater the need for customization and high service levels, the more likely the transaction will involve a specialty wire and cable distributor such as us.

        In certain circumstances, manufacturers of specialty wire and cable sell their products directly to the end-user. These transactions typically consist of a bulk volume of wire and cable, involve little or no customized services and may require long lead times between order and delivery. More frequently, an electrical distributor serves as the sales channel directly between the manufacturer and the contractor or end-user. The typical sale by an electrical distributor may involve a commonly purchased item that is specifically designated by the end-user and shipped from stock along with a variety of other electrical products. For customers requiring highly specialized wire and cable, custom cut lengths, technical expertise, short lead times or additional services, electrical distributors will generally source products from a specialty wire and cable distributor. We believe that the increasing complexity of specialty wire and cable specifications and the growing need for just-in-time delivery and logistics support will spur further growth in purchases through specialty wire and cable distributors.

        Our business is driven, in part, by the strength, growth prospects and activity in the end-markets in which our products are used. We have targeted three of these markets—the utility, industrial and infrastructure markets—in our recent sales and marketing initiatives.

        Utility Market.    The utility market includes large investor-owned utilities, rural cooperatives and municipal power authorities. We are positioned to benefit from expenditures for new power generation needed to satisfy a growing population with increasing energy demands and to comply with federal mandates to reduce toxic outputs from power generating facilities.

        Industrial Market.    The industrial market is one of the largest segments of the U.S. economy, comprised of a diverse base of manufacturing and production companies. We help our electrical distributor customers provide specialty wire and cable to industrial companies with large, complex plant maintenance, repair and operations ("MRO") requirements and for new capital projects.

        Infrastructure Market.    We believe that significant infrastructure improvements and additions will be needed over the next several years. According to a September 2004 Industrial Information Resources report, engineering and construction firms were awarded more than 1,350 active capital projects in the U.S. with a total investment value representing approximately $221 billion. We are assisting our customers to further

penetrate the engineering and construction market by working with application engineers to drive specialty wire and cable specifications in large construction projects.

        Beginning in 2003, we led the development and marketing of select private label products, including LifeGuard™, a low-smoke, zero-halogen cable product line. We sell our LifeGuard™ product across all of our end-markets.

        LifeGuard™ Market Opportunity.    We believe that the market for low-smoke, zero-halogen products is in its infancy in the U.S. and represents a significant market opportunity. Low-smoke, zero-halogen cables, which have been used extensively in Europe and Asia for many years, provide significant flame resistance, minimal smoke production and substantially reduced toxicity and corrosiveness when burned, as compared to traditional wire and cable. Our LifeGuard™ cable is designed for applications where a high degree of equipment protection and safety and environmental protection is required. Since its introduction in 2003, our LifeGuard™ line of cable has shown strong early signs of acceptance.

Competitive Strengths

        We are a nationally recognized, full-service distributor of specialty wire and cable and related services. Through eleven strategic locations across the United States with over 450,000 square feet of warehouse space, we provide same day shipment to a broad customer base including, among others, Border States Electric Supply, Consolidated Electrical Distributors, Inc., GE Supply Company, Graybar Electric Company, Inc., Hughes Supply, Inc., Mayer Electric Supply Company, Inc., Rexel, Inc., The Reynolds Company, Sonepar USA and WESCO Distribution, Inc. We operate in a highly fragmented market, and we believe that the following competitive strengths have helped us achieve our leading position in the market and a strong reputation among manufacturers and customers:

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Comprehensive Value-Added Services and Product Expertise. Our business model focuses on providing our customers with comprehensive value-added services and high levels of expertise across a broad range of our suppliers' products. Our services are designed to provide maximum efficiency and flexibility for our customers and include extensive product knowledge and application engineering support, inventory management, custom cut capabilities and 24/7/365 customer service. We help our customers achieve efficient and effective procurement of specialty wire and cable on terms that typically include short lead times and the ability to ship a high percentage of the products ordered within 24 hours.



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Strength and Tenure of Specialized Sales Force. We have invested in developing a sales force of highly knowledgeable professionals with considerable industry expertise. As of December 31, 2005,May 1, 2006, our sales force consisted of 40 field sales personnel and 8482 inside sales and technical support personnel. The size of our field sales force has increased significantly since 2003. We have an experienced sales force that has substantial expertise and is aligned according to targeted industries, geography and select customer relationships.



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First-Mover Advantage with LifeGuard™ Cable. We believe we have established a first-mover advantage in the U.S. with our LifeGuard™ line of low-smoke, zero-halogen cable products. We led the development and marketing of low-smoke, zero-halogen cable in the U.S. Since its introduction in 2003, our LifeGuard™ line of cable has shown strong early signs of acceptance and has been accepted for use by over 300 end-users, including leading engineering and construction firms, and is increasingly included in specifications for utility, data center and industrial related projects.



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Operating Leverage. Our ability to offer a high level of customer service is due in part to our highly efficient and effective operations that leverage centralized back-office administration and purchasing, a scalable information technology platform, automated warehouse operations and electronic product tracking. Efficient purchasing and management of our products have helped us increase our average inventory turnover from 3.18 in 2001 to 4.63 in 2005 and improved our gross margin during the same

period from 22.8% to 26.0%. In addition, by leveraging our national infrastructure and implementing back-office initiatives, we have decreased our operating expenses as a percentage of revenue from 18.0% in 2001 to 15.4% in 2005.2005 and 13.6% for the quarter ended March 31, 2006.

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Extensive Product Offering and Strong Supplier Relationships. In 2005, we sold over 20,000 SKUs, representing a broad and deep selection of high-quality specialty wire and cable. Our strategy is to maintain a wide breadth and depth of inventory, allowing us to ship a high percentage of the products ordered within 24 hours. We believe that our vast product offering and value-added services are significant factors in attracting and retaining many of our customers. In addition, we have strong, often decades-long, relationships with large wire and cable manufacturers such as Belden CDT, General Cable Corp., Nexans, Service Wire Company and Southwire Company.



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Strong and Diversified Customer Base. During 2005, we served approximately 2,600 customers, including eachvirtually all of the top 200 electrical distributors in the U.S. We have experienced exceptional customer retention, and we believe that we are the primary supplier of specialty wire and cable to a majority of our customers. Each of our top ten customers in 2005 (or their predecessors) has purchased products from us every year over the last decade.



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Experienced Management Team. Our highly experienced team of executive officers and key management has an average tenure with us of over 13 years. This continuity strengthens our relationships with our customers and suppliers and enables us to provide our customers with a high level of product and industry expertise. Following this offering, assuming exercise in full of the underwriters' over-allotment option, our management team will own %8.9% of our outstanding shares and will hold options to purchase an additional 165,376 shares.

Risk Factors

        An investment in our common stock involves risks. For a discussion of factors you should consider before deciding to invest in our common stock, we refer you to "Risk Factors" and the following summary:

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Downturns in capital spending and cyclicality in certain of the markets we serve could have a material adverse effect on our financial condition and results of operations;



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We have risks associated with inventory, and our operating results may be affected by fluctuations in commodity prices;



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If we are unable to maintain our relationships with the electrical distributors who purchase and distribute our products, it could have a material adverse effect on our financial results;



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An inability to obtain the products that we distribute could result in lost revenues and reduced margins and damage our relationships with customers; and



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We have had limited experience with our private branded products and cannot guarantee that our private branded products will continue to gain market acceptance.

Growth Strategies

        Since implementing our new sales and marketing strategy in 2003, our revenue has increased from $149.1 million in 2003 to $214.0 million in 2005, and our operating income has increased from $4.7 million to $22.8 million. We intend to continue to leverage our competitive strengths and pursue select strategic initiatives to drive growth in revenue and profit.

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Generate Increased Demand from Targeted Markets. During 2003, we realigned our sales efforts to work in concert with our distributor customers to generate demand directly from end-users in our targeted markets, including the utility, industrial and infrastructure markets. We believe that our sales and marketing programs and product application expertise can help our distributor customers drive

demand from their customers. In select target markets, we are assisting our customers in forming relationships with project and specifying engineers to create demand for our specialty wire and cable.

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Expand Our Sales Force. As part of our ongoing strategy to penetrate new markets, we expect to continue to expand our sales force and further focus our sales and marketing efforts on supporting our distributor customers in these markets. We typically hire experienced personnel for our sales force, and since 2003 we have significantly increased the number of our field sales personnel.



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Increase Sales of Private Branded Products. Beginning in 2003, we spearheaded the development and marketing of select private branded products, including LifeGuard™, a low-smoke, zero-halogen line of cable; Houwire®, a low-cost sound and security wire; and DataGuard™, a high-end electronic cable product line. While we are still in the early stages of selling these product lines, we believe the potential markets for these products are significant.



