10-Q

  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 June 30, 2018

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  ¨        NO x

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 x       NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act

Large Accelerated Filer    ¨	Accelerated Filer    x	Non-Accelerated Filer    ¨	Smaller Reporting Company     ¨
Emerging Growth Company     ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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 August 1, 2018 there were 16,526,439 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 June 30, 2018

INDEX

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
	Overview	10
	Cautionary Statement for Purposes of the “Safe Harbor”	10
	Results of Operations	11
	Impact of Inflation and Commodity Prices	14
	Liquidity and Capital Resources	14
	Contractual Obligations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	15
Item 4.	Controls and Procedures	15
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	15
Item 1A.	Risk Factors	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3.	Defaults Upon Senior Securities	15
Item 4.	Mine Safety Disclosures	15
Item 5.	Other Information	15
Item 6.	Exhibits	16
Signature Page		17

2

HOUSTON WIRE & CABLE COMPANY

Consolidated Balance Sheets

(In thousands, except share data)

	June 30,			December 31,
	2018			2017
	(unaudited)
Assets
Current assets:
Accounts receivable, net
Trade	$	59,685		$	51,031
Other		3,006			6,365
Inventories, net		87,819			88,115
Income taxes		848			449
Prepaids		1,742			1,938
Total current assets		153,100			147,898
Property and equipment, net		11,399			11,355
Intangible assets, net		11,627			12,015
Goodwill		22,353			22,353
Other assets		409			418
Total assets	$	198,888		$	194,039
Liabilities and stockholders' equity
Current liabilities:
Book overdraft	$	1,312		$	3,028
Trade accounts payable		8,010			8,449
Accrued and other current liabilities		12,301			16,823
Total current liabilities		21,623			28,300
Debt		80,149			73,555
Deferred income taxes		332			414
Other long term obligations		752			1,026
Total liabilities		102,856			103,295
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized: 20,988,952 shares issued: 16,526,439 and 16,491,181 outstanding at June 30, 2018 and December 31, 2017, respectively		21			21
Additional paid-in-capital		54,147			54,006
Retained earnings		101,889			97,336
Treasury stock		(60,025	)		(60,619	)
Total stockholders' equity		96,032			90,744
Total liabilities and stockholders' equity	$	198,888		$	194,039

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

3

 HOUSTON WIRE & CABLE COMPANY

Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share data)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2018		2017			2018		2017
Sales	$	93,852	$	75,646		$	178,878	$	154,355
Cost of sales		71,505		59,328			136,042		121,106
Gross profit		22,347		16,318			42,836		33,249
Operating expenses:
Salaries and commissions		9,906		8,828			19,100		17,672
Other operating expenses		7,508		6,827			14,988		14,304
Depreciation and amortization		541		825			1,086		1,685
Total operating expenses		17,955		16,480			35,174		33,661
Operating income (loss)		4,392		(162	)		7,662		(412	)
Interest expense		773		499			1,417		949
Income (loss) before income taxes		3,619		(661	)		6,245		(1,361	)
Income tax expense (benefit)		1,013		(607	)		1,692		(854	)
Net income (loss)	$	2,606	$	(54	)	$	4,553	$	(507	)
Earnings (loss) per share:
Basic	$	0.16	$	(0.00	)	$	0.28	$	(0.03	)
Diluted	$	0.16	$	(0.00	)	$	0.28	$	(0.03	)
Weighted average common shares outstanding:
Basic		16,387,112		16,266,342			16,368,610		16,253,848
Diluted		16,489,671		16,266,342			16,459,736		16,253,848

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

4

HOUSTON WIRE & CABLE COMPANY

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Six Months Ended June 30,
	2018			2017
Operating activities
Net income (loss)	$	4,553		$	(507	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		1,086			1,685
Amortization of unearned stock compensation		703			513
Provision for inventory obsolescence		191			111
Deferred income taxes		(82	)		1,033
Other non-cash items		129			99
Changes in operating assets and liabilities:
Accounts receivable		(5,403	)		(3,624	)
Inventories		105			1,172
Prepaids		196			(740	)
Income taxes		(399	)		(1,826	)
Book overdraft		(1,716	)		(2,663	)
Trade accounts payable		(439	)		(2,132	)
Accrued and other current liabilities		(4,483	)		(1,454	)
Other operating activities		(116	)		(59	)
Net cash used in operating activities		(5,675	)		(8,392	)
Investing activities
Expenditures for property and equipment		(741	)		(1,226	)
Cash received for acquisition		—			134
Net cash used in investing activities		(741	)		(1,092	)
Financing activities
Borrowings on revolver		179,994			165,025
Payments on revolver		(173,401	)		(155,483	)
Payment of dividends		(39	)		(34	)
Purchase of treasury stock/stock surrendered on vested awards		(138	)		(24	)
Net cash provided by financing activities		6,416			9,484
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.

5

HOUSTON WIRE & CABLE COMPANY
Notes to Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation and Principles of Consolidation

Houston Wire & Cable Company (the “Company”), through its wholly owned subsidiaries, provides industrial products to the U.S. market through twenty-one locations in fourteen states throughout the United States. The Company has no other business activity.

The consolidated financial statements as of June 30, 2018 and for the three and six months ended June 30, 2018, and 2017 have been prepared following accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year. All significant intercompany balances and transactions have been eliminated. The Company has evaluated subsequent events through the time these financial statements in this Form 10-Q were filed with the Securities and Exchange Commission (the “SEC”).

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant estimates are those relating to the inventory obsolescence reserve, the reserve for returns and allowances, vendor rebates, the realization of deferred tax assets and the valuation of goodwill and indefinite-lived assets. Actual results could differ materially from the estimates and assumptions used for the preparation of the financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

Recently Adopted Accounting Standards

The Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standard Update (“ASU”) to communicate changes to the codification. The Company considers the applicability and impact of all ASUs. The following are those recent ASUs that are relevant to the Company.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in the ASU were effective for annual and interim periods beginning after December 15, 2017. The Company adopted this ASU effective January 1, 2018, using the modified retrospective method, and it had no material impact on the Company’s consolidated financial statements.

The Company’s primary source of revenue is the sale of industrial products based upon purchase orders or contracts with customers. Revenue is recognized at a point in time once the Company has determined that the customer has obtained control over the product. Control is typically deemed to have been transferred to the customer when the product is shipped, or delivered (either by customer pickup or through common carrier). It is not normal Company practice to grant extended payment terms. Revenue is recognized net of any taxes collected, which are subsequently remitted to the appropriate taxing authorities. The Company treats its transportation costs (shipping and handling) as fulfillment costs and not as a separate performance obligation. These transportation costs are recorded in cost of sales.

