Simpson Manufacturing (SSD) 10-Q 2001 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended:September 30, 2001

OR

[   ] 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:0-23804

Simpson Manufacturing Co., Inc.

(Exact name of registrant as specified in its charter)

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

4120 Dublin Boulevard, Suite 400, Dublin, CA 94568

(Address of principal executive offices)

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

     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 [X] No [   ]

     The number of shares of the Registrant’s Common Stock outstanding as of September 30, 2001:12,146,175

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements.
		Condensed Consolidated Balance Sheets
		Condensed Consolidated Statements of Operations
		Condensed Consolidated Statements of Cash Flows
		Notes to Condensed Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
PART II — OTHER INFORMATION
	Item 1. Legal Proceedings.
	Item 2. Changes in Securities.
	Item 3. Defaults Upon Senior Securities.
	Item 4. Submission of Matters to a Vote of Security Holders.
	Item 5. Other Information.
	Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
Basic Earnings per Share

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

					September 30,
					(Unaudited)						December 31,
					2001			2000			2000
ASSETS
Current assets
		Cash and cash equivalents			$	82,386,649		$	62,849,064		$	59,417,658
		Trade accounts receivable, net				60,413,680			52,136,543			45,584,186
		Inventories				85,952,350			79,318,287			85,269,695
		Deferred income taxes				5,848,404			5,481,754			5,420,091
		Other current assets				1,998,852			2,727,747			5,040,017
				Total current assets		236,599,935			202,513,395			200,731,647
Property, plant and equipment, net						79,694,693			59,905,593			63,822,513
Investments						–			365,223			354,414
Other noncurrent assets						19,535,182			14,306,254			14,660,979
				Total assets	$	335,829,810		$	277,090,465		$	279,569,553
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
		Notes payable and current portion of long-term debt			$	1,177,881		$	332,563		$	335,754
		Trade accounts payable				14,983,984			14,167,506			14,630,941
		Accrued liabilities				10,263,286			8,129,591			9,373,007
		Income taxes payable				9,998,189			947,010			–
		Accrued profit sharing trust contributions				3,558,093			3,065,667			3,929,043
		Accrued cash profit sharing and commissions				6,260,710			6,518,992			2,979,060
		Accrued workers’ compensation				1,475,764			1,395,764			1,475,764
				Total current liabilities		47,717,907			34,557,093			32,723,569
Long-term debt, net of current portion						6,004,330			2,219,512			2,069,028
Deferred income taxes and long-term liabilities						100,000			357,630			341,600
				Total liabilities		53,822,237			37,134,235			35,134,197
Minority interest in consolidated subsidiaries						25,427			1,035,155			754,278
Commitments and contingencies (Notes 5 and 6)
Stockholders’ equity
		Common stock				46,273,975			43,724,580			40,968,501
		Retained earnings				238,617,261			197,934,255			204,901,540
Accumulated other comprehensive income						(2,909,090	)		(2,737,760	)		(2,188,963	)
	Total stockholders’ equity					281,982,146			238,921,075			243,681,078
			Total liabilities and stockholders’ equity		$	335,829,810		$	277,090,465		$	279,569,553

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

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Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

				Three Months Ended						Nine Months Ended
				September 30,						September 30,
				2001			2000			2001			2000
Net sales				$	111,660,531		$	101,048,081		$	322,326,991		$	283,489,158
Cost of sales					68,919,931			60,028,306			196,988,690			169,273,465
			Gross profit		42,740,600			41,019,775			125,338,301			114,215,693
Operating expenses:
	Selling				10,423,311			9,806,039			31,375,353			28,087,648
	General and administrative				12,477,597			12,655,445			38,746,495			34,950,828
					22,900,908			22,461,484			70,121,848			63,038,476
			Income from operations		19,839,692			18,558,291			55,216,453			51,177,217
Interest income, net					447,919			826,865			1,202,431			2,094,048
			Income before income taxes		20,287,611			19,385,156			56,418,884			53,271,265
Provision for income taxes					8,190,621			7,987,432			23,432,014			21,828,652
Minority interest					(19,925	)		(274,008	)		(728,851	)		(964,845	)
			Net income	$	12,116,915		$	11,671,732		$	33,715,721		$	32,407,458
Net income per common share
	Basic			$	1.00		$	0.97		$	2.79		$	2.69
		Diluted		$	0.98		$	0.95		$	2.74		$	2.63
Number of shares outstanding
	Basic				12,133,872			12,048,205			12,090,601			12,037,015
		Diluted			12,349,727			12,335,196			12,309,147			12,311,193

