HOUSTON
WIRE & CABLE COMPANY
Consolidated
Balance Sheets
(In
thousands, except share data)
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
48,223
|
|
|
$
|
44,677
|
|
Inventories, net
|
|
|
78,500
|
|
|
|
79,783
|
|
Income taxes
|
|
|
3,774
|
|
|
|
1,948
|
|
Prepaids
|
|
|
1,310
|
|
|
|
570
|
|
Total current assets
|
|
|
131,807
|
|
|
|
126,978
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
11,517
|
|
|
|
11,261
|
|
Intangible assets, net
|
|
|
12,404
|
|
|
|
13,378
|
|
Goodwill
|
|
|
22,495
|
|
|
|
22,770
|
|
Deferred income taxes
|
|
|
—
|
|
|
|
892
|
|
Other assets
|
|
|
623
|
|
|
|
591
|
|
Total assets
|
|
$
|
178,846
|
|
|
$
|
175,870
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Book overdraft
|
|
$
|
518
|
|
|
$
|
3,181
|
|
Trade accounts payable
|
|
|
6,274
|
|
|
|
8,406
|
|
Accrued and other current liabilities
|
|
|
11,493
|
|
|
|
13,248
|
|
Total current liabilities
|
|
|
18,285
|
|
|
|
24,835
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
69,930
|
|
|
|
60,388
|
|
Other long term obligations
|
|
|
510
|
|
|
|
516
|
|
Total liabilities
|
|
|
88,725
|
|
|
|
85,739
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.001 par value; 100,000,000 shares authorized: 20,988,952 shares issued: 16,487,334 and 16,457,525 outstanding at June 30, 2017 and December 31, 2016, respectively
|
|
|
21
|
|
|
|
21
|
|
Additional paid-in-capital
|
|
|
53,887
|
|
|
|
53,824
|
|
Retained earnings
|
|
|
97,051
|
|
|
|
97,550
|
|
Treasury stock
|
|
|
(60,838
|
)
|
|
|
(61,264
|
)
|
Total stockholders’ equity
|
|
|
90,121
|
|
|
|
90,131
|
|
Total liabilities and stockholders’ equity
|
|
$
|
178,846
|
|
|
$
|
175,870
|
|
|
|
|
|
|
|
|
|
|
The
accompanying Notes are an integral part of these Consolidated Financial Statements.
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,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
75,646
|
|
|
$
|
62,454
|
|
|
$
|
154,355
|
|
|
$
|
127,165
|
|
Cost of sales
|
|
|
59,328
|
|
|
|
50,024
|
|
|
|
121,106
|
|
|
|
101,336
|
|
Gross profit
|
|
|
16,318
|
|
|
|
12,430
|
|
|
|
33,249
|
|
|
|
25,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and commissions
|
|
|
8,828
|
|
|
|
6,838
|
|
|
|
17,672
|
|
|
|
13,747
|
|
Other operating expenses
|
|
|
6,827
|
|
|
|
5,496
|
|
|
|
14,304
|
|
|
|
11,333
|
|
Depreciation and amortization
|
|
|
825
|
|
|
|
774
|
|
|
|
1,685
|
|
|
|
1,466
|
|
Impairment charge
|
|
|
—
|
|
|
|
2,384
|
|
|
|
—
|
|
|
|
2,384
|
|
Total operating expenses
|
|
|
16,480
|
|
|
|
15,492
|
|
|
|
33,661
|
|
|
|
28,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(162
|
)
|
|
|
(3,062
|
)
|
|
|
(412
|
)
|
|
|
(3,101
|
)
|
Interest expense
|
|
|
499
|
|
|
|
149
|
|
|
|
949
|
|
|
|
324
|
|
Loss before income taxes
|
|
|
(661
|
)
|
|
|
(3,211
|
)
|
|
|
(1,361
|
)
|
|
|
(3,425
|
)
|
Income tax benefit
|
|
|
(607
|
)
|
|
|
(654
|
)
|
|
|
(854
|
)
|
|
|
(684
|
)
|
Net loss
|
|
$
|
(54
|
)
|
|
$
|
(2,557
|
)
|
|
$
|
(507
|
)
|
|
$
|
(2,741
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.00
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.17
|
)
|
Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.17
|
)
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,266,342
|
|
|
|
16,383,630
|
|
|
|
16,253,848
|
|
|
|
16,432,376
|
|
Diluted
|
|
|
16,266,342
|
|
|
|
16,383,630
|
|
|
|
16,253,848
|
|
|
|
16,432,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend declared per share
|
|
$
|
—
|
|
|
$
|
0.06
|
|
|
$
|
—
|
|
|
$
|
0.12
|
|
The
accompanying Notes are an integral part of these Consolidated Financial Statements.
