SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



ý☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~September~~June 30, ~~2017~~2022



o☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-13429

Simpson Manufacturing Co., Inc.

(Exact name of registrant as specified in its charter)



Delaware						94-3196943
(State or other jurisdiction of incorporation						(I.R.S. Employer
or organization)						Identification No.)

5956 W. Las Positas Blvd., Pleasanton, CA 94588

(Address of principal executive ~~offices)~~offices, including zip code)

(925) 560-9000

(Registrant’s telephone number, including area code): ~~(925) 560-9000~~


Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	SSD	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

o☐

Non-accelerated filer

o☐

~~(Do not check if a smaller reporting company)~~

Smaller reporting company

o☐

Emerging growth company

o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No ý

The number of shares of the registrant’s common stock outstanding as of ~~September 30, 2017: 47,313,707.~~August 8, 2022: 43,166,203

~~NOTE ABOUT FORWARD-LOOKING STATEMENTS~~

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements relating to events or results that may occur in the future are forward-looking statements, including but not limited to, statements regarding our plans, sales, sales trends, sales growth rates, revenues, profits, costs, working capital, balance sheet, inventories, products, market strategies, market share, expenses (including operating expenses and research, development and engineering investments), unrecognized costs (including those with respect to unvested stock-based compensation), cost savings or reduction measures, repatriation of funds, factory utilization rates, results of operations, tax liabilities, losses, capital spending, housing starts, price changes (including product prices and raw material, such as steel prices), profitability, profit margins, effective tax rates, depreciation or amortization expenses, amortization periods, capital return, stock repurchases, dividends, compensation arrangements, record dates, prospective adoption of new accounting standards, effects of changes in accounting standards, effects and expenses of (including eventual gains or losses related to) mergers and acquisitions and related integrations, effects and expenses of equity investments, effects and expenses of relocating manufacturing facilities, effects of changes in foreign exchange rates or interest rates, effects and costs of facility consolidations and expansions (including related savings), effects and costs of software program implementations (including related capital expenditures and savings), needs for additional facilities, materials and personnel, effects and costs of credit facilities and capital lease obligations, headcount, engagement of consultants, the Company's 2020 Plan (discussed under "Management's Discussion and Analysis of Financial Condition and Results of Operations" below), the Company's efforts and costs to implement the 2020 Plan, the effects of the 2020 Plan and the projected impact of any of the foregoing on our business, financial condition and results of operations. Forward-looking statements generally can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “target,” “continue,” “predict,” “project,” “change,” “result,” “future,” “will,” “could,” “may,” “likely,” “potentially,” or similar expressions. Forward-looking statements are necessarily speculative in nature, are based on numerous assumptions, and involve known and unknown risks, uncertainties and other factors (some of which are beyond our control) that could significantly affect our operations and may cause our actual actions, results, financial condition, performance or achievements to be substantially different from any future actions, results, financial condition, performance or achievements expressed or implied by any such forward-looking statements. Those factors include, but are not limited to: (i) general economic cycles and construction business conditions; (ii) customer acceptance of our products; (iii) product liability claims, contractual liability, engineering and design liability and similar liabilities or claims, (iv) relationships with key customers; (v) materials and manufacturing costs; (vi) financial conditions of customers, competitors and suppliers; (vii) technological developments, including software development; (viii) increased competition; (ix) changes in regulations (including changes in trade regulations) or industry practices; (x) litigation risks, and actions by activist shareholders; (xi) changes in market conditions; (xii) governmental and business conditions in countries where our products are manufactured and sold; (xiii) effects of merger or acquisition activities; (xiv) actual or potential takeover or other change-of-control threats; (xv) changes in our plans, strategies, objectives, expectations or intentions; and (xvi) other risks and uncertainties indicated from time to time in our filings with the U.S. Securities and Exchange Commission, including the Company's most recent Annual Report on Form 10-K under the heading “Item 1A - Risk Factors.” See below “Part I, Item 1A - Risk Factors.” Each forward-looking statement contained in this Quarterly Report on Form 10-Q is specifically qualified in its entirety by the aforementioned factors. In light of the foregoing, investors are advised to carefully read this Quarterly Report on Form 10-Q in connection with the important disclaimers set forth above and are urged not to rely on any forward-looking statements in reaching any conclusions or making any investment decisions about us or our securities. All forward-looking statements hereunder are made as of the date of this Quarterly Report on Form 10-Q and are subject to change. Except as required by law, we do not intend and undertake no obligation to update, revise or publicly release any updates or revisions to any forward-looking statements hereunder, whether as a result of the receipt of new information, the occurrence of future events, the change of circumstances or otherwise. We further do not accept any responsibility for any projections or reports published by analysts, investors or other third parties.

~~Each of the terms the “Company,” “we,” “our,” “us” and similar terms used herein refer collectively to~~ Simpson Manufacturing Co., Inc.~~, a Delaware corporation~~ and ~~its wholly-owned subsidiaries, including Simpson Strong-Tie Company Inc., unless otherwise stated.~~Subsidiaries

“Strong-Tie” and our other trademarks appearing in this report are our property. This report contains additional trade names and trademarks of other companies. We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.TABLE OF CONTENTS

Part I - Financial Information


Item 1 - Financial Statements
		Page No.
	Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2022, 2021 and December 31, 2021	4
	Condensed Consolidated Statements of Earnings and Comprehensive Income (unaudited) for the Three and Six Months Ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Stockholders' Equity (unaudited) for Three and Six Months Ended June 30, 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2022 and 2021	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3 - Quantitative and Qualitative Disclosures about Market Risk		39
Item 4 - Controls and Procedures		40
Part II - Other Information
Item 1 - Legal Proceedings		40
Item 1A - Risk Factors		41
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds		41
Item 3 - Defaults Upon Senior Securities		41
Item 4 - Mine Safety Disclosures		41
Item 5 - Other Information		41
Item 6 - Exhibits		42

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, unaudited)


	June 30,				December 31,
	2022		2021		2021
ASSETS
Current assets
Cash and cash equivalents	$	246,134	$	305,796	$	301,155
Trade accounts receivable, net	375,130		249,931		231,021
Inventories	539,844		310,254		443,756

Other current assets	43,501		35,722		22,903
Total current assets	1,204,609		901,703		998,835

Property, plant and equipment, net	346,184		255,353		259,869
Operating lease right-of-use assets	48,984		43,374		45,438
Goodwill	492,338		134,121		134,022

Intangible assets, net	357,698		23,749		26,269
Other noncurrent assets	35,655		15,674		19,692
Total assets	$	2,485,468	$	1,373,974	$	1,484,125
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Trade accounts payable	$	112,968	$	60,268	$	57,215
Accrued liabilities and other current liabilities	225,928		172,186		187,387
Long-term debt, current portion	22,500		—		—


Total current liabilities	361,396		232,454		244,602
Operating lease liabilities	39,654		34,087		37,091
Long term debt, net of issuance costs	665,449		—		—
Deferred income tax and other long-term liabilities	134,331		20,528		18,434
Total liabilities	1,200,830		287,069		300,127
Commitments and contingencies (see Note 14)	0		0		0
Stockholders’ equity
Common stock, at par value	433		435		432
Additional paid-in capital	293,720		289,261		294,330
Retained earnings	1,072,959		822,497		906,841
Treasury stock	(46,281)		(13,510)		—
Accumulated other comprehensive loss	(36,193)		(11,778)		(17,605)
Total stockholders’ equity	1,284,638		1,086,905		1,183,998
Total liabilities and stockholders’ equity	$	2,485,468	$	1,373,974	$	1,484,125

The accompanying notes are an integral part of these condensed consolidated financial statements

September 30, December 31,
2017 2016 2016
ASSETS

Current assets

Cash and cash equivalents $ 204,171
$ 218,720
$ 226,537
Trade accounts receivable, net 159,571
141,716
112,423
Inventories 244,476
220,207
232,274
Other current assets 13,276
12,321
14,013
Total current assets 621,494
592,964
585,247

Property, plant and equipment, net 265,178
229,670
232,810
Goodwill 137,313
126,845
124,479
Equity investment (see Note 6) 2,582
—
2,500
Intangible assets, net 30,050
24,629
22,864
Other noncurrent assets 11,766
10,195
12,074
Total assets $ 1,068,383
$ 984,303
$ 979,974
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Capital lease obligations - current portion $ 1,047
$ —
$ —
Trade accounts payable 30,857
24,777
27,674
Accrued liabilities 87,946
62,714
60,477
Income taxes payable 360
3,420
—
Accrued profit sharing trust contributions 5,652
5,157
6,549
Accrued cash profit sharing and commissions 13,123
17,153
10,527
Accrued workers’ compensation 3,548
4,161
3,569
Total current liabilities 142,533
117,382
108,796

Capital lease obligations - net of current portion 2,875
—
—
Deferred income tax and other long-term liabilities 6,933
5,817
5,336
Total liabilities 152,341
123,199
114,132
Commitments and contingencies (see Note 8)

Stockholders’ equity

Common stock, at par value 476
486
473
Additional paid-in capital 265,490
243,900
255,917
Retained Earnings 683,554
687,052
642,422
Treasury stock (20,000 ) (47,002 ) —
Accumulated other comprehensive loss (13,478 ) (23,332 ) (32,970 )
Total stockholders’ equity 916,042
861,104
865,842
Total liabilities and stockholders’ equity $ 1,068,383
$ 984,303
$ 979,974

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Statements of ~~Operations~~Earnings and Comprehensive Income

(In thousands except per-share amounts, unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net sales	$	593,232	$	410,281	$	1,086,802	$	757,922
Cost of sales	333,899		213,835		590,688		399,195
Gross profit	259,333		196,446		496,114		358,727
Operating expenses:
Research and development and other engineering	16,943		14,169		32,809		28,758
Selling	45,074		33,167		81,910		63,990
General and administrative	58,419		47,410		112,192		95,975
Total operating expenses	120,436		94,746		226,911		188,723
Acquisition and integration related costs	5,864		—		12,815		—
Net gain on disposal of assets	(43)		(28)		(1,126)		(108)
Income from operations	133,076		101,728		257,514		170,112
Interest expense, net and other finance costs	(3,372)		(420)		(3,585)		(765)
Other & foreign exchange loss, net	(1,890)		(2,216)		(2,107)		(3,648)
Income before taxes	127,814		99,092		251,822		165,699
Provision for income taxes	34,244		26,609		63,677		42,827
Net income	$	93,570	$	72,483	$	188,145	$	122,872
Other comprehensive income
Translation adjustment	(27,817)		7,505		(27,819)		(1,759)
Unamortized pension adjustments	860		(102)		689		390
Cash flow hedge adjustment, net of tax	18,489		(7)		8,542		19

Comprehensive net income	$	85,102	$	79,879	$	169,557	$	121,522

Net income per common share:
Basic	$	2.17	$	1.67	$	4.36	$	2.83
Diluted	$	2.16	$	1.66	$	4.34	$	2.82

Number of shares outstanding
Basic	43,145		43,434		43,162		43,406
Diluted	43,240		43,641		43,306		43,620

Cash dividends declared per common share	$	0.26	$	0.25	$	0.51	$	0.48

The accompanying notes are an integral part of these condensed consolidated financial statements

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Net sales $ 262,476
$ 230,974
$ 745,345
$ 660,470
Cost of sales 142,591
117,499
401,779
342,985
Gross profit 119,885
113,475
343,566
317,485
Operating expenses:
Research and development and other engineering 8,679
10,932
35,051
33,807
Selling 28,156
24,304
86,150
74,313
General and administrative 36,501
32,543
108,049
96,786
Net gain on disposal of assets (147 ) (81 ) (147 ) (763 )
73,189
67,698
229,103
204,143
Income from operations 46,696
45,777
114,463
113,342
Loss in equity method investment, before tax (13 ) —
(53 ) —
Interest expense, net (296 ) (82 ) (685 ) (400 )
Gain (adjustment) on bargain purchase of a business (2,052 ) —
6,336
—
Gain on disposal of a business 443
—
443
—
Income before taxes 44,778
45,695
120,504
112,942
Provision for income taxes 16,581
15,898
40,972
40,601
Net income $ 28,197
$ 29,797
$ 79,532
$ 72,341

Earnings per common share:

Basic $ 0.60
$ 0.62
$ 1.67
$ 1.50
Diluted $ 0.59
$ 0.62
$ 1.66
$ 1.49

Number of shares outstanding

Basic 47,367
48,119
47,544
48,231
Diluted 47,686
48,352
47,843
48,429

Cash dividends declared per common share $ 0.42
$ 0.18
$ 0.81
$ 0.52

~~Simpson Manufacturing Co., Inc. and Subsidiaries~~

~~Condensed Consolidated Statements of Comprehensive Income~~

~~(In thousands, unaudited)~~

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Net income $ 28,197
$ 29,797
$ 79,532
$ 72,341
Other comprehensive income (loss):
Translation adjustment, net of tax expense (benefit) 5,543
232
19,492
5,244
Comprehensive income $ 33,740
$ 30,029
$ 99,024
$ 77,585

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

~~At September~~(In thousands except per-share data, unaudited)

Three Months Ended June 30, ~~2016~~2022 and ~~2017,~~2021


	Common Stock			Additional Paid-in		Retained		Accumulated Other Comprehensive		Treasury
	Shares	Par Value		Capital		Earnings		Income (Loss)		Stock		Total
Balance at March 31, 2022	43,159	$	433	$	289,773	$	990,611	$	(27,725)	$	(21,281)	$	1,231,811
Net income	—	—		—		93,570		—		—		93,570
Translation adjustment, net of tax	—	—		—		—		(27,817)		—		(27,817)
Pension adjustment and other, net of tax	—	—		—		—		860		—		860
Cash flow hedges, net of tax	—	—		—		—		18,489		—		18,489
Stock-based compensation	—	—		3,947		—		—		—		3,947
Shares issued from release of Restricted Stock Units	7	—		—		—		—		—		—
Repurchase of common stock	(260)	—		—		—		—		(25,000)		(25,000)
Cash dividends declared on common stock, $0.26 per share	—	—		—		(11,222)		—		—		(11,222)

Balance at June 30, 2022	42,906	$	433	$	293,720	$	1,072,959	$	(36,193)	$	(46,281)	$	1,284,638

Balance at March 31, 2021	43,430	$	435	$	285,896	$	760,862	$	(19,174)	$	(13,510)	$	1,014,509
Net income	—	—		—		72,483		—		—		72,483
Translation adjustment and other, net of tax	—	—		—		—		7,505		—		7,505
Pension adjustment and other, net of tax	—	—		—		—		(109)		—		(109)

Stock-based compensation	—	—		3,365		—		—		—		3,365



Cash dividends declared on common stock, $0.25 per share	—	—		—		(10,848)		—		—		(10,848)

Balance, at June 30, 2021	43,437	$	435	$	289,261	$	822,497	$	(11,778)	$	(13,510)	$	1,086,905

The accompanying notes are an integral part of these condensed consolidated financial statements

Simpson Manufacturing Co., Inc. and ~~December 31, 2016~~Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands except per-share ~~amounts,~~data, unaudited)

Six Months Ended June 30, 2022 and 2021


	Common Stock			Additional Paid-in		Retained		Accumulated Other Comprehensive		Treasury
	Shares	Par Value		Capital		Earnings		Income (Loss)		Stock		Total
Balance at December 31, 2021	43,217	$	432	$	294,330	$	906,841	$	(17,605)	$	—	$	1,183,998
Net income	—	—				188,145		—		—		188,145
Translation adjustment, net of tax	—	—		—		—		(27,819)		—		(27,819)
Pension adjustment and other, net of tax	—	—		—		—		689		—		689
Cash flow hedges, net of tax	—	—		—		—		8,542		—		8,542
Stock-based compensation	—	—		7,954		—		—		—		7,954
Shares issued from release of Restricted Stock Units	137	1		(9,524)		—		—		—		(9,523)
Repurchase of common stock	(455)	—		—		—		—		(46,281)		(46,281)
Cash dividends declared on common stock, $0.51 per share	—	—		—		(22,027)		—		—		(22,027)
Common stock issued at $139.07 per share for stock bonus	7	—		960		—		—		—		960
Balance at June 30, 2022	42,906	$	433	$	293,720	$	1,072,959	$	(36,193)	$	(46,281)	$	1,284,638

Balance at December 31, 2020	43,326	$	433	$	284,007	$	720,441	$	(10,428)	$	(13,510)	$	980,943
Net income	—	—		—		122,872		—		—		122,872
Translation adjustment, net of tax	—	—		—		—		(1,759)		—		(1,759)
Pension adjustment and other, net of tax	—	—		—		—		409		—		409
Stock-based compensation	—	—		9,826		—		—		—		9,826
Shares issued from release of Restricted Stock Units	104	1		(5,263)		—		—		—		(5,262)


Cash dividends declared on common stock, $0.48 per share	—	—		—		(20,816)		—		—		(20,816)
Common stock issued at $93.45 per share for stock bonus	7	1		691		—		—		—		692
Balance, at June 30, 2021	43,437	$	435	$	289,261	$	822,497	$	(11,778)	$	(13,510)	$	1,086,905

The accompanying notes are an integral part of these condensed consolidated financial statements

Additional
Accumulated
Other

Common Stock Paid-in Retained Comprehensive Treasury
Shares Par Value Capital Earnings Income (Loss) Stock Total
Balance at January 1, 2016 48,184
$ 481
$ 238,212
$ 639,707
$ (28,576 ) $ —
$ 849,824
Net income —
—
—
72,341
—
—
72,341
Translation adjustment, net of tax —
—
—
—
5,244
—
5,244
Options exercised 227
3
6,692
—
—
—
6,695
Stock-based compensation —
—
9,039
—
—
—
9,039
Tax benefit of options exercised —
—
140
—
—
—
140
Shares issued from release of Restricted Stock Units 216
2
(3,998 ) —
—
—
(3,996 )
Repurchase of common stock (1,090 ) —
(6,500 ) —
—
(47,002 ) (53,502 )
Cash dividends declared on common stock, $0.52 per share —
—
—
(24,996 ) —
—
(24,996 )
Common stock issued at $32.45 per share for stock bonus 10
—
315
—
—
—
315
Balance at September 30, 2016 47,547
486
243,900
687,052
(23,332 ) (47,002 ) 861,104
Net income —
—
—
17,393
—

17,393
Translation adjustment, net of tax —
—
—
—
(9,164 ) —
(9,164 )
Pension adjustment, net of tax —
—
—
—
(474 ) —
(474 )
Options exercised 43
—
1,281
—
—
—
1,281
Stock-based compensation —
—
4,147
—
—
—
4,147
Tax benefit of options exercised —
—
111
—
—
—
111
Shares issued from release of Restricted Stock Units 1
—
(22 ) —
—
—
(22 )
Repurchase of common stock (154 ) —
6,500
—
—
(6,500 ) —
Retirement of common stock —
(13 ) —
(53,489 ) —
53,502
—
Cash dividends declared on common stock, $0.18 per share —
—
—
(8,534 ) —
—
(8,534 )
Balance at December 31, 2016 47,437
473
255,917
642,422
(32,970 ) —
865,842
Net income —
—
—
79,532
—
—
79,532
Translation adjustment, net of tax —
—
—
—
19,492
—
19,492
Options exercised 120
1
3,565
—
—
—
3,566
Stock-based compensation —
—
10,764
—
—
—
10,764
Shares issued from release of Restricted Stock Units 210
2
(5,168 ) —
—
—
(5,166 )
Repurchase of common stock (461 ) —
—
—
—
(20,000 ) (20,000 )
Cash dividends declared on common stock, $0.81 per share —
—
—
(38,400 ) —
—
(38,400 )
Common stock issued at $44.26 per share for stock bonus 9
—
412
—
—
—
412
Balance at September 30, 2017 47,315
$ 476
$ 265,490
$ 683,554
$ (13,478 ) $ (20,000 ) $ 916,042

