Encore Wire Reports Second Quarter Results

MCKINNEY, Texas--()--Encore Wire Corporation (NASDAQ Global Select: WIRE) today announced results for the second quarter of 2019.

Net sales for the second quarter ended June 30, 2019 were $336.9 million compared to $336.8 million for the second quarter of 2018. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 5.6% in the second quarter of 2019 versus the second quarter of 2018. The average selling price of wire per copper pound sold decreased 6.1% in the second quarter of 2019 versus the second quarter of 2018. Net income for the second quarter of 2019 decreased 1.7% to $17.8 million versus $18.1 million in the second quarter of 2018. Fully diluted net earnings per common share was $0.85 in the second quarter of 2019 versus $0.86 in the second quarter of 2018.

Net sales for the six months ended June 30, 2019 were $651.6 million compared to $628.2 million during the same period in 2018. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 9.3% in the six months ended June 30, 2019 versus the six months ended June 30, 2018. The average selling price of wire per copper pound sold decreased 5.9% in the six months ended June 30, 2019 versus the six months ended June 30, 2018, partially offsetting the unit volume impact on sales dollars. Copper wire sales prices decreased primarily due to the lower price of copper purchased, which decreased 9.1% in the six months ended June 30, 2019 versus the same period in 2018. Net income for the six months ended June 30, 2019 increased 5.9% to $31.2 million versus $29.4 million in the same period in 2018. Fully diluted net earnings per common share were $1.49 in the six months ended June 30, 2019 versus $1.41 in the same period in 2018.

On a sequential quarter comparison, net sales for the second quarter of 2019 were $336.9 million versus $314.7 million during the first quarter of 2019. Sales dollars increased due to an 8.4% unit volume increase of copper building wire sold, offset slightly by a 1.5% decrease in the average selling price per pound of copper wire sold on a sequential quarter comparison. Copper wire sales prices decreased 1.5%, while the price of copper purchased decreased 0.4%. Net income for the second quarter of 2019 was $17.8 million versus $13.4 million in the first quarter of 2019. Fully diluted net income per common share was $0.85 in the second quarter of 2019 versus $0.64 in the first quarter of 2019.

Commenting on the results, Daniel L. Jones, Chairman, President and Chief Executive Officer of Encore Wire Corporation, said, “We are pleased with our results in the second quarter and six months ended on June 30. There are some key items to note. Unit volumes increased in the second quarter and year to date comparisons of 2019 to 2018. Copper unit volumes increased 5.6% in the second quarter of 2019 versus the second quarter of 2018, and increased 9.3% in the six month comparison. The unit volume increase was achieved despite severe weather and flooding in parts of the country that slowed construction projects. Gross profit margins also held up despite a drop in copper prices versus last year's second quarter and first six months. One of the key metrics to our earnings is the “spread” between the price of copper wire sold and the cost of raw copper purchased in any given period. The copper spread decreased only 0.4% in the second quarter of 2019 versus the second quarter of 2018, while increasing 0.9% in the six month comparison. The copper spread did decrease 3.6% on a sequential quarter comparison. The copper spread contracted 0.4% as the average price of copper purchased decreased 8.7% in the second quarter of 2019 versus the second quarter of 2018, while the average selling price of wire sold decreased 6.1%. Margins, which are highly dependent on competitive market conditions, improved slightly in the second quarter to second quarter comparison. In aluminum wire, which represented 8.0% of our net sales in the second quarter of 2019, we continue to enforce our rights under the U.S. trade remedy laws. On May 30, 2019, the U.S. Commerce Department imposed a preliminary antidumping ruling on imports of aluminum wire from China at rates ranging from 58.36 to 63.32 percent. The final results of the U.S. Government’s ongoing anti-dumping and countervailing duty investigations are not expected until the end of the year.