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Focus on Efficient Operations and Cost Control. We continuously seek ways to reduce costs, increase efficiency and ultimately enhance our ability to serve our customers. We have invested in highly flexible and scalable information systems, which have been instrumental to the efficient integration of our sales, distribution and logistics capabilities. Improvements in our inventory management have created capacity in our warehouses that can be used to support our continued growth.



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Selectively Pursue Acquisition Opportunities. Our senior management team has experience in identifying and integrating acquisition targets. In 2000, we acquired our largest direct competitor, Futronix, from Kent Electronics. While we are not dependent on acquisitions to achieve our growth plan, we will selectively pursue acquisitions that leverage our established infrastructure and allow us to strategically address select target markets, grow our product and service offering, expand geographically and leverage our efficient distribution and operations platform.

Our Corporate Information

        We were incorporated in Delaware in 1997 under the name "HWC Holding Corporation" to acquire our operating subsidiary, then named Houston Wire & Cable Company, which was founded in 1975 and incorporated in Delaware in 1985. In 2006, we changed the name of our operating subsidiary and adopted the Houston Wire & Cable Company name for ourselves. Our corporate and executive offices are located at 10201 North Loop East, Houston, Texas 77029, and our telephone number at that address is (713) 609-2100. We maintain a website at www.houwire.com. The information contained in our website is not a part of, and is not incorporated by reference into, this prospectus.

This Offering

        The number of shares of common stock to be outstanding after this offering is based on 8,862,49216,617,172 shares outstanding as of April 28,May 15, 2006 and excludes:

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130,700245,065 shares of common stock issuable upon the exercise of outstanding options at a weighted average exercise price of $2.50$1.33 per share;



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15,000 shares of common stock issuable upon the exercise of an option to be granted to an independent director as of the closing of this offering at an exercise price equal to the initial public offering price; and



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1,785,000 additional shares of common stock that are reserved for future grants, awards or sale under our stock plans.

        Unless otherwise indicated, all information contained in this prospectus:

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assumes an initial public offering price of $$13.00 per share, which is the mid-point of the range set forth on the front cover of this prospectus;



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assumes the underwriters' over-allotment option will not be exercised; and



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gives effect to a -for-1.875-for-1 stock split, in connection with this offering.which occurred May 16, 2006.

Summary Consolidated Financial and Other Data

        The following table presents a summary of our historical financial information. When you read this summary consolidated financial data, it is important that you read along with it the historical financial statements and related notes, as well as the sections titled "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," included elsewhere in this prospectus.

(1)

The management fee arrangement will be terminated as of completion of this offering.

(2)

The pro forma income statement data assumes that we issued 4,250,000 shares of our common stock at a price of $$13.00 per share, and used the proceeds as set forth under "Use of Proceeds," as of January 1, 2005. In addition, the data assumes that the management fee was terminated as of January 1, 2005.

(3)

As adjusted to reflect the impact of the offering and the application of the net proceeds.proceeds as if the offering occurred on March 31, 2006.

(4)

Our book overdraft of $2,119 is funded by our revolving credit facility as soon as the related checks clear our disbursement account.

(5)

On December 30, 2005, we paid a special dividend of $20.0 million to our common stockholders and funded the payment by borrowing under our existing credit facilities.facility.

RISK FACTORS

        Investing in our common stock involves a high degree of risk. You should carefully consider the following factors, as well as other information contained in this prospectus, before deciding to invest in shares of our common stock. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment in our common stock.

Risks Relating to Our Business and Industry

Downturns in capital spending and cyclicality in certain of the markets we serve could have a material adverse effect on our financial condition and results of operations.

        The majority of our products are used in the construction, maintenance and operation of facilities, plants and projects in the communications, energy, engineering and construction, general manufacturing, infrastructure, petrochemical, transportation, utility and wastewater treatment industries. The demand for our products and services depends to a large degree on the capital spending levels of end-users in these markets. Many of these end-users defer capital expenditures or cancel projects during economic downturns. In addition, certain of the markets we serve are cyclical, which affects capital spending by end-users in these industries. A downturn in the general economy, or in one or more of the end-markets for our specialty wire and cable, could have a material adverse effect on our financial condition and results of operations.

We have risks associated with inventory.

        Our business requires us to maintain substantial levels of inventory. We must identify the right mix and quantity of products to keep in our inventory to meet customer orders. Failure to do so could adversely affect our sales and earnings. However, if our inventory levels are too high, we are at risk that an unexpected change in circumstances, such as a shift in market demand, drop in prices, or default or loss of a customer, could have a material adverse impact on the net realizable value of our inventory.

Our operating results may be affected by fluctuations in commodity prices.

        Copper and petrochemical products are components of the wire and cable we sell. Fluctuations in the costs of these and other commodities have historically affected our operating results. To the extent higher commodity prices result in increases in the costs we pay for our products, we attempt to reflect the increase in the prices we charge our customers. While we historically have been able to pass most of these cost increases on to our customers, to the extent we are unable to do so in the future, it could have a material adverse effect on our operating results. In addition, as commodity costs increase, our customers may delay or decrease their purchases of our wire and cable, which could adversely affect the demand for our products. To the extent commodity prices decline, the net realizable value of our existing inventory could be reduced, and our gross profits could be adversely affected.

If we are unable to maintain our relationships with our electrical distributor customers, it could have a material adverse effect on our financial results.

        We rely primarily on electrical distributors to purchase our wire and cable. The number, size, business strategy and operations of these electrical distributors vary widely from market to market. The success of our sales and distribution channels depends heavily on our successful cooperation with these electrical distributors in each of our various markets.

        In 2005, our ten largest customers accounted for approximately 44% of our sales, and our largest customer accounted for approximately 11% of our sales. If we were to lose one or more of our large electrical distributor customers, or if one or more of our large electrical distributor customers were to significantly reduce the amount of specialty wire and cable they purchase from us, and we were unable to replace the lost sales on similar terms, we could experience a significant loss of revenue and profits. In

addition, if one or more of our key electrical distributor customers failed or were unable to pay, we could experience a write-off or write-down of the related receivables, which could adversely affect our earnings. We participate in a number of national marketing groups and engage in joint promotional sales activities with the electrical distributor members of those groups. Any permanent exclusion of us from, or refusal to allow us to participate in, such national marketing groups could have a material adverse effect on our sales and our results of operations.

An inability to obtain the products that we distribute could result in lost revenues and reduced profits and damage our relationships with customers.

        We currently source products from approximatelymore than 150 suppliers. However, we have adopted a strategy to concentrate our purchases with a small number of suppliers in order to maximize product quality, delivery dependability, purchasing efficiencies and supplier incentives. As a result, in 2005 over 55% of our annual purchases came from three suppliers. If any of these suppliers changed its sales strategy to reduce its reliance on distributors, or decided to terminate its business relationship with us, our sales and earnings would be adversely affected unless and until we were able to establish relationships with suppliers of comparable products. In addition, if we are not able to obtain the products we distribute from either our current suppliers or other competitive sources, we could experience a loss of revenues, reduction in margins and damage to our relationships with our customers. Supply shortages may occur as a result of unanticipated demand or production cutbacks, shortages of raw materials, labor disputes or weather conditions affecting products or shipments, transportation disruptions or other reasons beyond our control. When shortages occur, specialty wire and cable suppliers often allocate products among distributors, and our allocations might not be adequate to meet our customers' needs.

Loss of key personnel or our inability to attract and retain new qualified personnel could hurt our ability to operate and grow successfully.

        Our success is highly dependent upon the services of Charles Sorrentino, our President and Chief Executive Officer, Nicol Graham, our Chief Financial Officer, and James Pokluda, our Vice President of Marketing and Merchandising. Our success will continue to depend to a significant extent on our executive officers and key management and sales personnel. We do not have key man life insurance covering any of our executive officers. We may not be able to retain our executive officers and key personnel or attract additional qualified management and sales personnel. The loss of any of our executive officers or our other key management and sales personnel or our inability to recruit and retain qualified personnel could hurt our ability to operate and make it difficult to execute our growth strategies.

A change in vendor rebate programs could adversely affect our gross margins and results of operations.

        The terms on which we purchase products from many of our suppliers entitle us to receive a rebate based on the volume of our purchases. These rebates effectively reduce our costs for products. If market conditions change, suppliers may adversely change the terms of some or all of these programs. These changes may lower our gross margins on products we sell and may have an adverse effect on our operating income.

