Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20192020
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: 000-20278

ENCORE WIRE CORPORATION
(Exact name of registrant as specified in its charter)

Delaware75-2274963
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1329 Millwood Road
McKinneyTexas75069
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (972) 562-9473
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareWIREThe NASDAQ Global Select Market

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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).          Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Acceleratedaccelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).       Yes  ☐    No  
Number of shares of Common Stock, par value $0.01, outstanding as of OctoberJuly 29, 2019: 20,961,9482020: 20,631,683




ENCORE WIRE CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBERJUNE 30, 20192020

Table of Contents

Page No.



Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Encore Wire Corporation
Balance Sheets
(In thousands, except share and per share data)
September 30, 2019December 31, 2018June 30, 2020December 31, 2019
(Unaudited)(See Note)(Unaudited)(See Note)
AssetsAssetsAssets
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$203,936  $178,405  Cash and cash equivalents$250,383  $230,965  
Accounts receivable, net of allowance of $2,031 and $2,030244,869  235,353  
Accounts receivable, net of allowance of $2,501 and $1,801Accounts receivable, net of allowance of $2,501 and $1,801192,067  223,098  
Inventories, netInventories, net90,244  102,367  Inventories, net87,880  89,684  
Income tax receivableIncome tax receivable3,111  1,389  Income tax receivable—  3,602  
Prepaid expenses and otherPrepaid expenses and other2,550  1,723  Prepaid expenses and other3,552  1,889  
Total current assetsTotal current assets544,710  519,237  Total current assets533,882  549,238  
Property, plant and equipment - at cost:Property, plant and equipment - at cost:Property, plant and equipment - at cost:
Land and land improvementsLand and land improvements52,354  51,169  Land and land improvements60,662  52,354  
Construction-in-progressConstruction-in-progress45,280  24,623  Construction-in-progress45,226  49,847  
Buildings and improvementsBuildings and improvements152,322  151,758  Buildings and improvements152,896  152,536  
Machinery and equipmentMachinery and equipment326,893  314,175  Machinery and equipment353,300  334,204  
Furniture and fixturesFurniture and fixtures10,855  9,687  Furniture and fixtures12,249  10,926  
Total property, plant and equipmentTotal property, plant and equipment587,704  551,412  Total property, plant and equipment624,333  599,867  
Accumulated depreciationAccumulated depreciation(262,938) (252,754) Accumulated depreciation(274,804) (266,688) 
Property, plant and equipment - netProperty, plant and equipment - net324,766  298,658  Property, plant and equipment - net349,529  333,179  
Other assetsOther assets771  165  Other assets634  737  
Total assetsTotal assets$870,247  $818,060  Total assets$884,045  $883,154  
Liabilities and Stockholders’ EquityLiabilities and Stockholders’ EquityLiabilities and Stockholders’ Equity
Current liabilities:Current liabilities:Current liabilities:
Trade accounts payableTrade accounts payable$39,907  $36,706  Trade accounts payable$30,039  $40,509  
Accrued liabilitiesAccrued liabilities33,197  36,866  Accrued liabilities27,338  34,787  
Income taxes payableIncome taxes payable2,499  —  
Total current liabilitiesTotal current liabilities73,104  73,572  Total current liabilities59,876  75,296  
Deferred income taxes and otherDeferred income taxes and other28,464  24,032  Deferred income taxes and other32,058  28,762  
Commitments and contingenciesCommitments and contingenciesCommitments and contingencies
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
Preferred stock, $.01 par value:Preferred stock, $.01 par value:Preferred stock, $.01 par value:
Authorized shares – 2,000,000; NaN issuedAuthorized shares – 2,000,000; NaN issued—  —  Authorized shares – 2,000,000; NaN issued—  —  
Common stock, $.01 par value:Common stock, $.01 par value:Common stock, $.01 par value:
Authorized shares – 40,000,000;Authorized shares – 40,000,000;Authorized shares – 40,000,000;
Issued shares – 26,989,403 and 26,906,603269  269  
Issued shares – 27,005,388 and 26,939,403Issued shares – 27,005,388 and 26,939,403270  269  
Additional paid-in capitalAdditional paid-in capital62,705  60,822  Additional paid-in capital66,554  63,009  
Treasury stock, at cost – 6,027,455 and 6,027,455 shares(91,056) (91,056) 
Treasury stock, at cost – 6,468,705 and 6,027,455 sharesTreasury stock, at cost – 6,468,705 and 6,027,455 shares(111,718) (91,056) 
Retained earningsRetained earnings796,761  750,421  Retained earnings837,005  806,874  
Total stockholders’ equityTotal stockholders’ equity768,679  720,456  Total stockholders’ equity792,111  779,096  
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$870,247  $818,060  Total liabilities and stockholders’ equity$884,045  $883,154  
Note: The balance sheet at December 31, 2018,2019, as presented, is derived from the audited financial statements at that date.
See accompanying notes.
1

Table of Contents
Encore Wire Corporation
Statements of Income
(In thousands, except per share data)
Quarter Ended September 30,Nine Months Ended September 30, Quarter Ended June 30,Six Months Ended June 30,
20192018201920182020201920202019
(Unaudited) (Unaudited) (Unaudited)(Unaudited)
Net salesNet sales$321,169  $340,732  $972,742  $968,956  Net sales$253,631  $336,866  $556,425  $651,573  
Cost of goods soldCost of goods sold278,181  286,227  842,518  832,460  Cost of goods sold217,132  290,956  474,153  564,337  
Gross profitGross profit42,988  54,505  130,224  136,496  Gross profit36,499  45,910  82,272  87,236  
Selling, general, and administrative expensesSelling, general, and administrative expenses22,672  24,214  71,515  68,599  Selling, general, and administrative expenses20,755  23,846  43,044  48,844  
Operating incomeOperating income20,316  30,291  58,709  67,897  Operating income15,744  22,064  39,228  38,392  
Net interest and other incomeNet interest and other income1,033  596  3,193  1,332  Net interest and other income267  1,082  1,151  2,160  
Income before income taxesIncome before income taxes21,349  30,887  61,902  69,229  Income before income taxes16,011  23,146  40,379  40,552  
Provision for income taxesProvision for income taxes4,948  7,209  14,308  16,109  Provision for income taxes3,664  5,364  9,424  9,359  
Net incomeNet income$16,401  $23,678  $47,594  $53,120  Net income$12,347  $17,782  $30,955  $31,193  
Earnings per common and common equivalent share – basicEarnings per common and common equivalent share – basic$0.78  $1.14  $2.28  $2.55  Earnings per common and common equivalent share – basic$0.60  $0.85  $1.50  $1.49  
Earnings per common and common equivalent share – dilutedEarnings per common and common equivalent share – diluted$0.78  $1.13  $2.27  $2.54  Earnings per common and common equivalent share – diluted$0.60  $0.85  $1.50  $1.49  
Weighted average common and common equivalent shares outstanding – basicWeighted average common and common equivalent shares outstanding – basic20,912  20,853  20,896  20,839  Weighted average common and common equivalent shares outstanding – basic20,496  20,898  20,646  20,891  
Weighted average common and common equivalent shares outstanding – dilutedWeighted average common and common equivalent shares outstanding – diluted20,991  20,919  20,985  20,910  Weighted average common and common equivalent shares outstanding – diluted20,537  20,988  20,696  20,985  
Cash dividends declared per shareCash dividends declared per share$0.02  $0.02  $0.06  $0.06  Cash dividends declared per share$0.02  $0.02  $0.04  $0.04  

