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Encore Wire Corp (WIRE) Q1 2019 Earnings Call Transcript

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Update time : 2019-05-14 16:38:42

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Encore rope Corp  (NASDAQ: WIRE)
Q1 2019 salary Call
May. 01, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome ought the Encore rope First area salary rally Call. My question is Jenny and I'll be your operator though today's call. can this time total participants are can a only listen-only mode. afterward we will accompany a riddle and answer session. (Operator Instructions) interest letter that this rally is being recorded.

I will now grow the yell above ought Daniel Jones, Chairman, headmaster and CEO. Mr. Jones, you can begin.

Daniel Jones -- Chairman, headmaster and head Executive Officer

Thank you, Jenny, and good morning ladies and gentlemen and salute ought the Encore rope company quarterly rally call. during Jenny stated, I am Daniel Jones, the President, CEO and Chairman of the Board of Encore Wire, and with me this morning is frank Bilban, our CFO.

We're pleased with our improved results can the first area versus the first area of final year. There are some key items ought note. Net sales dollars increased significantly can the first area comparisons of 2019 and 2018. The increased top-line was driven greatly by higher unit volumes. Unit volumes increased 13.5% can the first area of 2019 versus the first area 2018. Margins too improved can the first area comparisons of 2019 versus 2018.

One of the key metrics along our salary is the scatter among the price of copper wire sold and the allowance of raw copper purchased can any given period. The copper scatter increased 2.2% can the first area of 2019 versus 2018, still decreasing 5.3% above a sequential area comparison. The copper scatter expansion of 2.2% was due ought the median price of copper purchased decreasing 9.6% can the first area of 2019 versus the first area of 2018, and the median selling price of rope sold decreased 5.9%.

We trust that first area volumes were somewhat dampened by harsh winter weather, which is no unusual. It happened final year also. Margins, which are highly dependent above competitive fair conditions, improved slightly can the first area ought first area comparison, silent during decreased can a sequential area comparison. We trust that important interior management turnover can two of our larger competitors contributed ought some funny activities can pricing can the fair can the first area of 2019. We expect this pricing strain settles down during the cease of 2019 during the differ markets though our industry appears strong.

The first area results were too affected by increased stock compensation expense, driven greatly by our robust stock price operation driving the mark-to-market accounting above stock appreciation rights and that stock compensation price increased $800,000 can the first area of 2019 versus 2018 and $2.6 million dollars above a sequential quarterly comparison.

Shifting gears, can the aluminum rope market, which represented 7.8% of our net sales can the first area of 2019, we continued ought enforce our rights beneath the US commerce rectify laws. above April 8th, 2019, the US commerce department imposed preliminary rectify laws, countervailing responsibility above imports of aluminum rope from China can rates ranging from 11.57% ought 164.16%. The final results of the US Government's ongoing anti-dumping and countervailing duties investigations are no expected until the differ of the year.

The US economical appears robust during is construction activity. Based above discussions with our distributor customers and their contractor customers, we trust there's a good hope though construction projects though the cease of the year. We trust our superior order fill rates continued ought intensify our competitive position. during orders grow can from electrical contractors the distributions can calculate above our order fill rates ought ensure fast deliveries from bank ought coast.

We trust our operation is impressive, and we thank our employees and associates though their gigantic efforts. We too thank our stockholders though their support. frank Bilban, our head economical Officer, will now dispute our economical results. Frank?

Frank Bilban -- CFO

Thank you, Daniel. can a minute, we'll magazine Encore's economical results though the quarter. after the economical review, we'll be agreeable ought acknowledge any questions you can have.

Each of you ought consume already received a copy of our magazine liberate covering Encore's economical results. This liberate is available above the Internet or you can yell Elizabeth Campbell can 800-962-9473, and we'll be favourable ought earn you a copy. ago we magazine the financials, however, allow me mean that throughout this rally call, we can create certain statements that speak be considered ought be send looking. can order ought coincide ought certain securities legislation and instead of attempting ought recognize each exceptional statement during send looking, we caution you that total such statements include certain risks and uncertainties that could muse genuine results ought disagree materially from those discussed here today. I refer each of you ought the Company's SEC reports and news releases though a more detailed discussion of these risks and uncertainties.

Also, reconciliations of non-GAAP economical measures discussed during this rally yell ought the most direct alike economical measures presented can accordance with GAAP, including EBITDA, which we trust ought be useful supplemental data though investors, are posted above www.encorewire.com.