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands, unaudited)


	Six Months Ended
	June 30,
	2022		2021
Cash flows from operating activities
Net income	$	188,145	$	122,872
Adjustments to reconcile net income to net cash provided by operating activities:
Loss/(gain) on sale of assets and other	(1,126)		118
Depreciation and amortization	28,324		22,753
Noncash lease expense	5,430		4,914
Inventory step-up expense	9,236		—
Loss/(gain) in equity method investment, before tax	(229)		2,653
Deferred income taxes	(4,557)		1,144
Noncash compensation related to stock plans	9,528		10,245

Provision of doubtful accounts	223		(377)
Deferred hedge gain	(693)		—
Changes in operating assets and liabilities (net of amounts acquired from ETANCO. see Note 3)
Trade accounts receivable	(88,635)		(84,702)
Inventories	(15,203)		(27,270)
Trade accounts payable	15,668		10,774
Other current assets	(5,834)		(14,802)
Accrued liabilities and other current liabilities	21,904		35,879
Other noncurrent assets and liabilities	(23,730)		(2,569)
Net cash provided by operating activities	138,451		81,632
Cash flows from investing activities
Capital expenditures	(31,829)		(19,296)
Acquisitions, net of cash (see Note 3)	(805,904)		(218)
Equity method investments	(1,170)		(6,829)
Proceeds from sale of property and equipment	1,816		129
Terminated forward contract	3,535		—
Net cash used in investing activities	(833,552)		(26,214)
Cash flows from financing activities
Termination of cash flow hedge	21,252		—
Repurchase of common stock	(46,281)		—
Proceeds from borrowing under lines of credit and term loan	701,083		—
Repayments of lines of credit and capital leases	(6,600)		(384)
Debt issuance costs	(6,804)		—
Dividends paid	(21,596)		(19,956)
Cash paid on behalf of employees for shares withheld	(9,523)		(5,263)
Net cash provided by (used in) financing activities	631,531		(25,603)
Effect of exchange rate changes on cash and cash equivalents	8,549		1,342
Net increase (decrease) in cash and cash equivalents	(55,021)		31,157
Cash and cash equivalents at beginning of period	301,155		274,639
Cash and cash equivalents at end of period	$	246,134	$	305,796
Noncash activity during the period
Noncash capital expenditures	$	1,082	$	1,462
Dividends declared but not paid	11,223		10,847
Issuance of Company’s common stock for compensation	$	960	$	692

The accompanying notes are an integral part of these condensed consolidated financial statements

Nine Months Ended
September 30,
2017 2016
Cash flows from operating activities

Net income $ 79,532
$ 72,341
Adjustments to reconcile net income to net cash provided by operating activities:

Gain on sale of assets (147 ) (763 )
Depreciation and amortization 26,881
21,485
Write-off of software development project —
153
Loss in equity method investment, before tax 53
—
Gain (adjustment) on bargain purchase of a business (6,336 ) —
Gain on disposal of a business (443 ) —
Deferred income taxes 2,552
1,481
Noncash compensation related to stock plans 11,816
9,707
Excess tax benefit of options exercised and restricted stock units vested —
(162 )
Recovery (provision) of doubtful accounts 79
(131 )
Changes in operating assets and liabilities, net of acquisitions:

Trade accounts receivable (40,607 ) (35,463 )
Inventories 1,813
(22,992 )
Trade accounts payable 698
2,806
Income taxes payable 1,686
6,745
Accrued profit sharing trust contributions (902 ) (637 )
Accrued cash profit sharing and commissions 2,468
8,636
Other current assets 132
(2,751 )
Accrued liabilities 5,291
6,611
Long-term liabilities (234 ) (1,222 )
Accrued workers’ compensation (21 ) (432 )
Other noncurrent assets 280
1,471
Net cash provided by operating activities 84,591
66,883
Cash flows from investing activities

Capital expenditures (45,106 ) (29,934 )
Asset acquisitions, net of cash acquired (27,921 ) (5,361 )
Proceeds from sale of property and equipment 617
1,278
Proceeds from sale of a business 9,613
—
Net cash used in investing activities (62,797 )
(34,017 )
Cash flows from financing activities

Deferred and contingent consideration paid for asset acquisitions (205 ) (27 )
Repurchase of common stock (20,000 ) (53,502 )
Repayment of long-term borrowings and capital leases (360 ) —
Repayment of debt and line of credit borrowings (133 ) —
Debt issuance costs —
(1,125 )
Issuance of common stock 3,566
6,695
Excess tax benefit of options exercised and restricted stock units vested —
162
Dividends paid (27,044 ) (24,152 )
Cash paid on behalf of employees for shares withheld (5,166 ) (3,996 )
Net cash used in financing activities (49,342 ) (75,945 )
Effect of exchange rate changes on cash and cash equivalents 5,182
2,974
Net decrease in cash and cash equivalents (22,366 ) (40,105 )
Cash and cash equivalents at beginning of period 226,537
258,825
Cash and cash equivalents at end of period $ 204,171
$ 218,720
Noncash activity during the period

Noncash capital expenditures $ 892
$ 726
Capital lease obligations 4,362
—
Dividends declared but not paid 19,891
8,559
Contingent consideration for acquisition 1,314
—
Issuance of Company’s common stock for compensation 412
315

~~Simpson Manufacturing Co., Inc. and Subsidiaries~~

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Simpson Manufacturing Co., Inc. and its subsidiaries (collectively, the “Company”). ~~There were no investments~~Investments in ~~affiliates that would render such affiliates to be considered variable interest entities.~~50% or less owned entities are accounted for using either cost or the equity method. All significant intercompany transactions have been eliminated.

Use of Estimates

The preparation of the condensed financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that these condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation under GAAP. The Company assessed certain accounting matters that require the use of estimates and assumptions in context with the known and projected future impacts of COVID-19. The Company's actual results could differ materially from those estimates.

Interim Reporting Period ~~Reporting~~

The accompanying unaudited ~~interim~~quarterly condensed consolidated financial statements have been prepared in accordance with GAAP pursuant to the rules and regulations for reporting interim financial information and instructions on Form 10-Q. Accordingly, certain information and footnotes required by ~~accounting principles generally accepted in the United States of America (“GAAP”)~~GAAP have been condensed or omitted. These interim statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2021 (the “2021 Form 10-K”).

The unaudited quarterly condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the financial information set forth therein in accordance with GAAP. Certain prior period amounts in the condensed consolidated financial statements and the accompanying notes have been reclassified to conform to the current period’s presentation. The year-end condensed consolidated balance sheet data provided herein were derived from audited financial statements included in the 2021 Form 10-K, but do not include all disclosures required by GAAP. The Company’s quarterly results fluctuate. As a result, the Company believes the results of operations for this interim period presented are not indicative of the results to be expected for any future periods.

Revenue Recognition

Generally, the Company's revenue contract with a customer exists when (1) the goods are shipped, services are rendered, and the related invoice is generated, (2) the duration of the contract does not extend beyond the promised goods or services already transferred and (3) the transaction price of each distinct promised product or service specified in the invoice is based on its relative stated standalone selling price. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product to a customer at a point in time. Our shipping terms provide the ~~earnings process is complete, net~~primary indicator of ~~applicable provision for discounts, returns and incentives, whether actual or estimated, based on~~ the ~~Company’s experience. This generally occurs when products are shipped to the customer in accordance with the sales agreement or purchase order, ownership and risk~~transfer of ~~loss pass to the customer, collectability is reasonably assured and pricing is fixed or determinable.~~control. The ~~Company’s~~Company's general shipping terms are ~~F.O.B.~~Incoterm C.P.T. (F.O.B. shipping ~~point,~~point), where the title, and ~~title is transferred~~risk and ~~revenue is recognized~~rewards of ownership transfer at the point when the products are ~~shipped to customers. When~~no longer on the ~~Company sells F.O.B. destination point, title is transferred~~Company's premises. Other Incoterms are allowed as exceptions depending on the product or service being sold and the nature of the sale. The Company recognizes revenue based on ~~delivery or~~the consideration specified in the invoice with a customer, ~~acceptance, depending~~excluding any sales incentives, discounts, and amounts collected on ~~terms~~behalf of third parties (i.e., governmental tax authorities). Based on historical experience with the ~~sales agreement. Service sales, representing after-market repair~~customer, the customer's purchasing pattern, and ~~maintenance, engineering activities and software license sales and services, although less than 1.0%~~its significant experience selling products, the Company concluded that a significant reversal in the cumulative amount of ~~net sales and~~revenue recognized would not ~~material~~occur when the uncertainty (if any) is resolved (that is, when the total amount of purchases is known). Refer to the condensed consolidated financial statements, are recognized as the services are completed or the software products and services are delivered. If actual costs of sales returns, incentives and discounts were to significantly exceed the recorded estimated allowance, the Company’s sales would be adversely affected.Note 2 for additional information.

Net ~~Earnings~~Income Per Common Share

~~Basic earnings~~The Company calculates net income per common share ~~are computed~~ based on the weighted-average number of shares of the Company's common ~~shares outstanding.~~stock outstanding during the period. Potentially dilutive securities ~~using the treasury stock method,~~ are included in the diluted per-share calculations using the treasury stock method for all periods when the effect of their inclusion is dilutive.

Accounting for Leases

The ~~following is a reconciliation of basic earnings per common share to diluted earnings per share~~Company has operating and finance leases for ~~the three months~~certain facilities, equipment, autos and ~~nine months ended September 30, 2017 and 2016, respectively:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
(in thousands, except per share amounts) 2017 2016 2017 2016
Net income available to common stockholders $ 28,197
$ 29,797
$ 79,532
$ 72,341
Basic weighted-average shares outstanding 47,367
48,119
47,544
48,231
Dilutive effect of potential common stock equivalents — stock options and restricted stock units 319
233
299
198
Diluted weighted-average shares outstanding 47,686
48,352
47,843
48,429
Earnings per common share:

Basic $ 0.60
$ 0.62
$ 1.67
$ 1.50
Diluted $ 0.59
$ 0.62
$ 1.66
$ 1.49
Potentially dilutive securities excluded from earnings per diluted share because their effect is anti-dilutive —
—
—
—

~~Dividend Declaration and Notice of Annual Meeting~~

~~On September 28, 2017, the Board of Directors of~~data centers. As an accounting policy for short-term leases, the Company ~~(the "Board"~~elected to not recognize a right-of-use asset ("ROU asset") ~~declared~~and liability if, at the commencement date, the lease (1) has a ~~cash dividend~~term of ~~$0.21per share, payable on January 25, 2018 to shareholders of record as of January 4, 2018~~12 months or less and ~~scheduled the Company’s 2018 annual meeting of stockholders for Monday, April 24, 2018.~~

~~Share Repurchases~~

~~During the third quarter of 2017,~~(2) does not include renewal and purchase options that the Company ~~received 35,887 shares of~~is reasonably certain to exercise. Monthly payments on short-term leases are recognized on a straight-line basis over the Company's common stock pursuant to the Company’s $20.0 million accelerated share repurchase program (the “ASR Program”) with Wells Fargo Bank, National Association, which constituted the final delivery under the ASR Program initiated in June 2017. In August 2017, the Board increased its previous $125 million share repurchase authorization by $150 million to $275 million and extended such authorization to December 31, 2018.full lease term.

Accounting for Stock-Based Compensation

The Company ~~currently maintains an equity incentive plan,~~recognizes stock-based compensation expense related to the ~~Simpson Manufacturing Co., Inc. Amended and Restated 2011 Incentive Plan (the “2011 Plan”), which was originally adopted~~estimated fair value of restricted stock awards on April 26, 2011, and was subsequently amended and restated on April 21, 2015. The 2011 Plan amended and restated in their entirety, and incorporated and superseded, both the Simpson Manufacturing Co., Inc. 1994 Stock Option Plan (the “1994 Plan”), which was principally for the Company’s employees, and the Simpson Manufacturing Co., Inc. 1995 Independent Director Stock Option Plan (the “1995 Plan”), which was for its independent directors. Awards previously granted under the 1994 Plan or the 1995 Plan were not affected by the adoptiona straight-line basis, net of ~~the 2011 Plan and continued to be governed by the 1994 Plan or the 1995 Plan, respectively.~~

Under the 1994 Plan and the 1995 Plan, the Company could grant incentive stock options and non-qualified stock options, although the Company granted only non-qualified stock options thereunder. The Company generally granted stock options under each of the 1994 Plan and the 1995 Plan once every year. Stock options vest and expire according to terms established at the grant date. Stock options granted under the 1994 Plan typically vested evenlyestimated forfeitures, over the requisite service period of ~~four years and have a~~the awards, which is generally the vesting term of ~~seven~~four years. ~~Stock options granted under~~Stock-based expense related to performance share grants are measured based on grant date fair value and expensed on a graded basis over the 1995 Plan typically fully vest on the date of grant. Shares of common stock issued on exercise of stock options under the 1994 Plan and the 1995 Plan are registered under the Securities Act of 1933, as amended (the "Securities Act").

Under the 2011 Plan, the Company may grant incentive stock options, non-qualified stock options, restricted stock and restricted stock units ("RSUs"), although the Company currently intends to award primarily performance-based and/or time-based RSUs and to a lesser extent, if at all, non-qualified stock options (see "Note 9 Stock-Based Incentive Plans") to its employees. The Company currently intends to grant RSUs that vest on the date of grant to its independent directors. The Company does not currently intend to award incentive stock options or restricted stock. Under the 2011 Plan, no more than 16.3 million sharesservice period of the ~~Company’s~~

~~common stock in aggregate may be issued under the 2011 Plan, including shares already issued pursuant to prior~~ awards, ~~and shares reserved for issuance on exercise~~which is generally a performance period of ~~options previously granted under the 1994 Plan and the 1995 Plan. Shares of common stock to be issued pursuant to the 2011 Plan~~three years. The performance conditions are ~~registered under the Securities Act.~~

Subject to certain adjustments, the following limits shall apply with respect to any awards under the 2011 Plan that are intended to qualify for the performance-based exception from the tax deductibility limitations of section 162(m) of the U.S. Internal Revenue Code of 1986, as amended from time to time: (i) the maximum aggregate number of shares of the Company’s common stock that may be subject to stock options granted in any calendar year to any one participant shall be 150,000 shares; and (ii) the maximum aggregate number of shares of the Company’s common stock issuable or deliverable under RSUs granted in any calendar year to any one participant shall be 100,000 shares.

~~The following table represents the Company’s stock-based compensation activity for the three months and nine months ended September 30, 2017 and 2016, respectively:~~

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2017 2016 2017 2016
Stock-based compensation expense recognized in operating expenses $ 370
$ 3,141
$ 10,942
$ 8,995
Less: Tax benefit of stock-based compensation expense in provision for income taxes 58
1,112
3,962
3,262
Stock-based compensation expense, net of tax $ 312
$ 2,029
$ 6,980
$ 5,733
Fair value of shares vested $ 428
$ 3,088
$ 10,764
$ 9,039
Proceeds to the Company from the exercise of stock-based compensation $ 2,268
$ 4,166
$ 3,566
$ 6,695
Tax effect from the exercise of stock-based compensation, including shortfall tax benefits ⁽¹⁾
$ —
$ 121
$ —
$ 140

⁽¹⁾~~Zero balances in the three and nine months ended September 30, 2017 is the result of the Company's adoption of FASB issued~~

~~Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718)~~ ~~Improvements to Employee Share-~~

~~Based Payment Accounting~~ ~~("ASU 2016-09") on January 1, 2017, refer to~~ ~~Recently Adopted Accounting Standards~~ ~~below.~~

With respect to certain performance-based RSUs awarded to the Company's employees in February 2017, the achievement of their performance-based metrics was initially estimated as being probable , and therefore, their expense was recognized in the first two quarters of fiscal 2017. Based on updated information, the Company subsequently determined that the likelihood of achievement of the performance-based metrics is no longer probable for certain awards. As a result, the Company ceased recognition of expense in the three-month period ended September 30, 2017 and also reversed $1.6 million of expense during the three-month period ended September 30, 2017 recognized for such RSUs during the six months ended June 30, 2017.

~~The Company allocates stock-based compensation expenses among cost of sales, research and development and other engineering expense, selling expense, or general and administrative expense~~ based on the ~~job functions performed by~~Company's achievement of revenue growth and return on invested capital over the ~~employees~~performance period, and are evaluated for the probability of vesting at the end of each reporting period with changes in expected results recognized as an adjustment to ~~whom the stock-based compensation is awarded.~~expense. The assumptions used to calculate the fair value of ~~stock-based compensation~~restricted stock grants are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience. ~~Stock-based compensation capitalized in inventory was $0.3 million and $0.5 million as of September 30, 2017 and 2016, respectively.~~

~~Fair~~0Fair Value of Financial Instruments

~~The “Fair Value Measurements~~Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and ~~Disclosures” topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) establishes~~liabilities recorded at fair value are measured and classified under a three-tier fair valuation hierarchy ~~for disclosure~~based on the observability of the inputs ~~used to measure fair value. This hierarchy prioritizes~~available in the ~~inputs into three broad levels as follows:~~market: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets

and liabilities at fair value. ~~A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the~~The fair value ~~measurement.~~

Ashierarchy requires an entity to maximize the use of ~~September 30, 2017~~observable inputs and ~~2016 and December 31, 2016,~~minimize the ~~Company’s investments consisted~~use of ~~only money market funds, which are the Company’s primary financial instruments, maintained in cash equivalents and carried at cost, approximating~~unobservable inputs when measuring fair ~~value, based on Level 1 inputs. The balances of the Company's primary financial instruments at the dates indicated were as follows:~~

At September 30, At December 31,
(in thousands) 2017 2016 2016
Money market funds $ 5,409
$ 13,334
$ 2,832

value. The carrying amounts of trade accounts receivable, accounts payable, accrued liabilities and ~~accrued~~other current liabilities approximate fair value due to the short-term nature of these instruments. The fair values of the interest rate and foreign currency contracts are classified as Level 2 within the fair value hierarchy. The fair values of the Company’s contingent consideration related to acquisitions isand equity investments are classified as Level 3 within the fair value hierarchy, as ~~it is~~these amounts are based on unobserved inputs such as management estimates and entity-specific assumptions and isare evaluated on an ongoing basis. As

Derivative Instruments

The Company uses derivative instruments as a risk management tool to mitigate the potential impact of ~~September 30, 2017,~~certain market risks. Foreign currency and interest rate risk are the ~~estimated~~primary market risks the Company manages through the use of derivative instruments, which are accounted for as cash flow hedges or net investment hedges under the accounting standards and carried at fair value as other current or noncurrent assets or as other current or other long-term liabilities in the condensed consolidated balance sheets. Assets and liabilities with the legal right of offset are not offset in the condensed consolidated balance sheets. Net deferred gains and losses related to changes in fair value of cash flow hedges are included in accumulated other comprehensive income/loss ("OCI"), a component of stockholders' equity in the ~~Company's contingent consideration was approximately~~condensed consolidated balance sheets, and are reclassified into the line item in the condensed consolidated statement of earnings and comprehensive income in which the hedged items are recorded in the same period the hedged item affects earnings. The effective portion of gains and losses attributable to net investment hedges is recorded net of tax to OCI to offset the change in the carrying value of the net investment being hedged. Recognition in earnings of amounts previously recorded to OCI are limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. Changes in fair value of any derivatives that are determined to be ineffective are immediately reclassified from OCI into earnings.

