Encore Wire(WIRE) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Highlights Encore Wire reported decreased Q1 2024 net sales and net income year-over-year, driven by lower average selling prices despite higher unit volumes, with stable sequential results Key Financial and Operational Metrics (YoY & QoQ) Encore Wire reported a decrease in net sales and net income year-over-year for Q1 2024, primarily due to lower average selling prices, despite significant increases in copper and aluminum unit volumes. Sequentially, net sales remained stable, and gross profit percentage was consistent, reflecting current market conditions Q1 2024 vs Q1 2023 Financial and Operational Comparison | Metric | Q1 2024 | Q1 2023 | Change (YoY) | Driver/Comment | | :------------------------------ | :------------- | :------------- | :----------- | :----------------------------------------------- | | Net Sales | $632.7 million | $660.5 million | -4.2% | Decrease in average selling prices | | Copper Unit Volume | +19.7% | N/A | Increase | N/A | | Aluminum Unit Volume | Increased | N/A | Increase | N/A | | Gross Profit Percentage | 21.5% | 31.1% | -9.6 pp | Decrease in average selling price of wire | | Avg. Selling Price (Copper/lb) | -16.2% | N/A | Decrease | N/A | | Avg. Cost of Copper (Copper/lb) | -5.0% | N/A | Decrease | N/A | | Net Income | $63.3 million | $119.5 million | -47.0% | N/A | | Diluted EPS | $3.92 | $6.50 | -39.7% | N/A | Q1 2024 vs Q4 2023 Financial and Operational Comparison | Metric | Q1 2024 | Q4 2023 | Change (QoQ) | Driver/Comment | | :------------------------------ | :------------- | :------------- | :----------- | :----------------------------------------------- | | Net Sales | $632.7 million | $633.8 million | -0.2% | Decrease in overall unit volume, offset by higher ASP | | Copper Unit Volume | -4.1% | N/A | Decrease | N/A | | Aluminum Unit Volume | Increased | N/A | Increase | N/A | | Gross Profit Percentage | 21.5% | 21.5% | Consistent | Consistent with Q4 2023 | | Avg. Selling Price (Copper/lb) | +3.2% | N/A | Increase | N/A | | Avg. Cost of Copper (Copper/lb) | +3.6% | N/A | Increase | N/A | | Net Income | $63.3 million | $66.1 million | -4.2% | N/A | | Diluted EPS | $3.92 | $4.10 | -4.4% | N/A | - Cash on hand as of March 31, 2024, was $614.1 million, an increase from $560.6 million as of December 31, 2023[7] - Capital expenditures for the first quarter of 2024 totaled $34.2 million[7] Management Commentary and Strategic Initiatives CEO Daniel L. Jones highlighted consistent increased demand for copper wire and cable since mid-2023, attributing the company's ability to meet this demand to its single-site, build-to-ship model. The company maintains a strong balance sheet with no long-term debt and significant cash reserves, supporting ongoing investments in capacity expansion, efficiency, and vertical integration, including a new residential wire and cable manufacturing facility - Experienced consistent, increased copper wire and cable demand from mid-2023 through Q1 2024, capitalized by its single-site, build-to-ship model[8] - Maintains a strong balance sheet with no long-term debt and $614.1 million in cash as of March 31, 2024[9] - Declared a $0.02 cash dividend during the first quarter[9] - Committed to reinvesting in the business with projects focused on increasing capacity, efficiency, and vertical integration, including a new residential wire and cable manufacturing facility expected to be substantially complete in early Q3 2024[10] Projected Capital Expenditures (Millions) | Year | Projected Capital Expenditures (Millions) | | :--- | :---------------------------------------- | | 2024 | $130 - $150 | | 2025 | $130 - $150 | | 2026 | $100 - $120 | - Announced entry into an Agreement and Plan of Merger with Prysmian S.p.A. on April 14, 2024, subject to stockholder and regulatory approvals[12] Company Overview and Forward-Looking Information This section provides an overview of Encore Wire's business model and discusses the inherent risks and uncertainties associated with forward-looking statements, including merger-related approvals Company Profile Encore Wire Corporation is a leading US manufacturer of copper and aluminum electrical wire and cables, known for its low-cost production, exceptional customer service, and quick, complete order shipments from its vertically-integrated, single-site Texas campus - Encore Wire Corporation is a leading manufacturer of copper and aluminum electrical wire and cables[13] - The Company focuses on maintaining a low-cost of production while providing exceptional customer service and quickly shipping complete orders[13] - Products are manufactured in America at its vertically-integrated, single-site Texas campus[13] Forward-Looking Statements and Risk Factors This section outlines the nature of forward-looking statements, which are based on current beliefs and assumptions and are subject to various risks and uncertainties. Key risks include the potential inability to obtain stockholder or regulatory approvals for the pending merger, general macroeconomic conditions, and other factors detailed