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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, 2006
 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
(State of Incorporation)
    
    75-2274963
(I.R.S. employer identification number)1410 Millwood Road
McKinney, Texas
(Address of principal executive offices)
    
    75069
(Zip code)
 Registrants telephone number, including area code: (972) 562-9473
 þ o
  o þ o
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ENCORE WIRE CORPORATION
 FORM 10-Q
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006
 Page No.PART I. FINANCIAL INFORMATIONITEM 1. Consolidated Financial StatementsConsolidated Balance Sheets June 30, 2006 (Unaudited) and December 31, 2005
    
    
    3Consolidated Statements of Income (Unaudited)
Quarters and Six Months ended June 30, 2006 and June 30, 2005
    
    
    5Consolidated Statements of Cash Flows (Unaudited)
Six Months ended June 30, 2006 and June 30, 2005
    
    
    6Notes to Consolidated Financial Statements
    
    
    7ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    12ITEM 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 6. Exhibits
    
    
    19Signatures
    
    
    20First Amendment to Credit AgreementCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
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PART I. FINANCIAL INFORMATION
 
   
  June 30,
    
    
    December 31,2006
    
    
    2005In Thousands of Dollars
    
    (Unaudited)
    
    
    (See Note)ASSETSCurrent assets:Cash
    
    $
    2,760
    
    
    $
    2,622Accounts receivable (net of allowance
of $780 and $690)
    
    
    271,215
    
    
    
    164,930Inventories (Note 3)
    
    
    134,157
    
    
    
    67,932Prepaid expenses and other assets
    
    
    15,156
    
    
    
    18,628Current deferred income taxes
    
    
    3,046
    
    
    
    1,121Total current assets
    
    
    426,334
    
    
    
    255,233Property, plant and equipment-on the basis of cost:Land
    
    
    9,406
    
    
    
    8,375Construction in progress
    
    
    11,341
    
    
    
    12,113Buildings and improvements
    
    
    47,065
    
    
    
    38,063Machinery and equipment
    
    
    125,910
    
    
    
    120,326Furniture and fixtures
    
    
    3,916
    
    
    
    3,624Total property, plant, and equipment
    
    
    197,638
    
    
    
    182,501Accumulated depreciation and amortization
    
    
    94,797
    
    
    
    89,364102,841
    
    
    
    93,137Other assets
    
    
    97
    
    
    
    106Total assets
    
    $
    529,272
    
    
    $
    348,476
 Note:
    
    The consolidated balance sheet at December 31, 2005, as presented, is
derived from the audited consolidated financial statements at that date.
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June 30,
    
    
    December 31,2006
    
    
    2005In Thousands of Dollars, Except Share and Per Share Data
    
    (Unaudited)
    
    
    (See Note)LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    35,667
    
    
    $
    17,277Accrued liabilities
    
    
    20,920
    
    
    
    19,304Current income taxes payable
    
    
    22,833
    
    
    
    19,540Total current liabilities
    
    
    79,420
    
    
    
    56,121Non-current deferred income taxes
    
    
    10,026
    
    
    
    10,620Long term notes payable
    
    
    152,236
    
    
    
    70,438Other long term liabilities
    
    
    2,314
    
    
    
    762Stockholders equity:Common stock, $.01 par value:Authorized 40,000,000 shares; issued and
outstanding shares 26,025,902 and 25,939,103
    
    
    260
    
    
    
    259Additional paid-in capital
    
    
    40,476
    
    
    
    38,932Treasury stock (2,758,950 and 2,758,950 shares, at cost)
    
    
    (15,275
    )
    
    
    (15,275
    )Retained earnings
    
    
    259,815
    
    
    
    186,619Total stockholders equity
    
    
    285,276
    
    
    
    210,535Total liabilities and stockholders equity
    
    $
    529,272
    
    
    $
    348,476
 Note:
    
    The consolidated balance sheet at December 31, 2005, 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
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    362,048
    
    
    $
    169,265
    
    
    $
    614,097
    
    
    $
    306,459Cost of goods sold
    
    
    255,195
    
    
    
    153,894
    
    
    
    467,871
    
    
    
    280,340Gross profit
    
    
    106,853
    
    
    
    15,371
    
    
    
    146,226
    
    
    
    26,119Selling, general, and administrative expenses
    
    
    16,733
    
    
    
    10,898
    
    
    
    30,172
    
    
    