The amount of revenue recognized reflects the consideration the Company expects to be entitled to receive in exchange for products sold. Revenue is recorded at the transaction price net of estimates of variable consideration, which may include product returns, trade discounts and allowances. The Company accrues for variable consideration using the expected value method. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

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In May 2017, the FASB issued ASU No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting.” The amendments in this update provide guidance about which changes to the terms and conditions of a share-based payment award require the application of modification accounting. This update was effective for public companies for annual periods beginning after December 15, 2017. The Company adopted this ASU in the first quarter of 2018 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The new guidance requires that an employer disaggregate the service cost component from the other components of net benefit cost. This update was effective for public companies for annual periods beginning after December 15, 2017. The Company adopted this ASU in the first quarter of 2018 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The amendment in this ASU provides final guidance that simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the two-step impairment test under ASC 350. ASU No. 2017-04 is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company elected to early adopt this ASU in the first quarter of 2018 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740): Amendments to SEC Paragraph Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update).” This ASU added the SEC guidance released on December 22, 2017 regarding the U.S tax reform to the FASB ASC. At June 30, 2018, the Company has not made a material adjustment to the tax provision recorded under this ASU at December 31, 2017. The Company has not completed its accounting for all of the tax effects of the Tax Cuts and Jobs Act; however, the Company has made reasonable estimates of these effects.

Recent Accounting Pronouncements

In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” that simplifies the accounting for share-based payment arrangements with nonemployees for goods and services. Under the ASU, the guidance on such payments to nonemployees is aligned with the accounting for share-based payments granted to employees, including the measurement of equity-classified awards, which is fixed at the grant date under the new guidance. The ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees and is effective for public entities for interim and annual reporting periods beginning after December 15, 2018. The Company is assessing ASU 2018-07 and does not expect it to have a material impact on its accounting and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, a lessee will be required to recognize a right-to-use asset and a lease liability for leases greater than 1 year, both capital and operating leases. This update is effective for public companies for fiscal years beginning after December 15, 2018 with early adoption permitted. The Company has started gathering information on its leases and is evaluating the impact that adopting this ASU will have on the Company’s consolidated financial statements.

2. Earnings (loss) per Share

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share include the dilutive effects of options and unvested restricted stock awards and units.

The following reconciles the denominator used in the calculation of diluted earnings (loss) per share:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Denominator:
Weighted average common shares for basic earnings (loss) per share		16,387,112		16,266,342		16,368,610		16,253,848
Effect of dilutive securities		102,559		—		91,126		—
Weighted average common shares for diluted earnings (loss) per share		16,489,671		16,266,342		16,459,736		16,253,848

Stock awards to purchase 300,117 and 655,448 shares of common stock were not included in the diluted net income (loss) per share calculation for the three months ended June 30, 2018 and 2017, respectively, and 286,121 and 658,463 shares for the six months ended June 30, 2018 and 2017, respectively, as their inclusion would have been anti-dilutive.

7

3. Debt

HWC Wire & Cable Company, the Company, Vertex, and Bank of America, N.A., as agent and lender, are parties to the Fourth Amended and Restated Loan and Security Agreement (the “Loan Agreement”), as amended as of October 3, 2016. The Loan Agreement provides a $100 million revolving credit facility and expires on September 30, 2020. Under certain circumstances the Company may request an increase in the commitment by an additional $50 million.

Portions of the loan may be converted to LIBOR loans in minimum amounts of $1.0 million and integral multiples of $0.1 million. LIBOR loans bear interest at the British Bankers Association LIBOR Rate plus 100 to 150 basis points based on availability, and loans not converted to LIBOR loans bear interest at a fluctuating rate equal to the greatest of the agent’s prime rate, the federal funds rate plus 50 basis points, or 30-day LIBOR plus 150 basis points. The unused commitment fee is 25 basis points.

Availability under the Loan Agreement is limited to a borrowing base equal to 85% of the value of eligible accounts receivable, plus the lesser of 70% of the value of eligible inventory or 90% of the net orderly liquidation value percentage of the value of eligible inventory, in each case less certain reserves. The Loan Agreement is secured by substantially all of the property of the Company, other than real estate.

The Loan Agreement includes, among other things, covenants that require the Company to maintain a specified minimum fixed charge coverage ratio, unless certain availability levels exist. Additionally, the Loan Agreement allows for the unlimited payment of dividends and repurchases of stock, subject to the absence of events of default and maintenance of a fixed charge coverage ratio and minimum level of availability. The Loan Agreement contains certain provisions that may cause the debt to be classified as a current liability, in accordance with GAAP, if availability falls below certain thresholds, even though the ultimate maturity date under the loan agreement remains as September 30, 2020. At June 30, 2018, the Company was in compliance with the availability-based covenants governing its indebtedness.

The carrying amount of long term debt approximates fair value as it bears interest at variable rates. The fair value is a Level 2 measurement as defined in ASC Topic 820, “Fair Value Measurement.”

4. Income Taxes

On December 22, 2017 the Tax Cuts and Jobs Act was signed into law, making significant changes to the U.S. Internal Revenue Code. The major provisions include a corporate tax rate decrease from 35% to 21%, effective for years beginning after December 31, 2017, and changes in business-related exclusions and deductions.

The Company calculates its provision for income taxes during interim reporting periods by applying the estimated annual effective tax rate for the full fiscal year to pre-tax income or loss, excluding discrete items, for the reporting period.

A valuation allowance for deferred tax assets is recognized when it is more likely than not that some or all of the benefit from the deferred tax assets will not be realized. To assess that likelihood, the Company uses its current financial position, results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies, as well as the current and forecasted business economics, to determine whether a valuation allowance is required. The Company has determined that a $1.0 million valuation allowance was required at December 31, 2017 and June 30, 2018. 

5. Incentive Plans

Stock Option Awards

There were no stock option awards granted during the first six months of 2018 or 2017.

Restricted Stock Awards and Restricted Stock Units

The 2017 Stock Plan (the “2017 Plan”) was approved by the stockholders at the 2018 Annual Meeting on May 8, 2018. As a result, all awards outstanding under the 2017 Plan (including those cash/liability awards granted prior to the approval of the 2017 Plan) will entitle the recipient to receive shares of the Company’s common stock.

8

All awards outstanding prior to the approval of the 2017 Plan were reclassified to restricted stock units (equity) effective May 8, 2018. The total liability reclassified to additional paid-in-capital was $0.4 million. This modification resulted in an increase in total fair value of $0.1 million, recognized over the term of the grants, which range from 1 to 5 years.

On June 1, 2018, the Company awarded restricted stock units with a grant date value of $55,000, for a total of 6,667 restricted stock units, to its newly-appointed non-employee director. This award of restricted stock units vests at the date of the 2019 Annual Meeting of Stockholders. The grant entitles the non-employee director to receive a number of shares of the Company's common stock equal to the number of vested restricted stock units, together with dividend equivalents from the date of grant, at such time as the director’s service on the board terminates for any reason.

