Encore Wire Corp (WIRE) 2013 Q1 法說會逐字稿

Good day and welcome to the Encore Wire first quarter earnings call. My name is Matt and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

At this time, I would like to turn the call over to Mr. Daniel Jones, President and Chief Executive Officer of Encore Wire. Please go ahead.

Hey, thank you, Matt. Good morning, ladies and gentlemen, and welcome to the Encore Wire Corporation quarterly conference call. As stated, I am Daniel Jones, the President and Chief Executive Officer of Encore. With me this morning is Frank Bilban, our Chief Financial Officer and several key managers.

The first quarter of this year was another fairly steady volume quarter, considering the time of the year and the current economic and construction industry environment. We believe our expansion of product offerings over the last six years to our existing customer base has been critical to maintaining and perhaps boosting our market share.

Results in the first quarter of 2013 were mildly improved versus the first and fourth quarters of 2012. Building wire prices and margins were fairly stable during the quarter, following the pattern of stability in copper prices. Volumes were also comparable to the prior periods and may have been held down somewhat by lingering weather in the first quarter of 2013.

A new aluminum building wire plant began to produce wire in the fourth quarter of 2012. The last of the equipment is being delivered and installed -- I'm sorry -- installation should be completed in the second quarter of 2013. We expanded our distribution of aluminum wire to all of our sales reps and customers in the first quarter and expect to see sales of these products gradually increase over the course of 2013.

We continue to strive to lead or follow industry price increases to achieve profit growth and we've produced these results in a difficult environment due to our low-cost business model and aggressive cost control in all facets of our operation. We believe our superior order fill rates continue to enhance our competitive position, as our electrical distributor customers are holding lean inventories infield.

We believe our performance is impressive in this economy and we thank our employees and associates for their tremendous efforts. We'd also like to thank our stockholders 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 received a copy of Encore's press release covering our financial results. This release is available on the Internet and our website, or you can call Natalie Seelbach at 800-962-9473 and we will get you a copy.

Before we review the financials, let me indicate that throughout this conference call, 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 here 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 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, again, on our website on www.encorewire.com.

Now the financial results. Net sales for the quarter-ended March 31, 2013 were $265.4 million compared to $280.5 million during the first quarter of 2012. The average selling price of wire per copper pound sold dropped 5.3% in the first quarter of 2013 versus the first quarter of 2012, accounting for most of the decline in sales dollars.

Copper unit volume, measured in pounds of copper contained in the wire sold, decreased 3.1% in the first quarter of 2013 versus the first quarter of 2012. Aluminum building wire sales constituted 5.7% of net sales dollars for the first quarter of 2013 versus 2.9% in the first quarter of 2012.

Net income for the first quarter of 2013 was $6.4 million versus $6.7 million in the first quarter of 2012. Fully diluted net income per common share was $0.31 in the first quarter of 2013 versus $0.29 in the first quarter of 2012. The earnings per share results in the first quarter of 2013 reflect the Company's repurchase of 2,774,250 shares of its common stock in May of 2012.

On a sequential quarter comparison, net sales for the first quarter of 2013 were $265.4 million versus $258 million during the fourth quarter of 2012. Net income for the first quarter of 2013 was $6.4 million versus $5.2 million in the fourth quarter of 2012. Fully diluted net income per common share was $0.31 in the first quarter of 2013 versus $0.25 in the fourth quarter of 2012. Copper unit volumes increased 3.1% in the first quarter of 2013 versus the fourth quarter of 2012, while aluminum unit volumes increased 11.9%.

We continue to maintain our strong balance sheet. We have no long-term debt and our revolving line of credit is paid down to zero. In addition, we had $32.7 million in cash as of March 31, 2013. We also declared another quarterly cash dividend during the past quarter.

This conference call will be available for replay after the conclusion of this session. If you wish to hear the taped replay, please call 877-764-8714 and enter the conference reference code 337639 and the pound sign.

I will now turn the floor back over to Daniel Jones, our President and CEO. Daniel?

Thank you, Frank. As Frank highlighted, Encore performed well in the past quarter. We believe we are well positioned for the future.

And, Matt, we will now take questions from our listeners.

Thank you. We will now begin the question-and-answer session. (Operator Instructions). And our first question comes from Bob Kelly of Sidoti & Co. Please go ahead.

Hi, good morning.

Hi, Bob.

Just a question on the -- maybe the pace for volumes each month of 1Q. How did January, February and March compare to the year-ago period?

They were fairly -- not exactly equal, but pretty close to equal. During the quarter, Bob, of first-quarter '13, Comex copper peaked at about $3.76 the first week or so in February and was about $0.35 or $0.40 cheaper on the final day of March close. So the difference in the swing and the volatility led to a little bit of first quarter '13 sitting on the sideline, waiting to place orders, what have you, between February and March. But overall, the months were pretty stable surprisingly. So, in fact, January was better than we had expected and February was just a little bit bigger than January.

Okay, that was helpful. As far as the aluminum ramp-up, you had some really impressive year-over-year and sequential improvement there. As you think about aluminum longer-term, how big of a product line do you see that over the next couple of years?

We are trying to be really careful on how we go to market with that product, because as predicted, the competitive situation becomes -- you know, I guess the first line of defense of most of our competitors is price. They will cut the price to protect an order or a customer or whatever it might be, and that's just not our style. We will get credit for doing some things in the market that we're just simply not doing. So, from a timing standpoint, Bob, I think it's going to be a gradual ramp-up, but the market -- again, the market itself will dictate to what level, but more specifically to the answer, depending on, again, which direction the market goes, it could be 10% or 15% of the overall sales number pretty easily.

Okay, great. And then just as far as the outlook, since I guess the first quarter ended, lot of the leading indicators look fairly positive for commercial. Just wondering if the sentiment from your customers is matching that, not necessarily the order flow, but if sentiment is getting better among your customer base?

Yeah, I think so. I mean, I am supposed to stay within the boundaries of just the first quarter, but I can tell you, toward the end of the first quarter that [customers] would probably agree with that sentiment and there's nothing I could tell you that would change that going into the second quarter that we can see yet.

Okay. And just one last one on the margins for your legacy copper business and then your aluminum business. Is there a significant margin differential between the two product lines?

I really don't want to get that specific, but the answer is yes.

With the aluminum being higher than the copper?

That's correct, yes.

Thanks.

You bet. Thank you, Bob. Appreciate the support.

(Operator Instructions) And, gentlemen, I am showing no further questions at this time.

Well, that's great. Hey, Matt, we'd like to say thank you to all of our supporters and please call back if you have any questions, and we look forward to talking to you next quarter. Thanks a lot.

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.