<PAGE> 1
================================================================================
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
SEPTEMBER 30, 1998
OR
[ X ] 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 November 2, 1998: 16,304,148
================================================================================
<PAGE> 2
FORM 10-Q
ENCORE WIRE CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Consolidated Balance Sheets.....................................................................3
September 30, 1998 (Unaudited) and December 31, 1997
Consolidated Statements of Income (Unaudited)...................................................5
Quarters and nine months ended September 30, 1998 and September
30, 1997
Consolidated Statements of Cash Flows (Unaudited)...............................................6
Nine months ended September 30, 1998 and September 30, 1997
Notes to Consolidated Financial Statements......................................................7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................................10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.....................................................................17
ITEM 6. Exhibits and Reports on Form 8-K......................................................18
Signatures.......................................................................................................19
</TABLE>
2
<PAGE> 3
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ENCORE WIRE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
In Thousands of Dollars (Unaudited) (See Note 1)
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash .............................................. $ 1,098 $ 1,165
Accounts receivable (net of allowance of
$637 and $675) ................................ 60,740 44,302
Inventories (Note 2) .............................. 31,925 30,597
Prepaid expenses and other assets ................. 375 159
Deferred income taxes ............................. 793 793
----------- -----------
Total current assets .......................... 94,931 77,016
Property, plant and equipment-on the basis of cost:
Land .............................................. 3,568 1,747
Buildings and improvements ........................ 22,991 19,258
Construction in Progress .......................... 12,492 8,793
Machinery and equipment ........................... 52,071 35,498
Furniture and fixtures ............................ 1,142 829
----------- -----------
Total property, plant, and equipment .......... 92,264 66,125
Accumulated depreciation and
amortization .............................. 18,891 14,797
----------- -----------
73,373 51,328
Other assets ............................................... 185 411
----------- -----------
Total assets ............................................... $ 168,489 $ 128,755
=========== ===========
</TABLE>
See accompanying notes
3
<PAGE> 4
FORM 10-Q
ENCORE WIRE CORPORATION
CONSOLIDATED BALANCE SHEETS (continued)
<TABLE>
<CAPTION>
September December
30, 1998 31,1997
In Thousands of Dollars, Except Share Data (Unaudited) (See Note 1)
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable ................................. $ 15,085 $ 23,380
Accrued liabilities .................................... 7,312 8,248
Current income taxes payable ........................... 4,382 1,677
----------- -----------
Total current liabilities .............................. 26,779 33,305
Non-current deferred income taxes ............................... 3,240 3,240
Long term notes payable ......................................... 54,000 22,200
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - (16,304,148
at September 30, 1998 and 16,197,577 at
December 31, 1997) .............................. 163 162
Additional paid-in capital ...................................... 30,369 29,956
Treasury stock - 502,575 at September 30, 1998 and 300,375 at
December 31, 1997 ...................................... (4,467) (1,608)
Retained earnings ............................................... 58,405 41,500
----------- -----------
Total stockholders' equity ............................. 84,470 70,010
----------- -----------
Total liabilities and stockholders' equity ...................... $ 168,489 $ 128,755
=========== ===========
</TABLE>
Note: The consolidated balance sheet at December 31, 1997, as presented, is
derived from the audited consolidated financial statements at that
date.
See accompanying notes
4
<PAGE> 5
FORM 10-Q
ENCORE WIRE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
In Thousands of Dollars, Except Per Share Data 1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales ..................................... $ 69,557 $ 70,728 $ 196,390 $ 192,747
Cost of goods sold ............................ 54,220 55,381 153,144 153,660
---------- ---------- ---------- ----------
Gross profit .................................. 15,337 15,347 43,246 39,087
Selling, general, and administrative expense .. 4,992 4,487 14,062 12,178
---------- ---------- ---------- ----------
Operating income .............................. 10,345 10,860 29,184 26,909
Interest expense (net) ........................ 589 254 1,109 1,062
---------- ---------- ---------- ----------
Income before income taxes .................... 9,756 10,606 28,075 25,847
Provision for income taxes .................... 3,854 4,285 11,170 10,210
---------- ---------- ---------- ----------
Net income .................................... $ 5,902 $ 6,321 $ 16,905 $ 15,637
========== ========== ========== ==========
Weighted average common and common
equivalent shares - basic .................. 15,913 15,840 15,921 15,773
========== ========== ========== ==========
Net income per common and common
equivalent share - basic ................... $ .37 $ .40 $ 1.06 $ .99
========== ========== ========== ==========
Weighted average common and common
equivalent shares - diluted ................ 16,336 16,615 16,499 16,541
========== ========== ========== ==========
Net income per common and common
equivalent share - diluted ................. $ .36 $ .38 $ 1.02 $ .95
========== ========== ========== ==========
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>
Nine Months Ended
September 30,
In Thousands of Dollars 1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ............................................................ $ 16,905 $ 15,637
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Depreciation and amortization ................................. 4,137 2,955
Provision for bad debts ....................................... 500 341
Loss on disposal of assets .................................... (15) --
Changes in operating assets and liabilities:
Accounts receivable ....................................... (16,938) (20,396)
Inventory ................................................. (1,328) 2,505
Accounts payable and accrued liabilities .................. (9,231) 6,492
Other assets and liabilities .............................. (216) (51)
Current income taxes payable .............................. 2,705 642
---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES .... (3,481) 8,125
---------- ----------
INVESTING ACTIVITIES
Purchases of property, plant and equipment ............................ (26,179) (15,141)
Increase in Long Term Investments ..................................... 226 (80)
Proceeds from Sale of Equipment ....................................... 12 16
---------- ----------
NET CASH US VESTING ACTIVITIES .................................... (25,941) (15,205)
---------- ----------
FINANCING ACTIVITIES
Borrowings (repayments) under notes payable ........................... 31,800 6,400
Purchases of Treasury Stock ........................................... (2,859) (99)
Proceeds from issuance of common stock ................................ 414 652
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ......................... 29,355 6,953
---------- ----------
Net decrease in cash ...................................................... (67) (127)
Cash at beginning of period ............................................... 1,165 1,261
---------- ----------
Cash at end of period ..................................................... $ 1,098 $ 1,134
========== ==========
</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, 1998. These financial statements
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
NOTE 2 - INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined by the last-in, first-out (LIFO) method.
Inventories (in thousands) consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---------- ----------
<S> <C> <C>
Raw materials .......................... $ 6,638 $ 2,299
Work-in-process ........................ 2,992 6,128
Finished goods ......................... 18,784 20,818
---------- ----------
28,414 29,245
Increase to LIFO cost .................. 5,674 2,629
Lower of Cost or Market Adjustment ..... (2,163) (1,277)
---------- ----------
$ 31,925 $ 30,597
========== ==========
</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 (LOSS) 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,
treated as common stock equivalents, is calculated using the treasury stock
method.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Numerator:
Net Income $ 5,902,000 $ 6,321,000
================== ==================
Denominator:
Denominator for basic earnings per share -
weighted average shares 15,912,527 15,839,893
Effect of dilutive securities:
Employee stock options 423,780 774,713
------------------ ------------------
Denominator for diluted earnings per share -
weighted average shares 16,336,307 16,614,606
================== ==================
</TABLE>
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Numerator:
Net Income $ 16,905,000 $ 15,637,000
================== ==================
Denominator:
Denominator for basic earnings per share -
weighted average shares 15,920,751 15,773,196
Effect of dilutive securities:
Employee stock options 577,820 768,189
------------------ ------------------
Denominator for diluted earnings per share -
weighted average shares 16,498,571 16,541,385
================== ==================
</TABLE>
8
<PAGE> 9
FORM 10-Q
NOTE 4 - LONG TERM NOTE PAYABLE
Effective June 9, 1997, the Company completed an unsecured loan
facility with a group of banks (the "Financing Agreement"). This Financing
Agreement has been amended four times since June 9, 1997 to change, among other
items, the maximum borrowing amount, the term of the loan covenants and the
allowable purchases of the Company's common stock. The Financing Agreement
provides for maximum borrowings of the lesser of $65.0 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 banks. The calculated
maximum borrowing amount available at September 30, 1998, as computed under the
Financing Agreement, was $65.0 million. The Financing Agreement is unsecured and
contains customary covenants and events of default. The Company was in
compliance with these covenants, as amended, as of September 30, 1998. Pursuant
to the Financing Agreement, the Company is prohibited from declaring, paying or
issuing cash dividends. At September 30, 1998, the balance outstanding under the
Financing Agreement was $54.0 million. Amounts outstanding under the Financing
Agreement are payable on May 31, 2001 with interest due quarterly based on the
bank's prime rate or LIBOR Rate options, at the Company's election.