We have had limited experience with our private branded products and cannot guarantee that our private branded products will continue to gain market acceptance.

        An important element of our growth strategy is the continued development and market acceptance of our LifeGuard™ line of low-smoke, zero-halogen cable and other products sold under our private brands. Our success with our private branded products, however, depends on our ability to market these products in the appropriate channels and, ultimately, on the acceptance of these products in the markets we serve. We have only been selling LifeGuard™ cable since 2003, and our efforts to develop and market new private branded products might not be successful. Further demand for our products could diminish as a result of a competitor's introduction of higher quality, better performing or lower cost products in the marketplace. In

addition, the low-smoke, zero-halogen properties of our LifeGuard™ line of cable products depend on a highly-engineered petrochemical material. If there is not an adequate supply of this material, we may be unable to have our LifeGuard™ products manufactured, or our LifeGuard™ products may be available only at a higher cost or after a long delay. If we cannot sustain the growth in demand for our LifeGuard™ products, if we cannot have those products manufactured on acceptable terms or if we do not develop additional private branded products, we will be unable to realize fully our growth strategy.

If we encounter difficulties with our management information systems, we would experience problems managing our business.

        We believe our management information systems are a competitive advantage in maintaining our leadership position in the specialty wire and cable distribution industry. We rely upon our management information systems to manage and replenish inventory, fill and ship orders on a timely basis and coordinate our sales and marketing activities. If we experience problems with our management information systems, we could experience product shortages, diminished inventory control or an increase in accounts receivable. Any failure by us to maintain our management information systems could adversely impact our ability to attract and serve customers and would cause us to incur higher operating costs and experience reduced profitability.

An increase in competition could decrease sales or earnings.

        We operate in a highly competitive industry. We compete directly with national, regional and local providers of specialty wire and cable. Competition is primarily focused in the local service area and is generally based on product line breadth, product availability, service capabilities and price. Some of our existing competitors have, and new market entrants may have, greater financial and marketing resources than we do. To the extent existing or future competitors seek to gain or retain market share by reducing prices, we may be required to lower our prices, thereby adversely affecting our financial results. Existing or future competitors also may seek to compete with us for acquisitions, which could have the effect of increasing the price and reducing the number of suitable acquisitions. Other companies, including our current electrical distributor customers, could seek to compete directly with our private branded products, which could adversely affect our sales of those products and ultimately our financial results. Our existing electrical distributor customers, as well as suppliers, could seek to compete with us by offering services similar to ours, which could adversely affect our market share and our financial results. In addition, competitive pressures resulting from the industry trend toward consolidation could adversely affect our growth and profit margins.

We may be subject to product liability claims that could be costly and time consuming.

        We sell specialty wire and cable that has been manufactured by third parties. As a result, from time to time we have been named as defendants in lawsuits alleging that these products caused physical injury or injury to property. We rely on product warranties and indemnities from the product manufacturers, as well as insurance that we maintain, to protect us from these claims. However, manufacturers' warranties and indemnities are typically limited in duration and scope and may not cover all claims that might be asserted. Moreover, our insurance coverage may not be available or may not be adequate to cover every claim asserted or the entire amount of every claim.

Being a public company will increase our administrative costs and divert management time and attention, particularly to comply with regulatory requirements implemented by the Securities and Exchange Commission and The Nasdaq National Market.

        As a public company, we will incur significant legal, accounting and other costs that we did not incur as a private company. We will incur all of the internal and external costs of preparing and distributing periodic public reports required under the securities laws and to comply with the Sarbanes-Oxley Act of 2002 and other rules and regulations that the Securities and Exchange Commission, or the SEC, and The Nasdaq National Market, or Nasdaq, have adopted. We expect these additional costs to be in the range of

$1.25 million to $$1.75 million per year. In addition to increasing costs, we expect our compliance efforts will make some activities more time-consuming and divert management time and attention away from our core business. We will need to expand our operational and financial systems and controls as part of our compliance efforts. We also expect that being a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance and may require us to accept reduced coverage or incur substantially higher costs to maintain our current level of coverage.

        We intend to take advantage of "grace periods" for newly public companies under certain SEC and Nasdaq rules and regulations, which grace periods will provide us a short period of time after we become a public company before we are required to be in full compliance with these rules and regulations. For example, upon the consummation of this offering, we will not be in full compliance with the SEC and Nasdaq requirements that a majority of our board members and all of our audit committee members be "independent." Our ability to satisfy the various requirements before the expiration of the applicable grace periods will depend largely on our ability to attract and retain qualified independent members of our board of directors, particularly to serve on our audit committee. If we fail to satisfy these requirements before the expiration of the applicable grace periods, our common stock may be delisted from Nasdaq, which would cause a decline in the trading price of our common stock and impair the ability of the holders of our common stock to sell and buy our common stock in a public market.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm the trading price of our stock.

        Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

We may not be able to successfully identify acquisition candidates, effectively integrate newly acquired businesses into our operations or achieve expected profitability from our acquisitions.

        To supplement our growth, we intend to selectively pursue acquisition opportunities. If we are not successful in finding attractive acquisition candidates that we can acquire on satisfactory terms, or if we cannot complete those acquisitions that we identify, we will not be able to realize the benefit of this growth strategy.

        Acquisitions involve numerous possible risks, including unforeseen difficulties in integrating operations, technologies, services, accounting and personnel; the diversion of financial and management resources from existing operations; unforeseen difficulties related to entering geographic regions or target markets where we do not have prior experience; the potential loss of key employees; and the inability to generate sufficient profits to offset acquisition or investment-related expenses. If we finance acquisitions by issuing equity securities or securities convertible into equity securities, our existing stockholders could be diluted, which, in turn, could adversely affect the market price of our stock. If we finance an acquisition with debt, it could result in higher leverage and interest costs. As a result, if we fail to evaluate and execute acquisitions properly, we might not achieve the anticipated benefits of these acquisitions, and we may incur costs in excess of what we anticipate.

Risks Relating to this Offering

Our common stock has no prior public market, and our stock price may decline after this offering.

        Prior to this offering, there has been no public market for our common stock. We cannot assure you that an active trading market for our common stock will develop or be sustained after this offering. The initial

public offering price for our common stock will be determined by negotiations between the representatives of the underwriters, the selling stockholders and us. The initial public offering price may not correspond to the price at which our common stock will trade in the public market subsequent to this offering, and the price of our common stock available in the public market may not reflect our actual financial performance.

        The market price of our common stock could be subject to significant fluctuations after this offering. Among the factors that could affect our stock price are:

•

variations in our operating results;



•

announcements by us, our competitors or others of significant business developments, changes in customer relationships, acquisitions or expansion plans;



•

analysts' earnings estimates, ratings and research reports;



•

the depth and liquidity of the market for our common stock;



•

speculation in the press;



•

strategic actions by us or our competitors, such as sales promotions or acquisitions;



•

actions by institutional and other stockholders;



•

conditions in the specialty wire and cable industry as a whole and in the markets where our products are used; and



•

domestic and international economic factors unrelated to our performance.

        The stock markets, in general, periodically experience volatility that is sometimes unrelated to the operating performance of particular companies. These broad market fluctuations may cause the trading price of our common stock to decline. In particular, you may not be able to resell your shares at or above the initial public offering price.

If securities or industry analysts do not publish research or reports about our business or publish negative research, or our results are below analysts' estimates, our stock price and trading volume could decline.

        The trading market for our common stock may depend on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our stock or our results are below analysts' estimates, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Our current principal stockholder will continue to have significant influence over us after this offering, and they could delay, deter or prevent a change of control or other business combination or otherwise cause us to take actions with which you may disagree.

        Upon the closing of this offering, Code, Hennessy & Simmons II, L.P. will beneficially own approximately %43% of our outstanding common stock. In addition, two members of our board, Peter M. Gotsch and Robert G. Hogan, may be considered affiliates of Code, Hennessy & Simmons. As a result, Code, Hennessy & Simmons and its affiliates will have significant influence over our decision to enter into any corporate transaction and may have the ability to prevent any transaction that requires the approval of stockholders, regardless of whether other stockholders believe that the transaction is in their own best interests. This concentration of voting power could have the effect of delaying, deterring or preventing a change of control or other business combination that might otherwise be beneficial to our stockholders.

Shares eligible for public sale after this offering could adversely affect our stock price.

