UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September~~March 3031, ~~2020~~2021

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

For the transition period from to

Commission File Number: 000-52046

(Exact name of registrant as specified in its charter)

Delaware		36-4151663
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

10201 North Loop East
Houston, Texas		77029
(Address of principal executive offices)		(Zip Code)

(713) 609-2100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

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

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ☒ NO ☐

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

At May ~~November~~ 1, ~~2020~~2021 there were 16,~~544~~882,~~542~~557 outstanding shares of the registrant’s common stock, $0.001 par value per share.

HOUSTON WIRE & CABLE COMPANY

Form 10-Q

For the Quarter Ended ~~September~~March 3031, ~~2020~~2021

INDEX

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations	3
	Consolidated Statements of Stockholders’ Equity	4
	Consolidated Statements of Cash Flows	65
	Notes to Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~Overview~~	119
	Overview	119
	Cautionary Statement for Purposes of the “Safe Harbor”	1110
	Results of Operations	1211
	Impact of Inflation and Commodity Prices	1512
	Liquidity and Capital Resources	1513
	Contractual Obligations	1613
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	1614
Item 4.	Controls and Procedures	1614
PART II. OTHER INFORMATION		1614
Item 1.	Legal Proceedings	1614
Item 1A.	Risk Factors	1614
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1714
Item 3.	Defaults Upon Senior Securities	1714
Item 4.	Mine Safety Disclosures	1714
Item 5.	Other Information	1714
Item 6.	Exhibits	1815
Signature Page		1916

HOUSTON WIRE & CABLE COMPANY

Consolidated Balance Sheets

(In thousands, except share data)

	September 30,			December 31,
	March 31,			December 31,
	2020			2019
	2021			2020
	(unaudited)	~~(unaudited)~~
Assets
Current assets:
Cash	$	—1,760		$	~~4,096~~—
Accounts receivable, net:
Accounts receivable, net
Trade		4642,~~092~~878			5038,~~325~~057
Other		23,~~138~~137			63,~~640~~222
Inventories, net		8965,~~259~~187			~~114~~68,~~069~~470
Income taxes		1,331			1,353
Prepaids and other current assets		2,898			2,086
Prepaids and other current assets		2,760			1,833
Assets held for sale		—			6,398
Total current assets		~~141~~115,~~580~~860			~~178~~118,~~316~~233
Property and equipment, net		157,~~351~~135			147,~~589~~458
Intangible assets, net		107,~~164~~048			107,~~282~~390
Goodwill		229,~~353~~849			229,~~353~~849
Deferred income taxes		13,~~041~~374			~~600~~3,396
Operating lease right-of-use assets, net		1210,~~267~~218			1310,~~481~~879
Other assets		~~484~~494			~~527~~507
Total assets	$	~~203~~153,~~240~~978		$	~~240~~157,~~148~~712
Liabilities and stockholders’ equity
Current liabilities:
Book overdraft	$	~~532~~—		$	—1,662
Trade accounts payable		810,~~636~~899			135,~~858~~809
Accrued and other current liabilities		1513,~~661~~832			2313,~~261~~547
Operating lease liabilities		2,967			2,742
Income taxes		1,310			1,232
Total current liabilities		27,796			39,861
Operating lease liabilities		2,748			2,699
Revolver Debt		55,288			83,500
Liabilities held for sale		—			1,398
Paycheck Protection Program Loan		6,185			—
Total current liabilities		28,789			26,347
Operating lease long term liabilities		9,841			11,182
Revolver debt		17,000			22,580
Other long term liabilities		2,224			1,977
Paycheck Protection Program Loan		6,185			6,185
Total liabilities		101,334			136,520
Operating lease long term liabilities		8,025			8,736
Other long-term obligations		1,798			1,970
Total liabilities		61,797			65,818
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: 16,553,637 and 16,556,950 outstanding at September 30, 2020 and December 31, 2019, respectively		21			21
Common stock, $0.001 par value; 100,000,000 shares authorized: 20,988,952 shares issued: 16,882,557 and 16,870,326 shares outstanding at March 31, 2021 and December 31, 2020, respectively		21			21
Additional paid-in-capital		52,821			52,304
Additional paid-in capital		48,753			48,795
Retained earnings		~~106~~96,~~273~~239			~~108~~96,~~626~~080
Treasury stock, at cost		(5752,~~209~~832	)		(5753,~~323~~002	)
Total stockholders’ equity		~~101~~92,~~906~~181			~~103~~91,~~628~~894
Total liabilities and stockholders’ equity	$	~~203~~153,~~240~~978		$	~~240~~157,~~148~~712

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

HOUSTON WIRE & CABLE COMPANY

Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share data)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2020			2019			2020			2019
	2021			2020
Sales	$	7067,~~247~~030		$	8583,~~403~~533		$	~~220,557~~		$	~~255,999~~
Cost of sales		5550,~~257~~580			6563,~~972~~941			~~171,739~~			~~194,772~~
Gross profit		1416,~~990~~450			19,~~431~~592			~~48,818~~			~~61,227~~
Operating expenses:
Salaries and commissions		7,~~503~~417			9,~~249~~474			~~25,384~~			~~27,673~~
Other operating expenses		76,~~120~~735			97,~~602~~565			~~21,714~~			~~24,994~~
Depreciation and amortization		~~886~~868			~~667~~767			~~2,468~~			~~1,754~~
Impairment charge		—			—200			~~373~~			—
Total operating expenses		15,509			19,518			49,939			54,421
Loss on divestiture		1,013
Operating income (loss)		(519	)		(87	)		(1,121	)		6,806
Total operating expenses		16,033			18,006
Interest (expense)		(344	)		(812	)		(1,631	)		(2,291	)
Operating income		417			1,586
Income (loss) before income taxes		(863	)		(899	)		(2,752	)		4,515
Interest expense		152			813
Income tax (expense) benefit		128			178			399			(1,309	)
Income before income taxes		265			773
Net income (loss)	$	(735	)	$	(721	)	$	(2,353	)	$	3,206
Income tax expense		106			228
Earnings (loss) per share:
Net income	$	159		$	545
Basic	$	(0.04	)	$	(0.04	)	$	(0.14	)	$	0.19
Earnings per share:
Diluted	$	(0.04	)	$	(0.04	)	$	(0.14	)	$	0.19
Basic	$	0.01		$	0.03
Weighted average common shares outstanding:
Diluted	$	0.01		$	0.03
Basic		16,480,449			16,443,446			16,436,960			16,475,131
Weighted average common shares outstanding:
Diluted		16,480,449			16,443,446			16,436,960			16,558,068
Basic		16,656,559			16,387,460
Diluted		16,736,020			16,436,293

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

HOUSTON WIRE & CABLE COMPANY

Consolidated Statements of Stockholders’ ' Equity

(Unaudited)

					Additional												~~Total~~	Total
	Common Stock				Paid-In			Retained			Treasury Stock						~~Stockholders’~~	Stockholders'
	Shares		Amount		Capital			Earnings			Shares			Amount			~~Equity~~	Equity
	(In thousands, except share data)
Balance at December 31, 2019		20,988,952	$	21	$	52,304		$	108,626			(4,432,002	)	$	(57,323	)	$	103,628
Balance at December 31, 2020		20,988,952	$	21	$	48,795		$	96,080			(4,118,626	)	$	(53,002	)			$	91,894
Net income		—		—		—			~~545~~159			—			—			~~545~~		159
Amortization of unearned stock compensation		—		—		328			—			—			—			328
Repurchase of treasury shares												(1,295	)		(5	)				(5)
Impact of released vested restricted stock units		—		—		(356	)		—			27,510			356			—
Amortization of unearned stock compensation		—		—		133			—			—			—					133
Balance at March 31, 2020		20,988,952	$	21	$	52,276		$	109,171			(4,404,492	)	$	(56,967	)	$	104,501
Impact of released restricted stock units		—		—		(175	)		—			13,526			175					—
Net loss		—		—		—			(2,163	)		—			—			(2,163	)
Balance at March 31, 2021		20,988,952	$	21	$	48,753		$	96,239			(4,106,395	)	$	(52,832	)			$	92,181
Repurchase of treasury shares		—		—		—			—			(10,668	)		(24	)		(24	)
Amortization of unearned stock compensation		—		—		440			—			—			—			440
Impact of released vested restricted stock units		—		—		(232	)		—			18,026			232			—
Balance at June 30, 2020		20,988,952	$	21	$	52,484		$	107,008			(4,397,134	)	$	(56,759	)	$	102,754
Net loss		—		—		—			(735	)		—			—			(735	)
Repurchase of treasury shares		—		—		—			—			(4,103	)		(11	)		(11	)
Amortization of unearned stock compensation		—		—		(102	)		—			—			—			(102	)
Impact of released vested restricted stock units		—		—		(77	)		—			5,912			77			—
Impact of forfeited awards		—		—		516			—			(39,990	)		(516	)		—
Balance at September 30, 2020		20,988,952		21		52,821			106,273			(4,435,315	)		(57,209	)		101,906


