Encore Wire Q1 2009 Earnings Call Transcript

Apr.24.09 | About: Encore Wire (WIRE)

Encore Wire Corp. (NASDAQ:WIRE)

Q1 2009 Earnings Call

April 23, 2009 11:00 AM ET

Executives

Daniel Jones - President and Chief Executive Officer

Frank Bilban - Vice President and Chief Financial Officer

Analysts

Michael Coleman - Sterne, Agee & Leach

Robert Kelly - Sidoti & Co.

Keith Johnson - Morgan Keegan

Gil Nathan - Restoration Capital

Louis Corrigan - Kingsford Capital

Bill Baldwin - Baldwin Anthony Securities

Eric Marshall - Hughes Capital Management

Operator

Hello and welcome to the Encore Wire First Quarter Conference. As a reminder, all lines will be on listen-only mode and we will conduct Q&A session at the end of the call. (Operator Instructions).

At this time I'd like to turn the call over to Mr. Daniel Jones, President and CEO to begin. Please go ahead.

Daniel Jones

Thank you, Eric. Good morning, ladies and gentlemen and welcome to the Encore Wire Corporation quarterly earnings conference call. I'm Daniel Jones, the President and Chief Executive Officer of Encore Wire.

With me this morning is Frank Bilban, our Chief Financial Officer. We are pleased to announce these earnings in the midst of the tough environment we are experiencing in our industry and the slump in the overall U.S. economy. Despite the abundance of negative news in the media, our unit volumes were down only 4% from the first quarter of '08 to the first quarter of '09, and increased to 8.5% in the first quarter of '09 versus the fourth quarter of '08.

The current financial crisis has raised uncertainty among builders and buyers of buildings across America. This uncertainty is also effected our competitors and created a volatile crossing environment in our industry that compressed the spread between what we've spending for a pound of copper versus what we were able to charge for wire that contained a pound of copper.

In the first quarter of 2009, this spread fell by 23% versus the first quarter of '08 and it fell up 41% versus the fourth quarter of '08. We attempted to lead the industry with several cost increases during the quarter but met limited success as the average cost of wire sold dropped 26% while copper cost declined only 16% on a sequential quarter basis.

Our reps in the field also tell us that the volatility of copper of last year coupled with declining industry volumes has caused many of our distributors and customers to lean down their inventory levels. The low inventory levels in the distribution chain makes Encore's excellent order fill rates more valuable to customers, who're gravitating towards the Just-in-time inventory.

We believe our volume decreases are less than total industry and we believe that we're able to get slight premium for our service level from customers, who realize this saving money by buying from us. Making $0.20 per share in this economy is an impressive accomplishment and we thank our employees and associates for the tremendous efforts.

We want to thank our shareholders for their continued support. Frank.

Frank Bilban

Thank you, Daniel. In a minute, we will review Encore's financial results for the quarter. After the financial review, we will take any questions you may have.

Each of you should have received a copy of Encore's press release covering our financial results. This release is available on the internet or you can call the Denise List at 800-962-9473 and we will get you a copy.

Before we review the financials, let me indicate that in these initial comments and in the question-and-answer period that follows, we may make certain statements that might be considered to be forward-looking. In order to comply with certain securities legislation and instead of attempting to identify each particular statement as forward-looking, we advice you that all such statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed today.

I refer each of you to the company's SEC reports and news releases for on more detailed discussion of these risks and uncertainties. Also, reconciliations of non-GAAP financial measures discussed during this conference call to the most directly comparable financial measures presented in accordance with GAAP, including EBITDA, which we believe to be useful supplemental information for investors are posted on www.encorewire.com under Press Releases.

Now the financial results; net sales for the quarter ended March 31st 2009 were $144.5 million compared to $281.8 million during the first quarter of 2008. Total dollar sales and average selling prices fell due to declining copper prices. Net income for the first quarter of 2009 was $4.6 million versus 13.6 million in the first quarter of '08. Fully diluted net earning per common share was $0.20 in the first quarter of '09 versus $0.58 in the first quarter of '08.

