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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) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period endedMarch 31, 2004 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
    
    75-2274963(State of Incorporation)
    
    (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 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such
Reports), and (2) has been subject to such filing requirements for the past 90
days. Yes x No Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes x No Number of shares of Common Stock outstanding as of April 30, 2004: 15,360,126 Page 1 of 25 Sequentially Numbered Pages
Index to Exhibits on Page 18




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ENCORE WIRE CORPORATION FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004 Page No.PART I. FINANCIAL INFORMATIONITEM 1. Consolidated Financial StatementsConsolidated Balance Sheets March 31, 2004 (Unaudited) and December 31, 2003
    
    
    3Consolidated Statements of Income (Unaudited) Quarters ended March 31, 2004 and March 31, 2003
    
    
    5Consolidated Statements of Cash Flows (Unaudited) Quarters ended March 31, 2004 and March 31, 2003
    
    
    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
    
    
    15ITEM 4. Controls and Procedures
    
    
    15PART II. OTHER INFORMATIONITEM 2. Changes in Securities and use of Proceeds
    
    
    16ITEM 6. Exhibits and Reports on Form 8-K
    
    
    16Signatures
    
    
    17Certification of Chief Executive OfficerCertification of Chief Financial OfficerCertification of Chief Executive OfficerCertification of Chief Financial Officer




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PART I. FINANCIAL INFORMATION 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS ENCORE WIRE CORPORATION 
 CONSOLIDATED BALANCE SHEETS March 31,
    
    December 31,2004
    
    2003In Thousands of Dollars
    
    (Unaudited)
    
    See NoteASSETSCurrent Assets:Cash
    
    $
    369
    
    
    $
    391Accounts receivable (net of allowance
of $602 and $490)
    
    
    118,125
    
    
    
    81,430Inventories (Note 3)
    
    
    80,616
    
    
    
    59,344Prepaid expenses and other assets
    
    
    8,028
    
    
    
    5,112Current taxes receivable
    
    
    
    
    
    
    Total current assets
    
    
    207,138
    
    
    
    146,277Property, plant and equipment-on the basis of cost:Land
    
    
    5,894
    
    
    
    5,858Construction in progress
    
    
    4,668
    
    
    
    2,396Buildings and improvements
    
    
    30,994
    
    
    
    30,855Machinery and equipment
    
    
    109,488
    
    
    
    104,849Furniture and fixtures
    
    
    2,966
    
    
    
    2,942Total property, plant, and equipment
    
    
    154,010
    
    
    
    146,900Accumulated depreciation and amortization
    
    
    70,346
    
    
    
    67,97683,664
    
    
    
    78,924Other assets
    
    
    111
    
    
    
    98Total assets
    
    $
    290,913
    
    
    $
    225,299
 Note:
    
    The consolidated balance sheet at December 31, 2003 as presented, is
derived from the audited consolidated financial statements at that date.
 See accompanying notes. 3




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ENCORE WIRE CORPORATION CONSOLIDATED BALANCE SHEETS (continued) March 31,
    
    December 31,2004
    
    2003In Thousands of Dollars, Except Share Data
    
    (Unaudited)
    
    See NoteLIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Trade accounts payable
    
    $
    36,293
    
    
    $
    24,430Accrued liabilities
    
    
    9,889
    
    
    
    10,432Current income taxes payable
    
    
    9,052
    
    
    
    5,158Current deferred income taxes
    
    
    
    
    
    
    Total current liabilities
    
    
    55,234
    
    
    
    40,020Non-current deferred income taxes
    
    
    10,078
    
    
    
    10,078Long term notes payable
    
    
    88,343
    
    
    
    53,425Stockholders equity:Common stock, $.01 par value:Authorized 20,000,000 shares; issued
17,182,526 and
16,966,750 shares; outstanding 15,343,226 and
15,127,450 shares
    
    
    172
    
    
    
    170Additional paid-in capital
    
    
    36,309
    
    
    
    34,193Treasury stock 1,839,300 and 1,839,300 shares at cost
    
    
    (15,275
    )
    
    
    (15,275
    )Accumulated other comprehensive income (loss)
    
    
    (393
    )
    
    
    (492
    )Retained earnings
    
    
    116,445
    
    
    
    103,180Total stockholders equity
    
    
    137,258
    
    
    
    121,776Total liabilities and stockholders equity
    
    $
    290,913
    
    
    $
    225,299
 Note:
    
