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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-20278
ENCORE WIRE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2274963
(State of incorporation) (I.R.S. employer identification number)
1410 MILLWOOD ROAD
MCKINNEY, TEXAS 75069
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 562-9473
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 [X] No [ ]
Number of shares of Common Stock outstanding as of September 30, 2001:
15,014,672
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ENCORE WIRE CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2001
<Table>
<Caption>
Page No.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Consolidated Balance Sheets.....................................................................3
September 30, 2001 (Unaudited) and December 31, 2000
Consolidated Statements of Income (Unaudited)...................................................5
Quarters and nine months ended September 30, 2001 and
September 30, 2000
Consolidated Statements of Cash Flows (Unaudited)...............................................6
Nine months ended September 30, 2001 and September 30, 2000
Notes to Consolidated Financial Statements (Unaudited)..........................................7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................................10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings..............................................................................14
ITEM 5. Other Information..............................................................................14
ITEM 6. Exhibits and Reports on Form 8-K...............................................................14
Signatures.......................................................................................................15
</Table>
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ENCORE WIRE CORPORATION
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
September 30, December 31,
In Thousands of Dollars 2001 2000
(Unaudited) (See Note 1)
------------- ------------
ASSETS
Current assets:
Cash ........................................ $ 534 $ 56
Accounts receivable (net of allowance of
$518 and $414) .......................... 54,501 54,003
Inventories (Note 2) ........................ 33,660 42,867
Prepaid expenses and other assets ........... 894 461
Current taxes receivable .................... -- --
------------- ------------
Total current assets .................... 89,589 97,387
Property, plant and equipment-on the basis of cost:
Land ........................................ 3,457 3,583
Construction in progress .................... 5,639 2,978
Buildings and improvements .................. 24,673 26,086
Machinery and equipment ..................... 80,208 77,013
Furniture and fixtures ...................... 2,254 2,021
------------- ------------
Total property, plant, and equipment .... 116,231 111,681
Accumulated depreciation and
amortization ........................ 44,156 37,420
------------- ------------
72,075 74,261
Other assets ......................................... 864 191
------------- ------------
Total assets ......................................... $ 162,528 $ 171,839
============= ============
</Table>
See accompanying notes
3
ENCORE WIRE CORPORATION
CONSOLIDATED BALANCE SHEETS (continued)
<Table>
<Caption>
Sept. 30, December 31,
2001 2000
In Thousands of Dollars, Except Share Data (Unaudited) (See Note 1)
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable ................................................ $ 18,913 $ 18,487
Accrued liabilities ................................................... 6,521 8,655
Current income taxes payable .......................................... 3,002 738
Current deferred income taxes ......................................... 960 960
------------ ------------
Total current liabilities ............................................. 29,396 28,840
Non-current deferred income taxes .............................................. 6,853 6,853
Long term note payable (Note 4) ................................................ 27,500 42,600
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued shares - (16,703,772
at September 30, 2001 and 16,637,509 at
December 31, 2000) ............................................. 167 166
Additional paid-in capital ..................................................... 32,366 32,162
Treasury stock -1,689,100 shares at September 30, 2001 and 1,528,100 shares
at December 31, 2000 ........................................... (13,859) (12,493)
Retained earnings .............................................................. 80,105 73,711
------------ ------------
Total stockholders' equity ............................................ 98,779 93,546
------------ ------------
Total liabilities and stockholders' equity ..................................... $ 162,528 $ 171,839
============ ============
</Table>
Note 1: The consolidated balance sheet at December 31, 2000, as presented,
is derived from the audited consolidated financial statements at that
date.
