Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 01, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | Houston Wire & Cable CO | |
Entity Central Index Key | 1,356,949 | |
Document Type | 10-Q | |
Trading Symbol | HWCC | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 16,506,235 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets (un
Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Accounts receivable, net | $ 57,381 | $ 44,677 |
Inventories, net | 82,211 | 79,783 |
Income taxes receivable | 2,690 | 1,948 |
Prepaids | 1,209 | 570 |
Total current assets | 143,491 | 126,978 |
Property and equipment, net | 11,243 | 11,261 |
Intangible assets, net | 12,209 | 13,378 |
Goodwill | 22,354 | 22,770 |
Deferred income taxes | 892 | |
Other assets | 455 | 591 |
Total assets | 189,752 | 175,870 |
Current liabilities: | ||
Book overdraft | 1,888 | 3,181 |
Trade accounts payable | 6,621 | 8,406 |
Accrued and other current liabilities | 17,132 | 13,248 |
Total current liabilities | 25,641 | 24,835 |
Debt | 72,530 | 60,388 |
Deferred income taxes | 2,263 | |
Other long term obligations | 702 | 516 |
Total liabilities | 101,136 | 85,739 |
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: 16,505,235 and 16,457,525 outstanding at September 30, 2017 and December 31, 2016, respectively | 21 | 21 |
Additional paid-in-capital | 53,772 | 53,824 |
Retained earnings | 95,340 | 97,550 |
Treasury stock | (60,517) | (61,264) |
Total stockholders' equity | 88,616 | 90,131 |
Total liabilities and stockholders' equity | $ 189,752 | $ 175,870 |
Consolidated Balance Sheets (u3
Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized | 100,000,000 | 100,000,000 |
Common stock, issued | 20,988,952 | 20,988,952 |
Common stock, outstanding | 16,506,235 | 16,457,525 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Statement [Abstract] | ||||
Sales | $ 81,196 | $ 65,222 | $ 235,551 | $ 192,387 |
Cost of sales | 62,626 | 53,177 | 183,732 | 154,513 |
Gross profit | 18,570 | 12,045 | 51,819 | 37,874 |
Operating expenses: | ||||
Salaries and commissions | 8,975 | 7,148 | 26,647 | 20,895 |
Other operating expenses | 6,999 | 5,969 | 21,303 | 17,302 |
Depreciation and amortization | 549 | 732 | 2,234 | 2,198 |
Impairment charge | 2,384 | |||
Total operating expenses | 16,523 | 13,849 | 50,184 | 42,779 |
Operating income (loss) | 2,047 | (1,804) | 1,635 | (4,905) |
Interest expense | 543 | 129 | 1,492 | 453 |
Income (loss) before income taxes | 1,504 | (1,933) | 143 | (5,358) |
Income tax expense (benefit) | 3,215 | (494) | 2,361 | (1,178) |
Net (loss) | $ (1,711) | $ (1,439) | $ (2,218) | $ (4,180) |
Earnings (loss) per share: | ||||
Basic (in dollars per share) | $ (0.11) | $ (0.09) | $ (0.14) | $ (0.26) |
Diluted (in dollars per share) | $ (0.11) | $ (0.09) | $ (0.14) | $ (0.26) |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 16,274,663 | 16,302,870 | 16,260,862 | 16,388,892 |
Diluted (in shares) | 16,274,663 | 16,302,870 | 16,260,862 | 16,388,892 |
Dividend declared per share (in dollars per share) | $ 0.03 | $ 0.15 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Operating activities | ||
Net (loss) | $ (2,218) | $ (4,180) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Impairment charge | 2,384 | |
Depreciation and amortization | 2,234 | 2,198 |
Amortization of unearned stock compensation | 770 | 626 |
Provision for inventory obsolescence | 78 | 355 |
Deferred income taxes | 3,163 | (752) |
Other non-cash items | 195 | (11) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (12,619) | 3,360 |
Inventories | (2,082) | 11,859 |
Prepaids | (639) | (447) |
Income taxes | (742) | (645) |
Book overdraft | (1,293) | (2,599) |
Trade accounts payable | (1,790) | 2,108 |
Accrued and other current liabilities | 4,031 | 1,486 |
Other operating activities | 18 | 217 |
Net cash (used in) provided by operating activities | (10,894) | 15,959 |
Investing activities | ||
Expenditures for property and equipment | (1,307) | (955) |
Cash received upon finalization of purchase price for acquisition | 193 | |
Net cash used in investing activities | (1,114) | (955) |
Financing activities | ||
Borrowings on revolver | 243,651 | 195,914 |
Payments on revolver | (231,509) | (206,483) |
Payment of dividends | (60) | (2,477) |
Purchase of treasury stock | (74) | (1,958) |
Net cash provided by (used in) financing activities | 12,008 | (15,004) |
Net change in cash | ||
Cash at beginning of period | ||
Cash at end of period |
Basis of Presentation and Princ
Basis of Presentation and Principles of Consolidation | 9 Months Ended |
Sep. 30, 2017 | |