On a sequential quarter comparison, net sales for the first quarter of 2009 were 144.5 million versus $180.2 million in fourth quarter of 2008. Net income for the first quarter of 2009 was $4.6 million, versus 16.7 million in the fourth quarter of '08. Fully diluted net earnings per common share were $0.20 in the first quarter of 2009 versus $0.72 in the fourth quarter of '08.

As usual, the true story behind our earnings fluctuation is in the spread between what we paid a pound of copper, versus what we are able to charge for wire that contained a pound of copper. As Daniel indicated, in the first quarter of '09, this spread fell by 23% versus the first quarter of 2008 and has fell by 41% versus the fourth quarter of 2008. These spreads rose in the comparison periods of '08 and then fell back in '09 on midst of price cutting we witnessed in the industry in the first quarter of 2009.

Investors who have followed us for sometime and understand the dynamics of this business have always focused on the spread as the key driver of our earnings and understand that LIFO adjustment are consistently applied. LIFO serves to bring the latest cost of material into the statements and allows these spreads to be accurately included in our results in a timely fashion.

Our low cost structure enables us to continue to produce earnings in these turbulent times. We continue to obtain a strong balance sheet. The only long-term debt we have as of March 31st, 2009 is $100 million in long-term notes due in 2011 with $ 150 million revolving line of credit standing at a zero balance.

In addition, we have 230.7 million in cash as of March 31, 2009. We were also pleased to declare our tenth consecutive quarterly cash dividend during the first quarter of 2009. We want everyone to know that this conference call will be available for replay after the conclusion of this session. If you wish to hear the taped replay, please call 866-551-4520 and enter the conference reference 247273#. This information is also posted on the Internet.

I'll now turn the floor back over to Daniel Jones, our President and CEO. Daniel?

Daniel Jones

Thank you. As Frank highlighted, we feel Encore performed well in the past quarter. We believe we're well positioned for the future. And Eric, now we would invite the questions please.

Question-and-Answer Session

Operator

(Operator Instructions) First up is Michael Coleman with Sterne, Agee. Please go ahead.

Michael Coleman - Sterne, Agee & Leach

Good morning.

Daniel Jones

Hey Michael.

Michael Coleman - Sterne, Agee & Leach

Daniel, normally you get a seasonal lift in volumes from your first quarter to second quarter, kind of given in the environment and what you're seeing in April, did this pattern hold or to what degree is this pattern muted in the kind of environment that you're seeing?

Daniel Jones

Well, during the first quarter Michael, January and February were what they were and March actually picked up a little bit toward the end. So, with that said and discussing the first quarter, it appears to be headed in the right direction.

Michael Coleman - Sterne, Agee & Leach

Okay. In the first quarter, given the volatility in pricing and so forth, are you seeing contractors delay purchases or defer purchases?

Daniel Jones

That's being going on for 12, 18, 24 months now. But it seems to be possibly in some areas, it's about as lean as it could get and its run its course. In other areas, we're still seeing the growth and the orders coming in specifically job related to universities and schools and hospitals and municipal top building.

So, it really as far as cutting back, we've been in that same environment now for about 18 to 24 months.

Michael Coleman - Sterne, Agee & Leach

Okay. In terms of project activity or large projects that you know about kind of in the pipeline, what are you seeing there in terms of next couple of months?

Daniel Jones

The ones that we're put on hold are starting to leak back out into the market. We've had some competitors receive orders back in over the last year or so. But that seems to have run its course. What we're seeing in the market today more specifically is the jobs that are out there are pretty quick to be cut. They're in the market to buy the manipulation or the back in forth, or the shopping, the games that used to be played or not being played.

When people come to the table now Michel, it seems that they are ready to purchase the wire, which is really helps us it helps our model. It's the way for us to go to market. So, I think the activity today and as I stated at the end of the first quarter, seems to be headed in the positive direction both volume and the process; the order process.

Michael Coleman - Sterne, Agee & Leach

Okay thanks.

Operator

Next up is Robert Kelly with Sidoti & Company. Please go ahead.

Robert Kelly - Sidoti & Co.

Daniel and Frank, good morning.

Daniel Jones

Hey Rob, morning.