Cash and Cash Equivalents

The Company classifies investments that are highly liquid and have maturities of three months or less at the date of purchase as cash equivalents. As of June 30, 2022 and 2021, the value of these investments were $42.4 million and $57.1 million, respectively, consisting of United States Treasury securities and money market funds. The value of the investments is based on cost, which approximates fair value based on Level 1 inputs.

Current Estimated Credit Loss - Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts receivable for estimated future expected credit losses resulting from customers' failure to make payments on its accounts receivable. The Company determines the estimate of the allowance for doubtful accounts receivable by considering several factors, including (1) specific information on the financial condition and the current creditworthiness of customers, (2) credit rating, (3) payment history and historical experience, (4) aging of the accounts receivable, and (5) reasonable and supportable forecasts about collectability. The Company also reserves 100% of the amounts deemed uncollectible due to a ~~total~~customer's deteriorating financial condition or bankruptcy.

Every quarter, the Company evaluates the customer group using the accounts receivable aging report and its best judgment when considering changes in customers' credit ratings, level of ~~$1.3 million.~~delinquency, customers' historical payments and loss experience, current market and economic conditions, and expectations of future market and economic conditions.

The changes in the allowance for doubtful accounts receivable for the six months ended June 30, 2022 are outlined in the table below:


	Balance at				Balance at
(in thousands)	December 31, 2021		Expense (Deductions), net	Write-Offs1	June 30, 2022

Allowance for Doubtful Accounts	$	1,932	223	(56)	$	2,211

1Amount is net of recoveries and the effect of foreign currency fluctuations.

Income Taxes

Income taxes are calculated using an asset and liability approach. The provision for income taxes includes federal, state and foreign taxes currently payable and deferred taxes, due to temporary differences between the financial statement and tax bases of assets and liabilities. In addition, future tax benefits are recognized to the extent that realization of such benefits is more likely than not. This method gives consideration to the future tax consequences of the deferred income tax items and immediately recognizes changes in income tax laws in the year of enactment.

The Company uses an estimated annual ~~effective~~ tax rate to measure the tax benefit or tax expense recognized in each interim period. ~~The following table presents the Company’s effective tax rates and income tax expense for the three months and nine months ended September 30, 2017 and 2016, respectively:~~

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except percentages) 2017 2016 2017 2016
Effective tax rate 37.0 % 34.8 % 34.0 % 35.9 %
Provision for income taxes $ 16,581
$ 15,898
$ 40,972
$ 40,601

For the three months ended September 30, 2017, the Company's effective income tax rate increased to 37% from 35%, primarily due to a reduction of the nonrecurring bargain purchase gain related to the Gbo Fastening Systems acquisition (see "Gain (adjustment) on bargain purchase of a business" below ), which was not taxable.

For the nine months ended September 30, 2017, the Company's effective income tax rate decreased to 34.0% from 35.9%. The decrease was primarily due to an adjusted nonrecurring bargain purchase gain related to the Gbo Fastening Systems acquisition (see "Gain (adjustment) on bargain purchase of a business" below), which was not taxable, and the adoption of FASB Accounting Standards ~~Update No. 2016-09 on January 1, 2017 (see "Recently~~Not Yet Adopted ~~Accounting Standards" below), which recognizes~~

In March 2020, the excess tax benefits of stock-based awards as a reduction to income tax expense instead of the previous methodology which recorded the benefits on the balance sheets as a component of stockholders' equity.

~~Acquisitions~~

Under the business combinations topic of the FASB ASC 805, the Company accounts for acquisitions as business combinations and ascribes acquisition-date fair values to the acquired assets and assumed liabilities. Provisional fair value measurements are made at the time of the acquisitions. Adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date, as information necessary to complete the analysis is obtained. Fair value of intangible assets are generally based on Level 3 inputs.

~~Multi Services Dêcoupe S.A~~.

In August 2016, the Company purchased all of the outstanding shares of Multi Services Dêcoupe S.A. ("MS Decoupe"), a Belgium public limited company, for $6.9 million. MS Decoupe primarily manufactures and distributes wood construction, plastic, and

metal labeling products in Belgium and the Netherlands, including distributing the Company's products manufactured at the Company's production facility in France. With this acquisition, the Company could potentially offer the Belgium market a wider-range of its products, shorten delivery lead times, and expand the Company's sales presence into the Netherlands market. During the third quarter of 2017, the Company finalized its fair value measurement of assets acquired and liabilities assumed in this acquisition. MD Decoupe assets and liabilities included cash and cash equivalents of $1.4 million, other current assets of $1.6 million, noncurrent assets of $5.0 million, current liabilities of $0.6 million and noncurrent deferred income tax liabilities of $1.0 million. Included in noncurrent assets was goodwill of $1.4 million, which was assigned to the Europe segment, and intangible assets of $1.7 million, both of which are not subject to tax-deductible amortization. The estimated weighted-average amortization period for the intangible assets is 10 years.

~~CG Visions, Inc.~~

In January 2017, the Company acquired CG Visions, Inc. ("CG Visions") for up to approximately $20.8 million. CG Visions provides scalable technologies and services in building information modeling ("BIM") technologies, estimation tools and software solutions to a number of the top 100 mid-sized to large builders in the United States, which are expected to complement and support the Company's sales in North America. During the third quarter of 2017, the Company finalized its fair value measurement of assets acquired and liabilities assumed in this acquisition. CG Visions assets and liabilities included other current assets of $0.5 million, noncurrent assets of $20.4 million, current liabilities and contingent consideration of $1.1 million. Included in noncurrent assets was goodwill of $10.1 million, which was assigned to the North America segment, and intangible assets of $10.3 million, both of which are not subject to tax-deductible amortization. The estimated weighted-average amortization period for the intangible assets is 7 years.

~~Gbo Fastening Systems AB~~

In January 2017, the Company acquired Gbo Fastening Systems AB ("Gbo Fastening Systems"), a Sweden limited company, for approximately $10.2 million. Gbo Fastening Systems manufactures and sells a complete line of CE-marked structural fasteners as well as fastener dimensioning software for wood construction applications, currently sold mostly in northern and eastern Europe, which are expected to complement the Company's line of wood construction products in Europe.

~~Gain (Adjustment) on Bargain Purchase of a Business~~

In the first quarter of 2017, the Company recorded a preliminary nontaxable bargain purchase gain of $8.4 million, which was included in the condensed consolidated statements of operations. During the third quarter of 2017, the Company reevaluated the fair value of the assets acquired and liabilities assumed in Gbo Fastening Systems acquisition and recorded that the estimated fair value of the assets acquired and liabilities assumed was approximately $16.5 million. Consequently, a bargain purchase adjustment of $2.1 million was recorded resulting in a total of $6.3 million adjusted gain on bargain purchase of a business, which was included in the condensed consolidated statements of operation.

~~The following table represents the final allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed in the Gbo Fastening Systems acquisition:~~

(In thousands)
Assets *

Cash and cash equivalents $ 3,956
Accounts receivable 4,914
Inventory 13,591
Other current assets 760
Property, plant, equipment and noncurrent assets 3,929
27,150
Liabilities
Accounts payable 4,500
Other current liabilities 6,146
10,646

Total net assets 16,504
Gain (adjustment) on bargain purchase of a business (6,336 )
Total purchase price $ 10,168
* Intangible assets acquired were determined to have little to no value, thus were not recognized.

The results of operations of businesses acquired in 2016 through 2017 were included in the Company’s condensed consolidated results of operations since the date of the applicable acquisition. Such businesses are not material to the Company on an individual or aggregate basis, and accordingly, pro forma results of operations are not presented.

~~Sales of Gbo Poland and Gbo Romania~~

As a result of incompatibility with Simpson's market strategy, the Company completed the sale of all of its equity in Gbo Fastening Systems' Poland and Gbo Romania subsidiaries on September 29, 2017 and October 31, 2017, respectively, for approximately $10.2 million, resulting in a gain of $0.4 million which was presented in the accompanying condensed statements of operations.

~~Recently Adopted~~Financial Accounting Standards

~~In March 2016, the FASB~~ Board issued Accounting Standards Update ~~No. 2016-09, Compensation - Stock Compensation~~("ASU") 2020-04, Reference Rate Reform (Topic ~~718),~~

~~Improvements~~848). ASU 2020-04 provides optional guidance to ~~Employee Share-Based Payment Accounting~~ ~~("ASU 2016-09")~~, ~~which amends existing guidance related to~~ease the potential burden in accounting for ~~employee share-based payments affecting~~reference rate reform on financial reporting in response to the income tax consequences of awards, classification of awards as equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2016, with early adoption permitted. On January 1, 2017, the Company adopted ASU 2016-09.

This new guidance requires all excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the income statement and classified as an operating activity in the statement of cash flows. The Company prospectively adopted this guidance with the tax impact of a $1.1 million tax benefit recognized in the consolidated income statements and classified it as an operating activity in the consolidated statement of cash flows. The guidance also requires a policy election either to estimate the number of awards that are expected to vest or to account for forfeitures whenever they occur. The Company did not change its policy for calculating accrual compensation costs by estimating the number of awards that are expected to vest. Therefore, when the Company adopted this guidance, there was no recognized cumulative effect adjustment to retained earnings. In addition, this guidance requires cash paid by an employer, when directly withholding shares for tax withholding purposes, to be classified in the statement of cash flows as a financing activity, which differsmarket transition from the London Interbank Offered Rate (“LIBOR”). The Company's ~~previous method~~primary credit facility, which was amended and restated on March 30, 2022, is composed of ~~classification~~$450.0 million revolving line of ~~such cash payments as an operating activity. Accordingly, the Company applied this provision retrospectively~~credit and ~~for the nine months~~

~~ended September 30, 2017~~a $450.0 million term loan (the "Amended and ~~2016 and reclassified $5.2 million and $4.0 million, respectively, from operating activities to financing activities in the condensed consolidated statements of cash flows.~~

~~In March 2016, the FASB issued Accounting Standards Update No. 2016-07,~~ ~~Simplifying the Transition to the Equity Method of Accounting ("ASU 2016-07"~~Restated Credit Facility"), which ~~eliminates~~matures on March 30, 2027. Borrowings under the ~~requirement to apply the equity method~~Amended and Restated Credit Facility bear interest using Secured Overnight Financing Rate ("SOFR") plus an applicable margin in lieu of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. The amendments in ASU 2016-07 are effective for public companies for fiscal years beginning after December 15, 2016, including interim periods therein, with early adoption permitted. The new standard should be applied prospectively for investments that qualify for the equity method of accounting after the effective date. On January 1, 2017, the Company prospectively adopted ASU 2016-07. Adoption of ASU 2016-07 has had no material effect on the Company's consolidated financial statements and footnote disclosures.LIBOR.

~~In January 2017, the FASB issued Accounting Standards Updated No. 2017-01, Business Combinations (Topic 805):~~ ~~Clarifying the Definition of a Business~~ ("ASU 2017-01"), which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The new guidance clarifies that a business must also include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606, Revenue from Contracts with Customers. ASU 2017-01 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted. On January 1, 2017, the Company prospectively adopted ASU 2017-01. Adoption of ASU 2017-01 has had no material effect on the Company's consolidated financial statements and footnote disclosures.

All other newly issued and effective accounting standards during ~~2017~~the second quarter of 2022 were determined to be not relevant or material to the Company.

~~Recently Issued Accounting Standards Not Yet Adopted~~

~~Other than the following, there have been no new developments to those recently issued accounting standards disclosed in the Company’s 2016 Annual Report on Form 10-K.~~

~~In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (later codified as ASC 606),~~

2. Revenue from Contracts with Customers ~~which supersedes nearly all existing revenue recognition guidance~~

Disaggregated Revenue

The Company disaggregates net sales into the following major product groups as described in its segment information included in these interim financial statements under ~~GAAP. ASC 606 provides a five-step model~~Note 15.

Wood Construction Products Revenue. Wood construction products represented 87%, respectively, of total net sales for ~~revenue recognition~~the six months ended June 30, 2022 and 2021.

Concrete Construction Products Revenue. Concrete construction products represented 13%, respectively, of total net sales for both the six months ended June 30, 2022 and 2021.

Customer Acceptance Criteria. Generally, there are no customer acceptance criteria included in the Company's standard sales agreement with customers. When an arrangement with the customer does not meet the criteria to be ~~applied~~accounted for as a revenue contract under the standard, the Company recognizes revenue in the amount of nonrefundable consideration received when the Company has transferred control of the goods or services and has stopped transferring (and has no obligation to ~~all revenue~~transfer) additional goods or services. The Company offers certain customers discounts for paying invoices ahead of the due date, which are generally 30 to 60 days after the issue date.

Other Revenue. Service sales, representing after-market repair and maintenance, engineering activities and software license sales and services were less than 0.1% of net sales and recognized as the services are completed or by transferring control over a product to a customer at a point in time. Services may be sold separately or in bundled packages. The typical contract length for a service is generally less than one year. For bundled packages, the Company accounts for individual services separately when they are distinct within the context of the contract. A distinct service is separately identifiable from other items in the bundled package if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration (including any discounts) is allocated between separate services in a bundle based on their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells the services.

Reconciliation of Contract Balances

Contract assets are the rights to consideration in exchange for goods or services that the Company has transferred to a customer when that right is conditional on something other than the passage of time. Contract liabilities are recorded for any services billed to customers and not yet recognizable if the contract period has commenced or for the amount collected from customers in advance of the contract period commencing. As of June 30, 2022, the Company had no contract assets or contract liabilities from contracts with ~~customers. The five-step model includes: (1) determination~~customers.

3. Acquisition

On April 1, 2022, the Company completed its acquisition of ~~whether a contract, an agreement between two or more parties that creates legally enforceable rights and obligations, exists; (2) identification~~100% of the ~~performance obligations~~outstanding equity interest of FIXCO Invest S.A.S. (together with its subsidiaries, "ETANCO") for total purchase consideration of $805.4 million, net of cash acquired (the "Acquisition"). The Acquisition was completed pursuant to the securities purchase agreement dated January 26, 2022, as amended (the “SPA”), by and among the Company, Fastco Investment, Fastco Financing, LRLUX and certain other security holders. The purchase price for the Acquisition was paid using cash on hand and borrowings in the ~~contract; (3) determination~~amount of $250.0 million under the revolving credit facility and $450.0 million under the term loan facility. See Note 13 for further information on the Amended and Restated Credit Facility.

ETANCO is a manufacturer and distributor of fastener and fixing products headquartered in France and its primary product applications directly align with the addressable markets in which the Company operates. The Acquisition will allow the Company to enter into new commercial building markets such as façades, waterproofing, safety and solar, as well as grow its share of direct business sales in Europe.

ETANCO’s results of operations were included in the Company's consolidated financial statements from the date of acquisition. For the period subsequent to the acquisition that is included in both the three months and six months ended June 30, 2022, ETANCO had net sales of $80.3 million and a net loss of $2.0 million, which includes costs related to fair-value adjustments for acquired inventory, amortization of acquired intangible assets, and expenses incurred for integration. The allocation of the

purchase price is preliminary and subject to change, including any costs and expenses already recognized, as the Company refines its estimates over the measurement period, which is expected to be finalized by the end of the ~~transaction price; (4)~~2022 fiscal year.

Purchase price allocation

The Acquisition was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”) which requires, among other things, that assets acquired and liabilities assumed in a business combination be recorded at fair value as of the acquisition date with limited exceptions.

Preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations as of April 1, 2022. Due to the timing and significance of the Acquisition, the estimates and assumptions regarding certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes, contingent liabilities, goodwill and useful lives of intangible assets are subject to change as the Company obtains additional information during the measurement period of up to 12 months from the acquisition date.

The preliminary allocation of the ~~transaction~~$824.4 million purchase price to the ~~performance obligations~~estimated fair values of the tangible and intangible assets acquired and liabilities assumed is as follows:


(in thousands)	Amount
Cash and cash equivalents	$	19,010
Trade accounts receivable, net	63,607
Inventory	102,608
Other current assets	4,491
Property and equipment, net	87,156
Operating lease right-of-use assets	6,219
Goodwill	376,908
Intangible assets, net	358,761
Other noncurrent assets	1,428
Total assets	1,020,188
Trade accounts payable	46,467
Accrued liabilities and other current liabilities	21,922
Operating lease liabilities	6,034
Deferred income tax and other long-term liabilities	121,360
Total purchase price	$	824,405

Trade accounts receivable, net

The gross amount of trade receivables acquired was approximately $67.4 million, of which $63.6 million is estimated to be recoverable based on ETANCO's historical trend for collections.

Inventory

Acquired inventory primarily consists of raw materials and finished goods consisting of building and construction materials products. The Company adjusted acquired finished goods higher by $10.9 million to estimated fair value based on expected selling prices less a reasonable amount for selling efforts. The fair value adjustment is recognized as a component of cost of sales over the inventory’s expected turnover period, and as a result, $9.2 million of the adjustment was recognized during the three months ended June 30, 2022.The balance of the adjustment will be recognized in the ~~contract;~~quarter ended September 30, 2022.

Property and ~~(5) recognition~~equipment, net

Acquired property and equipment includes land of ~~revenue~~$22.3 million, buildings and site improvements of $29.4 million, and machinery, equipment, and software of $35.5 million. The estimated fair value of property and equipment was determined primarily using market and/or or cost approach methodologies. The acquired fair value for buildings and site improvements will depreciate on a straight-line basis over the estimated useful lives of the assets for a period of up to thirty years, Machinery, equipment and software will depreciate on an accelerated basis over an estimated useful life of three to ten years. Depreciation expense associated with the acquired property and equipment amounted to $1.4 million for three months ended June 30, 2022.

Goodwill

The excess of purchase price over the net assets acquired is recognized as goodwill and relates to the value that is expected from the acquired assembled workforce as well as the increased scale and synergies resulting from the integration of both businesses. The goodwill recognized from the Acquisition is not deductible for local income tax purposes. Goodwill will be allocated to reporting units within the European reporting segment when ~~(or as)~~ the ~~performance obligation~~purchase price allocation is ~~satisfied.~~ finalized during the measurement period.

Intangible assets, net

The ~~core principle~~estimated fair value of ~~ASC 606~~intangible assets acquired was determined primarily using income approach methodologies. The preliminary values allocated to intangible assets and the useful lives are as follows:


(in thousands except useful lives)	Weighted-average useful life (in years)	Amount
Customer relationships	16	$	220,810
Trade names	Indefinite	93,811
Developed technology	12.5	44,140

		$	358,761

The acquired definite-lived intangible assets will be amortized on a straight-line basis over estimated useful lives, which approximates the pattern in which these assets are utilized. The Company recognized $4.2 million of amortization expense on these assets during the three months ended June 30, 2022.

Deferred taxes

As a result of the increase in fair value of inventory, property and equipment, and intangible assets, deferred tax liabilities of $104.5 million were recognized, primarily due to intangible assets.

Acquisition and integration related costs

During the three and six months ended June 30, 2022 and the year ended December 31, 2021, the Company incurred acquisition and integration related expenses of $5.9 million, $12.8 million and $2.3 million, respectively. The fiscal 2022 amounts have been included in Acquisition and integration related costs in the Company’s income from operations, while the 2021 amounts were included in Interest expense, net and other. These acquisition and integration related costs consisted of investment banking, legal, accounting, advisory, and consulting fees.

Unaudited pro forma results

The following unaudited pro forma combined financial information presents estimated results as if the Company acquired ETANCO on January 1, 2021. The unaudited pro forma financial information as presented below is ~~that~~for informational purposes only and does not purport to actually represent what the Company’s combined results of operations would have been had the Acquisition occurred on January 1, 2021, or what those results will be for any future periods.

