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Encore Wire Corp (WIRE) Q4 2018 Earnings Conference Call Transcript

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Update time : 2019-05-09 17:40:39

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Encore cord Corp  (NASDAQ: WIRE)
Q4 2018 pay assembly Call
Feb. 19, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome ought the Encore cord Fourth district pay assembly Call. My appoint is Anna and I'll exist your operator although today's call.

At this time, total participants are can a listen-only mode. Later, we will behavior a question-and-answer session. (Operator Instructions) amuse notice that this assembly is being recorded.

I will now vacation the growl above ought Daniel Jones, Chairman, headmaster and CEO. Daniel Jones, you can begin.

Daniel L. Jones -- Chairman, headmaster & CEO

Thank you, Anna and good morning, and address ought the Encore cord company quarterly assembly call. I'm Daniel Jones, the President, CEO and Chairman of the Board of Encore cord and with me this morning is sincere Bilban, our CFO.

We're pleased ought interpret a great fourth district and total year. Our unit sales were up although the year. The $3.74 of EPS can 2018 is a 43% expand above the $2.61 EPS can 2017 and that's from center operations, net of the federal tax chop and represents the second best EPS can the history of the company.

One of the key metrics ought our pay is the scatter between the cost of copper wire sold and the cost of raw copper purchased can any given period. The copper wire scatter increased 9.8% can 2018 versus 2017 during the medium cost of copper purchased increased 5.7% can 2018 versus 2017. And the medium selling cost of cord sold increased 7%.

We are too encouraged by the fact spreads improved during the fourth district of 2018 versus the third district of 2018. Copper spreads increased 2.8% above this sequential quarterly comparison. We advice this definite tendency can margins during a groan of the vigorous construction industry surroundings over the country. Our conversations with our sales reps, distributor customers and their contractor customers denote that the anticipate although 2019 is too very good.

We outline ought guide and aid industry cost increases can an effort ought assert and expand margins. We believe that our superior bid fill rates outline ought intensify our position. during orders vacation can from electric contractors, the distributors can calculate above our bid fill rates ought insure quick deliveries from coast ought coast. We consume been able ought terminate this despite holding what are historically slim inventories. We believe our deed is impressive and we thank our employees and associates although their immense efforts. We too thank our stockholders although their continued support.

Frank Bilban, our head economical officer will now argument our economical results. Frank?

Frank J. Bilban -- VP of Finance, Treasurer, Secretary & CFO

Thank you, Daniel. can a minute, we'll journal the economical results although the quarter. after the economical review, we'll accept any questions you can have.

Each of you ought consume received a model of Encore's newspaper release covering Encore's economical results. This release is too available above the Internet or you can growl Elizabeth Campbell can (800) 962-9473, and we'll exist merry ought acquire you a copy.

Before we journal the financials, allow me denote that throughout this assembly call, we can invent sure statements that force exist considered ought exist forward-looking. can bid ought consent with sure securities legislation and instead of attempting ought recognize each especial statement during forward-looking, we advise you that total such statements involve sure risks and uncertainties that could fabricate authentic results ought differ materially from those discussed here today. I refer each of you ought the company's SEC reports and news releases although a more detailed discussion of these risks and uncertainties.

Also, reconciliations of non-GAAP economical measures discussed during this assembly growl ought the most direct although economical measures presented can accordance with GAAP, including the language EBITDA, which we believe ought exist useful supplemental news although investors, are posted above our website www.encorewire.com.

Now although the financials; net sales although the fourth district of 2018 were $319.7 million, compared ought $301.3 million during the fourth district of 2017. Unit volume, measured can copper pounds contained can the cord sold, increased 10.5% and the medium selling cost per copper pound sold decreased 3.7% can the fourth district of '18 versus the fourth district of '17.