in SEC filings - Forward-looking statements are based on current beliefs, expectations, and assumptions, and are subject to risks, uncertainties, and assumptions[14] - Risks include the possibility of not obtaining required stockholder or regulatory approvals for the pending merger, delays in consummation, and reactions from stakeholders[14] - Other uncertainties and risks include general macroeconomic conditions, costs related to the merger, and the pricing environment of raw materials like copper and aluminum[14][15] Detailed Financial Statements This section presents Encore Wire's non-GAAP EBITDA reconciliation, condensed balance sheets, and statements of income, offering a comprehensive view of the company's financial performance and position Non-GAAP Financial Measures (EBITDA) Encore Wire provides EBITDA as a non-GAAP financial measure, defining it as net income before interest, income taxes, depreciation, and amortization. This metric is used for financial ratios with banks and by analysts/investors for comparative performance, but it should not replace GAAP net income - EBITDA is defined as net income before interest, income taxes, depreciation, and amortization[16] - EBITDA is used for financial ratios with banks and by securities analysts/investors for performance comparison, but it is not a GAAP measure and should not be considered an alternative to net income[16] EBITDA Reconciliation (Q1 2024 vs Q1 2023, In Thousands) | In Thousands | Quarter Ended March 31, 2024 | Quarter Ended March 31, 2023 | | :---------------------------- | :--------------------------- | :--------------------------- | | Net Income | $ 63,277 | $ 119,483 | | Income Tax Expense | 18,954 | 36,072 | | Interest Expense | 102 | 100 | | Depreciation and Amortization | 8,526 | 7,692 |\ | EBITDA | $ 90,859 | $ 163,347 | Condensed Balance Sheets The condensed balance sheet shows Encore Wire's financial position as of March 31, 2024, compared to December 31, 2023. Key changes include an increase in total assets, primarily driven by higher cash and cash equivalents, and an increase in total stockholders' equity Condensed Balance Sheets (March 31, 2024 vs December 31, 2023, In Thousands) | In Thousands | March 31, 2024 (Unaudited) | December 31, 2023 (Audited) | | :----------------------------------- | :------------------------- | :-------------------------- | | Assets | | | | Cash and cash equivalents | $ 614,088 | $ 560,635 | | Accounts receivable, net | 471,246 | 475,291 | | Inventories, net | 173,669 | 163,679 | | Total current assets | 1,262,154 | 1,210,575 | | Property, plant and equipment, net | 779,017 | 756,863 | | Total assets | $ 2,041,540 | $ 1,967,912 | | Liabilities and Stockholders' Equity | | | | Trade accounts payable | $ 84,355 | $ 80,548 | | Accrued liabilities | 69,157 | 79,590 | | Income taxes payable | 14,895 | — | | Total current liabilities | 168,407 | 160,138 | | Total liabilities | 228,583 | 220,335 | | Retained earnings | 2,571,453 | 2,508,491 | | Total stockholders' equity | $ 1,812,957 | $ 1,747,577 | | Total liabilities and stockholders' equity | $ 2,041,540 | $ 1,967,912 | - Total assets increased by $73.6 million from December 31, 2023, to March 31, 2024, primarily driven by an increase in cash and cash equivalents[20] - Total stockholders' equity increased by $65.4 million during the quarter[20] Statements of Income The statements of income for Q1 2024 show a decrease in net sales and a significant reduction in gross profit and net income compared to Q1 2023, primarily due to lower average selling prices despite increased volumes Statements of Income (Q1 2024 vs Q1 2023, In Thousands, Except Per Share Data) | In thousands, except per share data | Quarter Ended March 31, 2024 | % of Net Sales | Quarter Ended March 31, 2023 | % of Net Sales | | :---------------------------------- | :--------------------------- | :------------- | :--------------------------- | :------------- | | Net sales | $ 632,661 | 100.0 % | $ 660,492 | 100.0 % | | Cost of goods sold | 496,672 | 78.5 % | 455,407 | 68.9 % | | Gross profit | 135,989 | 21.5 % | 205,085 | 31.1 % | | Selling, general, and administrative expenses | 61,088 | 9.7 % | 58,704 | 8.9 % | | Operating income | 74,901 | 11.8 % | 146,381 | 22.2 % | | Net interest and other income | 7,330 | 1.2 % | 9,174 | 1.4 % | | Income before income taxes | 82,231 | 13.0 % | 155,555 | 23.6 % | | Provision for income taxes | 18,954 | 3.0 % | 36,072 | 5.5 % | | Net income | $ 63,277 | 10.0 % | $ 119,483 | 18.1 % | | Earnings per common and common equivalent share – basic | $ 4.02 | | $ 6.60 | | | Earnings per common and common equivalent share – diluted | $ 3.92 | | $ 6.50 | | | Cash Dividends Declared per Share | $ 0.02 | | $ 0.02 | | - Net sales decreased by 4.2% year-over-year, from $660.5 million in Q1 2023 to $632.7 million in Q1 2024[22] - Gross profit declined by 33.7% to $136.0 million in Q1 2024, resulting in a gross profit percentage of 21.5% compared to 31.1% in Q1 2023[22] - Net income decreased by 47.0% to $63.3 million, and diluted EPS fell by 39.7% to $3.92 per share in Q1 2024 compared to Q1 2023[22]