The following unaudited pro forma consolidated financial information has been prepared using the acquisition method of accounting in accordance with U.S. GAAP:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021

Net sales	$	593,232	$	498,805	$	1,165,986	$	923,579
Net income	$	104,823	$	79,535	$	210,772	$	114,884

Pro forma earnings per common share:
Basic	$	2.43	$	1.83	$	4.88	$	2.65
Diluted	$	2.42	$	1.82	$	4.87	$	2.63

Weighted average shares outstanding:
Basic	43,145		43,434		43,162		43,406
Diluted	43,240		43,641		43,306		43,620

The unaudited pro forma results above includes the following non-recurring charges to net income:

1) Acquisition and integration related costs of $5.9 million, $6.9 million, and $2.3 million, which were incurred during the three months ended June 30, 2022, March 31, 2022, and December 31, 2021, respectively, were adjusted as if such costs were incurred during the three months ended March 31, 2021.

2) The $9.2 million of amortization related to the fair value adjustment for inventory and recognized during the three months ended June 30, 2022 was adjusted as if incurred during the three months ended March 31, 2021. The unamortized balance is included as an ~~entity should recognize revenue~~adjustment recognized during the three months ended June 30, 2021.

3) Net income for ETANCO includes adjustments of $0.5 million and $1.8 million to conform ETANCO’s historical financial results prepared under French GAAP to U.S. GAAP for the ~~transfer of goods or services equal~~three and six months ended June 30, 2021, respectively. In addition, $0.4 million in French to U.S. GAAP adjustments were made for the three and six months ended June 30, 2022. The U.S. GAAP adjustments are primarily related to share-based payments expense on awards that were settled prior to the ~~amount~~Acquisition, and costs incurred and capitalized by ETANCO on its historical acquisitions.

4. Net Income Per Share

The following shows a reconciliation of basic net earnings ("EPS") per share to diluted EPS:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2022		2021		2022		2021
Net income available to common stockholders	$	93,570	$	72,483	$	188,145	$	122,872
Basic weighted-average shares outstanding	43,145		43,434		43,162		43,406
Dilutive effect of potential common stock equivalents — restricted stock units	95		207		144		214
Diluted weighted-average shares outstanding	43,240		43,641		43,306		43,620
Net income per common share:
Basic	$	2.17	$	1.67	$	4.36	$	2.83
Diluted	$	2.16	$	1.66	$	4.34	$	2.82

5. Stockholders' Equity

Treasury Shares

As of June 30, 2022, the Company held 455,030 shares of its common stock as treasury shares.

During the six months ended June 30, 2022, the Company repurchased 455,030 shares of the Company's common stock in the open market at an average price of $101.71 per share, for a total of $46.3 million. As of June 30, 2022, approximately $53.7 million remains available for repurchase of shares of the Company's common stock under the previously announced $100.0 million share repurchase authorization (which expires at the end of 2022).

6. Stock-Based Compensation

The Company allocates stock-based compensation expense amongst cost of sales, research and development and other engineering expense, selling expense, or general and administrative expense based on the job functions performed by the employees to whom the stock-based compensation is awarded. Stock-based compensation capitalized in inventory was immaterial for all periods presented. The Company recognized stock-based compensation expense related to its equity plans for employees of $4.7 million and $3.3 million for the three months ended June 30, 2022 and 2021, respectively, and $9.5 million and $9.8 million for the six months ended June 30, 2022 and 2021, respectively.

During the six months ended June 30, 2022, the Company granted 112,963 RSUs and PSUs to the Company's employees, including officers at an estimated weighted average fair value of $119.60 per share based on the closing price (adjusted for the present value of dividends) of the Company's common stock on the grant date. The RSUs and PSUs granted to the Company's employees may be time-based, performance-based or time- and performance-based. Certain of the PSUs are granted to officers and key employees, where the number of performance-based awards to be issued is based on the achievement of certain Company performance criteria established in the award agreement over a cumulative three year period. These awards cliff vest after three years. In addition, these same officers and key employees also receive time-based RSUs, which vest pursuant to a three-year graded vesting schedule. Time-based RSUs that ~~it expects~~are granted to bethe Company's employees excluding officers and certain key employees, vest ratably over the four year vesting-term of the award.

The Company’s 7 non-employee directors are entitled to receive ~~for those goods or services. ASC 606 also requires additional disclosures about the nature, timing and uncertainty~~approximately $704 thousand in equity compensation annually. The number of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASC 606 is effective for annual and interim periods beginning after December 15, 2017. The Company will adopt the new standard on January 1, 2018.

~~Company management has completed a review of our significant customer contracts and~~shares ultimately granted are based on ~~that preliminary review, we expect~~ the ~~adoption of ASC 606 will not result in material differences from our accounting for revenues under the current revenue recognition guidance effective~~average closing share price for the Company ~~today. The Company has not yet completed~~over the ~~process of quantifying the effects (if any) of changes that will result from adoption.~~

~~ASC 606 permits two methods of adoption: retrospectively~~60 day period prior to ~~each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application(modified retrospective method). The Company will adopt the new standard using the modified retrospective approach through a cumulative-effect adjustment (if any) to retained earnings as~~approval of the ~~effective date. The Company is also identifying and preparing to implement changes to our accounting policies and practices, business processes, systems and controls to support~~award in the ~~enhanced disclosure requirements from ASC 606.~~

second quarter of each year. In ~~October 2016, the FASB issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740),~~ ~~Intra-Entity Transfers of Assets Other Than Inventory~~ ("ASU 2016-16"), which requires companies to account for the income tax effects of intercompany sales and transfers of assets other than inventory when the transfer occurs. Current guidance requires companies to defer the income tax effects of intercompany transfers of assets until the asset has been sold to an outside party or otherwise recognized. The amendment is to be applied using a modified retrospective approach. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. Based on current information

~~and subject to future events and circumstances,~~May 2022, the Company ~~does not know whether ASU 2016-16 will have a material impact on its financial statements upon adoption.~~

~~In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill and Other (Topic 350):~~ ~~Simplifying the Test for Goodwill Impairment~~ ~~("ASU 2017-04"), which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge or Step 2~~granted 6,206 shares of the ~~goodwill impairment analysis. Instead, an impairment charge will be recorded~~Company's common stock to the non-employee directors, based on the ~~excess~~average closing price of ~~a reporting unit's carrying amount over its fair value using Step 1~~$105.50 per share and recognized $655 thousand of expense.

As of June 30, 2022, the ~~goodwill impairment analysis. The standard~~Company's aggregate unamortized stock compensation expense was approximately $27.6 million which is ~~required~~expected to be adopted for annual and interim impairment tests performed after December 15, 2019. The amendment is to be applied prospectively. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. Based on current information and subject to future events and circumstances, the Company does not know whether ASU 2017-04 will haverecognized in expense over a ~~material impact on its financial statements upon adoption.~~weighted-average period of 2.4 years.

7. Trade Accounts Receivable, Net

Trade accounts receivable ~~at the dates indicated~~ consisted of the following:


	At September 30,						At December 31,				At June 30,				At December 31,
(in thousands)	2017			2016			2016			(in thousands)	2022		2021		2021
Trade accounts receivable	$	165,101		$	145,966		$	116,368		Trade accounts receivable	$	382,016	$	255,077	$	237,312
Allowance for doubtful accounts	(1,166		)	(945		)	(895		)	Allowance for doubtful accounts	(2,211)		(1,446)		(1,932)
Allowance for sales discounts and returns	(4,364		)	(3,305		)	(3,050		)	Allowance for sales discounts and returns	(4,675)		(3,700)		(4,359)
	$	159,571		$	141,716		$	112,423			$	375,130	$	249,931	$	231,021

3.8. Inventories

~~Inventories~~The components of inventories are as follows:


	At June 30,				At December 31,
(in thousands)	2022		2021		2021
Raw materials	$	193,254	$	101,163	$	191,174
In-process products	47,141		24,117		30,309
Finished products	299,449		184,974		222,273
	$	539,844	$	310,254	$	443,756

9. Derivative Instruments

The Company enters into derivative instrument agreements, including forward foreign currency exchange contracts, interest rate swaps, and cross currency swaps to manage risk in connection with changes in foreign currency and interest rates. The Company hedges committed exposures and does not engage in speculative transactions. The Company only enters into derivative instrument agreements with counterparties who have highly rated credit.

Beginning in March 2022, the Company entered into a forward foreign currency contract expiring in March 2029 to hedge its exposure to adverse foreign currency exchange rate movements for its operations in Europe and elected the spot method for designating this contract as a net investment hedge with the excluded forward point amortized to interest expense. During May 2022, the Company settled the March 2022 forward foreign currency contract for $3.9 million in cash, which included $0.4 million in recognized forward points, terminated the hedge accounting treatment and simultaneously entered into a new forward foreign currency contract expiring in March 2029 with the same notional amount at a new forward rate. The Company also elected the ~~dates indicated consisted~~spot method for designating the May 2022 contract as a net investment hedge. The $3.5 million gain recognized on the March 2022 contract excluding recognized forward points is deferred in OCI and will remain in OCI until either the sale or substantially complete liquidation of the ~~following:~~ hedged subsidiaries.

Beginning in March 2022, the Company also converted a Euro-denominated ("EUR"), fixed rate obligation into a U.S. Dollar fixed rate obligation using a receive fixed, pay fixed cross currency swap, which was designated as a cash flow hedge. During May 2022, the Company settled the March 2022 cross currency swap for $22.4 million in cash, which was comprised of $21.3 million gain on the swap excluding accrued interest and $1.1 million of net interest income accrued according to the terms of the swap. The Company terminated the hedge accounting treatment and simultaneously entered into a new cross currency swap expiring in March 2029 with a lower notional amount for the US dollar denominated leg at a new US dollar interest rate. An amount of $28.3 million was reclassified out of OCI into earnings to offset the currency loss on the underlying security being hedged resulting in a net $7.0 million hedge accounting reserve balance within OCI, which is being amortized to interest expense in the Condensed Consolidated Statement of Earnings and Comprehensive Income through the termination of the underlying hedged intercompany debt in March 2029.

In addition, the Company has converted its domestic U.S. variable rate debt to fixed rate debt using a receive variable, pay fixed interest rate swap expiring March 2027. The interest rate swap contract is also designated as a cash flow hedge.

At September 30, At December 31,
(in thousands) 2017 2016 2016
Raw materials $ 87,100
$ 83,613
$ 86,524
In-process products 26,248
20,313
20,902
Finished products 131,128
116,281
124,848
$ 244,476
$ 220,207
$ 232,274
As of June 30, 2022, the aggregate notional amount of the Company's outstanding interest rate contracts, cross currency swap contracts and forward contract were $694.4 million, $465.9 million and $271.9 million, respectively. As of June 30, 2021, the aggregate notional amount of the Company's outstanding forward contracts used to hedge variability in cash flows on its Chinese Yuan denominated purchases were $5.4 million, all of which expired by December 31, 2021. As of June 30, 2022 there were no outstanding forward contracts on its Chinese Yuan denominated purchases.

Changes in fair value of any forward contracts that are determined to be ineffective are immediately reclassified from OCI into earnings. There were no amounts recognized due to ineffectiveness during the six-months ended June 30, 2022.

The effects of fair value and cash flow hedge accounting on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the period ended June 30, 2022 was as follows:



				2022							2021
(in thousands)					Cost of sales		Interest expense, net		Other & foreign exchange loss, net		Cost of sales
Total amounts of income and expense line items presented in the Condensed Consolidated Statement of Earnings in which the effects of fair value or cash flow hedges are recorded					$	590,688	$	(3,585)	$	(2,107)	$	399,195
The effects of fair value and cash flow hedging
	Gain or (loss) on cash flow hedging relationships
		Interest contracts:
			Amount of gain or (loss) reclassified from OCI to earnings	—			(2,978)
		Cross currency swap contract
			Amount of gain or (loss) reclassified from OCI to earnings	—			1,959		29,124
		Forward contract
			Amount of gain or (loss) reclassified from OCI to earnings		163						200

The effects of derivative instruments on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the three months ended June 30 were as follow:


Cash Flow Hedging Relationships	Gain (Loss) Recognized in OCI				Location of Gain (Loss) Reclassified from OCI into Earnings	Gain (Loss) Reclassified from OCI into Earnings
(in thousands)	2022		2021			2022		2021
Interest rate contracts	$	8,681	$	—	Interest expense	$	(2,949)	$	—
Cross currency contracts	30,263		—		Interest expense	1,938		—
					FX gain (loss)	32,091		—
Forward contracts	$	—	$	228	Cost of goods sold	0		200
Total	$	38,944	$	228		$	31,080	$	200

The effects of derivative instruments on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the six months ended June 30 were as follow:


Cash Flow Hedging Relationships	Gain (Loss) Recognized in OCI				Location of Gain (Loss) Reclassified from OCI into Earnings	Gain (Loss) Reclassified from OCI into Earnings
	2022		2021			2022		2021
Interest rate contracts	$	6,876	$	—	Interest expense	$	(2,978)	$	—
Cross currency contracts	22,715		—		Interest expense	1,959		0
					FX gain (loss)	29,124		0
Forward contracts	—		428		Cost of goods sold	163		200
Total	$	29,591	$	428		$	28,268	$	200

For the three and six months ending June 30, 2022, gains on the net investment hedge of $18.1 million and $11.3 million were included in OCI, respectively. For both the three and six months ending June 30, 2022, excluded gains of $1.1 million were reclassified from OCI to interest expense.

As of June 30, 2022, the aggregate fair values of the Company’s derivative instruments were comprised of an asset of $24.5 million, of which $10.8 million is included in Other current assets on the condensed consolidated balance sheet, and the balance, or $13.7 million as an Other non-current assets on the condensed consolidated balance sheet, and a liability of $7.9 million, which is included in Other non-current liabilities on the condensed consolidated balance sheet.

10. Property, Plant and Equipment, Net

Property, plant and equipment ~~net, at~~consisted of the ~~dates indicated~~following:


	At June 30,				At December 31,
(in thousands)	2022		2021		2021
Land	$	55,279	$	28,373	$	28,175
Buildings and site improvements	223,920		202,573		202,393
Leasehold improvements	6,062		5,961		5,995
Machinery, equipment, and software	443,652		392,860		399,079
	728,913		629,767		635,642
Less accumulated depreciation and amortization	(415,029)		(393,653)		(402,246)
	313,884		236,114		233,396
Capital projects in progress	32,300		19,239		26,473
Total	$	346,184	$	255,353	$	259,869

11. Goodwill and Intangible Assets

Goodwill consisted of the following:

At September 30, At December 31,
(in thousands) 2017 2016 2016
Land $ 33,030
$ 30,217
$ 32,127
Buildings and site improvements 201,877
176,430
183,882
Leasehold improvements 5,911
5,682
5,550
Machinery, equipment, and software 289,970
249,227
248,861
530,788
461,556
470,420
Less accumulated depreciation and amortization (297,321 ) (275,096 ) (273,302 )
233,467
186,460
197,118
Capital projects in progress 31,711
43,210
35,692
$ 265,178
$ 229,670
$ 232,810

~~5. Goodwill and Intangible Assets, Net~~


	At June 30,				At December 31,
(in thousands)	2022		2021		2021
North America	$	96,264	$	96,393	$	96,307
Europe	394,761		36,296		36,331
Asia/Pacific	1,313		1,432		1,384
Total	$	492,338	$	134,121	$	134,022

Goodwill attotaled $492.3 million as of June 30, 2022, including $360.3 million attributable to the ~~dates indicated was as follows:~~ ETANCO acquisition.

At September 30, At December 31,
(in thousands) 2017 2016 2016
North America $ 95,781
$ 85,988
$ 85,488
Europe 40,038
39,402
37,616
Asia/Pacific 1,494
1,455
1,375
Total $ 137,313
$ 126,845
$ 124,479

~~Intangible~~Amortizable intangible assets, net, atconsisted of the ~~dates indicated were as follows:~~ following:


	At September 30, 2017								At June 30, 2022
	Gross					Net			Gross		Accumulated		Net
	Carrying		Accumulated			Carrying			Carrying		Amortization		Carrying
(in thousands)	Amount		Amortization			Amount		(in thousands)	Amount		& FX change		Amount
North America	$	33,923	$	(16,728	)	$	17,195	North America	$	46,642	$	(28,063)	$	18,579
Europe	29,430		(16,575		)	12,855		Europe	364,241		(25,122)		339,119
Total	$	63,353	$	(33,303	)	$	30,050	Total	$	410,883	$	(53,185)	$	357,698


	At September 30, 2016								At June 30, 2021
	Gross					Net			Gross				Net
(in thousands)	Carrying Amount		Accumulated Amortization			Carrying Amount		(in thousands)	Carrying Amount		Accumulated Amortization		Carrying Amount
North America	$	27,488	$	(17,347	)	$	10,141	North America	$	41,003	$	(24,715)	$	16,288
Europe	31,090		(16,602		)	14,488		Europe	26,499		(19,038)		7,461
Total	$	58,578	$	(33,949	)	$	24,629	Total	$	67,502	$	(43,753)	$	23,749

Intangible assets consist of definite-lived and indefinite-lived assets. Definite-lived intangible assets include customer relationships, patents, unpatented technology, and non-compete agreements. Amortization expense ~~for~~of definite-lived intangible assets ~~during~~was $5.3 million and $1.7 million for the three months ended ~~September~~June 30, ~~2017~~2022 and ~~2016, totaled $1.5~~2021, respectively and was $6.4 million and ~~$1.5~~$3.4 million ~~respectively; and during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016, totaled $4.7 million and $4.6 million,~~2021, respectively. The ~~only indefinite-lived~~weighted-average amortization period for all amortizable intangibles on a combined basis is 9.5 years.

Indefinite-lived intangible ~~asset, consisting~~assets totaled $88.9 million as of aJune 30, 2022, including $88.3 million attributable to trade ~~name, totaled $0.6 million at September 30, 2017.~~names acquired in the ETANCO acquisition.

At ~~September~~June 30, ~~2017,~~2022, the estimated future amortization of definite-lived intangible assets was as follows:

(in thousands)

Remaining three months of 2017 $ 1,635
2018 5,505
2019 5,185
2020 5,155
2021 4,675
2022 2,774
Thereafter 4,505
$ 29,434


(in thousands)

Remaining six months of 2022	$	10,674
2023	20,290
2024	19,384
2025	19,078
2026	18,416
2027	18,286
Thereafter	162,307
	$	268,435

The changes in the carrying amount of goodwill and intangible assets for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022, were as follows:


			Intangible
(in thousands)	Goodwill		Assets
Balance at December 31, 2021	$	134,022	$	26,269
Acquisition of ETANCO	376,908		358,761

Amortization	—		(6,440)
Foreign exchange	(18,592)		(20,892)
Balance at June 30, 2022	$	492,338	$	357,698

Intangible
(in thousands) Goodwill Assets
Balance at December 31, 2016 $ 124,479
$ 22,864
Acquisitions 10,066
10,351
Reclassifications (189 ) 626
Amortization —
(4,725 )
Foreign exchange 2,957
934
Balance at September 30, 2017 $ 137,313
$ 30,050
12. Leases

On December 23, 2016, the Company acquired a 25.0% equity interest in Ruby Sketch Pty Ltd. (“Ruby Sketch”), an Australian proprietary limited company, for $2.5 million, for which the Company accounts for its ownership interest using the equity accounting method. Ruby Sketch develops software that assists in designing residential structures, primarily used in Australia, and potentially for the North America market. The Company has no obligation to make any additional capital contributions to Ruby Sketch.

For the three and nine months ended September 30, 2017, the Company recorded an equity loss of $13 thousand and $53 thousand, respectively, with respect to its Ruby Sketch investment. However, the investment increased $82 thousand due to the foreign currency translation, primarily related to the strengthening Australian dollar against United States dollar, resulting in a $2.6 million balance as of September 30, 2017.

