Notes to Consolidated Financial Statements
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1.
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Operations and Summary of Significant Accounting Policies
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Nature of Operations
Simpson Manufacturing Co., Inc., through Simpson Strong-Tie Company Inc. and its other subsidiaries (collectively, the “Company”), focuses on designing, manufacturing, and marketing systems and products to make buildings and structures safe and secure. The Company 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 fiber reinforcing materials. The Company markets its products to the residential construction, industrial, commercial and infrastructure construction, remodeling and do-it-yourself markets.
The Company operates exclusively in the building products industry. The Company’s products are sold primarily in the United States, Canada, Europe and Pacific Rim. The Company closed its sales office in Asia in 2015 and its revenues have some geographic market concentration in the United States. A portion of the Company’s business is therefore dependent on economic activity within the North America segment. The Company is dependent on the availability of steel, its primary raw material.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Simpson Manufacturing Co., Inc. and its subsidiaries. Investments in
50%
or less owned entities are accounted for using either cost or the equity method. The Company consolidates all variable interest entities ("VIEs") where it is the primary beneficiary. There were no VIEs as of
December 31, 2017
or
2016
. All significant intercompany transactions have been eliminated.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, as amended from time to time ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company's actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue when the earnings process is complete, net of applicable provision for discounts, returns and incentives, whether actual or estimated based on the Company’s experience. This generally occurs when products are shipped to the customer in accordance with the sales agreement or purchase order, ownership and risk of loss pass to the customer, collectability is reasonably assured and pricing is fixed or determinable. The Company’s general shipping terms are F.O.B. shipping point, where title is transferred and revenue is recognized when the products are shipped to customers. When the Company sells F.O.B. destination point, title is transferred and the Company recognizes revenue on delivery or customer acceptance, depending on terms of the sales agreement. Service sales, representing after-market repair and maintenance, engineering activities, software license sales and service and lease income, though significantly less than
1%
of net sales and not material to the Consolidated Financial Statements, are recognized as the services are completed or the software products and services are delivered. If actual costs of sales returns, incentives and discounts were to significantly exceed the recorded estimated allowances, the Company’s sales would be adversely affected.
Sales Incentive and Advertising Allowances
The Company records estimated reductions to revenues for sales incentives, primarily rebates for volume discounts, and allowances for co-operative advertising.
Allowances for Sales Discounts
The Company records estimated reductions to revenues for discounts taken on early payment of invoices by its customers.
Cash Equivalents
The Company considers all highly liquid investments with an original or remaining maturity of three months or less at the time of purchase to be cash equivalents.
Allowance for Doubtful Accounts
The Company assesses the collectability of specific customer accounts that would be considered doubtful based on the customer’s financial condition, payment history, credit rating and other factors that the Company considers relevant, or accounts that the Company assigns for collection. The Company reserves for the portion of those outstanding balances that the Company believes it is not likely to collect based on historical collection experience. The Company also reserves
100%
of the amounts that it deems uncollectable due to a customer’s deteriorating financial condition or bankruptcy. If the financial condition of the Company’s customers were to deteriorate, resulting in probable inability to make payments, additional allowances may be required.
Inventory Valuation
Inventories are stated at the lower of cost or net realizable value. Cost includes all costs incurred in bringing each product to its present location and condition, as follows:
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•
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Raw materials and purchased finished goods for resale — principally valued at cost determined on a weighted average basis; and
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•
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In-process products and finished goods — cost of direct materials and labor plus attributable overhead based on a normal level of activity.
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The Company applies net realizable value and obsolescence to the gross value of the inventory. The Company estimates net realizable value based on estimated selling price less further costs to completion and disposal. The Company impairs slow-moving products by comparing inventories on hand to projected demand. If on-hand supply of a product exceeds projected demand or if the Company believes the product is no longer marketable, the product is considered obsolete inventory. The Company revalues obsolete inventory to its net realizable value. The Company has consistently applied this methodology. The Company believes that this approach is prudent and makes suitable impairments for slow-moving and obsolete inventory. When impairments are established, a new cost basis of the inventory is created. Unexpected change in market demand, building codes or buyer preferences could reduce the rate of inventory turnover and require the Company to recognize more obsolete inventory.
Warranties and recalls
The Company provides product warranties for specific product lines and records estimated recall expenses in the period in which the recall occurs, none of which has been material to the Consolidated Financial Statements. In a limited number of circumstances, the Company may also agree to indemnify customers against legal claims made against those customers by the end users of the Company’s products. Historically, payments made by the Company, if any, under such agreements have not had a material effect on the Company’s consolidated results of operations, cash flows or financial position
Fair Value of Financial Instruments
The “Fair Value Measurements and Disclosures” topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
™
(“ASC”) establishes a valuation hierarchy for disclosure of the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
As of
December 31, 2017
and
2016
, the Company’s investments consisted of only money market funds, which are the Company’s primary financial instruments, maintained in cash equivalents and carried at cost, approximating fair value, based on Level 1 inputs. The balance of the Company’s primary financial instruments was as follows:
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(in thousands)
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At December 31,
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2017
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2016
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Money market funds
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$
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5,293
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$
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2,832
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The carrying amounts of trade accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these instruments. The fair value of the Company’s contingent consideration related to acquisitions is classified as Level 3 within the fair value hierarchy as it is based on unobserved inputs such as management estimates and entity-specific assumptions and is evaluated on an ongoing basis. As of December 31, 2017, the estimated fair value of the Company's contingent consideration was approximately a total of
$1.3 million
, which was mostly based on the use of the Monte Carlo method of valuation.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Major renewals and betterments are capitalized. Maintenance and repairs are expensed on a current basis. When assets are sold or retired, their costs and accumulated depreciation are removed from the accounts, and the resulting gains or losses are reflected in the accompanying Consolidated Statements of Operations.
The “Intangibles—Goodwill and Other” topic of the FASB ASC provides guidance on capitalization of the costs incurred for computer software developed or obtained for internal use. The Company capitalizes qualified external costs and internal costs related to the purchase and implementation of software projects used for business operations and engineering design activities. Capitalized software costs primarily include purchased software, internal costs and external consulting fees. Capitalized software projects are amortized over the estimated useful lives of the software.
Depreciation and Amortization
Depreciation of software, machinery and equipment is provided using accelerated methods over the following estimated useful lives:
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Software
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3 to 5 years
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Machinery and equipment
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3 to 10 years
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Buildings and site improvements are depreciated using the straight-line method over their estimated useful lives, which range from
15
to
45
years. Leasehold improvements are amortized using the straight-line method over the shorter of the expected life or the remaining term of the lease. Amortization of purchased intangible assets with finite useful lives is computed using the straight-line method over the estimated useful lives of the assets.
Cost of Sales
The types of costs included in cost of sales include material, labor, factory and tooling overhead, shipping, and freight costs. Major components of these expenses are material costs, such as steel, packaging and cartons, personnel costs, and facility costs, such as rent, depreciation and utilities, related to the production and distribution of the Company’s products. Inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, and other costs of the Company’s distribution network are also included in cost of sales.
Tool and Die Costs
Tool and die costs are included in product costs in the year incurred.
Shipping and Handling Fees and Costs
The Company’s general shipping terms are F.O.B. shipping point. Shipping and handling fees and costs are included in revenues and product costs, as appropriate, in the year incurred.
Product and Software Research and Development Costs
Product research and development costs, which are included in operating expenses and are charged against income as incurred, were
$10.6 million
,
$10.8 million
and
$12.0 million
in
2017
,
2016
and
2015
, respectively. The types of costs included as product research and development expenses was revised in 2017 and prior years to include all related personnel costs including salary, benefits, retirement, stock-based compensation costs, as well as computer and software costs, professional fees, supplies, tools and maintenance costs. In
2017
,
2016
and
2015
, the Company incurred software development expenses related to its expansion into the plated truss market and some of the software development costs were capitalized. See "Note 5 — Property, Plant and Equipment." The Company amortizes acquired patents over their remaining lives and performs periodic reviews for impairment. The cost of internally developed patents is expensed as incurred.
Selling Costs
Selling costs include expenses associated with selling, merchandising and marketing the Company’s products. Major components of these expenses are personnel, sales commissions, facility costs such as rent, depreciation and utilities, professional services, information technology costs, sales promotion, advertising, literature and trade shows.
Advertising Costs
Advertising costs are included in selling expenses, are expensed when the advertising occurs, and were
$9.6 million
,
$7.1 million
and
$6.4 million
in
2017
,
2016
, and
2015
, respectively.
General and Administrative Costs
General and administrative costs include personnel, information technology related costs, facility costs such as rent, depreciation and utilities, professional services, amortization of intangibles and bad debt charges.
Income Taxes
Income taxes are calculated using an asset and liability approach. The provision for income taxes includes federal, state and foreign taxes currently payable and deferred taxes, due to temporary differences between the financial statement and tax bases of assets and liabilities. In addition, future tax benefits are recognized to the extent that realization of such benefits is more likely than not.
This method gives consideration to the future tax consequences of the deferred income tax items and immediately recognizes changes in income tax laws in the year of enactment. On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”). Further information on the tax impacts of the Tax Reform Act is included in Note 10 — Income Taxes of the Company’s consolidated financial statements.
Sales Taxes
The Company presents taxes collected and remitted to governmental authorities on a net basis in the accompanying Consolidated Statements of Operations.
Foreign Currency Translation
The local currency is the functional currency of most of the Company’s operations in Europe, Canada, Asia, Australia, New Zealand and South Africa. Assets and liabilities denominated in foreign currencies are translated using the exchange rate on the balance sheet date. Revenues and expenses are translated using average exchange rates prevailing during the year. The translation adjustment resulting from this process is shown separately as a component of stockholders’ equity. Foreign currency transaction gains or losses are included in general and administrative expenses.
Common Stock
Subject to the rights of holders of any preferred stock that may be issued in the future, holders of common stock are entitled to receive such dividends, if any, as may be declared from time to time by the Company’s Board of Directors (the "Board") out of legally available funds, and in the event of liquidation, dissolution or winding-up of the Company, to share ratably in all assets available for distribution. The holders of common stock have no preemptive or conversion rights. Subject to the rights of any preferred stock that may be issued in the future, the holders of common stock are entitled to
one
vote per share on any matter submitted to a vote of the stockholders. A director in an uncontested election is elected if the votes cast “for” such director’s election exceed the votes cast “against” such director’s election, except that, if a stockholder properly nominates a candidate for
election to the Board, the candidates with
the highest number of affirmative votes (up to the number of directors to be elected) are elected. There are no redemption or sinking fund provisions applicable to the common stock.
Preferred Stock
The Board has the authority to issue the authorized and unissued preferred stock in
one
or more series with such designations, rights and preferences as may be determined from time to time by the Board. Accordingly, the Board is empowered, without stockholder approval, to issue preferred stock with dividend, redemption, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of the Company’s common stock.
Stock Repurchase Program
At its meeting in August 2016, the Board authorized the Company to repurchase up to
$125 million
of its common stock. This authorization increased and extended the
$50.0 million
repurchase authorization from February 2016. For the fiscal year ended
December 31, 2016
, the Company purchased a total of
1,244,003
shares of its common stock at an average price of
$43.01
, which included
1,137,656
shares purchased pursuant to the
$50.0 million
accelerated share repurchase program ("2016 ASR Program") that the Company entered into with Wells Fargo Bank, National Association ("Wells Fargo") in August 2016. As of December 31, 2016, the 2016 ASR Program was completed at an average share price of
$43.95
per share. All shares repurchased during 2016 were retired.