See accompanying notes
4
ENCORE WIRE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<Table>
<Caption>
Quarter Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
In Thousands of Dollars, Except Per Share Data 2001 2000 2001 2000
---------- ---------- ---------- ----------
Net sales ........................................ $ 73,020 $ 70,387 $ 217,784 $ 210,463
Cost of goods sold ............................... 63,110 59,963 187,802 181,068
---------- ---------- ---------- ----------
Gross profit ..................................... 9,910 10,424 29,982 29,395
Selling, general, and administrative expense ..... 6,199 6,040 18,466 17,880
---------- ---------- ---------- ----------
Operating income ................................. 3,711 4,384 11,516 11,515
Interest expense (net) ........................... 376 985 1,524 3,056
---------- ---------- ---------- ----------
Income before income taxes ....................... 3,335 3,399 9,992 8,459
Provision for income taxes ....................... 1,200 1,224 3,597 3,045
---------- ---------- ---------- ----------
Net income ....................................... $ 2,135 $ 2,175 $ 6,395 $ 5,414
========== ========== ========== ==========
Net income per common and common
equivalent share - basic ...................... $ .14 $ .14 $ .42 $ .36
========== ========== ========== ==========
Weighted average common and common
equivalent shares - basic (Note 3) ............ 15,038 15,182 15,053 15,247
========== ========== ========== ==========
Net income per common and common
equivalent share - diluted .................... $ .14 $ .14 $ .42 $ .35
========== ========== ========== ==========
Weighted average common and common
equivalent shares - diluted (Note 3) .......... 15,339 15,282 15,295 15,496
========== ========== ========== ==========
Cash dividends declared per share ................ $ -- $ -- $ -- $ --
========== ========== ========== ==========
</Table>
See accompanying notes
5
ENCORE WIRE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
Nine Months Ended
September 30,
In Thousands of Dollars 2001 2000
-------- --------
OPERATING ACTIVITIES
Net income ............................................................ $ 6,395 $ 5,414
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Depreciation and amortization ................................. 7,190 6,845
Provision for bad debts ....................................... 112 50
Changes in operating assets and liabilities:
Accounts receivable ....................................... (610) (13,187)
Inventory ................................................. 9,208 14,113
Accounts payable and accrued liabilities .................. (1,708) 5,890
Other assets and liabilities .............................. (379) (309)
Current income taxes payable .............................. 2,264 40
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES .... 22,472 18,856
-------- --------
INVESTING ACTIVITIES
Purchases of property, plant and equipment ............................ (5,266) (3,484)
Increase (decrease) in long-term investments .......................... (673) (130)
Proceeds from sale of equipment ....................................... 207 55
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ............... (5,732) (3,559)
-------- --------
FINANCING ACTIVITIES
Borrowings (repayments) under notes payable ........................... (15,100) (14,400)
Purchases of treasury stock (Note 5) .................................. (1,366) (3,164)
Proceeds from issuance of common stock ................................ 204 1,510
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ............... (16,262) (16,054)
-------- --------
NET INCREASE (DECREASE) IN CASH ........................................... 478 (757)
Cash at beginning of period ............................................... 56 1,256
-------- --------
Cash at end of period ..................................................... $ 534 $ 499
======== ========
</Table>
See accompanying notes
6
ENCORE WIRE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Encore Wire
Corporation have been prepared in accordance with generally accepted accounting
principles for interim financial 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 generally accepted accounting principles
for complete 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
the periods presented are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. 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, 2000.
NOTE 2 - INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined by the last-in, first-out (LIFO) method.
Inventories (in thousands) consisted of the following:
<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------- ------------
Raw materials .......................... $ 6,154 $ 13,421
Work-in-process ........................ 2,721 3,404
Finished goods ......................... 19,362 24,694
------------- ------------
28,237 41,519
Increase to LIFO cost .................. 7,981 1,348
------------- ------------
36,218 42,867
Lower of Cost or Market Adjustment ..... (2,558) --
------------- ------------
$ 33,660 $ 42,867
============= ============
</Table>
An actual valuation of inventory under the LIFO method can be made only
at the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations are based on management's estimates of
expected year-end inventory levels and costs. Because these are subject to many
forces beyond management's control, interim results are subject to the final
year-end LIFO inventory valuation.
7
NOTE 3 - INCOME PER SHARE
Income per common and common equivalent share is 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.