					Additional											Total
	Common Stock				Paid-In			Retained		Treasury Stock						Stockholders'
	Shares		Amount		Capital			Earnings		Shares			Amount			Equity
	(In thousands, except share data)
Balance at December 31, 2019		20,988,952	$	21	$	52,304		$	108,626		(4,432,002	)	$	(57,323	)		$	103,628

Net income		—		—		—			545		—			—				545
Amortization of unearned stock compensation		—		—		328			—		—			—				328
Impact of released restricted stock units		—		—		(356	)		—		27,510			356				—
Balance at March 31, 2020		20,988,952	$	21	$	52,276		$	109,171		(4,404,492	)	$	(56,967	)		$	104,501

					Additional												Total
	Common Stock				Paid-In			Retained			Treasury Stock						Stockholders’
	Shares		Amount		Capital			Earnings			Shares			Amount			Equity
	(In thousands, except share data)
Balance at December 31, 2018		20,988,952	$	21	$	53,514		$	105,975			(4,377,301	)	$	(58,832	)	$	100,678
Net income		—		—		—			2,284			—			—			2,284
Repurchase of treasury shares		—		—		—			—			(1,506	)		(8	)		(8	)
Amortization of unearned stock compensation		—		—		342			—			—			—			342
Settlement of director’s deferred compensation		—		—		—			—			2,251			16			16
Cumulative effect of accounting change		—		—		—			101			—			—			101
Balance at March 31, 2019		20,988,952	$	21	$	53,856		$	108,360			(4,376,556	)	$	(58,824	)	$	103,413
Net income		—		—		—			1,643			—			—			1,643
Repurchase of treasury shares		—		—		—			—			(11,951	)		(73	)		(73	)
Amortization of unearned stock compensation		—		—		365			—			—			—			365
Impact of released vested restricted stock units		—		—		(601	)		—			44,737			601			—
Balance at June 30, 2019		20,988,952	$	21	$	53,620		$	110,003			(4,343,770	)	$	(58,296	)	$	105,348
Net loss		—		—		—			(721	)		—			—			(721	)
Repurchase of treasury shares		—		—		—			—			(236,266	)		(1,055	)		(1,055	)
Amortization of unearned stock compensation		—		—		376			—			—			—			376
Balance at September 30, 2019		20,988,952	$	21	$	53,996		$	109,282			(4,580,036	)	$	(59,351	)	$	103,948

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

HOUSTON WIRE & CABLE COMPANY

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2020			2019
	2021			2020
Operating activities
Net (loss) income	$	(2,353	)	$	3,206
Net income	$	159		$	545
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash used in operating activities:
Impairment of intangibles		373			—
Impairment charge		—			200
Depreciation and amortization		~~2,468~~868			~~1,754~~767
Amortization of unearned stock compensation		~~666~~133			~~1,083~~328
Non-cash lease expense		~~2,686~~801			~~5,143~~904
Provision for refund liability		~~366~~(6	)		~~751~~18
Provision for inventory obsolescence		~~907~~266			~~426~~173
Deferred income taxes		(441	)		453
Loss on divestiture		1,013			—
Other non-cash items		175			101
Deferred income taxes		22			(104	)
Other non-cash items		74			62
Changes in operating assets and liabilities:
Accounts receivable		8(3,~~603~~851	)		(~~1,546~~253	)
Inventories		232,~~903~~890			~~(11~~4,~~968~~513	)
Prepaids		(~~723~~823	)		(~~771~~1,238	)
Other assets		(~~204~~2	)		(~~817~~77	)
Lease payments		(~~2,694~~834	)		(~~3,016~~907	)
Book overdraft		~~532~~(1,662	)		—
Trade accounts payable		(54,~~222~~917	)		~~1,036~~793
Accrued and other current liabilities		~~(8,385~~447	)		(18,~~186~~281	)
Income taxes		2278			~~(888~~336	)
Other operating activities		~~247~~(173	)		~~1,311~~257
Net cash provided by (used in) operating activities		20,926			(4,928	)
Net cash provided by (used) in operating activities		4,317			(1,964	)
Investing activities
Expenditures for property and equipment		(1,510	)		(1,742	)
Purchase of property and equipment		(188	)		(857	)
Expenditures for intangibles		(838	)		—
Cash received from divestiture		3,434			—
Net cash used in investing activities		(2,348	)		(1,742	)
Net cash provided by (used in) investing activities		3,246			(857	)
Financing activities
Borrowings on revolver		~~227~~62,~~805~~387			~~266~~85,~~322~~653
Payments on revolver		(~~256~~67,~~017~~967	)		(~~259~~83,~~735~~233	)
Proceeds from Paycheck Protection Program loan		6,185			—
Release of treasury stock/stock surrendered on vested awards		(5	)		—
Payment of dividends		(1	)		(30	)
Lease payments		(218	)		(159	)
Purchase of treasury stock/stock surrendered on vested awards		(35	)		(1,120	)
Net cash (used in) provided by financing activities		(5,803	)		2,261
Lease payments		(611	)		(154	)
Net change in cash		1,760			(560	)
Net cash (used in) provided by financing activities		(22,674	)		5,283
Cash at beginning of period		—			4,096
Net change in cash		(4,096	)		(1,387	)
Cash at end of period	$	1,760		$	3,536
Cash at beginning of period		4,096			1,393
Cash at end of period	$	—		$	6
Supplemental disclosures of non-cash activities
Purchase of assets under finance leases	$	~~1,137~~22		$	~~1,878~~526

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

HOUSTON WIRE & CABLE COMPANY

Notes to Consolidated Financial Statements

(Unaudited)

Basis of Presentation and Principles of Consolidation

Houston Wire & Cable Company (the “Company”), through its wholly owned subsidiaries, provides industrial products including electrical wire and cable, ~~steel wire rope~~ and ~~hardware, and~~ fasteners to the U.S. market through ~~twenty~~fifteen locations in ~~fourteen~~twelve states throughout the United States. The Company has no other business activity.

The consolidated ~~financial~~ financial statements as of ~~September~~March 3031, ~~2020~~2021 and for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020 have been prepared following accounting principles generally accepted in the United States (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete ~~financial~~ financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered ~~necessary~~ necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year. All significant intercompany balances and transactions have been eliminated.

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

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020, as amended, filed with the SEC.

Risks and Uncertainties

The Company is ~~currently~~ subject to additional risks and uncertainties due to the COVID-19 pandemic. ~~The~~While ~~pandemic,~~we ~~and~~have seen an improvement in market conditions in the first quarter 2021, governmental and other actions taken in response to ~~it,~~the ~~have~~pandemic ~~had~~could have an adverse effect on the demand for the Company’s products and on its results of operations~~, and~~. ~~the~~There ~~virus~~is ~~continues~~still toa ~~spread.~~risk ~~Capital~~to capital markets ~~and~~from of the pandemic. Additionally, economies worldwide have been negatively impacted by the COVID-19 pandemic, and it is still possible that the impact could cause an extended local and/or global economic recession. Such economic disruption could ~~continue~~ to have a material adverse effect on our business asif companies in many industries curtail and reduce capital and overall spending. Policymakers around the globe have responded with fiscal policy actions to support specific industries and their economies as a whole. ~~However,~~While the overall effectiveness of these actions appears to be working currently in our markets, it remains uncertain if this will continue.

The long-term severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not ~~limited~~ limited to, the duration and severity of the pandemic worldwide and the extent and severity of the impact on the Company’s customers and vendors, all of which are uncertain and cannot be predicted. The Company’s future results of operations ~~and liquidity~~ could be materially adversely affected by delays in payments of outstanding receivables, supply chain disruptions, uncertain or reduced demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operational challenges ~~faced~~ faced by its customers. As of the date of issuance of these financial statements, the ~~extent~~worst toof ~~which~~the effects of the COVID-19 pandemic ~~may materially~~ ~~adversely~~on ~~affect~~ the Company’s financial condition, liquidity, orand results of operations appear to be behind it; however, things could still change as the pandemic is ~~uncertain~~not over.

