Encore Wire - Q3 2022
October 26, 2022
Transcript
Operator (participant)
Welcome to the Encore Wire reports third quarter results conference call. My name is Vanessa, 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. During the question-and-answer session, if you have a question, please press zero then one on your touchtone phone. As a reminder, this call is being recorded. I will now turn the call over to Bret Eckert. Sir, you may begin
Bret Eckert (EVP and CFO)
Thank you, Vanessa. Good morning, and welcome to the Encore Wire Corporation quarterly conference call. I'm Bret Eckert, CFO of Encore Wire. With me this morning is Daniel Jones, President, CEO, and Chairman of the Board. In a minute, we will review Encore's financial results for the Q3 ended September 30, 2022. 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 may be making certain statements that might be considered to be forward-looking. In order to comply with certain securities legislation, 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 for investors, are posted on our website. I'll now turn the call over to Daniel for some opening remarks. Daniel.
Daniel Jones (President, CEO, and Chairman of the Board)
Good morning, everyone, and thank you for joining us on the call and for your interest in Encore Wire. We appreciate your continued investment, confidence, and support. Our ability to quickly convert raw materials into complete delivered orders continues to differentiate us in the market, resulting in exceptional earnings in the Q3 of 2022. Continued persistent tightness in the availability of certain raw materials and the general inability of the sector to meet demand and timely delivery of finished goods kept spreads strong in the Q3 of 2022. Our one location, vertically integrated business model affords us the manufacturing scale and flexibility to enhance job site efficiency.
By continuing to execute on our core values of providing unbeatable customer service and high order fill rates, we were able to increase both copper and aluminum volumes shipped in the Q3 and year-to-date periods in 2022 over 2021 levels. Copper volumes shipped were also up over second quarter 2022 levels. This marks the third consecutive quarter of total volume growth, driven by continued demand for data center, healthcare, and renewable product solutions, among others. I believe our operational agility and speed to market remain competitive advantages in serving our customers' changing needs. Copper unit volumes increased 12.9% on a comparative quarter basis and 7.9% on a year-to-date basis. COMEX copper prices decreased gradually throughout the Q3, while other raw material costs and inputs generally continued to rise.
Copper spreads increased 7.3% on a year-to-date basis, but decreased 14.7% on a comparative quarter basis. Aluminum spreads and volumes increased for both the quarter and year-to-date periods in 2022 compared to 2021. The gradual abatement of copper spreads in the quarter was more than offset by increased aluminum spreads and an overall increase in total volume shipped. We continue to believe Encore Wire remains well positioned to capture market share and incremental growth in the current economic environment. As we address the near-term challenges, we remain focused on the long-term opportunities for our business, including improving our position as a sustainable and environmentally responsible company in our industry. We believe that our superior order fill rates and deep vertical integration 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'll now turn the call over to Bret to cover our financial results. Bret?
Bret Eckert (EVP and CFO)
Thank you, Daniel. Net sales for the Q3 ended September thirtieth, 2022 were $762.4 million, compared to $716.3 million for the Q3 of 2021. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 12.9% in the Q3 of 2022 versus the Q3 of 2021. Gross profit percentage for the Q3 of 2022 was 39.3% compared to 37.8% in the third quarter of 2021.
The average selling price of wire per copper pound sold decreased 14.4% in the Q3 of 2022 versus the Q3 of 2021, while the average cost of copper per pound purchased decreased 14.1%. As Daniel stated, the gradual abatement of copper spreads in the quarter was more than offset by increased aluminum spreads and an overall increase in total volume shipped. Resulting in the increased gross profit margin in the Q3 of 2022 compared to the Q3 of 2021. Net income for the Q3 of 2022 was $191.8 million, versus $175.5 million in the Q3 of 2021.
Fully diluted earnings per common share were $9.97 in the third quarter of 2022 versus $8.51 in the Q3 of 2021. Net sales for the nine months ended September 30, 2022 was $2.324 billion compared to $1.905 billion for the nine months ended September 30, 2021. Copper unit volume increased 7.9% in the nine months ended September 30, 2022 versus the nine months ended September 30, 2021. Gross profit percentage for the nine months ended September 30, 2022 was 37.2% compared to 33.2% for the nine months ended September 30, 2021.