The following table sets forth the computation of basic and diluted earnings per
share:
<Table>
<Caption>
Quarter Ended Quarter Ended
September 30, 2001 September 30, 2000
Numerator:
Net Income $ 2,134,615 $ 2,175,000
================== ==================
Denominator:
Denominator for basic earnings per share -
weighted average shares 15,037,793 15,181,520
Effect of dilutive securities:
Employee stock options 300,880 100,409
------------------ ------------------
Denominator for diluted earnings per share -
weighted average shares 15,338,673 15,281,929
================== ==================
</Table>
The following table sets forth the computation of basic and diluted earnings per
share:
<Table>
<Caption>
Nine Months Ended Nine Months Ended
September 30, 2001 September 30, 2000
Numerator:
Net Income $ 6,394,604 $ 5,414,000
================== ==================
Denominator:
Denominator for basic earnings per share -
weighted average shares 15,052,695 15,246,874
Effect of dilutive securities:
Employee stock options 242,474 249,146
------------------ ------------------
Denominator for diluted earnings per share -
weighted average shares 15,295,169 15,496,020
================== ==================
</Table>
8
NOTE 4 - LONG TERM NOTE PAYABLE
Effective August 31, 1999, the Company through its indirectly wholly
owned subsidiary, Encore Wire Limited, a Texas limited partnership, completed an
unsecured loan facility with a group of banks (the "Financing Agreement"). The
Financing Agreement replaced the Company's existing credit facility and the
Company is a guarantor of the indebtedness. The Financing Agreement has been
amended once since August 31, 1999, in June of 2000, to extend the term to May
31, 2003. The extension of the agreement is the only amendment that has been
made to the agreement. The Financing Agreement provides for maximum borrowings
of the lesser of $65.0 million or the amount of eligible accounts receivable
plus the amount of eligible finished goods and raw materials, less any available
reserves established by the banks. The calculated maximum borrowing amount
available at September 30, 2001, as computed under the Financing Agreement, was
$65.0 million. The Financing Agreement is unsecured and contains customary
covenants and events of default. The Company was in compliance with these
covenants as of September 30, 2001. Pursuant to the Financing Agreement, the
Company is prohibited from declaring, paying or issuing cash dividends. At
September 30, 2001, the balance outstanding under the Financing Agreement was
$27.5 million. Amounts outstanding under the Financing Agreement are payable on
May 31, 2003 with interest due quarterly based on the bank's prime rate or LIBOR
Rate options, at the Company's election.
NOTE 5 - STOCK REPURCHASE AUTHORIZATIONS
Pursuant to a 1995 stock repurchase program and extensions thereof, the
Company purchased an aggregate of 1,653,000 shares of its common stock during
the period from March 24, 1995 through June 30, 2001. All stock repurchases
under the program were authorized or ratified by the Board of Directors of the
Company and were consummated in accordance with Rule 10b-18 under the Securities
Exchange Act of 1934.
Following the attacks of September 11, 2001, the Company purchased an
aggregate of 36,000 shares of its common stock during the period from September
19 through September 24, 2001. No other shares were purchased by the Company
during the quarter ended September 30, 2001.
On November 6, the Board of Directors of the Company approved a new
stock repurchase program covering the purchase of up to 300,000 additional
shares of its common stock dependent upon market conditions. Common stock
purchases under the new program will be made from time to time until December
31, 2002 on the open market or through privately negotiated transactions at
prices determined by the Chairman of the Board or the President of the Company.
9
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is a low-cost manufacturer of copper electrical building
wire and cable. The Company is a significant supplier of residential wire for
interior wiring in homes, apartments and manufactured housing and commercial
wire for commercial and industrial buildings.
Price competition for electrical wire and cable is intense, and the
Company sells its products in accordance with prevailing market prices. Copper
is the principal raw material used by the Company in manufacturing its products.
Copper accounted for approximately 63.9%, 60.6%, 66.2%, 73.8% and 77.4% of the
Company's cost of goods sold during fiscal 2000, 1999, 1998, 1997 and 1996
respectively. The price of copper fluctuates with general economic conditions
and in relation to supply and demand, causing monthly variations in the cost of
copper purchased by the Company. The Company cannot predict copper prices in the
future or the effect of fluctuations in the cost of copper on the Company's
future operating results.
The following discussion and analysis relates to factors that have
affected the operating results of the Company for the three month and nine month
periods ended September 30, 2001 and 2000. 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, 2000.