HOUSTON
WIRE & CABLE COMPANY
Consolidated
Statements of Cash Flows
(Unaudited)
(In
thousands)
|
|
Six Months
Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(507
|
)
|
|
$
|
(2,741
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Impairment charge
|
|
|
—
|
|
|
|
2,384
|
|
Depreciation and amortization
|
|
|
1,685
|
|
|
|
1,466
|
|
Amortization of unearned stock compensation
|
|
|
513
|
|
|
|
422
|
|
Provision for inventory obsolescence
|
|
|
111
|
|
|
|
357
|
|
Deferred income taxes
|
|
|
1,033
|
|
|
|
(695
|
)
|
Other non-cash items
|
|
|
99
|
|
|
|
27
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(3,624
|
)
|
|
|
4,738
|
|
Inventories
|
|
|
1,172
|
|
|
|
10,840
|
|
Book overdraft
|
|
|
(2,663
|
)
|
|
|
(3,210
|
)
|
Trade accounts payable
|
|
|
(2,132
|
)
|
|
|
1,972
|
|
Accrued and other current liabilities
|
|
|
(1,454
|
)
|
|
|
(1,757
|
)
|
Prepaids
|
|
|
(740
|
)
|
|
|
(736
|
)
|
Income taxes
|
|
|
(1,826
|
)
|
|
|
(207
|
)
|
Other operating activities
|
|
|
(59
|
)
|
|
|
211
|
|
Net cash (used in) provided by operating activities
|
|
|
(8,392
|
)
|
|
|
13,071
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Expenditures for property and equipment
|
|
|
(1,226
|
)
|
|
|
(557
|
)
|
Cash received for acquisition
|
|
|
134
|
|
|
|
—
|
|
Net cash used in investing activities
|
|
|
(1,092
|
)
|
|
|
(557
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Borrowings on revolver
|
|
|
165,025
|
|
|
|
124,312
|
|
Payments on revolver
|
|
|
(155,483
|
)
|
|
|
(133,408
|
)
|
Payment of dividends
|
|
|
(34
|
)
|
|
|
(1,990
|
)
|
Purchase of treasury stock
|
|
|
(24
|
)
|
|
|
(1,428
|
)
|
Net cash provided by (used in) financing activities
|
|
|
9,484
|
|
|
|
(12,514
|
)
|
|
|
|
|
|
|
|
|
|
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.
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 wire and cable, industrial fasteners,
hardware and related services to the U.S. market through twenty-two locations in fourteen states throughout the United States.
The Company has no other business activity.
The consolidated financial
statements as of June 30, 2017 and for the six months ended June 30, 2017 and 2016 have been prepared following accounting principles
generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion
of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of
the results of these interim periods have been included. The results of operations for the interim periods are not necessarily
indicative of the results that may be expected for the full year. All significant intercompany balances and transactions have been
eliminated. The Company has evaluated subsequent events through the time these financial statements in this Form 10-Q were filed
with the Securities and Exchange Commission (the “SEC”).
The preparation of
the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. The most significant estimates are those relating to the inventory
obsolescence reserve, the reserve for returns and allowances, vendor rebates and asset impairments. Actual results could differ
materially from the estimates and assumptions used for the preparation of the financial statements.
For further information,
refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2016 filed with the SEC.
Recent Accounting Pronouncements
The Financial Accounting
Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative
GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standard Update
(“ASU”) to communicate changes to the codification. The Company considers the applicability and impact of all ASUs.
The followings are those ASUs that are relevant to the Company.
In March 2017, the
FASB issued ASU 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 is effective for public companies for annual periods
beginning after December 15, 2017. The Company is currently evaluating the impact of adopting this ASU.
In January 2017, the
FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.”
The amendment in this ASU provides final guidance that simplifies the accounting for goodwill impairment for all entities by requiring
impairment charges to be based on the first step in today’s two-step impairment test under ASC 350. ASU No. 2017-04 is effective
for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for
annual and interim goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating the impact of adopting
as well as the timing of when it will adopt this ASU.
In August 2016, the
FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.”
The amendments in this ASU address eight cash flow issues with the intention of reducing current diversity in practice among business
entities. The Company will evaluate the eight issues in the amendment and determine if any changes are necessary for compliance.
ASU No. 2016-15 is effective for annual and interim periods beginning after December 15, 2017; early adoption is permitted and
should be applied retrospectively where practical. The Company will determine the date of adoption, once the Company has evaluated
the impact of this ASU.
In March 2016, the
FASB issued ASU No. 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.”
