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, 1999
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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
------------------------------- -------------------
(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
September 30, 1999: 12,016,209
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30,
----------------------------
(Unaudited) December 31,
1999 1998 1998
------------ ------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 44,174,362 $ 34,515,012 $ 37,402,450
Trade accounts receivable, net 50,461,040 38,265,344 34,089,122
Inventories 68,867,778 51,699,130 56,340,053
Deferred income taxes 4,400,358 3,289,767 3,749,599
Other current assets 1,505,336 1,504,676 1,282,814
------------ ------------ ------------
Total current assets 169,408,874 129,273,929 132,864,038
Property, plant and equipment, net 60,024,345 53,462,633 54,964,704
Investments 385,264 535,773 524,964
Other noncurrent assets 10,452,557 2,993,033 3,246,045
------------ ------------ ------------
Total assets $240,271,040 $186,265,368 $191,599,751
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable and current
portion of long-term debt $ 300,000 $ 331,724 $ 330,704
Trade accounts payable 14,637,458 14,166,453 11,761,237
Accrued liabilities 7,622,273 5,416,675 5,591,292
Income taxes payable 3,469,005 1,304,227 1,465,384
Accrued profit sharing trust
contributions 2,696,669 2,463,741 3,173,362
Accrued cash profit sharing and
commissions 5,973,646 5,009,136 4,019,806
Accrued workers' compensation 1,145,764 779,272 879,272
------------ ------------ ------------
Total current liabilities 35,844,815 29,471,228 27,221,057
Long-term debt, net of current portion 2,584,345 2,722,720 2,565,182
Deferred income taxes and long-term
liabilities 621,840 592,453 531,149
------------ ------------ ------------
Total liabilities 39,051,000 32,786,401 30,317,388
------------ ------------ ------------
Commitments and contingencies (Notes 5 and 6)
Shareholders' equity
Common stock 44,655,797 33,607,488 33,723,845
Retained earnings 156,827,894 120,118,389 127,990,208
Accumulated other comprehensive income (263,651) (246,910) (431,690)
------------ ------------ ------------
Total shareholders' equity 201,220,040 153,478,967 161,282,363
------------ ------------ ------------
Total liabilities and
shareholders' equity $240,271,040 $186,265,368 $191,599,751
============ ============ ============
The accompanying notes are an integral part of these
condensed consolidated financial statements.
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMNETS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
Net sales $ 88,807,636 $ 77,207,820 $247,221,970 $207,248,839
Cost of sales 52,358,565 47,024,623 147,660,284 126,114,476
------------ ------------ ------------ ------------
Gross profit 36,449,071 30,183,197 99,561,686 81,134,363
------------ ------------ ------------ ------------
Operating expenses:
Selling 8,123,050 6,550,624 24,062,580 18,304,870
General and administrative 10,193,192 8,584,612 28,110,528 24,365,243
Compensation related to stock plans 85,000 18,000 289,135 120,000
------------ ------------ ------------ ------------
18,401,242 15,153,236 52,462,243 42,790,113
------------ ------------ ------------ ------------
Income from operations 18,047,829 15,029,961 47,099,443 38,344,250
Interest income, net 476,698 232,500 1,080,243 553,454
------------ ------------ ------------ ------------
Income before income taxes 18,524,527 15,262,461 48,179,686 38,897,704
Provision for income taxes 7,408,000 6,027,000 19,342,000 15,628,000
------------ ------------ ------------ ------------
Net income $ 11,116,527 $ 9,235,461 $ 28,837,686 $ 23,269,704
============ ============ ============ ============
Net income per common share
Basic $ 0.93 $ 0.80 $ 2.45 $ 2.01
Diluted $ 0.90 $ 0.77 $ 2.36 $ 1.93
Number of shares outstanding
Basic 11,968,123 11,570,904 11,777,481 11,554,623
Diluted 12,311,909 12,028,293 12,218,050 12,047,356
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
Net income $ 11,116,527 $ 9,235,461 $ 28,837,686 $ 23,269,704
Other comprehensive income, net of tax:
Foreign currency translation
adjustments 559,600 92,451 168,039 28,815
------------ ------------ ------------ ------------
Comprehensive income $ 11,676,127 $ 9,327,912 $ 29,005,725 $ 23,298,519
============ ============ ============ ============
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)
Nine Months
Ended September 30,
----------------------------
1999 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 28,837,686 $ 23,269,704
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) loss on sale of capital equipment (43,308) 17,918
