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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    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)1329 Millwood RoadMcKinney, Texas
    
    75069(Address of principal executive offices)
    
    (Zip code)
 Registrants telephone number, including area code: (972) 562-9473
 þ o
  Large accelerated filer
o
    
    Accelerated filer
þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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ENCORE WIRE CORPORATION
 FORM 10-Q
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008
 Page No.PART I. FINANCIAL INFORMATIONITEM 1. Consolidated Financial StatementsConsolidated Balance Sheets June 30, 2008 (Unaudited) and December 31, 2007
    
    
    3Consolidated Statements of Income (Unaudited)
Quarters and Six Months ended June 30, 2008 and June 30, 2007
    
    
    5Consolidated Statements of Cash Flows (Unaudited)
Six Months ended June 30, 2008 and June 30, 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    11ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    17ITEM 4. Controls and Procedures
    
    
    17PART II. OTHER INFORMATIONITEM 1A. Risk Factors
    
    
    18ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    18ITEM
5. Other Information
    
    
    19ITEM 6. Exhibits
    
    
    19Signatures
    
    
    20Fourth Amendment to Credit AgreementCertification by Daniel L. Jones, President and Chief Executive Officer Pursuant to Section 302Certification by Fank J. Bilban, Vice President-Finance, Chief Financial Officer, Treasurer and Secretary Pursuant to Section 302Certification by Daniel L. Jones, President and Chief Executive Officer Pursuant to Section 906Certification of CFO Pursuant to Section 906
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PART I. FINANCIAL INFORMATION
 
   
  June 30,
    
    
    December 31,2008
    
    
    2007In Thousands of Dollars
    
    (Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    104,641
    
    
    $
    78,895Accounts receivable (net of allowance
of $1,153 and $1,003)
    
    
    239,835
    
    
    
    216,780Inventories
    
    
    67,894
    
    
    
    82,013Prepaid expenses and other assets
    
    
    1,244
    
    
    
    8,503Current taxes receivable
    
    
    2,926
    
    
    
    9,784Total current assets
    
    
    416,540
    
    
    
    395,975Property, plant and equipment  at cost:Land
    
    
    10,837
    
    
    
    10,837Construction in progress
    
    
    14,139
    
    
    
    10,058Buildings and improvements
    
    
    64,615
    
    
    
    61,342Machinery and equipment
    
    
    143,315
    
    
    
    142,867Furniture and fixtures
    
    
    6,543
    
    
    
    6,124Total property, plant and equipment
    
    
    239,449
    
    
    
    231,228Accumulated depreciation and
amortization
    
    
    (119,689
    )
    
    
    (113,397
    )Net property, plant and equipment
    
    
    119,760
    
    
    
    117,831Other assets
    
    
    98
    
    
    
    106Total assets
    
    $
    536,398
    
    
    $
    513,912
 Note:
    
    The consolidated balance sheet at December 31, 2007, as presented, is
derived from the audited consolidated financial statements at that date.
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June 30,
    
    
    December 31,2008
    
    
    2007In Thousands of Dollars, Except Share Data
    
    (Unaudited)
    
    
    (See Note)LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    36,245
    
    
    $
    22,170Accrued liabilities
    
    
    21,265
    
    
    
    23,162Current deferred income taxes
    
    
    2,201
    
    
    
    3,733Total current liabilities
    
    
    59,711
    
    
    
    49,065Non-current deferred income taxes
    
    
    8,555
    
    
    
    8,968Long term notes payable
    
    
    100,794
    
    
    
    100,910Stockholders equity:Common
stock, $.01 par value: Authorized shares - 40,000,000;
Issued shares - 26,140,952 and 26,123,952
    
    
    261
    
    
    
    261Additional paid-in capital
    
    
    42,213
    
    
    
    41,806Treasury stock, at cost - 3,016,250 and
2,883,350 shares
    
    
    (19,378
    )
    
    
    (17,315
    )Retained earnings
    
    
    344,242
    
    
    
    330,217Total stockholders equity
    
    
    367,338
    
    
    
    354,969Total liabilities and stockholders equity
    
    $
    536,398
    
    
    $
    513,912
 Note:
    
    The consolidated balance sheet at December 31, 2007, as presented, is
derived from the audited consolidated financial statements at that date.
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Quarter Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,In Thousands of Dollars, Except Per Share Data
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    322,845
    
