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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, ~~2019~~2020

☐

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

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)

HOUSTON WIRE & CABLE COMPANY

(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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, par value $0.001 per share	HWCC	The Nasdaq Stock Market
Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒

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 ☐

Indicate by check mark whether the registrant has submitted electronically 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 such files). YES ☒ 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 ☒☐ 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES ☐ NO ☒

The aggregate market value of the voting stock (common stock) held by non-affiliates of the registrant as of June 30, ~~2019~~2020 was $8331,~~886~~938,~~290~~992.

At March 1, ~~2020~~2021, there were 16,~~556~~882,~~950~~ 826 shares of the registrant’s common stock, $.001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this report incorporates by reference specific portions of the registrant’s definitive Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 525, ~~2020~~2021.

HOUSTON WIRE & CABLE COMPANY

Form 10-K

For the Fiscal Year Ended December 31, ~~2019~~2020

INDEX

PART I.		2
Item 1.	Business	23
Item 1A.	Risk Factors	56
Item 1B.	Unresolved Staff Comments	810
Item 2.	Properties	810
Item 3.	Legal Proceedings	810
Item 4.	Mine Safety Disclosures	810
	Supplemental Item. Executive Officers of the Registrant	810
PART II.		9
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	911
Item 6.	Selected Financial Data	1012
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1214
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	2123
Item 8.	Consolidated Financial Statements and Supplementary Data	2224
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	2325
Item 9A.	Controls and Procedures	2325
Item 9B.	Other Information	2627
PART III.		26
Item 10.	Directors, Executive Officers and Corporate Governance	2627
Item 11.	Executive Compensation	2627
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	2627
Item 13.	Certain Relationships and Related Transactions, and Director Independence	2627
Item 14.	Principal ~~Accounting~~Accountant Fees and Services	2628
PART IV.		27
Item 15.	Exhibits and Financial Statement Schedules	2728
Item 16.	Form 10-K Summary	2728

PART I

ITEM 1. BUSINESS

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 sell electrical products through wholesale electrical distributors, ~~steel wire rope~~ and ~~synthetic~~fastener products through ~~rigging~~industrial distributors. ~~wholesalers~~As of December 31, ~~fastener~~2020, ~~products~~we ~~through~~also ~~industrial~~sold ~~distributors,~~mechanical wire and cable, fabricated steel wire rope and synthetic lifting and hardware products ~~to distributors and end users~~. 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.

Our wide product selection and specialized services support our position in the supply chain between manufacturers and the customer. The breadth and depth of wire and cable, fasteners, ~~lifting products~~ and related hardware that we offer requires significant warehousing resources and a large number of SKUs (stock-keeping units). While manufacturers may have the space and capabilities to maintain a large supply of inventory, we do not believe that any single manufacturer has the breadth and depth of product that we offer. More importantly, manufacturers historically have not offered the services that our customers need, such as complimentary custom cutting, cable coiling, ~~custom manufactured slings and harnesses,~~ paralleling, bundling, striping, cable management for large capital projects, and same day shipment, and do not have multiple distribution centers across the nation.

Our Cable Management Program addresses our customers’ requirement for sophisticated and efficient just-in-time product management for large capital projects. This program entails purchasing and storing dedicated inventory so our customers have immediate product availability for the duration of their projects. Advantages of this program include extra pre-allocated safety stock, firm pricing, zero cable surplus and just-in-time delivery. Used on large construction and capital expansion projects, our Cable Management Program combines the expertise of our cable specialists with dedicated project inventory and superior logistics to allow complex projects to be completed on time, within budget and with minimal residual waste.

History

We were founded in 1975 and have a long history of exceptional customer service, broad product selection and high levels of product expertise. In 1987, we completed our first initial public offering and were subsequently purchased in 1989 by ALLTEL Corporation and in 1997 by investment funds affiliated with Code, Hennessy & Simmons LLC. In 2006, we completed our second initial public offering. In 2010, we purchased Southwest Wire Rope LP (“Southwest”), its general partner Southwest Wire Rope GP LLC and its wholly owned subsidiary, Southern Wire (“Southern”), and subsequently merged the acquired businesses into our operating subsidiary. In 2016, we ~~completed~~acquired ~~the acquisition of~~ Vertex Corporate Holdings, Inc., and its subsidiaries (“Vertex”) from DXP Enterprises. Vertex is a master distributor of industrial fasteners, and this acquisition expanded our product offerings to the industrial marketplace that purchases our wire and cable products. In December 2020, we completed the sale of substantially all of the assets of Southern, and in March 2021, we completed the sale of substantially all of the assets of Southwest (other than Southwest accounts receivable), to Southern Rigging Companies, LLC.

Products

We offer products in most categories of electrical wire and cable, including: continuous and interlocked armor cable; control and power cable; electronic wire and cable; flexible and portable cord; instrumentation and thermocouple cable; lead and high temperature cable; medium voltage cable; premise and category wire and cable, primary and secondary aluminum distribution cable, ~~steel wire rope and wire rope slings,~~ as well as ~~synthetic fiber rope slings, chain, shackles, related~~ hardware and corrosion resistant products including inch and metric bolts, screws, nuts, washers, rivets and hose clamps. We also offer private branded products, including our proprietary brand LifeGuard, a low-smoke, zero-halogen cable. Our products are used in repair and replacement work, also referred to as Maintenance, Repair and Operations (“"MRO”"), and related projects, larger-scale projects in the utility, industrial and infrastructure markets and a diverse range of industrial applications including communications, energy, engineering and construction, general manufacturing, marine construction and marine transportation, mining, infrastructure, oilfield services, petrochemical, transportation, utility, wastewater treatment and food and beverage.

Targeted Markets

Our business is driven, in part, by the strength, growth prospects and activity in the end-markets in which our products are used, which are primarily in the continental United States, where we target the utility, industrial and infrastructure markets.

Industrial Market. The industrial market is one of the largest segments of the U.S. economy and is comprised of a diverse base of manufacturing and production companies. The largest driver of our success in this market results from the level of U.S. investment in upstream, midstream and downstream oil and gas exploration, transportation and production. We provide a wide variety of products specifically designed for use in manufacturing, metal/mineral, and oil and gas markets.

Utility Market. The utility market includes large investor-owned utilities, rural cooperatives and municipal power authorities. We are not a significant distributor of power lines used for the transmission of electricity but have products in our portfolio that are used in this sector. We sell our core products for the construction of power plants and the related pollution control equipment used to comply with environmental standards as well as plant modernizations implemented to extend the life of power generation facilities. Our customers utilize our cable management services to supply the wire and cable required in the construction of new power plants and upgrading of existing power plants.

Infrastructure Market. Investments in the development, construction and maintenance of infrastructure markets (including commercial buildings, education and health care; air, ground and rail transportation; telecommunications, and wastewater) are opportunities for our product and service offerings.

Distribution Logistics

Our national distribution presence and value-added services make us an essential partner in the supply chain for our suppliers, customers and end users. We have successfully expanded our business from the original location in Houston, Texas to 2219 locations nationwide, which includes ~~four~~two third-party logistics providers. Our standard practice is to process customers’' orders the same day they are received. Our strategically located distribution centers generally allow for ground delivery nationwide within 24 hours of shipment. Orders are delivered through a variety of distribution methods, including less-than-truck-load, truck-load, air or parcel service providers, direct from supplier, cross-dock shipments and customer pick-up. Freight costs are typically borne by our customers. Due to our shipment volume, we have preferred pricing relationships with our contract carriers.

Customers

During ~~2019~~ 2020, we served over 108,~~000~~500 customers, shipping approximately 4441,000 SKUs to approximately 14,~~500~~ 000 customer locations nationwide. No customer represented 10% or more of our ~~2019~~2020 sales.

Suppliers

We obtain products from leading suppliers and believe we have strong relationships with our top suppliers. Starting in mid-2020, we reduced our purchases from one of our top suppliers to a single product line. We source a portion of our products from offshore. While alternative sources are available for the vast majority of our products, we have strategically concentrated our purchases with our top suppliers in order to maximize product quality, delivery dependability, purchasing efficiencies, and vendor rebates. As a result, in ~~2019~~2020, approximately 5155% of our purchases came from ~~five~~ten suppliers. We do not believe we are dependent on any one supplier for any of the industrial products that we sell.

~~Our top five suppliers in 2019 were AmerCable Incorporated, Belden Inc., General Cable Corporation, Nexans Energy USA, Inc. and Southwire Company.~~Sales

~~Sales~~We market our products and related services through an inside sales force situated in our regional offices, a field sales force focused on key geographic markets, and regional sales agencies. By operating under a decentralized structure, region managers are able to adapt quickly to market-specific occurrences, allowing us to compete effectively with local competitors. We believe the knowledge, experience and tenure of our sales force are critical to serving our fragmented and diverse customer and end-user base.

We market our products and related services through an inside sales force situated in our regional offices, a field sales force focused on key geographic markets, and regional sales agencies. By operating under a decentralized structure, region managers are able to adapt quickly to market-specific occurrences, allowing us to compete effectively with local competitors. We believe the knowledge, experience and tenure of our sales force are critical to serving our fragmented and diverse customer and end-user base.Competition

~~Competition~~The industrial products market remains very competitive and fragmented, with several hundred electrical wire and cable, and fastener competitors serving this market. The product offerings and levels of service from the other providers of product with which we compete vary widely at the national, regional or local levels. In addition to the direct competition with other product providers, we also face, on a varying basis, competitors that sell products directly or through multiple distribution channels to end-users or other resellers.

The industrial products market remains very competitive and fragmented, with several hundred electrical wire and cable, steel wire rope, and fastener competitors serving this market. The product offerings and levels of service from In the ~~other~~markets ~~providers~~that ~~of product with which~~ we ~~compete~~sell ~~vary~~our ~~widely~~industrial ~~at the national~~products, ~~regional~~competition oris ~~local~~primarily ~~levels.~~based Inon ~~addition to the direct competition with other~~ product ~~providers~~line breadth, ~~we also face~~quality, onproduct ~~a varying basis~~availability, service ~~competitors~~capabilities ~~that~~and ~~sell products directly or through multiple distribution channels to end-users or other resellers~~price.

~~In the markets that we sell our industrial products, competition is primarily based on product line breadth, quality, product availability, service capabilities and price.~~Employees

~~Employees~~At December 31, 2020, we had 338 employees. Our sales and marketing staff accounted for 152 employees, including 25 field sales personnel and 94 inside sales and technical support personnel. We believe that our employee relations are good.

At December 31, 2019, we had 432 employees. Our sales and marketing staff accounted for 201 employees, including 30 field sales personnel and 127 inside sales and technical support personnel. We believe that our employee relations are good.4

3Website Access

~~Website~~We maintain ~~Access~~an internet website at www.houwire.com. We make available, under the “Investor Relations” tab on our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports, as well as proxy and information statements, as soon as reasonably practicable after such documents are electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”). Information contained on our website is not part of, and should not be construed as being incorporated by reference into, this Annual Report on Form 10-K.

We maintain an internet website at www.houwire.com. We make available, under the “Investor Relations” tab on our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports, as well as proxy and information statements, as soon as reasonably practicable after such documents are electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”). Information contained on our website is not part of, and should not be construed as being incorporated by reference into, this Annual Report on Form 10-K.Government Regulation

~~Government~~We are ~~Regulation~~subject to regulation by various federal, state and local agencies. We believe we are in compliance in all material respects with existing applicable statutes and regulations affecting environmental issues and our employment, workplace health and workplace safety practices.

We are subject to regulation by various federal, state and local agencies. We believe we are in compliance in all material respects with existing applicable statutes and regulations affecting environmental issues and our employment, workplace health and workplace safety practices.5

4ITEM 1A. RISK FACTORS

~~ITEM~~In addition 1Ato other information in this Annual Report on Form 10-K, the following risk factors should be carefully considered in evaluating our business, because such factors may have a significant impact on our business, operating results, cash flows and financial condition. ~~RISK~~As ~~FACTORS~~a result of the risks set forth below and elsewhere in this Annual Report, actual results could differ materially from those projected in any forward-looking statements.

In addition to other information in this Annual Report on Form 10-K, the following risk factors should be carefully considered in evaluating our business, because such factors may have a significant impact on our business, operating results, cash flows Industry and ~~financial~~General ~~condition.~~Economic ~~As a result of the risks set forth below and elsewhere in this Annual Report, actual results could differ materially from those projected in any forward-looking statements.~~Risks

~~Downturns~~The COVID-19 inpandemic, ~~capital~~efforts ~~spending~~to ~~and~~mitigate ~~cyclicality~~or indisrupt the ~~markets~~pandemic weand ~~serve~~the ~~have~~related ~~had~~weak, ~~and~~or ~~could~~weakening ~~continue~~of, toeconomic conditions have had a ~~material~~negative ~~adverse~~impact ~~effect~~ on our ~~financial~~business, ~~condition~~and the duration and ~~results~~extent of ~~operations~~the pandemic could prolong or increase the adverse impact.

~~The~~ ~~majority~~We depend ofon ~~our~~continued ~~products~~demand ~~are~~from ~~used~~our incustomers ~~the~~to ~~construction,~~purchase ~~maintenance,~~our ~~repair~~products and ~~operation~~services ofand ~~facilities,~~on ~~plants~~our ~~and~~customers’ ~~projects~~ability into ~~the~~pay. The ~~communications,~~ongoing ~~energy,~~COVID-19 ~~engineering~~pandemic ~~and~~has ~~construction,~~caused ~~general~~a ~~manufacturing,~~slowdown ~~infrastructure,~~of ~~oil~~economic ~~and~~activity ~~gas,~~around ~~marine~~the ~~construction~~world, ~~marine~~disruptions ~~transportation,~~in ~~mining,~~global ~~oilfield~~supply ~~services,~~chains and ~~transportation,~~significant ~~utility,~~volatility ~~wastewater~~and ~~treatment~~disruption ~~and~~of ~~food~~financial markets, and ~~beverage~~we ~~industries.~~expect ~~The~~these ~~demand~~impacts may continue for ~~our~~the ~~products~~foreseeable ~~and~~future. The ~~services~~COVID-19 ~~depends~~pandemic tohas had a ~~large~~particularly ~~degree~~adverse impact on the ~~capital~~oil ~~spending~~and ~~levels~~gas ofindustry, ~~end-users~~which inis ~~these~~one ~~markets.~~of ~~Many~~our ofmost ~~these~~important end-~~users~~markets. A ~~defer~~dramatic ~~capital~~reduction ~~expenditures~~in oroil ~~cancel~~and ~~projects~~gas ~~during~~prices ~~economic~~has ~~downturns~~led orto ~~periods~~reduced ofinvestment ~~uncertainty.~~in ~~In addition~~upstream, ~~certain~~midstream ofand ~~the~~downstream ~~markets~~oil weand ~~serve~~gas ~~are cyclical~~exploration, transportation ~~which~~and ~~affects~~production ~~capital~~and ~~spending~~lessened bythe ~~end-users~~demand infor ~~these~~our ~~industries~~products and services.

We ~~have~~Because the ~~risks~~duration ~~associated~~of ~~with~~the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the pandemic’s impact on our ~~customers~~operations, financial performance and liquidity, as well as its impact on our ability to successfully execute our business strategy, remains uncertain and difficult to predict. Further, the ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to: governmental, business, suppliers', and individuals’ ~~access~~actions that have been and continue to ~~credit~~be taken in response to the pandemic; the impact of the pandemic and actions taken in response on global and regional economies, travel, and economic activity; general economic uncertainty in the global markets we serve and volatility in financial markets; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subsides. While vaccines have been approved and are being made available, it is unclear how broadly they will be accepted or how quickly they will lead to an end to the pandemic. As a result, it is currently not practicable to predict the precise nature or the extent of any continued adverse impact of the COVID-19 pandemic on our business, and on the global economy as a whole. It is also currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels. As a result, we expect COVID-19 to continue to negatively impact our operating results in future periods, including by increasing many of the risks described below. However, we are currently unable to provide any assurance as to the magnitude and duration of any such impact.

~~Poor~~Downturns in ~~credit~~capital ~~market~~spending ~~conditions may adversely impact the availability of construction~~ and ~~other~~cyclicality ~~project financing, upon which many of our customers depend, resulting~~ in ~~project~~the ~~cancellations~~markets orwe ~~delays.~~serve ~~Our~~have ~~utility~~had and ~~industrial~~could ~~customers~~continue ~~may also face limitations when trying~~ to ~~access~~have ~~the~~a ~~credit~~material ~~markets~~adverse toeffect ~~fund~~on ~~ongoing operations or capital projects. Credit constraints experienced by~~ our financial ~~customers~~condition ~~may result in lost revenues, reduced gross margins for us~~ and, inresults ~~some~~of ~~cases, higher than expected bad debt losses~~operations.

WeThe majority ~~have~~of ~~risks~~our ~~associated~~products ~~with~~are ~~inventory~~used in the construction, maintenance, repair and operation of facilities, plants and projects in the communications, energy, engineering and construction, general manufacturing, infrastructure, oil and gas, marine construction, marine transportation, mining, oilfield services, transportation, utility, wastewater treatment and food and beverage industries. The demand for our products and services depends to a large degree on the capital spending levels of end-users in these markets. Many of these end-users defer capital expenditures or cancel projects during economic downturns or periods of uncertainty. In addition, certain of the markets we serve are cyclical, which affects capital spending by end-users in these industries.

Our operating ~~business~~results requires us to maintain substantial levels of inventory. We must identify the right mix and quantity of products to keep in our inventory to fulfill customer orders. Failure to do so could adversely affect our sales and earnings. However, if our inventory levels are ~~too~~affected ~~high,~~by wefluctuations ~~are at risk that unexpected changes~~ in ~~circumstances,~~commodity ~~such as a shift in market demand, drop in~~ prices ~~or loss of a customer, could have a material adverse impact on the net realizable value of our inventory~~.

~~Our~~Copper, steel, aluminum, nickel and petrochemical products are components of the products we sell. Fluctuations in the costs of these and other commodities have historically affected our operating results. ~~are~~If commodity prices decline, the net realizable value of our existing inventory could be reduced, and our gross profit could be adversely affected. byTo ~~fluctuations~~the inextent higher commodity prices result in increases in the costs we pay for our products, we attempt to reflect the increase in the prices we charge our customers. While we historically have been able to pass most of these cost increases on to our customers, to the extent we are unable to do so in the future, it could have a material adverse effect on our operating results. In addition, if commodity costs increase, our customers may delay or decrease their purchases of our products.

~~Copper, steel, aluminum, nickel and petrochemical products~~ Our sales are impacted ~~components~~by of the ~~products~~level weof ~~sell.~~activity ~~Fluctuations~~ in the ~~costs~~oil ~~of these~~ and ~~other~~gas ~~commodities have historically affected our operating results~~industry. If commodity prices decline, the net realizable value of our existing inventory could be reduced, and our gross profit could be adversely affected. To the extent higher commodity prices result in increases in the costs we pay for our products, we attempt to reflect the increase in the prices we charge our customers. While we historically have been able to pass most of these cost increases on to our customers, to the extent we are unable to do so in the future, it could have a material adverse effect on our operating results. In addition, if commodity costs increase, our customers may delay or decrease their purchases of our products.

~~Our~~We estimate that approximately one-third of our sales ~~are impacted~~ bydirectly depend upon the level of capital and operating expenditures in the oil and gas industry, including capital and other expenditures in connection with exploration, drilling, production, gathering, transportation, refining and processing operations. Demand for the products we distribute is sensitive to the level of exploration, development and production activity of, and the corresponding capital and other expenditures by, oil and gas companies. A material decline in oil or gas prices, inability to access capital, and consolidation within the industry could all depress levels of exploration, development and production activity and, therefore, could lead to a decrease in our sales due to curtailed capital and MRO expenditures.

We estimate that approximately one-third of our sales directly depend upon the level of capital and operating expenditures in the oil and gas industry, including capital and other expenditures in connection with exploration, drilling, production, gathering, transportation, refining and processing operations. Demand for the products we distribute is sensitive to the level of exploration, development and production activity of, and the corresponding capital and other expenditures by, oil and gas companies. A material decline in oil or gas prices, inability to access capital, and consolidation within the industry could all depress levels of exploration, development and production activity and, therefore, could lead to a decrease in our sales due to curtailed capital and MRO expenditures. 6

IfEpidemics and weother ~~are~~events ~~unable~~outside ~~to maintain~~ our ~~relationships~~control, ~~with~~and our ~~customers,~~inability itto ~~could~~successfully ~~have~~mitigate athe ~~material~~effects ~~adverse~~of ~~effect~~such onevents, ~~our~~may ~~financial~~harm ~~results~~our business.

WeAll of ~~rely~~our onfacilities ~~customers~~are subject to ~~purchase~~natural ~~our~~or ~~industrial~~man-made ~~products.~~disasters ~~The~~such ~~number~~as floods, ~~size~~fires, ~~business~~acts ~~strategy~~of ~~and~~terrorism, ~~operations~~failures of ~~these~~utilities and ~~customers~~epidemics ~~vary~~or ~~widely~~pandemics ~~from~~such ~~market~~as tothe ~~market~~coronavirus COVID-19. ~~Our~~If ~~success~~such ~~depends~~an ~~heavily~~event onwere to occur, our ~~ability~~business could be harmed due to ~~identify~~the ~~and~~event ~~respond~~or our inability to ~~our~~successfully ~~customers’~~mitigate ~~needs~~the effects of the particular event. Potential harms include the loss of business continuity, the loss of business data and damage to infrastructure.

InOur production ~~2019,~~and ~~our~~supply ~~ten~~chains ~~largest~~could ~~customers~~be ~~accounted~~severely ~~for~~affected ~~approximately~~if ~~37% of~~ our ~~sales.~~employees Ifor wethe ~~were~~regions toin ~~lose~~which ~~one or more of~~ our ~~large~~facilities ~~customers,~~ or ifsuppliers ~~one~~are located orare ~~more~~affected ofby ~~our~~a ~~large~~significant ~~customers~~outbreak ~~were~~of toany ~~significantly~~disease, ~~reduce~~epidemic ~~their~~or ~~purchases~~pandemic. ~~from~~For usexample, ~~and~~a wefacility ~~were~~could ~~unable~~be toclosed ~~replace~~by government ~~the~~authorities ~~lost~~for ~~sales on similar terms, we could experience~~ a ~~significant~~sustained ~~loss~~period of ~~revenue and profits. In addition~~time, ifsome ~~one~~ or ~~more~~all of our ~~key~~workforce ~~customers~~could ~~failed~~be orunavailable ~~were~~due ~~unable~~ to ~~pay~~quarantine, wefear of ~~could~~catching ~~experience~~the adisease ~~write-off~~ or ~~write-down~~other offactors, ~~the~~and ~~related receivables~~local, ~~which~~national ~~could~~or ~~adversely~~international ~~affect~~transportation ~~our~~or ~~earnings.~~other Weinfrastructure ~~participate~~could ~~with~~be affected, ~~national~~leading ~~marketing~~to ~~groups~~delays ~~and~~or ~~engage~~loss inof ~~joint~~production. ~~promotional~~In ~~sales~~addition, ~~activities~~our ~~with~~suppliers ~~the~~and ~~members~~customers ofare ~~those~~subject ~~groups.~~to ~~Any~~similar ~~exclusion of us from~~risks, orwhich could ~~refusal~~lead to ~~allow~~a usshortage toof ~~participate~~inventory inor components, ~~such~~or ~~national marketing groups could have~~ a ~~material~~reduction ~~adverse~~in ~~effect on~~ our ~~sales~~customers’ ~~and~~demand for our ~~results of operations~~products.

5An increase in competition could decrease sales or earnings.

AnWe operate ~~inability~~in toa ~~obtain~~highly ~~the~~competitive industry. We compete directly with national, regional and local providers of industrial products. Competition ~~that~~is primarily focused in the local service area and is generally based on product line breadth, quality, product availability, service capabilities and price. Some of our existing competitors have, and new market entrants may have, greater financial and marketing resources than we ~~distribute~~do. To the extent existing or future competitors seek to gain or retain market share by reducing prices, we may be required to lower our prices, thereby adversely affecting our financial results. Existing or future competitors also may seek to compete with us for acquisitions, which could ~~result~~have inthe ~~lost~~effect ~~revenues~~of ~~and~~increasing ~~reduced~~the ~~profits~~price and ~~damage~~reducing the number of suitable acquisitions. Other companies, including our ~~relationships~~ current customers, could seek to compete directly with our private branded products, which could adversely affect our sales of those products and ultimately our financial results. Our existing customers, as well as suppliers, could seek to compete with us by offering services similar to ours, as well as the increasing trend of our suppliers to sell direct to our customer and industry consolidation, which could adversely affect our market share and our financial results. In addition, competitive pressures resulting from economic conditions and the industry trend toward consolidation could adversely affect our growth and profit margins.

~~In 2019, we sourced products from approximately 376 suppliers. However, we have adopted a strategy~~ Changes to ~~concentrate~~the ~~our purchases with a small number of suppliers in order to maximize product quality, delivery dependability, purchasing efficiencies and vendor rebates~~U. ~~As a result, in 2019 approximately 51% of our purchases came from five suppliers~~S. ~~If any of these suppliers changes its sales strategy or decides to terminate its business relationship with us~~tax, ~~our~~tariff ~~sales~~ and ~~earnings~~import/export ~~could~~regulations bemay ~~adversely~~have affected unless and until we were able to establish relationships with suppliers of comparable products. In addition, if we are not able to obtain the products we distribute from either our current suppliers or other competitive sources, we could experience a ~~loss~~negative ofeffect ~~revenue,~~on ~~reduction in profits and damage to~~ our ~~relationships~~results ~~with our customers. Supply shortages may occur as a result~~ of unanticipated demand or production cutbacks, shortages of raw materials, labor disputes or weather conditions affecting products or shipments, transportation disruptions or other reasons beyond our controloperations. ~~When shortages occur, suppliers often allocate products among their customers, and our allocations might not be adequate to meet our customers’ needs.~~

~~Loss~~We import a relatively small but growing percentage of ~~key~~our ~~personnel~~wire orand cable products, as well as a significant portion of our ~~inability~~hardware products, tofrom ~~attract~~foreign manufacturers. Changes resulting from the 2017 Tax Cuts and ~~retain~~Jobs ~~new~~Act ~~qualified~~could ~~personnel~~disrupt supply chains on imported goods which could ~~hurt~~result in limited availability of supply, or cost competitiveness of supply. In addition, recent proposals regarding tariffs have created uncertainty about future trade policies, and any changes in import tariffs or other trade regulations could have a negative impact on our ~~ability~~cash flow and require us to ~~operate~~change our sourcing and ~~grow~~supply ~~successfully~~chain strategies, adversely affecting our profitability.

~~Our success is highly dependent upon the services of James L. Pokluda III, our President~~ Business and ~~Chief~~Operational Executive Officer, and Christopher M. Micklas, our Chief Financial Officer. Our success will continue to depend to a significant extent on our executive officers, key management and sales personnel. We do not have key man life insurance covering any of our executive officers. We may not be able to retain our executive officers, key personnel or attract additional qualified management and sales personnel. The loss of any of our executive officers or our other key management and sales personnel or our inability to recruit and retain qualified personnel could hurt our ability to operate and make it difficult to maintain our market share and to execute our growth strategies.Risks

AWe have ~~change~~risks inassociated ~~vendor~~with ~~rebate programs could adversely affect our gross margins and results of operations~~inventory.

~~The~~Our business ~~terms~~requires onus ~~which~~to wemaintain ~~purchase~~substantial ~~products~~levels ~~from many~~ of ~~our~~inventory. ~~suppliers~~We ~~entitle~~must usidentify tothe ~~receive~~right amix ~~rebate~~and ~~based~~quantity onof ~~the~~products ~~volume~~to ofkeep in our ~~purchases~~inventory to fulfill customer orders. ~~These~~Failure ~~rebates~~to ~~effectively~~do ~~reduce~~so could adversely affect our ~~costs~~sales ~~for~~and ~~products~~earnings. IfHowever, ~~suppliers~~if ~~adversely~~our ~~change~~inventory levels ~~the~~are ~~terms~~too ofhigh, ~~some~~we orare ~~all~~at ofrisk ~~these~~that ~~programs~~unexpected changes in circumstances, ~~the~~such ~~changes~~as ~~may~~a ~~lower~~shift ~~our~~in ~~gross~~market ~~margins~~demand, ondrop ~~products~~in weprices or ~~sell~~loss ~~and~~of ~~may~~a customer, could have ana material adverse ~~effect~~impact on ~~our~~the ~~operating~~net ~~results~~realizable value of our inventory.

IfWe have werisks ~~encounter~~associated ~~difficulties~~ with our ~~management~~customers’ ~~information~~access ~~systems,~~to ~~including cyber-attacks, we would experience problems managing our business~~credit.

WePoor credit ~~believe~~market ~~our~~conditions ~~management~~may ~~information~~adversely ~~systems~~impact ~~are~~the aavailability ~~competitive~~of ~~advantage~~construction inand ~~maintaining~~other aproject ~~leadership~~financing, ~~position~~upon inwhich ~~the~~many ~~industrial supply industry. We rely upon~~ of our ~~management~~customers ~~information systems to manage and replenish inventory~~depend, ~~determine~~resulting ~~pricing,~~in ~~fill~~project ~~and~~cancellations ~~ship~~or ~~orders~~delays. onOur autility ~~timely basis~~ and ~~coordinate~~industrial ~~our~~customers ~~sales~~may ~~and~~also ~~marketing~~face ~~activities.~~limitations when Iftrying weto ~~experience~~access ~~problems~~the ~~with~~credit ~~our~~markets ~~management~~to ~~information~~fund ~~systems,~~ongoing weoperations ~~could experience product shortages, diminished inventory control~~ or ancapital ~~increase in accounts receivable~~projects. ~~Any~~Credit ~~failure~~constraints experienced by ~~us to maintain~~ our customers ~~management~~may ~~information~~result ~~systems~~in ~~could~~lost ~~adversely~~revenues, ~~impact~~reduced ~~our~~gross ~~ability~~margins tofor ~~attract~~us and, ~~serve~~in ~~customers~~some ~~and~~cases, ~~would cause us to incur~~ higher ~~operating~~than ~~costs~~expected ~~and~~bad ~~experience~~debt ~~reduced profitability~~losses.

AnIf we ~~increase~~are inunable ~~competition~~to maintain our relationships with our customers, it could ~~decrease~~have ~~sales~~a ormaterial ~~earnings~~adverse effect on our financial results.