NOTE 5 - STOCK REPURCHASE AUTHORIZATION
In March 1995, the Board of Directors authorized the Company to
purchase up to 900,000 shares, or approximately 5.6%, of its outstanding common
stock dependent upon market conditions. Purchases made pursuant to this
authorization are made in the open market or through privately negotiated
transactions. As of September 30, 1998, the Company had repurchased an aggregate
of 502,575 shares of its common stock in the open market at a weighted average
price of $8.89 per share. The Financing Agreement, as amended, discussed in note
4 allows the Company to purchase up to 900,000 shares with an aggregate price of
these shares not to exceed $11,300,000. The Company purchased 202,200 shares
under this authorization during the third quarter of 1998.
NOTE 6 - STOCK DIVIDENDS
On July 22, 1997 the Board of Directors of the Company declared a
3-for-2 stock split to be paid as a 50% stock dividend on its common stock. The
stock dividend was payable August 18, 1997 to stockholders of record at the
close of business on August 11, 1997.
On May 5, 1998 the Board of Directors of the Company declared a 3-for-2
stock split to be paid as a 50% stock dividend on its common stock. The stock
dividend was payable June 15, 1998 to stockholders of record at the close of
business on June 8, 1998.
The per share amounts disclosed in this filing have been restated to reflect
each of the foregoing stock dividends.
9
<PAGE> 10
FORM 10-Q
MANAGEMENTS 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 and 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
is the principal raw material used by the Company in manufacturing its products.
Copper accounted for approximately 73.8%, 77.4%, 76.8%, 67.9% and 70.0% of the
Company's cost of goods sold during fiscal 1997, 1996, 1995, 1994 and 1993,
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.
The following discussion and analysis relates to factors that have
affected the operating results of the Company for the three month and nine month
periods ended September 30, 1998 and 1997. 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, 1997.
RESULTS OF OPERATIONS
Quarter Ended September 30, 1998 Compared to Quarter Ended September 30, 1997
Net sales for the third quarter of 1998 amounted to $69.6 million
compared with net sales of $70.7 million for the third quarter of 1997. This
decrease was due to a decrease in the average sales price per copper pound of
the Company's products, offset in part by an increase of 20% in the pounds of
copper shipped during the period. The decrease in the average sales price per
copper pound of the Company's products was due to a decrease of 28% in the
average cost of copper from the third quarter of 1997 to the same period in
1998, as well as competitive pricing pressures for the Company's products. Sales
volume increased due to several factors, including increases in customer
acceptance and product availability. Sales volume, as measured in copper pounds,
of both the residential and commercial products increased during the third
quarter of 1998 compared to the third quarter of 1997. The average sales price
per copper pound of product sold was $1.58 in the third quarter of 1998,
compared to $1.93 in the third quarter of 1997. Fluctuations in sales prices are
primarily a result of price competition and changing copper raw material prices.
Cost of goods sold was $54.2 million in the third quarter of 1998,
compared to $55.4 million in the third quarter of 1997. Copper costs decreased
to $35.7 million in the third quarter of 1998 from $44.0 million in the third
quarter of 1997. The average cost per copper pound purchased decreased to $.79
in the third quarter of 1998 from $1.09 in the third quarter of 1997. Copper
costs as a percentage of net sales decreased to 51.4% in the third quarter of
1998 from 62.3% in the third quarter of 1997. This decrease as a percentage of
net sales in the third quarter of 1998 from the comparable quarter in 1997 was
due primarily to lower copper cost per pound of product sold, partially offset
by a decreased
10
<PAGE> 11
FORM 10-Q
differential between what the Company pays per pound of copper purchased and the
Company's net sales price per copper pound. This differential decreased in the
third quarter of 1998 due to a lesser decrease in the average cost per copper
pound purchased than in the sales price per copper pound. The decreased
differential was a result of competitive pricing conditions. Other raw material
costs as a percentage of net sales increased to 13.0% in the third quarter of
1998, compared with 11.2% in the third quarter of 1997. This increase is due to
raw materials per pound of copper sold remaining relatively constant while the
sales price per copper pound of product sold decreased as discussed above.
Depreciation, labor and overhead costs as a percentage of net sales increased to
13.7% in the third quarter of 1998 from 9.0% in the third quarter of 1997. This
increase is due to an increase in depreciation, labor and overhead per pound of
copper sold relating to the Company's expansion projects as well as a lower
sales price per copper pound of product sold as discussed above.
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
decreased during the third quarter of 1998, necessitating a decrease in the LIFO
reserve of $995,000 that resulted in an increase to the inventory value and a
decrease in cost of goods sold. In the third quarter of 1997, the price of
copper decreased from the previous quarter, necessitating a decrease in the LIFO
reserve that resulted in an increase to the inventory value and a decrease to
the cost of goods sold by $2,956,000. At September 30, 1998, LIFO value exceeded
the market value of the inventory by $2,163,000. And an addition to the lower of
cost or market reserve in the amount of $886,000 was required. This adjustment
decreased the amount of the inventory and increased cost of goods sold. At
September 30, 1997, LIFO cost did not exceed the market value of the inventory
and no adjustment to lower the cost of inventory to market was necessary. Future
reductions in the price of copper could require the Company to record additional
lower of cost or market adjustments against the related inventory balance which
would result in a negative impact on net income. In addition, if the quantity of
inventory is reduced in any period, copper that is carried in inventory at a
cost different from the cost of copper in the period in which the reduction
occurs will be included in cost of goods sold at the different price.
Gross profit remained relatively constant at $15.3 million, or 22.0% of
net sales, in the third quarter of 1998 compared to $15.3 million, or 21.7% of
net sales, for the third quarter of 1997.
General and administrative expenses were $1.1 million, or 1.6% of net
sales, in the third quarter of 1998 compared to $887,000, or 1.3% of net sales,
in the third quarter of 1997. This increase in general and administrative
expenses was due to increased expenses related to the Company's increased sales
volume. As a percentage of sales, this increase was caused by the increase in
general and administrative costs as well as a decrease in the sales price per
copper pound sold. The provision for bad debts in the third quarter of 1998
remained relatively unchanged from $125,000 compared to $127,000 in the third
quarter of 1997. Selling expenses for the third quarter of 1998 were $3.7
million, or 5.4% of net sales, compared to $3.5 million, or 4.9% of net sales,
in the third quarter of 1997. Freight charges per copper pound of product
shipped decreased due to the a greater percentage of the Company's sales being
shipped to geographic locations closer to the Company's plant in the third
quarter of 1998 compared to the same quarter of 1997. This decrease was
partially offset by the decrease in the sales price per copper pound sold.
Net interest expense was $589,000 in the third quarter of 1998 compared
to $254,000 in the third quarter of 1997. This increase in interest expense was
attributable to larger debt balances during the third
11
<PAGE> 12
FORM 10-Q
quarter of 1998 compared to the same period of 1997. The larger balances were
due to capital expenditures and increased working capital. Additionally, some of
the interest attributable to construction of the Company's expansion projects
was capitalized during the third quarter of 1997 and expensed in the third
quarter of 1998 due to the completion of the projects. The amount of interest
relating to the construction of these projects in the third quarter of 1997 was
$273,000.
