UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2009
or
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period
from to
Commission
File Number: 000-52046
(Exact
name of registrant as specified in its charter)
|
Delaware
|
36-4151663
|
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
|
10201
North Loop East
Houston,
Texas
|
77029
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(713)
609-2100
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days YES x
NO ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
YES ¨
NO ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See definition of “large accelerated filer”, “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act
|
Large
Accelerated Filer ¨
|
Accelerated
Filer x
|
Non-Accelerated
Filer ¨
|
Smaller
Reporting Company ¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)
YES
¨
NO x
At
November 2, 2009 there were 17,652,737 outstanding shares of the registrant’s
common stock, $0.001 par value per share.
HOUSTON
WIRE & CABLE COMPANY
Form
10-Q
For
the Quarter Ended September 30, 2009
INDEX
|
PART
I. FINANCIAL INFORMATION
|
|
|
Item
1. Financial Statements (Unaudited)
|
2 |
|
Consolidated
Balance Sheets
|
2 |
|
Consolidated
Statements of Income
|
3 |
|
Consolidated
Statements of Cash Flows
|
4
|
|
Notes
to Consolidated Financial Statements
|
5 |
|
|
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
8 |
|
Overview
|
8 |
|
Results
of Operations
|
10 |
|
Impact
of Inflation and Commodity Prices
|
13 |
|
Liquidity
and Capital Resources
|
13 |
|
Contractual
Obligations
|
14 |
|
Cautionary
Statement for the Purposes of the “Safe Harbor”
|
15 |
|
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
|
15 |
|
Item
4. Controls and Procedures
|
15 |
|
PART
II. OTHER INFORMATION
|
|
|
Item
1. Legal Proceedings
|
15 |
|
Item
1A. Risk Factors
|
15 |
|
Item
2. Unregistered Sales of Equity Securities
and Use of Proceeds
|
15 |
|
Item
3. Defaults Upon Senior
Securities
|
16 |
|
Item
4. Submission of Matters to a Vote of
Security Holders
|
16 |
|
Item
5. Other Information
|
16 |
|
Item
6. Exhibits
|
16 |
|
|
|
|
Signature
Page
|
17 |
Page
1
PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
HOUSTON
WIRE & CABLE COMPANY
Consolidated
Balance Sheets
(In
thousands, except share data)
|
September
30,
|
December
31,
|
|||||||
|
2009
|
2008
|
|||||||
|
(unaudited)
|
||||||||
|
Assets
|
||||||||
|
Current
assets:
|
||||||||
|
Accounts
receivable, net
|
$
|
42,169
|
$
|
50,798
|
||||
|
Inventories,
net
|
71,948
|
73,459
|
||||||
|
Deferred
income taxes
|
1,674
|
1,591
|
||||||
|
Prepaid
expenses
|
817
|
829
|
||||||
|
Total
current assets
|
116,608
|
126,677
|
||||||
|
Property
and equipment, net
|
3,114
|
3,274
|
||||||
|
Goodwill
|
2,362
|
2,362
|
||||||
|
Deferred
income taxes
|
2,757
|
2,353
|
||||||
|
Other
assets
|
28
|
87
|
||||||
|
Total
assets
|
$
|
124,869
|
$
|
134,753
|
||||
|
Liabilities
and stockholders' equity
|
||||||||
|
Current
liabilities:
|
||||||||
|
Book
overdraft
|
$
|
1,656
|
$
|
4,933
|
||||
|
Trade
accounts payable
|
13,940
|
10,091
|
||||||
|
Accrued
and other current liabilities
|
12,297
|
11,682
|
||||||
|
Income
taxes payable
|
344
|
1,644
|
||||||
|
Total
current liabilities
|
28,237
|
28,350
|
||||||
|
Long
term obligations
|
16,707
|
29,808
|
||||||
|
Stockholders'
equity:
|
||||||||
|
Preferred
stock, $0.001 par value; 5,000,000 shares authorized, none issued and
outstanding
|
—
|
—
|
||||||
|
Common
stock, $0.001 par value; 100,000,000 shares authorized; 20,988,952 shares
issued: 17,652,737 and 17,642,552 outstanding at September 30, 2009 and
December 31, 2008, respectively
|
21
|
21
|
||||||
|
Additional
paid-in-capital
|
57,414
|
55,901
|
||||||
|
Retained
earnings
|
77,190
|
75,540
|
||||||
|
Treasury
stock
|
(54,700
|
)
|
(54,867
|
)
|
||||
|
Total
stockholders' equity
|
79,925
|
76,595
|
||||||
|
Total
liabilities and stockholders' equity
|
$
|
124,869
|
$
|
134,753
|
||||
The
accompanying Notes are an integral part of these Consolidated Financial
Statements
Page
2
HOUSTON
WIRE & CABLE COMPANY
Consolidated
Statements of Income
(Unaudited)
(In
thousands, except share and per share data)
|
Three Months Ended
September
30,
|
Nine Months Ended
September
30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Sales
|
$
|
63,579
|
$
|
98,854
|
$
|
191,293
|
$
|
285,679
|
||||||||
|
Cost
of sales
|
50,117
|
76,214
|
151,046
|
216,141
|
||||||||||||
|
Gross
profit
|
13,462
|
22,640
|
40,247
|
69,538
|
||||||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Salaries
and commissions
|
5,143
|
6,159
|
15,882
|
18,330
|
||||||||||||
|
Other
operating expenses
|
4,395
|
5,302
|
13,527
|
15,287
|
||||||||||||
|
Depreciation
and amortization
|
138
|
136
|
421
|
392
|
||||||||||||
|
Total
operating expenses
|
9,676
|
11,597
|
29,830
|
34,009
|
||||||||||||
|
Operating
income
|
3,786
|
11,043
|
10,417
|
35,529
|
||||||||||||
|
Interest
expense
|
140
|
472
|
403
|
1,463
|
||||||||||||
|
Income
before income taxes
|
3,646
|
10,571