Following the Annual Meeting of Stockholders on May 8, 2018, the Company approved the award of restricted stock units with a grant date value of $60,000 to each non-employee director who was re-elected, for an aggregate of 31,372 restricted stock units. Each award of restricted stock units vests at the date of the 2019 Annual Meeting of Stockholders. Each non-employee director is entitled to receive a number of shares of the Company’s common stock equal to the number of vested restricted stock units, together with dividend equivalents from the date of grant, at such time as the director’s service on the board terminates for any reason.

Also on May 8, 2018, the Company granted 28,144 voting shares of restricted stock to new members of the management team. Of the 28,144 shares granted, 26,144 shares vest in one third increments on the first, second and third anniversaries of the date of grant and the remaining 2,000 shares vest in one third increments on the third, fourth and fifth anniversaries of the date of grant, in each case as long as the recipient is then employed by the Company. Any dividends declared will be accrued and paid if and when the related shares vest.

Total stock-based compensation cost was $0.4 and $0.2 million for the three months ended June 30, 2018 and 2017, respectively, and $0.7 million and $0.5 million for the six months ended June 30, 2018 and 2017, respectively, and is included in salaries and commissions for employees, and in other operating expenses for non-director employees. 

6. Commitments and Contingencies

As a result of unfavorable lease terms relative to market for one of the leases acquired as part of the Vertex acquisition in 2016, there is a remaining additional liability of $0.2 million that is being amortized over the remaining term of the lease, which was 60 months at June 30, 2018.

The Company, along with many other defendants, has been named in a number of lawsuits in the state courts of Minnesota, North Dakota, and South Dakota alleging that certain wire and cable which may have contained asbestos caused injury to the plaintiffs who were exposed to this wire and cable. These lawsuits are individual personal injury suits that seek unspecified amounts of money damages as the sole remedy. It is not clear whether the alleged injuries occurred as a result of the wire and cable in question or whether the Company, in fact, distributed the wire and cable alleged to have caused any injuries. The Company maintains general liability insurance that, to date, has covered the defense of and all costs associated with these claims. In addition, the Company did not manufacture any of the wire and cable at issue, and the Company would rely on any warranties from the manufacturers of such cable if it were determined that any of the wire or cable that the Company distributed contained asbestos which caused injury to any of these plaintiffs. In connection with ALLTEL’s sale of the Company in 1997, ALLTEL provided indemnities with respect to costs and damages associated with these claims that the Company believes it could enforce if its insurance coverage proves inadequate.

There are no legal proceedings pending against or involving the Company that, in management’s opinion, based on the current known facts and circumstances, are expected to have a material adverse effect on the Company’s consolidated financial position, cash flows, or results of operations.

9

Item 2.  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, 2017.

Overview

We are a provider of industrial products to the U.S. market. We provide our customers with a single-source solution by offering a large selection of in-stock items, exceptional customer service and high levels of product expertise.

Critical Accounting Policies

The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses. On an on-going basis, we make and evaluate estimates and judgments, including those related to the inventory obsolescence reserve, the reserve for returns and allowances, vendor rebates, the realization of deferred tax assets and liabilities and the valuation of goodwill and indefinite-lived assets. We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances; the results of which form the basis for making judgments about amounts and timing of revenue and expenses, the carrying values of assets and the recorded amounts of liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change. We have discussed the development and selection of critical accounting policies and estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed our related disclosures. The critical accounting policies related to the estimates and judgments are discussed in our Annual Report on Form 10-K for the year ended December 31, 2017 under Management’s Discussion and Analysis of Financial Condition and Results of Operations. There have been no changes to our critical accounting policies and estimates during the three and six months ended June 30, 2018. 

Cautionary Statement for Purposes of the “Safe Harbor”

Forward-looking statements in this report are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements may relate to, but are not limited to, information or assumptions about our sales and marketing strategy, sales (including pricing), income, operating income or gross margin improvements, working capital, cash flow, interest rates, impact of changes in accounting standards, future economic performance, management’s plans, goals and objectives for future operations, performance and growth or the assumptions relating to any of the forward-looking statements.  These statements can be identified by the fact that they do not relate strictly to historical or current facts.  They use words such as “aim”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “project”, “should”, “will be”, “will continue”, “will likely result”, “would” and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance.  The Company cautions that forward-looking statements are not guarantees because there are inherent difficulties in predicting future results.  Actual results could differ materially from those expressed or implied in the forward-looking statements.  The factors listed under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, 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.

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Results of Operations

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		76.2	%		78.4	%		76.1	%		78.5	%
Gross profit		23.8	%		21.6	%		23.9	%		21.5	%
Operating expenses:
Salaries and commissions		10.6	%		11.7	%		10.7	%		11.4	%
Other operating expenses		8.0	%		9.0	%		8.4	%		9.3	%
Depreciation and amortization		0.6	%		1.1	%		0.6	%		1.1	%
Total operating expenses		19.1	%		21.8	%		19.7	%		21.8	%
Operating income (loss)		4.7	%		(0.2	)%		4.3	%		(0.3	)%
Interest expense		0.8	%		0.7	%		0.8	%		0.6	%
Income (loss) before income taxes		3.9	%		(0.9	)%		3.5	%		(0.9	)%
Income tax expense (benefit)		1.1	%		(0.8	)%		0.9	%		(0.6	)%
Net income (loss)		2.8	%		(0.1	)%		2.5	%		(0.3	)%

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

Comparison of the Three Months Ended June 30, 2018 and 2017

Sales

	Three Months Ended
	June 30,
(Dollars in millions)	2018		2017		Change
Sales	$	93.9	$	75.6	$	18.2	24.1	%

Our sales for the second quarter increased 24.1% to $93.9 million in 2018 from $75.6 million in 2017. The increase in sales is due to improved industrial activity, increased commodity prices and disciplined pricing. We estimate sales for our project business, which targets end markets, encompassing Environmental Compliance, Engineering & Construction, Industrials, Utility Power Generation, and Mechanical Wire Rope, increased 26%, while Maintenance, Repair, and Operations (MRO) sales increased 23%, as compared to the second quarter of 2017.

Gross Profit

	Three Months Ended
	June 30,
(Dollars in millions)	2018			2017			Change
Gross profit	$	22.3		$	16.3		$	6.0	36.9	%
Gross margin		23.8	%		21.6	%

Gross profit increased 36.9% to $22.3 million in 2018 from $16.3 million in 2017. The increase in gross profit was primarily attributable to the increased sales in the second quarter of 2018. Gross margin (gross profit as a percentage of sales) increased to 23.8% in 2018 from 21.6% in 2017 primarily due to improved pricing discipline and product mix.

