form10qa.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q/A
(Amendment No. 1)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
For the quarterly period ended March 31, 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
 
Logo
(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 May 1, 2009 there were 17,646,677 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 March 31, 2009


EXPLANATORY NOTE

 
This Amendment No. 1 on Form 10-Q/A (this “Amendment”) amends our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2009 as filed with the Securities and Exchange Commission on May 11, 2009, and is being filed solely to amend Note 2 “Earnings per Share” in the “Notes to Consolidated Financial Statements” (Part I, Item 1), in order to correct a typographical error in the number of weighted average common shares for basic earnings per share for the three months ended March 31, 2009.
 
This Form 10-Q/A should be read in conjunction with the Form 10-Q. Except as specifically noted above, this Form 10-Q/A does not modify or update disclosures in the Form 10-Q. Accordingly, this Form 10-Q/A does not reflect events occurring after the filing of the Form 10-Q.


INDEX


PART I. FINANCIAL INFORMATION
Item 1.  Financial Statements (unaudited)
2
3
4
5

 
1

PART I.  FINANCIAL INFORMATION

HOUSTON WIRE & CABLE COMPANY
Consolidated Balance Sheets
(In thousands, except share data)


 
 
March 31,
    
December 31,
 
 
 
2009
    
2008
 
 
 
(unaudited)
 
 
 
 
Assets
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Accounts receivable, net
 
$
41,838
 
 
$
50,798
 
Inventories, net
 
 
67,505
 
 
 
73,459
 
Deferred income taxes
 
 
1,559
 
 
 
1,384
 
Prepaid expenses
 
 
1,011
 
 
 
829
 
Total current assets
 
 
111,913
 
 
 
126,470
 
 
 
 
 
 
 
 
 
 
Property and equipment, net
 
 
3,179
 
 
 
3,274
 
Goodwill
 
 
2,996
 
 
 
2,996
 
Deferred income taxes
 
 
2,092
 
 
 
1,926
 
Other assets
 
 
63
 
 
 
87
 
Total assets
 
$
120,243
 
 
$
134,753
 
 
 
 
 
 
 
 
 
 
Liabilities and stockholders' equity
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Book overdraft
 
$
887
 
 
$
4,933
 
Trade accounts payable
 
 
7,167
 
 
 
10,091
 
Accrued and other current liabilities
 
 
10,171
 
 
 
11,682
 
Income taxes payable
 
 
1,688
 
 
 
1,644
 
Total current liabilities
 
 
19,913
 
 
 
28,350
 
 
 
 
 
 
 
 
 
 
Long term obligations
 
 
22,567
 
 
 
29,808
 
 
 
 
 
 
 
 
 
 
Stockholders' equity:
 
 
 
 
 
 
 
 
Common stock, $0.001 par value; 100,000,000 shares authorized: 20,988,952 shares issued: 17,644,802 outstanding at March 31, 2009 and 17,642,552 outstanding at December 31, 2008, respectively
 
 
21
 
 
 
21
 
Additional paid-in-capital
 
 
56,468
 
 
 
55,901
 
Retained earnings
 
 
76,104
 
 
 
75,540
 
Treasury stock
 
 
(54,830
)
 
 
(54,867
)
Total stockholders' equity
 
 
77,763
 
 
 
76,595
 
Total liabilities and stockholders' equity
 
$
120,243
 
 
$
134,753
 


The accompanying Notes are an integral part of these Consolidated Financial Statements

 
2

HOUSTON WIRE & CABLE COMPANY
Consolidated Statements of Income
(Unaudited)
(In thousands, except share and per share data)


   
Three Months Ended
March 31,
  
   
2009
    
2008
  
   
 
        
Sales
   $ 65,832     $ 89,441  
Cost of sales
     52,019       66,774  
Gross profit
     13,813       22,667  
                 
Operating Expenses:
                
Salaries and commissions
     5,538       6,076  
Other operating expenses
     4,620       4,984  
Depreciation and amortization
     142       127  
Total operating expenses
     10,300       11,187  
                 
Operating income
     3,513       11,480  
Interest expense
     155       541  
Income before income taxes
     3,358       10,939  
Income taxes
     1,294       4,202  
Net income
   $ 2,064     $ 6,737  
                 
Earnings per share:
                
Basic
   $ 0.12     $ 0.37  
Diluted
   $ 0.12     $ 0.37  
Weighted average common shares outstanding:
                
Basic
     17,642,856       18,081,809  
Diluted
     17,649,340       18,121,280  
                 
Dividends declared per share
   $ 0.085     $ 0.085  


The accompanying Notes are an integral part of these Consolidated Financial Statements

 
3

HOUSTON WIRE& CABLE COMPANY
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)


   
Three Months
  
   
Ended March 31,
  
   
2009
    
2008
  
             
Operating activities
 
 
 
 
 
 
Net income
 
$
2,064
 
 
$
6,737
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
 
142
 
 
 
127
 
Amortization of capitalized loan costs
 
 
20
 
 
 