|
10,014
|
34,066
|
||||||||||||
|
Income
taxes
|
1,405
|
3,996
|
3,864
|
13,009
|
||||||||||||
|
Net
income
|
$
|
2,241
|
$
|
6,575
|
$
|
6,150
|
$
|
21,057
|
||||||||
|
Earnings
per share:
|
||||||||||||||||
|
Basic
|
$
|
0.13
|
$
|
0.37
|
$
|
0.35
|
$
|
1.18
|
||||||||
|
Diluted
|
$
|
0.13
|
$
|
0.37
|
$
|
0.35
|
$
|
1.18
|
||||||||
|
Weighted
average common shares outstanding:
|
||||||||||||||||
|
Basic
|
17,651,074
|
17,676,468
|
17,647,334
|
17,839,160
|
||||||||||||
|
Diluted
|
17,666,284
|
17,704,818
|
17,659,425
|
17,874,238
|
||||||||||||
|
Dividends
declared per share
|
$
|
0.085
|
$
|
0.085
|
$
|
0.255
|
$
|
0.255
|
||||||||
The
accompanying Notes are an integral part of these Consolidated Financial
Statements
Page
3
HOUSTON
WIRE & CABLE COMPANY
Consolidated
Statements of Cash Flows
(Unaudited)
(In
thousands)
|
Nine
Months Ended
September
30,
|
||||||||
|
2009
|
2008
|
|||||||
|
Operating
activities
|
||||||||
|
Net
income
|
$
|
6,150
|
$
|
21,057
|
||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
and amortization
|
421
|
392
|
||||||
|
Amortization
of capitalized loan costs
|
91
|
60
|
||||||
|
Amortization
of unearned stock compensation
|
1,699
|
1,570
|
||||||
|
Provision
for doubtful accounts
|
—
|
114
|
||||||
|
Provision
for returns and allowances
|
(106
|
)
|
33
|
|||||
|
Provision
for inventory obsolescence
|
366
|
(43
|
)
|
|||||
|
Deferred
income taxes
|
(541
|
)
|
(545
|
)
|
||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable
|
8,735
|
(8,578
|
)
|
|||||
|
Inventories
|
1,145
|
(1,711
|
)
|
|||||
|
Prepaid
expenses
|
12
|
(139
|
)
|
|||||
|
Other
assets
|
(31
|
)
|
(53
|
)
|
||||
|
Book
overdraft
|
(3,277
|
)
|
252
|
|||||
|
Trade
accounts payable
|
3,849
|
4,141
|
||||||
|
Accrued
and other current liabilities
|
615
|
(3,484
|
)
|
|||||
|
Income
taxes payable/receivable
|
(1,300
|
)
|
1,293
|
|||||
|
Net
cash provided by operating activities
|
17,828
|
14,359
|
||||||
|
Investing
activities
|
||||||||
|
Expenditures
for property and equipment
|
(262
|
)
|
(384
|
)
|
||||
|
Net
cash used in investing activities
|
(262
|
)
|
(384
|
)
|
||||
|
Financing
activities
|
||||||||
|
Borrowings
on revolver
|
193,524
|
289,165
|
||||||
|
Payments
on revolver
|
(206,625
|
)
|
(283,472
|
)
|
||||
|
Proceeds
from exercise of stock options
|
22
|
57
|
||||||
|
Excess
tax benefit for stock options
|
13
|
264
|
||||||
|
Payment
of dividends
|
(4,500
|
)
|
(4,544
|
)
|
||||
|
Purchase
of treasury stock
|
—
|
(15,445
|
)
|
|||||
|
Net
cash used in financing activities
|
(17,566
|
)
|
(13,975
|
)
|
||||
|
Net
change in cash
|
—
|
—
|
||||||
|
Cash
at beginning of period
|
—
|
—
|
||||||
|
Cash
at end of period
|
$
|
—
|
$
|
—
|
||||
The
accompanying Notes are an integral part of these Consolidated Financial
Statements
Page
4
HOUSTON WIRE & CABLE
COMPANY
Notes
to Consolidated Financial Statements
(Unaudited)
1.
Basis of Presentation
Houston
Wire & Cable Company (“HWC” or the “Company”) through its wholly owned
subsidiaries, HWC Wire & Cable Company, Advantage Wire & Cable and Cable
Management Services Inc., distributes specialty electrical wire and cable to the
U.S. electrical distribution market through eleven locations in ten states
throughout the United States. The Company has no other business
activity.
The
consolidated financial statements as of September 30, 2009 and for the three and
nine months ended September 30, 2009 and 2008 have been prepared in accordance
with U.S. generally accepted accounting principles (“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 accruals, 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.
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 allowance for doubtful accounts, the reserve for
returns and allowances, the inventory obsolescence reserve and the accrual for
vendor rebates. These estimates are continually reviewed and adjusted as
necessary, but actual results could differ from those estimates.
For
further information, refer to the consolidated financial statements and notes
thereto included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008 filed with the Securities and Exchange Commission (the
“SEC”).
Reclassifications
Certain
prior period amounts have been reclassified to conform to the current period
presentation. Goodwill was reduced in the amount of $0.6 million with an
offsetting adjustment to deferred income taxes. In 2000, the Company acquired
the Futronix division of Kent Electronics Corporation. The purchase accounting
entries made at the time of this acquisition improperly omitted the $0.6 million
deferred tax asset associated with the Company’s book and tax basis differences
in the net assets acquired. The accounting for deferred income taxes associated
with subsequent reductions in the initial basis differences has been properly
recorded. At December 31, 2008, subsequent to the recording of this adjustment,
the deferred tax asset associated with the remaining basis difference is
properly stated at $0.1 million.
