LIFO pools are established at the end of each fiscal year. During the first three quarters of every year, LIFO calculations are based on the inventory levels and costs at that time. Accordingly, interim LIFO balances will fluctuate up and down depending on those inventory levels and costs.

NOTE 8 - CONTINGENCIES

The Company’s operating results in any given period are driven by several key factors, including the volume of product produced and shipped, the cost of copper and other raw materials, the competitive pricing environment in the wire industry and the resulting influence on gross margin and the efficiency with which the Company’s plants operate during the period, among others. Price competition for electrical wire and cable is intense, and the Company sells its products in accordance with prevailing market prices. Copper, a commodity product, is the principal raw material used by the Company in manufacturing its products. Copper accounted for approximately 72.1%65.2%, 74.7%72.1%, and 77.6%74.7% of the Company’s cost of goods sold during fiscal 2016, 2015 2014 and 2013,2014, respectively. The price of copper fluctuates depending on general economic conditions and in relation to supply and demand and other factors, which causes monthly variations in the cost of the Company’s purchased copper. Additionally, the SEC allows shares of certain physically backed copper exchange-traded funds (“ETFs”) to be listed and publicly traded. Such funds and other copper ETFs like them hold copper cathode as collateral against their shares. The acquisition of copper cathode by copper ETFs may materially decrease or interrupt the availability of copper for immediate delivery in the United States, which could materially increase the Company’s cost of copper. In addition to rising copper prices and potential supply shortages, we believe that ETFs and similar copper-backed derivative products could lead to increased price volatility for copper. The Company cannot predict copper prices or the effect of fluctuations in the cost of copper on the Company’s future operating results. Wire prices can, and frequently do, change on a daily basis. This competitive pricing market for wire does not always mirror changes in copper prices, making margins highly volatile. With the Company’s expansion into aluminum conductors in some of its building wire products, we expect aluminum will slowly grow its percentage share of the raw materials cost for the Company. The Company built a plant to expand the production of aluminum building wire beginning in late 2011. The plant was fully operational by mid-year 2013. In 2012, aluminumAluminum wire sales constituted 3.6% of net sales, growing to 6.9%represented 9.9% and 10.3% of net sales in 2013, 8.9% in 2014,2015 and 9.9% in 2015. This growth of aluminum

Cost of goods sold was $209.4$240.2 million, or 88.3%86.0% of net sales, in the thirdfirst quarter of 2016,2017, compared to $224.4$195.4 million, or 85.4%86.6% of net sales, in the thirdfirst quarter of 2015.2016. Gross profit decreasedincreased to $27.8$39.2 million, or 11.7%14.0% of net sales, in the thirdfirst quarter of 20162017 versus $38.3$30.1 million, or 14.6%13.4% of net sales, in the thirdfirst quarter of 2015.2016.

The decreaseincrease in gross profit margin percentage was driven primarily by decreasedincreased spreads. The spread between the average price paid for a pound of raw copper and the average sales price for a pound of copper decreased 10.3%increased 7.0% in the thirdfirst quarter of 20162017 versus the thirdfirst quarter of 2015.2016. The spread decreasedincreased as a result of the average sales price per copper pound sold declining 10.7%increasing 16.9% while the per pound cost of raw copper decreased 10.9%increased 22.6%. The aluminum wire spread also decreased 17.9%15.9% in the same quarterly comparison. The percentage dropschange on sales areis on a higher nominal dollar amount than on purchases and, therefore, spreads dropchange on a nominal dollar basis. The margin declineschanges were due primarily to the competitive pricing environment in the industry. There are two notable competitive factors currently at workCopper spreads improved in the market. First, our largest competitor announcedfourth quarter of 2016 and held through the purchasefirst quarter of 2017. It appears that the industry consolidation of a smallercopper competitor during the quarter. While these industry consolidations generally lead to better industry margin disciplinethat took place last year and damaged margins in the long term, insecond and third quarters of 2016 may be resolving itself. On the short termaluminum side, however, there are a couple of small competitors importing aluminum wire and selling it can lead to erratic pricing ifat below market prices. We understand that the selling company pumps sales volumesgovernment is looking into the market pre-sale and then dumps its remaining inventory into the market post-sale. In addition, we believethis import activity. We also have a different, financially stressed competitor has been acting erratically in the aluminum wire market.who appears to readily follow these low-price competitors. We believe both of these factors have contributed to the unsettled pricing environment and impacted our spreads negatively.

Total raw materials cost, including the LIFO adjustment, increased to 74.0%73.9% of net sales in the thirdfirst quarter of 2016,2017, from 72.5%73.3% of net sales in the thirdfirst quarter of 2015.2016. This increase in total raw materials cost as a percentage of net sales, plus higheroffset by lower percentages of overhead cost, resulted in the decreasedincreased gross profit margin percentage. Overheads contained some fixed and semi-fixed components which will risefluctuate as a percentage of sales when sales dollars decline.vary.

