Houston Wire & Cable Company Q1 2008 Earnings Call Transcript

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2008-05-12 13:08:08.0

Tags: Houston Wire & Cable Co.

Question-and-Answer Session

Operator

(Operators Instructions) Your first question comes from the line of Jeff Germanotta with William Blair. Please proceed.

Jeff Germanotta - William Blair

Congratulations on a nice quarter gentlemen.

Charles Sorrentino

Thanks Jeff.

Jeff Germanotta - William Blair

Hey, with the gross margin coming back and sales were relatively stronger than we thought you would have done. Can you comment on how much of that might be volume or did inflation help you a little bit there too?

Charles Sorrentino

There was some inflation in the quarter Jeff but there was also some heavy or I will say moderately heavy price competition. So the net of all of that is difficult to get a good read on. But essentially I think that there was probably enough price pressure that it mitigated the inflation in the quarter.

Jeff Germanotta - William Blair

So, I know it's artful, but said another way most of that 9% was volume and it was in the newer channel strategies?

Charles Sorrentino

Exactly yes that’s correct.

Jeff Germanotta - William Blair

And the gross margin come back, again just??

Charles Sorrentino

This product mix, I mean did you have certain product mix that could favorable in this particular quarter, it was favorable. I mentioned that we are seeing a rapid increase in our private branded products which also helps the margins. So you got a confluence of some events influencing the margin up, at the same time you have some headwinds out there, the competition, some other things occurring in the marketplace that negatively impact it. So we were pleased that the gross margins were up over trend, but we also want to make sure everybody understands that those margins will vary from time to time and quarter to quarter as we build out our business and that we really focus on the operating income margin as it means to manage the business.

Jeff Germanotta - William Blair

Thank you.

Charles Sorrentino

You bet.

Operator

Your next question comes from the line David Manthey with Robert W. Baird. Please proceed.

David Manthey - Robert W. Baird

Hi, good morning guys.

Charles Sorrentino

Good morning.

Nicol Graham

You bet.

David Manthey - Robert W. Baird

In days in inventory were about 95 days in the first quarter of '08. If I look back at couple of years ago clearly in a different growth environment, you had about 67 by my calculations. I am wondering if you could talk about where you feel comfortable in terms of days in inventory and why have you seen such a increase here lately?

 

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