See accompanying notes.

2

Table of Contents
Encore Wire Corporation
Statements of Stockholders' Equity
(In thousands, except per share data)

2019Common StockAdditional
Paid-In
Capital
Treasury StockRetained
Earnings
Total Stockholders' Equity
2020Common StockAdditional
Paid-In
Capital
Treasury StockRetained
Earnings
Total Stockholders' Equity
(Unaudited)(Unaudited)SharesAmountAdditional
Paid-In
Capital
SharesAmountRetained
Earnings
Total Stockholders' Equity(Unaudited)AmountAdditional
Paid-In
Capital
Retained
Earnings
Total Stockholders' Equity
Balance at December 31, 201826,907  $269  $60,822  $(91,056) $750,421  $720,456  
Balance at December 31, 2019Balance at December 31, 201926,939  $269  $63,009  6,027  $(91,056) $806,874  $779,096  
Net incomeNet income—  —  —  —  —  18,607  18,607  
Stock-based compensationStock-based compensation —  460  —  —  —  460  
Dividend declared—$0.02 per shareDividend declared—$0.02 per share—  —  —  —  —  (411) (411) 
Purchase of treasury stockPurchase of treasury stock—  —  —  439  (20,580) —  (20,580) 
Balance at March 31, 2020Balance at March 31, 202026,947  $269  $63,469  6,466  $(111,636) $825,070  $777,172  
Net incomeNet income—  —  —  —  —  13,411  13,411  Net income—  —  —  —  —  12,347  12,347  
Exercise of stock optionsExercise of stock options15  —  431  —  —  —  431  Exercise of stock options53   2,454  —  —  —  2,455  
Stock-based compensationStock-based compensation—  —  760  —  —  —  760  Stock-based compensation —  631  —  —  —  631  
Dividend declared—$0.02 per shareDividend declared—$0.02 per share—  —  —  —  —  (418) (418) Dividend declared—$0.02 per share—  —  —  —  —  (412) (412) 
Balance at March 31, 201926,922  $269  $62,013  6,027  $(91,056) $763,414  $734,640  
Net income—  —  —  —  —  17,782  17,782  
Exercise of stock options —  137  —  —  —  137  
Stock-based compensation —  502  —  —  —  502  
Dividend declared—$0.02 per share—  —  —  —  —  (418) (418) 
Balance at June 30, 201926,933  $269  $62,652  6,027  $(91,056) $780,778  $752,643  
Net income—  —  —  —  —  16,401  16,401  
Stock-based compensation, net —  53  —  —  —  53  
Dividend declared—$0.02 per share—  —  —  —  —  (418) (418) 
Balance at September 30, 201926,939  $269  $62,705  6,027  $(91,056) $796,761  $768,679  
Purchase of treasury stockPurchase of treasury stock—  —  —   (82) —  (82) 
Balance at June 30, 2020Balance at June 30, 202027,005  $270  $66,554  6,468  $(111,718) $837,005  $792,111  



2018Common StockAdditional
Paid-In
Capital
Treasury StockRetained
Earnings
Total Stockholders' Equity
2019Common StockAdditional
Paid-In
Capital
Treasury StockRetained
Earnings
Total Stockholders' Equity
(Unaudited)(Unaudited)SharesAmountAdditional
Paid-In
Capital
SharesAmountRetained
Earnings
Total Stockholders' Equity(Unaudited)AmountAdditional
Paid-In
Capital
Retained
Earnings
Total Stockholders' Equity
Balance at December 31, 201726,859  $269  $58,192  $(91,056) $673,940  $641,345  
Balance at December 31, 2018Balance at December 31, 201826,907  $269  $60,822  6,027  $(91,056) $750,421  $720,456  
Net incomeNet income—  —  —  —  —  11,353  11,353  Net income—  —  —  —  —  13,411  13,411  
Exercise of stock optionsExercise of stock options13  —  306  —  —  —  306  Exercise of stock options15  —  431  —  —  —  431  
Stock-based compensationStock-based compensation—  —  649  —  —  —  649  Stock-based compensation—  —  760  —  —  —  760  
Dividend declared—$0.02 per shareDividend declared—$0.02 per share—  —  —  —  —  (417) (417) Dividend declared—$0.02 per share—  —  —  —  —  (418) (418) 
Balance at March 31, 201826,872  $269  $59,147  6,027  $(91,056) $684,876  $653,236  
Net income—  —  —  —  —  18,089  18,089  
Stock-based compensation —  421  —  —  —  421  
Dividend declared—$0.02 per share—  —  —  —  —  (417) (417) 
Balance at June 30, 201826,877  $269  $59,568  6,027  $(91,056) $702,548  $671,329  
Balance at March 31, 2019Balance at March 31, 201926,922  $269  $62,013  6,027  $(91,056) $763,414  $734,640  
Net incomeNet income—  —  —  —  —  23,678  23,678  Net income—  —  —  —  —  17,782  17,782  
Exercise of stock optionsExercise of stock options —  125  —  —  —  125  Exercise of stock options —  137  —  —  —  137  
Stock-based compensationStock-based compensation—  —  187  —  —  —  187  Stock-based compensation —  502  —  —  —  502  
Dividend declared—$0.02 per shareDividend declared—$0.02 per share—  —  —  —  —  (418) (418) Dividend declared—$0.02 per share—  —  —  —  —  (418) (418) 
Balance at September 30, 201826,883  $269  $59,880  6,027  $(91,056) $725,808  $694,901  
Balance at June 30, 2019Balance at June 30, 201926,933  $269  $62,652  6,027  $(91,056) $780,778  $752,643  

