Encore Wire Corp (WIRE) 2010 Q3 法說會逐字稿

Hello, ladies and gentlemen, and welcome to the Encore Wire third-quarter conference call. As a reminder, all phone lines are on listen-only mode and there will be time for questions and answers toward the end. (Operator Instructions). Now to begin our call, I introduce Daniel Jones, the President and CEO of Encore Wire. Please go ahead.

Thank you, Matt. Good morning, ladies and gentlemen. Welcome to the Encore Wire Corporation quarterly conference call. I'm Daniel Jones, the President and Chief Executive Officer of Encore Wire. With me this morning is Frank Bilban, our Chief Financial Officer.

We're pleased to announce strong quarterly earnings in the midst of a severe recession currently taking place in the construction industry. As we have repeatedly noted, the key metric to our earnings is to spread between the price of wire sold and cost of raw copper. That spread increased 37.4% in the third quarter of 2010 versus the third quarter of 2009 while our unit volume shipped in the third quarter of 2010 increased 12.5% versus the third quarter of 2009. The spread increased 28% on a year-to-date basis while unit volume decreased 6.7%.

The results in the last two quarters are particularly encouraging. We believe the exit of a former competitor in the first quarter has had a positive impact on the pricing levels and margins in the last two quarters. We continue to strive to support industry price increases to maintain the momentum started during the past two quarters. We believe our superior order fill rates continue to enhance our competitive position as our electrical distributor customers are holding lean inventories in the field.

As orders come in from electrical contractors, the distributors can count on our order fill rates to ensure quick deliveries coast to coast. We have been able to accomplish this despite holding what are historically lean inventories for us. We believe our performance is impressive in this economy and we thank our employees and associates for their tremendous efforts and we also thank our shareholders for their continued support. Frank Bilban, our Chief Financial Officer, will now discuss our financial results. Frank?

Thank you, Daniel. In a minute, we will review Encore's financial results for the quarter. After the financial review, we will be happy to take any questions you may have. Each of you should have received a copy of Encore's press release covering Encore's financial results. This release is also available on the Internet or you can call [Denise List] at 800-962-9473 and we will be happy to get you a copy.

Before we review the financials, let me indicate that, in our initial comments and in the question-and-answer period that follows, we may make certain statements that might be considered to be forward-looking. In order to comply with certain securities legislation, and instead of attempting to identify each particular statement as forward-looking, we advise you that all such statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed today. I would refer each of you to the Company's SEC reports and news releases for a more detailed discussion of these risks and uncertainties.

Also, reconciliations of non-GAAP financial measures discussed during this conference call to the most directly comparable financial measures presented in accordance with GAAP, including EBITDA, which we believe to be useful supplemental information for investors, are posted on www.EncoreWire.com.

Now the financial results. Net sales for the third quarter ended September 30, 2010 were $242.8 million compared to $168.7 million during the third quarter of 2009. Higher prices for building wire sold in the quarter ended September 30, 2010 accounted for most of the increase in net sales dollars, increasing 27.9% per copper pound sold versus the same period in 2009. Sales prices rose primarily due to higher copper prices.

Unit volume in the third quarter of 2010 increased 12.5% versus the third quarter of 2009. Net income for the third quarter of 2010 increased 1467.3% to $5.1 million versus $300,000 in the third quarter of 2009. Fully diluted net earnings per common share were $0.22 in the third quarter of 2010 versus $0.01 in the third quarter of 2009.

Net sales for the nine months ended September 30, 2010 were $654.1 million compared to $472.5 million during the same period in 2009. Higher prices for building wire sold in the nine months ended September 30 accounted for the increase in net sales dollars, increasing 48.3% per copper pound versus the same period in 2009.

Unit volume in the nine months ended September 30, 2010 decreased 6.7% versus the same period in 2009. Net income for the nine months ended September 30, 2010 were $10.8 million versus $5.5 million in the same period in 2009.