The new guidance addresses several aspects of the accounting for share-based payment award transactions, including: (a) the recognition
of the income tax effects of awards in the income statement when the awards vest, forfeit, or are settled, thus eliminating additional
paid-in-capital pools, (b) classification of awards as either equity or liabilities, and (c) classification on the statement of
cash flows. This update was effective for public companies for fiscal years beginning after December 15, 2016 with early adoption
permitted. The Company adopted this guidance in the first quarter of 2017 and there was no material impact on the consolidated
financial statements.
In February 2016,
the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance, a lessee will be required to recognize
assets and liabilities for leases greater than 1 year, both capital and operating leases. This update is effective for public companies
for fiscal years beginning after December 15, 2018 with early adoption permitted. The Company is currently evaluating the impacts
of adopting as well as the timing of when it will adopt this ASU.
In July 2015, the
FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory” (Topic 330), which changes guidance for subsequent
measurement of inventory within the scope of the update from the lower of cost or market to the lower of cost and net realizable
value. This update was effective for annual and interim periods beginning after December 15, 2016 and early adoption was permitted.
The Company adopted this guidance in the first quarter of 2017 and the adoption did not have a material impact on the Company’s
consolidated financial statements.
In May 2014, the FASB
issued ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic 606), which supersedes the revenue recognition
requirements in ASC Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU is based on the
principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure
about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant
judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The amendments in
the ASU must be applied using one of two retrospective methods and are effective for annual and interim periods beginning after
December 15, 2017. As the Company recognizes revenue only once product has shipped, it does not believe this ASU will have a significant
impact on its revenue recognition policy. The Company will adopt this ASU effective January 1, 2018 and is still evaluating its
impact on its financial position and results of operations and disclosures and which implementation method the Company will use.
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,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares for basic earnings (loss) per share
|
|
|
16,266,342
|
|
|
|
16,383,630
|
|
|
|
16,253,848
|
|
|
|
16,432,376
|
|
Effect of dilutive securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Weighted average common shares for diluted earnings (loss) per share
|
|
|
16,266,342
|
|
|
|
16,383,630
|
|
|
|
16,253,848
|
|
|
|
16,432,376
|
|
Stock awards to purchase 655,448 and 728,535
shares of common stock were not included in the diluted net income (loss) per share calculation for the three months ended June
30, 2017 and 2016, respectively, and 658,463 and 697,688 shares for the six months ended June 30, 2017 and 2016, respectively,
as their inclusion would have been anti-dilutive.
3. Business Combination
On October 3, 2016, the Company completed
the acquisition of Vertex from DXP Enterprises. The acquisition has been accounted for in accordance with ASC Topic 805, “Business
Combinations.” Accordingly, the total purchase price has been allocated to the assets acquired and liabilities assumed based
on their fair values as of the acquisition date. Vertex is a master distributor of industrial fasteners, specializing in corrosion
resistant and specialty alloy inch and metric threaded fasteners, rivets, and hose clamps, to the industrial market. Under the
terms of the acquisition agreement, the purchase price was $32.3 million, subject to an adjustment based on the net working capital
of Vertex as of the date of closing. On May 2, 2017, the Company and DXP Enterprises finalized the working capital adjustment and
a final purchase price of $32.2 million. The Company treated the acquisition as a stock purchase for tax purposes.
The amount of goodwill deductible for tax purposes is $1.0 million. The acquisition was funded by borrowing under the Company’s
loan agreement. This acquisition expands the Company’s product offerings to the industrial marketplace that purchases its
wire and cable products.
The following table
summarizes the current estimated fair value of the acquired assets and assumed liabilities recorded as of the date of acquisition.
The fair value of all assets acquired and liabilities assumed are preliminary and subject to the completion of an incremental analysis
of the fair values of the assets acquired and liabilities assumed:
|
|
At October 3, 2016
|
|
|
|
|
(In thousands)
|
|
Cash
|
|
$
|
3
|
|
Accounts receivable
|
|
|
2,626
|
|
Inventories
|
|
|
14,582
|
|
Prepaids
|
|
|
46
|
|
Property and equipment
|
|
|
59
|
|
Intangibles assets
|
|
|
9,161
|
|
Goodwill
|
|
|
10,266
|
|
Other assets
|
|
|
116
|
|
Total assets acquired
|
|
|
36,859
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
1,130
|
|
Accrued and other current liabilities
|
|
|
1,053
|
|
Deferred income taxes
|
|
|
2,440
|
|
Total liabilities assumed
|
|
|
4,623
|
|
|
|
|
|
|
Net assets purchased
|
|
$
|
32,236
|
|
The preliminary fair
values of the assets acquired and liabilities assumed were determined using the market, income and cost approaches. The market
approach used by the Company included prices at which comparable assets were purchased under similar circumstances. The income
approach indicated value for the subject net assets based on the present value of cash flows projected to be generated by the net
assets over their useful life. Projected cash flows were discounted at a market rate of return that reflects the relative risk
associated with the asset and the time value of money. The cost approach estimated value by determining the current cost of replacing
the asset with another of equivalent economic utility. The cost to replace a given asset reflected the estimated reproduction or
replacement cost for the asset, less an allowance for loss in value due to depreciation.