The U.S. economy appears strong, as is construction activity. Based on discussions with our distributor customers and their contractor customers, we believe there is a good outlook for construction projects for the next year. We believe our superior order fill rates continue to enhance our competitive position. As orders come in from electrical contractors, the distributors can count on our order fill rates to ensure quick deliveries from coast to coast. Our balance sheet is very strong. We have no long-term debt, and our revolving line of credit is paid down to zero. In addition, we had $184.8 million in cash at the end of the quarter. We have plans on the drawing board for significant capital expenditures, but these plans have been delayed by issues arising in connection with a proposed new highway project which may bisect our property. We also declared a cash dividend during the quarter.

Our low-cost structure and strong balance sheet have enabled us to withstand difficult periods in the past, and we believe they are continuing to prove valuable now. We thank our employees and associates for their outstanding effort and our shareholders for their continued support.”

The Company will host a conference call to discuss the second quarter results on Wednesday, July 31, 2019, at 10:00 am Central time. Hosting the call will be Daniel Jones, Chairman, President and Chief Executive Officer, and Frank Bilban, Vice President and Chief Financial Officer. To participate in the call, the dial-in number is 800-774-6070, and the passcode is 5053702#. A telephone replay of this conference call will be available at 888-843-7419, conference reference 5053702#, until August 30, 2019. A replay of this conference call will also be accessible in the Investors section of our website for a limited time.

Encore Wire Corporation is a leading manufacturer of a broad range of electrical building wire for interior wiring in commercial and industrial buildings, homes, apartments, and manufactured housing. The Company is focused on maintaining a high level of customer service with low-cost production and the addition of new products that complement its current product line.

The matters discussed in this news release, other than the historical financial information, including statements about the copper and aluminum pricing environment, the extent of unfair import competition, profitability and stockholder value, may include forward-looking statements that involve risks and uncertainties, including payment of future dividends, future purchases of stock, fluctuations in the price of copper and other raw materials, the impact of competitive pricing and other risks detailed from time to time in the Company’s reports filed with the Securities and Exchange Commission. Actual results may vary materially from those anticipated.

Additional Disclosures:

The term “EBITDA” is used by the Company in presentations, quarterly conference calls and other instances as appropriate. EBITDA is defined as net income before interest, income taxes, depreciation and amortization. The Company presents EBITDA because it is a required component of financial ratios reported by the Company to the Company’s banks, and is also frequently used by securities analysts, investors and other interested parties, in addition to and not in lieu of measures of financial performance calculated and presented in accordance with Generally Accepted Accounting Principles (GAAP), to compare to the performance of other companies who also publicize this information. EBITDA is not a measurement of financial performance calculated and presented in accordance with GAAP and should not be considered an alternative to net income as an indicator of the Company’s operating performance or any other measure of financial performance calculated and presented in accordance with GAAP.

The Company has reconciled EBITDA with net income for fiscal years 1996 to 2018 on previous reports on Form 8-K filed with the Securities and Exchange Commission. EBITDA for each period pertinent to this press release is calculated and reconciled to net income as follows:

 

 

Quarter Ended June 30,

 

Six Months Ended June 30,

In Thousands

 

2019

 

2018

 

2019

 

2018

Net Income

 

$

17,782

 

 

$

18,089

 

 

$

31,193

 

 

$

29,442

 

Income Tax Expense

 

5,364

 

 

5,303

 

 

9,359

 

 

8,901

 

Interest Expense

 

59

 

 

85

 

 

119

 

 

144

 

Depreciation and Amortization

 

4,441

 

 

4,104

 

 

8,785

 

 

8,213

 

EBITDA

 

$

27,646

 

 

$

27,581

 

 

$

49,456

 

 

$

46,700

 

 

Encore Wire Corporation

Balance Sheets

(In Thousands)

 

June 30, 2019

 

December 31, 2018

 

(Unaudited)

 

 

ASSETS

 

 

 

Current Assets

 

 

 

Cash

$

184,800

 

 

$

178,405

 

Receivables, net

255,968

 

 

235,353

 

Inventories

96,039

 

