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 March 31, 2008





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 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,
2008 there were 17,791,736 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, 2008





INDEX




PART I. FINANCIAL INFORMATIONItem 1.  Financial Statements
      (Unaudited)
            2Consolidated Balance Sheets
            2Consolidated Statements of Income
            3Consolidated Statements of Cash
    Flows
            4Notes to Consolidated Financial
    Statements
            5Item 2.  Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
            7Overview
            7Results of Operations
            9Impact of Inflation and Commodity
      Prices
            10Liquidity and Capital
    Resources
            11Contractual Obligations
            12Cautionary Statement for the Purposes of
      the “Safe
      Harbor”
            12Item 3. Quantitative and Qualitative Disclosures about Market
      Risk
            12Item 4.  Controls and Procedures
            12PART II. OTHER INFORMATIONItem 1A.  Risk Factors
            12Item 2.  Unregistered Sales of Equity Securities and
      Use of Proceeds
            13Item 6.  Exhibits
            13Signature Page
            14


Table of Contents




HOUSTON WIRE& CABLE COMPANY


Consolidated BalanceSheets


(In
thousands, except share data)








March
      31,
            
            
            December
      31,2008
            
            
            2007(unaudited)AssetsCurrent
      assets:Accounts
      receivable, net
            
            $
            55,831
            
            
            $
            58,202Inventories,
      net
            
            
            69,554
            
            
            
            69,299Deferred
      income taxes
            
            
            1,344
            
            
            
            1,054Prepaid
      expenses
            
            
            1,025
            
            
            
            832Income
      taxes
            
            
            —
            
            
            
            2,004Total
      current assets
            
            
            127,754
            
            
            
            131,391Property
      and equipment, net
            
            
            3,223
            
            
            
            3,234Goodwill
            
            
            2,996
            
            
            
            2,996Deferred
      income taxes
            
            
            1,513
            
            
            
            1,356Other
      assets
            
            
            112
            
            
            
            114Total
      assets
            
            $
            135,598
            
            
            $
            139,091Liabilities
      and stockholders' equityCurrent
      liabilities:Book
      overdraft
            
            $
            1,889
            
            
            
            3,854Trade
      accounts payable
            
            
            13,676
            
            
            
            12,297Accrued
      and other current liabilities
            
            
            11,457
            
            
            
            17,263Income
      taxes payable
            
            
            2,529
            
            
            
            —Total
      current liabilities
            
            
            29,551
            
            
            
            33,414Long
      term obligations
            
            
            39,277
            
            
            
            34,507Stockholders'
      equity:Common
      stock, $0.001 par value; 100,000,000 shares authorized: 20,988,952 shares
      issued and 17,858,550 outstanding at March 31, 2008 and 20,988,952 issued
      and 18,577,727 outstanding at December 31, 2007
            
            
            21
            
            
            
            21Additional
      paid-in-capital
            
            
            54,691
            
            
            
            54,131Retained
      earnings
            
            
            62,934
            
            
            
            57,846Treasury
      stock
            
            
            (50,876
            )
            
            
            (40,828
            )Total
      stockholders' equity
            
            
            66,770
            
            
            
            71,170Total
      liabilities and stockholders' equity
            
            $
            135,598
            
            
            $
            139,091








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


2
 Table of Contents


HOUSTON
WIRE & CABLE COMPANY


ConsolidatedStatementsof Income


(Unaudited)


(In
thousands, except share and per share data)








Three
      Months Ended
              March
      31,2008
            
            
            2007Sales
            
            $
            89,441
            
            
            $
            81,788Cost
      of sales
            
            
            66,774
            
            
            
            59,179Gross
      profit
            
            
            22,667
            
            
            
            22,609Operating
      Expenses:Salaries
      and commissions
            
            
            6,076
            
            
            
            5,678Other
      operating expenses
            
            
            4,984
            
            
            
            4,766Depreciation
      and amortization
            
            
            127
            
            
            
            110Total
      operating expenses
            
            
            11,187
            
            
            
            10,554Operating
      income
            
            
            11,480
            
            
            
            12,055Interest
      expense
            
            
            541
            
            
            