11

Operating Expenses

	Three Months Ended
	June 30,
(Dollars in millions)	2018			2017			Change
Operating expenses:
Salaries and commissions	$	9.9		$	8.8		$	1.1		12.2	%
Other operating expenses		7.5			6.8			0.7		10.0	%
Depreciation and amortization		0.5			0.8			(0.3	)	(34.4	)%
Total operating expenses	$	18.0		$	16.5		$	1.5		9.0	%
Operating expenses as a percent of sales		19.1	%		21.8	%

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

Salaries and commissions increased $1.1 million between the periods primarily due to additional personnel and increased commissions resulting from higher sales and gross profit.

Other operating expenses increased $0.7 million primarily due to higher distribution expenses as a result of increased volume and higher administrative expenses.

Depreciation and amortization decreased $0.3 million primarily due to certain intangibles which became fully amortized in 2017.

Operating expenses as a percentage of sales decreased to 19.1% in 2018 from 21.8% in 2017, as operating expenses increased at a lower rate than the increase in sales, due to improved leverage. 

Interest Expense

Interest expense increased to $0.8 million in 2018 from $0.5 million in 2017 due to higher debt and to an increase in the average effective interest rate. Average debt was $82.5 million in 2018 compared to $72.6 million in 2017. The average effective interest rate was 3.7% in 2018 compared to 2.7% in 2017.

Income Taxes

The income tax expense of $1.0 million increased compared to the $0.6 million income tax benefit in the prior year period. The effective income tax rate decreased to 28.0% in 2018 from 91.8% in 2017, primarily due to higher estimated annual earnings for 2018 offset by the benefit in 2017 which also reflected the impact of a full valuation allowance on the net deferred tax assets as of June 30, 2017. The 2018 tax rate is also lower due to the lower corporate tax rate as a result of the 2017 Tax Cuts and Jobs Act.

Net Income

We achieved net income of $2.6 million in 2018 compared to a net loss of $0.1 million in 2017.

Comparison of the Six Months Ended June 30, 2018 and 2017

	Six Months Ended
	June 30,
(Dollars in millions)	2018		2017		Change
Sales	$	178.9	$	154.4	$	24.5	15.9	%

Our sales for the six month period increased 15.9% to $178.9 million in 2018 from $154.4 million in 2017. The primary reasons for the increase are improved industrial activity, increased commodity prices and disciplined pricing. Our project business, which includes our key growth initiatives encompassing Environmental Compliance, Engineering & Construction, Industrials, Utility Power Generation, and Mechanical Wire Rope, is estimated to have increased 30%, from 2017. MRO increased 12%, from 2017.

12

Gross Profit

	Six Months Ended
	June 30,
(Dollars in millions)	2018			2017			Change
Gross profit	$	42.8		$	33.2		$	9.6		28.8	%
Gross margin		23.9	%		21.5	%		2.4	%

Gross profit increased 28.8% to $42.8 million in 2018 from $33.2 million in 2017. The increase in gross profit was attributable to the higher sales and higher product gross margin. Gross margin increased to 23.9% in 2018 from 21.5% in 2017, primarily due to improved pricing discipline and product mix.

Operating Expenses

	Six Months Ended
	June 30,
(Dollars in millions)	2018			2017			Change
Operating expenses:
Salaries and commissions	$	19.1		$	17.7		$	1.4		8.1	%
Other operating expenses		15.0			14.3			0.7		4.8	%
Depreciation and amortization		1.1			1.7			(0.6	)	(35.5	)%
Total operating expenses	$	35.2		$	33.7		$	1.5		4.5	%
Operating expenses as a percent of sales		19.7	%		21.8	%		(2.1	)%

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

Salaries and commissions increased $1.4 million between the periods due to additional personnel, as well as increased commissions resulting from increased sales and gross profit.

Other operating expenses increased $0.7 million, as distribution expenses increased due to higher sales and increased administrative expenses.

Depreciation and amortization decreased primarily due to certain intangibles which became fully amortized in 2017.

Operating expenses as a percentage of sales decreased to 19.7% in 2017 from 21.8% in 2017, as operating expenses increased at a lower rate than the increase in sales, due to improved leverage. 

Interest Expense

Interest expense increased 49.3% to $1.4 million in 2018 from $0.9 million in 2017 due to higher average debt levels due to increased inventory investment and higher interest rates. Average debt was $79.7 million in 2018 compared to $70.3 million in 2017. The average effective interest rate rose to 3.5% in 2018 from 2.6% in the prior year period.

Income Taxes

The income tax expense of $1.7 million increased from a tax benefit of $0.9 million in 2017. The effective income tax rate decreased to 27.1% in 2018 from 62.7% in 2017, primarily due to higher estimated annual earnings for 2018 offset by the benefit in 2017 which also reflected the impact of a full valuation allowance on the net deferred tax assets as of June 30, 2017. The 2018 tax rate is also lower due to the lower corporate tax rate as a result of the 2017 Tax Cuts and Jobs Act.

Net Income

We achieved net income of $4.6 million in 2018 compared to a net loss of $0.5 million in 2017.

13

Impact of Inflation and Commodity Prices

Our results of operations are affected by changes in the inflation rate and commodity prices. Moreover, because copper, steel, aluminum, nickel and petrochemical products are components of the industrial products we sell, fluctuations in the costs of these and other commodities have historically affected our operating results. To the extent commodity prices decline, the net realizable value of our existing inventory could also decline, and our gross profit could be adversely affected because of either reduced selling prices or lower of cost or market adjustments in the carrying value of our inventory. We turn our inventory approximately three times a year, therefore, the impact of changes in commodity prices in any particular quarter would primarily affect the results of the succeeding two calendar quarters. If we are unable to pass on to our customers future cost increases due to inflation or rising commodity prices, our operating results could be adversely affected. 

Liquidity and Capital Resources

Our primary capital needs are for working capital obligations, capital expenditures and other general corporate purposes, including acquisitions. Our primary sources of working capital are cash from operations supplemented by bank borrowings.

 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;

· cash flows generated from operating activities;

· capital expenditures;

· acquisitions; and

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

Comparison of the Six Months Ended June 30, 2018 and 2017

Our net cash used in operating activities was $5.7 million for the six months ended June 30, 2018 compared to $8.4 million in 2017. We had net income of $4.6 million in 2018 compared to a net loss of $0.5 million in 2017.

Changes in our operating assets and liabilities resulted in cash used in operating activities of $12.3 million in 2018. An increase in accounts receivable of $5.4 million due to the increase in sales, a decrease in accrued and other liabilities of $4.5 million and a decrease in book overdraft of $1.7 million were the main uses of cash.