Intangible assets
acquired consist of customer relationships - $7.0 million and trade names - $2.1 million. Trade names are not being amortized,
while customer relationships are being amortized over a 9 year useful life. Amortization expense to be recognized on the acquired
intangible assets is expected to be $0.8 million per year in 2017 through 2024 and $0.6 million in 2025. Amortization expense was
$0.2 million during the three months ended June 30, 2017, and accumulated amortization on the acquired intangible assets was $0.6
million as of June 30, 2017.
The results of operations
of Vertex are included in the consolidated statement of operations prospectively from October 3, 2016. The unaudited pro forma
combined historical results of the Company, giving effect to the acquisition assuming the transaction was consummated on January
1, 2016, are as follows:
|
|
Six Months ended,
|
|
|
|
June 30, 2016
|
|
|
|
(In thousands, except earnings per share)
|
|
Sales
|
|
$
|
142,776
|
|
Net loss
|
|
|
(1,530
|
)
|
Basic loss per share
|
|
|
(0.09
|
)
|
Diluted loss per share
|
|
|
(0.09
|
)
|
The unaudited pro
forma combined historical results do not reflect any cost savings or other synergies that might result from the transaction. They
are provided for informational purposes only and are not necessarily indicative of the results of operations for future periods
or the results that actually would have been realized had the acquisition occurred as of January 1, 2016.
4.
Debt
On October 3, 2016,
in connection with the acquisition, HWC Wire & Cable Company, the Company, Vertex, and Bank of America, N.A., as agent and
lender, entered into a First Amendment (“the Loan Agreement Amendment”) amending the Fourth Amended and Restated Loan
and Security Agreement (“the 2015 Loan Agreement”). The Loan Agreement Amendment adds Vertex as a borrower (and lien
grantor) and provides the terms for inclusion of Vertex’s eligible accounts receivable and eligible inventory in the borrowing
base for the 2015 Loan Agreement. The 2015 Loan Agreement was expanded to include incremental availability on eligible accounts
receivable and inventory up to $5 million, which will be amortized quarterly, starting April 1, 2017, over two and a half years.
The 2015 Loan Agreement provides a $100 million revolving credit facility and expires on September 30, 2020. Under certain circumstances
the Company may request an increase in the commitment by an additional $50 million.
Portions of the loan
may be converted to LIBOR loans in minimum amounts of $1.0 million and integral multiples of $0.1 million. LIBOR loans bear interest
at the British Bankers Association LIBOR Rate plus 100 to 150 basis points based on availability, and loans not converted to LIBOR
loans bear interest at a fluctuating rate equal to the greatest of the agent’s prime rate, the federal funds rate plus 50
basis points, or 30-day LIBOR plus 150 basis points. The unused commitment fee is 25 basis points.
Availability under
the 2015 Loan Agreement is limited to a borrowing base equal to 85% of the value of eligible accounts receivable, plus the lesser
of 70% of the value of eligible inventory or 90% of the net orderly liquidation value percentage of the value of eligible inventory,
in each case less certain reserves. The 2015 Loan Agreement is secured by substantially all of the property of the Company, other
than real estate.
The 2015 Loan Agreement
includes, among other things, covenants that require the Company to maintain a specified minimum fixed charge coverage ratio, unless
certain availability levels exist. Additionally, the 2015 Loan Agreement allows for the unlimited payment of dividends and repurchases
of stock, subject to the absence of events of default and maintenance of a fixed charge coverage ratio and minimum level of availability.
The 2015 Loan Agreement contains certain provisions that may cause the debt to be classified as a current liability, in accordance
with GAAP, if availability falls below certain thresholds, even though the ultimate maturity date under the loan agreement remains
as September 30, 2020. At June 30, 2017, the Company was in compliance with the availability-based covenants governing its indebtedness.
The carrying amount of long term debt approximates
fair value as it bears interest at variable rates. The fair value is a Level 2 measurement as defined in ASC Topic 820, “Fair
Value Measurement.”
5. Income Taxes
The Company calculates its provision for income taxes during interim reporting periods by applying the
estimated annual effective tax rate for the full fiscal year to pre-tax income or loss, excluding discrete items, for the reporting
period. The Company’s effective tax rate increased in the six months ended June 30, 2017, compared to the six months ended
June 30, 2016, primarily due to changes in the estimated annual earnings for 2017 and the establishment of a full valuation allowance
on deferred tax assets not expected to be realized.