Recently Adopted Accounting Standards

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

In ~~August~~December ~~2018~~2019, the FASB issued ASU ~~2018~~2019-1312, ~~“Fair~~Income ~~Value~~Taxes ~~Measurement~~ (Topic ~~820~~740): ~~Disclosure~~Simplifying ~~Framework~~the –Accounting ~~Changes~~for Income toTaxes. This ASU is part of the ~~Disclosure~~Simplification ~~Requirements~~ Initiative and simplifies the accounting for ~~Fair~~income ~~Value~~taxes ~~Measurement~~by removing certain exceptions to the general principles of ASC Topic 740 “Income Taxes.” ~~The~~In ~~amendments~~addition, inthe ~~this~~amendment ~~update~~improves ~~eliminate,~~consistent application ~~add~~of and ~~modify~~simplifies ~~certain~~GAAP ~~disclosure~~for ~~requirements~~other ~~for fair~~areas ~~value~~of ~~measurements~~ASC asTopic ~~part~~740 ofby ~~the~~clarifying ~~FASB’s~~and ~~disclosure~~amending ~~framework~~existing ~~project~~guidance. ~~The~~This ~~Company~~update ~~adopted~~is effective ~~this~~for ~~ASU~~the Company beginning in the first quarter of ~~2020,~~2021. The Company has evaluated the new guidance and the adoption did not have a material impact on ~~the~~its ~~Company’s consolidated~~ financial statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other – 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.

Recent Accounting Pronouncements

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~~date of ~~these~~this ~~ASUs for~~ASU for smaller reporting companies (“SRC”) to fiscal years beginning after December 15, 2022. As of ~~September~~March 3031, ~~2020~~2021, the ~~Company~~ Company qualifies as a SRC and ~~expects~~will to adopt ~~these~~this ~~ASUs~~ASU in the first quarter of 2023.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes specific exceptions to the general principles in Topic 740 in GAAP. It eliminates the need for an organization to analyze whether certain exceptions apply in a given period. This ASU also improves financial statement preparers’ application of income tax-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 tax basis of goodwill; c) Separate financial statements of legal entities that are not subject to tax; and d) Enacted changes in tax laws in interim periods. For public business entities, ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments in the ASU provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued due to reference rate reform. The provisions of the new guidance were effective upon issuance and generally can be applied through December 31, 2022 with the option to apply the guidance at any point during that time period. The Company currently has a debt agreement that references LIBOR and will apply the new guidance as these contracts are modified to reference other rates.

Earnings per Share

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

~~The following reconciles the denominator used in the calculation of diluted earnings (loss) per share:~~6

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

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2020		2019		2020		2019
	2021		2020
Denominator:
Weighted average common shares for basic earnings per share		16,480,449		16,443,446		16,436,960		16,475,131
Weighted average common shares outstanding for basic earnings per share		16,656,559		16,387,460
Effect of dilutive securities		—79,461		—48,833		—		~~82,937~~
Weighted average common shares for diluted earnings per share		16,480,449		16,443,446		16,436,960		16,558,068
Weighted average common shares outstanding for diluted earnings per share		16,736,020		16,436,293

Stock awards to purchase ~~751~~ 147,~~042~~036 shares and ~~658~~553,~~420~~547 shares of common stock ~~for~~were ~~the~~not ~~three~~included ~~months~~in ~~ended~~the ~~September~~diluted ~~30,~~net ~~2020~~income ~~and~~per ~~2019,~~share ~~respectively, and 896,018 and~~calculation ~~322,771 shares~~ for the ~~nine~~three months ended ~~September~~March 3031, ~~2020~~2021 and ~~2019~~2020, respectively, ~~were not included in the diluted net income (loss) per share calculation~~ as their inclusion would have been anti-dilutive.

Debt

~~On March 12, 2019~~The ~~and December 10, 2019, the~~ Company, as guarantor, HWC Wire & Cable Company and Vertex, as borrowers, and Bank of America, N.A., as agent and lender, are ~~entered~~parties ~~into a 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~~that ~~12,~~provides ~~2024~~a ~~and~~$115 ~~the~~million ~~Third Amendment increased the~~ revolving credit facility toand ~~$115~~expires ~~million~~on March 12, 2024. Under certain circumstances, the ~~Company~~ Company may request an increase in the commitment by an additional $50 million.

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

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

The Loan Agreement includes, among other things, covenants that require the Company to maintain a specified minimum fixed charge coverage ratio, unless certain availability levels exist. Additionally, the Loan Agreement allows for the unlimited payment of dividends and repurchases of stock, subject to the absence of events of default and maintenance of a fixed charge coverage ratio and minimum level of availability. The Loan Agreement contains certain provisions that may cause the debt to be classified as a current liability, in accordance with GAAP, if availability falls below certain thresholds, even though the ultimate maturity date under the Loan Agreement remains March 12, 2024. At ~~September~~March 3031, ~~2020~~2021, the Company was in compliance with the availability-based covenants governing its indebtedness.

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

On May 4, 2020, the Company 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 ~~intends~~has toapplied ~~apply~~ for loan forgiveness inand ~~the~~expects ~~fourth~~to ~~quarter 2020. Under current rules, which could still be clarified further, the Company believes it will~~ achieve ~~around 80-~~90-95% forgiveness. The forgiveness amount will be equal to the amount that the Company ~~uses~~used for the approved expenses,: a minimum of 60% on payroll related expenses and up to 40% on non-payroll expenses. IfAny ~~the~~amount ~~total~~ of the loan that is not forgiven, ~~the Company~~ will ~~have~~be ~~two~~due ~~years~~on ~~from the funded date of~~ May 4, ~~2020 to repay the balance of the PPP loan to Bank of America~~2022. NoThe ~~principal or~~ interest ~~payments will be due prior to the end of the six-month deferment period and the interest~~ rate on the balance of the loan will not exceed 1.0% per annum.

Impairment of Goodwill and Intangible Assets

The Company tests goodwill and indefinite lived intangibles for impairment at least annually or more frequently whenever events or ~~circumstances~~ circumstances occur indicating that it might be impaired. ~~During~~There were no events or circumstances that indicated an impairment in the first ~~and~~quarter ~~second~~of 2021. During the first quarter of 2020, the Company’s market capitalization declined significantly, driven by ~~current~~ macroeconomic and geopolitical conditions due in large part to the COVID-19 outbreak, which ~~has~~ contributed to a decline in demand for the Company’s products, a decline in overall financial performance, partially due to the decline in oil prices, and a decline in industry and market conditions. Based on these events, the Company concluded that it was more-likely-than-not that the fair ~~values~~value of certain of its reporting units were less than their carrying values. Therefore, the Company performed an interim goodwill impairment test ~~for both the first and second quarter~~.

Goodwill and intangible asset impairment are evaluated at each of the four reporting units. During the first and second quarters of 2020, the Company determined the fair values of the two reporting units with goodwill and certain of its indefinite lived intangibles exceeded their respective carrying values. The amount of goodwill at September 30, 2020 for the two reporting units, Southern Wire and Vertex, were $12.5 million and $9.8 million, respectively, and the Vertex reporting unit has a negative carrying value. Additionally, the Company determined the fair value of its Vertex reporting unit’s tradenames was below its carrying value, and as a result recorded an impairment charge of $0.1 million in June 2020. The Company also determined the fair value of its Southwest Wire Rope reporting unit’s tradenames was below its carrying value, and as a result, recorded an impairment charge of $0.1 million in June 2020 and $0.2 million in March 2020.7

Goodwill impairment is evaluated at each of the Company’s reporting units, of which there were four in the first quarter of 2020. The Company determined the fair values of two reporting units with goodwill and certain of its indefinite lived intangibles exceeded their respective carrying values. Additionally, the Company determined the fair value of its Southwest Wire Rope reporting unit’s tradenames was below their carrying value, and as a result, recorded an impairment charge of $0.2 million in March 2020.

Income Taxes

The ~~Company calculated~~ ~~its~~effective ~~provision~~tax rate for ~~income taxes during~~ the ~~third~~three ~~quarter~~months byended ~~applying~~March ~~the~~31, ~~estimated~~2021 ~~annual~~was 40.0% ~~effective~~compared ~~tax~~to 29.5% ~~rate~~ for the ~~full~~same ~~fiscal~~period in 2020. ~~year~~Compared to the ~~pre-tax~~U.S. ~~loss~~statutory rate, ~~excluding~~the ~~discrete~~effective ~~items.~~tax ~~Due~~rate towas ~~the~~impacted ~~uncertainty~~by instate ~~the~~income ~~Company’s~~taxes ~~industry,~~and ~~the~~nondeductible ~~Company~~expenses. The ~~had~~Company ~~utilized~~calculated ~~the~~its ~~method~~provision offor ~~recording~~ income taxes onduring athe ~~year-to-date~~first quarter by applying the estimated annual effective tax rate for the ~~six~~full ~~months~~fiscal ~~ended~~year ~~June~~to 30the pre-tax income, ~~2020~~excluding discrete items.

The CARES Act was signed into law on March 27, 2020. The CARES Act contains several tax law changes for corporations, including ~~modifications~~ modifications for net operating loss carrybacks, the refundability of prior-year minimum tax liability, limitations on business interest and limitations on charitable contribution deductions. These benefits did not impact the Company’s tax provision for the ~~nine~~ three months ended ~~September~~March 3031, 2021 or 2020.