At its meeting in August 2017, the Board authorized the Company to repurchase up to
$275.0 million
of the its common stock. This authorization increased and extended the
$125.0 million
repurchase authorization from August 2016 and will remain in effect through December 31, 2018. For the fiscal year ended
December 31, 2017
, the Company purchased a total of
1,138,387
shares of its common stock for a total of
$60.0 million
through accelerated share repurchase programs that the Company entered into with Wells Fargo, which included
460,887
shares purchased at an average share price of
$43.39
per share pursuant to a
$20.0 million
accelerated share repurchase program initiated in June 2017 (the "2017 June ASR Program"), and
677,500
shares received at an average share price of
$59.04
per share, or
$40.0 million
, pursuant to a
$50.0 million
accelerated share repurchase program initiated in December 2017 (the "2017 December ASR Program"). The final delivery under the 2017 December ASR Program was made in February 2018. See Note 15 - "Subsequent Events." As of December 31, 2017,
460,887
shares were retired,
677,500
shares were held as treasury shares and approximately
$151.5 million
remained available for share repurchases through December 31, 2018 under the Board current authorization.
See the "Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2017, 2016 and 2015."
Net Income per Share
Basic net income per common share is computed based on the weighted average number of common shares outstanding. Potentially dilutive shares, using the treasury stock method, are included in the diluted per-share calculations for all periods when the effect of their inclusion is dilutive.
The following shows a reconciliation of basic earnings per share (“EPS”) to diluted EPS:
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Fiscal Year Ended December 31,
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(in thousands, except per-share amounts)
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2017
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|
2016
|
|
2015
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Net income available to common stockholders
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$
|
92,617
|
|
|
$
|
89,734
|
|
|
$
|
67,888
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
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47,486
|
|
|
48,084
|
|
|
48,952
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Dilutive effect of potential common stock equivalents
|
288
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|
|
211
|
|
|
229
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|
Diluted weighted average shares outstanding
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47,774
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|
|
48,295
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|
49,181
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Net earnings per share:
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Basic
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$
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1.95
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$
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1.87
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$
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1.39
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Diluted
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$
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1.94
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$
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1.86
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$
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1.38
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For the year ended
December 31, 2017
,
2016
, and
2015
,
no
potential common shares with anti-dilutive effect were included in the calculation of diluted net income per share.
Comprehensive Income or Loss
Comprehensive income is defined as net income plus other comprehensive income or loss. Other comprehensive income or loss consists of changes in cumulative translation adjustments and changes in unamortized pension adjustments recorded directly in accumulated other comprehensive income within stockholders’ equity. The following shows the components of accumulated other comprehensive income or loss as of
December 31, 2017
and
2016
, respectively:
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Foreign Currency Translation
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Pension Benefit
|
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Total
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(in thousands)
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Balance at January 1, 2015
|
$
|
(6,613
|
)
|
|
$
|
(567
|
)
|
|
$
|
(7,180
|
)
|
Other comprehensive income before reclassification net of tax benefit (expense) of ($57) and $82, respectively
|
(20,708
|
)
|
|
(457
|
)
|
|
(21,165
|
)
|
Amounts reclassified from accumulative other comprehensive income, net of $0 tax
|
(231
|
)
|
|
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(231
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)
|
Balance at December 31, 2015
|
(27,552
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)
|
|
(1,024
|
)
|
|
(28,576
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)
|
Other comprehensive loss net of tax benefit (expense) of ($222) and $87, respectively
|
(3,920
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)
|
|
(474
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)
|
|
(4,394
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)
|
Balance at December 31, 2016
|
(31,472
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)
|
|
(1,498
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)
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|
(32,970
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)
|
Other comprehensive loss net of tax benefit (expense) of $0 and $36, respectively
|
21,273
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|
|
(944
|
)
|
|
20,329
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|
Amounts reclassified from accumulative other comprehensive income, net of $0 tax
|
145
|
|
|
—
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|
145
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Balance at December 31, 2017
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$
|
(10,054
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)
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|
$
|
(2,442
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)
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|
$
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(12,496
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)
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Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash in banks, short-term investments in money market funds and trade accounts receivable. The Company maintains its cash in demand deposit and money market accounts held primarily at
17
banks.
Accounting for Stock-Based Compensation
The Company recognizes stock-based expenses related to stock options and restricted stock awards on a straight-line basis, net of forfeitures, over the requisite service period of the awards, which is generally the vesting term of
four
years. Stock-based expenses related to performance share grants are measured based on grant date fair value and expensed on a straight-line basis over the service period of the awards, which is generally the vesting term of
three
years. The assumptions used to calculate the fair value of options or restricted stock units are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience.
Goodwill Impairment Testing
The Company tests goodwill for impairment at the reporting unit level on an annual basis (in the fourth quarter for the Company). The Company also reviews goodwill for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or disposition or relocation of a significant portion of a reporting unit.
The reporting unit level is generally one level below the operating segment and is at the country level except for the United States, Denmark, Australia, and S&P Clever reporting units.
The Company has determined that the United States reporting unit includes
four
components: Northwest United States, Southwest United States, Northeast United States and Southeast United States (collectively, the “U.S. Components”). The Company aggregates the U.S. Components into a single reporting unit because management concluded that they are economically similar and that the goodwill is recoverable from the U.S. Components working in concert. The U.S. Components are economically similar because of a number of factors, including, selling similar products to shared customers and sharing assets and services such as intellectual property, manufacturing assets for certain products, research and development projects, manufacturing processes, management of inventory excesses and shortages and administrative services. These activities are managed centrally at the U.S. Components level and costs are allocated among the
four
U.S. Components.
The Company determined that the Australia reporting unit includes
four
components: Australia, New Zealand, South Africa and United Arab Emirates (collectively, the “AU Components”). The Company aggregates the AU Components into a single reporting unit because management concluded that they are economically similar and that the goodwill is recoverable from the AU Components working in concert. The AU Components are economically similar because of a number of factors, including that New Zealand, South Africa and United Arab Emirates operate as extensions of their Australian parent company selling similar products and sharing assets and services such as intellectual property, manufacturing assets for certain products, management of inventory excesses and shortages and administrative services. These activities are managed centrally at the AU Components level and costs are allocated among the AU Components.
The Company has determined that the S&P Clever reporting unit includes
nine
components: S&P Switzerland, S&P Poland, S&P Austria, S&P The Netherlands, S&P Portugal, S&P Germany, S&P France, S&P Nordic, and S&P Spain (collectively, the "S&P Components”). The Company aggregates the S&P Components into a single reporting unit because management concluded that they are economically similar and that the goodwill is recoverable from the S&P Components working in concert. The S&P Components are economically similar because of a number of factors, including sharing assets and services such as intellectual property, manufacturing assets for certain products, research and development projects, manufacturing processes, management of inventory excesses and shortages and administrative services. These activities are managed centrally at the S&P Components level and costs are allocated among the S&P Components.
For certain reporting units, the Company may first assess qualitative factors related to the goodwill of the reporting unit to determine whether it is necessary to perform a two-step impairment test. If the Company judges that it is more likely than not that the fair value of the reporting unit is greater than the carrying amount of the reporting unit, including goodwill, no further testing is required. If the Company judges that it is more likely than not that the fair value of the reporting unit is less than the carrying amount of the reporting unit, including goodwill, management will perform a two-step impairment test on goodwill. In the first step ("Step 1"), the Company compares the fair value of the reporting unit to its carrying value. The fair value calculation uses the income approach (discounted cash flow method) and the market approach, equally weighted. If the Company judges that the carrying value of the net assets assigned to the reporting unit, including goodwill, exceeds the fair value of the reporting unit, a second step of the impairment test must be performed to determine the implied fair value of the reporting unit’s goodwill. If the Company judges that the carrying value of a reporting unit’s goodwill exceeds its implied fair value, the Company would record an impairment charge equal to the difference between the implied fair value of the goodwill and the carrying value.
Determining the fair value of a reporting unit or an indefinite-lived purchased intangible asset is a judgment involving significant estimates and assumptions. These estimates and assumptions include revenue growth rates, operating margins and working capital requirements used to calculate projected future cash flows, risk-adjusted discount rates, selected multiples, control premiums and future economic and market conditions (Level 3 fair value inputs). The Company bases its fair value estimates on assumptions that it believes to be reasonable, but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.
Assumptions about a reporting unit’s operating performance in the first year of the discounted cash flow model used to determine whether or not the goodwill related to that reporting unit is impaired are derived from the Company’s budget. The fair value model considers such factors as macro-economic conditions, revenue and expense forecasts, product line changes, material, labor and overhead costs, tax rates, working capital levels and competitive environment. Future estimates, however derived, are inherently uncertain but the Company believes that this is the most appropriate source on which to base its fair value calculation.
The Company uses these parameters only to provide a basis for the determination of whether or not the goodwill related to a reporting unit is impaired. No inference whatsoever should be drawn from these parameters about the Company’s future financial performance and they should not be taken as projections or guidance of any kind.
The
2017
,
2016
and
2015
annual testing of goodwill for impairment did not result in impairment charges.
The Denmark reporting unit passed Step 1 of the annual
2017
impairment test by a
8.3%
margin indicating an estimated fair value greater than its net book value and was the only reporting unit with a fair value greater than net book value margin of less than 10%. The Denmark reporting unit is sensitive to management’s plans for increasing sales and operating margins. The Denmark reporting unit’s failure to meet management’s objectives could result in future impairment of some or all of the Denmark reporting unit’s goodwill, which was
$7.1 million
at
December 31, 2017
.
Key assumptions used in Step 1 of the Company's annual goodwill impairment test included compound annual growth rates (“CAGR”) and average annual pre-tax operating margins during the forecast period, multiple and discount rates. A sensitivity assessment for the key assumptions included in the 2017 goodwill impairment test on the Denmark reporting unit is as follows:
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•
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A 500 basis point hypothetical increase in the discount rate, holding all other assumptions constant, would not have decreased the fair value of the reporting unit below its carrying value, and thus it would not result in the reporting unit failing Step 1 of the goodwill impairment test;
|
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•
|
A 210 basis point hypothetical decrease in the multiple rate, holding all other assumptions constant, would not have decreased the fair value of the reporting unit below its carrying value, and thus it would not result in the reporting unit failing Step 1 of the goodwill impairment test;
|
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•
|
A 139 basis point hypothetical percentage decrease in the CAGR, holding all other assumptions constant, would not have decreased the fair value of the reporting unit below its carrying value and
|
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|
•
|
A
37%
hypothetical decrease in average annual pre-tax operating profit, holding all other assumptions constant, would not have decreased the fair value of the reporting unit below its carrying value.
|
The assets and liabilities of acquired businesses are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. Goodwill represents costs in excess of fair values assigned to the underlying identifiable net assets of acquired businesses. The annual changes in the carrying amount of goodwill, by segment, as of
December 31, 2016
and
2017
, were as follows, respectively:
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|
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(in thousands)
|
North
America
|
|
Europe
|
|
Asia
Pacific
|
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Total
|
Balance as of January 1, 2016:
|
|
|
|
|
|
|
|
Goodwill
|
$
|
96,500
|
|
|
$
|
50,135
|
|
|
$
|
1,396
|
|
|
$
|
148,031
|
|
Accumulated impairment losses
|
(10,666
|
)
|
|
(13,415
|
)
|
|
—
|
|
|
(24,081
|
)
|
|
85,834
|
|
|
36,720
|
|
|
1,396
|
|
|
123,950
|
|
Goodwill acquired
|
—
|
|
|
1,848
|
|
|
—
|
|
|
1,848
|
|
Foreign exchange
|
93
|
|
|
(952
|
)
|
|
(21
|
)
|
|
(880
|
)
|
Reclassifications
(1)
|
(439
|
)
|
|
—
|
|
|
—
|
|
|
(439
|
)
|
Balance as of December 31, 2016:
|
|
|
|
|
|
|
0
|
|
Goodwill
|
96,154
|
|
|
51,031
|
|
|
1,375
|
|
|
148,560
|
|
Accumulated impairment losses
|
(10,666
|
)
|
|
(13,415
|
)
|
|
—
|
|
|
(24,081
|
)
|
|
85,488
|
|
|
37,616
|
|
|
1,375
|
|
|
124,479
|
|
Goodwill acquired
|
10,066
|
|
|
—
|
|
|
—
|
|
|
10,066
|
|
Foreign exchange
|
198
|
|
|
2,472
|
|
|
114
|
|
|
2,784
|
|
Reclassifications
(2)
|
3
|
|
|
(192
|
)
|
|
—
|
|
|
(189
|
)
|
Balance as of December 31, 2017:
|
|
|
|
|
|
|
0
|
|
Goodwill
|
106,421
|
|
|
53,311
|
|
|
1,489
|
|
|
161,221
|
|
Accumulated impairment losses
|
(10,666
|
)
|
|
(13,415
|
)
|
|
—
|
|
|
(24,081
|
)
|
|
$
|
95,755
|
|
|
$
|
39,896
|
|
|
$
|
1,489
|
|
|
$
|
137,140
|
|
(1)
Reclassifications in 2016 of
$0.2 million
in patents,
$0.1 million
in non-compete agreements,
$46 thousand
in customer relationships and other assets, with
a corresponding
$0.4 million
decrease in goodwill related to the EBTY acquisition.