        The shares of our common stock outstanding prior to this offering will be eligible for sale in the public market at various times in the future. The 8,500,000 shares of our common stock sold in this offering will be available for resale immediately. Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that these sales could occur, could cause the market price of our common stock to decline. We, all of our officers and directors and our stockholders have agreed, subject to limited exceptions, not to sell any shares of our common stock for a period of 180 days after the date of this prospectus without the prior written consent of William Blair & Company, L.L.C. Upon expiration of the lock-up period described above, and subject to the provisions of Rule 144, an additional 12,367,172 restricted shares will be available for sale in the public market.

Your percentage ownership in us may be diluted by future issuances of capital stock, which could reduce your influence over matters on which stockholders vote and be dilutive to earnings.

        Following the closing of this offering, our board of directors haswill have the authority, without action or vote of our stockholders, except as required by Nasdaq, to issue all or any part of our authorized but unissued shares of common or preferred stock, including shares issuable upon the exercise of options. Our certificate of incorporation authorizes 100,000,000 shares of common stock and 5,000,000 shares of preferred stock. Following the initial public offering, 79,132,828 shares of common stock and 5,000,000 shares of preferred stock will be authorized but unissued. Issuances of common or preferred stock would reduce your influence over matters on which our stockholders vote and could be dilutive to earnings.

As a new investor, you will experience immediate and substantial dilution.

        The initial public offering price of the common stock being sold in this offering is considerably more than the net tangible book value per share of our outstanding common stock. Accordingly, investors purchasing shares of common stock in this offering will pay a price per share that substantially exceeds, on a per share basis, the value of our tangible assets after subtracting liabilities. Investors will suffer additional dilution to the extent outstanding stock options are exercised and to the extent we issue any stock or options to our employees under our 2006 stock plan.

We might need to raise capital, which might not be available.

        We may require additional equity or debt financing for additional working capital for expansion, to consummate an acquisition or if we suffer losses. In the event additional financing is unavailable to us, we may be unable to expand or make acquisitions and our stock price may decline. If we need additional capital as a result of significant losses and additional financing is unavailable to us, we may default under covenants contained in our loan agreements and we may need to sell assets.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

        Provisions in our certificate of incorporation and by-laws may have the effect of delaying or preventing a change of control or changes in our management. In addition, as a Delaware corporation, we are subject to certain Delaware anti-takeover provisions, including restrictions on our ability to engage in a business combination with any holder of 15% or more of our capital stock. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us.

FORWARD-LOOKING STATEMENTS

        The matters discussed in this prospectus that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties, which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as "aim," "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "project," "should," "will be," "will continue," "will likely result," "would" and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance. You should read statements that contain these words carefully, because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other "forward-looking" information.

        The factors listed under "Risk Factors," as well as any cautionary language in this prospectus, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially from those in the forward looking statements as a result of various factors, including, but not limited to, those described above under the heading "Risk Factors" and elsewhere in this prospectus. Before you invest in our common stock, you should read this prospectus completely and with the understanding that our actual future results may be materially different from what we expect.

        Forward-looking statements speak only as of the date of this prospectus. Except as required under federal securities laws and the rules and regulations of the SEC, we do not have any intention, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this prospectus, whether as a result of new information, future events or otherwise. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on the forward-looking statements included in this prospectus or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

USE OF PROCEEDS

        We estimate that our net proceeds from the sale of shares by us in this offering will be approximately $$49.9 million, based on the assumed initial public offering price of $$13.00 per share, the mid-point of the range on the cover of this prospectus, and after deducting the underwriting discount and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares by the selling stockholders. A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share would increase (decrease) the net proceeds to us from this offering by approximately $4.0 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and estimated offering expenses payable by us. Any increase (decrease) in the net proceeds would result in our paying down more (less) of the outstanding balance under the revolving loan.

        We intend to use the net proceeds we receive from this offering to reduce existing indebtedness under our current credit facility, including repaying $                        of the Term A Note due May 1, 2007, $$9.4 million of the Term B Note due May 1, 2007 and paying down $$40.5 million of the outstanding balance under our revolving facility,loan, which expires May 1, 2007. The Term B Note bears interest at 1.25% over the lender's base rate, and the Term A Note and the revolving loan bearbears interest at 0.25% over the lender's base rate. In accordance with our credit agreement, we have converted a portion of these borrowings to LIBOR loans, which bear interest, in the case of the Term B Note, at 2.75% over LIBOR and, in the case of the Term A Note and our revolving facility,loan, at 1.75% over LIBOR. Amounts repaid under the revolving credit facilityloan may be redrawn from time to time for general corporate purposes, including acquisitions. In the last 12 months, we borrowed under our revolving credit facilityloan to pay a $20.0 million special dividend and to fund working capital.

DIVIDEND POLICY

        We paid a special dividend aggregating $20.0 million on our common stock on December 30, 2005. However, we do not anticipate paying dividends after the closing of this offering, and our board of directors currently intends to retain any future earnings for reinvestment in our business. In any event, any determination to pay dividends will be at the discretion of our board of directors and will be dependent upon our results of operations and cash flows, our financial position and capital requirements, general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends, including the restrictions contained in the agreements governing our outstanding indebtedness and any other factors our board of directors deems relevant.

        As a holding company, our only source of funds to pay dividends is distributions from our operating subsidiary. Under our credit facility, our operating subsidiary may only pay us dividends for specified purposes, which do not include enabling us to pay dividends on our common stock.

CAPITALIZATION

        The following table sets forth our book overdraft, current portion of long-term obligations and consolidated capitalization as of DecemberMarch 31, 2005:2006:

•

on an actual basis; and



•

on an as adjusted basis to reflect this offering and the application of the net proceeds.

        You should read the data set forth below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and accompanying notes included elsewhere in this prospectus.

(1)

UponAssuming an initial public offering price of $13.00 per share, the midpoint of the range on the cover of this prospectus, upon the completion of this offering and as presented on an as adjusted basis, approximately $                   million outstanding under our Term A loan, $$9.4 million outstanding under our Term B loan and $$40.5 million outstanding under our revolving loan will be immediately repaid. A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share would increase (decrease) each of Long-term obligations: Revolving loans, Total stockholders' equity and Total capitalization by approximately $4.0 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and estimated offering expenses payable by us.

DILUTION

        Our net tangible book value as of DecemberMarch 31, 20052006 was ($2.3)$2.6 million, or ($0.25)$0.16 per share of common stock. Net tangible book value per share is determined by dividing our net tangible book value, which is total tangible assets less total liabilities, by the aggregate number of shares of common stock outstanding. Tangible assets represent total assets excluding goodwill and other intangible assets. Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of our common stock in this offering and the as adjusted net tangible book value per share of our common stock immediately afterwards. After giving effect to our sale of shares of common stock in this offering at an assumed initial public offering price of $$13.00 per share, our as adjusted net tangible book value at DecemberMarch 31, 20052006 would have been $$52.5 million, or $$2.51 per share. This represents an immediate increase in net tangible book value of $$2.35 per share to our existing stockholders and an immediate dilution of $$10.49 per share to new investors purchasing shares of common stock in this offering. The following table illustrates this dilution per share:

        A $1.00 increase (decrease) in the assumed initial public offering price of $13.00 per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, would increase (decrease) our net tangible book value after this offering by approximately $4.0 million and the dilution per share to new investors by $0.19, in each case assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and estimated offering expenses payable by us.

        The following table summarizes, as of DecemberMarch 31, 2005,2006, on an as adjusted basis, the number of shares of common stock purchased or to be purchased from us, the total consideration paid or to be paid to us and the average price per share paid or to be paid by existing stockholders and by new investors purchasing shares of common stock in this offering, before deducting the underwriting discount and estimated offering expenses payable by us.

(1)

The number of shares disclosed for the existing stockholders includes 4,250,000 shares being sold by the selling stockholders in this offering. The number of shares disclosed for the new investors does not include those shares.

(2)

If the underwriters' overallotment option is exercised in full, the number of shares held by existing stockholders will be reduced to            , or approximately        % of the shares of common stock outstanding after this offering, and the number of shares held by the new investors will be increased to            , or approximately        % of the total number of shares of our common stock outstanding after this offering.

        The above discussion and table assume no exercise of stock options after DecemberMarch 31, 2005.2006. As of DecemberMarch 31, 2005,2006, we had outstanding options to purchase a total of 245,065 shares of common stock at a weighted average price of $$1.33 a share. If all such options had been exercised as of DecemberMarch 31, 2005,2006, adjusted net tangible book value per share would be $$2.50 and dilution to new investors would be $$10.50 per share. To the extent any additional options are granted and exercised, there may be additional economic dilution to new investors.

