1
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, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ___________
Commission file number: 0-23804
SIMPSON MANUFACTURING CO., INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 94-3196943
- ---------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
4120 DUBLIN BOULEVARD, SUITE 400, DUBLIN, CA 94568
---------------------------------------------------------
(Address of principal executive offices)
(Registrant's telephone number, including area code): (925) 560-9000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of the Registrant's Common Stock outstanding as of
March 31, 2001: 12,084,713
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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,
2001 2000 2000
------------- ------------- -------------
ASSETS
Current assets
Cash and cash equivalents $ 41,784,481 $ 45,551,211 $ 59,417,658
Trade accounts receivable, net 58,975,024 52,893,480 45,584,186
Inventories 93,635,319 76,898,347 85,269,695
Deferred income taxes 5,956,712 5,684,187 5,420,091
Other current assets 3,811,698 2,156,309 5,040,017
------------- ------------- -------------
Total current assets 204,163,234 183,183,534 200,731,647
Property, plant and equipment, net 69,648,429 60,662,207 63,822,513
Investments 343,605 363,646 354,414
Other noncurrent assets 23,413,149 12,255,670 14,660,979
------------- ------------- -------------
Total assets $ 297,568,417 $ 256,465,057 $ 279,569,553
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable and current
portion of long-term debt $ 2,866,842 $ 487,549 $ 335,754
Trade accounts payable 13,207,540 10,192,763 14,630,941
Accrued liabilities 8,427,641 7,436,206 9,373,007
Income taxes payable 3,031,096 7,482,869 --
Accrued profit sharing trust contributions 5,038,061 1,135,525 3,929,043
Accrued cash profit sharing and commissions 4,099,837 4,808,670 2,979,060
Accrued workers' compensation 1,475,764 1,445,764 1,475,764
------------- ------------- -------------
Total current liabilities 38,146,781 32,989,346 32,723,569
Long-term debt, net of current portion 4,565,881 2,398,651 2,069,028
Deferred income taxes and long-term liabilities 206,372 423,932 341,600
------------- ------------- -------------
Total liabilities 42,919,034 35,811,929 35,134,197
------------- ------------- -------------
Minority interest in consolidated subsidiaries 456,874 1,804,040 754,278
------------- ------------- -------------
Commitments and contingencies (Notes 5 and 6)
Stockholders' equity
Common stock 44,297,473 44,901,418 40,968,501
Retained earnings 213,881,694 174,833,245 204,901,540
Accumulated other comprehensive income (3,986,658) (885,575) (2,188,963)
------------- ------------- -------------
Total stockholders' equity 254,192,509 218,849,088 243,681,078
------------- ------------- -------------
Total liabilities and stockholders' equity $ 297,568,417 $ 256,465,057 $ 279,569,553
============= ============= =============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------------------
2001 2000
------------ ------------
Net sales $ 94,823,953 $ 84,615,539
Cost of sales 57,687,565 50,779,161
------------ ------------
Gross profit 37,136,388 33,836,378
------------ ------------
Operating expenses:
Selling 10,779,049 8,553,122
General and administrative 11,893,980 10,648,327
------------ ------------
22,673,029 19,201,449
------------ ------------
Income from operations 14,463,359 14,634,929
Interest income, net 460,277 643,875
------------ ------------
Income before income taxes 14,923,636 15,278,804
Provision for income taxes 6,240,886 6,186,316
Minority interest (297,404) (195,960)
------------ ------------
Net income $ 8,980,154 $ 9,288,448
============ ============
Net income per common share
Basic $ 0.75 $ 0.77
Diluted $ 0.73 $ 0.76
Number of shares outstanding
Basic 12,037,073 12,020,446
Diluted 12,277,485 12,277,453
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2001 2000
----------- -----------
Net income $ 8,980,154 $ 9,288,448
Other comprehensive income, net of tax:
Foreign currency translation adjustments (1,797,695) (300,653)
----------- -----------
Comprehensive income $ 7,128,459 $ 8,987,795
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
-------------------------------
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,980,154 $ 9,288,448
------------ ------------
Adjustments to reconcile net income to net cash
used in operating activities:
Gain on sale of capital equipment (13,231) (1,700)
