Encore Wire Corp (NASDAQ:WIRE) Q3 2022 Earnings Conference Call October 26, 2022 11:00 AM ET
Company Participants
Bret Eckert – CFO, VP, Finance, Treasurer & Secretary
Daniel Jones – Chairman, President & CEO
Conference Call Participants
Julio Romero – Sidoti & Company
Brent Thielman – D.A. Davidson & Co.
William Baldwin – Baldwin Anthony Securities
Eric Marshall – Hodges Capital Management
Brian Gibson – Raymond James
Operator
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. [Operator Instructions].
I will now turn the call over to Bret Eckert. Sir, you may begin.
Bret Eckert
Thank you, Vanessa. Good morning, and welcome to the Encore Wire Corporation quarterly conference call. I’m Bret Eckert, Chief Financial Officer 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 third quarter 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 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 and 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
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 third quarter of 2022. Continued persistent tightness in the availability of certain raw materials and the general inability of the sector to meet demand for the timely delivery of finished goods kept spreads strong in the third quarter of 2022. Our one-location vertically-integrated business model affords us the manufacturing scale and flexibility to enhance job start 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 third quarter 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 third quarter, while other raw material costs and inputs generally continue 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
Thank you, Daniel. Net sales for the third quarter ended September 30, 2022, were $762.4 million compared to $716.3 million for the third quarter of 2021. Copper unit volume, measured in the pounds of copper contained in the wire sold, increased 12.9% in the third quarter of 2022 versus the third quarter of 2021. Gross profit percentage for the third quarter 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 third quarter of 2022 versus the third quarter 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 volumes shipped resulting in the increased gross profit margin in the third quarter of 2022 compared to the third quarter of 2021. Net income for the third quarter of 2022 was $191.8 million versus $175.5 million in the third quarter of 2021. Fully diluted earnings per common share were $9.97 in the third quarter of 2022 versus $8.51 in the third quarter of 2021.
Net sales for the 9 months ended September 30, 2022, were $2.324 billion compared to $1.905 billion for the 9 months ended September 30, 2021. Copper unit volume increased 7.9% in the 9 months ended September 30, 2022, versus the 9 months ended September 30, 2021. Gross profit percentage for the 9 months ended September 30, 2022, was 37.2% compared to 33.2% for 9 months ended September 30, 2021. The average selling price of wire per copper pound sold increased 4.3% in the 9 months ended September 30, 2022, versus the 9 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 than the 9 months ended September 30, 2022, compared to the commensurate period in 2021.
Net income for the 9 months ended September 30, 2022, was $563.8 million versus $399.8 million in the 9 months ended September 30, 2021. Fully diluted earnings per common share were $28.57 in the 9 months ended September 30, 2022 versus $19.31 in the 9 months ended September 30, 2021. Aluminum wire represented 17.4% and 14.7%, respectively, of our net sales in the quarter and 9 months ended September 30, 2022.
Aluminum wire volumes and spreads have increased for both the quarter and 9 months ended September 30, 2022, compared to the commensurate period in the prior year. Results through the third quarter ended September 30, 2022, where were driven by stable demand for our products. And 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 third quarter 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 have $573.6 million in cash at the end of the quarter. During the third quarter, we repurchased 785,747 shares of our common stock. On a year-to-date basis, we repurchased 1,893,769 of our common stock for a total cash outlay of $225.2 million. Since the first quarter of 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 has substantially completed in the second quarter 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 wider 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 9 months of 2022 and $118 million for the full year 2021. We expect total capital expenditures to range from $140 million to $150 million in 2022, $150 million to $170 million in 2023 and $80 million to $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
Thank you, Bret. Well done, buddy. Our consistent performance through the first 9 months of 2022, further attest to the strength of our one-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 and 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. 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 6 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, we’ll now take questions from our listeners.
Question-and-Answer Session
Operator
[Operator Instructions]. We have our first question from Julio Romero with Sidoti.