Adoption
of New Accounting Policy
FASB
Accounting Standards Codification
In June
2009, the Financial Accounting Standards Board (“FASB”) issued the FASB
Accounting Standards Codification (“ASC” or the “Codification”), the
authoritative guidance for GAAP. The Codification, which changes the referencing
of financial standards, became effective for interim and annual periods ended on
or after September 15, 2009. The Codification is now the single official
source of authoritative GAAP (other than guidance issued by the SEC),
superseding existing FASB, American Institute of Certified Public Accountants,
Emerging Issues Task Force (“EITF”), and related literature. Only one level of
authoritative GAAP now exists. All other literature is considered
non-authoritative. The Codification does not change GAAP. The Company adopted
the Codification during the quarter ended September 30, 2009. The adoption
of the Codification did not have any substantive impact on our consolidated
financial statements or related footnotes.
Business
Combinations
In
December 2007, the FASB issued authoritative guidance which establishes
principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
any non-controlling interest in the acquiree and the goodwill acquired. The
guidance also requires transaction costs related to the business combination to
be expensed as incurred and establishes disclosure requirements to enable the
evaluation of the nature and financial effects of the business combination. The
guidance applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The Company adopted the guidance
on January 1, 2009. The adoption did not have an impact on the consolidated
financial statements.
Page
5
Subsequent
Events
In May
2009, the FASB issued authoritative guidance which establishes general standards
of accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued.
Specifically, this standard sets forth the period after the balance sheet date
during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements, the circumstances under which an entity should recognize
events or transactions occurring after the balance sheet date in its financial
statements, and the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. The guidance is
effective for fiscal years and interim periods ended after June 15, 2009. The
Company adopted this guidance effective June 15, 2009 and in connection with the
filing of this Form 10-Q has evaluated subsequent events through November 9,
2009. The Company has disclosed these subsequent events in Note 7.
2.
Earnings Per Share
Basic
earnings per share is calculated by dividing the net income by the weighted
average number of common shares outstanding. Diluted earnings per share include
the dilutive effects of stock option awards. The denominator for each period
presented was determined as follows:
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Weighted
average common shares for basic earnings per share
|
17,651,074
|
17,676,468
|
17,647,334
|
17,839,160
|
||||||||||||
|
Effect
of dilutive securities
|
15,210
|
28,350
|
12,091
|
35,078
|
||||||||||||
|
Weighted
average common shares for diluted earnings per share
|
17,666,284
|
17,704,818
|
17,659,425
|
17,874,238
|
||||||||||||
The
weighted average common shares for diluted earnings per share exclude stock
options to purchase 890,000 and 833,500 shares for the three months ended
September 30, 2009 and 2008, respectively, and 1,060,393 and 836,548 shares for
the nine months ended September 30, 2009 and 2008, respectively. Since these
options have exercise prices that are higher than the average market price of
the Company’s common stock, including them in the calculation would have an
anti-dilutive effect on earnings per share for the respective
periods.
3. Long Term
Obligations
On
September 21, 2009, the Company as guarantor and HWC Wire & Cable Company as
borrower, entered into the Second Amended and Restated Loan and Security
Agreement (“Loan Agreement”), with Bank of America, N.A., as agent and lender.
The Loan Agreement provides for a $75 million revolving loan at the agent’s base
interest rate and matures on September 21, 2013. The lender has a security
interest in all of the assets of the Company with the exception of the real
estate in Houston, Texas. Availability under the Loan Agreement is calculated as
a percentage of qualifying accounts receivable and inventory, which, at
September 30, 2009, amounted to $72.9 million. The Company was in compliance
with the financial covenants governing its indebtedness at September 30,
2009.
4.
Stockholders’ Equity
The Board
of Directors approved a stock repurchase program, where the Company is
authorized to purchase from time to time up to $75 million of its outstanding
shares of common stock, depending on market conditions, trading activity,
business conditions and other factors. The program was initially scheduled to
expire on December 31, 2009 but has been extended through December 31, 2011; See
Note 7, Subsequent Events. Shares of stock purchased under the program are
currently being held as treasury stock and may be used to satisfy the exercise
of options, to fund acquisitions, or for other uses as authorized by the Board
of Directors. During the quarter ended September 30, 2009, the Company did not
repurchase any of its stock. During the quarter ended September 30, 2008, the
Company repurchased 55,300 shares for a total cost of $0.9 million.
During
each of the first three quarters of 2009, the Board of Directors approved a
quarterly dividend of $0.085 per share payable to stockholders. Dividends paid
were $4.5 million and $4.5 million during the nine months ended September 30,
2009 and 2008, respectively.
Page
6
On May
18, 2009, the Company’s Board of Directors adopted a stockholder rights plan and
declared a dividend of one preferred stock purchase right (a “Right”) for each
share of the Company’s common stock outstanding at the close of business on May
28, 2009. The Rights become exercisable (and separate from the common stock) ten
business days after (i) the acquisition of 20% or more of the common stock by
any person or group (an “Acquiring Person”) or (ii) the commencement of a tender
or exchange offer for 20% or more of the common stock.
