Notes to Financial Statements
December 31, 2022
1. Significant Accounting Policies
Business
The Company conducts its business in one segment, the manufacture of electric building wire, manufacturing a broad range of electrical wire and cables used to distribute power from the transmission grid to the wall outlet or switch. Encore’s diversified product portfolio and low-cost of production position it exceptionally well to play a key role in the transition to a more sustainable and reliable energy infrastructure. Our products are proudly made in America at our vertically-integrated, single-site, Texas campus. The Company sells its products through manufacturers’ representatives to wholesale electrical distributors servicing the residential, commercial, industrial and renewable energy sectors.
Copper, a commodity product, is the principal raw material used in the Company’s manufacturing operations. The price of copper fluctuates, depending on general economic conditions and in relation to supply and demand and other factors, and has caused monthly variations in the cost of copper purchased by the Company. The Company cannot predict future copper prices or the effect of fluctuations in the cost of copper on the Company’s future operating results.
Basis of Presentation
The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The Company is unable to predict the impact that COVID-19, or any ongoing variants, may have on our financial position and operating results in future periods. The duration or re-emergence of the outbreak and its long-term impact on our business remain uncertain.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Our revenue is derived by fulfilling customer orders for the purchase of our products, which include electrical building wire and cable. We recognize revenue at the point in time that control of the ordered products is transferred to the customer, which is typically upon shipment to the customer from our manufacturing facilities and based on agreed upon shipping terms on the related purchase order. Amounts billed and due from our customers are classified as accounts receivable on the balance sheet and require payment on a short-term basis through standard payment terms.
Revenue is measured as the amount of consideration we expect to receive in exchange for fulfilling product orders. The amount of consideration we expect to receive and revenue we recognize includes estimates for trade payment discounts and customer rebates which are estimated using historical experience and other relevant factors and is recorded within the same period that the revenue is recognized. We review and update these estimates regularly and the impact of any adjustments are recognized in the period the adjustments are identified. The adjustments resulting from updated estimates of trade payment discounts and customer rebates were not material.
Freight Expenses
The Company classifies shipping and handling costs as a component of selling, general and administrative expenses. Shipping and handling costs were approximately $58.9 million, $47.2 million and $35.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Derivatives
The Company may purchase copper and aluminum at current market prices for delivery in future months. These purchases meet the definition of a derivative in Accounting Standards Codification 815, Derivatives and Hedging (ASC 815). These transactions also qualify for the exclusion from derivative accounting as they meet the normal purchase and normal sale criterion in ASC 815.
Fair Value of Financial Instruments
Certain items are required to be measured at fair value on a recurring basis, primarily cash equivalents held in banks. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level hierarchy is followed for disclosure to show the extent and level of judgment used to estimate fair value measurements:
Level 1 – Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.
Level 2 – Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.
Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.
At December 31, 2022 and 2021, the carrying value of cash and cash equivalents is based on Level 1 measurements.
Concentrations of Credit Risk and Accounts Receivable
Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high credit quality financial institutions.
Accounts receivable represent amounts due from customers, primarily wholesale electrical distributors, related to the sale of the Company’s products. Such receivables are uncollateralized and are generally due from customers located throughout the United States. Encore has two customers, each of whom slightly exceeds 10% of the Company's total sales. The Company establishes an allowance for credit losses based upon the makeup of the current portfolio, past bad debt experience and current market conditions. | | | | | | | | | | | | | | | | | |
Allowance for Credit Losses (In Thousands) | 2022 | | 2021 | | 2020 |
Beginning balance January 1 | $ | 3,800 | | | $ | 2,215 | | | $ | 1,801 | |
Write-offs of bad debts | — | | | — | | | (286) | |
Collection of previous write-offs | — | | | 122 | | | — | |
Adjustment to allowance for credit losses | — | | | 1,463 | | | 700 | |
Ending balance at December 31 | $ | 3,800 | | | $ | 3,800 | | | $ | 2,215 | |
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. At December 31, 2022 and 2021, the Company’s cash equivalents consisted of investments in money market accounts with the Company’s banks.
Inventories
Inventories are stated at the lower of cost, using the LIFO method, or market. The Company evaluates the market value of its raw materials, work-in-process and finished goods inventory primarily based upon current raw material and finished goods prices at the end of each period.