(2)
Reclassifications in 2017 were
$3 thousand
and
$192 thousand
in other assets, with a corresponding
$189 thousand
decrease in goodwill related to CG
Visions and MS Decoupe acquisitions.
Amortizable Intangible Assets
Intangible assets from acquired businesses are recognized at their estimated fair values at the date of acquisition and consist of patents, unpatented technology, non-compete agreements, trademarks, customer relationships and other intangible assets. Finite-lived intangibles are amortized to expense over the applicable useful lives, ranging from
three
to
21
years, based on the nature of the asset and the underlying pattern of economic benefit as reflected by future net cash inflows. The Company performs an impairment test of finite-lived intangibles whenever events or changes in circumstances indicate their carrying value may be impaired.
The total gross carrying amount and accumulated amortization of intangible assets subject to amortization at
December 31, 2017
, were
$54.5
and
$25.2 million
, respectively. The aggregate amount of amortization expense of intangible assets for the years ended
December 31, 2017
,
2016
and
2015
was
$6.2 million
,
$6.0 million
and
$6.1 million
, respectively.
The annual changes in the carrying amounts of patents, unpatented technologies, customer relationships and non-compete agreements and other intangible assets subject to amortization as of
December 31, 2016
, and
2017
were as follows, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Patents
|
|
|
Balance at January 1, 2016
|
$
|
1,513
|
|
|
$
|
(379
|
)
|
|
$
|
1,134
|
|
Amortization
|
—
|
|
|
(149
|
)
|
|
(149
|
)
|
Reclassification
(1)
|
212
|
|
|
—
|
|
|
212
|
|
Foreign exchange
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
Balance at December 31, 2016
|
1,718
|
|
|
(528
|
)
|
|
1,190
|
|
Acquisition
|
800
|
|
|
—
|
|
|
800
|
|
Amortization
|
—
|
|
|
(187
|
)
|
|
(187
|
)
|
Foreign exchange
|
2
|
|
|
—
|
|
|
2
|
|
Removal of fully amortized assets
|
(170
|
)
|
|
170
|
|
|
—
|
|
Balance at December 31, 2017
|
$
|
2,350
|
|
|
$
|
(545
|
)
|
|
$
|
1,805
|
|
(1)
Reclassifications in 2016 of
$0.2 million
in patents,
$0.1 million
in non-compete agreements,
$46 thousand
in customer relationships and other assets, with
a corresponding
$0.4 million
decrease in goodwill related to the EBTY acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Unpatented Technology
|
|
|
Balance at January 1, 2016
|
$
|
21,604
|
|
|
$
|
(8,656
|
)
|
|
$
|
12,948
|
|
Amortization
|
—
|
|
|
(2,058
|
)
|
|
(2,058
|
)
|
Reclassifications
(1)
|
1,512
|
|
|
—
|
|
|
1,512
|
|
Foreign exchange
|
(243
|
)
|
|
—
|
|
|
(243
|
)
|
Removal of fully amortized assets
|
(1,711
|
)
|
|
1,711
|
|
|
—
|
|
Balance at December 31, 2016
|
21,162
|
|
|
(9,003
|
)
|
|
12,159
|
|
Amortization
|
—
|
|
|
(1,976
|
)
|
|
(1,976
|
)
|
Foreign exchange
|
505
|
|
|
$
|
—
|
|
|
505
|
|
Balance at December 31, 2017
|
$
|
21,667
|
|
|
$
|
(10,979
|
)
|
|
$
|
10,688
|
|
(1)
Reclassifications in 2016 of
$1.5 million
in unpatented technology for completed indefinite-lived in-process research and development ("IPR&D"), with a corresponding reduction in IPR&D intangibles.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Non-Compete Agreements,
Trademarks and Other
|
|
|
|
|
Balance at January 1, 2016
|
$
|
10,578
|
|
|
(7,203
|
)
|
|
3,375
|
|
Acquisition
|
1,212
|
|
|
—
|
|
|
1,212
|
|
Amortization
|
—
|
|
|
(2,040
|
)
|
|
(2,040
|
)
|
Foreign exchange
|
(39
|
)
|
|
—
|
|
|
(39
|
)
|
Reclassifications
(1)
|
119
|
|
|
—
|
|
|
119
|
|
Removal of fully amortized assets
|
(5,143
|
)
|
|
5,143
|
|
|
—
|
|
Balance at December 31, 2016
|
6,727
|
|
|
(4,100
|
)
|
|
2,627
|
|
Acquisition
|
9,260
|
|
|
—
|
|
|
9,260
|
|
Amortization
|
—
|
|
|
(2,495
|
)
|
|
(2,495
|
)
|
Foreign exchange
|
16
|
|
|
—
|
|
|
16
|
|
Removal of fully amortized asset
|
(3,778
|
)
|
|
3,778
|
|
|
—
|
|
Balance at December 31, 2017
|
$
|
12,225
|
|
|
$
|
(2,817
|
)
|
|
$
|
9,408
|
|
(1)
Reclassifications in 2016 of
$0.2 million
in patents,
$0.1 million
in non-compete agreements,
$46 thousand
in customer relationships and other assets, with a corresponding
$0.4 million
decrease in goodwill related to the EBTY acquisition
.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Customer Relationships
|
|
|
Balance at January 1, 2016
|
$
|
21,242
|
|
|
(13,152
|
)
|
|
8,090
|
|
Acquisition
|
—
|
|
|
—
|
|
|
—
|
|
Amortization
|
—
|
|
|
(1,793
|
)
|
|
(1,793
|
)
|
Reclassifications
(1)
|
46
|
|
|
—
|
|
|
46
|
|
Foreign exchange
|
(71
|
)
|
|
—
|
|
|
(71
|
)
|
Balance at December 31, 2016
|
21,217
|
|
|
(14,945
|
)
|
|
6,272
|
|
Acquisition
|
1,091
|
|
|
—
|
|
|
1,091
|
|
Amortization
|
—
|
|
|
(1,574
|
)
|
|
(1,574
|
)
|
Reclassifications
(2)
|
626
|
|
|
—
|
|
|
626
|
|
Foreign exchange
|
394
|
|
|
—
|
|
|
394
|
|
Removal of fully amortized assets
|
(5,650
|
)
|
|
5,650
|
|
|
—
|
|
Balance at December 31, 2017
|
$
|
17,678
|
|
|
$
|
(10,869
|
)
|
|
$
|
6,809
|
|
(1)
Reclassifications in 2016 of
$0.2 million
to patents,
$0.1 million
in non-compete agreements,
$46 thousand
in customer relationships and other assets, with a corresponding
$0.4 million
decrease in goodwill related to the EBTY acquisition.
(2)
Reclassifications in 2017 of
$0.6 million
in customer relationships with a corresponding
$0.6 million
decrease in other assets related to the MS Decoupe acquisition.
At
December 31, 2017
, estimated future amortization of intangible assets was as follows:
(in thousands)
|
|
|
|
|
2018
|
$
|
5,352
|
|
2019
|
5,260
|
|
2020
|
5,230
|
|
2021
|
4,751
|
|
2022
|
2,859
|
|
Thereafter
|
5,258
|
|
|
$
|
28,710
|
|
Indefinite-Lived Intangible Assets
As of
December 31, 2017
, the only indefinite-lived intangible asset, consisting of a trade name, totaled
$0.6 million
.
Amortizable and indefinite-lived assets, net, by segment, as of
December 31,
2016
and
2017
, respectively, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
(in thousands)
|
|
|
Total Intangible Assets
|
|
|
North America
|
$
|
23,562
|
|
|
$
|
(13,811
|
)
|
|
$
|
9,751
|
|
Europe
|
27,880
|
|
|
(14,767
|
)
|
|
13,113
|
|
Total
|
$
|
51,442
|
|
|
$
|
(28,578
|
)
|
|
$
|
22,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
(in thousands)
|
|
|
Total Intangible Assets
|
|
|
North America
|
$
|
30,775
|
|
|
$
|
(13,732
|
)
|
|
$
|
17,043
|
|
Europe
|
23,762
|
|
|
(11,479
|
)
|
|
12,283
|
|
Total
|
$
|
54,537
|
|
|
$
|
(25,211
|
)
|
|
$
|
29,326
|
|
Recently Adopted Accounting Standards
In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718),
Improvements to Employee Share-Based Payment Accounting
("ASU 2016-09")
,
which amends existing guidance related to accounting for employee share-based payments affecting the income tax consequences of awards, classification of awards as equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. On January 1, 2017, the Company adopted ASU 2016-09.
This new guidance requires all excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the income statement and classified as an operating activity in the statement of cash flows. The Company prospectively adopted this guidance with the tax impact of a
$1.1 million
tax benefit recognized in the consolidated income statements and classified it as an operating activity in the consolidated statement of cash flows. The guidance also requires a policy election either to estimate the number of awards that are expected to vest or to account for forfeitures whenever they occur. The Company did not change its policy for calculating accrual compensation costs by estimating the number of awards that are expected to vest. Therefore, when the Company adopted this guidance, there was no recognized cumulative effect adjustment to retained earnings. In addition, this guidance requires cash paid by an employer, when directly withholding shares for tax withholding purposes, to be classified in the statement of cash flows as a financing activity, which differs from the Company's previous method of classification of such cash payments as an operating activity. Accordingly, the Company applied this provision retrospectively for the twelve months ended December 31, 2017 and 2016, and reclassified
$1.3 million
and
$4.3 million
, respectively, from operating activities to financing activities in the condensed consolidated statements of cash flows.
In March 2016, the FASB issued Accounting Standards Update No. 2016-07,
Simplifying the Transition to the Equity Method of Accountin
g ("ASU 2016-07"), which eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. The amendments in ASU 2016-07 are effective for public companies for fiscal years beginning after December 15, 2016, including interim periods therein, with early adoption permitted. The new standard should be applied prospectively for investments that qualify for the equity method of accounting after the effective date. On January 1, 2017, the Company prospectively adopted ASU 2016-07. Adoption of ASU 2016-07 has had no material effect on the Company's consolidated financial statements and footnote disclosures.
In January 2017, the FASB issued Accounting Standards Updated No. 2017-01, Business Combinations (Topic 805):
Clarifying the Definition of a Business
("ASU 2017-01"), which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The new guidance clarifies that a business must also include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606, Revenue from Contracts with Customers. ASU 2017-01 is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2017, with early adoption permitted. On January 1, 2017, the Company prospectively adopted ASU 2017-01. Adoption of ASU 2017-01 has had no material effect on the Company's consolidated financial statements and footnote disclosures.