Incentive Plans

Stock Option Awards

~~There~~ There were no stock option awards granted during the first ~~nine~~three months of ~~2020~~2021 or ~~2019~~2020.

~~On June 26, 2020,~~Restricted ~~the~~Stock ~~Board~~Awards ~~of Directors granted 10,000 restricted stock units to the newly named executive chairman of the board. The award vests in two equal installments on June 26, 2021~~ and ~~June~~Restricted ~~26,~~Stock 2022. The award entitles the executive chairman of the board 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 his service on the board terminates for any reason.Units

~~Following the Annual~~There ~~Meeting~~were ofno ~~Stockholders on May 7, 2019, the Company granted~~ restricted stock ~~units~~awards ~~with a grant date value of $60,000 to each non-employee director who was elected~~ or ~~re-elected, for an aggregate of 58,920~~ restricted stock units. ~~Each~~granted ~~award~~during ~~of restricted stock units vested at~~ the ~~date~~first ofthree ~~the~~months ~~2020 Annual Meeting~~ of ~~Stockholders.~~2021 ~~Each~~or 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. The Company did not grant equity awards to the non-employee directors following the 2020 ~~Annual Meeting~~.

~~On March 12, 2019,~~Total ~~the Board of Directors granted 52,910 performance~~ stock-based ~~units~~compensation tocost ~~the~~was ~~Company’s~~$0.1 ~~President~~million and ~~CEO and 13,228 performance stock units to the former CFO~~$0.3 ~~The~~million ~~former~~for ~~CFO’s units were forfeited when he left~~ the ~~Company~~three inmonths ~~July~~ended ~~2020.~~March ~~The President and CEO’s performance stock units vest on December~~ 31, 2021, ~~based on~~ and ~~subject to the Company’s achievement of cumulative EBITDA (Earnings Before Interest~~2020, ~~Taxes~~respectively, ~~Depreciation,~~ and ~~Amortization)~~is ~~and~~included ~~stock~~in ~~price~~salaries ~~performance~~and ~~goals~~commissions ~~over~~for ~~a three year period~~employees, ~~as long as the grantee is then employed by the Company,~~ and ~~upon vesting will be settled~~ in ~~shares~~other ofoperating ~~our~~expenses ~~common~~for ~~stock.~~non-employee ~~Any dividends declared will be accrued and paid to the grantee if and when the related shares vest~~directors.

Total stock-based compensation (benefit) cost was ($0.1) million and $0.4 million for the three months ended September 30, 2020 and 2019, respectively, and $0.7 million and $1.1 million for the nine months ended September 30, 2020 and 2019, respectively, and is included in salaries and commissions for employees, and in other operating expenses for non-employee directors. In the third quarter of 2020, the Company recorded a reversal of the accrual on the former CFO’s forfeited awards, as well as a reversal of portions of the CEO’s performance grant that is not expected to vest.

Commitments and Contingencies

~~The~~ The Company had outstanding under the Loan Agreement letters of credit totaling $0.72 million to certain vendors as of ~~September~~March 3031, ~~2020~~2021.

From time to time, the Company is involved in lawsuits that are brought against itus in the normal course of business. The Company is not currently a party to any legal proceedings that it expects, either individually or in the aggregate, to have a material adverse effect on the Company’s consolidated financial position, cash flows, or results from operations.

Divestitures

Divestiture of Southwest Wire Rope reporting unit

On January 13, 2021, the Company entered into an asset purchase agreement with Southern Rigging Companies, LLC. to sell the Southwest Wire Rope reporting unit, other than accounts receivable. The sale was complete on March 12, 2021 and the Company received $3.4 million in cash, subject to the final working capital adjustments. An additional $0.8 million is being held in escrow and will be released no later than one year following the close of the transaction. At March 31, 2021, the Company recorded a pre-tax loss on divestiture of $1.0 million related to the transaction in its consolidated statements of income. The loss recognized included less than $0.1 million of selling costs.

Agreement and Plan of Merger

On March 25, 2021, the Company announced that it entered into an Agreement and Plan of Merger with Omni Cable, LLC (“OmniCable”) and a subsidiary of OmniCable pursuant to which, subject to the satisfaction of customary closing conditions, the subsidiary will be merged with and into the Company, and the Company will become a wholly-owned subsidiary of OmniCable. Under the terms of the merger agreement, at the effective time of the merger, each share of the Company’s common stock will be converted into the right to receive $5.30 in cash, without interest. In addition, each of the 300,461 stock-based equity awards outstanding under the Company’s stock and deferred compensation plan will be cancelled in exchange for $5.30. No consideration will be paid for stock option, all of which have exercise prices above the merger price.

Following the filing of the preliminary proxy statement, four separate lawsuits were filed related to the proxy statement. All four lawsuits assert a cause of action against the Company and the Company’s directors under Section 14(a) of the Exchange Act and its implementing regulations and a “control person” claim against the directors under Section 20(a) of the Exchange Act based on the alleged Section 14(a) violations, and one of the lawsuits includes a claim against the directors for breach of their fiduciary duty of candor/disclosure. Certain of the lawsuits also seek judgement directing the individual defendants to disseminate a proxy statement that complies with Section 14(a) and Rule 14a-9 promulgated thereunder and declaring that defendants violated Sections 14(a) and/or 20(a) and Rule 14a-9. The Company believes the allegations in these actions are without merit.

The merger is subject to the satisfaction or waiver of certain closing conditions, including, among other things: (1) the adoption of the merger agreement by the holders of a majority of the outstanding shares of Company common stock; (2) the absence of certain legal impediments preventing the completion of the merger; (3) the accuracy of the representations and warranties of the parties and the compliance of the parties with their respective covenants, subject to customary qualifications, including with respect to materiality; and (4) conditions relating to the Company’s tangible net book value and indebtedness. The Company expects the merger to be completed in the second quarter of 2021.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the Company’s financial position and results of operations. MD&A is provided as a supplement to the Company’s Consolidated Financial Statements (unaudited) and the accompanying Notes to Consolidated Financial Statements (unaudited) and should be read in conjunction with the MD&A included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as amended.

Overview

We are a provider of industrial products including electrical wire and cable and industrial fasteners to the U.S. market. We sell electrical products through wholesale electrical distributors and fastener products through industrial distributors. We provide our customers with a single-source solution by offering a large selection of in-stock items, exceptional customer service and high levels of product expertise.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses. On an on-going basis, we make and evaluate estimates and assumptions, including those related 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. We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances; the results of which form the basis for making judgments about amounts and timing of revenue and expenses, the carrying values of assets and the recorded amounts of liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change. We have discussed the development and selection of critical accounting policies and estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed our related disclosures. The critical accounting policies related to the estimates and judgments are discussed in our Annual Report on Form 10-K for the year ended December 31, 2020 under Management’s Discussion and Analysis of Financial Condition and Results of Operations. There have been no changes to our critical accounting policies and estimates during the three months ended March 31, 2021.

Impact of the COVID-19 Pandemic

The 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.

The 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, in 2020, 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 noncritical 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. We have seen an uptick in activity during the latter part of the first quarter of 2021 and hope this level of activity continues and increases.

Cautionary Statement for Purposes of the “Safe Harbor”

Forward-looking statements in this report are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate to, but are not limited to, information or assumptions about our sales and marketing strategy, sales (including pricing), income, operating income or gross margin improvements, working capital, cash flow, interest rates, impact of changes in accounting standards, future economic performance, management’s plans, goals and objectives for future operations, performance and growth or the assumptions relating to any of the forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “aim”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “project”, “should”, “will be”, “will continue”, “will likely result”, “would” and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance. The Company cautions that forward-looking statements are not guarantees because there are inherent difficulties in predicting future results. Actual results could differ materially from those expressed or implied in the forward-looking statements. The quarterly results are also non-comparable, as the first quarter 2020 contain Southern Wire results. There were also substantial expenses of approximately $0.7 million related to the merger included in the first quarter 2021 results. The factors listed under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as amended, and in Part II, Item 1A of this report, as well as any other cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements.

Website Disclosure

The Company uses its website, www.houwire.com, in the “Investors” section, as a channel of distribution of Company information. Financial and other important information about the Company is routinely accessible through and posted on its website. Accordingly, investors should monitor the Company’s website, in addition to following its press releases, SEC filings and public conference calls and webcasts. The contents of the Company’s website and information accessible through the Company’s website are not incorporated by reference into, and are not a part of, this document.

