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Edited Transcript of WIRE earnings conference call or presentation 20-Feb-19 4:00pm GMT

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Update time : 2019-05-09 17:40:26

Q4 2018 Encore rope Corp allowance Call

McKinney Feb 22, 2019 (Thomson StreetEvents) -- Edited Transcript of Encore rope Corp allowance conference scream or presentation Wednesday, February 20, 2019 at 4:00:00pm GMT

TEXT translation of Transcript

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Corporate Participants

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* Daniel L. Jones

Encore rope company - Chairman, principal & CEO

* unfold J. Bilban

Encore rope company - VP of Finance, Treasurer, Secretary & CFO

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Conference scream Participants

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* Bradford Alan Evans

Heartland Advisors, Inc. - SVP, Director of Equity investigation and Portfolio Manager

* Julio Alberto Romero

Sidoti & Company, LLC - Equity Analyst

* William Lewis Baldwin

Baldwin Anthony Securities, Inc. - main and Co-founder

* Zane Adam Karimi

D.A. Davidson & Co., investigation portion - investigation Associate

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Presentation

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Operator [1]

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Welcome ought the Encore rope Fourth zone allowance conference Call. My assign is Anna, and I will exist your operator because today's call. (Operator Instructions) interest letter that this conference is being recorded. I will now grow the scream at ought Daniel Jones, Chairman, principal and CEO. Daniel Jones, you can begin.

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Daniel L. Jones, Encore rope company - Chairman, principal & CEO [2]

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Thank you, Anna, and good morning, and greet ought the Encore rope company quarterly conference call. I'm Daniel Jones, the President, CEO and Chairman of the Board of Encore Wire, and with me this morning is unfold Bilban, our CFO.

We're pleased ought illustrate a large fourth zone and complete year, our unit sales were up because the year. The $3.74 of EPS at 2018 is a 43% multiply at the $2.61 EPS at 2017 and that's from middle operations net of the federal tax cut, and represents the second-best EPS at the history of the company.

One of the key metrics ought our allowance is the scatter among the charge of copper wire sold and the charge of raw copper purchased at any given period. The copper wire scatter increased 9.8% at 2018 versus 2017 because the medium charge of copper purchased increased 5.7% at 2018 versus 2017, and the medium selling charge of rope sold increased 7%. We are also encouraged by the fact spreads improved during the fourth zone of 2018 versus the third zone of 2018.

Copper spreads increased 2.8% at the sequential quarterly comparison. We progposal this certain trend at margins because a moan of the well construction industry surroundings across the country. Our conversations with our sales reps, distributor customers and their contractor customers mean that the hope because 2019 is also same good. We abstract ought direct and uphold industry charge increases at an effort ought affirm and multiply margins. We muse that our superior bid fill rates abstract ought enhance our position.

As orders become at from electric contractors, the distributors can calculate at our bid fill rates ought pledge rapid deliveries from coast-to-coast. We've been able ought terminate this, despite holding what are historically slight inventories. We muse our regulation is impressive, and we thank our employees and associates because their vast efforts. We also thank our stockholders because their continued support.

Frank Bilban, our main economical Officer, will now quarrel our economical results. Frank?

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Frank J. Bilban, Encore rope company - VP of Finance, Treasurer, Secretary & CFO [3]

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Thank you, Daniel. at a minute, we will newspaper the economical results because the quarter. back the economical review, we will receive any questions you can have.

Each of you to eat received a copy of Encore's newspaper free covering Encore's economical results. This free is also available at the internet or you can scream Elizabeth Campbell at (800) 962-9473, and we'll exist cheerful ought acquire you a copy.

Before we newspaper the financials, allow me mean that throughout this conference call, we can invent certain statements that country exist considered ought exist forward-looking. at bid ought business at certain securities legislation and instead of attempting ought identify each extraordinary statement because forward-looking, we warn you that complete such statements contain certain risks and uncertainties that could muse actual results ought disagree materially from those discussed here today.