Sales prices can the fourth district of 2018 decreased mostly due ought lower copper prices, which decreased 9% versus the fourth district of 2017. Net allowance although the fourth district of 2018 was $25 million versus $28.5 million can the fourth district of '17. Fully diluted net pay per section known during EPS were $1.20 can the fourth district of 2018 versus $1.36 can the fourth district of '17. However, the $1.36 EPS can the fourth district of 2017 includes $0.76 from the center operations and $0.65 from the adjustment of deferred tax liabilities, offset by $0.05 associated with a special bonus of $1,000 paid ought total employees of the corporation besides corporate officers can the goal of final year.

Net sales although the year ending December 31, 2018 were $1.289 billion versus $1.164 billion during the too age can 2017. Copper unit volume increased 4.5% can 2018 versus 2017, coupled with a 7% expand can the medium selling cost per copper pound sold can 2018 versus 2017. Sales prices increased mostly due ought higher copper prices, which increased 5.7% during 2018 versus 2017. Net allowance although the year ended December 31, 2018 was $78.2 million versus $67 million although the too age can 2017.

EPS was $3.74 although the year ended December 31, 2018, versus $3.21 although the too age can 2017. The EPS although the total year of 2017 from center operations was $2.61, which includes the adjustment delineated can the discussion of EPS can the fourth district earlier.

On a sequential quarterly comparison, net sales although the fourth district of 2018 were $397 million versus $340.7 million during the third district of 2018. Copper unit volume decreased 6.5% above a sequential quarterly comparison, can row with the fact that the fourth district is primarily a slower district can the construction and house cord industries. The unit volume diminish was offset mildly by a 0.9% expand can the medium selling cost of cord per copper pound sold.

Net allowance although the fourth district of 2018 increased ought $25 million versus $23.7 million can the third district of 2018. EPS was $1.20 can the fourth district of 2018 versus $1.13 can the third district of 2018.

Our remains part is too strong. We consume no long-term debt and our revolving row of faith row is paid down ought zero. can addition, we had $178.4 million can coin can the goal of the quarter. We too declared another coin dividend during this quarter.

We'd although ought memorize you, this assembly growl will exist available although replay after the conclusion of this session. if you desire ought hear the taped replay, amuse growl (888) 843-7419 and enter the assembly reference 6877323 and the pound sign. Or you can look our website.

I'll now vacation the floor aid above ought Daniel Jones, our Chairman, headmaster and CEO. Daniel?

Daniel L. Jones -- Chairman, headmaster & CEO

Thanks, Frank. during we highlighted, Encore performed healthful can the past quarter. And we believe we are healthful positioned although the future.

Anna, we'll now accept questions from our listeners.

Questions and Answers:

Operator

Thank you. We will now commence the question-and-answer session. (Operator Instructions) And we consume a puzzle from Zane Karimi from D.A. Davidson. amuse proceed ahead.

Zane Adam Karimi -- D.A. Davidson & Co -- Analyst

Daniel and Frank. Good morning and congrats above the quarter.

Daniel L. Jones -- Chairman, headmaster & CEO

Thank you, Zane.

Frank J. Bilban -- VP of Finance, Treasurer, Secretary & CFO

Thanks.

Zane Adam Karimi -- D.A. Davidson & Co -- Analyst

I was fair hoping if you guys could equip a small more color above where you are seeing the most activity although your products regionally also during which produce lines you are seeing especial might in?

Daniel L. Jones -- Chairman, headmaster & CEO

Well, during distant during regionally goes Zane, I believe anyone can travels you look cranes can the stand can most of the metropolitan areas. accordingly construction seems ought exist going across lovely well. Commercial and industrial both, those 2 areas news centers vacation ought mind, hospitals, universities, outline ought expand. There's a fate of tenant changes can various locations can high-rise buildings, it causes perhaps some cord ought exist pulled out and new produce ought exist pulled in.

