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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, 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 SEPTEMBER 30, 2008
 Page No.PART I. FINANCIAL INFORMATIONITEM 1. Consolidated Financial StatementsConsolidated Balance Sheets
September 30, 2008 (Unaudited) and December 31, 2007
    
    
    3Consolidated Statements of Income (Unaudited)
Quarters and Nine Months ended September 30, 2008 and
September 30, 2007
    
    
    5Consolidated Statements of Cash Flows (Unaudited)
Nine Months ended September 30, 2008 and September 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 6. Exhibits
    
    
    18Signatures
    
    
    19EX-31.1EX-31.2EX-32.1EX-32.2
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PART I. FINANCIAL INFORMATION
 
   
  September 30,
    
    
    December 31,2008
    
    
    2007In Thousands of Dollars
    
    (Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    108,516
    
    
    $
    78,895Accounts receivable (net of allowance
of $1,224 and $1,003)
    
    
    233,539
    
    
    
    216,780Inventories
    
    
    65,197
    
    
    
    82,013Prepaid expenses and other assets
    
    
    1,012
    
    
    
    8,503Current taxes receivable
    
    
    2,748
    
    
    
    9,784Total current assets
    
    
    411,012
    
    
    
    395,975Property, plant and equipment  at cost:Land
    
    
    10,837
    
    
    
    10,837Construction in progress
    
    
    15,606
    
    
    
    10,058Buildings and improvements
    
    
    65,026
    
    
    
    61,342Machinery and equipment
    
    
    144,501
    
    
    
    142,867Furniture and fixtures
    
    
    6,542
    
    
    
    6,124Total property, plant and equipment
    
    
    242,512
    
    
    
    231,228Accumulated depreciation and amortization
    
    
    (122,682
    )
    
    
    (113,397
    )Net property, plant and equipment
    
    
    119,830
    
    
    
    117,831Other assets
    
    
    103
    
    
    
    106Total assets
    
    $
    530,945
    
    
    $
    513,912
 Note:
    
    The consolidated balance sheet at December 31, 2007, as presented, is
derived from the audited consolidated financial statements at that date.  3




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September 30,
    
    
    December 31,2008
    
    
    2007In Thousands of Dollars, Except Share Data
    
    (Unaudited)
    
    
    (See Note)LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    19,328
    
    
    $
    22,170Accrued liabilities
    
    
    23,329
    
    
    
    23,162Current deferred income taxes
    
    
    4,061
    
    
    
    3,733Total current liabilities
    
    
    46,718
    
    
    
    49,065Non-current deferred income taxes
    
    
    8,424
    
    
    
    8,968Long term notes payable
    
    
    100,735
    
    
    
    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
    
    
    42,328
    
    
    
    41,806Treasury stock, at cost - 3,016,250 and 2,883,350 shares
    
    
    (19,378
    )
    
    
    (17,315
    )Retained earnings
    
    
    351,857
    
    
    
    330,217Total stockholders equity
    
    
    375,068
    
    
    
    354,969Total liabilities and stockholders equity
    
    $
    530,945
    
    
    $
    513,912
 Note:
    
    The consolidated balance sheet at December 31, 2007, as presented, is
derived from the audited consolidated financial statements at that date.  4




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Quarter Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,In Thousands of Dollars, Except Per Share Data
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    296,338
    
    
    $
    308,481
    
    
    $
    900,942
    
    
    $
    902,845Cost of goods sold
    
    
    267,993
    
    
    
    282,962
    
    
    
    817,604
    
    
    
    805,020Gross profit
    
    
    28,345
    
    
    
    25,519
    
    
    
    83,338
    
    
    
    97,825Selling, general, and administrative expenses
    
    
    15,682
    
    
    
    15,324
    
    
    
    47,072
    
    
    
    45,739Operating income
    
    
    12,663
    
    
    
    10,195
    
    
    
    36,266
    
    
    
    52,086Net interest and other income and expense
    
    
    485
    
    
    
    922
    
    
    
    1,804
    
    
    
    3,227Income before income taxes
    
    
    12,178
    
    
    
    9,273
    
    
    
    34,462
    
    
    
    48,859Provision for income taxes
    
    
    4,101
    
    
    
    3,518
    
    
    
    11,435
    
    
    
    16,955Net income
    
    $
    8,077
    
    
    $
    5,755
    
    
    $
    23,027
    
    
    $
    31,904Net income per common and common
equivalent share  basic
    
    $
    0.35
    
    
    $
    0.25
    
    
    $
    1.00
    
    
    $
    1.37Weighted average common and common
equivalent shares  basic
    
    
    23,125
    
    
    
    23,362
    
    
    
    23,142
    
    
    
    23,344Net income per common and common
equivalent share  diluted
    
    $
    0.34
    
    
    $
    0.24
    
    
    $
    0.98
    
    
    $
    1.35Weighted average common and common
equivalent shares  diluted
    
    
    23,415
    
    
    
    23,708
    
    
    
    23,432
    
    
    