        In addition, we may choose to raise additional capital due to market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

SELECTED CONSOLIDATED FINANCIAL DATA

        You should read the following selected financial information together with our financial statements and the related notes appearing at the end of this prospectus and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this prospectus. We have derived the statement of income data for the three months ended March 31, 2005 and 2006 and the balance sheet data at March 31, 2006 from our unaudited financial statements, which are included in this prospectus. The unaudited financial statements have been prepared on the same basis as the audited financial statements and, in the opinion of management, include all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the information set forth therein. We have derived the statement of income data for each of the years ended December 31, 2003, 2004 and 2005, and the balance sheet information at December 31, 2004 and December 31, 2005 from our audited financial statements, which are included in this prospectus. We have derived the statementsstatement of income data for the years ended December 31, 2001 and December 31, 2002, and the balance sheet data at December 31, 2001, 2002 and 2003 from our audited financial statements, which are not included in this prospectus.

(1)

The management fee arrangement will be terminated as of completion of this offering.

(2)

The pro forma income statement data assumes that we issued 4,250,000 shares of our common stock at a price of $$13.00 per share, and used the proceeds as set forth under "Use of Proceeds," as of January 1, 2005. In addition, the data assumes that the management fee was terminated as of January 1, 2005.

(3)

As adjusted to reflect the impact of the offering and the application of the net proceeds.proceeds as if the offering occurred on March 31, 2006.

(4)

Our book overdraft is funded by our revolving credit facility as soon as the related checks clear our disbursement account.

(5)

On December 30, 2005, we paid a special dividend of $20.0 million to our common stockholders and funded the payment by borrowing under our existing credit facilities.facility.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus. The following discussion of our historical consolidated financial statements covers periods before consummation of this offering and the application of the proceeds. Accordingly, the discussion does not reflect the impact that this offering will have on us. See the information provided in "Risk Factors," "Capitalization," "—Liquidity and Capital Resources" and elsewhere in this prospectus for further discussion relating to the impact of this offering on us. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Factors that could cause such differences include those described in "Risk Factors" and elsewhere in this prospectus. Certain tabular information will not foot due to rounding.

Overview

        Since our founding over 30 years ago, we have grown to be one of the largest distributors of specialty wire and cable and related services to the U.S. electrical distribution market. Today, we serve over 2,600 customers, including each of the top 200 electrical distributors in the U.S. Our specialty wire and cable is primarily used in maintenance, repair and operations ("MRO") related projects and is increasingly purchased for larger scale projects in the communications, energy, engineering and construction, general manufacturing, infrastructure, petrochemical, transportation, utility and wastewater treatment industries.

        In 2000, we acquired our largest competitor, the Futronix division of Kent Electronics Corporation. Since that time, we have pursued a number of initiatives designed to improve our operating efficiencies and increase our share of the fragmented market for specialty wire and cable. We integrated the Futronix business into our own and rationalized inventory, facilities and low-margin customer relationships. We have made substantial investments in warehouse facilities and information systems in order to enhance our ability to provide customers with comprehensive value-added services, including application engineering support, inventory management, custom cut capabilities and 24/7/365 customer service, order fulfillment and shipping. During the years 2001 through 2003, the U.S. electrical distribution market was adversely affected by the general slowdown of the economy. In response to these economic conditions, we increased our focus on achieving operating efficiencies by leveraging our investments in our centralized back-office administration and purchasing, investing in a scalable information technology platform and implementing automated warehouse operations and electronic product tracking. This focus has assisted us in increasing our operating income margin from 4.8% in 2001 to 10.6% in 2005.

        Since 2003, the U.S. electrical distribution market has experienced increased demand, as large industrial and commercial companies have increased capital spending to "catch-up" on deferred maintenance and upgrade and expand infrastructure. According toElectrical Wholesaling magazine, , the U.S. electrical distribution market is estimated to have grown from approximately $60.6 billion of industry-wide sales in 2003 to $74.3 billion in 2005, and is expected to grow 7.9% to $80.2 billion in 2006. At the same time as the electrical distribution market began to recover, we implemented a new sales and marketing strategy that focuses on working in concert with our distributor customers to generate demand from end-users in our targeted markets and to strengthen relationships with project and specifying engineers to stimulate demand for our specialty wire and cable. In addition, we have significantly increased the size of our sales force since 2003, and as of AprilMay 1, 2006 we had 142141 sales employees. In 2003, we introduced our LifeGuard™ line of low-smoke, zero-halogen cable products which, due to their highly engineered specifications and safety benefits, generate higher margins for us than traditional cable products. As a result of our new sales and marketing initiatives, as well as general market growth, our revenue has increased at a CAGR of 19.8% over the past three years, from $149.1 million in 2003 to $214.0 million in 2005.

        Our revenue is driven in part by the level of capital spending within the end-markets we serve. Because many of these end-markets defer capital expenditures during periods of economic downturns, our business has experienced cyclicality from time to time. We believe that our revenues will continue to be impacted by fluctuations in capital spending and by our ability to drive demand through our sales and marketing initiatives and the continued development and marketing of our private branded products, such as LifeGuard™.

        Our direct costs will continue to be influenced significantly by the prices we pay our suppliers to procure the products we distribute to our customers. Changes in these costs may result, for example, from increases or decreases in raw material costs, changes in our relationships with suppliers or changes in vendor rebates. Our operating expenses will continue to be affected by our investment in sales, marketing and customer support personnel and commissions paid to our sales force for revenue generated. Some of our operating expenses are related to our fixed infrastructure, including rent, utilities, administrative salaries, maintenance, insurance and supplies. To meet our customers' needs for an extensive product offering and short delivery times, we will need to continue to maintain adequate inventory levels. Our ability to obtain this inventory will depend, in part, on our relationships with suppliers.

Changes in Connection with Becoming a Public Company

        As a public company, we expect that we will incur significant additional operating expenses such as increased audit fees, professional fees, directors' and officers' insurance costs, compensation for our board of directors, and expenses related to hiring additional personnel and expanding our administrative functions. Many of these expenses were not incurred or were incurred at a lower level by us as a private company and are not included in our prior results of operations. We began to incur certain of these expenses during 2006, and we expect that these expenses will continue to increase. We expect these additional expenses to be in the range of $$1.25 million to $$1.75 million per year.

        Following the offering, we will no longer be subject to the annual $500,000 management fee that we pay to an affiliate of Code, Hennessy & Simmons.

        On December 30, 2005, we paid a special dividend of $20.0 million to our common stockholders and funded the payment by borrowing under our existing credit facilities.facility. Due to the interest payable on these borrowings, our net earnings, and earnings per share, in 2006 will be lower than they would have been had we not paid the special dividend. We intend to use our net proceeds from this offering to repay a portion of our outstanding indebtedness.

Critical Accounting Policies

        Critical accounting policies are those that both are important to the accurate portrayal of a company's financial condition and results, and require subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

        In order to prepare financial statements that conform to accounting principles generally accepted in the United States, commonly referred to as GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Certain estimates are particularly sensitive due to their significance to the financial statements and the possibility that future events may be significantly different from our expectations.

        We have identified the following accounting policies as those that require us to make the most subjective or complex judgments in order to fairly present our consolidated financial position and results of operations. Actual results in these areas could differ materially from management's estimates under different assumptions and conditions.

Allowance for Doubtful Accounts

        We maintain an allowance for doubtful accounts receivable for estimated losses resulting from the inability of our customers to make required payments. We perform periodic credit evaluations of our customers and typically do not require collateral. Consistent with industry practices, we require payment from most customers within 30 days of invoice date. We have an estimation procedure, based on historical data and recent changes in the aging of these receivables, that we use to record reserves throughout the year. In the last five years, write-offs against our allowance for doubtful accounts have averaged approximately $165,000 per year. A 20% change in our estimate at December 31, 2005 would have resulted in a change in income before income taxes of $89,000 for the year ended December 31, 2005.

Inventory Obsolescence

        We continually monitor our inventory levels at each of our distribution locations. Our reserve for inventory obsolescence is based on the age of the inventory, movements of our inventory over the prior eighteen months and the experience of our purchasing and sales departments in estimating demand for the product in the succeeding year.year. Our inventories are generally not susceptible to technological obsolescence. A 20% change in our estimate at December 31, 2005 would have resulted in a change in income before income taxes of $382,000 for the year ended December 31, 2005.

Goodwill

        Goodwill represents the excess of the amount we paid to acquire businesses over the estimated fair value of tangible assets and identifiable intangible assets acquired, less liabilities assumed. At December 31, 2005, our net goodwill balance was $3.0 million, representing 3.7% of our total assets.

        In 2002, we adopted the provisions of Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets ("SFAS 142"). Under SFAS 142, we test goodwill for impairment annually, or more frequently if indications of possible impairment exist, by applying a fair value-based test.