The Company's effective tax rate decreased to 39.5% in the third
quarter of 1998. This decrease from 40.4% in the third quarter of 1997 was due
to the Company's higher taxable income being taxed at higher marginal rates in
the third quarter of 1997. The Company expects its current tax rate to remain
relatively constant at 39.5%.
As a result of the foregoing factors, the Company's net income was $5.9
million in the third quarter of 1998 compared to net income of $6.3 million in
the third quarter of 1997.
Nine Months Ended September 30, 1998 Compared to Nine Months Ended
September 30, 1997
Net sales for the first nine months of 1998 amounted to $196.4 million
compared with net sales of $192.7 million for the first nine months of 1997.
This increase was primarily due to an increase in sales volume of 23% offset, in
part, by a decrease in the average sales price per copper pound of the Company's
products. The decrease in the average sales price per copper pound of the
Company's products was due to a decrease of 28% in the average cost of copper
from the first nine months of 1997 to the same period in 1998, as well as
competitive pricing pressure for the Company's products in the second and third
quarters of 1998. 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 nine months
of 1998 compared to the first nine months of 1997. The average sales price per
copper pound of product sold was $1.63 in the first nine months of 1998,
compared to $1.97 in the first nine months of 1997. Fluctuations in sales prices
are primarily a result of price competition and changing copper raw material
prices.
Cost of goods sold was $153.1 million in the first nine months of 1998,
compared to $153.7 million in the first nine months of 1997. Copper costs
decreased to $102.9 million in the first nine months of 1998 from $113.8 million
in the first nine months of 1997. The average cost per copper pound purchased
decreased to $.83 in the first nine months of 1998 from $1.15 in the first nine
months of 1997. Copper costs as a percentage of net sales decreased to 52.4% in
the first nine months of 1998 from 59.1% in the first nine months of 1997. This
decrease as a percentage of net sales in the first nine months of 1998 from the
comparable period in 1997 was due primarily to lower copper costs per pound of
product sold partially offset by a slightly decreased differential between what
the Company pays per pound of copper purchased and the Company's net sales price
per copper pound. This differential decreased in the first nine months of 1998
due to a lesser decrease in the average cost per copper pound purchased than in
the sales price per copper pound. The decreased differential was a result of
competitive pricing conditions in the second and third quarters of 1998. Other
raw material costs as a percentage of net sales increased to 14.4% in the first
nine months of 1998, compared with 12.2% in the first nine months of 1997. This
increase is due to a decrease in the sales price per copper pound sold, as
discussed above, which more than offset the slight decrease in raw materials per
pound of copper sold. Depreciation, labor and overhead costs as a percentage of
net sales increased to 12.2% in the first nine months of 1998 compared to 8.5%
in the first nine months of 1997. This increase is due to an increase
12
<PAGE> 13
FORM 10-Q
in depreciation, labor and overhead per pound of copper sold relating to the
Company's expansion projects as well as a lower sales price per copper pound of
product sold as discussed above.
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 decreased during the first nine months of 1998, necessitating a
decrease in the LIFO reserve of $3.0 million that resulted in an increase to the
inventory value and a decrease in cost of goods sold. In the first nine months
of 1997, the price of copper decreased slightly, necessitating a decrease in the
LIFO reserve of $122,000 that resulted in an increase to the inventory value and
a decrease in cost of goods sold. At September 30, 1998, LIFO value exceeded the
market value of the inventory by $2,163,000 and an addition to the lower of cost
or market reserve in the amount of $886,000 was required. This adjustment
decreased the amount of the inventory and increased cost of goods sold. At
September 30, 1997, LIFO cost did not exceed the market value of the inventory
and no adjustment to lower the cost of inventory to market was necessary. Future
reductions in the price of copper could require the Company to record additional
lower of cost or market adjustments against the related inventory balance which
would result in a negative impact on net income. In addition, if the quantity of
inventory is reduced in any period, copper that is carried in inventory at a
cost different from the cost of copper in the period in which the reduction
occurs will be included in cost of goods sold at the different price.
Gross profit increased to $43.2 million, or 22.0% of net sales, for the
first nine months of 1998 from $39.0 million, or 20.3% of net sales, for the
first nine months of 1997. The increase in gross profit as a percentage of net
sales was due primarily to larger unit volume in the first nine months of 1998
compared to the first nine months of 1997 which was partially offset by
competitive pricing for the Company's products in the second and third quarter
of 1998 as discussed above.
General and administrative expenses increased to $3.2 million, or 1.6%
of net sales, in the first nine months of 1998 compared to $2.5 million, or 1.3%
of net sales, in the first nine months of 1997. This increase in general and
administrative expenses was due to increased expenses related to the Company's
increased sales volume. As a percentage of sales, this increase was caused by
the increase in general and administrative costs as well as a decrease in the
sales price per copper pound sold. The provision for bad debts in the first nine
months of 1998 increased to $500,000 compared to $341,000 in the first nine
months of 1997. This increase was due to a larger accounts receivable balance at
September 30, 1998 than September 30, 1997. Selling expenses for the first nine
months of 1998 were $10.4 million, or 5.3% of net sales, compared to $9.3
million, or 4.8% of net sales, in the first nine months of 1997. Freight charges
per copper pound of product shipped decreased due to the a greater percentage of
the Company's sales being shipped to geographic locations closer to the
Company's plant in the first nine months of 1998 compared to the same period of
1997. This decrease was offset by the decrease in the sales price per copper
pound sold.
Net interest expense remained relatively constant at $1.1 million in
the first nine months of 1998 compared to the first nine months of 1997. Despite
interest expense remaining relatively constant, the Company had a higher average
debt balance outstanding during the first nine months of 1998 than the
comparable period in 1997. However, the amount of interest relating to the
construction of the Company's expansion products in 1998 exceeded the amount
capitalized in 1997. The increase in average debt outstanding was the result of
capital expenditures and additional working capital. The decreased cost of
copper in the first nine months of 1998 compared to the same period in 1997
decreased the amount
13
<PAGE> 14
FORM 10-Q
of working capital necessary for inventory, but this was partially offset by
increased quantities of inventory and an increased accounts receivable balance
in 1998.
The Company's effective tax rate increased to 39.8% in the first nine
months of 1998 compared to 39.5% in the first nine months of 1997. This increase
was due to the accrual for a non deductible penalty in the first nine months of
1998 (See Part II - Item 1. Legal Proceedings). Without the accrual of this
amount, the Company's effective tax rate would have been 39.5%.
As a result of the foregoing factors, the Company's net income
increased to $16.9 million in the first nine months of 1998 from $15.6 million
in the first nine months of 1997.
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 most of its customers payment terms that exceed
terms that it receives from its suppliers. 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 9, 1997, the Company completed an unsecured loan
facility with a group of banks (the "Financing Agreement"). This Financing
Agreement has been amended four times since June 9, 1997 to change, among other
items, the maximum borrowing amount, the term of the loan covenants and the
allowable purchases of the Company's common stock. The Financing Agreement
provides for maximum borrowings of the lesser of $65.0 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 banks. The calculated
maximum borrowing amount available at September 30, 1998, as computed under the
Financing Agreement, was $65.0 million. The Financing Agreement is unsecured and
contains customary covenants and events of default. The Company was in
compliance with these covenants, as amended, as of September 30, 1998. Pursuant
to the Financing Agreement, the Company is prohibited from declaring, paying or
issuing cash dividends. At September 30, 1998, the balance outstanding under the
Financing Agreement was $54.0 million. Amounts outstanding under the Financing
Agreement are payable on May 31, 2001 with interest due quarterly based on the
bank's prime rate or LIBOR Rate options, at the Company's election.
In March 1995, the Board of Directors authorized the Company to
purchase up to 900,000 shares, or approximately 5.6%, of its outstanding common
stock dependent upon market conditions. Purchases made pursuant to this common
stock authorization are made in the open market or through privately negotiated
transactions. As of September 30, 1998, the Company had repurchased an aggregate
of 502,575 shares of its common stock in the open market at a weighted average
price of $8.89 per share. The Financing Agreement, as amended, discussed above
allows the Company to purchase up to 900,000 shares with an aggregate price of
these shares not to exceed $11,300,000. The Company purchased 202,200 shares
under this authorization during the third quarter of 1998.