Julio Romero
I wanted to start on residential. Could you just talk about what percent of sales came from residential in the quarter? And could you speak to maybe what you’re seeing in regards to demand on the residential portion of the product portfolio?
Bret Eckert
Yes, I’ll take the percentage. If you look in the third quarter, residential was 28.3% in the third quarter of ’22. If you compare it to the third quarter of ’21, it was 28.7%. So 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, but I’ll let Daniel comment on the residential market and what he’s seen.
Daniel Jones
Yes. I mean there’s clearly a slight slowdown in that segment for sure, but year-over-year numbers still can 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, creating a little bit of a backlog there, maybe in the supply chain side. But overall, we’re still receiving pretty consistent demand and request for quotes for the residential piece.
Julio Romero
Got it. I appreciate that color. And you guys touched on this last call in July, you were able to flex your manufacturing capacity for residential products towards other product categories, if need be? I guess you have not started to see that — not started to do that at all in the third quarter yet?
Daniel Jones
Yes. We had some of that for sure. It changes based on the complexion of the orders coming in, the majority of the demand that comes in from distribution or the request for quotes, our custom list of materials. It’s not like a repeat list that you pull off the shelf and ship. So 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 we’re meeting that service level that we can. We’ll continue to do it on the finished goods side.
Julio Romero
Got it. And then just turning to the aluminum portion of the portfolio. Just could you compare the trend line you’re seeing in aluminum spreads versus copper spreads? And you’ve talked about a gradual abatement in copper spreads going forward? Do you see aluminum spreads following the different trajectory sequentially?
Bret Eckert
Great question, Julio. As we talked about, I said for 6 quarters now, I thought that copper spreads peaked in the second quarter of 2021. I stand by that. Obviously, we didn’t comment on aluminum spread. You saw what happened with aluminum in the second quarter. We’ve seen consistent growth in aluminum volumes and spreads throughout this period. And the challenges from the 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, the utility has taken up a lot of the domestic capacity.
You’ve seen imports increase come out of China of aluminum, but you’re not seeing them fall domestically. And so they’re really not coming into this market yet. And so all in, we’ve been able to leverage our capacity and footprint here to continue to expand volumes and serve the market. I mean it goes back to what we talked about before is 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. And I think this quarter really showed that. You had some tightening in the copper spreads, which we’ve been talking about and that tightening is more than offset by an overall increase of total volume shipped as well as the continued growth in aluminum spreads, and that resulted in an improved gross margin. So that would be my takeaway from the quarter.
Operator
[Operator Instructions]. And we will take our next question from Brent Thielman with D.A. Davidson.
Brent Thielman
Congrats on a great quarter, again. I guess, question, what pricing spreads and margins still really strong here, even as they’re — more spreads are coming off pretty high levels. It seems like the supply dynamics, particularly for metals are still pretty tight today. So Daniel, I’m just wondering if you can comment what are the underlying drivers of this sort of gradual abatement in spreads even with kind of metals so tight, you’ve got other disruptions obviously out there, a pretty strong demand environment. And then 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
Yes. Without getting into the 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, and we’ve got a strong industrial segment. The commercial segment has been strong. As Bret mentioned, the aluminum demand has been strong and not to take anything away from the copper side. There’s pockets that we have some pricing challenges from competitors on the larger size, copper cables, the basic stuff that’s pretty easy to run through equipment, which really doesn’t surprise me.
It’s a response in the market for them to, I guess, move some type of pounds or volume or something and what I can’t pretend to know what they’re trying to do or not do. It makes no sense. But 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. There’s good competitors, and there are some that are not as good at doing those things. But again, we’re doing our thing. Our model is very resilient for this type of market that we’re in. We have a lot of flexibility in our production capacity, as we’re talking about earlier. We can flex from one plant to the other. They have a primary purpose, but we’ve set them all up to be able to support one another and flex with that demand.
