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Welcome to Encore Wire Reports Third Quarter Results Conference Call. My name is Sylvia, and I'll be your operator for today's call. [Operator Instructions].
I will now turn the call over to Daniel Jones. Mr. Jones, you may begin.
Thank you, Sylvia, 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. And with me this morning is Bret Eckert, our Chief Financial Officer.
Thank you for joining us on the call and your interest in Encore wire. We appreciate your continued investment, confidence and support during these uncertain times. The health and safety of our employees and their families remains our top priority, and we're following CDC guidelines and maintaining safe working conditions while we continue to serve our customers during this critical time.
As the country reopens and the economy begins to recover, the strong earnings posted in the third quarter ended September 30, 2020, attest to the strength of our business model to weather uncertain times. Our balance sheet remains strong with $217.1 million of cash on hand at September 30 to fund our growth and expansion plans.
I'm very proud of how our employees are responding to the current crisis, allowing us to remain fully operational to serve our customers and drive value for our shareholders. In addition, our one location model allowed us to - allowed us the agility and flexibility to adapt to the changing market conditions during the quarter.
Detailed below are some key items to note in the quarter. Copper unit volumes increased 14.3% on a sequential quarter basis as we experienced a renewed optimism from our customers during the third quarter as order volumes started to normalize and all states reopened for construction. On a comparative basis, volumes remained suppressed due to the pandemic, with copper unit volumes declining 7.1% and 8.5% for the 3-month and 9-month periods ended September 30, 2020, versus the 3 months and 9-month periods in 2019.
COMEX copper prices experienced a steady rise throughout the third quarter, which had a positive impact on spreads. Copper spreads increased 17.2% on a comparative quarter basis and 20.7% on a sequential quarter basis. Copper spreads increased 3.9% for the 9 months ended September 30, 2020, compared to the 9-month period in 2019. The gross profit percentage increased for both the third quarter and 9 months ended September 30, 2020, compared to the same periods in 2019, highlighting the strength of our business model.
Aluminum wire represented 9.1% and 9.2% of our net sales in the 3-month and 9-month periods ended September 30, 2020. As stated for the previous quarter, customer buying patterns began to return to more historical levels beginning late in the second quarter and continuing in our third quarter, driven by the reopening of many state and local economies.
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, and we have limited visibility into the extent to which the market demand for our products as well as sector manufacturing and distribution capacity will be impacted.
We believe Encore Wire is well positioned to weather the storm and continue to serve the markets during the critical time. As we navigate the near-term challenges, we remain focused on long-term opportunities for our business. We believe that our superior order fill rates continue to enhance our competitive position. As orders come in from electrical contractors, our distributors can continue to depend on us for quick deliveries coast to coast.
I'll now turn the call over to Bret to cover our financial results. Bret?
Thank you, Daniel. In a minute, we will review Encore's financial results for the third quarter and 9 months ended September 30, 2020. After the financial review, we will take any questions you may have.
Before we review the financials, let me indicate that throughout this conference call, we may be making certain statements that might be considered to be forward-looking. In order to comply with certain securities legislation and instead of attempting to identify each particular statement as forward-looking, we advise you that all such statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed today. I refer each of you to the company's SEC reports and news releases for a more detailed discussion of these risks and uncertainties.
Also, reconciliations of non-GAAP financial measures discussed during this conference call to the most directly comparable financial measures presented in accordance with GAAP, including EBITDA, which we believe to be useful supplemental information for investors, are posted on our website.
Net sales for the third quarter ended September 30, 2020, were $339.7 million compared to $321.2 million for the third quarter of 2019. Copper unit volume, measured in pounds of copper contained in the wire sold, decreased 7.1% in the third quarter of 2020 versus the third quarter of 2019.
As stated for the previous quarter, customer buying patterns began to return to more historical levels beginning late in the second quarter and continuing in our third quarter, driven by the reopening of many state and local economies.
Gross profit percentage for the third quarter of 2020 was 15.7% compared to 13.4% in the third quarter of 2019. The average selling price of wire per copper pound sold increased 12% in the third quarter of 2020 versus the third quarter of 2019, while the average cost of copper per pound purchase increased 9.4%.
Net income for the third quarter of 2020 was $21 million versus $16.4 million in the third quarter of 2019. Fully diluted net earnings per common share was $1.02 in the third quarter of 2020 versus $0.78 in the third quarter of 2019.
Net sales for the 9 months ended September 30, 2020, were $896.1 million compared to $972.7 million during the same period in 2019. Copper unit volume, measured in pounds of copper contained in the wire sold, decreased 8.5% in the 9 months ended September 30, 2020, versus the 9 months ended in 2019.
Gross profit percentage for the 9 months ended September 30, 2020, was 15.1% compared to 13.4% during the same period in 2019. The average selling price of wire per copper pound sold decreased 0.9% in the 9 months ended September 30, 2020, versus the 9 months ended September 30, 2019, while the average cost of copper per pound purchase decreased 3.3%.