14
<PAGE> 15
FORM 10-Q
Cash used by operations was $3.5 million in the first nine months of
1998 compared to cash provided by operations of $8.1 million in the first nine
months of 1997. This decrease in cash provided by operations is primarily the
result of an increase in inventories during the first nine months of 1998
compared to a decrease in inventories during the same period of 1997.
Additionally, accounts payable and accrued liabilities decreased during the
first nine months of 1998 compared to an increase in the first nine months of
1997. Cash used in investing activities increased from $15.2 million in the
first nine months of 1997 to $25.9 million in the first nine months of 1998.
These funds were used primarily to increase the Company's production capacity,
purchase land adjacent to its production facility and construct the Company's
copper rod fabrication facility and finished goods distribution facility. The
cash provided by financing activities in the first nine months of 1997 and 1998
was due primarily to borrowings, offset by $2.9 million used to purchase common
stock as discussed above.
During the remainder of 1998, the Company expects its capital
expenditures will consist of additional manufacturing equipment for its
residential and commercial wire operations. In addition, the Company is in the
process of constructing and equipping a facility to manufacture polyvinyl
chloride ("PVC"). The Company currently purchases PVC for insulating its wire
products. The total capital expenditures associated with the completion of this
facility and the additional manufacturing equipment are estimated to be
approximately $8.0 million. The Company anticipates its working capital
requirements will continue to increase during 1998 as a result of expected
continued increases in sales. The Company believes that the cash flow from
operations and cash available pursuant to the Financing Agreement will satisfy
working capital needs and capital expenditure requirements for the next twelve
months.
IMPACT OF YEAR 2000
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any computer
program that has date sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a temporary inability
to process transactions or engage in normal manufacturing or other business
activities.
The Company has completed its initial review of the impact of the year
2000 issue on the Company's information systems and support systems, including
hardware and software used in the manufacture and distribution of its products.
Based on the Company's initial inventory and assessment of its systems, the
Company does not believe that any modifications to or replacement of its
information technology or other systems are necessary as a result of the year
2000 problem.
The Company has not initiated formal communications with its
significant third party suppliers and customers to determine the extent to which
the Company may be vulnerable to their failure to correct their own year 2000
issues. The Company intends to initiate such communications in the fourth
quarter of 1998 and to complete the process in the Spring of 1999. The Company
believes its significant trading partners have addressed year 2000 issues, but
their failure to do so could have a material adverse effect on the Company's
operations.
A contingency plan has not been developed for dealing with the most
reasonably likely year 2000 worst case scenario, and such scenario has not been
clearly identified. The Company intends to review in the Spring of 1999 the
extent to which contingency plans may be required for any third parties who fail
to achieve year 2000 compliance. The Company currently plans to complete such
analysis and any necessary contingency planning by December 31, 1999.
15
<PAGE> 16
FORM 10-Q
The Company believes that the cost of its year 2000 identification,
assessment, remediation and testing efforts, will not exceed $100,000, and to
date the Company has incurred costs significantly less than that amount in
connection with such efforts. The costs and timing of such efforts by the
Company are based on management's current evaluation using available
information. Factors that might cause material changes include, but are not
limited to availability of key year 2000 personnel, the readiness of third
parties and the Company's ability to respond to unforeseen year 2000
complications.
While the Company believes its efforts to address the year 2000 issue
will be successful in avoiding any material adverse effect on the Company's
operations or financial condition, it recognizes that failure by the Company,
its customers or vendors to resolve adequately the year 2000 problem on a timely
basis could, in a most reasonably likely worst case scenario, limit its ability
to manufacture and distribute its products and process its daily business
transactions for a period of time, especially if such failure is coupled with
infrastructure failures.
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.
16
<PAGE> 17
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 1. LEGAL MATTERS
On August 20, 1997, the Company was inspected by the U.S. Environmental
Protection Agency (the "EPA") to determine the Company's compliance with the
requirements of the Emergency Planning and Community Right-to-Know Act
provisions ("EPCRA") of the Comprehensive Environmental Response, Compensation
and Liability Act, as amended. In general, EPCRA requires private businesses to
maintain and file with the government specified documents concerning the on-site
recycling and off-site management of a defined group of chemicals, including
metal compounds. The Company was required to provide the EPA by September 12,
1997 with information concerning its processing of copper, lead compounds,
antimony compounds and methyl ethyl ketone for calendar years 1994 and 1995.
This information was researched by the Company and the required documents were
timely filed with the EPA.
In a separate matter, by letter dated February 17, 1998, the Company
was issued "Findings of Violation and Order for Compliance" by the EPA. In this
document, the EPA alleged that the Company had failed to obtain a federal storm
water discharge permit pursuant to the Clean Water Act ("CA") for its past and
current operations in McKinney, Texas and to otherwise meet the terms of this
permitting program. The Company was ordered timely to (1) apply for a federal
storm water discharge permit, (2) prepare and submit a Storm Water Pollution
Prevention Plan and (3) prepare and file a report with the EPA describing
actions the Company has taken or would take to correct alleged violations. On
March 6, 1998, the Company applied for a federal storm water discharge permit
and on March 23, 1998, the Company filed the Storm Water Pollution Prevention
Plan and the written report required by the "Findings of Violation and Order for
Compliance" with the EPA.
In addition, the "Findings of Violation and Order for Compliance"
offered the Company the opportunity to contact the EPA to schedule a show cause
hearing to demonstrate to the EPA why it should not take further enforcement
action against the Company relating to the matters stated in this document. The
Company requested a show cause hearing, and it was held on April 13, 1998.
On April 17, 1998, the Company was issued a consolidated "Complaint and
Notice of Opportunity for Hearing" by the EPA (the "1998 Complaint"). In the
1998 Complaint, the EPA proposed a civil penalty of $151,000 for seven alleged
violations of EPCRA's reporting requirements and a civil penalty of $27,500 for
the alleged failure to have a federal storm water discharge permit. In
accordance with the EPA's Rule of Practice, the Company filed an Answer to the
Complaint and requested an informal settlement conference and a hearing on all
matters alleged by the EPA. The Company is vigorously defending itself in this
matter.
17
<PAGE> 18
FORM 10-Q
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Third Amendment to Second Amended and Restated
Financing Agreement dated as of August 28, 1998 by
and among Encore Wire Corporation, NationsBank of
Texas, N.A. and Comerica Bank - Texas.
10.2 Fourth Amendment to Second Amended and Restated
Financing Agreement dated as of October 28, 1998 by
and among Encore Wire Corporation, NationsBank of
Texas, N.A. and Comerica Bank - Texas.
27 Financial Data Schedule
(b) No reports on form 8-K were filed by the Company during the
three months ended September 30, 1998.