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, provides wire and cable, industrial fasteners, hardware and related services to the U.S. market through twenty-two locations in fourteen states throughout the United States. The Company has no other business activity. The consolidated financial statements as of September 30, 2017 and for the nine months ended September 30, 2017 and 2016 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 intercompany 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, 2016 filed with the SEC. Recent Accounting Pronouncements The Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standard Update (“ASU”) to communicate changes to the codification. The Company considers the applicability and impact of all ASUs. The following are those recent ASUs that are relevant to the Company. In March 2017, the FASB issued ASU No. 017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The new guidance requires that an employer disaggregate the service cost component from the other components of net benefit cost. This update is effective for public companies for annual periods beginning after December 15, 2017. The Company is currently evaluating the impact of adopting this ASU. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The amendment in this ASU provides final guidance that simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under ASC 350. ASU No. 2017-04 is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting as well as the timing of when it will adopt this ASU. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The amendments in this ASU address eight cash flow issues with the intention of reducing current diversity in practice among business entities. The Company will evaluate the eight issues in the amendment and determine if any changes are necessary for compliance. ASU No. 2016-15 is effective for annual and interim periods beginning after December 15, 2017; early adoption is permitted and should be applied retrospectively where practical. The Company will determine the date of adoption, once the Company has evaluated the impact of this ASU. In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The new guidance addresses several aspects of the accounting for share-based payment award transactions, including: (a) the recognition of the income tax effects of awards in the income statement when the awards vest, forfeit, or are settled, thus eliminating additional paid-in-capital pools, (b) classification of awards as either equity or liabilities, and (c) classification on the statement of cash flows. This update was effective for public companies for fiscal years beginning after December 15, 2016 with early adoption permitted. The Company adopted this guidance in the first quarter of 2017 and there was no material impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, a lessee will be required to recognize a right to use asset and a lease liability for leases greater than 1 year, both capital and operating leases. This update is effective for public companies for fiscal years beginning after December 15, 2018 with early adoption permitted. The Company is currently evaluating the impacts of adopting as well as the timing of when it will adopt this ASU. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (Topic 330), which changes guidance for subsequent measurement of inventory within the scope of the update from the lower of cost or market to the lower of cost and net realizable value. This update was effective for annual and interim periods beginning after December 15, 2016 and early adoption was permitted. The Company adopted this guidance in the first quarter of 2017 and the adoption did not have a material impact on the Company’s consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in 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. The Company will adopt this ASU effective January 1, 2018 and plans to adopt the modified retrospective method. The Company has almost completed its evaluation and does not expect material changes to the timing of our revenue recognition relative to current accounting standards, however, the Company is still evaluating the disclosures to be included in the Company’s consolidated financial statements. |
Earnings (loss) per Share
Earnings (loss) per Share | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Earnings (loss) per Share | 2. Earnings (loss) per Share Basic earnings (loss) per share is 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 options and unvested restricted stock awards and units. The following reconciles the denominator used in the calculation of diluted earnings (loss) per share: Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Denominator: Weighted average common shares for basic earnings (loss) per share 16,274,663 16,302,870 16,260,862 16,388,892 Effect of dilutive securities — — — — Weighted average common shares for diluted earnings (loss) per share 16,274,663 16,302,870 16,260,862 16,388,892 The Company calculates earnings per share using the “two-class” method, whereby unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are “participating securities”, as discussed in Note 7, and therefore, these participating securities are treated as a separate class in computing earnings per share. Stock awards to purchase 667,239 and 736,968 shares of common stock were not included in the diluted net income (loss) per share calculation for the three months ended September 30, 2017 and 2016, respectively, and 683,847 and 772,012 shares for the nine months ended September 30, 2017 and 2016, respectively, as their inclusion would have been anti-dilutive. |