Depreciation and amortization 8,148,734 6,476,887
Deferred income taxes and long-term liabilities (560,068) 15,702
Equity in (income) loss of affiliates 107,273 (9,000)
Noncash compensation related to stock plans 119,800 169,894
Changes in operating assets and liabilities,
net of effects of acquisitions:
Trade accounts receivable (16,310,469) (13,609,741)
Inventories (11,664,237) 3,297,761
Trade accounts payable 2,876,221 5,353,257
Income taxes payable 8,275,688 1,859,638
Accrued profit sharing trust contributions (476,693) (423,134)
Accrued cash profit sharing and commissions 1,953,840 1,914,302
Other current assets (222,522) 218,911
Accrued liabilities 2,030,982 (90,228)
Accrued workers' compensation 266,492 120,000
Other noncurrent assets (1,619,970) (180,252)
------------ ------------
Total adjustments (7,118,237) 5,131,915
------------ ------------
Net cash provided by operating activities 21,719,449 28,401,619
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (11,903,467) (16,874,152)
Asset acquisitions, net of cash acquired (7,833,090) -
Proceeds from sale of equipment 260,476 39,397
------------ ------------
Net cash used in investing activities (19,476,081) (16,834,755)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of debt 202,040 3,111,314
Repayment of debt (213,581) (86,475)
Issuance of common stock 4,540,085 504,620
------------ ------------
Net cash provided by financing activities 4,528,544 3,529,459
------------ ------------
Net increase in cash and cash equivalents 6,771,912 15,096,323
Cash and cash equivalents at beginning of period 37,402,450 19,418,689
------------ ------------
Cash and cash equivalents at end of period $ 44,174,362 $ 34,515,012
============ ============
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") 1998 Annual Report on
Form 10-K (the "1998 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.
Certain prior year amounts have been reclassified to conform to the 1999
presentation with no effect on net income as previously reported.
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, 1999 September 30, 1998
---------------------------------- ----------------------------------
Per Per
Income Shares Share Income Shares Share
------------ ------------ ------ ------------ ------------ ------
BASIC EPS
Income available to
common shareholders $ 11,116,527 11,968,123 $ 0.93 $ 9,235,461 11,570,904 $ 0.80
EFFECT OF DILUTIVE SECURITIES
Stock options - 343,786 (0.03) - 457,389 (0.03)
------------ ------------ ------ ------------ ------------ ------
DILUTED EPS
Income available to
common shareholders $ 11,116,527 12,311,909 $ 0.90 $ 9,235,461 12,028,293 $ 0.77
============ ============ ====== ============ ============ ======
Nine Months Ended Nine Months Ended
September 30, 1999 September 30, 1998
---------------------------------- ----------------------------------
Per Per
Income Shares Share Income Shares Share
------------ ------------ ------ ------------ ------------ ------
BASIC EPS
Income available to
common shareholders $ 28,837,686 11,777,481 $ 2.45 $ 23,269,704 11,554,623 $ 2.01
EFFECT OF DILUTIVE SECURITIES
Stock options - 440,569 (0.09) - 492,733 (0.08)
------------ ------------ ------ ------------ ------------ ------
DILUTED EPS
Income available to
common shareholders $ 28,837,686 12,218,050 $ 2.36 $ 23,269,704 12,047,356 $ 1.93
============ ============ ====== ============ ============ ======
2. Trade Accounts Receivable
Trade accounts receivable consist of the following:
At September 30,
----------------------------
(Unaudited) December 31,
1999 1998 1998
------------ ------------ ------------
Trade accounts receivable $ 52,066,509 $ 39,858,760 $ 35,550,836
Allowance for doubtful accounts (1,205,142) (1,243,048) (1,173,656)
Allowance for sales discounts (400,327) (350,368) (288,058)
------------ ------------ ------------
$ 50,461,040 $ 38,265,344 $ 34,089,122
============ ============ ============
3. Inventories
The components of inventories consist of the following:
At September 30,
----------------------------
(Unaudited) December 31,
1999 1998 1998
------------ ------------ ------------
Raw materials $ 20,807,497 $ 16,941,620 $ 18,904,545
In-process products 7,368,534 5,308,232 5,255,755
Finished products 40,691,747 29,449,278 32,179,753
------------ ------------ ------------
$ 68,867,778 $ 51,699,130 $ 56,340,053
============ ============ ============
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 September 30,
1999, the LIFO cost exceeded the replacement value of LIFO inventories by
approximately $620,000 and at September 30, 1998, and December 31, 1998,
the replacement value of LIFO inventories exceeded LIFO cost by
approximately $438,000 and $359,000, respectively.