        In October 2005, we performed our annual goodwill impairment tests for goodwill and other indefinite-lived intangible assets, and, as a result of this test, we believe the goodwill on our balance sheet is not impaired.

        If circumstances change or events occur to indicate that our fair market value has fallen below book value, we will compare the estimated fair value of the goodwill to its carrying value. If the carrying value of goodwill exceeds the estimated fair value of goodwill, we will recognize the difference as an impairment loss in operating income.

Vendor Rebates

        Many of our arrangements with our vendors entitle us to receive a rebate of a specified amount when we achieve any of a number of measures, generally related to the volume of purchases from the vendor. We account for these rebates as a reduction of the prices of the vendor's products, which reduces inventory until we sell the product, at which time these rebates reduce cost of sales. Throughout the year, we estimate the amount of rebates earned based on our purchases to date and our estimate of purchases to be made for the remainder of the year relative to the purchase levels that mark our progress toward earning the rebates. We continually revise these estimates to reflect actual purchase levels. A 20% change in our estimate of total rebates earned during 2005 would have resulted in a change in income before income taxes of $580,000 for the year ended December 31, 2005.

New Accounting Pronouncements

        On December 16, 2004, the Financial Accounting Standards Board ("FASB") issued FASB Statement No. 123 (revised 2004) ("FASSFAS 123(R)"),Share-Based Payment, which is a revision of SFAS 123,Accounting

Accounting for Stock-Based Compensation. Generally, the approach to accounting for share-based payments in FASSFAS 123(R) is similar to the approach described in SFAS 123. However, FASSFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. As such, pro forma disclosure is no longer an alternative to financial statement recognition. We adopted FASSFAS 123(R) effective January 1, 2006.2006 using the prospective transition method. The adoption of FASSFAS 123(R) isdid not expected to have a material effect on our consolidated financial position, cash flows or results of operations.

Sales

        We generate most of our sales by providing specialty wire and cable to our customers. We also collect sales through freight charges. We recognize revenue upon shipment of our products to customers from our distribution centers or directly from our suppliers. Sales incentives earned by customers are accrued in the same month as the shipment is invoiced.

Cost of Sales

        Cost of sales consists primarily of the average cost of the specialty wire and cable that we sell. We also incur shipping and handling costs in the normal course of business. Cost of sales also reflects cash discounts for prompt payment to vendors and vendor rebates generally related to annual purchase targets.

Operating Expenses

        Operating expenses include all expenses incurred to receive, sell and ship product and administer the operations of our company.

        Salaries and Commissions.    Salary expense includes the base compensation, and any overtime earned by hourly personnel, for all sales, administrative and warehouse employees. Commission expense is earned by inside sales personnel based on gross profit dollars generated, by field sales personnel from generating sales and meeting various personal objectives, by sales, national and project managers for driving the sales process, by regional managers based on the profitability of their branches and by corporate managers based on the profitability of the company.

        Other Operating Expenses.    Other operating expenses include all other expenses, except for salaries and commissions, management fees and depreciation and amortization. This includes all payroll taxes, health insurance, traveling expenses, advertising, management information system expenses, facility rent and maintenance and all distribution expenses such as packaging, reels, and repair and maintenance of equipment and facilities.

        Management Fee.    The management fee consists of expenses that we pay to CHS Management II, L.P. for certain management and advisory services. This management fee arrangement will be cancelled upon the completion of the offering.

        Litigation Settlements.    Litigation settlements reflect the funds received from the settlement of a lawsuit against two vendors in 2004 and from a court award in 2005 related to a claim for breach of contract that occurred under the previous ownership.

        Depreciation and Amortization.    We incur depreciation and amortization expenses for costs related to the capitalization of property and equipment on a straight-line basis over the estimated useful lives of the assets, which range from three to 30 years. We amortize leasehold improvements over their estimated useful life or the remaining lease term.term, whichever is shorter. A non-compete agreement arising from the 2000 acquisition of Futronix was amortized over its four-year term.

Interest Expense

        Interest expense consists primarily of interest we pay on our debt. The decrease in interest expense in 2005 resulted from payments made in 2004 and 2005 on our junior subordinated promissory notes, which

bore interest at a rate of 14.0% per annum. Interest expense will increaseincreased in the first halfquarter of 2006 due to the additional debt incurred to finance the payment of the special dividend in December 2005. See "Use of Proceeds."

Results of Operations

        The following discussion compares our results of operations for the quarters ended March 31, 2006 and 2005 and the years ended December 31, 2005, 2004 and 2003.

        The following table shows, for the periods indicated, information derived from our consolidated statements of income, expressed as a percentage of sales for the period presented.

Comparison of Quarters Ended March 31, 2006 and 2005

Sales

        Our sales were $66.4 million for the three months ended March 31, 2006, an increase of $23.3 million, or 54.1%, compared to sales of $43.1 million for the comparable period in 2005. The increase reflected increased demand due to strong capital spending across a wide array of end markets, increased MRO spending which continued from the second half of 2005, an increase in product prices and the increased sales of the LifeGuard™ product line. The branches serving the Gulf Coast region had the highest increase in sales, due to product needed for damage repairs and rebuilding from the two hurricanes.

Cost of Sales

        Cost of sales was $48.4 million for the three months ended March 31, 2006, an increase of $16.5 million, or 51.6%, compared to cost of sales of $31.9 million for the comparable period in 2005. The increase reflects increases in demand for our products.

Gross Profit

        Gross profit was $18.0 million for the three months ended March 31, 2006, an increase of $6.8 million, or 61.3%, compared to gross profit of $11.2 million for the comparable period in 2005. This increase was due primarily to higher sales volume and an increase in our gross margin from 25.9% to 27.1%. The margin increase is attributed to an increase in the percentage of sales volume shipped from inventory held in our distribution centers of 72.6% in 2006 compared to 71.0% in 2005, and an increase in sales of higher margin products. Shipments from inventory held in our distribution centers generally represent smaller orders and command a higher level of gross margin than direct shipments from suppliers and cross-dock shipments.

Operating Expenses

        Operating expenses were $9.0 million for the three months ended March 31, 2006, an increase of $1.8 million, or 24.5%, compared to operating expenses of $7.3 million for the comparable period in 2005. This increase was due to the specific factors discussed below.

Salaries and Commissions.    Salaries and commissions were $5.1 million for the three months ended March 31, 2006, an increase of $0.8 million, or 18.3%, compared to salaries and commission expenses of $4.3 million for the comparable period in 2005. Almost all of this increase, $0.7 million, was due to higher commissions due to increased sales and gross profit. Salaries and commissions as a percentage of sales decreased from 9.9% in 2005 to 7.6% in 2006.

Other Operating Expenses.    Other operating expenses were $3.7 million for the three months ended March 31, 2006, an increase of $0.3 million, or 10.0%, compared to other operating expenses of $3.4 million for the comparable period in 2005. The increase in operating expenses is related to administrative costs, including additional professional fees and additional warehousing expenses, including supplies and equipment. Other operating expenses as a percentage of sales have decreased from 7.9% in 2005 to 5.6% in 2006.

Management Fee.    Management fee expenses were flat at $0.1 million for the three months ended March 31, 2006 and 2005. Following this offering, we will no longer pay any management fee to CHS Management II, L.P.

Litigation Settlement.    There was no litigation settlement for the three months ended March 31, 2006 and a $0.7 million litigation settlement for the comparable period in 2005.

Depreciation and Amortization.    Depreciation and amortization expenses were flat at $0.1 million for the three months ended March 31, 2006 and 2005.

Interest Expense

        Interest expense was $1.1 million for the three months ended March 31, 2006, an increase of $0.3 million, or 47.8%, compared to interest expense of $0.7 million for the comparable period in 2005. The increase was primarily due to the increase in debt in December 2005 to pay a special $20.0 million dividend.

Income Tax Expense

        Our effective income tax rate increased from 36.8% in the three months ended March 31, 2005 to 39.2% in the three months ended March 31, 2006. This was primarily due to an increase in the state tax rate in the current period and the non-taxable nature of a litigation settlement in the prior period.

Comparison of Years Ended December 31, 2005 and 2004

Sales

        Our sales were $214.0 million in 2005, an increase of $41.2 million, or 23.9%, compared to sales of $172.7 million in 2004. The increase is the result of greater demand for our products, spurred by a higher

level of capital spending in a number of end-markets, including investments by utilities in new power generation projects and facility upgrades, increased MRO spending and increased sales of our LifeGuard™ product. Sales of control and power cable, our largest product family, increased by $17.0 million, or 30%, from $56.4 million in 2004 to $73.4 million in 2005. Sales also benefited from the addition of 13 sales personnel in 2005 and from the efforts of our field sales force to track new construction and MRO projects to get our products included in specifications. Sales increased by more than 20% in every region we served except the Northeast, where general economic activity remained slower than in the rest of the country. We estimate that we benefited by approximately $5.0 to $6.0 million in sales as a result of the Gulf Coast hurricanes in the second half of 2005.

