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Welcome to the Encore Wire Reports Second Quarter Results Conference Call. My name is Adrianne, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]
Please note this conference call is being recorded. I will now turn the call over to Daniel Jones. Sir, you may begin.
Thank you, Adrianne, and good morning. And welcome to the Encore Wire Corporation quarterly conference call. I am Daniel Jones, President, CEO and Chairman of the Board of Encore Wire. With me this morning is Bret Eckert, our Chief Financial Officer.
Thank you for joining us on the call and for your interest in Encore Wire. We appreciate your continued investment and support during these uncertain times. The health and safety of our employees and their families remains our top priority.
We are following CDC guidelines and maintaining safe working conditions. We are very proud that some of the products we manufacture are being utilized to power temporary buildings and pop-up medical facilities in the fight against COVID-19, Our distributors remain very thankful that we continue to serve during this critical time.
Despite the economic challenges we are facing in this country the strong earnings posted in the second quarter ended June 30, 2020 attests to the ability of our business model to succeed in both good times and bad. We continue to increase the strength of our balance sheet ending with over $250 million of cash on hand at June 30 to fund future growth.
I am very proud of how our employees are responding to the current crisis, allowing us to maintain and remain fully operational to serve our customers and drive value for our shareholders. In addition, our one location model allowed us the agility and flexibility to adapt to the changing market conditions during the quarter.
There are some key items to note. Copper unit volumes decreased 12.7% on a sequential quarter basis as parts of the country shutdown job sites or significantly curtailed construction activity in response to the pandemic, leaving some customers unable to receive deliveries of our products during the second quarter.
Comex copper prices experienced a steady rise throughout the second quarter, while copper spreads decreased 5.8% on a comparative quarter basis. Copper spreads tightened in the quarter due to the economic strain on our customers and our decision to balance volume and price.
With that said, the gross profit percentage increased for both the second quarter and six months ended June 30, 2020, compared to the same periods in 2019, highlighting the strength of our business model. Aluminum wire represented 10.1% of our net sales in the second quarter of 2020.
Beginning late in the second quarter, we experienced a renewed optimism from our customers as order volumes have started to normalize as all states reopened for construction. Looking ahead the duration and severity of the COVID-19 outbreak and its long-term impact on our business are uncertain at this time.
Developments surrounding the COVID-19 global pandemic are changing daily and we have limited visibility into extent, which market demand for our products, as well as sector manufacturing and distribution capacity will be impacted. We believe Encore Wire is well-positioned to weather the storm and will continue to serve the markets during this critical time.
As we navigate near-term challenges, we remain focused on the long-term opportunities for our business. We believe that our superior order fuel rates continue to enhance our competitive position. As orders come in from electrical contractors, our distributors can continue to depend on us for quick deliveries coast to coast.
I will now turn the call over to Bret to cover our financial results. Bret?
Thank you, Daniel. In a minute we will review Encore’s financial results for the second quarter and six month ended June 30, 2020. After the financial review we will take any questions you may have.
Before we review the financials, let me indicate that throughout this conference call we will be making -- we may be making 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 advise 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 a 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 from investors are posted on our website.
Net sales for the second quarter ended June 30, 2020 were $253.6 million, compared to $336.9 million. You still on? Are you there, Adrianne? Compared to $253.6 million, I will start over. Net sales for the second quarter ended June 30, 2020 were $253.6 million, compared to $336.9 million for the second quarter of 2019.
Copper unit volume measured in pounds of copper contained in the wire sold decreased 18.6% in the second quarter of 2020 versus the second quarter of 2019. This unit volume decrease was due to COVID-19 related economic strain as parts of the country shutdown job sites or curtailed construction activity in response to the pandemic, leaving some customers unable to receive deliveries of our products during the quarter.
This coupled with uncertainly 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, driven by the reopening of many state and local economies, customer buying patterns began to return to more historical levels.
Gross profit percentage for the second quarter of 2020 was 14.4%, compared to 13.6% in the second quarter of 2019. The average selling price of wire per copper pound sold decreased 9.5% in the second quarter of 2020 versus the second quarter of 2019, while the average cost of copper per pound purchase decreased 11.4%.