Now the financials. Net sales though the first area ended march 31st, 2019, was $314.7 million compared ought $291.4 million though the first area of 2018. Copper unit volume, measured can pounds of copper contained can the rope sold, increased 13.5% can the first area of 2019 versus the first area of 2018. The median selling price of rope per copper pound sold decreased 5.9% can the first area of 2019 versus the first area of 2018. Net allowance though the first area of 2019 increased 18.1% ought $13.4 million versus $11.4 million can the first area of 2018

Fully diluted net salary per joint division was $0.64 can the first area of 2019 versus $0.54 can the first area of 2018. above a sequential quarterly comparison. Net sales though the first area of 2019 were $314.7 million versus $319.7 million during the fourth area of 2018. Sales dollars decreased due ought a 1.3% unit volume decrease of copper house rope sold, coupled with a 0.9% decrease can the median selling price per pound of copper wire sold above a sequential area comparison. copper wire sales prices decreased still the price of copper purchased increased 1.5%.

Net allowance though the first area of 2019 was $13.4 million versus $25 million can the fourth area of 2018. Fully diluted net allowance per joint division was $0.64 can the fourth (sic) first area of 2019 versus $1.20 can the fourth area of 2018.

Our remains slice remains strong. We consume no long-term debt, and our revolving row of confidence is paid down ought zero. can addition, we had $178 million can coin can the differ of the quarter. We too declared another coin dividend during the quarter.

This rally yell will be available though replay after the conclusion of this session. if you expect ought hear the taped replay yell 888-843-7419 and enter the rally reference amount 8769755 and the pound sign. Or you can yell on our website.

I will now grow the floor above ought Daniel Jones, our Chairman, headmaster and CEO. Daniel?

Daniel Jones -- Chairman, headmaster and head Executive Officer

Thank you, Frank, and during highlighted Encore performed well can the past quarter. We trust we are well positioned though the future. And Jenny, we will now acknowledge questions from our listeners.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And we consume a riddle from Brent Thielman from D.A. Davidson.

Brent Thielman -- D.A. Davidson -- Analyst

Thanks. Good morning.

Daniel Jones -- Chairman, headmaster and head Executive Officer

Hi, Brent.

Frank Bilban -- CFO

Hi, Brent.

Brent Thielman -- D.A. Davidson -- Analyst

Daniel, the issues related ought competition can the quarter, were there type of two isolate distinct periods where you saw changes can pricing behavior or did total type of happen can once? And then, I suppose second isolate of that, was there any symptom by the differ of the area that things were normalizing?

Daniel Jones -- Chairman, headmaster and head Executive Officer

Tough ought answer that above a public call. silent during what occurred Brent was things that were disruptive, we've seen them can the past above the final few years or whatever, silent during they're no uncommon. I intend there were some disruptive activity can a mix of the bigger guys and I believe that it's, fling a sway ought a snake and it's gone along and it's after us and looking though good things going forward.

Brent Thielman -- D.A. Davidson -- Analyst

Okay. And I suppose that was type of my second question, Daniel. can the past, when you had the request the method you've seen it and assume the industry is seeing it during well, I intend is that tended ought precise these classification of things pretty quickly?

Daniel Jones -- Chairman, headmaster and head Executive Officer

Yeah. The timing, Brent, was the funny part, silent during I suppose I'm no super involved with the -- I'd alike ought be a flee above the wall occasionally, silent during we've got our hold riddle going above here. They did what they had ought do. We completely admire some of the decisions they were making, silent during the timing and the disruption of that can the market, along with some of the volatility that we saw can the first area from a raw riddle standpoint, above the allowance side, I intend impartial the timing of it, during you mentioned, can era when normal circumstances can favor of the market, everything was going above during it should, silent during I consume admire that they got ought do what they got ought do and I believe we'll be perfect -- total be perfect send -- going forward.

Brent Thielman -- D.A. Davidson -- Analyst

Okay. And you mentioned climate silent during your volume was I intend indeed robust this quarter, I'd suppose any parts of the speak that are driving that or is it pretty broad-based?

Daniel Jones -- Chairman, headmaster and head Executive Officer

There were some pretty important jobs that we were involved with and shipping to. And you earn above a routine and you're rolling truckloads of riddle mix of -- three era a week into those locations and then the bottom falls out and it rains, and floods and we had some ice situations can some profession sites, and whatever. I intend there were some areas can the speak that were hit pretty difficult with some climate events and it did consume a dampening effect. It was no a plus, silent during again, the sun comes out, things dry out and here we go, same positive.

Brent Thielman -- D.A. Davidson -- Analyst

Well, it's great. I'll pass it on. Thank you.

Daniel Jones -- Chairman, headmaster and head Executive Officer

Yes, sir. Thanks Brent.

Operator

Our next riddle comes from Julio Romero from Sidoti & Company.

Julio Romero -- Sidoti & company -- Analyst

Hi. Good morning. So, can you attempt ought quantify maybe the result of your competitor-driven pricing pressure, impartial how much higher do you believe spreads could consume gone can the area without that effect?