In the
event that an Acquiring Person acquires 20% or more of the common stock, or if
the Company is the surviving corporation in a merger involving an Acquiring
Person, each Right (other than Rights owned by an Acquiring Person) will entitle
the holder to purchase for $40 (or the then-current purchase price) a number of
shares of the Company’s common stock having a market value of $80 (or twice the
then-current purchase price). Similarly, if the Company is acquired in a merger
or sells substantially all of its assets, each Right (other than Rights owned by
an Acquiring Person) will entitle the holder to purchase for the then-current
purchase price a number of shares of the surviving company’s stock having a
market value of twice the then-current purchase price.
The
Rights do not entitle the holder to vote or to receive dividends and may be
redeemed at the option of the Company for $0.001 per Right at any time before an
Acquiring Person acquires 20% or more of the common stock. At any time an
Acquiring Person owns between 20% and 50% of the common stock, the Board of
Directors may exchange all or part of the Rights (other than Rights owned by the
Acquiring Person) for shares of common stock on a one-for-one basis. Unless
previously exchanged or redeemed, the Rights will expire on May 18, 2012. The
Board of Directors will submit the stockholder rights plan for ratification by
the Company’s stockholders at the next annual meeting.
The
Company is authorized to issue 5,000,000 shares of preferred stock, par value
$.001 per share. The Board of Directors is authorized to fix the particular
preferences, rights, qualifications and restrictions of each series of preferred
stock. In connection with the adoption of the stockholder rights plan, the Board
of Directors designated 100,000 shares as Series A Junior Participating
Preferred Stock. No shares of preferred stock have been issued.
5.
Stock Based Compensation
On May 8,
2009, at the Annual Meeting of Stockholders, the Company issued options to
purchase 5,000 shares of its common stock to each non-employee director who was
re-elected (other than the Chairman of the Board, who received an option to
purchase 10,000 shares of the Company’s common stock), for an aggregate of
35,000 shares. Each option has an exercise price equal to the fair market value
of the Company’s common stock at the close of trading on May 8, 2009, has a
contractual life of ten years and vests one year after the date of
grant.
On
December 17, 2008, the Company granted options to purchase 65,000 shares of its
common stock to the Company’s chief executive officer with the exercise price
equal to the fair market value of the Company’s stock at the close of trading on
December 17, 2008. These options have a contractual life of ten years and vest
50% on March 9, 2011 and the remaining 50% on March 9, 2012, provided that in
the event of the chief executive officer’s death or permanent disability, such
options would vest ratably based on the days served from the date of
grant.
On May 8,
2008, at the Annual Meeting of Stockholders, the Company issued options to
purchase 5,000 shares of its common stock to each non-employee director who was
re-elected (other than the Chairman of the Board, who received an option to
purchase 10,000 shares of the Company’s common stock) and 15,000 shares of
common stock to the newly-elected non-employee director, for an aggregate of
45,000 shares. Each option has an exercise price equal to the fair market value
of the Company’s common stock at the close of trading on May 8, 2008, has a
contractual life of ten years and vested one year after the date of
grant.
On
January 9, 2008, the Company granted options to purchase 65,000 shares of its
common stock to the Company’s chief executive officer with an exercise price
equal to the fair market value of the Company’s stock at the close of trading on
January 9, 2008. These options have a contractual life of ten years and vest 50%
on March 9, 2011 and the remaining 50% on March 9, 2012, provided that in the
event of the chief executive officer’s death or permanent disability, such
options would vest ratably based on the days served from the date of
grant.
The
following assumptions were used to calculate the fair value of the Company’s
options issued during the nine months ended September 30, 2009 and
2008:
|
2009
|
2008
|
|||||||
|
Expected
volatility
|
81 | % | 69 | % | ||||
|
Expected
life in years
|
2.0
years
|
5.5
years
|
||||||
|
Risk-free
interest rate
|
1.00 | % | 3.81 | % | ||||
|
Dividend
yield
|
3.29 | % | 2.28 | % | ||||
Page
7
Total
stock-based compensation cost was $0.5 million in each of the three months ended
September 30, 2009 and 2008, and $1.7 million and $1.6 million for the nine
months ended September 30, 2009 and 2008, respectively. Total income tax benefit
recognized for stock-based compensation arrangements was $0.2 million in each of
the three months ended September 30, 2009 and 2008, and $0.7 million and $0.6
million for the nine months ended September 30, 2009 and 2008,
respectively.
As
of September 30, 2009, there was $4.9 million of total unrecognized stock
compensation cost related to nonvested share-based compensation arrangements.
The cost is expected to be recognized over a weighted average period of
approximately 31 months.
6.
Contingencies
HWC,
along with many other defendants, has been named in a number of lawsuits in the
state courts of Minnesota, North Dakota, New Jersey, California 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 HWC, in fact,
distributed the wire and cable alleged to have caused any injuries. The Company
maintains general liability insurance that has applied to these claims. To date,
all costs associated with these claims have been covered by the applicable
insurance policies and all defense of these claims has been handled by the
applicable insurance companies. In addition, HWC did not manufacture any of the
wire and cable at issue, and HWC would rely on any warranties from the
manufacturers of such wire and cable if it were determined that any of the wire
or cable that HWC 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 HWC 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.
7.
Subsequent Events
On
November 6, 2009, the Board of Directors approved a dividend on the shares of
common stock of the Company in the amount of $0.085 per share, payable on
November 27, 2009, to stockholders of record at the close of business on
November 16, 2009.
On November 6, 2009, the Board of Directors also approved an
extension of the current stock repurchase program for an additional two years
through December 31, 2011. As of November 6, 2009, the program has a remaining
authorization to purchase up to $19.4 million of shares.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The
following Management’s Discussion and Analysis (“MD&A”) is intended to help
the reader understand the Company’s financial position and results of
operations. MD&A is provided as a supplement to the Company’s Consolidated
Financial Statements (unaudited) and the accompanying Notes to Consolidated
Financial Statements (unaudited) and should be read in conjunction with the
MD&A included in the Company’s Form 10-K for the year ended December 31,
2008.