Depreciation and amortization 4,061,496 3,248,640
Minority interest (297,404) (195,960)
Deferred income taxes and long-term liabilities (249,358) (472,402)
Noncash compensation related to stock plans 137,700 --
Changes in operating assets and liabilities, net of
effects of acquisitions:
Trade accounts receivable (12,627,922) (10,571,756)
Inventories (3,608,389) (5,742,118)
Trade accounts payable (3,732,705) (2,519,618)
Income taxes payable 7,260,210 4,179,992
Accrued profit sharing trust contributions 1,117,647 (2,367,051)
Accrued cash profit sharing and commissions 1,121,057 276,818
Other current assets (677,364) (869,220)
Accrued liabilities (1,381,804) (356,846)
Accrued workers' compensation -- 100,000
Other noncurrent assets (1,651,658) (623,264)
------------ ------------
Total adjustments (10,541,725) (15,914,485)
------------ ------------
Net cash used in operating activities (1,561,571) (6,626,037)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (5,139,277) (2,548,553)
Asset acquisitions, net of cash acquired (13,489,924) (54,698)
Proceeds from sale of equipment 743 8,376
------------ ------------
Net cash used in investing activities (18,628,458) (2,594,875)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of debt 1,324,928 149,785
Repayment of debt (53,714) (15,551)
Issuance of common stock 1,399,816 127,618
------------ ------------
Net cash provided by financing activities 2,671,030 261,852
------------ ------------
Effect of exchange rate changes on cash (114,178) 661
------------ ------------
Net decrease in cash and cash equivalents (17,633,177) (8,958,399)
Cash and cash equivalents at beginning of period 59,417,658 54,509,610
------------ ------------
Cash and cash equivalents at end of period $ 41,784,481 $ 45,551,211
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Interim Period Reporting
The accompanying unaudited interim condensed consolidated financial statements
have been prepared pursuant to the rules and regulations for reporting on Form
10-Q. Accordingly, certain information and footnotes required by accounting
principles generally accepted in the United States of America have been
condensed or omitted. These interim statements should be read in conjunction
with the consolidated financial statements and the notes thereto included in
Simpson Manufacturing Co., Inc.'s (the "Company's") 2000 Annual Report on Form
10-K (the "2000 Annual Report").
The unaudited quarterly condensed consolidated financial statements have been
prepared on the same basis as the audited annual consolidated financial
statements, and in the opinion of management, contain all adjustments
(consisting of only normal recurring adjustments, except for the change in
accounting for inventory described in Note 3) necessary to present fairly the
financial information set forth therein, in accordance with accounting
principles generally accepted in the United States of America. The year-end
condensed consolidated balance sheet data was derived from audited financial
statements, but does not include all disclosures required by accounting
principles generally accepted in the United States of America. The Company's
quarterly results may be subject to fluctuations. As a result, the Company
believes the results of operations for the interim periods are not necessarily
indicative of the results to be expected for any future period.
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, 2001 MARCH 31, 2000
------------------------------------ ------------------------------------
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
---------- ---------- -------- ---------- ---------- --------
BASIC EPS
Income available to
common stockholders $8,980,154 12,037,073 $ 0.75 $9,288,448 12,020,446 $ 0.77
EFFECT OF DILUTIVE SECURITIES
Stock options -- 240,412 (0.02) -- 257,007 (0.01)
---------- ---------- -------- ---------- ---------- --------
DILUTED EPS
Income available to
common stockholders $8,980,154 12,277,485 $ 0.73 $9,288,448 12,277,453 $ 0.76
========== ========== ======== ========== ========== ========
Adoption of Statements of Financial Accounting Standards
In January 2001, the Company adopted Financial Accounting Standards Board
("FASB") statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as amended. The adoption of this standard by the Company has not
had a material effect on its financial position as of March 31, 2001, or results
of operations for the period then ended.
