Simpson Manufacturing Co., Inc. Announces Fourth Quarter Results
PLEASANTON, Calif.,
Feb. 7, 2013 /PRNewswire/ -- Simpson
Manufacturing Co., Inc. (the "Company") (NYSE: SSD) today announced
its fourth quarter 2012 results.
For the fourth quarter of 2012, net sales increased 10.7% to
$144.7 million compared to net sales
of $130.7 million for the fourth
quarter of 2011. The Company had net income of $5.9 million for the fourth quarter of 2012
compared to net income of $4.9
million for the fourth quarter of 2011. Diluted net income
per common share was $0.12 for the
fourth quarter of 2012 compared to diluted net income of
$0.10 per common share for the fourth
quarter of 2011. The fourth quarter 2012 net income included a
$9.9 million tax benefit.
The increase in the Company's fourth quarter 2012 sales was
primarily due to $8.8 million in
sales from businesses acquired since December 2011 with the remainder primarily due to
increased volume offset by reduced prices. In the fourth quarter
2012, sales increased in North
America, with an above-average increase in the United States, due in part to the recent
acquisitions of Fox Industries and Automatic Stamping. Sales
increases in Europe were also
above average, primarily due to sales from the recent acquisition
of S&P Clever in Europe,
partly offset by decreases in France and the U.K. Effects due to foreign
currency translation were not significant. Sales to contractor
distributors and lumber dealers increased in the fourth quarter of
2012, compared to the fourth quarter of 2011, while sales to home
centers decreased over the same period although sales to the
Company's largest customer were flat. Wood construction product
sales, including connectors, truss plates, fastening systems,
fasteners and shearwalls, represented 83% of total Company sales in
the fourth quarter of 2012, down from 88% in the fourth quarter of
2011. Concrete construction product sales, including adhesives,
chemicals, mechanical anchors, powder actuated tools and
reinforcing fiber materials, increased as a percentage of total
sales to 17% in the fourth quarter of 2012, from 11% in the fourth
quarter of 2011. The majority of sales from recent acquisitions
were attributed to the European acquisition, and mostly in concrete
construction products.
Gross profit increased slightly to $55.2
million in the fourth quarter of 2012 from $54.9 million in the fourth quarter of 2011. As a
percentage of net sales, gross profit decreased from 42.0% in the
fourth quarter of 2011 to 38.2% in the fourth quarter of 2012. The
North American gross profit margin decreased from 45.3% in the
fourth quarter of 2011 to 42.8% in the fourth quarter of 2012, as a
result of competitive price pressure, higher material, factory
overhead, shipping and warehouse costs as a percentage of sales and
increased concrete construction product sales, which have a lower
gross margin than wood construction product sales, although labor
costs were lower as a percentage of sales. The European gross
profit margin decreased from 31.4% in the fourth quarter of 2011 to
21.2% in the fourth quarter of 2012, primarily due to higher
overall costs as a percentage of sales, including severance costs
and loss on sale of inventory related to the plant closure in
Ireland and exiting the heavy-duty
mechanical anchor market in Europe, which accounted for 5.2% and 3.7% of
the reduced European gross margin, respectively and 1.0% and 0.7%
of the reduced consolidated gross margin, respectively. Increased
concrete construction product sales as a percentage of total sales
also reduced the gross margin percentage. While steel prices
decreased slightly in the fourth quarter the Company expects an
increase in steel prices during the first quarter of 2013 due to an
expected increase in demand.
