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Press release from Business Wire

Encore Wire Reports Improved Sequential Quarter Results

Wednesday, October 24, 2012

Encore Wire Reports Improved Sequential Quarter Results16:01 EDT Wednesday, October 24, 2012 MCKINNEY, Texas (Business Wire) -- Encore Wire Corporation (NASDAQ Global Select: WIRE) today announced results for the third quarter and nine months ended September 30, 2012. Net sales for the third quarter ended September 30, 2012 were $269.2 million compared to $319.4 million during the third quarter of 2011. Lower prices for building wire sold in the quarter ended September 30, 2012 accounted for most of the decrease in net sales dollars, decreasing 15.0% per copper pound sold versus the same period in 2011. Sales prices declined primarily due to lower copper prices, which declined 14.2% versus the third quarter of 2011. Unit volume, measured in copper pounds contained in the wire sold, decreased 2.7% in the third quarter of 2012 versus the third quarter of 2011. Net income for the third quarter of 2012 was $5.5 million versus $13.7 million in the third quarter of 2011. Fully diluted net earnings per common share were $0.27 in the third quarter of 2012 versus $0.59 in the third quarter of 2011. Net sales for the nine months ended September 30, 2012 were $814.3 million compared to $932.2 million during the same period in 2011. Lower prices for building wire sold in the nine months ended September 30, 2012 accounted for most of the decrease in net sales dollars, decreasing 12.7% per copper pound versus the same period in 2011. Unit volume in the nine months ended September 30, 2012 decreased 2.4% versus the same period in 2011. Net income for the nine months ended September 30, 2012 was $14.6 million versus $33.8 million in the same period in 2011. Fully diluted net earnings per common share were $0.66 for the nine months ended September 30, 2012 versus $1.45 in the same period in 2011. On a sequential quarter comparison, net sales for the third quarter of 2012 increased 1.7% to $269.2 million versus $264.7 million during the second quarter of 2012. Unit volume accounted for the increase, rising 1.6% on a sequential quarter comparison. Net income for the third quarter of 2012 increased 133.2% to $5.5 million versus $2.4 million in the second quarter of 2012. Fully diluted net income per common share increased 148.1% to $0.27 in the third quarter of 2012 versus $0.11 in the second quarter of 2012. Commenting on the results, Daniel L. Jones, President and Chief Executive Officer of Encore Wire Corporation, said, “The third quarter of this year was another fairly steady volume quarter in the midst of this construction industry recession. There are signs of bright spots around the country and talk of some major projects, but for the most part we are still in the trough. Major projects are discussed but then get delayed due to uncertainties surrounding the global economy and the U.S. economy and political environment. The good news is that our volumes are not trending downward. We believe our expansion of product offerings over the last six years to our existing customer base has been critical to maintaining and perhaps boosting our market share. As we have repeatedly noted, one of the key metrics to our earnings is the ‘spread' between the price of wire sold and cost of raw copper purchased in any given period. That spread increased 7.8% in the third quarter of 2012 versus the second quarter of 2012, while our copper unit volume shipped in the third quarter of 2012 increased 1.6% versus the second quarter of 2012. Comex prices for the raw copper we buy were somewhat less volatile in the first two months of this quarter than the previous quarter and then rose in September allowing us to marginally enhance spreads. As illustrated, relatively small movements in the spread can affect our earnings per share. and were a positive influence on a sequential quarterly comparison. Conversely, spreads were down 17.3% in the third quarter of 2012 versus the third quarter of 2011 and down 8.8% on a year-to-date basis in 2012 versus 2011. "We continue to 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 have $18.0 million in cash at the end of the quarter. We also declared another quarterly cash dividend during the quarter. "We understand that this is a cyclical industry and therefore we designed and manage our cost structure and balance