In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740), Balance Sheet
Classification of Deferred Taxes
("ASU 2015-17"). The objective is to simplify the presentation of deferred income taxes; the amendments require that deferred tax assets and liabilities be classified as noncurrent in a classified consolidated balance sheets.
ASU 2015-17 will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal
years. The Company adopted prospectively ASU 2015-17 in the first quarter of 2016, resulted in the Company offsetting all of its deferred income tax assets and liabilities, as of January 1, 2016, by taxing jurisdictions and classifying those balances as noncurrent. The result was a
$4.1 million
increase in "Other noncurrent assets," from
$6.7 million
to
$10.8 million
, and a
$12.1 million
decrease in "Deferred income tax and other long-term liabilities," from
$16.5 million
to
$4.4 million
.
All other issued and effective accounting standards during 2017 were determined to be not relevant or material to the Company.
Recently Issued Accounting Standards Not Yet Adopted
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (later codified as ASC 606), Revenue from Contracts with Customers (“ASC 606”), which supersedes nearly all existing revenue recognition guidance under GAAP. ASC 606 provides a five-step model for revenue recognition to be applied to all revenue contracts with customers. The five-step model includes: (1) determination of whether a contract, an agreement between two or more parties that creates legally enforceable rights and obligations, exists; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when (or as) the
performance obligations are satisfied. The core principle of ASC 606 is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASC 606 also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The standard is effective for annual and interim periods beginning after December 15, 2017 and permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company will adopt the new standard effective January 1, 2018 using the modified retrospective approach.
We completed our review of customer contracts and do not expect the adoption of this standard will materially impact the amount or timing of revenue recognized. The guidance requires the Company to estimate and record variable consideration resulting from rebates and other pricing allowances at contract inception. Net sales will not be materially impacted as a result of adoption as the Company currently records estimated rebates and allowances as reductions to revenue. Under current revenue recognition guidance, revenue from the sale of our finished goods is recognized at the point in time when all revenue recognition criteria are met, which typically occurs when products are shipped from our facilities with the Company’s general shipping terms. Based on the nature of our contracts, we expect to continue to recognize revenue from the sale of our finished goods upon shipment, which is the point in time when control is transferred to the customer. Accordingly, the adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements. The Company is identifying and preparing to implement changes to our accounting policies and practices, business processes, systems and controls to support the enhanced disclosure requirements of ASC 606.
In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740),
Intra-Entity Transfers of Assets Other Than Inventory
("ASU 2016-16"), which requires companies to account for the income tax effects of intercompany sales and transfers of assets other than inventory when the transfer occurs. Current guidance requires companies to defer the income tax effects of intercompany transfers of assets until the asset has been sold to an outside party or otherwise recognized. The amendment is to be applied using a modified retrospective approach. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. Based on current information and subject to future events and circumstances, the Company does not know whether ASU 2016-16 will have a material impact on its financial statements upon adoption.
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment
("ASU 2017-04"), which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge or Step 2 of the goodwill impairment analysis. Instead, an impairment charge will be recorded based on the excess of a reporting unit's carrying amount over its fair value using Step 1 of the goodwill impairment analysis. The standard is required to be adopted for annual and interim impairment tests performed after December 15, 2019. The amendment is to be applied prospectively. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. Based on current information and subject to future events and circumstances, the Company does not know whether ASU 2017-04 will have a material impact on its financial statements upon adoption.
In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02,
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
(ASU 2018-02)
.
ASU 2018-02 allows a reclassification from Accumulated other Comprehensive Income to Retained Earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and for interim periods therein. Early adoption of ASU 2018-02 is permitted. The Company is evaluating the impact of adopting this new accounting guidance on its consolidated financial statements.
|
|
2.
|
Stock-Based Compensation
|
The Company currently maintains an equity incentive plan, the Simpson Manufacturing Co., Inc. Amended and Restated 2011 Incentive Plan (the “2011 Plan”). The 2011 Plan amended and restated in their entirety, and incorporated and superseded, both the Simpson Manufacturing Co., Inc. 1994 Stock Option Plan (the “1994 Plan”), which was principally for the Company’s employees, and the Simpson Manufacturing Co., Inc. 1995 Independent Director Stock Option Plan (the “1995 Plan”), which was for the Company's independent directors. Awards previously granted under the 1994 Plan or the 1995 Plan will not be affected by the adoption of the 2011 Plan and will continue to be governed by the 1994 Plan or the 1995 Plan, respectively.
The Company generally granted options under each of the 1994 Plan and the 1995 Plan once each year. Options vest and expire according to terms established at the grant date. Shares of common stock issued on exercise of stock options under the 1994 Plan and the 1995 Plan are registered under the Securities Act of 1933, as amended (the "Securities Act").
Under the 2011 Plan, the Company may grant incentive stock options, non-qualified stock options, restricted stock and restricted stock units, although the Company currently intends to award primarily performance-based and/or time-based restricted stock units ("RSUs"), and to a lesser extent, if at all, non-qualified stock options. The performance-based RSUs may vest, only if the applicable Company-wide or profit-center operating goals, or both, or strategic goals, established by the Compensation and Leadership Development Committee (the “Committee”) of the Board, are met.
The Company does not currently intend to award incentive stock options or restricted stock. Under the 2011 Plan, no more than
16.3 million
shares of the Company’s common stock in aggregate may be issued including shares already issued pursuant to prior awards granted under the 2011 Plan and shares issued on exercise of options previously granted under the 1994 Plan and the 1995 Plan. Shares of common stock underlying awards to be issued pursuant to the 2011 Plan are registered under the Securities Act.
The Company granted RSUs under the 2011 Plan in 2015, 2016 and 2017 to its employees, including officers, and directors. The fair value of each RSU award is estimated on the measurement date as determined in accordance with GAAP and is based on the closing price of shares of the Company’s common stock on the day preceding the measurement date. The fair value excludes the present value of the dividends that the RSUs do not participate in. The RSUs granted to the Company’s employees may be time-based, performance-based or time- and performance-based. The restrictions on a portion of the time-based RSUs generally lapse pursuant to a vesting schedule. The restrictions on the performance-based RSUs generally lapse following a performance period, and the underlying shares of the Company’s common stock are subject to performance-based adjustment before becoming vested. The time- and performance-based RSUs require the underlying shares of the Company’s common stock to be subject to performance-based adjustment before starting to vest according to a vesting schedule.
The following table shows the Company’s stock-based compensation activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended December 31,
|
(in thousands)
|
2017
|
|
2016
|
|
2015
|
Stock-based compensation expense recognized in operating expenses
|
$
|
12,744
|
|
|
$
|
13,113
|
|
|
$
|
11,212
|
|
Tax benefit of stock-based compensation expense in provision for income taxes
|
4,575
|
|
|
4,757
|
|
|
3,987
|
|
Stock-based compensation expense, net of tax
|
$
|
8,169
|
|
|
$
|
8,356
|
|
|
$
|
7,225
|
|
Fair value of shares vested
|
$
|
11,043
|
|
|
$
|
13,186
|
|
|
$
|
10,997
|
|
Proceeds to the Company from the exercise of stock-based compensation
|
$
|
6,610
|
|
|
$
|
7,976
|
|
|
$
|
9,720
|
|
Tax benefit from exercise of stock-based compensation, including shortfall tax benefits
|
$
|
—
|
|
|
$
|
(251
|
)
|
|
$
|
(318
|
)
|
The stock-based compensation expense included in cost of sales, research and development and engineering expense, selling expense, or general and administrative expense depends on the job functions performed by the employees to whom the stock options were granted, or the restricted stock units were awarded. Stock-based compensation cost capitalized in inventory was
$0.2 million
in
2017
, and was
$0.4 million
in both
2016
and
2015
, respectively.
The following table summarizes the Company’s unvested restricted stock unit activity for the year ended
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
(in thousands)
|
|
Weighted-
Average
Price
|
|
Aggregate
Intrinsic
Value *
(in thousands)
|
Unvested Restricted Stock Units (RSUs)
|
|
|
Outstanding at January 1, 2017
|
615
|
|
|
$
|
31.81
|
|
|
$
|
26,915
|
|
Awarded
|
589
|
|
|
38.79
|
|
|
|
|
Vested
|
(336
|
)
|
|
32.85
|
|
|
|
|
Forfeited
|
(172
|
)
|
|
35.96
|
|
|
|
|
Outstanding at December 31, 2017
|
696
|
|
|
$
|
35.34
|
|
|
$
|
39,976
|
|
Outstanding and expected to vest at December 31, 2017
|
690
|
|
|
$
|
35.33
|
|
|
$
|
39,609
|
|
* The intrinsic value for outstanding and expected to vest is calculated using the closing price per share of
$57.41
, as reported by the New York Stock Exchange on
December 31, 2017
.
On February 4, 2017,
579,139
RSUs were awarded to the Company's employees, including officers, at an estimated fair value of
$38.74
per share, based on the closing price on February 3, 2017 of
$43.42
per share and adjusted for certain market factors, and to a lesser extent, the present value of dividends. On May 16, 2017,
10,066
RSUs were awarded to each of the Company’s
seven
non-employee directors at an estimated fair value of
$41.52
per share based on the closing price on May 15, 2017, which RSUs vested fully on the date of the grant.
The total intrinsic value of RSUs vested during the years ended
December 31, 2017
,
2016
and
2015
was
$14.7 million
,
$10.8 million
and
$10.3 million
, respectively, based on the market value on the award date.
No
stock options were granted under the 2011 Plan in
2015
,
2016
or
2017
.
The following table summarizes the Company’s stock option activity for the year ended
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
(in thousands)
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Life
|
|
Aggregate
Intrinsic
Value*
(in thousands)
|
Non-Qualified Stock Options
|
|
|
|
Outstanding at January 1, 2017
|
251
|
|
|
$
|
29.66
|
|
|
1.1
|
|
$
|
3,538
|
|
Exercised
|
(223
|
)
|
|
$
|
29.66
|
|
|
|
|
|
|
Forfeited
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Outstanding and exercisable at December 31, 2017
|
28
|
|
|
$
|
29.66
|
|
|
0.1
|
|
$
|
780
|
|
* The intrinsic value as of December 31, 2017 represents the amount by which the fair market value of the underlying common stock exceeds the exercise price of the option, and is calculated using the closing price per share of
$57.41
, as reported by the New York Stock Exchange on
December 31, 2017
.
The total intrinsic value of stock options exercised during each of the three years ended
December 31, 2017
,
2016
and
2015
, was
$4.6 million
,
$3.1 million
and
$2.4 million
, respectively.
As of
December 31, 2017
, there was
$10.2 million
total unrecognized compensation cost related to unvested stock-based compensation arrangements under the 2011 Plan for awards made through December 31, 2017, which is expected to be recognized over a weighted-average period of
1.8
years.
On February 15, 2018, approximately
186 thousand
RSUs were awarded to the Company's employees, including officers. The Company's closing price of its stock was
$57.16
on February 14, 2018. The fair value of the awards has not yet been determined, but the Company expects it will be less after adjustment for expected dividends the RSUs do not participate in.
