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: JUNE 30, 1996
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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 _____
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)
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
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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
June 30, 1996: 11,432,987
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
(UNAUDITED)
1996 1995 1995
------------ ------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 12,875,191 $ 3,017,060 $ 6,955,788
Trade accounts receivable, net 30,521,398 26,235,797 20,732,880
Inventories 34,823,846 36,613,197 34,471,250
Deferred income taxes 2,493,455 2,418,455 2,750,455
Other current assets 950,650 1,175,633 1,986,446
------------ ------------ ------------
Total current assets 81,664,540 69,460,142 66,896,819
Net property, plant and equipment 25,656,317 21,171,478 26,420,004
Investments 1,355,336 680,546 1,357,457
Other noncurrent assets 1,774,287 839,401 1,967,779
------------ ------------ ------------
Total assets $110,450,480 $ 92,151,567 $ 96,642,059
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes Payable $ - $ - $ 20,037
Trade accounts payable 8,408,694 8,530,861 7,375,014
Accrued liabilities 3,426,457 2,921,089 3,386,527
Accrued profit sharing trust contributions 3,302,741 2,869,787 1,999,739
Accrued cash profit sharing and commissions 3,012,877 2,435,980 1,289,144
Income taxes payable 868,164 1,618,429 -
Accrued workers' compensation 809,272 842,125 842,125
------------ ------------ ------------
Total current liabilities 19,828,205 19,218,271 14,912,586
Deferred income taxes and long-term liabilities 100,783 66,783 176,783
------------ ------------ ------------
Total liabilities 19,928,988 19,285,054 15,089,369
------------ ------------ ------------
Commitments and contingencies (Note 6)
Shareholders' equity
Common stock 30,993,676 29,659,225 30,415,716
Retained earnings 59,572,621 43,322,420 51,142,268
Cumulative translation adjustment (44,805) (115,132) (5,294)
------------ ------------ ------------
Total shareholders' equity 90,521,492 72,866,513 81,552,690
------------ ------------ ------------
Total liabilities and shareholders' equity $110,450,480 $ 92,151,567 $ 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
Net sales $ 51,759,610 $ 41,862,227 $ 95,217,057 $ 77,637,183
Cost of sales 31,508,992 25,980,437 59,864,983 50,016,203
------------ ------------ ------------ ------------
Gross profit 20,250,618 15,881,790 35,352,074 27,620,980
------------ ------------ ------------ ------------
Operating expenses:
Selling 5,462,644 4,013,825 9,972,678 7,872,554
General and administrative 6,225,481 5,186,399 11,353,926 9,020,769
11,688,125 9,200,224 21,326,604 16,893,323
------------ ------------ ------------ ------------
Income from operations 8,562,493 6,681,566 14,025,470 10,727,657
------------ ------------ ------------ ------------
Interest income (expense), net 97,356 (11,946) 150,883 53,380
------------ ------------ ------------ ------------
Income before income taxes 8,659,849 6,669,620 14,176,353 10,781,037
Provision for income taxes 3,492,000 2,777,000 5,746,000 4,479,000
------------ ------------ ------------ ------------
Net income $ 5,167,849 $ 3,892,620 $ 8,430,353 $ 6,302,037
============ ============ ============ ============
Net income per common share $ 0.44 $ 0.34 $ 0.72 $ 0.55
============ ============ ============ ============
Weighted average shares outstanding 11,747,506 11,412,303 11,691,673 11,416,541
============ ============ ============ ============
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)
SIX MONTHS ENDED
JUNE 30,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,430,353 $ 6,302,037
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of capital equipment (15,827) (1,525)
Depreciation and amortization 2,875,084 2,581,550
Deferred income taxes 181,000 287,000
Equity in (income) losses of affiliates (33,000) 14,750
Changes in operating assets and liabilities, net of
effects of acquisitions:
Trade accounts receivable (9,807,467) (9,011,189)
Inventories (371,546) (5,456,160)
Other current assets 283,963 (194,302)
Other noncurrent assets (40,430) (49,166)
Trade accounts payable 1,033,680 2,188,461
Accrued liabilities 75,029 (38,105)
Accrued profit sharing trust contributions 1,303,002 1,149,183
Accrued workers' compensation (32,853) (55,000)
Accrued cash profit sharing and commissions 1,723,733 1,100,854
Income taxes payable 1,789,446 1,117,768
------------ ------------
Total adjustments (1,036,186) (6,365,881)
------------ ------------
Net cash provided by (used in)
operating activities 7,394,167 (63,844)
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,858,062) (2,808,549)
Proceeds from sale of equipment 41,560 -
Equity Investments (11,637) -
------------ ------------
Net cash used in investing activities (1,828,139) (2,808,549)
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable (20,037) -
Issuance of Company's common stock 373,412 78,860
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Net cash provided by financing activities 353,375 78,860
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Net increase (decrease) in cash and cash equivalents 5,919,403 (2,793,533)
Cash and cash equivalents at beginning of period 6,955,788 5,810,593
------------ ------------
Cash and cash equivalents at end of period $ 12,875,191 $ 3,017,060
============ ============
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 six months ended June 30,
1996 and 1995.
