**UNITED STATESSECURITIES 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 June 30, 2006** |
| ** **                                        |
| **or**                                            |
|                                              |
| **o**                                             | **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          | (I.R.S. Employer     |
| incorporation or  organization)           | Identification  No.) |
|                                      |                 |
| **10201  North Loop East**                |                 |
| **Houston,  Texas**                       | **77029**            |
| (Address of  principal executive offices) | (Zip Code)           |

**(713)609-2100**

(Registrant’stelephone number, including area code)

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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 forsuch 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 o        NOx

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer or anon-accelerated filer.  See definition of“accelerated filer and large accelerated filer” in Rule 12b-2 of the ExchangeAct

Large Accelerated Filer o           AcceleratedFiler o           Non-AcceleratedFiler x

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act)YES o     NOx

At August14, 2006, there were 20,867,173 outstanding shares of the registrant’s commonstock, $.001 par value per share.

 

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**HOUSTONWIRE & CABLE COMPANY**

**Form 10-Q**

**For the Quarter and Six Months Ended June 30, 2006**

**INDEX**
| **PART I. FINANCIAL  INFORMATION**                                                                  | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|
|                                                                                                | ** ** |
| Item 1. Financial Statements (Unaudited)                                                            | ** ** |
| Consolidated Balance Sheets                                                                         |       |
| Consolidated Statements of Income                                                                   |       |
| Consolidated Statements of Cash Flows                                                               |       |
| Notes to Consolidated Financial Statements                                                          |       |
|                                                                                                |       |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations |       |
| Overview                                                                                            |       |
| Results  of Operations                                                                              |       |
| Impact of Inflation and Commodity Prices                                                            |       |
| Liquidity and Capital Resources                                                                     |       |
| Contractual  Obligations                                                                            |       |
| Cautionary Statement                                                                                |       |
|                                                                                                |       |
| Item 3. Quantitative and Qualitative Disclosures about  Market Risk                                 |       |
|                                                                                                |       |
| Item 4. Controls and Procedures                                                                     |       |
|                                                                                                |       |
| **PART  II. OTHER INFORMATION**                                                                     |       |
| ** **                                                                                          | ** ** |
| Item 1A. Risk Factors                                                                               |       |
|                                                                                                |       |
| Item 6. Exhibits                                                                                    |       |
|                                                                                                |       |
| **Signature Page**                                                                                  | ** ** |

 

2

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**HOUSTONWIRE & CABLE COMPANY**

**Part I.FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**ConsolidatedBalance Sheets**

(In thousands,except share data)
| ** **                                                                                                                                                    | ** ** | **June 30,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                    | ** ** | **(Unaudited)**         | ** ** | ** **                  | ** ** |
| Assets                                                                                                                                                        |       |                    |       |                        |       |
| Current assets:                                                                                                                                               |       |                    |       |                        |       |
| Accounts receivable,  less allowance of $455 at June 30, 2006 and $447 at December 31, 2005                                                                   |       | $                       | 52,844     |                        | $          | 41,778 |   |
| Inventories, net                                                                                                                                              |       | 53,991                  |       | 31,306                      |       |
| Deferred income  taxes                                                                                                                                        |       | 1,188                   |       | 826                         |       |
| Prepaid expenses                                                                                                                                              |       | 453                     |       | 490                         |       |
| Total current assets                                                                                                                                          |       | 108,476                 |       | 74,400                      |       |
|                                                                                                                                                          |       |                    |       |                        |       |
| Property and equipment,  net                                                                                                                                  |       | 2,807                   |       | 2,733                       |       |
| Goodwill                                                                                                                                                      |       | 2,996                   |       | 2,996                       |       |
| Deferred income taxes                                                                                                                                         |       | 775                     |       | 1,146                       |       |
| Other assets, net                                                                                                                                             |       | 308                     |       | 435                         |       |
| Total assets                                                                                                                                                  |       | $                       | 115,362    |                        | $          | 81,710 |   |
|                                                                                                                                                          |       |                    |       |                        |       |
| Liabilities and  stockholders’ equity                                                                                                                    |       |                    |       |                        |       |
| Current liabilities:                                                                                                                                          |       |                    |       |                        |       |
| Book overdraft                                                                                                                                                |       | $                       | 4,750      |                        | $          | 2,119 |   |
| Trade accounts  payable                                                                                                                                       |       | 17,204                  |       | 8,268                       |       |
| Accrued and  other current liabilities                                                                                                                        |       | 10,618                  |       | 8,351                       |       |
| Income taxes  payable                                                                                                                                         |       | 2,256                   |       | 824                         |       |
| Short-term  obligations                                                                                                                                       |       | 16,755                  |       | 3,468                       |       |
| Total current  liabilities                                                                                                                                    |       | 51,583                  |       | 23,030                      |       |
|                                                                                                                                                          |       |                    |       |                        |       |
| Long-term obligations                                                                                                                                         |       | —                  |       | 57,938                      |       |
|                                                                                                                                                          |       |                    |       |                        |       |
| Stockholders’ equity:                                                                                                                                    |       |                    |       |                        |       |
| Common stock,  $.001 par value; 100,000,000 shares authorized: 20,867,173 shares issued and  outstanding at June 30, 2006 and 16,606,673 at December 31, 2005 |       | 21                      |       | 17                          |       |
| Additional  paid-in capital                                                                                                                                   |       | 50,720                  |       | 1,302                       |       |
| Unearned stock  compensation                                                                                                                                  |       | —                  |       | (559                        | )          |
| Retained  earnings                                                                                                                                            |       | 13,056                  |       | —                      |       |
| Treasury shares,  at cost                                                                                                                                     |       | (18                     | )          | (18                         | )          |
| Total stockholders’  equity                                                                                                                              |       | 63,779                  |       | 742                         |       |
|                                                                                                                                                          |       |                    |       |                        |       |
| Total liabilities and stockholders’ equity                                                                                                               |       | $                       | 115,362    |                        | $          | 81,710 |   |

The accompanying Notesare an integral part of these Consolidated Financial Statements

3

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**HOUSTON WIRE & CABLE COMPANY**

**ConsolidatedStatements of Income**

(Unaudited)