Property, Plant, and Equipment
Property, plant and equipment is recorded at cost. Depreciation is recorded on a straight-line method over the estimated useful lives of the respective assets as follows: buildings and improvements, 3 to 39 years; machinery and equipment, 2 to 20 years; and furniture and fixtures, 5 to 20 years. Accelerated cost recovery methods are used for tax purposes. Repairs and maintenance costs are expensed as incurred.
Stock-Based Compensation
Compensation cost for all stock-based compensation expected to vest is measured at fair value on the date of grant and recognized over the related service period. The fair value of stock awards is determined based on the number of shares granted and the quoted price of Encore’s common stock, and the fair value of stock options and stock appreciation rights is estimated on the date of grant using the Black-Scholes model. Such value is recognized as expense over the service period, net of estimated forfeitures, on a straight-line basis. To the extent actual forfeitures or updated estimates of forfeitures differ from management’s current estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.
Earnings Per Share
Earnings per common and common equivalent share is computed using the weighted average number of shares of common stock and common stock equivalents outstanding during each period. The dilutive effects of stock awards, which are common stock equivalents, are calculated using the treasury stock method.
Income Taxes
Income taxes are provided for based on the liability method, resulting in deferred income tax assets and liabilities arising due to temporary differences. Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period the change in rate is enacted.
Comprehensive Income
Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. There were no differences between comprehensive income and reported income in the periods presented.
Recent Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative U.S. GAAP, along with the Securities and Exchange Commission ("SEC") and Public Company Accounting Oversight Board (“PCAOB”) issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standard Update (“ASU”) to communicate changes to the codification. The Company considers the applicability and impact of all ASUs. No new standards were adopted in 2022.
2. Inventories
Inventories consist of the following as of December 31: | | | | | | | | | | | |
In Thousands | 2022 | | 2021 |
Raw materials | $ | 69,567 | | | $ | 54,012 | |
Work-in-process | 42,611 | | | 40,422 | |
Finished goods | 138,943 | | | 123,401 | |
Total | 251,121 | | | 217,835 | |
Adjust to LIFO cost | (97,934) | | | (117,019) | |
| | | |
Inventory, net | $ | 153,187 | | | $ | 100,816 | |
There were no liquidations of inventories that had a material impact on the Company’s results of operations for any period presented.
3. Property, Plant and Equipment, net
Property, plant and equipment consist of the following as of December 31:
| | | | | | | | | | | |
In Thousands | 2022 | | 2021 |
Land and land improvements | $ | 85,286 | | | $ | 72,897 | |
Construction-in-progress | 125,809 | | | 92,414 | |
Buildings and improvements | 232,758 | | | 217,985 | |
Machinery and equipment | 438,303 | | | 362,996 | |
Furniture and fixtures | 15,178 | | | 13,805 | |
Property, plant and equipment, gross | 897,334 | | | 760,097 | |
Accumulated depreciation | (280,733) | | | (265,181) | |
Property, plant and equipment, net | $ | 616,601 | | | $ | 494,916 | |
Depreciation expense for the years ended December 31, 2022, 2021 and 2020 was $26.1 million, $23.2 million and $19.4 million, respectively.
4. Accrued Liabilities
Accrued liabilities consist of the following as of December 31: | | | | | | | | | | | |
In Thousands | 2022 | | 2021 |
Sales rebates payable | $ | 40,909 | | | $ | 40,657 | |
Stock Appreciation Rights (SAR) Liability | 20,282 | | | 22,095 | |
Property taxes payable | 5,287 | | | 5,018 | |
Accrued salaries | 7,616 | | | 4,778 | |
Other accrued liabilities | 7,287 | | | 6,199 | |
Total accrued liabilities | $ | 81,381 | | | $ | 78,747 | |
5. Debt
At December 31, 2022 and 2021, the Company had no debt outstanding.
On February 9, 2021, the Company terminated its previous credit agreement and entered into a new Credit Agreement (the “2021 Credit Agreement”) with two banks, Bank of America, N.A., as administrative agent and letter of credit issuer, and Wells Fargo Bank, National Association, as syndication agent. The 2021 Credit Agreement extends through February 9, 2026 and provides for maximum borrowings of $200.0 million. At our request and subject to certain conditions, the commitments under the 2021 Credit Agreement may be increased by a maximum of up to $100.0 million as long as existing or new lenders agree to provide such additional commitments.