RESULTS OF OPERATIONS
Quarter Ended September 30, 2001 Compared to Quarter Ended September 30, 2000
Net sales for the third quarter of 2001 amounted to $73.0 million
compared with net sales of $70.4 million for the third quarter of 2000. This
increase was due to a 24% increase in the pounds of copper shipped during the
period offset by a decrease in the average sales price per copper pound of the
Company's products. The decrease in the average sales price per copper pound of
the Company's products was due to the decrease in the average cost of copper
from the third quarter of 2000 to the same period in 2001, in addition to
competitive pricing pressure for the Company's products. Sales volume increased
due to several factors, including increases in customer acceptance and product
availability. Fluctuations in sales prices are primarily a result of price
competition and changing copper raw material prices.
Cost of goods sold increased to $63.1 million in the third quarter of
2001 from $60.0 million in the third quarter of 2000. Gross profit decreased to
$9.9 million, or 13.6% of net sales, for the third quarter of 2001 compared to
$10.4 million, or 14.8% of net sales, for the third quarter of 2000. The gross
profit percentage decrease in the third quarter of 2001 from the comparable
quarter in 2000 was due primarily to a decreased differential between what the
Company pays per pound of copper purchased and the Company's net sales price per
copper pound. This differential decreased in the third quarter of 2001 because
the average cost per copper pound purchased decreased less than the average
sales price per copper pound sold.
Inventories are stated at the lower of cost, determined by the last in,
first out (LIFO) method, or market. As permitted by 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 quarterly LIFO
adjustment to adjust total inventory and cost of goods sold to LIFO. As a result
of decreases in the price of copper during the third
10
quarter of 2001 and the resulting reduction of current inventory value, and the
reduction of inventory levels resulting in the liquidation of previous LIFO
layers, a LIFO adjustment was recorded reducing cost of sales by $2.0 million in
the quarter. At September 30, 2001, the LIFO cost basis of the inventory
exceeded the market value by $2,558,000, resulting in a $784,000 addition being
made to the lower of cost or market (LCM) reserve at September 30, 2001. 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. Additionally, a reduction in the quantity of
inventory in any period could cause copper that is carried in inventory at costs
different from the cost of copper in that period to be included at the different
price in cost of goods sold for that period.
Selling expenses for the third quarter of 2001 were $4.4 million, or
6.0% of net sales, compared to $4.5 million, or 6.3% of net sales, in the third
quarter of 2000. General and administrative expenses were $1.7 million, or 2.4%
of net sales, in the third quarter of 2001 compared to $1.6 million, or 2.2% of
net sales, in the third quarter of 2000. The provision for bad debts in the
third quarter of 2001 was $37,500 compared to zero in the third quarter of 2000.
Net interest expense was $376,000 in the third quarter of 2001 compared
to $985,000 in the third quarter of 2000. The decrease was due to a lower
average debt balance outstanding during the third quarter of 2001 than the
comparable period of 2000, and lower floating interest rates on the debt in 2001
versus 2000.
As a result of the foregoing factors, the Company's net income was $2.1
million in the third quarter of 2001 compared to $2.2 million in the third
quarter of 2000.
Nine Months Ended September 30, 2001 compared to Nine Months Ended September 30,
2000
Net sales for the first nine months of 2001 amounted to $217.8 million
compared with net sales of $210.5 million for the first nine months of 2000.
This increase was due to a 14.3% increase in the pounds of copper shipped during
the period offset by a decrease in the average sales price per copper pound of
the Company's products. The decrease in the average sales price per copper pound
of the Company's products was caused by a decrease in the average cost of copper
from the first nine months of 2000 to the same period in 2001, in addition to
competitive pricing pressure on the Company's products. Sales volume increased
due to several factors, including increases in product acceptance and
availability. Fluctuations in sales prices are primarily a result of price
competition and changing copper raw material prices.
Cost of goods sold increased to $187.8 million in the first nine months
of 2001 from $181.1 million in the first nine months of 2000. Gross profit
increased to $30.0 million, or 13.8% of net sales, for the third quarter of 2001
compared to $29.4 million, or 14.0% of net sales, for the same period of 2000.
The gross profit percentage decrease in the first nine months of 2001 from the
comparable period in 2000 was due primarily to a decreased differential between
what the Company pays per pound of copper purchased and the Company's net sales
price per copper pound. This differential decreased because the average cost per
copper pound purchased decreased less than the average sales price per copper
pound sold.
