Encore Wire Corporation (NASDAQ Global Select: WIRE) today
announced results for the third quarter of 2016 and the nine months
ended September 30, 2016.
Net sales for the third quarter ended September 30, 2016
were $237.2 million compared to $262.8 million during the third
quarter of 2015. Copper unit volume, measured in pounds of copper
contained in the wire sold, increased 1.0% in the third quarter of
2016 versus the third quarter of 2015. Aluminum unit volume was up
4.0% in the third quarter of 2016 versus the third quarter of 2015.
Aluminum building wire sales constituted 10.6% of net sales dollars
for the third quarter of 2016 versus 10.5% in the third quarter of
2015. The average selling price of wire per copper pound sold
dropped 10.7% in the third quarter of 2016 versus the third quarter
of 2015, driving the decrease in net sales dollars. Copper wire
sales prices declined primarily due to the lower price of copper
purchased, which declined 10.9% versus the third quarter of 2015.
Net income for the third quarter of 2016 was $6.0 million versus
$14.5 million in the third quarter of 2015. Fully diluted net
earnings per common share were $0.29 in the third quarter of 2016
versus $0.70 in the third quarter of 2015. The third quarter of
2016 includes a non-recurring charge to selling, general and
administrative expenses of $1.6 million or $0.05 of net earnings
per share, while the third quarter of 2015 included a net tax
refund of $0.3 million.
Net sales for the nine months ended September 30, 2016 were
$701.5 million compared to $766.8 million during the same period in
2015. The average selling price of wire per copper pound sold
dropped 14.6%, while copper unit volume sold increased 6.5% in the
nine months ended September 30, 2016 versus the nine months
ended September 30, 2015. Copper wire sales prices followed
the price of copper purchased, which declined 18.0%. Aluminum
building wire sales constituted 10.3% of net sales dollars for the
nine months ended September 30, 2016 versus 9.8% in the nine
months ended September 30, 2015. Net income for the nine
months ended September 30, 2016 was $22.4 million versus $36.7
million in the same period in 2015. Fully diluted net earnings per
common share were $1.08 for the nine months ended
September 30, 2016 versus $1.76 in the same period in
2015.
On a sequential quarter comparison, net sales for the third
quarter of 2016 were $237.2 million versus $238.8 million during
the second quarter of 2016. Sales dollars decreased due to a 2.4%
unit volume decrease of copper building wire sold, offset by a 0.9%
increase in the average selling price per pound of copper wire sold
on a sequential quarter comparison. Copper wire sales prices
increased slightly due to an increase of 0.7% in the price of
copper purchased. Net income for the third quarter of 2016
decreased to $6.0 million versus $7.8 million in the second quarter
of 2016. Fully diluted net income per common share was $0.29 in the
third quarter of 2016 versus $0.38 in the second quarter of
2016.
Commenting on the results, Daniel L. Jones, Chairman, President
and Chief Executive Officer of Encore Wire Corporation, said,
“Looking at the third quarter results, there are some key items to
note. Unit volumes were up 1.0% in copper pounds shipped and 4.0%
in aluminum pounds shipped over the third quarter of last year.
Margins, however, declined in both copper and aluminum wire sales.
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. That copper spread decreased 10.3% in the third
quarter of 2016 versus the third quarter of 2015, but increased
1.3% on a sequential quarter comparison. The copper spread
contracted 10.3% as the average price of copper purchased decreased
10.9% in the third quarter of 2016 versus the third quarter of
2015, and the average selling price of wire sold decreased 10.7%.
Bear in mind, the percentage drops on sales are on a higher nominal
dollar amount than on purchases and therefore spreads drop on a
nominal dollar basis. Aluminum spreads were down 17.9% in the third
quarter of 2016 versus the third quarter of 2015 and 3.6% in the
third quarter of 2016 versus the second quarter of 2016.
The margin declines were due to the competitive pricing
environment in the industry. We have previously noted that the
timing of price increases by the industry is critical and that
announcing price increases just ahead of a week of soft copper
commodity prices can result in these price increases having
difficulty gaining traction. While this is usually true, there are
two other competitive factors currently at work in the market.
First, our largest competitor announced the purchase of a smaller
competitor during the quarter. While these industry consolidations
generally lead to better industry margin discipline in the long
term, in the short term it can lead to erratic pricing if the
selling company pumps sales volumes into the market pre-sale and
then dumps its remaining inventory into the market post-sale. In
addition, we believe a different, financially stressed competitor,
has been acting erratically in the aluminum wire market. We believe
both of these factors have impacted our spreads negatively.