The average selling price of wire per copper pound sold increased 4.3% in the nine months ended September 30, 2022 versus the nine months ended September 30, 2021 while the average cost of copper per pound purchased increased 1.5% for the same period. The increase in copper spreads on a year-to-date basis, along with increased aluminum spreads over the same period, coupled with an overall increase in total volume shipped, drove the gross profit margin higher in the nine months ended September 30, 2022 compared to the same period in 2021.
Net income for the nine months ended September 30, 2022 was $563.8 million versus $399.8 million in the nine months ended September 30, 2021. Fully diluted earnings per common share was $28.57 in the nine months ended September 30, 2022 versus $19.31 in the nine months ended September 30, 2021. Aluminum wire represented 17.4% and 14.7% respectively of our net sales in the quarter and nine months ended September 30, 2022. Aluminum wire volumes and spreads have increased for both the quarter and nine months ended September 30, 2022 compared to the commensurate period in the prior year.
Results for the third quarter ended September 30, 2022 were driven by stable demand for our products. As Daniel said, the general inability of the sector to meet demand for the timely delivery of finished goods. Persistent tightness in the availability of certain raw materials, ongoing global uncertainties, and suppressed availability of skilled labor kept overall spreads strong through the Q3 of 2022. This marks the sixth consecutive quarter of elevated margins and spreads. Our balance sheet remains very strong. We have no long-term debt. Our revolving credit line remains untapped. We had $573.6 million in cash at the end of the quarter. During the Q3, we repurchased 785,747 shares of our common stock.
On a year-to-date basis, we repurchased 1,893,769 shares of our common stock for a total cash outlay of $225.2 million. Since the Q1of 2020, we repurchased over 2.8 million shares of our common stock at an average price of $102.90. We have also declared a $0.02 cash dividend during the quarter. The repurposing of our vacated distribution center to expand manufacturing capacity and extend our market reach was substantially completed in the Q2 of 2022 as previously reported.
The incremental investments announced in July of 2021 continue in earnest, focused on broadening our position as a low cost, sustainable manufacturer in the sector and increasing manufacturing capacity to drive growth. Capital spending in 2022 through 2024 will expand vertical integration in our manufacturing processes to reduce costs, as well as modernize select wire manufacturing facilities to increase capacity and efficiency and improve our position as a sustainable and environmentally responsible company in our industry. Total capital expenditures were $106 million in the first nine months of 2022, and $118 million for the full year of 2021.
We expect total capital expenditures to range from $140-$150 million in 2022, $150-$170 million in 2023, and $80-$100 million in 2024. We expect to continue to fund these investments with existing cash reserves and operating cash flows. I will now turn the floor over to Daniel for a few final remarks.
Daniel Jones (President, CEO, and Chairman of the Board)
Thank you, Bret Eckert. Well done, buddy. Our consistent performance through the first nine months of 2022 further attests to the strength of our on-campus, vertically integrated low-cost business model, which continues to thrive under current market conditions. I believe this business model remains a competitive advantage, giving us unmatched operational agility and speed to market in serving our customers' evolving needs. Despite persistent tightness in availability of certain raw materials, our supplier partners continue to deliver on their commitments to Encore. We wouldn't have this level of success without the consistent exceptional performance of our long-term suppliers. The labor market also remains tight and a limiting constraint for many companies.
All of these factors have contributed to the general inability of the sector to meet the demand for the timely delivery of finished goods, which positioned us favorably to expand volumes shipped for both the quarter and year-to-date periods. Looking ahead, we remain solely committed to execute upon the core values of our company, unbeatable customer service, nimble operations, and quick deliveries coast to coast. I want to close by recognizing our employees for their continued hard work and commitment to safety and excellence. Our performance over the past six quarters could not have happened without their extraordinary efforts. Our success in the market continues to allow us the opportunity to incrementally invest in our team as we position Encore as an employer of choice in the sector. I also want to thank our shareholders for their continued support. Vanessa will now take questions from our listeners.