I refer each of you ought the company's SEC reports and information releases because a more detailed discussion of these risks and uncertainties. Also, reconciliations of non-GAAP economical measures discussed during this conference scream ought the most direct alike economical measures presented at accordance with GAAP, including the term EBITDA, which we muse ought exist useful supplemental information because investors, are posted at www.encorewire.com.

Now because the financials. Net sales because the fourth zone of 2018 were $319.7 million compared ought $301.3 million during the fourth zone of 2017. Unit volume measured at copper pounds contained at the rope sold increased 10.5% and the medium selling charge per copper pound sold decreased 3.7% at the fourth zone of '18 versus the fourth zone of '17.

Sales prices at the fourth zone of 2018 decreased, largely due ought lower copper prices, which decreased 9% versus the fourth zone of 2017. Net allowance because the fourth zone of 2018 was $25 million versus $28.5 million at the fourth zone of '17.

Fully diluted net allowance per share, known because EPS, were $1.20 at the fourth zone of 2018 versus $1.36 at the fourth zone of '17. However, the $1.36 EPS at the fourth zone of 2017 includes $0.76 from the middle operations and $0.65 from the adjustment of deferred tax liabilities, offset by a nickel associated with a extraordinary bonus of $1,000 paid ought complete employees of the company, besides corporate officers, at the purpose of final year.

Net sales because the year ending December 31, 2018 were $1.289 billion versus $1.164 billion during the same epoch at 2017. Copper unit volume increased 4.5% at 2018 versus 2017, coupled with a 7% multiply at the medium selling charge per copper pound sold at 2018 versus 2017.

Sales prices increased largely due ought higher copper prices, which increased 5.7% during 2018 versus 2017. Net allowance because the year ended December 31, 2018 was $78.2 million versus $67 million because the same epoch at 2017. EPS was $3.74 because the year ended December 31, 2018, versus $3.21 because the same epoch at 2017. The EPS because the complete year of 2017 from middle operations was $2.61, which includes the adjustment delineated at the discussion of EPS at the fourth zone earlier.

On a sequential quarterly comparison, net sales because the fourth zone of 2018 were $319.7 million versus $340.7 million during the third zone of 2018. Copper unit volume decreased 6.5% at a sequential quarterly comparison, at rope with the fact that the fourth zone is mainly a slower zone at the construction and protection rope industries. The unit volume decrease was offset mildly by a 0.9% multiply at the medium selling charge of rope per copper pound sold. Net allowance because the fourth zone of 2018 increased ought $25 million versus $23.7 million at the 3rd zone of 2018. EPS was $1.20 at the 4th zone of 2018 versus $1.13 at the 3rd zone of 2018. Our surplus portion is same strong. We eat no long-term debt and our revolving belief rope is paid down ought 0. at addition, we had $178.4 million at money at the purpose of the quarter. We also declared another money dividend during this quarter. We'd alike ought recolect you this conference scream will exist available because replay back the conclusion of this session. if you wish ought hear the taped replay, interest scream (888) 843-7419 and enter the conference reference 687-7323 and the pound sign. Or you can visit our website.

I'll now grow the floor aid at ought Daniel Jones, our Chairman, principal and CEO. Daniel?

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Daniel L. Jones, Encore rope company - Chairman, principal & CEO [4]

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Thanks, Frank. because we highlighted, Encore performed healthy at the past zone and we muse we are healthy positioned because the future.

Anna, we will now receive questions from our listeners.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And we eat a question from Zane Karimi from D.A. Davidson.

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Zane Adam Karimi, D.A. Davidson & Co., investigation portion - investigation comrade [2]

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I was neutral hoping if you guys could furnish a tiny more color at where you were seeing the most activity because your products regionally also because which manufacture lines you are seeing extraordinary country in?

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Daniel L. Jones, Encore rope company - Chairman, principal & CEO [3]

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Well, because distant because regionally goes, Zane, I study anyone who travels you visit cranes at the stand at most of the metropolitan areas. therefore construction seems ought exist going across handsome well, commercial and industrial both. Those 2 areas, information centers become ought mind, hospitals, universities abstract ought expand. There is a destiny of tenant changes at different locations at high-rise buildings that causes perhaps some rope ought exist pulled out and new manufacture ought exist pulled in. It's no complete new construction, besides it does demand our manufacture ought exist shipped and delivered and whatever. therefore I study geographically, it's really coast-to-coast. There are some -- can exist some differences or outliers ought that, besides because the most isolate at habitual main cities and what eat you are expanding at some fashion, and again, commercial, industrial both exhibition ought exist handsome decent at this point.