Business Combination
Business Combination | 9 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
Business Combination | 3. Business Combination On October 3, 2016, the Company completed the acquisition of Vertex from DXP Enterprises. The acquisition has been accounted for in accordance with ASC Topic 805, “Business Combinations.” Accordingly, the total purchase price has been allocated to the assets acquired and liabilities assumed based on their fair values as of the acquisition date. Vertex is a master distributor of industrial fasteners, specializing in corrosion resistant and specialty alloy inch and metric threaded fasteners, rivets, and hose clamps, to the industrial market. Under the terms of the acquisition agreement, the purchase price was $32.3 million, subject to an adjustment based on the net working capital of Vertex as of the date of closing. On May 2, 2017, the Company and DXP Enterprises finalized the working capital adjustment resulting in a final purchase price of $32.2 million. The Company treated the acquisition as a stock purchase for tax purposes. The amount of goodwill deductible for tax purposes is $1.0 million. The acquisition was funded by borrowing under the Company’s loan agreement. This acquisition expands the Company’s product offerings to the industrial marketplace that purchases its wire and cable products. During the quarter, the Company finalized its analysis of assets acquired and liabilities assumed, including accounts receivable, inventories and leases. The following table summarizes the final fair value of the acquired assets and assumed liabilities recorded as of the date of acquisition: At October 3, 2016 (In thousands) Cash $ 3 Accounts receivable 2,874 Inventories 15,006 Prepaids 46 Property and equipment 59 Intangibles assets 9,161 Goodwill 9,849 Other assets 116 Total assets acquired 37,114 Trade accounts payable 1,134 Accrued and other current liabilities 1,051 Long-term obligation 320 Deferred income taxes 2,432 Total liabilities assumed 4,937 Net assets purchased $ 32,177 The fair values of the assets acquired and liabilities assumed were determined using the market, income and cost approaches. The market approach used by the Company included prices at which comparable assets were purchased under similar circumstances. The income approach indicated value for the subject net assets based on the present value of cash flows projected to be generated by the net assets over their useful life. Projected cash flows were discounted at a market rate of return that reflected the relative risk associated with the asset and the time value of money. The cost approach estimated value by determining the current cost of replacing the asset with another of equivalent economic utility. The cost to replace a given asset reflected the estimated reproduction or replacement cost for the asset, less an allowance for loss in value due to depreciation. Intangible assets acquired consist of customer relationships - $7.0 million and trade names - $2.1 million. Trade names are not being amortized, while customer relationships are being amortized over a 9 year useful life. Amortization expense to be recognized on the acquired intangible assets is expected to be $0.8 million per year in 2017 through 2024 and $0.6 million in 2025. Amortization expense was $0.2 million during the three months ended September 30, 2017, and accumulated amortization on the acquired intangible assets was $0.8 million as of September 30, 2017. The long-term obligation represents the unfavorable lease terms relative to market, and is being amortized over the remaining 81 months of the lease. The results of operations of Vertex are included in the consolidated statements of operations prospectively from October 3, 2016. The unaudited pro forma combined historical results of the Company, giving effect to the acquisition assuming the transaction was consummated on January 1, 2016, are as follows: Nine Months September 30, 2016 (In thousands, except earnings per share) Sales $ 215,055 Net loss (3,059 ) Basic loss per share (0.19 ) Diluted loss per share (0.19 ) The unaudited pro forma combined historical results do not reflect any cost savings or other synergies that might result from the transaction. They are provided for informational purposes only and are not necessarily indicative of the results of operations for future periods or the results that actually would have been realized had the acquisition occurred as of January 1, 2016. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Debt | 4. Debt On October 3, 2016, in connection with the acquisition of Vertex, HWC Wire & Cable Company, the Company, Vertex, and Bank of America, N.A., as agent and lender, entered into a First Amendment (“the Loan Agreement Amendment”) amending the Fourth Amended and Restated Loan and Security Agreement (“the 2015 Loan Agreement”). The Loan Agreement Amendment adds Vertex as a borrower (and lien grantor) and provides the terms for inclusion of Vertex’s eligible accounts receivable and eligible inventory in the borrowing base for the 2015 Loan Agreement. The 2015 Loan Agreement was expanded to include incremental availability on eligible accounts receivable and inventory up to $5 million, which is being amortized quarterly, starting April 1, 2017, over two and a half years. The 2015 Loan Agreement provides a $100 million revolving credit facility and expires on September 30, 2020. Under certain circumstances the Company may request an increase in the commitment by an additional $50 million. Portions of the loan may be converted to LIBOR loans in minimum amounts of $1.0 million and integral multiples of $0.1 million. LIBOR loans bear interest at the British Bankers Association LIBOR Rate plus 100 to 150 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. The unused commitment fee is 25 basis points. Availability under the 2015 Loan Agreement is limited to a borrowing base equal to 85% of the value of eligible accounts receivable, plus the lesser of 70% of the value of eligible inventory or 90% of the net orderly liquidation value percentage of the value of eligible inventory, in each case less certain reserves. The 2015 Loan Agreement is secured by substantially all of the property of the Company, other than real estate. The 2015 Loan Agreement includes, among other things, covenants that require the Company to maintain a specified minimum fixed charge coverage ratio, unless certain availability levels exist. Additionally, the 2015 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 2015 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, 2020. At September 30, 2017, 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 fair value is a Level 2 measurement as defined in ASC Topic 820, “Fair Value Measurement.” |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 5. Income Taxes The Company calculates its provision for income taxes during interim reporting periods by applying the estimated annual effective tax rate for the full fiscal year to pre-tax income or loss, excluding discrete items, for the reporting period. The Company’s effective tax rate increased in the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, primarily due to changes in the estimated annual earnings for 2017 and a valuation allowance on deferred tax assets not expected to be realized. In the nine months ended September 30, 2017, the effect of discrete period tax items was $2.1 million which were primarily related to the valuation allowance on deferred tax assets not expected to be realized. A valuation allowance for deferred tax assets is recognized when it is more likely than not, that some or all of the benefit from the deferred tax assets will not be realized. To assess that likelihood, the Company uses its current financial position, results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies, as well as the current and forecasted business economics to determine whether a valuation allowance is required. The Company has assessed both positive and negative evidence to estimate whether sufficient future taxable income will be generated and concluded that it is more likely than not that the deferred tax assets will not be realized and, as such, has recorded a valuation allowance of $2.4 million as of September 30, 2017. Going forward, management will continue to assess the available evidence to determine whether it is more likely than not that sufficient future taxable income will be generated to realize the deferred tax assets. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | 6. Stockholders’ Equity No dividend was declared during the first, second or third quarter of 2017. Dividends paid were $2.5 million during the nine months ended September 30, 2016. |
Stock Based Compensation
Stock Based Compensation | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Based Compensation | 7. Stock Based Compensation Stock Option Awards There were no stock option awards granted during the first nine months of 2017 or 2016. Restricted Stock Awards and Restricted Stock Units Following the Annual Meeting of Stockholders on May 5, 2017, the Company approved the award of restricted stock units with a value of $60,000 to each non-employee director who was elected or re-elected, for an aggregate of 37,500 restricted stock units. Issuance of the restricted stock unit awards was subject to adoption of a new stock plan, as the Company’s 2006 Stock Plan expired on May 1, 2017. On August 4, 2017, the Company adopted the 2017 Stock Plan. Each award of restricted stock units will vest at the date of the 2018 Annual Meeting of Stockholders. In addition, on August 4, 2017, the Company approved the award of 7,653 restricted stock units with a value of $45,000 to a newly elected director. Until the new stock plan has been approved by the Company’s stockholders, each restricted stock unit will