    The consolidated balance sheet at December 31, 2003, as presented, is
derived from the audited consolidated financial statements at that date.
 See accompanying notes. 4




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ENCORE WIRE CORPORATION 
 CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) Quarter EndedMarch 31,In Thousands of Dollars, Except Per Share Data
    
    2004
    
    2003Net sales
    
    $
    158,942
    
    
    $
    67,152Cost of goods sold
    
    
    126,021
    
    
    
    61,495Gross profit
    
    
    32,921
    
    
    
    5,657Selling, general, and administrative expenses
    
    
    11,218
    
    
    
    5,953Operating income (loss)
    
    
    21,703
    
    
    
    (296
    )Net interest & other expenses
    
    
    633
    
    
    
    511Income (loss) before income taxes
    
    
    21,070
    
    
    
    (807
    )Provision (benefit) for income taxes
    
    
    7,805
    
    
    
    (290
    )Net income (loss)
    
    $
    13,265
    
    
    $
    (517
    )Net income (loss) per common and common
equivalent shares  basic
    
    $
    .87
    
    
    $
    (.03
    )Weighted average common and common
equivalent shares  basic
    
    
    15,208
    
    
    
    15,119Net income (loss) per common and common
equivalent shares  diluted
    
    $
    .85
    
    
    $
    (.03
    )Weighted average common and common
equivalent shares  diluted
    
    
    15,678
    
    
    
    15,119Cash dividends declared per share
    
    $
    
    
    
    $
    
 See accompanying notes. 5




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ENCORE WIRE CORPORATION 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Quarter EndedMarch 31,In Thousands of Dollars
    
    2004
    
    2003OPERATING ACTIVITIESNet income (loss)
    
    $
    13,265
    
    
    $
    (517
    )Adjustments to reconcile net income to cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    2,795
    
    
    
    3,103Provision for bad debts
    
    
    180
    
    
    
    45Changes in operating assets and liabilities:Accounts receivable
    
    
    (36,875
    )
    
    
    (2,728
    )Inventory
    
    
    (21,273
    )
    
    
    2,243Accounts payable and accrued liabilities
    
    
    11,420
    
    
    
    (4,828
    )Other assets and liabilities
    
    
    (2,997
    )
    
    
    (1,654
    )Current income taxes receivable/payable
    
    
    3,894
    
    
    
    (343
    )NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    (29,591
    )
    
    
    (4,679
    )INVESTING ACTIVITIESPurchases of property, plant and equipment
    
    
    (7,466
    )
    
    
    (2,108
    )Change in long-term investments
    
    
    
    
    
    
    Proceeds from sale of equipment
    
    
    
    
    
    
    24NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
    
    
    (7,466
    )
    
    
    (2,084
    )FINANCING ACTIVITIESBorrowings (repayments) under notes payable
    
    
    34,918
    
    
    
    6,740Proceeds from issuance of common stock
    
    
    2,117
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    37,035
    
    
    
    6,740Net increase (decrease) in cash
    
    
    (22
    )
    
    
    (23
    )Cash at beginning of period
    
    
    391
    
    
    
    160Cash at end of period
    
    $
    369
    
    
    $
    137
 See accompanying notes. 6




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ENCORE WIRE CORPORATION 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) NOTE 1  BASIS OF PRESENTATION The unaudited consolidated financial statements of Encore Wire Corporation (the
Company) have been prepared in accordance with generally accepted accounting
principles for interim information and the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments considered
necessary for a fair presentation, have been included. Results of operations
for interim periods presented do not necessarily indicate the results that may
be expected for the entire year. These financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2003. NOTE 2  STOCK BASED EMPLOYEE COMPENSATION The Company has a stock option plan for employees that provides for the
granting of stock options. The Company accounts for stock-based compensation
utilizing the intrinsic value method in accordance with the provisions of
Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock
Issued to Employees and related interpretations. Accordingly, no compensation
expense is recognized for fixed option plans because the exercise prices of
employee stock options equal or exceed the market prices of the underlying
stock on the dates of grant. 7




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The following table represents the effect on net income (loss) and earnings per
share if the Company had applied the fair value based method and recognition
provisions of Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, to stock-based Employee
compensation: ($s in 000s) QuarterEndedMarch 31,In Thousands of Dollars, Except Per Share Data
    
    2004
    
    2003Net income (loss), as reported
    
    $
    13,265
    
    
    $
    (517
    )Add: Stock-based employee compensation expense
included in reported income, net of related tax effects
    