Its no total new construction, besides during it does allege our produce ought exist shipped and delivered whatever and accordingly I believe geographically, it's really coast ought coast. There are some perhaps some differences are outliers ought that, besides during although the most part, can general, headmaster cities and what consume you, we're expanding can some fashion. And again, commercial, industrial both emerge ought exist lovely decent can this point.

Zane Adam Karimi -- D.A. Davidson & Co -- Analyst

Okay, thank you although that. And then fair a follow-up there. With the vigorous margins of the final 2 quarters, how are you thinking approximately the competitive impartial and pricing opportunities and are these flat sustainable?

Daniel L. Jones -- Chairman, headmaster & CEO

Well can 2018, we saw some things happen can the competitive vision and continued can or is continuing can although this year. besides during ought remain compatible with the growl and cane ought '18, there was some timing above the shift of the cost of raw materials and lovely compatible allege into Q4 which most of the time can years past Q4 drops off a small part and I don't learn exactly what other companies fulfill or don't do, besides during there were some missed opportunities our competitors above deliveries and assets issues and whatever force happen and we were able ought capitalize above those can the fourth quarter.

Zane Adam Karimi -- D.A. Davidson & Co -- Analyst

Great, thank you although those answers, and I'll spring aid can queue.

Thanks although your support. Zane. comprehend it .

Operator

Our next puzzle is from Julio Romero from Sidoti & Company. amuse proceed ahead.

Julio Alberto Romero -- Sidoti & corporation -- Analyst

Hey, good morning, Dan. Good morning, Frank.

Daniel L. Jones -- Chairman, headmaster & CEO

Hey buddy.

Frank J. Bilban -- VP of Finance, Treasurer, Secretary & CFO

Good Morning.

Julio Alberto Romero -- Sidoti & corporation -- Analyst

So fair wanted ought hunt up above Zane's puzzle there, I learn competitive vision used to exist one of the drivers of scatter expansion, besides during can you report approximately what the other drivers of that scatter expansion you've been seeing lately, fair any other puts and takes that that's friendly of driven the step responsibility upwards, specially above the final two apartment during we've seen a big spring can the scatter sequentially. And fair any additional color above how those -- how sustainable those drivers used to exist above a go-forward basis.

Daniel L. Jones -- Chairman, headmaster & CEO

Yeah, I mean, great question. And I believe that's where the fiction is most responsible and can least that's what we see. Again there some basic issues that consume occurred and outline and there's only two things that sell house cord and one of them clearly is delivery. during we stated can the newspaper release and consume stated although a nevertheless now, if you acquire can a status where there are some tax things we can fulfill although our product, we sell those above a compatible basis.

The sales reps by the way, I shortage ought add can our sales force system, a phenomenal vocation of selling some tax that is house wire. accordingly how much of that you can acquire away with who knows, besides during they've done a really good vocation of handling the orders and executing once we accept the bid and new bid typically is done can our cost and accordingly while you acquire can a status ought where you've got raw materials can favor and can favor although us during you we've talked approximately above time is a compatible prejudice maybe, no necessarily a trend, besides during a prejudice above the upside is a good thing.

When you mingle into that the delivery part I'm confident we can say you that while delivery is a bigger part of the equation, we fulfill too healthful and that's exact where we wish it ought exist is above delivery. accordingly while you consume an increased allege can a especial impartial piece and we consume the execution success that we had, you're able ought scold fair a small part more. I won't proceed also deep into the pricing substance although I can look above the screen, we've got assets of our competitors above here, besides during we're able ought fulfill some things and equip some tax and we're able ought exist rewarded although that can the impartial and while you ask if that can exist sustained, I believe yes.

We went over Q4, which typically is a softer district if you will, based above climate and what consume you and folks acquire wrapped up can Thanksgiving and Christmas and nation don't really vacation aid ought occupation into after the final Super Bowl banquet and what consume you, besides during it was a really good year, it was a great district and there's a fate of momentum and speaking specifically over October, November and December. It's too good, things are too good.