See accompanying notes.
3

Table of Contents
Encore Wire Corporation
Statements of Cash Flow
(In thousands)
Nine Months Ended September 30, Six Months Ended June 30,
2019201820202019
(Unaudited)(Unaudited)
Operating Activities:Operating Activities:Operating Activities:
Net incomeNet income$47,594  $53,120  Net income$30,955  $31,193  
Adjustments to reconcile net income to net cash
provided by operating activities:
Adjustments to reconcile net income to net cash
provided by operating activities:
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortizationDepreciation and amortization13,254  12,321  Depreciation and amortization9,321  8,785  
Deferred income taxesDeferred income taxes3,044  1,516  Deferred income taxes3,327  816  
Stock-based compensation attributable to equity awardsStock-based compensation attributable to equity awards1,315  1,257  Stock-based compensation attributable to equity awards1,091  1,262  
OtherOther801  (145) Other520  (111) 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Accounts receivableAccounts receivable(9,516) (41,706) Accounts receivable30,331  (20,615) 
InventoriesInventories12,123  (3,641) Inventories1,804  6,328  
Other assetsOther assets(878) 120  Other assets(1,652) (200) 
Trade accounts payable and accrued liabilitiesTrade accounts payable and accrued liabilities1,431  9,647  Trade accounts payable and accrued liabilities(21,514) 2,266  
Current income taxes receivable / payableCurrent income taxes receivable / payable(1,722) 642  Current income taxes receivable / payable6,101  (1,873) 
Net cash provided by operating activitiesNet cash provided by operating activities67,446  33,131  Net cash provided by operating activities60,284  27,851  
Investing Activities:Investing Activities:Investing Activities:
Purchases of property, plant and equipmentPurchases of property, plant and equipment(41,251) (21,242) Purchases of property, plant and equipment(21,921) (21,210) 
Proceeds from sale of assetsProceeds from sale of assets22  66  Proceeds from sale of assets90  22  
Net cash used in investing activitiesNet cash used in investing activities(41,229) (21,176) Net cash used in investing activities(21,831) (21,188) 
Financing Activities:Financing Activities:Financing Activities:
Purchase of treasury stockPurchase of treasury stock(20,662) —  
Borrowings from revolver—  67,300  
Repayments to revolver—  (67,300) 
Proceeds from issuance of common stock, netProceeds from issuance of common stock, net568  431  Proceeds from issuance of common stock, net2,455  568  
Dividends paidDividends paid(1,254) (1,251) Dividends paid(828) (836) 
Net cash used in financing activitiesNet cash used in financing activities(686) (820) Net cash used in financing activities(19,035) (268) 
Net increase in cash and cash equivalentsNet increase in cash and cash equivalents25,531  11,135  Net increase in cash and cash equivalents19,418  6,395  
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period178,405  123,362  Cash and cash equivalents at beginning of period230,965  178,405  
Cash and cash equivalents at end of periodCash and cash equivalents at end of period$203,936  $134,497  Cash and cash equivalents at end of period$250,383  $184,800  
See accompanying notes.

4

Table of Contents
ENCORE WIRE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
SeptemberJune 30, 20192020
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited financial statements of Encore Wire Corporation (the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) 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 U.S. GAAP for complete annual 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 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
In March 2020 the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The Company is unable to predict the impact that COVID-19 will have on our financial position and operating results in future periods due to numerous uncertainties. The duration and severity of the outbreak and its long-term impact on our business remain uncertain.
Revenue Recognition
The majority of our revenue is derived by fulfilling customer orders for the purchase of our products, which include electrical building wire and cable. We recognize revenue at the point in time that control of the ordered products is transferred to the customer, which is typically upon shipment to the customer from our manufacturing facilities and based on agreed upon shipping terms on the related purchase order. Amounts billed and due from our customers are classified as accounts receivables on the balance sheet and require payment on a short-term basis through standard payment terms.
Revenue is measured as the amount of consideration we expect to receive in exchange for fulfilling product orders. The amount of consideration we expect to receive and revenue we recognize includes estimates for trade payment discounts and customer rebates which are estimated using historical experience and other relevant factors and is recorded within the same period that the revenue is recognized. We review and update these estimates regularly and the impact of any adjustments are recognized in the period the adjustments are identified. The adjustments resulting from updated estimates of trade payment discounts and customer rebates were not material.
Recent Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative U.S. GAAP other than Securities and Exchange Commission ("SEC") issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standard Update (“ASU”) to communicate changes to the codification. The Company considers the applicability and impact of all ASUs. The following are those ASUs that are relevant to the Company.
The Company has a minimal number of leases, all of which are classified as operating. As a result of the adoption of ASU No. 2016-02, “Leases (Topic 842),” on January 1, 2019, the Company recorded $0.7 million of right of use assets which are included in other non-current assets, $0.2 million of current lease liabilities which are included in accounts payable and $0.5 million of long-term lease liabilities included in other non-current liabilities.  We will evaluate any future lease commitments in conformance with ASU No. 2016-02.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326),” which makes significant changes to the accounting for credit losses on financial assets and disclosures about them. This ASU requires immediate recognition of management’s estimates of current expected credit losses. Under the prior model, losses were recognized only as they were incurred, which FASB has noted delayed recognition of expected losses that might not yet have met the threshold of being probable. The guidance affects all entities in all industries and applies to a wide variety of financial assets, including trade receivables. TheWe adopted this new standard will be effective for the Company beginning January 1, 2020. Early adoption2020 and applied a loss rate model to compute the expected credit loss allowance of our short-term trade receivable balances, which we concluded are representative of one collective pool. This method is permitted. ASU 2016-13 permits only a modified retrospective approach without restatement. The Company is still evaluating but does not expectbased on relevant information from past events, including historical experiences, current conditions, and reasonable and supportable forecasts that affect collectability. Our evaluation of the new standard toconcluded that it had no material impact on our financial statements materially.
statements.
5