Stock Bonus Plan
The Company also maintains a stock bonus plan, the Simpson Manufacturing Co., Inc. 1994 Employee Stock Bonus Plan (the “Stock Bonus Plan”), whereby it awards shares of the Company’s common stock to employees, who do not otherwise participate in any of the Company’s equity-based incentive plans and meet minimum service requirements as determined by the Committee. The number of shares awarded, as well as the required period of service, is determined by the Committee. Shares have generally been issued under the Stock Bonus Plan following the year in which the respective employee reached his or her tenth, twentieth, thirtieth, fortieth or fiftieth anniversary of employment with the Company or any direct or indirect subsidiary thereof. The Company committed to issuing
12 thousand
shares for 2017, (
8,100
shares to be issued and
3,900
shares of which are expected to be settled in cash for the Company's foreign employees). In
2016
and
2015
, the Company issued
12 thousand
and
10 thousand
shares, respectively. As a result, we recorded pre-tax compensation charges of
$1.2 million
,
$0.8 million
and
$0.7 million
for each of the years ended
December 31, 2017
,
2016
and
2015
, respectively. Employees are also awarded cash bonuses as included in these charges, to compensate for income taxes payable as a result of the stock bonuses.
|
|
3.
|
Trade Accounts Receivable, net
|
Trade accounts receivable consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2017
|
|
2016
|
Trade accounts receivable
|
$
|
139,910
|
|
|
$
|
116,368
|
|
Allowance for doubtful accounts
|
(996
|
)
|
|
(895
|
)
|
Allowance for sales discounts
|
(2,956
|
)
|
|
(3,050
|
)
|
|
$
|
135,958
|
|
|
$
|
112,423
|
|
The Company sells products on credit and generally does not require collateral.
The components of inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2017
|
|
2016
|
Raw materials
|
$
|
91,022
|
|
|
$
|
86,524
|
|
In-process products
|
26,849
|
|
|
20,902
|
|
Finished products
|
135,125
|
|
|
124,848
|
|
|
$
|
252,996
|
|
|
$
|
232,274
|
|
|
|
5.
|
Property, Plant and Equipment, net
|
Property, plant and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2017
|
|
2016
|
Land
|
$
|
33,087
|
|
|
$
|
32,127
|
|
Buildings and site improvements
|
212,817
|
|
|
183,882
|
|
Leasehold improvements
|
4,684
|
|
|
5,550
|
|
Machinery and equipment
|
300,334
|
|
|
248,861
|
|
|
550,922
|
|
|
470,420
|
|
Less accumulated depreciation and amortization
|
(299,907
|
)
|
|
(273,302
|
)
|
|
251,015
|
|
|
197,118
|
|
Capital projects in progress
|
22,005
|
|
|
35,692
|
|
|
$
|
273,020
|
|
|
$
|
232,810
|
|
Included in property, plant and equipment at
December 31, 2017
and
2016
, are fully depreciated assets with an original cost of
$189.9 million
and
$166.7 million
, respectively. These fully depreciated assets are still in use in the Company’s operations.
The Company capitalizes certain development costs associated with internal use software, including external direct costs of materials and services and payroll costs for employees devoting time to a software project. As of
December 31, 2017
and
2016
, depreciable capitalized software development costs were
$20.5 million
and
$4.6 million
, respectively, and included in capital projects in progress at
December 31, 2017
and
2016
, were software in development costs of
$12.2 million
and
$13.5 million
, respectively. The approximate
$29.0 million
increase in buildings and site improvements was primarily related to
$21.2 million
improvement costs associated with the manufacturing facility in West Chicago and the expansion of the McKinney facility.
Depreciation expense, including depreciation of equipment and software acquired through capital lease arrangements, was
$27.3 million
,
$21.6 million
and
$20.4 million
for the years ended December 31,
2017
,
2016
and
2015
, respectively.
6. Equity Investments
In December 2016, the Company acquired a
25.0%
equity interest in Ruby Sketch Pty Ltd. (“Ruby Sketch”), an Australian proprietary limited company, for
$2.5 million
. The Company has accounted for its ownership interest using the equity accounting method and recognized Ruby Sketch investment as an asset at cost. The investment will fluctuate in future periods based on the Company’s allocable share of earnings or losses from the investment which is recognized through earnings.
Ruby Sketch develops software that assists in designing residential structures, primarily used in Australia and potentially for the North America market. The Company’s future relationship with Ruby Sketch also could potentially include the specification of the Company’s products in Ruby Sketch's software. The Company has no obligation to make any additional capital contributions to Ruby Sketch.
7. Accrued Liabilities
Accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2017
|
|
2016
|
Sales incentive and advertising accruals
|
$
|
31,143
|
|
|
$
|
25,761
|
|
Vacation liability
|
8,993
|
|
|
7,432
|
|
Dividend payable
|
9,954
|
|
|
8,535
|
|
Labor related liabilities
|
16,970
|
|
|
8,431
|
|
Sales taxes payable and other
|
17,144
|
|
|
10,318
|
|
|
$
|
84,204
|
|
|
$
|
60,477
|
|
The Company has revolving lines of credit with various banks in the United States and Europe. Total available credit at
December 31, 2017
was
$304.2 million
including revolving credit lines and an irrevocable standby letter of credit in support of various insurance deductibles.
The Company’s primary credit facility is a revolving line of credit with
$300.0 million
in available credit, which expires on July 23, 2021. Amounts borrowed under this credit facility will bear interest at an annual rate equal to either, at the Company’s option, (a) the rate for Eurocurrency deposits for the corresponding deposits of United States dollars appearing on Reuters LIBOR1screen page (the “LIBOR Rate”), adjusted for any reserve requirement in effect, plus a spread of
0.60%
to
1.45%
, determined quarterly based on the Company’s leverage ratio (at
December 31, 2017
, the LIBOR Rate was
1.49%
, or (b) a
base rate
, plus a spread of
0.00%
to
0.45%
, determined quarterly based on the Company’s leverage ratio. The base rate is defined in a manner such that it will not be less than the LIBOR Rate. The Company will pay fees for standby letters of credit at an annual rate equal to the applicable spread described above, and will pay market-based fees for commercial letters of credit. The Company is required to pay an annual facility fee of
0.15%
to
0.30%
of the available commitments under the credit agreement, regardless of usage, with the applicable fee determined on a quarterly basis based on the Company’s leverage ratio.
In addition to the
$300.0 million
credit facility, the Company’s borrowing capacity under other revolving credit lines totaled
$4.0 million
at
December 31, 2017
. The other revolving credit lines charge interest ranging from
0.47%
to
8.50%
and have maturity dates from March 2017 to December 2018. The Company had
no
outstanding balance on any of its revolving credit lines at
December 31, 2017
and
2016
, respectively.
The Company and its subsidiaries are required to comply with various affirmative and negative covenants. The covenants include provisions that would limit the availability of funds as a result of a material adverse change to the Company’s financial position or results of operations. The Company was in compliance with its financial covenants under the loan agreement as of
December 31, 2017
.
The Company incurs interest costs, which include interest, maintenance fees and bank charges. The amount of costs incurred, capitalized, and expensed for the years ended
December 31, 2017
,
2016
and
2015
, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
Interest costs incurred
|
$
|
1,249
|
|
|
$
|
1,167
|
|
|
$
|
1,133
|
|
Less: Interest capitalized
|
(72
|
)
|
|
(20
|
)
|
|
(136
|
)
|
Interest expense
|
$
|
1,177
|
|
|
$
|
1,147
|
|
|
$
|
997
|
|
Capital Lease Obligations
The Company entered into
two
four
-year lease agreements for certain office equipment with Cisco Systems Capital Corporation for a total of approximately
$4.4 million
, which was recorded in fixed assets as capital lease obligations. These capital lease obligations are included in current liabilities and other long-term liabilities in the accompanying condensed consolidated balance sheets. The interest rates for these two capital leases are
2.89%
and
3.50%
, respectively, and the two leases will mature in May 2021 and July 2021, respectively.
As of
December 31, 2017
, the current portion of the outstanding liability for the leased equipment was approximately
$1.1 million
and the long-term portion was approximately
$2.6 million
.
|
|
9.
|
Commitments and Contingencies
|
Leases
Certain properties occupied by the Company are leased. The leases expire at various dates through 2026 and generally require the Company to assume the obligations for insurance, property taxes and maintenance of the facilities.
Rental expense for
2017
,
2016
and
2015
with respect to all leased property was approximately
$6.4 million
,
$5.9 million
and
$6.6 million
, respectively.
At
December 31, 2017
, minimum rental commitments under all non-cancelable leases were as follows:
(in thousands)
|
|
|
|
|
2018
|
$
|
6,923
|
|
2019
|
5,787
|
|
2020
|
4,472
|
|
2021
|
3,376
|
|
2022
|
2,270
|
|
Thereafter
|
2,339
|
|
Total
|
$
|
25,167
|
|
Some of these minimum rental commitments contain renewal options and provide for periodic rental adjustments based on changes in the consumer price index or current market rental rates. Other rental commitments provide options to cancel early without penalty. Future minimum rental payments, under the earliest cancellation options, are included in minimum rental commitments in the table above.
Other Contractual Obligations
Purchase obligations consist of commitments primarily related to the acquisition, construction or expansion of facilities and equipment, consulting agreements, and minimum purchase quantities of certain raw materials. The Company is not a party to any long-term supply contracts with respect to the purchase of raw materials or finished goods. Debt interest obligations include annual facility fees on the Company’s primary line-of-credit facility. Interest on line-of-credit facilities was estimated based on historical borrowings and repayment patterns.
At
December 31, 2017
, other contractual obligations were as follows:
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
Debt Interest Obligations
|
|
Capital Lease Obligations
|
Purchase Obligations
|
|
Total
|
2018
|
$
|
450
|
|
|
$
|
1,055
|
|
$
|
42,833
|
|
|
$
|
44,338
|
|
2019
|
450
|
|
|
1,089
|
|
679
|
|
|
2,218
|
|
2020
|
450
|
|
|
1,125
|
|
679
|
|
|
2,254
|
|
2021
|
250
|
|
|
480
|
|
679
|
|
|
1,409
|
|
2022
|
—
|
|
|
—
|
|
582
|
|
|
582
|
|
Thereafter
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
Total
|
$
|
1,600
|
|
|
$
|
3,749
|
|
$
|
45,452
|
|
|
$
|
50,801
|
|
Employee Relations
As of December 31, 2017, approximately
13%
of the Company’s employees are represented by labor unions and are covered by collective bargaining agreements. We have two locations with collective bargaining agreements covering tool and die craftsmen, maintenance workers, and sheet-metal workers. The two union contracts in Stockton, California will expire in July and September 2019, respectively. Moreover, the two contracts in San Bernardino County will expire in June 2018 and February 2021, respectively. We have not begun negotiations to extend the sheetmetal workers union labor contract that will expire in June 2018. Based on current information and subject to future events and circumstances, we believe that, even if new agreements are not reached before the existing labor union contracts expire, it is not expected to have a material adverse effect on the Company's ability to provide products to customers or on the Company's profitability.
Environmental
The Company’s policy with regard to environmental liabilities is to accrue for future environmental assessments and remediation costs when information becomes available that indicates that it is probable that the Company is liable for any related claims and
assessments and the amount of the liability is reasonably estimable. The Company does not believe that any such matters will have a material adverse effect on the Company’s financial condition, cash flows or results of operations.
Litigation and Potential Claims
From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. Corrosion, hydrogen enbrittlement, cracking, material hardness, wood pressure-treating chemicals, misinstallations, misuse, design and assembly flaws, manufacturing defects, labeling defects, product formula defects, inaccurate chemical mixes, adulteration, environmental conditions, or other factors can contribute to failure of fasteners, connectors, anchors, adhesives, specialty chemicals, such as fiber reinforced polymers, and tool products. In addition, inaccuracies may occur in product information, descriptions and instructions found in catalogs, packaging, data sheets, and the Company’s website.
The resolution of any claim or litigation is subject to inherent uncertainty and could have a material adverse effect on the Company’s financial condition, cash flows or results of operations.
Gentry Homes, Ltd. v. Simpson Strong-Tie Company Inc., et al.
, Case No. 17-cv-00566, was filed in a federal district court in Hawaii against Simpson Strong-Tie Company Inc. and the Company on November 20, 2017. The
Gentry
case is a product of a previous state court class action,
Nishimura v. Gentry Homes, Ltd., et al.