(In thousands,except share and per share data)
| ** **                                  | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                  | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                        |       |                                            |       |                                          |       |   |   |   |   |
| Sales                                       |       | $                                               | 84,184     |                                          | $          | 46,652 |   | $ | 150,612 |   | $ | 89,758 |   |
| Cost of sales                               |       | 59,657                                          |       | 34,599                                        |       | 108,094 |   | 66,548 |   |
| Gross profit                                |       | 24,527                                          |       | 12,053                                        |       | 42,518 |   | 23,210 |   |
| ** **                                  | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Operating  Expenses:                        |       |                                            |       |                                          |       |   |   |   |   |
| Salaries and commissions                    |       | 5,947                                           |       | 4,413                                         |       | 11,019 |   | 8,702 |   |
| Other operating expenses                    |       | 3,844                                           |       | 3,133                                         |       | 7,592 |   | 6,541 |   |
| Management fee                              |       | 83                                              |       | 125                                           |       | 208 |   | 250 |   |
| Recovery from litigation                    |       | —                                          |       | —                                        |       | — |   | (672 | ) |
| Depreciation and amortization               |       | 90                                              |       | 111                                           |       | 183 |   | 221 |   |
|                                        |       | 9,964                                           |       | 7,782                                         |       | 19,002 |   | 15,042 |   |
|                                        |       |                                            |       |                                          |       |   |   |   |   |
| Operating income                            |       | 14,563                                          |       | 4,271                                         |       | 23,516 |   | 8,168 |   |
| Interest expense                            |       | 1,120                                           |       | 724                                           |       | 2,174 |   | 1,437 |   |
| Income before  income taxes                 |       | 13,443                                          |       | 3,547                                         |       | 21,342 |   | 6,731 |   |
| Income taxes                                |       | 5,189                                           |       | 1,307                                         |       | 8,286 |   | 2,480 |   |
|                                        |       |                                            |       |                                          |       |   |   |   |   |
| Net income                                  |       | $                                               | 8,254      |                                          | $          | 2,240 |   | $ | 13,056 |   | $ | 4,251 |   |
|                                        |       |                                            |       |                                          |       |   |   |   |   |
| Earnings per  share:                        |       |                                            |       |                                          |       |   |   |   |   |
| Basic                                       |       | $                                               | 0.48       |                                          | $          | 0.13 |   | $ | 0.77 |   | $ | 0.26 |   |
| Diluted                                     |       | $                                               | 0.48       |                                          | $          | 0.13 |   | $ | 0.77 |   | $ | 0.25 |   |
| Weighted average  common shares outstanding |       |                                            |       |                                          |       |   |   |   |   |
| Basic                                       |       | 17,084,206                                      |       | 16,606,673                                    |       | 16,850,196 |   | 16,606,673 |   |
| Diluted                                     |       | 17,186,940                                      |       | 16,701,880                                    |       | 16,948,576 |   | 16,699,517 |   |

The accompanying Notesare an integral part of these Consolidated Financial Statements

4

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**HOUSTON WIRE & CABLE COMPANY**

**ConsolidatedStatements of Cash Flows**

(Unaudited)

(In thousands)
| ** **                                                                                   | ** ** | **Six Months Ended  June 30,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                   | ** ** | **2006**                                      | ** ** | **2005** | ** ** |
| **Operating  activities**                                                                    |       |                                          |       |   |   |
| Net income                                                                                   |       | $                                             | 13,056     |   | $ | 4,251 |   |
| Adjustments to  reconcile net income to net cash provided by (used in) operating activities: |       |                                          |       |   |   |
| Depreciation                                                                                 |       | 183                                           |       | 221 |   |
| Amortization of capitalized loan costs                                                       |       | 157                                           |       | 62 |   |
| Amortization of unearned stock compensation                                                  |       | 56                                            |       | — |   |
| Deferred interest                                                                            |       |                                          |       | 550 |   |
| Provision for doubtful accounts                                                              |       | —                                        |       | 23 |   |
| Provision for inventory obsolescence                                                         |       | (224                                          | )          | (50 | ) |
| Deferred income taxes                                                                        |       | 9                                             |       | 112 |   |
| Changes in operating assets and liabilities:                                                 |       |                                          |       |   |   |
| Accounts receivable                                                                          |       | (11,066                                       | )          | (1,965 | ) |
| Inventories                                                                                  |       | (22,461                                       | )          | (88 | ) |
| Prepaid expenses                                                                             |       | 37                                            |       | (197 | ) |
| Other assets                                                                                 |       | (30                                           | )          | (8 | ) |
| Book overdraft                                                                               |       | 2,631                                         |       | (113 | ) |
| Trade accounts payable                                                                       |       | 8,936                                         |       | 2,336 |   |
| Accrued and other current liabilities                                                        |       | 2,267                                         |       | (669 | ) |
| Income taxes payable                                                                         |       | 1,432                                         |       | 327 |   |
| Net cash  provided by (used in) operating activities                                         |       | (5,017                                        | )          | 4,792 |   |
| **Investing  activities**                                                                    | ** ** | ** **                                    | ** ** | ** ** | ** ** |
| Expenditures for property, plant, and equipment                                              |       | (257                                          | )          | (150 | ) |
| Net cash used in  investing activities                                                       |       | (257                                          | )          | (150 | ) |
| **Financing  activities**                                                                    | ** ** | ** **                                    | ** ** | ** ** | ** ** |
| Borrowing on revolver                                                                        |       | 150,953                                       |       | 97,579 |   |
| Payments on revolver                                                                         |       | (185,417                                      | )          | (96,221 | ) |
| Payments on long-term obligations                                                            |       | (10,187                                       | )          | — |   |
| Payments on junior subordinated debt                                                         |       | —                                        |       | (6,000 | ) |
| Proceeds from exercise of common stock options                                               |       | 6                                             |       | — |   |
| Proceeds from sale of common stock                                                           |       | 51,381                                        |       | — |   |
| Payment of common stock offering costs                                                       |       | (1,482                                        | )          | — |   |
| Excess income tax benefit for common stock options                                           |       | 20                                            |       | — |   |
| Net cash  provided by (used in) financing activities                                         |       | 5,274                                         |       | (4,642 | ) |
| Net change in  cash                                                                          |       | —                                        |       | — |   |
| Cash at  beginning of period                                                                 |       | —                                        |       | — |   |
| Cash at end of period                                                                        |       | $                                             | —     |   | $ | — |   |

The accompanyingNotes are an integral part of these Consolidated Financial Statements.

5

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**HOUSTON WIRE & CABLE COMPANY**

**Notes toConsolidated Financial Statements (Unaudited)**

**(inthousands, except per share amounts)**

 **1. Basis of Presentation**

Houston Wire & CableCompany (“HWC” or the “Company”) through its wholly owned subsidiaries, HWCWire & Cable Company, Advantage Wire & Cable and Cable ManagementServices Inc., distributes specialty electrical wire and cable to the U.S.electrical distribution market through eleven locations in ten statesthroughout the United States.  TheCompany has no other business activity.

