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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 FORM 10-Q
 x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934
 September 30, 2009
 OR
 
 
  ENCORE WIRE CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
(State of Incorporation)
    
    75-2274963
(I.R.S. Employer Identification Number)1329 Millwood Road 
McKinney, Texas
(Address of principal executive offices)
    
    75069
(Zip Code)
 Registrants telephone number, including area code: (972) 562-9473
 x
   Large accelerated filer
    [   ]
    
    
    Accelerated filer
xNon-accelerated filer
    [   ]
    (Do not check if a smaller reporting company)
    
    Smaller reporting company [   ]
  x




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##### 



ENCORE WIRE CORPORATION
 
 FORM 10-Q
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009
 Page No.PART IFINANCIAL INFORMATIONITEM 1. Consolidated Financial StatementsConsolidated Balance Sheets
September 30, 2009 (Unaudited) and December 31, 2008
    
    
    1Consolidated Statements of Income (Unaudited) Quarters and
Nine Months ended September 30, 2009 and September 30, 2008
    
    
    3Consolidated Statements of Cash Flows (Unaudited)
Nine Months ended September 30, 2009 and September 30, 2008
    
    
    4Notes to Consolidated Financial Statements
    
    
    5ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    16ITEM 4. Controls and Procedures
    
    
    16PART IIOTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    16ITEM 1A. Risk Factors
    
    
    17ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17ITEM 6. Exhibits
    
    
    17Signatures
    
    
    18EX-31.1EX-31.2EX-32.1EX-32.2




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PART IFINANCIAL INFORMATION
 
 Item 1. Financial Statements
  
  September 30,
    
    
    December 31,In Thousands of Dollars
    
    2009
    
    
    2008(Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    213,593
    
    
    $
    217,666Accounts receivable (net of allowance
of $2,203 and $2,000)
    
    
    123,303
    
    
    
    126,184Inventories
    
    
    59,216
    
    
    
    65,533Prepaid expenses and other assets
    
    
    18,746
    
    
    
    788Current income taxes receivable
    
    
    
    
    
    
    1,587Total current assets
    
    
    414,858
    
    
    
    411,758Property, plant and equipment - at cost:Land and land improvements
    
    
    11,727
    
    
    
    11,727Construction in progress
    
    
    9,266
    
    
    
    7,483Buildings and improvements
    
    
    68,125
    
    
    
    65,026Machinery and equipment
    
    
    164,480
    
    
    
    156,234Furniture and fixtures
    
    
    6,742
    
    
    
    6,604Total property, plant and equipment
    
    
    260,340
    
    
    
    247,074Accumulated depreciation
    
    
    (133,350
    )
    
    
    (125,632
    )Net property, plant and equipment
    
    
    126,990
    
    
    
    121,442Other assets
    
    
    211
    
    
    
    139Total assets
    
    $
    542,059
    
    
    $
    533,339
 Note:
    
    The consolidated balance sheet at December 31, 2008, as presented, isderived from the audited consolidated financial statements at that date.
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September 30,
    
    
    December 31,In Thousands of Dollars, Except Share Data
    
    2009
    
    
    2008(Unaudited)
    
    
    (See Note)LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    15,856
    
    
    $
    4,639Accrued liabilities
    
    
    15,468
    
    
    
    20,104Income taxes payable
    
    
    4,539
    
    
    
    Current deferred income taxes
    
    
    2,102
    
    
    
    8,982Total current liabilities
    
    
    37,965
    
    
    
    33,725Non-current deferred income taxes
    
    
    9,349
    
    
    
    9,320Long term notes payable
    
    
    100,492
    
    
    
    100,675Commitments and contingenciesStockholders equity:Preferred stock, $.01 par value:
    
    
    
    
    
    
    Authorized shares  2,000,000; none issuedCommon stock, $.01 par value:Authorized shares  40,000,000;Issued shares  26,155,252 and 26,145,452
    
    
    262
    
    
    
    262Additional paid-in capital
    
    
    42,960
    
    
    
    42,486Treasury stock, at cost  3,148,950 and 3,148,950
shares
    
    
    (21,269
    )
    
    
    (21,269
    )Retained earnings
    
    
    372,300
    
    
    
    368,140Total stockholders equity
    
    
    394,253
    
    
    