We rely ~~operate~~on incustomers ato ~~highly~~purchase ~~competitive~~our ~~industry. We compete directly with national, regional and local providers of~~ industrial products. ~~Competition~~The ~~is primarily focused in the local service area and is generally based on product line breadth~~number, ~~quality~~size, ~~product~~business ~~availability,~~strategy ~~service capabilities~~ and ~~price.~~operations ~~Some~~ of ~~our~~these ~~existing~~customers ~~competitors~~vary widely ~~have,~~from ~~and new~~ market ~~entrants may have, greater financial and marketing resources than we do. To the extent existing or future competitors seek~~ to ~~gain or retain~~ market. ~~share~~Our bysuccess ~~reducing~~depends ~~prices,~~heavily weon ~~may be required to lower~~ our ~~prices,~~ability ~~thereby adversely affecting our financial results. Existing or future competitors also may seek~~ to ~~compete~~identify ~~with us for acquisitions, which could have the effect of increasing the price~~ and ~~reducing~~respond ~~the number of suitable acquisitions. Other companies, including our current customers, could seek~~ to ~~compete directly with~~ our ~~private branded products, which could adversely affect our sales of those products and ultimately our financial results. Our existing~~ customers,’ as well as suppliers, could seek to compete with us by offering services similar to ours, as well as the increasing trend of our suppliers to sell direct to our customer and industry consolidation, which could adversely affect our market share and our financial resultsneeds. ~~In addition, competitive pressures resulting from economic conditions and the industry trend toward consolidation could adversely affect our growth and profit margins.~~

~~We may not be able to successfully identify acquisition candidates, effectively integrate newly acquired businesses into our operations or achieve expected profitability from our acquisitions.~~7

ToIn 2020, ~~supplement~~ our ~~growth,~~ten welargest ~~intend~~customers toaccounted ~~selectively~~for ~~pursue~~approximately ~~acquisition~~33% ~~opportunities~~of our sales. If we ~~are~~were ~~not~~to ~~successful~~lose inone ~~finding~~or ~~attractive~~more ~~acquisition~~of ~~candidates~~our ~~that~~large wecustomers, or ~~can~~if ~~acquire~~one onor ~~satisfactory~~more ~~terms,~~of orour iflarge wecustomers ~~cannot~~were ~~complete~~to ~~those~~significantly ~~acquisitions~~reduce ~~that~~their wepurchases ~~identify~~from us, and we ~~will~~were ~~not~~unable ~~be able~~ to ~~realize~~replace the lost ~~benefit~~sales on similar terms, we could experience a significant loss of ~~this~~revenue ~~growth~~and ~~strategy~~profits. In addition, if one or more of our key customers failed or were

6unable to pay, we could experience a write-off or write-down of the related receivables, which could adversely affect our earnings. We participate with national marketing groups and engage in joint promotional sales activities with the members of those groups. Any exclusion of us from, or refusal to allow us to participate in, such national marketing groups could have a material adverse effect on our sales and our results of operations.

Acquisitions involve numerous possible risks, including unforeseen difficulties in integrating operations, technologies, services, accounting and personnel; the diversion of financial and management resources from existing operations; unforeseen difficulties related to entering geographic regions or target markets where we do not have prior experience; the potential loss of key employees; and the An inability to ~~generate~~obtain sufficient profits to offset acquisition or investment-related expenses. If we finance acquisitions by issuing equity securities or securities convertible into equity securities, our existing stockholders could be diluted, which, in turn, could adversely affect the ~~market~~products ~~price~~that ~~of our stock. If~~ we ~~finance~~distribute ~~an acquisition with debt, it~~ could result in ~~higher~~lost ~~leverage~~revenues and ~~interest~~reduced ~~costs.~~profits ~~As a result, if we fail to evaluate~~ and ~~execute~~damage ~~acquisitions~~our ~~properly, we might not achieve the anticipated benefits of these acquisitions, and we may incur costs in excess of what we anticipate, and goodwill impairments may result~~relationships with customers.

WeIn 2020, ~~are~~we ~~anticipating~~sourced ~~growth~~products infrom ~~the~~approximately ~~businesses~~344 suppliers. However, we ~~acquired~~have adopted a strategy to concentrate our purchases with a small number of suppliers in ~~2010~~order to maximize product quality, delivery dependability, purchasing efficiencies and invendor ~~2016~~rebates. ~~However~~ As a result, ~~the~~in ~~Southwest reporting~~2020 ~~unit~~approximately ~~had~~55% anof ~~impairment~~our purchases came from ten suppliers. If any of ~~intangibles~~these insuppliers ~~2019~~changes its sales strategy or decides to terminate its business relationship with us, our sales and ~~2018~~earnings could be adversely affected unless and ~~goodwill~~until we inwere ~~2015~~able to establish relationships with suppliers of comparable products. In addition, ~~and~~if ~~the~~we ~~Southern reporting~~are ~~unit~~not ~~had~~able to obtain the products anwe ~~impairment~~distribute from either our current suppliers or other competitive sources, we could experience a loss of ~~intangibles~~revenue, reduction in ~~2013~~profits and ~~2016.~~damage ~~Future~~to ~~goodwill~~our ~~and~~relationships ~~tradename~~with ~~impairments~~our customers. Supply shortages may occur as a result of unanticipated demand or production cutbacks, ~~should~~shortages ~~the~~of ~~acquired~~raw ~~businesses not~~materials, ~~achieve~~labor ~~their~~disputes ~~currently~~or ~~forecasted~~weather ~~growth~~conditions affecting products or ~~profitability~~shipments, ~~targets~~transportation disruptions or other reasons beyond our control. When shortages occur, ~~which~~suppliers ~~would~~often ~~adversely~~allocate ~~affect~~products among their customers, and our ~~results~~allocations ofmight ~~operations~~not be adequate to meet our customers' needs.

WeLoss of ~~may~~key bepersonnel ~~subject~~or our inability to ~~product~~attract ~~liability~~and ~~claims~~retain ~~that~~new qualified personnel could behurt ~~costly~~our ability to operate and ~~time~~grow ~~consuming~~successfully.

WeOur ~~sell~~success ~~industrial~~depends to ~~products.~~a Assignificant aextent ~~result,~~on ~~from~~the ~~time~~services toof ~~time~~our weexecutive ~~have~~officers, ~~been~~key ~~named~~management asand asales ~~defendant~~personnel. inWe ~~lawsuits~~do ~~alleging~~not ~~that~~have ~~these~~key ~~products~~man life ~~caused~~insurance ~~physical~~covering ~~injury~~any orof ~~injury~~our toexecutive ~~property~~officers. We ~~rely~~may onnot ~~product~~be ~~warranties~~able ~~and~~to ~~indemnities~~retain ~~from~~our ~~the~~executive ~~product manufacturers~~officers, askey ~~well~~personnel asor ~~insurance~~attract additional ~~that~~qualified wemanagement ~~maintain,~~and tosales ~~protect~~personnel. usThe ~~from~~loss ~~these~~of ~~claims.~~any ~~However,~~of ifour ~~manufacturers’~~executive ~~warranties~~officers ~~and~~or ~~indemnities~~our other key management and sales personnel or our ~~insurance~~inability ~~coverage~~to ~~are~~recruit ~~not~~and ~~available~~retain orqualified ~~inadequate~~personnel could hurt our ability to ~~cover~~operate ~~every~~and ~~claim,~~make it ~~could~~difficult to ~~have~~maintain anour ~~adverse~~market ~~effect~~share onand to execute our ~~operating~~growth ~~results~~strategies.

~~Changes~~A change toin ~~the~~vendor ~~U.S.~~rebate ~~tax,~~programs ~~tariff~~could ~~and~~adversely ~~import/export~~affect ~~regulations~~our ~~may~~gross ~~have~~margins aand ~~negative effect on our~~ results of operations.

WeThe terms ~~import~~on awhich ~~relatively~~we ~~small~~purchase ~~but~~products ~~growing~~from ~~percentage~~many of our ~~wire~~suppliers ~~and~~entitle ~~cable~~us ~~products,~~to asreceive ~~well~~a asrebate abased ~~significant~~on ~~portion~~the volume of our ~~hardware products, from foreign manufacturers~~purchases. These ~~Changes~~rebates ~~resulting~~effectively ~~from~~reduce ~~the~~our ~~2017~~costs ~~Tax~~for ~~Cuts~~products. ~~and~~If ~~Jobs~~suppliers ~~Act~~adversely ~~could~~change ~~disrupt~~the ~~supply~~terms ~~chains on imported goods which could result in limited availability~~ of ~~supply,~~some or ~~cost~~all ~~competitiveness~~ of ~~supply.~~these ~~In addition~~programs, the ~~recent~~changes ~~tariff~~may ~~proposals~~lower ~~have~~our ~~created~~gross ~~uncertainty~~margins ~~about~~on ~~future~~products ~~trade~~we ~~policies~~sell and ~~any~~may ~~changes in import tariffs or other trade regulations, could~~ have aan ~~negative~~adverse ~~impact~~effect on our ~~cash~~operating ~~flow, and require us to change our sourcing and supply chain strategies, and adversely affect our profitability~~results.

WeInformation Technology ~~may be adversely affected by the potential discontinuation of LIBOR.~~ Risks

InIf we ~~July~~encounter ~~2017,~~difficulties ~~the~~with ~~Financial~~our ~~Conduct~~management ~~Authority~~information ~~in the United Kingdom~~systems, ~~which~~including ~~regulates LIBOR~~cyber-attacks, ~~publicly~~we ~~announced~~would ~~that~~experience itproblems ~~will~~managing our ~~no longer compel or persuade banks to make LIBOR submissions after 2021~~business. This announcement is expected to effectively end LIBOR rates beginning in 2022, and, while other alternatives have been proposed, it is unclear which, if any, alternative to LIBOR will be available and widely accepted in major financial markets.

~~Our~~ ~~loan~~We believe ~~agreement~~our ~~permits~~management ~~both~~information ~~base~~systems ~~rate~~are ~~borrowings~~a competitive advantage in maintaining a leadership position in the industrial supply industry. We rely upon our management information systems to manage and ~~LIBOR~~replenish ~~borrowings~~inventory, determine pricing, fill and ship orders on a timely basis and coordinate our sales and marketing activities. If we experience problems with our management information systems, we could experience product shortages, diminished inventory control or an ~~alternative~~increase toin ~~LIBOR is~~accounts ~~not~~receivable. As ~~available~~a ~~and~~result ~~widely~~of ~~accepted~~the ~~after~~COVID-19 ~~2021~~pandemic, remote access to our ~~ability~~networks and systems has increased substantially. All management information systems are vulnerable to ~~borrow~~security atthreats, ansuch ~~alternative~~as hacking, viruses, malicious software, and other unlawful attempts to ~~the~~disrupt or ~~base~~gain ~~rate~~access ~~under~~to ~~our~~these ~~loan~~systems. ~~agreement~~The steps we have taken to mitigate these risks may not be ~~adversely~~effective ~~impacted~~to prevent breaches of our information technology infrastructure, some of which is managed by third parties, and we may be more vulnerable to a successful cyber-attack or information security incident while our workforce works remotely. Breaches of our IT infrastructure could lead to disruptions in our business, potentially including the ~~costs~~theft, ~~associated~~destruction, ~~with~~loss, ~~any~~misappropriation, or release of confidential employee and customer information stored on our IT systems or confidential data or other business information and subject us to potential ~~future~~lawsuits ~~borrowings~~or ~~may~~other ~~increase~~material legal liabilities. These disruptions could adversely affect our operations, financial position, and results of operations.

~~Epidemics and other events outside our control, and our inability to successfully mitigate the effects of such events, may harm our business.~~8

~~All~~Legal ~~of our facilities are subject to natural or man-made disasters such as floods, fires, acts of terrorism, failures of utilities~~ and ~~epidemics~~Regulatory or pandemics such as the coronavirus COVID-19. If such an event were to occur, our business could be harmed due to the event or our inability to successfully mitigate the effects of the particular event. Potential harms include the loss of business continuity, the loss of business data and damage to infrastructure.Risks

~~Our production and supply chains could be severely affected if our employees or the regions in which our~~We ~~facilities~~may ~~or suppliers are located are affected by a significant outbreak of any disease, epidemic or pandemic. For example, a facility could~~ be ~~closed~~subject ~~by government authorities for a sustained period of time, some or all of our workforce could be unavailable due~~ to ~~quarantine,~~product ~~fear~~liability ofclaims ~~catching~~that ~~the disease or other factors, and local, national or international transportation or other infrastructure~~ could be ~~affected,~~costly ~~leading to delays or loss of production. In addition, our suppliers~~ and ~~customers~~time ~~are subject to similar risks, which could lead to a shortage of inventory or components, or a reduction in our customers’ demand for our products~~consuming.

7We sell industrial products. As a result, from time to time we have been named as a defendant in lawsuits alleging that these products caused physical injury or injury to property. We rely on product warranties and indemnities from the product manufacturers, as well as insurance that we maintain, to protect us from these claims. However, if manufacturers' warranties and indemnities and our insurance coverage are not available or inadequate to cover every claim, it could have an adverse effect on our operating results.

~~ITEM~~Credit and ~~1B.~~Liquidity ~~UNRESOLVED STAFF COMMENTS~~Risks

~~None~~We may be adversely affected by the expected discontinuation of LIBOR.

~~ITEM~~In November 2020, ICE Benchmark Administration, the administrator of U.S. Dollar LIBOR, announced that, following required consultations, (i) it intends to cease publication of 1-week and 2-month USD LIBOR at the end of 2021 and (ii) subject to compliance with applicable regulations, it does not intend to cease publication of the remaining USD LIBOR tenors until June 30, 2023. ~~PROPERTIES~~This announcement is expected to effectively end LIBOR rates beginning June 2023, and, while other alternatives have been proposed, it is unclear which, if any, alternative to LIBOR will be available and widely accepted in major financial markets. Our loan agreement permits both base rate borrowings and LIBOR borrowings. If an alternative to LIBOR is not available and widely accepted after 2023, our ability to borrow at an alternative to the base rate under our loan agreement may be adversely impacted, and the costs associated with any potential future borrowings may increase.

~~Facilities~~9

~~We operate out of twenty-two distribution centers strategically located throughout the United States with approximately 922,000 square feet of distribution space~~ITEM 1B. UNRESOLVED WeSTAFF own three facilities in Houston, Texas, including our corporate headquarters, and two facilities in Louisiana. All of the other facilities are leased, except for our four locations operated by third-party logistics providers, which are provided under service agreements. Nineteen of the facilities, in addition to containing inventory for re-sale, house knowledgeable sales staff. We believe that our properties are in good operating condition and adequately serve our current business operations. COMMENTS

~~ITEM 3~~None. ~~LEGAL PROCEEDINGS~~

~~From time to time, we are involved in lawsuits that are brought against us in the normal course of business~~ITEM 2. ~~We are not currently a party to any legal proceedings that we expect, either individually or in the aggregate, to have a material adverse effect on our business or financial condition.~~ PROPERTIES

~~ITEM 4. MINE SAFETY DISCLOSURES~~Facilities

~~Not~~We operate ~~applicable~~out of 19 distribution centers strategically located throughout the United States with approximately 885,000 square feet of distribution space. We own two facilities in Houston, Texas, including our corporate headquarters. All of the other facilities are leased, except for our two locations operated by third-party logistics providers, which are provided under service agreements. Seventeen of the facilities, in addition to containing inventory for re-sale, house knowledgeable sales staff. We believe that our properties are in good operating condition and adequately serve our current business operations.

~~SUPPLEMENTAL~~ ITEM 3. ~~EXECUTIVE~~LEGAL ~~OFFICERS OF THE REGISTRANT~~PROCEEDINGS

Name/Office	Age	Business Experience During Last 5 Years
James L. Pokluda III President and Chief Executive Officer	55	Chief Executive Officer since January 2012 and President since May 2011. Prior thereto, Vice President Sales & Marketing of the Company from April 2007 until May 2011.
Christopher M. Micklas Chief Financial Officer, Treasurer and Secretary	52	Chief Financial Officer, Treasurer and Secretary since April 2018. Prior thereto, Chief Financial Officer and Chief Accounting Officer at Par Pacific Holdings, Inc. from December 2013 until April 2017.

From time to time, we are involved in lawsuits that are brought against us in the normal course of business. We are not currently a party to any legal proceedings that we expect, either individually or in the aggregate, to have a material adverse effect on our business or financial condition.

8ITEM 4. MINE SAFETY DISCLOSURES

~~PART II~~Not applicable.

SUPPLEMENTAL ITEM 5. EXECUTIVE ~~MARKET~~OFFICERS ~~FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES~~ OF ~~EQUITY~~THE ~~SECURITIES~~REGISTRANT

Our common stock is listed on The NASDAQ Global Market under the symbol “HWCC”. As of January 31, 2020, there were 1,498 holders of record, including participants in security position listings. This figure does not include those beneficial holders whose shares may be held by brokerage firms and clearing agencies.

Name/Office	Age	Business Experience During Last 5 Years

James L. Pokluda III President and Chief Executive Officer	56	Chief Executive Officer since January 2012 and President since May 2011. Prior thereto, Vice President Sales & Marketing of the Company from April 2007 until May 2011.

Eric W. Davis Vice President and Chief Financial Officer	59	Vice President, Chief Financial Officer, Treasurer and Secretary since November 2020. Prior thereto, Interim Chief Financial Officer from June 2020 until November 2020, President – Heavy Lift from October 2015 until June 2020 and Vice President & Controller from December 2001 until October 2015.

Jerry M. Zurovchak Senior Vice President and Chief Operating Officer	53	Senior Vice President and Chief Operating Officer since June 2020. Prior thereto, Director, Operations from September 2019 June 2020.

~~Purchases of Equity Securities by the Issuer and Affiliated Purchasers~~10

The board authorized a stock repurchase program of $25 million in March 2014. The program has no expiration date. Purchases under the stock repurchase program were suspended in November 2016 and reactivated in August 2019. At December 31, 2019, there was $8.1 million available under the program to repurchase stock. PART II

~~Dividend~~ITEM 5. MARKET ~~Policy~~FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

~~Holders of our~~ Our common stock ~~are~~is ~~entitled~~listed toon ~~receive~~The ~~dividends~~NASDAQ ~~when,~~Global asMarket ~~and~~under ifthe ~~declared~~symbol by“HWCC”. As ~~our Board~~ of ~~Directors.~~December We31, ~~paid~~2020, athere were ~~quarterly~~1,457 ~~cash~~holders ~~dividend~~of ~~from~~record, ~~August~~including ~~2007~~participants ~~until~~in ~~August~~security ~~2016~~position listings. ~~The~~This ~~Board~~figure ofdoes ~~Directors~~not ~~determined~~include tothose ~~suspend~~beneficial holders ~~the~~whose ~~regular~~shares ~~dividend~~may inbe ~~November~~held ~~2016,~~by tobrokerage ~~redeploy~~firms ~~funds~~and ~~for~~clearing ~~other purposes, including the Vertex acquisition~~agencies.

~~As a holding company, our only source~~ Purchases of ~~funds~~Equity toSecurities ~~pay~~by ~~dividends is distributions from our operating subsidiaries. Our loan agreement does not limit~~ the ~~amount~~Issuer ~~of dividends we may pay or stock we may repurchase, as long as we are not in default under the loan agreement~~ and weAffiliated ~~maintain defined levels of fixed charge coverage and/or availability.~~Purchasers

~~Securities~~The board ~~Authorized~~authorized ~~for~~a ~~Issuance~~stock repurchase program of $25 million in March 2014. The program has no expiration date. Purchases under the ~~Equity~~stock ~~Compensation~~repurchase ~~Plans~~program were suspended in November 2016 and reactivated in August 2019. At December 31, 2020, there was $8.1 million available under the program to repurchase stock.

~~The information called for by this Item regarding securities available for issuance is provided in response to Item 12.~~Dividend Policy

9We paid a quarterly cash dividend from August 2007 until August 2016. The Board of Directors determined to suspend the regular dividend in November 2016, to redeploy funds for other purposes. We do not intend to resume the payment of cash dividends in the foreseeable future.

~~ITEM~~Securities Authorized 6.for ~~SELECTED~~Issuance ~~FINANCIAL~~under ~~DATA~~Equity Compensation Plans

~~You should read the following selected financial~~ The information ~~together~~called with our consolidated financial statements and the related notes and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Form 10-K. We have derived the consolidated statement of operations data for ~~each~~by ~~of the years ended December 31, 2019, 2018 and 2017, and the consolidated balance sheet data at December 31, 2019 and 2018, from our audited financial statements, which are included in~~ this ~~Form~~Item ~~10-K.~~regarding Wesecurities ~~have~~available ~~derived the consolidated statement of operations data~~ for ~~each~~issuance ofis ~~the~~provided ~~years ended December 31, 2016 and 2015, and the consolidated balance sheet data at December 31, 2017, 2016 and 2015 from our audited financial statements, which are not included~~ in ~~this~~response ~~Form~~to ~~10-K~~Item 12.

	Year Ended December 31,
	2019		2018		2017			2016			2015
	(Dollars in thousands, except share data)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales	$	338,286	$	356,858	$	317,697		$	261,644		$	308,133
Cost of sales		258,364		271,650		245,035			208,694			242,223
Gross profit		79,922		85,208		72,662			52,950			65,910
Operating expenses:
Salaries and commissions		37,180		38,110		36,570			29,369			28,537
Other operating expenses		33,238		30,962		28,716			24,714			25,023
Depreciation and amortization		2,502		2,178		2,772			3,018			2,915
Impairment charge		120		60		—			2,384			3,417
Total operating expenses		73,040		71,310		68,058			59,485			59,892
Operating income (loss)		6,882		13,898		4,604			(6,535	)		6,018
Interest expense		3,057		2,907		2,073			845			901
Income (loss) before income taxes		3,825		10,991		2,531			(7,380	)		5,117
Income tax expense (benefit)		1,275		2,355		2,753			(1,374	)		3,073
Net income (loss)	$	2,550	$	8,636	$	(222	)	$	(6,006	)	$	2,044
Earnings (loss) per share:
Basic	$	0.16	$	0.53	$	(0.01	)	$	(0.37	)	$	0.12
Diluted	$	0.15	$	0.52	$	(0.01	)	$	(0.37	)	$	0.12
Weighted average common shares outstanding:
Basic		16,433,644		16,389,876		16,269,611			16,345,679			17,012,560
Diluted		16,552,866		16,523,599		16,269,611			16,345,679			17,067,593

10ITEM 6. SELECTED FINANCIAL DATA

	As of December 31,
	2019		2018		2017		2016		2015
	(Dollars in thousands)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents	$	4,096	$	1,393	$	—	$	—	$	—
Accounts receivable, net	$	56,965	$	59,793	$	57,396	$	44,677	$	46,250
Inventories, net	$	114,069	$	94,325	$	88,115	$	79,783	$	75,777
Total assets	$	240,148	$	203,057	$	194,039	$	175,870	$	159,113
Book overdraft (1)	$	—	$	—	$	3,028	$	3,181	$	3,701
Total debt	$	83,500	$	71,316	$	73,555	$	60,388	$	39,188
Stockholders’ equity	$	103,628	$	100,678	$	90,744	$	90,131	$	100,001

You should read the following selected financial information together with our consolidated financial statements and the related notes and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this Form 10-K. We have derived the consolidated statement of operations data for each of the years ended December 31, 2020, 2019 and 2018, and the consolidated balance sheet data at December 31, 2020 and 2019, from our audited financial statements, which are included in this Form 10-K. We have derived the consolidated statement of operations data for each of the years ended December 31, 2017 and 2016, and the consolidated balance sheet data at December 31, 2018, 2017 and 2016 from our audited financial statements, which are not included in this Form 10-K.

(1) Our book overdraft is funded by our revolving credit facility as soon as the related checks clear our disbursement accounts.

	Year Ended December 31,
	2020			2019			2018			2017			2016
	(Dollars in thousands, except share data)

CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales	$	286,017		$	338,286		$	356,858		$	317,697		$	261,644
Cost of sales		222,968			258,364			271,650			245,035			208,694
Gross profit		63,049			79,922			85,208			72,662			52,950

Operating expenses:
Salaries and commissions		33,007			37,180			38,110			36,570			29,369
Other operating expenses		28,896			33,238			30,962			28,716			24,714
Depreciation and amortization		3,377			2,502			2,178			2,772			3,018
Impairment charge		373			120			60			—			2,384
Loss on divestiture/classification to held for sale (HFS classification)		8,727			—			—			—			—
Total operating expenses		74,380			73,040			71,310			68,058			59,485

Operating income (loss)		(11,331	)		6,882			13,898			4,604			(6,535	)
Interest (expense)		(1,887	)		(3,057	)		(2,907	)		(2,073	)		(845	)

Income (loss) before income taxes		(13,218	)		3,825			10,991			2,531			(7,380	)
Income tax (expense) benefit		636			(1,275	)		(2,355	)		(2,753	)		1,374

Net income (loss)	$	(12,582	)	$	2,550		$	8,636		$	(222	)	$	(6,006	)

Earnings (loss) per share:
Basic	$	(0.76	)	$	0.16		$	0.53		$	(0.01	)	$	(0.37	)
Diluted	$	(0.76	)	$	0.15		$	0.52		$	(0.01	)	$	(0.37	)

Weighted average common shares outstanding:
Basic		16,504,141			16,433,644			16,389,876			16,269,611			16,345,679
Diluted		16,504,141			16,552,866			16,523,599			16,269,611			16,345,679

1112

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	As of December 31,
	2020		2019		2018		2017		2016
	(Dollars in thousands)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents	$	—	$	4,096	$	1,393	$	—	$	—
Accounts receivable, net	$	41,279	$	56,965	$	59,793	$	57,396	$	44,677
Inventories, net	$	68,470	$	114,069	$	94,325	$	88,115	$	79,783
Total assets	$	157,712	$	240,148	$	203,057	$	194,039	$	175,870
Book overdraft ⁽¹⁾	$	1,662	$	—	$	—	$	3,028	$	3,181
Revolver debt	$	22,580	$	83,500	$	71,316	$	73,555	$	60,388
Stockholders’ equity	$	91,894	$	103,628	$	100,678	$	90,744	$	90,131

~~You~~(1) ~~should~~Our ~~read~~book ~~the~~overdraft ~~following~~is ~~discussion~~funded inby ~~conjunction with~~ our ~~consolidated~~revolving ~~financial~~credit ~~statements~~facility ~~and~~as ~~related~~soon ~~notes~~as ~~appearing~~the ~~elsewhere~~related inchecks ~~this~~clear Form 10-K. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our ~~expectations.~~disbursement ~~Factors that could cause such differences include those described in “Risk Factors” and elsewhere in this Form 10-K~~accounts. ~~Certain tabular information may not foot due to rounding.~~

~~Overview~~13

~~Since our founding 44 years ago, we have grown to be a large provider of industrial products to the~~ITEM U7. MANAGEMENT’S. ~~market.~~DISCUSSION ~~Today,~~AND weANALYSIS ~~serve~~OF ~~over~~FINANCIAL ~~10,000~~CONDITION ~~customers.~~AND ~~Our~~RESULTS ~~products~~OF are used in MRO activities and related projects, as well as for larger-scale projects in the utility, industrial and infrastructure markets and a diverse range of industrial applications including communications, energy, engineering and construction, general manufacturing, mining, marine construction and marine transportation, infrastructure, oilfield services, petrochemical, transportation, utility, wastewater treatment and food and beverage. In the past few years, activity in the MRO market has fluctuated, while the level of competition has increased.OPERATIONS

~~Our~~You should ~~revenue~~read isthe ~~driven~~following discussion in ~~part~~conjunction bywith ~~the~~our ~~level~~consolidated offinancial ~~capital~~statements ~~spending~~and ~~within~~related ~~the~~notes ~~end-markets~~appearing weelsewhere in ~~serve.~~this ~~Because~~Form ~~many of these end~~10-~~markets~~K. ~~defer~~In ~~capital~~addition ~~expenditures~~to ~~during~~historical ~~periods of economic downturns~~information, ~~our~~this ~~business~~discussion ~~has~~contains ~~experienced~~forward-looking ~~cyclicality.~~statements ~~Our~~that ~~revenue~~involve ~~has~~risks, uncertainties ~~been~~ and ~~will~~assumptions ~~continue~~that tocould because ~~impacted~~actual byresults ~~fluctuations~~to indiffer ~~capital~~materially ~~spending~~from ~~and by~~ our ~~ability~~expectations. toFactors ~~drive~~that ~~demand~~could ~~through~~cause such ~~our~~differences ~~sales~~include ~~and~~those ~~marketing~~described ~~initiatives~~in ~~and~~“Risk ~~the~~Factors” ~~continued development~~ and ~~marketing~~elsewhere ofin ~~our~~this ~~private~~Form ~~branded products, such as LifeGuardTM~~10-K. ~~The~~Certain ~~recent~~tabular ~~increased~~information may ~~levels~~not offoot ~~economic~~due ~~activity~~to ~~and commodity prices have impacted sales and the level of demand~~rounding.

Our direct costs will continue to be influenced significantly by the prices we pay our suppliers to procure the products we distribute to our customers. Changes in these costs may result, for example, from increases or decreases in raw material costs, changes in our relationships with suppliers or changes in vendor rebates. Our operating expenses will continue to be affected by our investment in sales, marketing and customer support personnel and commissions paid to our sales force for revenue and profit generated. Some of our operating expenses are related to our fixed infrastructure, including rent, utilities, administrative salaries, maintenance, insurance and supplies. To meet our customers’ needs for an extensive product offering and short delivery times, we will need to continue to maintain adequate inventory levels. Our ability to obtain this inventory will depend, in part, on our relationships with suppliers.Overview

~~Critical~~Since our ~~Accounting~~founding ~~Policies~~45 years ago, we have grown to be a large provider of industrial products to the U.S. market. Today, we serve over 8,500 customers. Our products are used in MRO activities and ~~Estimates~~related projects, as well as for larger-scale projects in the utility, industrial and infrastructure markets and a diverse range of industrial applications including communications, energy, engineering and construction, general manufacturing, mining, infrastructure, oilfield services, petrochemical, transportation, utility, wastewater treatment and food and beverage. In the past few years, activity in the MRO market has fluctuated, while the level of competition has increased.

~~Critical~~Our revenue ~~accounting~~is ~~policies~~driven ~~are~~in ~~those~~part ~~that~~by ~~both~~the ~~are~~level ~~important~~of tocapital spending within the ~~accurate~~end-markets ~~portrayal~~we serve. Because many of athese ~~company’s~~end-markets defer ~~financial~~capital ~~condition~~expenditures ~~and~~during ~~results~~periods of ~~operations~~economic downturns, our business has experienced cyclicality. Our revenue has been and ~~require~~will ~~subjective~~continue orto ~~complex~~be ~~judgments~~impacted by fluctuations in capital spending and by our ability to drive demand through our sales and marketing initiatives and the continued development and marketing of our private branded products, ~~often~~such as aLifeGuardTM. In ~~result~~2020, ofwe were negatively impacted by the ~~need~~COVID-19 topandemic ~~make~~by ~~estimates~~reducing ~~about~~economic activity and demand for our products, especially in the ~~effect~~oil and gas industry, which is our biggest market. Although economic activity and commodity prices have recently begun to show signs of ~~matters~~recovery, ~~that~~we ~~are~~cannot ~~inherently~~yet ~~uncertain~~predict how long the pandemic will continue to have a negative impact on our sales and level of demand.

InOur direct ~~order~~costs will continue to ~~prepare~~be ~~financial~~influenced ~~statements~~significantly ~~that~~by ~~conform~~the prices we pay our suppliers to ~~accounting~~procure ~~principles~~the ~~generally~~products ~~accepted~~we distribute to our customers. Changes in ~~the~~these ~~United~~costs ~~States~~may result, ~~commonly~~for ~~referred~~example, tofrom asincreases ~~GAAP~~or decreases in raw material costs, wechanges ~~make~~in our ~~estimates~~relationships ~~and~~with ~~assumptions~~suppliers ~~that~~or ~~affect~~changes ~~the~~in ~~amounts~~vendor ~~reported~~rebates. Our operating expenses will continue to be affected by our investment in sales, marketing and customer support personnel and commissions paid to our ~~financial~~sales ~~statements~~force for revenue and ~~accompanying~~profit ~~notes~~generated. ~~Certain~~Some of ~~estimates~~our ~~are~~operating ~~particularly~~expenses ~~sensitive~~are ~~due~~related to ~~their~~our ~~significance~~fixed toinfrastructure, ~~the~~including ~~financial~~rent, ~~statements~~utilities, information technology, administrative salaries, maintenance, insurance and ~~the~~supplies. ~~possibility~~To ~~that~~meet ~~future~~our ~~events~~customers’ ~~may~~needs befor ~~significantly~~an ~~different~~extensive ~~from~~product offering and short delivery times, we will need to continue to maintain adequate inventory levels. Our ability to obtain this inventory will depend, in part, on our ~~expectations~~relationships with suppliers.