Reclassifications
Certain prior period amounts have been reclassified to conform to the 2001
presentation with no effect on net income or retained earnings as previously
reported.
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2. Trade Accounts Receivable
Trade accounts receivable consist of the following:
AT MARCH 31,
------------------------------- AT DECEMBER 31,
2001 2000 2000
------------ ------------ ---------------
Trade accounts receivable $ 60,999,878 $ 54,461,542 $ 47,119,344
Allowance for doubtful accounts (1,480,256) (1,088,601) (1,201,289)
Allowance for sales discounts (544,598) (479,461) (333,869)
------------ ------------ ------------
$ 58,975,024 $ 52,893,480 $ 45,584,186
============ ============ ============
3. Inventories
The components of inventories consist of the following:
AT MARCH 31,
---------------------------- AT DECEMBER 31,
2001 2000 2000
----------- ----------- ---------------
Raw materials $27,777,313 $23,993,755 $26,979,866
In-process products 14,428,555 8,589,328 10,882,721
Finished products 51,429,451 44,315,264 47,407,108
----------- ----------- -----------
$93,635,319 $76,898,347 $85,269,695
=========== =========== ===========
Effective January 1, 2001, the Company changed its method of valuing inventories
from the last-in, first-out ("LIFO") method to the first-in, first-out ("FIFO")
method. The Company believes that the new method is preferable because the FIFO
method more effectively allocates fixed overhead costs in times of increased
production and, therefore more closely matches current costs and revenues. In
addition, the adoption of the FIFO method will enhance the comparability of the
Company's financial statements by changing to the predominant method utilized in
its industry and conforms all of the Company's inventories to the same
accounting method. The Company has applied this change retroactively by
restating its financial statements as required by Accounting Principles Board
No. 20, "Accounting Changes," which has resulted in a one time decrease in
previously reported retained earnings of $900,119 as of March 31, 2000, and a
one time increase in previously reported retained earnings of $89,837 as of
December 31, 2000. The effect of the change in accounting principle for the
three months ended March 31, 2001 and 2000, was immaterial.
4. Property, Plant and Equipment, Net
Property, plant and equipment, net consists of the following:
AT MARCH 31,
--------------------------------- AT DECEMBER 31,
2001 2000 2000
------------- ------------- ---------------
Land $ 5,390,349 $ 4,311,743 $ 4,454,322
Buildings and site improvements 33,114,721 26,715,204 27,634,848
Leasehold improvements 4,912,450 3,938,741 4,042,063
Machinery and equipment 90,008,699 81,968,262 88,221,556
------------- ------------- -------------
133,426,219 116,933,950 124,352,789
Less accumulated depreciation and amortization (72,177,268) (61,783,333) (69,293,151)
------------- ------------- -------------
61,248,951 55,150,617 55,059,638
Capital projects in progress 8,399,478 5,511,590 8,762,875
------------- ------------- -------------
$ 69,648,429 $ 60,662,207 $ 63,822,513
============= ============= =============
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5. Debt
Outstanding debt at March 31, 2001 and 2000, and December 31, 2000, and the
available credit at March 31, 2001, consisted of the following:
DEBT OUTSTANDING
-----------------------------------------------
AVAILABLE AT
CREDIT AT MARCH 31, AT
MARCH 31, ----------------------------- DECEMBER 31,
2001 2001 2000 2000
------------ ------------ ------------ ------------
Revolving line of credit, interest at bank's
reference rate (at March 31, 2001, the bank's
reference rate was 8.00%), expires
November 2001 $ 12,137,345 $ -- $ -- $ --
Revolving term commitment, interest at bank's
prime rate less 0.50% (at March 31, 2001, the
bank's prime rate less 0.50% was 7.50%),
expires September 2002 8,213,673 -- -- --
Revolving line of credit, interest rate at the
bank's base rate of interest plus 2% (at
