Encore Wire's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Encore Wire Corporation (WIRE)

Q1 2012 Earnings Call

April 25, 2012 11:00 am ET

Executives

Daniel L. Jones – President and Chief Executive Officer

Frank J. Bilban – Vice President and Chief Financial Officer

Analysts

Kerry Rigdon – Mayberry Partners

Anthony C. Kure – KeyBanc Capital Markets Inc.

Brad Evans – Heartland Advisors

Brian Gibson – Edward Jones

Robert Kelly – Sidoti & Company

Eric Marshall – Hodges Capital Management

Presentation

Operator

Ladies and gentlemen hello and welcome to today’s Encore Wire First Quarter Earnings Call. Please note that all lines are on listen-only mode and there will be a question-and-answer session at the end of the presentation. (Operator Instructions)

And now to start of our conference, I would like to welcome and turn the call over to Mr. Daniel Jones, President and Chief Executive Officer. Go ahead, please.

Daniel L. Jones

Thank you, [Tuwana] and good morning, ladies and gentlemen and welcome to the Encore Wire Corporation quarterly conference call. As stated, I’m Daniel Jones, the President and Chief Executive Officer of Encore Wire and with me this morning is Frank Bilban, our Chief Financial Officer. The results in the first quarter of 2012 were effective by somewhat weal processing in our market, compared to the first and the fourth quarters of 2011.

Building on our prices and margins were impacted negatively by the volatility of copper prices during the quarter. Copper traded erratically which made it difficult for us to maintain any top of industry announced price increases. For example, Comex prices ranged from a low of $3.41 a pound to a high of $3.97 a pound and kept balancing between those two points throughout the quarter with large swings occurring within the span of several days. This disrupted our customers buying patterns and enticed our competitors to cut or hold prices, lowering margins. The performance of our stock and the prolonged industry recession has been exceptional.

Encore Wire is one of only 120 companies of the 12,920 public companies that trade on the United States Exchange that has enjoyed positive share appreciation in 2008, 2009 and 2010. Furthermore, Encore Wire is one of only 67 public companies that has enjoyed positive share appreciation in 2008, 2009, 2010 and 2011.

We continue to support industry price increases in an effort to maintain an increased margins. 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’ve been able to accomplish this despite holding what or historically lean inventories for us.

We believe our performance is impressive in this economy. We’d like to 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?

Frank J. Bilban

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 might have. Everyone should have received a copy of Encore’s press release covering Encore’s financial results. This release is available on the Internet 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 would refer all 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 conformance with GAAP including EBITDA, which we believe to be useful supplemental information for investors are posted on our website www.encorewire.com.

Now the financials. Net sales for the quarter ended March 31, 2012 were $280.5 million compared to $303.4 million during the first quarter of 2011. The average selling price of wire per copper pound sold dropped 9.7% in the first quarter of 2012 versus the first quarter of 2011 accounting further decline in sales dollars.

Net income for the first quarter of 2012 was $6.7 million versus $10.7 million in the first quarter of 2011. Fully diluted net income per common share was $0.29 in the first quarter of 2012 versus $0.46 in the first quarter of 2011. Unit volumes, measured in pounds of copper contained in the wire sold during the period were virtually unchanged in the first quarter of ‘12 versus the first quarter of ‘11.

On a sequential quarter comparison, net sales for the first quarter of 2012 were $280.5 million versus $248.3 million during the fourth quarter of 2011. Net income for the first quarter of 2012 was $6.7 million versus $16.3 million in the fourth quarter of 2011. Fully diluted net income per common share was $0.29 in the first quarter of 2012 versus $0.69 in the fourth quarter of 2011.

Copper pound unit volumes increased 8.7% in the first quarter of 2012 versus the fourth quarter of 2011. The spread between the cost of a pound of copper purchased and the sales price of wire containing a pound of copper decreased by 13% sequentially, accounting for the majority of the gross profit declines.

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