            185Income
      before income taxes
            
            
            10,939
            
            
            
            11,870Income
      taxes
            
            
            4,202
            
            
            
            4,573Net
      income
            
            $
            6,737
            
            
            $
            7,297Earnings
      per share:Basic
            
            $
            0.37
            
            
            $
            0.35Diluted
            
            $
            0.37
            
            
            $
            0.35Weighted
      average common shares outstanding:Basic
            
            
            18,081,809
            
            
            
            20,868,027Diluted
            
            
            18,121,280
            
            
            
            20,996,579Dividends
      declared per share
            
            $
            0.085
            
            
            $
            —








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


3
 Table of Contents


HOUSTON
WIRE& CABLE COMPANY


Consolidated
Statements of Cash Flows


(Unaudited)


(In
thousands)








Three
      Months Ended March 31,2008
            
            
            2007Operating
      activitiesNet
      income
            
            $
            6,737
            
            
            $
            7,297Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
            
            
            127
            
            
            
            110Amortization
      of capitalized loan costs
            
            
            20
            
            
            
            16Amortization
      of unearned stock compensation
            
            
            519
            
            
            
            290Provision
      for returns and allowances
            
            
            (11
            )
            
            
            (116
            )Provision
      for inventory obsolescence
            
            
            (6
            )
            
            
            16Deferred
      income taxes
            
            
            (447
            )
            
            
            (211
            )Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            2,382
            
            
            
            1,163Inventories
            
            
            (249
            )
            
            
            (7,468
            )Prepaid
      expenses
            
            
            (193
            )
            
            
            (589
            )Other
      assets
            
            
            (18
            )
            
            
            3Book
      overdraft
            
            
            (1,965
            )
            
            
            2,190Trade
      accounts payable
            
            
            1,379
            
            
            
            2,793Accrued
      and other current liabilities
            
            
            (5,806
            )
            
            
            (1,390
            )Income
      taxes payable/receivable
            
            
            4,533
            
            
            
            3,685Net
      cash provided by operating activities
            
            
            7,002
            
            
            
            7,789Investing
      activitiesExpenditures
      for property, plant, and equipment
            
            
            (116
            )
            
            
            (96
            )Net
      cash used in investing activities
            
            
            (116
            )
            
            
            (96
            )Financing
      activitiesBorrowings
      on revolver
            
            
            91,157
            
            
            
            75,494Payments
      on revolver
            
            
            (86,387
            )
            
            
            (83,766
            )Proceeds
      from exercise of stock options
            
            
            18
            
            
            
            31Excess
      tax benefit for stock options
            
            
            41
            
            
            
            548Payment
      of dividends
            
            
            (1,527
            )
            
            
            —Purchase
      of treasury stock
            
            
            (10,188
            )
            
            
            —Net
      cash used in financing activities
            
            
            (6,886
            )
            
            
            (7,693
            )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
 Table of Contents


HOUSTON
WIRE & CABLE COMPANY


Notes
to Consolidated Financial Statements (Unaudited)


(in
thousands, except per share amounts)


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, 2008 and for the three months
ended March 31, 2008 and 2007 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, 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, 2007 filed with the Securities and Exchange Commission (the
“SEC”).





Recent
Accounting Pronouncements




In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised
2007),Business
Combinations (“SFAS 141R”). SFAS 141R 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 141R
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
141R is effective for fiscal years beginning after December 15, 2008, and the
Company will adopt it in the first quarter of fiscal 2009. We do not
expect the adoption of SFAS 141R to have a material impact on our Consolidated
Financial Statements.





Adoption
of New Accounting Policy





In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FASB Statement No.
115 (“SFAS 159”). SFAS 159 permits companies to choose to measure many
financial instruments and certain other items at fair value in order to mitigate
volatility in reported earning caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. SFAS No. 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007. At the effective date, a company may
elect the fair value option for eligible items that exist at that date. The
company shall report the effect of the first remeasurement to fair value as a
cumulative effect adjustment to the opening balance of retained earnings for the
fiscal year in which this statement is initially applied. The Company adopted
SFAS No. 159 effective January 1, 2008. The adoption of SFAS No. 159 had no
material impact on the Company’s Consolidated Financial Statements.





