Encore Wire Corporation (NASDAQ Global Select: WIRE) (“Encore
Wire” or the “Company”) today announced results for the second
quarter of 2023.
Second Quarter and YTD 2023 Highlights
- Second Quarter Earnings per diluted share of $6.01; YTD
Earnings per diluted share of $12.53
- Second Quarter Net Income of $104.7 million; YTD Net Income of
$224.2 million
- Gross Profit of 26.1% in the second quarter of 2023; 28.6% YTD
in 2023
- Cash on hand of $667.8 million as of June 30, 2023; $730.6
million as of December 31, 2022
- Capital expenditures of $74.7 million YTD in 2023
- Company repurchased 772,931 shares during the quarter and
1,475,409 YTD in 2023
- Total cash outlay for share repurchases of $126.7 million
during the quarter and $253.8 million YTD in 2023
- In June 2023, the Company's Board of Directors increased the
repurchase authorization back up to a full 2,000,000 shares of our
common stock through March 31, 2024
Net sales for the second quarter ended June 30, 2023 were $636.5
million compared to $838.2 million in the second quarter ended June
30, 2022. Copper unit volume, measured in pounds of copper
contained in the wire sold, increased 1.3% in the second quarter of
2023 versus the second quarter of 2022. The decrease in net sales
was driven by an anticipated decrease in the average selling price
in the second quarter of 2023 compared to the second quarter of
2022. Aluminum wire represented 14.4% of net sales in the second
quarter of 2023 compared to 15.0% in the second quarter of
2022.
Gross profit percentage for the second quarter of 2023 was 26.1%
compared to 38.3% in the second quarter of 2022. The average
selling price of wire per copper pound sold decreased 24.5% in the
second quarter of 2023 versus the second quarter of 2022, while the
average cost of copper per pound purchased decreased 11.2%. This
resulted in the gradual abatement of copper spreads during the
quarter, primarily driven by the decrease in the average selling
price noted above, which resulted in the decreased gross profit
margin in the second quarter of 2023 compared to the second quarter
of 2022.
Net income for the second quarter of 2023 was $104.7 million
versus $210.5 million in the second quarter of 2022. Fully diluted
earnings per common share were $6.01 in the second quarter of 2023
versus $10.71 in the second quarter of 2022.
On a sequential quarter basis, net sales for the second quarter
ended June 30, 2023 were $636.5 million compared to $660.5 million
in the first quarter ended March 31, 2023. Copper unit volume,
measured in pounds of copper contained in the wire sold, increased
10.4% in the second quarter of 2023 versus the first quarter of
2023. The slight decrease in net sales was driven by an anticipated
decrease in the average selling price in the second quarter of 2023
compared to the first quarter of 2023, partially offset by
increased volumes in the current quarter. Aluminum wire represented
14.4% of net sales in the second quarter of 2023 compared to 14.6%
in the first quarter of 2023.
Gross profit percentage for the second quarter of 2023 was 26.1%
compared to 31.1% in the first quarter of 2023. The average selling
price of wire per copper pound sold decreased 12.4% in the second
quarter of 2023 versus the first quarter of 2023, while the average
cost of copper per pound purchased decreased 5.3%. This resulted in
the gradual abatement of copper spreads during the quarter,
primarily driven by the decrease in the average selling price noted
above, which resulted in the decreased gross profit margin in the
second quarter of 2023 compared to the first quarter of 2023.
Net income for the second quarter of 2023 was $104.7 million
versus $119.5 million in the first quarter of 2023. Fully diluted
earnings per common share were $6.01 in the second quarter of 2023
versus $6.50 in the first quarter of 2023.
Net sales for the six months ended June 30, 2023 were $1.297
billion compared to $1.561 billion for the six months ended June
30, 2022. Copper unit volume, measured in pounds of copper
contained in the wire sold, increased 0.7% in the first six months
of 2023 versus the first six months of 2022. The decrease in net
sales was driven by an anticipated decrease in the average selling
price in the first six months of 2023 compared to the first six
months of 2022. Aluminum wire represented 14.5% of net sales in the
first six months of 2023 compared to 13.4% in the first six months
of 2022.
Gross profit percentage for the first six months of 2023 was
28.6% compared to 36.2% in the first six months of 2022. The
average selling price of wire per copper pound sold decreased 18.5%
in the first six months of 2023 versus the first six months of
2022, while the average cost of copper per pound purchased
decreased 9.6%. This resulted in the gradual abatement of copper
spreads during the first six months of 2023 versus the first six
months of 2022. The increase in SG&A in the first six months of
2023 was primarily due to an increase in Stock Appreciation Rights
(“SARs”) expense charges driven by the increase in our stock price
at March 31, 2023 and June 30, 2023 versus December 31, 2022. We
recorded $14.6 million in SARs expense in the first six months of
2023 compared to a $3.9 million SARs benefit recorded in the first
six months of 2022, resulting in an $18.5 million increase in
expenses period-over-period. No SARs were granted subsequent to
January of 2020.
Net income for the first six months of 2023 was $224.2 million
versus $372.1 million in the first six months of 2022. Fully
diluted earnings per common share were $12.53 in the first six
months of 2023 versus $18.62 in the first six months of 2022.