Robert Kelly - Sidoti & Co.

Question on strugglingly, strugglingly strong sequentially quarter volume growth, what was the primary driver?

Daniel Jones

Well again, we saw some good strength toward the end of the quarter and it appears that from our standpoint that the folks that we like to go to market with are seeing some successes with obviously they are contractors going forward. The games of guessing on copper and waiting to see what copper is going to do and what have you when things get as tight as they have gotten on the margin side or the spread side, the games that typically are played in the market tend to dry up and go away.

So, it's a very serious market right now, on the sales side, when we're in the field, traveling last week, I was able to speak with several customers. Their business is good relative to where they were. I don't know that anyone can compare back to 2006 or 2005 levels but recent history their level, their order level is good. People are getting paid on time. We're getting paid on time and those are couple of good keys.

Robert Kelly - Sidoti & Co.

Okay. You had mentioned the inventory downstream at the distribution level. Is that a matter of them going even lower on the weeks that they are carrying or is that just a function of the end market demand?

Daniel Jones

I think it's a mixture of both. The volatility more than anything has kind of made believers out of folks, that they can't out guess which direction copper is going and one other things we try to do in the field of sales people, myself included is try to convince these people. Its really -- you just can't depend on which direction you think copper is going to go.

It's too risky and even if you do get it correct and predict the exact percentage that copper ends up going down for that particular time period and that doesn't mean building wire process are going to follow exactly, which is something that we did have in the first quarter.

The sell price deterioration exceeded the decrease in other decline in COMEX, so pricing. So, you just cannot guess copper and for the most part, we've made believers out of the customers that we call on and again it's back to seriousness in the market. We try to help our customers with their service levels from here. And quite frankly, we push that. We feel like that's one of our strengths is having the service level that we try to maintain and it allows our customers to kind of smooth out if you will some of the volatility.

Robert Kelly - Sidoti & Co.

Okay. Great. And I guess you had referenced I guess, order flows starting to stabilize a bit in the back half of the March quarter. Selling price is also starting to stabilize?

Daniel Jones

Yes, a little bit. Again you get a swing in copper of 10 or $0.15 and if it's going down and you initiated across increase, you obviously loose the traction that you had going into it. But overall, process have improved a little bit and again with the serious approach to the order book, it appears that we're getting some traction on the volume side.

Robert Kelly - Sidoti & Co.

Okay. And then just one final one, SG&A management is that kind of run rate that 10.6 million we saw in 1Q. Should we expect that for the balance of the year?

Daniel Jones

That should pretty close, Bob. I mean and again, let's not miss the key, and again, SG&A is a little deceptive because in the S part, there is only two accounts and that's freight and commissions. And if copper and our sales prices rise, the commissions which are percentage-based factor will go up in terms of dollars. And so that won't fix at the 10 million run rate. And we'd be happy to see that. We'd be happy to pay more commissions on higher sales.

The freight, as it did last year can spike up due to as extemporaneous factors, namely diesel prices and the diesel latter we're paying and this year it's come of a little. So, the G&A portion which is the small portion is very small and that's relatively fixed.

Robert Kelly - Sidoti & Co.

So, the year-over-year declined here for SG&A in 1Q is more just price and volume driven?

Daniel Jones

Yes.

Robert Kelly - Sidoti & Co.

Okay. Thanks guys.

Daniel Jones

Thank you.

Operator

Next is Keith Johnson with Morgan Keegan. Please go ahead.

Keith Johnson - Morgan Keegan

Hi, good morning.

Daniel Jones

Hey Keith.

Frank Bilban

Hi Keith.

Keith Johnson - Morgan Keegan

Just a real quick kind of follow-up on that SG&A comment, could you breakout -- or question, could you breakout the selling and G&A piece for the first quarter?

Frank Bilban

Sure. In Q1 of '09, the selling part is $7.6 million and the G&A part is $3 million.

Keith Johnson - Morgan Keegan

Okay.

Frank Bilban

And again, the selling is 3.8 of that 7.6 or half exactly is of freight.