Simpson Manufacturing Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

		Three Months Ended					Nine Months Ended
		September 30,					September 30,
		2001		2000			2001			2000
Net income		$	12,116,915	$	11,671,732		$	33,715,721		$	32,407,458
Other comprehensive income, net of tax:
	Foreign currency translation adjustments		1,273,798		(940,509	)		(720,127	)		(2,152,838	)
Comprehensive income		$	13,390,713	$	10,731,223		$	32,995,594		$	30,254,620

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

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Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

					Nine Months
					Ended September 30,
					2001			2000
Cash flows from operating activities
	Net income				$	33,715,721		$	32,407,458
	Adjustments to reconcile net income to net cash provided by operating activities:
		Gain on sale of capital equipment				(137,357	)		(86,032	)
		Depreciation and amortization				12,177,279			10,030,929
		Minority interest				(728,851	)		(964,845	)
		Deferred income taxes and long-term liabilities				(252,396	)		(322,716	)
		Equity in income of affiliates				(256,412	)		(23,195	)
		Noncash compensation related to stock plans				137,700			196,875
		Changes in operating assets and liabilities, net of effects of acquisitions:
			Trade accounts receivable			(13,680,161	)		(9,591,936	)
			Inventories			4,838,753			(8,586,023	)
			Trade accounts payable			(2,190,558	)		1,665,392
			Income taxes payable			15,114,479			(1,856,952	)
			Accrued profit sharing trust contributions			(362,272	)		(429,062	)
			Accrued cash profit sharing and commissions			3,282,611			1,987,432
			Other current assets			1,401,411			(1,460,413	)
			Accrued liabilities			249,757			445,164
			Accrued workers’ compensation			–			50,000
			Other noncurrent assets			610,661			(261,386	)
				Total adjustments		20,204,644			(9,206,768	)
				Net cash provided by operating activities		53,920,365			23,200,690
Cash flows from investing activities
	Capital expenditures					(20,443,571	)		(8,120,242	)
	Asset acquisitions, net of cash acquired					(14,204,380	)		(4,620,151	)
	Proceeds from sale of equipment					837,664			183,368
		Net cash used in investing activities				(33,810,287	)		(12,557,025	)
Cash flows from financing activities
	Issuance of debt					1,821,955			143,545
	Repayment of debt					(1,311,118	)		(331,441	)
	Buyback of common stock					–			(2,314,305	)
	Issuance of common stock					2,481,221			580,137
		Net cash provided by (used in) financing activities				2,992,058			(1,922,064	)
Effect of exchange rate changes on cash						(133,145	)		(382,147	)
			Net increase in cash and cash equivalents			22,968,991			8,339,454
Cash and cash equivalents at beginning of period						59,417,658			54,509,610
Cash and cash equivalents at end of period					$	82,386,649		$	62,849,064

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

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Simpson Manufacturing Co., Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation

Interim Period Reporting

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States of America have been condensed or omitted. These interim statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Simpson Manufacturing Co., Inc.’s (the “Company’s”) 2000 Annual Report on Form 10-K (the “2000 Annual Report”).

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, except for the change in accounting for inventory described in Note 3) necessary to present fairly the financial information set forth therein, in accordance with accounting principles generally accepted in the United States of America. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The Company’s quarterly results may be subject to fluctuations. As a result, the Company believes the results of operations for the interim periods are not necessarily indicative of the results to be expected for any future period.

Revenue Recognition

The Company recognizes revenue as title to products is transferred to customers or services are rendered, net of applicable provision for discounts, returns and allowances.

Net Income Per Common Share

Basic net income per common share is computed based upon the weighted average number of common shares outstanding. Common equivalent shares, using the treasury stock method, are included in the diluted per-share calculations for all periods when the effect of their inclusion is dilutive.