    389,619Total liabilities and stockholders equity
    
    $
    542,059
    
    
    $
    533,339
 Note:
    
    The consolidated balance sheet at December 31, 2008, as presented, isderived from the audited consolidated financial statements at that date.
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Quarter Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,In Thousands, Except Per Share Data
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    168,695
    
    
    $
    296,338
    
    
    $
    472,531
    
    
    $
    900,942Cost of goods sold
    
    
    157,340
    
    
    
    267,993
    
    
    
    431,482
    
    
    
    817,604Gross profit
    
    
    11,355
    
    
    
    28,345
    
    
    
    41,049
    
    
    
    83,338Selling, general, and administrative expenses
    
    
    10,905
    
    
    
    15,682
    
    
    
    32,242
    
    
    
    47,072Operating income
    
    
    450
    
    
    
    12,663
    
    
    
    8,807
    
    
    
    36,266Net interest and other expenses
    
    
    340
    
    
    
    485
    
    
    
    1,105
    
    
    
    1,804Income before income taxes
    
    
    110
    
    
    
    12,178
    
    
    
    7,702
    
    
    
    34,462Provision (benefit) for income taxes
    
    
    (215
    )
    
    
    4,101
    
    
    
    2,162
    
    
    
    11,435Net income
    
    $
    325
    
    
    $
    8,077
    
    
    $
    5,540
    
    
    $
    23,027Net income per common and common
equivalent share  basic
    
    $
    0.01
    
    
    $
    0.35
    
    
    $
    0.24
    
    
    $
    1.00Weighted average common and common
equivalent shares  basic
    
    
    23,006
    
    
    
    23,125
    
    
    
    23,001
    
    
    
    23,142Net income per common and common
equivalent share  diluted
    
    $
    0.01
    
    
    $
    0.34
    
    
    $
    0.24
    
    
    $
    0.98Weighted average common and common
equivalent shares  diluted
    
    
    23,308
    
    
    
    23,415
    
    
    
    23,294
    
    
    
    23,432Cash dividends declared per share
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    0.06
    
    
    $
    0.06
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Nine Months EndedSeptember 30,In Thousands of Dollars
    
    2009
    
    
    2008OPERATING ACTIVITIESNet income
    
    $
    5,540
    
    
    $
    23,027Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    10,330
    
    
    
    10,563Deferred income tax benefit
    
    
    (6,851
    )
    
    
    (215
    )Other
    
    
    67
    
    
    
    572Changes in operating assets and liabilities:Accounts receivable
    
    
    2,678
    
    
    
    (16,980
    )Inventory
    
    
    6,317
    
    
    
    16,816Accounts payable and accrued liabilities
    
    
    6,581
    
    
    
    (2,673
    )Other assets and liabilities
    
    
    (18,096
    )
    
    
    7,361Current income taxes receivable / payable
    
    
    6,169
    
    
    
    7,120NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    12,735
    
    
    
    45,591INVESTING ACTIVITIESPurchases of property, plant and equipment
    
    
    (19,726
    )
    
    
    (12,860
    )Proceeds from sale of equipment
    
    
    4,162
    
    
    
    267NET CASH USED IN INVESTING ACTIVITIES
    
    
    (15,564
    )
    
    
    (12,593
    )FINANCING ACTIVITIESDeferred financing fees
    
    
    
    
    
    
    (133
    )Purchase of treasury stock
    
    
    
    
    
    
    (2,063
    )Proceeds from issuances of common stock
    
    
    93
    
    
    
    124Dividends paid
    
    
    (1,380
    )
    
    
    (1,389
    )Excess tax benefits of options exercised
    
    
    43
    
    
    
    84NET CASH USED IN FINANCING ACTIVITIES
    
    
    (1,244
    )
    
    
    (3,377
    )Net increase (decrease) in cash and cash equivalents
    
    
    (4,073
    )
    
    
    29,621Cash and cash equivalents at beginning of period
    
    
    217,666
    
    
    
    78,895Cash and cash equivalents at end of period
    
    $
    213,593
    
    
    $
    108,516
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Form 10-Q
    September 30,
    
    
    December 31,In Thousands of Dollars
    
    2009
    
    
    2008Raw materials
    
    $
    7,365
    
    
    $
    16,184Work-in-process
    
    
    17,469
    
    
    
