Encore Wire Reports Third Quarter Results
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MCKINNEY, Texas--(BUSINESS WIRE)-- Encore Wire Corporation (NASDAQ Global Select: WIRE) today announced results for the third quarter and nine months ended September 30, 2009.
Net sales for the third quarter ended September 30, 2009 were $168.7 million compared to $296.3 million during the third quarter of 2008. Lower prices for building wire sold in the quarter ended September 30, 2009 accounted for much of the decrease in net sales dollars, declining 25.1% per copper pound sold versus the same period in 2008. Unit sales in the third quarter of 2009 decreased 24.0% versus the third quarter of 2008. Sales prices fell primarily due to lower copper prices and building wire industry competition. Net income for the third quarter of 2009 was $0.3 million versus $8.1 million in the third quarter of 2008. Fully diluted net earnings per common share were $0.01 in the third quarter of 2009 versus $0.34 in the third quarter of 2008.
Net sales for the nine months ended September 30, 2009 were $472.5 million compared to $900.9 million during the same period in 2008. Lower prices for building wire sold in the nine months ended September 30, 2009 accounted for most of the decrease in net sales dollars, declining 37.4% versus the same period in 2008. Unit volume in the nine months ended September 30, 2009 decreased 16.3% versus the same period in 2008. Net income for the nine months ended September 30, 2009 was $5.5 million versus $23.0 million in the same period in 2008. Fully diluted net earnings per common share were $0.24 for the nine months ended September 30, 2009 versus $0.98 in the same period in 2008.
On a sequential quarter comparison, net sales for the third quarter of 2009 were $168.7 million versus $159.4 million during the second quarter of 2009. Unit volume decreased 9.2% on a sequential quarter comparison. Net income for the third quarter of 2009 was $0.3 million versus $0.6 million in the second quarter of 2009. Fully diluted net income per common share was $0.01 in the third quarter of 2009 versus $0.03 in the second quarter of 2009.
Commenting on the results, Daniel L. Jones, President and Chief Executive Officer of Encore Wire Corporation, said, "The slowdown in construction activity in the United States continues to impact our industry adversely as it has over the last three years. The current recession has slowed the rate of construction activity throughout America. The housing sector has been trending down for over three years, and commercial construction has been slowing since the beginning of 2008. Unit volume decreases caused by the slowdown in construction have created a volatile pricing environment in our industry that compressed the spread between what we paid for a pound of copper versus what we were able to charge for wire that contained a pound of copper. In the third quarter of 2009, this spread fell by 24.3% versus the third quarter of 2008 and it fell by 19.6% for the first nine months of 2009 versus the first nine months of 2008. We attempted to lead the industry with several price increases during the quarter, but met limited success, as the average spread remained almost unchanged on a sequential quarter basis. We have managed to break even in this difficult environment due to our low cost business model and aggressive cost cutting in all facets of our operation. 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.
"Our balance sheet is very strong. The only long-term debt we have as of September 30, 2009, is $100 million in long-term notes due in 2011, with our revolving line of credit paid down to zero. In addition, we have $213.6 million in cash as of September 30, 2009, greatly exceeding our long-term debt. We also declared our twelfth consecutive quarterly cash dividend during the third quarter of 2009.
"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 tremendous efforts 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. Financial analysts frequently ask for EBITDA when it has not been presented. 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 2008 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 September 30, 9 Months Ended September 30,
$'s in 000's 2009 2008 2009 2008
Net Income $ 325 $ 8,077 $ 5,540 $ 23,027
Income Taxes (215 ) 4,101 2,162 11,436
Interest Expense 744 1,051 2,441 3,472
Depreciation and 3,346 3,320 10,330 10,298
Amortization
EBITDA $ 4,200 $ 16,549 $ 20,473 $ 48,233
Encore Wire Corporation
1329 Millwood Road
McKinney, Texas 75069
(972) 562-9473
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
September 30, December 31,
2009 2008
ASSETS
Current Assets
Cash $ 213,593 $ 217,666
Receivables, net 123,303 126,184
Inventories 59,216 65,533
Prepaid Expenses and Other 18,746 2,375
Total Current Assets 414,858 411,758
Property, Plant and Equipment, net 126,990 121,442
Other Assets 211 139
Total Assets $ 542,059 $ 533,339
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 15,856 $ 4,639
Accrued Liabilities and Other 22,109 29,086
Total Current Liabilities 37,965 33,725
Long Term Liabilities
Note Payable 100,492 100,675
Other Long Term Liabilities - -
Non-Current Deferred Income Taxes 9,349 9,320
Total Long Term Liabilities 109,841 109,995
Total Liabilities 147,806 143,720
Stockholders' Equity
Common Stock 262 262
Additional Paid in Capital 42,960 42,486
Treasury Stock (21,269 ) (21,269 )
Retained Earnings 372,300 368,140
Total Stockholders' Equity 394,253 389,619
Total Liabilities and Stockholders' Equity $ 542,059 $ 533,339
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,
2009 2008 2009 2008
Net Sales $ 168,695 100.0 % $ 296,338 100.0 % $ 472,531 100.0 % $ 900,942 100.0 %
Cost of Sales 157,340 93.3 % 267,993 90.4 % 431,482 91.3 % 817,604 90.7 %
Gross Profit 11,355 6.7 % 28,345 9.6 % 41,049 8.7 % 83,338 9.3 %
Selling,
General and
Administrative 10,905 6.5 % 15,682 5.3 % 32,242 6.8 % 47,072 5.2 %
Expenses
Operating 450 0.3 % 12,663 4.3 % 8,807 1.9 % 36,266 4.0 %
Income
Net Interest & 340 0.2 % 485 0.2 % 1,105 0.2 % 1,804 0.2 %
Other Expense
Income before 110 0.1 % 12,178 4.1 % 7,702 1.6 % 34,462 3.8 %
Income Taxes
Income Taxes (215 ) -0.1 % 4,101 1.4 % 2,162 0.5 % 11,435 1.3 %
Net Income $ 325 0.2 % $ 8,077 2.7 % $ 5,540 1.2 % $ 23,027 2.6 %
Basic Earnings $ 0.01 $ 0.35 $ 0.24 $ 1.00
Per Share
Diluted
Earnings Per $ 0.01 $ 0.34 $ 0.24 $ 0.98
Share
Weighted
Average Number
of
Common and
Common
Equivalent
Shares
Outstanding:
-Basic 23,006 23,125 23,001 23,142
-Diluted 23,308 23,415 23,294 23,432
Dividend
Declared per $ 0.02 $ 0.02 $ 0.06 $ 0.06
Share
Source: Encore Wire Corporation
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