The consolidatedfinancial statements as of June 30, 2006 and for the three and six months endedJune 30, 2006 and 2005 have been prepared in accordance with generally acceptedaccounting principles for interim financial information and Article 10 of Regulation S-X.  Accordingly they do not include all of theinformation and footnotes required by U.S. generally accepted accountingprinciples (“GAAP”) for complete financial statements.  In the opinion of management, alladjustments, consisting only of normal recurring accruals, considered necessaryfor a fair presentation of the results of these interim periods have beenincluded.  The results of operations forthe interim periods are not necessarily indicative of the results that may beexpected for the full year.

The preparation of thefinancial statements in conformity with GAAP requires management to makeestimates and assumptions that affect the amounts reported in the financialstatements and accompanying notes.  Themost significant estimates are those relating to the allowance for doubtfulaccounts, the inventory obsolescence reserve and the reserve for returns andallowances.  These estimates arecontinually reviewed and adjusted as necessary, but actual results could differfrom those estimates.

On March 23, 2006, theCompany amended its certificate of incorporation to increase its authorizedcapital stock from 10,000 shares of common stock to 100,000 shares of commonstock and 5,000 shares of preferred stock. All references to authorized shares in the accompanying consolidatedfinancial statements have been retroactively restated for such increase inauthorized shares.

On May 16, 2006, theCompany effected a 1.875-for-1 stock split for its outstanding common stock inthe form of a stock dividend.  Allstockholder equity balances and disclosures in the accompanying consolidatedfinancial statements have been retroactively restated for such stock split.

We completed our initialpublic offering (“IPO”) on June 20, 2006 (see note 3).

*RecentAccounting Pronouncements*

In June 2006, the FASB issued Interpretation No. 48, *Accounting for Uncertainty in Income Taxes — aninterpretation of FASB Statement 109* (“FIN 48”).  FIN 48clarifies the accounting for uncertainty in income taxes by prescribing arecognition threshold for tax positions taken or expected to be taken in a taxreturn.  FIN 48 requires that entities recognize in their financialstatements the impact of a tax position if that position is more likely thannot of being sustained on audit, based on the technical merits of theposition.  The cumulative effect of applying the provisions of FIN 48 willbe reported as an adjustment to the opening balance of retained earnings uponadoption.  FIN 48 is effective for fiscal years beginning after December15, 2006.  The Company will adopt FIN 48 on January 1, 2007 and iscurrently evaluating the impact FIN 48 will have on its financial position andresults of operations.

**2.Earnings Per Share**

Basic earnings per shareis calculated by dividing the net income by the weighted-average number ofcommon shares outstanding. Diluted earnings per share includes the dilutiveeffects of stock option awards.  Thenumerator used in the calculation of both basic and diluted net income pershare for all periods presented was net income. The denominator for each period presented was determined as follows:
|                                                             | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                  | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| Weighted average  common shares for basic earning per share |       | 17,084                                          |       | 16,607                                        |       | 16,850 |   | 16,607 |   |
| Effect of  dilutive securities                              |       | 103                                             |       | 95                                            |       | 99 |   | 93 |   |
| Denominator of diluted  earnings per share                  |       | 17,187                                          |       | 16,702                                        |       | 16,949 |   | 16,700 |   |

 

6

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The Company adopted thefair value recognition provisions of Statement of Financial AccountingStandards 123 (R), Share Based Payments (“SFAS 123” (R)), on January 1, 2006,using the prospective transition method. The adoption of SFAS 123(R) results in lower diluted shares outstandingthat would have been calculated had compensation cost not been recorded forstock options and stock issuances under the employee stock purchase plan.  This is due to a modification required bySFAS 123(R) of the treasury stock method calculation utilized to compute thedilutive effect of stock options.  Theweighted average number of stock-based awards not included in the calculationof the dilutive effect of stock based awards was 2 and 1 for the three monthsand six months ended June 30, 2006, respectively.  There were no stock-based awards excluded fromthe calculation for the other periods presented.

**3. Initial Public Offering**

On June 14, 2006, aRegistration Statement relating to the Company’s initial public offering ofcommon stock was declared effective by the Securities and ExchangeCommission.  As a result, the Companyissued 4,250 shares of common stock which were subsequently sold to the publicfor $13 per share.  Certain sellingstockholders sold an additional 5,525 shares which also were resold to the publicfor $13 per share. The Company received net proceeds of $49,900 after deductingthe underwriting discounts and offering expenses.  The net proceeds were used to repay a portionof the outstanding debt.

**4.****Debt**

The Company’s current loan andsecurity agreement which currently includes a $55,000 revolving loan, and a$4,500 Term A loan matures on May 1, 2007. The Company plans on extending or renewing this agreement prior to May1, 2007.

**5. Stock Based Compensation**

The Company has granted options to purchase its commonstock to employees and directors of the Company under various stock optionplans at no less than the fair market value of the underlying stock on the dateof grant. These options are granted for a term not exceeding ten years and areforfeited in the event the employee or director terminates, other than byretirement, his or her employment or relationship with the Company. Theseoptions generally vest over one to five years. All option plans containanti-dilutive provisions that permit an adjustment of the number of shares ofthe Company’s common stock represented by each option for any change incapitalization.

The Company adopted the fair value recognitionprovisions of SFAS123 (R) on January 1, 2006, using the prospectivetransition method. The fair value of the options granted after January 1,2006, are estimated using a Black-Scholes option-pricing model and amortized toexpense over the options’ vesting period. Prior to adoption ofSFAS 123(R), the Company accounted for stock based payments under therecognition and measurement provisions of Accounting Principles Board OpinionNo. 25 (“APB 25”), and related Interpretations, as permitted bySFAS 123 Accounting for Stock Based Compensation. Under the prospectivetransition method, compensation cost recognized beginning in 2006 includes:(a) compensation cost for all stock based payments granted prior to, butnot yet vested as of January 1, 2006, based on the remaining amortizationof the intrinsic value of such stock based awards, and (b) compensationcost for all stock based payments granted subsequent to January 1, 2006,based on the grant-date fair value estimated in accordance with the provisionsof SFAS 123(R). Results for prior periods have not been restated. Totalstock compensation expense for the three months and six months ended June 30,2006 was $28 and $56 respectively.  Therewas no material effect on the Company’s income before income taxes and netincome for the three-months and six-months ended June 30, 2006, as a result ofadopting SFAS 123(R) instead of continuing to account for stock basedcompensation under APB 25.

Prior to the adoption of SFAS 123(R), the Companypresented all tax benefits of deductions resulting from the exercise of stockoptions as operating cash flows in the Statement of Cash Flows.  SFAS 123(R) requires the cash flowsresulting from the tax benefits resulting from tax deductions in excess of thecompensation cost recognized for those options (excess tax benefits) to beclassified as financing cash flows.