Commenting on the results, Daniel L. Jones, Chairman, President
and Chief Executive Officer of Encore Wire Corporation, said, “The
second quarter marks our ninth consecutive quarter of elevated
margins. Demand for our products has remained strong, and our
build-to-ship model, combined with the increased throughput of our
modern service center, allowed us to reach a near quarterly record
of copper and aluminum pounds shipped. 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 second
quarter of 2023.
Our balance sheet remains very strong, and we remain committed
to returning capital to shareholders, as evidenced by our ongoing
share repurchases. We have no long-term debt, and our revolving
line of credit remains untapped. We had $667.8 million in cash at
June 30, 2023. During the second quarter we repurchased 772,931
shares of our common stock for a total cash outlay of $126.7
million. Since the first quarter of 2020 we have repurchased
4,447,686 shares of our common stock at an average price of
$127.11, for a total cash outlay of $565.4 million. In June 2023,
the Board of Directors increased the repurchase authorization back
up to a full 2,000,000 shares of our common stock through March 31,
2024. We also declared a $0.02 cash dividend during the
quarter.
We remain committed to reinvesting in our business with current
and planned projects focused on increasing capacity, efficiency and
vertical integration across our campus, which will continue to
improve our service model. These types of organic investments have
fueled our consistent growth since inception and position us well
to continue to profitably capture market share for years to
come.
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 complete 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 $74.7 million in the first six
months 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.
I continue to believe that our operational agility, speed to
market, and deep supplier relationships remain competitive
advantages in serving our customers’ evolving needs and capturing
market share in the current economic environment. As we continue to
address near-term challenges, we remain focused on the long-term
opportunities for our business. 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 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/ENC60364 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 June 30,
Six Months Ended June 30,
In Thousands
2023
2022
2023
2022
Net Income
$
104,741
$
210,538
$
224,224
$
372,070
Income Tax Expense
30,803
60,476
66,875
106,595
Interest Expense
102
102
202
203
Depreciation and Amortization
8,089
6,312
15,780
12,521
EBITDA
$
143,735
$
277,428
$
307,081
$
491,389
Encore Wire
Corporation
Condensed Balance
Sheets
(In Thousands)
June 30, 2023
December 31, 2022
(Unaudited)
(Audited)
Assets
Current assets:
Cash and cash equivalents
$
667,790
$
730,557
Accounts receivable, net
463,318
498,762
Inventories, net
163,215
153,187
Income tax receivable
25,566
15,143
Prepaid expenses and other
8,625
3,992
Total current assets
1,328,514
1,401,641
Property, plant and equipment, net
683,747
616,601
Other assets
518
490
Total assets
$
2,012,779
$
2,018,732
Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable
$
90,725
$
62,780
Accrued liabilities
70,725
81,381
Total current liabilities
161,450
144,161
Long-term liabilities:
Deferred income taxes and other
54,437
55,905
Total long-term liabilities
54,437
55,905
Total liabilities
215,887
200,066
Commitments and contingencies
Stockholders’ equity:
Common stock
272
271
Additional paid-in capital
94,468
83,622
Treasury stock
(658,798
)
(402,639
)
Retained earnings
2,360,950
2,137,412
Total stockholders’ equity
1,796,892
1,818,666
Total liabilities and stockholders’
equity
$
2,012,779
$
2,018,732
Encore Wire
Corporation
Statements of Income
(In thousands, except per share
data)
Quarter Ended June 30,
Six Months Ended June
30,
2023
2022
2023
2022
(Unaudited)
(Unaudited)
Net sales
$
636,460
100.0
%
$
838,235
100.0
%
$
1,296,952
100.0
%
$
1,561,307
100.0
%
Cost of goods sold
470,312
73.9
%
517,463
61.7
%
925,719
71.4
%
996,788
63.8
%
Gross profit
166,148
26.1
%
320,772
38.3
%
371,233
28.6
%
564,519
36.2
%
Selling, general, and administrative
expenses
38,671
6.1
%
50,405
6.0
%
97,375
7.5
%
86,616
5.5
%
Operating income
127,477
20.0
%
270,367
32.3
%
273,858
21.1
%
477,903
30.6
%
Net interest and other income
8,067
1.3
%
647
0.1
%
17,241
1.3
%
762
—
%
Income before income taxes
135,544
21.3
%
271,014
32.3
%
291,099
22.4
%
478,665
30.7
%
Provision for income taxes
30,803
4.8
%
60,476
7.2
%
66,875
5.2
%
106,595
6.8
%
Net income
$
104,741
16.5
%
$
210,538
25.1
%
$
224,224
17.2
%
$
372,070
23.8
%
Earnings per common and common equivalent
share – basic
$
6.13
$
10.84
$
12.75
$
18.88
Earnings per common and common equivalent
share – diluted
$
6.01
$
10.71
$
12.53
$
18.62
Weighted average common and common
equivalent shares outstanding – basic
17,093
19,419
17,593
19,709
Weighted average common and common
equivalent shares outstanding – diluted
17,431
19,666
17,897
19,982
Cash Dividends Declared per Share
$
0.02
$
0.02
$
0.04
$
0.04
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230725077089/en/
Bret J. Eckert Executive Vice President & Chief
Financial Officer 972-562-9473
Encore Wire (NASDAQ:WIRE)
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