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, 2009
 
 or
 
  ̈
              TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
the transition period
from                              to
  Commission
File Number: 000-52046
 
 
 
 (Exact
name of registrant as specified in its charter)
 
 
 Delaware
                
                36-4151663(State
      or other jurisdiction of  incorporation or
      organization)
                
                (I.R.S.
      Employer Identification No.)10201
      North Loop East
                  Houston,
      Texas
                
                77029(Address
      of principal executive offices)
                
                (Zip
      Code)
 
 (713)
609-2100
 (Registrant’s
telephone number, including area code)
 
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days   YES xNO  ̈
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  YES  ̈NO  ̈
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See definition of “large accelerated filer”, “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act
 
 Large
      Accelerated Filer    ̈
                Accelerated
      Filer   x
                Non-Accelerated
      Filer    ̈
                Smaller
      Reporting Company     ̈
 
 
 
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)
 
 YES  ̈NO x
 
 At May 1,
2009 there were 17,646,677 outstanding shares of the registrant’s common stock,
$0.001 par value per share.
  
  HOUSTON
WIRE & CABLE COMPANY
 Form
10-Q
 For
the Quarter Ended March 31, 2009
 
 INDEX
  PART
      I. FINANCIAL INFORMATIONItem
      1.  Financial Statements (Unaudited)Consolidated 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
                  11Liquidity and Capital Resources
                  11Contractual Obligations
                  12Cautionary Statement for 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
                  13Item
      2.  Unregistered Sales of Equity Securities and
      Use of Proceeds
                  13Item
      6.  Exhibits
                  13Signature Page
                  14
  1
 Index
  HOUSTONWIRE & CABLE COMPANY
 Consolidated
Balance Sheets
 (In
thousands, except share data)
 
 
 March
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008(unaudited)AssetsCurrent
      assets:Accounts
      receivable, net
                        
                        $
                        41,838
                        
                        
                        $
                        50,798Inventories,
      net
                        
                        
                        67,505
                        
                        
                        
                        73,459Deferred
      income taxes
                        
                        
                        1,559
                        
                        
                        
                        1,384Prepaid
      expenses
                        
                        
                        1,011
                        
                        
                        
                        829Total
      current assets
                        
                        
                        111,913
                        
                        
                        
                        126,470Property
      and equipment, net
                        
                        
                        3,179
                        
                        
                        
                        3,274Goodwill
                        
                        
                        2,996
                        
                        
                        
                        2,996Deferred
      income taxes
                        
                        
                        2,092
                        
                        
                        
                        1,926Other
      assets
                        
                        
                        63
                        
                        
                        
                        87Total
      assets
                        
                        $
                        120,243
                        
                        
                        $
                        134,753Liabilities
      and stockholders' equityCurrent
      liabilities:Book
      overdraft
                        
                        $
                        887
                        
                        
                        $
                        4,933Trade
      accounts payable
                        
                        
                        7,167
                        
                        
                        
                        10,091Accrued
      and other current liabilities
                        
                        
                        10,171
                        
                        
                        
                        11,682Income
      taxes payable
                        
                        
                        1,688
                        
                        
                        
                        1,644Total
      current liabilities
                        
                        
                        19,913
                        
                        
                        
                        28,350Long
      term obligations
                        
                        
                        22,567
                        
                        
                        
                        29,808Stockholders'
      equity:Common
      stock, $0.001 par value; 100,000,000 shares authorized: 20,988,952 shares
      issued: 17,644,802 outstanding at March 31, 2009 and 17,642,552
      outstanding at December 31, 2008, respectively
                        
                        
                        21
                        
                        
                        
                        21Additional
      paid-in-capital
                        
                        
                        56,468
                        
                        
                        
                        55,901Retained
      earnings
                        
                        
                        76,104
                        
                        
                        
                        75,540Treasury
      stock
                        
                        
                        (54,830
                        )
                        
                        
                        (54,867
                        )Total
      stockholders' equity
                        
                        
                        77,763
                        
                        
                        
                        76,595Total
      liabilities and stockholders' equity
                        
                        $
                        120,243
                        
                        
                        $
                        134,753
 
 
 The
accompanying Notes are an integral part of these Consolidated Financial
Statements
  2
 Index
  HOUSTONWIRE & CABLE COMPANY
 Consolidated
Statements of Income
 (Unaudited)
 (In
thousands, except share and per share data)
 
 
 Three
      Months Ended
                    March
      31,2009
                  
                  
                  2008Sales
                  
                  $
                  65,832
                  
                  
                  $
                  89,441Cost
      of sales
                  
                  
                  52,019
                  
                  
                  
                  66,774Gross
      profit
                  
                  
                  13,813
                  
                  
                  
                  22,667Operating
      Expenses:Salaries
      and commissions
                  
                  
                  5,538
                  
                  
                  