Operator (participant)
Thank you, sir. We will now begin our question-and-answer session. If you have a question, please dial zero then one on your touchtone phone. If you wish to be removed from the queue, you can press zero then two. If you're using a speakerphone, please pick up the handset first before pressing the numbers. Once again, with your question, please enter the queue by pressing zero then one. We have our first question from Julio Romero with CIBC.
Julio Romero (Analyst)
Thanks. Hey, good morning, Daniel and Bret.
Bret Eckert (EVP and CFO)
Good morning, Julio. Yep.
Julio Romero (Analyst)
Wanted to start on residential. Can you talk about what percentage sales came from residential in the quarter? Could you speak to maybe what you're seeing in regards to demand on the residential portion on the product portfolio?
Bret Eckert (EVP and CFO)
Yeah, I'll take the percentage. You know, if you look in the Q3, you know, residential was 28.3% in the third quarter of 2022. If you compare it to the third quarter of 2021, it was 28.7%. You know, it's pretty comparable. As we talked about before with regards to really what drives our business, and it's not the housing start numbers. I'll let Daniel comment on the residential market and what he's seeing.
Daniel Jones (President, CEO, and Chairman of the Board)
Yeah, I mean, there's clearly a slight slowdown in that segment for sure, but year-over-year numbers still can, you know, consistently show to be strong. There still seems to be somewhat of a backlog on some of the other materials, building materials it takes to finish some of the houses, you know, creating a little bit of a backlog there maybe in the supply chain side. You know, overall, we're still receiving pretty consistent demand and requests for quotes for the residential piece.
Julio Romero (Analyst)
Got it. I appreciate that color. You guys touched on this last call in July. You're able to flex your manufacturing capacity for residential products towards other product categories if need be. I guess you have not started to do that at all in the Q3 yet.
Daniel Jones (President, CEO, and Chairman of the Board)
Yeah, we have some of that for sure. It changes based on the complexion of the orders coming in. You know, the majority of the demand that comes in from distribution or the request for quotes are custom lists of materials. It's not like a repeat list that you you know pull off the shelf and ship. There's clearly for us that opportunity to flex within the product categories and then also share from one plant to the other on the input side for the raw materials as long as you know we're meeting that service level that we can. We'll continue to do it on the finished goods side.
Julio Romero (Analyst)
Got it. Just turning to the aluminum portion of the portfolio. Just can you compare the trend line you're seeing in aluminum spreads versus copper spreads? As you talk about a gradual abatement in copper spreads going forward, do you see aluminum spreads following a different trajectory sequentially?
Bret Eckert (EVP and CFO)
Great question, Julio. You know, as we talked about, you know, you know, I've said for six quarters now, I thought that copper spreads peaked in the second quarter of 2021. I stand by that. You know, obviously, we didn't comment on aluminum spreads. You saw what happened with aluminum, you know, in the second quarter. You know, we've seen consistent growth in aluminum volumes and spreads throughout this period. You know, the challenges from aluminum standpoint that we saw when copper hit $5, and there was a few more projects heading that way. There's still continued tightness on that side of the market. You know, the utility's taken up a lot of the domestic capacity. You know, you've seen imports increase coming out of China of aluminum, but you're not seeing them fall domestically.
They're really not coming into this market yet. All in, you know, we've been able to leverage our capacity in footprint here to continue to expand volumes and serve the market. It goes back to what we talked about before is this single site manufacturing really positions us very well to adjust to these changing market conditions. We've got a very diverse product portfolio. We've got manufacturing nimbleness, and that affords us the ability to move with the market. I think this quarter really showed that. You had some tightening in the copper spreads, which we've been talking about.
Daniel Jones (President, CEO, and Chairman of the Board)
That tightening was more than offset by an overall increase of total volume shipped, as well as the continued growth in aluminum spreads. That resulted in an improved gross margin. That would be my takeaway from the quarter.
Julio Romero (Analyst)
Helpful. Thanks for taking the question. I'll hop back in the queue.
