Houston Wire & Cable Company (HWCC, Financial) filed Quarterly Report for the period ended 2009-09-30.
With more than three decades of experience in the electrical industryHOUSTON WIRE & CABLE COMPANY is one of the largest distributors of specialty wire and cable and related services in the U.S. electrical distribution market. Headquartered in HoustonHWCC has sales and distribution facilities in AtlantaBaton RougeCharlotteChicagoDenverHoustonLos AngelesPhiladelphiaSan FranciscoSeattle and Tampa.Standard stock items available for immediate delivery include continuous and interlocked armorinstrumentationmedium voltagehigh temperatureportable cordpower cables and private branded productsincluding LifeGuarda low-smokezero-halogen cable. HWCC's comprehensive value-added services include same-day shippingknowledgeable sales staffinventory management programsjust-in-time deliverylogistics supportcustomized internet-based ordering capabilities and round-the-clockthroughout-the-year service. Houston Wire & Cable Company has a market cap of $211.27 million; its shares were traded at around $11.97 with a P/E ratio of 16.18 and P/S ratio of 0.59. The dividend yield of Houston Wire & Cable Company stocks is 2.84%.
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 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.
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.
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.
We achieved net income of $2.2 million in 2009 compared to $6.6 million in 2008, a decrease of 65.9%.
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With more than three decades of experience in the electrical industryHOUSTON WIRE & CABLE COMPANY is one of the largest distributors of specialty wire and cable and related services in the U.S. electrical distribution market. Headquartered in HoustonHWCC has sales and distribution facilities in AtlantaBaton RougeCharlotteChicagoDenverHoustonLos AngelesPhiladelphiaSan FranciscoSeattle and Tampa.Standard stock items available for immediate delivery include continuous and interlocked armorinstrumentationmedium voltagehigh temperatureportable cordpower cables and private branded productsincluding LifeGuarda low-smokezero-halogen cable. HWCC's comprehensive value-added services include same-day shippingknowledgeable sales staffinventory management programsjust-in-time deliverylogistics supportcustomized internet-based ordering capabilities and round-the-clockthroughout-the-year service. Houston Wire & Cable Company has a market cap of $211.27 million; its shares were traded at around $11.97 with a P/E ratio of 16.18 and P/S ratio of 0.59. The dividend yield of Houston Wire & Cable Company stocks is 2.84%.
Highlight of Business Operations:
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.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 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.
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.
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.
We achieved net income of $2.2 million in 2009 compared to $6.6 million in 2008, a decrease of 65.9%.
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