                  6,076Other
      operating expenses
                  
                  
                  4,620
                  
                  
                  
                  4,984Depreciation
      and amortization
                  
                  
                  142
                  
                  
                  
                  127Total
      operating expenses
                  
                  
                  10,300
                  
                  
                  
                  11,187Operating
      income
                  
                  
                  3,513
                  
                  
                  
                  11,480Interest
      expense
                  
                  
                  155
                  
                  
                  
                  541Income
      before income taxes
                  
                  
                  3,358
                  
                  
                  
                  10,939Income
      taxes
                  
                  
                  1,294
                  
                  
                  
                  4,202Net
      income
                  
                  $
                  2,064
                  
                  
                  $
                  6,737Earnings
      per share:Basic
                  
                  $
                  0.12
                  
                  
                  $
                  0.37Diluted
                  
                  $
                  0.12
                  
                  
                  $
                  0.37Weighted
      average common shares outstanding:Basic
                  
                  
                  17,642,856
                  
                  
                  
                  18,081,809Diluted
                  
                  
                  17,649,340
                  
                  
                  
                  18,121,280Dividends
      declared per share
                  
                  $
                  0.085
                  
                  
                  $
                  0.085
 
 
 The
accompanying Notes are an integral part of these Consolidated Financial
Statements
  3
 Index
  HOUSTONWIRE& CABLE COMPANY
 Consolidated
Statements of Cash Flows
 (Unaudited)
 (In
thousands)
 
 
 Three
      Months
                            Ended
      March 31,2009
                          
                          
                          
                          2008Operating
      activitiesNet
      income
                          
                          $
                          2,064
                          
                          
                          $
                          6,737Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                          
                          
                          142
                          
                          
                          
                          127Amortization
      of capitalized loan costs
                          
                          
                          20
                          
                          
                          
                          20Amortization
      of unearned stock compensation
                          
                          
                          599
                          
                          
                          
                          519Provision
      for returns and allowances
                          
                          
                          (45
                          )
                          
                          
                          (11
                          )Provision
      for inventory obsolescence
                          
                          
                          147
                          
                          
                          
                          (6
                          )Deferred
      income taxes
                          
                          
                          (341
                          )
                          
                          
                          (447
                          )Changes
      in operating assets and liabilities:Accounts
      receivable
                          
                          
                          9,005
                          
                          
                          
                          2,382Inventories
                          
                          
                          5,807
                          
                          
                          
                          (249
                          )Prepaid
      expenses
                          
                          
                          (182
                          )
                          
                          
                          (193
                          )Other
      assets
                          
                          
                          4
                          
                          
                          
                          (18
                          )Book
      overdraft
                          
                          
                          (4,046
                          )
                          
                          
                          (1,965
                          )Trade
      accounts payable
                          
                          
                          (2,924
                          )
                          
                          
                          1,379Accrued
      and other current liabilities
                          
                          
                          (1,511
                          )
                          
                          
                          (5,086
                          )Income
      taxes payable
                          
                          
                          44
                          
                          
                          
                          4,533Net
      cash provided by operating activities
                          
                          
                          8,783
                          
                          
                          
                          7,722Investing
      activitiesExpenditures
      for property and equipment
                          
                          
                          (48)
                          
                          
                          
                          (116
                          )Net
      cash used in investing activities
                          
                          
                          (48)
                          
                          
                          
                          (116
                          )Financing
      activitiesBorrowings
      on revolver
                          
                          
                          67,124
                          
                          
                          
                          91,157Payments
      on revolver
                          
                          
                          (74,365
                          )
                          
                          
                          (86,387
                          )Proceeds
      from exercise of stock options
                          
                          
                          6
                          
                          
                          
                          18Payment
      of dividends
                          
                          
                          (1,500
                          )
                          
                          
                          (1,527
                          )Excess
      tax benefit for options
                          
                          
                          —
                          
                          
                          
                          41Purchase
      of treasury stock
                          
                          
                          —
                          
                          
                          
                          (10,908
                          )Net
      cash used in financing activities
                          
                          
                          (8,735
                          )
                          
                          
                          (7,606
                          )Net
      change in cash
                          
                          
                          —
                          
                          
                          
                          —Cash
      at beginning of period
                          
                          
                          —
                          
                          
                          
                          —Cash
      at end of period
                          
                          $
                          —
                          
                          
                          $
                          —
 
 
 The
accompanying Notes are an integral part of these Consolidated Financial
Statements.
  4
 Index
  HOUSTONWIRE & CABLE COMPANY
 Notes
to Consolidated Financial Statements
 (Unaudited)
 (in
thousands, except share and per share data)
 1.
Basis of Presentation
 
 Houston
Wire & Cable Company (“HWC” or the “Company”) through its wholly owned
subsidiaries, HWC Wire & Cable Company, Advantage Wire & Cable and Cable
Management Services Inc., distributes specialty electrical wire and cable to the
U.S. electrical distribution market through eleven locations in ten states
throughout the United States.  The Company has no other business
activity.
 