We also took a non-recurring write down of assets in the quarter
that affected EPS by $0.05 per share. 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, although we are steering through headwinds generated by
concern about the national political landscape and other
factors.
We continue to strive to lead and support industry price
increases in an effort to maintain and increase margins. We believe
our superior order fill rates continue to enhance our competitive
position, as our electrical distributor customers are holding lean
inventories in the field. 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 $79.9 million in cash at the end of the quarter. We also
declared another 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 third
quarter results on Thursday, October 27, 2016 at 10:00 am CDT.
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 888-517-2485, and the pin code is 8140369#. A telephone replay
of this conference call will be available at 888-843-7419,
conference reference 8140369#, until November 26, 2016. 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 pricing
environment, 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 Generally Accepted Accounting
Principles (GAAP) results to compare to the performance of other
companies who also publicize this information. EBITDA is not a
measurement of financial performance under 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 performance
derived in accordance with GAAP.
The Company has reconciled EBITDA with net income for fiscal
years 1996 to 2015 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 September 30, Nine Months Ended
September 30, In Thousands 2016 2015
2016 2015 Net Income $ 5,999 $ 14,511 $ 22,437
$ 36,652 Income Tax Expense 3,107 7,779 11,431 19,200
Interest Expense 60 63 177 187 Depreciation and Amortization
4,078 4,124 13,008 11,972 EBITDA
$ 13,244 $ 26,477 $ 47,053 $ 68,011
Encore Wire Corporation Condensed Consolidated Balance
Sheets (In Thousands) September 30, 2016
December 31, 2015 (Unaudited) ASSETS Current Assets Cash $
79,927 $ 79,152 Receivables, net 183,531 186,065 Inventories 94,415
95,254 Prepaid Expenses and Other 8,508 9,684
Total Current Assets 366,381 370,155 Property, Plant and
Equipment, net 277,905 254,768 Other Assets 193
3,193 Total Assets $ 644,479 $ 628,116
LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities
Accounts Payable $ 22,204 $ 28,743 Accrued Liabilities and Other
30,044 33,972 Total Current Liabilities
52,248 62,715 Long Term Liabilities Non-Current Deferred Income
Taxes 30,583 26,762 Total Long Term
Liabilities 30,583 26,762 Total
Liabilities 82,831 89,477 Stockholders’ Equity Common Stock 268 267
Additional Paid in Capital 54,837 53,024 Treasury Stock (91,056 )
(91,056 ) Retained Earnings 597,599 576,404
Total Stockholders’ Equity 561,648
538,639 Total Liabilities and Stockholders’ Equity $ 644,479
$ 628,116
Encore Wire
Corporation Condensed Consolidated Statements of Income
(Unaudited) (In Thousands, Except Per Share Data)
Quarter Ended September 30, Nine Months Ended
September 30, 2016 2015
2016 2015
Net Sales $ 237,168 100.0 % $ 262,756 100.0 % $ 701,543
100.0 % $ 766,766 100.0 % Cost of Sales 209,350
88.3 % 224,421 85.4 % 614,951
87.7 % 663,095 86.5 % Gross Profit 27,818 11.7
% 38,335 14.6 % 86,592 12.3 % 103,671 13.5 % Selling,
General and Administrative Expenses 18,721 7.9
% 16,063 6.1 % 52,756 7.5 %
47,952 6.3 % Operating Income 9,097 3.8 % 22,272 8.5
% 33,836 4.8 % 55,719 7.3 % Net Interest & Other Expense
(9 ) — % (18 ) — % (32 ) — %
(133 ) — % Income before Income Taxes 9,106 3.8 % 22,290 8.5
% 33,868 4.8 % 55,852 7.3 % Income Taxes 3,107
1.3 % 7,779 3.0 % 11,431 1.6 %
19,200 2.5 % Net Income $ 5,999
2.5 % $ 14,511 5.5 % $ 22,437 3.2 % $
36,652 4.8 % Basic Earnings Per Share $ 0.29
$ 0.70 $ 1.08 $ 1.77 Diluted Earnings
Per Share $ 0.29 $ 0.70 $ 1.08 $ 1.76
Weighted Average Number of Common and Common Equivalent Shares
Outstanding: Basic 20,704 20,716 20,696
20,726 Diluted 20,775 20,774
20,763 20,797 Dividend Declared per Share $
0.02 $ 0.02 $ 0.06 $ 0.06
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version on businesswire.com: http://www.businesswire.com/news/home/20161026006531/en/
Encore Wire CorporationFrank J. Bilban,
972-562-9473Vice President & CFO
Encore Wire (NASDAQ:WIRE)
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