In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements
(“SFAS 157”). SFAS 157 provides guidance for using fair value to measure assets
and liabilities. It also responds to investors’ requests for expanded
information about the extent to which companies measure assets and liabilities
at fair value, the information used to measure fair value, and the effect of
fair value measurements on earnings. SFAS 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value, and does
not expand the use of fair value in any new circumstances. The effective date of
adoption for the Company was initially January 1, 2008. However in November
2007, the FASB deferred the implementation of SFAS 157 for all non-financial
assets and liabilities that are not measured on a recurring basis until fiscal
years beginning after November 15, 2008. The Company’s adoption of this standard
on January 1, 2008 did not have a material impact on its Consolidated 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 includes the dilutive effects of stock option
awards.  The numerator used in the calculation of both basic and
diluted earnings per share for all periods presented was net
income.  The denominator for each period presented was determined as
follows:


5
 Table of Contents




Three
      Months Ended
              March
      31,2008
            
            
            2007Weighted
      average common shares for basic earning per share
            
            
            18,082
            
            
            
            20,868Effect
      of dilutive securities
            
            
            39
            
            
            
            129Denominator
      of diluted earnings per share
            
            
            18,121
            
            
            
            20,997





The
weighted average number of stock-based awards not included in the calculation of
the dilutive effect of stock based awards was 848 and 309 for the three
months ended March 31, 2008 and 2007, respectively.





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 balance outstanding at March 31, 2008 is almost entirely due
to borrowings in connection with the Company’s stock repurchase program that
began in the latter portion of 2007 and has continued in 2008.  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
August 30, 2009, where the Company is authorized to purchase up to $75,000 of
its outstanding shares of common stock, from time to time, 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, fund acquisitions, or other uses as authorized by the Board of
Directors.  During the quarter ended March 31, 2008, the Company
repurchased 728 shares for a total cost of $10,188.





On
February 1, 2008, the Board of Directors approved a quarterly dividend of $0.085
per share payable to stockholders of record on February 15,
2008.  This dividend totaling $1,527 was paid on February 29,
2008.





5.
Stock Based Compensation





On
January 9, 2008, the Company granted options to purchase 65 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.




On May 1,
2007, at the Annual Meeting of Stockholders, upon re-election, the four
independent directors each received the annual grant of an option to purchase 5
shares of common stock with an exercise price equal to the fair market value of
the Company’s stock at the close of trading on that day. These options have a
contractual life of ten years and vest after one year.




On
March 9, 2007, the Company granted to the Company’s chief executive
officer, an option to purchase 500 shares of its common stock with an
exercise price equal to the fair market value of the Company’s stock at the
close of trading on March 9, 2007. This option has a contractual life of
ten years and vests 50% four years after the date of grant and 50% five years
after the date of grant, provided that in the event of the chief executive
officer’s death or permanent disability, such option would vest ratably based on
the days served from the date of grant.




The fair
value of each option awarded is estimated on the date of grant using a
Black-Scholes option-pricing model. Expected volatilities are based on
historical volatility of the Company's stock and the historical volatility of
the stock of similar companies, and other factors. The Company uses historical
data to estimate option exercises and employee terminations within the valuation
model. The expected life of options granted represents the period of time that
options granted are expected to be outstanding. The risk-free rate for periods
within the life of the option is based on the U.S. Treasury yield curve in
effect at the time of grant.








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 and
2007:





2008
            
            2007Expected
      volatility
            68%
            
            42%Expected
      life in years
            5.5
      years
            
            5.5
      yearsRisk-free
      interest rate
            3.82%
            
            4.59%Dividend
      yield
            2.50%
            
            0%





Total
stock-based compensation cost was $519 and $290 for the three months ended March
31, 2008 and 2007, respectively. Total income tax benefit recognized for
stock-based compensation arrangements was $200 and $112 for the three months
ended March 31, 2008 and 2007, respectively.


6
 Table of Contents




As of
March 31, 2008, there was $7,119 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 47
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. 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 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. In addition, HWC 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.





