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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: March 31, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-23804
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Simpson Manufacturing Co., Inc.
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(Exact name of registrant as specified in its charter)
Delaware 94-3196943
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4637 Chabot Drive, Suite 200, Pleasanton, CA 94588
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(Address of principal executive offices)
(Registrant's telephone number, including area code): (925)460-9912
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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
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The number of shares of the Registrant's Common Stock outstanding as of
March 31, 2000: 12,025,423
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,
----------------------------
(Unaudited) December 31,
2000 1999 1999
------------ ------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 45,551,211 $ 33,642,222 $ 54,509,610
Trade accounts receivable, net 52,893,480 44,724,610 42,420,223
Inventories 78,380,347 59,564,149 72,751,245
Deferred income taxes 5,102,306 4,046,027 4,745,534
Other current assets 2,156,309 1,713,334 1,323,215
------------ ------------ ------------
Total current assets 184,083,653 143,690,342 175,749,827
Property, plant and equipment, net 60,662,207 56,557,645 61,143,524
Investments 363,646 514,155 374,455
Other noncurrent assets 12,255,670 3,048,198 9,986,187
------------ ------------ ------------
Total assets $257,365,176 $203,810,340 $247,253,993
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable and current
portion of long-term debt $ 487,549 $ 327,477 $ 349,541
Trade accounts payable 10,192,763 12,371,463 12,780,621
Accrued liabilities 7,436,206 5,223,706 7,819,155
Income taxes payable 7,482,869 5,356,866 3,362,254
Accrued profit sharing
trust contributions 1,135,525 4,128,707 3,504,286
Accrued cash profit sharing
and commissions 4,808,670 3,732,724 4,531,861
Accrued workers' compensation 1,445,764 879,272 1,345,764
------------ ------------ ------------
Total current liabilities 32,989,346 32,020,215 33,693,482
Long-term debt, net of current portion 2,398,651 2,557,020 2,414,562
Deferred income taxes and long-term
liabilities 423,932 434,607 556,783
------------ ------------ ------------
Total liabilities 35,811,929 35,011,842 36,664,827
------------ ------------ ------------
Minority interest in consolidated
subsidiaries 1,804,040 - -
------------ ------------ ------------
Commitments and contingencies (Notes 5 and 6)
Stockholders' equity
Common stock 44,901,418 33,871,198 44,716,488
Retained earnings 175,733,364 135,638,611 166,457,600
Accumulated other comprehensive income (885,575) (711,311) (584,922)
------------ ------------ ------------
Total stockholders' equity 219,749,207 168,798,498 210,589,166
------------ ------------ ------------
Total liabilities and
stockholders' equity $257,365,176 $203,810,340 $247,253,993
============ ============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
Simpson Manufacturing Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
----------------------------
2000 1999
------------ ------------
Net sales $ 84,615,539 $ 74,661,590
Cost of sales 50,800,161 46,212,976
------------ ------------
Gross profit 33,815,378 28,448,614
------------ ------------
Operating expenses:
Selling 8,553,122 7,897,807
General and administrative 10,648,327 8,121,761
------------ ------------
19,201,449 16,019,568
------------ ------------
Income from operations 14,613,929 12,429,046
Interest income, net 643,875 348,357
------------ ------------
Income before income taxes 15,257,804 12,777,403
Provision for income taxes 6,178,000 5,129,000
Minority interest (195,960) -
------------ ------------
Net income $ 9,275,764 $ 7,648,403
============ ============
Net income per common share
Basic $ 0.77 $ 0.66
Diluted $ 0.76 $ 0.63
Number of shares outstanding
Basic 12,020,446 11,580,828
Diluted 12,277,453 12,093,225
Simpson Manufacturing Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended
March 31,
----------------------------
2000 1999
------------ ------------
Net income $ 9,275,764 $ 7,648,403
Other comprehensive income, net of tax:
Foreign currency translation adjustments (300,653) (279,621)
------------ ------------
Comprehensive income $ 8,975,111 $ 7,368,782
============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
Simpson Manufacturing Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
----------------------------
2000 1999
------------ ------------
Cash flows from operating activities
Net income $ 9,275,764 $ 7,648,403
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of capital equipment (1,700) (20,219)