Unless otherwise noted, changes in operating expenses were
mostly attributable to the North American segment. Research and
development and engineering expense increased 42.7% from
$6.1 million in the fourth quarter of
2011 to $8.8 million in the fourth
quarter of 2012, including increases in professional fees of
$1.4 million primarily for truss
software development costs and personnel costs of $0.6 million resulting from additional employees,
partly due to the recent North American acquisitions, and a
company-wide annual pay rate increase instituted in January 2012. Selling expense increased 17.0%
from $18.0 million in the fourth
quarter of 2011 to $21.1 million in
the fourth quarter of 2012, primarily due to increases in personnel
costs of $1.7 million, mostly from
the recent North American acquisitions, additional employees and
increased pay rates, professional and legal fees of $0.8 million, cash profit sharing of $0.3 million and equity-based compensation of
$0.2 million. General and
administrative expense increased 1.0% from $23.6 million in the fourth quarter of 2011 to
$23.8 million in the fourth quarter
of 2012. Professional and legal fees decreased $3.2 million, primarily due to acquisitions
completed in 2011 and the first quarter of 2012 and a $0.4 million legal contingency recorded in 2011,
and depreciation decreased $0.7
million due to capital projects not completed in 2012 as
estimated. These decreases were partly offset by increased
personnel costs of $1.6 million
primarily due to the recent European acquisition, additional
employees and increased pay rates and amortization expense of
$1.2 million primarily due to recent
acquisitions in both North America
and Europe, as well as a
$0.5 million increase in facility
costs and a $0.3 million in fixed
asset impairment related to real estate in Germany. The goodwill impairment charge of
$2.3 million in the fourth quarter of
2012 was associated with assets acquired in Germany in 2002 and 2008.
In December 2012, the Company
completed a transaction with Keymark Enterprises LLC ("Keymark").
In 2011, the Company purchased various software assets from Keymark
and had engaged Keymark to perform certain software development for
the Company, for which the Company had agreed to compensate Keymark
at rates equal to a multiple of Keymark's costs. In the current
transaction, the Company paid Keymark $9.1
million, hired thirty-nine Keymark employees to perform the
development work that Keymark had previously been engaged to
perform and purchased from Keymark various assets needed for that
work. This transaction also included termination of the 2011
software development agreement and the Company will be entitled to
certain software license revenue that was previously received by
Keymark.
In September 2012, the Company
decided to discontinue manufacturing heavy-duty mechanical anchors
made in its facility in Ireland
and selling these products in Europe in order to focus on selling light-duty
and medium-duty anchors and its fastener products in conjunction
with its connector products there. In December 2012, the Company ceased producing and
selling these heavy-duty mechanical anchors and terminated
employees in Europe, primarily in
Ireland and Germany, who were manufacturing, selling or
supporting the product line. As a result, the Company recorded in
the fourth quarter of 2012 employee severance obligations of
$2.0 million, with $1.5 million allocated to cost of sales and
$0.5 million allocated to operating
expenses. This is in addition to $1.0
million in severance costs recorded in the third quarter of
2012. Of the total charge of $3.0
million recorded year-to-date, $2.4
million was paid in the fourth quarter of 2012 and
$0.6 million is to be paid in 2013.
Due to the decision to close the facility, depreciation of certain
fixed assets and amortization of intangible assets were
accelerated, resulting in additional quarterly depreciation and
amortization expense of $0.1 million
and $0.6 million, respectively, with
$0.1 million allocated to cost of
sales and $0.6 million allocated to
operating expenses. Other closing costs of $0.3 million were recorded in the quarter, with
$0.1 million unpaid at year-end, all
of which were allocated to operating expenses. In December 2012, the Company sold for $1.6 million certain assets associated with the
heavy-duty mechanical anchor line, including inventory, code
approvals and production equipment. The sale of inventory resulted
in a loss of $1.0 million, which was
included in gross margin, while the sale of long-term assets
resulted in no net gain or loss. The net effect of these fourth
quarter 2012 transactions was an increase in operating loss of
$4.1 million with $2.7 million recorded in cost of sales and
$1.4 million recorded in operating
expenses. The net effect of these year-to-date transactions was a
decrease in operating income of $5.1
million, with $3.5 million
recorded in cost of sales and $1.6
million recorded in operating expenses.
The fourth quarter 2012 income tax benefit was primarily due to
the realization of a $9.9 million tax
benefit resulting from the worthless stock deduction for its
investment in the Company's Irish subsidiary. The tax benefit was
partly offset by the valuation allowances taken on foreign losses.
The fourth quarter 2011 effective tax rate was 14.2%.
In 2012, net sales increased 8.9% to $657.2 million compared to net sales of
$603.4 million for 2011 due in part
to recent acquisitions and increased volumes. The Company had net
income of $42.0 million for 2012
compared to net income of $50.9
million for 2011. Diluted net income per common share was
$0.87 for 2012 compared to diluted
net income of $1.04 per common share
for 2011.