Except
for 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
Event





On May 8,
2008, the Board of Directors approved a dividend on the shares of common stock
of the Company in theamount of $0.085per share,
payable on May 29, 2008, to stockholders of record at the close of business
on May 15, 2008.





Following
the Annual Meeting of Stockholders on May 8, 2008, the Company issued options to
purchase 5 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 shares of the Company’s common stock) and 15 shares of common stock
to the newly-elected non-employee director, for an aggregate of 45 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.





Item
2.  Management’sDiscussion 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, 2007.





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 2,800 customers in
over 8,200 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 23,000
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 (cables 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);


7
 Table of Contents


·
            medium
      voltage cable (cables 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).








We also
offer private branded products, including our LifeGuardTM low-smoke, zero-halogen
cable. 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 both are 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 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 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
approximately $99,000 per year. A 20% change in our estimate at March 31, 2008
would have resulted in a change in income before income taxes of approximately
$26,000.





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 March 31, 2008 would have resulted in a change in income
before income taxes of approximately $126,000.





Inventory
Obsolescence





We
continually monitor our inventory levels at each of our distribution locations.
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 March 31, 2008 would have resulted
in a change in income before income taxes of approximately
$401,000.





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, which reduces 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 purchases to date
and our estimate of purchases to be made for the remainder of the year relative
to the purchase levels that mark our progress toward earning the rebates. We
continually revise these estimates to reflect actual purchase levels. A 20%
change in our estimate of total rebates earned during the three months ended
March 31, 2008 would have resulted in a change in income before income taxes of
approximately $428,000.





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 March 31, 2008, our net goodwill balance
was $3.0 million, representing 2.2% of our total assets.


8
 Table of Contents


Under the
provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets("SFAS
142"), we test goodwill for impairment annually, or more frequently if
indications of possible impairment exist, by applying a fair value-based test.
In October 2007, we performed our annual goodwill impairment tests for goodwill
and other indefinite-lived intangible assets, and, as a result of this test, we
believe the goodwill on our balance sheet is not impaired.





If
circumstances change or events occur to indicate that our fair 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.




Resultsof
Operations




The
following table shows, for the periods indicated, information derived from our
consolidated statements of income, expressed as a percentage of net sales for
the periods presented.





Three
      Months Ended
              March
      31,2008
            
            
            2007Sales
            
            
            100.0
            %
            
            
            100.0
            %Cost
      of sales
            
            
            74.7
            %
            
            
            72.4
            %Gross
      profit
            
            
            25.3
            %
            
            
            27.6
            %Operating
      expenses:Salaries
      and commissions
            
            
            6.8
            %
            
            
            6.9
            %Other
      operating expenses
            
            
            5.6
            %
            
            
            5.8
            %Depreciation
      and amortization
            
            
            0.1
            %
            
            
            0.1
            %Total
      operating expenses
            
            
            12.5
            %
            
            
            12.9
            %Operating
      income
            
            
            12.8
            %
            
            
            14.7
            %Interest
      expense
            
            
            0.6
            %
            
            
            0.2
            %Income
      before income taxes
            
            
            12.2
            %
            
            
            14.5
            %Income
      tax provision
            
            
            4.7
            %
            
            
            5.6
            %Net
      income
            
            
            7.5
            %
            
            
            8.9
            %





Note:Due to rounding,
percentages may not add up to total operating expenses, operating income, income
before taxes or net income.








Comparison
of the Three Months Ended March 31, 2008 and 2007





Sales





Three
      Months EndedMarch
      31,(in
      millions)
            
            2008
            
            
            2007
            
            
            ChangeSales
            
            $
            89.4
            
            
            $
            81.8
            
            
            $
            7.7
            
            
            
            9.4
            %





Sales in
the first quarter of 2008 increased 9.4% to $89.4 million from $81.8 million in
the first quarter of 2007. Internal growth accounted for the entire increase in
sales. We estimate that the entire sales growth  resulted from project
activity in the five internal growth initiatives encompassing Emission Controls,
Engineering & Construction, Industrials, LifeGuardTM (and other private
branded products) and Utility Power Generation. Investment and capital expansion
within these initiatives remained healthy and we benefited from continued
penetration into these markets. We estimate our core Repair and Replacement
sector, also referred to as Maintenance, Repair and Operations (“MRO”), was
slightly down as this sector is facing a challenging economy which we believe
lowered discretionary spending.