~~Credit Facilities~~

The Company has operating leases for certain facilities, equipment and automobiles. The existing operating leases expire at various dates through 2026, some of which include options to extend the leases for up to 5 years. The Company measured the lease liability at the present value of the lease payments to be made over the lease term. The lease payments are discounted using the Company's incremental borrowing rate. The Company measured the right-of-use ("ROU") assets at the amount at which the lease liability is recognized plus initial direct costs incurred or prepayment amounts. The ROU assets are amortized on a straight-line basis over the lease term.

The following table provides a summary of leases included on the condensed consolidated balance sheets as of June 30, 2022 and 2021 and December 31, 2021, condensed consolidated statements of earnings and comprehensive income, and condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021, respectively:

The components of lease expense were as follows:

Supplemental cash flow information related to leases is as follows:

The following is a schedule, by years, of maturities of lease liabilities as of June 30, 2022:

The following table summarizes the Company's lease terms and discount rates as of June 30, 2022 and 2021:

On March 30, 2022, the Company entered into the Amended and Restated Credit Facility, which amends and restates the Company's previous Credit Agreement, dated as of July 27, 2012. The Amended and Restated Credit Facility provides for a 5-year revolving ~~lines~~credit facility of $450.0 million revolving line of credit, which includes a letter of credit-sub-facility up to $50.0 million, and a 5-year term loan facility of $450.0 million. The Company borrowed $250.0 million, under the revolving credit facility and $450.0 million under the term loan facility to finance a portion of the purchase price of the Acquisition. In addition, the Company incurred $6.8 million of debt issuance costs, which are classified in long-term debt on the condensed consolidating balance sheet, that have been deferred and will amortize over the 5-year terms of the Amended and Restated Credit Facility.

The Company is required to pay an annual revolving credit facility fee of 0.10% to 0.25% per annum on the available commitments under the terms of the Amended and Restated Revolving Credit Facility, regardless of usage, with ~~various banks~~the applicable fee determined on a quarterly basis based on the Company’s net leverage ratio. The fee is included within Interest expense, net and other in the ~~United States~~Company's Condensed Consolidated Statement of Operations.

Amounts borrowed under the Amended and ~~Europe. Total~~Restated Credit Facility will bear interest from time to time at either the Base Rate, Spread Adjusted Daily Simple SOFR, Spread Adjusted Term SOFR, Adjusted Eurocurrency Rate or Daily Simple RFR, in each case, as calculated under and as in effect from time to time under the Amended and Restated Credit Facility, plus the Applicable Margin, as defined in the Amended and Restated Credit Facility. The Applicable Margin is determined based on the Company’s net leverage ratio, and ranges (i) from 0.00% to 0.75% per annum for amounts borrowed under the term loan facility that bear interest at Base Rate, (ii) from 0.75% to 1.75% per annum for amounts borrowed under the term loan facility that bear interest at Adjusted Eurocurrency Rate, Spread Adjusted Daily Simple SOFR or Spread Adjusted Term SOFR, (iii) from 0.00% to 0.50% per annum for amounts borrowed under the revolving credit facility that bear interest at Base Rate, (iv) from 0.68% to 1.53% per annum for amounts borrowed under the revolving credit facility that bear interest at Daily Simple RFR (solely to the extent denominated in pound sterling) and (v) from 0.65% to 1.50% per annum for amounts borrowed under the revolving credit facility that bear interest at Daily Simple RFR (other than loans denominated in pound sterling) or Adjusted Eurocurrency Rate. Loans outstanding under the Amended and Restated Credit Facility may be prepaid at any time without penalty except for customary breakage costs and expenses. Based on current principle payment expectations, the annual interest rate on the outstanding debt will be approximately 2.00% over the life of the debt including the effects of the interest rate swap and other derivatives noted above.

As of June 30, 2022, in addition to the Amended and Restated Credit Facility, certain of the Company’s domestic subsidiaries are guarantors for a credit agreement between certain of its foreign subsidiaries and institutional lenders. Together, all of its credit facilities provide the Company with a total of $203.1 million in available ~~credit at September 30, 2017, was $304.0 million including~~ revolving credit lines and an irrevocable standby letter of credit in support of various insurance deductibles.

The ~~Company’s primary~~Company has $694.4 million, excluding deferred financing costs, outstanding under the Amended and Restated Credit Facility, which is the estimated the fair value as of June 30, 2022. There were no outstanding balances under the Amended and Restated Credit Facility as of June 30, 2021, and December 31, 2021.

The following is a schedule, by years, of maturities for the remaining term loan facility as of June 30, 2022:

The $250.0 million borrowed under the revolving credit facility is a revolving line of credit with $300 million in available credit. On July 25, 2016, the Company entered into a second amendment (the "Amendment") to the credit facility. For additional information about the Amendment, see the Company's Current Reportdue on Form 8-K dated July 28, 2016. As amended, this credit facility will expire on July 23, 2021. Amounts borrowed under this credit facility bear interest at an annual rate equal to either, at the Company’s option, (a) the rate for Eurocurrency deposits for the corresponding deposits of U.S. dollars appearing on Reuters LIBOR1screen page (the “LIBOR Rate”), adjusted for any reserve requirement in effect, plus a spread of 0.60% to 1.45%, determined quarterly based on the Company’s leverage ratio (at September 30, 2017, the LIBOR Rate was 1.23%), or (b) a base rate, plus a spread of 0.00% to 0.45%, determined quarterly based on the Company’s leverage ratio. The base rate is defined in a manner such that it will not beMarch 31, 2027.

less than the LIBOR Rate. The Company will pay fees for standby letters of credit at an annual rate equal to the applicable spread described above, and will pay market-based fees for commercial letters of credit. The Company is required to pay an annual facility fee of 0.15% to 0.30% of the available commitments under the credit facility, regardless of usage, with the applicable fee determined on a quarterly basis based on the Company’s leverage ratio. The Company was also required to pay customary fees as specified in a separate fee agreement to the agent under the credit facility. The Company’s unused borrowing capacity under other revolving credit lines and a term note totaled $4.0 million at September 30, 2017. The other revolving credit lines and the term note charge interest ranging from 0.47% to 8.25%, currently have maturity dates from July 2017 to December 2017. The Company had no outstanding debt balance as of September 30, 2017 and 2016, and December 31, 2016, respectively. The Company was in compliance with its financial covenants ~~at September~~under the Amended and Restated Credit Facility as of June 30, ~~2017.~~2022.

~~Capital Lease Obligations~~

The Company entered into two four-year lease agreements for certain office equipment with Cisco Systems Capital Corporation for a total of approximately $4.4 million, which was recorded in fixed assets as capital lease obligations. These capital lease obligations are included in current liabilities and other long-term liabilities in the accompanying condensed consolidated balance sheets. The interest rates for these two capital leases are 2.89% and 3.50%, respectively, and the two leases will mature in May 2021 and July 2021, respectively.

~~As of September 30, 2017, the current portion of the outstanding liability for the leased equipment was approximately $1.0 million and the long-term portion was approximately $2.9 million.~~

8.14. Commitments and Contingencies

The Company’s policy with regard to environmental liabilities is to accrue for future environmental assessments and remediation costs when information becomes available that indicates that it is probable that the Company is liable for any related claims and assessments and the amount of the liability is reasonably estimable. The Company does not believe that any such matters will have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

Litigation and Potential Claims

From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. Corrosion, hydrogen ~~enbrittlement,~~embrittlement, cracking, material hardness, wood pressure-treating chemicals, misinstallations,

misuse, design and assembly flaws, manufacturing defects, labeling defects, product formula defects, inaccurate chemical mixes, adulteration, environmental conditions, or other factors can contribute to failure of fasteners, connectors, anchors, adhesives, specialty chemicals, such as fiber reinforced polymers, and tool products. In addition, inaccuracies may occur in product information, descriptions and instructions found in catalogs, packaging, data sheets, and the Company’s website.

As of the date of this Quarterly Report on Form 10-Q, the Company is not a party to any legal proceedings, which the Company expects individually or in the aggregate to have a material adverse effect on the Company’s financial condition, cash flows or results of operations. Nonetheless, theThe resolution of any claim or litigation is subject to inherent uncertainty and could have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

~~Potential Third-Party Claims~~

~~Nishimura v. Gentry Homes, Ltd.,~~ ~~Civil No. 11-1-1522-07, was filed in the Hawaii First Circuit court on July 20, 2011. The~~ ~~Nishimura~~ case involves claims by homeowners at Ewa by Gentry, a Honolulu development of approximately 2,400 homes. The claims arise out of alleged corrosion of strap-tie holdowns and mud-sill anchor products supplied by the Company. The plaintiff homeowners originally sued the developer, Gentry Homes, Ltd. (“Gentry”), as well as the Company. In 2012 and 2013, the Hawaii First Circuit granted the Company’s motions to dismiss and for summary judgment, resulting in the dismissal of all of the homeowners’ claims against the Company, and the Company has not since then been a party to the proceedings. The dismissed claims against the Company remain subject to potential appeal by the plaintiffs.

~~Gentry and the plaintiff homeowners thereafter moved their dispute to arbitration, and the Hawaii state court stayed the lawsuit pending arbitration. The Company was not a party to the arbitration.~~

Gentry initially reported no significant damage claims related to the Ewa development. In August 2016, Gentry advised the Company for the first time that a substantial number of plaintiff homeowners claimed serious corrosion of mudsill anchors and strap-tie holdowns. The plaintiff homeowners and Gentry proceeded to arbitration in April 2017. During the pendency of the arbitration, Gentry and the plaintiff homeowners reached a settlement of their dispute, pursuant to which Gentry agreed to pay approximately $90 million to the plaintiff homeowners.

In October 2017, Gentry demanded that the Company pay Gentry the amount it paid the plaintiff homeowners to settle their claims, asserting the Company was responsible for breach of warranty, negligent misrepresentation and fraud in connection with the supply of strap-tie holdowns and mud-sill anchor products to Gentry. As of the date of this Quarterly Report on Form 10-Q, Gentry had not yet initiated legal proceedings against the Company.

~~The Company admits no liability in connection with the~~ ~~Nishimura~~ case. At this time, the Company cannot reasonably ascertain the likelihood that it will be found responsible for substantial damages to Gentry or to the homeowners should they appeal; whether any legal theory against the Company might be viable, or the extent of the liability the Company might face if Gentry were to proceed against it.

The Company will vigorously defend any claims against it, whether appeal by the plaintiff homeowners, or third party claims by Gentry. Based on facts currently known to the Company and subject to future events and circumstances, the Company believes that all or part of any claims that any party might seek to allege against it related to the ~~Nishimura~~ ~~case may be covered by its insurance policies.~~

~~Charles Vitale, et al. v. D.R. Horton, Inc. and D.R. Horton-Schuler Homes, LLC~~, Civil No. 15-1-1347-07, a putative class action lawsuit, was filed in the Hawaii First Circuit on July 13, 2015, in which homeowner plaintiffs allege that all homes built by D.R Horton/D.R. Horton-Schuler Homes (collectively "Horton Homes") in the State of Hawaii have strap-tie holdowns that are suffering premature corrosion. The complaint alleges that various manufacturers make strap-tie holdowns that suffer from such corrosion, but does not identify the Company’s products specifically. The Company is not currently a party to the ~~Vitale~~ ~~lawsuit, but the lawsuit in the future could potentially involve the Company’s strap-tie holdowns.~~

~~If claims are asserted against the Company in the~~ ~~Vitale~~ case, it will vigorously defend any such claims, whether brought by the plaintiff homeowners, or third party claims by Horton Homes. Based on facts currently known to the Company and subject to future events and circumstances, the Company believes that all or part of any claims that any party might seek to allege against it related to the ~~Vitale~~ ~~case may be covered by its insurance policies.~~

~~Given the nature and the complexities involved in the~~ ~~Nishimura~~ ~~and~~ ~~Vitale~~ proceedings, the Company is unable to estimate reasonably a likelihood of possible loss or range of possible loss until the Company knows, among other factors, (i) whether it will be named in either lawsuit by any party; (ii) the specific claims and the legal theories on which they are based (iii) what claims, if any, might be dismissed without trial, (iv) the extent of the claims, including the size of any potential class, particularly as damages are not specified or are indeterminate, (v) how the discovery process will affect the litigation, (vi) the settlement posture of the other parties to the litigation, (vii) the extent to which the Company’s insurance policies will cover the claims or any part thereof, if at all, (viii) whether class treatment is appropriate; and (ix) any other factors that may have a material effect on the litigation.

While it is not feasible to predict the outcome of proceedings to which the Company is not currently a party, or reasonably estimate a possible loss or range of possible loss for the Company related to such matters, in the opinion of the Company, either the likelihood of loss from such proceedings is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to the Company’s financial position, results of operations or cash flows either individually or in the aggregate. Nonetheless, the resolution of any claim or litigation is subject to inherent uncertainty and could have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

~~9. Stock-Based Incentive Plans~~

The Company currently has one stock-based incentive plan, the 2011 Plan, which incorporates and supersedes its two previous plans except for awards previously granted under the two plans (see "Note 1 Basis of Presentation — ~~Accounting for Stock-Based~~

~~Compensation”~~). Generally, participants of the 2011 Plan have been granted stock-based awards, only if the applicable Company-wide and/or profit-center operating goals, or strategic goals, established by the Compensation and Leadership Development Committee (the "Committee") of the Board at the beginning of the year, were met. In 2017, some of the grants made will vest only if Company-wide and/or profit-center operating goals established by the Committee at the beginning of the year are met.

The Company granted restricted stock units (“RSUs”) under the 2011 Plan in 2015, 2016 and 2017. The fair value of each restricted stock unit award is estimated on the measurement date as determined in accordance with GAAP and is based on the closing market price of the underlying Company's common stock on the day of the grant or the immediately preceding the trading date. The fair value excludes the present value of the dividends that the RSUs do not participate in. The RSUs may be time-based, performance-based or time- and performance-based. The restrictions on the time-based RSUs granted to our named executive officers and certain members of our senior management in 2017 and prior generally lapse on the date of the award and each of the first, second and third anniversaries of the date of the award. The restrictions on the time-based RSUs granted in 2017 generally lapse on the first, second, third and fourth anniversaries of the date of the award. The restrictions on the performance-based RSUs granted to our named executive officers and certain members of the Company’s senior management in 2017 and prior, in addition to their time-based RSUs, generally lapse following a performance period set for the RSUs on the date of the award, and shares of our common stock underlying such awards are subject to performance-based adjustment before becoming vested. In addition, the restrictions on the time- and performance-based RSUs granted to our employees in 2017 generally lapse on the first, second, third and fourth anniversaries of the date of the award, provided that the applicable performance goals are achieved within the year of grant. Generally, performance-based awards (including time- and performance-based awards) granted under the 2011 Plan may vest following the end of the performance periods only if the applicable performance goals are achieved within such periods.

Under the 2011 Plan, or the applicable grant agreement, the vesting of RSUs granted thereunder may accelerate in four situations: (1) retirement after meeting certain age and/or service tenure conditions, (2) death, (3) disability, and (4) certain situations linked to a change in our control or our sale of assets. In case of early vesting of performance-based awards in any one of the four situations, shares of the underlying stock that could eventually vest in favor of the officer will be prorated based on the early-vesting date and the date when the applicable vesting period is scheduled to expire.

On February 4, 2017, 606,299 RSUs were awarded to the Company's employees, including officers, at an estimated fair value of $43.42 per share, based on the closing price on February 3, 2017. On May 16, 2017, 10,066 RSUs were awarded to each of the Company's seven independent directors at an estimated value of $41.52 per share based on the closing price of shares of the Company's common stock on May 15, 2017, which RSUs vested fully on the date of the grant.

~~The following table summarizes changes to the Company’s unvested RSUs for the nine months ended September 30, 2017:~~

Shares
Weighted-
Average Price

Aggregate
Intrinsic
Value *
Unvested Restricted Stock Units (RSUs) (in thousands) (in thousands)
Outstanding at January 1, 2017 615
$ 31.81
26,915
Awarded 616

Vested (327 )

Forfeited (38 )

Outstanding at September 30, 2017 866
$ 36.14
$ 42,469
Outstanding and expected to vest at September 30, 2017 844
$ 36.11
$ 41,366

The total intrinsic value of RSUs vested during the nine-month periods ended September 30, 2017 and 2016, was $11.0 million and $10.8 million, respectively, based on the market value on the award date.

~~No stock options were granted in 2016 or in the first nine months of 2017.~~

~~The following table summarizes the changes to the Company’s outstanding non-qualified stock options for the nine months ended September 30, 2017:~~

Shares
Weighted-
Average
Exercise Price

Weighted-
Average
Remaining
Contractual Life

Aggregate
Intrinsic
Value *
Non-Qualified Stock Options (in thousands) (in years) (in thousands)
Outstanding at January 1, 2017 251
$ 29.66
1.1 3,558
Exercised (120 )

Forfeited —

Outstanding and exercisable at September 30, 2017 131
$ 29.66
0.3 $ 2,534

~~The total intrinsic value of stock options exercised was $1.7 million and $2.4 million during nine-month periods ended September 30, 2017 and 2016, respectively.~~

As of September 30, 2017, there was $17.3 million, unrecognized cost related to unvested stock-based compensation arrangements under the 2011 Plan for awards made through February 2017. The portion of this cost related to RSUs awarded through May 2017 (as discussed above) is expected to be recognized over a weighted-average period of 2.3 years.

~~10.~~15. Segment Information

The Company is organized into ~~three reportable segments. The~~3 reporting segments ~~are~~ defined by the regions where the Company’s products are manufactured, marketed and distributed to the Company’s customers. The ~~three regional~~3 reporting segments are the North America segment ~~comprising~~(comprised primarily of the ~~United States~~Company’s operations in the U.S. and ~~Canada;~~Canada), the Europe segment, ~~comprising continental Europe and the United Kingdom;~~which includes ETANCO, and the Asia/Pacific segment ~~which the Company believes is not significant to its overall performance, comprising~~(comprised of the Company’s operations in ~~China, Hong Kong,~~Asia, the South Pacific, and the Middle ~~East. China and Hong Kong operations are manufacturing and administrative support locations, respectively.~~East). These ~~three reportable~~ segments are similar in several ways, including the types of materials used, the production processes, the distribution channels and the product applications.

The ~~Company’s measure~~Administrative & All Other column primarily includes expenses such as self-insured workers compensation claims for employees, stock-based compensation for certain members of ~~profit~~management, interest expense, foreign exchange gains or ~~loss for its reportable segments is~~losses and income ~~(loss) from operations.~~tax expense, as well as revenues and expenses related to real estate activities.

The following tables illustrate certain measurements used by management to assess the performance of its reportable segments as of or ~~for~~ the following periods:

* ~~The sales~~Sales to other segments are eliminated in consolidation.

** Beginning in 2022, the Company changed its presentation of its North America and Administrative and all other segment's statement of operations to display allocated expenses and management fees as a separate item below income from operations. During 2021, allocated expenses and management fees between the 2 segments were previously included in gross profit, operating expenses and in income from operations and been adjusted herein to conform to 2022 presentation. Consolidated income of operations, income before tax and net income for all periods presented below are not affected by the change of operations.