    
    $
    333,635
    
    
    $
    604,604
    
    
    $
    594,364Cost of goods sold
    
    
    303,322
    
    
    
    286,073
    
    
    
    549,610
    
    
    
    522,058Gross profit
    
    
    19,523
    
    
    
    47,562
    
    
    
    54,994
    
    
    
    72,306Selling, general, and administrative expenses
    
    
    16,923
    
    
    
    16,835
    
    
    
    31,390
    
    
    
    30,415Operating income
    
    
    2,600
    
    
    
    30,727
    
    
    
    23,604
    
    
    
    41,891Net interest and other income and expense
    
    
    587
    
    
    
    1,152
    
    
    
    1,320
    
    
    
    2,305Income before income taxes
    
    
    2,013
    
    
    
    29,575
    
    
    
    22,284
    
    
    
    39,586Provision for income taxes
    
    
    682
    
    
    
    9,865
    
    
    
    7,334
    
    
    
    13,436Net income
    
    $
    1,331
    
    
    $
    19,710
    
    
    $
    14,950
    
    
    $
    26,150Net income per common and common
equivalent shares  basic
    
    $
    0.06
    
    
    $
    0.84
    
    
    $
    .65
    
    
    $
    1.12Weighted average common and common
equivalent shares  basic
    
    
    23,120
    
    
    
    23,356
    
    
    
    23,138
    
    
    
    23,335Net income per common and common
equivalent shares  diluted
    
    $
    0.06
    
    
    $
    0.83
    
    
    $
    0.64
    
    
    $
    1.10Weighted average common and common
equivalent shares  diluted
    
    
    23,426
    
    
    
    23,712
    
    
    
    23,427
    
    
    
    23,703Cash dividends declared per share
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    0.04
    
    
    $
    0.04
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Six Months EndedJune 30,In Thousands of Dollars
    
    2008
    
    
    2007OPERATING ACTIVITIESNet income
    
    $
    14,950
    
    
    $
    26,150Adjustments to reconcile net income to cash provided by
operating activities:Depreciation and amortization
    
    
    7,156
    
    
    
    6,792Deferred income tax benefit
    
    
    (1,945
    )
    
    
    (156
    )Excess tax benefits of options exercised
    
    
    (84
    )
    
    
    
    (44
    )Other
    
    
    429
    
    
    
    134Changes in operating assets and liabilities:Accounts receivable
    
    
    (23,205
    )
    
    
    (20,873
    )Inventories
    
    
    14,119
    
    
    
    (13,777
    )Trade accounts payable and accrued liabilities
    
    
    12,180
    
    
    
    10,359Other assets
    
    
    7,089
    
    
    
    (546
    )Current income taxes payable
    
    
    6,943
    
    
    
    28,220NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    37,630
    
    
    
    36,259INVESTING ACTIVITIESPurchases of property, plant and equipment
    
    
    (9,269
    )
    
    
    (11,912
    )Proceeds from sale of equipment
    
    
    166
    
    
    
    145Other
    
    
    
    
    
    
    5NET CASH USED IN INVESTING ACTIVITIES
    
    
    (9,103
    )
    
    
    (11,762
    )FINANCING ACTIVITIESPurchase of treasury stock
    
    
    (2,063
    )
    
    
    Proceeds from issuance of common stock
    
    
    124
    
    
    
    582Dividend paid
    
    
    (927
    )
    
    
    (932
    )Excess tax benefit of options exercised
    
    
    85
    
    
    
    44NET CASH USED IN FINANCING ACTIVITIES
    
    
    (2,781
    )
    
    
    (306
    )Net increase in cash and cash equivalents
    
    
    25,746
    
    
    
    24,191Cash and cash equivalents at beginning of period
    
    
    78,895
    
    
    
    24,603Cash and cash equivalents at end of period
    
    $
    104,641
    
    
    $
    48,794
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June 30,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    33,917
    
    
    $
    28,190Work-in-process
    
    
    16,519
    
    
    
    14,919Finished goods
    
    
    114,261
    
    
    
    113,756164,697
    
    
    
    156,865Adjust to LIFO cost
    
    
    (96,803
    )
    
    
    (74,852
    )67,894
    
    
    
    82,013Lower of Cost or Market Adjustment
    
    
    
