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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 endedJune 30, 2007
 OR
 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
(State of Incorporation)
    
    75-2274963
(I.R.S. employer identification number)1410 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 JUNE 30, 2007
 Page No.PART I. FINANCIAL INFORMATIONITEM 1. Consolidated Financial StatementsConsolidated Balance Sheets June 30, 2007 (Unaudited) and December 31, 2006
    
    
    3Consolidated Statements of Income (Unaudited) Quarters and Six Months ended June 30, 2007 and June 30, 2006
    
    
    5Consolidated Statements of Cash Flows (Unaudited) Six Months ended June 30, 2007 and June 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
    
    
    19Third Amendment to Credit AgreementWaiver to Note Purchase AgreementWaiver to Master Note Purchase AgreementCertification by Daniel L. Jones, President and CEOCertification by Frank J. Bilban, Vice President-Finance, CFO, Treasurer and SecretaryCertification by Daniel L. Jones, President and CEOCertification by Frank J. Bilban, Vice President-Finance, CFO, Treasurer and Secretary
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
   
  June 30,
    
    
    December 31,In Thousands of Dollars
    
    2007
    
    
    2006(Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash
    
    $
    48,794
    
    
    $
    24,603Accounts receivable (net of allowance
of $950 and $884)
    
    
    235,776
    
    
    
    214,963Inventories (Note 2)
    
    
    117,724
    
    
    
    103,947Prepaid expenses and other assets
    
    
    7,081
    
    
    
    6,713Current taxes receivable
    
    
    
    
    
    
    18,523Current deferred income taxes
    
    
    1,879
    
    
    
    2,301Total current assets
    
    
    411,254
    
    
    
    371,050Property, plant and equipment  at cost:Land
    
    
    9,604
    
    
    
    9,592Construction in progress
    
    
    14,230
    
    
    
    6,672Buildings and improvements
    
    
    47,065
    
    
    
    47,065Machinery and equipment
    
    
    140,252
    
    
    
    136,552Furniture and fixtures
    
    
    4,147
    
    
    
    4,072Total property, plant, and equipment
    
    
    215,298
    
    
    
    203,953Accumulated depreciation and amortization
    
    
    (107,104
    )
    
    
    (100,966
    )Net property, plant, and equipment
    
    
    108,194
    
    
    
    102,987Other assets
    
    
    115
    
    
    
    120Total assets
    
    $
    519,563
    
    
    $
    474,157
 
 Note:
    
    The consolidated balance sheet at December 31, 2006, as presented, is
derived from the audited consolidated financial statements at that date.  3




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June 30,
    
    
    December 31,In Thousands of Dollars, Except Share Data
    
    2007
    
    
    2006(Unaudited)
    
    
    (See Note)LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    26,263
    
    
    $
    13,413Accrued liabilities
    
    
    30,937
    
    
    
    23,772Current deferred income taxes
    
    
    
    
    
    
    Total current liabilities
    
    
    57,200
    
    
    
    37,185Non-current deferred income taxes
    
    
    9,273
    
    
    
    9,851Long term notes payable
    
    
    98,394
    
    
    
    98,974Other long term liabilities
    
    
    1,606
    
    
    
    1,026Stockholders equity:Common stock, $.01 par value:Authorized shares  40,000,000;
Issued shares 26,118,952 and 26,035,302
    
    
    261
    
    
    
    260Additional paid-in capital
    
    
    41,602
    
    
    
    40,849Treasury stock, at cost  2,758,950 shares
    
    
    (15,275
    )
    
    
    (15,275
    )Retained earnings
    
    
    326,502
    
    
    
    301,287Total stockholders equity
    
    
    353,090
    
    
    
    327,121Total liabilities and stockholders equity
    
    $
    519,563
    
    
    $
    474,157
 
 Note:
    
    The consolidated balance sheet at December 31, 2006, as presented, is
derived from the audited consolidated financial statements at that date.  4




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Quarter Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,In Thousands of Dollars, Except Per Share Data
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    333,635
    
    
    $
    362,048
    
    
    $
    594,364
    
    
    $
    614,097Cost of goods sold
    
    
    286,073
    
    
    
    255,195
    
    
    
    522,058
    
    
    
    467,871Gross profit
    
    
    47,562
    
    
    
    106,853
    
    
    
    72,306
    
    
    
    146,226Selling, general, and administrative expenses
    
    
    16,835
    
    
    
    16,733
    
    
    
    30,415
    
    
    
    30,172Operating income
    
    
    30,727
    
    
    
    90,120
    
    
    
    41,891
    
    
    
    116,054Net interest & other expenses
    
    
    1,152
    
    
    
    1,945
    
    
    
    2,305
    
    
    
    3,078Income before income taxes
    
    
    29,575
    
    
    
    88,175
    
    
    
    39,586
    
    
    
    112,976Provision for income taxes
    
    
    9,865
    
    
    
    31,116
    
    
    
    13,436
    
    
    
    39,780Net income
    
    $
    19,710
    
    
    $
    57,059
    
    
    $
    26,150
    
    
    $
    73,196Net income per common and common
equivalent shares  basic
    
    $
    0.84
    
    
    $
    2.45
    
    
    $
    1.12
    
    
    $
    3.15Weighted average common and common
equivalent shares  basic
    
    
    23,356
    
    
    