Net cash used in investing activities was $0.7 million in 2018 compared to $1.1 million in 2017.

Net cash provided by financing activities was $6.4 million in 2018 compared to $9.5 million in 2017. Net borrowings on the revolver of $6.6 million were the primary source for financing activities in 2018.

Indebtedness

Our principal source of liquidity at June 30, 2018 was working capital of $131.5 million compared to $119.6 million at December 31, 2017. We also had additional available borrowing capacity of approximately $19.9 million at June 30, 2018 and $23.0 million at December 31, 2017 under our loan agreement.

We believe that we will have adequate availability of capital to fund our present operations, meet our commitments on our existing debt, 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 decide to issue additional shares of common or preferred stock to raise funds.

14

Contractual Obligations

The following table summarizes our loan commitment at June 30, 2018.

In thousands	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Total debt	$	80,149	$	—	$	80,149	$	—	$	—

There were no material changes in operating lease obligations or non-cancellable purchase obligations since December 31, 2017.

Item 3. 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, 2017.

Item 4. Controls and Procedures

As of June 30, 2018, 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 June 30, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company implemented internal controls to ensure it adequately evaluated its controls and properly assessed the impact of the new accounting standard related to revenue recognition on its financial statements to facilitate the adoption on January 1, 2018. There were no significant changes to the Company’s internal control over financial reporting due to the adoption of the new standard.

Part II. Other Information

Item 1 – Not applicable and has been omitted.

Item 1A.  Risk Factors

There were no material changes in the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 2 – Not applicable and has been omitted.

Item 3 – Not applicable and has been omitted.

Item 4 – Not applicable and has been omitted.

Item 5 – Not applicable and has been omitted.

15

Item 6.  Exhibits

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

EXHIBIT INDEX

Exhibit Number	Document Description
31.1	Certification by James L. Pokluda III 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 Christopher M. Micklas 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 James L. Pokluda III and Christopher M. Micklas pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document (1)
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

⁽¹⁾ Attached as exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at June 30, 2018 and December 31, 2017; (ii) the Consolidated Statements of Operations for the three and six month periods ended June 30, 2018 and 2017; (iii) the Consolidated Statements of Cash Flows for the six month periods ended June 30, 2018 and 2017; and (vi) Notes to the Consolidated Financial Statements.

16

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:  August 9, 2018	HOUSTON WIRE & CABLE COMPANY
	BY:	/s/ Christopher M. Micklas
	Christopher M. Micklas, Chief Financial Officer

17

EX-31.1

Exhibit 31.1

Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, James L. Pokluda III, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 of Houston Wire & Cable Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   August 9, 2018	/s/ James L. Pokluda III
	James L. Pokluda III
	Chief Executive Officer

EX-31.2

 Exhibit 31.2

Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Christopher M. Micklas, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 of Houston Wire & Cable Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   August 9, 2018	/s/ Christopher M. Micklas
	Christopher M. Micklas
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certifications of CEO and CFO Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Houston Wire & Cable Company (the “Corporation”) for the fiscal quarter ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), James L. Pokluda III, as Chief Executive Officer of the Corporation, and Christopher M. Micklas, as Chief Financial Officer of the Corporation, each hereby certifies, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date:  August 9, 2018	/s/ James L. Pokluda III
	James L. Pokluda III
	Chief Executive Officer
Date:  August 9, 2018	/s/ Christopher M. Micklas
	Christopher M. Micklas
	Chief Financial Officer

This certification accompanies the Report pursuant to section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by Houston Wire & Cable Company for purposes of section 18 of the Securities Exchange Act of 1934, as amended.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 01, 2018
Document And Entity Information
Entity Registrant Name	Houston Wire & Cable CO
Entity Central Index Key	0001356949
Document Type	10-Q
Trading Symbol	HWCC
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	No
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		16,526,439
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2018

XML

Consolidated Balance Sheets (unaudited) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Accounts receivable, net
Trade	$ 59,685	$ 51,031
Other	3,006	6,365
Inventories, net	87,819	88,115
Income taxes	848	449
Prepaids	1,742	1,938
Total current assets	153,100	147,898
Property and equipment, net	11,399	11,355
Intangible assets, net	11,627	12,015
Goodwill	22,353	22,353
Other assets	409	418
Total assets	198,888	194,039
Current liabilities:
Book overdraft	1,312	3,028
Trade accounts payable	8,010	8,449
Accrued and other current liabilities	12,301	16,823
Total current liabilities	21,623	28,300
Debt	80,149	73,555
Deferred income taxes	332	414
Other long term obligations	752	1,026
Total liabilities	102,856	103,295
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued and outstanding
Common stock, $0.001 par value; 100,000,000 shares authorized: 20,988,952 shares issued: 16,526,439 and 16,491,181 outstanding at June 30, 2018 and December 31, 2017, respectively	21	21
Additional paid-in-capital	54,147	54,006
Retained earnings	101,889	97,336
Treasury stock	(60,025)	(60,619)
Total stockholders' equity	96,032	90,744
Total liabilities and stockholders' equity	$ 198,888	$ 194,039

XML

Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, issued
Preferred stock, outstanding
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized	100,000,000	100,000,000
Common stock, issued	20,988,952	20,988,952
Common stock, outstanding	16,526,439	16,491,181

XML

Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Statement [Abstract]
Sales	$ 93,852	$ 75,646	$ 178,878	$ 154,355
Cost of sales	71,505	59,328	136,042	121,106
Gross profit	22,347	16,318	42,836	33,249
Operating expenses:
Salaries and commissions	9,906	8,828	19,100	17,672
Other operating expenses	7,508	6,827	14,988	14,304
Depreciation and amortization	541	825	1,086	1,685
Total operating expenses	17,955	16,480	35,174	33,661
Operating income (loss)	4,392	(162)	7,662	(412)
Interest expense	773	499	1,417	949
Income (loss) before income taxes	3,619	(661)	6,245	(1,361)
Income tax expense (benefit)	1,013	(607)	1,692	(854)
Net income (loss)	$ 2,606	$ (54)	$ 4,553	$ (507)
Earnings (loss) per share:
Basic (in dollars per share)	$ 0.16	$ (0.00)	$ 0.28	$ (0.03)
Diluted (in dollars per share)	$ 0.16	$ (0.00)	$ 0.28	$ (0.03)
Weighted average common shares outstanding:
Basic (in shares)	16,387,112	16,266,342	16,368,610	16,253,848
Diluted (in shares)	16,489,671	16,266,342	16,459,736	16,253,848