4. Net Property, Plant and Equipment
Net property, plant and equipment consists of the following:
At September 30,
----------------------------
(Unaudited) December 31,
1999 1998 1998
------------ ------------ ------------
Land $ 4,321,061 $ 3,891,519 $ 3,891,519
Buildings and site improvements 26,762,081 18,704,333 25,743,968
Leasehold improvements 3,887,913 3,380,305 3,463,063
Machinery and equipment 74,568,615 59,631,004 67,052,907
------------ ------------ ------------
109,539,670 85,607,161 100,151,457
Less accumulated depreciation
and amortization (56,420,453) (48,146,143) (49,498,717)
------------ ------------ ------------
53,119,217 37,461,018 50,652,740
Capital projects in progress 6,905,128 16,001,615 4,311,964
------------ ------------ ------------
$ 60,024,345 $ 53,462,633 $ 54,964,704
============ ============ ============
5. Debt
Outstanding debt at September 30, 1999 and 1998, and December 31, 1998,
and the available credit at September 30, 1999, consisted of the
following:
Debt Outstanding
Available --------------------------------------------
Credit at at September 30, at
September 30, ---------------------------- December 31,
1999 1999 1998 1998
------------ ------------ ------------ ------------
Revolving line of credit, interest
at bank's reference rate (at
September 30, 1999, the bank's
reference rate was 8.25%), expires
June 2000 $ 12,443,472 $ - $ - $ -
Revolving term commitment, interest
at bank's prime rate (at September
30, 1999, the bank's prime rate
was 8.25%), 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 411,252 - - -
Term loan, fixed interest rate
of 5.3%, expires September 2006 - 154,819 - -
Standby letter of credit facilities 1,939,901 - - -
Term loan, interest at LIBOR plus
1.375% (at September 30, 1999,
LIBOR plus 1.375% was 6.8125%),
expires May 2008 - 2,700,000 3,000,000 2,850,000
Other notes payable and long-term debt - 29,526 54,444 45,886
------------ ------------ ------------ ------------
23,411,253 2,884,345 3,054,444 2,895,886
Less current portion - 300,000 331,724 330,704
------------ ------------ ------------ ------------
23,411,253 $ 2,584,345 $ 2,722,720 $ 2,565,182
Standby letters of credit issued ============ ============ ============
and outstanding (1,939,901)
------------
$ 21,471,352
============
As of September 30, 1999, 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. The third, in the amount of $773,153,
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 1998
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 and nine months ended:
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
Net Sales
Connector products $ 71,607,000 $ 61,895,000 $199,989,000 $167,592,000
Venting products 17,201,000 15,313,00 47,233,000 39,657,000
------------ ------------ ------------ ------------
Total $ 88,808,000 $ 77,208,000 $247,222,000 $207,249,000
============ ============ ============ ============
Income from Operations
Connector products $ 15,360,000 $ 12,806,000 $ 40,100,000 $ 33,769,000
Venting products 2,575,000 1,999,000 7,010,000 4,751,000
All other 113,000 225,000 (11,000) (176,000)
------------ ------------ ------------ ------------
Total $ 18,048,000 $ 15,030,000 $ 47,099,000 $ 38,344,000
============ ============ ============ ============
At September 30,
----------------------------
1999 1998
------------ ------------
Total Assets
Connector products $149,661,000 $111,793,000
Venting products 43,020,000 37,594,000
All other 47,590,000 36,878,000
------------ ------------
Total $240,271,000 $186,265,000
============ ============
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 $41,607,000 and
$33,376,000 as of September 30, 1999 and 1998, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERAITONS.