entitle the non-employee director to receive, at such time as the director’s service on the board terminates for any reason, a cash payment equal to the market value of one share of the Company’s common stock, together with dividend equivalents from the date of grant, at the time of payment. Following stockholder approval of the new stock plan, instead of such cash payment each non-employee director will be entitled to receive a number of shares of the Company’s common stock equal to the number of vested restricted stock units, together with dividend equivalents from the date of grant, at such time as the director’s service on the board terminates for any reason. The Company intends to submit the 2017 Stock Plan for approval by stockholders at the 2018 Annual Meeting. Assuming such approval, at the time the awards vest, they will represent the right to receive shares of common stock. In addition, on August 4, 2017, the Company approved an award of $50,000 of restricted stock units to a new member of senior management, based on the closing price on the date of grant. These units vest in one third increments, on the third, fourth and fifth anniversaries of the date of grant, as long as the recipient is still employed by the Company. Assuming the stockholders approve the 2017 Stock Plan at the 2018 Annual Meeting, upon vesting each restricted stock unit will entitle the recipient to receive one share of the Company’s common stock, together with dividend equivalents from the date of grant. The three awards discussed above are liability awards and are required to be fair valued every quarter and any difference accounted for in the statement of operation. The Company believes that the impact of any fair value adjustment to be immaterial. On January 30, 2017, the Company granted to the Company’s President and CEO 60,000 shares of restricted stock and performance stock units with respect to an additional 40,000 shares of common stock under the 2006 Stock Plan. The equity award of 60,000 shares of restricted stock vest in one-third increments on January 30, 2018, December 19, 2018 and December 19, 2019, in each case as long as Mr. Pokluda is then employed by the Company. The performance stock units vest on December 31, 2019 based on and subject to the Company’s achievement of cumulative EBITDA and stock price performance goals over a three-year period, as long as Mr. Pokluda is then employed by the Company, and upon vesting will be settled in shares of our common stock. Any dividends declared will be accrued and paid to Mr. Pokluda if and when the related shares vest. Total stock-based compensation cost was $0.3 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively, and $0.8 million and $0.6 million for the nine months ended September 30, 2017 and 2016, respectively, and is included in salaries and commissions. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 8. 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 $0.1 million at September 30, 2017 relates to the cost of the monitoring, which the Company estimates will be incurred in the next year, 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 had outstanding under the 2015 Loan Agreement, letters of credit totaling $1.1 million to certain vendors as of September 30, 2017. The Company, 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 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 of operations. |
Basis of Presentation and Pri14
Basis of Presentation and Principles of Consolidation (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standard Update (“ASU”) to communicate changes to the codification. The Company considers the applicability and impact of all ASUs. The following are those recent ASUs that are relevant to the Company. In March 2017, the FASB issued ASU No. 017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The new guidance requires that an employer disaggregate the service cost component from the other components of net benefit cost. This update is effective for public companies for annual periods beginning after December 15, 2017. The Company is currently evaluating the impact of adopting this ASU. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The amendment in this ASU provides final guidance that simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under ASC 350. ASU No. 2017-04 is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting as well as the timing of when it will adopt this ASU. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” The amendments in this ASU address eight cash flow issues with the intention of reducing current diversity in practice among business entities. The Company will evaluate the eight issues in the amendment and determine if any changes are necessary for compliance. ASU No. 2016-15 is effective for annual and interim periods beginning after December 15, 2017; early adoption is permitted and should be applied retrospectively where practical. The Company will determine the date of adoption, once the Company has evaluated the impact of this ASU. In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The new guidance addresses several aspects of the accounting for share-based payment award transactions, including: (a) the recognition of the income tax effects of awards in the income statement when the awards vest, forfeit, or are settled, thus eliminating additional paid-in-capital pools, (b) classification of awards as either equity or liabilities, and (c) classification on the statement of cash flows. This update was effective for public companies for fiscal years beginning after December 15, 2016 with early adoption permitted. The Company adopted this guidance in the first quarter of 2017 and there was no material impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, a lessee will be required to recognize a right to use asset and a lease liability for leases greater than 1 year, both capital and operating leases. This update is effective for public companies for fiscal years beginning after December 15, 2018 with early adoption permitted. The Company is currently evaluating the impacts of adopting as well as the timing of when it will adopt this ASU. In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (Topic 330), which changes guidance for subsequent measurement of inventory within the scope of the update from the lower of cost or market to the lower of cost and net realizable value. This update was effective for annual and interim periods beginning after December 15, 2016 and early adoption was permitted. The Company adopted this guidance in the first quarter of 2017 and the adoption did not have a material impact on the Company’s consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in 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. The Company will adopt this ASU effective January 1, 2018 and plans to adopt the modified retrospective method. The Company has almost completed its evaluation and does not expect material changes to the timing of our revenue recognition relative to current accounting standards, however, the Company is still evaluating the disclosures to be included in the Company’s consolidated financial statements. |
Earnings (loss) per Share (Tabl
Earnings (loss) per Share (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Schedule of diluted earnings (loss) per share | The following reconciles the denominator used in the calculation of diluted earnings (loss) per share: Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Denominator: Weighted average common shares for basic earnings (loss) per share 16,274,663 16,302,870 16,260,862 16,388,892 Effect of dilutive securities — — — — Weighted average common shares for diluted earnings (loss) per share 16,274,663 16,302,870 16,260,862 16,388,892 |
Business Combination (Tables)
Business Combination (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
Schedule of current estimated fair value of the acquired assets and assumed liabilities | During the quarter, the Company finalized its analysis of assets acquired and liabilities assumed, including accounts receivable, inventories and leases. The following table summarizes the final fair value of the acquired assets and assumed liabilities recorded as of the date of acquisition: At October 3, 2016 (In thousands) Cash $ 3 Accounts receivable 2,874 Inventories 15,006 Prepaids 46 Property and equipment 59 Intangibles assets 9,161 Goodwill 9,849 Other assets 116 Total assets acquired 37,114 Trade accounts payable 1,134 Accrued and other current liabilities 1,051 Long-term obligation 320 Deferred income taxes 2,432 Total liabilities assumed 4 ,937 Net assets purchased $ 32,177 |
Schedule of operations | The unaudited pro forma combined historical results of the Company, giving effect to the acquisition assuming the transaction was consummated on January 1, 2016, are as follows: Nine Months September 30, 2016 (In thousands, except earnings per share) Sales $ 215,055 Net loss (3,059 ) Basic loss per share (0.19 ) Diluted loss per share (0.19 ) |
Earnings (loss) per Share (Deta
Earnings (loss) per Share (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Denominator: | ||||
Weighted average common shares for basic earnings (loss) per share | 16,274,663 | 16,302,870 | 16,260,862 | 16,388,892 |
Effect of dilutive securities | ||||
Weighted average common shares for diluted earnings (loss) per share | 16,274,663 | 16,302,870 | 16,260,862 | 16,388,892 |
Earnings (loss) per Share (De18
Earnings (loss) per Share (Details Narrative) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Earnings Per Share [Abstract] | ||||
Options to purchase common stock | 667,239 | 736,968 | 683,847 | 772,012 |
Business Combination (Details)
Business Combination (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Oct. 03, 2016 |
Goodwill | $ 22,354 | $ 22,770 | |
Vertex Acquisition [Member] | |||
Cash | $ 3 | ||
Accounts receivable | 2,874 | ||
Inventories | 15,006 | ||
Prepaids | 46 | ||
Property and equipment | 59 | ||
Intangibles assets | 9,161 | ||
Goodwill | 9,849 | ||
