Houston Wire & Cable (HWCC) 10-Q 6 Aug 15 2015 Q2 Quarterly report Financial data

Document And Entity Information

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 01, 2015
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q2
Entity Registrant Name	Houston Wire & Cable CO
Entity Central Index Key	1,356,949
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Trading Symbol	HWCC
Entity Common Stock, Shares Outstanding		17,161,857

Consolidated Balance Sheets

Consolidated Balance Sheets - Entity [Domain] - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Accounts receivable, net	$ 52,961	$ 61,599
Inventories, net	76,269	88,958
Deferred income taxes	3,398	3,188
Income taxes	1,288	219
Prepaids	1,000	565
Total current assets	134,916	154,529
Property and equipment, net	9,948	8,954
Intangible assets, net	7,274	8,501
Goodwill	14,866	17,520
Other assets	384	309
Deferred income taxes	245	0
Total assets	167,633	189,813
Current liabilities:
Book overdraft	1,230	3,113
Trade accounts payable	10,776	7,993
Accrued and other current liabilities	9,255	13,282
Total current liabilities	21,261	24,388
Debt	40,339	53,847
Other long term obligations	95	96
Deferred income taxes	0	175
Total liabilities	61,695	78,506
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued and outstanding	0	0
Common stock, $0.001 par value; 100,000,000 shares authorized: 20,988,952 shares issued: 17,172,857 and 17,508,015 outstanding at June 30, 2015 and December 31, 2014, respectively	21	21
Additional paid-in-capital	55,543	54,871
Retained earnings	108,650	111,233
Treasury stock	(58,276)	(54,818)
Total stockholders’ equity	105,938	111,307
Total liabilities and stockholders’ equity	$ 167,633	$ 189,813

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	20,988,952	20,988,952
Common stock, shares outstanding	17,172,857	17,508,015

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Sales	$ 77,959	$ 103,461	$ 159,559	$ 203,760
Cost of sales	61,024	81,022	124,900	159,617
Gross profit	16,935	22,439	34,659	44,143
Operating expenses:
Salaries and commissions	7,168	8,061	14,406	16,184
Other operating expenses	6,281	6,728	12,329	13,220
Depreciation and amortization	726	762	1,438	1,503
Impairment charge	2,994	0	2,994	0
Total operating expenses	17,169	15,551	31,167	30,907
Operating income	(234)	6,888	3,492	13,236
Interest expense	217	345	482	613
Income before income taxes	(451)	6,543	3,010	12,623
Income taxes	168	2,512	1,443	4,847
Net income	$ (619)	$ 4,031	$ 1,567	$ 7,776
Earnings per share:
Basic (in dollars per share)	$ (0.04)	$ 0.23	$ 0.09	$ 0.44
Diluted (in dollars per share)	$ (0.04)	$ 0.23	$ 0.09	$ 0.44
Weighted average common shares outstanding:
Basic (in shares)	17,101,952	17,647,936	17,198,927	17,748,863
Diluted (in shares)	17,101,952	17,713,021	17,251,178	17,821,479
Dividends declared per share (in dollors per share)	$ 0.12	$ 0.12	$ 0.24	$ 0.23

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Operating activities
Net income	$ 1,567	$ 7,776
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment charge	2,994	0
Depreciation and amortization	1,438	1,503
Amortization of unearned stock compensation	463	450
Provision for inventory obsolescence	330	704
Deferred income taxes	(670)	(319)
Other non-cash items	83	89
Changes in operating assets and liabilities:
Accounts receivable	8,564	(3,626)
Inventories	12,359	8,035
Book overdraft	(1,883)	(2,176)
Trade accounts payable	2,783	(2,007)
Accrued and other current liabilities	(4,009)	(5,880)
Income taxes	(1,069)	(289)
Other operating activities	(520)	(693)
Net cash provided by operating activities	22,430	3,567
Investing activities
Expenditures for property and equipment	(1,545)	(942)
Net cash used in investing activities	(1,545)	(942)
Financing activities
Borrowings on revolver	151,366	204,327
Payments on revolver	(164,874)	(199,118)
Payment of dividends	(4,110)	(4,077)
Purchase of treasury stock	(3,267)	(3,852)
Other financing activities	0	95
Net cash used in financing activities	(20,885)	(2,625)
Net change in cash	0	0
Cash at beginning of period	0	0
Cash at end of period	$ 0	$ 0

