Encore wire reports second quarter results; increased gross profit margins; highlights share repurchases during 2022
Mckinney, texas--(business wire)--encore wire corporation (nasdaq global select: wire) today announced results for the second quarter of 2022. second quarter and ytd 2022 highlights second quarter earnings per diluted share of $10.71; ytd earnings per diluted share of $18.62 second quarter net income of $210.5 million; ytd net income of $372.1 million gross profit of 38.3% in the second quarter of 2022; 36.2% ytd in 2022 copper volume sold increased 2.7% over second quarter of 2021; increased 5.5% ytd over 2021 ytd levels cash on hand of $469.5 million as of june 30, 2022, up from $439.0 million as of december 31, 2021 company repurchased 607,105 shares during the quarter; repurchased 1,108,022 shares ytd in 2022 net sales for the second quarter ended june 30, 2022 were $838.2 million compared to $744.4 million for the second quarter of 2021. copper unit volume, measured in pounds of copper contained in the wire sold, increased 2.7% in the second quarter of 2022 versus the second quarter of 2021. gross profit percentage for the second quarter of 2022 was 38.3% compared to 37.3% in the second quarter of 2021. the average selling price of wire per copper pound sold decreased 0.7% in the second quarter of 2022 versus the second quarter of 2021, while the average cost of copper per pound purchased increased 3.2%. net income for the second quarter of 2022 was $210.5 million versus $183.1 million in the second quarter of 2021. fully diluted earnings per common share were $10.71 in the second quarter of 2022 versus $8.82 in the second quarter of 2021 and $7.96 in the first quarter of 2022. net sales for the six months ended june 30, 2022 were $1.561 billion compared to $1.189 billion for the six months ended june 30, 2021. copper unit volume, measured in pounds of copper contained in the wire sold, increased 5.5% in the six months ended june 30, 2022 versus the six months ended june 30, 2021. gross profit percentage for the six months ended june 30, 2022 was 36.2% compared to 30.4% for the six months ended june 30, 2021. the average selling price of wire per copper pound sold increased 15.6% in the six months ended june 30, 2022 versus the six months ended june 30, 2021, while the average cost of copper per pound purchased increased 10.2% for the same period comparison. net income for the six months ended june 30, 2022 was $372.1 million versus $224.2 million in the six months ended june 30, 2021. fully diluted earnings per common share were $18.62 in the six months ended june 30, 2022 versus $10.81 in the six months ended june 30, 2021. aluminum wire represented 15.0% and 13.4%, respectively, of our net sales in the quarter and six months ended june 30, 2022. aluminum wire volumes and spreads have increased for both the quarter and six months ended june 30, 2022 compared to the comparative periods in the prior year. commenting on the results, daniel l. jones, chairman, president and chief executive officer of encore wire corporation, said, “the results for the second quarter of 2022 establish another high-water mark both financially and operationally for encore wire. our continued strong earnings in 2022 validate that our single-site campus model is a strategic competitive advantage in the market today, giving us unmatched flexibility to quickly pivot and adapt to ever-changing market dynamics. our manufacturing scale and flexibility, coupled with our value-added services, continue to drive jobsite efficiency. stable demand, coupled with global uncertainties, 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 throughout the first half of 2022. 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 second quarter and year-to-date periods in 2022 over 2021 levels. volumes shipped were also up over first quarter 2022 levels. this marks the third consecutive quarter of volume growth driven by continued increased demand for data center, healthcare and renewable product solutions. we believe existing market conditions and the current outlook support existing volume levels as well as support gross margin abatement continuing at a gradual pace. copper unit volumes increased 2.7% on a comparative quarter basis and 5.5% on a year-to-date basis. comex copper prices decreased gradually throughout the second quarter while other raw material costs and inputs continued to rise. copper spreads increased 22.0% on a year-to-date basis but decreased 4.4% on a comparative quarter basis. aluminum spreads increased for both the quarter and year-to-date periods in 2022 compared to 2021. 