The following is a reconciliation of basic earnings per share (“EPS”) to diluted EPS:

	Three Months Ended							Three Months Ended
	September 30, 2001							September 30, 2000
					Per							Per
	Income		Shares		Share			Income		Shares		Share
Basic EPS
Income available to common stockholders	$	12,116,915		12,133,872	$	1.00		$	11,671,732		12,048,205	$	0.97
Effect of Dilutive Securities
Stock options		–		215,855		(0.02	)		–		286,991		(0.02	)
Diluted EPS
Income available to common stockholders	$	12,116,915		12,349,727	$	0.98		$	11,671,732		12,335,196	$	0.95

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	Nine Months Ended							Nine Months Ended
	September 30, 2001							September 30, 2000
					Per							Per
	Income		Shares		Share			Income		Shares		Share
Basic EPS
Income available to common stockholders	$	33,715,721		12,090,601	$	2.79		$	32,407,458		12,037,015	$	2.69
Effect of Dilutive Securities
Stock options		–		218,546		(0.05	)		–		274,178		(0.06	)
Diluted EPS
Income available to common stockholders	$	33,715,721		12,309,147	$	2.74		$	32,407,458		12,311,193	$	2.63

Adoption of Statements of Financial Accounting Standards

In January 2001, the Company adopted Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended. The Company does not hold or issue any hedge instruments. Therefore, the adoption of this standard by the Company has not had a material effect on its financial position as of September 30, 2001, or results of operations for the period then ended.

In July 2001, the FASB issued SFAS No. 141, “Business Combinations” which requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method of accounting. As a result, use of the pooling-of-interests method is prohibited for business combinations initiated thereafter. SFAS 141 also establishes criteria for the separate recognition of intangible assets acquired in a business combination. The adoption of this standard by the Company is not expected to have a material effect on its financial position or results of operations.

In July 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets” which requires that goodwill and certain other intangible assets having indefinite lives no longer be amortized to earnings, but instead be subject to periodic testing for impairment. Intangible assets determined to have definitive lives will continue to be amortized over their useful lives. SFAS No. 142 is effective for the Company’s fiscal year beginning January 1, 2002. However, goodwill and intangible assets acquired after June 30, 2001, will be subject immediately to the non-amortization and amortization provisions of this Statement. The amount of goodwill amortization for the three and nine months ended September 30, 2001, was approximately $490,000 and $1,457,000, respectively. As the Company has not yet determined the effect of the adoption of SFAS 142 on its financial position and its results of operations, it has not yet determined if any of the goodwill or indefinite lived assets will be impaired and, as such, these amounts are not necessarily indicative of the effect of the Statement on the Company’s 2002 results.

Reclassifications

Certain prior period amounts have been reclassified to conform to the 2001 presentation with no effect on net income or retained earnings as previously reported.

2. Trade Accounts Receivable, net

Trade accounts receivable consist of the following:

	At September 30,
							At December 31,
	2001			2000			2000
Trade accounts receivable	$	62,540,388		$	53,831,941		$	47,119,344
Allowance for doubtful accounts		(1,642,415	)		(1,212,388	)		(1,201,289	)
Allowance for sales discounts		(484,293	)		(483,010	)		(333,869	)
	$	60,413,680		$	52,136,543		$	45,584,186

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3. Inventories

The components of inventories consist of the following:

	At September 30,
					At December 31,
	2001		2000		2000
Raw materials	$	24,985,484	$	24,251,076	$	26,979,866
In-process products		13,971,430		8,571,644		10,882,721
Finished products		46,995,436		46,495,567		47,407,108
	$	85,952,350	$	79,318,287	$	85,269,695

Effective January 1, 2001, the Company changed its method of valuing inventories from the last-in, first-out (“LIFO”) method to the first-in, first-out (“FIFO”) method. The Company believes that the new method is preferable because the FIFO method more effectively allocates fixed overhead costs in times of increased production and, therefore more closely matches current costs and revenues. In addition, the adoption of the FIFO method will enhance the comparability of the Company’s financial statements by changing to the predominant method used in its industry and conforms all of the Company’s inventories to the same accounting method. The Company has applied this change retroactively by restating its financial statements as required by Accounting Principles Board No. 20, “Accounting Changes,” which has resulted in a one time decrease in previously reported retained earnings of $588,455 as of September 30, 2000, and a one time increase in previously reported retained earnings of $89,837 as of December 31, 2000. The effect of the change in accounting principle for both the three and nine months ended September 30, 2000, was immaterial.