Basis of Presentation and Princ

Basis of Presentation and Principles of Consolidation	6 Months Ended
	Jun. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation and Principles of Consolidation	1. Basis of Presentation and Principles of Consolidation Houston Wire & Cable Company (the “Company”), through its wholly owned subsidiaries, HWC Wire & Cable Company, Advantage Wire & Cable and Cable Management Services Inc., provides wire and cable, hardware and related services to the U.S. market through nineteen The consolidated financial statements as of June 30, 2015 and for the six months ended June 30, 2015 and 2014 have been prepared following accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year. All significant inter-company balances and transactions have been eliminated. The Company has evaluated subsequent events through the time these financial statements in this Form 10-Q were filed with the Securities and Exchange Commission (the “SEC”). The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant estimates are those relating to the inventory obsolescence reserve, the reserve for returns and allowances, vendor rebates and asset impairments. Actual results could differ materially from the estimates and assumptions used for the preparation of the financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC. Recent Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (Subtopic 835-30). The amendments in this ASU require debt issuance costs to be presented on the balance sheet as a direct reduction from the carrying amount of the related debt liability. The amendments in the ASU are to be applied retrospectively and are effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the timing of adoption of this ASU which impacts only the balance sheet presentation. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The amendments in the ASU must be applied using one of two retrospective methods and are effective for annual and interim periods beginning after December 15, 2017. Early adoption for annual and interim periods beginning after December 31, 2016 is permitted. As the Company recognizes revenue only once product has shipped, it does not believe this ASU will have a significant impact on its revenue recognition policy. However, the Company is still evaluating the impact of this ASU on its financial position and results of operations before it makes a final determination of the impact of this ASU and which implementation method the Company will use.

Earnings (loss) per Share

Earnings (loss) per Share	6 Months Ended
	Jun. 30, 2015
Earnings Per Share [Abstract]
Earnings per Share	2. Earnings (loss) per Share Basic earnings (loss) per share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share include the dilutive effects of stock options and unvested restricted stock awards and units. Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Denominator: Weighted average common shares for basic earnings (loss) per share 17,101,952 17,647,936 17,198,927 17,748,863 Effect of dilutive securities — 65,085 52,251 72,616 Weighted average common shares for diluted earnings (loss) per share 17,101,952 17,713,021 17,251,178 17,821,479 The weighted average common shares for diluted earnings (loss) per share exclude stock options to purchase 600,364 521,747 591,436 484,949

Impairment of Goodwill and Inta

Impairment of Goodwill and Intangibles	6 Months Ended
	Jun. 30, 2015
Goodwill, Impaired [Abstract]
Impairment of Goodwill	3. Impairment of Goodwill and Intangibles During the second quarter of 2015 and prior to the annual impairment test of goodwill in October, the Company concluded that impairment indicators existed at the Southwest Wire Rope (Southwest) reporting unit, due to a decline in the overall financial performance and overall market demand. Impairment indicators also existed for certain of the Company’s tradenames related to the Southwest and Southern Wire reporting units. The Company performed step one of the impairment test and concluded that the fair value of the Southwest reporting unit was less than its carrying value. Therefore, the Company performed step two of the impairment analysis. The step one test also concluded that certain of the tradenames 0.4 Step two of the impairment analysis measures the impairment charge by allocating the reporting unit’s fair value to all of the assets and liabilities of the reporting unit in a hypothetical analysis that calculates implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a business combination and recording the deferred tax impact. Any excess of the carrying value of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill is recorded as an impairment loss. The fair value of the Southwest reporting unit and tradenames were estimated using a discounted cash flow model. The material assumptions used for the income approach included a weighted average cost of capital of 13 5 7 2.6 2.6 The fair value for goodwill and tradenames (indefinite-lived intangible assets) were both determined using a Level 3 measurement approach. The Level 3 value of all the Company’s tradenames at June 30, 2015 was $4,516.