, Civil No. 11-1-1522-07, which is now closed. The
Nishimura
case concerned alleged corrosion of the Company’s galvanized “hurricane straps” and mudsill anchor products used in a residential project in Ewa by Gentry, Honolulu, Hawaii. In the
Nishimura
case, the plaintiff homeowners and the developer, Gentry Homes, Ltd. (“Gentry”), arbitrated their dispute and agreed on a settlement in the amount of approximately
$90 million
. In the subsequent
Gentry
case, Gentry alleges breach of warranty and negligent misrepresentation by the Company related to its “hurricane strap” and mudsill anchor products, and demands general, special, and consequential damages from the Company in an amount to be proven at trial. Gentry also seeks pre-judgment and post-judgment interest, attorneys’ fees and costs, and other relief. The Company admits no liability and will vigorously defend the claims brought against it. At this time, the Company cannot reasonably ascertain the likelihood that it will be found responsible for substantial damages to Gentry. Based on the facts currently
known, and subject to future events and circumstances, the Company believes that all or part of the claims brought against it in the
Gentry
case may be covered by its insurance policies.
Charles Vitale, et al. v. D.R. Horton, Inc. and D.R. Horton-Schuler Homes, LLC
, Civil No. 15-1-1347-07, a putative class action lawsuit, was filed in the Hawaii First Circuit on July 13, 2015, in which the plaintiff homeowners allege that all homes built by D.R Horton/D.R. Horton-Schuler Homes (collectively, “Horton Homes”) in the State of Hawaii have strap-tie holdowns that are suffering premature corrosion. The complaint alleges that various manufacturers make strap-tie holdowns that suffer from such corrosion, but does not identify the Company’s products specifically. The Company is not currently a party to the
Vitale
lawsuit, but the lawsuit in the future could potentially involve the Company’s strap-tie holdowns. If claims are asserted against the Company in the
Vitale
case, it will vigorously defend any such claims, whether brought by the plaintiff homeowners or by Horton Homes. Based on the facts currently known, and subject to future events and circumstances, the Company believes that all or part of any claims that any party might bring against it related to the
Vitale
case may be covered by its insurance policies.
Given the nature and the complexities involved in the
Gentry
and
Vitale
proceedings, the Company is unable to estimate reasonably the likelihood of possible loss or a range of possible loss until the Company knows, among other factors, (i) the specific claims brought against the Company and the legal theories on which they are based; (ii) what claims, if any, might be dismissed without trial; (iii) how the discovery process will affect the litigation; (iv) the settlement posture of the other parties to the litigation; (v) the damages to be proven at trial, particularly if the damages are not specified or are indeterminate; (vi) the extent to which the Company’s insurance policies will cover the claims or any part thereof, if at all; and (vii) any other factors that may have a material effect on the proceeding.
On December 22, 2017, the Tax Reform Act was signed, which includes a broad range of tax reform proposals affecting businesses, including corporate tax rates, business deductions, and international tax provisions. Many of these provisions significantly differ from current U.S. tax law, resulting in financial reporting implications. Some of the changes include, but are not limited to, a U.S. corporate tax rate decrease from
35%
to
21%
effective for tax years beginning after December 31, 2017, the option to claim accelerated depreciation deductions, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings as of December 31, 2017.
While the Tax Reform Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions: the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as period cost are both acceptable methods subject to an accounting policy election. Effective the first quarter of 2018, the Company will elect to treat any potential GILTI inclusions as a period cost as we are not projecting any material impact from GILTI inclusions and any deferred taxes related to any inclusion would be immaterial.
The BEAT provisions in the Tax Reform Act eliminate the deduction of certain base-erosion payments made to related foreign corporations, and impose a minimum tax if greater than regular tax. The Company does not expect it will be subject to this tax and therefore has not included any tax impacts of BEAT in its consolidated financial statements for the year ended December 31, 2017.
On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued by the SEC to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. In accordance with SAB 118, the Company has recorded provisional amounts for
$2.8 million
of deferred tax benefit recorded in connection with the re-measurement of deferred tax assets and liabilities and
$3.8 million
of current tax expense recorded in connection with the transition tax on the mandatory deemed repatriation of foreign earnings. The Company considers these amounts to be reasonable estimates at December 31, 2017. Additional work is necessary to do a more detailed analysis of historical data as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in 2018 when the analysis is complete.
The provision for income taxes from operations consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2017
|
|
2016
|
|
2015
|
Current
|
|
|
|
|
|
|
|
|
Federal
|
$
|
36,077
|
|
|
$
|
39,649
|
|
|
$
|
29,684
|
|
State
|
6,357
|
|
|
7,053
|
|
|
5,001
|
|
Foreign
|
3,068
|
|
|
3,333
|
|
|
3,568
|
|
Deferred
|
|
|
|
|
|
|
|
|
Federal
|
6,093
|
|
|
260
|
|
|
2,390
|
|
State
|
544
|
|
|
13
|
|
|
753
|
|
Foreign
|
(338
|
)
|
|
(1,142
|
)
|
|
(605
|
)
|
|
$
|
51,801
|
|
|
$
|
49,166
|
|
|
$
|
40,791
|
|
Income and loss from operations before income taxes for the years ended
December 31, 2017
,
2016
, and
2015
, respectively, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2017
|
|
2016
|
|
2015
|
Domestic
|
$
|
132,105
|
|
|
$
|
131,827
|
|
|
$
|
106,381
|
|
Foreign
|
12,313
|
|
|
7,073
|
|
|
2,298
|
|
|
$
|
144,418
|
|
|
$
|
138,900
|
|
|
$
|
108,679
|
|
As a result of the reduction in the U.S. corporate income tax rate from
35%
to
21%
under the Tax Reform Act, the Company re-measured its ending net deferred tax liabilities at December 31, 2017 and recognized a provisional
$2.8 million
tax benefit for the year ended December 31, 2017.
At December 31, 2017, the Company had
$32.1 million
of pre-tax loss carryforwards in various foreign taxing jurisdictions, of which
$1.1 million
will begin to expire between 2019 and 2024. The remaining tax losses can be carried forward indefinitely.
At December 31, 2017, and 2016, the Company had deferred tax valuation allowances of
$11.1 million
and
$6.9 million
, respectively. The valuation allowance increased
$4.2 million
and decreased
$0.7 million
for the years ended December 31, 2017 and 2016, respectively. The increase in the valuation allowance in 2017 was primarily due to the Company’s remaining foreign tax credits carryforward in the U.S. The Company concluded it is more likely than not that these foreign tax credits will expire unrealized under the Tax Reform Act.
The Company has not historically recorded federal income taxes on the undistributed earnings of its foreign subsidiaries because such earnings are reinvested and, in the Company’s opinion, will continue to be reinvested indefinitely. The Tax Reform Act provided for a one-time transition tax on the mandatory deemed repatriation of foreign earnings through the year ended December 31, 2017. The Company has recorded a net
$3.8 million
tax liability based on undistributed foreign earnings of approximately
$73.3 million
, payable over eight years. The Company intends to limit any possible future distributions to earnings previously taxed in the U.S. As a result, the Company has not recognized a deferred tax liability on its investment in foreign subsidiaries. Determination of the related amount of unrecognized deferred U.S. income taxes is not practicable because of the complexities associated with this hypothetical calculation.
Reconciliations between the statutory federal income tax rates and the Company’s effective income tax rates as a percentage of income before income taxes for its operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2017
|
|
2016
|
|
2015
|
Federal tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State taxes, net of federal benefit
|
3.2
|
%
|
|
3.4
|
%
|
|
3.3
|
%
|
Tax benefit of domestic manufacturing deduction
|
(2.0
|
)%
|
|
(2.5
|
)%
|
|
(2.3
|
)%
|
Mandatory deemed repatriation of foreign earnings
|
2.7
|
%
|
|
—
|
%
|
|
—
|
%
|
Change in U.S. tax rate applied to deferred taxes
|
(1.9
|
)%
|
|
—
|
%
|
|
—
|
%
|
Change in valuation allowance
|
1.3
|
%
|
|
(0.1
|
)%
|
|
1.3
|
%
|
Difference between United States statutory and foreign local tax rates
|
(0.8
|
)%
|
|
(0.3
|
)%
|
|
0.2
|
%
|
Change in uncertain tax position
|
—
|
%
|
|
(0.2
|
)%
|
|
0.3
|
%
|
Other
|
(1.6
|
)%
|
|
0.1
|
%
|
|
(0.3
|
)%
|
Effective income tax rate
|
35.9
|
%
|
|
35.4
|
%
|
|
37.5
|
%
|
The tax effects of the significant temporary differences that constitute the deferred tax assets and liabilities at
December 31, 2017
and
2016
, respectively, were as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2017
|
|
2016
|
Deferred asset taxes
|
|
|
|
|
|
State tax
|
$
|
1,390
|
|
|
$
|
2,518
|
|
Workers’ compensation
|
822
|
|
|
1,381
|
|
Health claims
|
487
|
|
|
755
|
|
Vacation liability
|
1,008
|
|
|
1,485
|
|
Allowance for doubtful accounts
|
104
|
|
|
123
|
|
Inventories
|
5,385
|
|
|
6,833
|
|
Sales incentive and advertising allowances
|
709
|
|
|
1,126
|
|
Acquisition costs
|
—
|
|
|
528
|
|
Unrealized foreign exchange gain or loss
|
291
|
|
|
678
|
|
Stock-based compensation
|
2,967
|
|
|
5,550
|
|
Foreign tax credit carryforwards
|
4,453
|
|
|
1,288
|
|
Uncertain tax positions’ unrecognized tax benefits
|
31
|
|
|
104
|
|
Foreign tax loss carry forward
|
6,892
|
|
|
6,841
|
|
Other
|
1,291
|
|
|
1,259
|
|
|
$
|
25,830
|
|
|
$
|
30,469
|
|
Less valuation allowances
|
(11,114
|
)
|
|
(6,868
|
)
|
|
14,716
|
|
|
23,601
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
Depreciation
|
$
|
(7,050
|
)
|
|
$
|
(6,138
|
)
|
Goodwill and other intangibles amortization
|
(11,331
|
)
|
|
(14,126
|
)
|
Tax effect on cumulative translation adjustment
|
(487
|
)
|
|
(667
|
)
|
Other
|
—
|
|
|
(744
|
)
|
|
(18,868
|
)
|
|
(21,675
|
)
|
|
|
|
|
Total Deferred tax
|
$
|
(4,152
|
)
|
|
$
|
1,926
|
|
A reconciliation of the beginning and ending amounts of unrecognized tax benefits in
2017
,
2016
and
2015
, respectively, was as follows, including foreign translation amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Unrecognized Tax Benefits
|
2017
|
|
2016
|
|
2015
|
Balance at January 1
|
$
|
1,119
|
|
|
$
|
1,107
|
|
|
$
|
1,307
|
|
Additions based on tax positions related to prior years
|
660
|
|
|
204
|
|
|
310
|
|
Reductions based on tax positions related to prior years
|
(1
|
)
|
|
—
|
|
|
(514
|
)
|
Additions for tax positions of the current year
|
319
|
|
|
155
|
|
|
191
|
|
Lapse of statute of limitations
|
(202
|
)
|
|
(347
|
)
|
|
(187
|
)
|
Balance at December 31
|
$
|
1,895
|
|
|
$
|
1,119
|
|
|
$
|
1,107
|
|
Tax positions of
$0
,
$0
, and
$0.2
million are included in the balance of unrecognized tax benefits at
December 31, 2017
,
2016
, and
2015
, respectively, which if recognized, would reduce the effective tax rate.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense, which is a continuation of the Company’s historical accounting policy. During the year ended
December 31, 2017
, accrued interest increased by
$0.2 million
and during the years ended
2016
and
2015
, accrued interest decreased by
$61 thousand
and
$30 thousand
, respectively. The Company had accrued
$0.4 million
for each of the fiscal year ended
2017
, and
$0.2 million
for the years ended
2016
and
2015
, for the potential payment of interest, before income tax benefits.