Net income for the second quarter 2020 was $12.3 million versus $17.8 million in the second quarter of 2019.
Fully diluted net earnings per common share were $0.60 in the second quarter of 2020 versus $0.85 in the second quarter of 2019. Net sales for the six months ended June 30, 2020 were $556.4 million, compared to $651.6 million during the same period in 2019.
Copper unit volume measured in pounds of copper contained in the wires sold decreased 9.2% in the six months ended June 30, 2020 versus the six months ended June 30, 2019. Gross profit percentage for the six months ended June 30, 2020 was 14.8%, compared to 13.4% during that same period in 2019.
The average selling price of wire per copper pound sold decreased 7.4% in the six months ended June 30, 2020 versus the six month ended June 2019. While the average cost of copper per pound purchase decreased 9.6%.
Net income for the six months ended June 30, 2020 was $31 million versus $31.2 million in the same period in 2019. Fully diluted net earnings for common share were $1.50 in the six months ended June 30, 2020 versus $1.49 in the same period in 2019.
Looking on a sequential quarter comparison, net sales for the second quarter of 2020 were $253.6 million versus $302.8 million during the first quarter of 2020. Sales dollars decreased due to a 12.7% unit volume decrease of copper building wise sold, combined with a 5.6% decrease in the average selling price per pound of copper wire sold on a sequential quarter comparison.
Gross profit percentage for the second quarter of 2020 was 14.4%, compared to 15.1% in the first quarter of 2012. Copper wire sales prices decreased 5.6%, while the price of copper purchase decreased 3.9%.
Net income for the second quarter of 2020 was $12.3 million versus $18.6 million in the first quarter of 2020. Fully diluted net income per common share was $0.60 in the second quarter of 2020 versus $0.89 in the first quarter of 2020.
Our balance sheet remains very strong. We have no long-term debt and a revolving line of credit has paid down to zero. In addition, we had $250.4 million in cash at quarter end, which is an increase of $43.6 million during the quarter.
During the first six months of 2020, we repurchased 441,250 shares in the open market. We also declared a $0.02 cash dividend during the quarter. Our recently announced two phase expansion plans are well underway. We reaffirm our previously announced capital expenditure ranges of $85 million to $95 million in 2020, $70 million to $90 million in 2021 and $60 million to $80 million in 2022.
A strong balance sheet and ability to consistently generate high levels of operating cash flow should provide ample allowance to fund planned capital expenditures. A replay of this conference call will be accessible in the Investors section of our website.
I will now turn the floor over to Daniel for a few final remarks.
Thank you, Bret. As highlighted, Encore performed well in the second quarter and six months ended June 30, 2020. Our low cost structure, one location model and strong balance sheet have been able to us withstand difficult periods in the past and are continuing to prove valuable now.
We believe we are well-positioned going into the second half of 2020, as this country navigates this global pandemic. I am very proud of how each of our employees have rallied during this crisis, and I want to thank our employees and associates for their tremendous efforts. We also think our stockholders for their continued support.
Adrianne, we will now take questions from our listeners.
Thank you. [Operator Instructions] And the first question comes from Brent Thielman from D.A. Davidson. Your line is open.
Hey. Thank you. Good morning.
Good morning, Brent.
Brent, how are you?
I am well. Thank you. Daniel, the volume is down 19% and I was hoping you could just comment again on just how that has progressed through the quarter, when I talked to others in the construction industry, this didn’t feel like a down 19% kind of volume environment in 2Q. So I am just trying to understand what you think reflects sort of short-term project delays or true demand destruction or even any sort of competitive market share changes?
Yeah. That was a mouthful, Brent. Yeah, there are answer three parts of your question. On the market share piece to go -- start at the last and go backwards. On the market share piece, we feel like that we made strides and actually gained in some areas without being too specific with brand names or whatever, but we definitely picked up some share in certain areas.
As we disclosed in the press release, there were some areas across the country that states had shutdown some of the construction sites early on in the quarter. To combine the answer for two parts of your question, early in the quarter, we had some challenges with getting the trucks in and out the way that we would have liked.
The truckers were reluctant to go into certain areas where they were concerned about being able to stop and use public showers and the restaurants were closed. I mean, there were just lots of issues early in the quarter and uncertainties.