 The
consolidated financial statements as of March 31, 2009 and for the three months
ended March 31, 2009 and 2008 have been prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”) for interim financial
information and Article 10 of Regulation S-X.  Accordingly they do not
include all of the information and footnotes required by GAAP for complete
financial statements.  In the opinion of management, all adjustments,
consisting only of normal recurring accruals, considered necessary for a fair
presentation of the results of these interim periods have been
included.  The results of operations for the interim periods are not
necessarily indicative of the results that may be expected for the full
year.
 
 The
preparation of the financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes.  The most significant
estimates are those relating to the allowance for doubtful accounts, the reserve
for returns and allowances, the inventory obsolescence reserve and the accrual
for vendor rebates.  These estimates are continually reviewed and
adjusted as necessary, but actual results could differ from those
estimates.
 
 For
further information, refer to the consolidated financial statements and
footnotes thereto included in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2008 filed with the Securities and Exchange Commission (the
“SEC”).
 
 Reclassifications
 
 Certain
prior period amounts have been reclassified to conform to the current period
presentation.
 
 Adoption
of New Accounting Policy
 
 In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007),
Business Combinations
(“SFAS 141(R)”). SFAS 141(R) establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any non-controlling interest in the
acquiree and the goodwill acquired. SFAS 141(R) also requires transaction costs
related to the business combination to be expensed as incurred and establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. SFAS 141(R) applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. The Company adopted SFAS 141 (R) on January 1, 2009. The adoption did
not have an impact on the financial statements.
 
 2. Earnings per
Share
 
 In
accordance with SFAS No. 128,Earnings per Share, basic earnings per share is calculated by dividing
the net income by the weighted average number of common shares outstanding.
Diluted earnings per share include the dilutive effects of stock option awards.
The denominator for each period presented was determined as
follows:
 
 Three
      Months Ended
                                      March
      31,Denominator:
                                    
                                    2009
                                    
                                    
                                    2008Weighted
      average common shares for basic earning per share
                                    
                                    
                                    7,642,856
                                    
                                    
                                    
                                    18,081,809Effect
      of dilutive securities
                                    
                                    
                                    6,484
                                    
                                    
                                    
                                    39,471Weighted
      average common shares for diluted earnings per share
                                    
                                    
                                    17,649,340
                                    
                                    
                                    
                                    18,121,280
 
 
 The
weighted average common shares for diluted earnings per share for the periods
ended March 31, 2009 and March 31, 2008 exclude stock options to purchase
1,163,501 and 847,500 shares, respectively. Since these options have exercise
prices that are higher than the average market price of the Company’s common
stock, including them in the calculation would have an anti-dilutive effect on
earnings per share for the respective periods.
  5
 Index
  3. Long Term
Obligations
 
 The
Company’s current loan and security agreement provides for a $75,000 revolving
loan, bears interest at the agent bank’s base interest rate and matures on May
21, 2010. The lender has a security interest in all of the assets of the Company
and availability is calculated as a percentage of qualifying accounts receivable
and inventory. The Company is in compliance with the financial covenants
governing its indebtedness.
 
 4.  Stockholders’
Equity
 
 The Board
of Directors approved a stock repurchase program to be completed on or before
December 31, 2009, where the Company is authorized to purchase from time to time
up to $75,000 of its outstanding shares of common stock, depending on market
conditions, trading activity, business conditions and other
factors.  Shares of stock purchased under the program are currently
being held as treasury shares and may be used to satisfy the exercise of
options, to fund acquisitions, or for other uses as authorized by the Board of
Directors.  During the quarter ended March 31, 2009, the Company did
not repurchase any of its outstanding shares. During the quarter ended March 31,
2008, the Company repurchased 727,802 shares for a total cost of
$10,188.
 
 On
February 4, 2009, the Board of Directors approved a quarterly dividend of $0.085
per share payable to stockholders of record on February 17,
2009.  Dividends paid were $1,500 and $1,527 during the three months
ended March 31, 2009 and 2008, respectively.
 
 5.
Stock Based Compensation
 
 On
December 17, 2008, the Company granted options to purchase 65,000 shares of its
common stock to the Company’s chief executive officer with the exercise price
equal to the fair market value of the Company’s stock at the close of trading on
December 17, 2008. These options have a contractual life of ten years and vest
50% on March 9, 2011 and the remaining 50% on March 9, 2012, provided that in
the event of the chief executive officer’s death or permanent disability, such
options would vest ratably based on the days served from the date of
grant.
  On May 8,
2008, at the Annual Meeting of Stockholders, the Company issued options to
purchase 5,000 shares of its common stock to each non-employee director who was
re-elected (other than the Chairman of the Board, who received an option to
purchase 10,000 shares of the Company’s common stock) and 15,000 shares of
common stock to the newly-elected non-employee director, for an aggregate of
45,000 shares. Each option has an exercise price equal to the fair market value
of the Company’s common stock at the close of trading on May 8, 2008, has a
contractual life of ten years and vests one year after the date of
grant.
 