At
December 31, 2017
, the Company remained subject to United States federal income tax examinations for the tax years 2014 through
2017
. In addition, the Company remained subject to state, local and foreign income tax examinations primarily for the tax years 2012 through
2017
.
The Company has
six
defined contribution retirement plans covering substantially all salaried employees and nonunion hourly employees. On January 1, 2015, the Simpson Manufacturing Co., Inc. 401(k) Profit Sharing Plan for Salaried Employees was amended, restated and superseded by the Simpson Manufacturing Co., Inc. 401(k) Profit Sharing Plan (the “Restated Plan”), and the Simpson Manufacturing Co., Inc. 401(k) Profit Sharing Plan for Hourly Employees was merged with and incorporated into the Restated Plan. The Restated Plan, covering United States employees, provides for quarterly safe harbor contributions, limited to
3%
of the employees quarterly eligible compensation and for annual discretionary contributions, subject to certain limitations, but in no event are total contributions more than the amounts permitted under the Internal Revenue Code as deductible expense. The discretionary amounts for 2016 and 2017 were equal to
7%
of qualifying salaries or wages of the covered employees. The other
four
plans, covering the Company’s European and Canadian employees, require the Company to make contributions ranging from
3%
to
15%
of the employees’ compensation. The total cost for these retirement plans for the years ended
December 31, 2017
,
2016
and
2015
, was
$14.2 million
,
$10.1 million
and
$9.5 million
, respectively.
We participate in various multiemployer benefit plans that cover some of our employees who are represented by labor unions
.
We make periodic contributions to these plans in accordance with the terms of applicable collective bargaining agreements and laws but do not sponsor or administer these plans
.
We do not participate in any multiemployer benefit plans for which we consider our contributions to be individually significant. If we were to otherwise withdraw from participation in any of these plans, applicable law would require us to fund our allocable share of the unfunded vested benefits, which is known as a withdrawal liability. As of December 31, 2017, we believe that there was no probable withdrawal liability under the multiemployer benefit pension plans under the terms of collective-bargaining agreements that cover its union-represented employees.
Our total contribution to various industry-wide, union-sponsored pension funds and a statutorily required pension fund for employees in the U.S. and Europe were
$4.0 million
,
$3.1 million
and
$2.5 million
for the years ended
December 31, 2017
,
2016
and
2015
, respectively.
|
|
12.
|
Related Party Transactions
|
During 2017, the Company identified certain purchases of goods and services from companies where the Chief Executive Officer or a member of the Company’s own board of directors serve as directors on the respective company providing the goods or services.
The Company also identified purchases of services from a company affiliated with an immediate family member of another of the Company’s own board of directors. The amount of goods and services purchased by the Company pursuant to these arrangements was not material to the Company’s consolidated statement of income and cash flows for the year ended December 31, 2017.
|
|
13.
|
Acquisitions and Dispositions
|
Under the business combinations topic of the FASB ASC 805, the Company accounts for acquisitions as business combinations and ascribes acquisition-date fair values to the acquired assets and assumed liabilities. Provisional fair value measurements are made at the time of the acquisitions. Adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date, as information necessary to complete the analysis is obtained. Fair value of intangible assets are generally based on Level 3 inputs.
CG Visions, Inc.
In January 2017, the Company acquired CG Visions, Inc. ("CG Visions"), an Indiana corporation for
$20.8 million
. CG Visions provides scalable technologies and services in building information modeling ("BIM") technologies, estimation tools and software solutions to a number of the top 100 mid-sized to large builders in the United States, which are expected to complement and support the Company's sales in North America. During the third quarter of 2017, the Company finalized its fair value measurement of assets acquired and liabilities assumed in this acquisition. CG Visions assets and liabilities included other current assets of
$0.5 million
, noncurrent assets of
$20.4 million
, current liabilities and contingent consideration of
$1.1 million
. Included in noncurrent assets was goodwill of
$10.1 million
, which was assigned to the North America segment, and intangible assets of
$10.3 million
, both of which are not subject to tax-deductible amortization. The estimated weighted-average amortization period for the intangible assets is
7
years.
Gbo Fastening Systems AB
In January 2017, the Company acquired Gbo Fastening Systems AB ("Gbo Fastening Systems"), a Sweden limited company, for
$10.2 million
. Gbo Fastening Systems manufactures and sells a complete line of CE-marked structural fasteners as well as fastener dimensioning software for wood construction applications, currently sold mostly in northern and eastern Europe, which are expected to complement the Company's line of wood construction products in Europe. The Gbo Fastening Systems acquisition result in a
$6.3 million
gain on bargain purchase of a business, which was included in the condensed consolidated statements of operation. Without speculating regarding the sellers' motivation, the Company does not know why Gbo Fastening Systems was sold below fair value, resulting in a nonrecurring bargain purchase gain for the Company.
The following table represents the final allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed in the Gbo Fastening Systems acquisition:
|
|
|
|
|
|
(In thousands)
|
|
|
Assets
*
|
Cash and cash equivalents
|
$
|
3,956
|
|
|
Accounts receivable
|
4,914
|
|
|
Inventory
|
13,591
|
|
|
Other current assets
|
760
|
|
|
Noncurrent assets
|
3,929
|
|
|
|
27,150
|
|
|
|
|
Liabilities
|
Accounts payable
|
4,500
|
|
|
Other current liabilities and long-term liabilities
|
6,146
|
|
|
|
10,646
|
|
|
|
|
Total net assets
|
|
16,504
|
|
|
Gain on bargain purchase of a business, net of tax
|
(6,336
|
)
|
|
Total purchase price
|
10,168
|
|
*
|
Intangible assets acquired were determined to have little to no value, thus were not recognized
|
|
Multi Services Dêcoupe S.A
.
In August 2016, the Company purchased all of the outstanding shares of Multi Services Dêcoupe S.A. ("MS Decoupe"), a Belgium public limited company, for
$6.9 million
. MS Decoupe primarily manufactures and distributes wood construction, plastic, and metal labeling products in Belgium and the Netherlands, including distributing the Company's products manufactured at the Company's production facility in France. With this acquisition, the Company could potentially offer the Belgium market a wider-range of its products, shorten delivery lead times, and expand the Company's sales presence into the Netherlands market. During the third quarter of 2017, the Company finalized its fair value measurement of assets acquired and liabilities assumed in this acquisition. MS Decoupe assets and liabilities included cash and cash equivalents of
$1.4 million
, other current assets of
$1.6 million
, noncurrent assets of
$5.0 million
, current liabilities of
$0.6 million
and noncurrent deferred income tax liabilities of
$1.0 million
. Included in noncurrent assets was goodwill of
$1.4 million
, which was assigned to the Europe segment, and intangible assets of
$1.7 million
, both of which are not subject to tax-deductible amortization. The estimated weighted-average amortization period for the intangible assets is
10
years.
Blue Heron Enterprises, LLC and Fox Chase Enterprises, LLC.
In December 2015, the Company purchased all of the business assets including intellectual property from Blue Heron Enterprises, LLC, and Fox Chase Enterprises, LLC (collectively, "EBTY"), both New Jersey limited liability companies, for
$3.4 million
in cash. EBTY manufactured and sold hidden deck clips using a patented design. EBTY's patented design complements the Company's line of hidden clips and fastener systems. The Company's measurement of assets acquired included goodwill of
$2.0 million
, which was assigned to the North America segment, and intangible assets of
$1.1 million
, both of which are subject to tax-deductible amortization. Net assets consisting of inventory and equipment accounted for the balance of the purchase price. The weighted-average amortization period for the intangible assets is
7
years.
The results of operations of the businesses acquired in 2015 through 2017 have been in the Company’s consolidated results of operations since the date of the acquisition. They were not material to the Company on an individual or aggregate basis, and accordingly, pro forma results of such operations have not been presented.
Sales of Gbo Poland and Gbo Romania
As a result of incompatibility with Simpson's market strategy, the Company completed the sale of all of its equity in Gbo Fastening Systems' Poland and Gbo Romania subsidiaries on September 29, 2017 and October 31, 2017, respectively, for approximately
$10.2 million
, resulting in a loss of
$0.2 million
which was presented in the accompanying condensed statements of operations.
The Company is organized into
three
reporting segments. The segments are defined by the regions where the Company’s products are manufactured, marketed and distributed to the Company’s customers. The three regional segments are the North America segment (comprising primarily the Company's operations in the United States and Canada), the Europe segment and the Asia/Pacific segment (comprising the Company’s operations in Asia, the South Pacific, South Africa and the Middle East). These segments are similar in several ways, including the types of materials used, the production processes, the distribution channels and the product applications.
The Administrative & All Other column primarily includes expenses such as self-insured workers compensation claims for employees of the Company’s venting business, which was sold in 2010, stock-based compensation for certain members of management, interest expense, foreign exchange gains or losses and income tax expense, as well as revenues and expenses related to real estate activities, such as rental income and depreciation expense on the Company’s property in Vacaville, California, which the Company has leased to a third party for a
10
-year term expiring in August 2020.
The following table shows certain measurements used by management to assess the performance of the segments described above as of
December 31, 2017
,
2016
and
2015
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
North
America
|
|
Europe
|
|
Asia/
Pacific
|
|
Administrative
& All Other
|
|
Total
|
2017
|
|
|
|
|
Net sales
|
$
|
803,697
|
|
|
$
|
165,155
|
|
|
$
|
8,173
|
|
|
$
|
—
|
|
|
$
|
977,025
|
|
Sales to other segments *
|
3,237
|
|
|
959
|
|
|
20,715
|
|
|
—
|
|
|
24,911
|
|
Income from operations
|
132,890
|
|
|
4,421
|
|
|
1,179
|
|
|
677
|
|
|
139,167
|
|
Depreciation and amortization
|
25,745
|
|
|
5,832
|
|
|
1,246
|
|
|
901
|
|
|
33,724
|
|
Gain on bargain purchase of a business
|
—
|
|
|
6,336
|
|
|
—
|
|
|
—
|
|
|
6,336
|
|
Significant non-cash charges
|
9,861
|
|
|
1,509
|
|
|
65
|
|
|
2,473
|
|
|
13,908
|
|
Provision for income taxes
|
47,434
|
|
|
2,124
|
|
|
419
|
|
|
1,824
|
|
|
51,801
|
|
Capital expenditures and business acquisitions, net of
cash acquired
|
70,040
|
|
|
11,411
|
|
|
4,511
|
|
|
—
|
|
|
85,962
|
|
Total assets
|
953,033
|
|
|
208,640
|
|
|
26,820
|
|
|
(150,970
|
)
|
|
1,037,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
North
America
|
|
Europe
|
|
Asia/
Pacific
|
|
Administrative
& All Other
|
|
Total
|
2016
|
|
|
|
|
Net sales
|
$
|
742,021
|
|
|
$
|
111,274
|
|
|
$
|
7,366
|
|
|
$
|
—
|
|
|
$
|
860,661
|
|
Sales to other segments *
|
2,512
|
|
|
570
|
|
|
28,690
|
|
|
—
|
|
|
31,772
|
|
Income (loss) from operations
|
137,311
|
|
|
895
|
|
|
2,140
|
|
|
(869
|
)
|
|
139,477
|
|
Depreciation and amortization
|
19,433
|
|
|
5,809
|
|
|
1,208
|
|
|
1,477
|
|
|
27,927
|
|
Significant non-cash charges
|
9,124
|
|
|
1,052
|
|
|
113
|
|
|
3,657
|
|
|
13,946
|
|
Provision for income taxes
|
45,547
|
|
|
1,428
|
|
|
721
|
|
|
1,470
|
|
|
49,166
|
|
Capital expenditures and business acquisitions, net of
cash acquired
|
37,652
|
|
|
8,461
|
|
|
1,250
|
|
|
—
|
|
|
47,363
|
|
Total assets
|
853,826
|
|
|
165,121
|
|
|
25,118
|
|
|
(64,091
|
)
|
|
979,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
North
America
|
|
Europe
|
|
Asia/
Pacific
|
|
Administrative
& All Other
|
|
Total
|
2015
|
|
|
|
|
Net sales
|
$
|
676,618
|
|
|
$
|
108,068
|
|
|
$
|
9,373
|
|
|
$
|
—
|
|
|
$
|
794,059
|
|
Sales to other segments *
|
2,857
|
|
|
931
|
|
|
20,496
|
|
|
—
|
|
|
24,284
|
|
Income (loss) from operations
|
109,446
|
|
|
3,795
|
|
|
(3,445
|
)
|
|
(775
|
)
|
|
109,021
|
|
Depreciation and amortization
|
17,812
|
|
|
5,773
|
|
|
1,785
|
|
|
1,451
|
|
|
26,821
|
|
Significant non-cash charges
|
8,221
|
|
|
1,251
|
|
|
131
|
|
|
2,355
|
|
|
11,958
|
|
Provision for (benefit from) income taxes
|
36,999
|
|
|
1,692
|
|
|
581
|
|
|
1,519
|
|
|
40,791
|
|
Capital expenditures and business acquisitions, net of
cash acquired
|
33,336
|
|
|
4,177
|
|
|
825
|
|
|
27
|
|
|
38,365
|
|
Total assets
|
748,241
|
|
|
168,305
|
|
|
24,366
|
|
|
20,397
|
|
|
961,309
|
|
* Sales to other segments are eliminated on consolidation.