Gross
Profit




Three
      Months EndedMarch
      31,(in
      millions)
            
            2008
            
            
            2007
            
            
            ChangeGross
      profit
            
            $
            22.7
            
            
            $
            22.6
            
            
            $
            0.1
            
            
            
            0.3
            %Gross
      profit as a percent of sales
            
            
            25.3
            %
            
            
            27.6
            
            
            
            (2.3
            )


9
 Table of Contents




Gross
profit increased 0.3% to $22.7 million in 2008 from $22.6 million in 2007 as it
benefited from increased sales volume.  Our gross profit as a
percentage of sales (gross margin) was 25.3% in 2008 which was 230 basis points
lower than 2007.  The reduction in gross margin was primarily
attributable to current macro market pricing pressures.  Higher
customer incentives due to increased sales and to additional targeted customer
accounts and rising freight costs also compressed the gross margin.





Operating
Expenses


Three
      Months EndedMarch
      31,(in
      millions)
            
            2008
            
            
            2007
            
            
            ChangeOperating
      expenses:Salaries
      and commissions
            
            $
            6.1
            
            
            $
            5.7
            
            
            $
            0.4
            
            
            
            7.0
            %Other
      operating expenses
            
            
            5.0
            
            
            
            4.8
            
            
            
            0.2
            
            
            
            4.6
            %Depreciation
      and amortization
            
            
            0.1
            
            
            
            0.1
            
            
            
            0.0
            
            
            
            15.5
            %Total
      operating expenses
            
            $
            11.2
            
            
            $
            10.6
            
            
            $
            0.6
            
            
            
            6.0
            %Operating
      expenses as a % of sales
            
            
            12.5
            %
            
            
            12.9
            %
            
            
            (0.4
            )%




Note:  Due
to rounding, numbers may not add up to total operating expenses.





The
increase in salaries and commissions primarily reflects higher salaries due to
additional employees, annual pay increases and stock compensation expense. The
higher salaries were partially offset by lower commission expense due to lower
gross margin and changes to commission programs. Salaries and commissions as a
percentage of sales decreased to 6.8% in 2008 from 6.9% in the comparable period
in 2007.





Other
operating expenses increased in 2008 primarily due to costs associated with the
higher number of employees and increased facility costs.





Depreciation
and amortization expense was consistent at $0.1 million.





Operating
expenses as a percent of sales decreased slightly from 12.9% in 2007 to 12.5% in
2008.





Interest
Expense





Interest
expense increased $0.4 million or 192.4% from $0.2 million in 2007 to $0.5
million in 2008 due primarily to increased debt for stock repurchases in the
latter portion of 2007 and in 2008. Average debt was $41.3 million for the
quarter ended March 31, 2008 versus $9.7 million for the quarter ended March 31,
2007.  The average effective interest rate decreased to 5.0% in the
2008 period, from 7.4% in 2007 due to market interest rate
declines.





Income
Taxes





Income
taxes decreased $0.4 million or 8.1% as our income before income taxes decreased
$0.9 million or 7.8%. The effective income tax rate decreased slightly from
38.5% in 2007 to 38.4% in 2008.





Net
Income





We
achieved net income of $6.7 million compared to net income of $7.3 million in
2007, a decrease of 7.7%.





Impact ofInflation andCommodity
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. As we turn our inventory approximately four times a year,
the impact of decreasing copper prices would primarily affect the results of the
succeeding calendar quarter.


10
 Table of Contents


Liquidity andCapitalResources





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
2008, we have funded our capital expenditures through cash from operations. Our
working capital amounted to $98.2 million at March 31, 2008 compared to $98.0
million at December 31, 2007.





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.





