MCKINNEY, Texas — Encore Wire Corporation announced results for the second quarter of 2016 and the six months ended June 30, 2016.
Net sales for the second quarter ended June 30, 2016 were $238.8 million compared to $253.7 million during the second quarter of 2015. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 14.0% in the second quarter of 2016 versus the second quarter of 2015. Aluminum unit volume was up 14.3% in the second quarter of 2016 versus the second quarter of 2015. Aluminum building wire sales constituted 9.8% of net sales dollars for the second quarter of 2016 versus 9.4% in the second quarter of 2015. The average selling price of wire per copper pound sold dropped 17.8% in the second quarter of 2016 versus the second quarter of 2015, driving the decrease in net sales dollars. Copper wire sales prices declined primarily due to the lower price of copper purchased, which declined 22.1% versus the second quarter of 2015. Net income for the second quarter of 2016 was $7.8 million versus $11.4 million in the second quarter of 2015. Fully diluted net earnings per common share were $0.38 in the second quarter of 2016 versus $0.54 in the second quarter of 2015.
Net sales for the six months ended June 30, 2016 were $464.4 million compared to $504.0 million during the same period in 2015. The average selling price of wire per copper pound sold dropped 16.6%, while copper unit volume sold increased 9.6% in the six months ended June 30, 2016 versus the six months ended June 30, 2015. Copper wire sales prices followed the price of copper purchased, which declined 21.4%. Aluminum building wire sales constituted 10.1% of net sales dollars for the six months ended June 30, 2016 versus 9.4% in the six months ended June 30, 2015. Net income for the six months ended June 30, 2016 was $16.4 million versus $22.1 million in the same period in 2015. Fully diluted net earnings per common share were $0.79 for the six months ended June 30, 2016 versus $1.06 in the same period in 2015.
On a sequential quarter comparison, net sales for the second quarter of 2016 were $238.8 million versus $225.5 million during the first quarter of 2016. Sales dollars increased due to a 7.3% unit volume increase of copper building wire sold offset by a 0.5% decrease in the average selling price per pound of copper wire sold on a sequential quarter comparison. Copper wire sales prices declined slightly, despite an increase of 1.1% in the price of copper purchased. Net income for the second quarter of 2016 decreased to $7.8 million versus $8.6 million in the first quarter of 2016. Fully diluted net income per common share was $0.38 in the second quarter of 2016 versus $0.41 in the first quarter of 2016.
Commenting on the results, Daniel L. Jones, Chairman, President and Chief Executive Officer of Encore Wire Corporation, said, “We are generally pleased with the second quarter results. Unit volumes were up over the second quarter of last year, as well as the first quarter of this year. Margins, however, declined in both copper and aluminum wire sales. 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. That copper spread decreased 8.5% in the second quarter of 2016 versus the second quarter of 2015, and 3.3% on a sequential quarter comparison. The copper spread contracted 8.5% as the average price of copper purchased decreased 22.1% in the second quarter of 2016 versus the second quarter of 2015, and the average selling price of wire sold decreased 17.8%. Aluminum spreads were down 14.2% and 8.9% versus the same respective periods. The margin declines were due to the competitive pricing environment in the industry as well as the timing of at least two attempts by the industry to raise prices that were announced just ahead of a week of soft copper commodity prices. These price increase attempts had difficulty gaining traction, and margins dropped. Our aluminum plant expansion is now nearly fully operational and progressing well towards targeted efficiency levels. Based on discussions with our distributor customers and their contractor customers, we believe there is a fairly good outlook for construction projects this year, although we are steering through headwinds generated by concern about the national political landscape and other factors.
“We continue to strive to lead and support industry price increases in an effort to maintain and increase margins. We believe our superior order fill rates continue to enhance our competitive position, as our electrical distributor customers are holding lean inventories in the field. As orders come in from electrical contractors, the distributors can count on our order fill rates to ensure quick deliveries from coast to coast. We have been able to accomplish this despite holding what are historically lean inventories for us.
“Our balance sheet is very strong. We have no long term debt, and our revolving line of credit is paid down to zero. In addition, we had $81.1 million in cash at the end of the quarter. We also declared another cash dividend during the quarter.
“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.”
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