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Zane Adam Karimi, D.A. Davidson & Co., investigation portion - investigation comrade [4]

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Okay. And then neutral a track up there. With the well margins of the final 2 quarters, how are you thinking nearly the competitive neutral and pricing opportunities? And are these levels sustainable?

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Daniel L. Jones, Encore rope company - Chairman, principal & CEO [5]

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Well, at 2018, we saw some things venture at the competitive scene and continued at -- or is continuing at because this year, besides ought linger compatible with the scream and cane ought '18, there was some timing at the touch of the charge of raw materials and handsome compatible demand into Q4, which most of the time at years past, Q4 drops off a tiny slice and I don't know exactly what other companies conduct or don't do, besides there were some missed opportunities at our competitors at deliveries and goods issues and whatever country happen, and we were able ought capitalize at those at the fourth quarter.

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Operator [6]

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Our next question is from Julio Romero from Sidoti & Company.

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Julio Alberto Romero, Sidoti & Company, LLC - Equity Analyst [7]

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So I neutral wanted ought track up at Zane's question there. I know competitive scene used to exist one of the drivers of scatter expansion, besides can you oration nearly what the other drivers of that scatter expansion you've been seeing lately. neutral any of the puts and takes that's friendly of driven the step obligation upwards, especially at the final 2 quarters we've seen a large leap at the scatter sequentially. And neutral any additional color at how those -- how sustainable those drivers used to exist at a confront at send basis?

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Daniel L. Jones, Encore rope company - Chairman, principal & CEO [8]

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Great question. And I study that's where the fiction is most likely, and -- at least that's what we see. Again, there's some basic issues that eat occurred and continue, and there's only 2 things that sell protection wire, and one of them clearly is delivery. because we stated at the newspaper free and eat stated because a nevertheless now, if you acquire at a nation where there are some estimate things we can conduct because our product, we sell those at a compatible basis. The sales reps by the method I absence ought add at our sales compel eat neutral done a phenomenal profession of selling some value. Now it is protection wire, therefore how much of that you can acquire away with, who knows, besides they eat done a really good profession of handling new orders and executing once we receive the order. And the bid typically is done at our price. And therefore while you acquire at a nation ought where you've got raw materials at favor -- and at favor because us, because you -- we've talked nearly it at time, it's a compatible prejudice maybe, no necessarily a trend, besides a prejudice at the upside is a good business and you combine into that the delivery piece, I confidently can speak you that while delivery is a bigger bit of the equation, we conduct same well. And that's accurate where we desire it ought be, is at delivery. therefore while you eat an increased demand at a extraordinary neutral zone and we eat the execution success that we had, you're able ought scold neutral a tiny slice more. I don't desire ought confront at also deep into the process though I can visit at the fur we've got pretty a few of our competitors at here, besides we -- we're able ought conduct some things and furnish some estimate and we are able ought exist rewarded because that at the market. And while you ask if that can exist sustained, I think, yes. We went over Q4, which typically is a softer quarter, if you will, based at climate and what eat you and folks acquire wrapped up at Thanksgiving and Christmas and nation don't really become aid ought work until back the final Super Bowl banquet and what eat you, besides it was a really good year, it was a large zone and there is a destiny of momentum and speaking specifically over October, November and December, it's same good, things are same good.

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Julio Alberto Romero, Sidoti & Company, LLC - Equity Analyst [9]

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That's helpful. I comprehend the detail there. can we acquire an update at the aluminum side? Obviously, copper spreads eat naturally had a joyful step up, besides neutral any color you can award us into how price/ volume spreads eat trended lately there and perhaps the hope because where you visit aluminum products at habitual are going forward?