And so there’s still only a couple of things to sell building wire, 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 some of the demand that is — maybe doesn’t go out into the market for bid. We’re able to have that repeat business and sharing those successes with those end users and our distributor customers. And as we mentioned in the prepared statement, we certainly couldn’t do that without the fantastic vendors that we have. And it’s not that they’re — the challenges aren’t there on the raw materials, they’re certainly there. But we’ve got relationships that go way back with these — with our suppliers and vendors. And we’re able to execute really, really extremely well in this market that rewards you for services, which is what we’re after.
Brent Thielman
Yes. I appreciate that. I saw that some news out there that some rod mill capacity is getting shuttered in Texas, obviously not yours, but another. I mean, any thoughts on the implications in this type of environment that’s already pretty tight.
Daniel Jones
Yes. I mean there’s 8 or 9 rod mills in the U.S. hat and the 4 or 5 in Canada, Mexico combined. So the shape of copper obviously, is incredibly important. And it’s not just a Comex story. Historically, over the years, you have folks watching Comex and they try to make a business decision on significant purchase of building wire potentially based on what they think Comex is doing or going to 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. And even the day-to-day business is affected by the shape that every wire manufacturer needs to start with being rod. It is significantly tight.
Building wire is the biggest consumer, but it’s not the only consumer of those shapes. And so 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 and 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
Okay. And I guess my next question just would be, I mean, as 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. But 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, but anything you can share at this point in terms of what those do for you structurally in terms of contribution to Encore’s sort of core margins? In other words, in a steady market environment. Can we think about these investments, elevating your kind of longer-term normalized profit margin?
Bret Eckert
Yes. I mean it’s a great question, Brent. We’ve always said these CapEx investments are focused on 2 things. They have to either improve our service model and/or take costs out of the system, right? And that’s how this place has grown from day 1, 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. And as we talked about, as we got closer to the finalization of that repurposing that it was going to add 15% to 20% capacity.
As we get closer, these investments we’re making really are a combination of deeper vertical integration, it’s derisking some aspects of the supply chain that we didn’t maybe like the profile of as much as others, as we navigated through the pandemic in this past 18 to 24 months. And then it’s modernization. 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. But when we look at them, those first 2 things, improving the service model and taking costs out are really top of our list. And so more to come on that.
From a cash perspective, we saw the growth in the cash balance, $574 million is the cash at the end of September. That year-to-date, we spent $225 million on share repurchases and $106 million on CapEx, and we still grew cash to $135 million, $140 million. And so you’re sitting on $565 million of receivables as of the end of September, and those balances are all current. And so it’s more of the same as we generate through this, but from a CapEx standpoint, we tightened the range a little bit for 2022 and with the rest of them unchanged. That’s going to be the primary focus. We do have about 1.2 million shares remaining under our share repurchase operation — authorization, I’m sorry, through March of 2023. And so we’ll continue to look to opportunities in the market for that.
Brent Thielman
Okay. Maybe just last one. I mean the volume is really healthy this quarter. I imagine Plant 7 isn’t contributing a whole lot yet as that ramps up, correct me if I’m wrong, but Dan, just where are you seeing the biggest drivers in terms of underlying kind of demand right now, pull for your products?
Bret Eckert
I think it’s the one Daniel mentioned, right, he goes back to the web page and the slide that we have out there, data centers, renewables, healthcare and then 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 leans in well to the repurposed distribution center, and so we’re taking advantage of that. We didn’t just turn all the lines on all at one time late in the second quarter as we commission lines. We started making wire.
And it turned from initially a construction site, which was making wire to wire plant that had a little bit of construction left. And so 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.
Operator
We have our next question from William Baldwin with Baldwin Anthony Securities.
William Baldwin
Okay. I think you probably address the question I have, at least to the degree you’re willing to talk about it, but I 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. What areas, what products, this type of thing, if you’re able to offer any color there.