    20,486Operating income (loss)
    
    
    90,120
    
    
    
    4,473
    
    
    
    116,054
    
    
    
    5,633Net interest & other expenses
    
    
    1,945
    
    
    
    770
    
    
    
    3,078
    
    
    
    1,602Income (loss) before income taxes
    
    
    88,175
    
    
    
    3,703
    
    
    
    112,976
    
    
    
    4,031Provision (benefit) for income taxes
    
    
    31,116
    
    
    
    1,277
    
    
    
    39,780
    
    
    
    568Net income (loss)
    
    $
    57,059
    
    
    $
    2,426
    
    
    $
    73,196
    
    
    $
    3,463Net income (loss) per common and common
equivalent shares  basic
    
    $
    2.45
    
    
    $
    .10
    
    
    $
    3.15
    
    
    $
    .15Weighted average common and common
equivalent shares  basic
    
    
    23,262
    
    
    
    23,107
    
    
    
    23,238
    
    
    
    23,107Net income (loss) per common and common
equivalent shares  diluted
    
    $
    2.41
    
    
    $
    .10
    
    
    $
    3.09
    
    
    $
    .15Weighted average common and common
equivalent shares  diluted
    
    
    23,719
    
    
    
    23,393
    
    
    
    23,709
    
    
    
    23,413Cash dividends declared per share
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
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Six Months EndedJune 30,In Thousands of Dollars
    
    2006
    
    
    2005OPERATING ACTIVITIESNet income (loss)
    
    $
    73,196
    
    
    $
    3,463Adjustments to reconcile net income to cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    5,748
    
    
    
    6,143Provision for bad debts
    
    
    90
    
    
    
    90Changes in operating assets and liabilities:Accounts receivable
    
    
    (106,375
    )
    
    
    (15,948
    )Inventory
    
    
    (66,225
    )
    
    
    (10,610
    )Accounts payable and accrued liabilities
    
    
    20,006
    
    
    
    1,721Other assets and liabilities
    
    
    3,441
    
    
    
    (2,648
    )Current income taxes receivable/payable
    
    
    773
    
    
    
    197NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    (69,346
    )
    
    
    (17,592
    )INVESTING ACTIVITIESPurchases of property, plant and equipment
    
    
    (15,592
    )
    
    
    (4,633
    )Change in long-term investments
    
    
    
    
    
    
    Proceeds from sale of equipment
    
    
    181
    
    
    
    196NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    
    (15,411
    )
    
    
    (4,437
    )FINANCING ACTIVITIESBorrowings (repayments) under notes payable
    
    
    83,350
    
    
    
    20,418Proceeds from issuance of common stock
    
    
    794
    
    
    
    29Tax benefit of options exercised
    
    
    751
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    84,895
    
    
    
    20,447Net increase (decrease) in cash
    
    
    138
    
    
    
    (1,582
    )Cash at beginning of period
    
    
    2,622
    
    
    
    2,640Cash at end of period
    
    $
    2,760
    
    
    $
    1,058
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Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
 Share-Based Payment
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WeightedAverageWeighted
    
    Remaining
    
    AggregateNumber
    
    Average
    
    Contractual
    
    IntrinsicOf Shares
    
    Exercise Price
    
    Term
    
    ValueBalance outstanding
at December 31,
2005
    
    
    639,825
    
    
    $
    6.73Granted
    
    
    0
    
    
    
    0Exercised
    
    
    86,799
    
    
    
    7.69Forfeited/Cancelled
    
    
    1,500
    
    
    
    7.70Balance outstanding
at June 30, 2006
    
    
    551,526
    
    
    
    6.25
    
    
    
    4.28
    
    
    $
    16,373Options exercisable
at June 30, 2006
    
    
    480,046
    
    
    $
    5.82
    
    
    
    4.06
    
    
    $
    14,457
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June 30,
    
    
    December 31,2006
    
    
    2005Raw materials
    
    $
    17,122
    
    
    $
    11,288Work-in-process
    
    
    21,778
    
    
    
    8,428Finished goods
    
    
    184,042
    
    
    
    84,665222,942
    
    
    
    104,381Adjust to LIFO cost
    
    
    (88,785
    )
    
    
    (36,449
    )134,157
    
    
    
    67,932Lower of Cost or Market Adjustment
    
    
    
    
    