20
 
Amortization of unearned stock compensation
 
 
599
 
 
 
519
 
Provision for returns and allowances
 
 
(45
)
 
 
(11
)
Provision for inventory obsolescence
 
 
147
 
 
 
(6
)
Deferred income taxes
 
 
(341
)
 
 
(447
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Accounts receivable
 
 
9,005
  
 
 
2,382
  
Inventories
 
 
5,807
  
 
 
(249
)
Prepaid expenses
 
 
(182
)
 
 
(193
)
Other assets
 
 
4
  
 
 
(18
)
Book overdraft
 
 
(4,046
)
 
 
(1,965
)
Trade accounts payable
 
 
(2,924
)
 
 
1,379
 
Accrued and other current liabilities
 
 
(1,511
)
 
 
(5,086
)
Income taxes payable
 
 
44
 
 
 
4,533
 
Net cash provided by operating activities
 
 
8,783
 
 
 
7,722
 
 
 
 
 
 
 
 
 
 
Investing activities
 
 
 
 
 
 
 
 
Expenditures for property and equipment
 
 
(48)
  
 
 
(116
)
Net cash used in investing activities
 
 
(48)
  
 
 
(116
)
 
 
 
 
 
 
 
 
 
Financing activities
 
 
 
 
 
 
 
 
Borrowings on revolver
 
 
67,124
 
 
 
91,157
 
Payments on revolver
 
 
(74,365
)
 
 
(86,387
)
Proceeds from exercise of stock options
 
 
6
 
 
 
18
 
Payment of dividends
 
 
(1,500
)
 
 
(1,527
)
Excess tax benefit for options
 
 
—
 
 
 
41
 
Purchase of treasury stock
 
 
—
  
 
 
(10,908
)
Net cash used in financing activities
 
 
(8,735
)
 
 
(7,606
)
 
 
 
 
 
 
 
 
 
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.

 
4

HOUSTON WIRE & CABLE COMPANY
Notes to Consolidated Financial Statements
(Unaudited)
(in thousands, except share and per share data)
 
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 March 31, 2009 and for the three months ended March 31, 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 footnotes 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.

Adoption of New Accounting Policy

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”). SFAS 141(R) 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. SFAS 141(R) 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. SFAS 141(R) 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 SFAS 141 (R) on January 1, 2009. The adoption did not have an impact on the financial statements.

2. Earnings per Share

In accordance with SFAS No. 128, 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
March 31,
  
Denominator:
2009
    
2008
  
Weighted average common shares for basic earning per share
17,642,856
    
18,081,809
  
Effect of dilutive securities
6,484
    
39,471
  
Weighted average common shares for diluted earnings per share
17,649,340
    
18,121,280
  


The weighted average common shares for diluted earnings per share for the periods ended March 31, 2009 and March 31, 2008 exclude stock options to purchase 1,163,501 and 847,500 shares, 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.

 
5

3. Long Term Obligations

The Company’s current loan and security agreement provides for a $75,000 revolving loan, bears interest at the agent bank’s base interest rate and matures on May 21, 2010. The lender has a security interest in all of the assets of the Company and availability is calculated as a percentage of qualifying accounts receivable and inventory. The Company is in compliance with the financial covenants governing its indebtedness.

4. Stockholders’ Equity

The Board of Directors approved a stock repurchase program to be completed on or before December 31, 2009, where the Company is authorized to purchase from time to time up to $75,000 of its outstanding shares of common stock, depending on market conditions, trading activity, business conditions and other factors.  Shares of stock purchased under the program are currently being held as treasury shares 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 March 31, 2009, the Company did not repurchase any of its outstanding shares. During the quarter ended March 31, 2008, the Company repurchased 727,802 shares for a total cost of $10,188.

On February 4, 2009, the Board of Directors approved a quarterly dividend of $0.085 per share payable to stockholders of record on February 17, 2009.  Dividends paid were $1,500 and $1,527 during the three months ended March 31, 2009 and 2008, respectively.

5. Stock Based Compensation

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 vests 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.
 
There were no options granted during the first quarter of 2009. The following assumptions were used to calculate the fair value of the Company’s options on the date of grant during the three months ended March 31, 2008:

 
2008
Expected volatility
68%
Expected life in years
5.5 years
Risk-free interest rate
3.82%
Dividend yield
2.50%

Total stock-based compensation cost was $599 and $519 for the three months ended March 31, 2009 and 2008, respectively. Total income tax benefit recognized for stock-based compensation arrangements was $232 and $200 for the three months ended March 31, 2009 and 2008, respectively.

As of March 31, 2009, there was $6,025 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 38 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 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.

 
6

Other than the foregoing cases, 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 May 8, 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 May 29, 2009, to stockholders of record at the close of business on May 18, 2009.

Following the Annual Meeting of Stockholders on May 8, 2009, 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.

 
7

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:  May 18, 2009
HOUSTON WIRE & CABLE COMPANY
 
 
 
BY: /s/ Nicol G. Graham
 
Nicol G. Graham, Chief Financial Officer

 
8