Depreciation and amortization 3,248,640 2,540,621
Minority interest (195,960) -
Deferred income taxes and long-term liabilities (480,718) (392,970)
Changes in operating assets and liabilities,
net of effects of acquisitions:
Trade accounts receivable (10,571,756) (10,824,803)
Inventories (5,721,118) (3,281,486)
Trade accounts payable (2,519,618) 610,226
Income taxes payable 4,179,992 3,959,444
Accrued profit sharing trust contributions (2,367,051) 955,345
Accrued cash profit sharing and commissions 276,818 (287,082)
Other current assets (868,559) (430,522)
Accrued liabilities (356,846) (367,586)
Accrued workers' compensation 100,000 -
Other noncurrent assets (623,264) 57,966
------------ ------------
Total adjustments (15,901,140) (7,481,066)
------------ ------------
Net cash provided by (used in)
operating activities (6,625,376) 167,337
------------ ------------
Cash flows from investing activities
Capital expenditures (2,548,553) (4,064,037)
Asset acquisitions, net of cash acquired (54,698) -
Proceeds from sale of equipment 8,376 68,467
------------ ------------
Net cash used in investing activities (2,594,875) (3,995,570)
------------ ------------
Cash flows from financing activities
Issuance of debt 149,785 -
Repayment of debt (15,551) (11,389)
Issuance of common stock 127,618 79,394
------------ ------------
Net cash provided by financing activities 261,852 68,005
------------ ------------
Net decrease in cash and cash equivalents (8,958,399) (3,760,228)
Cash and cash equivalents at beginning of period 54,509,610 37,402,450
------------ ------------
Cash and cash equivalents at end of period $ 45,551,211 $ 33,642,222
============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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 generally accepted accounting principles 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") 1999 Annual Report on
Form 10-K (the "1999 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) necessary to
present fairly the financial information set forth therein, in accordance
with generally accepted accounting principles. The year-end condensed
consolidated balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. 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.
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
March 31, 2000 March 31, 1999
---------------------------------- ----------------------------------
Per Per
Income Shares Share Income Shares Share
------------ ------------ ------ ------------ ------------ ------
Basic EPS
Income available to
common stockholders $ 9,275,764 12,020,446 $ 0.77 $ 7,648,403 11,580,828 $ 0.66
Effect of Dilutive Securities
Stock options - 257,007 (0.01) - 512,397 (0.03)
------------ ------------ ------ ------------ ------------ ------
Diluted EPS
Income available to
common stockholders $ 9,275,764 12,277,453 $ 0.76 $ 7,648,403 12,093,225 $ 0.63
============ ============ ====== ============ ============ ======
2. Trade Accounts Receivable
Trade accounts receivable consist of the following:
At March 31,
----------------------------
(Unaudited) At December 31,
2000 1999 1999
------------ ------------ ------------
Trade accounts receivable $ 54,461,542 $ 46,501,014 $ 43,952,137
Allowance for doubtful accounts (1,088,601) (1,326,334) (1,203,147)
Allowance for sales discounts (479,461) (450,070) (328,767)
------------ ------------ ------------
$ 52,893,480 $ 44,724,610 $ 42,420,223
============ ============ ============
3. Inventories
The components of inventories consist of the following:
At March 31,
----------------------------
(Unaudited) At December 31,
2000 1999 1999
------------ ------------ ------------
Raw materials $ 24,432,755 $ 19,372,470 $ 22,816,584
In-process products 8,664,328 5,256,131 7,593,038
Finished products 45,283,264 34,935,548 42,341,623
------------ ------------ ------------
$ 78,380,347 $ 59,564,149 $ 72,751,245
============ ============ ============
Approximately 88% of the Company's inventories are valued using the LIFO
(last-in, first-out) method. Because inventory determination under the
LIFO method is only made at the end of each year based on the inventory
levels and costs at that time, interim LIFO determinations must
necessarily be based on management's estimates of expected year-end
inventory levels and costs. Since future estimates of inventory levels and
costs are subject to change, interim financial results reflect the
Company's most recent estimate of the effect of LIFO and are subject to
adjustment based upon final year-end inventory amounts. At March 31, 2000,
and December 31, 1999, LIFO cost exceeded the replacement value of LIFO
inventories by approximately $1,482,000 and $1,503,000, respectively. At
March 31, 1999, the replacement value of LIFO inventories exceeded LIFO
cost by approximately $284,000.