Comparison
of the Three Months Ended March 31, 2008 and 2007





Our net
cash provided by operating activities for the three months ended March 31, 2008
was $7.0 million compared to $7.8 million in the prior year period. Our net
income decreased to $6.7 million in 2008 from $7.3 million in 2007. Accounts
receivable decreased $2.4 million in 2008 due to the collection of vendor
incentives typically received in the first quarter partially offset by increased
trade receivables. Accrued and other current liabilities decreased $5.8 million
due to lower customer discounts payable as they are typically paid out in the
first quarter, lower accrued wire purchases and a reduction in prepayments on
cable management projects. The book overdraft, which is funded by our revolving
credit facility as soon as the related vendor checks clear our disbursement
account, decreased $2.0 million.





Net cash
used in investing activities was $0.1 million for the 2008 and 2007 periods, as
requirements for additional capital resources remained low.





Net cash
used in financing activities was $6.9 million in 2008 compared to $7.7 million
in 2007.  Treasury stock purchases of $10.2 million and dividend
payments of $1.5 million, partially offset by net borrowings of $4.8 million
used for the treasury stock purchases, were the main components of cash used in
financing activities.





Indebtedness





Our
principal source of liquidity at March 31, 2008 was working capital of $98.2
million compared to $98.0 million at December 31, 2007. We also had available
borrowing capacity of approximately $35.7 million at March 31, 2008 and $40.5
million at December 31, 2007 under our $75 million loan and security agreement
with a commercial bank (“lender”).





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 and security agreement with a commercial bank that provides for a revolving
loan through May 21, 2010. On September 28, 2007, we increased the facility to
$75.0 million to fund the stock repurchase program and fund business
growth.  The agreement allows for the payment of dividends, not to
exceed $10 million in the aggregate in any twelve month period; and, effective
January 29, 2008, the repurchase of stock, prior to December 31, 2009, in the
aggregate amount of not more than $75 million.  The lender has a
security interest in all of our assets, including accounts receivable and
inventory. The loan bears interest at the agent bank’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
$0.1million. Upon such conversion, interest is payable at LIBOR plus a margin
ranging from 1.00% to 1.50%, 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.


11
 Table of Contents


ContractualObligations





The
following table describes our loan commitment at March 31, 2008:





Total
            
            
            Less
      than
              1
      year
            
            
            1-3
      years
            
            
            3-5
      years
            
            
            More
      than
              5
      years(In
      thousands)Term
      loans and loans payable
            
            $
            39,277
            
            
            $
            —
            
            
            $
            39,277
            
            
            $
            —
            
            
            $
            —





There
were no new material changes in operating lease obligations or non-cancellable
purchase obligations since December 31, 2007.





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,
2007, 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.





Item
3. Quantitative and QualitativeDisclosures about Market
Risk





Interest
Rate Risk





There
have been no material changes from what we reported in the Form 10-K for the
year ended December 31, 2007.





Foreign
Exchange Risk





There
have been no material changes from what we reported in the Form 10-K for the
year ended December 31, 2007.





Item
4. Controlsand Procedures





As of
March 31, 2008, 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 March 31, 2008 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 – 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, 2007.


12
 Table of Contents


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 March 31, 2008 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
    planJanuary
      1 – 31, 2008
            
            
            465,189
            
            
            $
            13.31
            
            
            
            465,189
            
            
            $
            27,918,975February
      1 – 29, 2008
            
            
            239,673
            
            
            $
            15.31
            
            
            
            239,673
            
            
            $
            24,249,159March
      1 – 31, 2008
            
            
            22,940
            
            
            $
            14.24
            
            
            
            22,940
            
            
            $
            23,922,451Total
            
            
            727,802
            
            
            $
            14.00
            
            
            
            727,802


_______


(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. All of the above purchases were made under the
Company’s stock repurchase program.





Items
3 – 5 are not applicable and have been omitted.








Item6.  Exhibits





(a) Exhibits
required by Item 601 of Regulation S-K.




Exhibit
      Number
            
            Document
      Description31.1
            
            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.


13
 Table of Contents


Signatures





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
      12, 2008
            HOUSTON
      WIRE & CABLE COMPANYBY: /s/
      Nicol G. GrahamNicol G. Graham,
      Chief Financial Officer


14
 Table of Contents




EXHIBIT
INDEX





Exhibit
      Number
            
            Document
      Description31.1
            
            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.






15