It picked up a little bit in the middle of the quarter and then dropped back off as far as the availability of equipment and as we got into June, things started to kind of normalize if you will. There were labor issues.
You wouldn’t think that it would be difficult to ramp back up with hiring people, but there were issues as far as getting good help in -- hiring was a huge issue as we started back up, unemployment rate certainly doesn’t support that.
But the feedback we were getting was some of the folks that had left with whatever reason to get those folks back. They felt that they were making enough money sitting at home to pay the bills in some fashion. So we really had a hard time getting folks back in and back to work as June started to normalize.
Okay. Daniel, how much of -- when you look at that volume in the quarter, how much do you associate with things within the energy sector or products that were might be more associated with that sector?
Yeah. There were some shipments involved in some pretty large projects, in many projects actually in several different phases of the construction site. And as we have stated in the past, the timing of when our product enters into that construction cycle is typically well past the financial piece.
And so, there were some projects put on hold. There were some phases of projects that were put on hold early in the quarter and basically turned back on with some sense of urgency in the latter part of the quarter. A significant amount of the demand for the product was pushed even outside of late June into the current month.
So that specific product that goes into the energy sector was definitely pushed aside for a little bit, and then the projects, depending on what phase they were in was ramped back up toward the end of the month.
Okay. But nothing material to like the upstream side, Daniel?
Nothing material that cancelled and the activity on some of those projects continues. I mean, the conversations are still continuing. We are still having the discussions about which phase is next and whatever.
So it’s actually moving okay. It’s not great, it’s really good and again it feels more normal. The bigger issue has been the labor piece, getting folks back to work to get the stuff shipped out, that kind of thing was a bigger challenge in the quarter.
I am trying not to speak too much about Q3 yet, but the real issue more than anything was when the jobs turned back on, getting that stuff shipped and offloaded at the other end, that was the challenge for sure in the quarter.
Okay. Last one for me and I will get back in queue. The bigger -- almost kind of a bigger picture question, Daniel, which is I look at your first half sale, you are down 15% year-on-year, a lot of extraordinary things going on, but your gross margins are up like 100 basis points.
So, I guess, I am curious kind of what about that do you think you have controlled from a cost perspective. I know you have got movement in commodity prices that influence all that, but again I am just kind of wondering what’s been within your control in managing these costs through a tough revenue environment?
Yeah. That’s a great question. I mean we really were -- there’s a lot of uncertainties going into Q2 and we really focused on the cash side and making certain that if we took an order and we could ship it, they could receive it and we were, more importantly, we were going to get paid on time.
As that started to kind of unfold during the quarter, we were managing the order intake in the direction to make certain that we were going to hit those key points. We wanted to be able to ship it. We wanted them to be able to receive it.
We wanted to get paid and that may sound really simple, but that was the top three concerns that we had along with making certain that our folks that were working here. We are performing in a very safe manner with the social distancing and the face covering basically from day one.
So, in that respect, Brent, we were managing the heck out of every single order, every core -- everything that came through the door. We were super aggressive on the cost side, super aggressive on managing the risk side and we wanted to make certain that those things were going to happen before we said yes.
Okay. Thank you, guys. Appreciate it.
You bet. Thank you, Brent.
Thanks, Brent.
And our next question comes from Julio Romero from Sidoti & Company. Your line is open.
Hey. Good morning. I hope you all are well.
Good, Julio. How are you?
How are you?
I am good. Thanks. So I wanted to stay on that same topic of gross profit. Your gross profit dollars held up better than I expected given the pullback in the spread and you did have lower volumes as well. So can you maybe talk about or give us a refresher on some of the secondary gross profit drivers in the business and just any color into which one is maybe outperforming at the moment?
Yeah. Go ahead.
I will grab that one, Julio. I mean, we kind of touched on this, really this one location model, as we have said, really gave us the agility and the flexibility to real-time adapt to the changing market conditions in the quarter.
I think the biggest driver in that is the labor component of it, right? We run a lean organization that we flex up and down and we are a very cost conscious as we navigated through this given the uncertainty, the sporadic buying pattern, the sporadic nature of the sales and the volume and the purchases.