For the three and six months ended June 30, 2006, theCompany granted 15 stock options. The fair value of each option awarded isestimated on the date of grant using a Black-Scholes option-pricing model.Expected volatilities are based on historical volatility on the Company’s stockand the historical volatility of the stock of similar companies, and otherfactors. The Company will use historical data to estimate option exercises andemployee terminations within the valuation model. The expected life of optionsgranted represent the period of time that options granted are expected to beoutstanding. The risk-free rate for periods within the life of the option isbased on the U.S. Treasury yield curve in effect at the time of grant.

7

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Thefollowing assumptions were used to calculate the fair value of the Company’soptions on the date of grant during the six months ended June 30, 2006:
|                          | ** ** | **2006** | ** **  |
|--------------------------|------------|----------|-------------|
| Expected  volatility     |       | 45       | %           |
| Expected life in  years  |       | 5.5      |  years |
| Risk-free  interest rate |       | 5.15     | %           |
| Dividend yield           |       | 0        | %           |

The following tablepresents a summary of the Company’s stock options outstanding at and stockoption activity during the six months ended June 30, 2006 (“Price” reflects theweighted average exercise price per share):
|                                                 | ** ** | **Options** | ** ** | **Price** | ** ** | **Weighted Average  Remaining  Contractual Term** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|-------------------------------------------------|------------|-------------|------------|-----------|------------|-------------------------------------------------------------|------------|---------------------------------|------------|
| Outstanding –  December 31, 2005           |       | 256         |       | $         | 1.30       |                                                        |       |                            |       |   |
| Granted                                         |       | 15          |       | 13.00     |       |                                                        |       |                            |       |
| Exercised                                       |       | (11         | )          | 0.53      |       |                                                        |       |                            |       |
| Forfeited                                       |       | —      |       | —    |       |                                                        |       |                            |       |
| Expired                                         |       | —      |       | —    |       |                                                        |       |                            |       |
|                                            |       |        |       |      |       |                                                        |       |                            |       |
| Outstanding -  June 30, 2006                    |       | 260         |       | $         | 2.01       |                                                        | 7.23       |                            | $          | 3,952 |   |
|                                            |       |        |       |      |       |                                                        |       |                            |       |
| Exercisable -  June 30, 2006                    |       | 121         |       | $         | 0.53       |                                                        | 5.27       |                            | $          | 2,010 |   |
|                                            |       |        |       |      |       |                                                        |       |                            |       |
| Weighted average fair  value per option granted |       | $           | 6.34       |      |       |                                                        |       |                            |       |   |
|                                                 |            |             |            |           |            |                                                             |            |                                 |            |  |  |  |

As of June 30, 2006, 1,785 shares of Common Stock wereavailable for grant under the Company’s 2006 Stock Plan.

The total intrinsic value of options exercised duringthe six months ended June 30, 2006 was $131.

A summary of the Company’s nonvested options at June30, 2006, and changes during the six months ended June 30, 2006, is presentedbelow:
|                                     | ** ** | **Options** | ** ** | **Weighted  Average  Grant Date  Fair Value** | ** ** |
|-------------------------------------|------------|-------------|------------|---------------------------------------------------------|------------|
| Nonvested –  December 31, 2005 |       | 158         |       | $                                                       | 3.87       |   |
| Granted                             |       | 15          |       | 6.34                                                    |       |
| Vested                              |       | (34         | )          | (0.07                                                   | )          |
| Forfeited                           |       | —      |       | —                                                  |       |
| Nonvested - June 30,  2006          |       | 139         |       | $                                                       | 5.04       |   |

Vesting dates range from December 31, 2006 to December31, 2010, and expiration dates range from June 26, 2010 to June 20, 2016 atexercise prices and average contractual lives as follows:
| Exercise Prices | ** ** | **Outstanding  as of  6/30/06** | ** ** | **Weighted  Average  Remaining  Contractual  Life** | ** ** | **Exercisable  as of  6/30/06** | ** ** |
|----------------------|------------|--------------------------------------|------------|-----------------------------------------------------|------------|--------------------------------------|------------|
| $0.53                |       | 153                                  |       | 5.60                                                |       | 121                                  |       |
| $2.67                |       | 92                                   |       | 9.50                                                |       | —                               |       |
| $13.00               |       | 15                                   |       | 10.00                                               |       | —                               |       |
|                 |       | 260                                  |       |                                                |       | 121                                  |       |

 

8

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As of June 30, 2006,there was $599 of total unrecognized compensation cost related to nonvestedshare-based compensation arrangements. The cost is expected to be recognizedover a weighted average period of approximately four years.

**6. Contingencies**

InSeptember 2000, HWC lost a court case brought by a vendor for alleged breach ofcontract. The jury found in favor of the vendor and awarded the vendor the sumof $1,300 plus accrued interest, which totaled approximately $1,600. The breachof contract occurred prior to the acquisition of the Company from its previousowner (“ALLTEL”). HWC contended that this liability should be borne by ALLTEL.In 2001, HWC filed suit against ALLTEL under the terms of the purchaseagreement, in which HWC is to be indemnified by ALLTEL for any liability eitherdisclosed or undisclosed in the agreement of sale. In October 2004, the courtrendered its verdict on the suit. HWC was awarded approximately $672 for ALLTEL’sbreach under one portion of the suit which amount was received in January 2005and included in litigation settlements in the accompanying 2005 statement ofincome, while the court found in favor of ALLTEL on the second portion of thesuit. HWC appealed the decision on the second portion of the suit, but thisdecision was affirmed by the Illinois Appellate Court in March 2006.

HWC,along with many other defendants, have been named in a number of lawsuits inthe state courts of North Dakota alleging that certain wire and cable which mayhave contained asbestos caused injury to the plaintiffs who were exposed tothis wire and cable. These lawsuits are individual personal injury suits thatseek unspecified amounts of money damages as the sole remedy. It is not clearwhether the alleged injuries occurred as a result of the wire and cable inquestion or whether HWC, in fact, distributed the wire and cable alleged tohave caused any injuries. In addition, HWC did not manufacture any of the wireand cable at issue, and HWC would rely on any warranties from the manufacturersof such cable if it were determined that any of the wire or cable that HWCdistributed contained asbestos which caused injury to any of these plaintiffs.In connection with ALLTEL’s sale of the company in 1997, ALLTEL providedindemnities with respect to costs and damages associated with these claims thatHWC believes it could enforce if its insurance coverage proves inadequate. Inaddition, HWC maintains general liability insurance that has applied to theseclaims. To date, all costs associated with these claims have been covered bythe applicable insurance policies and all defense of these claims has beenhandled by the applicable insurance companies.