Cash collected by the Company’s ~~United States~~U.S. subsidiaries is routinely transferred into the Company’s cash management accounts and, therefore ~~has been included~~is in the total assets of “Administrative and all other.” Cash and cash equivalent balances in the “Administrative and all other” segment were ~~$116.0~~$167.4 million, ~~$128.6~~$238.3 million, and ~~$137.4~~$223.5 million, as of ~~September~~June 30, ~~2017~~2022 and ~~2016,~~2021, and December 31, ~~2016,~~2021, respectively. ~~Total "Administrative and all other" assets are net of inter-segment due to and from accounts eliminated in consolidation.~~

~~While the Company manages its business by geographic segment, presented as additional information, the following table illustrates the distribution of the~~The Company’s ~~net sales by product group for the following periods:~~

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2017 2016 2017 2016

Wood construction products $ 224,317
$ 193,513
$ 639,207
$ 562,025
Concrete construction products 38,051
37,461
105,785
98,445
Other 108
—
353
—
Total $ 262,476
$ 230,974
$ 745,345
$ 660,470

~~Wood~~wood construction products include connectors, truss plates, fastening systems, fasteners and pre-fabricated shearwalls and are used for connecting and strengthening wood-based construction primarily in ~~the~~ residential ~~construction market. Concrete~~and commercial construction. Its concrete construction products include adhesives, specialty chemicals, mechanical anchors, carbide drill bits, powder actuated tools and reinforcing fiber ~~reinforcing~~ materials and are used for restoration, protection or strengthening concrete, masonry and steel construction in residential, industrial, commercial and infrastructure construction. The table below illustrates the distribution of the Company’s sales by product group as additional information for the following periods:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021

Wood construction products	$	514,832	$	355,787	$	950,191	$	657,365
Concrete construction products	78,209		54,305		136,185		99,828
Other	191		189		426		729
Total	$	593,232	$	410,281	$	1,086,802	$	757,922

16. Subsequent Events

On July 27, 2022, the ~~fourth quarter~~Company’s Board of ~~2017, the Company announced employee reductions in the North America and Europe segments and related~~Directors (the "Board") declared a quarterly cash dividend of $0.26 per share, estimated ~~severance expenses of approximately $3.0 million to $3.5 million, most of which~~ to be ~~recorded~~$11.2 million in total. The dividend will be payable on October 27, 2022, to the ~~fourth quarter~~Company's stockholders of ~~2017.~~record on October 6, 2022.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Each of the terms the “Company,” “we,” “our,” “us” and similar terms used herein refer collectively to Simpson Manufacturing Co., Inc., a Delaware corporation, and its wholly-owned subsidiaries, including Simpson Strong-Tie Company Inc., unless otherwise stated. The Company regularly uses its website to post information regarding its business and governance. The Company encourages investors to use http://www.simpsonmfg.com as a source of information about the Company. The information on our website is not incorporated by reference into this report or other material we file with or furnish to the Securities and Exchange Commission (the "SEC"), except as explicitly noted or as required by law.

The following ~~is a~~ discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company’s consolidated financial condition and results of ~~operations for the Company for the three months and nine months ended September 30, 2017. The following~~operations. This discussion ~~and analysis~~ should be read in conjunction with the ~~interim Condensed Consolidated Financial Statements~~accompanying condensed consolidated financial statements and ~~related Notes~~notes thereto included in ~~Part I, Item 1, "Financial Statements”~~this report.

“Strong-Tie” and our other trademarks appearing in this report are our property. This report contains additional trade names and trademarks of ~~this Quarterly Report on Form 10-Q. The following discussion and analysis contain forward-looking statements that reflect~~other companies. We do not intend our ~~plans, estimates, and beliefs as discussed in the “Note About Forward-Looking Statements” at the beginning~~use or display of ~~this Quarterly Report on Form 10-Q. Our actual results could differ materially from those plans, estimates, and beliefs. Factors that could cause~~other companies’ trade names or ~~contribute~~trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these ~~differences include those discussed below and elsewhere in this~~companies.

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as ~~well~~amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “target,” “continue,” “predict,” “project,” “change,” “result,” “future,” “will,” “could,” “can,” “may,” “likely,” “potentially,” or similar expressions that concern our strategy, plans, expectations or intentions. Forward-looking statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, business outlook, priorities, expectations and intentions, expectations for sales growth, comparable sales, earnings and performance, stockholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, the integration of the acquisition of ETANCO, our strategic initiatives, including the impact of these initiatives, on our strategic and operational plans and financial results, and any statement of an assumption underlying any of the foregoing and other statements that are not historical facts. Although we believe that the expectations, opinions, projections and comments reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and we can give no assurance that such statements will prove to be correct. Actual results may differ materially from those expressed or implied in such statements.

Forward-looking statements are subject to inherent uncertainties, risks and other factors that are difficult to predict and could cause our actual results to vary in material respects from what we have expressed or implied by these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those expressed in our forward looking statements include, among others, the impact of the COVID-19 pandemic on our operations and supply chain, the operations of our customers, suppliers and business partners, and the successful integration of ETANCO and those discussed ~~in Part I,~~under Item ~~1A, “Risk Factors”~~1A. Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2021. Additional risks include: the cyclicality and impact of general economic conditions; changing conditions in global markets including the impact of sanctions and tariffs, quotas and other trade actions and import restrictions; the impact of pandemics, epidemics or other public health emergencies; volatile supply and demand conditions affecting prices and volumes in the markets for both our products and raw materials we purchase; the impact of foreign currency fluctuations; potential limitations on our ability to access capital resources and borrowings under our existing credit agreement; restrictions on our business and financial covenants under our credit agreement; reliance on employees subject to collective bargaining agreements; and or ability to repurchase shares of our common stock and the amounts and timing of repurchases, if any. To the extent that the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of such risks and other factors.

~~Business~~ We caution that you should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required under the federal securities laws or the rules and regulations of the SEC, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC that advise of the risks and factors that may affect our business.

We design, manufacture and sell building construction products that are of high quality and performance, easy touse and cost-effective for customers. We operate in three business segments determined by geographic region: North America,Europe and Asia/Pacific.

On April 1, 2022, the Company successfully completed the acquisition of ETANCO, a manufacturer of fixing and fastener products headquartered in France, for $805.4 million (730 million euros(1)) net of cash.

ETANCO's primary product applications directly align with the addressable markets in which the Company operates. Leveraging ETANCO's leading market position in Europe, following the acquisition, the Company would expand its portfolio of solutions, including mechanical anchors, fasteners and commercial building envelope solutions, as well as significantly increase its market presence across Europe. The acquisition of ETANCO has provided the Company access into new commercial building markets such as façades, waterproofing, safety and solar, as well as grow its share of direct business sales in Europe.

Upon announcing the acquisition, the Company expected to realize operating income synergies of approximately $30.0 million, on an annual run rate basis following integration efforts. We continue to expect that these synergies will be achieved through expanding the Company's market share by selling its products into new markets and channels, incorporating ETANCO's products into the Company's existing channels, as well as procurement optimization, manufacturing and operating expense efficiencies. Finally, interest expense has and will continue to increase as a result of the incurrence of debt to finance the acquisition of ETANCO.

Since we announced the transaction back in late December, planning for and initiating the integration of ETANCO has been our primary focus and we believe it has been progressing according to plan. We assembled a project management office that includes a leading globally recognized external advisory consulting group together with a multi-disciplinary team of key management from both Simpson and ETANCO. Because of our complementary cultures and values, our combined team has been working extremely well together as we develop detailed plans for each of our specific integration tracks. We believe our approach has contributed to a high employee retention rate throughout the transition. After several months, we have found no material adjustments to our previously identified synergy opportunities, although the realization of the full amount is subject to change based on the current environment in Europe. With the groundwork we have laid so far, we believe we are still well positioned to capture meaningful benefits from those synergies in the coming years.

At our March 23, 2021 analyst and investor day, we unveiled several key growth initiatives that we believe will help us continue our track record of achieving above market revenue growth through a combination of organic and inorganic opportunities. Our ~~primary business strategy is~~organic opportunities are focused on expansion into new markets within our core competencies of wood and concrete products. These key growth initiatives will focus on the original equipment manufacturers, repair and remodel or do-it-yourself, mass timber, concrete and structural steel markets.

In order to grow ~~through increasing our market share~~in these markets, we aspire to be among the leaders in engineered load-rated construction building products and ~~profitability in Europe; growing our share in the concrete space;~~systems and ~~continuing to develop our software to support our core wood products offering~~building technology while leveraging our ~~strengths~~engineering expertise, deep-rooted relationships with top builders, engineers, contractors, code officials and distributors, along with our ongoing commitment to testing, research and innovation. Importantly, we currently have existing products, testing results, distribution and manufacturing capabilities for our key growth initiatives. Although these initiatives are all currently in ~~engineering,~~different stages of development, our successful growth in these areas will ultimately be a function of expanding our sales and/or marketing functions to promote our products to different end users and distribution channels, expanding our customer base, and potentially introducing new products in the future.

We also highlighted our five-year ambitions during the March 2021 analyst and investor day, which are as follows:

•Strengthen our values-based culture;

•Be the business partner of choice;

•Strive to be an innovative leader in the markets we operate;

•Continue above market growth relative to the United States housing starts;

•Remain within the top quartile of our proxy peers for operating income margin; and

•Remain in the top quartile of our proxy peers for return on invested capital.

We have executed on several key milestones since we first announced our key strategic initiatives back in 2021.Here are a few examples:

•We acquired ETANCO and are already seeing tangible results in our actual operations, as well as for the future including the use of Simpson and ETANCO branded commercial concrete products in the construction of certain venues for the upcoming Olympic games in Paris.

•Realigned our sales teams to more specifically focus on five end use markets – Residential, Commercial, OEM, National Retail and Building Technology, which has led to new customer and project wins within five of our key growth initiatives.

•Invested in a venture capital fund focused on the home building industry and related new technologies.

•Entered into a joint indirect investment in the North America Hundegger equipment sales and ~~distribution,~~service representative partner, Hundegger USA, LLC to increase each parties' sales in the mass timber and component manufacturing markets by offering North America customers end-to-end solutions, including integrated software from a single source.

•Formed a strategic alliance with Structural Technologies that will allow both parties jointly deliver complete end-to-end strengthening solutions to engineering professionals, contractors and owners across multiple construction and repair markets,

•In the OEM market, we were recently awarded the opportunity to supply our ~~strong brand name.~~complete wood solutions, including specialty fasteners and other products, for the construction of custom wood base crates. We ~~believe these initiatives~~accomplished some key project wins within the Mass Timber space including our solutions are now being specified to construct mock-up structures from coast to coast to serve as a mass timber training course for union carpenters and ~~objectives~~ are ~~crucial to not only offer~~also being utilized in the construction of a ~~more complete solution to~~new home office for a large U.S.-based company.

•Within the National Retail market, we focused on growth in the repair and remodel and do-it-yourself markets by completing a reset of some of our fastener sets with one of our key customers, and ~~bolster~~increased our ~~sales~~publicity for Outdoor Accents in both The Home Depot and Lowe’s.

•Within the Commercial market, we expanded our offerings, including the expansion of ~~core wood connector products, but also to mitigate the cyclicality of the U.S. housing market.~~

~~On October 30, 2017, we announced the 2020 Plan to provide additional transparency into~~ our ~~strategic plan and financial objectives. Subject to future events and circumstances, our 2020 Plan is centered on three key operational objectives as further described below.~~

~~First, a continued focus on organic growth with a goal to achieve organically a net sales compound annual growth rate of approximately8% from $860.7 million reported in fiscal 2016 through fiscal 2020.~~

As we make progress on our growth initiatives, ~~as well as the expenses associated with our ongoing SAP implementation.~~

~~We believe our efforts~~above market growth relative to ~~achieve the 2020 Plan will contribute to improved business performance and operating results, improve returns on invested capital~~⁽¹⁾ ~~and allow us to be more aggressive in repurchasing shares of our stock in the near-term.~~

We believe our ability to achieve industry-leading margins from a gross profit and operating income standpoint is due to the high level of value-added services that we provide to our customers. Aside from our strong brand recognition and trusted reputation, Simpson is unique due to our extensive product testing capabilities and our state-of-the-art test lab; strong customer support and education for engineers, builders and contractors; deep 40-plus year relationships with engineers that get our products specified on the blueprint and pulled through to the job site; product availability with delivery in typically 24 hours or less; and an active involvement with code officials to improve building codes and construction practices. Based on current information, we expect the competitive environment to be relatively stable. We also expect U.S. ~~single-family~~ housing starts ~~to continue to grow as a percentage~~ in fiscal 2022 and beyond. These select key examples further emulate our Founder, Barclay Simpson’s, nine principles of doing business, and more specifically the ~~mid to high single digits over the next few years, which should support a sustainable organic revenue growth outlook in North America for many of our products.~~focus and obsession on customers and users.

~~We have invested in strategic initiatives to help us perform throughout all industry cycles, such~~as scaling up our wood construction products operations in Europe and ongoing development of our software solutions, including truss software, as our market strategy is to sell engineered product solutions. In support of this effort, we acquired Gbo Fastening Systems AB (“Gbo Fastening Systems”)

~~and CG Visions, Inc. (“CG Visions”) in January 2017, as we believe these two acquisitions fit into our current business model and growth strategy.~~

While acquisitions were part of a dual-fold approach to growth in the past, our go-forward strategy will focus on organic growth, supported by strategic capital investments in the business. As such, we will de-emphasize acquisitions activities going forward, especially as it relates to the concrete space. An exception may occur if the right opportunity were to arise in our core fastener space, which is the particular area where we believe it would be beneficial to gain additional production capacity to support our wood business.

Factors Affecting Our Results of Operations

The COVID-19 pandemic and Russia’s invasion of Ukraine has severely affected global economic conditions, resulting in substantial volatility in the financial markets, increased unemployment, and considerable operational challenges. The Company’s management team continues to monitor and manage its ability to operate effectively and, to date, the Company has not experienced any significant disruptions within its supply chain. Our supply chain partners are supportive, and continue to do their part to ensure that service levels to our customers remain strong. To date, we have not experienced any supply-chain disruptions and continued to meet our customers’ needs despite the challenges. We will continue to communicate with our supply chain partners to identify and mitigate risk and to manage inventory levels.

The Company’s business, financial condition and results of operations depends in part on the level of United States, housing starts and residential construction activity. Though single-family housing starts increased significantly over the past twelve months, we have seen demand begin to decline during the past quarter due to supply-chain factors, inflation and interest rate increases affecting new home starts and completions. With almost a full year of recent sales price increase in effect, we believe sales will likely increase during the 3rd quarter over the prior year comparable period even if demand decreases. These increased sales prices are expected to be offset by increasing raw material costs, sourcing logistics complications and a tight labor market, which could negatively affect operating margins for 2022.

Management continues to monitor the impact of rising material input and product logistics costs on the Company's financial condition, liquidity, operations, suppliers, industry, and workforce.

Unlike lumber or other products that have a more direct correlation to United States housing starts, our products are used to a greater extent in areas that are subject to natural forces, such as seismic or wind events. Our products are generally used in a sequential ~~process~~progression that follows the construction process. Residential and commercial construction begins with the

foundation, followed by the wall and the roof systems, and then the installation of our products, which flow into a project or a house according to these schedules. ~~Foundation product~~

In prior years, our sales ~~could be considered a leading indicator for our product sales. Sales of foundation products in the third quarter of 2017 increased compared to the same period in 2016.~~

~~Our sales also tend to be~~were heavily seasonal with operating results varying from quarter to ~~quarter. With some exceptions, our~~quarter depending on weather conditions that could delay construction starts. Our sales and income have historically been lower in the first and fourth quarters than in the second and third quarters of a fiscal ~~year, as~~year. Due to efforts in diversifying our ~~customers tend to purchase construction materials in the late spring~~global footprint, most notably with our acquisition of ETANCO, sales from our product line, customer base and ~~summer months for the construction season. In addition, weather conditions,~~customer purchases are becoming less seasonal. Political and economic events such as ~~extended cold or wet weather, which affect~~rising energy costs, volatile steel market, stressed product transportation systems and ~~sometimes delay installation~~increasing interest rates can also have an effect on our gross and operating profits as well as the amount of ~~some of our products,~~inventory on-hand. Changes in raw material cost could negatively affect our ~~results~~gross profit and operating margins depending on the timing of ~~operations. Political and economic events~~raw material purchases or how much sales prices can ~~also affect our~~be increased to offset higher raw material costs. Delays in receiving products or shipping sales ~~and profitability.~~

~~Operating expenses as a percentage of net sales were under 28% for the third quarter of 2017 and down 104 basis points from the prior year quarter~~orders, as well as ~~down 185 basis points compared to the second quarter of 2017, primarily due to lower stock-based compensation expense~~increased transportation costs, could negatively impact sales and ~~cash profit sharing expense on lower~~ operating ~~income and reduced payouts under our executive officer cash profit sharing plan.~~profits.

In January 2017, we acquired CG Visions for approximately $20.8 million subject to specified holdback provisions and post-closing adjustments. This acquisition is expected to enable us to build closer partnerships with builders by offering software and services to help them control costs and increase efficiency at all stages of the home building process. We expect to look for opportunities to incorporate our products into CG Visions' building information modeling ("BIM") packages and apply CG Visions’ expertise to our existing and future software initiatives.

In January 2017, we acquired Gbo Fastening Systems for approximately $10.2 million. Gbo Fastening Systems manufactures and sells a complete line of European approved CE-marked structural fasteners, mostly in northern and eastern Europe, which we expect to eventually distribute and sell in western Europe. We have begun distributing into the Nordic countries wood connector products that were manufactured in the Company's manufacturing facilities in western Europe. Further, we expect to access Gbo Fastening Systems' expertise in product development and testing, and proficiency in fastener manufacturing and surface treatment, to strengthen Gbo Fastening Systems' global presence and contribute engineering expertise in automatic fastening systems and fastener collation to help broaden its fastener and structural connectors lines.

In July 2017, the Company entered into an agreement to sell all of the outstanding shares in Gbo Fastening Systems' Poland and Romania subsidiaries ("Gbo Poland" and "Gbo Romania", respectively). The sale of Gbo Poland closed on September 29, 2017, and the sale of Gbo Romania closed on October 31, 2017. The Company will retain Gbo Fastening Systems' operations in Sweden and Norway.

In July 2016, our Board of Directors (the "Board") approved a plan to replace our current in-house enterprise resource planning ("ERP") and externally sourced accounting platforms with a fully integrated ERP platform from SAP America, Inc. ("SAP") in multiple phases by location over a period of three to four years at all facilities plus our headquarters, with a focus on configuring,

instead of customizing, the standard SAP modules. We anticipate the ERP implementation project will cost approximately $30 million to $34 million through 2019, including capital expenditures. Annual operating expenses will increase from 2017 to 2024 as a result of the ERP project, partly due to the amortization of related capitalized costs.

We believe that the ERP project has progressed well in the first nine months of 2017 and is currently on track and on budget. As of September 30, 2017, we have capitalized $8.3 million of the costs associated with the ERP project. We expect to go live with our first locations in the first quarter of 2018. We anticipate that, as the project progresses further into 2018, we will spend more time and resources in training our staff for the new platform, as opposed to configuring the SAP modules, and we expect to record the cost associated with such training as expense.

Business Segment Information

~~Our~~Historically our North America segment has generated more revenues ~~primarily~~ from wood construction products compared to concrete construction products. Due to improved economic conditions, including an increase in housing starts, net sales in regions of the segment have trended up, primarily due to increases in unit sales volumes and an approximately 4% price increase for our connector products in the United Stated effective on December 1, 2016, as well as added revenues from CG Visions. See “North America” below. Our ~~truss sales decreased slightly in the third quarter of 2017. Our truss specialists continue to convert small to medium size truss customers to our design and management software in 2017.~~

During the third quarter of 2016, we initiated a multi-year plan to increase our North America factory production efficiency, aiming to achieve a 75% factory utilization rate on two full shifts by moving high-volume connector production from both our Riverside and Western Canada facilities to our other three manufacturing locations in North America. As of September 30, 2017, we had relocated 100% of our planned high-volume connector production. Our factory utilization was approximately 45% when this project began and we are currently operating at approximately 60% factory utilization. Based on current information and subject to future events and circumstances, we estimate this transition will save approximately $3.0 million per year, mostly in production costs. Both the Riverside and Western Canada locations will continue as sales and distribution locations, and maintain the capability to manufacture custom orders to continue to meet the Company's service and product availability commitments to customers in the Southwestern region of the United States and Western region of Canada.