And so it just stayed very close to the business in navigating through those costs. I think the measure of a lot of companies coming out of this is how strong is their balance sheet and what have they learned going through this to make them better.
I think that’s going to be a big measure for us as well. I think the team did a phenomenal job of being very conscious of costs and making sure that we are matching that with the volume that was going out the door.
Okay. That’s helpful. And on pricing, right, so Comex kind of trended upward throughout the quarter, but it really seem to have taken kind of an acceleration in June and through July. Can you maybe just talk about kind of pricing trends? How you are able to kind of stay ahead of that on the pricing side and would you maybe characterize that dynamic, how would you characterize that dynamic today?
Yeah. Good question. Good point. First time in many quarters that you can see the low for the quarter was April 1st and the high was June 30, so or the end of June, June 28th, I think, when it stopped trading.
So if you look at the $0.52 swing from the beginning of the quarter literally to the end of the quarter, we were constantly and the industry was constantly putting price sheets, price increases out in front of the increase.
The -- one of the differences that you were able to see and showed up in our profit margin was we are very disciplined when it comes to the pricing scenario. When you have copper on a bias or a trend, if three months is now the trend, I guess, that discipline clearly will show up and forces the industry to have discipline.
The cost of goods sold piece, the copper represents the lowest it’s been is 50%-some-odd and the highest it’s been is in the mid-80s as a percent of cost of goods sold and that fluctuates pretty violently at times.
And so you might have a little gamesmanship early with people thinking that they are going to get ahead of a lack of something or a drop or they don’t believe that the increase in the metal cost is real. But when it happens first of the quarter through the end of the quarter on a consistent basis, it forces discipline by all of them, everyone that we compete with.
And so, we saw that. We are really good at our pricing strategy and we are really good at enforcing those price increases, when they are announced and when we say we are up, we are up, and I guess, that’s the best way to put it.
Got it. And cash flow was really strong in the quarter, can you maybe just talk about what your crystal ball tells you about working capital trends in the second half?
Yeah. Hey. Good question. I mean, it was very strong in the quarter, a little bit was timing with the share repurchase that occurred very late in the first quarter. But we have always had very strong operating cash flow. I don’t see this year as being any different.
With over $250 million on the books, you look at our capital expenditure ranges, $85 million to $95 million this year, $70 million to $90 million and then $60 million to $80 million in 2021. I think the trend you have seen of that cash flow generation over a historical period the last couple years is we are well-positioned to continue that this year. So despite the spend we will continue to have a very strong balance sheet and a strong cash balance as we come through this.
Yeah. We were fortunate, Julio, also our -- the customer profile that we go after, our receivables are all current. As Bret mentioned, our customers did a fantastic job of honoring commitments and paying on time, and doing the things that they felt like they needed to do.
But, again, there was uncertainty going into the quarter and a little conservative approach here and there. But for the most part, we were focused on the service piece and the safety of our folks and we are able to get paid on time, and I think, that’s a testament to the quality of the customer that we are serving.
Got it. Thanks for taking the questions. I will hop back in queue.
Thanks, Julio.
Thank you.
And our next question comes from John Koller from Oppenheimer. Your line is open.
Good morning. It’s Oppenheimer + Close. How are you today?
Good, John. How are you?
Good. Thanks. Just two questions on these both center on a couple years out so it may be too far. But given the environment we are in and the outlook possibly for construction over the next couple years. I am wondering how you are thinking about accelerating your capital expenditure plan, if you have the opportunity and also sort of related to that, the competitive position that you think you might be able to gain from doing that. So thanks very much.
Yeah. Thanks for the question. We are moving -- what feels like sometimes too slowly, but we are moving as fast as we can on the expansions that we can handle. The construction project and the equipment and the things that we are going through and the people to run it and the things that go on with our expansion is going along as we planned it. It’s a sizable expansion that we are under right now. We have got some plans that are stacked up behind it that we haven’t announced publicly yet, but -- it’s great.
Yeah.
Yeah. I hope it’s John’s dog.
Yeah. Sorry about that.
That’s okay. Yeah. We like it. And so, hopefully, they are a shareholder. So as we move on through the expansion, we don’t want to go too quickly. I have done that in the past. I’d rather do it at the right pace and that’s where we are moving right now. But we do have that going pretty well.
