PLEASANTON, Calif.,
April 27, 2017 /PRNewswire/ --
- Net sales of $219.9 million
increased 10% quarter-over-quarter
- Diluted net income per common share was $0.48
- Recorded Bargain Purchase Gain of $8.4 million or $0.18 per diluted common share
- Declared quarterly cash dividend of $0.21 per share
Simpson Manufacturing Co., Inc. (the "Company") (NYSE: SSD), an
industry leader in engineered structural connectors and building
solutions, today announced its first quarter 2017 financial
results. Unless otherwise stated, the Company's results below, when
referencing "recent acquisitions," refer to the August 2016 acquisition of Multi Services Dêcoupe
S.A. ("MS Decoupe") and the January
2017 acquisitions of Gbo Fastening Systems AB ("Gbo
Fastening Systems") and CG Visions, Inc. ("CG Visions"). When
referencing the "recent North
America acquisition," the Company's results below refer to
the CG Vision acquisition; and when referencing "recent
Europe acquisitions," refer to the
MS Decoupe and Gbo Fastening Systems acquisitions.
First Quarter 2017 Consolidated Financial Highlights
Unless otherwise stated, the results announced below, when
providing comparisons (which are generally indicated by words such
as "increased," "decreased," "remained" or "compared to"), compare
the results of operations for the three months ended March 31,
2017, against the results of operations for the three months ended
March 31, 2016. Unless otherwise stated, the results announced
below, when referencing "both quarters," refer to the three months
ended March 31, 2016 and the three months ended March 31,
2017. To avoid fractional percentages, all percentages presented
below were rounded to the nearest whole number.
- Net sales increased 10% to $219.9
million from $199.5 million.
Recent acquisitions accounted for $12.6
million of the increase in net sales.
-
- Net sales to lumber dealers, dealer distributors and home
centers increased, primarily due to increased home construction
activity, while net sales to contractor distributors
decreased.
- Wood construction product net sales, including sales of
connectors, truss plates, fastening systems, fasteners and
shearwalls, represented 87% and 86% of the Company's total net
sales in the first quarters of 2017 and 2016, respectively.
- Concrete construction product net sales, including sales of
adhesives, chemicals, mechanical anchors, powder actuated tools and
reinforcing fiber materials, represented 13% and 14% of the
Company's total net sales in the first quarters of 2017 and 2016,
respectively.
- Gross profit increased to $100.2
million from $92.5 million.
Gross profit margin was 46% in both quarters.
-
- Recent acquisitions had an average gross profit margin of
30%.
- Product group – The gross profit margins, including some
inter-segment expenses, which were eliminated in consolidation, and
excluding other expenses that are allocated according to product
group, decreased to 47% from 48% for wood construction products and
was 32% for both quarters for concrete construction products.
- Research and development and engineering expense increased 15%
to $13.1 million from $11.4 million, primarily due to an increase of
$1.3 million in personnel costs,
primarily related to the recent North
America acquisition as well as the addition of staff and pay
rate increases instituted on January 1,
2017, and a $0.4 million
increase in stock-based compensation (see "Stock-based
compensation" below), most of which occurred in North America. Recent acquisitions increased
research and development and engineering expense by $1.1 million.
- Selling expense increased 17% to $29.5
million from $25.2 million,
primarily due to increases of $2.6
million in personnel costs, $1.1
million in advertising costs and $0.9
million in stock-based compensation, partly offset by
decreases of $0.5 million in
professional fees and $0.3 million in
cash profit sharing and sales commissions expenses. Recent
acquisitions increased selling expense by $1.8 million.
- General and administrative expense increased 19% to
$35.0 million from $29.3 million, primarily due to increases of
$3.0 million in stock-based
compensation, $3.0 million in legal
and professional fees, mostly related to strategic initiatives such
as software and systems integration and compensation and governance
changes, $1.0 million in personnel
costs, mostly related to the addition of staff and pay rate
increases instituted on January 1,
2017, $0.6 million in software
licensing and maintenance fees, $0.3
million in bad debt expense, and $0.2
million in intangible amortization expense related to recent
acquisitions. That was partly offset by decreases of $1.4 million in cash profit sharing expense on
lower operating income and reduced payouts under our executive
officer cash profit sharing plan, $0.4
million in depreciation expense, and a $1.0 million decrease in net foreign currency
losses. Recent acquisitions increased general and administrative
expenses by $1.0 million.