In late 2016, we collaborated with The Home Depot, Inc. (“The Home Depot”) to roll out our mechanical anchor line of products that are available at The Home Depot. This collaboration increased a portion of our finished goods inventory and we expect to continue to introduce our mechanical anchor line of products through approximately 1,900 of The Home Depot store locations throughout 2017 and beyond. Once the rollout is completed, we anticipate this opportunity will meaningfully contribute to our concrete business lines going forward and estimate that on an annualized basis it could potentially increase our net sales by approximately $30 million. In addition, we are presenting the BIM platform acquired from CG Visions to various builders to showcase the software and for us to determine which modules and services that builders might be interested in using to support their business.

~~Our Europe segment generates more revenues from~~ wood ~~construction products than concrete construction products. Wood~~ construction product sales increased ~~67%~~35.2% for the quarter ended June 30, 2022 compared to June 30, 2021, and our concrete construction product sales increased 24.0% over the same periods, due to product price increases throughout 2021 in an effort to offset rising raw material costs. These product price increases were also the primary contributor to gross profits and operating profits increasing over the same comparable periods. As a result of the product price increases phased in during 2021, full phased in product price increases for 2022 could result in $300.0 million in additional net sales compared to 2021. We currently anticipate further gross margin and operating margin compression beginning in the ~~third quarter~~latter half of ~~2017~~2022 compared to 2021 as higher priced raw materials and rising average cost of steel on hand offset the product price increases.

During 2022, we have been reviewing the footprint for our U.S. operations with assistance from a third party. As a result, we identified facility expansions in the U.S. that will improve our overall service, production efficiencies and safety in the workplace, as well as reduce our reliance on certain outsourced, finished goods and component products and continue to ensure we have ample capacity to meet our customer needs. We recently announced an expansion of our Ohio facility and the project has commenced. These investments reinforce our core business model differentiators to remain the partner of choice as we continue to produce products locally and ensure superior levels of customer service. Investments in these expansions have already started this year and will continue into 2024.

Europe sales increased 136.1% for the quarter ~~of 2016,~~ended June 30, 2022 compared to June 30, 2021, primarily due to the acquisition of ~~Gbo Fastening Systems.~~ETANCO, which contributed $80.3 million in net sales, along with product price increases, mostly offset by lower volumes and the negative effect of approximately $6.9 million in foreign currency translation due a strengthening United States dollar. Wood construction product sales increased 135.3% for the quarter ended June 30, 2022 compared to June 30, 2021 with ETANCO contributing $64.9 million in wood construction product sales. Concrete construction product sales are mostly project based, and ~~net~~ sales increased ~~11%~~139.2% for the quarter ended June 30, 2022 compared to June 30, 2021 with ETANCO contributing $15.4 million in concrete construction product sales. The Company, including ETANCO, have suspended all sales and distribution activity to Russia and Belarus. We estimate annual sales to these countries would have been less than $5.0 million. Europe gross profit of $39.0 million included $19.2 million from the acquisition of ETANCO, net of $9.2 million in fair-value adjustments for inventory costs as a result of purchase accounting, most of which is a non-recurring charge. The Company expects there will be an additional nominal amount recognized in the third quarter of 2017 compared to the third quarter of 2016, primarily due to the completion of large projects during the third quarter of 2017. We are uncertain whether concrete construction product net sales will continue to grow at this pace for the remainder of 2017. In connection with the Gbo Fastening Systems acquisition, we estimated demand for wood connector products for the Nordic region and have placed inventory in Sweden. Our Western European locations are working on sales and marketing plans2022 for a ~~complete line~~fiscal year total of ~~fastener products~~$10.5 million in fair value adjustments. Europe reported operating income of $5.6 million, including ETANCO's operating loss of $1.6 million which was net of $9.2 million in inventory adjustments as noted above, $4.2 million of amortization expense on acquired intangible assets and ~~expect~~$5.9 million for integration costs for a total of $19.3 million. The Company expects to ~~introduce them~~incur additional costs in 2022 as it continues to ~~our customers by~~integrate ETANCO into its European operations. The Company has not realized any synergies from the ~~end of 2017. See “Europe” below.~~combination to date.

Our Asia/Pacific segment has generated revenues from both wood and concrete construction products. We ~~have closed our sales offices located in China, Thailand and Dubai; and discontinued our selling activities in Hong Kong, due to continued losses in the regions. We~~ believe that the Asia/Pacific segment is not significant to our overall performance.

Since June 2021, inventory pounds in North America, which is the bulk of our inventory, increased 14% while the weighted average cost per pound of total on hand increased approximately 31%. Based on our current expectations, we are anticipating continued raw material cost pressure for fiscal 2022. As we work through our on hand inventory and continue to buy raw material at these much higher prices, our costs of goods sold are expected to continue increasing modestly during the second



(1	)	When referred to above, the Company’s return on invested capital (“ROIC”) for a fiscal year is calculated based on (i) the net income of that year as presented in the Company’s consolidated statements of operations prepared pursuant to generally accepted accounting principles in the U.S. (“GAAP”), as divided by (ii) the average of the sum of the total stockholders’ equity and the total long-term liabilities at the beginning of and at the end of such year, as presented in the Company’s consolidated balance sheets prepared pursuant to GAAP for that applicable year. As such, the Company’s ROIC, a ratio or statistical measure, is calculated using exclusively financial measures presented in accordance with GAAP.

half of fiscal 2022, even if prices for raw material decline, as the impact from averaging raw material costs typically lags our product price increases. We began to see this accelerating increase in raw material costs occur beginning in the third quarter 2021.

The Company updated its 2022 financial outlook to include the acquisition of ETANCO, two quarters of actual results, and its latest expectations regarding demand trends, raw material costs and operating expenses as of July 25, 2022. Based on business trends and conditions, the Company's current outlook for the full fiscal year ending December 31, 2022 is as follows:

•Operating margin is expected to be in the range of 19.0% to 21.0%, in-line with its more recent historical average as the Company has better visibility on raw material costs and expected results from its acquisition of ETANCO. The revised outlook includes $20.0 to $25.0 million in expected integration and transaction costs for the acquisition.

•Interest expense on the outstanding $250.0 million Revolving Credit Facility and Term Loans, which had initial borrowings of $450.0 million, is expected to be approximately $10.4 million, including the benefit from interest rate and cross currency swaps mitigating substantially all of the volatility from changes in interest rates.

•The effective tax rate is expected to be in the range of 25.5% to 26.5%.

•Capital expenditures are expected to be in the range of $80.0 million to $90.0 million including amounts attributable to ETANCO and expansion of the Ohio facility.

(1) Reflects EUR to USD exchange rate as of April 1, 2022.

Results of Operations for the Three Months Ended ~~September~~June 30, ~~2017,~~2022, Compared with the Three Months Ended ~~September~~June 30, ~~2016~~2021

Unless otherwise stated, the below results, when providing comparisons (which are generally indicated by words such as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the three months ended June 30, 2022, against the results of operations for the three months ended June 30, 2021. Unless otherwise stated, the results announced below, when referencing “both quarters,” refer to the three months ended June 30, 2021 and the three months ended June 30, 2022.

Beginning in 2022, the Company changed its presentation for both the North America and the Administrative and all other segment's statement of operations to display allocated expenses and management fees as a separate item below income from operations. During 2021, allocated expenses and management fees between the two segments were previously included in gross profit, operating expenses and in income from operations and have been adjusted herein to conform to the 2022 presentation. Consolidated income from operations, income before tax and net income for all periods presented below are not affected by the change in presentation

Second Quarter 2022 Consolidated Financial Highlights

The following table shows the change in the Company's operations from the three months ended June 30, 2021 to the three months ended June 30, 2022, and the increases or decreases for each category by segment:


	Three Months Ended										Three Months Ended
			Increase (Decrease) in Operating Segment
	June 30,		North				Asia/		Admin &		June 30,
(in thousands)	2021		America		Europe		Pacific		All Other		2022
Net sales	$	410,281	$	105,853	$	76,800	$	298	$	—	$	593,232
Cost of sales	213,835		61,538		58,075		407		44		333,899
Gross profit	196,446		44,315		18,725		(109)		(44)		259,333
Research and development and other engineering expense	14,169		2,506		225		44		(1)		16,943
Selling expense	33,167		5,190		6,690		26		1		45,074
General and administrative expense	47,410		534		6,259		(75)		4,291		58,419
Total operating expenses	94,746		8,230		13,174		(5)		4,291		120,436
Acquisition and integration related costs	—		—		5,864		—		—		5,864
Net loss (gain) on disposal of assets	(28)		(15)		—		—		—		(43)
Income from operations	101,728		36,100		(313)		(104)		(4,335)		133,076

Interest income (expense), net and other	(420)		7		(3,524)		1		564		(3,372)



Other & foreign exchange loss, net	(2,216)		(3,123)		(329)		713		3,065		(1,890)
Income (loss) before income taxes	99,092		32,984		(4,166)		610		(706)		127,814
Provision for income taxes	26,609		9,109		(2,579)		228		877		34,244
Net income (loss)	$	72,483	$	23,875	$	(1,587)	$	382	$	(1,583)	$	93,570

Net sales increased 44.6% to $593.2 million from $410.3 million primarily driven by the four product price increases we implemented in 2021 to offset rising raw material costs, and the acquisition of ETANCO which contributed $80.3 million in net sales. Wood construction product sales, including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented 87% of the Company's total sales in both the second quarters of 2022 and 2021, respectively. Concrete construction product sales, including sales of adhesives, chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials, represented 13% of the Company's total sales in both the second quarters of 2022 and 2021, respectively.

Gross profit increased 32.0% to $259.3 million from $196.4 million. Gross margins decreased to 43.7% from 47.9%, primarily due to the acquisition of ETANCO, which has a lower gross margin profile relative to the Company overall, and higher raw material costs overall. Gross margins decreased to 43.7% from 47.4% for wood construction products and decreased to 43.2% from 47.5% for concrete construction products, respectively.

Research and development and engineering expense increased 19.6% to $16.9 million from $14.2 million, primarily due to increases of $2.4 million in personnel costs and $0.4 million in material and supplies consumption.

Selling expense increased 35.9% to $45.1 million from $33.2 million, primarily due to increases of $5.5 million in personnel costs, $1.7 million in advertising & trade shows, $1.0 million in travel related costs, and $0.5 million in professional fees.

General and administrative expense increased 23.2% to $58.4 million from $47.4 million, primarily due to increases of $4.1 million in depreciation and amortization, $3.4 million in personnel costs, $1.4 million in professional and legal fees, $0.6 million in travel related costs and $0.4 million in stock compensation expense, offset by a decrease of $0.8 million in cash profit sharing expense.

Our effective income tax rate decreased to 26.8% from 26.9%.

Consolidated net income was $93.6 million, which includes a $2.0 million loss from ETANCO, compared to $72.5 million. Diluted earnings per share was $2.16 compared to $1.66.

The following table shows net sales by segment for the three months ended June 30, 2022 and 2021, respectively:


	North						Asia/
(in thousands)	America			Europe			Pacific			Total
Three months ended
June 30, 2021	$	350,557		$	56,438		$	3,286		$	410,281
June 30, 2022	456,410			133,238			3,584			593,232
Increase	$	105,853		$	76,800		$	298		$	182,951
Percentage increase	30.2		%	136.1		%	9.1		%	44.6		%

The following table shows segment net sales as percentages of total net sales for the three months ended June 30, 2022 and 2021, respectively:


	North America		Europe		Asia/ Pacific		Total
Percentage of total 2021 net sales	85	%	14	%	1	%	100	%
Percentage of total 2022 net sales	77	%	22	%	1	%	100	%

The following table shows gross profit by segment for the three months ended June 30, 2022 and 2021, respectively:


	North				Asia/	Admin &
(in thousands)	America		Europe		Pacific	All Other	Total
Three months ended
June 30, 2021	$174,984		$20,298		$1,207	$(43)	$196,446
June 30, 2022	219,299		39,023		1,098	(87)	259,333
Increase (decrease)	$44,315		$18,725		$(109)	$(44)	$62,887
Percentage Increase (decrease)	25.3	%	92.3	%	*	*	32.0	%

The following table shows gross margin by segment for the three months ended June 30, 2022 and 2021, respectively:

Results of Operations for the Six Months Ended June 30, 2022, Compared with the Six Months Ended June 30, 2021

Unless otherwise stated, the results announced below, when providing comparisons (which are generally indicated by words such as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2022, against the results of operations for the ~~three~~six months ended ~~September~~June 30, ~~2016.~~2021. Unless otherwise stated, the results announced below, when referencing “both ~~quarters,~~periods,” refer to the ~~three~~six months ended ~~September~~June 30, ~~2016~~2021 and the ~~three~~six months ended ~~September~~June 30, ~~2017. To avoid fractional percentages,~~2022

Beginning in 2022, the Company changed its presentation for both the North America and the Administrative and all ~~percentages~~other segment's statement of operations to display allocated expenses and management fees as a separate item below income from operations. During 2021, allocated expenses and management fees between the two segments were previously included in gross profit, operating expenses and in income from operations and have been adjusted herein to conform to the 2022 presentation. Consolidated income from operations, income before tax and net income for all periods presented below ~~were rounded to~~are not affected by the ~~nearest whole number.~~change in presentation.

Unless otherwise stated, the Company’s results below, when referencing “recent acquisitions,” refer to the August 2016 acquisition of Multi Services Dêcoupe S.A. ("MS Decoupe") and the January 2017 acquisitions of Gbo Fastening Systems and CG Visions; when referencing “recently acquired businesses,” refer to MS Decoupe, Gbo Fastening Systems and/or CG Visions, as applicable; and when referencing “acquired net sales,” refer to net sales of such acquired businesses, as applicable. When referencing the “recent North America acquisition,” the Company’s results below refer to the CG Vision acquisition; and when referencing “recent Europe acquisitions,” refer to the MS Decoupe and Gbo Fastening Systems acquisitions.

~~Third Quarter 2017~~Year-to-Date (6-month) 2022 Consolidated Financial Highlights

The following table illustrates the differences in ~~the~~ our operating results for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2022, from the ~~three~~six months ended ~~September~~June 30, ~~2016,~~2021, and the increases or decreases for each category by ~~segment:~~segment:

Net sales increased ~~14%~~43.4% to ~~$262.5~~$1,086.8 million from ~~$231.0 million. Recently acquired businesses accounted for $15.8~~$757.9 million ~~(50%) of the increase in net sales. Net sales to contractor distributors, dealer distributors, home centers and lumber dealers increased primarily~~ due to ~~increased home construction activity~~the implementation of product price increases at various times during 2021, and ~~average net sales unit prices.~~revenues from the acquisition of ETANCO. Wood construction product ~~net~~ sales, including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented ~~86% and 84%~~87% of the Company's total ~~net~~ sales in the ~~third quarters~~first six months of ~~2017~~2022 and ~~2016, respectively.~~2021. Concrete construction product ~~net~~ sales, including sales of adhesives, chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials, represented ~~14% and 16%~~13% of the Company's total ~~net~~ sales in the ~~third quarters~~first six months of ~~2017~~2022 and ~~2016, respectively.~~2021.

Gross profit increased 38.3% to ~~$119.9~~$496.1 million from ~~$113.5~~$358.7 million. Gross ~~profit~~ margins decreased to ~~46%~~45.6% from ~~49%. Recently acquired businesses had an average~~47.3%, primarily due to the acquisition of ETANCO, which has a lower gross ~~profit~~ margin ~~of 31% in~~profile relative to the ~~third quarter of 2017. The gross profit~~Company overall, and higher raw material costs overall. Gross margins ~~including some inter-segment expenses, which were eliminated in consolidation, and excluding other expenses that are allocated according to product group,~~ decreased to ~~46%~~45.7% from ~~50%~~47.0% for wood construction products and ~~increased~~decreased to ~~35%~~44.8% from ~~32%~~45.2% for concrete construction products.

Research and development and engineering expense ~~decreased 21%~~increased 14.1% to ~~$8.7~~$32.8 million from $10.9 million, mostly due to a reclassification of $2.5 million year-to-date expenses associated with recent the North America acquisition from engineering expense to selling expense and general and administrative expense as well decreases of $0.4 million in cash profit sharing expense and $0.3 million in stock-based compensation expense.

~~Selling expense~~ ~~increased 16% to $28.2 million from $24.3~~$28.8 million primarily due to increases of ~~$3.2~~$3.9 million in personnel costs, ~~$0.8~~$0.4 million in ~~advertising costs~~material and ~~$0.6~~supplies consumption, and $0.2 million in ~~amortization~~professional fees.

Selling expense ~~which was partly offset by decreases of $0.7 million in stock-based compensation expense and $0.5 million in cash profit sharing expense. Recent acquisitions~~ increased ~~selling expense by $2.0 million, including the reclassification of $0.3 million year-to-date expenses associated with the North America acquisition from engineering expense~~ to ~~selling.~~

~~General and administrative expense~~ ~~increased 12% to $36.5~~$81.9 million from ~~$32.5~~$64.0 million, primarily due to increases of ~~$4.0~~$6.9 million in personnel costs and sales commissions, $2.7 million in advertising & trade shows, $1.6 million in ~~depreciation expense, $1.0~~travel related costs, $0.7 million in professional fees, and $0.7 million cash profit sharing expense.

General and administrative expense increased to $112.2 million from $96.0 million, primarily due to increases of $5.9 million in ~~software licensing~~professional fees, $4.7 million in personnel costs, $3.4 million in depreciation and ~~maintenance~~amortization expenses, and ~~hosting expense, which was partly~~$1.1 million in travel related costs, offset by decreases of ~~$2.4~~$1.6 million in stock-based compensation, $0.5 million in cash profit sharing expense on lower income from operations (or "operating income") and reduced payouts under our executive officer cash profit sharing plan and $1.0 million in stock-based compensation. Recent acquisitions increased general and administrative expenses by $5.2 million, including the reclassification of $2.2 million year-to-date expenses, associated with the North America acquisition from engineering expense to selling expense.expenses.

~~Gain (adjustment) on bargain purchase of a business~~ - On January 3, 2017, we acquired Gbo Fastening Systems for approximately $10.2 million. This transaction was recorded as a business combination and resulted in a preliminary bargain purchase gain estimate of $8.4 million, which represented an estimate of the excess fair value of the net assets acquired and liabilities assumed over the consideration exchanged as of the acquisition date. In the third quarter of 2017, we completed our estimate of the fair value for the assets acquired and liabilities assumed and concluded that the fair value of the assets acquired and liabilities assumed was $16.5 million, which resulted in an adjusted bargain purchase gain of $6.3 million and a decrease of the bargain purchase gain of $2.1 million. This nonrecurring, non-operating income gain adjustment is included in the line item “Gain (adjustment) on bargain purchase of a business” in our results of operations for the three months ended September 30, 2017.