 On
January 9, 2008, the Company granted options to purchase 65,000 shares of its
common stock to the Company’s chief executive officer with an exercise price
equal to the fair market value of the Company’s stock at the close of trading on
January 9, 2008. These options have a contractual life of ten years and vest 50%
on March 9, 2011 and the remaining 50% on March 9, 2012, provided that in the
event of the chief executive officer’s death or permanent disability, such
options would vest ratably based on the days served from the date of
grant.
  There
were no options granted during the first quarter of 2009. The following
assumptions were used to calculate the fair value of the Company’s options on
the date of grant during the three months ended March 31, 2008:
 
 2008Expected
      volatility
                        
                        68%Expected
      life in years
                        
                        5.5
      yearsRisk-free
      interest rate
                        
                        3.82%Dividend
      yield
                        
                        2.50%
 
 Total
stock-based compensation cost was $599 and $519 for the three months ended March
31, 2009 and 2008, respectively. Total income tax benefit recognized for
stock-based compensation arrangements was $232 and $200 for the three months
ended March 31, 2009 and 2008, respectively.
 
 As of
March 31, 2009, there was $6,025 of total unrecognized stock compensation cost
related to nonvested share-based compensation arrangements. The cost is expected
to be recognized over a weighted average period of approximately 38
months.
 
 6.
Contingencies
 
 HWC,
along with many other defendants, has been named in a number of lawsuits in the
state courts of Minnesota, North Dakota and South Dakota alleging that certain
wire and cable which may have contained asbestos caused injury to the plaintiffs
who were exposed to this wire and cable. These lawsuits are individual personal
injury suits that seek unspecified amounts of money damages as the sole remedy.
It is not clear whether the alleged injuries occurred as a result of the wire
and cable in question or whether HWC, in fact, distributed the wire and cable
alleged to have caused any injuries. The Company maintains general liability
insurance that has applied to these claims. To date, all costs associated with
these claims have been covered by the applicable insurance policies and all
defense of these claims has been handled by the applicable insurance companies.
In addition, HWC did not manufacture any of the wire and cable at issue, and HWC
would rely on any warranties from the manufacturers of such wire and cable if it
were determined that any of the wire or cable that HWC distributed contained
asbestos which caused injury to any of these plaintiffs. In connection with
ALLTEL's sale of the Company in 1997, ALLTEL provided indemnities with respect
to costs and damages associated with these claims that HWC believes it could
enforce if its insurance coverage proves inadequate.
  6
 Index
  Other
than the foregoing cases, there are no legal proceedings pending against or
involving the Company that, in management's opinion, based on the current known
facts and circumstances, are expected to have a material adverse effect on the
Company's consolidated financial position, cash flows, or results from
operations.
 
 7.  Subsequent
Events
 
 On May 8,
2009, the Board of Directors approved a dividend on the shares of common stock
of the Company in the amount of $0.085 per share, payable on May 29, 2009, to
stockholders of record at the close of business on May 18, 2009.
 
 Following
the Annual Meeting of Stockholders on May 8, 2009, the Company issued options to
purchase 5,000 shares of its common stock to each non-employee director who was
re-elected (other than the Chairman of the Board, who received an option to
purchase 10,000 shares of the Company’s common stock), for an aggregate of
35,000 shares. Each option has an exercise price equal to the fair market value
of the Company’s common stock at the close of trading on May 8, 2009, has a
contractual life of ten years and vests one year after the date of
grant.
 
 Item2.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations
 
 The
following Management’s Discussion and Analysis (“MD&A”) is intended to help
the reader understand the Company’s financial position and results of
operations.  MD&A is provided as a supplement to the Company’s
Consolidated Financial Statements (unaudited) and the accompanying Notes to
Consolidated Financial Statements (unaudited) and should be read in conjunction
with the MD&A included in the Company’s Form 10-K for the year ended
December 31, 2008.
 
 
 Overview
 
 We are
one of the largest distributors of specialty wire and cable and related services
to the U.S. electrical distribution market. We serve over 3,200 customers in
over 8,600 individual locations, including virtually all of the top 200
electrical distributors in the U.S. We have strong relationships with leading
wire and cable manufacturers and provide them with efficient access to the
fragmented electrical distribution market. We distribute approximately 22,000
SKUs (stock-keeping units) from eleven strategically located distribution
centers in ten states. We are focused on providing our electrical distributor
customers with a single-source solution for specialty wire and cable and related
services by offering a large selection of in-stock items, exceptional customer
service and high levels of product expertise.
 