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Operating activities
Net income (loss)	$ 4,553	$ (507)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	1,086	1,685
Amortization of unearned stock compensation	703	513
Provision for inventory obsolescence	191	111
Deferred income taxes	(82)	1,033
Other non-cash items	129	99
Changes in operating assets and liabilities:
Accounts receivable	(5,403)	(3,624)
Inventories	105	1,172
Prepaids	196	(740)
Income taxes	(399)	(1,826)
Book overdraft	(1,716)	(2,663)
Trade accounts payable	(439)	(2,132)
Accrued and other current liabilities	(4,483)	(1,454)
Other operating activities	(116)	(59)
Net cash used in operating activities	(5,675)	(8,392)
Investing activities
Expenditures for property and equipment	(741)	(1,226)
Cash received for acquisition		134
Net cash used in investing activities	(741)	(1,092)
Financing activities
Borrowings on revolver	179,994	165,025
Payments on revolver	(173,401)	(155,483)
Payment of dividends	(39)	(34)
Purchase of treasury stock/stock surrendered on vested awards	(138)	(24)
Net cash provided by financing activities	6,416	9,484
Net change in cash
Cash at beginning of period
Cash at end of period

XML

Basis of Presentation and Principles of Consolidation

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Principles of Consolidation

1. Basis of Presentation and Principles of Consolidation

Houston Wire & Cable Company (the “Company”), through its wholly owned subsidiaries, provides industrial products to the U.S. market through twenty-one locations in fourteen states throughout the United States. The Company has no other business activity. 

The consolidated financial statements as of June 30, 2018 and for the three and six months ended June 30, 2018, and 2017 have been prepared following accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year. All significant intercompany balances and transactions have been eliminated. The Company has evaluated subsequent events through the time these financial statements in this Form 10-Q were filed with the Securities and Exchange Commission (the “SEC”).

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant estimates are those relating to the inventory obsolescence reserve, the reserve for returns and allowances, vendor rebates, the realization of deferred tax assets and the valuation of goodwill and indefinite-lived assets. Actual results could differ materially from the estimates and assumptions used for the preparation of the financial statements. 

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. 

Recently Adopted Accounting Standards 

The Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standard Update (“ASU”) to communicate changes to the codification. The Company considers the applicability and impact of all ASUs. The following are those recent ASUs that are relevant to the Company. 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in the ASU were effective for annual and interim periods beginning after December 15, 2017. The Company adopted this ASU effective January 1, 2018, using the modified retrospective method, and it had no material impact on the Company’s consolidated financial statements. 

The Company’s primary source of revenue is the sale of industrial products based upon purchase orders or contracts with customers. Revenue is recognized at a point in time once the Company has determined that the customer has obtained control over the product. Control is typically deemed to have been transferred to the customer when the product is shipped, or delivered (either by customer pickup or through common carrier). It is not normal Company practice to grant extended payment terms. Revenue is recognized net of any taxes collected, which are subsequently remitted to the appropriate taxing authorities. The Company treats its transportation costs (shipping and handling) as fulfillment costs and not as a separate performance obligation. These transportation costs are recorded in cost of sales. 

The amount of revenue recognized reflects the consideration the Company expects to be entitled to receive in exchange for products sold. Revenue is recorded at the transaction price net of estimates of variable consideration, which may include product returns, trade discounts and allowances. The Company accrues for variable consideration using the expected value method. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.  

In May 2017, the FASB issued ASU No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting.” The amendments in this update provide guidance about which changes to the terms and conditions of a share-based payment award require the application of modification accounting. This update was effective for public companies for annual periods beginning after December 15, 2017. The Company adopted this ASU in the first quarter of 2018 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The new guidance requires that an employer disaggregate the service cost component from the other components of net benefit cost. This update was effective for public companies for annual periods beginning after December 15, 2017. The Company adopted this ASU in the first quarter of 2018 and the adoption did not have a material impact on the Company’s consolidated financial statements. 

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The amendment in this ASU provides final guidance that simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the two-step impairment test under ASC 350. ASU No. 2017-04 is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company elected to early adopt this ASU in the first quarter of 2018 and the adoption did not have a material impact on the Company’s consolidated financial statements. 

In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740): Amendments to SEC Paragraph Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update).” This ASU added the SEC guidance released on December 22, 2017 regarding the U.S tax reform to the FASB ASC. At June 30, 2018, the Company has not made a material adjustment to the tax provision recorded under this ASU at December 31, 2017. The Company has not completed its accounting for all of the tax effects of the Tax Cuts and Jobs Act; however, the Company has made reasonable estimates of these effects.

Recent Accounting Pronouncements

In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” that simplifies the accounting for share-based payment arrangements with nonemployees for goods and services. Under the ASU, the guidance on such payments to nonemployees is aligned with the accounting for share-based payments granted to employees, including the measurement of equity-classified awards, which is fixed at the grant date under the new guidance. The ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees and is effective for public entities for interim and annual reporting periods beginning after December 15, 2018. The Company is assessing ASU 2018-07 and does not expect it to have a material impact on its accounting and disclosures. 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, a lessee will be required to recognize a right-to-use asset and a lease liability for leases greater than 1 year, both capital and operating leases. This update is effective for public companies for fiscal years beginning after December 15, 2018 with early adoption permitted. The Company has started gathering information on its leases and is evaluating the impact that adopting this ASU will have on the Company’s consolidated financial statements.

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Earnings (loss) per Share

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Earnings (loss) per Share

2. Earnings (loss) per Share

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share include the dilutive effects of options and unvested restricted stock awards and units.

The following reconciles the denominator used in the calculation of diluted earnings (loss) per share:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Denominator:
Weighted average common shares for basic earnings (loss) per share		16,387,112		16,266,342		16,368,610		16,253,848
Effect of dilutive securities		102,559		—		91,126		—
Weighted average common shares for diluted earnings (loss) per share		16,489,671		16,266,342		16,459,736		16,253,848

Stock awards to purchase 300,117 and 655,448 shares of common stock were not included in the diluted net income (loss) per share calculation for the three months ended June 30, 2018 and 2017, respectively, and 286,121 and 658,463 shares for the six months ended June 30, 2018 and 2017, respectively, as their inclusion would have been anti-dilutive.

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Debt

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Debt

3. Debt

HWC Wire & Cable Company, the Company, Vertex, and Bank of America, N.A., as agent and lender, are parties to the Fourth Amended and Restated Loan and Security Agreement (the “Loan Agreement”), as amended as of October 3, 2016. The Loan Agreement provides a $100 million revolving credit facility and expires on September 30, 2020. Under certain circumstances the Company may request an increase in the commitment by an additional $50 million.

Portions of the loan may be converted to LIBOR loans in minimum amounts of $1.0 million and integral multiples of $0.1 million. LIBOR loans bear interest at the British Bankers Association LIBOR Rate plus 100 to 150 basis points based on availability, and loans not converted to LIBOR loans bear interest at a fluctuating rate equal to the greatest of the agent’s prime rate, the federal funds rate plus 50 basis points, or 30-day LIBOR plus 150 basis points. The unused commitment fee is 25 basis points.