- The Company's effective income tax rate decreased to 25% from
38%. The decreases were primarily due to a non-recurring gain on a
bargain purchase related to the Gbo Fastening Systems acquisitions
(see "Gain on bargain purchase" below), which was not taxable, and
the adoption of Financial Accounting Standards Board Update No.
2016-09 ("ASU 2016-09") in 2017, which recognizes the excess tax
benefits of stock-based awards as a reduction to income tax expense
instead of the previous methodology which recorded the benefit on
the balance sheet as a component of stockholders' equity.
- Stock-based compensation – Stock-based compensation
expense increased $5.1 million,
primarily due to a $3.7 million
increase from an updated retirement eligibility requirement for
stock-based awards that were granted in February 2017, as well as a $1.6 million increase in expense related to 2017
awards, whose vesting is subject to achieving future performance
goals. The updated retirement eligibility requirement increased the
number of employees that were eligible for retirement and
accelerated recognition of the expense related to those awards in
the first quarter of 2017. For the 2017 awards, an expense was
first recorded in the first quarter of 2017, whereas the expense
related to similar awards in 2016 was first recorded in the second
quarter of 2016. The acceleration of the recognition of the
stock-based compensation expense in the first quarter of 2017 is
expected to reduce the stock-based compensation expense related to
the same awards in future periods through early fiscal 2021.
- Gain on bargain purchase – On January 3, 2017, the Company acquired Gbo
Fastening Systems, a Sweden
limited company, for approximately $10.2
million. Gbo Fastening Systems manufactures and sells a
complete line of CE-marked structural fasteners and unique fastener
dimensioning software for wood construction applications currently
sold mostly in northern and eastern Europe, which is expected to complement the
Company's line of wood construction products in Europe. This transaction was recorded as a
business combination in accordance with the business acquisition
method. The Company recorded a preliminary bargain purchase gain of
$8.4 million, which represents an
estimate of the excess fair value of the net assets
acquired and liabilities assumed over the consideration
exchanged as of the acquisition date. The Company assessed the
preliminary recognition and measurement of the assets acquired and
liabilities assumed based on historical and pro forma data for
future periods and concluded that its valuation procedures and
resulting measures were reasonably appropriate. This non-recurring,
non-operating income gain is included in the line item "Gain on
bargain purchase of a business" in the results of operations below
for the three months ended March 31, 2017.
- Net income was $23.1 million
compared to $16.3 million. Diluted
net income per common share was $0.48
compared to $0.34. The increase in
net income was primarily due to the non-recurring $8.4 million gain on a bargain purchase (see
"Gain on bargain purchase" above), which increased diluted net
income $0.18 per common share.
First Quarter 2017 Consolidated Financial Highlights by
Segment
North America
- Net sales increased 5%, mostly due to increased average net
sales unit prices in the United
States as well as an increase in sales volumes. Canada's net sales increased, primarily due to
increased sales volumes on flat average net sales unit prices.
Canada's net sales were not
significantly affected by foreign currency translation. The recent
North America acquisition
increased net sales by $1.5
million.
- Gross profit margin was 48% in both quarters, primarily due to
a decrease in material costs, offset by increases in factory
overhead, partly due to increases of $0.9
million in stock-based compensation (see "Stock-based
compensation" above), labor, shipping and warehousing.
- Research and development and engineering expense increased 15%
to $11.8 million from $10.3 million, primarily due to an increase of
$1.2 million in personnel costs,
primarily related to the recent North
America acquisition as well as the addition of staff and pay
rate increases instituted on January 1,
2017, and a $0.3 million
increase in stock-based compensation (see "Stock-based
compensation" above). The recent North
America acquisition increased research and development and
engineering expense by $1.1
million.
- Selling expense increased $2.8
million, primarily due to increases of $1.1 million in personnel costs, mostly related
to the addition of staff and pay rate increases instituted on
January 1, 2017, $1.1 million in advertising costs, and
$0.9 million in stock-based
compensation, partly offset by decreases of $0.3 million in cash profit sharing and sales
commissions expenses and $0.3 million
in professional fees.
