<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED
MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number: 0-20278
ENCORE WIRE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2274963
(State of incorporation) (I.R.S. employer identification number)
1410 MILLWOOD ROAD
MCKINNEY, TEXAS 75069
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 562-9473
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Number of shares of Common Stock outstanding as of April 15, 1997: 7,124,717
Page 1 of 17 Sequentially Numbered Pages
Index to Exhibits on Page 15
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<PAGE> 2
FORM 10-Q
ENCORE WIRE CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Consolidated Balance Sheets
March 31, 1997 (Unaudited) and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income (Unaudited)
Quarters ended March 31, 1997 and
March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows (Unaudited)
Quarters ended March 31, 1997 and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(A) Exhibit 11 - Statement re Computation of
Per Share Earnings
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
<PAGE> 3
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ENCORE WIRE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
In Thousands of Dollars (Unaudited) (Note)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,522 $ 1,261
Accounts receivable (net of allowance of
$567 and $473) . . . . . . . . . . . . . . . . . . . . . . 41,200 33,232
Inventories (Note 2) . . . . . . . . . . . . . . . . . . . . . 33,406 27,248
Prepaid expenses and other assets . . . . . . . . . . . . . . 197 210
Deferred income taxes . . . . . . . . . . . . . . . . . . . . 268 268
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . 76,593 62,219
Property, plant and equipment-on the basis of cost:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287 287
Buildings and improvements . . . . . . . . . . . . . . . . . . 8,976 8,749
Machinery and equipment . . . . . . . . . . . . . . . . . . . 33,302 29,962
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . 689 676
-------- --------
Total property, plant, and equipment . . . . . . . . . . . 43,254 39,674
Accumulated depreciation and
amortization . . . . . . . . . . . . . . . . . . . . . 11,694 10,888
-------- --------
31,560 28,786
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 63
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $108,216 $ 91,068
======== ========
</TABLE>
See accompanying notes
3
<PAGE> 4
FORM 10-Q
ENCORE WIRE CORPORATION
CONSOLIDATED BALANCE SHEETS (continued)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
In Thousands of Dollars, Except Share Data (Unaudited) (Note)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $ 18,881 $ 15,473
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 3,875 6,250
Current income taxes payable . . . . . . . . . . . . . . . . . . . . . 2,426 1,359
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 25,182 23,082
Non-current deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 2,587 2,587
Long term notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,400 18,500
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - (7,124,717
at March 31, 1997 and 7,112,917 at
December 31, 1996) . . . . . . . . . . . . . . . . . . . . . 71 71
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 28,620 28,529
Treasury stock - 128,500 at March 31, 1997 and
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . (1,509) (1,509)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,865 19,808
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . 51,047 46,899
-------- --------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . $108,216 $ 91,068
======== ========
</TABLE>
Note: The consolidated balance sheet at December 31, 1996, as presented, is
derived from the audited consolidated financial statements at that date.
See accompanying notes
4
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FORM 10-Q
ENCORE WIRE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Quarter Ended
March 31,
In Thousands of Dollars, Except Per Share Data 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,131 $ 40,015
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,660 36,583
---------- -----------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,471 3,432
Selling, general, and administrative expenses . . . . . . . . . . . . . . . . . . . 3,511 2,703
---------- -----------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,960 729
Net interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 430
---------- -----------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,597 299
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,540 115
---------- -----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,057 $ 184
========== ===========
Net income per common and common
equivalent share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.56 $ 0.03
========== ===========
Weighted average common and common
equivalent shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,189 7,113
========== ===========
Cash dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
========== ===========
</TABLE>
See accompanying notes
5
<PAGE> 6
FORM 10-Q
ENCORE WIRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
In Thousands of Dollars 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,057 $ 184
Adjustments to reconcile net income to cash
used in operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 927 793
Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 --
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,063) (1,031)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,158) (3,414)
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 1,033 2,304
Other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (63)
Current income taxes receivable/payable . . . . . . . . . . . . . . . . . . . . . . . 1,067 461
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (7,028) (766)
---------- ----------
INVESTING ACTIVITIES
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . (3,716) (328)
Proceeds from sale of equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 --
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (3,702) (328)
---------- ----------
FINANCING ACTIVITIES
Increase in note payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,900 1,000
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 2
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,991 1,002
---------- ----------
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 (92)
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,261 992
---------- ----------
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,522 $ 900
========== ==========
</TABLE>
See accompanying notes
6
<PAGE> 7
FORM 10-Q
ENCORE WIRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Encore Wire
Corporation have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments consisting only of normal recurring adjustments considered
necessary for a fair presentation have been included. Results of operations
for the periods presented are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997. These financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996.