Availability under the Loan Agreement is limited to a borrowing base equal to 85% of the value of eligible accounts receivable, plus the lesser of 70% of the value of eligible inventory or 90% of the net orderly liquidation value percentage of the value of eligible inventory, in each case less certain reserves. The Loan Agreement is secured by substantially all of the property of the Company, other than real estate.

The Loan Agreement includes, among other things, covenants that require the Company to maintain a specified minimum fixed charge coverage ratio, unless certain availability levels exist. Additionally, the Loan Agreement allows for the unlimited payment of dividends and repurchases of stock, subject to the absence of events of default and maintenance of a fixed charge coverage ratio and minimum level of availability. The Loan Agreement contains certain provisions that may cause the debt to be classified as a current liability, in accordance with GAAP, if availability falls below certain thresholds, even though the ultimate maturity date under the loan agreement remains as September 30, 2020. At June 30, 2018, the Company was in compliance with the availability-based covenants governing its indebtedness.

The carrying amount of long term debt approximates fair value as it bears interest at variable rates. The fair value is a Level 2 measurement as defined in ASC Topic 820, “Fair Value Measurement.”

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Income Taxes

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

4. Income Taxes

On December 22, 2017 the Tax Cuts and Jobs Act was signed into law, making significant changes to the U.S. Internal Revenue Code. The major provisions include a corporate tax rate decrease from 35% to 21%, effective for years beginning after December 31, 2017, and changes in business-related exclusions and deductions.

The Company calculates its provision for income taxes during interim reporting periods by applying the estimated annual effective tax rate for the full fiscal year to pre-tax income or loss, excluding discrete items, for the reporting period.

A valuation allowance for deferred tax assets is recognized when it is more likely than not that some or all of the benefit from the deferred tax assets will not be realized. To assess that likelihood, the Company uses its current financial position, results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies, as well as the current and forecasted business economics, to determine whether a valuation allowance is required. The Company has determined that a $1.0 million valuation allowance was required at December 31, 2017 and June 30, 2018. 

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Incentive Plans

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Incentive Plans

5. Incentive Plans

Stock Option Awards

There were no stock option awards granted during the first six months of 2018 or 2017. 

Restricted Stock Awards and Restricted Stock Units 

The 2017 Stock Plan (the “2017 Plan) was approved by the stockholders at the 2018 Annual Meeting on May 8, 2018. As a result, all awards outstanding under the 2017 Plan (including those cash/liability awards granted prior to the approval of the 2017 Plan) will entitle the recipient to receive shares of the Company’s common stock.  

All awards outstanding prior to the approval of the 2017 Plan were reclassified to restricted stock units (equity) effective May 8, 2018. The total liability reclassified to additional paid-in-capital was $0.4 million. This modification resulted in an increase in total fair value of $0.1 million, recognized over the term of the grants, which range from 1 to 5 years. 

On June 1, 2018, the Company awarded restricted stock units with a grant date value of $55,000, for a total of 6,667 restricted stock units, to its newly-appointed non-employee director. This award of restricted stock units vests at the date of the 2019 Annual Meeting of Stockholders. The grant entitles the non-employee director to receive a number of shares of the Company's common stock equal to the number of vested restricted stock units, together with dividend equivalents from the date of grant, at such time as the director’s service on the board terminates for any reason. 

Following the Annual Meeting of Stockholders on May 8, 2018, the Company approved the award of restricted stock units with a grant date value of $60,000 to each non-employee director who was re-elected, for an aggregate of 31,372 restricted stock units. Each award of restricted stock units vests at the date of the 2019 Annual Meeting of Stockholders. Each non-employee director is entitled to receive a number of shares of the Company’s common stock equal to the number of vested restricted stock units, together with dividend equivalents from the date of grant, at such time as the director’s service on the board terminates for any reason. 

Also on May 8, 2018, the Company granted 28,144 voting shares of restricted stock to new members of the management team. Of the 28,144 shares granted, 26,144 shares vest in one third increments on the first, second and third anniversaries of the date of grant and the remaining 2,000 shares vest in one third increments on the third, fourth and fifth anniversaries of the date of grant, in each case as long as the recipient is then employed by the Company. Any dividends declared will be accrued and paid if and when the related shares vest.

 Total stock-based compensation cost was $0.4 and $0.2 million for the three months ended June 30, 2018 and 2017, respectively, and $0.7 million and $0.5 million for the six months ended June 30, 2018 and 2017, respectively, and is included in salaries and commissions for employees, and in other operating expenses for non-director employees. 

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

6. Commitments and Contingencies

As a result of unfavorable lease terms relative to market for one of the leases acquired as part of the Vertex acquisition in 2016, there is a remaining additional liability of $0.2 million that is being amortized over the remaining term of the lease, which was 60 months at June 30, 2018. 

The Company, along with many other defendants, has been named in a number of lawsuits in the state courts of Minnesota, North Dakota, and South Dakota alleging that certain wire and cable which may have contained asbestos caused injury to the plaintiffs who were exposed to this wire and cable. These lawsuits are individual personal injury suits that seek unspecified amounts of money damages as the sole remedy. It is not clear whether the alleged injuries occurred as a result of the wire and cable in question or whether the Company, in fact, distributed the wire and cable alleged to have caused any injuries. The Company maintains general liability insurance that, to date, has covered the defense of and all costs associated with these claims. In addition, the Company did not manufacture any of the wire and cable at issue, and the Company would rely on any warranties from the manufacturers of such cable if it were determined that any of the wire or cable that the Company distributed contained asbestos which caused injury to any of these plaintiffs. In connection with ALLTEL’s sale of the Company in 1997, ALLTEL provided indemnities with respect to costs and damages associated with these claims that the Company believes it could enforce if its insurance coverage proves inadequate. 

There are no legal proceedings pending against or involving the Company that, in management’s opinion, based on the current known facts and circumstances, are expected to have a material adverse effect on the Company’s consolidated financial position, cash flows, or results of operations. 

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Basis of Presentation and Principles of Consolidation (Policies)

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Reclassifications

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. 

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

The Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standard Update (“ASU”) to communicate changes to the codification. The Company considers the applicability and impact of all ASUs. The following are those recent ASUs that are relevant to the Company. 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in the ASU were effective for annual and interim periods beginning after December 15, 2017. The Company adopted this ASU effective January 1, 2018, using the modified retrospective method, and it had no material impact on the Company’s consolidated financial statements. 