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Daniel L. Jones, Encore rope company - Chairman, principal & CEO [10]

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Yes. Absolutely, I don't worry commenting at that at all. while we were -- the public is aware and we filed a petition. There are some issues that were going at there at the neutral that weren't necessarily something that we could sit aid and abstract ought take. And therefore we stepped up and everything has gone across because it should. It'll perhaps exist -- there will exist some time frame adjustments based at the government shutdown and whatever that means. besides overall, it's heading the accurate -- it's trending at the accurate direction, it's no where it to be, besides it's heading at the accurate direction. Aluminum sales were good, no great. margin at aluminum, we're better, besides no great. I don't study it's any secret that I choice -- and I've been same public with this. I choice ought sell copper complete the time. We sell aluminum therefore we don't lose the copper order, besides it's performing a destiny better. Aluminum is performing a destiny better. We've got room ought grow there because we absence to, and I'm confident at '19 that we'll conduct a tiny better at aluminum.

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Julio Alberto Romero, Sidoti & Company, LLC - Equity Analyst [11]

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Great. And neutral perhaps neutral the final one here is. I know at the final call, Dan, you mentioned while we talked nearly money deployment. You mentioned you were pursuing some opportunities there. I neutral wanted ought visit if there was any update nearly money deployment going forward?

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Daniel L. Jones, Encore rope company - Chairman, principal & CEO [12]

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Yes. I don't desire ought speak the sack is full, besides we've got some opportunities here ahead of us, and we haven't announced anything concrete publicly, besides we're constantly looking and investigating where we could exist better and add ought what we have. We're no interested at getting into something that we are no super intimate with or we're going ought purpose up with some sustain and somebody else gets the money. We constantly are able ought see at this industry that concrete venture and venture at front of us and therefore we're anxious ought acquire started at a attach of projects. Timing is everything. And hopefully, we'll exist able ought advertise something going forward. besides nothing has been announced yet. We are neutral consistently and constantly are trying ought better and therefore we've got some good ideas and it's a timing issue.

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Operator [13]

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Our next question comes from Bill Baldwin.

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William Lewis Baldwin, Baldwin Anthony Securities, Inc. - main and Co-founder [14]

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A housekeeping item, Frank. can you speak us what the LIFO shock was at the fourth quarter?

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Frank J. Bilban, Encore rope company - VP of Finance, Treasurer, Secretary & CFO [15]

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LIFO at the fourth zone was relatively minor. It was a $1.1 million decrement ought charge of sales.

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William Lewis Baldwin, Baldwin Anthony Securities, Inc. - main and Co-founder [16]

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Okay. $1.1 million. And can you award us any numbers at aluminum volume year-over-year because distant because the pounds of aluminum. You standard copper at pounds, conduct you standard aluminum the same method because distant because the year-over-year buy of aluminum, copper wire -- I mean, aluminum wire?

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Daniel L. Jones, Encore rope company - Chairman, principal & CEO [17]

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You're talking Q4 ought Q4 or year-over-year?

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William Lewis Baldwin, Baldwin Anthony Securities, Inc. - main and Co-founder [18]

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Yes. Q4 ought Q4.

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Daniel L. Jones, Encore rope company - Chairman, principal & CEO [19]

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Q4 ought Q4, the aluminum pounds were down 7.3%.

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William Lewis Baldwin, Baldwin Anthony Securities, Inc. - main and Co-founder [20]

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7.3%, okay.

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Daniel L. Jones, Encore rope company - Chairman, principal & CEO [21]

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And because a entire of our sales dollars, it was only 7.2% of net sales at Q4 of '18.

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William Lewis Baldwin, Baldwin Anthony Securities, Inc. - main and Co-founder [22]

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So Dan -- quote that quantity more time, Dan. You said 9%, 9...

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Daniel L. Jones, Encore rope company - Chairman, principal & CEO [23]

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No. Down 7%.

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William Lewis Baldwin, Baldwin Anthony Securities, Inc. - main and Co-founder [24]

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Down 7% the volume was. Okay. Okay. same good. And I know the information middle has been a pretty important incremental look of the business. I study it has bee

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