Keith Johnson - Morgan Keegan

Okay. I appreciate it. And I guess, you made the comment that or the comment was made earlier about getting paid on time. So, I guess there was no issue on that receivable side of the business or anything on those lines in the first quarter?

Keith Johnson - Morgan Keegan

No.

Keith Johnson - Morgan Keegan

Okay. I was wondering in back to the volume question. Were there regions on the commercial side of your business that may have looked better than other regions of the country or were there I think there was a question only about large projects. Was there timing on some large projects that may have helped volumes in the first quarter?

Daniel Jones

No, not really. Most of the larger projects are broken up into phases, what I mean by that Keith is in the past it wasn't uncommon for the copper or the building wire across to be firm through a longer time period. We've been super aggressive in the market trying to convince the distributors to shorten that time frame because the volatility, rather than going into six months tie-up pricing situation, we are really encouraging them to go quite a bit shorter with the pricing.

So, again it's hard to say exactly what you give credit to, its more of a combination of lot of little things but there was not anyone huge more key type job that put us over any specific number in volume, it was just actually appears to be some pretty decent top of activity out there relative to the prior 18 months.

Keith Johnson - Morgan Keegan

Okay. And I know you guys have mention several times this morning about buyers they have been looking at things differently being very serious when they come to the table, I was trying to I guess get our arms around kind of customer psychology and how even though copper was down a lot year-over-year, it did move a lot within the quarter and then I guess continued into the first part of April.

I guess we always understood the market as when those moves happened, do you have customers say; well, I'm not going sit around maybe I'll be take a little bit more because I don't want to get cult holding or bond than more expensive copper (inaudible) mentality of timing. Was there -- did you detect any of that in the moving copper from I guess the $30 or so range in January up pushing I guess to 20 there short period of time?

Daniel Jones

Yes. In the quarter itself, there were times when we had a 2 or 3, 4 day run on copper which certainly helped to support the process increases that we were trying to put through the market. There is no question.

Keith Johnson - Morgan Keegan

Okay. And do you think that help supported some of the moments on the volume side to some extent?

Daniel Jones

I m sure, had to a little bit yeah, yeah.

Keith Johnson - Morgan Keegan

Okay. And what was that I guess on the CapEx, I was wondering if you could, what it was for the first quarter and then may be kind of how guys are looking at 2009 in the current environment.

Frank Bilban

Right now through Q1, we were at 12.2 million and right now the best guess we have is in the 18 to $21 million range depending on the timing of some other projects. Daniel is looking at later in the third and fourth quarters and depending on the timing of those spending.

Keith Johnson - Morgan Keegan

And of course spending was 12.2?

Frank Bilban

That's right.

Keith Johnson - Morgan Keegan

Okay. So, I guess any large projects we could look forward to maybe some benefit during the year that may have occurred in 1Q?

Keith Johnson - Morgan Keegan

It's really kind of spread out among several miscellaneous things.

Keith Johnson - Morgan Keegan

Okay. Alright. Thanks and good luck.

Daniel Jones

You bet. Thanks Keith.

Operator

Next up is Joe Nathan with Restoration Capital. Please go ahead.

Gil Nathan - Restoration Capital

Hey guys, its Gil Nathan from Restoration. So, real quick that CapEx number was what?

Frank Bilban

12.2 million.

Gil Nathan - Restoration Capital

For Q1?

Frank Bilban

Yes sir.

Gil Nathan - Restoration Capital

Okay. Thanks. Question for you on inventory; how much in finished goods and work in progress is actual copper versus what's the finished goods number that we're looking out in inventory breakdown?

Frank Bilban

You're talking in dollar terms?

Gil Nathan - Restoration Capital

Whichever you prefer, it doesn't matter.

Frank Bilban

Well generally, copper makes up 70 to 80% of our finished goods and we're pulling that number right now. But you can count on that and that will be in the queue again.

Gil Nathan - Restoration Capital

And what's the poundage on that?

Frank Bilban

We generally hold about 6 to 8 weeks worth of inventory. So, we don't usually get into the volumes and talk about our sales volumes or production volumes. But in that, we turn our inventory on average 6 to 10 times a year, you can pretty much count on 6 to 8 turns.