A valuation allowance
for deferred tax assets is recognized when it is more likely than not, that some or all of the benefit from the deferred tax assets
will not be realized. To assess that likelihood, the Company uses its current financial position, results of operations, both actual
and forecasted, the reversal of deferred tax liabilities, and tax planning strategies, as well as the current and forecasted business
economics to determine whether a valuation allowance is required.
The Company has assessed
both positive and negative evidence to estimate whether sufficient future taxable income will be generated and concluded that it
is more likely than not that the deferred tax assets will not be realized and, as such, has recorded a full valuation allowance
as of June 30, 2017. The impact on income tax expense for the three and six months ended June 30, 2017 is immaterial. Going forward,
management will continue to assess the available evidence to determine whether it is more likely than not that sufficient future
taxable income will be generated to realize the deferred tax assets.
6. Stockholders’ Equity
No dividend was declared during the first
or second quarter 2017. Dividends paid were $2.0 million during the six months ended June 30, 2016.
7. Stock Based
Compensation
Stock Option Awards
There were no stock option awards granted
during the first six months of 2017 or 2016.
Restricted Stock Awards and Restricted Stock Units
Following the Annual
Meeting of Stockholders on May 5, 2017, the Company approved the award of restricted stock units with a value of $60,000 to each
non-employee director who was elected or re-elected, for an aggregate of 46,875 restricted stock units. Issuance of the restricted
stock unit awards was subject to adoption of a new stock plan, as the Company’s 2006 Stock Plan expired on May 1, 2017. On
August 4, 2017, the Company adopted the 2017 Stock Plan. See Note 9. Each award of restricted stock units will vest at the date
of the 2018 Annual Meeting of Stockholders. Until the new stock plan has been approved by the Company’s stockholders, each
restricted stock unit will entitle the non-employee director to receive, at such time as the director’s service on the board
terminates for any reason, a cash payment equal to the market value of one share of the Company’s common stock, together
with dividend equivalents from the date of grant, at the time of payment. Following stockholder approval of the new stock plan,
instead of such cash payment each non-employee director will be entitled to receive a number of shares of the Company’s common
stock equal to the number of vested restricted stock units, together with dividend equivalents from the date of grant, at such
time as the director’s service on the board terminates for any reason. The Company intends to submit the 2017 Stock Plan
for approval by stockholders at the 2018 Annual Meeting. Assuming such approval, at the time the awards vest, they will represent
the right to receive shares of common stock.
On January 30, 2017,
the Board of Directors granted to the Company’s President and CEO 60,000 shares of restricted stock and performance stock
units with respect to an additional 40,000 shares of common stock. The 60,000 shares of restricted stock vest in one-third increments
on January 30, 2018, December 19, 2018 and December 19, 2019, in each case as long as Mr. Pokluda is then employed by the Company.
The performance stock units vest on December 31, 2019 based on and subject to the Company’s achievement of cumulative EBITDA
and stock price performance goals over a three-year period, as long as Mr. Pokluda is then employed by the Company, and upon vesting
will be settled in shares of our common stock. Any dividends declared will be accrued and paid to Mr. Pokluda if and when the related
shares vest.
Total stock-based
compensation cost was $0.2 million for each of the three months ended June 30, 2017 and 2016 and $0.5 million and $0.4 million
for the six months ended June 30, 2017 and 2016, respectively, and is included in salaries and commissions.
8. Commitments
and Contingencies
As part of the acquisition
of Southwest Wire Rope and Southern Wire made in 2010, the Company assumed the liability for the post-remediation monitoring of
the water quality at one of the acquired facilities in Louisiana. The expected liability of $0.1 million at June 30, 2017 relates
to the cost of the monitoring, which the Company estimates will be incurred in the next year, and also the cost to plug the wells.
Remediation work was completed prior to the acquisition in accordance with the requirements of the Louisiana Department of Environmental
Quality.
The Company had outstanding
under the 2015 Loan Agreement, letters of credit totaling $1.1 million to certain vendors as of June 30, 2017.
The Company, along
with many other defendants, has been named in a number of lawsuits in the state courts of Minnesota, North Dakota, and South Dakota
alleging that certain wire and cable which may have contained asbestos caused injury to the plaintiffs who were exposed to this
wire and cable. These lawsuits are individual personal injury suits that seek unspecified amounts of money damages as the sole
remedy. It is not clear whether the alleged injuries occurred as a result of the wire and cable in question or whether the Company,
in fact, distributed the wire and cable alleged to have caused any injuries. The Company maintains general liability insurance
that, to date, has covered the defense of and all costs associated with these claims. In addition, the Company did not manufacture
any of the wire and cable at issue, and the Company would rely on any warranties from the manufacturers of such cable if it were
determined that any of the wire or cable that the Company distributed contained asbestos which caused injury to any of these plaintiffs.