    
    
    
    
    
    Deduct: Total stock-based employee compensation expense
determined under fair value based methods for all
awards net of related tax effects
    
    
    92
    
    
    
    101Pro forma net income (loss)
    
    $
    13,173
    
    
    $
    (618
    )Net income (loss) per shareBasic, as reported
    
    $
    0.87
    
    
    $
    (0.03
    )Basic, pro forma
    
    $
    0.87
    
    
    $
    (0.04
    )Diluted, as reported
    
    $
    0.85
    
    
    $
    (0.03
    )Diluted, pro forma
    
    $
    0.84
    
    
    $
    (0.04
    )
 As required, the pro forma disclosures above include options granted since
January 1, 1995. Consequently, the effects of applying SFAS 123 for providing
pro forma disclosures may not be representative of the effects on reported net
income for future years until all options outstanding are included in the pro
forma disclosures. For purposes of pro forma disclosures, the estimated fair
value of stock-based compensation plans and other options is amortized to
expense primarily over the vesting period. 8




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NOTE 3  INVENTORIES Inventories are stated at the lower of cost, determined by the last-in,
first-out (LIFO) method, or market. Inventories (in thousands) consisted of the following: March 31,
    
    December 31,2004
    
    2003Raw materials
    
    $
    19,605
    
    
    $
    12,976Work-in-process
    
    
    8,130
    
    
    
    5,490Finished goods
    
    
    70,802
    
    
    
    43,50798,537
    
    
    
    61,973Adjust to LIFO cost
    
    
    (17,921
    )
    
    
    (2,629
    )80,616
    
    
    
    59,344Lower of Cost or Market Adjustment
    
    
    
    
    
    
    $
    80,616
    
    
    $
    59,344
 An actual valuation of inventory under the LIFO method can be made only at the
end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
managements estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond managements control, interim
results are subject to the final year-end LIFO inventory valuation. 9




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NOTE 4  NET INCOME PER SHARE Net income (loss) per common and common equivalent share is computed using the
weighted average number of shares of common stock and common stock equivalents
outstanding during each period. If dilutive, the effect of stock options,
treated as common stock equivalents, is calculated using the treasury stock
method. The following table sets forth the computation of basic and diluted net income
per share: Quarter Ended
    
    Quarter Ended3/31/04
    
    3/31/03Numerator:Net income
    
    $
    13,264,636
    
    
    $
    (516,709
    )Denominator:Denominator for basic
earnings per share 
weighted average
shares
    
    
    15,207,690
    
    
    
    15,119,065Effect of dilutive securities:Employee stock options
    
    
    470,493
    
    
    
    Denominator for diluted
earnings per share
 weighted average shares
    
    
    15,678,183
    
    
    
    15,119,065
 NOTE 5  LONG TERM NOTE PAYABLE Effective August 31, 1999, the Company through its indirectly wholly-owned
subsidiary, Encore Wire Limited, a Texas Limited partnership (Encore Wire
Limited), refinanced its unsecured loan facility with a group of banks (the
Financing Agreement). The Company is a guarantor of the indebtedness.
Obligations under the Financing Agreement are the only contractual obligations
or commercial commitments of the Company. The Financing Agreement has been
amended five times since August 31, 1999, primarily to extend the terms to May
31, 2007. The fifth amendment, which was executed on January 15, 2004, also
expanded the credit line from $65 million to $125 million with the addition of
four new banks to the participant list. The Financing Agreement provides for
maximum borrowings of the lesser of $125.0 million or the amount of eligible
accounts receivable plus the amount of eligible finished goods and raw
materials, less any reserves established by the banks. The calculated maximum
borrowing amount available at March 31, 2004, as computed under the fifth
amendment of the Financing Agreement, was $125 million. The Financing Agreement is unsecured and contains customary covenants and
events of default. The Company was in compliance with these covenants, as of
March 31, 2004. Pursuant to the amended Financing Agreement, the Company is
allowed to pay cash dividends. At March 31, 2004, the balance outstanding
under the Financing 10