 We offer
products in most categories of specialty wire and cable, including:
 
 ·
              continuous
      and interlocked armor cable (cable encapsulated in either a seamless or
      interlocked aluminum protective
sheath);
 ·
              control
      and power cable (single or multiple conductor industrial
      cable);
 ·
              electronic
      wire and cable (computer, audio and signal
  cable);
 ·
              flexible
      and portable cords (flexible, heavy duty industrial
  cable);
 ·
              instrumentation
      and thermocouple cable (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);
 ·
              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.
  7
 Index
  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 accounting principles generally
accepted in the United States, commonly referred to as GAAP, we make estimates
and assumptions that affect the amounts reported in our financial statements and
accompanying notes. Certain estimates are particularly sensitive due to their
significance to the financial statements and the possibility that future events
may be significantly different from our expectations.
 
 We have
identified the following accounting policies as those that require us to make
the most subjective or complex judgments in order to fairly present our
consolidated financial position and results of operations. Actual results in
these areas could differ materially from management's estimates under different
assumptions and conditions.
 
 Allowance
for Doubtful Accounts
 
 We
maintain an allowance for doubtful accounts receivable for estimated losses
resulting from the inability of our customers to make required payments. We
perform periodic credit evaluations of our customers and typically do not
require collateral. Consistent with industry practices, we require payment from
most customers within 30 days of invoice date. We have an estimation procedure,
based on historical data, current economic conditions and recent changes in the
aging of these receivables, which we use to record reserves throughout the year.
In the last five years, write-offs against our allowance for doubtful accounts
have averaged approximately $98,000 per year. A 20% change in our estimate at
March 31, 2009 would have resulted in a change in income before income taxes of
approximately $53,000 for the quarter ended March 31, 2009.
 
 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, 2009 would have resulted in a change in income
before income taxes of approximately $134,000 for the quarter ended March 31,
2009.
 
 Inventories
 
 Inventories
are valued at the lower of cost, using the average cost method, or market. We
continually monitor our inventory levels at each of our distribution centers.
Our reserve for inventory obsolescence is based on the age of the inventory,
movements of our inventory over the prior twelve months and the experience of
our purchasing and sales departments in estimating demand for the product in the
succeeding year. Our inventories are generally not susceptible to technological
obsolescence. A 20% change in our estimate at March 31, 2009 would have resulted
in a change in income before income taxes of approximately $402,000 for the
quarter ended March 31, 2009.
 
 Vendor
Rebates
 
 Many of
our arrangements with our vendors entitle us to receive a rebate of a specified
amount when we achieve any of a number of measures, generally related to the
volume of purchases from the vendor. We account for these rebates as a reduction
of the prices of the vendor's products and therefore as a reduction of inventory
until we sell the product, at which time these rebates reduce cost of sales.
Throughout the year, we estimate the amount of rebates earned based on our
estimate of purchases to date relative to the purchase levels that mark our
progress toward earning the rebates. We continually revise these estimates to
reflect actual rebates earned based on actual purchase levels and all estimated
rebate amounts are reconciled. A 20% change in our estimate of total rebates
earned during the three months ended March 31, 2009 would have resulted in a
change in income before income taxes of approximately $365,000 for the quarter
ended March 31, 2009.
 
 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, 2009, our net goodwill balance
was $3.0 million, representing 2.5% of our total assets.
 
 In 2002,
we adopted the provisions of SFAS 142, Goodwill and Other Intangible
Assets. Under 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 2008, we performed our annual goodwill impairment
tests for goodwill and, as a result of this test, we believe the goodwill on our
balance sheet is not impaired. In light of current economic conditions, the
impairment test was also performed as of March 2009. No impairment of goodwill
was indicated from this test. If circumstances change or events occur to
indicate that our fair market value has fallen below book value, we will compare
the estimated fair value of the goodwill to its carrying value. If the carrying
value of goodwill exceeds the estimated fair value of goodwill, we will
recognize the difference as an impairment loss in operating
income.
  8
 Index
  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
      31,2009
                      
                      
                      2008Sales
                      
                      
                      100.0
                      %
                      
                      
                      100.0
                      %Cost
      of sales
                      
                      
                      79.0
                      %
                      
                      
                      74.7
                      %Gross
      profit
                      
                      
                      21.0
                      %
                      
                      
                      25.3
                      %Operating
      expenses:Salaries
      and commissions
                      