~~Item 2. Management’s Discussion and Analysis of Financial Condition and~~ Results of Operations

The following ~~Management’s Discussion~~table ~~and~~shows, ~~Analysis~~for ~~(“MD&A”) is intended to help~~ the ~~reader~~periods ~~understand~~indicated, ~~the~~information ~~Company’s~~derived ~~financial~~from ~~position and~~our ~~results~~consolidated statements of operations., ~~MD&A is provided~~ expressed as a ~~supplement~~percentage toof ~~the~~net ~~Company’s~~sales Consolidated Financial Statements (unaudited) and the accompanying Notes to Consolidated Financial Statements (unaudited) and should be read in conjunction with the MD&A included in the Company’s Form 10-K for the ~~year~~periods ~~ended December 31, 2019~~presented.

Overview

	Three Months Ended
	March 31,
	2021			2020

Sales		100.0	%		100.0	%
Cost of sales		75.5	%		76.5	%
Gross profit		24.5	%		23.5	%

Operating expenses:
Salaries and commissions		11.1	%		11.3	%
Other operating expenses		10.0	%		9.1	%
Depreciation and amortization		1.3	%		0.9	%
Impairment charge		0.0	%		0.3	%
Loss on divestiture		1.5	%		—	%
Total operating expenses:		23.9	%		21.6	%

Operating income		0.6	%		1.9	%
Interest expense		0.2	%		1.0	%

Income before income taxes		0.4	%		0.9	%
Income tax expense		0.2	%		0.3	%

Net income		0.3	%		0.7	%

~~We are a provider~~Note: of Due ~~industrial~~to ~~products including electrical wire and cable~~rounding, ~~steel~~percentages ~~wire~~may ~~rope~~not ~~and~~add ~~hardware,~~up ~~and fasteners~~ to ~~the~~total ~~U.S.~~operating ~~market.~~expenses, ~~We provide~~operating ~~our customers with a single-source solution by offering a large selection of in-stock items~~income, ~~exceptional~~income ~~customer~~before ~~service~~income ~~and~~taxes ~~high~~or ~~levels~~net ~~of product expertise~~income.

~~Critical~~Comparison of ~~Accounting~~the ~~Policies~~Three Months Ended March 31, 2021 and 2020

The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses. On an on-going basis, we make and evaluate estimates and assumptions, including those related 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. We base our estimates on historical experience and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about amounts and timing of revenue and expenses, the carrying values of assets and the recorded amounts of liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change. We have discussed the development and selection of critical accounting policies and estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed our related disclosures. The critical accounting policies related to the estimates and assumptions are discussed in our Annual Report on Form 10-K for the year ended December 31, 2019 under Management’s Discussion and Analysis of Financial Condition and Results of Operations. There have been no changes to our critical accounting policies and estimates during the nine months ended September 30, 2020.Sales

Impact of the COVID-19 Pandemic

	Three Months Ended
	March 31,
(Dollars in millions)	2021		2021		Change
Sales	$	67.0	$	83.5	$	(16.5	)	(19.8	)%

~~The~~Our ~~COVID-19~~sales ~~pandemic~~for the ~~has~~first ~~spread~~quarter ~~throughout~~were ~~the~~down ~~United~~19.8% ~~States~~to ~~and~~$67.0 ~~the~~million ~~countries~~ in ~~which~~2021 ~~our~~compared ~~offshore~~to ~~suppliers are located~~$83.5 ~~Governments~~million in ~~affected regions have implemented~~2020, ~~and~~primarily ~~may~~due ~~continue~~ to ~~implement,~~the ~~safety~~divestiture ~~precautions~~of ~~which~~the Southern ~~include~~Wire ~~quarantines,~~reporting ~~travel~~unit ~~restrictions,~~in ~~business closures,~~December ~~cancellations~~2020 ~~of public gatherings~~ and ~~other~~reduced ~~measures~~market ~~as they deem necessary. Many organizations and individuals~~demand, ~~including the~~as ~~Company~~a ~~and~~result ~~our~~of ~~employees~~current ~~are~~economic ~~taking~~conditions ~~additional~~caused ~~steps~~by tothe COVID-19 ~~avoid or reduce infection, including limiting travel and working remotely~~pandemic. We ~~continue~~estimate tosales ~~monitor~~for our ~~operations~~project ~~and~~business, ~~government~~which ~~recommendations~~targets ~~and~~end ~~have~~markets ~~made~~for ~~modifications~~Environmental toCompliance, ~~our normal operations because~~Engineering of& ~~the~~Construction, ~~pandemic~~Industrials, ~~including~~Utility ~~requiring~~Power ~~most~~Generation, ofand ~~our~~Mechanical ~~non-essential~~Wire ~~employees~~Rope, todecreased ~~work~~9%, ~~remotely.~~while WeMaintenance, ~~have~~Repair, ~~maintained a substantial portion~~and ofOperations ~~our~~(MRO) ~~operational~~sales ~~capacity~~decreased at22%, ~~our~~as ~~warehouses~~compared ~~across the continental United States and have instituted several health and safety protocols and procedures~~ to ~~safeguard our employees~~2020.

~~The rapid development~~Gross 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 include 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 in the third quarter and we expect, will continue 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 end of fiscal 2020.Profit

Cautionary Statement for Purposes of the “Safe Harbor”

	Three Months Ended
	March 31,
(Dollars in millions)	2021			2020			Change
Gross profit	$	16.5		$	19.6		$	(3.1	)	(16.0)	%
Gross margin		24.5	%		23.5	%

Forward-looking statements in this report are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate to, but are not limited to, information or assumptions about the duration, extent and impact of the COVID-19 pandemic, our sales and marketing strategy, sales (including pricing), income, operating income or gross margin improvements, working capital, cash flow, interest rates, impact of changes in accounting standards, future economic performance, management’s plans, goals and objectives for future operations, performance and growth or the assumptions relating to any of the forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “aim”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “project”, “should”, “will be”, “will continue”, “will likely result”, “would” and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance. The Company cautions that forward-looking statements are not guarantees because there are inherent difficulties in predicting future results. Actual results could differ materially from those expressed or implied in the forward-looking statements. The factors listed under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and in Part II, Item 1A of this report, as well as any cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. 11

~~Website~~Gross profit ~~Disclosure~~decreased 16.0% to $16.5 million in 2021 from $19.6 million in 2020 The decrease in gross profit was primarily attributable to the reduction in sales. Gross margin (gross profit as a percentage of sales) increased to 24.5%% in 2021 from 23.5% in 2020 primarily due to the increase in copper prices.

~~The Company uses~~Operating its website, www.houwire.com, in the “Investors” section, as a channel of distribution of Company information. Financial and other important information about the Company is routinely accessible through and posted on its website. Accordingly, investors should monitor the Company’s website, in addition to following its press releases, SEC filings and public conference calls and webcasts. The contents of the Company’s website and information accessible through the Company’s website is not incorporated by reference into, and is not a part of, this document.Expenses

	Three Months Ended
	March 31,
(Dollars in millions)	2021		2020			Change
Operating expenses:
Salaries and commissions	$	7.4	$	9.5		$	(2.1	)	(21.7	)%
Other operating expenses		6.7		7.6			(0.8	)	(11.0	)%
Depreciation and amortization		0.9		0.8			0.1		13.2	%
Impairment charge		0.0		0.2			0.2		(100.0	)%
Loss on divestiture		1.0		0.0			1.0		100.0	%
Total operating expenses	$	16.0	$	18.0		$	(2.0	)	(11.0	%

Operating expenses as a percent of sales		23.9%		21.6	%

~~Results~~Note: Due to ofrounding, ~~Operations~~numbers may not add up to total operating expenses.

~~The~~Salaries and ~~following~~commissions ~~table~~decreased ~~shows,~~$2.1 ~~for~~million ~~the~~in ~~periods indicated,~~2021 ~~information~~compared ~~derived~~to ~~from~~2020 ~~our~~due ~~consolidated~~to ~~statements~~reduced offull-time ~~operations,~~headcount ~~expressed~~and reduced temporary labor, both as a ~~percentage~~result of ~~net~~the ~~sales~~COVID-19 ~~for~~pandemic, along with the ~~periods presented~~sale of the Southern Wire reporting unit in December 2020.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		78.7	%		77.2	%		77.9	%		76.1	%
Gross profit		21.3	%		22.8	%		22.1	%		23.9	%
Operating expenses:
Salaries and commissions		10.7	%		10.8	%		11.5	%		10.8	%
Other operating expenses		10.1	%		11.2	%		9.8	%		9.8	%
Depreciation and amortization		1.3	%		0.8	%		1.1	%		0.7	%
Impairment charge		—			—			0.2	%		—
Total operating expenses		22.1	%		22.9	%		22.6	%		21.3	%
Operating income (loss)		(0.7	)%		(0.1	)%		(0.5	)%		2.7	%
Interest (expense)		(0.5	)%		(1.0	)%		(0.7	)%		(0.9	)%
Income (loss) before income taxes		(1.2	)%		(1.1	)%		(1.2	)%		1.8	%
Income tax (expense) benefit		0.2	%		0.2	%		0.2	%		(0.5	)%
Net income (loss)		(1.0	)%		(0.8	)%		(1.1	)%		1.3	%

Other operating expenses decreased in 2021 compared to 2020 due to continued expense management in response to the COVID-19 pandemic, along with the sale of the Southern Wire reporting unit in December 2020.