Table of Contents
NOTE 2 – INVENTORIES
Inventories are stated at the lower of cost, determined by the last-in, first-out (LIFO) method, or market.
Inventories consist of the following:
In ThousandsIn ThousandsSeptember 30, 2019December 31, 2018In ThousandsJune 30, 2020December 31, 2019
Raw materialsRaw materials$21,460  $28,455  Raw materials$22,084  $25,882  
Work-in-processWork-in-process33,157  30,529  Work-in-process22,546  25,381  
Finished goodsFinished goods77,086  88,708  Finished goods79,169  83,222  
Total Inventory at FIFO costTotal Inventory at FIFO cost131,703  147,692  Total Inventory at FIFO cost123,799  134,485  
Adjust to LIFO costAdjust to LIFO cost(41,459) (45,325) Adjust to LIFO cost(35,919) (44,801) 
Inventory, netInventory, net$90,244  $102,367  Inventory, net$87,880  $89,684  
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 poolspurposes. 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 established atbased primarily upon the most recent quoted market price of copper and other material prices as of the end of each fiscal year. Duringreporting period. The Company performs a lower of cost or market calculation quarterly. As of June 30, 2020, 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 first three quartersquantity of every year, LIFO calculationsinventory on hand could cause copper or other raw materials that are based oncarried in inventory at costs different from the inventory levelscost 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 that time. Accordingly, interim LIFO balances will fluctuate depending on those inventory levels and costs.the different price.
In the thirdsecond quarter of 2019,2020, LIFO adjustments were recorded, increasing cost of sales by $0.7 million, versus LIFO adjustments decreasing cost of sales by $3.3 million in the second quarter of 2019. In the first six months of 2020, LIFO adjustments were recorded, decreasing cost of sales by $4.4$8.9 million, versus LIFO adjustments decreasingincreasing cost of sales by $9.1 million in the third quarter of 2018. In the first nine months of 2019, LIFO adjustments were recorded, decreasing cost of sales by $3.9 million, versus LIFO adjustments decreasing cost of sales by $5.4$0.5 million in the first ninesix months of 2018.2019.
NOTE 3 – ACCRUED LIABILITIES
Accrued liabilities consist of the following:
In ThousandsIn ThousandsSeptember 30, 2019December 31, 2018In ThousandsJune 30, 2020December 31, 2019
Sales rebates payableSales rebates payable$16,486  $18,565  Sales rebates payable$12,280  $16,622  
Property taxes payableProperty taxes payable3,168  3,962  Property taxes payable2,039  4,011  
Accrued salariesAccrued salaries7,717  8,790  Accrued salaries6,446  7,924  
SAR LiabilitySAR Liability3,821  3,087  
Other accrued liabilitiesOther accrued liabilities5,826  5,549  Other accrued liabilities2,752  3,143  
Total accrued liabilitiesTotal accrued liabilities$33,197  $36,866  Total accrued liabilities$27,338  $34,787  

NOTE 4 – INCOME TAXES
Income taxes were accrued at an effective rate of 22.9% in the second quarter of 2020 versus 23.2% in the thirdsecond quarter of 2019, versus 23.3% in the third quarter of 2018, consistent with the Company’s estimated liabilities. For the ninesix months ended SeptemberJune 30, the Company’s tax rate was approximately 23.3% in 2020 and 23.1% in 2019 and 23.3% in 2018.2019. In all periods, the differences between the provisions for income taxes and the income taxes computed using the federal income tax statutory rate are due primarily to the incremental taxes accrued for state and local taxes.
NOTE 5 – EARNINGS PER SHARE
Earnings per common and common equivalent share are 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.
6

Table of Contents
The following table sets forth the computation of basic and diluted earnings per share:
Quarter Ended September 30,Nine Months Ended September 30, Quarter Ended June 30,Six Months Ended June 30,
In ThousandsIn Thousands2019201820192018In Thousands2020201920202019
Numerator:Numerator:Numerator:
Net incomeNet income$16,401  $23,678  $47,594  $53,120  Net income$12,347  $17,782  $30,955  $31,193  
Denominator:Denominator:Denominator:
Denominator for basic earnings per share – weighted average sharesDenominator for basic earnings per share – weighted average shares20,912  20,853  20,896  20,839  Denominator for basic earnings per share – weighted average shares20,496  20,898  20,646  20,891  
Effect of dilutive securities:Effect of dilutive securities:Effect of dilutive securities:
Employee stock awardsEmployee stock awards79  66  89  71  Employee stock awards41  90  50  94  
Denominator for diluted earnings per share – weighted average sharesDenominator for diluted earnings per share – weighted average shares20,991  20,919  20,985  20,910  Denominator for diluted earnings per share – weighted average shares20,537  20,988  20,696  20,985  
The weighted average of employee stock options excluded from the determination of diluted earnings per common and common equivalent share for the thirdsecond quarter was 121,413238,433 in 20192020 and 166,500117,500 in 2018.2019. The weighted average of employee stock options excluded from the determination of diluted earnings per common and common equivalent share for the ninesix months ended SeptemberJune 30 was 118,804239,609 in 20192020 and 159,537117,500 in 2018. 2019.Such options were anti-dilutive for their respective periods.
NOTE 6 – DEBT
The Company is party to a Credit Agreement (the “Credit Agreement”) with 2 banks, Bank of America, N.A., as administrative agent and letter of credit issuer, and Wells Fargo Bank, National Association, as syndication agent. The Credit Agreement, as amended, extends through October 1, 2021 and provides for maximum borrowings of $150.0 million. At our request, and subject to certain conditions, the commitments under the Credit Agreement may be increased by a maximum of up to $100.0 million as long as existing or new lenders agree to provide such additional commitments. Borrowings under the line of credit bear interest, at the Company’s option, at either (1) LIBOR plus a margin that varies from 0.875% to 1.75% depending upon the Leverage Ratio (as defined in the Credit Agreement), or (2) the base rate (which is the highest of the federal funds rate plus 0.5%, the prime rate, or LIBOR plus 1.0%) plus 0% to 0.25% (depending upon the Leverage Ratio). A commitment fee ranging from 0.15% to 0.30% (depending upon the Leverage Ratio) is payable on the unused line of credit. At SeptemberJune 30, 2019,2020, there were 0 borrowings outstanding under the Credit Agreement, and letters of credit outstanding in the amount of $1.5$1.6 million left $148.5$148.4 million of credit available under the Credit Agreement. Obligations under the Credit Agreement are the only contractual borrowing obligations or commercial borrowing commitments of the Company.
Obligations under the Credit Agreement are unsecured and contain customary covenants and events of default. The Company was in compliance with the covenants as of SeptemberJune 30, 2019.2020.
NOTE 7 – STOCKHOLDERS’ EQUITY
On November 10, 2006, the Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to an authorized number of shares of its common stock on the open market or through privately negotiated transactions at prices determined by the President of the Company during the term of the program. The Company’s Board of Directors has authorized several increases and annual extensions of this stock repurchase program, and, as of SeptemberJune 30, 2019, 1,132,9462020, 1,000,000 shares remained authorized for repurchase through March 31, 2020.2021. The Company did 0t repurchase anyrepurchased 441,250 shares of its stock in the ninesix months ended SeptemberJune 30, 2019 or 2018.2020 versus 0 shares in the six months ended June 30, 2019.
7