Inventories are stated at the lower of cost, using the last-in, first out (LIFO) method, or market. The Company maintains two inventory pools for LIFO purposes. As permitted by U.S. generally accepted accounting principles, the Company maintains its inventory costs and cost of goods sold on a first-in, first-out (FIFO) basis and makes a monthly 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, aluminum and finished wire prices as of the end of each reporting period. The Company performs a lower of cost or market calculation quarterly. As of September 30, 2016,March 31, 2017, no LCM adjustment was required. However, decreases in copper and other material prices could necessitate establishing an LCM reserve in future periods. Additionally, future reductions in the quantity of inventory on hand could cause copper or other raw materials that are carried in inventory at costs different from the cost of copper and other raw materials in the period in which the reduction occurs to be included in costs of goods sold for that period at the different price.

Selling expenses, consisting of commissions and freight, for the thirdfirst quarter of 20162017 were $12.3$13.5 million, or 5.2%4.8% of net sales, compared to $12.1$11.3 million, or 4.6%5.0% of net sales, in the thirdfirst quarter of 2015.2016. Commissions paid to independent manufacturers’ representatives are paid as a relatively stable percentage of sales dollars and, therefore, exhibited little change in percentage terms. Freight costs as a percentage of net sales increaseddecreased to 2.7%2.4% of net sales in the thirdfirst quarter of 20162017 from 2.2%2.5% of net sales in the thirdfirst quarter of 2015,2016, primarily due to the dropincrease in top line sales dollars as well as small changes in the mix of products sold, fuel costs and the geographical distribution of product sold. General and administrative expenses for the thirdfirst quarter of 20162017 were $6.4$5.2 million, or 1.9% of net sales, compared to $6.0 million, or 2.7% of net sales, compared to $3.9 million, or 1.5% of net sales, in the thirdfirst quarter of 2015. The third quarter of 2016 includes a non-recurring charge to write down assets in selling, general and administrative expenses of $1.6 million.2016.

The Company did not record any bad debt expense during the thirdfirst quarters of 2016 and 2015.

For more information on the Company’s revolving credit facility, see Note 6 to the Company’s consolidated financial statements included in Item 1 to this report, which is incorporated herein by reference.

Cash provided byused in operating activities was $39.6$4.4 million in the first ninethree months of 20162017 compared to cash provided of $42.6$8.3 million in the first ninethree months of 2015.2016. The following changes in components of cash flow from operations were notable. The Company had net income of $22.4$13.6 million in the first ninethree months of 20162017 compared to net income of $36.7$8.6 million in the first ninethree months of 2015.2016. Accounts receivable decreased $2.5increased $26.7 million in the first ninethree months of 20162017 compared to decreasing $14.9$10.9 million in the first ninethree months of 2015,2016, resulting in a source of cash in both years.2016 and a use of cash in 2017, a decrease of $37.6 million. Accounts receivable generally fluctuate in proportion to dollar sales and, to a lesser extent, are affected by the timing of when sales occur during a given quarter. With an average of 60 to 75 days of sales outstanding, quarters in which sales are more back-end loaded will have higher accounts receivable balances outstanding at quarter-end. Inventory value decreasedincreased in the first ninethree months of 2016, providing2017, using cash of $0.8$2.4 million versus an increase of inventory in the first nine months of 2015, resulting in a use of cash of $19.6$3.2 million andin the first three months of 2016, resulting in a positive swing in 20162017 cash flow of $20.4$0.8 million. Trade accounts payable and accrued liabilities were a use ofprovided cash of $8.4$9.2 million in 20162017 versus a $12.3$17.6 million use of cash in 2015.2016, resulting in an increase in cash flow of $26.8 million. In the first ninethree months of 2016,2017, changes in current and deferred taxes providedused cash of $6.9$2.4 million versus cash provided of $10.6$4.0 million in the first ninethree months of 2015.2016. These changes in cash flow were the primary drivers of the $3.0$12.8 million decrease in cash provided by operations in the first ninethree months of 20162017 compared to the first ninethree months of 2015.2016.

Cash used in investing activities increaseddecreased to $38.6$4.6 million in the first ninethree months of 20162017 from $34.8$8.7 million in the first ninethree months of 2015.2016. Cash used in financing activities consisted of $1.2$0.4 million of cash dividends paid, plus $0.2 million of financing fees for the Third Amendment to the Credit Agreement,partially offset by $1.1$0.2 million of proceeds from exercised stock options. These changes in cash flow were the primary drivers of the $0.2 million of cash used in financing activities for the first ninethree months of 20162017 versus $3.6$0.3 million used in the first ninethree months of 2015.2016. As of September 30, 2016,March 31, 2017, the balance on the Company’s revolving line of credit remained at zero. The Company’s cash balance was $79.9$86.5 million at September 30, 2016March 31, 2017 versus $58.8$78.6 million at September 30, 2015.

During the remainder of 2016,2017, the Company expects its capital expenditures will consist primarily of expenditures related to the purchases of manufacturing equipment throughout its facilities to update equipment and address bottlenecks in these facilities.bottlenecks. The total capital expenditures for all of 20162017 associated with these projects are currently estimated to be between $44$30 million and $48$35 million. The Company also expects its future working capital requirements to fluctuate as a result of changes in unit sales volumes and the price of copper and other raw materials. The Company believes that the current cash balance, cash flow from operations, and the financing available from its revolving credit facility will satisfy anticipated working capital and capital expenditure requirements during 2016.2017.

There have been no changes in the Company’s internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the period covered by this report.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.