NOTE 2 - INVENTORIES
Inventories are stated at the lower of cost, determined by the last-in
first-out (LIFO) method, or market.
Inventories (in thousands) consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ---------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . $ 5,629 $ 1,364
Work-in-process . . . . . . . . . . . . . 4,604 4,185
Finished .o.d. . . . . . . . . . . . . . . 25,211 21,821
--------- ---------
35,444 27,370
Decrease to LIFO cost . . . . . . . . . . (2,038) (122)
--------- ---------
$ 33,406 $ 27,248
========= =========
</TABLE>
An actual valuation of inventory under the LIFO method can be made
only at the end of each year based on the inventory levels and costs at that
time. Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond management's control, interim
results are subject to the final year-end LIFO inventory valuation.
7
<PAGE> 8
FORM 10-Q
NOTE 3 - INCOME PER SHARE
Income per common and common equivalent share is computed using the
weighted average number of shares of Common Stock and common stock equivalents
outstanding during each period. If dilutive, the effect of stock options and
common stock warrants, treated as common stock equivalents, is calculated using
the treasury stock method.
NOTE 4 - LONG TERM NOTE PAYABLE
The Company amended its unsecured loan facility (Facility) with a bank
as of August 31, 1995 to provide for a maximum borrowings of the lesser of
$35.0 million or the amount of eligible accounts receivable plus the amount of
eligible finished goods and raw materials as defined in the Financing Agreement
($35.0 million at March 31, 1997). The Facility is unsecured and contains
customary covenants and conditions providing for events of default.
The Company is prohibited from declaring, paying, or issuing dividends
in excess of an amount greater than 50% of the Company's net income for the
preceding year. At March 31, 1997, the balance outstanding under the revolving
credit facility was $29.4 million. Amounts outstanding under the facility are
payable on July 15, 1998, with interest due quarterly based on the bank's prime
rate, LIBOR or CD Rate options, at the Company's election. Each of the
interest rate options includes a premium dependent upon the Company's financial
performance.
8
<PAGE> 9
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a low-cost manufacturer of copper electrical building
wire and cable. The Company is a significant supplier of residential wire for
interior wiring in homes, apartments and manufactured housing. In 1994, the
Company completed a major plant expansion and began manufacturing commercial
wire for commercial and industrial buildings.
Price competition for electrical wire and cable is intense, and the
Company sells its products in accordance with prevailing market prices. Copper
rod, a commodity product, is the principal raw material used by the Company in
manufacturing its products. Copper accounted for approximately 77.4%, 76.8%,
67.9%, 70.0% and 73.9% of the Company's cost of goods sold during fiscal 1996,
1995, 1994, 1993 and 1992 respectively. The price of copper fluctuates,
depending on general economic conditions and in relation to supply and demand
and other factors, and has caused monthly variations in the cost of copper
purchased by the Company. The Company cannot predict copper prices in the
future or the effect of fluctuations in the cost of copper on the Company's
future operating results.
RESULTS OF OPERATIONS
The following discussion and analysis relates to factors that have
affected the operating results of the Company for the quarters ended March 31,
1997 and 1996. Reference should also be made to the audited financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
Net sales for the first quarter of 1997 amounted to $55.1 million
compared with net sales of $40.0 million for the first quarter of 1996, an
increase of 38%. This increase was primarily due to an increase in sales
volume of 26%, as well as improved pricing for the Company's products. The
improved pricing for the Company's products an increase in the average sales
price per copper pound of the Company's products. Sales volume increased due
to several factors, including increases in customer acceptance and product
availability. Sales volume of both the residential and commercial products
increased during the first quarter of 1997 compared to the first quarter of
1996. The average sales price per copper pound of product sold was $1.96 in
the first quarter of 1997, compared to $1.79 in the first quarter of 1996.
Fluctuations in sales prices are primarily a result of price competition and
changing copper raw material prices.