Overview
We are
one of the largest distributors of specialty wire and cable and related services
to the U.S. electrical distribution market. We serve over 3,200 customers in
over 8,600 individual locations, including virtually 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. We distribute approximately 22,000
SKUs (stock-keeping units) 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:
|
|
·
|
continuous and interlocked armor
cable (cable encapsulated in either a seamless or interlocked aluminum
protective sheath);
|
|
|
·
|
control and power cable (single
or multiple conductor industrial
cable);
|
|
|
·
|
electronic wire and cable
(computer, audio and signal
cable);
|
|
|
·
|
flexible and portable cords
(flexible, heavy duty industrial
cable);
|
|
|
·
|
instrumentation and thermocouple
cable (cable used for transmitting signals for instruments and heat
sensing devices);
|
|
|
·
|
lead and high temperature cable
(single conductor cable used for low or high temperature
applications);
|
|
|
·
|
medium voltage cable (cable used
for applications between 2,001 volts and 35,000 volts);
and
|
|
|
·
|
premise and category wire and
cable (cable used for home and high speed data
applications).
|
Page
8
We also
offer private branded products, including our low-smoke, zero-halogen
cable, LifeGuard™. 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.
Critical
Accounting Policies
Critical
accounting policies are those that are both 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, current economic conditions and recent changes in the
aging of these receivables, which we use to record reserves throughout the year.
In the last five years, write-offs against our allowance for doubtful accounts
have averaged $0.1 million per year. A 20% change in our estimate at September
30, 2009 would have resulted in a change in income before income taxes of $0.1
million.
Reserve
for Returns and Allowances
We
estimate the gross profit impact of returns and allowances for previously
recorded sales. This reserve is calculated on historical and statistical returns
and allowances data and adjusted as trends in the variables change. A 20% change
in our estimate at September 30, 2009 would have resulted in a change in income
before income taxes of $0.1 million.
Inventories
Inventories
are valued at the lower of cost, using the average cost method, or market. We
continually monitor our inventory levels at each of our distribution centers.
Our reserve for inventory obsolescence is based on the age of the inventory,
movements of our inventory over the prior twelve months and the experience of
our purchasing and sales departments in estimating demand for the product in the
succeeding year. Our inventories are generally not susceptible to technological
obsolescence. A 20% change in our estimate at September 30, 2009 would have
resulted in a change in income before income taxes of $0.4 million.
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 and therefore as a reduction of 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
estimate of purchases to date relative to the purchase levels that mark our
progress toward earning the rebates. We continually revise these estimates to
reflect actual rebates earned
based on actual purchase levels and all estimated rebate amounts are reconciled.
A 20% change in our estimate of total rebates earned during the nine months
ended September 30, 2009 would have resulted in a change in income before income
taxes of $0.9 million.
Page
9
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 September 30, 2009, our net goodwill
balance was $2.4 million, representing 1.9% of our total assets.
We test
goodwill for impairment annually, or more frequently if indications of possible
impairment exist, by applying a fair value-based test. In October 2009, we
performed our annual goodwill impairment tests for goodwill. No impairment of
goodwill was indicated from these tests. 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.
Results
of Operations
The
following table shows, for the periods indicated, information derived from our
consolidated statements of income, expressed as a percent of net sales for the
periods presented.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
|
September
30,
|
September
30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Sales
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
Cost
of sales
|
78.8 | % | 77.1 | % | 79.0 | % | 75.7 | % | ||||||||
|
Gross
profit
|
21.2 | % | 22.9 | % | 21.0 | % | 24.3 | % | ||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Salaries
and commissions
|
8.1 | % | 6.2 | % | 8.3 | % | 6.4 | % | ||||||||
|
Other
operating expenses
|
6.9 | % | 5.4 | % | 7.1 | % | 5.4 | % | ||||||||
|
Depreciation
and amortization
|
0.2 | % | 0.1 | % | 0.2 | % | 0.1 | % | ||||||||
|
Total
operating expenses:
|
15.2 | % | 11.7 | % | 15.6 | % | 11.9 | % | ||||||||
|
Operating
income
|
6.0 | % | 11.2 | % | 5.4 | % | 12.4 | % | ||||||||
|
Interest
expense
|
0.2 | % | 0.5 | % | 0.2 | % | 0.5 | % | ||||||||
|
Income
before income taxes
|
5.7 | % | 10.7 | % | 5.2 | % | 11.9 | % | ||||||||
|
Income
taxes
|
2.2 | % | 4.0 | % | 2.0 | % | 4.6 | % | ||||||||
|
Net
income
|
3.5 | % | 6.7 | % | 3.2 | % | 7.4 | % | ||||||||
Note:
Due to rounding,
percentages may not add up to total operating expenses, operating income, income
before income taxes or net income.
Comparison
of the Three Months Ended September 30, 2009 and 2008
Sales
|
Three Months
Ended
September 30,
|
||||||||||||||||
|
(
Dollars in millions )
|
2009
|
2008
|
Change
|
|||||||||||||
|
Sales
|
$ | 63.6 | $ | 98.9 | $ | (35.3 | ) | (35.7 | )% | |||||||
Page
10
Sales in
the third quarter of 2009 decreased 35.7% to
$63.6 million from $98.9 million in the third quarter of
2008. The two primary reasons for this decrease were continued reduced
demand for our products due to difficult economic conditions and the
significant reduction in the price of copper, a major component in our
products, which fell 23.5% from the third quarter of 2008
compared to the third quarter of 2009. We estimate sales
in our core business sectors of Repair and Replacement, also referred
to as Maintenance, Repair and Operations (“MRO”) and Capital Projects, were down
as a result of the challenging economy, which we believe lowered overall
demand and discretionary spending. Sales within our five internal
growth initiatives encompassing Emission Controls, Engineering &
Construction, Industrials, LifeGuard™ (and other private branded products) and
Utility Power Generation also decreased from the prior year
period.