Daniel Jones (President, CEO, and Chairman of the Board)
Thanks, Louis.
Operator (participant)
As a reminder, if you have a question, you can enter the queue by pressing zero then one on your touch-tone phone. We will take our next question from Brent Thielman with D.A. Davidson.
Brent Thielman (Managing Director and Senior Research Analyst)
Hey, Brent. Thanks. Congrats. Congrats on a great quarter again.
Daniel Jones (President, CEO, and Chairman of the Board)
Thank you.
Brent Thielman (Managing Director and Senior Research Analyst)
I guess question with pricing spreads and margins still really strong here, even as the spreads are coming off pretty high levels, it seems like the supply dynamics, particularly for metal, just feel pretty tight today. Daniel, I'm just wondering if you can comment on what are the underlying drivers of this sort of gradual abatement in spreads, even with kind of metal so tight. You've got other disruptions obviously out there, pretty strong demand environment. Just also wondering if you're seeing that across all sort of copper product lines, or is it isolated just to select few?
Daniel Jones (President, CEO, and Chairman of the Board)
Yeah. You know, without getting into any names or anything, but there's clearly a healthy demand for the entire product line. It moves up and down slightly, and then right when you think it's a little slower, it picks up. We've got, you know, strong industrial segment. The commercial segment has been strong. As Brett mentioned, the aluminum demand has been strong. Not to take anything away from the copper side. There's pockets that, you know, we have some pricing challenges from competitors on the larger size copper cables. The basic stuff that's pretty easy to run through the equipment, which really doesn't, you know, surprise me. It's a response in the market for them to, I guess, move some type of pounds or volume or something.
While I can't, you know, pretend to know what they're trying to do or not do, it makes no sense. Demand is still there. There's more emphasis still through Q3 on the delivery side and the service side than there is on significant pricing pressures from the competition. You know, there's good competitors, and there's some that are not as good at doing those things. Again, we're doing our thing. Our model is a very resilient for this type of market that we're in. We have a lot of flexibility in our production capacity, as we were talking about earlier. We can flex from, you know, one plant to the other.
They have a primary purpose, but we've, you know, set them all up to be able to support one another and flex with that demand. You know, there's still only a couple of things to sell building wires. It's price and delivery, and we spend the majority of our time focused on the delivery side, and we're able to charge for that service. We're able to create relationships to move with, you know, some of the demand that maybe doesn't go out into the market for bid. We're able to have that repeat business and share in those successes with those end users and our distributor customers. You know, it. As we mentioned in the prepared statement, we certainly couldn't do that without the fantastic vendors that we have.
It's not that they're that the challenges aren't there on the raw materials. They're certainly there. We've got relationships that go way back with our suppliers and vendors. We're able to execute really extremely well in this market that, you know, rewards you for services, which is what we're after.
Brent Thielman (Managing Director and Senior Research Analyst)
Yeah. I appreciate that, Daniel. I saw that some news out there that some rod mill capacity is getting shuttered in Texas, obviously not yours, but another. Any thoughts on the implications in this type of environment that's already pretty tight?
Daniel Jones (President, CEO, and Chairman of the Board)
Yeah. I mean, there's eight or nine rod mills in the U.S. and four or five in Canada and Mexico combined. You know, the shape of copper obviously is incredibly important. It's not just a COMEX story. You know, historically, over the years, you'd have folks watching COMEX, and they try to make a business decision on a significant purchase of building wire potentially based on what they think COMEX is doing or gonna do. That's less influential today. It really has moved over toward the shape of the copper and the availability of that shape, driving a lot of the service opportunities that are there for some of those larger jobs.
Even the day-to-day business is affected by the shape that every wire manufacturer needs to start with being rod. You know, it is significantly tight. Building wire is the biggest consumer, but it's not the only consumer of those shapes. Again, the service levels that we're able to provide in the market, we've been able to get materials, we've been able to get the right shape at the right time. Our speed to market once we receive those raw materials, I believe is pretty much unmatched in the industry, and we're able to benefit from that.