The 2021 Credit Agreement contains provisions to replace LIBOR with a replacement rate as described in the 2021 Credit Agreement. On October 20, 2022, the Company entered into the First Amendment to the 2021 Credit Agreement (the “Amended 2021 Credit Agreement”) which replaced LIBOR with BSBY as permitted under the 2021 Credit Agreement. Borrowings under the line of credit bear interest, at the Company’s option, at either (1) BSBY plus a margin that varies from 1.000% to 1.875% depending upon the Leverage Ratio (as defined in the 2021 Credit Agreement), or (2) the base rate (which is the highest of the federal funds rate plus 0.5%, the prime rate, or BSBY plus 1.0%) plus 0% to 0.375% (depending upon the Leverage Ratio). A commitment fee ranging from 0.20% to 0.325% (depending upon the Leverage Ratio) is payable on the unused line of credit. At December 31, 2022, there were no borrowings outstanding under the Amended 2021 Credit Agreement, and letters of credit outstanding in the amount of $0.3 million left $199.7 million of credit available under the Amended 2021 Credit Agreement. Obligations under the Amended 2021 Credit Agreement are the only contractual borrowing obligations or commercial borrowing commitments of the Company.
Obligations under the Amended 2021 Credit Agreement are unsecured and contain customary covenants and events of default. The Company was in compliance with the covenants as of December 31, 2022.
The Company paid interest totaling $0.4 million, $0.4 million and $0.2 million in 2022, 2021 and 2020, respectively, none of which was capitalized.
6. Income Taxes
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act includes several provisions for corporations including payroll tax credits, deferment of employer social security tax payments, expanded net operating loss carryback periods, accelerated alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act did not have a material impact on the Company's income tax provision in the year ended December 31, 2022 and 2021.
The Inflation Reduction Act (“IRA”) was enacted on August 16, 2022. The IRA includes provisions imposing a 1% excise tax on share repurchases that occur after December 31, 2022 and introduces a 15% corporate alternative minimum tax on adjusted financial statement income. The Company does not expect the IRA to have a material adverse impact to its financial statements.
The provision for income tax expense is summarized as follows for the years ended December 31: | | | | | | | | | | | | | | | | | |
In Thousands | 2022 | | 2021 | | 2020 |
Current: | | | | | |
Federal | $ | 175,090 | | | $ | 143,392 | | | $ | 14,277 | |
State | 12,379 | | | 12,319 | | | 2,024 | |
Deferred: | | | | | |
Federal | 19,797 | | | 2,132 | | | 6,285 | |
State | (257) | | | 132 | | | 143 | |
Total income tax expense | $ | 207,009 | | | $ | 157,975 | | | $ | 22,729 | |
The differences between the provision for income taxes and income taxes computed using the federal income tax rate are as follows for the years ended December 31: | | | | | | | | | | | | | | | | | |
In Thousands | 2022 | | 2021 | | 2020 |
Amount computed using the statutory rate | $ | 194,218 | | | $ | 146,873 | | | $ | 20,747 | |
State income taxes, net of federal tax benefit | 9,576 | | | 9,836 | | | 1,732 | |
| | | | | |
| | | | | |
Other | 3,215 | | | 1,266 | | | 250 | |
Total income tax expense | $ | 207,009 | | | $ | 157,975 | | | $ | 22,729 | |
The tax effect of each type of temporary difference giving rise to the net deferred tax liability at December 31 is as follows: | | | | | | | | | | | |
In Thousands | 2022 | | 2021 |
Depreciation | $ | (60,304) | | | $ | (42,966) | |
Inventory | (2,080) | | | 423 | |
Allowance for credit losses | 843 | | | 856 | |
Uniform capitalization rules | 574 | | | 729 | |
Stock-based compensation | 4,791 | | | 5,032 | |
Other | 536 | | | (175) | |
Net deferred income tax liability | $ | (55,640) | | | $ | (36,101) | |
The Company's inventory costing method for federal income tax purposes differs from the method allowed by GAAP. Both methods of inventory costing result in the same recovery of inventory. However, the timing of the recovery varies. As of December 31, 2022 the Company's tax inventory exceeds its book inventory, which created a deferred tax liability of $2.1 million.