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Agreement was $88.3 million. Amounts outstanding under the Financing Agreement
are payable on May 31, 2007, with interest payments due quarterly. In December 2001, the Company entered into an interest swap agreement on $24.0
million of its variable rate debt in order to hedge against an increase in
variable interest rates. The terms of the agreement fix the interest rate on
$24.0 million of the Companys variable rate, long-term note payable to 4.6%
per annum plus a variable adder that is based on certain financial ratios
contained in the loan covenants. This three-year agreement expires on December
20, 2004. For the quarter ended March 31, 2004, the Company recorded an
unrealized gain of $99,456, resulting in a net unrealized loss of $392,998
recorded in accumulated other comprehensive income (loss) in the equity section
of the balance sheet. NOTE 6  STOCK REPURCHASE AUTHORIZATION On November 6, 2001, the Board of Directors of the Company approved a stock
repurchase program covering the purchase of up to 300,000 shares of its common
stock dependent upon market conditions. Common stock purchases under this
program were authorized through December 31, 2002 on the open market or through
privately negotiated transactions at prices determined by the Chairman of the
Board or the President of the Company. As of December 31, 2002, 150,200 shares
had been purchased under this authorization. Early in 2003, the Board of
Directors extended this program through December 31, 2003 for the remaining
149,800 shares. There were no repurchases of stock in 2003. In February 2004,
the Board of Directors extended this program through December 31, 2004 for the
remaining 149,800 shares. NOTE 7  CONTINGENCIES The Company is a party to litigation and claims that arise out of the ordinary
business of the Company. While the results of these matters cannot be
predicted with certainty, the Company does not believe the final outcome of
such litigation and claims will have a material adverse effect on the financial
condition, the results of operation or the cash flows of the Company. The
Company also believes that it has adequate insurance to cover any damages that
may ultimately be awarded. 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The Company is a low-cost manufacturer of copper electrical building wire and
cable. The Company is a significant supplier of residential wire for interior
wiring in homes, apartments and manufactured housing and commercial wire for
commercial and industrial buildings. Price competition for electrical wire and cable is intense, and the Company
sells its products in accordance with prevailing market prices. Copper is the
principal raw material used by the Company in manufacturing its products.
Copper accounted for approximately 67.1%, 63.9% and 66.6% of the Companys cost
of goods sold during fiscal 2003, 2002 and 2001, respectively. The price of
copper fluctuates, depending on general economic conditions and in relation to
supply and demand and other factors, 11




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which has caused monthly variations in the cost of copper purchased by the
Company. The Company cannot predict copper prices in the future or the effect
of fluctuations in the cost of copper on the Companys future operating
results. The following discussion and analysis relates to factors that have affected the
operating results of the Company for the quarterly periods ended March 31, 2004
and 2003. Reference should also be made to the audited financial statements
and notes thereto included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2003. Results of Operations Quarter Ended March 31, 2004 Compared to Quarter Ended March 31, 2003 Net sales for the first quarter of 2004 amounted to $158.9 million compared
with net sales of $67.2 million for the first quarter of 2003. This dollar
increase was primarily the result of a 49% increase in the volume of product
shipped, coupled with a 58% increase in the price of wire sold. The company
believes the volume of wire sold increased principally due to the reduced
presence of certain competitors in the marketplace. The average cost per pound
of raw copper purchased increased in the first quarter of 2004 compared to the
first quarter of 2003, and was the principal reason the average sales price for
wire increased. Fluctuations in sales prices are primarily a result of
changing copper raw material prices and product price competition. Cost of goods sold increased to $126.0 million, or 79.3% of net sales, in the
first quarter of 2004, compared to $61.5 million, or 91.6% of net sales, in the
first quarter of 2003. Gross profit increased to $32.9 million, or 20.7% of
net sales, in the first quarter of 2004 versus $5.7 million, or 8.4% of net
sales, in the first quarter of 2003. The increased gross profit and gross
margin percentages were primarily the result of the increased volumes and
prices in 2004 versus 2003. Inventories are stated at the lower of cost, using the last-in, first-out
(LIFO) method, or market. The Company maintains only one inventory pool for
LIFO purposes as all inventories held by the Company generally relate to the
Companys only business segment, the manufacture and sale of copper building
wire products. As permitted by accounting principles generally accepted in the
United States, the Company maintains its inventory costs and cost of goods sold
on a first-in, first-out (FIFO) basis and makes a quarterly adjustment to
adjust total inventory and cost of goods sold from FIFO to LIFO. The Company
applies the lower of cost or market (LCM) test by comparing the LIFO cost of
its raw materials, work-in-process and finished goods inventories to estimated
market values, which are based primarily upon the most recent quoted market
price of copper, in pound quantities, as of the end of each reporting period.
Additionally, future reductions in the quantity of inventory on hand could
cause copper that is carried in inventory at costs different from the cost of
copper in the period in which the reduction occurs to be included in costs of
goods sold for that period. As a result of increasing copper costs during the first quarter 2004, a LIFO
adjustment was recorded increasing cost of sales by $15.3 million during the
quarter. Based on the current copper prices, there is no LCM adjustment
necessary. Future reductions in the price of copper could require the Company
to record a LCM adjustment against the related inventory balance, which would
result in a negative impact on net income. 12