Table of Contents
NOTE 8 - CONTINGENCIES

There are no material pending proceedings to which the Company is a party or to which any of its property is subject. However, the Company is from time to time involved in litigation, certain other claims and arbitration matters arising in the ordinary course of its business. The Company accrues for a liability when it is both probable that a liability has been incurred and the amount
7

Table of the loss can be reasonably estimated. Significant judgment is required in both the determination of the probability of a loss and the determination as to whether a loss is reasonably estimable. Any such accruals are reviewed at least quarterly and adjusted to reflect the effects of negotiations, settlements, rulings, advice of legal counsel and technical experts and other information and events pertaining to a particular matter. To the extent there is a reasonable possibility (within the meaning of ASC 450 “Contingencies”) that probable losses could exceed amounts already accrued, if any, and the additional loss or range of loss is able to be estimated, management discloses the additional loss or range of loss.

Contents
For matters where the Company has evaluated that a loss is not probable, but is reasonably possible, the Company will disclose an estimate of the possible loss or range of loss or make a statement that such an estimate cannot be made. In some instances, for reasonably possible losses, the Company cannot estimate the possible loss or range of loss. The nature and progression of litigation can make it difficult to predict the impact a particular lawsuit will have on the Company. There are many reasons that the Company cannot make these assessments, including, among others, one or more of the following: the early stages of a proceeding; damages sought that are unspecified, unsupportable, unexplained or uncertain; discovery is incomplete; the complexity of the facts that are in dispute; the difficulty of assessing novel claims; the parties not having engaged in any meaningful settlement discussions; the possibility that other parties may share in any ultimate liability; and/or the often slow pace of litigation.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Encore believes it is a low-cost manufacturer of electrical building wire and cable. The Company is a significant supplier of building wire for interior electrical wiring in commercial and industrial buildings, homes, apartments, and manufactured housing.
As discussed in Note 1, in the notes to the financial statements, the duration and severity of the outbreak and its long-term impact on our business are uncertain at this time. Developments surrounding the COVID-19 global pandemic are continuing to change daily, and we have limited visibility into the extent to which market demand for our products as well as sector manufacturing and distribution capacity will be impacted.
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 73.0%69.9%, 69.7%73.0%, and 65.2%69.7% of the Company’s cost of goods sold during fiscal 2019, 2018 2017 and 2016,2017, 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 risingraising 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 volatility of both raw material prices and wire prices in the Company’s end market, hedging raw materials can be risky. Historically, the Company has not engaged in hedging strategies for raw material purchases. The tables below highlight the range of closing prices of copper on a per pound basis on the Comex exchange for the periods shown.
COMEX COPPER CLOSING PRICE 2020
8

Table of Contents
April
2020
May
2020
June
2020
Quarter Ended June 30, 2020Six Months Ended June 30, 2020
High$2.38  $2.47  $2.71  $2.71  $2.88  
Low2.19  2.32  2.47  2.19  2.12  
Average2.31  2.39  2.60  2.43  2.50  
COMEX COPPER CLOSING PRICE 2019
July 2019August 2019September 2019Quarter Ended September 30, 2019Nine Months Ended September 30, 2019April
2019
May
2019
June
2019
Quarter Ended June 30, 2019Six Months Ended June 30, 2019
HighHigh$2.74  $2.66  $2.68  $2.74  $2.98  High$2.98  $2.84  $2.74  $2.98  $2.98  
LowLow2.62  2.53  2.51  2.51  2.51  Low2.88  2.65  2.63  2.63  2.57  
AverageAverage2.69  2.57  2.60  2.62  2.74  Average2.92  2.74  2.68  2.78  2.80  
COMEX COPPER CLOSING PRICE 2018
July 2018August 2018September 2018Quarter Ended September 30, 2018Nine Months Ended September 30, 2018
High$2.93  $2.76  $2.84  $2.93  $3.29  
Low2.69  2.56  2.58  2.56  2.56  
Average2.79  2.69  2.69  2.73  2.98  

The following discussion and analysis relate to factors that have affected the operating results of the Company for the quarters and ninesix months ended SeptemberJune 30, 20192020 and 2018.2019. 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, 2018.2019.
8

Table of Contents
Results of Operations
Quarter Ended SeptemberJune 30, 20192020 Compared to Quarter Ended SeptemberJune 30, 20182019
Net sales were $321.2$253.6 million in the thirdsecond quarter of 20192020 compared to $340.7$336.9 million in the thirdsecond quarter of 2018.2019. The drop in net sales dollars is primarily the result of an 18.6% decrease in copper wire unit volume shipped coupled with a 5.9%9.5% decrease in the average selling price of copper wire, offset slightly by a 0.2% increase in copper wire unit volume shipped.wire. Unit volume is measured in pounds of copper contained in the wire shipped during the period. The 0.2% increase18.6% decrease in unit volume shipped was primarily due to continued strongCOVID-19-related economic strain as parts of the country shut down job sites or significantly curtailed construction industry demand. activity in response to the pandemic, leaving some customers unable to receive deliveries of our products during the quarter. This, coupled with uncertainty in the market, resulted in reduced and sporadic customer buying patterns during April, May and part of June 2020. Beginning late in the second quarter of 2020, driven by the re-opening of many state and local economies, customer buying patterns began to return to more historical levels. Fluctuations in sales prices are primarily a result of changing copper and other raw material prices and product price competition. The average cost per pound of raw copper purchased decreased 4.2%11.4% in the thirdsecond quarter of 20192020 compared to the thirdsecond quarter of 20182019 and was a driver of the decreased average sales price of copper wire.
Cost of goods sold was $278.2$217.1 million, or 86.6%85.6% of net sales, in the thirdsecond quarter of 2019,2020, compared to $286.2$291.0 million, or 84.0%86.4% of net sales, in the thirdsecond quarter of 2018.2019. Gross profit decreased to $43.0$36.5 million, or 13.4%14.4% of net sales, in the thirdsecond quarter of 20192020 from $54.5$45.9 million, or 16.0%13.6% of net sales, in the thirdsecond quarter of 2018.2019.
The decrease in grossGross profit margin percentage for the second quarter of 2020 was primarily the result of a 9.0% decrease14.4% compared to 13.6% in the second quarter of 2019. The average selling price of wire per copper spreadpound sold decreased 9.5% in the thirdsecond quarter of 2020 versus the second quarter of 2019, versus the third quarter of 2018. The spread decreased as a result ofwhile the average sales pricecost of copper per pound of copper sold decreasing 5.9% while the per pound cost of raw copper purchased decreased 4.2%11.4%. The percentage change on sales is on a higher nominal dollar amount than on purchases and, therefore, spreads change on a nominal dollar basis. The margin changes were due primarily to the competitive pricing environment in the industry. It should be noted that the spreads in the third quarter of 2018 were the highest in over a decade. In aluminum wire, which represented 7.7% of our net sales in the third quarter of 2019, we continue to enforce our rights under the U.S. trade remedy laws. On October 18, 2019, the U.S. Commerce Department signed its final antidumping (“AD”) and countervailing duty (“CVD”) determinations, resulting in combined AD/CVD duty rates ranging from 81.27 to 218.42 percent for aluminum wire and cable imported from China. The final step in these investigations is a vote from the U.S. International Trade Commission, which is not expected until approximately November 20, 2019.
Total raw materials cost including the LIFO adjustment, increaseddecreased to 74.3%72.2% of net sales in the thirdsecond quarter of 2019,2020, from 73.2%74.6% of net sales in the thirdsecond quarter of 2018.2019. Overhead costs increased to 12.3%13.5% of net sales in the thirdsecond quarter of 2019,2020, from 10.8%11.8% of net sales in the thirdsecond quarter of 2018.2019. Overheads contain some fixed and semi-fixed components which do not fluctuate as much as sales dollars fluctuate.
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 and other material prices as of the end of each reporting period. The Company performs a lower of cost or market calculation quarterly. As of September 30, 2019, no LCM
9

