THIS PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 902(g) OF
REGULATION S-T
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, 1996
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 MANUFACTRUING CO., INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 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): (510)460-9912
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
March 31, 1996: 11,420,300
PART I -- FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31,
DECEMBER 31,
(UNAUDITED)
1996 1995 1995
------------ ------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 6,191,487 $ 4,784,455 $ 6,955,788
Trade accounts receivable, net 26,280,550 21,324,305 20,732,880
Inventories 34,335,990 34,226,389 34,471,250
Deferred income taxes 2,357,455 2,487,455 2,750,455
Other current assets 1,361,923 1,383,281 1,986,446
------------ ------------ ------------
Total current assets 70,527,405 64,205,885 66,896,819
Net property, plant and equipment 26,233,565 20,617,021 26,420,004
Investments 1,329,715 679,104 1,357,457
Other noncurrent assets 1,824,959 845,982 1,967,779
------------ ------------ ------------
Total assets $ 99,915,644 $ 86,347,992 $ 96,642,059
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes Payable $ - $ - $ 20,037
Trade accounts payable 5,869,968 9,240,490 7,375,014
Accrued liabilities 3,112,278 2,497,850 3,386,527
Accrued profit sharing trust contributions 2,626,226 2,296,130 1,999,739
Accrued cash profit sharing and commissions 1,307,125 952,680 1,289,144
Income taxes payable 951,393 1,568,764 -
Accrued workers' compensation 842,125 897,125 842,125
------------ ------------ ------------
Total current liabilities 14,709,115 17,453,039 14,912,586
Deferred income taxes and long-term liabilities 133,783 35,783 176,783
------------ ------------ ------------
Total liabilities 14,842,898 17,488,822 15,089,369
------------ ------------ ------------
Commitments and contingencies (Note 6)
Shareholders' equity
Common stock 30,789,607 29,580,365 30,415,716
Retained earnings 54,404,772 39,429,800 51,142,268
Cumulative translation adjustment (121,633) (150,995) (5,294)
------------ ------------ ------------
Total shareholders' equity 85,072,746 68,859,170 81,552,690
------------ ------------ ------------
Total liabilities and shareholders' equity $ 99,915,644 $ 86,347,992 $ 96,642,059
============ ============ ============
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,
1996 1995
------------ ------------
Net sales $ 43,457,448 $ 35,774,956
Cost of sales 28,355,992 24,035,766
------------ ------------
Gross profit 15,101,456 11,739,190
Operating expenses:
Selling 4,510,033 3,858,727
General and administrative 5,128,446 3,834,371
------------ ------------
9,638,479 7,693,098
------------ ------------
Income from operations 5,462,977 4,046,092
Interest income, net 53,527 65,325
------------ ------------
Income before income taxes 5,516,504 4,111,417
Provision for income taxes 2,254,000 1,702,000
------------ ------------
Net income $ 3,262,504 $ 2,409,417
============ ============
Net income per common share $ 0.28 $ 0.21
============ ============
Weighted average shares outstanding 11,621,429 11,389,259
============ ============
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,
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,262,504 $ 2,409,417
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of capital equipment (20,397) (738)
Depreciation and amortization 1,445,241 1,305,372
Deferred income taxes 350,000 187,000
Equity in losses of affiliates 16,000 37,000
Changes in operating assets and liabilities, net of
effects of acquisitions:
Trade accounts receivable (5,609,415) (4,117,629)
Inventories 135,260 (3,087,284)
Other current assets (127,310) (401,950)
Other noncurrent assets (27,450) (21,060)
Trade accounts payable (1,566,792) 2,898,090
Accrued liabilities (274,249) (461,344)
Accrued profit sharing trust contributions 626,487 575,526
Accrued cash profit sharing and commissions 17,981 (382,446)
Income taxes payable 1,703,227 1,068,103
------------ ------------
Total adjustments (3,331,417) (2,401,360)
------------ ------------
Net cash (used in) provided by
operating activities (68,913) 8,057
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,067,445) (1,034,195)
Proceeds from sale of equipment 29,840 -
Equity investments (11,637) -
------------ ------------
Net cash used in investing activities (1,049,242) (1,034,195)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (20,037) -
Issuance of Company's common stock 373,891 -
------------ ------------
Net cash provided by financing activities 353,854 -
------------ ------------
Net decrease in cash and cash equivalents (764,301) (1,026,138)
Cash and cash equivalents at beginning of period 6,955,788 5,810,593
------------ ------------
Cash and cash equivalents at end of period $ 6,191,487 $ 4,784,455
============ ============
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") 1995 Annual Report on Form 10-K
(the "1995 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
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 per-share calculations for all
periods since the effect of their inclusion is dilutive.