Cost of goods sold was $44.7 million in the first quarter of 1997,
compared to $36.6 million in the first quarter of 1996. Copper costs remained
relatively constant at $31.0 million in the first quarter of 1997 compared to
$31.0 million in the first quarter of 1996. The average cost per copper pound
purchased decreased to $1.16 in the first quarter of 1997 from $1.24 in the
first quarter of 1996. Copper costs as a percentage of net sales decreased to
56.2% in the first quarter of 1997 from 78.1% in the first quarter of 1996.
This decrease as a percentage of net sales in the first quarter of 1997 from
the comparable quarter in 1996 was due primarily to an increased differential
between what the Company pays per pound of copper purchased and the Company's
net sales price per copper pound. This differential was increased in the first
quarter of 1997 due to improved pricing for the Company's products. Other raw
material costs as a percentage of net sales remained relatively constant at
13.0%
9
<PAGE> 10
FORM 10-Q
in the first quarter of 1997, compared with 13.4% in the first quarter of 1996.
Depreciation, labor and overhead costs as a percentage of net sales also
remained relatively constant at to 8.3% in the first quarter of 1997 compared
to 8.4% in the first quarter of 1996.
Inventories are stated at the lower of cost, determined by the last
in, first out (LIFO) method, or market. As permitted by generally accepted
accounting principles, the Company maintains its inventory costs and cost of
goods sold on a first in, first out (FIFO) basis and makes a quarterly LIFO
adjustment to adjust total inventory and cost of goods sold to LIFO. The price
of copper increased during the first quarter of 1997, necessitating a increase
in the LIFO reserve of $1.9 million and a corresponding increase in cost of
goods sold. In the first quarter of 1996, the price of copper decreased
necessitating an decrease in the LIFO reserve that resulted in a increase to
the inventory value and a decrease to the cost of goods sold by $3.4million.
At March 31, 1997 and 1996, LIFO value did not exceed the market value of the
inventory, therefore no adjustment to lower the cost of the inventory to the
market value was necessary. Future reductions in the price of copper could
require the Company to record a lower of cost or market adjustment against the
related inventory balance which would result in a negative impact on net
income. Additionally, a reduction in the quantity of inventory in any period
could cause copper that is carried in inventory at costs different from the
cost of copper in that period to be included at the different price in cost of
goods sold for that period.
Gross profit increased to $10.5 million, or 19.0% of net sales, for
the first quarter of 1997 from $3.4 million, or 8.6% of net sales, for the
first quarter of 1996. The increase in gross profit as a percentage of net
sales was due primarily to increased sales volume and improved pricing for the
Company's products which resulted in a greater differential between product
price and copper cost in the first quarter of 1997, as discussed above.
General and administrative expenses were $873,000, or 1.6% of net
sales, in the first quarter of 1997 compared to $588,000, or 1.5% of net sales,
in the first quarter of 1996. The increase as a percentage of sales was due
primarily to higher general and administrative costs in the first quarter of
1997 relating to increased sales volume as well as a $96,000 provision for bad
debts in the first quarter of 1997 compared to no provision for bad debts in
the first quarter of 1996. Selling expenses for the first quarter of 1997 were
$2.6 million, or 4.8% of net sales, compared to $2.1 million, or 5.3% of net
sales, in the first quarter of 1996. This decrease as a percentage of sales
was due primarily to freight charges per copper pound of product shipped
remaining relatively unchanged while the sales price per copper pound sold
increased.
Net interest expense was $363,000 in the first quarter of 1997
compared to $430,000 in the first quarter of 1996. The decrease was due to a
lower average debt balance during the first quarter of 1997 compared to the
first quarter of 1996. Even though the debt balance increased by a larger
amount in the first quarter of 1997 than the same period of 1996, the average
debt balance in the first quarter of 1997 was less than the first quarter of
1996 due to a lower debt balance at December 31, 1996 compared to the balance
at December 31, 1995. The amount of debt outstanding at the end of the first
quarter of 1997 was greater than the balance at the end of the first quarter of
1996. This increase was due primarily to working capital requirements as well
as capital expenditures in the first quarter of 1997. Accounts receivable and
inventories increased as a result of increased sales volumes. These increases
were partially offset by the decreased cost of copper in the first quarter of
1997 compared to the first quarter of 1996.
