Encore Wire Corporation (NASDAQ Global Select: WIRE) today
announced results for the first quarter of 2023.
First Quarter 2023 Highlights
- First Quarter Earnings per diluted share of $6.50
- First Quarter Net Income of $119.5 million
- Gross Profit of 31.1% in the first quarter of 2023; 33.7% in
the first quarter of 2022
- Cash on hand of $697.4 million as of March 31, 2023; $730.6
million as of December 31, 2022
- Capital expenditures of $31.8 million in 2023
- Company repurchased 702,478 shares during the quarter;
1,297,522 shares remain authorized to be repurchased
- Total cash outlay for share repurchases of $127.1 million
during the quarter
Net sales for the first quarter ended March 31, 2023 were $660.5
million compared to $723.1 million for the first quarter of 2022.
Copper unit volume, measured in pounds of copper contained in the
wire sold, was flat in the first quarter of 2023 versus the first
quarter of 2022. The decrease in net sales was driven by a decrease
in the average selling price in the first quarter of 2023 compared
to the first quarter of 2022. Aluminum wire represented 14.6% of
net sales in the first quarter of 2023.
Gross profit percentage for the first quarter of 2023 was 31.1%
compared to 33.7% in the first quarter of 2022. The average selling
price of wire per copper pound sold decreased 11.8% in the first
quarter of 2023 versus the first quarter of 2022, while the average
cost of copper per pound purchased decreased 8.2%. This resulted in
the gradual abatement of copper spreads in the quarter, primarily
driven by a decrease in the average selling price noted above,
offset somewhat by increased aluminum spreads, which resulted in
the decreased gross profit margin in the first quarter of 2023
compared to the first quarter of 2022. The increase in SG&A in
the quarter was primarily due to an increase in Stock Appreciation
Rights (“SARs”) charges driven by the increase in our stock price
at March 31, 2023 versus December 31, 2022. We recorded $13.2
million in SARs expense in the first quarter of 2023 compared to a
$4.8 million SARs benefit recorded in the first quarter of 2022,
resulting in an $18 million increase in expenses
period-over-period. No SARs were granted subsequent to January of
2020.
Net income for the first quarter of 2023 was $119.5 million
versus $161.5 million in the first quarter of 2022. Fully diluted
earnings per common share were $6.50 in the first quarter of 2023
versus $7.96 in the first quarter of 2022.
Commenting on the results, Daniel L. Jones, Chairman, President
and Chief Executive Officer of Encore Wire Corporation, said, “The
strong results for the first quarter ended March 31, 2023 mark our
eighth consecutive quarter of elevated margins. Stable demand in
the quarter, coupled with continued domestic and global
uncertainties and persistent tightness in the availability of
copper, drove metal prices higher in the quarter while other raw
material costs remained fairly flat. Our key suppliers continue to
perform at a high level which positioned us favorably to meet
customer demand in a timely manner. By continuing to execute on our
core values of providing unbeatable customer service and high order
fill rates, ongoing margin abatement remained gradual in the first
quarter of 2023. I continue to believe that our operational
agility, speed to market, and deep supplier relationships remain
competitive advantages in serving our customers’ evolving needs. We
remain committed to reinvesting in our business with current and
planned projects focused on increasing capacity, efficiency and
vertical integration across our campus. We also remain committed to
shareholder capital return as evidenced by our share repurchases in
the quarter.
We continue to believe Encore Wire remains well positioned to
capture market share in the current economic environment. As we
address the near-term challenges, we remain focused on the
long-term opportunities for our business. 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.
Our balance sheet remains very strong. We have no long-term
debt, and our revolving line of credit remains untapped. We had
$697.4 million in cash at the end of the quarter. During the first
quarter, we repurchased 702,478 shares of our common stock for a
total cash outlay of $127.1 million. Since the first quarter of
2020, we have repurchased 3,674,755 shares of our common stock at
an average price of $119.38. We also declared a $0.02 cash dividend
during the quarter.
The incremental investments announced in July 2021 continue in
earnest, focused on broadening our position as a low-cost
manufacturer in the sector and increasing manufacturing capacity to
drive growth. In 2022 we began construction on a new, state of the
art, cross-link polyethylene (XLPE) compounding facility to deepen
vertical integration related to wire and cable insulation. XLPE
insulation is used in many applications including Data Centers, Oil
and Gas, Transit, Waste-Water Treatment facilities, Utilities, and
Wind and Solar applications. We anticipate the new facility will be
substantially completed by the end of the third quarter of 2023.
Capital spending in 2023 through 2025 will further 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. Total capital expenditures
were $148.4 million in 2022 and $31.8 million in the first quarter
of 2023. We expect total capital expenditures to range from $160 -
$180 million in 2023, $150 - $170 million in 2024, and $80 - $100
million in 2025. We expect to continue to fund these investments
with existing cash reserves and operating cash flows.