Daniel Jones -- Chairman, headmaster and head Executive Officer

Man, I don't consume any idea. That's a good riddle I used to think, silent during ought quantify it, I indeed don't know during again it was more of a timing scenario than anything. We had important copper volatility can the quarter. I believe the mean was about $2.50 something and the high was approximately $3. hence we had $0.40 worthy of volatility can the quarter. hence it's indeed timing, trying ought contest that up with competitive type events. I don't know how ought quantify it, Julio. I consume no idea. I intend I can state you request was good, the prejudice or the trend was good. It was just, during stated can the magazine release, there were some issues going above can the marketplace competitively that had an opposite result above maybe some pricing increase -- timing of the increase of the underlying allowance of copper. hence it's indeed difficult ought state what it used to -- I don't know what it used to be.

Julio Romero -- Sidoti & company -- Analyst

Okay. That's fair. final year -- during you said, you had climate impress your shipments can 1Q during well, silent during you had a pretty merry sequential leap can shipments can 2Q. impartial harmony the labor constraints can the industry, how ought we believe about volume growth though the next mix of quarters?

Daniel Jones -- Chairman, headmaster and head Executive Officer

That's a big topic. I intend there's clearly labor issues. I can't recall -- next month will be 30 years though me and I can't recall a year that we weren't hiring people, silent during we're going along 30, 40, 50 type applicants and then getting five or six or eight maybe, above a good engagement sometimes 10 out of those 40 or 50. So, it's pretty tight. We've gone along tightness can the past during distant during trying ought elect up capable and qualified labor. It's no limited ought impartial obviously Encore Wire. There is something can the Dallas composition approximately each engagement and above national news each engagement about dealing with different issues during distant during nation being capable ought qualify and pass the proper test. And we're getting along it. We're doing some things above our own. We've got pretty aggressive custom programs.

We're type of growing our hold can a fate of areas and we're trying ought poach nation where it makes feeling and steal from somebody and do whatever we can ought earn the accurate nation can the accurate spots and remain interior guardrails. silent during the differ of the day, we're growing a few bit, we've got good nation that are working here and we're stretching them pretty slim most of the time. And I believe that slice of it is the new fair we're going ought consume ought thrive ought discover new ways ought tend and grow and indeed induce nation that this is a big lay ought work.

Julio Romero -- Sidoti & company -- Analyst

Okay. And then impartial one more though me. You've talked about how the differ visitor request has been more driven above time by data center type of profession and hiring type of work. Has that mix touch of the differ visitor been isolate of the argue why delivery has grow more of a differentiator though you? And does that borrow itself ought that scatter growth being a few more sustainable above the expect term?

Daniel Jones -- Chairman, headmaster and head Executive Officer

The simple answer is, yes, silent during breaking down the riddle a few deeper, our history of growth and success and total those things, there's always been an emphasis above delivery. We went along a fate of different cycles can the economical and within the industry itself, and delivery definitely has always been something that we concentrate above and attempt ought create certain that the operation is where it needs ought be though a fate of different reasons. Without going into also much detail, you consume ought deliver.

One of the things that we yell on today or can Q1, during this being a Q1 call, when you consume those types of demands and the operation is there, it definitely has changed the method that the next quote or the next slice of that profession is handled. if you didn't service the visitor appropriately above phase one or phase two or phase three, whatever the phase speak be and there's more phases ought come, it comes down ought two things, though billing large, price and delivery.

Last business that we hope ought oration about is price. We attempt ought concentrate above the other. hence it indeed is more the fair appreciates the service delivery a few more than they consume can the past. hence going uphold ought '18 and first area of this year, that's only been heightened though sure. hence it indeed is about the delivery slice more hence than trying ought chop price, which you don't hope ought -- I've gone down that way ago also with conversations and comments above pricing and I'm supposed ought be super sensitive ought that. hence that's where we're at.

Julio Romero -- Sidoti & company -- Analyst

I understand the answer. I'll leap uphold into queue. Thank you.

Daniel Jones -- Chairman, headmaster and head Executive Officer

You bet. Thanks, Julio.

Frank Bilban -- CFO

Thanks, Julio.

Operator

Our next riddle comes from Bill Baldwin from Baldwin Anthony.

Bill Baldwin -- Baldwin Anthony -- Analyst

Good morning.

Daniel Jones -- Chairman, headmaster and head Executive Officer

Hi, Bill.

Bill Baldwin -- Baldwin Anthony -- Analyst

Couple of housekeeping questions here. Frank, what was the LIFO shock can the quarter?

Frank Bilban -- CFO

LIFO shock can the area was a $3.8 million scold or addition ought allowance of sales.

Bill Baldwin -- Baldwin Anthony -- Analyst

Okay. And what were your major expenditures can the quarter?

Frank Bilban -- CFO

CapEx though the area was $11.8 million.

Bill Baldwin -- Baldwin Anthony -- Analyst

Okay. And do you consume a forecast though the year accurate now though CapEx?