March 31, 2001, the bank's base rate
plus 2% was 7.25%), expires July 2001 359,749 -- -- --
Revolving line of credit, interest rate at 6.45%,
expires June 2001 863,793 2,402,179 -- --
Term loan, fixed interest rate
of 5.3%, expires September 2006 -- 120,668 148,651 119,028
Term loan, interest at LIBOR plus 1.375%
(at March 31, 2001, LIBOR plus
1.375% was 6.4588%), expires May 2008 -- 2,250,000 2,550,000 2,250,000
Term loan, interest at 5.65%,
expires June 2013 -- 829,770 -- --
Term loan, interest at 6.23%,
expires June 2018 -- 993,395 -- --
Term loan, interest at 5.70%,
expires December 2009 -- 821,454 -- --
Standby letter of credit facilities 2,648,982 -- -- --
Other notes payable and long-term debt -- 15,257 187,549 35,754
------------ ------------ ------------ ------------
24,223,542 7,432,723 2,886,200 2,404,782
Less current portion -- (2,866,842) (487,549) (335,754)
------------ ------------ ------------ ------------
24,223,542 $ 4,565,881 $ 2,398,651 $ 2,069,028
============ ============ ============
Standby letters of credit issued and outstanding (2,648,982)
------------
$ 21,574,560
============
As of March 31, 2001, the Company had three outstanding standby letters of
credit. Two of these letters of credit, in the aggregate amount of $1,972,655,
are used to support the Company's self-insured workers' compensation insurance
requirements. The third, in the amount of $676,327, is used to guarantee
performance on the Company's leased facility in the United Kingdom. Other notes
payable represent debt associated with foreign businesses.
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6. Commitments and Contingencies
Note 9 to the consolidated financial statements in the Company's 2000 Annual
Report provides information concerning commitments and contingencies. From time
to time, the Company is involved in various legal proceedings and other matters
arising in the normal course of business.
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,
-------------------------------
2001 2000
------------ ------------
Net Sales
Connector products $ 79,339,000 $ 69,515,000
Venting products 15,485,000 15,101,000
------------ ------------
Total $ 94,824,000 $ 84,616,000
============ ============
Income from Operations
Connector products $ 12,833,000 $ 12,552,000
Venting products 1,962,000 2,152,000
All other (332,000) (69,000)
------------ ------------
Total $ 14,463,000 $ 14,635,000
============ ============
AT MARCH 31, AT
------------------------------ DECEMBER 31,
2001 2000 2000
------------ ------------ ------------
Total Assets
Connector products $204,717,000 $164,769,000 $171,150,000
Venting products 43,897,000 43,049,000 44,071,000
All other 48,954,000 48,647,000 64,348,000
------------ ------------ ------------
Total $297,568,000 $256,465,000 $279,569,000
============ ============ ============
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 $39,333,000, $41,172,000 and
$54,183,000 as of March 31, 2001 and 2000, and December 31, 2000, respectively.
8. Acquisition
In January 2001, the Company's subsidiary, Simpson Strong-tie International,
Inc., acquired 100% of the shares of BMF Bygningsbeslag A/S ("BMF") of Denmark
for approximately $14.0 million in cash with an additional amount of
approximately $1.2 million contingent upon future operating performance.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Certain matters discussed below are forward-looking statements that involve
risks and uncertainties, certain of which are discussed in this report and in
other reports filed by the Company with the Securities and Exchange Commission.
Actual results might differ materially from results suggested by any
forward-looking statements in this report.
The following is a discussion and analysis of the consolidated financial
condition and results of operations for the Company for the three months ended
March 31, 2001 and 2000. The following should be read in conjunction with the
interim Condensed Consolidated Financial Statements and related Notes appearing
elsewhere herein.