The number of shares used in computing primary and fully diluted net income
per common share did not differ materially for the three months ended March
31, 1996 and 1995.
2. Trade Accounts Receivable
Trade accounts receivable consist of the following:
AT MARCH 31, DECEMBER 31,
1996 1995 1995
------------ ------------ ------------
Trade accounts receivable $ 27,522,716 $ 22,712,357 $ 21,832,701
Allowance for doubtful accounts (1,039,728) (1,231,052) (931,321)
Allowance for sales discounts (202,438) (157,000) (168,500)
------------ ------------ ------------
$ 26,280,550 $ 21,324,305 $ 20,732,880
============ ============ ============
3. Inventories
The components of inventories consist of the following:
AT MARCH 31, DECEMBER 31,
1996 1995 1995
------------ ------------ ------------
Raw materials $ 12,043,223 $ 11,369,378 $ 13,424,828
In-process products 3,716,719 3,014,738 3,180,416
Finished products 18,576,048 19,842,273 17,866,006
------------ ------------ ------------
$ 34,335,990 $ 34,226,389 $ 34,471,250
============ ============ ============
At March 31, 1996 and 1995, and December 31, 1995, the replacement value of
LIFO inventories exceeded LIFO cost by approximately $3,793,000, $2,883,000
and $4,178,000, respectively.
4. Net Property, Plant and Equipment
Net property, plant and equipment consists of the following:
AT MARCH 31, DECEMBER 31,
1996 1995 1995
------------ ------------ ------------
Land $ 2,065,682 $ 1,340,682 $ 2,065,682
Buildings and site improvements 10,382,039 5,268,537 10,379,901
Leasehold improvements 2,859,053 4,004,321 2,688,430
Machinery and equipment 40,806,558 35,184,762 40,393,578
------------ ------------ ------------
56,113,332 45,798,302 55,527,591
Less accumulated depreciation
and amortization (31,546,682) (26,862,774) (30,419,484)
------------ ------------ ------------
24,566,650 18,935,528 25,108,107
Capital projects in progress 1,666,915 1,681,493 1,311,897
------------ ------------ ------------
$ 26,233,565 $ 20,617,021 $ 26,420,004
============ ============ ============
5. Debt
As of March 31, 1996, the Company had no outstanding debt. The Company has
available to it credit facilities which consist of the following:
AMOUNT OF
FACILITY
------------
Revolving line of credit, interest at
bank's reference rate (at March 31,
1996, the bank's reference rate was
8.25%), expires June 1997 $ 11,274,437
Revolving line of credit, interest at
bank's prime rate (at March 31,
1996, the bank's prime rate was
8.25%), expires June 1997 4,000,000
Revolving term commitment, interest at
bank's prime rate (at March 31,
1996, the bank's prime rate was
8.25%), expires June 1997 4,000,000
Revolving lines of credit, interest
rate at the bank's base rate of
interest plus 2%, expires May 1996 687,375
Standby letter of credit facilities 1,781,493
------------
Total credit facilities 21,743,305
Standby letters of credit issued and outstanding (1,781,493)
------------
Total credit available $ 19,961,812
============
The Company has four outstanding standby letters of credit. Two of these
letters of credit, in the aggregate amount of $1,055,930, are used to
support the Company's self-insured workers' compensation insurance
requirements while the other two, in the aggregate amount of $725,563, are
used to support working capital needs of its European operations.