The Company made income tax payments of $201.7 million in 2022, $155.5 million in 2021 and $14.1 million in 2020.
The Company’s federal income tax returns for the years subsequent to December 31, 2018 remain subject to examination. The Company’s income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, 2017. The Company has no reserves for uncertain tax positions as of December 31, 2022 and 2021. Interest and penalties resulting from audits by tax authorities have been immaterial and are included in the provision for income taxes in the statements of income.
7. Stock-Based Compensation
Total stock-based compensation expense by type of award was as follows for the years ended December 31: | | | | | | | | | | | | | | | | | |
In Thousands | 2022 | | 2021 | | 2020 |
Restricted Stock Units | $ | 9,054 | | | $ | 1,889 | | | $ | — | |
Stock grants | 724 | | | 489 | | | 244 | |
Stock options | 289 | | | 435 | | | 561 | |
Stock appreciation rights (“SARs”) | 7,319 | | | 22,188 | | | 3,377 | |
Restricted Stock Awards | 1,005 | | | 1,005 | | | 1,101 | |
Total stock-based compensation expense | $ | 18,391 | | | $ | 26,006 | | | $ | 5,283 | |
In 2020, the Board of Directors adopted a new incentive plan called the Encore Wire 2020 Long Term Incentive Plan (the “2020 LTIP”) which was approved by the Company’s stockholders at the 2020 Annual Meeting of Stockholders. The 2020 LTIP permits the granting of 1,000,000 securities in the form of options to purchase shares of common stock, stock appreciation rights, restricted common stock, restricted stock units, unrestricted common stock, dividend equivalents, cash awards, or performance awards to non-employee directors, officers and employees of the Company. As of December 31, 2022, 706,600 securities remained available for grant under the 2020 LTIP.
Restricted Stock Units:
Restricted units granted to employees vest ratably over a period of three years from the time the restricted units were granted. During the years ended December 31, 2022 and 2021, the Company granted 177,200 units and 98,600 units, respectively, of restricted stock to employees pursuant to the 2020 Long Term Incentive Plan, with weighted grant date fair values of $127.58 and $61.92 per unit, respectively. There were zero restricted units issued in 2020. As of December 31, 2022, there was $17.6 million of total unrecognized compensation cost related to unvested units. That cost is expected to be recognized over a weighted-average period of 2.0 years.
The following presents a summary of restricted stock activity for the year ended December 31, 2022: | | | | | | | | |
| | Weighted Average |
| Number of Units | Grant Date Fair Value |
Outstanding at January 1, 2022 | 98,600 | | $ | 61.92 | |
Granted | 177,200 | | 127.58 | |
Vested | (32,864) | | 61.92 | |
Forfeited/Canceled | (1,500) | | 128.69 | |
Unvested at December 31, 2022 | 241,436 | | $ | 109.69 | |
Stock Grants:
In May 2022, the Company granted 1,250 shares of stock to 4 non-employee directors with a grant date fair value of $123.45 per share. In September 2022, the Company granted 850 shares of stock to 1 non-employee director with a grant date fair value of $125.37 per share. In May 2021, the Company granted 1,250 shares of stock to each of the 5 non-employee directors, with a grant date fair value of $78.29 per share. In May 2020, the Company granted 1,100 shares of stock to each of the 5 non-employee directors, with a grant date fair value of $44.31 per share.
Stock Options:
No stock option awards were granted in 2022, 2021 or 2020. Options vest ratably over a period of five years from the time the options were granted. The maximum term of any option previously granted under the 2010 Stock Option Plan or granted in the future under the 2020 LTIP is ten years. New shares are issued upon the exercise of options.