Inventories are stated at the lower of cost, determined by the last in,
first out (LIFO) method, or market. As permitted by 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 quarterly LIFO
adjustment to adjust total inventory and cost of goods sold to LIFO. As a result
of decreases in the price of copper during the first
11
nine months of 2001 and the resulting reduction of current inventory value, and
the reduction of inventory levels resulting in the liquidation of previous LIFO
layers, a LIFO adjustment was recorded reducing cost of sales by $6.6 million in
the first three quarters. At September 30, 2001, the LIFO cost basis of the
inventory exceeded the market value by $2,558,000, resulting in a $2,558,000
addition being made to the lower of cost or market (LCM) reserve during the
first three quarters of 2001. 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. Additionally, a
reduction in the quantity of inventory in any period could cause copper that is
carried in inventory at costs different from the cost of copper in that period
to be included at the different price in cost of goods sold for that period.
Selling expenses for the first nine months of 2001 were $13.2 million,
or 6.1% of net sales, compared to $13.2 million, or 6.3% of net sales, in the
first nine months of 2000. General and administrative expenses were $5.2
million, or 2.4% of net sales, in the first three quarters of 2001 compared to
$4.6 million, or 2.2% of net sales, in the comparable period of 2000. The
provision for bad debts in the first three quarters of 2001 was $112,500 versus
$50,000 in the first three quarters of 2000.
Net interest expense was $1,524,000 in the first nine months of 2001
compared to $3,056,000 in the first nine months of 2000. The decrease was due to
a lower average debt balance outstanding during 2001 than the comparable period
of 2000, and lower floating interest rates in 2001 versus 2000.
As a result of the foregoing factors, the Company's net income
increased to $6.4 million in the first nine months of 2001 from $5.4 million in
the first nine months of 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a substantial inventory of finished products to
satisfy customers' prompt delivery requirements. As is customary in the
industry, the Company provides payment terms to most of its customers that
exceed terms that it receives from its suppliers. Therefore, the Company's
liquidity needs have generally consisted of operating capital necessary to
finance these receivables and inventory. Capital expenditures have historically
been necessary to expand the production capacity of the Company's manufacturing
operations. The Company has satisfied its liquidity and capital expenditure
needs with cash generated from operations, borrowings under its revolving credit
facilities and sales of its common stock.
Note 4 of the Notes to Consolidated Financial Statements in Part I of
this Form 10-Q is incorporated herein by reference as if fully restated herein.
Cash provided by operations was $22.5 million in the first nine months
of 2001 compared to $18.9 million in the first nine months of 2000. This
increase of $3.6 million in cash provided by operations is primarily the result
of decreased working capital requirements in 2001, led by a reduction of
inventory in of $9.2 million in the first nine months of 2001. This dollar
reduction is due to a reduction in inventory levels and the drop in copper
prices over that period as previously discussed. Cash used in investing
activities increased from $3.6 million in the first nine months of 2000 to $5.7
million in the first nine months of 2001. In both periods, these funds were used
primarily to increase the Company's production capacity. The $16.3 million of
cash used by financing activities was due primarily to the $15.1 million of debt
the Company was able to pay down in the first nine months of 2001. This is
virtually unchanged from the first three quarters of 2000, when the Company used
$16.1 million by financing activities, $14.4 million of which was used to repay
debt.
12
During 2001, the Company expects its capital expenditures will consist
of additional building space and manufacturing equipment for its wire
operations. The Company has begun construction of a new building totaling
160,000 square feet at its McKinney, Texas location. This building is intended
to allow enough floor space to de-bottleneck certain existing production
operations and allow for smoother production flow. Machinery will be moved from
the present plants along with new machinery that is being purchased to produce
certain wire strand the Company is currently purchasing from other wire
producers. The total capital expenditures associated with this project are
estimated to be approximately $18 million. The majority of these expenditures
will be made over the next three quarters.
The Company expects to continue to manage its working capital
requirements during 2001. These requirements may increase as a result of
expected continued sales increases. These requirements will be impacted by the
price of copper. The Company believes that the cash flow from operations and the
financing that it expects to receive from its banks under the Financing
Agreement will satisfy working capital and capital expenditure requirements for
the next twelve months.
Following the attacks of September 11, 2001, the Company purchased an
aggregate 36,000 shares of its common stock during the period from September 19
through September 24, 2001.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes from the information provided in
Item 7.A. of the Company's Annual Report on Form 10-K for the year ended
December 31, 2000.