- General and administrative expense increased $4.7 million, primarily due to increases of
$2.8 million in legal and
professional fees, $2.2 million in
stock-based compensation, $0.8
million in personnel costs, mostly related to the addition
of staff and pay rate increases instituted on January 1, 2017, $0.5
million in software licensing and maintenance fees,
$0.2 million in intangible
amortization expense, and $0.2
million in bad debt expense, partly offset by decreases of
$0.9 million in cash profit sharing
expense and $0.3 million in
depreciation expense, as well as a $0.9
million decrease in net foreign currency losses. The recent
North America acquisition
increased general and administrative expense by $0.4 million.
Europe
- Net sales increased 45%, mostly due to recent Europe acquisitions. Recent Europe acquisitions had the effect of
increasing net sales by $11.1
million, which was offset by the negative effects of
approximately $1.3 million in foreign
currency translations, primarily related to the weakening of the
British pound against the United
States dollar in the latter half of 2016.
- Gross profit margin decreased to 32% from 36%, primarily due to
recent Europe acquisitions. Recent
Europe acquisitions had an average
gross profit margin of 21%.
- Selling expense increased $1.4
million, primarily due to an increase of $1.3 million in personnel costs, mostly related
to the addition of staff, partly offset by a decrease of
$0.3 million in professional fees.
Recent Europe acquisitions
increased selling expense by $1.7
million.
- General and administrative expense increased $1.1 million, primarily due to increases of
$0.3 million in personnel costs,
mostly related to the addition of staff and pay rate increases
instituted on January 1, 2017,
$0.2 million in stock-based
compensation, and $0.2 million in in
software licensing and maintenance fees. Recent Europe acquisitions increased general and
administrative expense by $0.6
million.
Asia/Pacific
- For information about the Company's Asia/Pacific segment, which it believes is not
significant to overall performance, please refer to the additional
financial data of the Company for the three months ended
March 31, 2017 and 2016, below.
Administrative and All Other
- General and administrative expenses decreased, primarily due to
a decrease of $0.7 million in cash
profit sharing expense, partly offset by an increase of
$0.6 million in stock-based
compensation.
Business Outlook
Based on current information and subject to future events and
circumstances, the Company currently estimates:
- Market prices for steel to remain relatively stable during the
second quarter of 2017.
- Gross profit margin for the full-year of 2017 to be
approximately 45% to 46%.
- The effective tax rate for the full-year of 2017 to be between
34% and 36%, which includes the non-recurring gain on a bargain
purchase and the adoption of ASU 2016-09.
Company Developments
In April 2017, the Company's Board
of Directors declared a cash dividend of $0.21 per share, an increase of $0.03 per share, or 17%, over the last dividend,
for stockholders of record as of July 6,
2017, payable on July 27,
2017.
Conference Call Details
Investors, analysts and other interested parties are invited to
join the Company's conference call on Friday, April 28, 2017, at 6:00 am Pacific Time. To participate, callers may
dial 877-876-9177 (international callers may dial
785-424-1666). The call will be will also be broadcast live
over the Internet accessible through the Company's website at
www.simpsonmfg.com.
For those unable to join for the live presentation, a replay of
the webcast will be available for 30 days following the event,
accessible through the Company's website at www.simpsonmfg.com.
About Simpson Manufacturing Co., Inc.
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.
Forward-Looking Statements
This document contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
All statements above relating to events or results that may occur
in the future are forward-looking statements, including but not
limited to, statements regarding anticipated or estimated steel
prices, gross profit margin, and effective tax rate.