18
<PAGE> 19
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: November 12, 1998 /s/ VINCENT A. REGO
-------------------------------------------------
Vincent A. Rego, President and
Chief Executive Officer
Date: November 12, 1998 /s/ DANIEL L. JONES
-------------------------------------------------
Daniel L. Jones, President
Date: November 12, 1998 /s/ SCOTT D. WEAVER
-------------------------------------------------
Scott D. Weaver, Vice President - Finance,
Treasurer and Secretary
(Principal Financial Officer)
19
<PAGE> 20
FORM 10-Q
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibit Page
- ------ ------- ----
<S> <C> <C>
10.1 Third Amendment to Second Amended and Restated Financing Agreement
dated as of August 28, 1998 by and among Encore Wire Corporation,
NationsBank of Texas, N.A. and Comerica Bank - Texas............................ 21
10.2 Fourth Amendment to Second Amended and Restated Financing Agreement
dated as of October 28, 1998 by and among Encore Wire Corporation,
NationsBank of Texas, N.A. and Comerica Bank - Texas............................ 22
10.3 $50,000,0.0 Revolving Note to NationsBank of Texas, N.A. ....................... 23
10.4 $15,000,0.0 Revolving Note to Comerica Bank - Texas............................. 24
27 Financial Data Schedule
</TABLE>
20
<PAGE> 1
EXHIBIT 10.1
THIRD AMENDMENT TO SECOND
AMENDED AND RESTATED FINANCING AGREEMENT
THIS THIRD AMENDMENT TO SECOND AMENDED AND RESTATED FINANCING AGREEMENT
(the "Amendment") dated as of August 28, 1998, is by and among ENCORE WIRE
CORPORATION, a Delaware corporation ("Borrower"), NATIONSBANK, N.A. (successor
by merger to NationsBank of Texas, N.A.), a national banking association, BANK
OF AMERICA, TEXAS, N.A. ("Bank of America"), a national banking association, and
COMERICA BANK-TEXAS (Comerica Bank"), a state banking association, in their
individual capacities as "Lenders" (as such term is defined herein), and
NATIONSBANK, N.A. (successor by merger to NationsBank of Texas, N.A.), a
national banking association, as agent for itself and the other Lenders (in such
capacity, together with its successors in such capacity, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent, NationsBank and Bank of America are
parties to the Second Amended and Restated Financing Agreement, dated as of June
9, 1997, as amended by the First Amendment to Second Amended and Restated
Financing Agreement, dated as of February 20, 1998 (the "First Amendment") and
by the Second Amendment to Second Amended and Restated Financing Agreement,
dated as of June 15, 1998 (the "Second Amendment") (as so amended, the "Original
Financing Agreement") relating to a $55,000,000 revolving credit facility
("Facility"), pursuant to which, inter alia, NationsBank and Bank of America
agreed to make certain loans available to the Borrower upon the terms and
conditions contained in the Original Financing Agreement;
WHEREAS, Bank of America desires to assign its rights and obligations
under the Original Financing Agreement to Comerica Bank, and Borrower desires
that the Lenders increase the available credit under said facility to an
aggregate of $65,000,000 and make certain other modifications to the Original
Financing Agreement; and
WHEREAS, the parties hereto desire to amend the Original Financing
Agreement in accordance with the terms and provisions of this Amendment;
NOW, THEREFORE, for and in consideration of these premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Agent and the Lenders hereby agree as follows:
1. Terms. All capitalized terms defined in the Original Financing
Agreement and not otherwise defined herein shall have the same definitions when
used herein as set forth in the Original Financing Agreement as amended by this
Third Amendment.
2. Amendment of Article I. Article I of the Original Financing
Agreement is amended by adding the following defined term:
<PAGE> 2
1.87 "Comerica Bank" means Comerica Bank-Texas in its individual
capacity as a Lender.
3. Amendment of Section 1.19. Section 1.19 of the Original Financing
Agreement is amended by deleting Section 1.19 in its entirety and replacing it
with the following:
1.19 "Contract Term" means the effective date specified in the preamble
of this Agreement and continuing through May 31, 2001.
4. Amendment of Section 1.81. Section 1.81 of the Original Financing
Agreement is amended by deleting Section 1.81 in its entirety and replacing it
with the following:
1.81 "Required Lenders" means, at any date of determination, Lenders
having in the aggregate at least 80% (in Dollar amount) of the
aggregate amount of the outstanding Commitments (or, if such
Commitments have terminated or expired, the aggregate outstanding
principal amount of the Loans and the aggregate Letter of Credit
Liabilities).
5. Amendment of Section 1.83. Section 1.83 of the Original Financing
Agreement is amended by deleting Section 1.83, as amended by the First Amendment
and the Second Amendment, in its entirety and replacing it with the following:
1.83 "Revolving Credit Limit" means the amount of (i) Sixty-Five
Million Dollars ($65,000,000) for the period commencing on August 28,
1998 until the last day of the Contract Term.
6. Amendment of Section 7.10. Section 7.10 of the Original Financing
Agreement is amended by deleting it in its entirety and replacing it with the
following:
7.10 This Section is Intentionally Deleted.
7. Amendment of Section 7.21(a)3. Section 7.21(a)3 of the Original
Financing Agreement is amended by deleting Section 7.21(a)3 in its entirety and
replacing it with the following:
3. Capital Expenditures. Capital Expenditures shall not
exceed in any one fiscal year the amount of
$7,5000,000; provided, however, solely with respect
to Borrower's fiscal year ending in 1998, Capital
Expenditures may not exceed $25,000,000.
8. Amendment of Section 7.26. Section 7.26 of the Original Agreement is
amended by deleting the amount of "$100,000.00" in subsection (c)(ii) thereof
and replacing it with the amount of "$500,000.00."
9. Amendment of Section 7.31. Section 7.31 of the Original Financing
Agreement is amended by deleting Section 7.31 in its entirety and replacing it
with the following:
2
<PAGE> 3
7.31 Redemptions and Acquisition of Shares. Borrower will not make any
payment on account of the purchase, redemption or other acquisition or
retirement of any shares of capital stock, provided, that
notwithstanding the foregoing, for so long as no Event of Default shall
have occurred and be continuing, and no other event or condition which
is reasonably expected to result in a Material Adverse Effect or would
be the subject of a required notice under paragraph 7.13 is in
existence, Borrower shall not be prohibited from repurchasing shares to
be held as treasury shares, provided further that (i) the aggregate
number of such shares purchased shall not exceed 900,000 and the
aggregate purchase price paid by Borrower for all such shares shall not
exceed the maximum amount of $11,300,000.00, and (ii) no Event of
Default shall result from, or exist immediately following, any such
repurchase.
10. Assignment and Acceptance of Commitment by Bank of America.
Immediately prior to the execution and delivery of this Third Amendment, Bank of
America shall (a) assign 75% (an amount representing $15,000,000 of its
Commitment) of its rights and obligations under the Original Financing Agreement
to Comerica Bank by execution and delivery of an Assignment and Acceptance and
(b) assign 25% (an amount representing $5,000,000 of its Commitment) of its
rights and obligations under the Original Financing Agreement to NationsBank by
execution and delivery of an Assignment and Acceptance.
11. Increase of Commitment. Following the execution and delivery of
the Assignment and Acceptances described in Section 10 above and upon the
execution and delivery of this Third Amendment, the aggregate Commitment of all
Lenders is increased from $55,000,000 to $65,000,000; the amount of
NationsBank's Commitment is increased from $40,000,000 (the sum of its
$35,000,000 Commitment prior to the Assignment from Bank of America and the
$5,000,000 Assignment from Bank of America) to $50,000,000; and the amount of
Comerica Bank's Commitment is $15,000,000.
12. Costs. The Borrower shall pay all reasonable out-of-pocket costs
and expenses incurred by the Agent or any Lender in connection with the
negotiation, preparation, execution and consummation of this Amendment and the
transactions contemplated by this Amendment, including, without limitation, the
reasonable fees and expenses of counsel to the Agent and the Lenders.
13. Miscellaneous.
13.1 Headings. Section headings are for reference only and shall not
affect the interpretation or meanings of any provision of this Amendment.
13.2 Effect of this Amendment. The Original Financing Agreement, as
amended by this Amendment, shall remain in full force and effect except that any
reference therein, or in any other Loan Document referring to the Original
Financing Agreement, shall be deemed to refer to the Original Financing
Agreement as amended by this Amendment.
3
<PAGE> 4
13.3 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW.
13.4 Counterparts. This Amendment may be executed by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but one and the
same Amendment.
13.5 NO ORAL AGREEMENTS. THE Original Financing Agreement, AS AMENDED
BY THIS AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE ENTIRE
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their respective duly authorized officers as of the date first above written.
BORROWER:
ENCORE WIRE CORPORATION
By: /s/ SCOTT WEAVER
-------------------------------
Scott Weaver, Vice President
LENDERS AND AGENT:
NATIONSBANK, N.A.
Individually and as Agent
By: /s/ TODD M. BURNS
-------------------------------
Todd M. Burns, Vice President
BANK OF AMERICA, TEXAS, N.A.