6. Commitments and Contingencies
Note 10 to the consolidated financial statements in the Company's 1995
Annual Report provides information concerning commitments and contingencies
relating to pending or possible claims, legal actions and proceedings
against the Company and its subsidiaries. Management believes that the final
resolution of these matters, individually or in the aggregate, is not
expected to have a material adverse effect on the financial position of the
Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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, 1996 and 1995. 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, 1996, Compared
with the Three Months Ended March 31, 1995
Sales increased 21.5% from the first quarter of 1995 to the first quarter of
1996. The increase reflected solid growth in the Western United States,
particularly in California, due in large part to higher sales in the region
in the first quarter of 1996 compared to the first quarter of 1995 when
heavy rainfall decreased construction activity in California. Sales
decreased slightly in the Northeast where harsh winter weather has
negatively affected both construction and do-it-yourself activity. Simpson
Strong-Tie's sales increased 22.0% while Simpson Dura-Vent's sales increased
20.0%. Contractor distributors were the fastest growing connector sales
channel, representing over one-third of the increase in Simpson Strong-Tie
sales. Homecenter connector sales were relatively flat as compared to the
same period in the prior year. The sales growth rate of seismic and high
wind products led Simpson Strong-Tie sales with above average increases,
while Simpson Dura-Vent sales of Direct-Vent products, sold to OEMs and
through Simpson Dura-Vent's distribution system, continued to experience
high growth. Simpson Strong-Tie's core products performed well and epoxy
products, while representing less than 2% of Simpson Strong-Tie sales, had a
growth rate of approximately 45% over the comparable period in the prior
year, excluding the sales increases resulting from the acquisition of
Ackerman Johnson Fastening Systems Inc. in September 1995. First quarter
sales were also positively influenced by sales at the businesses acquired in
the second half of 1995. The acquisitions accounted for 1.6% of first
quarter of 1996 sales or approximately 9% of the aggregate increase in sales
as compared to the first quarter of 1995.
Income from operations increased 35.0% from $4,046,092 in the first quarter
of 1995 to $5,462,977 in the first quarter of 1996. This increase was
primarily due to higher gross margins and lower selling expenses as a
percentage of sales, partially offset by increased general and
administrative expenses. The increase in gross margins resulted from lower
raw material costs and better absorption of fixed overhead costs as a result
of increased production, partially offset by lower margins on businesses
acquired in late 1995. Selling expenses increased 16.9% in total from
$3,858,727 in the first quarter of 1995 to $4,510,033 in the first quarter
of 1996. This increase was primarily due to increased advertising and
promotional expenses, including new retail displays and product packaging.
The Company also hired additional merchandisers to better support the
homecenter business. General and administrative expenses increased 33.7%
from $3,834,371 in the first quarter of 1995 to $5,128,446 in the first
quarter of 1996. This increase was primarily due to increased cash profit
sharing, as a result of higher operating profit, and higher personnel and
overhead costs. In addition, the Company's provision for possible losses on
delinquent accounts increased as compared to the same quarter last year. The
effective tax rate decreased from 41.4% in the first quarter of 1995 to
40.9% in the first quarter of 1996, primarily due to lower estimated
effective state tax rates.
Liquidity and Sources of Capital
As of March 31, 1996, working capital was $55.8 million as compared to $46.8
million at March 31, 1995, and $52.0 million at December 31, 1995. The
principal components of the increase in working capital from December 31,
1995, include an increase in trade accounts receivable, which increased to
support the higher level of sales and seasonal buying programs, and a
decrease in trade accounts payable, which was primarily due to the timing of
purchases near the end of the quarter. Offsetting these increases was an
increase in income taxes payable, which resulted from higher taxable income
and utilization of the Company's prepaid tax balance as of December 31,
1995. In addition, accrued contributions to the Company's profit sharing
trust increased principally due to the increase in the number of employees
as well as an overall increase in salaries and wages upon which they are
based. This increase in working capital combined with net income and noncash
expenses, such as depreciation and amortization, resulted in the use of $0.1
million cash from operating activities. As of March 31, 1996, the Company
had unused credit facilities available of nearly $20.0 million.
In its investing activities, the Company used $1.1 million in cash to
purchase capital equipment, approximately the same rate of expenditures as
in the first three months of 1995.
Financing activities provided an additional $0.4 million in cash primarily
as a result of the issuance of Common Stock upon the exercise of stock
options by current and former employees. There were no borrowings
outstanding on long-term debt as of March 31, 1996.
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
1996. Depending on the Company's future growth, it may become necessary to
secure additional sources of financing.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is involved in various legal proceedings and other matters
arising in the normal course of business. In the opinion of management, none
of such matters when ultimately resolved will have a material adverse effect
on the Company's financial position or results of operations.
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 Standby Letter of Credit Agreement and Arbitration
Agreement, dated March 21, 1996, between Simpson
Manufacturing Co., Inc. and Union Bank
10.2 Independent Agreement, effective January 1, 1996, through
December 31, 1998, dated April 18, 1996, between Simpson
Strong-Tie Company Inc. and Tool and Die Craftsman
Association
11 Statement re computation of earnings per share
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not filed.
b. Reports on Form 8-K
No reports of 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.
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(Registrant)
DATE: May 13, 1996 By /s/Stephen B. Lamson
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Stephen B. Lamson
Chief Financial Officer