Gil Nathan - Restoration Capital

Okay. Great. Question for you, on the commercial construction side, you guys decided some that you're seeing maybe a little pick up on maybe more municipal type projects but the environment for commercial real-estate side of it office and apartment, type buildings. It seems there is a big slowdown going on there.

How much of an impact do you think that guys did that has for you and how much can it be offset by some of the more municipal type projects or energy type projects?

Frank Bilban

Well Gil, we've gone through specific slowdowns in the past and there is product to address those and then obviously, we're constantly, may continually and aggressively attacking cost and looking at opportunities on the sales side. So, we have products that move differently within segments. We try to move those products within a segment to particular customers or are not particular customers. But to answer your commercial real estate question more specifically, I'm not sure what the exact impact would or wouldn't be based on those reports that you're seeing, but we have seen a pick-up, its not substantial and it is relative to recent history, but it seems that the activity in the market for our commercial and industrial product has picked up which is reflected in our volumes.

Gil Nathan - Restoration Capital

Okay. And one last question, on a gross margin kind a level of you guys talked about spread, do you see the gross margin being sustainable even with copper picking up or improving over the next couple of quarters?

Frank Bilban

It's hard to say that for us depending on where your opinion is that copper is going to go or not go but we typically do better in an increasing steady copper rising market. With that I would expect the earnings based on historical earnings to be better. Our approach to the market has been to continually attack the cost side and maximize every sales opportunity that we can.

Again having said that the volatility has changed the dynamics or the behavior on the distributor side, so as we sit today that things are the market is showing positive signs, again there is not those long-term lock-up top deals where the risk is super huge. So, it's more of a market that fits our model pretty well.

Having said that we are somewhat bullish here on copper for various reasons as long as the things continue as they are in the market today, I see no reason for us not to continue to grow there.

Gil Nathan

Thanks a lot guys.

Operator

(Operator Instructions). Gentlemen, we do have a few more questions, just be one second. Next up is Louis Corrigan with Kingsford Capital.

Louis Corrigan - Kingsford Capital

Hi. Could you talk about the LIFO impact in the quarter, was there is a benefit or did it hurt you?

Frank Bilban

There was a slight benefit of $5.3 million. Probably, in the quarter that was a benefit and then as the quarter were on, it swung back the other way and almost zeroed it out.

Louis Corrigan - Kingsford Capital

But so the net benefit for the quarter is 5.3 million.

Frank Bilban

That's correct.

Louis Corrigan - Kingsford Capital

Okay. And I noticed for your prepaid expenses were up quite a bit sequentially, it's actually at a level that it hasn't been on a while and I wondered what was part of that?

Frank Bilban

There is just two things really, number one is timing as always, when you get copper in here and when you don't and whether sometimes the minors or pre-ship and April copper and we accrue it and haven't paid for it yet or pay for it yet and so forth it will be prepaid. And we moved one asset for sale or into current status, which is in the other assets.

Louis Corrigan - Kingsford Capital

And how much was that, was that a couple of million or?

Frank Bilban

Yeah, about 3 million bucks.

Louis Corrigan - Kingsford Capital

Okay. I'm thinking back for your last call about 6 weeks into the quarter and it sounded like you were seeing relatively stable prices and a pretty contained competitive environment. And since that point, copper had gone up and usually that's an environment, where you're able to pass along higher prices and I guess I'm curious what happened in the last 6 weeks of the quarter to you sort of unleash a more competitive environment?

And that's -- I guess that's especially true given that you saw that the volumes picked up and later in March, which I think would tend to make the pricing even better.

Frank Bilban

Yeah again, it's tough to predict what our competition is going to do or not do. We're somewhat reactive in the market, obviously. February was pretty weak. From that standpoint, we weren't able to hold any pricing of any consequence on the increased side in February. It did. The pricing decreased faster than copper went down and then it improved in March.

That's the part in the quarter from Q4 of '08, I think that quarter, copper average was around 175 to give you some light there. But the first quarter of '09 average was about 156-157. So, it was about $0.20 swing on the downside from Q4 to Q1. You get that kind of it's been outside, you can't hold the pricing.