There is a couple of different topics that we haven’t -- I am just trying to be super careful with it, John, because it all who else on the call, but if you look at what we have in front of us as far as opportunities in the market that we currently serve and in some fringe ideas that still will be the same profile of customer basically, where the peculiarities have been identified that we want to do business with. It’s moving at the rate that we wanted to. It’s kind of falling into place.
How that shakes out in exact market share number, it’s hard to tell, because we have -- we had 30 some odd competitors over the years and we are probably down to something less than 10. So as the market kind of moves, we are going to continue to expand on the property and the campus that we have here.
The current plan is for us to start from scratch and build the buildings and bring the equipment in. Some of it’s pretty expensive as you can imagine. But for the most part, it’s more of the same. The growth pattern is there.
We feel that the market is receptive. We think we know what we are doing. We think we have got a good handle on how to get there and it’s moving along and I hate to be that vague. But I just can’t give you too many details and name names at this point.
No. That’s great. I appreciate it very much.
Yes, sir.
And our next question comes from Bill Baldwin from Baldwin Anthony.
Yes. Thank you. Good morning, Daniel and Bret.
Hi, Bill.
A couple of housekeeping items here to begin with. Bret, was there any LIFO impact on the quarter?
Yeah. Bill, good question, it was small, about $750,000 increase to cost of sales in the quarter, but pretty flat although.
Right. Okay. And secondly, when you talk about the spreads changing, I believe you said, 5.6%, 5.8%, is that year-over-year or is that sequential?
Each one is…
The copper spread?
Yeah. Really we have got all three in the press release and so we will talk about quarter-over-quarter or six months over six months and then second quarter over first quarter. So, I think, Daniel referred to some that I think were sequential. But we cover all three of them in the press release.
I didn’t see it in the press release on the year-over-year spreads for the Q2. Did I miss it? What was that number…
It’s there.
… Bret, the year-over-year change in spread?
Well, wait a second here. So if you look on a to-date, quarter-to-date basis, the -- so what we did we went through and I will get that to you, Bill, separately. I mean, what we quoted in here is the decrease in the price per copper pound sold is 7.4%.
Right. Right. You did that. But I didn’t see the spread, which is normally in the verbiage on that quarterly release. It wasn’t there this time. I don’t believe for Q2.
Yeah.
So the spread number you did talk about was for Q1 to Q2 then, is that correct?
That’s right. And so on a six months…
Okay.
…basis the spread is down 2.9%.
Okay. Well, if you don’t mind, I will check back with you and get the quarter-to-quarter spread for the second quarter.
Yeah. It’s in the press release as well. The second quarter to second quarter spread is the one that was down 5.8% and the...
Well, that was year-over-year -- that was year-over-year.
Well, 5.8% was quarter-over-quarter, so for the second quarter…
Okay.
And it was 2.9% six months ‘20 to six months ‘19.
Okay.
Both year…
5.8% was Q2 versus -- Q2 ‘20 versus Q2 29 -- 2019, okay.
Correct.
Daniel, can you offer any insights that the spreads of the aluminum business, so they kind of recovered back to levels early on and when you had your aluminum operation up and running going back several years before all the import competition set in?
They are not quite back where we want to be yet, Bill, but they are better.
Okay. And when you talked about labor issues on hiring labor, that was third-party labor, that really wasn’t your own labor at your own job there, wasn’t Daniel?
Yeah, sir. Including ours as well, April and May...
Is that right.
Yeah, sir. April and May, we were okay, but June hiring someone in and asking them to pass a drug test and doing the basic pre-employment testing procedure was quite a challenge to say the least and getting folks to come back that had.
We -- COVID-19, we offered folks different reasons to be off, if they felt that they were at risk or whatever, we let them go -- let them go home. We let them go. We didn’t -- we kept them. But when we call to -- encourage them to come back to work, they were feeling as if the money was good for them to stay home.
Well, does that imply then that they are no longer receiving your health insurance that they are off the payroll then if they don’t respond and come back. How do you handle it?
That’s correct.
Yeah. That’s correct. Yeah. They are off the payroll.
Off the payroll. Okay. Well.