WeCritical Accounting ~~have~~Policies ~~identified the following accounting policies as those that require us to make the most subjective or complex judgments in order to fairly present our consolidated financial position~~ and ~~results of operations. Actual results in these areas could differ materially from management’s estimates under different assumptions and conditions.~~Estimates

~~Inventory~~Critical accounting ~~Reserves~~policies are those that both are important to the accurate portrayal of a company’s financial condition and results of operations, and require subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

~~Inventories are valued at the lower of cost, using the average cost method, or net realizable value. We~~In ~~continually~~order ~~monitor~~to ~~our~~prepare ~~inventory~~financial ~~levels~~statements atthat ~~each~~conform ofto ~~our~~accounting ~~distribution~~principles ~~centers.~~generally ~~Our~~accepted ~~reserve~~in ~~for inventory is based on~~ the ~~age~~United ~~of the inventory~~States, ~~movements~~commonly referred ofto ~~our~~as ~~inventory~~GAAP, ~~over~~we ~~the~~make ~~prior~~estimates ~~twelve months~~ and ~~the~~assumptions ~~experience~~that ofaffect ~~our~~the ~~purchasing~~amounts ~~and~~reported ~~sales departments~~ in ~~estimating~~our ~~demand~~financial ~~for~~statements ~~the~~and ~~product in the succeeding year~~accompanying notes. ~~Our~~Certain ~~inventories~~estimates are ~~generally~~particularly ~~not~~sensitive ~~susceptible~~due to ~~technological~~their ~~obsolescence. At~~significance ~~December~~to ~~31,~~the ~~2019~~financial ~~and~~statements ~~2018, inventory reserves totaled $3.6 million~~ and ~~$3.7~~the ~~million, respectively. A 20% change in our inventory~~possibility ~~reserve~~that ~~estimate~~future atevents ~~December 31,~~may ~~2019~~be ~~would~~significantly ~~have~~different ~~resulted~~from inour ~~a change in income before income taxes of $0~~expectations.~~7 million.~~

12We have identified the following accounting policies as those that require us to make the most subjective or complex judgments in order to fairly present our consolidated financial position and results of operations. Actual results in these areas could differ materially from management’s estimates under different assumptions and conditions.

~~Goodwill~~Allowance for Doubtful Accounts

~~Goodwill~~We ~~represents~~maintain ~~the~~an ~~excess~~allowance offor ~~the~~doubtful ~~amount~~accounts wereceivable ~~paid~~for toestimated ~~acquire~~losses ~~businesses~~resulting ~~over~~from the ~~estimated fair value~~inability of ~~tangible~~our ~~assets~~customers ~~and~~to ~~identifiable~~make ~~intangible~~required ~~assets~~payments. ~~acquired~~Consistent with industry practices, ~~less~~we ~~liabilities~~require ~~assumed.~~payment ~~Determining~~from ~~the~~most ~~fair~~customers ~~value~~within 30-60 days of ~~assets acquired~~the ~~and~~invoice ~~liabilities~~date. ~~assumed~~We ~~requires~~have ~~management’s~~an ~~judgment~~estimation procedure, based on historical data and ~~often~~recent ~~involves~~changes in the ~~use~~aging of ~~significant~~the ~~estimates and assumptions~~receivables, ~~including~~that ~~assumptions~~we ~~with~~use ~~respect~~ to ~~future~~record ~~cash~~an ~~flows,~~allowance. ~~discount~~A ~~rates~~20% ~~and~~change ~~asset~~in ~~lives~~our ~~among~~estimate ~~other~~at ~~items. At~~ December 31,2020 would have resulted in a change in income ~~2019,~~before ~~our~~income ~~goodwill~~taxes ~~balance~~of ~~was~~less than $220.41 million, ~~representing~~for ~~9.3%~~the ofyear ~~our~~ended ~~total~~December ~~assets~~31, 2020.

We conduct impairment testing for goodwill annually in the fourth quarter of our fiscal year and more frequently, on an interim basis, when an event occurs or circumstances change that indicate that the fair value of a reporting unit may have declined below its carrying value. Events or circumstances which could indicate a probable impairment include, but are not limited to, financial performance, industry and market conditions, macroeconomic conditions, reporting unit-specific events, historical results of goodwill impairment testing and the timing of the last performance of a quantitative assessment.14

WeRefund test goodwill at the reporting unit level, which is defined as an operating segment or one level below an operating segment that constitutes a business for which financial information is available and is regularly reviewed by management. We have determined that we have four reporting units for this purpose. Before testing goodwill, we consider whether or not to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount and whether an impairment test is required.Liability

~~The~~We ~~goodwill~~estimate ~~impairment~~the ~~test~~gross ~~consists~~profit ofimpact ~~assessing qualitative factors to determine whether it is more-likely-than-not~~of ~~that~~returns ~~the~~and ~~fair~~allowances ~~value~~for ofpreviously arecorded ~~reporting~~sales. ~~unit~~This liability is ~~less~~calculated ~~than~~on ~~its~~historical ~~carrying~~and ~~amount,~~statistical ~~including~~returns ~~goodwill.~~and Weallowances ~~may~~data ~~bypass~~and ~~the~~adjusted ~~qualitative~~as ~~assessment~~trends ~~for any reporting unit~~ in ~~any period and proceed directly to performing~~ the ~~quantitative goodwill~~variables ~~impairment test~~change. ~~The~~A ~~quantitative~~20% ~~goodwill~~change ~~impairment~~in ~~test,~~our ~~used~~estimate toat ~~identify~~December ~~both the existence of impairment and the amount of impairment loss~~31, ~~compares~~2020 ~~the~~would ~~fair~~have ~~value~~resulted ~~of a reporting unit with its carrying amount, including goodwill. If the fair~~in ~~value of~~ a ~~reporting~~change ~~unit~~in ~~exceeds~~income ~~its~~before ~~carrying~~income ~~amount,~~taxes ~~goodwill~~ of ~~the~~approximately ~~reporting unit is considered not impaired~~$0.4 Ifmillion for the ~~carrying amount~~year ofended aDecember ~~reporting unit exceeds its fair value~~31, ~~an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit~~2020.

~~When~~Vendor performing goodwill impairment testing, the fair values of reporting units are determined based on valuation techniques using the best available information. Inherent in such fair value determinations are certain judgments and estimates relating to future cash flows, including our interpretation of current economic indicators and market valuations, and assumptions about our strategic plans. In developing fair values for our reporting units, we may employ a market multiple or a discounted cash flow methodology, or a combination thereof. The market multiple methodology compares us to similar companies on the basis of risk characteristics to determine our risk profile relative to the comparable companies as a group. This analysis generally focuses on quantitative considerations, which include financial performance and other quantifiable data, and qualitative considerations, which include any factors which are expected to impact future financial performance. The most significant assumptions affecting the market multiple methodology are the market multiples and control premium. A control premium represents the value an investor would pay above non-controlling interest transaction prices in order to obtain a controlling interest in the respective unit.Rebates

13Some of our arrangements with our vendors entitle us to receive a rebate of a specified amount when we achieve any of a number of measures, generally related to the volume of purchases from the vendor. We account for such rebates as a reduction of the prices of the vendor’s products and therefore as a reduction of inventory until we sell the product, at which time such rebates reduce cost of sales. Throughout the year, we estimate the amount of the rebates earned based on purchases to date relative to the total purchase levels expected to be achieved during the rebate period. We continually revise these estimates to reflect rebates expected to be earned based on actual purchase levels and forecasted purchase volumes for the remainder of the rebate period. A 20% change in our estimate of total rebates earned during 2020 would have resulted in a change in loss before income taxes of $0.8 million for the year ended December 31, 2020.

~~The~~Inventory discounted cash flow methodology establishes fair value by estimating the present value of the projected future cash flows to be generated from the reporting unit. The discount rate applied to the projected future cash flows to arrive at the present value is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows. The discounted cash flow methodology uses our projections of financial performance. The most significant assumptions used in the discounted cash flow methodology are the discount rate and expected future revenue and operating margins, which vary among reporting units. If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results of operations.Reserves

~~Intangible~~Inventories ~~Assets~~are valued at the lower of cost, using the average cost method, or net realizable value. We continually monitor our inventory levels at each of our distribution centers. Our reserve for inventory is based on the age of the inventory, movements of our inventory over the prior twelve months and the experience of our purchasing and sales departments in estimating demand for the product in the succeeding year. Our inventories are generally not susceptible to technological obsolescence. At December 31, 2020 and 2019, inventory reserves totaled $3.1 million and $3.6 million, respectively. A 20% change in our inventory reserve estimate at December 31, 2020 would have resulted in a change in income before income taxes of $0.6 million.

Our intangible assets, excluding goodwill, represent tradenames and customer relationships acquired in purchase transactions. At December 31, 2019, our intangible asset balance was $10.3 million, representing 4.3% of our total assets. Tradenames are not being amortized and are treated as indefinite-lived assets. Tradenames are tested for recoverability in the fourth quarter of our fiscal year, and more frequently, on an interim basis, when an event occurs or circumstances change that indicate that the fair value may have declined below its carrying value. We consider whether or not to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of an intangible asset is less than its carrying amount. If as a result of our qualitative assessment, we determine that an impairment test is required, or alternatively, if we elect to forego the qualitative assessment, we perform a quantitative test and, if required, record an impairment for the difference in the discounted cash flows and the carrying value. The results of the annual qualitative test for 2019 indicated that certain of the tradenames at Southwest were impaired. Accordingly, we performed a quantitative test on Southwest which resulted in an impairment charge of $0.1 million in 2019.Goodwill

WeGoodwill ~~assign~~represents the ~~useful~~excess ~~lives~~ of the amount we paid to ~~our~~acquire ~~intangible~~businesses over the estimated fair value of tangible assets ~~based~~and onidentifiable ~~the~~intangible assets ~~periods~~acquired, ~~over~~less ~~which~~liabilities weassumed. ~~expect~~Determining the ~~assets~~fair tovalue ~~contribute~~of ~~directly~~assets oracquired ~~indirectly~~and toliabilities ~~our~~assumed ~~future~~requires management’s ~~cash~~judgment ~~flows.~~and ~~Customer~~often ~~relationships~~involves ~~are~~the ~~amortized~~use ~~over~~of 6significant estimates and assumptions, including assumptions with respect to 9future ~~year~~cash flows, ~~useful~~discount ~~lives.~~rates Ifand ~~events~~asset orlives ~~circumstances~~among ~~were~~other toitems. ~~indicate~~At ~~that any~~December 31, of2020, our ~~definite-lived~~goodwill ~~intangible~~balance ~~assets~~was ~~might~~$9.8 ~~be impaired~~million, werepresenting 6.2% ~~would~~of ~~assess~~our ~~recoverability~~total ~~based~~assets. onIn connection with the ~~estimated~~sale ~~undiscounted future~~of ~~cash~~Southern, ~~flows~~we towrote-off be$12.5 ~~generated~~million ~~from~~of ~~the~~goodwill ~~applicable~~at ~~intangible~~December ~~asset~~31, 2020.

~~When~~We ~~performing~~conduct ~~quantitative~~impairment ~~assessments~~testing for ~~impairment,~~goodwill weannually ~~use~~in ~~various~~the ~~assumptions~~fourth inquarter ~~determining~~of ~~the~~our ~~current~~fiscal ~~fair~~year ~~value~~and ofmore ~~these~~frequently, ~~indefinite-lived~~on ~~intangible assets~~an interim basis, ~~including~~when ~~future~~an ~~expected~~event occurs ~~cash~~or ~~flows~~circumstances ~~and~~change ~~discount~~that ~~rates~~indicate ~~under~~that the ~~relief~~fair ~~from~~value ~~royalty~~of ~~method,~~a asreporting ~~well~~unit asmay ~~other~~have ~~fair~~declined below its carrying value ~~measures~~. Events Ifor ~~actual~~circumstances ~~results~~which ~~are~~could ~~not~~indicate ~~consistent~~a ~~with~~probable ~~our~~impairment ~~assumptions~~include, ~~and~~but ~~judgments~~are ~~used~~not inlimited ~~estimating~~to, ~~future~~financial ~~cash~~performance, ~~flows~~ industry and ~~asset fair~~market ~~values~~conditions, wemacroeconomic ~~may~~conditions, bereporting ~~exposed~~unit-specific toevents, ~~future~~historical ~~impairment~~results ~~charges~~of ~~that~~goodwill ~~could~~impairment betesting and ~~material~~the totiming ~~our~~of ~~results~~the last performance of ~~operations~~a quantitative assessment.

~~Income~~We ~~Taxes~~test goodwill at the reporting unit level, which is defined as an operating segment or one level below an operating segment that constitutes a business for which financial information is available and is regularly reviewed by management. We have determined that, in 2020, we had four reporting units for this purpose. At December 31, 2020, we only had three reporting units due to the sale of Southern. Before testing goodwill, we consider whether or not to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount and whether an impairment test is required.

WeThe ~~determine~~goodwill ~~deferred~~impairment test ~~tax~~consists ~~assets~~of ~~and~~assessing ~~liabilities~~qualitative ~~based~~factors onto ~~differences~~determine ~~between~~whether it is more-likely-than-not that the ~~carrying~~fair ~~amounts~~value of a reporting ~~assets~~unit ~~and~~is ~~liabilities~~less ~~for~~than ~~financial~~its ~~reporting~~carrying ~~purposes~~amount, ~~and~~including goodwill. We may bypass the ~~amounts~~qualitative ~~used~~assessment for ~~income~~any ~~tax~~reporting ~~purposes~~unit in any period and ~~measure~~proceed ~~them~~directly ~~using~~to performing the ~~enacted~~ ~~tax~~quantitative ~~rates~~goodwill ~~and~~impairment ~~laws~~test. ~~that~~The ~~will~~quantitative begoodwill inimpairment ~~effect~~test, used ~~when~~to identify both the ~~differences~~existence ~~are~~of ~~expected~~impairment toand ~~reverse.~~the Onamount ~~December~~of ~~22,~~impairment ~~2017~~loss, compares the ~~Tax~~fair ~~Cuts and~~value ~~Jobs~~of ~~Act~~a ~~was~~reporting ~~signed~~unit with ~~into~~its ~~law~~carrying amount, ~~making~~including ~~significant~~goodwill. ~~changes~~If to the USfair ~~Internal~~value ~~Revenue~~of ~~Code.~~a Inreporting ~~2018,~~unit weexceeds ~~completed~~its ~~our~~carrying ~~analysis~~ amount, goodwill of ~~our~~the reporting ~~accounting~~unit ~~for~~is ~~the~~considered ~~income~~not ~~tax~~impaired. ~~effects~~If the carrying amount of ~~tax~~a ~~reform~~reporting ~~and~~unit asexceeds aits ~~result~~fair value, noan ~~additional~~impairment ~~adjustments~~loss is ~~were~~recognized ~~recorded~~in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

~~Estimates~~ When performing goodwill impairment testing, ~~judgments~~the ~~and~~fair ~~assumptions~~values of reporting units are ~~required~~determined inbased ~~determining~~on ~~whether~~valuation ~~deferred~~techniques ~~tax~~using ~~assets~~the ~~will~~best beavailable ~~fully~~information. orInherent ~~partially~~in ~~realized. We~~such ~~establish~~fair avalue ~~valuation~~determinations ~~allowance~~are tocertain ~~reduce~~judgments ~~the~~and ~~deferred~~estimates ~~tax~~relating ~~assets~~to ~~when~~future itcash isflows, ~~more-likely-than-not that~~including ~~some~~our ~~portion~~interpretation of orcurrent ~~all~~economic ofindicators ~~the~~and ~~deferred~~market ~~tax~~valuations, ~~assets~~and ~~will~~assumptions ~~not~~about beour ~~realized~~strategic plans. In ~~evaluating~~developing ~~the~~fair ~~ability~~values tofor our ~~realize~~reporting ~~deferred tax assets~~units, we ~~consider~~may ~~all~~employ ~~available~~a ~~positive~~market ~~and~~multiple ~~negative~~or ~~evidence,~~a indiscounted ~~determining~~cash ~~whether~~flow methodology, ~~based~~or ona ~~the~~combination ~~weight~~thereof. ofThe ~~that~~market multiple ~~evidence,~~methodology acompares ~~valuation allowance~~us isto ~~needed~~similar ~~for~~companies ~~part~~on orthe ~~all~~basis of ~~the~~risk ~~deferred~~characteristics ~~tax~~to ~~assets.~~determine Inour ~~determining~~risk profile relative to the ~~need~~comparable ~~for~~companies as a ~~valuation~~group. ~~allowance~~This onanalysis ~~our~~generally ~~deferred tax~~focuses ~~assets~~on quantitative considerations, wewhich ~~place~~include ~~greater~~financial performance ~~weight~~and onother ~~recent~~quantifiable data, and ~~objectively~~qualitative ~~verifiable~~considerations, ~~current~~which ~~information,~~include asany ~~compared~~factors towhich ~~more~~are ~~forward-looking information~~expected ~~that~~to isimpact future ~~used~~financial inperformance. ~~valuing~~The ~~other~~most ~~assets~~significant onassumptions affecting the ~~balance~~market ~~sheet.~~multiple Wemethodology ~~have~~are ~~considered~~the ~~taxable~~market ~~income~~multiples and incontrol ~~prior~~premium. ~~carryback~~A ~~years, future~~control ~~reversals~~premium ofrepresents ~~existing~~the ~~taxable~~value ~~temporary~~an investor ~~differences,~~would ~~future~~pay ~~taxable~~above ~~income,~~non-controlling ~~and~~interest ~~tax~~transaction ~~planning~~prices ~~strategies~~ in ~~assessing~~order ~~the need~~to ~~for~~obtain ~~the~~a ~~valuation~~controlling ~~allowance~~interest in the respective unit.

We establish liabilities for estimated tax issues, and the provisions and benefits resulting from changes to those liabilities are included in our annual tax provision along with related interest. We recognize interest on any tax issue as a component of interest expense and any related penalties in other operating expenses.15

~~Sales~~The discounted cash flow methodology establishes fair value by estimating the present value of the projected future cash flows to be generated from the reporting unit. The discount rate applied to the projected future cash flows to arrive at the present value is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows. The discounted cash flow methodology uses our projections of financial performance. The most significant assumptions used in the discounted cash flow methodology are the discount rate and expected future revenue and operating margins, which vary among reporting units. If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results of operations.

~~Our~~Intangible primary source of revenue is the sale of industrial products based upon purchase orders or contracts with customers, as well as billing for freight charges. Revenue is recognized at a point in time once we have 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. Sales incentives earned by customers are accrued in the same month as the shipment is invoiced and are accounted for as a reduction in sales.Assets

~~Cost~~Our intangible assets, excluding goodwill, represent tradenames and customer relationships acquired in purchase transactions, as well as internal-use software acquired in 2020. At December 31, 2020, our intangible asset balance was $7.4 million, representing 4.7% of ~~Sales~~our total assets. Tradenames are not being amortized and are treated as indefinite-lived assets. Tradenames are tested for recoverability in the fourth quarter of our fiscal year, and more frequently, on an interim basis, when an event occurs or circumstances change that indicate that the fair value may have declined below its carrying value. We consider whether or not to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of an intangible asset is less than its carrying amount. If as a result of our qualitative assessment, we determine that an impairment test is required, or alternatively, if we elect to forego the qualitative assessment, we perform a quantitative test and, if required, record an impairment for the difference in the discounted cash flows and the carrying value. The results of the interim qualitative test in the first and second quarter of 2020 indicated that certain of the tradenames at Southwest and Vertex were impaired. Accordingly, we performed a quantitative test on Southwest and Vertex which resulted in an impairment charge of $0.2 million in March 2020 and $0.2 million in June 2020.

~~Cost~~We ofassign ~~sales~~useful ~~consists~~lives to ~~primarily~~our ofintangible assets based on the ~~average~~periods ~~cost~~over ofwhich we expect the ~~industrial~~assets ~~products~~to ~~that~~contribute wedirectly ~~sell~~or indirectly to our future cash flows. WeCustomer ~~also~~relationships ~~incur~~are ~~shipping~~amortized over 6 to 9 year useful lives and ~~handling~~internal ~~costs~~software inis ~~the~~amortized ~~normal~~over ~~course~~3 ofyear ~~business~~useful life. ~~Cost~~If events or circumstances were to indicate that any of ~~sales~~our ~~also~~definite-lived ~~reflects~~intangible ~~cash~~assets ~~discounts~~might ~~for~~be ~~prompt~~impaired, ~~payment~~we towould assess ~~vendors~~recoverability ~~and~~based ~~vendor~~on ~~rebates~~the ~~generally~~estimated ~~related~~undiscounted tofuture ~~annual~~cash ~~purchase~~flows ~~targets,~~to asbe ~~well~~generated asfrom ~~inventory~~the ~~obsolescence~~applicable ~~charges~~intangible asset.

~~Operating~~When ~~Expenses~~performing quantitative assessments for impairment, we use various assumptions in determining the current fair value of these indefinite-lived intangible assets, including future expected cash flows and discount rates under the relief from royalty method, as well as other fair value measures. If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment charges that could be material to our results of operations.

~~Operating~~Income ~~expenses include all expenses, excluding freight, incurred to receive, sell and ship product and administer the operations of the Company.~~Taxes

~~Salaries~~We ~~and~~determine ~~Commissions. Salary~~deferred tax ~~expense~~assets ~~includes the base compensation,~~ and ~~any~~liabilities overtime earned by hourly personnel, for all sales, administrative and warehouse employees and stock compensation expense for options and restricted stock granted to employees. Commission expense is earned by inside sales personnel based on ~~gross~~differences ~~profit~~between ~~dollars~~the ~~generated,~~carrying byamounts ~~field~~of ~~sales~~assets ~~personnel from generating sales~~ and ~~meeting~~liabilities ~~various~~for ~~objectives,~~financial byreporting purposes ~~sales, national~~ and ~~marketing~~the ~~managers~~amounts used for ~~driving~~income ~~the~~tax ~~sales~~purposes ~~process,~~and bymeasure ~~region~~them ~~managers~~using ~~based on~~ the ~~profitability~~enacted oftax ~~their~~rates ~~branches~~ and bylaws ~~corporate~~that ~~managers~~will ~~based~~be ~~primarily~~in oneffect when ~~our~~the ~~profitability~~differences ~~and~~are ~~also~~expected onto ~~other operating metrics~~reverse.

~~Other~~Estimates, ~~Operating~~judgments and ~~Expenses~~assumptions are required in determining whether deferred tax assets will be fully or partially realized. ~~Other~~ We ~~operating~~establish a ~~expenses~~valuation ~~include~~allowance to reduce the deferred tax assets when it is more-likely-than-not that some portion or all ~~payroll~~of ~~taxes,~~the ~~health~~deferred tax ~~insurance~~assets will not be realized. In evaluating the ability to realize deferred tax assets, ~~travel~~we ~~expenses~~consider all available positive and negative evidence, ~~public~~in ~~company~~determining ~~expenses~~whether, ~~advertising~~based on the weight of that evidence, ~~management~~a ~~information~~valuation ~~system~~allowance ~~expenses~~is needed for part or all of the deferred tax assets. In determining the need for a valuation allowance on our deferred tax assets, ~~facility~~we ~~rent~~place greater weight on recent and ~~all~~objectively ~~distribution~~verifiable ~~expenses~~current ~~such~~information, as ~~packaging~~compared to more forward-looking information that is used in valuing other assets on the consolidated balance sheet. We have considered taxable income in prior carryback years, ~~reels~~future reversals of existing taxable temporary differences, ~~and~~future ~~repair~~taxable income, and ~~maintenance~~tax ofplanning ~~equipment~~strategies ~~and~~in ~~facilities~~assessing the need for the valuation allowance.

14We establish liabilities for estimated tax issues, and the provisions and benefits resulting from changes to those liabilities are included in our annual tax provision along with related interest. We recognize interest on any tax issue as a component of interest expense and any related penalties in other operating expenses.

~~Depreciation~~Impact ~~and Amortization. We incur depreciation expense on costs related to capitalized property and equipment on a straight-line basis over the estimated useful lives~~ of the ~~assets,~~COVID-19 which range from three to thirty years. We incur amortization expense on leasehold improvements and finance leases over the shorter of the lease term or the life of the related asset and on intangible assets over the estimated life of the asset.Pandemic

~~Interest~~The ~~Expense~~COVID-19 pandemic has spread throughout the United States and the countries in which our offshore suppliers are located. Governments in affected regions have implemented safety precautions which include quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures as they deem necessary. Many organizations and individuals, including our Company and our employees are taking additional steps to avoid or reduce infection, including limiting travel and working remotely. We continue to monitor our operations and government recommendations and have made modifications to our normal operations because of the pandemic, including requiring most of our nonessential employees to work remotely. We have maintained a substantial portion of our operational capacity at our warehouses across the continental United States and have instituted several health and safety protocols and procedures to safeguard our employees.

~~Interest expense consists primarily of interest we incur on our debt.~~16

15The rapid development and uncertainty of the COVID-19 pandemic precludes any prediction as to the ultimate effect of the COVID-19 outbreak on our business. However, the outbreak has had an adverse impact on our business, including reductions in the demand for our products, especially from the oil and gas market. In response, we applied for and received funds under the Paycheck Protection Program and have implemented several cost savings measures which included furloughing employees, reducing headcount, temporary payroll reductions, and other actions to decrease corporate and non-critical expenses. These cost savings measures, which began to have an impact in the latter part of the second quarter, resulted in additional savings for the balance of the year. While we cannot reasonably estimate the length or severity of this pandemic, we currently anticipate an adverse impact on our consolidated financial position, consolidated results of operations, and consolidated cash flows at least through the first quarter of 2021.

~~Results of Operations~~Sales

~~The~~Our ~~following~~primary ~~discussion~~source of ~~compares~~revenue ~~our~~is ~~results~~the sale of ~~operations~~industrial products based upon purchase orders or contracts with customers, as well as billing for freight charges. Revenue is recognized at a point in time once we have determined that the ~~years~~customer ~~ended~~has ~~December 31,~~obtained ~~2019,~~control ~~2018~~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). Sales incentives earned by customers are accrued in the same month as the shipment is invoiced and ~~2017~~are accounted for as a reduction in sales.

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

	Year Ended December 31,
	2019			2018			2017
Sales		100.0	%		100.0	%		100.0	%
Cost of sales		76.4	%		76.1	%		77.1	%
Gross profit		23.6	%		23.9	%		22.9	%
Operating expenses:
Salaries and commissions		11.0	%		10.7	%		11.5	%
Other operating expenses		9.8	%		8.7	%		9.0	%
Depreciation and amortization		0.7	%		0.6	%		0.9	%
Impairment charge		n/m			n/m			0.0	%
Total operating expenses		21.6	%		20.0	%		21.4	%
Operating income		2.0	%		3.9	%		1.4	%
Interest expense		0.9	%		0.8	%		0.7	%
Income before income taxes		1.1	%		3.1	%		0.8	%
Income tax expense		0.4	%		0.7	%		0.9	%
Net income (loss)		0.8	%		2.4	%		(0.1	)%

Cost of sales consists primarily of the average cost of the industrial products that we sell. We also incur shipping and handling costs in the normal course of business. Cost of sales also reflects cash discounts for prompt payment to vendors and vendor rebates generally related to annual purchase targets, as well as inventory obsolescence charges.

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

~~Comparison~~Operating ofexpenses include ~~Years~~all ~~Ended~~expenses, ~~December 31~~excluding freight, ~~2019~~incurred to receive, sell and ~~2018~~ship product and administer the operations of the Company.

~~Sales~~Salaries and Commissions. Salary expense includes the base compensation, and any overtime earned by hourly personnel, for all sales, administrative and warehouse employees and stock compensation expense for options and restricted stock granted to employees. Commission expense is earned by inside sales personnel based on gross profit dollars generated, by field sales personnel from generating sales and meeting various objectives, by sales, national and marketing managers for driving the sales process, by region managers based on the profitability of their branches and by corporate managers based primarily on our profitability and also on other operating metrics.

	Year Ended
	December 31,
(Dollars in millions)	2019		2018		Change
Sales	$	338.3	$	356.9	$	(18.6	)	(5.2	)%

Other Operating Expenses. Other operating expenses include all payroll taxes, health insurance, travel expenses, public company expenses, advertising, management information system expenses, facility rent and all distribution expenses such as packaging, reels, and repair and maintenance of equipment and facilities.

~~Our~~Depreciation ~~sales in 2019 decreased $18~~and Amortization.6 We ~~million~~incur ordepreciation ~~5.2%~~expense ~~from~~on ~~2018.~~costs ~~The~~related ~~decrease in sales was primarily due~~ to ~~reduced~~ ~~industrial~~capitalized ~~market~~property ~~demand in oil~~ and ~~gas~~equipment ~~geographies,~~on ~~reduced~~a ~~demand for fasteners and reduced availability of inventory~~straight-line ~~due~~basis toover ~~supply chain disruptions resulting from~~ the ~~on-going~~estimated ~~trade~~useful ~~discussions~~lives ~~between~~of the ~~United States and China. We estimate sales for our project business~~assets, which ~~targets~~range ~~end~~from ~~markets~~three ~~for~~to ~~Environmental~~thirty years. ~~Compliance,~~We ~~Engineering~~incur &amortization ~~Construction, Industrials,~~expense ~~Utility~~on ~~Power~~leasehold ~~Generation,~~improvements and ~~Mechanical~~finance ~~Wire~~leases ~~Rope,~~over ~~decreased~~the ~~5%,~~shorter ~~while~~of ~~Maintenance,~~the ~~Repair,~~lease ~~and~~term ~~Operations~~or ~~(MRO)~~the ~~sales~~life ~~decreased 6%, as compared to 2018. When adjusted for fluctuations in commodity prices~~ of ~~approximately~~the ~~2%,~~related weasset ~~estimate that MRO~~ and ~~project~~on intangible ~~business~~assets ~~sales~~over ~~decreased~~the byestimated 4%life ~~and~~of ~~3%,~~the ~~respectively~~asset.

~~Gross~~Interest ~~Profit~~Expense

	Year Ended
	December 31,
(Dollars in millions)	2019			2018			Change
Gross profit	$	79.9		$	85.2		$	(5.3	)	(6.2	)%
Gross profit as a percent of sales		23.6	%		23.9	%

Interest expense consists primarily of interest we incur on our debt.

Gross profit decreased $5.3 million or 6.2% from 2018. The decrease in gross profit was primarily due to decreased sales. Gross margin (gross profit as a percentage of sales) was near flat at 23.6% in 2019 compared to 23.9% in 2018.17

16Results of Operations

~~Operating~~The following ~~Expenses~~discussion compares our results of operations for the years ended December 31, 2020, 2019, and 2018.