    
    
    
    $
    67,894
    
    
    $
    82,013
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June 30,
    
    December 31,In Thousands of Dollars
    
    2008
    
    2007Sales volume discounts payable
    
    $
    14,925
    
    
    $
    15,590Property taxes payable
    
    
    978
    
    
    
    1,940Commissions payable
    
    
    2,877
    
    
    
    2,317Accrued salaries
    
    
    1,551
    
    
    
    2,377Other accrued liabilities
    
    
    934
    
    
    
    938$
    21,265
    
    
    $
    23,162
    Quarter Ended
    
    
    Quarter Ended6/30/08
    
    
    6/30/07Numerator:Net income
    
    $
    1,331
    
    
    $
    19,710Denominator:Denominator for basic earnings per share  weighted
average shares
    
    
    23,120
    
    
    
    23,356Effect of dilutive securities:Employee stock options
    
    
    306
    
    
    
    356Denominator for diluted earnings per share  weighted
average shares
    
    
    23,426
    
    
    
    23,712
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Six Months 
Ended
    
    
    Six Months 
Ended6/30/08
    
    
    6/30/07Numerator:Net income
    
    $
    14,950
    
    
    $
    26,150Denominator:Denominator for basic earnings per share  weighted
average shares
    
    
    23,138
    
    
    
    23,335Effect of dilutive securities:Employee stock options
    
    
    289
    
    
    
    368Denominator for diluted earnings per share  weighted
average shares
    
    
    23,427
    
    
    
    23,703
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10




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General
    11




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Results of Operations
 Quarter Ended June 30, 2008 Compared to Quarter Ended June 30, 2007
     12




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Six Months Ended June 30, 2008 compared to Six Months Ended June 30, 2007
    13




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Liquidity and Capital Resources
  14




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15




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Information Regarding Forward Looking Statements
  16




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17




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PART IIOTHER INFORMATION
 
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Issuer Purchases of Equity Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders.
     NOMINEE FOR DIRECTOR
    
    NUMBER OF VOTES FOR
    
    NUMBER OF VOTES WITHHELDDonald E. Courtney
    
    
    22,008,146.66
    
    
    
    259,955.54Daniel L. Jones
    
    
    22,012,318.20
    
    
    
    255,784.00Thomas L. Cunningham
    
    
    21,991,019.20
    
    
    
    277,083.00William R. Thomas III
    
    
    22,147,279.20
    
    
    
    120,823.00John H. Wilson
    
    
    21,679,546.20
    
    
    
    588,556.00Scott D. Weaver
    
    
    22,144,731.20
    
    
    
    123,371.00
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Item 5. Other Information.
   
 Item 6. Exhibits.
  19




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ENCORE WIRE CORPORATION(Registrant)Dated: August 8, 2008
    
    /s/ DANIEL L. JONESDaniel L. Jones, President andChief Executive OfficerDated: August 8, 2008
    
    /s/ FRANK J. BILBANFrank J. Bilban, Vice President  Finance,Treasurer and SecretaryChief Financial Officer
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ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation of Encore Wire Corporation, as
amended through July 20, 2004 (filed on Exhibit 3.1 to the
Companys Quarterly Report on Form 10-Q for the quarter ended
June 30, 2004, and incorporated herein by reference).3.2
    
    Amended and Restated Bylaws of Encore Wire Corporation, as amended
through February 20, 2006 (filed as Exhibit 3.2 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2005,
and incorporated herein by reference).10.1*
    
    1999 Stock Option Plan, as amended and restated, effective as of
February 20, 2006 (filed as Exhibit 4.1 to the Companys
Registration Statement on Form S-8 (No. 333-138165), and
incorporated herein by reference).10.3
    
    Credit Agreement by and among Encore Wire Limited, as Borrower,
Bank of America, N.A., as Agent, and Bank of America, N.A. and
Wells Fargo Bank, National Association, as Lenders, dated August
27, 2004 (filed as Exhibit 10.1 to the Companys Quarterly Report
on Form 10-Q for the quarter ended September 30, 2004 and
incorporated herein by reference).10.4
    
    First Amendment to Credit Agreement of August 27, 2004, dated May
16, 2006, by and among Encore Wire Limited, as Borrower, Bank of
America, N.A., as Agent, and Bank of America, N.A. and Wells Fargo
Bank, National Association, as Lenders (filed as Exhibit 10.3 to
the Companys Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006 and incorporated herein by reference).10.5
    