Gross Profit
|
Three Months Ended
|
||||||||||||||||
|
September
30,
|
||||||||||||||||
|
(
Dollars in millions )
|
2009
|
2008
|
Change
|
|||||||||||||
|
Gross
profit
|
$ | 13.5 | $ | 22.6 | $ | (9.2 | ) | (40.5 | )% | |||||||
|
Gross
profit as a percent of sales
|
21.2 | % | 22.9 | % | (1.7 | )% | ||||||||||
Gross
profit decreased 40.5% to $13.5 million in 2009 from $22.6 million in 2008. This
decrease was primarily attributable to lower sales volume. Our gross profit as a
percentage of sales (gross margin) was 21.2% in 2009 which was 170 basis points
lower than 2008. The margin compression resulted from competitive pricing
pressures due to the prolonged economic slowdown.
The
severe drop in copper prices in the fourth quarter of 2008, which adversely
impacted the profitability of certain stock products with heavy copper content
in the first two quarters of 2009, had a minimal adverse impact on gross profit
during the third quarter of 2009. The average cost of inventory for these
products was reduced by purchasing new inventory at a lower copper base in 2009.
In addition, copper prices increased during the third quarter which positively
increased the differential between the average cost of the inventory and sales
prices.
Operating
Expenses
|
Three Months Ended
|
||||||||||||||||
|
September
30,
|
||||||||||||||||
|
(
Dollars in millions )
|
2009
|
2008
|
Change
|
|||||||||||||
|
Operating
expenses:
|
|
|||||||||||||||
|
Salaries
and commissions
|
$ | 5.1 | $ | 6.2 | $ | (1.0 | ) | (16.5 | )% | |||||||
|
Other
operating expenses
|
4.4 | 5.3 | (0.9 | ) | (17.1 | )% | ||||||||||
|
Depreciation
and amortization
|
0.1 | 0.1 | 0.0 | 1.5 | % | |||||||||||
|
Total
operating expenses
|
$ | 9.7 | $ | 11.6 | $ | (1.9 | ) | (16.6 | )% | |||||||
|
Operating
expenses as a percent of sales
|
15.2 | % | 11.7 | % | 3.5 | % | ||||||||||
Note: Due
to rounding, numbers may not add up to total operating expenses.
The
decrease in salaries and commissions was a result of lower incentive
compensation due to the lower sales levels, gross margin, gross profit levels
and other financial metrics used in the various incentive programs and a lower
headcount which reduced salaries.
Other
operating expenses in 2009 decreased primarily due to our cost control
initiatives involving tighter management of discretionary expenses, and lower
warehouse supplies due to decreased sales.
Depreciation
and amortization was consistent at $0.1 million.
Operating
expenses as a percent of sales increased from 11.7% in 2008 to 15.2% in 2009 due
to a deleveraging of operating expenses from the reduction in
sales.
Interest
Expense
Interest
expense decreased $0.3 million or 70.3% to $0.1 million in 2009 from $0.5
million in 2008. The decrease in interest expense is due to a lower average
effective interest rate resulting from market interest rate declines and lower
debt levels due to the pay down of debt using cash from operations. In addition,
in 2009 there were no treasury stock purchases, which we historically have
funded through borrowings. The average effective interest rate decreased to 1.8%
for the quarter ended September 30, 2009 from 3.9% for the quarter ended
September 30, 2008. Average debt was $19.0 million for the quarter ended
September 30, 2009 compared to $46.9 million for the quarter ended September 30,
2008.
Page
11
Income
Taxes
Income
taxes decreased $2.6 million or 64.8% to $1.4 million in 2009 from $4.0 million
in 2008 as our income before income taxes decreased 65.5%. Our effective income
tax rate was 38.5% in 2009 compared to 37.8% in 2008. The effective income tax
rate increased due to higher state taxes and the effect of comparable permanent
differences over a lower pretax income base.
Net
Income
We
achieved net income of $2.2 million in 2009 compared to $6.6 million in 2008, a
decrease of 65.9%.
Comparison
of the Nine Months Ended September 30, 2009 and 2008
Sales
|
Nine
Months Ended
|
||||||||||||||||
|
September 30,
|
||||||||||||||||
|
( Dollars in millions )
|
2009
|
2008
|
Change
|
|||||||||||||
|
Sales
|
$ | 191.3 | $ | 285.7 | $ | (94.4 | ) | (33.0 | )% | |||||||
Sales for
the first nine months of 2009 decreased 33.0% to
$191.3 million from $285.7 million in the first nine
months of 2008. The two primary reasons for this decrease were
continued reduced demand for our products due to difficult economic
conditions and the significant reduction in the price of copper, a major
component in our products, which fell 40.9% from the first nine
months of 2008 compared to the first nine months of
2009. We estimate sales in our MRO sector were down as a result of
the challenging economy which we believe lowered overall demand and
discretionary spending. Sales within our five internal growth initiatives
encompassing Emission Controls, Engineering & Construction, Industrials,
LifeGuard™ (and other private branded products) and Utility Power Generation
were also slightly down compared to the prior period. Sales within our growth
initiatives remained slightly more resilient to overall market
and economic conditions as projects in these areas were already in progress
and had been previously funded.