	Year Ended
	December 31,
(Dollars in millions)	2019			2018			Change
Operating expenses:
Salaries and commissions	$	37.2		$	38.1		$	(0.9	)	(2.4	)%
Other operating expenses		33.2			31.0			2.3		7.4	%
Depreciation and amortization		2.5			2.2			0.3		14.9	%
Impairment charge		0.1			0.1			0.1		0.0	%
Total operating expenses	$	73.0		$	71.3		$	1.7		2.4	%
Operating expenses as a percent of sales		21.6	%		20.0	%

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

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

	Year Ended December 31,
	2020			2019			2018
Sales		100.00	%		100.0	%		100.0	%
Cost of sales		78.0	%		76.4	%		76.1	%
Gross profit		22.0	%		23.6	%		23.9	%

Operating expenses:
Salaries and commissions		11.5	%		11.0	%		10.7	%
Other operating expenses		10.1	%		9.8	%		8.7	%
Depreciation and amortization		1.2	%		0.7	%		0.6	%
Impairment charge		0.1	%		n/m			n/m
Loss on divestiture/HFS classification		3.1	%		—			—
Total operating expenses		26.0	%		21.6	%		20.0	%

Operating income (loss)		(4.0	)%		2.0	%		3.9	%
Interest income (expense)		(0.7	)%		(0.9	)%		(0.8	)%
Income (loss) before income taxes		(4.6	)%		1.1	%		3.1	%
Income tax (expense) benefit		0.2	%		(0.4	)%		(0.7	)%

Net income (loss)		(4.4	)%		0.8	%		2.4	%

~~Salaries~~Note: Due ~~and~~to ~~Commissions.~~rounding, ~~Salaries~~percentages ~~and~~may ~~commissions~~not ~~decreased~~add ~~$0.9~~up ~~million~~to ortotal ~~2.4%~~operating ~~primarily~~expenses, ~~due~~operating toincome ~~lower~~(loss), ~~commissions~~income ~~resulting~~(loss) ~~from~~before income ~~the~~taxes ~~reduction~~or innet ~~sales~~income ~~and gross profit~~(loss).

~~Other Operating Expenses. Other operating expenses increased $2.3 million or 7.4% primarily due to the $2.2 million early termination~~Comparison ~~liability~~of ~~related~~Years toEnded ~~Vertex’s~~December 31, ~~Massachusetts~~2020 ~~facility lease~~ and ~~additional~~2019 ~~warehouse distribution expenses resulting from the closure of this facility and two additional warehouse moves in the fourth quarter.~~

Depreciation and Amortization. Depreciation and amortization increased slightly to $2.5 million in 2019 from $2.2 million in 2018 primarily due to depreciation on right-of-use assets from the adoption of Accounting Standards Update (“ASU”) 842.Sales

Impairment Charge. The Company recorded non-cash impairment charges in 2019 and 2018 with respect to tradenames at its Southwest reporting unit. (See Note 4 to our Consolidated Financial Statements)

	Year Ended
	December 31,
(Dollars in millions)	2020		2019		Change
Sales	$	286.0	$	338.3	$	(52.3	)	(15.5	)%

~~Operating~~Our sales ~~expenses~~in as2020 adecreased ~~percentage~~$52.3 ofmillion or 15.5% from 2019. The decrease in sales ~~increased~~was primarily due to ~~21.6%~~the decline in ~~2019~~the ~~from~~oil ~~20.0%~~and gas market, in ~~2018~~addition to reduced market demand, both as ~~operating~~a ~~expenses~~result ~~increased~~of ~~combined~~the ~~with~~COVID-19 apandemic. ~~reduction~~We inestimate sales for our project business, which targets end markets for Environmental Compliance, Engineering & Construction, Industrials, Utility Power Generation, and Mechanical Wire Rope, decreased 10%, while Maintenance, Repair, and Operations (MRO) sales decreased 17%, as compared to 2019.

~~Interest Expense~~Gross Profit

Interest expense increased 5.2% to $3.1 million in 2019 from $2.9 million in 2018 due to higher average debt to fund increased working capital and the payment of the early termination liability discussed above. Average debt was $76.6 million in 2019 compared to $76.8 million in 2018. The average effective interest rate increased slightly to 3.8% in 2019 from 3.7% in 2018.

	Year Ended
	December 31,
(Dollars in millions)	2020			2019			Change
Gross profit	$	63.0		$	79.9		$	(16.9	)	(21.1	)%
Gross profit as a percent of sales		22.0	%		23.6	%

~~Income Tax~~18

~~Income~~Gross ~~tax~~profit ~~expense~~ decreased 45$16.9% million toor $21.1% from 2019.3 ~~million~~The decrease in ~~2019~~gross ~~from~~profit ~~$2.4~~was ~~million~~primarily indue ~~2018.~~to ~~The~~decreased ~~effective~~sales ~~income tax~~from ~~rate~~the ~~was~~decline ~~33.3%~~ in ~~2019~~the ~~compared~~oil toand ~~21.4%~~gas market incaused ~~2018.~~by ~~The~~the ~~effective~~COVID-19 ~~tax~~pandemic. ~~rate~~Gross ismargin ~~affected~~(gross byprofit ~~recurring~~as ~~items,~~a ~~such~~percentage asof ~~nondeductible expenses,~~sales) ~~share-based~~decreased ~~compensation~~from ~~and~~23.6% ~~state~~in ~~taxes~~2019 to 22.0% in In2020 ~~addition,~~due to the ~~effective~~$0.6 ~~tax~~million ~~rate~~inventory ~~for~~returned ~~2018~~under ~~included~~ a ~~benefit~~one-time ofagreement ~~(9.5%)~~with ~~for~~a vendor in the ~~release~~second quarter of ~~the~~2020, ~~valuation~~as ~~allowance~~well as onlower ~~our~~rebates ~~net~~from ~~deferred~~vendors ~~tax~~and ~~assets~~reduced prompt pay discounts.

17Operating Expenses

Comparison of Years Ended December 31, 2018 and 2017

	Year Ended
	December 31,
(Dollars in millions)	2020			2019			Change
Operating expenses:
Salaries and commissions	$	33.0		$	37.2		$	(4.2	)	(11.2	)%
Other operating expenses		28.9			33.2			(4.3	)	(13.1	)%
Depreciation and amortization		3.4			2.5			0.9		35.0	%
Impairment charge		0.4			0.1			0.3		210.8	%
Loss on divestiture/HFS classification		8.7			0.0			8.7		n/m
Total operating expenses	$	74.4		$	73.0		$	1.3		1.8	%

Operating expenses as a percent of sales		26.0	%		21.6	%

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

	Year Ended
	December 31,
(Dollars in millions)	2018		2017		Change
Sales	$	356.9	$	317.7	$	39.2	12.3	%

Salaries and Commissions. Salaries and commissions decreased $4.2 million or 11.2% due to expense management necessitated by the decrease in oil and gas prices and the COVID-19 pandemic, as well as lower commissions resulting from the decrease in sales. Reduced full-time headcount, reduced temporary labor and partial-year salary reductions all contributed to the lower salaries and commissions expense.

~~Our~~Other Operating ~~sales~~Expenses. inOther ~~2018~~operating ~~increased~~expenses decreased $394.23 million or 1213.31% ~~from~~also ~~2017. The increase in sales was primarily~~ due to ~~improved~~expense ~~industrial~~management ~~activity~~in ~~and~~response ~~disciplined~~to the ~~pricing.~~COVID-19 Wepandemic, ~~estimate~~primarily ~~sales~~from ~~for~~lower ~~our~~travel ~~project~~and ~~business~~entertainment, ~~which targets end markets~~advertising, ~~encompassing~~office ~~Environmental~~and ~~Compliance,~~warehouse ~~Engineering~~supply &expenses. ~~Construction,~~In ~~Industrials,~~the third ~~Utility~~quarter ~~Power~~of ~~Generation~~2019, ~~and~~we ~~Mechanical~~recorded ~~Wire~~a ~~Rope,~~$2.2 ~~increased~~million ~~17%,~~early ~~while~~lease ~~MRO~~termination ~~sales~~liability ~~increased~~related ~~11%,~~to asVertex’s ~~compared~~former ~~to 2017~~Massachusetts facility.

~~Gross~~Depreciation and ~~Profit~~Amortization. Depreciation and amortization increased to$3.4 million in 2020 from $2.5 million in 2019 primarily due to depreciation on right-of-use assets and amortization of internal-use software acquired in the third quarter of 2020.

	Year Ended
	December 31,
(Dollars in millions)	2018			2017			Change
Gross profit	$	85.2		$	72.7		$	12.5	17.3	%
Gross profit as a percent of sales		23.9	%		22.9	%

Impairment Charge. We recorded non-cash impairment charges in 2020 and 2019 with respect to tradenames at our Southwest and Vertex reporting units. (See Note 4 to our Consolidated Financial Statements)

~~Gross~~Loss on ~~profit~~divestiture/HFS ~~increased~~classification. In December 2020, we completed the sale of Southern to Southern Rigging Companies, LLC (“Southern Rigging”) for $1217.5 million, ornet ~~17.3%~~of ~~from~~the ~~2017.~~final ~~The~~working ~~increase~~capital inadjustment. ~~gross~~In ~~profit~~January ~~was~~2021, ~~primarily~~we ~~due~~entered into an agreement to ~~increased~~sell ~~sales.~~Southwest ~~Gross~~to ~~margin~~Southern ~~increased~~Rigging for $5.0 million, subject to 23a working capital adjustment, and as such, have classified Southwest as held for sale as of December 31, 2020.9% inIn ~~2018~~connection ~~from~~with 22the divestiture of Southern and the classification of Southwest as held for sale, we recorded non-cash losses of $8.9%7 million in ~~2017~~December ~~primarily~~2020. ~~due~~(See toNote ~~ongoing~~13 ~~pricing~~to ~~discipline~~our ~~and~~Consolidated ~~product~~Financial ~~mix.~~Statements)

~~Operating Expenses~~ Interest Expense

	Year Ended
	December 31,
(Dollars in millions)	2018			2017			Change
Operating expenses:
Salaries and commissions	$	38.1		$	36.6		$	1.5		4.2	%
Other operating expenses		31.0			28.7			2.2		7.8	%
Depreciation and amortization		2.2			2.8			(0.6	)	(21.4	)%
Impairment charge		0.1			—			0.1		100.0	%
Total operating expenses	$	71.3		$	68.1		$	3.3		4.8	%
Operating expenses as a percent of sales		20.0	%		21.4	%

Interest expense decreased 38.3% from $3.1 million in 2019 to $1.9 million in 2020 due to lower average debt and a decrease in interest rates. Average debt was $72.0 million in 2020 compared to $76.6 million in 2019. The average effective interest rate decreased from 3.8% in 2019 to 2.3% in 2020.

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

~~Salaries~~The ~~and~~income ~~Commissions~~tax benefit of $0.6 ~~Salaries~~million in ~~and~~2020 ~~commissions~~decreased ~~increased~~from the income tax expense of $1.53 million orin 2019. The effective income tax rate was 4.28% ~~primarily~~in ~~due~~2020 compared to ~~additional~~33.3% ~~sales~~in ~~and~~2019. ~~warehouse~~The ~~personnel~~effective tax rate is affected by recurring items, such as ~~well~~nondeductible asexpenses, anshare-based ~~increase~~compensation and instate ~~commissions~~taxes. ~~due~~In toaddition, ~~higher~~the ~~sales~~effective ~~and~~tax ~~gross~~rate ~~profit~~for 2020 included a benefit of 13.9% for the sale of Southern.

Other Operating Expenses. Other operating expenses increased $2.2 million or 7.8% primarily due to additional warehouse distribution expenses as sales increased and increased administrative expenses due to increased personnel.19

~~Depreciation~~Comparison of ~~and~~Years ~~Amortization.~~Ended ~~Depreciation~~December 31, 2019 and ~~amortization decreased slightly to $2.2 million in~~ 2018 ~~from $2.8 million in 2017 primarily due to the full amortization of the Southern Wire reporting unit tradenames in 2017.~~

~~Impairment Charge. The Company recorded a non-cash impairment charge in 2018 with respect to tradenames at its Southwest Wire Rope reporting unit. (See Note 4 to our Consolidated Financial Statements)~~ Sales

	Year Ended
	December 31,
(Dollars in millions)	2019		2018		Change
Sales	$	338.3	$	356.9	$	(18.6	)	(5.2	)%

~~Operating~~Our sales ~~expenses~~in as2019 adecreased ~~percentage~~$18.6 ofmillion ~~sales~~or ~~decreased~~5.2% tofrom 202018.0% The decrease in ~~2018~~sales ~~from~~was ~~21.4%~~primarily due to reduced industrial market demand in ~~2017.~~oil ~~This~~and ~~decrease~~gas ~~primarily~~geographies, ~~relates~~reduced demand for fasteners and reduced availability of inventory due to ~~the~~supply ~~leverage~~chain ~~obtained~~disruptions resulting from ~~increased~~the on-going trade discussions between the United States and China. We estimate sales, for our project business, which ~~rose~~targets atend amarkets ~~higher~~for ~~rate~~Environmental ~~than~~Compliance, ~~the~~Engineering ~~increase~~& Construction, Industrials, Utility Power Generation, and Mechanical Wire Rope, decreased 5%, while MRO sales decreased 6%, as compared to 2018. When adjusted for fluctuations in ~~operating~~commodity prices ~~expenses~~of approximately 2%, we estimate that MRO and project business sales decreased by 4% and 3%, respectively.

~~Interest Expense~~Gross Profit

Interest expense increased 40.2% to $2.9 million in 2018 from $2.1 million in 2017 due to higher average debt to fund increased working capital and an increase in the average effective interest rate. Average debt was $76.8 million in 2018 compared to $71.8 million in 2017. The average effective interest rate increased to 3.7% in 2018 from 2.8% in 2017.

	Year Ended
	December 31,
(Dollars in millions)	2019			2018			Change
Gross profit	$	79.9		$	85.2		$	(5.3	)	(6.2	)%
Gross profit as a percent of sales		23.6	%		23.9	%

~~Income~~Gross profit ~~Tax~~decreased $5.3 million or 6.2% from 2018. The decrease in gross profit was primarily due to decreased sales. Gross margin was near flat at 23.6% in 2019 compared to 23.9% in 2018.

Income tax expense decreased 14.5% to $2.4 million in 2018 from $2.8 million in 2017. The effective income tax rate was 21.4% in 2018 compared to 108.8% in 2017. The 2018 tax rate included a benefit of (9.5%) for the release of the valuation allowance on our net deferred tax assets and 1.2% for share-based compensation. This compares to the 2017 tax rate which included a 41.0% charge for the establishment of a valuation allowance on our net deferred tax assets, 15.2% for share-based compensation expense and a 12.9% charge for deferred tax assets in respect of the tax reform rate change.Operating Expenses

Impact of Inflation and Commodity Prices

	Year Ended
	December 31,
(Dollars in millions)	2019			2018			Change
Operating expenses:
Salaries and commissions	$	37.2		$	38.1		$	(0.9	)	(2.4	)%
Other operating expenses		33.2			31.0			2.3		7.4	%
Depreciation and amortization		2.5			2.2			0.3		14.9	%
Impairment charge		0.1			0.1			0.1		0.0	%
Total operating expenses	$	73.0		$	71.3		$	1.7		2.4	%

Operating expenses as a percent of sales		21.6	%		20.0	%

~~Our~~Note: Due ~~results~~to ~~of operations are affected by changes in the inflation rate and commodity prices. Moreover~~rounding, ~~because~~numbers ~~copper,~~may ~~steel,~~not ~~aluminum,~~add ~~nickel~~up 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 can be adversely affected because of either reduced selling prices or lower of cost or net realizable value 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~~total ~~on to our customers future cost increases due to inflation or rising commodity prices, our~~ operating ~~results could be adversely affected~~expenses.

~~Liquidity~~Salaries and Commissions. Salaries and ~~Capital~~commissions ~~Resources~~decreased $0.9 million or 2.4% primarily due to lower commissions resulting from the reduction in sales and gross profit.

~~Our~~Other Operating ~~primary~~Expenses. ~~capital~~Other ~~needs~~operating ~~are~~expenses ~~for~~increased ~~working~~$2.3 ~~capital~~million ~~obligations,~~or ~~capital~~7.4% ~~expenditures, and~~primarily ~~other~~due ~~general~~to ~~corporate~~the ~~purposes,~~$2.2 ~~including~~million ~~acquisitions.~~early ~~Our~~termination liability ~~primary~~related ~~sources~~to ofVertex’s ~~working~~Massachusetts ~~capital~~facility ~~are~~lease ~~cash~~and additional warehouse distribution expenses resulting from the ~~operations~~closure ~~supplemented~~of bythis ~~bank~~facility ~~borrowings~~and two additional warehouse moves in the fourth quarter.

~~Liquidity~~Depreciation and isAmortization. ~~defined~~Depreciation asand ~~the~~amortization ~~ability~~increased toslightly ~~generate adequate amounts of cash~~ to ~~meet~~$2.5 ~~the~~million ~~current~~in ~~need~~2019 ~~for~~from ~~cash~~$2.2 Wemillion ~~assess our liquidity~~ in ~~terms~~2018 ofprimarily due ~~our ability~~ to ~~generate~~depreciation ~~cash~~on toright-of-use ~~fund~~assets ~~our~~from ~~operating~~the ~~activities.~~adoption ~~Significant~~of ~~factors~~Accounting ~~which~~Standards ~~could~~Update ~~affect~~(“ASU”) ~~liquidity include the following:~~842.

●Impairment Charge. ~~the~~We ~~adequacy~~recorded ofnon-cash ~~available~~impairment ~~bank~~charges ~~lines~~in of2019 ~~credit;~~and ●2018 ~~cash~~with ~~flows~~respect ~~generated~~to ~~from~~tradenames ~~operating~~at ~~activities;~~our ●Southwest ~~capital~~reporting ~~expenditures;~~unit. (See ●Note ~~acquisitions;~~4 ~~and ● the ability~~ to ~~attract~~our ~~long-term~~Consolidated ~~capital~~Financial ~~with satisfactory terms~~Statements)

~~Comparison~~Operating expenses as a percentage of ~~Years~~sales ~~Ended~~increased ~~December~~to ~~31,~~21.6% in 2019 ~~and~~from 20.0% in 2018, as operating expenses increased combined with a reduction in sales.

Our net cash used in operating activities was $5.6 million in 2019 compared to cash provided by operating activities of $5.3 million in 2018. We had net income of $2.6 million in 2019 compared to $8.6 million in 2018.20

~~Changes in our operating assets and liabilities resulted in cash used in operating activities of $19.3~~Interest million in 2019. The majority of the change was due to increased inventories of $20.3 million and lease payments of $6.2 million. Partially offsetting these uses of cash was the increase of accounts payable of $2.6 million, increase in accrued liabilities of $2.4 million and decrease in accounts receivable of $2.6 million. Expense

~~Net~~Interest expense ~~cash~~increased ~~used~~5.2% to $3.1 million in ~~investing~~2019 ~~activities~~from $2.9 million in 2018 due to higher debt to fund increased working capital and the payment of the early termination liability discussed above. Average debt was $276.46 million in 2019 compared to $176.58 million in 2018. The ~~increase~~average ~~was~~effective ~~primarily~~interest ~~due~~rate toincreased ~~expenditures~~slightly ~~for~~to ~~the~~3.8% ~~computer~~in ~~system~~2019 ~~upgrade~~from ~~and~~3.7% ~~conversion~~in 2018.

19Income Tax

~~Net~~Income tax ~~cash~~expense ~~provided~~decreased by45.9% ~~financing~~to ~~activities~~$1.3 ~~was~~million in 2019 from $102.74 million in ~~2019~~2018. ~~compared~~The toeffective ~~cash~~income ~~used~~tax rate was 33.3% in ~~financing~~2019 ~~activities~~compared ofto $221.54% ~~million~~ in 2018. ~~Net~~The ~~borrowings~~effective ~~under~~tax ~~our~~rate ~~revolver~~is ofaffected ~~$12.2~~by ~~million~~recurring items, such as nondeductible expenses, share -based compensation and state taxes. In addition, the ~~purchase~~effective oftax ~~treasury~~rate ~~stock~~for 2018 included a benefit of $1(9.~~2 million~~5%) ~~were~~for the ~~main~~release ~~components~~ of ~~financing~~the valuation ~~activities~~allowance inon ~~2019~~our net deferred tax assets.

~~Comparison~~ Impact of ~~Years~~Inflation ~~Ended December 31, 2018~~ and ~~2017~~Commodity Prices

Our results ~~net~~of ~~cash~~operations ~~provided~~are affected by ~~operating~~changes ~~activities~~in ~~was~~the $5inflation rate and commodity prices.3 ~~million~~Moreover, inbecause ~~2018~~copper, ~~compared~~steel, toaluminum, nickel ~~net~~and ~~cash~~petrochemical ~~used~~products are components of the industrial products we sell, fluctuations in ~~operating~~the ~~activities~~costs of ~~$11.3~~these ~~million~~and inother commodities ~~2017~~have historically affected our operating results. WeTo ~~had~~the extent commodity prices decline, the net ~~income~~realizable value of ~~$8.6~~our ~~million~~existing ininventory ~~2018~~could ~~compared~~also todecline, aand our gross profit can be adversely affected because of either reduced selling prices or lower of cost or net ~~loss~~realizable value adjustments in the carrying value of $0our inventory.2 ~~million~~If we turn our inventory approximately three times a year, the impact of changes in ~~2017~~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.

~~Changes in our operating assets~~ Liquidity and ~~liabilities~~Capital resulted in cash used in operating activities of $6.2 million in 2018. Inventories increased $6.8 million in alignment with the increase in sales volume. Accounts receivable increased $2.5 million, primarily due to increased sales in 2018. Partially offsetting these uses of cash was the decrease in book overdraft of $3.0 million, an increase in accounts payable of $2.8 million, an increase in accrued and other current liabilities of $2.5 million primarily due to increased inventory and customer volume discounts and a decrease in prepaid expenses of $1.2 million.Resources

~~Net~~Our primary ~~cash~~capital ~~used~~needs inare ~~investing~~for ~~activities~~working ~~was~~capital ~~$1.5~~obligations, ~~million~~capital inexpenditures, and ~~2018~~other ~~compared~~general tocorporate $1purposes, including acquisitions.6 ~~million~~Our inprimary ~~2017~~sources of working capital are cash from operations supplemented by bank borrowings.

~~Net~~Liquidity ~~cash~~is ~~used~~defined as inthe ~~financing~~ability ~~activities~~to ~~was~~generate ~~$2.5~~adequate ~~million~~amounts inof ~~2018~~cash ~~compared~~ to ~~net~~meet ~~cash~~the ~~provided~~current byneed ~~financing~~for ~~activities of $12~~cash.9 ~~million~~We inassess ~~2017.~~our ~~Net~~liquidity ~~payments~~in ~~under~~terms ~~our revolver~~ of ~~$2.2~~our ability ~~million~~to ~~and~~generate ~~the~~cash ~~purchase~~to offund ~~treasury~~our ~~stock~~operating ~~of $0~~activities.2 ~~million~~Significant ~~were~~factors ~~the~~which ~~main~~could ~~components~~affect ofliquidity ~~financing~~include ~~activities~~the ~~in 2018.~~following:

~~Indebtedness~~• 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

~~Our principal source~~ Comparison of ~~liquidity~~Years atEnded December ~~31,~~ ~~2019 was working capital of $138.5 million compared to $126.2 million at December~~ 31, ~~2018.~~2020 Weand ~~also had available borrowing capacity of approximately $22.8 million at December 31,~~ 2019 ~~and $28.7 million at December 31, 2018 under our loan agreement.~~

WeOur net ~~believe~~cash ~~that~~provided weby ~~will~~operating ~~have~~activities ~~adequate~~was ~~availability~~$36.9 ofmillion ~~capital~~in to2020 ~~fund~~compared ~~our~~to ~~present~~net ~~operations,~~cash ~~meet~~used ~~our~~in ~~commitments~~operating onactivities ~~our~~of ~~existing~~$5.6 million ~~debt, and fund anticipated growth over the next twelve months, including expansion~~ in ~~existing and targeted market areas~~2019. We ~~continually~~had 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~~net ~~base~~loss ~~for~~of ~~obtaining additional financing resources at competitive rates and terms~~$12.6 ~~Additionally,~~million ~~based~~in on2020 ~~market~~compared ~~conditions, we may decide~~ to ~~issue~~net ~~additional~~income ~~shares~~ of ~~common~~$2.6 ormillion ~~preferred~~in ~~stock to raise funds~~2019.

~~Loan~~Changes in our operating assets and ~~Security~~liabilities ~~Agreement~~resulted in cash provided by operating activities of $33.4 million in 2020. The majority of the change was due to decreases in inventories of $36.3 million, primarily due to efforts to reduce debt, decreases in accounts receivable of $13.6 million due to decreased sales. The main uses of cash were a decrease in accrued and other liabilities of $9.6 million, a decrease in trade accounts payable of $7.2 million as a result of the decrease in inventory, and lease payments of $3.6 million.

~~HWC~~Net cash ~~Wire~~provided &by ~~Cable~~investing ~~Company,~~activities ~~Vertex,~~was ~~and Bank of America, N~~$14.~~A.,~~7 asmillion ~~agent~~in ~~and~~2020 ~~lender,~~compared ~~are parties~~ to ~~the~~net ~~Fourth~~cash ~~Amended~~used ~~and~~in ~~Restated~~investing ~~Loan~~activities ~~and~~of ~~Security Agreement (the “Loan Agreement”), as amended on December 10, 2019. The Loan Agreement provides a~~ $~~115 million revolving credit facility and expires on March 12, 2024~~2.4 ~~Under certain circumstances we may request an increase~~ million in ~~the commitment by an additional $50 million~~2019. Borrowings under the Loan Agreement bear interest at the British Bankers Association LIBOR Rate plus 100 to 150 basis points based on availability, if a LIBOR loan, or at a fluctuating rate equal to the greatest of the agent’s prime rate, the federal funds rate plus 50 basis points, or LIBOR for a 30-day interest period plus 150 basis points, if a base rate loan. The ~~unused~~net ~~commitment~~cash ~~fee~~provided isby 25was ~~basis~~primarily ~~points.~~due ~~Availability under the Loan Agreement is limited~~ to ~~a borrowing base equal to 85% of~~ the ~~value~~sale of ~~eligible accounts receivable, plus~~ the ~~lesser~~Southern ofreporting ~~70%~~unit ~~of the value of eligible inventory or 90% of the net orderly liquidation value percentage of the value of eligible inventory,~~ in ~~each~~December ~~case less certain reserves~~2020. ~~The Loan Agreement is secured by substantially all of our property, other than real estate.~~

~~Covenants~~Net cash used in ~~the~~financing ~~Loan~~activities ~~Agreement~~was ~~require~~$55.6 usmillion in 2020 compared to ~~maintain~~cash aprovided ~~specified~~by ~~minimum~~financing ~~fixed~~activities ~~charge~~of ~~coverage~~$10.7 ~~ratio,~~million in ~~unless~~2019. ~~certain~~Net ~~availability~~payments ~~levels~~on ~~exist~~the revolver of $60.9 ~~Repaid~~million ~~amounts~~were ~~can~~the beprimary ~~re-borrowed~~uses ~~subject~~of tocash in 2020, offset by the ~~borrowing~~Paycheck ~~base.~~Protection Plan Asloan of ~~December 31,~~$6.2 ~~2019,~~million wereceived ~~met~~in the ~~availability-based~~second ~~covenant~~quarter of 2020.

~~Capital Expenditures~~21

~~We made capital expenditures~~ Comparison of ~~$2.4~~Years ~~million,~~Ended ~~$1.5 million and $1.8 million in the years ended~~ December 31, 2019, ~~2018~~ and ~~2017,~~2018 ~~respectively.~~

~~Off-Balance~~Our net ~~Sheet~~cash ~~Arrangements~~used in operating activities was $5.6 million in 2019 compared to cash provided by operating activities of $5.3 million in 2018. We had net income of $2.6 million in 2019 compared to $8.6 million in 2018.

WeChanges in ~~have~~our nooperating ~~off-balance~~assets ~~sheet~~and ~~arrangements~~liabilities resulted in cash used in operating activities of $19. 3 million in 2019. The majority of the change was due to increased inventories of $20.3 million and lease payments of $6.2 million. Partially offsetting these uses of cash was the increase of accounts payable of $2.6 million, increase in accrued liabilities of $2.4 million and decrease in accounts receivable of $2.6 million.

~~Financial~~Net cash ~~Derivatives~~used in investing activities was $2.4 million in 2019 compared to $1.5 million in 2018. The increase was primarily due to expenditures for the computer system upgrade and conversion.

WeNet cash ~~have~~provided noby ~~financial~~financing ~~derivatives~~activities was $10.7 million in 2019 compared to cash used in financing activities of $2.5 million in 2018. Net borrowings under our revolver of $12.2 million and the purchase of treasury stock of $1.2 million were the main components of financing activities in 2019.

20Indebtedness

~~Climate~~Our principal ~~Risk~~source of liquidity at December 31, 2020 was working capital of $91.4 million compared to $138.5 million at December 31, 2019. We also had available borrowing capacity of approximately $47.5 million at December 31, 2020 and 22.8 million at December 31, 2019 under our loan agreement.

~~Our~~We believe ~~operations~~that ~~are~~we ~~subject~~will have adequate availability of capital to ~~inclement~~fund ~~weather~~our ~~conditions~~present operations, ~~which~~meet ~~could~~our ~~potentially~~commitments beon ~~related~~our toexisting debt, ~~global~~and ~~warming~~fund anticipated growth over the next twelve months, including ~~hurricanes,~~expansion ~~earthquakes~~in existing and ~~abnormal~~targeted ~~weather~~market ~~events~~areas. ~~Our~~We ~~previous~~continually seek ~~experience~~potential acquisitions and from ~~these~~time ~~events~~to ~~has~~time ~~had~~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 ~~minimal~~solid ~~effect~~base for obtaining additional financing resources at competitive rates and terms. Additionally, based on ~~our~~market conditions, ~~operations~~we may decide to issue additional shares of common or preferred stock to raise funds.

~~Factors~~Loan and ~~Affecting~~Security ~~Future Results~~Agreement

~~This~~HWC Wire ~~Annual~~& ~~Report~~Cable onCompany, ~~Form~~Vertex, ~~10-K~~and ~~contains~~Bank ~~statements~~of ~~that~~America, ~~may~~N.A., beas ~~considered~~agent ~~forward-looking. These~~and ~~statements~~lender, ~~can~~are beparties ~~identified~~to by the ~~fact~~Fourth ~~that~~Amended ~~they~~and doRestated Loan ~~not~~and ~~relate~~Security ~~strictly~~Agreement to(the ~~historical~~“Loan orAgreement”), ~~current~~as ~~facts~~amended on December 10, 2019. ~~They~~The ~~use~~Loan ~~words~~Agreement ~~such~~provides asa $115 ~~“aim,”~~million ~~“anticipate,”~~revolving ~~“believe,”~~credit ~~“could,”~~facility ~~“estimate,”~~and ~~“expect,”~~expires ~~“intend,”~~on ~~“may,”~~March ~~“plan~~12,” ~~“project,”~~2024. ~~“should,”~~Under ~~“will~~certain ~~be,”~~circumstances ~~“will~~we ~~continue,”~~may ~~“will~~request ~~likely~~an ~~result,”~~increase ~~“would”~~in the ~~and~~commitment ~~other~~by ~~words~~an ~~and~~additional ~~terms~~$50 ofmillion. ~~similar~~Borrowings ~~meaning~~under inthe ~~conjunction~~Loan ~~with~~Agreement abear ~~discussion~~interest ofat ~~future~~the ~~operating~~British orBankers ~~financial~~Association LIBOR ~~performance.~~Rate ~~You~~plus ~~should~~100 ~~read~~to ~~statements~~150 ~~that~~basis ~~contain~~points ~~these~~based ~~words~~on ~~carefully~~availability, ~~because~~if ~~they~~a ~~discuss~~LIBOR ~~our~~loan, ~~future~~or ~~expectations,~~at ~~contain~~a ~~projections~~fluctuating ofrate ~~our~~equal ~~future~~to ~~results~~the greatest of ~~operations~~the oragent’s ofprime ~~our~~rate, ~~financial~~the ~~position~~federal funds rate plus 50 basis points, or ~~state~~LIBOR ~~other~~for ~~“forward~~a 30-~~looking”~~day ~~information~~interest period plus 150 basis points, if a base rate loan. ~~Actual~~ ~~results~~The ~~could~~unused ~~differ~~commitment ~~materially~~fee ~~from~~is 25 basis points. Availability under the ~~results~~Loan ~~indicated~~Agreement byis ~~these~~limited ~~statements,~~to a ~~because~~borrowing base equal to 85% of the ~~realization~~value of ~~those~~eligible ~~results~~accounts isreceivable, ~~subject~~plus tothe ~~many~~lesser ~~risks~~of ~~and~~70% ~~uncertainties. Some~~of the value of ~~these~~eligible ~~risks~~inventory or ~~and~~90% ~~uncertainties~~of ~~are~~the ~~discussed~~net orderly liquidation value percentage of the value of eligible inventory, in ~~greater~~each ~~detail~~case ~~under~~less ~~Item~~certain 1Areserves. The Loan Agreement is secured by substantially all of our property, ~~“Risk~~other ~~Factors~~than real estate.”