Daniel Jones
Yes, it’s along the same lines as what we’ve done in the past. We’re — as Bret mentioned, we’re specifically after savings and cost opportunities and increasing our service model and each one of those projects that we have going are heading in that direction. And we also — there’s a huge consideration here for our sustainability, and we’re moving in those directions and trying to stay ahead of what is there and take advantage of opportunities that come up in those categories as well. But we’re — we only have 5 basic raw materials. We’re addressing all of those in any way, shape or form that we can increase our service or cut into cost or some manner and at the same time, be very aware of and take advantage of 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 maybe more important than one market or the other, but we’re just posturing ourselves, Bill, as we have in the past to offer fantastic service from a low-cost perspective and be ready to take on whichever market presents itself. And 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.
So it’s really just more of the same. There’s some upgrades involved there. We’re — in the 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, and 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 and it fits. It’s raw materials, it’s finished goods. It’s distribution. It’s truly all of the above. This industry, we’ve talked in the past, we fight for pennies in this industry. And fortunately, right now, there’s nickels out there that we can pick up. So we’re accurate.
William Baldwin
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 you getting recognized now and you’re getting a heck of a return on it. So I congratulate you and your team for all the hard work over a long, long period of time.
Daniel Jones
Yes, sir. Thank you very much.
William Baldwin
Yes, it’s been very exciting to watch.
Operator
Our next question is from Eric Marshall with Hodges Capital Management.
Eric Marshall
Congratulations on the quarter, guys. I appreciate some of the color that you guys gave on what you see going on in the housing market. But can you give us an idea of an estimate on how much of your business this last quarter was residential compared to maybe a year ago?
Bret Eckert
Sure. Eric. So let’s look at a couple of periods, third quarter to third quarter, right? So third quarter of 2022 residential 28.3%. Third quarter 2021 residential, 28.7%. So it’s like almost flat. If you look at it from a 9-month comparison, you kind of pick up the meteoric second quarter of last year, it went from meteoric to just kind of hot since then. It’s 31.7% residential, 9 months 2021 compared to 29.6%, 9 months 2022. So it’s pretty slight change. The last one that I’ll kind of give you, will give you a little better perspective. Let’s look at it third quarter from second quarter of this year, right? What is it trending in the most recent period. We talked about 28.3% for third quarter 2022. If you look at second quarter 2022, just to remind you, it was 29.9%.
So it’s pretty gradual to shift. But you can see from a bottom line standpoint, we continue to just evolve and adapt and take what the market gives us.
Eric Marshall
Okay. And then 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. Does it carry higher margins than residential?
Daniel Jones
It can. The way that you asked the question, the answer would be yes, if it’s highly engineered products. There are standard products on the industrial commercial list offering as well. But 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 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
And then any comment that you can make on the — 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 further disrupt things?
Daniel Jones
No. Copper is up $0.10 today. The volatility is really where the story is when you get swings of $0.10, $0.15, $0.20 during 1 particular day, and as I mentioned earlier, the shape 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. And so when folks are just watching Comex, it’s certainly part of the story, but it’s less important part of the story as the shape and availability of shapes to run these wire plants. So the fact that there’s been an unbelievably tight market on the shape of rod that feeds wire plants, I mean the last time it was this tight, it was probably ’95, ’96 timeframe when there was this type of 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 going to back out of the market for a specified timeframe. So there’s just a lot around that copper piece to unpack. And 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, they’re just not there. It’s a pretty long drawn out process to get ready to do your own.
So again, the copper vendors, specifically to the raw material, if you’re speaking of that availability, you look at the — any report can support a conclusion, I guess, but there’s just no copper out there that’s extra and you know what happens with these electric vehicles on copper consumption. And you know what happens with companies that are going green with copper consumption, and you can read what happens to copper when there’s onshoring and reshoring of manufacturing. There’s quite a few things on the consumption demand side for copper and they’re just not any significant contributing supply side projects that are out there.
Eric Marshall
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
No, not that I’m aware of, I mean other than Canada and Mexico.
Operator
The next question is from Brian Gibson with Raymond James.