4. Net Property, Plant and Equipment
Net property, plant and equipment consists of the following:
At March 31,
----------------------------
(Unaudited) At December 31,
2000 1999 1999
------------ ------------ ------------
Land $ 4,311,743 $ 3,891,519 $ 4,316,015
Buildings and site improvements 26,715,204 25,675,093 26,724,935
Leasehold improvements 3,938,741 3,448,358 3,942,613
Machinery and equipment 81,968,262 67,015,178 81,147,265
------------ ------------ ------------
116,933,950 100,030,148 116,130,828
Less accumulated depreciation
and amortization (61,783,333) (51,851,356) (58,949,908)
------------ ------------ ------------
55,150,617 48,178,792 57,180,920
Capital projects in progress 5,511,590 8,378,853 3,962,604
------------ ------------ ------------
$ 60,662,207 $ 56,557,645 $ 61,143,524
============ ============ ============
5. Debt
Outstanding debt at March 31, 2000 and 1999, and December 31, 1999, and
the available credit at March 31, 2000, consisted of the following:
Debt Outstanding
Available --------------------------------------------
Credit at at March 31, at
March 31, ---------------------------- December 31,
2000 2000 1999 1999
------------ ------------ ------------ ------------
Revolving line of credit, interest
at bank's reference rate (at March
31, 2000, the bank's reference rate
was 9.00%), expires June 2000 $ 12,466,545 $ - $ - $ -
Revolving term commitment, interest
at bank's prime rate (at March 31,
2000, the bank's prime rate was
9.00%), expires June 2000 8,616,628 - - -
Revolving line of credit, interest
rate at the bank's base rate of
interest plus 2%, expires July 2000 398,979 - - -
Term loan, fixed interest rate
of 5.3%, expires September 2006 - 148,651 - 164,562
Standby letter of credit facilities 1,916,828 - - -
Term loan, interest at LIBOR plus
1.375% (at March 31, 2000, LIBOR
plus 1.375% was 7.2938%), expires
May 2008 - 2,550,000 2,850,000 2,550,000
Other notes payable and long-term debt - 187,549 34,497 49,541
------------ ------------ ------------ ------------
23,398,980 2,886,200 2,884,497 2,764,103
Less current portion - (487,549) (327,477) (349,541)
------------ ------------ ------------ ------------
23,398,980 $ 2,398,651 $ 2,557,020 $ 2,414,562
============ ============ ============
Standby letters of credit issued
and outstanding (1,916,828)
------------
$ 21,482,152
============
As of March 31, 2000, the Company had three outstanding standby letters of
credit. Two of these letters of credit, in the aggregate amount of
$1,166,748, are used to support the Company's self-insured workers'
compensation insurance requirements. These letters of credit were
increased to an aggregate amount of $1,710,324 in April 2000. The third,
in the amount of $750,080, is used to guarantee performance on the
Company's leased facility in the United Kingdom. Other notes payable
represent debt associated with foreign businesses.
6. Commitments and Contingencies
Note 9 to the consolidated financial statements in the Company's 1999
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.
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
three months ended:
Three Months Ended
March 31,
----------------------------
2000 1999
------------ ------------
Net Sales
Connector products $ 69,515,000 $ 59,839,000
Venting products 15,101,000 14,823,000
------------ ------------
Total $ 84,616,000 $ 74,662,000
============ ============
Income from Operations
Connector products $ 12,602,000 $ 10,276,000
Venting products 2,081,000 2,132,000
All other (69,000) 21,000
------------ ------------
Total $ 14,614,000 $ 12,429,000
============ ============
At March 31,
----------------------------
2000 1999
------------ ------------
Total Assets
Connector products $166,045,000 $128,957,000
Venting products 42,462,000 37,147,000
All other 48,858,000 37,706,000
------------ ------------
Total $257,365,000 $203,810,000
============ ============
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 $41,172,000 and
$32,573,000 as of March 31, 2000 and 1999, respectively.