Brent Thielman (Managing Director and Senior Research Analyst)
Okay. I guess my next question just would be, I mean, you all know, and we're all trying to figure out where margins find themselves from these extraordinary levels, and you continue to surpass expectations there. Daniel or Bret, I guess I'm just wondering if you can comment at least on the capital investment initiatives. I know you're not disclosing exactly what those are just yet. Anything you can share at this point in terms of, you know, what they'll do for you structurally in terms of contributions to Encore's sort of core margins? In other words, in a you know steady market environment, can you think about these investments elevating your kind of longer term normalized profit margin?
Bret Eckert (EVP and CFO)
Yeah. I mean, it's a great question, Brent. You know, we've always said these CapEx investments are focused on two things. They have to either improve our service model and/or take cost out of the system, right? That's how this place has grown from day one, right? The great example was the repurposing of the old distribution center, right? We really needed incremental capacity, but you had to build a new service center to be able to handle that incremental load. As we talked about, as we got closer to the finalization of that repurposing, that it was gonna add, you know, 15%-20% capacity.
As we get closer, these investments we're making really are a combination of deeper vertical integration and de-risking some aspects of the supply chain that we didn't maybe like the profile of as much as others as you navigated through the pandemic in this past 18-24 months. Then it's monetization. It's utilizing some of our land that we have here to continue to expand on capacity. We will get closer to what those are. You know, when we look at them, those first two things, improving the service model and taking costs out, are really top of our list. More to come on that. You know, from a cash perspective, you saw the growth in the cash balance, $574 million is the cash at the end of September.
You know, year to date, you know, we spent $225 million on share repurchases and $106 million on CapEx, and you still grew cash $135-$140 million. You're sitting on $565 million of receivables as of the end of September. You know, those balances are all current. You know, it's more of the same as we generate through this. You know, from a CapEx standpoint, we tightened the range a little bit for 2022 and left the rest of them unchanged. You know, that's gonna be the primary focus. You know, we do have about 1.2 million shares remaining under our share repurchase authorization, I'm sorry, through March of 2023.
We'll continue to look for opportunities in the market for that.
Brent Thielman (Managing Director and Senior Research Analyst)
Okay. Maybe just last one. I mean, the volume's really healthy this quarter. I can imagine plant seven isn't contributing a whole lot yet as that ramps up. Correct me if I'm wrong, but again, just where are you seeing the biggest drivers in terms of underlying kind of demand right now, pull for your products?
Bret Eckert (EVP and CFO)
I think it's the one Daniel mentioned, right? You know, and it goes back to the web page and the slide that we have out there. You know, data centers, renewables, healthcare, and then, you know, some of the incremental investments you're seeing outside just traditional commercial, industrial, and residential. We've definitely seen some accelerated growth in the industrial segment, which aligns well to the repurposed distribution center, and so we're taking advantage of that. You know, we didn't just turn all the lines on, all at one time. Late in the second quarter, as we commissioned lines, we started making wire. It turned from a, you know, initially a construction site which was making wire to a wire plant that had a little bit of construction left.
We continue to lean in as we ramp up the capacity in that facility, and we'll take advantage of the opportunities we see in the market.
Brent Thielman (Managing Director and Senior Research Analyst)
Okay. Great. Thank you, guys. Appreciate you taking the questions.
Bret Eckert (EVP and CFO)
Thanks, Brent. Great questions.
Daniel Jones (President, CEO, and Chairman of the Board)
Thanks, Brent.
Operator (participant)
Our next question from William Lewis Bolton with Bolton & Company.
William Lewis (EVP)
Good morning.
Bret Eckert (EVP and CFO)
Hey, Bill.
William Lewis (EVP)
I think you probably addressed the question I have, at least to the degree you're willing to talk about it, but I'll go ahead and ask it anyway. I was going to see what kind of color you could offer on the nature of your vertical integration, CapEx programs. You know, what areas, what products, this type of thing, if you're able to offer any color there.
