MCKINNEY, Texas — Encore Wire Corporation announced results for the second quarter of 2020.
Net sales for the second quarter ended June 30, 2020 were $253.6 million compared to $336.9 million for the second quarter of 2019. Copper unit volume, measured in pounds of copper contained in the wire sold, decreased 18.6% in the second quarter of 2020 versus the second quarter of 2019. The unit volume decrease was due to COVID-19-related economic strain as parts of the country shut down job sites or significantly curtailed construction activity in response to the pandemic, leaving some customers unable to receive deliveries of our products during the quarter. This, coupled with uncertainty in the market, resulted in reduced and sporadic customer buying patterns during April, May and part of June 2020. Beginning late in the second quarter, driven by the re-opening of many state and local economies, customer buying patterns began to return to more historical levels.
Gross profit percentage for the second quarter of 2020 was 14.4% compared to 13.6% in the second quarter of 2019. The average selling price of wire per copper pound sold decreased 9.5% in the second quarter of 2020 versus the second quarter of 2019, while the average cost of copper per pound purchased decreased 11.4%. Net income for the second quarter of 2020 was $12.3 million versus $17.8 million in the second quarter of 2019. Fully diluted net earnings per common share were $0.60 in the second quarter of 2020 versus $0.85 in the second quarter of 2019.
Net sales for the six months ended June 30, 2020 were $556.4 million compared to $651.6 million during the same period in 2019. Copper unit volume, measured in pounds of copper contained in the wire sold, decreased 9.2% in the six months ended June 30, 2020 versus the six months ended June 30, 2019.
Gross profit percentage for the six months ended June 30, 2020 was 14.8% compared to 13.4% during the same period in 2019.
The average selling price of wire per copper pound sold decreased 7.4% in the six months ended June 30, 2020 versus the six months ended June 30, 2019, while the average cost of copper per pound purchased decreased 9.6%. Net income for the six months ended June 30, 2020 was $31.0 million versus $31.2 million in the same period in 2019. Fully diluted net earnings per common share were $1.50 in the six months ended June 30, 2020 versus $1.49 in the same period in 2019.
On a sequential quarter comparison, net sales for the second quarter of 2020 were $253.6 million versus $302.8 million during the first quarter of 2020. Sales dollars decreased due to a 12.7% unit volume decrease of copper building wire sold, combined with a 5.6% decrease in the average selling price per pound of copper wire sold on a sequential quarter comparison.
Gross profit percentage for the second quarter of 2020 was 14.4% compared to 15.1% in the first quarter of 2020. Copper wire sales prices decreased 5.6%, while the price of copper purchased decreased 3.9%. Net income for the second quarter of 2020 was $12.3 million versus $18.6 million in the first quarter of 2020. Fully diluted net income per common share was $0.60 in the second quarter of 2020 versus $0.89 in the first quarter of 2020.
Commenting on the results, Daniel L. Jones, Chairman, President and Chief Executive Officer of Encore Wire Corporation, said, “Despite the economic challenges we are facing in this country, the strong earnings posted in the second quarter ended June 30, 2020 attest to the ability of our business model to succeed in both good times and bad. We continue to increase the strength of our balance sheet, ending with over $250.4 million of cash on hand at June 30th to fund future growth. I’m very proud of how our employees are responding to the current crisis, allowing us to remain fully operational to serve our customers and drive value for our shareholders. There are some key items to note. Copper unit volumes decreased 12.7% on a sequential quarter basis as parts of the country shut down or significantly curtailed construction activity during the second quarter in response to the pandemic. Comex copper prices experienced a steady rise throughout the second quarter while copper spreads decreased 5.8% on a comparative quarter basis. Copper spreads tightened in the quarter due to the economic strain on our customers and our decision to balance volume and price. Fortunately, beginning late in the second quarter, all states re-opened for construction and we experienced a renewed optimism from our customers as buying patterns started to normalize. Aluminum wire represented 10.1% of our net sales in the second quarter of 2020.
“In March 2020 the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The Company is unable to predict the impact that COVID-19 will have on our financial position and operating results in future periods due to numerous uncertainties. The duration and severity of the outbreak and its long-term impact on our business remain uncertain.
“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. We are very proud that some of the products we manufacture are being utilized to power temporary buildings and pop-up medical facilities in the fight against COVID-19. Our distributors remain very thankful we continue to serve during this critical time.
“We believe Encore Wire is well positioned to weather the storm, continuing to serve the markets during this critical time. As we navigate the near-term challenges, we remain focused on the long-term opportunities for our business. We believe that our superior order fill rates 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 is paid down to zero. In addition, we had $250.4 million in cash at the end of the quarter. During the first six months of 2020 we repurchased 441,250 shares of our common stock in the open market. We also declared a $0.02 cash dividend during the quarter. Our recently announced two-phase expansion plans are well under way. We reaffirm our previously announced capital expenditure ranges of $85 – $95 million in 2020, $70 – $90 million in 2021 and $60 – $80 million in 2022.
“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.”
Second Quarter and YTD 2020 Highlights
- Second Quarter Earnings per diluted share of $0.60; YTD Earnings per diluted share of $1.50
- Second Quarter Net income of $12.3 million; YTD Net income of $31.0 million
- Cash on hand of $250.4 million as of June 30, 2020; increase of $43.6 million during the quarter
- Current Ratio of 8.92 as of June 30, 2020
- No long-term debt and revolving credit line paid down to zero
- Company repurchased 441,250 shares YTD
- The Company’s Board of Directors has declared a quarterly dividend of $0.02 per share