Table of Contents
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.
Due primarily to decreases in copper costs and price and volume movements of other materials, a LIFO adjustment was recorded, decreasing cost of sales by $4.4 million during the third quarter of 2019. During the third quarter of 2018, a LIFO adjustment was recorded, decreasing cost of sales by $9.1 million.
Selling expenses, consisting of commissions and freight, for the thirdsecond quarter of 20192020 were $16.5$13.5 million, or 5.1%5.3% of net sales, compared to $17.5$17.3 million, or 5.1% of net sales, in the thirdsecond quarter of 2018.2019. 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 decreasedincreased to 2.8% of net sales in the second quarter of 2020 from 2.6% of net sales in the thirdsecond quarter of 2019 from 2.7% of net sales in the third quarter of 2018.2019. General and administrative (“G&A”) expenses for the thirdsecond quarter of 20192020 were $6.1$7.3 million, or 2.9% of net sales, compared to $6.5 million, or 1.9% of net sales, compared to $6.7 million, or 2.0% of net sales, in the thirdsecond quarter of 2018.2019. The G&A decreaseincrease was driven primarily by decreasedincreased stock compensation expense, driven primarily by a dropan increase in our stock price driving the mark to market accounting on stock appreciation rights. The net stock compensation expense decreased $1.0increased $1.4 million in the thirdsecond quarter of 20192020 versus the thirdsecond quarter of 2018. The Company did not record any bad debt expense during the third quarters of 2019 or 2018.2019.
NineSix Months Ended SeptemberJune 30, 20192020 Compared to NineSix Months Ended SeptemberJune 30, 20182019
Net sales for the first ninesix months of 20192020 were $972.7$556.4 million compared to net sales of $969.0$651.6 million for the first ninesix months of 2018.2019. This 0.4% increase14.6% decrease in net sales is primarily the result of a 6.0% increase15.9% decrease in copper wire sales, driven by a 9.2% decrease in copper wire unit volume shipped offset byand a 5.8%7.4% decrease in the average selling price of copper wire. Unit volume is measured in pounds of copper contained in the wire shipped during the period. Fluctuations in sales prices are primarily a result of changing copper and other raw material prices and product price competition. The average cost per pound of raw copper purchased decreased 7.3%9.6% in the first ninesix months of 20192020 compared to the first ninesix months of 20182019 and was athe principal driver of the decreased average sales price of copper wire.
Cost of goods sold increaseddecreased to $842.5$474.2 million in the first ninesix months of 2019,2020, compared to $832.5$564.3 million in the first ninesix months of 2018.2019. Gross profit decreased to $130.2$82.3 million, or 14.8% of net sales, in the first six months of 2020 versus $87.2 million, or 13.4% of net sales, in the first ninesix months of 2019 from $136.5 million, or 14.1%2019.
Gross profit percentage for the six months ended June 30, 2020 was 14.8% compared to 13.4% during the same period in 2019. The average selling price of net sales, in the first nine months of 2018.
The gross profit margin percentage decreased primarily as a result of the decrease in the spread between the average price paid for a pound of raw copper and the average sale price for a pound of copper in the first nine months of 2019 versus the first nine months of 2018 due primarily to competitive industry pricing. Fluctuations in sales prices are primarily a result of changing copper raw material prices and product price competition. The copper spread decreased 2.8% in the first nine months of 2019 versus the first nine months of 2018. The spread decreased as a result of the 5.8% decrease in the average sales pricewire per copper pound sold decreased 7.4% in the six months ended June 30, 2020 versus the six months ended June 30, 2019, while the average cost of copper per pound cost of raw copperpurchased decreased 7.3%9.6%. InThe percentage change on sales is on a higher nominal dollars, the sales price decreased moredollar amount than the cost of copper.on purchases and, therefore, spreads change on a nominal dollar basis.
Due primarily to decreases in copper costs and a decrease in copper inventory quantities on hand, andaided somewhat by price and volume movements of other materials in the first ninesix months of 2019,2020, LIFO adjustments were recorded, decreasing cost of sales by $3.9$8.9 million. During the same period in 2018,2019, LIFO adjustments were recorded, decreasingincreasing cost of sales by $5.4$0.5 million.
9