Yes.
Did that materially you think affects your shipments in the second quarter?
I think the ability to get folks hired and trained and whatever absolutely had an affect...
Pass it on [ph].
Yeah. Yeah. Yeah. I don’t -- I am not -- I don’t know the exact percentage, but we really…
Right. No. I understand. I understand. Is that still an issue, I mean, do you perceive that as an issue going forward?
It was better in June, the latter part of June was quite a bit better for the quarter and it remains to be seen what happens, I guess, for Q3. But…
Right.
…for certain it had an effect in April and a little bit, it was better in May and it trended better in June versus May.
And as far as the -- you have made comments in the past that qualitative product -- comments, not quantitative, but qualitative you sort of indicated, hey, the outlook for the construction spending looks pretty good, things of that nature. Has that visibility become a little bit more clear here going forward than it was going into the second quarter or is it still a pretty cloudy outlook right now as far as new construction projects and activity…
No. I am not…
… in general in the construction area?
Yes. Absolutely. There’s a measurable difference today versus going into Q2. You can -- states are -- everything that you see in the news has an effect. There’s still a few towns -- cities or towns where there’s some issues going on.
I don’t think it’s any secret that Portland is on day 60 something, 63 or 64 of having their issues. But there’s reluctance for trucks to go into areas where they have to enter at night for whatever reason.
But for the most part, that’s behind us and things in June really cleared up. The residential starts number, I have said it publicly before, I think, 1.2 million starts is the right number. We are probably something underneath that rate right now, which makes me a little bullish.
The commercial side, the folks that we see and when we are getting into job sites now is a little bit easier than it was. Travel has loosened up a little bit easier than it was. So the outlook is, I think, measurably more positive today and there’s some more clarity than we had going into Q2.
Very good. From a product mix or from a profitability standpoint, Daniel, does it make any difference to you whether you are shipping non-res products -- projects or residential projects? Is it pretty much the same profit profile?
In general the answer would be, yes, in general. If you get down…
Okay.
…specifically -- yeah. You would have to get really down in the weeds to separate the difference today. But in general, we -- as long as we are doing what we are supposed to, and selling and not getting cherry picked for one product or the other, we like to sell it all, Bill.
Okay. Very good. Good job. And...
Yes, sir.
Thanks for answering the questions.
Absolutely. Thanks for the support.
And our next question comes from Chris McCampbell from Hilltop Securities.
Good morning, guys. And I have been an off-and-on shareholder since the Vince Rego days. And so, I think, one of the things that I have been struck by over the years is just how strong a balance sheet you will have, how good managers you all are in the business, especially when you have had competitors from time-to-time that have been insane and the pricing has been ridiculous. But just from a 20,000-square-foot -- or square-foot, foot level, what would you all say, you could do with from the standpoint you have got ample capital, you have got great cash flow and it seems like you can finance your expansion. What can you do to maximize shareholder value here, where you have got a $0.02 dividend and a nominal buyback? Is there room to do something or do you just continue to see managing the business and it really doesn’t matter how big the balance sheet gets?
Hi, Chris. It’s Bret Eckert here. In the near-term and I say that in the next one to three years. I think the highest and best use is our capital expenditures and expansion. The news service center across the street, 720,000-square-feet, that really opens up the bottom of the funnel, right, and allows us to expand with regard to -- we commit to get everything out of here in 24 hours a 100% complete and so having that capacity is going to help a lot.
And then repurposing the existing distribution center, adding manufacturing capacity exactly where we want it, I think, as you look out the next three years, two and a half years, that really is the highest and best use of our cash. It does include about $35 million to $45 million of maintenance capital on our existing facility.
As we navigate through that, we will continue to be opportunistic when we got close to the book in the past you have seen it enter the market. We did 441,000 shares of repurchase in the first quarter, which is a little over $20 million, not insignificant. But we will assess that I think coming out of that expansion and the growth recapture in connection with that and then determine based on where the balance sheet fits, what’s the next best use.
Okay. Thanks.
You bet. Thanks, Chris.
And our last question comes from Brent Thielman from D.A. Davidson.
Hey, Daniel, Bret. I will come work for you guys, if you need me.
Come on Brent.