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, 1999 and 1998. 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, 1999,
COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 1998
Sales increased 15.0% in the third quarter of 1999 as compared to the
third quarter of 1998. The increase reflected sales growth throughout the
United States, particularly in California and the midwestern and
southeastern portions of the country. Sales in most of the Company's
international markets continued to grow, due in part to the acquisition of
Furfix Products Limited late in the third quarter. Simpson Strong-Tie's
third quarter sales increased 15.7% over the same quarter last year, while
Simpson Dura-Vent's sales increased 12.3%. 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. Anchoring
Systems products had the highest growth rate in sales and the Company's
new Strong-Wall product line also experienced strong sales growth. Sales
of most of Simpson Dura-Vent's major product lines increased compared to
the third quarter of 1998, led by above average growth rates for its
Direct-Vent product line.
Income from operations increased 20.1% from $15,029,961 in the third
quarter of 1998 to $18,047,829 in the third quarter of 1999 as a result of
higher sales and gross margins. Gross margins increased from 39.1% in the
third quarter of 1998 to 41.0% in the third quarter of 1999 primarily due
to better absorption of fixed overhead costs as a result of increased
production. Selling expenses increased 24.0% from $6,550,624 in the third
quarter of 1998 to $8,123,050 in the third quarter of 1999. The increase
was primarily due to higher promotional expenses as well as higher costs
related to an increase in the number of sales and merchandising personnel.
General and administrative expenses increased 18.7% from $8,584,612 in the
third quarter of 1998 to $10,193,192 in the third quarter of 1999
primarily due to increased cash profit sharing resulting from higher
operating income. The effective tax rate was 40.0% in the third quarter of
1999, a slight increase from the third quarter of 1998.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999,
COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1998
Sales increased 19.3% in the first nine months of 1999 as compared to the
first nine months of 1998. The increase reflected sales growth throughout
the United States, particularly in California and the midwestern and
southeastern portions of the country. Sales in most of the Company's
international markets continued to grow. Simpson Strong-Tie's sales
through the first nine months of 1999, increased 19.3% over the same
period in the prior year, while Simpson Dura-Vent's sales increased 19.1%.
Homecenters were the fastest growing connector sales channel. The sales
increase was broad based across most of Simpson Strong-Tie's major product
lines. Anchoring Systems products had the highest growth rate in sales and
the Company's new Strong-Wall product line also experienced strong sales
growth. Sales of most of Simpson Dura-Vent's major product lines increased
in the first nine months of 1999 compared to the same period in 1998, led
by above average growth rates for its Direct-Vent and chimney product
lines.
Income from operations increased 22.8% from $38,344,250 in the first nine
months of 1998 to $47,099,443 in the first nine months of 1999 as a result
of higher sales and gross margins and lower general and administrative
costs as a percentage of sales. Gross margins increased from 39.1% in the
first nine months of 1998 to 40.3% in the first nine months of 1999
primarily due to better absorption of fixed overhead costs as a result of
increased production. Selling expenses increased 31.5% from $18,304,870 in
the first nine months of 1998 to $24,062,580 in the first nine months of
1999. The increase was primarily due to higher promotional expenses as
well as higher costs related to an increase in the number of sales and
merchandising personnel. General and administrative expenses increased
15.4% from $24,365,243 in the first nine months of 1998 to $28,110,528 in
the first nine months of 1999 primarily due to increased cash profit
sharing resulting from higher operating income. The effective tax rate was
40.1% in the first nine months of 1999, a slight decrease from the first
nine months of 1998.