10
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FORM 10-Q
The Company's effective tax rate remained constant at 38.5%.
As a result of the foregoing factors, the Company's net income
increased to $4.1 million in the first quarter of 1997 from $184,000 in the
first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a substantial inventory of finished products to
satisfy customers' prompt delivery requirements. As is customary in the
industry, the Company provides to most of its customers 60-day payment terms,
although the Company's suppliers typically require more immediate payment,
generally within 30 days. Therefore, the Company's liquidity needs have
generally consisted of operating capital necessary to finance these receivables
and inventory. Capital expenditures have historically been necessary to expand
the production capacity of the Company's manufacturing operations. The Company
has satisfied its liquidity and capital expenditure needs with cash generated
from operations, borrowings under its revolving credit facilities and sales of
its Common Stock.
Effective June 15, 1994, the Company completed an unsecured loan
facility with a bank (the "Financing Agreement"). The Financing Agreement
initially provided for maximum borrowings of the lesser of $25.0 million or the
amount of eligible accounts receivable plus the amount of eligible finished
goods and raw materials, less any available reserves established by the bank.
The maximum borrowing amount was increased to the lesser of a calculated amount
or $35.0 million effective August 31, 1995. The calculated maximum borrowing
amount available at March 31, 1997, as computed in the Financing Agreement, was
$34.9 million. The Financing Agreement is unsecured and contains customary
covenants and events of default. Because of the net loss incurred in 1995, the
Company was in default at December 31, 1995 under certain of the covenants
contained in the Financing Agreement. However, the bank waived the Company's
default as of December 31, 1995, and the bank and the Company amended the
Financing Agreement, effective as of March 19, 1996, so that it contains less
restrictive covenants. The Company was in compliance with these new covenants
as of March 31, 1997. At March 31, 1997, the balance outstanding under the
Financing Agreement was $29.4 million. The Financing Agreement was amended
September 17, 1996 to extend the term of the agreement and to make other minor
changes. Amounts outstanding under the Financing Agreement are payable on July
15, 1998 with interest due quarterly based on the bank's prime rate, LIBOR or
CD Rate options, at the Company's election. Each of the interest rate options
includes a premium dependent upon the Company's financial performance, which is
computed quarterly. The Agreement was amended again on December 11, 1996 to
clarify certain provisions relating to the repurchase of the Company's Common
Stock. Effective October 1, 1996, and continuing into 1997, the Company's
financial performance earned it the lowest interest rate option offered by the
Financing Agreement.
In the first quarter of 1995, the Board of Directors of the Company
authorized the Company to purchase up to 400,000 shares, or approximately 5.6%,
of its outstanding Common Stock dependent upon market conditions. Common Stock
purchased under the authorization will be made from time to time on the open
market or through privately negotiated transactions at prices determined by the
Chairman of the Board or the President of the Company. Cash provided by
operations and borrowings under the Financing Agreement will be used to fund
any repurchase of shares by the Company. The repurchase program permits the
Company to purchase shares of its Common Stock whenever management believes
that the stock price is undervalued relative to the performance and future
prospects of the Company. The Financing Agreement has been amended to permit
the proposed purchase of these shares not to exceed
11
<PAGE> 12
FORM 10-Q
400,000 shares or $5.5 million. Purchases of common stock under the repurchase
program will be carried out in accordance with applicable rules and regulations
of the Securities and Exchange Commission. As of March 31, 1997, the Company
had repurchased 128,500 shares of its common stock in the open market at a
weighted average price of $11.74 per share.
Cash used by operations increased to $7.0 million in the first quarter
of 1997 from cash used by operations of $766,000 in the first quarter of 1996.
This increase in the use of cash is primarily the result of a greater increase
of accounts receivable and inventories in the first quarter of 1997 compared to
the increase in the first quarter of 1996. The increase in accounts receivable
and inventories in the first quarter of 1997 were due to a larger increase in
sales in the first quarter of 1997 from the fourth quarter of 1996 compared to
the increase in sales in the first quarter of 1996 from the fourth quarter of
1995. Cash used in investing activities increased from $328,000 in the first
quarter of 1996 to $3.7 million in the first quarter of 1997. In both
quarters, these funds were used primarily to increase the Company's production
capacity and to purchase equipment for use in the Company's copper rod
fabrication facility which is discussed in the following paragraph. The cash
provided by financing activities was due primarily to borrowings in the first
quarter of 1997 and 1996, the proceeds of which were used to fund the
activities discussed above.
