Frank J. Bilban
Vice-President & Chief Financial Officer
MCKINNEY, TX - Encore Wire Corporation (NASDAQ Global Select: WIRE) today announced results for the fourth quarter and full year ended December 31, 2016.
Net sales for the fourth quarter of 2016 were $239.2 million compared to $250.9 million during the fourth quarter of 2015. Unit volume, measured in copper pounds contained in the wire sold, decreased 8.7%, offset somewhat by a 4.4% increase in the average selling price per copper pound sold in the fourth quarter of 2016 versus the same period in 2015. Sales prices increased primarily due to higher copper prices, which increased 3.3% versus the fourth quarter of 2015. Aluminum building wire sales constituted 10.2% of net sales dollars for the fourth quarter of 2016 versus 10.2% in the fourth quarter of 2015. Net income for the fourth quarter of 2016 was $11.4 million versus $10.9 million in the fourth quarter of 2015. Fully diluted net earnings per common share were $0.55 in the fourth quarter of 2016 versus $0.53 in the fourth quarter of 2015.
Net sales for the year ended December 31, 2016 were $940.8 million versus $1.018 billion during the same period in 2015. Copper unit volume increased 2.4% in 2016 versus 2015, offset by a 10.1% decrease in the average selling price per copper pound sold in 2016 versus 2015. Sales prices declined primarily due to lower copper prices, which declined 13.2% in 2016 versus 2015. Aluminum building wire sales continued to grow, constituting 10.3% of net sales dollars during 2016 versus 9.9% in 2015. Net income for the year ended December 31, 2016 was $33.8 million versus $47.6 million for the same period in 2015. Fully diluted net earnings per common share were $1.63 for the year ended December 31, 2016 versus $2.29 for the same period in 2015.
On a sequential quarter comparison, net sales for the fourth quarter of 2016 were $239.2 million versus $237.2 million during the third quarter of 2016. Copper unit volume decreased 6.4% on a sequential quarter comparison, in-line with the fact that the fourth quarter is generally a slower quarter in the construction and building wire industries. The unit volume decrease was more than offset by the 8.2% increase in the average selling price of wire per copper pound sold. Net income for the fourth quarter of 2016 increased to $11.4 million versus $6.0 million in the third quarter of 2016. Fully diluted net income per common share was $0.55 in the fourth quarter of 2016 versus $0.29 in the third quarter of 2016.
Commenting on the results, Daniel L. Jones, Chairman, President and Chief Executive Officer, said, "We are pleased to report a good fourth quarter and full year. Our unit sales were up in both copper and aluminum building wire for the year despite two competitive issues we noted in our previous quarterly press release. First, our largest competitor announced the purchase of a smaller competitor in the third quarter. Historically, these consolidations generally lead to improved industry margin discipline in the long run, but, in the short run, they can lead to erratic pricing and volumes for us if the selling company pumps sales volumes into the market pre-sale and then dumps its remaining inventory into the market post-sale. We believe that this volume has moved through the pipe at this point, and, as a result, margins improved on a sequential quarter basis. In addition, a different, financially stressed competitor was acting erratically in the aluminum wire market. We hope to see some relief there in 2017. It is also noteworthy that three of our top competitors have had major changes to their executive teams in the last 18 months. This can also lead to some turmoil in the industry as the new teams find their footing in the market. Despite all this turmoil we believe we had a respectable year and believe the industry and our results can improve in 2017. The overall construction and building wire markets remained steady versus last year. Anecdotal information confirms our belief that there are still large commercial and industrial projects in the pipeline.
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 wire spread decreased 4.1% in 2016 versus 2015, as the average price of copper purchased decreased 13.2% in 2016 versus 2015, while the average selling price of wire sold decreased 10.1%. Similarly, aluminum spreads dropped 11.5% in 2016 versus 2015. We are, however, encouraged by the fact spreads improved during the fourth quarter of 2016 versus the third quarter of 2016. Spreads increased on this sequential quarterly comparison, climbing 10.3% and 3.6% for copper and aluminum wire, respectively.
We continue 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 $95.8 million in cash at the end of the quarter. We also declared another 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. We thank our employees and associates for their outstanding effort and our shareholders for their continued support."
Encore Wire Corporation is a leading manufacturer of a broad range of electrical building wire for interior wiring in commercial and industrial buildings, homes, apartments, and manufactured housing. The Company is focused on maintaining a high level of customer service with low-cost production and the addition of new products that complement its current product line. 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.