    
    $
    134,157
    
    
    $
    67,932
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Quarter Ended
    
    
    Quarter Ended6/30/06
    
    
    6/30/05Numerator:Net income
    
    $
    57,058,821
    
    
    $
    2,426,396Denominator:Denominator for basic
earnings per share 
weighted average
shares
    
    
    23,261,754
    
    
    
    23,107,499Effect of dilutive securities:Employee stock options
    
    
    457,439
    
    
    
    285,657Denominator for diluted earnings per share
 weighted average shares
    
    
    23,719,194
    
    
    
    23,393,156
  Six Months
    
    
    Six MonthsEnded
    
    
    Ended6/30/06
    
    
    6/30/05Numerator:Net income
    
    $
    73,196,019
    
    
    $
    3,463,229Denominator:Denominator for basic
earnings per share 
weighted average
shares
    
    
    23,237,708
    
    
    
    23,106,618Effect of dilutive securities:Employee stock options
    
    
    471,158
    
    
    
    306,237Denominator for diluted earnings per share
 weighted average shares
    
    
    23,708,866
    
    
    
    23,412,855
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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 General
    Results of Operations
 Quarter Ended June 30, 2006 Compared to Quarter Ended June 30, 2005
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Six Months Ended June 30, 2006 compared to Six Months Ended June 30, 2005
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Liquidity and Capital Resources
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Information Regarding Forward Looking Statements
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PART II. OTHER INFORMATION
 
 ITEM 1A.
    
    RISK FACTORSThere 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, 2005.
 
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
 Stock Repurchase Program
  
  Annual Meeting of Stockholders
 (a)
    
    The annual meeting of the stockholders of the Company was held in McKinney,
Texas at 9:00 a.m., local time, on May 2, 2006.(b)
    
    Proxies were solicited by the Board of Directors of the Company pursuant to
Regulation 14A under the Securities and Exchange Act of 1934; there was no
solicitation in opposition to the Board of Directors nominees for director as listed
in the proxy statement; and all of such nominees were duly elected as reported below.
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(c)
    
    Out of a total of 23,241,853 shares of the Companys common stock
outstanding and entitled to vote, 21,317,768 shares were present in person or by
proxy, representing approximately 90% of the outstanding shares.The first matter voted on by the stockholders, as fully described in the proxy
statement for the annual meeting, was the election of directors. The following
table presents the number of shares voted for, voted against, and withheld for
each nominee for director.
 NOMINEE FOR
    
    NUMBER OF
    
    
    NUMBER OFDIRECTOR
    
    VOTES FOR
    
    
    VOTES WITHHELDDonald E. Courtney
    
    
    20,839,856
    
    
    
    477,877Daniel L. Jones
    
    
    21,060,083
    
    
    
    275,685Thomas L. Cunningham
    
    
    21,081,304
    
    
    
    236,464William R. Thomas
    
    
    18,698,236
    
    
    
    2,619,532John H. Wilson
    
    
    21,297,950
    
    
    
    473,706Joseph M. Brito
    
    
    20,985,267
    
    
    
    332,501Scott D. Weaver
    
    
    20,179,507
    
    
    
    1,138,261
 The second matter voted on by the stockholders, as fully described in the proxy
statement for the annual meeting, was a resolution to amend the 1999 Stock
Option Plan of Encore Wire Corporation. The resolution was adopted with the
holders of 15,291,705 shares voting in favor of the resolution and the holders
of 573,183 shares voting against. Holders of 26,913 shares abstained from
voting, and there were 5,425,947 broker non-votes.The third matter voted on by the stockholders, as fully described in the proxy
statement for the annual meeting, was a resolution to approve Ernst & Young LLP
as the independent auditors of the Companys financial statements for the year
ending December 31, 2006. The resolution was adopted with the holders of
21,221,119 shares voting in favor of the resolution and the holders of 573,183
shares voting against. Holders of 26,933 shares abstained from voting, and there
were 5,425,947 broker non-votes.(d)
    
    Inapplicable.
 
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ENCORE WIRE CORPORATION(Registrant)Dated: August 8, 2006
    
    /s/ DANIEL L. JONESDaniel L. Jones, President andChief Executive OfficerDated: August 8, 2006
    
    /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 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
    
    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.31.1
    
    Certification by Daniel L. Jones, President and Chief Executive
Officer of Encore Wire Corporation, dated August 8, 2006 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, 2006 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, 2006 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, 2006 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