Louis Corrigan - Kingsford Capital

So, is that wrong that I mean, I'm just looking at the price of copper out there I mean it went up from the beginning of the quarter to the end of the quarter.

Frank Bilban

Right.

Louis Corrigan - Kingsford Capital

Is that, do you have to look at it on some sort of two months lagged basis or?

Frank Bilban

That changes. It depends on the market that you're in but again, you have people predicting copper going down that we compete with. So, they're going to cut prices to inventory before they get caught on the way down. Then copper turns back up, you get a price increase in place, then copper drops $0.10 the next day. You loose the traction on that price increase.

You put another one out at the end of the week, try to make it effective on Monday, same kind of thing repeats itself. So, we had 3 or maybe 5 different price increases from mid to late February through March.

Louis Corrigan - Kingsford Capital

Okay. Thanks very much.

Operator

Next is Bill Baldwin with Baldwin Anthony Securities. Please go ahead.

Bill Baldwin - Baldwin Anthony Securities

Good morning, Daniel and Frank.

Daniel Jones

Hey Bill.

Frank Bilban

Hi Bill.

Bill Baldwin - Baldwin Anthony Securities

Can you talk a little bit about what's going on in terms of any of your competitors, start any capacity or has there been any capacity rationalization in the industry in the past 6 to 12 months or more recently?

Daniel Jones

In general, yes; specifically, we'd rather not say too much but because I can see on the screen that they are all on here with us.

Bill Baldwin - Baldwin Anthony Securities

Okay.

Daniel Jones

Which is fine but ...

Bill Baldwin - Baldwin Anthony Securities

Tape it to one way street. They are private, you are public.

Daniel Jones

Yes, sir. And I would embark them to go public. But when you see, what happens in the industry on the demand side and you are somewhat near with our story and I appreciate that but we run the plans and to try to maintain balance between what we're actually selling at that moment and inventory levels.

We don't specifically set the plan up to run 'x' number of copper pounds and try to push that into the market. That's just not our style. We have had some turnover in the market from the competitor standpoint. Management in different areas and that has caused some turmoil, changing reps in a particular territory is not always good for that territory.

We haven't changed our reps. I'm speaking of competitive changes from the sales standpoint. So, that really hasn't helped the market maybe from the capacity side that you're talking about earlier, there has been some talk and some rumors and you get feedback from different industry partners that kind of thing but my guess is that most of them have cut back in some fashion either from 6 days to 5, or 5.5 to 5, or 5 to 4.

Bill Baldwin - Baldwin Anthony Securities

Right

Daniel Jones

And I think that that's what would happen is they would drive it back and possibly not push so much product in to market.

Bill Baldwin - Baldwin Anthony Securities

Let me re-phrase a little bit and Daniel, let me ask you this. Do you think that they are in this period will see permanent reduction and capacity in the business?

Daniel Jones

We are in a same slot that we've been in the past. Next month, it will be 20 years for me at Encore and I have seen 7 or 8 significant competitors go away and typically, its during one of these times where you get some -- you go through that cleansing process or retrenching or whatever the hot word is of the day but it appears to me that there is 1 or 2 guys out there that really should be doing something different than selling building wire.

Bill Baldwin - Baldwin Anthony Securities

Hey man, that'd great, when you guys are by far the more efficient operators in the business.

Daniel Jones

Thank you sir, I appreciate it.

Bill Baldwin - Baldwin Anthony Securities

And you're making money in this environment, I got to believe that the ones that are not so efficient, they've got to be having a real tough go over in here. Well, thank you much, good luck to you and look forward to watching your developments going forward.

Daniel Jones

Thanks Bill.

Operator

Next is Eric Marshall with Hughes Capital Management. Please go ahead.

Eric Marshall - Hughes Capital Management

Good morning guys.

Frank Bilban

Good morning.

Daniel Jones

Hey Eric.

Eric Marshall - Hughes Capital Management

Hey, not to be the dead horse here asking more questions on pricing, but the weakness that we did see in building wire prices in the first part of the quarter. Do you think part of that was this maybe some inventory introductions not only in the distribution channel but also with some of your competitors due to just need to reduce working capital because of balance sheet issues?