 

102,367

 

Income Tax Receivable

3,262

 

 

1,389

 

Prepaid Expenses and Other

1,885

 

 

1,723

 

Total Current Assets

541,954

 

 

519,237

 

Property, Plant and Equipment, net

311,421

 

 

298,658

 

Other Assets

806

 

 

165

 

Total Assets

$

854,181

 

 

$

818,060

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current Liabilities

 

 

 

Accounts Payable

$

46,053

 

 

$

36,706

 

Accrued Liabilities and Other

30,145

 

 

36,866

 

Total Current Liabilities

76,198

 

 

73,572

 

Long-Term Liabilities

 

 

 

Deferred Income Taxes and Other

25,340

 

 

24,032

 

Total Long-Term Liabilities

25,340

 

 

24,032

 

Total Liabilities

101,538

 

 

97,604

 

Stockholders’ Equity

 

 

 

Common Stock

269

 

 

269

 

Additional Paid-in Capital

62,652

 

 

60,822

 

Treasury Stock

(91,056

)

 

(91,056

)

Retained Earnings

780,778

 

 

750,421

 

Total Stockholders’ Equity

752,643

 

 

720,456

 

Total Liabilities and Stockholders’ Equity

$

854,181

 

 

$

818,060

 

Encore Wire Corporation

Statements of Income

(In thousands, except per share data)

 

Quarter Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

$

336,866

 

 

100.0

%

 

$

336,793

 

 

100.0

%

 

$

651,573

 

 

100.0

%

 

$

628,224

 

 

100.0

%

Cost of Goods Sold

290,956

 

 

86.4

%

 

292,296

 

 

86.8

%

 

564,337

 

 

86.6

%

 

546,232

 

 

86.9

%

Gross Profit

45,910

 

 

13.6

%

 

44,497

 

 

13.2

%

 

87,236

 

 

13.4

%

 

81,992

 

 

13.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, General and Administrative Expenses

23,846

 

 

7.1

%

 

21,498

 

 

6.4

%

 

48,844

 

 

7.5

%

 

44,385

 

 

7.1

%

Operating Income

22,064

 

 

6.5

%

 

22,999

 

 

6.8

%

 

38,392

 

 

5.9

%

 

37,607

 

 

6.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest & Other Income

1,082

 

 

0.3

%

 

393

 

 

0.1

%

 

2,160

 

 

0.3

%

 

736

 

 

0.1

%

Income before Income Taxes

23,146

 

 

6.9

%

 

23,392

 

 

6.9

%

 

40,552

 

 

6.2

%

 

38,343

 

 

6.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

5,364

 

 

1.6

%

 

5,303

 

 

1.6

%

 

9,359

 

 

1.4

%

 

8,901

 

 

1.4

%

Net Income

$

17,782

 

 

5.3

%

 

$

18,089

 

 

5.4

%

 

$

31,193

 

 

(4.8

)%

 

$

29,442

 

 

4.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

$

0.85

 

 

 

 

$

0.87

 

 

 

 

$

1.49

 

 

 

 

$

1.41

 

 

 

Diluted Earnings Per Share

$

0.85

 

 

 

 

$

0.86

 

 

 

 

$

1.49

 

 

 

 

$

1.41

 

 

 

Weighted Average Common and Common Equivalent Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

20,898

 

 

 

 

20,847

 

 

 

 

20,891

 

 

 

 

20,838

 

 

 

Diluted

20,988

 

 

 

 

20,918

 

 

 

 

20,985

 

 

 

 

20,911

 

 

 

Cash Dividends Declared per Share

$

0.02

 

 

 

 

$

0.02

 

 

 

 

$

0.04

 

 

 

 

$

0.04

 

 

 

 

Contacts

Frank J. Bilban
Vice President & CFO
972-562-9473

Release Summary

Encore Wire Releases Second Quarter Earnings

Contacts

Frank J. Bilban
Vice President & CFO
972-562-9473