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Selling expenses for the first quarter of 2004 were $9.0 million, or 5.7% of
net sales, compared to $4.4 million, or 6.5% of net sales, in the first quarter
of 2003. The percentage decrease was due to the increase in selling prices per
pound of wire that reduced the freight costs as a percentage of net sales.
General and administrative expenses increased to $2.0 million, or 1.3% of net
sales, in the first quarter of 2004 compared to $1.6 million, or 2.3% of net
sales, in the first quarter of 2003. The General and Administrative costs are
semi-fixed by nature and therefore did not increase proportionately with sales
and dropped as a percentage of sales. The provision for bad debts was $180,000
in the first quarter of 2004 versus $45,000 in the first quarter of 2003, as
the Company added to its provision to reflect the larger accounts receivable
balances outstanding consistent with the rapid growth of sales. Net interest expense was $633,000 in the first quarter of 2004 compared to
$511,000 in the first quarter of 2003. The increase was due to slightly higher
average debt balances and interest rates during the first quarter of 2004 than
the comparable period during 2003. As a result of the foregoing factors, the Companys net income increased to
$13.3 million in the first quarter of 2004 from a loss of $.5 million in the
first quarter of 2003. Liquidity and Capital Resources The Company maintains a substantial inventory of finished products to satisfy
customers prompt delivery requirements. As is customary in the industry, the
Company provides payment terms to most of its customers that exceed terms that
it receives from its suppliers. Therefore, the Companys liquidity needs have
generally consisted of operating capital necessary to finance these receivables
and inventory. Capital expenditures have historically been necessary to expand
the production capacity of the Companys manufacturing operations. The Company
has historically satisfied its liquidity and capital expenditure needs with
cash generated from operations, borrowings under its revolving credit
facilities and sales of its common stock. Effective August 31, 1999, the Company through Encore Wire Limited, refinanced
its unsecured loan facility with a group of banks (the Financing Agreement).
The Company is a guarantor of the indebtedness. Obligations under the
Financing Agreement are the only contractual obligations or commercial
commitments of the Company. The Financing Agreement has been amended five
times since August 31, 1999, primarily to extend the terms to May 31, 2007.
The fifth amendment, which was executed on January 15, 2004, also expanded the
credit line from $65 million to $125 million with the addition of four new
banks to the participant list. The Financing Agreement provides for maximum
borrowings of the lesser of $125.0 million or the amount of eligible accounts
receivable plus the amount of eligible finished goods and raw materials, less
any reserves established by the banks. The calculated maximum borrowing amount
available at March 31, 2004, as computed under the fifth amendment of the
Financing Agreement, was $125 million. The Financing Agreement is unsecured and contains customary covenants and
events of default. The Company was in compliance with these covenants, as of
March 31, 2004. Pursuant to the amended Financing Agreement, the Company is
allowed to pay cash dividends. At March 31, 2004, the balance outstanding
under the Financing 13