Sales in North America for 2012
increased, with an above-average increase in the United States, primarily due to increases
in volume and recent acquisitions. Sales in Europe for 2012 increased slightly due to the
recent European acquisition and to the sale of the heavy-duty
mechanical anchors in Ireland,
partly offset by decreases throughout the rest of the Company's
European operations. Foreign currency translation effects were not
significant. Sales to contractor distributors and lumber dealers
had above-average increases in 2012 as compared to in 2011, while
sales to home centers decreased over the same period, although
sales to the Company's largest customer increased. Wood
construction product sales represented 85% of total Company sales
in 2012, down from 89% in 2011. Concrete product sales represented
15% of total sales in 2012, up from 11% in 2011, with increases in
all geographic segments. Acquisitions since December 2011 contributed $32.2 million to sales in 2012, with the majority
attributed to the European acquisition, and mostly in concrete
construction products.
Gross profit increased to $283.5
million in 2012 from $270.8
million in 2011. As a percentage of net sales, gross profit
decreased from 44.9% in 2011 to 43.1% in 2012. The North American
segment gross profit margin decreased from 48.7% in 2011 to 46.5%
in 2012, primarily due to higher material costs as a percentage of
sales, increased concrete construction product sales, which have a
lower gross margin than wood construction product sales, and
competitive price pressure. These increases were partly offset by
lower factory overhead as a percentage of sales due to increased
volume. The gross profit margin for the European segment decreased
from 32.6% in 2011 to 30.9% in 2012, primarily due to higher labor
costs, factory overhead and warehouse costs as a percentage of
sales, partly offset by lower material costs.
Unless otherwise noted, changes in operating expenses were
mostly attributable to the North American segment. Research and
development and engineering expense increased 38.8% from
$25.9 million in 2011 to $35.9 million in 2012, including increases in
professional fees of $6.5 million,
primarily due to truss software development costs, personnel costs
of $2.4 million resulting from
additional employees in the North
America and Asia/Pacific
segments and a pay rate increase and equity-based compensation of
$0.4 million. Selling expense
increased 12.0% from $73.6 million in
2011 to $82.4 million in 2012,
primarily due to an increase in personnel costs of $5.0 million, resulting from the recent North
American and European acquisitions and expansion in the
Asia/Pacific segment, additional
employees and increased pay rates, an increase of $1.3 million in equity-based compensation, an
increase of $1.2 million in legal and
professional fees and an increase of $1.1
million in promotional costs. General and administrative
expense increased 5.4% from $95.8
million in 2011 to $101.0
million in 2012. Personnel costs increased $4.3 million primarily due to the recent European
acquisition and expansion in the Asia/Pacific segment, additional employees and
an increase in pay rates. Amortization expense increased
$3.3 million and depreciation expense
increased $1.5 million primarily due
to the recent acquisitions in both North
America and Europe. The
remaining increases in general and administrative expenses included
$1.3 million in equity-based
compensation, $0.7 million in
computer hardware, software and support and the remainder in
various other expenses. These increases were partly offset by a net
decrease in professional and legal fees of $5.3 million, although professional and legal
fees increased by $1.3 million in
Europe due to the 2012 acquisition
and the closure of the Ireland
facility, and a decrease in cash profit sharing of $2.2 million due to lower operating income.
The provision for income tax expense decreased primarily due to
the realization of a $9.9 million tax
benefit resulting from the worthless stock deduction for its
investment in the Company's Irish subsidiary. The 2011 effective
tax rate was 35.4%.
Investors, analysts and other interested parties are invited to
join the Company's conference call on Friday, February 8, 2013, at 6:00 am Pacific Time. To participate, callers may
dial 800-895-0198. The call will be webcast simultaneously as well
as being available for one month through a link on the Company's
website at www.simpsonmfg.com.
This document contains forward-looking statements, based on
numerous assumptions and subject to risks and uncertainties.