By: /s/ DONALD P. HELLMAN
-------------------------------
Donald P. Hellman, Vice President
COMERICA BANK-TEXAS
By: /s/ WILLIAM J. ROLLEY
----------------------------------
William J. Rolley, Vice President
4
<PAGE> 5
CONFIRMATION OF GUARANTY
EWC Leasing Corp. ("Guarantor"), a wholly-owned subsidiary of Encore
Wire Corporation, hereby acknowledges the matters covered by the Third Amendment
to Second Amended and Restated Financing Agreement to which this Confirmation of
Guaranty is attached and confirms that, notwithstanding such matters, the
Guaranty By Corporation dated as of June 9, 1997 issued by Guarantor to and in
favor of NationsBank of texas, N.A. (and now in favor of NationsBank, N.A. as a
result of the merger of NationsBank of Texas, N.A. with and into NationsBank,
N.A.) and the Guaranty By Corporation dated as of June 9, 1997 issued by
Guarantor to and in favor of Bank of America, Texas, N.A., assigned to Comerica
Bank, National Association pursuant to the Assignment and Acceptance described
in Section 10 above, remain in full force and effect as continuing obligations
of Guarantor, enforceable against Guarantor in accordance with their respective
terms.
In Witness Whereof, this Confirmation of Guaranty is executed and
delivered as of the 28th day of August, 1998.
EWC LEASING CORP.
By: /s/ SCOTT D. WEAVER
-----------------------------------
Scott D. Weaver
Vice President
5
<PAGE> 1
EXHIBIT 10.2
FOURTH AMENDMENT TO SECOND
AMENDED AND RESTATED FINANCING AGREEMENT
THIS FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED FINANCING
AGREEMENT (the "Amendment") dated as of October 28, 1998, is by and among ENCORE
WIRE CORPORATION, a Delaware corporation ("Borrower"), NATIONSBANK, N.A.
(successor by merger to NationsBank of Texas, N.A.), a national banking
association, and COMERICA BANK-TEXAS (Comerica Bank"), a state banking
association, in their individual capacities as "Lenders" (as such term is
defined herein), and NATIONSBANK, N.A. (successor by merger to NationsBank of
Texas, N.A.), a national banking association, as agent for itself and the other
Lenders (in such capacity, together with its successors in such capacity, the
"Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent, and the Lenders are parties to the
Second Amended and Restated Financing Agreement, dated as of June 9, 1997, as
amended by the First Amendment to Second Amended and Restated Financing
Agreement, dated as of February 20, 1998 (the "First Amendment"), by the Second
Amendment to Second Amended and Restated Financing Agreement, dated as of June
15, 1998 (the "Second Amendment") and by the Third Amendment to Second Amended
and Restated Financing Agreement, dated as of August 28, 1998 (the "Third
Amendment") (as so amended, the "Original Financing Agreement") relating to a
$65,000,000 revolving credit facility ("Facility"), pursuant to which, inter
alia, the Lenders agreed to make certain loans available to the Borrower upon
the terms and conditions contained in the Original Financing Agreement;
WHEREAS, the parties hereto desire to amend the Original Financing
Agreement in accordance with the terms and provisions of this Amendment;
NOW, THEREFORE, for and in consideration of these premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Agent and the Lenders hereby agree as follows:
1. Term. All capitalized terms defined in the Original Financing
Agreement and not otherwise defined herein shall have the same definitions when
used herein as set forth in the Original Financing Agreement as amended by this
Third Amendment.
2. Amendment of Section 7.21(a)3. Section 7.21(a)3 of the Original
Financing Agreement is amended by deleting Section 7.21(a)3 in its entirety and
replacing it with the following:
3. Capital Expenditures. Capital Expenditures shall not
exceed in any one fiscal year the amount of
$75,000,000; provided, however, solely with respect
to Borrower's fiscal year ending in 1998, Capital
Expenditures may not exceed $35,000,000.
<PAGE> 2
3. Costs. The Borrower shall pay all reasonable out-of-pocket costs and
expenses incurred by the Agent or any Lender in connection with the negotiation,
preparation, execution and consummation of this Amendment and the transactions
contemplated by this Amendment, including, without limitation, the reasonable
fees and expenses of counsel to the Agent and the Lenders.
4. Miscellaneous.
4.1 Headings. Section headings are for reference only and shall not
affect the interpretation or meanings of any provision of this Amendment.
4.2 Effect of this Amendment. The Original Financing Agreement, as
amended by this Amendment, shall remain in full force and effect except that any
reference therein, or in any other Loan Document referring to the Original
Financing Agreement, shall be deemed to refer to the Original Financing
Agreement as amended by this Amendment.
4.3 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW.
4.4 Counterparts. This Amendment may be executed by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but one and the
same Amendment.
4.5 NO ORAL AGREEMENTS. THE Original Financing Agreement, AS AMENDED BY
THIS AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE ENTIRE
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES.
REST OF PAGE INTENTIONALLY LEFT BLANK
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective duly authorized officers as of the date first above
written.
BORROWER:
ENCORE WIRE CORPORATION
By: /s/ SCOTT WEAVER
-------------------------------------
Scott Weaver, Vice President
LENDERS AND AGENT:
NATIONSBANK, N.A.
Individually and as Agent
By: /s/ TODD M. BURNS
-------------------------------------
Todd M. Burns, Vice President
COMERICA BANK-TEXAS
By: /s/ WILLIAM J. ROLLEY
-------------------------------------
William J. Rolley, Vice President
3
<PAGE> 4
CONFIRMATION OF GUARANTY
EWC Leasing Corp. ("Guarantor"), a wholly-owned subsidiary of Encore
Wire Corporation, hereby acknowledges the matters covered by the Third Amendment
to Second Amended and Restated Financing Agreement to which this Confirmation of
Guaranty is attached and confirms that, notwithstanding such matters, the
Guaranty By Corporation dated as of June 9, 1997 issued by Guarantor to and in
favor of NationsBank of Texas, N.A. (and now in favor of NationsBank, N.A. as a
result of the merger of NationsBank of Texas, N.A. with and into NationsBank,
N.A.) and the Guaranty By Corporation dated as of June 9, 1997 issued by
Guarantor to and in favor of Bank of America, Texas, N.A., assigned to Comerica
Bank, National Association pursuant to the Assignment and Acceptance described
in Section 10 above, remain in full force and effect as continuing obligations
of Guarantor, enforceable against Guarantor in accordance with their respective
terms.
In Witness Whereof, this Confirmation of Guaranty is executed and
delivered as of the 28th day of October, 1998.
EWC LEASING CORP.
By: /s/ SCOTT D. WEAVER
---------------------------------
Scott D. Weaver
Vice President
4
<PAGE> 1
EXHIBIT 10.3
REVOLVING NOTE
$50,000,000.00 Effective as of August 28, 1998
FOR VALUE RECEIVED, the undersigned, ENCORE WIRE CORPORATION, a Texas
corporation ("Borrower") hereby promises to pay to the order of NATIONSBANK,
N.A. (successor by merger to NationsBank of Texas, N.A.), a national bank
("Lender"), at the principal office of Agent at 911 Main Street, 7th Floor,
Dallas, Texas 75202 the principal amount of FIFTY MILLION and NO/100 DOLLARS
($50,000,000.00) or such lesser amount as may from time to time be advanced and
remain unpaid and outstanding hereunder, together with accrued interest as
provided hereinbelow.
This promissory note is executed and delivered by Borrower pursuant to
the certain Second Amended and Restated Financing Agreement of dated as of
June 9, 1997, among Lender, Bank of America of Texas, N.A., Borrower and EWC
Leasing Corp., as amended by that certain First Amendment to Second Amended and
Restated Financing Agreement dated as of February 20, 1998, as further amended
by that certain Second Amendment to Second Amended and Restated Financing
Agreement dated as of June 15, 1998, as further amended by that certain Third
Amendment to Second Amended and Restated Financing Agreement dated as of August
28, 1998 (as so amended and as it may be amended from time to time, hereinafter
called the "Financing Agreement") and is one of the Revolving Notes defined
therein. All terms defined in the Financing Agreement, wherever used herein,
shall have the same meaning prescribed by the Financing Agreement.