In addition to the foregoing cases, there are no legalproceedings pending against or involving the Company that, in management’sopinion, based on the current known facts and circumstances, are expected to have a material adverse effect on the Company’sconsolidated financial position, cash flows, or results from operations.

**7. Subsequent Event**

On July 19, 2006, theCompany granted to each of the two new directors elected on that date an optionto purchase 15 shares of its common stock under the Company’s 2006 StockPlan.  Each option has an exercise priceof $16.98 per share, which represents the closing price per share of theCompany’s common stock as reported on the NASDAQ National Market on July 19,2006.

**Item2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations**

The following Management’sDiscussion and Analysis (“MD&A”) is intended to help the reader understandthe Company’s financial position and results of operations.  MD&A is provided as a supplement to theCompany’s Consolidated Financial Statements (unaudited) and the accompanyingNotes to Consolidated Financial Statements (unaudited) and should be read inconjunction with the MD&A included in the Company’s Prospectus dated June14, 2006.

**Overview**

We are one of the largestdistributors of specialty wire and cable and related services to the U.S.electrical distribution market. We serve approximately 2,600 customers,including virtually all of the top 200 electrical distributors in the U.S. Wehave strong relationships with leading wire and cable manufacturers and providethem with efficient access to the fragmented electrical distribution market. Wedistribute approximately 20,000 SKUs (stock-keeping units) to over 8,300customer locations nationwide from eleven strategically located distributioncenters in ten states. We are focused on providing our electrical distributorcustomers with a single-source solution for specialty wire and cable andrelated services by offering a large selection of in-stock items, exceptionalcustomer service and high levels of product expertise.

We offer products in mostcategories of specialty wire and cable, including:

·                  continuousand interlocked armor cable (cable encapsulated in either a seamless orinterlocked aluminum protective sheath);

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·                  control and power cable (single ormultiple conductor industrial cable);

·                  electronic wire and cable (computer,audio and signal cable);

·                  flexible and portable cords(flexible, heavy duty industrial cable);

·                  instrumentation and thermocouplecable (cables used for transmitting signals for instruments and heat sensingdevices);

·                  lead and high temperature cable(single conductor cable used for low or high temperature applications);

·                  medium voltage cable (cables used forapplications between 2,001 volts and 35,000 volts); and

·                  premiseand category wire and cable (cable used for home and high speed dataapplications).

We alsooffer private branded products, including our LifeGuardTM low-smoke,zero-halogen cable. Low-smoke, zero halogen products are made with compoundsthat produce no halogen gases and very little smoke while under combustion.

Inaddition to our product offerings, we provide comprehensive value-addedservices including: standard same day shipment from our extensive inventory anddistribution network; application engineering support through our knowledgeablesales and technical support staff; custom cutting of wire and cable to exactspecifications; inventory management programs that provide job-specific assetmanagement and just-in-time delivery; job-site delivery and logistics support;24/7/365 customer service provided by our own employees; and customizedinternet-based ordering capabilities.

**CriticalAccounting Policies**

Criticalaccounting policies are those that both are important to the accurate portrayalof a company’s financial condition and results, and require subjective orcomplex judgments, often as a result of the need to make estimates about theeffect of matters that are inherently uncertain.

In orderto prepare financial statements that conform to accounting principles generallyaccepted in the United States, commonly referred to as GAAP, we make estimatesand assumptions that affect the amounts reported in our financial statementsand accompanying notes. Certain estimates are particularly sensitive due totheir significance to the financial statements and the possibility that futureevents may be significantly different from our expectations.

We haveidentified the following accounting policies as those that require us to makethe most subjective or complex judgments in order to fairly present ourconsolidated financial position and results of operations. Actual results inthese areas could differ materially from management’s estimates under differentassumptions and conditions.

**Allowancefor Doubtful Accounts**

Wemaintain an allowance for doubtful accounts receivable for estimated lossesresulting from the inability of our customers to make required payments. Weperform periodic credit evaluations of our customers and typically do notrequire collateral. Consistent with industry practices, we require payment frommost 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,that we use to record reserves throughout the year. In the last five years,write-offs against our allowance for doubtful accounts have averagedapproximately $176 per year. A 20% change in our estimate at June 30, 2006would have resulted in a change in income before income taxes of $91 for thesix months ended June 30, 2006.

**InventoryObsolescence**

Wecontinually 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 eighteen months and the experience ofour purchasing and sales departments in estimating demand for the product inthe succeeding year. Our inventories are generally not susceptible totechnological obsolescence. A 20% change in our estimate at June 30, 2006 wouldhave resulted in a change in income before income taxes of $378 for the sixmonths ended June 30, 2006.

**Goodwill**

Goodwillrepresents the excess of the amount we paid to acquire businesses over theestimated fair value of tangible assets and identifiable intangible assetsacquired, less liabilities assumed. At June 30, 2006, our net goodwill balancewas $3.0 million, representing 2.6% of our total assets.

 In 2002, we adopted the provisions of Statementof Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets(“SFAS 142”). Under SFAS 142, we test goodwill for impairment annually, or morefrequently if indications of possible impairment exist, by applying a fairvalue-based test.

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InOctober 2005, we performed our annual goodwill impairment tests for goodwilland other indefinite-lived intangible assets, and, as a result of this test, webelieve the goodwill on our balance sheet is not impaired.

Ifcircumstances change or events occur to indicate that our fair market value hasfallen below book value, we will compare the estimated fair value of thegoodwill to its carrying value. If the carrying value of goodwill exceeds theestimated fair value of goodwill, we will recognize the difference as animpairment loss in operating income.

**VendorRebates**

Many ofour arrangements with our vendors entitle us to receive a rebate of a specifiedamount when we achieve any of a number of measures, generally related to thevolume of purchases from the vendor. We account for these rebates as areduction of the prices of the vendor’s products, which reduces inventory untilwe sell the product, at which time these rebates reduce cost of sales.Throughout the year, we estimate the amount of rebates earned based on ourpurchases to date and our estimate of purchases to be made for the remainder ofthe year relative to the purchase levels that mark our progress toward earningthe rebates. We continually revise these estimates to reflect actual purchaselevels. A 20% change in our estimate of total rebates earned during the sixmonths ended June 30, 2006 would have resulted in a change in income beforeincome taxes of $466 for this period.