During 1997, the Company expects its capital expenditures will consist
of additional manufacturing equipment for its residential and commercial wire
operations. In addition, the Company plans to construct and equip a copper rod
fabrication facility and finished goods distribution facility. The total
capital expenditures associated with these facilities and the additional
manufacturing equipment are estimated to be approximately $19.0 million. The
Company also expects its working capital requirements to increase during 1997
as a result of expected continued increases in sales. Moreover, the Company
expects that the inventory levels necessary to support sales of commercial wire
will continue to be greater than the levels necessary to support comparable
sales of residential wire. The Company is currently negotiating with its bank
to provide additional financing for the capital expenditures and working
capital requirements. The Company believes that the cash flow from operations
and the financing that it expects to receive from its bank will satisfy working
capital and capital expenditure requirements for the next twelve months.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This report contains various forward-looking statements and information that
are based on management's belief as well as assumptions made by and information
currently available to management. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Such statements are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those expected. Among the key factors that may have a direct bearing on the
Company's operating results are fluctuations in the economy and in the level of
activity in the building and construction industry, demand for the Company's
products, the impact of price competition and fluctuations in the price of
copper.
12
<PAGE> 13
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11. Statement re: computation of per share earnings
(b) The Company filed a current report on Form 8-K dated March 18,
1997 relating to a press release distributed by the Company
regarding the announcement of plans to construct a new
facility. No financial statements were included in such
report. No other reports on Form 8-K were filed by the
Company during the three months ended March 31, 1997.
13
<PAGE> 14
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENCORE WIRE CORPORATION
----------------------------------------------
(Registrant)
Date: April 24, 1997 /s/ VINCENT A. REGO
----------------------------------------------
Vincent A. Rego, President and
Chief Executive Officer
Date: April 24, 1997 /s/ SCOTT D. WEAVER
----------------------------------------------
Scott D. Weaver, Vice President - Finance,
Treasurer and Secretary
(Principal Financial Officer)
14
<PAGE> 15
FORM 10-Q
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibit Page
- -------- ------- ----------
<S> <C> <C>
11. Statement re Computation of Per Share Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
27. Financial Data Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
15
<PAGE> 1
FORM 10-Q
EXHIBIT 11
16
<PAGE> 2
FORM 10-Q
ENCORE WIRE CORPORATION
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Quarter Ended
March 31,
1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common shares outstanding at
beginning of period . . . . . . . . . . . . . . . . . . . . 7,112,917 7,104,417
Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . (128,500) (77,500)
Weighted average number of common
shares issued during the period . . . . . . . . . . . . . . 8,356 1,890
Incremental shares related to assumed
exercise of warrants and stock options . . . . . . . . . . . 196,637 84,592
----------- -----------
Weighted common and common
equivalent shares outstanding . . . . . . . . . . . . . . . 7,189,410 7,113,399
=========== ===========
Weighted common and common
equivalent shares used in the
calculation of income per
common and common equivalent
share . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,189,410 7,113,399
=========== ===========
Net income (in thousands) . . . . . . . . . . . . . . . . . . . $ 4,057 $ 184
=========== ===========
Net income per common and
Common equivalent share . . . . . . . . . . . . . . . . . . $ .56 $ .03
=========== ===========
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,522
<SECURITIES> 0
<RECEIVABLES> 41,767
<ALLOWANCES> 567
<INVENTORY> 33,406
<CURRENT-ASSETS> 76,593
<PP&E> 43,254
<DEPRECIATION> 11,694
<TOTAL-ASSETS> 108,216
<CURRENT-LIABILITIES> 25,182
<BONDS> 0
0
0
<COMMON> 71
<OTHER-SE> 50,976
<TOTAL-LIABILITY-AND-EQUITY> 108,216
<SALES> 55,131
<TOTAL-REVENUES> 55,131
<CGS> 44,660
<TOTAL-COSTS> 3,511
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 96
<INTEREST-EXPENSE> 363
<INCOME-PRETAX> 6,597
<INCOME-TAX> 2,540
<INCOME-CONTINUING> 4,057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,057
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
</TABLE>