~~Note: Due~~Depreciation and toamortization ~~rounding,~~increased ~~percentages~~slightly ~~may~~primarily ~~not~~due ~~add up~~ to ~~total~~depreciation ~~operating~~on ~~expenses,~~the ~~operating~~internal-use ~~income~~software ~~(loss),~~intangible ~~income~~assets ~~(loss)~~added ~~before~~in ~~income~~the third ~~taxes~~and orfourth ~~net~~quarters ~~income~~of ~~(loss)~~2020.

~~Comparison~~We recorded ofan ~~the~~impairment ~~Three~~charge ~~Months~~in ~~Ended~~the ~~September~~first ~~30,~~quarter of 2020 ~~and~~with respect to tradenames at our Southwest Wire Rope reporting unit. ~~2019~~(See Note 4 of our Consolidated Financial Statements)

~~Sales~~In March 2021, we completed the sale of the Southwest Wire Rope reporting unit (“Southwest”) to Southern Rigging Companies, LLC for $3.4 million, prior to the final working capital adjustment. As a result, we recorded an additional $1.0 million in connection with the divestiture of Southwest Wire Rope. (See Note 8 to our Consolidated Financial Statements)

	Three Months Ended
	September 30,
(Dollars in millions)	2020		2019		Change
Sales	$	70.2	$	85.4	$	(15.2	)	(17.7	)%

Interest Expense

~~Our~~Interest ~~sales for the third quarter~~ expense decreased ~~from~~to $850.42 million in ~~2019~~2021 tofrom $700.28 million in 2020. ~~The decrease in sales was primarily~~ due to the ~~decline~~decrease in ~~the~~average ~~oil~~debt and ~~gas market, in addition to reduced market demand, both as~~ a ~~result~~lower ofaverage ~~the~~effective interest ~~COVID-19 pandemic~~rate. WeAverage ~~estimate~~debt ~~sales~~was ~~for~~$20.7 ~~our~~million ~~project~~in ~~business,~~the ~~which~~first ~~targets~~quarter ~~end~~of ~~markets~~2021 for Environmental Compliance, Engineering & Construction, Industrials, Utility Power Generation, and Mechanical Wire Rope, decreased 21%, while Maintenance, Repair, and Operations (MRO) sales decreased 18%, as compared to ~~2019~~$89.2 Inmillion ~~general,~~in ~~rising~~2020. ~~copper~~The ~~and aluminum prices increase our sales and profitability, however, due to our~~ average ~~cost~~effective interest ~~accounting~~rate ~~treatment~~was ~~there~~1.8% ~~is a time lag between changes~~ in ~~commodity~~2021 ~~prices~~compared ~~and the impact~~ to ~~our income statement~~3.4% ~~We would anticipate recent increases~~ in ~~copper and aluminum prices to translate into higher revenue and earnings in future quarters, all else being equal~~2020.

~~Gross~~Income Taxes ~~Profit~~

	Three Months Ended
	September 30,
(Dollars in millions)	2020			2019			Change
Gross profit	$	15.0		$	19.4		$	(4.4	)	(22.9	)%
Gross margin		21.3	%		22.8	%

The income tax expense of $0.1 million decreased from $0.2 million in the prior year period, primarily due to the decrease in income before income taxes. The estimated effective income tax rate for the quarter increased to 40.0% in 2021 from the estimated rate of 29.5% in 2020 due to state income taxes and nondeductible expenses.

12 Impact of Inflation and Commodity Prices

~~Gross profit~~Our ~~decreased~~results ~~22.9%~~of tooperations ~~$15.0~~are ~~million~~affected by changes in ~~2020~~the ~~from~~inflation ~~$19~~rate and commodity prices.4 ~~million~~Moreover, because copper, aluminum, nickel and petrochemical products are components of the industrial products we sell, fluctuations in ~~2019~~the costs of these and other commodities have historically affected our operating results. ~~The~~To ~~decrease~~the inextent commodity prices decline, the net realizable value of our existing inventory could also decline, and our gross profit ~~was~~can ~~primarily~~be ~~attributable~~adversely affected because of toeither reduced ~~sales~~selling ~~from~~prices ~~the~~or ~~decline~~lower inof ~~the~~cost ~~oil~~or ~~and~~net ~~gas~~realizable ~~market~~value ~~caused~~adjustments byin the ~~COVID-19~~carrying ~~pandemic.~~value ~~Gross~~of ~~margin~~our ~~(gross~~inventory. We ~~profit~~turn asour inventory approximately three times a ~~percentage~~year, therefore, the impact of ~~sales)~~changes ~~decreased~~in tocommodity ~~21.3%~~prices in ~~2020~~any ~~from~~particular quarter 22would primarily affect the results of the succeeding two calendar quarters.8% inIf ~~2019,~~we are unable to pass on to our customers future cost increases due to ~~lower~~inflation ~~vendor~~or ~~rebates~~rising ~~and~~commodity ~~reduced prompt~~prices, ~~pay~~our ~~discounts~~operating results could be adversely affected.

~~Operating Expenses~~12

	Three Months Ended
	September 30,
(Dollars in millions)	2020			2019			Change
Operating expenses:
Salaries and commissions	$	7.5		$	9.2		$	(1.7	)	(18.9	)%
Other operating expenses		7.1			9.6			(2.5	)	(25.8	)%
Depreciation and amortization		0.9			0.7			0.2		32.8	%
Total operating expenses	$	15.5		$	19.5		$	(4.0	)	(20.5	)%
Operating expenses as a percent of sales		22.1	%		22.9	%

Liquidity and Capital Resources

~~Note: Due~~Our primary tocapital ~~rounding~~needs are for working capital obligations, ~~numbers~~capital ~~may~~expenditures ~~not~~and ~~add~~other upgeneral tocorporate purposes, including ~~total~~acquisitions. ~~operating~~Our ~~expenses~~primary sources of working capital are cash from operations supplemented by bank borrowings.

~~Salaries and commissions~~Liquidity ~~decreased~~is ~~$1.7~~defined ~~million~~as ~~from~~ the ~~third~~ability ~~quarter~~to ~~2019~~generate ~~compared~~adequate toamounts ~~2020~~of ~~due~~cash to ~~expense~~meet ~~management necessitated by~~ the ~~decrease~~current inneed ~~oil and~~for ~~gas prices and the COVID-19 pandemic~~cash. ~~Reduced~~We ~~full-time~~assess ~~headcount,~~our ~~reduced~~liquidity ~~temporary~~in ~~labor, and salary reductions, as well~~terms asof ~~lower~~our ~~commissions~~ability ~~resulting~~to ~~from~~generate ~~the~~cash ~~reduction~~to infund ~~sales~~our ~~and~~operating ~~gross~~activities. ~~profit~~Significant ~~all~~factors ~~contributed~~which tocould ~~the~~affect ~~lower~~liquidity ~~salaries~~include ~~and commission~~the ~~expense.~~following:

~~Other~~● ~~operating~~the ~~expenses decreased~~adequacy ~~due~~of toavailable ~~expense~~bank ~~management~~lines inof ~~response~~credit; to● ~~the~~cash ~~COVID-19~~flows ~~pandemic,~~generated ~~mainly~~from ~~lower~~operating ~~travel~~activities; ~~and~~● ~~entertainment~~capital ~~and~~expenditures; ~~advertising expenses.~~● Inacquisitions; ~~the~~and ~~third~~● ~~quarter~~the ofability ~~2019,~~to weattract ~~recorded~~long-term acapital ~~$2.2~~with ~~million~~satisfactory ~~early termination liability related to Vertex’s Massachusetts facility lease.~~terms

~~Depreciation and amortization~~Comparison ~~increased primarily due to depreciation on right-~~of~~-use~~ ~~assets~~the ~~acquired~~Three inMonths ~~the~~Ended ~~third~~March ~~quarter~~31, of2021 and 2020.

~~Interest~~Our net ~~Expense~~cash provided by operating activities was $4.3 million for the three months ended March 31, 2021 compared to net cash used in operating activities of $2.0 million in 2020. We had net income of $0.2 million in 2021 compared to $0.5 million in 2020.