2. Trade Accounts Receivable
Trade accounts receivable consist of the following:
AT JUNE 30, DECEMBER 31,
1996 1995 1995
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Trade accounts receivable $ 32,029,660 $ 27,887,698 $ 21,832,701
Allowance for doubtful accounts (1,053,448) (1,341,901) (931,321)
Allowance for sales discounts (454,814) (310,000) (168,500)
------------ ------------ ------------
$ 30,521,398 $ 26,235,797 $ 20,732,880
============ ============ ============
3. Inventories The components of inventories consist of the following:
AT JUNE 30, DECEMBER 31,
1996 1995 1995
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Raw materials $ 12,206,175 $ 13,261,894 $ 13,424,828
In-process products 3,164,225 3,351,046 3,180,416
Finished products 19,453,446 20,000,257 17,866,006
------------ ------------ ------------
$ 34,823,846 $ 36,613,197 $ 34,471,250
============ ============ ============
At June 30, 1996 and 1995, and December 31, 1995, the replacement value of
LIFO inventories exceeded LIFO cost by approximately $3,077,000, $3,179,000
and $4,178,000, respectively.
4. Net Property, Plant and Equipment
Net property, plant and equipment consists of the following:
AT JUNE 30, DECEMBER 31,
1996 1995 1995
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Land $ 2,065,682 $ 1,340,682 $ 2,065,682
Buildings and site improvements 10,382,076 5,268,537 10,379,901
Leasehold improvements 2,859,204 4,021,807 2,688,430
Machinery and equipment 42,271,683 35,613,597 40,393,578
------------ ------------ ------------
57,578,645 46,244,623 55,527,591
Less accumulated depreciation
and amortization (32,866,366) (27,988,937) (30,419,484)
------------ ------------ ------------
24,712,279 18,255,686 25,108,107
Capital projects in progress 944,038 2,915,792 1,311,897
------------ ------------ ------------
$ 25,656,317 $ 21,171,478 $ 26,420,004
============ ============ ============
5. Debt
As of June 30, 1996, the Company had no outstanding debt. The Company has
available to it credit facilities which consist of the following:
Amount of
Facility
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Revolving line of credit, interest at
bank's reference rate (at June 30,
1996, the bank's reference rate was
8.25%), expires June 1997 $ 11,267,205
Revolving line of credit, interest at
bank's prime rate (at June 30,
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 June 30,
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 August 1996 687,375
Standby letter of credit facilities 1,869,926
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Total credit facilities 21,824,506
Standby letters of credit issued and outstanding (1,869,926)
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Total credit available $ 19,954,580
============
The Company has four outstanding standby letters of credit. Two of these
letters of credit, in the aggregate amount of $1,137,131, are used to support
the Company's self-insured workers' compensation insurance requirements while
the other two, in the aggregate amount of $732,795, 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
June 30, 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 June 30, 1996, Compared
with the Three Months Ended June 30, 1995
Net Sales increased 23.6% from the second quarter of 1995 to the second
quarter of 1996. The increase reflected solid growth throughout the United
States, with particularly strong sales in the Northeast. This increase was
probably due, in part, to more construction and do-it-yourself activity which
were negatively affected by harsh winter weather early in the year. Simpson
Strong-Tie's sales increased 22.0% while Simpson Dura-Vent's sales increased
30.7%. Homecenter connector sales recovered from a slow start in the first
quarter of 1996 to become the fastest growing connector sales channel while
contractor distributor sales growth continued at an above average growth rate.
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, more than doubling in the second
quarter of 1996 over the same period in the prior year. Second 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 the sales in the
second quarter of 1996 or approximately 8% of the aggregate increase in sales
as compared to the second quarter of 1995.