In connection with ALLTEL’s sale of the Company in 1997, ALLTEL provided indemnities with respect to costs and damages associated
with these claims that the Company believes it could enforce if its insurance coverage proves inadequate.
There are no legal
proceedings pending against or involving the Company that, in management’s opinion, based on the current known facts and
circumstances, are expected to have a material adverse effect on the Company’s consolidated financial position, cash flows,
or results of operations.
9. Subsequent Events
On August 4,
2017 the Board of Directors of the Company adopted a new stock plan, the Houston Wire & Cable Company 2017 Stock Plan,
subject to stockholder approval. In addition, the Company approved an award of $50,000 of restricted stock units to a new
member of senior management, based on the closing price on the date of grant. These units vest in one third increments, on
the third, fourth and fifth anniversaries of the date of grant, as long as the recipient is still employed by the
Company. Assuming the stockholders approve the 2017 Stock Plan at the 2018 Annual Meeting, upon vesting each restricted stock
unit will entitle the recipient to receive one share of the Company’s common stock, together with dividend equivalents
from the date of grant.
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, 2016.
Overview
We are a provider
of industrial products including electrical and mechanical wire and cable, industrial fasteners, hardware and related services
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 and asset impairments. 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, 2016 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 months ended June
30, 2017.
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, 2016, 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.
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,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
78.4
|
%
|
|
|
80.1
|
%
|
|
|
78.5
|
%
|
|
|
79.7
|
%
|
Gross profit
|
|
|
21.6
|
%
|
|
|
19.9
|
%
|
|
|
21.5
|
%
|
|
|
20.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and commissions
|
|
|
11.7
|
%
|
|
|
10.9
|
%
|
|
|
11.4
|
%
|
|
|
10.8
|
%
|
Other operating expenses
|
|
|
9.0
|
%
|
|
|
8.8
|
%
|
|
|
9.3
|
%
|
|
|
8.9
|
%
|
Depreciation and amortization
|
|
|
1.1
|
%
|
|
|
1.2
|
%
|
|
|
1.1
|
%
|
|
|
1.2
|
%
|
Impairment charge
|
|
|
—
|
|
|
|
3.8
|
%
|
|
|
—
|
|
|
|
1.9
|
%
|
Total operating expenses
|
|
|
21.8
|
%
|
|
|
24.8
|
%
|
|
|
21.8
|
%
|
|
|
22.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(0.2
|
)%
|
|
|
(4.9
|
)%
|
|
|
(0.3
|
)%
|
|
|
(2.4
|
)%
|
Interest expense
|
|
|
0.7
|
%
|
|
|
0.2
|
%
|
|
|
0.6
|
%
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(0.9
|
)%
|
|
|
(5.1
|
)%
|
|
|
(0.9
|
)%
|
|
|
(2.7
|
)%
|
Income tax benefit
|
|
|
(0.8
|
)%
|
|
|
(1.0
|
)%
|
|
|
(0.6
|
)%
|
|
|
(0.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(0.1
|
)%
|
|
|
(4.1
|
)%
|
|
|
(0.3
|
)%
|
|
|
(2.2
|
)%
|
Note:
Due to rounding, percentages may not add
up to total operating expenses, operating loss, loss before income taxes or net loss.
Comparison of the Three Months Ended June 30, 2017 and 2016
Sales
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
(Dollars in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Sales
|
|
$
|
75.6
|
|
|
$
|
62.5
|
|
|
$
|
13.2
|
|
|
|
21.1
|
%
|
Our sales for the
second quarter increased 21.1% to $75.6 million in 2017 from $62.5 million in 2016. The primary reasons for the increase were $8.1million
in sales from Vertex and an 8.1% increase in organic sales. We estimate that, when adjusted for the fluctuation in metal prices,
organic sales for 2017 were up 6.1%. We estimate sales for our project business, which targets end markets, encompassing Environmental
Compliance, Engineering & Construction, Industrials, Utility Power Generation, and Mechanical Wire Rope, decreased 22%, or
approximately 24% on a metals adjusted basis, from 2016. Maintenance, Repair, and Operations (MRO) sales increased 19%, or approximately
17% when adjusted for metals, over 2016.