Table of Contents
Based on current copper prices, there is no LCM adjustment necessary. Future reductions in the price of copper could require the Company to record an LCM adjustment against the related inventory balance, which would result in a negative impact on net income.
Selling expenses for the first ninesix months of 20192020 decreased to $50.3$28.8 million, or 5.2% of net sales, compared to $50.4$33.7 million, or 5.2% of net sales, in the same period of 2018.2019. Commissions paid to independent manufacturers’ representatives are paid as a relatively stable percentage of sales dollars, and therefore, exhibited little change in percentage terms, increasing $0.5decreasing $2.5 million in concert with the increaseddecreased sales dollars. Freight costs for the first ninesix months of 2019 remained at2020 were 2.7% of net sales, consistent with 2.7% of net sales for the first ninesix months of 2018.2019. General and administrative expenses were $21.2$13.5 million, or 2.2%2.4% of net sales, in the first nine monthshalf of 20192020 compared to $18.2$15.1 million, or 1.9%2.3% of net sales, in the first nine monthshalf of 2018.2019. The G&A increasedecrease was driven primarily by increaseddecreased stock compensation expense driven primarily by our strong stock price performance driving the mark to market accounting on stock appreciation rights. The net stock compensation expense increased $1.8decreased $2.0 million in the first ninesix months of 20192020 versus the first ninesix months of 2018. The Company did not record any bad debt expense during the first nine months of 2019 and 2018.2019.
10

Table of Contents
Liquidity and Capital Resources
The Company maintains a substantial inventory of finished products to satisfy customers’ delivery requirements promptly. As is customary in the building wire industry, the Company provides payment terms to most of its customers that exceed terms that it receives from its suppliers. Copper suppliers generally give very short payment terms (less than 15 days) while the Company and the building wire industry give customers much longer terms. In general, the Company’s standard payment terms result in the collection of a significant majority of net sales within approximately 75 days of the date of invoice. As a result of this timing difference, building wire companies must have sufficient cash and access to capital resources to finance their working capital needs, thereby creating a barrier to entry for companies who do not have sufficient liquidity and capital resources. The two largest components of working capital, receivables and inventory, and to a lesser extent, capital expenditures, are the primary drivers of the Company’s liquidity needs. Generally, these needs will cause the Company’s cash balance to rise and fall inversely to the receivables and inventory balances. The Company’s receivables and inventories will rise and fall in concert with several factors, most notably the price of copper and other raw materials and the level of unit sales. Capital expenditures have historically been necessary to expand and update 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 and borrowings under its various debt arrangements. The Company historically uses its revolving credit facility to manage day to day operating cash needs as required by daily fluctuations in working capital and has the facility in place should such a need arise in the future. We believe that the Company has sufficient liquidity and do not believe COVID-19 will materially impact our liquidity, but we continue to assess the COVID-19 pandemic and its impact on our business, including on our customer base and suppliers.
For more information on the Company’s revolving credit facility, see Note 6 to the Company’s financial statements included in Item 1 to this report, which is incorporated herein by reference.
Cash provided by operating activities was $67.4$60.3 million in the first ninesix months of 20192020 compared to $33.1$27.9 million in the first ninesix months of 2018.2019. The following changes in components of cash flow from operations were notable. The Company had net income of $47.6$31.0 million in the first ninesix months of 20192020 compared to net income of $53.1$31.2 million in the first ninesix months of 2018.2019. Accounts receivable increased $9.5decreased $30.3 million in the first ninesix months of 20192020 compared to $41.7increasing $20.6 million in the first ninesix months of 2018,2019, resulting in a positive change in cash flow of $32.2$50.9 million in the first ninesix months of 20192020 versus the first ninesix months of 2018.2019. 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 decreased $12.1$1.8 million in the first ninesix months of 20192020 compared to increasing $3.6decreasing $6.3 million in the first ninesix months 2018of 2019 producing a positivenegative swing in cash flow of $15.7$4.5 million in 20192020 versus 2018.2019. Trade accounts payable and accrued liabilities providedused cash of $1.4$21.5 million in the first ninesix months of 20192020 versus providing $9.6$2.3 million in the first ninesix months of 2018, resulting in a negative change in cash flow of $8.2 million.2019. In the first ninesix months of 2019,2020, changes in current and deferred taxes provided cash of $1.3$9.4 million versus $2.2$1.1 million of cash providedused in the first ninesix months of 2018.2019. These changes in cash flow were the primary drivers of the $34.3$32.4 million increase in cash provided by operations in the first ninesix months of 20192020 compared to the first ninesix months of 2018.2019.
Cash used in investing activities increased to $41.2$21.8 million in the first ninesix months of 20192020 from $21.2 million in the first ninesix months of 20182019 due to higher capital expenditures on plant and equipment. Cash used in financing activities in the first ninesix months of 20192020 consisted of $1.3$0.8 million of cash dividends paid, offset by $0.6$2.5 million of proceeds from exercised stock options.options, and $20.7 million of purchases of treasury stock. These changesactivities in cash flow used $0.7$19.0 million cash in financing activities for the first ninesix months of 2019 versus $0.82020 compared to $0.3 million used in the first ninesix months of 2018.2019. As of SeptemberJune 30, 2019,2020, the balance on the Company’s revolving line of credit remained at zero. The Company’s cash balance was $203.9$250.4 million at SeptemberJune 30, 20192020 versus $134.5$184.8 million at SeptemberJune 30, 2018, as a result2019.
10

Table of the changes in cash flow discussed above.Contents
During the remainder of 2019,2020, 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 production bottlenecks.the previously-announced construction of a new 720,000 square foot facility located at the north end of our existing campus. This new facility will act as a service center, modernizing our logistics to allow for increased throughput and provide the bandwidth necessary to capture incremental sales volumes. This phase one of our two-phase expansion plan will allow us to compete at a higher level in the marketplace while further strengthening our industry-leading customer service and order fill rates. We expect to complete construction in the second quarter of 2021. The total capital expenditures for all of 20192020 associated with these projects are currently estimated to be between $40$85 million and $45$95 million. We continueOur strong balance sheet and ability to refine our plans for significant capital expenditures, but these plans remain delayed by issues arising in connection with a proposed new highway project which may bisect our property. The Company also expects its future working capital requirements to fluctuate as a resultconsistently generate high levels of changes in unit sales volumes and the price of copper and other raw materials. The Company believes that the current cash balance,operating cash flow from operations, and the financing available from its revolving credit facility will satisfy anticipated workingshould provide ample allowance to fund planned capital and capital expenditure requirements during 2019.expenditures.
11