    Second Amendment to Credit Agreement of August 27, 2004, dated
August 31, 2006, by and among Encore Wire Limited, as Borrower,
Bank of America, N.A., as Agent, and Bank of America, N.A. and
Wells Fargo Bank, National Association, as Lenders (filed as
Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for
the quarter ended September 30, 2006 and incorporated herein by
reference).10.6
    
    Third Amendment to Credit Agreement of August 27, 2004, dated June
29, 2007, by and among Encore Wire Corporation, as Borrower, Bank
of America, N.A., as Agent, and Bank of America, N.A. and Wells
Fargo Bank, National Association, as Lenders (filed as Exhibit
10.6 to the Companys Quarterly Report on Form 10-Q for the
quarter ended June 30, 2007, and incorporated herein by
reference).10.7
    
    Fourth Amendment to Credit Agreement of August 27, 2004, dated August 6, 2008,
by and among Encore Wire Corporation, as Borrower, Bank of America, N.A., as Agent, and Bank of America, N.A. and Wells
Fargo Bank, National Association, as Lenders.10.8
    
    Note Purchase Agreement for $45,000,000 of 5.27% Senior Notes,
Series 2004-A due August 27, 2011, by and among Encore Wire
Limited and Encore Wire Corporation, as Debtors, and Hartford Life
Insurance Company, Great-West Life and Annuity Insurance Company,
London Life Insurance Company and London Life and Casualty
Reinsurance Corporation, as Purchasers, dated August 1, 2004
(filed as Exhibit 10.2 to
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ExhibitNumber
    
    Descriptionthe Companys Quarterly Report on Form
10-Q for the quarter ended September 30, 2004 and incorporated
herein by reference).10.9
    
    Waiver to Note Purchase Agreement for $45,000,000 of 5.27% Senior
Notes, Series 2004-A, due August 27, 2011, by and among Encore
Wire Limited and Encore Wire Corporation, as Debtors, and Hartford
Life Insurance Company, Great-West Life and Annuity Insurance
Company, London Life Insurance Company, London Life and General
Reinsurance Company Limited, as Holders, dated June 29, 2007
(filed as Exhibit 10.8 to the Companys Quarterly Report on Form
10-Q for the quarter ended June 30, 2007, and incorporated herein
by reference).10.10
    
    Master Note Purchase Agreement for $55,000,000 of Floating Rate
Senior Notes, Series 2006-A, due September 30, 2011, by and among
Encore Wire Limited and Encore Wire Corporation, as Debtors, and
Metropolitan Life Insurance Company, Metlife Insurance Company of
Connecticut and Great- West Life & Annuity Insurance Company, as
Purchasers, dated September 28, 2006 (filed as Exhibit 10.5 to the
Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2006 and incorporated herein by reference).10.11
    
    Waiver to Master Note Purchase Agreement for $55,000,000 of
Floating Rate Senior Notes, Series 2006-A, due September 30, 2011,
by and among Encore Wire Limited and Encore Wire Corporation, as
Debtors, and Metropolitan Life Insurance Company, Metlife
Insurance Company of Connecticut and Great-West Life & Annuity
Insurance Company, as Holders, dated June 29, 2007 (filed as
Exhibit 10.10 to the Companys Quarterly Report on Form 10-Q for
the quarter ended June 30, 2007, and incorporated herein by
reference).31.1
    
    Certification by Daniel L. Jones, President and Chief Executive
Officer of Encore Wire Corporation, dated August 8, 2008 and
submitted pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification by Frank J. Bilban, Vice President-Finance, Chief
Financial Officer, Treasurer and Secretary of Encore Wire
Corporation, dated August 8, 2008 and submitted pursuant to Rule
13a-14(a)/15d-14(a) and pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification by Daniel L. Jones, President and Chief Executive
Officer of Encore Wire Corporation, dated August 8, 2008 and
submitted as required by 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification by Frank J. Bilban, Vice President-Finance, Chief
Financial Officer, Treasurer and Secretary of Encore Wire
Corporation, dated August 8, 2008 as required by 18 U.S.C. 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 
 *
    
    Management contract or compensatory plan. 22