~~All~~Covenants in ~~forward-looking~~the ~~statements~~Loan ~~are~~Agreement ~~based~~require onus ~~current~~to ~~management~~maintain ~~expectations~~a ~~and~~specified ~~speak~~minimum ~~only~~fixed ascharge ofcoverage ~~the~~ratio, ~~date~~unless ofcertain ~~this~~availability ~~filing~~levels exist. ~~Except~~Repaid asamounts ~~required~~can ~~under~~be ~~federal~~re-borrowed ~~securities~~subject ~~laws~~to ~~and~~ the ~~rules~~borrowing ~~and~~base. ~~regulations~~As of ~~the~~December 31, ~~SEC~~2020, we domet ~~not have any intention, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after~~ the ~~date of this Form 10~~availability-Kbased covenant.

~~ITEM~~On May 7A4, 2020, we received a $6.2 –million ~~Not~~Paycheck ~~applicable~~Protection Program (“PPP”) loan from Bank of America (“Lender”), funded under the Coronavirus Aid, Relief, and ~~has~~Economic ~~been~~Security ~~omitted~~Act (the “CARES Act”), pursuant to a Promissory Note issued by the Company to Lender. We used the funds to pay payroll related expenses as well as rent expenses, as allowed by the terms of the loan. We have applied for loan forgiveness and believe we will achieve 90-95% forgiveness. Any portion of the loan that is not forgiven will be due on May 4, 2022.

21Capital Expenditures

~~ITEM~~We made 8capital expenditures of $1.1 ~~CONSOLIDATED~~million, ~~FINANCIAL~~$2.4 ~~STATEMENTS~~million ~~AND~~and ~~SUPPLEMENTARY~~$1.5 ~~DATA~~million in the years ended December 31, 2020, 2019 and 2018, respectively.

~~Houston Wire & Cable Company~~22

~~Index~~Off-Balance Sheet ~~to consolidated financial statements~~Arrangements

		Page
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets as of December 31, 2019 and 2018		F-2
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017		F-3
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017		F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017		F-5
Notes to Consolidated Financial Statements		F-6

We have no off-balance sheet arrangements.

22Financial Derivatives

~~Report~~We have ofno ~~Independent~~financial ~~Registered Public Accounting Firm~~derivatives.

~~To the Stockholders and Board of Directors of Houston Wire & Cable Company~~Climate Risk

~~Opinion~~Our operations onare ~~the~~subject ~~Financial~~to ~~Statements~~inclement weather conditions, which could potentially be related to climate change, including hurricanes, earthquakes and abnormal weather events. Our previous experience from these events has had a minimal effect on our operations.

WeFactors Affecting ~~have~~Future audited the accompanying consolidated balance sheets of Houston Wire & Cable Company (the Company) as of December 31, 2019 and 2018, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles. Results

WeThis Annual ~~also~~Report ~~have~~on ~~audited~~Form 10-K contains statements that may be considered forward-looking. 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 ~~accordance~~conjunction with ~~the~~a ~~standards~~discussion of ~~the~~future ~~Public~~operating ~~Company~~or ~~Accounting~~financial ~~Oversight~~performance. ~~Board~~You should ~~(United~~read ~~States)~~statements ~~(PCAOB)~~that contain these words carefully, ~~the~~ ~~Company’s~~because ~~internal~~they ~~control~~discuss ~~over~~our ~~financial~~future ~~reporting~~expectations, ascontain projections of our ~~December~~future ~~31,~~results ~~2019,~~of ~~based~~operations onor ~~criteria~~of ~~established~~our infinancial ~~Internal~~position ~~Control~~or state other "forward-~~Integrated~~looking" ~~Framework~~information. Actual results ~~issued~~could bydiffer materially from the ~~Committee~~results ofindicated ~~Sponsoring~~by ~~Organizations~~these ofstatements, because the ~~Treadway~~realization ~~Commission~~of ~~(2013~~those ~~framework)~~results is subject to many risks and ~~our~~uncertainties. Some ~~report~~of ~~dated~~these ~~March~~risks ~~13,~~and ~~2020~~uncertainties ~~expressed~~are andiscussed ~~unqualified~~in ~~opinion~~greater ~~thereon~~detail under Item 1A, "Risk Factors."

~~Basis~~All forward-looking ~~for~~statements ~~Opinion~~are based on current management expectations and speak only as of the date of this filing. Except as required under federal securities laws and the rules and regulations of the SEC, we do not have any intention, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this Form 10-K.

~~These financial statements are the responsibility of the Company’s management~~ITEM 7A. ~~Our~~– ~~responsibility~~Not is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable ~~rules~~ and ~~regulations~~has ofbeen ~~the Securities and Exchange Commission and the PCAOB~~omitted.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.23

~~We have served as~~ITEM ~~the~~8. CONSOLIDATED ~~Company’s~~FINANCIAL ~~auditor~~STATEMENTS ~~since~~AND ~~1997.~~SUPPLEMENTARY DATA

~~/s/~~Houston Wire ~~Ernst~~ & ~~Young~~ ~~LLP~~Cable Company

~~Houston,~~Index to ~~Texas~~consolidated financial statements

March 13, 2020

		Page
Reports of Independent Registered Public Accounting Firms		F-1 and F-2
Consolidated Balance Sheets as of December 31, 2020 and 2019		F-3
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018		F-4
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018		F-6
Notes to Consolidated Financial Statements		F-7

~~F-1~~24

~~Houston~~Report of ~~Wire &~~Independent ~~Cable~~Registered ~~Company~~Public Accounting Firm

~~Consolidated~~To ~~Balance~~the ~~Sheets~~Shareholders, Board of Directors and Audit Committee

	December 31,
	2019			2018
	(In thousands, exceptshare data)
Assets
Current assets:
Cash	$	4,096		$	1,393
Accounts receivable, net
Trade		50,325			52,946
Other		6,640			6,847
Inventories, net		114,069			94,325
Income tax receivable		1,353			435
Prepaids and other current assets		1,833			737
Total current assets		178,316			156,683
Property and equipment, net		14,589			11,456
Intangible assets, net		10,282			11,179
Goodwill		22,353			22,353
Deferred income taxes		600			930
Operating lease right-of-use assets, net		13,481			—
Other assets		527			456
Total assets	$	240,148		$	203,057
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	13,858		$	11,253
Accrued and other current liabilities		23,261			19,232
Operating lease liabilities		2,742			—
Total current liabilities		39,861			30,485
Debt		83,500			71,316
Operating lease long term liabilities		11,182			—
Other long-term obligations		1,977			578
Total liabilities		136,520			102,379
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: 16,556,950 and 16,611,651 shares outstanding at December 31, 2019 and 2018, respectively		21			21
Additional paid-in capital		52,304			53,514
Retained earnings		108,626			105,975
Treasury stock		(57,323	)		(58,832	)
Total stockholders’ equity		103,628			100,678
Total liabilities and stockholders’ equity	$	240,148		$	203,057

Houston Wire & Cable Company

~~The~~Houston, ~~accompanying notes are an integral part of these consolidated financial statements.~~Texas

~~F-2~~ Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Houston Wire & Cable Company (the "Company") as of December 31, 2020, and the related consolidated statements of operations, stockholders’ equity and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December31, 2020, in conformity with accounting principles generally accepted in the United States of America.

~~Consolidated~~Basis ~~Statements~~for ~~of Operations~~Opinion

	Year Ended December 31,
	2019		2018		2017
	(In thousands, except share and per share data)
Sales	$	338,286	$	356,858	$	317,697
Cost of sales		258,364		271,650		245,035
Gross profit		79,922		85,208		72,662
Operating expenses:
Salaries and commissions		37,180		38,110		36,570
Other operating expenses		33,238		30,962		28,716
Depreciation and amortization		2,502		2,178		2,772
Impairment charge		120		60		—
Total operating expenses		73,040		71,310		68,058
Operating income		6,882		13,898		4,604
Interest expense		3,057		2,907		2,073
Income before income taxes		3,825		10,991		2,531
Income tax expense		1,275		2,355		2,753
Net income (loss)	$	2,550	$	8,636	$	(222	)
Earnings (loss) per share:
Basic	$	0.16	$	0.53	$	(0.01	)
Diluted	$	0.15	$	0.52	$	(0.01	)
Weighted average common shares outstanding:
Basic		16,433,644		16,389,876		16,269,611
Diluted		16,552,866		16,523,599		16,269,611

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit.

~~The~~We ~~accompanying~~are ~~notes~~a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are anrequired ~~integral~~to ~~part~~be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of ~~these~~the ~~consolidated~~Securities and ~~financial~~Exchange ~~statements~~Commission and the PCAOB.

~~F-3~~ We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

~~Houston~~Our ~~Wire &~~audit ~~Cable~~included ~~Company~~performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.

~~Consolidated~~Critical ~~Statements~~Audit ~~of Stockholders’ Equity~~Matter

					Additional												Total
	Common Stock				Paid-In			Retained			Treasury Stock						Stockholders’
	Shares		Amount		Capital			Earnings			Shares			Amount			Equity
	(In thousands, except share data)
Balance at January 1, 2017		20,988,952		21		53,824			97,550			(4,531,427	)		(61,264	)			90,131
Net loss		—		—		—			(222	)		—			—				(222	)
Repurchase of treasury shares		—		—		—			—			(27,156	)		(177	)			(177	)
Amortization of unearned stock compensation		—		—		1,004			—			—			—				1,004
Impact of forfeited awards		—		—		361			—			(26,707	)		(361	)			—
Impact of released vested restricted stock units		—		—		(372	)		—			27,519			372				—
Issuance of restricted stock awards		—		—		(811	)		—			60,000			811				—
Dividends accrual reversal		—		—		—			8			—			—				8
Balance at December 31, 2017		20,988,952		21		54,006			97,336			(4,497,771	)		(60,619	)			90,744
Net income		—		—		—			8,636			—			—				8,636
Repurchase of treasury shares		—		—		—			—			(25,368	)		(175	)			(175	)
Amortization of unearned stock compensation		—		—		1,059			—			—			—				1,059
Amortization of reclassed liability awards		—		—		411			—			—			—				411
Impact of forfeited awards		—		—		179			—			(13,332	)		(179	)			—
Impact of released vested restricted stock units		—		—		(353	)		—			26,185			353				—
Issuance of restricted stock awards		—		—		(1,788	)		—			132,985			1,788				—
Dividend accrual reversal		—		—		—			3			—			—				3
Balance at December 31, 2018		20,988,952		21		53,514			105,975			(4,377,301	)		(58,832	)			100,678
Net income		—		—					2,550			—			—				2,550
Repurchase of treasury shares		—		—		—			—			(262,231	)		(1,188	)			(1,188	)
Amortization of unearned stock compensation		—		—		1,471			—			—			—				1,471
Impact of forfeited awards		—		—		117			—			(9,142	)		(117	)			—
Impact of released vested restricted stock units		—		—		(1,019	)		—			77,046			1,019				—
Settlement of director’s deferred compensation		—		—		—			—			2,251			16				16
Issuance of restricted stock awards		—		—		(1,779	)		—			137,375			1,779				—
Cumulative effect of accounting change (Note 10)		—		—		—			101			—			—				101
Balance at December 31, 2019		20,988,952		21	$	52,304		$	108,626			(4,432,002	)	$	(57,323	)		$	103,628

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

~~The~~Tradename ~~accompanying~~Impairment ~~notes are an integral part of these consolidated financial statements.~~Assessment

F-The Company’s indefinite lived intangible assets consist of tradenames with a balance of approximately $2.1 million at December 31, 2020. As described in Notes 1 and 4 to the consolidated financial statements, the tradenames are carried at acquisition fair value net of any impairment charges recognized. The Company tests indefinite lived intangible assets for impairment at least annually on October 1, or more frequently whenever events or circumstances occur indicating that they may be impaired. To estimate the fair value of the tradenames, the Company utilizes the relief from royalty method.

~~Houston~~The ~~Wire &~~principal ~~Cable~~consideration ~~Company~~for our determination that performing procedures relating to the impairment assessments of the tradenames is a critical audit matter was due to the subjective nature of the assumptions used to estimate the fair value of the tradenames. In particular, the fair value estimate was sensitive to significant assumptions, such as forecasted revenue growth rates, terminal period revenue growth rate, discount rate and royalty rate, which are affected by expectations about future market or economic conditions, including uncertainty resulting from the COVID-19 pandemic.

~~Consolidated~~To ~~Statements~~test the estimated fair value of ~~Cash~~the Company’s ~~Flows~~tradenames, with the support of our internal valuation specialists, we performed audit procedures that included, among others, assessing the valuation methodology and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis. We also compared the significant assumptions used by management to current industry and economic trends.

	Year Ended December 31,
	2019			2018			2017
	(In thousands)
Operating activities
Net income (loss)	$	2,550		$	8,636		$	(222	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Impairment charge		120			60			—
Depreciation and amortization		2,502			2,178			2,772
Amortization of unearned stock compensation		1,471			1,298			1,176
Non-cash lease expense		5,887			—			—
Provision for doubtful accounts		119			73			68
Provision for refund liability		84			37			180
Provision for inventory obsolescence		515			615			34
Deferred income taxes		431			(1,344	)		1,314
Other non-cash items		54			25			42
Changes in operating assets and liabilities:
Accounts receivable		2,625			(2,507	)		(12,719	)
Inventories		(20,259	)		(6,825	)		(7,942	)
Income taxes		(918	)		14			1,499
Prepaid expenses		(265	)		1,201			(1,368	)
Lease payments		(6,194	)		—			—
Book overdraft		—			(3,028	)		(153	)
Trade accounts payable		2,605			2,804			38
Accrued and other current liabilities		2,394			2,460			3,571
Other operating activities		673			(359	)		368
Net cash (used in) provided by operating activities		(5,606	)		5,338			(11,342	)
Investing activities
Purchase of property and equipment		(2,379	)		(1,503	)		(1,769	)
Proceeds from disposals of property and equipment		5			20			8
Cash refunded (paid) for acquisition		—			—			193
Net cash used in investing activities		(2,374	)		(1,483	)		(1,568	)
Financing activities
Borrowings on revolver		364,671			367,513			333,301
Payments on revolver		(352,487	)		(369,752	)		(320,133	)
Payment of dividends		(36	)		(48	)		(81	)
Purchase of treasury stock/stock surrendered on vested awards		(1,172	)		(175	)		(177	)
Lease payments		(293	)		—			—
Net cash (used in) provided by financing activities		10,683			(2,462	)		12,910
Net change in cash		2,703			1,393			—
Cash at beginning of year		1,393			—			—
Cash at end of year	$	4,096		$	1,393		$	—
Supplemental disclosures
Cash paid during the year for interest	$	3,011		$	2,811		$	1,961
Cash paid during the year for income taxes	$	1,762		$	3,696		$	64

We have served as the Company's auditor since 2020.

~~The~~/s/ ~~accompanying~~BKD, ~~notes are an integral part of these consolidated financial statements.~~LLP

~~F-5~~ Houston, Texas

~~Houston Wire~~March &25, ~~Cable Company~~ 2021

~~Notes to Consolidated Financial Statements~~F-1

1.Report ~~Organization and Summary~~ of ~~Significant~~Independent Registered Public Accounting ~~Policies~~Firm

~~Description~~To the Stockholders and Board of ~~Business~~Directors of Houston Wire & Cable Company

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

~~Basis~~We have audited the accompanying consolidated balance sheet of ~~Presentation~~Houston Wire & Cable Company (the Company) as of December 31, 2019, and ~~Principles~~the related consolidated statements of ~~Consolidation~~operations, stockholders’ equity, and cash flows for the years ended December 31, 2019 and 2018, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019, and the results of its operations and its cash flows for the years ended December 31, 2019 and 2018, in conformity with U.S. generally accepted accounting principles.

~~The~~Basis consolidated financial statements include the accounts of the Company and its subsidiaries and have been prepared following accounting principles generally accepted in the United States (“GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”). The financial statements include all normal and recurring adjustments that are necessary for ~~a fair presentation of the Company’s financial position and operating results. All significant inter-company balances and transactions have been eliminated.~~Opinion

~~Use~~These financial statements are the responsibility of ~~Estimates~~the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

~~The~~We ~~preparation~~conducted ofour ~~the~~audits ~~financial statements~~ in ~~conformity~~accordance with the ~~GAAP~~standards ~~requires~~of ~~management~~the toPCAOB. ~~make~~Those ~~estimates~~standards ~~and~~require ~~assumptions~~ that ~~affect~~we plan and perform the ~~amounts~~audit ~~reported~~to inobtain reasonable assurance about whether the financial statements ~~and~~are ~~accompanying~~free ~~notes.~~of ~~The~~material ~~most~~misstatement, ~~significant~~whether ~~estimates~~due ~~are~~to ~~those~~error ~~relating~~or fraud. Our audits included performing procedures to assess the ~~allowance~~risks ~~for~~of ~~doubtful~~material ~~accounts,~~misstatement of the ~~refund~~financial ~~liability~~statements, ~~the~~whether ~~inventory~~due ~~obsolescence~~to ~~reserve~~error or fraud, ~~vendor~~and ~~rebates~~performing procedures that respond to those risks. Such procedures include examining, ~~the~~on ~~realization~~a oftest ~~deferred~~basis, ~~tax~~evidence ~~assets~~regarding the amounts and disclosures in the ~~valuation~~financial ofstatements. ~~goodwill~~Our ~~and~~audits ~~indefinite-lived~~also ~~assets.~~included ~~Actual~~evaluating ~~results~~the ~~could~~accounting ~~differ~~principles ~~materially~~used ~~from~~and ~~the~~significant estimates ~~and~~made by ~~assumptions~~management, ~~used~~as ~~for~~well as evaluating the ~~preparation~~overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~Reclassifications~~/s/ Ernst & Young LLP

~~Certain~~We ~~prior~~have ~~period~~served ~~amounts~~as ~~have~~the ~~been~~Company’s ~~reclassified~~auditor from to1997 ~~conform~~ to ~~the current period presentation~~2020.

~~Accounts~~Houston, ~~Receivable~~Texas

~~Accounts~~March ~~receivable consists primarily of receivables from customers~~13, less an allowance for doubtful accounts of $0.2 million at December 31, 2019 and 2018. The Company has no contractual repurchase arrangements with its customers. Credit losses have been within management’s expectations.2020

F-6 2

~~Inventories~~Houston Wire & Cable Company

~~Inventories~~Consolidated Balance are carried at the lower of cost, using the average cost method, and net realizable value and consist primarily of goods purchased for resale, less a reserve for obsolescence and unusable items and unamortized vendor rebates. The reserve for inventory is based upon a number of factors, including the experience of the purchasing and sales departments, age of the inventory, new product offerings, and other factors. The reserve for inventory may periodically require adjustment as the factors identified above change. Sheets

Vendor Rebates


	December 31,
	2020			2019
	(In thousands, except share data)
Assets
Current assets:
Cash	$	—		$	4,096
Accounts receivable, net
Trade		38,057			50,325
Other		3,222			6,640
Inventories, net		68,470			114,069
Income tax receivable		—			1,353
Prepaids and other current assets		2,086			1,833
Assets held for sale		6,398			—
Total current assets		118,233			178,316

Property and equipment, net		7,458			14,589
Intangible assets, net		7,390			10,282
Goodwill		9,849			22,353
Deferred income taxes		3,396			600
Operating lease right-of-use assets, net		10,879			13,481
Other assets		507			527
Total assets	$	157,712		$	240,148

Liabilities and stockholders’ equity
Current liabilities:
Book overdraft	$	1,662		$	—
Trade accounts payable		5,809			13,858
Accrued and other current liabilities		13,547			23,261
Income taxes		1,232			—
Operating lease liabilities		2,699			2,742
Liabilities held for sale		1,398			—
Total current liabilities		26,347			39,861

Revolver debt		22,580			83,500
Paycheck Protection Program Loan		6,185			—
Operating lease long term liabilities		8,736			11,182
Other long-term obligations		1,970			1,977
Total liabilities		65,818			136,520

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: 16,870,326 and 16,556,950 shares outstanding at December 31, 2020 and 2019, respectively		21			21
Additional paid-in capital		48,795			52,304
Retained earnings		96,080			108,626
Treasury stock		(53,002	)		(57,323	)
Total stockholders’ equity		91,894			103,628

Total liabilities and stockholders’ equity	$	157,712		$	240,148

Under many of the Company’s arrangements with its vendors, the Company receives a rebate of a specified amount of consideration, payable when the Company achieves any of a number of measures, generally related to the volume level of purchases from the vendors. The ~~Company accounts for such rebates as a reduction of the prices of the vendors’ products and~~ ~~therefore~~accompanying asnotes aare ~~reduction~~an ofintegral ~~inventory~~part ~~until it sells the products, at which time such rebates reduce cost~~ of ~~sales~~these ~~in the accompanying~~ consolidated ~~statements~~financial ~~of operations~~statements. Throughout the year, the Company estimates the amount of the rebates earned based on purchases to date relative to the total purchase levels expected to be achieved during the rebate period. At year end, the Company recalculates the rebates earned based on actual purchases made.

~~Property and Equipment~~F-3

~~The~~Houston Wire & ~~Company~~Cable ~~provides for depreciation on a straight-line method over the following estimated useful lives:~~Company

Buildings	25 to 30 years
Machinery and equipment	3 to 10 years

Consolidated Statements of Operations

Leasehold improvements are depreciated over their estimated life or the term of the lease, whichever is shorter.


	Year Ended December 31,
	2020			2019			2018
	(In thousands, except share and per share data)

Sales	$	286,017		$	338,286		$	356,858
Cost of sales		222,968			258,364			271,650
Gross profit		63,049			79,922			85,208

Operating expenses:
Salaries and commissions		33,007			37,180			38,110
Other operating expenses		28,896			33,238			30,962
Depreciation and amortization		3,377			2,502			2,178
Impairment charge		373			120			60
Loss on divestiture/classification of held for sale (HFS classification)		8,727			—			—
Total operating expenses		74,380			73,040			71,310

Operating income (loss)		(11,331	)		6,882			13,898
Interest (expense)		(1,887	)		(3,057	)		(2,907	)
Income (loss) before income taxes		(13,218	)		3,825			10,991
Income tax (expense) benefit		636			(1,275	)		(2,355	)
Net income (loss)	$	(12,582	)	$	2,550		$	8,636

Earnings (loss) per share:
Basic	$	(0.76	)	$	0.16		$	0.53
Diluted	$	(0.76	)	$	0.15		$	0.52

Weighted average common shares outstanding:
Basic		16,504,141			16,433,644			16,389,876
Diluted		16,504,141			16,552,866			16,523,599

~~Total~~The accompanying ~~depreciation~~notes ~~expense~~are ~~was~~an ~~approximately~~integral ~~$1.7~~part ~~million for the year ended December 31, 2019, and $1.4 million for each~~ of ~~the~~these ~~years~~consolidated ~~ended~~financial ~~December 31, 2018 and 2017~~statements.

~~Goodwill~~F-4

~~Goodwill~~Houston Wire & ~~represents~~Cable the excess of the amount paid to acquire businesses over the estimated fair value of tangible assets and identifiable intangible assets acquired, less liabilities assumed. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates and asset lives among other items. At December 31, 2019, the goodwill balance was $22.4 million, representing 9.3% of the Company~~’s total assets.~~

~~F-7~~Consolidated Statements of Stockholders’ Equity

The Company conducts impairment testing for goodwill annually in the fourth quarter of its fiscal year and more frequently, on an interim basis, when an event occurs or circumstances change that indicate that the fair value of a reporting unit may have declined below its carrying value. Events or circumstances which could indicate a probable impairment include, but are not limited to, financial performance, industry and market conditions, macroeconomic conditions, reporting unit-specific events, historical results of goodwill impairment testing and the timing of the last performance of a quantitative assessment.


					Additional												Total
	Common Stock				Paid-In			Retained			Treasury Stock						Stockholders’
	Shares		Amount		Capital			Earnings			Shares			Amount			Equity

	(In thousands, except share data)
Balance at January 1, 2018		20,988,952	$	21	$	54,006		$	97,336			(4,497,771	)	$	(60,619	)	$	90,744
Net income		—		—		—			8,636			—			—			8,636
Repurchase of treasury shares		—		—		—			—			(25,368	)		(175	)		(175	)
Amortization of unearned stock compensation		—		—		1,059			—			—			—			1,059
Amortization of reclassed liability awards		—		—		411			—			—			—			411
Impact of forfeited awards		—		—		179			—			(13,332	)		(179	)		—
Impact of released vested restricted stock units		—		—		(353	)		—			26,185			353			—
Issuance of restricted stock awards		—		—		(1,788	)		—			132,985			1,788			—
Dividend accrual reversal		—		—		—			3			—			—			3

Balance at December 31, 2018		20,988,952		21		53,514			105,975			(4,377,301	)		(58,832	)		100,678
Net income		—		—					2,550			—			—			2,550
Repurchase of treasury shares		—		—		—			—			(262,231	)		(1,188	)		(1,188	)
Amortization of unearned stock compensation		—		—		1,471			—			—			—			1,471
Impact of forfeited awards		—		—		117			—			(9,142	)		(117	)		—
Impact of released vested restricted stock units		—		—		(1,019	)		—			77,046			1,019			—
Settlement of director’s deferred compensation		—		—		—			—			2,251			16			16
Issuance of restricted stock awards		—		—		(1,779	)		—			137,375			1,779			—
Cumulative effect of accounting change (Note 7)		—		—		—			101			—			—			101
Balance at December 31, 2019		20,988,952		21		52,304			108,626			(4,432,002	)		(57,323	)		103,628

Net loss		—		—		—			(12,582	)		—			—			(12,582	)
Repurchase of treasury shares		—		—		—			—			(25,201	)		(64	)		(64	)
Amortization of unearned stock compensation		—		—		876			—			—			—			876
Impact of forfeited awards		—		—		2,235			—			(173,131	)		(2,235	)		—
Impact of released vested restricted stock units		—		—		(1,055	)		—			81,708			1,055			—
Issuance of restricted stock awards		—		—		(5,565	)		—			430,000			5,565			—
Dividend accrual reversal		—		—		—			36									36
Balance at December 31, 2020		20,988,952	$	21	$	48,795		$	96,080			(4,118,626	)	$	(53,002	)	$	91,894

The ~~Company tests goodwill at the reporting unit level, which is defined as an operating segment or one~~ ~~level~~accompanying ~~below~~notes anare operating segment that constitutes a business for which financial information is available and is regularly reviewed by management. The Company determined that it has four reporting units for this purpose. Before testing goodwill, the Company considers whether or not to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount and whether an ~~impairment test~~integral ispart ~~required. If as a result~~ of ~~the~~these ~~qualitative~~consolidated ~~assessment,~~financial the Company determines that an impairment test is required, or alternatively, if the Company elects to forego the qualitative assessment, the Company performs a quantitative assessment and records an impairment to goodwill to the extent the carrying amount of the reporting unit, including goodwill, exceeds the fair value of the reporting unitstatements. ~~See Note 4 for more details.~~

~~Intangibles~~F-5

~~Intangible assets, from the acquisition of Southwest and Southern in 2010 and the acquisition of Vertex~~Houston inWire & ~~2016,~~Cable ~~consist of customer relationships and tradenames. The customer relationships are amortized over 6 to 9 year useful lives. If events or circumstances were to indicate that any of the~~ Company’s definite-lived intangible assets might be impaired, the Company would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable intangible asset. If the undiscounted cash flows were less than the carrying value, then the intangible assets would be written down to their fair value. Tradenames have an indefinite life and are not being amortized and are tested for impairment on an annual basis. See Note 4 for more details.

~~Leases~~Consolidated Statements of Cash Flows

At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The assessment is based on (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether the Company has the right to direct the use of the asset. All significant lease arrangements are recognized at lease commencement. Leases with a lease term of 12 months or less at inception are not recorded on the Consolidated Balance Sheets and are expensed on a straight-line basis over the lease term in the Consolidated Statements of Operations. The Company determines the lease term by assuming the exercise of renewal options that are reasonably certain. As most of the leases do not provide an implicit interest rate, the Company uses the incremental borrowing rate which approximates to a collateralized rate at the commencement date to determine the present value of future payments that are reasonably certain. See Note 11 for more details.


	Year Ended December 31,
	2020			2019			2018
	(In thousands)
Operating activities
Net income (loss)	$	(12,582	)	$	2,550		$	8,636
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Impairment charge		373			120			60
Depreciation and amortization		3,377			2,502			2,178
Amortization of unearned stock compensation		876			1,471			1,298
Non-cash lease expense		3,570			5,887			—
Provision for doubtful accounts		201			119			73
Provision for refund liability		583			84			37
Provision for inventory obsolescence		1,033			515			615
Loss on divestiture/HFS classification		8,727			—			—
Deferred income taxes		(2,796	)		431			(1,344	)
Other non-cash items		75			54			25
Changes in operating assets and liabilities:
Accounts receivable		13,611			2,625			(2,507	)
Inventories		36,301			(20,259	)		(6,825	)
Income taxes		2,585			(918	)		14
Prepaid expenses and other current assets		50			(265	)		1,201
Lease payments		(3,582	)		(6,194	)		—
Book overdraft		1,662			—			(3,028	)
Trade accounts payable		(7,189	)		2,605			2,804
Accrued and other current liabilities		(9,591	)		2,394			2,460
Other operating activities		(408	)		673			(359)
Net cash provided by (used in) operating activities		36,876			(5,606	)		5,338

Investing activities
Purchase of property and equipment		(1,092	)		(2,379	)		(1,503	)
Purchase of intangibles-software		(1,774	)		—			—
Proceeds from disposals of property and equipment		24			5			20
Cash received from divestiture		17,509			—			—
Net cash used in investing activities		14,667			(2,374	)		(1,483	)

Financing activities
Borrowings on revolver		291,356			364,671			367,513
Payments on revolver		(352,276	)		(352,487	)		(369,752	)
Proceeds from Paycheck Protection Program loan		6,185			—			—
Payment of dividends		(3	)		(36	)		(48	)
Purchase of treasury stock/stock surrendered on vested awards		(64	)		(1,172	)		(175	)
Lease payments		(837	)		(293	)		—
Net cash (used in) provided by financing activities		(55,639	)		10,683			(2,462	)

Net change in cash		(4,096	)		2,703			1,393
Cash at beginning of year		4,096			1,393			—

Cash at end of year	$	—		$	4,096		$	1,393
Supplemental disclosures
Cash paid during the year for interest	$	2,017		$	3,011		$	2,811
Cash paid during the year for income taxes	$	233		$	1,762		$	3,696

~~Self~~ The accompanying ~~Insurance~~notes are an integral part of these consolidated financial statements.