Daniel Jones (President, CEO, and Chairman of the Board)
Yeah. You know, it's along the same lines as what we've done in the past. As Brent mentioned, we're specifically after cost savings opportunities and increasing our service model. Each one of those projects that we have going are heading in that direction. We also, you know, there's a huge consideration here for our sustainability and we're moving in those directions and trying to stay ahead of, you know, what is there and take advantage of opportunities that come up in those categories as well. You know, we only have five basic raw materials. We're addressing all of those in any way, shape, or form that we can increase our service or cut costs in some manner.
At the same time, be very aware of and take advantage of, you know, opportunities to improve from a sustainability standpoint. On the product offering side, it's similar products to what we've been offering over the years. There's a few tweaks we can make to be, you know, maybe more important in one market or the other. We're just posturing ourselves, Bill, as we have in the past to, you know, offer fantastic service and from a low-cost perspective and be ready to take on whichever market presents itself. We've got the cash to do it. We've got the right guy or the right girl with backups identified in key positions and others to take advantage of it. It's really just more of the same.
There's some upgrades involved there. You know, we're in year 33 here. We're constantly trying to become more efficient and better through processes that we can find and develop through those experiences that we've built over the years. We're acting on them. We've got the cash to do it, and we've got the right folks, and the timing is good. It fits. It's raw materials, it's finished goods, it's distribution. It's truly all the above. You know, this industry, we've talked in the past, we fight for pennies in this industry. Just fortunately right now, there's nickels out there that we can pick up. We're after it. We're getting after it.
William Lewis (EVP)
Well, there's no question, Daniel. I mean, your strategic and operational execution has been unbelievable over the years, and it's just wonderful to see it getting recognized now and you're getting a heck of a return on it. I congratulate you and your team for all the hard work over a long, long period of time.
Daniel Jones (President, CEO, and Chairman of the Board)
Yes, sir.
William Lewis (EVP)
You know, yeah, it's been very exciting to watch.
Daniel Jones (President, CEO, and Chairman of the Board)
Thank you very much.
Operator (participant)
Operator, do you have any further questions before we release you?
William Lewis (EVP)
No, that's fine. That takes care of me. Thank you.
Operator (participant)
Well, thank you. Our next question is from Eric Marshall with Hodges Capital Management.
Daniel Jones (President, CEO, and Chairman of the Board)
Morning, Eric.
Eric Marshall (President, Head of Research, and Senior Investment Officer)
Congratulations on the quarter. Congratulations on the quarter, guys. Yeah, I appreciate the some of the color that you guys gave on what you see going on in the housing market. Can you give us an idea of, you know, an estimate on how much of your business this last quarter was residential compared to maybe a year ago?
Daniel Jones (President, CEO, and Chairman of the Board)
Sure. Hey, Eric. You know, let's look at a couple of periods. Third quarter to third quarter, all right? Third quarter of 2022, residential, 28.3%. Third quarter of 2021, residential, 28.7%. You know, it's like almost flat. If you look at it from a nine-month comparison, then you kind of pick up the mediocre second quarter of last year. It went from mediocre to just kind of hot since then. You were at 31.7 residential nine months, 2021, compared to 29.6, nine months, 2022. You know, it's pretty slight, the change. The last one that I'll kind of give you a little better perspective, let's look at it Q3 from Q2 of this year, right? What's it trending in the most recent period?
We talked about 28.3% for Q3 of 2022. If you look at second quarter of 2022, just to remind you, it was 29.9%. You know, it's pretty gradual, the shift. But you can see from a bottom-line standpoint, you know, we continue to just evolve and adapt and take what the market gives us.
Eric Marshall (President, Head of Research, and Senior Investment Officer)
Okay. When we think about the possibility of the housing market slowing down much more than the commercial industrial side of your business, does the mix of the type of more highly engineered wire and conduit that goes into the industrial side of your business carry higher margins than residential?
Daniel Jones (President, CEO, and Chairman of the Board)
It can. The way that you asked the question, the answer would be yes, for highly engineered products. There are standard products on the industrial, commercial listed offering as well. You know, again, as we've tried to communicate and highlight, even in the press release and on our website, we're not tied to the residential starts number as folks have tried to portray us, in the recent past. That production capacity that's in that residential plant, which is the original plant, and going back to day one, it will be used in other products that go out of here that are considered to be commercial and industrial related.
