Encore Wire Corp. (NASDAQ:WIRE) Q2 2020 Earnings Conference Call - Final Transcript

Jul 30, 2020 • 11:00 am ET

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Encore Wire Corp. (NASDAQ:WIRE) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Welcome to the Encore Wire Reports Second Quarter Results Conference Call. My name is Adrianne, and I'll be your operator for today's call. [Operator Instructions]. Please note, this conference call is being recorded. I'll now turn the call over to Daniel Jones. Sir, you may begin.

Executive
Daniel L. Jones

Thank you, Adrianne, and good morning, and welcome to the Encore Wire Corporation Quarterly Conference Call. I'm Daniel Jones, President, CEO and Chairman of the Board of Encore Wire. With me this morning is Bret Eckert, our Chief Financial Officer. Thank you for joining us on the call and for your interest in Encore Wire. We appreciate your continued investment and support during these uncertain times. The health and safety of our employees and their families remains our top priority. We're following CDC guidelines and maintaining safe working conditions. We're very proud that some of the products we manufacture are being utilized to power temporary buildings and pop-up medical facilities in the fight against COVID-19. Our distributors remain very thankful that we continue to serve during this critical time.

Despite the economic challenges we are facing in this country, the strong earnings posted in the second quarter ended June 30, 2020, attest to the ability of our business model to succeed in both good times and bad. We continue to increase the strength of our balance sheet ending with over $250 million of cash on hand at June 30 to fund future growth. I'm very proud of how our employees are responding to the current crisis, allowing us to maintain and remain fully operational to serve our customers and drive value for our shareholders. In addition, our one location model allowed us the agility and flexibility to adapt to the changing market conditions during the quarter. There are some key items to note.

Copper unit volumes decreased 12.7% on a sequential quarter basis as parts of the country shut down job sites or significantly curtailed construction activity in response to the pandemic, leaving some customers unable to receive deliveries of our products during the second quarter. COMEX copper prices experienced a steady rise throughout the second quarter while copper spreads decreased 5.8% on a comparative quarter basis. Copper spreads tightened in the quarter due to the economic strain on our customers and our decision to balance volume and price. With that said, the gross profit percentage increased for both the second quarter and six months ended June 30, 2020, compared to the same periods in 2019 highlighting the strength of our business model. Aluminum wire represented 10.1% of our net sales in the second quarter of 2020.

Beginning late in the second quarter, we experienced a renewed optimism from our customers as order volumes have started to normalize and all states reopened for construction. Looking ahead, the duration and severity of the COVID-19 outbreak and its long-term impact on our business are uncertain at this time. Developments surrounding the COVID-19 global pandemic are changing daily, we've limited visibility into extent, which market demand for our