Encore Wire Corp (WIRE) 2011 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to today's first-quarter earnings review conference call. Please note that all of your lines are on listen-only mode and there will be time for a Q&A session towards the conclusion of this meeting.

(Operator Instructions) And now to start off our conference, I would like to welcome and turn the call over to Mr. Daniel Jones, Chief Executive Officer, Encore Wire.

Thanks, Muna. Good morning, ladies and gentlemen, and welcome to the Encore Wire Corporation quarterly conference call.

I am Daniel Jones, the President and Chief Executive Officer of Encore Wire. With me this morning is Frank Bilban, our Chief Financial Officer.

We are 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 the spread between the average price of wire sold per copper pound and the Company's average cost of raw copper per pound in any given period.

That spread increased 42.2% in the first quarter of 2011 versus the first quarter of 2010 while our unit volume shipped in the first quarter of 2011 increased 28.9% versus the first quarter of 2010. The spread increased 14.3% on a sequential quarter basis while unit volume increased 5.3% driving the increase in our earnings.

In the trailing 12 months ended March 31, 2011 we produced net sales of $1.038 billion and net income of $28.4 million or $1.22 per share versus net sales of $680.4 million and a net loss of $3.4 million or negative $0.15 per share in the 12 months ended March 31, 2010. The results in the last four quarters are particularly encouraging.

We believe the exit of a former competitor in the first quarter of 2010 has contributed to the positive trend in our industry processing levels and margins over the last four corners. We continue to strive to lead or support industry price increases to achieve profit growth.

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 from coast to coast.

We have been able to accomplish this despite holding what are historically lean inventory levels for us. We believe our performance is impressive in this economy and we thank our employees and associates for their tremendous efforts. 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 take any questions you may have.

Each of you should have already received a copy of Encore's press release covering Encore's financial results. This release is available on the Internet or you can call Tracey West at 800-962-9473 and we will 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 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 www.encorewire.com.

Moving along to the financial results. Net sales for the quarter ended March 31, 2011 were $303.4 million compared to $165.2 million during the first quarter of 2010.

Net income for the first quarter of 2011 was $10.7 million versus a net loss of $2.5 million in the first quarter of 2010. Fully diluted net income per common share was $0.46 in the first quarter of 2011 versus a net loss of $0.11 in the first quarter of 2010.

Unit volumes measured in pounds of copper contained in the wires sold during the period increased 28.9% in the first quarter of 2011 versus the first quarter of 2010. The spread between the cost of a pound of copper purchased and the sale price of wire containing a pound of copper increased by 42.2%. The 2010 first-quarter results included a $2.6 million pretax charge associated with the early retirement of long-term debt that the Company paid off in January of 2010.

On a sequential quarter comparison, net sales for the first quarter of 2011 were $303.4 million versus $256.1 million during the fourth quarter of 2010. Net income for the first quarter of 2011 was $10.7 million versus $4.5 million in the fourth quarter of 2010.

Fully diluted net income per common share was $0.46 in the first quarter of 2011 versus $0.19 in the fourth quarter of 2010. Unit volumes increased 5.3% in first quarter of 2011 versus the fourth quarter of 2010.

The spread between the cost of a pound of copper purchased and the sales price of wire containing a pound of copper increased by 14.3%. As Daniel previously highlighted, our performance in the trailing 12-month comparisons are particularly encouraging.

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 $75.2 million in cash as of March 31, 2011. We also declared another quarterly cash dividend during the last quarter.

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 the taped replay, please call 866-551-4520 and enter the conference reference 272-369 and 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, Encore performed well in the past quarter and we believe we are well positioned for the future. Muna will now take questions from our listeners.

(Operator Instructions) Keith Johnson.

This is Keith Johnson with Morgan Keegan. Good quarter there, I was just wanting to get a couple maybe clarifications on a few items.

Maybe first off, the solid I guess increase in volumes year over year, could you kind of break that out on a year-over-year basis how the residential markets and commercial markets performed?

Residential -- and you're talking Q1 to Q1, Keith?

That's it.

Q1 to Q1 residential was just about dead, no gain or loss, and commercial was up 36% on a unit basis.

And then of that 73% or so year-over-year increase in revenues, how much would you attribute to kind of the selling price side of the equation? You highlighted the volume increase year over year but on the selling price side?

The average sales price per copper pound shipped went up 34%.

On the increase in the commercial volume, are you guys seeing any better trends in any of your markets related to kind of some early indicators on non-residential construction?

As far as this month?

Well, yes, kind of as you came through the first quarter, kind where you are now looking as we go into the summer?

Each month, Keith, actually was a little bit stronger than the other. February -- January and March beat February by a little bit and we are seeing that trend -- that as being a trend or a bias at least.

And what about maybe just comments around the trends and the pricing dynamics, the ability for that spread to expand. Was it consistently better through the first quarter or did it have some months that were a little stronger than others?

It was consistently better and I think the dynamics associated with the volatility and some of the uncertainties in the market led to price support, and as we mentioned and more directly to your question, each month was a little bit better.

And then just a final question. Inventory looks like you are still keeping it, and you made the comment earlier, at very low levels versus historical standards on a unit basis. Any effect there from a LIFO liquidation or any past layers that they may have showed up in the first quarter?

We did not liquidate any past layers, Keith. As a matter of fact if anything, we had a slight, very slight build and the LIFO charge for the quarter was $8.25 million. That was an expense of $8.25 million.

And then copper for the quarter for you guys was -- copper purchase price?

Average price of copper during the quarter?

That's it.

Was about $4.37.

Great, thanks. Good luck.

(Operator Instructions) Kerry Rigdon.

This is Kerry Rigdon, Mayberry Partners, congratulations, great quarter. One question, Daniel, concerning pricing. How would you characterize the pricing discipline in the quarter?

Well, it was improving from January through March, each month, each week, so forth got a little bit better. There were several price increase attempts and several of those were supported.

The volatility, obviously you guys can see what's happening with copper and the volatility supported that in most instances and in some instances, the day of a price increase, copper would drop and we met some resistance. But net net, the bias was more toward an increase being supported.

Terrific, thank you.

Gentlemen, it looks like that was our last question.

Well super, Muna, you've done a great job and we appreciate you folks that called in. If there's any questions that come up after the call, you can reach either Frank or myself at the office. And again, appreciate your support and thanks for calling in.

Ladies and gentlemen, thank you for your time and attendance. This conference is concluded. Enjoy the rest of your afternoon.