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Agreement was $88.3 million. Amounts outstanding under the Financing Agreement
are payable on May 31, 2007, with interest payments due quarterly. In December 2001, the Company entered into an interest swap agreement on $24.0
million of its variable rate debt in order to hedge against an increase in
variable interest rates. The terms of the agreement fix the interest rate on
$24.0 million of the Companys variable rate, long-term note payable to 4.6%
per annum plus a variable adder that is based on certain financial ratios
contained in the loan covenants. This three-year agreement expires on December
20, 2004. For the quarter ended March 31, 2004, the Company recorded an
unrealized gain of $99,456, resulting in a net unrealized loss of $392,998
recorded in accumulated other comprehensive income (loss) in the equity section
of the balance sheet. Cash used in operations was $29.6 million in the first quarter of 2004 compared
to $4.7 million of cash used in operations in the first quarter of 2003. This
increase in cash used in operations resulted primarily from an increase in
accounts receivable of $36.9 million and an increase in inventory of $21.3
million in the first quarter of 2004, versus an increase in accounts receivable
of $2.7 million and a decrease in inventory of $2.2 million in the first
quarter of 2003, offset by an increase in accounts payable of $11.9 million in
the first quarter of 2004 versus a decrease of $4.8 million in the first
quarter of 2003. The increase in accounts receivable and inventory is due to
the growth in the Companys unit sales and the rising prices of copper and
wire. This increase in working capital is to be expected in the case of a
company growing its sales as the Company did in the year over year comparison.
The strong earnings by the company, however, minimized this impact, as
illustrated by the fact that working capital increased by $45.6 million in the
quarter which along with the $7.5 million in first quarter capital expenditures
created a cash need of $53.1 million of which only $34.9 million came from
increased borrowings while $18.2 million was internally generated. Cash used
in investing activities increased to $7.5 million in the first quarter of 2004
from $2.1 million in the first quarter of 2003. In 2004, the funds were used
primarily to begin construction of the new 162,000 square foot addition to the
distribution center as well as the purchase of associated manufacturing
equipment that was part of the Companys capital plan announced in a press
release. The $34.9 million of cash provided by financing activities in the
first quarter of 2004 was a result of the Companys increase in outstanding
bank debt as discussed above. During the remainder of 2004, the Company expects its capital expenditures will
consist of additional plant and equipment for its residential and commercial
wire operations. The total capital expenditures associated with these projects
are currently estimated to be in the $18.0 to $21.0 million range in 2004. The
Company will continue to manage its working capital requirements. These
requirements may increase as a result of expected continued sales increases and
may be impacted by the price of copper. The Company believes that the cash
flow from operations and the financing available under the Financing Agreement
will satisfy working capital and capital expenditure requirements for the next
twelve months. Information Regarding Forward Looking Statements This report on Form 10-Q contains various forward-looking statements (within
the meaning of Section 27A of the securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended) and information
that are based on 14




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managements belief as well as assumptions made by and information currently
available to management. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Such
statements are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
expected. Among the key factors that may have a direct bearing on the
Companys operating results are fluctuations in the economy and in the level of
activity in the building and construction industry, demand for the Companys
products, the impact of price competition and fluctuations in the price of
copper. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes from the information provided in Item 7.A
of the Companys Annual Report on Form 10-K for the year ended December 31,
2003. 
 ITEM 4. CONTROLS AND PROCEDURES As of the end of the period covered by this report, an evaluation was performed
under the supervision and with the participation of the Companys management,
including the Chief Executive Officer (the CEO) and the Chief Financial
Officer (the CFO), of the effectiveness of the design and operation of the
Companys disclosure controls and procedures pursuant to Exchange Act Rule 13a-15
and 15d-15. Based on that evaluation, the Companys management, including the
CEO and CFO, concluded that the Companys disclosure controls and procedures
are adequately designed to ensure that the information required to be disclosed
in this report has been accumulated and communicated to management, including
the CEO and CFO, as appropriate, to allow timely decisions regarding such
required disclosure. There have been no significant changes in the Companys internal controls or in
other factors that have materially affected, or are reasonably likely to
materially affect, internal controls over financial reporting subsequent to the
period covered by this report. 15




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PART II. OTHER INFORMATION 
 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Stock Repurchase Program On November 6, 2001, the Board of Directors of the Company approved a stock
repurchase program covering the purchase of up to 300,000 shares of its common
stock dependent upon market conditions. Common stock purchases under this
program were authorized through December 31, 2002 on the open market or
through privately negotiated transactions at prices determined by the Chairman
of the Board or the President of the Company. As of December 31, 2002, 150,200
shares had been purchased under this authorization. Early in 2003, the Board
of Directors extended this program through December 31, 2003 for the remaining
149,800 shares. There were no repurchases of stock in 2003. In February 2004,
the Board of Directors extended this program through December 31, 2004 for the
remaining 149,800 shares. There were no repurchases of stock during the quarter ended March 31, 2004. 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K  (a)
    
    The information required by this Item 6(a) is set forth in
the Index to Exhibits accompanying this Form 10-Q.(b)
    