Forward-looking statements are necessarily speculative in nature,
are based on numerous assumptions, and involve known and unknown
risks, uncertainties and other factors (some of which are beyond
the Company's control) that could significantly affect the
Company's operations and may cause the Company's actual actions,
results, financial condition, performance or achievements to be
substantially different from any future actions, results, financial
condition, performance or achievements expressed or implied by any
such forward-looking statements. Those factors include, but are not
limited to: (i) general economic cycles and construction business
conditions; (ii) customer acceptance of the Company's products;
(iii) product liability claims, contractual liability, engineering
and design liability and similar liabilities or claims, (iv)
relationships with key customers; (v) materials and manufacturing
costs; (vi) financial conditions of customers, competitors and
suppliers; (vii) technological developments including software
development; (viii) increased competition; (ix) changes in
regulations or industry practices; (x) litigation risks, (xi)
changes in market conditions; (xii) governmental and business
conditions in countries where the Company's products are
manufactured and sold; (xiii) changes in trade regulations; (xiv)
effects of merger or acquisition activities; (xv) actual or
potential takeover or other change-of-control threats; (xvi)
changes in the Company's plans, strategies, objectives,
expectations or intentions; and (xvii) other risks and
uncertainties indicated from time to time in the Company's filings
with the SEC, including in the Company's most recent Annual Report
on Form 10-K under the heading "Item 1A - Risk Factors." Each
forward-looking statement contained in this document is
specifically qualified in its entirety by the aforementioned
factors. In light of the foregoing, investors are advised to
carefully read this document in connection with the important
disclaimers set forth above and are urged not to rely on any
forward-looking statements in reaching any conclusions or making
any investment decisions about the Company or its securities.
Except as required by law, the Company does not intend and
undertakes no obligation to update, revise or publicly release any
updates or revisions to any forward-looking statements hereunder,
whether as a result of the receipt of new information, the
occurrence of future events, a change in circumstances or
otherwise. We further do not accept any responsibility for any
projections or reports published by analysts, investors or other
third parties. The financial information set forth herein is
presented on a preliminary unaudited basis; reviewed financial
statements will be included in the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 2017, when
filed.
The Company's results of operations (unaudited) for the three
months ended March 31, 2017 and 2016, respectively, were as
follows:
|
Three Months
Ended
March 31,
|
(Amounts in
thousands, except per share data)
|
2017
|
|
2016
|
Net sales
|
$
|
219,867
|
|
|
$
|
199,523
|
|
Cost of
sales
|
119,711
|
|
|
107,000
|
|
Gross
profit
|
100,156
|
|
|
92,523
|
|
Research and
development and engineering expense
|
13,108
|
|
|
11,423
|
|
Selling
expense
|
29,483
|
|
|
25,187
|
|
General and
administrative expense
|
34,986
|
|
|
29,298
|
|
Gain on disposal of
assets
|
(51)
|
|
|
(26)
|
|
Income from
operations
|
22,630
|
|
|
26,641
|
|
Income in equity
method investment, before tax
|
(28)
|
|
|
—
|
|
Interest expense,
net
|
(189)
|
|
|
(235)
|
|
Gain on bargain
purchase of a business
|
8,388
|
|
|
—
|
|