Gross Profit
|
Nine
Months Ended
|
||||||||||||||||
|
September
30,
|
||||||||||||||||
|
(Dollars
in millions )
|
2009
|
2008
|
Change
|
|||||||||||||
|
Gross
profit
|
$ | 40.2 | $ | 69.5 | $ | (29.3 | ) | (42.1 | )% | |||||||
|
Gross
profit as a percent of sales
|
21.0 | % | 24.3 | % | (3.3 | )% | ||||||||||
Gross
profit decreased 42.1% to $40.2 million in 2009 from $69.5 million in 2008. This
decrease was primarily attributable to lower sales volume. Our gross profit as a
percentage of sales (gross margin) was 21.0% in 2009 which was 330 basis points
lower than 2008. The margin compression resulted from competitive pricing
pressures due to the prolonged economic slowdown. In addition, the severe drop
in copper prices in the fourth quarter of 2008 adversely impacted profitability
of certain stock products with heavy copper content primarily in the first two
quarters of 2009.
Operating
Expenses
|
Nine
Months Ended
|
||||||||||||||||
|
September
30,
|
||||||||||||||||
|
(
Dollars in millions )
|
2009
|
2008
|
Change
|
|||||||||||||
|
Operating
expenses:
|
|
|||||||||||||||
|
Salaries
and commissions
|
$ | 15.9 | $ | 18.3 | $ | (2.4 | ) | (13.4 | )% | |||||||
|
Other
operating expenses
|
13.5 | 15.3 | (1.8 | ) | (11.5 | )% | ||||||||||
|
Depreciation
and amortization
|
0.4 | 0.4 | 0.0 | 7.4 | % | |||||||||||
|
Total
operating expenses
|
$ | 29.8 | $ | 34.0 | $ | (4.2 | ) | (12.3 | )% | |||||||
|
Operating
expenses as a percent of sales
|
15.6 | % | 11.9 | % | 3.7 | % | ||||||||||
Note: Due
to rounding, numbers may not add up to total operating
expenses.
Page
12
The
decrease in salaries and commissions was primarily a result of lower incentive
compensation due to the lower sales levels, gross margin, gross profit levels
and other financial metrics used in the various incentive programs.
Additionally, a lower headcount reduced salaries.
Other
operating expenses in 2009 decreased primarily due to our cost control
initiatives involving tighter management of discretionary expenses, and lower
warehouse supplies due to decreased sales.
Depreciation
and amortization was consistent at $0.4 million.
Operating
expenses as a percent of sales increased from 11.9% in 2008 to 15.6% in 2009 due
to a deleveraging of operating expenses from the reduction in
sales.
Interest
Expense
Interest
expense decreased $1.1 million or 72.5% to $0.4 million in 2009 from $1.5
million in 2008. The decrease in interest expense is due to a lower average
effective interest rate resulting from market interest rate declines and lower
debt levels due to the pay down of debt using cash from operations. In addition,
in 2009 there were no treasury stock purchases, which we historically have
funded through borrowings. The average effective interest rate decreased to 1.8%
for the period ended September 30, 2009 from 4.3% for the period ended September
30, 2008. Average debt was $22.4 million for the period ended September 30, 2009
compared to $43.6 million for the period ended September 30, 2008.
Income
Taxes
Income
taxes decreased $9.1 million or 70.3% to $3.9 million in 2009 from $13.0 million
in 2008 as our income before income taxes decreased 70.6%. Our effective income
tax rate was 38.6% in 2009 compared to 38.2% in 2008.
Net
Income
We
achieved net income of $6.2 million in 2009 compared to $21.1 million in 2008, a
decrease of 70.8%.
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. 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 turn our inventory approximately four times a
year, the impact of severe fluctuations in copper prices would primarily affect
the results of the succeeding calendar quarter. Average copper prices for the
quarter ended September 30, 2009, December 31, 2008 and September 30, 2008 were
$2.64, $1.75 and $3.45, respectively.
Liquidity
and Capital Resources
Our
primary capital needs are for working capital obligations, debt service, capital
expenditures and other general corporate purposes. Our primary sources of
working capital are cash from operations supplemented by bank borrowings. During
2009, we have funded our capital expenditures through cash from operations. Our
working capital amounted to $88.4 million at September 30, 2009 compared to
$98.3 million at December 31, 2008.
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;
|
|
|
•
|
additional stock
repurchases;
|
|
|
•
|
cash flows generated from
operating activities;
|
|
|
•
|
payment of
dividends;
|
|
|
•
|
capital expenditures;
and
|
|
|
•
|
acquisitions.
|
Page
13
Comparison of the Nine Months Ended
September 30, 2009 and 2008
Our net
cash provided by operating activities for the nine months ended September 30,
2009 was $17.8 million compared to $14.4 million in the prior year period. Our
net income decreased by $14.9 million to $6.2 million in 2009 compared to $21.1
million in 2008.
Accounts
receivable decreased $8.7 million in 2009 due to lower sales volume. Accounts
payable increased $3.8 million as a result of increased inventory purchases at
the end of September. The book overdraft, which is funded by our revolving
credit facility as soon as the related vendor checks clear our disbursement
account, decreased $3.3 million.
Net cash
used in investing activities decreased slightly to $0.3 million in 2009 compared
to $0.4 million in 2008.
Net cash
used in financing activities was $17.6 million in 2009 compared to $14.0 million
in 2008. Net payments on the revolver of $13.1 million and dividend payments of
$4.5 million were the main components of cash used in financing activities
during 2009.
Indebtedness
Our
principal source of liquidity at September 30, 2009 was working capital of $88.4
million compared to $98.3 million at December 31, 2008. We also had available
borrowing capacity of $56.2 million at September 30, 2009 and $45.2 million at
December 31, 2008 under our $75 million loan agreement.