4. Property, Plant and Equipment, Net

Property, plant and equipment, net consists of the following:

	At September 30,
							At December 31,
	2001			2000			2000
Land	$	10,560,600		$	4,448,131		$	4,454,322
Buildings and site improvements		37,553,151			27,572,682			27,634,848
Leasehold improvements		5,568,286			3,949,068			4,042,063
Machinery and equipment		100,262,803			84,300,900			88,221,556
		153,944,840			120,270,781			124,352,789
Less accumulated depreciation and amortization		(78,004,621	)		(66,775,904	)		(69,293,151	)
		75,940,219			53,494,877			55,059,638
Capital projects in progress		3,754,474			6,410,716			8,762,875
	$	79,694,693		$	59,905,593		$	63,822,513

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5. Debt

Outstanding debt at September 30, 2001 and 2000, and December 31, 2000, and the available credit at September 30, 2001, consisted of the following:

				Debt Outstanding
	Available			at
	Credit at			September 30,						at
	September 30,									December 31,
	2001			2001			2000			2000
Revolving line of credit, interest at bank’s reference rate (at September 30, 2001, the bank’s reference rate was 6.0%), expires November 2001	$	12,037,934		$	–		$	–		$	–
Revolving term commitment, interest at bank’s prime rate less 0.50% (at September 30, 2001, the bank’s prime rate less 0.50% was 5.75%), expires September 2002		8,213,673			–			–			–
Revolving line of credit, interest rate at the bank’s base rate of interest plus 2% (at September 30, 2001, the bank’s base rate plus 2% was 6.5%), expires July 2002		368,601			–			–			–
Revolving line of credit, interest rate at 5.75%, expires June 2002		2,704,328			685,332			–			–
Term loan, interest at LIBOR plus 1.375% (at September 30, 2001, LIBOR plus 1.375% was 5.085%), expires May 2008		–			2,100,000			2,400,000			2,250,000
Term loans, interest rates between 5.25% and 6.23%, expirations between 2006 and 2018		–			4,078,574			119,512			119,028
Standby letter of credit facilities		2,748,393			–			–			–
Other notes payable and long-term debt		–			318,305			32,563			35,754
		26,072,929			7,182,211			2,552,075			2,404,782
Less current portion		–			(1,177,881	)		(332,563	)		(335,754	)
				$	6,004,330		$	2,219,512		$	2,069,028
Standby letters of credit issued and outstanding		(2,748,393	)
	$	23,324,536

As of September 30, 2001, the Company had three outstanding standby letters of credit. Two of these letters of credit, in the aggregate amount of $2,055,423, are used to support the Company’s self-insured workers’ compensation insurance requirements. The third, in the amount of $692,970, is used to guarantee performance on the Company’s leased facility in the United Kingdom.

6. Commitments and Contingencies

Note 9 to the consolidated financial statements in the Company’s 2000 Annual Report provides information concerning commitments and contingencies. From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. The Company’s policy with regard to environmental liabilities is to accrue for future environmental assessments and remediation costs as they are discovered and become estimable.

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7. Segment Information

The Company is organized into two primary segments. The segments are defined by types of products manufactured, marketed and distributed to the Company’s customers. The two product segments are connector products and venting products. These segments are differentiated in several ways, including the types of materials used, the production process, the distribution channels used and the applications in which the products are used. Transactions between the two segments were immaterial for each of the periods presented.

The following table illustrates certain measurements used by management to assess the performance of the segments described above as of or for the following periods:

			Three Months Ended					Nine Months Ended
			September 30,					September 30,
			2001			2000		2001			2000
Net Sales
	Connector products		$	94,288,000		$	84,604,000	$	274,054,000		$	237,402,000
	Venting products			17,373,000			16,444,000		48,273,000			46,087,000
		Total	$	111,661,000		$	101,048,000	$	322,327,000		$	283,489,000
Income from Operations
	Connector products		$	18,038,000		$	16,203,000	$	50,196,000		$	44,736,000
	Venting products			1,876,000			2,352,000		5,417,000			6,404,000
	All other			(74,000	)		3,000		(397,000	)		37,000
		Total	$	19,840,000		$	18,558,000	$	55,216,000		$	51,177,000