**Results of Operations**

The following tableshows, for the periods indicated, information derived from our consolidatedstatements of operations, expressed as a percentage of net sales for theperiods presented.

|                               | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                    | ** ** | **2006**                                        | ** ** | **2005**                                      | ** ** | **2006** | ** ** | **2005** | ** ** |
| Sales                         |       | 100.0                                           | %          | 100.0                                         | %          | 100.0 | % | 100.0 | % |
| Cost of sales                 |       | 70.9                                            | %          | 74.2                                          | %          | 71.8 | % | 74.1 | % |
| Gross profit                  |       | 29.1                                            | %          | 25.8                                          | %          | 28.2 | % | 25.9 | % |
| ** **                    | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Operating  expenses:          |       |                                            |       |                                          |       |   |   |   |   |
| Salaries and commissions      |       | 7.1                                             | %          | 9.5                                           | %          | 7.3 | % | 9.7 | % |
| Other operating expenses      |       | 4.6                                             | %          | 6.7                                           | %          | 5.0 | % | 7.3 | % |
| Management fee                |       | 0.1                                             | %          | 0.3                                           | %          | 0.1 | % | 0.3 | % |
| Recovery from litigation      |       | —                                          |       | —                                        |       | — |   | (0.7 | )% |
| Depreciation and amortization |       | 0.1                                             | %          | 0.2                                           | %          | 0.1 | % | 0.2 | % |
|                          |       |                                            |       |                                          |       |   |   |   |   |
| Total operating expenses      |       | 11.8                                            | %          | 16.7                                          | %          | 12.6 | % | 16.8 | % |
|                          |       |                                            |       |                                          |       |   |   |   |   |
| Operating income              |       | 17.3                                            | %          | 9.2                                           | %          | 15.6 | % | 9.1 | % |
| Interest expense              |       | 1.3                                             | %          | 1.6                                           | %          | 1.4 | % | 1.6 | % |
|                          |       |                                            |       |                                          |       |   |   |   |   |
| Income before  income taxes   |       | 16.0                                            | %          | 7.6                                           | %          | 14.2 | % | 7.5 | % |
| Income tax  provision         |       | 6.2                                             | %          | 2.8                                           | %          | 5.5 | % | 2.8 | % |
|                          |       |                                            |       |                                          |       |   |   |   |   |
| Net income                    |       | 9.8                                             | %          | 4.8                                           | %          | 8.7 | % | 4.7 | % |

Note:** **Due to rounding,percentages may not add up to operating income, income before taxes or netincome.

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**Comparisonof the Three Months Ended June 30, 2006 and 2005**

**Sales**
|                        | ** ** | **Three Months Ended  June 30,** | ** ** |
|------------------------|------------|-------------------------------------------------|------------|
| **(in millions)** | ** ** | **2006**                                        | ** ** | **2005** | ** ** | **Change** | ** ** |
| Sales                  |       | $                                               | 84.2       |   | $ | 46.7 |   | $ | 37.5 |   | 80 | % |
|                        |            |                                                 |            |  |  |  |  |  |  |  |  |  |

Internal growth accounted for the entire increase insales. The Company estimates that of this 80% increase, approximately 15-20% isattributable to growth in demand from its core distributor business, 10-15%reflects increased commodity prices for certain components of the Company’sproducts, principally copper and polymers, and 45-55% of growth from the fivemajor growth initiatives, encompassing Emission Controls, Engineering &Construction, Industrials, LifeGuardTM private branded products and UtilityPower Generation.

**Gross Profit**
|                                     | ** ** | **Three Months Ended  June 30,** | ** ** |
|-------------------------------------|------------|-------------------------------------------------|------------|
| **(in millions)**              | ** ** | **2006**                                        | ** ** | **2005** | ** ** | **Change** | ** ** |
| Gross profit                        |       | $                                               | 24.5       |   | $ | 12.1 |   | $ | 12.4 |   | 102 | % |
| Gross profit as a  percent of sales |       | 29.1                                            | %          | 25.8 | % | 3.3 | % |   |   |
|                                     |            |                                                 |            |  |  |  |  |  |  |  |  |  |

The increase in the Company’s gross margin for thesecond quarter of 2006 as compared to the second quarter of 2005 wasprincipally a result of an improved product mix and better price realizationfrom the Company’s decision to improve product availability and service throughincreased inventory levels.  Finally,increased demand for value-added services such as Cable Management enhancedgross margin. We believe that the 29.1% gross margin the Company achieved inthe second quarter to be a peak and likely not sustainable near term.

**Operating Expenses**
|                                     | ** ** | **Three Months Ended  June 30,** | ** ** |
|-------------------------------------|------------|-------------------------------------------------|------------|
| **(in millions)**              | ** ** | **2006**                                        | ** ** | **2005** | ** ** | **Change** | ** ** |
| Operating  Expenses:                |       |                                            |       |   |   |   |   |   |   |
| Salaries and commissions            |       | $                                               | 6.0        |   | $ | 4.4 |   | $ | 1.6 |   | 35 | % |
| Other operating expenses            |       | 3.8                                             |       | 3.2 |   | 0.6 |   | 23 | % |
| Management fee                      |       | 0.1                                             |       | 0.1 |   | — |   | (34 | )% |
| Depreciation and amortization       |       | 0.1                                             |       | 0.1 |   | — |   | (19 | )% |
| Total operating expenses            |       | $                                               | 10.0       |   | $ | 7.8 |   | $ | 2.2 |   | 28 | % |
|                                |       |                                            |       |   |   |   |   |   |   |
| Operating expenses as a  % of sales |       | 11.8                                            | %          | 16.7 | % | (4.9 | )% |   |   |

The increase in salaries and commissions primarilyreflects increased commissions due to the increase in sales and gross profitdollars.  Salaries and commissions as apercentage of net sales decreased to 7.1% for the three months ended June 30,2006 from 9.5% from the comparable period in 2005 as sales increased at afaster rate.

Operating expenses as apercent of net sales decreased from the second quarter of 2005 as we continuedto leverage our existing distribution infrastructure and sales and marketingbase to support the sales growth.

**Interest Expense**

Interest expenseincreased $0.4 million between periods as the effective interest rate increasedand our average outstanding debt increased primarily due to the borrowing thatoccurred in December 2005 to fund the special dividend.

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**Income Taxes**

The increase in incometaxes is due to the $9.9 million increase in income before income taxes and anincrease in our effective income tax rate to 38.6% for the second quarter of2006 from 36.8% for the comparative period in 2005. The increase in theeffective income tax rate reflects the non-taxable nature of the litigationsettlement received in 2005 and an increase in the state income tax rates in2006.