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 leader 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. our balance sheet remains very strong. we have no long-term debt, and our revolving line of credit remains untapped. we had $469.5 million in cash at the end of the quarter. during the second quarter, we repurchased 607,105 shares of our common stock. on a year-to-date basis we repurchased 1,108,022 shares of our common stock for a total cash outlay of $131.9 million. since the first quarter of 2020, we have repurchased 2,024,829 shares of our common stock at an average price of $96.71. we 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 was substantially completed in the second quarter of 2022. the incremental investments announced in july 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 wire 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 $75 million in the first half of 2022 and $118 million for the full year 2021. we expect total capital expenditures to range from $150 - $170 million in 2022, $150 - $170 million in 2023, and $80 - $100 million in 2024. 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 health and safety of our employees and their families remain our top priority, and we are following cdc guidelines to maintain safe working conditions. the company is unable to predict the impact that covid-19, or any of the ongoing variants, may have on our financial position and operating results in future periods. the duration or re-emergence of the outbreak and its long-term impact on our business remain uncertain.” the company will host a conference call to discuss the second quarter results on tuesday, july 26, 2022, at 10:00 am central time. hosting the call will be daniel jones, chairman, president and chief executive officer, and bret eckert, chief financial officer. to participate in the call, the dial-in number is 866-374-5140, and the confirmation number is 42180779#. in order to be put through to the call, you will be asked to provide your full name and your company name followed by the # key. please call in early to avoid being delayed by the information collection and missing the start of the call. 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 2021 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 2022 2021 2022 2021 net income $ 210,538 $ 183,053 $ 372,070 $ 224,242 income tax expense 60,476 53,187 106,595 65,376 interest expense 102 102 203 185 depreciation and amortization 6,312 5,677 12,521 10,977 ebitda $ 277,428 $ 242,019 $ 491,389 $ 300,780 encore wire corporation balance sheets (in thousands) june 30, 2022 december 31, 2021 (unaudited) (audited) assets current assets: cash and cash equivalents $ 469,540 $ 438,990 accounts receivable, net of allowance of $3,800 and $3,800 606,132 491,126 inventories, net 121,418 100,816 income tax receivable — 951 prepaid expenses and other 9,978 3,167 total current assets 1,207,068 1,035,050 property, plant and equipment, net 561,205 494,916 other assets 509 570 total assets $ 1,768,782 $ 1,530,536 liabilities and stockholders’ equity current liabilities: trade accounts payable $ 70,708 $ 75,353 accrued liabilities 72,782 78,747 income taxes payable 1,689 — total current liabilities 145,179 154,100 deferred income taxes and other 39,707 37,347 commitments and contingencies stockholders’ equity: preferred stock, $.01 par value: authorized shares – 2,000,000; none issued — — common stock, $.01 par value: authorized shares – 40,000,000; issued shares – 27,132,850 and 27,083,100 271 271 additional paid-in capital 78,123 72,753 treasury stock, at cost – 8,052,284 and 6,944,262 shares (286,870 ) (155,014 ) retained earnings 1,792,372 1,421,079 total stockholders’ equity 1,583,896 1,339,089 total liabilities and stockholders’ equity $ 1,768,782 $ 1,530,536 encore wire corporation statements of income (in thousands, except per share data) quarter ended june 30, six months ended june 30, 2022 2021 2022 2021 (unaudited) (unaudited) net sales $ 838,235 100.0 % $ 744,408 100.0 % $ 1,561,307 100.0 % $ 1,188,548 100.0 % cost of goods sold 517,463 61.7 % 467,066 62.7 % 996,788 63.8 % 826,702 69.6 % gross profit 320,772 38.3 % 277,342 37.3 % 564,519 36.2 % 361,846 30.4 % selling, general, and administrative expenses 50,405 6.0 % 41,140 5.5 % 86,616 5.5 % 72,292 6.1 % operating income 270,367 32.3 % 236,202 31.7 % 477,903 30.6 % 289,554 24.4 % net interest and other income 647 0.1 % 38 — % 762 — % 64 — % income before income taxes 271,014 32.3 % 236,240 31.7 % 478,665 30.7 % 289,618 24.4 % provision for income taxes 60,476 7.2 % 53,187 7.1 % 106,595 6.8 % 65,376 5.5 % net income $ 210,538 25.1 % $ 183,053 24.6 % $ 372,070 23.8 % $ 224,242 18.9 % earnings per common and common equivalent share – basic $ 10.84 $ 8.89 $ 18.88 $ 10.90 earnings per common and common equivalent share – diluted $ 10.71 $ 8.82 $ 18.62 $ 10.81 weighted average common and common equivalent shares outstanding – basic 19,419 20,581 19,709 20,574 weighted average common and common equivalent shares outstanding – diluted 19,666 20,763 19,982 20,741 cash dividends declared per share $ 0.02 $ 0.02 $ 0.04 $ 0.04