Debt

Debt	6 Months Ended
	Jun. 30, 2015
Debt [Abstract]
Debt	4. Debt On September 30, 2011, HWC Wire & Cable Company, as borrower, entered into the Third Amended and Restated Loan and Security Agreement (“2011 Loan Agreement”), with certain lenders and Bank of America, N.A., as agent, and the Company, as guarantor, executed a Second Amended and Restated Guaranty of the borrower’s obligations thereunder. The 2011 Loan Agreement provides for a $ 100 85 65 Portions of the loan may be converted to LIBOR loans in minimum amounts of $1,000 and integral multiples of $100. LIBOR loans bear interest at the British Bankers Association LIBOR Rate plus 125 to 200 basis points based on availability, and loans not converted to LIBOR loans bear interest at a fluctuating rate equal to the greatest of the agent’s prime rate, the federal funds rate plus 50 basis points, or 30-day LIBOR plus 150 basis points. Unused commitment fees are 25 or 30 basis points, depending on the amount of the unused commitment. The 2011 Loan Agreement includes, among other things, covenants that require the Company to maintain a specified minimum fixed charge coverage ratio and availability levels. Additionally, the 2011 Loan Agreement allows for the unlimited payment of dividends and repurchases of stock, subject to the absence of events of default and maintenance of a fixed charge coverage ratio and minimum level of availability. The 2011 Loan Agreement contains certain provisions that may cause the debt to be classified as a current liability, in accordance with GAAP, if availability falls below certain thresholds, even though the ultimate maturity date under the Loan Agreement remains as September 30, 2016. Availability has remained above these thresholds. On November 3, 2014, the Company entered into a Second Amendment to the 2011 Loan Agreement, which added an availability-based covenant as an alternative to the existing fixed charge coverage ratio. At June 30, 2015, the Company was in compliance with the availability-based covenants governing its indebtedness. The carrying amount of long term debt approximates fair value as it bears interest at variable rates. The carrying amount is a Level 2 measurement as defined in ASC Topic 820, “Fair Value Measurement.”

Stockholders' Equity

Stockholders' Equity	6 Months Ended
	Jun. 30, 2015
Stockholders' Equity [Abstract]
Stockholders' Equity	Stockholders’ Equity During each of the first and second quarters of 2015, the Board of Directors approved a quarterly dividend of $ 0.12 4,110 4,077

Stock Based Compensation

Stock Based Compensation	6 Months Ended
	Jun. 30, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock Based Compensation	6. Stock Based Compensation Stock Option Awards There were no stock option awards granted during the first six months of 2015. Restricted Stock Awards and Restricted Stock Units Following the Annual Meeting of Stockholders on May 5, 2015, the Company awarded restricted stock units with a value of $ 50 38,290 On May 5, 2015 new members of the management team received a total of 11,000 Total stock-based compensation cost was $ 246 237 463 450

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Jun. 30, 2015
Commitments and Contingencies [Abstract]
Commitments and Contingencies	7. Commitments and Contingencies As part of the acquisition of Southwest Wire Rope and Southern Wire made in 2010, the Company assumed the liability for the post-remediation monitoring of the water quality at one of the acquired facilities in Louisiana. The expected liability of $95 at June 30, 2015 relates to the cost of the monitoring, which the Company estimates will be incurred over approximately the next 2 years, and also the cost to plug the wells. Remediation work was completed prior to the acquisition in accordance with the requirements of the Louisiana Department of Environmental Quality. The Company, along with many other defendants, has been named in a number of lawsuits in the state courts of Illinois, Minnesota, North Dakota, and South Dakota alleging that certain wire and cable which may have contained asbestos caused injury to the plaintiffs who were exposed to this wire and cable. These lawsuits are individual personal injury suits that seek unspecified amounts of money damages as the sole remedy. It is not clear whether the alleged injuries occurred as a result of the wire and cable in question or whether the Company, in fact, distributed the wire and cable alleged to have caused any injuries. The Company maintains general liability insurance that, to date, has covered the defense of and all costs associated with these claims. In addition, the Company did not manufacture any of the wire and cable at issue, and the Company would rely on any warranties from the manufacturers of such cable if it were determined that any of the wire or cable that the Company distributed contained asbestos which caused injury to any of these plaintiffs. In connection with ALLTEL’s sale of the Company in 1997, ALLTEL provided indemnities with respect to costs and damages associated with these claims that the Company believes it could enforce if its insurance coverage proves inadequate. There are no legal proceedings pending against or involving the Company that, in management’s opinion, based on the current known facts and circumstances, are expected to have a material adverse effect on the Company’s consolidated financial position, cash flows, or results from operations.

Subsequent Events

Subsequent Events	6 Months Ended
	Jun. 30, 2015
Subsequent Events [Abstract]
Subsequent Events	8. Subsequent Events On August 4, 2015, the Board of Directors approved a dividend on the shares of common stock of the Company in the amount of $ 0.12

Earnings (loss) per Share (Tabl

Earnings (loss) per Share (Tables)	6 Months Ended
	Jun. 30, 2015
Earnings Per Share [Abstract]
Denominator used in Calculation of Earnings Per Share	The following reconciles the denominator used in the calculation of diluted earnings (loss) per share: Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Denominator: Weighted average common shares for basic earnings (loss) per share 17,101,952 17,647,936 17,198,927 17,748,863 Effect of dilutive securities — 65,085 52,251 72,616 Weighted average common shares for diluted earnings (loss) per share 17,101,952 17,713,021 17,251,178 17,821,479