sheet accordingly. Our low cost structure and strong balance sheet have enabled us to withstand difficult periods in the past, and we believe we will emerge stronger than most when market conditions improve. We thank our employees and associates for their outstanding effort and our shareholders for their continued support during these challenging times.” Encore Wire Corporation manufactures a broad range of copper electrical wire for interior wiring in homes, apartments, manufactured housing and commercial and industrial buildings. The matters discussed in this news release, other than the historical financial information, including statements about the copper pricing environment, profitability and shareholder value, may include forward-looking statements that involve risks and uncertainties, including fluctuations in the price of copper and other raw materials, 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. 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 Generally Accepted Accounting Principles (GAAP) results to compare to the performance of other companies who also publicize this information. EBITDA is not a measurement of financial performance under 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 performance derived in accordance with GAAP. The Company has reconciled EBITDA with net income for fiscal years 1996 to 2011 on previous Form 8-K filings with the Securities and Exchange Commission. EBITDA for each period pertinent to this press release is calculated and reconciled to net income as follows:   3 Months Ended Sept. 30,   9 Months Ended Sept. 30, $'s in 000's   2012     2011   2012     2011   Net Income $ 5,527 $ 13,721 $ 14,590 $ 33,836 Income Tax Expense 2,887 7,607 7,300 17,653 Interest Expense 81 87 238 242 Depreciation and Amortization   3,598   3,366   10,834   10,233   EBITDA $ 12,093 $ 24,781 $ 32,962 $ 61,964     Encore Wire Corporation 1329 Millwood Road McKinney, Texas 75069 (972) 562-9473 Condensed Consolidated Balance Sheets (In Thousands) (Unaudited)     September 30,December 31,   2012     2011   ASSETS   Current Assets Cash $ 17,988 $ 112,298 Receivables, net 207,544 199,366 Inventories 67,049 63,491 Prepaid Expenses and Other   21,390     1,899   Total Current Assets 313,971 377,054   Property, Plant and Equipment, net 161,103 138,832   Other Assets   798     260     Total Assets $ 475,872   $ 516,146     LIABILITIES AND STOCKHOLDERS' EQUITY   Current Liabilities Accounts Payable $ 28,165 $ 14,676 Accrued Liabilities and Other   23,599     27,894   Total Current Liabilities 51,764 42,570   Long Term Liabilities Non-Current Deferred Income Taxes   18,961     15,833   Total Long Term Liabilities   18,961     15,833     Total Liabilities 70,725 58,403   Stockholders' Equity Common Stock 266 266 Additional Paid in Capital 48,089 47,342 Treasury Stock (88,134 ) (21,496 ) Retained Earnings   444,926     431,631   Total Stockholders' Equity   405,147     457,743     Total Liabilities and Stockholders' Equity $ 475,872   $ 516,146       Encore Wire Corporation 1329 Millwood Road McKinney, Texas 75069 (972) 562-9473 Condensed Consolidated Statements of Income (In Thousands, Except Per Share Data) (Unaudited)                   Quarter Ended September 30,Nine Months Ended September 30,2012201120122011   Net Sales $ 269,152 100.0 % $ 319,356 100.0 % $ 814,348 100.0 % $ 932,176 100.0 % Cost of Sales   245,016   91.0 %   281,517 88.2 %   746,360   91.7 %   829,949 89.0 %   Gross Profit 24,136 9.0 % 37,839 11.8 % 67,988 8.3 % 102,227 11.0 %   Selling, General and Administrative Expenses   15,726   5.8 %   16,423 5.1 %   46,130   5.7 %   50,655 5.4 %   Operating Income 8,410 3.1 % 21,416 6.7 % 21,858 2.7 % 51,572 5.5 %   Net Interest & Other Expense   (4 ) 0.0 %   88 0.0 %   (32 ) 0.0 %   83 0.0 %   Income before Income Taxes 8,414 3.1 % 21,328 6.7 % 21,890 2.7 % 51,489 5.5 %   Income Taxes   2,887   1.1 %   7,607 2.4 %   7,300   0.9 %   17,653 1.9 %   Net Income $ 5,527   2.1 % $ 13,721 4.3 % $ 14,590   1.8 % $ 33,836 3.6 %     Basic Earnings Per Share $ 0.27   $ 0.59 $ 0.66   $ 1.45   Diluted Earnings Per Share $ 0.27   $ 0.59 $ 0.66   $ 1.45   Weighted Average Number of Common and Common Equivalent Shares Outstanding: -Basic   20,657     23,292   22,022     23,258   -Diluted   20,712     23,399   22,070     23,394     Dividend Declared per Share $ 0.02   $ 0.02 $ 0.06   $ 0.06 Encore Wire CorporationFrank J. Bilban, 972-562-9473Vice President & CFO