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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
September 30, 2007
 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
  o þ o
 o þ




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ENCORE WIRE CORPORATION
 FORM 10-Q
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007
 Page No.PART I. FINANCIAL INFORMATIONITEM 1. Consolidated Financial StatementsConsolidated Balance Sheets September 30,
2007 (Unaudited) and December 31, 2006
    
    
    3Consolidated Statements of Income
(Unaudited) Quarters and Nine Months
ended September 30, 2007 and September
30, 2006
    
    
    5Consolidated Statements of Cash Flows
(Unaudited) Nine Months ended September
30, 2007 and September 30, 2006
    
    
    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 6. Exhibits
    
    
    18Signatures
    
    
    19Certification by Daniel L. Jones Pursuant to Section 302Certification by Frank J. Bilban Pursuant to Section 302Certification by Daniel L. Jones Pursuant to Section 906Certification by Frank J. Bilban Pursuant to Section 906
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PART I. FINANCIAL INFORMATION
 
   
  September 30,
    
    
    December 31,2007
    
    
    2006In Thousands of Dollars
    
    (Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash
    
    $
    59,243
    
    
    $
    24,603Accounts receivable (net of allowance
of $995 and $884)
    
    
    246,502
    
    
    
    214,963Inventories (Note 2)
    
    
    89,286
    
    
    
    103,947Prepaid expenses and other assets
    
    
    1,514
    
    
    
    6,713Current taxes receivable
    
    
    10,909
    
    
    
    18,523Current deferred income taxes
    
    
    
    
    
    
    2,301Total current assets
    
    
    407,454
    
    
    
    371,050Property, plant and equipment  at cost:Land
    
    
    10,792
    
    
    
    9,592Construction in progress
    
    
    19,921
    
    
    
    6,672Buildings and improvements
    
    
    47,065
    
    
    
    47,065Machinery and equipment
    
    
    142,622
    
    
    
    136,552Furniture and fixtures
    
    
    4,155
    
    
    
    4,072Total property, plant, and equipment
    
    
    224,555
    
    
    
    203,953Accumulated depreciation and
amortization
    
    
    (110,076
    )
    
    
    (100,966
    )Net property, plant, and equipment
    
    
    114,479
    
    
    
    102,987Other assets
    
    
    120
    
    
    
    120Total assets
    
    $
    522,053
    
    
    $
    474,157
 
 Note:
    
    The consolidated balance sheet at December 31, 2006, as presented, is
derived from the audited consolidated financial statements at that date.
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September 30,
    
    
    December 31,2007
    
    
    2006In Thousands of Dollars, Except Share Data
    
    (Unaudited)
    
    
    (See Note)LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    24,951
    
    
    $
    13,413Accrued liabilities
    
    
    23,772
    
    
    
    23,772Current deferred income taxes
    
    
    5,774
    
    
    
    Total current liabilities
    
    
    54,497
    
    
    
    37,185Non-current deferred income taxes
    
    
    9,031
    
    
    
    9,851Long term notes payable
    
    
    99,676
    
    
    
    98,974Other long term liabilities
    
    
    324
    
    
    
    1,026Stockholders equity:Common stock, $.01 par value:Authorized shares - 40,000,000;
Issued
shares 26,123,952 and 26,035,302
    
    
    261
    
    
    
    260Additional paid-in capital
    
    
    41,749
    
    
    
    40,849Treasury stock, at cost - 2,758,950 shares
    
    
    (15,275
    )
    
    
    (15,275
    )Retained earnings
    
    
    331,790
    
    
    
    301,287Total stockholders equity
    
    
    358,525
    
    
    
    327,121Total liabilities and stockholders equity
    
    $
    522,053
    
    
    $
    474,157
 
 Note:
    
    The consolidated balance sheet at December 31, 2006, as presented, is
derived from the audited consolidated financial statements at that date.
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Quarter Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,In Thousands of Dollars, Except Per Share Data
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    308,481
    
    
    $
    372,915
    
    
    $
    902,845
    
    
    $
    987,011Cost of goods sold
    
    
    282,962
    
    
    
    298,649
    
    
    
    805,020
    
    
    
    766,520Gross profit
    
    
    25,519
    
    
    
    74,266
    
    
    
    97,825
    
    
    
    220,491Selling, general, and administrative expenses
    
    
    15,324
    
    
    
    16,589
    
    
    
    45,739
    
    
    
    46,760Operating income
    
    
    10,195
    
    
    
    57,677
    
    
    
    52,086
    
    
    
    173,731Net interest & other expenses
    
    
    922
    
    
    
    2,530
    
    
    
    3,227
    
    
    
    5,608Income before income taxes
    
    
    9,273
    
    
    
    55,147
    
    
    
    48,859
    
    
    
    168,123Provision for income taxes
    
    
    3,518
    
    
    
    19,386
    
    
    
    16,955
    
    
    
    59,166Net income
    
    $
    5,755
    
    
    $
    35,761
    
    
    $
    31,904
    
    
    $
    108,957Net income per common and common equivalent
shares  basic
    
    $
    0.25
    
    
    $
    1.54
    
    
    $
    1.37
    
    
    $
    4.69Weighted average common and common equivalent
shares  basic
    
    
    23,362
    
    
    
    23,267
    
    
    