			At September 30,				At
							December 31,
			2001		2000		2000
Total Assets
	Connector products		$	205,267,000	$	163,099,000	$	171,151,000
	Venting products			44,524,000		49,494,000		44,071,000
	All other			86,039,000		64,497,000		64,348,000
		Total	$	335,830,000	$	277,090,000	$	279,570,000

Cash collected by the Company’s subsidiaries is routinely transferred into the Company’s cash management accounts and, therefore, has been included in the total assets of the segment entitled “All other.” Cash and cash equivalent balances in this segment were approximately $77,778,000, $57,163,000 and $54,183,000 as of September 30, 2001 and 2000, and December 31, 2000, respectively.

8. Acquisitions

In January 2001, the Company’s subsidiary, Simpson Strong-tie International, Inc., acquired 100% of the shares of BMF Bygningsbeslag A/S of Denmark for approximately $13.7 million in cash with an additional amount of approximately $1.2 million contingent upon future operating performance. In August 2001, the German subsidiary of BMF purchased the remaining 51% stake in Bulldog-Simpson GmbH for approximately $0.6 million in cash.

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

Certain matters discussed below are forward-looking statements that involve risks and uncertainties, certain of which are discussed in this report and in other reports filed by the Company with the Securities and Exchange Commission. Actual results might differ materially from results suggested by any forward-looking statements in this report.

The following is a discussion and analysis of the consolidated financial condition and results of operations for the Company for the three and nine months ended September 30, 2001 and 2000. The following should be read in conjunction with the interim Condensed Consolidated Financial Statements and related Notes appearing elsewhere herein.

Results of Operations for the Three Months Ended September 30, 2001, Compared
with the Three Months Ended September 30, 2000

Sales growth occurred throughout the United States, with the exception of California where sales were flat. The increases were strongest in the midwestern and southeastern region of the United States, and in Europe as a result of the acquisition of BMF Bygningsbeslag A/S (“BMF”) in Denmark in January 2001. Simpson Strong-Tie’s third quarter sales increased 11.4% over the same quarter last year, while Simpson Dura-Vent’s sales increased 5.6%. Homecenters were the fastest growing Simpson Strong-Tie connector sales channel. The sales increase was broad based across most of Simpson Strong-Tie’s major product lines. The Anchor Systems product line had the highest percentage growth rates in sales with the addition of powder actuated tools contributing significantly. Strong-Wall sales declined during the third quarter of 2001 as compared to the third quarter of 2000. Sales of Simpson Dura-Vent’s chimney and pellet vent product lines increased compared to the third quarter of 2000 while sales of its Direct-Vent products decreased.

Income from operations increased 6.9% from $18,558,291 in the third quarter of 2000 to $19,839,692 in the third quarter of 2001 and gross margins decreased from 40.6% in the third quarter of 2000 to 38.3% in the third quarter of 2001. The decrease in gross margin was primarily due to the lower margins at BMF. The acquisition of BMF also contributed to the increase in operating expenses. Selling expenses increased 6.3% from $9,806,039 in the third quarter of 2000 to $10,423,311 in the third quarter of 2001, primarily due to higher personnel costs related to the increase in the number of sales and merchandising personnel, including those associated with the Anchoring Systems product line. General and administrative expenses decreased 1.4% from $12,655,445 in the third quarter of 2000 to $12,477,597 in the third quarter of 2001. This decrease was primarily due to a decrease in cash profit sharing, partially offset by increased administrative costs, including those associated with the acquisition of BMF. The tax rate was 40.4% in the third quarter of 2001, a decrease from 41.2% in the third quarter of 2000.

Results of Operations for the Nine Months Ended September 30, 2001, Compared
with the Nine Months Ended September 30, 2000

Most of the overall sales growth occurred in California and in Europe as a result of the acquisition of BMF. Simpson Strong-Tie’s first nine months’ sales increased 15.4% over the same period last year, while Simpson Dura-Vent’s sales increased 4.7%. Homecenters and contractor distributors were the fastest growing Simpson Strong-Tie connector sales channels. The sales increase was broad based across most of Simpson Strong-Tie’s major product lines. The Anchor Systems product line had the highest percentage growth rate in sales with the addition of powder actuated tools contributing significantly. The Strong-Wall product line had strong year to date growth over the first nine months of 2000 as a result of the increased sales during the first half of 2001. Sales of Simpson Dura-Vent’s chimney and pellet vent product lines increased compared to the first nine months of 2000 while sales of its Direct-Vent products decreased.