~~The Company retains certain self~~F-insurance risks for health benefits. The Company limits its exposure to these self-insurance risks by maintaining excess and aggregate liability coverage. Self-insurance reserves are established based on claims filed and estimates of claims incurred but not reported. The estimates are based on information provided to the Company by its claims administrators.6

~~Segment~~Houston Wire ~~Reporting~~& Cable Company

~~The Company operates in a single operating and reportable segment, sales of industrial products, including electrical and mechanical wire and cable, industrial fasteners, hardware and related services~~ Notes to ~~the~~Consolidated ~~U.S.~~Financial market. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer. The CODM makes operational and resource decisions based on company-wide sales and margin performance compared to the established strategic goals of the Company.Statements

~~Revenue~~1. ~~Recognition,~~Organization ~~Returns &~~and ~~Allowances~~Summary of Significant Accounting Policies

~~The Company’s primary source~~ Description 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 sales 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.Business

~~The~~Houston ~~amount~~Wire of& ~~revenue~~Cable ~~recognized~~Company ~~reflects~~ (the ~~consideration~~“Company”), ~~the~~through ~~Company~~its ~~expects~~wholly toowned besubsidiaries, ~~entitled~~provides industrial products to ~~receive~~the U.S. market through nineteen locations in ~~exchange~~thirteen ~~for~~states ~~products~~throughout ~~sold.~~the ~~Revenue~~United isStates. ~~recorded~~In atDecember 2020, the ~~transaction~~Company ~~price~~completed ~~net~~the sale of ~~estimates~~Southern ofWire ~~variable~~(“Southern”) ~~consideration~~to Southern Rigging Companies, ~~which~~LLC ~~may~~(“Southern Rigging”) ~~include~~for ~~product~~$17.5 ~~returns~~million, ~~trade~~net ~~discounts~~of ~~and~~the ~~allowances.~~final ~~The~~working ~~Company~~capital ~~accrues~~adjustment, ~~for~~and ~~variable~~was ~~consideration~~negotiating ~~using~~an ~~the~~agreement ~~expected~~for ~~value~~the ~~method.~~sale ~~Estimates~~of substantially all of ~~variable~~the ~~consideration~~assets ~~are~~of ~~included~~Southwest inWire ~~revenue~~Rope (“Southwest”) to ~~the~~Southern ~~extent~~Rigging. ~~that~~Accordingly, itSouthwest is classified ~~probable~~as ~~that~~held afor ~~significant~~sale ~~reversal~~as inof ~~the~~December ~~amount~~31, of2020. ~~cumulative~~(See ~~revenue~~Note ~~recognized~~13) ~~will~~The ~~not~~Company ~~occur~~has no other business activity.

~~Customers are permitted to return product only on a case-by-case basis. Product exchanges are handled~~Basis asof aPresentation ~~credit, with any replacement item being re-invoiced to the customer. Customer returns are recorded as a refund liability, included in accrued~~ and ~~other~~Principles ~~liabilities,~~of ~~with a corresponding reduction to sales. The Company has no installation obligations.~~Consolidation

FThe consolidated financial statements include the accounts of the Company and its subsidiaries and have been prepared following accounting principles generally accepted in the United States (“GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of the Company’s financial position and operating results. All significant inter-8 company balances and transactions have been eliminated.

~~The~~Use of ~~Company may offer sales incentives, which are accrued monthly as an adjustment to sales.~~Estimates

~~Shipping~~The preparation of the financial statements in conformity with GAAP requires management to make estimates and ~~Handling~~assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant estimates are those relating to the allowance for doubtful accounts, the refund liability, the inventory obsolescence reserve, 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.

The Company incurs shipping and handling costs in the normal course of business. Freight amounts invoiced to customers are included as sales, and freight charges are included as a component of cost of sales.Accounts Receivable

Accounts receivable consists primarily of receivables from customers, less an allowance for doubtful accounts of $0.3 million at December 31, 2020 and $0.2 million at December 31, 2019. Consistent with industry practices, the Company requires payment frommost customers within 30-60 days of the invoice date. The Company has an estimation procedure, based on historical data and recent changes in the aging of its receivables, that it uses to record an allowance. The Company reviews delinquent accounts, typically over 90 days, and writes-off balances, as appropriate, after collection efforts have been exhausted. The Company has no contractual repurchase arrangements with its customers. Credit ~~Risk~~losses have been within management’s expectations.

No single customer accounted for 10% or more of the Company’s sales in 2019, 2018 or 2017. The Company performs periodic credit evaluations of its customers and generally does not require collateral.Inventories

~~Financial~~Inventories are ~~Instruments~~carried at the lower of cost, using the average cost method, and net realizable value and consist primarily of goods purchased for resale, less a reserve for obsolescence and unusable items and unamortized vendor rebates. The reserve for inventory is based upon a number of factors, including the experience of the purchasing and sales departments, age of the inventory, new product offerings, and other factors. The reserve for inventory may periodically require adjustment as the factors identified above change.

~~The carrying values of accounts receivable, trade accounts payable and accrued and other current liabilities approximate fair value, due to the short maturity of these instruments.~~ Vendor Rebates

~~Stock-Based~~Under many ~~Compensation~~of the Company’s arrangements with its vendors, the Company receives a rebate of a specified amount of consideration, payable when the Company achieves any of a number of measures, generally related to the volume level of purchases from the vendors. The Company accounts for such rebates as a reduction of the prices of the vendors’ products and therefore as a reduction of inventory until it sells the products, at which time such rebates reduce cost of sales in the accompanying consolidated statements of operations. Throughout the year, the Company estimates the amount of the rebates earned based on purchases to date relative to the total purchase levels expected to be achieved during the rebate period. At year end, the Company recalculates the rebates earned based on actual purchases made.

~~Restricted stock awards, units~~ Property and cash awards are valued at the closing price of the Company’s stock on the grant date and are granted under the Company’s 2017 Stock Plan. Stock options issued under the Company’s now-expired 2006 Stock Plan have an exercise price equal to the fair value of the Company’s stock on the grant date. The Company recognizes compensation expense ratably over the vesting period. The Company’s stock-based compensation expense is included in salaries and commissions expense for employees and in other operating expenses for non-employee directors in the accompanying consolidated statements of operations.Equipment

The Company ~~receives~~provides ~~a tax deduction~~ for ~~certain~~depreciation ~~stock option exercises in the period in which the options are exercised, generally for the excess of the market price~~ on ~~the~~a ~~date~~straight-line ofmethod ~~exercise~~ over the ~~exercise~~following ~~price~~estimated ofuseful the options. The Company reports excess tax benefits from the award of equity instruments as operating cash flows. Excess tax benefits result when a deduction reported for tax return purposes for an award of equity instruments exceeds the cumulative compensation cost for the instruments recognized for financial reporting purposes.lives:

Income Taxes

Buildings		25 to 30 years
Machinery and equipment		3 to 10 years

Deferred tax assets and liabilities are determined based on differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance for deferred tax assets is recognized when it is moreF-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 to determine whether a valuation allowance is required.7

~~Recently~~Leasehold improvements ~~Adopted~~are ~~Accounting~~depreciated ~~Standards~~over their estimated life or the term of the lease, whichever is shorter.

~~The~~Total depreciation ~~Financial~~expense ~~Accounting~~was ~~Standards~~approximately ~~Board~~$1.7 ~~(the~~million ~~“FASB”)~~for ~~Accounting Standards Codification (“ASC”) is~~ the ~~sole~~years ~~source~~ended ofDecember ~~authoritative~~31, ~~GAAP~~2020 ~~other~~and ~~than~~2019, ~~SEC issued rules~~ and ~~regulations that apply only to SEC registrants~~$1.4 ~~The~~million ~~FASB~~for ~~issues an Accounting Standard Update (“ASU”) to communicate changes to~~ the ~~codification.~~year ended ~~The~~December ~~Company~~31, ~~considers the applicability and impact of all ASUs~~2018. ~~The following are those recent ASUs that were recently adopted by the Company.~~

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” Under the new guidance as amended, a lessee is required to recognize a right-of use asset and a lease liability for leases greater than 1 year, both finance and operating leases. This update was effective for public companies for fiscal years beginning after December 15, 2018. Under the transition rules, an entity initially applies the new leases standard at the adoption date, and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption and the comparative periods presented in the financial statements continue to be in accordance with previously-existing GAAP. The Company adopted this ASU effective January 1, 2019. See Note 11 for detailed information.Goodwill

F-Goodwill represents the excess of the amount paid to acquire businesses over the estimated fair value of tangible assets and identifiable intangible assets acquired, less liabilities assumed. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates and asset lives among other items. At December 31, 2020, the goodwill balance was $9 .8 million, representing 6.3% of the Company’s total assets.

InThe Company ~~June~~conducts ~~2018,~~impairment ~~the~~testing ~~FASB~~for ~~issued~~goodwill ~~ASU~~annually ~~No.~~in ~~2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which simplifies~~ the ~~accounting~~fourth ~~for~~quarter ~~share-based~~of ~~payment~~its ~~arrangements~~fiscal ~~with~~year ~~nonemployees for goods~~ and ~~services.~~more ~~Under the ASU~~frequently, ~~the guidance~~ on ~~such~~an interim ~~payments~~basis, towhen ~~nonemployees~~an isevent ~~aligned~~occurs ~~with~~or ~~the~~circumstances ~~accounting~~change ~~for~~that ~~share-based~~indicate ~~payments~~that ~~granted to employees, including~~ the ~~measurement~~fair value of ~~equity-classified~~a ~~awards,~~reporting ~~which~~unit ismay ~~fixed~~have atdeclined below ~~the~~its ~~grant~~carrying ~~date~~value. ~~under~~Events ~~the~~or ~~new~~circumstances ~~guidance.~~which ~~The~~could ~~ASU~~indicate ~~superseded~~a ~~Subtopic~~probable ~~505-50~~impairment include, ~~“Equity~~but -are ~~Equity-Based~~not ~~Payments~~limited to, financial ~~Non-Employees~~performance,” industry and ~~was~~market ~~effective~~conditions, ~~for~~macroeconomic ~~public~~conditions, ~~entities for interim and annual~~ reporting ~~periods~~unit-specific ~~beginning after December 15~~events, ~~2018.~~historical ~~The~~results of ~~Company~~goodwill ~~adopted~~impairment ~~this~~testing ~~ASU~~and in the ~~first~~timing ~~quarter~~ of ~~2019, and~~ the ~~adoption~~last ~~did~~performance ~~not~~of ~~have~~ a ~~material~~quantitative ~~impact on the Company’s consolidated financial statements~~assessment.

~~Recent~~The ~~Accounting~~Company ~~Pronouncements~~tests goodwill at the reporting unit level, which is defined as an operating segment or one level below an operating segment that constitutes a business for which financial information is available and is regularly reviewed by management. The Company determined that, in 2020, it had four reporting units for this purpose. At December 31, 2020, the Company only had three reporting units due to the sale of Southern. Before testing goodwill, the Company considers whether or not to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount and whether an impairment test is required. If as a result of the qualitative assessment, the Company determines that an impairment test is required, or alternatively, if the Company elects to forego the qualitative assessment, the Company performs a quantitative assessment and records an impairment to goodwill to the extent the carrying amount of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. See Note 4 for more details.

~~In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework~~Intangibles – Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in this update eliminate, add and modify certain disclosure requirements for fair value measurements as part of the FASB’s disclosure framework project. The guidance is effective for public companies beginning in the first quarter of 2020. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

InIntangible assets, ~~August~~consist ~~2018,~~of ~~the~~customer ~~FASB~~relationships ~~issued~~and ~~ASU~~tradenames ~~2018-15,~~from ~~“Intangibles~~the –acquisition ~~Goodwill~~of Southwest and ~~Other~~Southern –in ~~Internal-Use~~2010 and the acquisition ~~Software~~of ~~(Subtopic~~Vertex ~~350-40);~~in ~~Customer’s~~2016, ~~Accounting~~as ~~for~~well ~~Implementation~~as ~~Costs~~internal-use ~~Incurred~~software acquired in a2020. ~~Cloud~~The ~~Computing~~Southern ~~Arrangement~~intangible ~~That~~assets were written off at December Is31, a2020 ~~Service~~in ~~Contract~~connection with the sale.” The ~~amendments~~customer inrelationships ~~this~~and ~~update~~internal-use ~~require~~software ~~implementation~~are ~~costs~~amortized ~~incurred~~over by9 ~~customers~~and in3 ~~cloud~~year ~~computing~~useful ~~arrangements~~lives, (irespectively.~~e.,~~ ~~hosting~~If ~~arrangements)~~events toor becircumstances ~~capitalized~~were ~~under~~to ~~the~~indicate ~~same~~that ~~premises~~any of ~~authoritative~~the ~~guidance~~Company’s ~~for internal~~definite-~~use software,~~lived ~~and~~intangible ~~deferred~~assets might ~~over~~be impaired, the ~~non-cancellable~~Company ~~term~~would ofassess ~~the~~recoverability ~~cloud~~based ~~computing~~on ~~arrangement~~the ~~plus~~estimated ~~any~~undiscounted ~~option~~future ~~renewal~~cash ~~periods~~flows ~~that~~to ~~are~~be generated ~~reasonably~~from ~~certain~~the toapplicable beintangible ~~exercised~~asset. byIf the ~~customer~~undiscounted orcash ~~for~~flows ~~which~~were ~~the~~less ~~exercise~~than isthe ~~controlled~~carrying byvalue, then the ~~service~~intangible ~~provider.~~assets would ~~The~~be ~~guidance is~~written ~~effective~~down ~~for~~to ~~public~~their ~~companies~~fair ~~beginning~~value. inTradenames ~~the~~have ~~first~~an ~~quarter~~indefinite oflife ~~2020.~~and ~~The~~are ~~Company~~not isbeing ~~currently~~amortized ~~assessing~~and ~~the~~are ~~impact~~tested offor ~~this~~impairment ~~ASU~~ on ~~its~~an ~~consolidated~~annual ~~financial~~basis. ~~statements~~See Note 4 for more details.

In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. This ASU, among other narrow-scope improvements, clarifies guidance around how to report expected recoveries. This ASU permits organizations to record expected recoveries on assets purchased with credit deterioration. In addition to other narrow technical improvements, the ASU also reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities. The effective date and transition methodology are the same as in ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB deferred the effective dates of this ASU for smaller reporting companies (“SRC”) to fiscal years beginning after December 15, 2022. As of December 31, 2019, the Company qualifies as a SRC and will adopt this ASU in the first quarter of 2023.Leases

InAt the ~~December~~inception ~~2019~~of a contract, the ~~FASB~~Company ~~issued~~assesses ~~ASU 2019-12~~whether the contract is, ~~Income~~or ~~Taxes~~contains, ~~(Topic~~a ~~740~~lease. The assessment is based on (1): whether ~~Simplifying~~the contract involves the ~~Accounting~~use ~~for~~of ~~Income~~a ~~Taxes. This~~distinct ~~ASU~~identified ~~removes~~asset, ~~specific~~(2) ~~exceptions~~whether tothe Company obtains the right to substantially ~~general~~all ~~principles~~the ineconomic ~~Topic~~benefit ~~740~~from inthe ~~GAAP. It~~use ~~eliminates~~of the ~~need~~asset ~~for~~throughout anthe ~~organization~~period, toand ~~analyze~~(3) whether ~~certain~~the ~~exceptions~~Company has the right to direct ~~apply~~the inuse aof ~~given~~the ~~period~~asset. ~~This~~ ~~ASU~~All ~~also~~significant ~~improves~~lease ~~financial~~arrangements ~~statement~~are ~~preparers’~~recognized ~~application~~at oflease ~~income~~commencement. ~~tax-related~~Leases ~~guidance and~~with ~~simplifies~~a ~~GAAP~~lease ~~for:~~term a)of ~~Franchise~~12 months ~~taxes~~or ~~that~~less at inception are ~~partially~~not ~~based~~recorded on ~~income;~~the b)Consolidated ~~Transactions~~Balance ~~with~~Sheets aand ~~government~~are ~~that~~expensed ~~result~~on in a ~~step~~straight-line upbasis over the lease term in the ~~tax~~Consolidated ~~basis~~Statements of ~~goodwill;~~Operations. c)The ~~Separate~~Company ~~financial~~determines ~~statements~~the oflease ~~legal~~term ~~entities~~by assuming the exercise of renewal options that are ~~not~~reasonably ~~subject~~certain. toAs ~~tax;~~most ~~and~~of ~~d) Enacted~~the ~~changes~~leases indo ~~tax~~not ~~laws~~provide inan ~~interim~~implicit ~~periods. For~~interest ~~public~~rate, ~~business~~the ~~entities,~~Company ~~ASU~~uses the ~~2019-12~~incremental isborrowing ~~effective~~rate ~~for~~which ~~fiscal~~approximates ~~years~~to ~~beginning after~~a ~~December~~collateralized ~~15,~~rate ~~2020,~~at ~~and~~the ~~interim~~commencement ~~periods~~date ~~within~~to ~~those~~determine ~~fiscal~~the ~~years. The~~present ~~Company~~value of isfuture ~~currently~~payments ~~assessing~~that ~~the~~are ~~impact~~reasonably ~~of this~~certain. ~~ASU~~See onNote ~~its~~7 ~~consolidated~~for ~~financial~~more ~~statements~~details.

~~2. Earnings (loss) per Share~~Self Insurance

~~Basic~~The Company ~~earnings~~retains ~~(loss)~~certain ~~per~~self-insurance ~~share~~risks isfor ~~calculated~~health bybenefits. ~~dividing~~The ~~net~~Company ~~income~~limits ~~(loss)~~its byexposure ~~the~~to ~~weighted~~these ~~average~~self-insurance ~~number~~risks ofby ~~common~~maintaining ~~shares~~excess ~~outstanding~~and aggregate liability coverage. ~~Diluted~~Self-insurance ~~earnings~~reserves ~~(loss)~~are ~~per~~established ~~share~~based ~~include~~on ~~the~~claims ~~dilutive~~filed ~~effects~~and estimates of ~~options~~claims ~~and~~incurred ~~unvested~~but ~~restricted stock~~not ~~awards~~reported. ~~and~~The ~~units~~estimates are based on information provided to the Company by its claims administrators.

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

	Year Ended December 31,
	2019		2018		2017
Denominator:
Weighted average common shares for basic earnings per share		16,433,644		16,389,876		16,269,611
Effect of dilutive securities		119,222		133,723		—
Denominator for diluted earnings per share		16,552,866		16,523,599		16,269,611

The Company operates in a single operating and reportable segment, sales of industrial products, including electrical and mechanical wire and cable, industrial fasteners, hardware and related services to the U.S. market. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer. The CODM makes operational and resource decisions based on company-wide sales and margin performance compared to the established strategic goals of the Company.

Stock awards to purchase 369,325, 298,406 and 808,391 shares of common stock were not included in the diluted net income (loss) per share calculation for 2019, 2018 and 2017, respectively, as their inclusion would have been antiF-dilutive. In 2017 and for the first quarter of 2018, the Company calculated earnings per share using the “two-class” method, whereby unvested share-based payment awards that contained non-forfeitable rights to dividends or dividend equivalents were considered “participating securities”, as discussed in Note 9, and therefore, these participating securities were treated as a separate class in computing earnings per share.8

3.Revenue Recognition, ~~Detail~~Returns & ~~of Selected Balance Sheet Accounts~~Allowances

~~Accounts~~The Company’s ~~Receivable~~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 sales 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 ~~following~~of ~~table~~revenue ~~summarizes~~recognized reflects the ~~changes~~consideration the Company expects to be entitled to receive in exchange for products sold. Revenue is recorded at the ~~allowance~~transaction ~~for~~price ~~doubtful~~net ~~accounts~~of estimates of variable consideration, which may include product returns, trade discounts and allowances. The Company accrues for variable consideration using the ~~past~~expected ~~three~~value ~~years:~~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.

	2019			2018			2017
	(In thousands)
Balance at beginning of year	$	182		$	172		$	151
Bad debt expense		119			73			68
Write-offs, net of recoveries		(90	)		(63	)		(47	)
Balance at end of year	$	211		$	182		$	172

Customers are permitted to return product only on a case-by-case basis. Product exchanges are handled as a credit, with any replacement item being re-invoiced to the customer. Customer returns are recorded as a refund liability, included in accrued and other liabilities, with a corresponding reduction to sales. The Company estimates the gross profit impact of returns and allowances for previously recorded sales. This liability is calculated on historical and statistical returns and allowances data and adjusted as trends in the variables change. The Company has no installation obligations.

~~Inventories~~The Company may offer sales incentives, which are accrued monthly as an adjustment to sales.

~~The~~Shipping and ~~following table summarizes the changes in the inventory reserves for the past three years:~~Handling

	2019			2018			2017
	(In thousands)
Balance at beginning of year	$	3,709		$	3,925		$	4,366
Provision for inventory write-downs		515			615			34
Deduction for inventory write-offs		(640	)		(831	)		(475	)
Balance at end of year	$	3,584		$	3,709		$	3,925

~~F-10~~ Credit Risk

~~Property~~No single ~~and~~customer ~~Equipment~~accounted for 10% or more of the Company’s sales in 2020, ~~net~~2019 or 2018. The Company performs periodic credit evaluations of its customers and generally does not require collateral.

~~Property and equipment are stated at cost and consist of:~~Financial Instruments

	At December 31,
	2019			2018
	(In thousands)
Land	$	2,476		$	2,476
Buildings		8,712			8,501
Machinery and equipment (1)		19,199			14,867
		30,387			25,844
Less accumulated depreciation		(15,798	)		(14,388	)
Total	$	14,589		$	11,456

The carrying values of accounts receivable, trade accounts payable and accrued and other current liabilities approximate fair value, due to the short maturity of these instruments.

~~(1) This includes finance leases. See Note 11 for more details.~~Stock-Based Compensation

~~Intangible~~Restricted stock ~~assets~~awards, units and cash awards are valued at the closing price of the Company’s stock on the grant date and are granted under the Company’s 2017 Stock Plan. Stock options issued under the Company’s now-expired 2006 Stock Plan have an exercise price equal to the fair value of the Company’s stock on the grant date. The Company recognizes compensation expense ratably over the vesting period. The Company’s stock-based compensation expense is included in salaries and commissions expense for employees and in other operating expenses for non-employee directors in the accompanying Consolidated Statements of Operations.

Intangible assets consist of:	At December 31,
	2019			2018
	(In thousands)
Tradenames	$	5,816		$	5,936
Customer relationships		18,620			18,620
		24,436			24,556
Less accumulated amortization:
Tradenames		—			—
Customer relationships		(14,154	)		(13,377	)
		(14,154	)		(13,377	)
Total	$	10,282		$	11,179

The Company receives a tax deduction for certain stock option exercises in the period in which the options are exercised, generally for the excess of the market price on the date of exercise over the exercise price of the options. The Company reports excess tax benefits from the award of equity instruments as operating cash flows. Excess tax benefits result when a deduction reported for tax return purposes for an award of equity instruments exceeds the cumulative compensation cost for the instruments recognized for financial reporting purposes.

~~As of December 31, 2019, accumulated amortization on the acquired intangible assets was $14.2 million,~~Income and amortization expense was $0.8 million in the years ended December 31, 2019 and 2018 and $1.4 million in the year ended December 31, 2017. Future amortization expense to be recognized on the acquired intangible assets is expected to be as follows:Taxes

	AnnualAmortizationExpense
	(In thousands)
2020	$	777
2021		777
2022		777
2023		777
2024		777
2025		583

Deferred tax assets and liabilities are determined based on differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. 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 to determine whether a valuation allowance is required.

~~Goodwill~~F-9

	At December 31,
	2019		2018
	(In thousands)
Balance at beginning of year	$	22,353	$	22,353
Less purchase price adjustment		—		—
Balance at end of year (1)	$	22,353	$	22,353

Recently Adopted Accounting Standards

The Financial Accounting Standards Board (1the “FASB”) ~~The~~Accounting ~~balance~~Standards Codification (“ASC”) is ~~net~~the sole source of ~~$12~~authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants.6 ~~million~~The ofFASB ~~accumulated~~issues ~~impairment~~an Accounting ~~losses,~~Standard Update (“ASU”) to communicate changes to the codification. The Company considers the applicability and impact of ~~which~~all ~~none~~ASUs. The following are those recent ASUs that were ~~recorded~~recently inadopted ~~2019 or~~by ~~2018~~the Company.

FIn August 2018, the FASB issued ASU 2018-11 13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in this update eliminate, add and modify certain disclosure requirements for fair value measurements as part of the FASB’s disclosure framework project. The Company adopted this ASU in the first quarter of 2020, and the adoption did not have a material impact on the Company’s consolidated financial statements.

~~Accrued~~In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other ~~Current~~- ~~Liabilities~~Internal-Use Software (Subtopic 350-40); Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The amendments in this update require implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software, and deferred over the non-cancellable term of the cloud computing arrangement plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The Company adopted this ASU in the first quarter of 2020, and the adoption did not have a material impact on the Company’s consolidated financial statements.

Accrued and other current liabilities consist of:	At December 31,
	2019		2018
	(In thousands)
Customer rebates	$	4,979	$	6,163
Payroll, commissions, and bonuses		1,930		3,047
Accrued inventory purchases		11,122		5,140
Property taxes		977		1,041
Freight		464		689
Refund liability		1,182		435
Professional fees		399		415
Accrued interest		248		259
Lease obligations		593		71
Other		1,367		1,972
Total	$	23,261	$	19,232

Recent Accounting Pronouncements

4In November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses.” This ~~Impairment~~ASU, among other narrow-scope improvements, clarifies guidance around how to report expected recoveries. This ASU permits organizations to record expected recoveries on assets purchased with credit deterioration. In addition to other narrow technical improvements, the ASU also reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities. The effective date and transition methodology are the same as in ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of ~~Goodwill~~Credit Losses on Financial Instruments. The FASB deferred the effective dates of this ASU for smaller reporting companies (“SRC”) to fiscal years beginning after December 15, 2022. As of December 31, 2020, the Company qualifies as a SRC and ~~Intangible~~expects ~~Assets~~to adopt this ASU in the first quarter of 2023.

~~The~~ ~~annual~~In ~~goodwill~~December ~~and~~2019, ~~indefinite~~the FASB issued ASU 2019-~~lived~~12, ~~intangibles~~“Income ~~impairment~~Taxes ~~test~~(Topic ~~was~~740): ~~performed~~Simplifying the ~~using~~Accounting for Income Taxes.” This ASU removes specific exceptions to the ~~qualitative assessment~~general ~~option~~principles asin ofTopic ~~October~~740 1,in ~~2019~~GAAP. It ~~for~~eliminates the ~~Southern,~~need ~~Southwest~~for ~~and~~an ~~Vertex~~organization ~~reporting~~to ~~units,~~analyze ~~resulting~~whether certain exceptions apply in a ~~conclusion~~given ~~that~~period. This ASU also itimproves ~~was~~financial ~~more~~statement preparers’ application of income tax-~~likely-than-not~~related guidance and simplifies GAAP for: a) Franchise taxes that are partially based on income; b) Transactions with a government that result in a step up in the ~~fair~~tax ~~value~~basis of ~~the~~goodwill; c) ~~reporting~~Separate ~~units~~financial ~~exceeded~~statements ~~their~~of ~~respective~~legal ~~carrying~~entities ~~values~~that ~~except~~are ~~for~~not ~~certain~~subject to tax; and d) Enacted changes in tax laws in interim ~~tradenames~~periods. For ofpublic ~~the~~business ~~Southwest~~entities, ~~reporting~~ASU ~~unit~~2019-12 is effective for ~~which~~fiscal ayears ~~quantitative~~beginning ~~test~~after ~~was~~December ~~necessary~~15, 2020, and interim anperiods ~~impairment~~within ~~charge~~those offiscal $0years.1 The ~~million was~~Company ~~recorded~~is incurrently ~~2019~~assessing the impact of this ASU on its consolidated financial statements.

In March ~~2018~~2020, athe ~~quantitative~~FASB ~~assessment~~issued ~~was~~ASU ~~performed~~2020-04, in“Reference ~~which~~Rate ~~the fair~~Reform ~~values~~(Topic 848): Facilitation of the ~~reporting~~Effects ~~units~~of ~~were~~Reference ~~estimated~~Rate Reform ~~using~~on aFinancial ~~discounted~~Reporting.” ~~cash~~The ~~flow~~amendments ~~model~~in ~~(income~~the ~~approach)~~ASU ~~and~~provide optional guidance for a ~~guideline~~limited ~~public~~time ~~company method~~to ~~(market~~ease ~~approach),~~the ~~giving~~potential burden ~~50%~~in ~~weight~~accounting tofor ~~each~~reference rate reform. The ~~material~~new ~~assumptions~~guidance ~~used~~provides ~~included~~optional ~~cash~~expedients ~~flows~~and ~~based~~exceptions onfor ~~future~~applying ~~expected~~U.S. ~~performance~~GAAP ~~for~~to ~~the~~contracts, ~~reporting~~hedging ~~units,~~relationships ~~weighted~~and ~~average~~other ~~costs~~transactions ofaffected ~~capital~~by ~~ranging~~reference ~~from~~rate 11reform if certain criteria are met.5% The amendments apply only to ~~15.0%,~~contracts aand ~~long-term~~hedging ~~growth~~relationships ~~rate~~that ~~of 3%~~reference ~~for~~London ~~the~~Interbank ~~income~~Offered ~~approach~~Rate ~~and~~("LIBOR") or aanother ~~control~~reference ~~premium~~rate ofexpected ~~25.0%~~to ~~for~~be ~~the~~discontinued ~~guideline~~due ~~public~~to ~~company~~reference ~~method~~rate reform. The ~~results~~provisions of the ~~test~~new ~~indicated~~guidance were effective ~~that~~upon ~~certain~~issuance ofand generally can be applied through December 31, 2022 with the ~~tradenames~~option to apply the guidance at ~~Southwest~~any ~~were~~point ~~impaired~~during that time period. ~~Accordingly,~~The Company currently has a ~~charge~~debt ofagreement ~~less~~that ~~than~~references ~~$0.1~~LIBOR ~~million~~and ~~was~~will ~~recorded~~apply ~~for~~the ~~2018~~new guidance as this agreement is modified to reference other rates.

~~The Company is still anticipating significant growth in the businesses acquired in 2010 and in 2016~~2. Earnings (loss) Ifper ~~this projected growth is not achieved and or there are future reductions in our market capitalization or market multiples, further goodwill and intangible assets impairments may result.~~Share

5Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted ~~Debt~~earnings (loss) per share include the dilutive effects of options and unvested restricted stock awards and units.

~~On March 12, 2019 and December~~ F-10, 2019, the Company, as guarantor, HWC Wire & Cable Company and Vertex, as borrowers, and Bank of America, N.A., as agent and lender, entered into the Second and Third Amendments, respectively, to the Fourth Amended and Restated Loan and Security Agreement (such agreement, as so amended, the “Loan Agreement”). The Second Amendment extends the expiration date until March 12, 2024 and the Third Amendment increases the revolving credit facility to $115 million. Under certain circumstances the Company may request an increase in the commitment by an additional $50 million.

