Pre-IPO analysis & report from IPOdesktop.com
Houstong Wire & Cable (HWCC) -- Pre-IPO grade=C+, score=6, priced at $13 mid-range
Grading & scoring system
Note: P/E ratio based on annualizing results for the March quarter
Notice the low price-to-earnings ratio

Houston Wire & Cable (HWCC)

C+, 6

wire & cable distributor

Post-IPO shrs:21mm

Houston, TX

2004

2004

2005

Mar 31 qtr

IPO Mkt

Revenue ($mm)

$149

$173

$214

$66.4

Cap (mm)

Gross profit %

23.6%

23.9%

26.0%

27.1%

$272

Operating profit %

3.2%

6.6%

10.7%

13.6%

@$13

Net income (loss) $mm

$0.2

$4.8

$12.5

$4.8

Net income %

0.1%

2.8%

5.8%

7.2%

VALUATION RATIOS

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

Cap (mm)

Sales

Earnings

BookValue

TangibleBV

in IPO

Houston Wire (HWCC)

$272

1.0

14

4.9

5.2

41%

SCORECARD

Mgt

Market

Market Do-

Proprie-

Total

1-5, 5 is high

Growth

mination

tary

rating

20 is perfect

2

1

2

1

6

Business

. One of the largest distributors of specialty wire and cable and related services to the U.S. electrical distribution market.
. During 2005, served 2,600 customers, including each of the top 200 electrical distributors in the U.S.
. During 2005, distributed 20,000 SKUs (stock-keeping units) to over 8,300 customer locations nationwide from eleven strategically located distribution centers in ten states.

Industry Overview

. Operates within the U.S. electrical distribution market, which Electrical Wholesaling magazine estimates had industry-wide sales of $74.3 billion in 2005 and will grow 7.9% to $80.2 billion in 2006.
. Electrical distribution has historically been a growing segment of the industrial distribution industry, with a CAGR of 5.1% over the last 20 years.

Products & services

. Focused on providing electrical distributor customers with a single-source solution for specialty wire and cable and related services
. In addition to product offerings, provides value-added services including: custom cutting of wire and cable to exact specifications; inventory management programs that provide job-specific asset management and just-in-time delivery; job-site delivery and logistics support; 24/7/365 customer service

LifeGuard

. Beginning in 2003, developed and marketed select private label products, including LifeGuard™, a low-smoke, zero-halogen cable product line.
. HWCC sells its LifeGuard™ product across all of the end-markets.
. Since its introduction in 2003, the LifeGuard™ line of cable has shown strong early signs of acceptance, has been accepted for use by over 300 end-users, including leading engineering and construction firms and is increasingly included in specifications for utility, data center and industrial related projects.

Locations & customers

. Through eleven strategic locations across the United States with over 450,000 square feet of warehouse space
. Provides same day shipment to a broad customer base including, among others, Border States Electric Supply, Consolidated Electrical Distributors, Inc., GE Supply Company, Graybar Electric Company, Inc., Hughes Supply, Inc., Mayer Electric Supply Company, Inc., Rexel, Inc., The Reynolds Company, Sonepar USA and WESCO Distribution, Inc.

History

. Founded in 1975, in 1987 completed an initial public offering and was subsequently purchased in 1989 by ALLTEL Corporation.
. In 1997, purchased by an investment fund affiliated with Code Hennessy & Simmons LLC.
. In 2000, acquired largest direct competitor, the Futronix division of Kent Electronics
. Following the offering, will no longer be subject to the annual $500,000 management fee
payable to an affliate of Code, Hennessy & Simmons.
. Expects added costs of being a public company to be in the range of $1.25 million to $1.75 million per year.

Competition

. Fragmented market with over 200 specialty wire and cable distributors
. Primarily competes with other wire and cable distributors on a regional and local basis.
Use of $50mm in IPO proceeds from sale of 4.25mm shares
(shareholders intend to offer 4.25mm shares)
Repay debt
Note: On December 30, 2005, HWCC paid a special dividend of $20.0 million to common
stockholders and funded the payment by borrowing under existing credit facilities. Due to the interest payable on these borrowings, net earnings, and earnings per share, in 2006 will be lower than they would have been had HWC not paid the special dividend.