Other assets | 116 | ||
Total assets acquired | 37,114 | ||
Trade accounts payable | 1,134 | ||
Accrued and other current liabilities | 1,051 | ||
Long-term obligation | 320 | ||
Deferred income taxes | 2,432 | ||
Total liabilities assumed | 4,937 | ||
Net assets purchased | $ 32,177 |
Business Combination (Details 1
Business Combination (Details 1) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Sales | $ 81,196 | $ 65,222 | $ 235,551 | $ 192,387 |
Net loss | $ (1,711) | $ (1,439) | $ (2,218) | $ (4,180) |
Basic loss per share | $ (0.11) | $ (0.09) | $ (0.14) | $ (0.26) |
Diluted loss per share | $ (0.11) | $ (0.09) | $ (0.14) | $ (0.26) |
Vertex Acquisition [Member] | ||||
Sales | $ 215,055 | |||
Net loss | $ (3,059) | |||
Basic loss per share | $ (0.19) | |||
Diluted loss per share | $ (0.19) |
Business Combination (Details N
Business Combination (Details Narrative) - Vertex Acquisition [Member] - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Oct. 03, 2016 | |
Net assets purchased | $ 32,177 | |
Total purchase price before adjustment | 32,300 | |
Amount of goodwill deductible for tax purposes | $ 1,000 | |
Asset remaining amortization term | 6 years 9 months | |
Business combination unrecognized description | Amortization expense to be recognized on the acquired intangible assets is expected to be $0.8 million per year in 2017 through 2024 and $0.6 million in 2025. | |
Tradenames [Member] | ||
Indefinitelived intangible assets acquired | $ 2,100 | |
Amortization expense of intangible assets | 800 | |
Customer Relationships [Member] | ||
Intangible asset acquired | $ 7,000 | |
Asset useful life | 9 years | |
Amortization expense of intangible assets | $ 200 |
Debt (Details Narrative)
Debt (Details Narrative) - Fourth Amended and Restated Loan and Security Agreement (the 2015 Loan Agreement) [Member] - Revolving Credit Facility [Member] $ in Thousands | Oct. 03, 2016USD ($) |
Maximum amount outstanding | $ 100,000 |
Expiration date | Sep. 30, 2020 |
Additional commitment amount | $ 50,000 |
Description of collateral | Secured by substantially all of the property of the Company, other than real estate. |
Percentage of the value of eligible accounts receivable | 85.00% |
Percentage of the value of eligible inventory | 70.00% |
Percentage of the value of net orderly liquidation | 90.00% |
Description of loan converted | Portions of the loan may be converted to LIBOR loans in minimum amounts of $1.0 million and integral multiples of $0.1 million. |
Description of interest rate | LIBOR loans bear interest at the British Bankers Association LIBOR Rate plus 100 to 150 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. |
Percentage of unused capacity commitment fee | 0.25% |
Maximum incremental availability on eligible accounts receivable and inventory | $ 5,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) $ in Thousands | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Income Tax Disclosure [Abstract] | |
Effect of change in valuation allowance on deferred tax assets | $ 2,100 |
Valuation allowance | $ 2,400 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Equity [Abstract] | ||
Dividend paid | $ 60 | $ 2,477 |
Stock Based Compensation (Detai
Stock Based Compensation (Details Narrative) - USD ($) $ in Thousands | Aug. 04, 2017 | May 05, 2017 | Jan. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 |
Allocated share based compensation included in salaries and commissions | $ 300 | $ 200 | $ 770 | $ 626 | |||
Restricted Stock Units [Member] | |||||||
Award of restricted stock units | $ 60,000 | ||||||
Aggregate restricted stock units | 37,500 | ||||||
Restricted Stock Units [Member] | 2017 Stock Plan [Member] | Management [Member] | |||||||
Award of restricted stock units | $ 50,000 | ||||||
Description of vesting rights | These units vest in one third increments, on the third, fourth and fifth anniversaries of the date of grant, as long as the recipient is still employed by the Company. | ||||||
President and CEO [Member] | Restricted Stock Awards [Member] | 2006 Stock Plan [Member] | |||||||
Number of shares granted | 60,000 | ||||||
Remaining number of shares granted | 40,000 | ||||||
Description of vesting rights | The equity award of 60,000 shares of restricted stock vest in one-third increments on January 30, 2018, December 19, 2018 and December 19, 2019, in each case as long as Mr. Pokluda is then employed by the Company. | ||||||
Director [Member] | Restricted Stock Units [Member] | 2017 Stock Plan [Member] | |||||||
Number of shares granted | 7,653 | ||||||
Award of restricted stock units | $ 45,000 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - Southwest Wire Rope Reporting Unit [Member] $ in Thousands | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Expected post-remediation liability | $ 100 |
Description of post-remediation liability | Estimates will be incurred in the next year. |
Fourth Amended and Restated Loan and Security Agreement (the 2015 Loan Agreement) [Member] | |
Letters of credit issued | $ 1,100 |