Income before
taxes
|
30,801
|
|
|
26,406
|
|
Provision for income
taxes
|
7,680
|
|
|
10,063
|
|
Net income
|
$
|
23,121
|
|
|
$
|
16,343
|
|
Earnings per common
share:
|
|
|
|
Basic
|
$
|
0.49
|
|
|
$
|
0.34
|
|
Diluted
|
$
|
0.48
|
|
|
$
|
0.34
|
|
Weighted average
shares outstanding:
|
|
|
|
Basic
|
47,616
|
|
|
48,297
|
|
Diluted
|
47,906
|
|
|
48,450
|
|
Cash dividend
declared per common share
|
0.18
|
|
|
0.16
|
|
Other
data:
|
|
|
|
Depreciation and
amortization
|
$
|
8,363
|
|
|
$
|
7,437
|
|
Pre-tax equity-based
compensation expense
|
$
|
7,976
|
|
|
$
|
2,750
|
|
|
|
|
|
|
|
|
|
The Company's financial position (unaudited) as of
March 31, 2017 and 2016, and December 31, 2016,
respectively, were as follows:
|
|
March
31,
|
|
December
31,
|
(Amounts in
thousands)
|
|
2017
|
|
2016
|
|
2016
|
Cash and cash
equivalents
|
|
$
|
167,059
|
|
|
$
|
232,028
|
|
|
$
|
226,537
|
|
Trade accounts
receivable, net
|
|
148,506
|
|
|
135,123
|
|
|
112,423
|
|
Inventories
|
|
256,271
|
|
|
210,787
|
|
|
232,274
|
|
Other current
assets
|
|
13,744
|
|
|
13,284
|
|
|
14,013
|
|
Total current
assets
|
|
585,580
|
|
|
591,222
|
|
|
585,247
|
|
Property, plant and
equipment, net
|
|
250,465
|
|
|
216,660
|
|
|
232,810
|
|
Goodwill
|
|
135,113
|
|
|
125,614
|
|
|
124,479
|
|
Other noncurrent
assets
|
|
47,042
|
|
|
35,465
|
|
|
37,438
|
|
Total
assets
|
|
$
|
1,018,200
|
|
|
$
|
968,961
|
|
|
$
|
979,974
|
|
Trade accounts
payable
|
|
$
|
38,219
|
|
|
$
|
29,023
|
|
|
$
|
27,674
|
|
Capital lease
obligation - current portion
|
|
521
|
|
|
—
|
|
|
—
|
|
Other current
liabilities
|
|
84,821
|
|
|
70,523
|
|
|
81,122
|
|
Total current
liabilities
|
|
123,561
|
|
|
99,546
|
|
|
108,796
|
|
Other long-term
liabilities - net of current portion
|
|
7,686
|
|
|
5,159
|
|
|
5,336
|
|
Stockholders'
equity
|
|
886,953
|
|
|
864,256
|
|
|
865,842
|
|
Total liabilities and
stockholders' equity
|
|
$
|
1,018,200
|
|
|
$
|
968,961
|
|
|
$
|
979,974
|
|
Additional financial data of the Company (unaudited) for the
three months ended March 31, 2017 and 2016, respectively, were
as follows:
|
|
|
Three Months
Ended
|
|
|
|
|
|
March
31,
|
|
%
|
(Amounts in
thousands)
|
2017
|
|
2016
|
|
change*
|
Net Sales by
Reporting Segment
|
|
|
|
|
|
|
North
America
|
$
|
183,772
|
|
|
$
|
174,454
|
|
|
5%
|
|
Europe
|
34,381
|
|
|
23,698
|
|
|
45%
|
|
Asia/Pacific
|
1,714
|
|
|
1,371
|
|
|
25%
|
|
|
Total
|
$
|
219,867
|
|
|
$
|
199,523
|
|
|
10%
|
Net Sales by
Product Group**
|
|
|
|
|
|
|
Wood
Construction
|
$
|
190,877
|
|
|
$
|
171,777
|
|
|
10%
|
|
Concrete
Construction
|
28,817
|
|
|
27,745
|
|
|
4%
|
|
Other
|
173
|
|
|
1
|
|
|
N/M
|
|
|
Total
|
$
|
219,867
|
|
|
$
|
199,523
|
|
|
10%
|
Gross Profit
(Loss) by Reporting Segment
|
|
|
|
|
|
|
North
America
|
$
|
88,990
|
|
|
$
|
83,713
|
|
|
6%
|
|
Europe
|
11,056
|
|
|
8,562
|
|
|
29%
|
|
Asia/Pacific
|
129
|
|
|
306
|
|
|
(58)%
|
|
Administrative and
all other
|
(19)
|
|
|
(58)
|
|
|
67%
|
|
|
Total
|
$
|
100,156
|
|
|
$
|
92,523
|
|
|
8%
|
Income (Loss) from
Operations
|
|
|
|
|
|
|
North
America
|
$
|
26,767
|
|
|
$
|
30,452
|
|
|
(12)%
|
|
Europe
|
(1,835)
|
|
|
(1,618)
|
|
|
(13)%
|
|
Asia/Pacific
|
(195)
|
|
|
155
|
|
|
(226)%
|
|
Administrative and
all other
|
(2,107)
|
|
|
(2,348)
|
|
|
10%
|
|
|
Total
|
$
|
22,630
|
|
|
$
|
26,641
|
|
|
(15)%
|
|
|
|
|
*
|
Unfavorable
percentage changes are presented in parentheses.
|
|
**
|
The Company manages
its business by geographic segment but is presenting sales by
product group as additional information.
|
|
N/M
|
Statistic is not
material or not meaningful.
|
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SOURCE Simpson Manufacturing Co., Inc.