Brian Gibson
This is mainly a complementary call, but I do have 1 question or actually 2 questions. Daniel, you’ve said for years, we’re not going to get bigger and poorer and you’re certainly getting bigger, but you’re not — and you’re not getting poorer. So congratulations on how you guys run the business. I love the buybacks, I love investing in your infrastructure, investing in your buildings. That’s why it’s good business for people to be doing that.
About 5 quarters ago, you said, hey, business is going to normalize. We don’t know if it’s going to be quick or if it’s going to be gradual. You said that for a couple of 3 quarters. And then a couple of quarters ago, you said, “Hey, we can see signs now where business will normalize gradually.” Do you still think that?
Bret Eckert
Yes. So if you look at this, I think you really take that out. If you look at the last 2 quarters, right, in the last 2 quarters, gross margin has actually gone up, right? And so as I said earlier in the call, we saw copper spreads peak in June of ’21, right? And we saw gradual abatement as you went through there. And that’s a million-dollar question. How long has this happen? And does it — everyone worries you’re going to drive off a cliff. And as you look at this, look at the resiliency of the business now over the last 15 months, right? Margins are higher — your margin is higher today than it was at that point in time. And 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 a quarter in which gross margin went up. And so total volume shift continued to increase. That was a contributing factor of the overall increase as well as continued strength in the aluminum spreads. And so I think you take from that what you will. Copper remains very, very tight as 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? Probably half to 60% of the inventory at LME today is Russian. And so they’re going through a poll right now to decide what to do for next year. But if that doesn’t go in, that’s going to cause some disruption.
It’s not a big percentage, mainly goes to China, but that will send China to South America, which goes domestic. And so — and with pulls on ocean freight and ocean barge and port congestion and you can kind of play it out. So it remains very, very tight, Brian, as you go through this.
Brian Gibson
Yes. Okay. Yes, I just wonder, nothing stays the same forever. In a year — 5 quarters ago, you had this explosive earnings and it’s just stayed there, it’s gone up. It’s going up. So — but with putting — buying back the shares and putting money into your infrastructure should certainly help in the future. I think I heard you say, Daniel, that we have — how do I want to say that. You said people are not — we’re not putting — we’re not even — some jobs were not even betting. They just call in and say, get us the stuff. Is that pretty much what you said there that you’re not even — some jobs you’re not even betting, you’re just filling orders?
Daniel Jones
No, no. They don’t go out to the traditional path of putting it out to 2 or 3 vendors to bid on it. We certainly have to be attentive to demand and customer requests for quotes, no question. But we do have repeat business that doesn’t go out to 4 or 5 competitors to be take shots at or cut prices.
Brian Gibson
Okay. Yes. So yes, you still got to bid it, but it’s not going out. They’re just saying we’re going to — give us your price and — yes. And is that normal too? Or is it just because you guys have the product to supply the jobs?
Daniel Jones
We’ve always had a pretty decent track record attempting to keep things from being bid by competitors where they can have a chance to cut the price, but it’s a testament to our employees here, ourselves, 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. They’re less inclined to go out to shop at a rent and if you’re taking care of business. And so to say that it’s normal or abnormal, I consider it to be somewhat normal.
Operator
[Operator Instructions]. Our next question is a follow-up question from Julio Romero with Sidoti.
Julio Romero
One more on CapEx, just given the expansion you’ve undertaken given all the reinvestment, just a quick refresher on what annual maintenance CapEx looks like these days?
Bret Eckert
Yes. Great question, Julio. It’s still around $40 million to $60 million. And that $40 million to $60 million in maintenance CapEx is typically incremental machinery and equipment. But 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.
Operator
I have no further questions in queue at this time.
Bret Eckert
Perfect. Thank you so much, everyone. I appreciate your attendance today and enjoy your day.
Daniel Jones
Thank you.
Operator
Thank you. Ladies and gentlemen, this concludes our conference. We thank you for your participation. You may now disconnect.
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