    Reports on Form 8-KThe Company did not file any reports on Form 8-K during the first
quarter of 2004; however, the following reports on Form 8-K were
furnished to the SEC during the first quarter of 2004:On January 16, 2004, the Company furnished a report on Form 8-K
pursuant to Items 7(c) and 9, indicating that the Company issued a
press release announcing an amendment to its bank credit agreement
to increase the Companys line of credit from $65 million to $125
million and to add four additional banks to the lending group.On February 2, 2004, the Company furnished a report on Form 8-K
pursuant to Items 7(c), 9 and 12, indicating that the Company
issued an earnings release describing selected financial results
of the Company for the fourth quarter of 2003.On February 3, 2004, the Company furnished a report on Form 8-K
pursuant to Items 7(c) and 9, indicating that the Company issued a
press release announcing a planned expansion of its McKinney,
Texas distribution center. 16




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the
undersigned thereunto duly authorized. ENCORE WIRE CORPORATION(Registrant)Dated: May 7, 2004
    
    /s/ VINCENT A. REGOVincent A. Rego, Chairman of the Board andChief Executive OfficerDated: May 7, 2004
    
    /s/ DANIEL L. JONESDaniel L. Jones, President andChief Operating OfficerDated: May 7, 2004
    
    /s/ FRANK J. BILBANFrank J. Bilban, Vice President  Finance,Treasurer and SecretaryChief Financial Officer
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INDEX TO EXHIBITS ExhibitNumber
    
    Description3.1
    
    Certificate of Incorporation of Encore Wire Corporation, as
amended (filed as Exhibit 3.1 to the Companys Registration
Statement on Form S-1, as amended (No. 33-47696), and incorporated
herein by reference).3.2
    
    Amended and Restated Bylaws of Encore Wire Corporation, as amended
through February 7, 2002 (filed as Exhibit 3.2 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2001,
and incorporated herein by reference).10.1
    
    Financing Agreement by and among Encore Wire Limited, as Borrower,
Bank of America, National Association, as Agent, and Bank of
America, National Association, and Comerica Bank-Texas, as
Lenders, dated August 31, 1999 (filed as Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, and incorporated herein by reference).10.2
    
    First amendment to Financing Agreement of August 31, 1999, dated
June 27, 2000 by and among Encore Wire Limited, as Borrower, Bank
of America, National Association, as Agent, and Bank of America,
National Association, and Comerica Bank-Texas, as Lenders (filed
as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for
the quarter ended September 30, 2000, and incorporated herein by
reference).10.3
    
    Second amendment to Financing Agreement of August 31, 1999, dated
June 28, 2002 by and among Encore Wire Limited, as Borrower, Bank
of America, National Association, as Agent, and Bank of America,
National Association, and Comerica Bank-Texas, as Lenders (filed
as Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for
the quarter ended June 30, 2002, and incorporated herein by
reference).10.4
    
    Third Amendment to Financing Agreement of August 31, 1999, dated
March 31, 2003 by and among Encore Wire Limited, as Borrower, Bank
of America, National Association, as Agent, and Bank of America,
National Association, and Comerica Bank-Texas, as Lenders (filed
as Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003, and incorporated herein by
reference).10.5
    
    Fourth Amendment to Financing Agreement of August 31, 1999, dated
November 5, 2003 by and among Encore Wire Limited, as Borrower,
Bank of America, National Association, as Agent, and Bank of
America, National Association, and Comerica Bank-Texas, as Lenders
(filed as Exhibit 10.5 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2003, and incorporated herein by
reference).
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ExhibitNumber
    
    Description10.6
    
    Fifth Amendment to Financing Agreement of August 31, 1999, dated
January 15, 2004 by and among Encore Wire Limited, as Borrower,
Bank of America, National Association, as Agent, and Bank of
America, National Association, Comerica Bank-Texas, Wells Fargo
Bank, N.A., Bank One, N.A., Guaranty Bank and Hibernia National
Bank, as Lenders (filed as Exhibit 10.6 to the Companys Annual
Report on Form 10-K for the year ended December 31, 2003, and
incorporated herein by reference).10.7*
    
    1999 Stock Option Plan, as amended and restated, effective as of
October 24, 2001 (filed as Exhibit 99.1 to the Companys
Registration Statement on Form S-8 (No. 333-86620), and
incorporated herein by reference).10.8*
    
    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.31.1
    
    Certification by Vincent A. Rego, Chairman and Chief Executive
Officer of Encore Wire Corporation, dated May 7, 2004 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 May 7, 2004 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 Vincent A. Rego, Chairman and Chief Executive
Officer of Encore Wire Corporation, dated May 7, 2004 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 May 7, 2004 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.
 19