    23,262
    
    
    
    23,335
    
    
    
    23,238Net income per common and common
equivalent shares  diluted
    
    $
    0.83
    
    
    $
    2.41
    
    
    $
    1.10
    
    
    $
    3.09Weighted average common and common
equivalent shares  diluted
    
    
    23,712
    
    
    
    23,719
    
    
    
    23,703
    
    
    
    23,709Cash dividends declared per share
    
    $
    0.02
    
    
    $
    
    
    
    $
    0.04
    
    
    $
    
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Six Months EndedJune 30,In Thousands of Dollars
    
    2007
    
    
    2006OPERATING ACTIVITIESNet income
    
    $
    26,150
    
    
    $
    73,196Adjustments to reconcile net income to cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    6,792
    
    
    
    5,829Deferred income tax benefit
    
    
    (156
    )
    
    
    (2,519
    )Excess tax benefits of options exercised
    
    
    (44
    )
    
    
    (751
    )Other
    
    
    134
    
    
    
    49Changes in operating assets and liabilities:Accounts receivable
    
    
    (20,873
    )
    
    
    (106,375
    )Inventory
    
    
    (13,777
    )
    
    
    (66,225
    )Accounts payable and accrued liabilities
    
    
    10,359
    
    
    
    20,006Other assets and liabilities
    
    
    (546
    )
    
    
    3,400Current income taxes receivable/payable
    
    
    28,220
    
    
    
    4,044NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    36,259
    
    
    
    (69,346
    )INVESTING ACTIVITIESPurchases of property, plant and equipment
    
    
    (11,912
    )
    
    
    (15,592
    )Proceeds from sale of equipment
    
    
    145
    
    
    
    181Other
    
    
    5
    
    
    
    NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    
    (11,762
    )
    
    
    (15,411
    )FINANCING ACTIVITIESBorrowings (repayments) under notes payable
    
    
    
    
    
    
    83,350Proceeds from issuance of common stock
    
    
    582
    
    
    
    794Dividend paid
    
    
    (932
    )
    
    
    Excess tax benefit of options exercised
    
    
    44
    
    
    
    751NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    (306
    )
    
    
    84,895Net increase (decrease) in cash
    
    
    24,191
    
    
    
    138Cash at beginning of period
    
    
    24,603
    
    
    
    2,622Cash at end of period
    
    $
    48,794
    
    
    $
    2,760
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June 30,
    
    
    December 31,2007
    
    
    2006Raw materials
    
    $
    19,678
    
    
    $
    18,259Work-in-process
    
    
    25,379
    
    
    
    17,998Finished goods
    
    
    157,066
    
    
    
    149,962202,123
    
    
    
    186,219Adjust to LIFO cost
    
    
    (84,399
    )
    
    
    (82,272
    )117,724
    
    
    
    103,947Lower of Cost or Market Adjustment
    
    
    
    
    
    
    $
    117,724
    
    
    $
    103,947
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Quarter Ended
    
    
    Quarter Ended6/30/07
    
    
    6/30/06Numerator:Net income
    
    $
    19,710
    
    
    $
    57,059Denominator:Denominator for basic earnings per share  weighted average shares
    
    
    23,356
    
    
    
    23,262Effect of dilutive securities:Employee stock options
    
    
    356
    
    
    
    457Denominator for diluted earnings per share  weighted average shares
    
    
    23,712
    
    
    
    23,719
  Six Months Ended
    
    
    Six Months Ended6/30/07
    
    
    6/30/06Numerator:Net income
    
    $
    26,150
    
    
    $
    73,196Denominator:Denominator for basic earnings per
share  weighted average shares
    
    
    23,335
    
    
    
    23,238Effect of dilutive securities:Employee stock options
    
    
    368
    
    
    
    471Denominator for diluted earnings
per share  weighted average
shares
    
    
    23,703
    
    
    
    23,709
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General
   11




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Results of Operations
 Quarter Ended June 30, 2007 Compared to Quarter Ended June 30, 2006
   12




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Six Months Ended June 30, 2007 compared to Six Months Ended June 30, 2006
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Liquidity and Capital Resources
     15




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Information Regarding Forward Looking Statements
  
   
    17




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ITEM 1A.
    
    RISK FACTORS
There have been no material changes to the Companys risk factors as disclosed in
Item 1A, Risk Factors, in the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2006.
 
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
 Stock Repurchase Program
  
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ENCORE WIRE CORPORATION(Registrant) Dated: August 8, 2007
    /s/ DANIEL L. JONESDaniel L. Jones, President andChief Executive Officer Dated: August 8, 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 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 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 there under.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.
 20




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ExhibitNumber
    
    Description10.7
    
    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 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).10.8
    
    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 and Annuity
Insurance Company, London Life Insurance Company, London Life and
General Reinsurance Company Limited, as Holders, dated June 29,
2007.10.9
    
    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, 2007.31.1
    
    Certification by Daniel L. Jones, President and Chief Executive
Officer of Encore Wire Corporation, dated August 8, 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 August 8, 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 Encore Wire Corporation, dated August 8, 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 August 8, 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. 21