Perfect. We get you out of Portland.
You got to drive a forklift. You don’t know how to drive a forklift, come on Brent.
I just had a quick one for you. So much talk over the last few months, folks have been stuck at home just on the kind of the repair/remodel environment, big box stores have been pretty busy. Can you just remind me where you are at with your big box business today and how much of an emphasis that is for you?
Yeah. We do very little in retail. It hovers around zero. There’s a history there with we used to sell quite a bit of material to one of the large retail guys and they were pretty quick to -- there’s lot of details to it, Brent.
Basically I was in a meeting with one of their brand new buyers for our product category after doing business with them for about 20 years and doing great things. And he had some new ideas that just were not in alignment with my values and that was the end of that and we have not reentered that market since that meeting. That’s the best way to put it.
But there are opportunities there and we evaluate them on a continual basis and the minute that we can step in and service and make money, I am interested. What I am not interested is getting larger and poorer. So if it’s a profitable scenario for us, we are definitely interested in taking a look at it.
Okay. I have got one more comes to mind, I mean, one of the big kind of big sort of topics it seems to be coming out is we are all worried and thinking about non-residential construction, it occurs that not all, but it is the same and there’s so much talk about distribution warehouse, data center, almost like more horizontal type construction versus vertical. And as I think about your business, I think about the needs of wiring and something like that. Is it -- is there a way for us to think about, is there more wire and projects like that versus what we think of a traditional hotel or office tower? I am just trying to -- I am trying to think about that over the next couple of years as demand drivers change?
Yeah. That’s a great point, because we literally were just discussing this on the other day in one of our meetings. When you look at -- and you could pick the topic whether it’s residential or non-residential, almost every category that we currently serve specifically needs, there is a reason for more power in each category.
And so, gauges are changing for demand wise, the configurations of the wire itself. We are being asked to make products that in the past you wouldn’t offer in a catalog, right? So outside the catalog material is a good way to put it.
Each job that you can go in and discuss in great detail and you can change the insulation make up, you can change the pairing, you can change the gauges, you can change a lot of different things and almost customize the demand match up for our product categories.
And so, from that perspective, we are investing, we are spending, as you know, quite a bit of money in that service center and it is headed toward answering those questions and providing solutions for the end-user, that’s constantly being reconfigured and requested.
And it’s truly where the conversation goes from a sales perspective and I think as the previous guy, Mr. McCampbell was talking about when he said that he goes back to the Vince Rego days, ironically so do I. I have been here since day one.
So in that, if you look at what’s changed today versus maybe just five years or six years ago, it’s a hyper focus on solutions at the end-user piece and it is horizontal versus vertical, and some of it reverts back to we haven’t lost the vertical piece.
But there’s a huge opportunity for us when we go in and do those things versus the traditional competitive nature of some of the folks we deal with that simply runs their sales office like a trading desk and if the volume is not coming in the way they want, they cut the price.
And so, those days are not as -- they are not totally gone, but for the most part, and I have said this many times publicly, two things sell building wire, price and delivery. And we are currently in a situation where price we have proven is even less important. It doesn’t go away, obviously, but it’s certainly less important today than the delivery.
There are so many other opportunities on the delivery piece and the service offering that we have and so you are in the same vein that we are in, Brent. And we are starting to see and confirming some of our plans and opportunities are starting to hit the ground. So, good question, great topic, we are excited about it.
Just for us to conceptualize that, Daniel, how much of the business has shifted from catalog to, call it, custom over the last, whatever you want to call it, five years?
Right. Right. I would tell you that, over half of our shipments today are non-standard.
Okay. And that’s a big change from five years ago?
Yeah. You were doing -- we were doing 10%, 15%, 20% of total would be considered custom or non-standard and today it’s well over half.
Okay. Okay. Thank you for taking the extra questions. I appreciate it.
You bet, Brent. Appreciate it. Yeah.
And this concludes our question-and-answer session. I will turn the call back over for final remarks.
All right. Well, we appreciate the questions and the feedback and the participation today was fantastic, it looks like on the screens. So look forward to talking to you guys next quarter. Thank you.
Thank you, ladies and gentlemen. This concludes today’s conference call. Thank you for participating and you may now disconnect.