Our low-cost structure and strong balance sheet have allowed us
the flexibility to adapt quickly to changing market conditions, 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 first
quarter results on Wednesday, April 26, 2023, at 10:00 am Central
time. Hosting the call will be Daniel L. Jones, Chairman, President
and Chief Executive Officer, and Bret J. Eckert, Executive Vice
President and Chief Financial Officer. Attendants may register at
https://registrations.events/direct/ENC60945 to participate in the
call. A confirmation email will be sent to all registrants
containing a dial-in number and a unique passcode, which identifies
you as the registered participant for this call and should only be
used by the individual who has registered. Please plan to join this
call at least five minutes prior to the scheduled start time. After
entering your dial-in number, you will be prompted to enter your
unique passcode, followed by the # key. A replay of this conference
call will be accessible in the Investors section of our website,
www.encorewire.com, for a limited time.
Encore Wire Corporation is a leading manufacturer of a broad
range of copper and aluminum electrical wire and cables, supplying
power generation and distribution solutions to meet our customers’
needs today and in the future. The Company focuses on maintaining a
low-cost of production while providing exceptional customer
service, quickly shipping complete orders coast-to-coast. Our
products are proudly made in America at our vertically-integrated,
single-site, Texas campus.
The matters discussed in this news release may include
forward-looking statements. Forward-looking statements can be
identified by words such as: “anticipate”, “intend”, “plan”,
“goal”, “seek”, “believe”, “project”, “estimate”, “expect”,
“strategy”, “future”, “likely”, “may”, “should”, “will” and similar
references to future periods. Forward-looking statements are
neither historical facts nor assurances of future performance.
Instead, they are based only on our current beliefs, expectations
and assumptions regarding the future of our business, future plans
and strategies, projections, anticipated events and trends, the
economy and other future conditions. Because forward-looking
statements relate to the future, such statements are subject to
certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated or projected. Therefore, you
should not rely on any of these forward-looking statements.
Examples of such uncertainties and risks include, but are not
limited to, statements about the pricing environment of copper,
aluminum and other raw materials, the duration, magnitude and
impact of the ongoing COVID-19 global pandemic, our order fill
rates, profitability and stockholder value, payment of future
dividends, future purchases of stock, 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. Any
forward-looking statement made by us in this press release is based
only on information currently available to us and speaks only as of
the date on which it is made. We undertake no obligation to
publicly update any forward-looking statement, whether written or
oral, that may be made from time to time, whether as a result of
new information, future developments or otherwise.
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 2022 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 March 31,
In Thousands
2023
2022
Net Income
$
119,483
$
161,531
Income Tax Expense
36,072
46,119
Interest Expense
100
101
Depreciation and Amortization
7,692
6,210
EBITDA
$
163,347
$
213,961
Encore Wire
Corporation
Condensed Balance
Sheets
(In Thousands)
March 31, 2023
December 31, 2022
(Unaudited)
(Audited)
Assets
Current assets:
Cash and cash equivalents
$
697,424
$
730,557
Accounts receivable, net of allowance of
$3,800 and $3,800
479,831
498,762
Inventories, net
173,878
153,187
Income tax receivable
—
15,143
Prepaid expenses and other
2,485
3,992
Total current assets
1,353,618
1,401,641
Property, plant and equipment, net
642,446
616,601
Other assets
541
490
Total assets
$
1,996,605
$
2,018,732
Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable
$
41,594
$
62,780
Accrued liabilities
63,969
81,381
Income taxes payable
23,610
—
Total current liabilities
129,173
144,161
Long-term liabilities:
Deferred income taxes and other
53,528
55,905
Total long-term liabilities
53,528
55,905
Total liabilities
182,701
200,066
Commitments and contingencies
Stockholders’ equity:
Common stock
272
271
Additional paid-in capital
87,978
83,622
Treasury stock
(530,891
)
(402,639
)
Retained earnings
2,256,545
2,137,412
Total stockholders’ equity
1,813,904
1,818,666
Total liabilities and stockholders’
equity
$
1,996,605
$
2,018,732
Encore Wire
Corporation
Statements of Income
(In thousands, except per share
data)
Quarter Ended March
31,
2023
2022
(Unaudited)
Net sales
$
660,492
100.0
%
$
723,072
100.0
%
Cost of goods sold
455,407
68.9
%
479,325
66.3
%
Gross profit
205,085
31.1
%
243,747
33.7
%
Selling, general, and administrative
expenses
58,704
8.9
%
36,212
5.0
%
Operating income
146,381
22.2
%
207,535
28.7
%
Net interest and other income
9,174
1.4
%
115
—
%
Income before income taxes
155,555
23.6
%
207,650
28.7
%
Provision for income taxes
36,072
5.5
%
46,119
6.4
%
Net income
$
119,483
18.1
%
$
161,531
22.3
%
Earnings per common and common equivalent
share – basic
$
6.60
$
8.08
Earnings per common and common equivalent
share – diluted
$
6.50
$
7.96
Weighted average common and common
equivalent shares outstanding – basic
18,099
20,003
Weighted average common and common
equivalent shares outstanding – diluted
18,369
20,302
Cash Dividends Declared per Share
$
0.02
$
0.02
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230425006104/en/
Bret J. Eckert Executive Vice President & Chief Financial
Officer 972-562-9473
Encore Wire (NASDAQ:WIRE)
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