Although the Company believes that the forward-looking statements
are reasonable, it does not and cannot give any assurance that its
beliefs and expectations will prove to be correct. Many factors
could significantly affect the Company's operations and cause the
Company's actual results to differ substantially from the Company's
expectations. Those factors include, but are not limited to: (i)
general economic and construction business conditions; (ii)
customer acceptance of the Company's products; (iii) relationships
with key customers; (iv) materials and manufacturing costs; (v) the
financial condition of customers, competitors and suppliers; (vi)
technological developments; (vii) increased competition; (viii)
changes in capital and credit market conditions; (ix) governmental
and business conditions in countries where the Company's products
are manufactured and sold; (x) changes in trade regulations; (xi)
the effect of acquisition activity; (xii) changes in the Company's
plans, strategies, objectives, expectations or intentions; and
(xiii) other risks and uncertainties indicated from time to time in
the Company's filings with the U.S. Securities and Exchange
Commission. Actual results might differ materially from results
suggested by any forward-looking statements in this report. The
Company does not have an obligation to publicly update any
forward-looking statements, whether as a result of the receipt of
new information, the occurrence of future events or
otherwise.
The Company's results of operations for the three and twelve
months ended December 31, 2012
(unaudited) and 2011, were as follows:
|
|
Three
Months
|
Twelve
Months
|
|
|
Ended
December 31,
|
Ended
December 31,
|
(Amounts in thousands, except per share
data)
|
2012
|
2011
|
2012
|
2011
|
|
Net
sales
|
$144,686
|
$130,732
|
$657,236
|
$603,446
|
|
Cost of
sales
|
89,483
|
75,822
|
373,759
|
332,642
|
|
Gross profit
|
55,203
|
54,910
|
283,477
|
270,804
|
|
|
|
|
|
|
|
Research
and development and engineering expenses
|
8,763
|
6,143
|
35,919
|
25,886
|
|
Selling
expenses
|
21,109
|
18,041
|
82,364
|
73,568
|
|
General
and administrative expenses
|
23,799
|
23,570
|
100,973
|
95,820
|
|
Impairment
of goodwill
|
2,346
|
1,282
|
2,346
|
1,282
|
|
Loss on
sale of assets
|
124
|
190
|
166
|
191
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
(938)
|
5,684
|
61,709
|
74,057
|
|
|
|
|
|
|
|
Gain on
equity method investment, before tax
|
–
|
–
|
–
|
4,389
|
|
Interest
income, net
|
35
|
82
|
212
|
340
|
|
Income (loss) before
taxes
|
(903)
|
5,766
|
61,921
|
78,786
|
|
|
|
|
|
|
|
Provision
for (benefit from) income taxes
|
(6,785)
|
818
|
20,003
|
27,886
|
|
|
|
|
|
|
Net
income
|
$5,882
|
$4,948
|
$41,918
|
$50,900
|
|
|
|
|
|
|
|
Earnings
per common share:
|
|
|
|
|
|
Basic
|
$0.12
|
$0.10
|
$0.87
|
$1.04
|
|
Diluted
|
0.12
|
0.10
|
0.87
|
1.04
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
Basic
|
48,387
|
48,161
|
48,339
|
48,974
|
|
Diluted
|
48,495
|
48,214
|
48,412
|
49,023
|
|
|
|
|
|
|
|
Other
data:
|
|
|
|
|
|
Depreciation and
amortization
|
$6,184
|
$5,763
|
$26,857
|
$20,751
|
|
Pre-tax impairment of
assets
|
2,688
|
1,282
|
3,149
|
2,376
|
|
Pre-tax equity-based
compensation expense
|
3,303
|
3,025
|
10,667
|
6,837
|
|
|
|
|
|
|
|
Cash
dividend declared per common share
|
$0.25
|
$0.125
|
$0.625
|
$0.50
|
The Company's financial position (unaudited) as of December 31, 2012 and 2011, was as follows:
|
|
|
|
December 31,
|
(Amounts in thousands)
|
2012
|
2011
|
Cash and short-term
investments
|
$175,553
|
$213,817
|
Trade accounts receivable,
net
|
82,812
|
76,420
|
Inventories
|
204,124
|
180,129
|
Assets held for sale
|
593
|
6,793
|
Other current assets
|
34,972
|
24,905
|
Total
current assets
|
498,054
|
502,064
|
|
|
|
Property, plant and equipment,
net
|
213,452
|
195,716
|
Goodwill
|
121,981
|
99,849
|
Other noncurrent assets
|
56,835
|
38,458
|
Total
assets
|
$890,322
|
$836,087
|
|
|
|
Trade accounts payable
|
$37,117
|
$22,033
|
Notes payable and lines of
credit
|
178
|
–
|
Other current
liabilities
|
58,220
|
49,554
|
Total
current liabilities
|
95,515
|
71,587
|
|
|
|
Other long-term
liabilities
|
5,239
|
6,137
|
Stockholders' equity
|
789,568
|
758,363
|
Total
liabilities and stockholders' equity
|
$890,322
|
$836,087
|
Additional financial data of the Company for the three and
twelve months ended December 31, 2012
and 2011 (unaudited), were as follows:
|
|
|
%
|
|
|
%
|
|
Three
Months Ended
|
Qtr
|
Twelve
Months Ended
|
Year
|
|
December 31,
|
change
|
December 31,
|
change
|
(Amounts in thousands)
|
2012
|
2011
|
12 v
11
|
2012
|
2011
|
12 v
11
|
Net
Sales by Reporting Segment
|
|
|
|
|
|
|
North America
|
$113,250
|
$102,990
|
10%
|
$522,895
|
$474,722
|
10%
|
Europe
|
28,313
|
25,040
|
13%
|
122,549
|
118,246
|
4%
|
Asia/Pacific
|
2,886
|
2,465
|
17%
|
10,843
|
9,528
|
14%
|
Administrative and all
other
|
237
|
237
|
0%
|
949
|
950
|
0%
|
Total
|
$144,686
|
$130,732
|
11%
|
$657,236
|
$603,446
|
9%
|
|
|
|
|
|
|
|
Net
Sales by Product Group*
|
|
|
|
|
|
|
Wood Construction
|
$119,537
|
$115,508
|
4%
|
$558,113
|
$536,132
|
4%
|
Concrete Construction
|
24,888
|
14,933
|
67%
|
97,967
|
66,030
|
48%
|
Other
|
261
|
291
|
(10%)
|
1,156
|
1,284
|
(10%)
|
Total
|
$144,686
|
$130,732
|
11%
|
$657,236
|
$603,446
|
9%
|
|
|
|
|
|
|
|
Income
(Loss) from Operations
|
|
|
|
|
|
|
North America
|
$5,029
|
$3,325
|
51%
|
$71,586
|
$75,350
|
(5%)
|
Europe
|
(8,984)
|
(3,179)
|
(182%)
|
(8,095)
|
1,295
|
N/M
|
Asia/Pacific
|
(939)
|
126
|
N/M
|
(2,799)
|
(1,471)
|
(90%)
|
Administrative and all
other
|
3,956
|
5,412
|
(27%)
|
1,017
|
(1,117)
|
N/M
|
Total
|
$(938)
|
$5,684
|
N/M
|
$61,709
|
$74,057
|
(17%)
|
|
|
|
|
|
|
|
Acquisition Information**
|
|
|
|
|
|
|
Sales from Acquisitions
|
$8,756
|
$417
|
|
$32,209
|
$417
|
|
Operating Income (Loss) from
Acquisitions
|
(3,809)
|
(236)
|
|
(14,475)
|
(236)
|
|
*
|
The
Company manages its business by geographic segment but is
presenting sales by product group as additional
information.
|
**
|
Acquisitions include Fox Industries and Automatic
Stamping, both acquired in December 2011, S&P Clever, acquired
in January 2012, and CarbonWrap, acquired in March 2012.
|
N/M Not
Meaningful.
|
Simpson Manufacturing Co., Inc., headquartered in Pleasanton, California, through its
subsidiary, Simpson Strong-Tie Company Inc., designs, engineers and
is a leading manufacturer of wood construction products, including
connectors, truss plates, fastening systems, fasteners and
shearwalls, and concrete construction products, including
adhesives, specialty chemicals, mechanical anchors, powder actuated
tools and reinforcing fiber materials. The Company's common stock
trades on the New York Stock Exchange under the symbol "SSD."
For further information, contact Tom
Fitzmyers at (925) 560-9030.
SOURCE Simpson Manufacturing Co., Inc.