Gross Profit
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
(Dollars in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Gross profit
|
|
$
|
16.3
|
|
|
$
|
12.4
|
|
|
$
|
3.9
|
|
|
|
31.3
|
%
|
Gross margin
|
|
|
21.6
|
%
|
|
|
19.9
|
%
|
|
|
|
|
|
|
|
|
Gross profit increased
31.3% to $16.3 million in 2017 from $12.4 million in 2016. The increase in gross profit was primarily attributable to the increased
sales in the second quarter of 2017 due to the acquisition of Vertex. Gross margin (gross profit as a percentage of sales) increased
to 21.6% in 2017 from 19.9% in 2016 primarily due to the higher margins earned by Vertex.
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
June
30,
|
|
(Dollars in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and commissions
|
|
$
|
8.8
|
|
|
$
|
6.8
|
|
|
$
|
2.0
|
|
|
|
29.1
|
%
|
Other operating expenses
|
|
|
6.8
|
|
|
|
5.5
|
|
|
|
1.3
|
|
|
|
24.2
|
%
|
Depreciation and amortization
|
|
|
0.8
|
|
|
|
0.8
|
|
|
|
0.1
|
|
|
|
6.6
|
%
|
Impairment charge
|
|
|
—
|
|
|
|
2.4
|
|
|
|
(2.4
|
)
|
|
|
(100.0
|
)%
|
Total operating expenses
|
|
$
|
16.5
|
|
|
$
|
15.5
|
|
|
$
|
1.0
|
|
|
|
6.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
as a percent of sales
|
|
|
21.8
|
%
|
|
|
24.8.
|
%
|
|
|
|
|
|
|
|
|
Note: Due to rounding, numbers may not add up to
total operating expenses.
Salaries and commissions
increased $2.0 million between the periods primarily due to the additional personnel at Vertex and increased commissions due to
higher sales and gross profit.
Other operating expenses increased $1.3
million primarily due to $1.0 million of additional other operating expenses at Vertex and also due to higher sales and higher
healthcare costs.
Depreciation and amortization increased
slightly primarily due to the amortization of intangibles acquired in the acquisition.
The impairment charge in 2016 relates to
the write-off of goodwill at the HWC reporting unit and the write-down of trade names at the Southern Wire reporting unit.
Operating expenses as a percentage of sales
decreased to 21.8% in 2017 from 24.8% in 2016, as operating expenses increased at a lower rate than the increase in sales and there
was no impairment charge in 2017.
Interest Expense
Interest expense increased
to $0.5 million in 2017 from $0.1 million in 2016 due to higher debt as a result of the Vertex acquisition and to an increase in
the average effective interest rate. Average debt was $72.6 million in 2017 compared to $32.0 million in 2016. The average effective
interest rate was 2.7% in 2017 compared to 1.7% in 2016.
Income Taxes
The income
tax benefit of $0.6 million decreased compared to the $0.7 million income tax benefit in the prior year period. The
effective income tax rate increased to 91.8% in 2017 from 20.4% in 2016, primarily due to a change in the estimated annual
earnings for 2017, the cumulative effect of which, is reflected in the current quarter. The benefit in 2017 is offset by the
establishment of a full valuation allowance on the net deferred tax assets as of June 30, 2017. The 2016 income
tax benefit was net of the non-deductible portion of the goodwill impairment charge of $0.5 million.
Net Loss
We incurred a net loss of $0.1 million
in 2017 compared to a net loss of $2.6 million in 2016. The 2016 loss included an impairment charge of $2.4 million.
Comparison of the Six Months Ended June 30, 2017 and 2016
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
(Dollars in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Sales
|
|
$
|
154.4
|
|
|
$
|
127.2
|
|
|
$
|
27.2
|
|
|
|
21.4
|
%
|
Our sales for the
six month period increased 21.4% to $154.4 million in 2017 from $127.2 million in 2016. The primary reasons for the increase were
$15.9 million in sales from Vertex and an 8.9% increase in organic sales. We estimate that, when adjusted for the fluctuation in
metal prices, organic sales for 2017 were up approximately 7.9% compared to the first six months of 2016. 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 decreased 26%, or approximately 27% on a metals adjusted basis,
from 2016. MRO increased 22%, or approximately 21% when adjusted for metals, from 2016.
Gross Profit
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
(Dollars in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Gross profit
|
|
$
|
33.2
|
|
|
$
|
25.8
|
|
|
$
|
7.4
|
|
|
|
28.7
|
%
|
Gross margin
|
|
|
21.5
|
%
|
|
|
20.3
|
%
|
|
|
1.2
|
%
|
|
|
|
|
Gross profit increased 28.7% to $33.2 million
in 2017 from $25.8 million in 2016. The increase in gross profit was attributable to the gross profit generated by Vertex, higher
organic sales and higher product gross margin. Gross margin increased to 21.5% in 2017 from 20.3% in 2016, primarily due to the
higher gross margins generated by Vertex.