    23,344
    
    
    
    23,248Net income per common and common equivalent
shares - diluted
    
    $
    0.24
    
    
    $
    1.51
    
    
    $
    1.35
    
    
    $
    4.60Weighted average common and common equivalent
shares - diluted
    
    
    23,708
    
    
    
    23,680
    
    
    
    23,706
    
    
    
    23,666Cash dividends declared per share
    
    $
    0.02
    
    
    $
    
    
    
    $
    0.06
    
    
    $
    
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Nine Months EndedSeptember 30,In Thousands of Dollars
    
    2007
    
    
    2006OPERATING ACTIVITIESNet income
    
    $
    31,904
    
    
    $
    108,957Adjustments to reconcile net income to cash provided by (used
in) operating activities:Depreciation and amortization
    
    
    10,252
    
    
    
    9,052Deferred income tax liability (benefit)
    
    
    7,255
    
    
    
    (3,864
    )Excess tax benefits of options exercised
    
    
    (95
    )
    
    
    (768
    )Other
    
    
    199
    
    
    
    476Changes in operating assets and liabilities:Accounts receivable
    
    
    (31,644
    )
    
    
    (127,283
    )Inventory
    
    
    14,661
    
    
    
    (46,391
    )Other assets and liabilities
    
    
    4,926
    
    
    
    (5,279
    )Accounts payable and accrued liabilities
    
    
    11,536
    
    
    
    18,627Current income taxes receivable/payable
    
    
    7,709
    
    
    
    (17,379
    )NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    56,703
    
    
    
    (63,852
    )INVESTING ACTIVITIESPurchases of property, plant and equipment
    
    
    (21,594
    )
    
    
    (19,351
    )Proceeds from sale of equipment
    
    
    207
    
    
    
    225Other
    
    
    6
    
    
    
    NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    
    (21,381
    )
    
    
    (19,126
    )FINANCING ACTIVITIESBorrowings (repayments) under notes payable
    
    
    
    
    
    
    113,800Deferred financing fees
    
    
    
    
    
    
    (152
    )Proceeds from issuance of common stock
    
    
    622
    
    
    
    623Dividend paid
    
    
    (1,399
    )
    
    
    Excess tax benefit of options exercised
    
    
    95
    
    
    
    768NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    (682
    )
    
    
    115,039Net increase (decrease) in cash
    
    
    34,640
    
    
    
    32,061Cash at beginning of period
    
    
    24,603
    
    
    
    2,622Cash at end of period
    
    $
    59,243
    
    
    $
    34,683
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September 30,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    22,149
    
    
    $
    18,259Work-in-process
    
    
    18,615
    
    
    
    17,998Finished goods
    
    
    129,018
    
    
    
    149,962169,782
    
    
    
    186,219Adjust to LIFO cost
    
    
    (80,496
    )
    
    
    (82,272
    )89,286
    
    
    
    103,947Lower of Cost or Market Adjustment
    
    
    
    
    
    
    $
    89,286
    
    
    $
    103,947
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Quarter Ended
    
    
    Quarter Ended9/30/07
    
    
    9/30/06Numerator:Net income
    
    $
    5,755
    
    
    $
    35,761Denominator:Denominator for basic earnings per share  weighted average shares
    
    
    23,362
    
    
    
    23,267Effect of dilutive securities:Employee stock options
    
    
    346
    
    
    
    413Denominator for diluted earnings per share  weighted average shares
    
    
    23,708
    
    
    
    23,680
  Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended9/30/07
    
    
    9/30/06Numerator:Net income
    
    $
    31,904
    
    
    $
    108,957Denominator:Denominator for basic
earnings per share 
weighted average shares
    
    
    23,344
    
    
    
    23,248Effect of dilutive securities:Employee stock options
    
    
    362
    
    
    
    418Denominator for diluted earnings per share 
weighted average shares
    
    
    23,706
    
    
    
    23,666
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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 General
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Results of Operations
 Quarter Ended September 30, 2007 Compared to Quarter Ended September 30, 2006
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Nine Months Ended September 30, 2007 compared to Nine Months Ended September 30, 2006
       Liquidity and Capital Resources
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Information Regarding Forward Looking Statements
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Stock Repurchase Program
  
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ENCORE WIRE CORPORATION(Registrant)Dated: November 2, 2007
    /s/ DANIEL L. JONESDaniel L. Jones, President andChief Executive OfficerDated: November 2, 2007
    /s/ FRANK J. BILBANFrank J. Bilban, Vice President  Finance,Treasurer and Secretary
Chief Financial Officer 19




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ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation of Encore Wire Corporation, as
amended through July 20, 2004 (filed as 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 10.2 to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31,
2006, and incorporated herein by reference).10.2*
    
    1989 Stock Option Plan, as amended and restated (filed as Exhibit
4.1 to the Companys Registration Statement on Form S-8 (No.
333-38729), and incorporated herein by reference), terminated
except with respect to outstanding options thereunder.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,
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ExhibitNumber
    
    DescriptionNational 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
    
    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).10.8
    
    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 & 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).10.9
    
    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).10.10
    
    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 November 2, 2007 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 2, 2007 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
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ExhibitNumber
    
    DescriptionEncore Wire Corporation, dated November 2, 2007 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 2, 2007 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