Daniel Jones

Yes, I do.

Eric Marshall

And deep sense, that's kind of -- we kind of pass or do you think that could continue?

Daniel Jones

Well again, yes. The answer to it is yes. Short answer is yes.

Eric Marshall - Hughes Capital Management

Okay.

Daniel Jones

We've seen some improvement, the last 10 to 15 days of March were better than the first part of that month which was better than the first part of the quarter and today as we sit, factually, as I know what things are going along okay.

Eric Marshall - Hughes Capital Management

Okay. And then did you guys give a CapEx number for '09?

Frank Bilban

We said that the current estimate Eric, is in the 18 to $21 million range.

Eric Marshall - Hughes Capital Management

And is that all maintenance related?

Frank Bilban

There is nothing -- I wouldn't say its all maintenance. But there is no one huge project to point to and really talk about.

Eric Marshall - Hughes Capital Management

Okay. So, it's not really expansionary, maybe some enhanced efficiencies and ...

Frank Bilban

Exactly.

Eric Marshall - Hughes Capital Management

And when was your last year?

Frank Bilban

Last year, we spent right on the order of I think $18 million but we're double checking these numbers I speak.

Eric Marshall - Hughes Capital Management

Okay. Thanks a lot guys.

Daniel Jones

You bet.

Operator

Next is Michael Coleman with Sterne, Agee. Please go ahead.

Michael Coleman - Sterne, Agee & Leach

Daniel, over the years, we've focused a lot on potential and loosing its customer with Southwire been the largest and Wire second and then maybe Sero. There has already been a fair amount of concentration. So, I guess how much of a benefit do you think it would actually be to you if a number 4 or number 5 with a best high-single digit market share went down in the market? Do you think that's an actual benefit longer-term or is that something that just isn't that big of a deal any more?

Daniel Jones

Well, short -- sorry, to interrupt you Michael, short-term, it would be fantastic because the uncertainty that would lead to in the market. Long-term, it would be good because the other two guys that you mentioned participate on the retail side to pretty large extent and as you know, our space is in the wholesale electrical distribution market that would be super helpful if we lost a number 4, that would be great.

Michael Coleman - Sterne, Agee & Leach

Okay. Thinking about it on the other side, you've mentioned earlier your channel partners are doing better, you're supporting them service and so forth, to get consolidation in the electrical distribution channel, is that a benefit to you on the volume and how does that play out on the pricing side?

Daniel Jones

That's a great question. That's our customer's -- the distribution side has gone through significant changes over the years. Most recently in the last 10 to 12 months, there has been some favorable changes for Encore. It does help on the pricing side and it does help for us to on the volume side. As you can see from the fourth quarter to the first quarter, our volume was up.

So, those types of thing -- look, we are very selective in whom we sell out there and there is reasons behind that and typically obviously or maybe not so we choose the good guys. The good guys are going to win in the end. So, I really that the quality of our distribution and the quality of our sales reps is the only real reason as to why we are up in volume from fourth quarter to the first quarter. We're taking advantage of what's happening in the market place.

Michael Coleman - Sterne, Agee & Leach

Do you happen to know what kind of exposure or what kind of mix you would have to a kind of a regional, independent, that's perhaps under-capitalize this market that may be losing out in the industrial distribution?

Daniel Jones

We feel like sitting here that we are very close to those customers that we sell to, as close as you can get. We are in the field with them on a weekly, daily basis. To answer your question, I don't know any of our current customers that are having that type of problem as you described it.

Michael Coleman - Sterne, Agee & Leach

Okay. Thanks.

Operator

Alright gentlemen, that appears to be all of the questions for today.

Daniel Jones

Super, Eric. Thank you very much and thank you guys for the questions. We are as Frank indicated, there's a replay, you guys can call and get. We are available at the office anytime and if you see some orders out there that you'd like for us to look into, feel free to give me a call at the office.

Operator

Thank you for your attention, ladies and gentlemen. This conference is concluded. Thank you.

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