Operating Expenses
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
(Dollars in millions)
|
|
2017
|
|
|
2016
|
|
|
Change
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and commissions
|
|
$
|
17.7
|
|
|
$
|
13.7
|
|
|
$
|
3.9
|
|
|
|
28.6
|
%
|
Other operating expenses
|
|
|
14.3
|
|
|
|
11.3
|
|
|
|
3.0
|
|
|
|
26.2
|
%
|
Depreciation and amortization
|
|
|
1.7
|
|
|
|
1.5
|
|
|
|
0.2
|
|
|
|
14.9
|
%
|
Impairment charge
|
|
|
—
|
|
|
|
2.4
|
|
|
|
(2.4
|
)
|
|
|
(100.0
|
)%
|
Total operating expenses
|
|
$
|
33.7
|
|
|
$
|
28.9
|
|
|
$
|
4.7
|
|
|
|
16.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses as a percent of sales
|
|
|
21.8
|
%
|
|
|
22.7
|
%
|
|
|
(0.9
|
)%
|
|
|
|
|
Note: Due to rounding, numbers may not add up to
total operating expenses.
Salaries and commissions increased $3.9
million between the periods due to the additional personnel from the Vertex acquisition, as well as increased commissions, and
higher distribution salaries, both resulting from increased sales and gross profit.
Other operating expenses increased $3.0
million, primarily due to the additional other operating expenses at Vertex, as well as increased distribution expenses due to
increased sales.
Depreciation and amortization increased
slightly primarily due to the additional intangible assets acquired in the Vertex acquisition.
The impairment charge in 2016 relates to
the write-off of goodwill at the HWC reporting unit and the write-down of trade names at the Southern Wire reporting unit.
Operating expenses as a percentage of sales
decreased to 21.8% in 2017 from 22.7% in 2016, as operating expenses increased at a lower rate than the increase in sales.
Interest Expense
Interest expense increased
192.9% to $0.9 million in 2017 from $0.3 million in 2016 due to higher average debt levels from the Vertex acquisition and higher
interest rates. Average debt was $70.3 million in 2017 compared to $34.4 million in 2016. The average effective interest rate rose
to 2.6% in 2017 from 1.7% in the prior year period.
Income Taxes
The income tax
benefit of $0.9 million increased from the $0.7 million benefit in 2016. The effective income tax rate increased to 62.7% in
2017 from 20.0% in 2016. The benefit in 2017 is offset by the establishment of a full valuation allowance on the net deferred
tax assets as of June 30, 2017. The 2016 income tax benefit was net of the non-deductible portion of the goodwill
impairment charge of $0.5 million.
Net Loss
The net loss of $0.5 million in 2017 was
lower than the loss of $2.7 million in 2016. The 2016 loss included an impairment charge of $2.4 million.
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. If we turn our inventory approximately three times a year, 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, 2017 and 2016
Our net cash used
in operating activities was $8.4 million for the six months ended June 30, 2017 compared to net cash provided by operations of
$13.1 million in 2016. We had a net loss of $0.5 million in 2017 compared to net loss of $2.7 million in 2016.
Changes in our operating
assets and liabilities resulted in cash used in operating activities of $11.3 million in 2017. An increase in accounts receivable
of $3.6 million due to the increase in sales, a decrease in book overdraft of $2.7 million, a decrease in accounts payable of $2.1
million, an increase in income taxes payable of $1.8 million and a decrease in accrued and other liabilities of $1.5 million were
the main uses of cash.
Net cash used in investing
activities was $1.1 million in 2017 compared to $0.6 million in 2016. The 2017 amount included capital expenditures made at Vertex.
Net cash provided
by financing activities was $9.5 million in 2017 compared to cash used of $12.5 million in 2016. Net borrowings on the revolver
of $9.5 million were the primary source for financing activities in 2017.
Indebtedness
Our principal source
of liquidity at June 30, 2017 was working capital of $113.5 million compared to $102.1 million at December 31, 2016. We also had
additional available borrowing capacity of approximately $20.0 million at June 30, 2017 and $25.6 million at December 31, 2016
under our loan agreement. The availability at June 30, 2017 is net of outstanding letters of credit of $1.1 million.
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 and approval of our 2017 Stock Plan, we may decide to issue additional shares of common or preferred stock to raise
funds.
Contractual Obligations
The following table summarizes our loan
commitment at June 30, 2017.
In thousands
|
|
Total
|
|
|
Less than
1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
More
than
5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
69,930
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
69,930
|
|
|
$
|
—
|
|
There were no material changes in operating
lease obligations or non-cancellable purchase obligations since December 31, 2016.