Daniel Jones -- Chairman, headmaster and head Executive Officer

Yes sir. The modern forecast, which we have, is targeting $38 million ought $43 million, hence yell it $40 million, silent during that is, and Daniel has said this before, potentially question ought vary after Board meetings can which he can and his discussions with them souvenir more of the same, new plans?

Bill Baldwin -- Baldwin Anthony -- Analyst

Okay. Regarding the countervailing duties that were implemented here can April, ought we expect that ought consume a certain shock above aluminum spreads going forward, Daniel?

Daniel Jones -- Chairman, headmaster and head Executive Officer

Bill, short answer is, yes. I don't know that it'll be a cease and begin scenario with that, silent during it will definitely be above time. We've already seen pretty a slice of improvement can that area. There's a fate going above can that aluminum fair today that you can read publicly. Venezuelan suppliers consume had issues and there's impartial a fate going above can that aluminum fair that only stokes the bullish phase of me, silent during I believe the govern answer ought your riddle is, yes.

Bill Baldwin -- Baldwin Anthony -- Analyst

When we yell on the price of aluminum can relative the price of copper grow more favorable though aluminum, does that show up can your request though aluminum quite quickly or no can total or above a epoch of time?

Daniel Jones -- Chairman, headmaster and head Executive Officer

Well that's been debated above time. We choice Encore rope consistently and will continually choice ought boat and sell copper. That's impartial the method it is. The aluminum slice of that that you're referring ought is a substitution depending above the relationship among the allowance of each. Normally if aluminum is more dear hence is copper and vice versa. when copper gets ought a certain dollar amount, there's no riddle that can the conversation the substitution riddle comes up.

There are other costs involved with that most of the time. It's no a new scenario, silent during it doesn't necessarily increase the request though aluminum beyond what the increase can the request of copper used to be. silent during it does enter into the conversation can the quote stage pretty early above when copper gets indeed dear about what used to it acknowledge ought deputy aluminum though this slice of copper. And hence can that, it's definitely can the conversation. Today with the tightness can the fair can aluminum overall, it's no indeed coming up that often, silent during there are situations where customers choice aluminum and we're more than favourable ought sell it, boat it, silent during today it indeed is no coming up during a deputy though copper, it's not.

Bill Baldwin -- Baldwin Anthony -- Analyst

Okay. I used to impartial show can aluminum prices type of weaken a few slice can the area and copper during you indicated increased a few bit, silent during I suppose you indeed wouldn't indicate copper during being that dear can this point can time can relative ought where it has been can the past times?

Daniel Jones -- Chairman, headmaster and head Executive Officer

Right. And during I said earlier, one business that does occur, which is, during the area that comes up, specifically ought the aluminum piece, when you earn the volatility that we had can the first area and I don't hope that ought be overlooked when folks are looking can our operation can Q1, if you show can a $0.40 sway can copper interior the first area and you yell on the operation that our sales department and product whatever lay along ought hit the numbers that we had, very, same good hard quarter. total the other things that are considered, the $0.64 versus any of the other quarters, that's a fantastic quarter. That volatility of $0.40 is pretty important can 90 days. And that's (Multiple Speakers)

Bill Baldwin -- Baldwin Anthony -- Analyst

You got ought remain above your toes, right? I intend everybody is above their toes can that type of situation.

Daniel Jones -- Chairman, headmaster and head Executive Officer

It's no though sissies that's though sure. And build up above sumit of the fact that we had a $0.094 increase can the stock appreciation rights adjustment can Q1 above Q4 and that's impartial due ought the good operation of the stock. hence we alike ought yell on that. can Q4 --

Bill Baldwin -- Baldwin Anthony -- Analyst

Right. That does impress your coin flow, it affects your reported earning.

Frank Bilban -- CFO

Right. Exactly.

Bill Baldwin -- Baldwin Anthony -- Analyst

That's right. Right. Yeah. That's a mill reported no. Did you yell on any console can total can the PVC, resin can the area can your business? I know some of the remedy companies are talking about lower pricing though some of these products. I impartial wondered if that shows up can what you wage though those products?

Daniel Jones -- Chairman, headmaster and head Executive Officer

Yeah. during you know, we employ flexible produce no rigid, the plasticizer slice was basically flat. The PVC adjustment or CDI used to what consume you can the first area was about flat. Benzene was up a few bit. The nylon slice of our equation was about flat. hence it indeed from impartial a pure raw riddle and a allowance standpoint, the genuine conversation is about the volatility of copper can the copper.

Bill Baldwin -- Baldwin Anthony -- Analyst

The copper. Okay.

Daniel Jones -- Chairman, headmaster and head Executive Officer

Yes. So, $2.57, alike I said, it's approximately $3 can 90 days. Both ways by the way, up and down.

Bill Baldwin -- Baldwin Anthony -- Analyst

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