Income from operations increased 28.2% from $6,681,566 in the second quarter
of 1995 to $8,562,493 in the second quarter of 1996. This increase was
primarily due to higher gross margins and lower general and administrative
expenses as a percentage of sales, partially offset by increased selling
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 the businesses acquired in
late 1995. Selling expenses increased 36.1% in total from $4,013,825 in the
second quarter of 1995 to $5,462,644 in the second quarter of 1996. This
increase was primarily due to increased advertising and promotional expenses,
including new retail displays as well as additional merchandisers hired to
better support the homecenter business. General and administrative expenses
increased 20.0% from $5,186,399 in the second quarter of 1995 to $6,225,481 in
the second quarter of 1996. This increase was primarily due to increased cash
profit sharing, as a result of higher operating profit, and higher personnel
and other overhead costs. The effective tax rate decreased from 41.6% in the
second quarter of 1995 to 40.3% in the second quarter of 1996, primarily due
to lower estimated effective state tax rates.
Results of Operations for the Six Months Ended June 30, 1996, Compared
with the Six Months Ended June 30, 1995
Net sales for the first six months of 1996 increased 22.6% over the same
period in 1995. The growth rate in sales was highest in the Western United
States. California sales increased at a rate below the average rate during the
first six months of 1996. Simpson Strong-Tie's sales increased 22.0% during
the first half of the year, while Simpson Dura-Vent's sales increased 25.1%.
Contractor distributors were the fastest growing connector sales channel. 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 continued to experience high growth.
Income from operations increased 30.7% from $10,727,657 in the first half of
1995 to $14,025,470 in the first half of 1996. This increase was primarily due
to higher gross margins, partially offset by increased selling, 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 26.7% in total from $7,872,554 in the
first half of 1995 to $9,972,678 in the first half of 1996. This increase was
primarily due to increased advertising and promotional expenses, including new
retail displays as well as additional merchandisers hired to better support
the homecenter business. General and administrative expenses increased 25.9%
from $9,020,769 in the first half of 1995 to $11,353,926 in the first half of
1996. This increase was primarily due to increased cash profit sharing, as a
result of higher operating profit, higher personnel and other overhead costs,
and an increase in the Company's provision for possible losses on delinquent
accounts. The effective tax rate decreased from 41.5% in the first half of
1995 to 40.5% in the first half of 1996, primarily due to lower estimated
effective state tax rates.
Liquidity and Sources of Capital
As of June 30, 1996, working capital was $61.8 million as compared to $50.2
million at June 30, 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. Offsetting
these increases were increases in accrued cash profit sharing and commissions,
income taxes payable, as a result of higher operating and taxable income,
respectively, and trade accounts payable. In addition, accrued contributions
to the Company's profit sharing trust increased, as compared to June 30, 1995,
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 increase in cash and
cash equivalents of $5.9 million from operating activities. As of June 30,
1996, the Company had unused credit facilities available of nearly $20.0
million.
In its investing activities, the Company used $1.9 million in cash to purchase
capital equipment, a rate substantially below that of the first six months of
1995. The Company plans to increase its purchases of capital equipment in the
second half of 1996 in order to expand its capacity.
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 June 30, 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.
The Annual Meeting of Shareholders ("Annual Meeting") was held on May 14,
1996. The following seven nominees were reelected as director by the votes
indicated:
TOTAL VOTES TOTAL VOTES
FOR EACH WITHHELD FROM
NAME DIRECTOR EACH DIRECTOR
------------------------- ------------ -------------
Earl F. Cheit 10,731,036 400
Thomas J Fitzmyers 10,731,026 410
Stephen B. Lamson 10,731,026 410
Alan R. McKay 10,731,036 400
Sunne Wright McPeak 10,730,275 1,161
Barclay Simpson 10,730,997 439
Barry Lawson Williams 10,731,036 400
The following proposal was also adopted at the Annual Meeting by the vote
indicated:
BROKER
PROPOSAL FOR AGAINST ABSTAIN NON-VOTE
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To ratify the appointment of
Coopers & Lybrand L.L.P. as
independent auditors of the
Company for 1996 10,728,690 690 2,056 -
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 Lease Agreement, dated June 25, 1996, between Simpson
Strong-Tie Company Inc. and Stone Mountain Industrial
Park, Inc.
10.2 Amendment to Letter of Credit, dated May 31, 1996, between
Simpson Holdings, Inc. and Wells Fargo Bank, N.A.
10.3 Amendment to Letter of Credit, dated June 20, 1996, between
Simpson Manufacturing Co., Inc. and Union Bank
11 Statements 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: August 13, 1996 By: /s/ Stephen B. Lamson
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Stephen B. Lamson
Chief Financial Officer