    23,706Cash dividends declared per share
    
    $
    0.02
    
    
    $
    0.02
    
    
    $
    0.06
    
    
    $
    0.06
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Nine Months EndedSeptember 30,In Thousands of Dollars
    
    2008
    
    
    2007OPERATING ACTIVITIESNet income
    
    $
    23,027
    
    
    $
    31,904Adjustments to reconcile net income to cash provided by
operating activities:Depreciation and amortization
    
    
    10,563
    
    
    
    10,252Deferred income tax liability (benefit)
    
    
    (215
    )
    
    
    7,255Excess tax benefits of options exercised
    
    
    (84
    )
    
    
    (95
    )Other
    
    
    656
    
    
    
    199Changes in operating assets and liabilities:Accounts receivable
    
    
    (16,980
    )
    
    
    (31,644
    )Inventories
    
    
    16,816
    
    
    
    14,661Other assets
    
    
    7,361
    
    
    
    4,926Current taxes receivable
    
    
    7,120
    
    
    
    7,709Trade accounts payable and accrued liabilities
    
    
    (2,673
    )
    
    
    11,536NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    45,591
    
    
    
    56,703INVESTING ACTIVITIESPurchases of property, plant and equipment
    
    
    (12,860
    )
    
    
    (21,594
    )Proceeds from sale of equipment
    
    
    267
    
    
    
    207Other
    
    
    
    
    
    
    6NET CASH USED IN INVESTING ACTIVITIES
    
    
    (12,593
    )
    
    
    (21,381
    )FINANCING ACTIVITIESDeferred
financing fees
    
    
    (133
    )
    
    
    Purchase of treasury stock
    
    
    (2,063
    )
    
    
    Proceeds from issuance of common stock
    
    
    124
    
    
    
    622Dividend paid
    
    
    (1,389
    )
    
    
    (1,399
    )Excess tax benefit of options exercised
    
    
    84
    
    
    
    95NET CASH USED IN FINANCING ACTIVITIES
    
    
    (3,377
    )
    
    
    (682
    )Net increase in cash and cash equivalents
    
    
    29,621
    
    
    
    34,640Cash and cash equivalents at beginning of period
    
    
    78,895
    
    
    
    24,603Cash and cash equivalents at end of period
    
    $
    108,516
    
    
    $
    59,243
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September 30,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    27,906
    
    
    $
    28,190Work-in-process
    
    
    14,204
    
    
    
    14,919Finished goods
    
    
    105,289
    
    
    
    113,756147,399
    
    
    
    156,865Adjust to LIFO cost
    
    
    (82,202
    )
    
    
    (74,852
    )65,197
    
    
    
    82,013Lower of Cost or Market Adjustment
    
    
    
    
    
    
    $
    65,197
    
    
    $
    82,013
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September 30,
    
    December 31,In Thousands of Dollars
    
    2008
    
    2007Sales volume discounts payable
    
    $
    17,304
    
    
    $
    15,590Property taxes payable
    
    
    1,467
    
    
    
    1,940Commissions payable
    
    
    2,214
    
    
    
    2,317Accrued salaries
    
    
    2,025
    
    
    
    2,377Other accrued liabilities
    
    
    319
    
    
    
    938$
    23,329
    
    
    $
    23,162
    Quarter Ended
    
    
    Quarter Ended9/30/08
    
    
    9/30/07Numerator:Net income
    
    $
    8,077
    
    
    $
    5,755Denominator:Denominator for basic
earnings per share 
weighted average
shares
    
    
    23,125
    
    
    
    23,362Effect of dilutive securities:Employee stock options
    
    
    290
    
    
    
    346Denominator for diluted earnings per share
 weighted average shares
    
    
    23,415
    
    
    
    23,708
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Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended9/30/08
    
    
    9/30/07Numerator:Net income
    
    $
    23,027
    
    
    $
    31,904Denominator:Denominator for basic earnings per
share  weighted average shares
    
    
    23,142
    
    
    
    23,344Effect of dilutive securities:Employee stock options
    
    
    290
    
    
    
    362Denominator for diluted earnings
per share  weighted average shares
    
    
    23,432
    
    
    
    23,706
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General
    11




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




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Nine Months Ended September 30, 2008 compared to Nine Months Ended September 30, 2007
  13




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Liquidity and Capital Resources
    15




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Information Regarding Forward Looking Statements
  
   
   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 6. Exhibits.
  18




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ENCORE WIRE CORPORATION(Registrant)Dated: November 6, 2008
    
    /s/ DANIEL L. JONESDaniel L. Jones, President andChief Executive OfficerDated: November 6, 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
    
    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*
    
    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 (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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ExhibitNumber
    
    Description10.8
    
    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 the 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 November 6, 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 November 6, 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 November 6, 2008 and
submitted as required by 18 U.S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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ExhibitNumber
    
    Description32.2
    
    Certification by Frank J. Bilban, Vice President-Finance, Chief
Financial Officer, Treasurer and Secretary of Encore Wire
Corporation, dated November 6, 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