Cost of Sales

        Cost of sales was $158.2 million in 2005, an increase of $26.8 million, or 20.4%, compared to cost of sales of $131.4 million in 2004. The increase was primarily due to the increase in demand for our products mentioned above. The increase also resulted in part from an increase in freight costs of $0.9 million in 2005

over 2004. Partially offsetting these increases were vendor rebates and discounts for prompt payment totaling $1.7 million more in 2005 than in 2004 and an inventory obsolescence credit of $0.2 million in 2005, as compared to a charge of $0.7 million in 2004, reflecting our success in selling some older, reserved inventory.

Gross Profit

        Gross profit increased $14.4 million, or 34.9%, to $55.7 million in 2005 from $41.3 million in 2004, due primarily to increased sales. Gross profit as a percentage of net sales, commonly referred to as gross margin, increased to 26.0% in 2005 compared to 23.9% for 2004. This increase was due mainly to a more favorable product mix, including a greater proportion of higher margin items and increased vendor rebates. Improved inventory profiles allowed us to increase the percentage of sales volume shipped from inventory held in our distribution centers from 68.1% in 2004 to 69.5% in 2005. Shipments from inventory held in our distribution centers generally represent smaller orders and command a higher level of gross margin. Also contributing to this increase was the inventory obsolescence credit described above.

Operating Expenses

        Operating expenses were $32.9 million in 2005, an increase of $3.1 million, or 10.4%, compared to operating expenses of $29.8 million in 2004. This increase was attributable to the specific factors discussed below.

        Salaries and Commissions.    Salaries and commissions increased $2.0 million, or 12.3%, to $18.7 million in 2005 from $16.7 million in 2004. This increase consists of a $0.7 million increase in salaries due to pay increases and additional personnel and a $1.3 million increase in commission expense, reflecting the higher level of sales. Salaries and commissions as a percentage of net sales decreased to 8.7% in 2005 from 9.6% in 2004, as sales increased at a faster rate than personnel additions and commission payments.

        Other Operating Expenses.    Other operating expenses increased $1.6 million, or 13.1%, to $14.0 million in 2005 from $12.4 million in 2004. The increase in other operating expenses is due to expenditures for advertising to support the growth in the sales volume, administrative costs, including payroll taxes and medical and dental costs, and warehousing costs, including supplies and equipment. While other operating expenses increased in 2005 from 2004, other operating expenses as a percentage of net sales decreased to 6.6% in 2005 from 7.2% in 2004 due to our ability to leverage infrastructure costs.

        Management Fee.    Management fee expenses were consistent at $0.5 million in 2005 and 2004. Following this offering, we will no longer pay an annual management fee to CHS Management II, L.P.

        Litigation Settlement.    We realized a litigation settlement benefit of $0.7 million in 2005, an increase of $22,000 or 3.4% compared to the benefit received in 2004. The 2005 litigation settlement resulted from a

court award involving the seller indemnification provisions of the 1997 purchase agreement by which our current owners acquired us.

        Depreciation and Amortization.    Depreciation and amortization expense was $0.4 million in 2005, a decrease of $0.5 million, or 54.6%, compared to $0.9 million in 2004. This decrease was primarily due to the charge in 2004 of $0.3 million for the unamortized balance of a non-compete agreement (relating to the 2000 Futronix acquisition) that was fully amortized in 2004.

Interest Expense

        Interest expense decreased $0.6 million, or 16.6%, to $3.0 million in 2005 from $3.5 million in 2004. An increase in our average debt outstanding was more than offset by the effect of a decrease in our effective interest rate to 7.2% in 2005 from 7.9% in 2004. The decrease in the effective interest rate was primarily due to a reduction in the outstanding amount of the junior subordinated notes, which had a 14.0% interest rate.

Income Tax Expense

        Our effective income tax rate decreased from 39.7% in 2004 to 36.8% in 2005 primarily due to an increase in deferred tax assets as a result of an increase in the federal rate from 34% to 35% and the non-taxable nature of the litigation settlement.

Comparison of Years Ended December 31, 2004 and 2003

        Sales.    Sales were $172.7 million in 2004, an increase of $23.6 million, or 15.9%, compared to sales of $149.1 million in 2003. The increase was primarily due to the general increase in demand throughout the electrical distribution market, increased spending in the utility markets for new power generation projects and facility upgrades, increased MRO work and increased sales of our LifeGuard™ product.

        Cost of Sales.    Cost of sales was $131.4 million in 2004, an increase of $17.5 million, or 15.3%, compared to cost of sales of $114.0 million in 2003. The increase was primarily due to the increase in sales volume. The provision for inventory obsolescence increased by $0.5 million as a result of higher levels of older inventory, and freight costs increased by $0.4 million as a result of increased sales volume. These increases were offset by $1.0 million of additional discounts for prompt payment and vendor rebates due to higher sales volume and enhanced vendor rebate agreements.

        Gross Profit.    Gross profit increased $6.2 million, or 17.6%, to $41.3 million in 2004 from $35.1 million in 2003, due to increased sales. Gross margin increased slightly to 23.9% in 2004 compared to 23.6% for 2003. This increase was due primarily to enhanced product margins, higher discounts for prompt payment and larger vendor rebates, partially offset by higher inventory obsolescence charges and freight expenses.

        Operating Expenses.    Overall operating expenses decreased from $30.4 million in 2003 to $29.8 million in 2004. Excluding the recovery of the litigation settlement of $0.7 million in 2004, operating expenses would have remained relatively flat. Specific changes in the major components are discussed below.

        Salaries and Commissions.    Salaries and commissions increased $2.1 million, or 14.2%, to $16.7 million in 2004 from $14.6 million in 2003. This increase reflects a $0.6 million rise in salaries due to rate changes for existing employees, overtime and additional personnel and additional commission expense of $1.5 million as sales and gross profit increased. Salaries and commissions as a percentage of net sales decreased to 9.6% in 2004 from 9.8% in 2003 as sales increased at a faster rate than personnel additions and commission payments.

        Other Operating Expenses.    Other operating expenses decreased $1.5 million, or 10.6%, to $12.4 million in 2004 from $13.9 million in 2003. The decrease in other operating expenses is due primarily

to a reduction of $1.2 million in legal and professional fees, reflecting reduced litigation activity in 2004, and a $0.3 million decrease in other administrative, sales and warehouse expenses. Other operating expenses as a percentage of net sales decreased to 7.2% in 2004 from 9.3% in 2003, reflecting strict cost controls, the decrease in legal and professional fees and the increase in sales.

        Management Fee.    Management fee expenses were consistent at $0.5 million in 2004 and 2003.

        Litigation Settlements.    We realized a litigation settlement benefit of $0.7 million in 2004, compared to no litigation settlement benefit in 2003. The litigation settlement was received from two vendors against which we had filed suit.

        Depreciation and Amortization.    Depreciation and amortization expense was $0.9 million in 2004, a decrease of $0.6 million, or 40.9%, compared to $1.5 million in 2003. This decrease was primarily due to a $0.4 million decrease in the amortization of a non-compete agreement, which was fully amortized in the second quarter of 2004.

Interest Expense

        Interest expense decreased $0.6 million, or 15.3%, to $3.5 million in 2004 from $4.2 million in 2003. This decrease reflects a reduction in our average debt outstanding, as our effective interest rates were flat from 2003 to 2004. Average debt decreased, as we used cash generated from operations to pay down debt.

Income Tax Expense

        Our effective income tax rate decreased substantially from 57.7% in 2003 to 39.7% in 2004 primarily due to the substantially lower income before taxes in 2003 in relation to the level of state income taxes and non-deductible items.

Quarterly Results

        The following table presents our unaudited quarterly results of operations for each of our last eightnine quarters ended DecemberMarch 31, 2005.2006. You should read the following table in conjunction with the consolidated financial statements and related notes contained elsewhere in this prospectus. We have prepared the unaudited information on the same basis as our audited consolidated financial statements. Results of operations for any quarter are not necessarily indicative of results for any future quarters or for a full year. HurricaneWe estimate that hurricane activities in the summer and fall of 2005 resulted in increased sales of approximately $5.0 to $6.0 million in the third and fourth quarters of 2005. We do not anticipate that hurricanes will have a similar impact during the same periods in 2006.