    8,746Finished goods
    
    
    88,609
    
    
    
    63,718113,443
    
    
    
    88,648Adjust to LIFO cost
    
    
    (54,227
    )
    
    
    (23,115
    )Lower of cost or market adjustment
    
    
    
    
    
    
    $
    59,216
    
    
    $
    65,533
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September 30,
    
    
    December 31,In Thousands of Dollars
    
    2009
    
    
    2008Sales volume discounts payable
    
    $
    8,947
    
    
    $
    12,706Property taxes payable
    
    
    1,879
    
    
    
    2,207Commissions payable
    
    
    1,418
    
    
    
    1,240Accrued salaries
    
    
    790
    
    
    
    2,572Other accrued liabilities
    
    
    2,434
    
    
    
    1,379$
    15,468
    
    
    $
    20,104
    Quarter EndedSeptember 30,
    
    
    September 30,In Thousands
    
    2009
    
    
    2008Numerator:Net income
    
    $
    325
    
    
    $
    8,077Denominator:Denominator for basic
earnings per share 
weighted average
shares
    
    
    23,006
    
    
    
    23,125Effect of dilutive securities:Employee stock options
    
    
    302
    
    
    
    290Denominator for diluted earnings per share
 weighted average shares
    
    
    23,308
    
    
    
    23,415
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Nine Months EndedSeptember 30,
    
    
    September 30,In Thousands
    
    2009
    
    
    2008Numerator:Net income
    
    $
    5,540
    
    
    $
    23,027Denominator:Denominator for basic
earnings per share 
weighted average
shares
    
    
    23,001
    
    
    
    23,142Effect of dilutive securities:Employee stock options
    
    
    293
    
    
    
    290Denominator for diluted earnings per share
 weighted average shares
    
    
    23,294
    
    
    
    23,432
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 General
   9




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Results of Operations
 Quarter Ended September 30, 2009 Compared to Quarter Ended September 30, 2008
    10




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Nine Months Ended September 30, 2009 compared to Nine Months Ended September 30, 2008
  11




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Liquidity and Capital Resources
   13




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Information Regarding Forward Looking Statements
  15




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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
   
 PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings.
  16




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Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Issuer Purchases of Equity Securities
  
 Item 6. Exhibits.
  17




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ENCORE WIRE CORPORATION(Registrant)Dated: November 5, 2009
    
    /s/ DANIEL L. JONESDaniel L. Jones, President andChief Executive OfficerDated: November 5, 2009
    
    /s/ FRANK J. BILBANFrank J. Bilban, Vice President  Finance,Chief Financial Officer,Treasurer and Secretary
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ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation of Encore Wire Corporation and all
amendments thereto (filed as Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31,
2009, and incorporated herein by reference).3.2
    
    Second Amended and Restated Bylaws of Encore Wire Corporation, as
amended through December 13, 2007 (filed as Exhibit 3.2 to the
Companys Annual Report on Form 10-K for the year ended December
31, 2007, and incorporated herein by reference).10.1
    
    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).10.2
    
    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).10.3
    
    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).10.4
    
    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).10.5
    
    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 (filed as
Exhibit 10.7 to the Companys Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008, and incorporated herein by
reference).




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10.6
    
    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 & 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 the Companys Quarterly Report on Form
10-Q for the quarter ended September 30, 2004 and incorporated
herein by reference).10.7
    
    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).10.8
    
    Master Note Purchase Agreement for $300,000,000 Aggregate
Principal Amount of Senior Notes Issuable in Series, 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).10.9
    
    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).10.10*
    
    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).10.11
    
    Form of Indemnification Agreement (filed as Exhibit 10.11 to the
Companys Quarterly Report on Form 10-Q for the quarter ended
March 31, 2009 and incorporated herein by reference).10.12
    
    Form of Stock Option Agreement under the 1999 Stock Option Plan
(filed as Exhibit 10.12 to the Companys Quarterly Report on Form
10-Q for the quarter ended June 30, 2009 and incorporated herein
by reference).




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31.1
    
    Certification by Daniel L. Jones, President and Chief Executive
Officer of Encore Wire Corporation, dated November 5, 2009 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 November 5, 2009 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 November 5, 2009 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 November 5, 2009 as required by 18 U.S.C. 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
    
    Compensatory plan.