~~Gain on a disposal of a business -~~ ~~On September 29, 2017, we sold all of the outstanding shares of Gbo Poland for approximately $10.2 million, resulting in a gain of $0.4 million (both amounts are subject to post-closing adjustments).~~

Our effective income tax rate ~~increased~~decreased to ~~37%~~25.3% from 35%, primarily due to a reduction of the nonrecurring gain on a bargain purchase related to the Gbo Fastening Systems acquisition (see "Gain (adjustment) on bargain purchase of a business" above), which 25.8%.

Consolidated net income was ~~not taxable.~~

~~Net income~~ ~~was $28.2~~$188.1 million compared to ~~$29.8~~$122.9 million. Diluted ~~net income~~earnings per ~~common~~ share was ~~$0.59~~$4.34 compared to $0.62. The decrease in net income was primarily due to the $2.1 million reduction on the nonrecurring bargain purchase gain (see "Gain (adjustment) on bargain purchase of a business" above), which decreased diluted net income by $0.04 per common share.$2.82.

The following table represents net sales by segment for the ~~three-month~~six-month periods ended ~~September~~June 30, ~~2016~~2021 and ~~2017, respectively:~~2022:


	North						Asia/
(in thousands)	America			Europe			Pacific			Total
Six Months Ended
June 30, 2021	$	651,120		$	100,734		$	6,068		$	757,922
June 30, 2022	895,140			184,689			6,973			1,086,802
Increase	$	244,020		$	83,955		$	905		$	328,880
Percentage increase	37.5		%	83.3		%	14.9		%	43.4		%

North Asia/
(in thousands) America Europe Pacific Total
Three months ended

September 30, 2016 197,459
31,485
2,030
$ 230,974
September 30, 2017 213,254
47,137
2,085
262,476
Increase $ 15,795
$ 15,652
$ 55
$ 31,502
Percentage increase 8 % 50 % 3 % 14 %

The following table represents segment ~~net~~ sales as percentages of total net sales for the ~~three-month~~six-month periods ended ~~September~~June 30, ~~2016~~2021 and ~~2017,~~2022, respectively:


	North America		Europe		Asia/ Pacific		Total
Percentage of total 2020 net sales	86	%	13	%	1	%	100	%
Percentage of total 2021 net sales	82	%	17	%	1	%	100	%

North
America
Europe
Asia/
Pacific
Total
Percentage of total 2016 net sales 85 % 14 % 1 % 100 %
Percentage of total 2017 net sales 81 % 18 % 1 % 100 %

The following table represents gross profit by segment for the ~~three-month~~six-month periods ended ~~September~~June 30, ~~2016~~2021 and ~~2017, respectively:~~2022:


	North						Asia/		Admin &
(in thousands)	America			Europe			Pacific		All Other		Total
Six Months Ended
June 30, 2021	$	317,369		$	35,548		$	2,451	$	3,359	$	358,727
June 30, 2022	437,175			56,476			2,546		(83)		496,114
Increase (decrease)	$	119,806		$	20,928		$	95	$	(3,442)	$	137,387
Percentage increase	37.7		%	58.9		%	*		*		38.3		%

The following table represents gross margin by segment for the six-month periods ended June 30, 2021 and 2022:

North Asia/ Admin &
(in thousands) America Europe Pacific All Other Total
Three months ended

September 30, 2016 $ 99,524
$ 13,500
$ 511
$ (60 ) $ 113,475
September 30, 2017 101,628
18,068
209
(20 ) 119,885
Increase (decrease) $ 2,104
$ 4,568
$ (302 ) $ 40
$ 6,410
Percentage increase 2 % 34 % *
*
6 %

* The statistic is not meaningful or material.

~~The following table represents gross profit as a percentage of sales by segment for the three months ended September 30, 2016 and 2017, respectively:~~

(in thousand)
North
America
Europe
Asia/
Pacific

Admin &
All Other
Total
2016 gross profit percentage 50 % 43 % 25 % * 49 %
2017 gross profit percentage 48 % 38 % 10 % * 46 %

* The statistic is not meaningful or material.

~~Administrative and All Other~~

~~Business Outlook~~

~~Based on current information and subject to future events and circumstances, the Company currently estimates that:~~

~~Results of Operations for the Nine Months Ended September 30, 2017, Compared with the Nine Months Ended September 30, 2016~~

Unless otherwise stated, the results announced below, when providing comparisons (which are generally indicated by words such as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the nine months ended September 30, 2017, against the results of operations for the nine months ended September 30, 2016. Unless otherwise stated, the results announced below refer to the nine months ended September 30, 2016 and the nine months ended September 30, 2017. To avoid fractional percentages, all percentages presented below were rounded to the nearest whole number.


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	3,296	$	2,994	$	6,234	$	5,905
Finance cash flows for finance leases	—		146		—		292

Operating right-of-use assets obtained in exchange for lease obligations during the current period	2,936		3,307		5,132		4,093


(in thousands)	Operating Leases
Remaining six months of 2022	$	6,380
2023	11,105
2024	9,258
2025	7,448
2026	6,035
Thereafter	17,963
Total lease payments	58,189
Less: Present value discount	(8,704)
Total lease liabilities	$	49,485



	September 30,						December 31,
	2017			2016			2016
ASSETS
Current assets
Cash and cash equivalents	$	204,171		$	218,720		$	226,537
Trade accounts receivable, net	159,571			141,716			112,423
Inventories	244,476			220,207			232,274
Other current assets	13,276			12,321			14,013
Total current assets	621,494			592,964			585,247

Property, plant and equipment, net	265,178			229,670			232,810
Goodwill	137,313			126,845			124,479
Equity investment (see Note 6)	2,582			—			2,500
Intangible assets, net	30,050			24,629			22,864
Other noncurrent assets	11,766			10,195			12,074
Total assets	$	1,068,383		$	984,303		$	979,974
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Capital lease obligations - current portion	$	1,047		$	—		$	—
Trade accounts payable	30,857			24,777			27,674
Accrued liabilities	87,946			62,714			60,477
Income taxes payable	360			3,420			—
Accrued profit sharing trust contributions	5,652			5,157			6,549
Accrued cash profit sharing and commissions	13,123			17,153			10,527
Accrued workers’ compensation	3,548			4,161			3,569
Total current liabilities	142,533			117,382			108,796

Capital lease obligations - net of current portion	2,875			—			—
Deferred income tax and other long-term liabilities	6,933			5,817			5,336
Total liabilities	152,341			123,199			114,132
Commitments and contingencies (see Note 8)
Stockholders’ equity
Common stock, at par value	476			486			473
Additional paid-in capital	265,490			243,900			255,917
Retained Earnings	683,554			687,052			642,422
Treasury stock	(20,000		)	(47,002		)	—
Accumulated other comprehensive loss	(13,478		)	(23,332		)	(32,970		)
Total stockholders’ equity	916,042			861,104			865,842
Total liabilities and stockholders’ equity	$	1,068,383		$	984,303		$	979,974



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Net sales	$	262,476		$	230,974		$	745,345		$	660,470
Cost of sales	142,591			117,499			401,779			342,985
Gross profit	119,885			113,475			343,566			317,485
Operating expenses:
Research and development and other engineering	8,679			10,932			35,051			33,807
Selling	28,156			24,304			86,150			74,313
General and administrative	36,501			32,543			108,049			96,786
Net gain on disposal of assets	(147		)	(81		)	(147		)	(763		)
	73,189			67,698			229,103			204,143
Income from operations	46,696			45,777			114,463			113,342
Loss in equity method investment, before tax	(13		)	—			(53		)	—
Interest expense, net	(296		)	(82		)	(685		)	(400		)
Gain (adjustment) on bargain purchase of a business	(2,052		)	—			6,336			—
Gain on disposal of a business	443			—			443			—
Income before taxes	44,778			45,695			120,504			112,942
Provision for income taxes	16,581			15,898			40,972			40,601
Net income	$	28,197		$	29,797		$	79,532		$	72,341

Earnings per common share:
Basic	$	0.60		$	0.62		$	1.67		$	1.50
Diluted	$	0.59		$	0.62		$	1.66		$	1.49

Number of shares outstanding
Basic	47,367			48,119			47,544			48,231
Diluted	47,686			48,352			47,843			48,429

Cash dividends declared per common share	$	0.42		$	0.18		$	0.81		$	0.52



						Additional						Accumulated Other
	Common Stock					Paid-in			Retained			Comprehensive			Treasury
	Shares		Par Value			Capital			Earnings			Income (Loss)			Stock			Total
Balance at January 1, 2016	48,184		$	481		$	238,212		$	639,707		$	(28,576	)	$	—		$	849,824
Net income	—		—			—			72,341			—			—			72,341
Translation adjustment, net of tax	—		—			—			—			5,244			—			5,244
Options exercised	227		3			6,692			—			—			—			6,695
Stock-based compensation	—		—			9,039			—			—			—			9,039
Tax benefit of options exercised	—		—			140			—			—			—			140
Shares issued from release of Restricted Stock Units	216		2			(3,998		)	—			—			—			(3,996		)
Repurchase of common stock	(1,090	)	—			(6,500		)	—			—			(47,002		)	(53,502		)
Cash dividends declared on common stock, $0.52 per share	—		—			—			(24,996		)	—			—			(24,996		)
Common stock issued at $32.45 per share for stock bonus	10		—			315			—			—			—			315
Balance at September 30, 2016	47,547		486			243,900			687,052			(23,332		)	(47,002		)	861,104
Net income	—		—			—			17,393			—						17,393
Translation adjustment, net of tax	—		—			—			—			(9,164		)	—			(9,164		)
Pension adjustment, net of tax	—		—			—			—			(474		)	—			(474		)
Options exercised	43		—			1,281			—			—			—			1,281
Stock-based compensation	—		—			4,147			—			—			—			4,147
Tax benefit of options exercised	—		—			111			—			—			—			111
Shares issued from release of Restricted Stock Units	1		—			(22		)	—			—			—			(22		)
Repurchase of common stock	(154	)	—			6,500			—			—			(6,500		)	—
Retirement of common stock	—		(13		)	—			(53,489		)	—			53,502			—
Cash dividends declared on common stock, $0.18 per share	—		—			—			(8,534		)	—			—			(8,534		)
Balance at December 31, 2016	47,437		473			255,917			642,422			(32,970		)	—			865,842
Net income	—		—			—			79,532			—			—			79,532
Translation adjustment, net of tax	—		—			—			—			19,492			—			19,492
Options exercised	120		1			3,565			—			—			—			3,566
Stock-based compensation	—		—			10,764			—			—			—			10,764
Shares issued from release of Restricted Stock Units	210		2			(5,168		)	—			—			—			(5,166		)
Repurchase of common stock	(461	)	—			—			—			—			(20,000		)	(20,000		)
Cash dividends declared on common stock, $0.81 per share	—		—			—			(38,400		)	—			—			(38,400		)
Common stock issued at $44.26 per share for stock bonus	9		—			412			—			—			—			412
Balance at September 30, 2017	47,315		$	476		$	265,490		$	683,554		$	(13,478	)	$	(20,000	)	$	916,042



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2017		2016		2017		2016
Net income available to common stockholders	$	28,197	$	29,797	$	79,532	$	72,341
Basic weighted-average shares outstanding	47,367		48,119		47,544		48,231
Dilutive effect of potential common stock equivalents — stock options and restricted stock units	319		233		299		198
Diluted weighted-average shares outstanding	47,686		48,352		47,843		48,429
Earnings per common share:
Basic	$	0.60	$	0.62	$	1.67	$	1.50
Diluted	$	0.59	$	0.62	$	1.66	$	1.49
Potentially dilutive securities excluded from earnings per diluted share because their effect is anti-dilutive	—		—		—		—



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2017		2016		2017		2016
Stock-based compensation expense recognized in operating expenses	$	370	$	3,141	$	10,942	$	8,995
Less: Tax benefit of stock-based compensation expense in provision for income taxes	58		1,112		3,962		3,262
Stock-based compensation expense, net of tax	$	312	$	2,029	$	6,980	$	5,733
Fair value of shares vested	$	428	$	3,088	$	10,764	$	9,039
Proceeds to the Company from the exercise of stock-based compensation	$	2,268	$	4,166	$	3,566	$	6,695
Tax effect from the exercise of stock-based compensation, including shortfall tax benefits ⁽¹⁾	$	—	$	121	$	—	$	140



	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except percentages)	2017			2016			2017			2016
Effective tax rate	37.0		%	34.8		%	34.0		%	35.9		%
Provision for income taxes	$	16,581		$	15,898		$	40,972		$	40,601



(In thousands)
Assets *
	Cash and cash equivalents	$	3,956
	Accounts receivable	4,914
	Inventory	13,591
	Other current assets	760
	Property, plant, equipment and noncurrent assets	3,929
		27,150
Liabilities
	Accounts payable	4,500
	Other current liabilities	6,146
		10,646

Total net assets		16,504
	Gain (adjustment) on bargain purchase of a business	(6,336		)
	Total purchase price	$	10,168
*	Intangible assets acquired were determined to have little to no value, thus were not recognized.


	At December 31, 2016								At December 31, 2021
	Gross					Net			Gross				Net
(in thousands)	Carrying Amount		Accumulated Amortization			Carrying Amount		(in thousands)	Carrying Amount		Accumulated Amortization		Carrying Amount
North America	$	23,562	$	(13,811	)	$	9,751	North America	$	46,643	$	(26,346)	$	20,297
Europe	27,880		(14,767		)	13,113		Europe	26,371		(20,399)		5,972
Total	$	51,442	$	(28,578	)	$	22,864	Total	$	73,014	$	(46,745)	$	26,269



(in thousands)

Remaining three months of 2017	$	1,635
2018	5,505
2019	5,185
2020	5,155
2021	4,675
2022	2,774
Thereafter	4,505
	$	29,434


	Condensed Consolidated Balance Sheets Line Item	June 30,				December 31,
(in thousands)		2022		2021		2021
Operating leases
Assets
Operating leases	Operating lease right-of-use assets	$	48,984	$	43,374	$	45,438
Liabilities
Operating - current	Accrued expenses and other current liabilities	9,831		$	9,777	$	8,769
Operating - noncurrent	Operating lease liabilities	39,654		34,087		37,091
Total operating lease liabilities		$	49,485	$	43,864	$	45,860

Finance leases
Assets
Property and equipment, gross	Property, plant and equipment, net	$	3,569	$	3,569	$	3,569
Accumulated amortization	Property, plant and equipment, net	(3,556)		(3,264)		(3,416)
Property and equipment, net	Property, plant and equipment, net	$	13	$	305	$	153
Liabilities
Other current liabilities	Accrued expenses and other current liabilities	$	—	$	48	$	—

Total finance lease liabilities		$	—	$	48	$	—


Weighted-average remaining lease terms (in years):	2022		2021
Operating leases	6.4		6.9

Weighted-average discount rate:
Operating leases	4.8	%	5.3	%


(in thousands)	5-Year Term Loan
Remaining six months of 2022	$	11,250
2023	22,500
2024	22,500
2025	22,500
2026	22,500
2027	343,125
Total loan outstanding	$	444,375



	Shares		Weighted- Average Price		Aggregate Intrinsic Value *
Unvested Restricted Stock Units (RSUs)	(in thousands)		Weighted- Average Price		(in thousands)
Outstanding at January 1, 2017	615		$	31.81	26,915
Awarded	616
Vested	(327	)
Forfeited	(38	)
Outstanding at September 30, 2017	866		$	36.14	$	42,469
Outstanding and expected to vest at September 30, 2017	844		$	36.11	$	41,366


*	~~The intrinsic value is calculated using the closing price per share of $49.04 of the underlying Company's common stock as reported by the New York Stock Exchange on September 30, 2017.~~



	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value *
Non-Qualified Stock Options	(in thousands)				(in years)	(in thousands)
Outstanding at January 1, 2017	251		$	29.66	1.1	3,558
Exercised	(120	)
Forfeited	—
Outstanding and exercisable at September 30, 2017	131		$	29.66	0.3	$	2,534


*	The intrinsic value represents the amount, if any, by which the fair market value of the underlying Company's common stock exceeds the exercise price of the stock option, using the closing price per share of $49.04 such stock as reported by the New York Stock Exchange on September 30, 2017.


(in thousand)	North America		Europe		Asia/ Pacific		Admin & All Other	Total
2021 gross margin percentage	48.7	%	35.3	%	40.4	%	*	47.3	%
2022 gross margin percentage	48.8	%	30.6	%	36.5	%	*	45.6	%



(in thousands)	Dividends Paid		Open Market Share Repurchases		Accelerated Share Repurchases		Total
January 1 - September 30, 2017	$	27,044	$	—	$	20,000	$	47,044
January 1 - December 31, 2016	32,711		3,502		50,000		86,213
January 1 - December 31, 2015	29,352		22,144		25,000		76,496
Total	$	89,107	$	25,646	$	95,000	$	209,753


	(a)	(b)	(c)	(d)
Period	Total Number of Shares Purchased [1][2]	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs [2]	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs [2]
April 1 - April 30, 2022	—		—	$	78,719,058
May 1 - May 31, 2022	10	110.38	—	78,719,058
June 1 - June 30, 2022	260,285	96.05	260,285	$	53,719,063
Total	260,295



	(a)	(b)	(c)	(d)
Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs^[1]	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs
July 1 - July 31, 2017	—	N/A		$54.0 million^[1]
August 1 - August 31, 2017	35,887	43.39	35,887	$201.5 million^[2]
September 1 - September 30, 2017	—	N/A	—	$201.5 million^[2]
Total	35,887


~~3.1~~			~~Certificate of Incorporation of Simpson Manufacturing Co., Inc. is incorporated by reference to Exhibit 3.1 of its Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.~~

			EXHIBIT INDEX
~~3.2~~3.1						Certificate of Incorporation of Simpson Manufacturing Co., Inc., as amended ~~is incorporated~~(Incorporated by reference to Exhibit 3.1 of ~~its Current~~the Company's Quarterly Report on Form ~~8-K dated March 28, 2017~~10-Q filed on May 9, 2018).


~~3.3~~3.2						Amended and Restated Bylaws of Simpson Manufacturing Co., Inc., as amended ~~are incorporated~~(Incorporated by reference to Exhibit 3.2 of ~~its~~the Company's Current Report on Form 8-K dated March 28, ~~2017.~~2017).


~~4.1~~10.1						~~Certificate~~Amended and Restated Credit Agreement among the Company, the subsidiaries of ~~Designation, Preferences~~the Company party thereto as guarantors, the lenders party thereto , Wells Fargo Bank, National Association, as administrative agent, and ~~Rights~~the other parties party thereto (incorporated by reference to exhibit 10.1 of ~~Series A Participating Preferred Stock~~the Company's Current Report on Form 8-K filed April 4, 2022).
10.2						Securities Purchase Agreement by and between Simpson Strong-Tie Europe, Simpson Manufacturing Co., Inc. on the one hand, and the sellers identified herein, on the other hand, with respect to Fixco Invest, dated January, 26, 2022 (incorporated by reference to exhibit 10.1 of the Company's Current Report on Form 8-K filed on January 31, 2022).
10.3						Amendment No1 to the Securities Purchase Agreement by and between Simpson Strong-Tie Europe, Simpson Manufacturing Co., Inc., on the one hand, and the sellers identified therein, on the other hand, with respect to Fixco Invest, dated ~~July 30, 1999,~~March 17, 2022 is ~~incorporated by reference to Exhibit 4.2 of its Registration Statement on Form 8-A dated August 4, 1999.~~filed herewith.


31.1						Chief Executive Officer's Rule 13a-14(a)/15d-14(a) Certifications is filed herewith.


31.2						Chief Financial Officer's Rule 13a-14(a)/15d-14(a) Certifications is filed herewith.


32						Section 1350 Certifications are furnished herewith.
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Schema Linkbase Document
101.CAL						Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Labels Linkbase Document
101.PRE						Inline XBRL Taxonomy Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)