Net income for the 9 months ended September 30, 2020, was $52 million versus $47.6 million in the same period in 2019. Fully diluted net earnings per common share were $2.51 in the 9 months ended September 30, 2020, versus $2.27 in the same period in 2019.
On a sequential quarter comparison, net sales for the third quarter of 2020 were $339.7 million versus $253.6 million during the second quarter of 2020. Sales dollars increased due to a 14.3% unit volume increase in copper building wire sold, combined with an 18.4% increase in the average selling price per pound of copper wire sold on a sequential quarter comparison.
Gross profit percentage for the third quarter of 2020 was 15.7% compared to 14.4% in the second quarter of 2020. Copper wire sales prices increased 18.4%, while the price of copper purchased increased 17.1%.
Net income for the third quarter of 2020 was $21 million versus $12.3 million in the second quarter of 2020. Fully diluted net income per common share was $1.02 in the third quarter of 2020 versus $0.60 in the second quarter of 2020.
Our balance sheet remains very strong. We have no long-term debt. Our revolving line of credit is paid down to 0. In addition, as Daniel said, we had $217.1 million in cash at the end of the quarter. During the first 9 months of 2020, we repurchased 441,250 shares of our common stock in the open market. We also declared a $0.02 cash dividend during the quarter. Our 2-phased expansion plans announced earlier this year continue in earnest.
Due to the increased lead times required for certain machinery and equipment in the current environment, we have accelerated the timing of orders with manufacturers, which has shifted spending between years. We now expect capital expenditures to range from $95 million to $100 million in 2020, $100 million to $120 million in 2021 and $30 million to $50 million in 2022. A strong balance sheet and ability to consistently generate high levels of operating cash flow should provide ample allowance to fund planned capital expenditures.
A replay of this conference call will be accessible in the Investors section of our website. I will now turn the floor over to Daniel for a few final remarks.
Thank you, Bret. As we highlighted, Encore performed well in the third quarter and 9 months ended September 30, 2020. Our low-cost structure, one location model and strong balance sheet have enabled us to withstand difficult periods in the past, and they're continuing to prove valuable now. I'm very proud of how our employees have rallied during this crisis, and I want to thank our employees and associates for their tremendous efforts. We also thank our shareholders for their continued support.
Sylvia, we'll now take questions from our listeners.
[Operator Instructions]. And the first question comes from Zane Karimi from D.A. Davidson.
Daniel, Bret, congratulations on the strong quarter.
Thanks, buddy.
So first off, I was hoping to dive a little more into the campus construction that's currently underway. And particularly, when are you guys feeling or thinking earnings or revenue contributions might start to occur? And then given the market environment, are you able to further expand the CapEx spend and/or are there even market share opportunities for you guys, if you do so?
Yes. The current construction project, the service center is - the 4 walls are up, the roof is on. They're starting to paint on the inside and the outside. It's going along about as we expected on a top line basis. There's certainly ways that we can speed that up, and we're doing those things as quickly as possible. As most of the expansions around here, I probably should have started that one sooner. But it's going very well. We've got a great team over there from the construction team throughout the construction trailer. They all understand the importance of getting that thing built and opened up, and allowing us to service the customers from that new building.
As far as when we will see contributions from that, it should be late second quarter, early third quarter next year, 2021. We are going to add some equipment and some capacity rationalization to meet some of the market demand as it changes. There's several different categories that were fantastic a few years ago, they've been replaced by other categories. And there's different products that it will take from our offerings that we currently have to service those customers' needs in those construction sites and projects.
And as far as the opportunities for new product categories, we're constantly looking at what we can do to enhance our product offering. We've got some things that we're working on. Not ready to announce those currently, for no other reason than just market intel. But yes, we've got some things that we're working on. It should be last part of 2021, maybe first half of 2022 when we start to see some of that additional capacity come online for us.
Okay. Copy. And I guess we saw copper volumes decline a little bit year-over-year. Can you speak to the relative economic activity or shortcomings that are in that most largely impacted this result? Specifically with regards to the states reopening, are you seeing more activity in certain regions or states? And are there any regions that have opened, but you're still seeing pretty depressed demand from what you consider more of a normalized rate? Just trying to think about the expectations and the market strength moving into the fourth quarter.
Yes. Specific to the product issues, I'd say the industrial product got hit the hardest. The oil and gas and energy sector, obviously, was hit very hard, which you can tie that to a couple of different regions where they're heaviest. One of them specifically being South Texas, that Houston market over into Louisiana, South Louisiana, whatever, the energy piece was hit pretty hard.
There are some specific categories that were down as much as over 50% in volume from one year to the next. We're starting to see some come back in those markets as long as the hurricanes allow them to keep their head up and keep working. The residential market was up pretty good. The only area that we really didn't see happening the way that it happened was maybe in the armored cable segment. We had some competitors not as disciplined as probably they should have been with the cost of the materials going the way that they were going, which makes no sense, but we've been through it before. You hit the market with a fantastic idea and a new product, and the first thing you do is cut the price on it, which is beyond my comprehension, but I've seen it before.