The Company’s primary source of revenue is the sale of industrial products based upon purchase orders or contracts with customers. Revenue is recognized at a point in time once the Company has determined that the customer has obtained control over the product. Control is typically deemed to have been transferred to the customer when the product is shipped, or delivered (either by customer pickup or through common carrier). It is not normal Company practice to grant extended payment terms. Revenue is recognized net of any taxes collected, which are subsequently remitted to the appropriate taxing authorities. The Company treats its transportation costs (shipping and handling) as fulfillment costs and not as a separate performance obligation. These transportation costs are recorded in cost of sales.

The amount of revenue recognized reflects the consideration the Company expects to be entitled to receive in exchange for products sold. Revenue is recorded at the transaction price net of estimates of variable consideration, which may include product returns, trade discounts and allowances. The Company accrues for variable consideration using the expected value method. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.  

In May 2017, the FASB issued ASU No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting.” The amendments in this update provide guidance about which changes to the terms and conditions of a share-based payment award require the application of modification accounting. This update was effective for public companies for annual periods beginning after December 15, 2017. The Company adopted this ASU in the first quarter of 2018 and the adoption did not have a material impact on the Company’s consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The new guidance requires that an employer disaggregate the service cost component from the other components of net benefit cost. This update was effective for public companies for annual periods beginning after December 15, 2017. The Company adopted this ASU in the first quarter of 2018 and the adoption did not have a material impact on the Company’s consolidated financial statements. 

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The amendment in this ASU provides final guidance that simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the two-step impairment test under ASC 350. ASU No. 2017-04 is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company elected to early adopt this ASU in the first quarter of 2018 and the adoption did not have a material impact on the Company’s consolidated financial statements. 

In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740): Amendments to SEC Paragraph Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update).” This ASU added the SEC guidance released on December 22, 2017 regarding the U.S tax reform to the FASB ASC. At June 30, 2018, the Company has not made a material adjustment to the tax provision recorded under this ASU at December 31, 2017. The Company has not completed its accounting for all of the tax effects of the Tax Cuts and Jobs Act; however, the Company has made reasonable estimates of these effects. 

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2018, the FASB issued ASU No. 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” that simplifies the accounting for share-based payment arrangements with nonemployees for goods and services. Under the ASU, the guidance on such payments to nonemployees is aligned with the accounting for share-based payments granted to employees, including the measurement of equity-classified awards, which is fixed at the grant date under the new guidance. The ASU supersedes Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees and is effective for public entities for interim and annual reporting periods beginning after December 15, 2018. The Company is assessing ASU 2018-07 and does not expect it to have a material impact on its accounting and disclosures. 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, a lessee will be required to recognize a right-to-use asset and a lease liability for leases greater than 1 year, both capital and operating leases. This update is effective for public companies for fiscal years beginning after December 15, 2018 with early adoption permitted. The Company has started gathering information on its leases and is evaluating the impact that adopting this ASU will have on the Company’s consolidated financial statements. 

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Earnings (loss) per Share (Tables)

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Schedule of diluted earnings (loss) per share

The following reconciles the denominator used in the calculation of diluted earnings (loss) per share:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Denominator:
Weighted average common shares for basic earnings (loss) per share		16,387,112		16,266,342		16,368,610		16,253,848
Effect of dilutive securities		102,559		—		91,126		—
Weighted average common shares for diluted earnings (loss) per share		16,489,671		16,266,342		16,459,736		16,253,848

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Earnings (loss) per Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Denominator:
Weighted average common shares for basic earnings (loss) per share	16,387,112	16,266,342	16,368,610	16,253,848
Effect of dilutive securities	102,559		91,126
Weighted average common shares for diluted earnings (loss) per share	16,489,671	16,266,342	16,459,736	16,253,848

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Earnings (loss) per Share (Details Narrative) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Earnings Per Share [Abstract]
Options to purchase stock awards	300,117	655,448	286,121	658,463

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Debt (Details Narrative) - Fourth Amended and Restated Loan and Security Agreement (the 2015 Loan Agreement) [Member] - Revolving Credit Facility [Member] - USD ($)
$ in Thousands

6 Months Ended

Oct. 03, 2016

Jun. 30, 2018

Maximum amount outstanding

$ 100,000

Expiration date

Sep. 30, 2020

Additional commitment amount

$ 50,000

Description of collateral

The Loan Agreement is secured by substantially all of the property of the Company, other than real estate.

Percentage of the value of eligible accounts receivable

85.00%

Percentage of the value of eligible inventory

70.00%

Percentage of the value of net orderly liquidation

90.00%

Description of loan converted

Portions of the loan may be converted to LIBOR loans in minimum amounts of $1.0 million and integral multiples of $0.1 million.

Description of interest rate

LIBOR loans bear interest at the British Bankers Association LIBOR Rate plus 100 to 150 basis points based on availability, and loans not converted to LIBOR loans bear interest at a fluctuating rate equal to the greatest of the agent’s prime rate, the federal funds rate plus 50 basis points, or 30-day LIBOR plus 150 basis points.

Percentage of unused capacity commitment fee

0.25%

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Income Taxes (Details Narrative) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Income Tax Disclosure [Abstract]
Corporate tax rate (in percent)	21.00%
Previous corporate tax rate (in percent)	35.00%
Valuation allowance	$ 1,000	$ 1,000

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Incentive Plans (Details Narrative) - USD ($)
$ in Thousands

3 Months Ended

6 Months Ended

Jun. 01, 2018

May 08, 2018

Jun. 30, 2018

Jun. 30, 2017

Jun. 30, 2018

Jun. 30, 2017

Stock-based compensation cost

$ 400

$ 200

$ 703

$ 513

2017 Stock Plan [Member] | Restricted Stock Units [Member]

Liability reclassified to additional paid-in-capital

400

Increase in fair value

$ 100

2017 Stock Plan [Member] | Restricted Stock Units [Member] | Non-employee director [Member]

Number of shares granted under plan

6,667

31,372

Total grant-date fair value of options vested

$ 55

$ 60

2017 Stock Plan [Member] | Restricted Stock Units [Member] | Management [Member]

Number of shares granted under plan

28,144

Description of vesting term

Of the 28,144 shares granted, 26,144 shares vest in one third increments on the first, second and third anniversaries of the date of grant and the remaining 2,000 shares vest in one third increments on the third, fourth and fifth anniversaries of the date of grant, in each case as long as the recipient is then employed by the Company.

2017 Stock Plan [Member] | Restricted Stock Units [Member] | Maximum [Member]

Term of vesting period

5 years

2017 Stock Plan [Member] | Restricted Stock Units [Member] | Minimum [Member]

Term of vesting period

1 year

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Commitments and Contingencies (Details Narrative) - Vertex Acquisition [Member] $ in Thousands	Jun. 30, 2018 USD ($)
Remaining additional liability	$ 200
Amortized over the remaining term lease	60 months