~~Portions~~The following ofreconciles the ~~loan~~denominator ~~may~~used ~~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~~calculation ~~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~~diluted ~~agent’s~~earnings ~~prime~~(loss) ~~rate,~~per ~~the federal funds rate plus 50 basis points, or 30-day LIBOR plus 150 basis points. The unused commitment fee is 25 basis points.~~share:

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.

	Year Ended December 31,
	2020		2019		2018
Denominator:
Weighted average common shares for basic earnings per share		16,504,141		16,433,644		16,389,876
Effect of dilutive securities		—		119,222		133,723
Denominator for diluted earnings per share		16,504,141		16,552,866		16,523,599

~~The~~Stock awards ~~Loan~~to ~~Agreement~~purchase ~~includes~~843,336, ~~among other things~~369,325 ~~covenants~~and ~~that require the Company to maintain a specified minimum fixed charge coverage ratio~~298,406 ~~unless~~shares ~~certain~~of ~~availability~~common ~~levels~~stock ~~exist.~~were ~~Additionally,~~not ~~the~~included ~~Loan~~in ~~Agreement allows for~~ the ~~unlimited~~diluted ~~payment~~net ofincome ~~dividends~~(loss) ~~and~~per share ~~repurchases~~calculation offor ~~stock~~2020, ~~subject~~2019 ~~to the absence of events of default~~ and ~~maintenance~~2018, ofrespectively, aas ~~fixed~~their ~~charge~~inclusion ~~coverage~~would ~~ratio~~have ~~and~~been ~~minimum level of availability~~anti-dilutive. ~~The~~For ~~Loan Agreement contains certain provisions that may cause~~ the ~~debt~~first toquarter of ~~be classified as a current liability~~2018, inthe ~~accordance~~Company ~~with~~calculated ~~GAAP,~~earnings ifper ~~availability~~share ~~falls~~using ~~below~~the ~~certain~~“two-class” ~~thresholds~~method, ~~even~~whereby ~~though~~unvested ~~the~~share-based ~~ultimate~~payment awards ~~maturity~~that ~~date~~contained ~~under~~non-forfeitable ~~the~~rights ~~Loan~~to ~~Agreement~~dividends ~~remains~~or ~~March~~dividend ~~12,~~equivalents ~~2024.~~were Atconsidered ~~December~~“participating 31securities”, and ~~2019~~therefore, ~~the~~these ~~Company~~participating ~~was~~securities inwere ~~compliance~~treated ~~with~~as ~~the~~a ~~availability-based~~separate ~~covenant~~class ~~and~~in ~~fixed~~computing ~~coverage~~earnings ~~ratio~~per ~~governing its indebtedness~~share.

~~F-12~~ 3. Detail of Selected Balance Sheet Accounts

~~The~~ Accounts ~~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.”~~Receivable

The ~~Company’s~~following ~~borrowings~~table atsummarizes ~~December~~the ~~31,~~changes ~~2019~~in ~~and~~the ~~2018~~allowance ~~were~~for ~~$83.5~~doubtful ~~million~~accounts ~~and~~for ~~$71.3~~the ~~million,~~past ~~respectively.~~three ~~The~~years: ~~weighted average interest rates on outstanding borrowings were 3.4% and 4.1% at December 31, 2019 and 2018, respectively.~~

At December 31, 2019, the Company had available borrowing capacity of $22.8 million under the terms of the Loan Agreement. The Company paid $0.1 million for each of the years ended December 31, 2019, 2018, and 2017, for the unused facility.

	2020			2019			2018
	(In thousands)
Balance at beginning of year	$	211		$	182		$	172
Bad debt expense		201			119			73
Write-offs, net of recoveries		(113	)		(90	)		(63	)
Current year divestiture		(3	)		—			—
Balance at end of year	$	296		$	211		$	182

~~Principal repayment obligations for succeeding fiscal years are as follows:~~Inventories

	(In thousands)
2020	$	—
2021		—
2022		—
2023		—
2024		83,500
Total	$	83,500

The following table summarizes the changes in the inventory reserves for the past three years:

6. Income Taxes

	2020			2019			2018
	(In thousands)
Balance at beginning of year	$	3,584		$	3,709		$	3,925
Provision for inventory write-downs		1,033			515			615
Deduction for inventory write-offs		(1,146	)		(640	)		(831	)
Current year divestiture/HFS classification		(328	)		—			—
Balance at end of year	$	3,143		$	3,584		$	3,709

~~The provision (benefit) for income taxes consists of:~~F-11

	Year Ended December 31,
	2019		2018			2017
	(In thousands)
Current:
Federal	$	719	$	3,041		$	1,280
State		125		658			159
Total current		844		3,699			1,439
Deferred:
Federal		400		(1,246	)		1,259
State		31		(98	)		55
Total deferred		431		(1,344	)		1,314
Total	$	1,275	$	2,355		$	2,753

Property and Equipment, net

~~F-13~~ Property and equipment are stated at cost and consist of:

A reconciliation of the U.S. Federal statutory tax rate to the effective tax rate on income before taxes is as follows:

	At December 31,
	2020			2019
	(In thousands)
Land	$	617		$	2,476
Buildings		3,168			8,712
Machinery and equipment ⁽¹⁾		17,203			19,199
		20,988			30,387
Less accumulated depreciation		(13,530	)		(15,798	)
Total	$	7,458		$	14,589

	Year Ended December 31,
	2019			2018			2017
Federal statutory rate		21.0	%		21.0	%		35.0	%
State taxes, net of federal benefit		3.4			4.3			4.2
Impairment, non-deductible portion		—			0.1			—
Share-based compensation		3.7			1.2			15.2
Non-deductible items		5.4			2.1			4.6
Valuation allowance		—			(9.5	)		41.0
Tax reform rate change		—			—			12.9
Other		(0.2	)		2.2			(4.1	)
Total effective tax rate		33.3	%		21.4	%		108.8	%

(1)

This includes finance leases. See Note 7 for more details.

~~Significant components of the Company’s deferred taxes were as follows:~~Intangible assets

	Year Ended December 31,
Intangible assets consist of:	At December 31,
	2019			2018
	2020			2019
	(In thousands)
Deferred tax assets:
Tradenames	$	2,081		$	5,816
Operating lease right-of-use assets	$	3,425		$	—
Customer relationships		6,990			18,620
Inventory reserve		1,072			1,179
Internal-use software		1,774			—
Uniform capitalization adjustment		1,633			1,469
		10,845			24,436
Stock compensation expense		666			681
Less accumulated amortization:
Accrued commission		124			348
Tradenames		—			—
Other		199			276
Customer relationships		(3,301	)		(14,154	)
Total deferred tax assets		7,119			3,953
Internal-use software		(154	)		—
Deferred tax liabilities
		(3,455	)		(14,154	)
Operating lease right-of-use assets		(3,316	)		—
Total	$	7,390		$	10,282
Goodwill		(838	)		(649	)
Intangible assets		(2,230	)		(2,315	)
Other		(135	)		(59	)
Total deferred tax liabilities		(6,519	)		(3,023	)
Net deferred tax assets	$	600		$	930

OnAs of December 2231, ~~2017~~2020, ~~the~~accumulated ~~United~~amortization ~~States enacted significant changes to the U.S. tax law following the passage and signing of H.R.1, “An Act to Provide the Reconciliation Pursuant to Titles II and V of the Concurrent Resolution~~ on the ~~Budget~~remaining ~~for~~acquired/purchased ~~Fiscal~~intangible ~~Year~~assets ~~2018”~~was ~~(previously known as “The Tax Cuts and Jobs Act”)~~$3.4 ~~In March 2018~~million, ~~the~~and ~~FASB issued ASU 2018-05, “Income Taxes (Topic 740): Amendments to SEC Paragraphs~~amortization ~~Pursuant~~expense towas ~~SEC Staff Accounting Bulletin No~~$0.9 ~~118~~million ~~(SEC~~in ~~Update).” This ASU added~~ the ~~SEC~~year ~~guidance~~ended ~~released on~~ December 2231, ~~2017~~ ~~regarding~~2020 ~~the income tax accounting implication of the Tax Cuts~~ and ~~Jobs Act to ASC Topic 740. During 2017, the Company recorded income tax expense of~~ $0.38 million ~~to reflect the reduction~~ in the ~~U.S.~~years ~~corporate~~ended ~~income~~December ~~tax~~31, ~~rate~~2019 ~~from~~and ~~35% to 21%~~2018. ~~As of December 31,~~Future ~~2018,~~amortization ~~the~~expense ~~Company~~to ~~completed~~be ~~its~~recognized ~~analysis~~on ~~of its accounting for~~ the ~~income~~remaining ~~tax~~acquired/purchased ~~effects~~intangible ofassets ~~tax~~is ~~reform~~expected ~~and~~to be as ~~a result no additional adjustments were recorded.~~follows:

The Company does not have any unrecognized tax benefits recorded at December 2019, 2018 and 2017. The Company recognizes interest on any tax issue as a component of interest expense and any related penalties in other operating expenses. As of December 31, 2019, 2018 and 2017, the Company recorded no provision for interest or penalties related to uncertain tax positions. The tax years 2015 through 2019 remain open to examination by the major taxing jurisdictions to which the Company is subject.

	Annual Amortization Expense
	(In thousands)
2021	$	1,368
2022		1,368
2023		1,213
2024		777
2025		583

~~7. Stockholders’ Equity~~Goodwill

On March 7, 2014, the Board of Directors adopted a stock repurchase program under which the Company is authorized to purchase up to $25 million of its outstanding shares of common stock from time to time, depending on market conditions, trading activity, business conditions and other factors. Shares of stock purchased under the program are held as treasury shares and may be used to satisfy the exercise of options, issuance of restricted stock, to fund acquisitions or for other uses as authorized by the Board of Directors. In November 2016, the Board of Directors suspended purchases under the stock repurchase program. In August 2019, the plan was reactivated. During 2019, the Company made repurchases under the stock repurchase program of 235,500 shares for a total cost of $1.1 million.


	At December 31,
	2020			2019
	(In thousands)
Balance at beginning of year	$	22,353		$	22,353
Less current year divestiture		(12,504	)		—
Balance at end of year ⁽¹⁾	$	9,849		$	22,353

~~F-14~~ (1) The balance is net of $12.6 million of accumulated impairment losses, of which none were recorded in 2020 or 2019.

~~Under the terms of the 2017 Stock Plan, the Company acquired 26,731 shares and 25,368 shares that were surrendered by the holders to pay withholding taxes in 2019 and 2018, respectively.~~ F-12

~~The~~Accrued and ~~Company~~Other ~~paid~~Current ~~a quarterly cash dividend from August 2007 until August 2016. The Company has not paid a cash dividend since 2016.~~Liabilities

The Company is authorized to issue 5,000,000 shares of preferred stock, par value $.001 per share. The Board of Directors is authorized to fix the particular preferences, rights, qualifications and restrictions of each series of preferred stock. In connection with the adoption of a now terminated stockholder rights plan, the Board of Directors designated 100,000 shares as Series A Junior Participating Preferred Stock. No shares of preferred stock have been issued.


Accrued and other current liabilities consist of:	At December 31,
	2020		2019
	(In thousands)
Customer rebates	$	3,833	$	4,979
Payroll, commissions, and bonuses		2,272		1,930
Accrued inventory purchases		997		11,122
Property taxes		1,078		977
Freight		346		464
Refund liability		1,765		1,182
Prepayments on customer orders ⁽¹⁾		743		2
Professional fees		446		399
Accrued interest		84		248
Lease obligations		854		593
Other		1,129		1,365
Total	$	13,547	$	23,261

8(1) This amount represents prepayments by customers for inventory. ~~Retirement-related~~As ~~Benefits~~the customer requests their inventory, the Company ships the material, reduce the prepayment and recognize the revenue.

~~Defined~~4. ~~Contribution~~Impairment ~~Plan~~of Goodwill and Intangible Assets

The Company ~~maintains~~tests agoodwill ~~combination~~and ~~profit-sharing~~indefinite ~~plan~~lived ~~and~~intangibles ~~salary~~for ~~deferral~~impairment ~~plan~~at ~~for~~least ~~the~~annually ~~benefit~~or ofmore ~~its~~frequently ~~employees~~whenever ~~who~~events ~~are~~or circumstances ~~not~~occur ~~covered~~indicating bythat ait ~~collective~~might ~~bargaining~~be ~~agreement~~impaired. ~~Employees~~During ~~who~~the ~~are~~first ~~eligible~~and tosecond ~~participate~~quarter inof 2020, the ~~plan~~Company’s ~~can~~market capitalization ~~contribute~~declined asignificantly, ~~percentage~~driven ofby ~~their~~macroeconomic ~~base~~and ~~compensation,~~geopolitical upconditions due in large part to the ~~maximum~~COVID-19 ~~percentage~~outbreak, which ~~allowable~~has ~~not~~contributed to ~~exceed~~a ~~the~~decline ~~limits~~in ofdemand ~~Internal~~for ~~Revenue~~the ~~Code~~Company’s ~~Sections 401(k)~~products, ~~404,~~a ~~and~~decline ~~415~~in overall financial performance, ~~subject~~partially due to the ~~IRS-imposed~~decline ~~dollar~~in ~~limit.~~oil ~~Employee~~prices, ~~contributions~~and ~~are~~a ~~invested~~deterioration inof ~~certain~~industry ~~equity~~ and ~~fixed-income~~market ~~securities,~~conditions. ~~based~~Based on ~~employee~~these ~~elections.~~events, ~~The~~the Company ~~matches~~concluded that ~~100%~~it ofwas more-likely-than-not that the ~~first~~fair 1%values of ~~the~~certain ~~employee’s~~of ~~contribution.~~its ~~The~~reporting ~~Company’s~~units ~~match~~were ~~for~~less ~~the~~than ~~years~~their ~~ended~~carrying ~~December 31~~values. Therefore, ~~2019,~~the ~~2018~~Company ~~and~~performed ~~2017~~interim ~~was~~goodwill ~~$0.2~~impairment ~~million~~tests ~~for~~in ~~each~~both ~~year~~the first and second quarter.

~~Defined~~Goodwill ~~Benefit~~impairment is ~~Plan~~evaluated at each reporting unit that has goodwill; the Southern and Vertex reporting units as of December 31, 2019 and the Vertex reporting unit as of December 31, 2020. At December 31, 2019, the Company determined that the fair values of these two reporting units, as well as certain of the Company’s indefinite lived intangibles, exceeded their respective carrying values. The goodwill balance of Vertex at December 31, 2020 was $9.8 million, and due to its negative carrying value, no goodwill impairment was recorded.

~~The~~During ~~Company~~June ~~has a non-contributory defined benefit pension plan for those current and former employees of Vertex who are subject to a collective bargaining agreement. Effective November 30~~2020, ~~2019, there are no active employees in the~~ ~~plan as~~ the ~~plan~~Company ~~was~~determined ~~frozen with~~ the ~~closure~~fair ofvalue ~~Vertex’s Massachusetts facility. The benefit provisions to participants~~ of ~~the~~ ~~defined~~its ~~benefit~~Vertex ~~plan~~reporting ~~were~~unit’s ~~calculated~~tradenames ~~based~~was onbelow ~~the~~its ~~number~~carrying ofvalue, ~~years~~and ofas ~~service~~a ~~and~~result recorded an ~~annual~~impairment ~~negotiated~~charge ~~plan benefit per year~~ of ~~service~~$0.1 ~~Annual~~million. ~~compensation~~The ~~(or~~Company ~~future~~also ~~compensation~~determined ~~increases) is not used in calculating~~ the ~~benefit~~fair orvalue ~~future~~of ~~plan~~its ~~contributions. It~~Southwest isreporting ~~the Company~~unit’s tradenames ~~policy~~was tobelow ~~fund~~its ~~amounts~~carrying ~~for~~value, ~~pensions~~and ~~sufficient~~as toa ~~meet the minimum funding requirements set forth in applicable employee benefit laws~~result, ~~which~~recorded ~~currently~~an ~~approximate~~impairment ~~the~~charge ~~benefit payments made each year. A total contribution~~ of ~~less than~~ $0.1 million ~~was~~in ~~made~~June ~~during~~2020 ~~each~~and of$0.2 ~~the~~million in ~~years~~March ~~ended December 31, 2019, 2018 and 2017~~2020.

~~The~~As part ~~current~~of ~~projected~~the ~~benefit~~divestiture ~~obligation~~of ~~was~~the ~~$1.3~~Southern ~~million~~reporting ~~and~~unit, ~~$1.1~~the ~~million~~Company aswrote-off ofits ~~December~~$12.5 ~~31,~~million goodwill ~~2019~~balance and ~~2018,~~ ~~respectively.~~as ~~The~~part ~~discount~~of ~~rate~~the ~~used~~HFS toclassification ~~determine~~of the ~~projected~~Southwest ~~benefit~~reporting ~~obligation~~unit, ~~was~~wrote-off ~~3.2%~~its ~~and 4~~$1.2%0 million intradenames ~~2019~~balance ~~and~~at ~~2018~~December 31, ~~respectively~~2020.

~~The~~A qualitative ~~fair~~assessment ~~value~~was performed as of October 1, 2019 for the ~~assets~~Southern, Southwest and Vertex reporting units. The results of the ~~defined~~test ~~benefit~~indicated ~~plan~~that it was ~~$1.3~~more-likely-than-not ~~million~~that ~~and~~the ~~$1.0~~fair ~~million~~value inof ~~2019~~the ~~and~~reporting units exceeded their respective carrying ~~2018,~~values ~~respectively.~~except ~~The~~for ~~plan~~certain ~~assets~~of ~~are~~the ~~all~~tradenames ~~classified as~~of ~~Level~~the 1Southwest ~~and~~reporting asunit ~~such~~for ~~have~~which ~~readily~~a ~~observable~~quantitative ~~prices~~test was necessary and ~~therefore~~an impairment acharge ~~reliable~~of ~~fair~~$0.1 ~~market~~million ~~value~~was recorded for 2019.

AsThe Company ofis ~~November~~still ~~30,~~anticipating ~~2019,~~growth in the ~~defined~~business ~~benefit~~acquired ~~plan~~in isVertex ~~inactive,~~reporting ~~with~~unit. noIf ~~additional~~this ~~incremental~~projected ~~benefits~~growth is not achieved ~~being~~and ~~accrued~~or there are future reductions in our market capitalization or market multiples, further goodwill and nointangible ~~contributions~~assets ~~being~~impairments may ~~made~~result.

~~F-15~~ 5. Debt

9On March 12, 2019 and December 10, 2019, the Company, as guarantor, HWC Wire & Cable Company and Vertex, as borrowers, and Bank of America, N.A., ~~Incentive~~as ~~Plans~~agent and lender, entered into the Second and Third Amendments, respectively, to the Fourth Amended and Restated Loan and Security Agreement (such agreement, as so amended, the “Loan Agreement”). The Second Amendment extended the expiration date until March 12, 2024 and the Third Amendment increased the revolving credit facility to $115 million . Under certain circumstances, the Company may request an increase in the commitment by an additional $50 million.

~~On August 4, 2017, the Board~~ Portions of ~~Directors approved~~ the ~~Houston~~loan ~~Wire~~may &be ~~Cable~~converted ~~Company~~to ~~2017 Stock~~LIBOR ~~Plan (the~~loans ~~“2017~~in ~~Plan”).~~minimum ~~The~~amounts ~~2017~~of ~~Plan was approved by the stockholders at the 2018 Annual Meeting on May 8, 2018~~$1.0 ~~The~~million ~~2017 Plan provides for discretionary grants of stock options, stock awards, stock units~~ and ~~stock~~integral ~~appreciation~~multiples ~~rights (SARs) to employees and directors up to a total~~ of $0.1~~,000,000~~ ~~shares~~million. ~~Shares~~LIBOR ~~issuable~~loans bear ~~under~~interest at the ~~2017~~British ~~Plan~~Bankers ~~may~~Association beLIBOR ~~authorized~~Rate ~~but~~plus ~~unissued~~100 ~~shares~~to or150 ~~treasury~~basis ~~shares.~~points Ifbased ~~any~~on ~~award granted under the 2017 Plan expires~~availability, ~~terminates~~and orloans isnot converted ~~forfeited or cancelled for any reason, the shares subject~~ to ~~the~~LIBOR ~~award~~loans ~~will~~bear ~~again~~interest beat ~~available~~a ~~for~~fluctuating ~~issuance.~~rate ~~Any~~equal ~~shares subject~~ to ~~an award that are delivered to~~ the ~~Company~~greatest ~~or withheld by the Company on behalf~~ of ~~a participant as payment for~~ the ~~award~~agent’s ~~(including~~prime ~~the exercise price of a stock option or SAR) or as payment for any withholding taxes due in connection with the award~~rate, ~~or that are purchased by~~ the ~~Company~~federal funds ~~with~~rate ~~proceeds~~plus ~~received~~50 ~~from~~basis ~~a stock option exercise~~points, ~~will~~or ~~not~~30-day ~~again~~LIBOR beplus ~~available~~150 ~~for~~basis ~~issuance~~points. The ~~2017~~unused ~~Plan’s~~commitment ~~purpose~~fee is to25 ~~attract~~basis and retain outstanding individuals as employees and directors of the Company and its subsidiaries and to provide them with additional incentive to expand and improve the Company’s profits by giving them the opportunity to acquire or increase their proprietary interest in the Companypoints.

The 2017 Plan succeeded the Company’s 2006 Stock Plan (the “2006 Plan”), which expired on May 1, 2017. The types of equity awards previously authorized under the 2006 Plan did not significantly differ from those permitted under the 2017 Plan.F-13

~~Stock~~Availability under ~~Option~~the ~~Awards~~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 ~~Company~~Agreement ~~may~~includes, ~~grant~~among ~~options~~other tothings, ~~purchase~~covenants ~~its~~that ~~common~~require ~~stock~~the Company to ~~employees~~maintain ~~and~~a ~~directors~~specified ofminimum ~~the~~fixed ~~Company~~charge ~~under~~coverage ratio, ~~the~~unless ~~2006~~certain ~~Plan~~availability ~~and~~levels ~~2017~~exist. ~~Plan~~Additionally, atthe noLoan ~~less~~Agreement ~~than~~allows for the ~~fair~~unlimited ~~market~~payment ~~value~~ of ~~the~~dividends and ~~underlying~~repurchases of stock, onsubject to the ~~date~~absence of ~~grant.~~events ~~These~~of ~~options~~default ~~are~~and ~~granted~~maintenance ~~for~~of a ~~term~~fixed ~~not~~charge ~~exceeding~~coverage ~~ten~~ratio ~~years~~ and ~~may~~minimum level beof ~~forfeited~~availability. inThe ~~the~~Loan ~~event~~Agreement ~~the~~contains ~~employee~~certain orprovisions ~~director~~that ~~terminates~~may ~~his~~cause ~~or her employment or relationship with~~ the ~~Company.~~debt ~~Options granted~~ to ~~employees~~be ~~generally~~classified ~~vest~~as ~~over~~a ~~three~~current toliability, in ~~five~~accordance ~~years~~with GAAP, ~~and~~if ~~options~~availability ~~granted~~falls tobelow ~~directors~~certain ~~generally~~thresholds, ~~vest~~even ~~one~~though ~~year~~the ~~after~~ultimate ~~the~~maturity date ofunder ~~grant. Shares issued to satisfy~~ the ~~exercise~~Loan Agreement ofremains ~~options~~March ~~may~~12, ~~be newly issued shares or treasury shares~~2024. ~~Each~~At ~~plan~~December ~~contains~~31, ~~anti-dilutive~~2020, ~~provisions that permit an adjustment of~~ the ~~number of shares of the~~ Company’s ~~common~~was ~~stock represented by each option for any change~~ in ~~capitalization.~~compliance ~~Compensation~~with ~~cost for options granted is charged to expense on a straight line basis over~~ the ~~term~~availability-based ofcovenant ~~the~~governing its ~~option~~indebtedness.

The Company’s ~~fair~~borrowings ~~value~~at ofDecember ~~each~~31, ~~option~~2020 ~~awarded~~and is2019 ~~estimated~~were ~~on the date of grant using a Black-Scholes option-pricing model~~$28.8 million ~~Expected volatilities are based on historical volatility of the Company’s stock~~ and ~~other~~$83.5 ~~factors~~million, respectively. The ~~expected~~weighted ~~life~~average ofinterest ~~options~~rates ~~granted~~on ~~represents~~outstanding ~~the~~borrowings ~~period~~were ~~of time that options granted are expected to be outstanding~~1.9% and ~~The risk-free rate for periods within the life of the option is based on the U~~3.~~S. Treasury~~4% ~~yield curve in effect~~ at ~~the~~December ~~time~~31, 2020 ofand ~~grant. There were no options granted in~~ 2019, ~~2018 or 2017~~respectively.

~~All~~At December 31, ~~granted~~2020, ~~stock~~the ~~options~~Company ~~have~~had ~~vested,~~available ~~with~~borrowing ~~the~~capacity ~~last~~of ~~grant~~$47.5 million ~~having~~under anthe ~~expiration~~terms ~~date~~ of ~~December~~ ~~20,~~the ~~2021~~Loan Agreement. The ~~following~~Company ~~summarizes~~paid ~~stock~~$0.1 ~~option~~million ~~activity~~for each of the years ended December 31, 2020, 2019, and ~~related~~2018 ~~information:~~ for the unused facility.

	Options (in 000’s)						Weighted Average Exercise Price				Aggregate Intrinsic Value				Weighted Average Remaining Contractual Life (in years)
	2019			2018			2019		2018		2019		2018		2019		2018
Outstanding-Beginning of year		154			223			13.40		13.10	$	—	$	—		2.52		2.84
Granted		—			—			—		—
Exercised		—			—			—		—
Forfeited		(22	)		(30	)		13.04		11.17
Expired		(10	)		(39	)		10.32		13.42
Outstanding-End of year		122			154			13.72		13.40	$	—	$	—		1.75		2.52
Exercisable-End of year		122			154			13.72		13.40	$	—	$	—		1.75		2.52

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.”

~~There~~On May ~~was~~4, no2020, ~~excess~~the ~~tax~~Company ~~benefit~~received a $6.2 million Paycheck Protection Program (“PPP”) loan from Bank of America (“Lender”), funded under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), pursuant to a Promissory Note issued by the Company to Lender. The Company used the funds to pay its payroll related expenses as well as rent expenses, as allowed by the terms of the loan. The Company has applied for loan forgiveness and expects to achieve 90-95% forgiveness. The forgiveness amount will be equal to the amount that the Company used for the approved expenses: a minimum of 60% on payroll related expenses and up to 40% on non-payroll expenses. Any amount of the loan that is not forgiven will be due two years ~~ended~~from ~~December~~the funding ~~31,~~date ~~2019~~of May 4, ~~2018~~2020 to repay the balance of the PPP loan. No principal or interest payments will be due prior to the end of the six-month deferment period and ~~2017~~the interest rate on the balance of the loan will not exceed 1.0% per annum.

~~There~~Principal repayment ~~were~~obligations nofor ~~options~~succeeding ~~exercised~~fiscal ~~in the~~ years ~~ended~~are ~~December 31, 2019, 2018 and 2017. There is no intrinsic value of options outstanding and exercisable~~ as ~~of December 31, 2019 as the closing stock price at the end of 2019 creates a negative intrinsic value.~~follows:

The total grant-date fair value of options vested during 2019 was $0, as all the options vested as of December 31, 2018. The total grant-date fair value of options vested during the year ended December 31, 2017 was $0.2 million.

	(In thousands)
2021	$	—
2022 ⁽¹⁾		6,185
2023		—
2024		22,580
Total	$	28,765

~~Restricted~~(1) ~~Stock~~The ~~Awards,~~Company ~~Restricted~~has ~~Stock~~applied ~~Units~~for loan forgiveness and ~~Cash~~believes ~~Awards~~that it will achieve 90-95% forgiveness, or approximately $5.6-$5.9 million.

As a result of the approval of the 2017 Plan by the stockholders at the 2018 Annual Meeting, all cash/liability awards granted prior to stockholder approval of the 2017 Plan were reclassified to restricted stock units (equity) effective May 8, 20186. ~~The~~Income 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 terms of the grants, which range from 1 to 5 years.Taxes

~~F-16~~The provision (benefit) for income taxes consists of:

On December 3, 2019, the Board of Directors granted to the Company’s President and CEO 78,125 voting shares of restricted stock and to the CFO, 19,531 voting shares of restricted stock under the 2017 Plan. The shares vest in one-third increments on the first, second and third 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 or units vest.


	Year Ended December 31,
	2020			2019		2018
	(In thousands)
Current:
Federal	$	1,814		$	719	$	3,041
State		346			125		658
Total current		2,160			844		3,699

Deferred:
Federal		(2,592	)		400		(1,246	)
State		(204	)		31		(98	)
Total deferred		(2,796	)		431		(1,344	)

Total	$	(636	)	$	1,275	$	2,355

Also, on December 3, 2019, the Board of Directors granted 250,000 shares of restricted stock to the Company’s President and CEO and 125,000 shares of restricted stock to the CFO. Each grant vests if there is a Change in Control of the Company (as defined in the 2017 Plan) on or before December 2, 2024, as long as the recipient remained in continuous employment with the Company or a Subsidiary until the Change in Control or if the recipient was terminated by the Company without cause within one year before the Change in Control. Any dividends declared will be accrued and paid to the grantee if and when the related shares vest.F-14

~~The~~A reconciliation ~~Board~~ of ~~Directors also granted 39,719 voting shares of restricted stock under~~ the ~~2017 Plan to members of management in December 2019~~U.S. ~~The~~Federal ~~shares~~statutory ~~vest~~tax inrate ~~one-third~~to ~~increments on~~ the ~~third,~~effective ~~fourth~~tax ~~and~~rate ~~fifth~~on ~~anniversaries~~income ofbefore ~~the~~taxes ~~date~~is ~~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 or units vest.~~follows:

Following the Annual Meeting of Stockholders on May 7, 2019, the Company granted restricted stock units with a grant date value of $60,000 to each nonemployee director who was elected, for an aggregate of 58,920 restricted stock units. Each award of restricted stock units vests at the date of the 2020 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.


	Year Ended December 31,
	2020			2019			2018

Federal statutory rate		21.0	%		21.0	%		21.0	%
State taxes, net of federal benefit		(1.1	)		3.4			4.3
Impairment, non-deductible portion		—			—			0.1
Share-based compensation		(1.5	)		3.7			1.2
Non-deductible items		(0.3	)		5.4			2.1
Valuation allowance		—			—			(9.5	)
Current year divestiture		(13.9	)		—			—
Other		0.6			(0.2	)		2.2
Total effective tax rate		4.8	%		33.3	%		21.4	%

~~On March 12, 2019, the Board of Directors~~Significant ~~granted~~components ~~52,910 performance stock units to the Company’s President and CEO and 13,228 performance stock units to the CFO. Each grant~~ of ~~performance stock units vests on December 31, 2021, based on and subject to~~ the Company’s ~~achievement~~deferred oftaxes ~~cumulative EBITDA~~were ~~and stock price performance goals over a three-year period,~~ as long as the grantee 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 the grantee if and when the related shares vest.follows:

On December 4, 2018, the Board of Directors granted to the Company’s President and CEO 48,387 voting shares of restricted stock and to the CFO, 12,097 voting shares of restricted stock under the 2017 Plan. The shares vest in one-third increments on the first, second and third 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 or units vest.