All loans from time to time requested by Borrower hereunder are subject
to the terms and provisions of the Financing Agreement. The maximum principal
amount at any time outstanding hereunder shall not at any time exceed an amount
equal to Lender's Commitment. The unpaid principal from day to day outstanding
under this promissory note shall bear interest at the applicable rate prescribed
for the Revolving Facility as provided by the Financing Agreement. Lender's
records shall be conclusive proof of loans, payments and interest accruals
hereunder, absent proof by Borrower of error.
All unpaid principal and accrued interest under this promissory note
shall be payable as follows: (a) accrued interest on Prime Based Loans shall be
payable quarterly on the first day of each calendar quarter, and (b) accrued
interest on any LIBOR Based Loan shall be payable on the last day of the
Interest Period applicable thereto, respectively. All unpaid principal borrowed
under the Revolving Facility and all unpaid accrued interest thereon, and all
other amounts payable hereunder relative to the Revolving Facility, shall be due
and payable to Lender in full, and the Revolving Facility shall terminate, on
the last day of the Contract Term. To the extent that any accrued interest is
not paid on its due date as specified above, Lender may at its option (but with
no obligation to do so), debit the amount of such accrued interest against any
account maintained by Borrower with Lender or add such amount to the unpaid
principal due by Borrower under the Revolving Facility.
If at any time, from time to time, the aggregate unpaid principal
amount outstanding hereunder exceeds the maximum amount allowed to be
outstanding hereunder, Borrower shall make an immediate payment of principal in
an amount not less than the amount of such excess. All such amounts, if any,
payable by Borrower shall be deemed to be payable on demand, and may be offset
by Lender against any amount owing by Lender to Borrower, without prior notice
to Borrower.
This promissory note in all respects is subject to the Financing
Agreement. Lender and Agent shall have all rights and remedies as provided in
the Financing Agreement, specifically including, without limitation, the right
of acceleration and all other rights and remedies as are provided by Article IX
("Remedies") thereof.
No delay by Lender and/or Agent in the exercise of any power or right
hereunder shall operate as a waiver or impair Lender's or Agent's rights and
remedies under this promissory note or the Loan Documents. Borrower and each
other party ever liable hereunder severally hereby expressly waives presentment,
demand, notice of intention to demand, notice of intention to accelerate, notice
of acceleration, protest, notice of protest and any other notice of any kind,
and agrees that its liability hereunder shall not be affected by any renewals,
extensions or modifications, from time to time, of the
<PAGE> 2
time or manner of payment hereof, or by any release or modification of any
security for the obligations and indebtedness evidenced hereby.
Borrower hereby promises to pay to Lender and Agent all reasonable
fees, costs and expenses incurred by Lender or Agent, as applicable, in
enforcement and collection of any amounts under this promissory note, including
without limitation, reasonable attorneys fees.
In no contingency or event whatsoever shall the amount of interest
under this promissory note paid by Borrower, received by Lender and/or Agent,
agreed to be paid by Borrower, or requested or demanded to be paid by Lender or
Agent, exceed the Maximum Rate. In the event any such sums paid to Lender and/or
Agent by Borrower would exceed the maximum amount permitted by applicable law,
Lender and/or Agent, as applicable, shall automatically apply such excess to any
unpaid principal or, if the amount of such excess exceeds said unpaid principal,
such excess shall be paid to Borrower. All sums paid, or agreed to be paid, by
Borrower hereunder which are or hereafter may be construed to be compensation
for the use, forbearance, or detention of money shall be amortized, prorated,
spread and allocated in respect of the Obligations throughout the full Contract
Term until the Obligations are paid in full. Notwithstanding any provisions
contained in the Loan Documents or herein, neither Lender nor Agent shall ever
be entitled to receive, collect or apply as interest any amount in excess of the
Maximum Rate and, in the event Lender and/or Agent ever receives, collects, or
applies any amount that otherwise would be in excess of the Maximum Rate, such
amount shall automatically be deemed to be applied in reduction of the unpaid
principal balance of the Obligations and, if such principal balance is paid in
full, any remaining excess shall forthwith be paid to Borrower. In determining
whether or not the interest paid or payable under any specific contingency
exceeds the Maximum Rate, Borrower, Lender and/or Agent, as applicable, shall,
to the maximum extent permitted under applicable law, (i) characterize any
non-principal payment as a standby fee, commitment fee, prepayment charge,
delinquency charge or reimbursement for a third-party expense rather than as
interest, (ii) exclude voluntary prepayments and the effect thereof, and (iii)
amortize, prorate, allocate and spread in equal parts throughout the entire
period during which the indebtedness was outstanding the total amount of
interest at any time contracted for, charged or received. Nothing herein
contained shall be construed or so operate as to require Borrower to pay any
interest, fees, costs, or charges greater than is permitted by applicable law.
Subject to the foregoing, Borrower hereby agrees that the actual effective rate
of interest from time to time existing with respect to loans made by Lender to
Borrower hereunder, including all amounts agreed to by Borrower or charged or
received by Lender and/or Agent, which may be deemed to be interest under
applicable law, shall be deemed to be a rate which is agreed to and stipulated
by Borrower and/or Lender in accordance with applicable law.
This promissory note may not be changed, amended or modified except in
writing executed by Lender and Borrower.
This promissory note is in renewal and increase of the certain
promissory note dated effective as of February 20, 1998 which was executed and
delivered in renewal of that certain note dated effective as of June 15, 1994
which note was previously executed and delivered by Borrower to NationsBank of
Texas, N.A., and all obligations and indebtedness previously evidenced thereby
hereafter shall be governed and payable as provided herein.
<PAGE> 3
THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO
THE LAWS OF THE STATE OF TEXAS, EXCEPT AS TO PROVISIONS RELATING TO THE RATE OF
INTEREST TO BE CHARGED ON THE UNPAID PRINCIPAL HEREOF, IN WHICH CASE, TO THE
EXTENT FEDERAL LAW OTHERWISE WOULD ALLOW A HIGHER RATE OF INTEREST THAN WOULD BE
ALLOWED BY THE LAWS OF THE STATE OF TEXAS, SUCH FEDERAL LAW SHALL APPLY.
EXECUTED THIS 28TH DAY OF AUGUST, 1998, EFFECTIVE AS THE DATE
SPECIFIED ABOVE.
===============================================================================
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
NATIONSBANK, N.A. ENCORE WIRE CORPORATION
By: By: /s/ SCOTT D. WEAVER
---------------------------- ----------------------------
Todd M. Burns, Scott D. Weaver
Vice President Vice President-Finance
==============================================================================
ENCORE WIRE CORPORATION
By: /s/ SCOTT D. WEAVER
----------------------------
Scott D. Weaver
Vice President-Finance
<PAGE> 1
EXHIBIT 10.4
REVOLVING NOTE
$15,000,000.00 Effective as of August 28, 1998
FOR VALUE RECEIVED, the undersigned, ENCORE WIRE CORPORATION, a Texas
corporation ("Borrower") hereby promises to pay to the order of COMERICA
BANK-TEXAS, a state bank ("Lender"), at the principal office of Agent at 911
Main Street, 7th Floor, Dallas, Texas 75202, the principal amount of FIFTEEN
MILLION and NO/100 DOLLARS ($15,000,000.00) or such lesser amount as may from
time to time be advanced and remain unpaid and outstanding hereunder, together
with accrued interest as provided hereinbelow.