And then specific to, obviously - I think it's obvious, the hotel sector construction-wise project was hit pretty hard. Hospitals was hit - hospitals were hit pretty early and then bounced back a little bit. We saw an uptick also probably for obvious reasons in some of the municipal buildings, fire, police, courthouses, whatever.
And then there's a pretty good push right now, and we're doing very well, in some of the utility areas as it relates to water and sewer. And so as each one of those segments kind of starts to return to normal numbers that we've seen in the past, the only one that really stands out is that armored cable sector is, for whatever reason, just getting hammered on the margin side.
But that won't last. The strong copper, as you saw through the quarter, it's one of the few times where we began the quarter at the low mark on COMEX. That's helpful. And when copper climbs and aluminum even had a pretty decent climb in cost, raw material wise, as those things continue, it forces discipline. And so I'm looking for good things in Q4 for that armored cable sector.
But overall, things really kind of bottomed out and started to bounce around the bottom. Some of them came right back a little stronger than others. But for the most part, it looks pretty positive.
Well, I definitely appreciate the feedback there. And once again, congratulations on the strong quarter and margins and everything there.
Yes. Thank you. Thank you for the support.
Our following question comes from Julio Romero from Sidoti & Company.
So I guess I wanted to ask about the spreads in the quarter. You saw a significant jump both year-over-year and sequentially. And I struggled to find a similar rise in your historical quarters. I think I had to go back to the last cycle to find something similar there. So maybe if you could talk about the drivers of the spread in the quarter and maybe what - I think you spoke about the competitive landscape, but if you can speak to what Encore Wire is executing on better compared to the prior year?
Yes, great question. The spreads, obviously, are a function of just a couple of things. And the easy answer is our guys here in the sales department and girls did a fantastic job of remaining disciplined from the pricing standpoint rather than chasing something, if you will, because of a competitor's claim or whatever it might be. We remain very disciplined during the quarter. And the pricing environment was - it's never easy to get a price increase. But when you substantiate a notice of an increase not only with a bias or a trend on the COMEX side, you add on to that or add into the conversation the PVC piece of that equation, it substantiates the increase in some manner.
And so I'm not going to say that we got ahead of anything on the pricing scenario, but we did manage our inventory levels extremely well from a sales perspective. Our service levels improved throughout the quarter, which is significant. It allows us to be a little more disciplined. And so having the one location and having access to our resources in one location to hit that 100% fill rate number with customers and to get the product out of the dock, on a truck and on the road as quickly as possible, the execution in the third quarter by the team here was fantastic.
And that may be too much detail, but that's really what happens when you have - as I mentioned earlier, you enter the quarter at the low point of COMEX and substantiate your price increases as you go with not 1 but 2 and potentially 3 raw materials, it's more believable, if you will, in the marketplace. And so when you have a real cost increase as we experienced, the hard part is sticking with your price increase long enough for it to gain traction, and we were able to do that. And I think paying attention to what we do here in trying to close out some of the noise in the marketplace, I think our team was extremely successful during the third quarter doing that.
No, that is good color. So I guess just to kind of sum that up. I mean is sales execution, both on units and pricing, pricing discipline and your service prop, your high fill rates, is it kind of better than it was in the prior year?
Yes, I think that's fair. Certainly better than the first part of the year.
Got it. And so on that point, right? Earlier, first 2 quarters, I guess spread was, I think, down year-over-year. I mean how much of the spread in this quarter would you kind of categorize as maybe mean reversion versus outperformance?
That's a difficult one to explain. I really believe, at the risk of repeating some of it, I just - I mean there's some discipline that occurred in the market. Obviously, it was forced by the raw material increases. And if copper goes up for us, it goes up for everybody. So there was some forced discipline.
But our team navigated that issue of COVID and getting trucks unloaded. There's just a lot that went into the discipline piece of that from our perspective. It's not something as simple as don't take the order if you can't deliver it, but it's pretty close to that type of simplicity. We ran into quite a few competitive situations in the market, but that just wasn't true. We were able to ignore those shots, if you will, across the bow and continued to perform. And that is a team effort.
And I'm not trying to gain any points here by bragging on my sales team, but it starts with everybody, I mean, on the floor. Everyone improved. Every department had improvement in the third quarter. We really were attentive. We were shorthanded due to COVID issues, what have you. But again, our team in every department, production, purchasing and everything. We didn't have a - our team is very focused at this point.
And I'll just tell you, when you have that situation and the support in the market of the forced discipline from - again, copper was at the low point in the first day of the quarter, continued to rise, you can almost say that it was a trend in the third quarter of an increase. In those situations, we do very well. And the only area that we were - that was perplexing to me, 31 years here, was that armored cable segment. And I have no idea what was going on in that market and what they were thinking. But we did see improvement toward the end of the quarter in that segment. And I - it's a forced discipline. And I think that the raw materials as they are, I think that will straighten itself out.
[Operator Instructions]. And we have no questions at this time.
Okay. Sylvia. Listen, we appreciate the support and appreciate the questions that we did have and look forward to talking to you guys next quarter. Thank you.
Apparently, we do have Julio Romero back on line with a question. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.