LIQUIDITY AND SOURCES OF CAPITAL
As of September 30, 1999, working capital was $133.6 million as compared
to $99.8 million at September 30, 1998, and $105.6 million at December 31,
1998. The principal components of the increase in working capital from
December 31, 1998, were increases in the Company's trade accounts
receivable and inventories totaling approximately $28.9 million, primarily
due to higher sales levels and additional production capacity that has
been added recently. Partially offsetting these increases were increases
in trade accounts payable, accrued liabilities and accrued cash profit
sharing. These accounts increased an aggregate of approximately $6.9
million. In addition, income taxes payable increased by approximately $2.0
million, but overall had a positive effect on cash flow of approximately
$8.3 million, due to a $6.3 million tax benefit resulting from the
exercise of stock options by employees of the Company. The balance of the
change in working capital was due to the fluctuation of various other
asset and liability accounts. The working capital change, changes in
noncurrent assets and liabilities, excluding the acquisition of intangible
assets related to Furfix Products Limited, combined with net income and
noncash expenses, primarily depreciation and amortization, totaling
approximately $37.1 million, resulted in net cash provided by operating
activities of approximately $21.7 million. As of September 30, 1999, the
Company had unused credit facilities available of approximately $21.5
million.
The Company used approximately $19.5 million in its investing activities,
primarily to purchase the capital equipment and property needed to expand
its capacity and to acquire the assets of Furfix Products Limited. The
Company plans to continue this expansion throughout the remainder of the
year and into 2000.
Financing activities provided the Company with approximately $4.5 million
in cash. Substantially all of this cash was generated by the issuance of
stock upon the exercise of stock options by current employees and a
director of the Company.
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 1999 and into 2000. Depending on the Company's future
growth, it may become necessary to secure additional sources of financing.
YEAR 2000 PROBLEM
The year 2000 problem is primarily the result of computer programs and
computer controlled equipment using two digits rather than four to define
the applicable year. Such software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could potentially result in
system failures or miscalculations leading to disruptions in the Company's
activities or those of its significant customers, suppliers and banks.
The Company does not produce or sell any computer components, software or
electronic parts in its normal business environment and, therefore, does
not believe that it has any material risk of product liability or
obsolescence resulting from the year 2000 problem.
In 1998, the Company established a Year 2000 Committee (the "Committee")
to evaluate the extent, if any, of its year 2000 and associated problems,
to make any required changes and to establish contingency plans. The
Company's computer systems are PC based with few interfaces to other
internal systems. These systems use a date handling routine that the
Company believes to be year 2000 compliant. The Company has completed
tests of its internal software which demonstrated no significant risk from
the year 2000 problem.
The Company is also focusing on major customers, suppliers and equipment
used in its operations to assess compliance. The Committee will continue
to evaluate these areas of exposure and, where possible, will develop
contingency plans and alternative sources to avoid interruptions in the
Company's business. Nevertheless, the Company cannot give any assurance
that there will not be a material adverse effect on the Company if third
parties with whom the Company conducts business do not adequately address
the year 2000 problem and, therefore, are unable to conduct operations
without interruption.
Costs related to the year 2000 problem are funded through operating cash
flows. The Committee estimates that the costs of addressing the year 2000
problem are expected to be less than $100,000, most of which has been
spent. The Company presently expects that the total cost of achieving year
2000 compliant systems will not be material to its financial condition,
liquidity or results of operations.
Time and cost estimates are based on currently available information.
Developments that could affect estimates include, but are not limited to,
the availability and cost of trained personnel, the ability to locate and
correct all relevant computer code and systems, and the degree of
remediation success of the Company's customers, suppliers and banks in
finding and resolving their year 2000 problems.
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.
The Company adopted a Shareholder Rights Plan on July 29, 1999, as
previously reported in the Company's report on Form 8-K dated July 29,
1999.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITME 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
EXHIBIT
NO DESCRIPTION
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4.1 Rights Agreement, dated July 30, 1999, between Simpson
Manufacturing Co., Inc. and BankBoston, N.A..
10.1 Agreement for the purchase of the businesses and certain
assets of Easy Arches Limited and Furfix Product
Limited, dated August 31, 1999, between Donald Furr and
Others, Icon PLC, Easy Arches Limited and Furfix
Products Limited and Simpson Strong-Tie International,
Inc.
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
Report on Form 8-K, dated July 29, 1999, reporting under
Item 5 that the Company had adopted a Stockholder Rights
Plan.
Report on Form 8-K, dated September 3, 1999, reporting
under Item 5 that the Company had completed the
acquisition of Furfix Products Limited and Easy Arches
Limited.
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: NOVEMBER 11, 1999 By: /s/Stephen B. Lamson
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Stephen B. Lamson
Chief Financial Officer