                      
                      8.4
                      %
                      
                      
                      6.8
                      %Other
      operating expenses
                      
                      
                      7.0
                      %
                      
                      
                      5.6
                      %Depreciation
      and amortization
                      
                      
                      0.2
                      %
                      
                      
                      0.1
                      %Total
      operating expenses
                      
                      
                      15.6
                      %
                      
                      
                      12.5
                      %Operating
      income
                      
                      
                      5.3
                      %
                      
                      
                      12.8
                      %Interest
      expense
                      
                      
                      0.2
                      %
                      
                      
                      0.6
                      %Income
      before income taxes
                      
                      
                      5.1
                      %
                      
                      
                      12.2
                      %Income
      tax provision
                      
                      
                      2.0
                      %
                      
                      
                      4.7
                      %Net
      income
                      
                      
                      3.1
                      %
                      
                      
                      7.5
                      %
 
 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, 2009 and 2008
 
 Sales
 
 Three
      Months EndedMarch
      31,(Dollars in millions)
                      
                      2009
                      
                      
                      2008
                      
                      
                      ChangeSales
                      
                      $
                      65.8
                      
                      
                      $
                      89.4
                      
                      
                      $
                      (23.6
                      )
                      
                      
                      (26.4)
                      %
 
 Sales in
the first quarter of 2009 decreased 26.4% to $65.8 million from $89.4 million in
the first quarter of 2008.  The two primary reasons for this decrease
were continued reduced demand for our products due to deteriorating economic
conditions and the significant reduction in the price of copper, a major
component in some of our products, which fell 55.5% from the first quarter of
2008 compared to the first quarter of 2009. Sales in our core Repair and
Replacement sector, also referred to as Maintenance, Repair and Operations
(“MRO”), were down as a result of the challenging economy which we believe
lowered overall demand and any discretionary spending and from the impact of
copper deflation. Offsetting this decrease in MRO sales was the increase in
sales after adjusting for copper deflation within our five internal growth
initiatives encompassing Emission Controls, Engineering & Construction,
Industrials, LifeGuardTM (and other private branded products) and Utility Power
Generation. Sales within our growth initiatives in the first quarter of 2009
were more resilient than MRO sales in this challenging economy. These growth
initiatives generally relate to long term projects that were already in progress
and had been previously funded. Project bookings and backlog for our growth
initiatives in 2009 increased over the prior year period as a result of our
continued penetration into these markets.
  9
 Index
  Gross
Profit
 
 Three
      Months EndedMarch
      31,(Dollars in millions)
                      
                      2009
                      
                      
                      2008
                      
                      
                      ChangeGross
      profit
                      
                      $
                      13.8
                      
                      
                      $
                      22.7
                      
                      
                      $
                      (8.9
                      )
                      
                      
                      (39.1)
                      %Gross
      profit as a percent of sales
                      
                      
                      21.0
                      %
                      
                      
                      25.3
                      %
                      
                      
                      (4.3
                      )%
 
 Gross
Profit decreased 39.1% from $22.7 million in 2008 to $13.8 million in 2009. This
decrease was primarily attributable to lower sales volume. Our gross profit as a
percentage of sales (gross margin) was 21.0% in 2009 which was 430 basis points
lower than 2008. The margin compression resulted from competitive pricing
pressures due to the current economic slowdown. In addition, the severe drop in
copper prices in the fourth quarter of 2008 continues to impact the
profitability of certain products with heavy copper content.
 
 Operating
Expenses
 
 
 Three
      Months EndedMarch
      31,(Dollars in millions)
                                                      2009
                                                      
                                                      2008
                                                      
                                                      ChangeOperating
      expenses:Salaries
      and commissions
                                                      
                                                      $
                                                      5.5
                                                      
                                                      
                                                      $
                                                      6.1
                                                      
                                                      
                                                      $
                                                      (0.5
                                                      )
                                                      
                                                      
                                                      (8.9
                                                      )%Other
      operating expenses
                                                      
                                                      
                                                      4.6
                                                      
                                                      
                                                      
                                                      5.0
                                                      
                                                      
                                                      
                                                      (0.4
                                                      )
                                                      
                                                      
                                                      (7.3
                                                      )%Depreciation
      and amortization
                                                      
                                                      
                                                      0.1
                                                      
                                                      
                                                      
                                                      0.1
                                                      
                                                      
                                                      
                                                      0.0
                                                      
                                                      
                                                      
                                                      11.8
                                                      %Total
      operating expenses
                                                      
                                                      $
                                                      10.3
                                                      
                                                      
                                                      $
                                                      11.2
                                                      
                                                      
                                                      $
                                                      (0.9
                                                      )
                                                      
                                                      
                                                      (7.9
                                                      )%Operating
      expenses as a percent of sales
                                                      
                                                      
                                                      15.6
                                                      %
                                                      
                                                      
                                                      12.5
                                                      %
                                                      
                                                      
                                                      3.1
                                                      %
 
 
 Note:  Due
to rounding, numbers may not add up to total operating expenses.
 
 The
decrease in salaries and commissions was a result of lower incentive
compensation due to the lower sales levels, gross margin, gross profit levels
and other financial metrics used in the various incentive programs. The
headcount reduction that occurred in early March will not reduce salary expense
until the second quarter.
 