Income from operations increased 7.9% from $51,177,217 in the first nine months of 2000 to $55,216,453 in the first nine months of 2001 and gross margins decreased from 40.3% in the first nine months of 2000 to 38.9% in the first nine months of 2001. The decrease in gross margin was primarily due to the lower margins at BMF. The acquisition of BMF also contributed to the increases in operating expenses. Selling expenses increased 11.7% from $28,087,648 in the first nine months of 2000 to $31,375,353 in the first nine months of 2001. The increase was primarily due to higher personnel costs related to the increase in the number of sales and merchandising personnel, including those associated with the Anchoring Systems product line, as well as increased promotional expenses. General and administrative expenses increased 10.9% from $34,950,828 in the first nine months of 2000 to $38,746,495 in the first nine months of 2001. This increase was due in part to a non-cash charge to write-off the

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remaining Keybuilder.com software license in the second quarter of 2001, additional administrative personnel and higher costs associated with the acquisitions of BMF, Anchor Tiedown Systems and Masterset Fastening Systems, Inc. Partially offsetting this increase was a decrease in cash profit sharing. The tax rate was 41.5% in the first nine months of 2001, an increase from 41.0% in the first nine months of 2000.

In August 2001, the German subsidiary of BMF purchased the remaining 51% stake in Bulldog-Simpson GmbH (“Bulldog”) for approximately $0.6 million in cash.

Liquidity and Sources of Capital

As of September 30, 2001, working capital was $188.9 million as compared to $168.0 million at September 30, 2000, and $168.0 million at December 31, 2000. The primary components of the change in working capital from December 31, 2000, included the increase in cash and cash equivalents of $23.0 million, principally as a result of the timing of the payment of estimated income taxes, and increases in the Company’s trade accounts receivable of approximately $14.8 million, that were primarily due to higher sales levels and a delay of a significant customer in paying its outstanding balance of approximately $7.1 million as of September 30, 2001, which had been reduced to $6.4 million as of November 9, 2001. The Company is currently working with the management of this customer for payment of the remaining noncurrent balance. Offsetting these increases was an increase in income taxes payable and an increase in accrued cash profit sharing and commissions, together totaling approximately $13.3 million. The balance of the change in working capital was due to the fluctuation of various other asset and liability accounts. The working capital change and changes in noncurrent assets and liabilities (other than those associated with the BMF acquisition), combined with net income and noncash expenses, primarily depreciation and amortization, totaling approximately $45.9 million, resulted in net cash provided by operating activities of approximately $53.9 million. As of September 30, 2001, the Company had unused credit facilities available of approximately $23.3 million.

The Company used approximately $33.8 million in its investing activities. Of this, approximately $11.2 million was used for real estate and related purchases, approximately $9.2 million was used for capital equipment purchases and approximately $14.2 million was used to acquire BMF and Bulldog.

The Company’s financing activities provided net cash of approximately $3.0 million, primarily from the issuance of Company stock through the exercise of stock options by its employees. The balance of the cash provided from financing activities was through the issuance of debt to support its working capital needs in Europe.

The Company believes that cash generated by operations and borrowings available under its existing credit agreements will be sufficient for the Company’s working capital needs and planned capital expenditures through the remainder of 2001 and into 2002. Depending on the Company’s future growth and possible acquisitions, it may become necessary to secure additional sources of financing.

The Company believes that the effect of inflation on the Company has not been material in recent years, as inflation rates have remained relatively low.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business.

Item 2. Changes in Securities.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.

a	Exhibits.
	11. Statements re computation of earnings per share
b	Reports on Form 8-K
	No reports on Form 8-K were filed during the quarter for which this report is filed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Simpson Manufacturing Co., Inc.
		(Registrant)
DATE:November 13, 2001	By	/s/Michael J. Herbert
		Michael J. Herbert Chief Financial Officer (principal accounting and financial officer)

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