**Net Income**

The Company achievedrecord second quarter net income of $8.3 million in 2006 compared to net incomeof $2.2 million in 2005, an increase of 268.5%. The Company also estimates thatnet income benefited by $ 1.5 to $ 2.0 million due to the effect of productinflation during the second quarter of 2006.

**Comparisonof the Six Months Ended June 30, 2006 and 2005**

**Sales**
|                        | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------|------------|-----------------------------------------------|------------|
| **(in millions)** | ** ** | **2006**                                      | ** ** | **2005** | ** ** | **Change** | ** ** |
| Sales                  |       | $                                             | 150.6      |   | $ | 89.8 |   | $ | 60.8 |   | 68 | % |
|                        |            |                                               |            |  |  |  |  |  |  |  |  |  |

Internal growth accounted for the entire increase insales. The Company estimates that the growth in sales for the first half isattributable to 12-16% of growth in core distributor demand, 5-7% in inflation,principally from copper and higher polymer prices, and 45-55% of growth fromthe five major end-user market growth initiatives, encompassing EmissionControls, Engineering & Construction, Industrials, LifeGuardTM privatebranded products and Utility Power Generation.

**GrossProfit**
|                                     | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------|------------|-----------------------------------------------|------------|
| **(in millions)**              | ** ** | **2006**                                      | ** ** | **2005** | ** ** | **Change** | ** ** |
| Gross profit                        |       | $                                             | 42.5       |   | $ | 23.2 |   | $ | 19.3 |   | 83 | % |
| Gross profit as a  percent of sales |       | 28.2                                          | %          | 25.9 | % | 2.3 | % |   |   |
|                                     |            |                                               |            |  |  |  |  |  |  |  |  |  |

The increase in the Company’s gross margin for thefirst half of 2006 as compared to the first half of 2005 was principally aresult of an improved product mix. Better price realization, a result of a decision to improve productavailability and service through increased inventory levels, was a contributorto improved gross profit.  Additionally,forward inventory purchases tempered price increases from suppliers.

**Operating expenses**
|                                           | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------|------------|-----------------------------------------------|------------|
| **(in millions)**                    | ** ** | **2006**                                      | ** ** | **2005** | ** ** | **Change** | ** ** |
| Operating  expenses                       |       |                                          |       |   |   |   |   |   |   |
| Salaries and commissions                  |       | $                                             | 11.0       |   | $ | 8.7 |   | $ | 2.3 |   | 26 | % |
| Other operating expenses                  |       | 7.6                                           |       | 6.5 |   | 1.1 |   | 17 | % |
| Management fee                            |       | 0.2                                           |       | 0.3 |   | (0.1 | ) | (17 | )% |
| Recovery from litigation                  |       | —                                        |       | (0.7 | ) | 0.7 |   | n/a |   |
| Depreciation and amortization             |       | 0.2                                           |       | 0.2 |   | — |   | (17 | )% |
| Total operating expenses                  |       | $                                             | 19.0       |   | $ | 15.0 |   | $ | 4.0 |   | 27 | % |
|                                      |       |                                          |       |   |   |   |   |   |   |
| Operating expenses as a  percent of sales |       | 12.6                                          | %          | 16.8 | % | (4.2 | )% |   |   |

 

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The increase in salariesand commissions primarily reflects increased commissions due to the increase insales and gross profit dollars.  Salariesand commissions as a percentage of net sales decreased to 7.3% in 2006 from9.7% from the comparable period in 2005 as sales increased at a faster rate.

Operating expenses as apercent of net sales decreased from the first six months of 2005 as we wereable to leverage the cost of our existing distribution infrastructure andpersonnel base to support the continued sales growth.

**Interest Expense**

Interest expenseincreased $0.7 million between periods as the effective interest rate increasedand the average debt outstanding increased to fund the increase in our workingcapital requirements.

**Income Taxes**

The increase in incometaxes is due to the $14.6 million increase in income before income taxes and anincrease in our effective income tax rate to 38.8% for the six months endedJune 30, 2006 from 36.8% for the comparable period in 2005.  In the 2006 period, state tax rates increasedand in the prior year period the litigation settlement was not taxable forfederal tax purposes.

**Net Income**

The Company achievedrecord net income of $13.1 million for the first half of 2006 compared to netincome of $4.3 million for the first half of 2005, an increase of 207.1%.

The Company alsoestimates that net income benefited by an estimated $ 2.4 to $ 3.6 million dueto the effect of product inflation during the first half of 2006.

**Impact ofInflation and Commodity Prices**

Our results of operationsare affected by changes in the inflation rate and commodity prices. Moreover,because copper and petrochemical products are components of the wire and cablewe sell, fluctuations in the costs of these and other commodities havehistorically affected our operating results. To the extent we are unable topass on to our customers cost increases due to inflation or rising commodityprices, it could adversely affect our operating results.  A decrease in copper prices could have anegative impact on the Company’s sales and earnings per share.  As the Company turns its inventory in excessof four times a year, the impact of decreasing copper prices would primarilyaffect the results of the succeeding calendar quarter.

**Liquidityand Capital Resources**

Our primary capital needsare for working capital obligations and other general corporate purposes andcapital expenditures. Our primary sources of working capital are cash fromoperations supplemented by bank borrowings. We have funded our capitalexpenditures through cash from operations. Our working capital amounted to$56.9 million at June 30, 2006, compared to $51.4 million atDecember 31, 2005.

Working capital increasedin 2006 over December 31, 2005 primarily due to (i) higher accountsreceivable, which increased $11.1 million as a result of improved sales, and(ii) greater inventory, which increased $22.7 million as a result ofdemand for more product. These increases were offset by (i) higheraccounts payable, which increased $8.9 million as a result of our increasedpurchases, (ii) higher accrued and other current liabilities which increased by$2.3 million as the business operations continued to expand, (iii) anincrease in taxes payable, which increased $1.4 million due to increasedprofitability and (iv) an increase in current debt of $13.3 million as all ofthe debt under the existing debt agreement comes due on May 1, 2007 and isreflected as a current liability.

Liquidity is defined asthe ability to generate adequate amounts of cash to meet the current need forcash. We assess our liquidity in terms of our ability to generate cash to fundour operating activities. Significant factors which could affect liquidityinclude the following:

·the adequacy of available bank lines of credit;

·the ability to attract long-term capital with satisfactory terms;

·cash flows generated from operating activities;

·capital expenditures and

·acquisitions.