 Other
operating expenses in 2009 decreased primarily due to our cost control
initiatives involving tighter management of discretionary expenses, and lower
supplies due to decreased sales.
 
 Depreciation
and amortization expense was consistent at $0.1 million.
 
 Operating
expenses as a percent of sales increased from 12.5% in 2008 to 15.6% in 2009 due
to a deleveraging of operating expenses from the reduction in
sales.
 
 Interest
Expense
 
 Interest
expense decreased $0.4 million or 71.3% to $0.2 million in 2009 from $0.5
million in 2008. The decrease in interest expense is due to a lower average
effective interest rate resulting from market interest rate declines and lower
debt levels due to the pay down of debt using cash from operations. In addition,
there were no treasury stock purchases in 2009. The average effective interest
rate decreased from 5.0% in the 2008 period to 1.8% in 2009. Average debt was
$28.6 million in the first quarter of 2009 down from $41.3 million in the first
quarter of 2008.
 
 Income
Taxes
 
 Income
taxes decreased $2.9 million or 69.2% as our income before taxes decreased $7.6
million or 69.3%. Our effective income tax rate was relatively consistent at
38.4% in 2008 and 38.5% in 2009.
 
 Net
Income
 
 We
achieved net income of $2.1 million in 2009 compared to net income of $6.7
million in 2008, a decrease of 69.4%.
  10
 Index
  Impactof Inflation and Commodity Prices
 
 Our
results of operations are affected by changes in the inflation rate and
commodity prices. Moreover, because copper and petrochemical products are
components of the wire and cable we sell, fluctuations in the costs of these and
other commodities have historically affected our operating results. To the
extent we are unable to pass on to our customers cost increases due to inflation
or rising commodity prices, it could adversely affect our operating
results.  To the extent commodity prices decline, the net realizable
value of our existing inventory could be reduced, and our gross profits could be
adversely affected. If we turn our inventory approximately four times a
year, the impact of severe fluctuations in copper prices would primarily affect
the results of the succeeding calendar quarter. Average copper prices for the
quarter ended March 31, 2009, December 31, 2008 and March 31, 2008 were $1.57,
$1.75 and $3.53, respectively.
 
 Liquidityand Capital Resources
 
 Our
primary capital needs are for working capital obligations, debt service, capital
expenditures and other general corporate purposes. Our primary sources of
working capital are cash from operations supplemented by bank borrowings. During
2009, we have funded our capital expenditures through cash from operations. Our
working capital amounted to $92.0 million at March 31, 2009 compared to $98.1
million at December 31, 2008.
 
 Liquidity
is defined as the ability to generate adequate amounts of cash to meet the
current need for cash. We assess our liquidity in terms of our ability to
generate cash to fund our operating activities. Significant factors which could
affect liquidity include the following:
 
 •
              the
      adequacy of available bank lines of
credit;
 •
              the
      ability to attract long-term capital with satisfactory
    terms;
 •
              additional
      stock repurchases;
 •
              cash
      flows generated from operating
activities;
 •
              payment
      of dividends;
 •
              capital
      expenditures; and
 •
              acquisitions.
 
 Comparison
of the Three Months Ended March 31, 2009 and 2008
 
 Our net
cash provided by operating activities for the three months ended March 31, 2009
was $8.8 million compared to $7.7 million in the prior year period. Our net
income decreased by $4.7 million to $2.1 million in 2009 compared to $6.7
million in 2008. Accounts receivable decreased $9.0 million in 2009 due to lower
sales volume. Inventory decreased $5.8 million primarily as a result of the
reduction in cable management inventory. Cable management inventory levels
fluctuate higher when we are staging and cutting inventory in preparation for
shipment and lower when the product ships to the job site. The book overdraft,
which is funded by our revolving credit facility as soon as the related vendor
checks clear our disbursement account, decreased $4.0 million. Accounts payable
decreased $2.9 million due to lower inventory purchases. Accrued and other
liabilities decreased due primarily to a reduction in customer discounts
payable, as they are typically paid out in the first quarter, and lower accrued
wire purchases due to lower inventory purchases. These were partially offset by
an increase in prepayments on cable management projects.
 
 Net cash
used in investing activities was less than $0.1 million for 2009 and $0.1
million for 2008, as requirements for additional capital resources remained
low.
 
 Net cash
used in financing activities was $8.7 million in 2009 compared to $7.6 million
in 2008. Net payments on the revolver of $7.2 million and dividend payments of
$1.5 million were the main components of cash used in financing activities
during the first quarter of 2009.
 
 Indebtedness
 
 Our
principal source of liquidity at March 31, 2009 was working capital of $92.0
million compared to $98.1 million at December 31, 2008. We also had available
borrowing capacity of approximately $50.4 million at March 31, 2009 and $45.2
million at December 31, 2008 under our $75 million loan and security
agreement.
 