Earnings (loss) per Share (Deno

Earnings (loss) per Share (Denominator used in Calculation of Earnings Per Share) (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Denominator:
Weighted average common shares for basic earnings (loss) per share	17,101,952	17,647,936	17,198,927	17,748,863
Effect of dilutive securities	0	65,085	52,251	72,616
Weighted average common shares for diluted earnings (loss) per share	17,101,952	17,713,021	17,251,178	17,821,479

Earnings (loss) per Share (Addi

Earnings (loss) per Share (Additional Information) (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Weighted average number of common shares excluded from computation of earnings per share	600,364	521,747	591,436	484,949

Impairment of Goodwill and In17

Impairment of Goodwill and Intangibles (Additional Information) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Goodwill	$ 14,866	$ 17,520
Southwest Wire Rope [Member]
Fair Value Inputs, Discount Rate	13.00%
Goodwill	$ 2,600
Goodwill, Impairment Loss	$ 2,600
Southwest Wire Rope [Member] | Minimum [Member]
Fair Value Inputs, Long-term Revenue Growth Rate	5.00%
Southwest Wire Rope [Member] | Maximum [Member]
Fair Value Inputs, Long-term Revenue Growth Rate	7.00%
Trade Names [Member] | Southwest Wire Rope [Member]
Impairment of Intangible Assets (Excluding Goodwill)	$ 400
Indefinite-lived Intangible Assets (Excluding Goodwill), Fair Value Disclosure	$ 4,516

Debt (Additional Information) (

Debt (Additional Information) (Details) - USD ($) $ in Millions	1 Months Ended	6 Months Ended
	Sep. 30, 2011	Jun. 30, 2015
Line of Credit Facility [Line Items]
Revolving credit facility	$ 100
2011 Loan Agreement borrowing base, percentage of value of eligible accounts receivable	85.00%
2011 Loan Agreement borrowing base, percentage of value of eligible inventory	65.00%
Description of the loan converted		Portions of the loan may be converted to LIBOR loans in minimum amounts of $1,000 and integral multiples of $100.
Description of interest rate		LIBOR loans bear interest at the British Bankers Association LIBOR Rate plus 125 to 200 basis points based on availability, and loans not converted to LIBOR loans bear interest at a fluctuating rate equal to the greatest of the agent’s prime rate, the federal funds rate plus 50 basis points, or 30-day LIBOR plus 150 basis points.
Line of Credit Facility, Commitment Fee Description		Unused commitment fees are 25 or 30 basis points, depending on the amount of the unused commitment.
Line of Credit Facility, Expiration Date	Sep. 30, 2016

Stockholders' Equity (Additiona

Stockholders' Equity (Additional Information) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Stockholders Equity Note [Line Items]
Payment of dividends			$ 4,110	$ 4,077
Common Stock, Dividends, Per Share, Declared	$ 0.12	$ 0.12	$ 0.24	$ 0.23

Stock Based Compensation (Addit

Stock Based Compensation (Additional Information) (Details) - USD ($) $ in Thousands	May. 05, 2015	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share Based Compensation		$ 246	$ 237	$ 463	$ 450
Stock Issued During Period, Shares, Restricted Stock Award, Gross	11,000
Non Employee Director [Member] | Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock units awards, share	38,290
Restricted stock units awarded, grant date value	$ 50

Commitments and Contingencies (

Commitments and Contingencies (Additional Information) (Details) $ in Thousands	Jun. 30, 2015USD ($)
Commitments and Contingencies Disclosure [Line Items]
Expected Liability Monitoring Cost	$ 95

Subsequent Events (Additional I

Subsequent Events (Additional Information) (Details) - $ / shares	Aug. 04, 2015	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Subsequent Event [Line Items]
Dividend declared per share		$ 0.12	$ 0.12	$ 0.24	$ 0.23
Subsequent Event [Member] | Dividend Declared [Member]
Subsequent Event [Line Items]
Dividend declared per share	$ 0.12

Uncategorized Items - hwcc-2015

Label	Element	Value
Net Income (Loss) Attributable To Parent	us-gaap_NetIncomeLoss	$ (619)
Net Income (Loss) Attributable To Parent	us-gaap_NetIncomeLoss	4,031
Asset Impairment Charges	us-gaap_AssetImpairmentCharges	0
Asset Impairment Charges	us-gaap_AssetImpairmentCharges	2,994
Depreciation, Depletion and Amortization, Nonproduction	us-gaap_DepreciationAndAmortization	726
Depreciation, Depletion and Amortization, Nonproduction	us-gaap_DepreciationAndAmortization	$ 762