Impact of Inflation and Commodity Prices

        Our results of operations are affected by changes in the inflation rate and commodity prices. Moreover, because copper and petrochemical products are components of the wire and cable we sell, fluctuations in the costs of these and other commodities have historically affected our operating results. To the extent we are unable to pass on to our customers cost increases due to inflation or rising commodity prices, it could adversely affect our operating results.

Liquidity and Capital Resources

        Our primary capital needs are for working capital obligations and other general corporate purposes, including acquisitions and capital expenditures. Our primary sources of working capital are cash from operations supplemented by bank borrowings. We have funded our capital expenditures through cash from operations. Our working capital amounted to $52.4 million at March 31, 2006, compared to working capital of $51.4 million at December 31, 2005, compared toand working capital of $44.9 million at December 31, 2004.

        Working capital increased in 2005 primarily due to (i) higher accounts receivable, which increased $14.2 million over 2004 as a result of improved sales, and (ii) greater inventory, which increased $1.5 million over 2004 as a result of demand for more product. These increases were offset by (i) higher accounts payable, which increased $3.2 million over 2004 as a result of our increased purchases, (ii) an increase in taxes payable, which increased $0.8 million due to increased profitability and (iii) an increase in current debt as a result of $3.5 million of term debt that became due.

        Liquidity is defined as the ability to generate adequate amounts of cash to meet the current need for cash. We assess our liquidity in terms of our ability to generate cash to fund our operating activities. Significant factors which could affect liquidity include the following:

•

the adequacy of available bank lines of credit;



•

the ability to attract long-term capital with satisfactory terms;



•

cash flows generated from operating activities;



•

acquisitions; and



•

capital expenditures.

Comparison of Quarters Ended March 31, 2006 and 2005

        Our net cash provided by operations for the three months ended March 31, 2006, was $4.0 million compared to $5.0 million in the prior comparable period. As sales of product increased significantly in 2006 versus 2005, our cash flow demands moved in several areas. Cash from net income increased from $2.0 million in the first quarter of 2005 to $4.8 million in the first quarter of 2006, but this was offset by an increase in inventory investment of $7.8 million during the 2006 period as sales increased and product costs increased. Accounts receivable decreased by $1.0 million. Offsetting these were increases in accounts payable and accrued liabilities of $3.2 million and taxes payable of $1.2 million.

        Net cash used in investing activities was $0.1 million in both periods. The demand for additional capital resources to accommodate our operations remains low.

        Net cash used in financing activities was $3.9 million in the first quarter of 2006, compared to $4.9 million in the comparable 2005 period. This change was primarily due to the decrease in the level of pay downs on our revolving debt facility and scheduled principal payments of $0.6 million on our Term A and Term B loans.

Comparison of Years Ended December 31, 2005 and 2004

        Our net cash used by operating activities was $3.8 million for 2005 compared to net cash provided of $12.0 million for 2004. The cash used in operations in 2005 was primarily due to the decrease in the book overdraft of $5.9 million, an increase in accounts receivable of $14.3 million and an increase in inventory of $1.3 million. This was offset in 2005 by net income of $12.5 million and increases in accounts payable and income taxes payable of $3.2 million and $0.8 million, respectively. These changes were primarily due to the increase in sales in 2005 over 2004 levels. Depreciation and amortization decreased by $0.5 million, including a decrease of $0.3 million due to the absence in 2005 of a charge for a non-compete agreement that was fully amortized in 2004.

        Net cash used in investing activities for 2005 was $0.3 million compared to $0.2 million for 2004. The investing activities were for capital expenditures, which have remained relatively constant over the past three years.

        Net cash provided by financing activities for 2005 was $4.1 million compared to net cash used of $11.8 million for 2004. The difference was primarily due to the borrowing of additional funds in 2005 to finance a $20.0 million special dividend payment, while in 2004, we repaid $14.0 million of our junior subordinated promissory notes.

Comparison of Years Ended December 31, 2004 and 2003

        Our net cash provided by operating activities remained relatively constant at $12.0 million from 2003 to 2004, even though operating income improved by $6.8 million, from $4.7 million in 2003 to $11.5 million in 2004, reflecting our revenue growth and improved operating expense margins. Additional cash was needed to fund accounts receivable and inventory, up $6.2 million and $3.6 million, respectively, in 2004 from 2003, due to the increased sales volume. The additional cash requirements in 2004 were funded by an increase in book overdraft of $7.9 million, an increase in trade accounts payable of $1.7 million and an increase in accrued and other current liabilities of $2.8 million. Depreciation and amortization decreased $0.6 million to $0.9 million in 2004 from $1.5 million in 2003. Most of this decrease can be attributed to the reduction of the amortization of the non-compete agreement from $0.8 million in 2003 to $0.3 million in 2004 which became fully amortized in the second quarter of 2004.

        Net cash used in investing activities for 2004 was $0.2 million compared to $0.3 million for 2003.

        Net cash used in financing activities for 2004 was $11.8 million compared to $12.0 million for 2003. In 2004 we made repayments on our junior subordinated promissory notes of $14.0 million and had net borrowings of $2.1 million, while in 2003 we made net payments on our revolving loan of $8.0 million and repaid a Term A loan of $3.8 million.

Indebtedness

        Our principal source of liquidity at DecemberMarch 31, 20052006 was working capital of $51.4$52.4 million compared to $44.9$51.4 million at December 31, 2004.2005. We also had available borrowing capacity in the amount of $11.1 million at March 31, 2006 and $1.5 million at December 31, 2005 and $11.1 million at December 31, 2004 under our loan and security agreement with Bank of America and another syndication lender. Upon the completion of this offering, we will repay approximately $$49.9 million of our outstanding debt, providing us with $$51.6 million of available commitment under our exitingexisting revolving credit facility.facility, based on amounts outstanding as of March 31, 2006.

        We believe that, following the repayment of debt after our offering, we will have adequate availability of capital to fund our present operations, meet our commitments on our existing debt, and fund anticipated growth over the next twelve months, including expansion in existing and targeted market areas. We continually seek potential acquisitions and from time to time hold discussions with acquisition candidates. If suitable acquisition opportunities or working capital needs arise that would require additional financing, we believe that our financial position and earnings history provide a solid base for obtaining additional financing

resources at competitive rates and terms. Additionally, we may issue additional shares of common or preferred stock to raise funds.

Loan and Security Agreement

        We have a loan and security agreement with Bank of America and another lender. The lenders have a security interest in all of our assets, including accounts receivable and inventory. The agreement consists of:

•

a $4.5 million term loan commitment ("Term A") with scheduled monthly principal installments and interest at the lender's base interest rate plus 0.25%;



•

a $10.0 million term loan commitment ("Term B") with scheduled monthly principal installments and interest at the lender's base interest rate plus 1.25%; and



•

a $55.0 million revolving loan with interest at the lender's base interest rate plus 0.25%.

        The agreement matures on May 1, 2007. We expect to be able to refinance our loan agreement at that time.

        Portions of the outstanding loans may be converted to LIBOR loans in minimum amounts ranging between $100,000 to $1 million and integral multiples of $100,000. Upon such conversion, interest is payable at LIBOR plus 1.75% for the revolving and the Term A loans and at LIBOR plus 2.75% for the Term B loan. We have entered into a series of one-month LIBOR loans, which, upon maturity, are either rolled back into the revolving loan or renewed under a new LIBOR contract.

        Covenants in the loan agreement require us to maintain certain minimum financial ratios, restrict our ability to pay dividends and make capital expenditures and require us to use 75% of our excess cash flow to reduce outstanding borrowings. Additionally, we are obligated to pay an unused facility fee on the unused portion of the loan commitment. As of DecemberMarch 31, 2005,2006, we were in compliance with all financial covenants and paid approximately $69,000 for the unused facility for the year ended December 31, 2005.

Junior Subordinated Promissory Notes

        In 1997, we issued approximately $9.0 million of junior subordinated promissory notes, which bore interest at a rate of 14.0% per annum. On May 22 of each year, accrued interest was rolled into the principal amount of the notes. The principal amount of the notes, together with all unpaid accrued interest, was due and payable on May 22, 2007. On May 13, 2004 and December 30, 2004, we made equal payments of $7.0 million to reduce the borrowings under the notes. On June 1, 2005, we paid an additional $6.0 million to reduce the borrowings, and we paid the remaining balance of all principal and interest due of $4.3 million on November 10, 2005.

Contractual Obligations

        The following table describes our cash commitments to settle contractual obligations as of December 31, 2005.