Eric Marshall (President, Head of Research, and Senior Investment Officer)
Okay. Any comment that you can make on what you guys are seeing out there as far as the physical market for supply and demand for copper? Are there any pockets with copper being so volatile and pulling back here, are there any excesses out there that you see that could, you know, further disrupt things?
Daniel Jones (President, CEO, and Chairman of the Board)
No. I mean, you know, copper's up $0.10 today. The volatility is really where the story is. When you get swings of $0.10, $0.15, $0.20 during one particular day, and as I mentioned earlier, the scrap today has a huge influence on the cost itself. The adders above COMEX that are not published are significantly higher today than they have been in recent years. When folks are just watching COMEX, it's certainly part of the story. It's less important part of the story as the scrap and availability of scrap to run these wire plants. The fact that, you know, there's been an unbelievably tight market on the scrap rod that feeds wire plants.
I mean, the last time it was this tight was probably 1995, 1996 timeframe, when there was this type of, you know, lack of availability of rod to feed these wire plants. We've seen letters from competitors go out, declaring that they couldn't get rod, so they were gonna back out of the market for, you know, a specified time frame. There's just a lot around that copper piece to unpack. When you look at what projects are out there to help, if that's the right term, with that tightness or alleviate some of the tightness in the market, it's just not there. It's a pretty long, drawn out process to get ready to do your own.
Again, you know, the copper vendors specifically to the raw material, if you're speaking of that availability, you know, you look at any report can support either conclusion, I guess. There's just no copper out there that's extra. You know what happens with these electric vehicles and copper consumption. You know what happens with companies that are going green with copper consumption. You can read what happens to copper when there's onshoring and reshoring of manufacturing. You know, there's quite a few things on the consumption demand side for copper, and there's just not any significant contributing supply side projects that are out there.
Eric Marshall (President, Head of Research, and Senior Investment Officer)
With the Texas rod mill that was shuttered and the dollar being so strong, have we seen any imports of rod come in at all?
Daniel Jones (President, CEO, and Chairman of the Board)
No, not that I'm aware of. I mean, other than Canada and Mexico.
Eric Marshall (President, Head of Research, and Senior Investment Officer)
Okay. All right. That's all I have. Thanks, guys.
Daniel Jones (President, CEO, and Chairman of the Board)
You bet. Thanks a lot, Eric.
Operator (participant)
The next question is from Brian Gibson with RGC.
Brian Gibson (Analyst)
Good morning, Daniel and Bret.
Daniel Jones (President, CEO, and Chairman of the Board)
Hey, Brian.
Brian Gibson (Analyst)
Hey, no, RGC, sorry. Hey, this is mainly a complimentary call, but I do have one question, or actually two questions. You know, Daniel, you've said for years, we're not gonna get bigger and poorer. You're certainly getting bigger, but you're not getting poorer, so congratulations on how you guys run the business. Love the buybacks. I love investing in your infrastructure, investing in your buildings. That's wise. You know, it's good business people to be doing that. About 5Qs ago you said, "Hey, business is gonna normalize.
We don't know if it's gonna be quick or if it's gonna be gradual. You said that for a couple, 3Qs, and then a couple quarters ago you said, "Hey, we can see signs now where business will normalize gradually." Do you still think that? I mean, like.
Daniel Jones (President, CEO, and Chairman of the Board)
That is correct.
Bret Eckert (EVP and CFO)
Yeah. As you look at this, I think you really take that out. If you look at the last two quarters, right? In the last two quarters, gross margin's actually gone up. Right? As I said earlier in the call, we saw copper spreads peak in June of 2021, right? We saw gradual abatement as you went through there. That's the million dollar question, how long does this happen? And does it. You know, everyone worries you're gonna fall, drive off a cliff. As you look at this, you look at the resiliency of the business now over the last 15 months, right? Margins are higher. Your margin's higher today than it was at that point in time. It just shows, I think it shows a lot about that resiliency, what you saw this quarter.