~~Interest~~Changes ~~expense~~in ~~decreased from~~our ~~$0.8~~operating ~~million~~assets inand ~~2019~~liabilities toresulted ~~$0.3 million~~ in ~~2020~~cash asprovided aby ~~result~~operating activities of ~~lower~~$1.0 million ~~average debt and a decrease~~ in ~~interest rates~~2021. ~~Average~~An ~~debt was~~increase ~~$69.6 million~~ in ~~2020~~accounts ~~compared~~receivables toof $783.09 million inwas ~~2019.~~the ~~The~~main ~~average~~use ~~effective~~of ~~interest~~cash, ~~rate~~offset ~~was~~by ~~1.7%~~an increase in ~~2020~~accounts payable ~~compared~~of to $4.0% 9 million in ~~2019~~2021.

~~Income~~Net ~~Taxes~~cash provided by investing activities was $3.2 million in 2021 compared to net cash used in investing activities of was $0.9 million in 2020. The net cash provided by in 2021 was primarily due to the sale of Southwest Wire Rope in March 2021.

~~The income tax benefit~~Net ofcash ~~$0.1~~used ~~million~~in ~~changed~~financing ~~from~~activities was $05.28 million in ~~the~~2021 ~~prior~~compared ~~year period due~~ to anet ~~pretax~~cash ~~loss~~provided inby ~~the~~financing ~~third~~activities ~~quarter~~ of ~~2020~~$2.3 ~~The effective~~million ~~income~~in ~~tax~~2020. ~~rate~~Net ~~for~~payments on the ~~quarter~~revolver ~~was~~of 14$5.8%6 inmillion ~~2020~~were ~~compared~~the toprimary ~~19.8%~~uses inof ~~2019,~~cash ~~primarily due to non-deductible expenses~~ in ~~2020~~2021.

~~Comparison of the Nine Months Ended September 30, 2020 and 2019~~Indebtedness

Sales	Nine Months Ended
	September 30,
(Dollars in millions)	2020		2019		Change
Sales	$	220.6	$	256.0	$	(35.4	)	(13.8	)%

Our principal source of liquidity at March 31, 2021 was working capital of $87.1 million compared to $91.9 million at December 31, 2020. We also had available borrowing capacity of $55.9 million at March 31, 2021 and $47.5 million at December 31, 2020 under our loan agreement. The availability at March 31, 2021 and December 31, 2020 is net of outstanding letters of credit of $0.2 million.

~~Our sales for the nine-month period decreased 13.8% from $256.0~~We ~~million~~believe inthat ~~2019~~we towill ~~$220.6~~have ~~million~~adequate inavailability ~~2020.~~of ~~The~~capital ~~primary reasons for the decrease were the decline in the oil and gas market and~~ to ~~reduced~~fund ~~market demand, both as a result of the COVID-19 pandemic. We estimate that~~ our ~~project~~present ~~business~~operations, ~~which~~meet ~~includes~~ our ~~key~~ ~~growth~~commitments ~~initiatives~~on ~~encompassing~~our ~~Environmental Compliance, Engineering & Construction, Industrials, Utility Power Generation,~~existing ~~and Mechanical Wire Rope~~debt, ~~decreased 11%,~~ and ~~MRO~~fund ~~decreased~~anticipated ~~14%,~~growth ~~from~~over ~~2019.~~the Innext ~~general,~~twelve ~~rising copper and aluminum prices increase our sales and profitability~~months, ~~however,~~including ~~due~~expansion ~~to our average cost accounting treatment there is a time lag between changes~~ in ~~commodity prices~~existing and ~~the~~targeted ~~impact~~market ~~to our income statement~~areas. ~~We would anticipate recent increases in copper and aluminum prices to translate into higher revenue and earnings in future quarters, all else being equal.~~

13 Contractual Obligations

~~Gross~~The following ~~Profit~~ table summarizes our loan commitment at March 31, 2021.

	Nine Months Ended
In thousands	Total			Less than 1 year			1-3 years (1)			3-5 years			More than 5 years
	September 30,
Total debt	$	23,185		$	—		$	6,185		$	17,000		$	—
(Dollars in millions)	2020			2019			Change
Gross profit	$	48.8		$	61.2		$	(12.4	)		(20.3	)%
Gross margin		22.1	%		23.9	%

~~Gross profit~~(1) ~~decreased 20.3% from $61.2 million in 2019 to $48.8 million in 2020.~~ The ~~decrease~~Company inhas ~~gross~~applied ~~profit~~for ~~was~~loan ~~attributable~~forgiveness ~~to reduced sales from the decline in oil~~ and ~~gas~~believes ~~market~~that ~~and~~it ~~caused~~will byachieve ~~COVID~~90-~~19 pandemic. Gross margin decreased slightly to 22.1~~95% ~~in 2020 from 23.9% in 2019~~forgiveness, ~~primarily~~or ~~due~~approximately ~~to the one~~$5.6-~~time adjustment for a vendor return in the second quarter of 2020, as well~~$5.9 ~~as lower vendor rebates and reduced prompt pay discounts~~million.

~~Operating~~There were ~~Expenses~~ no material changes in non-cancellable purchase obligations since December 31, 2020.

	Nine Months Ended
	September 30,
(Dollars in millions)	2020			2019			Change
Operating expenses:
Salaries and commissions	$	25.4		$	27.7		$	(2.3	)	(8.3	)%
Other operating expenses		21.7			25.0			(3.3	)	(13.1	)%
Depreciation and amortization		2.5			1.8			0.7		40.7	%
Impairment charge		0.4			—			0.4		100.0	%
Total operating expenses	$	49.9		$	54.4		$	(4.5	)	(8.2	)%
Operating expenses as a percent of sales		22.6	%		21.3	%

~~Note: Due~~Item 3. toQuantitative ~~rounding,~~and ~~numbers~~Qualitative ~~may~~Disclosures ~~not~~about ~~add~~Market ~~up to total operating expenses.~~Risk

~~Salaries and commissions~~There ~~decreased~~were ~~$2.3~~no ~~million~~material ~~between~~changes ~~the periods due~~ to ~~expense~~our ~~management~~market ~~necessitated~~risk byas ~~the~~set ~~decrease~~forth in ~~oil~~Items ~~and~~7A ~~gas prices~~ and ~~the COVID-19~~7 ~~pandemic.~~of ~~Reduced~~our ~~full-time~~Annual ~~headcount,~~Report ~~reduced~~on ~~temporary~~Form ~~labor~~10-K ~~and~~for ~~salary~~the ~~reductions,~~year ~~as well as lower commissions resulting~~ended ~~from~~December ~~the~~31, ~~reduction in sales and gross profit~~2020, ~~all~~as ~~contributed to the decrease in salaries and commissions~~amended.

~~Other operating expenses~~Item ~~decreased $3~~4.3 ~~million~~Controls ~~to expense management in response to the COVID-19 pandemic, mainly lower travel~~ and ~~entertainment and advertising expenses. In the third quarter of 2019, we recorded a $2.2 million early termination liability related to Vertex’s Massachusetts facility lease.~~Procedures

~~Depreciation~~As of March 31, 2021, an evaluation was performed by the Company’s management, under the supervision and ~~amortization~~with the participation ~~increased~~of ~~primarily~~the ~~due~~Company’s tochief ~~depreciation~~executive onofficer ~~right-~~and chief financial officer, of~~-use~~ ~~acquired~~the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the chief executive officer and the chief financial officer concluded that the Company’s disclosure controls and procedures were effective. There were no changes in the ~~first~~Company’s ~~nine~~internal ~~months~~control over offinancial ~~2020~~reporting that occurred during the period ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~We recorded an impairment charge in the~~Part ~~first and second quarters of 2020 with respect to tradenames at our Southwest Wire Rope and Vertex reporting units~~II. ~~(See~~Other ~~Note 4 of our Consolidated Financial Statements)~~Information

~~Interest~~Item 1 ~~Expense~~- Not applicable and has been omitted.

~~Interest expense decreased~~Item 281A.8% Risk to $1.6 million in 2020 from $2.3 million in 2019 due to lower interest rates. Average debt was $78.9 million in 2020 compared to $73.9 million in 2019. The average effective interest rate fell to 2.5% in 2020 from 3.9% in the prior year period.Factors

~~Income~~There were ~~Taxes~~no material changes in the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, as amended.

~~The~~Item 2 – ~~income~~Unregistered ~~tax~~Sales ~~benefit~~ of ~~$0.4~~Equity ~~million~~Securities inand ~~2020~~Use ~~decreased from the income tax expense~~ of ~~$1.3 million in 2019 due to the pretax loss in 2020. The effective income tax rate decreased to 14.5% in 2020 from 29.0% in 2019, primarily due to non-deductible expenses in 2020.~~Proceeds

14 Our 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.

~~Impact~~No shares of ~~Inflation~~common ~~and~~stock ~~Commodity~~were ~~Prices~~purchased during the three months ended March 31, 2021. As of March 31, 2021, $8.1 million remained available under the repurchase authorization.