We
believe that we will have adequate availability of capital to fund our present
operations, meet our commitments on our existing debt, continue the stock
repurchase program, continue to fund our dividend payments 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, based on market conditions, we may issue additional shares
of common or preferred stock to raise funds.
Loan
and Security Agreement
We have a
loan agreement with Bank of America, N.A., as agent and lender, that provides
for a $75 million revolving loan. We amended and restated the loan agreement in
September 2009 to extend the maturity through September 21, 2013. The loan
agreement allows for the unlimited payment of dividends and repurchases of
stock, subject to the absence of events of default, maintaining defined levels
of fixed charge coverage and minimum levels of availability. The lender has
a security interest in all of our assets except for the real property in
Houston, Texas. The loan bears interest at the agent’s base interest
rate. Portions of the outstanding loan may be converted to LIBOR loans in
minimum amounts of $1.0 million and integral multiples of $0.1 million.
Upon such conversion, interest is payable at LIBOR plus a margin ranging from
1.25% to 1.75%, depending on the Company’s debt-to-EBITDA ratio. 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.
Contractual
Obligations
The
following table describes our loan commitment at September 30,
2009:
|
Total
|
Less
than
1 year
|
1-3
years
|
3-5
years
|
More
than
5
years
|
||||||||||||||||
|
(In
thousands)
|
||||||||||||||||||||
|
Loans
payable
|
$
|
16,707
|
$
|
—
|
$
|
—
|
$
|
16,707
|
$
|
—
|
||||||||||
There
were no new material changes in operating lease obligations or non-cancellable
purchase obligations since December 31, 2008.
Page
14
Cautionary
Statement for Purposes of the “Safe Harbor”
Forward-looking
statements in this report are made in reliance upon the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may relate to, but are not limited to, information or
assumptions about our sales and marketing strategy, sales (including pricing),
income, operating income or gross margin improvements, working capital, cash
flow, interest rates, impact of changes in accounting standards, future economic
performance, management’s plans, goals and objectives for future operations,
performance and growth or the assumptions relating to any of the 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. The Company
cautions that forward-looking statements are not guarantees because there are
inherent difficulties in predicting future results. Actual results could
differ materially from those expressed or implied in the forward-looking
statements. The factors listed under “Risk Factors” in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2008, as well as any
cautionary language in this report, 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. Any
forward looking statements speak only as of the date of this filing and the
Company undertakes no obligation to publicly update such
statements.
Item
3. Quantitative and Qualitative Disclosures about Market Risk
There
were no material changes to our market risk as set forth in Items 7A and 7 of
our Annual Report on Form 10-K for the year ended December 31,
2008.
Item
4. Controls and Procedures
As of
September 30, 2009, an evaluation was performed by the Company’s management,
under the supervision and with the participation of the Company’s chief
executive officer and chief financial officer, of the effectiveness of the
Company’s disclosure controls and procedures. Based on that evaluation, the
chief executive officer and the chief financial officer concluded that the
Company’s disclosure controls and procedures were effective. There were no
changes in the Company’s internal control over financial reporting that occurred
during the quarter ended September 30, 2009 that have materially affected, or
are reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Part II.
Other Information
Item
1. Legal Proceedings. – Not applicable and has been
omitted.
Item
1A. Risk Factors
There
have been no material changes in our risk factors from those disclosed in the
Form 10-K for the year ended December 31, 2008.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
The
following table provides information about our purchases of common stock for the
three months ended September 30, 2009 pursuant to the Company’s stock repurchase
program.
|
Period
|
Total number of
shares
purchased
|
Average
price paid
per share
|
Total number of
shares purchased
as part of publicly
announced plans or
programs (1)
|
Maximum
dollar value that
may yet be used
for purchases
under the plan
|
||||||||||||
|
July
1 – 31, 2009
|
—
|
$
|
—
|
—
|
$
|
19,385,303
|
||||||||||
|
August
1 – 31, 2009
|
—
|
$
|
—
|
—
|
$
|
19,385,303
|
||||||||||
|
September
1 – 30, 2009
|
—
|
$
|
—
|
—
|
$
|
19,385,303
|
||||||||||
|
Total
|
—
|
$
|
—
|
—
|
||||||||||||
|
(1)
|
The board authorized a stock
buyback program of $30 million in August 2007. This amount was increased
to $50 million in September 2007 and to $75 million effective January
2008. There were no purchases made under the Company’s stock repurchase
program in the third quarter of
2009.
|
Page
15
Item
3. Defaults Upon Senior Securities. - Not applicable and has been
omitted.
Item
4. Submission of Matters to a Vote of Security Holders. - Not
applicable and has been omitted.
Item
5. Other Information. - Not applicable and has been
omitted.
Item
6. Exhibits
(a) Exhibits
required by Item 601 of Regulation S-K.
|
Exhibit Number
|
Document Description
|
|
|
31.1
|
Certification
by Charles A. Sorrentino pursuant to Rule 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
31.2
|
Certification
by Nicol G. Graham pursuant to Rule 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.1
|
Certification
by Charles A. Sorrentino and Nicol G. Graham pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
Page
16
Signature
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
Date: November
9, 2009
|
HOUSTON
WIRE & CABLE COMPANY
|
|
BY: /s/
Nicol G. Graham
|
|
|
Nicol G. Graham,
Chief Financial Officer
|
Page
17
EXHIBIT
INDEX
|
Exhibit Number
|
Document Description
|
|
|
31.1
|
Certification
by Charles A. Sorrentino pursuant to Rule 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
31.2
|
Certification
by Nicol G. Graham pursuant to Rule 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.1
|
Certification
by Charles A. Sorrentino and Nicol G. Graham pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
Page
18