This promissory note is executed and delivered by Borrower pursuant to
the certain Second Amended and Restated Financing Agreement of dated as of
June 9, 1997, among Lender, Bank of America of Texas, N.A., Borrower and EWC
Leasing Corp., as amended by that certain First Amendment to Second Amended and
Restated Financing Agreement dated as of February 20, 1998, as further amended
by that certain Second Amendment to Second Amended and Restated Financing
Agreement dated as of June 15, 1998, as further amended by that certain Third
Amendment to Second Amended and Restated Financing Agreement dated as of
August 28, 1998 (as so amended and as it may be amended from time to time,
hereinafter called the "Financing Agreement") and is one of the Revolving Notes
defined therein. All terms defined in the Financing Agreement, wherever used
herein, shall have the same meaning prescribed by the Financing Agreement.
All loans from time to time requested by Borrower hereunder are subject
to the terms and provisions of the Financing Agreement. The maximum principal
amount at any time outstanding hereunder shall not at any time exceed an amount
equal to Lender's Commitment. The unpaid principal from day to day outstanding
under this promissory note shall bear interest at the applicable rate prescribed
for the Revolving Facility as provided by the Financing Agreement. Lender's
records shall be conclusive proof of loans, payments and interest accruals
hereunder, absent proof by Borrower of error.
All unpaid principal and accrued interest under this promissory note
shall be payable as follows: (a) accrued interest on Prime Based Loans shall be
payable quarterly on the first day of each calendar quarter, and (b) accrued
interest on any LIBOR Based Loan shall be payable on the last day of the
Interest Period applicable thereto, respectively. All unpaid principal borrowed
under the Revolving Facility and all unpaid accrued interest thereon, and all
other amounts payable hereunder relative to the Revolving Facility, shall be due
and payable to Lender in full, and the Revolving Facility shall terminate, on
the last day of the Contract Term. To the extent that any accrued interest is
not paid on its due date as specified above, Lender may at its option (but with
no obligation to do so), debit the amount of such accrued interest against any
account maintained by Borrower with Lender or add such amount to the unpaid
principal due by Borrower under the Revolving Facility.
If at any time, from time to time, the aggregate unpaid principal
amount outstanding hereunder exceeds the maximum amount allowed to be
outstanding hereunder, Borrower shall make an immediate payment of principal in
an amount not less than the amount of such excess. All such amounts, if any,
payable by Borrower shall be deemed to be payable on demand, and may be offset
by Lender against any amount owing by Lender to Borrower, without prior notice
to Borrower.
This promissory note in all respects is subject to the Financing
Agreement. Lender and Agent shall have all rights and remedies as provided in
the Financing Agreement, specifically including, without limitation, the right
of acceleration and all other rights and remedies as are provided by Article IX
("Remedies") thereof.
No delay by Lender and/or Agent in the exercise of any power or right
hereunder shall operate as a waiver or impair Lender's or Agent's rights and
remedies under this promissory note or the Loan Documents. Borrower and each
other party ever liable hereunder severally hereby expressly waives presentment,
demand, notice of intention to demand, notice of intention to accelerate, notice
of acceleration, protest, notice of protest and any other notice of any kind,
and agrees that its liability hereunder shall not be affected by any renewals,
extensions or modifications, from time to time, of the
<PAGE> 2
time or manner of payment hereof, or by any release or modification of any
security for the obligations and indebtedness evidenced hereby.
Borrower hereby promises to pay to Lender and Agent all reasonable
fees, costs and expenses incurred by Lender or Agent, as applicable, in
enforcement and collection of any amounts under this promissory note, including
without limitation, reasonable attorneys fees.
In no contingency or event whatsoever shall the amount of interest
under this promissory note paid by Borrower, received by Lender and/or Agent,
agreed to be paid by Borrower, or requested or demanded to be paid by Lender or
Agent, exceed the Maximum Rate. In the event any such sums paid to Lender and/or
Agent by Borrower would exceed the maximum amount permitted by applicable law,
Lender and/or Agent, as applicable, shall automatically apply such excess to any
unpaid principal or, if the amount of such excess exceeds said unpaid principal,
such excess shall be paid to Borrower. All sums paid, or agreed to be paid, by
Borrower hereunder which are or hereafter may be construed to be compensation
for the use, forbearance, or detention of money shall be amortized, prorated,
spread and allocated in respect of the Obligations throughout the full Contract
Term until the Obligations are paid in full. Notwithstanding any provisions
contained in the Loan Documents or herein, neither Lender nor Agent shall ever
be entitled to receive, collect or apply as interest any amount in excess of the
Maximum Rate and, in the event Lender and/or Agent ever receives, collects, or
applies any amount that otherwise would be in excess of the Maximum Rate, such
amount shall automatically be deemed to be applied in reduction of the unpaid
principal balance of the Obligations and, if such principal balance is paid in
full, any remaining excess shall forthwith be paid to Borrower. In determining
whether or not the interest paid or payable under any specific contingency
exceeds the Maximum Rate, Borrower, Lender and/or Agent, as applicable, shall,
to the maximum extent permitted under applicable law, (i) characterize any
non-principal payment as a standby fee, commitment fee, prepayment charge,
delinquency charge or reimbursement for a third-party expense rather than as
interest, (ii) exclude voluntary prepayments and the effect thereof, and (iii)
amortize, prorate, allocate and spread in equal parts throughout the entire
period during which the indebtedness was outstanding the total amount of
interest at any time contracted for, charged or received. Nothing herein
contained shall be construed or so operate as to require Borrower to pay any
interest, fees, costs, or charges greater than is permitted by applicable law.
Subject to the foregoing, Borrower hereby agrees that the actual effective rate
of interest from time to time existing with respect to loans made by Lender to
Borrower hereunder, including all amounts agreed to by Borrower or charged or
received by Lender and/or Agent, which may be deemed to be interest under
applicable law, shall be deemed to be a rate which is agreed to and stipulated
by Borrower and/or Lender in accordance with applicable law.
This promissory note may not be changed, amended or modified except in
writing executed by Lender and Borrower.
This promissory note is in renewal and increase of the certain
promissory note dated effective as of February 20, 1998 which was executed and
delivered in renewal of that certain note dated effective as of June 15, 1994
which note was previously executed and delivered by Borrower to NationsBank of
Texas, N.A., and all obligations and indebtedness previously evidenced thereby
hereafter shall be governed and payable as provided herein.
<PAGE> 3
THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO
THE LAWS OF THE STATE OF TEXAS, EXCEPT AS TO PROVISIONS RELATING TO THE RATE OF
INTEREST TO BE CHARGED ON THE UNPAID PRINCIPAL HEREOF, IN WHICH CASE, TO THE
EXTENT FEDERAL LAW OTHERWISE WOULD ALLOW A HIGHER RATE OF INTEREST THAN WOULD BE
ALLOWED BY THE LAWS OF THE STATE OF TEXAS, SUCH FEDERAL LAW SHALL APPLY.
EXECUTED THIS 28TH DAY OF AUGUST, 1998, EFFECTIVE AS THE DATE SPECIFIED ABOVE.
================================================================================
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
COMERICA BANK-TEXAS ENCORE WIRE CORPORATION
By: /s/ WILLIAM J. ROLLEY By: /s/ SCOTT D. WEAVER
-------------------------- --------------------------
William J. Rolley Scott D. Weaver
Vice President Vice President-Finance
===============================================================================
ENCORE WIRE CORPORATION
By: /s/ SCOTT D. WEAVER
--------------------------
Scott D. Weaver
Vice President-Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,098
<SECURITIES> 0
<RECEIVABLES> 61,377
<ALLOWANCES> 637
<INVENTORY> 31,925
<CURRENT-ASSETS> 94,931
<PP&E> 92,264
<DEPRECIATION> 18,891
<TOTAL-ASSETS> 168,489
<CURRENT-LIABILITIES> 26,779
<BONDS> 0
0
0
<COMMON> 163
<OTHER-SE> 84,307
<TOTAL-LIABILITY-AND-EQUITY> 108,489
<SALES> 196,390
<TOTAL-REVENUES> 196,390
<CGS> 153,144
<TOTAL-COSTS> 13,562
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 500
<INTEREST-EXPENSE> 1,109
<INCOME-PRETAX> 28,075
<INCOME-TAX> 11,170
<INCOME-CONTINUING> 16,905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,905
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.02
</TABLE>