~~Our results of operations~~Item ~~are~~3 ~~affected~~- byNot ~~changes~~applicable ~~in the inflation rate~~ and ~~commodity~~has ~~prices.~~been Moreover, because copper, steel, aluminum, nickel and petrochemical products are components of the industrial products we sell, fluctuations in the costs of these and other commodities have historically affected our operating resultsomitted. In general, rising copper and aluminum prices increase our sales and profitability, however, due to our average cost accounting treatment there is a time lag between changes in commodity prices and the impact to our income statement. We would anticipate recent increases in copper and aluminum prices to translate into higher revenue and earnings in future quarters, all else being equal. To the extent commodity prices decline, the net realizable value of our existing inventory could also decline, and our gross profit could be adversely affected because of either reduced selling prices or lower of cost or net realizable value adjustments in the carrying value of our inventory. If we turn our inventory approximately three times a year, the impact of changes in commodity prices in any particular quarter would primarily affect the results of the succeeding two calendar quarters. If we are unable to pass on to our customers future cost increases due to inflation or rising commodity prices, our operating results could be adversely affected.

~~Liquidity~~Item 4 - Not applicable and ~~Capital~~has ~~Resources~~been omitted.

~~Our primary capital~~Item ~~needs~~5 ~~are~~- ~~for~~Not ~~working~~applicable ~~capital obligations, capital expenditures~~ and ~~other~~has ~~general~~been ~~corporate purposes, including acquisitions~~omitted. ~~Our primary sources of working capital are cash from operations supplemented by bank borrowings.~~

Liquidity is defined as the ability to generate adequate amounts of cash to meet the current need for cash. We assess our liquidity in terms of our ability to generate cash to fund our operating activities. Significant factors which could affect liquidity include the following:14

~~● the adequacy of available bank lines of credit;~~Item 6. Exhibits

●(a) Exhibits ~~cash~~required ~~flows~~by ~~generated~~Item ~~from~~601 ~~operating~~of ~~activities;~~Regulation S-K.

● capital expenditures;

Exhibit Number		Document Description

31.1		Certification by James L. Pokluda III pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by Eric W. Davis pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by James L. Pokluda III and Eric W. Davis pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document ⁽¹⁾

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

●(1) ~~acquisitions~~Attached as exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at March 31, 2021 and December 31, 2020; (ii) the Consolidated Statements of Operations for the three month periods ended March 31, 2021 and 2020; (iii) the Consolidated Statements of Cash Flows for the three month periods ended March 31, 2021 and 2020; and (vi) Notes to the Consolidated Financial Statements.

~~● the ability to attract long-term capital with satisfactory terms~~15

~~Comparison of the Nine Months Ended September 30, 2020 and 2019~~Signature

~~Our~~Pursuant to ~~net~~the ~~cash~~requirements ~~provided by~~of ~~operating~~the ~~activities~~Securities ~~was~~Exchange ~~$20.9~~Act ~~million~~of ~~for~~1934, the ~~nine~~Registrant ~~months~~has ~~ended~~duly ~~September~~caused ~~30,~~this ~~2020~~report ~~compared~~ to ~~net~~be ~~cash~~signed ~~used~~on ofits ~~$4.9 million~~behalf inby ~~2019.~~the Weundersigned, ~~had~~thereunto aduly ~~net loss of $2~~authorized.~~4 million in 2020 compared to net income of $3.2 million in 2019.~~

Changes in our operating assets and liabilities resulted in cash provided by operating activities of $16.1 million in 2020. Decreases in inventories of $23.9 million primarily due to efforts to reduce debt and accounts receivable of $8.6 million due to decreased sales were the main sources of cash. The main uses of cash were a decrease in accrued and other current liabilities of $8.4 million, a decrease in trade accounts payable of $5.2 million as a result of the decrease in inventory and lease payments of $2.7 million.

Date: May 17, 2021	HOUSTON WIRE & CABLE COMPANY

	BY:	/s/ Eric W. Davis
	Eric W. Davis, Chief Financial Officer

Net cash used in investing activities was $2.3 million in 2020 compared to $1.7 million in 2019. The increase was primarily due to expenditures for IT equipment, including software and infrastructure, and machinery and equipment.16

Net cash used in financing activities was $22.7 million in 2020 compared to net cash provided by financing activities of $5.3 million in 2019. Net payments on the revolver of $28.2 million were the primary uses of cash in 2020, offset by the Paycheck Protection Plan loan of $6.2 million received in the second quarter of 2020.

Liquidity and Indebtedness

Our principal source of liquidity at September 30, 2020 was working capital of $113.8 million compared to $138.5 million at December 31, 2019. We also had available borrowing capacity of $30.9 million at September 30, 2020 and $22.8 million at December 31, 2019 under our loan agreement. The availability at September 30, 2020 is net of outstanding letters of credit of $0.7 million.

We believe that we will have adequate availability of capital to fund our present operations, meet our commitments on our existing debt, and fund anticipated growth over the next twelve months, including expansion in existing and targeted market areas. We continually seek potential acquisitions and from time to time hold discussions with acquisition candidates. If suitable acquisition opportunities or working capital needs arise that would require additional financing, we believe that our financial position and earnings history provide a solid base for obtaining additional financing resources at competitive rates and terms. Additionally, based on market conditions, we may decide to issue additional shares of common or preferred stock to raise funds.

Contractual Obligations

The following table summarizes our loan commitment at September 30, 2020.

In thousands		Total				Less than 1 year				1-3 years				3-5 years				More than 5 years
Total debt		$	61,473			$	—			$	6,185			$	55,288			$	—

There were no material changes in non-cancellable purchase obligations since December 31, 2019.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There were no material changes to our market risk as set forth in Items 7A and 7 of our Annual Report on Form 10-K for the year ended December 31, 2019.

Item 4. Controls and Procedures

As of September 30, 2020, an evaluation was performed by the Company’s management, under the supervision and with the participation of the Company’s chief executive officer and chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures. Based on that evaluation, the chief executive officer and the chief financial officer concluded that the Company’s disclosure controls and procedures were effective. There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2020, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. Other Information

Item 1 - Not applicable and has been omitted.

Item 1A. Risk Factors

The COVID-19 pandemic, efforts to mitigate or disrupt the pandemic and the related weak, or weakening of, economic or other negative conditions, have had a negative impact on our business, and the duration and extent of the pandemic could prolong or increase the adverse impact.

A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019 and subsequently declared a pandemic by the World Health Organization. As of the date of this report, the virus continues to spread and there is no effective vaccine available. The preventative measures taken to contain or mitigate the outbreak have caused, and are continuing to cause, business slowdown or shutdown in affected areas and significant disruption in the financial markets both globally and in the United States, which could lead to a decline in capital spending, and in turn further impact, possibly materially, our business, sales, financial condition and results of operations. It is currently not practicable to predict the precise potential impact, as well as the extent of any 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. A prolonged situation could have a significant adverse effect on economies and financial markets globally, potentially leading to a significant worldwide economic downturn, which could have a significant adverse effect on our business, operating results and financial condition.

The extent to which the COVID-19 pandemic adversely affects our business, results of operations, and financial condition will likely depend on numerous evolving factors which are highly uncertain and cannot be predicted, including but not limited to:

● Reductions in the demand for our products as a result of downturns in capital spending and our customers’ cost containment actions,

● Disruption to our distribution centers and our suppliers and other vendors, including through the effects of facility closures,

● Impacts to our distribution and logistics providers’ ability to operate or increases in their operating costs,

● Labor shortages,

● Real time changes in operating procedures and costs, including for additional cleaning and disinfection

● Significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future.

We intend to continue to monitor the situation and adjust our current policies and practices as more information and guidance become available.

Other than this item, there were no material changes in the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Our 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.

No shares of common stock were purchased during the three months ended September 30, 2020. As of September 30, 2020, $8.1 million remained available under the repurchase authorization.

Item 3 - Not applicable and has been omitted.

Item 4 - Not applicable and has been omitted.

Item 5 - Not applicable and has been omitted.

Item 6. Exhibits

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

Exhibit Number		Document Description
31.1		Certification by James L. Pokluda III pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by Eric W. Davis pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification by James L. Pokluda III and Eric W. Davis pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document (1)
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

(1) Attached as exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at September 30, 2020 and December 31, 2019; (ii) the Consolidated Statements of Operations for the three and nine month periods ended September 30, 2020 and 2019; (iii) the Consolidated Statements of Stockholders’ Equity for the nine month periods ended September 30, 2020 and 2019; (iv) the Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2020 and 2019; and (vi) Notes to the Consolidated Financial Statements.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 6, 2020	HOUSTON WIRE & CABLE COMPANY
	BY:	/s/ Eric W. Davis
	Eric W. Davis, Chief Financial Officer (Authorized Officer)

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