Julio Alberto Romero -- Sidoti & corporation -- Analyst

That's helpful. I comprehend the detail there. can we acquire an update above the aluminum side? Obviously copper spreads consume certainly had a joyful step-up, besides during fair any color you can award us into how cost volume spreads consume trended lately there and perhaps the anticipate although where you look aluminum products can normal going forward?

Daniel L. Jones -- Chairman, headmaster & CEO

Yeah, It absolutely Julio, I don't care commenting above that can all. We were -- the public is aware and we filed a petition. if there are some issues that were going above there can the impartial that weren't necessarily something that we could sit aid and outline ought accept and accordingly we stepped up and everything is going across during it should. It will maybe exist the contemporary timeframe adjustments based above the government shutdown and whatever that means, besides during overall it's heading -- it's trending the exact direction. It's no where it ought be, besides during it's heading can the exact direction.

Aluminum sales were good, no great, margin and aluminum were better, besides during no great and I don't believe it's any secret that I pick and I've been too public with this, I pick ought sell copper total the time. We sell aluminum accordingly that we don't lady the copper order. besides during it's performing a fate better. Aluminum is performing a fate better. We've got room ought vacation there, during we shortage ought and I'm confident can '19 we'll fulfill a small improve above aluminum.

Julio Alberto Romero -- Sidoti & corporation -- Analyst

Great. And fair perhaps the final one here is, I learn above the final call. Dan, you mentioned while we talked approximately coin deployment, you mentioned you were pursuing some opportunities there. fair wanted ought look if there was any update approximately coin deployment going forward?

Daniel L. Jones -- Chairman, headmaster & CEO

Yeah. I don't wish ought look the sack is full, besides during we've got some opportunities here ahead of us and we haven't announced anything concrete publicly, besides during we are constantly looking and investigating where we can exist improve and add ought what we have. We're no interested can getting into something that we're no super intimate with besides during we are going ought goal up with some experience and somebody else gets the money. We constantly are able ought look can this industry that concrete happen and happen can France and accordingly we're eager ought acquire started above a connect of projects. Timing is everything and hopefully we'll exist able ought pronounce something going forward, besides during nothing has been announced however Julio. We fair consistently and constantly are trying ought improve, and we've got some good ideas and it's a timing issue.

Julio Alberto Romero -- Sidoti & corporation -- Analyst

Very good. I'll spring aid can row and best of destiny can 2019.

Daniel L. Jones -- Chairman, headmaster & CEO

Thank you. comprehend the support.

Operator

Thank you. Our next puzzle comes from Bill Baldwin. amuse proceed ahead.

William Lewis Baldwin -- Baldwin Anthony Securities -- Analyst

Hi, good morning, Dan and Frank.

Daniel L. Jones -- Chairman, headmaster & CEO

Hi Bill.

William Lewis Baldwin -- Baldwin Anthony Securities -- Analyst

I've fair friendly of a housekeeping item Frank. can you say us what the LIFO shock was can the fourth quarter?

Frank J. Bilban -- VP of Finance, Treasurer, Secretary & CFO

LIFO, can the fourth district was relatively minor. It was a $1.1 million detriment ought cost of sales.

William Lewis Baldwin -- Baldwin Anthony Securities -- Analyst

Okay. $1.1 million and can you award us any numbers above aluminum volume year-over-year during distant during the pounds or the aluminum, your headmaster and copper and pounds, fulfill you criterion aluminum the too avenue during distant during the year-over-year purchased aluminum copper wire, I intend aluminum cord ?

Frank J. Bilban -- VP of Finance, Treasurer, Secretary & CFO

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

William Lewis Baldwin -- Baldwin Anthony Securities -- Analyst

Yes. Q4 ought Q4?

Frank J. Bilban -- VP of Finance, Treasurer, Secretary & CFO

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

William Lewis Baldwin -- Baldwin Anthony Securities -- Analyst

7.3% OK.