Table of Contents
Information Regarding Forward-Looking Statements
This quarterly report on Form 10-Q contains various “forward-looking statements” (withinwithin 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 is based on management’s belief as well as assumptions madeamended. Forward-looking statements can be identified by and information currently available to management. The words “believes”such as: “anticipate”, “estimates”“intend”, “anticipates”“plan”, “plans”“goal”, “seeks”“seek”, “expects”“believe”, “intends”“project”, “estimate”, “expect”, “strategy”, “future”, “likely”, “may”, “should”, “will” and similar expressions identify somereferences to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the forward-looking statements. Althoughfuture of our business, future plans and strategies, projections, anticipated events and trends, the Company believes that the expectations reflected in sucheconomy and other future conditions. Because forward-looking statements are reasonable, it can give no assurance thatrelate to the future, 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. Amonganticipated, estimated or projected. Therefore, you should not rely on any of these forward-looking statements. Examples of such uncertainties and risks include, but are not limited to, statements about the key factors that may have a direct bearing onpricing environment of copper, aluminum and other raw materials, the Company’s operating results are fluctuations induration, magnitude and impact of the economyongoing COVID-19 global pandemic, our order fill rates, profitability and in the levelstockholder value, payment of activity in the building and construction industry, demand for the Company’s products,future dividends, future purchases of stock, the impact of price competitioncompetitive pricing and fluctuationsother risks detailed from time to time in the priceCompany’s reports filed with the Securities and Exchange Commission (the “SEC”). Actual results may vary materially from those anticipated. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of copper and other raw materials.the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. For more information regarding “forward-looking statements,” see “Information Regarding Forward-Looking Statements” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018,2019, which is hereby incorporated by reference.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes from the information provided in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Item 4. Controls and Procedures.
The Company maintains controls and procedures designed to ensure that information required to be disclosed by it in the reports it files with or submits to the Securities and Exchange Commission (the “SEC”)SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive and Chief Financial Officers, as appropriate, to allow timely decisions regarding required disclosure. Based on an evaluation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report conducted by the Company’s management, with the participation of the Chief Executive and Chief Financial Officers, the Chief Executive and Chief Financial Officers concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files with or submits to the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive and Chief Financial Officers, as appropriate, to allow timely decisions regarding required disclosure.
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, the Company's internal control over financial reporting during the period covered by this report.
11
12

Table of Contents
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
For information on the Company’s legal proceedings, see Note 8 to the Company’s financial statements included in Item 1 to this report and incorporated herein by reference.
Item 1A. Risk Factors.
There have been no material changes to the Company’sThis section supplements and updates certain risk factors as disclosed in Item 1A “Risk Factors,” in the Company’s Annual Reportof Part I of our annual report on Form 10-K for the fiscal year ended December 31, 2018.2019 (the “Annual Report”). The following risk factors supersede the corresponding risks described in the Annual Report and should be read together with the other risk factors disclosed in the Annual Report. In addition to the other information in this Quarterly Report on Form 10-Q, all of these risk factors should be carefully considered in evaluating us and our common stock. Any of these risks, many of which are beyond our control, could materially and adversely affect our financial condition, results of operations or cash flows, or cause our actual results to differ materially from those projected in any forward-looking statements. We may also face other risks and uncertainties that are not presently known, are not currently believed to be material, or are not identified below because they are common to all businesses. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. For more information, see “Information Regarding Forward-Looking Statements” in Item 2 of Part I of this report.
Outbreak of Contagious Disease
Our business and the businesses of our suppliers, distributors and customers could be adversely affected by the effects of a widespread outbreak of contagious diseases, including the recent ongoing outbreak of COVID-19. Any outbreak of contagious diseases, and other adverse public health developments, could cause a disruption in our supply chain, distribution and demand for our products. The duration of any such disruption and the related financial impact from COVID-19 and other epidemics and pandemics cannot be reasonably estimated at this time. The occurrence or continuation of any of these events could lead to decreased revenues and limit our ability to execute on our business plan, which could adversely affect our business, financial condition and results of operations.
Industry Conditions and Cyclicality
The residential, commercial and industrial construction industry, which is the end user of the Company’s products, is cyclical and is affected by a number of factors, including the general condition of the economy, market demand and changes in interest rates. Industry sales of electrical wire and cable products tend to parallel general construction activity, which includes remodeling. Construction activity is affected by the ability of our end users to finance projects, which may be severely reduced due to a widespread outbreak of contagious disease, including an epidemic or pandemic such as the current COVID-19 pandemic. Residential, commercial and industrial construction could decline if companies and consumers are unable to finance construction projects or if the economy precipitously declines or stalls, which could result in delays or cancellations of capital projects.
Deterioration in the financial condition of the Company’s customers due to industry and economic conditions may result in reduced sales, an inability to collect receivables and payment delays or losses due to a customer’s bankruptcy or insolvency. Although the Company’s bad debt experience has been low in recent years, the Company’s inability to collect receivables may increase the amounts the Company must expense against its bad debt reserve, decreasing the Company’s profitability. A downturn in the residential, commercial or industrial construction industries and general economic conditions may have a material adverse effect on the Company.
12

Table of Contents
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Note 7 to the Company’s financial statements included in Item 1 to this report is hereby incorporated herein by reference.
The following table provides information relating to our purchases of shares of our common stock during the three months ended June 30, 2020.
ISSUER PURCHASES OF EQUITY SECURITIES
(a)(b)(c)(d)
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
April 1, 2020 – April 30, 20202,138  38.13  2,138  691,696  
May 1, 2020 – May 31, 2020—  1,000,000  
June 1, 2020 – June 30, 2020—  1,000,000  
2,138  $38.13  2,138  

(1) On November 10, 2006, the Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to an authorized number of shares of its common stock from time to time in open market or private transactions, at the Company’s discretion. This authorization originally expired on December 31, 2007, and the Company’s Board of Directors has authorized several increases and annual extensions of this stock repurchase program. As of June 30, 2020, 1,000,000 shares remained authorized for repurchase through March 31, 2021.
13

Table of Contents
Item 6. Exhibits.
Exhibit
Number
Description
3.1
3.2
4.1Form of certificate for Common Stock (filed as Exhibit 1 to the Company’s registration statement on Form 8-A, filed with the SEC on June 4, 1992, and incorporated herein by reference).
31.1 10.1
10.2
31.1
31.2
32.1
32.2
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

14
13

Table of Contents
SIGNATURES
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.
 
ENCORE WIRE CORPORATION
(Registrant)
Dated: OctoberJuly 30, 20192020/s/ DANIEL L. JONES
Daniel L. Jones
Chairman, President and Chief Executive Officer
Dated: OctoberJuly 30, 20192020/s/ FRANKBRET J. BILBANECKERT
FrankBret J. BilbanEckert
Vice President-Finance, Treasurer,
Secretary and Chief Financial Officer

1415