Cash collected by the Company’s United States subsidiaries is routinely transferred into the Company’s cash management accounts, and therefore has been included in the total assets of “Administrative & All Other.” Cash and short-term investment balances in “Administrative & All Other” were
$80.2 million
,
$137.4 million
and
$164.1 million
as of
December 31, 2017
,
2016
and
2015
, respectively. As of
December 31, 2017
, the Company had
$86.5 million
, or
51.3%
, of its cash and cash equivalents held outside the United States in accounts belonging to the Company’s various foreign operating entities. The majority of this balance is held in foreign currencies and could be subject to additional taxation if it were repatriated to the United States.
The significant non-cash charges comprise compensation related to the awards under the Company's stock-based incentive plans and the Company's employee stock bonus plan. The Company’s measure of profit or loss for its reportable segments is income (loss) from operations. The reconciling amounts between consolidated income before tax and consolidated income from operations are net interest income (expense), loss in equity method investment, gain on bargain purchase of a business, and loss on disposal of a business. Interest income (expense) is primarily attributed to “Administrative & All Other.”
The following table shows the geographic distribution of the Company’s net sales and long-lived assets as of
December 31, 2017
,
2016
and
2015
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2015
|
(in thousands)
|
Net
Sales
|
|
Long-Lived
Assets
|
|
Net
Sales
|
|
Long-Lived
Assets
|
|
Net
Sales
|
|
Long-Lived
Assets
|
United States
|
$
|
758,181
|
|
|
$
|
223,184
|
|
|
$
|
702,071
|
|
|
$
|
192,787
|
|
|
$
|
639,443
|
|
|
$
|
171,367
|
|
Canada
|
43,176
|
|
|
4,650
|
|
|
38,269
|
|
|
4,473
|
|
|
36,122
|
|
|
4,275
|
|
United Kingdom
|
23,157
|
|
|
1,459
|
|
|
20,905
|
|
|
1,183
|
|
|
22,924
|
|
|
1,357
|
|
Germany
|
21,821
|
|
|
14,153
|
|
|
20,751
|
|
|
12,582
|
|
|
19,974
|
|
|
13,358
|
|
France
|
36,677
|
|
|
9,152
|
|
|
33,062
|
|
|
8,349
|
|
|
31,147
|
|
|
8,621
|
|
Poland
|
20,409
|
|
|
2,471
|
|
|
6,633
|
|
|
1,830
|
|
|
6,417
|
|
|
893
|
|
Sweden
|
16,421
|
|
|
1,068
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Denmark
|
14,723
|
|
|
1,601
|
|
|
15,728
|
|
|
1,249
|
|
|
14,987
|
|
|
1,381
|
|
Norway
|
12,902
|
|
|
229
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Switzerland
|
5,593
|
|
|
8,748
|
|
|
6,549
|
|
|
8,469
|
|
|
5,538
|
|
|
9,071
|
|
Australia
|
5,501
|
|
|
268
|
|
|
4,741
|
|
|
239
|
|
|
3,121
|
|
|
274
|
|
Belgium
|
5,050
|
|
|
2,065
|
|
|
1,286
|
|
|
1,798
|
|
|
—
|
|
|
—
|
|
The Netherlands
|
4,834
|
|
|
110
|
|
|
4,909
|
|
|
21
|
|
|
4,773
|
|
|
15
|
|
New Zealand
|
2,604
|
|
|
130
|
|
|
2,474
|
|
|
163
|
|
|
2,154
|
|
|
142
|
|
Chile
|
2,314
|
|
|
61
|
|
|
1,572
|
|
|
56
|
|
|
902
|
|
|
91
|
|
Other countries
|
3,662
|
|
|
12,710
|
|
|
1,711
|
|
|
7,471
|
|
|
6,557
|
|
|
8,241
|
|
|
$
|
977,025
|
|
|
$
|
282,059
|
|
|
$
|
860,661
|
|
|
$
|
240,670
|
|
|
$
|
794,059
|
|
|
$
|
219,086
|
|
Net sales and long-lived assets, net of intangible assets, are attributable to the country where the sales or manufacturing operations are located.
The Company's wood construction products include connectors, truss plates, fastening systems, fasteners and pre-fabricated shearwalls and are used for connecting and strengthening wood-based construction primarily in the residential construction market. Its concrete construction products include adhesives, specialty chemicals, mechanical anchors, carbide drill bits, powder actuated tools and reinforcing fiber materials and are used for restoration, protection or strengthening concrete, masonry and steel construction in residential, industrial, commercial and infrastructure construction. The following table show the distribution of the Company’s net sales by product for the years ended
December 31, 2017
,
2016
and
2015
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
2017
|
|
2016
|
|
2015
|
Wood Construction
|
$
|
833,200
|
|
|
$
|
732,414
|
|
|
$
|
674,274
|
|
Concrete Construction
|
143,102
|
|
|
128,247
|
|
|
119,481
|
|
Other
|
723
|
|
|
—
|
|
|
304
|
|
Total
|
$
|
977,025
|
|
|
$
|
860,661
|
|
|
$
|
794,059
|
|
No customer accounted for as much as
10%
of net sales for the years ended
December 31, 2017
,
2016
and
2015
.
Dividend Declaration
On
January 29, 2018
, the Board declared a cash dividend of
$0.21
per share of our common stock, estimated to be
$9.8 million
in total. The record date for the dividend will be
April 5, 2018
, and it will be paid on
April 26, 2018
.
Share Repurchase
In February 2018, the Company received
182,171
shares of its common stock pursuant to the
$50.0 million
accelerated share repurchase program that it entered into with Wells Fargo in December 2017, which constituted the final delivery thereunder.
|
|
16.
|
Selected Quarterly Financial Data (Unaudited)
|
The following table sets forth selected quarterly financial data for each of the quarters in
2017
and
2016
, respectively:
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Second
Quarter
|
|
First
Quarter
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Second
Quarter
|
|
First
Quarter
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
231,681
|
|
|
$
|
262,476
|
|
|
$
|
263,002
|
|
|
$
|
219,866
|
|
|
$
|
200,192
|
|
|
$
|
230,974
|
|
|
$
|
229,973
|
|
|
$
|
199,523
|
|
Cost of sales
|
128,983
|
|
|
142,591
|
|
|
139,477
|
|
|
119,710
|
|
|
105,226
|
|
|
117,499
|
|
|
118,486
|
|
|
107,000
|
|
Gross profit
|
102,698
|
|
|
119,885
|
|
|
123,525
|
|
|
100,156
|
|
|
94,966
|
|
|
113,475
|
|
|
111,487
|
|
|
92,523
|
|
Research and development and other engineering
|
12,565
|
|
|
8,679
|
|
|
13,264
|
|
|
13,108
|
|
|
12,441
|
|
|
10,932
|
|
|
11,452
|
|
|
11,423
|
|
Selling
|
28,753
|
|
|
28,156
|
|
|
28,511
|
|
|
29,483
|
|
|
24,030
|
|
|
24,304
|
|
|
24,822
|
|
|
25,187
|
|
General and administrative
|
36,688
|
|
|
36,501
|
|
|
36,563
|
|
|
34,986
|
|
|
32,376
|
|
|
32,543
|
|
|
34,945
|
|
|
29,298
|
|
Gain (loss) on sale of assets
|
(13
|
)
|
|
(147
|
)
|
|
50
|
|
|
(50
|
)
|
|
(17
|
)
|
|
(81
|
)
|
|
(656
|
)
|
|
(26
|
)
|
Income from operations
|
24,705
|
|
|
46,696
|
|
|
45,137
|
|
|
22,629
|
|
|
26,136
|
|
|
45,777
|
|
|
40,924
|
|
|
26,641
|
|
Loss in equity method investment, before tax
|
(33
|
)
|
|
(13
|
)
|
|
(12
|
)
|
|
(28
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Interest (expense) income, net
|
(104
|
)
|
|
(296
|
)
|
|
(199
|
)
|
|
(189
|
)
|
|
(177
|
)
|
|
(82
|
)
|
|
(83
|
)
|
|
(235
|
)
|
Gain (adjustment) on bargain purchase of a business
|
—
|
|
|
(2,052
|
)
|
|
—
|
|
|
8,388
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Gain (loss) on disposal of a business
|
(654
|
)
|
|
443
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Provision for
income taxes
|
10,829
|
|
|
16,581
|
|
|
16,712
|
|
|
7,679
|
|
|
8,565
|
|
|
15,898
|
|
|
14,640
|
|
|
10,063
|
|
Net income
|
$
|
13,085
|
|
|
$
|
28,197
|
|
|
$
|
28,214
|
|
|
$
|
23,121
|
|
|
$
|
17,394
|
|
|
$
|
29,797
|
|
|
$
|
26,201
|
|
|
$
|
16,343
|
|
Earnings per share of common stock:
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.28
|
|
|
$
|
0.60
|
|
|
$
|
0.59
|
|
|
$
|
0.49
|
|
|
$
|
0.37
|
|
|
$
|
0.62
|
|
|
$
|
0.54
|
|
|
$
|
0.34
|
|
Diluted
|
0.27
|
|
|
0.59
|
|
|
0.59
|
|
|
0.48
|
|
|
0.36
|
|
|
0.62
|
|
|
0.54
|
|
|
0.34
|
|
Cash dividends declared per
share of common stock
|
$
|
—
|
|
|
$
|
0.42
|
|
|
$
|
0.21
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
|
$
|
0.16
|
|
Basic earnings per share of common stock (“EPS”) for each of the quarters presented above is computed based on the weighted average number of shares of common stock outstanding during the quarter. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential shares of common stock outstanding during the quarter using the treasury stock method. Dilutive potential shares of common stock include outstanding stock options and stock awards. The sum of the quarterly basic and diluted EPS amounts may not necessarily be equal to the full-year basic and diluted EPS amounts.