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 months
ended March 31, 2000 and 1999. 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 March 31, 2000, Compared
with the Three Months Ended March 31, 1999
Net sales increased 13.3% in the first quarter of 2000 as compared to the
first quarter of 1999. Most of the sales growth occurred domestically,
particularly in California. International sales also contributed to the
increase, due in large part to the acquisition of Furfix Products Limited
in the third quarter of 1999. Simpson Strong-Tie's first quarter sales
increased 16.2% over the same quarter last year, while Simpson Dura-Vent's
sales increased 1.9%. Contractor distributors were the fastest growing
connector sales channel. The sales increase was broad based across most of
Simpson Strong-Tie's major product lines. The Strong-Wall and Anchoring
Systems products had the highest growth rates in sales. Sales of Simpson
Dura-Vent's Direct-Vent and chimney product lines increased compared to
the first quarter of 1999, while its other product lines declined slightly
relative to the first quarter of 1999.
Income from operations increased 17.6% from $12,429,046 in the first
quarter of 1999 to $14,613,929 in the first quarter of 2000 as a result of
higher sales and gross margins. Gross margins increased from 38.1% in the
first quarter of 1999 to 40.0% in the first quarter of 2000 primarily due
to better absorption of fixed overhead costs as a result of the increased
production. Selling expenses increased 8.3% from $7,897,807 in the first
quarter of 1999 to $8,553,122 in the first quarter of 2000. The increase
was primarily due to higher personnel costs, particularly those associated
with the increase in the number of sales and merchandising personnel.
General and administrative expenses increased 31.1% from $8,121,761 in the
first quarter of 1999 to $10,648,327 in the first quarter of 2000
primarily due to increased cash profit sharing resulting from higher
operating income, and higher personnel and other administrative overhead
costs, including those associated with the operation of Keybuilder.com,
LLC ("Keybuilder.com"). Keybuilder.com is a joint venture 60% owned by the
Company and 40% owned by Keymark Enterprises, Inc. ("Keymark"), a software
developer based in Boulder, Colorado. The effective tax rate was 40.0%,
after adding back the minority interest to income before income taxes, in
the first quarter of 2000, a slight decrease from 40.1% in the first
quarter of 1999.
A large homebuilder has signed a letter of intent to investigate the
feasibility of investing in Keybuilder.com. Keybuilder.com was formed
to develop and market precise residential construction information
accessible over the internet by architects, engineers, building material
suppliers, and subcontractors. The Company has consolidated
Keybuilder.com's losses for the quarter ended March 31, 2000,
in its financial statements, net of Keymark's minority interest.
Liquidity and Sources of Capital
As of March 31, 2000, working capital was $151.1 million as compared to
$111.7 million at March 31, 1999, and $142.1 million at December 31, 1999.
The principal components of the increase in working capital from December
31, 1999, were increases in the Company's trade accounts receivable and
inventories totaling approximately $16.1 million, primarily due to higher
sales levels and seasonal buying programs. In addition, trade accounts
payable and accrued profit sharing trust contributions, primarily due to
an early payment of the Company's 1999 trust obligation, decreased by an
aggregate of approximately $5.0 million. Offsetting these increases was an
increase in income taxes payable of approximately $4.1 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 combined with net income and
noncash expenses, primarily depreciation and amortization, totaling
approximately $12.5 million, resulted in net cash used in operating
activities of approximately $6.6 million. As of March 31, 2000, the
Company had unused credit facilities available of approximately $21.5
million.
The Company used approximately $2.6 million in its investing activities,
primarily to purchase the capital equipment and property needed to expand
its capacity. The Company plans to continue this expansion throughout the
remainder of the year and into 2001.
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 2000 and into 2001. Depending on the Company's future
growth, 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.
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.
EXHIBIT
NO DESCRIPTION
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10.1 Office Building Lease, dated April 21, 2000, between
Koll Dublin Corporate Center, L.P., a Delaware limited
partnership, and Simpson Manufacturing Co., Inc., a
Delaware corporation.
10.2 Operating Agreement for Keybuilder.com, LLC, a
California limited liability company, dated March 6,
2000.
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.
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: MAY 15, 2000 By: /s/Stephen B. Lamson
------------ -------------------------------
Stephen B. Lamson
Chief Financial Officer