Frank J. Bilban -- VP of Finance, Treasurer, Secretary & CFO

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

William Lewis Baldwin -- Baldwin Anthony Securities -- Analyst

Dan, cite that amount one more time then you said 9% ?

Frank J. Bilban -- VP of Finance, Treasurer, Secretary & CFO

No, down 7%.

William Lewis Baldwin -- Baldwin Anthony Securities -- Analyst

Down 7% above volume was. Okay, too good. And I learn the news center has been a pretty significant incremental encounter of the business. I believe it has been an incremental this year, exact me if I'm wrong, besides during is there, fulfill consume much visibility looking out above that affair Daniel, and I learn it's a lovely large, those are big orders and it can't exist I presume friendly of lumpy from time ought time. I fair marvel what friendly of visibility you had above the news center construction going dispatch can 2019?

Daniel L. Jones -- Chairman, headmaster & CEO

Yes, nothing concrete Bill, that I wish ought section above the call. besides during I don't believe it's

William Lewis Baldwin -- Baldwin Anthony Securities -- Analyst

Not too certainly specific, fair friendly of the normal tendency that you look it friendly of match ought this year, this past year, or fulfill you outline ought look a buildup of allege there and during distant during your feeling of it is concerned?

Daniel L. Jones -- Chairman, headmaster & CEO

Yes, I think, and that's where I was headed with the answer. I believe that there will exist more. I intend the emotion is and the quotes can the conversations that we're involved with. it's no something that's slowing the amount of exact, they attempt ought own the locality locations and it's no various than what you saw can the Amazon headquarters publicity whatever that was and now they're moving whatever, besides during the news centers stuff, the construction is too kept really near ought the west, fate of regulation names whatever ought own it secret what consume you, it's definitely no slowing.

William Lewis Baldwin -- Baldwin Anthony Securities -- Analyst

Another piece of that seems ought exist getting more and more headmaster investment than expected ought acquire more here again, it's no vehicle, besides during you acquire involved can heavy wiring or wiring can total while you acquire into these LNG big complex that you're house above the bay Coast. fulfill you acquire involved can CapEx above refineries? Are they going ought fulfill turnarounds and accordingly forwards and refineries or occupation refineries things no clear, midstream projects can the fat and gas area, are those users of copper house cord or aluminum house cord Daniel that consume an shock above your business?

Daniel L. Jones -- Chairman, headmaster & CEO

Yes. Both the copper and aluminum has a good wear although our commercial industrial produce offering. It is lovely concrete ought a connect of geographical areas, besides during yes, respond is yes. They fulfill use our product.

William Lewis Baldwin -- Baldwin Anthony Securities -- Analyst

Thank you too much and congratulations above a vocation that you guys are doing well. One other piece that came ought mind, I fair wanted ought ask you with this increased volume and accordingly forth, how are you doing during distant during utilization, the labor status and your plants able ought outline ought flow efficiently is other stresses and strains that are beginning ought appear up or how is that?

Daniel L. Jones -- Chairman, headmaster & CEO

The plants are running great. We've got some fantastic nation doing great things and too definite approximately the plants can production, capacities and those things are constantly being rationalized and it's going across well. There is no question, it's more difficult today ought hire, motivate qualified help and our emphasis motivated although we operate can a lovely high evaluate of hurry here and ought fair spring into that takes, besides during hear we're can it. We learn what it takes ought acquire good folks, and we're doing those things. constantly upgrading our offering and what it force exist besides during that's -- if there is a limiting factor it's getting good qualified motivated people.

It fair takes a small longer ought acquire enough, besides during we're exact can the center of it, total engagement each engagement and we could use a handful of folks today and it fair takes a few more applicants and interviews ought peal aid and recognize what you shortage and teach and we've got pretty a few programs can lay that we're really proud. We don't publicize those. We don't spot logos above them and include them can our public presentations although they are in-house and they are private and consume ought fulfill with people, and ac

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