Fully diluted net earnings per common share were $0.46 for the nine months ended September 30, 2010 versus $0.24 in the same period in 2009. On a sequential quarter comparison, net sales for the third quarter of 2010 were $242.8 million versus $236.1 million during the second quarter of 2010. Unit volume was virtually unchanged, decreasing 1/10 of 1% on a sequential quarter comparison.

Net income for the third quarter of 2010 was $5.1 million versus $8.1 million in the second quarter of 2010. Fully diluted net income per common share was $0.22 in the third quarter of 2010 versus $0.35 in the second quarter of 2010.

Our balance sheet is very strong. We have no long-term debt and our revolving line of credit is paid down to zero. In addition, we have $90.4 million in cash as of September 30, 2010. We also declared another quarterly cash dividend during the third quarter of 2010.

Finally, we want everyone to know that this conference call will be available for replay after the conclusion of this session. If you wish to hear this taped replay, please call 866-551-4520 and enter the conference reference number 267614 followed by the pound sign. I will now turn the floor back over to Daniel Jones, our President and CEO. Daniel?

Thank you. As Frank highlighted, all things considered, we performed well in the past quarter and Matt, we would now like to open the lines up for questions.

(Operator Instructions) Tom Brashear, Preston Capital Management.

Good morning, gentlemen. Hey, congratulations on the quarter.

Thank you.

Are you seeing any improvement in the housing sector and are you continuing to see opportunities in the schools and churches and hospitals in that sector of the market?

There is not a lot of change in the housing part of it, Tom, as far as the volume goes. It is still very spotty. There is a few areas where there is some residential, not much. And as far as the commercial side or the hospitals, schools and what have you, still seem to be some pretty sizable jobs. Seems to be a little bit of a backlog there, not a substantial amount, but all in all, that business seems to be holding its own.

Very good. Thank you.

You bet.

(Operator Instructions) Louis Corrigan, Kingsford Capital.

Hi, could you just talk about the LIFO impact on the quarter?

Yes, sure. LIFO was a $12.25 million expense in the quarter.

Okay. Thanks very much.

You're welcome.

Liam Burke, Capital Market.

Thank you. Good morning, Daniel. Good morning, Frank. This might have been addressed in the first question, but could we circle back on the commercial market, how that has been growing and what pockets of the commercial market look like they have promised? The headline numbers in the Commerce Department show the construction -- the commercial side is down, but with your unit volumes up, it seems there's got to be some pockets there that are doing pretty well or doing better.

There is, Liam. The medical sector or the hospitals, three and four-story freestanding surgery-type centers, I mean there is a lot of specifics I could get into, but the medical overall seems to be doing pretty well. Most of the schools and universities around the country are doing something, adding whatever, upgrading dorms, living space, seem to be going along pretty steadily.

Public schools, elementary schools, middle schools and high schools seem to still be moving along fairly well. Airports around the country, municipal airports seem to be adding maybe FPOs, hangar space, private aircraft, some commercial activity surrounding airports. There are pockets. I wouldn't tell you that any one sector is huge, but overall, there seems to be some pretty steady business in the commercial market.

Okay, and with your ability to deliver 100% on time and your distributor customers needing to keep inventories lean, do you think there is a marketshare gain there, again, going back to the unit volume increase?

You know, there seems to be. It is hard to get exact numbers. We don't have a public competitor, so to speak, so it is tough to really nail that down. But based on the few areas that we trust for information and data, it seems that we have continued to creep up in the marketshare number.

Great. And Frank, what was or CapEx number year-to-date?

On a year-to-date basis --

Yes.

-- we are at $15.3 million.

Great. Thank you very much.

(Operator Instructions). Okay, looks like we have no further questions coming in from our audience.

Okay, Matt, well, thank you. Thank you, folks, that did participate and we appreciate the attention on the calls. I look forward to the next quarter. Thanks for the support.

Thank you, ladies and gentlemen. This conference is now concluded.