Results of Operations for the Three Months Ended March 31, 2001, Compared
with the Three Months Ended March 31, 2000
Net sales increased 12.1% in the first quarter of 2001 as compared to the first
quarter of 2000. Most of the sales growth occurred in California and as a result
of the acquisition of BMF Bygningsbeslag A/S in Denmark in January 2001. Simpson
Strong-Tie's first quarter sales increased 14.1% over the same quarter last
year, while Simpson Dura-Vent's sales increased 2.5%. Contractor distributors
were the fastest growing Strong-Tie connector sales channel. The sales increase
was broad based across most of Simpson Strong-Tie's major product lines.
Strong-Wall and Anchor Systems product lines had the highest growth rates in
sales. Sales of Simpson Dura-Vent's Direct-Vent products decreased compared to
the first quarter of 2000, while sales of its chimney and pellet vent product
lines increased.
Income from operations decreased 1.2% from $14,634,929 in the first quarter of
2000 to $14,463,359 in the first quarter of 2001 and gross margins decreased
from 40.0% in the first quarter of 2000 to 39.2% in the first quarter of 2001.
The decrease in gross margin was primarily due to the lower margins associated
with BMF as well as higher fixed overhead costs. Selling expenses increased
26.0% from $8,553,122 in the first quarter of 2000 to $10,779,049 in the first
quarter of 2001. The increase was primarily due to higher personnel costs
related to the increase in the number of sales and merchandising personnel,
particularly the additional sales personnel at BMF and those associated with the
Anchoring Systems product line, as well as increased promotional expenses.
General and administrative expenses increased 11.7% from $10,648,327 in the
first quarter of 2000 to $11,893,980 in the first quarter of 2001. This increase
was primarily due to the addition of administrative personnel and higher
administrative costs related to the acquisition of BMF, Anchor Tiedown Systems
in the third quarter of 2000, Masterset Fastening Systems, Inc. in the fourth
quarter of 2000, and the operations of Keybuilder.com, LLC. Partially offsetting
this increase was a decrease in cash profit sharing. The tax rate was 41.8% in
the first quarter of 2001, an increase from 40.5% in the first quarter of 2000.
Liquidity and Sources of Capital
As of March 31, 2001, working capital was $166.0 million as compared to $150.2
million at March 31, 2000, and $168.0 million at December 31, 2000. The primary
components of the change in working capital from December 31, 2000, included the
decrease in cash and cash equivalents of $17.6 million, principally as a result
of the BMF acquisition, offset by increases in the Company's trade accounts
receivable and inventories totaling approximately $21.8 million, primarily due
to higher sales levels and acquired inventories. In addition, increases in
income taxes payable and assumed notes payable, together totaling approximately
$5.6 million, also contributed. 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 $13.0 million, resulted in net cash used in operating
activities of approximately $1.6 million. As of March 31, 2001, the Company had
unused credit facilities available of approximately $21.6 million.
The Company used approximately $18.6 million in its investing activities,
primarily to acquire BMF and 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.
-9-
10
The Company's financing activities provided net cash of approximately $2.7
million, primarily from the issuance of stock through the exercise of stock
options by its employees and through the issuance of debt to support its working
capital needs in Denmark.
The Company believes that cash generated by operations and borrowings available
under its existing credit agreements, will be sufficient for the Company's
working capital needs and planned capital expenditures through the remainder of
2001. Depending on the Company's future growth and possible acquisitions, it may
become necessary to secure additional sources of financing.
The Company believes that the effect of inflation on the Company has not been
material in recent years, as inflation rates have remained relatively low.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, the Company is involved in various legal proceedings and
other matters arising in the normal course of business.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits.
11.Statements re computation of earnings per share
18.Letter re change in accounting principles
b. Reports on Form 8-K
Report on Form 8-K, dated January 11, 2001, reporting under Item
5 that the Company acquired 100% of the shares of BMF
Bygningsbeslag A/S.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIMPSON MANUFACTURING CO., INC.
--------------------------------
(Registrant)
DATE: May 14, 2001 By /s/Michael J. Herbert
----------------- --------------------------------------------
Michael J. Herbert
Chief Financial Officer
(principal accounting and financial officer)
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