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**Comparisonof the Six Months Ended June 30, 2006 and 2005**

Our netcash used by operations for the six months ended June 30, 2006 was $5.0 millioncompared with net cash provided of $4.8 million in the prior year period.  As sales of product increased significantlyin 2006 versus 2005, our cash flow demands moved in several areas.  Cash from net income increased from $4.3million in the first six months of 2005 to $13.1 million in the same period in2006, but this was offset by an increase in inventory investment of $22.4million during the 2006 period as sales and product costs increased.  Accounts receivable also increased duringthis period by $9.1 million.  Offsettingthese were increases in accounts payable and accrued liabilities of $9.5million and taxes payable of $1.1 million.

Net cashused in investing activities were $0.3 million in 2006 and $0.2 million in the2005 period, as demands for additional capital resources were low.

Net cashprovided in financing activities was $5.3 million in the 2006 period comparedto the $4.6 million used in the prior year period.  This change was primarily due to the pay downon our revolving debt facility and the net funds generated from the sale ofstock at the public offering.

**Indebtedness**

Our principal source ofliquidity at June 30, 2006 was working capital of $56.9 million comparedto $51.4 million at December 31, 2005. We also had availableborrowing capacity in the approximate amount of $42.6 million at June 30, 2006and $1.5 million at December 31, 2005 under our loan and securityagreement with Bank of America and another syndication lender. Upon completionof the IPO, we repaid approximately $49.9 million of our outstanding debt,providing us with $42.7 million of available commitment under our existingrevolving credit facility, based on amounts outstanding as of June 30, 2006.

We believe that we willhave adequate availability of capital to fund our present operations, meet ourcommitments on our existing debt, and fund anticipated growth over the nexttwelve months, including expansion in existing and targeted market areas. Wecontinually seek potential acquisitions and from time to time hold discussionswith acquisition candidates. If suitable acquisition opportunities or workingcapital needs arise that would require additional financing, we believe thatour financial position and earnings history provide a solid base for obtainingadditional financing resources at competitive rates and terms. Additionally, wemay issue additional shares of common or preferred stock to raise funds.

**Loan and Security Agreement**

We have a loan andsecurity agreement with Bank of America and another lender. The lenders have asecurity interest in all of our assets, including accounts receivable andinventory. The agreement consists of:

· a $4.5 million term loan commitment (“Term A”)with scheduled monthly principal installments and

· a $55.0 million revolving loan.

Both loans bear interestat the lender’s base interest rate plus 0.25%. Portions of the outstanding loans may be converted to LIBOR loans inminimum amounts ranging between $100,000 to $1 million and integral multiplesof $100,000. Upon such conversion, interest is payable at LIBOR plus 1.75%. .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 LIBORcontract.

The agreement matures onMay 1, 2007.  We used the net proceeds ofthe IPO of $49.9 million to repay in full the balance due on a Term B facility(originally $10 million) which has been terminated and a portion of therevolving loan.  The current facility issufficient to meet our current needs and the Company plans on extending orrenewing this agreement prior to May 1, 2007.

**ContractualObligations**

The following tabledescribes our loan commitment at June 30, 2006:
|                               | ** ** | **Total**               | ** ** | **Less than  1 year** | ** ** | **1-3 years** | ** ** | **3-5 years** | ** ** | **More than  5 years** | ** ** |
|-------------------------------|------------|-------------------------|------------|---------------------------------|------------|--------------------|------------|--------------------|------------|----------------------------------|------------|
| ** **                    | ** ** | **(In thousands)** | ** ** |
| Term loans and  loans payable |       | $                       | 16,755     |                            | $          | 16,755             |       | —             |       | —                           |       | — |   |
|                               |            |                         |            |                                 |            |                    |            |                    |            |                                  |            |  |  |

There were no new material changes in operating leaseobligations or non-cancellable purchase obligations since December 31, 2005.

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** **

**CautionaryStatement for Purposes of the “Safe Harbor”**

Forward-looking statementsin this report are made in reliance upon the safe harbor provisions of thePrivate Securities Litigation Reform Act of 1995.  Such forward-looking statements may relateto, but are not limited to, information or assumptions about our sales andmarketing strategy, sales (including pricing), income, operating income orgross margin improvements, working capital, cash flow, interest rates, impactof changes in accounting standards, future economic performance, management’splans, goals and objectives for future operations, performance and growth orthe assumptions relating to any of the forward-looking statements.  These statements can be identified by thefact 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”, “willbe”, “will continue”, “will likely result”, “would” and other words and termsof similar meaning in conjunction with a discussion of future operating orfinancial performance.  The Companycautions that forward-looking statements are not guarantees because there areinherent difficulties in predicting future results.  Actual results could differ materially fromthose expressed or implied in the forward-looking statements.  The factors listed under “Risk Factors” inthe Company’s Prospectus dated June 14, 2006, as well as any cautionarylanguage in this report, provide examples of risks, uncertainties and eventsthat may cause our actual results to differ materially from the expectations wedescribe in our forward-looking statements.

**Item 3.Quantitative and Qualitative Disclosures about Market Risk**

**Interest Rate Risk**

There have been nomaterial changes from what we reported in the Prospectus dated June 14, 2006.

**Item 4.Controls and Procedures**

As of June 30, 2006, anevaluation was performed by the Company’s management, under the supervision andwith the participation of the Company’s chief executive officer and chieffinancial officer, of the effectiveness of the Company’s disclosure controlsand procedures.  Based on thatevaluation, the chief executive officer and the chief financial officerconcluded that the Company’s disclosure controls and procedures were effective.

There we no changes inthe Company’s internal control over financial reporting that occurred duringthe quarter ended June 30, 2006 that have materially affected, or arereasonably likely to materially affect, the Company’s internal control overfinancial reporting.

**Part II.Other Information**

**Item 1 – Not applicable and has been omitted.**

**Item 1A - Risk Factors**

There have been nomaterial changes in our risk factors from those disclosed in the Prospectusdated June 14, 2006.

**Items 2 - 5 are not applicableand have been omitted.**

 **Item 6. Exhibits**

**(a) Exhibits required byItem 601 of Regulation S-K.**
| Exhibit  Number | ** ** | **Document Description**                                                                                                                                                         |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                             |
| 31.1            |       | 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. |

** **

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** **

**Signatures**

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.
| Date: August 14, 2006 | **HOUSTON WIRE & CABLE COMPANY**                                                                 |
|-----------------------|------------------------------------------------------------------------------------------------------|
|                  |                                                                                                 |
|                  | BY:                                                                                                  | /s/ Nicol G. Graham |   |
|                  | Nicol G. Graham, Chief Financial Officer,  and duly authorized signatory on behalf of the Registrant |

 

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EXHIBIT INDEX
| Exhibit  Number | ** ** | **Document Description**                                                                                                                                                         |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                             |
| 31.1            |       | 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. |

 

18

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