	Year Ended December 31,
	2020			2019
	(In thousands)
Deferred tax assets:
Operating lease right-of-use assets	$	3,203		$	3,425
Inventory reserve		856			1,072
Uniform capitalization adjustment		1,523			1,633
Stock compensation expense		501			666
Accrued commission		144			124
Held for sale		1,577			—
Property and equipment, net		233			—
Refund liability		406			—
Other		224			199
Total deferred tax assets		8,667			7,119

Deferred tax liabilities
Operating lease right-of-use assets		(3,075	)		(3,316	)
Goodwill		(232	)		(838	)
Intangible assets		(1,555	)		(2,230	)
Other		(409	)		(135	)
Total deferred tax liabilities		(5,271	)		(6,519	)

Net deferred tax assets	$	3,396		$	600

The Company ~~Board~~does ofnot ~~Directors also~~have ~~granted~~any ~~44,357~~unrecognized ~~voting~~tax ~~shares~~benefits ofrecorded ~~restricted~~at ~~stock~~December ~~under~~2020, ~~the~~2019 ~~2017~~and ~~Plan~~2018. toThe ~~members~~Company ofrecognizes ~~management~~ interest on ~~December~~any 4,tax ~~2018.~~issue ~~The~~as ~~shares vest~~a incomponent ~~one-third~~of ~~increments~~interest onexpense ~~the~~and ~~third,~~any ~~fourth~~related ~~and~~penalties ~~fifth~~in ~~anniversaries~~other ofoperating ~~the~~expenses. ~~date~~As of ~~grant~~December 31, 2020 inand ~~each~~2019, ~~case~~the asCompany ~~long~~recorded asno ~~the~~provision ~~recipient is~~for ~~then~~interest ~~employed~~or bypenalties ~~the~~related ~~Company.~~to ~~Any~~uncertain ~~dividends~~tax ~~declared~~positions. ~~will~~The betax ~~accrued~~years ~~and~~2016 through ~~paid~~2020 ifremain ~~and~~open ~~when~~to examination by the ~~related~~major ~~shares~~taxing orjurisdictions ~~units~~to ~~vest~~which the Company is subject.

On November 6, 2018 and June 1, 2018, the Company awarded restricted stock units with a grant date value of $30,000 and $55,000 for a total of 4,950 and 6,667 restricted stock units, respectively, to its newly appointed non-employee directors7. These awards of restricted stock units vest at the date of the 2019 Annual Meeting of Stockholders. Each 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.Leases

OnEffective January ~~May 8~~1, ~~2018~~2019, the Company ~~approved~~adopted ~~the~~ASU ~~award~~No. of2016-02, ~~restricted~~“Leases ~~stock~~(Topic ~~units~~842)” ~~with~~and athe ~~grant~~series ~~date value~~ of ~~$60,000~~related toASUs ~~each~~that ~~non-employee~~followed (collectively ~~director~~referred ~~who~~to ~~was~~as ~~re-elected, for~~“Topic an842”). ~~aggregate~~The ofmost ~~31,372~~significant ~~restricted~~changes ~~stock~~under ~~units.~~the ~~Each~~new ~~award~~guidance include clarification of ~~restricted~~the ~~stock~~definition ~~units~~of ~~vests~~a atlease, and the ~~date~~requirements offor ~~the~~lessees ~~2019~~to ~~Annual~~recognize ~~Meeting~~ a right-of-use ~~Stockholders.~~(ROU) ~~Each~~asset ~~non-employee~~and ~~director~~a islease ~~entitled~~liability tofor all ~~receive~~qualifying aleases ~~number~~with ofterms ~~shares~~longer ofthan ~~the~~twelve ~~Company’s~~months ~~common~~in ~~stock~~the ~~equal to~~consolidated ~~the~~balance ~~number~~sheet. ofIn ~~vested~~addition, ~~restricted~~under ~~stock~~Topic ~~units~~842, ~~together~~additional disclosures ~~with~~are ~~dividend~~required ~~equivalents~~to ~~from~~meet the ~~date~~objective of ~~grant,~~enabling atusers ~~such~~of ~~time~~financial asstatements to assess the ~~director’s~~ ~~service~~amount, ontiming ~~the~~and ~~board~~uncertainty of ~~terminates~~cash ~~for~~flows ~~any~~arising ~~reason~~from leases.

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.F-15

~~Restricted~~The Company ~~common~~elected ~~shares~~the ~~and~~practical ~~restricted~~expedient ~~stock~~available ~~units~~under ~~are~~ASU ~~measured~~2018-11 at“Leases: ~~fair~~Targeted ~~value~~Improvements,” onwhich allows the ~~date~~Company ofto ~~grant~~apply ~~based~~the ontransition provision for Topic 842 at the ~~quoted~~Company’s ~~price~~adoption date instead of at the ~~common~~earliest ~~stock~~comparative period presented in the Company’s financial statements. ~~Such~~Therefore, ~~value~~the isCompany recognized asand ~~compensation~~measured ~~expense~~leases ~~over~~existing ~~the~~at January ~~corresponding~~1, ~~vesting~~2019 ~~period~~but ~~which~~without ~~ranges~~retrospective ~~from~~application. ~~one~~The toCompany ~~five~~also ~~years,~~elected ~~based~~all onother ~~the~~available ~~number~~practical ofexpedients ~~awards~~except the ~~that~~hindsight ~~vest~~practical expedient.

~~The~~In electing ~~following~~the ~~summarizes~~practical ~~restricted~~expedients, ~~stock~~the ~~activity~~Company ~~for~~utilized the ~~years~~transition ~~ended~~practical ~~December 31~~expedient package whereby the Company did not reassess (i) whether any of the Company’s expired or existing contracts contain a lease, ~~2019~~(ii) the classification for any expired or existing leases and ~~2018:~~(iii) initial direct costs for any existing leases.

	Shares
	2019					2018
	Shares (in 000’s)			Weighted Average Market Value at Grant Date		Shares (in 000’s)			Weighted Average Market Value at Grant Date
Non-vested -Beginning of year		259		$	6.78		238		$	7.33
Granted		511			3.84		133			6.51
Vested		(107	)		7.24		(99	)		7.61
Cancelled/Forfeited		(9	)		6.34		(13	)		7.63
Expired		—			—		—			—
Cash awards converted to equity		—			—		—			—
Non-vested -End of year		654		$	5.18		259			6.78

The impact of Topic 842 on the Company’s consolidated balance sheet as of January 1, 2019 was the recognition of ROU assets and lease liabilities for operating leases, while the Company’s accounting for finance leases remained substantially unchanged. The Company’s finance leases were immaterial prior to the adoption of Topic 842, and no change was made to the classification of these leases. As a result of the adoption of Topic 842, beginning retained earnings was impacted by $0.1 million and there was no impact to the consolidated statement of operations.

~~F-17~~ The Company leases property including warehouse space, offices, vehicles and equipment. The Company determines if an arrangement is a lease at inception. As part of the transition to the new standard, the Company reviewed agreements with suppliers, vendors, customers, and other outside parties to determine if any agreements met the definition of an embedded lease. This is based on the nature of the contracts reviewed, and various factors, including identified assets included in the agreement to which the Company has exclusive rights of control as described by Topic 842. The Company concluded that these are not material agreements with parties that would constitute an embedded lease. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

	Units
	2019					2018
	Shares (in 000’s)			Weighted Average Market Value at Grant Date		Shares (in 000’s)			Weighted Average Market Value at Grant Date
Non-vested -Beginning of year		215		$	7.59		40		$	7.50
Granted		125			5.88		43			7.47
Vested		(60	)		7.59		(60	)		7.65
Cancelled/Forfeited		(3	)		7.65		(5	)		7.65
Expired		—			—		—			—
Cash awards converted to equity		—			—		197			7.65
Non-vested -End of year		277			6.83		215			7.59

Beginning January 1, 2019, operating ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Operating leases in effect prior to January 1, 2019 were recognized at the present value of the remaining lease payments over the remaining lease term as of January 1, 2019. The Company is required to determine a discount rate in order to calculate the present value of lease payments. If the rate is not included in the lease or cannot be readily determined, the Company uses its incremental secured borrowing rate based on lease term information available at the commencement date of the lease in determining the present value of lease payments. The Company recognizes lease components and non-lease components together and not as separate parts of a lease for all leases. The Company will exercise this practical expedient in the future by asset class.

Total stock-based compensation cost was $1.5 million for the year ended December 31, 2019, $1.3 million for the year ended December 31, 2018, and $1.2 million for the year ended December 31, 2017, of which $1.0 million was for equity awards and $0.2 million was for liability awards. Total income tax benefit recognized for equity awards stock-based compensation arrangements was $0.2 million for each of the years ended December 31, 2019, 2018 and 2017.

Lease Type	Statement of Operations Classification	2020		2019
		(In thousands)
Consolidated operating lease expense	Operating expenses	$	3,570	$	5,887

Consolidated financing lease amortization	Depreciation and amortization		835		305
Consolidated financing lease interest	Interest expense		141		61
Consolidating financing lease expense			976		366

Net lease cost		$	4,546	$	6,253

AsRent ofexpense ~~December 31, 2019, there~~ was approximately $13.87 million in ~~of total unrecognized compensation cost related to non-vested, stock-based compensation arrangements~~2018. ~~The cost is expected to be recognized over a weighted average period of approximately 26 months. There are 5,148 shares available for future grants under the 2017 Plan at December 31, 2019.~~

~~10.~~The value ~~Commitments~~of the net assets and ~~Contingencies~~liabilities generated by the leasing activity of the Company as lessee as of December 31, 2020 and December 31, 2019 were as follows:

The Company had aggregate purchase commitments for fixed inventory quantities of approximately $59.0 million at December 31, 2019.

Lease Type	Balance Sheet Classification	2020		2019
		(In thousands)
Total ROU operating lease assets ⁽¹⁾	Operating lease right-of-use assets, net	$	10,879	$	13,481
Total ROU financing lease assets ⁽²⁾	Property and equipment, net		2,793		2,430
Total lease assets		$	13,672	$	15,911

Total current operating lease obligation	Operating lease liabilities	$	2,699	$	2,742
Total current financing lease obligation	Accrued and other current liabilities		856		593
Total current lease obligation		$	3,555	$	3,335

Total long term operating lease obligation	Operating lease long term liabilities	$	8,736	$	11,182
Total long term financing lease obligation	Other long term liabilities		1,958		1,860
Total long term lease obligation		$	10,694	$	13,042

~~The Company had outstanding under the Loan Agreement letters of credit totaling $1.8 million to certain vendors as of December 31, 2019.~~F-16

~~From~~(1) ~~time~~Operating tolease ~~time,~~assets we are ~~involved~~recorded innet ~~lawsuits~~of ~~that~~accumulated ~~are~~amortization ~~brought against us in the normal course~~ of ~~business~~$4. We3 ~~are~~million ~~not~~and ~~currently~~$2.3 amillion ~~party~~as toof ~~any~~December ~~legal proceedings that we expect~~31, ~~either~~2020 ~~individually~~and ~~or in the aggregate~~2019, ~~to have a material adverse effect on the Company’s consolidated financial position, cash flows, or results from operations~~respectively.

~~F-18~~ (2) Financing lease assets are recorded net of accumulated amortization of $1.2 million and $0.4 million as of December 31, 2020 and 2019, respectively.

~~11.~~The future ~~Leases~~minimum lease payments for finance and operating lease liabilities of the Company as lessee as of December 31, 2020 were as follows:

Effective January 1, 2019, the Company adopted ASU No. 2016-02, “Leases (Topic 842)” and the series of related ASUs that followed (collectively referred to as “Topic 842”). The most significant changes under the new guidance include clarification of the definition of a lease, and the requirements for lessees to recognize a right-of-use (ROU) asset and a lease liability for all qualifying leases with terms longer than twelve months in the consolidated balance sheet. In addition, under Topic 842, additional disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.


Maturity Date of Lease Liabilities	Operating Leases			Financing Leases			Total
	(In thousands)
Year one	$	3,222		$	968		$	4,190
Year two		3,186			887			4,073
Year three		2,654			753			3,407
Year four		2,330			406			2,736
Year five		1,076			31			1,107
Subsequent years		266			—			266
Total lease payments		12,734			3,045			15,779
Less: Interest		(1,299	)		(231	)		(1,530	)
Present value of lease liabilities	$	11,435		$	2,814		$	14,249

The weighted ~~Company~~average ~~elected~~remaining ~~the~~lease ~~practical~~terms ~~expedient~~and ~~available~~discount ~~under~~rates ~~ASU 2018-11 “Leases: Targeted Improvements,” which allows the Company to apply the transition provision for Topic 842 at the Company’s adoption date instead~~ of at the ~~earliest comparative period presented in the Company’s financial statements. Therefore, the Company recognized and measured~~ leases ~~existing~~held atby ~~January 1, 2019 but without retrospective application. The Company also elected all other available practical expedients except~~ the ~~hindsight practical expedient. In electing the practical expedients, the~~ Company ~~utilized~~as ~~the transition practical expedient package whereby the Company did not reassess (i) whether any~~ of ~~the~~December ~~Company’s expired or existing contracts contain a lease~~31, ~~(ii)~~2020 ~~the classification for any expired or existing leases~~ and ~~(iii)~~2019 were ~~initial~~as ~~direct costs for any existing leases.~~follows:

Lease Type	Weighted Average Term in Years				Weighted Average Interest Rate
	2020		2019		2020		2019
Operating leases		4.2		4.9		5.3		5.3
Financing leases		3.4		4.2		4.7		5.3

The cash ~~Company~~outflows ~~leases property including warehouse space, offices, vehicles and equipment. The Company determines if an arrangement is a lease at inception. As part~~ of the ~~transition~~leasing toactivity ~~the~~of ~~new standard,~~ the Company ~~reviewed~~as ~~agreements~~lessee ~~with~~for ~~suppliers, vendors, customers, and other outside parties to determine if any agreements met~~ the ~~definition~~twelve ofmonths anended ~~embedded~~December ~~lease. This is based on the nature of the contracts reviewed~~31, 2020 and ~~various~~2019 ~~factors,~~were ~~including identified assets included in the agreement to which the Company has exclusive rights of control~~ as ~~described by Topic 842. The Company concluded~~ that these are not material agreements with parties that would constitute an embedded lease. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.follows:

Cash Flow Source	Classification	2020		2019
		(In thousands)
Operating cash outflows from operating leases	Operating activities	$	3,442	$	6,140
Operating cash outflows from financing leases	Operating activities		140		54
Financing cash outflows from financing leases	Financing activities		837		293

~~The~~During the ~~expenses~~years ~~generated~~ended byDecember ~~the~~31, ~~lease~~2020 ~~activity~~and of2019, the Company asrecorded ~~lessee~~non-cash ~~for~~ROU ~~the~~financing ~~twelve~~lease ~~months~~assets ~~ended~~and ~~December~~corresponding financing 31lease obligations totaling $1.2 million and $2.5 million, ~~2019~~respectively, ~~were~~primarily asrelated ~~follows:~~to warehouse machinery and IT infrastructure lease agreements.

Lease Type	Income Statement Classification	Amount
(Dollars in thousands)
Consolidated operating lease expense	Operating expenses	$	5,887
Consolidated financing lease amortization	Depreciation and amortization		305
Consolidated financing lease interest	Interest expense		61
Consolidating financing lease expense			366
Net lease cost		$	6,253

Also during the year ended December 31, 2019, the Company modified certain terms of the lease agreement with the landlord of Vertex’s Massachusetts facility, including early termination of the lease on November 30, 2019 and Vertex subleasing a portion of the space until the end of November. In connection with the modification, the Company recognized expense related to the early termination of approximately $2.2 million in 2019.

~~Rent expense was approximately $3~~8.7 ~~million~~Stockholders’ ~~and $3.5 million in 2018 and 2017, respectively.~~Equity

~~F-19~~ On March 7, 2014, the Board of Directors adopted a stock repurchase program under which the Company is authorized to purchase up to $25 million of its outstanding shares of common stock from time to time, depending on market conditions, trading activity, business conditions and other factors. Shares of stock purchased under the program are held as treasury shares and may be used to satisfy the exercise of options, issuance of restricted stock, to fund acquisitions or for other uses as authorized by the Board of Directors. In November 2016, the Board of Directors suspended purchases under the stock repurchase program. In August 2019, the plan was reactivated and during 2019, the Company purchased an aggregate of 235,500 shares for a total cost of $1.1 million. There were no purchases under the program in 2020.

~~The value of the net assets and liabilities generated by the leasing activity of the Company as lessee as of December 31, 2019 were as follows:~~F-17

Lease Type	Balance Sheet Classification	Amount
(Dollars in thousands)
Total ROU operating lease assets (1)	Operating lease right-of-use assets, net	$	13,481
Total ROU financing lease assets (2)	Property and equipment, net		2,430
Total lease assets		$	15,911
Total current operating lease obligation	Operating lease liabilities	$	2,742
Total current financing lease obligation	Accrued and other current liabilities		593
Total current lease obligation		$	3,335
Total long term operating lease obligation	Operating lease long term liabilities	$	11,182
Total long term financing lease obligation	Other long term liabilities		1,860
Total long term lease obligation		$	13,042

Under the terms of the 2017 Stock Plan, the Company acquired 25,201 shares and 26,731 shares that were surrendered by the holders to pay withholding taxes in 2020 and 2019, respectively. (See Note 10)

~~(1)~~The Company ~~Operating~~paid ~~lease~~a ~~assets~~quarterly ~~are~~cash ~~recorded~~dividend ~~net~~from ofAugust ~~accumulated~~2007 ~~amortization~~until ofAugust $22016.3 ~~million~~The asCompany ofhas ~~December~~not ~~31,~~paid ~~2019~~a cash dividend since 2016.

~~(2)~~The Company ~~Financing~~is ~~lease~~authorized ~~assets~~to ~~are~~issue ~~recorded~~5,000,000 ~~net~~shares of ~~accumulated~~preferred ~~amortization~~stock, ofpar value $0.4001 ~~million~~per asshare. The Board of ~~December~~Directors 31is authorized to fix the particular preferences, ~~2019~~rights, qualifications and restrictions of each series of preferred stock. In connection with the adoption of a now terminated stockholder rights plan, the Board of Directors designated 100,000 shares as Series A Junior Participating Preferred Stock. No shares of preferred stock have been issued.

~~The~~9. ~~future~~Retirement-related ~~minimum lease payments for finance and operating lease liabilities of the Company as lessee as of December 31, 2019 were as follows:~~Benefits

Maturity Date of Lease Liabilities	Operating Leases		Financing Leases		Total
(Dollars in thousands)
Year one	$	3,391		708		4,099
Year two		3,298		661		3,959
Year three		3,169		599		3,768
Year four		2,509		517		3,026
Year five		2,181		256		2,437
Subsequent years		1,266		—		1,266
Total lease payments		15,814		2,741		18,555
Less: Interest		1,900		289		2,189
Present value of lease liabilities	$	13,914		2,452		16,366

Defined Contribution Plan

The Company ~~weighted~~maintains ~~average~~a ~~remaining~~combination ~~lease~~profit-sharing ~~terms~~plan and ~~discount~~salary ~~rates~~deferral ofplan for the ~~leases~~benefit ~~held~~of its employees who are not covered by a collective bargaining agreement. Employees who are eligible to participate in the plan can contribute a percentage of their base compensation, up to the maximum percentage allowable not to exceed the limits of Internal Revenue Code Sections 401(k), 404, and 415, subject to the IRS-imposed dollar limit. Employee contributions are invested in certain equity and fixed-income securities, based on employee elections. From January 1, 2018 through April 30, 2020, the Company asmatched 100% of the first 1% of the employee’s contribution. The Company’s match for the year ended December 31, 2020 was $0.1 million and for the years ended December 31, 2019 ~~were~~and as2018 ~~follows:~~was $0.2 million for each year.

Lease Type	Weighted Average Term in Years	Weighted Average Interest Rate
Operating leases	4.9	5.3
Financing leases	4.2	5.3

Defined Benefit Plan

The Company ~~cash~~has ~~outflows~~a non-contributory defined benefit pension plan for those current and former employees of Vertex who are subject to a collective bargaining agreement. Effective November 30, 2019, there are no active employees in the ~~leasing~~plan ~~activity~~as the plan was frozen with the closure of Vertex’s Massachusetts facility. The benefit provisions to participants of the defined benefit plan were calculated based on the number of years of service and an annual negotiated plan benefit per year of service. Annual compensation (or future compensation increases) is not used in calculating the benefit or future plan contributions. It is the Company’s policy asto ~~lessee~~fund amounts for pensions sufficient to meet the ~~twelve~~minimum ~~months~~funding requirements set forth in applicable employee benefit laws, which currently approximate the benefit payments made each year. A total contribution of less than $0.1 million was made during each of the years ended December 31, 2020, 2019 ~~were~~and as2018. ~~follows:~~As of November 30, 2019, the defined benefit plan is inactive, with no additional incremental benefits being accrued.

Cash Flow Source	Classification	Amount
(Dollars in thousands)
Operating cash outflows from operating leases	Operating activities	$	6,140
Operating cash outflows from financing leases	Operating activities		54
Financing cash outflows from financing leases	Financing activities		293

The current projected benefit obligation was $0.8 million and $1.3 million as of December 31, 2020 and 2019, respectively. The discount rate used to determine the projected benefit obligation was 2.0% and 3.2% in 2020 and 2019, respectively.

~~During the~~The ~~year~~fair ~~ended~~value ~~December~~of ~~31,~~the ~~2019,~~assets of the ~~Company~~defined ~~recorded~~benefit ~~non-cash~~plan ~~ROU~~was ~~financing~~$0.8 ~~lease~~million ~~assets~~ and ~~corresponding~~$1.3 ~~financing~~million ~~lease~~in ~~obligations~~2020 and ~~totaling~~2019, $2respectively.5 ~~million~~The ~~primarily~~plan ~~related~~assets toare ~~warehouse~~all ~~machinery~~classified as Level 1 and ITas ~~infrastructure~~such ~~lease~~have ~~agreements~~readily observable prices and therefore a reliable fair market value.

During the year ended December 31, 2019, the Company modified certain terms of the lease agreement with the landlord of Vertex’s Massachusetts facility, including early termination of the lease on November 30, 2019 and Vertex subleasing a portion of the space until the end of November10. InIncentive ~~connection with the modification, the Company recognized expense related to the early termination of approximately $2.2 million.~~Plans

The Houston Wire & Cable Company ~~has~~2017 Stock ~~entered~~Plan (the ~~into~~“2017 ~~two~~Plan”) ~~operating~~as ~~leases~~amended ~~during~~in ~~2020~~2019, ~~with~~provides ~~significant~~for discretionary grants of stock options, stock awards, stock units and stock appreciation rights (SARs) to employees and ~~obligations that~~directors up to a total of $02,500,000 shares.8 ~~million~~Shares issuable under the 2017 Plan may be authorized but unissued shares or treasury shares. ~~All~~If ~~other~~any ~~leases~~award granted under the 2017 Plan expires, terminates or is forfeited or cancelled for any reason, the shares subject to the award will again be available for issuance. Any shares subject to an award that are delivered to the Company or withheld by the Company on behalf of a participant as payment for the award (including the exercise price of a stock option or SAR) or as payment for any withholding taxes due in connection with the award, or that are purchased by the Company with proceeds received from a stock option exercise, will not ~~material~~again be available for issuance. The 2017 Plan’s purpose is to attract and retain outstanding individuals as employees and directors of the Company and its subsidiaries and to provide them with additional incentive to expand and improve the Company's profits by giving them the opportunity to acquire or increase their proprietary interest in the Company.

F-20 18

~~12.~~The 2017 ~~Select~~Plan ~~Quarterly~~succeeded ~~Financial~~the ~~Data~~Company’s 2006 Stock Plan (~~unaudited~~the “2006 Plan”), which expired on May 1, 2017. The types of equity awards previously authorized under the 2006 Plan did not significantly differ from those permitted under the 2017 Plan.

~~The~~Stock Option following table presents the Company’s unaudited quarterly results of operations for each of the last eight quarters in the period ended December 31, 2019. The unaudited information has been prepared on the same basis as the audited consolidated financial statements.Awards

	Year Ended December 31, 2019
	FourthQuarter			ThirdQuarter			SecondQuarter		FirstQuarter
	(in thousands, except per share data)
Sales	$	82,287		$	85,403		$	85,326	$	85,270
Gross profit	$	18,695		$	19,431		$	20,537	$	21,259
Operating (loss) income	$	76		$	(87	)	$	3,030	$	3,863
Net (loss) income	$	(656	)	$	(721	)	$	1,643	$	2,284
Earnings (loss) per share:
Basic	$	(0.04	)	$	(0.04	)	$	0.10	$	0.14
Diluted	$	(0.04	)	$	(0.04	)	$	0.10	$	0.14

The Company may grant options to purchase its common stock to employees and directors of the Company under the 2006 Plan and 2017 Plan at no less than the fair market value of the underlying stock on the date of grant. These options are granted for a term not exceeding ten years and may be forfeited in the event the employee or director terminates his or her employment or relationship with the Company. Options granted to employees generally vest over three to five years, and options granted to directors generally vest one year after the date of grant. Shares issued to satisfy the exercise of options may be newly issued shares or treasury shares. Each plan contains anti-dilutive provisions that permit an adjustment of the number of shares of the Company’s common stock represented by each option for any change in capitalization. Compensation cost for options granted is charged to expense on a straight line basis over the term of the option.

	Year Ended December 31, 2018
	FourthQuarter		ThirdQuarter		SecondQuarter		FirstQuarter
	(in thousands, except per share data)
Sales	$	87,906	$	90,074	$	93,852	$	85,026
Gross profit	$	20,979	$	21,393	$	22,347	$	20,489
Operating income	$	3,190	$	3,046	$	4,392	$	3,270
Net income	$	1,628	$	2,455	$	2,606	$	1,947
Earnings per share:
Basic	$	0.10	$	0.15	$	0.16	$	0.12	(1)
Diluted	$	0.10	$	0.15	$	0.16	$	0.12	(1)

The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model. Expected volatilities are based on historical volatility of the Company’s stock and other factors. The expected life of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. There were no options granted in 2020, 2019 or 2018.

~~(1)~~All granted ~~The~~stock ~~“two-class”~~options ~~method~~have ~~was~~vested, ~~used~~with tothe ~~calculate~~last ~~earnings~~grant ~~per~~having ~~share~~an ~~which~~expiration ~~resulted~~date inof December ~~the~~20, ~~same value~~2021. The following summarizes stock option activity and related information: Schedule of stock option activity

F-21

	Options (in 000’s)						Weighted Average Exercise Price				Aggregate Intrinsic Value				Weighted Average Remaining Contractual Life (in years)
	2020			2019			2020		2019		2020		2019		2020		2019
Outstanding-Beginning of year		122			154			13.72		13.40	$	—	$	—		1.75		2.52
Granted		—			—					—
Exercised		—			—					—
Forfeited		(13	)		(22	)		13.23		13.04
Expired		(19	)		(10	)		12.14		10.32
Outstanding-End of year		90			122			14.11		13.72	$	—	$	—		0.97		1.75
Exercisable-End of year		90			122			14.11		13.72	$	—	$	—		0.97		1.75

~~ITEM~~There was 9.no ~~CHANGES~~excess INtax ~~AND~~benefit ~~DISAGREEMENTS~~for ~~WITH~~the ~~ACCOUNTANTS~~years ONended ~~ACCOUNTING~~December ~~AND~~31, ~~FINANCIAL~~2020, ~~DISCLOSURE~~2019 and 2018.

~~None~~There were no options exercised in the years ended December 31, 2020, 2019 and 2018. There is no intrinsic value of options outstanding and exercisable as of December 31, 2020 as the closing stock price at the end of 2020 creates a negative intrinsic value.

~~ITEM~~The total ~~9A.~~grant-date ~~CONTROLS~~fair ~~AND~~value ~~PROCEDURES~~of options vested during 2020 and 2019 was $0, as all the options vested as of December 31, 2018.

~~Evaluation~~Restricted Stock ofAwards, ~~Disclosure~~Restricted ~~Controls~~Stock Units and ~~Procedures~~Cash Awards

InAs a ~~accordance~~result ~~with~~of ~~Exchange~~the ~~Act~~approval ~~Rules~~of ~~13a-15~~the ~~and~~2017 ~~15a-15,~~Plan weby ~~carried out an evaluation, under~~ the ~~supervision~~stockholders ~~and~~at ~~with~~ the ~~participation~~2018 ofAnnual ~~management~~Meeting, ~~including~~all ~~our~~cash/liability ~~Chief~~awards ~~Executive~~granted ~~Officer~~prior to ~~and~~stockholder ~~Chief~~approval ~~Financial Officer,~~ of the ~~effectiveness~~2017 ofPlan ~~our~~were ~~disclosure~~reclassified ~~controls~~to ~~and~~restricted ~~procedures~~stock asunits of(equity) ~~the~~effective ~~end~~May of8, ~~the~~2018. ~~period~~The ~~covered~~total liability byreclassified ~~this~~to ~~report~~additional paid-in-capital was $0.4 ~~Based~~million. onThis ~~that~~modification ~~evaluation,~~resulted ~~our~~in ~~Chief~~an ~~Executive~~increase ~~Officer~~in ~~and~~total ~~Chief~~fair value ~~Financial~~of ~~Officer~~$0.1 ~~concluded~~million, ~~that~~recognized ~~our~~over ~~disclosure~~the ~~controls~~terms ~~and~~of ~~procedures~~the ~~were~~grants, ~~effective~~which asrange offrom ~~December~~1 ~~31,~~to ~~2019~~5 years.

~~Design~~On November ~~and~~3, ~~Evaluation~~2020, the Board of ~~Internal~~Directors ~~Control~~granted ~~over~~to the Company’s newly appointed Chief Financial ~~Reporting~~Officer 55,000 voting shares of restricted stock under the 2017 Plan. The shares vest in one-third increments on the first, second and third anniversaries of the date of grant, as long as he is then employed by the Company. Any dividends declared will be accrued and paid if and when the related shares vest.

~~Pursuant~~On June to26, ~~Section~~2020, ~~404 of~~ the ~~Sarbanes-Oxley~~Board ~~Act~~ of ~~2002,~~Directors wegranted ~~included~~10,000 arestricted ~~report~~stock ofunits ~~management’s~~to ~~assessment of~~ the ~~design~~newly ~~and~~named ~~effectiveness~~executive chairman of ~~our~~the ~~internal~~board. The ~~controls~~award asvests ~~part~~in oftwo ~~this~~equal ~~Annual~~installments ~~Report~~ on ~~Form~~June ~~10-K~~26, ~~for~~2021 ~~the~~and ~~fiscal~~June ~~year ended December 31~~26, ~~2019~~2022. ~~Ernst~~The &award ~~Young,~~entitles ~~LLP,~~the ~~our~~executive ~~independent~~chairman ~~registered~~of ~~public~~the board ~~accounting firm, also attested~~ to ~~our~~receive ~~internal~~a ~~control~~number ~~over~~of ~~financial~~shares ~~reporting.~~of ~~Management’s report and~~ the ~~independent registered accounting firm~~Company’s ~~attestation~~common ~~report~~stock ~~are~~equal ~~included~~to ~~on pages 24 and 25 under~~ the ~~captions~~number ~~entitled~~of ~~“Management’s~~vested ~~Report~~restricted onstock ~~Internal~~units, together ~~Control~~with ~~Over~~dividend ~~Financial~~equivalents ~~Reporting”~~from ~~and~~the ~~“Report~~date of ~~Independent~~grant, ~~Registered~~at ~~Public~~such ~~Accounting~~time ~~Firm~~as his service on

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