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This report contains various forward-looking statements and information
that are based on management's belief as well as assumptions made by and
information currently available to management. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that 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. Among the key factors that may have a direct
bearing on the Company's operating results are fluctuations in the economy and
in the level of activity in the building and construction industry, demand for
the Company's products, the impact of price competition and fluctuations in the
price of copper.
13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As originally disclosed in the Company's Form 10-Q Quarterly Report for
the Quarter Ended September 30, 2000, a lawsuit was filed in the district court
of Collin County, Texas by eight former employees of the Company. The plaintiffs
alleged they were discharged in retaliation for seeking workers' compensation
benefits. Following settlement for an amount not deemed material by the Company,
all eight cases were dismissed with prejudice by order of the court on October
8, 2001.
The Company also settled another suit during the quarter ended
September 30, 2001 in which it was the plaintiff. The Company filed the suit
against the supplier of certain manufacturing equipment that did not perform
according to specifications. The supplier of the equipment elected to forgive
the payment of certain invoices owed by the Company and to make a cash payment
to the Company in order to settle the matter. The cash payment exceeded the
amount paid to the former employees in the litigation referred to above and in
the aggregate the two settlements substantially off-set each other.
ITEM 5: OTHER INFORMATION
On November 6, 2001 the Board of Directors of the Company approved a
stock repurchase program covering the purchase of up to 300,000 shares of its
common stock dependent upon market conditions. Common stock purchases under the
new program will be made from time to time until December 31, 2002 on the open
market or through privately negotiated transactions at prices determined by the
Chairman of the Board or the President of the Company. See Note 5 of the Notes
to Consolidated Financial Statements in Part I of this Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The information required by Item 6(a) is set forth in the
Index to Exhibits accompanying this Form 10-Q.
(b) No reports on Form 8-K were filed by the Company during the
three months ended September 30, 2001.
14
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)
Date: November 12, 2001 /s/ Vincent A. Rego
-------------------------------------------
Vincent A. Rego,
Chief Executive Officer
Date: November 12, 2001 /s/ Daniel L. Jones
-------------------------------------------
Daniel L. Jones, President
Chief Operating Officer
Date: November 12, 2001 /s/ Frank J. Bilban
-------------------------------------------
Frank J. Bilban, Vice President - Finance,
Treasurer and Secretary
(Chief Financial Officer)
15
INDEX TO EXHIBITS
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Certificate of Incorporation of Encore Wire Corporation, as amended
(filed as Exhibit 3/1 to the Company's Registration Statement on Form
S-1, as amended (No. 33-47696), and incorporated herein by reference).
3.2 Amended and Restated Bylaws of Encore Wire Corporation (filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, and incorporated herein by reference).
10.1* Amended and Restated Agreement Not to Compete dated March 8, 1994,
between Encore Wire Corporation and Vincent A. Rego (filed as Exhibit
10.9 to the Company's Registration Statement on Form S-1, as amended
(No. 33-76216), and incorporated herein by reference).
10.2* Amended and Restated Agreement Not to Compete dated March 8, 1994,
between Encore Wire Corporation and Donald M. Spurgin (filed as Exhibit
10.10 to the Company's Registration Statement on Form S-1, as amended
(No. 33-76216), and incorporated herein by reference).
10.3* Employment Agreement dated as of October 1, 1996 between the Company
and Spurgin (filed as Exhibit 10.20 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and incorporated
reference).
10.4 Financing Agreement by and among Encore Wire Limited, as Borrower, Bank
of America, National Association, as Agent, and Bank of America,
National Association, and Comerica Bank-Texas, as Lenders, dated August
31, 1999 (filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, and incorporated
herein by reference).
10.5 First amendment to Financing Agreement of August 31, 1999, dated June
27, 2000 by and among Encore Wire Limited, as Borrower, Bank of
America, National Association, as Agent, and Bank of America, National
Association, and Comerica Bank-Texas, as Lenders, as Agent and Bank of
America, National Association and Comerica Bank - Texas as Lenders
(filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2000, and incorporated herein by
reference).
21.1 Subsidiaries (filed as Exhibit 21.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 2000, and incorporated herein
by reference).
</Table>
* Management contract or compensatory plan.
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