 We
believe that we will have adequate availability of capital to fund our present
operations, meet our commitments on our existing debt, continue the stock
repurchase program, continue to fund our dividend payments, and fund anticipated
growth over the next twelve months, including expansion in existing and targeted
market areas. We continually seek potential acquisitions and from time to time
hold discussions with acquisition candidates. If suitable acquisition
opportunities or working capital needs arise that would require additional
financing, we believe that our financial position and earnings history provide a
solid base for obtaining additional financing resources at competitive rates and
terms. Additionally, based on market conditions, we may issue additional shares
of common or preferred stock to raise funds.
  11
 Index
  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 lender’s base interest
rate.  Portions of the outstanding loan may be converted to LIBOR
loans in minimum amounts of $1.0 million and integral multiples of $0.1 million.
Upon such conversion, interest is payable at LIBOR plus a margin ranging from
1.0% to 1.5%, 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.
 
 ContractualObligations
 
 The
following table describes our loan commitment at March 31, 2009:
 
 Total
                        
                        
                        Less
      than
                          1
      year
                        
                        
                        1-3
      years
                        
                        
                        3-5
      years
                        
                        
                        More
      than
                          5
      years(In
      thousands)Term
      loans and loans payable
                        
                        $
                        22,567
                        
                        
                        $
                        —
                        
                        
                        $
                        22,567
                        
                        
                        $
                        —
                        
                        
                        $
                        —
 
 There
were no new material changes in operating lease obligations or non-cancellable
purchase obligations since December 31, 2008.
 
 CautionaryStatement for Purposes of the
“Safe Harbor”
 
 Forward-looking
statements in this report are made in reliance upon the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995.  Such
forward-looking statements may relate to, but are not limited to, information or
assumptions about our sales and marketing strategy, sales (including pricing),
income, operating income or gross margin improvements, working capital, cash
flow, interest rates, impact of changes in accounting standards, future economic
performance, management’s plans, goals and objectives for future operations,
performance and growth or the assumptions relating to any of the forward-looking
statements.  These statements can be identified by the fact that they
do not relate strictly to historical or current facts.  They use words
such as “aim”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”,
“may”, “plan”, “project”, “should”, “will be”, “will continue”, “will likely
result”, “would” and other words and terms of similar meaning in conjunction
with a discussion of future operating or financial performance.  The
Company cautions that forward-looking statements are not guarantees because
there are inherent difficulties in predicting future results.  Actual
results could differ materially from those expressed or implied in the
forward-looking statements.  The factors listed under “Risk Factors”
in the Company’s Annual Report on Form 10-K for the year ended December 31,
2008, as well as any cautionary language in this report, provide examples of
risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking
statements.
 
 Item3. Quantitative and Qualitative Disclosures about Market
Risk
 
 There
were no material changes to our market risk as set forth in Items 7A and 7 of
our Annual Report on Form 10-K for the year ended December 31,
2008.
 
 Item 4. Controls and Procedures
 
 As of
March 31, 2009, an evaluation was performed by the Company’s management, under
the supervision and with the participation of the Company’s chief executive
officer and chief financial officer, of the effectiveness of the Company’s
disclosure controls and procedures.  Based on that evaluation, the
chief executive officer and the chief financial officer concluded that the
Company’s disclosure controls and procedures were effective.  There
were no changes in the Company’s internal control over financial reporting that
occurred during the quarter ended March 31, 2009 that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
  12
 Index
  Part
II. Other Information
  Item
1 – Not applicable and has been omitted.
 
 Item1A.  Risk Factors
 
 There
have been no material changes in our risk factors from those disclosed in the
Form 10-K for the year ended December 31, 2008.
 
 
 Item2.  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, 2009 pursuant to the Company’s stock repurchase
program.
 
 Period
                  
                  Total
      number of shares purchased
                  
                  
                  Average
      price paid per share
                  
                  
                  Total number of shares purchased
      as part of publicly announced plans or programs(1)
                  
                  
                  Maximum
      dollar value that may yet be used for purchases under the
    planJanuary
      1 – 31, 2009
                  
                  
                  —
                  
                  
                  $
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  19,385,303February
      1 – 28, 2009
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  19,385,303March
      1 – 31, 2009
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  $
                  19,385,303Total
                  
                  
                  —
                  
                  
                  $
                  —
                  
                  
                  
                  —
 _______
 (1)
              The
      board authorized a stock repurchase program of $30 million in August 2007.
      This amount was increased to $50 million in September 2007 and to $75
      million effective January 2008. There were no purchases made under the
      Company’s stock repurchase program in the first quarter of
      2009.
 
 
 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
 Index
  Signature
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 
 
 Date:  May
      11, 2009
                  HOUSTON
      WIRE & CABLE COMPANYBY:/s/
      NicolG.GrahamNicol
      G. Graham, Chief Financial
Officer
  14
 Index
  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