The following presents a summary of stock option activity for the year ended December 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value (In Thousands) |
Outstanding at January 1, 2022 | 279,500 | | | $ | 43.18 | | | | | |
| | | | | | | |
Exercised | (4,000) | | | 51.63 | | | | | |
Forfeited/Canceled | — | | | — | | | | | |
Outstanding at December 31, 2022 | 275,500 | | | $ | 43.06 | | | 3.6 years | | $ | 26,036 | |
Vested and exercisable at December 31, 2022 | 258,000 | | | $ | 42.51 | | | 3.5 years | | $ | 24,522 | |
During the years ended December 31, 2022, 2021 and 2020, the total intrinsic value of options exercised was $0.2 million, $3.1 million and $0.4 million, respectively. As of December 31, 2022, total unrecognized compensation cost related to non-vested stock options was negligible.
Stock Appreciation Rights:
In 2014, the Board of Directors adopted a new stock appreciation rights plan called the Encore Wire 2014 Stock Appreciation Rights Plan (the “2014 SARs Plan”). The 2014 SARs Plan permits the grant of SARs that may only be settled in cash to non-executive officers and employees of the Company. SARs granted to employees vest ratably over a period of five years from the time the SARs were granted. The maximum term of any SARs granted under the 2014 SARs Plan is ten years. These awards are classified as liability awards. The liability balances were $20.3 million and $22.1 million at December 31, 2022 and 2021, respectively, and are included in accrued liabilities. Compensation cost for these awards is determined using a fair value method and remeasured at each reporting date until the date of settlement. As of December 31, 2022, a total of 332,164 SARs were outstanding under the 2014 SARs Plan. No SARs were granted subsequent to 2020 as this plan was replaced with a long-term deferred compensation plan.
The following presents a summary of SARs activity for the year ended December 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | |
| Cash-settled SARs | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value (In Thousands) |
Outstanding at January 1, 2022 | 467,668 | | | $ | 53.55 | | | | | |
| | | | | | | |
Exercised | (113,904) | | | 51.13 | | | | | |
Forfeited/Canceled | (21,600) | | | 56.66 | | | | | |
Outstanding at December 31, 2022 | 332,164 | | | $ | 54.18 | | | 6.2 years | | $ | 27,696 | |
Vested and exercisable at December 31, 2022 | 117,664 | | | $ | 52.07 | | | 5.8 years | | $ | 10,059 | |
The fair value of SARs outstanding during the years ended December 31, 2022, 2021 and 2020, are revalued each quarter using a Black-Scholes option pricing model and the following weighted average assumptions: | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 | | 2020 |
Risk-free interest rate | 4.46 | % | | 0.70 | % | | 0.18 | % |
Expected dividend yield | 0.06 | % | | 0.06 | % | | 0.13 | % |
Expected volatility | 44.03 | % | | 38.64 | % | | 35.51 | % |
Expected lives | 1.3 years | | 2.1 years | | 2.8 years |
The Company bases expected volatilities on historical volatilities of Encore's common stock. The expected life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting periods and management’s consideration of historical exercise patterns. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding to the expected life of the option. The expected dividend yield is based on the annualized dividend payment paid on common shares.
During the years ended December 31, 2022, 2021 and 2020, the weighted average fair value of SARs was $87.20, $90.04 and $17.94, respectively, and the total intrinsic value of SARs exercised was $9.1 million, $5.4 million and $1.1 million, respectively. As of December 31, 2022, total unrecognized compensation cost related to non-vested SARs of $9.3 million was expected to be recognized over a weighted average period of 1.7 years.
Restricted Stock Awards:
Restricted shares granted to employees vest ratably over a period of five years from the time the restricted shares were granted. There were no restricted shares issued in 2022 and 2021. During the years ended December 31, 2020 and 2019, the Company granted 37,000 shares and 60,000 shares, respectively, of restricted stock to employees pursuant to the 2010 Stock Option Plan, with weighted grant date fair values of $58.90 and $54.49 per share, respectively. As of December 31, 2022, there was $1.4 million of total unrecognized compensation cost related to unvested shares. That cost is expected to be recognized over a weighted-average period of 1.5 years. The total fair value of shares vested during the year ending December 31, 2022 was $2.2 million.