We saw copper spread abatement in the quarter, right? Still up on a year-to-date basis, but you saw some abatement occur in this quarter, in the quarter in which gross margin went up. Total volume shifts continued to increase. That was a contributing factor of an overall increase, as well as, you know, continued strength in the aluminum spreads. You know, I think you take from that what you will. Copper remains very, very tight. Daniel talked about the metal is the tightest it's ever been, even through the pandemic, and the shape has never been tighter. You still got to figure out some things with regard to Russian metal. Does it go into LME next year or not? You know, probably 50%-60% of the inventory at LME today is Russian.
They're going through a poll right now to decide what to do for next year. You know, if that doesn't go in, that's gonna cause some disruption. It's not a big percentage. Mainly goes to China, but then it'll send China to South America, which goes domestic. Which pulls on ocean freight and ocean barge and port congestion, and you can kind of play it out. It remains very, very tight, Brian, as you go through this.
Brian Gibson (Analyst)
Yeah. Okay. I just wonder, you know, nothing stays the same forever. In a year, five quarters ago, you had this explosive earnings, and it's just stayed there. It's gone up. It's just gone up. That would be, you know, buying back the shares and, you know, putting money into infrastructure should certainly help in the future. I think I heard you say, Daniel, that you said we're not putting, we're not even bidding. Some jobs we're not even bidding. They just call in and say, "Get us the stuff." Is that pretty much what you said there? That you're not even bidding. Some jobs you're not even bidding, you're just filling orders.
Daniel Jones (President, CEO, and Chairman of the Board)
No, no. We don't go out to the traditional path of putting it out to two or three vendors to bid on it. We certainly have to, you know, be attentive to demand and customers' request for quotes, no question. But we do have repeat business that doesn't go out to four or five competitors to be, you know, take shots at or cut prices.
Brian Gibson (Analyst)
Okay. Yeah. Yeah, you still got to bid it, but it's not going out. They're just saying, "We're gonna, you know, give us your price," and yeah. Is that normal, too, or is it just because you guys have the product to supply the jobs?
Daniel Jones (President, CEO, and Chairman of the Board)
We've always had a pretty decent track record of attempting to keep things from being bid by competitors where they can have a chance to cut the price. You know, it's a testament to our employees here, our sales office doing a great job, and operations doing a great job, shipping doing a great job. You do the things you're supposed to do and treat folks fairly, you know, they're less inclined to go out to shop it around if you're taking care of business. To say that it's normal or abnormal, you know, I consider it to be somewhat normal.
Brian Gibson (Analyst)
Okay. Hey, thanks for your time, guys.
Daniel Jones (President, CEO, and Chairman of the Board)
You bet. Thanks, Brian.
Operator (participant)
Once again, if you have a question, you can queue up by pressing zero and one. Our next question is a follow-up question from Julio Romero with CIBC.
Julio Romero (Analyst)
Hey, thanks for taking the follow-up. One more on CapEx, just given the expansion you've undertaken, all the reinvestment, just a quick refresher on what annual maintenance CapEx looks like these days?
Bret Eckert (EVP and CFO)
Yeah, great question, Julio. It's still around $40-$60 million. That $40-$60 million in maintenance CapEx is typically incremental machinery and equipment. That's kind of your annual run rate. Those numbers are embedded within our CapEx estimates, but I still think it's in that range as you get back to a normal investment level at some point.
Julio Romero (Analyst)
Great. I appreciate it. Thanks very much.
Daniel Jones (President, CEO, and Chairman of the Board)
Thanks for the support.
Operator (participant)
Thank you. I have no further questions in queue at this time.
Bret Eckert (EVP and CFO)
Perfect. Thank you so much, everyone. Appreciate your attendance today, and enjoy your day.
Daniel Jones (President, CEO, and Chairman of the Board)
Thank you.
Operator (participant)
Thank you. Ladies and gentlemen, this concludes our conference. We thank you for your participation. You may now disconnect.