McKINNEY, Texas — Encore Wire Corporation announced results for the fourth quarter and full year ended December 31, 2019.
Net sales for the fourth quarter ended December 31, 2019 were $302.3 million compared to $319.7 million for the fourth quarter of 2018. Copper unit volume, measured in pounds of copper contained in the wire sold, decreased 1.6% in the fourth quarter of 2019 versus the fourth quarter of 2018. The average selling price of wire per copper pound sold decreased 5.8% in the fourth quarter of 2019 versus the fourth quarter of 2018. Net income for the fourth quarter of 2019 decreased to $10.5 million versus $25.0 million in the fourth quarter of 2018. Fully diluted net earnings per common share were $0.50 in the fourth quarter of 2019 versus $1.20 in the fourth quarter of 2018.
Net sales for the year ended December 31, 2019 were $1.275 billion compared to $1.289 billion for the year ended December 31, 2018. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 4.1% in the year ended December 31, 2019 versus the year ended December 31, 2018. The average selling price of wire per copper pound sold decreased 5.8% in the year ended December 31, 2019 versus the year ended December 31, 2018, more than offsetting the unit volume impact on sales dollars. Net income for the year ended December 31, 2019 decreased to $58.1 million versus $78.2 million in the same period in 2018. Fully diluted net earnings per common share were $2.77 in the year ended December 31, 2019 versus $3.74 in the same period in 2018.
On a sequential quarter comparison, net sales for the fourth quarter of 2019 were $302.3 million versus $321.2 million during the third quarter of 2019. Sales dollars decreased due to an 8.1% unit volume decrease of copper building wire sold on a sequential quarter comparison. Copper wire sales prices increased 1.0%, while the price of copper purchased increased 1.4%. Net income for the fourth quarter of 2019 was $10.5 million versus $16.4 million in the third quarter of 2019. Fully diluted net income per common share was $0.50 in the fourth quarter of 2019 versus $0.78 in the third quarter of 2019.
We also have some news to share about our continued expansion plans, which we expect to proceed in two phases. Phase one will begin late in the first quarter of 2020 with the construction of a new 720,000 square foot facility located at the north end of our existing campus. This facility will act as a service center, modernizing our logistics to allow for increased throughput and provide the bandwidth necessary to capture incremental sales volumes. Phase one will allow us to compete at a higher level in the marketplace while further strengthening our industry-leading customer service and order fill rates. We expect to complete construction in the second quarter of 2021. Phase two of our expansion plans will commence following phase one and will focus on repurposing our existing distribution center to expand manufacturing capacity significantly and extend our market reach. Phase two completion is anticipated in 2022.
Commenting on the results and planned expansion, Daniel L. Jones, Chairman, President and Chief Executive Officer of Encore Wire Corporation, said, “This is an exciting time for Encore’s employees, customers and stakeholders. We’ve been under construction since inception and we continue to grow today. Our two-phase expansion plans will extend our reach and increase manufacturing capacity to meet the growing needs of our customers. We anticipate total capital expenditures to range from $85 – $95 million in 2020, $70 – $90 million in 2021, and $60 – $80 million in 2022. Our strong balance sheet and ability to consistently generate high levels of operating cash flow should provide ample allowance to fund planned capital expenditures. Our business and the markets for our products remain strong as evidenced by a 4.1% increase in unit volumes in 2019 compared to 2018. The unit volume increase was achieved even though we continue to face vigorous competition in the market place. Despite the strong U.S. construction market and demand for building wire, margins were restrained by competitive pricing in the fourth quarter of 2019 versus the fourth quarter of 2018. Gross profit margins fell in concert with a drop in copper prices versus 2018’s fourth quarter and full year basis, along with the competitive pressure noted above. 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. The copper spread decreased 11.2% in the fourth quarter of 2019 versus the fourth quarter of 2018, while decreasing 4.9% in the full year comparison. The copper spread contracted 11.2% as the average price of copper purchased decreased 2.8% in the fourth quarter of 2019 versus the fourth quarter of 2018, while the average selling price of wire sold decreased 5.8%. It should be noted that the spreads in the fourth quarter of 2018 were the highest in over a decade. However, we still believe that the currently strong end markets can support those margin levels.
In aluminum wire, which represented 8.1% of our net sales in 2019, we successfully enforced our rights under the U.S. trade remedy laws. As a result of the International Trade Commission’s final affirmative decision, U.S. importers of aluminum wire and cable from China will be required to pay antidumping duties at rates ranging from 47.83% to 52.79%, plus countervailing duties at rates ranging from 33.44% to 165.63%, depending upon the Chinese exporter/supplier.
The U.S. economy appears strong, as is construction activity. 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. We believe our superior order fill rates continue to enhance our competitive position. 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 remains very strong. We have no long-term debt, and our revolving line of credit is paid down to zero. In addition, we had $231.0 million in cash at the end of the year.
Our low-cost structure and strong balance sheet have enabled us to withstand challenges 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 stockholders for their continued support.”
Meanwhile, Encore announced that Donald E. Courtney, a director on the Company’s Board of Directors, will retire this year following 31 years on the Board. Courtney will serve the remainder of his current term on the Board and will not stand for re-election at the Company’s 2020 annual meeting of stockholders.
Daniel L. Jones, Chairman, President and Chief Executive Officer of Encore Wire Corporation, said, “Don Courtney has been a member of our board since inception in 1989, tirelessly serving on various committees of the Board during his tenure as a director. His experience and leadership helped shape us into the Company we are today. All of us at Encore Wire wish to express our sincere appreciation to Mr. Courtney for his exceptional contributions to the Company over the years. We have identified an individual that will bring diversity to our board with more information forthcoming in our Proxy filing in March.”Tagged with Encore Wire, financial results