The following presents a summary of restricted stock activity for the year ended December 31, 2022: | | | | | | | | |
| | Weighted Average |
| Number of Shares | Grant Date Fair Value |
Outstanding at January 1, 2022 | 58,000 | | $ | 56.88 | |
Granted | — | | — | |
Vested | (17,000) | | 56.61 | |
| | |
Unvested at December 31, 2022 | 41,000 | | $ | 57.00 | |
8. Earnings Per Share
The following table sets forth certain components of the computation of basic and diluted earnings per share for the years ended December 31: | | | | | | | | | | | | | | | | | |
In Thousands | 2022 | | 2021 | | 2020 |
Numerator: | | | | | |
Net income | $ | 717,841 | | | $ | 541,422 | | | $ | 76,067 | |
| | | | | |
Denominator: | | | | | |
Denominator for basic earnings per share – weighted average shares | 19,159 | | | 20,439 | | | 20,599 | |
| | | | | |
Effect of dilutive securities: | | | | | |
Employee stock awards | 287 | | | 210 | | | 54 | |
| | | | | |
Denominator for diluted earnings per share – weighted average shares | 19,446 | | | 20,649 | | | 20,653 | |
Stock options to purchase common stock at exercise prices in excess of the average actual stock price for the period that were anti-dilutive and that were excluded from the determination of diluted earnings per share are as follows: | | | | | | | | | | | | | | | | | |
In Thousands, Except Per Share Data | 2022 | | 2021 | | 2020 |
Weighted average anti-dilutive stock options | — | | | — | | | 136 | |
| | | | | |
Weighted average exercise price per share | $ | — | | | $ | — | | | $ | 51.20 | |
9. Stockholders’ Equity
On November 10, 2006, the Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to an authorized number of shares of its common stock from time to time in the open market or private transactions at the Company's discretion. This authorization originally expired on December 31, 2007, and the Company’s Board of Directors has authorized several increases and annual extensions of this stock repurchase program, most recently on August 1, 2022, authorizing the repurchase of up to 2,000,000 shares of our common stock. As of December 31, 2022, 1,052,552 shares
remained authorized for repurchase through March 31, 2023. Under this program, the Company repurchased 2,055,470 shares of its stock in 2022, 475,557 shares in 2021 and 441,250 shares in 2020.
Subsequently, in February 2023, the Board of Directors extended the repurchase authorization for up to 2,000,000 shares of our common stock through March 31, 2024.
10. Contingencies
There are no material pending proceedings to which the Company is a party or to which any of its property is subject. However, the Company is from time to time involved in litigation, certain other claims and arbitration matters arising in the ordinary course of its business.
11. Encore Wire Corporation 401(k) Profit Sharing Plan
The Company sponsors a 401(k) profit sharing plan (the “Plan”) that permits eligible employees to make self-directed contributions of their compensation, a portion of which is matched by the Company, subject to applicable limitations. At the discretion of its Board of Directors, the Company may, but is not required to, make profit-sharing contributions to the Plan on behalf of its employees. The Company’s matching contributions were $3.7 million, $3.0 million and $2.5 million in 2022, 2021 and 2020, respectively.
12. Quarterly Financial Information (Unaudited)
The following is a summary of the unaudited quarterly financial information for the two years ended December 31, 2022 and 2021 (in thousands, except per share data): | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
2022 | March 31 | | June 30 | | September 30 | | December 31 |
Net sales | $ | 723,072 | | | $ | 838,235 | | | $ | 762,363 | | | $ | 693,885 | |
Gross profit | 243,747 | | | 320,772 | | | 299,447 | | | 248,455 | |
Net income | 161,531 | | | 210,538 | | | 191,773 | | | 153,998 | |
Earnings per common share – basic | 8.08 | | | 10.84 | | | 10.11 | | | 8.43 | |
Earnings per common share – diluted | 7.96 | | | 10.71 | | | 9.97 | | | 8.28 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
2021 | March 31 | | June 30 | | September 30 | | December 31 |
Net sales | $ | 444,140 | | | $ | 744,408 | | | $ | 716,320 | | | $ | 687,853 | |
Gross profit | 84,504 | | | 277,342 | | | 270,766 | | | 235,134 | |
Net income | 41,189 | | | 183,053 | | | 175,538 | | | 141,642 | |
Earnings per common share – basic | 2.00 | | | 8.89 | | | 8.60 | | | 7.02 | |
Earnings per common share – diluted | 1.99 | | | 8.82 | | | 8.51 | | | 6.91 | |